<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 17, 1995
TENNECO INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 1-9864 76-0233548
(STATE OR OTHER JURISDICTION (COMMISSION FILE (I.R.S. EMPLOYER
OF INCORPORATION) NUMBER) IDENTIFICATION NO.)
</TABLE>
TENNECO BUILDING, HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP
CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 757-2131
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 17, 1995, Tenneco Inc. issued a press release announcing that it
had completed the acquisition of the plastics division of Mobil Corporation for
$1.27 billion. The plastics division will become part of Tenneco's packaging
division. Tenneco Packaging is headquartered in Evanston, Illinois. The
acquisition was financed by a combination of cash and short-term debt.
Reference is made to the November 17, 1995, press release, which is included as
an exhibit to this document.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired
INDEX TO AUDITED COMBINED FINANCIAL STATEMENTS OF
THE MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
FOR THE YEAR ENDED DECEMBER 28, 1994
Report of Independent Auditors
Combined Statement of Net Assets--December 28, 1994
Combined Statement of Operations Before Income Taxes--Year ended December 28,
1994
Combined Statement of Changes in Net Assets--Year ended December 28, 1994
Combined Statement of Cash Flows--Year ended December 28, 1994
Notes to Combined Financial Statements
INDEX TO UNAUDITED COMBINED FINANCIAL STATEMENTS OF
THE MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
FOR THE NINE MONTHS ENDED SEPTEMBER 23, 1994 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 27, 1995
Combined Statements of Net Assets--September 23, 1994 and September 27, 1995
Combined Statements of Operations Before Income Taxes--Nine Months ended
September 23, 1994 and September 27, 1995
Combined Statement of Changes in Net Assets--Nine Months ended September 23,
1994
Combined Statement of Changes in Net Assets--Nine Months ended September 27,
1995
Combined Statements of Cash Flows--Nine Months ended September 23, 1994 and
September 27, 1995
Notes to Interim Combined Financial Statements
(b) Pro Forma Financial Information
INDEX TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS OF TENNECO INC. AND
CONSOLIDATED SUBSIDIARIES
Pro Forma Condensed Balance Sheet--September 30, 1995
Pro Forma Condensed Statement of Income--Nine Months ended September 30, 1995
Pro Forma Condensed Statement of Income--Year ended December 31, 1994
Notes to Pro Forma Condensed Financial Statements
(c) Exhibits
The Exhibits to this Report are listed in the Exhibit Index set forth elsewhere
herein.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Mobil Corporation
We have audited the accompanying combined statement of net assets of the
Mobil Plastics Division of Mobil Corporation (the "Division") at December 28,
1994 and the related combined statements of operations before income taxes,
changes in net assets and cash flows for the year ended December 28, 1994.
These financial statements are the responsibility of the Division's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
As described in Note 1, the accompanying financial statements were prepared
to present the net assets and operations before income taxes of the Division,
which does not have a separate legal status or existence, and are not intended
to be a complete presentation of the assets and liabilities or the results of
operations of Mobil Corporation.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined net assets of the Division at December 28,
1994 and the combined results of its operations and its cash flows for the year
ended December 28, 1994 in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Buffalo, New York
August 18, 1995
1
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
COMBINED STATEMENT OF NET ASSETS
DECEMBER 28, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
Current assets:
Accounts receivable--net............................................ $102,930
Inventories......................................................... 73,785
Prepaid expenses and other current assets........................... 552
--------
Total current assets.................................................. 177,267
Properties, plants and equipment--net................................. 306,078
Assets held for sale.................................................. 9,160
--------
Total assets.......................................................... 492,505
Current liabilities:
Accounts payable.................................................... 53,503
Accrued restructuring charges....................................... 28,837
Accrued expenses--other............................................. 81,571
--------
Total current liabilities............................................. 163,911
--------
Net assets............................................................ $328,594
========
</TABLE>
See notes to combined financial statements.
2
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
COMBINED STATEMENT OF OPERATIONS BEFORE INCOME TAXES
YEAR ENDED DECEMBER 28, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
Net sales........................................................... $1,035,884
Other operating revenue............................................. 1,050
----------
1,036,934
Operating expenses:
Cost of goods sold................................................ 665,150
Selling, distribution, general and administrative................. 281,544
Research and development.......................................... 8,612
----------
955,306
----------
Operating income before restructuring and other charges............. 81,628
Restructuring and other charges..................................... 77,716
----------
Operating income.................................................... 3,912
Other income........................................................ 695
----------
Income before income taxes.......................................... $ 4,607
==========
</TABLE>
See notes to combined financial statements.
3
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
COMBINED STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 28, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
Excess of combined assets over liabilities at December 29, 1993...... $ 432,150
Income before income taxes........................................... 4,607
Net change in foreign currency translation adjustment................ (239)
Net change in parent company advances................................ (107,924)
---------
Excess of combined assets over liabilities at December 28, 1994...... $ 328,594
=========
</TABLE>
See notes to combined financial statements.
4
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 28, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Income before income taxes.......................................... $ 4,607
Adjustments to reconcile income before income taxes to net cash
flows provided by operating activities:
Depreciation...................................................... 42,184
Write down of properties, plants, equipment and inventory as a
result of restructuring program.................................. 34,386
Loss on disposal of machinery and equipment....................... 3,005
Changes in operating assets and liabilities:
Accounts receivable--net........................................ (11,605)
Inventories..................................................... 52,431
Prepaid expenses and other current assets....................... 5,056
Accounts payable and accrued expenses........................... 9,749
Accrued restructuring charges................................... 28,837
Other........................................................... 462
--------
Cash provided by operating activities............................... 169,112
INVESTING ACTIVITIES
Capital expenditures................................................ (63,031)
Proceeds from sale of machinery and equipment....................... 1,843
--------
Cash used in investing activities................................... (61,188)
FINANCING ACTIVITIES
Change in parent company investment................................. (107,924)
--------
Cash used in financing activities................................... (107,924)
--------
Net change in cash and cash equivalents............................. --
Cash and cash equivalents:
Beginning of period............................................... --
--------
End of period..................................................... $ --
========
</TABLE>
See notes to combined financial statements.
5
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying combined financial statements present, on a historical cost
basis, the combined assets, liabilities, revenue and expense related to the
Mobil Plastics Division of Mobil Corporation ("The Division" or the "Plastics
Division") as of December 28, 1994. These statements are presented as if the
Division had existed as a separate entity during the period presented.
Transactions between the businesses included in these statements have been
eliminated.
The combined financial statements include the financial position and results
of operations of the Plastics Packaging and Consumer Products business groups,
which are 100% owned by Mobil Corporation ("Mobil") through the legal entity,
Mobil Oil Corporation ("Mobil Oil"). These business groups have been organized
as part of a division of Mobil Chemical Company ("Mobil Chemical" or
"Chemical"), which is an operating entity of Mobil Oil.
As part of a program to review holdings not related to its core businesses,
Mobil has decided to seek potential buyers for the Division. The effect of such
a divestiture is not reflected in the accompanying special purpose combined
financial statements which are intended to reflect the specific assets and
liabilities on a historical cost basis of the operations being sold.
The accompanying special-purpose combined financial statements include the
assets, liabilities and related operations of the Division expected to be
included as part of any divestiture and exclude the assets, liabilities and
related operations of any other Chemical divisions, including the Films
Division and Tucker Housewares. As such, the accompanying financial statements
are not intended to be a complete presentation of the assets, liabilities or
the results of operations of Mobil Chemical or of the Division on a stand-alone
basis.
The Division incurs certain common costs which relate to both the Division
and other Chemical operations, and management has made allocations of these
costs to the Division. Also, in order to prepare these special-purpose combined
financial statements, management has made certain allocations of liabilities to
the Division. Management of Mobil Chemical believes such allocations are
reasonable; however, the amounts could differ from amounts that would be
determined if the Division were operated on a stand-alone basis.
Net assets reflect Mobil's investment in the Division, accumulated earnings
and losses of the Division, cumulative exchange translation adjustments and
intercompany activity with Mobil and other affiliates which are not settled on
a current basis.
Income taxes have been excluded from the accompanying combined financial
statements as the responsibility for such taxes is being retained by Mobil.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
All cash and cash equivalents are transferred to Mobil Corporation through
the intercompany account on a current basis and are excluded from assets on the
accompanying combined statement of net assets. The Division is part of a
centralized cash management system of Mobil, whereby all cash disbursements of
the Division are funded by, and all cash receipts are transferred to, Mobil.
6
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Inventories
Inventories are stated at cost, but not in excess of market. The cost of
substantially all product inventories is determined by the last-in, first-out
(LIFO) method. The cost of maintenance and supplies inventories is determined
by the first-in, first-out method.
Properties, Plants and Equipment
Properties, plants and equipment are stated at cost. Depreciation is computed
principally using the straight-line and various accelerated methods over the
estimated useful lives of the assets which range from 3 years to 11 years for
machinery and equipment, and 25 years to 32 years for land improvements and
buildings. Expenditures for renewals and improvements that extend the useful
life of an asset are capitalized. Expenditures for routine repairs and
maintenance are charged to operations when incurred. Property items retired or
otherwise disposed of are removed from the property and related allowance for
depreciation accounts. Any profit or loss is included in operations.
Foreign Currency Translation
Financial statements for the Canadian operations are translated into U.S.
dollars at period-end exchange rates as to assets and liabilities and weighted
average exchange rates as to revenues and expenses. The resulting translation
adjustments are recorded as part of net assets.
Revenue Recognition
The Division recognizes revenue at the point of passage of title, which is at
the time of shipment to the customer.
Promotional Programs
The Division accrues for the costs of promotional programs, including cents-
off coupons and other trade related programs, at the time the program is made
available to customers. Any adjustments between the original estimate and
ultimate costs are recorded as a change in estimate in the period known.
Environmental Liabilities
The estimated future costs for known environmental remediation requirements
are accrued when it is probable that a liability has been incurred and the
amount of remediation costs can be reasonably estimated. These amounts are the
undiscounted future estimated costs under existing regulatory requirements and
using existing technology.
Allocation of Expenses
The Division shares certain services with other related business groups at
the Divisional level. Services are also performed by Mobil Chemical Company and
Mobil Corporation. These services are allocated to the Plastics Division
primarily on the basis of estimated usage of services. A summary of the
services and the amounts allocated to the Division are described in Note 10.
7
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. OPERATING ACTIVITIES
The Division is comprised of two primary business groups, Plastics Packaging
and Consumer Products. Plastics Packaging serves food service, supermarkets and
industrial segments while Consumer Products serves the packaged goods segment
of the retail industry. The Division's products include waste bags, tableware,
food bags, food service disposables, meat trays, clear containers, grocery
sacks and stretch film. The Division operates ten manufacturing facilities in
the United States and one in Canada. These facilities consist of six
polyethylene and five polystyrene fabricating plants. The Division primarily
markets its products to customers in North America. There are no further
geographic concentrations of customers, and, generally, collateral is not
required.
4. ACCOUNTS RECEIVABLE
Accounts receivable consists of the following:
<TABLE>
<CAPTION>
DECEMBER 28,
1994
------------
(THOUSANDS)
<S> <C>
Accounts receivable--trade......................................... $101,911
Other receivables.................................................. 2,108
Less: Allowance for doubtful accounts.............................. (1,089)
--------
$102,930
========
</TABLE>
5. INVENTORIES
Major classes of inventories are as follows:
<TABLE>
<CAPTION>
DECEMBER 28,
1994
------------
(THOUSANDS)
<S> <C>
Raw material....................................................... $24,443
In-process......................................................... 10,637
Finished product................................................... 63,866
-------
Product inventory at current cost.................................. 98,946
Less: LIFO and other inventory reserves............................ (44,893)
-------
54,053
Other material and supplies........................................ 6,274
Maintenance........................................................ 13,458
-------
$73,785
=======
</TABLE>
As a result of the decreased level of inventories in 1994, a LIFO layer
liquidation occurred. The impact of the liquidation was approximately a $7,340
thousand decrease to cost of goods sold for the year ended December 28, 1994.
The decrease to cost of goods sold consists of a decrease of $8,640 thousand
for the Consumer Products business group which is offset by an increase of
$1,300 thousand for the Plastics Packaging business group.
8
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
6. PROPERTIES, PLANTS AND EQUIPMENT
Major classes of properties, plants and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 28,
1994
------------
(THOUSANDS)
<S> <C>
Land and land improvements......................................... $ 17,092
Buildings.......................................................... 111,262
Machinery, equipment, furniture and fixtures....................... 561,596
Construction in progress........................................... 31,580
---------
Properties, plants and equipment--gross............................ 721,530
Less accumulated depreciation...................................... (415,452)
---------
Properties, plants and equipment--net.............................. $ 306,078
=========
</TABLE>
The above amounts for properties, plants and equipment do not include the
cost basis of the Macedon Technical Center, but do include the specific
equipment of the Plastics Division located at the Center. This facility is
shared by the Plastics Division and Films Division of Mobil Chemical. All costs
associated with the Plastics Division's research and development activities at
the Technical Center are included in the accompanying financial statements.
7. ASSETS HELD FOR SALE
As part of the Division's reengineering program, as described in Note 15, the
Division closed two manufacturing plants and eliminated unprofitable product
lines which resulted in either the sale or disposal of the related machinery
and equipment. The restructuring charge recorded in 1994 includes $28,581
thousand to write-down the two plants, machinery and equipment to their
estimated realizable value. These items had an original cost of approximately
$97,500 thousand and accumulated depreciation of approximately $58,500 thousand
prior to the restructuring charge. The Washington, New Jersey plant was closed
in September 1994, and the Woodland, California plant was closed in March 1995.
The items that have not been sold or disposed of, primarily the two
manufacturing plants, are included as assets held for sale in the accompanying
combined statement of net assets at management's estimate of the realizable
value.
9
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
8. ACCRUED EXPENSES--OTHER
Accrued expenses--other consists of the following:
<TABLE>
<CAPTION>
DECEMBER 28,
1994
------------
(THOUSANDS)
<S> <C>
Salaries........................................................... $ 2,067
Vacation........................................................... 7,993
Benefits........................................................... 3,442
Workers' compensation insurance.................................... 2,230
Promotions......................................................... 42,139
Advertising........................................................ 1,219
Quantity discounts................................................. 7,150
Incentive programs................................................. 773
Commissions........................................................ 1,671
Sales force bonuses................................................ 2,331
Freight............................................................ 6,965
Property taxes..................................................... 904
Sales and use tax.................................................. 674
Relocation costs................................................... 873
Other accrued expenses............................................. 1,140
-------
$81,571
=======
</TABLE>
9. FOREIGN CURRENCY TRANSLATION
The cumulative currency translation adjustment included in net assets
consists of the following unrealized gain (loss):
<TABLE>
<CAPTION>
(THOUSANDS)
-----------
<S> <C>
Balance at December 29, 1993........................................ $ (770)
Exchange adjustments.............................................. (239)
-------
Balance at December 28, 1994........................................ $(1,009)
=======
</TABLE>
10. RELATED PARTY TRANSACTIONS
Mobil Chemical Company, Mobil Oil Corporation, and Mobil Corporation have
provided the Plastics Division with various administrative and financial
services. Mobil Chemical Company services include computer systems, accounting,
legal and purchasing functions. Mobil Oil Corporation and Mobil Corporation
services include computer mainframe and networking charges, payroll and
employee benefits administration, health, safety and environmental compliance
programs, and plastics industry trade dues. It is Mobil's policy to allocate
centrally incurred costs primarily on the basis of usage or on estimated time
spent. Management believes these allocations and charges have been made on a
reasonable basis; however, they are not necessarily indicative of the level of
expenses which might have been incurred had the Division been operating as a
stand-alone entity.
10
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
10. RELATED PARTY TRANSACTIONS--(CONTINUED)
Charges allocated to the Division from the above-mentioned sources amounted
to approximately $24,980 thousand for the year ended December 28, 1994. In
addition to the above charges, the Division is allocated a surcharge based on
payroll for various employee benefits, including those mandated by statute. For
U.S. operations these charges amounted to $46,591 thousand and for Canadian
operations these charges amounted to $610 thousand for the year ended December
28, 1994. In addition, workers' compensation costs were allocated to the
Division from Mobil Oil based on payroll, state mandated rates, and experience
ratings. Workers' compensation costs allocated to the Division for the year
ended December 28, 1994 amounted to approximately $7,300 thousand.
The Division obtains general liability and fire and extended property
insurance coverage from a wholly-owned subsidiary of Mobil Corporation. The
Division is self-insured up to deductible limits; these limits for fire and
extended property insurance were increased effective January 1, 1995. Insurance
premiums charged to the Division were approximately $801 thousand for the year
ended December 28, 1994.
The Division purchased approximately 10% of its polyethylene resin raw
material from Mobil affiliates during the year ended December 28, 1994. These
purchases, which were made at market rates, amounted to approximately $16,600
thousand for the year ended December 28, 1994.
11. DEFINED BENEFIT RETIREMENT PLANS
The majority of the Division's U.S. employees are covered by funded
noncontributory pension plans sponsored by Mobil Oil. These plans are primarily
final average pay plans. Funding for these plans, at the Corporate level, is
based on the projected unit credit actuarial cost method. The assets of these
plans consist primarily of equity and fixed income securities.
The Division receives an intercompany allocation of pension costs from Mobil
or its subsidiaries. The net pension obligation is maintained on Mobil's books
and no amount has been included in the accompanying combined statement of net
assets for the Division's share of the obligation.
Net pension costs allocated by Mobil Oil to the Plastics Division
approximated $4,619 thousand for the year ended December 28, 1994. Amounts
allocated are principally determined based on payroll. These charges are
included in the payroll surcharge amount disclosed in Note 10.
The Division also provides retirement benefits for its Canadian employees
under pension plans sponsored by a Canadian subsidiary of Mobil Corporation.
Net pension costs allocated to the Plastics Division amounted to approximately
$170 thousand for the year ended December 28, 1994. These charges are included
in the payroll surcharge amount disclosed in Note 10.
In accordance with certain reporting requirements, actuarial valuations for
the defined benefit retirement plans are performed on an annual basis. The most
recent actuarial valuations were performed as of December 28, 1994. The primary
assumptions used for the U.S. and Canadian plans are as follows:
<TABLE>
<CAPTION>
PERCENT
--------
<S> <C>
Discount rate.......................................................... 7.5--8.5
Rate of salary increase................................................ 4.0--5.6
Expected return on plan assets......................................... 8.2--8.5
</TABLE>
11
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
12. OTHER POSTRETIREMENT BENEFITS
The Division, through Mobil Oil, provides certain health care and life
insurance benefits for U.S. retired employees who meet eligibility
requirements. The cost of these benefits is allocated to the Division by Mobil
Oil. The net obligation for these benefits is maintained by Mobil Oil and no
amount has been recorded in the accompanying combined statement of net assets
for the Division's share of the obligation. Premium costs are shared on a plan-
by-plan basis between Mobil Oil and the participants. Postretirement health
care benefits are provided both before and after eligibility for Medicare. The
life insurance plans provide for a single lump-sum payment to a designated
beneficiary.
Charges for postretirement health care and life insurance plans allocated to
the Division by Mobil Oil were $3,460 thousand for the year ended December 28,
1994. Amounts allocated are principally determined based on payroll. These
charges are included in the payroll surcharge amount disclosed in Note 10.
In accordance with certain reporting requirements, actuarial valuations for
postretirement health care and life insurance plans are performed on an annual
basis. The most recent valuations were performed as of December 28, 1994.
The accumulated postretirement benefit obligation as of December 28, 1994 is
based on a weighted-average assumed discount rate of 8.5%. The assumed rates of
future increases in per capita cost of health care benefits (health care cost
trend rate) for 1995 is 10.3% and is assumed to decrease gradually over 10
years to 5.5%. The effect of a one percentage point increase in the assumed
health care cost trend rate would increase the Division's postretirement
benefit charge by approximately 15%.
Mobil Corporation's policy is to make contributions to funded plans and
provide book reserves for unfunded plans.
The Division does not provide postretirement benefits for its Canadian
employees because they are covered primarily by local government programs.
13. EMPLOYEE SAVINGS PLAN
The Division, through Mobil Oil, sponsors an Employee Savings Plan, which
covers most U.S. employees. The Plan includes a savings plan, which consists
primarily of an employee stock ownership plan (ESOP) and a 401(k) plan. The
ESOP consists of contributions made by Mobil Oil of 4% of eligible employees'
annual base salary. The 401(k) plan consists of Mobil Oil's contribution of 2%
of eligible employees' annual base salary and employee contributions of 1% to
10% of their base salary subject to IRS limitations. Mobil Oil contributions to
the ESOP are invested in Mobil ESOP Convertible Preferred Stock. Employee
contributions to the savings plan are invested at the employees' discretion in
Mobil Corporation common stock or a variety of mutual funds. The Division was
charged approximately $6,506 thousand for the year ended December 28, 1994 for
their allocated costs of these plans. These charges are included in the payroll
surcharge amount disclosed in Note 10.
The Division also sponsors, through a Canadian subsidiary of Mobil
Corporation, an Employee Savings Plan for its Canadian employees. For salaried
employees the plan consists of a 3-5% contribution by Mobil (depending on years
of service). This contribution is made only if an employee also contributes a
minimum of 5%. An employee may contribute up to 25% of their salary. For non-
salaried workers the employee has a choice of 2% of additional wages, or a 2%
contribution to the Savings Plan. All contributions are invested at the
employees' discretion in Mobil Corporation common stock or a variety of mutual
funds. Employee
12
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
13. EMPLOYEE SAVINGS PLAN--(CONTINUED)
Savings Plan contributions allocated to the Division amounted to approximately
$73 thousand for the year ended December 28, 1994. These charges are included
in the payroll surcharge amount disclosed in Note 10.
14. LEASE COMMITMENTS AND RENTALS
The Division rents certain property and equipment under various operating
leases. Total rental expense for the year ended December 28, 1994, amounted to
approximately $8,169 thousand.
Future minimum lease payments under all non-cancelable operating leases
having a remaining term in excess of one year are as follows:
<TABLE>
<CAPTION>
(THOUSANDS)
-----------
<S> <C>
1995................................................................ $3,442
1996................................................................ 2,098
1997................................................................ 1,415
1998................................................................ 930
1999................................................................ --
</TABLE>
15. RESTRUCTURING CHARGE
During 1994, the Division implemented a major reengineering program intent on
reducing the Division's cost structure through a comprehensive redesign of
operating practices and major business processes. The program included the
closing of two manufacturing plants, equipment consolidation, elimination of
unprofitable product lines, closure of outside warehouses, and manpower
reductions made possible by improved processes and consolidating accounting and
other administrative functions. As a result of the reengineering program, the
Division's headcount was reduced by approximately 25% or 1,200 positions.
Included in 1994 operating results is a charge of $74,809 thousand relating
to the cost of this program.
The restructuring charge consists of the following:
<TABLE>
<CAPTION>
(THOUSANDS)
-----------
<S> <C>
Employee severance packages........................................ $37,375
Write-down of equipment and inventory and related costs of
discontinued product lines........................................ 27,190
Charges to record closed manufacturing facilities at estimated
realizable value and related closure and selling costs............ 9,113
Other.............................................................. 1,131
-------
$74,809
=======
</TABLE>
The Division's combined statement of net assets includes accruals for
restructuring of $28,837 thousand at December 28, 1994. These accruals consist
primarily of employee severance packages which are paid on an ongoing basis; it
is anticipated that payments relating to this program will be completed in
1996.
The Division also incurred consulting charges relating to the restructuring
program of $2,907 thousand for the year ended December 28, 1994.
16. CONTINGENCIES
Environmental Matters
The Division is subject to loss contingencies pursuant to various federal,
state and local environmental laws and regulations. These include possible
obligations to remove or mitigate the effects on the environment of the
placement, storage, disposal or release of certain chemical or other substances
by the Division or by other parties.
13
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
16. CONTINGENCIES--(CONTINUED)
The cost of known environmental obligations that can be reasonably estimated
has been provided for in accordance with the Division's accounting policies.
The Division is not aware of any environmental obligations and accordingly has
not made any provisions for such obligations related to its current operating
facilities. In addition, the Division may, in the future, be involved in
further environmental assessments or clean-ups. While the ultimate requirement
for any such remediation, and its cost, is presently not known, the management
of the Division does not expect these costs, based upon currently known
information and existing requirements, to have a material adverse effect on its
net assets and future operating results.
14
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
COMBINED STATEMENTS OF NET ASSETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 23, SEPTEMBER 27,
1994 1995
------------- -------------
<S> <C> <C>
Assets
Current Assets:
Accounts receivable--net.......................... $100,539 $112,402
Inventories....................................... 70,705 85,880
Prepaid expenses and other current assets......... 2,930 1,460
-------- --------
Total current assets................................ 174,174 199,742
Properties, plants and equipment--net............... 303,550 325,676
Assets held for sale................................ 11,648 5,213
-------- --------
Total assets........................................ 489,372 530,631
Current liabilities:
Accounts payable.................................. 29,375 55,067
Accrued restructuring charges..................... 40,266 5,968
Accrued expenses--other........................... 93,528 79,957
-------- --------
Total current liabilities........................... 163,169 140,992
-------- --------
Net assets.......................................... $326,203 $389,639
======== ========
</TABLE>
See notes to interim combined financial statements.
15
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
COMBINED STATEMENTS OF OPERATIONS BEFORE INCOME TAXES
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 23, SEPTEMBER 27,
1994 1995
------------- -------------
<S> <C> <C>
Net sales.......................................... $756,094 $835,380
Other operating revenue............................ 897 924
-------- --------
756,991 836,304
Operating expenses:
Cost of goods sold............................... 492,110 534,496
Selling, distribution, general & administrative.. 206,290 211,957
Research and development......................... 6,310 5,466
-------- --------
704,710 751,919
Operating income before restructuring and other
charges........................................... 52,281 84,385
Restructuring and other charges.................... 74,809 2,000
-------- --------
Operating income (loss)............................ (22,528) 82,385
Other income....................................... 41 6,000
-------- --------
Income (loss) before income taxes.................. $(22,487) $ 88,385
======== ========
</TABLE>
See notes to interim combined financial statements.
16
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
COMBINED STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 23,
1994
-------------
<S> <C>
Excess of combined
assets over liabilities
at December 29, 1993... $432,150
Income (loss) before
income taxes........... (22,487)
Net change in foreign
currency translation
adjustment............. (214)
Net change in parent
company advances....... (83,246)
--------
Excess of combined
assets over liabilities
at September 23, 1994.. $326,203
========
</TABLE>
See notes to interim combined financial statements.
17
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
COMBINED STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 27,
1995
-------------
<S> <C>
Excess of combined
assets over liabilities
at December 28, 1994... $328,594
Income before income
taxes.................. 88,385
Net change in foreign
currency translation
adjustment............. (210)
Net change in parent
company advances....... (27,130)
--------
Excess of combined
assets over liabilities
at September 27, 1995.. $389,639
========
</TABLE>
See notes to interim combined financial statements.
18
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 23, SEPTEMBER 27,
1994 1995
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Income (loss) before income taxes................. $(22,487) $88,385
Adjustment to reconcile income (loss) before
income taxes to net cash flows provided by
operating activities:
Depreciation.................................... 34,307 30,611
Write down of properties, plants, equipment and
inventory as a result of restructuring program. 34,386 --
Loss on disposal of machinery and equipment..... 1,405 1,288
Changes in operating assets and liabilities:
Accounts receivable--net...................... (9,214) (9,472)
Inventories................................... 56,011 (12,095)
Prepaid expenses and other current assets..... 2,678 (908)
Accounts payable and accrued expenses......... (2,426) (50)
Accrued restructuring charges................. 40,266 (22,869)
Other......................................... 1,033 (57)
-------- -------
Cash provided by operating activities............. 135,959 74,833
INVESTING ACTIVITIES
Capital expenditures.............................. (52,902) (52,171)
Proceeds from sale of machinery and equipment..... 189 4,468
-------- -------
Cash used in investing activities................. (52,713) (47,703)
FINANCING ACTIVITIES
Change in parent company investment............... (83,246) (27,130)
-------- -------
Cash used in financing activities................. (83,246) (27,130)
-------- -------
Net change in cash and cash equivalents........... -- --
Cash and cash equivalents:
Beginning of period............................. -- --
-------- -------
End of period................................... $ -- $ --
======== =======
</TABLE>
See notes to interim combined financial statements.
19
<PAGE>
MOBIL PLASTICS DIVISION OF MOBIL CORPORATION
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
The unaudited combined financial information furnished herein reflects all
adjustments, which in the opinion of management are of a normal recurring
nature, to fairly state the Division's financial position and results from
operations for the periods presented. The information should be read in
conjunction with the Division's audited combined financial statements for the
year ended December 28, 1994.
The results of operations for the nine-month periods ended September 23, 1994
and September 27, 1995 are not necessarily indicative of the results to be
expected for the entire year ended December 28, 1994 and December 31, 1995.
2. INVENTORIES
Major classes of inventories are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 23, SEPTEMBER 27,
1994 1995
------------- -------------
(THOUSANDS)
<S> <C> <C>
Raw material.................................. $ 23,302 $ 29,705
In-process.................................... 10,870 13,358
Finished product.............................. 68,809 84,470
-------- --------
Product inventory at current cost............. 102,981 127,533
Less: LIFO and other inventory reserves....... (52,097) (57,616)
-------- --------
50,884 69,917
Other material................................ 5,419 6,334
Maintenance................................... 14,402 9,629
-------- --------
$ 70,705 $ 85,880
======== ========
</TABLE>
3. PATENT INFRINGEMENT SETTLEMENT
In March 1995 the Division received a $6,000 thousand settlement relating to
a patent infringement suit. This amount is recorded as other income during the
nine month period ended September 27, 1995.
4. CONTINGENCIES
Environmental Matters
The Division is subject to loss contingencies pursuant to various federal,
state and local environmental laws and regulations. These include possible
obligations to remove or mitigate the effects on the environment of the
placement, storage, disposal or release of certain chemical or other substances
by the Division or by other parties.
The cost of known environmental obligations that can be reasonably estimated
has been provided for in accordance with the Division's accounting policies.
The Division is not aware of any environmental obligations and accordingly has
not made any provisions for such obligations related to its current operating
facilities. In addition, the Division may, in the future, be involved in
further environmental assessments or clean-ups. While the ultimate requirement
for any such remediation, and its cost, is presently not known, the management
of the Division does not expect these costs, based upon currently known
information and existing requirements, to have a material adverse effect on its
net assets and future operating results.
20
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Financial Statements of Tenneco
Inc. and Consolidated Subsidiaries ("Tenneco") illustrate the effect of (i)
Tenneco's acquisition of the Mobil Plastics Division of Mobil Corporation
("Mobil Plastics") and (ii) the financing as described in the next paragraph.
The Unaudited Pro Forma Condensed Balance Sheet is prepared as of September 30,
1995, and illustrates the effects of the acquisition and the financing as if
they had occurred on that date. The Unaudited Pro Forma Condensed Statements of
Income are prepared for the nine months ended September 30, 1995, and for the
year ended December 31, 1994, and illustrate the effects of the acquisition and
the financing as if they had occurred at the beginning of 1994.
The Unaudited Pro Forma Condensed Financial Statements reflect Tenneco's
acquisition of the net assets of Mobil Plastics, excluding certain assets and
liabilities as discussed in footnote 1 to such statements. Tenneco's
acquisition of Mobil Plastics will be accounted for as a purchase. The purchase
price was $1.27 billion. The Unaudited Pro Forma Condensed Financial Statements
also reflect certain elements of the financing, including (i) the issuance of
$705 million of commercial paper, (ii) $400 million of variable-rate, short-
term bank loans and (iii) $165 million of cash.
The Unaudited Pro Forma Condensed Financial Statements should be read in
conjunction with the historical financial statements of Tenneco included in
Tenneco's Annual Report on Form 10-K for the year ended December 31, 1994,
Tenneco's Quarterly Report on Form 10-Q for the quarter ended September 30,
1995, and the historical financial statements of Mobil Plastics included
elsewhere herein. The pro forma adjustments are based on preliminary
information about Mobil Plastics' assets, liabilities and results of
operations. Final purchase price allocations will be based on more complete
evaluations and may differ from those shown herein. However, the management of
Tenneco believes that the assumptions utilized provide a reasonable basis for
presenting the significant effects of the acquisition and the financing and
that the pro forma adjustments give appropriate effect to those assumptions and
are properly applied in the pro forma financial information. The Unaudited Pro
Forma Condensed Financial Statements are not intended to be indicative of
actual operating results or financial position had the transactions occurred as
of the dates indicated above, nor do they purport to indicate operating results
or financial position which may be attained in the future.
21
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
SEPTEMBER 30, 1995
(MILLIONS)
<TABLE>
<CAPTION>
EXCLUDED ASSETS
AND LIABILITIES
MOBIL AND
TENNECO PLASTICS* PRO PRO
AS AS FORMA FORMA
ASSETS REPORTED REPORTED ADJUSTMENTS RESULTS
------ -------- --------- --------------- -------
<S> <C> <C> <C> <C>
Current assets:
Cash and temporary cash
investments................. $ 712 $(165)(9) $ 547
Receivables.................. 1,632 $112 (1)(1) 1,743
Deferred income taxes........ 56 46 (8) 102
Other current assets......... 1,265 88 42 (2) 1,395
------- ---- ----- -------
3,665 200 (78) 3,787
Investments and other assets... 3,347 5 (5)(1) 3,852
(42)(2)
(398)(3)
30 (4)
45 (5)
5 (6)
865 (7)
Plant, property and equipment,
net........................... 5,371 326 398 (3) 6,095
------- ---- ----- -------
$12,383 $531 $820 $13,734
======= ==== ===== =======
LIABILITIES AND SHAREOWNERS'
EQUITY
----------------------------
Current Liabilities:
Short-term debt.............. $666 $705 (9) $1,771
400 (9)
Other current liabilities.... 2,209 $141 (21)(1) 2,379
45 (5)
5 (6)
------- ---- ----- -------
2,875 141 1,134 4,150
Long-term debt................. 3,310 3,310
Deferred income taxes.......... 1,333 46 (8) 1,379
Deferred credits and other
liabilities................... 1,292 30 (4) 1,322
Minority interest.............. 315 315
Preferred stock with mandatory
redemption provisions......... 129 129
Shareowners' equity or net
assets........................ 3,129 390 (390)(1)(7)(9) 3,129
------- ---- ----- -------
$12,383 $531 $ 820 $13,734
======= ==== ===== =======
</TABLE>
- --------
*Certain amounts have been reclassified to conform to Tenneco's classification.
See the accompanying Notes to Unaudited Pro Forma Condensed Financial
Statements.
22
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MOBIL
TENNECO PLASTICS* PRO PRO
AS AS FORMA FORMA
REPORTED REPORTED ADJUSTMENTS RESULTS
------------ --------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Net sales and operating
revenues................... $ 6,497 $836 $ 7,333
Other income................ 353 6 359
------------ ---- ---- ------------
6,850 842 7,692
------------ ---- ---- ------------
Costs and expenses............ 5,780 754 $ 4 (11) 6,558
5 (12)
13 (10)
2 (13)
------------ ---- ---- ------------
5,780 754 24 6,558
------------ ---- ---- ------------
Income before interest
expense, income taxes and
minority interest............ 1,070 88 (24) 1,134
------------ ---- ---- ------------
Interest expense (net of
interest capitalized)........ 249 50 (14) 299
Income tax expense............ 252 6 (15) 258
Minority interest............. 17 17
------------ ---- ---- ------------
Income from continuing
operations................... 552 88 (80) 560
Preferred stock dividends..... 8 8
------------ ---- ---- ------------
Income from continuing
operations applicable to
common stock................. $ 544 $ 88 $(80) $ 552
============ ==== ==== ============
Average number of shares of
common stock outstanding..... 174,804,413 174,804,413
============ ============
Earnings per average share of
common stock from continuing
operations................... $ 3.11 $ 3.16
============ ============
</TABLE>
- --------
*Certain amounts have been reclassified to conform to Tenneco's classification.
See the accompanying Notes to Unaudited Pro Forma Condensed Financial
Statements.
23
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MOBIL
TENNECO PLASTICS* PRO PRO
AS AS FORMA FORMA
REPORTED REPORTED ADJUSTMENTS RESULTS
------------ --------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Net sales and operating
revenues................... $ 12,174 $1,037 $ 13,211
Other income................ 245 1 246
------------ ------ ---- ------------
12,419 1,038 13,457
------------ ------ ---- ------------
Costs and expenses............ 11,040 1,033 $ 2 (11) 12,106
9 (12)
17 (10)
5 (13)
------------ ------ ---- ------------
11,040 1,033 33 12,106
------------ ------ ---- ------------
Income before interest
expense, income taxes and
minority interest............ 1,379 5 (33) 1,351
------------ ------ ---- ------------
Interest expense (net of
interest capitalized)........ 407 67 (14) 474
Income tax expense............ 301 (38)(15) 263
Minority interest............. 30 30
------------ ------ ---- ------------
Income from continuing
operations................... 641 5 (62) 584
Preferred stock dividends..... 12 12
------------ ------ ---- ------------
Income from continuing
operations applicable to
common stock................. $ 629 $ 5 $(62) $ 572
============ ====== ==== ============
Average number of shares of
common stock outstanding..... 180,084,909 180,084,909
============ ============
Earnings per average share of
common stock from continuing
operations................... $ 3.49 $ 3.18
============ ============
</TABLE>
- --------
*Certain amounts have been reclassified to conform to Tenneco's classification.
See the accompanying Notes to Unaudited Pro Forma Condensed Financial
Statements.
24
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
1. Represents adjustments for certain assets and liabilities for which Mobil
Corporation retains ownership.
2. Represents the adjustment to record inventory at its estimated fair value.
For finished goods, the estimated fair value is net of a reasonable profit
for selling efforts.
3. Represents the preliminary adjustment to record plant, property and
equipment at its estimated fair value.
4. Represents the employee benefit obligations for retirement benefits based on
the difference between the projected benefit obligation and the accumulated
benefit obligation at date of acquisition.
5. Represents the estimated relocation, severance and lease cancellation costs
associated with combining certain administrative, manufacturing and
distribution facilities of the Mobil Plastics' business.
6. Represents estimated costs associated with investment banking, legal,
accounting and other out-of-pocket costs related to the acquisition of Mobil
Plastics.
7. Represents excess purchase price over net assets acquired at date of
purchase.
8. Represents deferred income taxes on the difference between the adjusted book
basis and tax basis of the net assets acquired using a tax rate of 40%.
9. Represents the issuance of $705 million of commercial paper, borrowing of
$400 million under short-term bank loans and use of $165 million of cash to
acquire the net assets of Mobil Plastics.
10. Represents amortization of intangible assets and goodwill on a straight-
line basis over a weighted average period of 30 years.
11. Represents additional pension expense that would have been incurred had the
Mobil Plastics' employees participated in the Tenneco Plans beginning
January 1, 1994.
12. Represents the additional depreciation expense arising from the excess of
the estimated fair value over the historical basis of fixed assets.
13. Represents the additional LIFO expense as if Tenneco had elected LIFO for
the acquired Mobil Plastics' business as of January 1, 1994.
14. Represents the interest expense incurred based on current rates related to
the short-term debt used to purchase the net assets of Mobil Plastics.
15. Represents income tax expense (benefit) on the pro forma adjustments and
the historical pretax income related to Mobil Plastics based on an
estimated combined federal and state income tax rate of 40%.
25
<PAGE>
EXHIBITS
<TABLE>
<C> <S>
2 --Asset Purchase Agreement among Mobil Oil Corporation, Mobil Chemical
Canada Limited and Tenneco Inc. dated as of October 1, 1995
23 --Consent of Ernst & Young LLP, Independent Auditors
99 --Press Release issued November 17, 1995, announcing that Tenneco had
completed the acquisition of the plastics division of Mobil Corporation
for $1.27 billion. Tenneco's packaging division, Tenneco Packaging, is
headquartered in Evanston, Illinois.
</TABLE>
26
<PAGE>
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.
TENNECO INC.
Registrant
M. W. Meyer
By: _________________________________
M.W. Meyer
Vice President and
Deputy General Counsel
DATE: December 4, 1995
27
<PAGE>
EXHIBIT 2
- -------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
among
MOBIL OIL CORPORATION,
MOBIL CHEMICAL CANADA LIMITED
and
TENNECO INC.
Dated as of October 1, 1995
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND TERMS
<TABLE>
<CAPTION>
Page
<S> <C>
1.1 Specific Definitions............... 2
1.2 Other Terms........................ 12
1.3 Other Definitional Provisions...... 12
</TABLE>
ARTICLE II
PURCHASE AND SALE OF THE PLASTICS BUSINESS
<TABLE>
<CAPTION>
<S> <C>
2.1 Purchase and Sale of Assets........ 12
2.2 Excluded Assets.................... 14
2.3 Assumption of Liabilities.......... 16
2.4 Excluded Liabilities............... 18
2.5 Purchase Price..................... 22
2.6 Post-Closing Adjustment............ 22
2.7 Closing............................ 26
2.8 Deliveries by Purchaser............ 28
2.9 Deliveries by Sellers.............. 29
2.10 Transfer Taxes and Recording Fees.. 30
</TABLE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
<TABLE>
<CAPTION>
<S> <C>
3.1 Organization and Qualification..... 31
3.2 Corporate Authorization............ 31
3.3 Consents and Approvals............. 32
3.4 Non-Contravention.................. 32
3.5 Binding Effect..................... 33
3.6 Financial Statements; Absence of
Certain Changes................... 34
3.7 Litigation and Claims.............. 36
3.8 Taxes.............................. 37
3.9 Employee Benefits.................. 38
3.10 Compliance with Laws............... 39
3.11 Environmental Matters.............. 39
3.12 Intellectual Property.............. 40
3.13 Labor Matters...................... 42
3.14 Contracts.......................... 43
3.15 Entire Business; Title to Property. 44
3.16 Finders' Fees...................... 46
3.17 No Undisclosed Liabilities......... 47
3.18 No Other Representations or
Warranties........................ 47
</TABLE>
i
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
<TABLE>
<CAPTION>
<S> <C>
4.1 Organization and Qualification................. 48
4.2 Corporate Authorization........................ 48
4.3 Consents and Approvals......................... 49
4.4 Non-Contravention.............................. 49
4.5 Binding Effect................................. 50
4.6 Finders' Fees.................................. 50
4.7 Financial Capability........................... 51
4.8 No Other Representations or Warranties......... 51
</TABLE>
ARTICLE V
COVENANTS
<TABLE>
<CAPTION>
<S> <C>
5.1 Access........................................ 51
5.2 Conduct of Business........................... 52
5.3 Best Efforts.................................. 53
5.4 Post-Closing Obligations to Certain
Employees.................................... 55
5.5 Compliance with WARN, etc..................... 61
5.6 Further Assurances............................ 61
5.7 Use of Corporate Name and Symbol; Technology
and Transition License Agreement............. 62
5.8 Transition Services........................... 63
5.9 Macedon Technical Center Shared Facilities
Agreement.................................... 63
5.10 Macedon Plant Essential Services Agreement.... 63
5.11 Certain Matters Related to Excluded
Liabilities and Assumed Liabilities.......... 64
5.12 Employee Matters.............................. 67
5.13 Tax Matters................................... 67
5.15 Covenant Not to Compete....................... 71
5.16 Confidentiality............................... 73
</TABLE>
ARTICLE VI
CONDITIONS TO CLOSING
<TABLE>
<CAPTION>
<S> <C>
6.1 Conditions to the Obligations of Purchaser
and Sellers................................ 74
6.2 Conditions to the Obligations of Purchaser.. 75
6.3 Conditions to the Obligations of Sellers.... 76
</TABLE>
ARTICLE VII
SURVIVAL; INDEMNIFICATION
<TABLE>
<CAPTION>
<S> <C>
7.1 Survival.................................. 78
7.2 Indemnification by Purchaser.............. 79
7.3 Indemnification by Sellers................ 80
7.4 Indemnification Procedures................ 82
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
7.5 Characterization of Indemnification
Payments.................................. 85
7.6 Computation of Losses Subject to
Indemnification........................... 86
</TABLE>
ARTICLE VIII
TERMINATION
8.1 Termination................................ 86
8.2 Effect of Termination...................... 87
ARTICLE IX
MISCELLANEOUS
<TABLE>
<CAPTION>
<S> <C>
9.1 Notices..................................... 88
9.2 Amendment; Waiver........................... 89
9.3 Assignment.................................. 90
9.4 Entire Agreement............................ 90
9.5 Fulfillment of Obligations.................. 90
9.6 Parties in Interest......................... 90
9.7 Public Disclosure........................... 91
9.8 Return of Information....................... 91
9.9 Expenses.................................... 92
9.10 Schedules................................... 92
9.11 Bulk Transfer Laws.......................... 92
9.12 GOVERNING LAW; SUBMISSION TO JURISDICTION;
SELECTION OF FORUM......................... 92
9.13 Counterparts................................ 93
9.14 Headings.................................... 93
9.15 Severability................................ 93
</TABLE>
iii
<PAGE>
EXHIBITS, SCHEDULES AND ANNEXES
EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Exhibit A - Technology and Transition Agreement
Exhibit B - Transition Services Agreement
Exhibit C - Terms of Macedon Technical Center
Shared Facilities Agreement
SCHEDULES
Schedule 1.1(a) - Composite Marks
Schedule 1.1(b) - Fixtures and Equipment
Schedule 1.1(c) - Grocery Sack Patents
Schedule 1.1(d) - Knowledge
Schedule 1.1(e) - Leased Real Property
Schedule 1.1(f) - Exceptions to Material Adverse
Change or Effect
Schedule 1.1(g) - Modified GAAP
Schedule 1.1(h) - Owned Real Property
Schedule 1.1(i) - Stretch Film Patents
Schedule 2.3(e) - Certain Assumed Litigation
Schedule 2.4(c) - Excluded Litigation
Schedule 2.5 - Purchase Price Allocation
Schedule 3.3 - Consent and Approvals
Schedule 3.4 - Non-Contravention
Schedule 3.6(a) - Financial Statements
Schedule 3.6(c) - Certain Changes
Schedule 3.7(a) - Litigation and Claims
Schedule 3.7(b) - Orders and Judgments
Schedule 3.9 - Mobil Plans
Schedule 3.10 - Compliance with Laws
Schedule 3.11 - Environmental Matters
Schedule 3.12(a) - Intellectual Property
Schedule 3.12(b) - Restrictions on Use of Selected Marks
Schedule 3.12(c) - Restrictions on Use of Intellectual
Property other than Selected Marks
Schedule 3.12(d) - Claims Affecting Intellectual Property
Schedule 3.13 - Labor Matters
Schedule 3.14(i) - Contracts
Schedule 3.14(ii) - Validity of Contracts
Schedule 3.14(iii) - Contracts in Default
Schedule 3.15(a) - Exceptions to Entire Business
Schedule 3.15(b) - Encumbrances
Schedule 3.15(d) - Limitations on Transferred Assets
Schedule 4.3 - Consent and Approvals
Schedule 4.4 - Non-Contravention
Schedule 5.2 - Conduct of Business
Schedule 5.4(a)(i) - U.S. Employees (other than Shared
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Employees)
Schedule 5.4(a)(ii) - Canadian Employees (other than Shared
Employees)
Schedule 5.4(b) - Required Level of Post-Closing
Employee Benefits
Schedule 5.4(d) - Employees Eligible for Retiree
Medical and Life Insurance Benefits
Schedule 5.4(f) - Employees Receiving Pay Protection
ANNEXES
Annex 6.2 (c) - Opinions of Sellers' Counsel
Annex 6.3 (c) - Opinions of Purchaser's Counsel
</TABLE>
v
<PAGE>
ASSET PURCHASE AGREEMENT
AGREEMENT, dated as of October 1, 1995, among MOBIL OIL CORPORATION, a
New York corporation ("Mobil Oil"), MOBIL CHEMICAL CANADA LIMITED, a corporation
organized under the laws of Ontario ("Mobil Canada" and, together with Mobil
Oil, "Sellers"), and TENNECO INC., a Delaware corporation ("Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Sellers are engaged, in part, in the business of developing,
manufacturing, marketing and distributing thermoformed and film-based plastic
packaging and consumer products (the "Plastics Business"); and
WHEREAS, Sellers desire to sell, transfer and assign to Purchaser, and
Purchaser desires to purchase and assume from Sellers, substantially all of the
assets and liabilities of the Plastics Business, all as more specifically
provided herein.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and subject to and on the terms and conditions
herein set forth, the parties hereto agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS AND TERMS
1.1 Specific Definitions. As used in this Agreement, the following
terms shall have the meanings set forth or as referenced below:
"Adjusted Closing Balance Sheet" shall have the meaning set forth in
Section 2.6(b).
"Affiliates" shall mean, with respect to any Person, any Persons
directly or indirectly controlling, controlled by or under common control with,
such other Person as of the date on which, or at any time during the period for
which, the determination of affiliation is being made.
"Agreement" shall mean this Agreement, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
"Ancillary Agreements" shall mean the Transition Services Agreement,
the Macedon Technical Center Shared Facilities Agreement, the Macedon Plant
Essential Services Agreement and the Technology and Transition License
Agreement.
"Assumed Liabilities" shall have the meaning set forth in Section 2.3.
"Balance Sheet" shall have the meaning set forth in Section 3.6(a).
"Base Amount" shall mean $421,894,000.
"Books and Records" shall mean all lists, files and documents Relating
to the Plastics Business and all general ledgers and underlying books of
original entry and other financial records of the Plastics Business, including
Tax Returns and tax records with respect to Taxes Relating to the Transferred
Assets the failure of which to pay would result in an Encumbrance on any of the
Transferred Assets (other than Tax Returns and tax records relating to Taxes
2
<PAGE>
measured by income and franchise Taxes) except to the extent included in or
Related to any Excluded Assets.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banks in New York City are authorized or obligated by law or
executive order to close.
"Canadian Act" shall mean the Competition Act, as amended, of Canada.
"Canadian Employees" shall mean Employees who are employed by Mobil
Canada.
"Claim Notice" shall have the meaning set forth in Section 7.4.
"Clean Air Act" shall mean the Clean Air Act, 42 U.S.C. (S) 7401 et
seq., as amended by the Clean Air Act Amendment of 1990 and implementing
regulations.
"Closing" shall mean the closing of the transactions contemplated by
this Agreement.
"Closing Balance Sheet" shall have the meaning set forth in Section
2.6(a).
"Closing Date" shall have the meaning set forth in Section 2.7(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Compliance Costs" shall mean capital and other costs and expenses of
compliance with Environmental Laws associated with the ongoing running of the
Plastics Business after the Closing or which arise by operation of Law or as a
condition of an operating permit, including but not limited to (i) any costs
associated with obtaining or maintaining compliance with permit requirements
under Environmental Laws, including, but not limited to, permits issued under
the Clean Air Act or similar state Laws, (ii) costs of constructing facilities
required under operating permits issued pursuant to Environmental Laws and (iii)
costs of operating, maintaining and removing or remediating asbestos-containing
material or presumed asbestos-containing
3
<PAGE>
material, but excluding costs of remediation of Hazardous Substances as
described in Section 2.4(b).
"Composite Mark" shall mean any trademark, service mark, brand name,
certification mark, trade name or other indication of origin that includes, in
addition to other terms or symbols, a Mobil Mark and which is listed in Schedule
1.1(a).
"Confidentiality Agreement" shall mean the Agreement, dated July 12,
1995, between Purchaser and Mobil Corporation.
"Contracts" shall mean all agreements, contracts, leases, purchase
orders, coupon, trade billback, refund and other arrangements, incentive
agreements, commitments and licenses that are Related to the Plastics Business
or to which the Transferred Assets are subject, except to the extent included in
the Excluded Assets.
"CPA Firm" shall have the meaning set forth in Section 2.6(b).
"Current Assets" shall mean, as of the Closing Date, Inventory and all
other current assets of the Plastics Business other than (i) cash, (ii) non-
trade accounts receivable from Sellers or their Affiliates and (iii) deferred
income Taxes.
"Current Liabilities" shall mean, as of the Closing Date, all current
liabilities of the Plastics Business other than (i) non-trade accounts payable
to Sellers or their Affiliates and (ii) accrued and unpaid federal, state, local
and foreign Taxes measured by income, including deferred income Taxes and
franchise Taxes, with respect to the taxable periods, or portions thereof ending
on or before the Closing Date.
"Determination Date" shall mean the close of business on the date
immediately preceding the Closing Date.
"Employees" shall mean (x) Persons who are exclusively employed in the
Plastics Business as of the Closing Date, (y) Inactive Employees and (z) Shared
Employees.
4
<PAGE>
"Encumbrances" shall mean liens, charges, encumbrances, security
interests, title defects, options or any other restrictions or third-party
rights.
"Environmental Assessment Report" shall mean the Environmental
Assessment Report, dated September 19, 1995, prepared by Lexicon Environmental
Associates included in Schedule 3.11.
"Environmental Claim" shall mean any written claim, notice of
violation or administrative or judicial action by any governmental authority or
other Person resulting from or alleging the violation of any Environmental Law
by either Seller in connection with the operation of the Plastics Business.
"Environmental Law" shall mean any Law relating to (x) the protection
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface or subsurface land or
wetlands) or (y) the exposure of Persons (other than Employees and Former
Employees) to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labelling, release or disposal of,
Hazardous Substances, but excluding any Law, including common Law, governing
protection of worker health and safety or human health (other than exposure of
Persons other than Employees and Former Employees to Hazardous Substances), or
establishing the basis for a claim for product liability.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Excluded Assets" shall have the meaning set forth in Section 2.2.
"Excluded Environmental Liabilities" shall have the meaning set forth
in Section 2.4.
"Excluded Liabilities" shall have the meaning set forth in Section
2.4.
"Financial Statements" shall have the meaning set forth in Section
3.6(a).
"Fixtures and Equipment" shall mean all furniture, fixtures,
furnishings, machinery, vehicles, equipment
5
<PAGE>
(including research and development equipment) and other tangible personal
property Related to the Plastics Business, including the Transferred Macedon
Fixtures and Equipment and the Transferred RACC Fixtures and Equipment and
except to the extent included in the Excluded Assets.
"Former Employees" shall mean Persons whose employment in the Plastics
Business terminated prior to the Closing Date (including Persons who, as of the
Closing Date, have been receiving long-term disability benefits under a Mobil
Plan for at least one year or have been laid off.
"GAAP" shall mean United States generally accepted accounting
principles.
"Governmental Authorizations" shall mean all licenses, permits,
certificates and other authorizations and approvals required to carry on the
Plastics Business as currently conducted under the applicable laws, ordinances
or regulations of any federal, state, local or foreign governmental authority.
"Grocery Sack License" shall have the meaning set forth in Section
5.7.
"Grocery Sack Patent" shall mean the patent listed on Schedule 1.1(c).
"GST" shall mean the goods and services Tax imposed in accordance with
Part IX of the Excise Tax Act (Canada).
"Hazardous Substances" shall mean any hazardous substances within the
meaning of 101(14) of CERCLA, 42 U.S.C. (S) 9601(14), or any pollutant or waste
or other substance that is regulated under any Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Inactive Employees" shall mean all Persons who (i) are exclusively
employed in the Plastics Business or are Shared Employees and (ii) are absent
from active employment by reason of disability, illness, injury, workers'
compensation or leave of absence, but excluding Former Employees.
6
<PAGE>
"Indemnified Parties" shall have the meaning set forth in Section
7.3(a).
"Indemnifying Party" shall have the meaning set forth in Section 7.4.
"Intangible Rights" shall mean all claims, deposits, proceeds
(including proceeds under any insurance contract or arrangement), prepayments,
prepaid assets, refunds, credits, causes of action, rights of recovery, rights
of set-off and recoupment, and all attorney-client, work product, and other
legal privileges of Sellers, to the extent such rights are Related to the
Transferred Assets or the Assumed Liabilities.
"Intellectual Property" shall mean (except to the extent included in
the Excluded Assets or subject to the rights of any third parties therein) all
intellectual property (and the rights associated therewith) Related to the
Plastics Business, including the following: trademarks, service marks, brand
names, certification marks, trade dress, assumed names, trade names and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; patents, applications for patents (including,
without limitation, divisions, continuations, continuations-in-part and renewal
applications), and any renewals, extensions or reissues thereof, in any
jurisdiction; non-public information, trade secrets and confidential information
and rights in any jurisdiction to limit the use or disclosure thereof by any
Person; copyrighted works and registrations or applications for registration of
copyrights in any jurisdiction, and any renewals or extensions thereof; any
similar intellectual property or proprietary rights; and any claims or causes of
action arising out of or related to any infringement or misappropriation of any
of the foregoing.
"Inventory" shall mean all inventory held for resale and all
polyethylene and polystyrene resins and other raw materials, work in process,
finished products, goods in transit, spares, wrapping, supply and packaging
items Related to the Plastics Business, except to the extent included in the
Excluded Assets.
7
<PAGE>
"Knowledge" or any similar term shall mean the actual knowledge of the
management employees of Sellers identified on Schedule 1.1(d).
"Laws" shall include any federal, state, foreign or local law,
statute, ordinance, rule, regulation, code, order, judgment, decree or
injunction.
"Leased Real Property" shall mean all real property leased on the date
hereof by either Seller as lessee, including any buildings, structures and
improvements thereon or appurtenances thereto and rights in respect thereof,
Related to the Plastics Business. Schedule 1.1(e) sets forth a list of the
Leased Real Property.
"Losses" shall have the meaning set forth in Section 7.2.
"Macedon Plant" shall mean the plant utilized by the Plastics Business
in Macedon, New York.
"Macedon Plant Essential Services Agreement" shall have the meaning
set forth in Section 5.10.
"Macedon Technical Center" shall mean the offices, laboratories and
pilot plant of Mobil Oil located in Macedon, New York.
"Macedon Technical Center Shared Facilities Agreement" shall have the
meaning set forth in Section 5.9.
"Material Adverse Change" shall mean a change or series of related
changes that individually or in the aggregate is, or could reasonably be
expected to be, materially adverse to the value of the Transferred Assets taken
as a whole, or materially adverse to the business, financial condition or
results of operations of the Plastics Business taken as a whole; provided,
however, that any change identified on Schedule 1.1(f) shall not constitute a
Material Adverse Change.
"Material Adverse Effect" shall mean an effect that is, or could
reasonably be expected to be, materially adverse to the value of the Transferred
Assets taken as a whole, or materially adverse to the business, financial
condition or results of operations of the Plastics Business taken as a whole;
provided, however, that any effect
8
<PAGE>
identified on Schedule 1.1(f) shall not constitute a Material Adverse Effect.
"Mobil Canada" shall have the meaning set forth in the recitals of
this Agreement.
"Mobil Mark" shall mean any trademark, service mark, brand name,
certification mark, trade name, corporate name, or other indication of origin,
incorporating or based on the term "Mobil" or the "Pegasus" symbol, or any other
similar term or symbol.
"Mobil Oil" shall have the meaning set forth in the recitals of this
Agreement.
"Mobil Plans" shall have the meaning set forth in Section 3.9.
"Modified GAAP" shall mean GAAP, as modified by the principles set
forth in Schedule 1.1(g).
"Net Worth" shall be determined in accordance with Schedule 1.1(g).
"North America" shall mean the United States of America, Canada and
Mexico.
"Notice Period" shall have the meaning set forth in Section 7.4.
"Owned Real Property" shall mean all real property owned by either
Seller, including any buildings, structures and improvements thereon or
appurtenances thereto and rights in respect thereof, Related to the Plastics
Business. Schedule 1.1(h) sets forth a list of the Owned Real Property.
"Past Service Credit" shall have the meaning set forth in Section
5.4(c).
"Permitted Encumbrances" shall have the meaning set forth in Section
3.15(b).
"Person" shall mean an individual, a corporation, a partnership, an
association, a trust or other entity or organization.
9
<PAGE>
"Plastics Business" shall have the meaning set forth in the recitals
of this Agreement.
"Purchase Price" shall have the meaning set forth in Section 2.5.
"Purchaser" shall have the meaning set forth in the recitals of this
Agreement.
"Purchaser Indemnified Parties" shall have the meaning set forth in
Section 7.3(a).
"Purchaser's Objection" shall have the meaning set forth in Section
2.6(b).
"RACC" shall mean the Rochester Computer Center of Mobil Oil.
"Related to" or "Relating to" shall mean primarily related to, or used
primarily in connection with, prior to the Closing.
"Required Approvals" shall mean the consents, approvals, waivers,
authorizations, notices and filings referred to in Sections 3.3 and 4.3 and
Schedules 3.3 and 4.3, other than any such consent, approval, waiver,
authorization, notice or filing which, if not obtained or made, would not have a
Material Adverse Effect and would not materially impair or delay the ability of
Sellers, on the one hand, or Purchaser, on the other hand, as the case may be,
to effect the Closing.
"Selected Marks" shall mean all trademarks listed on Schedule 3.12(a)
containing any of the terms "Hefty" (other than "Hefty Grip-its"), "Kordite",
"Baggies", "One-Zip", "Cinch Sak", "Medi-Tuff" or "Steel-Sak".
"Sellers" shall have the meaning set forth in the recitals of this
Agreement.
"Seller Indemnified Parties" shall have the meaning set forth in
Section 7.2.
"Shared Employees" shall mean the employees of Sellers' division
administration who provide services to the Plastics Business and are mutually
agreed to by Sellers and Purchaser prior to the Closing Date.
10
<PAGE>
"Stretch Film License" shall have the meaning set forth in Section
5.7.
"Stretch Film Patents" shall mean those patents listed on Schedule
1.1(i).
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership, joint venture or other legal entity of which such Person, either
directly or through or together with any other Subsidiary of such Person, owns
50% or more of the equity interests.
"Tax Returns" shall mean all reports and returns required to be filed
with respect to Taxes.
"Taxes" shall mean all federal, state, local or foreign taxes and
governmental fees and charges of any nature whatsoever and however denominated,
including but not limited to income, gross receipts, windfall profits, goods and
services, value added, severance, property, production, sales, use, license,
excise, franchise, employment, withholding or similar taxes, together with any
interest, additions or penalties with respect thereto and any interest in
respect of such additions or penalties.
"Technology and Transition License Agreement" shall have the meaning
set forth in Section 5.7.
"Technology Licenses" shall mean the Stretch Film License and the
Grocery Sack License.
"Transferred Assets" shall have the meaning set forth in Section 2.1.
"Transferred Macedon Fixtures and Equipment" shall mean the furniture,
fixtures, furnishings, machinery, vehicles, equipment and other tangible
personal property Related to the Plastics Business located at the Macedon
Technical Center.
"Transferred RACC Fixtures and Equipment" shall mean the furniture,
fixtures, furnishings, machinery, vehicles, equipment and other tangible
personal property Related to the Plastics Business located at RACC.
"Transfer Costs" shall have the meaning set forth in Section 2.10.
11
<PAGE>
"Transition Services Agreement" shall have the meaning set forth in
Section 5.8.
"U.S. Employees" shall mean Employees who are employed by Mobil Oil.
"WARN" shall mean the Worker Adjustment and Retraining Notification
Act.
1.2 Other Terms. Other terms may be defined elsewhere in the text of
this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
1.3 Other Definitional Provisions.
(a) The words "hereof", "herein", and "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a whole
and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States dollars.
ARTICLE II
PURCHASE AND SALE OF THE PLASTICS BUSINESS
2.1 Purchase and Sale of Assets. On the terms and subject to the
conditions set forth herein, at the Closing, Sellers agree to sell, convey,
transfer, assign and deliver to Purchaser, and Purchaser agrees to purchase from
12
<PAGE>
Sellers, all direct or indirect right, title and interest of Sellers in and to
the assets Related to the Plastics Business, whether tangible or intangible,
real or personal, as they exist on the date hereof (except for the Excluded
Assets) with such changes, deletions or additions thereto as may occur from the
date hereof to the Closing Date consistent with the terms and conditions of this
Agreement (the "Transferred Assets"). The Transferred Assets shall include
(other than as specifically limited by clauses (h) and (i) below), all of the
direct and indirect right, title and interest of Sellers in the following:
(a) the Owned Real Property and the Leased Real Property;
(b) the Fixtures and Equipment;
(c) the Current Assets;
(d) the Intellectual Property;
(e) the Contracts;
(f) the Books and Records;
(g) the Intangible Rights;
(h) all prepaid Taxes (other than Taxes measured by income and
franchise Taxes) Related to the Plastics Business);
13
<PAGE>
(i) all refunds of Taxes (other than Taxes measured by income and
franchise Taxes) Related to the Plastics Business); and
(j) all transferrable Governmental Authorizations.
2.2 Excluded Assets. Notwithstanding anything herein to the
contrary, from and after the Closing, Sellers shall retain all of their direct
and indirect right, title and interest in and to, and there shall be excluded
from the sale, conveyance, assignment or transfer to Purchaser hereunder, and
the Transferred Assets shall not include, the following (collectively, the
"Excluded Assets"):
(a) the assets (including, without limitation, real property, tangible
personal property, intellectual property and contracts) of the petroleum,
petrochemical, "Tucker" fabricated plastics, specialty chemicals, film (other
than stretch film in North America), resin trading, mining and minerals, and
real estate and any other businesses conducted by Sellers and their respective
Subsidiaries and/or other Affiliates other than the Plastics Business;
(b) the capital stock of all Subsidiaries of Sellers;
14
<PAGE>
(c) all cash, investment securities and other short-term and medium-
term investments and non-trade accounts receivable from Sellers and their
Affiliates;
(d) all prepaid Taxes (i) which are not Related to the Plastics
Business or (ii) measured by income and franchise Taxes which are Related to the
Plastics Business;
(e) all refunds of (i) Taxes which are not Related to the Plastics
Business and (ii) Taxes measured by income and franchise Taxes which are Related
to the Plastics Business;
(f) all income and franchise Tax Returns of Sellers;
(g) the Macedon Technical Center, the portions of the Macedon Plant
not included in the Owned Real Property, and the manufacturing facilities and
associated distribution facilities formerly operated by the Plastics Business in
Woodland, California and Washington, New Jersey;
(h) all furniture, fixtures, furnishings, machinery, vehicles,
equipment and other tangible personal property located on all real property or
interests in real property described in clause (g) above other than the
Transferred Macedon Fixtures and Equipment;
(i) all furniture, fixtures, furnishings, machinery, vehicles,
equipment and other tangible personal
15
<PAGE>
property located at RACC other than the Transferred RACC Fixtures and Equipment;
(j) all Books and Records which Sellers are required by law to
retain;
(k) the Mobil Plans; and
(l) subject to Section 5.7, all rights to the Mobil Marks, the
Composite Marks, the Grocery Sack Patent and the Stretch Film Patents.
2.3 Assumption of Liabilities. On the terms and subject to the
conditions set forth herein, at the Closing, Purchaser agrees to assume and
discharge or perform when due all debts, liabilities or obligations whatsoever,
other than Excluded Liabilities, that arise out of or are Related to the
Plastics Business or that otherwise arise out of or are Related to the
Transferred Assets, whether arising before or after the Closing and whether
known or unknown, fixed or contingent (the "Assumed Liabilities"), including,
without limitation, the following:
(a) the Contracts;
(b) the Current Liabilities shown on the Adjusted Closing Balance
Sheet;
(c) the Transfer Costs;
(d) except as provided in Section 2.4, all liabilities under
Environmental Laws arising out of or
16
<PAGE>
Related to the conduct of the Plastics Business, the Owned Real Property or the
Leased Real Property, including, without limitation, (i) liabilities for any
obligation to remediate contamination associated with the Plastics Business,
whether on-site or off-site, (ii) Compliance Costs, including without limitation
those associated with items identified in the Environmental Assessment Report,
and (iii) Environmental Claims arising from the operation of the Plastics
Business from and after the Closing.
(e) except as provided in Section 2.4(c), all liabilities (other than
liabilities covered by clause (d) above) with respect to all actions, suits,
proceedings, disputes, claims or investigations arising out of or Related to the
Plastics Business or that otherwise arise out of or are Related to the
Transferred Assets, at law, in equity or otherwise, including all product
liability matters and the matters identified on Schedule 2.3(e); and
(f) all liabilities and obligations relating to the employment or
termination of employment of Employees who are employed by Purchaser with
respect to periods commencing on the Closing Date, including, but not limited
to, retiree medical and life benefits for exempt salaried U.S. Employees who are
employed by Purchaser (whether credited prior to, on or after the Closing Date),
except for short-term
17
<PAGE>
disability, long-term disability and workers' compensation benefits for
Employees prior to their employment by Purchaser.
2.4 Excluded Liabilities. Notwithstanding any other provision of
this Agreement, the liabilities and obligations of Sellers which are not to be
assumed by Purchaser hereunder (the "Excluded Liabilities") are the following:
(a) all liabilities arising out of or Relating to the Excluded Assets
(other than those liabilities arising out of or Relating to Purchaser's use of
the Technology Licenses or the Composite Marks or the Mobil Marks pursuant to
the Transition License Agreement);
(b) the following liabilities (collectively, the "Excluded
Environmental Liabilities"): (i) all liabilities resulting from (x) the
existence or imposition of any obligation under any Environmental Law to
remediate (including related sampling, investigating and monitoring) or to
contribute or pay any amount towards remediation (including related sampling,
investigating and monitoring) at any property (other than the Owned Real
Property or the Leased Real Property) to which the Plastics Business disposed or
arranged for the disposal of Hazardous Substances prior to the Closing, (y) the
remediation
18
<PAGE>
(including related sampling, investigating and monitoring) described on Schedule
2.4(b)(i), and (z) any Environmental Claims pending as of the Closing; (ii)
subject to Section 5.11, 75% of all liabilities resulting from any obligation
imposed prior to the second anniversary of the Closing Date (whether or not all
expenditures actually have been made prior to such date) under any Environmental
Law (as in effect on the Closing Date) for remediation (including related
sampling, investigating and monitoring) of any and all of the matters described
in Schedule 2.4(b)(ii) (other than Compliance Costs) to the level of clean-up
required by Environmental Laws (including applicable cleanup guidance manuals
promulgated by federal or state environmental agencies) as in effect on the
Closing Date, but not including costs of any sampling or other investigation
(including legal and other professional fees) incurred by Purchaser to identify
or confirm the presence of contamination; provided, however, that the aggregate
amount of Excluded Environmental Liabilities comprehended by this clause (ii)
and therefore to be borne by Sellers shall not exceed $10 million; and (iii)
subject to Section 5.11, all liabilities in excess of the first $20 million
incurred by Purchaser resulting from the imposition of any obligation under any
Environmental Law (as in effect on the Closing
19
<PAGE>
Date) to remediate (including related sampling, investigating and monitoring)
any and all contamination by Hazardous Substances at Owned Real Property or
Leased Real Property (excluding any and all matters referred to in clause (i) or
(ii) above and excluding Compliance Costs) attributable to activities on the
Owned Real Property or Leased Real Property prior to the Closing and arising
from facts unknown to Purchaser at the Closing and discovered following the
Closing (excluding liability resulting from a change in Environmental Law
following the Closing Date); provided, however, that Purchaser notifies Seller
of the identification of such liability prior to the seventh anniversary of the
Closing Date (whether or not all expenditures are actually made prior to such
date);
(c) all liabilities arising out of the actions, suits, proceedings,
disputes, claims or investigations identified in Schedule 2.4(c);
(d) all obligations and liabilities to Former Employees, and Employees
who are not employed by Purchaser, with respect to periods ending prior to, on
or after the Closing Date;
(e) all liabilities to Employees under the Mobil Plans and any short-
term disability, long-term disability and workers compensation benefits under
the Mobil Plans for
20
<PAGE>
Employees prior to their employment by Purchaser, except for amounts accrued as
a Current Liability on the Adjusted Closing Balance Sheet;
(f) all liabilities for Taxes imposed with respect to taxable periods,
or portions thereof, ending on or before the Closing Date except to the extent
that the amount of any such Taxes which are Related to the Plastics Business is
reflected as a Current Liability on the Adjusted Closing Balance Sheet;
(g) all liabilities for non-trade accounts payable to Sellers or their
Affiliates;
(h) all liabilities for (x) "stay" bonuses granted by Sellers to
certain Employees in connection with the disposition of the Plastics Business
and (y) stock-based and other incentive compensation granted by Sellers or
Affiliates of Sellers to Employees and payable for the portion of fiscal year
1995 ending on the Closing Date pursuant to the Mobil Corporation Incentive
Compensation and Stock Ownership Plan;
(i) all other liabilities and obligations for which Sellers have
expressly assumed responsibility pursuant to this Agreement; and
(j) all debts, liabilities or obligations whatsoever, that do not
arise out of or are not Related to
21
<PAGE>
the Plastics Business or that do not otherwise arise out of or are not otherwise
Related to the Transferred Assets.
2.5 Purchase Price. On the terms and subject to the conditions set
forth herein, Purchaser agrees to pay Sellers an aggregate of $1,270,000,000
(the "Purchase Price"). The Purchase Price shall be allocated as provided in
Schedule 2.5 and shall be subject to adjustment as provided in Section 2.6.
2.6 Post-Closing Adjustment.
(a) Within 60 days following the Closing, Sellers shall, at their
expense, prepare, or cause to be prepared, and deliver to Purchaser a balance
sheet (the "Closing Balance Sheet") which shall set forth the assets and
liabilities of the Plastics Business as of the Determination Date in accordance
with the principles and the methods set forth on Schedule 1.1(g). The Closing
Balance Sheet shall be accompanied by a certificate from Ernst & Young LLP,
Sellers' independent public accountants, to the effect that such firm has read
this Agreement, and that the Closing Balance Sheet presents fairly the assets
and liabilities of the Plastics Business, excluding the Excluded Assets and the
Excluded Liabilities, as of the Determination Date in accordance with the terms
of this Agreement and was
22
<PAGE>
prepared, subject to Schedule 1.1(g), on a basis consistent with the Balance
Sheet.
(b) Purchaser and Purchaser's accountants shall, within 60 days after
the delivery by Sellers of the Closing Balance Sheet, complete their review of
Net Worth as derived from the Closing Balance Sheet. In the event that
Purchaser determines that Net Worth as derived from the Closing Balance Sheet
has not been determined on the basis set forth in Schedule 1.1(g), Purchaser
shall inform Sellers in writing (the "Purchaser's Objection"), setting forth a
specific description of the basis of Purchaser's Objection and the adjustments
to Net Worth which Purchaser believes should be made, on or before the last day
of such 60-day period. Sellers shall then have 30 days to review and respond to
the Purchaser's Objection. If Sellers and Purchaser are unable to resolve all
of their disagreements with respect to the determination of the foregoing items
within 10 days following the completion of Sellers' review of the Purchaser's
Objection, they shall refer their remaining differences to an internationally
recognized firm of independent public accountants as to which Sellers and
Purchaser mutually agree (the "CPA Firm"), who shall, acting as experts and not
as arbitrators, determine on the basis of the standards set forth in Schedule
1.1(g), and only with
23
<PAGE>
respect to the remaining differences so submitted, whether and to what extent,
if any, Net Worth as derived from the Closing Balance Sheet, requires
adjustment. Sellers and Purchaser shall direct the CPA Firm to use its best
efforts to render its determination within 45 days. The CPA Firm's
determination shall be conclusive and binding upon Purchaser and Sellers. In
resolving any disputed item, the CPA Firm may not assign a value to any item
greater than the greatest value for such item claimed by either party or less
than the smallest value for such item claimed by either party. The fees and
disbursements of the CPA Firm shall be shared equally by Purchaser, on the one
hand, and Sellers, on the other hand. Purchaser and Sellers shall make readily
available to the CPA Firm all relevant books and records and any work papers
(including those of the parties' respective accountants) relating to the Balance
Sheet and the Closing Balance Sheet and all other items reasonably requested by
the CPA Firm. The "Adjusted Closing Balance Sheet" shall be (i) the Closing
Balance Sheet in the event that (x) no Purchaser's Objection is delivered to
Sellers during the 60-day period specified above, or (y) Sellers and Purchaser
so agree, (ii) the Closing Balance Sheet, adjusted in accordance with the
Purchaser's Objection in the event that Sellers do not respond to the
Purchaser's Objection within
24
<PAGE>
the 30-day period following receipt by Sellers of the Purchaser's Objection, or
(iii) the Closing Balance Sheet, as adjusted by either (x) the agreement of
Sellers and Purchaser or (y) the CPA Firm.
(c) Purchaser shall provide Sellers and their accountants full access
(during regular business hours and upon reasonable advance notice) to the Books
and Records, any other information, including work papers of their accountants,
and to any employees to the extent necessary for Sellers to prepare the Closing
Balance Sheet. Purchaser and its accountants shall have the opportunity to
observe the taking of the Inventory (which may begin prior to the Closing Date)
in connection with the preparation of the Closing Balance Sheet and shall have
full access to all information used by Sellers in preparing the Closing Balance
Sheet, including the work papers of its accountants.
(d) Within 10 Business Days following issuance of the Adjusted Closing
Balance Sheet, Purchaser or Sellers, as the case may be, shall make an
adjustment payment in an amount equal to the difference between (x) the Base
Amount and (y) Net Worth as derived from the Adjusted Closing Balance Sheet.
The adjustment payment will be made by Sellers to Purchaser to the extent that
the Net Worth as derived from the Adjusted Closing Balance Sheet is less than
25
<PAGE>
the Base Amount, and by Purchaser to Sellers to the extent that Net Worth as
derived from the Adjusted Closing Balance Sheet is greater than the Base Amount,
plus, in either case, interest thereon from the Closing Date through the date of
payment at the "base rate" of Citibank or any successor thereto in New York, New
York on the Closing Date. The adjustment payment payable pursuant to this
Section 2.6(d) shall be paid by wire transfer of immediately available funds to
an account designated by Purchaser, on the one hand, or Sellers, on the other
hand, as the case may be.
2.7 Closing.
(a) The Closing shall take place at the offices of Weil, Gotshal &
Manges, 767 Fifth Avenue, New York, New York 10153 at 10:00 A.M. (New York City
time), on the fifth Business Day following the satisfaction or waiver (by the
party entitled to waive the condition) of all conditions to the Closing set
forth in Article VI, or at such other time and place as the parties hereto may
mutually agree. The date on which the Closing occurs is called the "Closing
Date".
(b) Notwithstanding anything to the contrary contained in this
Agreement, to the extent that the sale, assignment, transfer, conveyance or
delivery or attempted sale, assignment, transfer, conveyance or delivery to
26
<PAGE>
Purchaser of any Transferred Asset is prohibited by any applicable Law or would
require any governmental or third-party authorizations, approvals, consents or
waivers and such authorizations, approvals, consents or waivers shall not have
been obtained prior to the Closing, this Agreement shall not constitute a sale,
assignment, transfer, conveyance or delivery, or any attempted sale, assignment,
transfer, conveyance or delivery, thereof. Following the Closing, and without
limiting the provisions set forth in Section 5.3, the parties shall use
reasonable efforts, and cooperate with each other, to obtain promptly such
authorizations, approvals, consents or waivers; provided, however, that neither
Sellers nor Purchaser shall be required to pay any consideration therefor, other
than filing, recordation or similar fees payable to any governmental authority,
which fees shall be shared equally by Purchaser, on the one hand, and Sellers,
on the other hand. Pending such authorization, approval, consent or waiver, the
parties shall cooperate with each other in any reasonable and lawful
arrangements designed to provide to Purchaser the benefits and liabilities of
use of such Transferred Asset. Once such authorization, approval, consent or
waiver for the sale, assignment, transfer, conveyance or delivery of a
Transferred Asset not sold,
27
<PAGE>
assigned, transferred, conveyed or delivered at the Closing is obtained, the
applicable Seller shall promptly assign, transfer, convey and deliver, or cause
to be assigned, transferred, conveyed and delivered, such Transferred Asset to
Purchaser for no additional consideration. To the extent that any such
Transferred Asset cannot be transferred or the full benefits and liabilities of
use of any such Transferred Asset cannot be provided to Purchaser following the
Closing pursuant to this Section 2.7(b), then Purchaser and the applicable
Seller shall enter into such arrangements (including subleasing or
subcontracting if permitted) to provide to Purchaser the economic (taking into
account Tax costs and benefits) and operational equivalent of obtaining such
authorization, approval, consent or waiver and the performance by Purchaser of
the obligations thereunder.
2.8 Deliveries by Purchaser. At the Closing, Purchaser shall deliver
to Sellers the following:
(a) the Purchase Price in immediately available funds by wire transfer
to an account, which account shall be designated by Sellers not less than two
Business Days prior to the Closing;
(b) such instruments of assumption and other instruments or documents,
in form and substance reasonably
28
<PAGE>
acceptable to Sellers, as may be necessary to effect Purchaser's assumption of
the Assumed Liabilities;
(c) such other instruments and documents, in form and substance
reasonably acceptable to Sellers, as may be necessary to effect the Closing;
(d) a duly executed copy of each of the Ancillary Agreements; and
(e) the certificates and other documents to be delivered pursuant to
Section 6.3.
2.9 Deliveries by Sellers. At the Closing, Sellers shall deliver to
Purchaser the following:
(a) assignments, in form and substance reasonably acceptable to
Purchaser, assigning to Purchaser all Intellectual Property included in the
Transferred Assets;
(b) deeds, in limited warranty or other similar form, in form and
substance reasonably acceptable to Purchaser, transferring all Owned Real
Property to Purchaser subject to any and all Permitted Encumbrances;
(c) assignments or, where necessary, subleases, in form and substance
reasonably acceptable to Purchaser, assigning or subleasing to Purchaser all
Leased Real Property;
29
<PAGE>
(d) bills of sale, in form and substance reasonably acceptable to
Purchaser, transferring to Purchaser all other Transferred Assets;
(e) such other instruments or documents, in form and substance
reasonably acceptable to Purchaser, as may be necessary to effect the Closing;
(f) a duly executed copy of each of the Ancillary Agreements;
(g) the Required Approvals;
(h) all original certificates of title, duly executed for transfer to
Purchaser, for any Transferred Assets evidenced by a certificate of title;
(i) a certificate certifying that Mobil Oil is not a "foreign person"
within the meaning of Treasury Regulation Section 1.1445-2(b), conforming in
form and substance to the certificate annexed hereto as Schedule 2.9(i); and
(j) the certificates and other documents to be delivered pursuant to
Section 6.2.
2.10 Transfer Taxes and Recording Fees. Sales taxes, transfer taxes
and recording fees, if any, imposed upon the transfer of the Transferred Assets
hereunder and the filing of any instruments (the "Transfer Costs") shall be the
responsibility of, and shall be paid by, Purchaser.
30
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant to Purchaser as
follows:
3.1 Organization and Qualification. Each of the Sellers is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to own and operate its Transferred Assets and to carry on the
Plastics Business as currently conducted. Each of the Sellers is duly qualified
to do business and is in good standing as a foreign corporation in each
jurisdiction where the ownership or operation of the Transferred Assets or the
conduct of the Plastics Business requires such qualification, except where the
failure to be so qualified or in good standing, as the case may be, would not
have a Material Adverse Effect.
3.2 Corporate Authorization. Each of the Sellers has full corporate
power and authority to execute and deliver this Agreement and each of the
Ancillary Agreements, and to perform its obligations hereunder and thereunder.
The execution, delivery and performance by Sellers of this Agreement and each of
the Ancillary Agreements have been duly and validly authorized and no additional
corporate
31
<PAGE>
authorization or consent is required in connection with the execution, delivery
and performance by Sellers of this Agreement and each of the Ancillary
Agreements.
3.3 Consents and Approvals. Except as specifically set forth in
Schedule 3.3 or as required by the HSR Act, the Canadian Act or the Investment
Canada Act, no consent, approval, waiver or authorization is required to be
obtained by either Seller from, and no notice or filing is required to be given
by either Seller to or made by either Seller with, any federal, state, local or
foreign governmental authority or other Person in connection with the execution,
delivery and performance by Sellers of this Agreement and each of the Ancillary
Agreements, other than in all cases where the failure to obtain such consent,
approval, waiver or authorization, or to give or make such notice or filing,
would not have a Material Adverse Effect or materially impair or delay the
ability of Sellers to effect the Closing.
3.4 Non-Contravention. Except as set forth on Schedule 3.4, the
execution, delivery and performance by Sellers of this Agreement and each of the
Ancillary Agreements, and the consummation of the transactions contemplated
hereby and thereby, does not and will not (i) violate any provision of the
charter, bylaws or other organizational
32
<PAGE>
documents of either Seller, (ii) subject to obtaining the consents referred to
in Section 3.3, conflict with, or result in the breach of, or constitute a
default under, or result in the termination, cancellation or acceleration
(whether after the filing of notice or the lapse of time or both) of any right
or obligation of either Seller under, or to a loss of any benefit to which
either Seller is entitled under, any Contract or result in the creation of any
Encumbrance upon any of the Transferred Assets or (iii) assuming compliance with
the matters set forth in Sections 3.3 and 4.3, violate, or result in a breach of
or constitute a default under any Law or other restriction of any court or
governmental authority to which either Seller is subject, including any
Governmental Authorization, other than, in the cases of clauses (ii) and (iii),
any conflict, breach, termination, default, cancellation, acceleration, loss,
violation or Encumbrance which, individually or in the aggregate, would not have
a Material Adverse Effect or materially impair or delay the ability of Sellers
to perform their obligations hereunder.
3.5 Binding Effect. This Agreement constitutes, and each of the
Ancillary Agreements when executed and delivered by the parties thereto will
constitute, a valid and legally binding obligation of each Seller, enforceable
33
<PAGE>
in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
3.6 Financial Statements; Absence of Certain Changes.
(a) The audited combined balance sheet of the Plastics Business at
June 27, 1995 (the "Balance Sheet"), and the audited combined statements of
earnings from operations of the Plastics Business for the year ended December
28, 1994 and the six months ended June 27, 1995, attached as Schedule 3.6(a)
(collectively, the "Financial Statements"), fairly present, in all material
respects, the financial condition of the Plastics Business as of the date
thereof, or the results of operations for the period then ended, as the case may
be. Subject to the matters described in Note 1 thereof, the Financial
Statements were prepared in accordance with GAAP consistently applied throughout
the periods involved and are consistent with the regular books and records of
the Plastics Business in all material respects.
(b) All of the liabilities reflected on the Balance Sheet are Related
to the Plastics Business and arose
34
<PAGE>
out of or were incurred in the conduct of the Plastics Business.
(c) Except as set forth in Schedule 3.6(c) or 5.2 or otherwise
disclosed in this Agreement, since the date of the Balance Sheet, Sellers have
conducted the Plastics Business in the ordinary and usual course and have not,
with respect to the Plastics Business: (i) sold, assigned, pledged,
hypothecated or otherwise transferred any of the assets used in the Plastics
Business (other than Excluded Assets), other than for such sales, assignments,
pledges, hypothecations or other transfers in the ordinary and usual course of
business or which would not have a Material Adverse Effect; (ii) terminated (or
received a notice of termination under), materially amended, or waived any
material right under, any Contract that is material to the Plastics Business,
taken as a whole; (iii) suffered any damage, destruction or other casualty loss
(whether or not covered by insurance) which would have a Material Adverse
Effect; (iv) except for normal salary administration for professional employees,
other compensation increases in the ordinary course of business or the bonuses
and incentive compensation referred to in Section 2.4(h), increased the
compensation payable or to become payable by Sellers to any of the Employees, or
increased any bonus, insurance, pension
35
<PAGE>
or other employee benefit plan, payment or arrangement made by Sellers, for or
with any such Employees; (v) had any product recall or increase in warranty or
product liability claims which would have a Material Adverse Effect; (vi)
suffered any loss of customers which has had or will likely have a Material
Adverse Effect (it being understood that this clause (vi) shall not address the
period from and after the date of execution of this Agreement); (vii) made any
capital expenditures or capital additions or improvements, individually or in
the aggregate in excess of $5,000,000; or (viii) entered into an agreement to do
any of the foregoing.
3.7 Litigation and Claims.
(a) Except as set forth in Schedule 3.7(a), there is no civil,
criminal or administrative action, suit, demand, claim, hearing, proceeding or
investigation pending or, to the Knowledge of Sellers, threatened, involving the
Plastics Business or any of the Transferred Assets other than those which,
individually or in the aggregate, would not have a Material Adverse Effect or
materially impair or delay the ability of Sellers to effect the Closing or the
validity of this Agreement
(b) Except as set forth in Schedule 3.7(b), neither Sellers nor any of
the Transferred Assets is subject to any order, writ, judgment, award,
injunction, or decree
36
<PAGE>
of any court or governmental or regulatory authority of competent jurisdiction
or any arbitrator or arbitrators other than those which, individually or in the
aggregate, would not have a Material Adverse Effect or materially impair or
delay the ability of Sellers to effect the Closing.
(c) To the Knowledge of Sellers, there are no major findings with
respect to adverse health effects caused by the exposure of employees or
consumers to the products (or the component materials thereof) of the Plastics
Business, during the manufacturing process of the Plastics Business or when such
products are used for their intended purposes, which findings could reasonably
be expected to have a Material Adverse Effect.
3.8 Taxes.
(a) None of the Transferred Assets are required to be subject to the
"alternative depreciation system" (within the meaning of Section 168(g) of the
Code). None of the Transferred Assets is property which Purchaser or
Purchaser's Affiliates will be required to treat as "tax-exempt use property"
(within the meaning of Section 168(h)(1) of the Code). No "industrial
development bonds" (within the meaning of Section 103 of the Internal Revenue
Code of 1954, as amended and in effect immediately prior to the enactment of the
Tax Reform Act of 1986), "private
37
<PAGE>
activity bonds" (within the meaning of Section 141 of the Code), or other tax
exempt financings are outstanding which have been used to finance the
Transferred Assets, whether leased or owned.
(b) There is no contract, agreement, plan or arrangement covering any
individual, or entity treated as an individual, included in the Plastics
Business, the Transferred Assets or liabilities or obligations assumed by
Purchaser in respect of this transaction that, individually or collectively,
would give rise to a payment by Purchaser or Purchaser's Affiliates of any
material amount that would be subject to excise Taxes under Code Section 4999 or
not be deductible by reason of Section 280G of the Code, or subject to similar
provisions under other Laws.
(c) Mobil Oil is not a foreign person within the meaning of Section
1445(b)(2) of the Code. Mobil Canada is not, pursuant to this Agreement,
selling any United States real property interests within the meaning of Section
1445 of the Code.
(d) Mobil Canada is not a "non-resident" under the Income Tax Act
(Canada) and is a "registrant" for purposes of the GST.
3.9 Employee Benefits. Schedule 3.9 lists each employee benefit plan,
as defined in Section 3(3) of ERISA,
38
<PAGE>
and each bonus or other incentive compensation, severance, reduction in force,
relocation, salary continuation for sickness or other disability, vacation or
educational assistance program which either Seller maintains, contributes to or
has an obligation to contribute to on behalf of Employees (collectively, the
"Mobil Plans"). None of the Mobil Plans constitutes a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA).
3.10 Compliance with Laws. Except as set forth in Schedule 3.10, the
Plastics Business is being conducted in compliance with all Laws and
Governmental Authorizations except where the failure so to comply, individually
or in the aggregate, would not have a Material Adverse Effect and the Plastics
Business has all Governmental Authorizations other than those the absence of
which would not have a Material Adverse Effect; it being understood that nothing
in this representation is intended to address any compliance issue that is the
subject of any other representation or warranty set forth herein.
3.11 Environmental Matters. Except as set forth in Schedule 3.11
and, in each case, other than as Relates to an Excluded Liability:
(a) the Plastics Business is in compliance with all applicable
Environmental Laws and there are no liabili-
39
<PAGE>
ties under any Environmental Law with respect to the Plastics Business, other
than non-compliance or liabilities which, individually or in the aggregate,
would not have a Material Adverse Effect;
(b) Sellers have not received any notice of any material violation or
alleged material violation of, or any material liability under, any
Environmental Law in connection with the Plastics Business during the past three
years; and
(c) there are no material writs, injunctions, decrees, orders or
judgments outstanding, or any actions, suits, proceedings or investigations
pending or, to the Knowledge of Sellers, threatened, relating to compliance with
or liability under any Environmental Law affecting the Plastics Business or the
Transferred Assets.
3.12 Intellectual Property.
(a) Schedule 3.12(a) sets forth a list and description (including, if
registered or issued, the registration number and country of registration) of
all filed or registered Intellectual Property. As of the Closing Date, all
Taxes, royalties, fees and other payments due and payable and necessary to
maintain the ownership or license to use, as the case may be, such registered
Intellectual Property shall have been made (except with
40
<PAGE>
respect to those registrations and applications that Sellers have determined to
allow to lapse in the ordinary course of their business).
(b) With respect to Selected Marks, except as set forth on Schedule
3.12(b), there are no restrictions that would materially affect the use of the
Selected Marks in connection with the Plastics Business as currently conducted
and the Selected Marks as currently used do not infringe upon or otherwise
violate the rights of any other Person.
(c) With respect to Intellectual Property other than the Selected
Marks, to the Knowledge of Sellers, except as set forth in Schedule 3.12(c), no
product (or component thereof or process) currently used, sold or manufactured
by the Plastics Business infringes on or otherwise violates the patents,
trademarks or copyrights of any other Person, and Sellers have no Knowledge of
any rights of any third parties in any jurisdiction that would prohibit Sellers
or, from and after the Closing Purchaser, from conducting in any material
respect the Plastics Business as currently conducted.
(d) Except as set forth in Schedule 3.12(d), there are no actions or
proceedings pending or, to the Knowledge of Sellers, threatened challenging,
and, to the Knowledge of Sellers, no Person is infringing or otherwise
violating, the Intellectual Property, except for challenges,
41
<PAGE>
infringements or violations which, individually or in the aggregate, would not
have a Material Adverse Effect.
3.13 Labor Matters. Except as disclosed on Schedule 3.13:
(a) (i) neither Seller is a party to any labor or collective
bargaining agreement with respect to Employees, no Employees are represented by
any labor organization and (ii) to the Knowledge of Sellers, there are no
organizing activities (including any demand for recognition or certification
proceedings pending or threatened in writing to be brought or filed with the
National Labor Relations Board or other labor relations tribunal) involving
either Seller;
(b) there are no strikes, work stoppages, slowdowns, picketings,
lockouts, unfair labor practice charges, arbitrations or grievances pending or
threatened in writing against or involving either Seller except for those which,
individually or in the aggregate, would not have a Material Adverse Effect;
(c) there are no complaints, charges or claims against either Seller
pending or, to the Knowledge of Sellers, threatened in writing to be brought or
filed with any governmental authority, arbitrator or court based on or arising
out of the employment by either Seller of any
42
<PAGE>
Employee except for those which, individually or in the aggregate, would not
have a Material Adverse Effect; and
(d) each Seller is in compliance with all laws and orders relating to
the employment of labor, including all such laws and orders relating to wages,
hours, collective bargaining, discrimination, civil rights, safety and health,
workers' compensation and the collection and payment of withholding and/or
Social Security Taxes and similar Taxes except for non-compliance which,
individually or in the aggregate, would not have a Material Adverse Effect.
3.14 Contracts. Schedule 3.14(i) sets forth a list, as of the date
hereof, of each written Contract that is Related to the Plastics Business (other
than (i) purchase orders in the ordinary and usual course of business, (ii) any
Contract involving the payment of less than $150,000 in the aggregate or with a
term of less than one year and (iii) confidentiality agreements entered into in
the usual course of business) and such Schedule does not omit any Contract that
is material to the Plastics Business. Except as set forth in Schedule 3.14(ii),
each Contract is a valid and binding agreement of the Seller which is a party
thereto and, to the Knowledge of Sellers, is in full force and effect. Except
as otherwise provided in Schedule 3.14(iii),
43
<PAGE>
neither Seller is in default, and neither Seller has Knowledge of any default or
the occurrence of any event that, with the lapse of time or the giving of notice
or both, would constitute a default by either Seller or any other party thereto,
under any Contract listed (or required to be listed) on Schedule 3.14(i) except,
in each case, defaults that have been cured or waived or defaults which would
not have a Material Adverse Effect.
3.15 Entire Business; Title to Property.
(a) Except as set forth in Schedule 3.15(a), the Transferred Assets,
the Technology Licenses and the Transition License Agreement constitute all the
assets, properties and rights necessary to conduct the Plastics Business in all
material respects as currently conducted.
(b) Schedules 1.1(e) and 1.1(h) set forth true, accurate and complete
lists of all of the Leased Real Property and Owned Real Property, respectively.
One of the Sellers has good (and, in the case of Owned Real Property,
marketable) title to, or a valid and binding leasehold interest in, all property
included in the Transferred Assets, free and clear of all Encumbrances, except:
(i) as set forth in Schedule 3.15(b); (ii) any Encumbrances disclosed in the
Financial Statements; (iii) liens for Taxes, assessments and other governmental
charges not yet
44
<PAGE>
due and payable or due but not delinquent or being contested in good faith by
appropriate proceedings; (iv) inchoate mechanics' and materialmen's liens for
construction in progress, carriers'; workmen's, repairmen's, warehousemen's, or
other like liens arising or incurred in the ordinary course of business, and, if
not inchoate, which are being contested in the ordinary course of business,
original purchase price conditional sales contracts and equipment leases with
third parties entered into in the ordinary course of business; (v) with respect
to real property: (A) easements, quasi-easements, licenses, covenants, rights-
of-way and other similar restrictions, including, without limitation, any other
agreements, conditions or restrictions which would be shown by a current title
report or other similar report or listing; (B) any conditions that may be shown
by a current survey, title report or physical inspection; and (C) zoning,
building and other similar restrictions; provided, however, that none of the
items referred to in subsections (i) through (v) materially interferes with the
current use of, or materially detracts from the value of, such property and (vi)
Encumbrances which, individually or in the aggregate, would not have a Material
Adverse Effect (all items included in (i) through (vi), together with any matter
set forth in Schedule
45
<PAGE>
3.15(b), are referred to collectively herein as the "Permitted Encumbrances").
(c) Schedule 1.1(b) sets forth a list, including location, of all
Fixtures and Equipment, separately identifying the Transferred Macedon Fixtures
and Equipment and the computer hardware included in the Transferred RACC
Fixtures and Equipment, in each case where such Fixtures and Equipment has an
original cost in excess of $10,000.
(d) Except as set forth on Schedule 3.15(d), to the Knowledge of
Sellers, there are no: (i) material structural defects in any of the buildings
or other improvements situated on the Real Property or (ii) building systems
structures, improvements, or Fixtures and Equipment, owned, leased or used by
either Seller and required for the conduct of the Plastics Business as currently
conducted that are not in all material respects in good condition and working
order (reasonable wear and tear excepted) and adequate in quality and quantity
for the current normal operation of the Plastics Business.
3.16 Finders' Fees. Except for Goldman, Sachs & Co., whose fees will
be paid by Sellers, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
Sellers who might be entitled to any fee or commission from
46
<PAGE>
Sellers in connection with the transactions contemplated by this Agreement.
3.17 No Undisclosed Liabilities. There is no indebtedness,
obligation or liability Related to the Plastics Business of a nature required to
be reflected on a balance sheet prepared in accordance with GAAP, or guarantee,
conditional payment obligation or reimbursement obligation for letters of credit
or bonds, of the Plastics Business, except for (i) liabilities reflected or
reserved for in the Balance Sheet, (ii) Excluded Liabilities, (iii) liabilities
or obligations incurred from and after the date of the Balance Sheet in the
ordinary course of business or as otherwise permitted by this Agreement, (iv)
liabilities disclosed (or below the threshold requiring disclosure) in the
Schedules to this Agreement and (v) liabilities that would not have a Material
Adverse Effect.
3.18 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article III, neither of the
Sellers nor any other Person makes any other express or implied representation
or warranty on behalf of either Seller.
47
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers as follows:
4.1 Organization and Qualification. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own and operate and to carry on its business as currently
conducted. Purchaser is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction where the ownership of its
properties or the operation of its business requires such qualification.
4.2 Corporate Authorization. Purchaser has full corporate power and
authority to execute and deliver this Agreement and each of the Ancillary
Agreements, and to perform its obligations hereunder and thereunder. The
execution, delivery and performance by Purchaser of this Agreement and each of
the Ancillary Agreements have been duly and validly authorized and no additional
corporate authorization or consent is required in connection with the execution,
delivery and performance by Purchaser of this Agreement and each of the
Ancillary Agreements.
48
<PAGE>
4.3 Consents and Approvals. Except as specifically set forth in
Schedule 4.3 or as required by the HSR Act, the Canadian Act or the Investment
Canada Act, no consent, approval, waiver or authorization is required to be
obtained by Purchaser or any Subsidiary of Purchaser from, and no notice or
filing is required to be given by Purchaser or any Subsidiary of Purchaser to,
or made by Purchaser or any Subsidiary of Purchaser with, any federal, state,
local or other governmental authority or other Person in connection with the
execution, delivery and performance by Purchaser of this Agreement and each of
the Ancillary Agreements, other than in all cases where the failure to obtain
such consent, or to give or make such notice or filing, would not have a
Material Adverse Effect or materially impair or delay the ability of Purchaser
to effect the Closing.
4.4 Non-Contravention. Except as set forth in Schedule 4.4, the
execution, delivery and performance by Purchaser of this Agreement and each of
the Ancillary Agreements, and the consummation of the transactions contemplated
hereby and thereby, does not and will not (i) violate any provision of the
charter, bylaws or other organizational documents of Purchaser or (ii) assuming
compliance with the matters set forth in Sections 3.4 and
49
<PAGE>
4.3, violate or result in a breach of or constitute a default under any Law or
other restriction of any court or governmental authority to which Purchaser is
subject, including any Governmental Authorization, other than any conflict,
breach, termination, default, cancellation, acceleration, loss, violation or
Encumbrance which, individually or in the aggregate, would not have a Material
Adverse Effect or materially impair or delay the ability of Purchaser to perform
its obligations hereunder.
4.5 Binding Effect. This Agreement constitutes, and each of the
Ancillary Agreements when executed and delivered by the parties thereto will
constitute, a valid and legally binding obligation of Purchaser enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
4.6 Finders' Fees. Except for Lazard Freres & Co. LLC, whose fees
will be paid by Purchaser, there is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Purchaser or any Subsidiary of Purchaser who might be entitled to any fee or
commission from Purchaser in
50
<PAGE>
connection with the transactions contemplated by this Agreement.
4.7 Financial Capability. Purchaser has, and on the Closing Date
will have, sufficient funds (or committed lines of credit for which all
conditions to draw are and will be satisfied) to effect the Closing and all
other transactions contemplated by this Agreement.
4.8 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article IV, neither Purchaser
nor any other Person makes any other express or implied representation or
warranty on behalf of Purchaser.
ARTICLE V
COVENANTS
5.1 Access. Prior to the Closing, Sellers shall permit Purchaser and
its representatives to have access, during regular business hours and upon
reasonable advance notice, to the Transferred Assets, subject to reasonable
rules and regulations of Sellers, and shall furnish, or cause to be furnished,
to Purchaser, any financial and operating data and other information that is
available with respect to the Plastics Business as Purchaser shall from time to
time reasonably request; it being understood that
51
<PAGE>
such right of access shall not grant Purchaser the right to conduct invasive
environmental testing of any kind. Purchaser agrees to abide by the terms of
the Confidentiality Agreement with respect to such access and any information
furnished to it or its representatives pursuant to this Section 5.1.
5.2 Conduct of Business. During the period from the date hereof to
the Closing, except as otherwise contemplated by this Agreement or as Purchaser
shall otherwise agree in writing in advance, Sellers covenant and agree to
conduct the Plastics Business in the ordinary and usual course, and use their
reasonable efforts to preserve intact the Plastics Business and its
relationships with third parties. Sellers will immediately notify Purchaser of
any lawsuits or claims, proceedings or investigations that may be brought,
asserted or threatened or commenced of which they acquire Knowledge and which
are Related to the Plastics Business and have or could reasonably be expected to
have a Material Adverse Effect or any other event of the type referred to in
Section 3.6(c). During the period from the date hereof to the Closing, except
as otherwise provided for in this Agreement or as Purchaser shall otherwise
consent (which consent shall not be unreasonably withheld), Sellers covenant and
agree that with respect to the Plastics
52
<PAGE>
Business, other than as set forth in Schedule 5.2, they shall not:
(i) enter into commitments for new capital expenditures in excess
of $5,000,000 in the aggregate;
(ii) dispose of or incur, create or assume any Encumbrance on any
individual fixed asset of the Plastics Business if the greater of the book value
or the fair market value of such fixed asset exceeds $1,000,000, other than
Permitted Encumbrances;
(iii) enter into any material transaction;
(iv) grant material salary or wage increases other than normal
increases in the ordinary and usual course of business consistent with past
practices or (as it relates to Employees) materially change or amend any Mobil
Plan; or
(v) agree, in writing or otherwise, to do any of the foregoing.
Notwithstanding the foregoing, this Section 5.2 shall not restrict the
ability of Sellers to make distributions of cash or short-term investments to
holders of their capital stock or otherwise to engage in cash management
activities in the ordinary course of business.
5.3 Best Efforts. Sellers and Purchaser will cooperate and use their
respective best efforts to fulfill the conditions precedent to the other party's
obligations
53
<PAGE>
hereunder, including but not limited to securing as promptly as practicable all
consents, approvals, waivers and authorizations required in connection with the
transactions contemplated hereby. Sellers and Purchaser will promptly file
documentary materials required by the HSR Act and the Canadian Act and promptly
file any additional information requested as soon as practicable after receipt
of request therefor. Without limiting the generality of the foregoing,
Purchaser shall take or cause to be taken all actions, if any, required by the
relevant governmental authorities for the consummation of the transactions
contemplated by this Agreement, and no adjustment shall be made to the Purchase
Price as a result thereof. In addition, Sellers shall authorize Ernst & Young
LLP to provide to Purchaser, and shall use their best efforts to facilitate the
provision of, prior to the expiration of 45 days after the Closing Date, audited
and unaudited financial statements and other financial information for the
Plastics Business, to the extent such statements and information are required to
be included in Purchaser's filings under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), including, in the case of the audited financial
statements, their reports thereon, and all required schedules and consents with
respect thereto, all in such form and
54
<PAGE>
containing such information as is required under the 1934 Act. Sellers agree to
furnish management letter(s) to Ernst & Young LLP in form customarily required,
with an executed certificate of Sellers to the effect that Purchaser may rely on
such management representation letter(s); provided, however, that,
notwithstanding the delivery of such certificate, Sellers shall have no
liability to Purchaser (and Purchaser shall hold Sellers harmless from liability
to any other Person) with respect to any financial statements (other than the
Financial Statements), other information and management letter(s) referred to
herein. Purchaser shall reimburse Sellers for the reasonable costs incurred by
them after the date of this Agreement to provide such financial statements and
information.
5.4 Post-Closing Obligations to Certain Employees.
(a) Schedule 5.4(a)(i) sets forth a correct and complete list, as of
June 30, 1995, of all U.S. Employees (other than Shared Employees), indicating
each U.S. Employee who is an Inactive Employee as of such date. Schedule
5.4(a)(ii) sets forth a correct and complete list, as of July 12, 1995, of all
Canadian Employees. Each such Schedule sets forth the respective position, job
location,
55
<PAGE>
salary rate and date of hire of each Employee listed thereon.
(b) (i) Purchaser shall offer employment on an "at-will basis"
effective as of the Closing Date to all Persons who are U.S. Employees
immediately prior to the Closing Date; provided, however, that any Inactive
Employee who is absent from active service on the Closing Date by reason of such
Inactive Employee's entitlement to short-term disability, long-term disability
or workers' compensation benefits shall be offered employment by Purchaser
effective upon such Inactive Employee's availability to return to active
service. Each offer of employment to a U.S. Employee shall be at the same
compensation, position and place of employment held by such U.S. Employee
immediately prior to the Closing Date and upon such other terms and conditions
of employment as may be determined by Purchaser in its sole discretion;
provided, however, that (i) Purchaser shall honor any leave of absence in effect
for any Inactive Employee and (ii) Purchaser may make a reasonable accommodation
in the case of any Inactive Employee who returns to work following a period of
disability and is not fully capable of performing the functions of his or her
former position. U.S. Employees who are hired by Purchaser shall be treated no
less favorably than similarly situated
56
<PAGE>
employees of Purchaser. Subject to the requirements of the preceding sentence,
from the Closing Date through the first anniversary thereof, Purchaser shall
provide U.S. Employees with employee benefits (including, but not limited to,
defined benefit pension, 401(k) savings, medical, employee stock purchase,
medical expense and dependent care reimbursement accounts, dental, group term
life insurance, vacation and short- and long-term disability) having in the
aggregate a relative value (based on the employer contribution and determined
separately for exempt salaried and hourly (including non-exempt salaried)
employees) which is not less than the average of the benefits afforded by
competitors of the Plastics Business as described in the documents identified on
Schedule 5.4(b). During the nine-month period following the Closing Date,
Purchaser shall not, without the prior written consent of Mobil Oil, employ or
offer to employ, including as a consultant, any U.S. Employee who does not
accept Purchaser's offer of employment effective as of the Closing Date.
(ii) Purchaser shall offer in writing employment, effective on and
after the Closing Date, to all Canadian Employees at the same compensation,
position, place of employment and other terms and conditions of employment, to
those presently paid to or received by Canadian
57
<PAGE>
Employees. Mobil Canada and Purchaser shall exercise reasonable efforts in good
faith to persuade Canadian Employees to accept such offers of employment. Mobil
Canada shall have a reasonable opportunity to review the written offers of
employment prior to the offers being given to Canadian Employees. Purchaser
shall be liable for the cost of termination on or after the Closing Date of any
Canadian Employees who are employed by Purchaser, and Purchaser shall indemnify
Mobil Canada for any claims for severance or pay during any required period of
notice of termination made against Mobil Canada by any such Canadian Employees.
(iii) Purchaser shall have no obligation to offer employment to any
Former Employee.
(c) Purchaser shall grant all Employees credit for purposes of
eligibility (including eligibility for early retirement) and vesting under
Purchaser's employee benefit plans (including vacation and severance) for their
service with Sellers prior to the Closing Date, to the same extent such service
had been taken into account under the Mobil Plans ("Past Service Credit"), and
with Purchaser on and after the Closing Date. Purchaser shall also grant Past
Service Credit to all Employees under its defined benefit pension plans
applicable to the Employees for purposes of benefit accrual (but with
appropriate offsets for accrued
58
<PAGE>
benefits payable under the Mobil Plans so as not to duplicate benefits). Mobil
Oil shall grant all Employees credit for purposes of eligibility for early
retirement and vesting for their service with Purchaser after the Closing Date.
(d) Purchaser shall provide a medical plan as of the Closing Date so
as to ensure uninterrupted coverage of all U.S. Employees and, to the extent not
otherwise provided, all Canadian Employees. Such medical plan shall grant
credit for amounts paid by Employees during the applicable plan year, including
the Closing Date, and shall not exclude pre-existing conditions to the extent
covered under the Mobil Plans. Subject to Purchaser's right to amend or
terminate after the first anniversary of the Closing Date, Purchaser shall
provide for retiree medical and life benefits for exempt salaried U.S. Employees
under Purchaser's retiree medical and life plan for salaried employees.
(e) Purchaser shall provide, without duplication of benefits, all
Employees with vacation time rather than cash in lieu of vacation time for all
vacation earned, accrued and unpaid through the Closing Date, but only to the
extent accrued or otherwise reserved for in the Closing Balance Sheet.
Purchaser shall promptly reimburse Sellers
59
<PAGE>
for any accrued vacation required to be paid for any reason to Employees by
Sellers.
(f) Purchaser shall establish and maintain (x) from the Closing Date
through March 31, 1996, a severance pay plan providing benefits to U.S.
Employees that are at least equal to the Enhanced Severance Policy of Mobil Oil
(a complete and correct copy of which has been provided to Purchaser), without
any mitigation, and (y) from April 1, 1996 through the first anniversary of the
Closing Date, severance pay plans providing benefits for salaried and hourly
U.S. Employees, respectively, that are at least equal to Mobil Oil's standard
termination allowance plans for similarly situated salaried and hourly U.S.
Employees (complete and correct copies of which have been provided to
Purchaser), without any mitigation. Purchaser shall honor for the remainder of
the period currently in effect the terms of the Pay Protection Plan of Mobil Oil
(a complete and correct copy of which has been provided to Purchaser) with
respect to each Employee who is currently receiving pay protection thereunder as
of the date hereof and is listed on Schedule 5.4(f).
(g) Sellers shall retain sponsorship of the Mobil Plans and Purchaser
shall not be entitled to any assets of the Mobil Plans. Purchaser shall cause a
defined
60
<PAGE>
contribution plan it maintains to accept a transfer (as a direct rollover or
plan-to-plan transfer, as appropriate) of cash, and of employee loans to U.S.
Employees, on a one-time, trustee-to-trustee basis within 180 days after the
Closing Date. Purchaser shall establish and maintain for at least one year
following the Closing Date a registered pension plan applicable to Canadian
Employees.
(h) For purposes of this Section 5.4, Purchaser shall not have any
obligation to provide compensation or employee benefits, grant Past Service
Credit or accept any transfer of defined contribution plan assets for any
Employee who is not employed by Purchaser.
5.5 Compliance with WARN, etc. Purchaser with respect to the
Employees will timely give all notices required to be given under WARN or other
similar statutes or regulations of any jurisdiction relating to any plant
closing or mass layoff or as otherwise required by any such statute. For this
purpose, Purchaser shall be deemed to have caused a mass layoff if the mass
layoff would not have occurred but for Purchaser's failure to offer to employ
the Employees in accordance with the terms of this Agreement.
5.6 Further Assurances. At any time after the Closing Date, Sellers,
on the one hand, and Purchaser, on the other hand, shall promptly execute,
acknowledge and
61
<PAGE>
deliver any other assurances or documents reasonably requested by Purchaser or
Sellers, as the case may be, and necessary for them or it to satisfy their or
its respective obligations hereunder or obtain the benefits contemplated hereby.
5.7 Use of Corporate Name and Symbol; Technology and Transition
License Agreement.
(a) Except as set forth in the agreement referred to in subsection (b)
of this Section 5.7, after the Closing, Purchaser shall not use the Mobil Marks
or the Composite Marks.
(b) On the Closing Date, Purchaser and Sellers shall execute and
deliver an agreement (the "Technology and Transition License Agreement"),
attached as Exhibit A hereto, governing (i) Purchaser's rights to use the Mobil
Marks and the Composite Marks on products, labels, packaging and promotional
materials following the Closing Date and (ii) the following technology licenses
between Purchaser and Sellers: (x) a license from Sellers to Purchaser under the
Stretch Film Patents (the "Stretch Film License"); (y) a license from Sellers to
Purchaser under the Grocery Sack Patent (the "Grocery Sack License"); and (z) a
license from Purchaser to Sellers with respect to certain of the Intellectual
Property.
62
<PAGE>
5.8 Transition Services. On the Closing Date, Purchaser shall
execute and deliver, and Sellers or an Affiliate of Sellers shall execute and
deliver, a transition services agreement (the "Transition Services Agreement"),
attached as Exhibit B hereto, pursuant to which, for a period of 12 months
following the Closing Date (with the option of Purchaser to extend for six
additional one-month periods to the extent reasonably practicable for Sellers),
Sellers or such Affiliate of Sellers shall make available to Purchaser the
support and administrative services currently being provided to the Plastics
Business on a basis, and for a price, substantially consistent with the recent
historical practice of Sellers, including, without limitation, computer and
data-processing services and any software associated therewith.
5.9 Macedon Technical Center Shared Facilities Agreement. On the
Closing Date, Purchaser and Mobil Oil shall execute and deliver an agreement
(the "Macedon Technical Center Shared Facilities Agreement") pursuant to which
Purchaser shall be permitted to utilize a portion of the Macedon Technical
Center substantially on the terms set forth in Exhibit C hereto.
5.10 Macedon Plant Essential Services Agreement. On the Closing
Date, Purchaser and Mobil Oil shall execute
63
<PAGE>
and deliver an agreement (the "Macedon Plant Essential Services Agreement")
pursuant to which Purchaser shall provide certain essential services to Mobil
Oil's films business at the portion of the Macedon Plant not included in the
Owned Real Property, including power, fireloop and resin handling, and Purchaser
and Sellers shall allocate certain responsibilities for liabilities related to
the Macedon Plant, on commercially reasonable terms mutually acceptable to
Purchaser and Mobil Oil.
5.11 Certain Matters Related to Excluded Liabilities and Assumed
Liabilities.
(a) Sellers shall have the right, which may be exercised in their sole
discretion, to manage and control the handling of, to assume the defense of and
to settle or otherwise compromise claims relating to Excluded Liabilities where
settlement involves only the payment of monetary damages, it being understood
that with respect to other settlements of claims relating to Excluded
Liabilities, Purchaser shall have the right to consent to the entry of any
settlement, which consent shall not be unreasonably withheld.
(b) With respect to all Excluded Liabilities, the Purchaser
Indemnified Parties shall cooperate with Sellers, provide Sellers as promptly as
possible with notices and
64
<PAGE>
other information received by such parties as well as all relevant materials,
information and data requested by Sellers and shall grant Sellers, without
charge, reasonable access to employees of the Plastics Business and, in the case
of Excluded Environmental Liabilities, to the Owned Real Property and the Leased
Real Property, including the right to conduct environmental tests thereon and to
take samples therefrom. In addition, with respect to Excluded Environmental
Liabilities, Sellers shall have the right to control the development and
implementation of required remediation, including negotiations and settlements
with regulators and the retention of consultants and other professionals. If
Sellers exercise their right to control, Sellers shall consult with Purchaser
concerning all phases of the remediation process, including the preparation of
reports, review of analytical data, and meetings with regulators. Purchaser may
attend meetings with regulators but Purchaser will not meet with regulators
without Sellers in attendance. Sellers may not exercise their control in any
manner that unreasonably interferes with Purchaser's operation of the Plastics
Business.
With respect to environmental liabilities that are not Excluded
Environmental Liabilities, with respect to any material matters that may
reasonably be expected to trigger
65
<PAGE>
Sellers' obligations pursuant to Section 2.4(b)(iii), Purchaser shall consult
with Sellers concerning (but Sellers shall not have the right to control) all
phases of the investigation, remediation, and monitoring process. The Purchaser
Indemnified Parties agree not to defend, settle, compromise or make any payments
with respect to claims relating to Excluded Liabilities.
(c) With respect to the Assumed Liabilities, the Seller Indemnified
Parties shall cooperate with Purchaser, at Purchaser's expense, in contesting or
defending any charge, complaint, action, suit or hearing included in the Assumed
Liabilities, and shall provide Purchaser as promptly as possible with notices
and other information received by such parties as well as all relevant
materials, information and data requested by Purchaser, and shall grant
Purchaser, without charge, reasonable access to Sellers' and Sellers'
Affiliates' employees.
(d) Sellers acknowledge and agree that the Transferred Assets include
all attorney-client, work product and other legal privileges (to the extent that
such transfer does not waive or otherwise compromise such privileges) Relating
to the Transferred Assets and the Assumed Liabilities to which Sellers or any of
their Affiliates may be entitled, and that from and after the Closing Date
66
<PAGE>
Purchaser shall be exclusively entitled to control the assertion and waiver of
all such privileges.
5.12 Employee Matters. Mobil Oil and Purchaser agree to utilize the
alternative procedure set forth in Revenue Procedure 84-77, 1984-2 C.B. 753,
with respect to wage reporting. Mobil Oil shall cooperate with Purchaser and
furnish Purchaser with all information needed to prepare and file any wage
reporting form.
5.13 Tax Matters.
(a) Sellers shall prepare and file, or cause to be prepared and
filed, all Tax Returns Related to the Transferred Assets and the Plastics
Business which (i) are required to be filed on or before the Closing Date, and
(ii) pertain to Taxes which are required by law to be paid or filed by Sellers
and the failure to pay would result in an Encumbrance on the Transferred Assets.
Purchaser shall prepare and file all Tax Returns for Transfer Costs and which
otherwise Relate to the Transferred Assets.
(b) After the Closing Date, each of Sellers and Purchaser shall
cooperate (and cause their respective Affiliates to cooperate) with each other
and with each other's respective agents, including accounting firms and legal
counsel, in connection with the preparation or audit of any Tax Return, amended
Tax Return, claim for refund and
67
<PAGE>
any tax claim or litigation in respect of the Transferred Assets and the
Plastics Business that include whole or partial taxable periods, activities,
operations or events on or prior to the Closing Date, which cooperation shall
include, but not be limited to, making available to the other all Books and
Records in their possession relating to liabilities for Taxes associated with
the Transferred Assets and the Plastics Business, except as limited by this
Agreement. Sellers and Purchaser shall also make available to the other as
reasonably requested and available, personnel responsible for preparing,
maintaining and interpreting information, Records and documents in connection
with Taxes as well as related litigation. Any information provided or obtained
under this Section 5.15 shall be kept confidential, except as may be otherwise
necessary in connection with the filing of returns or reports, refund claims,
audits, tax claims and litigation.
(c) At the Closing, Mobil Canada and Purchaser, or Purchaser's
assignee, shall jointly execute an election under Section 167 of the Excise Tax
Act (Canada) to have the sale of the Transferred Assets and other assets of
Mobil Canada being transferred hereunder take place on a tax-free basis under
Part IX of such Act; and Mobil Canada shall file
68
<PAGE>
such election with its tax return for the reporting period in which the Closing
takes place.
(d) At the Closing, Mobil Canada shall provide Purchaser, or
Purchaser's assignee, with a certificate executed by an officer of Mobil Canada
or other evidence reasonably satisfactory to Purchaser, or Purchaser's assignee,
that all Taxes required to be paid by Mobil Canada under the Retail Sales Tax
Act (Ontario) and similar legislation where Mobil Canada does business in
Canada, other than Taxes not yet due and payable or being contested in good
faith, have been paid.
(e) Mobil Canada shall cooperate with Purchaser, or Purchaser's
assignee, in the making by Purchaser, or Purchaser's assignee, of an election
under Section 22 of the Income Tax Act (Canada).
(f) At the Closing, Purchaser or Purchaser's assignee shall deliver
to Mobil Canada an exemption certificate under the Retail Sales Tax Act
(Ontario) in respect of the Transferred Assets or any other assets acquired from
Mobil Canada which are not subject to Tax under that Act.
5.14 Books and Records. Subject to Section 2.2(j), within 15 days
after the Closing Date, Sellers shall deliver, or cause to be delivered, to
Purchaser possession
69
<PAGE>
of all of the Books and Records, or copies thereof in the possession of Sellers
and their Affiliates. Without limiting the generality of the foregoing, Sellers
shall deliver to Purchaser all copies, and Sellers shall not retain any copies,
of any privileged or work product documents so delivered to Purchaser. Sellers
shall preserve and keep the Books and Records not included in the Transferred
Assets pursuant to Section 2.2(j), if any, until the expiration of any
applicable statutes of limitations or extensions thereof and as otherwise
required by law, but in any event for not less than five years after the Closing
Date. Purchaser and Sellers shall make available to the other for inspection
and copying during normal business hours, in connection with the preparation of
Tax returns, audits and litigation and other matters related to the Plastics
Business, all Books and Records, as well as, in the case of Sellers, all Tax
Records (as defined below) in their possession. Notwithstanding the foregoing,
Purchaser and Sellers may dispose of such Books and Records and Tax Records
provided that ninety days' advance written notice of intent to dispose is given
to the other beforehand. Such notice shall be delivered in accordance with the
notice provisions set forth in this Agreement and shall include a list of the
Books and Records or Tax Records to be disposed
70
<PAGE>
of which shall describe each book, file or other record accumulation being
disposed of in reasonable detail. Each party so notified shall have the
opportunity, at its cost and subject to applicable law, to copy or remove,
within such ninety day period, all or any part of such Books and Records or Tax
Records. For the purpose of this Section 5.14, "Tax Records" shall include,
without limitation, journal vouchers, cash vouchers, general ledgers, material
contracts, and authorizations for expenditures (AFEs).
5.15 Covenant Not to Compete. (a) For a period of ten years from and
after the Closing Date, except through an acquisition permitted by Section
5.15(c), neither of the Sellers nor any of their Affiliates shall engage
anywhere in the world in the business currently engaged in by the Plastics
Business; provided, however, that Sellers and their Affiliates shall be
permitted to engage in the stretch film business outside of North America.
(b) Purchaser acknowledges and agrees that neither this Agreement nor
the Technology and Transition License Agreement shall restrict any buyer of any
assets or businesses of Sellers or any of their Affiliates from entering or
conducting any business, including the business of the Plastics Business,
subject only to Purchaser's rights
71
<PAGE>
under the Stretch Film Patents in North America and the non-transferability of
the Intellectual Property.
(c) For a period of three years from and after the Closing Date,
neither Sellers nor any of their Affiliates will acquire (by asset purchase,
stock purchase, merger, consolidation or otherwise) a Person which is primarily
engaged in substantially the same business as is currently engaged in by the
Plastics Business.
(d) For a period of three years from and after the Closing Date,
neither Sellers nor any of their Affiliates will hire any Employee who was a key
executive or key technical professional of the Plastics Business and who was
offered employment by Purchaser.
(e) If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 5.15 is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability will have the power to reduce the scope, duration
or area 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
72
<PAGE>
term or provision with a term or provision and this Agreement will be
enforceable as so modified.
(f) If any of Sections 5.15(a), (c) or (d) is breached by Sellers or
any of their Affiliates, then the time period set forth in the section so
breached shall be extended by an additional period of time equal to the duration
of such breach.
5.16 Confidentiality. Sellers shall not, and shall not permit any of
their Affiliates, to knowingly provide or make available, directly or
indirectly, any confidential or proprietary information used exclusively in to
the Plastics Business. Sellers shall cooperate with Purchaser, at Purchaser's
expense, in any efforts by Purchaser to enforce any non-disclosure or
confidentiality agreements included in the Contracts, including without
limitation any confidentiality agreements with employees and agents of Sellers
and with any prospective purchasers of the Plastics Business. If any
confidentiality or nondisclosure agreements of Sellers Relating to the Plastics
Business are, by their terms, non-assignable, Sellers shall, at the request and
expense of Purchaser, take all actions reasonably requested by Purchaser to
enforce such agreement.
73
<PAGE>
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to the Obligations of Purchaser and Sellers. The
obligations of the parties hereto to effect the Closing are subject to the
satisfaction (or waiver) prior to the Closing of the following conditions:
(a) HSR Act and Canadian Act. All filings under the HSR Act and the
Canadian Act shall have been made and any required waiting period under such
laws (including any extensions thereof obtained by request or other action of
any governmental authority) applicable to the transactions contemplated hereby
shall have expired or been earlier terminated. If the transactions contemplated
herein are reviewable under the Investment Canada Act, the Minister, as defined
in such Act, shall have been satisfied or deemed to have been satisfied prior to
the Closing Date that the transactions contemplated herein are likely to be of
"net benefit" to Canada.
(b) No Injunctions. No court or governmental authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order which is
in effect on the Closing Date and prohibits the consummation of the Closing, and
no proceeding for such a
74
<PAGE>
statute, rule, regulation, judgment, decree, injunction or other order shall
have been instituted by a governmental authority.
(c) Consents and Approvals. All Required Approvals shall have been
obtained.
6.2 Conditions to the Obligations of Purchaser. The obligation of
Purchaser to effect the Closing is subject to the satisfaction (or waiver) prior
to the Closing, of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Sellers contained herein that are qualified as to materiality
shall have been true and correct when made and shall be true and correct as of
the Closing, as if made as of the Closing, and the representations and
warranties of Sellers contained herein that are not qualified as to materiality
shall be true and correct in all material respects when made and shall be true
and correct in all material respects as of the Closing, as if made as of the
Closing (except, in each case, that representations and warranties that are made
as of a specific date need be true and correct or true and correct in all
material respects, as the case may be, only as of such date), and Purchaser
shall have received certificates
75
<PAGE>
to such effect dated the Closing Date and executed by a duly authorized officer
of each Seller.
(b) Covenants. The covenants and agreements of Sellers to be
performed on or prior to the Closing shall have been duly performed in all
material respects, and Purchaser shall have received certificates to such effect
dated the Closing Date and executed by a duly authorized officer of each Seller.
(c) Legal Opinions. Purchaser shall have received the opinions of
Sellers' counsel, dated as of the Closing Date, addressed to Purchaser
substantially to the effect set forth in Annex 6.2(c) hereto.
(d) Other Agreements. Sellers, or an Affiliate of Sellers, as the
case may be, shall have executed and delivered the Ancillary Agreements and the
other documents referred to in Section 2.9.
(e) No Material Adverse Change. Since the date of the Balance Sheet,
neither the Transferred Assets nor the Plastics Business shall have suffered a
Material Adverse Change.
6.3 Conditions to the Obligations of Sellers. The obligation of
Sellers to effect the Closing is subject to the satisfaction (or waiver) prior
to the Closing, of the following conditions:
76
<PAGE>
(a) Representations and Warranties. The representations and
warranties of Purchaser contained herein that are qualified as to materiality
shall have been true and correct when made and shall be true and correct as of
the Closing, as if made as of the Closing, and the representations and
warranties of Purchaser contained herein that are not qualified as to
materiality shall have been true and correct in all material respects when made
and shall be true and correct in all material respects as of the Closing, as if
made as of the Closing (except, in each case, that representations and
warranties that are made as of a specific date need be true and correct or true
and correct in all material respects, as the case may be, only as of such date),
and Sellers shall have received a certificate to such effect dated the Closing
Date and executed by a duly authorized officer of Purchaser.
(b) Covenants. The covenants and agreements of Purchaser to be
performed on or prior to the Closing shall have been duly performed in all
material respects, and Sellers shall have received a certificate to such effect
dated the Closing Date and executed by a duly authorized officer of Purchaser.
(c) Legal Opinions. Sellers shall have received the opinions of the
Purchaser's counsel, dated as of the
77
<PAGE>
Closing Date, addressed to Sellers substantially to the effect set forth in
Annex 6.3(c) hereto.
(d) Other Agreements. Purchaser shall have executed and delivered
the Ancillary Agreements and all other documents referred to in Section 2.8.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
7.1 Survival. The representations and warranties of Sellers
contained in this Agreement shall survive the Closing for the respective periods
set forth in this Section 7.1. All of the representations and warranties of
Sellers contained in this Agreement and all claims and causes of action with
respect thereto shall terminate on June 30, 1997, except that (i) the
representations and warranties in Sections 3.1, 3.2, 3.3, 3.4, 3.5 and 3.16
shall have no expiration date, (ii) claims based on Assumed Liabilities or
Excluded Liabilities shall have no expiration date (except as set forth in
Section 2.4(b)), (iii) the representations and warranties in Section 3.8 and in
Section 3.13(d) related to Taxes shall survive until the expiration of the
applicable statute of limitations and (iv) the representations and warranties in
Sections 3.7(c) and 3.11 shall not survive the Closing. The representations and
warranties of
78
<PAGE>
Purchaser contained in this Agreement shall have no expiration date. In the
event notice of any claim for indemnification under Section 7.2(a) or Section
7.3(a)(i) is given (within the meaning of Section 9.1) within the applicable
survival period, the representations and warranties that are the subject of such
indemnification claim shall survive until such time as such claim is finally
resolved.
7.2 Indemnification by Purchaser. Purchaser hereby agrees that it
shall indemnify, defend and hold harmless Sellers, their Affiliates and, if
applicable, their respective directors, officers, shareholders, partners,
attorneys, accountants, agents and employees and their heirs, successors and
assigns (the "Seller Indemnified Parties") from, against and in respect of any
damages, claims, losses, charges, actions, suits, proceedings, deficiencies,
Taxes, interest, penalties, and reasonable costs and expenses (including,
without limitation, reasonable attorneys' fees, removal costs, remediation
costs, closure costs, fines, penalties and expenses of investigation and ongoing
monitoring) (collectively, the "Losses") imposed on, sustained, incurred or
suffered by or asserted against any of the Seller Indemnified Parties, directly
or indirectly, relating to or arising out of (i) any breach of any
representation or warranty made by
79
<PAGE>
Purchaser contained in this Agreement for the period such representation or
warranty survives, (ii) the Assumed Liabilities, and (iii) the breach of any
covenant or agreement of Purchaser contained in this Agreement. Sellers
acknowledge that Section 2.3(d) and this Article VII constitute Sellers' sole
remedy with respect to any of the matters referred to herein including, without
limitation, any Losses or liability under any Environmental Law or with respect
to any Hazardous Substance to the extent such Losses constitute Assumed
Liabilities, and expressly waives any other rights or causes of action,
including under any Environmental Law or with respect to any claim involving the
presence of or exposure to any Hazardous Substance.
7.3 Indemnification by Sellers.
(a) Sellers hereby agree, jointly and severally, that they shall
indemnify, defend and hold harmless Purchaser, its Affiliates and, if
applicable, their respective directors, officers, shareholders, partners,
attorneys, accountants, agents and employees (other than the Employees) and
their heirs, successors and assigns (the "Purchaser Indemnified Parties" and,
collectively with the Seller Indemnified Parties, the "Indemnified Parties")
from, against and in respect of any Losses imposed on, sustained, incurred or
suffered by or asserted against any of the
80
<PAGE>
Purchaser Indemnified Parties, directly or indirectly, relating to or arising
out of (i) subject to Section 7.3(b), any breach of any representation or
warranty made by Sellers contained in this Agreement for the period such
representation or warranty survives, (ii) all Excluded Liabilities, (iii)
subject to Section 7.3(b), the breach of any covenant or agreement of either
Seller contained in this Agreement and (iv) the failure of Sellers to comply
with any applicable bulk sale or bulk transfer laws or similar laws (other than
Losses arising as a result of Purchaser's failure to discharge any Assumed
Liabilities); it being understood that for purposes of the right of the
Purchaser Indemnified Parties to indemnification pursuant to Section 7.3(a)(i),
the representations and warranties of Sellers contained herein shall not be
deemed qualified by any references to materiality or to whether or not any such
breach results or may result in a Material Adverse Effect. Purchaser
acknowledges that Section 2.4(b) and this Article VII constitute Purchaser's
sole remedy with respect to any of the matters referred to herein including,
without limitation, any Losses or liability under any Environmental Law or with
respect to any Hazardous Substance to the extent such items constitute Excluded
Liabilities, and expressly waives any other rights or causes of action,
including under
81
<PAGE>
any Environmental Law or with respect to any claim involving the presence of or
exposure to any Hazardous Substance.
(b) Sellers shall not be liable to the Purchaser Indemnified Parties
for any Losses with respect to the matters contained in Sections 7.3(a)(i) and
(except with respect to Section 5.6, 5.11, 5.14, 5.15 or 5.16) Section
7.3(a)(iii) except to the extent (and then only to the extent) the Losses
therefrom exceed an aggregate amount equal to $20 million, and then only for all
such Losses in excess thereof up to an aggregate amount equal to $127 million.
7.4 Indemnification Procedures. With respect to third-party claims,
all claims for indemnification by any Indemnified Party hereunder shall be
asserted and resolved as set forth in this Section 7.4. In the event that any
written claim or demand for which Purchaser or either Seller, as the case may be
(an "Indemnifying Party"), would be liable to any Indemnified Party hereunder is
asserted against or sought to be collected from any Indemnified Party by a third
party, such Indemnified Party shall promptly, but in no event more than 15 days
following such Indemnified Party's receipt of such claim or demand, notify the
Indemnifying Party of such claim or demand, describe such claim or demand in
reasonable detail, including the amount
82
<PAGE>
or the estimated amount thereof to the extent then feasible (which estimate
shall not be conclusive of the final amount of such claim or demand) and provide
the Indemnifying Party with copies of any notice or other document received from
or with any third party, including tax authorities, in respect of any such
matters (the "Claim Notice"); provided, however, that the failure to receive
timely notice (other than a notice not given within the two-year or seven-year
period of Section 2.4(b)) shall not relieve an Indemnifying Party of its
obligations hereunder except and to the extent that such delay actually
prejudices its ability to defend or contest the matter on which such claim or
demand is based. The Indemnifying Party shall have 60 days (or, if shorter,
until five days before any response is required to be filed if such claim
involves a suit or proceeding by a third party) from the personal delivery or
mailing of the Claim Notice (the "Notice Period") to notify the Indemnified
Party (a) whether or not the Indemnifying Party disputes the liability of the
Indemnifying Party to the Indemnified Party hereunder with respect to such claim
or demand and (b) whether or not it desires to defend the Indemnified Party
against such claim or demand. All costs and expenses incurred by the
Indemnifying Party in defending such claim or demand shall be a liability of,
and shall be paid by, the
83
<PAGE>
Indemnifying Party; provided, however, that the amount of such costs and
expenses that shall be a liability of the Indemnifying Party hereunder shall be
subject to the limitations set forth in Section 7.3(b). Except as hereinafter
provided, in the event that the Indemnifying Party notifies the Indemnified
Party within the Notice Period that it desires to defend the Indemnified Party
against such claim or demand, and actively defends the Indemnified Party by
appropriate actions, the Indemnifying Party shall have the right to defend the
Indemnified Party by appropriate proceedings and shall have the sole power to
direct and control such defense. If any Indemnified Party desires to
participate in any such defense, it may do so at its sole cost and expense. The
Indemnified Party shall not settle a claim or demand without the consent of the
Indemnifying Party. The Indemnifying Party shall not, without the prior written
consent of the Indemnified Party, settle, compromise or offer to settle or
compromise any such claim or demand on a basis which (a) would result in the
imposition of a consent order, injunction, agreement, ruling or decree which
would, or could reasonably be expected to, restrict the future activity or
conduct of the Indemnified Party or any Subsidiary or Affiliate thereof or (b)
would not include a general release in favor of the Indemnified
84
<PAGE>
Party with respect to the matter underlying the claim or demand. If the
Indemnifying Party elects not to defend, or does not actively defend by
appropriate actions, the Indemnified Party against such claim or demand, whether
by not giving the Indemnified Party timely notice as provided above or
otherwise, then the amount of any such claim or demand or, if the same be
contested by the Indemnified Party, then that portion thereof as to which such
defense is unsuccessful (including the reasonable costs and expenses pertaining
to the successful and unsuccessful portions of such defense), shall be the
liability of the Indemnifying Party hereunder, subject to the limitations set
forth in Section 7.3(b). To the extent the Indemnifying Party shall direct,
control or participate in the defense or settlement of any third-party claim or
demand, the Indemnified Party will give the Indemnifying Party and its counsel
access to, during normal business hours, the relevant business records and other
documents, and shall permit them to consult with the employees and counsel of
the Indemnified Party. The Indemnified Party shall use its best efforts in the
defense of all such claims.
7.5 Characterization of Indemnification Payments. All amounts paid
by Purchaser or Sellers, as the case may be, under Article II (other than
Section 2.7(b)), Article V
85
<PAGE>
or this Article VII shall be treated as adjustments to the Purchase Price for
all Tax purposes.
7.6 Computation of Losses Subject to Indemnification. The amount of
any Loss for which indemnification is provided under this Article VII shall (i)
be computed net of any insurance proceeds taking into account Tax benefits or
detriments received or incurred by the Indemnified Party in connection with such
Loss and (ii) exclude consequential, exemplary, special and punitive damages and
lost profits.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by agreement of Purchaser and Sellers;
(b) by either Purchaser, on the one hand, or Sellers, on the other
hand, by giving written notice of such termination to the other, if the Closing
shall not have occurred on or prior to November 30, 1995; provided that the
terminating party is not in material breach of its obligations under this
Agreement;
(c) by either Purchaser, on the one hand, or Sellers, on the other
hand, if there shall be in effect any Law that prohibits the consummation of the
Closing or if
86
<PAGE>
consummation of the Closing would violate any non-appealable final order, decree
or judgment of any court or governmental body having competent jurisdiction; or
(d) by either Purchaser, on the one hand, or Sellers, on the other
hand, if, as a result of action or inaction by Sellers (in which event Purchaser
shall have the right to terminate) or Purchaser (in which event Sellers shall
have the right to terminate), the Closing shall not have occurred on or prior to
the date that is 10 Business Days following the date on which all of the
conditions to the Closing set forth in Article VI are satisfied or waived.
8.2 Effect of Termination. In the event of the termination of this
Agreement in accordance with Section 8.1, this Agreement shall thereafter become
void and have no effect, and no party hereto shall have any liability to the
other party hereto or their respective Affiliates, directors, officers or
employees, except for the obligations of the parties hereto contained in this
Section 8.2 and in Sections 9.1, 9.7, 9.8, 9.9 and 9.10, and except that nothing
herein will relieve any party from liability for any breach of this Agreement
prior to such termination.
87
<PAGE>
ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices or other communications hereunder shall be
deemed to have been duly given and made if in writing and if served by personal
delivery upon the party for whom it is intended, if delivered by registered or
certified mail, return receipt requested, or by a national courier service, or
if sent by telecopier; provided that the telecopy is promptly confirmed by
telephone confirmation thereof, to the person at the address set forth below, or
such other address as may be designated in writing hereafter, in the same
manner, by such person:
To Purchaser:
TENNECO INC.
1010 Milam Street
Houston, Texas 77002
Telephone: (713) 757-2131
Telecopy: (713) 757-3581
Attn: Corporate Secretary
With a copy to:
PACKAGING CORPORATION OF AMERICA
1603 Orrington Avenue
Evanston, Illinois 60204
Telephone: (708) 492-4402
Telecopy: (708) 570-3044
Attn: General Counsel
88
<PAGE>
To Sellers:
MOBIL OIL CORPORATION
3225 Gallows Road
Fairfax, Virginia 22037
Telephone: (703) 846-3000
Telecopy: (703) 846-1476
Attn: S.H. Gillespie, Esq.
With a copy to:
WEIL, GOTSHAL & MANGES
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Telecopy: (212) 310-8007
Attn: Ellen J. Odoner, Esq.
9.2 Amendment; Waiver. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Purchaser and each Seller, or in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. Except as set forth herein, the rights
and remedies herein provided shall be cumulative and not exclusive of any rights
or remedies provided by law.
89
<PAGE>
9.3 Assignment. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written consent of
the other party hereto, except that Purchaser may assign its rights hereunder to
one or more of its direct or indirect wholly-owned Subsidiaries; provided,
however, that no such assignment shall relieve Purchaser of its obligations
hereunder.
9.4 Entire Agreement. This Agreement (including all Schedules and
Annexes hereto and the Ancillary Agreements) contains the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral or written, with
respect to such matters, except for the Confidentiality Agreement which will
remain in full force and effect for the term specified therein.
9.5 Fulfillment of Obligations. Any obligation of any party to any
other party under this Agreement or any of the Ancillary Agreements, which
obligation is performed, satisfied or fulfilled by an Affiliate of such party,
shall be deemed to have been performed, satisfied or fulfilled by such party.
9.6 Parties in Interest. Subject to Section 5.15(b), this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective
90
<PAGE>
successors and permitted assigns. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than Purchaser, Sellers or
their respective successors or permitted assigns, any rights or remedies under
or by reason of this Agreement.
9.7 Public Disclosure. Notwithstanding anything herein to the
contrary, each of the parties to this Agreement hereby agrees with the other
party or parties hereto that, except as may be required for tax purposes or to
comply with the requirements of any applicable Laws or the rules and regulations
of each stock exchange upon which the securities of one of the parties (or its
Affiliate) is listed, no press release or similar public announcement or
communication shall ever, whether prior to or subsequent to the Closing, be made
or caused to be made concerning the execution or performance of this Agreement
unless specifically approved in advance by all parties hereto. The parties
shall consult and reasonably cooperate with each other concerning any disclosure
made pursuant to the exception in the preceding sentence.
9.8 Return of Information. If for any reason whatsoever the
transactions contemplated by this Agreement are not consummated, Purchaser shall
promptly return to Sellers all Books and Records furnished by Sellers, the
91
<PAGE>
Plastics Business or any of their respective agents, employees or
representatives (including all copies, if any, thereof), and shall not use or
disclose the information contained in such Books and Records for any purpose or
make such information available to any other entity or person.
9.9 Expenses. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be borne by the party incurring
such expenses.
9.10 Schedules. The disclosure of any matter in any schedule to this
Agreement shall be deemed to be a disclosure for all purposes of this Agreement
to which such matter could reasonably be expected to be pertinent, but shall
expressly not be deemed to constitute an admission by Purchaser or either Seller
or to otherwise imply that any such matter is material for the purposes of this
Agreement.
9.11 Bulk Transfer Laws. Purchaser acknowledges that Sellers have
not taken, and do not intend to take, any action required to comply with any
applicable bulk sale or bulk transfer laws or similar laws.
9.12 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM.
THIS AGREEMENT SHALL BE GOVERNED BY,
92
<PAGE>
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. EACH PARTY
HERETO SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WAIVES ANY OBJECTION TO LAYING
VENUE IN SUCH COURT, WAIVES ANY OBJECTION THAT SUCH COURT IS AN INCONVENIENT
FORUM OR DOES NOT HAVE JURISDICTION OVER ANY PARTY HERETO AND AGREES THAT
SERVICE OF PROCESS UPON SUCH PARTY IN ANY SUCH ACTION OR PROCEEDING SHALL BE
EFFECTIVE IF NOTICE IS GIVEN IN ACCORDANCE WITH SECTION 9.1 OF THIS AGREEMENT.
9.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
9.14 Headings. The heading references herein and the table of
contents hereto are for convenience purposes only, do not constitute a part of
this Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
9.15 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application
93
<PAGE>
thereof to any Person or any circumstance, is invalid or unenforceable, (a) a
suitable and equitable provision shall be substituted therefor in order to carry
out, so far as may be valid and enforceable, the intent and purpose of such
invalid or unenforceable provision and (b) the remainder of this Agreement and
the application of such provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
94
<PAGE>
IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the date first written above.
MOBIL OIL CORPORATION
By: /S/ STEPHEN D. PRYOR
--------------------------------
Name: Stephen D. Pryor
Title: Vice President, Mobil Chemical Company (a
division of Mobil Oil Corporation),
Attorney-in-Fact
MOBIL CHEMICAL CANADA LIMITED
By: /S/ STEPHEN D. PRYOR
--------------------------------
Name: Stephen D. Pryor
Title: Vice President, Mobil Chemical Company (a
division of Mobil Oil Corporation),
Attorney-in-Fact
TENNECO INC.
By: /S/ STACY DICK
-------------------------------
Name: Stacy Dick
Title: Senior Vice President
PACKAGING CORPORATION OF AMERICA
By: /S/ PAUL T. STECKO
-------------------------------
Name: Paul T. Stecko
Title: President and Chief
Executive Officer
95
<PAGE>
EXHIBITS, SCHEDULES AND ANNEXES TO ASSET PURCHASE AGREEMENT
In accordance with Item 601(b)(2) of Regulation S-K, the Exhibits, Schedules and
Annexes to the Asset Purchase Agreement are not being filed herewith. A list of
such omitted Exhibits, Schedules and Annexes appears in the Table of Contents to
the Asset Purchase Agreement. The Registrant will furnish supplementally a copy
of any omitted Exhibits, Schedules and Annexes to the Commission upon request.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated August 18, 1995 with respect to
the December 28, 1994 combined financial statements of Mobil Plastics Division
of Mobil Corporation included in the Current Report of Tenneco Inc. on Form 8-K
dated November 17, 1995, which is made a part of the following Registration
Statements previously filed with the Securities and Exchange Commission:
REGISTRATION NO. FORM SECURITIES REGISTERED
- ---------------- ---- ---------------------
2-78521 S-8 Common Stock, par value $5 per share, of Tenneco
Inc. (formerly Tenneco Holdings, Inc.) ("Common
Stock") issuable under the 1981 Tenneco Inc. Key
Employee Stock Option Plan.
33-18788 S-3 Common Stock of Tenneco Inc. issuable upon
conversion of 10 percent Sterling/Dollar
Convertible Unsecured Loan Stock 1991/95 of
Tennessee Gas Pipeline Company (formerly Tenneco
Inc.).
33-46579 S-8 5,000,000 shares of Common Stock of Tenneco Inc.
offered in connection with the Tenneco Inc. 1992
Employee Stock Purchase Plan.
33-61135 S-8 8,400,000 shares of Common Stock of Tenneco Inc.
offered in connection with the 1994 Tenneco Inc.
Stock Ownership Plan.
33-52595 S-3 1,000,000 shares of Common Stock of Tenneco Inc.
offered in connection with the Dividend
Reinvestment and Stock Purchase Plan, as amended
by Post-Effective Amendment No. 1 dated February
10, 1995 in which the Plan was made available to
investors as a direct purchase plan.
33-61133 S-8 Packaging Corporation of America 401(k) Savings
Plan, contributions thereunder and Common Stock of
Tenneco Inc. offered thereunder.
33-61129 S-8 Newport News Shipbuilding Savings (401(k)) Plan
for Union Eligible Employees, contributions
thereunder and Common Stock of Tenneco Inc.
offered thereunder.
<PAGE>
REGISTRATION NO. FORM SECURITIES REGISTERED
- ---------------- ---- ---------------------
33-61127 S-8 Tenneco Automotive Hourly Employees Savings Plan,
contributions thereunder and Common Stock of
Tenneco Inc. offered thereunder.
33-54184 S-3 $500,000,000 aggregate principal amount of Debt
Securities of Tenneco Inc. offered pursuant to
Rule 415 of the General Rules and Regulations
under the Securities Act of 1933, as amended (of
which $400,000,000 has been issued).
33-55622 S-3 2,800,000 shares of Common Stock of Tenneco Inc.
offered to the trustee of the Tenneco Inc. General
Employee Benefit Trust.
33-61137 S-8 Tenneco Inc. Thrift Plan, contributions thereunder
and Common Stock of Tenneco Inc. offered
thereunder.
ERNST & YOUNG LLP
Buffalo, New York
December 4, 1995
<PAGE>
EXHIBIT 99
NEWS RELEASE (LOGO OF TENNECO INC. APPEARS HERE)
MEDIA CONTACT: Linda J. Ambrose, Tenneco (713) 757-2761
Warren Hazelton, Tenneco Packaging (708) 492-6968
TENNECO COMPLETES MOBIL PLASTICS ACQUISITION
HOUSTON, November 17, 1995 -- Tenneco announced today its packaging division,
Tenneco Packaging, completed the acquisition of the plastics division of the
Mobil Corporation for $1.27 billion.
The former Mobil unit, which was called Mobil Plastics, is based in
Rochester, N.Y. As Tenneco has stated previously, under current projections the
new business is expected in 1996 to add more than $1.1 billion in revenues and
more than $100 million in operating income, including goodwill amortization, to
Tenneco Packaging. Tenneco Packaging has the highest revenues among Tenneco's
four business divisions.
The acquisition will be financed by a combination of cash, short-term and
long-term debt.
"This new business will contribute immediately to earnings, and it
significantly accelerates our progress toward reshaping Tenneco Packaging," said
Dana G. Mead, chairman and chief executive officer of Tenneco. "Tenneco
Packaging has identified major opportunities in Mobil Plastics for higher growth
and profitability from the expanded distribution channels, related product lines
and combined marketing opportunities."
Paul T. Stecko, president and chief executive officer of Tenneco Packaging,
said, "The addition of Mobil Plastics is a key strategic move on several fronts.
In addition to an excellent customer base and distribution network, we expect to
make the most of the low cost manufacturing capacity, proprietary technology and
extensive new product development capabilities in this business."
<PAGE>
2
The industrial packaging and foodservice business of Mobil Plastics will
become part of Tenneco Packaging's specialty products business unit. There will
be a separate business unit for the former Mobil consumer products business
which includes such national brands as Hefty (registered trademark) trash bags
and tableware, Baggies (registered trademark) food storage bags and the new
Hefty OneZip (registered trademark) zipper closure bags.
For the foodservice, catering, convenience and carry-out markets, Tenneco
Packaging's specialty products group already produces clear polystyrene
containers, as well as aluminum foil and plastic containers. For similar
customer groups, the former Mobil division manufactures polystyrene foam
foodservice containers, plates and meat trays; clear "clamshell" containers,
cake domes, take-out containers and other thermoformed polystyrene packaging;
and polyethylene film products including liners, produce and retail bags, and
medical and industrial disposal packaging.
Tenneco Packaging's consumer products include Diamond Deluxe (registered
trademark) tableware made from molded fiber, a paper product, and E-Z Foil
(registered trademark) single-use aluminum cookware and bakeware.
Stecko said the acquisition should enable Tenneco Packaging to achieve its
goal of doubling revenues and tripling earnings by the year 2000, two to three
years ahead of plan.
In 1994 Tenneco Packaging reported operating earnings of $209 million on $2.2
billion of revenue. For the first three quarters of 1995, operating income was
$355 million on sales of nearly $2.0 billion. The 1995 revenues of the
acquisition are expected to be nearly $1.1 billion, growing to over $1.5 billion
by the year 2000. Operating income for Mobil Plastics in the first nine months
of 1995 was $88 million on sales of $835 million.
The former Mobil Division has 4,100 employees working at 11 manufacturing
plants and 16 distribution centers in the United States and Canada. There are
manufacturing plants in Bakersfield, California; Covington, Georgia; Frankfort
and Jacksonville, Illinois; Temple, Texas; Canandaigua and Macedon, New York;
and Belleville, Ontario. Distribution centers are in those cities and in Easton,
Pennsylvania, as well as Honolulu, Los Angeles, Seattle and Syracuse.
<PAGE>
3
Tenneco Packaging was known as Packaging Corporation of America until early-
November, when it adopted the current name and a new logo as part of Tenneco's
new corporate identity program. The division is one of the world's largest
manufacturers of specialty packaging and one of the nation's leading producers
of kraft linerboard and medium and recycled paperboard. Not including the
acquisition, Tenneco Packaging has over 13,000 employees and operates more than
100 facilities worldwide. Manufacturing operations are in 30 states and 10
countries.
Tenneco (NSE:TEN) is a major diversified industrial corporation based in
Houston with 1994 sales of $12.2 billion. In addition to its packaging business,
the company has significant interests in natural gas transportation and
marketing (Tenneco Energy), automotive parts (Tenneco Automotive), and ship
design, construction and repair (Newport News Shipbuilding).
Tenneco also owns approximately 21 percent of Case Corporation, a
manufacturer of farm and construction equipment.
# # #
