<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________TO _______________
COMMISSION FILE NUMBER 33-98828
PIONEER AMERICAS ACQUISITION CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 06-1420850
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4200 NATIONSBANK CENTER, 700 LOUISIANA STREET, HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(713) 225-3831
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [x] No [ ]
On August 12, 1996, there were outstanding 1,000 shares of the
Registrant's Common Stock, $.01 par value. All of such shares are owned by
Pioneer Companies, Inc.
The Registrant meets the conditions set forth in General Instruction
(H)(1)(a) and (b) of Form 10-Q, and is therefore filing this form with the
reduced disclosure format permitted by General Instruction (H)(2) of Form 10-Q.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I--FINANCIAL INFORMATION
Page
----
<S> <C> <C>
Item 1. Consolidated Financial Statements
[ ] Consolidated Balance Sheets--June 30, 1996 and December 31, 1995 3
[ ] Consolidated Statements of Operations--Three Months Ended June 30, 1996 and 1995 and
Six Months Ended June 30, 1996 and 1995 5
[ ] Consolidated Statements of Cash Flows--Six Months Ended June 30, 1996 and 1995 6
[ ] Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11
PART II--OTHER INFORMATION
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
<PAGE> 3
PART I--FINANCIAL INFORMATION
PIONEER AMERICAS ACQUISITION CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
--------------- --------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 8,774 $ 11,218
Accounts receivable, less allowance for doubtful
accounts of $1,451 at June 30, 1996 and $1,424 at
December 31, 1995 33,030 29,385
Due from parent 2,449 574
Inventories 14,193 13,004
Prepaid expenses 2,595 3,766
--------------- --------------
Total current assets 61,041 57,947
Property, plant and equipment:
Land 1,711 1,711
Buildings and improvements 17,036 13,997
Machinery and equipment 69,712 67,587
Cylinders and tanks 4,541 4,503
Construction in progress 17,730 9,394
--------------- --------------
110,730 97,192
Less accumulated depreciation (12,787) (7,795)
--------------- --------------
97,943 89,397
Other assets, net of accumulated amortization of $1,829 at
June 30, 1996 and $1,068 at December 31, 1995 13,457 11,664
Excess cost over fair value of net assets acquired, net of
accumulated amortization of $5,453 at June 30, 1996
and $3,311 at December 31, 1995 112,627 108,940
--------------- --------------
Total assets $ 285,068 $ 267,948
=============== ==============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
PIONEER AMERICAS ACQUISITION CORP.
CONSOLIDATED BALANCE SHEETS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
--------------- -------------
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 20,441 $ 20,183
Accrued liabilities 24,629 23,877
Returnable deposits 3,573 3,437
--------------- -------------
Total current liabilities 48,643 47,497
13 3/8% Mortgage Notes due 2005 135,000 135,000
Minority interest owned by parent 112 --
Notes payable 8,017 --
Returnable deposits 3,278 3,281
Accrued pension and other employee benefits 13,738 13,573
Other long-term liabilities 15,243 13,170
Commitments and contingencies -- --
Stockholders' equity:
Common stock, $.01 par value, authorized 1,000 shares,
issued and outstanding 1,000 shares 1 1
Additional paid-in capital 52,372 49,652
Retained earnings 8,664 5,774
--------------- -------------
Total stockholders' equity 61,037 55,427
--------------- -------------
Total liabilities and stockholders' equity $ 285,068 $ 267,948
=============== =============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
PIONEER AMERICAS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
PERIOD PERIOD
SIX FROM FROM
THREE MONTHS ENDED MONTHS INCEPTION JANUARY 1
JUNE 30, ENDED THROUGH THROUGH
---------------------- JUNE 30, JUNE 30, APRIL 20,
1996 1995 1996 1995 1995
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $ 54,217 $ 36,405 $ 103,113 $ 36,405 $ 57,848
Costs and expenses:
Cost of sales 38,993 24,901 73,742 24,901 37,400
Cost of sales-acquisition related
inventory step up -- 1,671 -- 1,671 --
Selling, general and administrative 7,479 5,356 14,316 5,356 7,047
Interest expense, net 4,528 3,636 8,757 3,636 1,665
--------- --------- --------- --------- ---------
Total costs and expenses 51,000 35,564 96,815 35,564 46,112
Minority interest 113 -- 223 -- --
Other income, net 8 349 93 349 (115)
--------- --------- --------- --------- ---------
Income before income taxes and
extraordinary item 3,338 1,190 6,614 1,190 11,621
Provision for income taxes 1,859 848 3,724 848 4,809
--------- --------- --------- --------- ---------
Income before extraordinary item 1,479 342 2,890 342 6,812
Extraordinary expense (net of income
tax benefit of $2,140) -- -- -- -- (3,420)
--------- --------- --------- --------- ---------
Net income $ 1,479 $ 342 $ 2,890 $ 342 $ 3,392
========= ========= ========= ========= =========
Net income per share $ 1,479 $ 342 $ 2,890 $ 342
========= ========= ========= =========
Weighted average number of shares of
common stock outstanding 1 1 1 1
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
PIONEER AMERICAS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
PERIOD PERIOD
SIX FROM FROM
MONTHS INCEPTION JANUARY 1
ENDED THROUGH THROUGH
JUNE 30, JUNE 30, APRIL 20,
1996 1995 1995
----------- ---------- ------------
<S> <C> <C> <C>
Operating activities:
Net income $ 2,890 $ 342 $ 3,392
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 9,074 3,505 4,490
Minority interest owned by
parent (223) -- --
Write-off of previous finance
costs -- -- 1,282
Gain on disposal of property,
plant and equipment -- -- 13
Equity in earnings of Basic Investments, Inc.
and Victory Valley Land Company, L.P. -- -- (204)
Future tax effects -- -- (2,086)
Utilization of net operating loss 2,720 -- --
carryforward ("NOL")
Changes in operating assets and
liabilities (net of purchase of
Kemira Water Treatment, Inc.):
Accounts receivable (2,508) 2,727 (3,570)
Inventories 230 1,208 (638)
Due from parent (1,875) -- --
Prepaid expenses 1,216 (148) 722
Other assets (2,900) (2,929) (1,342)
Accounts payable (1,909) (2,593) 4,899
Accrued liabilities 752 3,083 (3,784)
Returnable deposits 133 166 (259)
Other long-term liabilities 420 238 (304)
----------- ---------- ----------
Net cash provided by operating
activities 8,020 5,599 2,611
----------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
PIONEER AMERICAS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
PERIOD PERIOD
SIX FROM FROM
MONTHS INCEPTION JANUARY 1,
ENDED THROUGH THROUGH
JUNE 30, JUNE 30, APRIL 20,
1996 1995 1995
--------- ---------- -----------
<S> <C> <C> <C>
Investing activities:
Purchase of Kemira Water
Treatment, Inc. (1,237) -- --
Purchase of Predecessor Company -- (152,318) --
Proceeds from the sale of
property, plant and equipment -- -- 58
Purchases of property, plant and
equipment (9,296) (3,271) (3,447)
--------- ---------- ----------
Net cash used in investing activities (10,533) (155,589) (3,389)
Financing activities:
Payments on long-term debt -- (24,500) (103,971)
Proceeds from borrowings on
long-term debt -- 18,500 106,000
Proceeds from borrowings on
13 3/8% First Mortgage Notes
due 2005 -- 135,000 --
Dividends paid on preferred stock
and purchase stock put warrant -- -- (2,341)
Proceeds from issuance of
common stock -- 21,037 --
--------- ---------- ----------
Net cash provided by (used in)
financing activities -- 150,037 (312)
--------- ---------- ----------
Net decrease in cash (2,513) 47 (1,090)
Cash acquired in purchase 69 2,220 --
Cash at beginning of period 11,218 -- 3,310
--------- ---------- ----------
Cash at end of period $ 8,774 $ 2,267 $ 2,220
========= ========== ==========
</TABLE>
See notes to consolidated financial statements.
7
<PAGE> 8
PIONEER AMERICAS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
PERIOD PERIOD
SIX FROM FROM
MONTHS INCEPTION JANUARY 1
ENDED THROUGH THROUGH
JUNE 30, JUNE 30, APRIL 20,
1996 1995 1995
---------- --------- ---------
<S> <C> <C> <C>
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 9,201 $ 32 $ 3,067
Income taxes 3,048 165 1,852
Supplemental schedule of non-cash
investing and financing activities:
The allocation of the purchase price
of the Acquisition is summarized
as follows:
Cash paid for Acquisition $ 152,318
Seller notes issued 11,463
NOL benefit recognized 13,600
Liabilities assumed 90,596
---------
Fair value of assets acquired $ 267,977
=========
The allocation of the purchase price
of Kemira Water Treatment, Inc.
is summarized as follows:
Cash paid for purchase $ 1,572
Long-term note issued to seller 8,017
Liabilities assumed 2,167
----------
Fair value of assets acquired $ 11,756
==========
</TABLE>
See notes to consolidated financial statements.
8
<PAGE> 9
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Pioneer Americas Acquisition Corp. ("Pioneer") was incorporated in Delaware
on March 6, 1995 ("Inception"). Pioneer is 100% owned by Pioneer Companies,
Inc. ("PCI"). The consolidated financial statements include the accounts of
Pioneer and its subsidiaries (collectively referred to as the "Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation.
BASIS OF PRESENTATION EFFECTIVE APRIL 20, 1995
On April 20, 1995, pursuant to a Stock Purchase Agreement, dated as of
March 24, 1995 (the "Acquisition Agreement"), by and among PCI, Pioneer, and
the holders of the outstanding common stock and other common equity interests
(the "Sellers") of Pioneer Americas, Inc. (the "Predecessor Company"), Pioneer
acquired all of such stock and interests (the "Acquisition") for a purchase
price of approximately $176 million. The Acquisition has been accounted for as
a purchase transaction and, accordingly, the consolidated financial statements
subsequent to April 20, 1995 reflect the purchase price, including transaction
costs, allocated to tangible and intangible assets acquired and liabilities
assumed, based on their estimated fair values as of April 20, 1995.
The consolidated balance sheet as of June 30, 1996, the statements of
operations as of and for the three- and six-month periods ending June 30, 1996
and 1995 and the statements of cash flows as of and for the six months ended
June 30, 1996 and 1995 are unaudited and reflect all adjustments, consisting of
normal recurring items, which management considers necessary for a fair
presentation. Operating results for the first six months of 1996 are not
necessarily indicative of results to be expected for the year ending December
31, 1996.
Certain information and disclosures normally included in the notes to the
financial statements have been condensed or omitted as permitted by the rules
and regulations of the Securities and Exchange Commission. The accompanying
unaudited financial statements should be read in conjunction with the financial
statements contained in the Annual Report on Form 10-K for the year ended
December 31, 1995.
On February 2, 1996, the acquisition of Kemira Water Treatment, Inc.
("KWT"), including certain royalty and license agreements, from a subsidiary of
Kemira Oy of Finland ("Kemira") was completed. The purchase price was
approximately $9.6 million, of which $1.6 million was paid in cash and $8.0
million in a note issued to Kemira. The $8.0 million note bears an interest
rate equal to LIBOR plus 1.2%. The principal on the note is payable in four
equal installments on March 31, 2000, March 31, 2001, March 31, 2002 and
December 31, 2002, and interest is payable annually on December 31. KWT
produces specialty and commodity inorganic coagulants, including polyaluminum
chloride, aluminum sulfate, sodium aluminate and ferric sulfate, at its plant
in Savannah, Georgia for sale to the water treatment market in the eastern
United States and the Caribbean. The purchase of KWT has been accounted for
as a purchase transaction and, accordingly, the consolidated financial
statements subsequent to February 2, 1996 reflect the purchase price, including
transaction costs, allocated to tangible and intangible assets acquired and
liabilities assumed, based on their estimated fair values as of February 2,
1996, and include the results of KWT subsequent to such date.
KWT is wholly-owned by Kemwater North America Company ("Kemwater"), fifty
percent of the common stock of which is held by PCI and fifty percent of the
common stock of which is held by a subsidiary of Pioneer. The Company also
owns all of the outstanding shares of Kemwater's preferred stock.
9
<PAGE> 10
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
PRO FORMA FINANCIAL DATA
The following pro forma financial data presents the consolidated financial
results of operations as if the Acquisition had occurred at the beginning of
the period presented and does not purport to be indicative of either future
results of operations or results that would have occurred had the Acquisition
actually been made as of such date.
PRO FORMA COMBINED SUMMARY FINANCIAL DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
----------------------------- ------------------------------
1996 1995 1996 1995
------------ ----------- ------------- ------------
ACTUAL PRO FORMA ACTUAL PRO FORMA
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues $ 54,217 $ 46,411 $ 103,113 $ 94,253
Income before extraordinary item 1,479 49 2,890 4,247
Extraordinary item, early extinguishment of
debt (net of income tax benefit of $2,140) -- -- -- (3,420)
Net income 1,479 49 2,890 827
</TABLE>
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials, supplies and parts $ 11,488 $ 9,849
Finished goods and work-in-process 2,705 3,155
-------------- ---------------
$ 14,193 $ 13,004
============== ===============
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
The Company is subject to various legal proceedings and potential claims
arising in the ordinary course of its business. In the opinion of management,
the Company has adequate legal defenses and/or insurance coverage with respect
to these matters and management does not believe that they will materially
affect the Company's operations or financial position.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and the notes thereto.
This item will discuss and analyze the financial condition of the Company
at June 30, 1996 and the results of operations of the Company for the three
months and six months ended June 30, 1996 in comparison with the combined
operations of the Company and the Predecessor Company for the comparable 1995
periods. The following table sets forth certain operating data of the Company
and the Predecessor Company for the periods indicated. For comparative
purposes the Company's results of operations for the three months ended June
30, 1995 include the Predecessor Company's operating results from April 1, 1995
through April 20, 1995, and the Company's operating results for the six months
ended June 30, 1995 include the Predecessor Company's operating results from
January 1, 1995 through April 20, 1995. The Predecessor Company's operating
results for both periods exclude $1.0 million of transaction costs related to
the Acquisition. The Company believes that this provides a meaningful basis
for comparison.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ----------------------
1996 1995 (1) 1996 1995 (2)
--------- ---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues $ 54,217 $ 46,411 $ 103,113 $ 94,253
Cost of sales 38,993 31,673 73,742 62,301
Cost of sales-acquisition related inventory step up -- 1,671 -- 1,671
Selling, general and administrative expenses 7,479 7,162 14,316 12,403
Interest expense, net 4,528 3,926 8,757 5,301
Minority interest 113 -- 223 --
Other income, net 8 392 93 1,206
--------- ---------- --------- ---------
Income before income taxes and extraordinary item 3,338 2,371 6,614 13,783
Provision for income taxes 1,859 1,404 3,724 5,657
--------- ---------- --------- ---------
Net income before extraordinary item 1,479 967 2,890 8,126
Extraordinary expense (net of income tax benefit of
$2,140) -- -- -- (3,420)
--------- ---------- --------- ---------
Net income $ 1,479 $ 967 $ 2,890 $ 4,706
========= ========== ========= =========
</TABLE>
(1) Includes Predecessor Company from April 1, 1995 to April 20, 1995
(2) Includes Predecessor Company from January 1, 1995 to April 20, 1995
11
<PAGE> 12
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Revenues
Revenues increased by $8.9 million or 9% to $103.1 million for the six
months ended June 30, 1996. This increase is a result of higher volumes offset
by lower electrochemical unit ("ECU") prices. The average ECU price in the
first six months of 1996 decreased 9% from the first six months of 1995 because
of a decrease in prices for caustic soda.
Cost of Sales
Cost of sales increased by $9.8 million or 15% to $73.7 million for the
six months ended June 30, 1996. This increase is attributable to higher
volumes sold and higher raw material prices, particularly electrolytic power
which increased due to substantially higher natural gas prices, a major
component of power costs at one plant. The combination of lower ECU prices and
higher raw material costs resulted in a reduction of the gross profit margin in
the 1996 period to 28.5% from 32.1%.
Selling, General and Administrative Expense
Selling, general and administrative expense increased by $1.9 million or
15% to $14.3 million during the 1996 period primarily due to increased goodwill
amortization resulting from the Acquisition and additional accrued compensation
pursuant to the Company's incentive compensation program.
Interest Expense, Net
Interest expense during the first six months of 1996 increased to $8.8
million from $5.3 million for the 1995 period due to indebtedness incurred as a
result of the Acquisition.
Other Income, Net
Other income, net was $1.1 million lower in the first six months of 1996
due to insurance proceeds recognized in the 1995 period.
Income Before Income Taxes and Extraordinary Item
As a result of the above, net income before taxes and extraordinary
item decreased $7.2 million to $6.6 million for the six months ended June
30, 1996 from $13.8 million for the six months ended June 30, 1995.
Provision for Income Taxes
Provision for income taxes was $3.7 million in 1996 as compared to $5.7
million in 1995 due to lower pre-tax income. Taxable income is higher than
book income due to the non-deductibility of amortization of the excess cost
over the fair value of the net assets acquired. A provision is recorded on the
income statement; however, federal income taxes payable are reduced due to the
utilization of the net operating loss carryforward.
Extraordinary Expense
An extraordinary expense of $3.4 million net of an income tax benefit of
$2.1 million recorded during the first six months of 1995 was due to costs
incurred, and previously capitalized costs written off, pertaining to debt
refinanced by the Predecessor Company in 1995 prior to the Acquisition.
12
<PAGE> 13
RESULTS OF OPERATIONS--(CONTINUED)
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
Revenues
Revenues increased by $7.8 million or 17% to $54.2 million for the three
months ended June 30, 1996. This increase is a result of higher volumes offset
by lower electrochemical unit ("ECU") prices. The average ECU price for the
three months ended June 30, 1996 decreased 10.3% from the three months ended
June 30, 1995 as chlorine prices remained constant while caustic soda prices
reflected decreases of 16.1%.
Cost of Sales
Cost of sales increased by $5.6 million or 17% to $39.0 million for the
three months ended June 30, 1996. This increase, which is primarily
attributable to higher volumes sold and higher raw material prices,
particularly electrolytic power which increased due to substantially higher
natural gas prices, would have been $1.7 million higher if purchase accounting
had not resulted in a step-up in inventory value in that amount in 1995.
Because of that factor, the gross profit margin in the 1996 period of 28.1% was
approximately the same as 1995. In addition, one of the Company's subsidaries
substantially improved its margin on lower sales, which contributed to the
favorable comparison.
Selling, General and Administrative Expense
Selling, general and administrative expense increased by $0.3 million or
4% to $7.5 million during the 1996 period primarily due to additional accrued
compensation pursuant to the Company's incentive compensation program.
Interest Expense, Net
Interest expense during the first three months of 1996 increased to $4.5
million from $3.9 million for the 1995 period due to indebtedness incurred as a
result of the Acquisition and the purchase of KWT.
Other Income, Net
Other income, net was $0.4 million lower in the first three months of 1996
due to insurance proceeds recognized in the 1995 period.
Income Before Income Taxes and Extraordinary Item
As a result of the above, net income before taxes and extraordinary
item increased $0.9 million to $3.3 million for the three months ended June
30, 1996 from $2.4 million for the three months ended June 30, 1995.
Provision for Income Taxes
Provision for income taxes was $1.9 million in 1996 as compared to $1.4
million in 1995 due to higher pre-tax income. Taxable income is higher than
book income due to the non-deductibility of amortization of the excess cost
over the fair value of the net assets acquired. A provision is recorded on the
income statement; however, federal income taxes payable are reduced due to the
utilization of the net operating loss carryforward.
13
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company incurred substantial indebtedness in connection with the
Acquisition and the transaction with Kemira. As of June 30, 1996, the Company
had outstanding indebtedness of approximately $143.0 million. The Company
incurred $8.0 million of term debt concurrently with the acquisition of KWT,
with principal payments due at various times beginning March 31, 2000 and with
a final payment due December 31, 2002.
The Company has an available Credit Facility which provides a $30 million
revolving line of credit, subject to borrowing base limitations that relate to
the level of accounts receivable and inventory. As of June 30, 1996, the
Company had $2.9 million of letters of credit outstanding and had, subject to
certain restrictions (including borrowing base limitations), the ability to
draw up to $23.3 million of additional secured indebtedness under the Credit
Facility.
The Company believes that cash flow from current and anticipated future
levels of operations and, to a lesser extent, the availability under the Credit
Facility, will be adequate to make the required payments of principal and
interest on outstanding indebtedness, as well as to fund its foreseeable
capital expenditures and working capital requirements. Annualized cash interest
of $19.8 million will be payable on the Company's long-term debt. To the extent
that the Company were to draw upon the commitments under the Credit Facility
due to adverse business conditions or to finance acquisitions or for other
corporate purposes, the Company's aggregate interest expense would be
increased.
The Company anticipates that capital expenditures for 1996, excluding
acquisitions, will be approximately $16.0 million, including approximately $3.4
million for environmental compliance matters. The Company believes that
forecasted capital expenditures will permit it to maintain its facilities on a
basis competitive within the industry through improved efficiency and
throughput and continuation of high operating rates.
The Company's belief that it will generate sufficient cash flow for its
requirements is based, among other things, on the assumptions that: (i) the
Company's cash flow will be positive as a result of the continuing
profitability of its business; (ii) the Company will invest in working capital
in accordance with prior practices; (iii) the Company will not incur any
material capital expenditures in excess of its business plan.
Net Cash Provided by Operating Activities. The Company generated $8.0
million in cash from operating activities from profitability, depreciation and
the utilization of a net operating loss carryforward offset by an increase in
working capital (excluding the effect of the purchase of KWT). Working capital
increased because of the seasonal increase in accounts receivable.
Net Cash Used in Investing Activities. Cash used in investing activities
for the first six months of 1996 was $10.5 million, primarily due to the
purchase of KWT by the Company and the purchase of property plant and
equipment.
Net Cash Provided by (Used in) Financing Activities. There was no cash
provided by or used in financing activities in the first six months of 1996.
The Company obtained approximately $150.0 million in cash through borrowings
and the issuance of common stock from the Acquisition offset by the payment of
dividends on Preferred Stock during the first six months of 1995.
14
<PAGE> 15
PART II - OTHER INFORMATION
Item 5. Other Information.
On July 31, 1996, All-Pure Chemical Co. ("All-Pure"), an indirect
wholly-owned subsidiary of Pioneer Americas Acquisition Corp., acquired T.C.
Products, Inc. ("T.C. Products") through the acquisition of its parent, T.C.
Holdings, Inc., from trusts formed by Albert J. Clerc and Richard L. Belveal.
Consideration for the acquisition consisted of net cash payments of $5,458,835
and All-Pure subordinated notes with an aggregate principal amount of
$4,500,000. The Company's existing cash balances were used to fund the cash
portion of the purchase price.
T.C. Products is the sole operating asset of T.C. Holdings, Inc. Following
the acquisition T.C. Products continues to manufacture and package bleach and
related products at its plant in Tacoma, Washington. Mr. Clerc has agreed to
continue as an officer of T.C. Products for a period of up to one year
following the acquisition; both he and Mr. Belveal have also agreed not to
compete with T.C. Products for a period of three years following the
acquisition.
It is impractical to provide the required financial statements of T.C.
Products, the business acquired, at this time. Such financial statements,
consisting of audited financial statements for the fiscal year ended September
30, 1995, unaudited financial statements for the nine-month period ended June
30, 1996, and pro forma unaudited financial statements, will be filed as soon
as practicable, but not later than October 11, 1996, under cover of an
amendment on Form 8 to this Form 10-Q.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Stock Purchase Agreement, dated as of July 3, 1996,
by and among Richard L. Belveal, individually and in
his capacity as trustee of The Living Trust of
Richard Belveal dated February 14, 1995, and Albert
J. Clerc, individually and, with his spouse Patricia
A. Clerc, in their respective capacities as Trustees
of The Clerc Family Trust No. 1988-1 dated July 25,
1988, and Pioneer Companies, Inc, together with a
First Amendment thereto dated July 22, 1996.
10.2 Pioneer Companies, Inc. Key Executive Stock Grant
Plan.
27 Financial Data Schedule.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter ended June 30, 1996.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PIONEER AMERICAS ACQUISITION CORP.
August 13, 1996 By: /s/ Philip J. Ablove
------------------------------
Philip J. Ablove
Vice President and Chief
Financial Officer
16
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
10.1 Stock Purchase Agreement, dated as of July 3, 1996, by and among Richard L. Belveal, individually and in
his capacity as trustee of The Living Trust of Richard Belveal dated February 14, 1995, and Albert J.
Clerc, individually and, with his spouse Patricia A. Clerc, in their respective capacities as Trustees of
The Clerc Family Trust No. 1988-1 dated July 25, 1988, and Pioneer Companies, Inc, together with a First
Amendment thereto dated July 22, 1996.
10.2 Pioneer Companies, Inc. Key Executive Stock Grant Plan.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
================================================================================
STOCK PURCHASE AGREEMENT
BY AND AMONG
THE LIVING TRUST OF RICHARD BELVEAL
DATED FEBRUARY 14, 1995, THE CLERC FAMILY
TRUST NO. 1988-1 DATED JULY 25, 1988,
RICHARD L. BELVEAL AND ALBERT J. CLERC
AS SELLERS
AND
PIONEER COMPANIES, INC.
AS PURCHASER
================================================================================
JULY 3, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. References, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II PURCHASE AND SALE OF THE STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.01. Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.02. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.03. Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.04. Delivery of the Stock; Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.01. Organization and Qualificationg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.02. Capitalization of the Company; Title to the Stock . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.03. Capitalization of T.C. Products; Title to T.C. Products Stock . . . . . . . . . . . . . . . . . 4
Section 3.04. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.05. No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.06. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.07. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.08. Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.09. Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.10. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.11. Assets and Properties of the Company and T.C. Products . . . . . . . . . . . . . . . . . . . . 9
Section 3.12. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.13. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.14. Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.15. Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.16. Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.17. Collective Bargaining Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.18. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.19. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.20. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.21. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.22. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.23. Product Warranty and Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.24. Customers; Suppliers; Dealers and Distributors . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.25. Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.26. Public Utility Holding Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.27. Acquisition Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.28. Propriety of Past Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
Section 3.29. Brokers, Finders and Financial Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.30. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.31. Representations Relating to Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.01. Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.02. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.03. No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.04. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.06. Exchange Act Filings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.07. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.08. No Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.09. Issuance of Subordinated Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.10. Acquisition of the Stock for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.11. Brokers, Finders and Financial Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.12. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.01. Investigation of Business; Access to Properties and Records . . . . . . . . . . . . . . . . . 23
Section 5.02. Closing Conditions; Obtaining Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.03. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.04. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.05. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.06. Acquisition Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.07. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.08. Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.09. Casualty Loss and Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.10. Updating of Schedules; Certain Notifications . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.11. Collection of Receivables; Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.12. Employment and Non-Competition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.13. Post Closing Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VI CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.01. Conditions to Obligations of each of the Parties . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.02. Conditions to Obligations of Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.03. Conditions to Obligations of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.02. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.01. Indemnification of Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.02. Indemnification of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.03. Limitations on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.04. Indemnification Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.05. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.06. Other Indemnities; Survival of Representations,
Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.02. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.03. Benefit and Burden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.04. No Third Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.05. Amendments and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.06. Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.07. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.08. Captions and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.09. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.11. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.12. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.13. Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.14. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.15. Expenses; Prevailing Party Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.16. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
EXHIBITS
--------
EXHIBIT A - GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.04
EXHIBIT B - NONCOMPETITION AND EMPLOYMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . Section 5.12(a)
EXHIBIT C - NONCOMPETITION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.12(b)
</TABLE>
-iii-
<PAGE> 5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made
effective as of the 3rd day of July, 1996, by and among Richard L. Belveal, an
individual residing in Gig Harbor, Washington ("Belveal"), individually and in
his capacity as Trustee of The Living Trust of Richard Belveal dated February
14, 1995 ("Belveal Trust"), and Albert J. Clerc, an individual residing in Gig
Harbor, Washington, ("Clerc"), individually and, with his spouse Patricia A.
Clerc, in their respective capacities as trustees of The Clerc Family Trust No.
1988-1 dated July 25, 1988 ("Clerc Trust" and, with the Belveal Trust, herein
sometimes referred to collectively as the "Trusts", and Belveal, Clerc and the
Trusts being herein referred to individually as "Seller" and collectively as
the "Sellers"), and Pioneer Companies, Inc., a Delaware corporation ("Pioneer")
or its assignee provided for in Section 9.06 (Pioneer or such assignee being
herein referred to as "Purchaser").
PRELIMINARY STATEMENTS
1. T. C. Holdings, Inc., a New Mexico corporation (the
"Company"), has a wholly-owned subsidiary, T.C. Products,
Inc. ("T.C. Products"), a Washington corporation, which is
engaged in the manufacture and sale of bleach, rinse and
ammonia.
2. The Trusts own all of the issued and outstanding capital stock
of the Company (the "Stock").
3. Sellers desire that the Trusts sell the Stock to Purchaser,
and Purchaser desires to purchase the Stock from the Trusts,
on the terms, provisions and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Sellers and Purchaser do
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. Capitalized terms used
in this Agreement and not otherwise defined herein shall have the respective
meanings set forth in Annex A hereto.
<PAGE> 6
Section 1.02. References, Etc. The words "hereof," "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in Annex A or in any other provision of this
Agreement in the singular shall have the same meanings in the plural and vice
versa. All pronouns, nouns and other terms used in this Agreement shall include
the masculine, feminine and neuter forms thereof, wherever appropriate to the
context. All references herein to Articles, Sections, Annexes, Exhibits and
Schedules shall, unless the context requires a different construction, be deemed
to be references to the Articles and Sections of this Agreement and the Annexes,
Exhibits and Schedules attached hereto and made a part hereof. In this
Agreement, unless a clear contrary intention appears, the word "including" (and
with correlative meaning "include") means including, without limiting the
generality of any description preceding such term. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.
ARTICLE II
PURCHASE AND SALE OF THE STOCK
Section 2.01. Purchase and Sale. On the Closing Date and
upon the terms and subject to the conditions set forth herein, the Trusts shall
sell, convey, transfer, assign and deliver the Stock to Purchaser, free and
clear of all Liens, and Purchaser shall purchase and accept the Stock from the
Trusts.
Section 2.02. Purchase Price. The purchase price (the
"Purchase Price") for the Stock shall be an amount equal to (a) $12,000,000
plus all Cash of the Company (but not including Cash of T.C. Products) (b) less
the Company's Liabilities, (c) less unpaid Taxes or plus excess Taxes paid or
accrued, whichever applies, arising from operations or transactions by the
Company only, including Taxes payable in connection with the transactions
referenced in the first sentence of Sections 6.01(d) and (e), (d) plus any
receivable due to the Company for Taxes paid on behalf of T.C. Products arising
from the operations of or transactions by T.C. Products after the date of the
T.C. Products Unaudited Financial Statements, as reflected on the Unaudited
Financial Statements, (e) less any Liability of T.C. Products which is not
payable or performable in accordance with the stated terms of the instrument
evidencing such liability on or prior to one year after the date of this
Agreement and owed to Persons other than the Company, excluding any Debt
incurred or relating to capital expenditures committed to as provided, and
subject to the limitation, in Section 5.04(a), but including the amount of all
payment obligations from and after the Effective Time (as hereinafter defined)
arising in connection with the industrial revenue bonds of T.C. Products, as
the matters set forth in clause (e) are reflected in the T.C. Products
Unaudited Financial Statements and detailed by date, obligee and amount in
Schedule 2.02 hereto and (f) all interest earned on cash accounts of the
Company from the Effective Time to the Closing Date. A calculation of the
Purchase Price computed as if the Effective Time were May 26, 1996, is shown on
Schedule 2.02 attached hereto. All amounts (other than interest provided for
in clause (f)) shall be determined as of the Effective Time.
-2-
<PAGE> 7
Section 2.03. Time and Place of Closing. Subject to the
satisfaction or waiver of the conditions set forth in Article VI hereof, the
closing of the transactions contemplated by this Agreement shall take place on
the Closing Date at 10:00 A.M., Seattle time, at the offices of McGavick
Graves, P.S., 1102 Broadway, Suite 500, Tacoma, Washington 98401-1317, or at
such other time, date or place as Sellers and Purchaser may agree. Upon
consummation of the Closing, the transactions contemplated by this Agreement
shall be deemed effective as of 12:01 a.m. Seattle time on July 1, 1996
("Effective Time").
Section 2.04. Delivery of the Stock; Payment of Purchase
Price. On the Closing Date: (a) the Trusts shall deliver to Purchaser the
certificates representing the Stock, duly endorsed in blank or accompanied by
stock powers duly endorsed in blank, with all Taxes attributable to the
transfer and sale of the Stock paid by the Trusts; and (b) in full
consideration and exchange for the Stock, the Purchaser shall pay the Trusts
the Purchase Price as follows: (i) $4,500,000 by delivery of two Subordinated
Notes executed by Purchaser, with one Subordinated Note issued each Trust, in
equal principal amount and bearing interest at the prime rate announced by Bank
of America National Trust and Savings Association plus one per cent (but not
less than eight per cent per annum), payable monthly, maturing one year after
date subject to extension of maturity for a period of five (5) years from the
Closing Date in the event of the subsequent acquisition by Pioneer of T-Chem
Products, Inc., a California corporation ("T-Chem") and otherwise in form
mutually agreed by the parties on or prior to Closing, and (ii) the balance of
the Purchase Price by wire transfer of immediately available funds: (x) for the
Clerc Trust, to Seafirst Bank, Gig Harbor Branch, ABA No. 125000024, Account
No. 92171-685 in the name of Albert J. and Patricia A. Clerc as trustees for
the Clerc Family Trust Dated 7/88, and (y) for the Belveal Trust, to Seafirst
Bank, Gig Harbor Branch, ABA No. 125000024, Account No. 92171-727, in the name
of Richard L. Belveal as trustee for the Belveal Family Trust dated 2/94, or
such other account as is specified by either Trust in writing to Purchaser not
less than two Business Days prior to the Closing Date. Payment of the
Subordinated Notes shall be guaranteed by Pioneer and by Pioneer Water
Technologies, Inc., a Delaware corporation and wholly-owned subsidiary of
Pioneer ("PWT"), pursuant to guaranty agreements (collectively "Guaranty") each
in substantially the form attached as Exhibit A.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Subject to all of the terms, conditions and provisions of this
Agreement, each Seller hereby represents and warrants to Purchaser, as of the
date hereof and as of the Closing Date, as follows:
Section 3.01. Organization and Qualification. The Company is
a corporation duly organized, validly existing and in good standing under the
Laws of the State of New Mexico. The Company has all requisite power and
authority, corporate or otherwise, to own, lease and operate its Assets and
Properties and to carry on its business as now being conducted. The Company is
duly
-3-
<PAGE> 8
qualified to do business and is in good standing in the jurisdictions shown on
Schedule 3.01, which are the only jurisdictions in which its Assets and
Properties or the nature of the business conducted by it makes such
qualification necessary and where failure to so qualify would have a Material
Adverse Effect with respect to the Company and its subsidiaries. T.C. Products
is a corporation duly organized, validly existing and in good standing under
the Laws of the State of Washington. T.C. Products has all requisite power and
authority, corporate and otherwise, to own, lease and operate its Assets and
Properties and to carry on its business as now being conducted. T.C. Products
is duly qualified to do business and is in good standing in the jurisdictions
shown on Schedule 3.01, which are the only jurisdictions in which its Assets
and Properties or the nature of the business conducted by it makes such
qualification necessary and where failure to so qualify would have a Material
Adverse Effect with respect to T.C. Products. The Company does not have and
has had no subsidiaries or Affiliates (excluding Related Persons) other than
T.C. Products.
Section 3.02. Capitalization of the Company; Title to the
Stock. The authorized capital stock of the Company consists of 1,000 shares of
common stock, par value $1.00 per share, all of which shares representing the
Stock are issued and outstanding. All of the outstanding shares of capital
stock of the Company have been duly authorized and validly issued, are fully
paid and nonassessable and are free of preemptive rights. All of the Stock is
owned of record by the Trusts, free and clear of Liens, other than the Stock
owned by the Clerc Trust, which constitutes and is subject to community
property interests of Clerc and Patricia A. Clerc. There are no outstanding or
authorized subscriptions, options, warrants, calls, rights or other similar
Contracts, including rights of conversion or exchange under any outstanding
Debt or equity security or other Contract (each, a "Commitment"), to which any
of the Stock is subject or obligating the Company to issue, deliver or sell, or
cause to be issued, delivered or sold, any other shares of capital stock of the
Company or any other Debt or equity securities convertible into or evidencing
the right to subscribe for any such shares of capital stock or obligating the
Company to grant, extend or enter into any such Contract. There are no voting
trusts, proxies or other Contracts to which Sellers or the Company is a party
or is bound with respect to the voting of any shares of capital stock of the
Company. The Trusts have full legal right to sell, assign and transfer the
Stock to Purchaser and will, upon payment for the Stock and delivery to
Purchaser of a certificate or certificates representing the Stock, transfer
good and indefeasible title to the Stock to Purchaser, free and clear of Liens.
Section 3.03. Capitalization of T.C. Products; Title to T.C.
Products Stock. The authorized capital stock of T.C. Products consists of
1,000,000 shares of common stock, par value $1.00 per share, of which 300,000
shares are issued and outstanding. T.C. Products has no treasury shares. All
of the outstanding shares of capital stock of T.C. Products ("T.C. Products
Stock") have been duly authorized and validly issued, are fully paid and
nonassessable and are free of preemptive rights. All of the T.C. Products
Stock is owned beneficially and of record by the Company, free and clear of
Liens. There are no Commitments to which any of the T.C. Products Stock is
subject or obligating T.C. Products to issue, deliver or sell, or cause to be
issued, delivered or sold, any other shares of capital stock of T.C. Products
or any other Debt or equity securities convertible into or evidencing the right
to subscribe for any such shares of capital stock or obligating T.C. Products
to grant, extend or enter into any such Contract. There are no voting trusts,
proxies or other Contracts
-4-
<PAGE> 9
to which the Company or T.C. Products is a party or is bound with respect to
the voting of any shares of capital stock of T.C. Products.
Section 3.04. Authority. Each of the Sellers and the Company
has all requisite power and authority, corporate or otherwise, to execute and
deliver this Agreement and the Closing Documents to which he or it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery by the Company of the Closing Documents to which it will
be a party and the consummation of the transactions contemplated thereby have
been duly and validly authorized by the Board of Directors of the Company and
no other corporate proceedings or approvals on the part of the Company are
necessary to authorize the Closing Documents or to consummate the transactions
contemplated thereby. Each of the Sellers has duly and validly executed and
delivered this Agreement and each of the Sellers and the Company will, on or
prior to the Closing Date, execute and deliver the Closing Documents to which
it is a party and, assuming the due authorization, execution and delivery of
this Agreement and the Closing Documents by the parties hereto and thereto
other than Sellers and the Company, this Agreement constitutes, and when
executed and delivered each of such Closing Documents will constitute, the
legal, valid and binding obligation of each of the Sellers and the Company, as
applicable, enforceable against each of the Sellers and the Company, as
applicable, in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws affecting creditors' rights generally and general equitable
principles.
Section 3.05. No Conflict. Except as set forth on Schedule
3.05, the execution and delivery by each of the Sellers and the Company of this
Agreement and the Closing Documents to which he or it is a party and the
consummation of the transactions contemplated hereby and thereby, do not and
will not, by the lapse of time, the giving of notice or otherwise: (a)
constitute a violation of any Law; (b) constitute a breach or violation of any
provision contained in the charter or bylaws of the Company or T.C. Products;
(c) constitute a breach of any provision contained in, or a default under, any
Governmental Approval, any writ, injunction, order, judgment or decree of any
Governmental Authority or any Contract to which any of the Sellers, the Company
or T.C. Products is a party or by which any of the Sellers, the Company, T.C.
Products or any of their respective Assets and Properties is bound or affected;
or (d) result in or require the creation of any Lien upon the Stock or, except
as otherwise provided in this Agreement and the Closing Documents, any of the
Assets and Properties of any of the Sellers, the Company or T.C. Products.
Section 3.06. Consents and Approvals. Except as set forth in
Schedule 3.06, no Governmental Approvals and no notifications, filings or
registrations to or with any Governmental Authority or any other Person is or
will be necessary for the valid execution and delivery by each of the Sellers
and the Company of this Agreement and the Closing Documents to which he or it
is a party or the consummation of the transactions contemplated hereby or
thereby, or the enforceability hereof or thereof, other than those which have
been obtained or made and are in full force and effect.
Section 3.07. Financial Statements. Prior to the date
hereof, Sellers have delivered to Purchaser copies of: (a) the unaudited
consolidated balance sheets, statements of income and
-5-
<PAGE> 10
retained earnings and Related Schedules of the Company and T.C. Products as at
and for the fiscal years ended September 30, 1994 and 1995, as prepared by the
Company and T.C. Products, respectively, (the "Annual Financial Statements");
(b) the consolidated unaudited balance sheets, statements of income and
retained earnings and Related Schedules of the Company and T.C. Products as at
and for the eight month period ending May 31, 1996, as prepared by the Company
and T.C. Products, respectively (the "Unaudited Financial Statements"), (c) the
unaudited balance sheets, statements of income and retained earnings and
Related Schedules of T.C. Products as at and for the fiscal years ended
September 30, 1994 and 1995, (the "T.C. Products Annual Financial Statements"),
and (d) the unaudited balance sheet, statements of income and retained earnings
and Related Schedules of T.C. Products as at and for the eight month period
ending May 31, 1996 (the "T.C. Products Unaudited Financial Statements" and,
together with the Annual Financial Statements, the Unaudited Financial
Statements, the T.C. Products Annual Financial Statements, and the Effective
Time Financial Statements (as hereinafter defined), herein collectively the
"Financial Statements"). Not later than seven days prior to Closing, Sellers
shall have delivered to Purchaser copies of (a) the consolidated unaudited
balance sheet, statements of income and retained earnings and Related Schedules
of the Company and T.C. Products as at and for the period commencing October 1,
1995 and ending on the Effective Time, as prepared by the Company and T.C.
Products, respectively, and (b) the unaudited balance sheet, statements of
income and retained earnings and Related Schedules of T.C. Products as at and
for the period commencing October 1, 1995 and ending on the Effective Time
(collectively, the "Effective Time Financial Statements"). Except as set forth
in Schedule 3.07 (i) the Financial Statements have been prepared on a
consistent basis and fairly and accurately present the financial position of
the Company and/or T.C. Products, as applicable, as of the dates indicated
therein and the results of operations for the respective periods indicated
therein (except as otherwise noted therein), subject to changes in the
Unaudited Financial Statements, T.C. Products Unaudited Financial Statements
and the Effective Time Financial Statements resulting from normal year-end
adjustments which adjustments in the aggregate shall not be material (other
than adjustments related to depreciation, inventory valuation and unaccrued
bonuses and profit sharing plan contribution related to such unaccrued bonuses,
which adjustments are, for all Financial Statements other than the Effective
Time Financial Statements, reflected in Schedule 3.07, and for the Effective
Time Financial Statements are included therewith), and (ii) the Related
Schedules are true, correct and complete.
Section 3.08. Undisclosed Liabilities. Except as set forth
in Schedule 3.08, the Company and its Affiliates did not have as of the date of
the Unaudited Financial Statements, and have not incurred since that date, any
Liabilities of any nature, except Liabilities: (a) which are accrued or
reserved against in the Unaudited Financial Statements; or (b) which were
incurred after the date of the Unaudited Financial Statements in the ordinary
course of the business of the Company and its Affiliates consistent with past
practice and which did not have, and could not reasonably be expected to have,
a Material Adverse Effect with respect to the Company or any Affiliate.
Section 3.09. Absence of Changes. Except with respect to the
transactions contemplated by this Agreement and the Closing Documents or as set
forth in the Western States
-6-
<PAGE> 11
Letter and Schedule 3.09, since the date of the most recent Annual Financial
Statements, each of the Company and T.C. Products has:
(a) conducted its business only in the ordinary and usual
course and consistent with past practice;
(b) not (i) amended or proposed to amend its charter or
bylaws, (ii) split, combined or reclassified any shares of its capital
stock or (iii) declared, set aside or paid any dividend or
distribution on any shares of its capital stock, whether payable in
cash, stock, Assets and Properties or otherwise;
(c) not issued, sold, pledged or disposed of, or agreed
to issue, sell, pledge or dispose of, any shares of its capital stock
or any Commitment or any Debt or equity securities convertible into or
exchangeable for any shares of its capital stock;
(d) not (i) created, incurred, assumed, guaranteed or
become contingently liable with respect to any Debt (other than Debt
not exceeding $300,000 in the aggregate incurred in connection with
capital expenditures of the Company or T.C. Products, which amount
will not reduce the Purchase Price), or canceled any Debts owed to it,
(ii) paid any amounts owed under the Industrial Revenue Bonds issued
by T.C. Products other than scheduled payments, (iii) redeemed,
purchased, acquired or offered to purchase or acquire any shares of
its capital stock or any Commitments or any Debt or equity security
convertible into or exchangeable for any shares of its capital stock,
(iv) purchased, acquired or leased any Assets and Properties other
than in the ordinary course of business consistent with past practice,
(v) made any capital expenditure or commitment therefor other than in
the ordinary course of business, consistent with past practice, (vi)
sold, pledged, leased, disposed of or encumbered any of its Assets and
Properties other than sales of inventory in the ordinary course of
business, (vii) purchased or acquired any businesses or the securities
or other Debt or equity interests of any Person, (viii) made any loan
or advance to, or any investment in, any Person, (ix) entered into any
Contract, or amended, modified or terminated any Contract, other than
in the ordinary course of business consistent with past practice, (x)
made any payment or distribution to the Company or T.C. Products
except in the ordinary course of business and consistent with past
practices (which payments or distributions are set forth on Schedule
3.09), or (xi) changed its policies with respect to the extension of
credit to customers, suppliers or distributors;
(e) not (i) entered into or amended, or committed itself
to enter into or amend, any employment, severance, consulting,
compensation or special pay Contract, with respect to termination of
employment or otherwise, or other similar Contracts with any
directors, officers or key employees, (ii) paid or agreed to pay any
pension, retirement allowance or other employee benefit to any such
director, officer or key employee, whether past or present (other than
for benefit entitlements under Employee Plans and Agreements in effect
as of the date of the Annual Financial Statements in accordance with
the terms of such Employee
-7-
<PAGE> 12
Plans and Agreements), or (iii) paid any bonuses to, or increased the
compensation of, any Employee (including Sellers);
(f) not adopted, entered into or amended, or committed
itself to adopt, enter into or amend, any of the Employee Plans and
Agreements, except as required to comply with changes in applicable
Law;
(g) maintained its financial Books and Records on a
consistent basis, with to the best of Sellers' knowledge no deviation
from requirements of GAAP accounting principles other than as set
forth in Schedule 3.09, and not made any change in its accounting
systems, methods or practices;
(h) maintained with financially responsible insurance
companies insurance on its tangible Assets and Properties and its
businesses in such amounts and against such risks and Losses as are
consistent with past practice;
(i) not engaged in any transaction or sustained any Loss
which had, or could reasonably be expected to have, and there has not
been, a Material Adverse Effect with respect to the Company or T.C.
Products;
(j) not suffered any physical damage, destruction or Loss
to its Assets and Properties (whether or not insured) in excess of
$25,000 in the aggregate;
(k) used its customary efforts to preserve intact its
business organizations and goodwill, kept available the services of
its present officers and key employees, used its customary efforts to
preserve its business relationships with customers, suppliers,
dealers, distributors, franchisees and others having business
relationships with it and not engaged in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement or any of the Closing Documents;
(l) not increased or made any other change in, or charge
against, any of the Reserves or written off or written down any of the
Receivables; and
(m) not entered into any Contract to do any of the
foregoing.
Section 3.10. Litigation. Except as set forth in Schedule
3.10, there are no Claims pending or, to the knowledge of Sellers or the
Company, threatened against or affecting either the Company or T.C. Products or
any of their Assets and Properties before or by any Governmental Authority or
any other Person. Neither Sellers nor the Company has knowledge of the basis
for any Claim, which alone or in the aggregate: (a) could reasonably be
expected to result in any Liability which could have a Material Adverse Effect
with respect to the Company or T.C. Products; or (b) seeks to restrain or
enjoin the execution and delivery of this Agreement or any of the Closing
Documents or the consummation of any of the transactions contemplated hereby or
thereby. Except
-8-
<PAGE> 13
as set forth in Schedule 3.10, there are no judgments or outstanding orders,
injunctions, decrees, stipulations or awards (whether rendered by a Governmental
Authority or by an arbitrator) against the Company or T.C. Products or any of
their Assets and Properties: (i) that impose a material Liability on the Company
or T.C. Products; (ii) that have or could reasonably be expected to have a
Material Adverse Effect with respect to the Company or T.C. Products; or (iii)
which prohibit or restrict, or could reasonably be expected to result in any
delay of, the consummation of the transactions contemplated by this Agreement or
any of the Closing Documents.
Section 3.11. Assets and Properties of the Company and T.C.
Products. Except as set forth in Schedule 3.11, the Company and T.C. Products
have good and indefeasible title to all of the Assets and Properties reflected
in the Unaudited Financial Statements, free and clear of Liens (other than
Permitted Encumbrances), except for Assets and Properties sold or otherwise
disposed of by the Company or T.C. Products between the date of the Unaudited
Financial Statements and the date hereof in the ordinary course of business.
Except as set forth in Schedule 3.11, the Unaudited Financial Statements
reflect all of the material Assets and Properties used or held for use in the
business of T.C. Products as of the date hereof and such Assets and Properties
constitute all of the Assets and Properties necessary in the judgment of
Sellers to conduct the business of T.C. Products as currently conducted. All
leases under which the Company or T.C. Products leases any Assets and
Properties are free and clear of Liens (other than Permitted Encumbrances), in
good standing and valid and effective in accordance with their respective terms
and there is not, under any of such leases: (a) any existing default by the
Company or T.C. Products or, to the knowledge of Sellers or the Company, by any
other party thereto; or (b) to the knowledge of Sellers or the Company, any
event which with the giving of notice or the lapse of time, or both, would
become a default, except for such defaults as to which requisite waivers or
consents have been or will, on or prior to the Closing Date, be obtained.
Schedule 3.11 sets forth separate lists of all of the fixed Assets and
Properties of the Company and T.C. Products and all Assets and Properties of
the Company and T.C. Products which are leased by the Company and T.C.
Products. All of the Assets and Properties of the Company and T.C. Products
reflected in the Unaudited Financial Statements or purchased since the date of
the Unaudited Financial Statements: (i) other than inventory, have been
maintained in accordance with good industry practice; and (ii) as to inventory,
are of a quality and quantity usable and saleable in the ordinary course of
business, and not surplus or obsolete (other than inventory of T.C. Products
which might become obsolete in the ordinary course of business because of
changes required by customers of T.C. Products), and are valued in the
Unaudited Financial Statements at existing standard cost. Except as set forth
in Schedule 3.11, all work-in-process is of a quality ordinarily produced and
is produced in accordance with the requirements of the orders to which such
work-in-process is identified. Except as set forth in Schedule 3.11, all of
such Assets and Properties (including inventory and work-in-process) are
located on premises owned or leased by the Company or T.C. Products.
Section 3.12. Condemnation. Except as set forth in Schedule
3.12, there are no pending or, to the knowledge of Sellers or the Company,
threatened condemnation or eminent domain proceedings, or contemplated sales in
lieu thereof, involving a partial or total taking of any of the Assets and
Properties of the Company or T.C. Products.
-9-
<PAGE> 14
Section 3.13. Contracts. Except with respect to contracts
covered by the Western States Letter, Schedule 3.13 hereto sets forth a true,
complete and correct list of all Contracts (including all amendments thereto)
to which the Company or T.C. Products is a party or by which the Company, T.C.
Products or any of their Assets and Properties is bound and which (a) involve
consideration or other expenditures in excess of $25,000 or performance over a
period of more than one year, or (b) relate to transactions of any nature
between the Company or T.C. Products and any Affiliate of Sellers, the Company
or T.C. Products. Sellers or the Company has furnished Purchaser with true,
complete and correct copies of all of such Contracts. Except as set forth on
Schedule 3.13, as of the date hereof neither the Company nor T.C. Products is,
and to the knowledge of Sellers and the Company, no other party to any such
Contract is, in breach or violation of any such Contract or default thereunder
and there does not exist any event that, with the giving of notice or the lapse
of time, or both, would become a breach, violation or default by the Company or
T.C. Products or, to the knowledge of Sellers or the Company, any other party
thereto, except for such breaches, violations, defaults and events as to which
requisite waivers or consents have been or will, on or prior to the Closing
Date, be obtained.
Section 3.14. Intellectual Property Rights. Schedule 3.14
sets forth separate true, complete and correct lists of: (a) all of the
Intellectual Property Rights capable of being listed, specifying whether such
Intellectual Property Rights are owned or licensed by the Company or T.C.
Products; and (b) all Contracts relating to any of the Intellectual Property
Rights. The Company or T.C. Products owns or lawfully possesses, and has the
right to use, all of the Intellectual Property Rights, and all of the
Intellectual Property Rights are valid and in full force and effect. None of
the Intellectual Property Rights are owned by any Person other than the Company
or T.C. Products. Neither the Company nor T.C. Products is now, and upon
consummation of the transactions contemplated hereby will not be, in default in
any material respect under any license, distribution agreement, manufacturing
agreement or other Contract related to any of the Intellectual Property Rights.
Neither the Company nor T.C. Products has granted any license to or made any
assignment of any of the Intellectual Property Rights. Except as set forth in
Schedule 3.14, there is no existing or, to the knowledge of Sellers or the
Company, threatened infringement, misuse or misappropriation by any Person of
any of the Intellectual Property Rights. Neither the Company nor T.C. Products
is infringing or has infringed on any intellectual property rights of any
Person and there is no pending Claim (i) alleging any infringement, misuse or
misappropriation by the Company or T.C. Products of any intellectual property
rights allegedly owned by any other Person or (ii) challenging or, to the
knowledge of Sellers or the Company, threatening to challenge the Company's or
T.C. Products' rights, title and interests with respect to its continued use
and right to preclude others from using any of the Intellectual Property
Rights.
Section 3.15. Receivables. The Unaudited Financial
Statements set forth all of the trade and other accounts receivable, notes,
bonds and other evidences of Debt and other rights to receive payments owing to
the Company or T.C. Products at their respective dates (collectively with any
of the foregoing arising between the Receivables Schedule Date (as hereinafter
defined) and the Closing Date, the "Receivables") and any and all reserves
applicable thereto (collectively, the "Reserves"). Schedule 3.15 sets forth an
aged schedule of all of the Receivables as of a date within
-10-
<PAGE> 15
three Business Days prior to the date hereof (the "Receivables Schedule Date").
Except as set forth in Schedule 3.15 or shown on the T.C. Products Unaudited
Financial Statements, since September 30, 1995: (a) there has been no increase
or other change in, or charge against, any of the Reserves; or (b) any
write-off or write-down of any of the Receivables, except for increases,
changes, charges, write-offs or write-downs not exceeding $15,000 in the
aggregate. Except as set forth in Schedule 3.15, all of the Receivables: (i)
represent arms' length sales actually made in the ordinary course of business;
(ii) are subject to no counterclaim or set-off; and (iii) are not in dispute.
All Receivables remaining unpaid on the Closing Date will be collectible within
120 days following the Closing Date. Purchaser will use commercially
reasonable efforts to collect all Receivables in the ordinary course of
business.
Section 3.16. Governmental Approvals. Except as set forth in
Schedule 3.16: (a) the Company and T.C. Products have all Governmental
Approvals (including those required pursuant to any Environmental Law) required
for the ownership, conduct and operation of their business as presently
conducted; (b) all of such Governmental Approvals are in full force and effect;
(c) neither the Company nor T.C. Products has committed any violation of any of
the terms of any of such Governmental Approvals and is in compliance in all
material respects with all of such Governmental Approvals; and (d) neither the
Company nor T.C. Products has received any notice of violation of any of the
terms of any such Governmental Approvals which is outstanding and unresolved or
unsatisfied. No revocation, termination, limitation, withdrawal or inability
to renew any of such Governmental Approvals is pending or, to the knowledge of
Sellers or the Company, threatened. Except as set forth on Schedule 3.16: (i)
all consents and waivers required on the parts of Sellers, the Company or T.C.
Products under such Governmental Approvals in connection with the execution and
delivery of this Agreement and the Closing Documents and the consummation of
the transactions contemplated hereby and thereby have been obtained and are in
full force and effect; and (ii) the execution of this Agreement and the Closing
Documents and the consummation of the transactions contemplated hereby and
thereby in and of themselves will not result in the revocation, termination,
limitation, withdrawal or inability to renew any of such Governmental
Approvals.
Section 3.17. Collective Bargaining Agreements. Except as
set forth in Schedule 3.17: (a) neither the Company nor T.C. Products is a
party to any collective bargaining agreements with any unions, guilds, shop
committees or other collective bargaining groups representing or purporting to
represent employees of the Company or T.C. Products ("Employees"); (b) Sellers
or the Company has furnished Purchaser with true, complete and correct copies
of all such agreements; and (c) no grievance or arbitration proceeding has been
requested, is pending or, to the knowledge of Sellers or the Company,
threatened arising out of or in connection with any of such agreements.
Section 3.18. Labor Matters. Except as set forth in Schedule
3.18, since June 1, 1993 neither the Company nor T.C. Products has experienced
any labor strike, general employment dispute, request for representation, union
organization efforts, work slowdown or stoppage or boycott with respect to the
products or services sold by the Company or T.C. Products, against or affecting
the Company or T.C. Products or their Assets and Properties. Except as set
forth in Schedule 3.18: (a) the Company and T.C. Products have complied, and
are in compliance, in all
-11-
<PAGE> 16
material respects with all applicable Laws respecting employment and employment
practices, employment terms and conditions of employment, including any
provisions thereof relating to wages, hours, collective bargaining and the
payment of social security, unemployment and similar Taxes; (b) there is no
unfair labor practice charge or complaint against the Company or T.C. Products
pending or, to the knowledge of Sellers or the Company, threatened; (c) there
is no labor strike, general employment dispute, request for representation,
union organization effort, work slowdown or stoppage or boycott with respect to
the products or services sold by the Company or T.C. Products pending or, to
the knowledge of Sellers or the Company, threatened against or affecting the
Company or any of its Affiliates or their Assets and Properties; (d) there are
no administrative charges or court complaints against the Company or T.C.
Products concerning alleged employment discrimination or other employment
related matters pending or, to the knowledge of Sellers or the Company,
threatened before the U.S. Equal Employment Opportunity Commission or any other
Governmental Authority; and (e) no Person has, to the knowledge of Sellers or
the Company, asserted that the Company or T.C. Products has any Liability for
any arrearages of wages or any Taxes or penalties for failure to comply with
any of the foregoing.
Section 3.19. Employee Benefit Plans.
(a) Disclosure. Schedule 3.19(a) sets forth a true,
complete and correct list of all pension, thrift, savings, profit
sharing, retirement, incentive bonus or other bonus, medical, dental,
life, accident insurance, benefit, employee welfare, disability, group
insurance, stock purchase, stock option, stock appreciation, stock
bonus, executive or deferred compensation, loan, hospitalization,
cafeteria plan and other similar fringe or employee benefit or
compensation plans, programs and arrangements, and any employment or
consulting contracts, "golden parachutes," severance agreements or
plans, vacation and sick leave plans, programs, arrangements and
policies, including all "employee benefit plans" (as defined in
Section 3(3) of ERISA), all employee manuals, and all written or
binding oral statements of policies, practices or understandings
relating to employment (collectively, the "Employee Plans and
Agreements"), which are provided to, for the benefit of or relate to
the Employees and/or directors of the Company or T.C. Products,
including any former Employees or directors of the Company or T.C.
Products. Except as set forth in Schedule 3.19(a), Sellers have
furnished Purchaser with true, complete and correct copies of: (i) all
of the Employee Plans and Agreements, including all amendments thereto
and all summary plan descriptions thereof, (ii) the most recent
Liability valuation report with respect to each of the Employee Plans
and Agreements for which a report or estimate has been prepared, (iii)
the most recent assets valuation report with respect to each of the
Employee Plans and Agreements that has Assets and Properties for which
a report or estimate is required to have been prepared, (iv) the most
recent annual report (form 5500) filed with respect to each of the
Employee Plans and Agreements for which such report must be filed and
(v) the most recent favorable Internal Revenue Service determination
letter received with respect to each of the Employee Plans and
Agreements that is intended to be qualified under Section 401(a) of
the Code or trust intended to be exempt under Section 501(a) or
Section 501(c)(9) of the Code.
-12-
<PAGE> 17
(b) Compliance with Laws and Plan Terms; Qualification
and Exemption; Title IV of ERISA. Except as set forth on Schedule
3.19(b): (i) with respect to each of the Employee Plans and
Agreements, the Company and T.C. Products have complied in all
material respects with, and each of the Employee Plans and Agreements
conforms in all material respects to and has from its inception been
operated in all material respects in compliance with, all applicable
Laws, including ERISA and the Code, and each of the Employee Plans and
Agreements has been administered in all material respects in
accordance with its terms; (ii) all contributions required to be made
to any of the Employee Plans and Agreements and all premiums for
insurance coverage for each fiscal year for each of the Employee Plans
and Agreements ended before the date hereof, and for any portion of a
fiscal year ending on the Closing Date, have been timely paid, or with
respect to payments to be made but not yet due, have been properly
accrued and recorded in the Financial Statements; (iii) each of the
Employee Plans and Agreements that is intended to be qualified under
Section 401(a) of the Code and each trust intended to be exempt under
Section 501(a) or Section 501(c)(9) of the Code (the "Qualified
Plans") is qualified or exempt, as the case may be; and (iv) (x) none
of the Employee Plans and Agreements is subject to Title IV of ERISA
and (y) each of the Qualified Plans is a single plan, as defined in
Section 414(l) of the Code and the regulations thereunder, in which
the Company and T.C. Products are the sole employers.
(c) Liabilities; Claims and Proceedings; Terminations.
Except as set forth on Schedule 3.19(c), no event or condition has
occurred or exists (including any contingent withdrawal Liability
event under Section 4204 of ERISA) with respect to any "employee
benefit plan" (as defined in Section 3(3) of ERISA, including any
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA),
whether or not maintained or contributed to by the Company or T.C.
Products, which individually or collectively could result in a
material Liability to the Company or T.C. Products under the Code or
other applicable law. Except as set forth on Schedule 3.19(c), there
is no material pending or, to the knowledge of Sellers or the Company,
threatened or anticipated Claims (other than undisputed Claims for the
payment of benefits in accordance with the terms thereof), grievance
or allegation of unfair labor practice (or any basis therefor)
involving any of the Employee Plans and Agreements or any
investigation, proceeding, administrative review or other
administrative agency process pending or, to the knowledge of Sellers
or the Company, threatened which could result in the imposition upon
the Company or T.C. Products of any material penalty, assessment or
Liability in connection with any of the Employee Plans and Agreements,
individually or collectively. Except as set forth on Schedule
3.19(c), each of the Employee Plans and Agreements can be unilaterally
terminated at any time by the Company or T.C. Products without any
Liability to any Person.
(d) Prohibited Transactions; Reportable Events. Except
as set forth on Schedule 3.19(d), none of the Employee Plans and
Agreements has engaged or is about to engage in a "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code, a "Prohibited Transaction") and no "reportable event" (as
defined in Section
-13-
<PAGE> 18
4043 of ERISA) has occurred or is about to occur, in either case,
which could result in any material Liability to the Company or T.C.
Products.
(e) No Triggering of Obligations. The execution and
delivery by each of the Sellers and the Company of this Agreement and
the Closing Documents to which it is a party and the consummation of
the transactions contemplated hereby and thereby do not and will not:
(i) entitle any Employee to severance pay, unemployment compensation
or any other payment; (ii) except as set forth on Schedule 3.19(e),
accelerate the time of payment or vesting, or increase the amount of
compensation due to any Employee; or (iii) result in any Prohibited
Transaction for which an exemption is not available.
(f) Future Commitments. Except as set forth in Schedule
3.19(f), neither the Company nor T.C. Products has any commitment or
has taken any action to adopt or establish any additional Employee
Plans and Agreements or to materially increase the benefits under any
of the existing Employee Plans and Agreements. None of the Employee
Plans and Agreements provides (or has any obligation or commitment to
provide) health benefits with respect to any current or former
Employees, directors or independent contractors (or any beneficiary
thereof) of the Company or T.C. Products beyond their retirement or
other termination of service (other than coverage mandated by Title I,
Part 6 of ERISA, Subtitle B).
Section 3.20. Compliance with Laws. Except as set forth in
Schedule 3.20, each of the Company and T.C. Products: (a) has not committed a
violation of any material requirement of any Law and is in compliance in all
material respects with all Laws; (b) has not been given notice or been charged
with the violation of any material requirement of any Law; and (c) is not
subject to any Liability for past or continuing violation of any Law. Except
as disclosed in Schedule 3.20, no investigation or review by any Governmental
Authority with respect to the Company or T.C. Products or their Assets and
Properties is pending or, to the knowledge of Sellers or the Company,
threatened and no Governmental Authority has indicated to the Company, T.C.
Products or Sellers an intention to conduct the same.
Section 3.21. Taxes. The Company and T.C. Products have
correctly prepared and filed all federal, state, local and foreign Tax returns
and other reports that the Company and T.C. Products are required by Law to
file and have paid all Taxes that are due and payable pursuant to such returns
and reports or are otherwise due and payable under applicable Law, except to
the extent that any of the same are being contested in good faith by
appropriate proceedings promptly initiated and diligently pursued and with
respect to which reserves have been set aside on the Books and Records of the
Company or T.C. Products in an amount sufficient to discharge any such disputed
Tax Liability and which are reflected in the Unaudited Financial Statements.
Since September 30, 1995, T.C. Products has not, directly or indirectly, paid
or incurred any Liability for payment of Taxes in an amount greater than the
amount of Taxes it would have paid or become obligated to pay as a
non-consolidated individual taxpayer entity. No installment or deferred
payments of Taxes and no deficiency or assessment of Taxes has been proposed,
asserted or assessed or, to the knowledge
-14-
<PAGE> 19
of Sellers or the Company, been threatened to be proposed, asserted or
assessed, with respect to the business of the Company or T.C. Products by any
Governmental Authority or any other Person which has not been fully paid or
finally settled. There are no ongoing administrative or judicial proceedings
concerning Taxes or any audits or examinations of any of the Tax returns of the
Company or T.C. Products. None of the Assets and Properties of the Company or
T.C. Products is required to be treated as being owned by any other Person
pursuant to Section 168(f)(8) of the Code. No closing agreement or similar
Contract with any Governmental Authority exists with respect to the Company or
T.C. Products or their business relating to Taxes for any taxable year or
period after the date hereof. Neither the Company nor T.C. Products has been
granted any waiver of any statute of limitations with respect to, or any
extension of any period for the assessment of, any Taxes relating to the
Company or T.C. Products or their business. The Company and T.C. Products have
never been audited by the Internal Revenue Service. The statute of limitations
has run on all Tax returns of the Company and T.C. Products through September
30, 1992. Neither the Company nor T.C. Products has made any election under
Section 341(f) of the Code or is a United States real property holding company
under Section 897 of the Code. No Debt of the Company or T.C. Products is
"corporate acquisition indebtedness" within the meaning of Section 279(b) of
the Code. Except as may otherwise be provided in Section 5.07, all Tax
settlement agreements, arrangements, policies or guidelines, formal or
informal, express or implied, that may exist between the Company and T.C.
Products and all obligations thereunder shall terminate as of the Closing Date.
Sellers or the Company has furnished true, complete and correct copies of all
of such Tax settlement agreements, arrangements, policies or guidelines to
Purchaser.
Section 3.22. Insurance. Schedule 3.22 sets forth a true,
complete and correct list and description of all policies of fire, liability,
environmental, pollution, product liability, workers compensation, health and
other forms of insurance currently, or within the last three years, in effect
with respect to the Company or T.C. Products or their Assets and Properties
(and any programs of self insurance), including, with respect to each such
policy: (a) the limit of Liability upon the issuance thereof; (b) the period of
time during which such coverage has been maintained with the issuer thereof;
(c) a description of retentions, self-insured amounts, deductibles and other
similar amounts; (d) the available coverage thereunder as of the date hereof;
and (e) all Claims made and notices given to the insurer with respect to each
such policy's coverage during the last three years (or such shorter period of
time as to which such policy has been in force and effect with such insurer).
Neither the Company nor T.C. Products is a co-insurer under any such policies,
except to the extent of the amount of the deductible, self-retention or similar
amounts applicable to such policies. There is no Claim by the Company or T.C.
Products pending under any of such policies as to which coverage has been
questioned, denied or disputed. Except as set forth in Schedule 3.22, neither
the Company nor T.C. Products has been denied any insurance coverage
applicable to its business or its Assets and Properties within the last three
years by any insurer or prospective insurer. Neither the Company nor T.C.
Products has received any written notice from or on behalf of any insurance
carrier issuing any such policy that insurance rates therefor will hereafter be
increased (except to the extent that insurance rates may be increased for all
similarly situated risks for all policy holders) due to the activities or the
condition of the business of the Company or T.C. Products or their Assets and
Properties.
-15-
<PAGE> 20
Section 3.23. Product Warranty and Product Liability.
Schedule 3.23 sets forth a true, complete and correct description of product
Liability and similar Claims which are presently pending or, to the knowledge
of Sellers or the Company, threatened, or which have been asserted or commenced
against the Company or T.C. Products within the last three years. None of the
products of the Company or T.C. Products has been the subject of any recall
requirement within the last three years and no facts or conditions exist which
could reasonably be expected to result in any recall requirement. All of the
products of the Company and T.C. Products have been designed and manufactured
so as to comply in all material respects with all standards and specifications
of Governmental Authorities currently in effect in the jurisdictions in which
such products are sold with respect to the applications for which they are
sold, and the Company and T.C. Products have received all Governmental
Approvals necessary to allow the sale and use of such products in such
jurisdictions.
Section 3.24. Customers; Suppliers; Dealers and Distributors.
(a) Customers. Schedule 3.24(a) sets forth a true,
complete and correct list of all customers of T.C. Products (in terms
of and specifying the dollar volume of purchases from T.C. Products by
each such customer) that purchased products or services sold by T.C.
Products in and for each of its three most recent fiscal years and the
portion of the current fiscal year covered by the Unaudited Financial
Statements, showing the total dollar amount of gross sales to each
such customer during each such year or portion thereof. The T.C.
Products Annual Financial Statements and the T.C. Products Unaudited
Financial Statements show the total amount of returns from customers
during each of such fiscal years or portion thereof. T.C. Products
has not received notice from any of its ten largest customers during
the most recent fiscal year and the portion of the current year
covered by the T.C. Products Unaudited Financial Statements that the
execution of this Agreement and the Closing Documents and the
consummation of the transactions contemplated hereby and thereby will
result in the loss to T.C. Products of any such customers.
(b) Suppliers. Schedule 3.24(b) sets forth a true,
complete and correct list of all suppliers to T.C. Products (in terms
of and specifying the dollar volume of purchases by T.C. Products from
each such supplier) that supplied Assets and Properties (including
inventory) purchased by T.C. Products in and for each of the
twenty-four (24) calendar months ending June 28, 1996, showing the
total dollar amount of purchases from each such supplier during each
such month. Returns by T.C. Products to such suppliers during such
period are deducted from the obligation owing for purchases. Except
as set forth on Schedule 3.24(b), T.C. Products has not received
notice from any such supplier that the execution of this Agreement and
the Closing Documents and the consummation of the transactions
contemplated hereby and thereby will result in the loss to T.C.
Products of any such suppliers.
(c) Dealers , Distributors and Food Brokers. Schedule
3.24(c) sets forth a true, complete and correct list of all dealers,
distributors (including food brokers) and franchisees
-16-
<PAGE> 21
of T.C. Products. Prior to the date hereof, Sellers have delivered to
Purchaser copies of all dealer, distributor and franchise Contracts
and policy statements, and a description of all material modifications
or exceptions thereto. Neither the Company nor T.C. Products has
received notice from any such dealer, distributor or franchisee that
the execution of this Agreement and the Closing Documents and the
consummation of the transactions contemplated hereby and thereby will
result in the loss to T.C. Products of any such dealers, distributors
or franchisees.
Section 3.25. Environmental. Except as set forth in
Schedule 3.25:
(a) neither the Company nor T.C. Products has committed
any violation of any Environmental Law and the Company and T.C.
Products, and the present conditions and activities of and on, and use
of, the Assets and Properties of the Company and T.C. Products, are in
compliance in all material respects with all Environmental Laws;
(b) neither the Company nor T.C. Products has been given
notice of or been charged with any violation of any Environmental Law;
(c) neither the Company nor T.C. Products is subject to
any Liability under any Environmental Law arising out of operations by
the Company or T.C. Products prior to Closing;
(d) no investigation or review of the Company or T.C.
Products by any Governmental Authority in connection with any
Environmental Law is pending or, to the knowledge of Sellers or the
Company, threatened and no Governmental Authority has indicated to the
Company or Sellers an intention to conduct the same;
(e) none of the Assets and Properties presently or
heretofore owned or controlled by the Company or T.C. Products has
been used (i) as a landfill, or for waste disposal activities or
operations, (ii) as a site for the generation, storage, treatment,
processing, recycling or disposal of any Hazardous Material except in
compliance with Environmental Laws or (iii) for any other use that
would or could (excluding Hazardous Materials existing on such Assets
and Properties in compliance in all material respects with all
Environmental Laws) give rise to the Release of any Hazardous Material
on any of the Assets and Properties presently or heretofore owned or
controlled by the Company or T.C. Products, or on any off-site
properties;
(f) there is no Hazardous Material or storage tank
(whether underground or above ground, closed or otherwise), sump or
well currently on any of the Assets and Properties presently or
heretofore owned or controlled by the Company or T.C. Products;
(g) neither the Company nor T.C. Products has received
any notice or has any knowledge of any Environmental Claims,
Liabilities and Losses with respect to the Company
-17-
<PAGE> 22
or T.C. Products regarding any Assets and Properties presently or
heretofore owned or controlled by the Company or T.C. Products, or any
adjacent property;
(h) neither the Company nor T.C. Products nor any tenant
or subtenant of the Company or T.C. Products either is or has been
required to obtain any Governmental Approval to construct, occupy,
operate, use or conduct any activity currently ongoing on any of the
Assets and Properties of the Company or T.C. Products by reason of any
Environmental Law; and
(i) none of the Assets and Properties presently or
heretofore owned or controlled by the Company or T.C. Products is
currently on or has ever been on, or is or has ever been proposed for
listing on or investigation under, any federal or state "superfund" or
"super lien" list, including CERCLA.
Section 3.26. Public Utility Holding Company. Neither the
Company nor T.C. Products is a "holding company," a "subsidiary company" of a
"holding company," an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company" or a "public utility," as such terms are
defined in the Public Utility Holding Company Act of 1935 and the rules and
regulations thereunder.
Section 3.27. Acquisition Transactions. Except for the
letter of intent dated April 19, 1996 between certain of the Sellers and
Purchaser, this Agreement and the Closing Documents, none of Sellers, the
Company or T.C. Products is a party to any Contract, including any letter of
intent, in connection with, related to or providing for the acquisition of all
or any substantial part of the business or Assets and Properties of the Company
or T.C. Products or any capital stock of the Company or T.C. Products, whether
by merger, purchase of Assets and Properties, tender offer or otherwise, and
whether for cash, securities or any other consideration.
Section 3.28. Propriety of Past Payments. Except as set
forth in Schedule 3.28: (a) no funds or Assets and Properties of the Company or
T.C. Products have been used for illegal purposes; (b) no unrecorded funds or
Assets and Properties of the Company or T.C. Products have been established for
any purpose; (c) no accumulation or use of the funds or Assets and Properties
of the Company or T.C. Products has been made without being properly accounted
for in the financial Books and Records of the Company or T.C. Products; (d) all
payments by or on behalf of the Company or T.C. Products have been duly and
properly recorded and accounted for in their financial Books and Records; (e)
no fraudulent entry has been made in the financial Books and Records of the
Company or T.C. Products; (f) no payment has been made by or on behalf of the
Company or T.C. Products with the understanding that any part of such payment
is to be used for any purpose other than that described in the documents
supporting such payment; and (g) neither the Company nor T.C. Products has
made, directly or indirectly, any illegal contributions to any political party
or candidate, either domestic or foreign, or any other payment in violation of
any applicable Law.
-18-
<PAGE> 23
Section 3.29. Brokers, Finders and Financial Advisors. No
broker, finder or financial advisor has acted for Sellers or the Company or
T.C. Products in connection with this Agreement or any of the Closing Documents
or the transactions contemplated hereby or thereby, and no broker, finder or
financial advisor is entitled to any broker's, finder's or financial advisor's
fee or other commission in respect thereof based in any way on any Contract
with Sellers, the Company or T.C. Products.
Section 3.30. Disclosure. The schedules, documents,
exhibits, reports, certificates and other written statements and information
furnished by or on behalf of Sellers, the Company or T.C. Products to
Purchaser do not contain any material misstatement of fact or, to the knowledge
of Sellers or the Company, omit to state a material fact necessary in order to
make the statements contained therein, in light of the circumstances under
which they were made, not misleading. Sellers have not withheld any fact known
to them or the Company which has or is reasonably likely to have a Material
Adverse Effect with respect to the Company or T.C. Products.
Section 3.31. Representations Relating to Subordinated Notes.
(a) Each Seller understands that the Subordinated Notes have not been
registered under the Securities Act nor qualified under any state securities
laws, and that such securities are being offered and sold pursuant to an
exemption from such registration and qualification based in part upon the
representations of the Sellers contained herein.
(b) Each Seller has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of the investment contemplated by this Agreement. Each Trust is able to
bear the economic risk of its investment in Purchaser, including, but not
limited to, a complete loss of its investment.
(c) Each Seller understands: (i) that the Trust must
bear the economic risk of this investment indefinitely unless the Subordinated
Notes are registered pursuant to the Securities Act or, in the opinion of
counsel reasonably satisfactory to Purchaser, an exemption from such
registration is available, and unless the disposition of such securities is
qualified under applicable state securities laws or, in the opinion of counsel
reasonably satisfactory to Purchaser, an exemption from such qualification is
available; and (ii) that Purchaser has no obligation or present intention of so
registering or qualifying any of the Subordinated Notes. Each Trust further
understands that there is no assurance that any exemption from the Securities
Act will be available, or, if available, that such exemption will allow the
Trust to sell, assign, pledge, hypothecate, encumber or otherwise transfer or
dispose of (each, a "Transfer") any subordinated Note then held by the Trust in
the amounts or at the times the Trust might propose.
(d) Each Trust is acquiring the Subordinated Notes solely
for its own account for investment and not with a view toward the resale,
Transfer, or distribution thereof, nor with any present intention of
distributing the Subordinated Notes. Except as provided in this Agreement, the
Trust has not granted to another Person any right with respect to or interest
in the Subordinated
-19-
<PAGE> 24
Notes, nor has the Trust agreed to give any Person any such interest or right
in the future (excepting any rights or interests which may exist by virtue of
community property laws).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Subject to all of the terms, conditions and provisions of this
Agreement, Purchaser hereby represents and warrants to Sellers, as of the date
hereof and as of the Closing Date, as follows:
Section 4.01. Organization and Qualification. Purchaser is a
corporation, duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation. Purchaser has all requisite power
and authority, corporate or otherwise, to own, lease and operate its Assets and
Properties and to carry on its business as now being conducted. Purchaser is
duly qualified to do business and is in good standing in each jurisdiction in
which its Assets or Properties or the nature of the business conducted by it
makes such qualification necessary and where the failure to so qualify would
have a Material Adverse Effect with respect to Purchaser and its subsidiaries.
Section 4.02. Authority. Purchaser has all requisite power
and authority, corporate or otherwise, to execute and deliver this Agreement
and the Closing Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
Purchaser of this Agreement and the Closing Documents to which it is a party
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by the Board of Directors of Purchaser and no
other corporate proceedings or approvals on the part of Purchaser are necessary
to authorize this Agreement or the Closing Documents or to consummate the
transactions contemplated hereby or thereby. Purchaser has duly and validly
executed and delivered this Agreement and will, on or prior to the Closing
Date, execute and deliver each of the Closing Documents to which it is a party
and, assuming the due authorization, execution and delivery of this Agreement
and such Closing Documents by the other parties hereto and thereto, this
Agreement constitutes, and when executed and delivered each of such Closing
Documents will constitute, the legal, valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms, except
as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting creditors' rights
generally and general equitable principles.
Section 4.03. No Conflict. The execution and delivery by
Purchaser of this Agreement and the Closing Documents to which it is a party
and the consummation of the transactions contemplated hereby and thereby do not
and shall not, by the lapse of time, the giving of notice or otherwise: (a)
constitute a violation of any Law; (b) constitute a breach or violation of any
provision contained in its charter documents; (c) constitute a breach of any
provision contained
-20-
<PAGE> 25
in, or a default under, any Governmental Approval, any writ, injunction, order,
judgment or decree of any Governmental Authority or any Contract to which
Purchaser is a party or by which Purchaser or its Assets and Properties is
bound or affected; or (d) except as otherwise contemplated by this Agreement
and the Closing Documents, result in or require the creation of any Lien upon
any of the Assets and Properties of Purchaser.
Section 4.04. Consents and Approvals. Except as set forth in
Schedule 4.04, no Governmental Approvals and no notifications, filings or
registrations to or with any Governmental Authority or any other Person is or
will be necessary for the valid execution and delivery by Purchaser of this
Agreement and the Closing Documents to which it is a party, or the consummation
of the transactions contemplated hereby or thereby, or the enforceability
hereof or thereof, other than those which have been obtained or made and are in
full force and effect.
Section 4.05. Litigation. There are no Claims pending or, to
the knowledge of Purchaser, threatened before or by any Governmental Authority
or any other Person, and Purchaser has no knowledge of the basis for any Claim,
which either alone or in the aggregate, seeks to restrain or enjoin the
execution and delivery of this Agreement or any of the Closing Documents or the
consummation of any of the transactions contemplated hereby or thereby. There
are no judgments or outstanding orders, injunctions, decrees, stipulations or
awards (whether rendered by a Governmental Authority or by an arbitrator)
against Purchaser which prohibit or restrict, or could reasonably be expected
to result in any delay of, the consummation of the transactions contemplated by
this Agreement or any of the Closing Documents.
Section 4.06. Exchange Act Filings. The Annual Report on Form
10-K of Pioneer for its fiscal year ended December 31, 1995 (and the
information incorporated by reference therein) (the "Form 10-K") contained all
information required to be contained therein and otherwise complied in all
material respects with the Exchange Act and the rules and regulations
thereunder.
Section 4.07. Financial Statements. Purchaser has delivered
to Sellers the audited consolidated balance sheet of Pioneer as of the close of
its fiscal year ended December 31, 1995 and statements of income and cash flows
for the fiscal year then ended and the preceding fiscal year, accompanied by a
report of independent auditors, which financial statements (including the notes
thereto) are collectively referred to as "Purchaser Financial Statements". The
Purchaser Financial Statements fairly present the consolidated financial
position and results of operations of Pioneer as of the dates indicated therein
and results of operations for the fiscal periods indicated therein, in
accordance with GAAP which, except as may otherwise be noted in the footnotes
thereto, have been applied on a basis consistent with prior periods. The
Purchaser Financial Statements reflect or provide for Claims against, and Debts
and Liabilities of, Pioneer and its consolidated group, absolute, accrued,
contingent or otherwise, as at the dates thereof in accordance with GAAP.
Section 4.08. No Adverse Change. Since December 31, 1995
there has been no change in the business, financial condition, results of
operations or prospects (in the case of
-21-
<PAGE> 26
prospects, not taking into account general economic conditions or general
industry developments) which has had a Material Adverse Effect on Pioneer and
its consolidated group.
Section 4.09. Issuance of Subordinated Notes. The issuance
to the Trusts of the Subordinated Notes referred to in Section 2.04 has been or
will, prior to Closing, be duly and validly authorized by all necessary
corporate action of Purchaser.
Section 4.10. Acquisition of the Stock for Investment.
Purchaser has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of its purchase of the
Stock. Purchaser confirms that Sellers have made available to Purchaser the
opportunity to ask questions of the officers and management Employees of the
Company and T.C. Products and to acquire additional information about the
business and financial condition of the Company and T.C. Products. Purchaser
is acquiring the Stock for investment and not with a view to or for sale in
connection with any distribution thereof, or with any present intention of
distributing or selling the Stock (within the meaning of such terms under the
Securities Act). Purchaser acknowledges that the Stock may not be sold,
transferred, offered for sale, pledged, hypothecated or otherwise disposed of
without registration under the Securities Act, except pursuant to an exemption
from such registration available under such Act, and without compliance with
state securities Laws, in each case, to the extent applicable. Purchaser
understands that the Stock has not been and will not be registered under the
Securities Act or any state securities laws and is being offered and sold in
reliance upon federal and state exemptions for transactions not involving any
public offering. Purchaser confirms that it is able to bear the economic risk
and lack of liquidity inherent in holding the Stock indefinitely.
Section 4.11. Brokers, Finders and Financial Advisors.
Except for Schnitzius & Vaughan, whose fees and expenses shall be the sole
responsibility of Purchaser, no broker, finder or financial advisor has acted
for Purchaser in connection with this Agreement or any of the Closing Documents
or the transactions contemplated hereby or thereby, and no broker, finder or
financial advisor is entitled to any broker's, finder's or financial advisor's
fee or other commission in respect thereof based in any way on any Contract
with Purchaser.
Section 4.12. Disclosure. The representations and warranties
made by Purchaser in this Agreement and the statements made in any Closing
Documents, Exhibits or Schedules do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make any
such representation, warranty or statement, in light of the circumstances under
which it was made, not misleading.
-22-
<PAGE> 27
ARTICLE V
COVENANTS
Section 5.01. Investigation of Business; Access to Properties
and Records. (a) After the date hereof and prior to the Closing Date or the
earlier termination of this Agreement, Sellers shall and shall cause the
Company to afford to Purchaser and its accountants, counsel, financial advisors
and other representatives involved in the transactions contemplated by this
Agreement and the Closing Documents (the "Purchaser Representatives"), at
Purchaser's sole cost and expense, upon reasonable request during normal
business hours, full and complete access to the offices, Assets and Properties,
Books and Records and Contracts of the Company and T.C. Products; provided,
however, that such investigation shall be conducted in such a manner so as to
not cause any unreasonable disruption of or to the personnel and operations of
the Company or T.C. Products. No investigation pursuant to this Section 5.01
shall affect any representations or warranties made in this Agreement or any of
the Closing Documents or the conditions to the obligations of the respective
parties to consummate the transactions contemplated hereby or thereby; provided
that any information obtained as a result of any such investigation or
diligence shall be subject to the covenant in Section 5.10(b). Such
investigation and information obtained in connection therewith is subject to
the terms and conditions of that certain Confidentiality Agreement among
certain of the Sellers, the Company, Purchaser and another dated May 8, 1996
("Confidentiality Agreement"), and Purchaser shall hold and shall use
commercially reasonable efforts to cause the Purchaser Representatives to hold,
in strict confidence all non-public documents and information furnished to
Purchaser or the Purchaser Representatives in connection with the transactions
contemplated by this Agreement; provided, however, that: (i) Purchaser may
disclose any such information to the Purchaser Representatives; and (ii)
Purchaser and the Purchaser Representatives may disclose any such information
the failure of which to disclose would result in the violation of any Law or in
the imposition of any fine, penalty or charge by any Governmental Authority
that under authority of Law has required the disclosure or production of such
information by Purchaser or any of the Purchaser Representatives; provided
further, that in the event that Purchaser or a Purchaser Representative is
obligated to disclose any such information in order to avoid the violation of
any Law or the imposition of any fine, penalty or charge by any Governmental
Authority, it shall provide Sellers with such advance notice thereof as may be
reasonable under the circumstances in order to permit Sellers the opportunity
to intervene and seek appropriate relief for the protection of the
confidentiality of such information. In the event of any conflict between the
terms and provisions hereof and of the Confidentiality Agreement, the terms and
provisions of this Agreement shall govern and control.
(b) Purchaser agrees (i) to hold all of the material
Books and Records of the Company and T.C. Products received by Purchaser from
Sellers on the Closing Date, and to not destroy or dispose of any thereof, for
a period of five years commencing on the Closing Date or such longer period as
may be required by Law, and (ii) following the Closing Date, to afford Sellers,
their accountants and counsel, at Sellers' sole cost and expense, upon
reasonable request, during normal
-23-
<PAGE> 28
business hours, full and complete access to such Books and Records to the
extent that such access may be requested for any legitimate purpose; provided,
however, that such access shall be provided in such a manner so as to not cause
any unreasonable disruption of or to the personnel and operations of Purchaser,
the Company or T.C. Products.
(c) In the event that this Agreement is terminated in
accordance with its terms, each party shall promptly destroy or redeliver to
the other all non-public written material provided pursuant to this Section
5.01 and shall not retain any copies, extracts or other reproductions in whole
or in part of such written material. In such event, all documents, memoranda,
notes and other writings prepared by Purchaser based on the information in such
material shall also be destroyed (and Purchaser shall use commercially
reasonable efforts to cause the Purchaser Representatives to similarly destroy
their documents, memoranda, notes and other writings).
Section 5.02. Closing Conditions; Obtaining Consents.
Subject to the terms and conditions herein provided, Sellers and Purchaser each
agree to use commercially reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement and the Closing Documents and to
cooperate with the other in connection with the foregoing, including using
commercially reasonable efforts to: (a) obtain all waivers, consents and
approvals required to be obtained from other parties to Contracts of the
Company or T.C. Products; (b) obtain all Governmental Approvals required to be
obtained under any Law; (c) effect all necessary registrations and filings
including submissions of information requested by Governmental Authorities; and
(d) fulfill its respective conditions set forth in Article VI of this
Agreement. Sellers and Purchaser do not believe that any notice is required to
be filed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. Sellers and Purchaser further covenant and agree, with respect to any
threatened or pending preliminary or permanent injunction or other order,
decree or ruling or Law that would adversely affect the ability of Sellers, the
Company or Purchaser to execute and deliver this Agreement or any of the
Closing Documents or to consummate the transactions contemplated hereby or
thereby, to use commercially reasonable efforts to prevent the entry, enactment
or promulgation thereof, as the case may be, and to have any such injunction,
order or decree lifted or rescinded.
Section 5.03. Further Assurances. Sellers and Purchaser
agree that, from time to time, whether before, at or after the Closing Date,
each of them will take such other action as may be reasonably requested and
necessary or appropriate to carry out the purposes and intent of this Agreement
and the Closing Documents. From time to time before, or at the request of
Purchaser, the Company or T.C. Products, after the Closing Date, Sellers, to
the extent they then may lawfully do so: (a) shall, and shall cause each of
their Affiliates to, take such actions and to execute, acknowledge and deliver
to the Company such Contracts, deeds, assignments, conveyances, transfers,
powers of attorney and assurances as may reasonably be necessary to effect or
evidence the transfer to the Company or T.C. Products of any Assets and
Properties held by or in the name of, or which may appear in any public record
to be owned by, any such Person and used or held for use primarily in
connection with the business of the Company or T.C. Products; and (b) shall
assist
-24-
<PAGE> 29
the Company and T.C. Products in transferring to the Company or T.C. Products
all Governmental Approvals, if any, that are held by any such Person or any of
their respective predecessors and are necessary to the operation or maintenance
of the business of the Company or T.C. Products as currently conducted.
Section 5.04. Conduct of Business. Except as set forth in
Schedule 5.04 or as otherwise contemplated by this Agreement or the Closing
Documents, after the date hereof and prior to the Closing Date or earlier
termination of this Agreement, unless Purchaser shall otherwise agree in
writing, Sellers shall cause the Company and T.C. Products to:
(a) not take or perform any act or refrain from taking or
performing any act which, if taken or performed or failed to be taken
or performed between the date of the most recent Annual Financial
Statements and the date hereof, would have resulted in a breach of the
representations and warranties of Sellers set forth in Section 3.09;
provided, however, that with respect to Debt incurred for capital
expenditures, in addition to the restrictions contained in Section
3.09, any such Debt or commitment therefor shall not in the aggregate
exceed $300,000;
(b) not enter into any agreement, or extend an existing
agreement, for the purchase of chlorine or caustic soda that will
survive after the Closing Date;
(c) not sell (other than sales of inventory in the
ordinary course of business), pledge, lease, license or otherwise
transfer any of their Assets or Properties or, except as contemplated
by this Agreement, make any payments or distributions to Sellers or
any of their Affiliates;
(d) in the case of T.C. Products, not make any payments
or distributions of Assets or Properties to the Company or Sellers
except for products purchased or services performed and at prices
charged in the ordinary course of business and consistent with past
practices;
(e) confer on a regular and frequent basis with one or
more representatives of Purchaser to report operational matters of
materiality and the general status of ongoing operations; and
(f) not enter into any Contract to (i) take or perform
any act which Sellers are required to cause the Company to not take or
perform pursuant to this Section 5.04 or (ii) refrain from taking or
performing any act which Sellers are required to cause the Company to
take or perform pursuant to this Section 5.04.
Nothing contained in this Agreement shall give to Purchaser, directly or
indirectly, rights to control or direct the Company's operations prior to the
Closing Date. Prior to the Closing Date, the Company shall exercise,
consistent with the terms and conditions of this Agreement, complete control
and supervision of its operations.
-25-
<PAGE> 30
Section 5.05. Public Announcements. Except as required by
Law, without the prior written approval of the other party, neither Sellers nor
Purchaser will, and Sellers shall cause the Company to not, issue, or permit
any agent or Affiliate thereof to issue, any press release or otherwise make or
permit any agent or Affiliate thereof to make, any public statement or
announcement with respect to this Agreement, the Closing Documents or the
transactions contemplated hereby and thereby; provided, however, that to the
extent that, in the opinion of their respective counsels, any public statements
are required to be made by the Company or Purchaser pursuant to any Law, the
parties shall endeavor to consult with each other prior to issuing any such
press release or written public statement.
Section 5.06. Acquisition Transactions. After the date
hereof and prior to the Closing Date or the earlier termination of this
Agreement, Sellers shall not, and shall not permit the Company or T.C. Products
to, initiate, solicit, negotiate, encourage or facilitate any proposal or offer
to acquire all or any substantial part of the business or Assets and Properties
of the Company or T.C. Products, or any capital stock of the Company or T.C.
Products, whether by merger, purchase of Assets and Properties, tender offer or
otherwise, and whether for cash, securities or any other consideration or
combination thereof. Sellers: (a) acknowledge and agree that a breach of any
of the covenants contained in this Section 5.06 will result in irreparable harm
to Purchaser which will not be compensable in money damages; and (b) agree that
such covenant shall be specifically enforceable and that specific performance
and injunctive relief shall be a remedy properly available to Purchaser for a
breach of such covenant. Sellers further hereby agree jointly and severally,
to indemnify, defend and hold harmless Purchaser from and against any and all
Claims, Liabilities and Losses which may be imposed on, incurred by or asserted
against Purchaser, arising out of or resulting from any breach of the covenants
contained in this Section 5.06 or the inaccuracy of the representations set
forth in Section 3.27.
Section 5.07. Tax Matters. (a) Except as otherwise provided
in this Section 5.07, all Tax settlement agreements, arrangements, policies or
guidelines, formal or informal, express or implied, that may exist between the
Company, T.C. Products and Sellers and all obligations thereunder shall
terminate as of the Closing Date.
(b) Sellers shall timely prepare and file (or cause to be
so prepared and filed) all tax returns of the Company and T.C.
Products due for all periods prior to the Effective Time, and shall
provide copies of such returns a reasonable period of time prior to
filing to Purchaser for review and comment; provided that such returns
shall not be subject to Purchasers' approval. All other returns shall
be prepared and filed by Purchaser. Sellers shall pay, or be
responsible, for the Taxes arising out of or in connection with the
transactions effected pursuant to this Agreement as set forth in
Section 5.07(f) below and all Taxes related to income of the Company
or T.C. Products generated or accruing prior to the Effective Time
("Pre-Closing Taxes") to the extent that the Liability for such Taxes
is not reflected in the Effective Time Financial Statements or used in
the determination of the Purchase Price pursuant to Section 2.02.
-26-
<PAGE> 31
(c) After the Closing Date, Purchaser and Sellers shall,
and shall cause their respective Affiliates to, cooperate in the
preparation of all Tax returns and reports and shall provide, or cause
to be provided, to the requesting party any Books and Records
pertaining to the Company or T.C. Products requested by such party in
connection therewith, as well as access to, and the cooperation of,
the accountants and auditors of Purchaser and Sellers. Each party
shall cooperate with the other in connection with any Tax
investigation, audit or Claim. Purchaser and Sellers shall, and shall
cause their respective Affiliates to, preserve all Books and Records
relating to any Liabilities for Taxes with respect to any taxable
period until the later of the expiration of all applicable statutes of
limitation (including any extensions thereof) or the conclusion of all
Claims with respect to Taxes for such period.
(d) After the Closing Date, Sellers shall indemnify,
defend and hold harmless Purchaser, the Company and T.C. Products from
and against any Pre-Closing Taxes. Purchaser agrees to, after the
Closing Date, indemnify, defend and hold harmless Sellers from and
against any Taxes of the Company or T.C. Products other than
Pre-Closing Taxes. Sellers shall retain any refunds of Pre-Closing
Taxes and Purchaser (or the Company or T.C. Products) shall retain any
refunds received in respect of other Taxes. In the event that
Purchaser (or the Company or T.C. Products) receives any refund of
Pre-Closing Taxes, such refunds will be paid to the Trusts in
proportion to the ratio in which the Trusts held the shares of the
Company at Closing.
(e) In the event that Purchaser, the Company or T.C.
Products receives notice, whether orally or in writing, of any pending
or threatened Tax examinations, Claims settlements, proposed
adjustments, assessments or reassessments or related matters with
respect to Taxes that could affect Sellers, or if Sellers receive
notice of such matters that could affect Purchaser, the Company or
T.C. Products, the party receiving such notice shall notify in writing
the potentially affected party within ten days thereof. The failure of
any party to give such notice shall not impair that party's rights
hereunder except to the extent that the other party demonstrates
material detriment caused thereby. Sellers shall have the right to
control any audit or examination by any taxing authority, initiate any
Claim for refund, file any amended return and contest, resolve and
defend against any assessment, notice of deficiency or other
adjustment or proposed adjustment relating or with respect to any
Pre-Closing Taxes, and Purchaser, the Company and T.C. Products shall
have a corresponding right with respect to other Taxes.
(f) Sellers shall pay, or there shall be taken into
account in determining the Purchase Price pursuant to Section 2.02,
all Taxes arising out of or in connection with the transactions
effected pursuant to this Agreement, including those arising from the
sale by the Company of the Gig Harbor Property and the capital stock
or Property and Assets of T-Chem and Specialty Insurance, Inc.
("Specialty Insurance"). Sellers and Purchaser shall cooperate in
filing all necessary documentation and returns with respect to such
Taxes.
-27-
<PAGE> 32
Section 5.08 Employee Matters. As a material inducement and
part of the consideration to Sellers for consummation of the transactions
contemplated by this Agreement, Pioneer agrees to cause T.C. Products to
continue during the current fiscal year the incentive bonus plan currently in
place and, for the fiscal year to end September 30, 1996, to accrue and pay
bonuses in accordance with provisions of such plan, subject to any discretion
therein provided, in an amount not to exceed the aggregate amount of bonuses
paid for the fiscal year ended September 30, 1995, and to cause T.C. Products
to fulfill all obligations under the T.C. Products/Dial Corporation Asset
Purchase Agreement relating to the T.C. Products employees who were formerly
Dial Corporation employees.
Section 5.09. Casualty Loss and Condemnation. If, prior to
the Closing Date, all or any portion of the Assets and Properties of the
Company or T.C. Products is destroyed by fire or other casualty, or is taken in
condemnation or under the right of eminent domain, or if proceedings for such
purposes shall be pending or threatened and: (a) any such destruction, taking
or proceeding or any threat thereof involves, or if more than one in the
aggregate involve, an amount in excess of $100,000, Purchaser shall have the
right, in its sole discretion, to terminate this Agreement by providing Sellers
written notice of its election to do so; or (b) any such destruction, taking or
proceeding or any threat thereof involves, or if more than one in the aggregate
involve, an amount less than or equal to $100,000, or involves an amount in
excess thereof and Purchaser does not elect to terminate this Agreement
pursuant to Section 5.09(a), Purchaser shall purchase the Stock notwithstanding
any such destruction, taking or proceeding or threat thereof (without reduction
of the Purchase Price therefor) and Sellers shall, on the Closing Date: (i) pay
to Purchaser all sums paid to Sellers by third parties by reason of the
destruction or taking of such Assets and Properties; and (ii) assign, transfer
and set over unto Purchaser, without recourse against Sellers, all of the
rights, title and interests of Sellers in and to any unpaid awards or other
payments (including insurance proceeds not expended or committed to expenditure
by Sellers or the Company to repair or restore such destruction) from third
parties arising out of the destruction or taking of such Assets and Properties.
Prior to the Closing, none of Sellers, the Company or T.C. Products shall
voluntarily compromise, settle or adjust any material amounts payable by reason
of any material destruction or taking of any of the Assets and Properties of
the Company or T.C. Products without first obtaining the written consent of
Purchaser.
Section 5.10. Updating of Schedules; Certain Notifications.
(a) Sellers shall deliver to Purchaser: (i) an updated aged schedule of the
Receivables on the Closing Date, which schedule shall be prepared as of the
close of business on the Business Day immediately preceding the Closing Date;
and (ii) an update of all of the other Schedules to this Agreement not less
than two Business Days prior to the Closing Date. From the date hereof until
the Closing Date, Sellers shall promptly notify Purchaser in writing of any
changes or additions to the Schedules or the occurrence of any event which to
Sellers knowledge has resulted in or could reasonably be expected to result in
a Material Adverse Effect with respect to the Company or T.C. Products.
Nothing contained herein shall be deemed in any way to constitute a waiver by
Purchaser of the conditions contained in Article VI.
-28-
<PAGE> 33
(b) Each of the Sellers and Purchaser shall promptly
notify the other in writing of the occurrence of any event which becomes known
to either Sellers or Purchaser and which will, or could reasonably be expected
to, result in the failure to satisfy any of the conditions to the obligations
of any party specified in Article VI.
Section 5.11. Collection of Receivables; Guaranty. Purchaser
will, or will cause the Company and T.C. Products to, use commercially
reasonable efforts to collect the Receivables. In the event that,
notwithstanding such efforts, any of the Receivables are not paid in full at
the expiration of the 120 day period commencing with the Closing Date,
Purchaser will deliver to Sellers a schedule setting forth the aggregate amount
of uncollected Receivables, specifying the account debtor of each such
Receivable and the outstanding amount due thereunder, together with invoices
and supporting documents, and Sellers shall pay Purchaser an amount equal to:
(a) the aggregate outstanding balance of such Receivables; minus (b) an amount
equal to the balance of the Reserves as of the Closing Date. Upon receipt by
Purchaser of such amount from Sellers, Purchaser shall cause all right, title
and interest in and to the uncollected balances of such Receivables to be
assigned, transferred and delivered to Sellers, without recourse to Purchaser,
the Company or T.C. Products. In the event that any such Receivables are
assigned, transferred and delivered to Sellers, Purchaser agrees to provide
Sellers with such reasonable assistance in the collection of such Receivables
as Sellers may reasonably request. In the event that the Company or T.C.
Products makes any sales to or performs any services for any account debtor of
any of the Receivables after the Closing Date, any payments received by the
Company or T.C. Products from such account debtor shall be applied: (i) as
designated by such account debtor; or (ii) in the absence of any such
designation, to the oldest unpaid Receivable owed by such account debtor. Each
of Purchaser and Sellers shall promptly pay to the other any amounts received
by him or it (or any Affiliates) on account of a Receivable (or any portion
thereof) which is, at such time, the property of the other or an Affiliate of
the other.
Section 5.12. Employment and Non-Competition Agreements. On
or prior to Closing (a) Clerc shall have executed and delivered to the Company,
and the Company shall accept, a non-competition and employment agreement
("Noncompetition and Employment Agreement") in substantially the form attached
hereto as Exhibit B, and (b) Belveal shall have executed and delivered to the
Company, and the Company shall accept, a noncompetition agreement
("Noncompetition Agreement") in substantially the form attached hereto as
Exhibit C.
Section 5.13. Post Closing Mergers. Not later than 30 days
after the Closing Date, Pioneer agrees to cause any assignee Purchaser pursuant
to Section 9.06 which is issuer of the Subordinated Notes to be merged with and
into Western States and T.C. Products, with the intent and result that T.C.
Products shall be the surviving corporation and successor to the obligations to
the Trusts evidenced by the Subordinated Notes. Failure timely to satisfy this
covenant shall be an event of default under the Subordinated Notes.
-29-
<PAGE> 34
ARTICLE VI
CONDITIONS
Section 6.01. Conditions to Obligations of each of the
Parties. The respective obligations of each party to consummate the
transactions contemplated hereby shall be subject to the fulfillment at or
prior to the Closing Date of the following conditions:
(a) no preliminary or permanent injunction or other
order, decree or ruling by any Governmental Authority or any other
Person which prevents the consummation of the transactions
contemplated by this Agreement or any of the Closing Documents shall
have been issued and remain in effect;
(b) no Claim shall have been asserted, threatened or
commenced by any Governmental Authority or any other Person and no Law
shall have been enacted, promulgated or issued by any Governmental
Authority, which would reasonably be expected to (i) prohibit the
ownership or operation of all or any material portion of the business
of the Company or T.C. Products, (ii) prohibit the purchase of,
payment for or retention of the Stock by Purchaser or the consummation
of the transactions contemplated by this Agreement or any of the
Closing Documents or (iii) make the consummation of any such
transactions illegal;
(c) all Governmental Approvals legally required for the
consummation of the transactions contemplated by this Agreement and
the Closing Documents shall have been obtained and be in full force
and effect on the Closing Date;
(d) the Company shall have sold the Gig Harbor Property;
(e) the Company shall have sold all of the outstanding
capital stock of Specialty Insurance and of T-Chem owned by the
Company; and
(f) the Noncompetition Agreement and the Noncompetition
and Employment Agreement shall have been duly executed and delivered
as provided in Section 5.12.
Section 6.02. Conditions to Obligations of Sellers. The
obligations of Sellers to consummate the transactions contemplated hereby shall
be subject to the fulfillment at or prior to the Closing Date of the following
additional conditions, except as Sellers may waive in writing:
(a) Purchaser shall have complied with and performed in
all material respects all of the terms, covenants, agreements and
conditions contained in this Agreement and the
-30-
<PAGE> 35
Closing Documents to which it is a party which are required to be
complied with and performed on or prior to the Closing Date;
(b) the representations and warranties of Purchaser in
this Agreement and in each of the Closing Documents to which it is a
party shall have been true and correct on the date hereof or thereof,
as applicable, and such representations and warranties shall be true
and correct on and as of the Closing Date (except those, if any,
expressly stated to be true and correct at an earlier date), with the
same force and effect as though such representations and warranties
had been made on and as of the Closing Date;
(c) there shall have been no event or combination of
events which could reasonably be expected to have a Material Adverse
Effect on the ability of Pioneer or PWT to perform their respective
obligations under the Guaranty; and
(d) Sellers shall have received each of the following,
dated as of the Closing Date or, with respect to certificates of
Governmental Authorities, dated within ten Business Days prior to the
Closing Date:
(i) the Certificate of Incorporation of Pioneer certified
by the Secretary of State of the State of Delaware,
the Bylaws of Pioneer certified by its Secretary or
an Assistant Secretary, and a certificate of the
Secretary of State of the State of Delaware as to the
existence and good standing of Pioneer;
(ii) resolutions of the Board of Directors of Pioneer,
certified by its Secretary or an Assistant Secretary,
which authorize the execution, delivery and
performance of this Agreement and the Closing
Documents to which it is or is to be a party;
(iii) a certificate of incumbency certified by the
Secretary or an Assistant Secretary of Pioneer
certifying the names of the officers of Pioneer
authorized to execute this Agreement and the Closing
Documents to which it is or is to be a party
(including the certificates contemplated herein),
together with specimen signatures of such officers;
(iv) to the extent Pioneer has assigned its rights
hereunder pursuant to Section 9.06, the information
required pursuant to the foregoing clauses (i), (ii)
and (iii) with respect to such assignee Purchaser and
the Closing Documents to which it is or is to be a
party, and certified with respect to information
provided in clause (i) by the Secretary of State of
its jurisdiction of incorporation;
(v) the information required pursuant to the foregoing
clauses (i), (ii) and (iii) with respect to PWT and
the Guaranty to which it is to be a party;
-31-
<PAGE> 36
(vi) a certificate of the Chairman of the Board, Chief
Executive Officer, the President or a Vice President
of Purchaser certifying as to fulfillment of the
conditions specified in Section 6.02(a) and Section
6.02(b);
(vii) the Subordinated Notes referenced in Section 2.04
duly executed and delivered by the Purchaser;
(viii) the Guaranty referenced in Section 2.04 duly executed
and delivered by the Pioneer and PWT; and
(ix) an opinion of Kent R. Stephenson, general counsel of
Pioneer, and/or Andrews & Kurth L.L.P., special
corporate counsel to Pioneer, in form and substance
reasonably satisfactory to Sellers, covering such
matters as are customarily covered in opinions
delivered in transactions of the type contemplated by
this Agreement and the Closing Documents.
Section 6.03. Conditions to Obligations of Purchaser. The
obligations of Purchaser to consummate the transactions contemplated hereby
shall be subject to the fulfillment at or prior to the Closing Date of the
following additional conditions, except as Purchaser may waive in writing:
(a) each of the Sellers and the Company shall have
complied with and performed in all material respects all of the terms,
covenants, agreements and conditions contained in this Agreement and
the Closing Documents to which each is a party which are required to
be complied with and performed on or prior to the Closing Date;
(b) the representations and warranties of Sellers in this
Agreement and in each of the Closing Documents to which each is a
party shall have been true and correct on the date hereof or thereof,
as applicable, and such representations and warranties shall be true
and correct on and as of the Closing Date (except those, if any,
expressly stated to be true and correct at an earlier date), with the
same force and effect as though such representations and warranties
had been made on and as of the Closing Date;
(c) Purchaser shall have obtained, if necessary, the
written approval which is required from the holders of debt securities
issued by an Affiliate of Purchaser under that certain Indenture dated
as of April 11, 1995, as amended;
(d) except for any indebtedness of T. C. Products to the
Company provided for in Section 2.02(d), all indebtedness of T.C.
Products to the Company shall have been canceled as a contribution by
the Company to the capital of T.C. Products;
(e) Clerc shall have resigned as a director of T-Chem;
-32-
<PAGE> 37
(f) Purchaser shall have obtained financing necessary to
consummate the transactions contemplated by this Agreement in an
amount and upon terms and conditions acceptable to Purchaser in the
exercise of its discretion;
(g) there shall have not occurred after the date of the
Annual Financial Statements, any event or condition which has caused,
or which could reasonably be expected by Purchaser, in the exercise of
its sole discretion, to cause in the future, a Material Adverse Effect
with respect to the Company or T.C. Products;
(h) Purchaser shall have received consolidated financial
statements for the Company and T.C. Products consisting of (i)
balance sheets for the fiscal years ended September 30, 1994 and 1995,
and for the interim period from October 1, 1995 to July 1, 1996, (ii)
income statements for the fiscal years ended September 30, 1993, 1994
and 1995 and for the interim periods of October 1, 1994 to July 1,
1995 and October 1, 1995 to July 1, 1996, (each full year financial
statement audited and certified by Deloitte & Touche LLP) and (iii)
pro forma income statements and balance sheets for the fiscal year
ending September 30, 1995 and for the interim period from October 1,
1995 to July 1, 1996;
(i) the Effective Time Financial Statements shall not
reflect any Material Adverse Effect in the financial condition or
results of operations of the Company and T.C. Products from that
reflected in the Unaudited Financial Statements; and
(j) Purchaser shall have received each of the following,
dated as of the Closing Date or, with respect to certificates of
Governmental Authorities, dated within ten Business Days prior to the
Closing Date:
(i) the Certificate of Incorporation of the
Company certified by the Secretary of State
of the State of New Mexico, the Bylaws of the
Company certified by its Secretary or an
Assistant Secretary, a certificate of the
Secretary of State of the State of New Mexico
as to the existence and good standing of the
Company and certificates of the appropriate
Governmental Authorities of each state in
which the Company is qualified or authorized
to transact business as to the good standing
and qualification or authorization of the
Company;
(ii) the Certificate of Incorporation of T.C.
Products certified by the Secretary of State
of the State of Washington, the Bylaws of
T.C. Products certified by its Secretary or
an Assistant Secretary, a certificate of the
Secretary of State of the State of Washington
as to the existence and good standing of T.C.
Products and certificates of the appropriate
Governmental Authorities of each state in
which T.C. Products is qualified or
authorized to transact business as to the
good standing and qualification or
authorization of T.C. Products;
-33-
<PAGE> 38
(iii) resolutions of the Board of Directors of the
Company and T.C. Products, certified by their
respective Secretaries or Assistant
Secretaries, which authorize the execution,
delivery and performance of any Closing
Documents to which either of them is or is to
be a party;
(iv) a certificate of incumbency certified by the
Secretary or an Assistant Secretary of the
Company and T.C. Products certifying the
names of the officers of the Company and T.C.
Products authorized to execute any Closing
Documents to which either of them is or is to
be a party (including the certificates
contemplated herein), together with specimen
signatures of such officers;
(v) a certificate executed by each of Clerc and
Belveal, individually and in their capacities
as officers of the Company, certifying as to
fulfillment of the conditions specified in
Section 6.03(a) and Section 6.03(b);
(vi) an opinion of McGavick Graves, P.S. counsel
to Sellers and the Company, in form and
substance reasonably satisfactory to
Purchaser, covering such matters as are
customarily covered in opinions delivered in
transactions of the type contemplated by this
Agreement and the Closing Documents;
(vii) the original minute books and stock record
and transfer books of the Company, reflecting
as of the Closing Date the name and address
of, and the number of shares of capital stock
owned of record by, each shareholder of the
Company, and all unissued stock certificates
in the possession of Sellers or the Company;
(viii) the original minute books and stock record
and transfer books of T.C. Products,
reflecting as of the Closing Date the name
and address of, and the number of shares of
capital stock owned of record by, each
shareholder of T.C. Products, and all
unissued stock certificates in the possession
of Sellers or T.C. Products;
(ix) the original Books and Records of T.C.
Products and all Books and Records of the
Company other than those referenced in the
Western States Letter;
(x) resignations, effective as of the Closing
Date, of each of the officers and directors
of the Company and of T.C. Products; and
-34-
<PAGE> 39
(xi) waivers and/or consents in form reasonably
satisfactory to Purchaser from Sellers'
spouses, if required under community property
laws.
ARTICLE VII
TERMINATION
Section 7.01. Termination. This Agreement may be terminated
at any time prior to the Closing Date:
(a) by the mutual written consent of Sellers and
Purchaser;
(b) by Sellers, on the one hand, or Purchaser, on the
other hand, if (i) the non-terminating party or any of its Affiliates
fails to satisfy any term, covenant, agreement or condition required
to be satisfied by it on or before the Closing Date or (ii) there has
been a breach of any representation, warranty, term, covenant or
agreement made to or for the benefit of the terminating party or any
of its Affiliates in this Agreement, which breach has not been cured
as of the Closing Date;
(c) by either Sellers or Purchaser if the Closing has not
occurred on or prior to July 22, 1996; provided, however, that the
right to terminate this Agreement shall not be available to any party
whose failure, or the failure of any of its Affiliates, to fulfill an
obligation under this Agreement has been the cause of or resulted in
the failure of the Closing Date to occur on or before such date; or
(d) by either Sellers or Purchaser upon the issuance of
an injunction, stay or restraining order issued by any court of
competent jurisdiction enjoining or preventing consummation of the
purchase and sale of the Stock or the other transactions contemplated
by this Agreement or any of the Closing Documents beyond July 22,
1996, which injunction, stay or order has not been reversed, vacated
or expired so as to permit the Closing Date to occur on or before July
22, 1996.
Section 7.02. Effect of Termination. In order to elect to
terminate this Agreement pursuant to Section 7.01, written notice of such
election must be given by the terminating party to the other party and, upon
receipt of such notice by the non-terminating party, this Agreement shall
terminate and have no further effect, and the transactions contemplated hereby
shall be abandoned without any further action by either of the parties, except
that the provisions of Sections 3.27, 5.01(c), 5.06 (last sentence only), 7.02,
9.04, 9.13, 9.14 and 9.15 shall survive the termination of this Agreement;
provided, however, that if this Agreement is terminated by a party under
circumstances in which another party or any of its Affiliates has willfully or
in bad faith failed or refused to satisfy a covenant or condition to the
obligations of either party to consummate the transactions contemplated by this
Agreement (the "Defaulting Party"), the Defaulting Party shall be and remain
-35-
<PAGE> 40
liable for all Claims, Liabilities and Losses imposed on, incurred by or
asserted against the non-defaulting party, directly or indirectly, arising out
of or resulting from such failure.
ARTICLE VIII
INDEMNIFICATION
Section 8.01. Indemnification of Sellers. Subject to the
terms and conditions of this Article VIII, Purchaser agrees to indemnify,
defend and hold harmless Sellers, and their respective heirs, executors,
personal representatives, administrators, successors and assigns (the "Sellers
Indemnified Persons"), from and against any and all Claims, Liabilities and
Losses which may be imposed on, incurred by or asserted against any Seller
Indemnified Person, arising out of or resulting from, directly or indirectly:
(a) the inaccuracy of any representation or breach of any
warranty of Purchaser contained in or made pursuant to this Agreement
or any of the Closing Documents which was not disclosed to Sellers in
writing prior to the Closing; provided that no such notification shall
be deemed to waive or abrogate any right of Sellers with respect to
conditions to Closing in Section 6.02;
(b) the breach of any covenant or agreement of Purchaser
contained in this Agreement or in any of the Closing Documents; or
(c) the conduct of the business of the Company after the
Closing Date, or any act or failure to act of the Company or T.C.
Products prior to the Closing Date that is either (i) reflected in the
Unaudited Financial Statements or (ii) a Liability under any
contractual obligation identified in this Agreement or any of the
Schedules, the performance or payment of which was not due or owing
prior to the Closing Date;
(d) the presence, Release or threatened Release of any
Hazardous Material located on, within or affecting any of the Assets
and Properties of the Company or T.C. Products, or migrating to
adjacent properties, which Hazardous Material (i) was located on,
about or within such Assets and Properties prior to or as of the
Closing Date in compliance with all Environmental Laws or (ii) was not
located on, about or within such Assets and Properties prior to or as
of the Closing Date;
(e) any compliance, investigative, enforcement, cleanup,
removal, containment, remedial, response, cost recovery, contribution,
brownfields cleanup or other private or governmental or regulatory
action at any time threatened, instituted or completed, which is in
any way connected with (i) any Hazardous Material which was (i)
located on, about or within such Assets and Properties prior to or as
of the Closing Date in compliance with all Environmental Laws or (ii)
not located on, about or within the Assets and Properties of the
Company or T.C. Products prior to or as of the Closing Date or (ii)
the activities of, or
-36-
<PAGE> 41
ownership or operation of the Assets and Properties of the Company or
T.C. Products by the Company or T.C. Products after the Closing Date
(A) in violation of any Environmental Law, (B) that results in any
Administrative Proceeding or (C) that if reported to a Governmental
Authority would likely result in any Administrative Proceeding; or
(f) any Claim to fees or costs for alleged services by a
broker, agent, finder or other Person claiming to act in a similar
capacity at the request of Purchaser in connection with this Agreement
or any of the Closing Documents;
provided, however, that Purchaser shall not be liable for any portion of any
Claims, Liabilities or Losses resulting from a material breach by any Seller of
any of his or its obligations under this Agreement or any of the Closing
Documents or from a Seller Indemnified Person's gross negligence, fraud or
willful misconduct.
Section 8.02. Indemnification of Purchaser. Subject to the
terms and conditions of this Article VIII, from and after the Closing Date,
Sellers, jointly and severally, agree to indemnify, defend and hold harmless
Purchaser, the Company, their respective Affiliates, their respective present
and former directors, officers, shareholders, employees and agents and their
respective heirs, executors, personal representatives, administrators,
successors and assigns (the "Purchaser Indemnified Persons"), from and against
any and all Claims, Liabilities and Losses which may be imposed on, incurred by
or asserted against any Purchaser Indemnified Person, arising out of or
resulting from, directly or indirectly:
(a) the inaccuracy of any representation or breach of any
warranty of Sellers contained in or made pursuant to this Agreement or
any of the Closing Documents which was not disclosed to Purchaser in
writing prior to the Closing; provided that no such notification shall
be deemed to waive or abrogate any right of Purchaser with respect to
conditions to Closing in Section 6.03;
(b) the breach of any covenant or agreement of Sellers
contained in this Agreement or any of the Closing Documents;
(c) the conduct of the business of the Company or T.C.
Products prior to the Closing Date, or any act or failure to act of
the Company or T.C. Products prior to the Closing Date, that is
neither (i) reflected in the Unaudited Financial Statements nor (ii) a
Liability under a contractual obligation identified in this Agreement
or any of the Schedules, or otherwise disclosed by Sellers to
Purchaser in writing contemporaneous with execution of this Agreement
(including a specific reference in such written disclosure to this
Agreement), the performance or payment of which was not due or owing
prior to the Closing Date;
(d) the presence, Release or threatened Release of any
Hazardous Material located on, within or affecting any of the Assets
and Properties of Sellers, the Company or
-37-
<PAGE> 42
any of its Affiliates, or migrating to adjacent properties, which
Hazardous Material was located on, about or within such Assets and
Properties prior to or as of the Closing Date in violation of any
Environmental Law or which is a basis for an Administrative Proceeding
to the extent that such Administrative Proceeding relates to any
period prior to the Closing Date (or that if reported to a
Governmental Authority would likely result in and serve as a basis for
such Administrative Proceeding);
(e) any compliance, investigative, enforcement, cleanup,
removal, containment, remedial, response, cost recovery, contribution,
brownfields cleanup or other private or governmental or regulatory
action at any time threatened, instituted or completed, which is in
any way connected with (i) any Hazardous Material which was located
on, about or within the Assets and Properties of the Company or any of
its Affiliates prior to or as of the Closing Date in violation of any
Environmental Law or which is a basis for an Administrative Proceeding
to the extent that such Administrative Proceeding relates to any
period prior to the Closing Date (or that if reported to a
Governmental Authority would likely result in and serve as a basis for
such Administrative Proceeding); or (ii) the activities of or
ownership or operation of the Assets and Properties of the Company or
any of its Affiliates by Sellers, the Company or any of its Affiliates
prior to or as of the Closing Date (A) in violation of any
Environmental Law, (B) that results in any Administrative Proceeding
or (C) that if reported to a Governmental Authority would likely
result in any Administrative Proceeding; or
(f) any Claim to fees or costs for alleged services
rendered by a broker, agent, finder or other Person claiming to act in
a similar capacity at the request of Sellers, the Company or T.C.
Products in connection with this Agreement or any of the Closing
Documents;
provided, however, that Sellers shall not be liable for any portion of any
Claims, Liabilities or Losses resulting from a material breach by Purchaser of
its obligations under this Agreement or any of the Closing Documents or from a
Purchaser Indemnified Person's gross negligence, fraud or willful misconduct.
Section 8.03. Limitations on Indemnification. The
obligations of Purchaser and Sellers to indemnify any Person pursuant to this
Article VIII shall be subject to the following limitations:
(a) except as provided in Sections 8.03(b) and 8.03(c),
neither the Seller Indemnified Persons nor the Purchaser Indemnified
Persons shall be entitled to receive any indemnification payments
until the cumulative amount of all Claims, Liabilities and Losses for
which indemnification is sought pursuant to this Article VIII shall
exceed an amount equal to $75,000. Once this threshold has been
reached with respect to the Purchaser Indemnified Persons in the
aggregate or the Seller Indemnified Persons in the aggregate, the
Persons in such group shall be entitled to full payment for all
Claims, Liabilities and Losses for which indemnification is provided
pursuant to this Article VIII in excess of such
-38-
<PAGE> 43
threshold; provided that notice of such Claim shall have been given by
such Seller Indemnified Person or Purchaser Indemnified Person, as the
case may be, to Purchaser or Sellers within the two-year period after
the Effective Time (or such longer period of time for notice of Claims
as is provided in Section 8.06 hereof);
(b) with respect solely to claims for indemnification
pursuant to Section 8.02(d) or 8.02(e) or a breach of the
representations and warranties in Section 3.25, the Purchaser
Indemnified Persons shall not be entitled to receive any
indemnification payments until the cumulative amount of all Claims,
Liabilities and Losses for which indemnification is sought pursuant to
such Sections exceed, an amount equal to $75,000 with respect to the
Purchaser Indemnified Persons. Once this threshold has been reached
with respect to the Purchaser Indemnified Persons in the aggregate,
the Persons in such group shall be entitled to full payment for all
such Claims, Liabilities and Losses in excess of such threshold;
provided however, the aggregate liability of Sellers for such Claims,
Liabilities and Losses shall not exceed $1,000,000; provided further
that notice of such Claim shall have been given by the Purchaser
Indemnified Person to Sellers within the two-year period after the
Effective Time as provided in Section 8.06(a) hereof; and
(c) (i) the thresholds for recovery in Sections 8.03(a)
and 8.03(b) are separate and relate solely to the claims covered by
each such Section and shall not be combined, and (ii) notwithstanding
Sections 8.03(a) and 8.03(b), there shall be no threshold or other
limitations on claims for indemnification (i) pursuant to Sections
5.07 and 5.11 or (ii) for a breach of the representations, warranties
and covenants in Sections 3.27 and 5.06.
Section 8.04. Indemnification Procedures. The obligations
and Liabilities of any party to indemnify any other party pursuant to this
Article VIII shall be subject to the following terms and conditions:
(a) Notice and Defense. Within a reasonable period of
time after a party or parties to be indemnified (whether one or more,
the "Indemnified Party") receives actual notice of any Claim covered
by Section 8.01 or 8.02, as the case may be, the Indemnified Party
shall, if a Claim in respect thereof is to be made pursuant to Section
8.01 or 8.02, as the case may be, notify the party from whom
indemnification is sought (the "Indemnifying Party") in writing of
such Claim; provided however, that the failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party from any
Liability which it may have to the Indemnified Party pursuant to
Section 8.01 or 8.02, as the case may be, except to the extent of
material detriment suffered by the Indemnifying Party as a result of
such failure. In the event that a Claim, Liability or Loss arises out
of or results from matters with respect to third parties, the
Indemnifying Party will undertake the defense thereof by
representatives chosen by it which are reasonably acceptable to the
Indemnified Party. So long as the Indemnifying Party is defending any
such Claim actively and in good faith, the Indemnified Party shall not
settle such Claim. Each of the Indemnifying Party and the Indemnified
Party shall be entitled to consult with each other, to the extent it
reasonably
-39-
<PAGE> 44
requests, in respect of the defense of such Claim and shall cooperate
in the defense of any such Claim, including making its officers,
directors, employees and Books and Records available for use in such
Claim, and shall take those actions reasonably within its power which
are reasonably necessary to preserve any legal defenses to such
matters.
(b) Failure to Defend. If the Indemnifying Party, within
a reasonable time after notice of any such Claim, fails to defend such
Claim actively and in good faith, the Indemnified Party will (upon
further notice) have the right to undertake the defense, compromise or
settlement of such Claim or consent to the entry of a judgment with
respect to such Claim, on behalf of and for the account and risk of
the Indemnifying Party, and the Indemnifying Party shall thereafter
have no right to challenge the Indemnified Party's defense,
compromise, settlement or consent to judgment.
(c) Indemnified Party's Rights. Notwithstanding anything
contained in this Article VIII to the contrary: (i) if there is a
reasonable probability that a Claim may materially and adversely
affect the Indemnified Party other than as a result of money damages
or other money payments, the Indemnified Party shall have the right to
defend, compromise or settle such Claim; and (ii) no consent order
shall be entered into or Claim settled unless the Indemnified Party
has given its prior written consent thereto, which consent shall not
be unreasonably withheld or delayed; provided, however, that the
Indemnified Party shall consent to any settlement, compromise or
discharge of such Claim that the Indemnifying Party may recommend that
by its terms fully releases the Indemnified Party from any further
Claims with respect to the matters giving rise to such Claim.
Section 8.05. Payment. The Indemnifying Party shall promptly
pay the Indemnified Party any amount due under this Article VIII and reimburse
each Indemnified Party for all reasonable expenses (including reasonable
counsel fees) for which the Indemnified Party is entitled to be indemnified
hereunder as they are incurred by such Indemnified Party. Upon judgment,
determination, settlement or compromise of any third party Claim, the
Indemnifying Party shall promptly pay on behalf of the Indemnified Party,
and/or to the Indemnified Party in reimbursement of any amount theretofore
required to be paid by it, the amount so determined by such judgment,
determination, settlement or compromise and all other Claims of the Indemnified
Party with respect thereto, unless in the case of a judgment or determination
an appeal is made from such judgment or determination; provided, however, that
if the Indemnifying Party desires to appeal from an adverse judgment or
determination, then the Indemnifying Party shall post and pay the cost of the
security or bond to stay execution of the judgment or determination pending
appeal. Upon the payment in full by the Indemnifying Party of all of such
amounts, the Indemnifying Party shall succeed to the rights of the Indemnified
Party, to the extent such rights are not waived in settlement, against the
third party who made such third party Claim.
Section 8.06. Other Indemnities; Survival of Representations,
Warranties and Covenants. The indemnities provided in Sections 8.01 and 8.02
are in addition to, and not in lieu of, other indemnification obligations of
the parties contained in this Agreement. Except as otherwise
-40-
<PAGE> 45
provided herein, all representations, warranties, covenants and agreements made
by Sellers, the Company and Purchaser in this Agreement, the Closing Documents
or in any certificate or other instrument delivered by Sellers, the Company or
Purchaser under this Agreement or any of the Closing Documents shall survive
the execution and delivery of this Agreement and the Closing Documents,
regardless of any investigation made by or on behalf of any party; provided,
however, that:
(a) the representations and warranties of Sellers, other
than those contained in Sections 3.01 (first and fourth sentences
only), 3.02, 3.03 and 3.04 (which shall survive indefinitely), and
Section 3.21 (which shall survive as provided in subsection (b) of
this Section 8.06), and the indemnification obligations of Sellers set
forth in Section 8.02(d) and (e), shall terminate and have no further
force or effect after the expiration of the two year period commencing
on the Effective Time;
(b) the representations and warranties of Sellers
contained in Section 3.21 shall terminate and have no further force or
effect upon the expiration of the statute of limitations period
applicable thereto; and
(c) the representations and warranties of Purchaser,
other than those contained in Sections 4.01 (first sentence only) and
4.02 and 4.10 (which shall survive indefinitely), shall terminate and
have no further force or effect after the expiration of the two year
period commencing on the Effective Time, and the indemnificiation
obligations of Purchasers set forth in Section 8.01(d) and (e) shall
survive indefinitely;
in each case unless notice of a Claim relating thereto shall be delivered by a
Purchaser Indemnified Person to Sellers, or a Seller Indemnified Person to
Purchaser, as the case may be, prior to the expiration of the specified period
(other than those whose period of survival is indefinite and as to which Notice
of Claims can be given at any time), in which case such representation,
warranty or indemnity shall survive following such period solely with respect
to such Claim until such Claim is resolved. The right to indemnification
provided in this Article VIII shall be the exclusive remedy of any Purchaser
Indemnified Person or Seller Indemnified Person with respect to the inaccuracy
of any representation or the breach of any warranty made by Sellers or
Purchaser in this Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Notices. Any and all notices, requests or
other communications hereunder shall be given in writing and delivered by: (a)
regular, overnight or registered or certified mail (return receipt requested),
with first class postage prepaid; (b) hand delivery; (c) facsimile
transmission; or (d) overnight courier service, to the parties at the following
addresses or facsimile numbers:
-41-
<PAGE> 46
(i) if to Sellers, to:
Richard L. Belveal and Albert J. Clerc
4227 Burnham Drive N.W.
Gig Harbor, Washington 98332
Facsimile Number: (206) 851-6876
Telephone Number: (206) 851-5956
With a copy to:
Roy F. Kussmann, Esq.
McGavick Graves, P.S.
P. O. Box 1317
Tacoma, Washington 98401-1317
Facsimile Number: (206) 627-2247
Telephone Number: (206) 627-1181
(ii) if to Purchaser, to:
Pioneer Companies, Inc.
c/o Pioneer Americas, Inc.
700 Louisiana, Suite 4200
Houston, Texas 77002
Attention: Kent R. Stephenson, Esq.
Facsimile Number: (713) 223-9202
Telephone Number: (713) 225-3831
With a copy to:
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
600 Travis
Houston, Texas 77002
Attention: John T. Cabaniss, Esq.
Facsimile Number: (713) 220-4285
Telephone Number: (713) 220-4454
or at such other address or number as shall be designated by either of the
parties in a notice to the other party given in accordance with this Section
9.01. Except as otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given: (A) in the case of a notice sent by
regular or registered or certified mail, three Business Days after it is duly
deposited in the mails; (B) in the case of a notice delivered by hand, when
personally delivered; (C) in the case
-42-
<PAGE> 47
of a notice sent by facsimile, upon transmission subject to telephone
confirmation of receipt; and (D) in the case of a notice sent by overnight mail
or overnight courier service, the next Business Day after such notice is mailed
or delivered to such courier, in each case given or addressed as aforesaid.
Section 9.02. Setoff. Purchaser shall have the right to set
off and apply against any amounts owing to Purchaser by Sellers pursuant to the
terms of this Agreement or any of the Closing Documents any amounts owing
pursuant to the Subordinated Notes, subject to the following conditions:
(a) no set-off against the Subordinated Notes shall be
made in effecting payment under any item of this indemnity until the
amount of any asserted Claim, Loss or Liability and the costs of
defending the same are finally determined by agreement between
Purchaser and Sellers or by final decision of a court or arbitrators
as provided herein;
(b) any amount set-off against the Subordinated Notes
shall be applied to and reduce the payments next becoming due to the
Trusts thereunder, with such next accruing installment payments being
applied first to any amount Purchaser is entitled to set off
hereunder;
(c) following the giving of any notice of Claim, and if,
but only if, (i) Sellers fail to acknowledge in writing to Purchaser
and accept responsibility to indemnify and defend Purchaser with
respect to such Claim as herein provided, and (ii) the maximum amount
of Sellers liability under this Article VIII, as determined by the
Board of Directors of Purchaser acting in good faith ("Maximum
Amount"), is equal to or exceeds the remaining principal balance of
the Subordinated Notes determined as of the date such notice of Claim
is given ("Balance Due"), any installment payments of interest or
principal which may thereafter come due pursuant to the Subordinated
Notes may be paid into an escrow account, with a bank or other
financial institution and pursuant to escrow instructions mutually
agreed by the Trusts and Purchaser acting reasonably and in good
faith, with funds so deposited to be held in escrow pending final
determination of the full extent of Sellers liability hereunder, and
Purchaser shall not be deemed in default with respect to any such
payments or part thereof so deposited in escrow; provided, however,
that Purchaser shall be entitled to deposit in escrow, equally from
each Subordinated Note, only that portion of the payment due which
does not exceed the Maximum Amount; provided further that once a
Claim, Loss or other Liability is finally determined not to be payable
by Sellers (in whole or part), any funds deposited in escrow to which
the Trusts are entitled shall be paid over to the Trusts in accordance
with their respective interests in the Stock;
(d) the election of set-off shall not occur or be deemed
to have occurred until and unless the set- off is actually consummated
to effect payment of the Claim, Loss or Liability; and
-43-
<PAGE> 48
(e) Purchaser shall have and retain such rights as it may
have against Sellers for any Loss, Liability or Claim not fully
compensated for by exercise of the right of set-off.
For all purposes of this Agreement, the exercise by Purchaser of its right of
setoff as provided in this Section 9.02 shall not constitute a breach by
Purchaser of any of its covenants or agreements contained in this Agreement,
provided, however, the set-off provisions of this Section 9.02 shall constitute
all of Purchaser's rights of set-off as to any amount payable under the
Subordinated Notes and all other rights of set-off against the Subordinated
Notes, whether legal or equitable, are hereby expressly waived and relinquished
by Purchaser. The contractual set-off rights in this Section 9.02 are in
addition to, and not in lieu of any and all other rights of set-off, whether
legal or equitable, which either Purchaser or any Seller may have, all of which
set-off rights are expressly reserved.
Section 9.03. Benefit and Burden. This Agreement shall inure
to the benefit of, and shall be binding upon, the parties hereto and their
successors and permitted assigns.
Section 9.04. No Third Party Rights. Nothing in this
Agreement shall be deemed to create any right in any creditor or other Person
not a party hereto (other than the Seller Indemnified Persons and the Purchaser
Indemnified Persons) and this Agreement shall not be construed in any respect
to be a Contract in whole or in part for the benefit of any third party (other
than the Seller Indemnified Persons and the Purchaser Indemnified Persons).
Section 9.05. Amendments and Waiver. No amendment,
modification, restatement or supplement of this Agreement shall be valid unless
the same is in writing and signed by the parties hereto. No waiver of any
provision of this Agreement shall be valid unless in writing and signed by the
party against whom that waiver is sought to be enforced. No failure or delay
on the part of any party hereto in exercising any right, power or privilege
hereunder and no course of dealing between or among any of the parties hereto
shall operate as a waiver of any right, power or privilege hereunder. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder. No notice to or demand on any party in
any case shall entitle such party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of any
party to any other or further action in any circumstances without notice or
demand.
Section 9.06. Assignments. Except for Purchaser's right to
assign any of its rights, interests and obligations under this Agreement to an
Affiliate of Purchaser; and except for the right of a Trust to assign any of
its rights and interests under this Agreement in connection with a permitted
assignment of its interest in the Subordinated Notes, neither this Agreement
nor any right, interest or obligation hereunder may be assigned by any party
hereto and any attempt to do so shall be null and void; provided that no such
assignment by a Trust shall relieve such Trust of its obligations as a Seller
under this Agreement.
-44-
<PAGE> 49
Section 9.07. Counterparts. This Agreement may be executed
in counterparts and by the different parties in separate counterparts, each of
which when so executed shall be deemed an original and all of which taken
together shall constitute one and the same agreement.
Section 9.08. Captions and Headings. The captions and
headings contained in this Agreement are inserted and included solely for
convenience and shall not be considered or given any effect in construing the
provisions hereof if any question of intent should arise.
Section 9.09. Construction. The parties acknowledge that
each of them has had the benefit of legal counsel of its own choice and has
been afforded an opportunity to review this Agreement with its legal counsel
and that this Agreement shall be construed as if jointly drafted by the parties
hereto.
Section 9.10. Severability. Should any clause, sentence,
paragraph, subsection, Section or Article of this Agreement be judicially
declared to be invalid, unenforceable or void, such decision will not have the
effect of invalidating or voiding the remainder of this Agreement, and the
parties agree that the part or parts of this Agreement so held to be invalid,
unenforceable or void will be deemed to have been stricken herefrom by the
parties, and the remainder will have the same force and effectiveness as if
such stricken part or parts had never been included herein.
Section 9.11. Remedies. The parties agree that the covenants
and obligations contained in this Agreement and the Closing Documents relate to
special, unique and extraordinary matters and that a violation of any of the
terms hereof or thereof would cause irreparable injury in an amount which would
be impossible to estimate or determine and for which any remedy at law would be
inadequate. As such, the parties agree that if either party fails or refuses
to fulfill any of its obligations under this Agreement or any of the Closing
Documents or to make any payment or deliver any instrument required hereunder
or thereunder, then the other party shall have the remedy of specific
performance, which remedy shall be cumulative and nonexclusive and shall be in
addition to any other rights and remedies otherwise available under any other
Contract or at law or in equity and to which such party might be entitled.
Section 9.12. Applicable Law. THIS AGREEMENT AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF WASHINGTON, WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAW PRINCIPLES THEREOF.
Section 9.13. Submission to Jurisdiction. Each of the
parties hereby: (a) irrevocably submits to the non-exclusive personal
jurisdiction of any Washington state or federal court sitting in Seattle,
Washington, over any Claim arising out of or relating to this Agreement or any
of the Closing Documents and irrevocably agrees that all such Claims may be
heard and determined in such Washington state or federal court; and (b)
irrevocably waives, to the fullest extent permitted by applicable Law, any
objection it may now or hereafter have to the laying of venue in any proceeding
-45-
<PAGE> 50
brought in a Washington state or federal court sitting in Seattle, Washington,
and any claim that any such proceeding brought in a Washington state or federal
court sitting in Seattle, Washington, has been brought in an inconvenient
forum; provided, however, that nothing in this Section 9.13 is intended to
waive the right of either of the parties to remove any such action or
proceeding commenced in any such Washington state court to an appropriate
Washington federal court to the extent the basis for such removal exists under
applicable Law. Each of the parties hereby irrevocably agrees that service of
copies of the summons and complaint and any other process which may be served
in any such action or proceeding may be made by mailing, by certified mail, a
copy of such process to such party at its address for notices specified herein.
As an alternative method of service, each of the parties also irrevocably
consents to the service of any and all process in any such action or proceeding
by the mailing by certified mail of copies of such process to it at its address
for notices specified herein. Each of the parties agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
Law. Nothing in this Section 9.13 shall affect the right of either of the
parties to serve legal process in any other manner permitted by Law or affect
the right of either of the parties to bring any action or proceeding in the
courts of any other jurisdictions, domestic or foreign.
Section 9.14. Arbitration. Upon the demand of either party,
whether made before or after the institution of any judicial proceeding, any
Dispute shall be resolved by binding arbitration in accordance with the terms
of the arbitration provisions contained on Annex "B" attached hereto and
incorporated herein for all purposes. Either party to this Agreement may, by
summary proceedings (e.g., a plea in abatement or motion to stay further
proceedings), bring any action in court to compel arbitration of any Dispute.
Either party who fails or refuses to submit to binding arbitration following a
lawful demand by the other party shall bear all costs and expenses incurred by
such other party in compelling arbitration of any Dispute.
Section 9.15. Expenses; Prevailing Party Costs. Each of
Sellers and Purchaser shall pay its own expenses incident to this Agreement and
the Closing Documents and the transactions contemplated hereby and thereby,
including all legal and accounting fees and disbursements, and Sellers shall be
solely liable for any and all expenses of the Company which are incident to
this Agreement and the Closing Documents and the transactions contemplated
hereby and thereby (other than customary general, administrative and overhead
expenses incurred in the ordinary course of business). Notwithstanding
anything contained herein or therein to the contrary, if any party commences an
action against another party to enforce any of the terms, covenants, conditions
or provisions of this Agreement or any of the Closing Documents, or because of
a breach by a party of its obligations under this Agreement or any of the
Closing Documents, the prevailing party in any such action shall be entitled to
recover its Losses, including reasonable attorneys' fees, incurred in
connection with the prosecution or defense of such action, from the losing
party.
Section 9.16. Entire Agreement. This Agreement, the
Western States Letter and the Closing Documents set forth all of the promises,
agreements, conditions, understandings, warranties and representations among
the parties with respect to the transactions contemplated hereby and
-46-
<PAGE> 51
thereby, and supersede all prior agreements, arrangements and understandings
between the parties, whether written, oral or otherwise. There are no
promises, agreements, conditions, understandings, warranties or
representations, oral or written, express or implied, among the parties
concerning the subject matter hereof or thereof except as set forth herein and
therein.
-47-
<PAGE> 52
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first above written.
"SELLERS"
---------------------------------------
Richard L. Belveal
---------------------------------------
Albert J. Clerc
Living Trust of Richard Belveal
dated February 14, 1995
By:
-----------------------------------
Richard L. Belveal, Trustee
Clerc Family Trust No. 1988-1 dated
July 25, 1988
By:
-----------------------------------
Albert J. Clerc, Trustee
By:
-----------------------------------
Patricia A. Clerc, Trustee
"PURCHASER"
PIONEER COMPANIES, INC.
By:
-----------------------------------
Kent R. Stephenson
Vice President, General Counsel and
Secretary
-48-
<PAGE> 53
ANNEX "A"
DEFINITIONS
"Administrative Proceeding" means any action taken by a
Governmental Authority pursuant to or under any Law, including any
Environmental Law, including any clean up, removal or remediation
activity, notice of violation, notice of deficiency, notice of
potential liability, inspection, investigation, site characterization
or any notice or directive given by such Governmental Authority in
connection with clean up, removal or remediation activity.
"Affiliate" means, with respect to any Person, any other
Person: (i) that directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control
with such Person; and (ii) in the case of a natural person, that is
the parent, spouse, child or sibling (herein, collectively "Related
Persons") of such Person. The term "control" (including, with
correlative meaning, the terms "controlling", "controlled by" and
"under common control with") means the possession, directly or
indirectly, of the power to direct or cause direction of the
management and policies of a Person, whether through the ownership of
voting securities, by Contract or otherwise.
"Agreement" means the Stock Purchase Agreement to which this
Annex A is attached, as the same may be amended, modified or
supplemented from time to time.
"Annual Financial Statements" has the meaning specified in
Section 3.07 of the Agreement.
"Assets and Properties" means all assets and properties of
every kind, nature, character and description, whether real, personal
or mixed, tangible or intangible, wherever situated, including any
goodwill related thereto, and, with respect to any Person, means all
such assets and properties operated, owned or leased by such Person.
"Balance Due" has the meaning set forth in Section 9.02(c).
"Belveal Trust" has the meaning set forth in the premises to
this Agreement.
"Books and Records" means, with respect to any Person, all
files, documents, instruments, papers, books and records relating to
the business, operations, condition (financial and otherwise), results
of operations and Assets and Properties of such Person, including
financial statements, Tax returns and related guidelines, ledgers,
journals, deeds, title policies, surveys, minute books, stock
certificates and books, stock transfer ledgers, Contracts,
Governmental Approvals, customer lists, vendor lists, representative
listings, sales literature, computer files and programs, retrieval
programs, operating data and plans and environmental studies and
plans.
A-i
<PAGE> 54
"Business Day" means any day on which commercial banks are not
authorized or required to close in Seattle, Washington.
"Cash" means (i) cash and cash equivalents, (ii) securities
which (A) are listed on the New York Stock exchange or the American
Stock Exchange, (B) are reported on the Nasdaq Stock Exchange
("NASDAQ"), (C) are part of an issue which is listed on the New York
Stock Exchange or the American Stock Exchange or reported on NASDAQ or
(D) are regularly quoted by brokers or dealers making a market in such
securities, (iii) readily marketable securities or obligations issued
or guaranteed by the United States or any state, province, territory
or other political subdivision thereof, (iv) securities issued or
guaranteed by any national or state bank, savings and loan
association, credit union or other financial institution and (v) any
other item that would be reflected as cash or cash equivalents on a
balance sheet prepared in accordance with generally accepted
accounting principles, but reduced by credit balances in any cash
accounts.
"CERCLA" has the meaning specified in the definition of
"Environmental Laws."
"Claim" means any claim, demand, investigation, cause of
action, suit, default, assessment, litigation or other proceeding,
including arbitral proceedings and proceedings by or before any
Governmental Authority.
"Clerc Trust" has the meaning set forth in the premises to
this Agreement.
"Closing Date" means July 22, 1996 or such other date as shall
be mutually agreed by the parties.
"Closing Documents" means the Subordinated Notes, the
Guaranty, the Noncompetition Agreement, the Noncompetition and
Employment Agreement, the Western States Letter and all other
agreements, instruments and documents executed by or on behalf of
Sellers, the Company or Purchaser or any of their respective
Affiliates in connection with or relating to the Agreement, together
with all agreements, instruments and documents referred to therein or
contemplated thereby.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" has the meaning specified in Section 3.02 of the
Agreement.
"Company" means T.C. Holdings, Inc., a New Mexico corporation,
formerly named Western States Chemical Supply Corp.
"Confidentiality Agreement" shall have the meaning set forth
in Section 5.01(a).
A-ii
<PAGE> 55
"Contract" means any agreement, lease, license, evidence of
Debt, mortgage, deed of trust, note, bond, indenture, security
agreement, commitment, instrument, understanding or other contract,
obligation or arrangement of any kind.
"Debt" means, for any Person, all indebtedness, liabilities
and obligations of such Person: (i) for the repayment of money
borrowed (whether or not represented by bonds, debentures, notes,
securities or other evidences of indebtedness); (ii) representing
deferred payment of the purchase price for goods, services or Assets
and Properties; (iii) under any lease which, in conformity with GAAP,
is required to be capitalized for balance sheet purposes; (iv) under
guaranties, endorsements (other than for collection or deposit in the
ordinary course of business) or assumptions of, or other contingent
obligations in respect of, or to purchase or otherwise acquire, any
indebtedness, liabilities or other obligations of any other Person;
(v) in respect of letters of credit; (vi) secured by a Lien existing
on Assets and Properties owned by such Person, whether or not the
indebtedness, liabilities or obligations secured thereby shall have
been assumed by such Person; and/or (vii) to redeem or repurchase any
of such Person's capital stock, warrants, equity interests or
equivalents.
"Defaulting Party" has the meaning specified in Section 7.02
of the Agreement.
"Dispute" means any dispute or Claim by or between the parties
arising out of, relating to or in connection with this Agreement.
"Dollar" and the sign "$" mean lawful money of the United
States.
"Effective Time" has the meaning specified in Section 2.03.
"Employee Plans and Agreements" has the meaning specified in
Section 3.19(a) of the Agreement.
"Employees" has the meaning specified in Section 3.17 of the
Agreement.
"Environmental Claims, Liabilities and Losses" means, with
respect to any Person, any Claim, Liability (including strict
liability) or Loss arising out of (i) the presence, Release or
threatened Release of any Hazardous Material located on, about, within
or affecting any of the Assets and Properties of such Person; or (ii)
any compliance, investigative, enforcement, cleanup, removal,
containment, remedial, response, cost recovery, contribution,
brownfields cleanup or other private or governmental or regulatory
action at any time threatened, instituted or completed, which is in
any way connected with (A) any Hazardous Material or (B) the
activities of such Person or the ownership or operation of its Assets
and Properties (1) in violation of any Environmental Law, (2) that
results in any Administrative Proceeding or (3) that if reported to a
Governmental Authority would likely result in any Administrative
Proceeding.
A-iii
<PAGE> 56
"Environmental Laws" means any and all Laws and requirements
of any Governmental Authority, including any Governmental Approval,
judgment, decision, order, injunction, decree, restriction or
determination, pertaining to health, safety or the environment now or
hereafter in effect, including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section
9601 et seq., as amended by the Superfund Amendment and
Reauthorization Act of 1986 and as further amended ("CERCLA"), the
Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.,
as amended, the Solid Waste Disposal Act of 1976, 42 U.S.C. Section
6901 et seq., as amended, the Clean Air Act, 42 U.S.C. Section 7401
et seq., as amended, the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., as amended, the Hazardous Materials
Transportation Act, 49 Ap. U.S.C.A. Section 1801 et seq., as amended,
the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
Section 136 et seq., as amended, the Occupational Safety and Health
Act, 29 U.S.C. Section 651 et seq., as amended, and comparable state
and local Laws, and other environmental conservation and protection
Laws, as such Laws and requirements may be amended, supplemented or
superseded and in effect from time to time.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import,
together with the regulations thereunder, in each case as in effect
from time to time. References to sections of ERISA shall be construed
to also refer to any successor sections.
"Financial Statements" has the meaning specified in Section
3.07 of the Agreement.
"Form 10-K" shall have the meaning specified in Section 4.06.
"GAAP" means generally accepted United States accounting
principles, applied on a consistent basis, and which are applicable in
the circumstances as of the date in question. Accounting principles
are applied on a "consistent basis" when the accounting principles
observed in a current period are comparable in all material respects
to those accounting principles applied in preceding periods.
"Gig Harbor Property" means the real property heretofore owned
by the Company in Gig Harbor, Washington, and located at 4227 Burnham
Drive, N.W.
"Governmental Approval" means any authorization, consent,
approval, license, franchise, lease, ruling, tariff, rate, permit,
certificate or exemption of, or filing or registration with, any
Governmental Authority.
"Governmental Authority" means any nation or government, any
federal, state, county, province, city, town, municipality, local or
other political subdivision thereof or thereto and any court,
tribunal, department, commission, board, bureau, instrumentality,
agency, council, arbitrator or other entity exercising executive,
legislative, judicial,
A-iv
<PAGE> 57
regulatory or administrative functions of or pertaining to government
and any other governmental entity with authority over the applicable
Person or Assets and Properties.
"Guaranty" means the guaranty agreements executed by Pioneer
and PWT in favor of the Trusts referenced in Section 2.04.
"Hazardous Materials" means any hazardous or toxic substances
or contaminated material including asbestos (friable, non-friable or
any other form), polychlorinated biphenyl and any flammable materials,
explosives, radioactive materials, hazardous materials, hazardous
waste, hazardous or toxic or regulated substances or related materials
defined in or under any Environmental Laws and any other substance,
waste, pollutant, contaminant or material, including petroleum
products and derivatives, crude oil or fractions thereof or any
chemical which causes cancer or reproductive effects, which are
defined by applicable Law as hazardous or toxic or the use, transport,
disposal, storage, treatment, recycling, handling, discharge, Release
or emission of which is regulated or governed by any applicable Law.
"Indemnified Party" has the meaning specified in Section
8.04(a) of the Agreement.
"Indemnifying Party" has the meaning specified in Section
8.04(a) of the Agreement.
"Intellectual Property Rights" means all intellectual property
rights used in, held for use in or necessary for the business of the
Company or T.C. Products anywhere the Company or T.C. Products
currently conducts operations or otherwise does business, including
all technology, patents and patent rights, trademarks and trademark
rights, trade names and trade name rights, service marks and service
mark rights, service names and service name rights, brand names, trade
names, trade secrets, inventions, copyrights and copyright rights,
know-how, designs, labels, drawings, colors, information, computer
programs and licenses.
"Laws" means all laws, statutes, rules, regulations,
ordinances, orders, writs, injunctions or decrees and other
pronouncements having the effect of law of any Governmental Authority,
including Environmental Laws.
"Liability" means, with respect to any Person, any Debt,
obligation and other liability of such Person, whether absolute,
accrued, contingent, fixed or otherwise, or whether due or to become
due, including liabilities for Taxes, material forward or long-term
commitments, or unrealized or anticipated Losses from any unfavorable
Contracts or commitments.
"Lien" means any mortgage, lien, charge, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, security
interest, assessment, lease, adverse claim, levy, preference or
priority or other security agreement of any kind or nature whatsoever
(whether voluntary or involuntary, affirmative or negative, and
whether imposed or created by operation of Law or otherwise) in, on or
with respect to, or pledge of, any Assets and Properties or equity
interests, whether now owned or hereafter acquired, or any other
interest
A-v
<PAGE> 58
in Assets and Properties or equity interests designed to secure the
repayment of Debt or any other obligation, whether arising by
Contract, operation of Law or otherwise, or any Contract to give any
of the foregoing, and including any conditional sale or other title
retention agreement and any financing lease having substantially the
same effect as any of the foregoing.
"Loss" means any and all damages (including consequential,
punitive and exemplary), fines, penalties, judgments, deficiencies,
losses, costs and expenses, including court costs, reasonable fees of
attorneys, accountants and other experts and other reasonable expenses
of any Claim.
"Material Adverse Effect" means (i) with respect to any Person
a material adverse effect upon (A) the business, operations,
properties, assets, condition (financial or other), results of
operations or prospects of such Person and its subsidiaries, taken as
a whole, or (B) the ability of such Person to perform its obligations
under the Agreement or any of the Closing Documents or to consummate
the transactions contemplated thereby, or (ii) in the case of the
representations and warranties with respect to the Company and T.C.
Products set forth in Article III, any act, omission, event,
circumstance or condition which alone could reasonably be expected to
result in Losses or Liabilities of the Company or T.C. Products in
excess of $5,000 per occurrence or which, together with all other
acts, omissions, events, circumstances and conditions could reasonably
be expected to result in Losses or Liabilities of the Company or T. C.
Products in excess of $25,000 in the aggregate (this clause (ii) also
identifying matters which, as to any Person, would be considered
"material"). Any determination as to whether any act, omission,
event, circumstance or condition has a Material Adverse Effect on or
is material to any Person shall be made only after taking into account
all effective insurance coverage and effective indemnification with
respect to such act, omission, event, circumstance or condition to the
extent such insurance coverage or indemnification is not disputed.
"Maximum Amount" has the meaning set forth in Section 9.02(c).
"Noncompetition Agreement" means a noncompetition agreement,
substantially in the form attached hereto as Exhibit "C", to be
executed by Belveal, the Company and Purchaser at Closing.
"Noncompetition and Employment Agreement" means a
noncompetition and employment agreement, in substantially the form
attached hereto as Exhibit "B", to be entered into by Clerc, the
Company and Purchaser at Closing.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Permitted Encumbrances" means any and all: (i) Liens for
Taxes if the same shall at the time not be delinquent or thereafter
may be paid without penalty; (ii) Liens consisting
A-vi
<PAGE> 59
of minor easements, zoning restrictions or other restrictions on the
use of real property that do not materially affect the value of the
Assets and Properties encumbered thereby or materially impair the
ability of the Company to use such Assets and Properties in its
business; (iii) Liens of landlords, mechanics, materialmen,
warehousemen, carriers or other statutory Liens securing obligations
that are not yet due and are incurred in the ordinary course of
business; and (iv) Liens resulting from deposits to secure payments of
workmen's compensation or other social security programs or to secure
the performance of tenders, statutory obligations, surety and appeal
bonds, bids or Contracts in the ordinary course of business.
"Person" means any individual, firm, corporation, trust,
association, company, limited liability company, joint stock company,
partnership, joint venture, Governmental Authority or other entity or
enterprise.
"Pioneer" has the meaning set forth in the premises to this
Agreement.
"Pre-Closing Taxes" has the meaning specified in Section
5.07(b) of the Agreement.
"Prohibited Transaction" has the meaning specified in Section
3.19(d) of the Agreement.
"Purchase Price" has the meaning specified in Section 2.02 of
the Agreement.
"Purchaser" has the meaning specified in the introductory
paragraph of the Agreement.
"Purchaser Financial Statements" has the meaning specified in
Section 4.07.
"Purchaser Indemnified Persons" has the meaning specified in
Section 8.02 of the Agreement.
"Purchaser Representatives" has the meaning specified in
Section 5.01 of the Agreement.
"PWT" has the meaning set forth in Section 2.04.
"Qualified Plans" has the meaning specified in Section 3.19(b)
of the Agreement.
"Receivables" has the meaning specified in Section 3.15 of the
Agreement.
"Receivables Schedule Date" has the meaning specified in
Section 3.15 of the Agreement.
A-vii
<PAGE> 60
"Related Schedules" means schedules which set forth all
capital expenditures of, and all transfers or payments of cash or
other Assets and Properties between, the Company and T.C. Products for
and during the periods covered by each of the Financial Statements
included in Schedule 3.07.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing into the environment (including the abandonment
or discarding of barrels, containers and other closed receptacles).
"Reserves" has the meaning specified in Section 3.15 of the
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" has the meaning specified in the introductory
paragraph of the Agreement.
"Seller Indemnified Persons" has the meaning specified in
Section 8.01 of the Agreement.
"Stock" has the meaning specified in the recitals of the
Agreement.
"Subordinated Notes" means promissory notes, substantially in
the form attached hereto as Exhibit "D", to be issued by Purchaser and
delivered to Sellers at the Closing pursuant to Sections 2.04 and
6.02(c).
"Taxes" or "Tax" means any and all taxes, assessments,
imposts, deductions, charges, withholdings, claims and levies assessed
or imposed by any Governmental Authority and all Liabilities with
respect thereto, including any penalties, interest, additions to tax,
sales, use, transfer, stock transfer, real property transfer,
recording, gains, stamp, documentary, income, franchise, excise and
property taxes, charges and similar levies and fees.
"Transfer" has the meaning specified in Section 3.31(c).
"T-Chem" has the meaning set forth in Section 2.04.
"T. C. Products Annual Financial Statements" has the meaning
specified in Section 3.07.
"T.C. Products Unaudited Financial Statements" has the meaning
specified in Section 3.07.
"Trusts" means the Clerc Trust and the Belveal Trust.
A-viii
<PAGE> 61
"Unaudited Financial Statements" has the meaning specified in
Section 3.07 of the Agreement.
"United States" and "U.S." mean the United States of America
and its territories and possessions.
"Western States Letter" means that certain letter dated July
3, 1996 relating to the formation and existence of Western States
Chemical, Inc. executed by Clerc, Belveal and Pioneer.
A-ix
<PAGE> 62
ANNEX "B"
ARBITRATION PROVISIONS
(a) All Disputes between the parties submitted to arbitration shall be
resolved by binding arbitration administered by the American
Arbitration Association (the "AAA") in accordance with, and in the
following order of priority: (i) the terms of these arbitration
provisions; (ii) the Commercial Arbitration Rules of the AAA; (iii)
the Federal Arbitration Act (Title 9 of the United States Code); and
(iv) to the extent the foregoing are inapplicable, unenforceable or
invalid, the Laws of the State of Washington. The validity and
enforceability of these arbitration provisions shall be determined in
accordance with this same order of priority. In the event of any
inconsistency between these arbitration provisions and such rules and
statutes, these arbitration provisions shall control. Judgment upon
any award rendered hereunder shall be entered in any court having
jurisdiction.
(b) All statutes of limitation applicable to any Dispute shall apply to
any proceeding in accordance with these arbitration provisions.
(c) Arbitrators are empowered to resolve Disputes by summary rulings
substantially similar to summary judgments and motions to dismiss.
Arbitrators shall resolve all Disputes in accordance with the
applicable substantive Law. Any arbitrator selected shall be required
to be experienced and knowledgeable in the substantive Laws applicable
to the subject matter of the Dispute. With respect to a Dispute in
which the claims or amounts in controversy do not exceed $250,000, a
single arbitrator shall be chosen and shall resolve the Dispute. In
such case, the arbitrator shall be required (unless all parties to the
proceeding shall otherwise agree in writing) to make specific, written
findings of fact, and shall have authority to render an award up to
but not to exceed $250,000, including all amounts properly payable and
costs, fees and expenses. A Dispute involving claims or amounts in
controversy exceeding $250,000, shall be decided by a majority vote of
a panel of three arbitrators (an "Arbitration Panel"), the
determination of any two of the three arbitrators constituting the
determination of the Arbitration Panel; provided, however, that all
three arbitrators on the Arbitration Panel must actively participate
in all hearings and deliberations. Arbitrators, including any
Arbitration Panel, may grant any remedy or relief deemed just and
equitable and within the scope of these arbitration provisions and may
also grant such ancillary relief as is necessary to make effective any
award. Arbitration Panels shall be required (unless all parties to
the proceeding shall otherwise agree in writing) to make specific,
written findings of fact and conclusions of law. The determination of
an arbitrator or Arbitration Panel shall be binding on all parties and
shall not be subject to review or appeal.
B-i
<PAGE> 63
(d) To the maximum extent practicable, the AAA, the arbitrator (or the
Arbitration Panel, as appropriate) and the parties shall take any
action necessary to require that an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with
the AAA. Unless the parties shall agree otherwise, arbitration
proceedings hereunder shall be conducted in San Francisco, California.
Arbitrators shall be empowered to impose sanctions, permit or order
depositions and discovery and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal
Rules of Civil Procedure and applicable law. With respect to any
Dispute, each party agrees that all discovery activities shall be
expressly limited to matters directly relevant to the Dispute and any
arbitrator, Arbitration Panel and the AAA shall be required to fully
enforce this requirement. The provisions of these arbitration
provisions shall survive any termination, amendment or expiration of
this Agreement, unless the parties otherwise expressly agree in
writing. To the extent permitted by applicable Law, arbitrators,
including any Arbitration Panel, shall have the power to award
recovery of all costs and fees (including attorneys' fees,
administrative fees and arbitrators' fees) to the prevailing party or,
if no clear prevailing party, as the arbitrator (or Arbitration Panel,
if applicable) shall deem just and equitable. Each party agrees to
keep all Disputes and arbitration proceedings strictly confidential,
except for disclosures of information required by applicable Law.
B-ii
<PAGE> 64
July 22, 1996
Living Trust of Richard L. Belveal
dated February 14, 1995
Clerc Family Trust No. 1988-1
dated July 25, 1988
Richard L. Belveal
Albert J. Clerc
4227 Burnham Drive N.W.
Gig Harbor, Washington 98332
First Amendment to Stock Purchase Agreement
Gentlemen:
Reference is made to that certain Stock Purchase Agreement by
and among the Living Trust of Richard L. Belveal dated February 14, 1995, the
Clerc Family Trust No. 1988-1 dated July 25, 1988, Richard L. Belveal and
Albert J. Clerc, as Sellers, and Pioneer Companies, Inc., as Purchaser dated
as of July 3, 1996 ("Stock Purchase Agreement"). Capitalized terms used but
not defined herein shall have the meanings set forth in the Stock Purchase
Agreement.
Sellers and Purchaser desire to amend the Stock Purchase
Agreement in certain respects. Accordingly, in consideration of the mutual
covenants and agreements contained herein and in the Stock Purchase Agreement,
Sellers and Purchaser hereby agree as follows:
Section 1. Calculation of Purchase Price. Section 2.02
shall be amended by: (i) deleting clause (f) in its entirety and inserting the
word "and" before the beginning of clause (e), and (ii) deleting the
parenthetical in the last sentence in its entirety.
Section 2. Closing Date. The definition of "Closing Date"
contained in Annex "A" shall be changed to read in its entirety as follows:
"Closing Date" means July 31, 1996 or such other date as shall
be mutually agreed by the parties"
Section 3. Guarantors. The last sentence of Section
2.04 shall be revised hereafter to read in its entirety as follows:
"Payment of the Subordinated Notes shall be guaranteed by
Pioneer and by Pioneer Americas, Inc., a Delaware corporation
and indirectly wholly-owned subsidiary of Pioneer ("Pioneer
Americas"), pursuant to Guaranty Agreements (collectively
"Guaranty") each in substantially the form attached as
Exhibit A to this Agreement, except that the
<PAGE> 65
Living Trust of Richard L. Belveal, et al.
July 22, 1996
Page 2
Guaranty to be executed by Pioneer Americas shall include the
provision attached as Exhibit A to the letter agreement
amending this Agreement dated July 22, 1996."
References to "PWT" in Section 6.02(c) and clauses (v) and
(viii) of Section 6.02(d) of the Stock Purchase Agreement and in the definition
of "Guaranty" in Annex "A" thereto shall be deleted and in its place shall be
inserted the words "Pioneer Americas." The definition of "PWT" in Annex "A"
thereto shall be deleted.
Section 4. Capitalization of the Company. The first
sentence of Section 3.02 shall be amended in its entirety hereafter to read as
follows:
"The authorized capital stock of the Company consists of
50,000 shares of common stock, par value $1.00 per share, of
which 1,000 shares representing the Stock are issued and
outstanding."
Section 5. Employment and Noncompetition Agreements.
Section 5.12 of the Stock Purchase Agreement shall be amended in its entirety
hereafter to read as follows:
"On or prior to Closing (a) Clerc shall have executed and
delivered to T. C. Products, and T. C. Products shall accept,
a Noncompetition and Employment Agreement ("Noncompetition and
Employment Agreement") in substantially the form attached
hereto as Exhibit B and (b) Belveal shall have executed and
delivered to T. C. Products, and T. C. Products shall accept,
a Noncompetition Agreement ("Noncompetition Agreement") in
substantially the form attached hereto as Exhibit C."
Additionally, the forms of such Noncompetition and Employment Agreement for
Clerc and Noncompetition Agreement for Belveal shall be in substantially the
forms attached to this letter agreement as Exhibits B and C, respectively.
Section 6. Post-Closing Mergers. Section 5.13 shall be
amended hereafter to read in its entirety as follows:
"Not later than thirty (30) days after the Closing Date, and
unless All-Pure Chemical Co. ("All-Pure") is assignee and
succeeds to the rights of Purchaser pursuant to Section 9.06
of this Agreement, Pioneer agrees to cause any assignee
Purchaser pursuant to Section 9.06 other than All-Pure which
is issuer of the Subordinated Notes to be merged with and
into the Company and T. C. Products, with the intent and
result that T. C. Products shall in such instance be the
surviving
<PAGE> 66
Living Trust of Richard L. Belveal, et al.
July 22, 1996
Page 3
corporation and successor to the obligations to the Trusts
evidenced by the Subordinated Notes. Failure timely to
satisfy this covenant shall be an event of default under the
Subordinated Notes."
Section 7. Audited Financials. Section 6.03(h) shall be
supplemented by inserting at the end, after 1996 and prior to the semicolon, a
punctuation mark consisting of a period and the following added sentence:
"All costs and expenses incurred in obtaining such audited
financial statements shall be borne and paid by Purchaser;"
Section 8. Outside Closing Date. Subsections (c) and
(d) of Section 7.01 shall be amended to change the date therein set forth from
July 22, 1996 to July 31, 1996.
Section 9. Effective Amendment. Except as amended and
modified by this letter agreement, the Stock Purchase Agreement shall continue
in full force and effect. The Stock Purchase Agreement and this letter
agreement shall be read, taken and construed as one and the same instrument.
Upon the effectiveness of this letter agreement, each reference in the Stock
Purchase Agreement to "this Agreement" shall be and mean a reference to the
Stock Purchase Agreement as amended hereby.
Section 10. Execution and Delivery; Counterparts. This
letter agreement may be executed and delivered by facsimile exchange of
executed signature pages and signed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument, and it shall not be necessary in making proof of
this letter agreement to produce or account for more than one such counterpart.
Section 11. Entire Agreement. This letter agreement (a)
constitutes the entire contract between the parties relative to the amendments
to the Stock Purchase Agreements made hereby (b) supersedes all prior
agreements, consents and understandings relating to such amendments and (c) may
not be contradicted by evidence of prior, contemporaneous or subsequent oral
agreements of the parties.
Section 12. Governing Law. This Letter Agreement shall
be governed and enforced in accordance with, and the rights of the parties
shall be governed by, the internal laws of the State of Washington, without
reference to principles of conflicts of law.
Section 13. Binding Effect. This letter agreement shall
be binding upon and shall inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted assigns.
Section 14. Effectiveness. Upon the execution and
delivery of this letter agreement by the parties hereto, this Letter Agreement
shall be and become a binding agreement among the parties hereto.
<PAGE> 67
Living Trust of Richard L. Belveal, et al.
July 22, 1996
Page 4
If the foregoing accurately sets forth your agreement with
respect to the matters covered hereby, please so indicate by signing your names
in the spaces provided below.
"SELLERS"
________________________________________________
Richard L. Belveal
________________________________________________
Albert J. Clerc
Living Trust of Richard Belveal
dated February 14, 1995
By:_____________________________________________
Richard L. Belveal, Trustee
Clerc Family Trust No. 1988-1 dated July 25, 1988
By:_____________________________________________
Albert J. Clerc, Trustee
By:_____________________________________________
Patricia A. Clerc, Trustee
"PURCHASER"
PIONEER COMPANIES, INC.
By:_____________________________________________
Kent R. Stephenson
Vice President, General Counsel and Secretary
<PAGE> 1
PIONEER COMPANIES, INC.
KEY EXECUTIVE STOCK GRANT PLAN
<PAGE> 2
PIONEER COMPANIES, INC.
KEY EXECUTIVE STOCK GRANT PLAN
Table of Contents
<TABLE>
<S> <C> <C>
Section 1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3 Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4 Incentive Awards Performance Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 5 Limitations on Individual Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 6 Phantom Stock Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 7 General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 3
PIONEER COMPANIES, INC.
KEY EXECUTIVE STOCK GRANT PLAN
PREAMBLE
WHEREAS, Pioneer Companies, Inc. (the "Company") maintains the
Pioneer Companies, Inc. Incentive Cash Bonus Plan (the "Cash Bonus Plan") to
help the Company attract and retain exceptional employees and to provide a
direct incentive to such employees to improve the profitability of the Company;
and
WHEREAS, the Company desires to more closely align the
interests of its key executives who are participants in the Cash Bonus Plan
with those of the Company's stockholders by providing that part of any annual
cash bonus that they may earn under the Cash Bonus Plan will be automatically
deferred under this Plan as a Phantom Stock Award, which on its subsequent
vesting will be paid in shares of Company Stock;
NOW, THEREFORE, subject to the approval of this Plan by the
stockholders of the Company, the Company hereby establishes the Plan as set
forth herein, effective as of January 1, 1996.
SECTION 1
DEFINITIONS
For purposes of the Plan, the following terms shall have the
meanings indicated:
1.1 Beneficiary means the person(s) designated by a
Participant, on a form provided by the Management Committee and filed
with the Company's Human Resources Department, to receive benefits
from the Plan in the event of his death. A Participant may change his
beneficiary designation at any time. If no designated Beneficiary
survives the Participant, the Beneficiary shall be the Participant's
surviving spouse or, if none, his estate.
1.2 Board means the Board of Directors of the Company.
1.3 Company means Pioneer Companies, Inc., a Delaware
corporation.
1.4 Company Stock means the Class A Common Stock, par
value $.01, of the Company.
<PAGE> 4
1.5 Compensation Committee means the Compensation
Committee of the Board.
1.6 Employers means the Company and its subsidiaries.
1.7 Fair Market Value means, as applied to any specified
date, the closing sale price per share of the Company Stock on such
date in the principal market in which the Company Stock is traded, as
reported in The Wall Street Journal, or, if no Company Stock was
traded on such date, on the next preceding day on which Company Stock
was so traded; provided, however, with respect to the initial
crediting of an automatic deferral of a bonus amount in Phantom Stock,
Fair Market Value shall mean the average of the closing sales price
per share of the Company Stock on the last business day of each
calendar month for the calendar year immediately preceding the date
such Phantom Stock is credited to the Participant's Phantom Stock
Account.
1.8 Incentive Award means the amount of a Participant's
cash bonus award under the Cash Bonus Plan for a year as determined
pursuant to Section 6.1, but before the automatic 50% "deferral" with
respect to such award pursuant to this Plan.
1.9 Management Committee means the committee appointed
pursuant to Section 2.1 to administer the Plan.
1.10 Participant means a key executive of the Employers
who has been designated by the Compensation Committee as participating
in this Plan.
1.11 Permanent Disability means the Compensation Committee
has found, upon the basis of medical evidence satisfactory to it, that
a Participant has become totally disabled, whether due to physical or
mental condition, so as to be prevented from continuing to engage
further in his regular full-time duties with his Employer and that
such disability is reasonably expected to be permanent or long-term.
1.12 Phantom Stock means a phantom or notional share of
Company Stock. A Participant shall not possess any rights of a
stockholder of the Company with respect to a share of Phantom Stock,
including, without limitation, rights concerning voting and dividends.
1.13 Phantom Stock Account means a notional or ledger
account credited with Phantom Stock, as provided in Section 6.
1.14 Plan means the Pioneer Companies, Inc. Key Executive
Stock Grant Plan as set forth herein and as it may be amended from
time to time.
-2-
<PAGE> 5
1.15 Specified Deferral Date means a date after the
vesting date for a Phantom Stock grant on which a Phantom Stock grant
is to be paid or commence, as designated by a Participant in a
voluntary deferral election.
1.16 Termination means a Participant's termination of
employment with the Employers for any reason.
SECTION 2
ADMINISTRATION
2.1 Committee. The Plan shall be administered by the
Compensation Committee; however, the Compensation Committee may delegate its
ministerial duties under the Plan to a committee consisting of such employees
of the Employers as the President of the Company shall designate (the
"Management Committee"). The Compensation Committee shall have the authority
and power to interpret the Plan, prescribe, amend and rescind rules relating to
its administration, select the key executives who shall be Participants,
determine a Participant's (or Beneficiary's) right to a payment and the amount
of such payment, and to take all other actions necessary or desirable for the
administration of the Plan. All actions and decisions of the Compensation
Committee shall be final and binding upon all Participants and Beneficiaries.
SECTION 3
PARTICIPANTS
3.1 Participants. The Compensation Committee shall
determine and designate the key executives of the Employers who are eligible to
participate under the Plan. Participation is intended to be limited to those
key executives who, because of their positions, have significant responsibility
for the management, direction and success of the Company, a subsidiary or a
significant business unit. The Compensation Committee may provide for
participation by the designation of key executives by position or individually
and any participation designation may be a continuing designation until
rescinded or may be limited to a specified bonus year, in the Compensation
Committee's sole discretion.
-3-
<PAGE> 6
SECTION 4
INCENTIVE AWARDS PERFORMANCE CRITERIA
4.1 Incentive Awards. If the EBITDA target established
for the Company's Shared Earnings Program for a bonus year is met or exceeded,
the Compensation Committee shall establish the Incentive Awards for the
Participants under the Cash Bonus Plan for such year. The amount of the
Incentive Awards may be based upon the recommendation of the Company's
President and/or on such other factors as the Compensation Committee deems
appropriate.
4.2 Performance Criteria. Individual Incentive Awards
for Participants will be based upon the Participant's performance for the year
and may be measured against objective and/or subjective standards established
in advance for the Participant by the Compensation Committee. There may be one
or more performance objectives, different weights may be accorded different
objectives, and different objectives may be established for different
Participants. In evaluating the Participants, the Compensation Committee may
consider the corporate objectives of the Company for the year and the
individual's responsibilities and accomplishments, and may consider
recommendations of the President of the Company and such other factors as it
deems appropriate.
SECTION 5
LIMITATIONS ON INDIVIDUAL AWARDS
5.1 Incentive Award Limits. In no event may the
Incentive Award for any Participant for a bonus year exceed the Maximum Annual
Percentage for such Participant as set forth on Attachment A.
5.2 Adjustments to Awards. The Compensation Committee,
in its discretion, may grant all or such portion of an Incentive Award for a
year as it deems advisable to a Participant (or his Beneficiary in the case of
his death) who either becomes a Participant or is promoted after the beginning
of the bonus year, or whose employment is terminated during the year because of
his retirement, death, Permanent Disability or the sale or other disposition of
an Employer or a business unit.
-4-
<PAGE> 7
SECTION 6
PHANTOM STOCK AWARDS
6.1 Phantom Stock Award. Each Participant shall have 50%
of his Incentive Award otherwise payable to him in cash under the Cash Bonus
Plan for a year automatically deferred in shares of Phantom Stock under this
Plan, and receive an additional "matching" number of shares of Phantom Stock
credited to his Phantom Stock Account as provided below. The number of shares
of Phantom Stock automatically credited to a Participant's Phantom Stock
Account for any year with respect to which the Participant is entitled to
receive an Incentive Award under the Cash Bonus Plan shall be equal to (1) 100%
of the Participant's Incentive Award for that bonus year, determined prior to
any automatic deferral with respect to such award under this Section 6.1,
divided by (2) the Fair Market Value of the Company Stock for that bonus year.
The remaining 50% of the Participant's Incentive Award for the year shall be
paid to the Participant pursuant to the terms of the Cash Bonus Plan.
6.2 Vesting in Phantom Stock. The shares of Phantom Stock
automatically credited to a Participant, and any phantom dividends subsequently
credited thereon, shall not vest (i.e., shall remain forfeitable) until the
second January 1 following the date on which the related Incentive Award was
approved by the Compensation Committee; provided, however, if the Participant's
employment with the Employers is terminated due to his death, Disability,
retirement with the consent of the Compensation Committee, or by an Employer
other than for Cause (as defined in the Company's 1995 Stock Incentive Plan),
all shares of Phantom Stock then credited to the Participant's Phantom Stock
Accounts shall be immediately vested in full. If a Participant terminates
employment with the Employers for any reason other than as provided above, all
nonvested shares of Phantom Stock then credited to the Participant's Phantom
Stock Accounts shall be immediately forfeited without payment.
Unless the Participant has made a deferral election pursuant to
Section 6.3, the shares of Phantom Stock credited to the Participant's Phantom
Stock Account shall be automatically paid to the Participant in whole shares of
Company Stock, with cash for any fractional share, as soon as reasonably
practicable following the date such Phantom Stock becomes vested.
6.3 Voluntary Deferrals. Prior to the beginning of any
year with respect to which the Compensation Committee has authorized elective
deferrals of Phantom Stock awards by Participants, each Participant may elect
to have the payment of all or a designated portion of his Phantom Stock to be
credited for that year, if any, deferred until the date of his Termination or,
if permitted by the Compensation Committee, to a Specified Deferral Date that
is prior to his Termination, but in all cases after the normal January 1
vesting date for such Phantom Stock. The deferral election must be irrevocable
and must be made on a form prescribed by the Management Committee, which shall
govern the amount deferred, and the manner and timing of its payment. A
-5-
<PAGE> 8
Participant's deferral election shall apply only to the Incentive Award for
that election year. If a Participant has not made a deferral election, the
Phantom Stock award for that year shall be payable pursuant to Section 6.2.
6.4 Accounts. Each year the Company shall establish a
Phantom Stock Account for each Participant who has received an Incentive Award
that year to reflect the shares of Phantom Stock automatically deferred with
respect to such award; provided, however, all Phantom Stock Accounts for a
Participant that are to be paid at the same time may be combined into a single
Phantom Stock Account.
6.5 Investment of Accounts. Each Phantom Stock Account
shall be credited with whole and fractional shares of Phantom Stock as of the
date of the automatic deferral of the 50% portion of the Incentive Award for
such year and with phantom (notional) dividends with respect to the credited
Phantom Stock, which shall be credited as being reinvested in additional shares
of Phantom Stock based on the Fair Market Value of the Company Stock on the
applicable date.
6.6 Payment of Deferred Accounts. Upon a Participant's
Termination or earlier Specified Deferral Date, if applicable, the Company
shall pay to such Participant (or to his or her Beneficiary in case of the
Participant's death) the vested balance then credited to his or her Phantom
Stock Account(s) as follows:
(a) in a lump sum payment; or
(b) in five substantially equal annual
installments ("equal" shall be determined with reference to
the number of shares credited to such Phantom Stock Account);
whichever form of payment has been elected by the Participant. Payments of
deferred Phantom Stock Accounts shall commence or be made as soon as reasonably
practicable following the earlier of the Participant's date of Termination or
Specified Deferral Date. Payments shall be made in whole shares of Company
Stock, with any fractional share paid in cash.
6.7 Acceleration of Payments. Notwithstanding any
Participant deferral election to the contrary, the Compensation Committee, in
its sole discretion, may accelerate the payment of all or part of the unpaid
balance of any Phantom Stock Account on or following the Participant's
Termination.
6.8 Change in Control. Notwithstanding anything in the
Plan to the contrary, on the date of a Change in Control of the Company (as
defined in the Company's 1995 Stock Incentive Plan), all Phantom Stock Accounts
shall be fully vested and, regardless of any deferral elections, paid in cash
based on the CIC Fair Market Value of the Company Stock; provided, however,
with respect to any Participant who is subject to Section 16 of the Securities
Exchange Act of 1934, any shares of Phantom Stock that have been credited to
his Phantom Stock Account for less than six
-6-
<PAGE> 9
months as of the date of the Change in Control shall continue to remain
credited to his Phantom Stock Account until the expiration of six months and
one day from the date such shares were credited to the Phantom Stock Account,
at which time such shares of Phantom Stock shall be paid to the Participant in
cash based on the CIC Fair Market Value of the Company Stock. For purposes of
this Section 6.8, the CIC Fair Market Value of the Company Stock shall be the
greater of (i) the fixed or formula price for the acquisition of shares of
Company Stock specified in the agreement effecting the Change in Control of the
Company, if applicable, and (ii) the highest reported price per share of the
Company Stock during the sixty-day period ending on the date of the Change in
Control.
SECTION 7
GENERAL PROVISIONS
7.1 Unfunded Obligations. The amounts to be paid to
Participants pursuant to this Plan are unfunded obligations of the Company.
The Company is not required to segregate any monies from its general funds, to
create any trusts, or to make any special deposits with respect to these
obligations. Title to and beneficial ownership of any investments, including
trust investments, which the Company may make to fulfill these obligations
shall at all times remain in the Company. Any investments and the creation or
maintenance of any trust or notional accounts shall not create or constitute a
trust or a fiduciary relationship between the Compensation Committee or the
Company and a Participant, or otherwise create any vested or beneficial
interest in any Participant or his Beneficiary or his creditors in any assets
of the Company whatsoever. The Participants (and Beneficiaries) shall have no
claim against the Company for any changes in the value of any Accounts and
shall be general unsecured creditors of the Company with respect to any payment
due under this Plan.
7.2 Incapacity of Participant or Beneficiary. If the
Compensation Committee finds that any Participant or Beneficiary to whom a
payment is payable under the Plan is unable to care for his affairs because of
illness or accident or is under a legal disability, any payment due (unless a
prior claim therefore shall have been made by a duly appointed legal
representative) at the discretion of the Compensation Committee, may be paid to
the spouse, child, parent or brother or sister of such Participant or
Beneficiary or to any person whom the Compensation Committee has determined has
incurred expense for such Participant or Beneficiary. Any such payment shall
be a complete discharge of the obligations of the Company under the provisions
of the Plan.
7.3 Nonassignment. The right of a Participant or
Beneficiary to the payment of any amounts under the Plan may not be assigned,
transferred, pledged or encumbered in any manner nor shall such right or other
interests be subject to attachment, garnishment, execution or other legal
process.
-7-
<PAGE> 10
7.4 No Right to Continued Employment. Nothing in the
Plan shall be construed to confer upon any Participant any right to continued
employment with the Employers, nor interfere in any way with the right of an
Employer to terminate the employment of such Participant at any time without
assigning any reason therefor.
7.5 Withholding of Taxes. To the extent that the Company
is required to withhold any taxes in connection with any payment or award made
to a Participant or any other person under this Plan, it will be a condition to
the receipt of such payment or award that the Participant or such other person
make arrangements satisfactory to the Company for the payment of such taxes.
7.6 Termination and Amendment. The Board may from time
to time amend, suspend or terminate the Plan, in whole or in part, at any time;
provided that any amendment that would materially increase the benefits
accruing to Participants under the Plan, increase the aggregate number of
shares of Company Stock which may be issued under the Plan or materially modify
the requirements as to eligibility for participation in the Plan, shall be
subject to the approval of Company's stockholders, except that any such
increase or modification that may result from adjustments authorized by Section
7.7 does not require such approval. No amendment, suspension or termination of
the Plan may impair the right of a Participant or his Beneficiary to receive
the benefit accredited hereunder prior to the effective date of such amendment,
suspension or termination.
7.7 Company Stock Shares Available Under the Plan.
Subject to adjustments as provided below, the maximum number of shares of
Company Stock which may be issued with respect to shares of Phantom Stock
credited under the Plan shall be 500,000 shares. Such shares of Company Stock
may be shares of original issuance or treasury shares or a combination of the
foregoing. Any shares of Company Stock which are issuable with respect to
shares of Phantom Stock that are forfeited will again be available for issuance
under this Plan. In the event that the number of shares of Company Stock
available under this Plan is insufficient on any applicable date, then
notwithstanding anything in the Plan to the contrary, all Participants who
would otherwise be entitled to have shares of Phantom Stock credited to a
Phantom Stock Account on such date shall instead share ratably in the number of
shares of Phantom Stock then available for crediting under this Plan, and
thereafter all Incentive Awards (or remaining portions) shall be paid in cash
pursuant to the terms of the Cash Bonus Plan and thereafter all notional
dividends and other amounts credited on shares of Phantom Stock shall be
credited in cash and paid in cash. In the event of a change in the
capitalization of the Company due to a stock split, stock dividend,
recapitalization, merger, consolidation, combination, or similar event, the
aggregate number of shares subject to the Plan and the shares of Phantom Stock
then credited shall be adjusted accordingly by the Compensation Committee to
reflect such change.
7.8 Applicable Law. Except to the extent preempted by
any applicable federal law, the Plan shall be construed and governed in
accordance with the laws of the State of Delaware.
-8-
<PAGE> 11
ATTACHMENT A
MAXIMUM PERCENTAGE AWARDS
<TABLE>
<CAPTION>
POSITION % OF BASE SALARY
-------- ----------------
<S> <C>
President, Pioneer Companies, Inc. 60%
President, Pioneer Chlor Alkali Company, Inc. 60%
Pioneer Vice Presidents & Business Unit 50%
Presidents
Chlor Alkali Plant Managers 30%
Chlor Alkali Plant Management Staff 25%
Corporate Staff Managers 25%
Business Unit Vice Presidents 25%
All Other Participants 20%
</TABLE>
The term "base salary" shall mean the Participant's annual salary being paid at
the end of the applicable year (or the date of his Termination, if applicable),
exclusive of bonuses and all other items of compensation for the year.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 8,774
<SECURITIES> 0
<RECEIVABLES> 33,030
<ALLOWANCES> 1,451
<INVENTORY> 14,193
<CURRENT-ASSETS> 61,041
<PP&E> 110,730
<DEPRECIATION> (12,787)
<TOTAL-ASSETS> 285,068
<CURRENT-LIABILITIES> 48,643
<BONDS> 143,017
<COMMON> 1
0
0
<OTHER-SE> 61,036
<TOTAL-LIABILITY-AND-EQUITY> 285,068
<SALES> 103,113
<TOTAL-REVENUES> 103,113
<CGS> 73,742
<TOTAL-COSTS> 73,742
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,757
<INCOME-PRETAX> 6,614
<INCOME-TAX> 3,724
<INCOME-CONTINUING> 2,890
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,890
<EPS-PRIMARY> 2,890
<EPS-DILUTED> 2,890
</TABLE>
