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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 10, 1996
----------------------
UNIROYAL TECHNOLOGY CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware
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(State of other jurisdiction of incorporation)
0-20686 65-0341868
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(Commission File Number) (IRS Employer Identification No.)
One Sarasota Tower, Suite 900
Two North Tamiami Trail
Sarasota, Florida 34236
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (941) 366-5282
--------------
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
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Item 5. Other Events.
Pursuant to an Asset Purchase Agreement, dated as of June 5,
1996 between Rubatex Corporation ("Rubatex") and Uniroyal Technology
Corporation (the "Company"), the Company sold substantially all of the assets
of its Ensolite Division to Rubatex for twenty-five million dollars
($25,000,000) consisting of cash in the amount of twenty million dollars
($20,000,000) and a promissory note of the parent of Rubatex in the amount of
five million dollars ($5,000,000). The transaction closed on June 10, 1996. A
copy of the Asset Purchase Agreement, without exhibits, is appended hereto as
Exhibit A. Unaudited proforma condensed financial information is appended
hereto as Exhibit B.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
UNIROYAL TECHNOLOGY CORPORATION
By:/s/ Oliver J. Janney
--------------------
Oliver J. Janney
Vice President, General
Counsel and Secretary
Dated: June 24, 1996
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EXHIBIT A
ASSET PURCHASE AGREEMENT
BETWEEN
RUBATEX CORPORATION
AND
UNIROYAL TECHNOLOGY CORPORATION
JUNE 5, 1996
CONFIDENTIAL
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CONTENTS
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Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Purchase and Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) Adjustment to Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(e) The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(f) Deliveries at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(g) Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. Representations and Warranties of the Seller . . . . . . . . . . . . . . . . . . . . 9
(a) Organization of the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Authorization of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(c) Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(d) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(e) Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(f) Division Subsidiaries and Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 10
(g) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(h) Events Subsequent to Most Recent Fiscal Year End . . . . . . . . . . . . . . . . . 11
(i) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(j) Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(k) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(l) Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(m) Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(n) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(o) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(p) Notes and Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(q) Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(r) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(s) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(t) Product Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(u) Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(v) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(w) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(x) Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(y) Environment, Health, and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(z) Certain Business Relationships With the Division . . . . . . . . . . . . . . . . . 20
(aa) Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(bb) Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4. Representations and Warranties of the Buyer . . . . . . . . . . . . . . . . . . . . 21
(a) Organization of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(b) Authorization of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(c) Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(d) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
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<TABLE>
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Section 5. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(c) Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(d) Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(e) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(f) Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(g) Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(h) Disclosure Schedule/Notice of Developments . . . . . . . . . . . . . . . . . . . . 23
(i) Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Litigation Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(d) Removal of Acquired Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(e) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(f) Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(g) Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(h) Buyer Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7. Conditions to Obligation to Close. . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Conditions to Obligation of the Buyer . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Conditions to Obligation of the Seller . . . . . . . . . . . . . . . . . . . . . . 29
Section 8. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . . . . . . . . 30
(a) Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . 30
(b) Indemnification Provisions for Benefit of the Buyer . . . . . . . . . . . . . . . . 30
(c) Indemnification Provisions for Benefit of the Seller . . . . . . . . . . . . . . . 32
(d) Matters Involving Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(e) Recoupment Under Buyer Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(f) Other Indemnification Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(a) Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(b) Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(a) Press Releases and Public Announcements . . . . . . . . . . . . . . . . . . . . . . 34
(b) No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(c) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(d) Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(e) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(f) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(g) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(h) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(i) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(j) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(k) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(l) Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
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<TABLE>
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(m) Incorporation of Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . 37
(n) Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(o) Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
EXHIBITS
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Exhibit A - Trade Payables, Inventory and Accounts Receivable
Exhibit B - Form of Buyer Note
Exhibit C - Form of Earn-Out Agreement
Exhibit D - Excluded Inventory and Accounts Receivable
Exhibit E - Bill of Sale and Intellectual Property Assignment Agreement
Exhibit F - Form of Assumption
Exhibit G - Allocation Schedule
Exhibit H - Historical Financial Statements
Exhibit I - Forms of Side Agreements
I-1 - Tolling Agreement
I-2 - Non-Compete Agreement
I-3 - Option for F270 Banbury
Exhibit J - Form of Opinion of Counsel to the Seller
Exhibit K - List of Assets
Exhibit L - List of Certain Software
SCHEDULES Disclosure Schedules to Representations and Warranties
1. Schedule 3(e) -- Liens
2. Schedule 3(f) -- Seller Subsidiaries
3. Schedule 3(h) -- Events Subsequent to the Most Recent Fiscal Year
4. Schedule 3(i) -- Undisclosed Liabilities
5. Schedule 3(k) -- Tax Matters
6. Schedule 3(l)(i) -- Liens on Intellectual Property
7. Schedule 3(l)(ii) -- Claims of Infringement
8. Schedule 3(l)(iii) -- Descriptions of Intellectual Property Used by
Division
9. Schedule 3(l)(iv) -- Intellectual Property Used by Division Under
License
10. Schedule 3(o) -- Contracts
11. Schedule 3(r) -- Description of Insurance Policies
12. Schedule 3(s) -- Litigation Information
13. Schedule 3(t) -- Product Warranty
14. Schedule 3(v) -- Employees
15. Schedule 3(w) -- Employee Benefit Plans
16. Schedule 3(x) -- Guaranties
17. Schedule 3(y) -- Environment, Health and Safety
18. Schedule 3(z) -- Business Relationships With Affiliates or 5%
Stockholders
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ASSET PURCHASE AGREEMENT
This Agreement is entered into as of June 5, 1996 by and
between Rubatex Corporation, a Delaware corporation (the "Buyer"), and Uniroyal
Technology Corporation (the "Seller"). The Buyer and the Seller are referred
to collectively herein as the "Parties."
This Agreement contemplates a transaction in which the Buyer
will purchase certain assets (and assume certain of the liabilities) of the
Ensolite Division of the Seller in return for cash, the Buyer Notes and the
Earn-Out Agreement.
Now, therefore, in consideration of the premises and the
mutual promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"Accredited Investor" has the meaning set forth in Regulation
D promulgated under the Securities Act (as set forth in 12 C.F.R. Section
230.501).
"Acquired Assets" means all right, title, and interest in and
to all of the assets constituting the Division, including all of its (a) assets
contained on the list of fixed assets attached hereto as Exhibit K, (b)
tangible personal property (such as machinery, equipment, manufactured and
purchased parts, inventories of raw materials and supplies, inventories of
spare parts, other inventories, goods in process, finished goods, furniture,
automobiles, trucks, tractors, trailers, tools, jigs, and dies), (c)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions, (d) agreements, contracts, indentures,
mortgages, instruments, Security Interests, guaranties, other similar
arrangements, and rights thereunder, (e) accounts, notes, and other
receivables, (f) securities, (g) claims, deposits, prepayments, refunds, causes
of action, rights of recovery, rights of set off, and rights of recoupment
(including any such item relating to the payment of Taxes), (h) franchises,
approvals, permits, licenses, orders, registrations, certificates, variances,
and similar rights obtained from governments and governmental agencies, (i)
books, records, ledgers, files, documents, correspondence, lists, plats,
architectural plans, drawings, and specifications, creative materials,
advertising and promotional materials, studies, reports, and other printed or
written materials, (j) leases and leasehold interests (with the exception of
the lease for the Division's Mishawaka, Indiana facility), (k) equipment that
is subject to master financing leases; provided, however, that the Acquired
Assets shall not include (i) the corporate charter, qualifications to conduct
business as a foreign corporation, arrangements with registered agents relating
to foreign qualifications, taxpayer and other identification numbers, seals,
minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the
Seller as a corporation, (ii) any of the rights of the Seller under this
Agreement (or under any side agreement between the Seller on the one hand and
the Buyer on the other hand entered into on or after the date of this
Agreement), (iii) the two banbury systems owned by the Division, (iv) the
Ensolite Plant, (v) any real property, (vi) any Intellectual Property that is
used by Seller in both the Division and divisions other than the Division
(provided, however, Seller shall grant to Buyer and its successors and assigns
a perpetual, non-exclusive license to use such Intellectual Property that is
used by both the Division and other divisions of Seller), or (vii) the trade
name "Uniroyal."
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and
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fees, including court costs and attorneys' fees and expenses. Adverse
Consequences shall not include the loss of customers arising from Buyer's
actions.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act (as set forth in 12
CFR Section 240.12b-2).
"Affiliated Group" means any affiliated group within the
meaning of Code Sec. 1504(a) or any similar group defined under a similar
provision of state, local, or foreign law.
"Assumed Liabilities" means (a) the Division's net trade
payables owed to third parties, in an amount to be determined as of Closing (as
disclosed on Exhibit A), (b) the Division's pending orders, in the amount that
exists as of Closing, (c) the Division's obligations with respect to the
contracts and agreements that are described on Schedule 3(o) and marked with an
asterisk (*) (but not the Division's obligations for (I) breaches of or
defaults under those contracts and agreements, with respect to any breaches or
defaults that occurred prior to the Closing, or (II) any agreements set forth
on Schedule 3(o) which are not marked with an asterisk), and (d) the Division's
obligations with respect to contracts and agreements that would be described in
Section 3(o) but for the low dollar amounts involved (but not the Division's
obligations for breaches of or defaults under those contracts and agreements,
with respect to any breaches or defaults that occurred prior to the Closing).
No other Liabilities shall be included in the definition of "Assumed
Liabilities" (and hence no other liabilities shall be assumed by Buyer.
Liabilities that are not "Assumed Liabilities" (and hence are not assumed by
Buyer) shall include (by way of example only): (i) any Liability of the Seller
for Taxes (ii) any obligation of the Seller to indemnify any Person by reason
of the fact that such Person was a director, officer, employee, or agent of the
Seller or was serving at the request of the Seller as a partner, trustee,
director, officer, employee, or agent of another entity (whether such
indemnification is for judgments, damages, penalties, fines, costs, amounts
paid in settlement, losses, expenses, or otherwise and whether such
indemnification is pursuant to any statute, charter document, bylaw, agreement,
or otherwise), (iii) any Liability of the Seller for costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, (iv) any Liability or obligation of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyer on
the other hand entered into on or after the date of this Agreement), (v) any
Liability or obligation of the Seller under any Employee Benefit Plan, (vi) any
other Liabilities of the Division, whether or not set forth on the face of the
Division's Most Recent Balance Sheet, (vii) any Liabilities of the Division
which have arisen after the Most Recent Fiscal Month End outside of the
Ordinary Course of Business, (viii) any Liability for the Division's payables
(other than the Division's trade payables owed to third parties), (ix) any
Liability arising from any Environmental Health and Safety Laws (including any
liabilities described in Section 3(y)(ii) of this Agreement); (x) any Liability
for the Division's intercompany debt; or (xi) any Liability for any labor
matters, including any collective bargaining agreement.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms or could form the
basis for any specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Buyer Note" has the meaning set forth in Section 2(c) below.
"Cash" means cash and cash equivalents (including marketable
securities and short term investments) calculated in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
<PAGE> 9
"Closing" has the meaning set forth in Section 2(e) below.
"Closing Date" has the meaning set forth in Section 2(e)
below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning
the businesses and affairs of the Division that is not already generally
available to the public.
"Controlled Group of Corporations" has the meaning set forth
in Code Sec. 1563.
"Deferred Intercompany Transaction" has the meaning set forth
in Treas. Reg. Section 1.1502-13.
"Disclosure Schedule" has the meaning set forth in Section 3
below.
"Division" means the Seller's Ensolite Division.
"Division Subsidiary" means any Subsidiary of the Seller
included within the Division.
"Earn-Out Agreement" has the meaning set forth in Section 2(c)
below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Sec. 3(1).
"Ensolite Plant" has the meaning set forth in Section 6(d)
below.
"Environmental, Health and Safety Laws" means all laws in
effect at the Closing Date (including rules, regulations, codes, permit
requirements, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state and local governments (and all agencies
thereof), and all common law, relating to pollution control and environmental
protection, public health and safety, or employee health and safety, including
(a) the Occupational Safety and Health Act of 1970, as amended, (b) all laws
relating to hazardous materials, (c) all laws relating to the emission,
release, threatened release, generation, use, collection, treatment, storage,
transportation, recovery, removal, discharge or disposal of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of hazardous materials, substances, wastes,
pollutants, contaminants, or chemical, industrial, or toxic materials or
wastes, (d) all laws relating to the generation, treatment, storage, discharge
or disposal of wastewaters as provided for under the Federal Clean Water Act,
as amended, 33 U.S.C. Section Section 1251 et seq., and any amendments thereto
and regulations thereunder, (e) all laws relating to the generation, treatment,
emission or discharge of atmospheric pollutants as provided for under the
Federal Clean Air Act, as amended, 42 U.S.C. Section Section 7401 et seq., and
any amendments thereto and regulations thereunder, (f) all laws relating to
Asbestos, (g) all laws relating to polychlorinated biphenyls ("PCBs"),
chlorofluorocarbons, and any other chemicals as provided for under the Federal
Toxic Substances and Control
<PAGE> 10
Act, 15 U.S.C. Section Section 2601 et seq., and any amendments thereto and
regulations thereunder, (h) all laws related to underground storage tanks, and
(i) the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, 42 U.S.C. Section Section 9601 et seq., and any amendments thereto and
regulations thereunder, and any analogous state laws ("CERCLA and State
Equivalents"). The term "Asbestos," as used herein, shall be as defined in 40
C.F.R. Section 61.141 (1995).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Excess Loss Account" has the meaning set forth in Treas. Reg.
Section 1.1502-19.
"Extremely Hazardous Substance" has the meaning set forth in
Sec. 302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Financial Statement" has the meaning set forth in Section
3(g) below.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Hazardous Materials" means materials defined as "hazardous
substances," "hazardous wastes," "hazardous constituents" or "solid wastes"
in, or with respect to which liability or standards of conduct are otherwise
imposed pursuant to: (i) CERCLA and State Equivalents and any amendments
thereto and regulations thereunder, (ii) the Resource Conservation and Recovery
Act, 42 U.S.C. Section Section 6901 et seq., and any amendments thereto and
regulations thereunder, or (iii) any other Environmental, Health and Safety
Laws.
"Indemnified Party" has the meaning set forth in Section 8(d)
below.
"Indemnifying Party" has the meaning set forth in Section
8(d) below.
"Intellectual Property" means:
(a) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof,
(b) all trademarks, service marks, logos, and trade names,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith,
(c) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith,
(d) all trade secrets and confidential business information
(including customer lists, ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals),
<PAGE> 11
(e) all computer software material to the operation of the
business of Ensolite (including, for such software: (A) data, (B) related
documentation, (C) all software necessary to operate the banburies and other
equipment, (D) the software enumerated in Exhibit L, (E) all computer software
installed on individual personal computers, (F) all computer software licenses,
(G) all original software diskettes in readable condition, (H) original and
complete software documentation, (I) all source code for any modifications made
to computer software subsequent to purchase from original vendors, including
functional and design specifications for the modifications, and (J) all user
and system documentation changes for any modifications),
(f) the Ensolite trade name,
(g) all other proprietary rights, and
(h) all copies and tangible embodiments thereof (in whatever
form or medium).
Intellectual property shall include the above items, regardless of whether they
are registered, licensed, or located in the United States or in a foreign
country.
"Knowledge" means actual knowledge after reasonable
investigation, by the following persons: Phil Foster, Joe Miller, Randy
Greenlee, Bill Faust, Jim Long, Trey Moody, Loren Rice, Neil Benham, Howard R.
Curd, Robert Soran, George Zulanas, Oliver Janney, Martin Gutfreund and R.
David Bustard.
"Liability" means any liability, loss, or cost (whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due), including any liability for Taxes.
"Most Recent Balance Sheet" means the balance sheet contained
within the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth
in Section 3(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in
Section 3(g) below.
"Most Recent Fiscal Year End" has the meaning set forth in
Section 3(g) below.
"Multiemployer Plan" has the meaning set forth in ERISA Sec.
3(37).
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Post-Closing Tax Period" means, for any taxable period which
includes but does not end on the Closing Date, the period beginning with the
day after the Closing Date and ending with the last day of such
<PAGE> 12
taxable period.
"Pre-Closing Tax Period" means, for any taxable period which
includes but does not end on the Closing Date, the period beginning with the
first day of such taxable period and ending with (and including) the Closing
Date.
"Process Agent" has the meaning set forth in Section 10(o)
below.
"Production" has the meaning ascribed to it in the Toll
Manufacturing Agreement.
"Prohibited Transaction" has the meaning set forth in ERISA
Sec. 406 and Code Sec. 4975.
"Purchase Price" has the meaning set forth in Section 2(c)
below.
"Reportable Event" has the meaning set forth in ERISA Sec.
4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable,
(c) purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business
and not incurred in connection with the borrowing of money.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors.
"Seller" has the meaning set forth in the preface above.
"Tax" means any (A) federal, state, local or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit, environmental, customs,
duties, real property, personal property, capital stock, social security,
unemployment, disability, payroll, license, employee or other withholding, or
other tax, of any kind whatsoever, including any interest, penalties or
additions to tax or additional amounts in respect of the foregoing; (B)
liability of Seller for the payment of any amounts of the type described in
clause (A) arising as a result of being (or ceasing to be) a member of any
Affiliated Group (or being included (or required to be included) in any Tax
Return relating thereto); and (C) liability of Seller for the payment of any
amounts of the type described in clause (A) as a result of any express or
implied obligation to indemnify or otherwise assume or succeed to the liability
of any other person;
"Tax Returns" means returns, declarations, reports, claims for
refund, information returns or other documents (including any related or
supporting schedules, statements or information) filed or required to be filed
in connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Third Party Claim" has the meaning set forth in Section 8(d)
below.
<PAGE> 13
"Toll Manufacturing Agreement" means that certain Toll
Manufacturing Agreement between Buyer and Seller attached hereto as Exhibit
I-1.
2. BASIC TRANSACTION.
1. Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase
from the Seller, and the Seller agrees to sell, transfer,
convey, and deliver to the Buyer, all of the Acquired Assets
at the Closing for the consideration specified below in this
Section 2.
2. Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and
become responsible for all of the Assumed Liabilities at the
Closing. The Buyer will not assume or have any
responsibility, however, with respect to any other obligation
or Liability of the Seller not included within the definition
of Assumed Liabilities.
3. Purchase Price.
(i) The Buyer agrees to pay to the Seller at the
Closing $25 million (the "Purchase Price") by delivery of (x) a promissory note
from Buyer's affiliate, RBX Group, Inc. (the "Buyer Note") in the form of
Exhibit B attached hereto in the principal amount of $5 million, and (y) cash
for the balance of the Purchase Price payable by wire transfer or delivery of
other immediately available funds.
(ii) The Buyer shall be permitted, at Closing, to
withhold from the Purchase Price, an amount equal to the replacement cost of
any Acquired Assets for which title is not delivered on or before the Closing
Date. In the event that title is not delivered within sixty (60) days from the
Closing Date, Buyer shall be permitted to (x) forgo purchasing such asset from
Seller and (y) a payment from Seller to Buyer shall be made by Seller in the
event that the actual cost of acquiring such equipment exceeds the replacement
cost.
(iii) As of the date of execution of this
Agreement, Buyer shall also be permitted to hold-back $200,000 for granulator,
ribbon blender, and batch controller pending Seller's acquisition of title to
such assets. In the event Seller obtains title to such assets on or before the
Closing Date, title shall be transferred to the Buyer at Closing, and this
holdback provision shall be null and void. In the event Seller does not
provide title to these assets or comparable assets (as determined in
thereasonable satisfaction of the Buyer) within sixty (60) days from theClosing
Date, Buyer shall be permitted to not pay to Seller any of the $200,000
withheld pursuant to the preceding sentence. Notwithstanding the foregoing
sentence, at the end of the above-described 60-day period, Buyer shall be
required to elect, with respect to each of the granulator, ribbon blender, and
batch controller, either (i) to relinquish possession of the asset to Seller or
(ii) to pay the Seller for the asset. The holdback for these specific items in
this subparagraph (iii) is the sole holdback remedy for these items, and
subparagraph (ii) above shall not apply.
(iv) In addition, there shall be an earn-out,
pursuant to which Buyer may pay additional amounts to Seller; the terms of the
earn-out are contained in the Earn-out Agreement attached hereto as Exhibit C
(the "Earn-Out Agreement"). The Purchase Price shall be adjusted in the
manner described in Section 2(d) below.
<PAGE> 14
4. Adjustment to Purchase Price.
(i) The Purchase Price is based on an assumption
that net inventories equal $2,597,000 as of the Closing Date, net accounts
receivable equal $2,893,000 as of the Closing Date, and net trade payables to
third parties equal $1,544,429 as of the Closing Date. The Purchase Price
shall be: (A) increased by the amount by which net inventories exceed
$2,597,000 as of the Closing Date (or decreased by the amount by which net
inventories are less than $2,597,000), (B) increased by the amount by which net
accounts receivable exceed $2,893,000 as of the Closing Date (or decreased by
the amount by which net accounts receivable are less than $2,893,000), and (C)
decreased by the amount by which net trade payables to third parties exceed
$1,544,429 as of the Closing Date (or increased by the amount by which net
trade payables to third parties are less than $1,544,429).
(ii) Within ten (10) days after the Closing Date,
Seller shall provide to Buyer the information necessary for Buyer to commence
calculation of the adjustments required by this Section 2(d).
(iii) The adjustment to the Purchase Price shall be
calculated within 30 days of the Closing Date by Buyer's accountants (unless
extended mutually by Buyer because Seller has not provided the information
necessary to commence calculations as set forth in the preceding paragraph).
As soon as practicable after the completion of the review by Buyer's
Accountants, Buyer will deliver to Seller a notice describing the adjustment to
the Purchase Price. If the Seller has objections to the adjustment, Seller
will deliver a detailed statement describing its objections to the Buyer within
20 days after receiving the notice from Buyer. The Buyer and the Seller will
use reasonable efforts to resolve any such objections themselves. If the
Parties do not obtain a final resolution within 30 days after the Buyer has
received the statement of objections, however, the Buyer and Seller will select
a nationally recognized accounting firm mutually acceptable to them to resolve
any remaining objections. The determination of an accounting firm so selected
will be set forth in writing and will be conclusive and binding upon the
Parties.
(iv) Once Buyer and Seller reach agreement as to
the adjustment to the Purchase Price (or an accounting firm determines the
amount of adjustment, in the event of a lack of agreement), the adjustment to
the Purchase Price shall be made as follows:
(x) if the payment is by Buyer to Seller, the
payment shall be made in cash as soon as practicable.
(y) if the payment is by Seller to Buyer and the
payment amount is less than an amount equal to $2 million minus the amount (if
any) that Buyer has recouped against the Buyer Note for amounts due under the
Toll Manufacturing Agreement (the "Net Adjustment Amount"), then the payment
shall be made by recoupment against the Buyer Note.
(z) if the payment is by Seller to Buyer and the
payment amount is greater than the Net Adjustment Amount, then payment
shall be made as follows:
(A) payment of an amount equal to the
Net Adjustment Amount shall be made by recoupment against the
Buyer Note, and
(B) payment of the remainder shall be
made in cash as soon as practicable (provided, however, at
Buyer's option, payment of the remainder may be made by
recoupment against the Buyer Note).
For purposes of this section, the Seller represents and covenants that the net
inventories, net accounts
<PAGE> 15
receivable, and net trade payables to third parties are set forth and will be
maintained at their net realizable value, as defined by GAAP applied on a
consistent basis. The inventories and accounts receivable contain several
items that are not suitable for transfer to Buyer. Such items, which are
described on Exhibit D (as such exhibit may be modified as provided therein),
shall not be included in the calculation of inventory or accounts receivable as
of Closing.
5. The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices
of Kirkland & Ellis in New York City commencing at 8:00 a.m.
local time on the second business day following the
satisfaction or waiver of all conditions to the obligations of
the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective
Parties will take at the Closing itself) or such other date as
the Parties may mutually determine (the "Closing Date"). For
purposes of allocating income earned and Liabilities incurred,
the Closing shall be deemed to occur as of 5:00 Pm Eastern
Time on the Closing Date.
6. Deliveries at the Closing. At the Closing, (i) the Seller
will deliver to the Buyer the various certificates,
instruments, and documents referred to in Section 7(a) below;
(ii) the Buyer will deliver to the Seller the various
certificates, instruments, and documents referred to in
Section 7(b) below; (iii) the Seller will execute,
acknowledge, and deliver to the Buyer (A) assignments
(including Intellectual Property transfer documents) in the
forms attached hereto as Exhibit E, and (B) such other
instruments of sale, transfer, conveyance, and assignment as
the Buyer and its counsel may request; (iv) the Buyer will
execute, acknowledge, and deliver to the Seller (A) an
assumption in the form attached hereto as Exhibit F and (B)
such other instruments of assumption as the Seller and its
counsel may request; and (v) the Buyer will deliver to the
Seller the consideration specified in Section 2(c) above.
7. Allocation. A schedule containing a preliminary allocation of
the Purchase Price is attached hereto as Exhibit G. This
Schedule has been prepared in accordance with Section
6(g)(iii), and will be updated within 90 days after the
Closing pursuant to Section 6(g)(iii).
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents
and warrants to the Buyer that the statements contained in this
Section 3 are correct and complete as of the date of this Agreement
and will be and are correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this Section 3), except as set
forth in the disclosure schedule accompanying this Agreement and
initialed by the Parties (the " Disclosure Schedule"). The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Section 3.
1. Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation.
2. Authorization of Transaction. The Seller has full power and
authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its
obligations hereunder. Without limiting the generality of the
foregoing, the board of directors of the Seller has duly
authorized the execution, delivery, and performance of this
Agreement by the Seller, and the shareholders of Seller do not
need to authorize the execution, delivery and performance of
this Agreement. This Agreement constitutes the valid and
legally binding obligation of the Seller, enforceable in
accordance with its terms and conditions.
3. Noncontravention. Neither the execution and the delivery of
this Agreement, nor the
<PAGE> 16
consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in
Section 2 above), will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government, governmental
agency, or court to which the Seller is subject or any
provision of the charter or bylaws of the Seller, or (ii)
conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Seller is a
party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest
upon any of its assets). Except for a notice to the Antitrust
Division of the United States Department of Justice and its
Hart Scott Rodino filing with the Federal Trade Commission,
the Seller need not give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement
(including the assignments and assumptions referred to in
Section 2 above).
4. Brokers' Fees. The Seller has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this
Agreement for which the Buyer could become liable or
obligated.
5. Title to Assets. As of Closing, the Seller will have good and
marketable title to, or a valid leasehold interest in, the
properties and assets used by it, located on their premises,
or shown on the Most Recent Balance Sheet or acquired after
the date thereof, free and clear of all Security Interests,
except for properties and assets disposed of in the Ordinary
Course of Business since the date of the Most Recent Balance
Sheet. Without limiting the generality of the foregoing, as
of Closing the Seller will have good and marketable title to
all of the Acquired Assets, free and clear of any Security
Interest or restriction on transfer. The Acquired Assets, the
Banbury described in the Option (a copy of which is attached
to this Agreement as Exhibit I-3), and the Banbury remaining
with the Seller, together, consist of all of the necessary
assets to produce Ensolite material.
6. Division Subsidiaries and Subsidiaries. Seller does not have
any Division Subsidiaries or Subsidiaries.
7. Financial Statements. Attached hereto as Exhibit H are the
following financial statements (collectively the "Financial
Statements"): (i) unaudited consolidated and consolidating
balance sheets and statements of income, changes in control
account, and cash flow as of and for the fiscal years ended
September 26, 1993, October 2, 1994, and October 1, 1995 (the
"Most Recent Fiscal Year End") for the Division and the
Seller; and (ii) unaudited consolidated and consolidating
balance sheets and statements of income, and cash flow (the
"Most Recent Financial Statements") as of and for: (A) the
Closing Date, and (B) the seven months ended April 28, 1996
(the "Most Recent Fiscal Month End") for the Division. The
Financial Statements (including the notes to Seller's
financial statements) have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of the
Division as of such dates and the results of operations of the
Division for such periods, are, to Seller's Knowledge, correct
and complete, and are consistent with the books and records of
the Division (which books and records are correct and
complete).
8. Events Subsequent to Most Recent Fiscal Year End. Since the
Most Recent Fiscal Year End,
<PAGE> 17
there has not been any material adverse change in the
business, financial condition, operations, results of
operations, Acquired Assets, or properties of the Division
(provided, however, in no event shall a material adverse
change be deemed to occur in the event that any Division
customers become customers of Buyer or any of Buyer's
Affiliates). Without limiting the generality of the
foregoing, since that date (except as disclosed on Schedule
3(h)):
1. the Division has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible,
other than for a fair consideration in the Ordinary
Course of Business;
2. the Division has not entered into any agreement,
contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) (A)
involving more than $50,000, (B) that requires
performance for a period longer than three months, or
(C) that is outside the Ordinary Course of Business;
3. no party (including the Division) has accelerated,
terminated, modified, or cancelled any agreement,
contract, lease, or license (or series of related
agreements, contracts, leases, and licenses)
involving more than $50,000 to which the Division is
a party or by which it is bound;
4. the Division has not imposed any Security Interest
upon any of its assets, tangible or intangible.
5. the Division has not made any capital expenditure (or
series of related capital expenditures) involving
more than $50,000;
6. the Division has not made any capital investment in,
any loan to, or any acquisition of the securities or
assets of, any other Person (or series of related
capital investments, loans, and acquisitions)
involving more than $50,000;
7. the Division has not issued any note, bond, or other
debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or
capitalized lease obligation outside the Ordinary
Course of Business;
8. the Division has not delayed or postponed the payment
of accounts payable and other Liabilities outside the
Ordinary Course of Business;
9. the Division has not cancelled, compromised, waived,
or released any right or claim (or series of related
rights and claims) involving more than $50,000;
10. the Division has not granted any license or
sublicense of any rights under or with respect to any
Intellectual Property;
11. the Division has not experienced any material damage,
destruction, or loss (whether or not covered by
insurance) to its property;
12. the Division has not made any loan to, or entered
into any other transaction with, any of the
directors, officers, and employees of the Seller
outside the Ordinary Course of Business;
13. the Division has not granted any increase in the base
compensation or other cash
<PAGE> 18
compensation of any of the directors, officers, and
employees of the Seller outside the Ordinary Course
of Business (with the exception of any increases that
may be granted in order to retain the employment
services of persons through the term of the Toll
Manufacturing Agreement or any portion thereof);
14. neither the Seller nor the Division has adopted,
amended, modified, or terminated any bonus,
profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of the
directors, officers, and employees of the Seller (who
are employed by the Division), or taken any such
action with respect to any other Employee Benefit
Plan (with the exception of any incentive plans that
may be adopted in order to retain the employment
services of persons through the term of the Toll
Manufacturing Agreement);
15. the Division has not made any other change in
employment terms for any of the directors, officers,
and employees of the Seller (who are employed by the
Division) outside the Ordinary Course of Business
(except as may be made in order to retain the
employment services of persons through the term of
the Toll Manufacturing Agreement or any portion
thereof);
16. the Division has not made or pledged to make any
charitable or other capital contribution outside the
Ordinary Course of Business;
17. the Division has not paid any amount to any third
party with respect to any Liability or obligation
(including any costs and expenses the Seller has
incurred or may incur in connection with this
Agreement and the transactions contemplated hereby)
which would not constitute an Assumed Liability if in
existence as of the Closing;
18. there has not been any other occurrence, event,
incident, action, failure to act, or transaction
outside the Ordinary Course of Business involving the
Division; and
19. the Division has not committed to any of the
foregoing.
9. Undisclosed Liabilities. The Division does not have any
material Liability (and there is no Basis for any present or
future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against it giving rise to
any material Liability), except for (i) Liabilities set forth
on the face of the Most Recent Balance Sheet (rather than in
any notes thereto) and (ii) Liabilities which have arisen
after the Most Recent Fiscal Month End in the Ordinary Course
of Business (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach
of contract, breach of warranty, tort, infringement, or
violation of law).
10. Legal Compliance. The Division has materially complied with
all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against the
Division or the Seller alleging any failure so to comply.
11. Tax Matters.
<PAGE> 19
(i) Seller has timely filed all Tax Returns required to
be filed by it with respect to the Division, each such Tax Return has
been prepared in compliance with all applicable laws and regulations,
and all such Tax Returns are true and accurate in all material
respects. All Taxes due and payable by Seller with respect to the
Division have been paid.
(ii) Except as set forth in Schedule 3(k) attached hereto,
(A) no deficiency or proposed adjustment which has not been settled or
otherwise resolved for any amount of Tax has been proposed, asserted
or assessed by any taxing authority against Seller with respect to the
Division, and there is no action, suit, taxing authority proceeding or
audit now in progress, pending or, to Seller's knowledge, threatened
against or with respect to the Division; (B) with respect to the
Division, Seller has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third
party; (C) there are no liens for Taxes (other than for current Taxes
not yet due and payable) upon the Acquired Assets; and (D) the Assumed
Liabilities do not include any obligation to make any payments that
will be nondeductible under Section 280G of the Code (or any
corresponding provision of state, local or foreign income Tax law).
12. Intellectual Property.
1. The Division owns or has the right to use pursuant to
ownership, license, sublicense, agreement, or
permission of all Intellectual Property (with the
exception of software on the Division's personal
computers, with respect to which Seller does not make
this representation) necessary for the operation of
its businesses as presently conducted. Each item of
Intellectual Property owned or used by the Division
immediately prior to the Closing hereunder will be
owned or available for use by the Buyer on identical
terms and conditions immediately subsequent to the
Closing hereunder. The Division has taken all
necessary action to maintain and protect each
material item of Intellectual Property that it uses
in its business.
2. The Division has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with
any Intellectual Property rights of third parties,
and none of the officers (and employees with
responsibility for Intellectual Property matters) of
the Seller has ever received any charge, complaint,
claim, demand, or notice alleging any such
interference, infringement, misappropriation, or
violation (including any claim that the Division must
license or refrain from using any Intellectual
Property rights of any third party). To the
Knowledge of the Division's officers (and employees
with responsibility for Intellectual Property
matters) of the Seller, no third party has interfered
with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property
rights of the Division.
3. Section 3(l)(iii) of the Disclosure Schedule
identifies each patent or registration which has been
issued to the Division with respect to any of its
Intellectual Property, identifies each pending patent
application or application for registration which the
Division has made with respect to any of its
Intellectual Property, and identifies each license,
agreement, or other permission which the Division has
granted to any third party with respect to any of its
Intellectual Property (together with any exceptions).
The Seller has delivered to the Buyer correct and
complete copies of all such patents, registrations,
applications, licenses, agreements, and permissions
(as amended to date) and has made available to the
Buyer correct and complete copies of all other
written documentation evidencing ownership and
prosecution (if applicable) of each
<PAGE> 20
such item. Section 3(l)(iii) of the Disclosure Schedule also
identifies (x) each trade name or unregistered trademark used by the
Division in connection with any of its businesses, (y) in a
non-confidential manner, trade secrets used by the Division in
connection with the production of Ensolite material, and (z) all
computer software used by the Division. With respect to each item of
Intellectual Property required to be identified in Section 3(l)(iii)
of the Disclosure Schedule:
(1) the Division and Seller possess all right, title, and interest
in and to each item that Seller represents that it owns, free
and clear of any Security Interest, license, or other
restriction; and the Division and Seller possess the rights to
use each item which Seller represents that the Division uses
pursuant to license, sublicense, agreement, or permission;
(2) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(3) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the Knowledge of
any of the directors and officers (and employees with
responsibility for Intellectual Property matters) of the
Seller, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(4) the Division has not ever agreed to indemnify any Person for
or against any interference, infringement, misappropriation,
or other conflict with respect to the item.
4. Section 3(l)(iv) of the Disclosure Schedule identifies each item of
Intellectual Property that any third party owns and that the Division
uses pursuant to license, sublicense, agreement, or permission. The
Seller has delivered to the Buyer correct and complete copies of all
such licenses, sublicenses, agreements, and permissions (as amended to
date). With respect to each item of Intellectual Property required to
be identified in Section 3(l)(iv) of the Disclosure Schedule, to the
best of Seller's Knowledge and belief:
(1) the license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable, and in full force
and effect;
(2) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable,
and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in
Section 2 above);
(3) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or
acceleration thereunder;
(4) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
<PAGE> 21
(5) with respect to each sublicense, the representations
and warranties set forth in subsections (A) through
(D) above are true and correct with respect to the
underlying license;
(6) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(7) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to
the Knowledge of any of the directors and officers
(and employees with responsibility for Intellectual
Property matters) of the Seller, is threatened which
challenges the legality, validity, or enforceability
of the underlying item of Intellectual Property; and
(8) the Division has not granted any sublicense or
similar right with respect to the license,
sublicense, agreement, or permission.
5. The Division will not interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of third parties as a result of
the continued operation of its businesses as presently
conducted.
6. None of the officers (and employees with responsibility for
Intellectual Property matters) of the Seller has any Knowledge
of any new products, inventions, procedures, or methods of
manufacturing or processing that Seller has developed which
reasonably could be expected to supersede or make obsolete any
product or process of the Division.
7. For the software listed on Exhibit L and for software material
to the operation of Ensolite, (x) the computer software that
is installed on the Division personal computers is in working
order and the licenses for the computer software are current
and all applicable maintenance fees have been paid through the
date of the Closing (including user and development licenses);
(y) the Division has in its possession the original software
diskettes in readable condition and the original documentation
is complete and in good condition, and (z) in the event that
the original software diskettes and documentation cannot be
located, Seller will obtain the same from the appropriate
vendor and transfer these items to Buyer at or promptly after
the Closing.
13. Tangible Assets. The Division and Seller own or lease all machinery,
equipment, and other tangible assets necessary for the conduct of the
Division's businesses as presently conducted and as presently proposed
to be conducted. Each such tangible asset is suitable for the purpose
for which it is used, has been maintained in good operating condition
and repair, is in good operating condition and repair (subject to
normal wear and tear), and is suitable for the purposes for which it
is used.
14. Inventory. The inventory of the Division (that is included in the
Acquired Assets) is merchantable and fit for the purpose for which it
was procured or manufactured, and none of it is obsolete, damaged, or
defective, subject only to the reserve for inventory writedown set
forth on the face of the Most Recent Balance Sheet as adjusted for the
passage of time through the Closing Date in accordance with the past
custom and practice of the Division.
<PAGE> 22
15. Contracts. Section 3(o) of the Disclosure Schedule lists the
following contracts and other agreements to which the Division is a
party or to which the Division is subject:
1. any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease
payments in excess of $50,000 per annum;
2. any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or
receipt of services, the performance of which will extend over
a period of more than one year, result in a loss to the
Division, or involve consideration in excess of $50,000;
3. any agreement concerning a partnership or joint venture;
4. any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in
excess of $50,000 or under which it has imposed a Security
Interest on any of its assets, tangible or intangible;
5. any agreement concerning confidentiality or noncompetition;
6. any agreement involving the Seller or the Division, which
agreements apply to the Division or may reasonably be expected
to apply to the Division;
7. any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan
or arrangement for the benefit of the current or former
directors, officers, and employees of the Seller for which the
Division is or may be responsible;
8. any collective bargaining agreement, which agreement applies
to the Division or may reasonably be expected to apply to the
Division;
9. any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing
annual compensation in excess of $50,000 or providing
severance benefits;
10. any agreement under which the Division has advanced or loaned
any amount to any of the directors, officers, and employees of
the Seller or Division outside the Ordinary Course of
Business, which agreements apply to the Division or may
reasonably be expected to apply to the Division;
11. any agreement under which the consequences of a default or
termination could have a material adverse effect on the
business, financial condition, operations, and results of
operations of the Division; or
12. any other agreement (or group of related agreements) the
performance of which involves consideration in excess of
$50,000.
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 3(o) of the Disclosure Schedule (as amended
to date) and a written summary setting forth the terms and conditions
<PAGE> 23
of each oral agreement referred to in Section 3(o) of the Disclosure Schedule.
With respect to each such agreement: (A) the agreement is legal, valid,
binding, enforceable, and in full force and effect; (B) the agreement will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in Section 2
above); (C) to the best of Seller's Knowledge, no party is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (D) no party has repudiated any
provision of the agreement. In addition, with respect to the Astroturf and
Stearns agreements listed in Schedule 3(o)(xii):
(i) Seller's profit margins for products that have been sold
pursuant to the Astroturf and Stearns contracts through the date of
execution of this Agreement are at least as great as Seller's average
profit margins for sales of comparable products produced in fiscal
year 1995, and
(ii) with respect to products addressed by the Astroturf and
Stearns contracts that have not been sold, Seller's anticipated profit
margins (as of the time of the signing of the Astroturf and Stearns
contracts through Closing), given Seller's cost structure as it
existed and was known at the time of the execution of the Astroturf
and Stearns contracts through Closing, was at least as great as
Seller's average profit margins for sales of comparable products
produced in fiscal year 1995.
16. Notes and Accounts Receivable. All notes and accounts
receivable of the Division are reflected properly on the
Division's books and records, are valid receivables, are
subject to no setoffs or counterclaims, are current and
collectible (subject to the reserves reflected on the
Division's books and records and Most Recent Balance Sheet),
and will be collected in accordance with their terms at their
recorded amounts set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) as adjusted
for the passage of time through the Closing Date in accordance
with the past custom and practice of the Division.
17. Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Division.
18. Insurance. Section 3(r) of the Disclosure Schedule sets forth
the following information with respect to each insurance
policy (including policies providing property, casualty,
liability, and workers' compensation coverage and bond and
surety arrangements) to which the Division has been a party, a
named insured, or otherwise the beneficiary of coverage at any
time since September 27, 1992:
1. the name, address, and telephone number of the
broker;
2. the name of the insurer, the name of the
policyholder, and the name of each covered insured;
3. the policy number and the period of coverage;
4. the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other
basis) and amount (including a description of how
deductibles and ceilings are calculated and operate)
of coverage; and
5. a description of any retroactive premium adjustments
or other loss-sharing arrangements.
<PAGE> 24
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms immediately following the consummation of the transactions
contemplated hereby; (C) neither the Division nor any other party to the policy
is in breach or default (including with respect to the payment of premiums or
the giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (D) no party
to the policy has repudiated any provision thereof. The Division has been
covered from September 27, 1992 to the Closing Date by insurance in scope and
amount customary and reasonable for the businesses in which it has engaged
during the aforementioned period. Section 3(r) of the Disclosure Schedule
describes any self-insurance arrangements affecting the Division.
19. Litigation. Section 3(s) of the Disclosure Schedule sets
forth each instance in which the Division (i) is subject to
any outstanding injunction, judgment, order, decree, ruling,
or charge or (ii) is a party or, to the Knowledge of any the
officers (and employees with responsibility for litigation
matters) of the Seller, is threatened to be made a party to
any action, suit, proceeding, hearing, or investigation of,
in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction
or before any arbitrator. None of the actions, suits,
proceedings, hearings, and investigations set forth in Section
3(s) of the Disclosure Schedule could result in any material
adverse change in the business, financial condition,
operations, or results of operations of the Division. None of
the officers (and employees with responsibility for litigation
matters) of the Seller has any reason to believe that any such
action, suit, proceeding, hearing, or investigation may be
brought or threatened against the Division.
20. Product Warranty. Each product manufactured, sold, leased, or
delivered by the Division has been in material conformity with
all applicable contractual commitments and all express and
implied warranties, except where waived by the purchaser
thereof (and where such waiver is valid, enforceable, and
memorialized in writing, is not subject to cancellation or
rescission by the purchaser or by any other party, and
complies with all applicable laws regarding the waiver of
warranties). The Division does not have any Liability (and
there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim,
or demand against it giving rise to any Liability) for
replacement or repair thereof or other damages in connection
therewith (including no Liability that might arise from a
purchaser's rescission of a waiver of a warranty or a
purchaser's denial of having waived a warranty), subject only
to the reserve for product warranty claims set forth on the
face of the Most Recent Balance Sheet (rather than in any
notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice
of the Division. No product manufactured, sold, leased, or
delivered by the Division is subject to any guaranty,
warranty, or other indemnity beyond the applicable standard
terms and conditions of sale or lease. Section 3(t) of the
Disclosure Schedule includes copies of the standard terms and
conditions of sale or lease for each of the Division's
products (containing applicable guaranty, warranty, and
indemnity provisions).
21. Product Liability. The Division does not have any Liability
(and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim,
or demand against it giving rise to any Liability) arising out
of any injury to individuals or property as a result of the
ownership, possession, or use of any product manufactured,
sold, leased, or delivered by the Division.
22. Employees. Except as disclosed in Section 3(v) of the
Disclosure Schedule, the Division is
<PAGE> 25
not party to or bound by any collective bargaining agreement
or relationship with any labor organization. With respect to
the Division, except as disclosed in Section 3(v) of the
Disclosure Schedule, to the Knowledge of Seller, and to the
Knowledge of any of the officers (and employees with
responsibility for employment matters) of the Division (i) no
executive, key employee or group of employees has any plans to
terminate employment; (ii) no labor organization or group of
employees has filed any representation petition or made any
written or oral demand for recognition; (iii) no union
organizing campaigns are underway and no other question
concerning representation exists; (iv) no labor strike, work
stoppage or slowdown, or other material labor dispute is
underway; (v) there is no employment-related charge,
complaint, investigation, inquiry or obligation of any kind,
pending or threatened in any forum, relating to an alleged
violation by the Division of any law, regulation or contract.
Any notice required under any law or collective bargaining
agreement has been given, and all bargaining obligations with any employee
representative have been satisfied, including but not limited to obligations
relating to the effects on bargaining unit employees of the transaction
contemplated by this Agreement or the Tolling Agreement. The Division has not
implemented any plant closing or mass layoff of employees as those terms are
defined in the Worker Adjustment Retraining and Notification ("WARN") Act of
1988, as amended, or any similar state or local law or regulation, and no
layoffs that could implicate such laws or regulations will be implemented
before Closing or before expiration of the Tolling Agreement without advance
notification to the Buyer.
23. Employee Benefits.
1. Section 3(w) of the Disclosure Schedule lists
each Employee Benefit Plan that the Seller
maintains or to which the Seller contributes for the
benefit of employees of the Division.
(1) Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund)
in all material respects complies in form and
in operation in all respects with the
applicable requirements of ERISA, the Code,
and other applicable laws.
(2) Each such Employee Benefit Plan which is
intended to be a qualified plan meets
the requirements of a "qualified plan" under
Code Sec. 401(a) and has received a favorable
determination letter from the Internal
Revenue Service.
2. With respect to each Employee Benefit Plan that any
of the Seller and the Controlled Group of
Corporations which includes the Seller maintains or
ever has maintained or to which any of them
contributes, ever has contributed, or ever has been
required to contribute, there have been no Prohibited
Transactions with respect to any such Employee
Benefit Plan which could have a material adverse
effect on Buyer following consummation of the
transactions contemplated by this Agreement.
3. None of the Division and the other members of the
Controlled Group of Corporations that includes the
Division contributes to, ever has contributed to, or
ever has been required to contribute to any
Multiemployer Plan or has any material Liability
(including withdrawal Liability) under any
Multiemployer Plan with respect to any employees of
the Division.
24. Guaranties. The Division is not a guarantor or otherwise is
liable for any Liability or
<PAGE> 26
obligation (including indebtedness) of any other Person.
25. Environment, Health, and Safety. Except as set forth in
Schedule 3(y):
1. The Division has complied in all material respects
with, and is in all material respects in compliance
with, all applicable Environmental, Health, and Safety
Laws, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against it alleging
any failure so to comply in all material respects.
Without limiting the generality of the preceding
sentence, the Division has obtained, has been, and is
in compliance in all material respects with all of the
terms and conditions of all permits, licenses, and
other authorizations which are required under, and has
complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are
contained in, all Environmental, Health, and Safety
Laws.
2. The Division does not have any Liability (and none of
the Division, and its predecessors and Affiliates has
handled or disposed of any substance (including any
Hazardous Material), arranged for the disposal of any
such substance, exposed any employee or other
individual to any substance or condition, or owned or
operated any property or facility (and no such property
or facility is contaminated with any such substance) in
any manner that could form the Basis for any present or
future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand
against the Division giving rise to any Liability) for
damage to any site, location, or body of water (surface
or subsurface), for any illness of or personal injury
to any employee or other individual, or for any reason
under any Environmental, Health, and Safety Law.
3. All properties and equipment used in the business of
the Division have been free of Asbestos, PCBs,
underground storage tanks, surface impoundments or
other disposal areas.
26. Certain Business Relationships With the Division. Except as
disclosed on Schedule 3(z), to the best of Seller's Knowledge:
(i) none of the Seller's Affiliates or stockholders who own 5%
or more of Seller's stock has been involved in any business
arrangement or relationship with the Division within the past
12 months, and (ii) no such Affiliates or stockholders own any
asset, tangible or intangible, which is used in the business of
the Division.
27. Disclosure. The representations and warranties contained in
this Section 3 do not contain any untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements and information contained in this
Section 3 not misleading.
28. Investment. The Seller (i) understands that the Buyer Note has
not been, and will not be, registered under the Securities Act,
or under any state securities laws, and is being offered and
sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (ii) is
acquiring the Buyer Note solely for its own account for
investment purposes, and not with a view to the distribution
thereof, (iii) is a sophisticated investor with knowledge and
experience in business and financial matters, (iv) has received
certain information concerning the Buyer and has had the
opportunity to obtain additional information as desired in
order to evaluate the merits and the risks inherent in holding
the Buyer Note, (v) is able to bear the economic risk and lack
of liquidity inherent in holding the Buyer Note,
<PAGE> 27
and (vi) is an Accredited Investor.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Seller that the statements contained in this Section 4
are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this
Agreement throughout this Section 4), except as setforth in the
Buyer's disclosure schedule accompanying this Agreement and initialed
by the Parties. The Buyer's disclosure schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 4.
1. Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation.
2. Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its
obligations hereunder. Without limiting the generality of the
foregoing, the board of directors of the Buyer have duly
authorized the execution, delivery, and performance of this
Agreement by the Buyer, and the shareholders of Buyer do not
need to authorize the execution, delivery and performance of
this Agreement. This Agreement constitutes the valid and
legally binding obligation of the Buyer, enforceable in
accordance with its terms and conditions.
3. Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions
contemplated hereby (including the assignments and assumptions
referred to in Section 2 above), will (i) violate any
constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Buyer
is subject or any provision of its charter or bylaws or (ii)
conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party
or by which it is bound or to which any of its assets is
subject. Except for a notice to the Antitrust Division of the
United States Department of Justice and its Hart Scott Rodino
filing with the Federal Trade Commission, the Buyer does not
need to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 2 above).
4. Brokers' Fees. The Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this
Agreement for which the Seller could become liable or
obligated.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
1. General. Each of the Parties will use its best efforts to
take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set
forth in Section 7 below).
<PAGE> 28
2. Notices and Consents. The Seller will give any notices to
third parties, and the Seller will use its best efforts to
obtain any third party consents (including consents from
equipment lien-holders, if necessary, and consents from
lenders), that the Buyer reasonably may request in connection
with the matters referred to in Section 3(c) above. Each of
the Parties will give any notices to, make any filings with,
and use its best efforts to obtain any authorizations,
consents, and approvals of governments and governmental
agencies in connection with the matters referred to in Section
3(c) and Section 4(c) above. Without limiting the generality
of the foregoing, each of the Parties will file any
Notification and Report Forms and related material that it may
be required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice
under the Hart-Scott-Rodino Act, will use its best efforts to
obtain an early termination of the applicable waiting period,
and will make any further filings pursuant thereto that may be
necessary, proper, or advisable in connection therewith.
3. Operation of Business. The Seller will not cause or permit
the Division to engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing,
the Seller will not cause or permit the Division to (i) pay
any amount to any third party with respect to any Liability or
obligation (including any costs and expenses the Seller has
incurred or may incur in connection with this Agreement and
the transactions contemplated hereby) which would not
constitute an Assumed Liability if in existence as of the
Closing, or (ii) otherwise engage in any practice, take any
action outside of the Ordinary Course of Business. Nothing in
this section shall limit Seller's ability to compensate
employees in the Ordinary Course of Business, or make repairs
in the Ordinary Course of Business. In addition, Seller will
not enter into any agreement of the sort described in
Disclosure Schedule Section 3(o)(xii) without the prior
written consent of Buyer (which shall not be unreasonably
withheld or delayed), provided that in the event that the
Closing has not occurred by June 30, 1996, this sentence shall
have no further effect.
4. Preservation of Business. The Seller will cause the Division
to keep its business and properties substantially intact,
including its present operations, physical facilities, and
relationships with lessors, licensors, suppliers, customers,
and employees. The shift of the Division's customers to Buyer
shall not violate this covenant.
5. Employees. On or before execution of this Agreement, Seller
will provide to Buyer (i) an organizational chart of the
Division which contains job titles, and responsibilities of
all Division employees, and (ii) a list of the Division's
employees who may be available for employment with Buyer after
the Closing (the "Available Employees"). The list shall
include each employee's name, title, employment description
and salary. After the satisfaction of the conditions to
closing contained in Section 7(a)(x) and Section 7(b)(viii),
Buyer shall be permitted to discuss post-Closing employment
with the Available Employees, but Buyer shall not hire any
employees of the Division prior to Closing. In the event that
the Closing does not occur, Buyer will not solicit to hire any
employees of the Division prior to January 22, 1998.
6. Customers. Buyer shall not use the January 22, 1996 letter of
intent or this Agreement (or the fact of the existence of
either) to solicit any of Seller's customers prior to the
Closing. Notwithstanding the foregoing, Buyer shall be
permitted to talk with the Division's customers regarding
matters relating to the successful consummation of the
transaction set forth herein.
7. Full Access. The Seller will permit (and will cause the
Division to permit) representatives of the Buyer to have full
access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Division,
to all premises, properties, personnel,
<PAGE> 29
books, records (including Tax records relating to the
Division), contracts, and documents of or pertaining to each
of the Division. Notwithstanding the foregoing, Buyer shall
not have access to Seller's processes, formulas or customer
lists prior to Closing.
8. Disclosure Schedule/Notice of Developments. Seller will
deliver the Disclosure Schedule to Buyer concurrently with the
execution of this Agreement. Each Party will give prompt
written notice to the other Party of any material adverse
development causing a breach of any of its own representations
and warranties in Section 3 and Section 4 above. No
disclosure by any Party pursuant to this Section 5(h)
(including any update or supplement to the Disclosure
Schedule) shall be deemed to amend or supplement the
Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant,
without the written consent of the other Party.
9. Exclusivity. The Seller will not (and the Seller will not
cause or permit the Division to) (i) solicit, initiate, or
encourage the submission of any proposal or offer from any
Person relating to the acquisition of any substantial portion
of the assets of the Division (regardless of how such
acquisition may be structured) or (ii) participate in any
discussions or negotiations regarding, furnish any information
with respect to, assist or participate in, or facilitate in
any other manner any effort or attempt by any Person to do or
seek any of the foregoing. The Seller will notify the Buyer
immediately if any Person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing.
10. Pre-Closing Inventory. Seller and Buyer will conduct a joint
inventory of all the fixed assets listed on Exhibit K to this
Agreement, including the software that resides on Division
personal computers. The inventory will include the utilization
of specialized inventory management software (provided by
Buyer) on each personal computer to determine the resident
software.
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing.
1. General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of
this Agreement, each of the Parties will take such further
action (including the execution and delivery of such further
instruments and documents) as the other Party may reasonably
request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to
indemnification therefor under Section 8 below). The Seller
acknowledges and agrees that from and after the Closing the
Buyer will be entitled to possession of all documents, books,
records (including Tax records), agreements, and financial
data of any sort relating exclusively to the Division, except
for documents required for Seller's performance under the Toll
Manufacturing Agreement (provided, however, Buyer shall be
provided with copies of such Toll Manufacturing-related
documents upon the Closing and shall be provided with the
originals of such documents upon expiration of the term of the
Toll Manufacturing Agreement). Furthermore, upon Buyer's
request, Seller will make available to Buyer copies of all
documents that pertain in part, but not exclusively, to the
Division, and in connection with such documents Seller shall
be permitted to omit the portions not applicable to the
Division; provided, however, Seller's obligation to produce
documents pursuant to this sentence shall be limited to
documents that are material to Buyer (in Buyer' reasonable
judgment).
2. Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint,
<PAGE> 30
claim, or demand in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving the
Division, the other Party will cooperate with the contesting
or defending Party and its counsel in the contest or defense,
make available its personnel, and provide such testimony and
access to its books and records as shall be necessary in
connection with the contest or defense, all at the sole cost
and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification
therefor under Section 8 below). Each Party agrees to
maintain all applicable books and records until the expiration
of all applicable statutes of limitations.
3. Transition. The Seller will not take any action that is
designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business
associate of the Division from maintaining the same business
relationships with the Buyer after the Closing as it
maintained with the Division prior to the Closing. The Seller
will refer all customer inquiries relating to the businesses
of the Division to the Buyer from and after the Closing. The
Buyer will assist Seller with the collection of the Division's
accounts receivable that are due and owing to the Seller.
Seller will provide Additional Support Services (as defined in
the Toll Manufacturing Agreement) through the Tolling Period
as defined in the Toll Manufacturing Agreement.
4. Removal of Acquired Assets. Buyer shall remove the Acquired
Assets in the ordinary course. Buyer shall ensure that the
portion of the facility used for the Acquired Assets is
cleaned following the removal of the Acquired Assets. Buyer's
responsibility to clean the premises shall be limited to the
following: (i) removing the Acquired Assets from the premises;
(ii) broom sweeping the floor surrounding the areas where the
Acquired Assets were located; (iii) removing any incidental
loose or surface debris that may result directly from the
removal of the Acquired Assets; and (iv) repairing any
incidental egress openings made to the facility directly
caused by the removal of the Acquired Assets and which would
render the building subject to any material exposure from
weather. Buyer's responsibility to clean the premises shall
not include the following: (i) disposing of or removing any
residual materials or substances associated with the prior
operation of the Acquired Assets (including, but not limited
to, oil, kerosene, waste waters, foam rubber residues,
asbestos, chemicals, or dust), (ii) making any repairs for
damage that resulted from ordinary wear and tear to the areas
where the Acquired Assets were located, (iii) restoring the
building so that it can be used for other purposes, or (iv)
removing foundations, mountings, ancillary or other support
items in connection with any assets removed by Buyer. Buyer
shall not be responsible for cleanup of items that may raise
environmental concerns, unless the environmental Liability
resulted directly, exactly and entirely from Buyer's asset
removal (and, in such case, Buyer will only be responsible for
environmental Liability that is exactly, directly, and
entirely caused by Buyer's asset removal; provided, however,
if Seller knows of a reasonable probability of environmental
Liability with respect to a particular asset removal but does
not notify Buyer in writing with reasonable specificity before
Buyer engages in the asset removal, Buyer shall not be
responsible for the environmental Liability caused by the
particular asset removal; provided, further, if Seller does
notify Buyer of probable environmental Liability, Buyer shall
not be required to take any action that might result in
environmental Liability for the Buyer). This section shall
not change Buyer's and Seller's commitments and obligations
under the Toll Manufacturing Agreement. The Buyer will use
its best efforts to remove the Acquired Assets from the
Division's facility in Mishawaka, Indiana (the "Ensolite
Plant") by January 31, 1997. In the event Buyer has not
completed the removal of the Assets by January
<PAGE> 31
31, 1997, the date on which the Division's lease of the
premises will terminate, Seller will exercise its option to
extend the term of the lease for six (6) months or such
shorter period as may be satisfactory to Seller's landlord and
to Buyer. Buyer will be responsible for the pro rata costs
incurred by Seller after January 31, 1997 for only that part
of the Ensolite Plant actually used by Buyer and Seller
pursuant to the Toll Manufacturing Agreement. Seller will
endeavor to keep such costs to a minimum. Following the
execution of this Agreement, Seller will, upon request by
Buyer, endeavor to negotiate a shorter option period with the
landlord. In the event that Seller has no operations in the
Ensolite Plant on or after January 31, 1997 other than
pursuant to the Toll Manufacturing Agreement, any excess
facility costs, which shall be no more than $425,000 for the
six-month period, will be shared equally by Buyer and Seller.
Buyer shall not be responsible for any investigative,
remedial, or corrective obligations or liabilities arising
under Environmental, Health and Safety Laws, whether
associated with such removal or otherwise.
5. Confidentiality. The Seller will treat and hold as such all
of the Confidential Information, refrain from using any of the
Confidential Information except in connection with (x) the
Toll Manufacturing Agreement (for purposes of Production only,
as described in Section 9 of the Toll Manufacturing
Agreement), or (y) this Agreement. Seller will deliver
promptly to the Buyer or destroy, at the request and option of
the Buyer, all tangible embodiments (and all copies) of the
Confidential Information which are in its possession. In the
event that the Seller is requested or required (by oral
question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential
Information, the Seller will notify the Buyer promptly of the
request or requirement so that the Buyer may seek an
appropriate protective order or waive compliance with the
provisions of this Section 6(e). If, in the absence of a
protective order or the receipt of a waiver hereunder, the
Seller is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable
for contempt, the Seller may disclose the Confidential
Information to the tribunal; provided, however, that the
Seller shall use its best efforts to obtain, at the request
and sole expense of the Buyer, an order or other assurance
that confidential treatment will be accorded to such portion
of the Confidential Information required to be disclosed as
the Buyer shall designate.
6. Covenant Not to Compete. For a period of five years from and
after the Closing Date, the Seller will not (except as
provided in Exhibit I-2) engage directly or indirectly in any
business that the Division conducts as of the Closing Date in
the United States. Additionally, the Parties agree to execute
at Closing a Non-Compete Agreement in the form attached to
this Agreement as Exhibit I-2.
7. Tax Matters. The following provisions shall govern the
allocation of responsibility as between Buyer and Seller for
certain tax matters following the Closing Date:
(i) Prorations. All personal property taxes, ad
valorem obligations and similar taxes imposed on a periodic basis, in
each case levied with respect to the Acquired Assets, other than
conveyance taxes provided for in Section 6(g)(ii), for a taxable
period which includes the Closing Date (collectively, the "Apportioned
Obligations") shall be apportioned between Seller and Buyer as of the
Closing Date based on the number of days of such taxable period
included in the Pre-Closing Tax Period and the number of days of such
taxable period included in the Post-Closing Tax Period. Seller shall
be liable for the proportionate amount of such taxes that is
attributable to the Pre-Closing Tax Period. Within 90 days after the
Closing, Seller and Buyer shall present a reimbursement to which each
is entitled under this Section 6(g) together with such supporting
evidence as is reasonably
<PAGE> 32
necessary to calculate the proration amount. The proration amount
shall be paid by the party owing it to the other within 10 days after
delivery of such statement. Thereafter, Seller shall notify Buyer
upon receipt of any bill for real or personal property taxes relating
to the Acquired Assets, part or all of which are attributable to the
Post-Closing Tax Period, and shall promptly deliver such bill to Buyer
who shall pay the same to the appropriate taxing authority, provided
that if such bill covers the Pre-Closing Tax Period, Seller shall also
remit prior to the due date of assessment to Buyer payment for the
proportionate amount of such bill that is attributable to the
Pre-Closing Tax Period. In the event that either Seller or Buyer
shall thereafter make a payment for which it is entitled to
reimbursement under this Section 6(g), the other party shall make
such reimbursement promptly but in no event later than 30 days after
the presentation of a statement setting forth the amount of
reimbursement to which the presenting party is entitled along with
such supporting evidence as is reasonably necessary to calculate the
amount of reimbursement. Any payment required under this Section and
not made within 10 days of delivery of the statement shall bear
interest at the rate per annum determined, from time to time, under
the provisions of Section 6621(a)(2) of the Code for each day until
paid.
(ii) Certain Taxes. All transfer, documentary, sales,
use, stamp, registration and other such Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement
shall be paid by Buyer when due, and Buyer will, at its own expense,
file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and
other Taxes and fees, and, if required by applicable law, Buyer will,
and will cause its affiliates to, join in the execution of any such
Tax Returns and other documentation.
(iii) Allocation of Purchase Price. Buyer shall prepare,
or cause to be prepared, an appraisal of the Acquired Assets , which
appraisal shall be reasonably acceptable to Seller (the "Appraisal").
Each of Buyer and Seller shall allocate the Purchase Price among the
Acquired Assets pursuant to Section 1060 of the Code in accordance
with the fair market values of the assets as set forth in the
Appraisal. This schedule shall be prepared prior to or at Closing.
Then, this schedule shall be updated after Closing (for the purpose of
making it accurate as of the Closing Date). This post-closing
schedule shall be prepared within ninety (90) days from the Closing
Date. Each of Buyer and Seller shall file Internal Revenue Service
Form 8594 in a timely manner.
(iv) Cooperation on Tax Matters. Buyer and Seller shall
cooperate fully, as and to the extent reasonably requested by
the other party, in connection with any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Buyer and Seller
agree (A) to retain all books and records with respect to Tax matters
pertinent to the Seller relating to any taxable period beginning
before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Buyer or Seller, any
extensions thereof) of the respective taxable periods, and to abide by
all record retention agreements entered into with any taxing
authority, and (B) to give the other party reasonable written notice
prior to transferring, destroying or discarding any such books and
records and, if the other party so requests, the Buyer or Seller, as
the case may be, shall allow the other party to take possession of
such books and records.
8. Buyer Note. The Buyer Note will be imprinted with a legend
substantially in the following form:
The payment of principal and interest on this Note is subject to
certain recoupment provisions set forth in an Asset Purchase
Agreement dated as of June 5, 1996 (the "Agreement")
<PAGE> 33
between the issuer of this Note and the person to which this Note
originally was issued. This Note was originally issued on June __,
1996, and has not been registered under the Securities Act of 1933, as
amended. The transfer of this Note is subject to certain restrictions
set forth in the Agreement. The issuer of this Note will furnish a
copy of these provisions to the holder hereof without charge upon
written request.
Each holder desiring to transfer a Buyer Note first must furnish the Buyer with
(i) a written opinion reasonably satisfactory to the Buyer in form and
substance from counsel reasonably satisfactory to the Buyer to the effect that
the holder may transfer the Buyer Note as desired without registration under
the Securities Act and (ii) a written undertaking executed by the desired
transferee reasonably satisfactory to the Buyer in form and substance agreeing
to be bound by the recoupment provisions and the restrictions on transfer
contained herein. Buyer will assist such holders of the Buyer Note with the
foregoing.
7. CONDITIONS TO OBLIGATION TO CLOSE.
1. Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the
following conditions:
1. the representations and warranties set forth in
Section 3 above shall be true and correct in all
material respects at and as of the Closing Date
(including the representations and warranties in
Section 3(h) regarding the absence of any material
adverse change and in Section 3(e) regarding title to
assets, free and clear of Security Interests or
restrictions on transfer); Buyer shall be satisfied
that none of the items (either individually or in the
aggregate) that are disclosed by Seller in (x) the
Disclosure Schedules, or (y) any update or supplement
to the Disclosure Schedules (as described in Section
5(h)), would result in (A) a significant cost to
Buyer, or (B) a reduction in the prospects of the
Division taken as a whole, in the reasonable
discretion of Buyer.
2. the Seller shall have performed and complied with all
of its covenants hereunder through the Closing;
3. the Seller shall have procured all of the third party
consents specified in Section 5(b) above;
4. no action, suit, or proceeding (including any suit or
proceeding arising under the Hart-Scott-Rodino Act)
shall be pending or threatened before any court or
quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B)
cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, or
(C) affect adversely the right of the Buyer to own
the Acquired Assets, to operate the former businesses
of the Division (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
5. the Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions
specified above in Section 7(a)(i)-(iv) is satisfied
in all respects;
6. all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have
expired or otherwise been terminated, all
investigations of the
<PAGE> 34
transactions contemplated by this Agreement by the
United States Department of Justice (either alone or
in conjunction with the Federal Trade Commission)
shall have been completed, and the Buyer and Seller
shall have received all other authorizations,
consents, and approvals of governments and
governmental agencies referred to in Section 3(c) and
Section 4(c) above (without Buyer or Seller having
entered into any settlement with any governmental
agency that is not satisfactory to Buyer and without
government approval of the transaction being
qualified or conditioned in any manner that is not
satisfactory to Buyer);
7. in the event Buyer chooses to conduct further
business, legal, environmental and accounting due
diligence review of the Division, Buyer shall be
reasonably satisfied with the results of such due
diligence review (and reasonably satisfied shall mean
that Buyer does not identify any problems, issues or
items that, individually or in the aggregate, would
result in (i) a significant cost, or (ii) a reduction
in the prospects of the Division taken as a whole, in
the reasonable discretion of Buyer);
8. the Parties shall have entered into side agreements
in form and substance as set forth in Exhibit I-1
through Exhibit I-3 attached hereto and the same
shall be in full force and effect;
9. the Buyer shall have received (A) from Oliver Janney
an opinion in form and substance as set forth in
Exhibit J attached hereto, addressed to the Buyer,
and dated as of the Closing Date, and (B) either
officer's certificates from one of Seller's executive
officers or a legal opinion from Oliver Janney
regarding the materials described in bracketed text
in Paragraphs 5 and 6 of Exhibit J;
10. the conditions to the debt and equity financing
necessary in order for Buyer to consummate the
transactions contemplated hereby shall have been
fulfilled, and as to the debt financing those
conditions shall be as contained in Amendment No. 1
and Amendment No. 2 to the October 16, 1995 Credit
Agreement between RBX Group, Inc., RBX Corporation,
Chemical Bank as agent; and certain other lenders;
and
11. all actions to be taken by the Seller in connection
with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments,
and other documents required to effect the
transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
12. Seller shall be able to convey title or a perpetual
license to use the software listed on Exhibit L.
The Buyer may waive any condition specified in this Section 7(a) if it executes
a writing so stating at or prior to the Closing.
2. Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the
following conditions:
1. the representations and warranties set forth in
Section 4 above shall be true and correct in all
material respects at and as of the Closing Date;
<PAGE> 35
2. the Buyer shall have performed and complied with all
of its covenants hereunder in all material respects
through the Closing;
3. no action, suit, or proceeding (including any suit or
proceeding arising under the Hart-Scott-Rodino Act)
shall be pending or threatened before any court or
quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and
no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
4. the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions
specified above in Section 7(b)(i)-(iii) is satisfied
in all respects;
5. all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have
expired or otherwise been terminated, all
investigations of the transactions contemplated by
this Agreement by the United States Department of
Justice (either alone or in conjunction with the
Federal Trade Commission) shall have been completed,
and the Seller and Buyer shall have received all
other authorizations, consents, and approvals of
governments and governmental agencies referred to in
Section 3(c) and Section 4(c) above (without Buyer or
Seller having entered into any settlement with any
governmental agency that is not satisfactory to
Seller and without government approval of the
transaction being qualified or conditioned in any
manner that is not satisfactory to Seller);
6. the Parties shall have entered into side agreements
in form and substance as set forth in Exhibit I-1
through Exhibit I-3, and the same shall be in full
force and effect;
7. all actions to be taken by the Buyer in connection
with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments,
and other documents required to effect the
transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller; and
8. Seller shall be satisfied, in its reasonable
discretion, with any changes to the Buyer Note that
may be required in connection with the debt financing
for the transactions contemplated by this Agreement.
The Seller may waive any condition specified in this Section 7(b) if it
executes a writing so stating at or prior to the Closing.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
1. Survival of Representations and Warranties. All of the
representations and warranties of the Seller contained in
Section 3 of this Agreement shall survive the Closing (even if
the Buyer knew or had reason to know of any misrepresentation
or breach of warranty at the time of Closing) and continue in
full force and effect for a period of three years thereafter.
All of the representations and warranties of the Buyer
contained in Section 4 hereof shall survive the Closing (even
if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for a period of
three
<PAGE> 36
years thereafter.
2. Indemnification Provisions for Benefit of the Buyer.
1. In the event the Seller breaches (or in the event any
third party alleges facts that, if true, would mean
the Seller has breached) any of its representations,
warranties, and covenants contained in this
Agreement, and, provided that the Buyer makes a
written claim for indemnification against the Seller
within such survival period, then the Seller agrees
to indemnify the Buyer from and against the entirety
of any Adverse Consequences the Buyer may suffer
through and after the date of the claim for
indemnification (including any Adverse Consequences
the Buyer may suffer after the end of any applicable
survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the
breach (or the alleged breach); provided, however,
that the Seller shall not have any obligation to
indemnify the Buyer from and against any Adverse
Consequences resulting from, arising out of, relating
to, in the nature of, or caused by the breach (or
alleged breach) of any representation or warranty of
the Seller until the Buyer has suffered Adverse
Consequences by reason of all such breaches (or
alleged breaches) in excess of a $100,000 aggregate
threshold (at which point the Seller will be
obligated to indemnify the Buyer from and against all
Adverse Consequences that exceed the $100,000
aggregate threshold). Furthermore, Seller's
obligation to indemnify Buyer shall be capped at $3
million with respect to the matters addressed in
Section 3(d), Section 3(f)-(j), Section 3(l)-(x), and
Section 3(z)-(ab) of this Agreement. Seller's
obligation to indemnify Buyer with respect to the
items described in Section 3(a)-(c), Section 3(e),
Section 3(k) and Section 3(y) hereof shall be capped
at the amount of the Purchase Price, and payments
pursuant to those sections shall not count toward the
$3 million cap (provided, however, in no event shall
Seller be required to indemnify Buyer for an amount
in excess of the Purchase Price plus payments made
pursuant to the Earn-Out Agreement). Damages paid
pursuant to the Toll Manufacturing Agreement shall be
applied toward the $100,000 aggregate threshold and
the $3 million cap. For purposes of this Section 8
(b)(i), any requirement in Section 3 that an event
or fact be "material" or be "reasonably likely to
have a material adverse effect" (or any similar
materiality requirement) shall be ignored when
calculating the $100,000 aggregate threshold and the
$3 million cap (but shall not be ignored for
determining whether a breach has occurred).
2. The Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the
Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by:
(1) any Liability of the Seller (including with
respect to the Division) which is not an
Assumed Liability; or
(2) any Liability of the Buyer arising by
operation of law in connection with this
transaction (including under any bulk
transfer law of any jurisdiction or under any
common law doctrine of de facto merger or
successor liability).
3. The Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the
Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by items
disclosed in (i) the Disclosure Schedules relating to
pending or threatened litigation (as disclosed in
Section 3(s) of the Disclosure Schedule), (ii) the
Disclosure Schedules relating to the pending tax
audit and other tax matters (as disclosed in Section
3(k) of the
<PAGE> 37
Disclosure Schedule), or (iii) the following
Disclosure Schedules: 3(e), 3(f), 3(l), 3(o) (items
not marked with an asterisk), 3(v), and 3(y). The
amounts paid pursuant to this Section 8(b)(iii) shall
not be applied toward and shall not be subject to the
$100,000 aggregate threshold or the $3 million cap.
4. Except as otherwise provided in the Toll
Manufacturing Agreement, and regardless of the
contents of the Disclosure Schedule, Seller agrees
to indemnify the Buyer from and against the entirety
of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, or relating to (i)
any of Seller's collective bargaining agreement or
labor relationships (none of which are assumed by
Buyer), and any other claim of any sort whatsoever
brought by or pertaining to Seller's employees,
applicants for employment, or their representatives,
including but not limited to any claim of labor law
"joint employer" liability that may result from the
activities contemplated by the Toll Manufacturing
Agreement, and (ii)the past, present or future
release, threatened release, treatment, storage,
disposal or handling of hazardous materials,
substances or wastes at, onto, or from the Ensolite
Plant, otherwise relating in any fashion to the past,
present or future environmental condition of the
Ensolite Plant, or relating to any offsite location
at which hazardous materials, substances or wastes
originating at the Ensolite Plant, or otherwise
generated in the course of the operation of the
business of the Division, have come, or in the future
come, to be located, including without limitation all
such Adverse Consequences arising under CERCLA and
State Equivalents or any other Environmental, Health
and Safety Laws, whether enacted or in effect prior
to, on or after the Closing Date and including
without limitation any such Adverse Consequences
incurred in connection with any claim, demand or
action initiated by the City of Mishawaka, the
Calumet Project or any other Person, whether or not
all or any portion of any of the foregoing Adverse
Consequences were (or purport to be) settled,
released, waived, discharged, expunged or reduced in
any manner pursuant to (a) the Settlement Agreement
and Stipulated Order entered on or about September
28, 1992 by the United States Bankruptcy Court for
the Northern District of Indiana, South Bend Division
(the "Bankruptcy Court") in the Chapter 11 case No.
91-32791 entitled In re U.E. Systems, Inc., Polycast
Technology Corp., et al. (the "Chapter 11 Case"); (b)
any other order entered by the Bankruptcy Court in
the Chapter 11 Case or any other bankruptcy court
presiding over any bankruptcy case or proceeding
relating thereto; (c) applicable bankruptcy or
insolvency law; or (d) any other agreement
enforceable by the Seller or any of its predecessors
or affiliates. The amounts paid pursuant to this
Section 8(b)(iv) shall not be applied toward and
shall not be subject to the $100,000 aggregate
threshold or the $3 million cap.
3. Indemnification Provisions for Benefit of the Seller.
1. In the event the Buyer breaches (or in the event any
third party alleges facts that, if true, would mean
the Buyer has breached) any of its representations,
warranties, and covenants contained in this
Agreement, then the Buyer agrees to indemnify the
Seller from and against the entirety of any Adverse
Consequences the Seller may suffer through and after
the date of the claim for indemnification resulting
from, arising out of, relating to, in the nature of,
or caused by the breach (or the alleged breach);
provided, however, that the Buyer shall not have any
obligation to indemnify the
<PAGE> 38
Seller from and against any Adverse Consequences
resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or alleged
breach) of any representation or warranty of the
Buyer until the Seller has suffered Adverse
Consequences by reason of all such breaches (or
alleged breaches) in excess of a $100,000 aggregate
threshold (at which point the Seller will be
obligated to indemnify the Buyer from and against all
such Adverse Consequences that exceed the $100,000
aggregate threshold). Furthermore, Buyer's
obligation to indemnify the Seller shall be capped at
$3 million with respect to and for all matters.
Damages paid pursuant to the Toll Manufacturing
Agreement shall be applied toward the $100,000
aggregate threshold and the $3 million cap.
2. The Buyer agrees to indemnify the Seller from and
against the entirety of any Adverse Consequences the
Seller may suffer resulting from, arising out of,
relating to, in the nature of, or caused by any
Assumed Liability.
4. Matters Involving Third Parties.
1. If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a
"Third Party Claim") which may give rise to a claim
for indemnification against the other Party (the "
Indemnifying Party") under this Section 8, then the
Indemnified Party shall promptly notify the
Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified
Party in notifying the Indemnifying Party shall
relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
2. The Indemnifying Party will have the right to defend
the Indemnified Party against the Third Party Claim
with counsel of its choice satisfactory to the
Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing
within 10 business days after the Indemnified Party
has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified
Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim, (B)
the Indemnifying Party provides the Indemnified Party
with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will
have the financial resources to defend against the
Third Party Claim and fulfill its indemnification
obligations hereunder, (C) the Third Party Claim
involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement
of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the
Indemnified Party, likely to establish a precedential
custom or practice adverse to the continuing business
interests of the Indemnified Party, and (E) the
Indemnifying Party conducts the defense of the Third
Party Claim actively and diligently.
3. So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with
Section 8(d)(ii) above, (A) the Indemnified Party may
retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third
Party Claim, (B) the Indemnified Party will not
consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying
Party (not to be withheld unreasonably), and
<PAGE> 39
(C) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (which
consent shall not be unreasonably withheld or
delayed);
4. In the event any of the conditions in Section
8(d)(ii) above is or becomes unsatisfied, however,
(A) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into
any settlement with respect to, the Third Party Claim
in any manner it may deem appropriate (and the
Indemnified Party need not consult with, or obtain
any consent from, the Indemnifying Party in
connection therewith), (B) the Indemnifying Party
will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the
Third Party Claim (including reasonable attorneys'
fees and expenses), and (C) the Indemnifying Party
will remain responsible for any Adverse Consequences
the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent
provided in this Section 8.
5. Recoupment Under Buyer Note. Except as otherwise provided in
Section 2(d), the Buyer shall have the option of recouping all
or any part of any Adverse Consequences, adjustments to the
Purchase Price, or amounts due to the Seller pursuant to the
Toll Manufacturing Agreement it may suffer (in addition to
seeking indemnification to which it is entitled under this
Section 8 and in addition to all of Buyer's other remedies) by
notifying the Seller that the Buyer is reducing the principal
amount outstanding under the Buyer Note (which reduction
shall be treated as a permitted prepayment under the Buyer
Note in the amount of the recoupment). Nothing in the
preceding sentence shall be construed to permit Buyer to
recover twice for the above-described matters.
6. Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in
derogation of, any statutory, equitable, or common law remedy
any Party may have.
9. TERMINATION.
1. Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
1. the Buyer and the Seller may terminate this
Agreement by mutual written consent at any
time prior to the Closing;
2. the Buyer may terminate this Agreement by
giving written notice to the Seller on or
before the Closing Date if the Buyer is not
satisfied with the results of its continuing
business, legal, regulatory, tax and
accounting due diligence regarding the
Division;
3. the Buyer may terminate this Agreement by
giving written notice to the Seller at any
time prior to the Closing (A) in the event
the Seller has breached any representation,
warranty, or covenant contained in this
Agreement in any material respect, the Buyer
has notified the Seller of the breach, and
the breach has continued without cure or
substantial cure or substantial efforts by
Seller to cure for a period of 30 days after
the notice of breach or (B) if the Closing
shall not have occurred on or before August
15, 1996 by reason of the failure of any
condition precedent under Section 7(a) hereof
<PAGE> 40
(unless the failure results primarily from
the Buyer itself breaching any
representation, warranty, or covenant
contained in this Agreement); and
4. the Seller may terminate this Agreement by giving
written notice to the Buyer at any time prior to the
Closing (A) in the event the Buyer has breached any
representation, warranty, or covenant contained in
this Agreement in any material respect, the Seller
has notified the Buyer of the breach, and the breach
has continued without cure or substantial cure or
substantial efforts by Buyer to cure for a period of
30 days after the notice of breach, (B) if the
Closing shall not have occurred on or before August
15, 1996 by reason of the failure of any condition
precedent under Section 7(b) hereof (unless the
failure results primarily from the Seller itself
breaching any representation, warranty, or covenant
contained in this Agreement), or (C) if the Closing
shall not have occurred on or before the date that is
45 days after the date on which all of the conditions
to closing under Section 7(a) except Section 7(a)(x)
have been satisfied.
2. Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all rights and obligations of
the Parties hereunder shall terminate without any Liability of
any Party to the other Party (except for any Liability in
respect of the breach of any Party then in breach and except
for the rights and obligations of the Parties under Sections
4(f), 4(l) and 6(b) of the January 22, 1996 letter of intent
among the Parties).
10. MISCELLANEOUS.
1. Press Releases and Public Announcements. No Party shall issue
any press release or public announcement relating to the
subject matter of this Agreement prior to the Closing without
the prior written approval of the other Party; provided,
however, that (i) any Party may make any public disclosure it
believes in good faith is required by applicable law or any
listing agreement, trading agreement, or registration
statement (in which case the disclosing Party will use its
reasonable best efforts to advise the other Party prior to
making the disclosure), (ii) the Parties may issue press
releases in form acceptable to both parties, and (iii) the
Parties may each continue such communications with employees,
customers, suppliers, franchisees, lenders, lessors,
shareholders, and other particular groups as may be legally
required or necessary or appropriate and not inconsistent with
the best interests of the other Party or the prompt
consummation of the transactions contemplated by this
Agreement.
2. No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties
and their respective successors and permitted assigns.
3. Entire Agreement. Except for Sections 4(f), 4(l) and 6(b) of
the January 22, 1996 letter of intent among the Parties, this
Agreement (including the documents and agreements referred to
herein) constitutes the entire agreement between the Parties
and supersedes any prior understandings, agreements, or
representations by or between the Parties, written or oral, to
the extent they relate in any way to the subject matter
hereof.
4. Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and
their respective successors and permitted assigns. No Party
may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that the Buyer
may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate
one or more of its Affiliates to perform its obligations
hereunder (in any or all
<PAGE> 41
of which cases the Buyer nonetheless shall remain responsible
for the performance of all of its obligations hereunder).
5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but
all of which together will constitute one and the same
instrument.
6. Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any
way the meaning or interpretation of this Agreement.
7. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice,
request, demand, claim, or other communication hereunder shall
be deemed duly given if (and then two business days after) it
is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended
recipient as set forth below:
<TABLE>
<CAPTION>
If to Seller: With a copy to:
------------- ---------------
<S> <C>
Uniroyal Technology Corporation Uniroyal Technology Corporation
Two North Tamiami Trail, Suite 900 Two North Tamiami Trail, Suite 900
Sarasota, FL 34236 Sarasota, FL 34236
ATTN: Robert L. Soran, President ATTN: O.J. Janney, V.P., General Counsel &
Fax: (941) 361-2214 Secretary
Fax: (941) 361-2214
If to Buyer: With copies to:
------------ ---------------
Rubatex Corporation American Industrial Partners
5221 Valleypark Drive 551 Fifth Avenue, Suite 3800
Roanoke, VA 24019-3047 New York, NY 10176
ATTN: Frank H. Roland ATTN: Robert Klein
Fax: (540) 561-6027 Fax: (212) 986-5099
Kirkland & Ellis
655 Fifteenth Street, N.W., Suite 1200
Washington, DC 20005
ATTN: John P. Fitzgerald
Fax: (202) 879-5200
</TABLE>
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, facsimile transmission, telex, ordinary mail, or electronic mail),
but no such notice, request, demand, claim, or other communication shall be
deemed to have been duly given unless and until it actually is received by the
intended recipient. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
8. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of
New York, without giving effect to any choice or conflict of
law provision or rule (whether of the State of New York, or
any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
<PAGE> 42
9. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing
and signed by the Buyer and the Seller. No waiver by any
Party of any default, misrepresentation, or breach of warranty
or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder
or affect in any way any rights arising by virtue of any prior
or subsequent such occurrence.
10. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment
of a court of competent jurisdiction declares that any term or
provision of this Agreement is invalid or unenforceable, the
Parties agree to ask the court making the determination of
invalidity or unenforceability to reduce the scope, duration,
or area of the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision, and this
Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be
appealed.
11. Expenses. Each of the Buyer and the Seller will bear its own
costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the
transactions contemplated hereby. The Seller agrees that the
Division has not borne and will not bear any of the costs and
expenses of the Seller (including any of its legal fees and
expenses) in connection with this Agreement or any of the
transactions contemplated hereby (except for expenses incurred
by the Division after the Closing). The Seller also agrees
that the Division has not paid any amount to any third party,
and will not pay any amount to any third party, with respect
to any of the costs and expenses of the Seller (including any
of its legal fees and expenses) in connection with this
Agreement or any of the transactions contemplated hereby.
12. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the
Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship
of any of the provisions of this Agreement. Any reference to
any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word
"including" shall mean including without limitation. Nothing
in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made
herein unless the Disclosure Schedule identifies the exception
with reasonable particularity and describes the relevant facts
in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to
disclose an exception to a representation or warranty made
herein (unless the representation or warranty has to do with
the existence of the document or other item itself). The
Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance.
If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating
to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
<PAGE> 43
13. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein
by reference and made a part hereof.
14. Specific Performance. Each of the Parties acknowledges and
agrees that the other Party would be damaged irreparably in
the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the Parties agrees that the
other Party shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the
Parties and the matter (subject to the provisions set forth in
Section 10(o) below)], in addition to any other remedy to which
it may be entitled, at law or in equity.
15. Submission to Jurisdiction. Each of the Parties submits to
the jurisdiction of any federal or state court sitting in New
York (or, if such New York court refuses jurisdiction, to the
jurisdiction of any federal court sitting in the Eastern
District of Virginia) in any action or proceeding arising out
of or relating to this Agreement, and agrees that all claims
in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to
bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the Parties waives
any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other Party
with respect thereto. Each Party appoints its attorney (as
described in Section 10(g) of this Agreement) as its agent
(the "Process Agent") to receive on its behalf service of
copies of the summons and complaint and any other process that
might be served in the action or proceeding. Any Party may
make service on the other Party by sending or delivering a
copy of the process (i) to the Party to be served at the
address and in the manner provided for the giving of notices
in Section 10(g) above or (ii) to the Party to be served in
care of the Process Agent at the address and in the manner
provided for the giving of notices in Section 10(g) above.
Nothing in this Section 10(o), however, shall affect the right
of any Party to serve legal process in any other manner
permitted by law or in equity. Each Party agrees that a final
judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in
any other manner provided by law or in equity.
<PAGE> 44
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
RUBATEX CORPORATION
By: /s/ FRANK H. ROLAND
-----------------------------
Frank H. Roland, President
UNIROYAL TECHNOLOGY CORPORATION
By /s/ ROBERT L. SORAN
-----------------------------
Robert L. Soran, President
<PAGE> 45
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit B - Selected Unaudited Condensed Pro Forma Financial Information
The following unaudited pro forma financial information consists of the
unaudited pro forma condensed balance sheet as of March 31, 1996 and the
unaudited pro forma condensed statements of operations for the fiscal year
ended October 1, 1995 and the six month period ended March 31, 1996
(collectively, the "Pro Forma Statements"). The Pro Forma Statements give
effect to the consummation of the sale to Rubatex of certain assets and the
assumption of certain liabilities of the Company's Ensolite specialty foams
division for cash proceeds of $20,000,000 and the receipt of a $5,000,000 note
receivable as if it had occurred, in the case of the balance sheet on March 31,
1996, and in the case of the statements of operations, at the beginning of the
fiscal year ended October 1, 1995 and at the beginning of the six month period
ended March 31, 1996, respectively.
The pro forma adjustments are based on currently available information and upon
certain assumptions that management of the Company believes are reasonable
under the circumstances. The Pro Forma Statements do not purport to represent
what the Company's financial position or results of operations would have been
if the sale had in fact occurred at March 31, 1996 and in the case of the
condensed statements of operations at October 3, 1994 and October 2, 1995,
respectively or to project the Company's financial position or results of
operations at any future date or for any future periods.
<PAGE> 46
UNIROYAL TECHNOLOGY CORPORATION
PRO FORMA CONDENSED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------------------------------------------------
DISPOSITION OF PRO FORMA
HISTORICAL ENSOLITE (1) ADJUSTMENTS PRO FORMA
------------ -------------- -------------- ---------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 66 $ (1) $ 7,950 (2) $ 8,015
Trade accounts receivable - net 26,948 (3,042) - 23,906
Inventories 34,903 (2,673) - 32,230
Prepaid expenses and other current assets 1,732 (108) - 1,624
Deferred income taxes 6,541 - (826) (4) 5,715
-------- --------- -------- ---------
Total current assets 70,190 (5,824) 7,124 71,490
Property, plant and equipment - net 90,146 (9,949) - 80,197
Note receivable from Rubatex - restricted - - 5,000 (2) 5,000
Reorganization value in excess of amounts
allocable to identifiable assets - net 8,844 (177) - 8,667
Other assets
11,864 (780) - 11,084
-------- --------- -------- ---------
TOTAL ASSETS $181,044 $ (16,730) $ 12,124 $ 176,438
======== ========= ======== =========
</TABLE>
<PAGE> 47
UNIROYAL TECHNOLOGY CORPORATION
PRO FORMA CONDENSED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------------------------------------------------------
DISPOSITION OF PRO FORMA
HISTORICAL ENSOLITE (1) ADJUSTMENTS PRO FORMA
--------------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
Current liabilities:
Current portion of long-term debt $ 11,815 $ - $ (11,179) (2) $ 636
Accounts payable 16,340 (848) - 15,492
Accrued expenses:
Compensation and benefits 8,565 - 1,774 (6) 10,339
Interest 2,935 - - 2,935
Taxes, other than income 1,963 - - 1,963
State income taxes 264 - - 264
Other 2,861 - 785 (6) 3,646
--------- -------- --------- ----------
Total current liabilities 44,743 (848) (8,620) 35,275
Long-term debt 72,835 - (421) (2) 72,414
Other liabilities 7,778 - 5,134 (3),(6) 12,912
Deferred income taxes 3,232 - - 3,232
--------- -------- --------- ----------
Total liabilities 128,588 (848) (3,907) 123,833
--------- -------- --------- ----------
Commitments and contingencies
Stockholders' equity
Preferred stock 5,250 - - 5,250
Common stock 132 - - 132
Additional paid-in capital 52,555 - - 52,555
Deficit (5,481) - 149 (5) (5,332)
--------- -------- --------- ----------
Total stockholders' equity 52,456 - 149 52,605
--------- -------- --------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 181,044 $ (848) $ (3,758) $ 176,438
========= ======== ========= ==========
</TABLE>
<PAGE> 48
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
(1) Represents the elimination of the net assets acquired by Rubatex in
accordance with the Asset Purchase Agreement.
(2) Represents the increase in cash as a result of the sale as follows:
<TABLE>
(in thousands)
<S> <C>
Proceeds from the sale $25,000
Less: Fees and expenses of the sale 450
Repayment of revolving line of credit 11,077
Repayment of capital lease obligations 523
-------
Subtotal 12,950
11.75% Note Receivable from Rubatex 5,000
-------
Net cash proceeds $ 7,950 (a)
=======
</TABLE>
(a) Included in net cash proceeds is approximately $2,807,000 of
restricted cash placed in escrow with the trustee of the Company's Senior
Secured Notes. The note receivable from Rubatex was also placed in escrow in
accordance with the indenture agreement with the Company's Senior Secured Note
holders.
(3) Represents the $4.5 million liability recognized for postretirement
medical benefits in accordance with Statement of Financial Accounting Standards
No. 106 "Employers Accounting for Postretirement Benefits Other Than Pensions"
("SFAS No. 106"). Amount was included in the Company's unrecorded transition
obligation and was being amortized into operations over 16 years.
(4) Represents the decrease in the Company's deferred tax asset for the tax
liability incurred on the taxable portion of the gain from the sale to Rubatex,
calculated at the Company's statutory tax rate.
(5) Represents the decrease in the Company's deficit for the after tax gain on
the sale.
(6) Represents reserves established for (i) severance and incentive packages
offered to Ensolite employees to be terminated due to the sale, (ii) cleanup of
the Mishawaka, Indiana manufacturing facility upon the Company's exit from the
facility and (iii) excess facility costs to be incurred during the tolling
agreement that will not be reimbursed by Rubatex.
<PAGE> 49
UNIROYAL TECHNOLOGY CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OCTOBER 1, 1995
---------------------------------------------------------------------------
DISPOSITION OF PRO FORMA
HISTORICAL ENSOLITE (1) ADJUSTMENTS PRO FORMA
----------------- ---------------- ----------- --------------
<S> <C> <C> <C> <C>
Net sales $ 214,951 $ (24,638) $ $ 190,313
Costs, expenses and (other income):
Costs of goods sold 166,384 (18,866) 147,518
Selling and administrative 26,783 (1,104) (658) (4) 25,021
Amortization of reorganization
value in excess of amounts
allocable to identifiable assets 769 (15) 754
Depreciation and other amortization 9,521 (1,313) - 8,208
Reorganization professional fees
subsequent to effective date 708 - - 708
Excess facility expense 1,307 (779) (528) (3) -
Recovery from insurance settlement (70) - - (70)
---------- ---------- --------- -----------
Operating income (loss) 9,549 (2,561) 1,186 8,174
Interest expense (10,029) - 1,542 (2) (8,487)
---------- ---------- --------- ------------
Operating (loss) income (480) (2,561) 2,728 (313)
Income tax benefit 189 6 - 195
---------- ---------- --------- ------------
(Loss) income before extraordinary
income $ (291) $ (2,555) $ 2,728 $ (118)
========== ========== ========= ===========
Loss before extraordinary income per
share and common stock equivalent
- primary and fully diluted: $ (0.02) $ (0.01)
---------- -----------
Average number of shares used in
computation 13,014,910 13,014,910
========== ===========
</TABLE>
<PAGE> 50
UNIROYAL TECHNOLOGY CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTH PERIOD ENDED MARCH 31, 1996
---------------------------------------------------------------------------
DISPOSITION OF PRO FORMA
HISTORICAL ENSOLITE (1) ADJUSTMENTS PRO FORMA
----------------- ---------------- ----------- --------------
<S> <C> <C> <C> <C>
Net sales $ 100,168 $ (11,449) $ 88,719
Costs and expenses:
Costs of goods sold 81,862 (9,304) 72,558
Selling and administrative 14,422 (567) (329) (4) 13,526
Amortization of reorganization
value in excess of amounts
allocable to identifiable assets 384 (7) 377
Depreciation and other amortization 4,987 (647) 4,340
Reorganization professional fees
subsequent to effective date 378 - 378
Excess facility expense 649 (418) (231) (3) -
Strike settlement and training
expense 808 - - 808
----------- ---------- --------- -----------
Operating (loss) income (3,322) (506) 560 (3,268)
Interest expense (5,168) - 1,103 (2) (4,065)
----------- ---------- --------- ------------
Operating (loss) income (8,490) (506) 1,663 (7,333)
Income tax benefit 3,009 3 - 3,012
----------- ---------- --------- ------------
(Loss) income before extraordinary
income $ (5,481) $ (503) $ 1,663 $ (4,321)
=========== ========== ========= ===========
Loss before extraordinary income per
share and common stock equivalent
- primary and fully diluted: $ (0.42) $ (0.33)
----------- -----------
Average number of shares used in
computation 13,130,591 13,130,591
=========== ===========
</TABLE>
<PAGE> 51
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
(1) Represents the elimination of Ensolite's historical operating results for
the respective period.
(2) Represents interest earned at approximately 5.3% per annum on the average
cash balance during the respective period. Cash proceeds from the sale of
Ensolite have been adjusted to reflect the net cash used by the Company through
its operating, investing and financing activities during the respective period
presented.
(3) Represents elimination of the excess facility expense for the respective
period. Such expense has been reserved for at the time of the sale of
Ensolite.
(4) Represents reduction in retiree medical benefit costs due to the
recognition of Ensolite's portion of the Company's previously unrecorded
transition obligation in accordance with SFAS No. 106 and due to the reduction
in the number of active employees that will become eligible to receive retiree
medical benefits in the future.