EXHIBIT 2.1
ACQUISITION AGREEMENT
by and among
PACKAGING DYNAMICS CORPORATION,
3141276 CANADA INC.,
GMG INTERNATIONAL INC.,
PAPERCON, INC.
and
XXXX X. AJRAM
August 6, 2004
Table of Contents
ARTICLE I PURCHASE AND SALE OF SHARES....................................................................1
1.1 Purchase and Sale of Shares..........................................................1
1.2 Purchase Price; Payment..............................................................1
1.3 Cash Consideration Adjustment........................................................2
1.4 Net Assets Adjustment; Closing Cash Adjustment.......................................3
1.5 Tax and Accounting Treatment.........................................................4
ARTICLE II CLOSING.......................................................................................4
2.1 Closing..............................................................................4
2.2 Deliveries at the Closing............................................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANIES...................................6
3.1 Corporate Status.....................................................................7
3.2 Power and Authority..................................................................7
3.3 Enforceability.......................................................................7
3.4 Capitalization.......................................................................7
3.5 Shareholders of the Companies and the Transferred Sub................................8
3.6 Subsidiaries.........................................................................8
3.7 Good Title Conveyed..................................................................8
3.8 No Violation.........................................................................8
3.9 Records..............................................................................9
3.10 Financial Statements.................................................................9
3.11 Changes Since December 31, 2003.....................................................10
3.12 Liabilities.........................................................................12
3.13 Litigation..........................................................................13
3.14 Environmental Matters...............................................................13
3.15 Real Estate.........................................................................16
3.16 Good Title to and Condition of Assets...............................................17
3.17 Compliance with Laws................................................................17
3.18 Labor and Employment Matters........................................................18
3.19 Employee Benefit Plans..............................................................18
3.20 Tax Matters.........................................................................20
3.21 Insurance...........................................................................22
3.22 Licenses and Permits................................................................23
3.23 Adequacy of the Assets; Relationships with Customers and
Suppliers; Affiliated Transactions................................................23
3.24 Intellectual Property...............................................................24
3.25 Contracts...........................................................................25
3.26 Transferred Sub.....................................................................26
3.27 Casualties..........................................................................26
3.28 Product Liability...................................................................26
3.29 Accounts Receivable.................................................................27
3.30 Disputed Accounts Payable...........................................................27
3.31 Inventory...........................................................................27
3.32 Cash Rebate Receivables.............................................................27
3.33 Accuracy of Information Furnished...................................................27
3.34 No Commissions......................................................................28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER..................................................28
4.1 Corporate Status....................................................................28
4.2 Corporate Power and Authority.......................................................28
4.3 Enforceability......................................................................28
4.4 No Violation........................................................................28
4.5 Purchaser Shares....................................................................29
4.6 SEC Reports.........................................................................29
4.7 Listing and Maintenance Requirements................................................29
4.8 Common Stock........................................................................29
4.9 No Commissions......................................................................29
ARTICLE V CONDUCT OF BUSINESS PENDING THE CLOSING.......................................................30
5.1 Conduct of Business by the Companies Pending the Closing............................30
ARTICLE VI ADDITIONAL AGREEMENTS........................................................................32
6.1 Compliance with Covenants...........................................................32
6.2 Efforts and Actions to Cause Closing to Occur.......................................32
6.3 Access to Information...............................................................34
6.4 Notification of Certain Matters.....................................................34
6.5 Confidentiality.....................................................................34
6.6 No Other Discussions................................................................35
6.7 Shareholder and Director Vote.......................................................35
6.8 Indebtedness........................................................................35
6.9 Tax Matters.........................................................................35
6.10 Affiliated Transactions.............................................................40
6.11 Change of Control and Prepayment Obligations........................................40
6.12 Disposition of the Transferred Sub..................................................40
6.13 Publicity...........................................................................40
6.14 Marketable Securities...............................................................40
6.15 Distribution of Certain Assets......................................................40
6.16 Exempt Surplus......................................................................41
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF PURCHASER..................................................41
7.1 Accuracy of Representations and Warranties; Compliance with Obligations.............41
7.2 No Order or Injunction..............................................................41
7.3 HSR Act; Competition Act............................................................41
7.4 No Material Adverse Change..........................................................41
7.5 Corporate Certificate...............................................................42
7.6 Opinion of Counsel..................................................................42
7.7 Consents Obtained...................................................................42
7.8 No Adverse Litigation...............................................................42
7.9 Resignation of Directors and Officers...............................................42
7.10 Transfer............................................................................42
7.11 Lien Terminations...................................................................42
7.12 Purchaser Shares....................................................................42
ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF SELLER....................................................43
8.1 Accuracy of Representations and Warranties; Compliance with Obligations.............43
8.2 No Order or Injunction..............................................................43
8.3 HSR Act; Competition Act............................................................43
8.4 Opinion of Counsel..................................................................43
8.5 Purchaser Shares....................................................................43
ARTICLE IX INDEMNIFICATION..............................................................................43
9.1 Agreement by Seller for Indemnification.............................................43
9.2 Agreement by Purchaser for Indemnification..........................................44
9.3 Survival of Representations and Warranties..........................................44
9.4 Set-Off Rights......................................................................45
9.5 Indemnification Claims..............................................................45
9.6 Remedies Cumulative; Waiver.........................................................46
ARTICLE X DEFINITIONS...................................................................................46
10.1 Defined Terms.......................................................................46
10.2 Other Definitional Provisions.......................................................48
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER............................................................49
11.1 Termination.........................................................................49
11.2 Effect of Termination...............................................................49
ARTICLE XII GENERAL PROVISIONS..........................................................................49
12.1 Notices.............................................................................49
12.2 Entire Agreement....................................................................50
12.3 Expenses............................................................................50
12.4 Amendment; Waiver...................................................................51
12.5 Binding Effect; Assignment..........................................................51
12.6 Counterparts........................................................................51
12.7 Interpretation......................................................................51
12.8 Governing Law; Interpretation.......................................................51
12.9 Severability........................................................................51
12.10 Mediation...........................................................................52
12.11 Jurisdiction........................................................................52
12.12 Dispute Costs.......................................................................53
12.13 Arm's-Length Negotiations...........................................................53
Exhibits:
--------
Exhibit A................................... Note
Exhibit B................................... Non-Competition Agreement
Exhibit C................................... Lease
Exhibit D................................... Registration Rights Agreement
Exhibit E................................... Release
Exhibit F................................... Intercreditor Agreement
Exhibit G................................... Leased Premises
Schedules:
---------
Schedule 3.4................................ Capitalization
Schedule 3.10(a)............................ Combined Group Financial
Statements
Schedule 3.10(b)............................ Interim Combined Group
Financial Statements
Schedule 3.10(c)(i)......................... Parent Financial Statements-A
Schedule 3.10(c)(ii)........................ Parent Financial Statements-B
Schedule 3.10(d)(i)......................... Interim Parent Financial
Statements-A
Schedule 3.10(d)(ii)........................ Interim Parent Financial
Statements-B
Schedule 3.10(d)(iii)....................... Parent Assets and Liabilities
Schedule 3.11............................... Changes since December 31,
2003
Schedule 3.12(b)............................ Accounts
Schedule 3.13............................... Litigation
Schedule 3.14(d)............................ Environmental Matters
Schedule 3.15(b)............................ Real Estate
Schedule 3.16(a)............................ Liens
Schedule 3.19............................... Employee Benefit Plans
Schedule 3.20............................... Tax Matters
Schedule 3.21(a)............................ Insurance Policies
Schedule 3.21(b)............................ Outstanding Claims
Schedule 3.22............................... License and Permits
Schedule 3.23............................... Affiliated Transactions
Schedule 3.24(a)............................ Intellectual Property
Schedule 3.24(b)............................ License Agreements
Schedule 3.25............................... Material Contracts
Schedule 4.4................................ No Violation
Schedule 4.7................................ Listing and Maintenance
Requirements
Schedule 7.6................................ Opinion of Seller's Counsel
Schedule 8.4................................ Opinion of Purchaser's Counsel
ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT (this "Agreement") is entered into as of
August 6, 2004 by and among (i) Packaging Dynamics Corporation, a Delaware
corporation ("Purchaser"); (ii) 3141276 Canada Inc., a Canadian numbered
holding company ("Parent"); (iii) GMG International Inc., a Georgia
corporation and wholly-owned subsidiary of Parent ("GMG"); (iv) Papercon,
Inc., a Georgia corporation and wholly-owned subsidiary of GMG ("Papercon,"
and together with Parent and GMG, the "Companies"); and (v) Xx. Xxxx X. Ajram
("Seller"). Certain capitalized terms used in this Agreement have the meanings
assigned to them in Section 10.1.
RECITALS
WHEREAS, Seller owns 1,000 shares of common stock, no par value, and
13,937,815 shares of Class A preferred stock, no par value, of Parent,
constituting all of the issued and outstanding shares of capital stock of
Parent (such shares being referred to herein collectively as the "Shares");
and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires
to purchase from Seller, all of the Shares, upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and undertakings contained herein, and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Shares. Subject to the terms and conditions
of this Agreement, at the Closing (as defined herein), Seller shall sell,
assign, convey and transfer the Shares, free and clear of all Liens (as
defined herein), to Purchaser, and Purchaser shall purchase and acquire the
Shares from Seller.
1.2 Purchase Price; Payment. At the Closing and subject to the terms
and conditions set forth in this Agreement, in consideration for the sale,
assignment, transfer and delivery of the Shares, Purchaser shall pay to Seller
an aggregate purchase price consisting of (i) $67,000,000 to be paid in cash
(the "Cash Consideration"), as reduced by the amount of the Cash Consideration
Adjustment (as defined herein) and subject to the withholding requirement set
forth in Section 6.9(c) herein; (ii) a note substantially in the form attached
hereto as Exhibit A (the "Note") in the principal amount of $7,000,000; (iii)
833,333 shares of common stock, par value $0.01 per share, of Purchaser (the
"Purchaser Shares"); and (iv) $4,000,000 (the "Non-Competition Agreement
Payment") to be paid pursuant to and in accordance with the Non-Competition
Agreement by and among Seller and Purchaser substantially in the form attached
hereto as Exhibit B (the "Non-Competition Agreement"). The Cash Consideration
(as adjusted), Note, Purchaser Shares and Non-Competition Payment are
collectively referred to as the "Purchase Price."
1.3 Cash Consideration Adjustment.
(a) Not less than three (3) business days prior to the
Closing Date (as defined herein), Seller shall cause Parent to prepare and
deliver to Purchaser (i) an estimated statement of the Net Assets (as defined
herein) of the Companies that fairly presents the assets and liabilities of
the Companies on a consolidated basis as of the close of business on the
Closing Date (the "Estimated Net Assets Statement") to be prepared in good
faith in conformity with GAAP applied on a basis consistent with the Combined
Group Financial Statements (as defined herein) and (ii) a certificate as to
the preparation of the Estimated Net Assets Statement executed by the Chief
Executive Officer and Chief Financial Officer of each of the Companies.
Purchaser and its representatives shall have full access to all relevant books
and records and employees of the Companies in connection with Parent's
preparation, and Purchaser's review, of the Estimated Net Assets Statement.
The term "Net Assets" means (i) cash and cash equivalents, trade accounts
receivable (net of allowance for doubtful accounts) and receivables relating
to equipment sales not to exceed $30,000, inventory (net of valuation
allowances and allowances for excess and obsolete inventory) and prepaid
expenses and deposits (including prepaid income Taxes, but excluding Seller
Transaction Fees) of the Companies on a consolidated basis less (ii) the
accounts payable, accrued expenses (including income Taxes payable and accrued
transaction expenses) of the Companies on a consolidated basis, in the case of
each of the foregoing clauses (i) and (ii), determined in accordance with GAAP
consistently applied using the same accounting principles, procedures and
methods that were used to prepare the Combined Group Financial Statements plus
(iii) receivables for rebates from raw material vendors (the "Cash Rebate
Receivables") which have not been received as of the Closing Date, provided
that the Cash Rebate Receivables shall only include rebates which (1) have
been earned with respect to purchases of raw material received by Papercon at
any of its manufacturing locations prior to the Closing Date, (2) are fully
earned based on such purchases and receipts, (3) are required to be paid in
cash or pursuant to a credit memo that can be currently applied, (4) are
received in cash within sixty (60) calendar days of the end of the current
fiscal year or pursuant to a credit memo that can be applied within sixty (60)
calendar days of the end of the current fiscal year, (5) are with respect to
purchases of materials which are of a nature and amount consistent with the
ordinary course of business consistent with past practice, (6) are earned
pursuant to fully executed written rebate agreements entered into prior to
April 5, 2004, which agreements have not been entered into in connection with
or in anticipation of the consummation of transactions contemplated by this
Agreement, and (7) are not otherwise included in Net Assets.
(b) The term "Cash Consideration Adjustment" shall mean:
(i) if the Net Assets as reflected on the Estimated
Net Assets Statement (the "Estimated Net Assets") are less
than $33,500,000 (the "Net Assets Target"), an amount equal
to the difference obtained by subtracting (x) the amount of
the Estimated Net Assets from (y) the Net Assets Target; or
(ii) if the Estimated Net Assets are greater than
the Net Assets Target, an amount equal to $0.
1.4 Net Assets Adjustment; Closing Cash Adjustment.
(a) As soon as practicable (but not later than sixty (60)
calendar days) following the Closing Date, Purchaser shall prepare and deliver
to Seller a statement (the "Closing Net Assets Statement") setting forth the
Net Assets of the Companies as of the close of business on the Closing Date.
(b) After receipt of the Closing Net Assets Statement,
Seller shall have thirty (30) calendar days to review it. Unless Seller
delivers written notice (the "Objection Notice") to Purchaser on or prior to
the thirtieth (30th) calendar day after receipt of the Closing Net Assets
Statement of his disagreement as to any amount included in or omitted from the
Closing Net Assets Statement specifying in reasonable detail the basis for his
disagreement, Seller shall be deemed to have accepted and agreed to the
Closing Net Assets Statement. If Seller so notifies Purchaser of such an
objection to the Closing Net Assets Statement, Seller and Purchaser shall
within thirty (30) calendar days following the date of such notice (the
"Resolution Period") attempt to resolve their differences. Any resolution by
them as to any disputed amount shall be final, binding, conclusive and
nonappealable.
(c) If at the conclusion of the Resolution Period there are
amounts still remaining in dispute, then all amounts remaining in dispute
shall be submitted to an independent nationally recognized public accounting
firm reasonably acceptable to Purchaser and Seller (the "Independent
Auditor"). The Independent Auditor shall act as an arbitrator to determine,
based solely on presentations by Purchaser and Seller, and not by independent
review, only those amounts still in dispute. The Independent Auditor's
determination shall be made within thirty (30) calendar days of its
engagement, shall be set forth in a written statement delivered to Purchaser
and Seller and shall be final, binding and conclusive. The fees and expenses
of the Independent Auditor shall be allocated equally between Purchaser and
Seller. The term "Final Closing Net Assets Statement" means the definitive
Closing Net Assets Statement accepted by Seller or agreed to by Purchaser and
Seller in accordance with Section 1.4(b) or the definitive Closing Net Assets
Statement resulting from the determinations made by the Independent Auditor in
accordance with this Section 1.4(c) (in addition to those items theretofore
accepted by Seller or agreed to by Purchaser and Seller).
(d) Within three (3) calendar days of the determination of
the Final Closing Net Assets Statement:
(i) if the Estimated Net Assets were greater than
the Net Assets Target and the Net Assets set forth on the
Final Closing Net Assets Statement (the "Final Net Assets")
are less than the Net Assets Target, then Seller shall pay
to Purchaser, by wire transfer of immediately available
funds to an account designated by Purchaser, an amount equal
to the difference between the Net Assets Target and the
Final Net Assets; and
(ii) if the Estimated Net Assets were greater than
the Net Assets Target and the Final Net Assets are greater
than the Net Assets Target, there shall be no payments made
by Seller or Purchaser in respect of any Net Assets
adjustment pursuant to this Section 1.4; and
(iii) if the Estimated Net Assets were less than
the Net Assets Target and the Final Net Assets are less than
the Estimated Net Assets, Seller shall pay to Purchaser, by
wire transfer of immediately available funds to an account
designated by Purchaser, an amount equal to the difference
between the Estimated Net Assets and the Final Net Assets;
and
(iv) if the Estimated Net Assets were less than the
Net Assets Target and the Final Net Assets are greater than
the Estimated Net Assets, Purchaser shall pay to Seller, by
wire transfer of immediately available funds to an account
designated by Seller, an amount equal to the difference
between the Final Net Assets and the Estimated Net Assets
(the "Net Assets Excess"); provided, however, that in no
event shall the Net Assets Excess exceed the amount of the
Cash Consideration Adjustment.
1.5 Tax and Accounting Treatment. The parties hereto acknowledge and
agree that the purchase of Shares contemplated hereby shall be treated for
accounting purposes as a purchase. The parties also acknowledge and agree that
the purchase of Shares is intended to be a taxable transaction and to
constitute a "qualified stock purchase" within the meaning of Section
338(d)(3) of the Code.
ARTICLE II
CLOSING
2.1 Closing. Subject to the terms and conditions of this Agreement,
the closing of the transactions contemplated by this Agreement (the "Closing")
shall take place at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP,
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx, at 10 a.m. local time on
the fifth (5th) business day after the satisfaction or waiver of the
conditions set forth in Articles VII and VIII hereof or such other place and
time as the parties may otherwise agree, and the date of the Closing is
referred to herein as the "Closing Date").
2.2 Deliveries at the Closing.
(a) Deliveries by Seller and the Companies to Purchaser. At
or prior to the Closing, each of Seller and the Companies shall deliver or
cause to be delivered to Purchaser the following:
(i) the documents required to be delivered by
Seller and the Companies pursuant to Articles VI and VII;
(ii) stock certificates representing all of the
Shares, with stock transfer powers duly endorsed in blank
and in a form for transfer to Purchaser;
(iii) an executed copy of the Note;
(iv) an executed copy of the Lease by and between
GHGA Properties, L.P., a Georgia limited partnership
("Landlord"), all of the limited partnership interests of
which are owned by Seller and of which the general partner
is GHGA Management, Inc. ("Transferred Sub"), a Georgia
corporation and wholly-owned subsidiary of GMG, and Parent
substantially in the form attached hereto as Exhibit C (the
"Lease");
(v) an executed copy of the Non-Competition
Agreement;
(vi) an executed copy of the Registration Rights
Agreement by and between Seller and Purchaser substantially
in the form attached hereto as Exhibit D (the "Registration
Rights Agreement");
(vii) a release by Seller and such of his
Affiliates as may be designated by Purchaser in
substantially the form attached hereto as Exhibit E;
(viii) an executed copy of the Intercreditor
Agreement by and between Bank of America, N.A. and Seller in
substantially the form attached hereto as Exhibit F;
(ix) all of the books and records relating to the
Companies;
(x) a certification of non-foreign status for
Seller in the form and manner which complies with the
requirements of Section 1445 of the Code and the regulations
promulgated thereunder;
(xi) any other certifications which may be required
under applicable law stating that no Taxes are due to any
taxing authority for which Purchaser could have liability to
withhold and pay with respect to the transfer of the Shares
to Purchaser pursuant to this Agreement, except as otherwise
provided in Section 6.9(c); and
(xii) all other documents, certificates,
instruments and writings required to be delivered by any of
Seller or the Companies at or prior to the Closing pursuant
to this Agreement or otherwise required or reasonably
requested by Purchaser in connection herewith.
(b) Deliveries by Purchaser to Seller. At or prior to the
Closing, Purchaser shall deliver or cause to be delivered to Seller the
following:
(i) the documents required to be delivered by
Purchaser pursuant to Articles VI and VIII;
(ii) the Cash Consideration less the Cash
Consideration Adjustment;
(iii) stock certificates issued in the name of
Seller and dated as of the Closing Date representing the
Purchaser Shares;
(iv) an executed copy of the Note;
(v) an executed copy of the Lease;
(vi) an executed copy of the Guaranty issued by
Purchaser in connection with the Lease;
(vii) an executed copy of the Non-Competition
Agreement;
(viii) an executed copy of the Registration Rights
Agreement; and
(ix) all other documents, certificates, instruments
and writings required to be delivered by Purchaser at or
prior to the Closing pursuant to this Agreement or otherwise
required or reasonably requested by Seller in connection
herewith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANIES
As a material inducement to Purchaser to enter into this Agreement
and to consummate the transactions contemplated hereby, Seller and each of the
Companies jointly and severally make the following representations and
warranties to Purchaser as of the date of this Agreement (or if made as of a
specific date, as of such date) and as of the Closing Date:
3.1 Corporate Status. Each of the Companies is a corporation duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation. Each of the Companies has the
requisite power and authority to own or lease its properties and to carry on
its business as now being conducted. None of the Companies is required to
qualify to do business as a foreign corporation in any jurisdiction in which
it is not so qualified. Each of the Companies has fully complied with all of
the requirements of any statute governing the use and registration of
fictitious names, and has the legal right to use the names under which it
operates its businesses. There is no pending or threatened proceeding for the
dissolution, liquidation, insolvency or rehabilitation of any of the
Companies.
3.2 Power and Authority. Each of the Companies has all power and
authority necessary to execute and deliver this Agreement, to perform its
respective obligations hereunder, and to consummate the transactions
contemplated hereby. Each of the Companies has taken all action necessary to
authorize the execution and delivery of this Agreement, the performance of its
respective obligations hereunder, and the consummation of the transactions
contemplated hereby. Seller has the requisite competence and authority to
execute and deliver this Agreement, to perform his obligations hereunder and
to consummate the transactions contemplated hereby.
3.3 Enforceability. This Agreement has been duly executed and
delivered by each of Seller and the Companies and, assuming due and valid
authorization, execution and delivery by Purchaser, constitutes the legal,
valid and binding obligation of each of them, enforceable against each of them
in accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
3.4 Capitalization. Schedule 3.4 sets forth with respect to each of
the Companies, (a) the number of authorized shares of each class of its
capital stock and (b) the number of issued and outstanding shares of each
class of its capital stock. All of the issued and outstanding shares of
capital stock of each such entity: (i) have been duly authorized and validly
issued and are fully paid and nonassessable, (ii) were issued in compliance
with all applicable state, provincial, territorial and United States and
Canadian federal securities laws and (iii) were not issued in violation of any
preemptive rights or rights of first refusal or similar rights. No preemptive
rights or rights of first refusal or similar rights exist with respect to any
shares of capital stock of the Companies and no such rights arise by virtue of
or in connection with the transactions contemplated hereby; there are no
outstanding or authorized rights, options, warrants, convertible securities,
subscription rights, conversion rights, exchange rights or other agreements or
commitments of any kind that could require any of the Companies to issue or
sell any shares of its capital stock (or securities convertible into or
exchangeable for shares of its capital stock); there are no outstanding stock
appreciation, phantom stock, profit participation or other similar rights with
respect to the Companies; there are no proxies, voting rights or other
agreements or understandings with respect to the voting or transfer of the
capital stock of the Companies; and none of the Companies is obligated to
redeem or otherwise acquire any of its outstanding shares of capital stock.
3.5 Shareholders of the Companies and the Transferred Sub. Seller
owns all of the outstanding shares of capital stock of Parent. Parent owns all
of the outstanding shares of capital stock of GMG. GMG owns all of the
outstanding shares of capital stock of Papercon. As of the date of this
Agreement, GMG owns all of the outstanding shares of capital stock of
Transferred Sub. All of the shares referred to in this Section 3.5 are owned
by the applicable shareholders free and clear of all Liens.
3.6 Subsidiaries. Other than GMG, Papercon and the Transferred Sub,
Parent does not own, directly or indirectly, any outstanding voting securities
of or other interests in, or controls, any other corporation, partnership,
joint venture or other entity. Other than the Transferred Sub, neither GMG nor
Papercon owns, directly or indirectly, any outstanding voting securities of or
other interests in, or controls, any other corporation, partnership, joint
venture or other entity.
3.7 Good Title Conveyed. The stock certificates, stock powers,
endorsements, assignments and other instruments to be executed and delivered
by Seller to Purchaser at the Closing will be valid and binding obligations of
Seller, enforceable in accordance with their respective terms, and will
effectively vest in Purchaser good, valid and marketable title to all the
Shares pursuant to and as contemplated by this Agreement free and clear of all
Liens.
3.8 No Violation. Except for any approvals or consents required with
respect to those Material Contracts (as defined in Section 3.25) expressly
identified on Schedule 3.25 as requiring the consents of third parties, the
execution and delivery of this Agreement by Seller and the Companies, the
performance by such parties of their respective obligations hereunder and the
consummation by them of the transactions contemplated by this Agreement will
not (i) contravene any provision of the Certificate or Articles of
Incorporation, Bylaws or other organizational or governing document of any
such parties, (ii) violate or conflict with any law, statute, ordinance, rule,
regulation, decree, writ, injunction, judgment or order of any Governmental
Authority or of any arbitration award which is either applicable to, binding
upon or enforceable against any such parties, (iii) conflict with, result in
any breach of, or constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default) under,
or give rise to a right of payment under or the right to terminate, amend,
modify, abandon or accelerate, any Material Contract which is applicable to,
binding upon or enforceable against any such parties, (iv) result in or
require the creation or imposition of any Lien upon or with respect to any of
the properties or assets of any such parties, (v) give to any individual or
entity a right or claim against any such parties or (vi) require the consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority, any court or tribunal or any other Person, except (a)
any applicable filings required under the HSR Act, Competition Act and any
other federal, state and foreign laws that are designed or intended to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade or lessening of competition ("Competition
Law") by the Companies, Seller and Purchaser, and (b) any SEC and other
filings required to be made by Purchaser.
3.9 Records. The copies of the Certificate or Articles of
Incorporation, Bylaws or other organizational or governing documents and other
documents and agreements of each of the Companies that were provided to
Purchaser are true, accurate, and complete and reflect all amendments made
through the date of this Agreement. All accounts, books, ledgers and official
and other records of each of the Companies are accurate and complete in all
material respects, and there are no material inaccuracies or discrepancies of
any kind contained therein. The capital stock ledgers of each of the
Companies, as previously made available to Purchaser, contain accurate and
complete records of all issuances, transfers and cancellations of capital
stock of each of the Companies.
3.10 Financial Statements.
(a) Set forth on Schedule 3.10(a) hereto are true and
complete copies of the audited balance sheets of GMG, Papercon and the
Transferred Sub (collectively, the "Combined Group") on a consolidated basis
and the audited income statements and audited statements of cash flows of the
Combined Group on a consolidated basis as at and for the years ended December
31, 2003, December 29, 2002 and December 30, 2001 (together with the balance
sheets previously referred to in this Section 3.10(a), the "Combined Group
Financial Statements"). The Combined Group Financial Statements have been
prepared in accordance with GAAP (as defined herein), consistently applied,
and fairly present the financial condition and results of operations of the
Combined Group as at the dates and for the periods indicated and reflect all
adjustments necessary for a fair presentation of the financial information
contained therein.
(b) Set forth on Schedule 3.10(b) hereto are true and
complete copies of the balance sheets of the Combined Group on a consolidated
basis and the income statements and statements of cash flows of the Combined
Group on a consolidated basis as at and for the six month period ended June
30, 2004 (together with the balance sheets previously referred to in this
Section 3.10(b), the "Interim Combined Group Financial Statements"). Except
for the fact that the Interim Combined Group Financial Statements are subject
to normal recurring year-end adjustments consistent with past practices (which
in the aggregate are not material) and do not contain footnotes and as set
forth on Schedule 3.10(b) hereto, the Interim Combined Group Financial
Statements have been prepared in accordance with GAAP, consistently applied,
and fairly present the financial condition and results of operations of the
Combined Group as at the date and for the period indicated and reflect all
adjustments necessary for a fair presentation of the financial information
contained therein.
(c) Set forth on Schedule 3.10(c)(i) hereto are true and
complete copies of the compiled balance sheets of Parent and the compiled
income statements and compiled statement of cash flows of Parent as at and for
the years ended December 31, 2003, December 31, 2002 and December 31, 2001
(together with the balance sheets previously referred to in this Section
3.10(c), the "Parent Financial Statements"). Except as set forth on Schedule
3.10(c)(ii) hereto, the Parent Financial Statements have been prepared in
accordance with GAAP, consistently applied, and fairly present the financial
condition and results of operations of Parent as at the dates and for the
periods indicated and reflect all adjustments necessary for a fair
presentation of the financial information contained therein.
(d) Set forth on Schedule 3.10(d)(i) hereto are true and
complete copies of the compiled balance sheets of Parent and the compiled
income statements and compiled statement of cash flows of Parent as at and for
the six month period ended June 30, 2004 (together with the balance sheets
previously referred to in this Section 3.10(d), the "Interim Parent Financial
Statements" and, together with the Interim Combined Group Financial
Statements, the "Interim Financial Statements"). Except for the fact that the
Interim Parent Financial Statements are subject to normal recurring year-end
adjustments consistent with past practices (which in the aggregate are not
material) and do not contain footnotes and except as set forth on Schedule
3.10(d)(ii) hereto, the Interim Parent Financial Statements have been prepared
in accordance with GAAP, consistently applied, and fairly present the
financial condition and results of operations of Parent as at the date and for
the period indicated and reflect all adjustments necessary for a fair
presentation of the financial information contained therein. Schedule
3.10(d)(iii) hereto sets forth all of the assets and liabilities of Parent as
of June 30, 2004.
(e) The books and records of the Companies and the
Transferred Sub taken as a whole fully and fairly reflect all of their
respective transactions, properties, assets and liabilities. Except as
specifically noted therein, there are no material, special or non-recurring
items of income or expense with respect to the Companies or the Transferred
Sub during the periods covered by the financial statements referred to in
paragraphs (a), (b), (c) and (d) of this Section 3.10 (the "Financial
Statements"), and the balance sheets included in such financial statements do
not reflect any write-up or revaluation increasing the book value of any
assets of the Companies or the Transferred Sub, in each case except as
specifically disclosed in such financial statements or in the notes or other
attachments thereto. Except as specifically noted therein, the Financial
Statements reflect all adjustments necessary for a fair presentation of the
financial condition and results of operations of each of the Companies and the
Transferred Sub except for normal, recurring year end adjustments consistent
with past practices (which in the aggregate are not material).
(f) As of the Closing, there will be no outstanding
Indebtedness of the Companies.
3.11 Changes Since December 31, 2003. Except as set forth on Schedule
3.11 hereto, since December 31, 2003, except as expressly contemplated by the
terms of this Agreement, none of the Companies nor the Transferred Sub has:
(a) issued, sold, pledged, disposed of, encumbered, or
authorized the issuance, sale, pledge, disposition, grant or encumbrance of,
any shares of its capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
such capital stock or any other ownership interest;
(b) declared, set aside, made, or paid any dividend or other
distribution payable in cash, stock, property or otherwise, on or with respect
to its capital stock or other securities or reclassified, combined, split,
subdivided or redeemed, purchased or otherwise acquired, directly or
indirectly, any of its capital stock or other securities;
(c) sold, leased, licensed or transferred any of its
properties or assets other than in the ordinary course of business consistent
with past practice;
(d) abandoned or failed to maintain any rights in
Intellectual Property owned by or licensed to it;
(e) (i) acquired (including, without limitation, for cash or
shares of capital stock, by merger, consolidation or acquisition of stock or
assets) any interest in any corporation, partnership or other business
organization or division thereof or any assets, or made any investment either
by purchase of stock or securities, contributions of capital or property
transfer or, except in the ordinary course of business consistent with past
practice, purchased any property or assets of any other Person, (ii) made or
obligated itself to make capital expenditures out of the ordinary course
consistent with past practice, (iii) other than in the ordinary course
consistent with past practice, incurred any obligations or liabilities
including, without limitation, Indebtedness, (iv) issued any debt securities
or assumed, guaranteed or endorsed or otherwise as an accommodation become
responsible for, the obligations of any Person, or made any loans or advances,
(v) modified, terminated or entered into any Contract other than in the
ordinary course of business consistent with past practice, or (vi) imposed any
security interest or other Lien on any of its Assets other than in the
ordinary course of business consistent with past practice;
(f) suffered any theft, damage, destruction or casualty
loss, whether or not covered by insurance, in excess of $100,000 in the
aggregate;
(g) suffered any material adverse change (or any development
that, insofar as reasonably can be foreseen, is reasonably likely to result in
any material adverse change) in the working capital, consolidated financial
condition, businesses, results of operations or prospects of the Companies;
(h) waived, canceled, compromised or released any rights
other than in the ordinary course of business consistent with past practice;
(i) increased the compensation payable or to become payable
to its employees, officers or directors or granted any bonus, severance or
termination pay to, or entered into any bonus, employment, change of control
or severance agreement with, any of its managers, officers, or employees, or
established, adopted, entered into or amended or taken any action to
accelerate any rights or benefits with respect to any collective bargaining,
bonus, profit sharing trust, compensation, stock option, restricted stock
pension, retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the benefit
of any managers, officers or employees;
(j) made any loans to any of its officers, directors,
employees, affiliates, agents or consultants or made any change in its
existing borrowing or lending arrangements for or on behalf of any of such
persons, whether pursuant to an Employee Benefit Plan (as defined herein) or
otherwise;
(k) conducted any operations or adopted any policies other
than in the ordinary course of business consistent with past practice;
(l) taken any action with respect to accounting policies or
procedures or made any adjustment to its books and records other than in the
ordinary course of business and in a manner consistent with past practices;
(m) paid, discharged or satisfied any existing claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business of due and payable liabilities reflected or
reserved against in its financial statements, as appropriate, or liabilities
incurred after the date thereof in the ordinary course of business and
consistent with past practice;
(n) delayed paying any account payable beyond the date on
which it is due and payable except to the extent being contested in good
faith;
(o) entered into any transaction with Seller or any of his
Affiliates;
(p) made or pledged any charitable contributions in excess
of $5,000 in the aggregate; or
(q) agreed, in writing or otherwise, to do or authorized any
of the foregoing.
3.12 Liabilities.
(a) None of the Companies or the Transferred Sub has any
liabilities or obligations, whether accrued, absolute, contingent or
otherwise, except:
(i) to the extent reflected on its Interim
Financial Statement and not heretofore paid or discharged;
(ii) liabilities incurred in the ordinary course of
business consistent with past practice since the date of its
Interim Financial Statement which, individually and in the
aggregate, are not material and are of the same character
and nature as the obligations, duties and liabilities set
forth on its Interim Financial Statement; and
(iii) liabilities incurred in the ordinary course
of business prior to June 30, 2004 which, in accordance with
GAAP consistently applied, were not required to be recorded
thereon and which, in the aggregate, are not material.
(b) Schedule 3.12(b) lists the account numbers and names of
each bank, broker or other depository institution at which any of the
Companies maintains a depository account, and the names of all persons
authorized to withdraw funds from each such account.
3.13 Litigation. Except as set forth on Schedule 3.13, there is no
action, suit or other legal or administrative proceeding or governmental
investigation pending or, to the knowledge of the Companies, the Transferred
Sub or Seller, threatened, anticipated or contemplated (i) against, by or
affecting the Companies, the Transferred Sub or Seller, or their properties or
assets or the Leased Premises, or (ii) which questions the validity or
enforceability of this Agreement or the transactions contemplated hereby, and
there is no basis for any of the foregoing. There are no outstanding orders,
decrees or stipulations issued by any Governmental Authority in any proceeding
to which any of the Companies or the Transferred Sub is or was a party or with
respect to the Leased Premises which have not been complied with in full or
which continue to impose any obligations on the Companies, the Transferred Sub
or the Leased Premises.
3.14 Environmental Matters.
(a) The Companies, the Transferred Sub and Seller are and
have at all times been in full compliance with all Environmental Laws (as
defined herein) governing the Companies' and the Transferred Sub's businesses,
operations, properties, assets and the Leased Premises, including, without
limitation: (i) all requirements relating to the Discharge and Handling of
Hazardous Substances (each, as defined herein); (ii) all requirements relating
to notice, record keeping and reporting; (iii) all requirements relating to
obtaining and maintaining Licenses (as defined herein) for the use by the
Companies and the Transferred Sub of the Leased Premises; and (iv) all
applicable writs, orders, judgments, injunctions, governmental communications,
decrees, informational requests or demands issued pursuant to, or arising
under, any Environmental Laws.
(b) There are no (and there is no basis for any)
non-compliance orders, warning letters or notices of violation (collectively
"Notices"), claims, suits, actions, judgments, penalties, fines, or
administrative or judicial investigations of any nature or proceedings
(collectively "Proceedings") pending or, to the knowledge of the Companies or
Seller, threatened against or involving the Companies, the Transferred Sub or
their businesses, operations, properties or assets (including the Leased
Premises) issued by any Governmental Authority or third party with respect to
any Environmental Laws or Licenses issued to the Companies or the Transferred
Sub thereunder in connection with, related to or arising out of the use by the
Companies or the Transferred Sub of the Leased Premises, which have not been
resolved to the satisfaction of the issuing Governmental Authority or third
party in a manner that would not impose any material obligation, burden or
continuing liability on Purchaser or the Companies in the event that the
transactions contemplated by this Agreement are consummated.
(c) None of the Companies, the Transferred Sub or Seller (or
their respective Affiliates) have at any time Discharged, nor have they at any
time allowed or arranged for any third party to Discharge, Hazardous
Substances to, at or upon: (i) any location other than a site lawfully
permitted to receive such Hazardous Substances; (ii) any parcel of real
property owned, used or leased at any time by the Companies or the Transferred
Sub (including, without limitation, the Leased Premises), except in compliance
with applicable Environmental Laws; or (iii) any site which, pursuant to
CERCLA or any similar Canadian or state law, has been placed on the National
Priorities List or its Canadian or state equivalent, or as to which the
Environmental Protection Agency, Environment Canada or any relevant Canadian
or state agency has notified the Companies, the Transferred Sub or Seller that
it has proposed or is proposing to place on the National Priorities List or
its Canadian or state equivalent. There has not occurred, nor is there
presently occurring, a Discharge, or threatened Discharge, of any Hazardous
Substance on, into or directly beneath the surface of any real property owned
or leased at any time by the Companies or the Transferred Sub, including,
without limitation, the Leased Premises. There has been no Discharge from or
rupture of any Aboveground Storage Tanks or Underground Storage Tanks.
(d) Schedule 3.14(d) identifies (i) all environmental
audits, assessments or occupational health studies undertaken during the prior
five (5) years by any Governmental Authority, the Companies, the Transferred
Sub or Seller or their respective Affiliates or their respective agents or
representatives, or any third party, relating to or affecting the Leased
Premises; (ii) all ground, water, soil, air or asbestos monitoring undertaken
by the Companies, the Transferred Sub or Seller or their respective agents or
representatives or undertaken by any Governmental Authority or any third
party, relating to or affecting the real property owned or leased at any time
by the Companies or the Transferred Sub, including the Leased Premises; (iii)
all written communications between the Companies, the Transferred Sub or
Seller, on the one hand, and any Governmental Authority, on the other hand,
arising under or relative to Environmental Laws, including, but not limited
to, all Notices issued to the Companies, the Transferred Sub or Seller (or
their respective Affiliates) and pertaining to the Leased Premises; and (iv)
all outstanding citations issued under OSHA or its Canadian equivalent, or
similar United States or Canadian federal, state, provincial, local or foreign
statutes, laws, ordinances, codes, rules, regulations, orders, rulings or
decrees, relating to or affecting the Companies, the Transferred Sub or any
real property owned or leased at any time by the Companies or the Transferred
Sub, including, without limitation, the Leased Premises.
(e) For purposes of this Section, the following terms shall
have the meanings ascribed to them below:
"Aboveground Storage Tank" shall have the meaning ascribed to such
term in RCRA, or any applicable Canadian, state, provincial or local statute,
law, ordinance, code, rule, regulation, order ruling, or decree governing
Aboveground Storage Tanks.
"Discharge" means any manner of spilling, leaking, dumping,
discharging, releasing, migrating or emitting, as any of such terms may
further be defined in any Environmental Law, into or through any medium
including, without limitation, ground water, surface water, land, soil or air.
"Environmental Laws" means all United States and Canadian federal,
state, provincial, regional, local or foreign statutes, laws, rules,
regulations, codes, ordinances, orders, plans, injunctions, decrees, rulings,
licenses, and changes thereto, or judicial or administrative interpretations
thereof, or similar laws, whether currently in existence or hereafter enacted,
issued, or promulgated, any of which govern, purport to govern, or relate to
pollution, protection of the environment, public health and safety, air
emissions, water discharges, waste disposal, hazardous or toxic substances,
solid or hazardous waste, occupational, health and safety, as any of these
terms are or may be defined in such statutes, laws, rules, regulations, codes,
orders, ordinances, plans, injunctions, decrees, rulings, licenses, and
changes thereto, or judicial or administrative interpretations thereof,
including, without limitation: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendment
and Reauthorization Act of 1986 (herein, collectively, "CERCLA"); the Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act
of 1976 and subsequent Hazardous and Solid Waste Amendments of 1984 (herein,
collectively, "RCRA"); the Hazardous Materials Transportation Act, as amended
the Clean Water Act, as amended; the Clean Air Act, as amended; the Toxic
Substances Control Act, as amended; the Occupational Safety and Health Act of
1970, as amended, ("OSHA") and the Canadian Environmental Protection Act, as
amended ("CEPA").
"Handle" means any manner of generating, accumulating, storing,
treating, disposing of, transporting, transferring, labeling, handling,
manufacturing or using, as any of such terms may further be defined in any
Environmental Law.
"Hazardous Substances" shall be construed broadly to include any
toxic or hazardous substance, material or waste, and any other contaminant,
pollutant or constituent thereof, whether liquid, solid, semi-solid, sludge
and/or gaseous, including without limitation, chemicals, compounds,
by-products, pesticides, asbestos containing materials, petroleum or petroleum
products, and polychlorinated biphenyls, the presence of which requires
investigation or remediation under any Environmental Laws or which are or
become regulated, listed or controlled by, under or pursuant to any
Environmental Laws, or which has been or shall be determined or interpreted at
any time by any Governmental Authority to be a hazardous or toxic substance
regulated under any other statute, law, regulation, order, code, rule, order,
or decree.
"Licenses" means, for purposes of this Section 3.14 only, all
licenses, certificates, permits, approvals, decrees and registrations required
under the Environmental Laws.
"Underground Storage Tank" shall have the meaning ascribed to such
term in RCRA, or any applicable Canadian, state, provincial or local statute,
law, ordinance, code, rule, regulation, order, ruling or decree governing
Underground Storage Tanks.
3.15 Real Estate.
(a) None of the Companies currently owns, nor has any of the
Companies ever owned, any real property or any interest therein and the Leased
Premises is the only real property used in connection with the operations of
the Companies. A true and complete copy of each lease (including any
amendments, restatements, modifications, supplements or other revisions
thereto, if any) with respect to the Leased Premises (collectively, the
"Leased Premises Leases") has heretofore been delivered to Purchaser. Each
Leased Premises Lease is valid, binding and enforceable in accordance with its
terms and is in full force and effect. The leasehold estate created by each
Leased Premises Lease is free and clear of all Liens. There are no existing
defaults by the Companies under any of the Leased Premises Leases. No event
has occurred that (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default under
any Leased Premises Lease. None of the Companies, the Transferred Sub or
Seller has received notice, or has any other any reason to believe, that any
lessor under any Leased Premises Lease will not consent (where such consent is
necessary) to the consummation of the transactions contemplated hereby without
requiring any modification of the rights or obligations of the lessee
thereunder.
(b) Except as set forth on Schedule 3.15(b), neither Seller
nor any of his Affiliates own any real property or interest therein
(including, without limitation, any option or other right or obligation to
purchase any real property or any interest therein) which is contiguous to,
adjacent to, or otherwise located within a five (5) mile radius of any
boundary of the Leased Premises.
(c) With respect to each parcel of the Leased Premises, (i)
there are no pending or, to the knowledge of the Companies or Seller,
threatened condemnation proceedings, suits or administrative actions relating
to any such parcel or other matters affecting adversely the current use,
occupancy or value thereof, (ii) neither the Companies nor Seller have entered
into any outstanding contract for construction on any such parcel, (iii) no
materials have been furnished and no services have been rendered with respect
to any such parcel or any portion thereof which might give rise to mechanic's,
materialman's or other liens against such property or any portion thereof,
(iv) all improvements, buildings and systems on any such parcel are
structurally sound with no known defects and are in the same condition and
repair as the Companies have historically maintained in their operations, are
adequate for the uses to which they are being put and are safe for their
current occupancy and use, (v) except as set forth on Schedule 3.25, there are
no Contracts to which any of the Companies or the Transferred Sub are a party
relating to service, management or similar matters which affect any such
parcel, (vi) without qualification with respect to the Atlanta Properties and
to the knowledge of the Companies and Seller with respect to the Leased
Premises other than the Atlanta Properties, the buildings and improvements
located on each such parcel are located within the boundary lines of such
parcel and are not in violation of applicable setback requirements, local
comprehensive plan provisions, zoning laws and ordinances (and no such parcel
or buildings or improvements thereon are subject to "permitted non-conforming
use" or "permitted non-conforming structure" classifications), building code
requirements, permits, licenses or other forms of approval, regulation or
restrictions by any Governmental Authority, and do not encroach on any
easement which may burden the land, (vii) the land does not serve any
adjoining property for any purpose inconsistent with the use of the land,
(viii) no such parcel is located within any flood plain or subject to any
similar type restriction for which any permits or licenses necessary to the
use thereof have not been obtained, (ix) all facilities located on each such
parcel have received all approvals of Governmental Authorities (including
licenses and permits) required in connection with the ownership, operation or
use thereof and have been operated and maintained in accordance with
applicable laws, ordinances, rules and regulations, (x) there are no Contracts
granting to any party or parties the right of use or occupancy of any such
parcel, and there are no parties (other than the Companies) in possession of
any such parcel, (xi) without qualification with respect to the Atlanta
Properties and to the knowledge of the Companies and Seller with respect to
the Leased Premises other than the Atlanta Properties, there are no
outstanding options or rights of first refusal or similar rights to purchase
any such parcel or any portion thereof or interest therein and (xii) all
facilities located on each such parcel are supplied with utilities and other
services necessary for their ownership, operation or use, all of which
services are adequate in accordance with all applicable laws, ordinances,
rules and regulations, and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefiting each such parcel.
3.16 Good Title to and Condition of Assets.
(a) Each of the Companies has good and marketable title to
all of its owned Assets, free and clear of any Liens, other than Liens in the
ordinary course of business and such Liens as are described on Schedule
3.16(a). For purposes of this Agreement, the term "Assets" means all of the
properties and assets of any nature owned or used by the Companies.
(b) The plants, structures and equipment owned or used by
the Companies and the Transferred Sub are structurally sound with no known
defects and are in the same condition and repair as the Companies have
historically maintained in their operations and are adequate for the uses to
which they are being put. None of such plants, structures or equipment are in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs which are not material in nature or cost. The roof of each such
structure is watertight and in good repair and condition. None of the
Companies, the Transferred Sub or Seller has received notification that it is
in violation of any applicable building, zoning, health or other law,
ordinance or regulation in respect of their operations or the Leased Premises.
3.17 Compliance with Laws. The Companies, the Transferred Sub and
Seller and their respective Affiliates have been in compliance with all laws,
regulations and orders applicable to their businesses and operations (as
conducted by them now and in the past), the Leased Premises and any other
properties and assets owned or used by them now or in the past. Neither the
Companies nor Seller have been cited, fined or otherwise notified of any
asserted past or present failure to comply with any laws, regulations or
orders and no proceeding with respect to any such violation is pending or
threatened.
3.18 Labor and Employment Matters.
(a) None of the Companies is a party to or bound by any
collective bargaining agreement or any other agreement with a labor union, and
there has been no labor union prior to the date of this Agreement organizing
any employees of the Companies into one or more collective bargaining units.
There is not now, and there has not been prior to the date of this Agreement,
any actual or threatened labor dispute, strike or work stoppage which affects
or which may affect the businesses of the Companies or which may interfere
with their continued operations. None of the Companies, nor any employee,
agent or representative thereof, have since the date of incorporation or
formation committed any unfair labor practice as defined in the National Labor
Relations Act, as amended, or its Canadian equivalent and there is no pending
or threatened charge or complaint against the Companies by or with the
National Labor Relations Board or its Canadian equivalent or any
representative thereof.
(b) Since the enactment of the WARN Act, (i) none of the
Companies has effectuated a "plant closing" (as defined in the WARN Act)
affecting any site of employment or one or more facilities or operating units
within any site of employment or facility of any of the Companies, (ii) there
has not occurred a "mass layoff" (as defined in the WARN Act) affecting any
site of employment or facility of any of the Companies, (iii) none of the
Companies has been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state, provincial, local or foreign law or regulation and (iv) none of
the Companies' employees has suffered an "employment loss" (as defined in the
WARN Act) during the six-month period prior to the date hereof.
3.19 Employee Benefit Plans.
(a) Schedule 3.19 contains a true and complete list of each
deferred compensation and each incentive compensation, equity compensation
plan, "welfare" plan, fund or program (within the meaning of section 3(1) of
ERISA); "pension" plan, fund or program (within the meaning of section 3(2) of
ERISA); each employment, consulting, termination, severance or change in
control agreement; and each other employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to by any of the Companies or by
any trade or business, whether or not incorporated, that together with the any
of the Companies would be deemed a "single employer" within the meaning of
section 4001(b) of ERISA (an "ERISA Affiliate"), or to which any of the
Companies or an ERISA Affiliate is party, whether written or oral, for the
benefit of any current or former employee, director or consultant of the
Companies or any ERISA Affiliate (the "Employee Benefit Plans").
(b) With respect to each Employee Benefit Plan, the
Companies have delivered to Purchaser true and complete copies of the Employee
Benefit Plan and any amendments thereto, any related trust or other funding
vehicle, any annual reports or summaries required under ERISA or the Code, any
contracts relating to any Employee Benefit Plan and the most recent
determination letter received from the Internal Revenue Service with respect
to each Employee Benefit Plan intended to qualify under Section 401 of the
Code.
(c) At no time has any of the Companies or any ERISA
Affiliate ever maintained, established, sponsored, participated in or
contributed to any Employee Benefit Plan that is subject to Title IV of ERISA.
(d) At no time has any of the Companies or any ERISA
Affiliate ever contributed to or been requested to contribute to any
"multiemployer pension plan," as such term is defined in Section 3(37) of
ERISA.
(e) There has been no "prohibited transaction," as such term
is defined in Section 406 of ERISA and Section 4975 of the Code, with respect
to any Employee Benefit Plan. Each Employee Benefit Plan has been operated and
administered in all material respects in accordance with its terms and
applicable law, including but not limited to ERISA and the Code, and each
Employee Benefit Plan intended to be "qualified" within the meaning of section
401(a) of the Code is so qualified and the trusts maintained thereunder are
exempt from taxation under section 501(a) of the Code, and no event has
occurred which would affect such qualified status. Each Employee Benefit Plan
may be amended, terminated or otherwise discontinued after the Closing Date in
accordance with its terms, without material liability to Purchaser. All
contributions and premiums which the Companies or any ERISA Affiliate are
required to pay under the terms f each of the Employee Benefit Plans have, to
the extent due, been paid in full or properly recorded on the financial
statements or records of the applicable Company or ERISA Affiliate.
(f) No Employee Benefit Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for
current or former employees, directors or consultants of the Companies or any
ERISA Affiliate for periods extending beyond their retirement or other
termination of service, other than (A) coverage mandated by applicable law,
(B) death benefits under any "pension plan," or (C) benefits the full cost of
which is borne by the current or former employee, director or consultant (or
his beneficiary).
(g) No amounts payable under the Employee Benefit Plans
could fail to be deductible for federal income tax purposes by virtue of
section 280G of the Code.
(h) The consummation of the transactions contemplated by
this Agreement will not, either alone or in combination with another event,
(A) entitle any current or former employee, director or consultant of the
Companies or any ERISA Affiliate to severance pay, unemployment compensation
or any other payment, except as expressly provided in this Agreement, or (B)
accelerate the time of payment or vesting, increase the amount of compensation
due or otherwise enhance any benefit to such employee, director or consultant.
(i) There are no pending, threatened or anticipated claims
by or on behalf of any Employee Benefit Plan, by any employee or beneficiary
covered under any such Employee Benefit Plan, or otherwise involving any such
Employee Benefit Plan (other than routine claims for benefits).
(j) Each Foreign Plan (as defined below) has been
established, maintained and administered in compliance with its terms and
conditions and with the requirements prescribed by any and all statutory or
regulatory laws that applicable to such Foreign Plan. No Foreign Plan has
unfunded liabilities, that as of the Closing Date, will not be fully offset by
issuance or is fully and properly accrued on the financial statements or
records of the applicable Company or ERISA Affiliate. Each Foreign Plan may be
amended, terminated or otherwise discontinued after the Closing Date in
accordance with its terms, without material liability to Purchaser.
(k) The Companies have no liabilities with respect to any
misclassification of any Person as an independent contractor rather than as an
employee, or with respect to any employee leased from another employer.
(l) None of the Companies nor any ERISA Affiliate has, prior
to the Closing Date and in any material respect, violated any of the health
care continuation requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, or the Health Insurance Portability
Accountability Act of 1996, as amended, or any similar provision of state law
applicable to their employees.
(m) The Companies have provided Purchaser with complete
copies of the files pertaining to the IRS Voluntary Compliance Resolution
Program for the Papercon, Inc. Profit Sharing Retirement Plan (the "VCR
Program"), including, but not limited to, any closing letter or agreement, and
have performed any and all acts required to correct the defects identified in
the VCR Program.
3.20 Tax Matters. Except as set forth on Schedule 3.20 hereto:
(a) all Tax Returns (as defined herein) required to be filed
with respect to the Companies, or any of their income, properties, franchises
or operations have, in each case, been timely filed (after giving effect to
any extensions); each such Tax Return has been prepared in compliance with all
applicable laws and regulations; and all such Tax Returns are true, complete
and accurate in all respects;
(b) all Taxes (as defined herein) due and payable by or with
respect to any of the Companies have been paid;
(c) with respect to each taxable period of any of the
Companies, other than taxable periods ending December 31, 2001, 2002 and 2003,
either such taxable period has been audited by the relevant taxing authority
or the time for assessing or collecting Taxes with respect to each such
taxable period has closed and each taxable period is not subject to review by
any relevant taxing authority;
(d) no deficiency or proposed adjustment which has not been
settled or otherwise resolved for any amount of Taxes has been asserted or
assessed or reassessed in writing by any taxing authority against any of the
Companies;
(e) there is no action, suit, taxing authority proceeding,
or audit or claim for refund regarding Taxes now in progress, pending or, to
the knowledge of the Companies, Seller or Landlord threatened against or with
respect to any of the Companies;
(f) there are no Liens for Taxes (other than for current
Taxes not yet due and payable) on any of the Assets of any of the Companies;
(g) none of the Companies:
(i) has any pending consent to extend the time in
which any Taxes may be assessed or collected by any taxing
authority;
(ii) has requested or been granted an extension of
the time for filing any Tax Return to a date later than the
Closing;
(iii) will be required (A) as a result of a change
in method of accounting for a taxable period ending on or
prior to the Closing, to include any adjustment under
Section 481(c) of the Code (or any corresponding Canadian,
state, provincial, local or foreign law) in taxable income
for any taxable period (or portion thereof) beginning after
the Closing or (B) as a result of any closing agreement, as
described in Section 7121 of the Code (or any corresponding
provision of Canadian, state, provincial, local or foreign
law), to include any item of income or exclude any item of
deduction from any taxable period (or portion thereof)
beginning after the Closing;
(iv) is or has been (or is required to be) a member
of an affiliated group (as defined in Section 1504 of the
Code) or has filed or been included in a combined,
consolidated or unitary income Tax Return;
(v) is a party to or bound by any tax allocation or
tax sharing agreement or has any current or potential
liability for taxes of any other Person under Treasury
Regulation Section 1.1502-6 (or any corresponding provision
of Canadian, state, provincial, local or foreign tax law),
as a transferee or successor, by contract or otherwise;
(vi) has made any payment and none is or will
become obligated (under any contract entered into on or
before the Closing) to make any payments that will be
non-deductible under Section 280G of the Code (or any
corresponding provision of Canadian, state, provincial,
local or foreign law);
(vii) is or has been a United State real property
holding corporation within the meaning of Section 897(c)(2)
of the Code (or any corresponding provision of Canadian,
state, provincial, local or foreign law) during the
applicable period specified in Section 897(c)(1)(a)(ii) of
the Code (or any corresponding provision of Canadian, state,
provincial, local or foreign law);
(viii) has ever been subject to a written claim
made by a taxing authority in a jurisdiction in which the
Companies do not file Tax Returns that any of the Companies
is or may be subject to Taxes assessed by such jurisdiction;
and
(ix) has any permanent establishment in any foreign
country, as defined in the relevant tax treaty between the
United States of America and such foreign country, except
for Parent.
(h) true, correct and complete copies of all income and
sales Tax Returns filed by or with respect to the Companies for the past three
years have been furnished or made available to Purchaser;
(i) no facts exist that would give rise to an obligation of
any Company to pay any Taxes for the period ending at the Closing or for any
period for which a Tax Return has not been filed, other than those Taxes
reflected or accrued on the books and records of the Companies;
(j) no sales or use tax will be payable by the Companies,
Purchaser or any transferee as a result of the transactions contemplated
hereby, and there will be no non-recurring intangible tax, documentary stamp
tax or other excise tax (or comparable tax imposed by any governmental entity)
as a result of this transaction;
(k) no power of attorney currently in force with respect to
tax matters has been executed that could affect any of the Companies in any
period beginning after the Closing;
(l) Seller is not a foreign person within the meaning of
Section 1445 of the Code; and
(m) there are no circumstances existing which could result
in the application of any of sections 78 to 80.04 of the Income Tax Act
(Canada) or any equivalent provincial tax legislation to any of the Companies.
3.21 Insurance. Each of the Companies is covered by valid,
outstanding enforceable policies of insurance issued to it by reputable
insurers covering its properties, assets and business against risks of the
nature normally insured against by similar entities in the same or similar
lines of business in coverage amounts typically and reasonably carried by such
entities, including any insurance policies that the Companies are required to
obtain under any of the Leased Premises Leases (the "Insurance Policies"). A
true and complete list of all Insurance Policies is set forth on Schedule
3.21(a). Such Insurance Policies are in full force and effect, and all
premiums due thereon have been paid through the date of this Agreement and
will be paid through the Closing. The Companies have complied with the
provisions of such Insurance Policies applicable to them, and have provided
Purchaser copies of all Insurance Policies and all amendments and riders
thereto. There are no pending claims under any of the Insurance Policies,
including any claim for loss or damage to the properties, assets or business
of the Companies. None of the Companies has failed to give, in a timely
manner, any notice required under any of the Insurance Policies to preserve
its rights thereunder. Furthermore, (a) none of the Companies, the Transferred
Sub or Seller has received any notice of cancellation or non-renewal of any
such policy or arrangement nor is the termination of any such policies or
arrangements threatened, (b) none of the Companies, the Transferred Sub or
Seller has received any notice from any of its insurance carriers that any
insurance premiums will be increased in the future or that any insurance
coverage presently provided for will not be available to the Companies in the
future on substantially the same terms as now in effect and (c) none of such
policies or arrangements provides for any retrospective premium adjustment,
experienced-based liability or loss sharing arrangement affecting the
Companies. Except for claims made in the ordinary course of business by
employees covered by Papercon's group health insurance plan, a true and
complete list of all outstanding claims for medical expenses in excess of
$10,000 made by or with respect to any employee of the Companies is set forth
on Schedule 3.21(b).
3.22 Licenses and Permits. The Companies possess all licenses,
approvals, permits or authorizations from Governmental Authorities
(collectively, the "Permits") required to be obtained for their businesses and
operations. Schedule 3.22 sets forth a true, complete and accurate list of all
such Permits or applications for such Permits, itemized for the Companies. All
such Permits are valid and in full force and effect, each of the Companies is
in compliance with the respective requirements thereof, and no proceeding is
pending or threatened to revoke or amend any of them. None of such Permits is
or will be impaired or in any way affected by the execution and delivery of
this Agreement.
3.23 Adequacy of the Assets; Relationships with Customers and
Suppliers; Affiliated Transactions. The Assets and Leased Premises constitute,
in the aggregate, all of the assets and properties necessary for the conduct
of the business of the Companies in the manner in which and to the extent to
which such business is currently being conducted. Except as set forth on
Schedule 3.23 hereto, there has not been any material adverse change in the
business relationship of the Companies with any customer who accounted for
more than $1,000,000 of the Companies' sales (on a consolidated basis) during
the period from June 1, 2003 to June 1, 2004, or any supplier from whom the
Companies purchased more than $1,000,000 of goods or services (on a
consolidated basis) which they purchased during the same period. To the
knowledge of Seller and the Companies, the consummation of the transactions
contemplated by this Agreement will not adversely affect any such
relationships. Except as identified on Schedule 3.23 hereto, none of the
Companies nor Seller has any direct or indirect ownership interest in any
customer, supplier or competitor of the Companies or in any person from whom
or to whom the Companies lease real or personal property. Except as identified
on Schedule 3.23 hereto, no officer, director or shareholder of the Companies,
nor any person related by blood or marriage to any such person, nor any entity
in which any such person owns any beneficial interest, is a party to any
Contract or transaction with the Companies or has any interest in any property
used by the Companies.
3.24 Intellectual Property.
(a) Each of the Companies owns or has legal right to use all
trademarks, service marks, trade names, Internet domain names, copyrights,
software databases, know-how, patents, trade secrets, licenses (including
licenses for the use of computer programs), the names, likeness and
biographical information of Real Persons and other intellectual property and
proprietary rights (the "Intellectual Property") used in the conduct of its
business, free and clear of all Liens. Schedule 3.24(a) sets forth a true and
complete list of all patents and patent applications, trademark and service
xxxx registrations and applications and material unregistered trademarks and
service marks, Internet domain names, computer software, copyright
registrations and applications and material unregistered copyrights owned,
used or held for use in connection with the business of the Companies,
together with all licenses and agreements related to the foregoing, whether
any of the Companies is the licensee or licensor thereunder. The Company
indicated on Schedule 3.24(a) as owning any Intellectual Property listed
thereon is the sole beneficial and record owner of such Intellectual Property.
(b) The conduct of the business of the Companies in the
manner currently conducted and as contemplated to be conducted does not
infringe or otherwise violate any rights held or asserted by any Person and,
to the knowledge of the Companies and Seller, no Person is infringing on any
Intellectual Property owned, held or used by any of the Companies. No payments
are required for the continued use of any Intellectual Property by the
Companies, except as set forth in the license agreements on Schedule 3.24(b).
(c) No Intellectual Property owned, used or held for use by
any of the Companies is subject to any outstanding judgment, injunction,
order, decree or agreement restricting the use or licensing thereof by any of
the Companies. None of the Companies is a party to, or aware of, any
proceeding challenging such Company's right to own, hold, or use any
Intellectual Property, or the validity or enforceability of any Intellectual
Property owned, held or used by any of the Companies. The Intellectual
Property owned by the Companies, and to the knowledge of Seller and the
Companies, used by any of the Companies, is subsisting, in full force and
effect, valid and enforceable.
(d) Seller and the Companies take reasonable measures to
protect the confidentiality of the Companies' trade secrets.
(e) No Affiliate or current or former partner, director,
stockholder, officer or employee of Seller or the Companies will, after giving
effect to the transactions contemplated hereby, own or retain any rights to
use any of the Intellectual Property owned, used, or held for use by any of
the Companies
(f) The consummation of the transactions contemplated herein
will not result in the loss or impairment of any of the Companies' rights to
own or use any Intellectual Property.
3.25 Contracts. Schedule 3.25 sets forth a list of each Material
Contract (as defined below) to which any of the Companies, the Transferred Sub
or Seller (in the case of Material Contracts to which Seller is a party, those
contracts that relate solely to the business of the Companies or the
Transferred Sub), true, correct and complete copies of which have been
provided to Purchaser. Schedule 3.25 identifies those Material Contracts that
require the Consents of third parties to the transactions contemplated hereby.
The copy of each Material Contract furnished to Purchaser is a true and
complete copy of the document it purports to represent and reflects all
amendments thereto made through the date of this Agreement. None of the
Companies or the Transferred Sub has violated any of the terms or conditions
of any Material Contract or any term or condition which would permit
termination or modification of any Material Contract and no claims have been
made or issued for breach or indemnification or notice of default or
termination under any Material Contract. Each of the Material Contracts
constitutes the legal, valid and binding obligation of the respective Company
or the Transferred Sub that is a party to such Material Contract, each in
accordance with its express terms. No event has occurred which constitutes, or
after notice or the passage of time, or both, would constitute, a default by
the Companies or the Transferred Sub under any Material Contract, and no such
event has occurred which constitutes or would constitute a default by any
other party. None of the Companies or the Transferred Sub is subject to any
liability or payment resulting from renegotiation of amounts paid under any
Material Contract. The Companies are not subject to any Contract, decree or
injunction that restricts the continued operation of any business or the
expansion thereof to other geographical areas, customers and suppliers or
lines of business.
As used in this Section 3.25, "Material Contracts" shall mean written
or oral, (a) loan agreements, indentures, mortgages, pledges, hypothecations,
deeds of trust, conditional sale or title retention agreements, security
agreements, equipment financing obligations or guaranties, or other sources of
contingent liability in respect of any indebtedness or obligations to any
other Person, or letters of intent or commitment letters with respect to same;
(b) contracts obligating the Companies to provide or obtain products or
services for a period of one year or more, excluding standard warranty
contracts entered into in the ordinary course of its business without
modification from the preprinted forms used by the Companies in the ordinary
course of business, copies of which forms have been supplied to Purchaser; (c)
leases of real property; (d) leases of personal property (other than those
which individually provide for annual payments of less than $25,000 and which
do not in the aggregate provide for payments in excess of $100,000); (e)
distribution, sales agency or franchise or similar agreements, or agreements
providing for an independent contractor's services, or letters of intent with
respect to same (other than those which individually provide for annual
payments of less than $25,000 and which do not in the aggregate provide for
payments in excess of $100,000); (f) employment agreements, management service
agreements, consulting agreements, confidentiality agreements, non-competition
agreements and any other agreements relating to any employee, officer or
director of the Companies; (g) any Intellectual Property license agreement to
which any of the Companies is a party, whether as licensee or licensor
thereunder (other than non-exclusive licenses for the use of
commercially-available software which was acquired for a cost of less than
$5,000) and any "consent to use","non-assertion", or other agreement
restricting any of the Companies' ownership of rights to use Intellectual
Property; (h) contracts relating to pending capital expenditures by the
Companies; (i) contracts obligating the Companies to purchase parts,
accessories, supplies, equipment, (other than those which individually provide
for annual payments of less than $25,000 and which do not in the aggregate
provide for payments in excess of $100,000); (j) any contracts obligating the
Companies to make or receive payments in excess of $25,000, in the aggregate,
over the remaining term of such contract; (k) any contracts, agreements or
arrangements that entitle the Companies to rebates, discounts or incentives
for the purchase of parts, accessories, supplies, equipment or other goods and
services; and (l) all other Contracts or understandings which are material to
the Companies or its businesses, assets or properties.
3.26 Transferred Sub. The Transferred Sub was formed solely for the
purpose of serving as general partner of Landlord. The Transferred Sub has not
engaged in any business activities or conducted any operations other than in
connection with the ownership and leasing of the Atlanta Properties. Except
for its ownership interest in the Atlanta Properties, there are no Assets
owned by the Transferred Sub that are used in, held for use or useful to the
business of the Companies or otherwise. Except for the leases in connection
with the Atlanta Properties, and other than the limited liability partnership
agreement with Landlord, the Transferred Sub is not directly or indirectly a
party to any contract, arrangement or understanding with any of the Companies
or any third party.
3.27 Casualties. Since December 31, 2003, none of the Companies or
the Transferred Sub has been affected in any way as a result of flood, fire,
explosion or other casualty (whether or not material and whether or not
covered by insurance). None of the Companies, the Transferred Sub or Seller is
aware of any circumstance which is likely to cause the Companies or the
Transferred Sub to suffer any adverse change in its business, operations or
prospects.
3.28 Product Liability. There are not presently pending, or, to the
knowledge of the Companies or Seller, threatened, and, to the knowledge of the
Companies or Seller, there is no basis for, any civil, criminal or
administrative actions, suits, demands, claims, hearings, notices of
violation, investigations, proceedings or demand letters relating to any
alleged hazard or alleged Defect in design, manufacture, materials or
workmanship, including any failure to warn or alleged breach of express or
implied warranty or representation, relating to any Product manufactured,
distributed or sold by or on behalf of the Companies. Neither the Companies
nor Seller has extended to any of its customers any written, non-uniform
product warranties, indemnifications or guarantees.
3.29 Accounts Receivable. All accounts receivable of the Companies,
whether reflected in the Financial Statements or otherwise, represent sales
actually made in the ordinary course of business and are current and
collectible net of any reserves shown in the Financial Statements.
3.30 Disputed Accounts Payable. There are no unpaid invoices or bills
representing amounts alleged to be owed by any of the Companies or the
Transferred Sub, or other alleged obligations of any of the Companies or the
Transferred Sub, which the respective Company or the Transferred Sub has
disputed or determined to dispute or refuse to pay.
3.31 Inventory. All of the inventories of the Companies, whether
reflected in the Financial Statements or otherwise, consist of a quality and
quantity usable and salable in the ordinary and usual course of business,
except for items of obsolete materials and materials of below-standard
quality, all of which items have been written off or written down in the
Financial Statements to fair market value or for which adequate reserves have
been provided therein. All inventories not written off have been priced at the
lower of cost or market. The quantities of each type of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable and warranted in the present circumstances of the Companies. All
work in process and finished goods inventory held by the Companies is free of
any Defect or other deficiency.
3.32 Cash Rebate Receivables. All Cash Rebate Receivables, whether
reflected in the Financial Statements or otherwise, represent rebates which
(1) have been earned with respect to purchases of raw material received by
Papercon at any of its manufacturing locations prior to the Closing Date, (2)
are fully earned based on such purchases and receipts, (3) are required to be
paid in cash or pursuant to a credit memo that can be currently applied, (4)
will be received in cash within sixty (60) calendar days of the end of the
current fiscal year or pursuant to a credit memo that can be applied within
sixty (60) calendar days of the end of the current fiscal year, (5) are with
respect to purchases of materials which are of a nature and amount consistent
with the ordinary course of business consistent with past practice, (6) are
earned pursuant to fully executed written rebate agreements entered into prior
to April 5, 2004, which agreements have not been entered into in connection
with or in anticipation of the consummation of transactions contemplated by
this Agreement, and (7) are not otherwise included in Net Assets; provided,
however, that Seller shall not be liable for any violation of this Section
3.32 to the extent that such violation resulted from Purchaser's or the
Companies' material alteration of Papercon's relationship with any of its
suppliers to whom the Cash Rebate Receivables relate, as in effect as of the
Closing, during the period following the Closing until the end of the current
fiscal year.
3.33 Accuracy of Information Furnished. No representation, statement
or information contained in this Agreement (including, without limitation, the
various Schedules attached hereto) or any agreement executed in connection
herewith or in any certificate delivered pursuant hereto or thereto or made or
furnished to Purchaser or its representatives by the Companies or Seller,
contains or shall contain any untrue statement of a material fact or omits or
shall omit any material fact necessary to make the information contained
therein not misleading. Seller has not failed to disclose to Purchaser any
facts material to the business, results of operations, assets, liabilities,
financial condition or prospects of the Companies or the Transferred Sub.
Seller has provided, or has caused the Companies to provide, Purchaser with
true, accurate and complete copies of all documents listed or described in the
various Schedules attached hereto.
3.34 No Commissions. Neither the Companies nor Seller have incurred
or will incur any obligation for a finder's, broker's or agent's fee or
commission or similar consideration in connection with the transactions
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
As a material inducement to Seller to enter into this Agreement and
to consummate the transactions contemplated hereby, Purchaser makes the
following representations and warranties to Seller as of the date of this
Agreement (or if made as of a specific date, as of such date) and as of the
Closing Date:
4.1 Corporate Status. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Purchaser has the requisite power and authority to own or lease its properties
and to carry on its business as presently conducted. There is no pending or
threatened proceeding for the dissolution, liquidation, insolvency or
rehabilitation of Purchaser.
4.2 Corporate Power and Authority. Purchaser has the corporate power
and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
Purchaser has taken all corporate action necessary to authorize the execution
and delivery of this Agreement, the performance of its obligations hereunder
and the consummation of the transactions contemplated hereby.
4.3 Enforceability. This Agreement has been duly executed and
delivered by Purchaser and, assuming due and valid authorization, execution
and delivery by Seller and the Companies, constitutes its legal, valid and
binding obligation enforceable against it in accordance with its terms, except
as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.
4.4 No Violation. Except as set forth on Schedule 4.4, the execution
and delivery of this Agreement by Purchaser, the performance by it of its
obligations hereunder and the consummation of the transactions contemplated by
this Agreement will not (i) contravene any provision of the Certificate of
Incorporation or Bylaws of Purchaser, (ii) violate or conflict with any law,
statute, ordinance, rule, regulation, decree, writ, injunction, judgment,
ruling or order of any Governmental Authority or of any arbitration award
which is either applicable to, binding upon, or enforceable against Purchaser,
(iii) conflict with, result in any breach of, or constitute a default (or an
event which would, with the passage of time or the giving of notice or both,
constitute a default) under, or give rise to a right to terminate, amend,
modify, abandon or accelerate, any Contract which is applicable to, binding
upon or enforceable against Purchaser, (iv) result in or require the creation
or imposition of any Lien upon or with respect to any of the property or
assets of Purchaser, (v) give to any individual or entity a right or claim
against Purchaser, or (vi) require the consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Authority, any
court or tribunal or any other Person, except (a) pursuant to the Exchange
Act, (b) any filings required under the HSR Act, Competition Act or any other
applicable Competition Law, or (c) any filings or consents required to be made
or obtained by the Companies or Seller.
4.5 Purchaser Shares. At the Closing, all of the Purchaser Shares
shall have been duly authorized and validly issued and will be fully paid and
nonassessable. At the Closing, Purchaser shall deliver good, valid and
marketable title to all the Purchaser Shares to Seller pursuant to and as
contemplated by this Agreement free and clear of all Liens.
4.6 SEC Reports. Purchaser has filed all forms, reports, schedules
and other documents required to be filed by it with the SEC since January 1,
2003, pursuant to the federal securities laws and the SEC rules and
regulations thereunder, all of which, as of their respective dates, complied
in all material respects with all applicable requirements of the Exchange Act
or the Securities Act and the rules and regulations thereunder, as the case
may be (the "SEC Reports"). None of the SEC Reports, as of their respective
dates, contained any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statement therein, in light of
the circumstances under which they were made, not misleading.
4.7 Listing and Maintenance Requirements. Except as set forth on
Schedule 4.7 hereto, Purchaser has not, in the twelve (12) months preceding
the date of this Agreement, received notice from any trading market on which
its common stock is or has been listed or quoted to the effect that Purchaser
is not in compliance with the listing or maintenance requirements of such
trading market.
4.8 Common Stock. Purchaser will use commercially reasonable efforts
to list all of the Purchaser Shares on the Nasdaq National Market. If
Purchaser applies to have its common stock traded on any other trading market,
it will include in such application all of the Purchaser Shares.
4.9 No Commissions. Purchaser has not incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar compensation in
connection with the transactions contemplated hereby.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE CLOSING
5.1 Conduct of Business by the Companies Pending the Closing. Seller
covenants and agrees that, except as otherwise expressly required or permitted
by the terms of this Agreement including, without limitation, the requirement
of Section 6.12, or except as expressly approved or directed by Purchaser,
between the date of this Agreement and the Closing Date, the businesses of the
Companies and the Transferred Sub shall be conducted only in, and none of the
Companies or the Transferred Sub shall take any action except in, the ordinary
course of business consistent with past practice, and the Companies and the
Transferred Sub shall not change their operations or policies. Seller shall
use, and shall cause the Companies and the Transferred Sub to use, reasonable
best efforts to preserve intact the Companies' and the Transferred Sub's
business organizations, to keep available the services of their current
officers, employees and consultants, and to preserve their present
relationships with customers, suppliers and other Persons with which they have
business relations. By way of amplification and not limitation, none of the
Companies or the Transferred Sub shall, except as expressly required or
permitted by the terms of this Agreement, between the date of this Agreement
and the Closing, directly or indirectly, do or propose or agree to do any of
the following without the prior written consent or direction of Purchaser:
(a) amend or otherwise change its Articles of Incorporation,
By-laws or other organizational or governing documents;
(b) issue, sell, pledge, dispose of, encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of, any shares
of its capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of such capital
stock or any other ownership interest;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, on or with
respect to its capital stock or other securities, or reclassify, combine,
split, subdivide or redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock or other securities;
(d) sell, lease, license or transfer any of its properties
or assets other than in the ordinary course of business consistent with past
practice;
(e) abandon or fail to maintain any rights in Intellectual
Property;
(f) (i) acquire (including, without limitation, for cash or
shares of stock, by merger, consolidation or acquisition of stock or assets)
any interest in any corporation, partnership or other business organization or
division thereof or any assets, or make any investment either by purchase of
stock or securities, contributions of capital or property transfer or, except
in the ordinary course of business consistent with past practice, purchase any
property or assets of any other Person, (ii) make or obligate itself to make
capital expenditures in excess of $50,000, (iii) other than in the ordinary
course consistent with past practice, incur any obligations or liabilities,
including, without limitation, Indebtedness, (iv) issue any debt securities or
assume, guarantee or endorse or otherwise as an accommodation become
responsible for, the obligations of any Person, or make any loans or advances,
(v) modify, terminate, or enter into any Contract other than as provided
herein or in the ordinary course of business consistent with past practice, or
(vi) impose any security interest or other Lien on any of its Assets or on the
Leased Premises, as applicable, other than in the ordinary course of business
consistent with past practice;
(g) waive, cancel, compromise or release any rights other
than in the ordinary course of business consistent with past practice;
(h) make any payment in respect of its liabilities other
than in the ordinary course of business consistent with past practice;
(i) increase the compensation payable or to become payable
to its employees, officers or directors or, except as presently bound to do,
grant or pay any bonus, severance or termination pay to, or enter into any
bonus, employment, change of control or severance agreement with, any of its
directors, officers, or employees, or establish, adopt, enter into or amend or
take any action to accelerate any rights or benefits with respect to any
collective bargaining, bonus, profit sharing trust, compensation, stock
option, restricted stock pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any directors, officers or employees;
(j) make any loans to any of its officers, directors,
employees, affiliates, agents or consultants or make any change in its
existing borrowing or lending arrangements for or on behalf of any of such
persons, whether pursuant to an Employee Benefit Plan or otherwise;
(k) create any additional employee benefit or compensation
plans, policies or arrangements or, except as may be required by law, to
modify any Employee Benefit Plan;
(l) conduct any operations or adopt any policies other than
in the ordinary course of business consistent with past practice;
(m) take any action with respect to accounting policies or
procedures or make any adjustment to its books and records other than in the
ordinary course of business and in a manner consistent with past practices;
(n) pay, discharge or satisfy any existing claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business of due and payable liabilities reflected or
reserved against in its financial statements, as appropriate, or liabilities
incurred after the date thereof in the ordinary course of business and
consistent with past practice;
(o) delay paying any account payable beyond the date on
which it is due and payable except to the extent being contested in good
faith;
(p) enter into any transaction with Seller or any of his
Affiliates;
(q) make or pledge any charitable contributions in excess of
$5,000 in the aggregate;
(r) agree, in writing or otherwise, to take or authorize any
of the foregoing actions or any action which would make any representation or
warranty in Article III untrue or incorrect in any respect; or
(s) join in or consent to any private restrictive covenant
or other public or private restriction as to the present or future use or
operation of the Leased Premises.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Compliance with Covenants. Seller shall cause the Companies to
comply with all of their respective covenants under this Agreement.
6.2 Efforts and Actions to Cause Closing to Occur.
(a) Prior to the Closing, upon the terms and subject to the
conditions of this Agreement, Purchaser, Seller and the Companies shall use
their respective reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done and cooperate with each other in order
to do, all things necessary, proper or advisable (subject to any applicable
laws) to consummate the Closing and the other transactions contemplated hereby
as promptly as practicable including, but not limited to, the preparation and
filing of all forms, registrations and notices required to be filed to
consummate the Closing and the other transactions contemplated hereby and the
taking of such actions as are necessary to obtain any requisite approvals,
authorizations, consents, orders, licenses, permits, qualifications,
exemptions or waivers by any third party (it being understood that none of
Seller, any of the Companies nor Purchaser shall be required to make any
payments to obtain any of the foregoing) or Governmental Authority. In
addition, no party hereto shall take any action after the date of this
Agreement that could reasonably be expected to materially delay the obtaining
of, or result in not obtaining, any permission, approval or consent from any
Governmental Authority or other Person required to be obtained prior to
Closing.
(b) Prior to the Closing, each party shall promptly consult
with the other parties hereto with respect to, provide any necessary
information with respect to, and provide the other parties (or their
respective counsel) with copies of, all filings made by such party with any
Governmental Authority or any other information supplied by such party to a
Governmental Authority in connection with this Agreement and the transactions
contemplated hereby. Each party hereto shall promptly inform the others of any
communication received by such party from any Governmental Authority regarding
any of the transactions contemplated hereby. If any party hereto or Affiliate
thereof receives a request for additional information or documentary material
from any such Governmental Authority with respect to any of the transactions
contemplated hereby, then such party shall endeavor in good faith to make, or
cause to be made, as soon as reasonably practicable and after consultation
with the other parties, an appropriate response in compliance with such
request. To the extent that transfers, amendments or modifications of permits
(including environmental permits) are required as a result of the execution of
this Agreement or consummation of any of the transactions contemplated hereby,
Seller and the Companies shall use their best efforts to effect such
transfers, amendments or modifications.
(c) In addition to and without limiting the agreements of
the parties contained above, the Companies, Purchaser and Seller shall (i)
take promptly all actions necessary to make the filings required of them or
any of their Affiliates under the HSR Act (with any filing fees under the HSR
Act to be borne solely by Purchaser), Competition Act or any other applicable
Competition Law, (ii) comply at the earliest practicable date with any request
for additional information or documentary material received by the Companies,
Purchaser, Seller or any of their Affiliates from the Federal Trade Commission
(the "FTC") or the Department of Justice (the "DOJ") pursuant to the HSR Act
or from any State Attorney General or other Governmental Authority in
connection with antitrust matters, (iii) cooperate with each other in
connection with any filing under the HSR Act, Competition Act or any other
applicable Competition Law and in connection with resolving any investigation
or other inquiry concerning the transactions contemplated hereby commenced by
the FTC, DOJ, any State Attorney General or any other Governmental Authority;
(iv) use all reasonable commercial efforts to resolve such objections, if any,
as may be asserted with respect to the transactions contemplated hereby under
any antitrust law and (v) advise the other parties promptly of any material
communication received by such party from the FTC, DOJ, any State Attorney
General or any other Governmental Authority regarding any of the transactions
contemplated hereby, and of any understandings, undertakings or agreements
(oral or written) such party proposes to make or enter into with the FTC, DOJ,
any State Attorney General or any other Governmental Authority in connection
with the transactions contemplated hereby.
(d) Notwithstanding the foregoing or any other covenant
herein contained, in connection with the receipt of any necessary approvals
under the HSR Act, Competition Act or any other applicable Competition Law,
the Companies shall not be entitled or required to divest or hold separate or
otherwise take or commit to take any action that limits Purchaser's freedom of
action with respect of, or its ability to retain, the Companies or any
material portions thereof or any of the businesses, product lines, properties
or assets of the Companies, without Purchaser's prior written consent.
(e) Notwithstanding the foregoing or any other covenant
herein contained, nothing in this Agreement shall be deemed to require
Purchaser (i) to divest or hold separate any assets or agree to limit its
future activities, method or place of doing business, (ii) to commence any
litigation against any entity in order to facilitate the consummation of any
of the transactions contemplated hereby or (iii) to defend against any
litigation brought by any Governmental Authority seeking to prevent the
consummation of, or impose limitations on, any of the transactions
contemplated hereby.
6.3 Access to Information. From the date of this Agreement to the
Closing, the Companies and Seller shall, and shall cause their directors,
officers, employees, auditors, counsel and agents to, afford Purchaser and
Purchaser's officers, employees, auditors, counsel and agents reasonable
access at all reasonable times to its properties, offices and other
facilities, to its officers and employees and to all books and records, and
shall furnish such persons with all financial, operating and other data and
information as may be requested. Purchaser shall be entitled to conduct prior
to Closing a due diligence review of the assets, properties, books and records
of the Companies and an environmental assessment of the Leased Premises.
Purchaser shall also be entitled following the execution and delivery hereof
to conduct an inventory and appraisal of the Companies' inventory. No
information provided to or obtained by Purchaser shall affect any
representation or warranty in this Agreement.
6.4 Notification of Certain Matters. Each of the parties to this
Agreement shall give prompt notice to the other parties of the occurrence or
non-occurrence of any event which would likely cause any representation or
warranty made by such party herein to be untrue or inaccurate or any covenant,
condition or agreement contained herein not to be complied with or satisfied
(provided, however, that any such disclosure shall not in any way be deemed to
amend, modify or in any way affect the representations, warranties and
covenants made by any party in or pursuant to this Agreement).
6.5 Confidentiality. The provisions of the Confidentiality Agreement
shall remain binding and in full force and effect until the Closing, except
that the Confidentiality Agreement shall not apply to any documents prepared
in connection with or proceeding before or filed with, or other disclosure
made to, a court, arbitration tribunal or mediation service in order to
enforce Purchaser's or Seller's rights, as the case may be, arising in
connection with the termination of this Agreement and announcements and press
releases issued by Purchaser pursuant to Section 6.13 herein. The information
contained herein, in the Schedules attached to this Agreement or delivered to
Purchaser or its authorized representatives pursuant hereto shall be subject
to the Confidentiality Agreement as Evaluation Material (as defined and
subject to the exceptions contained therein) until the Closing and, for that
purpose and to that extent, the terms of the Confidentiality Agreement are
incorporated herein by reference. All obligations of the Purchaser under the
Confidentiality Agreement shall terminate simultaneously with the Closing.
Except as otherwise provided herein, Seller and the Companies shall, and shall
cause their consultants, advisors and representatives to treat after the date
hereof as strictly confidential and shall not disclose (unless compelled to
disclose by judicial or administrative process or, in the opinion of legal
counsel, by other requirements of law) the terms of this Agreement and all
nonpublic, confidential or proprietary information concerning the Companies,
and Seller and the Companies shall not, and shall cause their consultants,
advisors and representatives not to, after the date of this Agreement, use
such information to the detriment of the Companies or Purchaser.
6.6 No Other Discussions. Until the earlier of the Closing or the
termination of this Agreement, the Companies and Seller and their respective
Affiliates, employees, agents and representatives will not (a) initiate,
encourage the initiation by others of discussions or negotiations with third
parties or respond to solicitations by third persons relating to any merger,
sale or other disposition of any substantial part of the assets, capital stock
(or derivatives thereof), business or properties of the Companies (whether by
merger, consolidation, sale of stock, sale of assets, or otherwise), or (b)
enter into any agreement or commitment (whether or not binding) with respect
to any of the foregoing transactions. The Companies and Seller will promptly
notify Purchaser if any third party attempts to initiate any solicitation,
discussion, or negotiation with respect to any of the foregoing transactions,
and shall provide Purchaser with the name of such third parties and the terms
of any offers.
6.7 Shareholder and Director Vote. Each of Seller and Parent, in
executing this Agreement, consents as a shareholder and director of the
Companies, as applicable, to the transactions contemplated hereby, waives
notice of any meeting in connection therewith, and hereby releases and waives
all rights with respect to the transactions contemplated hereby under any
agreements relating to the sale, purchase or voting of stock of the Companies
and their assets.
6.8 Indebtedness. Seller covenants and agrees that the Companies
shall not have any outstanding Indebtedness as of the Closing.
6.9 Tax Matters.
(a) Tax Sharing Agreement. Any tax sharing agreements or
arrangements to which any Company is a party or may have liability, shall be
terminated effective as of the Closing. After the Closing none of Seller or
his Affiliates shall have any further rights thereunder. After the Closing,
this Agreement shall be the sole Tax sharing agreement relating to any of the
Companies for all Pre-Closing Tax Periods (as defined herein).
(b) Seller Parties Tax Indemnity.
(i) Notwithstanding any other provisions of this
Agreement, from and after the Closing Date, Seller shall be
liable to, and shall indemnify and hold harmless, the
Companies, Purchaser and their respective officers and
Affiliates against the following Taxes and other costs: (A)
Taxes and other costs imposed on or incurred by Seller,
Transferred Sub or any of the Companies with respect to
taxable years or periods ending on or before the Closing
Date; (B) with respect to taxable years or periods beginning
before the Closing Date and ending after the Closing Date,
Taxes and other costs imposed on or incurred by Transferred
Sub or any of the Companies which are allocable, pursuant to
clause (ii) hereof, to the portion of such taxable year or
period ending at the end of the day on the Closing Date (an
"Interim Period") (Interim Periods and any taxable years or
periods that end on or prior to the Closing Date being
referred to collectively hereinafter as "Pre-Closing Tax
Periods"); (C) Taxes and other costs imposed on or incurred
by any member of any affiliated group with which any of the
Companies files or has filed a Tax Return on a consolidated,
combined or unitary basis for a taxable year or period
beginning before the Closing Date; (D) all Taxes and other
costs imposed on or incurred by any Person as a result of
the Transfer; (E) Taxes and other costs imposed on or
incurred by any of the Companies, Purchaser or any of their
respective Affiliates as a result of a breach of any
representation or warranty set forth in Section 3.20 of this
Agreement or of any covenant contained in this Section 6.9
(without duplication); or (F) Taxes or other payments
required to be made after the date of this Agreement by any
of the Companies to any party under any Tax sharing,
indemnity or allocation agreement (whether or not written);
provided, however, that Seller shall not be liable pursuant
to this Section 6.9(b) for any Tax to the extent that such
Tax is included as a liability on the Final Closing Net
Assets Statement.
(ii) In order to apportion appropriately any Taxes
relating to any taxable year or period that includes an
Interim Period, the parties hereto shall, to the extent
permitted under applicable law, (x) elect with the relevant
Tax authority to treat, for all purposes, the Closing Date
as the last day of the taxable year or period of any of the
Companies and (y) elect the "closing of the books" method of
accounting with respect to allocations between taxable
periods ending on the Closing Date and any succeeding
taxable periods. Each such Interim Period shall be treated
as a short taxable year and a Pre-Closing Tax Period for
purposes of this Section 6.9(b). In any case where
applicable law does not permit a Company to treat the
Closing Date as the last day of the taxable year or period
of such Company with respect to Taxes that are payable with
respect to an Interim Period, the portion of any such Tax
that is allocable to the portion of the Interim Period
ending on the Closing Date shall be:
(A) In the case of Taxes that are either
(1) based upon or related to income or receipts, or
(2) imposed in connection with any sale or other
transfer or assignment of property (real or
personal, tangible or intangible), deemed equal to
the amount which would be payable if the taxable
year or period ended at the end of the day on the
Closing Date (except that, solely for purposes of
determining the marginal tax rate applicable to
income or receipts during such period in a
jurisdiction in which such tax rate depends upon
the level of income or receipts, annualized income
or receipts shall be taken into account, if
appropriate, for an equitable sharing of such
Taxes); and
(B) In the case of Taxes not described in
subparagraph (A) above that are imposed on a period
basis and measured by the level of any item, deemed
to be the amount of such Taxes for the entire
period (or, in the case of such Taxes determined on
an arrears basis, the amount of such Taxes for the
immediately preceding period) multiplied by a
fraction the numerator of which is the number of
calendar days in the Interim Period ending on and
including the Closing Date and the denominator of
which is the number of calendar days in the entire
relevant period.
(iii) Seller shall be liable for and shall pay all
applicable sales, transfer, recording, deed, stamp and other
similar taxes, including, without limitation, any real
property transfer or gains taxes (if any), resulting from
the consummation of the transactions contemplated by this
Agreement.
(c) Section 116 Certificate.
(i) Seller shall deliver to Purchaser at or before
the Closing a certificate issued by the Canada Customs and
Revenue Agency under section 116 of the Income Tax Act
(Canada) in respect of the disposition by Seller to
Purchaser of the Shares hereunder. The certificate limit
specified therein shall be equal to the Purchase Price less
the amount of the Non-Competition Agreement Payment (the
"Net Share Price") and the certificate shall otherwise be
satisfactory to the Purchaser in its reasonable discretion
(such certificate with a specified certificate limit of the
Net Share Price and satisfactory to Purchaser being referred
to as a "Section 116 Certificate").
(ii) If a Section 116 Certificate has not been
delivered to Purchaser at or before the Closing, Purchaser
shall withhold from the Purchase Price an amount equal to
25% of the Net Share Price (the "Withheld Amount").
Purchaser shall deposit the funds in an interest-bearing
account at a bank acceptable to Seller.
(iii) In the event that Seller delivers to
Purchaser a Section 116 Certificate at any time after
Closing and before the day that is the 30th day after the
end of the month in which the Closing Date occurs (the
"Remittance Date"), Purchaser shall, within two (2) business
days of such delivery, pay to Seller on account of the
Purchase Price the sum of (x) the Withheld Amount and (y)
the interest earned on the Withheld Amount (the "Withheld
Interest"), less any withholding tax thereon; provided,
however, that if Canada Customs and Revenue Agency confirms
in writing on or before the Remittance Date that Purchaser
may continue to hold the Withheld Amount until a later date
without adverse consequences to Purchaser, then Purchaser
will continue to hold that amount on the terms and
conditions of this Section 6.9(c) and on the terms outlined
in the confirmation from Canada Customs and Revenue Agency,
and the Remittance Date will be deemed to have been extended
until that later date.
(iv) In the event Seller does not deliver to
Purchaser a Section 116 Certificate by the Remittance Date,
on the Remittance Date, Purchaser shall remit the Canadian
dollar equivalent of the Withheld Amount (calculated based
on the Bank of Canada U.S. dollar exchange rate in effect
for the Closing Date (the "Remittance Amount")) to the
Receiver General for Canada.
(1) In the event of a decrease in the value of
the U.S. dollar relative to the Canadian dollar from the
Closing Date to the Remittance Date (calculated based on the
U.S. dollar exchange rate at Purchaser's bank in effect at
such times):
(A) to the extent that the Conversion
Costs exceed the Withheld Interest (less any
withholding tax thereon), Seller shall pay, within
two (2) business days of the Remittance Date, to
Purchaser, by wire transfer of immediately
available funds to an account designated by
Purchaser, an amount equal to the difference
between the Conversion Costs and the Withheld
Interest (less any withholding tax thereon) and
Purchaser shall retain the Withheld Interest; and
(B) to the extent that the Conversion
Costs are less than the Withheld Interest (less any
withholding tax thereon) Purchaser shall pay,
within two (2) business days of the Remittance
Date, to Seller, by wire transfer of immediately
available funds to an account designated by Seller,
an amount equal to the difference between the
Withheld Interest, less any withholding tax
thereon, and the Conversion Costs and Purchaser
shall retain the Withheld Interest.
(2) In the event of an increase in the value of
the U.S. dollar relative to the Canadian dollar from the
Closing Date to the Remittance Date (calculated based on the
U.S. dollar exchange rate at Purchaser's bank in effect at
such times):
(A) to the extent that the Conversion
Costs exceed the sum of the Withheld Interest (less
any withholding tax thereon) and the excess
remaining amount of the Withheld Amount after the
payment of the Remittance Amount (collectively, the
"Account Balance"), Seller shall pay, within two
(2) business days of the Remittance Date, to
Purchaser, by wire transfer of immediately
available funds to an account designated by
Purchaser, an amount equal to the difference
between the Conversion Costs and the Account
Balance and Purchaser shall retain the Account
Balance; and
(B) to the extent that the Conversion
Costs are less than the Account Balance, Purchaser
shall pay, within two (2) business days of the
Remittance Date, to Seller, by wire transfer of
immediately available funds to an account
designated by Seller, an amount equal to the
difference between the Account Balance and the
Conversion Costs and Purchaser shall retain the
Account Balance.
(v) Any amount that the Purchaser withholds from
the Purchase Price pursuant to this Section 6.9(c) shall be
treated as having been paid to Seller on account of the
Purchase Price on the date such amount is withheld.
(d) Mutual Cooperation. Each of the parties hereto shall
provide the other parties with such information and records and access to such
of its officers, directors, employees and agents as may be reasonably
requested by the other parties in connection with the preparation of any Tax
Return or any audit or other proceeding relating to the Companies or Seller.
(e) Contests. Whenever any taxing authority makes a written
assessment of Taxes for which Seller is or may be liable under this Agreement,
Purchaser shall, if informed of such an assertion, inform Seller within ten
(10) business days, and Seller shall have the right to control any resulting
proceedings and to determine whether and when to settle any such claim,
assessment or dispute to the extent such proceedings or determinations affect
the amount of Taxes for which Seller is liable under this Agreement; provided,
however, that Purchaser shall have the right to consent, which consent will
not be unreasonably withheld, to any settlement to the extent such proceedings
or settlement could reasonably be expected to materially affect the amount of
Taxes imposed on Purchaser or any of the Companies for periods beginning after
the Pre-Closing Tax Periods. Whenever any taxing authority asserts a claim,
makes an assessment or otherwise disputes the amount of Taxes for which
Purchaser is liable under this Agreement, Purchaser shall have the right to
control any resulting proceedings and to determine whether and when to settle
any such claim, assessment or dispute; provided, however, that Seller shall
have the right to consent, which consent shall not be unreasonably withheld,
to any settlement to the extent such proceedings could reasonably be expected
to materially affect the amount of Taxes for which Seller is or may be liable
under this Agreement.
(f) Refunds. Purchaser shall promptly pay to Seller any
refund or credit of Taxes received by Purchaser or any of the Companies
relating to such Company for any taxable period (or portion thereof) ending on
or before the Closing Date. Purchaser shall be entitled to retain all other
refunds of Taxes.
(g) Survival of Obligations. Notwithstanding any other
provisions of the Agreement, the obligations of the parties set forth in this
Section 6.9 shall be unconditional and absolute, shall not be subject to any
basket amounts or other limitation set forth in Article IX hereof, and shall
remain in effect until ninety (90) days after the expiration of the applicable
statutes of limitations.
(h) Section 338(g) Election. Purchaser agrees not to make an
election pursuant to Section 338(g) of the Code without Seller's prior written
consent.
6.10 Affiliated Transactions.
(a) Seller and the Companies shall cause all Contracts and
transactions by and between Seller and any of his Affiliates, on the one hand,
and the Companies, on the other hand, to be terminated effective as of the
Closing, and shall deliver to Purchaser evidence of such terminations that is
reasonably acceptable to Purchaser.
(b) Prior to the Closing, Seller shall satisfy, pay in full
or discharge all notes, sums and amounts receivable by the Companies from
Seller or any of his Affiliates. Seller shall provide evidence to Purchaser of
such repayment, discharge or forgiveness in form and substance reasonably
acceptable to Purchaser.
(c) Prior to the Closing, the Companies shall satisfy, pay
in full or discharge all notes, sums and amounts receivable by Seller or any
of his Affiliates from the Companies. The Companies shall provide evidence to
Purchaser of such repayment, discharge or forgiveness in form and substance
reasonably acceptable to Purchaser.
6.11 Change of Control and Prepayment Obligations. Seller shall,
prior to the Closing, take such steps as are necessary to ensure that no sums
are owed or payable by the Companies or Purchaser to any Person due to the
execution of this Agreement, the consummation of the transactions contemplated
hereby or any change of control or assignment by operation of law affecting
any of the Companies.
6.12 Disposition of the Transferred Sub. Prior to the Closing Date,
Seller and the Companies shall take all actions necessary to cause the
Transferred Sub to be transferred from GMG (the "Transfer") pursuant to
arrangements satisfactory in form and substance to Purchaser. Purchaser shall
have no liability whatsoever with respect to the Transferred Sub and any tax
consequences in connection with the Transfer.
6.13 Publicity. Until the Closing, or the date the transactions
contemplated hereby are terminated or abandoned pursuant to Article XI,
neither Seller, the Companies, Purchaser nor any of their respective
Affiliates shall issue or cause the publication of any press release or other
announcement with respect to this Agreement or the other transactions
contemplated hereby without prior approval of the other party, except as may
be required by law or by any listing agreement with a national securities
exchange or trading market, it being understood and acknowledged that
Purchaser shall issue a press release, a copy of which shall be provided to
Seller prior to issuance, with respect to the execution of this Agreement
immediately subsequent to the execution of this Agreement.
6.14 Marketable Securities. Prior to the Closing, Seller and the
Companies shall take all actions necessary to liquidate for cash all
marketable securities owned or held by or on behalf of any the Companies.
6.15 Distribution of Certain Assets. Prior to the Closing, the
Companies shall be permitted to distribute to Seller (i) the automobile that
has currently been provided to Seller by the Companies and (ii) Parent's bank
account # 00-000-00 held with Banque Nationale du Canada (the "Canadian
Account""); provided, that, the funds in the Canadian Account shall not exceed
$200,000.
6.16 Exempt Surplus. Seller covenants and agrees that immediately
after the Closing, the aggregate of the "exempt surplus" of GMG in respect of
Parent and the "exempt surplus" of Papercon in respect of Parent shall be not
less than $21 million and each of GMG and Papercon shall have no "taxable
deficit" in respect of Parent. For purposes of the foregoing, the terms
"exempt surplus" and "taxable deficit" shall have the same meaning as the
definitions assigned by Part LIX of the Income Tax Regulations (Canada) for
the purposes of such Part and subsection 113(1) of the Income Tax Act
(Canada).
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF PURCHASER
The obligations of Purchaser to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing of the
following conditions, any or all of which may be waived in whole or in part by
Purchaser:
7.1 Accuracy of Representations and Warranties; Compliance with
Obligations. The representations and warranties of Seller and the Companies
contained in this Agreement shall be true and correct in all material respects
(except for representations and warranties that have any materiality
qualifiers, which shall be true as written). The Companies and Seller shall
have performed or complied with all of their respective obligations required
by this Agreement to be performed or complied with at or prior to the Closing.
The Companies and Seller shall have delivered to Purchaser a certificate,
dated as of the Closing Date, (which in case of the Companies shall be duly
signed by their respective Chief Executive Officer and Chief Financial
Officer) certifying that such representations and warranties are true and
correct and that all such obligations have been performed and complied with.
7.2 No Order or Injunction. There shall not be issued and in effect
by or before any court or other governmental body an order or injunction
restraining or prohibiting the transactions contemplated hereby.
7.3 HSR Act; Competition Act. Any applicable waiting period under the
HSR Act, Competition Act or any other applicable Competition Law shall have
expired or been terminated.
7.4 No Material Adverse Change. Between the date of this Agreement
and the Closing Date, there shall not have occurred any material adverse
change (or any development that, insofar as reasonably can be foreseen, is
reasonably likely to result in any material adverse change) in the working
capital, consolidated financial condition, businesses, results of operations
or prospects of the Companies and the Companies and Seller shall have
delivered to Purchaser a certificate, dated as of the Closing Date, to that
effect.
7.5 Corporate Certificate. The Companies and Seller shall have
delivered to Purchaser (i) copies of the Certificate or Articles of
Incorporation, or other corporate formation document, of the Companies
certified by the Georgia Secretary of State, or the Canadian equivalent, as
the case may be, no longer than fifteen (15) days prior to the Closing, (ii)
copies of resolutions adopted by the Boards of Directors and the shareholders
of the Companies authorizing the transactions contemplated by this Agreement
and (iii) a Good Standing Certificate, or the Canadian equivalent, as the case
may be, with respect to the Companies issued by the State of Georgia as of a
date not more than five (5) days prior to the Closing Date, or the Canadian
equivalent as of a date not more than fifteen (15) days prior to the Closing
Date, as the case may be, and all of such documents of such entities shall be
certified as of the Closing Date by their respective Secretaries as being
true, correct and complete.
7.6 Opinion of Counsel. Purchaser shall have received an opinion,
dated as of the Closing Date, from counsel for the Companies and Seller in
substantially the form attached hereto as Schedule 7.6.
7.7 Consents Obtained. All consents of any Person necessary to the
consummation of the Closing and the other transactions contemplated hereby,
including consents from parties to loans, contracts, leases or other
agreements (including, without limitation, the Material Contracts) and
consents from governmental agencies, whether federal, state or local shall
have been obtained, and a copy of each such consent shall have been provided
to Purchaser at or prior to the Closing.
7.8 No Adverse Litigation. There shall not be pending or threatened
any action or proceeding by or before any court or other governmental body
which shall seek to restrain, prohibit, invalidate or collect damages arising
out of the transactions hereunder, or which, in the sole judgment of
Purchaser, makes it inadvisable to proceed with the transactions contemplated
hereby.
7.9 Resignation of Directors and Officers. To the extent requested by
Purchaser, each of the directors and officers of the Companies shall resign,
effective as of the Closing.
7.10 Transfer. The Transfer shall have occurred.
7.11 Lien Terminations. All of the Liens set forth on Schedule
3.16(a) hereto shall have been terminated.
7.12 Purchaser Shares. The average closing price of the Purchaser
Shares, as they are quoted on The Nasdaq National Market ("Nasdaq") during the
twenty (20) business days immediately prior to the Closing Date in which at
least five thousand (5,000) shares were traded, shall be less than $14.00 per
share.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF SELLER
The obligations of Seller to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing of the
following conditions, any or all of which may be waived in whole or in part by
Seller.
8.1 Accuracy of Representations and Warranties; Compliance with
Obligations. The representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects (except for
representations and warranties that have any materiality qualifiers, which
shall be true as written). Purchaser shall have performed or complied with all
of its obligations required by this Agreement to be performed or complied with
at or prior to the Closing. Purchaser shall have delivered to Seller a
certificate, dated as of the Closing Date, and signed by an authorized
officer, certifying that such representations and warranties are true and
correct and that all such obligations have been performed and complied with.
8.2 No Order or Injunction. There shall not be issued and in effect
by or before any court or other governmental body an order or injunction
restraining or prohibiting the transactions contemplated hereby.
8.3 HSR Act; Competition Act. Any applicable waiting period under the
HSR Act, Competition Act or any other applicable Competition Law shall have
expired or been terminated.
8.4 Opinion of Counsel. Seller shall have received an opinion, dated
as of the Closing Date, from counsel for Purchaser in substantially the form
attached hereto as Schedule 8.4.
8.5 Purchaser Shares. The average closing price of the Purchaser
Shares, as they are quoted on Nasdaq during the twenty (20) business days
immediately prior to the Closing Date in which at least five thousand (5,000)
shares were traded, shall be greater than $10.00 per share.
ARTICLE IX
INDEMNIFICATION
9.1 Agreement by Seller for Indemnification. Seller agrees to
indemnify and hold Purchaser and the Companies (as wholly-owned subsidiaries
of Purchaser) and their stockholders, directors, officers, employees,
attorneys, agents and Affiliates (collectively, the "Purchaser Indemnified
Parties") harmless from and against, the aggregate of all expenses, losses,
costs, deficiencies, liabilities and damages (including, without limitation,
related counsel fees and expenses) incurred or suffered by Purchaser or the
Companies arising out of, relating to, or resulting from (i) any breach of a
representation or warranty made by the Companies or Seller in or pursuant to
this Agreement, (ii) any breach of the covenants or agreements made by the
Companies or Seller in or pursuant to this Agreement, (iii) any inaccuracy in
any certificate, instrument or other document delivered by the Companies or
Seller as required by this Agreement, (iv) any tax consequences as a result of
the Transfer, or (v) the past, present and/or future ownership or operations
of the Transferred Sub (collectively, "Purchaser Indemnifiable Damages");
provided, however, except as otherwise provided in Section 6.9, Seller shall
not in any event be required to indemnify and hold the Purchaser Indemnified
Parties harmless under this Section 9.1(i) or (iii) until the aggregate amount
of such Purchaser Indemnifiable Damages exceeds $400,000 (the "Basket
Amount"), at which point Seller shall be required to indemnify and hold the
Purchaser Indemnified Parties harmless for all Purchaser Indemnifiable Damages
in excess of the Basket Amount, up to, but not in excess of, $88,000,000;
provided, further, that the foregoing limitations shall not apply to Purchaser
Indemnifiable Damages under this Section 9.1(ii), (iv) and (v); provided,
further, that Purchaser Indemnifiable Damages resulting from a breach of any
representation or warranty made in or pursuant to Sections 3.7 and 3.32 shall
not be subject to the Basket Amount limitation. Notwithstanding anything to
the contrary contained herein, in no event shall any of the Companies be
required to indemnify or hold the Purchaser Indemnified Parties harmless under
this Section 9.1 if the transactions contemplated hereby are consummated. Such
obligations shall be solely of Seller.
9.2 Agreement by Purchaser for Indemnification. Purchaser agrees to
indemnify and hold Seller harmless from and against, the aggregate of all
expenses, losses, costs, deficiencies, liabilities and damages (including,
without limitation, related counsel fees and expenses) incurred or suffered by
Seller arising out of, relating to, or resulting from (i) any breach of a
representation or warranty made by Purchaser in or pursuant to this Agreement,
(ii) any breach of the covenants or agreements made by Purchaser in or
pursuant to this Agreement, or (iii) any inaccuracy in any certificate,
instrument or other document delivered by Purchaser as required by this
Agreement (collectively, "Seller Indemnifiable Damages" and, together with
Purchaser Indemnifiable Damages, "Indemnifiable Damages); provided, however,
Purchaser shall not in any event be required to indemnify and hold Seller
harmless under this Section 9.2(i) or (iii) until the aggregate amount of such
Seller Indemnifiable Damages exceeds the Basket Amount, at which point
Purchaser shall be required to indemnify and hold Seller harmless for all
Seller Indemnifiable Damages in excess of the Basket Amount, up to, but not in
excess of, $10,000,000; provided, further, that the foregoing limitations
shall not apply to Seller Indemnifiable Damages under this Section 9.2(ii);
provided, further, that Seller Indemnifiable Damages resulting from a breach
of any representation or warranty made in or pursuant to Section 4.5 shall not
be subject to the Basket Amount limitation.
9.3 Survival of Representations and Warranties. Each of the
representations and warranties made in this Agreement or pursuant hereto shall
survive for a period of three (3) years after the Closing Date; provided,
however, that the representations and warranties set forth in Sections 3.14,
3.19 and 3.20 shall survive for the applicable statutory period of limitations
plus ninety (90) calendar days and the representations and warranties set
forth in Sections 3.4 through 3.7 and 4.5 shall survive indefinitely. No claim
for the recovery of Indemnifiable Damages for breach of a representation or
warranty herein may be asserted by either party after the applicable period
has expired; provided, however, that claims for Indemnifiable Damages first
asserted within such period shall not thereafter be barred. Notwithstanding
any knowledge of facts determined or determinable by any party by
investigation, each party shall have the right to fully rely on the
representations, warranties, covenants and agreements of the other parties
contained in this Agreement or in any other documents or papers delivered in
connection herewith. Each representation, warranty, covenant and agreement of
the parties contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
9.4 Set-Off Rights. Seller hereby agrees that Purchaser shall have
the right, but not the obligation, to set-off against Purchaser's payment
obligations under the Note, the Non-Competition Agreement and the Lease the
full amount of any Purchaser Indemnifiable Damages required to be paid
pursuant to Section 9.1. From time to time, if Purchaser elects to exercise
its set-off rights hereunder against the payments under the Note, the
Non-Competition Agreement and/or the Lease, it will give Seller written notice
of such election which includes the amount to be set-off, and upon giving of
such notice, the amount due in respect of such amount shall automatically be
reduced by the amount set forth in such notice and such amount shall be
deposited into an interest-bearing escrow account with a bank or financial
institution reasonably acceptable to Purchaser and Seller (the "Escrow Agent")
to be held in escrow by such Escrow Agent pending the resolution of claims for
Purchaser Indemnifiable Damages. Each of Purchaser and Seller shall pay
one-half of the reasonable fees and out-of-pocket expenses of the Escrow Agent
incurred by it in connection with carrying out its duties under this Section
9.4. In the event there is a "final determination" by a court of competent
jurisdiction, or if resolved by written mutual agreement of Purchaser and
Seller, that Purchaser was not entitled to indemnification under this Article
IX with respect to the set-off amount, all such amounts which are so
determined to have been wrongfully set-off shall be released from the escrow
account to Seller and the remainder of the set-off amount, if any, shall be
released from the escrow account to Purchaser. All interest accrued on the
set-off amount shall be paid to Purchaser and Seller pro rata based on the
amount of the escrow account disbursed to such parties pursuant to this
Section 9.4. For purposes of this Section 9.4, a determination shall be
"final" if any and all appeals therefrom shall have been resolved or if thirty
(30) calendar days shall have passed from the rendering of such determination
(or of any determination on appeal therefrom) and no party shall have
commenced any such appeal therefrom.
9.5 Indemnification Claims.
(a) Any claim for Indemnifiable Damages or any other damages
hereunder shall be made by written notice, which notice shall set forth (i)
the amount of Indemnifiable Damages or other loss, damage, cost or expense
which is claimed to have been sustained by reason thereof, and (ii) the basis
of such claim; and
(b) Payment for any claim made under subsection (a) shall be
effected on the later to occur of the expiration of twenty (20) days from the
date of such notice or, if such claim is contested in writing by Seller or
Purchaser within such twenty (20) day period, the date the dispute is resolved
by written mutual agreement of Purchaser and Seller or a final determination
as provided in Section 9.4 above.
9.6 Remedies Cumulative; Waiver. The remedies provided herein shall
be cumulative and shall not preclude any party from asserting any other right,
or seeking any other remedies against the other party.
ARTICLE X
DEFINITIONS
10.1 Defined Terms. As used herein, the following terms shall have
the following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as in effect on the
date of this Agreement.
"Atlanta Properties" means the Leased Premises located at 0000 Xxxxx
Xxxxxx Xxxx and 0000-00 Xxxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx 00000.
"Code" means the Internal Revenue Code of 1986, as amended.
"Competition Act" means the Competition Act (Canada), as amended and
includes the regulations thereunder.
"Confidentiality Agreement" means that certain Mutual Nondisclosure
and Nonuse Agreement, dated as of October 24, 2003, by and between Bagcraft
Packaging, L.L.C., a Delaware limited liability company and wholly-owned
subsidiary of Purchaser, Purchaser and Papercon.
"Contract" means any agreement, contract, lease, note, mortgage,
indenture, loan agreement, franchise agreement, covenant, employment
agreement, license, instrument, purchase and sales order, commitment,
undertaking, obligation, whether written or oral, express or implied.
"Conversion Costs" means, in connection with Section 6.9(c), the
aggregate of all expenses, charges, fees, or other costs associated with the
conversion of U.S. dollars into Canadian dollars or the payment of amounts to
the Receiver General for Canada including, without limiting the generality of
the foregoing, any additional amounts that are paid as a result of any
decrease in the value of the U.S. dollar relative to the Canadian dollar from
the Closing Date to the Remittance Date.
"Defect" means a defect or impurity of any kind, whether in design,
manufacture, processing, or otherwise, including any dangerous propensity
associated with any reasonably foreseeable use of a Product, or the failure to
warn of the existence of any defect, impurity, or dangerous propensity.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Foreign Plan" means an Employee Benefit Plan that has been adopted
or maintained by any of the Companies, whether formally or informally, for the
benefit of employees, directors or consultants of any such Company outside of
the United States.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in effect in
the United States of America from time to time.
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Indebtedness" of any Person means all obligations of such Person (i)
for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases, (v) all liabilities secured by any Lien on any
property, (vi) in the nature of guarantees of the obligations described in
clauses (i) through (v) above of any other Person and (vii) liabilities for
income Taxes relating to periods prior to the Closing.
"Leased Premises" means those certain assets consisting primarily of
real property used or to be used in the operation of Papercon, all of which
are listed on Exhibit G hereto. Any Intellectual Property that is embodied in
equipment, inventory or fixtures located, and any method or process employed,
at the Leased Premises are, as between the parties, owned by the Companies.
"Lien" means any condition, covenant or restriction of record,
mortgage, pledge, proxy, voting trust or agreement, security interest,
encumbrance, lien, claim, charge of any kind or other restrictions on title or
transfer of any nature whatsoever.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, estate, trust,
unincorporated association, joint venture, Governmental Authority or other
entity, of whatever nature.
"Product" means any product designed, manufactured, shipped, sold,
marketed, distributed and/or otherwise introduced into the stream of commerce
by or on behalf of the Companies, including any product sold in the United
States or Canada by the Companies as the distributor, agent, or pursuant to
any other contractual relationship.
"Purchaser Transaction Fees" means all legal, accounting, tax,
consulting and financial advisory and other fees and expenses incurred, paid,
or payable by Purchaser in connection with the transactions contemplated
hereby, including any filing fees incurred under the HSR Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Transaction Fees" means all legal, accounting, tax,
consulting and financial advisory and other fees and expenses incurred by the
Companies or Seller in connection with the transactions contemplated hereby.
"Tax Return" means any tax return, filing, information statement or
other document (including any amendments or attachments thereto) filed or
required to be filed in connection with or with respect to any Tax.
"Taxes" means all taxes, fees or other assessments, including, but
not limited to, income, estimated, excise, property, sales, use, franchise,
intangible, payroll, withholding, social security, capital and unemployment
taxes imposed by any United States or Canadian federal, state, provincial,
local or foreign government agency, and any interest or penalties related
thereto.
"WARN Act" means the Worker Adjustment and Retraining Notification
Act.
10.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the
defined meanings when used in any certificates, reports or other documents
made or delivered pursuant hereto or thereto, unless the context otherwise
requires.
(b) Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) All matters of an accounting nature in connection with
this Agreement and the transactions contemplated hereby shall be determined in
accordance with GAAP applied on a basis consistent with prior periods, where
applicable.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual written consent of all of the parties hereto
at any time prior to the Closing; or
(b) by Purchaser upon delivery of written notice to the
Companies and Seller in accordance with Section 12.1 of this Agreement in the
event of a material breach by the Companies or Seller of any provision of this
Agreement, including covenants, warranties or representations; or
(c) by the Companies and Seller upon delivery of written
notice to Purchaser in accordance with Section 12.1 of this Agreement in the
event of a material breach by Purchaser of any provision of this Agreement,
including covenants, warranties or representations; or
(d) by (i) Purchaser or (ii) the Companies and Seller upon
delivery of written notice in accordance with Section 12.1 of this Agreement,
if the Closing shall not have occurred within ninety (90) calendar days after
the date of this Agreement, provided that the party delivering such notice
shall not have caused such failure to close.
11.2 Effect of Termination. Except for the provisions of Section 6.5
and Section 12.3, which shall survive any termination hereof, in the event of
termination of this Agreement pursuant to Section 11.1, this Agreement shall
forthwith become void and of no further force and effect, and the parties
shall be released from any and all obligations hereunder; provided, however,
that nothing herein shall relieve any party from liability for fraud or the
breach of this Agreement prior to such termination or abandonment of the
transactions contemplated by this Agreement.
ARTICLE XII
GENERAL PROVISIONS
12.1 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be deemed given if
delivered by certified or registered mail (first class postage prepaid) or
guaranteed overnight delivery to the following addresses (or to such other
addresses which any party shall designate in writing to the other parties):
(a) if to Purchaser or to the Companies after Closing, to:
Packaging Dynamics Corporation
0000 Xxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
with a copy (which shall not constitute notice to
Purchaser or to the Companies), to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
if to Seller or to the Companies prior to Closing, to:
Xx. Xxxx X. Ajram
c\o Ellis, Funk, Xxxxxxxx, Xxxxxxxx & Dokson, P.C.
One Securities Centre
Suite 400
0000 Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
with a copy (which shall not constitute notice to
Seller or to the Companies), to:
Ellis, Funk, Xxxxxxxx, Xxxxxxxx & Dokson, P.C.
One Securities Centre
Suite 400
0000 Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
12.2 Entire Agreement. This Agreement (including the Schedules and
Exhibits attached hereto) and other documents delivered at the Closing
pursuant hereto, contains the entire understanding of the parties in respect
of its subject matters and supersedes all prior agreements and understanding
(oral or written) between or among the parties with respect to such subject
matter. The Schedules and Exhibits constitute a part hereof as though set
forth in full above.
12.3 Expenses. Seller shall pay the Seller Transaction Fees and
Purchaser shall pay the Purchaser Transaction Fees; provided, however, that
the Companies may pay the Seller Transaction Fees so long as such Seller
Transaction Fees are either paid prior to Closing or included in the Final
Closing Net Assets Statement.
12.4 Amendment; Waiver. This Agreement may not be modified, amended,
supplemented, canceled, or discharged, except by written instrument executed
by all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude the exercise of any other right, power or privilege. No waiver of any
breach of any provision shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision, nor shall any waiver be
implied from any course of dealing between the parties. No extension of time
for performance of any obligations or other acts hereunder or under any other
agreement shall be deemed to be an extension of the time for performance of
any other obligations or any other acts.
12.5 Binding Effect; Assignment. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall
be construed to give any other person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned or delegated by the Companies or Seller without
the prior written consent of Purchaser. Purchaser may assign its rights and
obligations hereunder to one or more wholly-owned subsidiaries of Purchaser;
provided, however, that such assignment shall not relieve Purchaser of its
obligations hereunder.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together
shall constitute one and the same instrument.
12.7 Interpretation. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement or
the schedules. Whenever, the words "include," "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words
"without limitation." Time shall be of the essence in this Agreement.
12.8 Governing Law; Interpretation. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the State of
Delaware applicable to contracts executed and to be wholly performed within
such State.
12.9 Severability. Any term or provision of this Agreement that is
held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction or other authority declares that any term or provision
hereof is invalid, void or unenforceable, the parties agree that the court
making such determination shall have the power to reduce the scope, duration,
area or applicability of the term or provision, to delete specific words or
phrases, or to replace any invalid, void or unenforceable term or provision
with a term or provision that is valid and enforceable and that comes closest
to expressing the intention of the invalid or unenforceable term or provision.
12.10 Mediation.
(a) The parties to this Agreement agree that any and all
disputes, controversies or claims (each, a "Dispute") arising out of or
relating to this Agreement, or the breach hereof, shall be submitted for
mediation in a mutually agreeable location. Either party may commence
mediation by providing to the other party a written request for mediation (a
"Dispute Notice"), setting forth the subject of the dispute and the relief
requested. The parties will cooperate with one another in selecting a mediator
from a panel of neutrals, and in scheduling the mediation proceedings. The
parties covenant that they will participate in the mediation in good faith,
and that they will share equally in its costs. All offers, promises, conduct
and statements, whether oral or written, made in the course of the mediation
by any of the parties, their agents, employees, experts and attorneys, and by
the mediator, are confidential, privileged and inadmissible for any purpose,
including impeachment, in any arbitration or court proceeding involving the
parties, provided that evidence that is otherwise admissible or discoverable
shall not be rendered inadmissible or non-discoverable as a result of its use
in the mediation.
(b) If the Dispute has not been resolved in accordance with
Section 12.10(a) within ninety (90) calendar days after receipt of a Dispute
Notice, then either party may take any action or exercise any remedy available
to it by appropriate legal proceedings against the other party.
(c) Notwithstanding the foregoing, (i) Purchaser shall not
be required to submit to mediation any request for injunctive or similar
relief for violation or alleged violation by Seller of the provisions of the
Non-Competition Agreement and (ii) Seller shall not be required to submit to
mediation any request for injunctive or similar relief for violation or
alleged violation by Purchaser of the provisions of the Registration Rights
Agreement.
12.11 Jurisdiction.
(a) The parties to this Agreement agree that any suit,
action or proceeding arising out of, or with respect to, this Agreement or any
judgment entered by any court in respect thereof shall be brought in the
courts of the State of Delaware or in the U.S. District Courts located in the
State of Delaware and Purchaser, the Companies and Seller hereby irrevocably
accept the exclusive personal jurisdiction of those courts for the purpose of
any suit, action or proceeding.
(b) In addition, Purchaser, the Companies and Seller each
hereby irrevocably waives, to the fullest extent permitted by law, any
objection which it or he may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
any judgment entered by any court in respect thereof brought in the State of
Delaware or the U.S. District Courts located in the State of Delaware, and
hereby further irrevocably waives any claim that any suit, action or
proceedings brought in any such court has been brought in an inconvenient
forum. 12.12 Dispute Costs. In the event of a Dispute which is ultimately
resolved by a court of competent jurisdiction, the non-prevailing party will
reimburse the prevailing party for its reasonable costs and expenses
(including, without limitation, legal fees and expenses) incurred in
connection with such action.
12.13 Arm's-Length Negotiations. Each party herein expressly
represents and warrants to all other parties hereto that (a) before executing
this Agreement, said party has fully informed itself of the terms, contents,
conditions, and effects of this Agreement; (b) said party has relied solely
and completely upon its own judgment in executing this Agreement; (c) said
party has had the opportunity to seek and has obtained the advise of counsel
before executing this Agreement; (d) said party has acted voluntarily and of
its own free will in executing this Agreement; (e) said party is not acting
under duress, whether economic or physical, in executing this Agreement; and
(f) this Agreement is the result of arm's-length negotiations conducted by and
among the parties and their respective counsel.
The parties hereto have caused this Agreement to be duly executed and
delivered as of the day and year first above written.
PACKAGING DYNAMICS CORPORATION,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman
3141276 CANADA INC., a Canadian
numbered holding company
By: /s/ Xxxx X. Ajram
--------------------------------
Name: Xxxx X. Ajram
Title:
GMG INTERNATIONAL INC., a Georgia
corporation
By: /s/ Xxxx X. Ajram
--------------------------------
Name: Xxxx X. Ajram
Title:
PAPERCON, INC., a Georgia corporation
By: /s/ Xxxx X. Ajram
--------------------------------
Name: Xxxx X. Ajram
Title:
/s/ Xxxx X. Ajram
------------------------------------
XXXX X. AJRAM, individually
