<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): November 3, 1997
---------------------
Quaker State Corporation
------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-2677 25-0742820
- ------------------------ --------------------- ---------------------
(State of incorporation) (Commission File No.) (IRS Employer ID No,)
225 E. John Carpenter Freeway, Irving, Texas 75062
- -------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(972) 868-0400
--------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former Name or Former Address, If Changed Since Last Report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 29, 1997, Quaker State Corporation (the "Registrant" or
"Quaker State") and its wholly owned subsidiary Quaker State Investment
Corporation ("QSIC") entered into a Stock Purchase Agreement (the "Agreement")
to sell all of the shares of stock of QSIC's wholly owned subsidiary,
Truck-Lite Company, Inc. ("Truck-Lite"), to Truck-Lite Acquisition Corporation,
a subsidiary of Penske Capital Partners LLC (the "Purchaser"). Truck-Lite is
a manufacturer and marketer of vehicular lighting products. The sale was
concluded on November 3, 1997. The consideration for the transaction was
approximately $82 million in cash (subject to certain possible adjustments) and
was arrived at through arm's length negotiations.
No material relationship between the Purchaser and the Registrant, or any of its
affiliates, officers and directors existed prior to the transaction.
The description of the transaction contained herein is qualified in its
entirety by reference to the Agreement, which is attached hereto as Exhibit 2
and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information.
The following unaudited pro forma condensed consolidated financial statements
are filed with this report:
Pro Forma Condensed Consolidated Statements of Operations of Quaker
State Corporation and Subsidiaries for the year ended December 31,
1996 and the nine months ended September 30, 1997.
Pro Forma Condensed Consolidated Balance Sheet of Quaker State
Corporation and Subsidiaries as of September 30, 1997.
Notes to Pro Forma Condensed Consolidated Balance Sheet and Statements
of Operations.
On June 28, 1996 and October 2, 1996, Quaker State acquired all the stock of
Blue Coral, Inc. ("Blue Coral") and Medo Industries, Inc. ("Medo"),
respectively. The acquisitions have been accounted for under the purchase
method and,
<PAGE> 3
accordingly, the operating results of Blue Coral and Medo have been included in
the consolidated financial statements of Quaker State from the date of
acquisition.
The adjustments presented in the Pro Forma statements are preliminary estimates
and subsequent revisions may be necessary. The Pro Forma financial statements
should be read in conjunction with the historical financial statements and
other financial information of Blue Coral and Medo appearing elsewhere in
Quaker State's Form 8-K/A-1, filed September 11, 1996, Form 8-K/A-1, filed
December 17, 1996, and the historical financial statements and other financial
information of Quaker State appearing in its 1996 Annual Report on Form 10-K
and its quarterly reports on Form 10-Q for the quarters ended March 31, 1997,
June 30, 1997 and September 30, 1997.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The unaudited Pro Forma Condensed Consolidated Statements of Operations of
Quaker State Corporation and Subsidiaries for the nine months ended September
30, 1997 and the year ended December 31, 1996 present the combined historical
results of Quaker State adjusted for the sale of Truck-Lite, purchase of Blue
Coral (prior to the acquisition date of June 28, 1996), purchase of Medo (prior
to the acquisition date of October 2, 1996) and pro forma results as though such
sale or purchases had occurred on January 1, 1996. The unaudited Pro Forma
Condensed Consolidated Statements of Operations do not purport to be indicative
of the results which actually would have occurred if the acquisitions and sale
had been consummated on January 1, 1996 or which may occur in the future.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The unaudited Pro Forma Condensed Consolidated Balance Sheet of Quaker State
Corporation and Subsidiaries as of September 30, 1997 presents the combined
financial position of Quaker State adjusted for the sale of Truck-Lite as of
September 30, 1997.
(c) Exhibits.
<TABLE>
<CAPTION>
Item No. Description
-------- -----------
<S> <C>
2 Stock Purchase Agreement dated October 29, 1997 among Quaker State Corporation, Quaker State
Investment Corporation and Truck-Lite Acquisition Corporation with list of omitted schedules, filed
herewith.
</TABLE>
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
QUAKER STATE CORPORATION
(Registrant)
DATE: November 17, 1997
By: /s/ CONRAD A. CONRAD
--------------------------------
Conrad A. Conrad
Vice Chairman and
Chief Financial Officer
<PAGE> 5
QUAKER STATE CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
<TABLE>
<CAPTION>
Quaker Blue Less:
State(1) Coral(2) NicSand(3) Adjustments Pro Forma Medo(4) Adjustments Pro Forma
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
REVENUES
Sales and operating revenues $ 1,200,229 $ 55,962 $ 2,282 $ 1,253,909 $ 54,293 $ 1,308,202
Other, net 7,470 -- -- 7,470 -- 7,470
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 1,207,699 55,962 2,282 1,261,379 54,293 1,315,672
COSTS AND EXPENSES
Cost of sales and operating costs 821,530 30,523 1,474 850,579 26,498 877,077
Selling, general and administrative 296,221 20,485 562 316,144 14,867 $ (2,498) (5) 328,513
Depreciation and amortization 38,578 696 21 $ 1,232 (6) 40,485 1,306 2,840 (6) 44,631
Interest 12,640 917 -- 704 (7) 14,261 674 6,609 (7) 21,544
Unusual items 14,507 14,507 14,507
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 1,183,476 52,621 2,057 1,936 1,235,976 43,345 6,951 1,286,272
- -------------------------------------------------------------------------------------------------------------------------------
Pretax income (loss) from
continuing operations 24,223 3,341 225 (1,936) 25,403 10,948 (6,951) 29,400
Provision for income taxes 10,500 264 109 298 (8) 10,953 312 1,287 (8) 12,552
- -------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
CONTINUING OPERATIONS $ 13,723 $ 3,077 $ 116 $(2,234) $ 14,450 $ 10,636 $ (8,238) $ 16,848
===============================================================================================================================
Weighted average
shares outstanding 34,465 156 (9) 34,621
===============================================================================================================================
Per share:
Income from
continuing operations $ 0.40 $ 0.49
===============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 6
QUAKER STATE CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996, CONTINUED
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
<TABLE>
<CAPTION>
Less:
Pro Forma Truck-Lite(10) Adjustments Pro Forma
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
REVENUES
Sales and operating revenues $ 1,308,202 $ 86,725 $ 1,221,477
Other, net 7,470 (204) 7,674
- -----------------------------------------------------------------------------------------------------
TOTAL REVENUES 1,315,672 86,521 1,229,151
COSTS AND EXPENSES
Cost of sales and operating costs 877,077 61,618 815,459
Selling, general and administrative 328,513 15,403 313,110
Depreciation and amortization 44,631 2,797 41,834
Interest 21,544 31 (4,826)(11) 16,687
Unusual items 14,507 14,507
- -----------------------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 1,286,272 79,849 (4,826) 1,201,597
- -----------------------------------------------------------------------------------------------------
Pretax income (loss) from
continuing operations 29,400 6,672 4,826 27,554
Provision for income taxes 12,552 2,600 1,930 (12) 11,882
- -----------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
CONTINUING OPERATIONS 16,848 $ 4,072 $ 2,896 $ 15,672
=====================================================================================================
Weighted average
shares outstanding 34,621 34,621
=====================================================================================================
Per share:
Income from
continuing operations $ 0.49 $ 0.45
=====================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 7
QUAKER STATE CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
<TABLE>
<CAPTION>
Quaker
State(1) Adjustments Pro Forma
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
REVENUES
Sales and operating revenues $ 916,983 $ 916,983
Other, net 4,551 4,551
- ---------------------------------------------------------------------------------------------------------
TOTAL REVENUES 921,534 921,534
COSTS AND EXPENSES
Cost of sales and operating costs 590,311 590,311
Selling, general and administrative 247,032 247,032
Depreciation and amortization 30,303 30,303
Interest 20,251 $ (3,619) (11) 16,632
Unusual item 4,667 4,667
- ---------------------------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 892,564 (3,619) 888,945
- ---------------------------------------------------------------------------------------------------------
Pretax income from continuing operations 28,970 3,619 32,589
Provision for income taxes 11,800 1,448 (12) 13,248
- ---------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS $ 17,170 $ 2,171 $ 19,341
=========================================================================================================
Weighted average shares outstanding 35,256 35,256
=========================================================================================================
Per share:
Income from continuing operations $ 0.49 $ 0.55
=========================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 8
QUAKER STATE CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Quaker Less:
State(1) Truck-Lite(10) Adjustments Pro Forma
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(IN THOUSANDS EXCEPT SHARE DATA)
ASSETS
Current assets:
Cash and cash equivalents $ 16,706 $ 16,706
Accounts and notes receivable, net of allowance 190,206 190,206
Inventories 92,507 92,507
Other current assets 22,233 22,233
Net assets of discontinued operations 34,428 $ 34,428 --
- -------------------------------------------------------------------------------------------------------------
Total current assets 356,080 34,428 321,652
- -------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net of
accumulated depreciation 234,251 234,251
Other assets 531,372 531,372
=============================================================================================================
TOTAL ASSETS $ 1,121,703 $ 34,428 $ 1,087,275
=============================================================================================================
LIABILITIES
Current liabilities:
Accounts payable $ 75,624 $ 75,624
Accrued liabilities 80,700 $ 19,972 (13) 100,672
Installments on long-term debt, payable within one year 1,198 1,198
- ------------------------------------------------------------------------------------------------------------
Total current liabilities 157,522 19,972 177,494
- ------------------------------------------------------------------------------------------------------------
Long-term debt, less current installments 458,717 (82,000)(11) 376,717
Other long-term liabilities 188,711 188,711
- ------------------------------------------------------------------------------------------------------------
Total liabilities 804,950 (62,028) 742,922
- ------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock 36,852 36,852
Additional capital 194,653 194,653
Retained earnings 114,012 27,600 (14) 141,612
Treasury Stock, at cost (26,924) (26,924)
Other, net (1,840) (1,840)
- -------------------------------------------------------------------------------------------------------------
Total stockholders' equity 316,753 27,600 344,353
- -------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,121,703 $ (34,428) $ 1,087,275
=============================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 9
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Explanation of adjustments to the Pro Forma Consolidated Statements of
Operations for the year ended December 31, 1996 and the nine months ended
September 30, 1997 and the Balance Sheet as of September 30, 1997 in connection
with the sale of Truck-Lite and the acquisitions of Blue Coral and Medo are
presented below:
(1) Quaker State's historical data represents reported results of operations
for the year ended December 31, 1996 and the nine months ended September
30, 1997 and the balance sheet as of September 30, 1997. Truck-Lite's
results of operations for the nine months ended September 30, 1997 were
presented as discontinued operations in Quaker State's September 30, 1997
Condensed Consolidated Statement of Operations.
(2) Blue Coral's historical data represents activity for the six months ended
June 28, 1996 adjusted for the sale of its interest in NicSand, Inc., on
October 31, 1996. Blue Coral's activity for the six months ended December
31, 1996 is included in Quaker State's historical data for the year ended
December 31, 1996 as this activity was subsequent to the acquisition date.
(3) To record the sale of Blue Coral's interest in NicSand, Inc. effective
October 31, 1996. Amounts represents activity from June 28, 1996 (the date
of acquisition) through September 30, 1996, which are reflected in Quaker
State's historical data for the year ended December 31, 1996.
(4) Medo's historical data represents activity for the nine months ended
September 30, 1996.
(5) To record a reduction in Medo's salaries as a result of the acquisition for
the year ended December 31, 1996 and to reverse bonuses paid by Medo in
September 1996, in connection with the acquisition.
(6) To record amortization of excess of purchase price over fair market value
of assets acquired by Quaker State ($82.2 million for Blue Coral and $145.9
million for Medo), for the year ended December 31, 1996. Amortization is
calculated on a straight-line basis over periods not exceeding 40 years.
<PAGE> 10
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
(7) To record the net effect on interest expense of the payment of Blue Coral
and Medo indebtedness and the increase in debt due to Quaker State's
borrowings in connection with the acquisitions for the year ended December
31, 1996. Calculation of adjustment is as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Initial Blue Coral borrowing $ 71,000
Less: Cash received from sale of NicSand 9,471
--------
Net Blue Coral borrowings $ 61,529
Effective annual interest rate 5.710%
Number of months pro forma interest expense calculated 6
--------
Gross increase in interest expense $ 1,757
Less:
Blue Coral interest expense on books 917
Interest expense related to NicSand 136
--------
Net pro forma adjustment for Blue Coral $ 704
========
Initial Medo borrowing $165,000
Effective annual interest rate 5.885%
Number of months pro forma interest expense calculated 9
--------
Gross increase in interest expense $ 7,283
Less: Medo interest expense on books 674
--------
Net pro forma adjustment for Medo $ 6,609
========
</TABLE>
(8) To record an income tax provision (benefit) for the results of operations
of Blue Coral and Medo and the tax effect of pro forma adjustments for the
year ended December 31, 1996.
(9) To increase the number of weighted average shares outstanding due to the
acquisition of Blue Coral. Calculation is as if shares were issued January
1, 1996 and shares repurchased from former Blue Coral stockholder were
repurchased January 1, 1996.
(10) Truck-Lite's historical data represents results of operations for the year
ended December 31, 1996 and balance sheet data as of September 30, 1997.
<PAGE> 11
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
(11) To record the reduction of indebtedness and related effect on interest
expense due to Quaker State's sale of Truck-Lite as of September 30, 1997,
for the year ended December 31, 1996 and the nine months ended September
30, 1997 . Calculation of adjustment is as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Proceeds from sale $82,000
Effective annual interest rate 5.885%
Number of months pro forma interest expense calculated 9
-------
Gross decrease in interest expense in 1997 $ 3,619
=======
Proceeds from sale $82,000
Effective annual interest rate 5.885%
Number of months pro forma interest expense calculated 12
-------
Gross decrease in interest expense in 1996 $ 4,826
=======
</TABLE>
(12) To record the tax effect of pro forma adjustments for the year ended
December 31, 1996 and the nine months ended September 30, 1997.
(13) To accrue the estimated tax liability and other closing costs in
connection with the sale of Truck-Lite as of September 30, 1997.
(14) To adjust Retained Earnings in connection with the sale of Truck-Lite.
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2 Stock Purchase Agreement dated October 29, 1997 among Quaker State Corporation, Quaker State
Investment Corporation and Truck-Lite Acquisition Corporation with list of omitted schedules,
filed herewith.
</TABLE>
<PAGE> 1
================================================================================
QUAKER STATE CORPORATION
SALE OF
TRUCK-LITE CO., INC.
--------------------------------
STOCK PURCHASE AGREEMENT
--------------------------------
Dated as of October 29, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Sale and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale and Purchase of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Representations and Warranties of the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Corporate Status and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 No Conflicts, Consents and Approvals, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Corporate Status of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 The Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.5 Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.7 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.8 Assets, Properties, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.9 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.10 Employment Agreements and Benefits, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.10.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.10.2 Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.10.3 Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.10.4 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.10.5 Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.10.6 Multi-Employer Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.10.7 No Post-Employment Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.10.8 Effect of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.10.9 Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.10.10 Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.10.11 501(c)(9) Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.12 Governmental Authorizations; Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.15 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
2.17 Environmental Compliance and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.18 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.19 Banking and Agency Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.20 Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.21 Suppliers; Raw Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.22 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.23 Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.24 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3. Representations and Warranties of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.1 Corporate Status and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.2 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.3 Financial Ability to Perform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.5 Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.6 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4. Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.1 Obligations of Both the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.1.1 Closing Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.1.2 Hart-Scott-Rodino Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.2 Obligations of the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.2.1 Conduct of Business, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.2.2 Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.3 Payment of Transaction-Related Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.4 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.5 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.6 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.7 Contact with Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.8 Credit Support Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.9 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.10 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.11 Transition Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.12 Post-Closing Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.14 Intercompany Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
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<TABLE>
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5. Employees and Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.1.1 Compensation and Benefits of Company Employees . . . . . . . . . . . . . . . . . . . . . . 41
5.1.2 Thrift & Stock Purchase Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.1.3 Quaker State Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.1.4 Seller's Incentive Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.1.5 Responsibility for Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.2 Conditions to Obligations of Both Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.2.1 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.2.2 No Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.3 Conditions to Obligations of the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.3.1 Representations and Warranties of the Purchaser . . . . . . . . . . . . . . . . . . . . . . 46
6.3.2 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.4 Conditions to Obligations of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.4.1 Representations and Warranties of the Seller . . . . . . . . . . . . . . . . . . . . . . . 46
6.4.2 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.4.3 Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.4.4 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.4.5 FIRPTA Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.4.6 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.2.1 By the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.2.2 By the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.2.3 Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.2.4 Tax Treatment of Indemnity Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.1 Modification; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.3 Exclusivity of Representations and Warranties and Indemnification Provision; Relationship Between
the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.4 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.5 Deposit; Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.6 Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.7 Post-Closing Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
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<TABLE>
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8.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.10 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.12 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.14 Consent to Jurisdiction, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.15 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
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SCHEDULES
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
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SELLER'S SCHEDULES
Schedule 1.4 Closing Balance Sheet
Schedule 2.2 Conflicts; Consents
Schedule 2.5 Subsidiaries and Investments
Schedule 2.6 Financial Statements
Schedule 2.7 Liabilities
Schedule 2.8 Real Property
Schedule 2.9 Contracts
Schedule 2.10.2 Employment Matters
Schedule 2.10.4 Compliance
Schedule 2.10.7 Post-Employment Obligations
Schedule 2.10.10 Labor
Schedule 2.11 Intellectual Property
Schedule 2.12 Governmental Permits
Schedule 2.13 Litigation
Schedule 2.14(a) Tax Returns; Payment of Taxes
Schedule 2.14(b) Extensions of Period of Assessment or Collection; Power of Attorney
Schedule 2.14(c) Tax Groups; Tax Sharing
Schedule 2.14(d) Tax Assessments; Ruling Request; Tax Contest or Audit
Schedule 2.14(e) Tax Claims
Schedule 2.14(f) States, Territories and Jurisdictions - Certain Return Filings
Schedule 2.14(g) Tax Liens
Schedule 2.14(i) Extension for Return Filing
Schedule 2.15 Absence of Certain Changes
Schedule 2.16 Insurance Policies
Schedule 2.17 Environmental Matters
Schedule 2.18 Affiliate Transactions
Schedule 2.19 Banking and Agency Agreements
Schedule 2.20 Customers
Schedule 2.21 Suppliers
Schedule 2.23 Products
Schedule 2.24 Credit Support Arrangements
</TABLE>
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<TABLE>
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PURCHASER'S SCHEDULES
Schedule 3.2 Conflicts, Governmental Consents
Schedule 6.4.6 Third Party Consents
SELLER'S AND PURCHASER'S SCHEDULES
Schedule 6.2.1 Consents
</TABLE>
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<PAGE> 8
STOCK PURCHASE AGREEMENT, dated as of October 29, 1997, among
Quaker State Corporation, a Delaware corporation (the "Seller"), Quaker State
Investment Corp., a Delaware corporation ("QSIC"), and Truck-Lite Acquisition
Corp., a Delaware corporation (the "Purchaser").
WHEREAS, the Seller owns all of the outstanding capital stock
of QSIC and QSIC owns all of the outstanding capital stock (the "Shares") of
Truck-Lite Co., Inc., a New York corporation (the "Company"); and
WHEREAS, the Seller desires to sell the Shares to the
Purchaser and the Purchaser desires to purchase the Shares.
NOW, THEREFORE, the parties hereto agree as follows:
1. Sale and Purchase.
1.1 Sale and Purchase of the Shares. Subject to the terms
and conditions of this Agreement, at the Closing (as defined in Section 1.3),
the Seller will sell, or cause to be sold, and the Purchaser will purchase, the
Shares for an aggregate purchase price of $82,000,000 (the "Purchase Price"),
payable as set forth below in Section 1.3 and subject to adjustment as
provided in Sections 1.3(b) and 1.4.
1.2 Deposit. An affiliate of the Purchaser has deposited
$3,000,000 with the Seller (the "Deposit") pursuant to an exclusivity
agreement, dated as of October 2, 1997, between the Seller and an affiliate of
the Purchaser. The Deposit will either be (a) applied to the Purchase Price at
the Closing as provided in Section 1.3(b) or (b) returned to the Seller or
retained by the Purchaser upon a termination of this Agreement as provided in
Sections 8.4 and 8.5.
1.3 Closing. The closing of the sale and the purchase of the
Shares (the "Closing") will take place at the offices of Fried, Frank, Harris,
Shriver & Jacobson, One New York Plaza, New York, New York 10022, at 10:00
A.M., E.S.T. on November 3, 1997, or, if the conditions to the Closing set
forth in Section 6 (other than those to be performed on the Closing Date) shall
not have been satisfied or waived by such date, as soon as practicable after
such conditions shall have been satisfied or waived. The date on which the
Closing shall occur is hereinafter referred to as the "Closing Date." At the
Closing:
<PAGE> 9
(a) the Seller will deliver, or cause QSIC to deliver, to the
Purchaser stock certificates representing the Shares, endorsed or
accompanied by stock powers in favor of the Purchaser, and accompanied
by all requisite stock transfer stamps; and
(b) the Purchaser will deliver, or cause to be delivered, to
QSIC by wire transfer of immediately available funds to a previously
designated account of the Seller the Purchase Price, minus the amount
of the Deposit, minus an estimate, prepared by the Seller in good
faith and delivered to the Purchaser at least one business day prior
to the Closing (which estimate shall be reasonably acceptable to the
Purchaser), of the amount, if any, by which the cash and cash
equivalents of the Company and its subsidiary as of the close of
business on the business day immediately preceding the Closing Date
are less than zero and minus an estimate, prepared by the Seller in
good faith and delivered to the Purchaser at least one business day
prior to the Closing, of the amount, if any, by which total
stockholders equity of the Company and its subsidiary as of the close
of business on the business day immediately preceding the Closing Date
is less than $35,000,000, provided, however, that to the extent any
adjustment is made with respect to a deficit in cash and cash
equivalents, there will not be a duplicative adjustment with respect
to total stockholders equity. The foregoing estimated amounts are
referred to herein as "Estimated Cash" and "Estimated Stockholders
Equity," respectively. For the purposes of this agreement, a
"business day" shall be a day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York are authorized or
required by law to close.
1.4 Purchase Price Adjustment. (a) Within 90 days after the
Closing Date, the Purchaser will cause the Purchaser's accountants to prepare
and deliver to the Seller a balance sheet of the Company and its subsidiary as
of the close of the business day immediately preceding the Closing Date (the
"Closing Balance Sheet"), which shall be prepared in accordance with Schedule
1.4. The Seller shall provide the Purchaser's accountants such access at all
reasonable times to its personnel, properties, books and records as is
reasonably required by the Purchaser's accountants to prepare the Closing
Balance Sheet, provided that the Purchaser's accountants execute and deliver a
confidentiality agreement, reasonably satisfactory to the Purchaser, and adhere
to whatever procedures the Seller reasonably requires to safeguard
confidential, non-public or privileged information relating to the Seller or
any of its subsidiaries. The Seller acknowledges that the Purchaser's
accountants shall have the responsibility and authority for preparing the
Closing Balance Sheet, provided that the Seller shall
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<PAGE> 10
have the right to object as set forth below and any adjustment to the purchase
price will only be made pursuant to subsection (d) below.
(b) Following the Seller's receipt of the Closing Balance
Sheet, the Seller and its advisors will be permitted to review the working
papers of the Purchaser, the Company and its subsidiary and the Purchaser's
accountants relating to the Closing Balance Sheet. The Purchaser will also
provide the Seller and its advisors access at all reasonable times to the
personnel, properties, books and records of the Company and its subsidiary.
The rights to review and access described in the preceding two sentences shall
be provided to the Seller and its advisors until final resolution of all
matters in dispute under this Section 1.4. The Seller agrees to execute and
deliver a confidentiality agreement, if requested by the Purchaser, which is
reasonably satisfactory to the Seller, and adhere to whatever procedures the
Purchaser reasonably requires to safeguard confidential, non-public or
privileged information relating to the Purchaser, the Company or its
subsidiary. The Closing Balance Sheet will become final and binding upon the
parties on the 45th day following delivery thereof, unless the Seller delivers
a written notice (the "Seller's Notice") to the Purchaser prior to such date
which specifies in reasonable detail the amount by which and the reasons why it
thinks particular line items in the Closing Balance Sheet either contain
mathematical errors or were not prepared in accordance with the methodology
specified in Schedule 1.4. The Seller's Notice may not specify any other basis
for disagreement with the Closing Balance Sheet other than as set forth in the
preceding sentence.
(c) If the Seller delivers a Seller's Notice in accordance
with Section 1.4(b), then the parties shall, during the 30-day period beginning
on Purchaser's receipt of the Seller's Notice, seek in good faith to resolve in
writing any differences which they may have with respect to the matters
specified in the Seller's Notice. If the Seller and the Purchaser are unable
to resolve all of the Seller's objections within such 30-day period, then such
unresolved objections shall be submitted to the New York office of Ernst &
Young (the "Third Party Accountants") for review and final and binding
resolution of any and all matters which remain in dispute and which were
properly included in the Seller's Notice. Each of the Seller and the Purchaser
represents and warrants that neither it nor any of its respective affiliates
has a current client relationship with the Third Party Accountants or KPMG Peat
Marwick. The Seller and the Purchaser shall use reasonable efforts to cause
the Third Party Accountants to render a decision resolving the matters in
dispute within 30 days following the final submission of such matter to the
Third Party Accountants for decision following such briefing and other
procedures as the Third Party Accountants shall establish. The Seller and the
Purchaser agree that judgment may be entered upon the determination of the
Third Party Accountants in any court having jurisdiction over the party against
3
<PAGE> 11
which such determination is to be enforced. The fees, costs and expenses of the
Third Party Accountants (i) shall be borne by the Seller in the proportion that
the aggregate dollar amount of such disputed items so submitted that are
unsuccessfully disputed by the Seller (as finally determined by the Third Party
Accountants) bears to the aggregate dollar amount of such items so submitted
and (ii) shall be borne by the Purchaser in the proportion that the aggregate
dollar amount of such disputed items so submitted that are successfully
disputed by the Seller (as finally determined by the Third Party Accountants)
bears to the aggregate dollar amount of such items so submitted.
(d) Within 10 days after (x) the Closing Balance Sheet
becomes final pursuant to Section 1.4(b) or (y) the parties reach agreement
pursuant to Section 1.4(c) or (z) the Third Party Accountants render their
decision pursuant to Section 1.4(c), a final adjustment to the Purchase Price
will be made as follows:
(i) If it is finally determined that the amount of cash and
cash equivalents of the Company and its subsidiary as of the close of
the business day immediately preceding the Closing Date ("Final Cash")
exceeded the amount of Estimated Cash then the Purchaser will pay the
Seller the amount of such excess or, in the event that Estimated Cash
exceeded zero, then the Purchaser will pay the Seller the amount by
which Final Cash exceeds zero. If it is finally determined that the
amount of Final Cash was less than the amount of Estimated Cash, then
the Seller will pay the Purchaser the amount of such deficit.
(ii) If it is finally determined that the total stockholders
equity of the Company and its subsidiary as of the close of the
business day immediately preceding the Closing Date ("Final
Stockholders Equity") exceeded the amount of Estimated Stockholders
Equity, then the Purchaser will pay the Seller the amount of such
excess. If it is finally determined that the amount of Final
Stockholders Equity was less than the Estimated Stockholders Equity,
then the Seller shall pay the Purchaser the amount of such deficit.
(iii) Notwithstanding the foregoing clause (ii), if Estimated
Stockholders Equity or Final Stockholders Equity exceeds $35,000,000,
then for purposes of Section 1.4(d)(ii) such amount shall be deemed to
be $35,000,000. Notwithstanding anything in this Section 1.4 to the
contrary, to the extent any adjustment is made with respect to Final
Cash, there will not be a duplicative adjustment with respect to Final
Stockholders Equity.
4
<PAGE> 12
(e) Notwithstanding anything in this Agreement to the
contrary, any matter which is the subject of an adjustment, or claimed
adjustment, to the purchase price pursuant to this Section 1.4, may not be
asserted by the Purchaser as an alleged misrepresentation or breach of any
covenant in this Agreement. Without limiting the generality of the foregoing,
the parties have agreed that the Purchaser may not assert a breach of Section
2.6 with respect to any balance sheet included in the financial statements
referred to therein.
2. Representations and Warranties of the Seller. The Seller
represents and warrants to the Purchaser as of the date hereof and as of the
Closing Date as follows:
2.1 Corporate Status and Authority. Each of the Seller and
QSIC is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware and QSIC has the corporate power and
authority to own the Shares and each of the Seller and QSIC has the corporate
power and authority to execute and deliver this Agreement and perform its
obligations hereunder. The execution, delivery and performance of this
Agreement have been duly authorized by the Seller's Board of Directors, which
constitutes all necessary corporate action on the part of the Seller for such
authorization. This Agreement has been duly executed and delivered by the
Seller and QSIC and constitutes the valid and binding obligation of the Seller
and QSIC, enforceable against each of them in accordance with its terms, except
as limited by laws affecting the enforcement of creditors' rights generally or
by general equitable principles. The Purchaser has previously been furnished
with complete and correct copies of (a) the Certificate of Incorporation and
all amendments thereto of the Company and its subsidiary and (b) the By-Laws,
as currently in effect, of the Company and its subsidiary. Such Certificates
of Incorporation and By-Laws are in full force and effect.
2.2 No Conflicts, Consents and Approvals, etc. (a) Except as
set forth in Schedule 2.2, the execution, delivery and performance of this
Agreement by the Seller and QSIC will not result in (i) any conflict with the
certificate of incorporation or by-laws of the Seller or any of its
subsidiaries, (ii) subject to obtaining the consents referred to in Section
2.2(b), any breach or violation of, or default under, or the termination,
cancellation or acceleration (whether after the filing of notice or the lapse
of time or both) of any right or obligation of the Seller or any of its
subsidiaries under, or the loss of any benefit to which the Seller or any of
its subsidiaries is entitled under, any law, rule, statute, regulation,
judgment, order, decree, license, permit or other governmental authorization or
any mortgage, lease, agreement, deed of trust, indenture or any other
instrument to which the Seller or any of its subsidiaries is a party or by
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<PAGE> 13
which any of them or their respective properties or assets are bound, or (iii)
the creation or imposition of any liens, security interests, adverse claims,
charges or other encumbrances ("Liens") other than Liens created by or
resulting from the actions of the Purchaser or any of its affiliates, except in
the case of clause (ii) only for such breaches, violations, defaults,
terminations, cancellations, accelerations or losses of benefits which would
not, individually or in the aggregate, reasonably be expected to result in a
liability in excess of $50,000 to the Company or its subsidiary.
(b) Except as set forth in Schedule 2.2, no consent, approval
or authorization of or filing with any governmental authority or third party is
required on the part of the Seller or any of its subsidiaries in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except (i) filings, if any, required with
respect to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act") and (ii) filings, consents or approvals which, if not made or obtained,
would not, individually or in the aggregate, reasonably be expected to result
in a liability in excess of $50,000 to the Company or its subsidiary.
2.3 Corporate Status of the Company. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of New York. The Company has all requisite corporate power
and authority to conduct its business and to own or lease its properties, as
now conducted, owned or leased. The Company is duly qualified to do business
in each jurisdiction in which the failure to be so qualified would reasonably
be expected to result in a liability to the Company in excess of $50,000.
2.4 The Shares. The authorized capital stock of the Company
consists of 1000 shares of common stock, par value $50 per share, 845 of which
shares are issued and outstanding and owned by QSIC, free and clear of all
Liens. The Shares have been duly authorized and validly issued and are fully
paid and non-assessable. There are no outstanding options, warrants,
conversion or other rights or agreements of any kind (other than this
Agreement) for the purchase or acquisition from, or the sale or issuance by,
the Seller or any of its subsidiaries of any shares of capital stock of the
Company, and no authorization therefor has been given.
2.5 Subsidiary. The authorized capital stock of the
Company's subsidiary is set forth on Schedule 2.5. All such issued and
outstanding shares are owned by the Company, free and clear of all Liens and
have been duly authorized and validly issued and are fully paid and
non-assessable. There are no outstanding options, warrants, conversion or
other rights or agreements of any kind for the purchase or
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acquisition from, or the sale or issuance by, the Company or its subsidiary of
any shares of capital stock of such subsidiary, and no authorization therefor
has been given. Other than the subsidiary set forth on Schedule 2.5, the
Company does not have any subsidiaries or any other equity interest or
investment in any corporation, partnership, joint venture, association or other
business organization.
The Company's subsidiary is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite corporate power and authority to conduct its business and
to own or lease its properties, as now conducted, owned or leased, and is duly
qualified to do business in each jurisdiction in which the failure to be so
qualified would reasonably be likely to result in a liability to such
subsidiary in excess of $50,000.
2.6 Financial Statements. The Seller has delivered to the
Purchaser copies (which copies are complete and correct) of the unaudited
balance sheets and related statements of income and cash flows of the Company
and its subsidiary on a consolidated basis for the 1994, 1995 and 1996 fiscal
years and as of July 25, 1997 for the seven months then ended (the "July
Balance Sheet") (collectively, the "Financial Statements"). The Financial
Statements were prepared on a consistent basis. The Financial Statements have
been derived from the books and records of the Company. Except as set forth on
Schedule 2.6, the Financial Statements present fairly in all material respects
the financial condition and results of operations and cash flows of the Company
and its subsidiary on a consolidated basis as of the dates or for the periods
indicated. Except as set forth on Schedule 2.6, the Financial Statements were
prepared in accordance with GAAP. Schedule 2.6 sets forth the methodology used
for inventory valuation, inventory reserves, pension accruals and litigation
reserves in the Financial Statements.
2.7 Absence of Undisclosed Liabilities. Except for
liabilities to the extent reflected or reserved against in the Financial
Statements or reflected in the schedules to this Agreement, including, without
limitation, those referred to in Schedule 1.4, neither the Company nor its
subsidiary has any liabilities or obligations other than liabilities or
obligations incurred in the ordinary course of business since July 25, 1997 or
liabilities or obligations which, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on the business,
assets, properties, financial condition or results of operations of the Company
and its subsidiary taken as a whole.
2.8 Assets, Properties, etc. (a) Schedule 2.8 lists all
items of real property owned by the Company or its subsidiary (the "Owned Real
Property") or
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leased by the Company or its subsidiary (the "Leased Real Property"). Except
as set forth in Schedule 2.8 and with respect to the Intellectual Property (as
defined below) which is provided for in Section 2.11, the Company and its
subsidiary have (i) good and marketable title to the Owned Real Property listed
on Schedule 2.8, (ii) valid leasehold interests in the Leased Real Property
listed on Schedule 2.8 (iii) valid options to purchase the Leased Real Property
marked with an asterisk on Schedule 2.8 and (iv) legal and beneficial ownership
of all of their respective tangible personal property and assets included in
the July Balance Sheet (except, in each such case, for properties and assets
disposed of since July 25, 1997 in the ordinary course of business), in each
case, free and clear of all Liens, except as set forth on Schedule 2.8 and
except for (i) Liens for taxes and other governmental charges and assessments
which are not yet due and payable or which are being contested in good faith by
appropriate proceedings, (ii) Liens of carriers, warehousemen, mechanics and
materialmen and other like Liens arising in the ordinary course of business for
sums not yet due and payable or that are being contested in good faith by
appropriate proceedings, (iii) easements, rights of way, title imperfections
and restrictions, zoning ordinances and other similar encumbrances affecting
the real property which in the aggregate do not materially and adversely affect
the value of such real property or materially impair its current use by the
Company or its subsidiary, (iv) statutory Liens in favor of lessors arising in
connection with any property leased to the Company or its subsidiary and (v)
Liens reflected in the Financial Statements (the "Permitted Liens"). Except as
set forth on Schedule 2.8, the Company and its subsidiary own or have the right
to use all of the rights, properties and assets used in and material to the
conduct of their business as currently conducted. Except as set forth in
Schedule 2.8, the tangible assets owned or leased by the Company and its
subsidiary constitute all the assets, properties and rights necessary to
conduct the business of the Company and its subsidiary as currently conducted.
Each such tangible asset has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purpose for which it is currently used.
(b) There exist no pending or, to the knowledge of the
Seller, threatened condemnation proceedings of or relating to the Owned Real
Property or any part thereof and, to the knowledge of the Seller, there exist
no pending or threatened condemnation proceedings of or relating to the Leased
Real Property or any part thereof. There exist no outstanding options or
rights of first refusal to purchase the Owned Real Property or any portion
thereof or any rights or interests therein. Each lease (including any option
to purchase contained therein) pursuant to which the Company or its subsidiary
leases any Leased Real Property listed on Schedule 2.8 (the "Leases") is in
full force and effect and, to the knowledge of the Seller, is enforceable
against the landlord which is party thereto in accordance with its terms.
There exists
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no material default or event of default (or any event with notice or lapse of
time or both would become a material default) on the part of the Company under
any Leases. The Seller has delivered to the Purchaser complete and correct
copies of all Leases including all amendments thereto. Neither the Company nor
its subsidiary has received any notice of any default under any lease by which
the Company leases the Leased Real Property nor any other termination notice
with respect thereto. Other than the Company and its subsidiary, there are no
parties in possession of or parties having any rights to use, occupy or possess
any of the Owned Real Property or any portion thereof or, to the knowledge of
the Seller, any Leased Real Property or other portion thereof. Neither the
Company (nor its subsidiary) is obligated to purchase any real property.
(c) Except as set forth on Schedule 2.8 or as budgeted for by
the Company in the ordinary course of business, no maintenance of or
improvements to real property are being performed by the Company with respect
to any Owned Real Property or any Leased Real Property.
(d) There are no written claims by or against the Company in
existence with respect to any of the leases by which the Company leases the
Leased Real Property, nor any existing arbitrations to which the Company is a
party with respect thereto, and neither the Company nor its subsidiary has
assigned or transferred or contracted to assign or transfer any of its right,
title and interest in such leases to any person.
2.9 Contracts. Schedule 2.9 lists all agreements, contracts
and commitments of the following types to which the Company or its subsidiary
is a party or by which the Company or its subsidiary or any of their respective
properties is bound (other than leases by which the Company leases the Leased
Real Property, labor or employment-related agreements and Intellectual Property
licenses which are listed in Schedules 2.8, 2.10.2 and 2.11, respectively):
(i) all contracts and agreements with any customers or
suppliers other than purchase orders with respect to the sale by the
Company or its subsidiary of their products or the purchase by the
Company or its subsidiary of raw materials that are entered into in
the ordinary course of business;
(ii) all contracts and agreements with distributors of or for
the marketing of the products of the Company and its subsidiary;
(iii) all mortgages, indentures, security agreements, notes,
loan agreements or guarantees of the obligations of third parties
binding upon the
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Company or its subsidiary or with respect to which any of the Owned
Real Property, Leased Real Property or other assets of the Company are
subject;
(iv) agreements prohibiting or materially limiting the
ability of the Company or its subsidiary to engage in any business or
compete with any person;
(v) contracts for the sale or purchase of any property
(tangible or intangible, real or personal) of the Company or its
subsidiary, other than in the ordinary course of business;
(vi) other agreements, contracts or commitments which are not
cancelable with notice of not more than 60 days or which require
payment by the Company or its subsidiary after the date hereof of more
than $10,000 in any one calendar year;
(vii) agreements with any customer relating to the
discounting from the listed or announced prices of products sold by
the Company;
(viii) agreements relating to acquisitions or divestitures
other than in the ordinary course of business;
(ix) settlement agreements with respect to which the Company
or its subsidiary has any ongoing liability or obligation; and
(x) any other material agreement, commitment or other
arrangement.
The Seller has furnished or made available to the Purchaser
true and correct copies of all of the contracts listed on Schedule 2.9.
Neither the Company nor its subsidiary, nor to the knowledge of the Seller, any
other person is in default under any of the contracts listed on Schedule 2.8,
2.9 or 2.11, and no event which would otherwise permit termination or
acceleration thereof has occurred, except for such defaults and events as would
not, individually or in the aggregate, reasonably be expected to result in a
liability in excess of $50,000 to the Company or its subsidiary. Each such
contract is a valid and binding agreement of the Company or its subsidiary and
is in full force and effect.
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<PAGE> 18
2.10 Employment Agreements and Benefits, Etc.
2.10.1 Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Benefit Plan" means each material plan, program, policy,
contract, agreement or other arrangement (other than any Employment Agreement)
providing for compensation, severance, termination pay, performance awards,
stock or stock-related awards, fringe benefits or other employee benefits of
any kind, whether formal or informal, funded or unfunded, written or oral,
including, without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Benefit Plan" means each Benefit Plan which is now or
previously has been sponsored, maintained, contributed to, or required to be
contributed to, for the benefit of any Employee, and pursuant to which the
Company or its subsidiary or the Seller has or may have any liability,
contingent or otherwise.
"Department" means the U.S. Department of Labor.
"Employee" means each current, former, or retired employee,
officer, consultant, independent contractor, agent or director of the Company
or its subsidiary, but shall not include any director who is not an employee of
the Company or its subsidiary and whose compensation for services as a director
has been borne entirely by the Seller or one of its affiliates other than the
Company or its subsidiary.
"Employment Agreement" means each management, employment,
severance, consulting, non-compete, confidentiality, or similar agreement or
contract to which any Employee is a party and pursuant to which the Company or
its subsidiary or the Seller has or may have any liability, contingent or
otherwise.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means each business or entity which is a
member of a "controlled group of corporations," under "common control" or an
"affiliated service group" with the Company within the meaning of Section
414(b), (c) or (m) of the Code, or required to be aggregated with the Company
under Section 414(o) of the
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<PAGE> 19
Code, or is under "common control" with the Company, within the meaning of
Section 4001(a)(14) of ERISA.
"IRS" means the Internal Revenue Service.
"Multi-Employer Plan" means each Company Benefit Plan which is
a "multi-employer plan" within the meaning of Section 3(37) or 4001(a)(3) of
ERISA.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means each Company Benefit Plan (other than a
Multi-Employer Plan) which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA.
"Welfare Plan" means each Company Benefit Plan which is an
"employee welfare benefit plan" within the meaning of Section 3(1) of ERISA.
2.10.2 Schedule. Schedule 2.10.2 contains a true and
complete list of each Company Benefit Plan and each Employment Agreement.
There is no plan or commitment, whether legally binding or not, to establish
any new Company Benefit Plan, to enter into any Employment Agreement or to
modify or to terminate any Company Benefit Plan or Employment Agreement (except
to the extent required by law, to conform any such Company Benefit Plan or
Employment Agreement to the requirements of any applicable law or as provided
under the terms of any such Company Benefit Plan, Employment Agreement or other
written contract, in each case as previously disclosed to Purchaser, or as
required by this Agreement), nor has any intention to do any of the foregoing
been communicated to Employees.
2.10.3 Documents. The Seller has provided, or has caused to
be provided, to Purchaser (i) current, accurate and complete copies of all
documents embodying each Company Benefit Plan and each Employment Agreement,
including all amendments thereto, formal interpretations thereof and trust or
funding agreements with respect thereto; (ii) the two most recent annual
actuarial valuations, if any, prepared for each Company Benefit Plan; (iii) the
two most recent annual reports (Series 5500 and all schedules thereto), if any,
required under ERISA in connection with each Company Benefit Plan or related
trust; (iv) any statement of alternative form of compliance pursuant to
Department of Labor Regulation '2520.104-23, if any, filed for each Company
Benefit Plan which is an "employee pension benefit plan" as defined in Section
3(2) of ERISA for a select group of management or highly compensated employees;
(v) the most recent determination letter received from the IRS, if any, for
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<PAGE> 20
each Company Benefit Plan and related trust which is intended to satisfy the
requirements of Section 401(a) of the Code; (vi) if the Company Benefit Plan is
funded, the most recent annual and periodic accounting of Company Benefit Plan
assets; (vii) the most recent summary plan description together with the most
recent summary of material modification, if any, required under ERISA with
respect to each Company Benefit Plan; and (viii) all material written
communications to any Employee or Employees relating to any Company Benefit
Plan.
2.10.4 Compliance. (i) Each Company Benefit Plan has been
administered and operated in all material respects in accordance with its terms
and all applicable laws, statutes, orders, rules and regulations, including but
not limited to ERISA and the Code; (ii) each Company Benefit Plan intended to
qualify under Section 401 of the Code is, and since its inception has been, so
qualified and a determination letter has been issued by the IRS to the effect
that each such Company Benefit Plan is so qualified and that each trust forming
a part of any such Company Benefit Plan is exempt from tax pursuant to Section
501(a) of the Code and, to the knowledge of the Company and the Seller, no
circumstances exist which would adversely affect such qualification or
exemption; (iii) no action or failure to act and no transaction or holding of
any assets by, or with respect to, any Company Benefit Plan has or may subject
the Company or its subsidiary to any material tax, penalty or other liability,
whether by way of indemnity or otherwise; (iv) there are no actions,
proceedings, arbitrations, suits or claims pending or, to the knowledge of the
Company or the Seller, threatened (other than routine claims for benefits) with
respect to any Company Benefit Plan or Employment Agreement; (v) all payments
or contributions required to be made on or before the date hereof with respect
to each Company Benefit Plan, each related trust, each collective bargaining
agreement or by law have been timely made; (vi) except as provided in Schedule
2.10.4, no Company Benefit Plan is under audit or investigation by the IRS, the
Department or the PBGC, and, to the knowledge of the Company or the Seller, no
such audit or investigation is threatened; and (vii) no liability under any
Company Benefit Plan has been funded nor has any such obligation been satisfied
with the purchase of a contract from an insurance company as to which notice
has been received to the effect that such insurance company is insolvent or is
in rehabilitation or any similar proceeding.
2.10.5 Pension Plans. With respect to each Pension Plan, (i)
no steps have been taken to terminate any Pension Plan now maintained or
contributed to, no liability under Title IV of ERISA has been incurred (other
than for the payment of premiums under Section 4007 of ERISA) by the Company or
its subsidiary, the Seller or any ERISA Affiliate which has not been satisfied
in full, and no event has occurred and no condition exists that could
reasonably be expected to result in the Company or
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<PAGE> 21
its subsidiary incurring any liability under Title IV of ERISA or could
constitute grounds for terminating any Pension Plan; (ii) no proceeding has
been initiated by the PBGC to terminate any Pension Plan or to appoint a
trustee to administer any Pension Plan, (iii) no Pension Plan which is subject
to Part 3 of Subtitle B of Title 1 of ERISA or Section 412 of the Code has
incurred any "accumulated funding deficiency," as defined in Section 412 of the
Code and Section 302 of ERISA, whether or not waived; and (iv) neither the
Company or its subsidiary, the Seller nor any ERISA Affiliate has sought nor
received a waiver of its funding requirements with respect to any Pension Plan.
Each of the actuarial reports provided to Purchaser in respect of each of the
Pension Plans sponsored and maintained by the Company is a fair and accurate
representation of the funding status as of the date thereof of the Pension Plan
to which it relates, based on the actuarial assumptions used therein, each of
which is reasonable, and the Seller and the Company have no knowledge of any
facts, circumstances or events that have occurred since the date of each such
report which would materially and adversely affect such status provided,
however, that to the extent that such representation pertains to the assets of
the Pension Plan, the assets shall be deemed to be equal to the value of the
assets as of the date hereof.
2.10.6 Multi-Employer Plans. During the last six years,
neither the Company nor its subsidiary has contributed to, or been required to
contribute to, any Multi-Employer Plan. During the last six years, neither the
Company nor its subsidiary has incurred any withdrawal liability (within the
meaning of Section 4201 of ERISA).
2.10.7 No Post-Employment Obligations. Except as set forth
on Schedule 2.10.7, neither the Company nor its subsidiary, (i) maintains or
contributes to any Company Benefit Plan which provides life insurance, medical,
severance or other employee welfare benefits to any Employee upon his
retirement or termination of employment, except as may be required by Section
4980B of the Code; or (ii) has promised or contracted (whether in oral or
written form) to any Employee (either individually or to Employees as a group)
that such Employee(s) would be provided with life insurance, medical, severance
or other employee welfare benefits upon their retirement or termination of
employment, except to the extent required by Section 4980B of the Code.
2.10.8 Effect of Transaction. Except as otherwise expressly
contemplated hereby, the execution of, and performance of the transactions
contemplated in, this Agreement will not (i) constitute an event under any
Company Benefit Plan, Employment Agreement, trust or loan that will or may
result in any additional payment (whether of severance pay or otherwise),
acceleration, forgiveness
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<PAGE> 22
of indebtedness, vesting, distribution, increase in benefits or an obligation
to fund benefits with respect to any Employee, or (ii) result in the triggering
or imposition of any restrictions or limitations on the right of the Company or
the Purchaser to amend or terminate any Company Benefit Plan and receive the
full amount of any excess assets remaining or resulting from such amendment or
termination, subject to applicable taxes. No payment or benefit which will or
may be made by the Company or its subsidiary or the Seller with respect to any
Employee will be characterized as an "excess parachute payment," within the
meaning of Section 280G(b)(1) of the Code.
2.10.9 Employment Matters. The Company and its subsidiary
and the Seller (i) are in compliance in all material respects with all
applicable federal, state and local laws, rules and regulations (domestic and
foreign) respecting employment, employment practices, labor, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) have withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to Employees; (iii) are
not liable for any arrears of wages due to be paid to any Employee on or before
the date hereof or for any taxes or any penalty for failure to comply with any
of the foregoing; and (iv) are not liable for any payment due to be paid on or
before the date hereof to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits for Employees.
2.10.10 Labor. No work stoppage or labor strike against the
Company or its subsidiary is pending or, to the knowledge of the Company and
the Seller, threatened. Except as set forth in Schedule 2.10.10, neither the
Company nor its subsidiary (i) is involved in or, to the knowledge of the
Company and the Seller, threatened with any labor dispute, grievance, or
litigation relating to labor matters involving any Employees, including,
without limitation, violation of any federal, state or local labor, safety or
employment laws (domestic or foreign), charges of unfair labor practices or
discrimination complaints; (ii) has engaged in any unfair labor practices
within the meaning of the National Labor Relations Act or the Railway Labor
Act; or (iii) is presently, nor has been in the past a party to, or bound by,
any collective bargaining agreement or union contract with respect to Employees
and no such agreement or contract is currently being negotiated. Except as set
forth in Schedule 2.10.10, no Employees are currently represented by any labor
union for purposes of collective bargaining and no activities the purpose of
which is to achieve such representation of all or some of such Employees are
threatened or ongoing.
2.10.11 501(c)(9) Trust. No Company Benefit Plan nor
Employment Agreement is funded by a trust described in Section 501(c)(9) of the
Code.
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2.11 Intellectual Property. Schedule 2.11 lists all
trademark and service mark registrations, copyrights registration (other than
commercially available software), trade names and patents and applications for
any of the foregoing (i) owned by the Company or its subsidiary and (ii)
licensed by the Company or its subsidiary. Except as set forth in Schedule
2.11, the Company and its subsidiary own or have the right to use the
Intellectual Property free and clear of all Liens, except Permitted Liens.
Except as set forth in Schedule 2.11, neither the Company nor its subsidiary
has notice of any claim that it is infringing, misappropriating or otherwise
coming into conflict with the U.S. or Canadian intellectual property rights of
any person and the Seller has no knowledge of any infringement or
misappropriation of, or conflict with, any Intellectual Property by any other
person. Except as set forth in Schedule 2.11, neither the Company nor its
subsidiary has granted any royalty-bearing or exclusive licenses of any
Intellectual Property to any other person.
(b) "Intellectual Property" means in each case to the extent
used or held for use in the conduct of the business of the Company or its
subsidiary in the United States and Canada, all United States and Canadian (i)
inventions and discoveries (whether patentable or unpatentable and whether or
not reduced to practice), all improvements thereto, and all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof, (ii) trademarks, service marks, trade dress, logos, trade names and
corporate names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (iii)
copyrights and all applications, registrations and renewals in connection
therewith, (iv) know-how, trade secrets and confidential business information,
whether patentable or unpatentable and whether or not reduced to practice
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information and business and marketing plans and proposals), (v) computer
software (including data and related documentation), (vi) other proprietary
rights and (vii) copies and tangible embodiments thereof (in whatever form or
medium) located in the United States and Canada.
2.12 Governmental Authorizations; Compliance with Law.
Except as otherwise set forth in Schedule 2.12 and as required by the HSR Act,
the Company and its subsidiary hold all licenses, permits and other
governmental authorizations necessary to conduct their business as currently
conducted in all material respects and neither the Company nor its subsidiary
has received any notice of any violation of any law, statute, rule, regulation,
judgment, order, decree, permit, concession, franchise, or other
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<PAGE> 24
governmental authorization or approval applicable to it or to any of its
properties, except for violations which would not, individually or in the
aggregate, reasonably be expected to result in a liability in excess of $50,000
to the Company or its subsidiary. This Section 2.12 does not relate to matters
with respect to taxes which are the subject of Section 2.14, to employee
benefit matters which are the subject of Section 2.10 or to environmental
matters which are the subject of Section 2.17. Except as set forth in Schedule
2.12, and except for products liability matters which are covered by Section
2.23, the business of the Company and its subsidiary is being conducted and
since January 1, 1991 has been conducted in compliance with all laws, statutes,
rules, regulations, judgments, orders, decrees, permits, concessions,
franchises and other governmental authorizations and approvals applicable to
them or to any of their properties, except for any noncompliance with such
laws, statutes, rules, regulations, judgments, orders, decrees, permits,
concessions, franchises and other governmental authorizations and approvals
which would not, individually or in the aggregate, reasonably be expected to
result in a liability to the Company or its subsidiary in excess of $50,000.
2.13 Litigation. Except as otherwise set forth in Schedule
2.13, Schedule 2.14(d) or Schedule 2.14(e), there are no judicial or
administrative actions, proceedings or investigations pending or, to the
knowledge of the Seller, threatened, which involve the Company, its subsidiary
or any of their respective assets or properties.
2.14 Taxes. (a) Except as set forth on Schedule 2.14(a),
all material Returns (as such capitalized term (and any other capitalized term
used in this Section 2.14 without definition are defined in subsection (j)
below) in respect of each member of the Company Group required to be filed on
or before the Closing Date will by the Closing Date have been duly and timely
filed or the time for filing such Returns shall have been validly extended to a
date after the Closing Date. Except for Taxes set forth on Schedule 2.14(a)
and Taxes to the extent reflected or reserved against in the final Closing
Balance Sheet, all Material Taxes (whether or not shown on such Returns) due
and payable by or with respect to each member of the Company Group on or before
the Closing Date will by the Closing Date have been duly and timely paid.
Except for Taxes set forth on Schedule 2.14(a) and Taxes to the extent
reflected or reserved against in the final Closing Balance Sheet, all Material
Taxes required to be withheld by each member of the Company Group in connection
with amounts paid to any employee, independent contractor or creditor or other
third party on or prior to the Closing Date will by the Closing Date have been
duly and timely paid to the proper governmental authority or properly set aside
in accounts for such purpose. Except as set forth on Schedule 2.14(a), all
material Returns in respect of each member of the
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<PAGE> 25
Company Group required to be filed on or before the date hereof have been duly
and timely filed or the time for filing such Returns shall have been validly
extended. Except for Taxes set forth on Schedule 2.14(a) and Taxes to the
extent reflected or reserved against in the July Balance Sheet, all material
Taxes (whether or not shown on such Returns) due and payable by or with respect
to each member of the Company Group on or before the date hereof have been
duly and timely paid. Except for Taxes set forth on Schedule 2.14(a) and Taxes
to the extent reflected or reserved against in the July Balance Sheet, all
material Taxes required to be withheld by each member of the Company Group in
connection with amounts paid to any employee, independent contractor or
creditor or other third party on or prior to the date hereof have been duly and
timely paid to the proper governmental authority or properly set aside in
accounts for such purpose.
(b) Except as set forth on Schedule 2.14(b), no written
agreement or other document extending, or having the effect of extending, the
period of assessment or collection of Taxes in respect of any member of the
Company Group, and no power of attorney with respect to any such Taxes, has
been executed or filed with the IRS or any other taxing authority.
(c) Except as set forth on Schedule 2.14(c), (i) no member of
the Company Group has been a member of any affiliated, consolidated, combined
or unitary group for purposes of filing Returns or paying Taxes and (ii) there
are no tax allocation or tax sharing agreements between any member of the
Company Group, on the one hand, and the Seller or any affiliate of the Seller
(other than the Company Group) (the "Non-Company Affiliate"), on the other
hand.
(d) Except as set forth on Schedule 2.14(d), (i) no material
Taxes in respect of any member of the Company Group have been asserted by any
governmental authority since December 31, 1988 to be due, (ii) no revenue
agent's report or written assessment for Taxes has been issued by any
governmental authority in the course of any audit of Taxes in respect of any
member of the Company Group that has been completed since December 31, 1991,
and (iii) no issue has been raised by any governmental authority in the course
of any audit of Taxes in respect of any member of the Company Group that has
not been completed, which issue has been raised in a writing that has been
received by the Seller or any member of the Company Group or, to Seller's
knowledge, has been made or threatened (other than in writing) since December
31, 1995, (iv) there are no pending Tax audits, examinations, investigations or
proceedings relating to any member of the Company Group, which audits,
examinations, investigations or proceedings have been raised in a writing that
has been received by the Seller or any member of the Company Group, or, to
Seller's
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<PAGE> 26
knowledge, have been made or threatened (other than in writing) since December
31, 1995, (v) there are no Tax rulings, requests for rulings or closing
agreements relating to any member of the Company Group which could affect its
liability for Taxes for any period after the Closing, (vi) complete copies of
Returns for all members of the Company Group, that have been filed from and
after January 1, 1995 through the date hereof, have been made available to the
Purchaser prior to the date hereof, provided that with respect to federal
Income Taxes and state, local and foreign Income Taxes with respect to which
any member of the Company Croup has filed a combined, consolidated, or unitary
state, local or foreign Income Tax Return with either of the Seller or any of
the Non-Company Affiliates, the Seller has made available to the Purchaser
pro-forma Returns that include only those items relating to the Company Group,
which pro-forma Returns have been prepared on a basis consistent with the
actual federal Income Tax Returns or combined, consolidated or unitary state,
local or foreign Income Tax Returns to which they relate and (vii) the Income
Tax Returns of each member of the Company Group for all taxable periods ending
before December 31, 1990 have been examined by the relevant taxing authority or
the periods covered by such Returns have been closed by the applicable statute
of limitations.
(e) Except as set forth on Schedule 2.14(e), no claim has
been made by any taxing authority in any jurisdiction where any member of the
Company Group does not file Returns that such member is or may be subject to
taxation by that jurisdiction, which claim has been raised in a writing that
has been received by the Seller or any member of the Company Group or, to the
Seller's knowledge, has been made or threatened (other than in writing) since
December 31, 1995.
(f) Schedule 2.14(f) contains a list of states, territories
and jurisdictions (whether foreign or domestic) in which any member of the
Company Group has filed income, franchise, sales and use Tax Returns for
taxable periods ending after December 31, 1995.
(g) Except as set forth on Schedule 2.14(g), there are no tax
liens on any assets of any member of the Company Group, except liens for Taxes
which are not yet due and payable.
(h) Each member of the Company Group is a member of the
affiliated group (within the meaning of Code Section 1504) of corporations
filing a consolidated federal Income Tax Return of which the Seller is the
common parent.
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(i) Except as set forth on Schedule 2.14(i), no extension of
time within which to file any Return that relates to any member of the Company
Group has been requested which Return has not since been filed.
(j) Definitions.
(i) "Company Group" means the Company and the subsidiary set
forth in Schedule 2.5.
(ii) "IRS" means the United States Internal Revenue Service.
(iii) "Material" means which would, individually or in the
aggregate, reasonably be expected to result in a liability to the
Company or its subsidiary in excess of $50,000.
(iv) "Taxes" means taxes of any kind, levies or other like
assessments, customs, duties, imposts, charges or fees, including
without limitation all income taxes, franchise taxes, withholding
taxes, unemployment insurance taxes, social security taxes, sales and
use taxes, excise taxes, real and personal property taxes, stamp
taxes, transfer taxes, workers' compensation taxes, payroll taxes,
capital taxes, net worth taxes, estimated taxes and other similar
taxes or governmental charges imposed on or payable to the United
States or any state, county, local or foreign government, subdivision
or agency thereof, together with all interest and penalties and other
additions payable with respect thereto.
(v) "Returns" means any return, report, declaration, form or
statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
2.15 Absence of Changes. Since July 25, 1997, other than in
connection with the transactions contemplated by this Agreement or as set forth
in the schedules to this Agreement:
(a) there has not been any material adverse change or event
in the business or financial condition of the Company and its subsidiary taken
as a whole, other than those relating to or as may be a result of (i) the
transactions contemplated by this Agreement or (ii) generally applicable
economic conditions or the Company's industry in general;
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(b) the Company and its subsidiary have conducted their
business in the ordinary course consistent with past practice, and neither the
Company nor its subsidiary has:
(i) purchased or redeemed any shares of its capital stock or
issued or agreed to issue any capital stock or other equity securities
or amend any of the terms of any equity securities outstanding on the
date hereof;
(ii) incurred any long-term indebtedness for borrowed money
or entered into any guaranty;
(iii) mortgaged, pledged or, except for Permitted Liens,
subjected (or permitted to be subjected) to any Lien any of its
properties or assets;
(iv) made any material change in its accounting methods,
principles or practices;
(v) other than for fair value in the ordinary course of
business consistent with past practice, sold any assets of the Company
or its subsidiary;
(vi) other than in the ordinary course of business consistent
with past practice, increased the benefits payable under or
established any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including without
limitation the granting of stock options, stock appreciation rights,
performance awards or restricted stock awards), stock purchase or
other employee benefit or compensation plan, or in any other fashion
increased the compensation payable or to become payable to any
officers or employees of the Company or its subsidiary, or entered
into any contract or other binding commitment to effect any of the
foregoing;
(vii) amended the Certificate of Incorporation or By-Laws of
the Company or its subsidiary;
(viii) canceled or forgiven any debts or claims, except in
the ordinary course of business consistent with past practice;
(ix) entered into any agreement, contract, lease or license
(or series of related agreements, contracts, leases and licenses)
outside the ordinary course of business;
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(x) approved any new capital expenditure in excess of
$100,000; or
(xi) changed its pricing, marketing and sales practices, in
any material respects, other than in the ordinary course of business
consistent with past practice;
provided, however, that no provision of this Agreement shall restrict or
(except for Sections 1.3 and 1.4) otherwise adversely affect the ability of the
Company or its subsidiary to distribute all of its cash, cash equivalents and
intercompany accounts receivable or use all of its cash and cash equivalents on
or prior to the close of the business day immediately preceding the Closing
Date, through legal dividends to its stockholders, repayment of outstanding
liabilities or otherwise.
2.16 Insurance. Schedule 2.16 lists, as of the date hereof,
all of the policies of insurance carried by the Company or its subsidiary or
covering the Company or its subsidiary or any of their assets or properties,
specifying in each case the policy limit, type of coverage and deductibles.
Such policies are in full force and effect and all premiums due with respect to
all periods to and including the Closing Date have either been paid or adequate
provisions for the payment by Seller thereof has been made. Neither the Seller
nor any of its subsidiaries has received any notice of increase of premiums
with respect to, or cancellation or non-renewal of, any of such insurance
policies. To the knowledge of the Seller, neither the Seller nor any of its
subsidiaries has failed to give any notice or present any claim under any of
such insurance policies relating to the business, assets or properties of the
Company or its subsidiary in due and timely fashion or has otherwise, through
any act, omission or nondisclosure, jeopardized or impaired full recovery under
such policies, except where such failures, acts, omissions or nondisclosures
would not, individually or in the aggregate, reasonably be expected to result
in a liability to the Company or its subsidiary in excess of $50,000. There
are no claims by the Seller or any of its subsidiaries under any of such
policies relating to the business, assets or properties of the Company or its
subsidiary as to which any insurance company is denying liability or defending
under a reservation of rights or similar clause.
2.17 Environmental Compliance and Conditions. (a) Except as
set forth on Schedule 2.17, the Company and its subsidiary have, to the
knowledge of the Seller, all permits, licenses, authorizations, registrations
and other governmental consents required under federal, state and local laws
and regulations, statutes and ordinances ("Environmental Laws") governing any
matters ("Environmental Matters") arising out of, resulting from or relating to
the pollution, contamination or protection of the environment, including laws
relating to emissions, discharges, releases or
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threatened releases of pollutants, contaminants, hazardous or toxic materials,
wastes or chemicals ("Hazardous Substances") into ambient air, surface water,
groundwater or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants or hazardous or toxic materials or waste and all such
permits are in full force and effect except where the failure to hold such
licenses, permits and authorizations would not, individually or in the
aggregate, reasonably be expected to result in a liability to the Company or
its subsidiary in excess of $50,000.
(b) Except as set forth on Schedule 2.17, the Company and its
subsidiary are in compliance with and since June 30, 1993 have been in
compliance with all applicable Environmental Laws or any written notice or
demand letter issued thereunder, except where the failure to so comply would
not, individually or in the aggregate, reasonably be expected to result in a
liability to the Company or its subsidiary in excess of $50,000.
(c) Except as set forth in Schedule 2.17, none of the
Company, its subsidiary or the Seller has received any notice (written or oral)
or other communication that the Company or its subsidiary (or the Seller with
respect to the Company or its subsidiary) is or may be a potentially
responsible person or otherwise liable in connection with any waste disposal
site allegedly containing, or other location used for the disposal of, any
Hazardous Substances.
2.18 Affiliate Transactions. Except as set forth in Schedule
2.18, neither the Company nor its subsidiary is party to any agreement with (a)
any of their respective directors or officers or (b) the Seller or any of its
subsidiaries (other than the Company and its subsidiary). Except as set forth
in Schedule 2.18, neither the Seller nor any of its affiliates (other than the
Company and its subsidiary) owns any property or asset which is material to and
used by the Company or its subsidiary. Schedule 2.18 sets forth a list of all
services provided by the Seller or any of its subsidiaries (other than the
Company and its subsidiary) to the Company or its subsidiary.
2.19 Banking and Agency Arrangements. Schedule 2.19 sets
forth a list of: (a) each bank, savings and loan or similar financial
institution in which the Company or its subsidiary has an account or safe
deposit box or other custodial arrangement and the numbers of such accounts or
safe deposit boxes maintained by the Company or its subsidiary and (b) the
names of all persons authorized to draw on each such account or to have access
to any such safe deposit box facility.
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2.20 Customers. Schedule 2.20 lists for the 1996 fiscal year
(a) the names and addresses of the five largest customers of the Company and
its subsidiary based on the aggregate value of goods and services ordered from
the Company and its subsidiary by such customers during such year and (b) the
amount for which each such customer was invoiced during such year. The Seller
has no knowledge that any of the customers listed on Schedule 2.20 (i) has
terminated or cancelled its business relationship with the Company or its
subsidiary, (ii) intends within the six-month period after the Closing Date to
order materially less quantities of the Company's products as compared to the
corresponding period during 1996-1997 or (iii) has requested a discount from
those prices charged to such customers in 1997 to date.
2.21 Suppliers; Raw Materials. Schedule 2.21 lists for the
1996 fiscal year (a) the names and addresses of the five largest suppliers of
the Company and its subsidiary based on the aggregate value of raw materials,
supplies, component parts, merchandise and other goods and services ordered by
the Company and its subsidiary from such suppliers during such year and (b) the
amount for which each such supplier invoiced the Company and its subsidiary
during such year. The Seller has no knowledge that any of the suppliers listed
on Schedule 2.21 (i) has terminated or cancelled its business relationship with
the Company or its subsidiary, (ii) has announced a material price increase
with respect to any of its products since July 25, 1997 or (iii) will not
supply materially the same quantities of products to the Company within the
six-month period after the Closing Date as compared to the corresponding period
during 1996-1997.
2.22 Brokers. All negotiations relating to this Agreement
and the transactions contemplated hereby have been carried out without the
intervention of any person acting on behalf of the Seller or the Company in
such manner as to give rise to any valid claim against the Purchaser, the
Seller or the Company for any brokerage or finder's commission, fee or similar
compensation.
2.23 Products. To the Seller's knowledge, there are no
statements, citations or decisions by any governmental entity stating that any
product currently manufactured, sold, distributed or marketed by the Company or
its subsidiary ("Products") is defective or unsafe or fails to meet any
standards promulgated by any governmental entity. Except as set forth on
Schedule 2.23, there is, to the knowledge of the Seller, no defect relating to
any Product that, to the Seller's knowledge, may impose upon the Company or its
subsidiary a duty to recall any Product or a duty to warn customers of such a
defect. No Product is currently the subject of any recall campaign, whether
voluntary or involuntary. Except as set forth on Schedule 2.23, no
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Product is subject to any express guaranty or warranty beyond the applicable
standard terms and conditions of sale, a copy of which is included in Schedule
2.23.
2.24 Guaranties. Schedule 2.24 sets forth a list of each of
the Credit Support Arrangements (as defined in Section 4.8), copies of which
have previously been provided to the Purchaser.
3. Representations and Warranties of the Purchaser. The
Purchaser represents and warrants to the Seller as follows:
3.1 Corporate Status and Authority. The Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the power and authority to execute and
deliver this Agreement and perform its obligations hereunder. The execution,
delivery and performance of this Agreement have been duly authorized by the
Board of Directors of Purchaser which constitutes all necessary corporate
action on the part of the Purchaser for such authorization. This Agreement has
been duly executed and delivered by the Purchaser and constitutes the valid and
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms, except as limited by laws affecting the enforcement
of creditors' rights generally or by general equitable principles.
3.2 No Conflicts. (a) Except as set forth in Schedule 3.2,
the execution, delivery and performance of this Agreement by the Purchaser will
not result in (i) any conflict with the certificate of incorporation or by-laws
of the Purchaser, (ii) subject to obtaining the consents referred to in Section
3.2(b), any breach or violation of or default under any law, rule, statute,
regulation, judgment, order, decree, license, permit or other governmental
authorization or any mortgage, lease, agreement, deed of trust, indenture or
any other instrument to which the Purchaser is a party or by which the
Purchaser or any of its properties or assets are bound, or (iii) the creation
or imposition of any Lien other than Liens created by the Seller, except in the
case of clause (ii) only for such breaches, violations or defaults which would
not, individually or in the aggregate, impair the ability of the Purchaser to
fulfill its obligations hereunder.
(b) Except as set forth in Schedule 3.2, no consent, approval
or authorization of or filing with any governmental authority or third party is
required on the part of the Purchaser in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except filings, if any, required with respect to the HSR Act.
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3.3 Financial Ability to Perform. The Purchaser will have
sufficient funds on hand at the Closing Date to purchase the Shares on the
terms and conditions contemplated by this Agreement and to consummate the
transactions contemplated hereby.
3.4 Litigation. There are no judicial or administrative
actions, proceedings or investigations pending or, to the knowledge of the
Purchaser, threatened, which question the validity of this Agreement or any
action taken or to be taken by the Purchaser in connection herewith.
3.5 Purchase for Investment. The Purchaser is acquiring the
Shares for investment and not with a view toward any resale or distribution
thereof except in compliance with the Securities Act of 1933, as amended.
3.6 Brokers. All negotiations relating to this Agreement and
the transactions contemplated hereby have been carried out without the
intervention of any person acting on behalf of the Purchaser in such manner as
to give rise to any valid claim against the Purchaser, the Seller or the
Company for any brokerage or finder's commission, fee or similar compensation.
4. Certain Covenants.
4.1 Obligations of Both the Parties.
4.1.1 Closing Conditions. The parties shall use their
commercially reasonable best efforts to bring about the satisfaction as soon as
practicable of all the conditions contained in Section 6 and to effect the
consummation of the transactions contemplated by this Agreement by November 3,
1997. Without limiting the generality of the foregoing, the parties shall
apply for and diligently prosecute all applications for, and shall use their
commercially reasonable best efforts promptly to obtain, such consents,
authorizations and approvals from such governmental authorities and third
parties as shall be necessary to permit the consummation of the transactions
contemplated by this Agreement. In the event that all such consents,
authorizations and approvals are not obtained by the Closing and the Purchaser
waives the condition set forth in Section 6.4.6, then the Purchaser will, and
will cause the Company to, indemnify the Seller and its affiliates from and
against any loss, obligation, cost or expense (including reasonable attorneys'
fees) that any of them may suffer as a result of such consents, authorizations
and approvals having not been obtained.
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4.1.2 Hart-Scott-Rodino Act. Each of the Seller and the
Purchaser shall (a) prepare and file as promptly as practicable with the
Department of Justice and the Federal Trade Commission the notification and
report form, if any, required for the transactions contemplated hereunder by
the HSR Act, including without limitation, a request for early termination of
the waiting period thereunder, and (b) respond promptly to inquiries, if any,
from the Federal Trade Commission or the Department of Justice in connection
with such filing. The Purchaser will be responsible for all filing fees in
connection with the filings required by the HSR Act and each party shall bear
the expenses for the preparation of their documentation for the filing. If the
Purchaser concludes that no filing is required under the HSR Act, it will
provide the Purchaser on the Closing Date with an officer's certificate
containing mutual acceptable representations and warranties regarding the facts
underlying the exemption on which the Purchaser is relying.
4.2 Obligations of the Seller.
4.2.1 Conduct of Business, etc. From the date hereof until
the Closing, except (a) for entering into this Agreement, (b) for the effect of
the consummation of the transactions contemplated hereby, (c) for the
performance of the Seller's obligations hereunder, (d) as contemplated by the
Company's budgets heretofore made available to the Purchaser or (e) as
otherwise consented to by the Purchaser in writing, such consent not to be
unreasonably withheld or delayed, the Seller shall cause the Company and its
subsidiary to (i) conduct their business in the ordinary course consistent with
the manner in which it previously has been conducted, (ii) not take any action
that would cause a material breach of any representation or warranty of the
Seller contained in this Agreement, and (iii) not take any action that would be
reasonably expected to have a material adverse effect on the Company's
business, properties and relationships with its customers, suppliers and
employees.
4.2.2 Access and Information. The Seller shall, and shall
cause the Company and its subsidiary to (a) give to the Purchaser or its
authorized representatives reasonable access at all reasonable times to the
properties, books and records of the Company and its subsidiary and of the
Seller and its affiliates to the extent they reasonably relate to business,
assets or properties of the Company and its subsidiary and (b) furnish to the
Purchaser or its authorized representatives such financial and operating data
and other information with respect to the business and properties of or
otherwise relating to the Company or its subsidiary, in each case, as the
Purchaser may reasonably request, provided that the Purchaser shall not be
entitled to any such access, information or documents for the purposes of
conducting any environmental audit or
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assessment without the prior written consent of the Seller. All such
information and documents obtained by the Purchaser shall be subject to the
terms of the Confidentiality Agreement, dated September 20, 1997 (the
"Confidentiality Agreement"), between the Purchaser and the Seller. The
Purchaser hereby agrees that the provisions of the Confidentiality Agreement
will apply to any properties, books, records, data, documents or other
information relating to the Seller provided to the Purchaser or its affiliates
or any of their respective advisers or employees pursuant to this Agreement.
4.3 Payment of Transaction-Related Taxes. Each of the Seller
and the Purchaser shall be responsible for 50% of any sales, use, transfer,
documentary or other similar Taxes that relate to the purchase and sale of the
Shares pursuant to this Agreement, provided that in the event such Taxes exceed
$50,000 then the Seller shall be solely responsible for such excess.
4.4 Taxes.
(a) Payments
(i) Seller's Responsibility. The Seller shall be responsible
for and pay or cause to be paid (without duplication) (A) all Combined
Income Taxes with respect to members of the Company Group, (B) any
liability of any member of the Company Group for Taxes arising under
Section 1.1502-6 of the Treasury Regulations or analogous provisions
of state, local or foreign law and (C) all other Income Taxes (but
excluding any such Income Taxes paid to the relevant taxing
authorities on or before the Closing Date) with respect to members of
the Company Group for taxable periods (or portions thereof) ending on
or before the Closing Date (determined by an interim closing of the
books of the member of the Company Group as of the close of business
on the Closing Date) but only to the extent that the liability for
such Taxes exceeds the amount of such Taxes reflected on the Final
Closing Balance Sheet (the "Separate Income Taxes"), provided that the
Seller shall not be liable for any interest, penalties or additions to
such Taxes due to the Purchaser's failure to timely file any Return
for which the Purchaser has filing responsibility hereunder or timely
pay any Tax with respect to such Returns unless such failure is caused
(in whole or in part) by any action or inaction of the Seller or any
Non-Company Affiliate. The Seller shall not be responsible for Income
Taxes of the Purchaser or a member of the Company Group except to the
extent provided in the preceding paragraph or as otherwise
specifically provided herein.
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(ii) The Purchaser's Responsibility. The Purchaser (A) shall
pay or cause to be paid to the relevant taxing authority all Taxes
payable with respect to any member of the Company Group that are not
described as being the responsibility of the Seller in Section
4.4(a)(i) or Section 4.4(i) and (B) notwithstanding the provisions of
Section 4.4(m) of this Agreement, shall pay, with respect to Combined
Income Taxes, to the Seller (x) $2,357,000 within 30 days after the
Closing Date and (y) $1,650,000 on or before February 15, 1998. On the
day the Closing Balance Sheet becomes final, Purchaser shall pay to
Seller, or Seller shall pay to Purchaser, as appropriate, an amount
reflecting the difference between the amount of such Taxes reflected
on the Final Closing Balance Sheet and $4,007,000. This Section
4.4(a)(ii) shall in no manner operate to limit Purchaser's claim for a
breach of representation pursuant to Section 7.2.1 herein.
(b) Returns.
(i) Seller's Responsibility. The Seller and the Purchaser
shall cause the Company and other members of the Company Group, to the
extent permitted by law, to join, for all taxable periods (or portions
thereof) ending on or prior to the Closing Date, in (A) the
consolidated federal Income Tax Returns of the affiliated group of
corporations filing a consolidated federal Income Tax Return, of which
the Seller is a member (the "Seller's Consolidated Group") and (B) the
combined, consolidated or unitary Returns for state and local Income
Taxes with respect to (x) which the Company or such other member filed
such a Return for the most recent taxable period for which a Return
has been filed prior to the Closing Date and may file such a Return
for such taxable periods ending on or prior to the Closing Date or (y)
which the Company or such other member is required to file such a
Return for such taxable periods ending on or prior to the Closing
Date. The income, deductions and credits of the Company or such other
member of the Company Group for taxable periods ending on or prior to
the Closing Date (including, without limitation, income attributable
to the Section 338(h)(10) Elections) shall be included in the
consolidated federal Income Tax Returns of the Seller's Consolidated
Group and in such combined, consolidated and unitary Returns where
applicable.
(ii) Separate Income Tax Returns
(A) Return other than Straddle Returns. The
Purchaser shall prepare (or cause to be prepared), timely
deliver (or cause to be timely delivered) to the Seller and
timely file (or cause to
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be timely filed) all Income Tax Returns of any member of the
Company Group (other than those addressed in (b)(i) above) for
any taxable period ending on or before the Closing Date, which
Returns are not required to be filed as of the Closing Date.
The Seller shall, consistent with the manner that payments
must be made with respect to each of such Returns, upon
written notice by the Purchaser, provide the Purchaser with
funds to timely pay the portion of the Tax liability shown on
such Return which is a Separate Income Tax described as being
the responsibility of the Seller under Section 4.4(a)(i)(C),
and Purchaser shall pay or cause to be paid such amounts to
the appropriate taxing authority.
(B) Straddle Returns. The Purchaser shall prepare
(or cause to be prepared) and file (or cause to be filed) all
Income Tax Returns for any member of the Company Group for
taxable periods commencing prior to the Closing Date and
ending subsequent to the Closing Date (the "Straddle Returns"
and the "Straddle Periods"). The Seller shall, consistent
with the manner that payments must be made with respect to
each of such Returns, upon written notice by the Purchaser,
provide the Purchaser with funds to timely pay the portion of
the Tax liability shown on such Return which is a Separate
Income Tax described as being the responsibility of the Seller
under Section 4.4(a)(i)(C), and Purchaser shall pay or cause
to be paid such amounts to the appropriate taxing authority.
(C) Filing Procedures. The Returns referred to in
(A) and (B) above, shall, to the extent not otherwise required
by law, be prepared in a manner consistent with the Company
Group's past practice (including any Tax elections and methods
of accounting). With respect to any Return (including amended
Returns) referred to in (A) and (B) above or any other Return
(including amended Returns) relating to Separate Income Taxes,
the Purchaser shall provide to the Seller a draft of such
Return and Tax information (including, without limitation,
work papers and schedules) for review of such Return in a
timely manner no later than 45 days prior to the due date
(taking into account valid extensions) of such Return. The
Seller shall have the right at its expense to review all work
papers and procedures used to prepare each such draft Return.
Unless the Seller timely objects as specified
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in this Section 4.4(b)(ii)(C), each such draft Return shall be
final and binding on the parties without further adjustment.
If the Seller objects to any item on any such draft Return, it
shall, within 22 days after delivery of such draft Return,
notify the Purchaser in writing that it so objects, specifying
any such item and stating the factual or legal basis for any
such objection. If a notice of objection shall be duly
delivered, any disputed item shall be resolved pursuant to the
Tax Dispute Resolution Mechanism. Upon resolution of all
disputed items, such Return shall be adjusted to reflect such
resolution and shall be final and binding on the parties
without further adjustment.
(D) Notwithstanding the other provisions of this
Section 4.4, (x) if the Purchaser shall fail to provide notice
to the Seller with respect to a Return or to an audit relating
to a Separate Income Tax as provided in Section 8.8, the
Seller shall not be required to pay to the Purchaser pursuant
to this Section 4.4 any portion of such Separate Income Tax to
the extent that such failure to give notice results in a lack
of actual notice to the Seller and the Seller is materially
prejudiced as a result of such failure or (y) if the Purchaser
shall file any Return (including amended Returns) relating to
any Separate Income Tax or any Return (including amended
Returns) described in Section 4.4(b)(ii)(A) or (B) without
complying with the provisions of Section 4.4(b)(ii)(C), the
Seller shall not be required to pay to the Purchaser pursuant
to this Section 4.4 any portion of such Separate Income Tax to
the extent that the Seller is materially prejudiced as a
result of such failure to comply (in each case, except to the
extent such failure was caused by Seller).
(iii) Purchaser's Responsibility. The Purchaser shall file,
or cause to be filed, all Returns relating to the business or assets
of the Company Group and which do not also relate to the Seller or a
Non-Company Affiliate other than those Returns described in Section
4.4(b)(i).
(c) Cooperation; Access; Record Retention. The Purchaser
and the Seller shall cooperate, and the Purchaser shall cause the Company Group
to cooperate with the Seller, with respect to the preparation and filing of any
Return for which the other is responsible pursuant to Section 4.4(b)
(including, but not limited to, providing work papers and schedules). The
parties agree to retain, and to cause the Company Group to retain, all books,
records, Returns, schedules, documents, work papers and other material items of
information relating to Taxes for periods (or portions thereof)
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ending or prior to on the Closing Date for the longer of (i) the seven-year
period beginning on the Closing Date or (ii) the full period of the applicable
statute of limitations, including any extension thereof.
(d) Refunds. Subject to the provisions of this Section
4.4(d), (i) the Seller shall be entitled to retain, or receive prompt payment
from the Company or the Purchaser of, any refund or credit with respect to
Income Taxes, plus any interest received with respect thereto from the
applicable taxing authorities, net of any Tax cost to the Purchaser or any
member of the Company Group with respect to the receipt of such refund or such
interest, relating to any member of the Company Group for periods on or prior
to the Closing Date, and (ii) the Purchaser or the Company shall be entitled to
retain, or receive prompt payment from the Seller of, any refund or credit with
respect to Taxes, plus any interest received with respect thereto from the
applicable taxing authorities, relating to any member of the Company Group for
periods after the Closing Date, provided that no member of the Company Group
shall carry back any item of loss, deduction or credit from a Return described
as being the responsibility of the Purchaser in Section 4.4(b)(iii), to a
Return described as being the responsibility of the Seller in Section
4.4(b)(i), and provided, further that any refund relating to Income Taxes that
is reflected on the Final Closing Balance Sheet, net of any Tax cost to the
Seller or any Non-Company Affiliate with respect to the receipt of such refund,
shall be for the benefit of the Purchaser, subject to the provisions of this
Section 4.4(d). The Purchaser and the Seller shall cooperate, and the
Purchaser shall cause the Company Group to cooperate with the Seller, with
respect to claiming any refund or credit with respect to Taxes referred to in
this Section 4.4(d). Such cooperation shall include providing all relevant
information available to the Seller or the Purchaser (through the Company or
otherwise), as the case may be, with respect to any such claim; filing and
diligently pursuing such claim (including by litigation, if appropriate);
paying over to the Seller or the Purchaser, as the case may be, and, in
accordance with this provision, any amount received by the Purchaser (or any
member of the Company Group) or the Seller, as the case may be, with respect to
such claim; and, in the case of the party filing such a claim, consulting with
the other party prior to agreeing to any disposition of such claim, provided
that the foregoing shall be done in a manner so as not to interfere
unreasonably with the conduct of the business of the parties, provided, further
that neither the Seller, the Purchaser nor the Company Group shall have an
obligation to pursue or assist in the pursuit of a refund in the event they
determine, in their reasonable good faith judgement, that the pursuit of such
refund would have an adverse effect upon the tax position of the Seller, the
Purchaser or any member of the Company Group, as the case may be. The party
that is to enjoy the economic
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benefit of a refund under this Section 4.4(d) shall bear the out-of-pocket
expenses of the other party reasonably incurred in seeking such refund. If one
party is to enjoy the economic benefit of a refund under this Section 4.4(d),
but the refund involves an issue that could have a material adverse effect on
the other party, the party that would enjoy the economic benefit shall give
notice to the other party and keep the other party reasonably informed with
respect to such issue.
(e) Audits. Each of the Purchaser and the Seller shall
promptly notify the other in writing within ten business days from its receipt
of written notice of (i) any pending or threatened Tax audits or assessments of
any member of the Company Group, as long as any taxable periods ending on or
prior to, or beginning before and ending after, the Closing Date remain open,
and (ii) any pending or threatened Tax audits or assessments of the Purchaser
or the Seller, or any of its affiliates thereof, in each case that may affect
the Tax liabilities of any member of the Company Group for any taxable period
ending on or prior to, or beginning before and ending after, the Closing Date.
The Seller shall have the right to represent the interests of the Company Group
in any Tax audit or administrative or court proceeding to the extent relating
to Income Taxes for periods on or prior to the Closing Date, and to employ
counsel of its choice at its expense. The Purchaser shall have the right to
represent the interests of the Company Group in any Tax audit or administrative
or court proceeding not described in the immediately preceding sentence and to
employ counsel of its choice at its expense. The Purchaser and the Seller
shall reasonably cooperate, and the Purchaser shall cause the Company Group to
reasonably cooperate with the Seller, with respect to any Tax audit or
administrative or court proceeding relating to Taxes referred to in this
Section 4.4(e). Such cooperation shall include providing all relevant
information available to the Seller or the Purchaser (through the Company or
otherwise), as the case may be, with respect to any such audit or proceeding
and making personnel available at and for reasonable times, including, without
limitation, to prepare responses to requests for information, provided that the
foregoing shall be done in a manner so as not to interfere unreasonably with
the conduct of the business of the parties.
(f) Section 338(h)(10) Election.
(i) Election; Payment. The Purchaser and the Seller shall
join in an election with respect to each member of the Company Group
pursuant to section 338(h)(10) of the Code, and the Purchaser shall
and the Seller shall (or shall cause the proper Non-Company Affiliate
to) join in all comparable elections under state and local Income Tax
law (the "Section 338(h)(10) Election") and, if applicable, any
Additional Section 338 Election. The Seller shall be responsible for
and shall indemnify the Purchaser and the Company Group from any
Losses arising from any Section 338(h)(10) Election or
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Additional 338 Election being invalid or improperly or untimely filed
to the extent attributable to (i) Seller's failure to timely or
validly execute any Section 338 Forms or file any Section 338 Forms
with any applicable Income Tax Return (except, in each case, to the
extent caused by Purchaser), (ii) any information provided by Seller
in connection with the Section 338 Forms being inaccurate or
incomplete or (iii) the inaccuracy of the representation set forth in
Section 2.14(h). Buyer shall be responsible for and shall indemnify
Seller and the Non-Company Affiliates from any Losses arising from any
Section 338(h)(10) Election or Additional 338 Election being invalid
or improperly or untimely filed to the Purchaser's failure to timely
or validly execute or file any Section 338 Forms (except, in each
case, to the extent caused by Seller) or (ii) any information provided
by Purchaser in connection with the Section 338 Forms being inaccurate
or incomplete.
(ii) Forms. The Purchaser shall be responsible for preparing
drafts of all forms, attachments and schedules necessary to effectuate
the Section 338(h)(10) Election and the Additional Section 338
Elections (including, without limitation, IRS Form 8023-A (or its
successor form) and any similar forms under applicable state or local
Income Tax law (each such form a "Section 338 Form")). The Seller
shall cooperate in good faith with the Purchaser, and shall promptly
provide the Purchaser with all information reasonably requested by the
Purchaser and relevant to the preparation of the Section 338 Forms.
At least 90 days prior to the latest date for the filing of each
Section 338 Form, the Purchaser shall furnish the Seller with a copy
of each such draft Section 338 Form prepared by the Purchaser together
with (x) a proposed allocation of the purchase price for the deemed
sale of assets resulting from the Section 338(h)(10) Elections and the
Additional Section 338 Elections (referred to in applicable Treasury
Regulations under Section 338 as the "MADSP") among the assets
acquired in the deemed sale and (y) a copy of a report of the proposed
allocation prepared by a firm of independent appraisers of nationally
recognized reputation (the "Report"), the fees and expenses of which
shall be borne by the Purchaser, setting forth the estimated fair
market values of the assets of the Company and, to the extent relevant
to such deemed sale, other member of the Company Group. The Seller
and the Purchaser shall cooperate in good faith in determining the
amount of the liabilities on the Closing Date of the Company and those
members of the Company Group to which the Section 338(h)(10) Elections
and the Additional Section 338 Elections apply and the MADSP, provided
that the Seller shall accept the Purchaser's determination (the
"Determination") of the amount of such liabilities, the MADSP, and the
allocation thereof if the Determination is reasonable, consistent with
the Report
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and in accordance with applicable Tax law. Any disputes with respect
to whether the Determination meets the foregoing standards shall be
governed by the Tax Dispute Resolution mechanism.
(g) Modification; Revocation. The Purchaser and the Seller
agree that none of them shall, or shall permit any of their affiliates to, take
any action to modify the Section 338 Forms following the execution thereof, or
to modify or revoke the Section 338(h)(10) Election and the Additional Section
338 Elections following the filing of the Section 338 Forms, without the
written consent of the Seller and the Purchaser, as the case may be.
(h) Consistent Treatment. The Purchaser and the Seller
shall, and shall cause their respective affiliates to, (i) file all Returns in
a manner consistent with the information contained in the Section 338 Forms and
the Final Allocation, and (ii) to act in accordance with the information
contained in the Section 338 Forms and the final determination of the MADSP and
the Final Allocation in the course of any tax audit, tax appeal or litigation
unless otherwise required by law. The Seller shall file (or cause to be filed)
a copy of (i) the executed Form 8023-A with its consolidated federal Income Tax
Return for the taxable year including the Closing Date and (ii) any analogous
state or local forms required to be filed in the combined, consolidated or
unitary state Income Tax Returns with respect to which any member of the
Company Group is required to file with either of the Seller or any of the
Non-Company Affiliates for the taxable year including the Closing Date.
(i) Taxes and Expenses Resulting from Election. The Seller
shall be responsible for all Income Taxes resulting from (i) the Section
338(h)(10) Elections, (ii) any other elections pursuant to Section 338 of the
Code or analogous provisions of state or local law that are made or deemed to
be made automatically as a result of the Section 338(h)(10) Elections and (iii)
any election under Code Section 338 or analogous provisions of state or local
law with respect to jurisdictions in which any member of the Company Group has
filed any Income Tax return or has been included in a combined, consolidated or
unitary Income Tax Return, prior to the Closing Date and with respect to
taxable periods ending after December 31, 1995 (elections made pursuant to part
(ii) and (iii) of this Section 4.4(i) referred to herein as the "Additional 338
Elections"). Notwithstanding anything herein to the contrary, Seller's
responsibility shall, without limitation, include the payment of all Income
Taxes arising with respect to all elections under Code Section 338 or analogous
provisions of state or local law with respect to the states of New York,
California, Pennsylvania and Michigan, and Seller shall, or shall cause the
appropriate Non-Company Affiliate to join in any such elections to the extent
necessary to obtain an asset basis step-up in such
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states. Notwithstanding any other provision of this Agreement, the Purchaser
and its Affiliates (including the Company Group following the Closing) shall
bear all administrative, appraisal, legal, accounting and similar expenses
resulting from the making of the Section 338(h)(10) Election and the additional
338 Elections of the Purchaser and its Affiliates but not of the Seller and its
Affiliates.
(j) Notices, etc. All notices and other materials required
to be provided pursuant to this Section 4.4 shall be provided as set forth in
Section 8.8, but if to the Seller, additional copies shall be sent to Khadija
Amsrouy, Esq., Debevoise & Plimpton, 875 Third Avenue, New York, New York
10022.
(k) Conduct of Tax Affairs. Notwithstanding any other
provision of this Agreement, the Purchaser shall be responsible for, and
neither Seller nor any Non-Company Affiliates shall bear any incremental
liability for Taxes that results from (i.e., that would not have arisen but
for) the failure, following the Closing, of the Purchaser to cause any member
of the Company Group to carry on its business on the Closing Date only in the
ordinary course and in substantially the same manner as hereto conducted.
(l) Tax Dispute Resolution Mechanism. Wherever in this
Section 4.4 it shall be provided that a dispute shall be resolved pursuant to
the "Tax Dispute Resolution Mechanism," such dispute shall be resolved as
follows: (i) the parties will in good faith attempt to negotiate a settlement
of the dispute, (ii) if the parties are unable to negotiate a resolution of the
dispute within 15 days, the dispute will be submitted to Ernst & Young or other
independent accountants of nationally recognized standing reasonably
satisfactory to the Seller and the Purchaser (the "Tax Dispute Accountants")
(iii) the parties will present their arguments to the Tax Dispute Accountants
within 15 days after submission of the dispute to the Tax Dispute Accountants,
(iv) the Tax Dispute Accountants will resolve the dispute, in a fair and
equitable manner and in accordance with the applicable Tax law and the
provisions of this Agreement, within 15 days after the parties have presented
their arguments to the Tax Dispute Accountants, whose decision shall be final,
conclusive and binding on the parties, (v) any payment to be made as a result
of the resolution of a dispute shall be made, and any other action to be taken
as a result of the resolution of a dispute shall be taken, on or before the
later of (A) the date on which such payment or action would otherwise be
required or (B) the third business day following the date on which the dispute
is resolved (in the case of a dispute resolved by the Tax Dispute Accountants,
such date being the date on which the parties receive written notice from the
Tax Dispute Accountants of their resolution), provided that if a dispute with
respect to an item in a Tax Return (including, but not limited to, Section 338
Forms) shall not be
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resolved on or before the date that is three business days prior to the latest
date on which such Tax Return may be filed under applicable Tax law, then (x)
the party having the responsibility for filing such Tax Return pursuant to
Section 4.4 shall file such Tax Return reflecting all disputed items that have
been resolved in the manner so resolved, and reflecting all unresolved disputed
items in the manner proposed by such party, and shall, upon the resolution of
all such unresolved disputed items, file an amended Tax Return reflecting the
resolution thereof in the manner so resolved, and (y) the party who is not
responsible for filing such Tax Return shall (or shall cause to) execute such
Tax Return if such execution is reasonably necessary for such Tax Return to be
effective and (vi) the fees and expenses of the Tax Dispute Accountants in
resolving a dispute will be borne by the Seller and the Purchaser in accordance
with the principles set forth in the last sentence of Section 1.4(c).
(m) Tax Sharing Agreements. On the Closing Date, all Tax
sharing agreements and other similar arrangements between any member of the
Company group, on the one side, and Seller and any Non-Company Affiliate on the
other side, shall be terminated, and no additional payments shall be made
thereunder.
(n) Definitions.
(i) "Code" means the United States Internal Revenue Code of
1986, as amended.
(ii) "Combined Income Taxes" means (A) all federal Income
Taxes payable with respect to which any member of the Company Group
has filed or is required to file (pursuant to Section 4.4(b)(i)) a
consolidated federal Income Tax Return with the consolidated group of
which the Seller is a member (the "Seller's Consolidated Group"),
payable with respect to such member of the Company Group for all
taxable periods or portions thereof ending on or prior to the Closing
Date, (B) all state and local Income Taxes with respect to which any
member of the Company Group has filed or is required to file pursuant
to Section 4.4(b)(i) a combined, consolidated or unitary state or
local Income Tax Return with either of the Seller or any of the Non-
Company Affiliates, payable with respect to such member of the Company
Group for all taxable periods or portions thereof ending on or prior
to the Closing Date and (C) all Income Taxes resulting from the
Section 338(h)(10) Elections.
(iii) "Income Taxes" means any Taxes computed in whole or in
part based on or by reference to net income, capital, net worth or
profit and any
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franchise, alternative, minimum, accumulated earnings or personal
holding company Tax (including all interest and penalties thereon and
additions thereto).
(iv) "Treasury Regulations" means the regulations prescribed
under the Code.
4.5 Publicity. No press release or public announcement
related to this Agreement or the transactions contemplated hereby, shall be
issued or made without the joint approval of the Seller and the Purchaser,
unless required by law or New York Stock Exchange rule (in the reasonable
opinion of counsel) in which case the Seller and the Purchaser shall have the
right to review such press release or announcement prior to publication.
4.6 Notice. The Seller will provide notice to the Purchaser
with respect to any matter that, if existing or occurring at or prior to the
Closing Date, would have been required to be set forth or described in any
schedule to this Agreement to make the representations and warranties of the
Seller set forth in Section 2 true and correct in all material respects, such
notice to be provided promptly following the time at which the Seller becomes
aware of such matter. In no event shall any such notice be deemed to amend,
supplement or modify any provision of this Agreement or the Schedules hereto in
any way, including without limitation to prevent or cure any misrepresentation,
breach of warranty or breach of covenant.
4.7 Contact with Customers and Suppliers. The Purchaser (and
all of its agents and affiliates and any employees, directors or officers
thereof) shall be permitted to contact and communicate with the employees,
customers, suppliers and licensors of the Company and its subsidiary in
connection with the transactions contemplated hereby.
4.8 Credit Support Arrangements. The Purchaser acknowledges
that in the course of the conduct by the Company and its subsidiary of their
business, the Seller and its subsidiaries other than the Company's subsidiary
have entered into various arrangements (a) in which guarantees (including of
performance under contracts, leases or agreements), letter of credit or other
credit arrangements, including surety and performance bonds, were issued by or
for the account of the Seller and its subsidiaries other than the Company's
subsidiary or (b) in which the Seller and its subsidiaries other than the
Company's subsidiary are the primary or secondary obligors on debt instruments
or financing or other contracts or agreements, in any case to support or
facilitate business transactions by the Company and its subsidiary. Such
arrangements are referred to herein as the "Credit Support Arrangements." The
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Purchaser shall use its commercially reasonable best efforts following the
Closing, and in any event within 180 days thereof, to (i) obtain replacement
Credit Support Arrangements or (ii) repay, or cause the repayment of, all debt
and other obligations to which such Credit Support Arrangements relate (and
cause the cancellation of such Credit Support Arrangements) or arrange for
itself or one of its subsidiaries to be substituted as the obligor thereof.
Following the Closing, the Purchaser shall, and shall cause the Company to,
indemnify the Seller and its affiliates from and against any loss, obligations,
cost or expense (including reasonable attorneys' fees) they may suffer arising
out of the Credit Support Arrangements. The Purchaser shall, and shall cause
the Company to, provide any financial information that the Seller may
reasonably request to monitor the creditworthiness of the Company in respect of
such indemnity obligations.
4.9 Exclusivity. The Seller shall not (and the Seller shall
cause its affiliates, the Company and its subsidiary to not) (a) solicit,
initiate or encourage the submission of any proposal or offer from any person
relating to the acquisition of any capital stock or other voting securities, or
any substantial portion of the assets, of any of the Company and its subsidiary
(including any acquisition structured as a merger, consolidation or share
exchange) or (b) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any person to do or
seek any of the foregoing. The Seller shall not vote the Shares in favor of
any such acquisition structured as a merger, consolidation or share exchange.
The Seller shall notify the Purchaser promptly if any person makes any
proposal, offer, inquiry or contact with respect to any of the foregoing.
4.10 Covenant Not to Compete. For a period of five years
from and after the Closing Date, the Seller and its subsidiaries shall not
engage, directly or indirectly, in any business that either the Company or its
subsidiary conducts as of the Closing Date in any geographic area in which
either the Company or its subsidiary conducts that business as of the Closing
Date; provided, however, that no owner of less than 5% of the outstanding stock
of any publicly-traded corporation shall be deemed to engage solely by reason
thereof in any of such publicly traded company's businesses. The parties
acknowledge that the time, scope, geographic area and other provisions of this
Section 4.10 have been specifically negotiated by sophisticated commercial
parties and agree that all such provisions are reasonable under the
circumstances of the transactions contemplated by this Agreement. However, if
the final judgment of a court of competent jurisdiction declares that any term
or provision of this Section 4.10 is invalid or unenforceable, the parties
agree that the court making the determination of invalidity or unenforceability
shall have the power to reduce the scope, duration or area
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of the term or provision, to delete specific words or phrases, or to replace
any invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed. The parties acknowledge that monetary damages will
be inadequate for a breach of this Section 4.10 and that, accordingly, the
Purchaser is entitled to seek injunctive relief, including specific
performance, upon a breach of this Section 4.10.
4.11 Transition Services. For a period of time following the
Closing Date as determined by the Purchaser, but in no event to exceed 90 days,
the Seller shall continue to provide to the Company the services designated
with an asterisk on Schedule 2.18 as "Transition Services." Prior to the
Closing Date the Seller and the Purchaser shall agree on the compensation the
Seller shall receive from the Company for the cost of each such Transition
Service, it being understood that such compensation will be based on the
Seller's costs.
4.12 Post-Closing Access. Following the Closing, the Seller
shall, and shall cause its subsidiaries and its and their employees and
accountants to, provide to the Purchaser or its authorized representatives
reasonable access to the properties, books and records of the Seller and its
subsidiaries to the extent they reasonably relate to the business, assets or
properties of the Company and its subsidiary on or prior to the Closing Date,
and to furnish the Purchaser or its authorized representatives such financial
and operating data and other information reasonably related to the business,
assets or properties of the Company on or prior to the Closing Date, as may be
reasonably requested by the Purchaser. Without limiting the generality of the
foregoing, the Seller shall use commercially reasonable efforts to cause its
accountants to cooperate with the Purchaser and the Company in the preparation
of financial statements of the Company and its subsidiary with respect to
periods prior to the Closing Date, including, without limitation, providing
such accountants work papers relating to the Financial Statements.
4.13 Insurance. The Seller has agreed that after the Closing
Date it will make claims on behalf of the Company with respect to occurrences
prior to the Closing Date pursuant to those insurance policies covering the
Company's business and properties as of the Closing Date and which provide for
insurance on an occurrence basis, provided that prior to the Closing the Seller
and the Purchaser will mutually agree on (a) which insurance policies will be
covered by this obligation and (b) the details of such arrangement so that the
cost to the Seller (taking into account, among other things, adjustments to
premiums, deductibles, co-payments, self-insurance
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arrangements, other reimbursement agreement obligations and administrative
costs) is insignificant and provided, further, that the Seller will be
permitted to cancel or amend any such insurance policies after the Closing
provided that such cancellations or amendments are not specific to the Company
and the Seller provides 60 days' advance notice thereof to the Company.
4.14 Intercompany Accounts. All intercompany accounts
between the Company or its subsidiary, on the one hand, and the Seller and any
of its subsidiaries, on the other hand, shall be canceled as of close of
business on the business day immediately preceding the Closing Date, other than
the intercompany account designated as the "Tax Intercompany Account" on
Schedule 2.18.
5. Employees and Employee Benefit Plans.
5.1.1 Compensation and Benefits of Company Employees. From
and after the Closing, the Purchaser shall, or shall cause the Company or the
Company's subsidiary or one of the Purchaser's subsidiaries, as applicable, to
honor, pay, perform, and satisfy any and all liabilities, obligations and
responsibilities to or in respect of each Company Benefit Plan (other than
those Company Benefit Plans sponsored or maintained by Seller) (the "Assumed
Company Benefit Plans") and each Employment Agreement. From and for a period
of one year after the Closing, the Purchaser shall, or shall cause the Company
or the Company's subsidiary or one of the Purchaser's subsidiaries, as
applicable, to provide each Employee providing services to the Company or its
subsidiary immediately prior to the Closing (the "Active Employees") with a
base salary, fees or commissions at least equal to the base salary, fees or
commissions provided to such Employee immediately prior to the Closing and with
benefits which are substantially comparable in the aggregate to the benefits
provided to such Employee immediately prior to the Closing (excepting employer
matching contributions provided to Employees under the Seller's Thrift Plan (as
defined below), and benefits provided to Employees under the Seller's Employee
Stock Ownership Plan and the Company's Profit Sharing/Bonus Plan). Nothing in
this Section 5.1.1 shall preclude the Purchaser or the Company or its
subsidiary from, at any time following the Closing, (i) amending, modifying or
terminating any particular Assumed Company Benefit Plan pursuant to the
relevant provision of such Assumed Company Benefit Plan or (ii) terminating the
employment of any Active Employee.
5.1.2 Thrift & Stock Purchase Plan.
(a) As of the Closing Date, the Company and its subsidiary
shall cease to be a participating employer under the Quaker State Thrift &
Stock Purchase Plan
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(the "Thrift Plan") and the Seller shall take any and all actions necessary to
effect such cessation of participation. As soon as practicable, but in no
event later than 120 days after the Closing Date, the Purchaser shall, or shall
cause the Company to, establish or designate, a defined contribution plan
intended to be qualified under Section 401(a) of the Code (the "Purchaser's
Investment Plan") to provide benefits to the Active Employees who are
participants in the Thrift Plan as of the Closing Date (the "Active Thrift
Participants").
(b) As soon as practicable after the later of (i) the Closing
Date and (ii) receipt by the Seller of an opinion of counsel to the Purchaser,
in a form reasonably acceptable to the Seller, that Purchaser's Investment
Plan, in form, meets the requirements of Sections 401(a) and (k) of the Code,
the Seller shall cause to be transferred to the Purchaser's Investment Plan an
amount equal to the account balances of all Active Thrift Participants as of
the end of the most recent practicable business day (but not earlier than the
third business day) ended immediately prior to the transfer date (the "Transfer
Date"). Such distribution shall be effected by a transfer in cash or, with the
written consent of the Purchaser, by the transfer of a proportionate interest
in any investments held for the benefit of such Active Thrift Participants
under the terms of the Thrift Plan, provided that, to the extent that any loan
had been extended to any Active Thrift Participant from the Thrift Plan prior
to the Closing Date, such loans and any promissory notes or other documents
evidencing such loans shall be transferred to the Purchaser's Investment Plan
and shall be valued based on the outstanding principal and interest due
thereunder. From and after such transfer from the Thrift Plan to Purchaser's
Investment Plan in accordance with the provisions of this Section 5.1.2, the
Purchaser's Investment Plan shall be solely responsible for the provision of
all benefits to the Active Thrift Participants previously provided under the
Thrift Plan.
(c) During the period from the end of the period during which
the Seller provides to the Company Transition Services pursuant to Section 4.11
(the "Transition Services Period") to the Transfer Date, the Purchaser shall
(or shall cause the Company and its subsidiary) to use commercially reasonable
efforts to collect from each Active Thrift Participant who, on the Closing
Date, had an outstanding loan from the Thrift Plan which remains outstanding an
amount sufficient to meet each and every scheduled payment on such loan that
comes due after the end of the Transition Services Period and before the
Transfer Date, and to remit promptly each amount withheld to the Trustee of the
Thrift Plan to be applied to the repayment of such loan. The Seller and the
Purchaser agree to, and to cause their respective agents, employees and
affiliates, to provide the other with such reasonable information and
cooperation as shall be necessary or appropriate to effect the administration
of such outstanding loans during
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the period from and after the end of the Transition Services Period and to the
Transfer Date.
5.1.3 Quaker State Pension Plan.
(a) As of the Closing Date, the Company and its subsidiary
shall cease to be a participating employer under the Quaker State Pension Plan
(the "Pension Plan") and the Seller shall take any and all actions necessary to
effect such cessation of participation. As soon as practicable, but in no
event later than 120 days after the Closing Date, the Purchaser shall, or shall
cause the Company to, establish or designate, a defined benefit pension plan
(the "Purchaser's Pension Plan") to provide benefits to the Active Employees
who are participants in the Pension Plan as of the Closing Date (the "Active
Pension Participants").
(b) As soon as practicable after the Closing Date, the Seller
shall cause the actuary for the Pension Plan (the "Plan Actuary") to determine
the present value of the accrued benefits as of the Closing Date of the Active
Pension Participants, calculated on a plan termination basis in accordance with
the requirements of Section 414(l) using the actuarial assumptions prescribed
by the PBGC for single employer plans terminating on the Closing Date (the
"Pension Liabilities"). The Plan Actuary shall then determine the amount of
the assets of the Pension Plan not in excess of the Pension Liabilities which
may be transferred to the Purchaser's Pension Plan (the "Pension Benefits
Value"), taking into account the funding status of the Pension Plan on the
Closing Date and the requirements of Section 414(l) and the assets allocation
methodology provided in Section 4044 of ERISA. The Plan Actuary shall provide
the actuary for the Purchaser (the "Purchaser's Actuary") with the census data
and other information used for the determination of the Pension Benefits Value.
Except with respect to mathematical errors and/or errors in the data used to
determine the Pension Benefits Value, the amount of the Pension Benefits Value
determined by the Plan Actuary shall be final and conclusive. The Plan Actuary
and the Purchaser's Actuary shall cooperate to correct any mathematical errors
and/or any errors stemming from errors in data prior to the date as of which
any transfer of assets from the Pension Plan occurs hereunder.
(c) As soon as practicable after the later of (i) the Closing
Date, (ii) the 30th day following the filing of any required Form 5310 with the
IRS in respect of the Purchaser's Pension Plan and the Pension Plan and (iii)
receipt by the Seller of an opinion of counsel to the Purchaser, in a form
reasonably acceptable to the Seller, that Purchaser's Pension Plan, in form,
meets the requirements of Section 401(a) of the Code, the Seller shall cause
the trustee of the Pension Plan to transfer to the trustee of
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the Purchaser's Pension Plan an amount (the "Pension Transfer Amount") equal to
the Pension Benefits Value (x) adjusted up or down by an amount equal to the
product of (1) the Pension Benefits Value and (2) the rate of return realized by
the Pension Plan on all of its assets for the period commencing on the Closing
Date and ending on the third business day immediately prior to the date of
transfer, it being understood that any asset that is not susceptible of a daily
valuation shall be valued for this purpose (in a manner consistent with the
trustee's valuation practices prior to the date hereof) at the value reported on
the Pension Plan's records on the last preceding month end valuation of the
Pension Plan's assets and (y) reduced by an amount equal to the aggregate amount
of all benefits payments made to the Active Pension Participants during the
period from the Closing to the date of transfer (the "Interim Period"). During
the Interim Period, all benefits payments due in respect of the Active Pension
Participants shall be made from the Pension Plan. The transfer contemplated
hereby shall be effected by a transfer in cash or, with the written consent of
the Purchaser, by the transfer of a proportionate interest in any investment
held under the Pension Plan. From and after such transfer from the Pension Plan
to Purchaser's Pension Plan, the Purchaser's Pension Plan shall be solely
responsible for the provision of all benefits of the Active Pension Participants
accrued under the Pension Plan through the Closing Date.
(d) The Seller shall pay (on the date the asset transfer is
made from the Pension Plan to the Purchaser's Pension Plan) to the Purchaser
cash equal to the amount, if any, by which the Pension Liabilities exceed the
sum of (i) the Pension Benefits Value plus (ii) Seven Hundred and Fifty
Thousand dollars ($750,000).
5.1.4 Seller's Incentive Plans. After the Closing the
Company or the Purchaser shall pay all bonuses that would be payable to
Employees in accordance with the generally applicable provisions of the
incentive plans of the Company and the Seller's Management Incentive Plan in an
aggregate amount up to the amount of the accrual on the final Closing Balance
Sheet plus $580,000. The parties agree that the amount of the accrual on the
final Closing Balance Sheet shall be the excess of (i) a prorated portion of
the amount that participants in the bonus plans would have earned for the
entire year 1997 which shall be determined by multiplying such amount by a
fraction, the numerator of which is the number of calendar months during 1997
ended on or before the Closing Date and the denominator of which is twelve,
over (ii) $580,000. In determining what participants would have earned under
the bonus plans for the entire year, the extent to which the applicable
performance goals have been attained (or exceeded) shall be determined as
follows: (i) with respect to any performance goal under the bonus plans that
is based on the performance of Seller on a consolidated basis, the actual
performance of Seller for the entire year 1997 shall be
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<PAGE> 52
measured against the performance goal for the entire year and (ii) with respect
to any goals under the bonus plans that are based on the performance of the
Company, the performance goals shall be prorated based on the portion of the
fiscal year that has elapsed through the Closing Date and the actual
performance of the Company through the Closing Date shall be measured against
that prorated performance goal.
5.1.5 Responsibility for Plans. Except to the extent otherwise expressly
provided to the contrary in this Section 5, the Seller shall be responsible for
any and all claims for benefits made by any Employee, whether made before, on or
after the Closing Date, and any other liability arising under the terms of any
Company Benefit Plan identified on Schedule 2.10.2 as the Seller's plan (as
opposed to the Company's plan) and the severance agreement between Mr. Kotsi and
the Seller, and the Seller shall indemnify and hold harmless the Purchaser
against any and all Damages (as defined herein) which may be incurred by the
Purchaser arising out of or relating to the funding, operation, administration,
amendment or termination of, or withdrawal or partial withdrawal from, any
Benefit Plan sponsored or maintained by the Seller or any ERISA Affiliate (other
than the Company and its subsidiary), whether arising out of or relating to any
event or state of facts occurring or existing before, on or after the Closing
Date, and including, but not limited to, Damages arising under Title IV of
ERISA, Section 302 of ERISA and Section 412 and 4971 of the Code. From and
after the Closing, Purchaser shall (or shall cause the Company) to indemnify and
hold harmless the Seller against any and all Damages (as defined herein) which
may be incurred by the Seller arising out of or relating to the funding,
operation, administration, amendment or termination of, or withdrawal or partial
withdrawal from, any Benefit Plan sponsored or maintained by the Company or its
subsidiary or the Purchaser, arising out of or relating to any event occurring
after the Closing Date; provided, however, that Purchaser shall have no duty to
indemnify Seller for any Damages that arise from or relate to any set of
circumstances, transactions or events as to which a representation has been made
hereunder which proves to be incorrect or otherwise inaccurate in any material
way.
6. Conditions Precedent.
6.1 General. The respective obligations set forth herein of
the Seller and the Purchaser to consummate the sale and purchase of the Shares
at the Closing shall be subject to the fulfillment or waiver, on or before the
Closing Date, in the case of the Seller, of the conditions set forth in
Sections 6.2 and 6.3, and in the case of the Purchaser, of the conditions set
forth in Sections 6.2 and 6.4.
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<PAGE> 53
6.2 Conditions to Obligations of Both Parties.
6.2.1 Consents. All governmental consents listed on Schedules
2.2 and 3.2 and all third party consents listed on Schedule 6.2.1 shall have
been obtained. If notifications are required to be filed under the HSR Act,
the waiting period under the HSR Act shall have been terminated or expired.
6.2.2 No Injunction. There shall not be in effect any
injunction or other order issued by a court of competent jurisdiction
restraining or prohibiting the consummation of the transactions contemplated by
this Agreement.
6.3 Conditions to Obligations of the Seller.
6.3.1 Representations and Warranties of the Purchaser. The
representations and warranties in Section 3 shall be true and correct in all
material respects when made and at and as of the Closing with the same effect
as though made at and as of such time. The Purchaser shall have duly performed
and complied in all material respects with all agreements contained herein
required to be performed or complied with by it at or before the Closing.
6.3.2 Officer's Certificate. The Purchaser shall have
delivered on the Closing Date to the Seller a certificate, dated the Closing
Date and signed by a duly authorized officer of the Seller, as to the
fulfillment of the conditions set forth in Section 6.3.1.
6.4 Conditions to Obligations of the Purchaser.
6.4.1 Representations and Warranties of the Seller. The
representations and warranties in Section 2 shall be true and correct in all
material respects when made and at and as of the Closing with the same effect
as though made at and as of such time. The Seller shall have duly performed
and complied in all material respects with all agreements contained herein
required to be performed or complied with by it at or before the Closing.
6.4.2 Officer's Certificate. The Seller shall have delivered
on the Closing Date to the Purchaser a certificate, dated the Closing Date and
signed by a duly authorized officer of the Purchaser, as to the fulfillment of
the conditions set forth in Section 6.4.1.
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<PAGE> 54
6.4.3 Resignations. The directors of the Company and its
subsidiary specified in a notice delivered by the Purchaser to the Seller at
least five days prior to the Closing shall have submitted their resignations
from the Boards of Directors of the Company and its subsidiary, as the case may
be, effective as of the Closing Date.
6.4.4 Material Adverse Change. Since July 25, 1997, there
shall have been no material adverse change in the business or financial
condition of the Company and its subsidiary taken as a whole, other than those
relating to or as may be a result of (i) the transaction contemplated by this
Agreement or (ii) generally applicable economic conditions or the Company's
industry in general.
6.4.5 FIRPTA Certificate. The Seller shall have delivered on
the Closing Date to the Purchaser a certificate, as contemplated under and
meeting the requirements of section 1.1445-2(b)(2)(i) of the Treasury
Regulations, to the effect that the Seller is not a foreign person within the
meaning of the Code and applicable Treasury Regulations.
6.4.6 Third Party Consents. All third party consents listed
on Schedule 6.4.6 shall have been obtained.
7. Indemnification.
7.1 Survival of Representations and Warranties. Any claim
for indemnification under Section 7 with respect to the representations and
warranties contained in this Agreement must be brought prior to the first
anniversary of the Closing Date in accordance with Section 7.2.3, provided,
however, that claims for indemnification with respect to the representations
and warranties set forth in Section 2.14 may be brought at any time prior to 30
days after the expiration of the applicable statute of limitations for Taxes
covered by such Section 2.14
7.2 Indemnification.
7.2.1 By the Seller. From and after the Closing, the Seller
agrees to indemnify and hold harmless the Purchaser and its affiliates from and
against any loss, liability or damage, including reasonable attorneys' fees and
other costs and expenses (collectively, "Damages"), incurred or sustained by
the Purchaser and its affiliates resulting from (i) the breach by the Seller of
any covenant set forth in this Agreement, (ii) subject to Section 7.1, the
breach by the Seller of any representation or warranty set forth in this
Agreement, (iii) workers compensation claims by employees or former employees
of the Company or its subsidiary in respect of accidents or injuries occurring
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<PAGE> 55
prior to the Closing, provided that the Seller or its subsidiary has had notice
thereof prior to the Closing Date, (iv) the matters set forth in Schedule 2.13
(or included in the loss report included as part of Schedule 2.13) and (v) the
lawsuit filed in the Circuit Court of Cook County, Illinois (case number 95 L
04799) against the Company and others asserting claims arising from a fire that
occurred at Jewel's warehouse at 300 Craig Drive, Hillside, Illinois, on August
1, 1993 (including, without limitation, any premiums or deductibles under any
insurance policy relating thereto); provided that there shall not be any
duplicative payments or indemnities by the Seller.
The rights of the Purchaser to indemnification under this
Section 7 shall be limited as follows:
(a) The amount of any Damages incurred by the Purchaser shall
be reduced by the net amount the Purchaser or any of its affiliates
recovers (after deducting all attorneys' fees, expenses and other
costs of recovery) from any insurer or other party liable for such
Damages, and the Purchaser shall use commercially reasonable efforts
to effect any such recovery.
(b) The Purchaser shall be entitled to indemnification under
Section 7.2.1(ii) only to the extent that the aggregate amount of such
Damages (reduced as provided in paragraphs (a) and (b) above) exceeds
$800,000 and then only for the amount of such excess and in no event
will the Purchaser be entitled to indemnification in excess of
$20,000,000, provided that the foregoing $800,000 and $20,000,000
limitations shall not apply to any Damages sustained by the Purchaser
as a result of the Seller's breach of Section 2.14.
7.2.2 By the Purchaser. From and after the Closing, the
Purchaser agrees to indemnify and hold harmless the Seller and its affiliates
from and against any Damages incurred or sustained by the Seller and its
affiliates resulting from the breach by the Purchaser of any covenant,
representation or warranty set forth in this Agreement, provided that there
shall not be any duplicative payments or indemnities by the Purchaser.
The rights of the Seller to indemnification under this Section
7 shall be limited as follows:
The amount of any Damages incurred by the Seller shall be
reduced by the net amount the Seller or any of its affiliates recovers
(after deducting all attorneys' fees, expenses and other costs of
recovery) from any insurer or other
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<PAGE> 56
party liable for such Damages, and the Seller shall use commercially
reasonable efforts to effect any such recovery.
7.2.3 Indemnification Procedures. A party entitled to
indemnification hereunder shall herein be referred to as an "Indemnitee." A
party obligated to indemnify an Indemnitee hereunder shall herein be referred
to as an "Indemnitor."
(a) Third Party Claims. Within 15 business days after an
Indemnitee receives notice of any third party claim or the
commencement of any action by any third party which such Indemnitee
reasonably believes may give rise to a claim for indemnification from
an Indemnitor hereunder, such Indemnitee shall, if a claim in respect
thereof is to be made against an Indemnitor under Section 7, notify
such Indemnitor in writing in reasonable detail of such claim or
action, provided, however, that failure to so notify the Indemnitor
shall not relieve the Indemnitor of its indemnification obligations
hereunder, except to the extent the Indemnitor is actually prejudiced
thereby. Upon receipt of such notice, the Indemnitor shall be
entitled to participate in such claim or action, to assume the defense
thereof with counsel reasonably satisfactory to the Indemnitee, and to
settle or compromise such claim or action, provided that if the
Indemnitee has elected to be represented by separate counsel pursuant
to the proviso to the following sentence, such settlement or
compromise shall be effected only with the consent of the Indemnitee,
which consent shall not be unreasonably withheld or delayed. After
notice to the Indemnitee of the Indemnitor's election to assume the
defense of such claim or action, the Indemnitor shall not be liable to
the Indemnitee under Section 7 for any legal or other expenses
subsequently incurred by the Indemnitee in connection with the defense
thereof other than reasonable costs of investigation, provided that
the Indemnitee shall have the right to employ counsel to represent it
if either (x) such claim or action involves remedies other than
monetary damages and such remedies, in the Indemnitee's reasonable
judgment, could have a material adverse effect on such Indemnitee or
(y) the Indemnitee may have available to it one or more defenses or
counterclaims which are inconsistent with one or more defenses or
counterclaims which may be alleged by the Indemnitor, and in any such
event the fees and expenses of such separate counsel shall be paid by
the Indemnitee. If the Indemnitor does not elect to assume the
defense of such claim or action, the Indemnitee shall act reasonably
and in accordance with its good faith business judgment with respect
thereto, and shall not settle or compromise any such claim or action
without the consent of the Indemnitor, which consent shall not be
unreasonably withheld or delayed. The parties hereto agree to render
to each other such assistance as may reasonably be
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requested in order to insure the proper and adequate defense of any
such claim or action, including making employees available on a
mutually convenient basis to provide additional information and
explanation of any relevant materials or to testify at any proceedings
relating to such claim or action.
(b) Other Claim. Within 15 business days after an
Indemnitee obtains knowledge that it has sustained any Damages not
involving a third party claim or action which such Indemnitee
reasonably believes may give rise to a claim for indemnification from
an Indemnitor hereunder, such Indemnitee shall deliver notice of such
claim to the Indemnitor; provided, however, that failure to so notify
the Indemnitor shall not relieve the Indemnitor of its indemnification
obligations hereunder, except to the extent that the Indemnitor is
actually prejudiced thereby. If the Indemnitor does not notify the
Indemnitee within 30 calendar days following its receipt of such
notice that the Indemnitor disputes its liability to the Indemnitee
under this Section 7, such claim specified by the Indemnitee in such
notice shall be conclusively deemed a liability of the Indemnitor
under this Section 7 and the Indemnitor shall pay the amount of such
claim to the Indemnitee on demand or, in the case of any notice in
which the amount of the claim (or any portion thereof) is estimated,
on such later date when the amount of such claim (or such portion
thereof) becomes finally determined. If the Indemnitor has timely
disputed its liability with respect to such claim, as provided above,
the Indemnitor and the Indemnitee shall proceed in good faith to
negotiate a resolution of such dispute and, if not resolved through
negotiations, such dispute shall be resolved by litigation in an
appropriate court of competent jurisdiction in accordance with
Sections 8.13 and 8.14.
7.2.4 Tax Treatment of Indemnity Payment. Each of the Seller
and the Purchaser agrees to treat any indemnity payment made pursuant to
Section 7.2 as an adjustment to the Purchase Price for all Tax purposes unless
otherwise required by law.
8. General Provisions.
8.1 Modification; Waiver. This Agreement may be modified
only by a written instrument executed by both parties hereto. Any of the terms
and conditions of this Agreement may be waived in writing at any time on or
prior to the Closing Date by the party entitled to the benefits thereof.
8.2 Entire Agreement. This Agreement, including the
schedules hereto (which are hereby incorporated by reference and made a part
hereof) is the entire
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agreement of the parties with respect to the subject matter hereof and
supersedes all other prior agreements (including the exclusivity agreement
referred to in Section 1), understandings, documents, projections, financial
data, statements, representations and warranties, oral or written, express or
implied, between the parties hereto and their respective affiliates,
representatives and agents in respect of the subject matter hereof, except that
this Agreement does not supersede the Confidentiality Agreement, the terms and
conditions of which the parties hereto expressly reaffirm.
8.3 Exclusivity of Representations and Warranties and
Indemnification Provision; Relationship Between the Parties. It is the
explicit intent and understanding of each of the parties hereto that neither
party nor any of its affiliates, representatives or agents is making any
representation or warranty whatsoever, oral or written, express or implied,
other than those set forth in Section 2 and 3 and the documents delivered
pursuant to Sections 6.3.2, 6.4.2 and 6.4.6 and neither party is relying on any
statement, representation or warranty, oral or written, express or implied,
made by the other party or such other party's affiliates, representatives or
agents, except for the representations and warranties set forth in such
sections and documents. The indemnity provided for in Section 7 shall be the
sole and exclusive remedy of the Purchaser after the Closing for any inaccuracy
of any representation or warranty of the Seller or any failure or breach of any
covenant, obligation, condition or agreement to be performed or fulfilled by
the Seller pursuant to this Agreement. The parties agree that this is an arm's
length transaction in which the parties' undertakings and obligations are
limited to the performance of their obligations under this Agreement. The
Purchaser acknowledges that it is a sophisticated investor and that it has only
a contractual relationship with the Seller, based solely on the terms of this
Agreement, and that there is no special relationship of trust or reliance
between the Purchaser and the Seller. The Seller acknowledges that it has only
a contractual relationship with the Purchaser, based solely on the terms of
this Agreement, and that there is no special relationship of trust or reliance
between the Purchaser and the Seller.
8.4 Termination. (a) Notwithstanding anything contained
herein to the contrary, this Agreement may be terminated and the transactions
contemplated hereby abandoned at the any time prior to the Closing:
(i) by mutual written consent of the Seller and the
Purchaser; or
(ii) by either party hereto, if the Closing does not occur
on or prior to December 1, 1997, provided, however, that if the
parties determine that a notification must be filed under the HSR Act,
such date will automatically be extended to December 15, 1997;
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<PAGE> 59
provided, however, that the party seeking termination pursuant to the foregoing
clause (ii) is not in breach in any material respect of any of its
representations, warranties, covenants or agreements contained in this
Agreement, including, without limitation, those set forth in Section 1.3.
(b) In the event of termination by the Seller or the
Purchaser pursuant to this Section 8.4, written notice thereof shall forthwith
be given to the other party and the transactions contemplated by this Agreement
shall be terminated without further action by either party. If the
transactions contemplated by this Agreement are terminated as provided herein:
(i) The Purchaser shall return to the Seller all
documents and other materials received from the Seller, its affiliates
or its agents (including all copies of or materials developed from any
such documents or other materials) relating to the transactions
contemplated hereby, whether obtained before or after the execution
hereof; and
(ii) All confidential information received by the
Purchaser with respect to the Seller and its affiliates shall be
treated in accordance with the Confidentiality Agreement which shall
remain in full force and effect notwithstanding the termination of
this Agreement.
(c) If this Agreement is terminated as provided in this
Section 8.4, this Agreement shall become null and void and of no further force
or effect, except for the Confidentiality Agreement as amended by the last
sentence of Section 4.2.2, Section 4.5 relating to publicity and Section 8.5
relating to the Deposit and certain expenses. Nothing in this Section 8.4
shall be deemed to release either party from any liability for any breach by
such party of the terms and provisions of this Agreement or to impair the right
of either party to compel specific performance by the other party of its
obligations under this Agreement.
8.5 Deposit; Expenses. (a) In the event this Agreement is
terminated by the Seller pursuant to Section 8.4(a)(ii) because of the
Purchaser's failure to deliver the Purchase Price at the Closing and the
conditions set forth in Sections 6.2 and 6.4 shall have been satisfied (or
waived by the Purchaser) on or prior to December 1, 1997 (or December 15, 1997
in the event the parties determine that a notification must be filed under the
HSR Act), then the Seller shall be entitled to retain the Deposit. If this
Agreement is terminated for any other reason, the Seller will return the
Deposit to the Purchaser. The parties agree that the Deposit shall not relieve
the Purchaser from liability for any breach hereunder or be construed as
limiting the Seller's rights in any
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manner, except that the amount of the Deposit shall be credited against any
damages which may be awarded to the Seller for the Purchaser's failure to
deliver the Purchase Price at the Closing and the Seller agrees that if it is
ultimately determined that the Deposit exceeded the Seller's damages for such
failure to deliver the Purchase Price, such excess will be returned to the
Purchaser.
(b) Except as expressly provided herein, whether or not the
transactions contemplated herein shall be consummated, each party shall pay its
own expenses incident to the preparation and performance of this Agreement.
8.6 Further Actions. Each party shall execute and deliver
such certificates and other documents and take such other actions as may
reasonably be requested by the other party in order to consummate or implement
the transactions contemplated hereby.
8.7 Post-Closing Access. In connection with any matter
relating to any period prior to, or any period ending on, the Closing, the
Purchaser shall, upon the reasonable request of the Seller, permit the Seller
and its representatives full access at all reasonable times to the books and
records of the Company and its subsidiary which shall have been transferred to
the Purchaser, and the Purchaser shall execute (and shall cause the Company or
its subsidiary to execute) such documents as the Seller may reasonably request
to enable the Seller to file any required reports or tax returns relating to
the Company and its subsidiary. Subject to Section 4.4(c) of this Agreement,
the Purchaser may dispose of such books and records at any time, provided that
for the six year period beginning with the Closing Date, the Purchaser shall
give 30 days' prior written notice of any such destruction to the Seller, and
the Seller shall have the right to take possession of such books and records
within 60 days at no expense to the Purchaser.
8.8 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given or made as follows: (a) if sent by registered or certified mail in
the United States return receipt requested, upon receipt; (b) if sent by
reputable overnight air courier (such as DHL or Federal Express), two business
days after mailing; (c) if sent by facsimile transmission, with a copy mailed
on the same day in the manner provided in (a) or (b) above, when transmitted
and receipt is confirmed by telephone; or (d) if otherwise actually personally
delivered, when delivered and shall be delivered as follows:
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if to the Seller:
Quaker State Corporation
225 East John Carpenter Freeway
Irving, Texas 75062-2732
Fax Number: (972) 868-0440
Attention: Paul E. Konney, Esq.
Senior Vice President, General
Counsel and Secretary
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Fax Number: (212) 909-6836
Attention: Margaret Andrews Davenport, Esq.
if to the Purchaser:
Penske Capital Partners, L.L.C.
c/o Penske Corporation
13400 Outer Drive West
Detroit, Michigan 48239-4001
Fax Number: (313) 592-7332
Attention: Lawrence Bluth, Esq.
with copies to:
Penske Capital Partners, L.L.C.
94 Colt Road
Summit, New Jersey 07901
Fax Number: (908) 522-1756
Attention: Mr. James Hislop
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and
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Fax Number: (212) 859-4000
Attention: Valerie Ford Jacob, Esq.
Robert C. Schwenkel, Esq.
or to such other address or fax number or to such other person as either party
hereto shall have last designated by notice to the other party.
8.9 Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but shall not be assignable, by operation of law or
otherwise, by either party hereto without the prior written consent of the
other party and any purported assignment or other transfer without such consent
shall be void and unenforceable; provided, that no such consent shall be
required of the Purchaser to assign all or any part of its rights and
obligations under this Agreement to one or more of its affiliates, but no such
assignment shall relieve the Purchaser of its obligations hereunder.
8.10 No Third Party Beneficiaries. Except as otherwise
provided herein, nothing in this Agreement shall confer any rights upon any
person or entity which is not a party or a successor or permitted assignee of a
party to this Agreement.
8.11 Counterparts. This Agreement may be executed in
counterparts, both of which shall constitute one and the same instrument.
8.12 Interpretation. The section headings in this Agreement
are for convenience of reference only and shall not be deemed to alter or
affect the meaning or interpretation of any provision hereof. Any references
to the knowledge of the Seller or the Seller's knowledge or any similar
formulation shall mean the actual knowledge of Conrad Conrad, Keith Krzeminski,
Ronald Harvot, Elizabeth Hill, Richard Winkler, Richard Kotsi, Thomas McCann,
Brad Van Riper, David Gerringer, Joseph Zeman, Joseph Bellomo and Donald
Pangborn. The disclosure of any matter in the schedules hereto shall be deemed
to be a disclosure for all purposes of this Agreement to which such matter
could reasonably be likely to be pertinent, but shall expressly not be deemed
to constitute an admission by the Seller or the Purchaser, or to otherwise
imply, that any such matter is material for the purposes of this Agreement.
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8.13 Governing Law. This Agreement shall be construed,
performed and enforced in accordance with the laws of the State of New York.
8.14 Consent to Jurisdiction, etc. (a) Each of the parties
hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the exclusive jurisdiction of any New York State court or Federal
court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby or for
recognition or enforcement of any judgment relating thereto, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
New York State court or, to the extent permitted by law, in such Federal court.
Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby in any New York State or Federal court.
Each of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 8.8. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
8.15 Waiver of Jury Trial. (a) EACH PARTY ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
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<PAGE> 64
(b) EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVER, (iii) IT MAKES SUCH WAIVER VOLUNTARILY, AND (iv)
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 8.15.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
QUAKER STATE CORPORATION
By: /s/ CONRAD A. CONRAD
-------------------------------------
Name Conrad A. Conrad
Title Vice Chairman and Chief
Financial Officer
QUAKER STATE INVESTMENT CORP.
By: /s/ RICHARD WINKLER
-------------------------------------
Name Richard Winkler
Title Vice President
TRUCK-LITE ACQUISITION CORP.
By: /s/ [ILLEGIBLE]
-------------------------------------
Name
Title
<PAGE> 66
LIST OF OMITTED SCHEDULES
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
<S> <C>
Schedule 1.4 Closing Balance Sheet
Schedule 2.2 Conflicts; Consents
Schedule 2.5 Subsidiaries and Investments
Schedule 2.6 Financial Statements
Schedule 2.7 Liabilities
Schedule 2.8 Real Property
Schedule 2.9 Contracts
Schedule 2.10.2 Employment Matters
Schedule 2.10.4 Compliance
Schedule 2.10.7 Post-Employment Obligations
Schedule 2.10.10 Labor
Schedule 2.11 Intellectual Property
Schedule 2.12 Governmental Permits
Schedule 2.13 Litigation
Schedule 2.14(a) Tax Returns; Payment of Taxes
Schedule 2.14(b) Extensions of Period of Assessment or Collection; Power of Attorney
Schedule 2.14(c) Tax Groups; Tax Sharing
Schedule 2.14(d) Tax Assessments; Ruling Request; Tax Contest or Audit
Schedule 2.14(e) Tax Claims
Schedule 2.14(f) States, Territories and Jurisdictions - Certain Return Filings
Schedule 2.14(g) Tax Liens
Schedule 2.14(i) Extension for Return Filing
Schedule 2.15 Absence of Certain Changes
Schedule 2.16 Insurance Policies
Schedule 2.17 Environmental Matters
Schedule 2.18 Affiliate Transactions
Schedule 2.19 Banking and Agency Agreements
Schedule 2.20 Customers
Schedule 2.21 Suppliers
Schedule 2.23 Products
Schedule 2.24 Credit Support Arrangements
Schedule 3.2 Conflicts, Governmental Consents
Schedule 6.4.6 Third Party Consents
Schedule 6.2.1 Consents
</TABLE>
