EX-2.1
Merger Agreement
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MERGER AGREEMENT
Dated as of August 28, 1996
By and Among
SPECIALTY PAPERBOARD, INC.,
CPG ACQUISITION COMPANY,
and
CPG INVESTORS INC.
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS................................................................ 2
ARTICLE II
THE MERGER................................................................. 9
ss.2.1 The Merger................................................... 9
ss.2.2 Consummation of the Merger................................... 10
ss.2.3 Effects of the Merger........................................ 10
ss.2.4 Certificate of Incorporation; By-laws........................ 10
ss.2.5 Directors and Officers....................................... 10
ss.2.6 Conversion of Securities..................................... 11
ss.2.7 Closing of Transfer Records.................................. 13
ss.2.8 Payment of Merger Consideration.............................. 13
ss.2.9 Determination of Adjustment to Each
Shareholder's Closing Payment.............................. 15
ss.2.10 Adjustments to Closing Payments.............................. 18
ss.2.11 Payment of Bank Debt......................................... 20
ss.2.12 Dissenting Shares............................................ 20
ss.2.13 Closing...................................................... 22
ARTICLE III
REPRESENTATIONS OF THE COMPANY............................................. 23
ss.3. Representations of the Company............................... 23
ss.3.1 Existence and Good Standing.................................. 23
ss.3.2 Capital Stock................................................ 23
ss.3.3 Authorization and Validity of this
Agreement.................................................. 24
ss.3.4 Subsidiaries and Investments................................. 25
ss.3.5 Financial Statements; No Material Changes.................... 26
ss.3.6 Books and Records............................................ 28
ss.3.7 Title to Properties; Encumbrances............................ 29
ss.3.8 Real Property................................................ 29
ss.3.9 Intellectual Property........................................ 30
ss.3.10 Leases....................................................... 31
ss.3.11 Material Contracts........................................... 31
ss.3.12 Consents and Approvals; No Violations........................ 33
ss.3.13 Litigation................................................... 34
ss.3.14 Taxes........................................................ 35
ss.3.15 Liabilities.................................................. 38
ss.3.16 Insurance.................................................... 39
(i)
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ss.3.17 Compliance with Laws......................................... 40
ss.3.18 Employment Relations......................................... 40
ss.3.19 Employee Benefit Plans....................................... 41
ss.3.20 Interests in Customers, Suppliers, etc....................... 52
ss.3.21 Environmental Laws and Regulations........................... 53
ss.3.22 Bank Accounts, Powers of Attorney............................ 57
ss.3.23 Compensation of Employees.................................... 58
ss.3.24 Conduct of Business.......................................... 58
ss.3.25 Customer Relations........................................... 59
ss.3.26 Condition of Assets.......................................... 59
ss.3.27 Broker's or Finder's Fees.................................... 59
ARTICLE IV
[INTENTIONALLY OMITTED]............................................. ...... 60
ARTICLE V
REPRESENTATIONS OF THE PARENT AND ACQUISITION.............................. 60
ss.5. Representations of the Parent and
Acquisition................................................ 60
ss.5.1 Existence and Good Standing; Power and
Authority.................................................. 60
ss.5.2 Restrictive Documents........................................ 61
ss.5.3 Broker's or Finder's Fees.................................... 61
ARTICLE VI
TRANSACTIONS PRIOR TO THE CLOSING DATE..................................... 61
ss.6.1 Conduct of Business of the Company........................... 61
ss.6.2 Exclusive Dealing............................................ 64
ss.6.3 Review of the Company........................................ 64
ss.6.4 Reasonable Efforts........................................... 66
ss.6.6 Environmental Audit; Escrow; Reporting....................... 67
ARTICLE VII
CONDITIONS TO THE PARENT'S AND ACQUISITION'S OBLIGATIONS................... 69
ss.7. Conditions to the Parent's and Acquisition's
Obligations................................................ 69
ss.7.1 Opinions of Counsel.......................................... 70
ss.7.2 Good Standing and Other Certificates......................... 70
ss.7.3 No Material Adverse Change................................... 71
ss.7.4 Truth of Representations and Warranties...................... 71
ss.7.5 Performance of Agreements.................................... 72
(ii)
Page
ss.7.6 No Litigation Threatened..................................... 72
ss.7.7 Third Party Consents; Governmental ..........................
Approvals.................................................. 72
ss.7.8 Repayment of Indebtedness to Third Parties; .................
Termination of Security Interests.......................... 73
ss.7.9 Financing.................................................... 73
ss.7.10 Termination of Stock Option Plan; Other
Arrangements............................................... 73
ss.7.11 FIRPTA....................................................... 73
ss.7.12 HSR Act...................................................... 74
ss.7.13 Escrow Agreement............................................. 74
ss.7.14 Environmental Assessments; Rochester
Environmental Escrow Amount................................ 74
ss.7.15 Customer/Supplier and Tax Diligence.......................... 74
ss.7.16 Adoption of Flexible Benefits Plan
Document................................................... 75
ss.7.17 Correction of Noncompliance by Employee
Benefit Plans With Terms of Plan and/or
Law........................................................ 75
ss.7.18 Tax Indemnification Agreement................................ 75
ARTICLE VIII
CONDITIONS TO THE COMPANY'S OBLIGATIONS.................................... 76
ss.8. Conditions to the Company's Obligations...................... 76
ss.8.1 Opinions of Counsel.......................................... 76
ss.8.2 Truth of Representations and Warranties...................... 76
ss.8.3 Third Party Consents; Governmental
Approvals.................................................. 77
ss.8.4 Performance of Agreements.................................... 77
ss.8.5 No Litigation Threatened..................................... 77
ss.8.6 HSR Act...................................................... 77
ss.8.7 Shareholder Approval......................................... 78
ss.8.8 Environmental Matters........................................ 78
ARTICLE IX
TAX MATTERS................................................................ 78
ss.9.1 Tax Returns.................................................. 78
ss.9.2 Apportionment of Taxes....................................... 80
ss.9.3 Cooperation; Audits.......................................... 81
ss.9.4 Controversies................................................ 81
ss.9.5 Transfer Taxes............................................... 83
ss.9.6 Amended Returns.............................................. 84
ss.9.7 Indemnification.............................................. 84
(iii)
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION............................... 86
ss.10.1 Survival of Representations.................................. 86
ss.10.2 Indemnification.............................................. 87
ss.10.3 Indemnification Procedure.................................... 94
ARTICLE XI
TERMINATION................................................................ 97
ss.11.1 Termination.................................................. 97
ss.11.2 Effect of Termination........................................ 99
ss.11.3 Effect of Waiver of Condition Precedent...................... 99
ARTICLE XII
MISCELLANEOUS.............................................................. 100
ss.12.1 Knowledge of the Company..................................... 100
ss.12.2 Expenses..................................................... 100
ss.12.3 Governing Law................................................ 100
ss.12.4 Captions..................................................... 100
ss.12.5 Publicity.................................................... 101
ss.12.6 Notices...................................................... 101
ss.12.7 Parties in Interest.......................................... 102
ss.12.8 Counterparts................................................. 103
ss.12.9 Entire Agreement............................................. 103
ss.12.10 Amendments................................................... 103
ss.12.11 Severability............................................... 103
ss.12.12 Third Party Beneficiaries.................................. 103
EXHIBITS
Exhibit I Shareholders
Exhibit II Unaudited Statements
Exhibit III Form of Escrow Agreement
Exhibit IV Form of Tax Indemnification Agreement
SCHEDULES
Schedule 3.2 Equity Rights
Schedule 3.4 Subsidiaries
Schedule 3.5 Preparation of Unaudited Statements; Material
Adverse Changes
Schedule 3.7 Title to Properties
Schedule 3.8 Real Property
Schedule 3.9 Intellectual Property
(iv)
Schedule 3.10 Leases
Schedule 3.11 Material Contracts
Schedule 3.12 Consents and Approvals; Violations
Schedule 3.13 Litigation
Schedule 3.14 Other Tax Matters
Schedule 3.15 Liabilities
Schedule 3.16 Insurance
Schedule 3.18 Employment Relations
Schedule 3.19 Employer Benefit Plans
Schedule 3.20 Interests in Customers and Suppliers
Schedule 3.21 Environmental Laws and Regulations
Schedule 3.22 Bank Accounts, Powers of Attorney
Schedule 3.23 Compensation of Employees
Schedule 3.24 Conduct of Business
Schedule 3.27 Broker's or Finder's Fees
Schedule 6.3 Contracts and other Arrangements Restricting
Disclosure
Schedule 7.8 Indebtedness; Security Interests
(v)
MERGER AGREEMENT
MERGER AGREEMENT (this "Agreement") dated as of August 28, 1996 by and
among SPECIALTY PAPERBOARD, INC., a Delaware corporation (the "Parent"), CPG
ACQUISITION COMPANY, a Delaware corporation and a wholly-owned subsidiary of the
Parent ("Acquisition"), and CPG INVESTORS INC., a Delaware corporation (the
"Company").
W I T N E S S E T H :
WHEREAS, the persons named on Exhibit I attached hereto under Column A
(the "Shareholders") own an aggregate of 520,058 shares of common stock of the
Company as specified and described thereon (collectively the "Stock"), such
shares of the Shareholders being all of the outstanding shares of the capital
stock of the Company;
WHEREAS, the Company has granted options (the "Options") to purchase
54,500 shares of Class A Common Stock of the Company to certain of its employees
(the "Optionholders") pursuant to the CPG Investors Inc. Stock Option Plan, all
of which are outstanding;
WHEREAS, each of the Optionholders is the holder of Options to acquire the
number of shares of Class A Common Stock set forth opposite such Optionholder's
name in Exhibit
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I attached hereto under Column A, which Options constitute all of the issued and
outstanding options to purchase Common Stock or any other capital stock of the
Company;
WHEREAS, subject to the terms and conditions hereof, at or prior to the
Closing, the Optionholders will exercise all of their respective Options;
WHEREAS, the parties hereto desire Acquisition to be merged with and into
the Company pursuant to this Agreement with the Company as the surviving
corporation (the "Merger"); and
WHEREAS, it is the intention of the parties hereto that, upon consummation
of the Merger pursuant to this Agreement, the Parent shall own all of the
outstanding shares of capital stock of the Surviving Corporation.
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
DEFINITIONS
ss.1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the respective meanings specified
therefor below (such meanings to be equally applicable to both the singular and
plural forms of the terms defined).
"Acquisition" shall have the meaning specified in the preamble to this
Agreement.
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"Agreement" shall mean this Agreement, as amended, modified or
supplemented from time to time.
"Arbitrator" shall have the meaning specified in Section 2.9(b)(i).
"Audited Balance Sheets" shall have the meaning specified in Section 3.5.
"Audited Statements" shall have the meaning specified in Section 3.5.
"Balance Sheet" shall have the meaning specified in Section 3.5.
"Balance Sheet Date" shall have the meaning specified in Section 3.5.
"Base Net Worth" shall have the meaning specified in Section 2.10(a).
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which banks located in New York, New York shall be authorized or required by
law to close.
"Claim" shall have the meaning specified in Section 10.3.
"Closing" shall have the meaning specified in Section 2.13.
"Closing Balance Sheet" shall have the meaning specified in Section
2.9(a)(i).
"Closing Date" shall have the meaning specified in Section 2.13.
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"Closing Net Worth" shall have the meaning specified in Section 2.9(a).
"Code" shall have the meaning specified in Section 3.14.
"Common Stock" shall have the meaning specified in Section 3.2.
"Company" shall have the meaning specified in the preamble to this
Agreement.
"Company Property" shall have the meaning specified in Section 3.21.
"Confidentiality Agreement" shall have the meaning specified in Section
6.3.
"CPG Holdings" shall have the meaning specified in Section 3.5(a).
"Crestar" shall have the meaning specified in Section 2.6(a).
"Crestar Loan" shall have the meaning specified in Section 2.6(a).
"Damages" shall have the meaning specified in Section 10.2(a).
"DGCL" shall have the meaning specified in Section 2.1.
"Dissenting Shareholders" shall have the meaning specified in Section
12.12.
"Effective Time" shall have the meaning specified in Section 2.2.
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"Employee Benefit Plans" shall have the meaning specified in Section 3.19.
"Encumbrances" shall have the meaning specified in Section 3.7.
"ENSR" shall mean ENSR Corporation.
"Environment" shall have the meaning set forth in Section 3.21.
"Environmental Claim" shall have the meaning specified in Section 3.21.
"Environmental Law" shall have the meaning specified in Section 3.21.
"Equity Rights" shall have the meaning specified in Section 3.2.
"ERISA" shall have the meaning specified in Section 3.19.
"Escrow Account" shall have the meaning specified in Section 2.8(b).
"Escrow Agent" shall have the meaning specified in Section 2.8(b).
"Escrow Agreement" shall have the meaning specified in Section 7.13.
"GAAP" shall have the meaning specified in Section 3.5.
"Governmental Authority" shall have the meaning specified in Section 3.21.
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"Hazardous Materials" shall have the meaning specified in Section 3.21.
"HSR Act" shall have the meaning specified in Section 6.4.
"Indemnified Party" shall have the meaning specified in Section 10.3(a).
"Indemnifying Party" shall have the meaning specified in Section 10.3(a).
"ISRA" shall have the meaning set forth in Section 3.21.
"Intellectual Property" shall have the meaning specified in Section 3.9.
"Material Adverse Effect" shall have the meaning specified in Section 3.1.
"Merger" shall have the meaning specified in the preamble to this
Agreement.
"Merger Consideration" shall have the meaning specified in Section 2.6(a).
"Multiemployer Plan" shall have the meaning specified in Section 3.19.
"Notice of Objection" shall have the meaning specified in Section
2.9(a)(ii).
"Optionholders" shall have the meaning specified in the preamble to this
Agreement.
"Options" shall have the meaning specified in the preamble to this
Agreement.
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"Overlap Period" shall have the meaning specified in Section 9.4.
"Parent" shall have the meaning specified in preamble to this Agreement.
"Parent Indemnities" shall have the meaning specified in Section 10(b).
"PBGC" shall have the meaning specified in Section 3.19.
"Person" shall have the meaning specified in Section 3.11.
"Pre-Closing Period" shall have the meaning specified in Section 3.14.
"Real Property" shall have the meaning specified in Section 3.8.
"Release" shall have the meaning specified in Section 3.21.
"Remedial Work" shall have the meaning specified in Section 3.21.
"Returns" shall have the meaning specified in Section 3.14.
"Rochester Environmental Escrow Account" shall have the meaning specified
in Section 2.8(c).
"Rochester Environmental Escrow Amount" shall have the meaning specified
in Section 6.6(a).
"Shareholder's Closing Payment" shall have the meaning specified in
Section 2.8(a).
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"Shareholders" shall have the meaning specified in the preamble to this
Agreement.
"Shareholders' Payment Agent" shall have the meaning specified in Section
2.8(a).
"Shareholder's Percentage" shall have the meaning specified in Section
2.10(a).
"Shareholders' Representative" shall mean SCI Investors Inc. or a
replacement representative of the Shareholders appointed by vote of a majority
in interest of the Shareholders determined based on their holdings of Stock as
set forth in Exhibit I attached hereto.
"Single Employer Plan" shall have the meaning specified in Section 3.19.
"Stock" shall have the meaning specified in the preamble to this
Agreement.
"Subsidiary" shall have the meaning specified in Section 3.4.
"Surviving Corporation" shall have the meaning specified in Section 2.1.
"Tax Indemnification Agreement" shall have the meaning specified in
Section 7.18.
"Tax Matter" shall have the meaning specified in Section 9.4.
"Taxes" means all taxes, assessments, charges, duties, fees, levies or
other governmental charges, including,
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without limitation, all Federal, state, local, foreign and other income,
franchise, profits, capital gains, capital stock, transfer, sales, use,
occupation, property, excise, severance, windfall profits, stamp, license,
payroll, withholding and other taxes, assessments, charges, duties, fees, levies
or other governmental charges of any kind whatsoever (whether payable directly
or by withholding and whether or not requiring the filing of a Return), all
estimated taxes, deficiency assessments, additions to tax, penalties and
interest and shall include any liability for such amounts as a result either of
being a member of a combined, consolidated, unitary or affiliated group or of a
contractual obligation to indemnify any person or other entity.
"Unaudited Statements" shall have the meaning specified in Section 3.5.
ARTICLE II
THE MERGER
ss.2.1 The Merger. Subject to and in accordance with the terms and
conditions of this Agreement and in accordance with the Delaware General
Corporation Law (the "DGCL") at the Effective Time, Acquisition shall be merged
with and into the Company. As a result of the Merger, the separate corporate
existence of Acquisition shall cease and the Company shall continue as the
surviving corporation (sometimes referred to
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herein as the "Surviving Corporation") and shall succeed to and assume all of
the rights and obligations of Acquisition in accordance with the DGCL.
ss.2.2 Consummation of the Merger. As soon as practicable on the Closing
Date, the parties hereto will cause the Merger to be consummated by filing with
the Delaware Secretary of State a certificate of merger, in form reasonably
satisfactory to the Company, Parent and Acquisition, executed in accordance with
the relevant provisions of the DGCL, and shall make all other filings or
recordings required under the DGCL. The "Effective Time" as that term is used in
this Agreement shall mean the date on which the certificate of merger is filed
in accordance with the DGCL.
ss.2.3 Effects of the Merger. The Merger shall have the effects set forth
in Section 259 of the DGCL.
ss.2.4 Certificate of Incorporation; By-laws. The Certificate of
Incorporation and By-laws of Acquisition, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation and By-laws of the
Surviving Corporation and thereafter shall continue to be its Certificate of
Incorporation and By-Laws until amended as provided therein and under the DGCL.
ss.2.5 Directors and Officers. The directors of Acquisition immediately
prior to the Effective Time shall be
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the initial directors of the Surviving Corporation each to hold office in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation and until their respective successors are duly elected or appointed
and qualified. The officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation, each to hold
office until their respective successors are duly elected or appointed and
qualified.
ss.2.6 Conversion of Securities. Subject to the terms and conditions of
this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of the Company, the Parent, Acquisition or their respective
shareholders (including without limitation, the Shareholders):
(a) Each share of Common Stock issued and outstanding immediately
prior to the Effective Time as set forth (and, with respect to the
Optionholders, as to be set forth on or prior to the Closing upon exercise of
their respective Options) on Exhibit I under Column B shall be converted into
the right to receive, in cash, subject to the sums to be held in the Escrow
Account and in the Rochester Environmental Escrow Account pursuant to Section
2.8, a per share amount equal to (i)(A) $53,000,000 less the amount to be repaid
on the Closing Date in accordance with Section 2.11
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by the Company to Crestar Bank ("Crestar") and certain other banks for which
Crestar acts as agent under the Credit Agreement, dated as of November 5, 1993
(the "Crestar Loan"), between the Company and Crestar divided by (B) the number
of issued and outstanding shares of Common Stock immediately prior to the
Effective Time (after taking into consideration the exercise of Options), plus
or minus (ii) the adjustment determined and payable pursuant to Sections 2.9 and
2.10. The aggregate consideration payable as described above for all of the
shares of Common Stock shall be referred to herein as the "Merger
Consideration."
(b) As of the Effective Time, all Common Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any shares of Common Stock
shall cease to have any rights with respect thereto, except the right to receive
such holder's appropriate portion of the Merger Consideration as set forth in
Section 2.6(a), upon surrender of such certificate in accordance with Section
2.6(d).
(c) Each share of Common Stock held in the treasury of the Company
immediately prior to the Effective Time shall be cancelled and extinguished at
the Effective Time without any conversion thereof and no payment shall be made
with respect thereto.
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(d) At the Effective Time, each holder of an outstanding certificate
that prior thereto represented Common Stock shall be entitled, upon surrender
thereof to the Parent, to receive in exchange therefor such holder's appropriate
portion of the Merger Consideration pursuant to Section 2.6(a).
(e) Each share of common stock, par value $.001 per share, of
Acquisition issued and outstanding immediately prior to the Effective Time shall
automatically without any action on the part of the holder thereof be converted
into one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation.
ss.2.7 Closing of Transfer Records. After the close of business on the
Closing Date, transfers of Common Stock outstanding prior to the Effective Time
shall not be made on the stock transfer books of the Surviving Corporation.
ss.2.8 Payment of Merger Consideration. Subject to the adjustment provided
for in Sections 2.9 and 2.10, payment of the Merger Consideration shall be made
by the Parent by wire transfer in immediately available funds as follows:
(a) to Crestar or such other bank as the Shareholders' Representative may
designate, as payment agent for the Shareholders (the "Shareholders' Payment
Agent"), the sum of $53,000,000, less (i) the amount to be repaid to Crestar
pursuant to Section 2.11 hereof with respect to the Crestar
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Loan, (ii) the sum of $3,000,000 to be placed in the Escrow Account pursuant to
Section 2.8(b) hereof, and (iii) such amount as the Parent and the Company agree
to place in the Rochester Environmental Escrow Account pursuant to Section
2.8(c) hereof, such sum to be divided among the Shareholders on a pro rata basis
according to the number of shares of Common Stock held by each such Shareholder,
as listed on Exhibit I attached hereto and, with respect to the Optionholders,
as to be set forth on Exhibit I on or before the Closing upon the exercise of
their Options (each such amount, the "Shareholder's Closing Payment") to the
account designated by the Shareholders' Payment Agent to the Parent at least two
Business Days prior to the Closing;
(b) to the escrow agent (the "Escrow Agent") to be held in an escrow
account (the "Escrow Account") pursuant to the provisions of the Escrow
Agreement as contemplated by Section 10.2 hereof, the sum of $3,000,000; and
(c) to the Escrow Agent to be held in an environmental escrow account (the
"Rochester Environmental Escrow Account") pursuant to the provisions of the
Escrow Agreement as contemplated by Section 10.2 hereof, such amount as is
mutually agreed upon by the Parent and the Company pursuant to Section 6.6
hereof to be held as the Rochester Environmental Escrow Amount.
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Each Shareholder's Closing Payment shall be subject to adjustment in
accordance with Section 2.9 below.
ss.2.9 Determination of Adjustment to Each Shareholder's Closing Payment.
(a) Closing Balance Sheet. (i) As soon as practicable (and in no event
later than 45 days after the Closing) the Company shall prepare and deliver to
the Parent and the Shareholders' Representative a proposed actual closing
consolidated balance sheet of the Company and its subsidiaries as of the opening
of business on the Closing Date (the "Closing Balance Sheet"). The Closing
Balance Sheet will be prepared in accordance with GAAP on a basis consistent
with the Audited Balance Sheets. Simultaneously with the preparation and
delivery of the Closing Balance Sheet, the Company shall prepare and deliver to
the Parent and the Shareholders' Representative a statement of "Closing Net
Worth," defined herein as total assets, including cash, less total liabilities,
excluding the outstanding balance of the Crestar Loan, each as set forth in the
Closing Balance Sheet.
(ii) If neither the Parent nor the Shareholders' Representative
objects to the determination by the Company of the Closing Net Worth by written
notice of objection (the "Notice of Objection") delivered to the other party
within 20 days after the receipt of such statement, such Notice of
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Objection to describe in reasonable detail such party's proposed adjustments to
the Closing Net Worth, the proposed Closing Net Worth shall be deemed final and
binding.
(iii) If either party delivers a Notice of Objection in respect of
the Closing Net Worth, then any dispute shall be resolved in accordance with
paragraph (b) of this Section 2.9.
(iv) During the period that the Parent and the Shareholders'
Representative are conducting their review of the determination of the Closing
Net Worth, and subsequent to issuance of the Closing Balance Sheet, Parent and
the Shareholders' Representative and their respective representatives shall have
reasonable access during normal business hours to the workpapers, schedules,
memoranda, and all of the documents, including accounting records and other
information arising after the Closing Date, prepared or reviewed by the Company
and its employees related to or arising in connection with the preparation of
the Closing Balance Sheet and the determination of the Closing Net Worth.
(v) The Company will make the work papers prepared in connection
with its preparation of the Closing Balance Sheet available to each of the
Parent and the Shareholders' Representative and their respective representatives
at reasonable times and upon reasonable notice subsequent to the completion of
their review of the Closing Balance Sheet and
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at any time during the resolution of any objections raised by any party with
respect to the Closing Balance Sheet and the determination of the Closing Net
Worth.
(b) Resolution of Disputes. (i) If either Parent or the Shareholders'
Representative objects to the Closing Balance Sheet or the determination of the
Closing Net Worth as determined by the Company, then the Parent and the
Shareholders' Representative shall promptly endeavor to agree upon the Closing
Net Worth. In the event that a written agreement as to the Closing Net Worth has
not been reached within 20 days after the date of receipt by the Parent or the
Shareholders' Representative, as the case may be, of a Notice of Objection
thereto, then the determination of the Closing Net Worth shall be submitted to a
mutually agreed nationally recognized accounting firm (the "Arbitrator").
(ii) Within 45 days of the submission of any dispute concerning the
preparation of the Closing Balance Sheet or the determination of Closing Net
Worth to the Arbitrator, the Arbitrator shall render a decision in accordance
with this paragraph (b) hereof along with a statement of reasons therefor. The
decision of the Arbitrator shall be final and binding upon the parties hereto.
(iii) The fees and expenses of the Arbitrator for any determination
under this paragraph (b) shall be shared equally by the Parent and the
Shareholders' Representative.
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(iv) Nothing herein shall be construed to authorize or permit the
Arbitrator to determine (A) any question or matter whatever under or in
connection with this Agreement, except the determinations of what adjustments,
if any, must be made in one or more of the items reflected in the Closing
Balance Sheet delivered by the Company in order for the Closing Balance Sheet to
be prepared in accordance with the provisions of this Agreement. Nothing herein
shall be construed to require the Arbitrator to follow any rules or procedures
of any arbitration association.
ss.2.10 Adjustments to Closing Payments. (a) Upon the final determination
of the Closing Net Worth, the parties shall make the following adjustments:
(i) If the Closing Net Worth is greater than $22,771,000 (the "Base
Net Worth"), then each Shareholder's Closing Payment shall be increased by the
amount of such difference multiplied by a fraction, the numerator of which is
the number of shares of Common Stock owned by such Shareholder as set forth
(and, with respect to the Optionholders, as to be set forth on or prior to the
Closing upon exercise of their respective Options) on Exhibit I attached hereto,
and the denominator of which is the total number of issued and outstanding
shares of Common Stock (after taking into account the exercise of Options) (the
"Shareholder's Percentage").
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(ii) If the Closing Net Worth is less than the Base Net Worth, then
each Shareholder's Closing Payment shall be decreased by the amount of such
difference multiplied by the Shareholder's Percentage.
(b) Any adjustment to any Shareholder's Closing Payment required
under this Section 2.10 shall bear interest from the Closing Date to the date of
payment thereof at a per annum rate equal to the "prime lending rate" as
published in The Wall Street Journal as of the Closing Date based upon the
actual number of days elapsed on a 365 day year. Any adjustment required
pursuant to Section 2.10(a)(i) shall be paid by the Parent to the Shareholders'
Payment Agent in cash in the manner set forth in Section 2.8(a). Any adjustment
required pursuant to Section 2.10(a)(ii) shall be paid by each Shareholder to
the Parent in cash by wire transfer in immediately available funds to an account
specified by the Parent at least two Business Days prior to the date on which
such payment is required to be made hereunder. Such adjustment shall be made on
such of the following dates as may be applicable: (A) if neither Parent nor the
Shareholders' Representative shall have objected to the preparation of the
Closing Balance Sheet, the earlier of (1) 25 days after delivery to the Parent
and the Shareholders' Representative of the Closing Balance Sheet or (2) 5 days
after each of the Parent and the Shareholders' Representative
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have each indicated that it has no objections to the Closing Balance Sheet or
(B) if the Parent or the Shareholders' Representative shall have objected to the
Closing Balance Sheet, within 5 days following final agreement or decision with
respect to the Closing Balance Sheet as provided above.
ss.2.11 Payment of Bank Debt. In addition to the payment of the Merger
Consideration pursuant to Article II hereof, at Closing, Parent shall, by wire
transfer, pay or cause the Company to repay the outstanding balance of the
Crestar Loan as of the opening of business on the Closing Date.
ss.2.12 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, but only to the extent required by the DGCL, shares of Common
Stock that are issued and outstanding immediately prior to the Effective Time
and are held by Shareholders who comply with all the provisions of the DGCL
concerning the right of Shareholders to dissent from the Merger and require
appraisal of their shares of Common Stock ("Dissenting Shareholders") shall not
be converted into the right to receive the Merger Consideration but shall become
the right to receive such consideration as may be determined to be due such
Dissenting Shareholder pursuant to the law of the State of Delaware; provided,
however, that (i) if any Dissenting Shareholder shall subsequently deliver a
written withdrawal of his or her demand for appraisal (with the written approval
of the Surviving
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Corporation, if such withdrawal is not tendered within 60 days after the
Effective Time), or (ii) if any Dissenting Shareholder fails to establish and
perfect his or her entitlement to appraisal rights as provided by applicable
law, or (iii) if within 120 days of the Effective Time neither any Dissenting
Shareholder nor the Surviving Corporation has filed a petition demanding a
determination of the value of all shares of Common Stock outstanding at the
Effective Time and held by Dissenting Shareholders in accordance with applicable
law, then such Dissenting Shareholder or Shareholders, as the case may be, shall
forfeit the right to appraisal of such shares and such shares shall thereupon be
deemed to have been converted into the right to receive, as of the Effective
Time, the Merger Consideration, without interest. The Company shall give the
Parent, Acquisition and the Shareholders' Representative prompt notice of any
written demands for appraisal, withdrawals of demands for appraisal and any
other related instruments received by the Company, and shall give the
Shareholders' Representative, after consultation with the Parent, the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal. The Company will not voluntarily make any payment with respect to
any demands for appraisal and will not, except with the prior written consent of
the Parent and the Shareholders' Representative, settle or offer to settle any
demand for an
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amount in excess of the sum described in the next succeeding paragraph of this
Section 2.12.
If at the conclusion of the appraisal procedure set forth in Section
262 of the DGCL, the Surviving Corporation is ordered to make any payment in
respect of any of the shares of Common Stock of any Dissenting Shareholder in an
amount in excess of the product of (A) the number of any such shares of any such
Dissenting Stockholder and (B) the per share Merger Consideration, then, upon
the making of any such payment, the Surviving Corporation shall be entitled to
be repaid out of the Escrow Account the amount of such payment, together with
the fees, costs and expenses suffered or reasonably incurred by the Surviving
Corporation, including, without limitation, any costs taxed to it by the court
in such proceedings, relating to the demand for and the implementation and
conduct of such proceedings.
ss.2.13 Closing. The closing of the Merger referred to in Section 2.1 (the
"Closing") shall take place at 10:00 A.M. at the offices of White & Case, New
York, New York on September 30, 1996, or at such other time and date (not later
than October 15, 1996) as the parties hereto shall designate in writing. Such
date is herein referred to as the "Closing Date".
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ARTICLE III
REPRESENTATIONS OF THE COMPANY
ss.3. Representations of the Company. The Company hereby represents and
warrants to the Parent as follows:
ss.3.1 Existence and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has the requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. The Company is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the character or location of the
properties owned, leased or operated by the Company or the nature of the
business conducted by the Company makes such qualification or license necessary,
except where the failure to be so duly qualified or licensed would not have a
material adverse effect on the business, operations, financial condition or
results of operations of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect").
ss.3.2 Capital Stock. The Company has an authorized capitalization
consisting of 577,201 shares of common stock, par value $0.01 per share, of
which 462,814 are designated as Class A Common Stock, 10,101 are designated as
Class B Common Stock and 104,286 are designated as Class C Common Stock
(collectively, the "Common Stock"), of which 405,671 shares
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of Class A Common Stock, 10,101 shares of Class B Common Stock and 104,286
shares of Class C Common Stock are issued and outstanding on the date hereof and
460,171 shares of Class A Common Stock, 10,101 shares of Class B Common Stock
and 104,286 shares of Class C Common Stock will be issued and outstanding at
Closing. All outstanding shares of capital stock of the Company have been, or
will be when issued, duly authorized and validly issued and are fully paid and
non-assessable. As of the date of this Agreement, except as set forth on
Schedule 3.2, there are no outstanding subscriptions, options, warrants, rights,
calls, commitments, conversion rights, rights of exchange, plans or other
agreements (collectively "Equity Rights") of any character providing for the
purchase, issuance or sale of any shares of the capital stock of the Company. At
closing, there will be no outstanding Equity Rights.
ss.3.3 Authorization and Validity of this Agreement. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement by the Company and the performance of its
obligations hereunder have been duly authorized and approved by its Board of
Directors and by the holders of a requisite amount of the Stock and no other
corporate action on the part of the Company or action by the
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stockholders of the Company is necessary to authorize the execution, delivery
and performance of this Agreement by the Company. This Agreement has been duly
executed and delivered by the Company and, assuming due execution of this
Agreement by the Parent, is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except to the
extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
ss.3.4 Subsidiaries and Investments. Set forth on Schedule 3.4 is a list
of each corporation, partnership and other business entity in which the Company
owns, directly or indirectly, any equity security or other equity interest and
which is controlled, directly or indirectly, by the Company (a "subsidiary").
Except as set forth on Schedule 3.4 each subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation (as set forth on Section 3.4), and has all
requisite power to own its property and to carry on its business as now being
conducted. Set forth on Schedule 3.4 is a list of jurisdictions in which each
subsidiary is qualified as a foreign corporation. Such jurisdictions are the
only jurisdictions in which the character or location of
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the properties owned or leased by each subsidiary, or the nature of the business
conducted by each subsidiary, makes each qualification necessary, except where
the failure to be so qualified would not have a Material Adverse Effect. All of
the outstanding shares of capital stock and other equity interests of each
subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable, and, except as set forth on Schedule 3.4, are owned, of record
and beneficially, by the Company or a subsidiary, free and clear of all liens,
encumbrances, restrictions and claims of every kind. No shares of capital stock
and other equity interests of any subsidiary are reserved for issuance and there
are no outstanding options, warrants, rights, subscriptions, claims, agreements,
obligations, convertible or exchangeable securities or other commitments,
contingent or otherwise, relating to the capital stock of any subsidiary or
pursuant to which any subsidiary is or may become obligated to issue or exchange
any shares of capital stock or other equity interests. Neither the Company nor
any subsidiary owns, directly or indirectly, any capital stock or other equity
or ownership or proprietary interest in any corporation, partnership,
association, trust, joint venture or other entity except as set forth on
Schedule 3.4.
ss.3.5 Financial Statements; No Material Changes.
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(a) The Company has heretofore furnished the Parent with audited
consolidated balance sheets of its wholly-owned subsidiary, CPG Holdings Inc.
("CPG Holdings") and its subsidiaries as of December 31, 1994 and December 31,
1995 (the "Audited Balance Sheets"), together with related consolidated
statements of income and retained earnings and cash flows for the years then
ended, together with the report of Coopers & Xxxxxxx L.L.P. (collectively with
the Audited Balance Sheets, the "Audited Statements"). The Audited Statements,
including the footnotes thereto, have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
indicated ("GAAP") and fairly present in all material respects the financial
position of CPG Holdings its subsidiaries at the respective dates thereof, and
the results of the operations and cash flows of CPG Holdings and its
subsidiaries for the respective periods indicated.
(b) The Company has also heretofore furnished the Parent with an unaudited
consolidated balance sheet of CPG Holdings and its subsidiaries as of June 2,
1996, together with related consolidated statements of income and retained
earnings and cash flows for the period then ended, a copy of which is attached
hereto as Exhibit II (collectively, the "Unaudited Statements"). Except as
described on Schedule 3.5, the Unaudited Statements have been prepared in
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accordance with GAAP and fairly present in all material respects the financial
position of CPG Holdings and its subsidiaries at the date thereof, and the
results of the operations and cash flows of CPG Holdings and its subsidiaries
for the period indicated. The unaudited balance sheet of CPG Holdings and its
subsidiaries dated June 2, 1996, is hereinafter referred to as the "Balance
Sheet" and June 2, 1996, is hereinafter referred to as the "Balance Sheet Date."
(c) Except as set forth on Schedule 3.5, since December 31, 1995, there
has been no (i) material adverse change in the business, operations, financial
condition or results of operations of the Company and its subsidiaries taken as
a whole or (ii) material damage, destruction or loss to any asset or property,
tangible or intangible, of the Company or any of its subsidiaries which
materially affects the ability of the Company or any of its subsidiaries to
conduct its business.
(d) The Company has no assets (other than 100% of the issued and
outstanding capital stock of CPG Holdings) and has no liabilities.
ss.3.6 Books and Records. The minute books of the Company and each of its
subsidiaries, as previously made available to the Parent and its
representatives, contain materially accurate records of all meetings of, and
corporate actions taken by (including action taken by written consent),
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the respective shareholders and Board of Directors of the Company and each of
such subsidiaries. At Closing all of the books and records of the Company and
its subsidiaries will be in the possession of the Company.
ss.3.7 Title to Properties; Encumbrances. Except as set forth on Schedule
3.7 attached hereto and except for such properties and assets which have been
sold or otherwise disposed of in the ordinary course of business, the Company
and each of its subsidiaries have good title to their material properties and
assets (real and personal, tangible and intangible), including, without
limitation, the material properties and assets reflected in the Balance Sheet,
subject to no encumbrance, lien, charge or other restriction of any kind or
character ("Encumbrances"), except for (i) Encumbrances reflected in the Balance
Sheet or the Audited Statements, (ii) Encumbrances for current taxes,
assessments or governmental charges or levies on property not yet due and
delinquent, (iii) Encumbrances arising by operation of law and (iv) Encumbrances
described on Schedule 3.7 attached hereto.
ss.3.8 Real Property. Schedule 3.8 attached hereto contains an accurate
and complete list of all real property owned in whole or in part by the Company
or any of its subsidiaries (the "Real Property"). With respect to all of the
buildings, structures and appurtenances situated on the
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Real Property, the Company and its subsidiaries have adequate rights of ingress
and egress for operation of the business of the Company and its subsidiaries in
the ordinary course consistent with past practice. None of such buildings,
structures or appurtenances, or the operation or maintenance thereof, violates
any restrictive covenant or encroaches on any property owned by others, except
for such violations, encumbrances or encroachments which would not have a
Material Adverse Effect.
ss.3.9 Intellectual Property. Schedule 3.9 attached hereto sets forth a
list of all licenses, patents, trade names, trademarks and service marks
(collectively, the "Intellectual Property") owned by the Company and its
subsidiaries and/or used in the conduct of its business as presently conducted.
The Company knows of no license, patent, trade name, trademark or service xxxx
which is not included within the Intellectual Property and which is necessary
for the continued conduct of its business as presently conducted. Except as
described on Schedule 3.9, all such Intellectual Property is in full force and
effect and neither the Company nor any of its subsidiaries has received written
notice of any event, inquiry, investigation or proceeding threatening the rights
of the Company or any of its subsidiaries in any such Intellectual Property.
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ss.3.10 Leases. Schedule 3.10 attached hereto contains a list of all
leases or sub-leases to which the Company or any of its subsidiaries is a party
requiring an annual aggregate payment of at least $50,000. Except as otherwise
set forth in Schedule 3.10 attached hereto, each lease or sub-lease set forth in
Schedule 3.10 is in full force and effect; all rents and additional rents due to
date from the Company or any of its subsidiaries on each such lease or sublease
have been paid; neither the Company nor any of its subsidiaries has received
written (or, to the Company's knowledge, oral) notice that it is in material
default under any such lease or sub-lease; and, to the knowledge of the Company,
there exists no event, occurrence, condition or act (including the consummation
of the transactions contemplated by this Agreement) which, with the giving of
notice, the lapse of time or the happening of any further event or condition,
would become a material default by the Company or any of its subsidiaries under
such lease or sub-lease.
ss.3.11 Material Contracts. Except as set forth on Schedule 3.10 and
Schedule 3.11 attached hereto, neither the Company nor any of its subsidiaries
has or is bound by (a) any agreement, contract or commitment that involves the
performance of services or the delivery of goods and/or materials by it of an
amount or value in excess of $50,000 other than open sales orders and purchase
orders entered into
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in the ordinary course of business, (b) any agreement, contract or commitment
not in the ordinary course of business, (c) any agreement, indenture or other
instrument which contains restrictions with respect to payment of dividends or
any other distribution in respect of its capital stock, (d) any agreement,
contract or commitment relating to capital expenditures in excess of $50,000,
(e) any agreement, indenture or instrument relating to indebtedness, liability
for borrowed money or the deferred purchase price of property (excluding trade
payables in the ordinary course of business), (f) any loan or advance to, or
investment in, any individual, partnership, joint venture, corporation, trust,
unincorporated organization, government or other entity (each a "Person"), any
agreement, contract or commitment relating to the making of any such loan,
advance or investment or any agreement, contract or commitment involving a
sharing of profits, (g) any guarantee or other contingent liability in respect
of any indebtedness or obligation of any Person (other than in the ordinary
course of business), (h) any management service, consulting or any other similar
type of contract, (i) any agreement, contract or commitment limiting the ability
of the Company or any of its subsidiaries to engage in any line of business or
to compete with any Person, (j) any warranty, guaranty or other similar
undertaking with respect to a contractual performance extended by the Company
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or any of its subsidiaries other than in the ordinary course of business, or (k)
any amendment, modification or supplement in respect of any of the foregoing.
Except as otherwise set forth on Schedule 3.11, each contract or agreement set
forth on Schedule 3.11 is in full force and effect and there exists no material
default or event of default by the Company or any of its subsidiaries thereunder
or, to the knowledge of the Company, event, occurrence, condition or act
(including the consummation of the transactions contemplated hereby) which, with
the giving of notice, the lapse of time or the happening of any other event or
condition, would become a material default or event of default thereunder.
ss.3.12 Consents and Approvals; No Violations. Except as set forth in
Schedule 3.12 attached hereto, the execution and delivery of this Agreement by
the Company and the consummation of the transactions contemplated hereby (a)
will not violate or contravene any provision of the Certificate of Incorporation
or By-laws of the Company or any of its subsidiaries, (b) will not violate or
contravene any statute, rule, regulation, order or decree of any public body or
authority by which the Company or any of its subsidiaries is bound or by which
any of their respective properties or assets are bound, (c) will not require any
filing with, or permit, consent or approval of, or the giving of any notice to,
any governmental or regulatory body, agency or authority,
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or any other Person and (d) will not result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation, payment or
acceleration) under, or result in the creation of any Encumbrance upon any of
the properties or assets of the Company or any of its subsidiaries under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, agreement, lease, franchise agreement or any other
instrument or obligation to which the Company or any of its subsidiaries is a
party, or by which it or any of their respective properties or assets may be
bound, except, in the case of clauses (b), (c) and (d), for such filing, permit,
consent or approval, the absence of which, and violations, breaches, defaults,
conflicts and encumbrances which, in the aggregate would not have a Material
Adverse Effect.
ss.3.13 Litigation. Except as set forth on Schedule 3.13 attached hereto,
there is no action, suit, proceeding at law or in equity, arbitration or
administrative or other proceeding by or before (or to the knowledge of the
Company any investigation by) any governmental or other instrumentality or
agency, pending, or, to the knowledge of the Company, threatened, against or
affecting the Company or any of its subsidiaries or their respective properties
or rights
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which could materially and adversely affect the right or ability of the Company
or any of its subsidiaries to carry on their respective business as now
conducted, or which could have a Material Adverse Effect; and the Company knows
of no valid basis for any such action, proceeding or investigation. Neither the
Company nor any of its subsidiaries is subject to any judgment, order or decree
entered in any lawsuit or proceeding which could reasonably be likely to have a
Material Adverse Effect.
ss.3.14 Taxes. (a) Tax Returns. The Company and each of its subsidiaries
have timely filed or caused to be timely filed or will timely file or cause to
be timely filed with the appropriate taxing authorities all returns, statements,
forms and reports for Taxes ("Returns") that are required to be filed by, or
with respect to, the Company and its subsidiaries on or prior to the Closing
Date. The Returns have accurately reflected and will accurately reflect all
material liability for Taxes of the Company and its subsidiaries for the periods
covered thereby.
(b) Payment of Taxes. All material Taxes and Tax liabilities of the
Company and each of its subsidiaries for all taxable years or periods that end
as of or before the opening of business on the Closing Date and, with respect to
any taxable year or period beginning before and ending after the Closing Date,
the portion of such taxable year or period
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ending as of the opening of business on the Closing Date ("Pre-Closing Periods")
have been timely paid or accrued and adequately disclosed and fully provided for
on the books and records of the Company in accordance with GAAP.
(c) Other Tax Matters. (i) Schedule 3.14 attached hereto sets forth (A)
each taxable year or other taxable period of the Company and each of its
subsidiaries for which an audit or other examination of Taxes by the appropriate
tax authorities of any nation, state or locality is currently in progress (or
scheduled as of the Closing Date to be conducted) together with the names of the
respective tax authorities conducting (or scheduled to conduct) such audits or
examinations and a description of the subject matter of such audits or
examinations, (B) the most recent taxable year or other taxable period for which
an audit or other examination relating to Federal income taxes of the Company
has been finally completed and the disposition of such audits or examinations,
(C) the taxable years or other taxable periods of the Company and each of its
subsidiaries which will not be subject to the normally applicable statute of
limitations by reason of the existence of circumstances that would cause any
such statute of limitations for applicable Taxes to be extended, (D) the amount
of any proposed adjustments (and the principal reason therefor) relating to any
Returns for Tax liability of the Company and its subsidiaries which have been
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proposed or assessed by any taxing authority and (E) a list of all notices
received by the Company and its subsidiaries from any taxing authority relating
to any issue which could affect the Tax liability of the Company and its
subsidiaries, which issue has not been finally determined and which, if
determined adversely to the Company or such subsidiary, could result in a Tax
liability.
(ii) Except as set forth on Schedule 3.14, neither the Company nor
any of its subsidiaries has been included in any "consolidated," "unitary" or
"combined" Return provided for under the law of the United States, any foreign
jurisdiction or any state or locality with respect to Taxes for any taxable
period for which the statute of limitations has not expired.
(iii) All Taxes which the Company or any of its subsidiaries is (or
was) required by law to withhold or collect have been duly withheld or
collected, and have been timely paid over to the proper authorities to the
extent due and payable.
(iv) Neither the Company nor any of its subsidiaries is a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (the "Code").
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(v) There are no tax sharing, allocation, indemnification or similar
agreements or arrangements in effect as between the Company or any predecessor
or affiliate thereof and any other party (including any of the Shareholders and
any predecessor or affiliate thereof) under which the Parent, the Company or any
of its subsidiaries could be liable for any Taxes or other claims of any party.
(vi) Neither the Company nor any of its subsidiaries has applied
for, been granted, or agreed to any accounting method change for which it will
be required to take into account any adjustment under Section 481 of the Code or
any similar provision of the Code or the corresponding tax laws of any nation,
state or locality.
(vii) No indebtedness of the Company or any of the subsidiaries
consists of "corporate acquisition indebtedness" within the meaning of Section
279 of the Code.
(viii) Neither the Company nor any of its subsidiaries is a party to
any agreement that would require it to make any payment that would constitute an
"excess parachute payment" for purposes of Sections 280G and 4999 of the Code.
ss.3.15 Liabilities. Neither the Company nor any of its subsidiaries has
any outstanding material claims, liabilities or indebtedness, contingent or
otherwise, which are required to be disclosed in accordance with GAAP, except as
set forth
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in the Balance Sheet or the Audited Statements or referred to in the footnotes
thereto, other than (a) liabilities incurred subsequent to the Balance Sheet
Date in the ordinary course of business or (b) as disclosed on Schedule 3.15
attached hereto.
ss.3.16 Insurance. Schedule 3.16 contains an accurate and complete list of
all policies of property, fire and casualty, product liability, workers
compensation and other forms of insurance owned or held by the Company or any of
its subsidiaries together with a summary description thereof. Neither the
Company nor any of its subsidiaries has received (i) any written notice of
cancellation of any policy described in such Schedule or refusal of coverage
thereunder, (ii) any written notice that any issuer of such policy has filed for
protection under applicable bankruptcy laws or is otherwise in the process of
liquidating or has been liquidated, or (iii) to the knowledge of the Company,
any other indication that such policies are no longer in full force or effect or
that the issuer of any such policy is no longer willing or able to perform its
obligations thereunder. To the knowledge of the Company, since the last renewal
date of any insurance policy, there has not been any material adverse change in
the relationship of the Company or any its subsidiaries with its insurers or in
the premiums payable pursuant to such policies.
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ss.3.17 Compliance with Laws. The Company and each of its subsidiaries is
in compliance with all applicable laws, regulations, orders, judgments and
decrees, except where the failure to so comply would not have a Material Adverse
Effect. Notwithstanding the foregoing, this Section 3.17 shall not apply to
Environmental Laws, which are covered exclusively by Section 3.21 hereof, or to
compliance with ERISA and the Code in connection with Employee Benefit Plans,
which are covered exclusively by Section 3.19 hereof.
ss.3.18 Employment Relations. (a) The Company and each of its subsidiaries
is in material compliance with all Federal, state or other applicable laws,
domestic or foreign, respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not, and is not, engaged
in any unfair labor practice;
(b) no unfair labor practice complaint against the Company or any of its
subsidiaries is pending before the National Labor Relations Board;
(c) there is no labor strike, dispute, slowdown or stoppage actually
pending or, to the knowledge of the Company, threatened against or involving the
Company or any of its subsidiaries;
(d) except as set forth in Section 3.18, neither the Company nor any of
its subsidiaries is a party to any collective bargaining agreement and no
collective bargaining
-40-
agreement is currently being negotiated by the Company or any of its
subsidiaries; and
(e) except as provided on Schedule 3.18, no claim in respect of the
employment of any employee has been asserted or, to the knowledge of the
Company, threatened, against the Company or any of its subsidiaries.
ss.3.19 Employee Benefit Plans. (a) List of Plans. Set forth in Schedule
3.19 attached hereto is an accurate and complete list of all domestic and
foreign (i) "employee benefit plans," within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations thereunder ("ERISA"); (ii) bonus, stock option, stock purchase,
restricted stock, incentive, profit-sharing, pension, retirement, deferred
compensation, medical, life, disability, accident, accrued leave, vacation, sick
pay, sick leave, supplemental retirement and unemployment benefit plans,
programs, arrangements, commitments and/or practices; (whether or not insured);
and (iii) employment, consulting, termination, and severance contracts or
agreements; for active, retired or former employees or directors, whether or not
any such plans, programs, arrangements, commitments, contracts, agreements
and/or practices (referred to in (i), (ii) or (iii)) are in writing or are
otherwise exempt from the provisions of ERISA; that have been established,
maintained or contributed to (or
-41-
with respect to which an obligation to contribute has been undertaken) or with
respect to which any potential liability is borne by the Company or any of its
subsidiaries (including, for this purpose and for the purpose of all of the
representations in this Section 3.19, any predecessors to the Company or to any
of its subsidiaries and all employers (whether or not incorporated) that are by
reason of common control treated together with the Company, any of its
subsidiaries and/or the Shareholders as a single employer (i) within the meaning
of Section 414 of the Code or (ii) as a result of the Company or any subsidiary
and/or any of the Shareholders being or having been a general partner of any
such employer), since September 2, 1974 ("Employee Benefit Plans").
(b) Status of Plans. Except as set forth on Schedule 3.19 or, except with
respect to an event or condition of noncompliance which would not result in a
Material Adverse Effect, each Employee Benefit Plan has at all times been
maintained and operated in compliance in all material respects with its terms
and the requirements of all applicable laws, including, without limitation,
ERISA and the Code. No complete or partial termination of any Employee Benefit
Plan has occurred or is expected to occur. Neither the Company nor any of its
subsidiaries has any commitment, intention or understanding to create, modify or
terminate any
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Employee Benefit Plan. Except as required by applicable law or the terms of a
current collective bargaining agreement, no condition or circumstance exists
that would prevent the amendment or termination of any Employee Benefit Plan.
Except for scheduled benefit increases under the Company's defined benefit
pension plan required by the current collective bargaining agreements listed in
Schedule 3.18, copies of which have been furnished to the Parent, no event has
occurred and no condition or circumstance has existed that could result in a
material increase in the benefits under or the expense of maintaining any
Employee Benefit Plan from the level of benefits or expense incurred for the
most recent fiscal year ended thereof.
(c) Liabilities. No Employee Benefit Plan subject to Section 412 or 418B
of the Code or Section 302 of ERISA has incurred any accumulated funding
deficiency within the meaning of Section 412 or 418B of the Code or Section 302
of ERISA, respectively, or has applied for or obtained a waiver from the
Internal Revenue Service of any minimum funding requirement under Section 412 of
the Code. Except for payments of premiums to the Pension Benefit Guaranty
Corporation ("PBGC"), neither the Company nor any of its subsidiaries has
incurred any liability (including, for this purpose and for the purpose of all
of the representations in this Section 3.19, any indirect, contingent, or
secondary
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liability) to the PBGC in connection with any Employee Benefit Plan covering any
active, retired or former employees or directors of the Company or any of its
subsidiaries, including, without limitation, any liability under Section 4069 or
4212(c) of ERISA or any penalty imposed under Section 4071 of ERISA, or ceased
operations at any facility or withdrawn from any such Plan in a manner which
could subject it to liability under Section 4062, 4063 or 4064 of ERISA, or
knows of any facts or circumstances that might give rise to any liability of the
Company or any of its subsidiaries to the PBGC under Title IV of ERISA that
could reasonably be anticipated to result in any claims being made against
Parent by the PBGC.
Neither the Company nor any of its subsidiaries has incurred any
withdrawal liability (including any contingent or secondary withdrawal
liability) within the meaning of Section 4201 or 4204 of ERISA to any Employee
Benefit Plan which is a "multiemployer plan" (as such term is defined in Section
4001(a)(3) of ERISA) ("Multiemployer Plan"), and no event has occurred and no
condition or circumstance has existed, that presents a material risk of the
occurrence of any withdrawal from or the partition, termination, reorganization
or insolvency of any such Multiemployer Plan which could result in any liability
of the Company or any of its subsidiaries to any such Multiemployer Plan.
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Neither the Company nor any of its subsidiaries maintains any Employee
Benefit Plan which is a "group health plan" (as such term is defined in Section
5000(b)(1) of the Code) that has not been administered and operated in all
material respects in compliance with the applicable requirements of Section 601
of ERISA and Section 4980B(f) of the Code and neither the Company nor any of its
subsidiaries is subject to any liability, including, without limitation,
additional contributions, fines, penalties or loss of tax deduction as a result
of such administration and operation. Except as set forth in Schedule 3.19,
neither the Company nor any of its subsidiaries maintains any Employee Benefit
Plan (whether qualified or nonqualified within the meaning of Section 401(a) of
the Code) providing for retiree health and/or life benefits and having unfunded
liabilities. Neither the Company nor any of its subsidiaries maintains any
Employee Benefit Plan which is an "employee welfare benefit plan" (as such term
is defined in Section 3(1) of ERISA) that has provided any "disqualified
benefit" (as such term is defined in Section 4976(b) of the Code) with respect
to which an excise tax could be imposed.
Except as set forth on Schedule 3.19, neither the Company nor any of its
subsidiaries has any unfunded liabilities pursuant to any Employee Benefit Plan
that is not intended to be qualified under Section 401(a) of the Code.
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Except as set forth on Schedule 3.19, neither the Company nor any of its
subsidiaries has incurred any liability for any tax or excise tax arising under
Section 4971, 4977, 4978, 4978B, 4979, 4980 or 4980B of the Code, and no event
has occurred and no condition or circumstance has existed that could give rise
to any such liability.
No asset of the Company or any of its subsidiaries is subject to any lien
arising under Section 302(f) of ERISA or Section 412(n) of the Code, and no
event has occurred and no condition or circumstance has existed that could give
rise to any such lien. Neither the Company nor any of its subsidiaries has been
required to provide any security under Section 307 of ERISA or Section
401(a)(29) or 412(f) of the Code, and no event has occurred and no condition or
circumstance has existed that could give rise to any such requirement to provide
any such security.
There are no actions, suits or claims pending, or, to the knowledge of the
Company, threatened, anticipated or expected to be asserted against any Employee
Benefit Plan or the assets of any such plan (other than routine claims for
benefits and appeals of denied routine claims). No civil or criminal action
brought pursuant to the provisions of Title I, Subtitle B, Part 5 of ERISA is
pending, threatened, anticipated, or expected to be asserted against the Company
or any of its subsidiaries or any fiduciary of any Employee
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Benefit Plan, in any case with respect to any Employee Benefit Plan. Except as
set forth on Schedule 3.19, no Employee Benefit Plan or any fiduciary thereof
has been the direct or indirect subject of an audit, investigation or
examination by any governmental or quasi-governmental agency.
(d) Contributions. Except as set forth on Schedule 3.19, full payment has
been made of all amounts which the Company or any of its subsidiaries is
required, under applicable law or under any Employee Benefit Plan or any
agreement relating to any Employee Benefit Plan to which the Company or any of
its subsidiaries is a party, to have paid as contributions thereto as of the
last day of the most recent fiscal year of such Employee Benefit Plan ended
prior to the date hereof. All such contributions have been fully deducted for
income tax purposes or will be deducted for the Company's taxable year on
account of which such contributions were made and no such deduction has been
challenged or disallowed by any governmental authority, and to the knowledge of
the Company, no event has occurred and no condition or circumstance has existed
that could give rise to any such challenge or disallowance. Except as set forth
on Schedule 3.19, the Company has made adequate provision for reserves to make
Employee Benefit Plan contributions that have accrued through the Closing Date,
but that have not been made because they are not yet due under the terms of any
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Employee Benefit Plan or related agreements. Benefits under all Employee Benefit
Plans are as represented and have not been increased subsequent to the date as
of which documents have been provided.
(e) Funded Status; Withdrawal Liability. Except as set forth on Schedule
3.19, as of the date of this Agreement, the current value of the accumulated
benefit obligations (based upon actuarial assumptions which are in the aggregate
reasonable in all respects and which have been furnished to and relied upon by
the Parent) under each Employee Benefit Plan which is covered by Title IV of
ERISA and which is a "Single Employer Plan" (as such term is defined in Section
4001(a)(15) of ERISA) ("Single Employer Plan") did not exceed the current fair
value of the assets of each such Single Employer Plan allocable to such accrued
benefits. Except as set forth on Schedule 3.19, since the Balance Sheet Date,
there has been (i) no material adverse change in the financial condition of any
Single Employer Plan, (ii) no change in the actuarial assumptions with respect
to any Single Employer Plan and (iii) no increase in benefits under any Single
Employer Plan as a result of plan amendments, written interpretations or
announcements (whether written or not), change in applicable law or otherwise,
which individually or in the aggregate, would result in the current value of any
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Single Employer Plan's accrued benefits exceeding the current value of all such
Single Employer Plan's assets.
As of the date of this Agreement, using actuarial assumptions and
computation methods consistent with Subpart 1 of Subtitle E of Title IV of
ERISA, the aggregate liabilities of the Company and its subsidiaries to all
Multi-employer Plans in the event of a complete withdrawal therefrom, as of the
close of the most recent fiscal year of each Multiemployer Plan ended prior to
the date hereof, would not exceed $50,000. To the knowledge of the Company,
there has been no material change in the financial condition of any
Multiemployer Plan, in any such actuarial assumption or computation method or in
the benefits under any Multiemployer Plan as a result of collective bargaining
or otherwise since the close of each such fiscal year which, individually or in
the aggregate, would materially increase such liability.
(f) Tax Qualification. Each Employee Benefit Plan intended to be qualified
under Section 401(a) of the Code has been determined to be so qualified, as to
design, by the Internal Revenue Service, but solely as to plan provisions
required as of December 31, 1994. Each trust established in connection with any
Employee Benefit Plan which is intended to be exempt from Federal income
taxation under Section 501(a) of the Code has been determined to be so exempt by
the Internal Revenue Service. Since the date of each most recent
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determination referred to in this paragraph (f), to the knowledge of the
Company, no event has occurred and no condition or circumstance has existed that
resulted or is likely to result in the revocation of any such determination or
that could adversely affect the qualified status of any such Employee Benefit
Plan or the exempt status of any such trust.
(g) Transactions. No "reportable event" (as such term is defined in
Section 4043 of ERISA) for which the 30-day notice requirement has not been
waived by the PBGC has occurred or is expected to occur with respect to any
Employee Benefit Plan. Neither the Company nor any of its subsidiaries nor any
of their respective directors, officers, employees or, to the knowledge of the
Company, other persons who participate in the operation of any Employee Benefit
Plan or related trust or funding vehicle, has engaged in any transaction with
respect to any Employee Benefit Plan or breached any applicable fiduciary
responsibilities or obligations under Title I of ERISA that would subject any of
them to a tax, penalty or liability for prohibited transactions under ERISA or
the Code or would result in any claim being made under, by or on behalf of any
such Employee Benefit Plan by any party with standing to make such claim.
(h) Triggering Events. The execution of this Agreement and the
consummation of the transactions contemplated hereby,
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do not constitute a triggering event under any Employee Benefit Plan, policy,
arrangement, statement, commitment or agreement, whether or not legally
enforceable, which (either alone or upon the occurrence of any additional or
subsequent event) will or may result in any payment (whether of severance pay or
otherwise), acceleration, vesting or increase in benefits to any employee or
former employee or director of the Company or any of its subsidiaries. Except as
set forth on Schedule 3.19, no Employee Benefit Plan provides for the payment of
severance benefits upon the termination of an employee's employment.
(i) Documents. The Company has delivered or caused to be delivered to the
Parent and its counsel true and complete copies of all material documents in
connection with each Employee Benefit Plan, including, without limitation (where
applicable): (i) all Employee Benefit Plans as in effect on the date hereof,
together with all amendments thereto, including, in the case of any Employee
Benefit Plan not set forth in writing, a written description thereof; (ii) all
current summary plan descriptions, summaries of material modifications, and
material communications; (iii) all current trust agreements, declarations of
trust and other documents establishing other funding arrangements (and all
amendments thereto and the latest financial statements thereof); (iv) the most
recent Internal Revenue Service determination letter
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obtained with respect to each Employee Benefit Plan intended to be qualified
under Section 401(a) of the Code or exempt under Section 501(a) of the Code; (v)
the annual report on Internal Revenue Service Form 5500-series for each of the
last three years for each Employee Benefit Plan required to file such form; (vi)
the most recently prepared actuarial valuation report for each Employee Benefit
Plan covered by Title IV of ERISA; (vii) the most recently prepared financial
statements; and (viii) all contracts relating to each Employee Benefit Plan,
including, without limitation, service provider agreements, insurance contracts,
annuity contracts, investment management agreements, subscription agreements,
participation agreements, and recordkeeping agreements.
ss.3.20 Interests in Customers, Suppliers, etc. Except as set forth on
Schedule 3.20 attached hereto, none of the Shareholders nor any officer or
director of the Company or any of its subsidiaries possesses, directly or
indirectly, any ownership interest in, or is a director, officer or employee of,
any Person which is a supplier, customer, lessor, lessee, licensor, developer,
competitor or potential competitor of the Company or any of its subsidiaries.
Ownership of securities of a company whose securities are registered under the
Securities Exchange Act of 1934 of 5% or less of any class of such securities
shall not be deemed to be a financial interest for purposes of this Section
3.20.
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ss.3.21 Environmental Laws and Regulations. Except as set forth on
Schedule 3.21 and except for that which would not have a Material Adverse
Effect:
(a) To the knowledge of the Company, Hazardous Materials have not been
generated, used, treated, stored or Released on, or transported to or from, any
Company Property, except in compliance with Environmental Law.
(b) The Company and each of its subsidiaries is in compliance in all
material respects with Environmental Law (as hereinafter defined) and the
requirements of any permits issued under such Environmental Laws with respect to
any Company Property.
(c) There are no pending or, to the knowledge of the Company, threatened
Environmental Claims against the Company, its subsidiaries or any Company
Property.
(d) There are no facts, circumstances, conditions or occurrences regarding
the Company's past or present business or operations or any Company Property or
former Company Property, that could reasonably be anticipated (i) to form the
basis of an Environmental Claim against the Company, its subsidiaries or any
Company Property or (ii) to cause such Company Property to be subject to any
legal restrictions on its ownership, occupancy, use or transferability under any
Environmental Law. Notwithstanding anything herein to the contrary, the matters
covered in subparagraphs (a), (b), (c)
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and (e) of this Section 3.21 shall be excluded from the scope of this
subparagraph (d), it being the intent of the parties that the representations
made pursuant to such other subparagraphs shall be the exclusive representations
and warranties made in this Agreement with respect to the matters addressed
therein.
(e) To the knowledge of the Company, there are not now and never have been
any underground storage tanks located on any Company Property or on any property
adjoining or adjacent to any Company Property.
(f) For purposes of this Agreement, the following words and phrases shall
have the following meanings:
"Company Property" means any real property and improvements owned,
leased, used, operated or occupied by the Company or any of its subsidiaries.
"Hazardous Materials" means (i) any petroleum or petroleum products,
radioactive materials, friable asbestos and transformers or other equipment that
contain dielectric fluid containing polychlorinated biphenyls; and (ii) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," or words of similar import, under any applicable Environmental Law.
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"Environment" means soil, sediment, surface waters, groundwater and
air.
"Environmental Claim" means (i) any (a) Remedial Work, to the extent
required by Environmental Law, or (b) a judicial or administrative proceeding
under any Environmental Law, commenced by a Governmental Authority, or by a
third party, seeking damages, injunctive relief, reimbursement of costs,
response costs or penalties, in the case of (a) or (b) arising from the Release
prior to Closing of Hazardous Materials on Company Property or from the
Company's conduct prior to Closing, (ii) a directive by a Governmental Authority
requiring that Remedial Work be undertaken pursuant to an Environmental Law to
address a Release of Hazardous Materials on Company Property, which Release
occurred prior to Closing, or (iii) a written notice from a Governmental
Authority that an investigation has commenced, will commence or must be
commenced concerning the Release or suspected Release of Hazardous Materials on
Company Property, which Release is ultimately determined to have occurred prior
to Closing. Notwithstanding the foregoing, "Environmental Claim" shall not
include any directive or judicial, administrative or regulatory proceeding, or
investigation, to the extent that it relates to (x) laws or regulations which
have as their primary mission the protection of employee health and safety and
which are administered or enforced by
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the Occupational Safety and Health Administration or other Governmental
Authority, (y) Remedial Work required pursuant to ISRA that relates to a
condition created on any Company property subsequent to Closing, or (z)
obligations (including, without limitation, closure obligations under RCRA) that
are incurred or arise because of the cessation of some or all of the operations
at any Company Property subsequent to the Closing Date (except obligations that
relate to the presence of Hazardous Materials on Company Property prior to
Closing in circumstances that could have given rise to an Environmental Claim
prior to Closing had such circumstances been known to the relevant Governmental
Authorities).
"Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code, written and binding guideline or policy, or
rule of common law, in effect and, in each case as amended as of the Closing
Date, and any judicial or administrative interpretation thereof as of the
Closing Date, applicable to the Company or Company Property, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, health, safety or Hazardous Materials, including the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. ss. 9601 et seq.; the Resource Conservation and Recovery Act ("RCRA"), as
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amended, 42 U.S.C. ss. 6901 et seq.; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. ss. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C.
ss. 2601 et seq.; the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the Safe
Drinking Water Act, 42 U.S.C. ss. 300f et seq.; the Oil Pollution Act of 1990,
33 U.S.C ss.2701 et seq.; the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. ss. 651 et seq.;and their state and local counterparts and
equivalents, and the New Jersey Industrial Site Recovery Act, N.J.S.A. ss.
13.6:1k-6, et seq. ("ISRA").
"Governmental Authority" means any federal, state, or local agency,
department or political subdivision of government that has jurisdiction to
administer and enforce an Environmental Law.
"Release" means disposing, discharging, injecting, spilling,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing and
the like, or otherwise entering, into the Environment.
"Remedial Work" means any investigation, monitoring, clean-up,
containment, restoration, remedial, removal or other work concerning or relating
to Hazardous Materials that is required by any Governmental Authority, judicial
order or decree, or by any Environmental Law.
ss.3.22 Bank Accounts, Powers of Attorney. Set forth on Schedule 3.22
attached hereto is an accurate and complete
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list showing (a) the name and address of each bank in which the Company or any
of its subsidiaries has a material account or safe deposit box, the number of
any such account or any such box and the names of all persons authorized to draw
thereon or to have access thereto and (b) the names of all persons, if any,
holding powers of attorney from the Company or any of its subsidiaries.
ss.3.23 Compensation of Employees. Set forth on Schedule 3.23 attached
hereto is an accurate and complete list for fiscal year 1995 showing the names
of all persons employed by the Company and/or any of its subsidiaries who
received more than $50,000 in 1995 cash compensation (including, without
limitation, salary, commission and bonus) and who are expected to be employed by
the Company and/or any of its subsidiaries on the Closing Date. Such list sets
forth the present salary or hourly wage, total in 1995 and expected 1996 cash
compensation (including, without limitation, salary, commission and bonus), of
each such person.
ss.3.24 Conduct of Business. Except as disclosed on Schedule 3.24 attached
hereto and except as expressly contemplated by this Agreement, since December
31, 1995, the Company has taken no action which, if taken subsequent to the
execution of this Agreement and on or prior to the Closing Date, would
constitute a breach of the Company's agreements set forth in Section 6.1
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ss.3.25 Customer Relations. To the knowledge of the Company, there has not
been any change in relations with customers of the Company and its subsidiaries
as a result of the transactions contemplated by this Agreement which could have
a Material Adverse Effect and the Company has no knowledge of any plans by any
of its customers to make any such change.
ss.3.26 Condition of Assets. The assets and properties utilized in and
material to the conduct of the Company's and its subsidiaries' business, whether
owned or leased, are, in the aggregate, in good operating condition and repair
(normal wear and tear excepted) and, in the opinion of the Company, are suitable
for the purposes for which they are presently being used.
ss.3.27 Broker's or Finder's Fees. Except as described on Schedule 3.27
(whose fees and expenses will be paid by the Company prior to Closing or by the
Shareholders), no agent, broker, person or firm acting on behalf of the Company
or the Shareholders, is, or will be, entitled to any commission or broker's or
finder's fees from the Company or any of its subsidiaries in connection with any
of the transactions contemplated by this Agreement.
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ARTICLE IV
[INTENTIONALLY OMITTED]
ARTICLE V
REPRESENTATIONS OF THE PARENT AND ACQUISITION
ss.5. Representations of the Parent and Acquisition. Each of the Parent
and Acquisition represents and warrants to the Company and the Shareholders as
follows:
ss.5.1 Existence and Good Standing; Power and Authority. Each of the
Parent and Acquisition is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of the Parent and
the Acquisition has the requisite corporate power and authority to enter into,
execute and deliver this Agreement and perform its obligations hereunder. This
Agreement has been duly authorized and approved by each of the Parent and
Acquisition and, assuming the due execution of this Agreement by the Company, is
a valid and binding obligation of each of the Parent and Acquisition enforceable
against it in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
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ss.5.2 Restrictive Documents. Neither the Parent nor Acquisition is
subject to any mortgage, lien, lease, agreement, instrument, order, law, rule,
regulation, judgment or decree, or any other restriction of any kind or
character which would prevent consummation by it of the transactions
contemplated by this Agreement.
ss.5.3 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Parent or Acquisition is, or will be, entitled to any
commission or broker's or finder's fees from the Company or any of the
Shareholders in connection with any of the transactions contemplated by this
Agreement.
ARTICLE VI
TRANSACTIONS PRIOR TO THE CLOSING DATE
ss.6.1 Conduct of Business of the Company. During the period from the date
of this Agreement to the Closing Date, the Company and each of its subsidiaries
shall conduct its operations only according to its ordinary and usual course of
business; use its reasonable efforts to preserve intact its business
organizations, keep available the services of its officers and employees and
maintain its relationships and goodwill with licensors, suppliers, distributors,
customers, landlords, employees, agents and others having business relationships
with it; subject to applicable laws relating to
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the exchange of information, confer with the Parent concerning operational
matters of a material nature and report periodically to the Parent concerning
the business, operations and financial condition of the Company and its
subsidiaries. Notwithstanding the immediately preceding sentence, prior to the
Closing Date, except as may be first approved in writing by the Parent or as is
otherwise permitted or required by this Agreement, the Company shall, and shall
cause each of its subsidiaries to, (a) refrain from amending or modifying its
Certificate of Incorporation or ByLaws from its form on the date of this
Agreement, (b) refrain from paying or increasing any bonuses, salaries, or other
compensation to any director, officer, employee or stockholder or entering into
any employment, severance, or similar agreement with any director, officer, or
employee other than, in each case, in the ordinary course of business consistent
with past practice, (c) refrain from the adopting or increasing of any profit
sharing, bonus, deferred compensation, savings, insurance, pension, retirement,
or other employee benefit plan for or with any of its employees, (d) refrain
from entering into any material contract or commitment except material contracts
and commitments in the ordinary course of business consistent with past
practice, (e) refrain from increasing its indebtedness for borrowed money,
except current borrowings in the ordinary course of
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business, (f) refrain from cancelling or waiving any claim or right of
substantial value which, individually or in the aggregate, is material, (g)
refrain from declaring or paying any dividends in respect of its capital stock
or redeeming, purchasing or otherwise acquiring any of its capital stock, (h)
refrain from making any material change in accounting methods or practices,
except as required by law or generally accepted accounting principles, (i) other
than in connection with the exercise of Options, refrain from issuing or selling
any shares of capital stock or any other securities, or issuing any securities
convertible into, or options, warrants or rights to purchase or subscribe to, or
entering into any arrangement or contract with respect to the issue and sale of,
any shares of its capital stock or any other securities, or making any other
changes in its capital structure, (j) other than inventory sold in the ordinary
course of business, refrain from selling, leasing or otherwise disposing of any
asset or property having a value in excess of $100,000 in the aggregate, unless
pursuant to an existing contract or commitment to do so which has been listed on
Schedule 3.11 attached hereto, (k) refrain from entering into any commitment for
the making of a capital expenditure in excess of $100,000, (l) refrain from
writing off as uncollectible any notes or accounts receivable, except write-offs
in the ordinary course of business charged to applicable reserves,
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none of which individually or in the aggregate is material and (m) refrain from
agreeing in writing to do any of the foregoing.
ss.6.2 Exclusive Dealing. During the period from the date of this
Agreement to the Closing Date, neither the Company or any of its subsidiaries,
nor any officer or director of the Company or any of its subsidiaries nor the
Shareholders' Representative shall take any action to, directly or indirectly,
encourage, initiate or engage in discussions or negotiations with, or provide
any information to, any Person, other than the Parent, concerning any purchase
of any capital stock of the Company or any of its subsidiaries or any merger,
sale of substantial assets or similar transaction involving the Company or its
subsidiaries.
ss.6.3 Review of the Company. Subject to applicable laws relating to the
exchange of information, the Parent may, prior to the Closing Date, directly or
through its representatives, review the properties, books and records of the
Company and its subsidiaries and their respective financial and legal condition
to the extent they deem necessary or advisable to familiarize itself with such
properties and other matters; such review shall not, however, affect the
representations and warranties made by the Company in this Agreement or the
remedies of the Parent for breaches
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of those representations and warranties. Subject to applicable laws relating to
the exchanges of information, upon reasonable notice, the Company shall permit
the Parent and its representatives to have, after the date of execution of this
Agreement, full access to the premises and to all the books and records of the
Company and its subsidiaries and to cause the officers of the Company to furnish
the Parent with such financial and operating data and other information with
respect to the business and properties of the Company as the Parent shall from
time to time reasonably request. The Company shall deliver or cause to be
delivered to the Parent such additional instruments, documents, certificates and
opinions as the Parent may reasonably request for the purpose of (a) verifying
the information set forth in this Agreement or on any Schedule attached hereto
and (b) consummating or evidencing the transactions contemplated by this
Agreement. Notwithstanding anything herein to the contrary, neither the Company
nor any of its subsidiaries shall be required to provide access to, or to
disclose, information where such access or disclosure would violate the rights
of any customer of the Company or any of its subsidiaries under a written
contract with the Company or any of its subsidiaries which is listed on Schedule
6.3, jeopardize the attorney-client privilege, or contravene any judgment,
decree or agreement which is binding on the Company entered into prior to the
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date of this Agreement and which is listed on Schedule 6.3. The Company and its
subsidiaries will endeavor to make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply. The parties hereto acknowledge that the Parent and Custom Papers
Group Inc. have entered into a Confidentiality Agreement dated May 21, 1996 (the
"Confidentiality Agreement") and that information obtained during any such
review will be subject to the terms of the Confidentiality Agreement.
ss.6.4 Reasonable Efforts. Each of the Company, the Shareholders'
Representative and the Parent shall cooperate and use their respective
reasonable best efforts to take, or cause to be taken, all appropriate actions,
and to make, or cause to be made, all filings necessary, proper or advisable
under applicable laws and regulations (including, without limitation, the filing
of Notification and Report Forms under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act") with the Federal Trade
Commission and the Antitrust Division of the Department of Justice) to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, their respective reasonable best efforts to
obtain, prior to the Closing Date, all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental
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authorities and parties to contracts with the Company or its subsidiaries as are
necessary for consummation of the transactions contemplated by the Agreement and
to fulfill the conditions to the sale contemplated hereby.
ss.6.5 ISRA Filings. Prior to Closing, the Company shall obtain, or cause
to be obtained, in connection with the transactions contemplated by this
Agreement, from the New Jersey Department of Environmental Protection ("NJDEP"),
in accordance with the provisions of the New Jersey Industrial Site Recovery
Act, N.J.S.A. ss. 13.6:1k-8 et seq., a "Negative Declaration," "No Further
Action Letter," a remedial action workplan, a remediation agreement, or a
determination that the transaction contemplated by this Agreement may proceed
without further approvals by NJDEP and without further actions by the Company
and/or the Shareholders with respect to the Company Property located in
Hughesville and Xxxxxx Xxxx, New Jersey.
ss.6.6 Environmental Audit; Escrow; Reporting. (a) Promptly after
execution of this Agreement, the Parent and the Company shall instruct ENSR to
perform a Phase II environmental assessment with respect to (i) the two settling
ponds located on the north side of the Company's Rochester, Michigan facility
and (ii) the earthen bermed tank storage area located in the southeast corner of
the Company's Rochester, Michigan facility; the scope of which review shall
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be in accordance with the Phase II framework prepared by ENSR as set forth in a
memorandum dated, August 23, 1996 which has been agreed to by the Parent and the
Company on or prior to the date hereof. The costs and expenses of such
environmental assessment shall be borne equally by the Company and the Parent.
Upon completion of such environmental assessment, the Parent shall cause a copy
of all written reports and analytical results to be delivered to the Company and
the Parent and the Company shall engage in a good faith effort to mutually agree
in writing on an amount to be deposited into the Rochester Environmental Escrow
Account to provide the indemnification set forth in Section 10.2(b)(i)(B) (the
"Rochester Environmental Escrow Amount").
(b) The Company agrees to (i) report promptly to the appropriate
Governmental Authorities events relating to the release on or about February
1995 of approximately 3,000 gallons of polyvinyl acetate resin; and (ii)
complete all sampling, testing and other investigation of the two settling ponds
located on the north side of the Company's Rochester, Michigan facility as
required by applicable Environmental Laws or otherwise sufficient to determine
whether such ponds have been closed in full compliance with applicable
Environmental Laws, including whether notice to or involvement by Governmental
Authorities may be required under applicable Environmental Laws, and, in the
event notice or
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involvement is required, provide appropriate and timely notice or initiate such
involvement after consultation with the Parent. In the event the Company
believes, after conducting sufficient sampling, testing or other investigation
in connection with clause (ii) above, that the ponds have been closed in full
compliance with applicable Environmental Laws and that no notice to or
involvement by a Governmental Authority is required, the Company shall provide
to the Parent a legal opinion to that effect, in form and substance, and from
counsel, reasonably acceptable to the Parent.
ss.6.7 Schedule Supplements and Amendments. From time to time prior to the
Closing Date with the prior written consent of the Parent which may be withheld
in the Parent's sole discretion, the Company may supplement or amend any of the
Schedules attached hereto with respect to any matter hereafter arising which, if
existing or occurring at or prior to the date of this Agreement would have been
required to be set forth or described in any such Schedule.
ARTICLE VII
CONDITIONS TO THE PARENT'S AND ACQUISITION'S OBLIGATIONS
ss.7. Conditions to the Parent's and Acquisition's Obligations. The
obligation of the Parent and Acquisition to consummate the Merger and purchase
the Stock contemplated by
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this Agreement are conditioned upon satisfaction, at or prior to the Closing, of
the following conditions:
ss.7.1 Opinions of Counsel. The Company shall have furnished the Parent
with an opinion, dated the Closing Date, of Williams, Mullen, Christian &
Xxxxxxx, a Professional Corporation, in form and substance reasonably
satisfactory to Parent and its counsel.
ss.7.2 Good Standing and Other Certificates. The Parent shall have
received (a) copies of the charter, including all amendments thereto, in each
case certified by the Secretary of State or other appropriate official of the
jurisdiction of incorporation of the Company and each of its subsidiaries, (b) a
certificate from the Secretary of State or other appropriate official of the
jurisdiction of incorporation of the Company to the effect that the Company and
each of its subsidiaries is in good standing and listing all charter documents
of the Company and such subsidiaries on file, (c) a certificate from the
Secretary of State or other appropriate official in each State in which the
Company or any of its subsidiaries is qualified to do business to the effect
that the Company or such subsidiary is so qualified in such State, (d) if
available and not otherwise covered in Section 7.2(b) above, a certificate as to
the tax status of the Company and/or each of its subsidiaries from the
appropriate official in its jurisdiction of incorporation and
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each state in which the Company or such subsidiary is qualified to do business
and (e) a copy of the By-Laws of the Company and each of its subsidiaries
certified by the Secretary of the Company as being true and correct and in
effect on the Closing Date.
ss.7.3 No Material Adverse Change. Prior to the Closing there shall have
been no material adverse change in the business, operations, financial condition
or results of operations or of the Company and its subsidiaries taken as a whole
and the Company shall have delivered to the Parent an officer's certificate,
dated the Closing Date, to the foregoing effect. Without limiting the foregoing,
the loss of one or more of the top ten customers of the Company and its
subsidiaries taken as a whole (based on the Company's consolidated 1995
revenues) or one or more of the top ten suppliers of the Company and its
subsidiaries taken as a whole (based on the Company's consolidated 1995 direct
cost of goods sold) of the Company or any of its subsidiaries (or receipt of
notification from a major customer or supplier that the Company or any of its
subsidiaries would lose such customer or supplier) during such period shall be
deemed a material adverse change in the business of the Company and its
subsidiaries taken as a whole.
ss.7.4 Truth of Representations and Warranties. The representations and
warranties of the Company and the
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representations and warranties of the Shareholders' Representative contained in
this Agreement shall be true and correct on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of such date, and the Company and the Shareholders' Representative shall have
each delivered to the Parent a certificate, dated the Closing Date, to such
effect.
ss.7.5 Performance of Agreements. All of the agreements of the Company and
the Shareholders to be performed prior to the Closing pursuant to the terms of
this Agreement shall have been duly performed in all material respects, or
waived in writing by Parent, and the Company shall have each delivered to the
Parent a certificate, dated the Closing Date, to such effect.
ss.7.6 No Litigation Threatened. No action or proceedings shall have been
instituted or, to the knowledge of the Company, threatened before a court or
other government body or by any public authority to restrain or prohibit any of
the transactions contemplated hereby.
ss.7.7 Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, disclosed on any Schedule attached hereto or
required in connection with the consummation of the transactions contemplated by
this Agreement shall have been received. All of the consents, approvals,
authorizations, exemptions and waivers from
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governmental agencies that shall be required in order to enable the Parent to
consummate the transactions contemplated hereby shall have been obtained.
ss.7.8 Repayment of Indebtedness to Third Parties; Termination of Security
Interests. The Crestar Loan shall be repaid at Closing as provided in Section
2.11 hereof. Documents and instruments necessary to release all security
interests, liens, mortgages, claims or other encumbrances of any kind securing
the Crestar Loan shall be delivered at Closing. Neither the Company nor any of
its subsidiaries has any outstanding indebtedness for borrowed money except for
the Crestar Loan.
ss.7.9 Financing. The Parent and Acquisition shall have received financing
on substantially the same terms and conditions as set forth in the commitment
letter of Bankers Trust Company, dated August 9, 1996, a copy of which has been
delivered to the Shareholders' Representative.
ss.7.10 Termination of Stock Option Plan; Other Arrangements. The Company
shall have terminated its stock option plan, its financial and advisory service
arrangements with SCI Investors Inc. and the contracts listed on Schedule 3.11
attached hereto which are signified by an asterisk("*").
ss.7.11 FIRPTA. The Company shall have furnished to the Parent, on or
within thirty (30) days prior to the Closing Date, an affidavit issued by the
Company pursuant to Treasury
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Regulation ss. 1.897-2(h), certifying that the Company is not and has not been
at any time during the past 5 years a United States real property holding
corporation as required by Section 1445 of the Code.
ss.7.12 HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the transactions contemplated by this Agreement shall have
expired or terminated.
ss.7.13 Escrow Agreement. The Shareholders' Representative, the Parent and
the Escrow Agent shall have entered into an escrow agreement substantially in
the form of Exhibit III hereto (the "Escrow Agreement").
ss.7.14 Environmental Assessments; Rochester Environmental Escrow Amount.
The Parent's environmental consultants shall have completed to Parent's
reasonable satisfaction the Phase II environmental assessment referred to in
Section 6.6(a) and the Parent and the Company shall have agreed upon the
Rochester Environmental Escrow Amount.
ss.7.15 Customer/Supplier and Tax Diligence. The Parent shall have
completed, to Parent's reasonable satisfaction, its customer/supplier and tax
diligence; provided, however, that this condition precedent shall lapse and be
of no further effect to the extent Parent has not notified the
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Company of its objections, if any, in connection with such matters by September
15, 1996.
ss.7.16 Adoption of Flexible Benefits Plan Document. The Company shall
have prepared and adopted a plan document, in compliance with the applicable
provisions of the Code and ERISA, under which the Company's Flexible Benefits
Plan, including, among other features, its Health Care Expense Reimbursement
Account Plan and Dependent Care Expense Reimbursement Account Plan, shall be set
forth, and the Parent shall have received a copy of such plan document.
ss.7.17 Correction of Noncompliance by Employee Benefit Plans With Terms
of Plan and/or Law. The Company shall have corrected, in a manner reasonably
satisfactory to the Parent, each instance disclosed in Schedule 3.19(b) attached
hereto which is signified by an asterisk ("*") of the failure of an Employee
Benefit Plan, and/or the sponsor of an Employee Benefit Plan, to comply with
applicable law and/or the terms of such Employee Benefit Plan.
ss.7.18 Tax Indemnification Agreement. Not less than ninety-eight percent
(98%) of the Shareholders shall have executed and delivered a tax indemnity
agreement in substantially the form of Exhibit IV attached hereto (the "Tax
Indemnfication Agreement") providing for indemnification after the Survival
Expiration Date (as defined in the Escrow Agreement) equivalent to the
indemnification described in
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Section 9.7; provided that the Shareholders' indemnification obligations under
the Tax Indemnification Agreement shall not exceed the aggregate amount
distributed to the Shareholders from the Escrow Account in accordance with the
Escrow Agreement on the Survival Expiration Date (as defined in the Escrow
Agreement).
ARTICLE VIII
CONDITIONS TO THE COMPANY'S OBLIGATIONS
ss.8. Conditions to the Company's Obligations. The obligations of the
Company to effect the transactions contemplated by this Agreement on the Closing
Date are conditioned upon satisfaction or waiver, at or prior to the Closing, of
the following conditions:
ss.8.1 Opinions of Counsel. The Parent shall have furnished the Company
and the Shareholders with an opinion, dated the Closing Date, of White & Case,
in form and substance reasonably satisfactory to the Company and its counsel.
ss.8.2 Truth of Representations and Warranties. The representations and
warranties of the Parent and Acquisition contained in this Agreement shall be
true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such date, and
the Parent and Acquisition shall have
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delivered to the Shareholders' Representative an officer's certificate, dated
the Closing Date, to such effect.
ss.8.3 Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, required in connection with the consummation of
the transactions contemplated by this Agreement shall have been received. All of
the consents, approvals, authorizations, exemptions and waivers from government
agencies that shall be required in order to permit the consummation of the
transactions contemplated hereby shall have been obtained.
ss.8.4 Performance of Agreements. All of the agreements of the Parent and
Acquisition to be performed prior to the Closing pursuant to the terms of this
Agreement shall have been duly performed in all material respects, and the
Parent and Acquisition shall have delivered to the Shareholders' Representative
an officer's certificate, dated the Closing Date, to such effect.
ss.8.5 No Litigation Threatened. No action or proceeding shall be
instituted or, to the knowledge of the Parent, threatened before a court or
other government body or any public authority to restrain or prohibit any of the
transactions contemplated hereby.
ss.8.6 HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the transactions
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contemplated by this Agreement shall have expired or terminated.
ss.8.7 Shareholder Approval. The transactions contemplated by this
Agreement shall have been approved by the Shareholders to the extent required by
law; provided, however, that this condition precedent shall lapse and be of no
further effect to the extent that such approval of the Shareholders has not been
obtained by September 6, 1996, and, on or prior to such date, the Company shall
not have notified Parent that the Shareholders have refused to give such
approval.
ss.8.8 Environmental Matters. The Company and the Parent shall have agreed
upon the Rochester Environmental Escrow Amount.
ARTICLE IX
TAX MATTERS
I ss.9.1 Tax Returns. The Parent shall prepare and timely file, or cause to
be prepared and timely filed, all Returns of the Company and its subsidiaries.
Such authority shall include, but not be limited to, the determination of the
manner in which any items of income, gain, deduction, loss or credit arising out
of the income, properties and operations of the Company and its subsidiaries
shall be reported or disclosed on such Returns; provided, however, with respect
to
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Returns to be filed by the Parent pursuant to this Section 9.1 for taxable
periods beginning before the Closing Date, items set forth on such Returns shall
be treated in a manner consistent with the past practices with respect to such
items, unless otherwise required by law. The Parent shall provide to the
Sellers' Representative drafts of all Returns of the Company to be filed by the
Parent pursuant to this Section 9.1 with respect to taxable years or other
taxable periods beginning before the Closing Date and ending after the Closing
Date at least thirty (30) days prior to the due date for the filing of such
Returns. At least fifteen (15) days prior to the due date for the filing of such
Returns, the Sellers' Representative shall notify the Parent of the existence of
any objection (specifying in reasonable detail the nature and basis of such
objection) the Sellers' Representative may have to any items set forth on such
draft Returns. The Parent and the Sellers' Representative agree to consult and
to resolve in good faith any such objection within such 15 day period. The
Parent shall not file any such Return with respect to taxable years or other
taxable periods beginning before the Closing Date and ending after the Closing
Date without the prior consent of the Sellers' Representative, which consent
shall not be unreasonably withheld or delayed.
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ss.9.2 Apportionment of Taxes. All Taxes and Tax liabilities with respect
to the income, property or operations of the Company that relate to a taxable
year or other taxable period beginning before and ending after the Closing Date
shall be apportioned between the Pre-Closing Period and the post-closing period
as follows: (A) in the case of Taxes other than income Taxes and sales and use
Taxes, on a per diem basis, and (B) in the case of income Taxes and sales and
use Taxes, as determined from the books and records of the Company, to the
portion of such period ending on the Closing Date as though the taxable year of
the Company terminated at the opening of business on the Closing Date, and based
on accounting methods, elections and conventions that do not have the effect of
distorting income and expenses. All Taxes of the Company which are attributable
(as determined under this Section 9.2) to any taxable year or other taxable
period (or portion thereof) ending on or prior to the Closing Date, reduced by
liability accruals or other applicable reserves or provisions set forth in the
Closing Balance Sheet shall, be payable out of the Escrow Account to the extent
provided in Section 9.7 hereof or by the Shareholders to the extent provided in
the Tax Indemnification Agreement, subject to the applicable limitations set
forth in Section 9.7 hereof. The Parent shall be liable for the payment of Taxes
which are
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attributable to taxable years and other taxable periods (or portions thereof)
beginning on the Closing Date, except as provided for in clause (iii) of Section
9.7.
ss.9.3 Cooperation; Audits. In connection with the preparation of Returns,
audit examinations and any administrative or judicial proceedings relating to
the Tax liabilities imposed on the Company for all Pre-Closing Periods, the
Parent and the Company on the one hand, and the Sellers' Representative on the
other hand, will cooperate fully with each other, including, but not limited to,
the furnishing or making available during normal business hours of records,
personnel (as reasonably required), books of account, powers of attorney or
other materials necessary or helpful for the preparation of such Returns, the
conduct of audit examinations or the defense of claims by Tax authorities as to
the imposition of Taxes.
ss.9.4 Controversies. The Parent shall promptly notify the Shareholders'
Representative in writing upon receipt by the Parent or any affiliate of the
Parent (including the Company and its subsidiaries after the Closing Date) of
written notice of any inquiries, claims, assessments, audits or similar events
with respect to Taxes relating to a taxable period ending on or prior to the
Closing Date for which the Parent or the Company may be entitled to
indemnification under Section 9.7 hereof or under the Tax Indemnification
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Agreement (any such inquiry, claim, assessment, audit or similar event, a "Tax
Matter"). The Shareholders' Representative shall have the authority to represent
the interests of the Company and its subsidiaries with respect to any Tax Matter
before the Internal Revenue Service, any other taxing authority, any other
governmental agency or authority or any court and shall have the sole right to
control the defense, compromise or other resolution of any Tax Matter, including
responding to inquiries, filing Tax returns and settling audits; provided,
however, that the Shareholders' Representative shall not enter into any
settlement of or otherwise compromise any Tax Matter that affects or may affect
the Tax liability of the Parent, the Company, its subsidiaries, or any affiliate
of the foregoing for any period ending after the Closing Date, including the
portion of a period beginning before the Closing Date and ending after the
Closing Date (the "Overlap Period") that is after the Closing Date, without the
prior written consent of the Parent, which consent shall not be unreasonably
withheld. The Shareholders' Representative shall keep the Parent fully and
timely informed with respect to the commencement, status and nature of any Tax
Matter. The Shareholders' Representative shall, in good faith, allow the Parent
to make comments to the Shareholders' Representative regarding the conduct of or
positions taken in any such proceeding. During
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such period as the Escrow Account is being held, all reasonable expenses of the
Shareholders' Representative incurred in connection with any Tax Matter
hereunder shall be paid out of such Escrow Account.
Except as otherwise provided in this Section 9.4, the Parent shall have
the sole right to control any audit or examination by any taxing authority,
initiate any claim for refund or amend any Return, and contest, resolve and
defend against any assessment for additional Taxes, notice of Tax deficiency or
other adjustment of Taxes of, or relating to, the income, assets or operations
of the Company or any of its subsidiaries for all taxable periods; provided,
however, that the Parent shall not, and shall cause its affiliates (including
the Company and its subsidiaries) not to, enter into any settlement of any
contest or otherwise compromise any issue with respect to the portion of the
Overlap Period ending on or prior to the Closing Date without the prior written
consent of the Shareholders' Representative, which consent shall not be
unreasonably withheld.
ss.9.5 Transfer Taxes. All transfer, sales and use, registration, stamp
and similar Taxes imposed in connection with the sale of the Stock or any other
transaction that occurs pursuant to this Agreement shall be borne equally by the
Shareholders, on the one hand, and the Parent, on the other hand.
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ss.9.6 Amended Returns. None of the Shareholders, the Company, nor any of
its subsidiaries shall file or cause to be filed any amended Return relating to
the Company or any of its subsidiaries without the prior written consent of the
Parent, which consent shall not be unreasonably withheld.
ss.9.7 Indemnification. The Parent, its affiliates (including the
Surviving Corporation and its subsidiaries) and the successors to the foregoing
(and their respective shareholders, officers, directors, employees and agents)
shall be indemnified out of the available proceeds held in the Escrow Account on
an after-tax basis against (i) all Taxes, losses, claims and expenses resulting
from, arising out of, or incurred with respect to, any claims that may be
asserted by any party based upon, attributable to, or resulting from the failure
of any representation or warranty made pursuant to Section 3.14 to be true and
correct as of the Closing Date; (ii) all Taxes imposed on or asserted against
the properties, income or operations of the Company or any of its subsidiaries
for all Pre-Closing Periods to the extent such Taxes have not been paid prior to
Closing or are not fully disclosed and reserved for, accrued, or otherwise
provided for in the Closing Balance Sheet; and (iii) all Taxes imposed on the
Company or any of its subsidiaries, or for which the Company or any of its
subsidiaries may be liable, as a result of any transaction contemplated by this
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Agreement; provided, however, that to the extent the Tax liability of the
Company with respect to a Pre-Closing Period is adjusted and such adjustment
gives rise to an obligation under this Section 9.7 to make an indemnification
payment, the amount of such indemnification payment shall be reduced by the
amount of Tax savings resulting from such adjustment (the "Tax Savings")
actually realized by the Parent or the Company on or prior to the date when such
indemnification payment is due, as determined by the Parent in its sole
discretion (it being understood that the Company and the Parent shall not be
obligated to disclose any information with respect to the income, results of
operations, or Taxes or Returns of the Company or the Parent with respect to any
period after the Closing Date, other than as expressly provided for in Section
9.1). If the Tax liability of the Company or Parent is adjusted after filing a
Return in which the Tax Savings are realized by the Company or the Parent and
such adjustment reduces the amount of such Tax Savings realized by the Company
and/or the Parent, the Company and/or the Parent shall be reimbursed out of the
Escrow Account or by the Shareholders pursuant to the Tax Indemnfication
Agreement, subject to the applicable limitations of this Section 9.7, for the
amount of such reduced Tax Savings, as determined by the Parent, within 10 days
after receipt by Sellers' Representative from the Parent of a certificate
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setting forth the amount of such reduced Tax Savings. The Parent shall promptly
give the Shareholders' Representative or his representative written notice of
all Taxes, losses, claims and expenses which the Parent has reasonably
determined may give rise to a right of indemnification under this Section 9.7,
including a computation of the amount of the required indemnification with
sufficient detail and particularity to enable the Shareholders to reasonably
determine the amount of such required indemnification. All claims for indemnity
under this Section 9.7 shall be subject to the provisions of Section 10.3 and to
Sections 10.1 and 10.2, in each case to the extent expressly provided therein.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
ss.10.1 Survival of Representations. The respective representations,
warranties and indemnities of the Company, the Parent and Acquisition contained
in this Agreement shall survive the Closing for a period of eighteen (18)
months, except for the representations, warranties and indemnities of the
Company contained in Sections 3.14 and 9.7, which shall survive for the
applicable statute of limitations period; provided, however, that to the extent
that prior to the expiration of the applicable survival date described above, a
party asserts a claim for indemnification in accordance
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with this Agreement and, if applicable, the Escrow Agreement, then such party's
right to indemnification with respect to such claim shall not terminate as of
the expiration of the survival date, but shall continue for such period
thereafter (subject to Section 3(j) of the Escrow Agreement) as may be required
to finally resolve such claim.
ss.10.2 Indemnification. (a) To the extent of the proceeds held in the
Escrow Account, the Parent, its affiliates (including, without limitation, the
Surviving Corporation and its subsidiaries) and the successors to the foregoing
(and their respective shareholders, officers, directors, employees and agents)
shall be indemnified and held harmless from damages, losses, costs or expenses
(including, without limitation, reasonable attorneys' and consultants' fees and
expenses), in each case reduced by any amounts actually recovered under
insurance policies (net of related costs of collection) and, with respect to any
particular damage, loss, cost or exposure, by any applicable reserves or
allowances reflected on the Closing Balance Sheet with respect to such
particular damage, loss, cost or exposure, and determined on an after-tax basis
("Damages") incurred or suffered as a result of or arising out of (i) the
failure of any representation or warranty made by the Company in this Agreement
(without regard to any "materiality" or any "material adverse effect" exception
contained therein) to be
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true and correct as of the Closing Date, (other than a breach of Section 3.14
with respect to Taxes which shall be governed by Section 9.7 and a breach of
Section 3.21 which shall be governed by paragraph (b) of this Section 10.2) or
(ii) the breach of any covenant or agreement made or to be performed by the
Company pursuant to this Agreement; provided, however, that the Parent, its
affiliates and successors, shall have no right to seek any indemnity under this
Section 10.2(a) unless the aggregate amount of Damages (together with Damages
under Section 10.2(b)(i)(A)) exceeds $300,000 and then only to the extent of
such excess; provided, further, however, that the maximum indemnity proceeds to
which the Parent, its affiliates and successors shall be eligible to receive
under Section 9.7, this Section 10.2(a) and Section 10.2(b)(i)(A) and Section
10.2(b)(i)(B), to the extent of any indemnity pursuant to such Section in excess
of the Rochester Environmental Escrow Account, shall not exceed $3,000,000 in
the aggregate.
(b) (i)(A) To the extent of the proceeds held in the Escrow Account, the
Parent, its affiliates (including, without limitation, the Surviving Corporation
and its subsidiaries) and the successors to the foregoing (and their respective
shareholders, officers, directors, employees and agents) and/or to the Parent's
or the Company's interest in the chain-of-title to Company Property
(collectively the
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"Parent Indemnitees"), shall be indemnified and held harmless from Damages
incurred or suffered as a result of or arising out of (x) the failure of any
representation or warranty made by the Company in Section 3.21 (without regard
to any "materially" or "material adverse effect" exception contained therein) or
(y) any Environmental Claim; provided, however, that the Parent Indemnitees
shall have no right to seek any indemnity under this Section 10.2(b)(i)(A)
unless the aggregate amount of Damages (together with Damages under Section
10.2(a)) exceeds $300,000 and then only to the extent of such excess; and
provided, further, however, that the maximum indemnity proceeds to which the
Parent Indemnitees shall be eligible to receive under Section 9.7, Section
10.2(a) and this Section 10.2(b)(i)(A) and Section 10.2(b)(i)(B), to the extent
of any indemnity pursuant to such Section in excess of the Rochester
Environmental Escrow Account, shall not exceed $3,000,000 in the aggregate.
(B) Notwithstanding clause (A) above, to the extent of the proceeds held
in the Rochester Environmental Escrow Account and, if not adequate therefor,
also to the extent of the proceeds in the Escrow Account, the Parent Indemnitees
shall be indemnified and held harmless from dollar one from Damages incurred or
suffered as a result of or arising out of any Environmental Claim relating to or
arising from (i) the areas associated with or affected by, or any events or acts
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or omissions of the Company relating to (a) the two settling ponds located on
the north side of the Company's Rochester, Michigan facility, or (b) the earthen
bermed tank storage area located in the southeast corner of the Company's
Rochester, Michigan facility; or (ii) any action by a Governmental Authority
arising from a notice or report filed by the Company in accordance with Section
6.6(b) (including, without limitation, any investigation or oversight by a
Governmental Authority resulting from such notice or report with respect to the
subject matter thereof); provided, however, that the maximum indemnity proceeds
to which the Parent Indemnitees shall be eligible to receive under this Section
10.2(b)(i)(B) shall not exceed, in the aggregate, (x) the Rochester
Environmental Escrow Amount, plus (y) the sum of $3,000,000, reduced by the
aggregate indemnity proceeds received prior to such time by the Parent
Indemnitees pursuant to Sections 9.7, 10.2(a), 10.2(b)(i)(A) and, other than
proceeds paid from the Rochester Environmental Escrow Account, this Section
10.2(b)(i)(B).
(ii) As to any Remedial Work for which indemnity is provided under this
section 10.2(b), Parent, in consultation with Shareholders' Representative,
shall have the right to plan, implement and control such Remedial Work. Parent
and Shareholders' Representative shall cooperate fully and in good faith with
each other in connection with such Remedial
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Work. Parent shall act in good faith, in planning, implementing and controlling
any such Remedial Work, and any disagreement between Parent and Shareholders'
Representative shall be resolved in good faith.
(iii) Any Remedial Work undertaken for which Parent Indemnitees seek
indemnity shall be limited solely to that which is necessary to achieve
compliance with Environmental Laws in effect at the Closing. In no event shall
Parent Indemnitees be entitled to indemnity for Remedial Work that (1) exceeds
applicable cleanup levels established by or under Environmental Laws or by the
applicable Governmental Authority or (2) arises from any change in Environmental
Laws after the Closing.
(iv) Upon any "transferring ownership or operations" or "closing
operations" (as such terms are defined in ISRA) of or at the Hughesville or
Xxxxxx Xxxx xxxxx, or either of them, subsequent to the Closing Date, Parent and
the Company shall be solely responsible for any costs necessary to comply with
ISRA at the mill or xxxxx so sold, transferred or closed other than such costs
which are imposed by ISRA as a result of the transactions contemplated by this
Agreement for which the Shareholders have agreed to provide indemnity and which
are payable out of the Escrow Account pursuant to subsection (b)(i)(A) above.
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(v) The Parent Indemnitees' right to indemnity pursuant to this Section
10.2(b) shall be reduced to the extent that the negligent acts or omissions of
any of the Parent Indemnitees after the Closing materially and adversely affect
a Release prior to Closing and the amount of Damages for which indemnity is
sought.
(vi) The provisions of this Section 10.2(b) set forth the sole right of
Parent Indemnitees against the Shareholders and/or the Escrow Account or the
Rochester Environmental Escrow Account with respect to indemnity for all matters
relating to the Environment, including, but not limited to, Environmental Claims
and the warranties and representations set forth in Section 3.21 above. Except
for the obligations expressly undertaken by Shareholders' Representative in this
Agreement and the rights of the Parent Indemnitees under this Agreement and the
Escrow Agreement, Parent, for itself, and its affiliates and successors
(including, without limitation the Surviving Corporation) and their respective
officers, directors, employees, agents, affiliates, subsidiaries, successors and
assigns hereby releases Shareholders from any claims, damages, costs, losses,
response costs or other liabilities concerning or relating to the Environment,
including, but not limited to, claims for contribution or other response costs
under the Comprehensive Environmental Response, Compensation and Liability Act.
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(c) The Parent hereby agrees to indemnify and hold the Shareholders
harmless from Damages incurred or suffered as a result of or arising out of (i)
the failure of any representation or warranty made by the Parent or Acquisition
in this Agreement to be true and correct as of the Closing Date or (ii) the
breach of any covenant or agreement made or to be performed by the Parent or
Acquisition pursuant to this Agreement; provided, however, that the Parent and
Acquisition shall not be liable under clause (i) of this Section unless the
aggregate amount of Damages exceeds $300,000 and then only to the extent of such
excess; provided, further, however, that the Parent's and Acquisition's
liability under Section 10.2(c) shall not exceed $3,000,000 in the aggregate.
(d) Except with respect to the Company's right to repayment under Section
2.12, after the Closing the foregoing indemnification provisions, and the
indemnification for Taxes provided in Section 9.7 and in the Tax Indemnification
Agreement, shall be the exclusive remedy for any breach of the covenants,
obligations, representations or warranties set forth in this Agreement;
provided, however, that the provisions of this Section 10.2(d) shall not prevent
the Shareholders or the Parent from seeking the remedies of specific performance
or injunctive relief in connection with a breach of a covenant or agreement of
any party contained herein. The Shareholders have no personal liability
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hereunder to Parent, its affiliates or successors, beyond such party's right to
obtain indemnity payments from the Escrow Account as provided herein, from the
Rochester Environmental Escrow Account and under the Tax Indemnification
Agreement to the extent set forth therein, and, absent fraud, Parent agrees that
the sole and exclusive recourse possessed by it and its affiliates and
successors is to seek indemnity from the proceeds of the Escrow Account, and
from the proceeds of the Rochester Environmental Escrow Account, and to the
extent set forth therein, from the Shareholders under the Tax Indemnification
Agreement.
(e) The Indemnified Party shall use all reasonable efforts to recover
amounts under its insurance policies, if any, in respect of Claims for Damages
for which indemnification is provided for under this Agreement.
ss.10.3 Indemnification Procedure. (a) Any party seeking indemnification
(the "Indemnified Party") from any other party (the "Indemnifying Party") with
respect to any claim, demand, action, proceeding or other matter pursuant to
this Agreement (the "Claim") shall promptly notify the Indemnifying Party of the
existence of the Claim, setting forth in reasonable detail the facts and
circumstances pertaining thereto and the basis for the Indemnified Party's right
to indemnification, including, in the case of Remedial Work required by
Environmental Law, the particular provision or
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provisions of Environmental Law which form the basis of such Environmental
Claim. For the purposes of this Agreement any claim by Parent against the Escrow
Account shall be deemed to be the seeking of indemnification from the
Shareholders.
(b) If any third party shall notify any Indemnified Party with respect to
any matter which may give rise to a Claim for indemnification against the
Indemnifying Party under this Agreement, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof (which notice, in the case of a
Claim against the Shareholders, shall be given to the Shareholders'
Representative); provided, however, that no delay on the part of the Indemnified
Party in notifying any Indemnifying Party shall relieve the Indemnifying Party
from any liability or obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is materially prejudiced by such failure
or delay to give notice. In the event that any Indemnifying Party notifies the
Indemnified Party within 30 days after the Indemnified Party has given notice of
the matter that the Indemnifying Party would be required to indemnify the
Indemnified Party in full against any such Claim and is assuming the defense
thereof:
(i) the Indemnifying Party may elect to defend the Indemnified Party
against the matter with counsel of its choice reasonably satisfactory to the
Indemnified Party or,
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in the alternative, may elect to allow the Indemnified Party to conduct its own
defense;
(ii) if the Indemnifying Party elects to conduct the defense of a Claim,
the Indemnified Party may retain separate co-counsel at its sole cost and
expense (except that the Indemnifying Party will be responsible for the
reasonable fees and expenses of the separate co-counsel (a) to the extent the
Indemnified Party concludes reasonably based upon advice of counsel that a
conflict of interest exists between the Indemnified Party and Indemnifying Party
or (b) the named parties to any such action (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party and such
Indemnified Party shall have been advised by counsel that there may be one or
more legal defenses available to the Indemnified Party which are not available
to the Indemnifying Party, or available to the Indemnifying Party, but the
assertion of which would be adverse to the interest of the Indemnified Party);
(iii) the Indemnified Party will not consent to the entry of any judgment
or enter into any settlement with respect to the matter without the written
consent of the Indemnifying Party (not to be withheld unreasonably); and
(iv) the Indemnifying Party will not consent to the entry of any judgment
or enter into any settlement, without
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the written consent of the Indemnified Party (not to be withheld unreasonably).
(c) If no Indemnifying Party notifies the Indemnified Party within 30 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, then the Indemnified Party may defend
against, or enter into any settlement with respect to, the matter in any manner
it reasonably may deem appropriate, without prejudice to any of its rights
hereunder.
(d) The Indemnified Party shall be entitled to reimbursement of reasonable
expenses included in Damages with respect to any Claim (including, without
limitation, the cost of defense, preparation and investigation relating to such
Claim) as such expenses are incurred by the Indemnified Party.
(e) The reasonable costs and expenses of the Shareholders and/or
Shareholders Representative in connection with any indemnity Claim by Parent
shall be paid out of the Escrow Account in accordance with the provisions set
forth therein.
ARTICLE XI
TERMINATION
ss.11.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
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(a) by the mutual written consent of the Parent and the Company;
(b) by the Parent, if there has been a material violation or breach by the
Company of any covenant, representation or warranty contained in this Agreement
which has prevented the satisfaction of any condition to the obligations of the
Parent at the Closing and such violation or breach has not been waived by the
Parent or, in the case of a covenant breach, cured by the Company within the
earlier of ten days after written notice thereof from the Parent or the Closing
Date;
(c) by the Company, if there has been a material violation or breach by
the Parent of any covenant, representation or warranty contained in this
Agreement which has prevented the satisfaction of any condition to the
obligation of the Company at the Closing and such violation or breach has not
been waived by the Company or, with respect to a covenant breach, cured by the
Parent within the earlier of ten days after written notice thereof by the
Company or the Closing Date; or
(d) by either the Parent or the Company if the transactions contemplated
hereby have not been consummated by October 15, 1996; provided, however, that
(i) neither the Parent nor the Company shall be entitled to terminate this
Agreement pursuant to this Section 11.1(d) if such Person's
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breach of this Agreement has prevented the consummation of the transactions
contemplated hereby.
ss.11.2 Effect of Termination. In the event that this Agreement shall be
terminated pursuant to Section 11.1, all further obligations of the parties
hereto under this Agreement (other than pursuant to Sections 12.2 and 12.5,
which shall continue in full force and effect) shall terminate without further
liability or obligation of either party to the other party hereunder; provided,
however, that no party shall be released from liability hereunder if this
Agreement is terminated and the transactions abandoned by reason of (i) willful
failure of such party to have performed its obligations hereunder or (ii) any
intentional and knowing misrepresentation made by such party of any material
matter set forth herein.
ss.11.3 Effect of Waiver of Condition Precedent. If any party expressly
waives in writing any condition to its obligation to consummate the Merger in
Article VII or Article VIII hereof and elects to proceed with the Closing and
the consummation of the Merger, then such party shall be deemed to have waived
any right to seek indemnification with respect to the condition so waived (and
with respect to any event, occurrence or circumstance which gave rise to the
failure of such condition).
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ARTICLE XII
MISCELLANEOUS
ss.12.1 Knowledge of the Company. Where any representa- tion or warranty
made by the Company contained in this Agreement is expressly qualified by
reference to its knowl- edge, such knowledge shall be deemed to exist if the
matter is within the actual knowledge of Xxxxx X. Xxxxxx, Xxxxx X. Xxxxxxx,
Xxxxxx X. Xxxxxx, Xx. or Xxxxxxx X. Xxxxxxx, Xx.
ss.12.2 Expenses. The parties hereto shall pay their own expenses relating
to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel and financial
advisers, it being understood that all expenses of the Company incurred in
connection with the transactions contemplated by this Agreement shall be paid by
the Company at or prior to the Closing or, otherwise shall be paid by the
Shareholders.
ss.12.3 Governing Law. THE INTERPRETATION AND CONSTRUCTION OF THIS
AGREEMENT, AND ALL MATTERS RELATING HERETO, SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO AGREEMENTS EXECUTED AND TO BE PERFORMED SOLELY
WITHIN SUCH STATE.
ss.12.4 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
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ss.12.5 Publicity. Except as otherwise required by law, none of the
parties hereto shall issue, prior to the Closing, any press release or make any
other public statement, in each case relating to, connected with or arising out
of this Agreement or the matters contained herein, without obtaining the prior
approval of the Shareholders' Representative, on the one hand, and the Parent,
on the other hand, to the contents and the manner of presentation and
publication thereof. Except as otherwise required by law, after the Closing the
Shareholders shall not issue any press release or make any other public
statement, in each case relating to, connected with or arising out of this
Agreement or the matters contained herein, without obtaining the prior approval
of the Parent. Unless required by applicable law or regulation, Parent shall not
disclose the nature or amount of the consideration paid under this Agreement
without consultation with the Shareholders' Representative.
ss.12.6 Notices. Any notice or other communication required or permitted
under this Agreement shall be sufficiently given if delivered in person or sent
by telecopy (if promptly confirmed by a copy thereof delivered by mail or by
courier as provided herein) or by registered or certified mail, or by a
nationally recognized overnight courier service, postage or fees prepaid or
billing therefor arranged to the sender, addressed as follows: if to the Parent,
to
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Specialty Paperboard, Inc., Xxxxxxx Xxxx, X.X. Xxx 000, Xxxxxxxxxxx, Xxxxxxx
00000 (Facsimile Number (000) 000-0000) Attention: Chief Financial Officer, with
a copy to its counsel, White & Case, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 (Facsimile Number (000) 000-0000), Attention: Xxxxx X. Xxxxxx, Esq.;
and if to the Company or the Shareholders, to SCI Investors, Inc. 000 Xxxxxxx
Xxxx, Xxxxx 0, Xxxxxxxx, XX 00000, with copies to Xxxxxx Xxxxxxxx & Co., 0000
Xxxx Xxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, XX 00000, Attention: Xx. Xxxxxxxxxxx X.
Xxxxxxxx, and to Williams, Mullen, Christian & Xxxxxxx, 0000 X. Xxxxx Xxxxxx,
00xx Xxxxx, Xxxxxxxx, XX 00000 (mailing address: X.X. Xxx 0000, Xxxxxxxx, XX
00000) Attention: Xxxxxxxx X. Xxxxxx, Esq. or such other address or number as
shall be furnished in writing by any such party, and such notice or
communication shall be deemed to have been given as of the date so delivered,
sent by facsimile or mailed.
ss.12.7 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
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ss.12.8 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
ss.12.9 Entire Agreement. This Agreement, including the other documents
referred to herein and therein which form a part hereof and thereof, contain the
entire understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
ss.12.10 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by the parties hereto.
ss.12.11 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
ss.12.12 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto, the Shareholders and the
Indemnified Parties.
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IN WITNESS WHEREOF, each of the Parent, Acquisition and the Company has
caused this Agreement to be executed on its behalf by its respective officer
thereunto duly authorized, all as of the day and year first above written.
SPECIALTY PAPERBOARD, INC.
By /s/ Xxxx Xxxxxx
------------------------------
Name: Xxxx Xxxxxx
Title: President
CPG ACQUISITION COMPANY
By /s/ Xxxx Xxxxxx
------------------------------
Name: Xxxx Xxxxxx
Title: President
CPG INVESTORS INC.
By /s/ Xxxxx X. Xxxxxx
------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman
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EXHIBIT I
List of Shareholders
No. of
Name Shares
Class A Holders
---------------
Diliwyn P. Paiste, IV 22,500
Xxxxxxx X. Xxxxxxx, Xx. 22,500
Xxxxx X. Xxxxx 17,500
X. X. Xxxxxx 7,000
Xxxxxxx X. Xxxxxxxx 10,000
Xxxxxxxx X. XxXxxxx 15,000
Xxxxx X. Xxxxxxx, Xx. 7,500
Xxxxxxx X. Xxxxxx 20,000
Xxxxx X. Xxxxxx 44,000
Xxxxxx Xxxxxxx 20,000
Xxxxx X. Xxxxxxx 42,500
AEA Investors Inc. 50,000
Winston Capital Fund I, LP 25,000
Xxxxxx X. Xxxxxx 27,500
A. Xxxxxxx Xxxxxx 49,000
AWA Paper Mfg. Co., Ltd. 2,268
Miki Sangyo (USA) Inc. 3,403
The Tredegar Trust
Company Trustee u/a
dated 12/2/86 f/b/o Xxxxx X.
Xxxxxx (EIN 00-0000000) 10,000
The Tredegar Trust
Company Trustee u/a
dated 1 2/2/86 f/b/o Xxxxxx X.
Xxx (EIN 00-0000000) 10,000
Class B Holders
---------------
Xxxxx X. Xxxxxx 492
Xxxxxx X. Xxxxxx 410
Dillwyn P. Paiste, IV 000
Xxxxxxx X. Xxxxxxx, Xx. 328
Xxxxx X. Xxxxx 164
Xxxxxxx X. Xxxxxxxx 164
Xxxxxxxx X. XxXxxxx 328
Xxxxx X. Xxxxxxx, Xx. 246
Xxxxx X. Xxxxxx 1,442
Xxxxxx Xxxxxxx 656
AEA Investors Inc. 1,639
Winston Capital Fund I, LP 820
X. X. Xxxxxx 66
Xxxxxxx X. Xxxxxx 656
A. Xxxxxxx Xxxxxx 2,261
AWA Paper Mfg. Co., Ltd. 40
Miki Sangyo (USA) Inc. 61
Class C Holders
---------------
A. Xxxxxxx Xxxxxx 52,143
Xxxxx X. Xxxxxx 52,143
-------
Total Shares 520,058
Option Holders
--------------
Xxxxx X. Xxxxxxx 17,000
Xxxxxx X. Xxxxxx 8,500
Diltwyn P. Paiste 6,500
Xxxxxxx X. Xxxxxxx, Xx. 5,000
Xxxxx X. Xxxxx 4,000
X. X. Xxxxxx 3,500
Xxxxxxx X. Xxxxxxxx 3,500
Xxxxxxxx X. XxXxxxx 4,000
Xxxxxx X. Xxxxxxxx 1,500
Xxxxxx X. Spruce 1,000
-------
Total Options 54,500
EXHIBIT II
Balance Sheet
Unaudited consolidated balance sheets of CPG Holdings Inc. and its subsidiaries
are attached hereto.
Exhibit II
CPG HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 2,1996
(Unaudited)
ASSETS June 2,
1996,
June 2,1996 Adjustments Adjusted
----------- ----------- --------
Current assets:
Cash and cash equivalents $ 1,453 ($ 1,453) $ --
Accounts receivable, less allowances 8,494 8,494
Inventories 7,700 7,700
Prepaid expenses 439 439
Deferred income taxes 716 -- 716
-------- -------- --------
Total current assets 18,802 (1453) 17,349
-------- -------- --------
Properly, plant and equipment, net 18,142 18,142
Other assets 1,063 1,063
Deferred income taxes 136 -- 136
-------- -------- --------
$ 38,143 $ (1453) $ 36,690
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,134 $ -- $ 4,134
Current portion of long-term debt 1,250 (1,250)
Accrued liabilities 5,322 -- 5,322
-------- -------- --------
Total current liabilities 10,706 (1,250) 9,456
-------- -------- --------
Long-term debt 10,000 (10,000)
Other liabilities 4,463 4,463
Stockholders' equity:
Common stock 4,570 9,797 14,367
Retained earnings 8,469 8,469
Minimum pension liability adjustment (65) -- (65)
-------- -------- --------
Total stockholders' equity 12,974 9,797 22,771
-------- -------- --------
$ 38,143 $ (1,453) $ 36,690
======== ======== ========
Exhibit II, continued
CPG HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
for the period (22 weeks) ended June 2,1996
(Unaudited)
Net sales $39,827
Costs and expenses:
Cost of goods sold 33,549
Selling and administrative expenses 2,477
-------
Income from operations 3,801
Interest expense 462
-------
Income before income taxes 3,339
Income tax expense 1,336
-------
Net income 2,003
Retained earnings, beginning of period 6,466
-------
Retained earnings, end of period $ 8,469
=======
Exhibit II, continued
CPG HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the period (22 weeks) ended June 2, 1996
(Unaudited)
Cash provided by (used for) operating activities:
Net income $ 2,003
Items not affecting cash:
Depreciation 735
Amortization 95
-------
2,833
Change in current assets and liabilities:
Accounts receivable 697
Inventory 533
Prepaid expenses (36)
Accounts payable (1,364)
Accrued expenses 320
Other, net 130
-------
280
-------
Cash provided by operating activities 3,113
Cash used for investing activities:
Expenditures for property, plant and equipment (1,595)
-------
Cash used for financing activities:
Reduction of long-term debt (645)
-------
Increase in cash 873
Cash and cash equivalents, beginning of period 580
-------
Cash and cash equivalents, end of period $ 1,453
=======
EXHIBIT III
Escrow Agreement
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of ________, 1996 (the "Escrow Agreement"),
is made and entered into by and among SPECIALTY PAPERBOARD, INC., a Delaware
corporation ("SPI"), CPG ACQUISITION COMPANY, a Delaware corporation and a
wholly-owned subsidiary of SPI ("Acquisition Company"), CPG INVESTORS INC., a
Delaware corporation ("CPG"), SCI INVESTORS INC., a Virginia corporation,
solely in its capacity as Shareholders' Representative and agent on behalf of
the shareholders of CPG (the "Shareholders' Representative"), and [CRESTAR BANK,
a national banking association], as escrow agent (the "Escrow Agent").
RECITALS
A. SPI, Acquisition Company and CPG have entered into a certain Merger
Agreement, dated as of August 28, 1996 (the "Merger Agreement"), whereby
Acquisition Company will merge (the "Merger") with and into CPG and CPG will
become a wholly-owned subsidiary of SPI (sometimes referred to herein as the
"Surviving Corporation") and the shareholders of CPG (other than those
exercising appraisal rights, if any) would collectively receive the Merger
Consideration as provided in the Merger Agreement.
B. Section 2.8(b) of the Merger Agreement provides that, at the Closing,
the sum of Three Million Dollars ($3,000,000.00) (the "Base Escrow Amount"),
shall be delivered to the Escrow Agent and Section 2.8(c) of the Merger
Agreement provides that, at the Closing, the Rochester Environmental Escrow
Amount (the amount of which shall be set forth on Exhibit B hereto) shall be
delivered to the Escrow Agent, in each case to be held and distributed pursuant
to the terms of the Merger Agreement and this Escrow Agreement in connection
with claims for indemnity made by an SPI Indemnitee.
C. The parties hereto desire to set forth the terms and conditions relating
to the holding and distribution of the Escrowed Cash (as hereinafter defined) by
the Escrow Agent.
TERMS OF AGREEMENT
In connection with the consummation of the transactions contemplated in the
Merger Agreement, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. Capitalized terms used herein and not otherwise
defined shall have the same meaning given to them in the Merger Agreement. The
following terms shall have the indicated meanings, unless the context requires
otherwise:
Acknowledgement shall mean a written statement of the Shareholders'
Representative acknowledging receipt of a Request or a Notice.
Acquisition shall mean the consummation of the transactions
contemplated in the Merger Agreement.
Base Escrow Amount shall have the meaning set forth in the Recitals to
this Escrow Agreement.
Claim shall mean any claim made by an SPI Indemnitee for recovery from
the Escrowed Cash pursuant to such SPI Indemnitee's rights to indemnification
under, and in accordance with the terms of, the Merger Agreement. Claims shall
include (i) Third Party Claims made against an SPI Indemnitee directly by a
Third Party Claimant for which the SPI Indemnitee may seek recovery from the
Escrowed Cash pursuant to the SPI Indemnitee's rights to indemnification under,
and in accordance with the terms of, the Merger Agreement, and (ii) any other
claim made by an SPI Indemnitee for recovery from the Escrowed Cash pursuant to
the SPI Indemnitee's rights under, and in accordance with the terms of, the
Merger Agreement, including claims with respect to Taxes pursuant to Section 9.7
of the Merger Agreement and claims for Damages pursuant to Sections 10.2(a) or
10.2(b) of the Merger Agreement.
Closing shall mean the closing of the transactions contemplated in the
Merger Agreement to take place on the Closing Date.
Closing Date shall mean the date on which the Closing shall occur
under the Merger Agreement.
Damages shall have the meaning set forth in Section 10.2(a) of the
Merger Agreement.
Days shall mean calendar days.
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Escrowed Cash shall mean the portion of the Merger Consideration
delivered by wire transfer to the Escrow Agent on the Closing Date, to be held
and distributed by the Escrow Agent under the terms of this Escrow Agreement,
comprised of the Base Escrow Amount and the Rochester Environmental Escrow
Amount. Escrowed Cash shall also include any Retained Escrowed Cash held
pursuant to the terms of this Escrow Agreement after the Survival Expiration
Date.
Merger Agreement shall mean the Merger Agreement, dated as of August
28, 1996, by and between SPI, the Acquisition Company and CPG.
Merger Consideration shall mean the total cash consideration to be
paid and delivered by SPI to the Shareholders in connection with the Merger in
accordance with the Merger Agreement.
Notice shall have the meaning Set forth in Section 3.2(b) of this
Escrow Agreement.
Person shall mean an individual, corporation, partnership, joint
venture, trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
Reply shall mean a written response by the Shareholders'
Representative to a Request or to a Notice in which the Shareholders'
Representative, on behalf of the Shareholders, either (i) agrees to and accepts
all of the Claim set forth in a Request, or (ii) objects to all or part of the
Claim set forth in a Request, and which, in the case of such objection, sets
forth (1) the amount in the Request to which the Shareholders' Representative
objects, (2) the amount in the Request, if any, which is not subject to
objection, and (3) the reasons for the objection. In the case of Third Party
Claims of which the Shareholders' Representative is notified in a Notice, the
Shareholders' Representative shall specify in its Reply whether or not the
Shareholders' Representative, on behalf of the Shareholders, elects to assume
the defense of the Third Party Claim as provided in Section 3.2(b) of this
Escrow Agreement. If the Reply is silent regarding the election by the
Shareholders' Representative to assume the defense of the Third Party Claim,
then the Shareholders Representative shall be deemed to have elected not to
assume such defense. If the Shareholders' Representative elects to assume the
defense of a Third Party Claim, the Shareholders' Representative shall specify
in the Reply the name and address of the counsel who shall be retained to
conduct such defense. A Reply shall be delivered by the Shareholders'
Representative to both SPI and the Escrow Agent.
Retained Escrowed Cash shall have the meaning set forth in Section
3.3(b) hereof.
-3-
Request shall mean a written request of an SPI Indemnitee pursuant to
which the Escrow Agent is requested to transfer and deliver to such SPI
Indemnitee all or part of the Escrowed Cash as reimbursement or payment for a
Claim made under the Merger Agreement, and which sets forth (i) the dollar
amount claimed, (ii) the provisions of the Merger Agreement upon which SPI
Indemnitee bases its Claim, and (iii) a description of the facts and
circumstances which such SPI Indemnitee asserts give rise to its Claim
(including in the case of Remedial Work required by Environmental Law, the
particular provisions of Environmental Law which form the basis of the
Environmental Claim).
Shareholders shall mean the shareholders of CPG immediately prior to
the effective time of the Merger1 as more particularly set forth on Exhibit A
attached hereto.
Shareholder's Percentage shall have the meaning given to that term in
Section 2.10 of the Merger Agreement.
SPI Indemnitees shall mean SPI, its affiliates (including, without
limitation, the Surviving Corporation and its subsidiaries) and the successors
to the foregoing, and their respective shareholders, employees, directors,
officers and agents.
Survival Expiration Date shall mean _________, 1998, the date that is
eighteen (18) months after the date of this Escrow Agreement.
Third Party Claim shall mean any claim, demand, action, lawsuit or
other legal proceeding filed, delivered or otherwise asserted against an SPI
Indemnitee by a Third Party Claimant seeking recovery for, or asserting rights
in connection with, any matter for which an SPI Indemnitee may seek
indemnification under the Merger Agreement.
Third Party Claimant shall mean any Person, other than SPI or its
Affiliates, who or which files, delivers or otherwise asserts a Third Party
Claim against an SPI Indemnitee.
ARTICLE 2
APPOINTMENT OF ESCROW AGENT
AND DEPOSIT OF ESCROWED CASH
Section 2.1 Appointment of Escrow Agent. SPI, CPG and the Shareholders'
Representative hereby appoint and direct the Escrow Agent to act as escrow agent
in accordance with the terms of this Escrow Agreement and the Merger Agreement,
and the Escrow Agent hereby accepts such appointment and agrees to hold,
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safeguard and disburse the Escrowed Cash pursuant to the terms and conditions
hereof.
Section 2.2 Deposit of Escrowed Cash.
(a) SPI, CPG and the Shareholders' Representative hereby consent to
and acknowledge the deposit of the Escrowed Cash with the Escrow Agent and the
Escrow Agent acknowledges receipt thereof. The Escrowed Cash deposited with the
Escrow Agent shall be held and disposed of by the Escrow Agent in accordance
with the terms and provisions of this Escrow Agreement or as jointly directed in
writing by SPI and the Shareholders' Representative.
(b) SPI, CPG and the Shareholders' Representative hereby authorize and
direct the Escrow Agent to keep and preserve the Escrowed Cash in its
possession, free and clear of any and all claims, liens and encumbrances
whatsoever, pending the disbursement thereof in accordance with the terms of
this Escrow Agreement.
ARTICLE 3
PAYMENT OF CLAIMS AND
DISBURSEMENT OF ESCROWED CASH
Section 3.1 Distribution of Escrowed Cash.
(a) Subject to the limitations contained in the Merger Agreement and
Section 3.1(b) hereof, SPI Indemnitees may make Claims for recovery from the
Escrowed Cash pursuant to their rights under, and in accordance with the terms
and conditions of, the Merger Agreement and in accordance with the procedures
set forth in the Merger Agreement and this Escrow Agreement. The Escrow Agent
shall disburse such Escrowed Cash, or portions thereof, to satisfy Claims in
accordance with and only in accordance with: (i) the terms and provisions of
this Escrow Agreement, (ii) the mutual written direction of SPI and the
Shareholders' Representative, or (iii) the decision of a court of competent
jurisdiction as provided in this Article 3.
(b) Recovery of any amounts of the Escrowed Cash for the purpose of
indemnification with respect to any Claim shall be limited to the satisfaction
of Claims, the aggregate amount of which shall exceed Three Hundred Thousand
Dollars ($300,000.00) (the "Threshold Amount"), and then such recovery shall
only be allowable to the extent of the excess of the aggregate amount of such
Claims over the Threshold Amount; provided, however, that in the event the SPI
Indemnitees are entitled to indemnification pursuant to Section 9.7 of the
Merger Agreement or Section 10.2(b)(i)(B) of the Merger Agreement, such
Threshold Amount shall not
-5-
apply. Notwithstanding anything herein to the contrary, as provided in Section
10.2 of the Merger Agreement, the maximum indemnity which the SPI Indemnitees
shall be entitled to receive shall not exceed Three Million Dollars
($3,000,000.00) in the aggregate; provided, however that with respect to
indemnity pursuant to Section 10.2(b)(i)(B) of the Merger Agreement the
foregoing limitation shall apply only after the Rochester Environmental Escrow
Amount has been fully disbursed in accordance with the terms of this Escrow
Agreement.
Section 3.2 Disbursement of Escrowed Cash to Satisfy Claims.
(a) Any SPI Indemnitee seeking indemnification with respect to any
Claim shall promptly notify the Shareholders' Representative and the Escrow
Agent of the existence of the Claim by delivery of a Request.
(b) If any third party shall notify any SPI Indemnitee with respect to
any matter which may give rise to a Third Party Claim, then the SPI Indemnitee
shall promptly notify the Shareholders' Representative and the Escrow Agent
thereof in writing , which notice shall set forth (i) the name and address of
the Third Party Claimant, (ii) the amount of such Third Party Claim, and (iii)
the provisions of the Merger Agreement upon which the SPI Indemnitee bases its
claim that indemnity may be sought with respect to such Third Party Claim, and
such notice shall also include a copy of the documents pursuant to which such
Third Party Claimant has asserted such Third Party Claim, and a copy of any
other documents possessed by the SPI Indemnitee which relate to such Third Party
Claim or to the subject matter thereof (a "Notice"); provided, however, that no
delay on the part of such SPI Indemnitee in delivering a Notice to the
Shareholders' Representative or the Escrow Agent shall relieve the Shareholders
from any liability or obligation under the Merger Agreement unless (and then
solely to the extent) the Shareholders (or the Shareholders' Representative
acting on their behalf) are materially prejudiced by such failure or delay to
give such Notice. In the event that the Shareholders' Representative notifies
the SPI Indemnitee in a Reply (delivered within 30 days after receipt by the
Shareholders' Representative of the Notice relating to such Third Party Claim)
that it is assuming the defense thereof:
(i) the Shareholders' Representative, on behalf of the Shareholders,
will defend the SPI Indemnitee against the Third Party Claim with counsel
of its choice reasonably satisfactory to such SPI Indemnitee;
(ii) the SPI Indemnitee may retain separate co-counsel at its sole
cost and expense (except that the Shareholders, to the extent of the
Escrowed Cash, will be responsible for the reasonable fees and expenses of
the separate co-counsel (a) to the extent such SPI Indemnitee concludes,
reasonably based upon advice of counsel, that a conflict of interest exists
between the SPI Indemnitee and the Shareholders or (b) the named parties to
-6-
any such action (including any impleaded parties) include both such SPI
Indemnitee and the Shareholders (or the Shareholders' Representative) and
such SPI Indemnitee shall have been advised by counsel that there may be
one or more legal defenses available to the SPI Indemnitee which are not
available to the Shareholders (or the Shareholders' Representative), or
available to the Shareholders (or the Shareholders' Representative), but
the assertion of which would be adverse to the interest of such SPI
Indemnitee; provided, however that the Shareholders shall not be
responsible for the fees and expenses of more than one co-counsel for all
SPI Indemnitees);
(iii) such SPI Indemnitee will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without
the written consent of the Shareholders' Representative (not to be withheld
unreasonably); and
(iv) the Shareholders' Representative will not consent to the entry of
any judgment or enter into any settlement, without the written consent of
such SPI Indemnitee (not to be withheld unreasonably).
(c) If the Shareholders' Representative does not notify such SPI
Indemnitee in a Reply (delivered within 30 days after receipt by the
Shareholders' Representative of the Notice relating to a Third Party Claim) that
the Shareholders' Representative is assuming the defense of a Third Party Claim
as provided in paragraph (b) of this Section 3.2, or if Shareholders'
Representative expressly stales in a Reply that it will not assume the defense
of any such Third Party Claim, then such SPI Indemnitee may defend against the
Third Party Claim in any manner it reasonably may deem appropriate, without
prejudice to any of its rights hereunder; provided that such SPI Indemnitee
shall not consent to the entry of any judgment or enter into any settlement with
respect to the matter without the written consent of the Shareholders'
Representative (not to be withheld unreasonably).
(d) Any SPI Indemnitee shall be entitled to reimbursement of
reasonable expenses incurred in connection with the defense of any Third Party
Claim with respect to which such SPI Indemnitee is entitled to conduct under
paragraph (c) of this Section 3.2, as such expenses are incurred by such SPI
Indemnitee, unless the Shareholders' Representative has notified SPI of any
objection with respect to such Third Party Claim in a Reply delivered pursuant
to the provisions of this Escrow Agreement, in which case such costs and
expenses shall be paid only in accordance with paragraph (h) of this Section
3.2.
(e) The reasonable costs and expenses of the Shareholders'
Representative in connection with the defense or other handling of any Third
Party Claim shall be paid out of the Escrowed Cash as such costs and expenses
are incurred by it. The costs and expenses of the Shareholders' Representative
incurred in
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connection with investigating, defending against, or otherwise handling on
behalf of the Shareholders any other Claim asserted by an SPI Indemnitee shall
not be paid to the Shareholders' Representative out of the Escrowed Cash, but
may be paid out of any undistributed interest or other income earned on the
Escrowed Cash as provided in Section 5.2 below.
(f) If, within five (5) days after the date upon which the Escrow
Agent first receives a copy of a Request or a Notice, the Escrow Agent has not
received an Acknowledgement from the Shareholders' Representative with respect
to that Request or Notice, the Escrow Agent shall promptly deliver to the
Shareholders' Representative a copy of such Request or Notice. If within thirty
(30) days after the date upon which Escrow Agent receives a copy of a Request or
Notice, the Escrow Agent has not received a Reply from the Shareholders'
Representative with respect to such Request or Notice, Escrow Agent shall (i)
promptly notify SPI that no Reply was received from the Shareholders'
Representative within such thirty (30) day period, and (ii) thereafter, upon
written direction from SPI stating that it has also not received a Reply which
objects to its Request or Notice, Escrow Agent shall promptly (A) transfer and
deliver to the SPI Indemnitee such portion of the Escrowed Cash as is set forth
and claimed in the Request, or (B) pay any sums thereafter requested by such SPI
Indemnitee pursuant to paragraph (d) of this Section 3.2 in connection with the
defense of the Third Party Claim described in the Notice.
(g) If, within thirty (30) days after the date upon which the Escrow
Agent receives a copy of the Request or the Notice, the Escrow Agent receives a
Reply from the Shareholders' Representative, the Escrow Agent shall (i) promptly
notify SPI of its receipt of the Reply and provide SPI a copy thereof, and (ii)
transfer and deliver to SPI Indemnitee such portion of the Escrowed Cash as is
necessary to satisfy the amount1 if any, claimed in the Request which is not
stated to be the subject of an objection or disagreement by Shareholders'
Representative in the Reply. The amount of any Request to be paid pursuant to
Section 3.2(f), or the amount of any Request not the subject of disagreement to
be paid pursuant to this Section 3.2(g), shall be promptly paid to SPI from the
Escrowed Cash held by the Escrow Agent, subject to the limitations referred to
in Section 3.1(b) of this Escrow Agreement.
(h) The Escrow Agent shall not transfer and deliver Escrowed Cash to
an SPI Indemnitee to satisfy the portion of any Claim or to defend any Third
Party Claim to which the Shareholders' Representative objects in a Reply until
the earlier to occur of (i) SPI and the Shareholders' Representative direct the
Escrow Agent, in a writing signed by both, to transfer and deliver the requisite
portion of the Escrowed Cash to SPI to satisfy the amount claimed, or (ii) the
Escrow Agent receives a certified copy of a final decision of a court of
competent jurisdiction with respect to the disposition of the Claim or the right
to indemnity with respect to the Third Party Claim, in either case holding in
favor of the SPI Indemnity, and the period for the filing
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of any available appeals with respect thereto shall have expired. Upon receipt
of either a jointly signed direction or a certified copy of such a decision, the
Escrow Agent shall promptly take the action as set forth therein.
(i) The Escrow Agent shall confirm its disbursements from the Escrowed
Cash as soon as practicable by telephone and fax transmission to the
Shareholders' Representative and SPI and shall at the end of each calendar month
deliver a written account statement to each of the Shareholders' Representative
and SPI. The Shareholders' Representative or SPI shall advise the Escrow Agent
in writing of any discrepancies which it believes to exist in any such account
statement within thirty (30) days after receipt thereof. Failure to inform the
Escrow Agent in writing of any discrepancies in any such account statement
within such thirty-day period shall conclusively be deemed confirmation by the
party failing to so inform of the correctness of such account statement.
(j) With respect to any Request or Notice which has resulted in the
holding of any Retained Escrowed Cash pursuant to Section 3.3(b) hereof and with
respect to which the Shareholders' Representative has notified SPI in a Reply of
an objection with respect thereto, unless within one hundred twenty (120) days
following the delivery of the Reply setting forth such objection (i) SPI and the
Shareholders' Representative notify the Escrow Agent in writing that they have
resolved such objection and instruct the Escrow Agent as to the continued
holding and/or disbursement of such Retained Escrowed Cash, or (ii) the SPI
Indemnitee who delivered such Request or Notice files suit in a court of
competent jurisdiction seeking resolution of such objection and delivers a copy
of the pleadings filed in connection therewith to the Shareholders'
Representative and the Escrow Agent, the Escrow Agent shall promptly following
the expiration of such 120 day period, distribute such Retained Escrowed Cash to
the Shareholders in the manner provided in Section 3.3(a) and the SPI
Indemnitees shall have no further right with respect to such sums after the
expiration of such 120 day period. If any SPI Indemnitee shall file a suit
pursuant to this paragraph (j), which suit is thereafter dismissed or otherwise
terminated (which dismissal or termination is final and, if appealable, the
period for the filing of an appeal with respect thereto has expired) without
final determination on the merits by the court of the objection with respect to
which the suit was filed, then upon delivery by the Shareholders' Representative
to the Escrow Agent of a copy of the court order or other document evidencing
such dismissal or termination, the Escrow Agent shall disburse the Retained
Escrowed Cash to the Shareholders in accordance with Section 3.3(a), unless in
connection with such dismissal or termination SPI and the Shareholders'
Representative have agreed in writing to a different disposition or handling of
such sum, in which case the Escrow Agent shall comply with the terms of such
written agreement.
(k) Any sums held as Retained Escrowed Cash pursuant to Section 3.3(b)
hereof shall only be subject to the specific Claim or Claims with respect to
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which it was retained and shall not be disbursed to any SPI Indemnitee in
connection with any other Claim.
Section 3.3 Final Distribution.
(a) Except as otherwise provided in subsection (b) hereof, on the
Survival Expiration Date the Escrow Agent shall pay and deliver to the
Shareholders all Escrowed Cash then held by it, in accordance with their
respective Shareholder's Percentages.
(b) If, prior to the Survival Expiration Date, the Escrow Agent
receives a Request or a Notice in accordance with Section 3.2 hereof and the
right to indemnity for the Claim or Third Party Claim to which such Request or
Notice relates has not been finally resolved in accordance with Section 3.2 by
the Survival Expiration Date, Escrow Agent shall, notwithstanding the expiration
of the Survival Expiration Date, retain custody of such portion of the Escrowed
Cash as is equal to the amount claimed in the Request and/or the amount claimed
in any Third Party Claim with respect to which the Notice relates (the "Retained
Escrowed Cash") and shall distribute the remaining portion of the Escrowed Cash
to the Shareholders pursuant to subsection (a) hereof. Escrow Agent shall
thereafter continue to hold the Retained Escrowed Cash pursuant to the terms and
conditions of this E6crow Agreement and shall only distribute the Retained
Escrowed Cash in accordance with Section 3.2 hereof.
(c) Upon the final distribution by the Escrow Agent of all Escrowed
Cash and all Retained Escrowed Cash as provided in this Escrow Agreement, the
Escrow Agent shall thereafter be discharged of any further duties or obligations
under this Escrow Agreement.
ARTICLE 4
TERMINATION OF ESCROW AGREEMENT
Section 4.1 Termination. This Escrow Agreement shall terminate upon the
final transfer and delivery by the Escrow Agent of all amounts of the Escrowed
Cash in accordance with either (i) the provisions of Article 3 hereof or (ii) a
joint written direction of the Shareholders' Representative and SPI directing
the disposition of the Escrowed Cash.
ARTICLE 5
INVESTMENT OF ESCROWED CASH
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Section 5.1 Investment of Escrowed Cash. Except as SPI and the
Shareholders' Representative may from time to time direct in writing, the Escrow
Agent shall invest the Escrowed Cash, to the extent possible, in United States
Treasury Bills having a remaining maturity of 90 days or less and repurchase
obligations secured by such United States Treasury Bills, with the remainder
being deposited and maintained in a money market deposit account with Escrow
Agent until disbursement in accordance with this Escrow Agreement. The Escrow
Agent is authorized to liquidate in accordance with its customary procedures any
portion of the Escrowed Cash consisting of investments in order to provide for
payments required to be made in accordance with this Escrow Agreement.
Section 5.2 Interest on Escrowed Cash. All interest or other income
income") received or paid on or with respect to any of the Escrowed Cash shall
be the property of the Shareholders (who shall be considered the owners thereof
for the purpose of all local, state and federal taxes, on a pro rata basis based
on their respective Shareholder's Percentage) and shall not become a part of the
Escrowed Cash, but shall be held by the Escrow Agent free of any claims of any
SPI Indemnitee. Such income shall be distributed, from time to time, as follows:
(i) to the Shareholders' Representative, upon written request by it to the
Escrow Agent, such portion of any earned income then held by the Escrow Agent
which is necessary to reimburse the Shareholders' Representative for any costs
or expenses incurred by it in connection with any Claim asserted by any SPI
Indemnitee, which pursuant to Section 3.2(e) may be paid out of such income; and
(ii) to the Shareholders, on a pro rata basis based upon their respective
Shareholder's Percentage, on a quarterly basis, the amount of any income then
held by the Escrow Agent, less the amount of any sums then due to the
Shareholders' Representative pursuant to clause (i) of this Section 5.2 and less
such amount, if any, as the Shareholders' Representative may request in writing
to be held in reserve to provide for the payment of any future sums which may be
payable to it in accordance with such clause (i). As soon as practicable after
the end of each calendar year or part of a calendar year during which this
Escrow Agreement shall remain in effect, the Escrow Agent shall prepare and
deliver to each Shareholder a Form 1099 reflecting all interest and other income
earned or paid on the Escrowed Cash for the account of the Shareholders. The
Escrow Agent may condition any payment of interest or other income to any
Shareholder hereunder upon such Shareholder's execution and delivery of a
completed Form W-9 to the Escrow Agent.
ARTICLE 6
ESCROW AGENT
Section 6.1 Limitation of Duties. The Escrow Agent undertakes to perform
only such duties as are expressly set forth herein, and no implied covenants or
obligations shall be read into this Escrow Agreement against the Escrow Agent.
-11-
Section 6.2 Permissible Reliance.
(a) The Escrow Agent may rely and shall be protected in acting or
refraining from acting upon any written notice, instruction or request furnished
to it hereunder and reasonably believed by it to be genuine and to have been
signed or presented by the proper party or parties.
(b) The Escrow Agent shall be deemed to have properly delivered the
Escrowed Cash upon (i) placing the monies in the United States mail in a
suitable package or envelope with first class prepaid postage affixed, addressed
to the addressee at such addressee's address as set forth in this Escrow
Agreement or such other address as such Person shall have furnished to the
Escrow Agent in writing; (ii) delivery in person at the offices of the Escrow
Agent; or (iii) delivery in any other manner pursuant to written instructions of
SPI or the Shareholders' Representative, as applicable.
(c) Payment of monies hereunder shall be made by check or by wire
transfer of immediately available funds in accordance with instructions
contained in the applicable disbursement notice to the Escrow Agent.
Section 6.3 Liability of Escrow Agent. Absent gross negligence or willful
misconduct, the Escrow Agent shall not be liable to SPI, CPG, the Shareholders,
the Shareholders' Representative, the Surviving Corporation or any other Person
for any action taken by it in good faith and believed by it to be authorized or
within the rights and powers conferred upon it by this Escrow Agreement, and may
consult with counsel of its own choice and shall have full and complete
authorization and protection for any action taken or suffered by it hereunder in
good faith and in accordance with the opinion of such counsel. The Escrow Agent
is authorized by each of SPI, CPG, and the Shareholders' Representative to rely
upon all representations, both actual and implied, of each of SPI and the
Shareholders' Representative and all other persons relating to this Escrow
Agreement and/or the Escrowed Cash including, without limitation,
representations as to authority to execute and deliver this Escrow Agreement,
notifications, receipts or instructions hereunder, and the Escrow Agent shall
not be liable to any person in any manner by reason of such reliance.
Section 6.4 Resignation of Escrow Agent. The Escrow Agent may resign at any
time upon 30 days prior written notice to SPI and to the Shareholders'
Representative. In such event, the Shareholders' Representative shall appoint a
successor escrow agent with the consent of SPI (not to be unreasonably withheld)
and shall give the Escrow Agent notice of the address of, a successor Escrow
Agent within such 30 day notice period. Upon the effective date of its
resignation, the Escrow Agent shall either (i) deliver the Escrowed Cash to such
successor escrow agent selected by the Shareholders' Representative with SPI's
consent as provided
-12-
above, or (ii) if it has not been notified of such a selected successor escrow
agent, deliver the Escrowed Cash, if any is still being held, to a successor
escrow agent appointed by a court of competent jurisdiction upon the petition of
the Escrow Agent.
Section 6.5 Fees and Expenses of Escrow Agent In consideration of its
services hereunder the Escrow Agent shall be paid an escrow fee of ___________.
($________) (the "Escrow Fee"). SPI and the Shareholders shall each pay fifty
percent (50.0%) of the Escrow Fee to the Escrow Agent and shall deliver their
respective portions of the Escrow Fee to Escrow Agent simultaneously with the
delivery of the Escrowed Cash.
Section 6.6 Reliance on Counsel. Escrow Agent may from time to time consult
with legal counsel of its own choosing in the event of any disagreement, or
controversy, or question or doubt as to the construction of any of the
provisions of this Escrow Agreement or its duties hereunder; provided, however,
that prior to consulting any such counsel Escrow Agent shall give prior written
notice to SPI and Shareholders' Representative of its intent to do so. Unless
SPI and Shareholders' Representative jointly notify Escrow Agent in writing
within thirty (30) days after the date of such notice from Escrow Agent of their
agreement with Escrow Agent as to the resolution of the disagreement,
controversy, or question or doubt as to the construction of the Escrow Agreement
or Escrow Agent's duties hereunder, Escrow Agent may proceed to consult its
legal counsel and shall be entitled to be reimbursed for the fees and expenses
of such counsel.
ARTICLE 7
SHAREHOLDERS' REPRESENTATIVE
Section 7.1 Representatives. The initial Shareholders' Representative shall
be SC Investors, Inc., a Virginia corporation. The Shareholders may appoint a
new Shareholders' Representative by the affirmative vote of Shareholders who
held a majority of the shares of stock in CPG.
Section 7.2 Actions by the Shareholders' Representative. The signature of
the president, secretary, or any other duly authorized officer of the
Shareholders' Representative shall be sufficient to constitute an act of the
Shareholders' Representative.
ARTICLE 8
MISCELLANEOUS PROVISIONS
Section 8.1 Notices. All notices and communications hereunder shall be in
writing and shall be deemed to be duly given when delivered by hand or when
mailed
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by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Escrow Agent, to: _________________________
_________________________
_________________________
_________________________
If to the Shareholders'
Representative or CPG, to: SCI Investors, Inc.
000 Xxxxxxx Xxxx, Xxxxx X
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
With a copy to: Williams, Mullen, Christian & Xxxxxxx
X.X. Xxx 0000
Xxxxxxxx0 Xxxxxxxx 00000-0000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
If to SPI, to: Specialty Paperboard, Inc.
Xxxxxxx Xxxx
X.X. Xxx 000
Xxxxxxxxxxx, Xxxxxxx 00000
Attention: Chief Financial Officer
With a copy to: White & Case
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
or at such other address as any of the above may have furnished to the other
parties in writing in the manner described above.
Section 8.2 Integration. This Escrow Agreement and the Merger Agreement
shall constitute the entire agreement between the parties hereto with respect to
the escrow agent transactions contemplated hereby. With respect to the
obligations of the Escrow Agent hereunder, if any term of this Escrow Agreement
expressly conflicts with any term of the Merger Agreement, the term contained
within the Merger Agreement shall govern.
Section 8.3 Controlling Law. This Escrow Agreement shall be construed
under, and governed by, the laws of [Delaware].
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Section 8.4 Binding Agreement1 Assignment This Escrow Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, personal representatives, successors,
and assigns; provided, however, that no assignment of this Escrow Agreement or
any of the rights or obligations hereof shall relieve any party of its
obligations under this Escrow Agreement.
Section 8.5 Amendment. This Escrow Agreement may be amended only by a
written agreement executed by all of the parties hereto.
Section 8.6 Warranty of Authority. Each party executing this Escrow
Agreement warrants his, her or its authority to execute this Escrow Agreement.
Section 8.7 Execution in Counterparts. This Escrow Agreement may be
executed in multiple counterparts, each of which shall be deemed an original,
but all of which constitute one and the same instrument.
Section 8.8 Exhibits. All Exhibits attached hereto are made a part hereof
by this reference.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be executed as of the date and year first above written.
SPECIALTY PAPERBOARD, INC.
By:________________________________
Title:_____________________________
CPG ACQUISITION COMPANY
By:________________________________
Title:_____________________________
CPG INVESTORS INC.
By:________________________________
Title:_____________________________
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SCI INVESTORS INC.
By:________________________________
Title:_____________________________
[CRESTAR BANK]
By:________________________________
Title:_____________________________
-16-
EXHIBIT A
SHAREHOLDERS
-17-
EXHIBIT B
ROCHESTER ENVIRONMENTAL ESCROW AMOUNT
-18-
Exhibit IV
================================================================================
TAX INDEMNIFICATION AGREEMENT
Dated as of October 31, 1996
By and Among
SPECIALTY PAPERBOARD, INC.,
and
THE SHAREHOLDERS NAMED HEREIN
================================================================================
INDEMNIFICATION AGREEMENT (this "Agreement") dated as of October 31, 1996
by and among Specialty Paperboard, Inc. (the "Parent"), and the former
stockholders of CPG Investors Inc. (the "Company") listed on the signature pages
hereof (each a "Shareholder" and collectively the "Shareholders"). Capitalized
terms herein which are not otherwise defined herein shall have the meanings
therefor set forth in the Merger Agreement described below.
WITNESSETH:
WHEREAS, the Parent, CPG Acquisition Company ("Acquisition") and the
Company have entered into a certain Merger Agreement, dated as of August 28,
1996 (the "Merger Agreement") whereby Acquisition will merge (the "Merger") with
and into the Company the Company will become a wholly-owned subsidiary of the
Parent (sometimes referred to herein as the "Surviving Corporation") and the
shareholders of the Company (other than those exercising appraisal rights)
collectively receive the Merger Consideration as provided in the Merger
Agreement;
WHEREAS, this Agreement is entered into pursuant to Section 2.18 of the
Merger Agreement as a condition precedent to the obligations of the Parent and
Acquisition to consummate the Merger; and
WHEREAS, capitalized terms used but not defined herein shall have the
respective meanings ascribed to such terms in the Merger Agreement.
NOW, THEREFORE, IT IS AGREED:
ARTICLE I.
INDEMNIFICATION
Section 1.1 Indemnification. The Shareholders hereby agree severally, to
indemnify and hold the Parent, its affiliates (including, without limitation,
the Surviving Corporation and its subsidiaries) and the successors to the
foregoing and their respective shareholders, officers, directors, employees and
agents, harmless on an after-tax basis from and against all Taxes, losses,
claims and expenses (including, without limitation, reasonable attorneys' fees
and expenses) to the extent of the indemnification provided in Section 9.7 of
the Merger Agreement; provided, however, that the limitations of such
indemnification to available proceeds held in the Escrow Account provided in
Section 9.7 of the Merger Agreement shall
be disregarded for purposes of this Agreement; and provided, further, that in no
event shall the aggregate amount of each Shareholders' liability under this
Agreement exceed the product of (a) such Shareholder's Percentage and (b) the
aggregate amount distributed to the Shareholders pursuant to the Escrow
Agreement (excluding therefrom the distribution of any income earned on such
Escrow Account and excluding therefrom any amount distributed to the
Shareholders from the Rochester Environmental Escrow Amount).
Section 1.2 Indemnification Procedure. Procedures for notification,
cooperation and controversies shall be as set forth in Sections 9.3 and, 9.4 and
10.3 of the Merger Agreement; provided that in the event of a conflict between
Section 9.3 or 9.4 of the Merger Agreement, on the one hand, and Section 10.3 of
the Merger Agreement on the other hand, the provisions of Section 9.3 or 9.4 of
the Merger Agreement, as applicable, shall govern.
ARTICLE II
REPRESENTATIONS OF THE SHAREHOLDERS
Representations of the Shareholders. Each of Shareholders, severally, as to
such Shareholder, represents, warrants and agrees as follows:
Section 2.1 Authorization and Validity of Agreement. Such Shareholders has
the requisite power and authority to enter into this Agreement and to perform
such Shareholder's obligations hereunder. This Agreement has been duly executed
and delivered by such Shareholder and is a valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except to the extent that enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and to general equitable
principles.
Section 2.2 No Conflicts. The execution, delivery and performance of this
Agreement by such Shareholder will not (a) result in a violation of any law,
rule, ordinance, regulation, order, judgement or decree by which such
Shareholder is bound or (b) conflict with or result in a material breach of or
default under any mortgage, lien, lease, license, permit, agreement, contract or
instrument to which such Shareholder is a party or by which such Shareholder is
bound.
-2-
ARTICLE III
TERMINATION
Section 3.1 Termination. This Agreement shall terminate upon the expiration
of all statutes of limitations applicable to the matters contained in Section
3.14 of the Merger Agreement.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of Delaware applicable to agreements executed and to be performed solely
within such State.
Section 4.2 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 4.3 Notices. Any notice or other communication required or
permitted under this Agreement shall be sufficiently given if delivered in
person or sent by telecopy or by registered or certified mail, postage prepaid,
addressed as follows: if to the Parent, to Specialty Paperboard, Inc., Xxxxxxx
Xxxx, X.X. Xxx 000, Xxxxxxxxxxx, Xxxxxxx 00000 (Facsimile Number (000) 000-0000)
Attention: Chief Financial Officer, with a copy to its counsel, White & Case,
0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (Facsimile Number (212)
354-8113), Attention: Xxxxx X. Xxxxxx, Esq.; if to the Shareholders, to SCI
Investors, Inc., 000 Xxxxxxx Xxxx, Xxxxx 0, Xxxxxxxx, Xxxxxxxx 00000, with
copies to Xxxxxx Xxxxxxxx & Co., 0000 Xxxx Xxxx Xxxxxx, Xxxxx 000, Xxxxxxxx,
Xxxxxxxx 00000, Attention: Xx. Xxxxxxxxxxx X. Xxxxxxxx, and to Williams, Mullen,
Christian & Xxxxxxx, 0000 X. Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxx, Xxxxxxxx 00000
(mailing address: X.X. Xxx 0000, Xxxxxxxx, Xxxxxxxx 00000), Attention Xxxxxxxx
X. Xxxxxx, Esq., or such other address or number as shall be furnished in
writing by any such party, and such notice or communication shall be deemed to
have been given as of the date so delivered, sent by facsimile or mailed.
Section 4.4 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
Section 4.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
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Section 4.6 Entire Agreement. This Agreement, including the other documents
referred to herein and therein which form a part hereof and thereof, contain the
entire understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
Section 4.7 Amendments. This Agreement may not be changed orally, but only
by an agreement in writing signed by the Parent and the Shareholders.
Section 4.8 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
Section 4.9 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
Section 4.10 Jurisdiction. Any judicial proceeding brought against any of
the parties to this Agreement or any dispute arising out of this Agreement or
any matter related hereto shall be brought in the courts of the State of
Delaware or in a United States District Court for a District of Delaware, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of such courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
Person other than the respective parties to this Agreement.
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IN WITNESS WHEREOF, the Parent and the Shareholders have signed this
Agreement and the Company has caused its corporate name to be hereunto
subscribed by its officers thereunto duly authorized, all as of the day and year
first above written.
THE SHAREHOLDERS:
By:_____________________________
Dillwyn P. Paiste, IV
By:_____________________________
Xxxxxxx X. Xxxxxxx, Xx.
By:_____________________________
Xxxxx X. Xxxxx
By:_____________________________
X. X. Xxxxxx
By:_____________________________
Xxxxxxx X. Xxxxxxxx
By:_____________________________
Xxxxxxxx X. XxXxxxx
By:_____________________________
Xxxxx X. Xxxxxxx, Xx.
By:_____________________________
Xxxxxxx X. Xxxxxx
By:_____________________________
Xxxxx X. Xxxxxx
By:_____________________________
Xxxxxx Xxxxxxx
By:_____________________________
Xxxxx X. Xxxxxxx
AEA Investors Inc.
By:_____________________________
Name:
Title:
Winston Capital Fund I, LP
By:_____________________________
Name:
Title:
By:_____________________________
Xxxxxx X. Xxxxxx
By:_____________________________
A. Xxxxxxx Xxxxxx
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AWA Paper Mfg. Co., Ltd.
By:_____________________________
Name:
Title:
Miki Sangyo (USA) Inc.
By:_____________________________
Name:
Title:
The Tredegar Trust Company
Trustee u/a dated 12/2/86
f/b/o Xxxxx X. Xxxxxx
(EIN 00-0000000)
By:_____________________________
Name:
Title:
The Tredegar Trust Company
Trustee u/a dated 12/2/86
f/b/o Xxxxxx X. Xxxxxx
(EIN 00-0000000)
By:_____________________________
Xxxxxx X. Xxxxxxxx
By:_____________________________
Xxxxxx X. Spruce
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THE PURCHASER:
SPECIALTY PAPERBOARD, INC.
By:_____________________________
Name:
Title:
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