Exhibit 4.2
ASSET PURCHASE AGREEMENT
BY AND AMONG
EMPAQUES DE CARTON TITAN, S.A. DE C.V.,
CORPORACION DURANGO, S.A. DE C.V.,
AND
EMPAQUES MOLDEADOS DE AMERICA TECNOLOGIAS, S.R.L. de C.V.
--------------------------------------------------------------------------------
Dated as of February 3, 2003
TABLE OF CONTENTS
ARTICLE I DEFINITIONS ........................................................1
Section 1.1. Certain Defined Terms...............................14
Section 1.2. Certain Rules of Construction.......................14
ARTICLE II PURCHASE AND SALE.................................................14
Section 2.1. Purchase and Sale...................................14
Section 2.2. Assumed Liabilities.................................15
Section 2.3. Excluded Liabilities................................16
Section 2.4. Purchase Price......................................16
Section 2.5. The Closing.........................................16
Section 2.6. Closing Deliveries by the Seller....................16
Section 2.7. Closing Deliveries by the Buyer.....................16
Section 2.8. Working Capital Adjustment..........................17
Section 2.9. EBITDA Adjustment...................................19
Section 2.10. Release of Holdback Amount..........................20
Section 2.11. Allocation of Purchase Price........................22
Section 2.12. Taxes...............................................23
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER ....................24
Section 3.1. Organization; Power ................................24
Section 3.2. Authorization, Effect of Agreement .................24
Section 3.3. Subsidiaries and Equity Interests ..................24
Section 3.4. Consents ...........................................24
Section 3.5. No Violations ......................................24
Section 3.6. Financial Statements ...............................25
Section 3.7. Conduct in the Ordinary Course; Absence of
Certain Changes, Events and Conditions..............25
Section 3.8. No Undisclosed Liabilities .........................27
Section 3.9. Title to and Sufficiency and Condition of Assets....27
Section 3.10. Permits.............................................27
Section 3.11. Real Property ......................................28
Section 3.12. Compliance with Laws ...............................29
Section 3.13. Contracts .................................. .......29
Section 3.14. Intellectual Property ....................... ......30
Section 3.15. Litigation..........................................31
Section 3.16. Employee Benefit Plans .............................31
Section 3.17. Tax Matters.........................................32
Section 3.18. Environmental Matters ..............................33
Section 3.19. Labor Matters.......................................33
Section 3.20. Receivables.........................................34
Section 3.21. Inventories.........................................34
Section 3.22. Prepaid Expenses ...................................34
Section 3.23. Accounts Payable ...................................35
Section 3.24. Certain Related Party Interests ....................35
Section 3.25. Brokers ............................................35
Section 3.26. Ethical Conduct ....................................35
Section 3.27. Accuracy of Disclosure .............................36
Section 3.28. Solvency of the Seller..............................36
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER ......................36
Section 4.1. Organization; Power.................................36
Section 4.2. Authorization; Effect of Agreement..................36
Section 4.3. Consents............................................37
Section 4.4. No Violations.......................................37
Section 4.5. Litigation..........................................37
Section 4.6. Availability of Funds...............................37
Section 4.7. Brokers.............................................38
ARTICLE V COVENANTS OF THE SELLER............................................38
Section 5.1. Action by the Seller................................38
Section 5.2. Conduct of the Business.............................38
Section 5.3. Access..............................................39
Section 5.4. Publicity...........................................39
Section 5.5. Notice of Certain Events............................39
Section 5.6. Exclusivity.........................................39
Section 5.7 Use of Proceeds ....................................40
ARTICLE VI COVENANTS OF THE BUYER ...........................................40
Section 6.1. Action by the Buyer.................................40
Section 6.2. Publicity ..........................................40
Section 6.3. Confidentiality ....................................40
Section 6.4. Financing ..........................................41
Section 6.5. Notice of Certain Events ...........................41
ARTICLE VII ADDITIONAL COVENANTS.............................................41
Section 7.1. Further Assurances .................................41
Section 7.2. Permits ............................................41
Section 7.3. Books and Records ..................................42
Section 7.4. Insurance ..........................................42
Section 7.5. Payments from Third Parties.........................42
Section 7.6. Substitution Labor Activities.......................42
Section 7.7. Notification of Customers...........................42
Section 7.8. Assignment of Iberdrola Agreement ..................43
Section 7.9. Water Connection....................................43
Section 7.10. Cooperation in Tax Matters..........................44
ARTICLE VIII CONDITIONS TO THE BUYER'S OBLIGATIONS ..........................45
Section 8.1. Representations and Warranties; Performance.........45
Section 8.2. Consents ...........................................45
Section 8.3. Seller's Closing Certificates ......................45
Section 8.4. Antitrust ..........................................45
Section 8.5. Absence of Certain Proceedings .....................45
Section 8.6. Financing ..........................................45
Section 8.7. Opinion of Counsel .................................45
Section 8.8. Transition Services Agreement ......................46
Section 8.9. Monterrey Facility Lease............................46
Section 8.10. Financial Certificate ..............................46
Section 8.11. Noncompete and Nonsolicitalion Agreement ...........46
Section 8.12. Sales Invoice ......................................46
Section 8.13. Mexican Peso Devaluation ...........................46
Section 8.14. Solvency Certificate ...............................47
Section 8.15. Xxxxxxxx 420 Lease..................................47
ARTICLE IX CONDITIONS TO THE SELLER'S OBLIGATIONS ...........................47
Section 9.1. Representations and Warranties; Performance ........47
Section 9.2. Consents ...........................................47
Section 9.3. Absence of Certain Proceedings .....................47
Section 9.4. Buyer's Closing Certificate ........................47
Section 9.5. Antitrust ..........................................48
Section 9.6. Releases ...........................................48
Section 9.7. Intentionally Omitted ..............................48
Section 9.8. Opinion of Counsel .................................48
Section 9.9. Mexican Peso Valuation .............................48
ARTICLE X EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS ....................48
Section 10.1. Transferred Employees ..............................48
Section 10.2. Collective Bargaining Agreements....................48
Section 10.3. Employee Benefit Plans..............................49
Section 10.4. Former Employees ...................................50
Section 10.5. Seller's Obligation to Transferred Employees .......50
Section 10.6. Seller's Retained Obligations ......................50
ARTICLE XI TERMINATION .....................................................51
Section 11.l. Termination and Abandonment ........................51
Section 11.2. Effect of Termination ..............................51
ARTICLE XII SURVIVAL AND INDEMNIFICATION ....................................51
Section 12.1. Survival ...........................................51
Section 12.2. Indemnification by the Seller and Durango ..........52
Section 12.3. Indemnification by the Buyer .......................53
Section 12.4. Procedure for Indemnification ......................53
Section 12.5. Payment ............................................54
Section 12.6. Adjustment Amounts..................................55
Section 12.7. Limitations on Indemnification .....................55
Section 12.8. Exclusivity.........................................56
Section 12.9. Tax Treatment.......................................56
ARTICLE XIII MISCELLANEOUS...................................................56
Section 13.1. Fees and Expenses...................................56
Section 13.2. Amendments..........................................56
Section 13.3 Entire Agreement....................................56
Section 13.4 Assignment, Binding Effect; Benefit.................57
Section 13.5. Headings ...........................................57
Section 13.6. Notices.............................................57
Section 13.7. Governing Law; Arbitration .........................59
Section 13.8. Currency ...........................................60
Section 13.9. Counterparts........................................61
Section 13.10. Schedules ..........................................61
Section 13.11. Severability........................................61
SCHEDULES
Schedule 2.1 (a)(i) Tangible Personal Property
Schedule 2.1 (a)(iv) Business Intellectual Property
Schedule 2.1 (a)(vi) Assigned Permits
Schedule 2.1 (a)(vii) Assigned Contracts
Schedule 2.1 (a)(vii)(A) Real Property Leases
Schedule 2.1 (a)(vii)(B) Personal Property Leases
Schedule 2.1 (b)(i) Owned Real Property
Schedule 2.4 Calculation of Estimated Seller Straddle Taxes
and Estimated Buyer Straddle Taxes
Schedule 2.8 Closing Statement
Schedule 2.11 Purchase Price Allocation
Schedule 3.4 Seller's Consents
Schedule 3.5 No Violations
Schedule 3.6 Financial Statements
Schedule 3.7(b)(ii) Material Contracts Other Than Ordinary Course
Schedule 3.7(b)(iv) Capital Expenditures Other Than Ordinary Course
Schedule 3.7(b)(v) Purchases Other Than Ordinary Course
Schedule 3.7(b)(vi) Transfers of Property Other Than Ordinary Course
Schedule 3.7(b)(vii)(A) Increases in Wages
Schedule 3.7(b)(vii)(B) Required and Ordinary Course Increases in Wages
Schedule 3.7(b)(ix) Changes to Material Contracts
Schedule 3.9 Title to and Sufficiency and Condition of Asstes
Schedule 3.10 Permits
Schedule 3.11(a) Owned Real Property
Schedule 3.1l(b) Owned Real Property (Agreements, etc.)
Schedule 3.1l(c) Real Property Leases (Exceptions)
Schedule 3.12 Compliance with Laws
Schedule 3.13(a) Material Contracts
Schedule 3.13(b) Material Contracts (Enforceability)
Schedule 3.13(c) Assigned Contracts (Breach/Default)
Schedule 3.14(a) Business Intellectual Property
Schedule 3.14(b) Business Intellectual Property (Exceptions)
Schedule 3.15 Litigation
Schedule 3.16(a) Employee Benefit Plans
Schedule 3.16(e) Former Employees and Pension Obligations
Schedule 3.17(a) Tax Matters
Schedule 3.17(d) Straddle Taxes
Schedule 3.17(e) Transfer Taxes
Schedule 3.18 Environmental Matters
Schedule 3.19(a) Labor Matters
Schedule 3.19(b) Active and Inactive Employees
Schedule 3.20 Receivables
Schedule 3.21 Inventory
Schedule 3.22 Prepaid Expenses
Schedule 3.23 Accounts Payable
Schedule 3.24(a) Certain Related Party Interests
Schedule 3.24(b) Interdivision and Intercompany Transactions
Schedule 4.3 Buyer's Consents
Schedule 5.2 Conduct of Business
Schedule 7.2 Permit Consents
Schedule 9.5 Releases
Schedule 10.4 Former Employee Benefits
EXHIBITS
Exhibit A Procedures for Calculation of EBITDA
Exhibit B Form of Review Letter of PWC
Exhibit C Review Letter of PWC
Exhibit D Form of Opinion of White & Case, S.C.
Exhibit E Form of Opinion of Xxxxxxx Xxxxxxxx
Exhibit F Form of Opinion of White & Case LLP
Exhibit G Form of Transition Services Agreement
Exhibit H Form of Monterrey Facility Lease
Exhibit I Form of Noncompete and Nonsolicitation Agreement
Exhibit J Form of Seller's Notice Regarding Repricing
Exhibit K Form of Solvency Letter
Exhibit L Intentionally Omitted
Exhibit M Form of Opinion of Xxxxx, Xxxxxxxx Xxxxxxx
Exhibit N Form of Opinion of Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Exhibit 0 Form of Buyer's Notice Regarding Repricing
Exhibit P-1 Form of Notice to SINTIPEC regarding the Titan
Guadalajara Mill
Exhibit P-2 Form of Notice to SINTIPEC regarding the Titan
Xxxxxxxxxx Mill
Exhibit P-3 Form of Notice to SINTIPEC regarding the Titan
Apodaca Mill and the Titan
Monterrey Mill
Exhibit P-4 Form of Notice to Transferred Employees
Exhibit Q-1 Form of Assignment Notice (English version)
Exhibit Q-2 Form of Assignment Notice (Spanish version)
Exhibit Q-3 Form of Confirmation Notice (English version)
Exhibit Q-4 Form of Confirmation Notice (Spanish version)
Exhibit Q-5 Alternative Form of Confirmation Notice (Spanish version)
Exhibit Q-6 Alternative Form of Confirmation Notice (Spanish version)
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of February 3, 2003 (this
"Agreement"), by and among Empaques de Carton Titan, S.A. de C.V., a sociedad
anonima de capital variable organized under the laws of the United Mexican
States (the "Seller"), Corporacion Durango, S.A. de C.V., a sociedad anonima de
capital variable organized under the laws of the United Mexican States
("Durango"), and Empaques Moldeados de America Tecnologias, S.R.L. de C.V., a
sociedad de responsibilidad limitada de capital variable organized under the
laws of the United Mexican States (the "Buyer"). The Buyer, the Seller and
Durango are referred to collectively herein as the "Parties."
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Seller operates four facilities known as the Titan
Apodaca Mill, the Titan Guadalajara Mill, the Titan Xxxxxxxxxx Mill and the
Titan Monterrey Mill (the "Facilities") which produce molded pulp egg cartons
and egg trays (the "Business"); and
WHEREAS, Durango owns capital stock of the Seller representing 99.99%
of the shares of outstanding capital stock of the Seller;
WHEREAS, it is a condition to the Buyer's execution and delivery of
this Agreement that Durango agree to the indemnification obligations of Durango
set forth in Article XII;
WHEREAS, upon the terms and subject to the conditions contained in
this Agreement, the Seller desires to sell to the Buyer and the Buyer desires to
purchase from the Seller all of the assets required to operate the Business at
the Facilities;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained in this Agreement, the Parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"Acquired Assets" shall have the meaning set forth in Section 2.1(b).
"Action" shall mean any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority or
arbitrator.
"Active Employee" shall mean any Business Employee (a) whose principal
place of employment is at any of the Facilities (or is otherwise principally
engaged in the operation of the Business on the date hereof) and (b) who is
actively at work on the Closing Date; provided further that any Business
Employee whose principal place of employment is at any of the Facilities (or is
otherwise principally engaged in the operation of the Business on the date
hereof)
who is not actively at work on the Closing Date due to a short-term absence
(including due to vacation, holiday, illness or injury of shorter duration than
a long-term disability, jury duty or death leave) in accordance with applicable
policies of the Seller shall be deemed an Active Employee.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person. A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such other Person, whether through the ownership
of voting securities, by contract or otherwise.
"Agreement" shall have the meaning set forth in the Preamble.
"Assessed Acquired Assets" shall have the meaning set forth in Section
2.1(a).
"Assessed Acquired Asset Purchase Price" shall mean (i) the Initial
Amount, plus (ii) the U.S. Dollar Equivalent as of the date preceding the
Closing Date of the Closing Accounts Payable set forth in the Financial
Certificate, less (iii) the Exempt Acquired Asset Purchase Price.
"Assigned Contracts" shall have the meaning set forth in Section
2.1(a)(vii).
"Assigned Permits" shall have the meaning set forth in Section
2.1(a)(vi).
"Assumed Liabilities" shall have the meaning set forth in Section 2.2.
"Average Exchange Rate" shall mean, as of any date, the average of the
exchange rates published by the Banco de Mexico in the Diario Oficial de la
Federacion for the close of business on any consecutive five days on which such
exchange rates are published ending on such date.
"Banorte VAT Loan Amount" shall mean an amount equal to the lesser of
(a) US$3,100,000, and (b) an amount equal to 0.42 multiplied by the VAT
Assessment.
"Books and Records" shall have the meaning set forth in Section
2.1(a)(v).
"Business" shall have the meaning set forth in the Recitals.
"Business Day" shall mean any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by law to be closed in New
York, New York or Mexico City, D.F.
"Business Employees" shall mean all current employees (including those
on layoff with recall rights, disability or leave of absence, whether paid or
unpaid), former employees and retired employees of the Seller who are or, when
employed by the Seller, were engaged primarily in the activities of the
Business.
2
"Business Intellectual Property" shall mean all Intellectual Property
owned, used or held for use by the Seller or any of its Affiliates in connection
with the conduct of the Business, other than items of Intellectual Property
which incorporate the words "Durango" or "Titan", the Titan logo, or any
derivatives thereof or anything confusingly similar thereto in whole or in part.
"Buyer" shall have the meaning set forth in the Preamble.
"Buyer Indemnitees" shall have the meaning set forth in Section
12.2(a).
"Buyer Material Adverse Effect " shall mean a material adverse effect
on (a) the business, operations, results of operations or condition (financial
or otherwise) of the Buyer or (b) the ability of the Buyer to perform its
obligations under this Agreement or any of the other Transaction Documents or to
consummate the transactions contemplated hereby or thereby.
"Buyer Peso Threshold" shall have the meaning set forth in Section
8.13(c).
"Buyer's Closing Certificate" shall have the meaning set forth in
Section 9.4.
"Claimant" shall have the meaning set forth in Section 13.7(b)(ii).
"Closing" shall have the meaning set forth in Section 2.5.
"Closing Accounts Payable" shall have the meaning set forth in the
definition of Closing Current Liabilities.
"Closing Accounts Receivable" shall have the meaning set forth in the
definition of Closing Current Assets.
"Closing Current Assets" shall mean the U.S. Dollar Equivalent at the
Closing Date of the sum of (A) trade accounts receivable as evidenced by copies
of invoices delivered to the Buyer at the Closing (the "Closing Accounts
Receivable"), net of allowances for doubtful accounts, discounts and claims, (B)
inventory, net of reserves; provided that the amount of inventory included in
Closing Current Assets shall not exceed 23,284,800 Mexican Pesos, and (C)
prepaid expenses, in each case, (i) to the extent included in the Acquired
Assets, (ii) as at 12:01 a.m. (Monterrey, Mexico time) on the Closing Date, and
(iii) without giving effect to any assets acquired or disposed of by Buyer or
its Affiliates on or after the Closing other than in the Ordinary Course (it
being understood and agreed that Closing Current Assets shall not include any
cash or cash equivalents), all as determined in conformity with Mexican GAAP;
provided that Closing Current Assets shall not include any intercompany
receivables or current Tax assets.
"Closing Current Liabilities " shall mean the U.S. Dollar Equivalent
at the Closing Date of the sum of (A) suppliers and accounts payable (the
"Closing Accounts Payable") and (B) accrued expenses, in each case, (i) to the
extent included in the Assumed Liabilities, (ii) as at 12:01 a.m. (Monterrey,
Mexico time) on the Closing Date, and (iii) without giving effect to any
liabilities paid or incurred by the Buyer or its Affiliates on or after the
Closing other than in the Ordinary Course, all as determined in conformity with
Mexican GAAP; provided that Closing Current Liabilities shall not include any
intercompany payables or current Tax liabilities.
3
"Closing Date" shall have the meaning set forth in Section 2.5.
"Closing Statement" shall have the meaning set forth in Section
2.8(a).
"Commitment Letter" shall have the meaning set forth in Section 4.6.
"Consents" shall mean any consent, approval, authorization or other
order of, or action or exemption by, or filing with or notification of, any
Governmental Authority or third party.
"Contract" shall mean any agreement, contract, instrument, license,
lease, sublease, or binding understanding, arrangement or commitment.
"CVC" shall mean Court Square Capital, Ltd.
"Dispute Period" shall mean the period ending 15 calendar days
following receipt by an Indemnitor of Notice.
"Durango" shall have the meaning set forth in the Preamble.
"EBITDA" shall mean the U.S. Dollar Equivalent of the amount of
earning before interest, taxes, depreciation and amortization of the Business
for the calendar year ended December 31, 2002 as calculated pursuant to Exhibit
A.
"EBITDA Adjustment" shall mean an amount due from the Seller to the
Buyer, if any, determined in accordance with Section 2.9(d).
"EBITDA Certificate" shall have the meaning set forth in Section
2.9(a).
"Employee Benefit Plan" shall mean any Plan entered into, established,
maintained, sponsored, contributed to or required to be contributed to by the
Seller or any of its Affiliates for the benefit of any Business Employee or
director of, or consultant retained by, the Seller in connection with the
Business with respect to which any liability exists on the date of this
Agreement or may exist at any time subsequent thereto.
"Encumbrance" shall mean any lien, security interest, mortgage,
covenant, pledge, adverse claim, title defect, assessment, lease, levy, charge
or other encumbrance of any kind, or any conditional sale contract, title
retention contract or other contract to give any of the preceding.
"Environmental Laws" shall mean all applicable environmental and
health and safety Laws, including without limitation the Mexican General Law of
Ecological Balance and Environmental Protection (Ley General del Equilibrio
Ecologico y la Proteccion al Ambiente) and its Regulations, the National Waters
Law (Ley de Aguas Nacionales) and its Regulations, the General Health Law (Ley
General de Salud) (to the extent relating to Environmental Matters) and the
General Regulations of Health and Safety in the Workplace (to the extent
relating to Environmental Matters), and all Official Mexican Standards (Normas
Oficiales Mexicanas) that establish limits for air emissions or wastewater
discharges, requirements in the manufacture, use,
4
handling, transportation, treatment, storage or disposal of hazardous toxic or
deleterious materials or waste, and occupational health and safety requirements.
"Environmental Matters" shall mean any matter arising out of or
relating to pollution or protection of the environment, human health or safety
of employees.
"Environmental Permits" shall mean all governmental permits, licenses,
authorizations and variances required pursuant to applicable Environmental Laws
currently in effect for the operation of the Business at the Facilities.
"Estimated Buyer Straddle Taxes" shall mean the U.S. Dollar amount of
estimated Straddle Taxes allocable to the Buyer as calculated pursuant to
Schedule 2.4 on the third Business Day prior to the Closing Date.
"Estimated Seller Straddle Taxes" shall mean the U.S. Dollar amount of
estimated Straddle Taxes allocable to the Seller as calculated pursuant to
Schedule 2.4 on the third Business Day prior to the Closing Date.
"Exempt Acquired Assets" shall have the meaning set forth in Section
2.1(b).
"Exempt Acquired Asset Purchase Price" shall mean the sum of (i) the
U.S. Dollar Equivalent as of the date preceding the Closing Date of the Closing
Accounts Receivable set forth in the Financial Certificate, and (ii) the U.S.
Dollar Equivalent as of the date preceding the Closing Date of 36,960,548
Mexican Pesos, in respect of the Owned Real Property set forth on Schedule
2.1(b)(i).
"Existing CBAs" shall have the meaning set forth in Section 10.2.
"Existing Water Cost " shall have the meaning set forth in Section
7.9(b).
"Facilities" shall have the meaning set forth in the Recitals.
"FENASA" shall mean Federacion Nacional de Asociaciones Sindicales
Autonomas.
"Final Amount" shall mean the amount, if any, by which the Closing
Current Assets exceeds the Closing Current Liabilities, as set forth on the
Final Statement.
"Final EBITDA" shall mean the EBITDA set forth in the Final EBITDA
Certificate.
"Final EBITDA Certificate" shall have the meaning set forth in Section
2.9(c).
"Final Statement" shall have the meaning set forth in Section 2.8(c).
"Final 2002 Income Statement " shall have the meaning set forth in
Section 2.9(c).
"Financial Certificate" shall have the meaning set forth in Section
8.10.
5
"Financing" shall have the meaning set forth in Section 4.6.
"First Water Alternative" shall have the meaning set forth in Section
7.9(a).
"Former Employee" shall mean any Business Employee not employed by the
Seller or any of its Affiliates immediately prior to the Closing, provided that
no Inactive Employee shall be considered a Former Employee.
"Governmental Authority" shall mean any governmental,
quasi-governmental, public or self-regulatory body or authority.
"Governmental Order" shall mean any order, judgment, injunction,
decree or stipulation entered by or with a Governmental Authority.
"Guadalajara CBAs" shall mean (i) the Union Agreement dated August 11,
2001, as amended August 30, 2002, between Empaques de Carton Titan, S.A. de C.V.
and Sindicato Industrial de Trabajadores de las Industrias del Papel, Empaques y
Carton Secc, Guadalajara (FENASA), (ii) the Collective Bargaining Agreement
dated August 11, 2001, as amended on August 30, 2002, among Empaques de Carton
Titan, S.A. de C.V., Sindicato de Trabajadores de Empaques de Carton Titan
Sucursal Guadalajara and Federacion Nacional de Asociaciones Sindicales
Autonomas (FENASA), (iii) the Labor Agreement Relating to Pavigi Housing Fund
System, dated March 22, 1972, between Sindicato de Trabajadores de Empaques de
Carton Titan Sucursal Guadalajara and Empaques de Carton Titan, S.A., (iv) the
IMSS Contribution Modification Agreement, dated January 30, 1976, between
Sindicato Trabajadores de Empaques de Carton Titan Sucursal Guadalajara and
Empaques de Carton Titan, S.A., and (v) the Savings Plan Labor Agreement dated
August 1, 1994 between Union and Empaques de Carton Titan, S.A Planta
Guadalajara.
"Guarantee" shall have the meaning set forth in Section 9.7
"Holdback Amount" shall mean, as of any date, the Initial Holdback
Amount plus all amounts by which the Holdback Amount is increased prior to such
date pursuant to Section 2.10(c)(i)(B) less all Holdback Payments made prior to
such date pursuant to Section 2.10 less all amounts retained by the Buyer in
satisfaction of the Purchase Price Adjustment, Outstanding Claims or Pending
Indemnification Obligations pursuant to Section 2.10.
"Holdback Payment" shall mean any payment to the Seller of a portion
of the Holdback Amount pursuant to Section 2.10.
"Iberdrola Agreement" shall mean the Installation, Capacity Commitment
and Electric Energy Provision Agreement dated July 31, 2001 among Iberdrola
Energia Monterrey, S.A. de C.V., Cerveceria Xxxxxxxxxx Xxxxxxxxx, S.A. de C.V.,
Grafo Regia, S.A. de C.V., Fabricas Monterrey, S.A. de C.V., Sistema Ambiental
Industrial, S.A. de C.V. and the Seller.
"Inactive Employee" shall mean any Business Employee whose principal
place of employment is at any of the Facilities (or is otherwise principally
engaged in the operation of the Business on the date hereof) who is not actively
at work on the Closing Date due to leave of absence, disability leave, military
leave or layoff with recall rights.
6
"Income Tax" shall mean any federal, state, local or foreign income
tax, including any interest, penalty or addition thereto, whether disputed or
not.
"Indebtedness" of any Person shall mean at any date, without
duplication, (a) all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person to pay the deferred purchase
price of property or services, except trade accounts payable or accruals arising
in the Ordinary Course, (d) all obligations of such Person as lessee that are
capitalized in accordance with applicable generally accepted accounting
principles, (e) all Indebtedness of others secured by an Encumbrance on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person, and (f) all obligations of such Person in the nature of guarantees of
the obligations described in clauses (a) through (e) above of any other Person.
"Indemnified Environmental Losses" shall have the meaning set forth in
Section 12.2(b).
"Indemnitee" shall have the meaning set forth in the definition of
"Losses".
"Indemnitor" shall have the meaning set forth in the definition of
"Losses".
"Indemnity Holdback Amount" shall mean US$1,000,000.
"Independent Accounting Firm " shall have the meaning set forth in
Section 2.8(b)(ii).
"Initial Amount" shall mean US$54,000,000, as such amount may be
reduced pursuant to a notice in the form of Exhibit J delivered by the Seller in
accordance with Section 8.13(c) or increased pursuant to a notice in the form of
Exhibit O delivered by the Buyer in accordance with Section 9.9.
"Initial Holdback Amount" shall mean an amount equal to the VAT
Assessment less the Banorte VAT Loan Amount.
"Intellectual Property" shall mean, collectively: (i) trademarks,
service marks, brand names, certification marks, trade dress, trade names and
other indications of origin, and the goodwill associated with the foregoing;
(ii) patents, inventors' certificates and invention disclosures; (iii) trade
secrets, know-how and confidential information; (iv) copyrights; and (v) any
similar intellectual property or proprietary rights; in each case, including all
registrations, applications for registration, applications, renewals,
extensions, re-examinations and reissues, of or for any of the foregoing and in
any jurisdiction.
"Interest Rate" shall mean 2.0% per annum calculated on the basis of a
360 day year composed of 12 30-day months.
"Inventory" shall have the meaning set forth in Section 2.1(a)(ii).
"Knowledge" shall mean, with respect to any Person, the knowledge,
assuming reasonable investigation, of any executive officer or director of such
Person.
7
"KPMG" shall mean KPMG LLP.
"Law" shall mean any federal, state local or foreign statute, law,
ordinance, regulation, rule, code, order, other requirement or rule of law.
"Leased Personal Property " shall mean any item of Tangible Personal
Property leased by the Seller or any of its Affiliates pursuant to a Personal
Property Lease.
"Leased Real Property" shall have the meaning set forth in Section
3.11(c).
"Lender" shall have the meaning set forth in Section 4.6.
"Loss" or "Losses" shall mean all claims, losses, liabilities,
obligations, payments, actual damages, judgments, fines, penalties, Taxes,
amounts paid in settlement, and any related reasonable costs and expenses
(including, without limitation, interest which may be imposed in connection
therewith, costs and expenses of investigation, remediation and mitigation,
actions, suits, proceedings, demands, assessments and reasonable fees and
disbursements of counsel, environmental consultants and other experts) incurred
by the Person seeking indemnification (the "Indemnitee") (whether relating to
claims asserted by or against third parties or to claims asserted against the
Person providing indemnification (the "Indemnitor"), including, without
limitation, in connection with the enforcement of the Indemnitee's right of
indemnification).
"Material Contracts" shall have the meaning set forth in Section
3.13(a).
"Mexican GAAP" shall mean Mexican generally accepted accounting
principles.
"Mexican Peso" shall mean the lawful currency of the United Mexican
States.
"Monterrey CBAs" shall mean (i) the Union Agreement dated August 1,
2001, as amended August 1, 2002, among Empaques de Carton Titan, S.A. de C.V.
and Sindicato Industrial de Trabajadores de las Industrias del Papel, Empaques y
Carton Secc, Monterrey (FENASA), (ii) the Collective Bargaining Agreement dated
August 1, 2001, as amended on August 26, 2002, among Empaques de Carton Titan,
S.A. de C.V. and Sindicato Industrial de Trabajadores de Empaques de Carton
Titan and Federacion Nacional de Asociaciones Sindicales Autonomas (FENASA),
(iii) the Warehouse Collective Bargaining Agreement dated January 15, 2001, as
amended January 15, 2002, between Sindicato Xxxxxx Xxxxx Xxxxxx de Trabajadores
y Empleados del Comercio and Empaques de Carton Titan, S.A. de C.V., (iv) the
Private Agreement of Economic Benefits Administration, dated June 22, 2001,
between Sindicato Industrial de Trabajadores de las Industrias del Papel,
Empaque y Carton and Empaques de Carton Titan, S.A. de C.V., (v) the Labor
Agreement Relating to Pavigi Housing Fund System, dated March 1, 1972, between
Union de Trabajadores Xxxxxxxxxx y Famosa and Empaques de Carton Titan, S.A.,
(vi) the IMSS Contribution Modification Agreement, dated January 19, 1976,
between Sindicato Industrial de Trabajadores de Empaques de Carton Titan and
Empaques de Carton Titan, S.A., and (vii) the Savings Plan Labor Agreement dated
August 1, 1994 between Union and Empaques de Carton Titan, S.A Planta Monterrey.
"Monterrey Facility Lease" shall have the meaning set forth in Section
8.9.
8
"New Water Cost" shall have the meaning set forth in Section 7.9(b).
"Noncompete and Nonsolicitation Agreement" shall have the meaning set
forth in Section 8.11.
"Notice" shall have the meaning set forth in Section 12.4(a).
"Officer" shall mean each Senior or Executive Vice President or
President or director of the Seller or any of its Affiliates.
"Ordinary Course" shall mean the ordinary course of the Business
consistent with the past practice of the Business.
"Outstanding Claim" shall mean, as of any date, any claim for
indemnification by a Buyer Indemnitee set forth in a Notice delivered prior to
such date that has not been finally determined to result in an obligation of the
Seller to pay such Buyer Indemnitee pursuant to the Seller's indemnification
obligations set forth in Article XII (it being understood that each claim for
indemnification under Sections 12.2(a)(i), 12.2(a)(ii)(A) or 12.2(b) shall be
deemed to be an Outstanding Claim, irrespective of whether the aggregate amount
of claims under Sections 12.2(a)(i), 12.2(a)(ii)(A) and 12.2(b) exceed the
basket of US$500,000 specified by Section 12.7(b)(ii)).
"Owned Real Property" shall have the meaning set forth in Section
3.11(a).
"Parties" shall have the meaning set forth in the Preamble.
"Pending Indemnification Obligations" shall mean, as of any date, the
aggregate amount of all claims for indemnification by Buyer Indemnitees set
forth in Notices delivered prior to such date that have been finally determined
to result in an obligation of the Seller to pay such Buyer Indemnitee pursuant
to the Seller's indemnification obligations set forth in Article XII that have
not been paid on or prior to such date.
"Pension Obligations" shall have the meaning set forth in Section
3.16(e).
"Permit" shall mean any permit, license or authorization issued,
granted or given or otherwise made available by or under the authority of any
Governmental Authority.
"Permitted Encumbrances" shall mean (a) Encumbrances set forth on
Schedule 3.9, (b) liens of Taxes not yet due and payable (c) any statutory
Encumbrance arising in the Ordinary Course by operation of law with respect to a
liability that is not yet due or delinquent, and (d) any minor imperfection of
title or similar Encumbrance which, in the case of each of clause (a), (b), (c)
and (d), individually or in the aggregate could not reasonably be expected to
have a Seller Material Adverse Effect.
"Person" shall mean any individual, firm, corporation, partnership,
limited liability company, trust, joint venture, association, unincorporated
organization, Governmental Authority or other entity.
9
"Personal Property Lease" shall mean any lease of Tangible Personal
Property to which the Seller or any of its Affiliates is a party.
"Plan" shall mean any employment, bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom stock, leave
of absence, layoff, vacation, day or dependent care, legal services, cafeteria,
life, health, medical, accident, disability, workmen's compensation or other
insurance, severance, separation, termination, change of control retention,
fringe benefit or other benefit plan, agreement, practice, policy, program or
arrangement of any kind, whether written or oral.
"Purchase Price" shall have the meaning set forth in Section 2.4.
"Purchase Price Adjustment" shall mean:
(a) In the event that the Working Capital Adjustment is due from the
Seller to the Buyer:
(i) in the event that an EBITDA Adjustment is due from the Seller
to the Buyer, an amount due from the Seller to the Buyer equal to the
sum of the amount of the Working Capital Adjustment plus the amount of
the EBITDA Adjustment; and
(ii) In the event that no EBITDA Adjustment is due from the
Seller to the Buyer, an amount due from the Seller to the Buyer equal
to the amount of the Working Capital Adjustment;
(b) In the event that the Working Capital Adjustment is due from the
Buyer to the Seller:
(i) In the event that an EBITDA Adjustment is due from the Seller
to the Buyer:
(A) In the event that the amount of the Working Capital
Adjustment is greater than the amount of the EBITDA Adjustment,
an amount due from the Buyer to the Seller equal to the amount of
the Working Capital Adjustment less the amount of the EBITDA
Adjustment;
(B) In the event that the amount of the Working Capital
Adjustment is equal to the amount of the EBITDA Adjustment, US$0;
and
(C) In the event that the amount of the Working Capital
Adjustment is less than the amount of the EBITDA Adjustment, an
amount due from the Seller to the Buyer equal to the amount of
the EBITDA Adjustment less the amount of the Working Capital
Adjustment; and
10
(ii) In the event that no EBITDA Adjustment is due from the
Seller to the Buyer, an amount due from the Buyer to the Seller equal
to the Working Capital Adjustment.
"Purchase Price Adjustment Date" shall mean the later of the final
determination of the Working Capital Adjustment and the final determination of
the EBITDA Adjustment.
"Purchase Price Adjustment Holdback Amount" shall mean US$2,000,000.
"Purchase Price Allocation " shall have the meaning set forth in
Section 2.11.
"PWC" shall mean PricewaterhouseCoopers, S.C.
"Real Property" shall mean all real property, improvements thereon and
rights in respect thereof comprising the Facilities, or otherwise primarily or
exclusively used in connection with or necessary for the operation of the
Business.
"Real Property Leases" shall have the meaning set forth in Section
3.11(c).
"Recipients" shall have the meaning set forth in Section 6.3.
"Reference Balance Sheet" shall have the meaning set forth in Section
3.6(a).
"Reference Exchange Rate" shall mean 10.9057 Mexican Pesos per one
U.S. Dollar.
"Reference Financial Statements" shall have the meaning set forth in
Section 3.6(a).
"Remaining Holdback" shall have the meaning set forth in Section
2.10(e).
"Remaining VAT Holdback Amount" shall mean, as of any date, (i) if (A)
the aggregate amount of all VAT Refunds received by the Buyer prior to such date
is less than (B) the VAT Holdback Amount, an amount equal to the VAT Holdback
Amount less the aggregate amount of any VAT Refunds received by the Buyer on or
prior to such date, and (ii) if (A) the aggregate amount of all VAT Refunds
received by the Buyer on or prior to such date is equal to or greater than (B)
the VAT Holdback Amount, an amount equal to US$0.
"Remaining VAT Refund Amount" shall mean, as of any date, (i) if the
aggregate amount of all VAT Refunds received by the Buyer on or prior to such
date is less than the Initial Holdback Amount less the Indemnity Holdback
Amount, the Initial Holdback Amount less the sum of the Indemnity Holdback
Amount and the aggregate amount of all VAT Refunds received by the Buyer on or
prior to such date, and (ii) if the aggregate amount of all VAT Refunds received
by the Buyer on or prior to such date is equal to or greater than the Initial
Holdback Amount less the Indemnity Holdback Amount, US$0.
"Request" shall have the meaning set forth in Section 13.7(b)(ii).
11
"Respondent" shall have the meaning set forth in Section 13.7(b)(ii).
"Satisfactory Completion" shall have the meaning set forth in Section
7.9(a).
"Seller" shall have the meaning set forth in the Preamble.
"Seller Indemnitees" shall have the meaning set forth in Section 12.3.
"Seller Peso Threshold" shall have the meaning set forth in Section
9.9.
"Seller's Closing Certificate" shall have the meaning set forth in
Section 8.3.
"Seller Material Adverse Effect" shall mean a material adverse effect
on (a) the business, operations, results of operations or condition (financial
or otherwise) of the Business, (b) the Acquired Assets or the Assumed
Liabilities, or (c) the ability of the Seller to perform its obligations under
this Agreement or any of the other Transaction Documents or to consummate the
transactions contemplated hereby or thereby.
"SINTIPEC" shall mean the Sindicato Industrial Nacional de
Trabajadores de las Industrias del Papel, Empaque y Carton.
"Straddle Taxes" shall mean Taxes that are imposed on a periodic basis
with respect to the Business and the Acquired Assets and are payable for any
taxable period that begins before but ends after the Closing Date, other than
Taxes based on (or measured by) net assets or income or similar Taxes (including
Taxes imposed in lieu of such Taxes).
"Subsidiary" shall mean any Person, with respect to which a specified
Person owns 50% or more of the capital stock or other equity interests of such
Person, the holders of which are generally entitled to vote for the election of
the board of directors or other governing body of such Person, directly or
through one or more Subsidiaries.
"Tangible Personal Property" shall mean all machinery, equipment,
vehicles, office furniture, tools, fixtures and other tangible property, other
than Inventory, located at the Facilities or otherwise primarily or exclusively
used in connection with or necessary for the operation of the Business.
"Tax" or "Taxes" shall mean any taxes, assessments, duties, fees,
levies, imposts, deductions, withholdings or other governmental charges of any
nature whatsoever imposed by any taxing authority of any country or political
subdivision of any country, including any interest, penalties, additions to tax
or additional amounts imposed by any taxing authority with respect thereto.
"Tax Return" shall mean any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto.
"Third-Party Claim" shall have the meaning set forth in Section
12.4(a).
12
"Transaction Documents" shall mean this Agreement, the Transition
Services Agreement, the Monterrey Facility Lease, the Financial Certificate, the
Seller's Closing Certificate, the Noncompete and Nonsolicitation Agreement, the
Seller's Notice Regarding Repricing, the Buyer's Notice Regarding Repricing, and
the Buyer's Closing Certificate.
"Transfer Tax" shall mean all transfer, documentary, sales, use,
stamp, registration and other similar Taxes and fees (including penalties,
interest and additions to tax attributable thereto and costs and expenses
relating to such Taxes) payable in connection with the transactions contemplated
by this Agreement.
"Transferred Employees" shall have the meaning set forth in Section
10.1.
"Transition Services Agreement" shall have the meaning set forth in
Section 8.8.
"2002 Income Statement" shall have the meaning set forth in Section
2.9(a).
"U.S. Dollar" and "US$" shall mean the lawful currency of the United
States of America.
"U.S. Dollar Equivalent" shall mean, with respect to any amount of
Mexican Pesos as of any date, the amount of U.S. Dollars such amount of Mexican
Pesos would purchase based on the exchange rate by the Banco de Mexico published
in the Diario Oficial de la Federacion for the close of business on such date,
provided that for purposes of determining EBITDA, "U.S. Dollar Equivalent" shall
mean the amount of U.S. Dollars such amount of Mexican Pesos would purchase
based on an exchange rate of 9.682 Mexican Pesos per U.S. Dollar.
"VAT" shall mean Impuesto al Valor Agregado.
"VAT Assessment" shall mean an amount equal to 0.15 multiplied by the
Assessed Acquired Asset Purchase Price.
"VAT Holdback Amount" shall mean the Initial Holdback Amount less the
sum of the Indemnity Holdback Amount and the Purchase Price Adjustment Holdback
Amount.
"VAT Refund" shall mean the U.S. Dollar Equivalent, as of the date of
receipt by the Buyer, of any and all amounts received by the Buyer from the
Servicio de Administracion Tributaria (whether in cash or as a credit against
VAT payable by the Buyer) with respect to the VAT equivalent amount charged to
the Buyer with respect to the sale of the Assessed Acquired Assets in excess of
the amount necessary to pay the Banorte VAT Loan Amount to the Lender; provided
that the aggregate amount of all VAT Refunds shall not exceed the Initial
Holdback Amount.
"VAT Refund Application" shall have the meaning set forth in Section
7.10(b).
"VAT Refund Date" shall mean any date on which the Buyer receives a
VAT Refund.
13
"Water Connection" shall have the meaning set forth in Section 7.9(a).
"Water Notice" shall have the meaning set forth in Section 7.9(a).
"Working Capital Adjustment " shall mean an amount due from the Seller
to the Buyer or from the Buyer to the Seller determined in accordance with
Section 2.8(d).
"Working Capital Reference Amount" shall mean US$3,000,000; provided
that if the Initial Amount is reduced pursuant to a notice in the form of
Exhibit J delivered by the Seller in accordance with Section 8.13(c), the
Working Capital Reference Amount shall mean US$3,000,000 multiplied by a
fraction, the numerator of which shall be the Initial Amount and the denominator
of which shall be US$54,000,000.
Section 1.2. Certain Rules of Construction.
(a) When used in this Agreement, the words "hereof," "herein" and
"hereunder" and words of similar import shall refer to this Agreement as a whole
and not to any particular provision of this Agreement. References to Preamble,
Recitals, Articles, Sections, Schedules or Exhibits shall refer respectively to
the Preamble, Recitals, Articles, Sections, Schedules or Exhibits of this
Agreement, unless otherwise expressly provided.
(b) When used herein, the terms "include," "includes," and "including"
are not limiting.
(c) Unless the context requires otherwise, derivative forms of any
term defined herein shall have a comparable meaning to that of such term.
(d) When a Party's consent is required hereunder, such Party's consent
may be granted or withheld in such Party's sole discretion, unless otherwise
specified.
ARTICLE II
PURCHASE AND SALE
Section 2.1. Purchase and Sale. (a) Upon the terms and subject to the
conditions of this Agreement, at the Closing the Seller shall sell, convey,
transfer, assign and deliver to the Buyer, or cause to be sold, conveyed,
transferred, assigned and delivered to the Buyer, and the Buyer shall purchase
from the Seller, free and clear of any Encumbrances (other than Permitted
Encumbrances), all of the Seller's and its Affiliates' right, title and interest
in, to and under all of the following assets and properties (each and all of
such assets and properties being herein referred to as the "Assessed Acquired
Assets"):
(i) Tangible Personal Property set forth in Schedule 2.1(a)(i);
(ii) all raw materials, inventories, including inventories of work in
process, samples and finished goods, spare parts relating to Tangible
Personal Property located at the Facilities or otherwise primarily or
exclusively used in connection with or necessary for the operation of the
Business (the "Inventory");
14
(iii) all claims, deposits, prepayments, refunds, and rights of
recovery, set off and recoupment with respect to the Business;
(iv) all Business Intellectual Property set forth in Schedule
2.1(a)(iv);
(v) all files, instruments, papers, books, records, technical manuals,
and other documents of the Seller necessary to the conduct of the Business,
including, without limitation, budgets, ledgers, journals, deeds, title
policies, agreements, customer lots, computer files and programs, operating
data and plans and environmental studies and plans, other than those
documents which the Seller is required by Law to retain (copies of which
will be provided to the Buyer) ("Books and Records");
(vi) all Consents and Permits set forth in Schedule 2.1(a)(vi) (the
"Assigned Permits");
(vii) all Contracts set forth in Schedule 2.1(a)(vii) and all open
purchase orders of the Seller for the purchase of raw materials or the sale
of finished goods entered into in the Ordinary Course for the benefit of
the Business (collectively, the "Assigned Contracts"), including all Real
Property Leases set forth in Schedule 2.1(a)(vii)(A) and all Personal
Property Leases set forth in Schedule 2.1(a)(vii)(B) ; and
(viii) all improvements and construction attached to the Owned Real
Property set forth in Schedule 2.1(b)(i).
(b) Upon the terms and subject to the conditions of this Agreement, at
the Closing the Seller shall sell, convey, transfer, assign and deliver to the
Buyer, or cause to be sold, conveyed, transferred, assigned and delivered to the
Buyer, and the Buyer shall purchase from the Seller, free and clear of any
Encumbrances (other than Permitted Encumbrances), all of the Seller's right,
title and interest in, to and under all of the following assets and properties
(each and all of such assets and properties being herein referred to as the
"Exempt Acquired Assets" and, together with the Assessed Acquired Assets, the
"Acquired Assets"):
(i) all Owned Real Property set forth in Schedule 2.1(b)(i); and
(ii) all accounts, notes and other receivables of the Business as
evidenced by copies of invoices delivered to the Buyer at the Closing.
Section 2.2. Assumed Liabilities. The Buyer shall assume on and as of
the Closing Date, and shall thereafter pay, perform and discharge when due (or
cause to be paid, performed and discharged when due), the following liabilities
and obligations, (collectively, the "Assumed Liabilities"):
(a) all liabilities and obligations of the Seller arising under any of
the Assigned Contracts or Assigned Permits, other than liabilities or
obligations arising out of any condition, event, action or failure to act
occurring prior to the Closing;
(b) all liabilities and obligations relating to Environmental Matters
that arise out of the conduct of the Business or the use, operation or
ownership of the Acquired Assets, other than
15
any such liabilities or obligations arising out of any condition, event, action
or failure to act occurring prior to Closing;
(c) all trade accounts payable of the Seller arising solely from the
operation of the Business in the Ordinary Course; and
(d) all liabilities and obligations of the Seller relating to
employment and employee benefit arrangements assumed by the Buyer under
Article X hereof.
Section 2.3. Excluded Liabilities. The Seller and its Affiliates shall
retain all of their respective liabilities and obligations, other than the
Assumed Liabilities.
Section 2.4. Purchase Price. On the third Business Day prior to the
Closing Date, the Seller shall deliver to the Buyer a written statement setting
forth an estimate of the U.S. Dollar Equivalent, as of the fourth Business Day
prior to the Closing Date, of the Closing Accounts Receivable and the Closing
Accounts Payable as of such date. On the third Business Day prior to the Closing
Date, the Seller and the Buyer shall jointly produce a statement setting forth
the amount of the Estimated Buyer Straddle Taxes and the Estimated Seller
Straddle Taxes, in each case calculated pursuant to Schedule 2.4. The aggregate
purchase price for the Acquired Assets shall be equal to the Assessed Acquired
Asset Purchase Price and the Exempt Acquired Asset Purchase Price (as adjusted
pursuant to this Article II and Article XII, the "Purchase Price").
Section 2.5. The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of White &
Case LLP, 000 Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx, Xxxxxxx 00000, at 10:00 A.M.
local time, on the fifth Business Day after the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the Parties
will take at the Closing itself), or at such other place, time and/or date as
the Parties may mutually agree (the date of the Closing, the "Closing Date").
Section 2.6. Closing Deliveries by the Seller. At the Closing, the
Seller shall:
(a) execute, acknowledge (if appropriate) and deliver to the Buyer
(before a notary public, if appropriate) such instruments of sale,
transfer, conveyance and assignment as the Buyer may reasonably request in
form and substance reasonably satisfactory to the Buyer and the Seller; and
(b) deliver to the Buyer the opinions, certificates and other
documents required to be delivered pursuant to Article VIII.
Section 2.7. Closing Deliveries by the Buyer. At the Closing, the
Buyer shall:
(a) deliver to the Seller an amount equal to (i) the Initial Amount,
plus (ii) the VAT Assessment, in respect of the VAT equivalent amount
charged to the Buyer with respect to the sale of the Assessed Acquired
Assets, plus (iii) if the aggregate amount of Straddle Taxes actually paid
by the Seller on or before the Closing Date exceeds the aggregate amount of
the Estimated Seller Straddle Taxes, the U.S. Dollar Equivalent as of the
third Business Day prior to the Closing Date of the amount of such excess,
plus (iv)(A) in the event that neither the Buyer
16
nor the Seller has delivered notices in the forms of Exhibit J or Exhibit O
pursuant to Sections 8.13(c) or 9.9, respectively, one-half the U.S. Dollar
Equivalent as of the third Business Day prior to the Closing Date of the
aggregate amount of Transfer Taxes, (B) if the Seller delivers a notice to the
Buyer in the form of Exhibit J pursuant to Section 8.13(c), the U.S. Dollar
Equivalent as of the third Business Day prior to the Closing Date of the
aggregate amount of Transfer Taxes, and (C) if the Buyer delivers a notice to
the Seller in the form of Exhibit O pursuant to Section 9.9, US$0, less (v) the
Initial Holdback Amount, less (vi) if the aggregate amount of the Estimated
Seller Straddle Taxes exceeds the aggregate amount of Straddle Taxes actually
paid by the Seller on or before the Closing Date, the amount of such excess. The
net amount shall be paid by wire transfer of immediately available funds to an
account specified in writing by the Seller to the Buyer not less than three
Business Days prior to the Closing Date;
(b) execute, acknowledge (if appropriate) and deliver to the Seller
such instruments of assumption as the Seller may reasonably request in form
and substance reasonably satisfactory to the Buyer and the Seller; and
(c) deliver to the Seller the opinions, certificates and other
documents required to be delivered pursuant to Article IX.
Section 2.8. Working Capital Adjustment. Closing Statement. As
promptly as practicable, but in any event within 45 calendar days following the
Closing Date, the Seller shall deliver to the Buyer and KPMG an unaudited
statement, substantially in the form of Schedule 2.8, setting forth the Closing
Current Assets and the Closing Current Liabilities (the "Closing Statement"),
together with a report from PWC in the form of Exhibit B. The Closing Statement
shall be prepared in accordance with Mexican GAAP, using the same accounting
methods, policies, practices and procedures, with consistent classification,
judgments, and estimation methodology, as used in the preparation of the
Reference Balance Sheet. There shall be attached to the Closing Statement an
annex setting forth in reasonable detail the computation of the Working Capital
Adjustment. The fees, costs and expenses of PWC shall be borne by the Seller.
(b) Disputes. (i) Subject to clause (ii) of this Section 2.8(b), for
purposes of the determination of the Working Capital Adjustment under this
Section 2.8, the Closing Statement delivered by the Seller to the Buyer and the
computation of the Working Capital Adjustment annexed thereto shall be deemed to
be and shall be final, binding and conclusive on the Parties, absent manifest
error or fraud.
(ii) The Buyer may dispute any amounts reflected on the Closing
Statement, but only on the basis that the amounts reflected on the Closing
Statement were not arrived at in accordance with this Agreement; provided,
however, that the Buyer shall have notified the Seller in writing of each
disputed item, specifying the amount thereof in dispute and setting forth,
in reasonable detail, the basis for such dispute, within 30 calendar days
of the Seller's delivery of the Closing Statement to the Buyer. The Seller
shall cause PWC to make its work papers generated in connection with the
preparation of the Closing Statement available to the Buyer and KPMG in
connection with the Buyer's review of the Closing Statement. In the event
of such a dispute, the Seller and the Buyer shall attempt to reconcile
their differences, and any resolution by them as to any disputed amounts
shall be final, binding and conclusive on the Parties for purposes of the
17
determination of the Working Capital Adjustment under this Section 2.8 absent
fraud. If the Seller and the Buyer are unable to reach a resolution with such
effect within 15 calendar days after receipt by the Seller of the Buyer's
written notice of dispute, the Seller and the Buyer shall submit the items
remaining in dispute for resolution to the Mexican affiliate of either Deloitte
& Touche or Ernst & Young, as selected jointly by the Seller or Buyer or in the
absence of agreement on such selection within 30 calendar days after the receipt
by the Seller of the Buyer's written notice of dispute, as selected by the
American Arbitration Association (such accounting firm being referred to herein
as the "Independent Accounting Firm"), which shall, within 30 calendar days
after the submission of such dispute to it, determine (based solely on
presentations by the Seller and the Buyer and such additional information as the
Independent Accounting Firm shall request and on its accounting and other
relevant expertise) and report to the Buyer and the Seller upon such remaining
disputed items, and such report shall be final, binding and conclusive on the
Seller and the Buyer. The Buyer and the Seller each shall make available to the
Independent Accounting Firm their respective work papers generated in connection
with the preparation or review of the Closing Statement. The fees and
disbursements of the Independent Accounting Firm shall be shared equally by the
Seller and the Buyer.
(c) The "Final Statement" shall be:
(i) if the Buyer does not dispute the Closing Statement delivered by
the Seller within 30 calendar days of the delivery thereof to the Buyer,
the Closing Statement prepared by the Seller;
(ii) if the Buyer and the Seller are able to resolve all disputes
raised by the Buyer with respect to the Closing Statement delivered by the
Seller, the Closing Statement as prepared by the Seller modified to reflect
the resolution reached among the Parties; and
(iii) if the Independent Accounting Firm is retained to resolve any
disputes, the Closing Statement delivered by the Seller modified to reflect
the resolution of any disputed items reached among the Parties and the
determination of the Independent Accounting Firm with respect to all other
disputed items.
(d) Calculation of Working Capital Adjustment. In the event that the
Final Amount exceeds the Working Capital Reference Amount, the Working Capital
Adjustment will be an amount equal to such excess, which amount shall be due
from the Buyer to the Seller. In the event that the Final Amount is less than
the Working Capital Reference Amount, the Working Capital Adjustment will be an
amount equal to the amount by which the Working Capital Reference Amount exceeds
the Final Amount, which amount shall be due from the Seller to the Buyer,
provided that if the Closing Current Liabilities exceed the sum of the Closing
Current Assets, the Working Capital Adjustment will be an amount equal to the
sum of (x) the amount by which the Closing Current Liabilities exceed the sum of
the Closing Current Assets, and (y) the Working Capital Reference Amount, which
amount shall be due from the Seller to the Buyer. All amounts due under this
Section 2.8(d) shall be paid pursuant to Section 2.10.
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Section 2.9. EBITDA Adjustment.
(a) 2002 Income Statement and EBITDA Certificate. Concurrently with
delivery of the Closing Statement, the Seller shall deliver to the Buyer an
unaudited statement of revenues and expenses of the Business for the calendar
year ended December 31, 2002 (the "2002 Income Statement"), together with a
report from PWC in the form of Exhibit B, and (ii) a certificate setting forth
the EBITDA for the year ended December 31, 2002, based on the amounts set forth
in the 2002 Income Statement (the "EBITDA Certificate"). There shall be attached
to the EBITDA Certificate an annex setting forth in reasonable detail the
computation of the EBITDA for the year ended December 31, 2002 based upon the
2002 Income Statement. The 2002 Income Statement shall be prepared in accordance
with Mexican GAAP (except for the application of Bulletin B-10 of the Mexican
Institute of Public Accountants), using the same accounting methods, policies,
practices and procedures, with consistent classification, judgments, and
estimation methodology, as used in the preparation of the statement of revenues
and expenses of the Business included in the Reference Financial Statements,
except for changes in the allocation of corporate charges by Durango and the
Seller. The fees, costs and expenses of PWC shall be borne by the Seller.
(b) Disputes. (i) Subject to clause (ii) of this Section 2.9(b), for
purposes of the determination of the EBITDA Adjustment under this Section 2.9,
the 2002 Income Statement and the EBITDA Certificate delivered by the Seller to
the Buyer shall be deemed to be and shall be final, binding and conclusive on
the Parties, absent manifest error or fraud.
(ii) The Buyer may dispute any amounts reflected on the 2002 Income
Statement or the EBITDA Certificate, but only on the basis that the amounts
reflected on the 2002 Income Statement were not arrived at in accordance
with this Agreement; provided, however, that the Buyer shall have notified
the Seller and PWC in writing of each disputed item, specifying the amount
thereof in dispute and setting forth, in reasonable detail, the basis for
such dispute, within 30 calendar days of the Seller's delivery of the 2002
Income Statement to the Buyer. The Seller shall cause PWC to make its work
papers generated in connection with the preparation of the 2002 Income
Statement available to the Buyer and KPMG in connection with the Buyer's
review of the 2002 Income Statement. In the event of such a dispute, the
Seller and the Buyer shall attempt to reconcile their differences, and any
resolution by them as to any disputed amounts shall be final, binding and
conclusive on the Parties for purposes of the determination of the EBITDA
Adjustment under this Section 2.9 absent fraud. If the Seller and the Buyer
are unable to reach a resolution with such effect within 15 calendar days
after receipt by the Seller and PWC of the Buyer's written notice of
dispute, the Seller and the Buyer shall submit the items remaining in
dispute for resolution to the Independent Accounting Firm, which shall,
within 30 calendar days after the submission of such dispute to it,
determine (based solely on presentations by the Seller and the Buyer and
such additional information as the Independent Accounting Firm shall
request and on its accounting and other relevant expertise) and report to
the Buyer and the Seller upon such remaining disputed items, and such
report shall be final, binding and conclusive on the Seller and the Buyer.
The Buyer and the Seller each shall make available to the Independent
Accounting Firm their respective work papers generated in connection with
the preparation or review of the 2002 Income Statement and the EBITDA
Certificate.
19
The fees and disbursements of the Independent Accounting Firm shall be shared
equally by the Seller and the Buyer.
(c) The "Final 2002 Income Statement" and the "Final EBITDA
Certificate" shall be:
(i) if the Buyer does not dispute either the 2002 Income Statement or
the EBITDA Certificate delivered by the Seller within 30 calendar days of
the delivery thereof to the Buyer, the 2002 Income Statement and the EBITDA
Certificate delivered by the Seller;
(ii) if the Buyer and the Seller are able to resolve all disputes
raised by the Buyer with respect to the 2002 Income Statement and the
EBITDA Certificate delivered by the Seller, the 2002 Income Statement and
the EBITDA Certificate as prepared by the Seller modified to reflect the
resolution reached among the Parties; and
(iii) if the Independent Accounting Firm is retained to resolve any
disputes, the 2002 Income Statement and the EBITDA Certificate as prepared
by the Seller modified to reflect the resolution of any disputed items
reached among the Parties and the determination of the Independent
Accounting Firm with respect to all other disputed items.
(d) Calculation of EBITDA Adjustment. In the event that the Final
EBITDA is less than US$10,735,000, the "EBITDA Adjustment" will be an amount due
from the Seller to the Buyer equal to (i) 2.9 multiplied by (ii) the amount by
which (x) the Final EBITDA is less than (y) US$11,735,000. All amounts due under
this Section 2.9(d) shall be paid pursuant to Section 2.10.
Section 2.10. Release of Holdback Amount. (a) On any date on which the
Holdback Amount is greater than US$0 that any Outstanding Claim is finally
determined to result in an obligation of the Seller to pay to a Buyer Indemnitee
any amount pursuant to the Seller's indemnification obligations set forth in
Article XII, the Buyer shall be entitled to, and agrees that in lieu of its
rights to payment and setoff pursuant to Section 12.5 it shall, (i) retain an
amount of the Holdback Amount equal to the aggregate amount of such obligation
and all Pending Indemnification Obligations to which the Buyer is entitled to
payment under Article XII in full satisfaction of such obligation and such
Pending Indemnification Obligations, or (ii) in the event that the Holdback
Amount as of such date is less than the aggregate amount of such obligation and
all Pending Indemnification Obligations to which the Buyer is entitled to
payment under Article XII, the Buyer shall be entitled to retain the Holdback
Amount in partial satisfaction of such obligation and such Pending
Indemnification Obligations.
(b) Prior to the Purchase Price Adjustment Date, on the third Business
Day following any date on which the Holdback Amount exceeds the sum of the
Remaining VAT Holdback Amount, the Purchase Price Adjustment Holdback Amount,
the Indemnity Holdback Amount, the aggregate amount of all Outstanding Claims as
of such date and the aggregate amount of all Pending Indemnification Obligations
as of such date, the Buyer shall pay to Seller a Holdback Payment equal to the
amount by which the Holdback Amount on such date exceeds the sum of the
Remaining VAT Holdback Amount on such date, the Purchase Price Adjustment
Holdback
20
Amount, the Indemnity Holdback Amount, the aggregate amount of all Outstanding
Claims as of such date and the aggregate amount of all Pending Indemnification
Obligations as of such date, by wire transfer of immediately available funds to
an account specified in writing by the Seller.
(c) On the third Business Day following the Purchase Price Adjustment
Date:
(i) If the Purchase Price Adjustment is an amount due to the
Seller,
(A) the Buyer will pay to the Seller an amount equal to the
amount, if any, by which the sum of the Purchase Price Adjustment
and the Holdback Amount on the Purchase Price Adjustment Date
exceeds the sum of the Remaining VAT Refund Amount on the
Purchase Price Adjustment Date, the Indemnity Holdback Amount,
the aggregate amount of all Outstanding Claims as of the Purchase
Price Adjustment Date and the aggregate amount of all Pending
Indemnification Obligations as of the Purchase Price Adjustment
Date, by wire transfer of immediately available funds to an
account specified in writing by the Seller, and
(B) the amount, if any, by which the Purchase Price
Adjustment exceeds the amount paid pursuant to clause (1) above
will be added to the Holdback Amount; and
(ii) if the Purchase Price Adjustment is an amount due to the
Buyer
(A) If the Purchase Price Adjustment is less than or equal
to the lesser of the Purchase Price Adjustment Holdback Amount
and the Holdback Amount, the Buyer shall retain from the Holdback
Amount an amount equal to the Purchase Price Adjustment in full
satisfaction of the Purchase Price Adjustment; and
(B) If the Purchase Price Adjustment is greater than the
lesser of the Purchase Price Adjustment Holdback Amount and the
Holdback Amount, (x) the Buyer shall retain the lesser of the
Purchase Price Adjustment Holdback Amount and the Holdback Amount
in partial satisfaction of the Purchase Price Adjustment, and (y)
the Seller shall pay to the Buyer an amount equal to the Purchase
Price Adjustment less the lesser of the Purchase Price Adjustment
Holdback Amount and the Holdback Amount by wire transfer of
immediately available funds to an account specified in writing by
the Buyer.
(d) After the third Business Day following the Purchase Price
Adjustment Date and on or prior to the first anniversary of the Closing Date, on
the third Business Day following any date on which the Holdback Amount exceeds
the sum of the Remaining VAT Refund Amount on such date, the Indemnity Holdback
Amount, the aggregate amount of all Outstanding Claims as of such date and the
aggregate amount of all Pending Indemnification Obligations as of such date, the
Buyer shall pay to Seller (A) a Holdback Payment equal to the amount by which
the Holdback Amount on such date exceeds the sum of the Remaining VAT Refund
Amount on such date, the Indemnity Holdback Amount, the aggregate amount of all
Outstanding Claims as
21
of such date and the aggregate amount of all Pending Indemnification Obligations
as of such date, plus (B) interest on the amount of such Holdback Payment
(determined with respect to each VAT Refund or portion thereof funding such
Holdback Payment from and including the respective VAT Refund Date to but
excluding the date of such Holdback Payment) at the Interest Rate, by wire
transfer of immediately available funds to an account specified in writing by
the Seller.
(e) On the first anniversary of the Closing Date and on each Business
Day thereafter on which the Holdback Amount is greater than US$0, the Buyer
shall pay to Seller (i) a Holdback Payment equal to the Holdback Amount on such
Business Day less the aggregate amount of all Outstanding Claims and the
aggregate amount of all Pending Indemnification Obligations on such Business Day
(the "Remaining Holdback"); provided that if all or any portion of the
Outstanding Claims or Pending Indemnification Obligations on such Business Day
arise solely from indemnification pursuant to Section 12.2(a)(i), 12.2(a)(ii)(A)
or 12.2(b), such portion of the Outstanding Claims and Pending Indemnification
Obligations shall be included in the Remaining Holdback only to the extent that
such Outstanding Claims and Pending Indemnification Obligations, if resolved in
favor of the Buyer, would result in a payment obligation under Section
12.7(b)(ii), plus (ii) interest on the amount of such Holdback Payment
(determined with respect to each VAT Refund or portion thereof funding such
Holdback Payment (if any) from and including the respective VAT Refund Date to
but excluding the date of such Holdback Payment) at the Interest Rate, by wire
transfer of immediately available funds to an account specified in writing by
the Seller.
(f) In determining the amount of any interest payments to be made
pursuant to this Section 2.10, each Holdback Payment with respect to which such
interest is due shall be deemed to be funded by VAT Refunds and such VAT Refunds
or portions thereof shall be deemed applied against Holdback Payments in the
inverse order of receipt by the Buyer; provided that to the extent that any
Holdback Payment, when added to the aggregate amount of all Holdback Payments
made to and including such date, exceeds the Initial Holdback Amount, the amount
of such excess shall bear interest at the Interest Rate from and including the
Purchase Price Adjustment Date to but excluding the date of such Holdback
Payment.
Section 2.11. Allocation of Purchase Price. The Seller and the Buyer
shall use their reasonable best efforts to agree upon an allocation of the
Purchase Price and other relevant items (the "Purchase Price Allocation") for
federal, state, local and foreign tax purposes on or prior to the Closing, which
allocation shall be annexed as Schedule 2.11 of this Agreement at the Closing.
The Buyer shall deliver to the Seller a proposed allocation of the Purchase
Price and other relevant items for the Seller's review and approval and the
Seller shall promptly review and approve or disapprove of such allocation.
Neither the Buyer nor the Seller shall take any position inconsistent with the
allocation agreed pursuant to this Section 2.11 or otherwise set forth in a
sales invoice delivered in compliance with Section 8.12, except as may be
required by law, without the consent of the other Party. The Purchase Price
Allocation determined in accordance with this Section 2.11 or otherwise set
forth in a Sales Invoice delivered in compliance with Section 8.12 shall be
appropriately adjusted to reflect any subsequent adjustment to the Purchase
Price based upon the particular tax asset to which such adjustment relates. Such
adjusted Purchase Price Allocation shall be determined in a manner consistent
with
22
Schedule 2.11 or, alternatively, the allocation set forth in a sales invoice
delivered in compliance with Section 8.12.
Section 2.12. Taxes. (a) (i) All Straddle Taxes shall be paid by the
Party that, pursuant to applicable Law, is liable for such Taxes. Any interest,
penalties or additions to tax caused by late payment shall be borne by the Party
whose failure caused such interest, penalties or additions to tax.
Notwithstanding the identity of the Party paying the Straddle Taxes, Straddle
Taxes (aside from interest, penalties or additions to tax, which shall be
apportioned as provided for in the prior sentence) shall be apportioned as
follows: (A) in the case of VAT with respect to water bills and electrical
energy bills, they shall be allocated between the Seller on the one hand and the
Buyer on the other hand, based upon the amount which would be payable if the
relevant taxable period ended on the Closing Date, and (B) in the case of real
estate property Taxes, they shall be allocated between the Seller on the one
hand and the Buyer on the other hand, based upon the relative number of days in
the portion of the taxable period up to and including the Closing Date and the
relative number of days in the portion of the taxable period subsequent to the
Closing Date. Any refund or credit of Straddle Taxes shall be allocated between
the Seller on the other hand and the Buyer on the other hand, in a manner
consistent with the preceding sentence.
(ii) The Parties acknowledge that they have attempted to estimate the
amount of Straddle Taxes to be allocated between the Parties. Upon the
payment of any Straddle Tax by the Buyer or the Seller, the Party paying
such Straddle Tax shall promptly provide a written notice to the other
Party indicating the amount of such Straddle Tax so paid (including a copy
of any return relating to, and evidence of payment of, such Straddle Tax),
each Party's allocable share of such Straddle Tax, and the amount of such
Straddle Tax tentatively allocated to each Party pursuant to the statement
of Estimated Buyer Straddle Taxes and Estimated Seller Straddle Taxes
produced pursuant to Section 2.4. The Parties shall promptly make such
payments between each other (if any) necessary to true up the allocation of
Straddle Taxes required by Section 2.12(a)(i), taking into account the
Closing adjustments made based on the Estimated Seller Straddle Taxes
calculated pursuant to Schedule 2.4.
(b) The Seller shall pay to the Servicio de Administracion Tributaria
the VAT payable with respect to the sale of the Assessed Acquired Assets. The
Seller shall pay all other Transfer Taxes and the Buyer will reimburse the
Seller for one-half of the aggregate amount of such other Transfer Taxes;
provided that (i) if the Seller delivers a notice to the Buyer in the form of
Exhibit J pursuant to Section 8.13(c), the Buyer will reimburse the Seller for
the aggregate amount of such other Transfer Taxes, and (ii) if the Buyer
delivers a notice to the Seller in the form of Exhibit O pursuant to Section
9.9, the Buyer shall have no obligation to reimburse the Seller for any Transfer
Taxes. The Seller shall prepare and timely file all necessary tax returns and
other documentation with respect to all such Transfer Taxes. The Buyer shall
reasonably cooperate with the Seller in the preparation and filing of any such
tax returns and other documentation.
23
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer as follows:
Section 3.1. Organization; Power. Each of Durango and the Seller is a
sociedad anonima de capital variable duly organized and validly existing under
the laws of the United Mexican States and has all requisite corporate power and
authority to carry on its business as it is now being conducted, to execute,
deliver and perform this Agreement and each of the other Transaction Documents
to which it is a party, to carry out its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. Each of
Durango and the Seller is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which the properties owned or leased by it
or the operation of its business makes such licensing or qualification
necessary, except to the extent that the failure to be so licensed or qualified
would not have a Seller Material Adverse Effect.
Section 3.2. Authorization, Effect of Agreement. The execution,
delivery and performance by each of Durango and the Seller of this Agreement and
each of the other Transaction Documents to which it is a party, the performance
by each of Durango and the Seller of its obligations hereunder and thereunder
and the consummation by each of Durango and the Seller of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate action on the part of each of Durango and the Seller. This Agreement
has been, and upon its execution each of the other Transaction Documents to
which the Seller is a party shall have been, duly and validly executed and
delivered by each of Durango and the Seller party thereto. This Agreement
constitutes (assuming due authorization, execution and delivery by the Buyer),
and upon its execution each of the other Transaction Documents to which the
Seller is a party will constitute (assuming due authorization, execution and
delivery by all parties other than the Seller), a valid and binding obligation
of each of Durango or the Seller party thereto, enforceable against each of
Durango and the Seller party thereto in accordance with its terms, except to the
extent that such enforceability (i) may be limited by concurso mercantil,
bankruptcy, insolvency, reorganization or other similar laws relating to
creditors' rights generally, and (ii) is subject to general principles of
equity.
Section 3.3. Subsidiaries and Equity Interests. There are no
Subsidiaries or Affiliates of the Seller engaged in the Business. Upon
consummation of the transactions contemplated by this Agreement, none of the
Seller, its Subsidiaries or its Affiliates will be engaged in the Business or
any portion thereof.
Section 3.4. Consents. Except as set forth on Schedule 3.4, no Consent
is required to be obtained or made by the Seller or any of its Affiliates in
connection with the execution, delivery and performance by the Seller and
Durango of this Agreement or the other Transaction Documents or the consummation
by the Seller of the transactions contemplated hereby or thereby.
Section 3.5. No Violations. Except as set forth on Schedule 3.5, the
execution, delivery and performance by each of Durango and the Seller of this
Agreement and each of the other Transaction Documents to which it is a party and
the consummation by each of Durango and the Seller of the transactions
contemplated hereby and thereby (including the use by the Seller of proceeds
received from the consummation of any such transaction) will not, with or
without the giving of notice or the lapse of time, or both, (a) violate,
conflict with or result in breach of any
24
provisions of the constituent documents of the Seller or any of its Affiliates,
(b) conflict with or violate any Law or Governmental Order applicable to the
Seller or any of its Affiliates or any of their respective assets, properties or
businesses, (c) assuming the obtaining of all Consents set forth on Schedule
3.4, conflict with, result in any breach of, constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, or give to any Person any right of termination or acceleration
under, or result in the creation of any Encumbrance on any of Acquired Assets
pursuant to, any Contract or Permit to which the Seller or any of its Affiliates
is a party or by which any of the Acquired Assets or any other asset or property
of the Seller or any of its Affiliates is bound or affected.
Section 3.6 Financial Statements. (a) The Seller has delivered to the
Buyer (i) an unaudited balance sheet of the Business as of September 30, 2002
(the "Reference Balance Sheet"), and (ii) an unaudited statement of revenues and
expenses of the Business for the nine-month period ended September 30, 2002
(collectively with the Reference Balance Sheet, the "Reference Financial
Statements"), together with the report from PWC attached hereto as Exhibit C.
Copies of the Reference Financial Statements are included as Schedule 3.6.
Except as set forth on Schedule 3.6, the Reference Financial Statements (x) were
prepared in accordance with the books of account and other financial records of
the Business, (y) present fairly in all material respects the financial
condition and results of operations of the Business as of the dates thereof or
for the periods covered thereby, and (z) have been prepared in accordance with
Mexican GAAP, except for the effects derived from the application of Bulletin
B-10 of the Mexican Institute of Public Accountants.
(b) The Books and Records are in all material respects complete and
correct and have been maintained, in all material respects, in accordance with
all Laws and the constituent documents of the Seller.
Section 3.7. Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. Except as permitted or contemplated by this
Agreement, since September 30, 2002:
(a) The Seller has conducted the Business in the Ordinary Course and
there has not been any event, circumstance or development or combination of
events, circumstances or developments that, individually or in the
aggregate, has had or could reasonably be expected to have a Seller
Material Adverse Effect, and
(b) The Seller has not:
(i) permitted or allowed any of the Acquired Assets to be
subjected to any Encumbrance, except for Permitted Encumbrances;
(ii) except as set forth on Schedule 3.7(b)(ii), entered into
any Material Contract;
(iii) other than in the Ordinary Course, (A) delayed or postponed
the payment of any accounts payable, expenses or liabilities of the
Business, (B) accelerated or delayed the collection of receivables
related to the Business, or (C) accelerated or delayed the production,
acquisition or sale of Inventory;
25
(iv) except as set forth on Schedule 3.7(b)(iv), made any capital
expenditure or contract for any capital expenditure in connection with
the Business or the Acquired Assets involving expenditures in excess
of US$50,000 individually or US$100,000 in the aggregate;
(v) except as set forth on Schedule 3.7(b)(v), issued any sales
orders or otherwise agreed to make any purchases in connection with
the Business, other than in the Ordinary Course, involving
expenditures (in cash or otherwise) in excess of US$30,000
individually or US$100,000 in the aggregate;
(vi) except as set forth on Schedule 3.7(b)(vi), sold,
transferred, leased, subleased, licensed or otherwise disposed of any
properties or assets (real, personal or mixed including, without
limitation, leasehold interests and intangible assets) used or held
for use in connection with the Business and having a value in excess
of US$30,000 individually or US$100,000 in the aggregate, other than
the sale of inventories or obsolete equipment in the Ordinary Course;
(vii) except as set forth on Schedule 3.7(b)(vii)(A), increased
the wages, salaries, compensation, pension or other benefits payable,
or to become payable in connection with the Business, to any of its
officers, employees or agents, including, without limitation, any
bonus payments or severance or termination pay, other than increases
in wages and salaries required by employment arrangements existing on
the date hereof and set forth on Schedule 3.7(b)(vii)(B) or in the
Ordinary Course and set forth on Schedule 3.7(b)(vii)(B);
(viii) allowed any Permit that was issued in connection with or
relates to the Business or the Acquired Assets to lapse or terminate
or failed to renew any such Permit that is scheduled to terminate or
expire within 90 calendar days after the Closing Date, except for any
lapse, termination or failure to renew that individually or in the
aggregate could not reasonably be expected to have a Seller Material
Adverse Effect;
(ix) except as set forth on Schedule 3.7(b)(ix), materially
amended, modified or consented to the termination of any Material
Contract or any of the Seller's rights thereunder to the extent
arising or otherwise relating to any period on or after the Closing
Date;
(x) terminated, discontinued, closed or disposed of any plant,
facility or other business operation relating to the Business, or laid
off any Business Employees (other than layoffs of less than 50
employees in any six-month period in the Ordinary Course) or announced
or planned any such action for the future;
(xi) permitted to lapse or go abandoned any Business Intellectual
Property (or any registration or grant thereof or any application
relating thereto) except for lapses that individually or in the
aggregate could not reasonably be expected to have a Seller Material
Adverse Effect;
26
(xii) suffered any casualty loss or damage with respect to any of
the Acquired Assets which in the aggregate have a replacement cost of
more than US$250,000, whether or not such loss or damage shall have
been covered by insurance; or
(xiii) agreed, whether in writing or otherwise, to take any of
the actions specified in this Section 3.7 or granted any options to
purchase, rights of first refusal, rights of first offer or any other
similar rights or contracts with respect to any of the actions
specified in this Section 3.7.
Section 3.8. No Undisclosed Liabilities. There are no liabilities
included in the Assumed Liabilities other than liabilities (a) reflected or
reserved against on the Reference Balance Sheet, (b) incurred or arising since
the date of the Reference Balance Sheet in the Ordinary Course or (c) that are
not, individually or in the aggregate, material to the Business.
Section 3.9. Title to and Sufficiency and Condition of Assets. (a) The
Seller owns, leases or has the legal right to use the Acquired Assets. Except
for Leased Real Property, the Leased Personal Property or as set forth on
Schedule 3.9, the Seller has good and marketable title to, and actual and
exclusive possession of, all of the properties and assets included in the
Acquired Assets. The Seller has valid and subsisting leasehold interests in the
Leased Real Property and the Leased Personal Property, free and clear of all
Encumbrances other than Permitted Encumbrances.
(b) The Acquired Assets constitute all the properties, assets and
rights which are necessary to enable the Buyer to conduct the Business at the
Facilities after the Closing in substantially the same manner as it was
conducted by the Seller in the Ordinary Course, without material disruption. The
Acquired Assets include all the material assets, properties and rights included
as assets on the Reference Balance Sheet or otherwise used or held for use by
the Seller or any of its Affiliates in the conduct of the Business, except for
Inventory sold, consumed or otherwise disposed of in the Ordinary Course since
September 30, 2002. The Tangible Personal Property is in such physical condition
and state of repair as to enable the Buyer to conduct the operations of the
Business in the Ordinary Course without material disruption. All material
Tangible Personal Property is included in the list set forth on Schedule
2.1(a)(i) and is in the same physical condition and state of repair as on the
date of the Reference Balance Sheet, ordinary wear and tear excepted.
(c) Immediately following the Closing, the Buyer will (i) own, free
and clear of all Encumbrances (other than Permitted Encumbrances and
Encumbrances imposed at the direction of the Buyer), all Acquired Assets (other
than the Leased Real Property, the Leased Personal Property and the Titan
Monterrey Mill), (ii) hold, under valid and subsisting leases, all the right,
title and interest of the Seller in, to and under the Leased Real Property and
the Leased Personal Property, and (iii) hold, under a valid and subsisting
lease, the right, title and interest in, to and under the Titan Monterrey Mill
set forth in the Monterrey Facility Lease.
Section 3.10. Permits. The Assigned Permits are all the material
Permits held by the Seller or any of its Affiliates in connection with the
conduct of the Business. Neither the Seller nor any of its Affiliates have
received any notice from any Governmental Authority revoking, canceling,
rescinding, materially modifying or refusing to renew any Assigned Permit or
27
advising of violations under any Law that individually or in the aggregate could
reasonably be expected to have a Seller Material Adverse Effect. Except as set
forth on Schedule 3.10, (a) the Seller and each of its Affiliates are and have
been in compliance with the Assigned Permits and the requirements of the
Assigned Permits, except where the failure to comply therewith could not,
individually or in the aggregate, reasonably be expected to have a Seller
Material Adverse Effect, (b) the Assigned Permits are in full force and effect,
and (c) upon consummation of the transactions contemplated by this Agreement,
assuming that all Consents set forth on Schedule 3.4 are obtained, the Assigned
Permits shall continue in full force and effect without penalty or other adverse
consequence.
Section 3.11. Real Property. (a) Schedule 3.11(a) sets forth a true
and complete list of all of the real property owned by the Seller or any of its
Affiliates and used in the operation of the Business in the Ordinary Course or
which is reflected as an asset on the Reference Balance Sheet (the "Owned Real
Property").
(b) Except as set forth in Schedule 3.11(b), (i) the Seller has not
made any agreement to lease, license, sell, mortgage or otherwise encumber the
Owned Real Property (or any portion thereof), or given any other Person an
option to purchase or rights of first refusal overall or any portion of the
Owned Real Property; (ii) the Seller has good and marketable title to the Owned
Real Property, free from all Encumbrances other than Permitted Encumbrances;
(iii) to the Knowledge of the Seller, there are no physical, mechanical or
structural defects in or concerning the buildings and other improvements
constituting part of the Owned Real Property which defects, individually or in
the aggregate, would reasonably be expected to result in a Seller Material
Adverse Effect; (iv) there are no leases, subleases, licenses, concessions or
other agreements (written or oral) granting to any Person or Persons the right
to use or occupancy of any portion of the Owned Real Property; and (v) there are
no Persons, other than the Seller, in possession of the Owned Real Property.
(c) Schedule 2.1(a)(vii)(A) sets forth a true and complete list of all
leases of real property (the "Real Property Leases") used in the operation of
the Business in the Ordinary Course or reflected on the Reference Balance Sheet
(the "Leased Real Property") to which the Seller or any of its Affiliates is a
party. Except as disclosed on Schedule 3.11(c), each Real Property Lease (i) is
valid, binding and enforceable against the Seller and each of its Affiliates
party thereto, and, to the Knowledge of the Seller, the other parties thereto,
except to the extent that such enforceability (A) may be limited by concurso
mercantil, bankruptcy, insolvency, reorganization or other similar laws relating
to creditors' rights generally and (B) is subject to general principles of
equity; (ii) is in full force and effect and represents the entire agreement
between the respective landlord and the Seller with respect to the use and
occupancy of such Leased Real Property; and (iii) upon consummation of the
transactions contemplated by this Agreement, assuming that all Consents set
forth on Schedule 3.4 are obtained, will continue in full force and effect
without penalty or other adverse consequence. In addition, the Seller (w) has
not received any notice of cancellation or termination under any such Real
Property Lease or given notice to the landlord of any Leased Real Property of an
intention to exercise a right of early termination with respect to all or part
of any Leased Real Property, (x) is not in breach of, or default under, any such
Real Property Lease, which breach or default has not been cured or could
reasonably be expected, individually or in the aggregate, to have a Seller
Material Adverse Effect, (y) does not have Knowledge of any uncured breach or
default under any Real Property
28
Lease, which breach or default, individually or in the aggregate, could
reasonably be expected to result in a Seller Material Adverse Effect, or (z)
other than as set forth on Schedule 3.11(c), has not granted to any other Person
any rights, adverse or otherwise, under any such Real Property Lease.
Section 3.12. Compliance with Laws. Except as set forth on Schedule
3.12, the Seller and each of its Affiliates is and has been in compliance with
all laws, rules and regulations, orders, judgments and decrees applicable the
operation of the Business or the use, operation or ownership of the Acquired
Assets, except where the failure to comply therewith individually or in the
aggregate could not reasonably be expected to have a Seller Material Adverse
Effect.
Section 3.13. Contracts. (a) Schedule 3.13(a) sets forth a true and
complete list of the following Contracts to which the Seller or any of its
Affiliates is a party or a beneficiary (collectively, the "Material Contracts"):
(i) each Contract (or group of related Contracts) for the purchase of
inventory, spare parts, other materials or personal property with any
supplier or for the furnishing of services to the Seller or any of its
Affiliates related to the Business or the Acquired Assets under the terms
of which a party thereto could be reasonably expected to pay or otherwise
give consideration of more than US$100,000 in the aggregate over the
remaining term of such Contract;
(ii) each Contract (or group of related Contracts) for the sale of
inventory or other personal property or for the furnishing of services by
the Seller or any of its Affiliates related to the Business, the Acquired
Assets or the Facilities under the terms of which a party thereto could be
reasonably expected to pay or otherwise give consideration of more than
US$100,000 in the aggregate over the remaining term of such Contract;
(iii) all broker, distributor, dealer, manufacturer's representative,
franchise, agency, sales promotion, market research, marketing, consulting
and advertising Contracts related to the Business under the terms of which
a party thereto could be reasonably expected to pay or otherwise give
consideration of more than US$100,000 in the aggregate over the remaining
term of such Contract;
(iv) all management Contracts and Contracts with independent
contractors or consultants (or similar arrangements) related to the
Business, the Facilities or any of the Acquired Assets under the terms of
which a party thereto could reasonably be expected to pay or otherwise give
consideration of more than US$100,000 in the aggregate over the remaining
term of such Contract;
(v) each Contract (or group of related Contracts) relating to the
operation of the Real Property under the terms of which a party thereto
could reasonably be expected to pay or otherwise give consideration of more
than US$100,000 in the aggregate over the remaining term of such Contract;
(vi) all Contracts relating to any Indebtedness secured by the
Acquired Assets;
29
(vii)all Contracts related to the Business or any of the Acquired
Assets to which any Governmental Authority is a party;
(viii) all Contracts that limit or purport to limit the ability of the
Seller or any of its Affiliates to compete or otherwise conduct business
(or granting any right of first refusal, first offer, first negotiation or
other option) with respect to the manufacture of molded pulp products with
any Person or in any geographic area or during any period of time;
(ix) all Contracts related to the Business, the Acquired Assets, or
the Assumed Liabilities between or among the Seller and any of its
Affiliates;
(x) all Contracts related to the material Business Intellectual
Property;
(xi) all Contracts providing for continuing service arrangements on or
after the Closing Date with respect to the Acquired Assets or the Business;
(xii) all Contracts providing for continuing warranties covering any
of Acquired Assets;
(xiii) all Contracts for fuel, energy or water which are used in
connection with the Business or by the Acquired Assets; and
(xiv) any other Contracts which are material to the operation of the
Business or to the Acquired Assets or Assumed Liabilities.
(b) Except as disclosed on Schedule 3.13(b), each Assigned Contract:
(i) is valid and binding and enforceable against the Seller and each of its
Affiliates party thereto, and, to the Knowledge of the Seller, the other parties
thereto, except to the extent that such enforceability (A) may be limited by
concurso mercantil, bankruptcy, insolvency, reorganization or other similar laws
relating to creditors' rights generally, and (B) is subject to general
principles of equity; (ii) is in full force and effect; and (iii) upon
consummation of the transactions contemplated by this Agreement, assuming that
all Consents set forth on Schedule 3.4 are obtained, shall continue in full
force and effect without penalty or other adverse consequence.
(c) The Seller is not in breach of, or default under, any Assigned
Contract, except for breaches or defaults which individually or in the aggregate
could not reasonably be expected to have a Seller Material Adverse Effect, and,
except as disclosed on Schedule 3.13(c), to the Knowledge of the Seller, no
other party to any Assigned Contract is in breach thereof or default thereunder,
except for breaches or defaults which individually or in the aggregate could not
reasonably be expected to have a Seller Material Adverse Effect.
Section 3.14. Intellectual Property. Schedule 3.14(a) sets forth a
true and complete list of all material items of Business Intellectual Property.
Except as disclosed on Schedule 3.14(b), or except as could not reasonably be
expected to have a Seller Material Adverse Effect (whether individually or in
the aggregate):
30
(a) the Seller owns free and clear of all Encumbrances (other than
Permitted Encumbrances), or possesses under valid licenses all rights to use,
all Business Intellectual Property, and upon consummation of the transactions
contemplated by this Agreement, the Buyer will acquire all of the Seller's
ownership or rights to use the Business Intellectual Property, and such
ownership or rights to use the Business Intellectual Property will not be
impaired or adversely affected by the transactions contemplated by this
Agreement;
(b) to the Knowledge of the Seller, all Business Intellectual Property
is valid and enforceable, and no claim or action is pending or threatened that
challenges the validity, enforceability, ownership, or right to use, sell, or
license any Business Intellectual Property;
(c) to the Knowledge of the Seller, no item of Business Intellectual
Property nor the use of any item of Business Intellectual Property in the
conduct of the Business does or will infringe upon or misappropriate the
Intellectual Property of any third party;
(d) no claim or action is pending or, to the Knowledge of the Seller,
threatened that alleges that any Business Intellectual Property or the use
thereof in the conduct of the Business infringes upon or misappropriates any
Intellectual Property or any other rights of any Person;
(e) to the Knowledge of the Seller, no third party is infringing upon
or misappropriating any Business Intellectual Property; and
(f) the Seller is not currently is in breach of any licenses under
which any items of Business Intellectual Property are held for use in the
Business, and currently there is no event or situation that, with the giving of
notice or the passage of time, will give rise to any such breach or give to any
party the right to terminate or accelerate under any such licenses.
Section 3.15. Litigation. Except as set forth on Schedule 3.15, there
are no Actions by or against the Seller or any of its Affiliates affecting the
Business or any of the Acquired Assets or Assumed Liabilities pending (or, to
the Knowledge of the Seller, threatened). Except as disclosed on Schedule 3.15,
none of the matters disclosed on Schedule 3.15 could reasonably be expected to
have a Seller Material Adverse Effect or could reasonably be expected to affect
the legality, validity or enforceability of this Agreement or the other
Transaction Documents. Neither the Business nor any of the Acquired Assets or
Assumed Liabilities is subject to any Governmental Order (nor, to the Knowledge
of the Seller, are there any such Governmental Orders threatened to be imposed
by any Governmental Authority) that could reasonably be expected, individually
or in the aggregate, to have a Seller Material Adverse Effect.
Section 3.16. Employee Benefit Plans. (a) Schedule 3.16(a) sets forth
a true and complete list of each Employee Benefit Plan.
(b) The execution of this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby (alone or together with any other event which, standing alone, would not
by itself constitute such a triggering event) will not constitute a triggering
event under any Employee Benefit Plan which will result in any acceleration of
the payment or vesting of any benefits to any Business Employee or in any
31
increase in benefits provided under the Employee Benefit Plans; and no
liability, claim, action, litigation, audit, examination, investigation or
administrative proceeding has been made, commenced or, to the Knowledge of the
Seller, threatened with respect to any Employee Benefit Plan (other than routine
claims for benefits payable in the Ordinary Course) which could result in a
material liability of the Seller or any of its Affiliates.
(c) The Seller has delivered or caused to be delivered to the Buyer or
its counsel true and complete copies of each Employee Benefit Plan, together
with all amendments thereto, and, to the extent applicable, all current summary
plan descriptions.
(d) The Employee Benefit Plans fulfill all of the Seller's obligations
to the Business Employees under any agreement with such Business Employees,
under Law or otherwise.
(e) Schedule 3.16(e) sets forth a true and complete list of each
Former Employee and the pension benefits payable to such Former Employee (the
"Pension Obligations") (including all payments made to such Former Employee with
respect to such pension plans during calendar year 2002).
Section 3.17. Tax Matters. (a) The Seller has filed all Tax Returns
that it was required to file, and has paid all Taxes due, except where the
failure to file Tax Returns or to pay Taxes could not reasonably be expected to
have a Seller Material Adverse Effect.
(b) There are no Encumbrances (other than liens of Taxes not yet due
and payable) with respect to Taxes on any material Acquired Assets.
(c) Except as set forth in Schedule 3.17(a), each of the following
statements is true and correct. The Reference Financial Statements contain
adequate provisions, in accordance with Mexican GAAP, for all Taxes required to
have been accrued or for which the Seller may be liable as of the date thereof
with respect to the Business. The Seller is not presently under any Tax
examination with respect to the Business, nor has the Seller received any
written notice (official, unofficial or otherwise) in respect thereof, for the
assessment or the proposed assessment or for the collection of any Taxes with
respect to the Business nor are there any audits or other Actions presently
pending with regard to any Taxes or Tax Returns of the Seller related to the
Business. There are no agreements in effect to extend the period of limitations
for the assessment or collection of any Taxes for which the Seller may become
liable with respect to the Business and no requests for any such agreements are
pending. The Seller has withheld from the Business Employees, any independent
contractors that have performed services with respect to the Business and
creditors of the Business and timely paid to the appropriate authority proper
and accurate amounts for all periods through the date hereof in compliance with
all Tax withholding provisions of all applicable Laws. The Seller is not a party
to, bound by or has any obligation under any agreement or authorization for the
sharing of Taxes with respect to the Business or any similar contract or
arrangement or any agreement that obligates the Seller to make any payment
computed by reference to the Taxes, taxable income or taxable losses of any
other Person.
(d) Schedule 3.17(d) sets forth a description of all Straddle Taxes,
including the average of the last three payments required to be made in respect
of each such Straddle Tax.
32
(e) Schedule 3.17(e) sets forth a description of all Transfer Taxes
payable by any of the Parties with respect to the transactions contemplated by
this Agreement. The amount of such Transfer Taxes shall not exceed the amounts
set forth on Schedule 3.17(e).
Section 3.18. Environmental Matters. Except as set forth in Schedule
3.18: (a) the Seller has obtained all Environmental Permits which are required
under Environmental Laws in connection with the operation of the Business as
presently conducted and all such Environmental Permits are set forth on Schedule
2.1(a)(vi); (b) each such Environmental Permit is in full force and effect and
the Business and the Facilities have been and are in compliance with the terms
and conditions of all such Environmental Permits and with any applicable
Environmental Law; (c) to the Knowledge of the Seller, no hazardous or toxic
materials or wastes are present or within the applicable statute of limitations
have been used, stored, disposed of, discharged or released at, on or under the
Facilities or, to the extent arising from the Seller's activities or operations
at, on or under any other properties that require notification, investigation or
remediation or could give rise to a Third-Party Claim pursuant to Environmental
Laws; and (d) in connection with the Business, the Seller has not received any
notice that it is liable for any (i) any violation of any applicable
Environmental Law or Environmental Permit, (ii) disposal, discharge or release
of any hazardous or toxic materials or wastes, (iii) harm to human health or the
environment or (iv) any response, removal, investigative or remedial costs under
any applicable Environmental Law.
Section 3.19. Labor Matters. (a) Except as set forth on Schedule
3.19(a): (i) the Seller is not a party to any collective bargaining agreement or
other labor union contract applicable to Persons currently employed by the
Seller in connection with the Business and currently, to the Knowledge of the
Seller, there are no organizational campaigns, petitions or other unionization
activities seeking recognition of a collective bargaining unit which could
reasonably be expected to have a Seller Material Adverse Effect; (ii) except as
may result from the permitted announcement of the execution of this Agreement,
there are no controversies, strikes, strike procedures, slowdowns or work
stoppages pending or, to the Knowledge of the Seller, threatened between the
Seller and any Business Employee, and the Seller has not experienced any such
controversy, strike, strike procedures, slowdown or work stoppage within the
past twelve months in which Business Employees were involved; (iii) the Seller
has not breached or otherwise failed to comply with the provisions of any
collective bargaining agreement or labor union contract applicable to Persons
currently employed by the Seller in connection with the Business, and there are
no grievances outstanding against the Seller under any such agreement or
contract, which, in either case, could have a Seller Material Adverse Effect;
(iv) there are no complaints relating to unfair labor practices, wrongful
termination or severance obligations pending against the Seller before any
Governmental Authority involving Business Employees which could reasonably be
expected to have a Seller Material Adverse Effect; (v) the Seller has made all
payments in connection with the employment of the Business Employees required to
be made under applicable Law to the Instituto Mexicano del Seguro Social, the
Instituto del Fondo Nacional de la Vivienda para los Trabajadores, the
Patrimonio de la Vivienda Grupo Industrial A.C. and Sistema de Ahorro Para el
Retiro; and the Seller has been and is currently in compliance in all material
respects with all applicable Laws relating to the employment of the Business
Employees, including those related to wages, hours, collective bargaining and
the payment and withholding of Taxes as required by the appropriate Governmental
Authority, and has withheld and paid to the appropriate Governmental Authority
or are holding for payment not
33
yet due to such Governmental Authority all amounts required to be withheld from
Business Employees and are not liable for any material arrears of wages, taxes,
penalties or other sums for failure to comply with any of the foregoing.
(b) The list of Active and Inactive Employees set forth in Schedule
3.19(b) is a true and complete list of all Active and Inactive Employees
(including any employee identification number, date of hire, current title or
position and base salary (except in the case of Xxxxxxxxx Xxxx) for each such
Active and Inactive Employee). The Active Employees and Inactive Employees set
forth in Schedule 3.19(b) constitute all the employees of the Seller or its
Affiliates to whom the Buyer will be required, under the provisions of Article
41 of the Mexican Federal Labor Law, to give notice at the Closing of an
employer labor substitution.
Section 3.20. Receivables. Except to the extent, if any, reserved for
on the Reference Balance Sheet and as set forth on Schedule 3.20, all accounts
receivable related to the Business reflected on the Reference Balance Sheet
arose from, and the accounts receivable related to the Business existing on the
Closing Date will have arisen from, the sale of inventory or services to Persons
who are not Affiliates of the Seller and in the Ordinary Course.
Section 3.21. Inventories. (a) Subject to amounts reserved therefor on
the Reference Balance Sheet, the values at which all Inventories are carried on
the Reference Balance Sheet reflect the inventory valuation policy of the Seller
of stating such Inventories at the lower of cost (determined on the average cost
method) or market value. Except as set forth on Schedule 3.21, the Seller has
good title to the Inventories reflected on the Reference Balance Sheet and
Inventories existing at the Closing free and clear of all Encumbrances other
than Permitted Encumbrances. The Seller is not under any obligation or liability
with respect to accepting returns of items of Inventory or merchandise in the
possession of its customers other than in the Ordinary Course. No clearance sale
of the Inventories has been conducted since January 1, 2002. The Seller has not
acquired nor committed to acquire or manufacture Inventory for sale which is not
of a quality and quantity usable in the Ordinary Course, nor has the Seller
changed the price of any Inventory except for (i) price reductions to reflect
any reduction in the cost thereof to the Seller, (ii) reductions and increases
responsive to normal competitive conditions and consistent with the Seller's
past sales practices and (iii) increases to reflect any increase in the cost
thereof to the Seller.
(b) The Inventories reflected on the Reference Balance Sheet are, and
the Inventories existing on the Closing Date will be, in good and merchantable
condition in all material respects, are suitable and usable for the purposes for
which they are intended and are or will be in a condition such that they can be
sold in the Ordinary Course.
Section 3.22. Prepaid Expenses. Except as provided in Schedule 3.22,
all prepaid expenses reflected on the Reference Balance Sheet under "Current
Assets," and all the expenses related to the Business that were prepaid
subsequent to September 30, 2002, were prepaid in accordance with the Ordinary
Course. There has not been any material write-down or write-off, or other
adjustment to, such prepaid expenses since September 30, 2002, except for
amortization in the Ordinary Course.
34
Section 3.23. Accounts Payable. Except as set forth in Schedule 3.23,
all accounts payable and accrued expenses reflected on the Reference Balance
Sheet, and all accounts payable and accrued expenses related to the Business
that were incurred subsequent to September 30, 2002, were incurred and have been
paid in the Ordinary Course. Schedule 3.23 sets forth as of the date stated
therein the trade payables related to the Business that are more than 90 days
overdue.
Section 3.24. Certain Related Party Interests. (a) Except as set forth
on Schedule 3.24(a), no Officer and no relative or spouse (or relative of such
spouse) who resides with, or is a dependent of, any such Officer:
(i) has any direct or indirect financial interest in any competitor,
supplier or customer of the Business; provided, however, that ownership of
shares representing less than 5% of the outstanding voting power of any
competitor, supplier or customer, which are listed on any national
securities exchange or traded actively in the national over-the-counter
market, shall not be deemed to be a "financial interest" so long as the
Person owning such securities has no other connection or relationship with
such competitor, supplier or customer;
(ii) owns, directly or indirectly, in whole or in part, or has any
other interest in any tangible or intangible property which the Seller uses
or has used in the conduct of the Business (including any of the Acquired
Assets or the Assumed Liabilities); or
(iii) is a party to or beneficiary of any Assigned Contract.
(b) Except as set forth on Schedule 3.24(b), since January 1, 2002,
neither the Seller nor any of its Affiliates has entered into or engaged in any
transaction with or relating to the Business or the Acquired Assets or Assumed
Liabilities (including through the provision of services) with any Affiliate of
the Seller other than transactions entered into in the Ordinary Course and which
are on an arms'-length basis. Except as set forth on Schedule 3.24(b), the
preceding sentence would be true and correct if the Business had been a
stand-alone juridical entity that was a Subsidiary of the Seller since January
1, 2002 rather than a division of the Seller.
(c) There are no outstanding Contracts or other transactions between
the Seller and any of its Affiliates which, upon consummation of the
transactions contemplated by this Agreement and the other Transaction Documents,
would give rise to any obligation (contingent or otherwise) of the Seller or the
Buyer or would otherwise be material to the Business, the Assumed Liabilities or
the Acquired Assets.
Section 3.25. Brokers. Except for the fees payable to Xxxxxxxxxx
Xxxxxxx & Co., which are the sole responsibility of the Seller, the Seller has
not paid or become obligated to pay any fee or commission to any broker, finder,
or intermediary in connection with the transactions contemplated hereby. The
Buyer shall not, through the transfer of the Acquired Assets or otherwise, have
any obligations in respect of any such fees or commissions.
Section 3.26. Ethical Conduct. Neither the Seller nor any of its
Affiliates has made an offer, payment, promise to pay or authorization of the
payment of any money, or other property,
35
gift, promise to give, or authorization of the giving of anything of value to
any employee or official of a Governmental Authority, court or arbitration
tribunal, to any political party, domestic or foreign (or official thereof) or
candidate for political office or to any other Person who was or is in a
position to help or hinder the Seller (a) that was with the intent or purpose of
inducing such official to do or omit to do any act in violation of the lawful
duty of such official; (b) that would cause the Seller to have violated or be in
violation of any applicable Law subject to damages or penalties in a civil or
criminal proceeding; or (c) that could reasonably be expected to have a Seller
Material Adverse Effect if not continued.
Section 3.27. Accuracy of Disclosure. (a) The Seller has provided, or
otherwise made available in a data room to which the Buyer and its
representatives have had access or otherwise, to the Buyer or its
representatives true and complete copies of (i) all material pleadings, motions,
briefs or other filings in respect of any Action listed in the Schedules, (ii)
the Books and Records, and (iii) all Assigned Contracts, other than Assigned
Contracts which are designated as unwritten on Schedule 2.1(a)(vii), Assigned
Permits, Employee Benefit Plans and other documents listed in the Schedules. The
Seller has disclosed to the Buyer the material terms of each Assigned Contract
which is designated as unwritten on Schedule 2.1(a)(vii).
(b) This Agreement (including, without limitation, the Schedules) does
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained herein not misleading.
Section 3.28. Solvency of the Seller. The Seller is solvent as of the
date hereof, and the consummation of the transactions contemplated by this
Agreement and the other Transaction Documents will not have as a consequence the
insolvency of the Seller. For purposes of this Section 3.28, the term "solvency"
shall have the meaning assigned thereto by the Mexican Federal Civil Code
(Codigo Civil Federal) as in effect on the date hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
Section 4.1. Organization; Power. The Buyer is a sociedad de
responsibilidad limitada de capital variable organized under the laws of the
United Mexican States duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to carry on its business as it is now being
conducted, to execute, deliver and perform this Agreement and each of the other
Transaction Documents to which it is a party, to carry out its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby.
Section 4.2. Authorization; Effect of Agreement. The execution,
delivery and performance by the Buyer of this Agreement and each of the other
Transaction Documents to which it is a party, the performance by the Buyer of
its obligations hereunder and thereunder and the consummation by the Buyer of
the transactions contemplated hereby and thereby have been duly authorized by
all requisite corporate action on the part of the Buyer. This Agreement has
been, and upon its execution each of the other Transaction Documents to which
the Buyer is a
36
party shall have been, duly and validly executed and delivered by the Buyer.
This Agreement constitutes (assuming due authorization, execution and delivery
by the Seller), and upon its execution each of the other Transaction Documents
to which the Buyer is a party will constitute (assuming due authorization,
execution and delivery by all parties other than the Buyer), a valid and binding
obligation of the Buyer, enforceable against the Buyer in accordance with its
terms, except to the extent that such enforceability (a) may be limited by
concurso mercantil, bankruptcy, insolvency, reorganization or other similar laws
relating to creditors' rights generally, and (b) is subject to general
principles of equity.
Section 4.3. Consents. Except as set forth in Schedule 4.3, no Consent
is required to be obtained or made by the Buyer in connection with the
execution, delivery and performance by the Buyer of this Agreement or any of the
other Transaction Documents or the consummation by it of the transactions
contemplated hereby and thereby.
Section 4.4. No Violations. The execution, delivery and performance by
the Buyer of this Agreement and each of the other Transaction Documents to which
the Buyer is a party and the consummation by the Buyer of the transactions
contemplated hereby and thereby will not, with or without the giving of notice
or the lapse of time, or both, (a) violate, conflict with or result in the
breach of any provision of the constituent documents of the Buyer, (b) conflict
with, or violate any Law or Governmental Order applicable to the Buyer or any of
its assets, properties or businesses, or (c) assuming the obtaining of all
Consents set forth on Schedule 4.3, conflict with, result in any breach of,
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, or give to any Person any right of
termination or acceleration under any Contract or Permit to which the Buyer is a
party or which the Buyer holds.
Section 4.5. Litigation. There are no Actions by or against the Buyer
pending (or, to the Knowledge of the Buyer or CVC, threatened) which could
reasonably be expected to have a Buyer Material Adverse Effect or could
reasonably be expected to affect the legality, validity or enforceability of
this Agreement or the other Transaction Documents. The Buyer is not subject to
any Governmental Order (nor, to the Knowledge of the Buyer or CVC, are there any
such Governmental Orders threatened to be imposed by any Governmental Authority)
which could reasonably be expected to have a Buyer Material Adverse Effect or
could reasonably be expected to affect the legality, validity or enforceability
of this Agreement or the other Transaction Documents.
Section 4.6. Availability of Funds. The Buyer has obtained, and
previously provided to the Seller, two fully executed commitment letters, dated
February 3, 2003, from Banco Mercantil del Norte, S.A., Institucion de Banca
Multiple, Grupo Financiero Banorte (the "Lender"), which provides for, subject
to certain conditions set forth therein, the financing necessary, together with
funds available to the Buyer, to consummate the transactions contemplated hereby
(the "Financing") and describing the terms and conditions upon which such Lender
will provide such financing (such commitment letters being collectively referred
to herein as the "Commitment Letter"). The Commitment Letter is in full force
and effect as of the date hereof. The Commitment Letter has not been amended or
modified or withdrawn or rescinded in any material respect and neither the Buyer
not any of its Affiliates is aware of any fact, event or circumstance which any
of them believes is likely to (i) prevent the conditions described in the
Commitment
37
Letter from being satisfied, (ii) prevent the Buyer from receiving financing
pursuant to the terms of the Commitment Letter or (iii) make any of the
assumptions set forth in the Commitment Letter unreasonable. The Lender has not
advised the Buyer or any of its Affiliates of any facts which cause them to
believe that the financing contemplated by the Commitment Letter will not be
consummated substantially in accordance with the terms thereof. All fees
required to be paid by the Buyer or any of its Affiliates on or prior to the
date hereof in respect of the Commitment Letter have been paid. The funds
committed under the Commitment Letter, together with the capital contributions
to be made to the Buyer are sufficient to enable the Buyer to pay the Purchase
Price and the Transfer Taxes and to pay the anticipated fees and expenses of the
Buyer related to the transactions contemplated hereby.
Section 4.7. Brokers. The Buyer has not paid or become obligated to
pay any fee or commission to any broker, finder or intermediary in connection
with the transactions contemplated hereby. The Seller shall not, through the
transfer of the Acquired Assets or otherwise, have any obligations in respect of
any such fees or commissions.
ARTICLE V
COVENANTS OF THE SELLER
The Seller hereby covenants and agrees with the Buyer as follows:
Section 5.1. Action by the Seller. From the date hereof until the
Closing, the Seller will use commercially reasonable efforts, and the Buyer will
cooperate with the Seller, to secure all Consents from third parties as shall be
required, on behalf of the Seller or its Affiliates, in order to enable the
Seller to effect the transactions contemplated hereby and by the other
Transaction Documents, and the Seller will otherwise use its commercially
reasonable efforts to cause the consummation of such transactions in accordance
with the terms and conditions hereof and thereof.
Section 5.2. Conduct of the Business. Except as otherwise permitted by
this Agreement or consented to in writing by the Buyer (which consent shall not
be unreasonably withheld or delayed), from the date hereof until the Closing,
the Seller shall conduct the Business only in the Ordinary Course. Without
limiting the generality of the foregoing, except as set forth on Schedule 5.2,
the Seller shall, in connection with the Business, (a) continue its advertising
and promotional activities, and pricing and purchasing policies, substantially
in accordance with past practice; (b) not materially shorten or lengthen the
customary payment cycles for any payables or receivables and not materially
accelerate or delay production of Inventories; (c) use commercially reasonable
efforts to (i) preserve intact its business organization, (ii) retain the
services of the employees (as a group) engaged in activities of the Business,
(iii) continue in full force and effect without material modification all
existing policies or binders of insurance currently maintained in respect of the
Business and the Acquired Assets and (iv) preserve current relationships with
customers, suppliers and other persons with which it has significant business
relationships, (d) exercise, but only after notice to the Buyer and receipt of
the Buyer's prior consent, any rights of renewal pursuant to the terms of any of
the Material Contracts, leases or subleases set forth on Schedule 2.1(a)(vii)(A)
or Schedule 3.13(a) which by their terms would otherwise expire; (e) maintain
current and in force all Assigned Permits; and (f) not engage in any practice,
take any action, fail to take any action or enter into any transaction which
could
38
reasonably be expected to cause any representation or warranty of the Seller to
be untrue or result in a breach of any covenant made by the Seller in this
Agreement (including, without limitation, any action referred to in Section
3.7(b)). Notwithstanding the foregoing, the Buyer agrees and understands that
the Seller is entitled to transfer cash out of the Business and that it is
intended that at the Closing there shall be a cash balance of zero in the
accounts of the Business.
Section 5.3. Access. From the date hereof until the Closing, the
Seller shall provide the Buyer with such information as the Buyer may from time
to time reasonably request with respect to the Business, the Acquired Assets,
the Assumed Liabilities and the transactions contemplated by this Agreement and
each of the other Transaction Documents, and shall provide the Buyer and its
accountants, counsel, consultants, prospective lenders and other representatives
access during regular business hours and upon reasonable notice to the
personnel, properties, and books and records of the Seller related to the
Business as the Buyer may from time to time reasonably request; provided that
(i) such access shall not unduly interfere with the conduct of the Business and
(ii) the Seller shall not be obligated to provide the Buyer with any information
which would violate any law, rule or regulation or any term of any Contract of
the Seller or which may subject the Seller to risk of liability, or if the
provision thereof would adversely affect the ability of the Seller to assert
attorney-client, attorney work product or other similar privilege. Any
disclosure whatsoever during such investigation by the Buyer shall not
constitute an enlargement of or additional representations or warranties of the
Seller beyond those specifically set forth in this Agreement.
Section 5.4. Publicity. The Seller will not release, generate or
permit any press release, public statement or other publicity concerning this
Agreement or the other Transaction Documents or the transactions contemplated
hereunder or thereunder nor submit this Agreement or the other Transaction
Documents or any document relating hereto or thereto to any Governmental
Authority, without first consulting with and obtaining the consent of the Buyer,
except as required by Law or any Governmental Authority.
Section 5.5. Notice of Certain Events. From the date hereof until the
Closing Date, the Seller shall give prompt notice to the Buyer of any event,
development or circumstance of which the Seller has Knowledge and which causes,
or could reasonably be expected to cause, a breach of any of the Seller's
representations and warranties in Article III or a failure to satisfy the
conditions set forth in Article VIII.
Section 5.6. Exclusivity. From the date hereof until the earlier of
the Closing Date and the termination of this Agreement pursuant to Article XI,
the Seller shall not (and the Seller shall not cause or permit any of its
Affiliates or the directors, officers, employees, agents or representatives of
any of them to) directly or indirectly (a) solicit, initiate or encourage the
submission of any proposal or offer from any Person relating to, (b) continue,
propose to negotiate with or hold discussions with respect to, or (c) enter into
any agreement or understanding providing for, the acquisition of all or
substantially all of the assets of the Business or any of the Acquired Assets or
any other proposed action that would adversely affect the ability of the Buyer
and the Seller to consummate the transactions contemplated by this Agreement.
39
Section 5.7. Use of Proceeds. The Seller shall use the proceeds of the
Purchase Price lawfully and strictly in accordance with the applicable
requirements of any Contract to which it or any of its Affiliates is a party,
other than any such requirement which has been waived in writing, and otherwise
in accordance with the terms of such Contract, by the other parties to such
Contract on or prior to the Closing Date.
ARTICLE VI
COVENANTS OF THE BUYER
The Buyer hereby covenants and agrees with the Seller as follows:
Section 6.1. Action by the Buyer. From the date hereof until the
Closing, the Buyer will use commercially reasonable efforts, and the Seller will
cooperate with the Buyer, to secure all Consents from third parties as shall be
required, on behalf of the Buyer, in order to enable the Buyer to effect the
transactions contemplated hereby and by the other Transaction Documents, and the
Buyer will otherwise use its commercially reasonable efforts to cause the
consummation of such transactions in accordance with the terms and conditions
hereof and thereof.
Section 6.2. Publicity. The Buyer will not release, generate or permit
any press release, public statement or other publicity concerning this Agreement
or the other Transaction Documents or the transactions contemplated hereunder or
thereunder nor submit this Agreement or the other Transaction Documents or any
document relating hereto or thereto to any Governmental Authority, without first
consulting with and obtaining the consent of the Seller, except as required by
Law or any Governmental Authority.
Section 6.3. Confidentiality. The Buyer may disclose non-public
information relating to the Business or the Seller or any of its Affiliates only
to those officers, directors and employees of the Buyer or any of its
Affiliates, to those advisors of the Buyer and to any prospective lender
providing any Financing who need to know such information for the purpose of
evaluating, or assisting the Buyer or the prospective lender in its evaluation
of, the Business and the transactions contemplated hereby and by the other
Transaction Documents (the "Recipients") and who agree to keep it confidential.
The Buyer shall be responsible for any failure by any Recipient to maintain the
confidentiality of any such information. The obligations of the Buyer under this
Section 6.3 shall not apply to any such information that (i) was already known
to the Recipients prior to disclosure in connection with the transactions
contemplated hereby; (ii) is or becomes public knowledge without the fault of
the Recipients; (iii) is lawfully acquired by the Recipients from a source not
under any obligation to the Seller or its Affiliates regarding disclosure of
such information; (iv) is disclosed by any Recipient with the prior written
consent of the Seller or any of its Affiliates; or (v) is disclosed by any
Recipient under legal compulsion; provided that to the extent that such
Recipient may become legally compelled to make such disclosure, such Recipient
may only disclose such information if such Recipient shall first have used
reasonable efforts to, and, if practicable, shall have afforded the Seller and
Durango the opportunity to obtain, an appropriate protective order or other
satisfactory assurance of confidential treatment for the information required to
be so disclosed. The obligation of the Buyer under this Section 6.3 shall
terminate (i) with respect to non-public information relating to the Business,
on the earlier of the Closing Date and the fifth anniversary of the date hereof,
and
40
(ii) with respect to other non-public information relating to the Seller or any
of its Affiliates, on the fifth anniversary of the date hereof.
Section 6.4. Financing. The Buyer agrees to use its commercially
reasonable efforts to complete the transactions contemplated by the Commitment
Letter. Following the date hereof, any amendment, modification, termination or
cancellation of the Commitment Letter, or any information which becomes known to
the Buyer or any of its Affiliates which makes it unlikely that the Financing
will be obtained on the terms set forth in the Commitment Letter, shall be
promptly disclosed to the Seller. None of the Buyer or any of its Affiliates
will knowingly attempt, directly or indirectly, to induce or encourage the
Lender or other Persons not to fund any of the financing provided for in the
Commitment Letter.
Section 6.5. Notice of Certain Events. From the date hereof until the
Closing Date, the Buyer shall give prompt notice to the Seller of any event,
development or circumstance of which the Buyer or CVC has Knowledge and which
causes, or could reasonably be expected to cause, a breach of any of the Buyer's
representations and warranties in Article IV or a failure to satisfy the
conditions set forth in Article IX.
ARTICLE VII
ADDITIONAL COVENANTS
Section 7.1. Further Assurances. The Buyer and the Seller shall each,
from time to time after the Closing, at the reasonable request of the other and
without further consideration, execute and deliver such further documents and
instruments of assignment, transfer, license or assumption and take such further
action in order more effectively to transfer, reduce to possession and record
title to any of the Acquired Assets, to permit the Buyer to operate the Business
or to implement the assumption by the Buyer of the Assumed Liabilities.
Section 7.2. Permits. As promptly as practicable following the
Closing, the Seller shall notify each Governmental Authority that has issued any
of the Permits set forth on Schedule 7.2 that the Buyer has purchased the
Acquired Assets and will, following the Closing Date, be the operator of the
Business and the beneficiary of the rights under each such Permit issued by such
Governmental Authority. In the event that any such Governmental Authority makes
any request for further information with respect to the assignment of any such
Permit, the Seller will cooperate with the Buyer in responding to such request.
In the event that any such Governmental Authority refuses to allow the
assignment of any such Permit, the Seller will use its commercially reasonable
efforts to assist the Buyer in obtaining a Permit on terms substantially similar
to the Permit with respect to which such assignment was refused. The Seller
shall pay all fees and out-of-pocket costs and expenses relating to the
assignment of such Permits and the Buyer will reimburse the Seller for one-half
of the lesser of US$45,000 and the aggregate amount of such fees, costs and
expenses; provided that (i) if the Seller delivers a notice to the Buyer in the
form of Exhibit J pursuant to Section 8.13(c), the Buyer will reimburse the
Seller for the lesser of US$45,000 and the aggregate amount of such fees, costs
and expenses, and (ii) if the Buyer delivers a notice to the Seller in the form
of Exhibit O pursuant to Section 9.9, the Buyer shall have no obligation to
reimburse the Seller for such fees, costs and expenses.
41
Section 7.3. Books and Records. The Buyer, on the one hand, and the
Seller, on the other hand, shall each, on the request of the other, make
available to such other Party from time to time on a reasonable basis records
and other documents substantially relating to the Acquired Assets, the Assumed
Liabilities and the Business (including records or documents relating to
Straddle Taxes or Transfer Taxes). Such records and other documents shall be
held by the Party in possession of such documents for five years after the
Closing Date and copies shall be delivered to the other Party upon such other
Party's request at any time and at such other Party's out-of-pocket expense.
Section 7.4. Insurance. As of the Closing Date, the coverage under all
insurance policies related to the Business shall continue in force only for the
benefit of the Seller, and not for the benefit of the Buyer or the Business. As
of the Closing Date, the Buyer shall arrange for new insurance policies with
respect to the Business covering all periods and agree not to seek, through any
means, to benefit from any of the Seller's insurance policies which may provide
coverage for claims relating in any way to the Business on or prior to the
Closing Date.
Section 7.5. Payments from Third Parties. In the event that, on or
after the Closing Date, the Buyer or the Seller shall receive any payments or
other funds due to another Person pursuant to the terms hereof or otherwise,
then the Person receiving such funds shall promptly forward such funds to the
proper Person.
Section 7.6. Substitution Labor Activities. As promptly as practicable
after the Closing Date, the Buyer and the Seller, acting through their
representatives pursuant to appropriate powers of attorney, will execute and
deliver such further documents and instruments with all appropriate labor
authorities in Mexico and take such further action as is necessary to accomplish
the employer substitution set forth in this Agreement with respect to the
Transferred Employees, including, without limitation, (i) the registration by
the Buyer or its Affiliate of the Transferred Employees who are assigned to the
Titan Xxxxxxx Mill and the Titan Monterrey Mill with the Instituto del Fondo
Nacional de la Vivienda para los Trabajadores, (ii) the execution by the Buyer
or its Affiliate of a consulting and services agreement with Desarrollo Laboral,
S.A. de C.V. with respect to the Transferred Employees on substantially the same
terms as the Consulting and Services Agreement, dated as of January 2, 1999, the
Seller and Desarrollo Laboral, S.A. de C.V., and (iii) the execution by the
Buyer or its Affiliate of an agreement with the SINTIPEC with respect to the
Transferred Employees on substantially the same terms as the Social Prevision
Agreement, dated as of January 2, 1999, between the Seller and SINTIPEC.
Section 7.7. Notification of Customers. (a) No later than five
Business Days prior to the Closing Date, the Seller shall provide written
notice, substantially in the form of Exhibit Q-1 or Exhibit Q-2, to each
customer of the Seller that owes the Seller any amount under any outstanding
account receivable of the Business informing such customer of the execution of
this Agreement and the Seller's intent to assign all accounts receivable of the
Business outstanding at the Closing Date to the Buyer.
(b) At the Closing, the Seller shall provide written notice,
substantially in the form of Exhibit Q-3 or Exhibit Q-4 (or, in the case of any
customer to whom the Seller did not deliver a notice in the form of Exhibit Q-1
or Exhibit Q-2, a notice substantially in the form of Exhibit Q-5 or Exhibit
Q-6), to each customer that owes the Seller any amount under any outstanding
42
account receivable of the Business confirming that the Closing has occurred and
that all accounts receivables of the Business outstanding at the Closing had
been assigned to the Buyer and that payments thereof must be delivered to the
Buyer, and, if applicable, attaching a copy of the prior written notice provided
to such customer pursuant to Section 7.7(a).
Section 7.8. Assignment of Iberdrola Agreement. The Seller shall use
its commercially reasonable efforts to assign to the Buyer the Seller's rights
under the Iberdrola Agreement with respect to distribution of electricity to the
Titan Xxxxxxx Mill as soon as practicable following the Closing Date. The Buyer
agrees to assume on and as of the date of such assignment, and to thereafter
pay, perform and discharge when due (or cause to be paid, performed and
discharged when due), all liabilities and obligations of the Seller arising
under the Iberdrola Agreement with respect to distribution of electricity to the
Titan Xxxxxxx Mill, other than liabilities or obligations arising out of any
condition, event, action or failure to act prior to the date of such assignment.
Section 7.9. Water Connection. (a) The Buyer shall have the right to
provide written notice to the Seller (the "Water Notice") at any time prior to
the earlier to occur of (i) in the event that a ruling in the litigation
described in Schedule 3.15 is issued in favor of the Seller that permits the
Buyer, without additional cost to or obligation imposed on the Buyer, to draw
water for not less than ten years from xxxxx located at the Titan Xxxxxxx Mill
in a manner that will enable the Buyer to operate the Business in the same
manner as the Seller operated the Business in the Ordinary Course prior to the
Closing, the expiration of the time in which the Comision Nacional del Agua is
permitted to file an appeal of such ruling without the Comision Nacional del
Agua filing such an appeal, and (ii) the first anniversary of the Closing Date,
stating that the Buyer has elected to construct and install a connection between
the treated waste water main with sufficient capacity nearest the Titan Xxxxxxx
Mill (the "First Water Alternative") and the water intake of the Titan Xxxxxxx
Mill (or if the Buyer reasonably determines that the First Water Alternative is
not commercially feasible, the lowest cost alternative water source that the
Buyer reasonably determines will permit the Buyer to operate the Business in the
same manner as the Seller operated the Business in the Ordinary Course prior to
the Closing) (the "Water Connection"). If the Buyer provides the Water Notice
within such period, which notice shall include commercially reasonable technical
specifications for the Water Connection which will permit the Buyer to operate
the Business in the same manner as the Seller operated the Business in the
Ordinary Course prior to the Closing, the Seller shall pay the cost and
out-of-pocket expense of the construction and installation of the Water
Connection. Within 30 days of the receipt of such notice, the Seller shall
provide to the Buyer the names of three construction and engineering firms
reasonably satisfactory to the Buyer from whom bids to perform the construction
and installation of the Water Connection may be solicited by the Buyer. The
Buyer shall as promptly as practicable solicit bids from such construction and
engineering firms and select from among such bidders a construction and
engineering firm which shall be engaged to construct and install the Water
Connection on the terms of the bid that it submitted. The Buyer shall use its
commercially reasonable efforts, including in its solicitation and evaluation of
bids, to ensure that the Water Connection is completed within a reasonable
amount of time following the date on which the Seller provides the name of
eligible bidders. Upon the completion of the construction and installation of
the Water Connection in conformity with the technical specifications included in
the Water Notice ("Satisfactory Completion"), the Buyer shall cease drawing
water from the xxxxx located at the Titan Xxxxxxx Mill in a manner that would
create liability for the Seller.
43
(b) The Seller and the Buyer agree that in the event that the Buyer
elects to construct and install the Water Connection pursuant to Section 7.9(a),
(i) in the event that the U.S. Dollar Equivalent, as of the date of Satisfactory
Completion of the Water Connection, of the price that would be charged to the
Buyer for water from the new water source, at the rates in effect on the date of
Satisfactory Completion of the Water Connection, for the quantity of water drawn
by the Titan Xxxxxxx Mill during the last full calendar month preceding the date
of Satisfactory Completion of the Water Connection (the "New Water Cost")
exceeds the U.S. Dollar Equivalent, as of the date of Satisfactory Completion of
the Water Connection, of the cost to the Buyer of water drawn by the Titan
Xxxxxxx Mill from the xxxxx located at the Titan Xxxxxxx Mill during the last
full calendar month preceding the date of Satisfactory Completion of the Water
Connection (the "Existing Water Cost "), upon Satisfactory Completion of the
Water Connection the Seller will pay the Buyer an amount equal to the net
present value, calculated using a discount rate of 12%, of a series of monthly
payments over 10 years with each monthly payment in an amount equal to the
amount by which the New Water Cost exceeds the Existing Water Cost, and (ii) in
the event that the New Water Cost is less than the Existing Water Cost, the
Buyer will pay the Seller, on the later of (x) the date which is 18 months after
the Closing Date, and (y) the date of the Satisfactory Completion of the Water
Connection, an amount equal to the lesser of (A) the net present value,
calculated using a discount rate of 12%, of a series of monthly payments over 10
years with each monthly payment in an amount equal to the amount by which the
Existing Water Cost exceeds the New Water Cost, and (B) the amount paid by the
Seller with respect to the reimbursement of costs and out-of-pocket expenses
pursuant to Section 7.9(a).
Section 7.10. Cooperation in Tax Matters. (a) After the Closing Date,
the Parties shall cooperate with one another in connection with the preparation
and filing of tax returns and any audits or proceedings relating to Straddle
Taxes or Transfer Taxes, including furnishing or making available books and
records relating to such Taxes and making employees, available on a mutually
convenient basis to provide explanations of any such books and records.
(b) Without limiting the generality of Section 7.10(a), the Parties
agree that as soon as practicable after the Closing Date, the Buyer will prepare
an application for a refund of all VAT equivalent amounts charged to the Buyer
by the Seller with respect to the sale of the Assessed Acquired Assets (the "VAT
Refund Application"), and that the Seller shall cooperate with the Buyer in the
preparation of the VAT Refund Application. The Buyer agrees that as soon as
practicable following the Closing, the Buyer shall execute and file the VAT
Refund Application with the Servicio de Administracion Tributaria and shall use
its commercially reasonable efforts to file all other documentation, including,
without limitation, a certificate from the auditors of the Buyer stating the
amount of VAT that the Buyer is entitled to have refunded, and perform all
actions necessary in order to receive the entire amount of the VAT Refund as
promptly as practicable. The Seller shall reasonably cooperate with the Buyer in
the preparation of such other documentation and the performance of such actions.
The Buyer shall provide a written notice to the Seller within three Business
Days following the receipt of any VAT Refund, stating the VAT Refund Date with
respect to such VAT Refund and the amount of such VAT Refund.
44
ARTICLE VIII
CONDITIONS TO THE BUYER'S OBLIGATIONS
The obligations of the Buyer to consummate the transactions
contemplated by this Agreement shall be subject to satisfaction (or waiver by
the Buyer), at or prior to the Closing, of each of the following conditions:
Section 8.1. Representations and Warranties; Performance. All
representations and warranties not qualified as to materiality or Seller
Material Adverse Effect made by the Seller in this Agreement shall be true in
all material respects, and all other representations and warranties made by the
Seller in this Agreement shall be true in all respects, at and as of the time
when made, and at and as of the time of the Closing as though such
representations and warranties were made at and as of such time or, in the case
of representations and warranties made as of a specified date earlier than the
Closing Date, on and as of such earlier date. The Seller shall have performed
and complied in all respects with all the terms, provisions and conditions of
this Agreement to be complied with and performed by such Seller at or before the
Closing.
Section 8.2. Consents. All Consents specified in Schedule 3.4 shall
have been obtained, in form and substance reasonably satisfactory to the Buyer,
other than Consents with respect to the assignment of the Permits set forth on
Schedule 7.2.
Section 8.3. Seller's Closing Certificates. The Buyer shall have
received a certificate of the President or a Vice President of the Seller (the
"Seller's Closing Certificate"), dated as of the Closing Date, in form and
substance reasonably satisfactory to the Buyer, certifying that the conditions
set forth in Sections 8.1 and 8.2 have been fulfilled.
Section 8.4. Antitrust. Effective as of Closing, the Parties shall
have secured the non-objection from the Mexican Federal Competition Commission
(Comision Federal de Competencia) regarding the execution of the transaction.
Section 8.5. Absence of Certain Proceedings. No Action seeking to
prevent or render illegal consummation of the transactions contemplated by this
Agreement or the other Transaction Documents shall be pending.
Section 8.6. Financing. The conditions to the final funding
contemplated by the Commitment Letter with respect to the Financing shall have
been satisfied in full or waived, and the cash contemplated by the Commitment
Letter shall have been provided or made available to the Buyer on the terms set
forth in the Commitment Letter and at interest rates that do not exceed (i) in
the case of the floating rate Mexican Peso financing described in the Commitment
Letter, TIIE plus 300 basis points, (ii) in the case of the fixed rate Mexican
Peso financing described in the Commitment Letter, 15.30% per annum, and (iii)
in the case of the U.S. Dollar financing described in the Commitment Letter, 25
basis points in excess of the spreads set forth in the Commitment Letter.
Section 8.7. Opinion of Counsel. The Buyer shall have received an
opinion of counsel, dated as of the Closing Date, from White & Case, S.C.,
special Mexican counsel to the Seller, as to the matters set forth in Exhibit D,
an opinion of counsel, dated as of the Closing Date, from Xxxxxxx Xxxxxxxx,
general counsel of Durango, as to the matters set forth in Exhibit E, and an
45
opinion of counsel, dated as of the Closing Date, from White & Case LLP, special
U.S. counsel to the Seller, as to matters set forth in Exhibit F.
Section 8.8. Transition Services Agreement. The Seller shall have
executed and delivered to the Buyer a Transition Services Agreement (the
"Transition Services Agreement") substantially in the form of Exhibit G.
Section 8.9. Monterrey Facility Lease. The Seller shall have executed
and delivered to the Buyer a lease with respect to the Titan Monterrey Mill (the
"Monterrey Facility Lease") substantially in the form of Exhibit H.
Section 8.10. Financial Certificate. The Seller shall have delivered
to the Buyer a certificate signed by the President or Vice President of the
Seller (i) certifying that the Closing Accounts Receivable exceed the Closing
Accounts Payable, and (ii) attaching thereto (A) a statement of the Closing
Accounts Receivable, including the invoice number, the amount and the debtor for
each account receivable included in the Closing Accounts Receivable, and (B) a
statement of the Closing Accounts Payable, including the invoice number, the
amount and the creditor for each account payyable included in the Closing
Accounts Payable (the "Financial Certificate").
Section 8.11. Noncompete and Nonsolicitation Agreement. Each of Xxxxxx
Xxxxxx, Xxxx Xxxxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxxxxxx Xxxxxx, Xxxxxxx Xxxxxx and
Xxxxxx Xxxxxx, each of their spouses, and each of the Seller and Durango shall
have executed and delivered to the Buyer a noncompete and nonsolicitation
agreement substantially in the form attached as Exhibit I (the "Noncompete and
Nonsolicitation Agreement").
Section 8.12. Sales Invoice. The Seller shall have delivered to the
Buyer an invoice for the Assessed Acquired Assets (other than the Real Property
included therein) that (a) is prepared in accordance with Mexican Tax Laws, (b)
is in form and substance reasonably satisfactory to the Buyer, and (c) sets
forth a Purchase Price Allocation that is consistent with Schedule 2.11 or, if
the Buyer and the Seller are unable to reach agreement with respect to the
Purchase Price Allocation, sets forth a purchase price allocation that is
reasonably satisfactory to the Buyer.
Section 8.13. Mexican Peso Devaluation. (a) The number of Mexican
Pesos required to purchase US$1 on any date from the date hereof to and
including the Closing Date using the Average Exchange Rate, as of each such
date, shall have not been greater than 1.2 times the number of Mexican Pesos
required to purchase US$1 using the Reference Exchange Rate.
(b) The number of Mexican Pesos required to purchase US$1 using the
exchange rate published by the Banco de Mexico in the Diario Oficial de la
Federacion for the close of business on any of the five consecutive days on
which such exchange rates are published immediately prior to the Closing Date
shall not have been greater than 1.2 times the number of Mexican Pesos required
to purchase US$1 using the Reference Exchange Rate.
(c) The number of Mexican Pesos required to purchase US$1, using the
higher of the number of Mexican Pesos per US$1 reflected in (i) the Average
Exchange Rate for the close of business on the fourth Business Day prior to the
Closing Date, and (ii) the exchange rate published by the Banco de Mexico in the
Diario Oficial de la Federacion for the close of
46
business on the fourth Business Day prior to the Closing Date, shall not have
exceeded 10.91 (the "Buyer Peso Threshold"); provided, however, that the
condition set forth in this clause (c) shall be deemed satisfied if, on or prior
to the third Business Day prior to the Closing Date, the Seller delivers to the
Buyer a notice in the form of Exhibit J, stating its agreement to reduce the
Initial Amount to the number of U.S. Dollars that could be purchased with
589,140,000 Mexican Pesos using the higher of the number of Mexican Pesos per
US$1 reflected in (x) the Average Exchange Rate for the close of business on the
fourth Business Day prior to the Closing Date and (y) the exchange rate
published by the Banco de Mexico in the Diario Oficial de la Federacion for the
close of business on the fourth Business Day prior to the Closing Date.
Section 8.14. Solvency Certificate. The Seller shall have delivered to
the Buyer a certificate signed by PWC in the form attached as Exhibit K.
Section 8.15. Xxxxxxxx 420 Lease. The Seller shall have delivered to
the Buyer written evidence, in form and substance reasonably satisfactory to the
Buyer, that the Financial Lease Agreement dated March 27, 1996 between
Corporacion Durango, S.A. de C.V., as Lessee, and Arrendadora Bank of America,
S.A., as Lessor, as amended on February 13, 1998 and October 11, 2002, has been
paid in full.
ARTICLE IX
CONDITIONS TO THE SELLER'S OBLIGATIONS
The obligations of the Seller to consummate the transactions
contemplated by this Agreement shall be subject to satisfaction (or waiver by
the Seller), at or prior to the Closing, of each of the following conditions:
Section 9.1. Representations and Warranties; Performance. All
representations and warranties not qualified as to materiality or Buyer Material
Adverse Effect made by the Buyer in this Agreement shall be true in all material
respects, and all other representations and warranties made by the Buyer in this
Agreement shall be true in all respects, at and as of the time when made, and at
and as of the time of the Closing as though such representations and warranties
were made at and as of such time or, in the case of representations and
warranties made as of a specified date earlier than the Closing Date, on and as
of such earlier date. The Buyer shall have performed and complied in all
respects with all the terms, provisions and conditions of this Agreement to be
complied with and performed by the Buyer at or before the Closing.
Section 9.2. Consents. All Consents specified in Schedule 4.3 shall
have been obtained.
Section 9.3. Absence of Certain Proceedings. No Action seeking to
prevent or render illegal consummation of the transactions contemplated by this
Agreement or the other Transaction Documents shall be pending.
Section 9.4. Buyer's Closing Certificate. The Seller shall have
received from the Buyer a certificate of an officer of the Buyer (the "Buyer's
Closing Certificate"), dated as of the Closing Date, in form and substance
reasonably satisfactory to the Seller, certifying that the conditions set forth
in Sections 9.1 and 9.2 have been fulfilled.
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Section 9.5. Antitrust. Effective as of Closing, the Parties shall
have secured the non-objection from the Mexican Federal Competition Commission
(Comision Federal de Competencia) regarding the execution of the transaction.
Section 9.6. Releases. The Seller and its Affiliates shall be released
from all of their obligations under the Contracts listed in Schedule 9.6 as of
the Closing Date.
Section 9.7. Intentionally Omitted.
Section 9.8. Opinion of Counsel. The Seller and Durango shall have
received an opinion of counsel, dated as of the Closing Date, from Xxxxx,
Xxxxxxx x Xxxxxxx, special Mexican counsel to the Buyer, as to the matters set
forth in Exhibit M, and an opinion of counsel, dated as of the Closing Date,
from Cleary, Gottlieb, Xxxxx & Xxxxxxxx, special U.S. counsel to the Buyer and
the Guarantor, as to matters set forth in Exhibit N.
Section 9.9. Mexican Peso Valuation. The number of Mexican Pesos
required to purchase US$1, using the lower of the number of Mexican Pesos per
US$1 reflected in (i) the Average Exchange Rate for the close of business on the
fourth Business Day prior to the Closing Date, and (ii) the exchange rate
published by the Banco de Mexico in the Diario Oficial de la Federacion for the
close of business on the fourth Business Day prior to the Closing Date, shall
not have been fewer than 10.2 (the "Seller Peso Threshold"); provided, however,
that the condition set forth in this Section 9.9 shall be deemed satisfied if,
on or prior to the third Business Day prior to the Closing Date, the Buyer
delivers to the Seller a notice in the form of Exhibit O, stating its agreement
to increase the Initial Amount to the number of U.S. Dollars that could be
purchased with 550,800,000 Mexican Pesos using the lower of the number of
Mexican Pesos per US$1 reflected in (x) the Average Exchange Rate for the close
of business on the fourth Business Day prior to the Closing Date and (y) the
exchange rate published by the Banco de Mexico in the Diario Oficial de la
Federacion for the close of business on the fourth Business Day prior to the
Closing Date.
ARTICLE X
EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS
Section 10.1. Transferred Employees. At the Closing, the Buyer or one
of its Affiliates will deliver written notice to SINTIPEC and each of the Active
and Inactive Employees set forth in Schedule 3.19(b) (with a copy to the
Seller), in accordance with the provisions of Article 41 of the Mexican Federal
Labor Law, of the occurrence of an employer labor substitution, in substantially
the forms attached hereto as Exhibits P-1 through P-4. The Business Employees so
notified shall be referred to as "Transferred Employees."
Section 10.2. Collective Bargaining Agreements. From and after the
Closing, the Buyer or one or more of its Affiliates will honor the collective
bargaining agreements (the "Existing CBAs") with SINTIPEC and FENASA listed on
Schedule 3.19(a) pursuant to which the Buyer or its Affiliates will provide the
same terms and conditions of employment, including without limitation, at the
same wage level, in the same job classification, with the same benefits and with
the same level of seniority, provided that (i) with respect to the Monterrey
CBAs, this obligation
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shall only apply to the Transferred Employees covered by the Monterrey CBAs and
that portion of the Monterrey CBAs applicable to such Transferred Employees, and
(ii) with respect to the Guadalajara CBAs, this obligation shall only apply to
the Transferred Employees covered by the Guadalajara CBAs and that portion of
the Guadalajara CBAs applicable to such Transferred Employees. The Seller will,
and will cause its directors, officers and employees to, use their commercially
reasonable efforts to cooperate with and otherwise assist the Buyer and its
Affiliates in any discussions with the Transferred Employees, SINTIPEC and
FENASA. The Seller and the Buyer will also take all necessary action (i) to
amend the Monterrey CBAs by dividing them from single agreements covering all
the employees located in Monterrey to distinct agreements covering separately
the facilities that are included in the Acquired Assets and the facilities that
are not, and (ii) to amend the Guadalajara CBAs by dividing them from single
agreements covering all the employees located in Guadalajara to distinct
agreements covering separately the facilities that are included in the Acquired
Assets and the facilities that are not.
Section 10.3. Employee Benefit Plans.
(a) For at least one year following the Closing Date, the Buyer or its
Affiliates shall provide or cause to be provided to each Transferred Employee:
(i) a salary or wage level and bonus opportunity (i.e., the percentage of salary
that may be earned as a bonus) at least equal to the salary or wage level and
bonus opportunity to which such Transferred Employee was entitled immediately
prior to the Closing Date; (ii) benefits identical to those available to the
Transferred Employees pursuant to the Employee Benefit Plans immediately prior
to the Closing Date, and (iii) severance benefits no less favorable than the
severance benefits provided under the Seller's severance benefit program as
disclosed on Schedule 3.16(a).
(b) The Buyer or its Affiliates shall grant all Transferred Employees
on and after the Closing Date credit for all service with the Seller or its
Affiliates and any of their respective predecessors prior to the Closing Date
for the purpose of seniority to the same extent as if such service had been
provided to the Buyer, and the Buyer or its Affiliates shall waive any
pre-existing condition exclusions and actively-at-work requirements to the
extent that such requirements would have been satisfied had each Transferred
Employee been employed by the Buyer during any period during which such
Transferred Employee was employed by the Seller or its Affiliates or their
respective predecessors and provide that any expenses incurred on or before the
Closing Date by a Transferred Employee or a Transferred Employee's covered
dependent shall be taken into account for purposes of satisfying applicable
deductible, coinsurance and maximum out-of-pocket provisions under each employee
benefit plan in which Transferred Employees will be eligible to participate to
the same extent as if such expenses had been incurred under such employee
benefit plans.
(c) The Buyer shall be responsible for (i) all liabilities and
obligations with respect to any Transferred Employee arising out of
circumstances or events occurring on or after the Closing Date, including, but
not limited to, all liabilities and obligations for wages, benefits,
compensation, worker's compensation claims, accrued vacation, contributions,
insurance and health maintenance organization premiums, reserves and
administrative expenses, and (ii) liabilities and obligations to provide
post-retirement health and life insurance benefits to Transferred Employees;
provided that the Seller shall retain responsibility for liabilities and
49
obligations under any health benefit plan arising from any continuous period of
hospitalization commencing prior to the Closing Date.
Section 10.4. Former Employees. Effective as of the Closing Date, the
Buyer shall assume and be responsible for the obligation to pay the Pension
Obligations to the Former Employees set forth on Schedule 3.16(e) and the
obligations to, or claims made under any Employee Benefit Plan set forth on
Schedule 10.4 by, such Former Employees and their beneficiaries arising out of
circumstances or events occurring on or after the Closing.
Section 10.5. Seller's Obligation to Transferred Employees. Except as
provided in Section 10.3, the Seller shall retain all liabilities and
obligations with respect to any Transferred Employee arising out of
circumstances or events occurring prior to the Closing, including without
limitation:
(a) Liability for any salary or other payment claimed to be owed to a
Transferred Employee in connection with such Transferred Employee's service
with the Seller or any of its Affiliates prior to the Closing;
(b) Responsibility for any obligations to, or claims made by
Transferred Employees under, any Employee Benefit Plan that arise from
events that occurred prior to the Closing;
(c) Responsibility for all worker's compensation claims made by
Transferred Employees that arise from events that occurred prior to the
Closing; and
(d) Responsibility for any obligations or liabilities to the Instituto
Mexicano del Seguro Social, the Instituto del Fondo Nacional de la Vivienda
para los Trabajadores, the Patrimonio de la Vivienda Grupo Industrial A.C.
or the Sistema de Ahorro Para el Retiro arising out of circumstances or
events occurring prior to the Closing.
Section 10.6. Seller's Retained Obligations. The Seller shall retain
all liabilities and obligations with respect to all Business Employees who do
not become Transferred Employees, other than the liabilities undertaken by the
Buyer pursuant to Section 10.4, including without limitation:
(a) Liability for any salary, severance or other payment claimed by
any Business Employee in connection with such Business Employee's service
with the Seller or any of its Affiliates;
(b) Responsibility for any obligations to, or claims made under any
Employee Benefit Plan by, such Business Employee;
(c) Responsibility for all worker's compensation claims made by such
Business Employee; and
(d) Responsibility for any obligations or liabilities to the Instituto
Mexicano del Seguro Social, the Instituto del Fondo Nacional de la Vivienda
para los Trabajadores, the Patrimonio de la Vivienda Grupo Industrial A.C.
or the Sistema de Ahorro Para el Retiro in connection with such Business
Employee.
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ARTICLE XI
TERMINATION
Section 11.1. Termination and Abandonment. This Agreement may be
terminated and the transactions contemplated by this Agreement may be
abandoned at any time prior to the Closing:
(a) by mutual written consent of the Parties; or
(b) by the Buyer, on the one hand, or the Seller, on the other hand,
if the Closing shall not have occurred on or prior to February 28, 2003,
provided, however, that the right to terminate this Agreement under this
Section 11.1(b) shall not be available to any Party whose failure to
fulfill any obligations under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before such date; or
(c) by the Buyer by giving notice to the Seller at any time prior to
the Closing in the event that the Seller has breached any representation,
warranty or covenant contained in this Agreement in any material respect,
the Buyer has notified the Seller of such breach and the breach, if capable
of cure, has continued without cure for a period of 30 days after the
notice of breach; or
(d) by the Seller by giving notice to the Buyer at any time prior to
the Closing in the event that the Buyer has breached any representation,
warranty or covenant contained in this Agreement in any material respect,
the Seller has notified the Buyer of such breach and the breach, if capable
of cure, has continued without cure for a period of 30 days after the
notice of breach.
Section 11.2. Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 11.1, this Agreement shall forthwith cease
to be of any further force and effect (except for Section 6.3, this Article XI
and Article XIII, which shall survive such termination), and there shall be no
liability or obligation on the part of any Party.
ARTICLE XII
SURVIVAL AND INDEMNIFICATION
Section 12.1. Survival. The representations and warranties of the
Seller contained in Article III of this Agreement shall survive the Closing
until the first anniversary of the Closing Date and shall thereupon expire,
together with any right to indemnification in respect thereof; provided,
however, that the representations and warranties of the Seller contained in
Sections 3.9(a) and 3.9(c) (Title to and Sufficiency and Condition of Assets),
3.16 (Employee Benefit Plans), 3.17 (Tax Matters), 3.18 (Environmental Matters)
and Section 3.19(a)(iii), (iv) and (v) (Labor Matters) shall survive until the
thirtieth day following the expiration of the applicable statute of limitations
for Third-Party Claims with respect to matters addressed by such provisions. The
representations and warranties of the Buyer contained in Article IV of this
Agreement shall survive the Closing until the first anniversary of the Closing
Date and shall thereupon expire, together with any right to indemnification in
respect thereof. Neither the period of survival nor the liability of a Party
with respect to its representations and warranties shall be reduced by any
investigation made at any time by or on behalf of any other Party. The
51
covenants and agreements contained herein to be performed or complied with prior
to the Closing shall expire at the Closing; provided, however, that the Buyer's
right to indemnification for the breach of Section 5.2 shall survive the Closing
until the first anniversary of the Closing Date. The covenants and agreements
contained herein to be performed or complied with at or after the Closing shall
survive the Closing until the expiration of the applicable statute of
limitations. If notice of a claim has been given prior to the expiration of the
applicable survival period by a Party to the other Party, then the relevant
representations, warranties and covenants shall survive as to such claim, until
such claim has been finally resolved.
Section 12.2. Indemnification by the Seller and Durango. (a) From and
after the Closing, the Seller and Durango, jointly and severally, shall
indemnify and hold harmless the Buyer, its Affiliates, and their respective
officers, directors, employees, agents, consultants, representatives and
successors (collectively, the "Buyer Indemnitees") from and against any and all
Losses incurred by any of them arising out of or resulting from: (i) any breach
of any representation or warranty of the Seller contained in this Agreement, the
Seller's Closing Certificate or the Financial Certificate (in each case
disregarding for such purpose any qualifications set forth in this Agreement,
the Seller's Closing Certificate or the Financial Certificate with respect to
materiality or Seller Material Adverse Effect); (ii) any failure by the Seller
to perform any of its covenants or agreements contained (A) in Section 5.2 or
(B) in any other provision of this Agreement; (iii) any failure to pay when due
any liabilities not assumed by the Buyer, (iv) any Straddle Tax payable by the
Seller pursuant to Section 2.12(a) or any other Tax not assumed by Buyer
pursuant to Section 2.12, (v) the failure of the Seller to comply with any of
the provisions of Article X or any claim against the Buyer or its Affiliates
that is inconsistent with the allocation of responsibilities under Article X,
and (vi) any Loss arising out fines or other penalties imposed by or any other
action taken by any Governmental Authority relating to the matter described on
Schedule 3.15 to the extent relating to the use of water by the Seller or the
Buyer prior to (A) in the event that the Buyer delivers the Water Notice in
accordance with Section 7.9, the date of Satisfactory Completion of the Water
Connection, or (B) in the event that the Buyer does not deliver the Water Notice
in accordance with Section 7.9, the first anniversary of the Closing Date.
(b) From and after the Closing, the Seller and Durango, jointly and
severally, will indemnify, hold harmless, and defend, Buyer Indemnitees from and
against any Losses, to the extent that such Losses arise from or relate to any
circumstance or condition involving the conduct of the Business or the use,
operation or ownership of the Acquired Assets and occurring or existing prior to
the Closing Date, resulting from: (i) any claim of a third party pursuant to
Environmental Laws in effect as of the Closing Date relating to personal injury,
property damage, damage to the environment or the presence or exposure to any
hazardous or toxic substances, materials or wastes; (ii) any notification,
investigation, monitoring or remediation of, or other response to, any presence,
use, storage, treatment, disposal or release of hazardous or toxic substances,
materials or wastes, to the extent required pursuant to Environmental Laws in
effect as of the Closing Date; and (iii) the disposal, or arranging for the
disposal, at any offsite facility of hazardous or toxic materials or wastes
used, generated or stored by the Seller at the Facilities, to the extent
required pursuant to Environmental Laws in effect as of the Closing Date
(collectively referred to as "Indemnified Environmental Losses"); provided,
however, that the Seller shall have no indemnification obligations with respect
to any Indemnified Environmental Losses for conditions discovered in any Phase 2
soil or water investigation conducted by the
52
Buyer after the Closing for the sole purpose of pursuing an indemnity claim
under this Agreement; provided, further, that the Seller shall have no
indemnification obligations with respect to Indemnified Environmental Losses of
the type described in clauses (ii) or (iii) unless such Indemnified
Environmental Losses are the subject of a Notice given in accordance with
Section 12.4 within three years of the Closing Date.
Section 12.3. Indemnification by the Buyer. From and after the
Closing, the Buyer shall indemnify and hold harmless the Seller, its Affiliates,
and their respective officers, directors, employees, agents, consultants,
representatives and successors (collectively, the "Seller Indemnitees") from and
against any and all Losses incurred by any of them arising out of or resulting
from: (a) any breach of any of the representations and warranties of the Buyer
contained in this Agreement or the Buyer's Closing Certificate (in each case
disregarding for such purpose any qualifications set forth in the Agreement of
the Buyer's Closing Certificate with respect to materiality or Buyer Material
Adverse Effect); (b) any failure by the Buyer to perform any of its covenants or
agreements contained in this Agreement; (c) any failure to pay when due the
Assumed Liabilities, (d) any Straddle Tax payable by the Buyer pursuant to
Section 2.12, or (e) the failure of the Buyer to comply with any of the
provisions of Article X or any claim against the Seller or its Affiliates that
is inconsistent with the allocation of responsibilities under Article X.
Section 12.4. Procedure for Indemnification. In the event that any
Indemnitee shall incur or suffer any Losses in respect of which indemnification
may be sought hereunder by the Seller, on the one hand, or Buyer, on the other
hand, the Indemnitee shall assert a claim for indemnification by notice (the
"Notice") to the Indemnitor stating the nature and basis of such claim, and, if
known, the amount, or a good faith estimate of the amount, of the liability
arising therefrom. Promptly after receipt by an Indemnitee of Notice of the
assertion of a claim or the commencement of any action, litigation or proceeding
by any third party (a "Third-Party Claim") with respect to a matter for which
indemnification is or may be owing pursuant to Section 12.2 or Section 12.3, the
Indemnitee shall give Notice to the Indemnitor and shall thereafter keep the
Indemnitor informed of all other information it receives with respect thereto;
provided, however, that failure of the Indemnitee to give the Indemnitor prompt
Notice and such other information as provided herein shall not relieve the
Indemnitor of any of its obligations hereunder unless and then only to the
extent that the Indemnitor shall have been actually prejudiced thereby. The
Indemnitee shall provide to the Indemnitor, as promptly as practicable after
giving notice of such claim, information and documentation reasonably requested
by the Indemnitor to support and verify the claim asserted, unless the
Indemnitee has been advised by counsel that there are no reasonable grounds to
assert a joint defense privilege with respect to such information and
documentation. The Indemnitor shall have the right, at its option and at its own
expense, to participate in or, by giving written notice to the Indemnitee within
the Dispute Period, to take control of, the defense, negotiations and/or
settlement of any such Third-Party Claim, with counsel chosen by the Indemnitor
and reasonably satisfactory to the Indemnitee; provided, however, that the
Indemnitee may at the sole cost and expense of the Indemnitee, at any time prior
to the Indemnitor's delivery to the Indemnitee of the notice referred to in this
sentence, file any motion, answer or other pleadings or take any other action
that the Indemnitee reasonably believe necessary (based upon the exigencies of
the Third Party Claim) to protect its interests; provided further that if the
filing of any such motion, answer or other pleading or the taking of such action
prejudices the ability of the Indemnitor to defend, negotiate and/or settle such
Third
53
Party Claim, the Indemnitor shall be relieved of its obligations under this
Article XII to the extent of the Indemnitor has been prejudiced thereby. After
the Indemnitor takes control of the defense, negotiation and/or settlement of
any such Third-Party Claim, the Indemnitee shall have the right to participate
therein, at its own expense and with counsel of its own choosing; provided,
however, that the Indemnitor shall pay for the costs and expenses of such
separate counsel if, in the good faith judgment of the Indemnitee based upon the
advice of counsel, representation of both the Indemnitor and the Indemnitee
would be inappropriate under the relevant standards of professional conduct. The
Parties shall cooperate and render such assistance as may reasonably be
requested in order to insure the proper and adequate defense of any such
Third-Party Claim or proceeding, which assistance shall include, without
limitation, making appropriate personnel reasonably available for any discovery
or trial. Notwithstanding anything to the contrary herein, if (i) the Indemnitor
fails or refuses to undertake the defense of any such Third-Party Claim within
the Dispute Period or disputes its liability to the Indemnitee under this
Article XII with respect to such Third-Party Claim, (ii) the Indemnitor fails to
diligently defend and contest such Third-Party Claim in a Commercially
Reasonable Manner with counsel reasonably acceptable to the Indemnitor, or (iii)
the Indemnitee irrevocably waives its right to indemnity hereunder with respect
to such Third-Party Claim, then the Indemnitee shall have the right to take
control of the defense, negotiation and/or settlement of such Third-Party Claim
at, in the case of clauses (i) and (ii) above, the Indemnitor's expense.
Notwithstanding anything to the contrary herein, the Indemnitor or the
Indemnitee, as the case may be, having undertaken to defend any Third Party
Claim, including any claim with respect to Indemnified Environmental Losses,
shall undertake such defense (including litigation, negotiation or the
performance of any action described in Section 12.2(b)(ii) or (iii)) in a
Commercially Reasonable Manner. "Commercially Reasonable Manner" shall be
determined from the perspective of a reasonable business person acting (without
regard to the availability of indemnification hereunder) to avoid or mitigate a
loss or liability or potential loss or liability (including, without limitation,
taking into account any adverse effect such Third Party Claim may have on the
Indemnitee or any of its Affiliates that may arise other than as a result of
monetary damages), and with respect to Environmental Matters, to achieve
compliance (based on reasonable reliance on the advice of expert third-party
consultants or counsel) with Environmental Law. Notwithstanding anything to the
contrary herein, neither the Indemnitor nor the Indemnitee shall settle or
compromise any Third-Party Claim without the consent of the other, which consent
shall not be unreasonably withheld, conditioned or delayed; provided, however,
that any settlement or compromise shall include an unconditional release of the
Indemnitee from all liabilities or obligations relating to the Third-Party Claim
and provides only for the payment of monetary damages solely by the Indemnitor
without any obligations on the part of the Indemnitee.
Section 12.5. Payment. (a) With respect to Third-Party Claims for
which indemnification is payable under this Agreement, such indemnification
shall be paid by the Indemnitor promptly upon (i) the entry of a final judgment
against the Indemnitee and the expiration of any applicable appeal period; (ii)
the entry of a non-appealable judgment or final appellate decision against the
Indemnitee; (iii) the entering into of any settlement agreement in accordance
with the provisions of this Article XII; (iv) the entry of any consent order or
decree binding upon the Indemnitee.
54
(b) In addition to any other rights now or hereafter granted under
applicable Law or otherwise, and not by way of limitation of such rights, upon
the resolution of any claim of indemnification hereunder, the Indemnitee shall
have the right, at any time and from time to time, without presentment, demand,
protest or other notice of any kind to the Indemnitor or any other Person (any
such notice being expressly waived) to set off the amount required to be paid by
the Indemnitor in respect of such claim against any obligations owed by the
Indemnitee to the Indemnitor, under any other Transaction Document or otherwise,
regardless of whether such obligations, or any of them, shall be contingent or
unmatured.
Section 12.6. Adjustment Amounts. Notwithstanding anything to the
contrary set forth herein, the Buyer shall not be deemed to have suffered or
incurred any Loss to the extent such Loss was included in any adjustments made
pursuant to Sections 2.8 or 2.9 and the payment in respect thereof was made by
the Seller to the Buyer.
Section 12.7. Limitations on Indemnification. (a) The indemnification
obligations set forth in this Agreement, including in this Article XII, shall be
limited to indemnification for actual damages suffered and shall not include
consequential or punitive damages; provided, however, that any consequential or
punitive damages recovered by a third party against an Indemnitee entitled to
indemnity under this Agreement shall be included in the damages recoverable
pursuant to the indemnities herein.
(b) Notwithstanding any other provision of this Article XII, (i) the
aggregate liability of the Seller under Section 12.2 shall in no event exceed
the aggregate amount of the Purchase Price, as adjusted pursuant to Sections 2.8
and 2.9 and (ii) no amount shall be payable for indemnification pursuant to
Sections 12.2(a)(i), 12.2(a)(ii)(A) or 12.2(b), except to the extent the
aggregate amount payable under Sections 12.2(a)(i), 12.2(a)(ii)(A) and 12.2(b)
exceeds US$500,000.
(c) No Buyer Indemnitee shall be entitled to indemnification for any
Losses to the extent that an amount has been reserved, provided or allowed for
in the Reference Balance Sheet in respect of such Losses and such amount is in
respect of Acquired Assets or Assumed Liabilities.
(d) No Indemnitee shall be entitled to indemnification under this
Article XII to the extent, if any, that any Losses result from a failure on the
part of any Indemnitee to exercise good faith in not jeopardizing or prejudicing
the interests of the Indemnitor or otherwise arises out of any gross negligence
or willful misconduct of an Indemnitee.
(e) All indemnification payments under this Article XII shall be made
by the Indemnitor net of any any actual reduction in Taxes paid by the
Indemnitee realized as a result of such Losses or such obligations that are
actually paid to the Indemnitee.
(f) All indemnification payments under this Article XII shall be paid
in U.S. Dollars. The amount of any indemnification payments with respect to
Losses that were incurred in Mexican Pesos shall be the U.S. Dollar Equivalent
of the amount of such Loss as of the date on which such the amount of such Loss
was incurred by the Indemnitee. The amount of any indemnification payments with
respect to Losses that were incurred in any currency other than
55
U.S. Dollars or Mexican Pesos shall be shall be converted into U.S. Dollars at
the rate of exchange at which, in accordance with normal banking procedures, the
Indemnitee could purchase with such other currency in The City of New York on
the Business Day preceding that on which the amount of such Loss was incurred by
the Indemnitee.
Section 12.8. Exclusivity. Except as specifically set forth in this
Agreement, effective as of the Closing, each Party waives any rights and claims
it may have against any other Party and any of their Affiliates, whether in law
or in equity, relating to the transactions contemplated hereby (other than any
such rights or claims under the Transition Services Agreement, the Monterrey
Facility Lease or the Noncompete and Nonsolicitation Agreement). The rights and
claims waived by the Parties include, without limitation, claims for
contribution or other rights of recovery arising out of or relating to any
Environmental Law, claims for breach of contract, breach of representation or
warranty, negligent misrepresentation and all other claims for breach of duty.
After the Closing, the indemnification provisions of this Agreement shall
provide the exclusive remedy to the Parties for any misrepresentation, breach of
warranty, covenant or other agreement or other claim arising out of this
Agreement or the transactions contemplated hereby (other than any claim arising
under the Transition Services Agreement, the Monterrey Facility Lease or the
Noncompete and Nonsolicitation Agreement or any claim arising from the failure
of the Seller to comply with the provisions of Section 7.7).
Section 12.9. Tax Treatment. The Parties shall treat all
indemnification payments made pursuant to this Agreement as adjustments to the
Purchase Price for all Tax purposes. If, notwithstanding the prior sentence, any
such payment is deemed taxable income or otherwise is subject to Tax, an
additional amount shall be paid such that the amount received net of such Tax,
is equal to what would have been received had no Tax applied, provided, however,
that the amount of any Losses or indemnification obligations under this Article
XII shall be adjusted (including, without limitation, retroactively) to take
account of any actual reduction in Taxes paid by the Indemnitee realized as a
result of such Losses or such obligations.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Fees and Expenses. Except as otherwise provided herein,
each of the Parties shall pay all legal, accounting, investment banking and
other expenses incurred by it or on its behalf in connection with the
transactions contemplated by this Agreement, whether or not such transactions
are consummated.
Section 13.2. Amendments. This Agreement shall not be modified or
otherwise amended except pursuant to an instrument in writing executed and
delivered by each of the Parties.
Section 13.3. Entire Agreement. This Agreement (including the
Schedules, Exhibits and other documents referred to herein) and the other
Transaction Documents constitute the entire understanding and agreement between
the Parties with respect to the subject matter hereof and supersede any and all
prior agreements and understandings, whether oral or written, between the
Parties, with respect to such subject matter, all of which are merged herein.
The Parties acknowledge that in deciding to enter into this Agreement and to
consummate the transactions
56
contemplated hereby they have not relied upon any statements, promises or
representations, written or oral, express or implied, other than those
explicitly set forth in this Agreement and the other Transaction Documents. In
furtherance and not in limitation of the foregoing, the Buyer acknowledges that
the Seller has not made any representations or warranties, of any kind, either
express or implied, except as expressly set forth in this Agreement or the other
Transaction Documents. THE BUYER AGREES THAT THE REPRESENTATIONS AND WARRANTIES
GIVEN HEREIN BY THE SELLER ARE IN LIEU OF, AND THE BUYER HEREBY EXPRESSLY WAIVES
ALL RIGHTS TO, ANY IMPLIED WARRANTIES WHICH MAY OTHERWISE BE APPLICABLE BECAUSE
OF THE PROVISIONS OF THE UNIFORM COMMERCIAL CODE OR ANY OTHER STATUTE,
INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE.
Section 13.4. Assignment, Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party (whether by operation of law or otherwise) without the
prior written consent of the other Party; provided, however, that the Buyer may
assign this Agreement as security for obligations undertaken in connection with
the Financing. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the Parties and their respective
successors and assigns. Notwithstanding anything contained in this Agreement to
the contrary, nothing in this Agreement, express or implied, is intended to
confer on any Person other than the Parties or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
Section 13.5. Headings. Headings of the Articles, Sections, Schedules
and Exhibits of this Agreement are for the convenience of the parties only, and
shall be given no substantive or interpretive effect whatsoever.
Section 13.6. Notices. Any notice, request, claim, instruction or
other document to be given hereunder by any Party to any other Party shall be in
writing and delivered personally, by facsimile transmission or sent by
registered or certified mail (postage prepaid return receipt requested),
If to the Seller, to:
Empaques de Carton Titan, S.A. de C.V.
Edificio Losoles
Ave. Xxxxxx Xxxxxxx 2400
6 Piso, Xxxx B-61
Residencial San Xxxxxxx
Xxxxx Xxxxxx, X.X.
Monterrey, Mexico C.P. 66220
Facsimile No.: 011-52-818-363-1849
Attention: Xxxxxxx Xxxxxx
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with a copy to:
White & Case LLP
000 X. Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx-Xxxxx
If to Durango, to:
Corporacion Durango, S.A. de C.V.
Potasio No. 150
Ciudad Industrial
Durango, Durango
Mexico CP 34220
Facsimile No.: 011-52-000-000-0000
Attention: C.P. Xxxxxx Xxxxxx xx Xxxxxxx
with a copy to:
White & Case LLP
000 X. Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx-Xxxxx
If to the Buyer, to:
Citigroup Venture Capital
000 X. Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxx, Xxxxxxx 00000
Facsimile No: (000) 000-0000
Attention: R. Andrew de Pass
and
Citigroup Venture Capital
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No: (000) 000-0000
Attention: Xxxx Xxxxx
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with a copies to:
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
and
Xxxxx Xxxxxxx x Xxxxxxx
Torre del Bosque
Blvd. X. Xxxxx Xxxxxxx Xx. 00, Xxxx 00
Xxx.Xxxxx xx Xxxxxxxxxxx
00000 Xxxxxx, D.F.
Facsimile No: x00 00 0000 0000
Attention: Xxxxx Xxxxx
or at such other address for a Party as shall be specified by like notice. Any
notice which is delivered in the manner provided herein shall be deemed to have
been duly given to the Party to whom it is directed upon actual receipt by such
Party (evidenced, in the case of, a facsimile transmission, by the receipt of
the correct answer back).
Section 13.7. Governing Law; Arbitration. (a) This Agreement shall be
governed in all respects, including as to validity, interpretation and effect,
by the internal laws of the State of New York, without giving effect to its
principles or rules of conflict of laws (to the extent that such principles or
rules would require the application of the laws of another jurisdiction to the
interpretation of the Parties' rights and obligations hereunder); provided that
the arbitration provisions set forth herein and any arbitration conducted
thereunder shall be governed exclusively by the Federal Arbitration Act, Xxxxx
0, Xxxxxx Xxxxxx Code, to the exclusion of any state or municipal law of
arbitration, and by the United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards.
(b) (i) Except as otherwise provided herein, the Parties irrevocably
agree that any and all disputes, controversies or claims arising out of,
relating to, or in connection with, this Agreement, or the breach, termination
or validity thereof, shall be finally settled by arbitration. Except as provided
in Sections 2.8 and 2.9, the arbitration shall be conducted in accordance with
the International Arbitration Rules of the American Arbitration Association in
effect at the time of the arbitration, except as they may be modified herein or
by mutual agreement of the Parties. The seat of the arbitration shall be New
York, New York, and it shall be conducted in the English language; provided that
either Party may submit testimony or documentary evidence in Spanish and shall,
on the request of the other Party, furnish a translation or interpretation into
the other language of any such testimony or documentary evidence.
(ii) Any arbitration under this Section 13.7 shall be conducted by
three arbitrators and for purposes of this Section 13.7(b)(ii), the Buyer
and its Affiliates shall be deemed to be one party, and the Seller, Durango
and their Affiliates shall be deemed
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to be the other party. The party initiating arbitration (the "Claimant")
shall appoint an arbitrator in its request for arbitration (the "
Request"). The other party (the "Respondent") shall appoint an arbitrator
within 10 days of receipt of the Request and shall notify the Claimant of
such appointment in writing. If within 10 days of receipt of the Request by
the Respondent, either party has not appointed an arbitrator, then the
arbitrator shall be appointed by the American Arbitration Association. The
first two arbitrators appointed in accordance with this provision shall
appoint a third arbitrator within 10 days after the Respondent has notified
Claimant of the appointment of the Respondent's arbitrator or, in the event
of a failure by a Party to appoint, within 10 days after the American
Arbitration Association has notified the parties and any arbitrator already
appointed of its appointment of an arbitrator on behalf of the party
failing to appoint. When the third arbitrator has accepted the appointment,
the two arbitrators making the appointment shall promptly notify the
parties of the appointment. If the first two arbitrators appointed fail to
appoint a third arbitrator or so to notify the Parties of the appointment
within the time period specified above, the American Arbitration
Association shall appoint the third arbitrator and shall promptly notify
the parties of the appointment. The third arbitrator shall act as Chair of
the tribunal. The Parties agree that each arbitrator appointed hereunder
shall be licensed to practice law in the State of New York and that the
third arbitrator appointed hereunder shall be fluent in Spanish and
English. In the event an appointed arbitrator may not continue to act as an
arbitrator of such panel, then the party (or parties in the case of the
third arbitrator) that appointed such arbitrator shall have the right to
appoint a replacement arbitrator in accordance with the provisions of this
Section 13.7(b).
(iii) The arbitral award issued under this Section 13.7 shall be in
writing, state the reasons for the award, and be final and binding on the
Parties. The award may include an award of costs, including reasonable
attorneys' fees and disbursements and the expenses of any witnesses, to the
prevailing Party. Judgment upon the award may be entered by any court
having jurisdiction thereof or having jurisdiction over the relevant Party
or its assets. A request for interim measures by a Party to a court shall
not be deemed incompatible with, or a waiver of, this agreement to
arbitrate.
(iv) In order to facilitate the comprehensive resolution of related
disputes, and upon request by any party to an arbitration proceeding
arising under this Agreement, the arbitration panel may, at any time before
the first oral hearing of evidence, consolidate the arbitration proceeding
with any other arbitration proceeding arising under the Guarantee.
Section 13.8. Currency. The obligation of the Parties to make payment
in U.S. Dollars of any obligation due hereunder shall not be discharged or
satisfied by any tender, or any recovery pursuant to any judgment, which is
expressed in or converted into any currency other than U.S. Dollars, except to
the extent such tender or recovery shall result in the actual receipt by the
Party receiving such payment of the full amount of U.S. Dollars expressed to be
payable in respect of any such obligation. The obligation of any Party to make
payment in U.S. Dollars as aforesaid shall be enforceable as an alternative or
additional cause of action for the purpose of recovery in U.S. Dollars of the
amount, if any, by which such actual receipt shall fall short of the
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full amount of U.S. Dollars expressed to be payable in respect of any such
obligations, and shall not be affected by judgment being obtained for any other
sums due under this Agreement.
Section 13.9. Counterparts. This Agreement may be executed in any
number of counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall be deemed to be one and the same
instrument.
Section 13.10. Schedules. Disclosure of any fact or item in any
Schedule shall not necessarily mean that such item or fact is material to the
Seller or the Business or would have a Seller Material Adverse Effect.
Section 13.11. Severability. If any provision of this Agreement or the
application of any such provision to any Person or circumstances shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not effect
any other provision hereof and this Agreement shall remain in force and be
effectuated as if such illegal, invalid or unenforceable provision is, not part
of this Agreement.
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IN WITNESS WHEREOF, the Parties have entered into this Agreement as of
the date first above written.
EMPAQUES DE CARTON TITAN, S.A. DE C.V.
By: /s/Xxxxxx Xxxxxx xx Xxxxxxx
Name: Xxxxxx Xxxxxx xx Xxxxxxx
Title: Chief Financial Officer
CORPORACION DURANGO, S.A. DE C.V.
By: /s/Xxxx X. Xxxxxx
Name: Xxxx X. Xxxxxx
Title: Chief Operating Officer
EMPAQUES MOLDEADOS DE AMERICA
TECNOLOGIAS, S.R.L. de C.V.
By: /s/Xxxxxx de Pass
Name: Xxxxxx de Pass
Title: Director
62
