EXHIBIT 2
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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXXXXXX, L.L.C.,
KTHP ACQUISITION, INC.
AND
PACKAGING DYNAMICS CORPORATION
FEBRUARY 24, 2006
TABLE OF CONTENTS
ARTICLE I THE MERGER; EFFECTIVE TIME; CLOSING................................1
1.1 The Merger.......................................................1
1.2 Effective Time...................................................2
1.3 Closing..........................................................2
ARTICLE II SURVIVING CORPORATION.............................................2
2.1 Certificate of Incorporation.....................................2
2.2 By-laws..........................................................2
2.3 Directors........................................................3
2.4 Officers.........................................................3
ARTICLE III MERGER CONSIDERATION; CONVERSION OR CANCELLATION
OF SHARES IN THE MERGER..........................................3
3.1 Share Consideration for the Merger; Conversion or
Cancellation of Shares in the Merger.............................3
3.2 Dissenting Shares................................................4
3.3 Stockholders' Meeting and Proxy..................................4
3.4 Payment for Shares in the Merger.................................6
3.5 Transfer of Shares Immediately Prior to the Effective Time.......7
3.6 Stock Options and Other Equity Incentive Awards..................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................8
4.1 Corporate Organization and Qualification.........................8
4.2 Capitalization...................................................8
4.3 Authority Relative to This Agreement.............................9
4.4 Consents and Approvals; No Violation............................10
4.5 SEC Documents; Financial Statements.............................11
4.6 Absence of Certain Changes or Events............................12
4.7 Litigation......................................................13
4.8 Proxy Statement.................................................13
4.9 Taxes...........................................................13
4.10 Employee Benefit Plans..........................................14
4.11 Labor Matters...................................................17
4.12 Environmental Laws and Regulations..............................18
4.13 Intellectual Property...........................................18
4.14 Compliance with Laws and Orders.................................20
4.15 Property........................................................20
4.16 Material Contracts..............................................21
4.17 State Takeover Statutes.........................................22
4.18 Interested Party Transactions...................................22
4.19 Insurance.......................................................22
4.20 Commercial Relationships........................................23
4.21 Brokers and Finders.............................................23
4.22 Opinion of Financial Advisors...................................23
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT
AND NEWCO.....................................................23
5.1 Corporate Organization and Qualification........................23
5.2 Authority Relative to This Agreement............................24
5.3 Consents and Approvals; No Violation............................24
5.4 Proxy Statement.................................................25
5.5 Financing.......................................................25
5.6 Interim Operations of Newco.....................................25
5.7 Share Ownership.................................................26
5.8 Brokers and Finders.............................................26
ARTICLE VI ADDITIONAL COVENANTS AND AGREEMENTS..............................26
6.1 Conduct of Business of the Company..............................26
6.2 Acquisition Proposals...........................................30
6.3 Commercially Reasonable Efforts.................................32
6.4 Financing.......................................................33
6.5 Access to Information...........................................34
6.6 Publicity.......................................................35
6.7 Indemnification of Directors and Officers.......................35
6.8 Employees.......................................................37
6.9 Certain Actions and Proceedings.................................37
6.10 Director Resignations...........................................38
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER........................38
7.1 Conditions to Each Party's Obligations to Effect the Merger.....38
7.2 Conditions to Obligations of Parent and Newco...................38
7.3 Conditions to the Obligation of the Company.....................39
ARTICLE VIII TERMINATION; AMENDMENT; WAIVER.................................40
8.1 Termination by Mutual Consent...................................40
8.2 Termination by Either Parent or the Company.....................40
8.3 Termination by Parent...........................................40
8.4 Termination by the Company......................................41
8.5 Effect of Termination...........................................41
8.6 Certain Payments................................................41
8.7 Extension; Waiver...............................................43
ARTICLE IX MISCELLANEOUS AND GENERAL........................................44
9.1 Payment of Expenses.............................................44
9.2 Survival of Representations and Warranties;
Survival of Confidentiality.....................................44
9.3 Modification or Amendment.......................................44
9.4 Waiver of Conditions............................................44
9.5 Counterparts....................................................44
9.6 Governing Law...................................................44
9.7 Jurisdiction....................................................44
9.8 Notices.........................................................45
9.9 Entire Agreement; Assignment....................................46
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9.10 Parties in Interest.............................................46
9.11 Certain Definitions.............................................46
9.12 Disclosure Schedules............................................49
9.13 Obligation of Parent............................................49
9.14 Validity........................................................49
9.15 Captions........................................................49
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of February
24, 2006, by and among Xxxxxxxx, L.L.C., a Delaware limited liability company
("PARENT"), KTHP Acquisition, Inc., a Delaware corporation and a direct
wholly-owned Subsidiary of Parent ("NEWCO"), and Packaging Dynamics
Corporation, a Delaware corporation (the "COMPANY").
RECITALS
WHEREAS, the board of directors of Newco and the board of managers of
Parent have unanimously approved this Agreement and the transactions
contemplated hereby; and
WHEREAS, the board of directors of the Company (the "BOARD OF
DIRECTORS") has (i) approved this Agreement and the transactions contemplated
hereby, (ii) determined that it is advisable and in the best interests of the
Company and its stockholders to adopt the Agreement and to consummate the
acquisition of the Company by Parent and Newco upon the terms and subject to
the conditions set forth in the Agreement, (iii) determined that the cash
consideration to be received for the Shares, in the Merger is fair to the
stockholders of the Company who will receive such consideration, and (iv)
recommended to the stockholders of the Company to vote to approve this
Agreement and the Merger;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition to Parent's and Newco's willingness to enter into
this Agreement, each of the stockholders of the Company listed on EXHIBIT A
hereto (the "PRINCIPAL STOCKHOLDERS"), Parent and Newco will enter into voting
agreements, in the form attached hereto as EXHIBIT B (the "VOTING
AGREEMENTS"), pursuant to which, among other things, such Principal
Stockholders will agree to vote their Shares to approve this Agreement and the
Merger, upon the terms and subject to the conditions set forth in the Voting
Agreements; and
WHEREAS, Parent, Newco and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein,
Parent, Newco and the Company hereby agree as follows:
ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING
1.1 THE MERGER. Subject to the terms and conditions of this
Agreement and in accordance with the Delaware General Corporation Law (the
"DGCL"), at the Effective Time, the Company and Newco shall consummate a
merger (the "MERGER") in which (a) Newco shall be merged with and into the
Company and the
separate corporate existence of Newco shall thereupon cease, (b) the Company
shall be the successor or surviving corporation in the Merger and shall
continue to be governed by the Laws of the State of Delaware and (c) the
separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger. The
corporation surviving the Merger is sometimes hereinafter referred to as the
"SURVIVING Corporation." The Merger shall have the effects set forth in
Section 259 of the DGCL. Without limiting the generality of the foregoing, at
the Effective Time, except as otherwise provided herein, all the property,
rights, privileges, powers and franchises of the Company and Newco shall vest
in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Newco shall become the debts, liabilities and duties of the
Surviving Corporation. If at any time after the Effective Time any further
action is necessary to vest in the Surviving Corporation the title to all
property or rights of Newco or the Company, the authorized officers and
directors of the Surviving Corporation are fully authorized in the name of
Newco or the Company, as the case may be, to take, and shall take, any and all
such lawful action.
1.2 EFFECTIVE TIME. Parent, Newco and the Company will cause a
Certificate of Merger (the "CERTIFICATE OF MERGER") to be executed and filed
on the date of the Closing (or on such other date as Parent and the Company
may agree in writing) with the Secretary of State of the State of Delaware as
provided in the DGCL and shall make all other filings or recordings required
by the DGCL in connection with the Merger. The Merger shall become effective
on the date on which the Certificate of Merger has been duly filed with the
Secretary of State of the State of Delaware, or such later date as is agreed
upon by the parties and specified in the Certificate of Merger, and such date
is hereinafter referred to as the "EFFECTIVE TIME."
1.3 CLOSING. The closing of the Merger (the "CLOSING") shall
take place (a) at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000
Xxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx, at 10:00 a.m. Chicago time on the third
business day following the date on which the last of the conditions set forth
in Article VII hereof shall be fulfilled or waived in accordance with this
Agreement (other than such conditions which by their terms are not capable of
being satisfied until the Closing) or (b) at such other place, time and date
as Parent and the Company may agree in writing (the "CLOSING DATE").
ARTICLE II
SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The certificate of
incorporation of Newco, as in effect immediately prior to the Effective Time,
shall be the certificate of incorporation of the Surviving Corporation.
2.2 BY-LAWS. The by-laws of Newco, as in effect immediately
prior to the Effective Time, shall be the by-laws of the Surviving
Corporation.
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2.3 DIRECTORS. The directors of Newco immediately prior to the
Effective Time shall, from and after the Effective Time, be the initial
directors of the Surviving Corporation until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation
or removal in accordance with the Surviving Corporation's certificate of
incorporation and by-laws.
2.4 OFFICERS. The officers of the Company immediately prior to
the Effective Time shall, from and after the Effective Time, be the initial
officers of the Surviving Corporation until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation
or removal in accordance with the Surviving Corporation's certificate of
incorporation and by-laws.
ARTICLE III
MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
3.1 SHARE CONSIDERATION FOR THE MERGER; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER. At the Effective Time, by virtue of the
Merger and without any action on the part of the holders of any outstanding
shares of common stock, par value $0.01 per share, of the Company (the
"SHARES") or capital stock of Newco:
(a) Each Share issued and outstanding immediately prior
to the Effective Time (other than Shares owned by the Parent and any of its
direct or indirect wholly-owned Subsidiaries (the "PARENT COMPANIES"), any of
the Company's direct or indirect wholly-owned Subsidiaries, Shares held in the
treasury of the Company, or Shares held by stockholders properly exercising
appraisal rights pursuant to Section 262 of the DGCL) shall, by virtue of the
Merger and without any action on the part of Newco, the Company or the holder
thereof, be cancelled and extinguished and converted into the right to
receive, pursuant to Section 3.4, $14.00 in cash (the "MERGER CONSIDERATION"),
payable to the holder thereof, less any required withholding of taxes, without
interest thereon.
(b) At the Effective Time, each Share issued and
outstanding and owned by any of the Parent Companies or any of the Company's
direct or indirect wholly-owned Subsidiaries or held in the treasury of the
Company immediately prior to the Effective Time shall cease to be outstanding
(if applicable), be cancelled, retired and cease to exist and no consideration
shall be delivered in exchange therefor.
(c) At the Effective Time, each share of common stock
of Newco issued and outstanding immediately prior to the Effective Time shall
be converted into one duly authorized, validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
(d) On and after the Effective Time, holders of
certificates which immediately prior to the Effective Time represented Shares
(the "CERTIFICATES") shall cease to have any rights as stockholders of the
Company, except the right to receive
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the consideration set forth in this Article III for each Share held by them.
All Merger Consideration paid in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to
such Shares.
(e) If between the date of this Agreement and the
Effective Time, the Shares shall have been changed into a different number of
shares or other form of security or a different class, by reason of any stock
dividend, reclassification, recapitalization, split, division, combination or
exchange of shares, or rights issued in respect of the Shares, or other like
changes in the Company's capitalization, there will be a proportionate
adjustment made to the Merger Consideration to reflect such change.
3.2 DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, Shares outstanding immediately prior to the
Effective Time and held by a stockholder who has not voted in favor of the
adoption of this Agreement or consented thereto in writing and who has
properly demanded and perfected their rights to be paid the fair value of such
Shares in accordance with Section 262 of the DGCL ("DISSENTING SHARES") shall
not be converted into a right to receive the Merger Consideration unless such
stockholder fails to perfect or waives, withdraws or otherwise loses his or
her right to appraisal under Section 262 of the DGCL. A holder of Dissenting
Shares shall be entitled to receive payment of the appraised value of such
Shares held by him or her in accordance with Section 262 of the DGCL, unless,
after the Effective Time, such holder fails to perfect or waives, withdraws or
loses his or her right to appraisal under Section 262 of the DGCL, in which
case such Shares shall be treated as Shares that had been converted as of the
Effective Time into only the right to receive the Merger Consideration, less
any required withholding of taxes, without interest thereon, in accordance
with Section 3.1. The Company shall give Parent (i) prompt notice of any
notices of dissent, written demands for appraisal of any Shares, attempted
withdrawals of such demands and any other instruments served pursuant to the
DGCL and received by the Company relating to rights of appraisal and (ii) the
opportunity to participate in and direct all negotiations and proceedings with
respect to demands for appraisal under the DGCL. Except with the prior written
consent of Parent, the Company shall not make any payment with respect to any
demands for appraisal or settle or offer to settle any such demands for
appraisal, or agree to do any of the foregoing.
3.3 STOCKHOLDERS' MEETING AND PROXY.
(a) The Company shall, in accordance with applicable
Law and its certificate of incorporation and by-laws, duly call, give notice
of, convene and hold a special meeting of the Company's stockholders (the
"STOCKHOLDERS' MEETING"), for the purpose of considering the adoption and
approval of this Agreement and the Merger as soon as practicable following the
date hereof, regardless of whether the Board of Directors determines at any
time that this Agreement is no longer advisable or recommends that the
stockholders of the Company reject it or any other Company Adverse
Recommendation has occurred at any time; PROVIDED that unless otherwise
requested in writing by Parent, with reasonable advance notice, the date of
the Stockholders' Meeting shall be no earlier than May 15, 2006; PROVIDED,
FURTHER, that the Company may extend the date of the Stockholders' Meeting to
the extent (i) necessary in
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order to obtain a quorum of its stockholders or (ii) the Company reasonably
determines that such delay is required by applicable Law.
(b) Subject to Section 6.2, the Company shall, through
its Board of Directors, recommend that the stockholders of the Company vote in
favor of the adoption of this Agreement and approval of the Merger and include
such recommendation in the Proxy Statement;
(c) As promptly as practicable following the date of
this Agreement (but in any event within fifteen (15) business days following
the date hereof), the Company shall prepare and file a preliminary proxy
statement relating to the transactions contemplated by this Agreement and the
Merger (the "PRELIMINARY PROXY STATEMENT") with the United States Securities
and Exchange Commission (the "SEC"), and shall use its commercially reasonable
efforts to obtain and furnish the information required to be included by it in
the Proxy Statement and, after consultation with Parent and Newco, respond as
promptly as practicable to any comments made by the SEC with respect to the
Proxy Statement and any preliminary version thereof and cause a definitive
proxy statement (the "DEFINITIVE PROXY STATEMENT", and together with the
Preliminary Proxy Statement, the "PROXY STATEMENT") to be mailed to its
stockholders as soon as is reasonably practicable following the date hereof.
(d) Each party shall promptly notify the other parties
upon the receipt of any comments from the SEC or its staff or any request from
the SEC or its staff for amendments or supplements to the Proxy Statement and
shall provide the other parties with copies of all correspondence between it
and its representatives, on the one hand, and the SEC and its staff, on the
other hand relating to the Proxy Statement. If at any time prior to the
Stockholders' Meeting, any information relating to the Company, Parent or any
of their respective Affiliates, officers or directors, should be discovered by
the Company or Parent which should be set forth in an amendment or supplement
to the Proxy Statement, so that the Proxy Statement shall not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, the party which discovers such information shall promptly notify
the other parties, and the parties shall cooperate (which shall include
providing each other with an opportunity to review and comment) in the prompt
filing with the SEC of an appropriate amendment or supplement describing such
information and, to the extent required by applicable Law, in disseminating
the information contained in such amendment or supplement to the stockholders
of the Company.
(e) Subject to Section 6.2, the Company will use
commercially reasonable efforts to (i) solicit from its stockholders proxies
in favor of the adoption of this Agreement and approval of the Merger and (ii)
take all other action necessary or advisable to secure the vote or consent of
its stockholders required by applicable Law to obtain such approvals.
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(f) At such meeting, Parent, Newco and their affiliates
will vote all Shares owned by them in favor of adoption of this Agreement,
approval of the Merger and the transactions contemplated thereby.
3.4 PAYMENT FOR SHARES IN THE MERGER. The manner of making
payment for Shares in the Merger shall be as follows:
(a) At the Effective Time, Parent shall deliver to a
bank or trust company selected by Parent and reasonably acceptable to the
Company (the "EXCHANGE AGENT") for the benefit of the holders of Shares, the
funds necessary to make the payments contemplated by Section 3.1 (the
"EXCHANGE FUND"). The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the Merger Consideration out of the Exchange Fund.
Pending distribution of the Exchange Fund pursuant to Section 3.4(b) hereof,
the Exchange Fund shall be held in trust for the benefit of the holders of the
Shares and the Exchange Fund shall not be used for any other purposes, and
Parent and the Surviving Corporation may direct the Exchange Agent to invest
such cash, provided that such investments (i) shall be obligations of or
guaranteed by the United States of America, commercial paper obligations
receiving the highest rating from either Xxxxx'x Investors Services, Inc. or
Standard & Poor's Corporation, or certificates of deposit, bank repurchase
agreements or bankers acceptances of domestic commercial banks with capital
exceeding $250,000,000 (collectively "PERMITTED INVESTMENTS") or money market
funds which are invested solely in Permitted Investments and (ii) shall have
maturities that will not prevent or delay payments to be made pursuant to
Section 3.4(b) hereof. Any interest and other income resulting from such
investments remaining after nine months from the Effective Date and thereafter
shall be paid to Parent.
(b) As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record (other
than holders of certificates for Shares referred to in Section 3.1(b)) of a
Certificate (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) and (ii) instructions for use in effecting the surrender of the
Certificates for payment therefor. Upon surrender of Certificates for
cancellation to the Exchange Agent, together with such letter of transmittal
duly executed and any other required documents, the holder of such
Certificates shall be entitled to receive for each of the Shares formerly
represented by such Certificates the Merger Consideration, less any required
withholding of taxes, without any interest thereon, and the Certificates so
surrendered shall forthwith be cancelled. If payment is to be made to a person
other than the person in whose name a Certificate so surrendered is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed and otherwise in proper form for
transfer and that the person requesting such payment shall pay to the Exchange
Agent any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the Certificate surrendered, or
shall establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 3.4(b), each Certificate (other than Certificates
formerly representing Shares held by the Parent Companies or any of the
Company's direct or indirect wholly-owned Subsidiaries or held in the treasury
of the
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Company) shall represent for all purposes only the right to receive, for each
Share formerly represented thereby, the Merger Consideration, less any
required withholding of taxes, without interest thereon.
(c) Any portion of the Exchange Fund made available to
the Exchange Agent which remains unclaimed by the former stockholders of the
Company for twelve months after the Effective Time shall be delivered to the
Surviving Corporation, upon demand of the Surviving Corporation, and any
former stockholders of the Company shall thereafter look only to the Surviving
Corporation for payment of their claim for the Merger Consideration for the
Shares.
(d) None of Parent, Newco, the Surviving Corporation or
the Exchange Agent shall be liable to any person in respect of any retained
Shares (or dividends or distributions with respect thereto) or cash properly
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar Law.
(e) Parent, the Surviving Corporation or the Exchange
Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of Shares such
amounts as Parent, the Surviving Corporation or the Exchange Agent are
required to deduct and withhold in respect of such Shares under the Code, or
any provision of state, local or foreign tax Law, with respect to the making
of such payment. To the extent that amounts are so withheld by Parent, the
Surviving Corporation or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder
of Shares in respect of whom such deduction and withholding was made by
Parent, the Surviving Corporation or the Exchange Agent.
3.5 TRANSFER OF SHARES IMMEDIATELY PRIOR TO THE EFFECTIVE TIME.
No transfers of Shares shall be made on the stock transfer books of the
Company after the close of business on the day prior to the date of the
Effective Time.
3.6 STOCK OPTIONS AND OTHER EQUITY INCENTIVE AWARDS Prior to the
Effective Time, the Board of Directors (or, if appropriate, any committee
thereof) shall adopt appropriate resolutions and take all other actions
necessary and appropriate to provide that, immediately prior to the Effective
Time, each unexpired and unexercised option, restricted stock units or similar
rights to purchase Shares ("OPTIONS"), as set forth in Section 4.2 of the
Company Disclosure Schedule, and which have been granted under any
compensatory stock option plan or any other equity-based plans, agreements or
arrangements of or with the Company or any of its Subsidiaries providing for
the granting of options or other equity-based awards (collectively, the
"OPTION PLANS"), including, without limitation, the Packaging Dynamics
Corporation 2005 Long-Term Stock Incentive Plan or 2002 Long-Term Incentive
Stock Plan or any predecessor plans thereto, and that is outstanding at the
Effective Time, whether or not then vested or exercisable, shall be cancelled
and, in exchange therefor, each former holder of any such cancelled Option
shall be entitled to receive, in consideration of the cancellation of such
Option and in settlement therefor, a payment in cash (subject to any
applicable withholding or other taxes required by applicable Law to be
withheld) of an amount equal to the product of (a)
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the excess, if any, of the Merger Consideration minus the exercise or
reference price per Share of each such Option and (b) the number of Shares
covered by such Option (such amounts payable hereunder being referred to as
the "OPTION PAYMENT"). From and after the Effective Time, any such cancelled
Option shall no longer be exercisable by the former holder thereof, but shall
only entitle such holder to the payment of the Option Payment, without
interest thereon. Prior to the Closing, the Company and Parent shall each use
its reasonable efforts to obtain all necessary consents, waivers or releases,
if any, from holders of such Options and take such actions to give effect to,
and accomplish, the transactions contemplated by this Section 3.6, including
but not limited to the payment of the Option Payment at the Effective Time and
ensure that no Options remain outstanding as of the Effective Time. After the
Effective Time, all Option Plans shall be terminated and no further Options
shall be granted thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Newco that:
4.1 CORPORATE ORGANIZATION AND QUALIFICATION. Each of the
Company and its Subsidiaries is duly organized, validly existing and (to the
extent the concept of good standing exists in the applicable jurisdiction) in
good standing under the Laws of its respective jurisdiction of organization.
Each of the Company and its Subsidiaries is qualified to do business and (if
applicable) in good standing in each jurisdiction where the properties owned,
leased or operated, or the business conducted by it require such
qualification, except where failure to so qualify or be in good standing has
not had and would not reasonably be likely to have a Material Adverse Effect.
Each of the Company and its Subsidiaries has all requisite corporate or other
power and authority to own its properties and to carry on its business as it
is now being conducted, except where failure to have such power and authority
has not had and would not reasonably be likely to have a Material Adverse
Effect. The Company has heretofore made available to Parent complete and
correct copies of the certificate of incorporation and by-laws or other
organizational documents of the Company and each of its Subsidiaries as
presently in effect. Neither the Company nor any of its Subsidiaries is in
material violation of any provision of its certificate of incorporation or
by-laws or similar organizational document.
4.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 40,000,000 Shares and 5,000,000 shares of preferred stock, par
value $0.01 per share. As of the date hereof, (i) 10,751,249 Shares are issued
and outstanding, (ii) no shares of preferred stock of the Company are issued
and outstanding, (iii) no Shares are issued and held in the treasury of the
Company and (iv) 1,363,301 Shares are reserved for issuance upon the exercise
of outstanding Options. All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable, and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the DGCL, the Company's
certificate of incorporation or by-laws
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or any Contract to which the Company is a party or otherwise bound. Except as
set forth in Section 4.2 of the disclosure schedule delivered by the Company
herewith (the "COMPANY DISCLOSURE SCHEDULE"), all outstanding shares of
capital stock of or comparable equity interests in the Company's Subsidiaries
are owned by the Company or a direct or indirect wholly-owned Subsidiary of
the Company, free and clear of all Liens. Other than the equity of its
Subsidiaries, the Company does not own, directly or indirectly, any
Investments or other equity interests in any other person. Each of the
outstanding shares of capital stock of each of the Company's Subsidiaries
having corporate form is duly authorized, validly issued, fully paid and
nonassessable. Section 4.2 of the Company Disclosure Schedule sets forth a
true and complete list of the names, jurisdictions of organization and
capitalization of each of the Company's Subsidiaries and, for the Company and
each Subsidiary, the jurisdictions in which it is qualified to do business.
Section 4.2 of the Disclosure Schedules lists each Option outstanding on the
date hereof, the Plan under which such Option was granted, the number of
Shares issuable thereunder, the vesting schedule, the expiration date and the
exercise price thereof. Except as set forth in Section 4.2 of the Company
Disclosure Schedule, there are not any outstanding or authorized options,
warrants, calls, rights (including preemptive rights), convertible or
exchangeable securities, "phantom" stock rights, stock appreciation rights,
stock-based performance units, commitments, contracts, undertakings or any
other arrangements of any character to which the Company or any of its
Subsidiaries is a party, or by which any of them may be bound, (i) requiring
any of them to issue, transfer, sell, purchase, redeem or acquire, or cause to
be issued, transferred, sold, purchased, redeemed or acquired, any shares of
capital stock or any securities or rights convertible into, exchangeable for,
or evidencing the right to subscribe for, any shares of capital stock of or
comparable equity interests in the Company or any of its Subsidiaries, (ii)
obligating the Company or any of its Subsidiaries to issue, grant, extend or
enter into any such option, warrant, call, right, security, commitment,
contract, undertaking or arrangement or (iii) that give any person the right
to receive any economic benefit or right similar to or derived from the
economic benefits and rights accruing to holders of the capital stock of the
Company. Except as set forth in Section 4.2 of the Company Disclosure
Schedule, to the best knowledge of the Company, there are no stockholder
agreements, voting trusts, proxies or other agreements, instruments or
understandings with respect to the voting of the capital stock of the Company.
No dividends on the Shares have been declared or have accrued since December
1, 2005.
4.3 AUTHORITY RELATIVE TO THIS AGREEMENT. (a) The Company has
the requisite corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The Board of Directors has duly and validly
approved this Agreement and the performance and consummation by the Company of
the transactions contemplated hereby. No other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby (other than, with respect to the Merger,
the adoption of this Agreement by holders of a majority of the Shares to the
extent required by applicable Laws). This Agreement has been duly and validly
executed and delivered by the Company and, assuming this Agreement constitutes
the valid and binding agreement of Parent and Newco, constitutes the valid and
binding agreement of the Company, enforceable against the Company in
accordance with its
9
terms, except that the enforcement hereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar Laws now or hereafter
in effect relating to creditors' rights generally and (ii) general principles
of equity (regardless of whether enforceability is considered in a proceeding
in equity or at law);
(b) the Board of Directors, at a meeting duly called
and held prior to the execution of this Agreement, (i) approved and declared
advisable this Agreement, the Merger and the other transactions contemplated
hereby, (ii) determined that this Agreement and the Merger are fair to and in
the best interests of the Company and its stockholders, (iii) resolved to
recommend that the holders of Shares approve and adopt this Agreement and the
Merger and (iv) directed that this Agreement be submitted for consideration by
the holders of Shares at a meeting of such stockholders.
4.4 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement, the performance by the Company of its
obligations hereunder, nor the consummation by the Company of the transactions
contemplated hereby will:
(a) conflict with or result in any breach of any
provision of the certificate of incorporation or by-laws of the Company or the
comparable governing documents of any of its Subsidiaries;
(b) except as set forth in Section 4.4(b) of the
Company Disclosure Schedule, require any consent, approval, license, order,
authorization or permit of, or registration, declaration or filing with or
notification to, any governmental or regulatory authority, except (i) in
connection with the applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), (ii) pursuant to the
applicable requirements of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), (iii) the filing of the Certificate of Merger pursuant
to the DGCL and appropriate documents with the relevant authorities of other
states in which the Company or any of its Subsidiaries is authorized to do
business, (iv) in connection with any state or local tax which is attributable
to the beneficial ownership of the Company's or any of its Subsidiaries' real
property, if any, (v) as may be required by any applicable state securities or
"blue sky" Laws or state takeover Laws, (vi) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, individually or in the aggregate, has not had and would not
reasonably be likely to have a Material Adverse Effect, or (vii) where the
requirement to obtain such consent, approval, authorization or permit, or to
make such filing or notification, has or will become applicable as a result of
the activities or status of Parent or Newco;
(c) except as set forth in Section 4.4(c) of the
Company Disclosure Schedule, result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise
to any right of termination, cancellation or acceleration or lien or other
charge or encumbrance or to loss of a material benefit under, or to material
increased, additional or accelerated costs) or require consent under any of
the terms, conditions or provisions of any note, license, agreement, Contract,
Employment Agreement or other instrument or obligation, whether written or
10
oral, to which or by which the Company or any of its Subsidiaries or any of
their assets may be bound, except for such violations, breaches and defaults
(or rights of termination, cancellation or acceleration or lien or other
charge or encumbrance) which, individually or in the aggregate, have not had
and would not reasonably be likely to have a Material Adverse Effect; or
(d) except as set forth in Section 4.4(d) of the
Company Disclosure Schedule, assuming the consents, approvals, authorizations
or permits and filings or notifications referred to in this Section 4.4 are
duly and timely obtained or made and, with respect to the Merger, the approval
of this Agreement by the Company's stockholders has been obtained to the
extent required by applicable Laws, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or any of its
Subsidiaries or to any of their respective assets; except for violations
which, individually or in the aggregate, have not had and would not reasonably
be likely to have a Material Adverse Effect.
4.5 SEC DOCUMENTS; FINANCIAL STATEMENTS.
(a) Except as set forth in Section 4.5(a) of the
Company Disclosure Schedule, the Company has timely filed all reports and
documents required to be filed by it with the SEC since January 1, 2003
(collectively, the "COMPANY SEC DOCUMENTS") pursuant to the federal securities
Laws and the SEC rules and regulations thereunder, all of which Company SEC
Documents, as of their respective dates, complied in all material respects
with all applicable requirements of the Securities Act of 1933, as amended
(the "SECURITIES ACT"), the Exchange Act, and the rules and regulations
promulgated thereunder. None of the Company SEC Documents, including, without
limitation, any financial statements or schedules included therein, as of
their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Except to the extent that information
contained in any Company SEC Document has been revised or superseded by a
later dated Company SEC Document filed prior to the date hereof, none of the
Company SEC Documents contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading, which statement or omission individually
or in the aggregate would require an amendment, supplement or corrective
filing to such Company SEC Document. As of the date of this Agreement, to the
knowledge of the Company, none of the Company SEC Documents is the subject of
ongoing SEC review or outstanding SEC comment. As of the date of this
Agreement, the SEC has not notified the Company that any final responses to
SEC comment are inadequate, insufficient or otherwise non-responsive.
(b) The consolidated financial statements (including
the related notes thereto) of the Company included in the Company SEC
Documents (the "FINANCIAL STATEMENTS"), (i) as of their respective dates,
complied in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto in effect
at the time of filing, (ii) were prepared in accordance with
11
generally accepted accounting principles ("GAAP") applied on a basis
consistent with prior periods (except as otherwise noted therein), and (iii)
present fairly, in all material respects, the consolidated financial position
of the Company and its consolidated Subsidiaries as of their respective dates,
and the consolidated results of their operations, changes in stockholders'
equity and their cash flows for the periods presented therein (subject, in the
case of the unaudited interim financial statements, to normal year-end
adjustments). The Company has no liabilities other than (i) those disclosed in
the Financial Statements filed with the SEC prior to the date hereof
(excluding the notes to such Financial Statements), (ii) those arising in the
ordinary course of business, consistent with past practice, since September
30, 2005 (iii) those disclosed in Section 4.5(b) of the Company Disclosure
Schedules or (iv) that, individually or in the aggregate, have not had and
would not reasonably be likely to have a Material Adverse Effect.
(c) Section 4.5(c) of the Company Disclosure Schedule
sets forth (i) as of January 31, 2006, (x) the aggregate principal amount of
borrowings under the Amended and Restated Credit Agreement, dated September
29, 2003, as amended (the "CREDIT AGREEMENT") and (y) the principal amount
outstanding under the Promissory Note dated September 14, 2004 payable to Xxxx
X. Ajram and (ii) as of December 31, 2005, the outstanding capital lease
obligations of the Company and its Subsidiaries. Neither the Company nor any
of its Subsidiaries has indebtedness for borrowed money other than pursuant to
the foregoing arrangements and neither the Company nor any of its Subsidiary
guaranties any indebtedness of any Person other than of the Company or its
Subsidiaries.
(d) The Company's "disclosure controls and procedures"
(as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are
reasonably designed to ensure that all information (both financial and
non-financial) required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is reported within the time periods
specified in the rules and forms of the SEC.
(e) The Company has disclosed to Parent, as of the date
hereof, (A) any significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting known to management
of the Company which are reasonably likely to adversely affect the Company's
ability to record, process, summarize and report financial information and (B)
any fraud known to management of the Company, whether or not material, that
involves management or other employees who have a significant role in the
Company's internal controls over financial reporting.
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 4.6 of the Company Disclosure Schedule, since September 30, 2005, (a)
there has not been any event, change, effect, development or occurrence that,
individually or in the aggregate, has had or would reasonably be likely to
have a Material Adverse Effect, (b) there has not been any damage, destruction
or loss, whether covered by insurance or not, that, individually or in the
aggregate, has had or would reasonably be likely to have a Material Adverse
Effect, (c) the Company and its Subsidiaries have conducted their business
only in the ordinary course, consistent with past practice and (d) the Company
12
and its Subsidiaries have not taken any actions that would have been
prohibited by Sections 6.1 (a)-(f) of this Agreement if such actions had been
taken after the date hereof.
4.7 LITIGATION. Except as set forth in Section 4.7 of the
Company Disclosure Schedule or in the Company SEC Documents filed prior to the
date hereof, there are no actions, claims, suits, proceedings, arbitrations or
administrative, governmental or other investigations pending or, to the
knowledge of the Company, threatened in writing against the Company or any of
its Subsidiaries, or any of their properties, assets or business, which
individually or in the aggregate, have had or would reasonably be likely to
have a Material Adverse Effect.
4.8 PROXY STATEMENT. None of the information included in the
Proxy Statement distributed to the Company's stockholders in connection with
the Merger, including any amendments or supplements thereto, at the respective
times that the Proxy Statement or any amendments or supplements thereto are
(i) filed with the SEC, (ii) mailed to the Company's stockholders, (iii) at
the time of the Stockholders' Meeting or (iv) at the Effective Time, contain
any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
4.9 TAXES. (a) Except as disclosed in Section 4.9 of the Company
Disclosure Schedule, since January 1, 2003, the Company and its Subsidiaries
have (i) timely filed all Tax Returns required to be filed by any of them
(taking into account applicable extensions), all of which Tax Returns were
true, correct and complete in all material respects and (ii) paid or accrued
(in accordance with GAAP) all material Taxes (whether or not shown to be due
on such Tax Returns), other than such Taxes not yet due and payable or as are
being contested in good faith and for which adequate reserves have been
established on the Company's books and records in accordance with GAAP;
(b) with respect to Tax Returns referred to in Section
4.9(a), except as disclosed in Section 4.9 of the Company Disclosure Schedule,
there are no material ongoing federal, state, local or foreign Tax audits,
disputes, investigations or examinations;
(c) with respect to Tax Returns referred to in Section
4.9(a), except as disclosed in Section 4.9 of the Company Disclosure Schedule,
there are no outstanding written requests, agreements, consents or waivers to
extend the statutory period of limitations applicable to the assessment of any
Taxes;
(d) except as disclosed in Section 4.9 of the Company
Disclosure Schedule, the Company and its Subsidiaries (x) are not a party to
any agreement providing for the allocation or sharing of Taxes and (y) have
not executed any power of attorney with respect to any Tax, other than powers
of attorney that will not be in force after the Effective Time. Section 4.9 of
the Company Disclosure Schedule lists all closing agreements, private letter
rulings, technical advice memoranda or similar agreements or rulings relating
to Taxes that have been entered into or issued by any
13
governmental authority with or in respect of the Company or any of its
Subsidiaries that have effect for any period after the Effective Time;
(e) except as disclosed in Section 4.9 of the Company
Disclosure Schedule, there are no material liens for Taxes upon the assets of
the Company or its Subsidiaries which are not provided for in the Company SEC
Reports, except liens for Taxes not yet due and payable and liens for Taxes
that are being contested in good faith and for which appropriate reserves have
been established on the Company's books and records in accordance with GAAP;
(f) the unpaid Taxes of the Company and its
Subsidiaries (a) did not as of the date of the most recent audited financial
statements of the Company and its Subsidiaries exceed the reserve for Taxes
(excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of such most
recent audited financial statements (rather than in any notes thereto) and (b)
will not materially exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
the Company and its Subsidiaries in filing their Tax Returns;
(g) neither the Company nor any of its Subsidiaries has
been a "distributing corporation" or a "controlled corporation" within the
meaning of Section 355(a)(1)(A) of the Code;
(h) Company and each of its Subsidiaries has deducted,
withheld and timely paid to the appropriate Governmental Entity all material
Taxes required to be deducted, withheld or paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, member or
other third party, and the Company and each of its Subsidiaries has complied
in all material respects with all reporting and recordkeeping requirements;
and
(i) neither the Company nor any of its Subsidiaries has
participated in any "reportable transaction" within the meaning of Treas. Reg.
Section 1.6011-4 or any "tax shelter" within the meaning of Section 6662 of
the Code.
4.10 EMPLOYEE BENEFIT PLANS.
(a) Section 4.10(a) of the Company Disclosure Schedule
contains a true and complete list of all (i) "employee pension benefit plans"
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (sometimes referred to herein as "PENSION PLANS"),
including any such Pension Plans that are "multiemployer plans" (as such term
is defined in Section 4001(a)(3) of ERISA) (collectively, the "MULTIEMPLOYER
PENSION PLANS"), (ii) "employee welfare benefit plans" (as defined in Section
3(1) of ERISA) and all other material benefit plans, policies, programs,
agreements or arrangements and (iii) other bonus, deferred compensation,
severance pay, pension, profit-sharing, retirement, insurance, stock purchase,
stock option, incentive or equity compensation or other fringe benefit plan,
program, policy, agreement, arrangement or practice (each, a "PLAN")
maintained, or
14
contributed to, by the Company or any of its Subsidiaries or any trade or
business, whether or not incorporated, that, together with the Company would
be deemed a "single employer" within the meaning of Section 4001(b) of ERISA
or Section 414 of the Internal Revenue Code of 1986, as amended (each, an
"ERISA AFFILIATE"), for the benefit of any current or former employees,
officers, consultants or directors of the Company or any of its Subsidiaries,
or with respect to which the Company or any of its Subsidiaries could have any
liability (collectively, the "BENEFIT PLANS"). Except as set forth on Section
4.10(a) of the Company Disclosure Schedule, the Company has delivered or made
available to Newco correct and complete copies (including all amendments) of
(i) each Benefit Plan, (ii) the two most recent annual reports on Form 5500
filed with the Internal Revenue Service with respect to each Benefit Plan (if
any such report was required), (iii) the most recent summary plan description
and summary of material modifications for each Benefit Plan for which such
document is required, (iv) each trust agreement and group annuity contract
relating to any Benefit Plan, (v) the most recent actuarial report or
valuation, to the extent applicable, and (vi) a current Internal Revenue
Service favorable determination letter, to the extent applicable. Section
4.10(a) of the Company Disclosure Schedule lists all Employment Agreements
(other than Employment Agreements with individuals who are paid an annual base
salary of less than $150,000) to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries is bound or
affected.
(b) Except as set forth in Section 4.10(b) of the
Company Disclosure Schedule, (i) each Benefit Plan has been operated in
accordance with its terms and complies with all applicable Laws, except as,
individually and in the aggregate, has not had and would not reasonably be
likely to have a Material Adverse Effect and (ii) all Pension Plans intended
to be qualified plans have been the subject of determination letters from the
Internal Revenue Service to the effect that such Pension Plans are qualified
and exempt from Federal income taxes under Section 401(a) and 501(a),
respectively, of the Code, and no such determination letter has been revoked.
To the knowledge of the Company as of the date hereof, there is no reasonable
basis for the revocation of any such determination letter.
(c) Except as set forth in Section 4.10(c) of the
Company Disclosure Schedule, none of the Benefit Plans is, and none of the
Company, any of its Subsidiaries or any ERISA Affiliate has ever maintained or
had an obligation to contribute to (i) a "single employer plan" (as such term
is defined in Section 4001(a)(15) of ERISA) subject to Section 412 of the Code
or Title IV of ERISA, (ii) a "multiemployer plan (as such term is defined in
section 3(37) of ERISA), (iii) a "multiple employer plan" (as such term is
defined in ERISA), or (iv) a funded welfare benefit plan (as such term is
defined in Section 419 of the Code). Except as set forth in Section 4.10(c) of
the Company Disclosure Schedule, there are no unpaid contributions due prior
to the date hereof with respect to any Benefit Plan that are required to have
been made under the terms of such Benefit Plan, any related insurance contract
or any applicable Law and all contributions due have been timely made. None of
the Company or any of its Subsidiaries has incurred any liability or taken any
action, and the Company does not have any knowledge of any action or event,
that could reasonably be likely to cause any one of them to incur any
liability (i) under Section 412 of the Code or Title IV of ERISA
15
with respect to any single employer plan (as such term is defined in Section
4001(a)(15) of ERISA), (ii) under Title IV of ERISA, including on account of a
partial or complete withdrawal (as such term is defined in Section 4203 and
4205 of ERISA, respectively) with respect to any Multiemployer Pension Plan,
(iii) on account of unpaid contributions to any Multiemployer Pension Plan or
(iv) by reason of Section 4069, 4203 or 4212 of ERISA.
(d) None of the Company, any of its Subsidiaries or any
ERISA Affiliate has engaged in a "prohibited transaction" (as such term is
defined in Section 406 of ERISA and Section 4975 of the Code) or any other
breach of fiduciary responsibility with respect to any Benefit Plan that
reasonably could be expected to subject the Company or any of its Subsidiaries
to any material tax or penalty. Except as set forth in Schedule 4.10(d) of the
Company Disclosure Schedule, with respect to any Benefit Plan: (i) no filing,
application or other matter is pending with the Internal Revenue Service, the
Pension Benefit Guaranty Corporation, the United States Department of Labor or
any other governmental body, and (ii) there is no action, suit, audit,
investigation or claim pending, or to the Company's knowledge, threatened,
other than routine claims for benefits.
(e) Except as set forth in Schedule 4.10(e) of the
Company Disclosure Schedule, none of the Company or any of its Subsidiaries
has any obligation to provide any material health benefits or other
non-pension benefits to retired or other former employees, directors or
consultants except as specifically required by Part 6 of Title I of ERISA
("COBRA").
(f) Except as set forth in Schedule 4.10(f) of the
Company Disclosure Schedule, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby or any
termination of employment or service (or other event or occurrence) in
connection therewith will (i) result in any payment (including severance,
golden parachute, bonus or otherwise) becoming due to, or result in any
forgiveness of indebtedness with respect to, any current or former employee,
director or consultant, (ii) increase any benefits otherwise payable by the
Company or any Subsidiary or (iii) result in the acceleration of the time of
payment or vesting of any such benefits (except as expressly contemplated by
this Agreement).
(g) To the knowledge of the Company, each Benefit Plan
that is a "nonqualified deferred compensation plan" subject to Section 409A of
the Code has been operated in good faith compliance with Section 409A of the
Code and guidance of the Internal Revenue Service provided thereunder. Except
as set forth in Section 4.10(g) of the Company Disclosure Schedule, no amounts
payable (individually or collectively and whether in cash, capital stock of
the Company or other property) under any of the Benefit Plans or any other
contract, agreement or arrangement with respect to which the Company or any
Subsidiary of the Company may have any liability could fail to be deductible
for federal income tax purposes by virtue of Section 404 or Section 280G of
the Code.
16
(h) To the knowledge of the Company, neither the
Company nor any of its ERISA Affiliates has used the services or workers
provided by third party contract labor suppliers, temporary employees, "leased
employees" (as that term is defined in Section 414(n) of the Code), or
individuals who have provided services as independent contractors to an extent
that would reasonably be expected to result in the disqualification of any of
the Benefit Plans or the imposition of penalties or excise taxes with respect
to the Plans by the Internal Revenue Service, the Department of Labor, or the
Pension Benefit Guaranty Corporation.
4.11 LABOR MATTERS.
(a) Except as set forth in Section 4.11(a) of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
is a party to or bound by any collective bargaining agreement and there are no
labor unions or other organizations representing or, to the Company's
knowledge, purporting to represent or attempting to represent any employees of
the Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries is now, or within the last three years has been, the subject of
any union organizing effort, strike, dispute, slowdown, picketing, work
stoppage, concerted refusal to work overtime or similar labor activity; nor,
to the Company's knowledge, has the Company or any of its Subsidiaries been
threatened with any such labor activity within the last three years.
(b) Except as set forth in Section 4.11(b) of the
Company Disclosure Schedule, no labor union has been certified by the National
Labor Relations Board or any state labor board as bargaining agent for any
employees of the Company or any of its Subsidiaries and, to the Company's
knowledge, none of the employees of the Company or any of its Subsidiaries is
the subject of a representation petition before the National Labor Relations
Board or any state labor board.
(c) There are no unfair labor practice charges or
complaints pending before the National Labor Relations Board or, to the
Company's knowledge, otherwise threatened in writing against the Company. To
the Company's knowledge, neither the Company nor any of its Subsidiaries is
engaged in any unfair labor practices. Except as set forth in Section 4.11(c)
of the Company Disclosure Schedule, there is no labor or employment dispute
involving either the Company or any of its Subsidiaries that is currently
subject to any grievance procedure, arbitration or litigation, which,
individually or in the aggregate, has had or and would reasonably be likely to
have a Material Adverse Effect.
(d) Except as set forth in Section 4.11(d) of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
has effectuated a "plant closing" (as defined in the WARN Act) affecting any
site of employment or one or more facilities or operating units within any
site of employment or facility of the Company or any of its Subsidiaries, and
there has not occurred a "mass layoff" (as defined in the WARN Act) affecting
any site of employment or facility of the Company or any of its Subsidiaries
within the last three (3) years. Neither the Company nor any of
17
its Subsidiaries is presently planning to effectuate any such "plant closing"
or "mass layoff."
4.12 ENVIRONMENTAL LAWS AND REGULATIONS. Except as set forth in
Section 4.12 of the Company Disclosure Schedule, (i) the Company and its
Subsidiaries are in compliance with all applicable federal, state and local
Laws relating to protection of human health or the environment (collectively,
"ENVIRONMENTAL LAWS"), except for non-compliance that, individually or in the
aggregate, has not had and would not reasonably be likely to have a Material
Adverse Effect; (ii) there has been no release or threatened release of any
pollutant, contaminant or toxic or hazardous material (including toxic mold),
substance or waste, or petroleum or any fraction thereof, (each a "HAZARDOUS
SUBSTANCE") on, upon, into or from any site currently or, to the knowledge of
the Company, previously owned, leased or otherwise used by the Company, except
for releases that, individually or in the aggregate, have not had and would
not reasonably be likely to have a Material Adverse Effect; (iii) there have
been no Hazardous Substances generated by the Company that have been disposed
of or come to rest at any site that has been included in any U.S. federal,
state or local "superfund" site list or any other similar list of hazardous or
toxic waste sites published by any governmental authority in the United
States; (iv) to the knowledge of the Company, there are no underground storage
tanks located on, no polychlorinated biphenyls ("PCBs") or PCB-containing
equipment used or stored on, and no hazardous waste as defined by the Resource
Conservation and Recovery Act, as amended, stored on, any site owned or
operated by the Company, except for such underground storage tanks,
PCB-containing equipment and storage of hazardous waste in compliance with
Environmental Laws; and (v) the Company has made available to Parent true and
correct copies of all material environmental records, reports, notifications,
certificates of need, permits, pending permit applications, correspondence,
engineering studies, and environmental studies or assessments in the Company's
possession and, with respect to each Subsidiary, prepared since the
acquisition of such Subsidiary.
4.13 INTELLECTUAL PROPERTY.
(a) Section 4.13(a) of the Company Disclosure Schedule
sets forth a true and complete list of all material registered copyrights,
registered Trademarks, (including internet domain name registrations), common
law Trademarks, and patents and all applications to register any of the
foregoing, currently owned by the Company or its Subsidiaries (collectively,
"SCHEDULED INTELLECTUAL PROPERTY"). The entire right, title and interest in
the Scheduled Intellectual Property is solely owned by the Companies or its
Subsidiaries. Each of the registered or applied for Scheduled Intellectual
Property has been duly registered or application filed with the appropriate
authority. All application, renewal or other similar fees for any such
Scheduled Intellectual Property have been properly paid and are current as of
the date of this Agreement, and all such registrations and filings remain in
full force and effect except as, individually or in the aggregate, has not had
and would not reasonably be likely to have a Material Adverse Effect.
(b) Each of the Company and its Subsidiaries owns or
possesses the valid rights to exploit all Intellectual Property exploited in
the operation of
18
their business, free and clear of any Liens, in the manner and for the
purposes that such rights are exploited in their business, except where
failure to so own or possess, individually or in the aggregate, has not had
and would not reasonably be likely to have a Material Adverse Effect.
"INTELLECTUAL PROPERTY" means all rights, titles and interest pertaining to or
deriving from (i) patents, copyrights, technology, know-how, processes, trade
secrets, algorithms, inventions, proprietary data, databases, formulae,
research and development data and computer software or firmware; (ii)
trademarks, trade names, service marks, service names, brands, domain names,
trade dress and logos, and the goodwill and activities associated therewith
("TRADEMARKS"); (iii) rights of privacy and publicity, moral rights,
proprietary rights of any kind or nature and other similar intangible assets;
(iv) any and all registrations, applications, licenses, common-law rights and
contractual obligations relating to any of the foregoing; and (v) all actions,
audits, suits, claims and rights to xxx at law or in equity for any past or
future infringement or other violation of any of the foregoing, including the
right to receive all proceeds and damages therefrom, and all rights to obtain
renewals, continuations, divisions or other extensions of legal protections
pertaining thereto.
(c) Except as disclosed in Section 4.13(c) of the
Company Disclosure Schedule, and except for such claims which, individually or
in the aggregate, have not had and would not reasonably be likely to have a
Material Adverse Effect, there are no actual or, to the knowledge of the
Company, threatened opposition proceedings, cancellation proceedings,
interference proceedings or other similar action challenging the validity,
enforceability, and ownership of any portion of the Scheduled Intellectual
Property. None of the Scheduled Intellectual Property has been previously
adjudged to be invalid or unenforceable in whole or in part except as
disclosed in Section 4.13(c) of the Company Disclosure Schedule.
(d) Except as set forth in Section 4.13(d) of the
Company Disclosure Schedule, and except for such claims which would not have a
Material Adverse Effect, no claims are pending or, to the knowledge of the
Company, threatened that the conduct of the Company's or its Subsidiaries'
respective businesses has or does infringe, misappropriate or otherwise
violate the Intellectual Property of any person. Except as set forth in
Section 4.13(d), to the knowledge of the Company, neither the Company nor any
of its Subsidiaries have received any "invitations to license" or other
communications asserting that the Company or any of its Subsidiaries will be
obligated to take license under third party Intellectual Property rights to
continue to conducting business in the ordinary course.
(e) Except as would not have a Material Adverse Effect,
with respect to the Scheduled Intellectual Property, proprietary product
designs, confidential marketing plans and business methods, proprietary data,
and computer software owned or purported to be owned by the Company or any
Subsidiary (collectively, "OWNED INTELLECTUAL PROPERTY"), the Company or a
Subsidiary is the owner of the entire right, title and interest in and to such
Owned Intellectual Property (except for portions thereof that may consist of
embedded third party products licensed from others) and is entitled to use,
sell, license, transfer, and otherwise exploit such Owned Intellectual
Property in the continued operation of its respective business consistent with
past practice. To the
19
knowledge of the Company, the conduct of the business of the Company and its
Subsidiaries as currently conducted does not infringe upon, misappropriate or
violate any copyrights, trademarks, service marks, trade names, trade secrets
and patents of any third party. Except as set forth in Schedule 4.13(e),
neither the Company nor any Subsidiary has exclusively licensed any Owned
Intellectual Property to any person. To the knowledge of the Company, no
person has engaged in any activity that has infringed upon the Owned
Intellectual Property in any material respect. The Company and its
Subsidiaries take commercially reasonable actions to protect, preserve and
maintain the Owned Intellectual Property and to retain the confidentiality of
and restrict the improper use of confidential information. To the knowledge of
the Company, there has been no unauthorized disclosure of any material trade
secrets or confidential information of the Company.
4.14 COMPLIANCE WITH LAWS AND ORDERS. Except as set forth in
Sections 4.9, 4.10, 4.11 and 4.12 of the Company Disclosure Schedule, neither
the Company nor any of its Subsidiaries is in violation of or in default under
any law, statute, rule or regulation having the effect of law of the United
States or any state, county, city or other political subdivision thereof or of
any government or regulatory authority ("LAWS") or writ, judgment, decree,
injunction or similar order of any governmental or regulatory authority, in
each case, whether preliminary or final, applicable to the Company or any
Subsidiary or any of their respective assets and properties the effect of
which, individually or in the aggregate, has had or would reasonably be likely
to have a Material Adverse Effect. The Company and its Subsidiaries has in
effect from the appropriate Governmental Entity, whether federal, state or
local, all licenses, permits, authorizations, approvals, franchises and rights
("GOVERNMENTAL APPROVALS") that are necessary for the Company or its
Subsidiaries to engage in the business currently conducted by the Company and
its Subsidiaries, except in those instances in which failure to possess
Governmental Approvals, individually or in the aggregate, has not had and
would not reasonably be likely to have a Material Adverse Effect. Except as
set forth in Section 4.14 of the Company Disclosure Schedule, the Company and
its Subsidiaries are not now, and during the last three years have not been,
the subject of any complaint, charge, citation, investigation, audit, suit or
other legal process with respect to any of its employees, or any of the terms
or conditions of their employment, by any federal, state, or local
governmental agency, including the U.S. Department of Labor, the Equal
Employment Opportunity Commission, the Occupational Safety and Health
Administration, Occupational Safety and Health Review Commission, the National
Labor Relations Board, the Office of Federal Contract Compliance or any state
agency comparable to any of the foregoing, except as, individually or in the
aggregate, have not had and would not reasonably be likely to have a Material
Adverse Effect.
4.15 PROPERTY.
(a) The Company or its Subsidiaries has good and valid
title to each parcel of real property owned by the Company or any Subsidiary
(the "OWNED REAL PROPERTY"), in each case free and clear of all mortgages,
pledges, liens, security interests, conditional and installment sale
agreements, encumbrances, charges or other claims of third parties of any
kind, including, without limitation, any easement, right of way or
20
other encumbrance to title, or any option, right of first refusal, or right of
first offer (collectively, "LIENS"), other than Permitted Liens. Section
4.15(a) of the Company Disclosure Schedule lists each parcel of Owned Real
Property.
(b) The Company or one of its Subsidiaries has a valid
leasehold interest and right to the use and occupancy of each parcel of real
property leased or subleased by the Company or any Subsidiary that is
currently used in the conduct of the business of the Company or any of its
Subsidiaries (the "LEASED PROPERTIES"), subject to the terms of the applicable
lease or sublease relating thereto and Permitted Liens. Other than (i) leases
with a remaining term of three (3) months or less and monthly rental payments
less than $5,000 or (ii) month-to-month leases that are terminable by the
Company upon one month's prior notice and monthly rental payments less than
$5,000, Section 4.15(b) of the Company Disclosure Schedule lists each lease in
respect of real property to which the Company or any of its Subsidiaries is a
party as of the date hereof and lists by address each parcel of Leased
Property.
(c) There is not pending, or, to the knowledge of the
Company, threatened, any eminent domain, condemnation or similar proceeding
affecting any Owned Real Property or Leased Property.
4.16 MATERIAL CONTRACTS.
(a) Except as specifically set forth in Section 4.16(a)
of the Company Disclosure Schedule, and except as has not had and would not
reasonably be likely to have, individually or in the aggregate, a Material
Adverse Effect, (i) neither the Company nor any of its Subsidiaries is (and,
to the Company's knowledge, no other party is) in breach of or default under
any Contract, (ii) neither the Company nor any of its Subsidiaries has
received any written notice or claim of default under any Contract or any
written notice of an intention to, and to the knowledge of the Company, no
other party to any Contract intends to terminate, not renew or challenge the
validity or enforceability of any Contract (including as a result of the
execution and performance of this Agreement), (iii) to the Company's
knowledge, no event has occurred that, with or without notice or lapse of time
or both, would result in a breach or a default under any Contract, (iv) each
of the Contracts is in full force and effect, and is the valid, binding and
enforceable obligation of the Company and its Subsidiaries, and to the
Company's knowledge, of the other parties thereto, and (v) the Company and its
Subsidiaries have performed all respective material obligations required to be
performed by them to date under the Contracts and are not (with or without the
lapse of time or the giving of notice, or both) in material breach thereunder.
(b) Section 4.16(b) of the Company Disclosure Schedule
lists the following Contracts to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries or any of their
respective properties or assets are bound or affected as of the date hereof,
complete and correct copies of which Contracts have previously been made
available to Parent, other than such Contracts that the Company has previously
filed with the SEC:
21
(i) any Contract that purports to limit in any
material respect the right of the Company or its Subsidiaries (A) to
engage or compete in any line of business or market, or to sell,
supply or distribute any service or product or (B) to compete with
any person or operate in any location;
(ii) any Contract that (A) contains most
favored customer pricing provisions or (B) grants any exclusive
rights, rights of first refusal, rights of first negotiation or
similar rights to any person;
(iii) any Contract for the acquisition or
disposition, directly or indirectly (by merger or otherwise), of
assets (other than inventory or capital expenditures in the ordinary
course of business) or capital stock or other equity interests of
another person for aggregate consideration in excess of $1,000,000;
(iv) other than Employment Agreements, any
Contract with Affiliates of the Company or any of its Subsidiaries;
(v) all agreements under which the Company or
any Subsidiary has advanced or loaned any funds in excess of
$1,000,000 individually;
(vi) any Contract with the customers or
suppliers listed in Section 4.20 of the Company Disclosure Schedule.
4.17 STATE TAKEOVER STATUTES. The Company has taken all
appropriate actions so that the restrictions on business combinations
contained in Section 203 of the DGCL will not apply with respect to or as a
result of this Agreement and the transactions contemplated hereby, including
the Merger, without any further action on the part of the stockholders or the
Board of Directors. To the knowledge of the Company, no other takeover statute
or similar statute or regulation enacted under state or federal laws in the
United States is applicable to or purports to be applicable to the Merger or
any other transaction contemplated by this Agreement.
4.18 INTERESTED PARTY TRANSACTIONS. Since the date of the filing
of the Company's 2005 annual meeting proxy statement with the SEC, no event
has occurred that would be required to be reported by the Company pursuant to
Item 404 of Regulation S-K promulgated by the SEC except as (i) have been
reported prior to the date hereof or (ii) relate to Contracts that have been
reported pursuant to Item 404 of Regulation S-K prior to the date hereof and
are not materially different in amount than amounts previously reported.
4.19 INSURANCE. The Company maintains in full force and effect
policies of insurance that to the knowledge of the Company are reasonably
adequate with respect to all material properties, assets and business
activities of the Company and each of its Subsidiaries against such
casualties, risks, and contingencies as are customarily insured
22
against by entities owning similar properties or assets or engaged in similar
business activities.
4.20 COMMERCIAL RELATIONSHIPS. Section 4.20 of the Company
Disclosure Schedule sets forth a list of (a) the top ten customers of the
Company and the Company Subsidiaries during the fiscal year ended December 31,
2005, determined on the basis of gross revenues (on a consolidated basis) and
(b) the top ten suppliers from whom the Company and the Company Subsidiaries
purchased goods or services during the fiscal year ended December 31, 2005,
determined on the basis of gross expenditures (on a consolidated basis). Since
September 30, 2005, to the Company's knowledge, there has been no material
adverse change in the business relationship of the Company or any of its
Subsidiaries with any customer or supplier named in Section 4.20 of the
Company Disclosure Schedule.
4.21 BROKERS AND FINDERS. Except for the fees and expenses
payable to Deutsche Bank Securities Inc. ("DEUTSCHE BANK") and Xxxxxx Brothers
Inc. ("XXXXXX"), the Company and its Subsidiaries have not employed any
investment banker, broker, finder, consultant or intermediary in connection
with the transactions contemplated by this Agreement which would be entitled
to any investment banking, brokerage, finder's or similar fee or commission in
connection with this Agreement or the transactions contemplated hereby.
4.22 OPINION OF FINANCIAL ADVISORS. The Company has received the
opinion of Deutsche Bank dated the date of this Agreement and the opinion of
Xxxxxx dated the date of this Agreement, both to the effect that, as of such
date, the cash consideration to be received by the holders of the Shares
pursuant to the Merger is fair to such holders from a financial point of view.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Each of Parent and Newco represent and warrant jointly and severally
to the Company that:
5.1 CORPORATE ORGANIZATION AND QUALIFICATION. Each of Parent and
Newco is duly formed, validly existing and (to the extent the concept of good
standing exists in the applicable jurisdiction) in good standing under the
Laws of its respective jurisdiction of organization and is qualified to do
business and (if applicable) in good standing in each jurisdiction where the
properties owned, leased or operated, or the business conducted by it require
such qualification, except, in each case, where such failure would not
materially delay the consummation of the transactions contemplated hereby.
Each of Parent and its Subsidiaries has all requisite corporate or other power
and authority to own its properties and to carry on its business as it is now
being conducted, except where failure to have such power and authority would
not materially delay the consummation of the transactions contemplated hereby.
Parent and Newco have
23
heretofore made available to the Company complete and correct copies of their
respective by-laws and organizational documents.
5.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Newco has the requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. This
Agreement and the consummation by Parent and Newco of the transactions
contemplated hereby have been duly and validly authorized by the boards of
managers of Parent and the board of directors of Newco and by Parent as sole
stockholder of Newco, and no other corporate proceedings on the part of Parent
and Newco are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Newco and, assuming this
Agreement constitutes the valid and binding agreement of the Company,
constitutes the valid and binding agreement of each of Parent and Newco,
enforceable against each of them in accordance with its terms, except that the
enforcement hereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar Laws now or hereafter in effect
relating to creditors' rights generally and (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity
or at law).
5.3 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by Parent or Newco, the performance by Parent
and Newco of their obligations hereunder, nor the consummation by Parent and
Newco of the transactions contemplated hereby will:
(a) conflict with or result in any breach of any
provision of the charter or the by-laws, respectively, of Parent or Newco;
(b) require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, except (i) in connection with the applicable requirements of the
HSR Act, (ii) pursuant to the applicable requirements of the Exchange Act,
(iii) the filing of the Certificate of Merger pursuant to the DGCL, (iv) as
may be required by any applicable state securities or "blue sky" Laws or state
takeover Laws, or (v) where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not
materially adversely affect the ability of Parent or Newco to consummate the
transactions contemplated hereby;
(c) except as set forth in Section 5.3(d) of the
disclosure schedule delivered by Parent and Newco herewith (the "PARENT
DISCLOSURE SCHEDULE" and, together with the Company Disclosure Schedule, the
"DISCLOSURE Schedules"), result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise
to any right of termination, cancellation or acceleration or lien or other
charge or encumbrance or to loss of a material benefit under, or to material
increased, additional or accelerated costs) under any of the terms, conditions
or provisions of any note, license, agreement or other instrument or
obligation to which Parent or any of its Subsidiaries or any of their assets
may be bound, except for such
24
violations, breaches and defaults (or rights of termination, cancellation or
acceleration or lien or other charge or encumbrance) which would not
materially adversely affect the ability of Parent or Newco to consummate the
transactions contemplated hereby; or
(d) assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in this Section 5.3 are duly
and timely obtained or made, violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Parent or any of its Subsidiaries or
to any of their respective assets, except for violations which would not
materially adversely affect the ability of Parent or Newco to consummate any
of the transactions contemplated hereby.
5.4 PROXY STATEMENT. None of the information supplied by Parent
or Newco in writing for inclusion in the Proxy Statement distributed to the
Company's stockholders in connection with the Merger, including any amendments
or supplements thereto, at the respective times that the Proxy Statement or
any amendments or supplements thereto are (i) filed with the SEC, (ii) mailed
to the Company's stockholders, (iii) at the time of the Stockholders' Meeting
or (iv) at the Effective Time, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading.
5.5 FINANCING. Parent has received commitment letters (the
"FINANCING LETTERS" and the financing to be collectively provided thereunder,
the "FINANCING") addressed to the Parent from (i) Deutsche Bank Securities
Inc., Deutsche Bank AG Cayman Islands Branch and Deutsche Bank Trust Company
Americas, Jefferies Babson Finance LLC and Xxxxxxxxx & Company, Inc.
(collectively, the "LENDERS"), dated as of the date hereof (the financing to
be provided thereunder, the "DEBT FINANCING"), and (ii) Kohlberg Partners V,
L.P., Xxxxxxxx XX Investors V, L.P., Kohlberg Investors V, L.P. and Kohlberg
Offshore Investors V, L.P. (collectively, the "KOHLBERG FUNDS"), dated as of
the date hereof. Subject to the terms and conditions of the Financing Letters,
the Financing is sufficient to consummate the Merger, pay the Merger
Consideration and to pay related fees and expenses. Parent has provided the
Company with complete and correct copies of such Financing Letters. The
Financing Letters have been duly executed by Parent and by all other parties
thereto, are in full force and effect on the date hereof and have not been
withdrawn as of the date hereof and are not, to the knowledge of Parent,
subject to any conditions other than as set forth therein. All commitment and
other fees required to be paid under the Financing Letters prior to the date
hereof have been paid and, as of the date hereof, to the knowledge of Parent,
there is no fact or occurrence existing that would be reasonably expected to
make any of the stated assumptions or conditions or any of the other
statements set forth in the Financing Letters materially inaccurate. As of the
date of this Agreement, Parent has no reason to believe that it will be unable
to satisfy any of the conditions to the Financing Letters or that the funds
for the Financing Letters will not be available on a timely basis for the
transactions contemplated by this Agreement.
5.6 INTERIM OPERATIONS OF NEWCO. Newco was formed solely for the
purpose of engaging in the transactions contemplated hereby and has not
engaged in any
25
business activities or conducted any operations other than in connection with
the transactions contemplated hereby.
5.7 SHARE OWNERSHIP. Except as set forth in Section 5.7 of the
Parent Disclosure Schedule, none of Parent, Newco or any of their respective
"affiliates" or "associates" (as those terms are defined in Rule 12b-2 under
the Exchange Act) beneficially owns any Shares.
5.8 BROKERS AND FINDERS. Parent has not employed any broker,
finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to any brokerage,
finder's or similar fee or commission in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 CONDUCT OF BUSINESS OF THE COMPANY. The Company agrees that
during the period from the date of this Agreement to the Effective Time
(unless Parent shall otherwise agree in writing and except as otherwise
expressly contemplated by this Agreement), the Company will, and will cause
each of its Subsidiaries to, conduct its operations according to its ordinary
and usual course of business consistent with past practice and use reasonable
efforts to preserve intact their respective businesses, properties and assets
and their current business organizations, keep available the service of their
current officers and employees and preserve their relationships with
customers, suppliers and others having business dealings with them. In
addition, without limiting the generality of the foregoing, except as
expressly permitted in this Agreement or as set forth in Section 6.1 of the
Company Disclosure Schedule, prior to the Effective Time, neither the Company
nor any of its Subsidiaries will, without the prior written consent of Parent,
which consent with respect to subsections (g)(i), (h)(ii), (j), (k), (l), (p),
(q) or (r) shall not be unreasonably withheld or delayed:
(a) except for Shares to be issued or delivered
pursuant to options outstanding on the date hereof and listed in Section 4.2
of the Company Disclosure Schedule, issue, grant, deliver, sell, transfer,
dispose of, pledge or otherwise encumber, or authorize the issuance, grant,
delivery, sale, transfer, disposition or pledge or other encumbrance of (i)
any shares of capital stock of any class or any other ownership interest
(including phantom stock) of the Company or any Subsidiary (including the
Shares), or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for any shares of capital stock or any other
ownership interests of the Company or any Subsidiary, or any rights, warrants,
options, calls, commitments or any other agreements of any character to
purchase or acquire any shares of capital stock or any other ownership
interest of the Company or any Subsidiary or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe for,
any shares of capital stock or any other ownership interest of the Company or
any
26
Subsidiary, or (ii) any other securities of the Company or any Subsidiary in
respect of, in lieu of, or in substitution for, Shares outstanding on the date
hereof;
(b) redeem, purchase or otherwise acquire, or propose
to redeem, purchase or otherwise acquire, any outstanding shares of capital
stock or make any change in the number of shares of its capital stock
authorized, issued or outstanding (other than issuances of Shares in
connection with the exercise of options outstanding on the date hereof, or
redemptions or acquisitions of stock required in connection with any Plan, in
each case, as listed in Section 4.2 of the Company Disclosure Schedule);
(c) split, combine, subdivide or reclassify any shares
of capital stock or declare, set aside for payment or pay any dividend, or
make any other actual, constructive or deemed distribution in respect of any
shares of capital stock or otherwise make any payments to stockholders in
their capacity as such, except for dividends by a wholly-owned Subsidiary of
the Company;
(d) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries, other than the
Merger;
(e) adopt any amendments to its certificate of
incorporation or by-laws or comparable governing documents or alter through
merger, liquidation, reorganization, restructuring or in any other fashion the
corporate structure or ownership of any Subsidiary or elect or appoint new
officers or directors;
(f) acquire or agree to acquire by means of merger,
consolidation, or by purchasing a substantial portion of the stock or assets
of, or by any other manner, any business or any corporation, partnership,
joint venture, association or other business organization or division thereof;
(g) (i) authorize, or make any commitment with respect
to any capital expenditure, or acquire any property or asset, other than as
referenced in the Company's annual budget as previously provided to Parent, in
excess of $250,000 individually, but in no event to exceed $1,000,000 in the
aggregate; (ii) enter into any new line of business; or (iii) make investments
in persons other than wholly owned Subsidiaries;
(h) (i) sell or transfer, or mortgage, pledge, lease,
license or otherwise encumber any of its assets, including any Intellectual
Property rights, other than sales or transfers of inventory or equipment in
the ordinary course of business, consistent with past practice or (ii) fail to
pay any fee, take any action or make any filing reasonably necessary to
maintain material Intellectual Property;
(i) other than borrowings in the ordinary course of
business consistent with past practice under the Credit Agreement, repurchase,
repay, cancel or incur any indebtedness for borrowed money in excess of
$100,000 in the aggregate or guarantee any such indebtedness, or make any
loans, advances or capital contributions to,
27
or investments in, any other person other than to the Company or any
wholly-owned Subsidiary of the Company;
(j) pay, discharge, waive, release, assign, settle or
satisfy any claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge,
waiver, release, assignment, settlement or satisfaction, in the ordinary
course of business and consistent in amount and kind with past practice;
(k) pay, discharge, waive, release, assign, settle or
compromise any pending or threatened action, suit, arbitration or other legal,
administrative or other governmental investigation, inquiry or proceeding (i)
in respect of any matter requiring payment by the Company or any of its
Subsidiaries in excess of $250,000 individually or $1,000,000 in the aggregate
or entailing any admission of liability by the Company or any of its
Subsidiaries or any material non-monetary relief against the Company or any of
its Subsidiaries, or (ii) that is brought by any current, former or purported
holder of any securities of the Company or any of its Subsidiaries in its
capacity as such;
(l) other than in the ordinary course of business, in a
manner consistent with past practice and on terms not materially adverse to
the Company and its Subsidiaries taken as a whole, (a) enter into, amend or
modify in any material respect, cancel or consent to the termination of any
material Contract; or (b) materially amend, waive, modify, cancel or consent
to the termination of the Company's or any of its Subsidiary's rights
thereunder;
(m) amend, modify or waive any of the Company's
existing takeover defenses or take any action to render any state takeover
statutes inapplicable to any transaction other than the transactions
contemplated by this Agreement;
(n) make any change in the compensation or benefits
payable to any of its employees, directors or officers other than (i) normal
recurring increases in the ordinary course of business for employees who are
not an officer or director, (ii) pursuant to any Company Benefit Plan or
Employment Agreement existing on the date hereof or (iii) as required pursuant
to any collective bargaining agreement existing on the date hereof;
(o) enter into, adopt or amend any Employment
Agreement, Company Benefit Plan, stock option or restricted stock plan,
severance plan or except in the ordinary course of business make any loan to
any employee;
(p) lay off or otherwise terminate the employment of
any employees within 91 days of the Closing Date for a reason that would
constitute an "employment loss" under the Worker Adjustment and Retraining
Notification Act, or any successor federal law or any applicable state plant
closing, mass layoff or severance pay or notification law or like law (all of
the foregoing, collectively, the "WARN ACT");
(q) except as may be required by applicable Law, make
any Tax election, file any amended Tax Returns or settle or compromise any
material federal,
28
state, local or foreign income Tax liability, make any material change in any
method of Tax accounting, or waive or extend the statute of limitations in
respect of Taxes;
(r) make any material change in its accounting
principles or methods except insofar as may be required by a change in GAAP or
in applicable Law;
(s) enter into, amend in any material respect or waive
any rights under any Contract or transaction (or series of related Contracts
or transactions) with an executive officer or director (or, other than on
arm's-length terms in the ordinary course of business, any person in which
such executive officer or director, or any immediate family member of such
executive officer or director, has over a 10% interest) involving amounts in
excess of $60,000;
(t) except in accordance with Section 6.3(b) or as
otherwise explicitly permitted by this Agreement, (i) take any action that
would reasonably be likely to prevent or materially delay satisfaction of any
condition contained in Section 7.1, 7.2 or 7.3 or the consummation of the
Merger, or (ii) take any action that would have a Material Adverse Effect; or
(u) announce an intention, enter into any contract,
agreement, commitment or arrangement or otherwise undertake to do any of the
foregoing.
29
6.2 ACQUISITION PROPOSALS.
(a) From and after the date of this Agreement, the
Company and its Subsidiaries will not, and will use their reasonable best
efforts to cause their respective officers, directors, employees and
investment bankers, attorneys, financial advisors, accountants or other
advisors, agents or representatives (collectively, "REPRESENTATIVES") retained
by the Company or any of its Subsidiaries to immediately cease and cause to be
terminated any discussions or negotiations with any parties (other than
Parent, Newco and their respective representatives) that may be ongoing with
respect to an Acquisition Proposal. From and after the date of this Agreement,
the Company and its Subsidiaries will not, and will not authorize their
respective officers, directors, employees or Representatives to directly or
indirectly (i) initiate, solicit, propose or knowingly encourage any inquiries
or the making of any Acquisition Proposal or (ii) except as permitted below in
Section 6.2(d) or to inform persons of the existence of the provisions
contained in this Section 6.2, engage in negotiations or discussions with, or
furnish any non-public information or data to, any person relating to, in
connection with or which would reasonably likely lead to an Acquisition
Proposal. The Company shall promptly inform its, and its Subsidiaries',
directors, officers, employees and Representatives of the obligations
undertaken in this Section 6.2. Without limiting the foregoing, it is agreed
that any violation of the restrictions set forth in the preceding sentence by
any of Company's Subsidiaries or any of the Company's or its Subsidiaries'
officers, directors, employees or Representatives shall be a breach of this
Section 6.2 by the Company.
(b) Except as provided in this Section 6.2(b), the
Board of Directors (or any committee thereof) shall not and shall not publicly
propose to (i) withdraw, modify or change in a manner adverse to Parent the
Company Recommendation, (ii) approve, adopt or recommend an Acquisition
Proposal or Superior Proposal or (iii) approve or recommend, or allow the
Company or any of its Subsidiaries to enter into any letter of intent,
memorandum of understanding, agreement in principle, option agreement, joint
venture agreement, acquisition agreement or similar agreement constituting or
relating to, or that is intended to or would be reasonably expected to result
in an Acquisition Proposal (other than any confidentiality agreement as
permitted by paragraph (d) of this Section 6.2) (any action described in
clause (i), (ii) or (iii), a "COMPANY ADVERSE RECOMMENDATION CHANGE").
Notwithstanding the foregoing, prior to the Stockholders' Meeting, in response
to an unsolicited BONA FIDE written Acquisition Proposal, if the Board of
Directors (A) determines in good faith (after consultation with its outside
legal counsel and a financial advisor of nationally recognized reputation)
that such Acquisition Proposal is a Superior Proposal, (B) determines in good
faith (after consultation with its outside legal counsel) based on such
matters as it deems appropriate that the failure to do so would cause it not
to be in compliance with its fiduciary duties under applicable Law and (C) is
not otherwise in violation of this Section 6.2, then the Company may in
connection with such Superior Proposal, make a Company Adverse Recommendation
Change; provided, that the Board of Directors shall not make a Company Adverse
Recommendation Change unless (I) the Company has given Parent three (3)
business days prior written notice of its intention to take such action and
(II) in the case of an action described in clause (ii) or (iii) above, (x) the
Board of Directors shall
30
have considered and negotiated with Parent in good faith regarding proposed
changes to this Agreement proposed in writing by Parent, (y) the Company has
complied in all material respects with its obligations under this Section 6.2
and (z) the Company shall have terminated this Agreement in accordance with
the provisions of Sections 8.4(ii) and 8.6(e) hereof.
(c) The Company shall promptly (and in any event within
48 hours) advise Parent orally and in writing of the Company's receipt of any
request for information or any Acquisition Proposal and the material terms and
conditions of such request or Acquisition Proposal (including the identity of
the person making such request or Acquisition Proposal). The Company shall
keep Parent reasonably informed in all material respects of the status and
details of any such Acquisition Proposal.
(d) Notwithstanding any other provision of this
Agreement, provided that in no event shall this Section 6.2(d) affect or limit
the obligations of the Company and the Board of Directors under Sections
6.2(a), (b) or (c), the Company and the Board of Directors
(i) prior to Stockholders' Meeting, may
participate in discussions or negotiations with or furnish
information to any person in connection with an unsolicited BONA FIDE
written Acquisition Proposal by such person received after the date
hereof, if and only to the extent that prior to taking such action
the Board of Directors (A) determines in good faith (after receiving
the advice of its outside legal counsel and a financial advisor of
nationally recognized reputation) that such Acquisition Proposal
constitutes or could reasonably be expected to result in a Superior
Proposal, which Acquisition Proposal was not, directly or indirectly,
the result of a breach of this Section 6.2 and (B) receives from such
person an executed confidentiality agreement, the terms of which are
substantially similar to and no less favorable to the Company than
those contained in the Confidentiality Agreements; and
(ii) shall be permitted to (A) take and
disclose to the Company's stockholders a position contemplated by
Rule 14e-2(a) under the Exchange Act or make a statement required
under Rule 14a-9 under the Exchange Act and (B) make any disclosure
with respect to an Acquisition Proposal to the Company's stockholders
that is required by applicable Law.
If requested to do so by a third party, the Company may waive the provisions
of any "standstill" agreement between the Company and such person solely to
the extent necessary and for the limited purpose of permitting such person to
submit an unsolicited Acquisition Proposal that the Board of Directors
believes, in its good faith judgment (after consultation with its financial
advisors), is reasonably likely to result in a Superior Proposal.
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(e) For purposes of this Agreement, "ACQUISITION
PROPOSAL" means any inquiry, proposal or offer made by any person other than
Parent, Newco or any affiliate thereof relating to (i) the acquisition of,
other than in the transactions contemplated by this Agreement, (x) the
Company, (y) beneficial ownership (as defined under Section 13(d) of the
Exchange Act) of 25% or more of any class of capital stock of the Company
pursuant to a merger, consolidation or other business combination, sale of
shares of capital stock, tender offer or exchange offer or similar transaction
involving the Company including, without limitation, any single or multistep
transaction or series of related transactions which is structured in good
faith to permit such person to acquire beneficial ownership of 25% or more of
any class of capital stock of the Company or (z) 25% or more of the fair
market value of the assets of the Company and its Subsidiaries taken as a
whole or (ii) any other merger, consolidation, business combination,
recapitalization, reorganization, liquidation, dissolution or other similar
transaction involving the Company or any of its Subsidiaries.
(f) The term "SUPERIOR PROPOSAL" means a bona fide
written Acquisition Proposal (with all of the percentages included in the
definition of Acquisition Proposal increased to 80%) not solicited or
initiated in violation of this Agreement, which the Board of Directors
determines in good faith (after consultation with its financial advisors of
nationally recognized reputation and legal counsel) to be (i) more favorable
(taking into account all the terms and conditions of such proposal and this
Agreement (including any changes to the financial terms of this Agreement
proposed by Parent in response to such offer or otherwise)) to the holders of
Shares (in their capacities as stockholders) from a financial point of view
than the transactions provided for in this Agreement and (ii) reasonably
capable of being completed, taking into account all financial, legal,
regulatory, financing commitments and contingencies and other aspects of such
proposal.
6.3 COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and
conditions herein provided, including the provisions of Section 6.2, each of
the parties hereto shall use all commercially reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, and to assist
and cooperate with the other parties hereto in doing, all things necessary,
proper or advisable under applicable Laws to consummate and make effective as
soon as reasonably practicable the transactions contemplated by this
Agreement, including using its reasonable efforts to obtain all necessary or
appropriate waivers, consents and approvals, to effect all necessary
registrations, filings and submissions (including, but not limited to, (i)
filings under the HSR Act and any other submissions requested by the Federal
Trade Commission or Department of Justice and (ii) such filings, consents,
approvals, orders registrations and declarations as may be required under the
Laws of any country other than the United States in which the Company, Parent
or any of their respective Subsidiaries conducts any business or owns any
assets) and to lift any injunction or other legal bar to the Merger (and, in
such case, to proceed with the Merger as expeditiously as possible), subject,
however, to the requisite votes of the stockholders of the Company, if
applicable. Upon the terms and subject to the conditions hereof, each of the
Parties shall use commercially reasonable efforts to take, or cause to be
taken, all reasonable actions and to do, or cause to be done, all things
necessary to satisfy the other conditions of Closing set forth herein
32
and to cooperate with all reasonable requests made by the other parties.
Without limiting the generality of the foregoing, and notwithstanding anything
in this Agreement to the contrary, the Company shall use commercially
reasonable efforts to obtain all consents, amendments to or waivers from other
parties under the terms of all leases and other agreements between the Company
and such parties required as a result of the transactions contemplated by this
Agreement and obtain all necessary consents, approvals and authorizations as
are required to be obtained under any federal or state Law. The Parties shall
consult regularly with each other in advance and from time to time regarding
the conduct and status of any filings with Governmental Entities. Nothing in
this Agreement shall be deemed to require any party to waive any provision of
this Agreement or any other substantial rights or agree to any substantial
limitation on its operations or to dispose of any significant asset or
collection of assets. Between the date hereof and the Closing, the Company
shall give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (a) the occurrence or non-occurrence of any event or circumstance
the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of such party contained in this Agreement to be
untrue or inaccurate if made at such time and (b) any failure of the Company
or Parent, as the case may be, to comply with or satisfy any of such party's
covenants, conditions or agreements to be complied with or satisfied by it
hereunder; PROVIDED, HOWEVER, that the delivery or non-delivery of any notice
required to be sent pursuant to this Section 6.3 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
6.4 FINANCING. At the sole cost and expense of Parent (including
the Company's reasonable attorneys' and other out-of-pocket fees and
expenses), the Company shall use, and shall cause its Subsidiaries to use,
commercially reasonable efforts to cooperate and assist Parent with respect to
the Financing. The Company agrees to provide, and shall cause its Subsidiaries
and its and their Representatives to provide on a timely basis, all
commercially reasonable cooperation in connection with the arrangement of the
Debt Financing as may be reasonably requested by Parent (PROVIDED, that such
requested cooperation does not unreasonably interfere with the ongoing
operations of the Company and its Subsidiaries), including (i) participation
in meetings, drafting sessions and due diligence sessions led by Parent, (ii)
furnishing Parent and its financing sources with financial and other pertinent
information regarding the Company as may be reasonably requested by Parent,
including without limitation all financial statements and financial data of
the type required by Regulation S-X and Regulation S-K under the Securities
Act as well as of the type and form customarily included in private placements
under Rule 144A of the Securities Act, (iii) assisting Parent and its
financing sources and counsel in the preparation by Parent of (A) an offering
document for any of the Debt Financing and (B) materials for rating agency
presentations, (iv) reasonably cooperating with the marketing efforts of
Parent and its financing sources for any of the Debt Financing, (v) providing
and executing documents as may be reasonably requested by Parent, including a
certificate of the chief financial officer of the Company or any of its
Subsidiaries with respect to solvency matters and assisting Parent in
obtaining comfort letters of the Company's accountants, consents of the
Company's accountants for use of their reports in any materials relating to
the Debt Financing, legal opinions of the Company's counsel and surveys and
title insurance with respect to the Owned Real
33
Property; (vi) assisting in the satisfaction of the conditions set forth in
Exhibit C to the Senior Secured Financing Letter and in Section 3 of Bridge
Financing Letter (in each case to the extent the satisfaction of such
conditions requires actions by or cooperation of the Company or its
Subsidiaries), (vii) making senior officers and representatives of the Company
reasonably available for presentations to ratings agencies, and (viii)
reasonably facilitating the pledge of the Surviving Corporation's collateral;
PROVIDED, that none of the Company or any of its Subsidiaries shall be
required to pay any commitment or other similar fee or incur any other
liability in connection with the Debt Financing prior to the Effective Time.
All non-public or otherwise confidential information regarding the Company
obtained by Parent or its representatives pursuant to this Section 6.4 shall
be kept confidential in accordance with the Confidentiality Agreements;
PROVIDED, that Parent and its Representatives shall be permitted to disclose
information as necessary and consistent with customary practices in connection
with the Debt Financing so long as the parties who receive such information
are informed of the confidential nature of the information or upon the prior
consent of the Company, which consent shall not be unreasonably withheld or
delayed.
6.5 ACCESS TO INFORMATION. Upon reasonable notice, the Company
shall (and shall cause each of its Subsidiaries to) afford to officers,
employees, counsel, accountants and other authorized Representatives of
Parent, in order to evaluate the transactions contemplated by this Agreement,
reasonable access, during normal business hours and upon reasonable notice
throughout the period prior to the Effective Time, to its properties, books
and records and, during such period, shall (and shall cause each of its
Subsidiaries to) furnish promptly to such Representatives all information
concerning its business, properties and personnel as may reasonably be
requested; PROVIDED, HOWEVER, that the Company may restrict the foregoing
access and information to the extent that (i) applicable Laws require the
Company or any of its Subsidiaries to restrict or prohibit access to any such
properties, books, records or information or (ii) the information is subject
to confidentiality obligations to a third party. Parent agrees that it will
not, and will cause its Representatives not to, use any information obtained
pursuant to this Section 6.5 for any competitive or other purpose unrelated to
the consummation of the transactions contemplated by this Agreement. The
Confidentiality Agreement, dated November 7, 2005 (the "XXXXXXXX
CONFIDENTIALITY AGREEMENT"), by and between the Company and Parent, and the
Confidentiality Agreement, dated January 24, 2006 (the "PACKAGING DYNAMICS
CONFIDENTIALITY AGREEMENT", together with the Xxxxxxxx Confidentiality
Agreement, the "CONFIDENTIALITY AGREEMENTS") shall apply with respect to
information furnished by the parties hereunder, their Subsidiaries and their
officers, employees, counsel, accountants and other authorized representatives
hereunder; PROVIDED, that Parent and its Representatives shall be permitted to
disclose information as necessary and consistent with customary practice in
connection with the Debt Financing so long as the parties who receive such
information are informed of the confidential nature of the information or upon
the prior consent of the Company, which consent shall not be unreasonably
withheld or delayed. The parties acknowledge that the Confidentiality
Agreements shall remain in full force and effect until the Closing. No
investigation by Parent shall diminish or obviate any of the representations,
warranties, covenants or agreements of the Company contained in this
Agreement.
34
6.6 PUBLICITY. The parties will consult with each other and will
mutually agree upon any press releases or public announcements pertaining to
the Merger and shall not issue any such press releases or make any such public
announcements prior to such consultation and agreement, except as may be
required by applicable Laws or by obligations pursuant to any listing
agreement with any national securities exchange, in which case the party
proposing to issue such press release or make such public announcement shall
use its reasonable efforts to consult in good faith with the other party
before issuing any such press releases or making any such public
announcements.
6.7 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) From and after the Effective Time, Parent shall,
and shall cause the Surviving Corporation to indemnify, defend and hold
harmless any person who is now, has been at any time prior to the date hereof,
or becomes prior to the Effective Time an officer, director, employee or agent
(the "INDEMNIFIED PARTY") of the Company or its Subsidiaries (i) to the
fullest extent permitted under Delaware Law, to the same extent such persons
are indemnified as of the date of this Agreement by the Company pursuant to
the Company's certificate of incorporation and the Company by-laws and
indemnification agreements, if any, in existence on the date of this Agreement
with any directors and officers of the Company against all losses, claims,
damages, liabilities, costs and expenses (including attorneys' fees and
expenses), judgments, fines, losses, and amounts paid in settlement in
connection with any actual or threatened action, suit, claim, proceeding or
investigation (each a "CLAIM") to the extent that any such Claim is based on,
or arises out of, the fact that such person is or was a director, officer,
employee or agent of the Company or any of its Subsidiaries or is or was
serving at the request of the Company or any of its Subsidiaries as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, and (ii) without limitation to
clause (i), to the fullest extent permitted under Delaware Law, in each case
to the extent that any such Claim pertains to any matter or fact arising,
existing or occurring prior to or at the Effective Time (including to the
extent that any such Claim is based on, or arises out of this Agreement or any
of the transactions contemplated hereby), regardless of whether such Claim is
asserted or claimed prior to, at or after the Effective Time, other than in
each case for Claims judicially determined to involve a wilful breach of this
Agreement. Without limiting the foregoing, in the event any Indemnified Party
becomes involved in any capacity in any Claim, then from and after the
Effective Time, Parent shall, or shall cause the Surviving Corporation to,
advance periodically and promptly upon a request therefor to such Indemnified
Party its legal and other expenses (including the cost of any investigation
and preparation incurred in connection therewith), subject to the provision by
such Indemnified Party of an undertaking to reimburse the amounts so advanced
in the event of a determination by a court of competent jurisdiction that such
Indemnified Party is not entitled thereto.
(b) Parent and the Company agree that all rights to
indemnification and all limitations of liability existing in favor of any
Indemnified Party as provided in the Company's certificate of incorporation
and by-laws and indemnification agreements as in effect as of the date hereof
shall survive the Merger and shall continue in full force and effect, without
any amendment thereto, for a period of six
35
(6) years from the Effective Time; PROVIDED that, in the event any Claim or
Claims are asserted or made within such six-year period, all rights to
indemnification in respect of each such Claim shall continue until disposition
of any and all such Claims; provided further that any determination required
to be made with respect to whether an Indemnified Party's conduct complies
with the standards set forth under applicable Laws, the Company's certificate
of incorporation or by-laws or such agreements, as the case may be, shall be
made by independent legal counsel selected by the Indemnified Party and
reasonably acceptable to Parent; and provided further that nothing in this
Section 6.7 shall impair any rights or obligations of any present or former
directors or officers of the Company;
(c) Parent shall provide for not less than six (6)
years from the Effective Time policies of directors' and officers' liability
insurance and fiduciary liability insurance (the "D&O INSURANCE") that
provides substantially the same coverage containing terms and conditions which
are no less favorable in the aggregate than the Company's policies existing on
the date of this Agreement for the Indemnified Parties and any other
employees, agents or other individuals otherwise covered by such insurance
policies prior to the Effective Time (collectively, the "INSURED PARTIES")
with respect to matters occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement); PROVIDED, that Parent shall not be required to pay an annual
premium for the D&O Insurance in excess of 150% of the last annual premium
paid prior to the date of this Agreement. The provisions of the immediately
preceding sentence shall be deemed to have been satisfied if prepaid policies
have been obtained prior to the Effective Time for purposes of this Section
6.7(c), which policies provide such directors and officers with coverage that
is no less favorable in the aggregate than the Company's policies existing on
the date of this Agreement for an aggregate period of six (6) years with
respect to claims arising from facts or events that occurred on or before the
Effective Time, including, without limitation, in respect of the transactions
contemplated by this Agreement, except as set forth in Section 6.7(a) hereof;
PROVIDED, HOWEVER, that without Parent's prior written consent, Company shall
not pay more than $425,000 to purchase such policy; and PROVIDED, FURTHER,
HOWEVER, that prior to purchasing any such policy, Company shall afford Parent
the opportunity to purchase a substitute policy on terms not materially less
favorable to such directors and officers. If such prepaid policies have been
obtained prior to the Effective Time, Parent shall, and shall cause the
Surviving Corporation to, maintain such policies in full force and effect, and
continue to honor the obligations thereunder.
(d) this Section 6.7 is intended to benefit the Insured
Parties, including the Indemnified Parties, and shall be binding on all
successors and assigns of Parent, Newco, the Company and the Surviving
Corporation. Parent hereby guarantees the payment and performance by the
Surviving Corporation of the indemnification and other obligations pursuant to
this Section 6.7 and the certificate of incorporation and by-laws of the
Surviving Corporation; and
(e) in the event that Parent, the Surviving Corporation
or any of their successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving person of such
consolidation or merger or (ii)
36
transfers or conveys a majority of its properties and assets to any person,
then, and in each such case, proper provision shall be made so that the
successors, assigns and transferees of Parent or the Surviving Corporation or
their respective successors or assigns, as the case may be, assume the
obligations set forth in this Section 6.7.
6.8 EMPLOYEES.
(a) Parent agrees to provide employee benefit plans,
programs, arrangements and policies for the benefit of employees of the
Company and its Subsidiaries (excluding any equity incentive or defined
benefit plans, programs or arrangements) (i) for a period of nine (9) months
following the Effective Time, that in the aggregate are no less favorable to
such employees than the Company Benefit Plans and (ii) for the three (3) month
period immediately thereafter, that in the aggregate are no less favorable to
such employees of the Parent holding comparable positions. All service
credited to each employee by the Company or its affiliates through the
Effective Time shall be recognized by Parent and its affiliates for all
purposes, including for purposes of eligibility to participate and vesting and
benefit accruals under any employee benefit plan provided by Parent or its
affiliates for the benefit of the employees (other than with respect to
benefit accruals under defined benefit plans or to the extent necessary to
avoid the duplication of benefits). Without limiting the foregoing, to the
extent permitted by the applicable plan or plans, Parent shall not treat (and
shall cause its affiliates not to treat) any such employee as a "new" employee
for purposes of any pre-existing condition exclusions, waiting periods,
evidence of insurability requirements or similar provision under any health or
other welfare plan, and will take commercially reasonable efforts to make
appropriate arrangements with its insurance carrier(s), to the extent
applicable to ensure such result, and Parent shall provide (or shall cause its
affiliates to provide) each such employee with credit for any copayments and
deductibles paid prior to the Effective Time in satisfying any applicable
deductible or out-of-pocket requirements under any welfare benefit plans in
which such employees are eligible to participate after the Effective Time, as
if those deductibles or copayments had been paid under the welfare benefit
plans (if different) in which such employees are eligible to participate at
and after the Effective Time.
(b) The Surviving Corporation hereby agrees to honor
(promptly and without modification) and assume the Company's obligations under
employment agreements, employment termination agreements and individual
benefit arrangements set forth in the Company Disclosure Schedule, all as in
effect at the Effective Time. Parent hereby guarantees the payment and
performance by the Surviving Corporation of such obligations pursuant to this
Section 6.7(b).
6.9 CERTAIN ACTIONS AND PROCEEDINGS. Until this Agreement is
terminated in accordance with Article VIII, the parties hereto shall cooperate
and consult with the other parties in the defense of any action, suit or
proceeding instituted against the Company (or any of its directors or
officers) before any court or Governmental Entity or threatened by any
Governmental Entity or any third party, including a Company shareholder, to
restrain, modify or prevent the consummation of the transactions
37
contemplated by this Agreement, or to seek damages or a discovery order in
connection with such transactions.
6.10 DIRECTOR RESIGNATIONS. At the Closing the Company shall
deliver to Parent evidence reasonably satisfactory to Parent of the
resignation of all directors of each Subsidiary of the Company, as specified
by Parent reasonably in advance of the Closing, in each case, effective at the
Effective Time.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER.
The respective obligation of each party to effect the Merger is subject to the
satisfaction, or (to the extent permitted by Law) waiver by Parent and
Company, on or prior to the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have
been adopted and the Merger approved by the stockholders of the Company in
accordance with applicable Laws and the certificate of incorporation and
by-laws of the Company.
(b) NO INJUNCTIONS OR RESTRAINTS. There shall not be in
effect any statute, rule, regulation, executive order, decree, ruling or
injunction or other order of a court or governmental or regulatory agency of
competent jurisdiction directing that the transactions contemplated herein not
be consummated or which prevents or prohibits consummation of the Merger or
any transactions contemplated by this Agreement; PROVIDED, HOWEVER, that prior
to invoking this condition each party shall use its reasonable best efforts to
have any such decree, ruling, injunction or order vacated. (c) GOVERNMENTAL
FILINGS AND CONSENTS. All governmental consents, orders and approvals required
for the consummation of the Merger and the transactions contemplated hereby
shall have been obtained and be in effect at the Effective Time, except where
the failure to obtain any such consent would not, individually or in the
aggregate, reasonably be expected to be material, and the waiting period under
the HSR Act shall have expired or been terminated.
7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND NEWCO. The
obligations of Parent and Newco to effect the Merger are further subject to
the satisfaction, or (to the extent permitted by Law) waiver by Parent and
Newco, on or prior to the Effective Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Other than with
respect to Sections 4.2 (Capitalization), 4.3 (Authority Relative to This
Agreement), 4.17 (State Takeover Statutes), 4.18 (Interested Party
Transactions), 4.21 (Brokers and Finders) and 4.22 (Opinion of Financial
Advisors), the representations and warranties of the Company shall be true and
accurate on and as of the date of this Agreement and on and as of the
Effective Time as if made on and as of such dates (other than those
representations and warranties that address matters only as of a particular
date or only with respect to a
38
specific period of time which need only be true and accurate as of such date
or with respect to such period), except where the failure of such
representations and warranties to be so true and accurate (without giving
effect to any limitation as to "materiality" or "material adverse effect" set
forth therein), individually or in the aggregate, has not had and would not
reasonably be likely to have a Material Adverse Effect. The representations
and warranties of the Company contained in Sections 4.2 (Capitalization) and
4.18 (Interested Party Transactions) shall be true and correct in all respects
on the date hereof and as of the Effective Time as if made on and as of such
dates except where the failure of any such representations and warranties to
be so true and correct, in the aggregate, has not resulted in and would not
reasonably be expected to result in, liability to the Company or to the
Surviving Corporation in excess of $1,000,000. The representations and
warranties of the Company contained in Sections 4.3 (Authority Relative to
This Agreement), 4.17 (State Takeover Statutes), 4.21 (Brokers and Finders)
and 4.22 (Opinion of Financial Advisors), giving effect to all qualifications
and exceptions contained therein relating to materiality or Material Adverse
Effect or any similar standard or qualification, shall be true and correct in
all respects on the date hereof and as of the Effective Time as if made on and
as of such dates.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The
Company shall have performed and complied with in all material respects its
obligations hereunder required to be performed or complied with by it at or
prior to the Effective Time, and Parent shall have received a certificate
signed on behalf of the Company by the chief executive officer and the chief
financial officer, dated as of the Effective Time, to the effect that the
conditions set forth in SECTION 7.2(A) and SECTION 7.2(B) have been satisfied.
(c) CONSENTS. Company shall have obtained the waivers
or consents, which shall remain in full force and effect, and provided the
notices, set forth on Section 7.2(c) of the Company Disclosure Schedule.
(d) MATERIAL ADVERSE EFFECT. Since the date of this
Agreement, there shall have been no event, change, effect, development or
occurrence that, individually or in the aggregate, has had or would reasonably
be likely to have a Material Adverse Effect.
7.3 CONDITIONS TO THE OBLIGATION OF THE COMPANY. The obligation
of the Company to effect the Merger is further subject to the satisfaction, or
(to the extent permitted by Law) waiver by Company, on or prior to the
Effective Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Other than with
respect to Sections 5.2 (Authority Relative to This Agreement) and 5.5
(Financing), the representations and warranties of Parent and Newco shall be
true and accurate on and as of the date of this Agreement and on and as of the
Effective Time as if made on and as of such dates (other than those
representations and warranties that address matters only as of a particular
date or only with respect to a specific period of time which need only be true
and accurate as of such date or with respect to such period), except where the
failure of
39
such representations and warranties to be so true and accurate, individually
or in the aggregate, would not materially adversely affect the ability of
Parent or Newco to consummate the transactions contemplated hereby. The
representations and warranties of Parent and Newco contained in Sections 5.2
(Authority Relative to This Agreement) and 5.5 (Financing), giving effect to
all qualifications and exceptions contained therein relating to materiality or
any similar standard or qualification, shall be true and correct in all
respects on the date hereof and as of the Effective Time as if made on and as
of such dates (other than those representations and warranties that address
matters only as of a particular date or only with respect to a specific period
of time which need only be true and accurate as of such date or with respect
to such period).
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND NEWCO.
Each of Parent and Newco shall have performed and complied with in all
material respects all of the respective obligations hereunder required to be
performed or complied with by Parent or Newco, as the case may be, at or prior
to the Effective Time and the Company shall have received a certificate signed
by two authorized officers of Parent, dated as of the Effective Time, to the
effect that the conditions set forth in SECTION 7.3(A) and SECTION 7.3(B) have
been satisfied.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated, and the Merger may be abandoned, at any time prior to the
Effective Time by the mutual written consent of Parent and the Company.
8.2 TERMINATION BY EITHER PARENT OR THE COMPANY. This Agreement
may be terminated, and the Merger may be abandoned, by Parent or the Company
if (i) the Merger shall not have been consummated by September 30, 2006 (the
"TERMINATION DATE"); PROVIDED, HOWEVER, that the right to terminate this
Agreement under this Section 8.2(i) shall not be available to any party whose
willful breach of a representation, warranty or covenant in this Agreement has
been a principal cause of or resulted in the failure of the Merger to be
consummated on or before such date, (ii) any Governmental Entity shall have
issued an order, decree or ruling or taken any other action (which order,
decree, ruling or other action the parties hereto shall use their commercially
reasonable efforts to lift), in each case permanently restraining, enjoining
or otherwise prohibiting the material transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become
final and nonappealable or (iii) if the Company fails to obtain the required
approval of its stockholders as required by Law; PROVIDED, HOWEVER, that the
right to terminate this Agreement under this Section 8.2(iii) shall not be
available to any party whose willful breach of a representation, warranty or
covenant in this Agreement has been a principal cause of or resulted in the
failure to obtain such approval.
8.3 TERMINATION BY PARENT. This Agreement may be terminated by
Parent, if (i) the Company shall have breached or failed to perform or comply
with any of its representations, warranties, covenants or obligations set
forth in this Agreement,
40
which breach or failure to perform or comply (A) would give rise to the
failure of a condition set forth in Section 7.1 or 7.2 and (B) is not cured,
or is incapable of being cured, by the Company within 30 calendar days
following receipt or written notice of such breach or failure to perform from
Parent or (ii) a Triggering Event shall have occurred. For purposes of this
Agreement, a "TRIGGERING EVENT" shall be deemed to have occurred if: (1) the
Board of Directors or any committee thereof shall for any reason have effected
a Company Adverse Recommendation Change; (2) the Company shall have failed to
include in the Proxy Statement the recommendation of the Board of Directors in
favor of the adoption and approval of this Agreement and the Merger; (3) the
Company shall have failed to call or hold the Company Stockholders' Meeting in
accordance with Section 3.3(a); or (4) the Board of Directors or any committee
thereof shall have failed to publicly reaffirm its recommendation of this
Agreement and the Merger within 10 business days following Parent's request to
do so.
8.4 TERMINATION BY THE COMPANY. This Agreement may be terminated
by the Company, (i) if Parent or Newco shall have breached or failed to
perform or comply with any of their representations, warranties, covenants or
obligations set forth in this Agreement, which breach or failure to perform or
comply (A) would give rise to the failure of a condition set forth in Section
7.1 or 7.3 and (B) is not cured, or is incapable of being cured, by Parent or
Newco within 30 calendar days following receipt or written notice of such
breach or failure to perform from Company or (ii) a Company Adverse
Recommendation Change shall have occurred; PROVIDED, the Company shall have
complied with the provisions and requirements of Sections 6.2(b) and 8.6(e).
8.5 EFFECT OF TERMINATION. In the event of the termination of
this Agreement as provided in ARTICLE VIII written notice thereof shall
forthwith be given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
forthwith become null and void, and there shall be no liability on the part of
Parent, Newco or the Company or their respective affiliates, directors,
officers, employees, stockholders, interest holders, Representatives, agents
or advisors other than, with respect to Parent, Newco and the Company, the
obligations pursuant to SECTION 6.6, SECTION 8.5, SECTION 8.6, ARTICLE IX and
the confidentiality provisions of SECTION 6.5. Nothing contained in this
SECTION 8.5 shall relieve Parent, Newco or the Company from liability for
willful breach of this Agreement or the Confidentiality Agreements.
8.6 CERTAIN PAYMENTS.
(a) Except as otherwise expressly contemplated herein,
whether or not the Merger is consummated, all fees and Expenses incurred in
connection with this Agreement and the transactions contemplated hereby,
including the fees and disbursements of counsel, financial advisors and
accountants, shall be paid by the party incurring such fees and expenses.
"EXPENSES", as used in this Agreement, shall include all expenses (including
all fees and expenses of counsel, accountants, investment bankers, financing
sources, hedging counterparties, experts and consultants to a party hereto and
its Affiliates) incurred by a party or on their behalf (or with respect to
Parent, incurred by Parent's interest holders or financing sources or on their
behalf) in connection with or
41
related to the transactions contemplated hereby, authorization, preparation,
negotiation, execution and performance of this Agreement, the preparation,
printing, filing and mailing of the Proxy Statement, the solicitation of
stockholder approval, financing and all other matters related to the closing
of the Merger.
(b) In the event that this Agreement is terminated by
either Parent or the Company pursuant to Section 8.2(i) or Section 8.2(iii)
and at such time of termination Parent is not in breach in any material
respect of any of its representations, warranties or covenants contained in
this Agreement and (A) prior to such termination, any person publicly
announces an Acquisition Proposal which shall not have been withdrawn prior to
such termination and (B) within 12 months of such termination the Company or
any of its Subsidiaries enters into a definitive agreement with respect to, or
consummates, any Acquisition Proposal, then the Company shall, upon the
earlier to occur of the second business day following execution of such
definitive agreement and the consummation of such Acquisition Proposal, pay
Parent a non-refundable fee equal to $5,000,000 (the "TERMINATION FEE"),
payable by wire transfer in immediately available funds to an account
designated in writing to the Company by Parent.
(c) In the event that this Agreement is terminated by
Parent pursuant to Section 8.3(i) as a result of any intentional breach or
failure to perform by the Company and at such time of termination Parent is
not in breach in any material respect of any of its representations,
warranties or covenants contained in this Agreement and (A) prior to such
termination, any person publicly announces an Acquisition Proposal which shall
not have been withdrawn prior to such termination and (B) within 12 months of
such termination the Company or any of its Subsidiaries enters into a
definitive agreement with respect to, or consummates, any Acquisition
Proposal, then the Company shall, upon the earlier to occur of the second day
following execution of such definitive agreement and the consummation of such
Acquisition Proposal, pay Parent a non-refundable Termination Fee, payable by
wire transfer in immediately available funds to an account designated in
writing to the Company by Parent.
(d) In the event that this Agreement is terminated by
Parent pursuant to Section 8.3(ii), then the Company shall promptly, but in no
event later than two business days after the date of such termination, pay
Parent a non-refundable fee Termination Fee, payable by wire transfer in
immediately available funds to an account designated in writing to the Company
by Parent.
(e) In the event that this Agreement is terminated by
the Company pursuant to Section 8.4(ii), then the Company shall, at the time
of and as a condition to the effectiveness of such termination, pay Parent a
non-refundable Termination Fee, payable by wire transfer in immediately
available funds to an account designated in writing to the Company by Parent.
(f) Notwithstanding anything to the contrary in this
Agreement, Parent's right to receive payment of the Termination Fee pursuant
to Sections 8.6(b), (c), (d) or (e), as the case may be, shall be the
exclusive remedy of Parent and Newco against the Company or any of its
stockholders, partners, members, directors,
42
officers or agents for the loss suffered as a result of the failure of the
Merger to be consummated in accordance with Sections 8.6(b), (c), (d) or (e),
as the case may be, and upon payment of the Termination Fee in accordance with
Sections 8.6(b), (c), (d) or (e), as the case may be, neither the Company nor
any of its stockholders, partners, members, directors, officers or agents, as
the case may be, shall have any further liability or obligation relating to or
arising out of this Agreement or the transactions contemplated by this
Agreement; PROVIDED, however, that nothing in this Section 8.6(f) shall
relieve any Principal Stockholder from its obligations under any Voting
Agreement.
(g) In the event that this Agreement is terminated by
the Company pursuant to Section 8.2(i) and at the time of any such termination
(1) all of the conditions set forth in Article VII have been satisfied or
waived except for conditions that are capable of being satisfied on the date
of termination but, by their terms, cannot be satisfied until the Closing Date
and (2) the Debt Financing has not been consummated due to any condition or
circumstance which has had, or could reasonably be expected to have, a
material adverse effect on the business, assets (tangible or intangible),
financial condition, liabilities or results of operations of Parent since
September 30, 2005, excluding developments or occurrences resulting from
general changes in economic, market (including securities market), regulatory
or political conditions or changes in conditions generally applicable to the
industries and markets in which Parent is involved that do not, in each case,
have a disproportionate effect on Parent as compared to other persons in the
industries and markets in which Parent is involved or resulting from the
execution or announcement of the Merger Agreement or consummation of the
Merger, then Parent shall promptly, but in no event later than two business
days after the date of such termination, pay the Company a non-refundable
Termination Fee, payable by wire transfer in immediately available funds to an
account designated in writing to Parent by the Company. Notwithstanding
anything to the contrary in this Agreement, the Company's right to receive
payment of the Termination Fee pursuant to this Section 8.6(g) shall be the
exclusive remedy of the Company and its Subsidiaries against Parent and Newco
or any of their respective stockholders, partners, members, directors,
officers or agents for the loss suffered as a result of the failure of the
Merger to be consummated in accordance with this Section 8.6(g), and upon
payment of the Termination Fee in accordance with this Section 8.6(g), neither
Parent nor Newco, nor any of their respective stockholders, partners, members,
directors, officers or agents, as the case may be, shall have any further
liability or obligation relating to or arising out of this Agreement or the
transactions contemplated by this Agreement.
8.7 EXTENSION; WAIVER. At any time prior to the Effective Time,
each of Parent, Newco and the Company may (to the extent permitted by Law) (i)
extend the time for the performance of any of the obligations or other acts of
the other parties, (ii) waive any inaccuracies in the representations and
warranties of the other parties contained herein or in any document,
certificate or writing delivered pursuant hereto or (iii) waive compliance by
the other parties with any of the agreements or conditions contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in any instrument in writing signed on behalf
of such party. The failure of a party hereto to assert any of its rights
hereunder shall not constitute a waiver of such rights.
43
8.8 LIMITATION OF LIABILITY. Notwithstanding anything to the
contrary in this Agreement, none of the stockholders, partners, members,
directors, officers, affiliates or agents of Parent or Newco shall have any
liability or obligation relating to or arising out of this Agreement or the
transactions contemplated by this Agreement.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 PAYMENT OF EXPENSES. Whether or not the Merger shall be
consummated, each party hereto shall pay its own expenses incident to
preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby.
9.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; SURVIVAL OF
CONFIDENTIALITY. The representations and warranties made herein shall not
survive beyond the Effective Time. This Section 9.2 shall not limit any
covenant or agreement of the parties hereto which by its terms contemplates
performance after the Effective Time. The Confidentiality Agreements shall
survive any termination of this Agreement, and the provisions of such
Confidentiality Agreements shall apply to all information and material
delivered by any party hereunder.
9.3 MODIFICATION OR AMENDMENT. Subject to the applicable
provisions of the DGCL, at any time prior to the Effective Time, the parties
hereto may modify or amend this Agreement by written agreement executed and
delivered by duly authorized officers of the respective parties; PROVIDED,
HOWEVER, that after approval of this Agreement by the stockholders of the
Company, no amendment shall be made which changes the consideration payable in
the Merger, adversely affects the rights of the Company's stockholders
hereunder or is otherwise required under any applicable Laws to be approved by
such stockholders without the approval of such stockholders.
9.4 WAIVER OF CONDITIONS. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party
and may be waived by such party in whole or in part to the extent permitted by
applicable Laws.
9.5 COUNTERPARTS. For the convenience of the parties hereto,
this Agreement may be executed manually or by facsimile in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
9.7 JURISDICTION. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated by this
Agreement may be brought against any of the parties in any federal court
located in the State of Delaware or any other competent court
44
of the State of Delaware, and each of the parties hereto hereby consents to
the exclusive jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and waives any
objections to venue laid therein. Process in any suit, action or proceeding
may be served on any party anywhere in the world, whether within or without
the State of Delaware. Without limiting the generality of the foregoing, each
party hereto agrees that service of process upon such party at the address
referred to in Section 9.8, together with written notice of such service to
such party, shall be deemed effective service of process upon such party.
9.8 NOTICES. Any notice, request, instruction or other document
to be given hereunder by any party to the other parties shall be in writing
and delivered personally or sent by registered or certified mail, postage
prepaid, by overnight delivery service or by facsimile transmission (with a
confirming copy sent by overnight delivery service), as follows:
(a) If to the Company, to
Packaging Dynamics Corporation
0000 Xxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
(000) 000-0000 (telephone)
(000) 000-0000 (facsimile)
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx
Attention: Xxxxxxx X. Xxxxxx
(000) 000-0000 (telephone)
(000) 000-0000 (facsimile)
(b) If to Parent or Newco, to
Xxxxxxxx, L.L.C.
000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
(000) 000-0000 (telephone)
(000) 000-0000 (facsimile)
45
with a copy to:
Ropes & Xxxx LLP
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
(000) 000-0000 (telephone)
(000) 000-0000 (facsimile)
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
9.9 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement and the
Confidentiality Agreements (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all other
prior agreements and understandings, both written and oral, among the parties
or any of them with respect to the subject matter hereof; PROVIDED, that if
any term of the Confidentiality Agreements shall conflict with the terms of
this Agreement, this Agreement shall control, and (b) shall not be assigned by
operation of law or otherwise, except that Parent and Newco may assign any or
all of their respective rights and obligations hereunder to any affiliate of
Parent or Newco, PROVIDED, HOWEVER, that no such assignment shall relieve the
assigning party of its obligations hereunder if such assignee does not perform
such obligations.
9.10 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement;
PROVIDED, HOWEVER, that the provisions of Section 6.7 shall inure to the
benefit of and be enforceable by the Insured Parties, including the
Indemnified Parties.
9.11 CERTAIN DEFINITIONS. As used herein:
(a) "ACTION" means any claim, action, cause of action
or suit (whether in contract or tort or otherwise), litigation (whether at law
or in equity, whether civil or criminal), controversy, assessment,
arbitration, investigation, hearing, charge, complaint, demand, notice or
proceeding to, from, by or before any Governmental Entity.
(b) "CODE" means the United States Internal Revenue
Code of 1986, as amended.
(c) "COMPANY BENEFIT PLAN" means any employee benefit
plans, programs, arrangements, funds, policies, practices, or contracts and
employment agreements with respect to which, through which, or under which (1)
the Company has any liability to provide benefits or compensation to or on
behalf of employees, former employees, or independent contractors of the
Company, whether formal or informal, whether or not written, including but not
limited to any employee benefit plan (within the
46
meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), any multiemployer plan (as defined in Section
3(37) and Section 4001(a)(3) of ERISA), stock purchase, stock option,
severance, employment, change in control, fringe benefit, collective
bargaining, bonus, incentive, and deferred compensation arrangement, or (2)
the Company or any Subsidiary has or is reasonably expected to have any
liability (direct or indirect, contingent or otherwise).
(d) "CONTRACTS" means all legally binding written or
oral contracts, agreements, licenses, leases, purchase agreements, indentures,
mortgages, instruments of indebtedness, security agreements, guaranties,
purchase orders, sales orders, distribution agreements, and rights under any
of the foregoing.
(e) "EMPLOYMENT AGREEMENT" means any written or oral
contract of employment, termination or severance agreement, change of control
agreement, retention agreement, deferred compensation agreement, agreement
with respect to bonus, commissions or other incentive compensation, agreement
with respect to confidentiality, non-competition, non-solicitation of
customers, clients or employees, and/or assignment of rights to intellectual
property, collective bargaining agreement or other memorandum, letter
agreement, side letter or memorandum of understanding with a union or labor
organization, or any other agreement respecting any terms and/or conditions of
employment or payment of compensation in respect of any current or former
officer or employee or any agreement with a consultant or independent
contractor.
(f) "GOVERNMENTAL ENTITY" means any Federal, state,
local or foreign government, any court, administrative, regulatory or other
governmental agency, commission or authority or any organized securities
exchange.
(g) "INVESTMENT" means, with respect to any person, any
corporation, association, general or limited partnership, company, limited
liability company, trust, joint venture, organization or other entity in which
such person owns, directly or indirectly, an equity or similar interest, or an
interest convertible into or exchangeable or exercisable for an equity or
similar interest, of less than 50%.
(h) "MATERIAL ADVERSE EFFECT" means any event, change,
effect, development or occurrence that either individually or in the
aggregate, when taken together with all other events, changes, effects,
developments or occurrences (i) is or is reasonably likely to be materially
adverse to the business, assets (tangible or intangible) financial condition,
liabilities or results of operations of the Company or any of its Subsidiaries
which is material to the Company and its Subsidiaries, taken as a whole, or
(ii) is or is reasonably expected to materially and adversely affect the
ability of the Company to consummate the Merger or prevent or delay the
consummation of the Merger; excluding, in either case, any events, changes,
effects, developments or occurrences resulting from general changes in
economic, market (including securities market), regulatory or political
conditions or changes in conditions generally applicable to the industries and
markets in which the Company and its Subsidiaries are involved that do not, in
each case, have a disproportionate effect on the Company and its Subsidiaries,
taken as a whole, as compared to other persons in the industries and markets
in which the
47
Company and its Subsidiaries are involved or resulting from the execution or
announcement of this Agreement or consummation of the Merger.
(i) "PERMITTED LIENS" means (a) Liens for current
Taxes, including real estate Taxes, assessments and other governmental levies,
fees, or charges that are (i) not due and payable as of the Closing Date or
(ii) being contested in good faith by appropriate proceedings, and the
Companies or the Subsidiaries, as applicable, have set aside adequate reserves
in accordance with GAAP; (b) inchoate mechanics' and materialmen's Liens for
construction in progress (c) workmen's, repairmen's, warehousemen's, carriers'
Liens and other similar Liens for labor, materials, or supplies incurred in
the ordinary course of business for amounts that are (i) not delinquent and
would not, individually and in the aggregate, have not had and would not
reasonably be likely to have a Material Adverse Effect or (ii) being contested
in good faith by appropriate proceedings, and the Companies or the
Subsidiaries, as applicable, have set aside adequate reserves in accordance
with GAAP; (d) zoning, building codes, and other land use laws regulating the
use or occupancy of Owned Real Property or the activities conducted thereon
that are imposed by any governmental authority having jurisdiction over such
Owned Real Property that do not, individually or in the aggregate, materially
interfere with the ordinary course of business conducted on such property; (e)
easements, covenants, conditions, restrictions, and other similar matters
affecting title to Owned Real Property and other title defects that do not and
could not materially impair the use or occupancy of Owned Real Property in the
operation of the business of the Companies and their Subsidiaries, (f) the
Liens set forth on Section 9.11(i) of the Company Disclosure Schedule and (g)
all Liens and other imperfections of title (including matters of record) and
encumbrances that do not materially interfere with the conduct of the business
of the Company and the Subsidiaries, taken as a whole.
(j) "SUBSIDIARY" means, when used with reference to any
person, any entity of which (i) securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions are at any time directly or indirectly
owned by such person or (ii) such person or any other Subsidiary of such
Person is a general partner (including any such partnership where such person
or any Subsidiary of such person does not have a majority of the voting
interest in such partnership).
(k) "TAX" means (i) any and all federal, state, local,
or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental,
customs duties, capital stock, franchise, profits, withholding, social
security (or similar, including FICA), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind or any
charge of any kind in the nature of (or similar to) taxes whatsoever,
including any interest, penalty, or addition thereto, and (ii) any liability
for the payment of any amounts of the type described in clause (i) of this
definition as a result of being a member of an affiliated, consolidated,
combined or unitary group for any period, as a result of any tax sharing or
tax allocation agreement, arrangement or understanding, or as a result of
48
being liable for another person's taxes as a transferee or successor, by
contract or otherwise.
(l) "TAX RETURN" means any return, declaration, report,
claim for refund or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
9.12 DISCLOSURE SCHEDULES. The Disclosure Schedules shall be
construed with and as an integral part of this Agreement to the same extent as
if the same has been set forth verbatim herein. Any matter disclosed pursuant
to the Disclosure Schedules shall be deemed to be disclosed for purposes of
the corresponding section of this Agreement, but such disclosure shall not be
deemed to be an admission or representation as to the materiality of the item
so disclosed.
9.13 OBLIGATION OF PARENT. Whenever this Agreement requires Newco
to take any action, such requirement shall be deemed to include an undertaking
on the part of Parent to cause Newco to take such action and a guarantee of
the payment and performance thereof.
9.14 VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, each of which shall remain in full
force and effect.
9.15 CAPTIONS. The article, section and paragraph captions herein
are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers as of the date first
above written.
PACKAGING DYNAMICS CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman and Chief Executive
Officer
XXXXXXXX, L.L.C.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
KHTP ACQUISITION, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
EXHIBIT A
PRINCIPAL STOCKHOLDERS
Packaging Investors, L.P.
51
EXHIBIT B
FORM OF VOTING AGREEMENT
[SEE ATTACHED.]
52
