EXHIBIT 10.5
PURCHASE AND SALE AGREEMENT
DATED AS OF OCTOBER 23, 1997
among
SMURFIT PACKAGING CORPORATION,
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ HOLDINGS, INC.
and
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ CORP.
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE OF ASSETS....................................................1
1.1 Assets to be Transferred..............................................1
1.2 Excluded Assets.......................................................3
1.3 Other Transactions....................................................5
1.4 Assignment of Assets..................................................5
1.5 Obtaining Permits and Licenses........................................6
ARTICLE II
CONSIDERATION..................................................................6
2.1 Purchase Price........................................................6
2.2 Allocation of Purchase Price..........................................6
ARTICLE III
LIABILITIES, OBLIGATIONS AND INDEMNITIES.......................................7
3.1 Liabilities and Indemnity.............................................7
3.2 Indemnification Procedure............................................11
3.3 Other Indemnification Provisions.....................................12
3.4 Cash Settlements.....................................................12
ARTICLE IV
EMPLOYEES AND EMPLOYEE BENEFITS...............................................13
4.1 Interim Employment Period............................................13
4.2 Employment By Buyer..................................................13
4.3 Seller Reliance. ...................................................14
4.4 Health Care ...........................................14
4.5 Past Service and Vacations...........................................14
4.6 Bonuses. ...........................................................15
4.7 Employee Benefit Plans...............................................15
4.8 Addition to Assumed Liabilities......................................15
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PAGE
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER .....................................16
5.1 Organization and Corporate Power.....................................16
5.2 Due Authorization; No Breach.........................................16
5.3 Real Property........................................................17
5.4 Personal Property....................................................19
5.5 Title and Condition of Assets; Entire Business.......................19
5.6 Consents.............................................................20
5.7 Compliance With Laws.................................................20
5.8 Permits and Licenses.................................................20
5.9 Environmental Conditions.............................................21
5.10 Product Safety.......................................................22
5.11 Employee Relations...................................................22
5.12 Litigation, Claims and Proceedings...................................23
5.13 Intellectual Property................................................23
5.14 Contracts............................................................24
5.15 Benefit Plans........................................................25
5.16 Financial Statements.................................................26
5.17 Absence of Certain Changes or Events.................................27
5.18 Insurance............................................................27
5.19 Affiliate Transactions. ............................................28
5.20 Tax Matters. .......................................................28
5.21 Material Customers and Suppliers. ..................................28
5.22 Books and Records. .................................................28
5.23 Disclosure. ........................................................28
5.24 Survival of Representations and Warranties...........................29
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER............................29
6.1 Organization and Power...............................................29
6.2 Due Authorization; No Breach.........................................29
6.3 Consents.............................................................30
6.4 Financing. .........................................................30
6.5 Survival of Representations and Warranties...........................30
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PAGE
ARTICLE VII
PRE-CLOSING COVENANTS.........................................................30
7.1 Conduct of the Business..............................................30
7.2 Access to Books, Records and Facilities..............................31
7.3 ISRA.................................................................32
7.4 Best Efforts.........................................................32
7.5 Purchase Order No. 685-2155. .......................................32
ARTICLE VIII
CONDITIONS OF CLOSING.........................................................32
8.1 Seller's Conditions..................................................32
8.2 Buyer's Conditions...................................................33
ARTICLE IX
TERMINATION; SURVIVAL.........................................................34
9.1 Termination by Buyer or Seller.......................................34
9.2 Survival.............................................................34
ARTICLE X
CLOSING.......................................................................34
10.1 Closing..............................................................34
10.2 Seller's Obligations and Closing Deliveries..........................34
10.3 Buyer's Obligations and Closing Deliveries...........................35
ARTICLE XI
EXPENSES AND POST CLOSING OBLIGATIONS.........................................36
11.1 Taxes and Other Charges..............................................36
11.2 Restriction..........................................................37
11.3 Insurance Data.......................................................38
11.4 Further Assurances...................................................38
11.5 Access to Books, Records and Facilities..............................38
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PAGE
11.6 Preparation of Audited Financial Statements. .......................39
ARTICLE XII
BULK SALES LAW................................................................39
12.1 Waiver...............................................................39
ARTICLE XIII
PUBLICITY, CONFIDENTIALITY....................................................39
13.1 Publicity............................................................39
13.2 Confidentiality......................................................40
13.3 Negotiations with Third Parties......................................40
ARTICLE XIV
NOTICES.......................................................................40
14.1 Notices..............................................................40
ARTICLE XV
CONSULTANT FEES...............................................................42
15.1 Brokers..............................................................42
ARTICLE XVI
MISCELLANEOUS.................................................................43
16.1 Binding Effect; Assignment...........................................43
16.2 Exhibits and Schedules...............................................43
16.3 Specific Performance.................................................43
16.4 Counterparts.........................................................43
16.5 Headings; Interpretation.............................................43
16.6 Waiver...............................................................43
16.7 Severability.........................................................44
16.8 Governing Law and Forum..............................................44
16.9 Materiality..........................................................44
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PAGE
16.10 Obligations Guarantee..................................................44
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PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT (this "Agreement"), dated as of
October 23, 1997, among SMURFIT PACKAGING CORPORATION, a Delaware corporation
("Seller"), ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ HOLDINGS, INC, a Delaware corporation ("Parent"),
and ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ Corp., a New Jersey corporation ("Buyer"). Seller and Buyer
are collectively referred to as the "Parties".
W I T N E S S E T H:
WHEREAS, Seller is engaged in the business of manufacturing
and marketing drums through its Plastics Division (the "Division");
WHEREAS, Seller owns or holds certain assets, including land,
buildings and other real property, fixed assets, machinery, equipment, inventory
and other personal property, technology, contracts and other intangible property
used in the business of the Division as presently conducted (the "Business");
and
WHEREAS, Buyer wishes to purchase, and Seller is willing to
sell, all of Seller's right, title and interest in and to the Division, together
with all of the assets of Seller and its affiliates used by Seller primarily in
the conduct of the Business (other than Excluded Assets as defined below), and
as part of such purchase and sale of such assets Buyer is willing to assume
certain of the obligations and liabilities of Seller related to the Assets (as
defined below) and the Division;
NOW, THEREFORE, for and in consideration of the mutual
covenants and agreements hereinafter set forth, the parties hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 ASSETS TO BE TRANSFERRED. Subject to the terms and
conditions of this Agreement, and except as otherwise expressly provided in
Articles 1.2 and 1.4 hereof, at the Closing (as defined in Article 10.1 hereof),
Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer
shall purchase, acquire and accept from Seller, all of Seller's right, title and
interest in and to all property, plant, machinery, equipment, inventories,
goodwill, and other assets of every kind, character and description, whether
tangible or intangible, whether real, personal or mixed, and wherever situated,
owned, possessed, leased
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or licensed by any of Seller or its affiliates and used by
Seller or its affiliates primarily in the conduct of the Business, with such
changes, deletions or additions thereto as may occur from the date hereof to the
Closing in accordance with the terms and conditions of this Agreement and any
Ancillary Agreement (as defined herein) executed in connection herewith,
including, without limitation, each of the following assets used by Seller or
its affiliates primarily in the conduct of the Business, except as otherwise
expressly provided in Article 1.2 hereof (collectively, the "Assets"):
(a) all properties, assets, rights and entitlements reflected
on the balance sheet included in the Financial Statements (as defined in Article
5.16(a)) hereof);
(b) all real property used by the Business that is owned by
Seller and listed on Schedule 5.3(a) and all buildings, structures and other
improvements and fixtures located on such real property and any additions,
improvements, replacements and alterations thereto between the date hereof and
the Closing Date;
(c) all leasehold interests in real property relating to the
Business leased by Seller and listed on Schedule 5.3(b), including all
buildings, structures and other improvements located on such real property and
any additions, improvements, replacements and alterations thereto between the
date hereof and the Closing Date;
(d) all tangible personal property and interests therein
located on the real property or leaseholds listed on Schedules 5.3(a) or 5.3(b)
or used by the Division, including all machinery, equipment, furniture,
equipment, raw materials, supplies, spare and replacement parts, vehicles,
storage tanks, fuel and construction in progress;
(e) all inventory and work in progress relating to the
Business, including, without limitation, any of such items in transit from
manufacturing facilities or warehouses of Seller (the "Inventory");
(f) all accounts and notes receivable relating to the
Business, including intercompany receivables, deposits and advances, and other
receivables (the "Accounts Receivable");
(g) all rights under all contracts, leases, licenses,
commitments, sales orders, purchase orders, invoices and other agreements
relating to the Business (the "Contracts");
(h) all warranties, claims and causes of action against third
parties relating to the Business, except to the extent related to Excluded
Assets or Excluded Liabilities;
(i) all prepayments and prepaid expenses relating to the
Business;
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(j) all United States, state and foreign intellectual property
owned or used by the Division, including, without limitation: (i) (A)
inventions, technology, discoveries, processes, formulae, designs, methods,
techniques, procedures, machines, manufactures, concepts, developments, new and
useful improvements thereof and know-how relating thereto, whether or not
patented or eligible for patent protection; (B) copyrights and copyrightable
works, including computer applications, programs, software, databases and
related items; (C) trademarks, service marks, trade names, trade dress, the
goodwill of the Business symbolized thereby and appurtenant thereto, and all
common-law rights relating thereto; (D) trade secrets and other confidential or
proprietary designs and information; (ii) all registrations, applications,
recordings and licenses related to the foregoing; (iii) the right to obtain all
renewals, reissues, divisions, continuations or other similar legal protections
pertaining to the foregoing; and (iv) the right to ▇▇▇ at law or in equity for
any infringement or misappropriation of, or impairment to the foregoing,
including the right to receive all proceeds and damages therefrom (collectively
"Intellectual Property");
(k) originals or copies of all records, files, invoices,
customer lists, supplier lists, blueprints, specifications, designs, accounting
books and records, tax books and records, business books and records,
promotional or advertising material, operating data and plans, and other
relevant data relating to the Business; provided that Seller shall retain
originals of any such items which (x) relate primarily to the Excluded Assets or
Excluded Liabilities; (y) are income tax books and records; or (z) are tax books
and records (other than income tax) relating to taxes paid by Seller prior to
the Closing; provided further that Buyer shall receive copies of the items set
forth in clauses (x), (y) and (z) to the extent such records do not contain
confidential information of Seller, and, to the extent such records do contain
confidential information, Seller shall provide Buyer and its representatives
with access during normal business hours upon reasonable prior notice to such
other confidential records; and Buyer shall receive originals of all other such
items;
(l) all federal, state, local and other governmental licenses,
permits, approvals and authorizations relating to the Business to the extent
transferrable or assignable;
(m) all insurance proceeds relating to the Business arising
out of or related to damage, destruction or loss of any Assets to the extent of
any damage or destruction that remains unrepaired, or to the extent any Assets
remain unreplaced, as of the Closing;
(n) all telephone numbers of the Division;
(o) all goodwill associated with the Business, the Division or
the Assets; and
(p) all other properties and assets of Seller and its
affiliates used primarily in the conduct of the Business as presently conducted
or as conducted on the date of the Closing.
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1.2 EXCLUDED ASSETS. The parties to this Agreement expressly
understand and agree that neither Seller nor any affiliate of Seller is
hereunder selling, assigning, transferring or conveying to Buyer any of the
following assets, rights and properties (the "Excluded Assets"):
(a) cash and cash equivalents (including marketable securities
and short-term investments) of Seller (other than ▇▇▇▇▇ cash located at the real
property described in Schedule 5.3);
(b) insurance policies and any prepaid premiums thereon and
the cash surrender value thereof;
(c) any assets sold or otherwise disposed of not in violation
of any provisions of this Agreement during the period from the date hereof until
the Closing;
(d) the name "Smurfit" and all trademarks, service marks,
trade names, trade dress and logos containing such name and the goodwill of any
business of Seller symbolized thereby and appurtenant thereto and all common law
rights relating thereto (the "Excluded Intellectual Property"); PROVIDED that
until the nine month anniversary of the Closing Date, Buyer shall have the right
to use the Excluded Intellectual Property in connection with the sale of
finished goods inventory and the use of product literature, signage and trailers
and other vehicles existing on the Closing Date which bear markings containing
the Excluded Intellectual Property; PROVIDED FURTHER, that Buyer shall
appropriately sticker such product literature so as to reflect accurately the
current ownership status of the Assets after the Closing Date and, if requested
by Seller, will deliver to Seller, at Seller's expense, any signage containing
the "Smurfit" name and logo removed by Buyer during such nine month period, and
Buyer agrees that any such use will cease after such nine month anniversary;
(e) any rights of Seller under this Agreement and any
agreement relating hereto between Seller and Buyer entered into on or after the
date hereof;
(f) any Tax refunds with respect to periods prior to the
Closing;
(g) the corporate charter qualifications to conduct business
as a foreign corporation, arrangements with registered agents relating to
foreign qualifications, taxpayer and other identification numbers, minute books,
blank share certificates and share transfer ledgers and other documents relating
to the organization, maintenance and existence of Seller as a corporation;
(h) personal belongings of any employee of Seller;
(i) the insurance recoveries, if any, relating to the Excluded
Assets and Excluded Liabilities;
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(j) the assets identified on Schedule 1.2(j) hereto; and
(k) all assets which are used exclusively in Seller's other
businesses.
1.3 OTHER TRANSACTIONS. In addition to the transactions
contemplated above, the following acts or transactions shall also occur on or
before the Closing:
(a) Buyer and Seller each shall execute and deliver a
Transition Services Agreement substantially in the form attached hereto as
Exhibit 1.3(a);
(b) Buyer and Seller each shall execute and deliver a ▇▇▇▇ of
Sale and Assignment substantially in the form attached hereto as Exhibit 1.3(b);
and
(c) Buyer shall execute and deliver an Assumption Agreement
substantially in the form attached hereto as Exhibit 1.3(c).
The agreements set forth in paragraphs (a) through (c) of this
Article 1.3 are hereinafter referred to as the "Ancillary Agreements."
1.4 ASSIGNMENT OF ASSETS. (a) To the extent that any lease,
contract, license, agreement, sales or purchase order, commitment, property
interest, qualification or other Asset to be sold, assigned, transferred or
conveyed to Buyer, or any claim, right or benefit arising thereunder or
resulting therefrom (the "Interests"), cannot be sold, assigned, transferred or
conveyed without the approval, consent or waiver of or filing with the issuer
thereof or the other party thereto or any third person (including a government
or governmental unit), or to the extent that such sale, assignment, transfer or
conveyance or attempted sale, assignment, transfer or conveyance of any such
Interest would constitute a breach thereof or a violation of any law, decree,
order, regulation or other governmental edict, this Agreement shall not
constitute a sale, assignment, transfer or conveyance thereof or an attempted
sale, assignment, transfer or conveyance thereof.
(b) Notwithstanding anything to the contrary contained herein,
Seller is not obligated to sell, assign, transfer or convey to Buyer, and Buyer
is not obligated to purchase from Seller, any of Seller's rights and obligations
in and to any of the Interests without first having the necessary approvals,
filings, consents or waivers required to effect such sale, assignment, transfer
or conveyance and all permits, licenses, registrations or other authorizations
necessary to conduct the Business subsequent to Closing set forth in Schedule
5.6(b) hereof.
(c) To the extent that any of the approvals, consents,
filings, waivers, permits, licenses, registrations or other authorizations
referred to in Article 1.4(a) hereof have not been obtained by Seller as of the
Closing, Seller and its affiliates shall, during the remaining term of
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such Interest, use all reasonable efforts, to (i) obtain the consent of any such
third person (including a government or governmental unit), (ii) cooperate with
Buyer and Parent in any reasonable and lawful arrangement designed to provide
the benefits of such Interest to Buyer and (iii) enforce, at the request of
Buyer or Parent and for the benefit of Buyer, any rights of Seller and its
affiliates arising from such Interest against such issuer thereof or the other
party or parties thereto (including the right to elect to terminate any such
Interest in accordance with the terms thereof upon the written request of Buyer
or Parent). Any such efforts by Seller pursuant to this Article 1.4(c) shall be
at the expense of Seller.
1.5 OBTAINING PERMITS AND LICENSES. Buyer, in cooperation with
Seller, shall use all reasonable efforts to obtain as of the Closing or as soon
thereafter as may be practicable all permits and licenses required by any
governmental agency with respect to the Assets or the Division (including,
without limitation, environmental and other operating permits) and all
approvals, filings, consents or waivers necessary for Buyer to conduct the
Business, without any guaranty or liability of Seller and its affiliates with
respect thereto. Seller and its affiliates will assign, transfer and convey to
Buyer at the Closing those permits and licenses which are held or used by Seller
in the conduct of the Business and can be assigned without having to obtain the
consent of any third party (other than any affiliate of Seller) with respect
thereto, provided that Seller and Buyer will work together and use all
reasonable efforts to obtain any third party consents necessary to the
assignment or transfer of any other permits or licenses used or held by Seller
in the conduct of the Business which are so assignable or transferable.
Subsequent to the assignment, transfer and conveyance of each Asset on or after
the date of the Closing, to the extent permitted by law, Seller shall have the
right to cancel any permits or licenses held by Seller now applicable to such
Asset to the extent not assignable or transferrable to Buyer pursuant to this
Article 1.5. The failure of Seller to cancel any permits or licenses shall not
affect the rights, obligations, liabilities and indemnifications of Seller by
Buyer under this Agreement.
ARTICLE II
CONSIDERATION
2.1 PURCHASE PRICE. As consideration for the Assets and the
covenant contained in Article 11.2 hereof, at the Closing (as defined in Article
10.1 hereof) Buyer shall pay Seller the sum of (i) $69.5 million plus (ii) the
Addison Option Amount (as hereinafter defined). All payments made to Seller
pursuant to this Article 2.1 (the "Purchase Price") shall be made by wire
transfer of immediately available funds to an account designated by Seller at
least two business days prior to the Closing Date. As used herein the "Addison
Option Amount" shall mean an amount equal to the sum of (i) $450,000,
representing the option purchase price amount due upon exercise of the purchase
option pursuant to the real property lease for the Addison, Illinois facility;
plus (ii) $18,822.23, representing Seller's out-of-pocket costs incurred in
connection with the closing of the exercise of such purchase option.
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2.2 ALLOCATION OF PURCHASE PRICE. (a) Buyer and Seller agree
that they shall allocate the sum of the Purchase Price among the Assets as of
the Closing Date on Internal Revenue Service ("IRS") Form 8594, in accordance
with Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"),
and the Treasury regulations promulgated thereunder. The allocation described in
the preceding sentence shall be determined by the joint agreement of Buyer and
Seller based upon the fair market value of the Assets as of the Closing Date.
Buyer shall provide Seller with a copy of Buyer's proposed fair market value
allocation (the "Allocation") as promptly as reasonably practicable. In the
event that Buyer and Seller are unable to agree on the Allocation within 90 days
of the date on which Buyer provides Seller with a copy of the Allocation, a
third-party appraiser jointly selected by Buyer and Seller, the cost of which
shall be borne equally by Buyer and Seller, shall resolve all items with respect
to the Allocation to which there is a dispute between the parties.
(b) Buyer and Seller shall timely file with the appropriate
Tax authorities copies of the agreed upon IRS Form 8594 and shall use the
Allocation in the preparation of all Tax Returns (including any attachments
thereto) and for all other Tax purposes. In the event any party hereto receives
notice of an audit in respect of the Allocation, such party shall notify the
other party in writing as to the date and subject of such audit as promptly as
reasonably practicable.
(c) If any Tax Return filed by Buyer or Seller relating to the
transactions contemplated hereby is challenged by the Tax authority with which
such Tax Return was filed on the basis of the Allocation, as finally adjusted,
the filing party shall assert in good faith the validity and correctness of the
Allocation, provided, however, that after asserting such position the filing
party shall be free to settle such dispute as it determines. If any such Tax
Return is challenged as herein described, the party filing such Tax Return shall
keep the other party generally apprised of its decisions and the current status
and progress of all administrative and judicial proceedings, if any, that are
undertaken at the election of such party with respect thereto.
(d) Any adjustment to the Purchase Price or the amount of
Assumed Liabilities shall result in an appropriate adjustment to the Allocation
and the IRS Form 8594 described above.
ARTICLE III
LIABILITIES, OBLIGATIONS AND INDEMNITIES
3.1 LIABILITIES AND INDEMNITY. (a) Subject to the provisions
of Article 3.1(b) hereof and except as otherwise provided in this Agreement,
effective as of the Closing, Buyer shall, without any further responsibility or
liability of or recourse to Seller or any of its affiliates or any of their
respective directors, shareholders, officers, employees, agents, consultants,
representatives, successors, transferees and assigns (hereinafter sometimes
referred to as "Seller
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Indemnified Parties"), absolutely and irrevocably assume and be solely liable
and responsible for any and all of the following Liabilities (as defined below)
(collectively, the "Assumed Liabilities"):
(i) all Liabilities reflected on the unaudited balance sheet
of the Business as of June 30, 1997 and the notes thereto included in the
Financial Statements (the "June 30 Balance Sheet");
(ii) all Liabilities of Seller arising under the Contracts
assigned to Buyer hereunder (other than Liabilities attributable to any failure
by Seller to comply with the terms thereof);
(iii) all other Liabilities as of the Closing Date of Seller
incurred in the ordinary course of the Business since June 30, 1997 and not in
violation of any provision of this Agreement;
(vi) Liabilities agreed to be assumed by Buyer with respect to
Transferred Employees pursuant to Article IV hereof;
(v) Liabilities arising from any claim, action, suit,
investigation or proceeding relating to or arising out of Buyer's ownership of
the Assets after the Closing or Buyer's conduct of the Business after the
Closing, including without limitation, claims with respect to defective products
or services, alleged improper sales practices, warranty claims, claims for any
loss, damage or cost arising out of any property damage or personal injury, in
each case due to the use of any product sold by or services furnished by the
Business after the Closing Date;
(vi) Liabilities under or relating to Environmental Laws (as
defined in Article 5.9(a) hereof), in force or effect on or after the Closing
Date, concerning the Buyer's ownership of the Assets on or after the Closing
Date or Buyer's conduct of the Business on or after the Closing and, in each
case, arising out of or as a consequence of an event or condition first
occurring or existing on or after the Closing Date; without limiting the
foregoing, Buyer shall be responsible for compliance with Environmental Laws
which were enacted prior to the Closing Date and are in effect as of the Closing
Date and which by the terms of such Environmental Laws do not require compliance
until after the Closing Date; and
(vii) Seller's payables to Seller's affiliates identified on
Schedule 3.1(e)(iv) hereto.
The term "Liability" shall mean and include any direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, cost of environmental investigation
or remediation, obligation or
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responsibility, whether known or unknown, fixed or unfixed, ▇▇▇▇▇▇ or inchoate,
liquidated or unliquidated, secured or unsecured, accrued or unaccrued,
absolute, contingent or otherwise.
(b) Notwithstanding anything to the contrary contained in
Article 3.1(a) hereof, the term "Assumed Liabilities" shall not mean or include,
or be deemed to mean or include, and Seller hereby agrees to indemnify and hold
harmless each of Parent and Buyer and its affiliates and their respective
directors, shareholders, partners, officers, employees, agents, consultants,
representatives, successors, transferees and assigns (hereinafter sometimes
referred to as "Buyer Indemnified Parties") against (i) any Liabilities which
are satisfied or discharged prior to the Closing and (ii) any Excluded
Liabilities not expressly assumed under Section 3.1(a) (including in each case
any penalties, fines, reasonable attorneys' fees and other costs incident to
proceedings or investigations or the prosecution or defense of any claim
(collectively, "Damages")). Except as set forth in Articles 3.1(a) and 3.1(b)
hereof, or as may be otherwise expressly agreed upon in any Ancillary Agreement,
Buyer will assume no Liability of Seller or any of its affiliates. It is
understood that indemnity claims under this Article 3.1(b) may be brought by
Buyer Indemnified Parties at any time and shall not be limited as to dollar
amount.
(c) Buyer shall indemnify and hold harmless the Seller
Indemnified Parties against all Assumed Liabilities (including Damages) and (ii)
Damages which are caused by or arise out of the failure by Buyer to perform or
fulfill any agreement or covenant to be performed or fulfilled by Buyer under
this Agreement or any Ancillary Agreement. It is agreed and understood that
claims under this Article 3.1(c) may be brought by Seller Indemnified Parties at
any time and shall not be limited as to dollar amount.
(d) Buyer shall also indemnify and hold harmless the Seller
Indemnified Parties against any Damages which are caused by or arise out of any
breach of any representation or warranty of Buyer. It is agreed and understood
that no claim under this Article 3.1(d) shall be asserted after the second
anniversary of the Closing.
(e) Except for the Assumed Liabilities, Buyer is not assuming,
and is not responsible for, any Liabilities of Seller, whether or not related to
the Division ("Excluded Liabilities"), including without limitation, the
following:
(i) any Liabilities with respect to the operation of the
Business prior to the Closing for all Taxes (including, without limitation, all
United States federal, state and local income, sales, real property, personal
property and other Taxes, but excluding payroll Taxes), all levies, imposts and
duties in the nature of Taxes and all deficiencies, assessments, charges and
penalties associated therewith and any other Liabilities for Taxes for all
periods prior to the Closing;
(ii) Liabilities relating to employee benefits or compensation
arrangements arising before or as a result of the Closing, including, without
limitation, any
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Liabilities under any of Seller's Plans (as defined in Article 5.15
hereof), including, without limitation, Liabilities relating to any
severance payments or other benefits payable as a result of the
transactions contemplated hereby, except as provided in Article IV;
(iii) Liabilities accruing prior to the Closing to the extent
that Seller actually is reimbursed therefor under its insurance policies;
(iv) Seller's payables to Seller's affiliates which are not
identified on Schedule 3.1(e)(iv) hereto;
(v) Liabilities under any bond, note, debenture, or similar
instrument or any other indebtedness for borrowed money;
(vi) Any cash overdrafts;
(vii) Liabilities of Seller related to the Excluded Assets;
(viii) Liabilities of Seller under this Agreement or any
Ancillary Agreement;
(ix) Liabilities of Seller arising out of or as a consequence
of (A) injury or death of any person as a consequence of any event occurring
prior to the Closing, (B) damage to the property of any third party as a
consequence of any event occurring prior to the Closing, and (C) workers'
compensation claims relating to events or conditions which occurred or arose
prior to the Interim Employment Period Termination Date (as defined);
(x) Liabilities arising from any claim, action, suit,
investigation or proceeding (whether initiated prior to or after Closing)
relating to or arising out of Seller's ownership of the Assets or Seller's
conduct of the Business prior to the Closing, including without limitation,
claims with respect to defective products or services, alleged improper sales
practices, warranty claims, claims for any loss, damage or cost arising out of
any property damage or personal injury due to the use of any product sold by or
services furnished by the Business prior to the Closing Date;
(xi) Liabilities under or relating to Environmental Laws (as
defined in Article 5.9(a) hereof) concerning the Seller, the Assets, the
Business or the Division and arising out of or as a consequence of an event or
condition occurring or existing prior to the Closing; without limiting the
foregoing, Buyer shall be responsible for compliance with Environmental Laws
which were enacted prior to the Closing Date and are in effect as of the Closing
Date and which by the terms of such Environmental Laws do not require compliance
until after the Closing Date;
11
(xii) Liabilities relating to the Division resulting from or
relating to Seller's failure to qualify to do business as a foreign corporation
in any jurisdiction;
(xiii) any Liabilities relating to Seller's former Fibredrum
business, including Seller's former facility located in Matawan, New Jersey;
(xiv) Liabilities identified on Schedule 5.12;
(xv) any liability of any other division of Seller or any
affiliate of Seller; and
(xvi) any obligations or liabilities arising out of or
relating to all claims and causes of action under federal, state and/or
municipal civil rights and/or employment law statutes including, but without
limitation, Title VII of the Civil Rights Acts of 1964, the Americans with
Disabilities Act, the Age Discrimination in Employment Act, the Fair Labor
Standards Act, the Occupational Health & Safety Act, the National Labor
Relations Act, or the Missouri Civil Rights Act for actions of Seller arising
prior to the Closing Date.
(f) Seller shall also indemnify and hold harmless each Buyer
Indemnified Party against any Damages which are caused by or arise out of any
breach of any representation or warranty of Seller. No claim shall be asserted
for a claim under this Article 3.1(f) after the eighteen month anniversary of
the Closing, provided that the foregoing shall not apply to claims for a breach
of (i) a representation or warranty under Articles 5.9 hereof, which may be
brought at any time on or prior to the third anniversary of the Closing or (ii)
any representation or warranty under Article 5.20 hereof, which may be brought
at any time prior to the sixtieth day following the expiration of all applicable
statutes of limitation (after giving effect to any extensions or tolling
thereof). No Buyer Indemnified Party shall be entitled to indemnification for
claims under this Article 3.1(f) for any claim or damage unless and until the
aggregate amount of claims of Buyer Indemnified Parties exceeds $500,000. If the
aggregate amount of such claims exceeds $500,000, then the Buyer Indemnified
Parties may claim indemnification only for any claims in excess of $500,000. The
aggregate indemnification obligations of Seller for claims under this Article
3.1(f) shall not exceed $25 million.
(g) Any indemnification amounts payable to Buyer Indemnified
Parties or Seller Indemnified Parties hereunder shall be paid them by wire
transfer of immediately available funds.
3.2 INDEMNIFICATION PROCEDURE. The obligation of a party (the
"Indemnifying Party") to indemnify any person or entity (the "Indemnified
Party") under Article 3.1 hereof is conditioned upon receiving from the
Indemnified Party written notice of the assertion or institution of a claim
arising from or related to any liability set forth in Article 3.1 hereof (a
"Claim") or of the occurrence of an event which the Indemnified Party reasonably
believes could
12
lead to the assertion of a Claim, specifying in reasonable detail the nature and
amount of such Claim, promptly after the Indemnified Party becomes aware of such
Claim or event; provided, however, that the failure of the Indemnifying Party to
receive such notice on a timely basis shall relieve the Indemnifying Party of
its obligation to indemnify hereunder only if and to the extent that such
failure is prejudicial to its ability to defend such Claim. Subject to the terms
hereof, the Indemnifying Party shall have the absolute right, in its sole
discretion and at its sole expense, to elect to defend, settle or otherwise
protect against any Claim with legal counsel of its own selection reasonably
satisfactory to the Indemnified Party, provided, however, that no Claim may be
settled by the Indemnifying Party without the consent of the Indemnified Party,
which consent shall not be unreasonably withheld. The Indemnified Party shall
have the right, but not the obligation, to participate, at its own expense, in
the defense of any Claim through counsel of its own and the fees and expenses of
such counsel will be at the expense of such Indemnified Party unless (i) the
Indemnifying Party specifically authorized the employment of such counsel and
specifically agreed to pay such counsel's fees, (ii) the Indemnifying Party does
not employ counsel that is reasonably satisfactory to the Indemnified Party, or
there is a conflict of interest between the position of the Indemnifying Party
on the one hand and the Indemnified Party on the other hand, or (iii) the
Indemnifying Party fails to assume the defense or fails to contest such action
in good faith, in any which case, if the Indemnified Party notifies the
Indemnifying Party that it elects to employ separate counsel, the Indemnifying
Party will not have the right to assume the defense of such Claim on behalf of
the Indemnified Party and the reasonable fees and expenses of such separate
counsel shall be borne by the Indemnifying Party. The Indemnified Party shall,
and shall cause its affiliates to, at all times cooperate in all reasonable ways
with, make its relevant files and records available for inspection and copying
by, and make (subject to assertion of attorney-client and other applicable
privileges) its employees available or otherwise render reasonable assistance to
the Indemnifying Party in connection with its defense of any Claim. Subject to
the next sentence, in the event the Indemnified Party, without prior consent of
the Indemnifying Party (which shall not be unreasonably withheld or delayed),
makes any settlement with respect to any Claim, the Indemnifying Party shall be
discharged from all obligations under Article 3.1 hereof with respect to such
Claim. In the event the Indemnifying Party fails timely to defend, contest or
otherwise protect against any Claim or to contest any Claim in good faith, the
Indemnified Party shall have the right, but not the obligation, to defend,
contest, assert cross claims or counterclaims or otherwise protect against the
same, to make any compromise or settlement thereof, with the consent of the
Indemnifying Party which shall not be unreasonably withheld or delayed, and to
recover from the Indemnifying Party and be indemnified by the Indemnifying Party
for the entire cost thereof, including, without limitation, legal expenses,
disbursements and all amounts paid as a result of such Claim or the compromise
or settlement thereof.
3.3 OTHER INDEMNIFICATION PROVISIONS. The Parties shall make
appropriate adjustments for tax benefits actually realized as a result of an
indemnifiable Liability and for insurance proceeds actually recovered by or on
behalf of an Indemnified Party in respect of an indemnifiable Liability in
determining the amount of Damages pursuant to any Claims asserted
13
under this Article 3. All indemnification payments made pursuant to this Article
3 shall be considered adjustments to the Purchase Price.
3.4 CASH SETTLEMENTS. (a) Any cash or cash equivalent
received by Seller (in its lock box or otherwise) on or prior to 5:00 p.m.,
eastern standard time, on the Closing Date shall constitute part of the Excluded
Assets.
(b) Any cash or cash equivalents received by Seller (in its
lock box or otherwise) after the Closing Date in respect of Accounts Receivable
or any other Assets shall be paid to Buyer within five (5) days of receipt
thereof to an account designated by Buyer.
(c) Seller shall issue checks on the Closing Date in respect
of all payments which are due on or prior to the Closing Date based upon
Seller's customary payment terms and conditions, which, in certain cases,
include a 66 day payment term notwithstanding an invoice specifying "net 30".
ARTICLE IV
EMPLOYEES AND EMPLOYEE BENEFITS
4.1 INTERIM EMPLOYMENT PERIOD. As provided in the Transition
Services Agreement all salaried, non-union hourly and unionized hourly employees
of Seller related to the Division ("Division Employees") shall remain employees
of Seller after the Closing until April 30, 1998 or such earlier date as Buyer
may elect by written notice to Seller ("Interim Employment Period," the last day
of the Interim Employment Period is hereinafter referred to as "Interim
Employment Termination Date").
4.2 EMPLOYMENT BY BUYER. (a) Effective as of the Interim
Employment Period Termination Date, Buyer (i) will offer employment to all
salaried and non-union hourly Division Employees of Seller at comparable
positions and rates of pay and (ii) agrees to hire all of Seller's unionized
hourly Division Employees subject to the terms and conditions of the collective
bargaining agreements applicable to such employees (the "Transferred
Employees"); provided, however that Buyer may terminate, at Buyer's sole
discretion and expense, at any time after the Interim Employment Period
Termination Date the employment of any Transferred Employee with Buyer provided,
that Buyer shall indemnify and hold Seller harmless from and against any claims
or causes of action asserted by any Transferred Employees arising from such
termination, including, without limitation, any claims for severance benefits.
Buyer agrees to offer severance benefits to the Transferred Employees in
accordance with Buyer's existing severance plan, giving the Transferred
Employees Past Service (as hereinafter defined) credit. For purposes of this
Article IV, Transferred Employees shall not include any person on disability
(including sick leave, short-term disability and long-term disability), layoff
or leave of absence or any retirees, COBRA
14
beneficiaries or vested terminations as of the Interim Employment Period
Termination Date provided, however, that Buyer agrees to hire any Division
Employees of Seller who as of the Interim Employment Period Termination Date are
on disability, layoff or leave of absence as soon as the disability, layoff or
leave of absence terminates if such employee would have been entitled to
reinstatement at the time he or she is available to return to work in accordance
with the Seller's personnel policies in effect at the time of the Closing. Buyer
shall not assume responsibility for any Transferred Employee until such employee
commences employment with Buyer, except to the extent of the Assumed Liabilities
and as provided in the Transition Services Agreement.
(b) Effective as of the Interim Employment Period Termination
Date, Buyer shall, without any further responsibility or liability of or
recourse to Seller, assume and be solely liable and responsible for any and all
of the following Liabilities:
(i) Liabilities arising from the collective bargaining
agreements identified on Schedule 4.2(b) hereof;
(ii) workers compensation claims reported after the Interim
Employment Period Termination Date related to events or conditions which
occurred or arose after such date; and
(iii) Liabilities for vacation and sick pay accrued on the
books and records of Seller in the ordinary course of business consistent with
past practice which are due Transferred Employees after the Interim Employment
Period Termination Date.
4.3 SELLER RELIANCE. Buyer understands and acknowledges that
upon termination of the Interim Employment Period Termination Date Seller will
be relying on Buyer's agreement set forth in Section 4.2 hereof. In that regard,
Buyer retains sole responsibility for any Liabilities to the Transferred
Employees under the Worker Adjustment and Retraining Notification Act ("WARN")
and agrees to hold Seller harmless from and against any Liabilities arising
therefrom relating to the Transferred Employees.
4.4 HEALTH CARE (a) Buyer shall be responsible for providing
health care continuation coverage as required by the Consolidated Omnibus
Reconciliation Act of 1985 ("COBRA") to any Transferred Employees who are
employed by Buyer on and after the Interim Employment Period Termination Date
and who terminated employment after the Interim Employment Period Termination
Date.
(b) Buyer will waive any pre-existing condition restrictions
for Transferred Employees under Buyer's welfare plans to the extent the
Transferred Employee has satisfied the pre-existing condition restriction in the
Seller's welfare plans. Claims for expenses incurred by Transferred Employees or
their dependents prior to the Interim Employment Period Termination
15
Date shall be covered by Seller's welfare plans and claims for expenses incurred
by Transferred Employees or their dependents on or after the Interim Employment
Period Termination Date shall be covered by Buyer's welfare plans.
4.5 PAST SERVICE AND VACATIONS. Transferred Employees will
receive credit for Past Service (as hereinafter defined) in determining vacation
entitlement under Buyer's applicable vacation policy. "PAST SERVICE" means
service (i) as an employee of Seller or Seller's affiliates and (ii) as an
employee of predecessor companies prior to the acquisition of the Business by
Seller, but only to the extent that such service is continuous through the
Closing Date; PROVIDED, HOWEVER, that in no event shall Buyer be required to
provide or recognize past service for any period of service not recognized under
Seller's Plans. Buyer will give credit to Transferred Employees for earned but
unused vacation and/or accrued vacation (determined as of the Interim Employment
Period Termination Date). Buyer shall have no obligation to make any cash
payment in lieu of earned, but unused, or accrued vacation to any Transferred
Employee. For purposes of this Section 4.5, "EARNED" vacation shall mean
vacation earned under Seller's vacation policy with respect to service in 1998
but to be taken in 1998, while "ACCRUED" vacation shall mean vacation accrued
under Seller's vacation policy with respect to service in 1997 but available
only in 1998.
4.6 BONUSES. Schedule 4.6 sets forth the amounts by employees
of the bonuses earned and accrued on the books of the Division by the salaried
employees of the Division as of September 30, 1997. At Closing, Seller shall
deliver to Buyer an update to Schedule 4.6 setting forth the amounts of such
bonuses accrued as of the Closing Date. Seller shall pay the 1997 bonuses in the
ordinary course of business prior to March 31, 1998, and Buyer shall reimburse
Seller for the portion of such bonuses earned from the Closing Date through
December 31, 1997, together with all taxes and other amounts payable in
connection with such portion, in accordance with the procedures set forth for
the reimbursement of salary and benefits in the Transition Services Agreement.
4.7 EMPLOYEE BENEFIT PLANS. (a) Except as otherwise expressly
provided herein, Seller shall retain all assets (including any plan
overfundings) and all liabilities and obligations in respect of benefits,
contributions or premiums accrued or incurred prior to the Interim Employment
Period Termination Date by employees of Seller related to the Division
(including Transferred Employees) under (i) any Seller Plans (as defined in
Article 5.15 hereof), (ii) any group life, accident, medical, dental or
disability plan or similar arrangement or (iii) any worker's compensation
arrangements, and Buyer shall not have any liability with respect thereto. No
assets of any of Seller's Plans shall be transferred to Buyer or to any plan of
Buyer. Seller shall cause all of Seller's Plans that are pension plans (as
defined in Section 3(2) of ERISA) to be amended to provide that the accrued
benefits as of the Interim Employment Period Termination Date of all Transferred
Employees and their beneficiaries shall be vested as of the Interim Employment
Period Termination Date and Seller agrees that any comparable plans established
by Buyer shall
16
provide that any benefits payable under Buyer's plans shall be reduced by any
benefits payable or due under Seller's Plans.
(b) Except as otherwise provided in this Article IV, Buyer
will recognize all service of the Transferred Employees with the Seller and its
affiliates, only for purposes of eligibility to participate in, and vesting
under, any plans or other benefit arrangements of Buyer within the meaning of
Section 3(3) of ERISA, in which the Transferred Employees participate.
4.8 ADDITION TO ASSUMED LIABILITIES. The Liabilities to be
assumed by Buyer as of the Interim Employment Period Termination Date pursuant
to this Article IV, including those set forth in Article 4.2(b) hereof, and the
Transaction Services Agreement shall as of such date become for all purposes
"Assumed Liabilities" as defined in this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SELLER
Seller hereby represents and warrants to Parent and Buyer
that:
5.1 ORGANIZATION AND CORPORATE POWER. (a) Seller is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware. Seller has all requisite power and authority to
own, lease and operate the Assets and to conduct the Business. Seller has full
corporate power and authority to enter into and perform this Agreement and each
Ancillary Agreement.
(b) Each affiliate of Seller has all requisite power and
authority to enter into and perform any Ancillary Agreements to which such
affiliate is a party.
5.2 DUE AUTHORIZATION; NO BREACH. The execution, delivery and
performance by Seller of this Agreement and by Seller and its affiliates of each
Ancillary Agreement to which Seller or such affiliate is a party and the
transactions contemplated hereby and thereby have been approved by the Board of
Directors of each of Seller and Seller's relevant affiliates and no further
action is required to be taken by any of Seller and such affiliates in order to
execute, deliver and perform this Agreement and any of the Ancillary Agreements
to which Seller or such affiliate is a party and to transfer the Assets to
Buyer. This Agreement is a valid and legally binding obligation of Seller,
enforceable against it in accordance with its terms subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors rights and remedies generally, and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in equity), and each
Ancillary Agreement and other agreement or instrument contemplated by this
Agreement, when
17
executed and delivered by any of Seller or its affiliates in accordance with the
provisions thereof, will be a valid and legally binding obligation of each of
Seller and any affiliate which is a party thereto, enforceable against each such
party in accordance with its terms subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors rights and remedies generally, and subject, as to enforceability, to
the effect of general principles of equity (regardless of whether enforcement is
considered in a proceeding at law or in equity). All persons who have executed
this Agreement on behalf of Seller, or who will execute on behalf of Seller or
any affiliate of Seller, any agreement or instrument contemplated by this
Agreement, have been duly authorized to do so by all necessary corporate action.
Neither the execution and delivery of this Agreement, any Ancillary Agreement to
which Seller or any affiliate of Seller is a party and the other agreements and
documents to be executed or delivered pursuant hereto, nor the consummation of
the transactions contemplated hereby and thereby, will (i) violate, or conflict
with, any provision of the articles of incorporation or by-laws (or other
governing documents) of Seller or any of its affiliates, (ii) violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event of default which with notice or lapse of time or both would
become a default) under, or result in the termination (or grant a right of
termination) of, cancellation, amendment or accelerate (or grant the right to
accelerate) the performance required by, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the Assets under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, agreement, lease, Permit or other material instrument to which
Seller or any of its affiliates is a party or by which they or any of the Assets
are bound or (iii) violate, or conflict with, any order, writ, injunction,
arbitration award, judgment or decree of any court, governmental body or
arbitrator applicable to Seller or any applicable statute, law, rule or
regulation, except, in the case of clause (ii) or (iii), as would not have a
Material Adverse Effect (as defined in Article 5.3).
5.3 REAL PROPERTY. (a) Schedule 5.3(a) attached hereto is a
true and complete list of all real property owned by Seller or its affiliates
and used in the conduct of the Business (other then Seller's Matawan, New Jersey
property, which is an Excluded Asset) (collectively, the "Owned Real Property";
the Owned Real Property and the Leased Real Property are hereinafter
collectively referred to as the "Real Property"). Legal descriptions of such
Real Property and the most recent title reports or policies with respect to each
Owned Real Property have previously been delivered to Buyer. Seller is (and at
Closing Buyer shall be) the sole owner of good, valid, fee simple, indefeasible,
sufficient and marketable title to the Owned Real Property, including, without
limitation, all easements or rights of ways granted to Seller and all buildings,
structures, fixtures, and improvements located thereon, in each case free and
clear of all pledges, security interests, liens, mortgages, encumbrances,
equities, claims, reservations, third party rights or obligations (including,
without limitation, third party leases or subleases, easements, rights of way or
other commercial or governmental use restrictions) of any nature (collectively,
"Encumbrances"), except (i) as expressly set forth on Schedule 5.3(a), (ii)
Encumbrances described in clauses (ii) and (v) of Article 5.5 hereto, (iii)
Encumbrances which, individually or in the aggregate, do not materially detract
from the value of the Assets or result in a material
18
adverse effect on the business, financial condition or results of operations of
the Division or the Assets or have a material adverse effect on the ability of
any of Seller and its affiliates to perform Seller's and such affiliates'
obligations hereunder or under any Ancillary Agreement (each of such effects is
herein called a "Material Adverse Effect") and (iv) Encumbrances created by, or
arising as a result of the ownership of the Assets by, Buyer (clauses (i), (ii),
(iii) and (iv), collectively, the "Real Property Encumbrances"). There are no
brokerage or leasing commissions pertaining to the Owned Real Property which
have not been fully paid.
(b) Schedule 5.3(b) attached hereto is a true and complete
list of all agreements (together with any amendments thereof, collectively, the
"Real Property Leases") pursuant to which Seller leases, subleases or otherwise
occupies (whether as landlord, tenant, subtenant or other occupancy arrangement)
any real property included in the Assets (collectively, the "Leased Real
Property"), and true and complete copies of the Real Property Leases have
previously been delivered to Buyer. With respect to each Real Property Lease,
except as set forth on Schedule 5.3(b), (i) each Real Property Lease is a valid
and subsisting agreement in full force and effect and constitutes a valid and
binding obligation of Seller and, to Seller's Knowledge (as defined below), of
any other party thereto, and is legally enforceable against Seller and, to
Seller's Knowledge, any other party thereto, (ii) each such Real Property Lease
may be assigned by Seller without the consent of any other party and without
resulting in an increase in rent or penalty to the tenant or an early
termination, (iii) Seller has not received any written notice from the other
party to such lease of the termination thereof or alleging a default by Seller,
(iv) there is no material default or event which, with notice or lapse of time
or both, would constitute a material default on the part of Seller (nor, to
Seller's Knowledge, on the part of any other party thereto) under any such
lease, (v) Seller has not transferred, assigned, hypothecated, pledged or
encumbered any of its rights or interest thereunder, and (vi) Seller has, and
immediately after the Closing, Buyer will have, good, valid and enforceable
title to the leasehold estate in the Leased Real Property, free and clear of any
Encumbrance of any nature, except for Encumbrances listed on Schedule 5.3(a) or
which, individually or in the aggregate, would not have a Material Adverse
Effect and except for Encumbrances created by, or arising as a result of the
ownership of the Assets by, Buyer. For the purposes of this Agreement, "Seller's
Knowledge" shall mean any fact or set of facts of which ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ and any general manager,
plant manager or controller or sales manager employed by the Division have
actual knowledge.
(c) Seller has obtained all easements and rights of way
required from all governmental jurisdictions or from private parties for the
normal use and operation of the Business on the Owned Real Property as
heretofore conducted.
(d) There is no pending or, to Seller's Knowledge, threatened
condemnation, expropriation, eminent domain or similar proceeding affecting any
of the Real Property and Seller has not received any written notice of any of
the same.
19
(e) Each Owned Real Property and, to Seller's Knowledge, each
Leased Real Property and all buildings, structures, fixtures and improvements on
each Owned Real Property and, to Seller's Knowledge, each Leased Real Property,
and all use of any thereof by Seller, conform with all applicable building,
zoning, subdivision, land use, fire and other laws pertaining to or affecting
real property, except where the failure to so conform would not have a Material
Adverse Effect. Each occupied Owned Real Property and, to Seller's Knowledge,
each occupied Leased Real Property is occupied under a valid and existing
certificate of occupancy for such Real Property. Seller has taken all corrective
action indicated in all written notices or orders to Seller to correct
violations of laws issued by any governmental authority having jurisdiction
against or affecting the Real Property. The Real Property is not in violation of
any restrictive covenant, condition, restriction or limitation which would have
a Material Adverse Effect or a material adverse effect on the use thereof as
currently utilized.
(f) No Owned Real Property is subject to any contract or other
restriction of any nature whatsoever (recorded or unrecorded) preventing or
limiting the right of Seller to convey or use it as currently operated.
(g) All Real Property and the improvements thereon are
supplied with the utilities necessary for the operation of such facilities as
currently operated.
(h) Seller has not received written notice of any special
assessment relating to any Real Property or any portion thereof, and, to
Seller's Knowledge, there are no pending or threatened special assessments.
(i) Seller has furnished Buyer with all non-privileged
environmental, engineering or other studies or reports prepared for Seller since
January 1, 1992 which primarily deal with the ownership, operation, maintenance
or management of the Real Property.
5.4 PERSONAL PROPERTY. (a) Except as disclosed or provided
for in this Agreement or any Exhibit or Schedule 5.4 attached hereto, and except
for dispositions of assets after the date hereof and prior to the Closing in
accordance with the terms of this Agreement, all of the fixtures, plants,
buildings, improvements, machinery, equipment, vehicles, construction in
progress and other tangible personal property referred to in Articles 1.1(c) and
1.1(d) hereof are located on the Real Property. Except for goods in transit and
as disclosed or provided for in this Agreement or any Exhibit or Schedule 5.4
attached hereto, all of the Inventory is located on the Real Property.
(b) All of the fixtures, plants, buildings, structures and
improvements on the Real Property and all machinery, equipment, vehicles and
other tangible personal property included in the Assets have no material
defects, are in normal operating condition and repair, except for immaterial
exceptions, and have been reasonably maintained consistent with standards
generally followed in the industry (giving due account to the age and length of
use of same, ordinary wear and tear excepted).
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5.5 TITLE AND CONDITION OF ASSETS; ENTIRE BUSINESS. (a) Seller
has good and marketable title to, or holds by valid and existing lease or
license, all of the Assets and will transfer same to Buyer at the Closing.
Except for Encumbrances created by, or arising as a result of the ownership of
the Assets by, Buyer, the Assets (other than the Real Property) are free and
clear of all Encumbrances, except:
(i) Encumbrances reflected on or reserved against in the
balance sheet included in the Financial Statements;
(ii) taxes and general and special assessments not in default
and payable without penalty or interest;
(iii) Encumbrances which, individually or in the aggregate, do
not have a Material Adverse Effect;
(iv) Encumbrances of public record;
(v) inchoate mechanic's and material men's liens for
construction in progress and workmen's, repairmen's, warehousemen's and
carrier's liens arising in the ordinary course of business; and
(vi) Encumbrances set forth on Schedule 5.5 hereto.
(b) Encumbrances referred to in paragraphs (i), (ii), (iii),
(iv), (v) or (vi) of Article 5.5(a) hereof are collectively referred to as
"Permitted Encumbrances".
(c) The Assets, together with the rights of Buyer under the
Ancillary Agreements, are sufficient to allow Buyer to conduct the Business
substantially in the same manner and to substantially the same extent as
heretofore conducted by Seller.
5.6 CONSENTS. Schedule 5.6(a) hereto sets forth all actions,
approvals, permits, consents or authorizations, including but not limited to any
action, approval, consent or authorization by any third party, financial
institution, governmental or quasi-governmental agency, commission, board,
bureau or instrumentality, required to be obtained by any of Seller and its
affiliates in order to consummate the transactions contemplated hereby and in
order for Buyer to continue the conduct of the Business after the Closing,
including, without limitation, (i) the expiration of any applicable waiting
period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act")
and (ii) consents required to transfer or assign any Contracts or Permits (as
defined in Article 5.8) to Buyer. Schedule 5.6(b) identifies those items set
forth in Schedule 5.6(a) that are conditions to Closing pursuant to Article
8.2(e) hereof.
21
5.7 COMPLIANCE WITH LAWS. Except (i) as set forth in Schedule
5.7 hereto and (ii) as to Environmental Laws, which are covered by Section 5.9
hereof, Seller is not , with respect to the conduct of the Business or the use
of the Assets, in default under or in violation of any federal, state or local
statute, law, ordinance, regulation, rule, judgment, order or decree which would
give rise to a material liability.
5.8 PERMITS AND LICENSES. Schedule 5.8 attached hereto sets
forth all governmental licenses, permits, franchises and other governmental
authorizations (collectively "Permits") which are issued to, held or used in
relation to the Business by Seller or for which Seller has applied, including
the dates of issuance and expiration or of application as the case may be, and,
except as set forth on Schedule 5.8 hereto, there are no other governmental
licenses, permits, franchises or authorizations which are material to the
Business. Except as set forth on Schedule 5.8 hereto and for environmental
matters, which are exclusively addressed in Article 5.9, within the past 24
months, Seller has not received any written warning, notice of violation or
probable violation, notice of revocation or other written communication from or
on behalf of any governmental entity, which violation has not been corrected or
otherwise settled, alleging (i) any material violation of any Permit relating to
the Division, (ii) that Seller needs a Permit material to the Business not
currently held by Seller in order to conduct the Business or (iii) any current
material violation, with respect to the conduct of the Business or the use of
the Assets, of any federal, state, county, local or foreign laws, ordinances,
regulations or orders.
5.9 ENVIRONMENTAL CONDITIONS. Except as disclosed on Schedule
5.9, in connection with the Business, the Assets (excluding the Excluded Assets)
or the Division,
(a) Seller holds, and is in compliance with, all Environmental
Permits (as defined below) and is otherwise in compliance with all applicable
Environmental Laws (as defined below), except for such failures to be in
compliance which individually or in the aggregate will not have a Material
Adverse Effect. Except as identified on Schedule 5.9(a) hereto, no modification,
revocation, reissuance, alteration, transfer, or amendment of the Environmental
Permits, or any review by, or approval of, any third party of the Environmental
Permits is required in connection with the execution or delivery of this
Agreement or the consummation of the transactions contemplated hereby or the
continuation of the Business following such consummation assuming the Business
is conducted as heretofore conducted. To Seller's Knowledge, there is no
condition that could prevent or interfere with continued material compliance
with Environmental Laws, assuming the Business continues to be conducted as
presently conducted and the Assets used as presently used. For purposes of this
Agreement, "Environmental Permits" shall mean all permits, licenses,
registrations and other governmental authorizations required under Environmental
Laws for the Seller to conduct the Business and "Environmental Laws" shall mean
any and all foreign, federal, state, local or municipal laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, requirements of any
governmental authority, or requirements of law (including, without
22
limitation, common law) now in effect relating in any manner to contamination,
pollution, or protection of the environment;
(b) Since January 1, 1994, Seller has not received any written
notice of any Environmental Claim (as hereinafter defined) and, to Seller's
Knowledge, no such Environmental Claim is, or has been since January 1, 1994,
threatened. For purposes of this Agreement, "Environmental Claim" means any
notice, claim, demand, action, suit, complaint, proceeding or other
communication by any third person alleging liability or potential liability
(including, without limitation, liability or potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resource damages, property damage, personal injury, fines or penalties) arising
out of, relating to, based on or resulting from (x) the presence, discharge,
emission, release or threatened release of any Hazardous Materials (as
hereinafter defined) at any location, or (y) circumstances forming the basis of
any violation by Seller of any Environmental Laws, including, but not limited
to, any violations by Seller of any applicable Environmental Permits, in each
case which would reasonably be expected to result in material liability under
Environmental Laws. For purposes of this Agreement, "Hazardous Materials" means
any and all hazardous or toxic substances, wastes, materials or chemicals,
petroleum (including crude oil or any fraction thereof) and petroleum products,
asbestos and asbestos-containing materials, pollutants, contaminants,
polychlorinated biphenyls and any and all other materials and substances
regulated pursuant to any Environmental Laws or that could result in the
imposition of liability under any currently applicable Environmental Laws;
(c) Since January 1, 1994, Seller has not entered into, has
not agreed to, and has not received any written notice that it is subject to any
judgment, decree or order of any governmental authority under any Environmental
Laws, including, without limitation, relating to compliance or to investigation,
cleanup, remediation or removal of Hazardous Materials;
(d) To Seller's Knowledge, Hazardous Materials have not been
generated, transported, treated, stored, disposed of, arranged to be disposed
of, released or threatened to be released at, on, from or under any of the
Assets in violation of, or in a manner or, to Seller's Knowledge, to a location
that would reasonably be expected to give rise to material liability relating to
the Business under, any Environmental Laws;
(e) To Seller's Knowledge, there are no (r) underground or
aboveground storage tanks, (s) polychlorinated biphenyls, (t) asbestos or
asbestos-containing materials, (u) Hazardous Materials, (v) urea-formaldehyde
insulation, (w) sumps, (x) surface impoundments, (y) landfills or (z) sewer or
septic systems currently or formerly present at or about any of the Assets which
presently constitute a violation of any Environmental Law would reasonably be
expected to give rise to material liability under any Environmental Laws;
23
(f) The Seller has not assumed, contractually or, to Seller's
Knowledge, by operation of law, any liabilities or obligations of third parties
under any Environmental Laws that concern the Business.
5.10 PRODUCT SAFETY. To Seller's Knowledge, each of the
products produced or sold by Seller in connection with the Business is, and at
all times up to and including the sale thereof has been, in compliance in all
material respects with all applicable federal, state, local and foreign laws and
regulations relating to safety.
5.11 EMPLOYEE RELATIONS. Except as disclosed in Schedule 5.11
attached hereto, Seller does not have any agreements with labor unions or
associations representing any employees of the Division. There is neither
pending nor, to Seller's Knowledge, threatened any strike, slowdown, picketing,
work stoppage or labor trouble or other occurrence, event or condition of a
similar character in which the employees of the Division are participating or,
to Seller's Knowledge, have threatened to participate, and the Division has not
experienced such labor controversy since January 1, 1994. There is no material
unfair labor practice charge or complaint pending or, to Seller's Knowledge,
threatened against the Division. No representation question exists or, to
Seller's Knowledge, has been raised since January 1, 1994, respecting any of the
Division's employees nor to Seller's Knowledge are there any campaigns being
conducted to solicit cards from employees of the Division to authorize
representation by any labor organization. The Seller has paid in full to all
employees of the Division all wages, salaries, commissions, bonuses, benefits
and other compensation, except as provided in Article 4.6, which are required to
be paid to such employees or otherwise arising under any policy, practice,
agreement, plan, program, statute or other law. Except as set forth on Schedule
5.11 attached hereto, Seller does not have any consultant agreements or
contracts of employment in connection with the Division and, from December 31,
1996 to the date hereof Seller has not made any commitment or agreement to
increase the wages or to materially modify the conditions or terms of employment
of any of the employees of the Division. The Seller has not closed any plant or
facility of the Division, except as set forth in Schedule 5.11, effectuated any
layoffs of employees of the Division at a single employment site during any
30-day period for at least ten percent of the employees or at least twenty
employees (whichever is less), or implemented any early retirement, separation
or window program applicable to employees of the Division since January 1, 1994,
nor has the Seller planned or announced any such action or program for the
future relating to the Division. Assuming compliance by Buyer with Article 4.1
hereof, the Seller is in compliance with its obligations pursuant to the Worker
Adjustment and Retraining Notification Act of 1988 and, except as set forth on
Schedule 5.11 hereto, all other notification and bargaining obligations arising
under any collective bargaining agreement, statute or otherwise relating to the
Division.
5.12 LITIGATION, CLAIMS AND PROCEEDINGS. Except as set forth
in Schedule 5.12 attached hereto, there are no judgments, orders, writs or
injunctions of any federal, state or local court or governmental authority
presently pending or, to Seller's Knowledge, threatened against Seller relating
to the Business or by which the Assets are or would be bound, and there are no
24
lawsuits, actions, arbitrations, claims, governmental proceedings or notices of
violation presently pending or, to Seller's Knowledge, threatened to which
Seller is a party (as plaintiff, defendant or otherwise) which relate to the
Business, except for routine litigation, claims or proceedings (including,
without limitation, product liability and warranty claims or litigation, and
workers compensation claims) in which the amount in controversy does not exceed
$50,000 for any individual matter or $250,000 in the aggregate for any related
matters. Except as set forth on Schedule 5.12 hereto, to Seller's Knowledge,
there are no facts which could reasonably be expected to give rise to any
action, suit, proceeding, inquiry or investigation which could, if adversely
decided, have a Material Adverse Effect on the Division.
5.13 INTELLECTUAL PROPERTY. (a) Schedule 5.13(a) attached
hereto sets forth all Intellectual Property owned or used by Seller in the
conduct of the Business as heretofore conducted and the nature of Seller's
rights therein. For all Intellectual Property owned by a third party and used by
Seller in the conduct of the Business pursuant to a license or other agreement,
all such licenses or agreements are, to the Seller's Knowledge, in force and
assignable to Buyer. If specific disclosure on Schedule 5.13(a) would jeopardize
or impair the value or validity of any Intellectual Property, such Intellectual
Property is described generally thereon.
(b) Except as set forth on Schedule 5.13(a), (i) Seller owns
or has a valid license to use all Intellectual Property necessary to conduct the
Business and such Intellectual Property is valid, subsisting, unexpired,
enforceable, free of all Encumbrances, has not been abandoned by Seller, and, to
Seller's Knowledge, does not infringe or otherwise impair the intellectual
property rights of any third party; (ii) none of the Intellectual Property owned
or used by the Division is the subject of any license, security interest or
other agreement granting rights therein from Seller to any third party; (iii) no
judgment, decree, injunction, order or agreement is in effect which would limit,
cancel or question the validity of, or Seller's rights in and to, any
Intellectual Property used in the conduct of the Business; and (iv) no suit,
action, proceeding or investigation is pending or, to Seller's Knowledge,
threatened that seeks to limit, cancel or question the validity of, or Seller's
rights in and to, any Intellectual Property used in the conduct of the Business.
(c) Seller specifically warrants that the Assets (i) contain
all Intellectual Property for which improper or unauthorized disclosure would
jeopardize or impair its value or validity ("Trade Secrets") owned, possessed,
licensed and/or used by Seller in the conduct of the Business and (ii) to
Seller's Knowledge, constitute all those Trade Secrets necessary to conduct the
Business as heretofore conducted. Except as set forth on Schedule 5.13(c),
Seller is the owner of all Trade Secrets used in the conduct of the Business,
and where Seller does not own any Trade Secret, Seller is the licensee thereof
and all applicable license agreements are in force and assignable to Buyer.
5.14 CONTRACTS. (a) Schedule 5.14 attached hereto lists as of
the date hereof all written contracts, agreements, commitments and personal
property leases and includes summaries
25
of all oral arrangements which relate to the Business and, with respect to both
oral and written arrangements, which meet the criteria specified in the
paragraphs below:
(i) involve future expenditures or receipts or other
performance with respect to goods or services having a total value in excess of
$50,000;
(ii) involve a lease, sublease, installment purchase or
similar arrangement for the use of property which involves a total consideration
in excess of $50,000;
(iii) contain any severance pay obligations or payments to
employees due as a result of the consummation of the transactions contemplated
hereby;
(iv) compel the employment of any person in the status of
"employee";
(v) involve a consulting relationship which involve total
consideration in excess of $50,000 during the term of such agreement;
(vi) any agreement with or for the benefit of any affiliate of
Seller other than Ancillary Agreements;
(vii) involves the handling, treatment, storage,
transportation, recycling, reclamation or disposal of wastes or substances
except for oral arrangements with suppliers that are not material;
(viii) contain commitments of suretyship, guaranty or
indemnification (except for guarantees, warranties and indemnities provided by
Seller in respect of its products in the ordinary course of business);
(ix) involve the development of any of the Real Property or
provide for improvements thereto;
(x) relate to the disposition or acquisition since January 1,
1992 of the assets or stock of, or any interest in, any business enterprise;
(xi) involve payments to or by Seller in respect of the
Business over the term in excess of $50,000 or which may not be terminated on 60
days or less notice without penalty; or
(xii) contain an indenture, mortgage, pledge, credit (other
than credit terms offered to customers in the ordinary course of business), or
other financing commitment for the borrowing or lending of funds from or to any
person.
26
(b) Except as otherwise indicated in any Schedule or Exhibit
attached hereto, with respect to the contracts listed in Article 5.14(a) above,
(i) Seller is not in default of any material obligation under any of such
contracts, (ii) to Seller's Knowledge, no other party to any of such contracts
is in default of any material obligation thereunder and (iii) there does not
exist under any provision thereof any event that, with the giving of notice or
the lapse of time or both, would constitute a material default thereunder,
except for the failure to obtain any necessary consents.
5.15 BENEFIT PLANS. (a) Schedule 5.15 contains a true and
complete list of each "employee benefit plan" of the Seller (within the meaning
of section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), (including, without limitation, multiemployer plans within
the meaning of ERISA Section 3(37)), stock purchase, stock option, severance,
employment, change-in-control, fringe benefit, collective bargaining, bonus,
incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject to
ERISA (including any funding mechanism therefor now in effect or required in the
future as a result of the transaction contemplated by this Agreement or
otherwise), whether formal or informal, oral or written, legally binding or not
under which any employee or former employee of the Division has any present or
future right to benefits or under which Seller has any present or future
liability which relate to the Division. All such plans, agreements, programs,
policies and arrangements shall be collectively referred to as the "Seller
Plans".
(b) With respect to each Seller Plan, Seller has delivered to
the Buyer or its representative a current, accurate and complete copy (or, to
the extent no such copy exists, an accurate description) thereof and, to the
extent applicable, (i) any related trust agreement, annuity contract or other
funding instrument; (ii) the most recent determination letter if applicable;
(iii) any summary plan description and other written communications (or a
description of any oral communications) by the Seller to its employees
concerning the extent of the benefits provided under a Seller Plan; and (iv) for
the three most recent years (I) the Form 5500 and attached schedules; (II)
audited financial statements; (III) actuarial valuation reports; and (IV)
attorney's response to an auditor's request for information.
(c) (i) Each Seller Plan has been established and administered
in accordance with its terms, and in compliance in all material respects with
the applicable provisions of ERISA, the Code and other applicable laws, rules
and regulations; and (ii) each Seller Plan which is intended to be qualified
within the meaning of Code section 401(a) is so qualified and has received a
favorable determination letter as to its qualification and nothing has occurred,
whether by action or failure to act, that could reasonably be expected to cause
the loss of such qualification.
(d) Seller is not a party to, or obligated to contribute to,
any multiemployer plan (within the meaning of ERISA section 4001(a)(3)) with
respect to the employees of the Division.
27
5.16 FINANCIAL STATEMENTS. (a) Attached hereto as Schedule
5.16 are (i) the unaudited balance sheet of the Business as of December 31, 1996
and the related unaudited statement of operations and statement of cash flows
for the Business for the fiscal year ended December 31, 1996 and (ii) the
unaudited balance sheet of the Business as of June 30, 1997 and the related
unaudited statement of operations and unaudited statement of cash flows for the
Business for the six months ended June 30, 1997 (collectively, clauses (i) and
(ii) are referred to herein as the "Financial Statements"). The Financial
Statements present fairly in all material respects the financial position and
results of operations of the Business as of the date or for the periods set
forth therein and, except as set forth on Schedule 5.16 hereto, were prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied during the periods set forth therein.
(b) Except (i) as specifically disclosed herein or in the
Schedules hereto, (ii) as reflected, reserved against or otherwise expressly
disclosed in the Financial Statements or (iii) for liabilities and obligations
or changes in assets incurred in accordance with the provisions of this
Agreement, since December 31, 1996, the Business has not had and will not have
any change in assets, liabilities or obligations that would be required to be
reflected on a balance sheet for the Business prepared in accordance with GAAP
consistently applied during the period set forth therein.
(c) The accounts and notes receivable of the Business,
including intercompany receivables, as of the date of the Closing will represent
valid claims, incurred in the ordinary course of business and consistent with
past practice, and no counterclaims or offsetting claims with respect to such
receivables shall be pending or, to the Seller's Knowledge, threatened as of the
date of the Closing other than customer credits arising in the ordinary course
of business and consistent with past practice.
(d) The inventories reflected on the Financial Statements
(except the inventories which have been sold or disposed of in the ordinary
course of business since the dates thereof and except for excess and obsolete
inventory which has been written off) and the inventories thereafter acquired or
manufactured in connection with the Business and not subsequently sold or
disposed of in the ordinary course of business do, and the inventories as of the
Closing Date will, consist of items of a quality and quantity which in the
aggregate are (i) usable in the ordinary course of the Business or (ii) saleable
in the ordinary course of the Business at net realizable values (i.e., normal
selling price less all applicable discounts, commissions and shipping costs) not
less than their respective book value amounts. Inventory on the Financial
Statements is, and Inventory as of the Closing Date will be, except for obsolete
and below-standard quality inventory described below, stated at the lower of
cost (determined by the FIFO method) or market in accordance with GAAP,
consistently applied. The value of excess and obsolete inventory and inventory
of below standard quality reflected on the Financial Statements has been, and as
of the Closing Date will be, written down to net realizable marketable value or
written off or adequate reserves in accordance with GAAP, consistently applied,
have been provided therefor. The
28
inventory on hand is, and as of the Closing Date will be, at levels consistent
with expected customer demand and consistent with past practice.
5.17 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in Schedule 5.17 hereto, since December 31, 1996, the Business has been
conducted only in the ordinary course consistent with past practice and there
has not been:
(a) any event, occurrence or state of circumstances or facts
which has resulted in a Material Adverse Effect;
(b) any material damage or destruction of any of the Assets;
(c) any disposition by Seller of any assets relating to the
Business other than in the ordinary course of business consistent with past
practice;
(d) except in the ordinary course of business consistent with
past practice, any increase in, or commitment or plan adopted to increase, the
wages, salaries, compensation, pension or other benefits or payments to
employees of the Division;
(e) any change in accounting methods, principles or practices
of Seller relating to the Division except for any such change after the date
hereof required by reason of a concurrent change in generally accepted
accounting principles; or
(f) the agreement of Seller or any of its respective
affiliates to do any of the foregoing, except as otherwise expressly
contemplated hereby and by the Ancillary Agreements.
5.18 INSURANCE. The properties and assets of Seller which are
of an insurable character and are used or useful in the Business are insured
against loss or damage by fire or other risks, and Seller maintains liability
insurance, to the extent and in the manner and covering such risks as is
customary for companies engaged in a business similar to the Business or owning
assets similar to the Assets. The coverage under each such policy and binder is
in full force and effect, and no notice cancellation or nonrenewal with respect
to any such policy or binder has been received by Seller. Schedule 5.18 lists
insurance maintained by Seller on the Assets and with respect to the employees
and representatives of the Business and the operations of the Business.
5.19 AFFILIATE TRANSACTIONS. Except as set forth in Schedule
5.19, there are no agreements, arrangements, undertakings or other transactions
between the Business and any other division or business of Seller or any
affiliate of Seller.
5.20 TAX MATTERS. All Tax Returns required to be filed by
Seller on or before the Closing Date with respect to the Business or its
activities, properties or employees have been or shall be timely filed and all
Taxes which are due on such returns have been or shall be timely
29
paid or accrued within the prescribed period, including any extension thereof.
There are no Liens upon any of the Assets in respect of Taxes except for Liens
for current Taxes that are not yet due and payable. All Taxes required to be
withheld by Seller with respect to the Business or its activities, properties or
employees have been withheld and paid over to the appropriate Tax authority.
Seller (or any predecessor of Seller) is not a party to and has not received any
notice with respect to any proposed or pending action by any governmental
authority for assessment or collection of Taxes with respect to the Business or
its activities, properties or employees, nor is Seller a party to any dispute or
threatened dispute in which action or dispute an adverse determination
reasonably could be expected to result in a foreclosure of the Assets and no
such claim for assessment or collection of Taxes has been made upon Seller.
Seller is not a "foreign person" within the meaning of section 1445 of the Code,
and Seller will furnish Buyer with an affidavit that satisfies the requirements
of section 1445(b)(2) of the Code. For purposes of this Agreement, (i) the term
"Tax" or "Taxes" shall mean all United States federal, state and local and all
foreign income, profits, franchise, gross receipts, payroll, sales, employment,
use, property, excise, value added, net worth, intangible, privilege, business,
license, transfer, estimated, stamp, alternative or add-on minimum,
environmental, withholding and any other taxes, duties, assessments or other
similar governmental charges, together with all interest, penalties and
additions imposed with respect to such amounts, (ii) the term "Tax Returns"
shall mean any return (including any consolidated combined or unitary return),
declaration, estimated, installment, report, claim for refund or information
return or statement relating to Taxes which is required to be filed with any
governmental agency or other Tax authority, including any schedule or attachment
thereto, and including any amendment thereof and (iii) the term "Tax authority"
shall mean any authority having jurisdiction over Taxes.
5.21 MATERIAL CUSTOMERS AND SUPPLIERS. Schedule 5.21 sets
forth the names of the ten suppliers of the Business to whom Seller paid the
greatest sum of money in respect of products and materials sold to the Business
and the ten customers of Business from whom Seller received the greatest sum of
money in respect of products or services provided by the Business between
January 1, 1996 and December 31, 1996.
5.22 BOOKS AND RECORDS. The financial books and records
pertaining to the Business are complete and correct in all material respects,
have been maintained in accordance with good business practice, and reflect the
basis for the financial position and results of operations of the Business set
forth in the Financial Statements.
5.23 DISCLOSURE. This Agreement and the related Schedules
hereto contain no untrue statement of any material fact nor omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
30
5.24 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties made by Seller contained in this Article V shall
survive until the eighteen month anniversary of the Closing, except that those
representations and warranties contained in (i) Articles 5.9 shall survive until
the third anniversary of the Closing and (ii) Article 5.20 shall survive until
the sixtieth day following the expiration of all applicable statutes of
limitation (after giving effect to any extensions or tollings thereof).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer hereby represent and warrant to Seller that:
6.1 ORGANIZATION AND POWER. Each of Parent and Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of Parent and Buyer has full corporate power and
authority to enter into and perform this Agreement.
6.2 DUE AUTHORIZATION; NO BREACH. (a) The execution and
performance by each of Parent and Buyer of this Agreement, the Ancillary
Agreements to which it is a party and each of the other agreements contemplated
hereby and the transactions contemplated hereby and thereby has been approved by
its Board of Directors, and no further corporate action is required to be taken
by it in order to execute, deliver and perform this Agreement. Each of this
Agreement and the Ancillary Agreements to which it is a party is a valid and
legally binding obligation of each of Parent and Buyer, and each agreement or
instrument contemplated by this Agreement, when executed and delivered by Parent
or Buyer, as the case may be, in accordance with the provisions hereof, will be
a valid and legally binding obligation of Parent or Buyer, as the case may be,
in each case enforceable against Parent or Buyer, as the case may be, in
accordance with its terms subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors
rights and remedies generally, and subject, as to enforceability, to the effect
of general principles of equity (regardless of whether enforcement is considered
in a proceeding at law or in equity). All persons who have executed this
Agreement on behalf of Parent or Buyer, as the case may be, or who will execute
on behalf of Parent or Buyer, as the case may be, any agreement or instrument
contemplated by this Agreement, have been duly authorized to do so by all
necessary corporate action. Neither the execution and delivery of this
Agreement, the Ancillary Agreements and all other agreements and documents to be
executed or delivered hereunder, nor the performance and fulfillment by Parent
or Buyer, as the case may be, of all its representations, warranties, covenants
and obligations hereunder, will (i) violate, or conflict with, any provision of
Parent's or Buyer's certificate of incorporation or by-laws, (ii) violate, or
conflict with, or result in a breach of any provisions of, or constitute a
default under, or result in the termination of, or accelerate the performance
required by, or result in the creation of any
31
Encumbrance upon any of the properties or assets of Parent or
Buyer under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, agreement, lease or other material
instrument to which Parent or Buyer is a party or by which either of them is
bound, or (iii) violate, or conflict with, any order, writ, injunction,
arbitration award, judgment or decree of any court, governmental body or
arbitrator applicable to Parent or Buyer or any statute, law, rule or
regulation, except, in the case of clause (i) or (ii), as would not have a
material adverse effect on the ability of Parent or Buyer to perform its
obligations hereunder or any Ancillary Agreement to which it is a party.
6.3 CONSENTS. Except for those permits, consents and approvals
required for the transfer of the Assets, permits of the type described in
Article 5.8, and except for the expiration of the applicable waiting periods
under the HSR Act, no action, approval, consent or authorization, including but
not limited to, any action, approval, permit, consent or authorization by any
third party, financial institution, governmental or quasi-governmental agency,
commission, board, bureau or instrumentality, is required to be obtained by
Buyer in order to consummate the transactions contemplated hereby.
6.4 FINANCING. Buyer has all funds necessary, or binding
commitments for all funds necessary (copies of which have been delivered to
Seller prior to the date hereof), to consummate the transactions contemplated by
this Agreement and Ancillary Agreements.
6.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties made by Parent or Buyer contained in this Article
VI shall survive until the second anniversary of the Closing.
ARTICLE VII
PRE-CLOSING COVENANTS
Seller hereby agrees that:
7.1 CONDUCT OF THE BUSINESS. From the date hereof until the
Closing, or termination of this Agreement in accordance with Article IX hereof,
Seller will:
(a) operate the Business only in the usual and ordinary course
of business consistent with past practice and do all acts and things as may be
necessary to preserve, protect and maintain intact the Assets and the Business
as a going concern;
(b) make payments on payables relating to the Business in a
manner consistent with past practice and collect receivables relating to the
Business in a manner consistent with past practice;
32
(c) use reasonable efforts to preserve the business
relationships of Seller with respect to the Business;
(d) refrain from entering into any contract or renewing any
lease relating to the Business which (i) calls for payments exceeding $50,000 or
(ii) does not expire within one year or is not cancelable by Buyer within one
year without penalty, without the prior written approval of Buyer;
(e) refrain from taking any action which reasonably could be
expected to render any representation or warranty of Seller contained herein
untrue or incorrect in any material respect (except to the extent a
representation or warranty is qualified by materiality, in which case Seller
will refrain from taking any action which would render such representation or
warranty untrue or incorrect) as of the Closing;
(f) comply in all material respects with all laws applicable
to the Business, including, but not limited to, Environmental Laws;
(g) refrain from making any disposition of any assets relating
to the Business other than in the ordinary course of business consistent with
past practice;
(h) refrain from making any commitment for capital
expenditures relating to the Business in excess of $50,000 without the prior
written consent of Buyer, which consent shall not be unreasonably withheld;
(i) refrain from permitting any of the Assets owned by it to
become subject to any Encumbrances, except Permitted Encumbrances or Real
Property Encumbrances;
(j) maintain insurance as currently in effect;
(k) give Buyer a copy of any notice from any governmental or
regulatory authority or any other person alleging any violation of any rule,
regulation, law or ruling;
(l) refrain from making any change in accounting methods,
principles or practices relating to the Business; and
(m) refrain from agreeing to do any of the foregoing.
7.2 ACCESS TO BOOKS, RECORDS AND FACILITIES. Seller agrees
that prior to the Closing, Seller will permit Buyer, Parent and their
representatives full access during normal business hours and upon reasonable
notice to all of their respective plants, properties, books, contracts, records
and employees used in or relating to the conduct of the Business and will
33
furnish Buyer, Parent and their representatives during such period, upon
reasonable notice, with all such financial, operating and other information
concerning the Assets and the conduct of the Business as Buyer, Parent or their
representatives may reasonably request.
7.3 ISRA. Seller, at its sole expense, shall comply with all
applicable requirements of the New Jersey Industrial Site Recovery Act,
including, without limitation, all requirements to undertake environmental
investigations and remediations.
7.4 BEST EFFORTS. Each Party will use all reasonable best
efforts to take all action and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (without payment of money, commencement of litigation, the assumption
of any material obligation or the entering of any agreement to divest or hold
separate any assets).
7.5 PURCHASE ORDER NO. 685-2155. Seller agrees to pay all
remaining amounts due under Purchase Order No. 685-2155 referenced in Schedule
5.12 on or prior to the Closing Date.
ARTICLE VII
CONDITIONS OF CLOSING
8.1 SELLER'S CONDITIONS. The obligations of Seller to
consummate the transactions contemplated by this Agreement are, unless waived by
Seller, subject to the fulfillment on or before the Closing, of each of the
following conditions:
(a) No statute, rule, regulation, injunction or restraining
order shall be in effect to forbid or enjoin the consummation of the
transactions contemplated by this Agreement;
(b) The transactions contemplated by this Agreement to be
completed before the Closing shall have been consummated upon the terms and
subject to the conditions set forth therein;
(c) Seller shall have received the Purchase Price and all
certificates, instruments, agreements and other documents to be delivered by
Buyer at or before the Closing as provided in this Agreement in form and
substance reasonably satisfactory to Seller;
(d) All covenants of Buyer and Parent under this Agreement to
be performed prior to the Closing shall have been performed, and the
representations and warranties of Buyer and Parent contained in this Agreement
shall be true and correct on and as of the Closing in all material respects
(except to the extent qualified by materiality in which event such
representations
34
and warranties shall be true and correct) with the same effect as though such
representations and warranties had been made on and as of such date, except to
the extent attributable to actions permitted or consented to by Seller in
writing;
(e) All approvals, consents or authorizations or filings
listed on Schedule 5.6(b) hereto shall have been obtained, and all waiting
periods under the HSR Act shall have expired or been terminated; and
(f) Buyer and each other party thereto shall have executed and
delivered each of the Ancillary Agreements.
8.2 BUYER'S CONDITIONS. The obligations of Buyer to consummate
the transactions contemplated by this Agreement are, unless waived by Buyer,
subject to the fulfillment, on or before the Closing, of each of the following
conditions:
(a) No statute, rule, regulation, injunction or restraining
order shall be in effect to forbid or enjoin the consummation of the
transactions contemplated by this Agreement or to impose material limitations on
the ability of Buyer to effectively acquire and hold the Assets;
(b) Buyer shall have received all certificates, instruments,
agreements, and other documents to be delivered by Seller at or before the
Closing as provided in this Agreement in form and substance reasonably
satisfactory to Buyer;
(c) All covenants of Seller under this Agreement to be
performed prior to the Closing shall have been performed, and the
representations and warranties of Seller contained in this Agreement shall be
true and correct on and as of the Closing in all material respects (except to
the extent qualified by materiality in which event such representations and
warranties shall be true and correct) with the same effect as though such
representations and warranties had been made on and as of such date, except to
the extent attributable to actions permitted or consented to by Buyer in
writing;
(d) All items set forth on Schedule 5.6(b) hereto shall have
been obtained and all waiting periods under the HSR Act shall have expired or
been terminated; and
(e) Seller and each other party thereto shall have executed
and delivered each of the Ancillary Agreements.
(f) With respect to each parcel of Owned Real Property, Buyer
shall have received at Closing an owner's title insurance policy or binding
marked commitment therefor issued by a title insurance company reasonably
satisfactory to Buyer and Seller insuring the fee simple title to such property,
subject only to Real Property Encumbrances (other than those described in clause
(v) of Article 5.5 hereto).
35
ARTICLE IX
TERMINATION; SURVIVAL
9.1 TERMINATION BY BUYER OR SELLER. Anything herein or
elsewhere to the contrary notwithstanding, this Agreement may be terminated and
the transactions contemplated hereby abandoned at any time prior to or at the
Closing by:
(a) mutual written consent of Seller and Buyer;
(b) Seller or Buyer, by written notice to the other, if the
transactions contemplated hereby are not consummated on or before the earlier to
occur of the (1) twentieth day after all items set forth on Schedule 5.6(b)
having been obtained and (2) December 31, 1997 and if the failure to consummate
such transactions on or before such date did not result from a breach of any
representation, warranty or covenant of the party seeking such termination prior
to or at the Closing; or
(c) Seller or Buyer, by written notice to the other, if a
court of competent jurisdiction or governmental, regulatory or administrative
agency or commission shall have issued an order, decree or ruling or taken any
other action, in each case permanently restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated hereby and such
order, decree, ruling or other action shall have become final and nonappealable.
9.2 SURVIVAL. If this Agreement is terminated pursuant to
Article 9.1 hereof, this Agreement shall become void and of no further force and
effect, except for the provisions of Articles 11.1(a), 13.1, 13.2 and 15.1
hereof; PROVIDED that such termination shall not relieve any party for liability
for Damages resulting from its breach of this Agreement. Promptly following
termination of this Agreement each party will destroy or return to the other
parties all documents received from such parties in connection with the
contemplated transaction, except documents which have been publicly distributed.
ARTICLE X
CLOSING
10.1 CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ as soon as
practicable after all the conditions to Closing set forth
36
in Article VIII hereof shall be satisfied or duly waived, or at such other time
and place as Buyer and Seller may mutually agree.
10.2 SELLER'S OBLIGATIONS AND CLOSING DELIVERIES. At the
Closing, Seller shall deliver to Buyer:
(a) Bills of Sale and Assignments in recordable form for each
jurisdiction in which Assets are located substantially in the form attached as
Exhibit 1.3(b) hereto;
(b) Executed and acknowledged Assignments, each in a form
reasonably acceptable to Buyer, with respect to all Intellectual Property
identified in Schedule 5.13(a) or described in Article 1.1(i) hereof;
(c) Executed copy of each document of transfer required of
Seller with respect to the permits and licenses to be assigned or transferred at
Closing as described in Article 1.5 hereof;
(d) Special warranty deeds (or equivalent) in recordable form
and substance satisfactory to Buyer and sufficient to convey to Buyer all of
Seller's interest in the Owned Real Property free and clear of all Encumbrances,
except for Real Property Encumbrances;
(e) Such other instruments of sale, transfer, conveyance and
assignment, in form and substance reasonably satisfactory to Buyer's counsel, as
shall be effective to vest in Buyer good title, rights and interest to the
Assets (the General Assignments and other instruments referred to in Articles
10.2(a), 10.2(b), 10.2(c), 10(d) and 10.2(e) being collectively referred to
herein as the "Assignment and Assumption Instruments") and such other documents
to facilitate the transfer of the Real Property and the obtaining of title
insurance by Buyer as Buyer may reasonably request;
(f) Certified copy of the resolutions of Seller's Board of
Directors evidencing the authorizations set forth in Article 5.2 hereof;
(g) Executed copy of each of the Ancillary Agreements;
(h) Written receipt executed by Seller of payment of the
Purchase Price;
(i) Certificate of the President or any Vice President of
Seller that the conditions set forth in Article 8.2(c) hereof have been
satisfied;
(j) Opinion of ▇▇▇▇▇ ▇. ▇▇▇▇, Esq. substantially in the form
of Exhibit 10.2(j) hereto;
37
(k) Certification of Nonforeign Status in accordance with
Internal Revenue Code Section 897 and Section 1445(b)(2) of the Foreign
Investment and Real Property Tax Act, as amended.
10.3 BUYER'S OBLIGATIONS AND CLOSING DELIVERIES. At the
Closing, Buyer shall deliver, or cause to be delivered, to Seller:
(a) The Purchase Price;
(b) Fully executed copy of each of the Assignment and
Assumption Instruments previously delivered by Seller and an executed copy of
the Assumption Agreement substantially in the form attached as 1.3(d) hereto;
(c) Certified copy of the resolutions of Buyer's and Parent's
Boards of Directors evidencing the authorization set forth in Article 6.2(a)
hereof;
(d) Executed copy of each of the Ancillary Agreements;
(e) Certificate of the President or any Vice President of
Buyer and Parent to the effect that the conditions set forth in Article 8.1(d)
have been satisfied;
(f) Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ substantially in the
form of Exhibit 10.3(f) hereto; and
(g) Opinion of ▇▇▇▇▇▇▇▇▇, Rowe, Smith, ▇▇▇▇▇▇ & ▇▇▇▇▇
substantially in the form of Exhibit 10.3(g) hereto.
ARTICLE XI
EXPENSES AND POST CLOSING OBLIGATIONS
11.1 TAXES AND OTHER CHARGES. (a) Seller shall be responsible
for and shall pay any ad valorem real property taxes and general and special
assessments and any ad valorem personal property taxes, including any interest
or penalties thereon, which are attributable or are assessed with respect to the
operation and ownership of the Business for periods and events prior to the
Closing. Buyer will be responsible for ad valorem real property taxes and
general and special assessments and any ad valorem personal property taxes,
including any interest or penalties thereon, attributable or assessed with
respect to all periods and events on or following the Closing. Buyer is
responsible for and shall pay any rents, street surfacing and other municipal
charges, and fuel, water, sewer, electrical and other utility charges, including
any interest or penalties thereon, which are attributable to the operation and
ownership of the Business in the
38
ordinary course and consistent with past practice for periods and events prior
to the Closing but not yet due and payable as of the Closing. Buyer will be
responsible for any such charges attributable to periods and events on or
following the Closing.
(b) Regardless of whether or not the transactions contemplated
hereby are consummated, each party to this Agreement shall pay all expenses
incurred by it or on its behalf in connection with the preparation,
authorization, execution and performance of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby, including, but not limited to, all fees and expenses of all
consultants, brokers, investment bankers, agents, representatives, counsel and
accountants engaged by such party; except that: (i) Buyer and Seller shall share
equally the costs of obtaining title insurance for the Real Property and (ii)
Buyer and Seller shall share equally any liability for all sales, transfer and
similar Taxes (including, without limitation, all recording fees and related
charges) arising from or attributable or related to the sale, transfer or
assignment to Buyer of any of the Real Property.
(c) Seller and Buyer shall cooperate regarding the filing of
any Tax Returns relating to the Business that cover a period which includes the
date of the Closing. Property Tax Returns will be filed by the party which owns
the property subject to the return on the assessment date for the property tax.
(d) Seller, at its option, shall have sole control over any
contest (including claims for refund or challenges of tax assessments) which
relates to liability for taxes during periods prior to the date of the Closing,
subject to approval of Buyer relating to any going-forward liability reasonably
likely to be imposed on Buyer or the Business thereafter for taxes. In any
event, any refunds of taxes which become available on or after the date of the
Closing but which relate to periods prior to the Closing shall belong to Seller
provided that Seller paid the taxes giving rise to the refund.
11.2 RESTRICTION. From the date of the Closing until the
fifth anniversary of the Closing, Seller shall not, and shall not permit any of
its Affiliates (as hereinafter defined) to, directly or indirectly, anywhere in
the world, (i) engage in the Restricted Business, (ii) license or permit any
person or entity to use technology or Trade Secrets hereby transferred by Seller
to Buyer or (iii) employ or solicit to hire, or otherwise receive the services
of, any Transferred Employee (x) so long as such Transferred Employee is
employed by any of Parent and its subsidiaries or their respective transferees
and assigns and (y) prior to the six month anniversary of the termination of
such employment. Nothing contained in this Section 11.2 shall prohibit, restrict
or prevent Seller or its Affiliates from consummating an acquisition transaction
even if a portion of the entity being acquired competes with the Restricted
Business, provided, that the net sales of the competitive business being so
acquired are 10% or less of the consolidated net sales of the entire business
being so acquired, and provided further, that the portion of the entity being
acquired which competes with the Restricted Business is sold by Seller and its
Affiliates on or prior to the first anniversary of the closing of the
acquisition thereof by Seller and its Affiliates. If
39
Buyer (or a transferee of Buyer) transfers, directly or indirectly, by sale of
stock, merger, sale of assets or otherwise, any part of the Business to one or
more third parties, Seller's agreements in this Article 11.2 shall continue with
respect to such third party transferees and each transferee shall have the same
rights as Buyer hereunder. The parties agree that the remedy at law for any
breach of any obligation under this Article 11.2 will be inadequate and that in
addition to any other rights and remedies to which they may be entitled
hereunder, at law or in equity, Buyer and its transferees shall be entitled to
injunctive relief and reimbursement for all reasonable attorney's fees and other
expenses incurred in connection with the enforcement hereof. In the event this
Article 11.2 is held to be in any respect an unreasonable restriction upon
Seller or any of its affiliates by any court having competent jurisdiction, the
court so holding may reduce the territory to which this Article 11.2 pertains
and/or the period of time for which it operates, or effect any other change to
the extent necessary to render this Article 11.2 enforceable by such court. As
so modified Article 11.2 will continue in full force and effect. Such decision
by a court of competent jurisdiction shall not invalidate this Agreement, but
this Agreement shall be interpreted, construed and enforced as not containing
such invalidated provision. The term "Affiliates" as used in this Section 11.2
shall mean Jefferson Smurfit Group, plc ("JS Group") and any subsidiary or
affiliate (1) in which JS Group directly or indirectly beneficially owns voting
securities constituting 50.1% or more of the outstanding voting power thereof or
(2) a majority of the directors, trustees, managing partners or managing members
(or equivalent) of which are, directly or indirectly, nominees or designees of
JS Group or (3) other than Jefferson Smurfit Corporation, a Delaware
corporation, and its wholly owned subsidiaries, which JS Group directly or
indirectly otherwise controls. The term "Restricted Business" as used in this
Section 11.2 means the manufacture, sale, distribution, lease, reconditioning
and/or fleet management of plastic or steel drums or plastic or steel
intermediate bulk containers; PROVIDED HOWEVER, the manufacture, sale or
distribution of "bag in the box", which is a plastic liner inside a corrugated
or other rigid container and which is currently being manufactured, sold and
distributed by JS Group, shall not constitute "Restricted Business."
11.3 INSURANCE DATA. To the extent that, after the Closing,
either Buyer or Seller requires any information regarding claim data, payroll or
other information in order to make filings with insurance carriers relating to
the Business, Seller shall promptly supply such information to Buyer and Buyer
shall promptly supply such information to Seller.
11.4 FURTHER ASSURANCES. At any time after the Closing, the
parties agree to cooperate with one another to execute and deliver such other
documents, instruments of transfer or assignment, files, books and records and
do all such further acts and things as may be reasonably required to carry out
the transactions contemplated hereunder.
11.5 ACCESS TO BOOKS, RECORDS AND FACILITIES. Seller agrees
that on and after the Closing it will permit each of Parent and Buyer and its
representatives, during normal business hours and upon reasonable advance
notice, to have access to and to examine and make copies of (i) all books and
records of Seller (except books and records protected by attorney-client or
other
40
privilege which Seller may be entitled to assert against Buyer in any pending or
threatened proceeding, suit or action) which relate to the Business to the
extent that the events reflected therein relate to transactions or events
occurring prior to the Closing or to transactions or events occurring subsequent
to the Closing which arise out of transactions or events occurring prior to the
Closing and (ii) all documents listed in the Schedules attached hereto and all
files, records and papers of any and all proceedings and matters listed in the
Schedules attached hereto. All books and records of Seller relating to the
Business will be preserved by Seller in accordance with Seller's records
retention policy, but in no event for a period of less than three years
following the Closing. Prior to any destruction or disposition by Seller of any
books and records relating to the Business, Seller will notify Buyer in writing
and Buyer shall have the right to receive and retain such books and records at
its expense. Buyer agrees that, after the Closing, it will permit, and will
cause its subsidiaries to permit, Seller and its representatives full access
during normal business hours and upon reasonable advance notice to all of its
and their respective properties, plants and facilities used in connection with
the Business, and to have access to the books and records (except records
protected by attorney-client or other privilege which Buyer or its affiliates
may be entitled to against Seller in any pending or threatened proceeding,
action or suit) of the Business, to the extent that any of the foregoing relates
to periods prior to the Closing, and is reasonably necessary in connection with
any then pending or threatened litigation, claim, liability, or judicial or
administrative matters in which Seller is involved and which involves or arises
out of the ownership or operation of the Business by Seller.
11.6 PREPARATION OF AUDITED FINANCIAL STATEMENTS. Seller
agrees that at the request of Buyer after the Closing Date Seller shall, and
shall use all reasonable efforts to cause its officers, employees and
independent public accountants to, cooperate with Buyer and Buyer's independent
public accountants, in the preparation by Buyer of audited financial statements
and notes thereto of the Business for each of the fiscal years ended December
31, 1995 and 1996 and the period ending at Closing in 1997. Buyer shall
reimburse Seller from time to time upon Seller's request (accompanied by
statements or other documentation evidencing such expenses) for all
out-of-pocket expenses and costs (including the fees and expenses of Seller's
independent public accountants) incurred by Seller in connection with the
preparation of such financial statements. Further, Buyer agrees to cooperate
with Seller as to the timing of its request so as not to burden the Seller's
internal auditing staff during periods in which they are preparing Seller's
year-end financials.
ARTICLE XIII
BULK SALES LAW
12.1 WAIVER. Buyer hereby waives compliance by Seller with any
bulk sales laws (including any applicable bulk sales provision of any state
sales tax law) which may be applicable. Seller agrees to indemnify and hold
Buyer harmless against any and all claims, losses,
41
damages, liabilities, costs and expenses (including, without limitation, any
Taxes) incurred by Buyer or any of its affiliates as a result of any failure to
comply with any such bulk sales laws, except to the extent that any such claims,
losses, damages, liabilities, costs and expenses are Assumed Liabilities.
ARTICLE XIII
PUBLICITY, CONFIDENTIALITY
13.1 PUBLICITY. The Parties agree that no publicity, release
or announcement concerning the execution of this Agreement, any of the
provisions of this Agreement or the transactions contemplated hereby shall be
issued without the advance written approval of the form and content of the same
by the Parties; provided, however, that no such consent shall be required when
such disclosure is required by applicable law.
13.2 CONFIDENTIALITY. Each of Parent and Buyer confirms that
it is bound by the terms of the confidentiality agreement, dated February 3,
1997, between Seller and ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ Corp. as if it were a signatory thereto
and that it will keep and treat the evaluation material and all other items of
confidential information provided by Seller to Parent and Buyer hereunder in
accordance with the terms of that confidentiality agreement.
13.3 NEGOTIATIONS WITH THIRD PARTIES. From the date hereof
through the Closing or, if earlier, the termination of this Agreement pursuant
to Article IX, Seller will not directly or indirectly, through any director,
employee, affiliate, representative, agent or otherwise, (i) solicit, initiate,
encourage or assist in the submission of any inquiries, proposals or offers from
any corporation, partnership, person, or other entity or group (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) (other than
Parent and Buyer, their respective associates and affiliates and officers,
partners, employees and other authorized representatives of Parent and Buyer or
such affiliates or associates) (collectively, "Persons") relating to any
acquisition or purchase of assets of, or any equity interest in, the Business or
any form of recapitalization transaction, merger, consolidation, business
combination, spin-off, liquidation or similar transaction involving, directly or
indirectly, the Business (each, an "Acquisition Proposal"), (ii) participate in
any discussions or negotiations regarding an Acquisition Proposal or furnish to
any Person any information concerning the Business or the transactions
contemplated hereby or (iii) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to make or enter into an Acquisition Proposal. Should Seller receive any
inquiry, proposal or offer to enter into any transaction of the type referred to
in clauses (i), (ii) or (iii) above, Seller will promptly inform Buyer of the
terms thereof and the identity of the party making such inquiry, proposal or
offer.
42
ARTICLE XIV
NOTICES
14.1 NOTICES. Any notices or communications permitted or
required hereunder shall be deemed sufficiently given if hand-delivered, or sent
by (i) registered or certified mail return receipt requested, (ii) telecopy or
other electronic transmission service (to the extent receipt is confirmed) or
(iii) by overnight courier, in each case to the parties at their respective
addresses and telecopy numbers set forth below, or to such other address of
which any party may notify the other party in writing.
If to Seller, to
Smurfit Packaging Corporation
Jefferson Smurfit Centre
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇.▇. Smurfit, Jr.
Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Jefferson Smurfit Corporation
Jefferson Smurfit Center
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
Winston & ▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
43
If to Parent or Buyer, to
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ Holdings, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
with copies to:
c/o Vestar Capital Partners
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
ARTICLE XV
CONSULTANT FEES
15.1 BROKERS. Each of the Parties represents and warrants to
the other that, except for Parent's and Buyer's retention of Vestar Capital
Partners and PaineWebber Incorporated, whose fees and expenses shall be paid by
Parent and Buyer, no broker or finder has acted on its behalf in connection with
the transactions contemplated by this Agreement. Each of the Parties agrees to
indemnify, defend and hold the other party harmless against any claim or demand
for any commission, compensation or other payment by any other broker, finder or
similar agent claiming to have been or that was in fact employed by or on behalf
of it.
44
ARTICLE XVI
MISCELLANEOUS
16.1 BINDING EFFECT; ASSIGNMENT. This Agreement shall be
binding upon, and inure to the benefit of, all the Parties and their respective
successors, legal representatives and assigns permitted in accordance with this
Article 16.1. Nothing herein shall create or be deemed to create any third party
beneficiary rights in any person or entity not a party hereto. No assignment of
this Agreement or of any rights or obligations hereunder may be made by any
party (by operation of law or otherwise) without the prior written consent of
the other party, and any attempted assignment without the required consents
shall be void; provided, however, that no such consent shall be required for
Buyer to assign part or all of its rights and obligations under this Agreement
prior to the Closing to one or more subsidiaries of Buyer, or after the Closing
to any third party.
16.2 EXHIBITS AND SCHEDULES. All Exhibits and Schedules
attached hereto and the documents and agreements referred to herein to be
delivered and the acts to be performed at or subsequent to the Closing
(collectively, the "Items") are incorporated herein and expressly made a part of
this Agreement as fully as though completely set forth herein.
16.3 SPECIFIC PERFORMANCE. Each of Seller and Buyer
acknowledges that the other will have no adequate remedy at law if it fails to
perform any of its obligations under this Agreement. In such event, the
performing party shall have the right, in addition to any other rights it may
have, to specific performance of this Agreement.
16.4 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Each counterpart may
consist of a number of copies hereof each signed by less than all, but together
signed by all, of the parties. In pleading or proving any provision of this
Agreement, it shall not be necessary to produce more than one such counterpart.
16.5 HEADINGS; INTERPRETATION. (a) The headings contained in
this Agreement are inserted for convenience of reference only and shall not
otherwise affect the meaning or interpretation or be deemed a substantive part
of this Agreement.
(b) Except to the extent that the context otherwise requires
"include," "includes" and "including" are deemed to be followed by "without
limitation" whether or not they are in fact followed by such words or words of
like import.
16.6 WAIVER. The failure of any party at any time or times to
enforce or require performance of any provision hereof shall in no way operate
as a waiver or affect the right of such party at a later time to enforce the
same. No waiver by any party of any condition or the breach
45
of any term, covenant, representation or warranty contained in this Agreement,
in any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach, or a waiver of any other
condition or of any term, covenant, representation or warranty contained in this
Agreement. Any agreement on the part of a party hereto to a waiver shall be
valid only if set forth in an instrument in writing signed by such party.
16.7 SEVERABILITY. If any provision of this Agreement shall
hereafter be held to be invalid or unenforceable for any reason, that provision
shall be reformed to the maximum extent permitted to preserve the parties'
original intent, failing which, it shall be severed from this Agreement with the
balance of this Agreement continuing in full force and effect. Such occurrence
shall not have the effect of rendering the provision in question invalid in any
other jurisdiction or in any other case or circumstances, or of rendering
invalid any other provisions contained herein to the extent that such other
provisions are not themselves actually in conflict with any applicable law.
16.8 GOVERNING LAW AND FORUM. This Agreement and the Ancillary
Agreements shall be governed by and construed in all respects under the laws of
the State of New York, without reference to its conflicts of laws, rules or
principles. Any action to enforce, which arises out of or in any way relates to,
any of the provisions of this Agreement and the Ancillary Agreements may be
brought and prosecuted in such court or courts located within the State of New
York as provided by law; and the parties consent to the jurisdiction of such
court or courts located within the State of New York and to service of process
by registered mail, return receipt requested, or by any other manner provided by
New York law.
16.9 MATERIALITY. The dollar thresholds set forth in this
Agreement have been negotiated for the special purposes of the specific
provisions in which they appear, and are not to be taken as evidence of the
level of "materiality" for purposes of any other provision or statutory or
common law which may be applicable to the transactions contemplated by this
Agreement under which a level of materiality might be an issue.
16.10 OBLIGATIONS GUARANTEE. Parent hereby guarantees the
obligations of the Buyer and its permitted assigns under this Agreement and the
Ancillary Agreements and agrees to cause the Buyer and its permitted assigns to
comply with the terms of this Agreement and the Ancillary Agreements. This
guarantee shall be a continuing and irrevocable guarantee and shall survive the
Closing. Without limitation, the obligations of this guarantee shall not be
released, discharged or affected by any extensions of time or indulgences or
modifications granted by the Seller in favor of the Buyer or its permitted
assigns, or by any failure to enforce any of the terms of this Agreement or by
the bankruptcy, insolvency, dissolution, amalgamation, winding-up or
reorganization of the Buyer or its permitted assigns, and Parent hereby waives
any right to require the Seller to exhaust any action or recourse against the
Buyer or its permitted assigns before requiring performance by Parent pursuant
to this guarantee.
46
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized representatives as of the day and year
first above written.
SMURFIT PACKAGING CORPORATION
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇. SMURFIT, JR.
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇. Smurfit, Jr.
Title:President and CFO
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ HOLDINGS, INC.
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:Executive Vice President
and CFO
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ CORP.
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President
and CFO
