EXHIBIT 10.3
JR CAPITAL CONTRIBUTION AGREEMENT
---------------------------------
THIS CAPITAL CONTRIBUTION AGREEMENT (this "Agreement") is made as of
this 20th day of January, 1996, by and between XXXXX RIVER PAPER COMPANY,
INC., a Virginia corporation ("Xxxxx River") and WINCUP HOLDINGS, L.P., a
Delaware limited partnership (the "Partnership").
BACKGROUND
----------
A. Pursuant to the terms and conditions of a Limited Partnership
Agreement (the "Partnership Agreement") dated as of the date hereof, Xxxxx River
is a limited partner of the Partnership.
X. Xxxxx River desires to make an initial capital contribution of
certain assets to the Partnership, and the Partnership desires to accept such
initial capital contribution, pursuant to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties and covenants hereinafter set forth, and intending
to be legally bound hereby, the parties agree as follows:
ARTICLE I
CONTRIBUTION OF ASSETS
AND ASSUMPTION OF LIABILITIES
1.1 Contribution. On the Closing Date (as hereinafter defined) Xxxxx
------------
River shall contribute to the Partnership as an initial capital contribution,
and the Partnership shall accept as an initial capital contribution, all of the
tangible and intangible property and rights of Xxxxx River used or held for use
exclusively in connection with the Foam Business (as hereinafter defined),
including, without limitation, the properties and rights described below and
described and assigned a preliminary estimated value in Schedule 1.1 hereto,
with final values to be assigned and provided to the Partnership within sixty
(60) days after the Closing Date, and made a part hereof (collectively, the
"Transferred Assets"):
(a) All fixed assets, leasehold improvements, technology, patents,
trademarks, real property and other non-current assets associated with
HandiKup's one-piece foam cup container and thermoform lid manufacturing
operations exclusively related to the one-piece foam cup container operations
located in Corte Madera, California; Jacksonville, Florida; Metuchen, New
Jersey; West Chicago, Illinois and other locations.
(b) The inventory, spare parts and other current assets associated
with the Foam Business; and
(c) All of Xxxxx River's contractual rights in and under the contracts
listed on Schedule 1.1(c) (the "Contracts"), copies of which have been
delivered to the Partnership.
In addition to the foregoing, Xxxxx River shall contribute to the
Partnership substantially all of the Xxxxx River employees associated with the
Transferred Assets (collectively, the "Transferred Employees"). A list of the
Transferred Employees is contained in Schedule 1.1(d). A list of those
employees associated with the Transferred Assets, but who will not be
contributed to the Partnership ("Retained Employees"), is contained in Schedule
1.1(e).
1.2 Excluded Assets. Xxxxx River will not transfer to the
---------------
Partnership (a) any interest in any of the other assets of Xxxxx River which are
not included in the Transferred Assets, including, without limitation, the cash,
cash equivalents and accounts receivable of Xxxxx River, and (b) the assets
listed on attached Schedule 1.2.
1.3 Assumption of Liabilities.
------------------------
(a) The Partnership hereby agrees to assume, satisfy and discharge:
(i) all liabilities and obligations relating to the Transferred Assets arising
on or after the Closing Date including those relating to the Contracts; and
(ii) annual (but not carried forward) employee liabilities for vacation, holiday
and sick pay in the amounts set forth on Schedule 1.3(a) (collectively, the
"Assumed Liabilities").
(b) The Partnership will distribute to Xxxxx River, in accordance with
the terms of that certain promissory note, in the original principal amount of
$4,400,000, the form of which is attached hereto as Exhibit A (the "$4,400,000
Note"), the amount of $4,400,000 less any Inventory Deficiency (as hereinafter
defined) (the "Payment").
(c) The Partnership shall also assume responsibility for claims
related to the Foam Business and covered under standard policies of commercial
general liability insurance arising from events that occurred prior to the
Closing Date but which have not been reported to and are not known to Xxxxx
River on or before the Closing Date. Xxxxx River shall have the right to
review, approve and amend, if necessary, the commercial general liability
insurance policy when issued by the insurance carrier, which is anticipated
within 60 days after Closing, to insure that the policy conforms to this
Agreement and the other documents related to the transactions contemplated
herein.
(d) As of the Closing Date, the Partnership shall assume, and Xxxxx
River shall have no further obligation with respect to (i) all employee related
liabilities and obligations that are payable on or after the Closing Date with
respect to Transferred Employees and their beneficiaries and dependents other
than those liabilities and obligations
-2-
that arose before the Closing Date which are not assumed pursuant to clause (ii)
hereafter; and (ii) all employee related liabilities and obligations that arose
prior to the Closing Date with respect to the Transferred Employees and their
employee benefits to the extent set forth in Article 11 of the Partnership
Agreement.
(e) It is expressly acknowledged and agreed by the parties hereto
that, except for the Assumed Liabilities and the liabilities described in
Sections 1.3(c) and 1.3(d) of this Agreement, all other liabilities and
obligations of Xxxxx River, whether or not related to the Transferred Assets,
whether now existing or arising in the future, fixed or contingent, known or
unknown, and attributable to any facts existing on or prior to the Closing Date,
including without limitation those arising out of trade accounts payable and
litigation matters, shall be and remain the liabilities and obligations of Xxxxx
River and shall not be booked as or become a liability of the Partnership.
(f) Notwithstanding Section 1.3(a)(i) hereof or any other provision of
this Agreement, Xxxxx River shall retain, and the Partnership will assume no
liability for, related to, arising out of, under or in respect of any Hazardous
Substances existing as of the Closing Date on, in or about the Transferred
Assets or the leased premises on which the Transferred Assets are located or any
Hazardous Emissions or Handling Hazardous Substances prior to the Closing Date
at any location (including, without limitation, remote storage, treatment,
recycling or disposal sites). For the purposes of this Agreement, the following
capitalized terms shall have the meanings set forth below:
"Hazardous Substances" means (i) those substances defined as hazardous
by Section 9601(14) of the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("CERCLA"), 42 USCA 9601 et seq., (ii) all fluids
------
containing polychlorinated biphenyls, (iii) asbestos and asbestos-containing
materials, (iv) nuclear fuel and waste, (v) petroleum and petroleum products,
and (vi) all other substances regulated under Environmental Laws.
"Environmental Laws" means federal statutes and regulations
promulgated thereunder intended to provide protection for public health and the
environment, including, without limitation, CERCLA, the Clean Air Act, the Clean
Water Act, the Solid Waste Disposal Act (including the Resource Conservation and
Recovery Act), the Toxic Substances Control Act, their state and regulatory
counterparts, and other substantially similar foreign statutes and regulations,
as the foregoing may be in effect from time to time.
"Handling Hazardous Substances" means the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
"Hazardous Emissions" means all emissions, releases, leaks, escapes,
dumping, discharges or threatened discharges of Hazardous Substances into the
air, surface water, ground water or the ocean or on or into the land.
-3-
1.4 Value of the Transferred Assets. The parties agree that the
-------------------------------
value of the Transferred Assets and the allocation of such value will be as set
forth, as of the Closing Date, on Schedule 1.1 hereto.
1.5 Transfer of Assets and Assumption of the Assumed Liabilities. At
------------------------------------------------------------
the Closing (as hereinafter defined) Xxxxx River and the Partnership shall
execute and deliver to each other a xxxx of contribution and assignment and
assumption agreement, in a form agreeable to the parties hereto and WinCup
Holdings, Inc. ("WinCup"), pursuant to which Xxxxx River shall transfer the
Transferred Assets to the Partnership and the Partnership shall specify the
amount of and assume the Assumed Liabilities and shall assume the other
liabilities to be assumed by the Partnership under this Agreement.
1.6 Closing.
-------
(a) Closing Date. The closing (the "Closing") of the transactions
------------
contemplated hereby shall take effect as of 12:00 a.m., January 20, 1996 (the
"Closing Date").
(b) Effect of the Closing. On and subsequent to the Closing Date, all
---------------------
business transacted in connection with the Transferred Assets, and, except as
otherwise provided in this Agreement, all obligations accruing in connection
with the Transferred Assets and Assumed Liabilities, shall be for the account of
the Partnership.
1.7 Post-Closing Adjustments.
------------------------
(a) The value of the inventory (including raw materials, work in
process, finished goods, spare parts, supplies and stores inventory) contributed
by Xxxxx River on the Closing Date is estimated to be Eight Million Three
Hundred Thousand Dollars ($8,300,000). As provided in Section 1.3(b), the
Payment shall take into account any Inventory Deficiency determined in
accordance with Section 1.7(b) below.
(b) Inventory Level Adjustment.
--------------------------
(1) The Partnership caused its auditors, on November 18 and 19,
1995, to conduct a physical inventory of the inventory contributed by Xxxxx
River pursuant to Section 1.1(b) of the Agreement, which physical inventory the
Partnership shall roll forward to the Closing Date (as rolled forward, the "JR
Inventory"). As promptly as practical, but in any event not more than thirty
(30) days after the Closing, the Partnership shall cause its auditors to
prepare, on the basis of such physical inventory and the rolling forward of such
physical inventory, and deliver to Xxxxx River a draft of a statement of the "JR
Inventory Value" as of the commencement of business on the Closing Date (the
"Preliminary Closing Statement"). "JR Inventory Value" shall mean the value of
the JR Inventory on hand as of the Closing Date calculated as set forth in this
Section 1.7(b). JR Inventory on hand as of the Closing Date, as determined by
the physical inventory and rolling forward of the physical
-4-
inventory referred to above, will include items which have historically been
carried on the books of Xxxxx River and held for sale in the ordinary course of
Xxxxx River's business. Raw materials, WIP and finished goods inventory will be
valued at the lower of cost or market determined in accordance with generally
accepted accounting principles applied on a consistent basis. Cost for raw
materials, WIP and finished goods will be calculated to reflect raw material
prices as of the Closing Date. Supplies, store and spare parts will be valued
at cost as of the Closing Date. Finished goods inventory will be reduced for
obsolete, slow-moving or damaged inventory. Spare parts will be reduced for
obsolete spare parts. The use of the term "slow moving" with respect to
inventory shall mean all inventory in excess of the most recent total of twelve
(12) months' external customer shipments in cases before the Closing Date, which
slow moving inventory shall be valued at fifty percent (50%) of cost. The use of
the term "obsolete" with respect to inventory shall mean all inventory where the
most recent total of twelve (12) months before the Closing Date for all external
customer shipments in cases is zero, except for newly introduced products, which
obsolete inventory shall be valued at zero. The use of the term "damaged" with
respect to inventory shall mean all inventory contributed by Xxxxx River which
is ripped, torn, defaced or squashed, which damaged inventory shall be valued at
zero. The term "obsolete" with respect to spare parts shall mean those spare
parts which are no longer used in the production process, which obsolete spare
parts shall be valued at zero.
(2) During the ten (10) days following the receipt by Xxxxx River
of the draft of the Preliminary Closing Statement and the report of the
Partnership's auditors with respect thereto, Xxxxx River shall be permitted to
review the working papers of the Partnership's auditors relating to the draft of
the Preliminary Closing Statement and shall have such access to the
Partnership's personnel as may be reasonably necessary to permit it to review in
detail the manner in which the draft was prepared. Before the end of such ten
(10) day period, Xxxxx River shall give any comments or objections it has with
respect to the draft of the Preliminary Closing Statement to the Partnership.
Such comments or objections, insofar as they relate to the valuation of the JR
Inventory, shall be resolved without regard to any materiality standard, and the
Final Closing Statement delivered to Xxxxx River pursuant to the provisions of
the next paragraph shall reflect such resolution.
(3) Within ten (10) days after the expiration of such ten-day
period described in the preceding paragraph, the Partnership shall deliver to
Xxxxx River a Final Closing Statement (the "Final Closing Statement")
accompanied by a definitive report of the Partnership's auditors with respect
thereto. Within five (5) business days after receipt of such Final Closing
Statement and report, Xxxxx River shall deliver a letter to the Partnership
stating whether they concur with such report and their exceptions thereto, if
any, together with the reasons therefor. If such objections cannot be resolved
between the Partnership and Xxxxx River within five (5) business days after
delivery of such letter to the Partnership by Xxxxx River, the question or
questions in dispute shall then be submitted, as soon as practicable, to a
mutually acceptable firm of independent public accountants of nationally
recognized standing, the decision of which as to such question or questions in
dispute shall be made within ten (10) days thereafter and shall be final and
binding upon the parties hereto.
-5-
(4) If the Final Closing Statement, after the resolution of all
disputes, indicates that the value of the JR Inventory is less than Eight
Million Three Hundred Thousand Dollars ($8,300,000) ("Inventory Deficiency"),
the Partnership shall amend the $4,400,000 Note to deduct from the payments due
thereunder the amount of such Inventory Deficiency.
(5) The fees of Xxxxx River (including the fees of any auditors
independently retained by Xxxxx River) incurred in connection with the
preparation of the Preliminary and Final Closing Statements shall be reimbursed
by the Partnership in accordance with Section 1.8 below. The fees of any
independent accounting firm appointed pursuant to Paragraph (3) of this Section
1.7(b) shall be paid one-half by the Partnership and one-half by Xxxxx River.
1.8 Reimbursement of Expenses. The Partnership shall reimburse Xxxxx
-------------------------
River for all fees and expenses incurred by Xxxxx River for its legal counsel,
accountants (for fees associated with conducting physical inventories and
preparing inventory valuations and financial statements in connection with the
formation of the Partnership and excluding fees incurred in connection with the
consummation of the transactions contemplated by that certain Asset Purchase
Agreement, dated as of October 31, 1995, among WinCup, Benchmark Holdings, Inc.
and Xxxxx River) and investment bankers, in connection with the negotiation,
documentation and consummation of the transactions contemplated by this
Agreement and the other documents executed in connection herewith. Attached
hereto as Schedule 1.8 is an itemization of all such fees and expenses paid or
estimated to be due by Xxxxx River, all of which are deemed to be reasonable.
The Partnership shall reimburse Xxxxx River for all such fees and expenses as
promptly as practicable after receipt by the Partnership of sufficient evidence
supporting the payment by Xxxxx River of such fees and expenses. The estimated
amounts listed on Schedule 1.8 shall be adjusted from time to time after the
Closing, either upward or downward, to the extent required to reflect the actual
fees and expenses paid by Xxxxx River and reimburseable pursuant to this Section
1.8. To the extent permitted under the Capital Expenditure Loans (as defined in
that certain Revolving Credit, Term Loan and Security Agreement, dated as of the
date hereof, among the Partnership, WinCup and The Bank of New York Commercial
Corporation (as Lender and as Agent)), the Partnership shall draw on amounts
from such loan and pay such drawed amounts to Xxxxx River to reimburse Xxxxx
River for all capital expenditures incurred by Xxxxx River within ninety (90)
days prior to Closing and related to any engineering projects undertaken for the
benefit of the Partnership and its business.
1.9 Retention of Books and Records; Availability of Employees.
--------------------------------------------------------
Xxxxx River will retain and maintain, in an organized and retrievable manner,
all material documents and records pertaining to the Foam Business for periods
prior to the Closing Date. Xxxxx River agrees to make available to the
Partnership all such documents and records, including, without limitation, such
documents and records as the Partnership shall reasonably require to compile the
previous three years audited financials, as well as such employees of Xxxxx
River, as may be reasonably requested by the Partnership in order to comply with
all
-6-
pertinent requests from the Internal Revenue Service and state taxing
authorities which relate to periods prior to the Closing or as the Partnership
otherwise deems necessary to the efficient operation of the Partnership's
business, which shall be deemed to include any refinancing of the Partnership's
indebtedness.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF XXXXX RIVER
2.1 Representations and Warranties of Xxxxx River. Xxxxx River
---------------------------------------------
hereby represents and warrants to the Partnership as follows:
(a) Organization. Xxxxx River is a duly organized and validly
------------
existing corporation in good standing under the laws of Virginia, its
jurisdiction of incorporation, and has all requisite corporate power and
authority to own, lease and operate its assets and to carry on its business as
presently conducted and to execute, deliver and perform its obligations under
this Agreement. Xxxxx River is duly qualified and in good standing to do
business in each jurisdiction in which its Foam Business makes such
qualification necessary except where failure to so qualify has no material
adverse effect on Xxxxx Xxxxxx' financial condition or the conduct of the Foam
Business. Xxxxx River has heretofore delivered to the Partnership complete and
correct copies of its Certificate of Incorporation and Bylaws, as currently in
effect.
(b) Due Authorization and Binding Effect. This Agreement has been
------------------------------------
duly authorized by Xxxxx River's Board of Directors, has been duly executed and
delivered by Xxxxx River and constitutes the legal and binding obligation of
Xxxxx River enforceable in accordance with its terms except as the same may be
limited by (i) any applicable bankruptcy, insolvency, reorganization, moratorium
or similar law affecting creditors' rights generally or (ii) general principles
of equity, whether considered in a proceeding in equity or at law.
(c) Non-Contravention. Except as set forth in Schedule 2.1(c) and
----------------- ---------------
Schedule 2.1(t), the execution and delivery by Xxxxx River of this Agreement
---------------
does not and the consummation of the transactions contemplated hereby will not
(i) violate or result in a breach of any provision of the Certificate of
Incorporation or Bylaws of Xxxxx River (ii) result in a default, or give rise
to any right of termination, modification or acceleration, or the imposition of
any Encumbrance (as hereinafter defined), whether immediately or after the
giving of notice or the passage of time, under the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement, lease or
other instrument or obligation to which Xxxxx River is a party or by which any
of the Transferred Assets may be bound, or (iii) violate any law, regulation,
judgment, order or decree applicable to Xxxxx River or any of the Transferred
Assets or the Foam Business.
-7-
(d) Brokers and Finders. Xxxxx River has not employed any broker,
-------------------
finder, consultant or intermediary who would be entitled to a broker's, finder's
or similar fee or commission in connection with or upon the consummation of the
transactions contemplated in this Agreement.
(e) Title to Transferred Assets. Xxxxx River is the sole and
---------------------------
exclusive owner of the Transferred Assets and possesses good (and, with respect
to owned real estate, marketable) title thereto free and clear, except as
otherwise disclosed herein, of any and all pledges, security interests,
mortgages, liens, conditional sales agreements, restrictions, encumbrances or
charges other than Permitted Encumbrances (as hereinafter defined) (collectively
"Encumbrances") and, except for the consents and approvals set forth in Schedule
2.1(e) hereto, has the complete and unrestricted power and unqualified right to
sell, convey, assign, transfer and deliver to the Partnership sole and exclusive
ownership of the Transferred Assets free and clear of any and all Encumbrances
other than Permitted Encumbrances. "Permitted Encumbrances" shall mean: (i)
statutory liens for current taxes or assessments not yet due or delinquent; (ii)
mechanics', carriers', workers', repairers' and other similar liens arising or
incurred in the ordinary course of business relating to obligations as to which
there is no default on the part of Xxxxx River, provided that the same shall be
fully discharged of record before the Closing; (iii) exceptions shown on the
Commonwealth Land Title Insurance Company Policies of title insurance to be
issued pursuant Commitment Xx. X000000 (Xxxxxxxx, Xxx Xxxxxx) and Commitment Xx.
00X000 (Xxxx Xxxxxxx, Xxxxxxxx); and (iv) such other Encumbrances which do not
materially adversely affect the use or value of the real property contained in
the Transferred Assets.
(f) Financial Statements. Xxxxx River has delivered to the
--------------------
Partnership: (a) unaudited balance sheet items of Xxxxx River's HandiKup foam
container operations ("HandiKup Division") as at December 31 in each of the
years 1993 and 1994, and the related unaudited statements of sales and operating
expenses for each of the fiscal years then ended ("Year-end Financial
Statements") and (b) unaudited balance sheet items of the HandiKup Division as
of September 24, 1995 and the related unaudited statements of sales and
operating expenses for the period then ended ("Interim Financial Statements").
Such Year-end Financial Statements and Interim Financial Statements fairly
present the financial condition and results of operations of the HandiKup
Division as at the respective dates of and for the periods referred to therein.
(g) Inventory. All inventory of Xxxxx River included within the
---------
Transferred Assets (i) is usable or saleable in the ordinary course of the Foam
Business, (ii) is sufficient but not excessive in kind or amount for the conduct
of the Foam Business as it is presently being conducted, and (iii) is carried on
the books of Xxxxx River as reflected on the Interim Financial Statements at an
amount which reflects valuations not in excess of the lower of cost or market
(FIFO) determined in accordance with generally accepted accounting principles
applied on a consistent basis. Schedule 2.1(g) sets forth the locations of
---------------
inventory not located at the sites identified in Section 1.1(a) hereof.
-8-
(h) No Material Adverse Change. Since September 24, 1995, there has
--------------------------
not been any material adverse change in the financial condition of Xxxxx River,
and no event has occurred or circumstance exists that can reasonably be expected
to result in such a material adverse change.
(i) Contracts; Materiality; No Defaults. Except as set forth on
-----------------------------------
Schedule 2.1(i), the Contracts constitute all of the agreements or contracts
which are Material to the HandiKup one-piece foam cup container business of
Xxxxx River (the "Foam Business"). "Material" for this purpose shall mean an
agreement, contract or commitment: (i) upon which any part of the Foam Business
is dependent or which, if breached, could reasonably be expected to materially
and adversely affect the Transferred Assets or the earnings, financial
condition, operations or prospects of the Foam Business; (ii) which provides for
aggregate future payments by or to Xxxxx River for the Foam Business of more
than $50,000 in any year, except for purchase orders or sales orders arising in
the ordinary course of business, in which case they are listed only if any party
thereto may be obligated to make future payments aggregating more than $100,000
in any year; (iii) which relates to the Transferred Assets, extends more than
one year from the date hereof and is not cancelable by either party on 30 days'
notice; (iv) which provides for the sale or lease or other transfer, after the
date hereof and other than in the ordinary course of business, of any of the
Transferred Assets; (v) which relates to the employment, retirement or
termination of the services of any employee, officer, former officer or
consultant of Xxxxx River whose employment relates or was related to the Foam
Business; or (vi) which contains covenants pursuant to which any person has
agreed not to compete with any business conducted by the Foam Business or not
disclose to others information concerning the Transferred Assets or the Foam
Business. Except as set forth on Schedule 2.1(i), Xxxxx River is not in default
under any of the Contracts. To Xxxxx River's knowledge, except as set forth on
Schedule 2.1(i), each other party to any of the Contracts is not in default and
no event has occurred or circumstance exists that (with or without notice or
lapse of time) may result in a violation or breach of any of the Contracts.
(j) Licenses and Permits. Except as set forth in Schedule 2.1(j),
--------------------
Xxxxx River has all licenses and permits required to conduct the Foam Business
as it is presently being conducted. Schedule 2.1(j) contains a complete list of
all such licenses and permits, all of which are in full force and effect and,
except as noted on Schedule 2.1(j), all of which are assignable. Except as
disclosed on Schedule 2.1(j), Xxxxx River has operated the Foam Business in
compliance with all of the terms and conditions set forth in such licenses and
permits. Except as set forth in Schedule 2.1(j), no investigation or review is
pending with respect to any alleged failure of Xxxxx River to comply with the
provisions of its license and permits, and no event has occurred or condition
exists which, with the giving of notice or the passage of time, can reasonably
be expected to result in any such allegation.
(k) Litigation. Except as set forth in Schedule 2.1(k), there are no
----------
actions, suits, claims, investigations or proceedings (legal, administrative or
arbitrative) pending or, to the knowledge of Xxxxx River, threatened against
Xxxxx River, whether at law or in equity and whether civil or criminal in
nature, before any court, governmental body, commission,
-9-
agency or arbitrator, domestic or foreign, nor are there any judgments, orders
or decrees of any such court, governmental body, commission, agency or
arbitrator outstanding against Xxxxx River which have or can reasonably be
expected to have, directly or indirectly, an adverse effect on the Transferred
Assets or the earnings, financial conditions, operations or prospects of the
Foam Business, or which seek specifically to prevent, restrict or delay
consummation of the transactions contemplated hereby or fulfillment of any of
the conditions hereof.
(l) Undisclosed Liabilities. Except as set forth in Schedule 2.1(l),
-----------------------
the HandiKup Division does not have, with respect to the Transferred Assets or
the operations of the Foam Business, any liabilities (whether matured or
unmatured, accrued, contingent or otherwise) which are not reflected in the
Interim Financial Statements other than those which were incurred subsequent to
the date of such financial statements in the ordinary course of business and
consistent with past practices and cannot reasonably be expected to materially
and adversely affect the Transferred Assets or the earnings, financial
condition, operations or prospects of the Foam Business.
(m) Absence of Changes. Except as set forth in Schedule 2.1(m), since
------------------
September 24, 1995, there has not been:
(i) any change, or development involving a prospective change,
including, without limitation, any damage, destruction or loss (whether or not
covered by insurance) which adversely affects or, to the knowledge of a Xxxxx
River, can reasonably be expected to materially and adversely affect the
Transferred Assets or the earnings, financial condition, operations or prospects
of the Foam Business;
(ii) any obligation or liability involving more than $200,000
(whether matured or unmatured, accrued, contingent, or otherwise) incurred in
the aggregate by Xxxxx River with respect to the Transferred Assets or the Foam
Business;
(iii) any general uniform increase in the compensation of the
employees of the Foam Business (including, without limitation, any increase
pursuant to any bonus, pension, profit sharing or other plan or commitment);
(iv) an increase (other than normal increases consistent with
past practices and those required by law) in the compensation payable to any
employee (including officers) of the Foam Business;
(v) any amendment to any employment agreement to which any
employee of the Foam Business is a party;
(vi) any sale of any of the Transferred Assets other than in the
ordinary course of business; or
(vii) any material deterioration of relations between the Foam
Business and its suppliers or customers.
Since the date of the Interim Financial Statements, the Foam Business has been
conducted only in the ordinary and usual course and in a manner consistent with
past practices.
-10-
(n) Leases. Schedule 2.1(n) includes a complete list of each lease
------
into which Xxxxx River has entered, whether as lessor or lessee, on behalf of
the Foam Business which relates to either real or personal property, other than
monthly leases of personal property which may be cancelled upon not more than 60
days notice and require the payment of not more than $100 per month. The leases
listed in Schedule 2.1(n) are referred to herein as a "Lease" or the "Leases."
Xxxxx River has not breached any such Lease and, to the knowledge of Xxxxx
River, no other party to any Lease has breached the Lease and no event has
occurred or condition exists which, with the giving of notice or the passage of
time, can reasonably be expected to result in a default under, or permit the
termination, modification or acceleration of any Lease by any party thereto.
Xxxxx River has good and valid leasehold title to the real estate covered by the
Leases, free and clear of all encumbrances. Complete copies of all of the
Leases have been delivered to the Partnership. Except as disclosed on Schedule
2.1(n), the Leases can be transferred to the Partnership without the consent of
the lessors thereunder or any other person.
(o) Intellectual Property. Schedule 2.1(o) sets forth (i) a list of
---------------------
certain identified intellectual property which Xxxxx River owns and uses in
connection with the Foam Business; and (ii) a list of certain identified
intellectual property which Xxxxx River does not own but has the right to use in
connection with the Foam Business. Except as is set forth in Schedule 2.1(o),
Xxxxx River has the right to use the intellectual property listed on Schedule
2.1(o) free and clear of any restrictions and its right to such intellectual
property is assignable. To the knowledge of Xxxxx River, Xxxxx River is not
infringing upon the rights of any person, is not aware of any claim of such
infringement, and no person is infringing upon the rights of Xxxxx River in the
intellectual property. To the best knowledge of Xxxxx River, all letters
patent, registrations and certificates issued by any governmental agency
relating to the intellectual property are valid and subsisting and have been
properly maintained. Complete copies of all documents of the intellectual
property listed on Schedule 2.1(o) pursuant to which Xxxxx River has acquired
the right to use, or has licensed or otherwise permitted any other person to
use, any such intellectual property listed on Schedule 2.1(o) have been
delivered to the Partnership.
(p) Maintenance of Equipment. The equipment which is a part of the
------------------------
Transferred Assets has been maintained in good repair in accordance with the
usual practices in the United States of businesses similar to the Foam Business
conducted by Xxxxx River, is in good condition, ordinary wear and tear excepted,
and is useable in the ordinary course of the Foam Business as it is presently
being conducted.
(q) Sufficiency of Transferred Assets. Except as set forth on
---------------------------------
Schedule 2.1(q), the Transferred Assets include all properties and rights of
Xxxxx River that are necessary for the conduct of the business of the Foam
Business as it is presently being conducted.
-11-
(r) Labor and Employment Matters. Except as set forth in Schedule
----------------------------
2.1(r), there are no collective bargaining agreements or employment agreements
(other than the Contracts) to which Xxxxx River is a party or by which it is
otherwise obligated. There are no controversies, claims or grievances pending,
or, to the knowledge of each Xxxxx River, threatened between Xxxxx River and any
employees of the Foam Business which affect, or can reasonably be expected to
have, directly or indirectly, an adverse effect on the Transferred Assets or the
earnings, financial condition, operations or prospects of the Foam Business or
relate to any specific effort to prevent, restrict or delay consummation of the
transactions contemplated by this Agreement.
(s) Certain Practices. To the knowledge of Xxxxx River, no
-----------------
shareholder, director or officer, employee or agent of Xxxxx River has, directly
or indirectly, made, or agreed to make, any improper or illegal payment, gift or
political contribution to, or taken any other improper or illegal action, for
the benefit of any customer, supplier, governmental employee or other person who
is or may be in a position to assist or hinder the business of the Foam
Business.
(t) Consents and Approvals. Except as set forth in Schedule 2.1(t),
----------------------
there is no requirement applicable to Xxxxx River to make any filing with, or to
obtain any consent or approval of any Person (as hereinafter defined) as a
condition to the transfer of the Transferred Assets to the Partnership or the
consummation of the transactions contemplated by this Agreement (other than as
may be required by the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976).
(u) Compliance with Laws. Except as set forth in Schedule 2.1(u),
--------------------
Xxxxx River has operated the Foam Business in compliance with all laws,
regulations, judgments, orders or decrees of any federal, state, local or
foreign court or governmental body applicable to Xxxxx River or any of the
Transferred Assets or the Foam Business including, without limitation, those
related to (i) antitrust and trade matters, (ii) civil rights, (iii) zoning and
building codes, (iv) public health and safety, (v) worker health and safety and
(vi) labor, employment and discrimination in employment. Except as set forth on
Schedule 2.1(u), no investigation or review is pending with respect to any
alleged failure by Xxxxx River to comply with any such law, regulation, order,
judgment or decree and no event has occurred or condition exists which, with the
giving of notice or the passage of time, can reasonably be expected to result in
any such allegation.
(v) Disclosure. Neither this Agreement, nor the Year-End Financial
----------
Statements nor the Interim Financial Statements, contains an untrue statement of
a material fact. To the knowledge of Xxxxx River no event has occurred or
condition exists which, with the giving of notice or the passage of time, can
reasonably be expected to have a material adverse effect on the Transferred
Assets or the earnings, financial condition, operations or prospects of the Foam
Business.
-12-
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE PARTNERSHIP
3.1 Representations and Warranties of the Partnership. The
-------------------------------------------------
Partnership hereby represents and warrants to Xxxxx River as follows:
(a) Organization. The Partnership is a duly organized and validly
------------
existing limited partnership in good standing under the laws of Delaware, the
jurisdiction in which it is organized, and has all requisite power and authority
to own, lease and operate its assets and to carry on its business as presently
contemplated and to execute, deliver and perform its obligations under this
Agreement.
(b) Due Authorization and Binding Effect. This Agreement has been
------------------------------------
duly authorized by all requisite action on the part of the Partnership, has been
duly executed and delivered by the Partnership and constitutes the legal and
binding obligation of the Partnership enforceable in accordance with its terms.
(c) Compliance. The execution, delivery and performance of this
----------
Agreement by the Partnership will not conflict with, result in any breach of or
constitute a default under or cause the acceleration of, any provision of any
partnership agreement, certificate of limited partnership, judgment, decree,
law, ordinance, regulation or order to which the Partnership is a party or by
which the Partnership or any of its assets are bound or affected.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions Precedent. The obligations of the Partnership and
--------------------
Xxxxx River, respectively, to proceed with the transactions contemplated hereby
are subject to the satisfaction of the following conditions:
(a) The execution and delivery of the instruments referred to in
Section 1.5 hereof and 1.3 of the Agreement, dated as of October 31, 1995,
between WinCup and Xxxxx River (the "Foam Agreement").
(b) The concurrent consummation of the closing contemplated under the
Foam Agreement.
-13-
ARTICLE V
FURTHER ASSURANCES; COVENANTS
5.1 Further Assurances. If at any time after the Closing Date any
------------------
further assignments, conveyances or assurances in law are necessary or desirable
to vest, perfect or confirm of record in the Partnership the title to any of the
Transferred Assets, or otherwise to carry out the provisions hereof, the proper
officers and directors of Xxxxx River shall execute and deliver any and all
proper assignments, instruments of assumption, powers of attorney and assurances
in law, and do all things necessary or proper to vest, perfect or confirm title
to such property or rights in the Partnership and otherwise to carry out the
provisions hereof.
5.2 Intellectual Property. Xxxxx River shall make due inquiry as
---------------------
soon as reasonably practicable after the Closing Date to determine the existence
of any patents owned or used in connection with the Foam Business which are not
listed on Schedule 2.1(o) ("Undisclosed Patents"). Xxxxx River shall, promptly
after the discovery any such Undisclosed Patents, disclose to the Partnership
Undisclosed Patents of which it becomes aware. If Xxxxx River becomes aware of
any Undisclosed Patents used exclusively by Xxxxx River prior to the date hereof
in the Foam Business, it shall assign, at no cost to the Partnership, such
Undisclosed Patents to the Partnership if it owns such Undisclosed Patents or it
shall grant a royalty-free license to the Partnership in such Undisclosed
Patents for the duration of the term of the right to use such Undisclosed
Patents.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification.
---------------
(a) Indemnification by Xxxxx River. Subject to the limitations
------------------------------
contained in this Article VI, Xxxxx River will indemnify and hold the
Partnership harmless from any damage, loss, liability or expense (including,
without limitation, reasonable expenses of investigation and litigation and
reasonable attorneys', accountants', and other professional fees) arising out
of:
(i) a breach of any representation or warranty made by Xxxxx
River in this Agreement;
(ii) a breach of any agreement of Xxxxx River
contained in this Agreement;
(iii) the failure of Xxxxx River to satisfy in full any of the
payables and allocated expenses associated with the Foam Business and not
assumed by the Partnership hereunder; and
-14-
(iv) any liability or obligation of Xxxxx River not assumed by
the Partnership pursuant to this Agreement.
(b) Indemnification by the Partnership. Subject to the limitations
----------------------------------
contained in this Article VI, the Partnership will indemnify and hold Xxxxx
River harmless from any damage, loss, liability or expense (including, without
limitation, reasonable expenses of investigation and litigation and reasonable
attorney's, accountants' and other professional fees) arising out of:
(i) a breach of any representation or warranty made by the
Partnership in this Agreement;
(ii) a breach of any agreement of the Partnership contained in
this Agreement; and
(iii) the Assumed Liabilities and other liabilities assumed by
the Partnership under this Agreement.
(c) Third Party Claims. The obligation of an indemnifying party to
------------------
indemnify another party to this Agreement under the provisions of this Article
VI with respect to claims resulting from the assertion of liability by those not
parties to this Agreement (including governmental claims for penalties, fines
and assessments) shall be subject to the following terms and conditions:
(i) The indemnified party shall give prompt written notice to
the indemnifying party of any assertion of liability by a third party which
might give rise to a claim for indemnification based on the foregoing provisions
of this Article VI, which notice shall state the nature and basis of the
assertion and the amount thereof, to the extent known, provided, however, that
no delay on the part of the indemnified party in giving notice shall relieve the
indemnifying party of any obligation to indemnify unless (and then solely to the
extent that) the indemnifying party is prejudiced by such delay;
(ii) If any action, suit or proceeding (a "Legal Action") is
brought against an indemnified party with respect to which the indemnifying
party may have liability under the foregoing provisions of this Article VI, the
Legal Action shall be defended (such defense to include all proceedings for
appeal or review which counsel for the indemnified party shall deem appropriate)
by the indemnifying party;
(iii) Notwithstanding the provisions of the previous subsection
of this Agreement, until the indemnifying party shall have assumed the defense
of any such Legal Action, the defense shall be handled by the indemnified party.
Furthermore, (a) if the indemnified party shall have reasonably concluded that
there are likely to be defenses available to the indemnified party that are
different from or in addition to those available to the indemnifying party; (b)
if the indemnifying party fails to provide the indemnified party
-15-
with evidence reasonably acceptable to the indemnified party that the
indemnifying party has sufficient financial resources to defend and fulfill its
indemnification obligation with respect to the Legal Action; (c) if the Legal
Action involves other than money damages and seeks injunctive or other equitable
relief; or (d) if a judgment against the indemnified party in the Legal Action
will, in the good faith opinion of the indemnified party, establish a custom or
precedent which will be materially adverse to the best interest of its
continuing business, the indemnifying party shall not be entitled to assume the
defense of the Legal Action and the defense shall be handled by the indemnified
party. If the defense of the Legal Action is handled by the indemnified party
under the provisions of this subsection, the indemnifying party shall pay all
legal and other expenses reasonably incurred by the indemnified party in
conducting such defense;
(iv) In any Legal Action initiated by a third party and
defended by the indemnifying party (a) the indemnified party shall have the
right to be represented by advisory counsel and accountants, at its own expense,
(b) the indemnifying party shall keep the indemnified party fully informed as to
the status of such Legal Action at all stages thereof, whether or not the
indemnified party is represented by its own counsel, (c) the indemnifying party
shall make available to the indemnified party, and its attorneys, accountants
and other representatives, all books and records of the indemnifying party
relating to such Legal Action and (d) the parties shall render to each other
such assistance as may be reasonably required in order to ensure the proper and
adequate defense of such Legal Action; and
(v) In any Legal Action initiated by a third party and
defended by the indemnifying party, the indemnifying party shall not make any
settlement of any claim without the written consent of the indemnified party,
which consent shall not be unreasonably withheld. Without limiting the
generality of the foregoing, it shall not be deemed unreasonable to withhold
consent to a settlement involving injunctive or other equitable relief against
the indemnified party or its assets, employees or business, or relief which the
indemnified party reasonably believes could establish a custom or precedent
which will be materially adverse to the best interests of its continuing
business.
(d) Limitations on Indemnification.
------------------------------
(i) Notwithstanding the foregoing provisions of this Article VI,
Xxxxx River shall not be liable to the Partnership under Section 6.l(a)(i) and
the Partnership shall not be liable to Xxxxx River under Section 6.1(b)(i), (1)
with respect to any single claim, or series of claims arising from a single
occurrence, unless and to the extent the liability under such claim or series of
claims exceeds $50,000, and thereafter the indemnified party shall be entitled
to indemnification thereunder only for the aggregate amount of such liability in
excess of $50,000 or (2) except as set forth in clause (1), unless and to the
extent the aggregate amount of liability under such Section (including any
amounts for which liability is determined under clause (1) above) exceeds
$250,000, and thereafter the indemnified party
-16-
shall be entitled to indemnification thereunder only for the aggregate amount of
such liability in excess of $250,000.
(ii) All damages to which an indemnified party may be entitled
pursuant to the provisions of this Article VI shall be net of any insurance
coverage with respect thereto.
(e) Survival; Investigation. The representations and warranties of
-----------------------
the parties contained in Sections 2.1 and 3.1 of this Agreement and Xxxxx
River's indemnification obligations under Section 6.1(a)(iii) shall survive any
investigation by any party and shall not terminate until eighteen (18) months
after the Closing Date. With respect to any claim asserted by the Partnership
with respect to the liabilities retained by Xxxxx River pursuant to Section
1.3(f), the right of indemnification provided for in Section 6.1(a)(iv) shall
survive for a period of five (5) years from the Closing Date. Notwithstanding
the provisions of the preceding sentences, any representation or warranty in
respect of which indemnification may be sought under Section 6.l(a)(i) or
6.1(b)(i) and any claim in respect of which indemnification may be sought
pursuant to Section 6.1(a)(iii) or 6.1(a)(iv) shall survive the applicable
termination date set forth in the preceding sentences if written notice, given
in good faith, of a specific breach thereof is given to the indemnifying party
on or before such termination date, whether or not liability has actually been
incurred.
ARTICLE VII
MISCELLANEOUS
7.1 Governing Law. The execution, validity, construction and
-------------
performance of this Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to conflicts of laws
principles.
7.2 Binding Effect. This Agreement shall be binding upon, and inure
--------------
to the benefit of, the respective heirs, successors and permitted assigns of the
parties hereto.
7.3 Entire Agreement. This Agreement and the documents contemplated
----------------
by this Agreement set forth the entire understanding of the parties with respect
to the subject matter hereof. Any previous agreements or understandings between
the parties regarding the subject matter hereof are merged into and superseded
by this Agreement.
7.4 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original and all of which, when taken together,
shall constitute one and the same instrument, binding on the parties hereto, and
the signature of any party to any counterpart shall be deemed a signature to,
and may be appended to, any other counterpart.
-17-
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
WINCUP HOLDINGS, L.P.
By: WINCUP HOLDINGS, INC.,
its General Partner
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------
Xxxxxxx X. Xxxxxxx
President
XXXXX RIVER PAPER COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxx
---------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Senior Vice President and
Treasurer
-18-
