EX-2.2
Stock Purchase Agreement
================================================================================
STOCK PURCHASE AGREEMENT
Dated as of August 28, 1996
By and Among
SPECIALTY PAPERBOARD, INC.,
ARCON COATING XXXXX, INC.,
ARCON HOLDINGS CORP.,
THE STOCKHOLDERS OF
ARCON HOLDINGS CORP.
and
VARIOUS OTHER PARTIES
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS........................................................... 4
ss.1.1 Definitions............................................. 4
ARTICLE II
PURCHASE OF STOCK; CANCELLATION OF OPTIONS AND WARRANTS............... 11
ss.2.1 Purchase of Stock; Cancellation of Option
and Warrants............................................ 11
ss.2.2 Price................................................... 12
ss.2.3 Cash on Hand............................................ 14
ss.2.4 Closing................................................. 15
ARTICLE III
REPRESENTATIONS OF THE COMPANIES...................................... 15
ss.3. Representations of the Company.......................... 15
ss.3.1 Existence and Good Standing............................. 15
ss.3.2 Capital Stock........................................... 16
ss.3.3 Authorization and Validity of this
Agreement............................................... 17
ss.3.4 Subsidiaries and Investments............................ 18
ss.3.5 Financial Statements; No Material Changes............... 18
ss.3.6 Books and Records....................................... 20
ss.3.7 Title to Properties; Encumbrances....................... 20
ss.3.8 Real Property........................................... 22
ss.3.9 Intellectual Property................................... 22
ss.3.10 Leases................................................. 22
ss.3.11 Material Contracts..................................... 23
ss.3.12 Consents and Approvals; No Violations.................. 25
ss.3.13 Litigation............................................. 26
ss.3.14 Taxes.................................................. 27
ss.3.15 Liabilities............................................ 30
ss.3.16 Insurance.............................................. 30
ss.3.17 Compliance with Laws................................... 31
ss.3.18 Employment Relations................................... 31
ss.3.19 Employee Benefit Plans................................. 32
ss.3.20 Interests in Customers, Suppliers, etc................. 40
(i)
Page
----
ss.3.21 Environmental Laws and Regulations..................... 41
ss.3.22 Bank Accounts, Powers of Attorney...................... 44
ss.3.23 Compensation of Employees.............................. 44
ss.3.24 Conduct of Business.................................... 45
ss.3.25 Customer Relations..................................... 45
ss.3.26 Condition of Assets.................................... 45
ss.3.27 Broker's or Finder's Fees.............................. 46
ARTICLE IV
REPRESENTATIONS OF THE SELLERS........................................ 46
ss.4. Representations of the Seller........................... 46
ss.4.1 Ownership of Stock...................................... 46
ss.4.2 Authorization and Validity of Agreement................. 47
ss.4.3 Restrictive Documents................................... 48
ss.4.4 Consents................................................ 48
ss.4.5 Broker's or Finder's Fees............................... 49
ARTICLE V
REPRESENTATIONS OF THE PURCHASER...................................... 49
ss.5. Representations of the Purchaser........................ 49
ss.5.1 Existence and Good Standing; Power and
Authority............................................... 49
ss.5.2 Restrictive Documents; No Legal Bar..................... 50
ss.5.3 Purchase for Investment................................. 50
ss.5.4 Broker's or Finder's Fees............................... 51
ss.5.5 Litigation; Disputes.................................... 51
ss.5.6 Consents................................................ 51
ARTICLE VI
TRANSACTIONS PRIOR TO THE CLOSING DATE................................ 52
ss.6.1 Conduct of Business of the Companies.................... 52
ss.6.2 Exclusive Dealing....................................... 54
ss.6.3 Review of the Companies................................. 55
ss.6.4 Reasonable Efforts...................................... 55
ss.6.5 Agreement by the Purchaser Regarding No
Other Representations or Warranties by the
Sellers................................................. 56
ss.6.6 Satisfaction of Financing Condition..................... 56
ARTICLE VII
CONDITIONS TO THE PURCHASER'S OBLIGATIONS............................. 57
ss.7. Conditions to the Purchaser's Obligations............... 57
(ii)
Page
----
ss.7.1 Opinions of Counsel..................................... 57
ss.7.2 Good Standing and Other Certificates.................... 57
ss.7.3 [Intentionally Omitted]................................. 58
ss.7.4 Truth of Representations and Warranties................. 58
ss.7.5 Performance of Agreements............................... 58
ss.7.6 No Litigation Threatened................................ 59
ss.7.7 Third Party Consents; Governmental
Approvals............................................... 59
ss.7.8 Termination of Security Interests....................... 59
ss.7.9 Resignations............................................ 59
ss.7.10 Financing.............................................. 59
ss.7.11 [Intentionally omitted]................................ 60
ss.7.12 FIRPTA................................................. 60
ss.7.13 HSR Act................................................ 60
ss.7.14 Escrow Agreement....................................... 60
ARTICLE VIII
CONDITIONS TO THE COMPANIES AND
THE SELLERS' OBLIGATIONS.............................................. 60
ss.8. Conditions to the Seller's Obligations.................. 60
ss.8.1 Opinions of Counsel..................................... 60
ss.8.2 Truth of Representations and Warranties................. 61
ss.8.3 Third Party Consents; Governmental
Approvals............................................... 61
ss.8.4 Performance of Agreements............................... 61
ss.8.5 No Litigation Threatened................................ 62
ss.8.6 HSR Act................................................. 62
ss.8.7 Warrants................................................ 62
ARTICLE IX
TAX MATTERS........................................................... 62
ss.9.1 Tax Returns............................................. 62
ss.9.2 Overlap Period, Refunds, Tax Benefits................... 68
ss.9.3 Cooperation; Audits..................................... 71
ss.9.4 Controversies........................................... 73
ss.9.5 Transfer Taxes.......................................... 75
ss.9.6 Amended Returns......................................... 75
ss.9.7 Non-foreign Person Affidavit............................ 76
ss.9.8 Indemnification......................................... 76
ss.9.9 FSE Tax Indemnity....................................... 78
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION........................ 80
(iii)
Page
----
ss.10.1 Survival of Representations............................ 80
ss.10.2 Indemnification........................................ 81
ss.10.3 Indemnification Procedure.............................. 85
ARTICLE XI
TERMINATION........................................................... 91
ss.11.1 Termination............................................ 91
ss.11.2 Effect of Termination.................................. 92
ARTICLE XII
MISCELLANEOUS......................................................... 93
ss.12.1 Knowledge.............................................. 93
ss.12.2 Expenses............................................... 93
ss.12.3 Governing Law.......................................... 94
ss.12.4 Captions............................................... 94
ss.12.5 Publicity.............................................. 94
ss.12.6 Notices................................................ 95
ss.12.7 Parties in Interest.................................... 96
ss.12.8 Counterparts........................................... 96
ss.12.9 Entire Agreement....................................... 96
ss.12.10 Amendments............................................ 97
ss.12.11 Severability.......................................... 97
ss.12.12 Third Party Beneficiaries............................. 98
ss.12.13 Jurisdiction.......................................... 98
ss.12.14 Action by Sellers..................................... 98
ss.12.15 Sellers' Representative............................... 99
ss.12.16 Assignment............................................100
ss.12.17 Construction..........................................100
ss.12.18 Schedules.............................................100
SCHEDULES
Schedule 3.2 Capital Stock
Schedule 3.5(b) Financial Statements
Schedule 3.7 Title to Properties; Encumbrances.
Schedule 3.8 Real Property.
Schedule 3.9 Intellectual Property
Schedule 3.10 Leases
Schedule 3.11 Material Contracts
Schedule 3.12 Consents and Approvals; No Violations
Schedule 3.13 Litigation
Schedule 3.14 Taxes
(iv)
Schedule 3.15 Liabilities
Schedule 3.16 Insurance
Schedule 3.17 Compliance with Laws
Schedule 3.18 Employment Relations
Schedule 3.19 Employee Benefit Plans
Schedule 3.20 Interests in Customers, Suppliers, etc.
Schedule 3.21 Environmental Laws and Regulations
Schedule 3.22 Bank Accounts, Powers of Attorney
Schedule 3.23 Compensation of Employees
Schedule 3.24 Conduct of Business
Schedule 3.25 Customer Relations
Schedule 4.4 Consents
Schedule 5.6 Third Party Consents
EXHIBITS
Exhibit A Form of Escrow Agreement
ANNEXES
Annex I Stock Ownership
Annex II Percentage Interests
(v)
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of August 28, 1996 by
and among SPECIALTY PAPERBOARD, INC., a Delaware corporation (the "Purchaser"),
the stockholders (the "Stockholders") of ARCON HOLDINGS CORP., a Delaware
corporation ("Arcon Holdings") and the sole stockholder of ARCON COATING XXXXX,
INC., a Delaware corporation (the "Company"), the option holders ("the
Optionholders") listed on Annex I attached hereto, Arcon Holdings and the
Company. Each of the Stockholders and the Optionholders shall be referred to
herein individually as a "Seller" and collectively as the "Sellers."
W I T N E S S E T H :
WHEREAS, Arcon Holdings owns all of the issued and outstanding shares of
common stock, $.01 par value, of the Company (collectively the "Company Stock"),
such shares being all of the outstanding shares of the capital stock of the
Company;
WHEREAS, each of the Sellers identified as a Common Stock Seller under
Column A of Annex I attached hereto (the "Common Stock Holders") is the holder
of the number of shares of common stock, $0.01 par value, of Arcon Holdings (the
"Common Stock"), set forth opposite such Seller's name in
Column B of Annex I attached hereto, which shares of Common Stock constitute all
of the issued and outstanding shares of Common Stock of Arcon Holdings;
WHEREAS, each of the Sellers identified as a Series A Holder under Column
A of Annex I attached hereto (the "Series A Stock Holders") is the holder of the
number of shares of Series A Non-Voting Convertible Preferred Stock, $0.01 par
value, of Arcon Holdings (the "Series A Stock") set forth opposite such Seller's
name in Column B of Annex I attached hereto, which shares of Series A Stock
constitute all of the issued and outstanding shares of Series A Stock of Arcon
Holdings;
WHEREAS, each of the Sellers identified as a Series B Holder under Column
A of Annex I attached hereto (the "Series B Stock Holders") is the holder of the
number of shares of Series B (Voting) Convertible Preferred Stock, $0.01 par
value, of Arcon Holdings (the "Series B Stock" and together with the Series A
Stock, the "Preferred Stock" and together with the Common Stock and the Series A
Stock, the "Stock") set forth opposite such Seller's name in Column B of Annex I
attached hereto, which shares of Series B Stock constitute all of the issued and
outstanding shares of Series B Stock of Arcon Holdings;
WHEREAS, each of the Optionholders (collectively with the Common Stock
Holders, the Series A Stock Holders and the
-2-
Series B Stock Holders, the "Common Stock Sellers") is the holder of options
(the "Options") to acquire the number of shares of Common Stock set forth
opposite such Seller's name in Column B of Annex I attached hereto, which
Options constitute all of the issued and outstanding options to purchase Common
Stock or any other capital stock of Arcon Holdings;
WHEREAS, the Bank is the holder of warrants (the "Warrants") to acquire
85,000 shares of Common Stock, which Warrants constitute all of the issued and
outstanding warrants to purchase Common Stock or any other capital stock of
Arcon Holdings;
WHEREAS, the Optionholders desire to cancel the Options in consideration
of payment by the Purchaser to each Optionholder of the Net Option Payment;
WHEREAS, prior to the Closing, Arcon Holdings intends to repurchase the
Warrants from the Bank and cancel the Warrants; and
WHEREAS, it is the intention of the parties hereto that, upon consummation
of the purchase and sale of the Stock, the payment of the Net Option Payment and
the cancellation of the Options and the Warrants pursuant to this Agreement, the
Purchaser shall own all of the outstanding shares (and rights to acquire shares)
of capital stock of Arcon Holdings.
NOW, THEREFORE, IT IS AGREED:
-3-
ARTICLE I
DEFINITIONS
ss.1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the respective meanings specified
therefor below (such meanings to be equally applicable to both the singular and
plural forms of the terms defined).
"Aggregate Closing Payment" shall have the meaning specified in Section
2.2.
"Agreement" shall mean this Agreement, as amended, modified or
supplemented from time to time.
"Arcon Holdings" shall have the meaning specified in the preamble to this
Agreement.
"Audited Statements" shall have the meaning specified in Section 3.5.
"Balance Sheet" shall have the meaning specified in Section 3.5.
"Balance Sheet Date" shall have the meaning specified in Section 3.5.
"Bank" shall mean Xxxxxx Financial, Inc.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which banks located in New York, New York shall be authorized or required by
law to close.
"Claim" shall have the meaning specified in Section 10.3
-4-
"Closing" shall have the meaning specified in Section 2.4.
"Closing Date" shall have the meaning specified in Section 2.4.
"Code" shall have the meaning specified in Section 3.14.
"Common Stock" shall have the meaning specified in the preamble to this
Agreement.
"Common Stock Holders" shall have the meaning specified in the preamble to
this Agreement.
"Common Stock Sellers" shall have the meaning specified in the preamble to
this Agreement.
"Companies" shall have the meaning specified in Article III.
"Company" shall have the meaning specified in the preamble to this
Agreement.
"Company Property" shall have the meaning specified in Section 3.21.
"Company Stock" shall have the meaning specified in the preamble to this
Agreement.
"Confidentiality Agreement" shall have the meaning specified in Section
6.3.
"Damages" shall have the meaning specified in Section 10.2.
"Deductions" shall have the meaning specified in Section 9.2.
-5-
"Determination" shall have the meaning specified in Section 10.3.
"Dispute Notice" shall have the meaning specified in Section 9.1.
"Employee Benefit Plans" shall have the meaning specified in Section 3.19.
"Encumbrances" shall have the meaning specified in Section 3.7.
"Environmental Claims" shall have the meaning specified in Section 3.21.
"Environmental Law" shall have the meaning specified in Section 3.21.
"ERISA" shall have the meaning specified in Section 3.19.
"Escrow Account" shall have the meaning specified in Section 2.2.
"Escrow Agent" shall have the meaning specified in Section 2.2.
"Escrow Agreement" shall have the meaning specified in Section 7.14.
"Escrow Amount" shall have the meaning specified in Section 2.2(b).
"FSE Tax Indemnity" shall mean the Stock Purchase Agreement among Arcon
Holdings, Arcon Acquisition Corp., FSE Holdings, Inc. and the Company, dated as
of April 14, 1994.
-6-
"FSE Indemnifiable Amounts" shall have the meaning specified in Section
9.9.
"GAAP" shall have the meaning specified in Section 3.5. "Hazardous
Materials" shall have the meaning specified in Section 3.21.
"HSR Act" shall have the meaning specified in Section 6.4.
"Indemnified Party" shall have the meaning specified in Section 10.3.
"Indemnifiable Amounts" shall have the meaning specified in Section
10.3(f).
"Indemnifying Party" shall have the meaning specified in Section 10.3.
"Indemnity Response" shall have the meaning specified in Section 10.3.
"Independent Auditor" shall have the meaning specified in Section 9.1.
"Insurable Amounts" shall have the meaning specified in Section 10.3(f).
"Intellectual Property" shall have the meaning specified in Section 3.9.
"IRS" shall have the meaning set forth in Section 3.19.
"Material Adverse Effect" shall have the meaning specified in Section 3.1.
-7-
"Net Option Payment" shall mean, as to each Optionholder, the portion of
the Aggregate Closing Payment payable to each Optionholder pursuant to Section
2.2(d) plus his respective portion of the Escrow Amount set forth under Column C
of Annex I.
"Option" shall have the meaning specified in the preamble to this
Agreement.
"Optionholders" shall have the meaning specified in the preamble to this
Agreement.
"Outstanding Indebtedness" shall mean the outstanding indebtedness for
borrowed money of Arcon Holdings and the Company at the Closing (including
unpaid interest thereon and penalties, if any, associated with the repayment
thereof).
"Overlap Period" shall have the meaning specified in Section 9.2.
"PBGC" shall have the meaning set forth in Section 3.19.
"Percentage Interest" of any Person shall mean the percentages as set
forth across from such Person's name on Annex II attached hereto.
"Permitted Encumbrances" shall have the meaning specified in Section 3.7.
"Person" shall have the meaning specified in Section 3.11.
"Personal Liability Amount" shall have the meaning specified in Section
10.2.
-8-
"Pre-Closing Period" shall have the meaning specified in Section 3.14.
"Preferred Stock" shall have the meaning specified in the preamble to this
Agreement.
"Purchaser" shall have the meaning specified in the preamble to this
Agreement.
"Real Property" shall have the meaning set forth in Section 3.8.
"Refund Requests" shall have the meaning specified in Section 9.1(a).
"Required Sellers" shall mean such Sellers who hold in the aggregate more
than 50% of the then issued and outstanding Common Stock held by all Sellers as
of immediately prior to the Closing (calculated (i) as if all issued and
outstanding shares of Preferred Stock were converted into shares of Common Stock
and (ii) as if all Options have been fully exercised into shares of Common
Stock).
"Returns" shall have the meaning specified in Section 3.14.
"Seller" and "Sellers" shall have the meanings specified in the preamble
to this Agreement.
"Sellers' Liability Amount" shall have the meaning set forth in Section
10.2.
"Sellers' Representative" shall have the meaning specified in Section 9.1.
-9-
"Series A Stock" shall have the meaning specified in the preamble to this
Agreement.
"Series A Stock Holders" shall have the meaning specified in the preamble
to this Agreement.
"Series B Stock" shall have the meaning specified in the preamble to this
Agreement.
"Series B Stock Holders" shall have the meaning specified in the preamble
to this Agreement.
"Single Employer Plan" shall have the meaning set forth in Section 3.19.
"Stock" shall have the meaning specified in the preamble to this
Agreement.
"Stockholder" shall have the meaning specified in the preamble to this
Agreement.
"Tax Matter" shall have the meaning specified in Section 9.4.
"Taxes" means all taxes, assessments, charges, duties, fees, levies or
other governmental charges, including, without limitation, all Federal, state,
local, foreign and other income, capital, franchise, profits, capital gains,
capital stock, transfer, sales, use, occupation, property, excise, severance,
windfall profits, stamp, license, payroll, withholding and other taxes,
assessments, charges, duties, fees, levies or other governmental charges of any
kind whatsoever (whether payable directly or by withholding and whether or
-10-
not requiring the filing of a Return), all estimated taxes, deficiency
assessments, additions to tax, penalties and interest and shall include any
liability for such amounts as a result either of being a member of a combined,
consolidated, unitary or affiliated group or of a contractual obligation to
indemnify any person or other entity.
"Termination Date" shall have the meaning specified in Section 2.4.
"Unaudited Statements" shall have the meaning specified in Section 3.5.
"Warrants" shall have the meaning specified in the preamble to this
Agreement.
ARTICLE II
PURCHASE OF STOCK; CANCELLATION OF OPTIONS AND WARRANTS
ss.2.1 Purchase of Stock; Cancellation of Option and Warrants. Subject to
the terms and conditions set forth in this Agreement, the Purchaser agrees to
purchase from each of the Sellers on the Closing Date and each of the Sellers
agrees to sell, assign, transfer and deliver to the Purchaser on the Closing
Date, the shares of Stock so owned by such Seller. Subject to the terms and
conditions of this Agreement, each of the Optionholders agrees to cancel such
Optionholder's Options and to deliver to the Purchaser on the Closing Date, the
cancelled Options. Subject to the terms of
-11-
this Agreement, the Company agrees to cancel the Warrants and to deliver to the
Purchaser on the Closing Date the cancelled Warrants. The certificates
representing the Stock shall be duly endorsed in blank, or accompanied by stock
powers duly executed in blank by each of the Sellers, transferring the same to
the Purchaser with all necessary transfer tax and other revenue stamps affixed
and cancelled. Each of the Sellers agrees to cure any deficiencies with respect
to the endorsement of the certificates representing the Stock or with respect to
the stock power accompanying any such certificates.
ss.2.2 Price. In consideration for the sale to the Purchaser by Sellers of
the Stock and the cancellation by the Optionholders of the Options, the
Purchaser shall deliver at the Closing an aggregate cash amount equal to
$32,000,000 (such amount, the "Aggregate Closing Payment") by wire transfer in
immediately available funds as follows:
(a) to the escrow agent (the "Escrow Agent") to be held in an escrow
account (the "Escrow Account") pursuant to the provisions of the Escrow
Agreement as contemplated by Section 10.2 hereof, an amount equal to $2,000,000
(the "Escrow Amount"), representing the sum of that portion of the Aggregate
Closing Payment to be held in the Escrow Account as set forth under Column C of
Annex I attached hereto;
-12-
(b) to the Bank, the amount of Outstanding Indebtedness owed to the Bank
on the Closing Date to an account specified to the Purchaser at least two
Business Days prior to the Closing (it being acknowledged and agreed that it is
the intent of the parties hereto that such amount shall be deemed to have been
paid to the Bank immediately prior to the Closing);
(c) to the Shareholders' Representative an amount equal to $300,000 to an
account specified by the Shareholders' Representative at least two Business Days
prior to the Closing; and each Seller hereby acknowledges and agrees that such
amount, together with any and all earnings in respect thereof (collectively, the
"Sellers Amount"), will be used by the Sellers' Representative in its sole
discretion to pay any and all costs and expenses of the Sellers' under this
Agreement or in connection with the execution, delivery, performance or
consummation of the transactions contemplated hereby, including, without
limitation, to pay all costs and expenses of the Sellers' attorneys and
accountants, to pay Taxes, expenses and other liabilities of the Sellers arising
under Article IX (including, without limitation in connection with the
preparation and filing of Tax Returns and Refund Requests) and Article X, and to
pay the costs and expenses incurred by the Sellers' Representative in connection
with or relating to its acting as Sellers' Representative hereunder
-13-
or under the Escrow Agreement. Each Seller hereby irrevocably and
unconditionally authorizes the Sellers' Representative to utilize in its sole
discretion the Sellers Amount to make any and all of the foregoing payments and
to otherwise utilize the Sellers Amount as provided above. In addition, each
Seller acknowledges that the Sellers' Representative shall not be responsible
for determining the foregoing amounts and that the Sellers Amount may not be
sufficient to pay in full all of the foregoing amounts;
(d) to each of the Optionholders (i) the balance of the Aggregate Closing
Payment multiplied by his Percentage Interest minus (ii) the aggregate exercise
price of the Options held by such Optionholder to the account specified by each
of the Optionholders at least two Business Days prior to Closing; each of the
Sellers hereby acknowledges and consents to the payment of the Net Option
Payment to each of the Optionholders; and
(e) to each of the Sellers (other than the Optionholders) the balance of
the Aggregate Closing Payment multiplied by the Percentage Interest of such
Seller to the account specified by each of the Sellers to the Purchaser at least
two Business Days prior to Closing.
ss.2.3 Cash on Hand. The Purchaser agrees and acknowledges that, any and
all cash on hand of the Companies (or either of them) at or prior to the Closing
shall be
-14-
utilized in the sole discretion of the Companies including, without limitation,
to pay bonuses to employees of the Companies, to prepay Outstanding Indebtedness
and/or to purchase the Warrants.
ss.2.4 Closing. The purchases and sales referred to in Section 2.1 (the
"Closing") shall take place at 10:00 A.M. at the offices of White & Case, New
York, New York within 10 Business Days after the later of the termination or
expiration of the applicable waiting period (and any extension thereof) under
the HSR Act or the satisfaction or waiver of all other conditions precedent set
forth in Articles VII and VIII hereof, or at such other time and date (not later
than October 31, 1996 (the "Termination Date")) as the parties hereto shall
designate in writing. Such date is herein referred to as the "Closing Date."
ARTICLE III
REPRESENTATIONS OF THE COMPANIES
ss.3. Representations of the Company. Each of Arcon Holdings and the
Company (collectively, the "Companies") hereby jointly and severally represents
and warrants as of the date hereof to the Purchaser as follows:
ss.3.1 Existence and Good Standing. Each of the Companies is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
-15-
Each of the Companies has the requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. Each of the Companies is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the character or location
of the properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or license necessary, except where the
failure to be so duly qualified or licensed would not have a material adverse
effect on the business, operations, financial condition or results of operations
of the Companies taken as a whole (a "Material Adverse Effect").
ss.3.2 Capital Stock. Arcon Holdings has an authorized capitalization
consisting of (i) 1,500,000 shares of Common Stock of which 41,175.1 shares are
issued and outstanding, (ii) 100,000 shares of Class B Common Stock, $0.01 par
value per share, none of which are issued and outstanding on the date hereof and
none of which will be issued and outstanding at Closing, (iii) 32,000 shares of
Series A Stock of which 31,944.8 shares are issued and outstanding, and (iv)
6,500 shares of Series B Stock of which 6,225.3 shares are issued and
outstanding. The Company has an authorized capitalization consisting of 1,000
shares of Company Stock, of which 1,000 shares are issued and outstanding and
held of record and beneficially by Arcon Holdings. All outstanding shares
-16-
of capital stock of each of Arcon Holdings and the Company have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
set forth on Schedule 3.2 attached hereto, there are no outstanding
subscriptions, options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or other agreements of any character providing for the
purchase, issuance or sale of any shares of the capital stock of Arcon Holdings
or the Company.
ss.3.3 Authorization and Validity of this Agreement. Each of the Companies
has the requisite corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement by each of the Companies and the performance of
their respective obligations hereunder have been duly authorized and approved by
their respective Board of Directors and no other corporate action on the part of
the Companies or action by the stockholders of the Companies is necessary to
authorize the execution, delivery and performance of this Agreement by the
Companies. This Agreement has been duly executed and delivered by each of the
Companies and, assuming due execution of this Agreement by the Purchaser, is a
valid and binding obligation of each of the Companies enforceable against each
of the Companies in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy,
-17-
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
ss.3.4 Subsidiaries and Investments. Neither Arcon Holdings (except for
its ownership of the Company Stock) nor the Company owns any capital stock or
other equity or ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity.
ss.3.5 Financial Statements; No Material Changes. (a) The Company has
heretofore furnished the Purchaser with xxxxxxx- dated audited balance sheets of
Arcon Holdings and the Com- pany and audited balance sheets of the Company as of
October 31, 1994, and October 31, 1995, respectively, together with related
consolidated statements of operation, stockholders' equity and cash flows for
the periods then ended, together with the report of Price Waterhouse LLP
(collectively, the "Audited Statements"). The Audited Statements, including the
footnotes thereto, have been prepared in accordance with generally accepted
accounting principles consistently applied by the Companies throughout the
periods indicated ("GAAP") and fairly present in all material respects the
consolidated financial position of the Companies and the financial position of
the Company, as applicable, at the respective dates thereof, and the
consolidated results of the operations and cash flows of the Companies and the
results of operations
-18-
and cash flows of the Company for the respective periods indicated.
(b) The Company has also heretofore furnished the Purchaser with a
consolidated unaudited balance sheet of the Companies as of June 30, 1996,
together with related consolidated statements of operations for the period then
ended (collectively, the "Unaudited Statements"). The Unaudited Statements have
been prepared in accordance with GAAP (except that the Unaudited Statements do
not contain footnotes and do not reflect normal year end adjustments) and,
except as disclosed on Schedule 3.5(b), fairly present in all material respects
the consolidated financial position of the Companies at its date thereof and the
results of the operations of the Companies for the period indicated. The
unaudited balance sheet of the Companies dated June 30, 1996, is hereinafter
referred to as the "Balance Sheet" and June 30, 1996, is hereinafter referred to
as the "Balance Sheet Date."
(c) Since October 31, 1995, there has been no (i) material adverse change
in the business, operations, financial condition or results of operations of the
Companies or (ii) material damage, destruction or loss to any asset or property,
tangible or intangible, of the Companies which materially and adversely affects
the ability of the Companies to conduct their respective business.
-19-
ss.3.6 Books and Records. The minute books of Arcon Holdings, as
previously made available to the Purchaser and its representatives, contain
materially accurate records of all meetings of, and corporate actions taken by
(including action taken by written consent), their respective shareholders and
Boards of Directors. At Closing all of the books and records of Arcon Holdings
will be in the possession of Arcon Holdings and the Company.
ss.3.7 Title to Properties; Encumbrances. Except as set forth on Schedule
3.7 attached hereto and except for such properties and assets which have been
sold or otherwise disposed of in the ordinary course of business, each of Arcon
Holdings and the Company has good title to its material properties and assets
(real and personal, tangible and intangible) owned by it (and good leasehold
title to the material properties and assets leased by it), including, without
limitation, the material properties and assets reflected in the Balance Sheet,
subject to no encumbrance, lien, charge or other restriction of any kind or
character ("Encumbrances"), except for (i) Encumbrances reflected in the Balance
Sheet, (ii) Encumbrances for current taxes, assessments or governmental charges
or levies on property not yet due and delinquent, (iii) Encumbrances arising by
operation of law, (iv) pledges or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insur-
-20-
ance and other social security legislation, (v) easements, rights-of-way,
restrictions and other similar Encumbrances previously incurred in the ordinary
course of business which, in respect of properties or assets of the Companies
are not material and which, in the case of such encumbrances on the assets or
properties of the Companies, do not materially detract from the value of any
such properties or assets or materially interfere with any present use of such
properties or assets, (vi) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Encumbrances arising in the ordinary course of
business which are not overdue for a period of more than 90 days or which are
being contested in good faith by appropriate proceedings, (vii) deposits to
secure the performance of bids, contracts (other than for borrowed money),
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business,
(viii) statutory and contractual Encumbrances on the property of the Companies
in favor of landlords securing leases, and (ix) Encumbrances in existence on the
Closing Date and described on Schedule 3.7 attached hereto (Encumbrances of the
type described in clauses (i) through (ix) above are hereinafter sometimes
referred to as "Permitted Encumbrances").
-21-
ss.3.8 Real Property. Schedule 3.8 attached hereto contains an accurate
and complete list of all real property owned in whole or in part by Arcon
Holdings or the Company (the "Real Property"). With respect to all of the
buildings, structures and appurtenances situated on the Real Property, each of
the Companies has adequate rights of ingress and egress for operation of the
business of the Companies in the ordinary course consistent with past practice.
None of such buildings, structures or appurtenances, nor the operation or
maintenance thereof, violates any restrictive covenant or encroaches, on any
property owned by others, except for such violations, encumbrances or
encroachments which would not have a Material Adverse Effect.
ss.3.9 Intellectual Property. All licenses, patents, trade names,
trademarks and service marks (collectively, the "Intellectual Property") owned
by Arcon Holdings or the Company are set forth on Schedule 3.9 attached hereto.
All such Intellectual Property is, to the Companies' knowledge, in full force
and effect and neither Arcon Holdings nor the Company has received any written,
or to its knowledge, oral notice of any event, inquiry, investigation or
proceeding threatening the validity of any such Intellectual Property, except as
set forth on Schedule 3.9.
ss.3.10 Leases. Schedule 3.10 attached hereto contains a list of all
leases or sub-leases to which Arcon Holdings or
-22-
the Company is a party requiring an annual aggregate payment of at least
$25,000. Except as otherwise set forth in Schedule 3.10 attached hereto, each
lease or sub-lease set forth in Schedule 3.10 is in full force and effect; all
rents and additional rents due to date from Arcon Holdings or the Company on
each such lease or sub-lease have been paid; neither Arcon Holdings nor the
Company has received written notice (nor, to the knowledge of the Companies,
oral notice) that it is in material default under any such lease or sublease;
and, to the knowledge of the Companies, there exists no default by either of the
Companies or any other party under such lease or sub-lease, except for such
defaults which would not have a Material Adverse Effect.
ss.3.11 Material Contracts. Except as set forth on Schedule 3.10 and
Schedule 3.11 attached hereto, neither Arcon Holdings nor the Company is bound
by (a) any agreement, contract or commitment that involves the performance of
services or the delivery of goods and/or materials by it of an amount or value
in excess of $25,000, (b) any agreement, contract or commitment not in the
ordinary course of business, (c) any agreement, indenture or other instrument
which contains restrictions with respect to payment of dividends or any other
distribution in respect of its capital stock, (d) any agreement, contract or
commitment relating to capital expenditures in excess of $25,000, (e) any
agreement,
-23-
indenture or instrument relating to indebtedness, liability for borrowed money
or the deferred purchase price of property (excluding trade payables in the
ordinary course of business), (f) any loan or advance to, or investment in, any
individual, partnership, joint venture, corporation, trust, unincorporated
organization, government or other entity (each a "Person"), any agreement,
contract or commitment relating to the making of any such loan, advance or
investment or any agreement, contract or commitment involving a sharing of
profits, other than loans or advances to employees of Arcon Holdings and the
Company in the ordinary course of business not in excess of $5,000 in any
individual instance (g) any guarantee or other contingent liability in respect
of any indebtedness or obligation of any Person (other than in the ordinary
course of business), (h) any management service, consulting or any other similar
type of contract, (i) any agreement, contract or commitment limiting the ability
of Arcon Holdings or the Company to engage in any line of business or to compete
with any Person, (j) any warranty, guaranty or other similar undertaking with
respect to a contractual performance extended by Arcon Holdings or the Company
other than in the ordinary course of business, or (k) any amendment,
modification or supplement in respect of any of the foregoing. Except as
otherwise set forth on Schedule 3.11, each contract or agreement set forth on
-24-
Schedule 3.11 is, to the knowledge of the Companies, in full force and effect
and there exists no default or event of default by the Companies thereunder,
except for such defaults which would not have a Material Adverse Effect.
ss.3.12 Consents and Approvals; No Violations. Except as set forth in
Schedule 3.12 attached hereto, the execution and delivery of this Agreement by
Arcon Holdings and the Company and the consummation of the transactions
contemplated hereby to be consummated by the Companies (a) will not violate or
contravene any provision of the Certificate of Incorporation or By-laws of Arcon
Holdings or the Company, (b) except as may be required under the HSR Act will
not violate or contravene any statute, rule, regulation, order or decree of any
public body or authority by which Arcon Holdings or the Company is bound or by
which any of its respective properties or assets are bound, (c) except as may be
required under the HSR Act will not require by Arcon Holdings or the Company any
filing with, or permit, consent or approval of, or the giving of any notice to,
any governmental or regulatory body, agency or authority, or any other Person
and (d) will not result in a violation or breach of, conflict with, constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation, payment or acceleration) under, or
result in the creation of any Encumbrance upon any of the properties or assets
of Arcon
-25-
Holdings or the Company under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, franchise, permit, agreement, lease,
franchise agreement or any other instrument or obligation to which Arcon
Holdings or the Company is a party, or by which it or any of their respective
properties or assets is bound, except, in the case of clauses (c) and (d), for
such filing, permit, consent or approval, the absence of which, and violations,
breaches, defaults, conflicts and Encumbrances which, in the aggregate would not
have a Material Adverse Effect.
ss.3.13 Litigation. Except as set forth on Schedule 3.13 attached hereto,
there is no action, suit, proceeding at law or in equity, arbitration or
administrative or other proceed- ing by or before (or to the knowledge of the
Companies any investigation by) any governmental or other instrumentality or
agency, pending, or, to the knowledge of the Companies, threatened, against
Arcon Holdings or the Company or any material portion of their respective
properties or rights which, if adversely determined, would materially and
adversely affect the right or ability of Arcon Holdings or the Company to carry
on its business as now conducted, or which would have a Material Adverse Effect;
and neither Arcon Holdings nor the Company knows of any valid basis for any such
action, proceeding or investigation. Neither Arcon
-26-
Holdings nor the Company is subject to any judgment, order or decree entered in
any lawsuit or proceeding which would have a Material Adverse Effect.
ss.3.14 Taxes. Except as set forth in Schedule 3.14: (a) Tax Returns. Each
of Arcon Holdings and the Company has timely filed or caused to be timely filed
or will timely file or cause to be timely filed with the appropriate taxing
authorities all returns, statements, forms and reports for Taxes ("Returns")
that are required to be filed by, or with respect to, either of them on or prior
to the Closing Date. The Returns have accurately reflected and will accurately
reflect all material liability for Taxes of Arcon Holdings and the Company for
the periods and the type covered thereby.
(b) Payment of Taxes. All material Taxes and Tax liabilities of Arcon
Holdings and the Company for all taxable years or periods that end on or before
the Closing Date and, with respect to any taxable year or period beginning
before and ending after the Closing Date, the portion of such taxable year or
period ending on and including the Closing Date ("Pre-Closing Periods") have
been timely paid or accrued and adequately disclosed on the books and records of
the Companies in accordance with GAAP.
(c) Other Tax Matters. (i) (A) there are no audits or other examinations
of Taxes by the appropriate tax authori- ties of any nation, state or locality
currently in progress
-27-
(or to the knowledge of Companies scheduled as of the Closing Date to be
conducted), (B) there have been no audits or other examinations relating to
Federal income taxes of Arcon Holdings or the Company which have resulted in an
adjustment in Federal income tax liability, (C) there are no taxable years or
other taxable periods of Arcon Holdings or the Company which will not be subject
to the normally applicable statute of limitations by reason of the existence of
circumstances that would cause any such statute of limitations for applicable
Taxes to be extended, (D) no taxing authority has notified Arcon Holdings or the
Company that it has proposed or assessed any adjustments or assessed any
deficiency relating to any Returns for Tax liability of Arcon Holdings or the
Company and (E) neither Arcon Holdings nor the Company has received any written
notice from any taxing authority relating to any issue which could affect the
Tax liability of Arcon Holdings or the Company, which issue has not been finally
determined and which, if determined adversely to Arcon Holdings or the Company,
could result in a Tax liability.
(ii) Except for the consolidated, unitary or combined Returns filed
by Arcon Holdings that have included the Company, as set forth on Schedule 3.14
hereto, the Companies have not been included in any "consolidated," "unitary" or
"combined" Return provided for under the law of
-28-
the United States, any foreign jurisdiction or any state or locality with
respect to Taxes for any taxable period for which the statute of limitations has
not expired.
(iii) All Taxes which Arcon Holdings or the Company is (or was)
required by law to withhold or collect have been duly withheld or collected, and
have been timely paid over to the proper authorities to the extent due and
payable.
(iv) Neither Arcon Holdings nor the Company is a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code").
(v) There are no tax sharing, allocation, indemnification or similar
agreements or arrangements in effect as between Arcon Holdings or the Company or
any predecessor or affiliate thereof and any other party (including any of the
Sellers and any predecessor or affiliate thereof) under which the Purchaser,
Arcon Holdings or the Company could be liable for any Taxes or other claims of
any party.
(vi) Neither Arcon Holdings nor the Company has applied for, been
granted, or agreed to any accounting method change for which it will be required
to take into account any adjustment under Section 481 of the Code or any similar
pro-
-29-
vision of the Code or the corresponding tax laws of any nation, state or
locality.
(vii) At and after giving effect to Closing there will not be any
indebtedness of Arcon Holdings or the Company that consists of "corporate
acquisition indebtedness" within the meaning of Section 279 of the Code.
(viii) Neither Arcon Holdings nor the Company is a party to any
agreement that would require it to make any payment that would constitute an
"excess parachute payment" for purposes of Sections 280G and 4999 of the Code.
ss.3.15 Liabilities. Neither Arcon Holdings nor the Company has any
outstanding indebtedness or other liabilities, contingent or otherwise, except
(i) as set forth in the Balance Sheet or referred to in the footnotes in the
Audited Statements, (ii) liabilities incurred subsequent to the Balance Sheet
Date in the ordinary course of business, (iii) as set forth in Schedule 3.15 and
(iv) liabilities which would not have a Material Adverse Effect.
ss.3.16 Insurance. Schedule 3.16 contains an accurate listing of all
policies of property, fire and casualty, product liability, workers compensation
and other forms of insurance owned or held by Arcon Holdings or the Company. The
Companies have not received (i) any written notice of cancellation of any policy
described in such Schedule or refusal of coverage thereunder, (ii) any written
notice that
-30-
any issuer of such policy has filed for protection under applicable bankruptcy
laws or is otherwise in the process of liquidating or has been liquidated, or
(iii) any other written notice that such policies are no longer in full force or
effect.
ss.3.17 Compliance with Laws. Except as set forth on Schedule 3.17, the
Companies are in compliance with all applicable laws, regulations, orders,
judgments and decrees, except where the failure to so comply would not have a
Material Adverse Effect.
ss.3.18 Employment Relations. Except as set forth on Schedule 3.18: (a)
The Companies are in compliance with all Federal, state or other applicable
laws, domestic or foreign, respecting employment and employment practices, and
are not engaged in any unfair labor practice, except where the failure to so
comply would not have a Material Adverse Effect;
(b) no unfair labor practice complaint against the Companies is pending
before the National Labor Relations Board;
(c) there is no labor strike, slowdown or stoppage actually pending or to
the Companies' knowledge, threatened against the Companies;
(d) neither Arcon Holdings nor the Company is a party to any collective
bargaining agreement and no collective bar-
-31-
gaining agreement is currently being negotiated by the Companies; and
(e) except for written claims for benefits in the ordinary course, no
claim in respect of the employment of any employee has been asserted or, to the
knowledge of the Companies, threatened, against the Companies.
ss.3.19 Employee Benefit Plans. (a) List of Plans. Set forth in Schedule
3.19 attached hereto is an accurate and complete list of all domestic and
foreign (i) "employee benefit plans," within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations thereunder ("ERISA"); (ii) bonus, stock option, stock purchase,
restricted stock, incentive, profit-sharing, pension, retirement, deferred
compensation, medical, life, disability, accident, accrued leave, vacation, sick
pay, sick leave, supplemental retirement and unemployment benefit plans and/or
programs (whether or not insured); and (iii) employment, consulting,
termination, and severance contracts or agreements; for active, retired or
former employees or directors, whether or not any such plans, programs,
arrangements, commitments, contracts, agreements and/or practices (referred to
in (i), (ii) or (iii)) are in writing or are otherwise exempt from the
provisions of ERISA; that have been established, maintained or contributed to
(or with respect to which an obligation to contribute has been
-32-
undertaken by Arcon Holdings or the Company or with respect to which any
potential liability is borne by Arcon Holdings or the Company (including, for
this purpose and for the purpose of all of the representations in Sections
3.19(c) and (d), any predecessors to Arcon Holdings or the Company and all
employers (whether or not incorporated) that are by reason of common control
treated together with Arcon Holdings or the Company as a single employer (A)
within the meaning of Section 414 of the Code or (B) as a result of Arcon
Holdings or the Company being or having been a general partner of any such
employer in each case while treated as a single employer with Arcon Holdings or
the Company, within the last six years from the date hereof ("Employee Benefit
Plans").
(b) Status of Plans. Each Employee Benefit Plan has at all times been
maintained and operated in compliance with its terms and the requirements of all
applicable laws, including, without limitation, ERISA and the Code except where
failure to so comply will not have a Material Adverse Affect. Except as set
forth on Schedule 3.19 attached hereto, (i) no complete or partial termination
of any Employee Benefit Plan has occurred or is expected to occur and (ii)
neither Arcon Holdings nor the Company has any commitment, intention or
understanding to create, modify or terminate any Employee Benefit Plan. Except
as required by applicable law, no condition or, to the Company's or Arcon
Holding's knowledge,
-33-
circumstance exists, that would prevent the amendment or termination of any
Employee Benefit Plan. No event has occurred and, to the Company's or Arcon
Holding's knowledge, no condition or circumstance has existed, that could result
in a material increase in the benefits under or the expense of maintaining any
Employee Benefit Plan from the level of benefits or expense incurred for the
most recent fiscal year ended thereof other than premium increases in the normal
course.
(c) Liabilities. No Employee Benefit Plan subject to Section 412 of the
Code or Section 302 of ERISA has incurred any accumulated funding deficiency
within the meaning of Section 412 of the Code or Section 302 of ERISA,
respectively, or has applied for or obtained a waiver from the Internal Revenue
Service ("IRS") of any minimum funding requirement under Section 412 of the
Code. Except as set forth in Schedule 3.19, neither Arcon Holdings nor the
Company currently maintains, sponsors or is required to make contributions, nor
within the previous six years maintained, contributed to, or was required to
make contributions, to any "employee pension benefit plan" (within the meaning
of Section 3(2) of ERISA) which is subject to Title IV of ERISA. Neither Arcon
Holdings nor the Company has ever contributed to or had any obligation to
contribute to (or borne any
-34-
liability with respect to) any "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA).
Neither Arcon Holdings nor the Company maintains any Employee
Benefit Plan which is a "group health plan" (as such term is defined in Section
5000(b)(1) of the Code) that has not been administered and operated in all
respects in substantial compliance with the applicable requirements of Section
601 of ERISA and Section 4980B(f) of the Code and neither Arcon Holdings nor the
Company is subject to any material liability, including, without limitation,
additional contributions, fines, penalties or loss of tax deduction as a result
of such administration and operation. Except as set forth on Schedule 3.19,
neither Arcon Holdings nor the Company maintains any Employee Benefit Plan
(whether qualified within the meaning of Section 401(a) of the Code or
nonqualified) providing for retiree health and/or life benefits and having
unfunded liabilities. Neither Arcon Holdings nor the Company maintains any
Employee Benefit Plan which is an "employee welfare benefit plan" (as such term
is defined in Section 3(1) of ERISA) that has provided any "disqualified
benefit" (as such term is defined in Section 4976(b) of the Code) with respect
to which an excise tax could be imposed.
Except as set forth in Schedule 3.19, neither Arcon Holdings nor the
Company has any unfunded liabilities
-35-
pursuant to any Employee Benefit Plan that is not intended to be qualified under
Section 401(a) of the Code.
Neither Arcon Holdings nor the Company has incurred any liability
for any tax or excise tax arising under Section 4971, 4977, 4978, 4978B, 4979,
4980 or 4980B of the Code, and no event has occurred and is continuing and, to
each of their knowledge, no condition or circumstance has existed and is
continuing that could give rise to any such liability.
There are no actions, suits or claims pending, or, to the knowledge
of Arcon Holdings and the Company, threatened, anticipated or expected to be
asserted against any Employee Benefit Plan or the assets of any such plan (other
than routine claims for benefits and appeals of denied routine claims). No civil
or criminal action brought pursuant to the provisions of Title I, Subtitle B,
Part 5 of ERISA is pending, or to the knowledge of Arcon Holdings and the
Company, threatened, anticipated, or expected to be asserted against Arcon
Holdings or the Company or any fiduciary of any Employee Benefit Plan, in any
case with respect to any Employee Benefit Plan. No Employee Benefit Plan or, to
the knowledge of Arcon Holdings and the Company, any fiduciary thereof has been
the direct or indirect subject of an audit, investigation or examination by any
governmental or quasi-governmental agency which audit, investigation or
examination has not been settled.
-36-
(d) Contributions. Full payment has been made of all amounts which Arcon
Holdings or the Company is required, under applicable law or under any Employee
Benefit Plan or any agreement relating to any Employee Benefit Plan to which
Arcon Holdings or the Company is a party, to have paid as contributions thereto
as of the last day of the most recent fiscal year of such Employee Benefit Plan
ended prior to the date hereof which are required to be contributed as of the
date hereof. All such contributions have been fully deducted for income tax
purposes to the extent permitted by applicable law and no such deduction has
been challenged or, to the knowledge of the Company and Arcon Holdings after due
inquiry, disallowed, by any governmental entity, and to the knowledge of Arcon
Holdings and the Company no event has occurred and no condition or circumstance
has existed that could give rise to any such challenge or disallowance. Each of
Arcon Holdings and the Company has made adequate provision for reserves to meet
contributions that have accrued but that have not been made because they are not
yet due under the terms of any Employee Benefit Plan or related agreements.
Except as set forth in Schedule 3.19, benefits under all Employee Benefit Plans
are as represented and have not been increased subsequent to the date as of
which documents have been provided.
-37-
(e) Tax Qualification. Each Employee Benefit Plan intended to be qualified
under Section 401(a) of the Code has been determined to be so qualified by the
Internal Revenue Service. Each trust established in connection with any Employee
Benefit Plan which is intended to be exempt from Federal income taxation under
Section 501(a) of the Code has been determined to be so exempt by the Internal
Revenue Service. Since the date of each most recent determination referred to in
this paragraph (f), no event has occurred and no condition or, to the knowledge
of Arcon Holdings and the Company, circumstance has existed that resulted or is
likely to result in the revocation of any such determination or that could
adversely affect the qualified status of any such Employee Benefit Plan or the
exempt status of any such trust.
(f) Transactions. No "reportable event" (as such term is defined in
Section 4043 of ERISA) for which the 30-day notice requirement has not been
waived by the PBGC has occurred or is expected to occur with respect to any
Employee Benefit Plan. Neither Arcon Holdings nor the Company nor any of their
respective directors, officers, employees or, to the knowledge of Arcon Holdings
and the Company, other persons who participate in the operation of any Employee
Benefit Plan or related trust or funding vehicle, has engaged in any transaction
with respect to any Employee Benefit Plan or breached any applicable fiduciary
responsibilities or obligations
-38-
under Title I of ERISA that would subject any of them to a tax, penalty or
liability for prohibited transactions under ERISA or the Code or would result in
any claim being made under, by or on behalf of any such Employee Benefit Plan by
any party with standing to make such claim.
(g) Triggering Events. The execution of this Agreement and the
consummation of the transactions contemplated hereby, do not constitute a
triggering event under any Employee Benefit Plan or program, whether or not
legally enforceable, which will or may result in any payment (whether of
severance pay or otherwise), acceleration, vesting or increase in benefits to
any employee or former employee or director of Arcon Holdings and/or the
Company. Except as set forth in Schedule 3.19, no Employee Benefit Plan provides
for the payment of severance benefits upon the termination of an employee's
employment.
(h) Documents. Arcon Holdings and/or the Company has delivered or caused
to be delivered to Purchaser and its counsel true and complete copies of the
following documents in connection with each Employee Benefit Plan (where
applicable): (i) all Employee Benefit Plans as in effect on the date hereof,
together with all amendments thereto, including, in the case of any Employee
Benefit Plan not set forth in writing, a written description thereof; (ii) all
current summary plan descriptions, summaries of material modifica-
-39-
tions thereof, and material written employee communications; (iii) all current
trust agreements, declarations of trust and other documents establishing other
funding arrangements (and all amendments thereto and the latest financial
statements thereof); (iv) the most recent Internal Revenue Service determination
letter obtained with respect to each Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code or exempt under Section 501(a) of the
Code; (v) the annual report on Internal Revenue Service Form 5500-series for
each of the last three plan years for each Employee Benefit Plan required to
file such form; (vi) the most recently prepared financial statements; and (vii)
all contracts relating to each Employee Benefit Plan, including, without
limitation, service provider agreements, insurance contracts, annuity contracts,
investment management agreements, subscription agreements, participation
agreements, and recordkeeping agreements.
ss.3.20 Interests in Customers, Suppliers, etc. Except as set forth on
Schedule 3.20 attached hereto, none of the Sellers nor, to the knowledge of the
Companies or any officer or director of Arcon Holdings or the Company,
possesses, directly or indirectly, any ownership interest in, or is a director,
officer or employee of, any Person which is a supplier, customer, lessor,
lessee, licensor, developer or competitor of Arcon Holdings or the Company.
Ownership of
-40-
securities of a company whose securities are registered under the Securities
Exchange Act of 1934 of 5% or less of any class of such securities shall not be
deemed to be a financial interest for purposes of this Section 3.20.
ss.3.21 Environmental Laws and Regulations. Except as set forth on
Schedule 3.21 and except for that which would not have a Material Adverse
Effect:
(a) Hazardous Materials (as hereinafter defined) have not been generated,
used, treated stored, released or disposed by Arcon Holdings or the Company or,
to the knowledge of the Companies, by any other Person on any Company Property,
except in substantial compliance with Environmental Laws.
(b) Each of Arcon Holdings and the Company is in substantial compliance
with Environmental Laws (as hereinafter defined) and the requirements of permits
issued under such Environmental Laws with respect to the Companies' business,
operations and any Company Property.
(c) There are no pending or, to the knowledge of the Companies, threatened
Environmental Claims (as hereinafter defined) against Arcon Holdings, the
Company or any Company Property.
(d) There are no facts, circumstances, conditions or occurrences regarding
the Companies' past or present business or operations or any Company Property or
former Company
-41-
Property that could reasonably be anticipated (i) to form the basis of an
Environmental Claim against Arcon Holdings, the Company or any Company Property
or (ii) to cause such Company Property to be subject to any restrictions on its
ownership, occupancy, use or transferability under any Environmental Law.
(e) For purposes of this Section 3.21 the following definitions shall
apply:
"Company Property" means any real property and improvements owned,
leased, used, operated or occupied by Arcon Holdings or the Company.
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is friable, urea formaldehyde
foam insulation, transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls, and radon gas; and (b) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," or words of similar import, under any applicable Environmental Law.
"Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code, policy or rule of common law in effect and in
each case as amended
-42-
as of the Closing Date, and any judicial or administrative interpretation
thereof as of the Closing Date, including any judicial or administrative order,
consent decree or judgment, relating to the environment, health, safety or
Hazardous Materials, including the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. ss. 6901 et seq.;
the Resource Conservation and Recovery Act, as amended, 42 U.S.C. ss. 9601 et
seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss. 1251 et
seq.; the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.; the Clean
Air Act, 42 U.S.C. ss. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. ss.
300f et seq.; the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq.; the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. ss.651 et
seq.; and their state and local counterparts and equivalents.
"Environmental Claims" means administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, investigations or proceedings by, from or in favor
of any governmental or regulatory authorities or any other party or entity
alleging liability (a) for enforcement, cleanup, investigatory, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) for damages, contribution, indemnification, cost
recovery, com-
-43-
pensation or injunctive relief resulting from Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.
(e) The Purchaser agrees that the only representations and warranties of
Arcon Holdings and the Company or the Sellers herein as to Environmental Laws,
Environmental Claims and all other environmental-related matters are those
contained in this Section 3.21.
ss.3.22 Bank Accounts, Powers of Attorney. Set forth on Schedule 3.22
attached hereto is an accurate and complete list showing (a) the name and
address of each bank in which Arcon Holdings or the Company has a material
account or safe deposit box, the number of any such account or any such box and
the names of all persons authorized to draw thereon or to have access thereto
and (b) the names of all persons, if any, holding powers of attorney from Arcon
Holdings or the Company.
ss.3.23 Compensation of Employees. The Company has previously provided the
Purchaser with an accurate and complete list for fiscal year 1995 showing the
names of all persons employed by the Company who received more than $50,000 in
1995 cash compensation (including, without limitation, salary, commission and
bonus) and who are employed by the Companies as of the date hereof. Such list
sets forth the present salary or hourly wage (including, without limitation,
-44-
salary, commission and bonus) and fringe benefits (excluding Employee Benefit
Plans set forth on Schedule 3.19), of each such person.
ss.3.24 Conduct of Business. Except as disclosed on Schedule 3.24 attached
hereto and except as expressly contemplated by this Agreement, since October 31,
1995, neither Arcon Holdings nor the Company has taken any action which, if
taken subsequent to the execution of this Agreement and on or prior to the
Closing Date, would constitute a breach of the Companies' agreements set forth
in clauses (a) through and including (m) of Section 6.1.
ss.3.25 Customer Relations. Except as set forth on Schedule 3.25 attached
hereto, neither Arcon Holdings nor the Company has, since June 30, 1996,
received written notice (nor, to the knowledge of the Companies, any oral
notice) from any of the top ten customers of Arcon Holdings or the Company
(based on 1995 revenues of the Companies) that any such customer intends to
reduce the volume or dollar amount of purchases from Arcon Holdings or Company
which could have a Material Adverse Effect.
ss.3.26 Condition of Assets. The assets and properties utilized in and
material to the conduct of the Companies' business, whether owned or leased, are
in the aggregate adequate operating condition and repair (normal wear and tear
-45-
excepted) and are adequate for the purposes for which they are presently being
used.
ss.3.27 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of Arcon Holdings, the Company or the Sellers, is, or will be,
entitled to any commission or broker's or finder's fees from Arcon Holdings or
the Company, or from any Person controlling, controlled by or under common
control with the Company, in connection with any of the transactions
contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS OF THE SELLERS
ss.4. Representations of the Sellers. Each of the Sellers represents and
warrants as of the date hereof (severally and not jointly and with each Seller's
personal liability expressly limited as set forth in Article X) as to such
Seller to the Purchaser as follows:
ss.4.1 Ownership of Stock. Each of the Sellers is the lawful owner of the
Stock and/or the Options listed under column B on Annex I attached hereto, free
and clear of all liens, encumbrances, restrictions and claims of every kind.
Such Seller has the (partnership in the case of Northwood Ventures and Xxxx,
Xxxx & Co.; and limited liability company in the case of Northwood Capital
Partners LLC) full legal right, power and authority to enter into this Agreement
and
-46-
to sell, assign, transfer and convey such shares of Stock pursuant to this
Agreement, and the delivery to the Purchaser of such shares of Stock pursuant to
the provisions of this Agreement will transfer to the Purchaser good title
thereto, free and clear of all Encumbrances, except for those encumbrances
created by the Purchaser or its affiliates in connection with the acquisition by
the Purchaser of such shares pursuant to this Agreement.
ss.4.2 Authorization and Validity of Agreement. Northwood Ventures is a
limited partnership validly existing and in good standing under the laws of the
State of New York. Xxxx, Loeb & Co. is a general partnership, validly existing
and in good standing under the laws of the State of New York. Northwood Capital
Partners, LLC is a limited liability company, validly existing and in good
standing under the laws of the State of New York. Such Seller has the requisite
(partnership in the case of Northwood Ventures and Xxxx, Xxxx & Co.; and limited
liability company in the case of Northwood Capital Partners LLC) power and
authority to execute and deliver this Agreement, to perform its respective
obligations hereunder and to consummate the transactions contemplated to be
performed by it hereby. This Agreement has been duly executed and delivered by
such Seller and, assuming the due execution of this Agreement by the Purchaser,
is a valid and binding obligation of such Seller, enforceable against such
-47-
Seller in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization and similar laws affecting the enforcement of creditors' rights
generally and to general equitable principles. The representations and
warranties of Northwood Ventures, Xxxx, Loeb & Co. and Northwood Capital
Partners, LLC set forth in this Section 4.2 are made only by Northwood Ventures,
Xxxx, Xxxx & Co. and Northwood Capital Partners LLC, respectively, as to itself,
and not by any other Seller.
ss.4.3 Restrictive Documents. Subject to the termination or expiration of
all applicable waiting periods under the HSR Act, such Seller is not subject to
any mortgage, lien, lease, agreement, instrument, order, law, rule, regulation,
judgment or decree, or any other restriction of any kind or character which
would prevent consummation by such Seller of the transactions contemplated by
this Agreement.
ss.4.4 Consents. Except as may be required under the HSR Act or as set
forth on Schedule 4.4 hereto, no consents, approvals or authorizations of, or
filings with, any governmental authority or any other person or entity are
required in connection with the execution and delivery of this Agreement by such
Seller and the consummation of the transactions contemplated hereby to be
consummated by it.
-48-
ss.4.5 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of such Seller is, or will be, entitled to any commission or broker's
or finder's fees from Arcon Holdings, the Company, or from any Person
controlling, controlled by or under common control with the Company, in
connection with any of the transactions contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS OF THE PURCHASER
ss.5. Representations of the Purchaser. The Purchaser represents and
warrants as of the date hereof to the Companies and each of the Sellers as
follows:
ss.5.1 Existence and Good Standing; Power and Authority. The Purchaser is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Purchaser has the requisite corporate power
and authority to enter into, execute and deliver this Agreement and perform its
obligations hereunder. This Agreement has been duly authorized and approved by
the Purchaser and, assuming the due execution of this Agreement by each of the
Sellers, is a valid and binding obligation of the Purchaser enforceable against
it in accordance with its terms, except to the extent that its enforceability
may be subject to applicable bankruptcy, insolvency, reorganization, moratorium
-49-
and other similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles.
ss.5.2 Restrictive Documents; No Legal Bar. The Purchaser is not subject
to any mortgage, lien, lease, agreement, instrument, order, law, rule,
regulation, judgment or decree, or any other restriction of any kind or
character which would prevent consummation by it of the transactions
contemplated by this Agreement. Neither the execution and delivery of this
Agreement by the Purchaser, nor the consummation of the transactions
contemplated hereby by the Purchaser, (i) violates any provision of the
certificate of incorporation or by-laws of the Purchaser, (ii) except for the
termination or expiration of all applicable waiting periods under the HSR Act,
constitutes a violation of any applicable law, or (iii) violates or conflicts
with, or results in any breach of any of the terms of any material contract,
commitment, agreement, or lease of any kind to which the Purchaser is a party or
by which the Purchaser or any of its assets are bound including, without
limitation, the financing documents contemplated by the commitment letter
referred to in Section 7.10.
ss.5.3 Purchase for Investment. The Purchaser will acquire the Stock for
its own account for investment and not with a view toward any resale or
distribution of all or any part thereof; provided, however, that the disposition
of the
-50-
Purchaser's property shall at all times remain within the sole control of the
Purchaser.
ss.5.4 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Purchaser is, or will be, entitled to any commission or
broker's or finder's fees from the Seller in connection with any of the
transactions contemplated by this Agreement.
ss.5.5 Litigation; Disputes. There is no action, suit, proceeding at law
or in equity, arbitration or administrative or other proceeding by or before
(or, to the knowledge of the Purchaser any investigation by) any governmental or
other instrumentality or agency, pending, or, to the knowledge of the Purchaser,
threatened, against the Purchaser which challenges the validity of this
Agreement, or which if adversely determined, would adversely materially affect
its ability to consummate the transactions contemplated by this Agreement; and
the Purchaser knows of no valid basis for any such action, proceeding or
investigation.
ss.5.6 Consents. Except as may be required under the HSR Act or as set
forth on Schedule 5.6 hereto, no consents, approvals or authorizations of, or
filings with, any governmental authority or any other person or entity are
required in connection with the execution and delivery of this Agreement by the
Purchaser and the consummation of the transactions contemplated hereby to be
consummated by it.
-51-
ARTICLE VI
TRANSACTIONS PRIOR TO THE CLOSING DATE
ss.6.1 Conduct of Business of the Companies. During the period from the
date of this Agreement to the Closing Date, the Companies shall conduct their
operations only according to its ordinary course of business; use their
reasonable efforts to preserve intact its business organizations, keep available
the services of their officers and employees and maintain its relationships and
goodwill with licensors, suppliers, distributors, customers, landlords, agents
and others having business relationships with it; confer with the Purchaser (as
reasonably requested by the Purchaser during normal business hours without undue
interruption) concerning the business, operations and finances of the Companies.
Notwithstanding the immediately preceding sentence, prior to the Closing Date,
except as permitted in Section 2.3 and otherwise except as may be first approved
in writing by the Purchaser, each of Arcon Holdings and the Company shall, (a)
refrain from amending or modifying its Certificate of Incorporation or By-Laws
from its form on the date of this Agreement, (b) refrain from paying or
increasing any bonuses, salaries, or other compensation to any director,
officer, employee or stockholder or entering into any employment, severance, or
similar agreement with any
-52-
director, officer, or employee other than, in each case, in the ordinary course
of business consistent with past practice or as disclosed to the Purchaser
pursuant to Section 3.23 hereof, (c) except as set forth on Schedule 3.19,
refrain from the adopting or increasing of any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or other employee benefit
plan for or with any of its employees, (d) refrain from entering into any
material contract or commitment except material contracts and commitments in the
ordinary course of business consistent with past practice, (e) refrain from
increasing its indebtedness for borrowed money, except borrowings in the
ordinary course of business, (f) refrain from cancelling or waiving any claim or
right of substantial value which individually or in the aggregate is material
other than in the ordinary course of business, (g) refrain from declaring or
paying any dividends in respect of its capital stock or redeeming, purchasing or
otherwise acquiring any of its capital stock, (h) refrain from making any
material change in accounting methods or practices, except as required by law or
generally accepted accounting principles, (i) refrain from issuing or selling
any shares of capital stock or any other securities, or issuing any securities
convertible into, or options, warrants or rights to purchase or subscribe to, or
entering into any arrangement or contract with respect to the issue and sale
-53-
of, any shares of its capital stock or any other securities, or making any other
changes in its capital structure, except pursuant to outstanding options or
other rights disclosed on Schedule 3.2 attached hereto, (j) refrain from
selling, leasing or otherwise disposing of any material asset or property other
than the sale of inventory and other assets in the ordinary course of business
consistent with past practices, (k) refrain from entering into any commitment
for the making of a capital expenditure, except in the ordinary course of
business consistent with past practice, (l) refrain from writing off as
uncollectible any notes or accounts receivable, except write-offs in the
ordinary course of business charged to applicable reserves, none of which
individually or in the aggregate is material and (m) refrain from agreeing in
writing to do any of the foregoing.
ss.6.2 Exclusive Dealing. During the period from the date of this
Agreement to the earlier of the termination of this Agreement and the Closing
Date, none of the Sellers, Arcon Holdings or the Company shall take any action
to, directly or indirectly, encourage, initiate or engage in discussions or
negotiations with, or provide any information to, any Person, other than the
Purchaser, concerning any purchase of any capital stock of Arcon Holdings or the
Company or any merger, sale of all or substantially all assets or similar
transaction involving Arcon Holdings or the Company.
-54-
ss.6.3 Review of the Companies. Upon reasonable notice, during normal
business hours and without undue interruption, the Companies shall permit the
Purchaser and its representatives to have, after the date of execution of this
Agreement, full access to the premises and to all the books and records of the
Companies and to cause the officers of the Companies to furnish the Purchaser
with such financial and operating data and other information with respect to the
business and properties of the Company as the Purchaser shall from time to time
reasonably request. The parties hereto acknowledge that the Purchaser, Arcon
Holdings, the Company and the Sellers have entered into a Confidentiality
Agreement dated December 6, 1995 (the "Confidentiality Agreement") and that
information obtained during any such review will be subject to the terms of the
Confidentiality Agreement.
ss.6.4 Reasonable Efforts. Each of Arcon Holdings, the Company, the
Sellers and the Purchaser shall reasonably cooperate and use their respective
reasonable best efforts to cause to be made the filing of Notification and
Report Forms under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act") with the Federal Trade Commission and the Antitrust
Division of the Department of Justice) and to obtain, prior to the Closing Date,
all required consents and approvals of parties to contracts with Arcon Holdings
or the Company set forth in Schedule 3.12
-55-
attached hereto and designated by an asterisk and to fulfill the conditions to
the sale contemplated hereby.
ss.6.5 Agreement by the Purchaser Regarding No Other Representations or
Warranties by the Sellers. The Purchaser agrees that except for the
representations and warranties expressly set forth in Articles II and III of
this Agreement, neither Arcon Holdings, the Company nor any of the Sellers nor
any affiliate thereof has made and shall not be construed as having made to the
Purchaser or to any representative or affiliate thereof any representation or
warranty of any kind. Without limiting the generality of the foregoing, the
Purchaser agrees that neither Arcon Holdings, the Company nor any of the Sellers
nor any affiliate thereof makes or has made any representation or warranty to
the Purchaser or to any representative or affiliate thereof with respect to any
projections, estimates or budgets heretofore or hereafter delivered to or made
available to the Purchaser or its counsel, accountants, advisors, lenders,
representatives or affiliates of future revenues, expenses or expenditures,
future results of operations (or any component thereof), future cash flows (or
any component thereof) or future financial condition (or any component thereof)
of the Companies or the future business, operations or affairs of the Companies.
ss.6.6 Satisfaction of Financing Condition. The Purchaser shall use all
reasonable efforts to satisfy the
-56-
condition set forth in Section 7.10 on or prior to the Termination Date.
ARTICLE VII
CONDITIONS TO THE PURCHASER'S OBLIGATIONS
ss.7. Conditions to the Purchaser's Obligations. The obligation of the
Purchaser to purchase the Stock contemplated by this Agreement is conditioned
upon satisfaction, at or prior to the Closing, of the following conditions:
ss.7.1 Opinions of Counsel. The Companies shall have furnished the
Purchaser with an opinion, dated the Closing Date, of Xxxxxx & Xxxxxx, in form
and in substance reasonably acceptable to the Purchaser and its counsel.
ss.7.2 Good Standing and Other Certificates. The Purchaser shall have
received (a) copies of the charters, including all amendments thereto, in each
case certified by the Secretary of State or other appropriate official of the
jurisdiction of incorporation of each of Arcon Holdings and the Company, (b) a
certificate from the Secretary of State or other appropriate official of the
jurisdiction of incorporation of each of Arcon Holdings and the Company to the
effect that such company is in good standing and listing all charter documents
of such company on file, (c) a certificate from the Secretary of State or other
appropriate official in each State in which each of Arcon Holdings and the
Company is
-57-
qualified to do business to the effect that such company is in good standing in
such State, (d) a certificate as to the tax status of each of Arcon Holdings and
the Company from the appropriate official in their respective jurisdictions of
incorporation and each state in which such company is qualified to do business
and (e) a copy of the By-Laws of Arcon Holdings and the Company certified by the
Secretary of such company as being true and correct and in effect on the Closing
Date.
ss.7.3 [Intentionally Omitted].
ss.7.4 Truth of Representations and Warranties. The representations and
warranties of the Companies contained in this Agreement and the representations
and warranties of the Sellers contained in this Agreement shall be true and
correct in all material respects (other than those representations and
warranties of the Companies and the Sellers which are qualified by
"materiality," "material adverse effect" or words of equivalent import, which
shall be true and correct) on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date,
and the Companies and the Seller shall have each delivered to the Purchaser a
certificate, dated the Closing Date, to such effect.
ss.7.5 Performance of Agreements. All of the agreements of the Companies
and the Sellers to be performed prior to the
-58-
Closing pursuant to the terms of this Agreement shall have been duly performed
in all material respects, and the Companies and the Sellers shall have each
delivered to the Purchaser a certificate, dated the Closing Date, to such
effect.
ss.7.6 No Litigation Threatened. No action or proceedings shall have been
instituted or, to the knowledge of the Companies or the Sellers, threatened
before a court or other government body or by any public authority to restrain
or prohibit any of the transactions contemplated hereby.
ss.7.7 Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, disclosed on Schedules 3.12 or 5.6 attached hereto
and designated by an asterisk or required in connection with the consummation of
the transactions contemplated by this Agreement shall have been received.
ss.7.8 Termination of Security Interests. All security interests, liens,
mortgages, claims or other encumbrances of any kind securing Outstanding
Indebtedness shall be released.
ss.7.9 Resignations. All members of the Board of Directors of the
Companies shall have tendered their resignation from such positions effective at
the Closing.
ss.7.10 Financing. The Purchaser shall have received financing on
substantially the same terms and conditions as set forth in the commitment
letter of Bankers Trust company
-59-
dated August 27, 1996, a copy of which has been delivered to the Seller's
Representative.
ss.7.11 [Intentionally omitted]
ss.7.12 FIRPTA. The Sellers shall have furnished to the Purchaser, on or
prior to the Closing Date, a non-foreign person affidavit required by Section
1445 of the Code.
ss.7.13 HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the transactions contemplated by this Agreement shall have
expired or terminated.
ss.7.14 Escrow Agreement. The Sellers, the Purchaser and the Escrow Agent
shall have entered into an escrow agreement substantially in the form of Exhibit
A hereto (the "Escrow Agreement").
ARTICLE VIII
CONDITIONS TO THE COMPANIES AND
THE SELLERS' OBLIGATIONS
ss.8. Conditions to the Seller's Obligations. The obligations of the
Companies and the Sellers to effect the transactions contemplated by this
Agreement on the Closing Date are conditioned upon satisfaction or waiver, at or
prior to the Closing, of the following conditions:
ss.8.1 Opinions of Counsel. The Purchaser shall have furnished the Sellers
with an opinion, dated the Closing
-60-
Date, of White & Case, in form and in substance reasonably acceptable to the
Sellers' Representative and its counsel.
ss.8.2 Truth of Representations and Warranties. The representations and
warranties of the Purchaser contained in this Agreement shall be true and
correct in all material respects (other than those representations and
warranties of the Companies and the Sellers which are qualified by
"materiality," "material adverse effect" or words of equivalent import, which
shall be true and correct) on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date,
and the Purchaser shall have delivered to the Sellers an officer's certificate,
dated the Closing Date, to such effect.
ss.8.3 Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, disclosed on Schedule 3.12 and Schedule 4.4 and
designated by an asterisk shall have been received.
ss.8.4 Performance of Agreements. All of the agreements of the Purchaser
to be performed prior to the Closing pursuant to the terms of this Agreement
shall have been duly performed in all material respects, and the Purchaser shall
have delivered to the Sellers an officer's certificate, dated the Closing Date,
to such effect.
-61-
ss.8.5 No Litigation Threatened. No action or proceeding shall be
instituted or, to the knowledge of the Purchaser, threatened before a court or
other government body or any public authority to restrain or prohibit any of the
transactions contemplated hereby, and the Purchaser shall have delivered to the
Sellers an officer's certificate, dated the Closing Date, to such effect.
ss.8.6 HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the transactions contemplated by this Agreement shall have
expired or terminated.
ss.8.7 Warrants. The Bank shall have executed and delivered an agreement
with Arcon Holdings providing for the purchase by Arcon Holdings of the Warrants
from the Bank, in form and substance reasonably acceptable to Arcon Holdings and
such purchase shall have been consummated.
ARTICLE IX
TAX MATTERS
ss.9.1 Tax Returns. (a) The Sellers, acting through an appointed
representative (the "Sellers' Representative"), shall have the exclusive
authority and obligation, subject to compliance by the Purchaser and the
Companies with their obligations under this Article IX, to prepare and timely
-62-
file, or cause to be prepared and timely filed, (i) all Returns of the Company
and Arcon Holdings that are due and (ii) at its sole option and discretion, all
applications or requests for refunds ("Refund Requests") of Taxes paid by or on
behalf of the Company and Arcon Holdings, in each case, with respect to any
taxable year or other taxable period ending on or prior to the Closing Date.
Such authority shall include, but not be limited to, the determination of the
manner in which any items of income, gain, deduction, loss or credit arising out
of the income, properties and operations of the Company and Arcon Holdings shall
be reported or disclosed in such Returns and Refund Requests; provided, however,
that such Returns and Refund Requests shall be prepared by treating items on
such Returns and Refund Requests in a manner consistent with the past practices
with respect to such items, unless otherwise required by law. The Sellers'
Representative shall provide to the Purchaser drafts of all Returns and Refund
Requests of the Company and Arcon Holdings required or permitted to be prepared
and filed by the Sellers' Representative under this Section 9.1(a) at least
thirty (30) days prior to the due date (including extensions) for the filing of
such Returns or Refund Requests. No later than fifteen (15) days after receipt
of such draft, the Purchaser shall give written notice (the "Dispute Notice") of
the existence of any objection the
-63-
Purchaser may have to any items set forth on such draft Returns or Refund
Requests to the Sellers' Representative, which Dispute Notice shall specify in
reasonable detail the nature and basis for such objection (and in the absence of
any such Dispute Notice, the Purchaser shall be deemed to have no objection to
the filing of such Return or Refund Request). The Purchaser and the Sellers'
Representative agree to consult and use their best efforts to resolve in good
faith any such objection within 15 days of receipt by the Sellers'
Representative of the Dispute Notice. If the Sellers' Representative and the
Purchaser are unable to resolve the disputed matters within such 15-day period
all disputed matters raised in the Dispute Notice and not so resolved shall be
submitted to such nationally recognized independent accounting firm as is chosen
by mutual agreement of the Sellers' Representative and the Purchaser acting in
good faith (such firm which accepts the engagement, the ("Independent Auditor"),
for final resolution. Each party shall be permitted to submit to the Independent
Auditor a written statement in support of its position with respect to the
disputed matters raised in the Dispute Notice and not resolved. The Sellers'
Representative and the Purchaser shall use their respective reasonable best
efforts to cause the Independent Auditor to make its determination as soon as
possible, but in no event later than 30 days after receipt of
-64-
the disputed matters. Such determination shall be final and binding upon all
parties hereto. The Independent Auditor's determination shall be limited to
matters of dispute which are raised in the Dispute Notice and not resolved by
the Sellers' Representative and the Purchaser. The Independent Auditor's
resolution of any such dispute shall be reflected in a written report which
shall be delivered to the Sellers' Representative and the Purchaser. All fees
and disbursements of the Independent Auditor and any interest or penalties
attributable to the late filing of a Return that results from the failure of the
parties to resolve such issues prior to the due date of such Return, shall be
borne by the party whose position with respect to such issues is most at
variance from the position with respect to such issues determined by the
Independent Auditor. The Sellers' Representative shall not file any Return or
Refund Request without the prior consent of the Purchaser, which consent shall
not be unreasonably withheld or delayed; provided, however, that no such consent
shall be required if the Purchaser shall not have delivered a Dispute Notice or
if the objections contained in a Dispute Notice shall have been finally
resolved, in each case in accordance with this Article IX. None of Purchaser,
the Company, Arcon Holdings, nor any affiliate of the foregoing shall file any
application or request to extend, or consent to the extension of, the
-65-
time to file any Return of the Company or Arcon Holdings with respect to any
taxable year or other taxable period ending on or prior to the Closing Date,
including any Return of the Company or Arcon Holdings for the short taxable year
ending on the Closing Date, unless requested to do so by the Sellers'
Representative (provided, however, that no such extended period shall extend
beyond the termination of the Escrow Account pursuant to the Escrow Agreement).
(b) Except as provided in Section 9.1(a), the Purchaser shall have the
exclusive authority and obligation to prepare and timely file, or cause to be
prepared and timely filed, all Returns and Refund Requests of the Company and
Arcon Holdings. Such authority shall include, but not be limited to, the
determination of the manner in which any items of income, gain, deduction, loss
or credit arising out of the income, properties and operations of the Company
and Arcon Holdings shall be reported or disclosed on such Returns and Refund
Requests; provided, however, with respect to Returns and Return Requests to be
filed by the Purchaser pursuant to this Section 9.1 for taxable periods
beginning before the Closing Date and ending after the Closing Date, items set
forth on such Returns and Return Requests shall be treated in a manner
consistent with the past practices of the Companies with respect to such items,
unless otherwise required by law. The Purchaser shall provide to the Sellers'
Representative
-66-
drafts of all Returns and Refund Requests of the Company and Arcon Holdings
required or permitted to be filed by the Purchaser pursuant to this Section
9.1(b) with respect to taxable years or other taxable periods beginning before
the Closing Date and ending after the Closing Date at least thirty (30) days
prior to the due date (including extensions) for the filing of such Returns or
Refund Requests. No later than fifteen (15) days after receipt of such draft,
the Sellers' Representative shall give the Purchaser a Dispute Notice with
respect to the existence of any objection (which Dispute Notice shall specify in
reasonable detail the nature and basis of such objection) the Sellers'
Representative may have to any items set forth on such draft Returns or Refund
Requests (and in the absence of any such timely objection, the Sellers'
Representative shall be deemed to have no objection to the filing of such Return
or Refund Request). The Purchaser and the Sellers' Representative agree to
consult and use their best efforts to resolve in good faith any such objection
within such 15-day period. In the event that the Purchaser and the Sellers'
Representative are unable to resolve such objection within such 15-day period,
the dispute resolution and cost allocation procedure set forth in Section 9.1(a)
shall apply. None of the Purchaser, Arcon Holdings, the Company, nor any
affiliate of the foregoing shall file any such Return or Refund Request with
respect to
-67-
taxable years or other taxable periods beginning before the Closing Date and
ending after the Closing Date without the prior consent of the Sellers'
Representative, which consent shall not be unreasonably withheld or delayed;
provided, however, that no such consent shall be required if the Sellers'
Representative shall not have delivered a Dispute Notice or if the objections
contained in a Dispute Notice shall have been finally resolved, in each case in
accordance with this Article IX. None of the Purchaser, Arcon Holdings, the
Company, or any affiliate of the foregoing will make any election under Treasury
Regulation ss.1.1502-76(c) to file a separate return for the entire taxable year
ending October 31, 1996.
ss.9.2 Overlap Period, Refunds, Tax Benefits. All Taxes and Tax
liabilities with respect to the income, property or operations of the Company
and Arcon Holdings that relate to a taxable year or other taxable period
beginning before and ending after the Closing Date (an "Overlap Period") shall
be apportioned between the Pre-Closing Period and the portion of such Overlap
Period after the Closing Date (the "Post-Closing Period") as follows: (A) in the
case of Taxes other than income Taxes and sales and use Taxes, on a per diem
basis, and (B) in the case of income Taxes (including income Taxes based on
capital or other alternative bases) and sales and use Taxes, as determined from
the books and records of the
-68-
Company and Arcon Holdings, between the Pre-Closing Period and the Post-Closing
Period as though the taxable year of Arcon Holdings or the Company terminated at
the close of business on the Closing Date, and based on accounting methods,
elections and conventions that do not have the effect of distorting income and
expenses.
To the extent the Company or Arcon Holdings has made a payment of
Taxes on or prior to the Closing Date with respect to Taxes attributable to a
Pre-Closing Period in excess of the liability of the Companies for such Taxes
for such Pre-Closing Period, the Purchaser and the Companies will, if requested
by the Sellers' Representative, use their reasonable best efforts to obtain a
prompt refund of such overpayment. The Purchaser or the Companies shall remit
any refund received pursuant to the preceding sentence (and any refunds under
Section 9.1(a)), net of any Taxes of the Purchaser, the Company or Arcon
Holdings arising from the receipt of such refund, to the Sellers' Representative
for the benefit of the Sellers within 10 days of the receipt of such refund.
Further, to the extent any deductions attributable to unamortized
original issue discount attributable to the Warrants and the exercise or
cancellation of the Options (the "Deductions") are included as deductions in any
Return of the Company or Arcon Holdings for any taxable year or other
-69-
taxable period ending after the Closing Date, the Purchaser, the Company or
Arcon Holdings shall remit to the Sellers' Representative for the benefit of the
Sellers the amount of the actual reduction in the Tax liability of the Company
and/or Arcon Holdings (the "Tax Benefit") attributable to the Deductions (a) for
taxable years or other taxable periods commencing on or after the day following
the Closing Date, and (b) with respect to an Overlap Period, for the portion of
such Overlap Period commencing on the day following the Closing Date (it being
understood and agreed that the parties intend that for purposes of preparing the
Returns provided for in Section 9.1, the Purchaser, the Companies and the
Sellers shall treat the Deductions as being attributable to a Pre-Closing
Period). The Purchaser, the Company or Arcon Holdings shall remit such amount
within 10 days after the filing of a Return in which any such Deduction is
utilized. The Purchaser shall determine and shall certify to the Sellers the
amount of the Tax Benefit and the timing of the utilization of such Tax Benefit
in its reasonable discretion (provided, however, the Purchaser and the Companies
shall not be obligated to disclose any information with respect to the income,
results of operations, or Taxes or Returns of the Companies with respect to any
period after the Closing Date, other than the information with respect to an
Overlap Period provided for in Section 9.1(b) and other than contemplated by
-70-
Section 9.3). If the Tax liability of the Company or Arcon Holdings is adjusted
by the appropriate taxing authority after filing a Return in which the
Deductions are utilized and such adjustment reduces the amount of the Tax
Benefit realized by the Company and/or Arcon Holdings from the Deductions, the
Sellers shall reimburse the Purchaser for the amount of such reduced Tax Benefit
to the extent that the Purchaser or the Companies previously remitted such
reduced Tax Benefit to the Sellers (but not in excess of the amount paid by the
Purchaser and the Companies to the Sellers' Representative pursuant to this
Section 9.2), as reasonably determined by the Purchaser (provided, however, the
Purchaser and the Companies shall not be obligated to disclose any information
with respect to the income, results of operations, or Taxes or Returns of the
Companies with respect to any period after the Closing Date, other than the
information with respect to an Overlap Period provided for in Section 9.1(b) and
other than contemplated by Section 9.3), within 10 days after receipt by
Sellers' Representative from the Purchaser of a certificate setting forth the
amount of such reduced Tax Benefit.
ss.9.3 Cooperation; Audits. In connection with the preparation of Returns,
Refund Requests, audit examinations and any administrative or judicial
proceedings relating to the Tax liabilities imposed on the Company and Arcon
Holdings
-71-
for all Pre-Closing Periods, the Purchaser, the Company and Arcon Holdings on
the one hand, and the Sellers' Representative on the other hand, will cooperate
fully with each other, including, but not limited to, the furnishing or making
available during normal business hours, at no cost to Sellers or Sellers'
Representative (except out-of-pocket costs, excluding salaries and wages of
personnel, provided such cooperation does not interfere with normal operations
of the Company, Arcon Holdings or the Purchaser), of records, personnel (as
reasonably required), books of account, powers of attorney or other materials
with respect to Pre-Closing Periods and the Post-Closing Period necessary or
helpful for the preparation of such Returns or Refund Requests, the conduct of
audit examinations or the defense of claims by Tax authorities as to the
imposition of Taxes. Without limiting the generality of the foregoing, the
Sellers' Representative and its accountants and attorneys shall be entitled to
examine books and records of the Company and Arcon Holdings, with respect to any
Pre-Closing Period and the Post-Closing Period, and shall have reasonable access
to personnel of the Company and Arcon Holdings, including their cooperation in
timely signing Returns and Refund Requests and applying any current liability
accruals to the payment of Taxes shown due thereon, to the extent necessary or
helpful for purposes of
-72-
preparing or filing any Tax Returns or obtaining Tax refunds with respect to all
Pre-Closing Periods.
ss.9.4 Controversies. The Purchaser shall promptly notify the Sellers'
Representative in writing upon receipt by the Purchaser or any affiliate of the
Purchaser (including Arcon Holdings and the Company after the Closing Date) of
written notice of any inquiries, claims, assessments, audits or similar events
with respect to Taxes relating to a taxable period ending on or prior to the
Closing Date for which the Sellers may be liable under this Agreement (any such
inquiry, claim, assessment, audit or similar event, a "Tax Matter"). The
Sellers' Representative, at the sole expense of the Sellers, shall have the
exclusive authority to represent the interests of the Companies with respect to
any Tax Matter before the Internal Revenue Service, any other taxing authority,
any other governmental agency or authority or any court and shall have the sole
right to extend or waive the statute of limitations with respect to a Tax Matter
and to control the defense, compromise or other resolution of any Tax Matter,
including responding to inquiries, filing Tax returns and settling audits;
provided, however, that the Sellers' Representative shall not enter into any
settlement of or otherwise compromise any Tax Matter that affects or may affect
the Tax liability of the Purchaser, Arcon Holdings, or the Company or any
affiliate of the foregoing for any period
-73-
ending after the Closing Date, including the Post-Closing Period, without the
prior written consent of the Purchaser, which consent shall not be unreasonably
withheld or delayed. The Sellers' Representative shall keep the Purchaser
reasonably informed with respect to the commencement, status and nature of any
Tax Matter. The Sellers' Representative shall, in good faith, allow the
Purchaser to make comments to the Sellers' Representative regarding the conduct
of or positions taken in any such proceeding.
Except as otherwise provided in Section 9.1, this Section 9.4, Section 9.8
and Section 9.9 the Purchaser shall have the sole right to control any audit or
examination by any taxing authority, initiate any claim for refund or amend any
Return, and contest, resolve and defend against any assessment for additional
Taxes, notice of Tax deficiency or other adjustment of Taxes of, or relating to,
the income, assets or operations of the Companies for all taxable periods;
provided, however, that the Purchaser shall not, and shall cause its affiliates
(including the Companies) not to, enter into any settlement of any contest or
otherwise compromise any issue that affects or may affect the Tax liability of
the Sellers, Arcon Holdings or the Company for any Pre-Closing Period, including
the portion of an Overlap Period ending on or prior to the Closing Date, without
the prior written consent of the Sellers' Representative, which
-74-
consent shall not be unreasonably withheld or delayed. The Purchaser shall keep
the Sellers' Representative reasonably informed with respect to the
commencement, status and nature of any Tax matter conducted by Purchaser with
respect to the Overlap Period. The Purchaser shall, in good faith, allow
Sellers' Representative to make comments to the Purchaser regarding the conduct
of or position taken in any such proceeding with respect to the Overlap Period.
ss.9.5 Transfer Taxes. All transfer, sales and use, registration, stamp
and similar Taxes imposed in connection with the sale of the Stock or any other
transaction that occurs pursuant to this Agreement shall be borne equally by the
Sellers, on the one hand, and the Purchaser, on the other hand.
ss.9.6 Amended Returns. None of the Sellers or the Sellers'
Representative, shall file or cause to be filed any amended Return of or
including the Company or Arcon Holdings without the prior written consent of the
Purchaser, which consent shall not be unreasonably withheld or delayed. None of
the Purchaser, the Company, Arcon Holdings, nor any affiliate of the foregoing
shall file or cause to be filed any amended Return relating to or including any
Pre-Closing Period, including the portion of an Overlap Period ending on or
prior to the Closing Date, of the Company or Arcon Holdings without the prior
written consent of the Sellers'
-75-
Representative, which consent shall not be unreasonably withheld or delayed.
ss.9.7 Non-foreign Person Affidavit. Each Seller shall furnish to the
Purchaser on or before the Closing Date a non- foreign person affidavit as
required by Section 1445 of the Code.
ss.9.8 Indemnification. Subject to Section 9.3, Section 9.4 and Section
9.9, each of the Sellers agrees severally (on the basis of such Seller's
Percentage Interest and with each Seller's personal liability expressly limited
as set forth in Section 10.2(c)) to indemnify, defend and hold harmless the
Purchaser, its affiliates (including Arcon Holdings and the Company) and the
successors to the foregoing (and their respective shareholders, officers,
directors, employees and agents) on an after-tax basis against (i) all Taxes,
losses, claims and expenses resulting from, arising out of, or incurred with
respect to, any claims that may be asserted by any party based upon,
attributable to, or resulting from the failure of any representation or warranty
made pursuant to Section 3.14 (other than Section 3.14(b)) to be true and
correct as of the Closing Date; and (ii) all unpaid Taxes imposed on or asserted
against the properties, income or operations of Arcon Holdings and the Company
at any time after the Closing Date to the extent such Taxes relate to any
Pre-Closing Period. Notwithstanding any of the foregoing,
-76-
(v) any indemnification provided under any clause of the preceding sentence
shall be without duplication of any indemnification provided under the other
clause of the preceding sentence, (w) the indemnification provided under clause
(ii) above shall not apply to any Tax liability paid to the appropriate taxing
authority on or prior to the Closing Date to the extent such amount is not
refunded or otherwise returned to any of the Sellers, the Sellers'
Representative, the Company or Arcon Holdings, (x) the indemnification provided
under the preceding sentence shall not apply to income Tax and sales or use
Taxes to the extent of the current liability accruals attributable to income
Taxes and sales and use Taxes disclosed to the Purchaser and set forth on the
books and records of the Company or Arcon Holdings at the Closing Date
(maintained in accordance with past practices), (y) the indemnification provided
in the preceding sentence for any liability that is related to an income Tax or
sales or use Tax shall be subject to and included in the $4,000,000 limit on the
Sellers' indemnification liabilities (but not the $400,000 "Deductible")
provided for in ss.10.2 hereof, and (z) the indemnification provided in the
preceding sentence for any liability that is not related to an income Tax or
sales or use Tax shall be subject to and included within the $400,000
"Deductible" and the $4,000,000 limit on the Sellers'
-77-
indemnification liabilities provided for in ss.10.2 hereof. The Purchaser shall
promptly give the Sellers' Representative written notice of all Taxes, losses,
claims and expenses which the Purchaser has reasonably determined may give rise
to a right of indemnification under this Section 9.8, including a computation of
the amount of the required indemnification with sufficient detail and
particularity to enable the Sellers' Representative to reasonably determine the
amount of such required indemnification. The Sellers shall not be liable for any
Tax or payment hereunder to the extent that the Purchaser's failure timely to
notify the Sellers' Representative as required by the preceding sentences or in
Section 9.4 causes or increases a Tax or other payment to be due or otherwise
materially prejudices the ability of the Sellers to contest such Tax liability.
ss.9.9 FSE Tax Indemnity. The Purchaser and the Companies shall cooperate
reasonably and in good faith, at Sellers' sole expense, with Sellers and the
Sellers' Representative to enforce any and all rights Purchaser or the Companies
may have under the FSE Tax Indemnity in respect of Taxes and liabilities which
are otherwise indemnifiable amounts of the Sellers under this Article IX (such
indemnifiable amounts recoverable under the FSE Tax Indemnity (the "FSE
Indemnifiable Amount")), all without prejudice to the Sellers' agreements and
obligations under this Article IX
-78-
or under the Escrow Agreement. The Purchaser and the Companies shall, subject to
the terms and conditions of this Section 9.9, at Sellers' sole expense, seek to
recover all FSE Indemnifiable Amounts under the FSE Tax Indemnity first, before
proceeding to enforce against the Sellers any of their rights under this Article
IX. Subject to Sellers' obligation to advance, in reasonable increments as
mutually agreed in good faith by the Purchaser and the Sellers' Representatives,
all of the Companies' reasonable costs and expenses (including, without
limitation, reasonable attorney's fees) of such enforcement, the Purchaser and
the Companies shall pursue all available remedies to enforce the FSE Tax
Indemnity, including by recourse to appropriate judicial proceedings); provided,
however that neither the Purchaser nor the Companies shall be obligated to
pursue any such legal proceeding unless the Sellers shall have paid the FSE
Indemnifiable Amounts to the Purchaser in accordance with this Agreement and the
Escrow Agreement whereupon the Sellers shall be subrogated to the rights of the
Companies under the FSE Tax indemnity. Any amounts actually recovered by the
Purchaser and the Companies pursuant to the FSE Tax Indemnity (i) shall be
without duplication of any indemnification provided in Section 9.8 hereof, (ii)
shall be excluded from the $400,000 "Deductible" and the $4,000,000 limitation
on Sellers' indemnification liabilities provided for in Section
-79-
10.2 hereof and (iii) which constitute reimbursement or other payment of costs
and expenses of the Sellers, the Purchaser and the Companies incurred in
connection with pursuing FSE Indemnifiable Amounts which have been paid by or on
behalf of the Sellers shall be promptly paid to the Sellers' Representative upon
receipt by the Purchaser or the Companies. Notwithstanding anything to the
contrary herein, the Purchaser and the Companies agree that the Sellers'
Representative, at Sellers' sole expense, shall have the exclusive authority to
represent the interests of the Companies with respect to any FSE Tax Indemnity
matter and to control the prosecution, compromise and resolution of any such
matter (including with attorneys and other advisors chosen by the Sellers'
Representative) and the Purchaser and each of the Companies shall cooperate
reasonably and in good faith with the Sellers and the Sellers' Representative in
the prosecution of any such FSE Tax Indemnity matter.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
ss.10.1 Survival of Representations. The respective representations and
warranties of the Companies, the Sellers and the Purchaser contained in this
Agreement shall survive the Closing for a period of 18 months except for the
repre-
-80-
sentations and warranties contained in Section 3.14 (other than the
representations and warranties contained in Section 3.14(b) which shall not
survive the Closing), which shall survive for the applicable statute of
limitations period (subject to Section 9.1(a)), and the representations and
warranties of the Sellers in Section 4.1 which shall survive indefinitely.
ss.10.2 Indemnification. (a) Following the Closing, each of the Sellers,
severally and not jointly (based upon their respective Percentage Interest and
with each Sellers's personal liability expressly limited as set forth in Section
10.2(b) and 10.2(c)) hereby agrees to indemnify and hold the Purchaser and its
officers, directors, affiliates (including, without limitation, Arcon Holdings
and the Company) and agents, and any successors thereto, harmless from damages,
losses, costs or expenses (including, without limitation, reasonable attorneys'
fees and expenses) ("Damages") incurred or suffered as a result of or arising
out of (i) the failure of any representation or warranty made by the Company in
this Agreement (without regard to any "materiality" or any "material adverse
effect" exception contained in any such representation and warranty other than
the representations and warranties contained in Section 3.5 and Section 3.24
(but only as to clauses (d), (h) and (l) of Section 6.1 incorporated by
reference into such Section 3.24) and Section
-81-
3.25) to be true and correct as of the Closing Date with the same effect as
though such representation and warranty had been made on and as of the Closing
Date, (other than a breach of Section 3.14 with respect to Taxes which shall be
governed by Section 9.8), or (ii) the breach of any covenant or agreement made
or to be performed by the Sellers pursuant to this Agreement; provided, however,
that the Sellers shall not be liable under clause (i) of this Section unless the
aggregate amount of Damages exceeds $400,000 and then only to the extent of such
excess; provided further, however, that, except as set forth in Section 10.2(b)
below, the Sellers' aggregate liability under this Article X and Article IX
shall not exceed $4,000,000 in the aggregate (the "Sellers Liability Amount").
(b) Following the Closing, each of the Sellers, severally as to itself and
not jointly, hereby agrees to indemnify and hold the Purchaser and its officers,
directors, affiliates (including without limitation, Arcon Holdings and the
Company) and agents, and any successors thereto, harmless from Damages incurred
or suffered as a result of or arising out of the failure of any representation
or warranty made by such Seller in Article IV of this Agreement to be true and
correct as of the Closing Date; provided, however, that aggregate liability of
the Sellers under this Section 10.2(b) shall not exceed the Aggregate Closing
Payment (net of the
-82-
amount of Outstanding Indebtedness paid to the Bank pursuant to Section 2.2(b)
and amounts recovered under Sections 10.2(a) and 9.8 of such Seller) and the
liability of each of the Sellers under this Section 10.2(b) shall not exceed, as
to each Seller, the product of the Aggregate Closing Payment and the Percentage
Interest (net of the amount of Outstanding Indebtedness paid to the Bank
pursuant to Section 2.2(b) and amounts recovered under Sections 10.2(a) and 9.8
of such Seller).
(c) Personal Liability of the Sellers. Except as set forth in Section
10.2(b), the aggregate personal liability (the "Personal Liability Amount") of
each of the Sellers with respect to the subject matter of this Agreement and the
transactions contemplated hereby is, and shall be, limited to an aggregate
amount equal to the product of the Sellers' Liability Amount and the Percentage
Interest of such Seller. No Seller shall have any personal liability in excess
of the applicable Personal Liability Amount for the performance or observance of
the covenants, agreements, representations and warranties of Sellers, the
Sellers' Representative, Arcon Holdings or the Company contained in this
Agreement (including, without limitation, Article IX hereof and, except as set
forth in ss.10.2(b), this Article X or in any document executed in connection
herewith and the Purchaser, on behalf of itself and its affiliates (including,
without limitation,
-83-
each of the Companies), covenants and, absent fraud, agrees not to seek any
Damages or personal money judgment against any or all Sellers, in excess of the
Sellers' Liability Amount with respect to all of the Sellers (except as set
forth in Section 10.2(b)) or the applicable Personal Liability Amount with
respect to any Seller (except as set forth in Section 10.2(b)), for any Damage
sustained by the Purchaser, for any default or breach under this Agreement or
any other document executed in connection herewith or otherwise. To the extent
any term or provision of this Agreement provides for the joint and several
liability of the Sellers, such joint and several liability shall be limited in
the aggregate, in all respects with respect to all of the Sellers, to the
Sellers' Liability Amount (except as set forth in Section 10.2(b)), and in all
respects with respect to any of the Sellers, to the applicable Personal
Liability Amount (except as set forth in Section 10.2(b)).
(d) After the Closing, the Purchaser hereby agrees to indemnify and hold
the Sellers harmless from Damages incurred or suffered as a result of or arising
out of (i) the failure of any representation or warranty made by the Purchaser
in this Agreement to be true and correct as of the Closing Date with the same
effect as though such representation and warranty had been made on and as of the
Closing Date or (ii) the breach of any covenant or agreement made or to be
-84-
performed by the Purchaser or the Companies pursuant to this Agreement after the
Closing; provided, however, that the Purchaser shall not be liable under clause
(i) of this Section unless the aggregate amount of Damages exceeds $400,000 and
then only to the extent of such excess; provided further, however, that the
Purchaser's aggregate liability under this Article X shall not exceed $4,000,000
in the aggregate.
(e) The foregoing indemnification provisions in this Article X and the
indemnification by Sellers provided in Section 9.8 shall be the sole and
exclusive remedy for any breach of the covenants, obligations, representations
or warranties or other agreements set forth in this Agreement or any other
agreement or other document executed in connection herewith; provided, however,
that the provisions of this Section 10.2(e) shall not prevent the Seller or the
Purchaser from seeking the remedies of specific performance or injunctive relief
prior to Closing in connection with a breach of a covenant or agreement of any
party contained herein.
ss.10.3 Indemnification Procedure. (a) Any party seeking indemnification
(the "Indemnified Party") from any other party (the "Indemnifying Party") with
respect to any claim, demand, action, proceeding or other matter pursuant to
this Agreement other than a claim by Purchaser with respect to Taxes (a "Claim")
shall promptly notify the Indemnifying Party of the existence of the Claim,
setting forth in
-85-
reasonable detail the facts and circumstances pertaining thereto, the basis for
the Indemnified Party's right to indemnification, the amount of Damages for
which indemnification is being asserted, if known, and, in the case of third
party claims, such notice shall be accompanied by copies of all relevant
pleadings, demands and other papers, if any, served on the Indemnified Party.
(b) If any third party shall notify any Indemnified Party with respect to
any matter which may give rise to a Claim for indemnification against the
Indemnifying Party under this Agreement, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent) the Indemnifying Party thereby is
materially prejudiced by such failure to give notice. In the event that any
Indemnifying Party notifies the Indemnified Party within 30 days after the
Indemnified Party has given notice of the matter that the Indemnifying Party
would be required to indemnify the Indemnified Party in full against any such
Claim and is assuming the defense thereof:
-86-
(i) the Indemnifying Party will defend the Indemnified Party against
the matter with counsel of its choice reasonably satisfactory to the Indemnified
Party;
(ii) the Indemnified Party may retain separate co-counsel at its
sole cost and expense (except that the Indemnifying Party will be responsible
for the reasonable fees and expenses of the separate co-counsel (a) to the
extent the Indemnified Party concludes reasonably based upon written advice of
counsel that a conflict of interest exists between the Indemnified Party and
Indemnifying Party or (b) the named parties to any such action (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party and such Indemnified Party shall have been advised in writing by counsel
that there may be one or more material legal defenses available to the
Indemnified Party which are not available to the Indemnifying Party, or
available to the Indemnifying Party, but the assertion of which would be
materially adverse to the interest of the Indemnified Party);
(iii) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld or delayed
unreasonably);
(iv) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement (other
-87-
than with respect to a judgement or settlement involving exclusively money
damages), without the written consent of the Indemnified Party (not to be
withheld or delayed unreasonably), provided, that, in the case of entry of any
such judgement or settlement (to the extent involving exclusively money
damages), the claimant or plaintiff in the matter shall have provided the
Indemnified Party a written release from all liability with respect thereto; and
(v) subject to Section 10.3(d), within 30 days after the
Determination Date with respect to a third party Claim, the Indemnifying Party
shall pay the Indemnified Party the amount of Damages incurred by the
Indemnified Party. As used herein, the term "Determination Date" shall mean the
date on which the Determination is final, legally binding, and non-appealable.
As used herein, the term "Determination" shall mean (i) the final non-appealable
judgment by a court of competent jurisdiction with respect to any third party
Claim covered by this Article X or (ii) a compromise and settlement agreement
executed and delivered by both Indemnifying Party and Indemnified Party with
respect to any third party Claim covered by this Article X.
(c) If no Indemnifying Party notifies the Indemnified Party within 30 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, then the Indemnified Party may defend
-88-
against, or enter into any settlement with respect to (subject to subsection
(b)(iii) above), the matter in any manner it reasonably may deem appropriate,
without prejudice to any of its rights hereunder.
(d) The Indemnified Party shall be entitled to reimbursement of reasonable
out-of-pocket expenses included in Damages with respect to any Claim (including,
without limitation, the reasonable out-of-pocket cost of defense, preparation
and investigation relating to such Claim) as such expenses are incurred by the
Indemnified Party following receipt by the Indemnifying Party of appropriate
invoices with respect thereto.
(e) In the event that liability hereunder does not involve a third party
claim, the Indemnifying Party shall within 30 days after the date of an
Indemnity Notice respond in writing to the Indemnified Party (the "Indemnity
Response") and set forth with reasonable specificity those items in the
Indemnity Notice to which the Indemnified Party does not agree as well as the
summary basis upon which such disagreement is founded. Within 30 days following
the delivery of the Indemnity Response to the Indemnified Party, representatives
of the Indemnifying Party and Indemnified Party shall meet to attempt to resolve
through good faith negotiations the applicable indemnification claims.
-89-
(f) The amount of any Damages for which indemnification is provided under
this Article X shall be net of the amount of Tax benefits actually realized by
the Indemnified Party in the tax year in which payments in respect of
indemnification are received, and net of any amounts actually recovered by the
Indemnified Party under insurance policies (other than premiums paid and related
costs of collection) with respect to such Damages. The Indemnified Party shall
use all reasonable efforts to recover amounts under its insurance policies, if
any, in respect of Claims for Damages for which indemnification is provided
under this Agreement ("Insurable Amounts"). To the extent Insurable Amounts are
actually recovered by the Purchaser after the Purchaser has recovered from the
Escrow Account or the Sellers amounts in respect of the same Claims for Damages
for which the Purchaser has actually received such Insurable Amounts
("Indemnifiable Amount"), the Purchaser shall promptly pay to the Sellers'
Representative for the benefit of the Sellers out of such Insurable Amounts
actually recovered an amount equal to such Indemnifiable Amount.
(g) Except for Claims that the Purchaser may have pursuant to this Article
X or Article IX and Claims for fraud, the Purchaser, on behalf of itself and its
successors and assigns, hereby waives and releases from and after the Closing
the other parties hereto and their respective
-90-
successors and assigns from any and all claims of any kind or nature (including,
without limitation, claims for contribution, cost recovery or reimbursement)
which the Purchaser may otherwise have under any laws, rules or regulations
(including, without limitation, Environmental Laws) applicable to the Companies,
any of the Sellers or the Company Property.
ARTICLE XI
TERMINATION
ss.11.1 Termination. This Agreement may be terminated in writing at any
time prior to the Closing:
(a) by the mutual written consent of the Purchaser and the Required
Sellers;
(b) by the Purchaser, if there has been a material breach by Arcon
Holdings, the Company or any of the Sellers of any material covenant,
representation or warranty contained in this Agreement which has prevented the
satisfaction of any condition to the obligations of the Purchaser at the Closing
and such breach has not been waived by the Purchaser or, in the case of a
covenant breach, cured by Arcon Holdings, the Company or any of the Sellers
within the earlier of 30 days after written notice thereof from the Purchaser or
the Termination Date;
-91-
(c) by the Required Sellers, if there has been a material breach by the
Purchaser of any material covenant, representation or warranty contained in this
Agreement which has prevented the satisfaction of any condition to the
obligation of the Sellers or the Companies at the Closing and such breach has
not been waived by the Required Sellers or, with respect to a covenant breach,
cured by the Purchaser within the earlier of 30 days after written notice
thereof by the Sellers or the Companies or the Termination Date;
(d) by either the Purchaser or the Required Sellers if (i) the
transactions contemplated hereby have not been consummated by the Termination
Date; provided, however, that neither the Purchaser nor the Sellers shall be
entitled to terminate this Agreement pursuant to this Section 11.1(d) if such
Person's breach of this Agreement has prevented the consummation of the
transactions contemplated hereby.
(e) by either the Purchaser or the Required Sellers if any governmental
authority shall have issued an order, decree, ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and nonappealable.
ss.11.2 Effect of Termination. In the event that this Agreement shall be
terminated pursuant to Section 11.1, all further obligations of the parties
hereto under this Agree-
-92-
ment or otherwise (other than pursuant to Sections 12.2 and 12.5 and the
Confidentiality Agreement, which shall continue in full force and effect in
accordance with their terms) shall terminate without further liability or
obligation of the Sellers or the Companies, on the one hand and the Purchaser on
the other hand; provided, however, that no party shall be released from
liability hereunder if this Agreement is terminated pursuant to Section 11.1(b),
11.1(c) or 11.1(d) and the transactions abandoned by reason of (i) willful
failure of such party to have performed its obligations hereunder or (ii) any
knowing material misrepresentation made by such party of any matter set forth in
Article III, IV or V, as applicable.
ARTICLE XII
MISCELLANEOUS
ss.12.1 Knowledge. Where any representation or warranty made by the
Companies or either of them contained in this Agreement is expressly qualified
by reference to its knowledge, such knowledge shall be deemed to exist if the
matter is within the actual knowledge of any of the Sellers and/or the executive
officers of Arcon Holdings or the Company.
ss.12.2 Expenses. Subject to Section 9.3 the parties hereto shall pay
their own expenses relating to the transac- tions contemplated by this
Agreement, including, without
-93-
limitation, the fees and expenses of their respective counsel and financial
advisers, it being understood that all third party out-of-pocket expenses of the
Companies incurred prior to the Closing in connection with the transactions
contemplated by this Agreement shall be paid by the Sellers prior to the Closing
Date (it being understood and agreed by the parties, without limiting the
generality of the foregoing in this Section 12.2, that all accounting fees and
expenses of the Companies incurred in connection with the Purchaser's financing
of the transaction contemplated by this Agreement, whether or not the Closing
occurs, shall be borne by the Purchaser).
ss.12.3 Governing Law. THE INTERPRETATION AND CONSTRUC- TION OF THIS
AGREEMENT, AND ALL MATTERS RELATING HERETO, SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS EXECUTED AND TO BE PERFORMED SOLELY
WITHIN SUCH STATE.
ss.12.4 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
ss.12.5 Publicity. Except as otherwise required by law, none of the
parties hereto shall issue, prior to the Closing, any press release or make any
other public statement, in each case relating to, connected with or arising out
of this Agreement or the matters contained herein, without obtaining
-94-
the prior approval of the Companies, on the one hand, and the Purchaser, on the
other hand, to the contents and the manner of presentation and publication
thereof. Except as otherwise required by law, after the Closing the Sellers
shall not issue any press release or make any other public statement, in each
case relating to, connected with or arising out of this Agreement or the matters
contained herein, without obtaining the prior approval of the Purchaser which
shall not be unreasonably withheld or delayed.
ss.12.6 Notices. Any notice or other communication required or permitted
under this Agreement shall be sufficiently given if delivered in person or sent
by telecopy or by registered or certified mail, postage prepaid, addressed as
follows: if to the Purchaser, to Specialty Paperboard, Inc., Xxxxxxx Xxxx, X.X.
Xxx 000, Xxxxxxxxxxx, Xxxxxxx 00000 (Facsimile Number (000) 000-0000) Attention:
Chief Financial Officer, with a copy to its counsel, White & Case, 0000 Xxxxxx
xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (Facsimile Number (000) 000-0000),
Attention: Xxxxx X. Xxxxxx, Esq.; and if to the Sellers, to the Sellers'
Representative, initially Northwood Ventures, 000 Xxxxxxxxx Xxxxxxxxx, Xxxxxxx,
Xxx Xxxx 00000 (Facsimile Number (000) 000-0000), Attention: Xxxxx X. Xxxxxx,
with a copy to their counsel, Xxxxxx & Xxxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 (Facsimile Number (000) 000-0000), Attention: Xxxxxxx X.
-00-
Xxxx, Xxx. or such other address or number as shall be furnished in writing by
any such party, and such notice or communication shall be deemed to have been
given as of the date so delivered, sent by facsimile or mailed.
ss.12.7 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
ss.12.8 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
ss.12.9 Entire Agreement. This Agreement (including the Schedules hereto)
and the Confidentiality Agreement, including the other documents referred to
herein and therein which form a part hereof and thereof, contain the entire
understanding of the parties hereto with respect to the subject matter contained
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter other
than the Confidentiality Agreement which, in accordance with its terms, shall
survive termination hereof but shall terminate and be of no further force and
effect on and after the Closing.
-96-
ss.12.10 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by the Purchaser, the Companies and each of the
Sellers.
ss.12.11 Severability. Should any provision of this Agreement be held by a
court of competent jurisdiction to be enforceable only if modified, such holding
shall not affect the validity of the remainder of this Agreement, the balance of
which shall continue to be binding upon the parties hereto with any such
modification to become a part hereof and treated as though originally set forth
in this Agreement. The parties further agree that any such court is expressly
authorized to modify any such unenforceable provision of this Agreement in lieu
of severing such unenforceable provision from this Agreement in its entirety,
whether by rewriting the offending provision, deleting any or all of the
offending provision, adding additional language to this Agreement, or by making
such other modifications as it deems warranted to carry out the intent and
agreement of the parties as embodied herein to the maximum extent permitted by
law. The parties expressly agree that this Agreement as so modified by such
court shall be binding upon and enforceable against each of them. In any event,
should one or more of the provisions of this Agreement be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions hereof,
-97-
and if such provision or provisions are not modified as provided above, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provisions had never been set forth herein.
ss.12.12 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
ss.12.13 Jurisdiction. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto shall be brought in the courts of the State of New York,
or in the United States District Court for the Southern District of New York,
and, by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the exclusive jurisdiction of such courts, and irrevocably
agrees to be bound by any judgment rendered thereby in connection with this
Agreement. The foregoing consent to jurisdiction shall not be deemed to confer
rights on any Person other than the respective parties to this Agreement.
ss.12.14 Action by Sellers. Except as expressly set forth herein, whenever
this Agreement requires or permits action to be taken by the Sellers, such
action shall be sufficient if taken by the Required Sellers. Each of the Sellers
hereby consents and agrees to all actions or inac-
-98-
tions taken or omitted to be taken by the Required Sellers and agrees to
indemnify and hold harmless the Required Sellers from and against all costs and
expenses (including, without limitation, reasonable attorneys fees and expenses
incurred by the Required Sellers in any claim, action or proceeding between the
Required Sellers and the Sellers (or any of them) or between the Required
Sellers and any third party (including, without limitation, the Purchaser or the
Companies) or otherwise) incurred or suffered as a result of or arising out of
such actions or inactions.
ss.12.15 Sellers' Representative. By the execution and delivery of this
Agreement, each Seller hereby irrevocably constitutes and appoints Northwood
Ventures, a New York limited partnership, as the Sellers' Representative with
the exclusive authority and power to take all actions required or permitted to
be taken by the Sellers' Representative under this Agreement including, without
limitation, under Article IX hereof and the Escrow Agreement. Each of the
Sellers hereby consents and agrees to all actions or inactions taken or omitted
to be taken by the Sellers' Representative under this Agreement and the Escrow
Agreement hereby agrees to indemnify and hold harmless the Sellers'
Representative from and against all costs and expenses (including, without
limitation, reasonable attorneys' fees and accountants' expenses) incurred by
the Sellers' Representative in any
-99-
claim, action or proceeding between the Sellers' Representative and the Sellers
(or any of them) or between the Sellers' Representative and any third party
(including, without limitation, the Purchaser or the Companies) or otherwise
incurred or suffered as a result of or arising out of such actions or inactions.
Upon written notice to the Purchaser, the Sellers may change the identity of the
Sellers' Representative by written consent signed by the Required Sellers.
ss.12.16 Assignment. This Agreement shall not be assignable by any of the
parties hereto except pursuant to a writing executed by all of the parties
hereto.
ss.12.17 Construction. The parties hereto agree that this Agreement is the
product of negotiations between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in, and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentem.
ss.12.18 Schedules. All Schedules, Exhibit A and Annex I and Annex II to
this Agreement are integral parts of this Agreement. Without limiting the
generality of the foregoing,
-100-
the fact that any disclosure on any of the Schedules is not required to be
disclosed in order to render the applicable representation or warranty to which
it relates true, or that the absence of such disclosure on the Schedule would
not constitute a breach of such representation or warranty, shall not be deemed
or construed to expand the scope of any representation or warranty hereunder or
to establish a standard of disclosure in respect of any representation or
warranty.
-101-
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed on its behalf by its respective officer thereunto duly
authorized, all as of the day and year first above written.
SPECIALTY PAPERBOARD, ARCON HOLDINGS CORP.
INC.
By: /s/ Xxxx Xxxxxx By /s/ Xxxxx X. Xxxxxx
--------------------- -----------------------------
Name: Xxxx Xxxxxx Name: Xxxxx X. Xxxxxx
Title: President Title: Chairman
ARCON COATING XXXXX, INC.
By /s/ Xxxxx X. Xxxxx
-----------------------------
Name: Xxxxx X. Xxxxx
Title: President - CEO
NORTHWOOD VENTURES
By /s/ Xxxxx X. Xxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxx
Title: General Partner
NORTHWOOD CAPITAL PARTNERS LLC
By /s/ Xxxxx X. Xxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman and CEO
XXXX, LOEB & CO.
By /s/ Xxxxx X. Xxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxx
Title: Managing Partner
/s/ Xxxxxx X. Xxxxxx
-------------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxx
-------------------------------
Xxxxxxx X. Xxxxx
/s/ Xxxxxxx Xxxx
-------------------------------
Xxxxxxx Xxxx
/s/ Xxxxxxxxx X. Xxxxx
-------------------------------
Xxxxxxxxx X. Xxxxx
/s/ Xxxxx X. Xxxxxx
-------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxx
-------------------------------
Xxxxx X. Xxxxx
/s/ Xxxxxx X. Ablum
-------------------------------
Xxxxxx X. Ablum
/s/ Xxxxx X. Xxxxx
-------------------------------
Xxxxx X. Xxxxx
-103-
ANNEX I
A B C
Sellers'
Shares of Stock/ Escrow
Name Options Owned Payment
---------------------------------- ---------------- --------
Preferred Stock Holders
Series A Holders
Northwood Ventures 21,239.2 --
Northwood Capital Partners LLC 10,610.1 --
Xxxxx X. Xxxxxx 95.5 --
Series B Holders
Xxxx, Loeb & Co. 2,387.5 --
Xxxxxx X. Xxxxxx 955.0 --
Xxxxxxx X. Xxxxx 955.0 --
Xxxxxxxxx X. Xxxxx 382.0 --
Xxxxx X. Xxxxx 238.8 --
Xxxxxx X. Ablum 382.0 --
Xxxxx X. Xxxxx 955.0 --
Common Stock Sellers
Northwood Ventures 22,893.3 1,030,630
Northwood Capital Partners LLC 11,436.4 514,906
Xxxx, Xxxx & Co. 2,573.4 115,856
Xxxxxx X. Xxxxxx 1,029.4 46,342
Xxxxxxx X. Xxxxx 1,029.4 46,342
Xxxxxxxxx X. Xxxxx 411.8 18,536
Xxxxx X. Xxxxxx 102.9 4,644
Xxxxx X. Xxxxx 257.3 124,102
Xxxxxx X. Ablum 411.8 18,536
Xxxxx X. Xxxxx 1,029.4 46,342
Xxxxxxx Xxxx -- 33,764
Optionholders
Xxxxx X. Xxxxx 55,556 N/A
Xxxxxxx Xxxx 16,667 N/A
ANNEX II
Percentage
Interest
----------
Northwood Ventures 51.5333
Northwood Capital Partners LLC 25.7455
Xxxx, Loeb & Co. 5.7928
Xxxxxx X. Xxxxxx 2.3171
Xxxxxxx X. Xxxxx 2.3171
Xxxxxxxxx X. Xxxxx .9268
Xxxxx X. Xxxxxx .2322
Xxxxx X. Xxxxx 6.2051
Xxxxxx X. Ablum .9268
Xxxxx X. Xxxxx 2.3171
Xxxxxxx Xxxx 1.6882
Total 100%
Exhibit A
FORM OF ESCROW AGREEMENT
ESCROW AGREEMENT (this "Escrow Agreement") made this 31st day of
October, 1996 by and among SPECIALTY PAPERBOARD, INC., a Delaware corporation
(the "Purchaser"), each of the Persons listed on Exhibit A hereto (each a
"Seller" and, collectively, the "Sellers"), former owners of all of the
outstanding Stock, Options and Warrants of ARCON HOLDINGS CORP., a Delaware
corporation ("Arcon Holdings"), and The Bank of New York, a New York banking
corporation (the "Escrow Agent").
WHEREAS, the Sellers and the Purchaser have entered into a Stock
Purchase Agreement dated as of August 28, 1996 (the "Agreement");
WHEREAS, the Agreement provides that the Purchasers shall put into
escrow with the Escrow Agent the amount of Two Million Dollars ($2,000,000) (the
"Escrow Amount"), to be used to satisfy claims arising out of and under Article
IX and/or Article X of the Agreement during the period from the date hereof
until a date which is eighteen months after the date hereof; and
WHEREAS, the parties to this Escrow Agreement have agreed upon and
wish to set forth the terms and conditions with respect to the Escrow Amount
held by the Escrow Agent.
NOW THEREFORE, in consideration of the premises and for other good
and valuable consideration the receipt and sufficiency of which are hereby
acknowledged the parties agree as follows:
1. Definitions. Capitalized terms used but not defined herein shall
have the respective meanings set forth in the Agreement. The following terms
shall have the following meanings when used herein:
"Agreed Amount" shall have the meaning specified in Section 7(a)
hereof.
"Arcon Holdings" shall have the meaning specified in the
introductory paragraph hereof.
"Claim Notice" shall have the meaning specified in Section 7(a)
hereof.
"Escrow Account" shall have the meaning specified in Section 3.
"Escrow Agent" shall have the meaning specified in the introductory
paragraph hereof.
"Escrow Agreement" shall have the meaning specified in the
introductory paragraph hereof.
"Escrow Amount" shall have the meaning specified in the third
WHEREAS clause of this Escrow Agreement.
"Escrow Deposit" shall have the meaning specified in Section 4(b)
hereof.
"Expiration Date" shall have the meaning
specified in Section 4(a) hereof.
"Final Judgment" shall have the meaning specified in Section 8
hereof.
"Judgment Amount" shall have the meaning specified in Section 7(b)
hereof.
"Purchaser" shall have the meaning specified in the introductory
paragraph hereof.
"Required Sellers" shall mean such Sellers who hold in the aggregate
more than 50% of the then issued and outstanding Common Stock held by all
Sellers as of the Closing Date (calculated (i) as if all issued and outstanding
shares of Preferred Stock were converted into shares of Common Stock and (ii) as
if all Options have been fully exercised into shares of Common Stock).
"Seller" or "Sellers" shall have the meaning specified in the
introductory paragraph hereof.
"Sellers' Representative" shall mean the representative of the
Sellers appointed pursuant to Section 19 of this Escrow Agreement.
2. Escrow Agent. The Sellers and Purchaser hereby designate and
appoint the Escrow Agent to serve in accordance with the terms, conditions and
provisions of this Escrow Agreement, and the Escrow Agent hereby agrees
-2-
to act as such, upon the terms, conditions and provisions provided in this
Escrow Agreement.
3. Deposit of Escrow Amount. Concurrently with the execution of this
Escrow Agreement, the Purchaser has deposited for the account of the Sellers
with the Escrow Agent the Escrow Amount, to be held in a separate account (the
"Escrow Account") subject to the terms and provisions herein contained.
Subject to the removal of the Escrow Agent or the right of the
Escrow Agent to resign as hereinafter provided, the Escrow Agent shall hold the
funds placed in escrow pursuant to this Escrow Agreement to satisfy certain
contingent indemnity obligations of the Sellers to the Purchaser and funds
representing the payment thereof shall not be disbursed except as herein
provided.
4. Termination of Escrow Agreement; Release of Escrow Amount. (a)
This Escrow Agreement shall terminate and the Purchaser and the Sellers'
Representative shall give joint written notice to the Escrow Agent of such
termination, on the later of (i) April 30, 1998 (the "Expiration Date"), or (ii)
if on such Expiration Date, a written claim shall have been previously delivered
to the Sellers' Representative and the Escrow Agent and not theretofore
determined pursuant to a written agreement between Purchaser and the Sellers'
Representative or pursuant to a Final Judgment, the date when such claim shall
have been finally determined as provided herein and payment thereof, if any,
shall have been made to the Purchaser or the Sellers, as the case may be.
(b) The Escrow Agent shall release the Escrow Amount and all
interest, earnings and proceeds therefrom (collectively, the "Escrow Deposit")
to the Sellers upon termination pursuant to Section 4(a); provided, however,
(i) that if on the Expiration Date, a written claim shall have been
delivered to the Sellers' Representative and the Escrow Agent in an
amount less than the remaining Escrow Amount, the Escrow Agent shall
release to the Sellers all interest, earnings and proceeds from the
Escrow Amount plus the difference between the remaining Escrow
Amount and the asserted claim; and
(ii) that if on the Expiration Date, a written claim shall have been
delivered to the Sellers' Representative and the Escrow Agent in an
amount
-3-
greater than the remaining Escrow Amount, the Escrow Agent shall
release to the Sellers an amount determined in accordance with
Section 4(a)(ii) hereof (except that the Escrow Agent shall release
to the Sellers all interest, earnings and proceeds from the Escrow
Amount on the Expiration Date).
5. Investment of Escrow Amount. The Escrow Agent shall invest and
reinvest the funds in the Escrow Account as directed from time to time in
writing by the Sellers' Representative in any one or more of the following
investments: in United States treasury bills or United States treasury notes, in
any other direct obligation issued by or guaranteed in full as to principal and
interest by the United States of America, or in certificates of deposit issued
by a commercial bank having capital, surplus and undivided profits of not less
than One Hundred Million Dollars ($100,000,000) (including the Escrow Agent) or
in such other interest-bearing security or account as shall be approved in
writing by the Purchaser and the Sellers; provided, however, that any such
obligations shall have maturities of no more than 90 days. The Escrow Agent
shall not be liable or responsible in any manner for any loss or depreciation
resulting from any such investment, or for any costs in connection therewith
other than due to its gross negligence, bad faith or willful misconduct, and all
of said losses and costs shall be borne by the Escrow Account. The Escrow Agent
shall hold all securities in the Escrow Account in the name of one or more of
its nominees. The Escrow Agent shall have the power to sell or liquidate the
investments described in this Section 5 whenever the Escrow Agent shall be
directed in writing to release all or any portion of the Escrow Deposit
hereunder.
6. Investment Income. All income, interest, earnings and gains of
all kinds from amounts held in the Escrow Account shall be a part of the Escrow
Account. All interest, earnings and proceeds accrued or paid upon amounts held
in the Escrow Account shall be disbursed quarterly to the Sellers on the last
day of March, June, September and December of each year. The Escrow Agent shall
prepare for and deliver to each Seller Forms 1099 for the applicable periods
occurring during the term of this Escrow Agreement.
7. Claims by Purchaser under Agreement. If at any time or from time
to time while this Escrow Agreement continues in effect:
-4-
(a) the Purchaser has notified the Sellers' Representative and the
Escrow Agent in writing (a "Claim Notice") that the Purchaser is entitled
to indemnification under Article IX and/or Article X of the Agreement, in
a specified amount on or prior to the Expiration Date, and the Sellers
agree in writing that the Purchaser is entitled to such indemnification in
such amount (the "Agreed Amount"); or
(b) with respect to a claim made on or prior to the Expiration Date,
the Purchaser delivers to the Sellers a copy of a Final Judgment entered
by a court of competent jurisdiction in favor of the Purchaser assessing
Damages in favor of the Purchaser, as certified by an officer of the
Purchaser in a written certificate delivered to the Sellers (the aggregate
of the amount of such Damages approved pursuant to such Final Judgment are
hereinafter referred to as the "Judgment Amount");
and copies of appropriate documentation verifying the Agreed Amount or the
Judgment Amount, as the case may be, shall have been delivered (in the case of
subsection (a) above, pursuant to the joint written instructions of the
Purchaser and the Sellers' Representative) to the Escrow Agent and the Sellers'
Representative, the Escrow Agent shall deliver to the Purchaser the Agreed
Amount or the Judgment Amount within five (5) Business Days after receipt of
such appropriate documentation. If a Final Judgment in respect of a claim made
by the Purchaser prior to the Expiration Date for indemnification under Article
IX and/or Article X of the Agreement is entered in favor of the Sellers, the
Escrow Agent shall deliver the amount of money approved pursuant to such Final
Judgement upon receipt by the Escrow Agent of copies of appropriate
documentation verifying such amount within five (5) Business Days after receipt
of such appropriate documentation. The Purchaser shall deliver each Claim Notice
to the Escrow Agent and the Sellers' Representative. Upon receipt by the Escrow
Agent of each Claim Notice, the Escrow Agent shall send a copy thereof to the
Sellers' Representative within three (3) Business Days of such receipt.
8. Responsibilities of the Escrow Agent. The Escrow Agent shall have
no duties or responsibilities except those expressly set forth herein. The
Escrow Agent shall have no responsibility for the validity of any agreements
referred to in this Escrow Agreement, or for the performance of any such
agreements by any party thereto or for interpretation of any of the provisions
of any of such
-5-
agreements. The liability of the Escrow Agent hereunder shall be limited solely
to bad faith, willful misconduct or gross negligence on its part. The Escrow
Agent shall be protected in acting upon any certificate, notice or other
instrument whatsoever received by the Escrow Agent under this Escrow Agreement,
not only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth and accuracy of any information therein
contained, which the Escrow Agent in good faith believes to be genuine and to
have been signed or presented by a proper person or persons or their counsel.
If a controversy arises between two or more of the parties hereto,
or between any of the parties hereto and any person not a party hereto, as to
whether or not or to whom the Escrow Agent shall deliver the Escrow Deposit or
any portion thereof or as to any other matter arising out of or relating to this
Escrow Agreement, the Escrow Agent shall not be required to determine same and
need not make any delivery of the Escrow Deposit held in escrow or any portion
thereof but may retain the same until the rights of the parties to the dispute
shall have finally been determined by written agreement of the Purchaser and the
Sellers' Representative or by final judgment of a court of competent
jurisdiction after all appeals have been finally determined or the time for
further appeals has expired without an appeal having been made (for purposes of
this Agreement, a "Final Judgment"). The Escrow Agent shall be entitled to
assume that no such controversy has arisen unless it has received a written
notice that such a controversy has arisen which refers specifically to this
Escrow Agreement and identifies the adverse claimants to the controversy.
Except as provided herein the Escrow Agent shall have no
responsibility as to the validity, collectibility or value of any cash and
securities held by it in escrow pursuant to this Escrow Agreement, and the
Escrow Agent may rely on any notice, instruction, certificate, statement,
request, consent, confirmation, agreement or other instrument which it believes
to be genuine and to have been signed or presented by a proper person or
persons. In the event that the Escrow Agent shall be uncertain as to its duties
or rights hereunder or shall receive instructions from any of the undersigned
with respect to any portion of the Escrow Deposit held by it in escrow pursuant
to this Escrow Agreement which, in the opinion of the Escrow Agent, are in
conflict with any of the provisions of this Escrow Agreement, the Escrow Agent
shall be entitled to refrain from taking any action until it shall be directed
otherwise
-6-
in writing by all of the other parties hereto or by an order of a court of
competent jurisdiction. The Escrow Agent shall be deemed to have no notice of,
or duties with respect to, any agreement or agreements with respect to the
Escrow Deposit (or any portion thereof) held by it in escrow pursuant to this
Escrow Agreement other than this Escrow Agreement or except as otherwise
provided herein. This Escrow Agreement and the Agreement (to the extent referred
to herein) sets forth the entire agreement between the parties hereto and the
Escrow Agent as escrow agent with respect to the Escrow Account and the
distribution of the Escrow Deposit (or any portion thereof) held therein.
Notwithstanding any provision to the contrary contained in any other agreement
(excluding any amendment to this Escrow Agreement) between any of the parties
hereto, the Escrow Agent shall have no interest in the Escrow Deposit (or any
portion thereof) held by it in escrow pursuant to this Escrow Agreement. With
respect to the Escrow Account, in the event that any of the terms and provisions
of any other agreement (excluding any amendment to this Escrow Agreement)
between any of the parties hereto conflict or are inconsistent with any of the
terms and provisions of this Escrow Agreement, the terms and provisions of this
Escrow Agreement shall govern and control in all respects.
9. Amendment and Cancellation. The Escrow Agent shall not be bound
by any cancellation, waiver, modification or amendment of this Escrow Agreement,
including the transfer of any interest hereunder, unless such modification is in
writing and signed by each of the Purchaser and the Sellers' Representative and,
if the duties of the Escrow Agent hereunder are affected, unless the Escrow
Agent also shall have given its written consent thereto.
10. Legal Counsel. The Escrow Agent may consult with, and obtain
advice from, legal counsel in the event of any question as to any of the
provisions hereof or its duties hereunder, and it shall incur no liability and
shall be fully protected in acting in good faith in accordance with the opinion
and instructions of such counsel.
11. Resignation and Removal. The Escrow Agent shall have the right,
in its discretion, to resign as escrow agent hereunder at any time, by giving at
least thirty (30) days' prior written notice of such resignation to the Sellers'
Representative and the Purchaser. The Escrow Agent may be removed at any time by
an instrument or concurrent instruments in writing delivered to the Escrow Agent
and signed by each of the Sellers' Representative and Purchaser. Such
resignation or removal, as the case may
-7-
be, shall take effect upon the appointment of a successor escrow agent in
accordance with the provisions of this Section 11 and the acceptance of such
appointment by the successor escrow agent. Upon such resignation or removal, as
the case may be, each of the Sellers and the Purchaser shall use their best
efforts to appoint another bank with capital, surplus and undivided profits of
not less than One Hundred Million Dollars ($100,000,000) as successor Escrow
Agent. Upon acceptance of such appointment, each of the Sellers and the
Purchaser will enter into an agreement with such successor escrow agent in
substantially the form of this Escrow Agreement. Resignation by or removal of,
as the case may be, the Escrow Agent shall relieve the Escrow Agent of any
responsibility or duty thereafter arising hereunder, but shall not relieve the
Escrow Agent of responsibility to deliver the Escrow Deposit as provided for in
this Section 11. Immediately upon the effectiveness of such resignation or
removal, as the case may be, the Escrow Agent shall deliver to the successor
escrow agent the Escrow Deposit then held in the Escrow Account. In the event of
the resignation of the Escrow Agent, if a substitute for the Escrow Agent
hereunder shall not have been selected as aforesaid within the 30-Business Day
notice period referred to in the first sentence of this Section 11, the Escrow
Agent shall be entitled to petition any court of competent jurisdiction for the
appointment of a substitute for it hereunder or, in the alternative, it may
transfer and deliver the Escrow Deposit then held in the Escrow Account to or
upon the order of such court. The Escrow Agent shall be discharged from all
further duties hereunder upon the effectiveness of such resignation or removal
as set forth above and upon transfer and delivery of the Escrow Deposit in the
Escrow Account to or upon the order of any such court, as the case may be.
12. Fees. The Sellers (severally, and not jointly, in accordance
with such seller's percentage interest as set forth in Exhibit A hereto), on the
one hand, and the Purchaser, on the other hand, agree to share equally the
Escrow Agent's annual fee (such fees to be based upon the anniversary date of
this Escrow Agreement) and all other fees and expenses of the Escrow Agent
pursuant to the fee schedule attached hereto as Exhibit B. Each of the Sellers
hereby agrees that the Sellers' Representative may pay such Seller's percentage
interest of such fees from the Sellers Amount, as provided for in Section 2.2(c)
of the Agreement. This Section 12 shall survive the termination of this
Agreement.
-8-
13. Payments. At any time the Escrow Agent is required to distribute
or pay over any amounts held by or received by it under any of the provisions of
this Escrow Agreement to the Sellers, such distribution and payment shall be
effected by issuance of the Escrow Agent's check in the appropriate amount
payable to such Seller and by mailing of such check to such Seller at the
address of such Seller set forth in Exhibit A hereto, provided that:
A. Any Seller may, by written notice delivered to the Escrow Agent, direct
that payment of amounts required to be distributed to such Seller be effected by
wire transfer in immediately available funds to an account established by such
Seller for such purpose, or by mailing the Escrow Agent's check for such amounts
to any other or changed address specified in such notice, and payments
thereafter (but not theretofore) made by the Escrow Agent to such Seller
hereunder shall thereafter be made in accordance with such notice (until changed
by subsequent notice delivered to the Escrow Agent as herein provided);
B. In the event of any transfer or assignment, by death, divorce or
otherwise by operation of law, or by sale, assignment, contract, security
agreement or otherwise, of any right to receive payment of any part of any
amounts held by the Escrow Agent (notice of which sale, transfer or assignment
shall be given by such Seller to the Escrow Agent) the Escrow Agent shall
nevertheless be entitled to withhold payment of any amounts to such assignee,
transferee or successor in interest until written instructions from such
assignee, transferee or successor in interest are delivered to the Escrow Agent
specifying the mailing address or account of such assignee, transferee or
successor in interest pursuant to the foregoing provisions of this Section; and
C. All payments and distributions of all kinds required to be made to the
Sellers in accordance with the terms hereof shall be made according to each such
Seller's Percentage Interest as set forth in Exhibit A hereto.
14. Notices. All communications and disbursements required
pursuant to this Escrow Agreement shall be addressed to the Escrow Agent, the
Purchaser and the Sellers, respectively, as follows:
-9-
If to the Escrow Agent:
The Bank of New York
Insurance Trust and Escrow Department
000 Xxxxxxx Xxxxxx, 00-X
Xxx Xxxx, Xxx Xxxx 00000
If to the Purchaser:
Specialty Paperboard, Inc.
000 Xxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. XxXxxxxx
If to the Sellers:
To the respective addresses of the Sellers
shown in Exhibit A to this Escrow Agreement.
with a copy to:
Xxxxxx & Xxxxxx
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
If to the Sellers' Representative:
Northwood Ventures
000 Xxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx, Xxx Xxxx 00000-0000
with a copy to:
Xxxxxx & Xxxxxx
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Any notice or instructions under any of the provisions of this Escrow Agreement
shall be deemed effectively given only if such notice is in writing and is
received by the recipient thereof if notice is personally delivered or sent by
courier or three (3) Business Days after date of mailing, if sent by certified
mail, return receipt requested. Any delivery under this Escrow Agreement shall
be made by
-10-
hand delivery, or by courier with receipt acknowledged, or by certified mail,
return receipt requested, addressed to the respective addresses of the parties
hereto as set forth in this Section 14 or at such other address as any of the
parties hereto may hereafter specify to the others in writing. Notwithstanding
any of the foregoing, no notice or instructions to the Escrow Agent shall be
deemed to have been received by the Escrow Agent prior to actual receipt by the
Escrow Agent, and any computation of a time period which is to begin after
receipt of a notice by the Escrow Agent shall run from the date of such receipt
by the Escrow Agent.
15. Parties in Interest. This Escrow Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
16. Headings. The Section headings used herein are for reference
purposes only, and shall not in any way affect the meaning or interpretation of
this Escrow Agreement.
17. Execution by Escrow Agent. The execution of this Escrow
Agreement by the Escrow Agent shall constitute a receipt for the Escrow Amount
and shall evidence its acceptance and agreement to the terms hereof.
18. Indemnification of Escrow Agent. Sellers, on the one hand, and
the Purchaser, on the other hand, hereby jointly and severally agree to
indemnify the Escrow Agent and its officers, directors, employees,
representatives and agents form and hold each of them harmless against any and
all liabilities, obligations (including removal or remedial actions), losses,
damages, penalties, claims, actions, judgments, suits, costs, expenses and
disbursements incurred by any of them as a result of, or arising out of, or in
any way related to, or by reason of any investigation, litigation or other
proceeding (whether or not the Escrow Agent is a party thereto) related to the
entering into and/or performance of this Agreement, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the bad faith, gross negligence or willful misconduct of the Escrow
Agent). The foregoing indemnities in this Section shall survive termination of
this Escrow Agreement.
-11-
19. Sellers' Representative. The initial Sellers' Representative
shall be Northwood Ventures, a New York limited partnership. Upon written notice
to the Purchaser and the Escrow Agent, the Sellers may change the identity of
the Sellers' Representative by written consent signed by the Required Sellers.
20. Governing Law. This Escrow Agreement shall be construed and
interpreted in accordance with the law of the State of New York. Any judicial
proceeding brought against any of the parties to this Escrow Agreement or any
dispute arising out of this Escrow Agreement or any matter related hereto shall
be brought in the courts of the State of New York, or in the United States
District Court for the Southern District of New York, and, by execution and
delivery of this Escrow Agreement, each of the parties to this Escrow Agreement
accepts the exclusive jurisdiction of such courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Escrow Agreement.
The foregoing consent to jurisdiction shall not be deemed to confer rights on
any Person other than the respective parties to this Escrow Agreement.
21. Counterparts. This Escrow Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one instrument.
-12-
IN WITNESS WHEREOF, the parties hereunto have duly caused this
Escrow Agreement to be executed as of the day first above written.
SPECIALTY PAPERBOARD, THE BANK OF NEW YORK
INC.
By______________________ By___________________________
Name: Xxxxx X. Xxxxx Name:
Title: Vice President Title:
and Chief Financial
Officer
ARCON HOLDINGS CORP.
By___________________________
Name:
Title:
ARCON COATING XXXXX, INC.
By___________________________
Name:
Title:
NORTHWOOD VENTURES
By__________________________
Name:
Title:
NORTHWOOD CAPITAL
PARTNERS LLC
By__________________________
Name:
Title:
-00-
XXXX, XXXX & CO.
By__________________________
Name:
Title:
____________________________
Xxxxxx X. Xxxxxx
____________________________
Xxxxxxx X. Xxxxx
____________________________
Xxxxxxx Xxxx
____________________________
Xxxxxxxxx X. Xxxxx
____________________________
Xxxxx X. Xxxxxx
____________________________
Xxxxx X. Xxxxx
____________________________
Xxxxxx X. Ablum
____________________________
Xxxxx X. Xxxxx
-14-
EXHIBIT A
ADDRESS PERCENTAGE INTEREST
------- -------------------
Northwood Ventures 51.5333
Suite 205
000 Xxxxxxxxx Xxxx.
Xxxxxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxxx
General Partner
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Northwood Capital Partners LLP 25.7455
Suite 205
000 Xxxxxxxxx Xxxx.
Xxxxxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxxx
General Partner
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxx, Loeb & Co. 5.7928
20th Floor
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxxxx X. Xxxxxx 2.3171
Salomon Brothers Inc.
40th Floor
0 Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
EXHIBIT A
Page 0
Xxxxxxx X. Xxxxx 0.0000
Xxxxxxxxx & Xxxxx
00 Xxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxx Xxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxxxxx Xxxx 0.0000
Xxxxx Coating Xxxxx, Inc.
0000 Xxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxxxxxxx X. Xxxxx .9268
Xxxx Xxxxxxx Inc.
Xxxxxxxxx Xxxx Xxxx
X.X. Xxx 000
Xxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxxx X. Xxxxxx .2322
Suite 205
000 Xxxxxxxxx Xxxx.
Xxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxxx X. Xxxxx 6.2051
Arcon Coating Xxxxx, Inc.
0000 Xxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
EXHIBIT A
Page 0
Xxxxxx X. Xxxxx .0000
Xxxxxx, Xxxxx & Co.
Suite 205
175 North Franklin
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxxx X. Xxxxx 0.0000
Xxxxx 000
000 Xxxxxxxxx Xxxx.
Xxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
EXHIBIT B
ESCROW AGENT FEE SCHEDULE
Acceptance Fee........................................................$1,500.00
Review Escrow Agreement and supporting documents
Establish Account
Annual Administration Fee.............................................$5,000.00
(pro rated for partial years subject to a minimum of
$2,500.00)
Investment Transaction Fee, (if applicable)..............................$25.00
Wire Transfers and Checks, each (if applicable)..........................$15.00
Preparation of Forms 1099......................................$250.00 per year
