Exhibit 2.2
INVESTMENT AGREEMENT
This Investment Agreement (this "Agreement") dated as of February 19,
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1998, is by and among KFI Holding Corporation, a Delaware corporation
("Holding"); Heritage Fund I Investment Corporation, a Delaware corporation
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("Heritage"); Xxxxxx X. Xxxxxx, an individual residing in the State of
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Pennsylvania; H. Xxxxx Xxxxxx, an individual residing in the State of
Pennsylvania; Xxxxxxx X. Xxxxxx, not individually but as Trustee under Indenture
of Trust dated 6/4/96 of Xxxxxx X. Xxxxxx; Xxxxxx X. Xxxxxx, not individually
but as trustee under an Irrevocable Deed of Trust dated 8/12/92 f/b/o H. Xxxxx
Xxxxxx, (together, collectively, the "Klearfold Xxxxxx Investors") and each of
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the other employees of Klearfold, Inc., a Pennsylvania corporation ("Klearfold")
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listed in Part II of Schedule 1A hereto who are purchasing Series A Common Stock
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(as defined herein) pursuant to this Agreement (together, collectively, the
"Klearfold Employee Investors", and together with the Klearfold Xxxxxx
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Investors, the "Klearfold Management Investors"); each of the persons listed on
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Schedule 2 hereto (together, collectively, the "AGI Rollover Investors"; each of
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whom is an individual, residing in the state referred to beneath their
respective names; and each of the persons listed in the attached Schedule 3
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(together, collectively, the "New AGI Investors", and together with the AGI
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Rollover Investors, collectively, the "AGI Investors"), each of whom is an
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individual residing in the State of Illinois. The AGI Investors, the Klearfold
Management Investors and Heritage, collectively, are referred to herein as the
"Investors".
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Concurrently with the execution and delivery of this Agreement, Holding,
Holding's wholly-owned subsidiary, AGI Acquisition Corporation, an Illinois
corporation ("Acquisition"), AGI Incorporated, an Illinois corporation ("AGI"),
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each of the AGI Investors and certain other holders of securities of AGI are
entering into an Agreement and Plan of Merger (the "Merger Agreement"), dated as
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of the date hereof, pursuant to and subject to the terms and conditions of
which, among other things, Holding will acquire ownership, through the merger of
Acquisition with and into AGI, of all of the capital stock of AGI not acquired
by Holding at the Closing under this Agreement.
The parties desire that the Investors contribute certain securities of
Holding and AGI to, and make certain investments in, Holding on the terms and
conditions set forth herein, and in exchange for such contributions and
investments receive certain shares of Holding's Series A Common Stock (as
defined herein).
Capitalized terms used and not otherwise defined upon first usage herein
are defined in Section 11.1 of this Agreement.
Accordingly, subject to the terms and conditions herein and based upon the
respective representations and warrants herein and in the Other Agreements, the
parties hereby agree as follows:
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1. CONTRIBUTIONS AND INVESTMENTS.
(A) HERITAGE. Subject to the terms and conditions set forth in this
Agreement, at the Closing, Heritage shall contribute to Holding the securities
listed below:
(i) 14,500 shares of Old Preferred Stock;
(ii) 45,000 shares of Old Voting Common Stock;
(iii) 8,500 shares of Old Non-Voting Common Stock; and
(iv) Holding's Variable Amount Voting Common Stock Purchase Warrant
dated June 7, 1996, for the purchase of up to 45,313 shares of Old Voting
Common Stock (the "Old Warrant");
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and Heritage shall pay to Holding as a cash investment $3,400,000 by wire
transfer, and upon receipt by Holding of such amount and each of the
certificates or instruments representing the securities described in clauses (i)
- (iv) of this Section 1.1(a), Holding shall issue to Heritage 40,000 shares of
Series A Common Stock (such shares, the "New Heritage Stock"). The parties
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agree that the aggregate purchase price for the New Heritage Stock is
$13,600,000, for a purchase price of $340.00 per share, and shall be reported as
such by all parties for all federal, state and local Tax purposes.
(B) KLEARFOLD MANAGEMENT INVESTORS. Subject to the terms and conditions
set forth in this Agreement, at the Closing, each of the Klearfold Xxxxxx
Investors shall contribute to Holding the securities set forth opposite his or
its name in columns 2, 3 and 4 of Schedule 1 hereto, consisting in total of the
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securities listed below:
(i) 4,500 shares of Old Preferred Stock;
(ii) 42,500 shares of Old Voting Common Stock; and
(iii) 500 shares of Old Non-Voting Common Stock;
and each of the Klearfold Management Investors shall pay to Holding as a cash
investment the amount set forth opposite his or its name in column 5 of Schedule
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1 hereto, consisting in total of an aggregate amount of $1,200,000, by wire
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transfer, and upon receipt by Holding of such amounts and each of the
certificates or instruments representing the securities described in clauses (i)
- (iii) above, Holding shall issue to each of the Klearfold Management Investors
that number of shares of Series A Common Stock as is set forth opposite such
Investor's name in column 6 of Schedule 1 hereto, consisting in total of 17,647
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shares of Series A Common Stock (the "New Klearfold Management Stock"). The
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parties agree that the aggregate purchase price for the New Klearfold Management
Stock is
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$6,000,000, for a purchase price of $340.00 per share, and shall be reported as
such by all parties for all federal, state and local Tax purposes.
(C) AGI ROLLOVER INVESTORS. Subject to the terms and conditions set forth
in this Agreement, at the Closing, each of the AGI Rollover Investors shall
contribute to Holding shares of AGI's Common Stock, $1.00 par value per share
("AGI Stock") and/or cash, with the aggregate amount of contributed
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consideration with respect to each such AGI Rollover Investor being set forth
opposite his name in column 2 of Schedule 2 hereto (with each share of AGI Stock
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so contributed being valued at an amount equal to the amount of the Per Share
Consideration, as defined in and determined in accordance with the Merger
Agreement), and upon receipt by Holding of such amounts by wire transfer or off-
set and each of the certificates representing the shares of AGI Stock being
contributed hereunder, Holding shall issue to each of the AGI Rollover Investors
that number of shares of Series A Common Stock as is set forth opposite such AGI
Rollover Investor's name in column 3 of Schedule 2 hereto (the "New AGI Rollover
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Investor Stock").
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(D) NEW AGI INVESTORS. Subject to the terms and conditions set forth in
this Agreement, at the Closing, each of the New AGI Investors shall pay to
Holding as a cash investment the amount set forth opposite his name in column 2
of Schedule 3 hereto, consisting in total of an aggregate amount of $1,373,600,
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by wire transfer, and upon receipt by Holding of such amounts, Holding shall
issue to each of the New AGI Investors that number of shares of Series A Common
Stock as is set forth opposite such New AGI Investor's name in column 3 of
Schedule 3 hereto (all such shares of Series A Common Stock, together with the
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New AGI Rollover Investor Stock referred to in Section 1.1(c) above, being
referred to herein as the "New AGI Investor Stock"), consisting (when aggregated
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with the New AGI Rollover Investor Stock referred to in Section 1.1(c) above) in
total of 42,353 shares of New AGI Investor Stock. The parties agree that the
aggregate purchase price for the New AGI Investor Stock is $14,400,000, for a
purchase price of $340.00 per share, and shall be reported as such by all
parties for all federal, state and local Tax purposes.
2. CLOSING.
2.1. TIME AND PLACE. The closing of the contributions and investments set
forth in Section 1 above (the "Closing") shall be held at the offices of Xxxxxx
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& Xxxxxxx, 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000 on the date referred
to in Section 1.1 of the Merger Agreement as the Closing Date. The date on
which the Closing is actually held hereunder is also referred to herein as the
"Closing Date".
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2.2. TRANSACTIONS AT CLOSING. At the Closing, in addition to the delivery
of any other instruments or documents referred to herein or in the Merger
Agreement:
(a) Certain of the Klearfold Management Investors, together with other
persons, all of whom are listed and specifically identified on Schedule 1B
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hereto, shall deliver to Holding certificates representing the shares of capital
stock of Holding held by such
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persons free and clear of any Lien other than Liens in favor of Holding; Holding
shall deliver the promissory notes in the aggregate amount of $35,000 payable to
it made by each of the persons listed on Schedule 1B hereto; and such shares of
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capital stock and such promissory notes shall be exchanged and canceled;
(b) Heritage shall deliver to Holding free and clear of any Lien, the Old
Warrant, marked canceled, and certificates representing the shares of capital
stock of Holding referred to in Sections 1(a)(i) - 1(a)(iii) above, duly
endorsed in blank or with duly executed stock powers attached;
(c) each of the Klearfold Xxxxxx Investors shall deliver to Holding, free
and clear of any Lien, certificates representing the shares of Holding stock
referred to in Sections 1(b)(i) - 1(b)(iii) above, duly endorsed in blank or
with duly executed stock powers attached;
(d) each of the AGI Rollover Investors shall deliver to Holding, free and
clear of any Lien, certificates representing any shares of AGI Stock delivered
pursuant to Section 1(c), duly endorsed in blank and with duly executed stock
powers attached, and in addition thereto, Xxxxx Xxxxxxxx and Xxxxx Block shall
pay to the Escrow Agent under and as defined in the Merger Agreement and the
Escrow Agreement described therein, an amount in each case equal to the Holdback
Amount (as defined in Section 1.3(a) of the Merger Agreement) multiplied by the
number of AGI Shares contributed by such AGI Investor pursuant to this Section
2.2(d), such amount to be held as part of the Escrow Amount pursuant to Section
1.3(a) of the Merger Agreement and the Escrow Agreement;
(e) each of Heritage, the Klearfold Management Investors, and the AGI
Investors shall pay to Holding the cash investments described in Section 1
above;
(f) the Restated Certificate of Incorporation of Holding, in the form
attached hereto as Exhibit A, or in such other form as shall have been approved
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in writing by the Majority Heritage Holders, the Majority Klearfold Management
Holders and the Majority AGI Holders on or prior to the Closing Date (the
"Charter Amendment"), shall be filed with the Secretary of State of the State of
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Delaware;
(g) Holding shall deliver to each of Heritage, the Klearfold Management
Investors and the AGI Investors certificates representing all of the shares of
Series A Common Stock, in the amounts set forth opposite each such Investor's
name in Schedule 4 hereto;
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(h) Holding shall enter into agreements with each of the Klearfold
Employee Investors, together with the other Klearfold employees listed and
specifically identified on Schedule 1C hereto (collectively, the "Klearfold
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Optionees") and the Klearfold Xxxxxx Investors, providing for each of the
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Klearfold Optionees to receive incentive stock option agreements for the number
of shares of Series A Common Stock set forth opposite such Klearfold Optionee's
name on Schedule 1C hereto, such shares to be provided by the
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Klearfold Xxxxxx Investors, on the terms referred to in such Schedule 1C and/or
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on such other terms as shall be reasonably satisfactory to the Klearfold Xxxxxx
Investors and the Klearfold Optionees and the Board of Directors of Holding as
constituted pursuant to Section 2.2(i) below;
(i) Each of the Investors shall execute and deliver to Holding the
Stockholder Agreement in the form attached hereto as Exhibit B (the "Stockholder
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Agreement"), and the Boards of Directors of Holding, each of its Subsidiaries
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and AGI as the Surviving Corporation under the Merger Agreement shall be
constituted as set forth in Section 3.1(a) of the Stockholder Agreement;
(j) Holding, Heritage, and each of the Klearfold Xxxxxx Investors shall
execute and deliver the Termination Agreement in the form attached hereto as
Exhibit C, pursuant to which each of (i) that certain Investment Agreement dated
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as of May 15, 1996, and (ii) the Stockholders' Agreement of Holding dated as of
June 7, 1996 (the "Existing Stockholders' Agreement"), shall be terminated with
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effect from the Closing Date; Holding and each of the Klearfold Optionees shall
execute and deliver a Termination Agreement in the form attached hereto as
Exhibit D, pursuant to which the Stock Restriction Agreements of Holding dated
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as of June 7, 1996, shall be terminated with effect from the Closing Date; and
each of the stockholders of Holding prior to the Closing Date and certain other
Affiliates of Holding prior to the Closing Date shall execute and deliver a
Release similar in substance to Article 1 of the General Release and Agreement
in Contemplation of Merger to be delivered pursuant to Section 7.12 of the
Merger Agreement, and otherwise reasonably satisfactory to Holding and the
releasing parties thereunder;
(k) Each of the Investors listed on Schedule 5 hereto shall execute and
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deliver to Holding an Employment, Non-Competition and Stock Repurchase Agreement
in the form referred to in Schedule 5 hereto, with such modifications thereto as
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Holding and such Investor shall mutually agree;
(l) Each of the Klearfold Optionees shall execute and deliver to Holding
an Agreement relating to Employment and Stock Ownership in form and substance as
mutually agreed upon by Holding and such Klearfold Optionee;
(m) The By-Laws of Holding shall be amended and restated in the form
attached hereto as Exhibit E, and the By-Laws of Klearfold and each of its
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domestic Subsidiaries shall be amended and restated to conform in form and
substance with the Amended and Restated By-Laws of Holding as set forth in
Exhibit E hereto;
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(n) Holding shall adopt an Equity Incentive Plan providing for the
issuance of up to ten percent (10%) of the fully-diluted common stock equity of
the Company, which shall be in form and substance satisfactory to the Majority
Heritage Holders, the Majority Klearfold Management Holders and the Majority AGI
Holders; and
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(o) immediately following completion of the Closing hereunder, Holding,
Acquisition, AGI and the "Participating Stockholders" referred to in the Merger
Agreement shall complete the "Closing" under and as defined in the Merger
Agreement in accordance with the terms and provisions thereof, pursuant to
which, among other things, all of the shares of AGI Stock contributed to Holding
hereunder shall be canceled.
3. REPRESENTATIONS AND WARRANTIES OF HOLDING.
Holding hereby represents and warrants to each of the Investors (other than
Heritage and the Klearfold Xxxxxx Investors), both as of the date hereof and as
of the Closing Date (immediately prior to the Closings hereunder and under the
Merger Agreement), as follows, subject in each case to such exceptions as are
specifically contemplated by this Agreement or as are set forth in (i) the
attached Disclosure Schedule, or (ii) except as provided in the final sentence
of Section 5(e) hereof, the disclosure supplements contemplated by that section,
and provided that, notwithstanding the fact that the representations and
warranties in this Section 3 are made by Holding alone, Holding, each of its
Subsidiaries and the Holding Indemnitors (as defined below) shall indemnify
against any and all Damages related to or arising, directly or indirectly, out
of or in connection with any breach of such representations and warranties to
the extent, and subject to the limitations, set forth in Section 8 hereof.
Notwithstanding any other provision of this Agreement (except the final sentence
of Section 5(e)), the Disclosure Schedule, or any such disclosure supplement,
each exception set forth in the Disclosure Schedule or any such disclosure
supplement shall be deemed to qualify each representation and warranty set forth
in this Agreement (x) that is specifically identified (by cross-reference or
otherwise) in the Disclosure Schedule or such disclosure supplement as being
qualified by such exception, or (y) with respect to which the relevance of such
exception is apparent on the face of the disclosure of such exception set forth
in the Disclosure Schedule or such disclosure supplement, provided, in either
case, that the relevant facts are set forth in reasonable detail in the
Disclosure Schedule or such disclosure supplement.
3.1. INCORPORATION; AUTHORITY. Holding is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware,
and has all requisite corporate power and authority to own or lease and operate
its properties and to carry on its business as now conducted. Holding has
delivered to each of the Investors or their respective counsel complete and
correct copies of Holding's Certificate of Incorporation and by-laws, in each
case with all amendments thereto.
3.2. AUTHORIZATION AND ENFORCEABILITY. Each of Holding and its
Subsidiaries has all requisite power and full legal right and authority
(including due approval of its Board of Directors) to enter into this Agreement
and all of the Other Agreements to which it is or is to be a party as
contemplated hereby, to perform all of its agreements and obligations hereunder
and thereunder, each in accordance with its respective terms, and to consummate
the transactions contemplated hereby and thereby. Each of this Agreement and
such Other Agreements to which Holding and/or any of its Subsidiaries is or is
to be a party has been, or upon execution and delivery as contemplated hereby,
will be, duly
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executed and delivered by Holding and/or such Subsidiary, as the case may be,
and constitutes or will constitute its legal, valid, and binding obligation,
enforceable against it in accordance with its respective terms, except to the
extent that (i) enforcement may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium, or similar laws now or hereafter in
effect relating to or limiting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court or
other similar Person before which any proceeding therefor may be brought.
3.3. CAPITALIZATION.
(a) Immediately prior to the effectiveness of the Charter Amendment, the
authorized capital stock of Holding consists of 19,000 shares of Old Preferred
Stock, all of which are issued and outstanding on the date hereof, 135,813
shares of Old Voting Common Stock, 90,500 of which are issued and outstanding on
the date hereof, and 9,500 shares of Old Non-Voting Common Stock, all of which
are issued and outstanding on the date hereof. All of such outstanding shares
of the capital stock of Holding are duly authorized, validly issued, fully paid
and non-assessable, are owned of record, as set forth in Section 3.3(a) of the
Disclosure Schedule, and, to Holding's knowledge, are owned free and clear of
all Liens, other than (i) any restrictions on transfer arising under applicable
securities laws solely by reason of the fact that such shares were issued
pursuant to exemptions from registration under such securities laws and (ii)
restrictions imposed pursuant to the Existing Stockholders' Agreement, which
restrictions shall be terminated on the Closing Date. Except as set forth in
this Investment Agreement or in the Existing Stockholders' Agreement, there are
no agreements or other obligations on the part of Holding to purchase or sell,
and other than as set forth in Section 3.3(a) of the Disclosure Schedule, no
options, warrants, or other rights to subscribe for or purchase from Holding or
any of its Stockholders, any shares of capital stock or other securities of
Holding.
(b) Immediately following the effectiveness of the Charter Amendment, the
authorized capital stock of Holding will consist of (i) 150,000 shares of Series
A Common Stock, 100,000 shares of which shall, after giving effect to the
transactions described herein, be issued and outstanding, and (ii) 50,000 shares
of Series B Common Stock, none of which shall, after giving effect to the
transactions described herein, be issued and outstanding. All of such
outstanding shares of Series A Common Stock will, upon issuance thereof pursuant
to and in accordance with the terms and conditions of this Agreement, be duly
authorized, validly issued, fully paid and non-assessable, and will be owned of
record as set forth in Section 3.3(b) of the Disclosure Schedule.
3.4. QUALIFICATION. Each of Holding and its Subsidiaries is duly qualified
and in good standing as a foreign corporation in all jurisdictions in which the
character of its owned or leased properties or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
or admitted and in good standing does not and is not reasonably likely to have a
material adverse effect on the business,
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financial condition, or results of operations of Holding and its Subsidiaries,
taken as a whole (a "Material Adverse Effect").
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3.5. SUBSIDIARIES.
(a) Holding does not have any Subsidiaries other than those listed in
Section 3.5 of the Disclosure Schedule. Each Subsidiary so listed is a
corporation duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation and has all requisite corporate power
and authority to own or lease and operate its properties and to carry on its
business as now conducted. Holding has delivered to each of the Investors or
their respective counsel complete and correct copies of each of its
Subsidiaries' charter documents and by-laws, in each case with all amendments
thereto.
(b) The numbers of shares of the capital stock of each Subsidiary of
Holding that are, respectively, (i) authorized, and (ii) issued and outstanding
or held in treasury, are set forth in Section 3.5 of the Disclosure Schedule.
All of such issued and outstanding shares of capital stock of each of Holding's
Subsidiaries are duly authorized, validly issued, fully paid, and non-assessable
and are owned of record, and in the case of shares held by Holding, also
beneficially, as set forth in Section 3.5 of the Disclosure Schedule. There are
no agreements or other obligations on the part of Holding, any of its
Subsidiaries, or, to Holding's knowledge, any of its Stockholders, to purchase
or sell, and no options, warrants, or other rights to subscribe for or purchase
from any of them, any shares of capital stock or other securities of any such
Subsidiary.
(c) Except as described in Section 3.5 of the Disclosure Schedule, Holding
does not own any equity securities or other legal and/or beneficial interests in
any corporations, partnerships, limited liability companies, business trusts, or
joint ventures or in any other unincorporated trade or business enterprises.
3.6. FINANCIAL STATEMENTS. Included in Section 3.6 of the Disclosure
Schedule are copies of the consolidated balance sheets of Holding and its
Subsidiaries as of December 31, 1996 and December 31, 1997 (such balance sheet
as of December 31, 1997, the "Audited Balance Sheet"), and of the consolidated
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balance sheet of Klearfold and its wholly-owned Subsidiaries as of December 31,
1995, and in each case the related consolidated statements of income, retained
earnings and cash flows of such Persons for the fiscal years ended on such
dates, certified by KPMG Peat Marwick LLP, in the case of the 1995 and 1996
financial statements and Price Waterhouse L.L.P., in the case of the 1997
financial statements. Each of such financial statements is true and complete in
all material respects and has been prepared (a) from, and is consistent with,
Holding's or, as the case may be, Klearfold's books and records (which
themselves are true and complete and properly reflect all transactions of the
Company) and (b) in accordance with generally accepted accounting principles
applied on a basis consistent with prior periods; each of such balance sheets
fairly presents the consolidated financial condition of Holding and its
Subsidiaries, or Klearfold and its wholly-owned Subsidiaries, as the case may
be, as of its respective date; and each of such statements of income, retained
earnings, and cash flows
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fairly presents the consolidated results of operations, retained earnings or
cash flows, as the case may be, of Holding and its Subsidiaries, or Klearfold
and its wholly-owned Subsidiaries, as the case may be, for the period covered
thereby.
3.7. ABSENCE OF CERTAIN CHANGES. Except as set forth in Section 3.7 of the
Disclosure Schedule, since December 31, 1997, Holding and its Subsidiaries have
conducted their business only in the ordinary course, and without limiting the
foregoing, there has not been: (a) any change in the assets, liabilities,
sales, income, or business of Holding and its Subsidiaries, taken as a whole, or
in their respective relationships with suppliers, customers, or lessors, other
than changes that were both in the ordinary course of business and have not had,
either in any case or in the aggregate, a Material Adverse Effect; (b) except as
specifically contemplated by Section 3.7 of the Disclosure Schedule or otherwise
in this Agreement, any acquisition or disposition by Holding or any of its
Subsidiaries of any asset or property (i) from or to any Affiliate of any of
them, or (ii) other than in the ordinary course of business, other than any such
acquisitions, on the one hand, or dispositions, on the other hand, of assets the
fair market value and book value of which do not in the aggregate exceed
$100,000; (c) any damage, destruction or loss, whether or not covered by
insurance to the property of Holding or any of its Subsidiaries which, after
giving effect to any insurance proceeds receivable in connection therewith, had
or is reasonably likely to have a Material Adverse Effect, (d) any declaration,
setting aside or payment of any dividend or any other distributions in respect
of any shares of capital stock of Holding, and there has been no such
declaration, setting aside or payment since June 30, 1997; (e) any issuance of
any shares of the capital stock of Holding or any of its Subsidiaries or any
direct or indirect redemption, purchase, or other acquisition by Holding or any
of its Subsidiaries of any such capital stock; (f) any increase in the
compensation, pension, or other benefits payable or to become payable by Holding
or any of its Subsidiaries to any of their respective officers or employees, or
any bonus payments or arrangements made to or with any of them, other than (i)
increases occurring in the ordinary course of business consistent with past
practices or required by law and described in Section 3.7 of the Disclosure
Schedule and (ii) bonuses payable pursuant to Holding's or any of its
Subsidiaries' bonus plan in the ordinary course of business consistent with past
practices and described in Section 3.7 of the Disclosure Schedule, and, to the
extent required by Section 3.25 hereof, in Section 3.25 of the Disclosure
Schedule; (g) any forgiveness or cancellation of any material debt or claim by
Holding or any of its Subsidiaries or any waiver of any right of material value
other than compromises of accounts receivable in the ordinary course of
business; (h) except as specifically contemplated hereby, any entry by Holding
or any of its Subsidiaries into any transaction with any Affiliate of any of
them other than in the ordinary course of business; (i) any incurrence by
Holding or any of its Subsidiaries of any obligations or liabilities, whether
absolute, accrued, contingent or otherwise (including without limitation
liabilities as guarantor or otherwise with respect to obligations of others),
other than obligations and liabilities incurred in the ordinary course of
business with Persons other than any Affiliate of Holding or any of its
Subsidiaries; (j) any incurrence or imposition of any material Lien on any of
the assets, tangible or intangible, of Holding or any of its Subsidiaries; (k)
any discharge or satisfaction by Holding or any of its Subsidiaries of any
material Lien or
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payment by Holding or any of its Subsidiaries of any obligation or liability
(fixed or contingent) other than (i) current liabilities included in the Audited
Balance Sheet, and (ii) current liabilities to Persons other than any Affiliate
of Holding or any of its Subsidiaries incurred since the date of the Audited
Balance Sheet in the ordinary course of business; (l) any material change in the
credit practices of Holding or any of its Subsidiaries; (m) any employment
contract or collective bargaining agreement, whether written or oral, entered
into by Holding or any of its Subsidiaries or any material modification of the
terms of any existing such contract or agreement; or (n) a commitment, whether
oral or written, by or on behalf of Holding or any of its Subsidiaries to do any
of the matters described in clauses (a) through (m) of this Section 3.7.
3.8. TITLE TO PROPERTY, REAL PROPERTY LEASES, ETC.
(a) Personal Property. Except as set forth in Section 3.8 of the
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Disclosure Schedule, (i) Holding and each of its Subsidiaries has good and
marketable title to, or a valid leasehold interest in, the personal property and
assets it uses regularly in the conduct of its business (including, without
limitation, those reflected on the Audited Balance Sheet, except to the extent
such properties and assets have been disposed of since the date of such balance
sheet in the ordinary course of business), and none of such properties or assets
owned by Holding or any of its Subsidiaries is subject to any Liens other than
Permitted Liens, and (ii) all of the properties, plant and equipment which are
material to business of Holding and its Subsidiaries are, in all material
respects, in satisfactory condition (subject, in the case of tangible property,
to normal wear, tear and maintenance) and as such are, in the aggregate,
adequate to conduct the business of the Company as presently conducted. Section
3.8 of the Disclosure Schedule sets forth a complete list of all capital assets
owned by the Company having a net book value in excess of $100,000.
(b) Real Property. Section 3.8 of the Disclosure Schedule sets forth a
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legal description of each parcel of real property owned by Holding or any of its
Subsidiaries (including all improvements thereon, the "Owned Real Property") and
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all real property leased by Holding or any of its Subsidiaries (including all
leased improvements thereon, the "Leased Real Property" and collectively with
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the Owned Real Property, the "Real Property"). The Real Property constitutes
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all of the real property owned, leased, occupied or otherwise utilized in
connection with the business of Holding and its Subsidiaries (including, without
limitation, the Real Property reflected on the Audited Balance Sheet, except to
the extent such Real Property has been disposed of since the date of such
balance sheet in the ordinary course of business). Except as set forth in
Section 3.8 of the Disclosure Schedule, (i) Holding or its Subsidiary, as
applicable, has title to or a valid leasehold interest in the Real Property, and
none of the Real Property is subject to any Liens other than Permitted Liens,
(ii) other than Holding or its Subsidiaries, there are no parties in possession
or parties having any current or future right to occupy any of the Owned Real
Property, (iii) Holding or its Subsidiary, as applicable, is in quiet possession
of the Leased Real Property, and (iv) the Real Property is adequate to conduct
the business of Holding and its Subsidiaries as presently conducted. Except as
set forth in Section 3.8 of the Disclosure Schedule, Holding does not have
knowledge of (x) any proposed
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condemnation, requisition or other taking of any of the Real Property by any
public authority or (y) any public improvements which may result in special
assessments against or otherwise affecting any of the Real Property.
(c) Leases. Section 3.8 of the Disclosure Schedule lists all lease and
------
other agreements affecting the rights or obligations of Holding or any of its
Subsidiaries with respect to the Leased Real Property and any personal property
and assets leased by Holding or any of its Subsidiaries, including without
limitation, any master lease agreements, equipment schedules, non-disturbance
and recognition agreements, subordination agreements, attornment agreements and
agreements regarding the term or renewal of any of the leases, and any
amendments and modifications thereof (the "Leases"). Except as set forth in
------
Section 3.8 of the Disclosure Schedule all of the material Leases are valid and
enforceable and in full force and effect, except to the extent that (i)
enforcement may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium, or similar laws now or thereafter in effect relating
to or limiting creditors' rights generally, (ii) the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court or other Person
before which any proceeding therefor may be brought, or (iii) the enforcement
thereof may be contrary to public policy. Except as set forth in Section 3.8 of
the Disclosure Schedule, neither Holding nor any of its Subsidiaries, and to the
knowledge of Holding, no other party, is in default in any material respect, or
in material breach, of its obligations under any of the Leases, and neither
Holding nor any of its Subsidiaries has either delivered or received any notice
of default under any such Lease, and, to Holding's knowledge, no event has
occurred which, with the giving of notice, the passage of time or that, would
constitute a default under any such Lease. Complete and correct copies of all
of the Leases have been delivered by Holding and its Subsidiaries to the
Investors or their respective counsel.
3.9. INDEBTEDNESS. Neither Holding nor any of its Subsidiaries has any
Indebtedness outstanding except as set forth in Section 3.9 of the Disclosure
Schedule. Neither Holding nor any of its Subsidiaries is in default with
respect to any outstanding Indebtedness or any agreement, instrument, or other
obligation relating thereto and no such Indebtedness or any agreement,
instrument, or other obligation relating thereto purports to limit the issuance
of any securities by Holding or any of its Subsidiaries or the operation of
their respective businesses. Complete and correct copies of all agreements,
instruments, and other obligations (including all amendments, supplements,
waivers, and consents) relating to any Indebtedness of Holding or any of its
Subsidiaries have been furnished to each of the Investors or their respective
counsel.
3.10. ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent (a)
reflected or reserved against in the Audited Balance Sheet, (b) incurred with
Persons other than any Affiliate of Holding or any of its Subsidiaries in the
ordinary course of business after the date of the Audited Balance Sheet, (c)
incurred under contracts, leases and instruments either (i) set forth in the
Disclosure Schedule or (ii) entered into in the ordinary course of the business
of Holding and its Subsidiaries and otherwise not required to be disclosed in
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any section of the Disclosure Schedule (but not, in any such case, liabilities
for breaches thereof), or (d) not included under clauses (a) - (c) above and
aggregating not more than $50,000, neither Holding nor any of its Subsidiaries
has any liabilities or obligations of any nature, whether accrued, absolute,
contingent, or otherwise (including without limitation liabilities, as guarantor
or otherwise, in respect of obligations of others).
3.11. TAXES.
(A) BASIS, ETC. Set forth in Section 3.11(a) of the Disclosure Schedule
are the net operating loss, net capital loss, credit, minimum tax, charitable
contribution, and other Tax carryforwards (by type of carryforward and
expiration date, if any) of Holding and each of its Subsidiaries.
(B) ELECTIONS. All material elections with respect to Taxes (including
without limitation any elections under Sections 108(b)(5), 338(g), 565, 936(a),
or 936(e) of the Code or Treasury Regulation Sections 1.1502-20(g) or 1.1502-
32(f)(2) (as in effect before January 1, 1995)) affecting Holding or any of its
Subsidiaries and/or made by Holding or any of its Subsidiaries are described in
Section 3.11(b) of the Disclosure Schedule.
(C) FILING OF TAX RETURNS AND PAYMENT OF TAXES. Holding and each of its
Subsidiaries have timely filed all Tax Returns required to be filed by any of
them, each such Tax Return has been prepared in compliance with all applicable
laws and regulations, and all such Tax Returns are true and accurate in all
respects. All Taxes due and payable by Holding or any of its Subsidiaries have
been paid, and Holding and such Subsidiaries shall not be liable for any
additional Taxes in respect of any taxable period ending on or before the
Closing Date in an amount that exceeds the corresponding reserve therefor, if
any, reflected in the accounting records of Holding or the relevant Subsidiary
at that date. Holding has delivered to the Investors or their respective
counsel correct and complete copies of all Tax Returns filed by or with respect
to it or any of its Subsidiaries with respect to taxable periods ended on or
after December 31, 1994, and all relevant documents and information with respect
thereto, including without limitation work papers, records, examination reports,
statements of deficiencies assessed against or agreed to by Holding or any of
its Subsidiaries.
(D) AUDIT HISTORY. With respect to each taxable period of Holding or any
of its Subsidiaries ended on or before December 31, 1991, either such taxable
period has been audited by the relevant taxing authority or the time for
assessing or collecting Tax with respect to each such taxable period has closed
and such taxable period is not subject to review by any relevant taxing
authority.
(E) DEFICIENCIES. No deficiency or proposed adjustment in respect of
Taxes that has not been settled or otherwise resolved has been asserted,
assessed, or threatened in writing by any taxing authority against Holding or
any of its Subsidiaries.
-13-
(F) LIENS. There are no Liens for Taxes (other than current Taxes not yet
due and payable) on the assets of Holding or any of its Subsidiaries.
(G) EXTENSIONS OF STATUTES OF LIMITATIONS ON ASSESSMENT OR COLLECTION OF
TAXES. Neither Holding nor any of its Subsidiaries has consented to extend the
time in which any Tax may be assessed or collected by any taxing authority.
(H) EXTENSIONS OF THE TIME FOR FILING TAX RETURNS. Neither Holding nor any
of its Subsidiaries has requested or been granted an extension of the time for
filing any Tax Return to a date on or after the Closing Date.
(I) PENDING PROCEEDINGS. There is no action, suit, taxing authority
proceeding, or audit with respect to any Tax now in progress, pending, or to
Holding's knowledge, threatened, against or with respect to (i) Holding or any
of its Subsidiaries, or (ii) any Affiliated Group with respect to a taxable
period during which Holding or any of its Subsidiaries was a member of such
Affiliated Group.
(J) NO CLAIM OF FAILURE TO FILE TAX RETURNS. No claim has ever been made
by a taxing authority in a jurisdiction where Holding or any of its Subsidiaries
does not pay Tax or file Tax Returns that any such Person is or may be subject
to Taxes assessed by such jurisdiction.
(K) MEMBERSHIP IN AFFILIATED GROUPS, ETC. None of Holding or any of its
Subsidiaries has been a member of any Affiliated Group, or filed or been
included in a combined, consolidated, or unitary Tax Return, other than one of
which Holding was the parent.
(L) (INTENTIONALLY OMITTED)
(M) ADJUSTMENTS UNDER SECTION 481. Neither Holding nor any of its
Subsidiaries will be required, as a result of a change in method of accounting
for any period ending on or before the Closing Date, to include any adjustment
under Section 481(c) of the Code (or any similar or corresponding provision or
requirement under any Tax law) in taxable income for any period ending on or
after the Closing Date.
(N) TAX SHARING, ALLOCATION, OR INDEMNITY AGREEMENTS. Neither Holding nor
any of its Subsidiaries is a party to or bound by any Tax sharing or allocation
agreement or has any current or potential contractual obligation to indemnify
any other Person with respect to Taxes.
(O) WITHHOLDING TAXES. Holding and each of its Subsidiaries have withheld
and paid all Taxes required to have been withheld and paid by them in connection
with amounts paid or owing to any employee, creditor, independent contractor, or
other Person.
-14-
(P) FOREIGN PERMANENT ESTABLISHMENTS AND BRANCHES. Neither Holding nor
any of its Subsidiaries has a "permanent establishment" in any foreign country,
as defined in the relevant tax treaty between the United States of America and
such foreign country, or otherwise operates or conducts business through any
branch in any foreign country.
(Q) U.S. REAL PROPERTY HOLDING CORPORATION. Neither Holding nor any of
its Subsidiaries has been a United States real property holding corporation
within the meaning of Code Section 897(c)(2), during the applicable period
specified in Code Section 897(c)(1)(A)(ii).
(R) SAFE HARBOR LEASE PROPERTY. None of the property owned or used by
Holding or any of its Subsidiaries is subject to a tax benefit transfer lease
executed in accordance with Section 168(f)(8) of the Internal Revenue Code of
1954, as amended by the Economic Recovery Tax Act of 1981.
(S) TAX-EXEMPT USE PROPERTY. None of the property owned by Holding or any
of its Subsidiaries is "tax-exempt use property" within the meaning of Section
168(h) of the Code.
(T) SECURITY FOR TAX-EXEMPT OBLIGATIONS. Except as set forth in Section
3.11(t) of the Disclosure Schedule, none of the assets of Holding or any of its
Subsidiaries directly or indirectly secures any indebtedness, the interest on
which is tax-exempt under Section 103(a) of the Code, and none of them is
directly or indirectly an obligor or a guarantor with respect to any such
indebtedness.
(U) SECTION 341(F) CONSENT. Neither Holding nor any of its Subsidiaries
has filed a consent under Code Section 341(f) concerning collapsible
corporations.
(V) PARACHUTE PAYMENTS. Neither Holding nor any of its Subsidiaries has
made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments, that will not be deductible under Code Sections 162(m) or 280G.
3.12. LITIGATION. Except as set forth in Section 3.12 of the Disclosure
Schedule, there is no litigation, arbitration, action, suit, proceeding, or
investigation (whether conducted by any judicial or regulatory body, arbitrator,
or other Person) is pending or, to the knowledge of Holding, threatened against
Holding or any of its Subsidiaries (nor is there any basis therefor known to
Holding) which, seeks damages in excess of $50,000 in any individual instance of
$100,000 in the aggregate, or which seek any form of equitable or injunctive
relief, including without limitation, seeking to prohibit, restrict or delay the
consummation of the transactions contemplated hereby. Except as set forth in
Section 3.12 of the Disclosure Schedule, neither Holding nor any of its
Subsidiaries nor any of their respective properties and assets are subject to
any judicial or administrative order, judgment or decree.
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3.13. SAFETY AND ENVIRONMENTAL MATTERS.
(a) Except as set forth in Section 3.13 or Section 3.28 of the Disclosure
Schedule:
(i) Holding and each of its Subsidiaries and each real property
owned, leased, operated, or controlled by any of them currently or within
the last five years is now, and at all times within the last five years has
been, in material compliance with all Environmental and Safety Laws;
(ii) Holding and each of its Subsidiaries have obtained all
material permits, licenses, and authorizations required pursuant to all
applicable Environmental and Safety Laws with respect to their respective
properties and operations;
(iii) neither Holding nor any of its Subsidiaries has received any
notice from any third party asserting that any of them is or may be liable
under any Environmental and Safety Laws, including without limitation in
connection with any release or threatened release of any hazardous or
regulated substances or wastes;
(iv) Holding and its Subsidiaries have not, nor, to the knowledge
of Holding, have any of their predecessors or any other Person for which
Holding or any of its Subsidiaries may be obligated, disposed of or
released any hazardous or regulated substance in a manner that reasonably
could be expected to result in any Person incurring liability pursuant to
Environmental and Safety Laws;
(v) there is no contamination from any hazardous or regulated
substance, or any other environmental defect, at, on, upon, or under the
real property currently owned, leased, operated, or controlled by Holding
or any of its Subsidiaries, or to Holding's knowledge, any real property
formerly owned, leased, operated, or controlled by Holding or any of its
Subsidiaries, any of its predecessors or any other Person for which Holding
or any of its Subsidiaries may be obligated, that reasonably could be
expected to result in any Person incurring any cleanup costs (including,
without limitation, any cost of investigation, abatement, removal,
remediation, or corrective action);
(vi) to the knowledge of Holding, there currently exist no
conditions, circumstances, or events that reasonably could be expected to
result in Holding or any of its Subsidiaries, either now or with the
passage of time, incurring any material expenditure to comply with any
Environmental and Safety Law or any permit issued pursuant thereto; and
(vii) no environmental studies, reports, assessments, sampling
results, or audits with respect to real property owned, leased, operated or
controlled by
-16-
Holding or any of its Subsidiaries have been conducted during the period of
its tenure at or operation or control of such property or, to Holding's
knowledge, during any other time.
(b) For purposes of this Agreement, "Environmental and Safety Laws" means
------------- --- ------ ----
all federal, state, local, and foreign statutes, regulations, ordinances, and
similar provisions having the force or effect of law, and all judicial and
administrative orders, judgments, decrees, and similar determinations,
concerning public health and safety, pollution, occupational health and safety,
and/or protection of the environment, including without limitation the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Federal Clean Water Act, the
Federal Clean Air Act, the Toxic Substances Control Act, and the Occupational
Safety and Health Act of 1970, as amended.
3.14. LABOR RELATIONS. Holding and each of its Subsidiaries are and have
been in compliance in all material respects with all federal and state laws
respecting employment and employment practices, terms and conditions of
employment, wages and hours, and nondiscrimination in employment, and are not
and have not been engaged in or, to Holding's knowledge, alleged to have been
engaged in, any unfair labor practice, or any unlawful discrimination in
employment practices. There is no labor strike, dispute, concerted work slow-
down, or concerted work stoppage pending or, to Holding's knowledge, threatened
against or involving Holding or any of its Subsidiaries. No one has petitioned
within the last five years or is now petitioning for union representation of any
of the employees of Holding or any of its Subsidiaries. No grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is pending against Holding or any of its Subsidiaries and no claim
therefor has been asserted. Except for employees covered by the collective
bargaining agreements listed in Section 3.14 of the Disclosure Schedule, none of
the employees of Holding or any of its Subsidiaries is covered by any collective
bargaining agreement, and no collective bargaining agreement is currently being
negotiated by Holding or any of its Subsidiaries. Neither Holding nor any of
its Subsidiaries has experienced any concerted work stoppage or other material
labor difficulty during the last five years. Neither Holding nor any of its
Subsidiaries has implemented any plant closing or mass layoff of employees that
could implicate the Worker Adjustment Retraining and Notification Act of 1988,
as amended, or any similar state or local law or regulations.
3.15. CONTRACTS. Section 3.15 of the Disclosure Schedule sets forth a
complete and accurate list of all contracts to which Holding or any of its
Subsidiaries is a party or by or to which any of them or any of their respective
assets or properties is bound or subject and which, with respect to any single
contract or group of related contracts, call for or potentially could call for
payments to or from Holding or any of its Subsidiaries in excess of $50,000, or
which grant exclusive dealing arrangements or which in any manner, restrict the
Company's operation or business except (i) contracts (and related correspondence
and other documents) for the sale or purchase of goods and/or services by
-17-
Holding and/or any of its Subsidiaries, entered into with customers or suppliers
in the ordinary course of business, (ii) contracts with Persons other than any
Affiliate of any of them, entered into in the ordinary course of business after
the date hereof and before the Closing, which will be identified to the
Investors or their respective counsel before the Closing in a disclosure
supplement pursuant to Section 5(e) hereof, and (iii) contracts terminable by
Holding and/or its Subsidiary party thereto, as the case may be, upon 60 days'
notice or less and without the payment of any termination fee or penalty. As
used in this Agreement, the word "contract" includes every agreement or
understanding of any kind, written or oral, that is legally enforceable by or
against or otherwise binding on Holding or any of its Subsidiaries, and
specifically includes: (a) contracts and other agreements with any current or
former officer, director, employee, consultant, or stockholder, or any
partnership, corporation, joint venture, or any other entity in which any such
Person has an interest; (b) contracts and other agreements with any labor union
or association representing any employee; (c) contracts and other agreements for
the provision of services by or to Holding or any of its Subsidiaries; (d) bonds
or other security agreements provided by any party in connection with the
business of Holding or any of its Subsidiaries; (e) contracts and other
agreements for the purchase or other acquisition or the sale or other
disposition of any of the assets or properties of Holding or any of its
Subsidiaries, in each case other than in the ordinary course of business, or for
the grant to any person of any preferential rights to purchase any of such
assets or properties; (f) joint venture agreements relating to the assets,
properties, or business of Holding or any of its Subsidiaries or by or to which
any of them or any of their respective assets or properties are bound or
subject; (g) contracts and other agreements under which Holding or any of its
Subsidiaries agrees to indemnify any party, to share tax liability of any party,
or to refrain from competing with any party; (h) contracts or other agreements
with regard to Indebtedness; or (i) any other contract or other agreement,
whether or not made in the ordinary course of business. All of the contracts
listed in Section 3.15 of the Disclosure Schedule are in full force and effect,
and neither Holding nor any of its Subsidiaries is in default in any material
respect under, or material breach of, any of them, nor to the knowledge of
Holding is any other party to any such contract in default in any material
respect thereunder or in material breach thereof; nor does any event or
condition exist that after notice or lapse of time or both could constitute a
default thereunder or a material breach thereof on the part of Holding or any of
its Subsidiaries, or to the knowledge of Holding, any other party thereto.
Except as disclosed in Section 3.15 of the Disclosure Schedule, no approval or
consent of any Person that has not already been obtained is needed in order that
the contracts listed in Section 3.15 of the Disclosure Schedule continue in full
force and effect following the consummation of the transactions contemplated by
this Agreement, and no such contract includes any provision, the effect of which
may be to terminate such contract or enlarge or accelerate any obligations of
Holding or any of its Subsidiaries thereunder or to give additional rights to
any other party thereunder upon consummation of the transactions contemplated by
this Agreement. Holding has delivered to each of the Investors or their
respective counsel true, correct, and complete copies of all contracts listed in
Section 3.15 of the Disclosure Schedule, together with copies of all
modifications and supplements thereto.
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3.16. EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Section 3.16 of the Disclosure Schedule,
neither Holding nor any of its Subsidiaries now maintains or contributes to, or
has in the current or preceding six calendar years maintained or contributed to,
any pension, profit-sharing, deferred compensation, bonus, stock option, share
appreciation right, severance, group or individual health, dental, medical, life
insurance, survivor benefit, or similar plan, policy, or arrangement, whether
formal or informal, for the benefit of any director, officer, consultant or
employee, whether active or terminated, of Holding or any of its Subsidiaries.
Each of the arrangements set forth in Section 3.16 of the Disclosure Schedule is
hereinafter referred to as an "Employee Benefit Plan," except that any such
arrangement which is a multi-employer plan shall be treated as an Employee
Benefit Plan only for purposes of Sections 3.16(d)(iii), (iv) and (vi), 3.16(e)
and 3.16(g) below.
(b) Holding has delivered to each of the Investors or their respective
counsel true, correct, and complete copies of each Employee Benefit Plan, and
with respect to each such Plan (i) any associated trust, custodial, insurance,
or service agreements, (ii) any annual report, actuarial report, or disclosure
materials (including specifically any summary plan descriptions) submitted to
any governmental agency or distributed to participants or beneficiaries
thereunder in the current or any of the three preceding calendar years, and
(iii) the most recently received Internal Revenue Service ("IRS") determination
---
letters and any governmental advisory opinions or rulings.
(c) Each Employee Benefit Plan is and has heretofore been maintained and
operated in all material respects in compliance with the terms of such Plan and
with the requirements prescribed (whether as a matter of substantive law or as
necessary to secure favorable tax treatment) by any and all statutes,
governmental or court orders, and governmental rules or regulations in effect
from time to time, including but not limited to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and the Internal Revenue Code of
-----
1986, as amended (the "Code") and applicable to such Plan. Each Employee
----
Benefit Plan that is intended to qualify under Section 401(a) of the Code has
been determined by the IRS to be so qualified, and to the knowledge of Holding,
nothing has occurred since the date of the last such determination that has
resulted or is likely to result in the revocation of such determination.
(d) (i) There is no pending, or to the knowledge of Holding,
threatened, legal action, proceeding, or investigation, other than routine
claims for benefits, concerning any Employee Benefit Plan, or, to the
knowledge of Holding, any fiduciary or service provider thereof, and, to
the knowledge of Holding, there is no basis for any such legal action,
proceeding, or investigation concerning any Employee Benefit Plan or any
such fiduciary or service provider.
(ii) No liability (contingent or otherwise) to the Pension Benefit
Guaranty Corporation ("PBGC") has been incurred by Holding or any of its
----
Subsidiaries or
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any of their respective Affiliates (other than insurance premiums satisfied in
due course). No Employee Benefit Plan is a plan subject to Title IV of ERISA.
(iii) No Employee Benefit Plan other than a multiemployer plan nor
any party in interest with respect thereof, nor to the knowledge of
Holding, no Employee Benefit Plan that is a multiemployer plan nor any
party in interest with respect thereof, has engaged in a prohibited
transaction that could subject Holding or any of its Subsidiaries directly
or indirectly to liability under Section 409 or 502(i) of ERISA or Section
4975 of the Code.
(iv) No Employee Benefit Plan provides welfare benefits subsequent
to termination of employment to employees or their beneficiaries (except to
the extent required by applicable state insurance laws and Title I, Part 6
of ERISA).
(v) No benefits due under any Employee Benefit Plan have been
forfeited subject to the possibility of reinstatement (which possibility
would still exist at or after Closing).
(vi) Neither Holding nor any of its Subsidiaries has contracted or
otherwise agreed to maintain or contribute to any Employee Benefit Plan for
any definite future period of time and each such Plan is terminable at the
sole discretion of the sponsor thereof, subject only to such constraints as
may be imposed by applicable law or any currently applicable collective
bargaining agreement.
(e) With respect to each Employee Benefit Plan for which a separate fund
of assets is or is required to be maintained, full payment has been made of all
amounts that Holding or any of its Subsidiaries is required, under the terms of
each such Plan, to have paid as contributions to that Plan, either as of the end
of the most recently ended plan year of that Plan or on all such amounts
required to be paid through the Closing. No Employee Benefit Plan is subject to
Section 302 of ERISA or Section 412 of the Code.
(f) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not result in any payment (whether of
severance pay or otherwise) becoming due from any Employee Benefit Plan to any
current or former director, officer, consultant, or employee of Holding or any
of its Subsidiaries or result in the vesting, acceleration of payment, or
increases in the amount of any benefit payable to or in respect of any such
current or former director, officer, consultant, or employee.
(g) Neither Holding nor any of its Subsidiaries nor any of their
respective affiliates (i) has incurred any liability to a multi-employer plan,
contingent or otherwise, that has not been previously satisfied, on account of a
discontinuance or reduction in contributions thereto (including without
limitation a withdrawal or partial withdrawal within the meaning of Title IV of
ERISA), (ii) has experienced any event that, within the following twelve months,
will result in a withdrawal or partial withdrawal as so defined, or (iii) has
incurred a reduction in contributions such that if the current rate of
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contributions continues, a seventy percent (70%) decline in contributions (as
defined in Section 4205 of ERISA) will occur within the next three plan years.
Neither Holding nor any of its Subsidiaries nor any of their respective
affiliates has received notice with respect to any multi-employer plan of (i)
any failure by such plan to satisfy the minimum funding requirements of Section
412 of the Code, (ii) any application for or receipt of a waiver of such minimum
funding requirements with respect to such plan, or (iii) such plan's insolvency
or entry into reorganization status within the meaning of Section 4241 of ERISA.
Holding has previously provided to each of the Investors or their respective
counsel copies of all documents and other information received by Holding or any
of its Subsidiaries from any multi-employer plan (or any of its agents) to which
Holding or a Subsidiary contributes pertaining to Holding's or any of its
Subsidiaries' obligations under such plan, including any materials pertaining to
the computation of any liability that may be imposed upon a cessation of or
reduction in contributions thereto.
(h) For purposes of this Section 3.16, "multi-employer plan," "party in
interest," "current value," "accrued benefit," "reportable event," and "benefit
liability" have the same meaning assigned such terms under Sections 3, 4043(b)
or 4001(a) of ERISA, and "affiliate" means any entity that under Section 414 of
the Code is treated as a single employer with Holding or any of its
Subsidiaries.
3.17. POTENTIAL CONFLICTS OF INTEREST.
(a) No officer, director or stockholder of Holding or any of its
Subsidiaries (i) owns, directly or indirectly, any interest (excepting not more
than 1% stock holdings for investment purposes in securities of publicly held
and traded companies) in, or is an officer, director, employee, or consultant
of, any Person that is a competitor, lessor, lessee, customer, or supplier of
Holding or any of its Subsidiaries; (ii) owns, directly or indirectly, in whole
or in part, any tangible or intangible property that Holding or any of its
Subsidiaries is using or the use of which is necessary for the business of
Holding or any of its Subsidiaries; or (iii) has any cause of action or other
claim whatsoever against, or owes any amount to, Holding or any of its
Subsidiaries, except for claims in the ordinary course of business, such as for
accrued vacation pay, accrued benefits under Employee Benefit Plans, and similar
matters and agreements.
(b) To the knowledge of Holding, no officer, director, employee, or
consultant of Holding or any of its Subsidiaries is presently obligated under or
bound by any agreement or instrument, or any judgment, decree, or order of any
court of administrative agency, that (i) conflicts or may conflict with his or
her agreements and obligations to use his or her best efforts to promote the
interests of Holding or any of its Subsidiaries, (ii) conflicts or may conflict
with the business or operations of Holding or any of its Subsidiaries as
presently conducted or as proposed to be conducted in the short term, or (iii)
restricts or may restrict the use or disclosure of any information that may be
useful to Holding or any of its Subsidiaries.
3.18. INTELLECTUAL PROPERTIES.
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(a) Section 3.18 of the Disclosure Schedule lists all patents, patent
applications, trademarks, trade names, service marks, logos, copyrights,
technology, know-how, trade secrets, processes, formulas, techniques, and
licenses (other than for off-the-shelf software programs that have not been
customized for Holding's or any of its Subsidiaries' use) used in the business
of Holding or any of its Subsidiaries as now being conducted (collectively, the
"Intellectual Properties"). Holding (or, if so indicated in Section 3.18 of the
-----------------------
Disclosure Schedule, one of its Subsidiaries) owns, or is licensed or otherwise
has the full and unrestricted exclusive right to use throughout the world,
without the payment of royalties or other further consideration except as
indicated in Section 3.18 of the Disclosure Schedule, all of the Intellectual
Properties. No intellectual property rights, privileges, licenses, contracts or
other agreements, instruments or evidences of interest, other than (i) the
Intellectual Properties, and (ii) off-the-shelf software programs that have not
been customized for Holding's or any of its Subsidiaries' use, are necessary to
or used in the conduct of the business of Holding and its Subsidiaries as now
being conducted. All of the patents, trademarks and copyrights owned by Holding
or any of its Subsidiaries have been duly registered in, filed in or issued by
the United States Patent and Trademark Office or Register of Copyrights or the
corresponding offices of other countries as identified in Section 3.18 of the
Disclosure Schedule, and have been properly maintained and renewed, consistent
with commercially reasonable business practices, in accordance with all
applicable provisions of law and administrative regulations in the United States
and each such country.
(b) In any instance where Holding's rights to Intellectual Properties, or
such rights of any of its Subsidiaries, arise under a license or similar
agreement (other than for off-the-shelf software programs that have not been
customized for Holding's or such Subsidiary's use), this is indicated in Section
3.18 of the Disclosure Schedule, and to the knowledge of Holding, such rights
are licensed exclusively to Holding or the indicated Subsidiary except as
indicated in Section 3.18 of the Disclosure Schedule. To Holding's knowledge,
no other Person has an interest in or right or license to use any of the
Intellectual Properties. To Holding's knowledge, none of the Intellectual
Properties is being infringed by others, or is subject to any outstanding order,
decree, judgment, or stipulation. No litigation (or other proceedings in or
before any court or other governmental, adjudicatory, arbitral, or
administrative body) relating to the Intellectual Properties (other than any
Intellectual Properties licensed by Holding or any of its Subsidiaries as
licensee), or, to Holding's knowledge, relating to any Intellectual Properties
licensed by Holding or any of its Subsidiaries as licensee, is pending, or to
Holding's knowledge, threatened, nor, to Holding's knowledge, is there any basis
for any such litigation or proceeding. Each of Holding and its Subsidiaries
maintains reasonable security measures for the preservation of the secrecy and
proprietary nature of such of its Intellectual Properties as constitute trade
secrets or other confidential information.
(c) (i) Neither Holding nor any of its Subsidiaries, nor to the knowledge
of Holding, any of the employees of or consultants to Holding or any of its
Subsidiaries, has infringed or made unlawful use of, or is infringing or making
unlawful use of, any
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proprietary or confidential information of any Person, including without
limitation any former employer of any past or present employee of or consultant
to Holding or any of its Subsidiaries; and (ii) the activities of the employees
of or consultants to Holding and its Subsidiaries in connection with their
employment do not violate any agreements or arrangements that any such employees
or consultants have with any former employer or any other Person. Except as
described in Section 3.18 of the Disclosure Schedule, no litigation (or other
proceedings in or before any court or other governmental, adjudicatory,
arbitral, or administrative body) charging Holding or any of its Subsidiaries
with infringement or unlawful use of any license, patent, trademark, service
xxxx, trade name, logo, copyright, trade secret, or other proprietary right is
pending, or to the knowledge of Holding, threatened; nor, to the knowledge of
Holding, is there any basis for any such litigation or proceeding.
3.19. ACCOUNTS RECEIVABLE. All accounts and notes receivable reflected on
the Audited Balance Sheet, and all accounts and notes receivable arising
subsequent to the date of such Audited Balance Sheet, have arisen in the
ordinary course of business, represent valid obligations to Holding or its
Subsidiaries, and have been collected or are collectible in the aggregate
recorded amounts thereof in accordance with their terms net of (i) the reserve
for uncollected accounts set forth in the accounting records of Holding or its
Subsidiaries, as the case may be, and (ii) the proceeds of credit insurance with
respect thereto payable to Holding or any of its Subsidiaries.
3.20. INSURANCE. Section 3.20 of the Disclosure Schedule lists the
policies of theft, fire, liability, workmen's compensation, life, property and
casualty, and other insurance owned or held by Holding or any of its
Subsidiaries. Such policies of insurance are maintained with financially sound
and reputable insurance companies, funds, or underwriters, and are of the kinds,
cover such risks, and are in such amounts and with such deductibles and
exclusions, as are consistent with prudent business practice. All such policies
are in full force and effect; are sufficient for compliance by Holding and its
Subsidiaries with all requirements of law and of all agreements to which Holding
or any of its Subsidiaries is a party; are valid, outstanding, and (subject to
the qualifications set forth in Section 3.2(i) and (ii)) enforceable policies
and provide that they will remain in full force and effect through the
respective dates set forth in Section 3.20 of the Disclosure Schedule; and will
not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. Holding and its Subsidiaries have
delivered to the Investors or their respective counsel complete and correct
copies of all such policies with all riders and amendments thereto.
3.21. BANK ACCOUNTS, SIGNING AUTHORITY, POWERS OF ATTORNEY. Section 3.21
of the Disclosure Schedule sets forth a complete and accurate list of all bank,
brokerage, and other accounts, and all safe-deposit boxes, of Holding and its
Subsidiaries and the Persons with signing or other authority to act with respect
thereto. Except as so listed, neither Holding nor any of its Subsidiaries has
any account or safe deposit box in any bank, and no Person has any power,
whether singly or jointly, to sign any checks on behalf of Holding or any of its
Subsidiaries, to withdraw any money or other property from any
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bank, brokerage, or other account of Holding or any of its Subsidiaries, or to
act under any agency or power of attorney granted by Holding or any of its
Subsidiaries at any time for any purpose. Section 3.21 of the Disclosure
Schedule also sets forth the names of all persons authorized to borrow money or
sign notes on behalf of Holding or any of its Subsidiaries.
3.22. GOVERNMENTAL AND OTHER THIRD-PARTY CONSENTS, NON-CONTRAVENTION, ETC.
Except for (i) the filing of the Charter Amendment with the Secretary of State
of the State of Delaware, and (ii) the filing of the notifications required on
the part of Holding and AGI under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement
Act of 1976, as amended, and the rules and regulations promulgated thereunder
(the "HSR Act"), and any further information required in connection therewith
--- ---
(as referred to in Section 12.1 below), no consent, approval, or authorization
of or registration, designation, declaration, or filing with any governmental
authority, federal or other, or any other Person, on the part of Holding, is
required in connection with the execution, delivery, and performance of this
Agreement by Holding or the consummation by Holding of the transactions
contemplated hereby. The execution, delivery, and performance of this Agreement
and the Other Agreements executed and delivered or to be executed and delivered
by Holding and/or any of its Subsidiaries as contemplated hereby, and the
consummation of the transactions contemplated hereby and thereby, will not
violate (a) any provision of the charter or by-laws of Holding or any of its
Subsidiaries, (b) any order, judgment, injunction, award or decree of any court
or state or federal governmental or regulatory body applicable to Holding or any
of its Subsidiaries, or (c) any judgment, decree, order, statute, rule,
regulation, agreement, instrument, or other obligation to which Holding or any
of its Subsidiaries is a party or by or to which any of them or any of their
respective assets is bound or subject.
3.23. INVENTORY. The inventory and supplies of Holding and its
Subsidiaries are adequate for their present needs, and are, in all material
respects, in usable or saleable condition in the ordinary course of business,
subject only to such reserves for obsolescence, if any, as are reflected in
their respective accounting records.
3.24. SUPPLIERS AND CUSTOMERS. Section 3.24 of the Disclosure Schedule
lists the five largest suppliers and ten largest customers of Holding and its
Subsidiaries during the twelve months ended on the date of the Audited Balance
Sheet. The relationships of Holding and such Subsidiaries with their respective
suppliers and customers are good commercial working relationships, and no
supplier or customer of material importance to Holding and its Subsidiaries,
taken as a whole, has canceled or otherwise terminated, or threatened in writing
to cancel or terminate, its relationship with Holding or such Subsidiary or has
during the last 12 months decreased materially, or threatened to decrease or
limit materially, its services, supplies, or materials to Holding or such
Subsidiary or its usage or purchase of the services or products of Holding or
such Subsidiary, except for normal cyclical changes related to customers'
businesses. To Holding's knowledge, no such supplier or customer intends to
cancel or otherwise substantially modify its relationship with Holding or any of
such Subsidiaries, or to decrease materially or limit its
-24-
services, supplies or materials to them, or its usage or purchase of their
services or products, and the consummation of the transactions contemplated
hereby will not, to the knowledge of Holding, adversely affect the relationship
of Holding or any of such Subsidiaries with any such supplier or customer.
3.25. EMPLOYMENT OF OFFICERS, EMPLOYEES. Section 3.25 of the Disclosure
Schedule lists the name and total annual compensation payable by Holding or any
of its Subsidiaries for the calendar year ended December 31, 1997 to each exempt
non-hourly employee (a) whose base salary for the calendar year ended December
31, 1997, or current annual base salary, is $200,000 or more, or (b) who
received bonuses for the calendar year ended December 31, 1997, of $50,000 or
more.
3.26. MINUTE BOOKS. The copies of the minute books of Holding and its
Subsidiaries made available to the Investors or their respective counsel for
inspection accurately record therein all material actions taken by their
respective Boards of Directors and stockholders.
3.27. BROKERS. No finder, broker, agent, or other intermediary has acted
for or on behalf of Holding or any of its Subsidiaries in connection with the
negotiation, preparation, execution, or delivery of this Agreement or the
consummation of the transactions contemplated hereby.
3.28. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Except with respect
to the matters that are the subject of the specific representations and
warranties set forth in Section 3.13 hereof ("Safety and Environmental
Matters"), Holding and each of its Subsidiaries has complied with, and is in
compliance with, (a) all laws, statutes, governmental regulations and all
judicial or administrative tribunal orders, judgments, writs, injunctions,
decrees or similar commands applicable to its business, (b) all unwaived terms
and provisions of all contracts, agreements and indentures to which Holding or
any such Subsidiary is a party, or by which Holding, such Subsidiary, or any of
their respective properties is subject, and (c) its charter and by-laws,
respectively, each as amended to date; in the case of the preceding clauses (a)
and (b), excepting only any such noncompliances that, both individually and in
the aggregate, have not resulted and will not result in Material Adverse Effect.
Neither Holding nor any of its Subsidiaries has been charged with, or to the
knowledge of Holding, been under investigation with respect to, any violation by
Holding or any of its Subsidiaries of any provision of any federal, state, or
local law or administrative regulation. Holding and its Subsidiaries have and
maintain, and Section 3.28 of the Disclosure Schedule sets forth a complete and
correct list of, all such licenses, permits, and other authorizations of
governmental authorities as are necessary for the conduct of their respective
businesses or in connection with the ownership or use of their respective
properties, all of which are in full force and effect, and true and complete
copies of all of which have previously been delivered to each of the Investors
or their respective counsel. Holding does not have knowledge of any fact which
would make it reasonably likely that the Company would be unable to obtain the
renewal of any such license, permit or other authorization.
-25-
3.29. ASSETS AND PROPERTIES COMPLETE. The assets and properties of
Holding and each of its Subsidiaries are and as of the Closing Date shall be in
all material respects adequate and sufficient to conduct the business of Holding
or the relevant Subsidiary as currently conducted.
3.30. DISCLOSURE. No representation or warranty of Holding in this
Agreement (including the exhibits and schedules hereto), or any of the Other
Agreements to be executed and delivered by any of them as contemplated hereby
contains or shall contain any untrue statement of a material fact or omits or
shall omit to state a material fact required to be stated therein or necessary
to make the statements contained therein not false or misleading. There is no
fact that Holding has not disclosed to the Investors or their respective counsel
in writing that has or is reasonably likely to have a Material Adverse Effect,
or materially adversely affects the ability of Holding or any of its
Subsidiaries to perform their respective obligations under this Agreement and
the Other Agreements, or to consummate any of the transactions contemplated
hereby or thereby.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
In order to induce Holding to enter into this Agreement and to issue and
sell its securities as contemplated hereby, each of the Investors severally
represents and warrants to Holding, as of the date hereof and as of the Closing
Date, as follows:
4.1. AUTHORIZATION AND ENFORCEABILITY. Such Investor has all requisite
power and full legal right and authority (including, in the case of Heritage,
due approval of its Board of Directors) to enter into this Agreement, to perform
all of his or its agreements and obligations hereunder, and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by such Investor and constitutes his or its legal, valid, and binding
obligation, enforceable against him or it, as the case may be, in accordance
with its terms, except to the extent that (a) enforcement may be limited by or
subject to any bankruptcy, insolvency, reorganization, moratorium, or similar
laws now or hereafter in effect relating to or limiting creditors' rights
generally, and (b) the remedy of specific performance and injunctive and other
forms of equitable relief are subject to certain equitable defenses and to the
discretion of the court or other similar Person before which any proceeding
therefor may be brought.
4.2. INVESTMENT REPRESENTATIONS.
(a) Such Investor represents that the securities to be acquired by him
or it as contemplated hereby shall be acquired for his or its own account, for
investment, and not with a view to the distribution thereof. Such Investor
understands that such securities have not been registered under the Securities
Act of 1933, as amended (the "Act"), on the ground that the offer and sale of
---
such securities to him or it are exempt from the registration requirements of
the Act under Section 4(2) thereof as a transaction not involving any public
offering of such securities. Such Investor understands that Holding's
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reliance on such exemption is predicated in part on the representations of such
Investor contained herein.
(b) Such Investor understands that he or it must bear the economic risk of
his investment in the securities to be acquired by him or it hereunder for an
indefinite period of time because such securities have not been registered under
the Act, and therefore cannot be sold unless they are subsequently registered
under the Act or an exemption from such registration is available. Such
Investor agrees that he or it shall not offer to sell or otherwise transfer any
of such securities except after Holding has received an opinion of counsel,
reasonably acceptable to Holding in form and substance, that such offer, sale,
and/or transfer is not in violation of the registration requirements of the Act
or other applicable law.
(c) Such Investor acknowledges and agrees that each certificate
representing the securities acquired by him or it hereunder shall bear a
restrictive legend substantially in the following form:
"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended. No transfer, sale, or other
disposition of these securities may be made unless a registration statement
with respect to these shares has become effective under said act, or the
issuer has been furnished with an opinion of counsel, satisfactory to the
issuer in form and substance, that such registration is not required."
(d) Such Investor acknowledges and agrees that Holding shall make a
notation regarding the restrictions on transfer of the securities acquired by
such Investor hereunder in the stock books of Holding, and any purported
transfer of such securities shall be reflected in the stock books of Holding
only if and when transferred in compliance with all of the terms and conditions
of this Agreement.
(e) Such Investor acknowledges and agrees that, before the issuance of any
securities to him or it pursuant to this Agreement, he or it shall execute and
deliver the Stockholder Agreement, pursuant to which the securities to be issued
to such Investor pursuant to this Agreement shall be subject to the restrictions
set forth therein, including without limitation certain restriction on the
voting and transfer of such securities.
4.3. TITLE TO CONTRIBUTED SECURITIES. Such Investor has, and as of the
Closing will have, sole record ownership of all of the securities of Holding or
AGI, as the case may be, to be contributed to Holding hereunder pursuant to
Section 1 hereof, free and clear of any Liens, other than (a) any restrictions
on transfer arising under applicable securities laws solely by reason of the
fact that such shares were issued pursuant to exemptions from registration under
such securities laws, (b) in the case of any shares of AGI Stock contributed by
Xxxxxxx Xxxxx pursuant to Section 1(c) hereof, the Maranov Option as defined and
more fully described in Section 3.3(b) of the Merger Agreement, (c) in the case
of the shares of AGI Stock contributed pursuant to Section 1(c) hereof,
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restrictions pursuant to the Existing Shareholders Agreement of AGI, as defined
and more fully described in Section 3.3(b) of the Merger Agreement, and (d) in
the case of the shares of Old Preferred Stock, Old Voting Common Stock and Old
Non-Voting Common Stock, and the Old Warrant, contributed pursuant to Section
1(a) and 1(b) hereof, restrictions pursuant to the Existing Stockholders'
Agreement of Holding, provided that all of the Liens referred to in clauses (b)
- (d) shall be terminated as of the Closing Date.
4.4. GOVERNMENTAL CONSENTS. Except as set forth in Section 4.4 of the
Disclosure Schedule, no consent, approval or authorization of, or registration,
qualification or filing with, any governmental agency or authority is required
for the execution and delivery by such Investor of this Agreement, or for the
consummation by such Investor of the transactions contemplated hereby.
5. CONDITIONS TO THE PARTIES' OBLIGATIONS.
(A) CONDITIONS TO OBLIGATIONS OF HERITAGE. The obligations of Heritage to
consummate the transactions contemplated hereby are subject to the satisfaction
(to the extent not specifically waived in writing by Heritage) on or before the
Closing Date, of:
(i) each of the conditions precedent set forth in Section 6 of the
Merger Agreement, other than the completion of the Closing hereunder (except to
the extent such conditions shall have been waived in accordance with the
provisions of the Merger Agreement), and the additional condition precedent
that, subject to the foregoing, the Merger Agreement is in full force and
effect;
(ii) the condition precedent that each of the Investors other than
Heritage shall have performed and complied with all of their respective
obligations under this Agreement to be performed or complied with by each of
them before or at the Closing; and
(iii) the condition precedent that each of the transactions described
in Section 2.2 above to be performed at the Closing, other than those to be
performed by Heritage, shall have been performed.
(B) CONDITIONS TO OBLIGATIONS OF KLEARFOLD MANAGEMENT INVESTORS. The
obligations of Klearfold Management Investors to consummate the transactions
contemplated hereby are subject to the satisfaction (to the extent not
specifically waived in writing by Klearfold Management Investors) on or before
the Closing Date, of:
(i) each of the conditions precedent set forth in Section 6 of the
Merger Agreement, other than the completion of the Closing hereunder (except to
the extent such conditions shall have been waived in accordance with the
provisions of the Merger Agreement), and the additional condition that, subject
to the foregoing, the Merger Agreement is in full force and effect;
-28-
(ii) the condition precedent that each of the Investors other than
the Klearfold Management Investors shall have performed and complied with all of
their respective obligations under this Agreement to be performed or complied
with by each of them before or at the Closing; and
(iii) the condition precedent that each of the transactions described
in Section 2.2 above to be performed at the Closing, other than those to be
performed by the Klearfold Management Investors, shall have been performed.
(C) CONDITIONS TO OBLIGATIONS OF AGI INVESTORS. The obligations of each of
the AGI Investors to consummate the transactions contemplated hereby are subject
to the satisfaction (to the extent not specifically waived in writing by such
AGI Investor), on or before the Closing Date, of:
(i) each of the conditions precedent set forth in Section 7 of the
Merger Agreement, other than the completion of the Closing hereunder (except to
the extent such conditions shall have been waived in accordance with the
provisions of the Merger Agreement), and the additional condition that, subject
to the foregoing, the Merger Agreement is in full force and effect;
(ii) the conditions precedent that each of the representations and
warranties of Holding set forth in this Agreement shall have been true and
correct when made and shall be true and correct at and as of the Closing, and
that Holding and each of the Investors other than the AGI Investors shall have
performed and complied with all of their respective obligations under this
Agreement to be performed or complied with by each of them before or at the
Closing; and
(iii) the condition precedent that each of the transactions described
in Section 2.2 above to be performed at the Closing, other than those to be
performed by the AGI Investors, shall have been performed.
(D) CONDITIONS TO OBLIGATIONS OF HOLDING. The obligations of Holding to
consummate the transactions contemplated hereby are subject to the satisfaction
(to the extent not specifically waived in writing by Holding), on or before the
Closing Date, of the condition precedent that each of the representations and
warranties of each of the Investors set forth in this Agreement shall have been
true and correct when made and shall be true and correct at and as of the
Closing; and that each of the Investors shall have performed and complied with
all of its obligations under this Agreement to be performed or complied with by
him or it before or at the Closing, including without limitation such Investor's
execution and delivery of the Stockholder Agreement.
(E) DISCLOSURE SUPPLEMENTS. From time to time before the Closing, and in
any event immediately before the Closing, Holding shall promptly advise each of
the Investors or their respective counsel in writing of any matter hereafter
arising or becoming known to Holding that, if existing, occurring, or known at
the date of this Agreement, would have
-29-
been required to be set forth or described in the Disclosure Schedule hereto, or
that is necessary to correct any information in such Disclosure Schedule that is
or has become inaccurate. No such disclosure shall be taken into account in
determining whether the conditions to any of the Investor's obligations to
consummate the transactions contemplated by this Agreement have been satisfied,
but such disclosures shall be taken into account in determining whether Holding
or any of its Subsidiaries are liable to the AGI Investors or any of them
pursuant to Section 8.1 hereof.
6. COVENANTS OF HOLDING.
6.1. CONDUCT OF BUSINESS PENDING CLOSING. Holding covenants that, from
and after the date of this Agreement and until the Closing, except as otherwise
specifically contemplated by this Agreement (including without limitation the
attached Disclosure Schedule) or otherwise specifically consented to or approved
in writing by the holders of a majority of the shares of AGI Stock to be
contributed to Holding hereunder:
(A) STOCKHOLDER APPROVAL. As promptly as practicable, Holding shall either
circulate a written consent to or call and hold a special meeting of its
stockholders for the purpose of approving the Charter Amendment. Heritage and
the Klearfold Management Investors shall vote (or cause to be voted) all shares
of each class of the capital stock of Holding directly or indirectly owned by
them in favor of such approval.
(B) FULL ACCESS. Holding shall afford to the AGI Investors and their
authorized representatives full access during normal business hours to all
properties, books, records, contracts and documents of Holding and its
Subsidiaries and a full opportunity to make such investigations as they shall
desire to make of Holding and its Subsidiaries, and Holding shall furnish or
cause to be furnished to the AGI Investors and their authorized representatives
all such information with respect to the affairs and businesses of Holding and
its Subsidiaries as the AGI Investors or their counsel may reasonably request.
(C) CARRY ON IN REGULAR COURSE. Holding and its Subsidiaries shall
maintain their owned and leased properties in good operating condition and
repair, shall make all necessary renewals, additions, and replacements thereto,
shall carry on their business diligently and substantially in the same manner as
heretofore, and shall not make or institute any new, unusual, or novel methods
of manufacture, purchase, sale, lease, management, accounting, or operation
(including, without limitation, the extension of the time for payment of
Holding's and its Subsidiaries' payables or rebates) or take or permit to occur
or exist any action or circumstance referred to in Section 3.7 hereof, other
than (i) the repayment of Indebtedness of Holding and the Subsidiaries either in
the ordinary course of business from cash generated by operations or in
connection with obtaining the financing referred to in Sections 6.7 and 7.5 of
the Merger Agreement and (ii) the adoption of the name "IMPAC Group, Inc."
pursuant to the Charter Amendment, and any preparations therefor.
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(D) NO DIVIDENDS, ISSUANCES, REPURCHASES, ETC. Holding shall not declare,
set aside, or pay any dividends (whether in cash, shares of stock, other
property, or otherwise) on, or make any other distribution in respect of, any
shares of its capital stock, or issue, purchase, redeem, or otherwise acquire
for value any shares of its capital stock (other than pursuant to this
Agreement), or the capital stock of any of its Subsidiaries.
(E) NO GENERAL INCREASES. Neither Holding nor any of its Subsidiaries
shall grant any general or uniform increase in the rates of pay of its
employees, or grant any general or uniform increase in the benefits under any
bonus or pension plan or other contract or commitment, or increase the
compensation payable or to become payable to officers, directors, key employees,
or agents, or increase any bonus, insurance, pension, or other benefit plan,
payment, or arrangement made to, for, or with any such officers, directors, key
employees, or agents, other than increases occurring in the ordinary course of
business consistent with Holding's and its Subsidiaries' past practices or
required by law.
(F) CONTRACTS AND COMMITMENTS. Neither Holding nor any of its Subsidiaries
shall enter into any contract or commitment or engage in any transaction with
any Affiliate of any of them other than in the usual and ordinary course of
business and consistent with its normal business practices.
(G) PURCHASE AND SALE OF CAPITAL ASSETS. Neither Holding nor any of its
Subsidiaries shall purchase, lease as lessee, license as licensee, or otherwise
acquire any interest in, or sell, lease as lessor, license as licensee, or
otherwise dispose of any interest in, any capital asset(s) (i) other than in the
ordinary course of business, or (ii) having a market value in excess of $10,000
in any instance, or in excess of $50,000 in the aggregate.
(H) INSURANCE. Holding and its Subsidiaries shall maintain with
financially sound and reputable insurance companies, funds or underwriters
adequate insurance (including without limitation the insurance referred to on
Section 3.20 of the Disclosure Schedule) of the kinds, covering such risks, in
such amounts, and with such deductibles and exclusions, as are consistent with
prudent business practice.
(I) PRESERVATION OF ORGANIZATION. Holding and its Subsidiaries shall use
their best efforts to preserve their business organizations intact, to keep
available for the benefit of the Investors their present key officers and
employees, and to preserve for the benefit of the Investors the present business
relationships with their suppliers and customers and others having business
relationships with them.
(J) NO DEFAULT. Holding and of its Subsidiaries shall use commercially
reasonable efforts to avoid a default in any material respect under, or a
material breach of any contract, commitment, or obligation of Holding or any of
its Subsidiaries.
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(K) COMPLIANCE WITH LAWS. Holding and each of its Subsidiaries shall
comply in all material respects with all applicable laws, regulations, and
orders.
(L) ADVICE OF CHANGE. Holding shall promptly advise the AGI Investors in
writing, in accordance with Section 12.5 hereof, of any change resulting in, or
reasonably likely to result in, a Material Adverse Effect.
(M) CONSENTS OF THIRD PARTIES. Holding and its Subsidiaries shall use
their respective commercially reasonable efforts to secure, as soon as possible
but in any event on or before the Closing Date, the consent, in form and
substance satisfactory to the AGI Investors and their counsel, to the
consummation of the transactions contemplated by this Agreement by each Person
whose consent or approval thereof may be necessary to permit such consummation,
including without limitation each party to any contract, commitment, or
obligation of Holding or any of its Subsidiaries under which such transactions
would constitute a default in any material respect or a material breach, would
accelerate obligations of Holding or any of its Subsidiaries, or would permit
cancellation of any such contract by a Person other than Holding and its
Subsidiaries.
(N) NO SHOPPING. Neither Holding, nor any of its Subsidiaries, nor
Heritage, nor any of the Klearfold Management Investors shall negotiate for,
solicit, discuss, negotiate, or enter into any agreement or understanding,
whether or not binding, with respect to the issuance, sale, or transfer of any
of the capital stock or substantial part of the assets of Holding or any of its
Subsidiaries (other than sales of inventory in the ordinary course of business)
or any merger or other business combination of Holding or any of its
Subsidiaries, to or with any Person other than (i) pursuant to the Merger
Agreement, or (ii) in connection with a possible transaction with Sancoa
previously disclosed to the Investors.
6.2. CONTINUING COVENANTS. Holding covenants that, unless otherwise
specified in the Stockholder Agreement, or except as may be otherwise
specifically agreed to in writing by the holders of at least a majority of the
outstanding shares of Series A Common Stock, Holding shall comply and shall
cause any Subsidiaries it may have from time to time (including without
limitation Klearfold and AGI) to comply with the following provisions:
(A) RECORDS AND ACCOUNTS. Holding and each of its Subsidiaries shall keep
true and accurate records and books of account in which full, true, and correct
entries shall be made in accordance with generally accepted accounting
principles, and maintain adequate accounts and reserves for all Taxes (including
income Taxes), all depreciation, depletion, obsolescence, and amortization of
its properties, all contingencies, and all other reserves.
(B) CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. Holding and each of
its Subsidiaries shall preserve and keep in full force and effect their
respective corporate existences, rights, and franchises. Holding and each of
its Subsidiaries shall maintain all of their respective properties used or
useful in the conduct of their respective businesses in
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good condition, repair, and working order, and shall cause to be made all
necessary repairs, renewals, replacements, betterments, and improvements
thereto, all as in the judgment of Holding may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this section shall prevent
Holding or any of its Subsidiaries from discontinuing the operation and
maintenance of any of such properties if such discontinuance is, in the judgment
of Holding, desirable in the conduct of its business and does not have a
material adverse effect on Holding or any of its Subsidiaries.
(C) INSURANCE. Holding and each of its Subsidiaries shall maintain with
financially sound and reputable insurance companies, funds, or underwriters,
insurance of the kinds, covering the risks and in the relative amounts usually
carried by reasonable and prudent companies conducting businesses similar to
those of Holding or such Subsidiary, as the case may be.
(D) TAXES. Holding and each of its Subsidiaries shall pay and discharge,
or cause to be paid and discharged, before the same shall become overdue, all
Taxes upon it and its business, properties, sales, and activities, or any part
thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies that if unpaid might by law give rise to a Lien
upon any of its properties; provided, however, that any such Tax or claim need
not be paid if the validity or amount thereof shall currently be contested in
good faith by appropriate proceedings and if Holding or such Subsidiary shall
have set aside on its books adequate reserves with respect thereto; and provided
further that Holding or such Subsidiary shall pay or cause to be paid all such
Taxes or claims forthwith upon the commencement of proceedings to foreclose any
Lien that may have attached as security therefor.
(E) COMPLIANCE WITH LAWS, CONTRACTS, LICENSES AND PERMITS. Holding and
each of its Subsidiaries shall comply with (i) all applicable laws and
regulations wherever its business is conducted, (ii) the provisions of its
Certificate of Incorporation (and/or other charter documents) and by-laws, (iii)
all agreements and instruments to which it is party or by or to which it or any
of its properties may be bound or subject, and (iv) all applicable decrees,
orders, and judgments; except where in each case other than under clause (ii),
such noncompliances would not, either individually or in the aggregate, have a
material adverse effect on the condition (financial or otherwise), business or
assets of Holding and its Subsidiaries taken as a whole. If any authorization,
consent, approval, operating right, permit, or license from any officer, agency,
or instrumentality of any government shall become necessary or required in order
that Holding or any of its Subsidiaries may fulfill any of its obligations
hereunder, Holding or such Subsidiary shall immediately take or cause to be
taken all reasonable steps within its power to obtain such authorization,
consent, approval, operating right, permit, or license.
(F) EMPLOYEE BENEFIT PLANS. Holding and each of its Subsidiaries shall
take all actions necessary to maintain, fund, and administer its Employee
Benefit Plans in accordance with federal, state, and local law.
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(G) FURTHER ASSURANCES. Holding and each of its Subsidiaries shall
cooperate with each of the Investors and execute such further instruments and
documents as it or he may reasonably request to carry out to its or his
reasonable satisfaction the transactions contemplated by this Agreement.
(H) ANNUAL STATEMENTS. As soon as available, and in any event within 90
days after the close of each fiscal year of Holding, commencing with the fiscal
year ending December 31, 1997, Holding shall deliver to each of the Investor
Representatives consolidated and consolidating balance sheets and statements of
income, retained earnings, and cash flows of Holding and its Subsidiaries, such
consolidated financial statements to be audited by an independent public
accounting firm selected by Holding and reasonably acceptable to each of the
Investor Representatives, and certified by such accounting firm to have been
prepared in accordance with generally accepted accounting principles,
consistently applied, except for such changes in the application of such
principles as are required by such principles themselves.
(I) MONTHLY STATEMENTS. As soon as available, and in any event within 30
days after the end of each month commencing with the first month ending after
the Closing Date, Holding shall deliver to each of the Investor Representatives
consolidated and consolidating internal, unaudited balance sheets and statements
of income, retained earnings, and cash flows of Holding and its Subsidiaries as
of the end of each such month, certified by the President and the Treasurer of
Holding to be true and correct and to have been prepared in accordance with
generally accepted accounting principles, consistently applied (subject to the
absence of footnotes and to normal year-end adjustments, the details of which,
if they are expected to be material, shall be disclosed).
(J) OTHER FINANCIAL INFORMATION. Holding shall deliver to each of the
Investor Representatives, at least 30 days prior to the commencement of each
fiscal year, an annual budget and projected monthly balance sheets and
statements of income for such fiscal year, prepared on a comparative basis to
the projections of the future financial performance of Holding and its
Subsidiaries, on a consolidated basis, that have been provided to the Investors
and as soon as practicable after preparation thereof, complete and correct
copies of all quarterly (if any) and annual budgetary analyses or forecasts of
Holding in the form customarily prepared by management for its own internal use
or the use of the Board of Directors of Holding. Promptly after the receipt
thereof, Holding shall provide copies of any management letters or other reports
of its independent accountants as to the internal accounting controls of Holding
and/or its Subsidiaries.
(K) NOTICE OF LITIGATION, DEFAULT, ETC. Holding shall promptly give notice
to each of the Investor Representatives of any litigation, arbitration, action,
suit, proceeding, or investigation to which Holding or any of its Subsidiaries
may hereafter become a party (or that is threatened against any of them) that
may result in any material adverse effect with respect to any of them.
Forthwith upon any officer of Holding or of any of its Subsidiaries obtaining
knowledge of any default or event of default (or any occurrence or
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circumstance that, with the giving of notice or the passage of time or both,
could give rise to a default or event of default) under any agreement or
instrument relating to any Indebtedness of Holding or any of its Subsidiaries,
Holding shall furnish a notice specifying in reasonable detail the nature and
period of existence thereof and what action Holding and/or any of its
Subsidiaries has taken, is taking, and/or proposes to take with respect thereto.
(L) RIGHTS TO ATTEND BOARD MEETINGS. Each of Holding and its Subsidiaries
shall give each of the Investor Representatives at least five business days'
prior written notice of the time, place, and subject matter of any proposed
meeting (or action by written consent) of its Board of Directors (or any
executive thereof) of Holding or such Subsidiary, such notice to include true
and complete copies of all documents furnished to any director in connection
with such meeting or consent. Any of the respective Investor Representatives,
or their officers and authorized representatives (in addition to any such
Investor Representative or such officers or representatives who have been
elected to the Board of Directors of Holding or such Subsidiary) shall be
entitled to attend as an observer at any such meeting, or if a meeting is held
by telephone conference, to participate therein for the purpose of listening
thereto. Each of Holding and its Subsidiaries shall call and hold a meeting of
its Board of Directors or executive committee at least once each fiscal quarter.
(M) OTHER INFORMATION. From time to time upon the request of any of the
Investor Representatives, Holding shall furnish to such Person or any authorized
officer or representative of such Person such information regarding the
business, affairs, prospects, and financial condition of Holding and its
Subsidiaries as such Investor Representative may reasonably request and which
may be so furnished by Holding without undue effort or expense. Each Investor
Representative or any authorized officer or representative of such Person shall
have the right during normal business hours to examine the books and records of
Holding and its Subsidiaries, to make copies, notes, and abstracts therefrom,
and to make an independent examination of the books and records of Holding and
its Subsidiaries.
7. REGISTER AND TRANSFER OF SHARES.
(A) REGISTER OF SHARES. Holding shall keep at its principal office a
register in which shall be recorded the names and addresses of the record
holders of shares of Series A Common Stock, and all transfers of such shares.
References to the "holder" or "holder of record" of any shares of Series A
Common Stock shall mean the holder thereof unless the holder shall have
presented stock certificates evidencing such shares of Series A Common Stock to
Holding for transfer, and the transferee shall have been entered in said
register as a subsequent holder, in which case such terms shall mean such
subsequent holder. The ownership of any shares of the Series A Common Stock
shall be proven by such register and Holding may conclusively rely upon such
register.
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(B) TRANSFER OF SHARES. Upon surrender at such office of any certificate
representing shares of Series A Common Stock for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed by
the holder of such certificate or such holder's attorney duly authorized in
writing, then subject to compliance with the applicable provisions of this
Agreement, the Stockholder Agreement, and applicable securities laws, Holding
shall issue, at its expense, one or more new certificates, in such denomination
or denominations as may be requested, for the transferred shares of Series A
Common Stock, and registered as the presenting holder may have requested.
Holding shall pay shipping and insurance charges, from and to each holder's
principal office, upon any transfer pursuant to this section.
(C) REPLACEMENT OF CERTIFICATES. Upon receipt of evidence reasonably
satisfactory to Holding of the loss, theft, destruction, or mutilation of any
certificate representing any shares of Series A Common Stock, and, in the case
of any such loss, theft, or destruction, upon delivery of an indemnity bond in
such reasonable amount as Holding may determine (or, in the case of any such
security held by Heritage or any other institutional holder, of an unsecured
indemnity agreement from such holder reasonably satisfactory to Holding), or, in
the case of any such mutilation, upon the surrender of such certificate to
Holding at its principal office for cancellation, Holding, at its own expense,
shall execute and deliver, in lieu thereof, a new certificate of like tenor.
Any lost, stolen, destroyed, or mutilated certificate in lieu of which any such
new certificate has been so executed and delivered by Holding shall not be
deemed to be outstanding for any purpose.
8. INDEMNIFICATION.
8.1. INDEMNIFICATION BY HOLDING.
(a) Subject to the limitations set forth in Section 8.5 hereof, if the
transactions contemplated hereby are not consummated, Holding and each of its
Subsidiaries, jointly and severally, shall indemnify, defend and hold harmless
each of the AGI Indemnitees from and against any and all Damages related to or
arising, directly or indirectly, out of or in connection with any Holding
Indemnified Claims. Notwithstanding the foregoing, in no event shall the
aggregate damages payable pursuant to this Section 8.1(a) by the Company and its
Subsidiaries together exceed the Maximum Holding Indemnity Amount or, if less,
the aggregate amount of all costs, expenses and disbursements of the AGI
Indemnitees incurred in connection with the transactions contemplated hereby and
by the Merger Agreement.
(b) Subject to the limitations set forth in this Section 8.1(b) and in
Section 8.5 hereof, if the transactions contemplated hereby are consummated,
each of Heritage and the Klearfold Xxxxxx Investors (together, the "Holding
-------
Indemnitors") shall indemnify, defend and hold harmless each of the AGI
-----------
Indemnitees from and against any and all Damages related to or arising, directly
or indirectly, out of or in connection with any Holding Indemnified Claims;
provided that Heritage shall not be liable under this Section 8.1(b) for any
Damages in excess of sixty-eight percent (68%) of the Damages for which the
Holding
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Indemnitors would otherwise be liable hereunder from time to time but for this
proviso, and the Klearfold Xxxxxx Investors together shall not be liable under
this Section 8.1 for any Damages in excess of thirty-two percent (32%) of the
Damages for which the Holding Indemnitors would otherwise be liable hereunder
from time to time but for this proviso, and provided further that:
(i) the aggregate liability of the Holding Indemnitors with respect to
any Holding Indemnified Claims other than Unlimited Holding Claims shall
not exceed the Maximum Holding Indemnity Amount; and
(ii) the aggregate liability of the Holding Indemnitors with respect to
any Holding Indemnified Claims which are Unlimited Holding Claims shall be
limited to the Share Value of all shares of Series A Common Stock owned by
the Holding Indemnitors immediately after consummation of the transactions
contemplated hereby.
Any Damages related to or arising directly or indirectly out of or in connection
with Unlimited Holding Claims shall not be included in calculating whether the
aggregate amount of Damages is equal to or exceeds the Maximum Holding Indemnity
Amount.
8.2. INDEMNIFICATION BY THE INVESTORS. Subject to the limitations set
forth in Section 8.5 hereof, regardless of whether the transactions contemplated
hereby are consummated, each of the Investors severally and not jointly shall
indemnify, defend and hold harmless Holding and its Subsidiaries, and each of
their respective directors, officers, employees, representatives and other
Affiliates (collectively, "Holding Indemnitees", and each a "Holding
------- ----------- -------
Indemnitee"), from and against any and all Damages related to or arising,
----------
directly or indirectly, out of any failure or any breach by such Investor of any
representation, warranty, covenant, agreement, obligation, or undertaking made
by in this Agreement (including any schedule or exhibit hereto), or any other
agreement, instrument, certificate, or other document delivered by or on behalf
of such Investor in connection with this Agreement or any of the transactions
contemplated hereby, but excluding any representation, warranty, covenant,
agreement, obligation, or undertaking made by any of the AGI Investors in the
Merger Agreement in such AGI Investor's capacity as a Principal Stockholder or
Participating Stockholder, as to which the terms and provisions of the Merger
Agreement shall apply, and without duplication of indemnities provided for in
the Merger Agreement, provided that the aggregate liability of any Investor
under this Section 8.2 is hereby limited to and shall in no event exceed the
Share Value of all shares of Series A Common Stock owned by such Investor
immediately after consummation of the transactions contemplated hereby.
8.3. CLAIMS. In the event that any party hereto (the "Indemnified Party")
----------- -----
desires to make a claim against another party hereto (the "Indemnifying Party,"
------------ -----
which term shall include all indemnifying parties if more than one) in
connection with any third-party litigation, arbitration, action, suit,
proceeding, claim, or demand at any time instituted against or made upon it for
which it may seek indemnification hereunder (a "Third-Party
-----------
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Claim"), the Indemnified Party shall notify the Indemnifying Party of such
-----
Third-Party Claim and of its claims of indemnification with respect thereto,
provided, that failure to give such notice shall not relieve the Indemnifying
Party of its indemnification obligations under this Section 8 except to the
extent, if at all, that the Indemnifying Party shall have been actually
prejudiced thereby. Upon receipt of such notice from the Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense of such
Third-Party Claim, and if and only if each of the following conditions is
satisfied, the Indemnifying Party may assume the defense of such Third-Party
Claim, and in the case of such an assumption the Indemnifying Party shall have
the authority to negotiate, compromise, and settle such Third-Party Claim,
provided, that the Indemnifying Party shall not agree to any settlement of such
Third-Party Claim that does not include an unconditional release of all
liability of each Indemnified Party with respect to such Third-Party Claim, or
which imposes on any Indemnified Party the burden of any injunctive or equitable
relief, without in either case the prior written consent of such Indemnified
Party (such consent not to be unreasonably withheld or delayed):
(i) the Indemnifying Party confirms in writing that it is obligated
hereunder to indemnify the Indemnified Party in full with respect to such
Third-Party Claim; and
(ii) the Indemnified Party does not give the Indemnifying Party
written notice that the Indemnified Party's counsel has determined, in its
reasonable opinion, that an irreconcilable conflict of interest make
separate representation by the Indemnified Party's counsel advisable.
The Indemnified Party shall retain the right to employ its own counsel and
to participate in the defense of any Third-Party Claim, the defense of which has
been assumed by an Indemnifying Party pursuant hereto, but such Indemnified
Party shall bear and shall be solely responsible for its own costs and expenses
in connection with such participation. The Indemnified Party shall make no
settlement or compromise in connection with any Third-Party Claim (whether or
not the defense thereof has been assumed by the Indemnifying Party) that would
impose upon any Indemnifying Party the burden of any injunctive or equitable
relief, or would give rise to liability on the part of any Indemnifying Party,
without the prior written consent of such Indemnifying Party (such consent not
to be unreasonably withheld or delayed).
8.4. PAYMENT OF CLAIMS.
(a) In the event of any claims for indemnification under this Section 8,
the claimant shall advise the party or parties who are required to provide
indemnification therefor in writing of the amount and circumstances surrounding
such claim. With respect to liquidated claims, if within thirty days the other
party has not contested such claim in writing, such other party shall (subject
to the provision of Section 8.4(b) below) pay the full amount thereof within ten
days after the expiration of such thirty-day period. Any amount payable by an
Indemnifying Party in respect of indemnification pursuant to this
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Agreement may be set off and deducted by the Indemnified Party from and against
any amounts that may otherwise be or become payable by such Indemnified Party to
such Indemnifying Party, including without limitation amounts payable pursuant
to any of the Other Agreements. The unpaid balance of any claim for Damages
under this Section 8 shall bear interest at the rate announced from time to time
by BankBoston, N.A., as its "Base Rate" plus two percent, from the date notice
----
of such claim is given by the Indemnified Party to the Indemnifying Party.
(b) In the event an Indemnified Party is either a Holding Indemnitee or an
Investor under the Investment Agreement, and the Indemnifying Party is also an
Investor under, and acquires shares of Series A Common Stock pursuant to, the
Investment Agreement, the Indemnifying Party shall have the option, upon final
determination of the dollar amount of a claim for indemnification payable to
such Indemnified Party in accordance with this Section 8, by written notice to
such Indemnified Party delivered within ten (10) business days after the date of
such determination, to elect to satisfy such claim, or any part thereof, by
transferring without further consideration to such Indemnified Party, free and
clear of all Liens, that number of shares of Series A Common Stock, rounded to
the second decimal place, which is equal to:
(i) if the Indemnified Party is either (A) a Holding Indemnitee other
than an Investor pursuant to the Investment Agreement or (B) an Investor
pursuant to the Investment Agreement seeking indemnification other than on
account of, or related to, Damages suffered by Holding or any of its
Subsidiaries, (x) the final determined dollar amount of such Claim (or such
portion thereof as the applicable Indemnifying Party is electing to satisfy
pursuant to this Section 8.4(b)) divided by (y) the Share Value; and
(ii) if the Indemnified Party is an Investor pursuant to the
Investment Agreement and is seeking indemnification on account of Damages
suffered by Holding or any of its Subsidiaries, (x) such Investor's pro rata
directly- or indirectly-allocable portion of the dollar amount of the Damages
suffered by Holding or such Subsidiary (or such portion thereof as the
applicable Indemnifying Party is electing to satisfy pursuant to this Section
8.4(b)), calculated on the same basis as is set forth in Section 8.5(a) below,
divided by (y) the Adjusted Share Value (as defined below).
For the purposes hereof, the term "Adjusted Share Value" shall mean the Share
-------- ----- -----
Value, reduced to reflect the per share reduction in the value of Series A
Common Stock solely as a result of the Damages on account of which
indemnification is being sought, and as appropriately adjusted from time to time
to reflect stock splits, combinations, recapitalizations or the like; provided,
--------
however, that (1) with respect to AGI Indemnified Claims, other than Unlimited
-------
Claims (in each case as defined in the Merger Agreement), the aggregate amount
of the adjustment shall not exceed the Maximum AGI Indemnity Amount, and (2)
with respect to Holding Indemnified Claims, other than Unlimited
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Holding Claims, the aggregate amount of the adjustment shall not exceed the
Maximum Holding Indemnity Amount.
8.5. LIMITATIONS OF LIABILITY.
(a) In the event that any Damages are incurred or suffered by Holding or
any of its Subsidiaries resulting from Holding Indemnified Claims for which the
AGI Investors are entitled to indemnification from the Holding Indemnitors
pursuant to Section 8.1(b) above, the Holding Indemnitors shall only be required
to indemnify the AGI Investors for that portion of any such Damages which is
equal to the product of (i) the aggregate amount of such Damages incurred or
suffered by Holding or such Subsidiary, as the case may be, multiplied by (ii) a
fraction, the denominator of which is the total number of shares of Series A
Common Stock then outstanding on a fully-diluted basis, and the numerator of
which is the total number of shares of Series A Common Stock issued hereunder
and then owned by the AGI Investors. For the avoidance of doubt, this Section
8.5(a) shall not operate to reduce the amount payable to the AGI Investors or
any of them with respect to any Damages directly suffered or incurred by any
such AGI Investor and for which such AGI Investor is entitled to indemnification
pursuant to Section 8.1 above.
(b) Holding, its Subsidiaries and the Holding Indemnitors shall not be
required to indemnify any of the AGI Indemnitees hereunder except to the extent
that the aggregate amount of Damages (including Damages from Unlimited Holding
Claims) for which the AGI Indemnitees pursuant to Section 8.1 hereof (after
application of the limitation in Section 8.5(a) hereof), and pursuant to Section
8.2 of the Merger Agreement would otherwise be entitled to indemnification
exceeds $100,000, whereupon such AGI Indemnitees shall be entitled to
indemnification in the amount by which the aggregate amount of all such Damages
exceeds $100,000, subject to the limitations on liability set forth in the
proviso in Section 8.1(b) and on maximum amount of recovery set forth in Section
8.1(b) and this Section 8.5(b).
(c) Notwithstanding anything to the contrary stated herein or in any of the
Other Agreements, neither Heritage nor any of the Klearfold Management
Investors, nor any of their respective directors, officers, employees,
representatives and other Affiliates, shall be entitled to indemnification for
any breach by Holding of any of its representations and warranties in Section 3
of this Agreement.
(d) No Indemnifying Party shall be liable for any Damages pursuant to this
Section 8 unless a written claim for indemnification in accordance with Section
8.4 is given by the Indemnified Party to the Indemnifying Party with respect
thereto, subject to the following proviso, within (i) in the case of any Damages
related to or arising, directly or indirectly from any breach of the
representations and warranties in Section 3.13 hereof ("Safety and Environmental
Matters") or any Unlimited Holding Claims described in clause (b) of the
definition thereof, two years after the Closing, and (ii) otherwise, one year
after the Closing; provided, that these time limitations shall not apply to any
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Unlimited Holding Claims described in clause (a) of the definition thereof, for
which indemnification shall have no time limitation except as otherwise imposed
by law.
(e) The amount of any Damages otherwise payable to any Indemnified Party in
respect of any breach of the representations and warranties set forth in
Sections 3 and/or 4 of this Agreement shall be reduced to the extent that such
Indemnified Party actually realizes, by reason of such Damages, any tax benefit
that is not offset by any corresponding adjustment of the tax attributes of such
Indemnified Party or any of his or its assets (e.g., any tax deduction available
to such Indemnified Party in respect of such Damages breach shall not be deemed
to result in a tax benefit to such Indemnified Party to the extent that such tax
deduction results in a decrease in such Indemnified Party's basis in any
securities or other assets). In the event that any such tax benefit is actually
realized by an Indemnified Party subsequent to the receipt by such Indemnified
Party of an indemnification payment hereunder in respect of the Damages to which
such tax benefit relates, appropriate refunds shall be made regarding the amount
of such indemnification payment.
(f) No Indemnifying Party shall be liable pursuant to this Section 8 for
lost profits or special or consequential Damages, even if notified in advance of
the possibility thereof.
(g) Each of the parties hereto agrees that its sole recourse for any breach
or default hereunder or under the Merger Agreement (other than any such breach
or default under or with respect to Section 9.1 or 9.2 of the Merger Agreement
or Section 9 hereof), or for any other matter as to which indemnification is
provided to it in this Section 8 or in Section 8 of the Merger Agreement, shall
be the indemnification provisions set forth herein and therein, and, to the
extent applicable, the Escrow Agreement and the Escrow Amount held thereunder
(in each case as defined in the Merger Agreement).
9. CONFIDENTIAL INFORMATION.
(A) BEFORE THE CLOSING. Any and all non-publicly available information
disclosed by or on behalf of Holding or its representatives to any of the
Investors or their representatives, as part of or in connection with the
negotiations leading to the execution of this Agreement, or in furtherance
thereof, which information was not already known to the receiving Person, as the
case may be, shall remain confidential until the Closing Date, except to the
extent that such Investor in its or his reasonable judgment must disclose any
such information to banks and other institutional lenders in the process of
obtaining financing for the transactions contemplated hereby. If the Closing
does not take place for any reason, each of the AGI Investors agrees not to
further divulge or disclose or use for their benefit or purposes any such
information of Holding or its Subsidiaries at any time in the future unless it
has otherwise become public through no action or omission on the part of any
party required hereunder to keep such information confidential. The information
intended to be protected hereby shall include without limitation information
with respect to
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finances, customers, sales, representatives, and anything else having an
economic or pecuniary benefit to the disclosing party.
Notwithstanding the foregoing, if any party is required by law or
regulation to disclose any information covered by this clause (a), the party
under such disclosure obligation will provide the party who disclosed such
information with prompt notice of such disclosure obligation so that the
disclosing party may seek a protective order or take other appropriate action
and/or waive compliance with this Section 9(a) to the extent of such required
disclosure. In the absence of such a waiver, if any party is, in the opinion of
its counsel, compelled to disclose any such information of any other party upon
pain of liability for contempt or other censure or penalty, the party under such
disclosure obligation may disclose such information to the relevant court or
other tribunal or governmental authority without liability hereunder, but
notwithstanding such disclosure, such information shall remain confidential
under this Section 9(a) after such disclosure.
(B) AFTER THE CLOSING. If the transactions contemplated hereby are
consummated, each of the Investors shall maintain the confidentiality of all
confidential, sensitive, or proprietary information of Holding and/or any of its
Subsidiaries, including without limitation with respect to their respective
businesses, finances, affairs, and technology, which shall be and remain the
exclusive property of Holding and/or such Subsidiary, as the case may be, and
unless previously authorized in writing by Holding, and except with respect to
information that has otherwise become public through no action or omission on
the part of any such Investor, shall not disclose any such information to any
third party or use it for any purpose, other than in the discharge of any such
Investor's respective employment responsibilities (if any) in the ordinary
course of Holding's business.
Notwithstanding the foregoing, if any of the Investors is required by law
or regulation to disclose any confidential, sensitive, or proprietary
information of Holding and/or any of its Subsidiaries, such Investor will
provide Holding with prompt notice of such disclosure obligation, so that
Holding may seek a protective order or take other appropriate action and/or
waive compliance with this Section 9(b) to the extent of such required
disclosure. In the absence of such a waiver, if any Investor is, in the opinion
of his or its counsel, compelled to disclose any such information upon pain of
liability for contempt or other censure or penalty, such Investor may disclose
such information to the relevant court or other tribunal or governmental
authority without liability hereunder, but notwithstanding such disclosure, such
information shall remain confidential under this Section 9(b) after such
disclosure.
10. TERMINATION.
(a) This Agreement may be terminated at any time by agreement of all of
the parties hereto.
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(b) This Agreement, and the obligations of the parties to make the
contributions and investments and to issue securities in exchange therefor all
as set forth in Section 1 hereof, shall automatically terminate upon termination
in accordance with its terms of the Merger Agreement prior to the Closing Date.
(c) This Agreement shall terminate, and the covenants of Holding set
forth in Section 6.2 hereof shall be of no further force or effect, upon the
closing of a Qualified Public Offering (as defined in the Stockholder
Agreement).
(d) Any termination of this Agreement shall not affect the rights or
obligations of any party arising, or based on actions or omissions occurring,
before such termination. The provisions of Sections 8 ("Indemnification"), 9
("Confidential Information"), and 12 ("General") (other than Section 12.1
("Cooperation")) hereof shall survive any termination of this Agreement.
11. DEFINITIONS.
11.1. CERTAIN DEFINED TERMS. As used in this Agreement, the following
terms have the following respective meanings:
"Affiliate" means, with respect to a specified Person, (i) any Person that
---------
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified Person and (ii)
any Person that is an officer, director, trustee, member or general partner of,
or serves in a similar capacity with respect to, the specified Person, or of
which the specified Person is an officer, director, trustee, member or general
partner, or with respect to which the specified Person serves in a similar
capacity or (iii) any Person who is a spouse, parent, sibling or lineal
descendant of such Person or any Person described in clauses (i) or (ii). For
purposes of this definition the term "control" when used with respect to a
-------
Person means (a) the beneficial ownership (as defined in Rule 13d-d promulgated
under the Securities and Exchange Act of 1934, as amended) of 50 percent or more
of the voting interests in such Person, or (b) the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"Affiliated Group" has the meaning given to it in Section 1504 of the Code,
---------- -----
and in addition includes any analogous combined, consolidated, or unitary group,
as defined under any applicable state, local, or foreign income Tax law.
"AGI Indemnitees" means the AGI Investors, and if the transactions hereby
--- -----------
are not consummated, also AGI and its directors, officers, employees,
representatives and other Affiliates, and each individually an "AGI Indemnitee".
--- ----------
"AGI Investor Shares" means the shares of Series A Common Stock issued and
--- -------- ------
sold to the AGI Investors pursuant to this Agreement, together with any
securities issued or
-43-
issuable with respect to the original AGI Investor Shares by way of a stock
dividend, stock split, combination or division of shares, recapitalization,
merger, consolidation, reorganization, or the like and any securities into which
any of the original AGI Investor Shares are (directly or indirectly) converted
or for which any of the original AGI Investor Shares are (directly or
indirectly) exchanged, and "Majority AGI Holders" means the holders, as of the
-------- --- -------
relevant time of reference, of at least a majority of the AGI Investor Shares.
"Damages" means, with respect to any Person, all claims, liabilities,
-------
obligations, losses, damages, costs and expenses, including without limitation
the fees and disbursements of counsel, of or to such Person.
"Heritage Shares" means the shares of Series A Common Stock issued and sold
-------- ------
to Heritage pursuant to this Agreement, together with any securities issued or
issuable with respect to the original Heritage Shares by way of a stock
dividend, stock split, combination or division of shares, recapitalization,
merger, consolidation, reorganization, or the like and any securities into which
any of the original Heritage Shares are (directly or indirectly) converted or
for which any of the original Heritage Shares are (directly or indirectly)
exchanged, and "Majority Heritage Holders" means the holders, as of the relevant
-------- -------- -------
time of reference, of at least a majority of the Heritage Shares.
"Holding Indemnified Claims" means, collectively, any claim for Damages
------- ----------- ------
resulting from any failure or breach by Holding and/or any of its Subsidiaries
of any representation, warranty, covenant, agreement, obligation, or undertaking
made by them or any of them in this Agreement (including any schedule or exhibit
hereto), or any other agreement, instrument, certificate, or other document
delivered by or on behalf of them or any of them in connection with this
Agreement or any of the transactions contemplated hereby.
"Indebtedness", as applied to any Person, means (a) all indebtedness of
------------
such Person for borrowed money, whether current or funded, or secured or
unsecured, (b) all indebtedness of such Person for the deferred purchase price
of property or services represented by a note or other security, (c) all
indebtedness of such Person created or arising under any conditional sale or
other title retention agreement (even if the rights and remedies of the seller
or lender under such agreement in the event of default are limited to
repossession or sale of specific property), (d) all indebtedness of such Person
secured by a purchase money mortgage or other Lien to secure all or part of the
purchase price of property subject to such mortgage or other Lien, (e) all
obligations of such Person under leases that have been or must be, in accordance
with generally accepted accounting principles, recorded as capital leases in
respect of which such Person is liable as lessee, (f) any liability of such
Person in respect of banker's acceptances or letters of credit, and (g) all
indebtedness referred to in clauses (a), (b), (c), (d), (e), or (f) above that
is directly or indirectly guaranteed by such Person or which such Person has
agreed (contingently or otherwise) to purchase or otherwise acquire or in
respect of which such Person has otherwise assured a creditor against loss.
-44-
"Investor Representatives" means, collectively, one Person designated from
-------- ---------------
time to time by the Majority Heritage Holders, one Person designated from time
to time by the Majority Klearfold Management Holders, and one Person designated
from time to time by the Majority AGI Holders, in each case by written notice to
Holding given in accordance with Section 12.5 hereof, for purposes of making
elections, and giving and receiving notices and other communications to and from
Holding (subject to appropriate confidentiality restrictions), on behalf of the
holders of the Heritage Shares, the Klearfold Management Shares or the AGI
Investor Shares, as the case may be; and "Investor Representative" means any of
-------- --------------
the Investor Representatives.
"Klearfold Management Shares" means the shares of Series A Common Stock
--------- ---------- ------
issued and sold to the Klearfold Management Investors pursuant to this
Agreement, together with any securities issued or issuable with respect to the
original Klearfold Management Shares by way of a stock dividend, stock split,
combination or division of shares, recapitalization, merger, consolidation,
reorganization, or the like and any securities into which any of the original
Klearfold Management Shares are (directly or indirectly) converted or for which
any of the original Klearfold Management Shares are (directly or indirectly)
exchanged, and "Majority Klearfold Management Holders" means the holders, as of
-------- --------- ---------- -------
the relevant time of reference, of at least a majority of the Klearfold
Management Shares.
"knowledge" "known to" or similar terms, when used to qualify any
--------- ----- --
representation or warranty of Holding, or when used in any similar context, mean
that (at the time the applicable representation or warranty is made or deemed
made or repeated) any of Xxxxxx X. Xxxxxx, H. Xxxxx Xxxxxx, Xxxx Xxxxxxx, Xxxx
XxXxxxxxx, Xxxxxx Xxxxxx or Xxxxxxx Xxxxxxxx either has actual (and not imputed
or constructive) knowledge of certain specific facts or circumstances affecting
such representation or warranty, or is actually (and not imputedly or
constructively) aware of facts or circumstances which should have led a
reasonable person with similar business responsibilities to conduct a
reasonably-detailed investigation into such facts or circumstances and the legal
consequences thereof, and such an investigation would have resulted in the
investigating party having actual (and not imputed or constructive) knowledge of
specific facts or circumstances affecting such representation or warranty.
Except as specifically described above, no knowledge of any other stockholder,
director, officer, or employee of the Holding shall be imputed to Holding.
"Lien" means any lien, claim, mortgage, security interest, charge,
----
encumbrance, or restriction on transfer of any kind.
"Maximum AGI Indemnity Amount" means $3,500,000.
------- --- --------- ------
"Maximum Holding Indemnity Amount" means $2,305,882.
------- ------- --------- ------
-45-
"Old Non-Voting Common Stock" means Holding's Voting Common Stock, $0.001
--- ---------- ------ -----
par value per share, prior to the effectiveness of the Charter Amendment.
"Old Preferred Stock" means Holding's Preferred Stock, $0.001 par value per
--- --------- -----
share, prior to the effectiveness of the Charter Amendment.
"Old Voting Common Stock" means Holding's Voting Common Stock, $0.001 par
--- ------ ------ -----
value per share, prior to the effectiveness of the Charter Amendment.
"Other Agreement(s)" means the Merger Agreement and all of the other
----- ------------
agreements, instruments, certificates, and documents executed and delivered at
the Closing or otherwise in connection with this Agreement and/or the Merger
Agreement, and/or in connection with the transactions contemplated hereby and
thereby, and when used with reference to any particular Person, means all such
agreements, instruments, certificates and other documents executed and delivered
by such Person.
"Person" means any natural person, entity, or association, including
------
without limitation any corporation, partnership, limited liability company,
government (or agency or subdivision thereof), trust, joint venture or sole or
joint proprietorship.
"Series A Common Stock" means Holding's Series A Common Stock, $0.001 par
------ - ------ -----
value per share, from and after the effectiveness of the Charter Amendment.
"Series B Common Stock" means Holding's Series B Common Stock, $0.001 par
------ - ------ -----
value per share, from and after the effectiveness of the Charter Amendment.
"Share Value" means $340.00, being the value of each share of Series A
----- -----
Common Stock as of the Closing Date, as agreed among the parties hereto for the
purposes of this Agreement, and as such amount shall be appropriately adjusted
from time to time to reflect stock splits, combinations, recapitalizations or
the like.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any
---------- ------------
corporation a majority (by number of votes) of the outstanding shares of any
class or classes of the capital stock of which shall at the time be owned by
such Person or by a Subsidiary of such Person, if the holders of the shares of
such class or classes of capital stock (a) are ordinarily, in the absence of
contingencies, entitled to vote for the election of at least a majority of the
directors (or persons performing similar functions) of the issuer thereof,
regardless of whether the right so to vote has been suspended by the happening
of such a contingency, or (b) are at the relevant time of reference entitled, as
such holders, to vote for the election of at least a majority of the directors
(or persons performing similar functions) of the issuer thereof, regardless of
whether the right so to vote exists by reason of the happening of a contingency.
AGI shall not be deemed to be a Subsidiary of Holding for purposes of Sections 3
and 6.1 hereof.
-46-
"Tax" or "Taxes" means any federal, state, local, or foreign income, gross
--- -----
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties,
real property, personal property, capital stock, intangibles, social security,
unemployment, disability, payroll, license, employee, or other tax or levy, of
any kind whatsoever, including any interest, penalties, or additions to tax in
respect of the foregoing.
"Tax Return" means any return, declaration, report, claim for refund,
--- ------
information return, or other document (including any related or supporting
estimates, elections, schedules, statements, or information) filed or required
to be filed in connection with the determination, assessment, or collection of
any Tax or the administration of any laws, regulations, or administrative
requirements relating to any Tax.
"Unlimited Holding Claims" means (a) all Damages related to or arising
--------- ------- ------
directly or indirectly out of or in connection with any inaccuracy in or breach
of any representation or warranty made by Holding in Sections 3.2
("Authorization and Enforceability"), 3.3 ("Capitalization"), 3.11 ("Taxes"),
3.27 ("Brokers"), or (to the extent that it relates to any of the foregoing)
3.31 ("Disclosure") hereof, and (b) all Damages to Holding or any of its
Subsidiaries related to or arising directly or indirectly out of or in
connection with Klearfold's agreements in Section 2 and/or Section 7 of Article
X of that certain Agreement between United Paperworkers International Union
Local 286 and Klearfold, effective December 1, 1994, as amended and in effect
from time to time.
11.2. TERMS DEFINED ELSEWHERE. The following terms are defined herein in
the sections identified below:
@@
-47-
TERM SECTION TERM SECTION
---- ------- ---- -------
Acquisition Preamble Indemnified Party 8.3
Act 4.2(a) Indemnifying Party 8.3
Adjusted Share Value 8.4 Intellectual Properties 3.18
AGI Preamble Investor Preamble
AGI Investors Preamble IRS 3.16(b)
AGI Rollover Investors Preamble Klearfold Preamble
AGI Stock 1.1(c) Klearfold Xxxxxx Investors Preamble
Agreement Preamble Klearfold Employee Investors Preamble
Audited Balance Sheet 3.6 Klearfold Management
Charter Amendment 2.2(f) Investors Preamble
Closing 2.1 Klearfold Optionees 2.2(h)
Closing Date 2.1 Material Adverse Effect 3.4
Code 3.16(c) Merger Agreement Preamble
Contract 3.15 New AGI Investors Preamble
Damages 8.1(a) New AGI Investor Stock 1.1(d)
Employee Benefit Plan 3.16(a) New AGI Rollover
Environmental and Safety Laws 3.13(b) Investor Stock 1.1(c)
ERISA 3.16(c) New Heritage Stock 1.1(a)
Existing Stockholders' New Klearfold Management
Agreement 2.2(j) Stock 1.1(b)
Holding Preamble Old Warrant 1.1(a)(iv)
Holding Indemnitees 8.2 PBGC 3.16(d)(ii)
Holding Indemnitors 8.1(b) Real Property 3.8
HSR Act 3.22 Stockholder Agreement 2.2(i)
Third Party Claim 8.3
@@ 12. GENERAL.
12.1. COOPERATION. Each of the parties hereto agrees to use his or its
commercially reasonable efforts to fulfill the conditions precedent to the
effectiveness of this Agreement. Each of the parties shall cooperate with the
others and use commercially reasonable efforts to prepare all necessary
documentation, to effect all necessary filings, and to obtain all necessary
permits, consents, approvals, and authorizations of all third parties and
governmental bodies necessary to consummate the transactions contemplated by
this Agreement. Each party shall have the right to review and approve in advance
all descriptions of or with respect to it that appear in any filing with any
governmental body made in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, the parties shall act reasonably
and as promptly as practicable.
12.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the parties hereto contained in this Agreement or any of the Other
Agreements or otherwise made in writing in connection with the transactions
contemplated hereby shall be deemed material, and, notwithstanding any
investigation by Holding or any of the Investors, as the case may be, shall be
deemed to have been relied on by them, and, subject to the provisions of Section
8.5(d) hereof and Section 8 of the Merger Agreement, shall survive the Closing
and the consummation of the transactions contemplated hereby and by the Merger
Agreement.
-48-
12.3. EXPENSES. Except as expressly provided otherwise in this Agreement
or the Merger Agreement, each of the parties shall be responsible for and shall
pay its or his own expenses in connection with the negotiation and preparation
of this Agreement and the consummation of the transactions contemplated hereby.
12.4. BENEFITS OF AGREEMENT; NO ASSIGNMENTS; NO THIRD-PARTY BENEFICIARIES.
(a) This Agreement shall bind and inure to the benefit of the parties
hereto and their respective heirs, successors, and permitted assigns.
(b) No party shall assign any rights or delegate any obligations
hereunder without the consent of the other parties, and any attempt to do so
shall be void.
(c) Nothing in this Agreement is intended to or shall confer any rights
or remedies on any Person other than the parties hereto and their respective
heirs, successors, and permitted assigns.
12.5. NOTICES. All notices, requests, payments, instructions, or other
documents to be given hereunder shall be in writing or by written
telecommunication, and shall be deemed to have been duly given if (i) delivered
personally (effective upon delivery), (ii) mailed by registered or certified
mail, return receipt requested, postage prepaid (effective five business days
after dispatch), (iii) sent by a reputable, established courier service that
guarantees next business day delivery (effective the next business day), or (iv)
sent by telecopier followed within 24 hours by confirmation by one of the
foregoing methods (effective upon receipt of the telecopy in complete, readable
form), addressed as follows (or to such other address as the recipient party may
have previously furnished to the sending party in accordance with this section):
(a) If to Holding or any of its Subsidiaries prior to the Closing Date,
to or in care of:
-49-
KFI Holding Corporation
000 Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: H. Xxxxx Xxxxxx
Telecopier No. (000) 000-0000
and if to Holding or any of its Subsidiaries after the Closing Date,
to or in care of:
IMPAC Group, Inc.
0000 Xxxxx Xxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxx and Xxxxx Xxxxxxxxx
Telecopier No. (000) 000-0000
and in each case with copies to the other addresses specified in
paragraphs (b) - (d) below.
(b) If to Heritage, to or in care of:
Heritage Partners Management Company, Inc.
00 Xxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, Managing Director
Telecopier No. (000) 000-0000
with a copy sent at the same time and by the same means to:
Xxxxx X. Xxxxx, Esq.
Xxxxxxx Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telecopier No. (000) 000-0000
(c) If to any of the Klearfold Management Investors, to or in care of:
Klearfold, Inc.
000 Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: H. Xxxxx Xxxxxx
Telecopier No. (000) 000-0000
with a copy sent at the same time and by the same means to:
-00-
Xxxxxxx Xxxxxxx, Xxx.
Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000-0000
Telecopier No.: (000) 000-0000
(d) If to any of the AGI Investors, to or in care of:
AGI Incorporated
0000 Xxxxx Xxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxx and Xxxxx Xxxxxxxxx
Telecopier No. (000) 000-0000
with copies sent at the same time and by the same means to:
Xxxxx Xxxxxxx Xxxxxx, Esq.
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
Suite 8000 Sears Tower
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopier No. (000) 000-0000
12.6. COUNTERPARTS. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument. In pleading or proving this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
12.7. CAPTIONS. The captions of sections or subsections of this Agreement
are for reference only and shall not affect the interpretation or construction
of this Agreement.
12.8. EQUITABLE RELIEF. Each of the parties hereby acknowledges that any
breach by it of its obligations under this Agreement would cause substantial and
irreparable damage to the other parties, and that money damages would be an
inadequate remedy therefor, and accordingly, acknowledges and agrees that each
of the other parties shall be entitled to an injunction, specific performance,
and/or other equitable relief to prevent the breach of such obligations (in
addition to all other rights and remedies to which such party may be entitled in
respect of any such breach).
12.9. CONSTRUCTION. The language used in this Agreement is the language
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party.
-51-
12.10. WAIVERS. No waiver of any breach or default hereunder shall be
valid unless in a writing signed by the waiving party. No failure or other delay
by any party exercising any right, power, or privilege hereunder shall be or
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege.
12.11. FURTHER ASSURANCES. From time to time on and after the Closing
Date, each party hereto shall promptly execute and deliver all such further
instruments and other documents, and shall promptly take all such further
actions, as any other party hereto may reasonably request in order more
effectively to effect or confirm the transactions hereby contemplated and to
carry out the purposes of this Agreement.
12.12. ENTIRE AGREEMENT. This Agreement, together with the exhibits and
schedules hereto, the Other Agreements, and the other agreements, instruments,
certificates and documents referred to herein and/or therein as having been or
to be executed and delivered in connection with the transactions contemplated
hereby and thereby, contains the entire understanding and agreement among the
parties, and supersedes any prior understandings or agreements among them, or
between or among any of them, with respect to the subject matter hereof.
12.13. GOVERNING LAW. This Agreement shall to the maximum lawful extent be
governed by and interpreted and construed in accordance with the internal laws
of the State of Delaware, as applied to contracts under seal made, and entirely
to be performed, within Delaware, and without reference to principles of
conflicts or choice of law.
SIGNATURE PAGE 1 OF 3 FOR INVESTMENT AGREEMENT
IN WITNESS WHEREOF, each of the parties has executed and delivered this
Agreement to the others as an agreement under seal as of the date first above
written.
KFI HOLDING CORPORATION
By /s/ Xxxxxxx X. Xxxxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title:
HERITAGE FUND I
INVESTMENT CORPORATION
By /s/ Xxxxxxx X. Xxxxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title:
KLEARFOLD XXXXXX INVESTORS:
/s/ Xxxxxx X. Xxxxxx
-------------------------------
Xxxxxx X. Xxxxxx
/s/ H. Xxxxx Xxxxxx
-------------------------------
H. Xxxxx Xxxxxx
/s/ Xxxxxxx X. Xxxxxx
-------------------------------
Xxxxxxx X. Xxxxxx, as Trustee under
Indenture of Trust dated 06/04/96 of
Xxxxxx X. Xxxxxx
SIGNATURE PAGE 2 OF 3 FOR INVESTMENT AGREEMENT
/s/ Xxxxxx X. Xxxxxx
-------------------------------
Xxxxxx X. Xxxxxx, as Trustee under
an Irrevocable Deed of Trust dated
08/12/92 f/b/o H. Xxxxx Xxxxxx
AGI ROLLOVER INVESTORS:
/s/ Xxxxxxx Xxxxx
-------------------------------
Xxxxxxx Xxxxx
/s/ Xxxxx Xxxxxxxxxxx
-------------------------------
Xxxxx Xxxxxxxxxxx
/s/ Xxxxxxx Xxxxxxxxxxx
-------------------------------
Xxxxxxx Xxxxxxxxxxx
/s/ Xxxx Xxxxxxx
-------------------------------
Xxxx Xxxxxxx
/s/ Xxxx Xxxxxxx
-------------------------------
Xxxx Xxxxxxx
/s/ Xxxxxx Xxxxxxxx
-------------------------------
Xxxxxx Xxxxxxxx
/s/ Xxxxx Xxxxxxxx
-------------------------------
Xxxxx Xxxxxxxx
SIGNATURE PAGE 3 OF 3 FOR INVESTMENT AGREEMENT
/s/ Zenas Block
------------------------------
Zenas Block
NEW AGI INVESTORS:
/s/ Xxxx Xxxxxx
-------------------------------
Xxxx Xxxxxx
/s/ Xxxxx Xxxxxxxxx
-------------------------------
Xxxxx Xxxxxxxxx
/s/ Xxxxxx XxXxxx
-------------------------------
Xxxxxx XxXxxx
/s/ Xxxx Xxxxxxx Xxxxxxx
-------------------------------
Xxxx Xxxxxxx Xxxxxxx
KLEARFOLD EMPLOYEE INVESTORS:
/s/ Xxxxx Xxxxxxx
-------------------------------
Xxxxx Xxxxxxx
/s/ Xxxxxx Xxxxxx
-------------------------------
Xxxxxx Xxxxxx
/s/ Xxxxxx Xxxxxxx
-------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxx XxXxxxxxx
-------------------------------
Xxxx XxXxxxxxx
/s/ Xxxxxxx Xxxxxxx
-------------------------------
Xxxxxxx Xxxxxxx
/s/ Xxxxx X. Xxxxxx
-------------------------------
Xxxxx X. Xxxxxx
SCHEDULE 1A
-------- --
KLEARFOLD MANAGEMENT INVESTORS
--------- ---------- ---------
1. 2. 3. 4. 5. 6.
Klearfold Management Investor Shares of Old Preferred Shares of Old Shares of Old Cash Shares of Series
Stock Voting Common Non-Voting Investment A Common Stock
Stock Common Stock
Part I
---- -
Klearfold Xxxxxx Investors
--------- ------ ---------
Xxxxxx X. Xxxxxx/1/ 3,553 10,625 250 4,964
H. Xxxxx Xxxxxx/1/
Xxxxxxx X. Xxxxxx and Xxxxxx X. 10,625 3,916
Xxxxxx, as Trustees under Indenture
of Trust dated 06/04/96 of Xxxxxx
X. Xxxxxx/1/
Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx, 947 21,250 250 7,958
and H. Xxxxx Xxxxxx, as Trustees
under an Irrevocable Deed
of Trust dated 08/12/92 f/b/o H.
Xxxxx Xxxxxx/1/
___________________________________
_________/1/Does not reflect inter-Xxxxxx transfers prior to contribution.
2. 3. 4. 5. 6.
Part II Shares of Old Preferred Shares of Old Shares of Old Cash Shares of Series
---- --
Klearfold Employee Investors Stock Voting Common Non-Voting Investment A Common Stock
--------- -------- ---------
Stock Common Stock
Xxxxxx Xxxxxxx $ 75,000 220.5
Xxxx XxXxxxxx $ 100,000 294.0
Xxxxx Xxxxxx $ 25,000 73.5
Xxxxxx Xxxxxx $ 25,000 73.5
Xxxxx Xxxxxxx $ 25,000 73.5
H. Xxxxx Xxxxxx $ 925,000 2720.5
Xxxxxxx Xxxxxxx $ 25,000 73.5
TOTAL $1,200,000 3,259
SCHEDULE 1B
-------- --
CANCELLATION OF OLD COMMON STOCK
--------------------------------
NAME OF HOLDER SHARES OF OLD VOTING COMMON STOCK SHARES OF OLD NON-VOTING COMMON
STOCK
Xxxxxxx Xxxxxxx 500 -0-
Xxxxxx Xxxxxxx 500 -0-
Xxxxxxx Xxxxxxx 500 -0-
Xxxxx Xxxxxx 500 -0-
Xxxxxx Xxxxxx -0- 500
Xxxxxx X. Xxxxxx 500 -0-
H. Xxxxx Xxxxxx 500 -0-
SCHEDULE 1C
-------- --
KLEARFOLD OPTIONEES
-------------------
KLEARFOLD OPTIONEES OPTIONS FOR FOLLOWING NUMBER OF
SHARES OF SERIES A COMMON STOCK
Xxxxxx Xxxxxx 152
Xxxxxx Xxxxxxx 152
Xxxxxxx Xxxxxxx 000
Xxxxx Xxxxxx 000
Xxxxxx Xxxxxxx 152
Xxxxx Xxxxxxx 152
Xxxx XxXxxxxx 152
SCHEDULE 2
-------- -
AGI ROLLOVER INVESTORS
--- -------- ---------
1. 2. 3. 4.
AGI Rollover Investor Shares of AGI Stock Cash Investment Shares of Series A Common
Contributed (from proceeds Stock
OF SAR'S)
Xxxxxxx Xxxxx 103,398.57 6154000 18,100
Xxxxx Xxxxxxxxxxx 19,737.60 2117180 6,227
Xxxxxxx Xxxxxxxxxxx 8,669.71 1509600 4,440
Xxxx Xxxxxxx 14,660.57 henkel - 1285880 2,941
999940
Xxxxxx Xxxxxxxx 5,277.81 360060 1,059
Xxxx Xxxxxxx 5,131.20 349860 1,029
Xxxxx Xxxxxxxx 2,932.11 199920 588
Zenas Block 733.03 49980 147
SCHEDULE 3
-------- -
NEW AGI INVESTORS
--- --- ---------
1. 2. 3.
New AGI Investor Cash Investment Shares of Series A Common
(from proceeds of SAR's) Stock
Xxxx Xxxxxx $ 761,003 3,782
Xxxxx Xxxxxxxxx $1,044,480 3,072
Xxxxxx XxXxxx $ 164,560 484
Xxxx Xxxxxxx Xxxxxxx $ 164,560 484
TOTAL $1,373,600
SCHEDULE 4
-------- -
HOLDERS OF SERIES A COMMON STOCK
------- -- ------ - ------ -----
Name of Holder Number of Shares
-------------- ----------------
Heritage Fund I Investment Corporation 40,000
Xxxxxxx Xxxxx 18,100
Xxxxxx X. Xxxxxx 4,964
Xxxxxxx X. Xxxxxx and Xxxxxx X. Xxxxxx, not individually, 3,916
as Trustees under an Irrevocable Deed of Trust dated
06/04/96 of Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxx, and H. Xxxxx Xxxxxx, 7,958
not individually but as Trustees under an Irrevocable Deed
of Trust dated 08/12/92 f/b/o H. Xxxxx Xxxxxx
Xxxxx Xxxxxxxxxxx 6,227
Xxxxxxx Xxxxxxxxxxx 4,440
Xxxxx Xxxxxxxxx 3,072
Xxxx Xxxxxxx 2,941
Xxxx Xxxxxx 3,782
Xxxxxx Xxxxxxxx 1,059
Xxxx Xxxxxxx 1,029
Xxxxx Xxxxxxxx 588
Xxxxxx XxXxxx 481
Xxxx Xxxxxxx Xxxxxxx 000
Xxxxx Xxxxx 147
_______
TOTAL 99,185
SCHEDULE 5
-------- -
EMPLOYMENT AGREEMENTS
---------- ----------
The following individuals will enter into Employment, Non-Competition and Stock
Repurchase Agreements substantially in the form attached to the Merger Agreement
as Exhibit 1.4(c), with such modifications thereto as such individual and
------- ------
Holding shall agree:
Xxxxxxx Xxxxx
Xxxxx Xxxxxxxxxxx
Xxxxxxx Xxxxxxxxxxx
Xxxxx Xxxxxxxxx
Xxxx Xxxxxx
The following individuals will enter into Employment, Non-Competition and Stock
Repurchase Agreements in a form; based on the form attached to the Merger
Agreement as Exhibit 1.4, to be mutually agreed between such individual and
------- ---
Holding:
Xxxxxxxxxx Xxxxx
Xxxxxx XxXxxx
Xxxx Xxxxxxx Xxxxxxx
The following individuals will enter into Employment, Non-Competition and Stock
Repurchase Agreements substantially in the forms agreed with Holding on or prior
to the date hereof, with such modifications thereto as such individual and
Holding shall agree:
Xxxxxx X. Xxxxxx
H. Xxxxx Xxxxxx
SCHEDULES TO THE INVESTMENT AGREEMENT (OMITTED HEREIN)
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Disclosure Schedules
--------------------
Section 3.3(a) Previous Capitalization of Holding
Section 3.3(b) New Capitalization of Holding
Section 3.5 Subsidiaries
Section 3.6 Financial Statements
Section 3.7 Absence of Certain Changes
Section 3.8 Title to Property, Real Property Leases, Etc.
Section 3.9 Indebtedness
Section 3.10 Absence of Certain Undisclosed Liabilities
Section 3.11 Taxes
Section 3.12 Litigation
Section 3.13 Safety and Environmental Matters
Section 3.14 Labor Relations
Section 3.15 Contracts
Section 3.16 Employee Benefit Plans
Section 3.18 Intellectual Property
Section 3.20 Insurance
Section 3.21 Bank Accounts, Signing Authority, Powers of
Attorney
Section 3.24 Suppliers and Customers
Section 3.25 Employment of Officers, Employees
Section 3.28 Compliance with Other Instruments, Laws, Etc.
Section 4.4 Governmental Consents of Investors
Exhibits
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Exhibit A Form of Amended and Restated Certificate of
Incorporation of Holding
Exhibit B Form of Stockholders Agreement
Exhibit C Form of Termination Agreement terminating the old
Investment and old Stockholders' Agreement of
Holding.
Exhibit D Form of Termination Agreement terminating the
old Stock Restriction Agreement of Holdings
Exhibit E Amended and Restated By-Laws of Klearfold
The Company will furnish supplementally a copy of any omitted schedule to the
Securities and Exchange Commission upon request.
