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) May 31, 2000
------------
UNIROYAL TECHNOLOGY CORPORATION
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware
(State of other jurisdiction of incorporation)
0-20686 65-0341868
-------- ------------------
(Commission File Number) (IRS Employer Identification No.)
Two North Tamiami Trail, Suite 900
Sarasota, Florida 34236
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code (941) 366-2100
--------------
(Former name or former address, if changed since last
report.)
<PAGE>
Item 5. Other Events.
--------------------------------------
Pursuant to a Merger Agreement dated as of April 10, 2000, among
Uniroyal Technology Corporation (the "Company"), Bayplas4, Inc., a wholly owned
subsidiary of the Company ("Bayplas4") and Sterling Semiconductor, Inc.
("Sterling"), Bayplas4 was merged into Sterling, and Sterling became a wholly
owned subsidiary of the Company. The transaction was closed on May 31, 2000.
Copies of the Merger Agreement, without exhibits (other than Exhibit E) and
schedules, and the amendment dated April 27, 2000 to the Merger Agreement are
appended to this report as Exhibit 10.54. Unaudited pro forma condensed
financial information is appended to this report as Appendix A.
Item 7. Exhibits
<TABLE>
Table Exhibit
Item No. Exhibit Description Number
------------------------------------------------------
<S> <C> <C>
Merger Agreement dated as of
April 10, 2000, among Uniroyal
Technology Corporation, Bayplas4,
Inc., and Sterling Semiconductor,
10 Inc. 10.54
</TABLE>
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
Executive Vice President, General
Counsel and Secretary
Dated: June 14, 2000
<PAGE>
Exhibit 10.54
MERGER AGREEMENT
AMONG
UNIROYAL TECHNOLOGY CORPORATION,
BAYPLAS4, INC.
AND
STERLING SEMICONDUCTOR, INC.
Dated: April 10, 2000
<PAGE>
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C:\wp51\agreemnt\merger
<PAGE>
TABLE OF CONTENTS
Exhibits.....................................................................ii
Schedules...................................................................iii
Article 1 - Name; Amended Articles of Incorporation...........................1
1.1 Name...........................................................1
1.2 Articles.......................................................2
Article 2 - Directors.........................................................2
Article 3 - By-Laws...........................................................2
Article 4 - Service of Process................................................2
Article 5 - Terms of Merger..................................................2
5.1 Conversion of Shares...........................................2
5.2 Exchange of Shares.............................................3
5.3 Purchase Price Adjustment......................................4
Article 6 - Effect of Merger..................................................4
Article 7 - Representations, Warranties and Agreements of Sterling............4
7.1 Corporate Status...............................................4
7.2 Capitalization.................................................5
7.3 Stock Ownership................................................5
7.4 Subsidiaries...................................................5
7.5 Financial Statements...........................................5
7.6 Undisclosed Liabilities........................................6
7.7 Changed Conditions. ..........................................7
7.8 Taxes..........................................................8
7.9 Intellectual Property..........................................9
7.10 Real Property..................................................9
7.11 Personal Property.............................................10
7.12 Title to Property.............................................10
7.13 Contracts, Leases and Commitments.............................10
7.14 Accounts Receivable...........................................11
7.15 Inventory.....................................................11
7.16 Insurance; Bank Accounts; Powers of Attorney..................11
7.17 Claims, Investigations and Litigation.........................12
7.18 Broker........................................................12
7.19 Permits; Compliance with Laws.................................12
7.20 Workers' Compensation.........................................13
7.21 Labor Union Activity..........................................14
7.22 Employees; Employee Benefits..................................14
7.23 Adverse Trends................................................15
7.24 Sales Volume..................................................15
7.25 Restrictions..................................................15
7.26 Effect of Agreement...........................................15
7.27 Accuracy of Statements........................................16
7.28 Product Warranty..............................................16
7.29 Product Liability.............................................17
7.30 Proxy Statement/Private Placement Memorandum/Registration
Statement,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,17
Article 8 - Representations, Warranties and Covenants of Uniroyal and
Merger Sub.................................................17
8.1 Corporate Status..............................................17
8.2 Capitalization................................................18
8.3 Financial Statements..........................................18
8.4 No Broker.....................................................18
8.5 Restrictions..................................................18
8.6 No Lawsuits, Consents.........................................19
8.7 Execution and Effect of Agreement.............................19
8.8 SEC Reports...................................................19
8.9 Tax-Free Reorganization.......................................19
8.10 Best Efforts..................................................19
Article 9 - Covenants of Sterling............................................20
9.1 Access to Information.........................................20
9.2 Business As Usual.............................................20
9.3 Contract Commitments..........................................20
9.4 Indebtedness..................................................20
9.5 Credit........................................................20
9.6 Employee, Supplier, Customer Relations........................20
9.7 Inventories...................................................21
9.8 Condition of Assets...........................................21
9.9 Dividends.....................................................21
9.10 Amendment of Articles of Incorporation; By-Laws...............21
9.11 Capital Changes...............................................21
9.12 This section is intentionally left blank......................21
9.13 Power of Attorney.............................................21
9.14 Violation of Law..............................................21
9.15 Advances, Loans...............................................22
9.16 Taxes.........................................................22
9.17 Capital Expenditures..........................................22
9.18 Capital Dispositions..........................................22
9.19 Payment of Liabilities and Waiver of Claims...................22
9.21 Insurance.....................................................23
9.22 Compensation..................................................23
9.23 Banking.......................................................23
9.24 Accounting....................................................23
9.25 Financial Information.........................................23
9.26 Third Party Consents..........................................23
9.27 Warranties and Representations................................24
9.28 Exclusivity...................................................24
9.29 Provide Information...........................................24
9.30 Shareholders' Approval........................................25
9.31 Loans and Advances............................................25
9.32 Cooperation on SEC Filings....................................25
9.33 Tax-Free Reorganization.......................................25
9.34 Employment Agreements.........................................25
9.35 Best Efforts..................................................25
Article 10 - Conditions to Obligations of Uniroyal...........................26
10.1 Representations and Warranties of Sterling....................26
10.2 Compliance with Agreement.....................................26
10.3 No Adverse Change.............................................26
10.4 No Litigation.................................................26
10.5 No Casualty...................................................27
10.6 Shareholders Meeting..........................................27
10.7 Certificates..................................................27
10.8 Opinion of Counsel............................................27
10.9 Consents......................................................28
10.10 Financial Results.............................................28
10.11 Accountant's Confirmation.....................................28
10.13 Information about Sterling Shareholders.......................29
Article 11 - Conditions to Obligations of Sterling...........................29
11.1 Representations and Warranties.................................29
11.2 Compliance with Agreement......................................29
11.3 Proceedings and Documents......................................29
11.4 Opinions of Counsel or Public Accountants......................29
11.5 No Litigation..................................................30
11.6 Certificate of Fulfillment of Conditions.......................30
Article 12 - Waiver, Modification and Termination............................31
12.1 Waiver.........................................................31
12.2 Amendment......................................................31
12.3 Termination....................................................31
12.4 Breakup Fee....................................................31
12.5 Effect of Termination..........................................32
Article 13 - Time Merger Becomes Effective...................................32
Article 14 - Post- Closing Covenants.........................................32
14.1 Certain Filings...............................................32
14.2 Registration Statement; Proxy Statement/Private
Placement Memorandum......................................33
14.3 Nasdaq........................................................33
14.4 Tax-Free Reorganization.......................................34
14.5 Repurchase Contingency........................................34
Article 15 - Notices.........................................................34
Article 16 - Survival; Confidentiality.......................................35
16.1 Survival of Representations and Warranties....................35
16.2 Confidentiality...............................................35
Article 17 - Miscellaneous...................................................36
17.1 Entire Agreement..............................................36
17.2 Counterparts..................................................36
17.3 Exhibits......................................................36
17.4 Governing Law.................................................36
17.5 Transactional Expenses........................................36
17.6 Bridge Notes..................................................36
<PAGE>
Exhibits
Exhibit Section No(s). Exhibit Title
A 1.2, 7.1 Sterling's Articles of Incorporation
B 7.1 Certificate of Good Standing for Sterling
C 3.1, 7.1 Sterling's By-Laws
D 10.12 Form of Employment Agreement
E Defined Terms
F 5.3 March Balance Sheet and Forecast Balance
Sheet
<PAGE>
Schedules
Schedule Section No(s). Schedule Title
Schedule 7.1 7.1 Directors and Officers of Sterling
Schedule 7.3 7.3 List of Sterling Shareholders
Schedule 7.5 7.5 Financial Statements
Schedule 7.6 7.6 Extraordinary Liabilities
Schedule 7.7 7.7 Extraordinary Actions Since December
31,1999
Schedule 7.9 7.6, 7.7,
7.9 Intellectual Property List
Schedule 7.10 7.5(b),7.10 Leased Real Property List
Schedule 7.11 7.11 Personal Property List
Schedule 7.12 7.12 Exceptions to Title
Schedule 7.13 7.6(c), 7.7,
7.13 Contract List
Schedule 7.14 7.14 Accounts Receivable
Schedule 7.15 7.15 Inventory
Schedule 7.16(a) 7.6(c),
7.16(a) Insurance List
Schedule 7.16(b) 7.16(b) Bank Accounts; Powers of Attorney
Schedule 7.19 7.19 Permit List
Schedule 7.20 7.20 Worker's Compensation Claims
Schedule 7.22 7.22 Employee Benefit Plans
Schedule 7.23 7.23 Adverse Trends
Schedule 7.28 7.28 Terms and Conditions of Sale
Schedule 9.17 9.17 Capital Expenditures
<PAGE>
THIS AGREEMENT OF MERGER, dated as of April 10, 2000 among Uniroyal
Technology Corporation, a Delaware corporation, ("Uniroyal"); Bayplas4, Inc., a
Delaware corporation ("Merger Sub"); and Sterling Semiconductor, Inc., a
Virginia corporation ("Sterling"). Merger Sub and Sterling are sometimes
referred to herein collectively as the "Constituent Corporations."
WITNESSETH
WHEREAS, Uniroyal desires to acquire all of the issued and outstanding
common stock, par value $0.01 per share, of Sterling (the "Sterling Common
Shares") and all of the issued and outstanding Series A Convertible Preferred
Stock, par value $0.01 per share, of Sterling (the "Sterling Preferred Shares",
the Sterling Common Shares and Sterling Preferred Shares being hereinafter
referred to as the "Sterling Shares" and a single share of either as a "Sterling
Share"); and
WHEREAS, the holders of the Sterling Shares (the "Sterling
Shareholders") desire to transfer the Sterling Shares in exchange for shares of
the common stock, par value $0.01 per share, of Uniroyal (the "Uniroyal Common
Shares"), provided that such transfer can be made on a basis that will generally
not be subject to federal income tax until they sell the Uniroyal Common Shares
that they receive in the transaction hereunder; and
WHEREAS, the Boards of Directors of Sterling and Uniroyal have approved
this Agreement and the merger of Merger Sub into Sterling pursuant to this
Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency whereof are hereby
acknowledged, and in accordance with the laws of the State of Delaware and the
Commonwealth of Virginia, Sterling and Uniroyal have agreed and do hereby agree
that, subject to the conditions hereinafter set forth, Merger Sub shall be
merged into Sterling and Sterling shall be the surviving corporation
incorporated under the laws of the Commonwealth of Virginia (herein sometimes
called the "Surviving Corporation"), and that the terms and conditions of such
merger (the "Merger") shall be as follows:
Article 1 - Name; Amended Articles of Incorporation
1.1 Name. The name of the Surviving Corporation shall be Sterling
Semiconductor, Inc.
1.2 Articles. The Articles of Incorporation of Sterling, as heretofore
amended shall, from and after the time the Merger becomes effective (the
"Effective Time"), constitute the articles of incorporation of the Surviving
Corporation within the meaning of Section 13.1-721 of the Virginia Stock
Corporation Act and may be certified separately and apart from this Agreement as
the articles of incorporation of the Surviving Corporation. A copy of such
Articles of Incorporation is attached hereto as Exhibit A.
Article 2 - Directors
2.1 The Directors of the Surviving Corporation shall resign and be
replaced by Howard R. Curd, Robert L. Soran and George J. Zulanas, Jr., who
shall continue as Directors of the Surviving Corporation from and after the
Closing.
Article 3 - By-Laws
3.1 The Amended By-Laws of Sterling as in effect immediately prior to
the Effective Time shall from and after the Effective Time be the By-Laws of the
Surviving Corporation. A copy thereof is attached hereto as Exhibit C.
Article 4 - Service of Process
4.1 CT Corporation System, whose address is 1200 South Pine Island
Road, Plantation, Florida 33324, is the statutory agent upon whom any process,
notice, or demand against either of the Constituent Corporations or the
Surviving Corporation may be served.
Article 5 - Terms of Merger
5.1 Conversion of Shares. The terms and conditions of the Merger, the
mode of carrying the Merger into effect, and the manner and basis of causing the
securities of Sterling to constitute or to be converted into securities of
Uniroyal shall be as follows:
a. Uniroyal shall contribute to the capital of Merger Sub a
number of Uniroyal Common Shares sufficient to permit the
conversion in Subsection 5.1b below and conversion of other
securities of Sterling pursuant to Subsections 5.1.e and 5.1.f
below.
b. Each Sterling Share which shall be issued and outstanding at
Closing shall be converted into unregistered Uniroyal Common
Shares, the number of which will be calculated pursuant to the
Conversion Ratio. Promptly after the Closing, Uniroyal shall
file the articles of merger with the Virginia Corporation
Commission and the certificate of merger with the Secretary of
State of the State of Delaware and, not later than five (5)
business days after the Closing, shall file the Registration
Statement with the Commission to register the Uniroyal Common
Shares delivered pursuant to this Article 5.
c. The common stock of Merger Sub held by Uniroyal will be
cancelled.
d. In the event that, prior to the Closing, there shall be any
split of Uniroyal Common Shares or any stock dividend thereon,
the number of Uniroyal Common Shares to be delivered to the
holders of Sterling Shares will be adjusted to reflect such
split or stock dividend fully.
e. The Board of Directors of Sterling will take action prior to
the Closing to cause options under the Sterling stock option
plans (the "Sterling Option Plans") to be treated as follows:
(i) options held by employees of Sterling will have the
options held by them cancelled and replaced with options to
purchase Uniroyal Common Shares, based on the Conversion
Ratio, under one of Uniroyal's stock option plans on terms
identical as to vesting dates, termination dates and exercise
price and such other terms as the Board of Directors of
Sterling may deem necessary to deem such replacement fair
under the Sterling Option Plans, provided that all
terms of such replacement are permitted under the terms of
the Uniroyal stock option plans; and (ii) options held by
persons other than employees of Sterling shall be deemed to
be exercised with no cash payment, entitling each such
holder to Sterling Common Shares having a value, based on
the Conversion Ratio, equal to the difference between such
value and the exercise price, and such Sterling Common Shares
shall be converted into unregistered Uniroyal Common Shares,
the number of which shall be calculated based on the
Conversion Ratio.
f. Holders of warrants issued by Sterling that have not been
exercised prior to the Closing shall be deemed to be exercised
with no cash payment, entitling each such holder to Sterling
Common Shares having a value, based on the Conversion Ratio,
equal to the difference between such value and the exercise
price, and such Sterling Common Shares shall be converted into
unregistered Uniroyal Common Shares, the number of which shall
be calculated based on the Conversion Ratio.
5.2 Exchange of Shares. At the Effective Time, the holders of
certificates for the Sterling Common Shares and Sterling Preferred Shares, other
than objecting shareholders who shall have perfected their appraisal rights
under the applicable provisions of the Virginia Dissenters' Rights Law shall
cease to have any rights as shareholders of Sterling, and their sole rights
shall be with respect to the Uniroyal Common Shares. After the Closing, the
holders of the certificates for the Sterling Shares, upon surrender of the same
to the transfer agent for Uniroyal Common Shares, shall receive in exchange
therefor a certificate or certificates representing the Uniroyal Common Shares
into which such holders' Sterling Shares shall have been converted by the
Merger. Uniroyal will not issue a certificate or certificates for any fraction
of a Uniroyal Common Share to any holder of a certificate or certificates for
Sterling Shares. In lieu of such fractional shares, any holder of Sterling
Shares otherwise entitled to receive a fractional Uniroyal Common Share shall be
paid an amount in cash equal to the value of such fractional interest as soon as
practicable after the surrender of such holder's certificate or certificates
representing Sterling Shares.
5.3 Purchase Price Adjustment. Prior to the Closing, Sterling shall
prepare a balance sheet of Sterling as of March 31, 2000 (the "March Balance
Sheet") and a forecast of the balance sheet of Sterling as of April 30, 2000
(the "Forecast Balance Sheet"). Copies of the March Balance Sheet and the
Forecast Balance Sheet are appended hereto as Exhibit F. The Forecast Balance
Sheet will include reserves for the reasonable anticipated costs of Sterling in
connection with the transactions contemplated by this Agreement. Sterling shall
use the method in establishing the Forecast Balance Sheet which was consistently
applied in preparing the February Balance Sheet. Prior to the Closing, Sterling
shall prepare a balance sheet of Sterling as of April 30, 2000 (the "Closing
Balance Sheet"). In the event that the Working Capital on the Closing Balance
Sheet is less than the Working Capital shown on the Forecast Balance Sheet, the
Conversion Ratio for the Shares will be reduced on the basis of a one dollar
($1.00) reduction in the total value of Uniroyal Common Shares being delivered
hereunder for each dollar that such actual Working Capital varies from the
Working Capital set forth on the Forecast Balance Sheet, provided that such
adjustment will reflect only decreases in Working Capital in excess of $250,000
and fraud.
Article 6 - Effect of Merger
6.1 At the Effective Time the effect shall be as provided by the
applicable provisions of the Stock Corporation Act of the Commonwealth of
Virginia.
Article 7 - Representations, Warranties and Agreements of Sterling
Sterling hereby makes the following representations and warranties to
Uniroyal.
7.1 Corporate Status. Sterling is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Virginia,
and has all necessary corporate powers, governmental qualifications and
authorizations to own its assets and to operate its business in each
jurisdiction in which such assets are now owned and such business is now
operated by it, except to the extent that failure to obtain such qualification
and authorization would not have a material adverse effect on the business of
Sterling. Attached as Exhibit A is a true and complete copy of Sterling's
Articles of Incorporation, as amended to date, certified by the Virginia
Corporation Commission not earlier than twenty (20) days prior to the date
hereof. To be attached as Exhibit B prior to the Closing are certificates of
good standing in respect of Sterling from the Virginia Corporation Commission
and from each jurisdiction in which Sterling is qualified to do business or in
which Sterling owns assets or conducts business, each certified by the
appropriate Secretary of State. Attached as Exhibit C is a true and complete
copy of Sterling's By-Laws, as amended to date, certified by the Secretary of
Sterling. The minute books of Sterling which have been provided for inspection
by Uniroyal contain true originals or copies of all minutes of meetings of, and
actions taken by the shareholders of Sterling, the Board of Directors and all
committees of the Board of Directors of Sterling. Schedule 7.1 lists all the
directors and officers of Sterling as of the date hereof.
7.2 Capitalization. The authorized number of shares of Sterling is
3,600,000, consisting of 2,600,000 shares of Sterling Common Stock and 1,000,000
shares of Sterling Preferred Stock. Sterling has issued and outstanding 691,658
shares of Sterling Common Stock, 254,729 shares of Sterling Preferred Stock and
warrants and stock options outstanding to purchase 935,132 Sterling Common
Shares. All of such issued and outstanding Sterling Shares are duly authorized,
validly issued, fully paid and nonassessable. None of such shares were issued in
violation of preemptive rights of any shareholder of Sterling. No shares of
capital stock of Sterling are held as treasury stock. Except as set forth above,
there are no outstanding Sterling Shares reserved for issuance upon exercise of
outstanding stock options, and there are no outstanding subscriptions, warrants,
options or other purchase rights requiring the issuance or delivery of any
additional shares of capital stock of Sterling.
7.3 Stock Ownership. The names, addresses and Social Security or
federal tax identification numbers of the record owners of the Sterling Shares
are set forth on Schedule 7.3 hereto.
7.4 Subsidiaries. Sterling has no subsidiaries and is not a
partner or joint venturer, nor does it hold a proprietary interest, in any
business entity, organization or enterprise.
7.5 Financial Statements.
(a) The following financial statements of Sterling (hereinafter
called the "Financial Statements") are attached hereto as
Schedule 7.5:
(i) Statements of income for the twelve months ended
December 31, 1997 and 1998 and the unaudited
statements of income for the twelve months ended
December 31, 1999 and the two months ended February
29, 2000 (the "February Income Statement"), and
(ii) Balance sheets for the same periods as the statements
of income, including the unaudited balance sheet as
of February 29, 2000 (the "February Balance Sheet").
(b) The Sterling Financial Statements are complete and correct
and have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a basis consistent
in all material respects with that of the preceding year or
period. The inventory values have been established using the
first-in, first out (FIFO) method. The inventory of Sterling
as reflected in its February Balance Sheet was owned by
Sterling on the date thereof and was of good and salable
quality. Sterling has no information or reasonable grounds to
believe that such inventory will not be as salable in the
future as it was on February 29, 2000. Subject to any
adjustments that may be made in the Closing Balance Sheet, all
of the fixed assets reflected in the February Balance Sheet
are, on the date hereof, in existence and are in the
possession of Sterling and located at one of the facilities of
Sterling listed in Schedule 7.10 hereto.
(c) With the exception of matters disclosed in this Agreement or
any exhibit or schedule delivered pursuant hereto, Sterling
does not know, or have any reasonable grounds to know, of any
facts which could reasonably give rise to any Liability or
obligation of Sterling whatsoever,liquidated or unliquidated,
actual or contingent, criminal or civil, whether or not
covered by insurance, for which adequate provision has not
been made in the February Balance Sheet, subject to
adjustments that may be made in the Closing Balance Sheet.
For the purpose of this Agreement, the obligations or
liabilities referred to above will include, without
limitation, any claim which may be made against Sterling for
a refund of all or any part of the purchase price or rental
or lease fee paid for products sold, rented or leased by it,
or for damages for loss or injury suffered, which is based on
negligence or a breach or an alleged breach by Sterling of
any express or implied obligation or duty imposed upon it as
a vendor or lessor of products, or any claim which may be
made against Sterling for any penalties or other relief
under the provisions of any federal, state or local law,
statute, regulation, rule, ordinance, code or standard.
7.6 Undisclosed Liabilities. Sterling does not have any liabilities,
fixed or contingent, which are not fully shown or provided for on the balance
sheet as at December 31, 1999 (the "December Balance Sheet") or in the notes
thereto, except:
(a) liabilities incurred in or as a result of the ordinary course
of business since December 31, 1999, all of which have been
incurred on a basis consistent with past practices;
(b) liabilities permitted by or provided for or otherwise
disclosed in this Agreement, in Schedule
7.6, or in any of the other Schedules hereto; and
(c) obligations to perform after December 31, 1999, under
contracts and agreements listed in Schedules 7.9, 7.13 or
7.16(a) hereto.
7.7 Changed Conditions. Since December 31, 1999, except as set
forth in or contemplated by Schedule 7.7 to this Agreement or
the contracts, leases, or documents listed in Schedule 7.13
hereto, Sterling has not:
(a) issued or sold any shares of its capital stock or debt
securities or granted any option for the purchase of any such
securities;
(b) incurred any material obligation or Liability other than in
the ordinary course of business;
(c) satisfied and discharged any lien, or paid any obligation or
Liability other than current liabilities included in the
December Balance Sheet and current liabilities incurred since
that date in the ordinary course of business;
(d) declared or paid any dividend on, or made any distribution
with respect to, its capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of its
capital stock;
(e) made any general wage or salary increase or any increase in
compensation payable or to become payable to any officers or
management employees, or entered into any employment contract
with any officer or key salaried employee;
(f) mortgaged, pledged or subjected to lien or other encumbrance
any of its property (except possible liens for current state
and local property taxes not yet payable);
(g) sold or transferred any of its assets or prepaid or canceled
any debts or claims, except in each case in the ordinary
course of business;
(h) sold, assigned, or granted rights under any patent, trade
name, trademark or copyright, or any application therefor, or
any trade secrets or designs for any products currently
manufactured or services provided by Sterling;
(i) knowingly waived any rights of material value;
(j) acquired any other business or entered into any licensing
arrangement or joint venture;
(k) become involved in or threatened with any labor dispute which
has had or could have an effect on its business or financial
condition;
(l) suffered any material loss;
(m) suffered any damage or destruction, whether or not covered by
insurance, adversely affecting its properties;
(n) changed its accounting methods;
(o) entered into any transaction other than in the ordinary
course of business; or
(p) to Sterling's Knowledge, experienced any other event or
condition of any character which is, or with the lapse of
time or occurrence of such event or condition would be,
materially adverse to the financial condition, business,
assets, properties or operations of Sterling.
7.8 Taxes. Sterling has:
(a) timely filed in accordance with all applicable laws,
all material returns, extensions, statements,
reports, estimates, declarations and forms
(hereinafter referred to collectively as the
"Returns") required to be filed by it on or before
the Closing with respect to any Taxes;
(b) paid all Taxes shown to have become due pursuant to
such Returns; and
(c) paid all Taxes for which a notice of, or assessment
or demand for, payment has been received or which are
otherwise due and payable.
All such Returns are true and correct in all material respects and reflected as
of the time of filing the facts regarding the income, business, assets,
operations, activities and status of Sterling and any other information required
to be shown therein.
Correct and complete copies of:
(a) federal income tax returns for Sterling, and
(b) state and local income and other tax returns of
Sterling for each of the years ended December 31,
1996 through December 31, 1998, have heretofore
been delivered or made available to Uniroyal.
To Sterling's Knowledge, (A) there is no action, suit, proceeding,
investigation, audit, claim or assessment pending or proposed with respect to
Taxes with respect to any Return; (B) all amounts required to be collected or
withheld by Sterling with respect to Taxes have been duly collected or withheld
and any such amounts that are required to be remitted to any taxing authority
have been duly remitted; (C) no extension of time within which to file any
Return has been requested, following which the Return has not been filed within
the terms of the extension; (D) there are no Security Interests for federal or
state Taxes upon the assets of Sterling; (E) there are no waivers or extensions
of any applicable statute of limitations for the assessment or collection of
Taxes with respect to any Return which remains in effect; (F) there are no tax
rulings, requests for rulings, or closing agreements relating to Sterling which
could affect its Liability for Taxes for any period after the Closing ; (G) no
federal, state or local income tax returns of Sterling have been audited and
closed or are Returns with respect to which the applicable statute of
limitations has expired without extension or waiver; (H) no power of attorney
has been granted by Sterling with respect to any matter relating to Taxes of
Sterling which is currently in force; (I) no property of Sterling is property
that Sterling is required to treat as being owned by another person pursuant to
the provisions of Section 168(f)(8) of the Code prior to its amendment by the
Tax Reform Act of 1986 or is "tax exempt use property" within the meaning of
Section 168(h) of the Code; (J) Sterling has not filed any consent under Section
341(f) of the Code or any comparable provision of state revenue statutes; and
(K) Sterling has not participated in or cooperated in any international boycott,
within the meaning of Section 999 of the Code, nor has Sterling had operations
which are or may hereafter become reportable under Section 999 of the Code. The
accruals for current federal income taxes to be reflected in the Closing Balance
Sheet will be established based on the consistent application of methods that
Sterling has heretofore used.
7.9 Intellectual Property. Sterling has not registered, nor filed any
application to register, any patents, copyrights or trademarks. Schedule 7.9
hereto contains a list of each license or other agreement relating to patents,
copyrights, trademarks or other Intellectual Property used in Sterling's
business. Sterling owns the entire right, title and interest in or leases all
Intellectual Property used in its business, and such items constitute all the
Intellectual Property required by Sterling for use in its business and
operation. Sterling is not a party to any agreement by which it is granted a
license or by which it grants a license on Intellectual Property owned by it or
by which it agrees to maintain the secrecy or confidentiality of any
intellectual property, except as set forth in such Schedule 7.9. To Sterling's
Knowledge, none of the Intellectual Property used in its business is subject to
any pending or threatened challenge, nor has Sterling received any notice that
the foregoing are invalid or conflict with or infringe the asserted rights of
others. Sterling has no Knowledge that any third party is infringing any
Intellectual Property rights of Sterling. To its Knowledge, Sterling has no
Liability for intellectual property infringement as to any equipment, materials
or supplies manufactured, used or sold by it. Except as indicated in Schedule
7.9 hereto, Sterling has not given indemnification for potential intellectual
property infringement as to any equipment, materials or supplies manufactured,
used or sold by Sterling.
7.10 Real Property. Sterling owns no real property. Schedule 7.10
hereto contains a list of all real property leased to Sterling. Copies of all
leases evidencing or affecting the title to all real property leased or used by
Sterling have been furnished to Uniroyal (collectively, the "Real Property
Leases"), and such copies are, to the Knowledge of Sterling, correct and
complete. To Sterling's Knowledge, Sterling is not involved in any dispute with
any third party under any of the Real Property Leases. To Sterling's Knowledge,
Sterling has all easements and rights of ingress and egress necessary for
utilities and services and for all operations conducted on such real property.
Sterling is not aware of any claims of adverse possession nor of any set of
facts which might give rise to such a claim(s).
7.11 Personal Property. Schedule 7.11 lists each item of tangible
personal property owned, rented, leased or used by Sterling and having a value
of $1,000 or more; the quantity of each item; the location of such personal
property; and where applicable, the serial number of each item of personal
property. Schedule 7.11 also lists separately each automobile, truck or other
automotive equipment owned, rented, leased or used by Sterling. As to each item
of personal property owned by Sterling, Schedule 7.11 lists the date such
property was purchased, the net book value thereof and whether or not such
property is subject to a lien, encumbrance, title retention or security
arrangement. As to each such item of personal property subject to a lien,
encumbrance, title retention or security arrangement, Schedule 7.11 identifies
the holder and nature thereof and the amount and repayment terms of the
underlying debt which such lien, encumbrance, title retention or security
arrangement secures. With regard to each item of personal property rented or
leased by Sterling, Schedule 7.11 identifies the party from whom such property
is rented or leased, the date and term of the lease or rental agreement, the
amount of rent payable; any renewal and purchase options; and all other material
terms. Except as set forth in Schedule 7.11, no personal property used by
Sterling in connection with its business is held under any lease, conditional
sale contract, installment sale contract or other lien, encumbrance, title
retention or security arrangement, or is located at a place not in the
possession of Sterling. Each item of personal property identified in Schedule
7.11 is in good working condition and is in a good state of maintenance and
repair, ordinary wear and tear excepted.
7.12 Title to Property. Sterling has good and marketable title to, or
holds by valid and enforceable agreement of lease or license, all of the assets
owned, leased, rented, licensed, used or otherwise held by Sterling, and such
assets are free and clear of any restrictions or conditions to transfer or
assignment and are free and clear of all liens, mortgages, easements, rights of
way, pledges, encumbrances, agreements, charges, claims, Security Interests,
equities, taxes, conditions enforceable by any third party, covenants,
conditions or restrictions, except as set forth in Schedule 7.12.
7.13 Contracts, Leases and Commitments. Schedule 7.13 is a complete
list of all contracts and agreements (other than payroll), written or oral,
involving the payment of$10,000 or more in any twelve-month period, including,
without limitation, sales agreements, purchase agreements, mortgages,
guarantees, security agreements (including, without limitation, Uniform
Commercial Code financing statements), loan agreements, and leases of real or
personal property, to which Sterling is a party. Schedule 7.13 specifies the
type of agreement; a general description of the subject matter; the term and
effective date; the dollar value; and the names and addresses of the parties to
such agreements; and all other material terms of such agreements. All of the
agreements listed in Schedule 7.13 are valid and binding upon the parties
thereto and enforceable in accordance with their terms. Except as indicated in
Schedule 7.13, to Sterling's Knowledge, each of the parties to each agreement
listed therein has complied with and is complying with all the provisions
thereof in all material respects and is not in default under any provision
thereof, and no party to any such agreement has given notice to any other party
thereto that the latter is in default thereunder. Except as disclosed in
Schedule 7.13, neither this Agreement nor consummation of the transactions
contemplated hereby will result in a default under or breach of, or require the
consent or approval of any party to, any agreement listed in Schedule 7.13.
Schedule 7.13 includes a complete list of all contracts, agreements,
commitments, leases, instruments, debts, or obligations, oral or written,
between Sterling and any of its shareholders, officers, directors or employees
(or any other person affiliated with such persons or Sterling); Schedule 7.13
indicates the parties; their relationship to Sterling; a general description of
the subject matter; the effective date; the term and dollar value of each
agreement listed; and all other material terms.
7.14 Accounts Receivable. Schedule 7.14 lists the accounts receivable
of Sterling as of February 29, 2000, including the name of each account; the
account number; the invoice number and date; payment terms; and the age of each
such account on the basis of thirty (30), sixty (60), and ninety (90) days and
over, from the date of original invoice. Each such account receivable listed
arose from valid sales or rentals in the ordinary course of business and is
collectible. Except as reflected in Schedule 7.14, no refunds, reimbursements,
discounts or other adjustments are payable by Sterling with respect to any of
its accounts receivable. Sterling has no Knowledge and has no reasonable grounds
to know, of any defenses, rights of setoff, recoupment, assignments, pledges,
liens, encumbrances, claims, equities or conditions enforceable by third parties
with respect to or affecting the accounts receivable of Sterling.
7.15 Inventory. The inventory of Sterling shown on its February Balance
Sheet or acquired or ordered by it since that date is of such a quality as to be
usable and saleable in the ordinary course of business and does not include any
items that are below standard quality or obsolete (less stated reserves for
obsolescence), that have a slow rate of turnover, or that are not in conformance
with Sterling's existing standards, except as described in Schedule 7.15.
7.16 Insurance; Bank Accounts; Powers of Attorney. Schedule 7.16(a)
lists all insurance policies and bonds in force or which were in force at any
time within the last three years with respect to Sterling and the dates of
termination of the policies of insurance of each type now or previously held by
Sterling. Sterling has furnished Uniroyal with copies of the insurance policies
now in force and included on Schedule 7.16(a) and with loss runs indicating
claims made or paid under such policies during the last three (3) years and
claims currently pending under such policies. Schedule 7.16(b) hereto sets forth
(a) the name of each bank in which Sterling has an account, lock box or safe
deposit box, and the names of all personnel authorized to draw thereon or to
have access thereto, and (b) the name of each person, corporation, firm,
association or business entity holding a proxy, general or special power of
attorney, or other similar instrument from Sterling. Copies of all such proxies,
powers of attorney and other documents have been heretofore provided to
Uniroyal.
7.17 Claims, Investigations and Litigation. There is no material claim
or litigation by or against Sterling alleging personal injury, property damage
or economic loss and involving Sterling or any director, officer, employee or
agent of Sterling or any property of, or product or service sold or provided by
Sterling or any other litigation or investigation (including government
investigations or audits) of Sterling. To Sterling's Knowledge, there are no
claims, lawsuits, arbitrations, government proceedings, investigations or audits
pending to which Sterling is a party (as plaintiff, defendant or otherwise) or
which relate to any of the Sterling Shares . Sterling has no reasonable grounds
to anticipate the filing or receipt of any other material claim or the
commencement of any other lawsuit, arbitration or proceeding by or against, or
investigation of, Sterling or involving the assets of Sterling or the Sterling
Shares.
7.18 Broker. Sterling does not know of any broker, finder, or financial
advisor who is acting or has acted in Sterling's behalf, or of any person, firm
or corporation entitled to receive any brokerage or finder's or financial
advisory fee from Sterling in connection with the transactions contemplated by
this Agreement other than Wallace Willmore & Cromwell & Co., LLC, for whose fee
Sterling will be responsible.
7.19 Permits; Compliance with Laws.
A. Schedule 7.19 lists all governmental licenses, permits and
authorizations which are held or used by Sterling. With respect to each such
license, permit or authorization, 7.19 contains a brief description of the
license, permit or authorization; the identity of the issuing agency or
authority; the license or permit number; the expiration date of each such
license, permit or authorization; and all other material terms of such license,
permit or authorization. Such licenses, permits and authorizations are the only
material governmental licenses, permits and authorizations currently required of
Sterling for the operation of its business, and all such licenses, permits and
authorizations are in effect as of the date hereof. Sterling is not aware of any
reason why Uniroyal should not be able to obtain renewal of such licenses,
permits and authorizations upon proper submission by Uniroyal of applications
therefor to appropriate governmental bodies, authorities or agencies, nor is
Sterling aware of any circumstances relating to Uniroyal's ownership or use of
the assets to be acquired hereunder in the same manner as Sterling has owned and
used the same which would require Uniroyal to obtain any governmental license,
permit or authorization in addition to the licenses, permits and authorizations
disclosed in Schedule 7.19. Sterling has complied with all conditions or
requirements imposed by the licenses, permits and authorizations described in
Schedule 7.19, and Sterling has not received any notice and does not have any
reason to believe, that any appropriate authority intends to cancel or terminate
any of such licenses, permits or authorizations or that valid grounds for such
cancellation or termination currently exist.
B. To Sterling's Knowledge, Sterling has complied with, and is not in
material violation of, any federal, state, or local statutes, laws, ordinances,
rules, regulations, codes or standards which affect the operation of Sterling's
business (including, without limitation, Environmental, Health and Safety Laws),
except for minor failures to comply that would not reasonably be expected to
result in a material adverse effect on the assets or financial condition or
prospects of the business of Sterling. To Sterling's Knowledge, all corporate
action required of Sterling in connection with the proper conduct of its
business, and all reports and returns required to be filed and permits required
to be secured by Sterling in connection with the conduct of its business, have
been taken, filed, or secured. To Sterling's Knowledge, Sterling has not
received any notice of any claimed violation of any federal, state or local
statute, law, ordinance, rule, regulation, code, standard or order, and Sterling
has no Knowledge, or any reasonable grounds to know, of any such violation.
C. To Sterling's Knowledge, (1) Sterling is not in violation of any
provision, regulation or requirement issued by any regulatory body of competent
jurisdiction under the Resource Conservation and Recovery Act; (2) there are no
underground tanks located on any real property currently leased to Sterling,
except as listed in Schedule 7.19; (3) there have been no federal Environmental
Protection Agency or Occupational Safety and Health Administration (OSHA)
inspections, or inspections by any comparable state or local agencies, of
Sterling's facilities within the last three (3) years; (4) there have been no
OSHA citations or citations by comparable state and local authorities received
by Sterling; (5) Sterling has filed no OSHA 200 Forms with federal, state or
local agencies during the last three (3) years which contain safety records and
procedures at Sterling's facilities; (6) Sterling has not conducted any hearing
tests and noise surveys within the last three (3) years; and (7) there is no
site owned by any third party as to which Sterling or any predecessor has or may
have cleanup Liability, including, without limitation, any superfund site as to
which Sterling or any predecessor of Sterling may be a Potentially Responsible
Party ("PRP").
7.20 Workers' Compensation. Schedule 7.20 hereto describes all closed,
pending or, to Sterling's Knowledge, threatened claims of past or present
employees for compensation for any injury, disability or illness arising out of
their employment by Sterling that have occurred within the past three (3) years.
7.21 Labor Union Activity. There has not been during the last
three years, nor is there currently pending or, to Sterling's Knowledge,
threatened, any strike, work stoppage or labor troubles involving the
employees of Sterling.
7.22 Employees; Employee Benefits.
A. Sterling has heretofore provided Uniroyal with (1) the names,
calendar year 1999 annual earnings and current rates of pay of each of the
current employees of Sterling; (2) any general increase, since December 31,
1999, in the rate of compensation paid to Sterling's salaried and hourly
employees; (3) all presently outstanding loans and advances (other than routine
travel advances) made by Sterling to any employee and the current status
thereof; (4) copies of any employment application used by Sterling since January
1, 1996 (including any forms used to comply with the Immigration Reform and
Control Act of 1986); and (5) information on COBRA compliance. Sterling has not
maintained any written affirmative action plan during the last three (3) years,
has not been audited by the Office of Federal Contract Compliance Programs
during the last three (3) years, and has not filed any EEO-1 reports during the
last three (3) years.
B. All "Employee Benefit Plans" as defined by Section 3(3) of ERISA and
any other plans providing for compensation or benefits maintained by Sterling
are listed in Schedule 7.22 hereto. Any such plans which constitute "employee
pension benefit plans" as defined in Section 3(2) of ERISA ("Pension Plans")
have been determined by the Internal Revenue Service to be qualified under
Section 401 of the Internal Revenue Code of 1986, as amended (the "Code"), and
the trusts maintained pursuant thereto are exempt from federal income taxation
under Section 501 of the Code. The Pension Plans have been maintained in all
material respects in accordance with ERISA. To Sterling's Knowledge, neither
Sterling nor any "party in interest" or "disqualified person" with respect to
the Pension Plans has engaged in a prohibited transaction within the meaning of
Section 4975 of the Code or Title I, Part 4 of ERISA. No Employee Benefit Plan
of Sterling is subject to Title IV of ERISA or the minimum funding standards
under ERISA or the Code. Sterling has filed all reports and returns, and has
made all required disclosures, required by applicable provisions of ERISA and
the Code. Full payment has been (or prior to the time the Merger becomes
effective will be) made or accrued of all amounts which are required or expected
under the terms of each such plan to have been paid for the period ending at the
time the Merger becomes effective, including any amounts accrued as
contributions pursuant to a defined contributions plan. All of the expenses of
such plans have been properly accounted for in accordance with generally
accepted accounting principles consistently applied. At the time the Merger
becomes effective, no transaction shall have occurred in connection with which
Sterling would be subject to a civil penalty pursuant to Section 502(i) of ERISA
or which would constitute a prohibited transaction under ERISA or be subject to
a tax imposed under Section 4975 of the Code. True and complete copies of any
such employee benefit plans (including plan summaries, announcements or booklets
provided to Sterling employees), determination letters issued after 1980 by the
Internal Revenue Service with respect to the qualification of any of such plans
qualified or intended to qualify, under Section 401(a) of the Code, annual or
actuarial reports and Form 5500 and other filings made by or on behalf of any
such plans, have been provided to Uniroyal. Sterling neither contributes to nor
is under any obligation to contribute to any multiemployer plan (as defined in
Section 3(37) of ERISA).
7.23 Adverse Trends. Except as fully and accurately disclosed in
Schedule 7.23 hereto, to Sterling's Knowledge, there is no material fact,
condition, or event relating to (i) the potential loss of the benefit of, or any
material change in, any relationship with any customers, suppliers, key
employees, or insurers, or (ii) price increases for parts, raw materials,
supplies, services or equipment purchased from present suppliers or vendors
which is, with the lapse of time or the occurrence of such event or condition
will be, materially adverse to the financial condition, business, assets,
properties or operations of Sterling.
7.24 Sales Volume. Except as fully and accurately disclosed in Schedule
7.23 hereto, there is no basis to anticipate any material reduction, during the
year ending December 31, 2000, in dollar volume of sales or prices charged by
Sterling to any customer of Sterling which accounted for five percent (5%) or
more of Sterling's sales during the year ended December 31, 1999.
7.25 Restrictions. Except as set forth in this Agreement or in the
Schedules hereto, neither the execution nor delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will conflict with or
result in a breach of, or give rise to a right of termination of, or accelerate
the performance required by, any terms of any court order, consent decree,
agreement or permit to which Sterling is subject or a party, or constitute a
default thereunder, or result in the creation of any liens, claim or encumbrance
upon any of Sterling's assets, or violate any of the provisions of the Articles
of Incorporation or By-Laws of Sterling, each as amended to the date hereof.
There is no lawsuit, proceeding, or investigation pending, or to the Knowledge
of Sterling, threatened against Sterling which might prevent the consummation of
any of the transactions contemplated by this Agreement.
7.26 Effect of Agreement. Sterling has the corporate power and
authority to enter into this Agreement (subject to approval thereof by the
shareholders of Sterling) and, subject to such approval, this Agreement
constitutes the legal and binding obligation of Sterling, enforceable against
Sterling in accordance with its terms. To Sterling's Knowledge, neither this
Agreement nor the consummation of the transactions contemplated hereby violates
or will violate any statute, law, regulation, rule, ordinance, code, standard,
order, writ, judgment, injunction, decree, determination or award, or conflicts
with or constitutes a default under Sterling's Articles of Incorporation or
By-Laws or any indenture, mortgage, lease, lien, instrument or other agreement
by which Sterling is bound, nor will it result in an event which, whether
immediately or upon the giving of notice or lapse of time or both, will permit
the acceleration of the maturity date of any obligation under any such
indenture, mortgage, lease, lien, instrument or other agreement or the creation
of any lien or encumbrance on any property or asset of Sterling, nor will it
enable any party to any agreement to which Sterling is a party to exercise a
right to terminate or otherwise modify the terms thereof.
7.27 Accuracy of Statements. No representation or warranty by Sterling
contained in this Agreement, and no writing, certificate, schedule, list,
report, instrument, or other document furnished to or to be furnished to
Uniroyal pursuant hereto or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of material fact solely
with respect to Sterling or its business, or omits or will omit to state a
material fact solely with respect to Sterling or its business necessary in order
to make the statement and information contained therein not misleading, or
necessary in order to provide a prospective purchaser of the capital stock of
Sterling with full and proper information as to Sterling and Sterling's affairs.
7.28 Product Warranty. To Sterling's Knowledge, each product
manufactured, sold, leased, or delivered by Sterling 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, it 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). To Sterling's
Knowledge, Sterling 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 any 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 December Balance Sheet (rather than in any notes thereto) as adjusted for
the passage of time through the Closing in accordance with the past custom and
practice of Sterling. No product manufactured, sold, leased, or delivered by
Sterling is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale or lease. Schedule 7.28
includes copies of the standard terms and conditions of sale for each of
Sterling's products containing applicable guaranty, warranty, and indemnity
provisions.
7.29 Product Liability. To Sterling's knowledge, Sterling 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 Sterling.
7.30 Proxy Statement/Private Placement Memorandum/Registration
Statement. Sterling will provide to Uniroyal any necessary information
concerning Sterling and its officers, shareholders and affiliates (the "Sterling
Information") in connection with the notice of meeting and confidential private
placement memorandum (the "Proxy Statement/Private Placement Memorandum") to be
sent to the Sterling Shareholders in connection with the meeting of the Sterling
Shareholders to consider the Merger and the Registration Statement. The Sterling
Information will not, on the date the Proxy Statement/Private Placement
Memorandum (or any amendment thereof or supplement thereto) is first mailed to
Sterling Shareholders or at the time of such meeting, contain any statement
which, at such time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact, or shall omit to state
any material fact necessary in order to make the statements made therein, in
light of the circumstances under which it shall be omitted, not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication to Sterling Shareholders in connection
with the meeting which has become false or misleading. If at any time prior to
the Closing any event relating to Sterling or any of its officers, directors,
shareholders or other affiliates is discovered by Sterling which should be set
forth in a supplement to the Proxy Statement/Private Placement Memorandum,
Sterling shall promptly inform Uniroyal. The Sterling Information supplied by
Sterling for inclusion in the Registration Statement shall not at the time the
Registration Statement is declared effective by the Commission contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading. The Sterling Information will comply in all material respects with
the requirements of the Securities Act and the rules of the Commission
thereunder. Notwithstanding the foregoing, Sterling makes no representation or
warranty with respect to any information supplied by Uniroyal or Merger Sub
which is contained or incorporated by reference in, or furnished in connection
with the preparation of, the Proxy Statement/Private Placement Memorandum or the
Registration Statement.
Article 8 - Representations, Warranties and Covenants of Uniroyal and Merger Sub
8.1 Corporate Status. Each of Uniroyal and Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power to own its properties and to carry
on its business as now being conducted. Merger Sub is a wholly-owned subsidiary
of Uniroyal and has not heretofore engaged in business, and at the date of this
Agreement it has no assets other than its paid-in capital.
8.2 Capitalization. The authorized number of shares of Uniroyal is
35,000,000 Common Shares and 1,000 shares of preferred stock. At January 30,
2000, Uniroyal had (1) 12,371,820 Uniroyal Common Shares issued and outstanding,
and (2) 2,079,944 Uniroyal Common Shares reserved for issuance upon the exercise
of outstanding options to officers and key personnel, and (3) warrants
outstanding to purchase 368,185 Uniroyal Common Shares. All the issued and
outstanding Uniroyal Common Shares are entitled to vote. The authorized number
of shares of capital stock of Merger Sub is 1,000 shares of common stock, $0.01
par value per share. The Uniroyal Common Shares to be delivered pursuant to this
Agreement, when so delivered, will be duly authorized and validly issued, fully
paid and nonassessable.
8.3 Financial Statements. The financial statements of Uniroyal set
forth in its public filings with the Commission are complete and correct and
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a basis consistent in all material respects with that of the
preceding year or period. With the exception of matters disclosed in its
published financial statements, Uniroyal does not know, or have any reasonable
grounds to know, of any facts which could reasonably give rise to any Liability
or obligation of Uniroyal whatsoever, liquidated or unliquidated, actual or
contingent, criminal or civil, whether or not covered by insurance, for which
adequate provision has not been made in Uniroyal's published financial
statements.
8.4 No Broker. Uniroyal does not know of any broker, finder, or
financial adviser acting or who has acted on its behalf, or of any persons,
firm, or corporation entitled to receive any brokerage or finder's or financial
advisory fee in connection with the transactions contemplated by this Agreement
other than Jesup & Lamont Capital Markets, Inc., for whose fee Uniroyal will be
responsible.
8.5 Restrictions. Neither the execution nor delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will conflict with
or result in a breach of, or give rise to a right of termination of, or
accelerate the performance required by, any terms of any court order, consent
decree, agreement or permit to which Uniroyal or Merger Sub is subject or a
party, or constitute a default thereunder, or result in the creation of any
liens, claim or encumbrance upon any of the assets of Uniroyal or Merger Sub, or
violate any of the provisions of the Certificate of Incorporation or By-Laws of
Uniroyal or Merger Sub, each as amended to the date hereof. There is no lawsuit,
proceeding, or investigation pending, or to the actual knowledge of Uniroyal and
Merger Sub, after reasonable investigation by their respective officers,
threatened against Uniroyal or Merger Sub which might prevent the consummation
of any of the transactions contemplated by this Agreement.
.
8.6 No Lawsuits, Consents. There is no lawsuit, proceeding, or
investigation pending or, to the actual knowledge of Uniroyal's executive
officers after reasonable investigation, threatened against Uniroyal or Merger
Sub which might prevent the consummation of any of the transactions contemplated
by this Agreement, and no approval or authorization of any governmental
authority or of any third party on the part of Uniroyal or Merger Sub is
required in connection with the execution and delivery of this Agreement or any
instrument contemplated hereby or the consummation of any of the transactions
contemplated hereby.
8.7 Execution and Effect of Agreement. Each of Uniroyal and Merger Sub
has the corporate power and authority to enter into this Agreement, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action of Uniroyal and Merger Sub, and this Agreement constitutes the
legal and binding obligation of Uniroyal and Merger Sub, enforceable against
each of Uniroyal and Merger Sub in accordance with its terms.
8.8 SEC Reports. Uniroyal has duly filed all reports required to be
filed by it with the SEC under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and all such reports conform in all material respects with the
requirements of the 1934 Act and the rules and regulations thereunder and do not
contain any untrue statements of material fact or fail to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. Since the filing of Uniroyal's
Quarterly Report on Form 10-Q for the quarter ended January 2, 2000, Uniroyal
has not, to the actual knowledge of Uniroyal's executive officers, after
reasonable investigation, experienced any other event or condition of any
character which is, or with the lapse of time or occurrence of such event or
condition would be, materially adverse to the financial condition, business,
assets, properties or operations of Uniroyal on a consolidated basis.
8.9 Tax-Free Reorganization. Neither Uniroyal nor Merger Sub will take,
or fail to take, any action that would reasonably be expected to (i) adversely
affect the qualification of the Merger as a reorganization pursuant to Section
368 (a)(2)(E) of the Code, or (ii) result in the receipt of Uniroyal Common
Shares by Sterling Shareholders (without giving effect to disposition of such
Uniroyal Common Shares) being treated as a taxable transaction.
8.10 Best Efforts. Uniroyal and Merger Sub will use their reasonable
best efforts to effectuate the conditions set forth in Article 11 hereof. In the
event that any party becomes aware of any fact that would jeopardize the
treatment of the Merger as a reorganization under Section 368(a)(2)(E) of the
Code, Uniroyal and Uniroyal Sub will use their reasonable best efforts to assist
in structuring the Merger to comply with such provision or such other provision
as will permit the Merger to be a tax-free reorganization.
Article 9 - Covenants of Sterling
From and after the date hereof and until the Closing of the Merger,
Sterling hereby covenants and agrees that:
9.1 Access to Information. Uniroyal and its counsel, accountants and
other representatives will have full access during normal business hours to all
assets, properties, books, accounts, records, contracts and documents of or
relating to Sterling. Sterling shall furnish or cause to be furnished to
Uniroyal and its representatives all data and information concerning the
business, finance, properties and prospects of Sterling that may reasonably be
requested.
9.2 Business As Usual. Sterling shall continue to carry on its business
diligently and in good faith in substantially the same manner as heretofore and
shall make no material change in or institute any unusual or novel method of
business operation. Sterling shall promptly, and in any event within forty-eight
(48) hours, notify Uniroyal in writing of any material change to Sterling or its
business.
9.3 Contract Commitments. Without the prior written consent of
Uniroyal, which shall not be unreasonably withheld, Sterling shall not make any
contract or commitment or series of related contracts or commitments, written or
oral, which (a) has a term of performance extending beyond one (1) year or (b)
involves sales or purchases by Sterling other than in the ordinary course of
business.
9.4 Indebtedness. Sterling shall not create any indebtedness other than
that: (a) incurred in the ordinary course of business; (b) incurred pursuant to
existing contracts; (c) incurred pursuant to commitments permitted hereby; or
(d) reasonably incurred in doing the acts and things contemplated by this
Agreement.
9.5 Credit. Sterling shall not extend credit to any third party
other than in accordance with its normal credit terms.
9.6 Employee, Supplier, Customer Relations. Sterling shall use its best
efforts to preserve intact the business organization of Sterling, to maintain
the present employees of Sterling, and to preserve the good will of Sterling's
suppliers, customers and others having business relations with it.
9.7 Inventories. Sterling shall buy and maintain inventories only
in the ordinary course of business.
9.8 Condition of Assets. Sterling shall maintain its assets in as
good condition as on the date of this Agreement, ordinary wear and tear
excepted.
9.9 Dividends. Without Uniroyal's prior written consent, Sterling shall
not declare or pay any dividend or make any other distribution to its
shareholders with respect to the capital stock or debt of Sterling, shall not
purchase or redeem any of its shares of capital stock, shall not issue rights or
options to purchase or subscribe to any shares of its capital stock, or
subdivide or otherwise change any such shares, and shall not issue or sell any
shares of its capital stock. The foregoing is not intended to restrict Sterling
from (i) paying stock dividends in Sterling Common Shares to holders of Sterling
Preferred Shares pursuant to the terms of the Sterling Preferred Share, (ii)
distributing to the Sterling Shareholders the share dividend approved by the
Board of Directors of Sterling on December 3, 1999, (iii) issuing Sterling
Common Shares pursuant to the merger of Novecon Technologies Corporation into
Sterling, or (iv) issuing Sterling Common Shares to comply with the provisions
of currently outstanding Sterling stock options and warrants.
9.10 Amendment of Articles of Incorporation; By-Laws. Sterling
shall not amend its Articles of Incorporation or its By-Laws, except as
contemplated by this Agreement.
9.11 Capital Changes. Except in order (i) to comply with the
requirements of the merger of Novecon Technologies Corporation into Sterling,
(ii) to comply with the provisions of stock options and warrants heretofore
issued by Sterling, (iii) to pay stock dividends in Sterling Common Shares to
holders of Sterling Preferred Shares pursuant to the terms of the Sterling
Preferred Shares, or (iv) to distribute to the Sterling Shareholders the share
dividend approved by the Sterling Board of Directors on December 3, 1999,
Sterling shall not issue or sell any securities, convertible units, options,
warrants to purchase or rights to subscribe to, or enter into any arrangement or
contract with respect to any shares of capital, stock or any other securities of
Sterling, or make any other changes in the capital structure of Sterling without
the prior written consent of Uniroyal.
9.12 [This section is intentionally left blank.]
9.13 Power of Attorney. Sterling shall not give to any person or
organization any power of attorney without the prior written consent of
Uniroyal.
9.14 Violation of Law. Sterling shall promptly, and in any event within
forty-eight (48) hours, notify Uniroyal of receipt by Sterling of any claim
alleging its violation of any federal, state or local law, statute, ordinance,
regulation, rule, code, standard or order.
9.15 Advances, Loans. Sterling shall not advance or lend any sum
of money to any Sterling Shareholder, director, officer or employee of Sterling
or to any third party. All advances or loans to shareholders, directors,
officers, or employees of Sterling or to any third party made prior to the
Closing will be fully repaid as of the Closing .
9.16 Taxes.
(a) Returns and Tax Responsibility.
(i) Sterling shall timely prepare and file all Returns of
Sterling for all periods ending on or before the
Closing . All such Returns will be prepared, and all
elections with respect to such Returns will be made,
to the extent permitted by law, in a manner
consistent with Sterling's prior normal practice. At
least fifteen (15) days prior to the filing of the
Returns that Sterling is required to file pursuant to
this Section 9.16(a)(i), Sterling shall provide
Uniroyal with copies of such Returns for Uniroyal's
review.
(ii) Sterling shall timely pay or cause to be paid all
Taxes with respect to Returns prepared by Sterling
pursuant to Section 9.16(a)(i). Sterling shall
provide adequate reserves, computed in a manner
consistent with Sterling's prior normal practice, on
Sterling's Closing Balance Sheet for all liabilities
for and with respect to Taxes of Sterling for periods
ending on or before the Closing which are not
required to be paid on or prior to the Closing.
9.17 Capital Expenditures. Except as provided in the forecast set forth
in Schedule 9.17, without the prior written consent of Uniroyal, Sterling shall
not make any capital expenditures in excess of $5,000 for any single item or
$10,000 in the aggregate, or enter into any lease of capital equipment or other
property.
9.18 Capital Dispositions. Sterling shall not sell or dispose of any
capital assets without the prior written consent of Uniroyal. Sterling shall not
dispose of or permit to lapse any trademark or other Intellectual Property used
in the present conduct of Sterling's business.
9.19 Payment of Liabilities and Waiver of Claims. Sterling shall
not do, or agree to do, any of the following acts:
(a) pay any obligation or Liability, fixed or contingent,
other than current liabilities;
(b) waive or compromise any right or claim; or
(c) cancel, without full payment, any note, loan, or
other obligation owing to Sterling or assigned for
the benefit of Sterling.
9.20 Existing Agreements. Sterling shall not materially modify,
amend, cancel or terminate any of its existing contracts or agreements listed
in Schedule 7.13, nor agree to do any such act without the prior written
consent of Uniroyal.
9.21 Insurance. Sterling shall keep in effect and undiminished its
existing insurance coverage of all types. At the request of Uniroyal and at
Uniroyal's sole expense, the amount of insurance against fire and other
casualties which at the date of this Agreement Sterling carried on any of its
properties or in respect of its operations will be increased by such amount or
amounts as Uniroyal may specify.
9.22 Compensation. Except to the extent, if any, required by good-faith
collective bargaining obligations, Sterling shall not grant any general or
uniform increase in the rate of pay to employees, any increase in salaries to
any director, officer, employee or agent or any bonus or profit sharing payment.
Sterling shall not increase, by means of any new or preexisting pension,
profit-sharing, retirement, deferred compensation, insurance, vacation,
termination or other similar employee benefit plan, contract or commitment, by
any amount, the current or deferred compensation of any director, officer,
employee or agent.
9.23 Banking. Sterling shall not make any change in its banking or
safe deposit arrangements.
9.24 Accounting. Sterling shall not make any changes in its
accounting methods or practices.
9.25 Financial Information. Sterling, promptly upon their becoming
available, shall provide to Uniroyal all financial information and data compiled
or generated by or for Sterling relating to the business operations or financial
condition of Sterling, including, without limitation, all balance sheets,
statements of retained earnings, statements of changes in financial position,
income statements, and information relating to Sterling's sales or receipts.
Sterling shall also promptly provide to Uniroyal such other financial
information and data relating to the business operations or financial condition
of Sterling as Uniroyal may reasonably request.
9.26 Third Party Consents. Sterling shall obtain at the earliest
practicable date and prior to the Closing, all material consents required to
consummate the transactions contemplated hereby.
9.27 Warranties and Representations. Sterling shall refrain from taking
any action which would render any representation or warranty contained in this
Agreement inaccurate and shall promptly notify Uniroyal of the occurrence of any
event or the failure of any event to occur prior to the Closing which results in
an omission in or breach of any of the representations or warranties by Sterling
in this Agreement or any of the exhibits or schedules delivered pursuant hereto.
9.28 Exclusivity. Until the earlier of the Closing or termination of
this Agreement, Sterling shall not , directly or indirectly, (a) initiate
contact with any person or entity in an effort to solicit any Takeover Proposal,
(b) cooperate with, or furnish or cause to be furnished to any person or entity
any non-public information concerning the business, properties or assets of
Sterling in connection with any Takeover Proposal; (c) negotiate with any person
or entity with respect to any Takeover Proposal; or (d) enter into any agreement
or understanding with the intent to effect a Takeover Proposal. Sterling agrees
that it will immediately notify Uniroyal in writing of the details of any
Takeover Proposal of which it becomes aware. For purposes of this Section 9.28 a
"Takeover Proposal" shall mean any proposal, other than as contemplated by this
Agreement, (i) for a merger, consolidation, reorganization, other business
combination or recapitalization involving a five percent (5%) or greater
interest in Sterling or acquisition of the right to cast five percent (5%) or
more of the votes of the Selling Shareholder on any matter with respect to
Sterling, or for the acquisition of a substantial portion of Sterling's assets
other than in the ordinary course of business; or (ii) the effect of which could
be to prohibit, restrict or delay the consummation of the transactions
contemplated by this Agreement or to impair the contemplated benefits to
Uniroyal of the transactions contemplated by this Agreement. Further, Sterling
shall not provide, subject to existing contracts or as may be required by law,
to any party other than Uniroyal access to Sterling's properties, books,
records, financial statements, contracts, and documents. The foregoing is not
intended to require the Board of Directors of Sterling to violate their
fiduciary duties under Virginia law, including, but not limited to, the Virginia
Stock Corporation Act.
9.29 Provide Information. Sterling will furnish Uniroyal with all of
the information concerning Sterling that may be required for inclusion (a) in
any listing application or information statement which may be filed by Uniroyal
with the Nasdaq National Market relating to the Uniroyal Common Shares; or (b)
in any application or statement made by Uniroyal to any governmental agency in
connection with the transactions contemplated by this Agreement; or (c) in the
Proxy Statement/Private Placement Memorandum and the Registration Statement. All
such information shall be true, complete, and correct in all material respects,
shall not contain an untrue statement of any material fact, and shall not omit
to state any material fact required to be stated or necessary in order to make
such information not misleading.
9.30 Shareholders' Approval. The Proxy Statement/Private Placement
Memorandum shall include the recommendation of the Board of Directors of the
Company in favor of the Merger, and such recommendation shall not be withdrawn,
modified or changed in a manner adverse to Uniroyal or Merger Sub unless this
Agreement is terminated pursuant to Section 12.3. Sterling shall notify each of
the Sterling Shareholders in the text of the Proxy Statement/Private Placement
Memorandum that appraisal rights are available with respect to the Merger and
shall include in such notice a copy of Article 15 of the Virginia Dissenters'
Rights Law.
9.31 Loans and Advances. Prior to the Closing, Sterling shall obtain
the repayment of all principal and interest on all loans and advances made to
employees (other than reasonable travel advances made in the ordinary course of
business).
9.32 Cooperation on SEC Filings. Sterling agrees to cooperate with
Uniroyal with respect to all filings that are required to be made by Uniroyal
with regulatory authorities, in order to effect the transactions contemplated by
this Agreement. Sterling shall assist Uniroyal and Merger Sub in making all such
filings, applications and notices as may be necessary or desirable in order to
obtain the authorization, approval or consent of any governmental authority
which may be reasonably required or which Uniroyal or Merger Sub may reasonably
request in connection with the consummation of the transactions contemplated by
this Agreement. Sterling agrees to make all appropriate representations and
covenants in connection with the opinions of counsel to be attached to the
Registration Statement with respect to the correctness of the discussion of the
Registration Statement as to the material federal income tax consequences of the
Merger.
9.33 Tax-Free Reorganization. Sterling will not take any action, or
fail to take, any action that would reasonably be expected to (i) adversely
affect the qualification of the Merger as a reorganization pursuant to Section
368(a)(2)(E) of the Code or (ii) result in the receipt of Uniroyal Common Shares
by Sterling Shareholders being treated as a taxable transaction.
9.34 Employment Agreements. Sterling will not mail the Proxy Statement/
Private Placement Memorandum to the Sterling Shareholders and none of the
parties hereto shall issue a public announcement about the Merger until Sterling
has entered into employment agreements satisfactory to Uniroyal and the
employees with the following key employees of Sterling: Gene E. Lewis, James
LeMunyon, Cengis Balkas, Larry Rowland, Andrew Timmerman and Shaoping Wang.
9.35 Best Efforts. Sterling will use its reasonable best efforts to
effectuate the conditions set forth in Article 10 hereof; if the conditions set
forth in Section 10.13 are not fulfilled, Sterling will use its reasonable best
efforts to assist in structuring the Merger to comply with the requirements of
applicable laws. Sterling will use its reasonable best efforts to effectuate the
conditions set forth in Article 10 hereof. In the event that any party becomes
aware of any fact that would jeopardize the treatment of the Merger as a
reorganization under Section 368(a)(2)(E) of the Code, Sterling will use its
reasonable best efforts to assist in structuring the Merger to comply with such
provision or such other provision as will permit the Merger to be a tax-free
reorganization.
Article 10 - Conditions to Obligations of Uniroyal
All obligations of Uniroyal to be performed at the Closing are subject
to the fulfillment, prior to or at the Closing, of each of the conditions
hereinafter set forth in this Article 10. Nothing in this Article 10 will limit
or restrict any rights or remedies which Uniroyal may have by reason of any
misrepresentation, breach of warranty or nonfulfillment of any covenant,
agreement or obligation by Sterling under or pursuant to this Agreement.
10.1 Representations and Warranties of Sterling. Sterling's
representations and warranties made in this Agreement shall be true in all
material respects at and as of the Closing as though such representations and
warranties were made at and as of such time, except to the extent that such
representations and warranties shall then be untrue because of events or changes
(which shall not in the aggregate have materially adversely affected the
financial condition, business, properties, prospects or operations of Sterling)
occurring or arising after the date of this Agreement in the ordinary course of
business or in the due performance in accordance with their terms of contracts,
leases and documents referred to in Schedule 7.13 hereto or in the carrying out
of the transactions permitted by this Agreement or approved in writing by
Uniroyal.
10.2 Compliance with Agreement. Sterling shall have performed and
complied in all material respects with all of its obligations under this
Agreement at or before the Closing.
10.3 No Adverse Change. Since December 31, 1999, there shall have
been no material adverse change in the businesses, properties, prospects,
assets or financial condition of Sterling.
10.4 No Litigation. No litigation, proceeding, investigation, or action
shall be pending or, to the Knowledge of Sterling, threatened by any significant
customer or by any competitor of Uniroyal or Sterling to enjoin or prevent the
consummation of the transactions contemplated by this Agreement or to obtain
damages or other relief by reason of such consummation, or involving any of the
business or properties owned or leased by Sterling which, in the reasonable
opinion of Uniroyal, cannot be resolved promptly without any material adverse
effect on the business, operations or prospects of Sterling.
10.5 No Casualty. There shall not have occurred any casualty in
and to any property of Sterling as a result of which either:
(a) the monetary amount of damage or destruction totals thirty percent
(30%) or more of the value of all of the operating properties owned or leased by
Sterling, measured by book value; or
(b) the monetary amount of damage or destruction totals less than
twenty percent (20%) but more than five percent (5%) of the value of all of the
operating properties owned or leased by Sterling, measured by book value, and
such loss and business interruption shall not be fully covered by valid and
existing insurance underwritten by responsible insurers.
10.6 Shareholders Meeting. This Agreement shall have been adopted by
the vote of the holders of two-thirds (2/3) of the Sterling Shares. Sterling
shall have delivered to Uniroyal copies of the resolutions adopted or other
actions taken by the Sterling Shareholders, certified by the President and
Secretary of Sterling.
10.7 Certificates. Sterling shall have delivered to Uniroyal (a)
Articles of Merger in a form appropriate for filing with the Virginia
Corporation Commission as evidence of the completion of all necessary corporate
proceedings for the merger of Sterling into Merger Sub into Sterling, and (b) a
certificate, dated the Closing Date, of an executive officer of Sterling, to the
effect that the conditions set forth in Sections 10.1, 10.2, 10.3, 10.4, 10.5
and 10.6 have been complied with.
10.8 Opinion of Counsel. Sterling shall have delivered to Uniroyal
the opinion of Shaw Pittman, legal counsel for Sterling, dated as of the
Closing Date, in form and substance reasonably satisfactory to Uniroyal, to the
effect that
(a) Sterling's corporate existence, good standing and qualification are
as stated in Section 7.1; (b) Sterling's authorized and outstanding
capital stock is as stated in Section 7.2; (c) this Agreement has been
duly authorized by Sterling by all necessary corporate proceedings
(including appropriate action by the shareholders and
directors of Sterling) and is valid and enforceable against
Sterling in accordance with its terms (except for the effect
of bankruptcy, insolvency, reorganization, moratorium, and
other similar laws affecting creditors' rights generally);
(d) Sterling has full corporate power and authority to consummate
the Merger contemplated by this Agreement;
(e) neither the execution nor delivery of this Agreement, nor the
consummation of the transactions contemplated thereby, will
conflict with or result in a breach of, or give rise to a
right of termination of, or accelerate the performance
required by, any terms of any agreement, instrument, permit,
court order, or any consent decree to which Sterling is
subject or a party, or constitute a default thereunder, or
result in the creation of any lien, claim or encumbrance upon
any of Sterling's assets, or violate any of the provisions of
Sterling's Articles of Incorporation or By-Laws, as amended to
the date of such opinion;
(f) the merger of Merger Sub into Sterling pursuant to this
Agreement complies with the requirements of the Virginia
Stock Corporation Act;
(g) no consent or approval by any governmental authority is
required in connection with the execution and delivery by
Sterling of this Agreement and the consummation of the
transactions contemplated herein; and
(h) such counsel does not know of any pending or threatened claim
or litigation against Sterling, or involving any of its
properties, which might result in any material adverse change
in the financial condition, business, assets, properties or
operations of Sterling, or interference with the sale of
products by Sterling.
In rendering such opinion, counsel for Sterling is entitled to rely on
certificates of public officials and officers of Sterling, reports of searches
of filings under the Uniform Commercial Code, and opinions of local counsel.
10.9 Consents. Uniroyal shall have received evidence satisfactory to it
that Sterling has obtained all consents and approvals required for the
consummation of the transactions contemplated by this Agreement.
10.10 Financial Results. Prior to the Closing the February Balance
Sheet and February Income Statement will not have been restated in such a manner
that causes Uniroyal, in its reasonable judgment, to believe that the business
or operations or prospects for Sterling have been materially adversely impacted.
10.11 Accountant's Confirmation. Uniroyal shall have received a
report of PricewaterhouseCoopers, LLP, independent certified public
accountants ("Sterling's Accountants"), satisfactory to Uniroyal, based
upon a limited review (not constituting an examination in accordance with
generally accepted auditing principles) of the February Balance Sheet, and
the February Income Statement, which report shall state that nothing came to
their attention that caused them to believe that the figures set forth in such
financial statements were materially inaccurate.
10.12 Employment Agreements. Sterling shall have entered into
employment agreements with Gene E. Lewis, James LeMunyon, Cengiz Balkas, Larry
Rowland, Andrew Timmerman, and Shaoping Wang substantially in the form of
Exhibit D appended hereto, including a non-competition provision customary in
the industry.
10.13 Information about Sterling Shareholders. Sterling shall have
provided to Uniroyal information reasonably satisfactory to Uniroyal to
establish (a) which Sterling Shareholders are Accredited Investors; (b) that
Sterling Shareholders who are non-Accredited Investors have sufficient
information to meet the requirements of Regulation D of the Commission; and (c)
that the number of Sterling Shareholders who are non-Accredited Investors does
not exceed thirty-five (35).
Article 11 - Conditions to Obligations of Sterling
All obligations of Sterling to be performed at the Closing are subject
to the fulfillment, prior to or at the Closing, of each of the conditions
hereinafter set forth in this Article 11. Nothing in this Article 11 will limit
or restrict any rights or remedies which Sterling may have by reason of any
misrepresentation, breach of warranty or nonfulfillment of any covenant,
agreement or obligation by Uniroyal or Merger Sub under or pursuant to this
Agreement.
11.1 Representations and Warranties. The representations and warranties
made in this Agreement by Uniroyal and Merger Sub shall be true at and as of the
Closing of the Merger as though such representations and warranties were made at
and as of such time, except to the extent that, since January 30, 2000, Uniroyal
may have delivered or issued Common Shares upon the exercise of options to
officers and key personnel or issued additional Common Shares in other
acquisition transactions and except to the extent that, since January 30, 2000,
the respective numbers of shares reserved in Section 8.2 may have changed as a
result of such delivery or issuance or as a result of the grant of additional
options to officers and key personnel.
11.2 Compliance with Agreement. Uniroyal and Merger Sub shall have
performed and complied in all material respects with all of its obligations
under this Agreement at or before the Closing.
11.3 Proceedings and Documents. All proceedings, corporate or
otherwise, to be taken in connection with the transactions contemplated by this
Agreement, and all documents incident thereto, shall be reasonably satisfactory
in form and substance to Sterling; and Uniroyal shall have furnished Sterling
with certified copies of such proceedings and such other instruments and
documents as Sterling shall have reasonably requested.
11.4 Opinions of Counsel or Public Accountants. Uniroyal shall have
delivered to Sterling the opinion of Oliver J. Janney or other counsel
satisfactory to Sterling, dated as of the Closing Date, in form and substance
satisfactory to Sterling, to the effect that Uniroyal's and Merger Sub's
corporate existence, good standing and corporate power are as stated in Section
8.1; that the authorized and outstanding capital stock of Uniroyal and Merger
Sub, respectively, is as stated in Section 8.2; that Uniroyal has duly
authorized this Agreement by all necessary corporate proceedings and that no
action by the shareholders of Uniroyal is required to authorize this Agreement
and the Merger; that the Uniroyal Common Shares to be delivered pursuant to this
Agreement, when so delivered, will be validly issued, fully paid and
nonassessable; that this Agreement is valid and enforceable against Uniroyal in
accordance with its terms, subject to normal exceptions for creditors' rights;
that neither the execution nor delivery of this Agreement, nor the consummation
of the transactions contemplated thereby, will conflict with or result in a
breach of, or give rise to a right of termination of, or accelerate the
performance required by, any terms of any agreement, instrument, permit, court
order, or any consent decree to which Uniroyal or Merger Sub is subject or a
party, or constitute a default thereunder, or result in the creation of any
lien, claim or encumbrance upon any of the assets of Uniroyal or Merger Sub, or
violate any of the provisions of the certificate of incorporation or by-laws of
Uniroyal or Merger Sub, as amended to the date of such opinion; that no consent
or approval by any governmental authority is required in connection with the
execution and delivery by Uniroyal and Merger Sub of this Agreement and the
consummation of the transactions contemplated thereby; and that such counsel
does not know of any pending or threatened claim or litigation against Uniroyal
or Merger Sub, or involving any of its properties, which might result in any
material adverse change in the financial condition, business, assets, properties
or operations of Uniroyal, or interference with the sale of products by
Uniroyal. Uniroyal shall also have delivered to Sterling the opinion of
Williams, Parker, Harrison, Dietz & Getzen or such other counsel or independent
public accountants as may be reasonably satisfactory to Sterling that the Merger
is a reorganization under Section 368(a)(2)(E) of the Code.
11.5 No Litigation. No litigation, proceeding, investigation or action
shall be pending or, to the actual knowledge of the executive officers of
Uniroyal after reasonable investigation, threatened by any significant customer
or by any competitor of Uniroyal or Sterling to enjoin or prevent the
consummation of the transactions contemplated by this Agreement or to obtain
damages or other relief by reason of such consummation, or involving any of the
business or properties owned or leased by Uniroyal which, in the reasonable
opinion of Sterling, cannot be resolved promptly without any material adverse
effect on the business or operations of Uniroyal.
11.6 Certificate of Fulfillment of Conditions. Uniroyal shall have
delivered to Sterling a certificate signed by an executive officer of Uniroyal,
dated the Closing Date, to the effect that the conditions set forth in Sections
11.1, 11.2 and 11.5 have been complied with.
Article 12 - Waiver, Modification and Termination
12.1 Waiver. Either Uniroyal or Sterling may, by written
notice to the other,
(a) extend the time for the performance of any of the
obligations or other actions of the other party but not
beyond August 1, 2000; provided that, in the event that the
Closing has not occurred by June 15, 2000 and provided that
Sterling is not in default hereunder, Uniroyal will lend
Sterling the sum of two million five hundred thousand
dollars ($2,500,000) for working capital on terms similar
to those at which Sterling is then currently entitled to
borrow;
(b) waive any inaccuracies in the representation of the other
party contained in this Agreement; or
(c) waive compliance with any of the agreements of the other
party contained in this Agreement or waive or consent to
the modification of performance of any of the obligations
of the other party.
No other action taken pursuant to this Agreement, including, without limitation,
any investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, condition, or agreement contained herein. Any extension, waiver or
consent by any party shall be validly and sufficiently authorized for the
purposes of this Agreement if authorized or ratified by the Board of Directors
of such party.
12.2 Amendment. The parties hereto, by mutual consent of their
respective Boards of Directors or any persons designated thereby, may amend,
modify, or supplement this Agreement (whether before or after the approval of
this Agreement by the shareholders of Sterling) in such manner as may be agreed
upon by them in writing.
12.3 Termination. This Agreement may be terminated and the
Merger hereby provided for may be abandoned at any time prior to the Effective
Time:
(a) by mutual consent of the respective Boards of Directors of
Sterling and Uniroyal; and
(b) by the Board of Directors of Uniroyal or Sterling, if any
of the conditions provided for in
Article 10 or 11 of this Agreement, as the case may be,
have not been met and have not been waived by such party by
July 1, 2000, unless such time has been extended by an
officer of Uniroyal or Sterling, as the case may be, in
writing.
12.4 Breakup Fee. In the event that this Agreement is terminated by
Uniroyal for reasons other than Sterling's default under this Agreement,
compliance with law or failure of Sterling to have entered into the employment
agreements referred to in Section 9.34 of this Agreement, Uniroyal will at the
time of such termination make an equity investment in Sterling of five million
dollars ($5,000,000) on terms to be set by mutual agreement. In the event that
this Agreement is terminated by Sterling for reasons other than Uniroyal's
default under this Agreement or compliance with law, Sterling will at the time
of such termination pay to Uniroyal the sum of five million dollars
($5,000,000). Such payment will be made by the terminating party fifteen (15)
days after the termination.
12.5 Effect of Termination. In the event of termination and abandonment
of the Merger (i) all information received by a party from another party with
respect to the business of the other shall not at any time be used by such party
for its advantage or disclosed by it to third persons to the detriment of the
other party; (ii) all documents, lists, or other materials, and any copies made
thereof, furnished by a party shall be returned to the party that furnished
them, or upon request, destroyed; and (iii) none of Uniroyal, Merger Sub nor
Sterling shall have any Liability or further obligation to any other party under
this Agreement, except as stated in the preceding (i) and (ii) of this Section
12.5, and each party shall bear its own expenses in connection with this
Agreement.
Article 13 - Time Merger Becomes Effective
13.1 The closing under this Agreement ( the "Closing") shall take place
at the offices of Uniroyal Technology Corporation, Two North Tamiami Trail,
Sarasota, Florida (or at such other place as the parties may agree upon in
writing) as soon as practicable after the last of the conditions specified in
Sections 10 and 11 has been fulfilled (or waived by the party entitled to waive
that condition).
13.2 Uniroyal and Sterling shall effect the Merger provided for by this
Agreement as soon as practicable after the date of closing (the "Closing Date")
by filing duly executed Articles of Merger and a Certificate of Merger pursuant
to the applicable provisions of Virginia and Delaware law, respectively, in the
offices of the Secretary of State of the Commonwealth of Virginia and the
Secretary of State of the State of Delaware.
Article 14 - Post- Closing Covenants
The parties agree to take the following actions after the Closing:
14.1 Certain Filings. Uniroyal and Merger Sub agree to make or cause to
be made all filings with regulatory authorities that are required of them to
effect the transactions contemplated by this Agreement. Uniroyal and Merger Sub
agree to make all reasonable representations and covenants in connection with
the opinions of counsel to be attached to the Registration Statement with
respect to the correctness of the discussion in the Registration Statement as to
the material federal income tax consequences of the Merger.
14.2 Registration Statement; Proxy Statement/Private Placement
Memorandum. Not later than five (5) business days after the Closing, Uniroyal
will prepare and file the registration statement (the "Registration Statement")
in order to register the Uniroyal Shares issued in connection with the Merger
with the Securities and Exchange Commission (the "Commission"). The Registration
Statement shall not at the time the Registration Statement is declared effective
by the Commission contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. Uniroyal and Merger Sub shall furnish all information
reasonably required to be included in the Proxy Statement/Private Placement
Memorandum and the Registration Statement or for any application or other filing
to be made pursuant to the rules and regulations of any United States or foreign
governmental body in connection with the transactions contemplated by this
Agreement. Such information will comply in all material respects with the
requirements of the Securities Act and the rules of the Commission thereunder.
The information supplied by Uniroyal and Merger Sub in writing specifically for
including in the Proxy Statement/Private Placement Memorandum will not, on the
date the Proxy Statement/Private Placement Memorandum (or any amendment thereof
or supplement thereto) is first mailed to Sterling Shareholders or at the time
of such meeting, contain any statement which, at such time and in light of the
circumstances under which it is made, is false or misleading with respect to any
material fact, or shall omit to state any material fact necessary in order to
make the statements made therein, in light of the circumstances under which it
shall be omitted, not false or misleading; or omit to state any material fact
necessary to correct any statement in any earlier communication to Sterling
Shareholders in connection with the meeting which has become false or
misleading. If at any time prior to the date on which the Registration Statement
becomes effective any fact relating to Uniroyal or Merger Sub or any of their
respective officers, directors, shareholders or other affiliates is discovered
by Uniroyal or Merger Sub which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement/Private Placement
Memorandum, Uniroyal shall promptly inform Sterling. Notwithstanding the
foregoing, Uniroyal and Merger Sub make no representation or warranty with
respect to any information supplied by Sterling which is contained or
incorporated by reference in, or furnished in connection with the preparation
of, the Registration Statement or the Proxy Statement/Private Placement
Memorandum.
14.3 Nasdaq. Uniroyal will take all actions necessary to have the
Uniroyal Common Shares issued in connection with the Merger listed on the Nasdaq
National Market upon effectiveness of the Registration Statement.
14.4 Tax-Free Reorganization. None of the Surviving Corporation,
Uniroyal nor Merger Sub will take, or fail to take, any action that would
reasonably be expected to (i) adversely affect the qualification of the Merger
as a reorganization pursuant to Section 368(a)(2)(E) of the Code, or result in
the receipt of Uniroyal Common Shares by Sterling Shareholders being treated as
a taxable transaction.
14.5 Repurchase Contingency. In order to provide partial protection to
persons who are not employees of Sterling and own options to purchase Sterling
Common Shares ("Non-Employee Option Holders") against adverse income tax
consequences that could result from a precipitous decline in the market price of
Uniroyal Common Shares received by them in connection with the Merger between
the Closing Date and the date on which the Registration Statement becomes
effective, Uniroyal agrees that, for a period of thirty (30) days after the date
on which the Registration Statement becomes effective, Uniroyal will, on the
written request of any such Non-Employee Option Holder, purchase from such
Non-Employee Option Holder the number of shares equal to up to fifty percent
(50%) of the number of Uniroyal Common Shares acquired by such person in
exchange for the Sterling Common Shares acquired by such Non-Employee Option
Holder through the exercise of one or more stock options. The percentage to be
purchased by Uniroyal will be based on the Tax Liabilities of each such
Non-Employee Option Holder who or which requests the purchase. Uniroyal will
purchase said shares at a price per share that is equal to the closing price of
the Uniroyal Common Shares on the Nasdaq National Market System on the Closing
Date, provided that Uniroyal will not be required to make any such purchase to
the extent that such purchase would jeopardize the status of the Merger as a
reorganization under Section 368(a)(2)(E) of the Code.
14.6 Indemnification. Uniroyal shall indemnify and hold harmless any
and all persons who receive Uniroyal Common Shares in the Merger for any and all
Taxes that result from the failure of the Merger to qualify as a reorganization
under Section 368(a)(2)(E) of the Code other than by reason of actions taken by
Sterling prior to the Closing.
Article 15 - Notices
15.1 All notices and other communications hereunder shall be deemed to
have been duly given if mailed, by first class mail, postage prepaid, delivered
by personal delivery or overnight courier or sent by facsimile transmission, in
every case addressed as follows:
If to Uniroyal or
Merger Sub: George J. Zulanas, Jr.
Chief Financial Officer
Uniroyal Technology Corporation
Two North Tamiami Trail, Suite 900
Sarasota, Florida 34236
Facsimile Number: (941)361-2214
With a copy to: Oliver J. Janney, Esq.
General Counsel
Uniroyal Technology Corporation
Two North Tamiami Trail, Suite 900
Sarasota, Florida 34236
Facsimile Number: (941)361-2214
If to Sterling: Gene E. Lewis
Chief Executive Officer
Sterling Semiconductor, Inc.
22260 Executive Drive, Suite 101
Sterling, Virginia 20166
Facsimile Number: (703) 736-3443
With a copy to: Steven L. Meltzer, Esq.
Shaw Pittman
1676 International Drive
McLean, Virginia 22102
Facsimile Number: (703) 790-7901
or to any other address provided by either party to the other in writing.
Article 16 - Survival; Confidentiality
16.1 Survival of Representations and Warranties. The representations
and warranties made by Sterling or pursuant to this Agreement or in any writing,
certificate, exhibit, schedule, statement, list, report, document or instrument
furnished or delivered pursuant hereto, will survive until the Closing, at which
time they shall terminate.
16.2 Confidentiality. From and after the Closing, the directors of
Sterling at the time of execution of this Agreement shall not, directly or
indirectly, except at the request of Uniroyal, use or disclose to any third
party any of the technical, financial, operational, marketing, customer,
supplier or similar or different confidential and proprietary information
pertaining to the assets or the business of Sterling.
Article 17 - Miscellaneous
17.1 Entire Agreement. All understandings heretofore made between
Uniroyal and Sterling are merged in this Agreement, which, together with only
the other agreements referred to herein, fully and completely express the
agreement of the parties.
17.2 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
17.3 Exhibits. All schedules and exhibits attached hereto, and lists or
letters furnished pursuant to any Article of this Agreement shall be deemed to
be incorporated in every other Article of this Agreement for the purposes of
disclosure hereunder.
17.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to the conflicts of laws provisions thereof.
17.5 Transactional Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, each of the parties hereto shall
bear the fees and expenses incurred by it in connection with the preparation,
negotiation, execution, delivery, and performance of this Agreement. If for any
reason the performance of the transactions contemplated by this Agreement are
not consummated, no party shall have any Liability to any other party whatsoever
with respect to such expenses.
17.6 Bridge Notes. Sterling has issued certain notes under bridge loans
(the "Bridge Notes") which include warrants to purchase Sterling Common Shares.
The holders of Bridge Notes will be permitted to use the principal of the Bridge
Notes to exercise the associated warrants. Any unpaid balances of the Bridge
Notes will be repaid by Sterling at the Closing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
UNIROYAL TECHNOLOGY CORPORATION
By /s/ Howard R. Curd
Its Chairman of the Board
BAYPLAS4, INC.
By /s/ Howard R. Curd
Its Chairman of the Board
STERLING SEMICONDUCTOR, INC.
By /s/ Harry S. Flemming
Its Chairman of the Board
<PAGE>
EXHIBIT E
DEFINED TERMS
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act (as set forth in 12 C.F.R. ss. 230.501).
"affiliate" or "affiliated". As used herein, the term "any person
affiliated with" any other person shall mean any member of the class that
includes the spouse, parents, grandparents, children, grandchildren, brothers
and sisters, and nieces and nephews of such other person, the spouse of any such
parent, grandparent, child, grandchild, brother or sister, niece or nephew, or
any corporation, partnership, sole proprietorship, trust or other entity in
which such person or any one or more members of the foregoing class has any
direct or beneficial interest of ten percent (10%) or more in the aggregate. As
used herein, the term "any person affiliated with Sterling" shall mean any
member of the class that includes the directors, officers, employees of
Sterling, the spouse, parents, grandparents, children, grandchildren, brothers
and sisters, and nieces and nephews of such directors, officers, employees, the
spouse of any such parent, grandparent, child, grandchild, brother or sister,
niece or nephew, or any corporation, partnership, sole proprietorship, trust or
other entity in which any one or more members of the foregoing class has any
direct or beneficial interest of ten percent (10%) or more in the aggregate.
"Asbestos" as used herein, will be as defined in 40 C.F.R.ss.61.141
(1995).
"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.
"Bridge Notes" has the meaning set forth in Section 17.6.
"Closing" has the meaning set forth in Section 13.1.
"Closing Date" has the meaning set forth in Section 13.2.
"Closing Balance Sheet" has the meaning set forth in Section 5.3.
"Code" means the Internal Revenue Code of 1986, as amended.
*
"Commission" has the meaning set forth in Section 14.2.
"Conversion Ratio" means for each Sterling Share the number of Uniroyal
Common Shares having a value of twenty-eight dollars ($28.00), based on the
average closing price of the Uniroyal Common Shares on the Nasdaq National
Market System for the ten (10) trading days preceding the date of this
Agreement.
"December Balance Sheet" has the meaning set forth in Section 7.6.
"Effective Time" has the meaning set forth in Section 1.2.
"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.
"Environmental, Health and Safety Laws" means all laws in effect at the
Closing (including rules, regulations, codes, permit requirements, 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.Sections1251 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. Sections 7401 et seq., and any
amendments thereto and regulations thereunder, (f) all laws relating to
Asbestos, (g) all laws relating to PCBs, chlorofluorocarbons, and any other
chemicals as provided for under the Federal Toxic Substances and Control Act, 15
U.S.C. Sections 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. Sections 9601 et seq., and any amendments thereto and regulations
thereunder, and any analogous state laws ("CERCLA and State Equivalents").
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, including regulations and interpretations thereunder.
"February Balance Sheet" has the meaning set forth in Section 7.5(a).
"February Income Statement" has the meaning set forth in Section
7.5(a).
"Financial Statements" has the meaning set forth in Section 7.5 (a).
"Forecast Balance Sheet" has the meaning set forth in Section 5.3.
"GAAP" has the meaning set forth in Section 7.5(b).
"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. Sections 6901 et seq., and any amendments thereto and regulations
thereunder, or (iii) any other Environmental, Health and Safety Laws.
"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),
(e) all material computer software used in the operation
of the business of Sterling,
(f) the "Sterling" and "Sterling Semiconductor" trade
names,
(g) all other proprietary rights, and
(h) all copies and tangible embodiments thereof (in
whatever form or medium).
Intellectual property will include the above items, regardless of whether they
are registered, licensed, or located in the United States or in a foreign
country.
"Knowledge" or "Sterling's Knowledge" means actual knowledge after
reasonable investigation by the following persons: Harry Flemming, Gene E.
Lewis, James LeMunyon, and, solely as to the representations and warranties made
in Section 7.9, Cengiz Balkas, Nikolai Yushin and Shaoping Wang, and, solely as
to the representations and warranties made in Sections 7.9 and 7.11, Andrew
Timmerman and Lawrence Rowland.
"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.
"March Balance Sheet" has the meaning set forth in Section 5.3.
"Merger" has the meaning set forth in the first operative provision.
"Merger Sub" has the meaning set forth in the preamble.
"Non-Employee Option Holders" has the meaning set forth in Section
14.5.
"PCBs" means polychlorinated biphenyls.
"Pension Plans" has the meaning set forth in Section 7.22.B.
"Proxy Statement/Private Placement Memorandum" has the meaning set
forth in Section 7.30.
"PRP" has the meaning set forth in Section 7.19.C.
"Real Property Leases" has the meaning set forth in Section 7.10.
"Registration Statement" has the meaning set forth in Section 14.2.
"Returns" has the meaning set forth in Section 7.8(a).
"Securities Act" means the Securities Act of 1933, 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.
"Sterling" has the meaning set forth in the preamble.
"Sterling Common Shares" has the meaning set forth in the first
recital.
"Sterling Information" has the meaning set forth in Section 7.30.
"Sterling Preferred Shares" has the meaning set forth in the first
recital.
"Sterling Shares" has the meaning set forth in the first recital.
"Sterling Shareholders" has the meaning set forth in the second
recital.
"Sterling's Accountants" has the meaning set forth in Section10.11.
"Surviving Corporation" has the meaning set forth in the first
operative provision.
"Takeover Proposal" has the meaning set forth in Section 9.28.
"Tax" or "Taxes" means taxes of any kind, levies or other like
assessments, customs, duties, imposts, charges or fees, including, without
limitation, income, gross receipts, ad valorem, value added, excise, real or
personal property, asset, sales, use, license, payroll, transaction, capital,
net worth and franchise taxes, withholding, employment, social security,
workers' compensation, utility, severance, production, unemployment
compensation, occupation, premium, windfall profits, transfer and gains taxes or
other government taxes imposed or payable to the United States, or any state,
county, local or foreign government or subdivision or agency thereof, and in
each instance such term will include any interest, penalties or additions to tax
attributable to any such Tax.
"Uniroyal" has the meaning set forth in the preface.
"Uniroyal Common Shares" has the meaning set forth in the second
recital.
"Uniroyal Stock" is the common stock, $.01 par value per share, of
Uniroyal.
"Working Capital" means the sum of all current assets less all current
liabilities maintained at their net realized value for federal income tax
purposes.
<PAGE>
UNIROYAL TECHNOLOGY CORPORATION
ONE SARASOTA TOWER
SUITE 900
TWO NORTH TAMIAMI TRAIL
SARASOTA, FLORIDA 34236
GEORGE J. ZULANAS, JR.
EXECUTIVE VICE PRESIDENT Telephone: (941) 361-2220
CHIEF FINANCIAL OFFICER Fax: (941) 361-2214
TREASURER
June 9, 2000
Mr. Harry Flemming
Chairman of the Board
Sterling Semiconductor, Inc.
22260 Executive Drive, Suite 101
Sterling, VA 20166
Re: Merger Agreement dated April 10, 2000 among Uniroyal
Technology Corporation, Bayplas4, Inc. and Sterling
Semiconductor, Inc. (the "Merger Agreement")
Dear Harry:
This will confirm our agreement as follows: The final sentence of
Section 5.3 of the Merger Agreement is hereby deleted and replaced in its
entirety with the following:
In the event that the Working Capital on the Closing Balance
Sheet is less than the Working Capital shown on the Forecast
Balance Sheet or in the event of fraud on the part of
Sterling, the Conversion Ratio for the Shares will be reduced
on the basis of a one dollar ($1.00) reduction in the total
value of Uniroyal Common Shares being delivered hereunder for
each dollar that such actual Working Capital varies from the
Working Capital set forth on the Forecast Balance Sheet and
for fraud, provided that such adjustment will reflect only
decreases in Working Capital in excess of $250,000, and fraud.
In the event that the deficiency in working capital is less
than $250,000, up to fifty percent (50%) of the aggregate
amount of $140,000 in signing bonuses paid by Sterling to four
non-executive employees may be applied against the balance of
the $250,000, it being the parties' intention that Sterling
will be credited with the lesser of the unused portion of the
$250,000 and one-half of the $140,000 paid in signing bonuses.
Except as hereby modified, the Merger Agreement will continue
unchanged in full force and effect. Please confirm that the foregoing completely
and accurately sets forth our agreement by signing and returning the enclosed
copy of this letter agreement to me.
Very truly yours,
UNIROYAL TECHNOLOGY CORPORATION
/s/ George J. Zulanas, Jr.
George J. Zulanas, Jr.
The foregoing sets forth our agreement.
STERLING SEMICONDUCTOR, INC.
By: /s/ Harry Flemming
--------------------
Harry Flemming
Chairman of the Board
<PAGE>
APPENDIX A
Selected Unaudited Condensed Pro Forma Financial Information
The following unaudited pro forma condensed consolidated financial information
of Uniroyal Technology Corporation ("Uniroyal") consists of the unaudited pro
forma condensed consolidated balance sheet as of April 2, 2000 and the unaudited
pro forma condensed consolidated statements of operations for the fiscal year
ended September 26, 1999 and the six month period ended April 2, 2000
(collectively, the "Pro Forma Statements"). The Pro Forma Statements are based
upon the consolidated financial statements of Uniroyal and the unaudited
consolidated financial statements of Sterling Semiconductor, Inc. ("Sterling")
combined and adjusted to give effect to the May 31, 2000 merger between Uniroyal
Technology Corporation, its wholly owned subsidiary, BayPlas4, Inc., and
Sterling Semiconductor, Inc.
The unaudited pro forma condensed consolidated balance sheet gives effect to the
transaction as if it had occurred on April 2, 2000, and reflects the total
estimated purchase costs. The unaudited pro forma condensed consolidated balance
sheet combines Uniroyal's unaudited consolidated balance sheet as of April 2,
2000 with Sterling's unaudited consolidated balance sheet as of March 31, 2000.
The unaudited pro forma condensed consolidated statements of operations for the
fiscal year ended September 26, 1999 and the six months ended April 2, 2000,
reflect the transaction as if it had occurred on September 28, 1998. The
unaudited pro forma condensed consolidated statements of operations combine
Uniroyal's consolidated statement of operations for the year ended September 26,
1999 and Uniroyal's unaudited consolidated statement of operations, for the six
month period ended April 2, 2000, with Sterling's unaudited consolidated
statement of operations for the year ended September 30, 1999 and Sterling's
unaudited consolidated statement of operations for the six month period ended
March 31, 2000.
The Pro Forma Statements are based upon information set forth in this document
and assumptions included in the accompanying notes. Uniroyal anticipates
completion of a valuation of the significant assets, liabilities and business
operations of Sterling. Using this information, Uniroyal will make a final
purchase price allocation between tangible assets and liabilities, identifiable
intangible assets and goodwill. The impact of these changes, principally
affecting intangible assets and related amortization, could be material.
Uniroyal will account for the merger using the purchase method of accounting.
Accordingly, Uniroyal's cost to acquire Sterling, estimated at approximately $41
million, will be allocated to the identifiable assets acquired and the
liabilities assumed according to their respective fair values, with the excess
purchase price allocated to goodwill. As noted above, the final allocation of
purchase price is dependent upon valuations that are not yet complete.
Accordingly, the purchase price allocation adjustments made in connection with
the development of the Pro Forma Statements are preliminary and have been made
solely for the purpose of developing the Pro Forma Statements.
The Pro Forma Statements, and accompanying notes, should be read in conjunction
with the audited consolidated financial statements and unaudited interim
condensed consolidated financial statements, including the notes to the
consolidated financial statements, of Uniroyal and Sterling. The related
Uniroyal financial statements have been previously filed. The related Sterling
financial statements will be included in a related Form 8-K/A to be filed within
60 days of the filing date of this Form 8-K.
The Pro Forma Statements are based on currently available information and upon
certain assumptions that management believes are reasonable under the
circumstances. The Pro Forma Statements do not purport to represent what
Uniroyal's financial position or results of operations would have been if the
Sterling merger had in fact occurred at April 2, 2000 and in the case of the
condensed consolidated statements of operations, at September 28, 1998, or to
project Uniroyal's financial position or results of operations at any future
date or for any future periods.
<PAGE>
<TABLE>
<CAPTION>
UNIROYAL TECHNOLOGY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
ASSETS
APRIL 2, 2000
------------------------------------------------------------------------------
PRO FORMA
UNIROYAL STERLING ADJUSTMENTS
TECHNOLOGY SEMICONDUCTOR, STERLING
CORPORATION INC. ACQUISITION PRO FORMA
------------ ------------- ----------- ---------
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 99,478 $ 2,021 $ (2,491) (1) $ 99,008
Trade accounts receivable - net 5,045 419 - 5,464
Inventories 10,298 260 - 10,558
Deferred income taxes 4,981 - 53 (2) 5,034
Prepaid expenses and other current
assets 1,405 315 - 1,720
---------- ---------- ---------- ----------
Total current assets 121,207 3,015 (2,438) 121,784
Property, plant and equipment - net 47,915 1,904 - 49,819
Property, plant and equipment held for
sale 1,871 - - 1,871
Goodwill - net 1,282 - - 1,282
Intangible assets - net - 1,230 37,885 (3) 39,115
Deferred income taxes - net 9,478 - 2,339 (2) 11,817
Other assets - net 11,948 57 (500) (4) 11,505
---------- ---------- ---------- ----------
TOTAL ASSETS $ 193,701 $ 6,206 $ 37,286 $ 237,193
========== ========== ========== ==========
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
UNIROYAL TECHNOLOGY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
APRIL 2, 2000
---------------------------------------------------------------------------------
PRO FORMA
UNIROYAL STERLING ADJUSTMENTS
TECHNOLOGY SEMICONDUCTOR, STERLING
CORPORATION INC. ACQUISITION PRO FORMA
----------- -------------- ------------- ------------
Current liabilities:
<S> <C> <C> <C> <C>
Current portion of long-term debt $ 4,904 $ 4,323 $ (3,823) (5) $ 5,404
Trade accounts payable 8,810 1,067 - 9,877
Net liabilities of discontinued
operations 6,472 - - 6,472
Accrued expenses:
Compensation and benefits 8,687 76 - 8,763
Interest 74 - - 74
Taxes, other than income 408 5 - 413
Income taxes payable 15,116 - - 15,116
Other 4,830 85 679 (6) 5,594
---------- ---------- ---------- ----------
Total current liabilities 49,301 5,556 (3,144) 51,713
Long-term debt, net of current portion 23,412 578 - 23,990
Other liabilities 22,634 - - 22,634
---------- ---------- ---------- ----------
Total liabilities 95,347 6,134 (3,144) 98,337
---------- ---------- ---------- ----------
Minority interest 4,812 - - 4,812
Stockholders' equity:
Preferred stock - 3,602 (3,602) (7) -
Common stock 306 6 (6) (7) 306
Additional paid-in capital 60,053 3,525 24,941 (8) 88,519
Retained earnings (deficit) 56,533 (6,977) 6,977 (9) 56,533
---------- ---------- ---------- ----------
116,892 156 28,310 145,358
Less treasury stock at cost (23,350) (84) 12,120 (10) (11,314)
---------- ---------- ---------- ----------
Total stockholders' equity 93,542 72 40,430 134,044
---------- ---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 193,701 $ 6,206 $ 37,286 $ 237,193
========== ========== ========== ==========
</TABLE>
See accompanying notes.
<PAGE>
(1) Represents the principal balance of Sterling notes payable due and paid
upon the consummation of the merger on May 31, 2000 (approximately
$2,489,000), plus approximately $2,000 due to Sterling shareholders for
fractional shares of Uniroyal common stock paid as a result of the
consummation of the merger.
(2) Represents a purchase accounting entry for the reversal of the Sterling
deferred tax asset valuation allowance. Management believes it will be
more likely than not that the deferred tax assets acquired will be
utilized by the consolidated group after the merger.
(3) The estimated purchase price and allocation of the purchase price are
as follows (in thousands):
<TABLE>
<CAPTION>
Estimated Acquisition Cost
--------------------------
<S> <C>
Exchange of Uniroyal shares for Sterling preferred and common stock $ 31,743 (a)
Conversion of Sterling stock options to Uniroyal stock options 8,871 (b)
Registration costs (112) (c)
----------
Subtotal - fair value of stock given 40,502
Cash for fractional shares 2
Acquisition expenses 566 (d)
----------
Total estimated acquisition cost $ 41,070
==========
Purchase Price Allocation
-------------------------
Estimated fair value of Sterling assets acquired $ 8,598
Estimated fair value of Sterling liabilities assumed (5,301)
Accrued registration costs (112)
Intangible assets acquired 37,885 (e)
----------
Total $ 41,070
==========
</TABLE>
(a) Represents the exchange of approximately 1,532,000 shares of
Uniroyal common stock for the outstanding shares of Sterling
preferred and common stock. The purchase price was based upon the
application of the Conversion Ratio (as defined in the merger
agreement included elsewhere in this Form 8-K and calculated to be
1.1965 shares of Uniroyal stock for each share of Sterling stock)
to the outstanding Sterling shares, warrants and non-employee stock
options. The Uniroyal shares are valued at $20.725 per share based
upon the average closing share price of Uniroyal stock for the five
trading days surrounding April 30, 2000, which represents the date
on which a working capital adjustment affected the original
purchase price. The purchase price is subject to a potential
additional adjustment for the non-employee option holders of
Sterling stock if the closing price of the Uniroyal stock on the
Registration Effective Date (as defined in the merger agreement) is
less than 95% of the closing price of Uniroyal stock on May 31,
2000 ($16.00).
(b) Represents the conversion of approximately 425,000 outstanding and
unexercised Sterling stock options (the majority of which are
vested) into approximately 508,000 Uniroyal vested stock options
based upon the application of the Conversion Ratio. The fair value
of the Uniroyal options was calculated using the Black-Sholes
option-pricing model. All vested stock options exchanged are
included as part of the purchase price based upon their fair value.
(c) Represents estimated registration costs of the Uniroyal common
stock used to effect the merger.
(d) Represents estimated costs of the acquisition that includes an
estimate of approximately $406,000 to be paid to Jesup & Lamont
Securities, a related party, and other costs of the acquisition.
(e) The preliminary intangible asset allocation was determined by
subtracting the estimated identifiable tangible net assets acquired
from the total estimated acquisition costs. The preliminary pro
forma intangible asset allocation is being amortized straight-line
over a 5-year period for purposes of the pro forma. A 5-year life
is deemed to be reasonable given the rapid rate of change in
technology.
The final allocation of the purchase price is dependent upon the
completion of a valuation study. Changes to the intangible asset
and related amortization as a result of the finalization of the
valuation study could be material.
(4) Represents the elimination of a Uniroyal investment in Sterling, which
was in the form of a $500,000 bridge loan.
(5) Represents the approximate reduction of Sterling debt at the
consummation of the merger from notes repaid in cash on the merger date
of $2,489,000, notes converted to Uniroyal stock on the merger date of
$1,478,000, elimination of the Uniroyal bridge loan of $500,000 and the
write-off of the related debt discount ($644,000).
(6) Represents an accrual for estimated acquisition and registration costs.
(7) Represents the elimination of Sterling preferred stock and common
stock.
(8) Represents the elimination of Sterling paid-in-capital, the fair value
of the Uniroyal stock given to effect the merger (less the cost of the
treasury stock based upon first in-first out methodology) and the fair
value of Uniroyal stock options exchanged for Sterling employee stock
options.
(9) Represents the elimination of Sterling's retained deficit.
(10) Represents reduction in Uniroyal treasury stock used to effect the
merger(at cost based upon first in-first out methodology) and the
elimination of Sterling treasury stock.
<PAGE>
<TABLE>
<CAPTION>
UNIROYAL TECHNOLOGY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE FISAL YEAR ENDED SEPTEMBER 26, 1999
-------------------------------------------------------------------------
PRO FORMA
UNIROYAL STERLING ADJUSTMENTS
TECHNOLOGY SEMICONDUCTOR, STERLING
CORPORATION INC. ACQUISITION PRO FORMA
------------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales $ 71,214 $ 1,948 $ - $ 73,162
Costs, expenses and (other income):
Costs of goods sold 53,680 2,882 - 56,562
Selling and administrative 18,276 1,178 19,454
Depreciation and other amortization 3,505 873 7,577 (1) 11,955
Gain on sale of division (667) - - (667)
Gain on sale of preferred stock investment (898) - - (898)
----------- ----------- ----------- -----------
Loss before interest, income taxes, minority
interest and discontinued operations (2,682) (2,985) (7,577) (13,244)
Interest expense - net (778) (383) 220 (2) (941)
----------- ----------- ----------- -----------
Loss before income taxes, minority interest
and discontinued operations (3,460) (3,368) (7,357) (14,185)
Income tax benefit 2,520 - 1,228 (3) 3,748
----------- ----------- ----------- -----------
Loss before minority interest
and discontinued operations (940) (3,368) (6,129) (10,437)
Minority interest 2,191 650 (650) (4) 2,191
----------- ----------- ----------- -----------
Income (loss) from continuing operations $ 1,251 $ (2,718) $ (6,779) $ (8,246)
=========== =========== =========== ===========
Income (loss) from continuing operations per share:
Basic $ 0.05 $ (0.32)
=========== ===========
Assuming dilution $ 0.05 $ (0.32)
=========== ===========
Average number of shares used in computation:
Basic 24,315,992 25,847,992 (5)
Assuming dilution 26,572,668 25,847,992 (6)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNIROYAL TECHNOLOGY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE SIX MONTH PERIOD ENDED APRIL 2, 2000
-----------------------------------------------------------------------------
PRO FORMA
UNIROYAL STERLING ADJUSTMENTS
TECHNOLOGY SEMICONDUCTOR, STERLING
CORPORATION INC. ACQUISITION PRO FORMA
------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 31,298 $ 1,654 $ - $ 32,952
Costs, expenses and (other income):
Costs of goods sold 24,586 1,579 - 26,165
Selling and administrative 20,328 910 - 21,238
Depreciation and other amortization 2,118 457 3,789 (1) 6,364
Provision for uncollectible note receivable 5,387 - - 5,387
Loss on assets to be disposed of 2,223 - - 2,223
Gain on sale of preferred stock investment (2,905) - - (2,905)
----------- ----------- ----------- -----------
Loss before interest, income taxes, minority
interest and discontinued operations (20,439) (1,292) (3,789) (25,520)
Interest expense - net (303) (613) 586 (2) (330)
----------- ----------- ----------- -----------
Loss before income taxes, minority interest
and discontinued operations (20,742) (1,905) (3,203) (25,850)
Income tax benefit 21,677 - 514 (3) 22,191
----------- ----------- ----------- -----------
Income (loss) before minority interest
and discontinued operations 935 (1,905) (2,689) (3,659)
Minority interest 3,067 146 (146) (4) 3,067
----------- ----------- ----------- -----------
Income (loss) from continuing operations $ 4,002 $ (1,759) $ (2,835) $ (592)
=========== =========== =========== ===========
Income (loss) from continuing operations per share:
Basic $ 0.16 $ (0.02)
=========== ===========
Assuming dilution $ 0.14 $ (0.02)
=========== ===========
Average number of shares used in computation:
Basic 24,277,802 25,809,802 (5)
Assuming dilution 28,400,727 25,809,802 (6)
</TABLE>
<PAGE>
(1) Represents the incremental amortization of intangible assets resulting
from the merger. The intangible assets are being amortized on a
straight-line basis over a 5-year period as previously described.
(2) Represents the elimination of interest expense related to the Sterling
notes payable that were repaid or converted to Uniroyal stock upon the
consummation of the merger.
(3) Represents the income tax benefit on the net effect of Sterling's net
loss and pro forma interest expense adjustment for the period,
calculated at the statutory rate. Sterling had not recorded a tax
benefit due to the belief that it was more likely than not that the
resulting deferred tax asset would not be utilized. It is management's
belief that it is more likely than not that the acquired deferred tax
asset of Sterling will be utilized by Uniroyal. The amortization of the
intangible asset recorded as a result of the merger is not deductible
for tax purposes.
(4) Represents the elimination of Sterling's minority interest.
(5) Reflects additional Uniroyal shares issued in the merger of
approximately 1,532,000.
(6) Does not include the effect of approximately 508,000 stock options
issued in connection with the merger, as the effect would be
antidilutive.
