<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission File Numbers 0-25586 and 33-66740
UNIROYAL CHEMICAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-1258925
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
UNIROYAL CHEMICAL COMPANY, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 06-1148490
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
BENSON ROAD
MIDDLEBURY, CONNECTICUT 06749
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code - (203) 573-2000
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuers' classes of
common stock, as of April 30, 1996:
Uniroyal Chemical Corporation: 24,286,043 shares of Common Stock;
Uniroyal Chemical Company, Inc.: 100 shares of Common Stock.<PAGE>
<PAGE>
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
PART I - FINANCIAL INFORMATION PAGE
Item 1 -- Financial Statements (unaudited):
- Consolidated Statements of Operations -
Three and Six Months Ended March 31, 1996 and April 2, 1995 2
- Consolidated Balance Sheets -
March 31, 1996 and October 1, 1995 3
- Consolidated Statements of Cash Flows -
Six Months Ended March 31, 1996 and April 2, 1995 5
- Notes to Unaudited Consolidated Financial Statements 6
Item 2 -- Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II - OTHER INFORMATION
Item 1 -- Legal Proceedings 15
Item 6 -- Exhibits and Reports on Form 8-K 16
-- Signature 17
1<PAGE>
<PAGE>
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- ----------------------
March 31, April 2, March 31, April 2,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 295,628 $ 274,322 $ 527,108 $ 485,963
Cost of products sold 194,427 174,194 363,745 323,369
Selling, general and
administrative expenses 53,637 50,346 102,988 94,931
---------- ---------- ---------- ----------
Operating income 47,564 49,782 60,375 67,663
Interest expense 26,954 29,630 53,296 60,225
Other (income) expense 1,133 (2,593) 1,551 (770)
---------- ---------- ---------- ----------
Income before income taxes
and extraordinary charges 19,477 22,745 5,528 8,208
Provision (benefit) for
income taxes 7,791 (71,091) 2,210 (75,092)
---------- ---------- ---------- ----------
Income before
extraordinary charges 11,686 93,836 3,318 83,300
Extraordinary charges - early
retirement of debt (304) (8,279) (304) (8,279)
---------- ---------- ---------- ----------
Net income 11,382 85,557 3,014 75,021
Preferred stock dividends earned 103 101 210 194
---------- ---------- ---------- ----------
Net income applicable
to common shares $ 11,279 $ 85,456 $ 2,804 $ 74,827
========== ========== ========== ==========
Earnings per common share:
Income before
extraordinary charges $0.47 $6.90 $0.12 $6.71
Extraordinary charges (0.01) (0.61) (0.01) (0.67)
---------- ---------- ---------- ----------
Net income per common share $0.46 $6.29 $0.11 $6.04
========== ========== ========== ==========
Weighted average shares
outstanding 24,559 13,590 24,542 12,385
</TABLE>
See notes to unaudited consolidated financial statements
2<PAGE>
<PAGE>
UNIROYAL CHEMICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, October 1,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 21,747 $ 29,519
Accounts receivable 172,392 159,254
Inventories 198,464 177,647
Other current assets 50,987 39,114
------------ ------------
Total current assets 443,590 405,534
Property, plant and equipment, net 385,829 394,472
Intangible assets 233,903 241,710
Deferred income taxes 69,833 63,890
Other assets 64,347 66,101
------------ ------------
$ 1,197,502 $ 1,171,707
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 99,441 $ 94,826
Short-term debt 69,171 33,305
Current portion of long-term debt 11,503 11,434
Accrued liabilities 100,118 106,365
------------ ------------
Total current liabilities 280,233 245,930
Long-term debt 898,564 910,156
Accrued postretirement liability 180,590 180,413
Other liabilities 137,647 134,437
Stockholders' equity (deficit)
Preferred Stock 4,172 4,172
Common Stock 254 253
Additional paid-in capital 177,004 176,799
Accumulated deficit (444,446) (447,460)
Pension liability adjustment (3,617) (3,617)
Cumulative translation adjustment (22,038) (18,488)
Treasury stock (10,861) (10,888)
------------ ------------
Total stockholders' deficit (299,532) (299,229)
------------ ------------
$ 1,197,502 $ 1,171,707
============ ============
</TABLE>
See notes to unaudited consolidated financial statements
3<PAGE>
<PAGE>
UNIROYAL CHEMICAL COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, October 1,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 21,747 $ 29,519
Accounts receivable 172,392 159,254
Inventories 198,464 177,647
Other current assets 50,987 39,114
------------ ------------
Total current assets 443,590 405,534
Property, plant and equipment, net 385,829 394,472
Intangible assets 233,903 241,710
Deferred income taxes 69,833 63,890
Other assets 64,347 66,101
------------ ------------
$ 1,197,502 $ 1,171,707
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable $ 99,441 $ 94,826
Short-term debt 69,171 33,305
Current portion of long-term debt 11,503 11,434
Accrued liabilities 100,118 106,365
------------ ------------
Total current liabilities 280,233 245,930
Long-term debt 898,564 910,156
Accrued postretirement liability 180,590 180,413
Other liabilities 137,647 134,437
Stockholder's equity (deficit)
Common Stock 1 1
Additional paid-in capital 172,251 172,018
Accumulated deficit (446,129) (449,143)
Pension liability adjustment (3,617) (3,617)
Cumulative translation adjustment (22,038) (18,488)
------------ ------------
Total stockholders' deficit (299,532) (299,229)
------------ ------------
$ 1,197,502 $ 1,171,707
============ ============
</TABLE>
See notes to unaudited consolidated financial statements
4<PAGE>
<PAGE>
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
<TABLE>
<CAPTION>
Six Months Ended
---------------------------
March 31, April 2,
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,014 $ 75,021
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation 22,395 20,992
Amortization of intangibles 10,844 9,988
Non-cash interest 7,626 10,929
Deferred income taxes (6,691) (82,187)
Extraordinary charge 304 8,279
Other 750 281
Changes in operating assets and liabilities:
Accounts receivable (14,286) (17,700)
Inventories (21,687) (33,921)
Accounts payable 4,820 6,740
Accrued liabilities (2,750) (10,353)
Other (11,820) (6,597)
------------ ------------
Net cash flows used in operating activities (7,481) (18,528)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (15,012) (26,027)
Acquisitions --- (90,794)
Other (1,722) (5,418)
------------ ------------
Net cash flows used in investing activities (16,734) (122,239)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (19,926) (189,043)
Proceeds from long-term debt 1,865 56,715
Short-term borrowings, net 35,723 31,741
Debt issuance costs (1,345) (1,844)
Proceeds from issuance of stock 233 150,910
------------ ------------
Net cash flows from financing activities 16,550 48,479
Effects of exchange rate changes on cash (107) (1,558)
------------ ------------
Net decrease in cash and cash equivalents (7,772) (93,846)
Cash and cash equivalents, beginning of period 29,519 121,344
------------ ------------
Cash and cash equivalents, end of period $ 21,747 $ 27,498
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $45,582 $52,880
Income taxes paid 10,939 4,300
</TABLE>
See notes to unaudited consolidated financial statements
5<PAGE>
<PAGE>
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Uniroyal Chemical Corporation ("UCC") and its wholly-owned subsidiary Uniroyal
Chemical Company, Inc. ("Uniroyal Chemical" and together with UCC and their
subsidiaries, the "Companies"). UCC is dependent on cash flow from Uniroyal
Chemical and its subsidiaries to service its debt and meet its other cash needs.
Accordingly, the consolidated financial statements of Uniroyal Chemical set
forth herein are presented on a basis of accounting which reflects substantially
all of the operations (primarily interest expense), assets and liabilities of
UCC.
The statements have been prepared by the Companies without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission and
according to generally accepted accounting principles, and reflect all
adjustments consisting of normal recurring accruals which, in the opinion of
management, are necessary for a fair statement of the results of the interim
periods presented. These financial statements do not include all disclosures
associated with annual financial statements and, accordingly, should be read in
conjunction with the notes contained in the Companies' audited consolidated
financial statements for the year ended October 1, 1995. Certain prior year
amounts have been reclassified to conform with the 1996 presentation.
2. Inventories
A summary of inventory components is as follows (in thousands):
<TABLE>
<CAPTION>
March 31, October 1,
1996 1995
------------ ------------
<S> <C> <C>
Finished goods $146,845 $129,263
Work in process 10,165 7,437
Raw materials 41,454 40,947
------------ ------------
$198,464 $177,647
============ ============
</TABLE>
3. Capital Stock
UCC has 50,000,000 shares of Series A and B Preferred Stock authorized at
$0.01 par value. As of March 31, 1996, UCC had issued and outstanding 29,721
shares of Series A Cumulative Redeemable Preferred Stock and 12,000 shares of
Series B Preferred stock. In addition, UCC has 2,050,000 shares of Series C
Junior Participating Preferred Stock authorized at $0.01 par value none of which
are issued.
UCC also has 205,000,000 shares of Common Stock authorized at $0.01 par
value. As of March 31, 1996, UCC had issued 25,421,051 shares, including
1,136,588 treasury shares. Uniroyal Chemical has 2,500 shares of common stock
authorized at no par value with 100 shares issued and outstanding.
6<PAGE>
<PAGE>
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Income Taxes
The provision for income taxes for the six months ended March 31, 1996 and
April 2, 1995 includes foreign tax provisions of $9.7 million and $5.3 million,
respectively. The difference between the effective and statutory federal income
tax rate consists primarily of expenses that are not deductible for income tax
purposes, including goodwill amortization, as well as state income taxes and the
impact of foreign earnings subject to various foreign tax rates and withholding
taxes.
The benefit for income taxes for the three and six months ended April 2,
1995 reflects a benefit of $78.9 million due to the reduction in the Companies'
valuation allowance recorded against the Companies' net operating loss
carryforward position in the United States. As a result of the debt repurchase
concurrent with UCC's initial public offering in March 1995, the Companies
expect future taxable income, and therefore it was more likely than not that a
significant portion of the loss carryforwards would be realized.
5. Debt Repurchase
During March 1996, the Companies repurchased $10.0 million of their long-
term debt in the open market. As a result of this repurchase, the Companies
recognized an extraordinary charge of $0.3 million comprised of premiums and the
write-off of related unamortized fees, net of a related tax benefit of $0.2
million. The 1995 extraordinary charge relates to the debt repurchase
concurrent with UCC's initial public offering in March 1995.
6. Contingencies
The Companies' are involved in claims, litigation, administrative
proceedings and investigations of various types in several jurisdictions. A
number of such matters involve claims for a material amount of damages and
relate to or allege environmental liabilities, including clean-up costs
associated with hazardous waste disposal sites, natural resource damages,
property damage and personal injury. Uniroyal Chemical has been identified by
federal, state or local governmental agencies, and other potentially responsible
parties (each a "PRP"), as a PRP for costs associated with waste disposal sites
at various locations in the United States. In many cases, Uniroyal Chemical is
one of many PRP's so identified. In addition, the Companies are involved with
environmental remediation and compliance activities at some of their current and
former sites.
Each quarter, the Companies evaluate and review estimates for future
remediation and other costs to determine appropriate environmental reserve
amounts. For each site a determination is made of the specific measures that are
believed to be required to remediate the site, the estimated total cost to carry
out the remediation plan, the portion of the total remediation costs to be borne
by the Companies' and the anticipated time frame over which payments toward the
remediation plan will occur. As of March 31, 1996, the Companies' reserves for
environmental liabilities totaled $63.6 million. These estimates may
subsequently change should additional sites be identified, further remediation
measures be required or undertaken, the interpretation of current laws and
regulations be modified or additional environmental laws and regulations be
enacted.
7<PAGE>
<PAGE>
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Contingencies (continued)
The Companies intend to assert all meritorious legal defenses and all other
equitable factors which are available to them with respect to the above matters.
The Companies believe that the resolution of these environmental matters, which
may be over the next decade, will not have a material adverse effect on the
consolidated financial position of the Companies, but could have a material
adverse effect on the Companies' consolidated results of operations in any given
year if a significant number of these matters are resolved unfavorably which the
Companies believe to be unlikely.
6. Subsequent Events
UCC entered into an Agreement and Plan of Merger, dated as of April 30, 1996
(the "Merger Agreement"), with Crompton & Knowles Corporation ("Crompton") and
Tiger Merger Corp. ("Tiger"). The merger agreement provides, among other
things, pursuant to the terms and subject to the conditions therein, that Tiger,
a wholly-owned subsidiary of Crompton, will merge with and into UCC (the
"Merger"). Under the terms of the Merger Agreement, each share of UCC's common
stock issued and outstanding immediately prior to the consummation of the Merger
will be converted into a number of shares of Crompton common stock equal to the
Exchange Ratio. The "Exchange Ratio" equals $15.00 divided by the average
closing price of Crompton's common stock on the New York Stock Exchange
Composite Tape for the twenty trading days ending with the third trading day
preceding the date of the mailing of the proxy statement/prospectus to UCC's and
Crompton's stockholders; provided that the Exchange Ratio shall not be less than
0.9091 nor more than 1.1111. Each share of UCC's Series A Cumulative Redeemable
Preferred Stock and Series B Preferred Stock issued and outstanding immediately
prior to the consummation of the Merger will be converted into and represent a
number of shares of Crompton common stock equal to the Exchange Ratio multiplied
by 6.667.
The Merger Agreement provides that UCC would be required to pay Crompton a
termination fee of $50 million if the Merger Agreement is terminated (i) under
certain circumstances following receipt of a proposal for a competing
transaction and a competing transaction is consummated within one year following
such termination or (ii) after UCC's determination to terminate the Merger
Agreement to pursue a competing transaction that would be more favorable to UCC
stockholders than the proposed Merger with Crompton.
The Merger is subject to the satisfaction or waiver of various conditions,
including approval by the stockholders of both UCC and Crompton, Hart-Scott-
Rodino and other regulatory approvals and availability of tax-free status and
pooling of interests accounting treatment. The Merger is anticipated to
close in the third calendar quarter of this year.
8<PAGE>
<PAGE>
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Subsequent Events (continued)
On May 8, 1996, UCC amended the Rights Agreement (the "Rights Agreement"),
dated April 29, 1993 and amended October 31, 1995, between UCC and Chemical Bank
("Amendment No. 2"). Amendment No. 2 provides that neither Crompton nor any of
its Affiliates (as defined in the Rights Agreement) shall become an Acquiring
Person (as defined in the Rights Agreement) as a result of the execution of the
Merger Agreement or consummation of the Merger (as defined in the Merger
Agreement) pursuant to the terms of the Merger Agreement.
9<PAGE>
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Second Quarter 1996 versus 1995
Net Sales
Consolidated net sales for the second quarter ended March 31, 1996 increased
$21.3 million, or 7.8% to $295.6 million from $274.3 million for the second
quarter of fiscal 1995. Price increases, particularly in the Chemicals and
Polymers Division, accounted for $11.3 million of the sales increase, while
increased volume, including the impact of acquisitions in 1995 accounted for
$9.5 million of the increase. Net exchange rate impacts were not material in
the quarter.
Sales for the Chemicals and Polymers Division rose 2.3% in the second quarter
to $124.8 million compared to $122.0 million in the second quarter of fiscal
1995 as this division continues to benefit from higher selling prices. Higher
rubber chemical sales were mainly due to a series of selling price increases
implemented since the second quarter of fiscal 1995. Sales of EPDM also
benefitted from modest selling price increases but were more than offset by
decreased volume. EPDM volume declined in the United States due to price
competition and a slow down in the roofing industry due to bad weather and in
certain foreign markets, primarily due to softening in the construction industry
in Europe. Nitrile rubber sales were up primarily due to higher selling prices.
Sales of Crop Protection chemicals in the second quarter of fiscal 1996
increased 25% to $98.1 million from $78.6 million in the same period last year.
The primary factor contributing to this increase was the incremental sales from
the acquisition of the worldwide crop protection business of Solvay Duphar (the
"Duphar Acquisition") in March 1995. Total sales excluding the Duphar
Acquisition increased 9% versus the prior year, reflecting the success of the
new Gaucho (TM) seed treatment insecticide.
Specialties Division sales of $70.8 million decreased 1.4% versus second
quarter sales in fiscal 1995 of $71.8 million. The decrease was primarily due
to unusually high opportunistic sales of chemical intermediates in the United
States in the second quarter of fiscal 1995. Excluding these sales, the
division's sales increased by 3.5%, primarily from continuing higher sales of
urethane prepolymers. Sales of urethane prepolymers increased in all regions of
the world due to higher selling prices and continued strong demand resulting
from an expanding global market. Worldwide average selling prices were
increased in December 1995 in response to higher raw material costs. In
addition, higher sales of Synton (TM) PAO's in the United States have resulted
from increased demand and enhanced production facilities, while worldwide
lubricant additive sales have been soft due to a general weakness in passenger
car motor oil sales.
10<PAGE>
<PAGE>
Operating Income
Operating income for the second quarter of fiscal 1995 included a $9.9
million non-recurring gain from insurance recoveries. Excluding these insurance
recoveries, operating income for the second quarter of 1996 increased by 19.3%
to $47.6 million. Gross profit during the second quarter of fiscal 1996 was
$101.2 million, or 34.2% of net sales compared to 32.6% of net sales during the
second quarter of fiscal 1995, excluding the insurance recoveries. The gross
profit increase was primarily due to increased gross margins in the Chemicals
and Polymers Division as a result of higher selling prices and lower raw
material costs, as well as the increased contribution from the higher margin
Crop Protection Division.
Selling, general and administrative expenses during the second quarter of
fiscal 1996 were essentially flat as a percentage of sales. The increase in
real dollar expenses was primarily due to incremental expenses related to the
Duphar Acquisition, increased spending for research and development and
promotional spending on new products such as Gaucho. These increases were
partially offset by benefits related to the cost reduction program implemented
in the fourth quarter of fiscal 1995.
Interest Expense
Interest expense for the three months ended March 31, 1996 was $2.7 million
lower than for the three months ended April 2, 1995, primarily from the
repurchase of debt concurrent with UCC's initial public offering ("IPO") in
March 1995. These savings were partially offset by additional interest expense
from the borrowings required to finance the Duphar Acquisition.
Other Income (Expense)
Other income in the second quarter of fiscal 1995 included non-recurring
licensing income and significant interest income resulting from the build up of
cash in anticipation of the debt repurchase concurrent with the IPO and the
Duphar Acquisition in March 1995. Excluding these two items, net other expense
was consistent quarter to quarter.
Income Taxes
The provision for taxes for the three months ended March 31, 1996 includes a
$0.5 million federal and state tax provision, in addition to a foreign provision
of $7.3 million. The benefit for taxes in the second quarter of fiscal 1995
includes a reduction of the Companies' deferred tax valuation allowance of $78.9
million.
First half 1996 versus 1995
Net Sales
Consolidated net sales for the six months ended March 31, 1996 were $527.1
million, an 8.5% increase over sales of $486.0 million for the six months ended
April 2, 1995. Price increases, particularly in the Chemicals and Polymers
Division, accounted for $23.6 million of the sales increase, while increased
volume, including the impact of acquisitions in 1995 accounted for $16.9 million
of the increase. Net exchange rate impacts were not material in the first half
of 1996.
11
<PAGE>
Sales for the Chemicals and Polymers Division increased 3.3% to $240.6
million in the first six months of fiscal 1996 versus $233.0 million for the
same period of the prior year as this division is benefitting from higher
selling prices; particularly in rubber chemicals, somewhat offset by lower EPDM
volumes due to the factors previously addressed in the second quarter analysis.
Sales of Crop Protection chemicals in the first six months of fiscal 1996
increased 27.4% to $146.4 million from $114.9 million in the same period last
year. The Duphar Acquisition was the primary factor contributing to this
increase. Excluding the Duphar Acquisition, sales increased 6.3% versus the
prior year.
Specialties Division sales of $136.3 million in the first half of fiscal 1996
increased $2.2 million, or 1.7%, compared to $134.1 million in the first half of
fiscal 1995 primarily due to higher urethane prepolymer sales being mostly
offset by lower sales of chemical intermediates and other specialty chemicals
due to the factors previously discussed in the quarterly analysis.
Operating Income
Operating income was $60.4 million for the first six months of fiscal 1996 an
increase of 4.7% over the first half of 1995 after adjusting for the one time
insurance proceeds in the prior period. Gross profit increased as a result of
the higher sales as the gross margin percentage remained constant at 31% after
adjusting for the 1995 insurance recoveries.
Selling, general and administrative expenses during the first six months of
fiscal 1996 were up $8.1 million, or 8.5%, versus the first six months of fiscal
1995 but were essentially flat as a percentage of sales. The increase in
expenses was primarily due to the factors previously discussed in the quarterly
analysis.
Interest Expense
Interest expense of $53.3 million for the six months ended March 31, 1996 was
$6.9 million lower than the six months ended April 2, 1995, primarily due to the
factors discussed in the quarterly analysis.
Other Income (Expense)
Other income in the first half of fiscal 1995 includes certain non-recurring
licensing income and interest income as discussed in the quarterly analysis.
Excluding these items, other expense for the first half of 1996 would have been
lower than 1995 due to the foreign exchange losses related to the devaluation of
the Mexican Peso in the first six months of fiscal 1995.
Income Taxes
The provision for taxes for the six months ended March 31, 1996 is comprised
of a benefit of $7.5 million for federal and state tax and a foreign provision
of $9.7 million. The benefit for taxes in the first half of fiscal 1995
includes a reduction of the Companies' deferred tax valuation allowance of $78.9
million.
12<PAGE>
<PAGE>
Liquidity and Capital Resources
At March 31, 1996, the Companies had $21.8 million of cash and cash
equivalents of which $15.5 million was outside the United States. Due to the
seasonal nature of Uniroyal Chemical's crop protection business, cash flows
typically are lower in the first half of the fiscal year than in the second half
of the year. Therefore, cash flow during the first six months of fiscal 1996 and
cash availability in the United States at March 31,1996, are not indicative of
cash flows and cash availabilities anticipated for the entire fiscal year.
Net cash used in operating activities for the six months of fiscal 1996 was
$7.5 million, or less than half of the $18.5 million used in the first six
months of fiscal 1995. Working capital reductions, particularly in inventories,
together with lower interest payments, more than offset the lower operating
results and higher tax payments.
The Companies used $15.0 million for capital expenditures during the six
months ended March 31,1996 as compared with $26.0 million in the first six
months of fiscal 1995. Other investing activities in fiscal 1996 includes the
payment of $2.0 million in January 1996 for inventory and certain other assets
related to the long-term manufacturing agreement with Negromex.
Net cash flows from financing activities for the six months ended March 31,
1996 of $16.6 million, primarily consisted of $35.7 million in net short-term
borrowings, including $50.0 million in borrowings under Uniroyal Chemical's
recently amended $150 million U.S. Credit Agreement. These additional
borrowings are mainly due to the seasonal cash nature of the Companies' crop
protection business. In addition, $19.9 million of long-term debt was retired,
including scheduled maturities of $9.9 million and $10.0 million of debt
repurchases the Companies' made in the open market in March 1996.
Future Liquidity
Management believes that projected cash flows from operations and the
Companies' current capital position will provide sufficient liquidity to meet
the Companies' anticipated short and long-term operating and capital
requirements. Factors supporting this belief include the Companies' operating
income growth and the reduction in interest expense to be realized as a result
of the current and anticipated repayments of long-term debt.
Recent Events
In April 1996, UCC announced that it has voluntarily cancelled registered
uses of its propargite miticide on certain crops in the United States. The
action was taken to reduce dietary exposure as requested by the United States
Environmental Protection Agency ("EPA"), using EPA's current risk assessment
model. Existing stocks of propargite will be relabeled by the Companies, and
new labels will be placed in the hands of growers and pesticide applicators.
Tests to confirm that propargite does not pose a dietary risk are continuing
under EPA approved protocols. The Companies estimate that the impact of this
voluntary action on fiscal 1996 annual pretax earnings will be approximately
$5.0 million.
13<PAGE>
<PAGE>
UCC entered into an Agreement and Plan of Merger, dated as of April 30,
1996 (the "Merger Agreement"), with Crompton & Knowles Corporation ("Crompton")
and Tiger Merger Corp. ("Tiger"). The merger agreement provides, among other
things, pursuant to the terms and subject to the conditions therein, that Tiger,
a wholly-owned subsidiary of Crompton, will merge with and into UCC (the
"Merger"). Under the terms of the Merger Agreement, each share of UCC's common
stock issued and outstanding immediately prior to the consummation of the Merger
will be converted into a number of shares of Crompton common stock equal to the
Exchange Ratio. The "Exchange Ratio" equals $15.00 divided by the average
closing price of Crompton's common stock on the New York Stock Exchange
Composite Tape for the twenty trading days ending with the third trading day
preceding the date of the mailing of the proxy statement/prospectus to UCC's and
Crompton's stockholders; provided that the Exchange Ratio shall not be less than
0.9091 nor more than 1.1111. Each share of UCC's Series A Cumulative Redeemable
Preferred Stock and Series B Preferred Stock issued and outstanding immediately
prior to the consummation of the Merger will be converted into and represent a
number of shares of Crompton common stock equal to the Exchange Ratio multiplied
by 6.667.
The Merger Agreement provides that UCC would be required to pay Crompton a
termination fee of $50 million if the Merger Agreement is terminated (i) under
certain circumstances following receipt of a proposal for a competing
transaction and a competing transaction is consummated within one year following
such termination or (ii) after UCC's determination to terminate the Merger
Agreement to pursue a competing transaction that would be more favorable to UCC
stockholders than the proposed Merger with Crompton.
The Merger is subject to the satisfaction or waiver of various conditions,
including approval by the stockholders of both UCC and Crompton, Hart-Scott-
Rodino and other regulatory approvals and availability of tax-free status and
pooling of interests accounting treatment. The Merger is anticipated to
close in the third calendar quarter of this year.
On May 8, 1996, UCC amended the Rights Agreement (the "Rights Agreement"),
dated April 29, 1993 and amended October 31, 1995, between UCC and Chemical Bank
("Amendment No. 2"). Amendment No. 2 provides that neither Crompton nor any of
its Affiliates (as defined in the Rights Agreement) shall become an Acquiring
Person (as defined in the Rights Agreement) as a result of the execution of the
Merger Agreement or consummation of the Merger (as defined in the Merger
Agreement) pursuant to the terms of the Merger Agreement.
A copy of the Merger Agreement is included herewith as Exhibit 2.
14<PAGE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
(i) Reference is made to page 16 of Uniroyal Chemical's Annual Report on Form
10-K for the fiscal year ended October 1, 1995, for information pertaining to
the settlement by Uniroyal Chemical as part of a group of settling defendants,
of certain personal injury and property damage suits arising from the
Combustion, Inc. site in Denham Springs, Louisiana. Final court approval of the
settlement and the dismissal of Uniroyal Chemical and the other settling
defendants from the suits became effective in April 1996.
15<PAGE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2 Agreement and Plan of Merger.
11 Statement re computation of per share earnings.
27 Financial data schedules.
(b) Reports on Form 8-K
During the quarterly period ended March 31, 1996, the registrants did
not file any reports on Form 8-K.
16<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
(Registrants)
Date: May 13, 1996 By /s/ Alexander R. Castaldi
----------------- -----------------------------
Vice President and
Chief Financial Officer
(Principal Financial Officer)
17<PAGE>
<PAGE>
UNIROYAL CHEMICAL CORPORATION
EXHIBIT 11 - COMPUTATION OF EARNINGS PER COMMON SHARE
For the three and six months ended March 31, 1996 and April 2, 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
NET INCOME APPLICABLE TO COMMON SHARES (primary and fully diluted)
<S> <C> <C> <C> <C>
Income before extraordinary charges $11,686 $93,836 $ 3,318 $83,300
Extraordinary charges (304) (8,279) (304) (8,279)
Preferred stock dividends earned (103) (101) (210) (194)
--------- --------- --------- ---------
Net income applicable
to common shares $11,279 $85,456 $ 2,804 $74,827
========= ========= ========= =========
PRIMARY EARNINGS PER SHARE
Weighted average shares
outstanding 24,279 12,945 24,269 11,685
Effect of warrants 100 400 103 455
Effect of stock options 65 102 61 102
Other dilutive securities 115 143 109 143
--------- --------- --------- ---------
Weighted average shares and
share equivalents outstanding 24,559 13,590 24,542 12,385
========= ========= ========= =========
Earnings per common share:
Income before extraordinary charges $ 0.47 $ 6.91 $ 0.13 $ 6.73
Extraordinary charges (0.01) (0.61) (0.01) (0.67)
Preferred stock dividends earned -- (0.01) (0.01) (0.02)
--------- --------- --------- ---------
Net income per common share $ 0.46 $ 6.29 $ 0.11 $ 6.04
========= ========= ========= =========
FULLY DILUTED EARNINGS PER SHARE
Weighted average shares
outstanding 24,279 12,945 24,269 11,685
Effect of warrants 100 400 105 455
Effect of stock options 71 102 72 102
Other dilutive securities 123 143 123 143
--------- --------- --------- ---------
Weighted average shares and
share equivalents outstanding 24,573 13,590 24,569 12,385
========= ========= ========= =========
Earnings per common share
Income before extraordinary charges $ 0.47 $ 6.91 $ 0.13 $ 6.73
Extraordinary charges (0.01) (0.61) (0.01) (0.67)
Preferred stock dividends earned -- (0.01) (0.01) (0.02)
--------- --------- --------- ---------
Net income per common share $ 0.46 $ 6.29 $ 0.11 $ 6.04
========= ========= ========= =========
</TABLE>
[FN]
Note: These calculations are submitted in accordance with Regulation S-K item
601(b)(11).
[FN]
(1) Effect of dilutive securities was determined using the treasury stock
method.
AGREEMENT AND PLAN OF MERGER
AMONG
CROMPTON & KNOWLES CORPORATION
("Crompton"),
TIGER MERGER CORP.
a wholly owned direct subsidiary of Crompton
("Subcorp"),
and
UNIROYAL CHEMICAL CORPORATION
("Uniroyal")
April 30, 1996<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF MERGER............................. 1
PRELIMINARY STATEMENTS................................... 1
AGREEMENT................................................ 1
ARTICLE I: THE MERGER................................... 1
1.1 The Merger................................... 1
1.2 Effective Time............................... 2
1.3 Effects of the Merger........................ 2
1.4 Certificate of Incorporation and Bylaws...... 2
1.5 Directors and Officers....................... 2
1.6 Additional Actions........................... 2
ARTICLE II: CONVERSION OF SECURITIES..................... 3
2.1 Conversion of Capital Stock.................. 3
2.2 Exchange Ratio; Fractional Shares............ 3
2.3 Exchange of Certificates..................... 4
(a) Exchange Agent........................... 4
(b) Exchange Procedures...................... 4
(c) Distributions with Respect to
Unexchanged Shares...................... 5
(d) No Further Ownership Rights in Uniroyal Common
Stock and Uniroyal Preferred Stock...... 5
(e) Termination of Exchange Fund............. 5
(f) No Liability............................. 6
(g) Investment of Exchange Fund.............. 6
2.4 Treatment of Stock Options and Warrants...... 6
2.5 Dissenter's Rights........................... 7
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF
CROMPTON AND SUBCORP...................... 8
3.1 Organization and Standing.................... 8
3.2 Subsidiaries................................. 8
3.3 Corporate Power and Authority................ 9
3.4 Capitalization of Crompton................... 9
3.5 Conflicts, Consents and Approval............. 9
3.6 Brokerage and Finder's Fees.................. 10
3.7 Opinion of Financial Advisor................. 10
3.8 Accounting Matters........................... 11
3.9 Employee Benefit Plans....................... 11
3.10 Crompton SEC Documents....................... 13
3.11 Taxes........................................ 13
3.12 Registration Statement....................... 14
3.13 Compliance with Law.......................... 14
3.14 Litigation................................... 14
<PAGE>
3.15 No Material Adverse Change................... 15
3.16 Board Meeting................................ 15
3.17 Undisclosed Liabilities...................... 15
3.18 Labor Relations.............................. 15
3.19 Operation of Crompton's Business............. 15
3.20 Permits; Compliance.......................... 16
3.21 Environmental Matters........................ 16
3.22 Uniroyal Stock Ownership..................... 16
3.23 Contracts.................................... 16
3.24 State Takeover Laws.......................... 17
3.25 Crompton Rights Agreement.................... 17
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF
UNIROYAL................................... 17
4.1 Organization and Standing.................... 17
4.2 Subsidiaries................................. 17
4.3 Corporate Power and Authority................ 18
4.4 Capitalization of Uniroyal................... 18
4.5 Conflicts; Consents and Approvals............ 19
4.6 No Material Adverse Change................... 19
4.7 Uniroyal SEC Documents....................... 19
4.8 Taxes........................................ 20
4.9 Compliance with Law.......................... 21
4.10 Registration Statement....................... 21
4.11 Litigation................................... 21
4.12 Brokerage and Finder's Fees; Expenses........ 21
4.13 Opinion of Financial Advisor................. 21
4.14 Accounting Matters........................... 21
4.15 Employee Benefit Plans....................... 22
4.16 Contracts.................................... 24
4.17 Labor Relations.............................. 24
4.18 Undisclosed Liabilities...................... 24
4.19 Operation of Uniroyal's Business............. 24
4.20 Permits; Compliance.......................... 24
4.21 Environmental Matters........................ 24
4.22 Crompton Stock Ownership..................... 25
4.23 Board Meeting................................ 25
4.24 DGCL Section 203 and State Takeover Laws..... 25
4.25 Uniroyal Rights Agreement.................... 25
ARTICLE V: COVENANTS OF THE PARTIES..................... 26
5.1 Mutual Covenants............................. 26
(a) General................................. 26
(b) HSR Act................................. 26
(c) Other Governmental Matters.............. 26
(d) Pooling-of-Interests.................... 26
(e) Tax-Free Treatment...................... 26
(f) Public Announcements.................... 26
(g) Access.................................. 26
5.2 Covenants of Crompton........................ 27
(a) Crompton Stockholders Meeting........... 27
(b) Preparation of Joint Proxy Statement.... 27
(c) Conduct of Crompton's Operations........ 27
(d) Indemnification......................... 27
(e) Directors' and Officers' Insurance...... 28
(f) Employee Benefits....................... 28
(g) Notification of Certain Matters......... 29
(h) No Solicitation......................... 29
(i) [Intentionally Omitted]................. 30
(j) Listing Application..................... 30
(k) Directors of Crompton................... 30
<PAGE>
(l) Affiliates of Crompton.................. 30
(m) Change in Control....................... 31
5.3 Covenants of Uniroyal........................ 31
(a) Uniroyal Stockholders Meeting........... 31
(b) Information for the Registration Statement and
Preparation of Joint Proxy Statement.... 31
(c) Conduct of Uniroyal's Operations........ 31
(d) No Solicitation......................... 33
(e) Affiliates of Uniroyal.................. 34
(f) Notification of Certain Matters......... 34
ARTICLE VI: CONDITIONS................................... 34
6.1 Mutual Conditions............................ 34
6.2 Conditions to Obligations of Uniroyal........ 36
6.3 Conditions to Obligations of Crompton and
Subcorp.................................... 36
ARTICLE VII: TERMINATION AND AMENDMENT................. 37
7.1 Termination.................................. 37
7.2 Effect of Termination........................ 38
7.3 Amendment.................................... 39
7.4 Extension; Waiver............................ 39
ARTICLE VIII: MISCELLANEOUS............................. 40
8.1 Survival of Representations and
Warranties................................. 40
8.2 Notices...................................... 40
8.3 Interpretation............................... 40
8.4 Counterparts................................. 41
8.5 Entire Agreement............................. 41
8.6 Third Party Beneficiaries.................... 41
8.7 Governing Law................................ 41
8.8 Specific Performance......................... 41
8.9 Assignment................................... 41
8.10 Expenses..................................... 41
8.11 Incorporation of Disclosure Schedules........ 42
8.12 Severability................................. 42
8.13 Subsidiaries................................. 42
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement")
is made and entered into as of the 30th day of April, 1996, by
and among Crompton & Knowles Corporation, a Massachusetts cor-
poration ("Crompton"), Tiger Merger Corp., a Delaware corpo-
ration and a wholly owned subsidiary of Crompton ("Subcorp"),
and Uniroyal Chemical Corporation, a Delaware corporation
("Uniroyal").
PRELIMINARY STATEMENTS
A. Crompton desires to acquire the specialty
chemical business and other businesses operated by Uniroyal
through the merger (the "Merger") of Subcorp with and into
Uniroyal, with Uniroyal as the surviving corporation, pursuant
to which each share of Uniroyal Common Stock (as defined in
Section 4.4) and each share of Uniroyal Preferred Stock (as
defined in Section 2.1(c)) outstanding at the Effective Time
(as defined in Section 1.2) will be converted into the right to
receive shares of Crompton Common Stock (as defined in Section
3.4) as more fully provided herein.
B. Uniroyal desires to combine its specialty
chemical and other businesses with the specialty chemical and
related businesses operated by Crompton and for the holders of
shares of Uniroyal Common Stock ("Uniroyal Stockholders") to
have a continuing equity interest in the combined Crompton/
Uniroyal businesses.
C. The parties intend that the Merger constitute a
tax-free "reorganization" within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
D. The parties intend that the Merger be accounted
for as a pooling-of-interests for financial reporting purposes.
E. The respective Boards of Directors of Crompton,
Subcorp and Uniroyal have determined the Merger in the manner
contemplated herein to be desirable and in the best interests
of their respective stockholders and, by resolutions duly
adopted, have approved and adopted this Agreement.
AGREEMENT
Now, therefore, in consideration of these premises
and the mutual and dependent promises hereinafter set forth,
the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the provisions of the
Delaware General Corporation Law (the "DGCL"), Subcorp shall be
merged with and into Uniroyal as soon as practicable following
<PAGE>
the satisfaction or waiver of the conditions set forth in
Article VI. Following the Merger, the separate corporate
existence of Subcorp shall cease and Uniroyal shall continue
its existence under the laws of the State of Delaware.
Uniroyal, in its capacity as the corporation surviving the
Merger, is hereinafter sometimes referred to as the "Surviving
Corporation."
1.2 Effective Time. The Merger shall be consummated
by filing with the Secretary of State of the State of Delaware
(the "Delaware Secretary of State") a certificate of merger
(the "Certificate of Merger") in such form as is required by
and executed in accordance with Section 251(c) of the DGCL.
The Merger shall become effective (the "Effective Time") when
the Certificate of Merger has been filed with the Delaware Sec-
retary of State or at such later time as shall be specified in
the Certificate of Merger. Prior to the filing referred to in
this Section 1.2, a closing (the "Closing") shall be held at
the offices of Crompton, One Station Place, Metro Center,
Stamford, Connecticut, or such other place as the parties may
agree on the date (the "Closing Date") specified by the
parties, which date shall be as soon as practicable, but in any
event within ten business days, following the date upon which
all conditions set forth in Article VI hereof have been
satisfied or waived or such other time as the parties may
mutually agree.
1.3 Effects of the Merger. The Merger shall have
the effects set forth in Section 259 of the DGCL.
1.4 Certificate of Incorporation and Bylaws. The
Certificate of Merger shall provide that at the Effective Time
(i) the Certificate of Incorporation of the Surviving Corpora-
tion as in effect immediately prior to the Effective Time shall
be amended as of the Effective Time so as to contain the provi-
sions, and only the provisions, contained immediately prior
thereto in the Certificate of Incorporation of Subcorp, except
for Article I thereof which shall continue to read "The name of
the corporation is 'Uniroyal'", and (ii) the By-laws of
Uniroyal in effect immediately prior to the Effective Time
shall be the By-laws of the Surviving Corporation, amended as
of the Effective Time so as to contain the provisions, and only
the provisions, contained in the Bylaws of Subcorp immediately
prior thereto; in each case until amended in accordance with
applicable law.
1.5 Directors and Officers. From and after the Ef-
fective Time, the officers of Uniroyal shall be the officers of
the Surviving Corporation and the directors of Subcorp shall be
the directors of the Surviving Corporation, in each case until
their respective successors are duly elected and qualified.
Prior to the Effective Time, Uniroyal shall deliver to Crompton
evidence satisfactory to Crompton of the resignations of the
directors of Uniroyal, such resignations to be effective as of
the Effective Time.
1.6 Additional Actions. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be
advised that any further deeds, assignments or assurances in
law or any other acts are necessary or desirable to carry out
<PAGE>
the provisions of this Agreement, the proper officers and di-
rectors of Crompton and Uniroyal shall take all such necessary
action.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. At the Effective
Time, by virtue of the Merger and without any action on the
part of Crompton, Subcorp or Uniroyal:
(a) Each share of common stock, $0.01 par value, of
Subcorp issued and outstanding immediately prior to the
Effective Time shall beconverted into one share of common
stock, $0.01 par value, of the Surviving Corporation.
Such newly issued shares shall thereafter constitute all
of the issued and outstanding capital stock of the Surviv-
ing Corporation.
(b) Each share of Uniroyal Common Stock (other than
shares to be cancelled in accordance with Section 2.1(d))
issued and outstanding immediately prior to the Effective
Time shall be converted into and represent a number of
shares of Crompton Common Stock equal to the Exchange
Ratio (as defined below).
(c) Each share of the Series A Cumulative Redeemable
Preferred Stock, $0.01 par value per share, of Uniroyal
(the "Uniroyal Series A Preferred Stock") issued and
outstanding immediately prior to the Effective Time (other
than shares to be cancelled in accordance with Section
2.1(d) and other than Dissenting Shares covered by Section
2.5) shall be converted into and represent a number of
shares of Crompton Common Stock equal to the Exchange
Ratio multiplied by 6.667. Each share of the Series B
Preferred Stock, $0.01 par value per share, of Uniroyal
(the "Uniroyal Series B Preferred Stock," and, together
with the Uniroyal Series A Preferred Stock, the "Uniroyal
Preferred Stock") issued and outstanding immediately prior
to the Effective Time (other than shares to be cancelled
in accordance with Section 2.1(d) and other than
Dissenting Shares covered by Section 2.5) shall be
converted into and represent a number of shares of
Crompton Common Stock equal to the Exchange Ratio
multiplied by 6.667.
(d) Each share of capital stock of Uniroyal held in
the treasury of Uniroyal or held by Crompton or any of its
subsidiaries shall be cancelled and retired and no payment
shall be made in respect thereof.
2.2 Exchange Ratio; Fractional Shares. The "Ex-
change Ratio" shall equal $15.00 divided by the "Acquiror
Transaction Value" (as defined below), rounded to four decimal
places; provided, however, that notwithstanding the foregoing,
the Exchange Ratio shall not be less than 0.9091 nor more than
1.1111. The term "Acquiror Transaction Value" shall mean the
average closing price on the New York Stock Exchange ("NYSE")
<PAGE>
Composite Tape of Crompton Common Stock for the twenty (20) New
York Stock Exchange trading days ending with the third New York
Stock Exchange trading day immediately preceding the date of
mailing of the Joint Proxy Statement (as defined in Section
3.12). No certificates for fractional shares of Crompton
Common Stock shall be issued as a result of the conversions
provided for in Section 2.1(b) and in Section 2.1(c). To the
extent that an outstanding share of Uniroyal Common Stock or
Uniroyal Preferred Stock would otherwise have become a
fractional share of Crompton Common Stock, the holder thereof,
upon presentation of such fractional interest represented by an
appropriate certificate for Uniroyal Common Stock or Uniroyal
Preferred Stock to the Exchange Agent pursuant to Section 2.3,
shall be entitled to receive a cash payment therefor in an
amount equal to the value (determined with reference to the
closing price of Crompton Common Stock on the NYSE Composite
Tape on the last full trading day immediately prior to the
Effective Time) of such fractional interest. Such payment with
respect to fractional shares is merely intended to provide a
mechanical rounding off of, and is not a separately bargained
for, consideration. If more than one certificate representing
shares of Uniroyal Common Stock or Uniroyal Preferred Stock
shall be surrendered for the account of the same holder, the
number of shares of Crompton Common Stock for which cer-
tificates have been surrendered shall be computed on the basis
of the aggregate number of shares represented by the
certificates so surrendered. In the event that prior to the
Effective Time Crompton shall declare a stock dividend or other
distribution payable in shares of Crompton Common Stock or
securities convertible into shares of Crompton Common Stock, or
effect a stock split, reclassification, combination or other
change with respect to Crompton Common Stock, the Exchange
Ratio set forth in this Section 2.2 shall be adjusted to
reflect such dividend, distribution, stock split, reclas-
sification, combination or other change.
2.3 Exchange of Certificates.
(a) Exchange Agent. At or prior to the Effective
Time, Crompton shall deposit with an exchange agent designated
by Crompton and reasonably acceptable to Uniroyal (the "Ex-
change Agent"), for the benefit of Uniroyal Stockholders and
holders of Uniroyal Preferred Stock, for exchange in accordance
with this Section 2.3, certificates representing shares of
Crompton Common Stock issuable pursuant to Section 2.1 in
exchange for outstanding shares of Uniroyal Common Stock and
Uniroyal Preferred Stock and shall from time-to-time deposit
cash in an amount reasonably expected to be paid pursuant to
Section 2.2 (such shares of Crompton Common Stock and cash, to-
gether with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. Promptly and, in any
event, within three (3) business days after the Effective Time,
Crompton shall cause the Exchange Agent to mail to each holder
of record of a certificate or certificates (the "Certificates")
which immediately prior to the Effective Time represented out-
standing shares of Uniroyal Common Stock or Uniroyal Preferred
Stock whose shares were converted into the right to receive
shares of Crompton Common Stock pursuant to Section 2.1(b) or
<PAGE>
Section 2.1(c) (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form
and have such other provisions as Crompton may reasonably
specify) and (ii) instructions for effecting the surrender of
the Certificates in exchange for certificates representing
shares of Crompton Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together
with a duly executed letter of transmittal, the holder of such
Certificate shall be entitled to receive in exchange therefor
(x) a certificate representing that number of shares of
Crompton Common Stock which such holder has the right to
receive pursuant to Section 2.1 and (y) a check representing
the amount of cash in lieu of fractional shares, if any, and
unpaid dividends and distributions, if any, which such holder
has the right to receive pursuant to the provisions of this
Article II, after giving effect to any required withholding
tax, and the shares represented by the Certificate so
surrendered shall forthwith be cancelled. No interest will be
paid or accrued on the cash in lieu of fractional shares, if
any, and unpaid dividends and distributions, if any, payable to
holders of shares of Uniroyal Common Stock or Uniroyal
Preferred Stock. In the event of a transfer of ownership of
shares of Uniroyal Common Stock or Uniroyal Preferred Stock
which is not registered on the transfer records of Uniroyal, a
certificate representing the proper number of shares of
Crompton Common Stock, together with a check for the cash to be
paid in lieu of fractional shares, if any, and unpaid dividends
and distributions, if any, may be issued to such transferee if
the Certificate representing such shares of Uniroyal Common
Stock or Uniroyal Preferred Stock held by such transferee is
presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.3, each Certifi-
cate shall be deemed at any time after the Effective Time to
represent only the right to receive upon surrender a certifi-
cate representing shares of Crompton Common Stock and cash in
lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, as provided in this Article II.
(c) Distributions with Respect to Unexchanged
Shares. Notwithstanding any other provisions of this Agree-
ment, no dividends or other distributions declared or made af-
ter the Effective Time with respect to shares of Crompton
Common Stock having a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate,
and no cash payment in lieu of fractional shares shall be paid
to any such holder, until the holder shall surrender such
Certificate as provided in this Section 2.3. Subject to the
effect of Applicable Laws (as defined in Section 3.13),
following surrender of any such Certificate, there shall be
paid to the holder of the certificates representing whole
shares of Crompton Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount
of dividends or other distributions with a record date after
the Effective Time theretofore payable with respect to such
whole shares of Crompton Common Stock and not paid, less the
amount of any withholding taxes which may be required thereon,
<PAGE>
and (ii) at the appropriate payment date subsequent to
surrender, the amount of dividends or other distributions with
a record date after the Effective Time but prior to surrender
and a payment date subsequent to surrender payable with respect
to such whole shares of Crompton Common Stock, less the amount
of any withholding taxes which may be required thereon.
(d) No Further Ownership Rights in Uniroyal Common
Stock and Uniroyal Preferred Stock. All shares of Crompton
Common Stock issued upon surrender of Certificates in
accordance with the terms hereof (including any cash paid
pursuant to this Article II) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such
shares of Uniroyal Common Stock or Uniroyal Preferred Stock
represented thereby, and from and after the Effective Time
there shall be no further registration of transfers on the
stock transfer books of Uniroyal of shares of Uniroyal Common
Stock or Uniroyal Preferred Stock. If, after the Effective
Time, Certificates are presented to the Surviving Corporation
for any reason, they shall be cancelled and exchanged as pro-
vided in this Section 2.3.
(e) Termination of Exchange Fund. Any portion of
the Exchange Fund which remains undistributed to Uniroyal
Stockholders and holders of Uniroyal Preferred Stock for one
(1) year after the Effective Time shall be delivered to
Crompton or the Surviving Corporation, upon demand thereby, and
holders of shares of Uniroyal Common Stock or Uniroyal Pre-
ferred Stock who have not theretofore complied with this Sec-
tion 2.3 shall thereafter look only to Crompton for payment of
any claim to shares of Crompton Common Stock, cash in lieu of
fractional shares thereof, or dividends or distributions, if
any, in respect thereof.
(f) No Liability. None of Crompton, the Surviving
Corporation or the Exchange Agent shall be liable to any person
in respect of any shares of Uniroyal Common Stock or Uniroyal
Preferred Stock (or, in each case, dividends or distributions
with respect thereto) or cash from the Exchange Fund delivered
to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Certificates shall
not have been surrendered prior to seven years after the Ef-
fective Time of the Merger (or immediately prior to such ear-
lier date on which any cash, any cash in lieu of fractional
shares or any dividends or distributions with respect to whole
shares of Uniroyal Common Stock or Uniroyal Preferred Stock in
respect of such Certificate would otherwise escheat to or be-
come the property of any Governmental Authority (as defined in
Section 3.5)), any such cash, dividends or distributions in
respect of such Certificate shall, to the extent permitted by
Applicable Law, become the property of Crompton, free and clear
of all claims or interest of any person previously entitled
thereto.
(g) Investment of Exchange Fund. The Exchange Agent
shall invest any cash included in the Exchange Fund, as di-
rected by Crompton, on a daily basis. Any interest and other
income resulting from such investments shall be paid to
Crompton upon termination of the Exchange Fund pursuant to
Section 2.3(e).
<PAGE>
2.4 Treatment of Stock Options and Warrants.
(a) Prior to the Effective Time, Crompton and
Uniroyal shall take all such actions as may be necessary to
cause each unexpired and unexercised option or right to
purchase shares of Uniroyal Common Stock under stock option
plans and stock purchase plans of Uniroyal in effect on the
date hereof which has been granted to current or former
directors, officers, employees, consultants or independent
contractors of Uniroyal or its subsidiaries by Uniroyal (each,
a "Uniroyal Option") to be automatically converted at the
Effective Time into an option (a "Crompton Exchange Option") to
purchase that number of shares of Crompton Common Stock equal
to the number of shares of Uniroyal Common Stock issuable
immediately prior to the Effective Time upon exercise of the
Uniroyal Option (without regard to actual restrictions on
exercisability) multiplied by the Exchange Ratio, with an exer-
cise price equal to the exercise price which existed under the
corresponding Uniroyal Option divided by the Exchange Ratio,
and with other terms and conditions that are the same as the
terms and conditions of such Uniroyal Option immediately before
the Effective Time (including, without limitation, the
acceleration of the exercisability of each such option upon the
consummation of the Merger and the length of the period of
continuing exercisability of each such option after any termi-
nation of the employment of the respective optionee); provided
that with respect to any Uniroyal Option that is an "incentive
stock option" within the meaning of Section 422 of the Code,
the foregoing conversion shall be carried out in a manner sat-
isfying the requirements of Section 424(a) of the Code. In
connection with the issuance of Crompton Exchange Options,
Crompton shall (i) reserve for issuance the number of shares of
Crompton Common Stock that will become subject to Crompton
Exchange Options pursuant to this Section 2.4 and (ii) from and
after the Effective Time, upon exercise of Crompton Exchange
Options, make available for issuance all shares of Crompton
Common Stock covered thereby, subject to the terms and
conditions applicable thereto. A list of certain optionees
whose termination will be treated as "for Good Reason" or
"without Cause" (as defined in the Uniroyal Options) in deter-
mining the length of the post-termination period of continuing
exercisability has been agreed upon by Crompton and Uniroyal
and provided to Crompton by Uniroyal on the date hereof.
Crompton shall cause the committee administering its stock
incentive plan to grant Crompton Exchange Options in accordance
with this Section 2.4.
(b) The Surviving Corporation shall take all such
actions as may be necessary to cause each unexpired and
unexercised warrant to purchase shares of Uniroyal Common Stock
under the Warrant Agreement, dated as of October 30, 1989,
between Uniroyal and Avery, Inc. (each, a "Uniroyal Warrant")
to be converted into a warrant (a "Crompton Exchange Warrant")
to purchase that number of shares of Crompton Common Stock
equal to the number of shares of Uniroyal Common Stock issuable
immediately prior to the Effective Time upon exercise of the
Uniroyal Warrant (without regard to actual restrictions on
exercisability) multiplied by the Exchange Ratio, with an exer-
cise price equal to the exercise price which existed under the
<PAGE>
corresponding Uniroyal Warrant divided by the Exchange Ratio,
and with other terms and conditions that are the same as the
terms and conditions of such Uniroyal Warrant immediately
before the Effective Time. In connection with the issuance of
Crompton Exchange Warrants, Crompton shall (i) reserve for
issuance the number of shares of Crompton Common Stock that
will become subject to Crompton Exchange Warrants pursuant to
this Section 2.4 and (ii) from and after the Effective Time,
upon exercise of Crompton Exchange Warrants, make available for
issuance all shares of Crompton Common Stock covered thereby,
subject to the terms and conditions applicable thereto.
(c) Uniroyal agrees to issue treasury shares of
Uniroyal, to the extent available, upon the exercise of
Uniroyal Options or Uniroyal Warrants prior to the Effective
Time.
(d) Crompton agrees to file with the Securities and
Exchange Commission (the "Commission") as soon as reasonably
practicable after the Closing Date a registration statement on
Form S-8 or other appropriate form under the Securities Act to
register shares of Crompton Common Stock issuable upon exercise
of the Crompton Exchange Options and use its reasonable best
efforts to cause such registration statement to remain
effective until the exercise or expiration of such options.
2.5 Dissenter's Rights. Notwithstanding anything in
this Agreement to the contrary, Uniroyal Preferred Stock
outstanding immediately prior to the Effective Time and held by
a holder who has delivered a written demand for appraisal of
such shares in accordance with Section 262 of the DGCL, if such
Section 262 provides for appraisal rights for such Uniroyal
Preferred Stock in the Merger ("Dissenting Shares"), shall not
be converted as provided in Section 2.1 hereof, unless and
until such holder fails to perfect or effectively withdraws or
otherwise loses his right to appraisal and payment under the
DGCL. If, after the Effective Time, any such holder fails to
perfect or effectively withdraws or loses his right to
appraisal, such Dissenting Shares shall thereupon be treated as
if they had been converted as of the Effective Time into the
right to receive the Crompton Common Stock, as provided in
Section 2.1 hereof, and to which such holder is entitled,
without interest or dividends thereon. Uniroyal shall give
Crompton prompt notice of any demands received by Uniroyal for
appraisal of Uniroyal Preferred Stock, and, prior to the
Effective Time, Crompton shall have the right to participate in
all negotiations and proceedings with respect to such demands.
Prior to the Effective Time, Uniroyal shall not, except with
the prior written consent of Crompton, make any payment with
respect to, or offer to settle, any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CROMPTON AND SUBCORP
In order to induce Uniroyal to enter into this Agree-
ment, Crompton and Subcorp hereby represent and warrant to
Uniroyal that the statements contained in this Article III are
true, correct and complete.
<PAGE>
3.1 Organization and Standing. Each of Crompton and
its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its state of
incorporation with full power and authority (corporate and
other) to own, lease, use and operate its properties and to
conduct its business as and where now owned, leased, used,
operated and conducted. Each of Crompton and its subsidiaries
is duly qualified to do business and in good standing in each
jurisdiction in which the nature of the business conducted by
it or the property it owns, leases or operates makes such
qualification necessary, except where the failure to be so
qualified or in good standing in such jurisdiction would not
have a material adverse effect on Crompton. Neither Crompton
nor any of its subsidiaries is in default in the performance,
observance or fulfillment of any provision of, in the case of
Crompton, its Articles of Organization, as amended and restated
(the "Crompton Articles"), or By-Laws, or, in the case of any
subsidiary of Crompton, its Certificate of Incorporation, By-
laws or other organizational documents.
3.2 Subsidiaries. As of the date hereof, other than
immaterial interests, Crompton does not own, directly or indi-
rectly, any equity or other ownership interest in any corpora-
tion, partnership, joint venture or other entity or enterprise,
except as set forth in Section 3.2 to the disclosure schedule
(the "Crompton Disclosure Schedule") delivered by Crompton to
Uniroyal and dated the date hereof. Section 3.2 to the
Crompton Disclosure Schedule sets forth as to each subsidiary
of Crompton: (i) its name and jurisdiction of incorporation or
organization, (ii) its authorized capital stock or share
capital, and (iii) the number of issued and outstanding shares
of its capital stock or share capital. Except as set forth in
Section 3.2 to the Crompton Disclosure Schedule, Crompton owns,
directly or indirectly, each of the outstanding shares of
capital stock (or other ownership interests having by their
terms ordinary voting power to elect a majority of directors or
others performing similar functions with respect to such
subsidiary) of each of Crompton's subsidiaries. Except as set
forth in Section 3.2 to the Crompton Disclosure Schedule, each
of the outstanding shares of capital stock of each of
Crompton's subsidiaries is duly authorized, validly issued,
fully paid and nonassessable, and is owned, directly or indi-
rectly, by Crompton free and clear of all liens, pledges,
security interests, claims or other encumbrances, other than
liens imposed by law which could not reasonably be expected to
have, in the aggregate, a material adverse effect on Crompton.
Other than as set forth in Section 3.2 to the Crompton
Disclosure Schedule, there are no outstanding subscriptions,
options, warrants, puts, calls, agreements, understandings,
claims or other commitments or rights of any type relating to
the issuance, sale or transfer of any securities of any
subsidiary of Crompton, nor are there outstanding any securi-
ties which are convertible into or exchangeable for any shares
of capital stock of any subsidiary of Crompton; and no sub-
sidiary of Crompton has any obligation of any kind to issue any
additional securities or to pay for securities of any
subsidiary of Crompton or any predecessor thereof.
3.3 Corporate Power and Authority. Each of Crompton
<PAGE>
and Subcorp has all requisite corporate power and authority to
enter into this Agreement and, subject to authorization of the
Merger and the transactions contemplated hereby by the holders
of Crompton Common Stock ("Crompton Stockholders"), to
consummate the transactions contemplated by this Agreement.
The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part
of each of Crompton and Subcorp, subject to authorization of
the Merger and the transactions contemplated hereby by Crompton
Stockholders. This Agreement has been duly executed and
delivered by each of Crompton and Subcorp, and constitutes the
legal, valid and binding obligation of each of Subcorp and
Crompton enforceable against each of them in accordance with
its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights
and general principles of equity.
3.4 Capitalization of Crompton. As of the date
hereof, Crompton's authorized capital stock consisted solely of
(a) 250,000,000 shares of common stock, $0.10 par value per
share ("Crompton Common Stock"), of which (i) 48,026,751 shares
were issued and outstanding, (ii) 5,334,321 shares were issued
and held in treasury (which does not include the shares re-
served for issuance as set forth in clause (a)(iii) below) and
(iii) 2,601,077 shares were reserved for issuance upon the
exercise or conversion of options, warrants or convertible
securities granted or issuable by Crompton, and (b) 250,000
shares of preferred stock, without par value, none of which was
issued and outstanding or reserved for issuance and 67,000
shares of which are designated as "Series A Junior Participat-
ing Preferred Stock." Each outstanding share of Crompton
capital stock is, and all shares of Crompton Common Stock to be
issued in connection with the Merger will be, duly authorized
and validly issued, fully paid and nonassessable, and each out-
standing share of Crompton capital stock has not been, and all
shares of Crompton Common Stock to be issued in connection with
the Merger will not be, issued in violation of any preemptive
or similar rights. As of the date hereof, other than as set
forth in the first sentence hereof, in the Crompton SEC
Documents (as defined in Section 3.10) or in Section 3.4 to the
Crompton Disclosure Schedule, there are no outstanding
subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any
type relating to the issuance, sale or transfer by Crompton of
any securities of Crompton, nor are there outstanding any
securities which are convertible into or exchangeable for any
shares of capital stock of Crompton; and Crompton has no obli-
gation of any kind to issue any additional securities or to pay
for securities of Crompton or any predecessor. Crompton has no
outstanding bonds, debentures, notes or other similar
obligations the holders of which have the right to vote
generally with holders of Crompton Common Stock.
3.5 Conflicts, Consents and Approval. Neither the
execution and delivery of this Agreement by Crompton or Subcorp
nor the consummation of the transactions contemplated hereby
will:
(a) conflict with, or result in a breach of any pro-
<PAGE>
vision of the Crompton Articles or By-Laws of Crompton or
the Certificate of Incorporation or Bylaws of Subcorp;
(b) except as disclosed to Uniroyal on the date
hereof, violate, or conflict with, or result in a breach
of any provision of, or constitute a default (or an event
which, with the giving of notice, the passage of time or
otherwise, would constitute a default) under, or entitle
any party (with the giving of notice, the passage of time
or otherwise) to terminate, accelerate, modify or call a
default under, or result in the termination, acceleration
or cancellation of, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the
properties or assets of Crompton or any of its subsidiar-
ies under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, li-
cense, contract, undertaking, agreement, lease or other
instrument or obligation to which Crompton or any of its
subsidiaries is a party;
(c) violate any order, writ, injunction, decree,
statute, rule or regulation, applicable to Crompton or any
of its subsidiaries or their respective properties or as-
sets; or
(d) require any action or consent or approval of, or
review by, or registration or filing by Crompton or any of
its affiliates with any third party or any court, arbitral
tribunal, administrative agency or commission or other
governmental or regulatory body, agency, instrumentality
or authority (a "Governmental Authority"), other than (i)
authorization of the Merger and the transactions contem-
plated hereby by Crompton Stockholders, (ii)
authorization for inclusion of the shares of Crompton
Common Stock to be issued in the Merger and the
transactions contemplated hereby on the NYSE, subject to
official notice of issuance, (iii) actions required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated there-
under (the "HSR Act"), and (iv) registrations or other ac-
tions required under federal and state securities laws as
are contemplated by this Agreement;
except for any of the foregoing that are set forth in Section
3.5 to the Crompton Disclosure Schedule and, in the case of
(b), (c) and (d), for any of the foregoing that would not,
individually or in the aggregate, have a material adverse
effect on Crompton.
3.6 Brokerage and Finder's Fees. Except for
Crompton's obligation to Salomon Brothers Inc ("Salomon") (a
copy of the written agreement relating to such obligation hav-
ing previously been provided to Uniroyal), Crompton has not in-
curred and will not incur, directly or indirectly, any
brokerage, finder's or similar fee in connection with the
transactions contemplated by this Agreement. Other than the
foregoing obligation to Salomon, Crompton is not aware of any
claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the
negotiation of this Agreement or in connection with the
transactions contemplated hereby. A bona fide written estimate
<PAGE>
of the aggregate amount of all fees and expenses expected to be
paid by Crompton to all accountants and investment bankers in
connection with the Merger has been provided to Uniroyal on the
date hereof.
3.7 Opinion of Financial Advisor. Crompton has
received the opinion of Salomon to the effect that, as of the
date hereof, the Exchange Ratio is fair to Crompton from a
financial point of view.
3.8 Accounting Matters. To the best knowledge of
Crompton and except as set forth in Section 3.8 to the Crompton
Disclosure Schedule, neither Crompton nor any of its affiliates
has taken or agreed to take any action that (without giving
effect to any actions taken or agreed to be taken by Uniroyal
or any of its affiliates) would prevent Crompton from ac-
counting for the business combination to be effected by the
Merger as a pooling-of-interests for financial reporting pur-
poses in accordance with Accounting Principles Board Opinion
No. 16, the interpretative releases issued pursuant thereto,
and the pronouncements of the Commission thereon.
3.9 Employee Benefit Plans.
(a) For purposes of this Section 3.9, the following
terms have the definitions given below:
"Controlled Group Liability" means any and all
liabilities under (i) Title IV of ERISA, (ii) section
302 of ERISA, (iii) sections 412 and 4971 of the
Code, (iv) the continuation coverage requirements of
section 601 et seq. of ERISA and section 4980B of the
Code, and (v) corresponding or similar provisions of
foreign laws or regulations, in each case other than
pursuant to the Crompton Plans.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and the regulations
thereunder.
"ERISA Affiliate" means, with respect to any
entity, trade or business, any other entity, trade or
business that is a member of a group described in
Section 414(b), (c), (m) or (o) of the Code or Sec-
tion 4001(b)(1) of ERISA that includes the first en-
tity, trade or business, or that is a member of the
same "controlled group" as the first entity, trade or
business pursuant to Section 4001(a)(14) of ERISA.
"Crompton Plans" means all employee benefit
plans, programs, policies, practices, and other
arrangements providing benefits to any employee or
former employee or beneficiary or dependent thereof,
whether or not written, and whether covering one
person or more than one person, sponsored or
maintained by Crompton or any of its subsidiaries or
to which Crompton or any of its subsidiaries
contributes or is obligated to contribute. Without
limiting the generality of the foregoing, the term
"Crompton Plans" includes all employee welfare ben-
<PAGE>
efit plans within the meaning of Section 3(1) of
ERISA and all employee pension benefit plans within
the meaning of Section 3(2) of ERISA.
(b) Section 3.9 to the Crompton Disclosure Schedule
lists all Crompton Plans. With respect to each Crompton Plan,
Crompton has made available to Uniroyal a true, correct and
complete copy of: (i) each writing constituting a part of such
Crompton Plan, including without limitation all plan documents,
benefit schedules, trust agreements, and insurance contracts
and other funding vehicles; (ii) the most recent Annual Report
(Form 5500 Series) and accompanying schedule, if any; (iii) the
current summary plan description, if any; (iv) the most recent
annual financial report, if any; and (v) the most recent
determination letter from the IRS, if any.
(c) The Internal Revenue Service has issued a favor-
able determination letter with respect to each Crompton Plan
that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code (a "Qualified Crompton Plan") and
there are no existing circumstances nor any events that have
occurred that could adversely affect the qualified status of
any Qualified Crompton Plan or the related trust.
(d) All contributions required to be made to any
Crompton Plan by Applicable Laws or by any plan document or
other contractual undertaking, and all premiums due or payable
with respect to insurance policies funding any Crompton Plan,
for any period through the date hereof have been timely made or
paid in full and through the Closing Date will be timely made
or paid in full or, to the extent not required to be made or
paid on or before the date hereof or the Closing Date, as
applicable, have been or will be fully reflected in the
Crompton SEC Documents filed or to be filed with the
Commission.
(e) Crompton and its subsidiaries have complied, and
are now in compliance, in all material respects, with all pro-
visions of ERISA, the Code and all laws and regulations ap-
plicable to the Crompton Plans. There is not now, and there
are no existing, circumstances that could give rise to, any
requirement for the posting of security with respect to a
Crompton Plan or the imposition of any lien on the assets of
Crompton or any of its subsidiaries under ERISA or the Code.
(f) Except as set forth in Section 3.9(f) to the
Crompton Disclosure Schedule, no Crompton Plan is subject to
Title IV or Section 302 of ERISA or Section 412 or 4971 of the
Code. No Crompton Plan is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA (a "Multiemployer Plan")
or a plan that has two or more contributing sponsors at least
two of whom are not under common control, within the meaning of
Section 4063 of ERISA (a "Multiple Employer Plan"), nor has
Crompton or any of its subsidiaries or any of their respective
ERISA Affiliates, at any time within five years before the date
hereof, contributed to or been obligated to contribute to any
Multiemployer Plan or Multiple Employer Plan.
(g) There does not now exist, and there are no ex-
isting, circumstances that could result in, any Controlled
<PAGE>
Group Liability that would be a liability of Crompton or any of
its subsidiaries following the Closing. Without limiting the
generality of the foregoing, neither Crompton nor any of its
subsidiaries nor any of their respective ERISA Affiliates has
engaged in any transaction described in Section 4069 or Section
4204 of ERISA.
(h) Except as disclosed in the Crompton SEC
Documents filed with the Commission as of the date hereof or as
disclosed to Uniroyal on the date hereof and except for health
continuation coverage as required by Section 4980B of the Code
or Part 6 of Title I of ERISA, neither Crompton nor any of its
subsidiaries has any liability for life, health, medical or
other welfare benefits to former employees or beneficiaries or
dependents thereof.
(i) Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby will result in, cause the accelerated vesting or deliv-
ery of, or increase the amount or value of, any payment or ben-
efit to any employee of Crompton or any of its subsidiaries.
Without limiting the generality of the foregoing and except as
set forth in Section 3.9(i) to the Crompton Disclosure
Schedule, no amount paid or payable by Crompton or any of its
subsidiaries in connection with the transactions contemplated
hereby either solely as a result thereof or as a result of such
transactions in conjunction with any other events will be an
"excess parachute payment" within the meaning of Section 280G
of the Code.
(j) There are no pending or threatened claims (other
than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the
Crompton Plans, any fiduciaries thereof with respect to their
duties to the Crompton Plans or the assets of any of the trusts
under any of the Crompton Plans which could reasonably be ex-
pected to result in any material liability of Crompton or any
of its subsidiaries to the Pension Benefit Guaranty
Corporation, the Department of Treasury, the Department of
Labor or any Multiemployer Plan.
3.10 Crompton SEC Documents. Each of Crompton and
its subsidiaries has timely filed with the Commission all
forms, reports, schedules, statements, exhibits and other
documents required to be filed by it since December 31, 1992
under the Securities Exchange Act of 1934, as amended (together
with the rules and regulations thereunder, the "Exchange Act")
or the Securities Act (such documents, as supplemented and
amended since the time of filing, collectively, the "Crompton
SEC Documents"). The Crompton SEC Documents, including, with-
out limitation, any financial statements or schedules included
therein, at the time filed (and, in the case of registration
statements and proxy statements, on the dates of effectiveness
and the dates of mailing, respectively) (a) did not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances un-
der which they were made, not misleading, and (b) complied in
all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be. The
<PAGE>
financial statements of Crompton included in the Crompton SEC
Documents at the time filed (and, in the case of registration
statements and proxy statements, on the date of effectiveness
and the date of mailing, respectively) complied as to form in
all material respects with applicable accounting requirements
and with the published rules and regulations of the Commission
with respect thereto, were prepared in accordance with gener-
ally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated
in the notes thereto or, in the case of unaudited statements,
as permitted by Form 10-Q of the Commission), and fairly
present (subject in the case of unaudited statements to normal,
recurring and year-end audit adjustments) in all material
respects the consolidated financial position of Crompton as at
the dates thereof and the consolidated results of its op-
erations and cash flows for the periods then ended.
3.11 Taxes. Except as set forth in Section 3.11 to
the Crompton Disclosure Schedule, (i) Crompton has duly filed
all federal, and material state, local and foreign income,
franchise, excise, real and personal property and other tax
returns and reports (including, but not limited to, those filed
on a consolidated, combined or unitary basis) required to have
been filed by Crompton prior to the date hereof, (ii) all of
the foregoing returns and reports are true and correct in all
material respects, and Crompton has paid or, prior to the
Effective Time, will pay all taxes required to be paid in
respect of the periods covered by such returns or reports to
any federal, state, foreign, local or other taxing authority,
(iii) Crompton has paid or made adequate provision (in
accordance with generally accepted accounting principles) in
the financial statements of Crompton included in the Crompton
SEC Documents for all taxes payable in respect of all periods
ending on or prior to December 31, 1995, (iv) neither Crompton
nor any of its subsidiaries will have any material liability
for any taxes in excess of the amounts so paid or reserves so
established and neither Crompton nor any of its subsidiaries is
delinquent in the payment of any material tax, assessment or
governmental charge and none of them has requested any exten-
sion of time within which to file any returns in respect of any
fiscal year which have not since been filed, (v) no
deficiencies for any tax, assessment or governmental charge
have been proposed in writing, asserted or assessed (tenta-
tively or definitely), in each case, by any taxing authority,
against Crompton or any of its subsidiaries for which there are
not adequate reserves (in accordance with generally accepted
accounting principles), (vi) as of the date of this Agreement,
there are no pending requests for waivers of the time to assess
any such tax, other than those made in the ordinary course and
for which payment has been made or there are adequate reserves
(in accordance with generally accepted accounting principles),
(vii) the federal income tax returns of Crompton and its
subsidiaries have been audited by the Internal Revenue Service
through the fiscal year ending December 31, 1991, and (viii)
Crompton has not filed an election under Section 341(f) of the
Code to be treated as a consenting corporation. For purposes
of this Agreement, the term "tax" shall include all federal,
state, local and foreign taxes including interest and penalties
thereon.
<PAGE>
3.12 Registration Statement. None of the informa-
tion provided by Crompton or any of its subsidiaries for
inclusion in the registration statement on Form S-4 to be filed
with the Commission by Crompton under the Securities Act,
including the prospectus (as amended, supplemented or modified,
the "Prospectus") relating to shares of Crompton Common Stock
to be issued in the Merger and the joint proxy statement and
form of proxies relating to the vote of Uniroyal Stockholders
with respect to the Merger and the vote of Crompton
Stockholders with respect to the Merger (collectively and as
amended, supplemented or modified, the "Joint Proxy Statement")
contained therein (such registration statement as amended, sup-
plemented or modified, the "Registration Statement"), at the
time the Registration Statement becomes effective or, in the
case of the Joint Proxy Statement, at the date of mailing, will
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or neces-
sary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. Each
of the Registration Statement and Joint Proxy Statement, except
for such portions thereof that relate only to Uniroyal and its
subsidiaries, will comply as to form in all material respects
with the provisions of the Securities Act and Exchange Act.
3.13 Compliance with Law. Each of Crompton and its
subsidiaries is in compliance with, and at all times since
December 31, 1992 has been in compliance with, all applicable
laws, statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or orders
entered by any Governmental Authority (collectively,
"Applicable Laws") relating to it or its business or prop-
erties, except for any such failures to be in compliance
therewith which, individually or in the aggregate, would not
have a material adverse effect on Crompton.
3.14 Litigation. Except as set forth in Section
3.14 to the Crompton Disclosure Schedule or in the Crompton SEC
Documents, there is no suit, claim, action, proceeding or
investigation (an "Action") pending or, to the knowledge of
Crompton, threatened against Crompton or any of its
subsidiaries which, individually or in the aggregate, could
reasonably be expected to have a material adverse effect on
Crompton or a material adverse effect on the ability of
Crompton to consummate the transactions contemplated hereby.
Neither Crompton nor any of its subsidiaries is subject to any
outstanding order, writ, injunction or decree which, individu-
ally or in the aggregate, insofar as can be reasonably fore-
seen, could have a material adverse effect on Crompton or a
material adverse effect on the ability of Crompton to consum-
mate the transactions contemplated hereby.
3.15 No Material Adverse Change. Except as set
forth in the Crompton SEC Documents filed with the Commission
as of the date hereof or in Section 3.15 to the Crompton
Disclosure Schedule, since December 31, 1995, each of Crompton
and its subsidiaries has conducted its business in the ordinary
course, consistent with past practice, and there has been no
(i) material adverse change in the assets, liabilities, results
of operations, business or financial condition of Crompton and
its subsidiaries taken as a whole, (ii) material adverse effect
<PAGE>
on the ability of Crompton to consummate the transactions
contemplated hereby, (iii) declaration, setting aside or pay-
ment of any dividend or other distribution with respect to its
capital stock, or (iv) material change in its accounting prin-
ciples, practices or methods.
3.16 Board Meeting. The Board of Directors of
Crompton, at a meeting duly called and held, has by the
required vote of the directors then in office determined that
this Agreement and the transactions contemplated hereby,
including the Merger, taken together, are fair to and in the
best interests of Crompton and the Crompton Stockholders.
3.17 Undisclosed Liabilities. Except (i) as and to
the extent disclosed or reserved against on the consolidated
balance sheet of Crompton as of December 31, 1995 or the notes
thereto included in the Crompton SEC Documents or otherwise
disclosed in the Crompton SEC Documents filed with the
Commission as of the date hereof, (ii) as incurred after the
date thereof in the ordinary course of business consistent with
prior practice and not prohibited by this Agreement or (iii) as
set forth in Section 3.17 to the Crompton Disclosure Schedule,
neither Crompton nor any of its subsidiaries have any li-
abilities or obligations of any nature, whether known or un-
known, absolute, accrued, contingent or otherwise and whether
due or to become due, that, individually or in the aggregate,
have or would reasonably be expected to have a material adverse
effect on Crompton.
3.18 Labor Relations. There is no unfair labor
practice complaint against Crompton or any of its subsidiaries
pending before the NLRB and there is no labor strike, dispute,
slowdown or stoppage, or any union organizing campaign, actu-
ally pending or, to the knowledge of Crompton, threatened
against or involving Crompton or any of its subsidiaries,
except for any such proceedings which would not have a material
adverse effect on Crompton. Except as disclosed in the
Crompton SEC Documents, neither Crompton nor any of its
subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract or other agreement or under-
standing with a labor union or labor organization. To the
knowledge of Crompton, there are no organizational efforts with
respect to the formation of a collective bargaining unit pres-
ently being made or threatened involving employees of Crompton
or any of its subsidiaries.
3.19 Operation of Crompton's Business. (a) Since
December 31, 1995 through the date of this Agreement, none of
Crompton or any of its subsidiaries has engaged in any
transaction which, if done after execution of this Agreement,
would violate Section 5.2(c) hereof except as described or
reflected in the Crompton SEC Documents or as set forth in
Section 3.19 to the Crompton Disclosure Schedule.
3.20 Permits; Compliance. Each of Crompton and its
subsidiaries is in possession of all franchises, grants, au-
thorizations, licenses, permits, easements, variances, exemp-
tions, consents, certificates, approvals and orders (collec-
<PAGE>
tively, "Permits") necessary to own, lease and operate its
properties and to carry on its business as it is now being con-
ducted, except for any such Permits the failure of which to
possess, individually or in the aggregate, would not reasonably
be expected to have a material adverse effect on Crompton.
3.21 Environmental Matters.
(a) As used herein, the term "Environmental Laws"
means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (in-
cluding, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, con-
taminants, or industrial, toxic or hazardous substances or
wastes (collectively, "Hazardous Materials") into the environ-
ment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judg-
ments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.
(b) Except as set forth in the Crompton SEC
Documents filed with the Commission as of the date hereof,
there are, with respect to Crompton, its subsidiaries or any
predecessor of the foregoing, no past or present violations of
Environmental Laws, releases of any material into the envi-
ronment, actions, activities, circumstances, conditions,
events, incidents, or contractual obligations which may give
rise to any common law environmental liability or any liability
under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 or similar federal, state, local or
foreign laws, other than those which, individually or in the
aggregate, would not reasonably be expected to have a material
adverse effect on Crompton, and none of Crompton and its
subsidiaries has received any notice with respect to any of the
foregoing, nor is any Action pending or threatened in connec-
tion with any of the foregoing.
(c) Except as set forth in the Crompton SEC
Documents filed with the Commission as of the date hereof, no
Hazardous Materials are contained on or about any real property
currently owned, leased or used by Crompton or any of its sub-
sidiaries and no Hazardous Materials were released on or about
any real property previously owned, leased or used by Crompton
or any of its subsidiaries during the period the property was
so owned, leased or used, except in the normal course of
Crompton's business.
3.22 Uniroyal Stock Ownership. Neither Crompton nor
any of its subsidiaries owns any shares of Uniroyal Common
Stock or other securities convertible into Uniroyal Common
Stock.
3.23 Contracts. Except as set forth in Section 3.23
to the Crompton Disclosure Schedule, none of Crompton, any of
its subsidiaries, or, to the knowledge of Crompton, any other
<PAGE>
party thereto is in violation of or in default in respect of,
nor has there occurred an event or condition which with the
passage of time or giving of notice (or both) would constitute
a default by Crompton under, any contract, agreement,
guarantee, lease or executory commitment (each a "Contract") to
which it is a party, except such violations or defaults under
such Contracts which, individually or in the aggregate, would
not have a material adverse effect on Crompton.
3.24 State Takeover Laws. Prior to the date hereof,
the Board of Directors of Crompton has taken all action
necessary to exempt under or make not subject to any state
takeover law or state law that purports to limit or restrict
business combinations or the ability to acquire or vote shares:
(i) the execution of this Agreement, (ii) the Merger and (iii)
the transactions contemplated hereby.
3.25 Crompton Rights Agreement. Crompton has taken
or will take all action necessary, if any, in respect of the
Rights Agreement dated as of July 20, 1988, as amended, between
Crompton and The Chase Manhattan Bank, N.A. (the "Crompton
Rights Agreement"), so as to provide that none of Uniroyal and
its affiliates will become an "Acquiring Person" and that no
"Stock Acquisition Date" or "Distribution Date" (as such terms
are defined in the Crompton Rights Agreement) will occur as a
result of the execution of this Agreement or the consummation
of the Merger pursuant to this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF UNIROYAL
In order to induce Subcorp and Crompton to enter into
this Agreement, Uniroyal hereby represents and warrants to
Crompton and Subcorp that the statements contained in this
Article IV are true, correct and complete.
4.1 Organization and Standing. Each of Uniroyal and
its subsidiaries is a corporation duly organized, validly ex-
isting and in good standing under the laws of its state of in-
corporation with full power and authority (corporate and other)
to own, lease, use and operate its properties and to conduct
its business as and where now owned, leased, used, operated and
conducted. Each of Uniroyal and its subsidiaries is duly
qualified to do business and in good standing in each jurisdic-
tion in which the nature of the business conducted by it or the
property it owns, leases or operates makes such qualification
necessary, except where the failure to be so qualified or in
good standing in such jurisdiction would not have a material
adverse effect on Uniroyal. Neither Uniroyal nor any of its
subsidiaries is in default in the performance, observance or
fulfillment of any provision of, in the case of Uniroyal, its
Certificate of Incorporation, as amended, or Bylaws, as amended
and restated, or, in the case of any subsidiary of Uniroyal,
its Certificate of Incorporation, Bylaws or other organiza-
tional documents.
4.2 Subsidiaries. As of the date hereof, other than
immaterial interests, Uniroyal does not own, directly or indi-
<PAGE>
rectly, any equity or other ownership interest in any corpora-
tion, partnership, joint venture or other entity or enterprise,
except as set forth in Section 4.2 to the disclosure schedule
(the "Uniroyal Disclosure Schedule") delivered by Uniroyal to
Crompton and dated the date hereof. Section 4.2 to the
Uniroyal Disclosure Schedule sets forth as to each subsidiary
of Uniroyal: (i) its name and jurisdiction of incorporation or
organization, (ii) the number of issued and outstanding shares
of its capital stock or share capital and (iii) the percentage
of securities owned by its immediate parent. Except as set
forth in Section 4.2 to the Uniroyal Disclosure Schedule,
Uniroyal owns, directly or indirectly, each of the outstanding
shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of
directors or others performing similar functions with respect
to such subsidiary) of each of Uniroyal's subsidiaries. Each
of the outstanding shares of capital stock of each of
Uniroyal's subsidiaries is duly authorized, validly issued,
fully paid and nonassessable, and is owned, directly or indi-
rectly, by Uniroyal free and clear of all liens, pledges,
security interests, claims or other encumbrances, other than
liens imposed by law which could not reasonably be expected to
have, in the aggregate, a material adverse effect on Uniroyal.
Other than as set forth in Section 4.2 to the Uniroyal
Disclosure Schedule, there are no outstanding subscriptions,
options, warrants, puts, calls, agreements, understandings,
claims or other commitments or rights of any type relating to
the issuance, sale or transfer of any securities of any sub-
sidiary of Uniroyal, nor are there outstanding any securities
which are convertible into or exchangeable for any shares of
capital stock of any subsidiary of Uniroyal; and no subsidiary
of Uniroyal has any obligation of any kind to issue any
additional securities or to pay for securities of any
subsidiary of Uniroyal or any predecessor thereof.
4.3 Corporate Power and Authority. Uniroyal has all
requisite corporate power and authority to enter into this
Agreement and, subject to authorization of the Merger and the
transactions contemplated hereby by Uniroyal Stockholders, to
consummate the transactions contemplated by this Agreement.
The execution and delivery of this Agreement and the consumma-
tion of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of
Uniroyal, subject to authorization of the Merger and the trans-
actions contemplated hereby by Uniroyal Stockholders. This
Agreement has been duly executed and delivered by Uniroyal and
constitutes the legal, valid and binding obligation of Uniroyal
enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of
equity.
4.4 Capitalization of Uniroyal. As of the date
hereof, Uniroyal's authorized capital stock consisted solely of
(a) 205,000,000 shares of common stock, $0.01 par value per
share ("Uniroyal Common Stock"), of which (i) 24,286,043 shares
were issued and outstanding, (ii) 1,136,588 shares were issued
and held in treasury (which does not include the shares
reserved for issuance set forth in clause (a)(iii) below) and
(iii) 1,959,108 shares were reserved for issuance upon the
<PAGE>
exercise or conversion of outstanding options, warrants or
convertible securities other than purchase rights granted or
issued by Uniroyal, and (b) 50,000,000 shares of preferred
stock, $0.01 par value per share, of which (i) 29,721 shares
are designated as "Series A Cumulative Redeemable Preferred
Stock," all of which were issued and outstanding, (ii) 12,000
shares are designated as "Series B Preferred Stock," all of
which were issued and outstanding, and (iii) 2,050,000 shares
are designated as "Series C Junior Participating Preferred
Stock," none of which was issued and outstanding. Each
outstanding share of Uniroyal capital stock is duly authorized
and validly issued, fully paid and nonassessable, and has not
been issued in violation of any preemptive or similar rights.
As of the date hereof, other than as set forth in the first
sentence hereof, in the Uniroyal SEC Documents (as defined in
Section 4.7) or in Section 4.4 to the Uniroyal Disclosure
Schedule, there are no outstanding subscriptions, options, war-
rants, puts, calls, agreements, understandings, claims or other
commitments or rights of any type relating to the issuance,
sale or transfer by Uniroyal of any securities of Uniroyal, nor
are there outstanding any securities which are convertible into
or exchangeable for any shares of capital stock of Uniroyal;
and Uniroyal has no obligation of any kind to issue any
additional securities or to pay for securities of Uniroyal or
any predecessor. Uniroyal has no outstanding bonds,
debentures, notes or other similar obligations the holders of
which have the right to vote generally with holders of Uniroyal
Common Stock.
4.5 Conflicts; Consents and Approvals. Neither the
execution and delivery of this Agreement by Uniroyal, nor the
consummation of the transactions contemplated hereby will:
(a) conflict with, or result in a breach of any pro-
vision of the Certificate of Incorporation, as amended, or
Bylaws, as amended and restated, of Uniroyal;
(b) except as disclosed to Crompton on the date
hereof, violate, or conflict with, or result in a breach
of any provision of, or constitute a default (or an event
which, with the giving of notice, the passage of time or
otherwise, would constitute a default) under, or entitle
any party (with the giving of notice, the passage of time
or otherwise) to terminate, accelerate, modify or call a
default under, or result in the termination, acceleration
or cancellation of, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the
properties or assets of Uniroyal or any of its
subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of
trust, license, contract, undertaking, agreement, lease or
other instrument or obligation to which Uniroyal or any of
its subsidiaries is a party;
(c) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Uniroyal or any
of its subsidiaries or any of their respective properties
or assets; or
(d) require any action or consent or approval of, or
<PAGE>
review by, or registration or filing by Uniroyal or any of
its affiliates with any third party or any Governmental
Authority, other than (i) authorization of the Merger and
the transactions contemplated hereby by Uniroyal
Stockholders, (ii) actions required by the HSR Act and
(iii) registrations or other actions required under
federal and state securities laws as are contemplated by
this Agreement;
except, in the case of (b), (c) and (d), for any of the
foregoing that would not, individually or in the aggregate,
have a material adverse effect on Uniroyal.
4.6 No Material Adverse Change. Except as set forth
in the Uniroyal SEC Documents filed with the Commission as of
the date hereof or in Section 4.6 to the Uniroyal Disclosure
Schedule, since October 1, 1995, each of Uniroyal and its
subsidiaries has conducted its business in the ordinary course,
consistent with past practice, and there has been no (i)
material adverse change in the assets, liabilities, results of
operations, business or financial condition of Uniroyal and its
subsidiaries taken as a whole, (ii) material adverse effect on
the ability of Uniroyal to consummate the transactions contem-
plated hereby, (iii) declaration, setting aside or payment of
any dividend or other distribution with respect to its capital
stock, or (iv) material change in its accounting principles,
practices or methods.
4.7 Uniroyal SEC Documents. Each of Uniroyal and
its subsidiaries has timely filed with the Commission all
forms, reports, schedules, statements, exhibits and other
documents required to be filed by it since December 31, 1992
under the Exchange Act or the Securities Act (such documents,
as supplemented and amended since the time of filing, collec-
tively, the "Uniroyal SEC Documents"). The Uniroyal SEC
Documents, including, without limitation, any financial state-
ments or schedules included therein, at the time filed (and, in
the case of registration statements and proxy statements, on
the dates of effectiveness and the dates of mailing, respec-
tively) (a) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading, and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities
Act, as the case may be. The financial statements of Uniroyal
included in the Uniroyal SEC Documents at the time filed (and,
in the case of registration statements and proxy statements, on
the date of effectiveness and the date of mailing, respec-
tively) complied as to form in all material respects with ap-
plicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto, were
prepared in accordance with generally accepted accounting prin-
ciples applied on a consistent basis during the periods in-
volved (except as may be indicated in the notes thereto or, in
the case of unaudited statements, as permitted by Form 10-Q of
the Commission), and fairly present (subject in the case of
unaudited statements to normal, recurring and year-end audit
adjustments) in all material respects the consolidated finan-
cial position of Uniroyal as at the dates thereof and the
<PAGE>
consolidated results of its operations and cash flows for the
periods then ended.
4.8 Taxes. Except as set forth in the Uniroyal SEC
Documents or in Section 4.8 to the Uniroyal Disclosure
Schedule, (i) Uniroyal has duly filed all federal, and material
state, local and foreign income, franchise, excise, real and
personal property and other tax returns and reports (including,
but not limited to, those filed on a consolidated, combined or
unitary basis) required to have been filed by Uniroyal prior to
the date hereof, (ii) all of the foregoing returns and reports
are true and correct in all material respects, and Uniroyal has
paid or, prior to the Effective Time, will pay all taxes
required to be paid in respect of the periods covered by such
returns or reports to any federal, state, foreign, local or
other taxing authority, (iii) Uniroyal has paid or made
adequate provision (in accordance with generally accepted
accounting principles) in the financial statements of Uniroyal
included in the Uniroyal SEC Documents for all taxes payable in
respect of all periods ending on or prior to December 31, 1995,
(iv) neither Uniroyal nor any of its subsidiaries will have any
material liability for any taxes in excess of the amounts so
paid or reserves so established and neither Uniroyal nor any of
its subsidiaries is delinquent in the payment of any material
tax, assessment or governmental charge and none of them has
requested any extension of time within which to file any re-
turns in respect of any fiscal year which have not since been
filed, (v) no deficiencies for any tax, assessment or gov-
ernmental charge have been proposed in writing, asserted or
assessed (tentatively or definitely), in each case, by any tax-
ing authority, against Uniroyal or any of its subsidiaries for
which there are not adequate reserves (in accordance with gen-
erally accepted accounting principles), (vi) as of the date of
this Agreement, there are no pending requests for waivers of
the time to assess any such tax, other than those made in the
ordinary course and for which payment has been made or there
are adequate reserves (in accordance with generally accepted
accounting principles), (vii) the federal income tax returns of
Uniroyal and its subsidiaries have been audited by the Internal
Revenue Service through the fiscal year ending October 1, 1989,
and (viii) Uniroyal has not filed an election under Section
341(f) of the Code to be treated as a consenting corporation.
4.9 Compliance with Law. Each of Uniroyal and its
subsidiaries is in compliance with, and at all times since
December 31, 1992 has been in compliance with, all Applicable
Laws relating to it or its business or properties, except for
any such failures to be in compliance therewith which,
individually or in the aggregate, would not have a material
adverse effect on Uniroyal.
4.10 Registration Statement. None of the informa-
tion provided by Uniroyal or any of its subsidiaries for
inclusion in the Registration Statement at the time it becomes
effective or, in the case of the Joint Proxy Statement, at the
date of mailing, will contain any untrue statement of a mate-
rial fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. The Registration Statement and Joint
<PAGE>
Proxy Statement, except for such portions thereof that relate
only to Crompton and its subsidiaries, will each comply as to
form in all material respects with the provisions of the
Securities Act and the Exchange Act.
4.11 Litigation. Except as set forth in Section
4.11 to the Uniroyal Disclosure Schedule or in the Uniroyal SEC
Documents, there is no Action pending or, to the knowledge of
Uniroyal, threatened against Uniroyal or any of its
subsidiaries which, individually or in the aggregate, could
reasonably be expected to have a material adverse effect on
Uniroyal or a material adverse effect on the ability of
Uniroyal to consummate the transactions contemplated hereby.
Neither Uniroyal nor any of its subsidiaries is subject to any
outstanding order, writ, injunction or decree which,
individually or in the aggregate, insofar as can be reasonably
foreseen, could have a material adverse effect on Uniroyal or a
material adverse effect on the ability of Uniroyal to consum-
mate the transactions contemplated hereby.
4.12 Brokerage and Finder's Fees; Expenses. Except
for Uniroyal's obligation to Morgan Stanley & Co. Incorporated
("Morgan") (a copy of the written agreement relating to such
obligation having previously been provided to Crompton),
Uniroyal has not incurred and will not incur, directly or
indirectly, any brokerage, finder's or similar fee in con-
nection with the transactions contemplated by this Agreement.
Other than the foregoing obligation to Morgan, Uniroyal is not
aware of any claim for payment of any finder's fees, brokerage
or agent's commissions or other like payments in connection
with the negotiation of this Agreement or in connection with
the transactions contemplated hereby. A bona fide written
estimate of the aggregate amount of all fees and expenses ex-
pected to be paid by Uniroyal to all attorneys, accountants and
investment bankers in connection with the Merger has been
provided to Crompton on the date hereof.
4.13 Opinion of Financial Advisor. Uniroyal has re-
ceived the opinion of Morgan to the effect that, as of the date
hereof, the consideration to be received by the Uniroyal
Stockholders is fair to the Uniroyal Stockholders from a
financial point of view.
4.14 Accounting Matters. To the best knowledge of
Uniroyal, neither Uniroyal nor any of its affiliates has taken
or agreed to take any action that (without giving effect to any
actions taken or agreed to be taken by Crompton or any of its
affiliates) would prevent Crompton from accounting for the
business combination to be effected by the Merger as a pooling-
of-interests for financial reporting purposes in accordance
with Accounting Principles Board Opinion No. 16, the
interpretative releases issued pursuant thereto, and the
pronouncements of the Commission thereon.
4.15 Employee Benefit Plans.
(a) For purposes of this Section 4.15, the following
terms have the definitions given below:
"Controlled Group Liability" means any and all
<PAGE>
liabilities under (i) Title IV of ERISA, (ii) section
302 of ERISA, (iii) sections 412 and 4971 of the
Code, (iv) the continuation coverage requirements of
section 601 et seq. of ERISA and section 4980B of the
Code, and (v) corresponding or similar provisions of
foreign laws or regulations, in each case other than
pursuant to the Uniroyal Plans.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and the regulations
thereunder.
"ERISA Affiliate" means, with respect to any
entity, trade or business, any other entity, trade or
business that is a member of a group described in
Section 414(b), (c), (m) or (o) of the Code or Sec-
tion 4001(b)(1) of ERISA that includes the first en-
tity, trade or business, or that is a member of the
same "controlled group" as the first entity, trade or
business pursuant to Section 4001(a)(14) of ERISA.
"Uniroyal Plans" means all employee benefit
plans, programs, policies, practices, and other
arrangements providing benefits to any employee or
former employee or beneficiary or dependent thereof,
whether or not written, and whether covering one
person or more than one person, sponsored or
maintained by Uniroyal or any of its subsidiaries or
to which Uniroyal or any of its subsidiaries
contributes or is obligated to contribute. Without
limiting the generality of the foregoing, the term
"Uniroyal Plans" includes all employee welfare
benefit plans within the meaning of Section 3(1) of
ERISA and all employee pension benefit plans within
the meaning of Section 3(2) of ERISA.
(b) All material Uniroyal Plans for the benefit of
the executive officers of Uniroyal have been disclosed in the
Uniroyal SEC Documents. With respect to each Uniroyal Plan,
Uniroyal has made available to Crompton a true, correct and
complete copy of: (i) each writing constituting a part of such
Uniroyal Plan, including without limitation all plan documents,
benefit schedules, trust agreements, and insurance contracts
and other funding vehicles; (ii) the most recent Annual Report
(Form 5500 Series) and accompanying schedule, if any; (iii) the
current summary plan description, if any; (iv) the most recent
annual financial report, if any; and (v) the most recent
determination letter from the IRS, if any.
(c) The Internal Revenue Service has issued a favor-
able determination letter with respect to each Uniroyal Plan
that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code (a "Qualified Uniroyal Plan") and
there are no existing circumstances nor any events that have
occurred that could adversely affect the qualified status of
any Qualified Uniroyal Plan or the related trust, except as set
forth in Section 4.15(c) to the Uniroyal Disclosure Schedule.
(d) All contributions required to be made to any
Uniroyal Plan by Applicable Laws or by any plan document or
other contractual undertaking, and all premiums due or payable
<PAGE>
with respect to insurance policies funding any Uniroyal Plan,
for any period through the date hereof have been timely made or
paid in full and through the Closing Date will be timely made
or paid in full or, to the extent not required to be made or
paid on or before the date hereof or the Closing Date, as
applicable, have been or will be fully reflected in Uniroyal's
financial statements contained in the Uniroyal SEC Documents.
(e) Except as set forth in Section 4.15(c) to the
Uniroyal Disclosure Schedule, Uniroyal and its subsidiaries
have complied, and are now in compliance, in all material
respects, with all provisions of ERISA, the Code and all laws
and regulations applicable to the Uniroyal Plans. There is not
now, and there are no existing, circumstances that standing
alone could give rise to, any requirement for the posting of
security with respect to a Uniroyal Plan or the imposition of
any lien on the assets of Uniroyal or any of its subsidiaries
under ERISA or the Code.
(f) Except as set forth in Section 4.15(f) to the
Uniroyal Disclosure Schedule, no Uniroyal Plan is subject to
Title IV or Section 302 of ERISA or Section 412 or 4971 of the
Code. No Uniroyal Plan is a Multiemployer Plan (as defined in
Section 3.9) or a Multiple Employer Plan (as defined in Section
3.9), nor has Uniroyal or any of its subsidiaries or any of
their respective ERISA Affiliates, at any time within five
years before the date hereof, contributed to or been obligated
to contribute to any Multiemployer Plan or Multiple Employer
Plan.
(g) There does not now exist, and there are no ex-
isting, circumstances that could result in, any Controlled
Group Liability that would be a liability of Uniroyal or any of
its subsidiaries following the Closing, other than normal
funding responsibilities. Without limiting the generality of
the foregoing, neither Uniroyal nor any of its subsidiaries nor
any of their respective ERISA Affiliates has engaged in any
transaction described in Section 4069 or Section 4204 of ERISA.
(h) Except as disclosed in the Uniroyal SEC
Documents filed with the Commission as of the date hereof or as
disclosed to Crompton on the date hereof and except for health
continuation coverage as required by Section 4980B of the Code
or Part 6 of Title I of ERISA, neither Uniroyal nor any of its
subsidiaries has any liability for life, health, medical or
other welfare benefits to former employees or beneficiaries or
dependents thereof.
(i) A statement by Uniroyal, to the best of
Uniroyal's knowledge, as to the "excess parachute payments"
within the meaning of Section 280G of the Code which may become
payable by Uniroyal or any of its subsidiaries in connection
with the transactions contemplated hereby either solely as a
result thereof or as a result of such transactions in
conjunction with any other events has been provided to Crompton
by Uniroyal on the date hereof.
(j) There are no pending or threatened claims (other
than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the
<PAGE>
Uniroyal Plans, any fiduciaries thereof with respect to their
duties to the Uniroyal Plans or the assets of any of the trusts
under any of the Uniroyal Plans which could reasonably be ex-
pected to result in any material liability of Uniroyal or any
of its subsidiaries to the Pension Benefit Guaranty
Corporation, the Department of Treasury, the Department of
Labor or any Multiemployer Plan.
4.16 Contracts. None of Uniroyal, any of its
subsidiaries, or, to the knowledge of Uniroyal, any other party
thereto is in violation of or in default in respect of, nor has
there occurred an event or condition which with the passage of
time or giving of notice (or both) would constitute a default
by Uniroyal under, any Contract to which it is a party, except
such violations or defaults under such Contracts which,
individually or in the aggregate, would not have a material
adverse effect on Uniroyal.
4.17 Labor Relations. There is no unfair labor
practice complaint against Uniroyal or any of its subsidiaries
pending before the NLRB and there is no labor strike, dispute,
slowdown or stoppage, or any union organizing campaign, actu-
ally pending or, to the knowledge of Uniroyal, threatened
against or involving Uniroyal or any of its subsidiaries,
except for any such proceedings which would not have a material
adverse effect on Uniroyal. Except as disclosed in the
Uniroyal SEC Documents, neither Uniroyal nor any of its
subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract or other agreement or under-
standing with a labor union or labor organization. To the
knowledge of Uniroyal, there are no organizational efforts with
respect to the formation of a collective bargaining unit pres-
ently being made or threatened involving employees of Uniroyal
or any of its subsidiaries.
4.18 Undisclosed Liabilities. Except (i) as and to
the extent disclosed or reserved against on the balance sheet
of Uniroyal as of December 31, 1995 or the notes thereto
included in the Uniroyal SEC Documents or otherwise disclosed
in the Uniroyal SEC Documents filed with the Commission as of
the date hereof, or (ii) as incurred after the date thereof in
the ordinary course of business consistent with prior practice
and not prohibited by this Agreement, neither Uniroyal nor any
of its subsidiaries have any liabilities or obligations of any
nature, whether known or unknown, absolute, accrued, contingent
or otherwise and whether due or to become due, that, individu-
ally or in the aggregate, have or would reasonably be expected
to have a material adverse effect on Uniroyal.
4.19 Operation of Uniroyal's Business. (a) Since
October 1, 1995 through the date of this Agreement, none of
Uniroyal or any of its subsidiaries has engaged in any
transaction which, if done after execution of this Agreement,
would violate Section 5.3(c) hereof except as described or
reflected in the Uniroyal SEC Documents or as set forth in
Section 4.19 to the Uniroyal Disclosure Schedule.
4.20 Permits; Compliance. Each of Uniroyal and its
subsidiaries is in possession of all Permits necessary to own,
lease and operate its properties and to carry on its business
<PAGE>
as it is now being conducted, except for any such Permits the
failure of which to possess, individually or in the aggregate,
would not reasonably be expected to have a material adverse ef-
fect on Uniroyal.
4.21 Environmental Matters.
(a) Except as set forth in Section 4.21 to the
Uniroyal Disclosure Schedule or set forth in the Uniroyal SEC
Documents filed with the Commission as of the date hereof or in
a report previously provided by Uniroyal to Crompton, there
are, with respect to Uniroyal, its subsidiaries or any
predecessor of the foregoing, no past or present violations of
Environmental Laws, releases of any material into the
environment, actions, activities, circumstances, conditions,
events, incidents, or contractual obligations which may give
rise to any common law environmental liability or any liability
under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 or similar federal, state, local or
foreign laws, other than those which, individually or in the
aggregate, would not reasonably be expected to have a material
adverse effect on Uniroyal, and none of Uniroyal and its
subsidiaries has received any notice with respect to any of the
foregoing, nor is any Action pending or threatened in connec-
tion with any of the foregoing.
(b) Except as set forth in Section 4.21 to the
Uniroyal Disclosure Schedule or set forth in the Uniroyal SEC
Documents filed with the Commission as of the date hereof or in
a report previously provided by Uniroyal to Crompton, no
Hazardous Materials are contained on or about any real property
currently owned, leased or used by Uniroyal or any of its
subsidiaries and no Hazardous Materials were released on or
about any real property previously owned, leased or used by
Uniroyal or any of its subsidiaries during the period the
property was so owned, leased or used, except in the normal
course of Uniroyal's business.
4.22 Crompton Stock Ownership. Neither Uniroyal nor
any of its subsidiaries owns any shares of Crompton Common
Stock or other securities convertible into Crompton Common
Stock.
4.23 Board Meeting. The Board of Directors of
Uniroyal, at a meeting duly called and held, has by the
required vote of the directors then in office determined that
this Agreement and the transactions contemplated hereby,
including the Merger, taken together, are fair to and in the
best interests of Uniroyal and the stockholders of Uniroyal.
4.24 DGCL Section 203 and State Takeover Laws.
Prior to the date hereof, the Board of Directors of Uniroyal
has taken all action necessary to exempt under or make not
subject to (x) Section 203 of the DGCL and (y) any other state
takeover law or state law that purports to limit or restrict
business combinations or the ability to acquire or vote shares:
(i) the execution of this Agreement, (ii) the Merger and (iii)
the transactions contemplated hereby.
4.25 Uniroyal Rights Agreement. Uniroyal has taken
<PAGE>
or will take all action necessary, if any, in respect of the
Rights Agreement dated as of April 29, 1993, between Uniroyal
and Chemical Bank, as amended (the "Uniroyal Rights
Agreement"), so as to provide that none of Crompton and its
affiliates will become an "Acquiring Person" and that no "Stock
Acquisition Date," "Distribution Date" or "Triggering Event"
(as such terms are defined in the Uniroyal Rights Agreement)
will occur as a result of the execution of this Agreement or
the consummation of the Merger pursuant to this Agreement or
the acquisition or transfer of shares of Uniroyal Common Stock
by Crompton.
ARTICLE V
COVENANTS OF THE PARTIES
The parties hereto agree as follows with respect to
the period from and after the execution of this Agreement.
5.1 Mutual Covenants.
(a) General. Each of the parties shall use its rea-
sonable efforts to take all action and to do all things neces-
sary, proper or advisable to consummate the Merger and the
transactions contemplated by this Agreement (including, without
limitation, using its reasonable efforts to cause the condi-
tions set forth in Article VI for which they are responsible to
be satisfied as soon as reasonably practicable and to prepare,
execute and deliver such further instruments and take or cause
to be taken such other and further action as any other party
hereto shall reasonably request).
(b) HSR Act. As soon as practicable, and in any
event no later than ten (10) business days after the date here-
of, each of the parties hereto will file any Notification and
Report Forms and related material required to be filed by it
with the Federal Trade Commission and the Antitrust Division of
the United States Department of Justice under the HSR Act with
respect to the Merger, will use its reasonable efforts to ob-
tain an early termination of the applicable waiting period, and
shall promptly make any further filings pursuant thereto that
may be necessary, proper or advisable; provided, however, that
neither Crompton nor any of its subsidiaries shall be required
hereunder to divest or hold separate any portion of their busi-
ness or assets.
(c) Other Governmental Matters. Each of the parties
shall use its reasonable efforts to take any additional action
that may be necessary, proper or advisable in connection with
any other notices to, filings with, and authorizations, con-
sents and approvals of any Governmental Authority that it may
be required to give, make or obtain.
(d) Pooling-of-Interests. Each of the parties shall
use its best efforts to cause the Merger to qualify for
pooling-of-interests accounting treatment for financial report-
ing purposes.
(e) Tax-Free Treatment. Each of the parties shall
<PAGE>
use its best efforts to cause the Merger to constitute a tax-
free "reorganization" under Section 368(a) of the Code and to
permit Wachtell, Lipton, Rosen & Katz and Skadden, Arps, Slate,
Meagher & Flom to issue their respective opinions provided for
in Section 6.1(g).
(f) Public Announcements. Unless otherwise required
by Applicable Laws or requirements of the National Association
of Securities Dealers or the NYSE (and in that event only if
time does not permit), at all times prior to the earlier of the
Effective Time or termination of this Agreement pursuant to
Section 7.1, Crompton and Uniroyal shall consult with each
other before issuing any press release with respect to the
Merger and shall not issue any such press release prior to such
consultation.
(g) Access. From and after the date of this Agree-
ment until the Effective Time (or the termination of this
Agreement), Crompton and Uniroyal shall permit representatives
of the other to have appropriate access at all reasonable times
to the other's premises, properties, books, records, contracts,
tax records, documents, customers and suppliers. Information
obtained by Crompton and Uniroyal pursuant to this Section
5.1(g) shall be subject to the provisions of the confidential-
ity agreement between them dated March 18, 1996 (the "Confiden-
tiality Agreement"), which agreement remains in full force and
effect.
5.2 Covenants of Crompton.
(a) Crompton Stockholders Meeting. Crompton shall
take all action in accordance with Applicable Laws and the
Crompton Articles and By-Laws necessary to convene a meeting of
Crompton Stockholders as promptly as practicable to consider
and vote upon the approval of the Merger, this Agreement and
the transactions contemplated hereby.
(b) Preparation of Joint Proxy Statement. Crompton
shall cooperate with Uniroyal to, and shall, as soon as is
reasonably practicable, prepare and file the Joint Proxy State-
ment with the Commission on a confidential basis. Crompton
shall cooperate with Uniroyal to, and shall, prepare and file
the Registration Statement with the Commission as soon as is
reasonably practicable following clearance of the Joint Proxy
Statement by the Commission and shall cooperate with Uniroyal
to, and shall, use all reasonable efforts to have the Registra-
tion Statement declared effective by the Commission as promptly
as practicable and to maintain the effectiveness of the Regis-
tration Statement through the Effective Time. Crompton shall
use all reasonable efforts to mail at the earliest practicable
date to Crompton Stockholders the Joint Proxy Statement, which
shall include all information required under Applicable Laws to
be furnished to Crompton Stockholders in connection with the
Merger and the transactions contemplated thereby. Crompton
shall advise Uniroyal promptly after it receives notice of (i)
the Registration Statement being declared effective or any
supplement or amendment thereto being filed with the
Commission, (ii) the issuance of any stop order in respect of
the Registration Statement, and (iii) the receipt of any
correspondence, comments or requests from the Commission in
<PAGE>
respect of the Registration Statement. Crompton also shall
cooperate with Uniroyal to, and shall, take such other rea-
sonable actions (other than qualifying to do business in any
jurisdiction in which it is not so qualified) required to be
taken under any applicable state securities laws in connection
with the issuance of shares of Crompton Common Stock in the
Merger.
(c) Conduct of Crompton's Operations. During the
period from the date of this Agreement to the Effective Time,
and except as set forth in Section 5.2(c) to the Crompton
Disclosure Schedule, Crompton shall conduct its operations in
the ordinary course except as expressly contemplated by this
Agreement and the transactions contemplated hereby and shall
use its reasonable efforts to maintain and preserve its
business organization and its material rights and franchises
and to retain the services of its officers and key employees
and maintain relationships with customers, suppliers and other
third parties to the end that their goodwill and ongoing
business shall not be impaired in any material respect.
(d) Indemnification. From and after the Effective
Time, Crompton shall cause the Surviving Corporation to indem-
nify and hold harmless to the fullest extent permitted under
Applicable Law each person who is now, or has been at any time
prior to the date hereof, an officer, director, employee,
trustee or agent of Uniroyal (or any subsidiary or division
thereof), including, without limitation, each person control-
ling any of the foregoing persons (individually, an "Indemni-
fied Party" and collectively, the "Indemnified Parties"),
against all losses, claims, damages, liabilities, costs or ex-
penses (including attorneys' fees), judgments, fines, penalties
and amounts paid in settlement in connection with any claim,
action, suit, proceeding or investigation arising out of or
pertaining to acts or omissions, or alleged acts or omissions,
by them in their capacities as such, whether commenced, as-
serted or claimed before or after the Effective Time and in-
cluding, without limitation, liabilities arising under the Se-
curities Act, the Exchange Act and state corporation laws in
connection with the Merger. Crompton shall cause the Surviving
Corporation to keep in effect Uniroyal's current provisions in
its Certificate of Incorporation and Bylaws providing for
exculpation of director and officer liability and
indemnification of the Indemnified Parties to the fullest
extent permitted under the DGCL, which provisions shall not be
amended except as required by Applicable Law or except to make
changes permitted by law that would enlarge the Indemnified
Parties' right of indemnification. In the event of any actual
or threatened claim, action, suit, proceeding or investigation
in respect of such acts or omissions, (i) Crompton shall cause
the Surviving Corporation to pay the reasonable fees and
expenses of counsel selected by the indemnified party, which
counsel shall be reasonably acceptable to Crompton, in advance
of the final disposition of any such action to the full extent
permitted by Applicable Law, upon receipt of any undertaking
required by Applicable Law, and (ii) Crompton shall cause the
Surviving Corporation to cooperate in the defense of any such
matter; provided, however, that the Surviving Corporation shall
not be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld).
<PAGE>
(e) Directors' and Officers' Insurance. Crompton
agrees to use its reasonable best efforts to cause the
Surviving Corporation to maintain in effect for not less than
six years after the Effective Time the current policies of
directors' and officers' liability insurance maintained by
Uniroyal with respect to matters occurring prior to the
Effective Time; provided, however, that (i) the Surviving
Corporation may substitute therefor policies of at least the
same coverage containing terms and conditions which are no less
advantageous to the covered officers and directors and (ii) the
Surviving Corporation shall not be required to pay an annual
premium for such insurance coverage in excess of four times the
current annual premium paid by Uniroyal for its existing
coverage, but in such case shall purchase as much coverage as
possible for such amount.
(f) Employee Benefits. Crompton covenants and
agrees that, for a period of two years from and after the Ef-
fective Time, it will cause the Surviving Corporation or its
subsidiaries to provide for the benefit of employees of the
Surviving Corporation or its subsidiaries benefits that are no
less favorable, in the aggregate, as those provided to
employees of Uniroyal or its subsidiaries immediately prior to
the date of this Agreement. If any Employee (as defined below)
becomes a participant in any employee benefit or compensation
plan of Crompton, a Crompton subsidiary (other than the
Surviving Corporation) or a Crompton affiliate, such Employee
shall be given credit under such plan for all service with
Uniroyal and its subsidiaries, affiliates and predecessors
which is recognized by Uniroyal and is rendered prior to the
time the Employee becomes such a participant, solely for
purposes of determining eligibility and vesting (but not for
benefit accrual or any other purposes); provided, however, such
service need not be credited to the extent it would result in a
duplication of benefits, including, without limitation, benefit
accrual service under defined benefit plans. To the extent
employee benefit plans of Crompton or its subsidiaries or
affiliates provide medical or dental welfare benefits to
Employees or Former Employees (as defined below) after the
Effective Time, such plans shall waive any preexisting condi-
tions and actively-at-work exclusions and shall provide that
any expenses incurred on or before the Effective Time shall be
taken into account under such plans for purposes of satisfying
applicable deductible, coinsurance and maximum out-of-pocket
provisions. For purposes of the foregoing, (i) "Employees"
shall mean the employees of Uniroyal or a Uniroyal subsidiary
whose terms of employment are not subject to a collective
bargaining agreement immediately prior to the Effective Time,
including, without limitation, any employee who is absent at
the Effective Time on short-term disability, long-term dis-
ability, Workers' Compensation or an authorized leave (such as
maternity, military, family and medical leaves or other leaves
where return to work is subject to statutory requirements), and
(ii) "Former Employees" shall mean any former employees of
Uniroyal or a Uniroyal subsidiary whose employment terminated
prior to the Effective Time (whether by retirement or other-
wise).
<PAGE>
Crompton shall cause the Surviving Corporation and
its subsidiaries to honor all Uniroyal's existing agreements
with any Employee or Former Employee and shall pay by wire
transfer at the Closing the amounts referred to in that certain
letter agreement dated the date hereof between Crompton and
Uniroyal. The parties hereto agree that, prior to the Closing,
Uniroyal will, with the participation of Crompton, use its best
efforts to enter into amendments (reasonably satisfactory to
Crompton) to the existing employment agreements with all
individuals listed in Section 5.2(f) to the Crompton Disclosure
Schedule to reflect the amendments described on the term sheets
dated April 30, 1996, signed by such individuals.
A description of the amounts to be paid at Closing to
various individuals who have existing employment agreements
with Uniroyal, if any such individual notifies Crompton in
writing prior to the Closing that he will terminate his
employment with Uniroyal as of the Closing, has been agreed
upon by Crompton and Uniroyal and provided to Crompton by
Uniroyal on the date hereof.
(g) Notification of Certain Matters. Crompton shall
give prompt notice to Uniroyal of (i) the occurrence or non-
occurrence of any event the occurrence or non-occurrence of
which would cause any Crompton or Subcorp representation or
warranty contained in this Agreement to be untrue or inaccurate
at or prior to the Effective Time and (ii) any material failure
of Crompton to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to
this Section 5.2(g) shall not limit or otherwise affect the
remedies available hereunder to Uniroyal.
(h) No Solicitation. Crompton agrees that, during
the term of this Agreement, it shall not, and shall not
authorize or permit any of its subsidiaries or any of its or
its subsidiaries' directors, officers, employees, agents or
representatives, directly or indirectly, to (i) solicit,
initiate, encourage or facilitate, or furnish or disclose non-
public information in furtherance of, any inquiries or the
making of any proposal with respect to any recapitalization,
merger, consolidation or other business combination involving
Crompton, or acquisition of any capital stock or any material
portion of the assets (except as set forth in Section 5.2(h) to
the Crompton Disclosure Schedule and except for acquisition of
assets in the ordinary course of business consistent with past
practice) of Crompton, or any combination of the foregoing (a
"Crompton Competing Transaction"), (ii) negotiate, explore or
otherwise engage in discussions with any person (other than
Uniroyal or its directors, officers, employees, agents and
representatives) with respect to any Crompton Competing
Transaction or (iii) enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by
this Agreement; provided that Crompton may (i) furnish infor-
mation to, and negotiate or otherwise engage in discussions
with, any party who delivers a written proposal for a Crompton
Competing Transaction if and so long as the Board of Directors
of Crompton determines in good faith by a majority vote, based
upon advice of its outside legal counsel, that failing to take
<PAGE>
such action would reasonably be expected to constitute a breach
of the fiduciary duties of the Board and determines in good
faith by a majority vote that such a proposal is more favorable
to Crompton Stockholders in the aggregate and from a financial
point of view than the transactions contemplated by this
Agreement (including any adjustment to the terms and conditions
of such transactions proposed by Uniroyal in response to such
Crompton Competing Transaction) and (ii) take a position with
respect to the Merger or a Crompton Competing Transaction, or
amend or withdraw such position, in compliance with Rule 14d-9
or Rule 14e-2 promulgated under the Exchange Act with regard to
a Crompton Competing Transaction. Crompton will immediately
cease all existing activities, discussions and negotiations
with any parties conducted heretofore with respect to any of
the foregoing. From and after the execution of this Agreement,
Crompton shall immediately advise Uniroyal in writing of the
receipt, directly or indirectly, of any inquiries, discussions,
negotiations, or proposals relating to a Crompton Competing
Transaction (including the specific terms thereof) and promptly
furnish to Uniroyal a copy of any such proposal or inquiry in
addition to any information provided to or by any third party
relating thereto.
(i) [Intentionally Omitted]
(j) Listing Application. Crompton shall, as soon as
practicable following the date hereof, prepare and submit to
the NYSE a listing application covering the shares of Crompton
Common Stock (and associated rights) issuable in the Merger,
and shall use its reasonable best efforts to obtain, prior to
the Effective Time, approval for the listing of such shares of
Crompton Common Stock (and associated rights), subject to
official notice of issuance.
(k) Directors of Crompton. Immediately after the
Effective Time, Crompton will take such action as may be
necessary to cause (x) Robert J. Mazaika, Uniroyal's Chairman,
President and Chief Executive Officer, to be elected to the
Board of Directors of Crompton as Crompton's "Vice Chairman,"
(y) Thomas M. Begel, a director of Uniroyal, to be elected to
the Board of Directors of Crompton and (z) Harry Corless, a
director of Uniroyal, to be elected to the Board of Directors
of Crompton, each of the foregoing to be elected to a different
class of the Crompton Board.
(l) Affiliates of Crompton. Crompton shall use its
reasonable best efforts to cause each such person who may be at
the Effective Time or was on the date hereof an "affiliate" of
Crompton within the meaning of Rule 145 under the Securities
Act, to execute and deliver to Uniroyal no less than 35 days
prior to the date of the meeting of Crompton Stockholders to
approve the Merger written undertakings in the form reasonably
acceptable to Uniroyal.
(m) Change in Control. Crompton agrees that the
consummation of the Merger shall constitute a "Change in
Control" of Uniroyal for all purposes within the meaning of all
compensation or benefit plans or agreements of Uniroyal and its
subsidiaries, including without limitation, the Uniroyal 1993
Stock Option Plan, the supplemental executive retirement
<PAGE>
agreements, the share purchase agreements, the Management
Subscription Agreement and the employment agreements. In
amplification of the foregoing, Crompton specifically agrees
that, if the holder of a Uniroyal employment agreement shall
terminate his employment within one year after the consummation
of the Merger, such termination shall be deemed to be upon a
termination of employment described in clause (C) of the first
sentence of Section 7(d) of Uniroyal's employment agreements
with Messrs. Mazaika, Johnson, Ingulli, Krakower, Melore,
Eisenberg, Stephenson and Hagen or clause (B) of the first
sentence of Section 3(d) of Uniroyal's employment agreement
with Mr. Castaldi, except as otherwise agreed to by such
individual after the date hereof.
5.3 Covenants of Uniroyal.
(a) Uniroyal Stockholders Meeting. Uniroyal shall
take all action in accordance with Applicable Laws and its
Certificate of Incorporation, as amended, and Bylaws, as
amended and restated, necessary to convene a meeting of
Uniroyal Stockholders as promptly as practicable to consider
and vote upon the approval of the Merger, this Agreement and
the transactions contemplated hereby.
(b) Information for the Registration Statement and
Preparation of Joint Proxy Statement. Uniroyal shall promptly
furnish Crompton with all information concerning it as may be
required for inclusion in the Registration Statement. Uniroyal
shall cooperate with Crompton in the preparation of the Regis-
tration Statement in a timely fashion and shall use all reason-
able efforts to have the Registration Statement declared effec-
tive by the Commission as promptly as practicable. If at any
time prior to the Effective Time, any information pertaining to
Uniroyal contained in or omitted from the Registration
Statement makes such statements contained in the Registration
Statement false or misleading, Uniroyal shall promptly so in-
form Crompton and provide Crompton with the information neces-
sary to make statements contained therein not false and mis-
leading. Uniroyal shall use all reasonable efforts to
cooperate with Crompton in the preparation and filing of the
Joint Proxy Statement with the Commission on a confidential
basis. Uniroyal shall use all reasonable efforts to mail at
the earliest practicable date to Uniroyal Stockholders the
Joint Proxy Statement, which shall include all information
required under Applicable Laws to be furnished to Uniroyal
Stockholders in connection with the Merger and the transactions
contemplated thereby.
(c) Conduct of Uniroyal's Operations. During the
period from the date of this Agreement to the Effective Time,
Uniroyal shall conduct its operations in the ordinary course
except as expressly contemplated by this Agreement and the
transactions contemplated hereby and shall use its reasonable
efforts to maintain and preserve its business organization and
its material rights and franchises and to retain the services
of its officers and key employees and maintain relationships
with customers, suppliers and other third parties to the end
that their goodwill and ongoing business shall not be impaired
in any material respect. Without limiting the generality of
the foregoing, during the period from the date of this Agree-
<PAGE>
ment to the Effective Time or the earlier termination of this
Agreement pursuant to Section 7.1, Uniroyal shall not, except
as otherwise expressly contemplated by this Agreement and the
transactions contemplated hereby or as set forth in Section
5.3(c) to the Uniroyal Disclosure Schedule, without the prior
written consent of Crompton:
(i) do or effect any of the following actions with
respect to its securities: (A) adjust, split, combine or
reclassify its capital stock, (B) make, declare or pay any
dividend or distribution on, or directly or indirectly
redeem, purchase or otherwise acquire, any shares of its
capital stock or any securities or obligations convertible
into or exchangeable for any shares of its capital stock
(except in connection with the use of shares of capital
stock of Uniroyal to pay the exercise price or tax with-
holding in connection with stock-based employee benefit
plans of Uniroyal or any of its subsidiaries), (C) grant
any person any right or option to acquire any shares of
its capital stock, (D) issue, deliver or sell or agree to
issue, deliver or sell any additional shares of its capi-
tal stock or any securities or obligations convertible
into or exchangeable or exercisable for any shares of its
capital stock or such securities (except pursuant to the
exercise of outstanding warrants, options or rights to
purchase Uniroyal Common Stock), or (E) enter into any
agreement, understanding or arrangement with respect to
the sale or voting of its capital stock;
(ii) sell, transfer, lease, pledge, mortgage, encum-
ber or otherwise dispose of any of its property or assets
which are material, individually or in the aggregate,
other than in the ordinary course of business consistent
with past practice;
(iii) make or propose any changes in its Certificate
of Incorporation, as amended, or Bylaws, as amended and
restated or other organizational documents;
(iv) merge or consolidate with any other person or
acquire a material amount of assets or capital stock of
any other person or enter into any confidentiality agree-
ment with any person, other than in connection with this
Agreement and the transactions contemplated hereby;
(v) incur, create, assume or otherwise become liable
for indebtedness for borrowed money, other than in the
ordinary course of business consistent with past practice,
or assume, guarantee, endorse or otherwise as an accom-
modation become responsible or liable for obligations of
any other individual, corporation or other entity, other
than in the ordinary course of business consistent with
past practice;
(vi) enter into or modify any employment, severance,
termination or similar agreements or arrangements with, or
grant any bonuses, salary increases, severance or termina-
tion pay to, any officer, director, consultant or employee
other than salary increases and bonuses granted in the
ordinary course of business consistent with past practice,
<PAGE>
or otherwise increase the compensation or benefits pro-
vided to any officer, director, consultant or employee
except as may be required by Applicable Law, this Agree-
ment, any applicable collective bargaining agreement or a
binding written contract in effect on the date of this
Agreement;
(vii) change its method of doing business or change
any method or principle of accounting in a manner that is
inconsistent with past practice;
(viii) settle any Actions, whether now pending or here-
after made or brought involving an amount in excess of
$250,000;
(ix) modify, amend or terminate, or waive, release or
assign any material rights or claims with respect to, any
material Contract to which Uniroyal is a party or any
confidentiality agreement to which Uniroyal is a party;
(x) incur or commit to any capital expenditures,
obligations or liabilities in respect thereof, other than
in the ordinary course of business consistent with past
practice;
(xi) take any action to exempt under or make not sub-
ject to (x) Section 203 of the DGCL or (y) any other state
takeover law or state law that purports to limit or re-
strict business combinations or the ability to acquire or
vote shares, any person or entity (other than Crompton or
its subsidiaries) or any action taken thereby, which per-
son, entity or action would have otherwise been subject to
the restrictive provisions thereof and not exempt there-
from;
(xii) take any action that would reasonably be ex-
pected to result in the representations and warranties set
forth in Section 4.25 becoming false or inaccurate, or to
otherwise terminate, amend, modify or make inapplicable as
to any person or entity, the Uniroyal Rights Agreement or
redeem the rights issued thereunder;
(xiii) permit or cause any subsidiary to do any of the
foregoing or agree or commit to do any of the foregoing;
or
(xiv) agree in writing or otherwise to take any of the
foregoing actions.
(d) No Solicitation. Uniroyal agrees that, during
the term of this Agreement, it shall not, and shall not
authorize or permit any of its subsidiaries or any of its or
its subsidiaries' directors, officers, employees, agents or
representatives, directly or indirectly, to (i) solicit,
initiate, encourage or facilitate, or furnish or disclose non-
public information in furtherance of, any inquiries or the
making of any proposal with respect to any recapitalization,
merger, consolidation or other business combination involving
Uniroyal, or acquisition of any capital stock or any material
portion of the assets (except as set forth in Section 5.3(d) to
<PAGE>
the Uniroyal Disclosure Schedule and except for acquisition of
assets in the ordinary course of business consistent with past
practice) of Uniroyal, or any combination of the foregoing (a
"Uniroyal Competing Transaction"), (ii) negotiate, explore or
otherwise engage in discussions with any person (other than
Crompton, Subcorp or their respective directors, officers, em-
ployees, agents and representatives) with respect to any
Uniroyal Competing Transaction or (iii) enter into any agree-
ment, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the Merger or any other trans-
actions contemplated by this Agreement; provided that Uniroyal
may (i) furnish information to, and negotiate or otherwise
engage in discussions with, any party who delivers a written
proposal for a Uniroyal Competing Transaction if and so long as
the Board of Directors of Uniroyal determines in good faith by
a majority vote, based upon advice of its outside legal
counsel, that failing to take such action would reasonably be
expected to constitute a breach of the fiduciary duties of the
Board and determines in good faith by a majority vote that such
a proposal is more favorable to Uniroyal Stockholders in the
aggregate and from a financial point of view than the transac-
tions contemplated by this Agreement (including any adjustment
to the terms and conditions of such transactions proposed by
Crompton in response to such Uniroyal Competing Transaction)
and (ii) take a position with respect to the Merger or a
Uniroyal Competing Transaction, or amend or withdraw such
position, in compliance with Rule 14d-9 or Rule 14e-2
promulgated under the Exchange Act with regard to a Uniroyal
Competing Transaction. Uniroyal will immediately cease all
existing activities, discussions and negotiations with any
parties conducted heretofore with respect to any of the
foregoing. From and after the execution of this Agreement,
Uniroyal shall immediately advise Crompton in writing of the
receipt, directly or indirectly, of any inquiries, discussions,
negotiations, or proposals relating to a Uniroyal Competing
Transaction (including the status, but not the specific terms
thereof) and promptly furnish to Crompton a copy of any such
proposal or inquiry in addition to any information provided to
or by any third party relating thereto.
(e) Affiliates of Uniroyal. Uniroyal shall use its
reasonable best efforts to cause each such person who may be at
the Effective Time or was on the date hereof an "affiliate" of
Uniroyal within the meaning of Rule 145 under the Securities
Act, to execute and deliver to Crompton no less than 35 days
prior to the date of the meeting of Uniroyal Stockholders to
approve the Merger written undertakings in the form reasonably
acceptable to Crompton.
(f) Notification of Certain Matters. Uniroyal shall
give prompt notice to Crompton of (i) the occurrence or non-
occurrence of any event the occurrence or non-occurrence of
which would cause any Uniroyal representation or warranty con-
tained in this Agreement to be untrue or inaccurate at or prior
to the Effective Time and (ii) any material failure of Uniroyal
to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this
Section 5.3(f) shall not limit or otherwise affect the remedies
available hereunder to Crompton.
<PAGE>
ARTICLE VI
CONDITIONS
6.1 Mutual Conditions. The obligations of the par-
ties hereto to consummate the Merger shall be subject to ful-
fillment of the following conditions:
(a) No temporary restraining order, preliminary or
permanent injunction or other order or decree which pre-
vents the consummation of the Merger shall have been is-
sued and remain in effect, and no statute, rule or regu-
lation shall have been enacted by any Governmental Author-
ity which prevents the consummation of the Merger.
(b) All waiting periods applicable to the consumma-
tion of the Merger under the HSR Act shall have expired or
been terminated and all other material consents, approv-
als, permits or authorizations required to be obtained
prior to the Effective Time from any Governmental
Authority in connection with the execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby shall have been obtained.
(c) The Merger and the transactions contemplated
hereby shall have been approved by the Uniroyal Stock-
holders in the manner required by any Applicable Law.
(d) The Merger and the transactions contemplated
hereby shall have been approved by the Crompton
Stockholders in the manner required by any Applicable Law.
(e) The Commission shall have declared the Crompton
Registration Statement effective. On the Closing Date and
at the Effective Time, no stop order or similar restrain-
ing order shall have been threatened by the Commission or
entered by the Commission or any state securities admin-
istrator prohibiting the Merger.
(f) No Action shall be instituted by any Governmen-
tal Authority which seeks to prevent consummation of the
Merger or which seeks material damages in connection with
the transactions contemplated hereby which continues to be
outstanding.
(g) Crompton shall have received an opinion of
Wachtell, Lipton, Rosen & Katz and Uniroyal shall have
received an opinion of Skadden, Arps, Slate, Meagher &
Flom substantially to the effect that, on the basis of the
facts, representations and assumptions set forth in such
opinion which are consistent with the state of the facts
then existing, under Applicable Law, for Federal income
tax purposes, the Merger will constitute a reorganization
under Section 368(a) of the Code. In rendering such
opinions, Wachtell, Lipton, Rosen & Katz and Skadden,
Arps, Slate, Meagher & Flom may require and rely on
representations contained in certificates of Crompton,
<PAGE>
Uniroyal, Subcorp and others, as they deem reasonably
appropriate.
(h) Crompton shall have received a letter, in form
and substance reasonably satisfactory to Crompton, from
KPMG Peat Marwick LLP, dated the date of the Joint Proxy
Statement and confirmed in writing at the Effective Time,
stating that the Merger will qualify as a pooling of in-
terests transaction under Opinion 16 of the Accounting
Principles Board.
(i) Uniroyal shall have received a letter, in form
and substance reasonably satisfactory to Uniroyal, from
Deloitte & Touche LLP, dated the date of the Joint Proxy
Statement and confirmed in writing at the Effective Time,
stating that the Merger will qualify as a pooling of in-
terests transaction under Opinion 16 of the Accounting
Principles Board.
(j) The shares of Crompton Common Stock to be issued
in the Merger shall have been authorized for inclusion on
the NYSE, subject to official notice of issuance.
(k) Agreements with the officers of Uniroyal jointly
identified by Crompton and Uniroyal on the date hereof and
set forth in Section 5.2(f) to the Crompton Disclosure
Schedule shall have been executed substantially on the
terms set forth in the term sheets dated April 30, 1996,
signed by such officers.
6.2 Conditions to Obligations of Uniroyal. The
obligations of Uniroyal to consummate the Merger and the trans-
actions contemplated hereby shall be subject to the fulfillment
of the following conditions unless waived by Uniroyal:
(a) The representations and warranties of each of
Crompton and Subcorp set forth in Article III shall be
true and correct on the date hereof and on and as of the
Closing Date as though made on and as of the Closing Date
(except for representations and warranties made as of a
specified date, which need be true and correct only as of
the specified date), except for such inaccuracies which
have not had and would not reasonably be expected to have
in the reasonably foreseeable future a material adverse
effect on Crompton.
(b) Each of Crompton and Subcorp shall have per-
formed in all material respects each obligation and agree-
ment and shall have complied in all material respects with
each covenant to be performed and complied with by it
hereunder at or prior to the Effective Time.
(c) Each of Crompton and Subcorp shall have fur-
nished Uniroyal with a certificate dated the Closing Date
signed on behalf of it by the Chairman, President or any
Vice President to the effect that the conditions set forth
in Sections 6.2(a) and (b) have been satisfied.
(d) Each person who may be at the Effective Time or
<PAGE>
was on the date of this Agreement an "affiliate" of
Crompton within the meaning of Rule 145 under the Securi-
ties Act, shall have executed and delivered to Uniroyal at
least 35 days prior to the date of the meeting of Crompton
Stockholders to approve the Merger written undertakings in
the form reasonably acceptable to Uniroyal.
(e) Crompton shall have entered into satisfactory
arrangements with respect to the consolidated indebtedness
of the combined company.
6.3 Conditions to Obligations of Crompton and Sub-
corp. The obligations of Crompton to consummate the Merger and
the other transactions contemplated hereby shall be subject to
the fulfillment of the following conditions unless waived by
each of Crompton and Subcorp:
(a) The representations and warranties of Uniroyal
set forth in Article IV shall be true and correct on the
date hereof and on and as of the Closing Date as though
made on and as of the Closing Date (except for representa-
tions and warranties made as of a specified date, which
need be true and correct only as of the specified date),
except for such inaccuracies which have not had and would
not reasonably be expected to have in the reasonably
foreseeable future a material adverse effect on Uniroyal.
(b) Uniroyal shall have performed in all material
respects each obligation and agreement and shall have com-
plied in all material respects with each covenant to be
performed and complied with by it hereunder at or prior to
the Effective Time.
(c) Uniroyal shall have furnished Crompton with a
certificate dated the Closing Date signed on its behalf by
its Chairman, President or any Vice President to the ef-
fect that the conditions set forth in Sections 6.3(a) and
(b) have been satisfied.
(d) Each person who may be at the Effective Time or
was on the date of this Agreement an "affiliate" of
Uniroyal within the meaning of Rule 145 under the Securi-
ties Act, shall have executed and delivered to Crompton at
least 35 days prior to the date of the meeting of Uniroyal
Stockholders to approve the Merger written undertakings in
the form reasonably acceptable to Crompton.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated
at any time prior to the Effective Time, whether before or af-
ter approval and adoption of this Agreement by Uniroyal Stock-
holders and Crompton Stockholders:
(a) by mutual consent of Crompton and Uniroyal;
(b) by either Crompton or Uniroyal if any permanent
<PAGE>
injunction or other order or decree of a court or other
competent Governmental Authority preventing the con-
summation of the Merger shall have become final and non-
appealable, provided that the party seeking to terminate
this Agreement under Section 7.1(b) shall have used its
reasonable efforts to remove such injunction, order or
decree;
(c) by either Crompton or Uniroyal if the Merger
shall not have been consummated before December 31, 1996,
unless extended by the Boards of Directors of both
Crompton and Uniroyal (provided that the right to termi-
nate this Agreement under this Section 7.1(c) shall not be
available to any party whose failure or whose affiliate's
failure to perform any material covenant or obligation
under this Agreement has been the cause of or resulted in
the failure of the Merger to occur on or before such
date);
(d) by Crompton or Uniroyal if at the meeting of
Uniroyal Stockholders held for such purpose (including any
adjournment or postponement thereof) the requisite vote of
the Uniroyal Stockholders to approve the Merger and the
transactions contemplated hereby shall not have been
obtained;
(e) by Crompton or Uniroyal if the meeting of
Crompton Stockholders held for such purpose (including any
adjournment or postponement thereof) the requisite vote of
the Crompton Stockholders to approve the Merger and the
transactions contemplated hereby shall not have been
obtained;
(f) by Crompton or Uniroyal (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant or other agreement con-
tained herein) if there shall have been a material breach
of any of the covenants or agreements or any of the
representations or warranties set forth in this Agreement
on the part of the other party, which breach is not cured
within thirty (30) days following written notice given by
the terminating party to the party committing such breach,
or which breach, by its nature, cannot be cured prior to
the Closing; or
(g) by either Crompton or Uniroyal if the Board of
Directors of Uniroyal shall reasonably determine that a
Uniroyal Competing Transaction is more favorable to
Uniroyal Stockholders in the aggregate and from a
financial point of view than the transactions contemplated
by this Agreement and Uniroyal shall have delivered to
Crompton a written notice of the determination by the
Uniroyal Board of Directors to terminate this Agreement
pursuant to this Section 7.1(g); provided, however, that
Uniroyal may not terminate this Agreement pursuant to this
clause (g) unless (i) five business days shall have
elapsed after delivery to Crompton of the notice referred
to above, (ii) at the end of such five business-day period
the Uniroyal Board of Directors shall continue to believe
that such Uniroyal Competing Transaction is more favorable
<PAGE>
to Uniroyal Stockholders in the aggregate and from a
financial point of view than the transactions contemplated
by this Agreement, (iii) at the time of such termination,
Uniroyal shall have paid to Crompton the Termination Fee
and (iv) promptly thereafter Uniroyal shall enter into a
definitive acquisition, merger or similar agreement to
effect such Uniroyal Competing Transaction.
7.2 Effect of Termination.
(a) In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement, except for
the provisions of the last sentence of Section 5.1(g) and the
provisions of Sections 7.2 and 8.10, shall become void and have
no effect, without any liability on the part of any party or
its directors, officers or stockholders. Notwithstanding the
foregoing, nothing in this Section 7.2 shall relieve any party
to this Agreement of liability for a material breach of any
provision of this Agreement. If this Agreement is terminated
(i) by Crompton or Uniroyal pursuant to Section 7.1(g), (ii) by
Crompton pursuant to Section 7.1(c) if (A) Uniroyal's or
Uniroyal's affiliate's failure to perform any material covenant
or obligation under this Agreement has been the cause of or
resulted in the failure of the Merger to have occurred on or
before December 31, 1996 and (B) a Prior Event (as defined
below) shall have occurred prior to such termination and (C) a
Uniroyal Competing Transaction is consummated within one year
following such termination, (iii) by Crompton pursuant to
Section 7.1(f) if (A) Uniroyal's or Uniroyal's affiliate's
failure to perform any material covenant or obligation under
this Agreement is the basis for such termination and (B) a
Prior Event shall have occurred prior to such termination and
(C) a Uniroyal Competing Transaction is consummated within one
year following such termination or (iv) by Crompton or Uniroyal
pursuant to Section 7.1(d) if (A) a Prior Event shall have
occurred prior to such termination and (B) a Uniroyal Competing
Transaction is consummated within one year following such
termination; then in any such case Uniroyal will, in the case
of a termination by Crompton, within three business days
following, in the case of clause (i) of this paragraph, any
such termination or, in the case of clauses (ii), (iii) or (iv)
of this paragraph, the consummation of the Uniroyal Competing
Transaction, or, in the case of a termination by Uniroyal,
prior to, in the case of clause (i) of this paragraph, such
termination or, in the case of clause (iv) of this paragraph,
the consummation of the Uniroyal Competing Transaction, pay to
Crompton in cash by wire transfer in immediately available
funds to an account designated by Crompton a termination fee in
an amount equal to $50 million (the "Termination Fee").
(b) As used herein, a "Prior Event" shall mean any
of the following events:
(i) any person (other than Crompton or any of its
subsidiaries) shall have commenced (as such term is
defined in Rule 14d-2 under the Exchange Act), or shall
have filed a registration statement under the Securities
Act, with respect to, a tender offer or exchange offer to
purchase any shares of Uniroyal Common Stock such that,
<PAGE>
upon consummation of such offer, such person would
Beneficially Own (as defined below) or control 10% or more
of the then outstanding Uniroyal Common Stock;
(ii) Uniroyal or any of its subsidiaries shall have
entered into, authorized, recommended, proposed or pub-
licly announced an intention to enter into, authorize,
recommend, or propose, an agreement, arrangement or un-
derstanding with any person (other than Crompton or any of
its subsidiaries) to, or any person (other than Crompton
or any of its subsidiaries) shall have publicly announced
a bona fide intention to, (A) effect any Competing
Transaction, (B) purchase, lease or otherwise acquire 10%
or more of the assets of Uniroyal or any of its
subsidiaries or (C) purchase or otherwise acquire (in-
cluding by way of merger, consolidation, tender or ex-
change offer or similar transaction) Beneficial Ownership
of securities representing 10% or more of the voting power
of Uniroyal or any of its subsidiaries; or
(iii) any person (other than Crompton or any subsid-
iary of Crompton) shall have acquired Beneficial Ownership
or the right to acquire Beneficial Ownership of a number
of shares of Uniroyal Common Stock in addition to the
number of shares of Uniroyal Common Stock Beneficially
Owned by such person on the date hereof equal to 10% or
more of the voting power of Uniroyal.
(c) As used herein, the terms "Beneficial Ownership"
and "Beneficially Own" shall have the meanings ascribed to them
in Rule 13d-3 under the Exchange Act. As used herein, "person"
shall have the meaning specified in Sections 3(a)(9) and
13(d)(3) of the Exchange Act.
7.3 Amendment. This Agreement may be amended by the
parties hereto, by action taken or authorized by their respec-
tive Boards of Directors, at any time before or after adoption
of this Agreement by Uniroyal Stockholders or authorization of
issuance of shares of Crompton Common Stock in the Merger by
Crompton Stockholders, but after each such approval or
authorization, no amendment shall be made which by law requires
further approval or authorization by the Uniroyal Stockholders
or Crompton Stockholders, as the case may be, without such
further approval or authorization. Notwithstanding the
foregoing, this Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties
hereto.
7.4 Extension; Waiver. At any time prior to the
Effective Time, Crompton (with respect to Uniroyal) and
Uniroyal (with respect to Crompton and Subcorp) by action taken
or authorized by their respective Boards of Directors, may, to
the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of such
party, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on
the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument signed
<PAGE>
on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
8.1 Survival of Representations and Warranties. The
representations and warranties made herein by the parties here-
to shall not survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement of the parties here-
to, which by its terms contemplates performance after the Ef-
fective Time or the termination of this Agreement.
8.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if de-
livered personally, telecopied (which is confirmed) or dis-
patched by a nationally recognized overnight courier service to
the parties at the following addresses (or at such other ad-
dress for a party as shall be specified by like notice):
(a) if to Crompton or Subcorp:
Crompton & Knowles Corporation
One Station Place, Metro Center
Stamford, CT 06902
Attention: John T. Ferguson, II
Telecopy No.: (203) 353-5470
with a copy to
Edward D. Herlihy
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy No.: (212) 403-2000
(b) if to Uniroyal:
Uniroyal Chemical Corporation
Benson Road
Middlebury, CT 06749
Attention: Ira J. Krakower
Telecopy No.: (203) 573-4301
with a copy to
Joseph A. Coco
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telecopy No.: (212) 735-2000
8.3 Interpretation. When a reference is made in
this Agreement to an Article or Section, such reference shall
be to an Article or Section of this Agreement unless otherwise
indicated. The headings and the table of contents contained in
this Agreement are for reference purposes only and shall not
<PAGE>
affect in any way the meaning or interpretation of this Agree-
ment. When a reference is made in this Agreement to common
stock of Uniroyal or Crompton, as the case may be, or shares
thereof, such reference shall be deemed to include the
preferred share purchase rights issued pursuant to the Uniroyal
Rights Agreement or Crompton Rights Agreement, as the case may
be that trade together with such common stock. For the
purposes of any provision of this Agreement, a "material
adverse effect" with respect to any party shall be deemed to
occur if the aggregate consequences of all breaches and
inaccuracies of covenants and representations of such party and
its subsidiaries, taken as a whole, under this Agreement, when
read without any exception or qualification for a material ad-
verse effect, are reasonably likely to have a material adverse
effect on the assets, liabilities, results of operations,
business or financial condition of such party and its
subsidiaries, taken as a whole.
8.4 Counterparts. This Agreement may be executed in
counterparts, which together shall constitute one and the same
Agreement. The parties may execute more than one copy of the
Agreement, each of which shall constitute an original.
8.5 Entire Agreement. This Agreement (including the
documents and the instruments referred to herein) and the Con-
fidentiality Agreement constitute the entire agreement among
the parties and supersede all prior agreements and understand-
ings, agreements or representations by or among the parties,
written and oral, with respect to the subject matter hereof and
thereof.
8.6 Third Party Beneficiaries. Nothing in this
Agreement, express or implied, is intended or shall be con-
strued to create any third party beneficiaries, except for the
provisions of Sections 5.2(d), 5.2(e), 5.2(k) and 5.2(m) which
may be enforced by the beneficiaries thereof (the expenses,
including reasonable attorneys' fees, that may be incurred
thereby in enforcing such provisions to be paid by Crompton).
8.7 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of Dela-
ware without regard to principles of conflicts of law.
8.8 Specific Performance. The transactions contem-
plated by this Agreement are unique. Accordingly, each of the
parties acknowledges and agrees that, in addition to all other
remedies to which it may be entitled, each of the parties here-
to is entitled to a decree of specific performance, provided
that such party is not in material default hereunder.
8.9 Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be as-
signed by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of the
other parties. Subject to the preceding sentence, this Agree-
ment shall be binding upon, inure to the benefit of and be en-
forceable by the parties and their respective successors and
assigns.
8.10 Expenses. Subject to the provisions of Section
<PAGE>
7.2, Crompton and Uniroyal shall pay their own costs and
expenses associated with the transactions contemplated by this
Agreement, except that Uniroyal and Crompton shall share
equally (i) the filing fees in connection with the filing of
the Joint Proxy Statement and Registration Statement with the
Commission and (ii) the expenses incurred in connection with
printing and mailing the Joint Proxy Statement to the Crompton
Stockholders and Uniroyal Stockholders.
8.11 Incorporation of Disclosure Schedules. The
Uniroyal Disclosure Schedule and the Crompton Disclosure
Schedule are hereby incorporated herein and made a part hereof
for all purposes as if fully set forth herein.
8.12 Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other juris-
diction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
8.13 Subsidiaries. As used in this Agreement, the
word "subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or un-
incorporated, (i) of which such party directly or indirectly
owns or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect
a majority of the board of directors or others performing simi-
lar functions with respect to such corporation or other organi-
zation, or any organization of which such party is a general
partner and (ii) for purposes of Articles III and IV hereof,
that would constitute a "significant subsidiary" of such party
within the meaning of Rule 1-02 of Regulation S-X promulgated
by the Commission.
IN WITNESS WHEREOF, Crompton, Subcorp and Uniroyal
have signed this Agreement as of the date first written above.
CROMPTON & KNOWLES CORPORATION
By: /s/ V. A. Calarco
V. A. Calarco
TIGER MERGER CORP.
By: /s/ V. A. Calarco
V. A. Calarco
<PAGE>
UNIROYAL CHEMICAL CORPORATION
By: /s/ Robert J. Mazaika
Robert J. Mazaika<PAGE>
<PAGE>
Related Documents not Filed with the Merger Agreement
-----------------------------------------------------
1. UCC Disclosure Schedule to Merger Agreement
2. C & K Disclosure Schedule to Merger Agreement
3. UCC and C & K Estimates of fees in connection with the Merger
4. UCC and C & K Disclosure of Existing Debt
5. UCC and C & K Agreement with respect to certain Employee Benefit Payments
6. Press Release
Uniroyal Chemical Corporation agrees to furnish supplementally any of
the above Merger Agreement related documents to the Commission upon
request.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000858905
<NAME> UNIROYAL CHEMICAL CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-1-1995
<PERIOD-END> MAR-31-1996
<CASH> 21,747
<SECURITIES> 0
<RECEIVABLES> 175,673
<ALLOWANCES> 3,281
<INVENTORY> 198,464
<CURRENT-ASSETS> 443,590
<PP&E> 620,486
<DEPRECIATION> 234,657
<TOTAL-ASSETS> 1,197,502
<CURRENT-LIABILITIES> 280,233
<BONDS> 872,624
0
4,172
<COMMON> 254
<OTHER-SE> (303,958)
<TOTAL-LIABILITY-AND-EQUITY> 1,197,502
<SALES> 527,108
<TOTAL-REVENUES> 527,108
<CGS> 363,745
<TOTAL-COSTS> 466,733
<OTHER-EXPENSES> 1,551
<LOSS-PROVISION> 729
<INTEREST-EXPENSE> 53,296
<INCOME-PRETAX> 5,528
<INCOME-TAX> 2,210
<INCOME-CONTINUING> 3,318
<DISCONTINUED> 0
<EXTRAORDINARY> 304
<CHANGES> 0
<NET-INCOME> 3,014
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000862612
<NAME> UNIROYAL CHEMICAL CO INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-1-1995
<PERIOD-END> MAR-31-1996
<CASH> 21,747
<SECURITIES> 0
<RECEIVABLES> 175,673
<ALLOWANCES> 3,281
<INVENTORY> 198,464
<CURRENT-ASSETS> 443,590
<PP&E> 620,486
<DEPRECIATION> 234,657
<TOTAL-ASSETS> 1,197,502
<CURRENT-LIABILITIES> 280,233
<BONDS> 872,624
0
0
<COMMON> 1
<OTHER-SE> (299,533)
<TOTAL-LIABILITY-AND-EQUITY> 1,197,502
<SALES> 527,108
<TOTAL-REVENUES> 527,108
<CGS> 363,745
<TOTAL-COSTS> 466,733
<OTHER-EXPENSES> 1,551
<LOSS-PROVISION> 729
<INTEREST-EXPENSE> 53,296
<INCOME-PRETAX> 5,528
<INCOME-TAX> 2,210
<INCOME-CONTINUING> 3,318
<DISCONTINUED> 0
<EXTRAORDINARY> 304
<CHANGES> 0
<NET-INCOME> 3,014
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
