EXHIBIT 10.2
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "Agreement"), dated as
of September 14, 2004, is between Xx. Xxxx X. Ajram ("Mr. Ajram") and Packaging
Dynamics Corporation, a Delaware corporation ("Packaging Dynamics").
RECITALS
WHEREAS, Mr. Ajram, Packaging Dynamics and the other parties
thereto have entered into that certain Acquisition Agreement (the "Acquisition
Agreement"), dated as of August 6, 2004, pursuant to which Packaging Dynamics
is acquiring from Mr. Ajram all of the outstanding capital stock of 3141276
Canada Inc., a Canadian numbered holding company and indirect parent
corporation of Papercon, Inc., a Georgia corporation (the "Company"); and
WHEREAS, in order to induce Packaging Dynamics to enter into
the Acquisition Agreement and consummate the transactions contemplated thereby,
Mr. Ajram agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and
obligations contained herein and in the Acquisition Agreement (including the
payments to Mr. Ajram hereunder and thereunder), Mr. Ajram and Packaging
Dynamics agree as follows:
1. Representations and Warranties of Mr. Ajram. Mr. Ajram
makes the following representations and warranties to Packaging Dynamics:
(a) Power and Authority. Mr. Ajram has the requisite
competence and authority to execute and deliver this Agreement and to perform
his obligations hereunder.
(b) Enforceability. This Agreement has been duly
executed and delivered by Mr. Ajram and, assuming due and valid authorization,
execution and delivery by Packaging Dynamics, constitutes the legal, valid and
binding obligation of Mr. Ajram, enforceable against him in accordance with its
terms.
2. Representations and Warranties of Packaging Dynamics.
Packaging Dynamics makes the following representations and warranties to Mr.
Ajram:
(a) Corporate Power and Authority. Packaging
Dynamics has the corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. Packaging Dynamics has taken all corporate
action necessary to authorize the execution and delivery of this Agreement and
the performance of its obligations hereunder.
(b) Enforceability. This Agreement has been duly
executed and delivered by Packaging Dynamics and, assuming due and valid
authorization, execution and delivery by Mr. Ajram, constitutes its legal,
valid and binding obligation enforceable against it in accordance with its
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.
3. Covenants of Mr. Ajram.
(a) Acknowledgment. Mr. Ajram agrees and
acknowledges that in order to assure Packaging Dynamics that the Company will
retain its value and that of its business as a going concern, it is necessary
that Mr. Ajram undertakes not to utilize his special confidential knowledge of
the business and operations of the Company and his relationship with clients or
customers to compete with Packaging Dynamics or the Company.
(b) Non-Competition. Except as otherwise provided in
the proviso set forth in the third paragraph of the Note (as such term is
defined in the Acquisition Agreement), Mr. Ajram hereby agrees that from and
after the Closing Date and continuing for ten (10) years from the Closing Date
(the "Restricted Period"), he shall not, directly or indirectly, as employee,
agent, consultant, stockholder, director, manager, co-partner or in any other
individual or representative capacity, own, operate, manage, control, engage
in, invest in or participate in any manner in, act as a consultant or advisor
to, render services for (alone or in association with any Person (as such term
is defined in the Acquisition Agreement), other than the Packaging Dynamics
Companies (as such term is defined in Section 3(f) herein)), or otherwise
assist any Person, other than the Packaging Dynamics Companies, that engages in
or owns, invests in, operates, manages or controls any venture or enterprise
that directly or indirectly engages or proposes to engage anywhere in the
United States or Canada (the "Territory") in the business of the Packaging
Dynamics Companies as of the date hereof and those businesses of the Packaging
Dynamics Companies through the time Mr. Ajram is an employee or director of any
of the Packaging Dynamics Companies (the "Restricted Business") or any business
similar to, or competitive with, the Restricted Business; provided, however,
that nothing contained herein shall be construed to prevent Mr. Ajram from (i)
investing in the stock of any competing corporation listed on a national
securities exchange or traded in the over-the-counter market so long as Mr.
Ajram is not involved in the business of said corporation and Mr. Ajram does
not own more than five (5%) percent of the stock of such corporation and (ii)
participating in the business of Flexipak Industries Inc. as such business is
conducted as of the date hereof; provided, further, that nothing contained
herein shall be construed to prevent Mr. Ajram from engaging in a business in
which none of the Packaging Dynamics Companies are engaged as of the date
hereof but in which a Packaging Dynamics Company becomes engaged subsequent to
the date hereof, so long as Mr. Ajram became engaged in such new business prior
to any of the Packaging Dynamics Companies. With respect to the Territory, Mr.
Ajram specifically acknowledges that the Packaging Dynamics Companies have
heretofore conducted their businesses throughout the United States and Canada.
(c) Non-Solicitation. Without limiting the
generality of the provisions of Section 3(b) and except as otherwise provided
in the proviso set forth in the third paragraph of the Note, Mr. Ajram hereby
agrees that during the Restricted Period, he will not, directly or indirectly,
without the prior written consent of Packaging Dynamics (i) induce any Person
which is a customer of any of the Packaging Dynamics Companies to patronize any
business directly or indirectly in competition with the Restricted Business
conducted by the Packaging Dynamics Companies; (ii) canvass, solicit or accept
from any Person who is a customer of the Packaging Dynamics Companies, any such
competitive business; or (iii) request or advise any Person who is a customer
or vendor of the Packaging Dynamics Companies or their successors to withdraw,
curtail or cancel any such customer's or vendor's business with any such
entity.
(d) Confidential Information. During the Restricted
Period, Mr. Ajram shall keep secret and retain in strictest confidence, and
shall not, without the prior written consent of Packaging Dynamics, furnish,
make available or disclose to any third party or use for the benefit of himself
or any third party, any Confidential Information. As used in this Section 3(d),
"Confidential Information" shall mean any information relating to the business
or affairs of the Packaging Dynamics Companies, including, without limitation,
to information relating to financial statements, client or customer identities,
potential clients or customers, employees, suppliers, servicing methods,
equipment, programs, strategies and information, analyses, profit margins or
other proprietary information; provided, however, that Confidential Information
shall not include any information which is in the public domain or becomes
generally known in the public domain through no wrongful act on the part of Mr.
Ajram. Mr. Ajram acknowledges that the Confidential Information is vital,
sensitive, confidential and proprietary to the Company and its Affiliates. Mr.
Ajram agrees to deliver to Packaging Dynamics at the termination of his
employment, or at any time Packaging Dynamics may request, all memoranda,
notes, plans, records, reports, analyses, compilations, computer disks,
forecasts, studies and other documents (and copies thereof), including any
information stored in digital or analog form, whether on electronic or magnetic
media, and pictures thereof stored on film or tape or electronically stored,
relating to the Packaging Dynamics Companies or other forms of Confidential
Information which Mr. Ajram may then possess or have under his control.
(e) Interference with Relationships. During the
Restricted Period, Mr. Ajram shall not, directly or indirectly, without the
prior written consent of Packaging Dynamics, employ, engage, recruit or solicit
for employment or engagement, any Person who is (or was within six (6) months
of the Closing Date) employed or engaged by the Packaging Dynamics Companies or
otherwise seek to influence or alter any such Person's relationship with any of
the foregoing.
(f) As used in this Agreement, the term "Packaging
Dynamics Companies" shall mean and include Packaging Dynamics and all of its
present and future subsidiaries including, without limitation, the Company.
(g) Blue-Pencil. Mr. Ajram recognizes that the
territorial, time and scope limitations set forth in this Section 3 are
reasonable and are properly required for the protection of the Packaging
Dynamics Companies' legitimate interest in client relationships, goodwill and
trade secrets, and in the event that any such territorial, time or scope
limitation is deemed to be unreasonable by a court of competent jurisdiction,
Packaging Dynamics and Mr. Ajram agree, and Mr. Ajram submits, to the reduction
of any or all of said territorial, time or scope limitations to such an area,
period or scope as said court shall deem reasonable under the circumstances,
and in its reduced form, such provision shall then be enforceable and shall be
enforced.
(h) Remedies. Mr. Ajram acknowledges and agrees that
the covenants set forth in this Section 3 are reasonable and necessary for the
protection of the Packaging Dynamics Companies' business interests, that
irreparable injury will result to the Packaging Dynamics Companies if Mr. Ajram
breaches any of the terms of this Section 3 and that in the event of Mr.
Ajram's actual or threatened breach of any of the provisions contained in this
Section 3, Packaging Dynamics will have no adequate remedy at law. Mr. Ajram
accordingly agrees that in the event of any actual or threatened breach by him
of any of the provisions contained in this Section 3, Packaging Dynamics shall
be entitled to such injunctive and other equitable relief, without the
necessity of showing actual monetary damages or posting a bond, as may be
deemed necessary or appropriate by a court of competent jurisdiction. Nothing
contained herein shall be construed as prohibiting Packaging Dynamics from
pursuing any other remedies available to it for such breach or threatened
breach, including, without limitation, the right to monetary damages.
4. Consideration. The aggregate consideration for the
covenants of Mr. Ajram contained herein is $4,000,000 (the "Consideration"), to
be paid in twelve (12) equal quarterly payments of $333,333.33, with such
payments to be made on each March 31, June 30, September 30 and December 31,
commencing on December 31, 2004 and ending on September 30, 2007.
5. Set-Off Rights. In addition to, and without limiting
Packaging Dynamics' rights under Section 9.4 of the Acquisition Agreement, Mr.
Ajram hereby agrees that Packaging Dynamics shall have the right, but not the
obligation, to set-off against Packaging Dynamics' payment obligations under
this Agreement, the full amount of any Purchaser Indemnifiable Damages (as such
term is defined in the Acquisition Agreement) required to be paid pursuant to
Section 9.1 of the Acquisition Agreement. From time to time, if Packaging
Dynamics elects to exercise its set-off rights hereunder, it will give Mr.
Ajram written notice of such election which includes the amount under this
Agreement to be set-off, and upon giving of such notice, the amount due in
respect of such amount under this Agreement shall automatically be reduced by
the amount set forth in such notice and such amount shall be deposited into an
interest-bearing escrow account with the Escrow Agent (as such term is defined
in the Acquisition Agreement) to be held in escrow by such Escrow Agent pending
the resolution of claims for Purchaser Indemnifible Damages. Each of Packaging
Dynamics and Mr. Ajram shall pay one-half of the reasonable fees and
out-of-pocket expenses of the Escrow Agent incurred by it in connection with
carrying out its duties under this Section 5. In the event there is a "final
determination" by a court of competent jurisdiction, or if resolved by written
mutual agreement of Packaging Dynamics and Mr. Ajram, that Packaging Dynamics
was not entitled to indemnification under Article IX of the Acquisition
Agreement with respect to the set-off amount, all such amounts which are so
determined to have been wrongfully set-off shall be released from the escrow
account to Mr. Ajram and the remainder of the set-off amount, if any, shall be
released from the escrow account to Packaging Dynamics. All interest accrued on
the set-off amount shall be paid to Mr. Ajram and Packaging Dynamics pro rata
based on the amount of the escrow account disbursed to such parties pursuant to
this Section 5. For purposes of this Section 5, a determination shall be
"final" if any and all appeals therefrom shall have been resolved or if thirty
(30) calendar days shall have passed from the rendering of such determination
(or of any determination on appeal therefrom) and no party shall have commenced
any such appeal therefrom.
6. Events of Default of Packaging Dynamics. If any one or
more of the following events (each, an "Event of Default") shall occur and be
continuing:
(i) Packaging Dynamics shall fail to make any
payment (beyond any applicable grace period) that is not subject to a
claim for set-off pursuant to Section 5 herein to Mr. Ajram under this
Agreement pursuant to the terms hereof, so long as Mr. Ajram shall not
have breached any obligations under, or otherwise violated any term,
agreement, covenant or provision of, this Agreement; or
(ii) Packaging Dynamics shall fail to pay any amount
of principal or interest under the Note that is not subject to a claim
of set-off pursuant to the terms thereof within five (5) business days
after such amount becomes due and payable under the Note;
then Mr. Ajram, may, by written notice to Packaging Dynamics, declare the
outstanding balance of the Consideration due hereunder to be, and the same
shall thereupon be, immediately due and payable. Following an Event of Default
and the acceleration of the Consideration due hereunder, and continuing until
(i) such Event of Default is cured by Packaging Dynamics or waived by Mr. Ajram
or (ii) the amounts due hereunder are paid in full, Packaging Dynamics shall
pay interest on the balance of the Consideration due hereunder at a rate per
annum of twelve percent (12%). Packaging Dynamics shall reimburse Mr. Ajram for
his reasonable costs and expenses (including, without limitation, legal fees
and expenses) incurred in connection with the collection of amounts due in the
event of an Event of Default.
7. Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be deemed given if
delivered by certified or registered mail (first class postage prepaid) or
guaranteed overnight delivery to the following addresses (or to such other
addresses which any party shall designate in writing to the other parties):
if to Packaging Dynamics, to:
Packaging Dynamics Corporation
0000 Xxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
with a copy (which shall not constitute
notice to Packaging Dynamics), to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
if to Mr. Ajram, to:
Xx. Xxxx X. Ajram
x/x Xxxxx, Xxxx, Xxxxxxxx, Xxxxxxxx & Dokson, P.C.
One Securities Centre
Suite 400
0000 Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
with a copy (which shall not constitute
notice to Mr. Ajram), to:
Ellis, Funk, Xxxxxxxx, Xxxxxxxx & Dokson, P.C.
One Securities Centre
Suite 400
0000 Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
8. Entire Agreement. This Agreement, the Acquisition
Agreement and the other documents delivered at the closing of the transactions
contemplated by the Acquisition Agreement contain the entire understanding of
the parties in respect of their subject matter and supersede all prior
agreements and understanding (oral or written) between or among the parties
with respect to such subject matter.
9. Amendment; Waiver. This Agreement may not be modified,
amended, supplemented, canceled, or discharged, except by written instrument
executed by all parties. No failure to exercise, and no delay in exercising,
any right, power or privilege under this Agreement shall operate as a waiver,
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude the exercise of any other right, power or privilege. No
waiver of any breach of any provision shall be deemed to be a waiver of any
preceding or succeeding breach of the same or any other provision, nor shall
any waiver be implied from any course of dealing between the parties. No
extension of time for performance of any obligations or other acts hereunder or
under any other agreement shall be deemed to be an extension of the time for
performance of any other obligations or any other acts.
10. Binding Effect; Assignment. The rights and obligations of
this Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder. The
rights and obligations of this Agreement may not be assigned or delegated by
Mr. Ajram without the prior written consent of Packaging Dynamics. Packaging
Dynamics may assign its rights and obligations hereunder to one or more
wholly-owned subsidiaries of Packaging Dynamics; provided, however, that such
assignment shall not relieve Packaging Dynamics of its obligations hereunder.
11. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one and the same instrument.
12. Governing Law; Interpretation. This Agreement shall be
construed in accordance with and governed for all purposes by the laws of the
State of Delaware applicable to contracts executed and to be wholly performed
with such State.
13. Mediation.
(a) The parties to this Agreement agree that any and
all disputes, controversies or claims (each, a "Dispute") arising out of or
relating to this Agreement, or the breach hereof, shall be submitted for
mediation in a mutually agreeable location. Either party may commence mediation
by providing to the other party a written request for mediation (a "Dispute
Notice"), setting forth the subject of the dispute and the relief requested.
The parties will cooperate with one another in selecting a mediator from a
panel of neutrals, and in scheduling the mediation proceedings. The parties
covenant that they will participate in the mediation in good faith, and that
they will share equally in its costs. All offers, promises, conduct and
statements, whether oral or written, made in the course of the mediation by any
of the parties, their agents, employees, experts and attorneys, and by the
mediator, are confidential, privileged and inadmissible for any purpose,
including impeachment, in any arbitration or court proceeding involving the
parties, provided that evidence that is otherwise admissible or discoverable
shall not be rendered inadmissible or non-discoverable as a result of its use
in the mediation.
(b) If the Dispute has not been resolved in
accordance with Section 13(a) within ninety (90) calendar days after receipt of
a Dispute Notice, then either party may take any action or exercise any remedy
available to it by appropriate legal proceedings against the other party.
(c) Notwithstanding the foregoing, Packaging
Dynamics shall not be required to submit to mediation any request for
injunctive or similar relief for violation or alleged violation by Mr. Ajram of
the provisions of this Agreement.
14. Jurisdiction.
(a) The parties to this Agreement agree that any
suit, action or proceeding arising out of, or with respect to, this Agreement
or any judgment entered by any court in respect thereof shall be brought in the
courts of the State of Delaware or in the U.S. District Courts located in the
State of Delaware and each of the parties hereto hereby irrevocably accept the
exclusive personal jurisdiction of those courts for the purpose of any suit,
action or proceeding.
(b) In addition, each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
it or he may now or hereafter have to the laying of venue of any suit, action
or proceeding arising out of or relating to this Agreement or any judgment
entered by any court in respect thereof brought in the State of Delaware or the
U.S. District Courts located in the State of Delaware, and hereby further
irrevocably waives any claim that any suit, action or proceedings brought in
any such court has been brought in an inconvenient forum.
15. Dispute Costs. In the event of a Dispute which is
ultimately resolved by a court of competent jurisdiction, the non-prevailing
party will reimburse the prevailing party for its reasonable costs and expenses
(including, without limitation, legal fees and expenses) incurred in connection
with such action.
16. Arm's-Length Negotiations. Each party herein expressly
represents and warrants to all other parties hereto that (a) before executing
this Agreement, said party has fully informed itself of the terms, contents,
conditions, and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party
has had the opportunity to seek and has obtained the advise of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arm's-length negotiations conducted by and among the
parties and their respective counsel.
The parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
PACKAGING DYNAMICS CORPORATION, a Delaware
corporation
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman
/s/ Xxxx X. Ajram
------------------------------
XXXX X. AJRAM, individually
