UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
AEP Industries Inc.
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
001031103
(CUSIP Number)
Henry R. Kravis, KKR Associates, Whitehall Associates, L.P. c/o Kohlberg
Kravis Roberts & Co.
9 West 57th Street, New York, N.Y. 10019 (212) 750-8300
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
June 20, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box .
Check the following box if a fee is being paid with the statement . (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
<PAGE>
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE>
SCHEDULE 13D
CUSIP No. 001031103 Page 2 of 14
Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
BORDEN, INC.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New Jersey
7 SOLE VOTING POWER
NUMBER OF
SHARES 2,294,695
BENEFICIALL
8 SHARED VOTING POWER Y OWNED BY
EACH
0 REPORTING
9 SOLE DISPOSITIVE POWER PERSON
WITH
0
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,294,695
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
49.2%
<PAGE>
14 TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION
<PAGE>
SCHEDULE 13D
CUSIP No. 001031103 Page 3 of 14
Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
BORDEN HOLDINGS, INC.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 2,294,695
BENEFICIALL
8 SHARED VOTING POWER Y OWNED BY
EACH
0 REPORTING
9 SOLE DISPOSITIVE POWER PERSON
WITH
0
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,294,695
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
49.2%
<PAGE>
14 TYPE OF REPORTING PERSON*
CO, HC
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION
<PAGE>
SCHEDULE 13D
CUSIP No. 001031103 Page 4 of 14
Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
BW HOLDINGS LLC
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 2,294,695
BENEFICIALL
8 SHARED VOTING POWER Y OWNED BY
EACH
0 REPORTING
9 SOLE DISPOSITIVE POWER PERSON
WITH
0
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,294,695
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
49.2%
<PAGE>
14 TYPE OF REPORTING PERSON*
OO, HC
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION
<PAGE>
SCHEDULE 13D
CUSIP No. 001031103 Page 5 of 14
Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
WHITEHALL ASSOCIATES, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 2,294,695
BENEFICIALL
8 SHARED VOTING POWER Y OWNED BY
EACH
0 REPORTING
9 SOLE DISPOSITIVE POWER PERSON
WITH
0
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,294,695
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
49.2%
<PAGE>
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION
<PAGE>
SCHEDULE 13D
CUSIP No. 001031103 Page 6 of 14
Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
KKR ASSOCIATES
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
7 SOLE VOTING POWER
NUMBER OF
SHARES 2,294,695
BENEFICIALL
8 SHARED VOTING POWER Y OWNED BY
EACH
REPORTING
9 SOLE DISPOSITIVE POWER PERSON
WITH
0
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,294,695
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
49.2%
<PAGE>
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE AND THE SIGNATURE ATTESTATION
<PAGE>
Item 1. Security and Issuer.
This statement relates to shares of common stock, $.01 par value per
share ("Common Stock"), of AEP Industries Inc., a Delaware corporation (the
"Issuer"). The principal executive offices of the Issuer are located at 125
Phillips Avenue, South Hackensack, New Jersey 07606.
Item 2. Identity and Background.
This statement is being filed jointly by Borden, Inc., a New Jersey
corporation ("Borden"), Borden Holdings, Inc., a Delaware corporation ("Borden
Holdings"), BW Holding, LLC, a Delaware limited liability company ("BW
Holdings"), Whitehall Associates, L.P., a Delaware limited partnership
("Whitehall Associates"), and KKR Associates, a New York limited partnership
("KKR Associates" and, together with Borden, Borden Holdings, BW Holdings and
Whitehall Associates, the "Reporting Persons"). The agreement among the
Reporting Persons relating to joint filing of this statement is attached as
Exhibit 1 hereto.
Borden is engaged primarily in manufacturing, processing, purchasing
and distributing a broad range of products in the dairy, chemical, residential
wallcovering, consumer adhesive and other industries. Borden Holdings is a
holding company engaged solely in holding all of the capital stock of Borden.
BW Holdings is a holding company holding, along with the capital stock of other
entities, all of the capital stock of Borden Holdings. The address of the
principal business and office of Borden is 180 East Broad Street, Columbus,
Ohio 43215. The address of the principal business and office of Borden
Holdings and BW Holdings is 2711 Centerville Road, Wilmington, Delaware 19808.
Information concerning the directors and executive officers of Borden
and Borden Holdings is contained in Schedule A attached hereto.
Whitehall Associates is principally engaged in the business of
investing in securities. The address of the principal business and office of
<PAGE>
Whitehall Associates is 9 West 57th Street, New York, New York 10019.
The sole general partner of Whitehall Associates is KKR Associates.
KKR Associates is principally engaged in the business of investing through
partnerships in industrial and other companies. The address of its principal
business and office is 9 West 57th Street, New York, New York 10019.
Messrs. Henry R. Kravis, George R. Roberts, Robert I. MacDonnell,
Paul E. Raether, Michael W. Michelson, Saul A. Fox, James H. Greene, Jr.,
Michael T. Tokarz, Clifton S. Robbins, Scott M. Stuart, Edward A. Gilhuly and
Perry Golkin are the general partners of KKR Associates. Messrs. Kravis,
Roberts, MacDonnell, Raether, Michelson, Fox, Greene, Tokarz, Robbins, Stuart,
Gilhuly and Golkin are each United States citizens, and the present principal
occupation or employment of each is as a member of KKR & Co. L.L.C., a Delaware
limited liability company and the general partner of Kohlberg Kravis Roberts &
Co. L.P. ("KKR"), a private investment firm, the addresses of which are 9 West
57th Street, New York, New York 10019, and 2800 Sand Hill Road, Suite 200,
Menlo Park, California 94025. The business address of Messrs. Kravis, Raether,
Tokarz, Robbins, Stuart and Golkin is 9 West 57th Street, New York, New York
10019; the business address of Messrs. Roberts, MacDonnell, Michelson, Fox,
Greene and Gilhuly is 2800 Sand Hill Road, Suite 200, Menlo Park, California
94025.
During the last five years, neither the Reporting Persons nor, to the
best knowledge of the Reporting Persons, any of the other persons named in this
Item 2 or Schedule A hereto: (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors); or (ii) was a party to
a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
<PAGE>
Item 3. Source and Amount of Funds or Other Consideration.
As more fully described in Item 4 hereof, on June 20, 1996, Borden
entered into agreements with certain stockholders of the Issuer whereby such
stockholders agreed, among other things, to vote their shares in favor of the
Purchase (as defined in Item 4 hereof) and issuance of the Common Stock to
Borden in connection therewith. Other than simultaneously entering into the
Purchase Agreement (as defined in Item 4 hereof) with the Issuer, no
consideration was paid to such stockholders.
Item 4. Purpose of Transaction.
On June 20, 1996, Borden and Issuer entered into a Purchase Agreement
(the "Purchase Agreement") providing for the purchase (the "Purchase") by the
Issuer of the global packaging business of Borden.
The purchase price for the Purchase to be paid by the Issuer consists
of $280 million in cash, along with an aggregate value, except as otherwise
described below, of at least $80 million in newly issued shares of Common
Stock. No fewer than 2,412,818 shares of Common Stock will be issued to
Borden. If the average closing price of the Common Stock on The Nasdaq
National Market over a 50 trading day period prior to the stockholders' meeting
to be called to approve the issuance of the shares of Common Stock to Borden
falls below $33.15625 per share, the number of shares will be increased to
maintain the $80 million in aggregate value, but in no event will the Issuer
issue more than 4.0 million shares of Common Stock to Borden. Assuming
issuance of 2,412,818 shares of Common Stock, Borden would own approximately
34% of the then outstanding shares of Common Stock.
Prior to the effectuation thereof, the Purchase and the issuance of
the shares of Common Stock to Borden in connection therewith must be approved
by the stockholders of the Issuer. Concurrently with the execution and
delivery of the Purchase Agreement, Borden entered into the following
<PAGE>
agreements (collectively, the "Stockholders Agreements") with certain
stockholders of the Issuer: (i) the Stockholders Agreement, dated as of June
20, 1996 (the "Voting Agreement"), by and among Borden, Inc. and J. Brendan
Barba, Paul M. Feeny, David MacFarland, Robert Cron, Kenneth J. Avia, Melanie
K. Barba, John Powers, Lauren Powers, Carolyn Vegliante and Lawrence Noll and
(ii) the Voting Agreement, dated as of June 20, 1996 (the "Voting Agreement"),
by and among Borden, Inc. and EGS Partners L.L.C., EGS Associates, L.P., BEV
Partners, L.P., JONAS Partners, L.P., William Ehrman, Frederic Greenberg,
Frederick Ketcher, Jonas Gerstl, James McLauren, Beverly Ehrman, Beverly Ehrman
as custodian for Stephanie Ehrman and Linda Greenberg. The Stockholders
Agreements provide, among other things, that each of the stockholders party
thereto will vote the shares of Common Stock beneficially owned by such
stockholder in favor of the Purchase and issuance of shares of Common Stock to
Borden in connection therewith. As a result of entering into the Stockholders
Agreement, the Reporting Persons are deemed to have beneficial ownership of the
2,294,695 shares of Common Stock subject thereto. See Item 5.
Concurrently with the execution and delivery of the Purchase
Agreement, Borden and the Issuer entered into an agreement (the "Governance
Agreement") concerning the corporate governance of the Issuer after the date on
which the Purchase occurs (the "Closing Date"). The Governance Agreement
provides that (i) Borden will have certain rights to subscribe for additional
shares of Common Stock issued by the Issuer to maintain its percentage
ownership of the Issuer, (ii) Borden will not increase its ownership interest
in the Issuer beyond that owned by Borden on the Closing Date after giving
effect to the Purchase, (iii) subject to changes in the size of the board of
directors of the Issuer and changes in Borden's percentage ownership of the
Issuer, Borden may designate four of the 10 total members on the board of
directors of the Issuer, (iv) super-majority approval of the directors of the
Issuer is required for certain corporate actions of the Issuer and (v) Borden
<PAGE>
will have the right to require the Issuer to register, pursuant to the terms
and provisions of the Governance Agreement, the shares of Common Stock owned by
Borden under applicable federal and state securities laws.
Each of the agreements described in this Item 4 are attached hereto
as exhibits and are incorporated herein in their entirety.
Item 5. Interest in Securities of the Issuer.
(a) and (b) As of June 20, 1996, under the definition of "beneficial
ownership" as set forth in Rule 13d-3 under the Securities Exchange Act of
1934, as amended, Borden may be deemed to have beneficially owned 2,294,695
shares of Common Stock subject to the Stockholders Agreements (the "Shares"),
constituting approximately 49.2% of the outstanding shares of Common Stock
(based on the number of shares of Common Stock represented by the Issuer in the
Purchase Agreement to be outstanding as of June 20, 1996). In addition to the
Shares, pursuant to the Voting Agreement, EGS Partners, L.L.C. ("EGS") has
agreed to vote 314,302 shares of Common Stock, representing certain managed
accounts (the "Managed Accounts Shares"), in favor of the Purchase and issuance
of shares of Common Stock to Borden in connection therewith. Because EGS's
voting power with respect to certain of the Managed Accounts Shares is subject
to the provisions of the Employee Retirement Income Security Act of 1974, as
amended, and all of such shares are subject to whatever instructions may be
given by the client, the Managed Accounts Shares have not been counted as
shares of Common Stock that may be deemed to be beneficially owned by the
Reporting Persons.
Borden is a wholly owned subsidiary of Borden Holdings and Borden
Holdings is a wholly owned subsidiary of BW Holdings. Whitehall Associates is
the managing member of BW Holdings. KKR Associates is the sole general partner
of Whitehall Associates. Therefore, Borden Holdings, BW Holdings, Whitehall
Associates and KKR Associates each has the power to direct the voting of any
<PAGE>
shares of Common Stock deemed to be beneficially owned by Borden. As a result,
Borden Holdings, BW Holdings, Whitehall Associates and KKR Associates may each
be deemed to beneficially own any shares of Common Stock deemed to be
beneficially owned by Borden. Each of Messrs. Kravis, Roberts, MacDonnell,
Raether, Michelson, Fox, Greene, Tokarz, Robbins, Stuart, Gilhuly and Golkin,
the general partners of KKR Associates, has shared power to vote or direct the
vote of any shares of Common Stock deemed to be beneficially owned by KKR
Associates. As a result, each of the general partners of KKR Associates may be
deemed to beneficially own any shares of Common Stock that KKR Associates may
be deemed to beneficially own.
Neither the filing of this Schedule 13D nor any of its contents shall
be deemed to constitute an admission that any Reporting Person is the
beneficial owner of the Common Stock referred to in this paragraph for purposes
of Section 13(d) of the Exchange Act or for any other purpose, and such
beneficial ownership is expressly disclaimed.
(c) Except as set forth in this Item 5, to the best knowledge of
each of the Reporting Persons, none of the Reporting Persons and no other
person described in Item 2 hereof has beneficial ownership of, or has engaged
in any transaction during the past 60 days in, any shares of Common Stock.
(d) The Stockholders will continue to have the right to receive
dividends from, or the proceeds from the sale of, all shares of Common Stock
subject to the Stockholders Agreements.
(e) Not applicable.
Item 6. Contracts, Arrangements or Understandings
with Respect to Securities of the Issuer.
Except as set forth in this Statement, to the best knowledge of the
Reporting Persons, there are no other contracts, arrangements, understandings
or relationships (legal or otherwise) among the persons named in Item 2 and
between such persons and any person with respect to any securities of the
<PAGE>
Issuer, including but not limited to, transfer or voting of any of the
securities of the Issuer, joint ventures, loan or option arrangements, puts or
calls, guarantees or profits, division of profits or loss, or the giving or
withholding of proxies, or a pledge or contingency the occurrence of which
would give another person voting power over the securities of the Issuer.
Item 7. Material to be Filed as Exhibits.
1. Joint Filing Agreement, dated July 1, 1996, among Borden, Inc.,
Borden Holdings, Inc., BW Holdings L.L.C., Whitehall Associates,
L.P., and KKR Associates relating to the filing of a joint statement
on Schedule 13D.
2. Stockholders Agreement, dated as of June 20, 1996, by and among
Borden, Inc. and J. Brendan Barba, Paul M. Feeny, David MacFarland,
Robert Cron, Kenneth J. Avia, Melanie K. Barba, John Powers, Lauren
Powers, Carolyn Vegliante and Lawrence Noll.
3. Voting Agreement, dated as of June 20, 1996, by and among Borden,
Inc. and EGS Partners L.L.C., EGS Associates, L.P., BEV Partners,
L.P., JONAS Partners, L.P., William Ehrman, Frederic Greenberg,
Frederick Ketcher, Jonas Gerstl, James McLauren, Beverly Ehrman,
Beverly Ehrman as custodian for Stephanie Ehrman and Linda Greenberg.
4. Purchase Agreement, dated as of June 20, 1996, between Borden, Inc.
and AEP Industries Inc.
5. Governance Agreement, dated as of June 20, 1996, between Borden, Inc.
and AEP Industries Inc.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this Statement is true, complete
and correct.
KKR ASSOCIATES
By: /s/ Scott M. Stuart
_______________________
Name: Scott M. Stuart
Title: General Partner
WHITEHALL ASSOCIATES, L.P.
By KKR Associates, its
General Partner
By: /s/ Scott M. Stuart
_______________________
Name: Scott M. Stuart
Title: General Partner
<PAGE>
BW HOLDINGS LLC
By Whitehall Associates,
L.P., its managing member
By Borden Holdings, Inc.,
attorney-in-fact
By: /s/ Phyllis Yeatman
_______________________
Name: Phyllis Yeatman
Title: Secretary
BORDEN HOLDINGS, INC.
By: /s/ Phyllis Yeatman
_______________________
Name: Phyllis Yeatman
Title: Secretary
BORDEN, INC.
By: /s/ Ellen G. Berndt
_______________________
Name: Ellen G. Berndt
Title: Secretary
DATED: July 1, 1996
<PAGE>
SCHEDULE A
BORDEN, INC.
Executive Officers and Directors:
Business (a) Principal
Name Address Occupation and
(b) Office Citizenship
C.R. Kidder 180 East Broad Street (a)-(b) Chairman U.S.
Columbus, OH 43215 of the Board,
Director,
Chief Executive
Officer and
President of
Borden, Inc.
H.R. Kravis 9 W. 57th Street (a) Member of KKR U.S.
New York, NY 10019 & Co. L.L.C. and
(b) Director
of Borden, Inc.
A. Navab 9 W. 57th Street (a) Member of KKR U.S.
New York, NY 10019 & Co. L.L.C. and
(b) Director of
Borden, Inc. U.S.
C.S. Robbins 9 W. 57th Street (a) Member of KKR
New York, NY 10019 and (b) Director
of Borden, Inc.
G.R. Roberts 2800 Sand Hill Road (a) Member of KKR U.S.
Suite 200 & Co. L.L.C. and
Menlo Park, CA 94025 (b) Director of
Borden, Inc.
S.M. Stuart 9 W. 57th Street (a) Member of KKR U.S.
New York, NY 10019 & Co. L.L.C. and
(b) Director of
Borden, Inc.
W.H. Carter 180 E. Broad Street (a)-(b) Executive U.S.
Columbus, OH 43215 Vice President and
Chief Financial
Officer of Borden,
Inc.
R.L. de Ney 180 E. Broad Street (a)-(b) Executive U.S.
Columbus, OH 43215 Vice Prsident-
Corporate Strategy
and Development
R.C. Kesselman 180 E. Broad Street (a)-(b) Executive U.S.
Columbus, OH 43215 Vice President,
Chaiman-Wise Foods
and Elmer's Products<PAGE>
Executive Officers and Directors:
Business (a) Principal
Name Address Occupation and
(b) Office Citizenship
J.M. Saggese 180 E. Broad Street (a)-(b) Executive U.S.
Columbus, OH 43215 Vice President,
Chairman and Chief
Executive Officer-
Borden Chemical and
Chairman-Borden
Decorative Products
D.A. Smith 180 E. Broad Street (a)-(b) Executive U.S.
Columbus, OH 43215 Vice President,
Chairman and Chief
Executive Officer-
Borden Foods
R.D. Kautto 180 E. Broad Street (a)-(b) Senior Vice U.S.
Columbus, OH 43215 President-Human
Resources and
Corporate Affairs
R.P. Starkman 180 E. Broad Street (a)-(b) Senior Vice U.S.
Columbus, OH 43215 President and
Treasurer
T.V. Barr 180 E. Broad Street (a)-(b) Vice U.S.
Columbus, OH 43215 President and
Director of Taxes
N.R. Iammartino 180 E. Broad Street (a)-(b) Vice U.S.
Columbus, OH 43215 President-Public
Affairs
D.K. Roche 180 E. Broad Street (a)-(b) Vice U.S.
Columbus, OH 43215 President and
General Auditor
E. Berndt 180 E. Broad Street (a)-(b) Secretary U.S.
Columbus, OH 43215
<PAGE>
BORDEN HOLDINGS, INC.
Executive Officers and Directors:
Business (a) Principal
Name Address Occupation and (b) Office Citizenship
C.R. Kidder 180 East Broad Street (a) Chairman of the Board,
Columbus, OH 43215 Director, Chief Executive U.S.
Officer and President
of Borden, Inc. and (b)
President and
Director of Borden
Holdings, Inc.
H.R. Kravis 9 W. 57th Street (a) Member of KKR & Co. U.S.
New York, NY 10019 L.L.C. and (b) Director of
Borden U.S. Holdings, Inc.
G.R. Roberts 2800 Sand Hill Road (a) Member of KKR & Co. U.S.
Suite 200 L.L.C. and (b) Director of
Menlo Park, CA 94025 Borden Holdings, Inc.
C.S. Robbins 9 W. 57th Street (a) Member of KKR & Co. U.S.
New York, NY 10019 L.L.C. and (b) Director of
Borden Holdings, Inc.
S.M. Stuart 9 W. 57th Street (a) Member of KKR & Co. U.S.
New York, NY 10019 L.L.C. and (b) Director of
Borden Holdings, Inc.
A. Navab 9 W. 57th Street (a) Member of KKR & Co. U.S.
New York, NY 10019 L.L.C. and (b) Director of
Borden Holdings, Inc.
R.P. Starkman 180 East Broad Street (a) Senior Vice President U.S.
Columbus, OH 43215 and Treasurer of Borden, Inc.
and (b) Vice President and
Treasurer of Borden Holdings,
Inc.
E. Berndt 180 East Broad Street (a) Secretary of Borden, Inc. U.S.
Columbus, OH 43215 and (b) Secretary of Borden
Holdings, Inc.
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description of Exhibits
1. Joint Filing Agreement, dated July 1, 1996, among Borden, Inc.,
Borden Holdings, Inc., BW Holdings L.L.C., Whitehall Associates,
L.P., and KKR Associates relating to the filing of a joint
statement on Schedule 13D.
2. Stockholders Agreement, dated as of June 20, 1996, by and among
Borden, Inc. and J. Brendan Barba, Paul M. Feeny, David
MacFarland, Robert Cron, Kenneth J. Avia, Melanie K. Barba, John
Powers, Lauren Powers, Carolyn Vegliante and Lawrence Noll.
3. Voting Agreement, dated as of June 20, 1996, by and among
Borden, Inc. and EGS Partners L.L.C., EGS Associates, L.P., BEV
Partners, L.P., JONAS Partners, L.P., William Ehrman, Frederic
Greenberg, Frederick Ketcher, Jonas Gerstl, James McLauren,
Beverly Ehrman, Beverly Ehrman as custodian for Stephanie Ehrman
and Linda Greenberg.
4. Purchase Agreement, dated as of June 20, 1996, between Borden,
Inc. and AEP Industries Inc.
5. Governance Agreement, dated as of June 20, 1996, between Borden,
Inc. and AEP Industries Inc.
EXHIBIT 1
JOINT FILING AGREEMENT
We, the signatories of the statement on Schedule 13D to which this
Agreement is attached, hereby agree that such statement is, and any amendments
thereto filed by any of us will be, filed on behalf of each of us.
KKR ASSOCIATES
By:/s/Scott M. Stuart
Name: Scott M. Stuart
Title: General Partner
WHITEHALL ASSOCIATES, L.P.
By KKR Associates, its
General Partner
By:/s/Scott M. Stuart
Name: Scott M. Stuart
Title: General Partner
BW HOLDINGS LLC
By Whitehall Associates,
L.P., its managing member
By Borden Holdings, Inc., attorney-in
fact
By:/s/Phyllis Yeatman
Name: Phyllis Yeatman
Title: Assistant Secretary
BORDEN HOLDINGS, INC.
By:/s/Phyllis Yeatman
Name: Phyllis Yeatman
Title: Assistant Secretary
BORDEN, INC.
By:/Ellen G. Berndt
Name: Ellen G. Berndt
Title: Secretary
Dated: July 1, 1996
STOCKHOLDERS AGREEMENT
AGREEMENT dated as of June 20, 1996 by and among Borden, Inc.
a New Jersey corporation ("Seller"), and the other parties signatory hereto
(each a "Stockholder").
RECITALS
Concurrently herewith, Seller and AEP Industries Inc., a
Delaware corporation ("Buyer"), are entering into a Purchase Agreement of even
date herewith (as such agreement may be amended from time to time, the
"Purchase Agreement"; capitalized terms used but not defined herein shall have
the meanings set forth in the Purchase Agreement) pursuant to which Buyer will
purchase from Seller and the Subsidiary Asset Sellers the Subsidiary Stock and
the Assets (the "Stock and Asset Purchase") in consideration for a combination
of cash and shares of common stock, par value $0.01 per share, of Buyer (the
"Buyer Common Stock").
As a condition to Seller's willingness to enter into the
Purchase Agreement, Seller requires that each Stockholder enter into, and each
such Stockholder has agreed to enter into, this Agreement.
AGREEMENT
To implement the foregoing and in consideration of the mutual
agreements contained herein, the parties agree as follows:
1. Representations and Warranties. Each Stockholder hereby
severally represents and warrants to Seller as follows:
(a) Ownership of Shares. (1) Such Stockholder is either
(i) the record holder and beneficial owner of, (ii) trustee of a trust
that is the record holder or beneficial owner of, and whose
beneficiaries are the beneficial owners (such trustee, a "Trustee") of,
(iii) executor of an estate that is the record holder or beneficial
<PAGE>
owner of, and whose beneficiaries are the beneficial owners (such
executor, an "Executor") of, (iv) director of a foundation that is the
record holder (such director, a "Foundation Director") of, or (v) the
beneficial owner but not the record holder of, the number of shares of
Buyer Common Stock as set forth opposite such Stockholder's name on
Section 1 of the disclosure schedule (the "Stockholders Agreement
Disclosure Schedule") (the "Existing Shares", and together with any
shares of Buyer Common Stock acquired by such Stockholder in any such
capacities after the date hereof and prior to the termination hereof,
whether upon exercise of options, conversion of convertible securities,
purchase, exchange or otherwise, the "Shares").
(2) On the date hereof, the Existing Shares set forth
opposite such Stockholder's name on Section 1 of the Stockholders
Agreement Disclosure Schedule constitute all of the shares of Buyer
Common Stock owned of record or beneficially by such Stockholder.
(3) Such Stockholder has sole power of disposition with
respect to all of the Existing Shares set forth opposite such
Stockholder's name on Section 1 of the Stockholders Agreement
Disclosure Schedule and sole voting power with respect to the matters
set forth in Section 2 hereof, in each case with respect to all of the
Existing Shares set forth opposite such Stockholder's name on Section
2 of the Stockholders Agreement Disclosure Schedule, with no
restrictions on such rights, subject to applicable federal securities
laws and the terms of this Agreement.
(b) Power; Binding Agreement. Such Stockholder has the legal
capacity, power and authority to enter into and perform all of such
Stockholder's obligations under this Agreement. The execution,
delivery and performance of this Agreement by such Stockholder will
not violate any other agreement to which such Stockholder is a party
or by which such Stockholder is bound including, without limitation,
any trust agreement, will, testamentary document, voting agreement,
stockholders agreement, voting trust or other agreement. This
Agreement has been duly and validly executed and delivered by such
Stockholder and constitutes a valid and binding agreement of such
Stockholder, enforceable against such Stockholder in accordance with
its terms. There is no beneficiary of or holder of a voting trust
certificate or other interest of any trust of which a Stockholder is
Trustee, any estate in respect of which a Stockholder is an Executor
or any Foundation of which a Stockholder is a Foundation Director
whose consent is required for the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
If such Stockholder is married and such Stockholder's Shares
constitute community property, this Agreement has been duly
authorized, executed and delivered by, and constitutes a valid and
binding agreement of, such Stockholder's spouse, enforceable against
such person in accordance with its terms.
(c) No Conflicts. (A) No filing with, and no permit,
authorization, consent or approval of, any state or federal public
body or authority is necessary for the execution of this Agreement
by such Stockholder and the consummation by such Stockholder of the
transactions contemplated hereby and (B) neither the execution and
delivery of this Agreement by such Stockholder nor the consummation
by such Stockholder of the transactions contemplated hereby nor
compliance by such Stockholder with any of the provisions hereof
shall (x) conflict with or result in any breach of any applicable
trust, estate, foundation or other organizational documents
applicable to such Stockholder, (y) result in a violation or
breach of, or constitute (with or without notice or lapse of time
<PAGE>
or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any
kind to which such Stockholder is a party or by which such
Stockholder or any of such Stockholder's properties or assets
may be bound or (z) violate any order, writ, injunction, decree,
judgment, order, statute, rule or regulation applicable to such
Stockholder or any of such Stockholder's properties or assets.
(d) Such Stockholder's Shares and the certificates
representing such Shares are now and at all times during the term
hereof will be held by such Stockholder, or by a nominee or custodian
for the benefit of such Stockholder, free and clear of all liens,
claims, security interests, proxies, voting trusts or agreements,
understandings or arrangements or any other encumbrances whatsoever,
except for any such encumbrances or proxies arising hereunder.
(e) No broker, investment banker, financial adviser or other
person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of
such Stockholder.
(f) Such Stockholder understands and acknowledges that Seller
is entering into the Purchase Agreement in reliance upon such
Stockholder's execution and delivery of this Agreement.
2. Agreement to Vote; Proxy.
2.1 Voting. Each Stockholder hereby severally agrees that,
during the time this Agreement is in effect (except, with respect to clauses
(i) and (iv) of this Section 2.1, until the Closing Date), at any meeting of
the stockholders of Buyer, however called, or in connection with any written
<PAGE>
consent of the stockholders of Buyer, such Stockholder shall vote (or cause to
be voted) the Shares held of record or beneficially by such Stockholder (i) in
favor of the Stock and Asset Purchase and the authorization and issuance of
shares of Buyer Common Stock to Seller in connection therewith (the "Buyer
Stock Issuance"), the execution and delivery by Buyer of the Purchase Agreement
and the approval of the terms thereof and each of the other actions
contemplated by the Purchase Agreement and this Agreement and any actions
required in furtherance hereof and thereof; (ii) against any action or
agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of Buyer under the Purchase
Agreement or this Agreement; (iii) (A) in favor of any amendments to the
Certificate of Incorporation and By-Laws of the Buyer in order to conform such
documents to the requirements of the Governance Agreement and (B) otherwise in
a manner consistent with the provisions of the Governance Agreement; and (iv)
except as specifically requested in writing by Seller in advance and except as
otherwise specified in clauses (i), (ii) and (iii) above, against the following
actions (other than the Stock and Asset Purchase, the Buyer Stock Issuance and
the transactions contemplated by the Purchase Agreement and the Governance
Agreement): (1) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving Buyer or its
subsidiaries; (2) a sale, lease or transfer of a material amount of assets of
Buyer or its subsidiaries or a reorganization, recapitalization, dissolution or
liquidation of Buyer or its subsidiaries; (3) (a) any change in the majority of
the board of directors of Buyer; (b) any material change in the present
capitalization of Buyer or any amendment of Buyer's Certificate of
Incorporation; (c) any other material change in Buyer's corporate structure or
business; or (d) any other action which, is intended, or could reasonably be
expected, to impede, interfere with, delay, postpone, discourage or materially
adversely affect the Stock and Asset Purchase, the Buyer Stock Issuance or the
<PAGE>
transactions contemplated by the Purchase Agreement, this Agreement or the
Governance Agreement or the contemplated economic benefits of any of the
foregoing. Such Stockholder shall not enter into any agreement or
understanding with any person or entity prior to the Termination Date (as
defined in Section 7) to vote or give instructions after the Termination Date
in any manner inconsistent with clauses (i), (ii) or (iii) of the preceding
sentence.
2.2 PROXY. EACH STOCKHOLDER HEREBY GRANTS TO, AND APPOINTS,
SELLER AND WILLIAM CARTER OF SELLER AND RICHARD L. DE NEY OF SELLER, IN THEIR
RESPECTIVE CAPACITIES AS OFFICERS OF SELLER, AND ANY INDIVIDUAL WHO SHALL
HEREAFTER SUCCEED TO ANY SUCH OFFICE OF SELLER, AND ANY OTHER DESIGNEE OF
SELLER, EACH OF THEM INDIVIDUALLY, SUCH STOCKHOLDER'S IRREVOCABLE (UNTIL THE
TERMINATION DATE) PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION)
TO VOTE THE SHARES AS INDICATED IN SECTION 2.1 ABOVE. EACH STOCKHOLDER INTENDS
THIS PROXY TO BE IRREVOCABLE (UNTIL THE TERMINATION DATE) AND COUPLED WITH AN
INTEREST AND WILL TAKE SUCH FURTHER ACTION AND EXECUTE SUCH OTHER INSTRUMENTS
AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY AND HEREBY REVOKES
ANY PROXY PREVIOUSLY GRANTED BY SUCH STOCKHOLDER WITH RESPECT TO SUCH
STOCKHOLDER'S SHARES.
3. Certain Covenants of Stockholders. Except in accordance
with the terms of this Agreement, each Stockholder hereby severally covenants
and agrees as follows:
3.1 Restriction on Transfer, Proxies and Non-Interference;
Restriction on Withdrawal. From the date hereof until the Transfer Restriction
Ending Date with respect to such Stockholder, such Stockholder shall not,
directly or indirectly: (i) except (w) subsequent to the Closing Date, in a
Permitted Disposition, (x) for gifts to family members who either are
signatories to this Agreement or who, upon such gift, become signatories to
this Agreement, (y) for gifts by J. Brendan Barba in an aggregate amount not
<PAGE>
exceeding 10,000 shares of Buyer Common Stock and (z) with the prior written
consent of Seller, offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, enforce or permit the execution of the
provisions of any redemption agreement with Buyer or enter into any contract,
option or other arrangement or understanding with respect to or consent to the
offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or
other disposition of, any or all of such Stockholder's Shares or any interest
therein; (ii) except as contemplated hereby, grant any proxies or powers of
attorney, deposit any Shares into a voting trust or enter into a voting
agreement with respect to any Shares; or (iii) take any action that would make
any representation or warranty of such Stockholder contained herein untrue or
incorrect or have the effect of preventing or disabling such Stockholder from
performing such Stockholder's obligations under this Agreement. "Permitted
Disposition" means a sale, transfer or other disposition (i) pursuant to a
statutory merger, consolidation or similar mandatory transaction; (ii) pursuant
to a tender offer if, subsequent to the Closing Date, the board of directors of
Buyer recommends acceptance of such tender offer or declines to take a position
regarding such tender offer; (iii) as a result of any pledge or hypothecation
to a bona fide financial institution to secure a bona fide loan or the
foreclosure of any lien or encumbrance which may be placed on any Buyer Common
Stock provided that, with respect to pledges or hypothecations by any
Stockholder, in one or a series of transactions of 1% or more of the
outstanding shares of Buyer Common Stock, such institution or institutions
agrees to be bound by the terms hereof; (iv) pursuant to the cashless exercise
of stock options issued under the Company's Stock Option Plans; or (v) from
time to time after the Closing Date equal to an amount of Shares (expressed as
a percentage) such that (A) the number of Shares owned by such Stockholder and
not so sold, transferred or otherwise disposed divided by the number of Shares
owned by such Stockholder immediately after the Closing Date is no less than
<PAGE>
(B) the number of shares of Buyer Common Stock owned at such time by the Seller
divided by the number of shares of Buyer Common Stock owned by the Seller
immediately after the Closing Date. "Transfer Restriction Ending Date" shall
mean (i) with respect to J. Brendan Barba, Paul M. Feeney, Melanie K. Barba,
John Powers, Lauren Powers and Carolyn Vegliante and all of their respective
transferees and assigns, the Termination Date or (ii) with respect to all other
Stockholders and all of their respective transferees and assigns, the Closing
Date.
3.2 No Termination or Closure of Trusts, Foundations and
Estates. Unless, in connection therewith, the Shares held by any trust,
foundation or estate which are presently subject to the terms of this Agreement
are transferred upon termination to one or more Stockholders and remain subject
in all respects to the terms of this Agreement, or other persons or entities
who upon receipt of such Shares become signatories to this Agreement, the
Stockholders who are Trustees, Executors or Foundation Directors shall not take
any action to terminate, close or liquidate any such trust, estate or
foundation and shall take all steps necessary to maintain the existence thereof
at least until the Termination Date.
3.3 Continued Service as Director. J. Brendan Barba and Paul
M. Feeney each agrees, if so nominated and elected, to serve as a member of the
Board of Directors of Buyer, and, in the case of Mr. Barba, if so elected by
the Board, as Chairman thereof, for five years following the Closing Date.
3.4 Employment Agreements. J. Brendan Barba and Paul M.
Feeney each agree to enter into their respective employment agreements in the
respective forms attached as Schedule 5.3(i)(2) to the Purchase Agreement on
the Closing Date.
4. Further Assurances. From time to time, at the other
party's request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further action
<PAGE>
as may be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement.
5. Certain Events. Each Stockholder agrees that this
Agreement and the obligations hereunder shall attach to such Stockholder's
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of such Shares shall pass, whether by operation of law or
otherwise, including without limitation such Stockholder's heirs, guardians,
administrators or successors or as a result of any divorce.
6. Stop Transfer. Until the Transfer Restriction Ending Date
(a) each Stockholder agrees with, and covenants to, Seller that such
Stockholder shall not request that Buyer register the transfer (book-entry or
otherwise) of any certificated or uncertificated interest representing any of
such Stockholder's Shares, unless such transfer is made in compliance with this
Agreement; (b) each Stockholder agrees, with respect to any Shares in
certificated form, that such Stockholder will tender to Buyer, within ten
business days after the date hereof, the certificates representing such Shares
and Buyer will inscribe upon such certificates the following legend: "The
shares of Common Stock, par value $.01 per share, of AEP Industries Inc. (the
"Company") represented by this certificate are subject to a Stockholders
Agreement dated as of June 20, 1996, and may not be sold or otherwise
transferred, except in accordance therewith. Copies of such Agreement may be
obtained at the principal executive offices of the Company"; (c) each
Stockholder (other than Lawrence Noll) agrees that within ten business days
after the date hereof, such Stockholder will have all uncertificated securities
representing Shares issued in certificated form in the name of such Stockholder
with the legend above inscribed on such certificates and to do such other
things as may be required by the transfer agent; and (d) each Stockholder
(other than Lawrence Noll) agrees that within ten business days after the date
<PAGE>
hereof, such Stockholder will no longer hold any Shares in "street name" or in
the name of any nominee.
7. Termination. The covenants and agreements contained herein
shall terminate on the first to occur of (a) the third anniversary of the
Closing Date, (b) the date, if any, prior to the Closing Date the Purchase
Agreement is terminated in accordance with its terms and (c) such time
following the Closing Date as Seller owns less than 10% of the outstanding
shares of Buyer Common Stock (the "Termination Date"); provided, that clauses
(i) and (iv) of Section 2.1 shall terminate on the earlier of the Closing Date
or the Termination Date.
8. Miscellaneous.
8.1 Entire Agreement; Assignment. This Agreement
(i) constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (ii) shall not be assigned by operation of law or
otherwise without the prior written consent of the other party.
8.2 Amendments. This Agreement may not be modified, amended,
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto; provided that Section 1 of the
Stockholders Agreement Disclosure Schedule may be supplemented by Seller by
adding the name and other relevant information concerning any stockholder of
Buyer who agrees to be bound by the terms of this Agreement without the
agreement of any other party hereto, and thereafter such added stockholder
shall be treated as a "Stockholder" for all purposes of this Agreement.
8.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram,
telex or telecopy, or by mail (registered or certified mail, postage prepaid,
<PAGE>
return receipt requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered
to the respective parties at the following addresses:
If to
Stockholder: c/o AEP Industries Inc.
125 Phillips Avenue
South Hackensack, New Jersey
Attn: Paul M. Feeney, Executive Vice
President
Fax: (201-807-2447)
copy to: Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
New York, New York 10017
Attn: Paul E. Gelbard, Esq.
Fax: (212-297-0261)
If to
Borden, Inc.: 180 East Broad Street
Columbus, Ohio 43215
Attn: Richard L. de Ney
Fax: (614-225-4108)
copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: David J. Sorkin, Esq.
Fax: (212-455-2502)
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
8.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
8.5 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
<PAGE>
8.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same Agreement.
8.7 Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
8.8 Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
8.9 Definitions; Construction. For purposes of this
Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect
to any securities shall mean having "beneficial ownership" of such
securities (as determined pursuant to Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act)), including
pursuant to any agreement, arrangement or understanding, whether or not
in writing. Without duplicative counting of the same securities by the
same holder, securities Beneficially Owned by a Person shall include
securities Beneficially Owned by all other Persons with whom such
Person would constitute a "group" as described in Section 13(d)(3) of
the Exchange Act.
<PAGE>
(b) "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated
organization or other entity.
(c) In the event of a stock dividend or distribution, or any
change in the Buyer Common Stock by reason of any stock dividend,
split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall be deemed to refer to and include the
Shares as well as all such stock dividends and distributions and any
shares into which or for which any or all of the Shares may be changed
or exchanged.
<PAGE>
IN WITNESS WHEREOF, Seller and each Stockholder have caused
this Agreement to be duly executed as of the day and year first above written.
BORDEN, INC.
By: /s/ Richard L. de Ney
Name: Richard L. de Ney
Title: Executive Vice President
STOCKHOLDERS
/s/ J. Brendan Barba
Name: J. Brendan Barba
/s/ Paul M. Feeney
Name: Paul M. Feeney
/s/ David MacFarland
Name: David MacFarland
/s/ Robert Cron
Name: Robert Cron
/s/ Kenneth J. Avia
Name: Kenneth J. Avia
/s/ Melanie K. Barba
Name: Melanie K. Barba
/s/ John Powers
Name: John Powers
/s/ Lauren Powers
Name: Lauren Powers
/s/ Carolyn Vegliante
Name: Carolyn Vegliante
/s/ Lawrence Noll
Name: Lawrence Noll
VOTING AGREEMENT
AGREEMENT dated as of June 20, 1996 by and among Borden, Inc.
a New Jersey corporation ("Seller"), and the stockholders of AEP Industries
Inc., as Delaware corporation ("Buyer"), named on the signature pages to this
voting agreement, severally but not jointly (the "Stockholders").
RECITALS
Concurrently herewith, Seller and Buyer are entering into a
Purchase Agreement of even date herewith (the "Purchase Agreement"; capitalized
terms used but not defined herein shall have the meanings set forth in the
Purchase Agreement) pursuant to which Buyer will purchase from Seller and the
Subsidiary Asset Sellers the Subsidiary Stock and the Assets (the "Stock and
Asset Purchase") in consideration for $280 million of cash and 2,412,818 shares
of common stock, par value $0.01 per share, of Buyer (the "Buyer Common
Stock"), subject to adjustment pursuant to the terms and provisions of the
Purchase Agreement.
As a condition to Seller's willingness to enter into the
Purchase Agreement, Seller requires that each Stockholder enter into, severally
but not jointly, and such Stockholder has agreed to enter into, this Agreement.
AGREEMENT
To implement the foregoing and in consideration of the mutual
agreements contained herein, the parties agree as follows:
1. Representations and Warranties. Each Stockholder hereby
severally but not jointly represents and warrants to Seller as follows:
(a) Ownership of Shares. (1) Such Stockholder is either
(i) the record holder and beneficial owner of, (ii) trustee of a trust
that is the record holder or beneficial owner of, and whose
beneficiaries are the beneficial owners (such trustee, a "Trustee") of,
<PAGE>
(iii) executor of an estate that is the record holder or beneficial
owner of, and whose beneficiaries are the beneficial owners (such
executor, an "Executor") of, or (iv) the beneficial owner but not the
record holder of, the number of shares of Buyer Common Stock as set
forth opposite such Stockholder's name on Section 1 of the disclosure
schedule attached hereto (the "Voting Agreement Disclosure Schedule")
(the "Shares").
(2) On the date hereof, the Shares set forth opposite such
Stockholder's name on Section 1 of the Voting Agreement Disclosure
Schedule constitute shares of Buyer Common Stock owned of record or
beneficially by such Stockholder.
(3) Such Stockholder has power of disposition with respect to
all of the Shares set forth opposite such Stockholder's name on Section
1 of the Voting Agreement Disclosure Schedule and voting power with
respect to the matters set forth in Section 2 hereof, in each case with
respect to all of the Shares set forth opposite such Stockholder's name
on Section 2 of the Voting Agreement Disclosure Schedule, with no
restrictions on such rights, subject to applicable federal securities
laws, margin regulations and standard margin arrangements, the
limitations noted on the Voting Agreement Disclosure Schedule and the
terms of this Agreement.
(b) Power; Binding Agreement. Such Stockholder has the legal
capacity, power and authority to enter into and perform all of such
Stockholder's obligations under this Agreement. The execution,
delivery and performance of this Agreement by such Stockholder will not
violate any other agreement to which such Stockholder is a party or by
which such Stockholder is bound including, without limitation, any
trust agreement, will, testamentary document, voting agreement,
stockholders agreement, voting trust or other agreement. This
<PAGE>
Agreement has been duly and validly executed and delivered by such
Stockholder.
(c) No Conflicts. (A) Except for the filing of an amendment
to the Schedule 13D of the Stockholders on file with the Securities and
Exchange Commission with respect to the Buyer Common Stock, no filing
with, and no permit, authorization, consent or approval of, any state
or federal public body or authority is necessary for the execution of
this Agreement by such Stockholder and the consummation by such
Stockholder of the transactions contemplated hereby and (B) neither the
execution and delivery of this Agreement by such Stockholder nor the
consummation by such Stockholder of the transactions contemplated
hereby nor compliance by such Stockholder with any of the provisions
hereof shall (x) conflict with or result in any breach of any
applicable trust, estate or other organizational documents applicable
to such Stockholder, (y) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
(or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or
other instrument or obligation of any kind to which such Stockholder is
a party or by which such Stockholder or any of such Stockholder's
properties or assets may be bound or (z) violate any order, writ,
injunction, decree, judgment, order, statute, rule or regulation
applicable to such Stockholder or any of such Stockholder's properties
or assets.
(d) Such Stockholder's Shares are free and clear of all
proxies, voting trusts or agreements, understandings or similar
<PAGE>
arrangements, except for this Agreement and as reflected on the Voting
Agreement Disclosure Schedule.
2. Agreement to Vote.
2.1 Voting. (a) Subject to the limitations described on the
Voting Agreement Disclosure Schedule, each Stockholder hereby agrees that,
during the time this Agreement is in effect, at any meeting of the stockholders
of Buyer, however called, or in connection with any written consent of the
stockholders of Buyer, such Stockholder shall vote (or cause to be voted) the
Shares then held of record or beneficially by such Stockholder in favor of the
Stock and Asset Purchase and the authorization and issuance of shares of Buyer
Common Stock to Seller in connection therewith (the "Buyer Stock Issuance"),
the execution and delivery by Buyer of the Purchase Agreement and the approval
of the terms thereof and each of the other actions contemplated by the Purchase
Agreement.
(b) Subject to the limitations described on the Voting
Agreement Disclosure Schedule, each Stockholder hereby agrees that, during the
time this Agreement is in effect, in the event such Stockholder sells,
transfers or otherwise disposes of any Shares following the record date for any
meeting of the stockholders of Buyer or for any written consent of the
stockholders of Buyer in connection with the Buyer Stock Issuance, such
Stockholder will retain the right to vote such Shares in connection with the
Buyer Stock Issuance and will vote such Shares held of record in accordance
with the provisions of Section 2.1(a) hereof, in each case subject to the
limitations described on the Voting Agreement Disclosure Schedule.
2.2 Private Sales. Each Stockholder hereby agrees that,
during the time this Agreement is in effect, in the event such Stockholder
sells, transfers or otherwise disposes of any Shares in a privately negotiated
transaction (a "Private Sale"), the purchaser or transferee in such Private
Sale will be required to agree in writing to be bound by the terms and
<PAGE>
provisions of this Voting Agreement, in each case subject to the limitations
described on the Voting Agreement Disclosure Schedule.
3. Certain Covenants of the Stockholder. Except in accordance
with the terms of this Agreement, the Stockholder hereby severally covenants
and agrees as follows:
3.1 Restriction on Stockholder Actions. From the date hereof
until the Termination Date, the Stockholder shall not, directly or indirectly,
take any action that would make any representation or warranty of such
Stockholder contained herein untrue or incorrect or otherwise transfer or sell
any Shares prior to the Termination Date for the purpose of circumventing such
Stockholder's obligations under this Agreement.
4. Further Assurances. From time to time, at the other
party's request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further action
as may be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement. Seller agrees to reimburse the Stockholders for any reasonable
expenses incurred by such Stockholders in connection with any such further
actions.
5. Public Announcement. Seller agrees to issue a news release
or other public announcement pertaining to the transactions contemplated by the
Purchase Agreement within one (1) business day after the signing of this
Agreement and the Purchase Agreement.
6. Termination. The covenants and agreements contained herein
shall terminate on the first to occur of (a) the Closing Date, (b) the date the
Purchase Agreement is terminated and (c) January 31, 1997 (the "Termination
Date").
<PAGE>
7. Miscellaneous.
7.1 Entire Agreement; Assignment; No Third Party
Beneficiaries. This Agreement (i) constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all other
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof and (ii) shall not be assigned by
operation of law or otherwise without the prior written consent of the other
parties. This Agreement is not intended to confer upon any Person other than
the parties hereto any rights or remedies.
7.2 Amendments. This Agreement may not be modified, amended,
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
7.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram,
telex or telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered
to the respective parties at the following addresses:
If to any
Stockholder: c/o EGS Partners, L.L.C.
300 Park Avenue, 21st Floor
New York, New York 10022
Attn: Arthur Goetchius
Facsimile: 212-755-9188
copy to: Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022
Attn: Peter A. Nussbaum, Esq.
Facsimile: 212-593-5955
If to
Borden, Inc.: 180 East Broad Street
Columbus, Ohio 43215
Attn: Richard L. de Ney
<PAGE>
copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: David J. Sorkin, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
7.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
7.5 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
7.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same Agreement.
7.7 Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
7.8 Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
<PAGE>
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
7.9 Definitions; Construction. For purposes of this
Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect
to any securities shall mean having "beneficial ownership" of such
securities (as determined pursuant to Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act)), including
pursuant to any agreement, arrangement or understanding, whether or not
in writing. Without duplicative counting of the same securities by the
same holder, securities Beneficially Owned by a Person shall include
securities Beneficially Owned by all other Persons with whom such
Person would constitute a "group" as described in Section 13(d)(3) of
the Exchange Act.
(b) "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated
organization or other entity.
(c) In the event of a stock dividend or distribution, or any
change in the Buyer Common Stock by reason of any stock dividend,
split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall be deemed to refer to and include the
Shares as well as all such stock dividends and distributions and any
shares into which or for which any or all of the Shares may be changed
or exchanged.
<PAGE>
IN WITNESS WHEREOF, Seller and the Stockholder have caused
this Agreement to be duly executed as of the day and year first above written.
BORDEN, INC.
By: /s/ Richard L. de Ney
Name: Richard L. de Ney
Title: Executive Vice President
EGS Partners L.L.C.
By: /s/ William Ehrman
Name: William Ehrman
Title: General Partner
EGS Associates, L.P.
By: /s/ William Ehrman
Name: William Ehrman
Title: General Partner
BEV Partners, L.P.
By: /s/ William Ehrman
Name: William Ehrman
Title: General Partner
JONAS Partners, L.P.
By: /s/ William Ehrman
Name: William Ehrman
Title: General Partner
/s/ William Ehrman
William Ehrman
/s/ Frederic Greenberg
Frederic Greenberg
/s/ Frederick Ketcher
Frederick Ketcher
/s/ Jonas Gerstl
Jonas Gerstl
/s/ James McLaren
James McLaren
/s/ Beverly Ehrman
Beverly Ehrman
/s/ Beverly Ehrman
Beverly Ehrman as Custodian
for Stephanie Ehrman
/s/ Linda Greenberg
Linda Greenberg
Voting Agreement Disclosure Schedule
Section 1
Beneficial Owner Shares
- - ---------------- ---------
EGS Partners, L.L.C. (certain managed accounts) 314,302<F1>
EGS Associates, L.P. 138,418
BEV Partners, L.P. 120,033
Jonas Partners, L.P. 7,883
William Ehrman 45,011
Frederic Greenberg 6,003
Fredrick Ketcher 4,802
Jonas Gerstl -
James McLaren -
Beverly Ehrman 20,506
Beverly Ehrman as Custodian
for Stephanie Ehrman 15,562
Linda Greenberg 801
Section 2
Beneficial Owner Shares
- - ---------------- --------
EGS Partners, L.L.C. 314,302<F2>
EGS Associates, L.P. 138,418
BEV Partners, L.P. 120,033
Jonas Partners, L.P. 7,883
William Ehrman 45,011
Frederic Greenberg 6,003
Fredrick Ketcher 4,802
Jonas Gerstl -
James McLaren -
Beverly Ehrman 20,506
Beverly Ehrman as Custodian
for Stephanie Ehrman 15,562
Linda Greenberg 801
<PAGE>
____________________
[FN]
<F1> The Beneficial Owner's exercise of its power to dispose of certain of
such Shares is subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and all such Shares
are subject to whatever instructions may be given by the client.
<F2> The Beneficial Owner's voting power with respect to certain of such
Shares is subject to the provisions of ERISA and all such Shares are
subject to whatever instructions may be given by the client.
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of June 20, 1996, between BORDEN, INC.,
a New Jersey corporation (the "Seller") and AEP INDUSTRIES INC., a Delaware
corporation (the "Buyer").
W I T N E S S E T H :
WHEREAS, the Seller, and the Seller's subsidiaries listed on Exhibit
A hereto (the "Subsidiaries", and collectively with the Seller, the "Company")
are engaged, in part, in the business of the development, production,
marketing, distribution and sale of flexible and rigid plastic packaging
materials in North America, Europe, South Africa, Australia and Asia (the
"Packaging Business" or "Borden Global Packaging");
WHEREAS, in consideration for a combination of cash and newly-issued
or treasury shares of common stock of the Buyer (a) the Buyer desires to
purchase from the Seller and the Seller desires to sell to the Buyer the assets
(other than assets excluded pursuant hereto), subject to the assumption of all
related liabilities, of the Packaging Business held by Borden, Inc. (the
"Borden Inc. Assets") upon the terms and subject to the conditions set forth
herein (the "Borden Inc. Asset Purchase") and (b) the Buyer desires to purchase
from the Seller and its Subsidiaries, and the Seller desires to sell, or to
cause its respective Subsidiaries to sell, to the Buyer (i) all of the
outstanding shares of stock owned by the Company (collectively, the "Subsidiary
Stock") of the Subsidiaries listed on Exhibit B-1 hereto (the "Transferred
Subsidiaries") (the sale and purchase of the Stock being referred to herein as
the "Stock Purchase") and (ii) the packaging assets of the Packaging Business
(other than the assets excluded pursuant hereto), subject to the assumption of
all related liabilities, held by the Subsidiaries listed on Exhibit B-2 hereto
(such Subsidiaries, the "Subsidiary Asset Sellers" and together with the
<PAGE>
Seller, the "Asset Sellers"; such assets, the "Subsidiary Assets", and together
with the Borden, Inc. Assets, the "Assets"; such purchase the "Subsidiaries
Asset Purchase", and together with the Borden, Inc. Asset Purchase, the "Asset
Purchase"; the Stock Purchase and the Asset Purchase are collectively referred
to herein as the "Stock and Asset Purchase"), each purchase and sale described
in clauses (a) and (b) to be upon the terms and subject to the conditions set
forth herein;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to the Seller's willingness to
enter into this Agreement, the Seller and certain stockholders of the Buyer
have entered into a stockholders agreement (the "Management Stockholders
Agreement") dated as of the date hereof attached as Exhibit C-1 hereto and the
Seller and certain other stockholders of the Buyer have entered into a voting
agreement (together with the Management Stockholders Agreement, the
"Stockholders Agreement") dated as of the date hereof attached as Exhibit C-2
hereto; and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to the Seller's willingness to
enter into this Agreement, and as a condition to the Buyer's willingness to
enter into this Agreement, the Buyer and the Seller have entered into a
governance agreement (the "Governance Agreement") dated as of the date hereof
attached as Exhibit D hereto and relating to the establishment of certain terms
and conditions concerning the corporate governance of the Buyer after the
Closing Date (as defined herein) and certain terms and conditions concerning
the acquisition and disposition of securities of the Buyer by the Seller and
its affiliates.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants of the parties hereto, it is hereby agreed as follows:
<PAGE>
1. Sale and Transfer of Subsidiary Stock; Purchase and Sale of Assets;
Assumption of Certain Liabilities
1.1. Sale and Transfer of Subsidiary Stock. On the basis of the
representations, warranties, covenants and agreements and subject to the
satisfaction or waiver of the conditions set forth in this Agreement and
subject to Section 2.2, on the Closing Date (as defined in Section 2.1), the
Seller shall cause to be delivered to the Buyer certificates representing the
Subsidiary Stock, duly endorsed, or accompanied by stock powers duly executed,
with all necessary stock transfer stamps attached thereto and cancelled, or
such other assignments, deeds, share transfer forms, endorsements, notarial
deeds of transfer or other instruments or documents, duly stamped where
necessary, as required by the jurisdiction of organization of each Transferred
Subsidiary as set forth on Schedule 1.1 of the disclosure schedule delivered by
the Seller to the Buyer on the date hereof (the "Seller Disclosure Schedule").
1.2. Transfer of Assets. On the basis of the representations,
warranties, covenants and agreements and subject to the satisfaction or waiver
of the conditions set forth in this Agreement, on the Closing Date, and subject
to the provisions of Section 1.3, the Seller shall sell, convey, assign,
transfer and deliver to the Buyer, or shall cause the Subsidiary Asset Sellers
to sell, convey, assign, transfer and deliver to the Buyer, and the Buyer shall
purchase and acquire from the Asset Sellers, all of the assets, rights,
properties, claims, contracts and business of the Asset Sellers at the Closing
Date which are principally utilized in the Packaging Business, of every kind,
nature, character and description, tangible and intangible, real, personal or
mixed, wherever located, including, without limitation, the following:
(a) Each Asset Seller's right, title and interest in and to the
patents, patent registrations, patent applications, trademarks, trademark
registrations, trademark applications, tradenames, copyrights, copyright
applications, copyright registrations, franchises, permits, licenses (both
<PAGE>
as licensor and licensee), processes, formulae, inventions and royalties
described on Section 1.2(a) of the Seller Disclosure Schedule, including
all rights to sue for past infringement, together with the goodwill
associated therewith;
(b) The real property and leasehold interests in real property
described on Section 1.2(b) of the Seller Disclosure Schedule owned by the
Asset Sellers, including all buildings, structures and other improvements
situated thereon (individually, a "Plant" and collectively, the "Plants"),
and all easements, privileges, rights-of-way, riparian and other water
rights, lands underlying any adjacent streets or roads and appurtenances
pertaining to or accruing to the benefit of such property to which the
Asset Sellers have title, in each case subject to the exceptions described
on Section 1.2(b) of the Seller Disclosure Schedule;
(c) Each Asset Seller's right, title and interest in and to the
equipment, furniture, furnishings, fixtures, machinery, vehicles, tools
and other tangible personal property described on Section 1.2(c) of the
Seller Disclosure Schedule pertaining to the operation of the Packaging
Business (collectively, the "Equipment") and all warranties and
guarantees, if any, express or implied, existing for the benefit of the
Asset Sellers in connection with the Equipment to the extent transferable;
(d) The inventory of Borden Global Packaging finished products on
hand at the Plants, in transit or in the distribution system of the Asset
Sellers on the Closing Date (the "Finished Goods") and the raw materials,
packaging materials and work in process for Borden Global Packaging
products on hand at the Plants, in transit or in the distribution system
of the Asset Sellers on the Closing Date, together with each Asset
Seller's right, title and interest in and to the spare parts, supplies and
promotional materials that are used in connection with the manufacture or
<PAGE>
sale of Borden Global Packaging products (the "Materials", and together
with the Finished Goods, the "Inventory");
(e) All management information systems and software, to the extent
that such systems and software are transferable by the Asset Sellers and
relate principally to the operations of the Plants, the ownership of the
Assets or the manufacture and sale of Borden Global Packaging products,
customer lists, vendor lists, catalogs, research material, technical
information, trade secrets, technology, know-how, specifications, designs,
drawings, processes, and quality control data, if any;
(f) Except for those contracts, agreements and commitments set forth
on Section 1.3(g) of the Seller Disclosure Schedule, each Asset Seller's
right, title and interest in and to contracts, maintenance and service
agreements, purchase commitments for materials and other services,
advertising and promotional agreements, leases and other agreements
(including but not limited to, any agreements of the Asset Sellers with
suppliers, sales representatives, distributors, agents, personal property
lessors, personal property lessees, licensors, licensees, consignors and
consignees specified therein) that relate to the Packaging Business,
whether or not entered into in the ordinary course of the Packaging
Business, that are listed on Section 1.2(f) of the Seller Disclosure
Schedule and those contracts pertaining to the Packaging Business that are
not Material Contracts (as defined in Section 3.1(q) hereof);
(g) Each Asset Seller's licenses, permits or franchises issued by
any federal, state, municipal or foreign authority relating to the
development, use, maintenance or occupation of the Plants or the
manufacture or sale of Borden Global Packaging products which are listed
on Section 1.2(g) of the Seller Disclosure Schedule, to the extent that
such licenses, permits or franchises are transferable and relate to the
<PAGE>
operations of the Plants, the ownership of the Assets or the manufacture
and sale of Borden Global Packaging products;
(h) Accounts receivable and other receivables of the Asset Sellers
in existence prior to the Closing Date (whether or not billed) to the
extent attributable to Borden Global Packaging Products sold prior to
12:01 A.M. on the Closing Date (the "Effective Time");
(i) Each Asset Seller's rights to goods and services and all other
economic benefits to be received subsequent to the Closing Date arising
out of prepayments and payments in advance by the Asset Sellers prior to
the Closing Date to the extent related to the Plants or the manufacturing,
marketing or sale of Borden Global Packaging products or the Packaging
Business (collectively, the "Prepaid Assets") and reflected on the Closing
Balance Sheet;
(j) Each Asset Seller's right, title and interest in deposits on
contracts relating principally to the Packaging Business that require
shipments on dates subsequent to the Closing Date; and
(k) All Borden Global Packaging customer lists, vendor lists,
catalogs, research material, technical information, trade secrets,
technology, know-how, specifications, designs, drawings, processes, and
quality control data, if any, and other materials and documents relating
to the Packaging Business (or copies thereof to the extent not principally
related to the Packaging Business).
1.3. Excluded Assets. It is expressly understood and agreed that the
Assets shall not include the following (each, an "Excluded Asset"):
(a) The assets (including, without limitation, all rights,
properties, claims, contracts and business) of all businesses other than
the Packaging Business conducted by the Asset Sellers to the extent not
principally used in the Packaging Business;
<PAGE>
(b) The capital stock of all Subsidiaries of the Seller other than
the Transferred Subsidiaries;
(c) Cash and cash equivalents or similar type investments, bank
accounts, certificates of deposit, Treasury bills and other marketable
securities (excluding deposits and prepayments to be transferred pursuant
to Section 1.2(j) hereof);
(d) All real property, leasehold interests in real property,
equipment, machinery, vehicles, tools and other tangible personal property
(other than the Plants and the Equipment) of the Asset Sellers used for
the transportation, storage, distribution or sale of Inventory outside the
Plants; provided, however, any contracts related to such transportation,
storage, distribution or sale of Inventory shall, to the extent permitted
thereby, be assigned to the Buyer pursuant to Section 1.2(f);
(e) Any Equipment as is used, transferred or otherwise disposed of
by the Asset Sellers in the ordinary course of business consistent with
past business practice of Borden Global Packaging through the Closing
Date;
(f) Any refunds or credits with respect to any taxes paid or
incurred by the Asset Sellers (plus any related interest received from the
relevant taxing authority), except to the extent reflected on the Closing
Balance Sheet;
(g) Each Asset Seller's right, title and interest in and to the
contracts listed on Section 1.3(g) of the Seller Disclosure Schedule;
(h) The trademarks, names and corporate logos of the Asset Sellers
listed on Section 4.11 of the Seller Disclosure Schedule, which
trademarks, names and corporate logos may appear on certain products and
other materials only to the extent permitted pursuant to Section 4.11;
<PAGE>
(i) The real property, including all buildings, structures and other
improvements situated thereon, and other assets listed on Section 1.3(i)
of the Seller Disclosure Schedule;
(j) All of the Asset Sellers' right, title and interest to the
assets pertaining to the production, marketing, distribution and sale of
flexible and rigid plastic packaging materials in South America;
(k) Except as otherwise provided in Section 4.16 hereof, all right,
title and interest of the Seller in any insurance policies relating to the
Packaging Business and all rights of the Seller to insurance claims and
proceeds arising from or related to (i) the operation of the Packaging
Business prior to the Closing and (ii) the Excluded Assets and Excluded
Liabilities;
(l) All assets relating to the Business Plans (as defined in Section
3.1(n) (i) hereof), except as expressly provided in Sections 6.4 and 6.8
hereof and in Section 6.4 of the Seller Disclosure Schedule; and
(m) The office lease for the office used by the Packaging Business
in Singapore.
1.4. Instruments of Conveyance and Transfer. On the Closing Date,
the Asset Sellers shall (a) deliver or cause to be delivered to the Buyer such
general or special warranty deeds, bills of sale, endorsements, consents,
assignments, licenses, and other good and sufficient instruments of transfer,
conveyance and assignment as the parties and their respective counsel shall
deem necessary or appropriate or as may be required by the jurisdiction of
organization of each Subsidiary Asset Seller to vest in the Buyer good and
marketable title to, or a binding leasehold interest in, the Assets, free and
clear of all liens, claims and encumbrances other than Permitted Liens (as
defined in Section 3.1(e) hereof) and (b) transfer to the Buyer all the
contracts, agreements, commitments, books, records, files and other data (or
<PAGE>
copies thereof) relating to the Assets as, and to the extent, set forth in
Section 1.2(k).
1.5. Further Assurances. From time to time after the Closing Date,
the Seller will execute and deliver, or cause to be executed and delivered,
such other instruments of conveyance, assignment, transfer and delivery and
will take such other actions as the Buyer may reasonably request in order more
effectively to transfer, convey, assign, and deliver to the Buyer any of the
Assets, or to enable the Buyer to exercise and enjoy all rights and benefits of
the Asset Sellers with respect thereto.
1.6. Assumed Liabilities. On the Closing Date, the Buyer shall
deliver to the Seller an undertaking (the "Assumption Agreement") in the form
attached hereto as Exhibit E whereby the Buyer, on and as of the Closing Date,
assumes and agrees to pay, perform and discharge when due, upon the terms and
subject to the conditions of this Agreement, the following debts, liabilities
and obligations, other than Excluded Liabilities, arising out of or pertaining
to the Packaging Business or the Assets whether arising before or after the
Closing:
(a) all liabilities of the Packaging Business reflected on the
Closing Balance Sheet,
(b) debts, obligations and liabilities in respect of the Packaging
Business or the Assets arising or incurred by the Buyer on and after the
Closing Date (other than as a result of any breach by the Asset Sellers of
any of their obligations to the Buyer),
(c) all debts, obligations and liabilities of the Asset Sellers
which arise on account of the Buyer's operation of the Packaging Business,
the use of the Assets, and/or sale of any products manufactured and/or
sold by the Buyer on and after the Closing Date,
<PAGE>
(d) all obligations relating to the Packaging Business or the Assets
under the contracts, commitments and agreements transferred pursuant to
Section 1.2(f);
(e) all liabilities and obligations for post-Closing returns of
Borden Global Packaging products sold prior to, on or after the Closing
Date;
(f) all liabilities and obligations for trade promotion programs
(including, without limitation, trade allowance programs) and marketing
programs and commitments applicable to Borden Global Packaging products
incurred in the ordinary course of business, consistent with past
practice;
(g) all liabilities and obligations under the licenses, permits or
franchises disclosed on Section 1.2(g) of the Seller Disclosure Schedule;
(h) all liabilities and obligations arising out of the operations of
the Plants prior to the Closing Date (including, without limitation, (i)
all products liability claims with respect to products manufactured by the
Asset Sellers prior to the Closing Date where such claims were not made
prior to the Closing Date and (ii) all liabilities and obligations related
to the presence, disposal, escape, seepage, leakage, discharge, emission,
release or threatened release of any substances or materials);
(i) all liabilities and obligations in respect of employee relations
and benefits pursuant to and to the extent set forth in Section 6 hereof;
(j) all liabilities and obligations for any taxes and expenses
described in Section 9.3 hereof to the extent set forth therein;
(k) all liabilities with respect to all actions, suits, proceedings,
disputes, claims or investigations arising out of or related to the
Packaging Business or that otherwise arise out of or are related to the
Assets;
<PAGE>
(l) all liabilities for claims relating to the Packaging Business
under the Seller's self-insurance arrangements; and
(m) all other liabilities and obligations arising out of or related
to the Packaging Business or the Assets.
The debts, liabilities and obligations assumed by the Buyer in accordance
with this Section 1.6 are sometimes hereinafter referred to as the "Assumed
Liabilities".
1.7. Excluded Liabilities. It is expressly understood and agreed
that, notwithstanding anything to the contrary in this Agreement, Assumed
Liabilities shall not include the following (collectively, the "Excluded
Liabilities"):
(a) all liabilities arising out of or relating to the Excluded
Assets;
(b) all liabilities and obligations for which the Seller has
expressly assumed responsibility pursuant to this Agreement;
(c) all debts, liabilities or obligations of the Asset Sellers that
principally do not arise out of or are not related to the Packaging
Business or that principally do not otherwise arise out of or are not
otherwise related to the Assets;
(d) any liability for federal, state or local taxes, charges, fees,
levies, or other similar assessments, including without limitation income,
gross receipts, ad valorem, premium, excise, real property, personal
property, windfall profit, sales, use, transfer, licensing, withholding,
employment, payroll, estimated and franchise taxes or any claim by any
federal, state or local taxing authority, in each case, relating to any
taxable period ending on or prior to the Closing Date;
(e) liabilities required under generally accepted accounting
principles, applied as of the Closing Date consistent with Section 2.4, to
be reflected on the Closing Balance Sheet and are not so reflected, but
<PAGE>
only if and to the extent such liabilities both (i) exceed the applicable
reserves reflected on the Closing Balance Sheet and (ii) with respect to
liabilities which had they been reflected on the Closing Balance Sheet
would have been reflected as Closing Other Non-Current Liabilities (as
defined in Section 2.4(a) hereof), exceed, together with the Closing Other
Non-Current Liabilities reflected on the Closing Balance Sheet,
$9,450,000;
(f) liabilities relating to the participation of U.S. Transferred
Employees in the U.S. Business Plans on or prior to the Effective Time,
except as otherwise set forth, and to the extent set forth, in Section 6
hereof (including, but not limited to, Sections 6.6 or 6.8(b) hereof);
(g) to the extent that the Seller, in its sole discretion, decides
to retain liabilities subject to insurance coverage for which claims have
been made to insurance carriers prior to the Closing ("Retained Insurance
Claims"), all liabilities principally arising out of or related to such
Retained Insurance Claims, provided that nothing in this Agreement
requires Seller to retain any such Retained Insurance Claims;
(h) liabilities which the Seller has agreed to retain under and to
the extent set forth in Section 4.16; and
(i) liabilities represented by the "Debt payable in one year" line
item under the heading Current Liabilities contained on the Closing
Balance Sheet.
2. Closing; Payment of Purchase Price at Closing
2.1. Closing Date. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 7.1 hereof, the closing with respect to the transactions provided for
in this Agreement (the "Closing") shall take place at the offices of Simpson
Thacher & Bartlett located at 425 Lexington Avenue, New York, New York 10017-
3954, at 10:00 a.m., New York City time, on a mutually agreed upon date not
<PAGE>
later than January 31, 1997. The actual time and date of the Closing are
herein called the "Closing Date".
2.2. Purchase Price and Payment. (a) Subject to Section 2.4 hereof,
regardless of whether the transfer of any Assets or Subsidiary Stock have been
deferred pursuant to the provisions of Section 2.3 of this Agreement, in
consideration for the sale and transfer of the Assets and the Subsidiary Stock,
and subject to the terms and conditions of this Agreement, the Buyer shall on
the Closing Date assume the Assumed Liabilities as provided in Section 1.6
hereof and shall transfer to or, in whole or in part, as directed by the
Seller: (i) certificates representing the greater of (A) 2,412,818 shares (the
"Fixed Shares") of common stock, par value $0.01 per share (the "Buyer Common
Stock"), of the Buyer and (B) a number of shares of Buyer Common Stock (rounded
up to the nearest whole share) equal to the quotient obtained by dividing (x)
$80.0 million by (y) the Buyer Stock Price; provided, however, that in the case
of clause (B), in no event will the Buyer be required to deliver in excess of
4.0 million shares of Buyer Common Stock (the "Equity Consideration"), all of
which shares shall have been duly authorized, validly issued, fully paid and
nonassessable, and (ii) $280.0 million of cash in immediately available funds
(the "Cash Consideration"; and together with the Equity Consideration,
collectively referred to as the "Purchase Price"). The "Buyer Stock Price"
shall be equal to the average of the closing prices of Buyer Common Stock on
The Nasdaq National Market, as reported in The Wall Street Journal, for the 50
trading days immediately preceding the second trading day prior to the
Stockholders' Meeting (as defined in Section 3.2(q)) or such shorter number of
trading days between the date hereof and the second trading day prior to the
Stockholders' Meeting.
(b) The Buyer and the Seller agree that if Hitachi Chemical Company
Ltd. ("Hitachi") exercises its right to purchase the shares of Hitachi - Borden
Chemical Products, Inc. ("Hitachi-Borden") owned by the Seller (the "Hitachi
<PAGE>
Shares") pursuant to the Joint Venture Basic Agreement dated as of June 23,
1972 (the "Joint Venture Agreement") between the Seller and Hitachi (the
"Hitachi Right of First Refusal"), then (i) the Purchase Price shall be equal
to the amount set forth above less $30.0 million (the "Hitachi Amount") and
(ii) at the Seller's option, the deduction of the Hitachi Amount from the
Purchase Price may be effected by means of a reduction of the Cash
Consideration in an amount equal to the Hitachi Amount (the "Hitachi Cash
Reduction") or a reduction in the number of shares of Buyer Common Stock
constituting the Equity Consideration equal to the quotient obtained by
dividing (a) the Hitachi Amount by (b) the Average Buyer Common Stock Price
(the "Hitachi Equity Reduction"). The "Average Buyer Common Stock Price" shall
be equal to the average of the closing prices of Buyer Common Stock on The
Nasdaq National Market, as reported in The Wall Street Journal, for the 20
trading days immediately preceding the second trading day prior to the Closing
Date. In the event that the Closing takes place prior to the date that Hitachi
has either exercised the Hitachi Right of First Refusal or waived the Hitachi
Right of First Refusal and the Hitachi Right of First Refusal has not
theretofore expired pursuant to its terms, the Buyer may withhold the Hitachi
Amount from the Purchase Price at the Closing, at the Seller's option, in the
form of the Hitachi Cash Reduction or the Hitachi Equity Reduction, and the
Closing will occur without any transfer by the Seller of the Hitachi Shares;
provided that within one business day following notice from the Seller to the
Buyer of any waiver by Hitachi of the Hitachi Right of First Refusal or of the
expiration of such right pursuant to its terms, the Buyer shall transfer to the
Seller in immediately available funds the Hitachi Cash Reduction (in the event
of a Hitachi Cash Reduction) or that number of shares of Buyer Common Stock
equal to the Hitachi Equity Reduction (in the event of a Hitachi Equity
Reduction) in the form so withheld and, subject to Section 2.3, the Seller
shall transfer to the Buyer the Hitachi Shares; and provided, further, that at
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the Closing, in the event that the payment of the Hitachi Amount is deferred in
the form of the Hitachi Cash Reduction, the Buyer shall deliver to the Seller
credit support or other evidence of its ability to pay the Hitachi Amount in
cash.
(c) The parties to this Agreement agree to allocate the Purchase
Price (the "1060 Allocation") in accordance with the rules under Section 1060
of the Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury
Regulations promulgated thereunder. To the extent possible, the parties agree
to provide the 1060 Allocation at the Closing. The parties recognize that the
Purchase Price does not include the Buyer's acquisition expenses and that the
Buyer will allocate such expenses appropriately. The Seller and the Buyer
agree to act in accordance with the computations and allocations in the 1060
Allocation (including any modifications thereto reflecting any post-Closing
adjustments) in any relevant tax returns or filings (including any forms or
reports required to be filed pursuant to Section 1060 of the Code, the Treasury
Regulations promulgated thereunder or any provisions of local, state and
foreign law ("1060 Forms")), and to cooperate in the preparation of any 1060
Forms and to file such 1060 Forms in the manner required by applicable law.
2.3. Deferred Transfers. (a) If, on the Closing Date, (i) the
Seller or the Buyer has not obtained any authorization, approval, order,
license, permit, franchise or consent from any foreign government or
governmental authority (an "Approval") with respect to a transfer of Assets or
Subsidiary Stock of a Subsidiary organized outside the United States or Canada
in the absence of which Approval the conditions precedent to the Closing set
forth in Section 5 would nevertheless be satisfied and which Approval is either
necessary in order to transfer the relevant Assets or Subsidiary Stock or the
failure to obtain which would subject the Buyer, the Seller or any subsidiary,
or any officer, director or agent of any such person to civil or criminal
liability or could render such transfer void or voidable or (ii) there is in
<PAGE>
effect any injunction, restraining order or decree of any nature of any court
or governmental agency or body of competent jurisdiction that would not prevent
the conditions precedent to the Closing set forth in Section 5 from being
satisfied and that restrains or prohibits the transfer to the Buyer of any
Assets or Subsidiary Stock of a Subsidiary organized outside the United States
and that is not permanent and non-appealable (a "Non-Final Injunction"), such
Assets or Subsidiary Stock (the "Deferred Items") shall be withheld from sale
without any reduction in the Purchase Price and, if necessary, be transferred
by dividend or otherwise, to the extent such transfer would not subject the
Seller to any taxes, from a Subsidiary to the Seller immediately prior to the
Closing. From and after the Closing, the Seller and/or the Buyer shall
continue to use reasonable efforts to obtain all Approvals, relating to the
Deferred Items or the transfer thereof, and/or to cause all Non-Final
Injunctions relating to the Deferred Items or the transfer thereof to be
lifted. To the extent consistent with applicable law and this Agreement, the
Buyer and the Seller will enter into a mutually reasonably acceptable agreement
or agreements governing the management by Buyer of the Assets or Subsidiaries
comprising the Deferred Items.
(b) Until such time as any Deferred Items have been transferred to
the Buyer pursuant to Section 2.3(c) or otherwise disposed of in accordance
with Section 2.3(d) (each, a "Deferred Transfer"), the Deferred Items shall be
held for the Buyer's benefit and the Assets or Subsidiaries comprising Deferred
Items shall be managed and operated by the Seller for the Buyer's benefit and
account in the manner hereinafter provided from the Closing to the time of the
respective Deferred Transfers, with all gains, income, losses, taxes or other
items generated thereby to be for the Buyer's account. Neither the Seller nor
any Subsidiary shall have any liability to the Buyer arising out of the
management or operation by the Seller of any Assets or Subsidiaries comprising
Deferred Items other than for gross negligence, wilful misconduct or failure to
<PAGE>
follow the Buyer's instructions if such instructions are permitted under
applicable law and do not require the Seller to violate any applicable law.
The Buyer shall reimburse the Seller and shall hold the Seller
harmless from and against all liabilities incurred or asserted as a result of
the Seller's post-Closing direct or indirect ownership, management, operation
or sale (other than to the Buyer) of the Deferred Items, including, without
limitation, the amount of any additional taxes payable by the Seller (whether
currently or in the future), after application of the terms of this Agreement,
as a result thereof in excess of the amount of taxes which would have been
payable by the Seller, after application of the terms of this Agreement, if the
Deferred Items had been transferred to the Buyer or any of its affiliates on
the Closing Date. Such reimbursement shall be made by the Buyer and received
by the Seller within ten business days of the Buyer receiving any bill, claim,
invoice or other request for payment from the Seller, together with appropriate
documentation showing the calculation of the amount claimed due.
From the Closing to the date of the Deferred Transfer, the Seller
shall hold the Deferred Items and hold or operate the Assets or Subsidiaries
comprising the Deferred Items only in the ordinary course substantially
consistent with past practice, except as otherwise specified in the Buyer's
instructions in accordance with Section 2.3(d) hereof; provided, however, that
the Seller shall not be required to finance the operations of any such
Subsidiary directly or indirectly. Subject to applicable law and regulations
(including, without limitation, all laws and regulations requiring investment
approvals or consents or antimonopoly clearances, exemptions or waivers in
connection with any disposition of the Deferred Items, and all exchange
controls and laws concerning foreign corrupt practices, expatriation of funds
or otherwise), the Seller shall, in respect of any Deferred Items, use all
reasonable efforts to follow and implement the reasonable written instructions
and policies of the Buyer relating to the holding of the Deferred Items and the
<PAGE>
management and operation of any Subsidiaries to which any such Deferred Items
relate. The Seller shall give the Buyer reasonable notice of all material
proposed financings with respect to the operations of the Assets or
Subsidiaries comprising the Deferred Items.
(c) Unless otherwise disposed of upon the Buyer's instructions in
accordance with Section 2.3(d) hereof, the certificates for the relevant
Subsidiary Stock comprising any Deferred Items, duly endorsed in blank and with
all necessary transfer stamps affixed thereto or such other assignments, deeds,
share transfer forms, endorsements, notarial deeds of transfer or other
instruments or documents, duly stamped where necessary, as are necessary under
the laws of the jurisdiction of organization of each Transferred Subsidiary as
set forth on Section 1.1 of the Seller Disclosure Schedule in order to
effectively transfer such Deferred Items, will be delivered to the Buyer free
and clear of all liens (except for liens which had existed on the Closing Date
and had been disclosed and liens which were created for the Buyer's benefit
during the period the Deferred Items were being held for the Buyer's benefit),
on the date which is fifteen (15) business days after all Approvals relating to
any such Deferred Item or the transfer thereof shall have been obtained and/or
after any Non-Final Injunction relating to any such Deferred Items or the
transfer thereof has been lifted or on such other date as the parties hereto
may mutually agree.
(d) At any time prior to the Deferred Transfer relating to any of
the Deferred Items, the Seller shall, (i) on the Buyer's written instructions
(subject to applicable law and regulations), or may at any time after 10 years
from the Closing Date, with the Buyer's consent (which shall not be
unreasonably withheld), for the Buyer's benefit, dispose of the Deferred Items
or, in the case of Subsidiary Stock, the assets of the Subsidiaries to which
such Deferred Items relate, and remit the proceeds of such sale (less
withholding or similar taxes, if any, payable with respect to such disposition
<PAGE>
or remittance) to the Buyer and (ii) for a period of 10 years following the
Closing Date, operate that portion of the Packaging Business related to the
Deferred Items in accordance with instructions from the Buyer if such
instructions are permitted under applicable law and do not require the Seller
to violate any applicable law; provided that in the event of either clause (i)
or (ii) above (x) the Seller shall have no liability to any such third party
arising out of such transactions or operations other than for gross negligence,
willful misconduct or failure to follow the Buyer's instructions if such
instructions are permitted under applicable law and do not require the Seller
to violate any applicable law; and (y) any amount so remitted to the Buyer
pursuant to this Section 2.3(d) shall be reduced by the sum of (I) the amount
by which the taxes payable by the Seller (whether currently or in the future),
after application of the terms of this Agreement, with respect to the initial
transfer, if any, to the Seller pursuant to Section 2.3(a) and the subsequent
disposition exceed the amount of taxes which would have been payable by the
Seller, after application of the terms of this Agreement, with respect to the
Deferred Items had they been transferred on the Closing Date by the owner
thereof (prior to their transfer, if any, to the Seller) without regard to this
Section 2.3, and (II) to the extent not previously paid by or on behalf of the
Buyer pursuant to Section 2.3(b) hereof, the amount of any liabilities imposed
upon or incurred by the Seller as a result of the Seller's post-Closing direct
or indirect ownership, management, operation or sale of the Deferred Items,
including, without limitation, the amount of any taxes (other than taxes
previously paid by the Buyer pursuant to Section 2.3(b)) payable by the Seller
as a result thereof.
2.4. Post-Closing Adjustment. (a) Within 60 days following the
Closing, the Seller shall, at its expense, prepare, or cause to be prepared,
and deliver to the Buyer a balance sheet (the "Closing Balance Sheet") which
shall set forth those assets and liabilities of the Packaging Business relevant
<PAGE>
to the adjustments contemplated by this Section 2.4 on the basis set forth on
Section 2.4(a) of the Seller Disclosure Schedule as of the Effective Time.
Subject to Section 2.4(a) of the Seller Disclosure Schedule, the Closing
Balance Sheet shall be prepared in accordance with generally accepted
accounting principles using the same accounting principles, methods, practices
and estimation methodologies as were utilized in the preparation of the
consolidated balance sheet of the Packaging Business as at December 31, 1995
(the "Pre-Closing Balance Sheet") included as part of the Financial Information
previously delivered to the Buyer. The Seller shall also deliver within 60
days from the Closing a calculation of (i) working capital derived from the
Closing Balance Sheet on the basis set forth on Section 2.4(a) of the Seller
Disclosure Schedule (the "Closing Working Capital") and (ii) Closing Other Non-
Current Liabilities. The term "Closing Other Non-Current Liabilities" shall
mean "Long-Term Liabilities", other than "Deferred income taxes", as set forth
on the Closing Balance Sheet, consistent with this Section 2.4(a) and Section
2.4(a) of the Seller Disclosure Schedule. The term "Closing Figures" shall
mean, collectively, the Closing Working Capital and the Closing Other Non-
Current Liabilities.
(b) The Buyer and the Buyer's accountants shall, within 30 days
after the delivery by the Seller of the Closing Balance Sheet and calculation
of the Closing Figures, complete their review of the Closing Figures, provided
that the Seller has furnished to the Buyer all information reasonably requested
by the Buyer necessary for its review of the Closing Figures. In the event
that the Buyer determines that either of the components of the Closing Figures
has not been stated or determined in accordance with this Section 2.4 and
Section 2.4(a) of the Seller Disclosure Schedule, the Buyer shall inform the
Seller in writing (the "Buyer's Objection"), setting forth the basis of the
Buyer's Objection in reasonable detail and to the extent practicable the
adjustments to the Closing Figures which the Buyer believes should be made, on
<PAGE>
or before the last day of such 30-day period. The Seller shall then have 30
days to review and respond to the Buyer's Objection. If the Seller and the
Buyer are unable to resolve all of their disagreements with respect to the
determination of the foregoing items within 30 days following the completion of
the Seller's review of the Buyer's Objection, they shall refer their remaining
differences to Ernst & Young LLP or another internationally recognized firm of
independent public accountants as to which the Seller and the Buyer mutually
agree (the "CPA Firm"), which shall, acting as experts in accounting and not as
arbitrators, determine on the basis of the standards set forth on Section
2.4(a) of the Seller Disclosure Schedule, and only with respect to the specific
remaining accounting related differences so submitted, whether and to what
extent, if any, either of the components of the Closing Figures requires
adjustment. The Seller and the Buyer shall direct the CPA Firm to use its best
efforts to render its determination within 45 days. The CPA Firm's
determination shall be conclusive and binding upon the Buyer and the Seller.
The fees and disbursements of the CPA Firm shall be shared equally by the
Buyer, on the one hand, and the Seller, on the other hand. The Buyer and the
Seller shall make readily available to the CPA Firm all relevant books and
records and any work papers (including those of the parties' respective
accountants) relating to the Pre-Closing Balance Sheet, the Closing Balance
Sheet, the Closing Working Capital, the Closing Other Non-Current Liabilities
and all other items reasonably requested by the CPA Firm. The "Adjusted
Closing Working Capital" shall be (i) the Closing Working Capital in the event
that (x) no the Buyer's Objection is delivered to the Seller during the 30-day
period specified above, or (y) the Seller and the Buyer so agree, (ii) the
Closing Working Capital, adjusted in accordance with the Buyer's Objection in
the event that the Seller does not respond to the Buyer's Objection within the
30-day period following receipt by the Seller of the Buyer's Objection, or
(iii) the Closing Working Capital, as adjusted by either (x) the agreement of
<PAGE>
the Seller and the Buyer or (y) the CPA Firm. The "Adjusted Closing Other Non-
Current Liabilities" shall be (i) the Closing Other Non-Current Liabilities in
the event that (x) no the Buyer's Objection is delivered to the Seller during
the 30-day period specified above, or (y) the Seller and the Buyer so agree,
(ii) the Closing Other Non-Current Liabilities, adjusted in accordance with the
Buyer's Objection in the event that the Seller does not respond to the Buyer's
Objection within the 30-day period following receipt by the Seller of the
Buyer's Objection, or (iii) the Closing Other Non-Current Liabilities, as
adjusted by either (x) the agreement of the Seller and the Buyer or (y) the CPA
Firm. "Adjusted Closing Figures" shall include the Adjusted Closing Working
Capital and the Adjusted Closing Other Non-Current Liabilities.
(c) The Buyer shall provide the Seller and its accountants full
access to the books and records of the Packaging Business, to any other
information, including work papers of their accountants, and to any employees
to the extent necessary for the Seller to prepare the Closing Balance Sheet and
determine the Closing Figures. The Buyer and its accountants shall have the
opportunity to observe the taking of the Inventory (which may begin prior to
the Closing Date on a date mutually agreed to by the Buyer and the Seller and
which shall be taken on a year-end basis consistent with past practice) in
connection with the preparation of the Closing Balance Sheet and the Closing
Figures and shall have full access to all information used by the Seller in
preparing the 1995 Balance Sheet (as defined below), Closing Balance Sheet and
Closing Figures, including the procedures, books, records and work papers of
its accountants.
(d) Within 10 business days following determination of the Adjusted
Closing Figures, the Buyer or the Seller, as the case may be, shall make an
adjustment payment (the "Adjustment Amount") equal to the difference between
the Buyer Adjustment Amount and the Seller Adjustment Amount. The "Buyer
Adjustment Amount" shall equal the sum of (i) the amount, if any, by which (A)
<PAGE>
the Adjusted Closing Working Capital exceeds (B) the Pre-Closing Working
Capital and (ii) the amount, if any, by which the Adjusted Closing Other Non-
Current Liabilities is less than $7,450,000. The "Pre-Closing Working Capital"
shall be equal to the working capital of the Packaging Business at December 31,
1995 as set forth on Section 2.4(d) of the Seller Disclosure Schedule. The
"Seller Adjustment Amount" shall equal the sum of (i) the amount, if any, by
which (A) the Adjusted Closing Working Capital is less than (B) the Pre-Closing
Working Capital and (ii) the amount, if any, by which the Adjusted Closing
Other Non-Current Liabilities exceeds $9,450,000.
(e) The Adjustment Amount will be payable (x) by the Seller to the
Buyer to the extent that the Seller Adjustment Amount exceeds the Buyer
Adjustment Amount at the Seller's option (i) in U.S. dollars in the amount of
the Adjustment Amount or (ii) in such number of shares of the Buyer Common
Stock equal to the quotient obtained by dividing (a) the Adjustment Amount by
(b) the Average Buyer Common Stock Price (the "Adjustment Shares"), and (y) by
the Buyer to the Seller to the extent that the Buyer Adjustment Amount exceeds
the Seller Adjustment Amount in the form of U.S. dollars, plus, in either case,
interest, payable in cash, on the Adjustment Amount from the Closing Date
through the date of payment at the "base rate" of Citibank, N.A. or any
successor thereto in New York, New York on the Closing Date. The Adjustment
Amount payable pursuant to this Section 2.4(e) shall be paid, in the case of
clauses (x)(i) and (y) above, by wire transfer of immediately available funds
to an account designated by the Buyer, on the one hand, or the Seller, on the
other hand, as the case may be and, in the case of clause (x)(ii) above, by
delivery to the Buyer of stock certificates representing the Adjustment Shares,
duly endorsed for transfer to the Buyer or accompanied by stock powers duly
executed in favor of the Buyer, together with evidence of payment of any
applicable transfer and documentary stamp taxes and other fees.
<PAGE>
3. Representations and Warranties
3.1. Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer as follows:
(a) Due Organization; Good Standing and Power. The Seller and each
of the Subsidiaries is a corporation duly organized, validly existing and
has the requisite power and authority to own, lease and operate its
property to be sold hereunder and to conduct the Packaging Business as now
conducted by it and, with respect to each U.S. corporation, is in good
standing under the laws of the jurisdiction of its incorporation. The
Seller has all requisite power and authority to enter into this Agreement
and the Governance Agreement and the Seller and each Subsidiary Asset
Seller has all requisite power and authority to enter into the other
agreements contemplated hereby and to perform its obligations hereunder
and thereunder, and the Seller and each Subsidiary Asset Seller has all
requisite power and authority to convey good and marketable title to the
Buyer with respect to the Assets owned by it. Each of the Seller and the
Subsidiaries is duly authorized, qualified or licensed to do business as a
foreign corporation, and with respect to each U.S. corporation is in good
standing, in each of the jurisdictions in which its right, title or
interest in or to any of the Assets held by it, or the conduct of the
Packaging Business by it, requires such authorization, qualification or
licensing, except where the failure to so qualify or to be in good
standing would not, individually or in the aggregate, have or reasonably
be expected to have a material adverse effect on the results of
operations, financial condition or business of Borden Global Packaging
taken as a whole. Other than the Subsidiaries, (i) the Seller has no
direct or indirect subsidiaries that engage directly or indirectly in the
Packaging Business and (ii) the Seller and the Subsidiaries do not own in
excess of 5% of the outstanding capital stock or equity interests of any
<PAGE>
entity that engages directly or indirectly in the Packaging Business.
Except for Hitachi-Borden, neither the Seller nor any of the Subsidiaries
is a party to any joint venture or partnership agreement relating to the
Packaging Business, and none of the Transferred Subsidiaries is a party to
any joint venture or partnership agreement.
(b) Authorization and Validity of Agreement. The execution,
delivery and performance by the Seller of this Agreement and the
Governance Agreement and the other agreements contemplated hereby and the
consummation by it of the transactions contemplated hereby and thereby
have been duly authorized by the Board of Directors of the Seller. No
other corporate or stockholder action is necessary for the authorization,
execution, delivery and performance by the Seller of this Agreement and
the Governance Agreement and the other agreements contemplated hereby and
the consummation by the Seller and the Subsidiaries of the transactions
contemplated hereby or thereby, other than certain corporate approvals of
the foreign Subsidiaries set forth on Section 3.1(b) of the Seller
Disclosure Schedule, which corporate approvals shall have been obtained by
the Closing Date. This Agreement has been duly executed and delivered by
the Seller and constitutes a valid and legally binding obligation of the
Seller, enforceable against it in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting the enforcement
of creditors' rights generally, by general equitable principles
(regardless of whether such enforceability is considered in a proceeding
in equity or at law) or by an implied covenant of good faith and fair
dealing.
(c) No Governmental Approvals or Notices Required; No Conflict with
Instruments to which the Seller is a Party. Except as required by the
terms of the Hitachi Right of First Refusal and except as described on
<PAGE>
Section 3.1(c) of the Seller Disclosure Schedule, the execution, delivery
and performance of this Agreement and the other agreements contemplated
hereby by the Seller and the consummation by it and the Subsidiaries of
the transactions contemplated hereby and thereby (i) will not violate
(with or without the giving of notice or the lapse of time or both) or
require any consent, approval, filing or notice to be made by any Asset
Seller or Transferred Subsidiary under, any provision of any law, rule or
regulation, court order, judgment or decree applicable to the Seller or
any such Subsidiary, except for (x) the applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and (y) such violations the occurrence of which, and such consents,
approvals, filings or notices the failure of which to obtain or make,
would not, individually or in the aggregate, have or reasonably be
expected to have a material adverse effect on the results of operations,
financial condition or business of Borden Global Packaging taken as a
whole, and (ii) will not conflict with, or result in the breach or
termination of any provision of, or constitute a default under, or result
in the acceleration of the performance of the obligations of the Seller or
any such Subsidiary under, or require the consent or approval of any
person under, or result in the creation of a lien, charge or encumbrance
upon a portion of the properties, assets or business of Borden Global
Packaging pursuant to, the charter or by-laws (or analogous organizational
documents) of the Seller or any such Subsidiary, or any indenture,
mortgage, deed of trust, lease, licensing agreement, contract, instrument
or other agreement to which the Seller or any such Subsidiary is a party
or by which the Seller or any such Subsidiary or any of the Assets held by
the Seller or any such Subsidiary is bound, except for such conflicts,
breaches, terminations, defaults, accelerations, liens, charges or
encumbrances which would not, individually or in the aggregate, have or
<PAGE>
reasonably be expected to have a material adverse effect on the results
of operations, financial condition or business of Borden Global Packaging
taken as a whole.
(d) Entire Business. Except as set forth on Section 3.1(d) of the
Seller Disclosure Schedule, the Assets and the Subsidiary Stock, together
with the services and arrangements described in Sections 4.10, 4.11 and
4.12 (subject to the limitations therein and in the related Exhibits)
constitute all the assets, properties and rights used in or necessary to
conduct the Packaging Business in all material respects as currently
conducted.
(e) Title to Properties. The Seller and the Subsidiaries have (x)
good title to the Subsidiary Stock and (y) good, valid and marketable
title to property owned, and a valid and binding leasehold interest in
property leased, included in the Assets or otherwise pertaining to the
Packaging Business, in the case of each of clauses (x) and (y), free and
clear of all liens, charges and other encumbrances, except (i) as set
forth on Section 3.1(e) of the Seller Disclosure Schedule or any Exhibit
hereto; (ii) as disclosed in the Financial Information; (iii) liens for
taxes, assessments and other governmental charges not yet due and payable
or, if due, (A) not delinquent or (B) being contested in good faith by
appropriate proceedings during which collection or enforcement against the
property is stayed; (iv) mechanics', workmen's, repairmen's,
warehousemen's, carriers' or other like liens arising or incurred in the
ordinary course of business if the underlying obligations are not past
due, original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course of business;
(v) with respect to real property, (A) easements, licenses, covenants,
rights-of-way and other similar restrictions, including, without
limitation, any other agreements, conditions or restrictions which would
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be shown by a current title report or other similar report or listing, (B)
any conditions that may be shown by a current survey, title report or
physical inspection and (C) zoning, building and other similar
restrictions, so long as none of (A), (B) or (C) render the title of such
real property unmarketable or prevent the use of such real property
substantially as currently used; and (vi) liens, charges or other
encumbrances which, individually or in the aggregate, would not have or
reasonably be expected to have a material adverse effect on the results of
operations, financial condition or business of Borden Global Packaging
taken as a whole (such liens, charges and encumbrances described in
clauses (i)-(vi) hereof are referred to herein as "Permitted Liens"). The
buildings, plants, structures and equipment of the Seller included in the
Assets are in good operating condition and repair, ordinary wear and tear
expected, and are adequate for the present and contemplated uses to which
they are being, or are contemplated to be, put except for such conditions
or inadequacy that, individually or in the aggregate, would not have or
reasonably be expected to have a material adverse effect on the results of
operations financial condition or business of Borden Global Packaging
taken as a whole.
(f) Financial Information; Absence of Certain Changes. (i) The
Seller has delivered to the Buyer audited balance sheets of Borden Global
Packaging as at December 31 for each of the years 1993, 1994 and 1995 (for
1995, the "1995 Balance Sheet"), and the related audited statements of
income and retained earnings and cash flows for each of the fiscal years
then ended, together with the report thereon of independent certified
public accountants, including notes thereto attached as Section 3.1(f)(i)
of the Seller Disclosure Schedule (the "Financial Information"). Such
financial statements and notes fairly present the financial condition and
results of operations of Borden Global Packaging as at the respective
<PAGE>
dates thereof and for the periods therein referred to, all in accordance
with generally accepted accounting principles consistently applied by the
Seller throughout the periods involved. Except (x) as and to the extent
set forth on the 1995 Balance Sheet, including the notes thereto, or in
the Interim Financial Information (as defined in Section 3.1(f)(ii)) or
(y) as disclosed in this Agreement or the Seller Disclosure Schedule,
neither the Seller nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or
otherwise) which would be required to be reflected on a balance sheet or
in the notes thereto prepared in accordance with generally accepted
accounting principles other than liabilities or obligations incurred in
the ordinary course of business since December 31, 1995 which would not,
individually or in the aggregate, have or reasonably be expected to have a
material adverse effect on the results of operations, financial condition
or business of Borden Global Packaging taken as a whole; provided that no
breach of the foregoing representation shall be deemed to have occurred
with respect to liabilities or obligations (or that portion thereof to the
extent that such breach has an effect not fully reflected on the Closing
Balance Sheet) ultimately reflected on the Closing Balance Sheet. All of
the liabilities reflected on the 1995 Balance Sheet are related to the
Packaging Business and arose out of or were incurred in the conduct of the
Packaging Business.
(ii) The Seller has delivered to the Buyer an unaudited balance sheet of
Borden Global Packaging as at May 31, 1996, and the related unaudited
statements of income and retained earnings and cash flows for the period
then ended including notes thereto attached as Section 3.1(f)(ii) of the
Seller Disclosure Schedule (the "Interim Financial Information"). The
Interim Financial Information was prepared on a basis consistent with
prior practice for the preparation of interim monthly financial statements
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for Borden Global Packaging and fairly presents, consistent with such
method of preparation, the financial condition and results of operations
of Borden Global Packaging at May 31, 1996, and for the period then ended;
(iii) Except as reflected in Sections 3.1(f)(i) or 3.1(f)(ii) of the
Seller Disclosure Schedule or otherwise contemplated by or disclosed in
this Agreement, the Seller Disclosure Schedule (including, without
limitation, Section 3.1(f)(iii) thereof) or the Exhibits hereto, since the
date of the 1995 Balance Sheet, the Seller has conducted the Packaging
Business in the ordinary course consistent with past practice, and other
than in the ordinary course, there has not occurred or arisen, with
respect to the Packaging Business: (i) any material adverse changes in or
any condition, event or occurrence which, individually or in the
aggregate, would cause, or would reasonably be expected to cause, a
material adverse change in the results of operations, financial condition
or business of the Packaging Business taken as a whole, (ii) any notice of
non-renewal, cancellation or termination from any existing customers with
respect to any material contracts of the Packaging Business, (iii) any
sale, assignment, pledge, hypothecation or other transfer of any of the
Assets, other than such sales, assignments, pledges, hypothecations or
other transfers which would not have or reasonably be expected to have a
material adverse effect on the results of operations, financial condition
or business of Borden Global Packaging taken as a whole and other than
transfers between Borden, Inc. or a Subsidiary, on the one hand, and
Borden, Inc. or a Subsidiary, on the other hand, (iv) any termination or
material amendment of, or any notice of termination of, any contract or
other agreement that is material to the Packaging Business taken as a
whole, (v) any damage, destruction or other casualty loss (not covered by
insurance) which would have or reasonably be expected to have a material
adverse effect on the results of operations, financial condition or
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business of Borden Global Packaging taken as a whole, (vi) except for
salary administration, bonuses and incentive compensation in the ordinary
course of business, any increase in the compensation payable or to become
payable by Borden Global Packaging to any employees or any increase in any
employee benefit plan, payment or arrangement for any such employee, (vii)
any incurrence or assumption of any indebtedness for borrowed money or the
guaranty by the Seller or any of the Subsidiaries of any indebtedness or
other obligation of another person relating to the Packaging Business,
other than borrowings or guarantees between Borden, Inc. or a Subsidiary,
on the one hand, and Borden, Inc. or a Subsidiary, on the other hand,
(viii) the cancellation of any debts to or waiver of any claims or rights
of value to the Seller relating to the Packaging Business, (ix) any
capital expenditures or additions to property, plant or equipment or the
acquisition of any other property or assets (other than raw materials,
supplies and inventory) at a cost in excess of $1,000,000 in the
aggregate, by the Seller and the Subsidiaries relating to the Packaging
Business, (x) any lease to the Seller or any of the Subsidiaries of any of
the properties or assets relating to the Packaging Business, (xi) the
entering into of any Material Contract (as defined in Section 3.1(q)
hereof) or (xii) the entering into of an agreement to do any of the
foregoing; provided that no breach of the foregoing representation shall
be deemed to have occurred to the extent that such occurrence or event (or
that portion thereof to the extent that such breach has an effect not
fully reflected on the Closing Balance Sheet) is reflected as a liability
on the Closing Balance Sheet.
(g) Capitalization. All of the outstanding shares of capital stock
or other equity interests of each of the Subsidiaries, including, without
limitation, the Transferred Subsidiaries, have been validly issued and are
fully paid and nonassessable and, except as set forth on Section 3.1(g) of
<PAGE>
the Seller Disclosure Schedule and except for directors' qualifying shares
and other nominal share interests issued to third parties to comply with
requirements of law, are owned by the Seller and/or one or more of its
subsidiaries free and clear of all liens, claims, charges, security
interests, options or other legal or equitable encumbrances. Section
3.1(g)(i) of the Seller Disclosure Schedule sets forth for each of the
Transferred Subsidiaries the authorized capital stock, the number of
shares of outstanding capital stock, the number of shares of such
outstanding capital stock owned by each owner thereof and the name of each
such owner. The Seller has the right to cause all such director's
qualifying shares and other nominal share interests to be transferred to
the Buyer or its designee in accordance with the terms hereof. Except as
indicated on Section 3.1(g)(ii) of the Seller Disclosure Schedule, there
are no outstanding options, warrants or other rights of any kind relating
to the sale, issuance or voting of any shares of capital stock of any
class of, or other ownership interests in, the Subsidiaries which have
been issued, granted or entered into by the Seller or any of the
Subsidiaries or any securities convertible into or evidencing the right to
purchase any shares of capital stock of any class of, or other ownership
interests in, any of the Subsidiaries.
(h) Defects. Except as described on Section 3.1(h) of the Seller
Disclosure Schedule or as reflected in the Financial Information or the
Interim Financial Information, (i) there are no defects in the normal
operating condition and repair of the Plants or Equipment currently used
in connection with the Borden Global Packaging business, which defects
individually or in the aggregate would materially interfere with the
current use thereof in the normal operation of any single Plant or of such
Plants or Equipment in the Packaging Business taken as a whole as
presently conducted; (ii) the Finished Goods of the Seller relating to the
<PAGE>
Packaging Business are, in all material respects, good and merchantable in
the ordinary course of business; and (iii) the Materials of the Seller
relating to the Packaging Business are, in all material respects, in good
condition and usable in the ordinary course of business.
(i) Legal Proceedings. Except as described on Section 3.1(i) of the
Seller Disclosure Schedule, there is no litigation, proceeding, tax audit
or governmental investigation or inquiry relating to Borden Global
Packaging to which the Seller or any of the Subsidiaries is a party, or to
which any of the Assets is subject, pending or, to the knowledge of the
Seller, threatened against it or any of the Subsidiaries or relating to
the Assets or the Packaging Business or the transactions contemplated by
this Agreement which, if determined or resolved adversely or in accordance
with the plaintiff's demands, would, individually or in the aggregate,
result, or would reasonably be expected to result, in any material adverse
effect on the results of operations, financial condition or business of
Borden Global Packaging taken as a whole. Neither the Seller nor any
Subsidiary has received any notice of any event or occurrence which could
result, or could reasonably be expected to result, in any such litigation,
inquiry, proceeding or investigation, nor to the knowledge of the Seller
or any of the Subsidiaries has there been any event or occurrence which
could result, or could reasonably be expected to result, in any such
litigation, inquiry, proceeding or investigation.
(j) Labor Controversies. Except as described on Section 3.1(j) of
the Seller Disclosure Schedule, (a) the Seller and the Subsidiaries with
respect to the Packaging Business are in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and
neither the Seller nor any Subsidiary with respect to the Packaging
Business has been engaged in any unfair labor practice, (b) there is no
<PAGE>
unfair labor practice complaint against the Seller or the Subsidiaries
with respect to the Packaging Business pending before the National Labor
Relations Board, (c) there is no labor strike, dispute, slowdown or
stoppage actually pending or threatened against or affecting the Seller or
the Subsidiaries with respect to the Packaging Business, (d) neither the
Seller nor any Subsidiary with respect to the Packaging Business has
experienced any strike, work stoppage or other labor difficulty, (e)
neither the Seller nor any Subsidiary with respect to the Packaging
Business is a party to, or subject to, a collective bargaining agreement,
and no collective bargaining agreement relating to employees of the Seller
or any Subsidiary with respect to the Packaging Business is currently
being negotiated, which in the case of any of the foregoing would,
individually or in the aggregate, have or reasonably be expected to have a
material adverse effect on the results of operations, financial condition
or business of Borden Global Packaging taken as a whole.
(k) Patents, Trademarks and Similar Rights. Except as described on
Section 3.1(k) of the Seller Disclosure Schedule, the Seller or the
Subsidiaries own, or are licensed to use subject to Section 4.11, all
material patents, trade names, trademarks, copyrights, technology, know-
how and processes used in the business of Borden Global Packaging as
presently conducted, and the consummation of the transactions contemplated
hereby will not alter or impair any such rights in any material respect.
Neither the Seller and the Subsidiaries nor to the best of the Seller and
the Subsidiaries' knowledge any other person is in default under any
license or other agreement relating to such Intellectual Property, except
for such default which would individually or in the aggregate, not have or
reasonably be expected to have a material adverse effect on the results of
operations, financial condition or business of Borden Packaging taken as a
whole, and all such material licenses and agreements are valid,
<PAGE>
enforceable and in full force and effect. To the best knowledge of the
Seller and the Subsidiaries, the use of such Intellectual Property does
not violate or infringe the rights of any person in any material respect
and no person is infringing any Intellectual Property of the Seller and
its Subsidiaries in any material respect. The Seller has received no
notice of any such alleged infringement. The patents, trade names,
trademarks, copyrights, technology, know-how and processes (the
"Intellectual Property") described on Section 1.2(a) of the Seller
Disclosure Schedule and the Intellectual Property owned by the Transferred
Subsidiaries constitute, in all material respects, the Intellectual
Property used in or necessary to conduct the Borden Global Packaging
business as currently conducted. The Seller has made all filings required
under the laws of the jurisdictions listed on Section 1.2(a) of the Seller
Disclosure Schedule necessary to preserve its rights in such Intellectual
Property.
(l) Government Licenses, Permits and Related Approvals. Except as
described on Section 3.1(l) of the Seller Disclosure Schedule, the Seller
or the Subsidiaries have all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities
required for the conduct of the business of Borden Global Packaging as
presently conducted, and such licenses, permits, consents, approvals,
authorizations, qualifications or orders are in full force and effect, and
the Seller has received no notices of any violation thereof except where
the failure to have, or to keep in full force and effect such licenses,
permits, consents, approvals, authorizations, qualifications and orders
would not, individually or in the aggregate, have or reasonably be
expected to have a material adverse effect on the results of operations,
financial condition or business of Borden Global Packaging taken as a
whole.
<PAGE>
(m) Conduct of Business in Compliance with Regulatory and
Contractual Requirements. Except as described on Section 3.1(m) of the
Seller Disclosure Schedule, the Seller has conducted the Packaging
Business so as to comply in all material respects with all applicable
laws, ordinances, regulations or orders or other requirements of any
governmental, regulatory or administrative agency or authority or court,
rights of concession, licenses, know-how or other proprietary rights of
others and received no notice of any failure to comply with such laws,
ordinances, regulations, orders or rights, except where the failure to
comply with such laws, ordinances, regulations, orders or rights would
not, individually or in the aggregate, have or reasonably be expected to
have a material adverse effect on the results of operations, financial
condition or business of Borden Global Packaging taken as a whole.
(n) Employee Benefit Plans. (i) For purposes of this Agreement,
"Business Plans" shall mean all "employee benefit plans" (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), including, without limitation, "multiemployer
plans" (within the meaning of Sections 3(37) and 4001(a)(3) of ERISA)),
retirement, savings, stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, collective bargaining, bonus,
incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements (A) under which any
employee or former employee of Borden Global Packaging (collectively, the
"Business Employees") has any present or future right to benefits and (B)
under which the Seller has any present or future liability. For purposes
of this Agreement, "U.S. Business Plans" shall mean all Business Plans
under which any Business Employee who is or was primarily employed in the
United States (collectively, the "U.S. Business Employees") has any
<PAGE>
present or future right to benefits. Section 3.1(n)(i) of the Seller
Disclosure Schedule sets forth a list of each material Business Plan.
(ii) With respect to each material Business Plan, the Seller has
made available to the Buyer a written description thereof.
(iii) Except as described on Section 3.1(n)(iii) of the
Seller Disclosure Schedule, each material Business Plan sponsored by the
Seller or its Subsidiaries has been established and administered in
accordance with its terms and in compliance with the applicable provisions
of ERISA, the Code and other applicable laws, rules and regulations,
except where a failure to do so would not, individually or in the
aggregate, have or reasonably be expected to have a material adverse
effect on the results of operations, financial condition or business of
Borden Global Packaging taken as a whole.
(iv) Except as reflected in the Financial Information or the
Interim Financial Information and except as set forth in Section
3.1(n)(iv) of the Seller Disclosure Schedule, to the best of the Seller's
and the Subsidiaries' knowledge, there were no unfunded liabilities of the
Transferred Subsidiaries in respect of any of the Business Plans that are
required by law, rule or regulation to be funded.
(o) Environmental Matters. Except as described on Section 3.1(o) of
the Seller Disclosure Schedule, to the best knowledge of the Seller: (i)
the Packaging Business complies in all respects with applicable federal,
state, local or foreign laws, rules and regulations relating to
environmental matters, pollution, waste disposal or industrial hygiene as
in effect on the date hereof (including, without limitation, the Federal
Resource Conservation and Recovery Act and the Federal Water Pollution
Control Act) (collectively, "Environmental Laws"), except where the
failure to comply with such laws, rules and regulations would not,
individually or in the aggregate, have or reasonably be expected to have a
<PAGE>
material adverse effect on the results of operations, financial condition
or business of Borden Global Packaging taken as a whole; (ii) the Seller
has obtained and is in compliance with all permits required under
Environmental Laws for the conduct of the Packaging Business, except as
would not reasonably be expected to result, individually or in the
aggregate, in a material adverse effect on the results of operations,
financial condition or business of Borden Global Packaging taken as a
whole; (iii) none of the Borden Global Packaging operations is subject to
any judicial or administrative proceeding alleging the violation of or
liability under any Environmental Laws which if adversely determined
would, individually or in the aggregate, have or reasonably be expected to
have a material adverse effect on the results of operations, financial
condition or business of Borden Global Packaging taken as a whole; (iv)
neither the Seller nor any other person has not released or disposed of
any material that is defined as hazardous or toxic under any Environmental
Law at any of the Plants, except as would not reasonably be expected to
result, individually or in the aggregate, in a material adverse effect on
the results of operations, financial condition or business of Borden
Global Packaging taken as a whole; (v) none of the Plants has been listed
on the National Priorities List or the Comprehensive Environment Response
Cleanup Liability Information System list prepared pursuant to the federal
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"); (vi) in connection with Borden Global Packaging operations,
the Seller has not been identified in writing as a potentially responsible
party under CERCLA or any equivalent State statute and (vii) neither the
Seller nor any Subsidiary has received notification from any governmental
bodies or other third parties or is subject to any order or decree
relating to any potential liability under Environmental Laws or disposal
of hazardous or toxic material on or affecting any property owned or
<PAGE>
leased by the Packaging Business. The Seller has made available to the
Buyer true and complete copies of any material reports, studies, analyses,
tests, or monitoring possessed or initiated by the Seller or the
Subsidiaries pertaining to hazardous or toxic materials in, on or under
the Plants, or concerning compliance by the Seller, the Subsidiaries or
any other person for whose conduct they are or may be responsible, with
Environmental Laws.
(p) Tax Matters. (i) There has been filed by or on behalf of the
Subsidiaries, or a filing extension from the appropriate federal, state,
local or foreign governments or governmental agencies has been obtained
with respect to, all returns relating to any United States federal, state,
provincial, local, territorial and foreign income, profits, franchise,
gross receipts, payroll, sales, employment, use, property, real estate,
excise, value added, estimated, stamp, alternative or add-on minimum,
environmental, withholding and any other taxes, duties or assessments,
together with all interest, penalties and additions imposed with respect
to such amounts required to be filed on or prior to the date of this
Agreement (the "Tax Returns"), and all taxes shown as due on such Tax
Returns have been paid or adequate provision in accordance with generally
accepted accounting principles for the payment of all taxes shown to be
due on such Tax Returns has been made. The Tax Returns are complete and
accurate in all material respects.
(ii) No audit or other proceeding by any court, governmental or
regulatory authority, or similar person is pending with respect to any
taxes due from or with respect to any Subsidiary, except to the extent
that such audit or proceeding would not have or reasonably be expected to
have a material adverse effect on the results of operations, financial
condition or business of Borden Global Packaging taken as a whole. No
written assessment of tax is proposed against any Subsidiary, except to
<PAGE>
the extent that such audit or proceeding would not have or reasonably be
expected to have a material adverse effect on the results of operations,
financial condition or business of Borden Global Packaging taken as a
whole or to the extent that any such written assessment is being contested
in good faith by appropriate proceedings.
(q) Contracts. Section 1.2(f) of the Seller Disclosure Schedule
lists all contracts, agreements or commitments of the Asset Sellers (other
than ordinary course purchase and sale orders for Inventory) that relate
principally to the Packaging Business that involve payment of more than
$250,000 in the aggregate and are expiring, are to be performed in or are
terminable in (in each case without significant continuing obligations)
120 days or longer ("Material Contracts"). To the best knowledge of the
Seller after due inquiry, all contracts, agreements or commitments of
Borden Global Packaging were entered into on an arm's length basis and in
good faith or are disclosed on Section 3.1(q) of the Seller Disclosure
Schedule. To the best of the Seller's knowledge, except as specified on
the Seller Disclosure Schedule, all contracts, maintenance and service
agreements, purchase commitments for materials and other services,
advertising and promotional agreements, leases and other agreements
pertaining to Borden Global Packaging that are being transferred pursuant
to the terms of Section 1.2(f) are in full force and effect and are valid
and enforceable in accordance with their respective terms, except (i) as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the
enforcement of creditors' rights generally, by general equitable
principles (regardless of whether enforceability is considered in a
proceeding in equity or at law) or by an implied covenant of good faith
and fair dealing or (ii) where the failure to be in full force and effect
and valid and enforceable would not, individually or in the aggregate,
<PAGE>
have or reasonably be expected to have a material adverse effect on the
results of operations, financial condition or business of Borden Global
Packaging taken as a whole. Except as specified on the Seller Disclosure
Schedule, the Seller and its Subsidiaries are not in breach or default in
the performance of, and to the best of the Seller's knowledge, no other
person is in breach or default of, any obligation thereunder and no event
has occurred or has failed to occur whereby any of the other parties
thereto have been or will be released therefrom or will be entitled to
refuse to perform thereunder, except for such breaches, defaults and
events which, individually or in the aggregate, would not have or
reasonably be expected to have a material adverse effect on the results of
operations, financial condition or business of Borden Global Packaging
taken as a whole.
Except as set forth on Section 3.1(q) of the Seller Disclosure
Schedule, there is no material lease, agreement or commitment or
transactions between the Seller and the Subsidiaries, on the one hand, and
any affiliate of the Seller, on the other hand, and no affiliate of the
Seller has any material interest in any property, real or personal,
tangible or intangible, including, without limitation, any Intellectual
Property, used in or pertaining to the Packaging Business.
(r) Insurance. Section 3.1(r) of the Seller Disclosure Schedule
contains an accurate and complete description of all material policies of
liability insurance covering the Seller or the Subsidiaries that relate to
the Packaging Business. All such policies are in full force and effect,
all premiums with respect thereto (or with respect to new policies that,
in the ordinary course of business, have replaced such policies listed on
Section 3.1(r) of the Seller Disclosure Schedule) covering all periods up
to and including the Closing Date have been paid, to the extent due prior
to the Closing Date, or accrued on the Seller's financial statements and
<PAGE>
books and records and no notice of cancellation or termination has been
received with respect to any such policy (other than any policy that
expires, is cancelled or is terminated in accordance with its terms and
has been continued, extended or reinstated on substantially similar terms
or is replaced with another policy with substantially similar terms).
Such policies are sufficient for compliance with all requirements of law
and all agreements to which the Seller is a party and are valid,
outstanding and enforceable policies. No insurance has been refused with
respect to any of the operations, properties or assets of the Seller, nor
has the Seller received notice that the coverage of any insurance has been
limited by any insurance carrier which has carried, or received any
application for, any such insurance during the last three years.
(s) Returns. Since December 31, 1995, the dollar amount of products
returned to the Seller and its Subsidiaries with respect to the Packaging
Business has not been materially greater than the dollar amount of returns
experienced by the Seller and its Subsidiaries during equivalent periods
in previous years.
(t) Certain Fees. With the exception of fees and expenses payable
to Morgan Stanley & Co. Incorporated ("Morgan Stanley"), which shall be
paid by the Seller, neither the Seller nor any of the Subsidiaries nor any
of their respective officers, directors or employees, on behalf of the
Seller or such Subsidiaries, has employed any broker or finder or incurred
any other liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated hereby.
(u) Buyer Common Stock Held for Investment. The Seller is aware
that no shares of the Buyer Common Stock to be received by the Seller in
partial consideration for the Stock and Asset Purchase are registered
under the Securities Act or under any state securities laws. The Seller
is not an underwriter, as such term is defined under the Securities Act,
<PAGE>
and is acquiring such shares solely for investment, with no present
intention to distribute any such shares to any person, and the Seller will
not sell or otherwise dispose of shares except in compliance with the
registration requirements or exemption provisions under the Securities Act
and the rules and regulations promulgated thereunder, or any other
applicable securities laws.
(v) Information Supplied. None of the information supplied or to be
supplied by the Seller to the Buyer in writing specifically for inclusion
in the Proxy Statement (as defined in Section 3.2(q)) will to the extent
included in the Proxy Statement, at the date the Proxy Statement is first
mailed to the Buyer's stockholders or at the time of the Stockholders'
Meeting, contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they are made, not misleading.
(w) No Other Representations or Warranties. Except for the
representations and warranties contained in this Section 3.1, neither the
Seller nor any other person makes any other express or implied
representation or warranty on behalf of the Seller or the Subsidiaries.
3.2. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller as follows:
(a) Due Organization; Good Standing and Power. The Buyer is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has the requisite
corporate power and authority and any necessary governmental approvals to
own, lease and operate its properties and to carry on its business as it
is now being conducted, except where the failure to have such power,
authority and governmental approvals would not, individually or in the
aggregate, have or reasonably be expected to have a material adverse
<PAGE>
effect on the results of operations, financial condition or business of
the Buyer. The Buyer is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction
where the character of its properties owned, leased or operated by it or
the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed or
in good standing which would not, individually or in the aggregate, have
or reasonably be expected to have a material adverse effect on the results
of operations, financial condition or business of the Buyer.
(b) Authorization and Validity of Agreement. The Buyer has all
necessary corporate power and authority to execute and deliver this
Agreement and the Governance Agreement, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by the Buyer
of this Agreement and the Governance Agreement and the other agreements
contemplated hereby and the consummation by the Buyer of the transactions
contemplated hereby and thereby have been duly and validly authorized by
all necessary corporate action and no other corporate proceedings on the
part of the Buyer are necessary to authorize this Agreement and the
Governance Agreement or to consummate the transactions so contemplated
(other than the approval of the issuance of the Buyer Common Stock in
connection with the Stock and Asset Purchase by the affirmative vote of
the holders of a majority of the shares of the Buyer Common Stock present
in person or represented by proxy, and entitled to vote thereon at the
meeting of holders of the Buyer Common Stock to be called therefor
(provided that the shares so present or represented constitute a majority
of the outstanding shares of the Buyer Common Stock) (the "Buyer
Stockholder Approval")). No other corporate or stockholder action is
necessary for the authorization, execution, delivery and performance by
<PAGE>
the Buyer of this Agreement and the other agreements contemplated hereby
and the consummation by the Buyer of the transactions contemplated hereby
or thereby. This Agreement has been duly executed and delivered by the
Buyer and constitutes a valid and legally binding obligation of the Buyer,
enforceable against the Buyer in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally, by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law) or
by an implied covenant of good faith and fair dealing. The Board of
Directors of the Buyer (at a meeting duly called and held) has
(i) determined that the Stock and Asset Purchase and the Governance
Agreement are fair to and in the best interests of the Buyer and its
stockholders, (ii) approved this Agreement and the Governance Agreement
and the transactions contemplated hereby and thereby (including but not
limited to the Stock and Asset Purchase and the issuance of the Buyer
Common Stock in connection therewith), (iii) resolved to recommend
approval of the issuance of the Buyer Common Stock in connection with the
Stock and Asset Purchase by the Buyer's stockholders, and (iv) directed
that approval of the issuance of the Buyer Common Stock to the Seller in
connection with the Stock and Asset Purchase be submitted to the Buyer's
stockholders. The Buyer hereby agrees to the inclusion in the Proxy
Statement (as defined in Section 3.2(q)) of the recommendations of the
Board of Directors of the Buyer described in this Section 3.2(b).
(c) No Governmental Approvals or Notices Required; No Conflict with
Instruments to which the Buyer is a Party. Except as described on Section
3.2(c) of the disclosure schedule delivered by Buyer to Seller on the date
hereof (the "Buyer Disclosure Schedule" and, together with the Seller
Disclosure Schedule, the "Disclosure Schedules"), the execution, delivery
<PAGE>
and performance of this Agreement, the Governance Agreement and the other
agreements contemplated hereby by the Buyer and the consummation by the
Buyer of the transactions contemplated hereby and thereby (i) will not
violate (with or without the giving of notice or the lapse of time or
both) or require any consent, approval, filing or notice under, any
provision of any law, rule or regulation, court order, judgment or decree
applicable to the Buyer, except for (x) the applicable requirements of the
HSR Act and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder and (y) such
violations the occurrence of which, and such consents, approvals, filings
or notices the failure of which to obtain or make, would not, individually
or in the aggregate, have or reasonably be expected to have a material
adverse effect on the results of operations, financial condition or
business of the Buyer, and (ii) will not conflict with, or result in the
breach or termination of any provision of, or constitute a default under,
or result in the acceleration of the performance of the obligations of the
Buyer under, or require the consent or approval of any person under, or
result in the creation of a lien, charge or encumbrance upon a portion of
the properties, assets or business of the Buyer pursuant to, the charter
or by-laws of the Buyer or any indenture, mortgage, deed of trust, lease,
licensing agreement, contract, instrument or other agreement to which the
Buyer is a party or by which the Buyer or any of its assets or properties
is bound, except for such conflicts, breaches, terminations, defaults,
accelerations or liens which would not, individually or in the aggregate,
have or reasonably be expected to have a material adverse effect on the
results of operations, financial condition or business of the Buyer.
(d) Title to Properties. Except as set forth on Section 3.2(d) of
the Buyer Disclosure Schedule, the Buyer has good, valid and marketable
title to property owned and a valid leasehold interest in property leased,
<PAGE>
all of its material properties and assets (real, personal and mixed,
tangible and intangible), including, without limitation, all the
properties and assets reflected in the balance sheet of the Buyer as at
April 30, 1996 included in the Buyer's Quarterly Report on Form 10-Q for
the period ended on such date (except for properties and assets disposed
of in the ordinary course of business and consistent with past practices
since April 30, 1996). None of such properties or assets are subject to
any liens, charges and other encumbrances, except (i) as set forth on
Section 3.2(d) of the Buyer Disclosure Schedule; (ii) as specifically
disclosed in the Buyer SEC Reports (as defined in Section 3.2(e)); (iii)
liens for taxes, assessments and other governmental charges not yet due
and payable or, if due, (A) not delinquent or (B) being contested in good
faith by appropriate proceedings during which collection or enforcement
against the property is stayed; (iv) mechanics', workmen's, repairmen's,
warehousemen's, carriers' or other like liens arising or incurred in the
ordinary course of business if the underlying obligations are not past
due, original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course of business;
(v) with respect to real property, (A) easements, licenses, covenants,
rights-of-way and other similar restrictions, including, without
limitation, any other agreements, conditions or restrictions which would
be shown by a current title report or other similar report or listing, (B)
any conditions that may be shown by a current survey, title report or
physical inspection and (C) zoning, building and other similar
restrictions, so long as none of (A), (B) or (C) render the title of such
real property unmarketable or prevent the use of such real property
substantially as currently used; and (vi) liens, charges or other
encumbrances which, individually or in the aggregate, would not have or
reasonably be expected to have a material adverse effect on the results of
<PAGE>
operations, financial condition or business of the Buyer. The buildings,
plants, structures and equipment of the Buyer are in good operating
condition and repair, ordinary wear and tear excepted, and are adequate
for the present and contemplated uses to which they are being, or are
contemplated to be, put except for such conditions or inadequacy that,
individually or in the aggregate, would not have or reasonably be expected
to have a material adverse effect on the results of operations financial
condition or business of the Buyer.
(e) SEC Filings; Absence of Certain Changes. (i) The Buyer and, to
the extent applicable, each of its then subsidiaries, has filed all forms,
reports, statements and documents required to be filed with the Securities
and Exchange Commission (the "SEC") since October 31, 1992 (collectively,
the "Buyer SEC Reports"), each of which has complied in all material
respects with the applicable requirements of the Securities Act of 1933,
as amended (the "Securities Act"), and the rules and regulations
promulgated thereunder, or the Exchange Act and the rules and regulations
promulgated thereunder, each as in effect on the date so filed. The Buyer
has heretofore delivered or (in the case of any such document not yet
filed with the SEC) promptly will deliver to the Seller, in the form filed
with the SEC (including any amendments thereto), true and complete copies
of the Buyer SEC Reports. None of such Buyer SEC Reports (including but
not limited to any financial statements or schedules included or
incorporated by reference therein) contained, when filed, any untrue
statement of a material fact or omitted to state a material fact required
to be stated or incorporated by reference therein or necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, which misstatement or omission continues
to expose the Buyer to liability under the United States federal
securities laws or the securities laws of any state of the United States.
<PAGE>
Except to the extent revised or superseded by a subsequent filing with the
SEC (a copy of which has been provided to the Seller prior to the date
hereof), none of the Buyer SEC Reports filed by the Buyer since October
31, 1992 and prior to the date hereof, contains any untrue statement of a
material fact or omits to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(ii) Each of the audited and unaudited financial statements of the
Buyer (including any related notes thereto) included in the Buyer SEC
Reports, complies or, if not yet filed, will comply as to form in all
material respects with all applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto; has been
or, if not yet filed, will have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited quarterly
statements, as permitted by Form 10-Q of the SEC) applied on a consistent
basis throughout the periods involved (except as may be indicated in the
notes thereto) and fairly presents or, if not yet filed, will fairly
present the financial position of the Buyer at the respective date thereof
and the results of its and their operations and changes in cash flows for
the periods indicated (subject, in the case of unaudited quarterly
statements, to normal year-end audit adjustments).
(iii) Except as and to the extent set forth on the balance sheet of
the Buyer at October 31, 1995, including the notes thereto, included in
the Buyer's Annual Report on Form 10-K for the fiscal year ended October
31, 1996, or on the balance sheet of the Buyer at April 30, 1996,
including the notes thereto, included in the Buyer's Quarterly Report on
Form 10-Q for the fiscal quarter ended April 30, 1996, the Buyer has no
liabilities or obligations of any nature (whether accrued, absolute,
<PAGE>
contingent or otherwise) which would be required to be reflected on a
balance sheet or in the notes thereto prepared in accordance with
generally accepted accounting principles, except for liabilities or
obligations incurred in the ordinary course of business since October 31,
1995, which would not, individually or in the aggregate, have or
reasonably be expected to have a material adverse effect on the results of
operations, financial condition or business of the Buyer.
(iv) The Buyer has heretofore furnished to the Seller a complete and
correct copy of any amendments or modifications which have not yet been
filed with the SEC to agreements, documents or other instruments which
previously had been filed by the Buyer with the SEC pursuant to the
Securities Act and the rules and regulations promulgated thereunder or the
Exchange Act and the rules and regulations promulgated thereunder.
(f) Conduct of Business. Except as reflected in Section 3.2(f) of
the Buyer Disclosure Schedule or otherwise contemplated by or disclosed in
this Agreement, the Buyer Disclosure Schedule or the Exhibits hereto or
otherwise disclosed in the Buyer SEC Reports filed and publicly available
prior to the date of this Agreement, since October 31, 1995, the Buyer has
conducted its business in the ordinary course consistent with past
practice, and other than in the ordinary course, there has not occurred or
arisen, with respect to its business: (i) any material adverse changes in
or any condition, event or occurrence which, individually or in the
aggregate, would cause, or would reasonably be expected to cause, a
material adverse change in the results of operations, financial condition
or business of the Buyer; (ii) any notice of non-renewal, cancellation or
termination from any existing customers with respect to any material
contracts of the business of the Buyer; (iii) any sale, assignment,
pledge, hypothecation or other transfer of any assets, businesses or
operations, other than such sales, assignments, pledges, hypothecations or
<PAGE>
other transfers which would not, individually or in the aggregate have or
reasonably be expected to have a material adverse effect on the results of
operations, financial condition or business of the Buyer, (iv) any
termination or material amendment of, or any notice of termination of, any
contract or other agreement that is material to the business of the Buyer,
(v) any damage, destruction or other casualty loss (not covered by
insurance) which would have or reasonably be expected to have a material
adverse effect on the results of operations, financial condition or
business of the Buyer, (vi) except for salary administration, bonuses and
incentive compensation in the ordinary course of business, any increase in
the compensation payable or to become payable by the Buyer to any
employees or any increase in any employee benefit plan, payment or
arrangement for any such employee, (vii) any incurrence or assumption of
any indebtedness for borrowed money or the guaranty by the Buyer of any
indebtedness or other obligation of another person; (viii) the
cancellation of any debts to or waiver of any claims or rights of value to
the Buyer; (ix) any capital expenditures or additions to property, plant
or equipment or the acquisition of any other property or assets (other
than raw materials, supplies and inventory) at a cost in excess of
$1,000,000 in the aggregate, by the Buyer; (x) any lease to the Buyer of
any of its properties or assets; (xi) the entering into of any Buyer
Material Contract (as defined in Section 3.2(p)) or (xii) the entering
into of an agreement to do any of the foregoing.
(g) Capitalization; Subsidiaries. (i) The authorized capital stock
of the Buyer consists of 21,000,000 shares, consisting of (a) 1,000,000
shares of a class designated as preferred stock, par value $1.00 per share
("preferred stock") and (b) 20,000,000 shares of the Buyer Common Stock.
As of the date hereof, (i) 4,667,901 shares of the Buyer Common Stock were
issued and outstanding, all of which shares were duly authorized, validly
<PAGE>
issued, fully paid and nonassessable and were issued free of preemptive
(or similar) rights, (ii) 2,801,000 shares of the Buyer Common Stock were
held in the treasury of the Buyer, (iii) an aggregate of 411,000 shares of
the Buyer Common Stock were reserved for issuance and issuable upon or
otherwise deliverable in connection with the exercise of authorized but
unissued stock options of the Buyer (the "Buyer Stock Options") issued
pursuant to any stock option, performance unit or similar plan of the
Buyer (the "Buyer Stock Plans"), (iv) 582,875 shares of the Buyer Common
Stock issuable upon exercise of outstanding the Buyer Stock Options (with
an average exercise price of $17.56), (v) up to 300,000 shares of the
Buyer Common Stock were reserved for issuance pursuant to the 1995
Employee Stock Purchase Plan of Buyer and (vi) an indeterminate number of
shares of Buyer Common Stock were reserved for issuance pursuant to the
401(K) Savings and Employee Stock Ownership Plan of the Buyer. All of the
shares of the Buyer Common Stock which may be issued pursuant to the Buyer
Stock Plans will be, when issued, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive (or similar) rights.
Except (i) as set forth above or (ii) as a result of the exercise of stock
options pursuant to the Buyer Stock Plans outstanding as of the date
hereof, there are outstanding (a) no shares of capital stock or other
voting securities of the Buyer, (b) no securities of the Buyer convertible
into or exchangeable for shares of capital stock or voting securities of
the Buyer, (c) no options, warrants or other rights to acquire from the
Buyer, and no obligation of the Buyer to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital
stock or voting securities of the Buyer and (d) no equity equivalents,
interests in the ownership or earnings of the Buyer or other similar
rights (collectively, the "Buyer Securities"). Except as set forth in
Section 3.2(g) of the Buyer Disclosure Schedule, (i) there are no
<PAGE>
outstanding obligations of the Buyer to repurchase, redeem or otherwise
acquire any the Buyer Securities and (ii) there is no voting trust or
other agreement or understanding to which the Buyer is a party or is bound
with respect to the voting of the capital stock of the Buyer. There are
no other options, calls, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or
unissued capital stock of the Buyer to which the Buyer is a party. As of
the date hereof, the Fixed Shares represent approximately 34.08% of the
issued and outstanding shares of the Buyer Common Stock (after giving
effect to the issuance of the Fixed Shares) and approximately 31.5% of the
fully diluted shares of the Buyer Common Stock (after giving effect to the
issuance of the Fixed Shares).
(ii) The Buyer has no subsidiaries and does not own, directly or
indirectly, any capital stock or other equity interests in any entity in
excess of 5% of the outstanding capital stock or equity interests of such
entity.
(h) Legal Proceedings. Except as described on Section 3.2(h) of the
Buyer Disclosure Schedule or as disclosed on the Buyer SEC Reports filed
and publicly available prior to the date of this Agreement, there is no
litigation, proceeding, tax audit or governmental investigation or inquiry
to which the Buyer is a party, or to which any of its assets is subject,
pending or, to the knowledge of the Buyer, threatened against or affecting
it or relating to the transactions contemplated by this Agreement which,
if determined or resolved adversely or in accordance with the plaintiff's
demands, would, individually or in the aggregate, result, or would
reasonably be expected to result, in any material adverse effect on the
results of operations, financial condition or business of the Buyer. The
Buyer has not received any notice of any event or occurrence which could
result, or could reasonably be expected to result, in any such litigation,
<PAGE>
inquiry, proceeding or investigation, nor to the knowledge of the Buyer
has there been any event or occurrence which could result, or could
reasonably be expected to result, in any such litigation, inquiry,
proceeding or investigation.
(i) Labor Controversies. Except as described on Section 3.2(i) of
the Buyer Disclosure Schedule, (a) the Buyer is in compliance in all
material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and
hours, and the Buyer has not been engaged in any unfair labor practice,
(b) there is no unfair labor practice complaint against the Buyer pending
before the National Labor Relations Board, (c) there is no labor strike,
dispute, slowdown or stoppage actually pending or threatened against or
affecting the Buyer, (d) the Buyer has not experienced any strike, work
stoppage or other labor difficulty, (e) the Buyer is not a party to, or
subject to, a collective bargaining agreement, and no collective
bargaining agreement relating to employees of the Buyer is currently being
negotiated, which in the case of any of the foregoing would, individually
or in the aggregate, have or reasonably be expected to have a material
adverse effect on the results of operations, financial condition or
business of the Buyer.
(j) Patents, Trademarks and Similar Rights. Except as described on
Section 3.2(j) of the Buyer Disclosure Schedule, the Buyer owns, or is
licensed to use, all material patents, trade names, trademarks,
copyrights, technology, know-how and processes used in the business of the
Buyer as presently conducted, and the consummation of the transactions
contemplated hereby will not alter or impair any such rights in any
material respect. Neither the Buyer nor, to the best of the Buyer's
knowledge, any other person is in default under any license or other
agreement relating to such Intellectual Property, except for such default
<PAGE>
which would individually or in the aggregate, not have or reasonably be
expected to have a material adverse effect on the results of operations,
financial condition or business of the Buyer, and all such material
licenses and agreements are valid, enforceable and in full force and
effect. To the best knowledge of the Buyer, the use of such Intellectual
Property does not violate or infringe the rights of any person in any
material respect and no person is infringing any Intellectual Property of
the Buyer in any material respect. The Buyer has received no notice of
any such alleged infringement. The patents, trade names, trademarks,
copyrights, technology, know-how and processes owned by the Buyer
constitute, in all material respects, the intellectual property used in or
necessary to conduct the business of the Buyer as currently conducted.
The Buyer has made all filings required necessary to preserve its rights
in such intellectual property.
(k) Government Licenses, Permits and Related Approvals. Except as
described on Section 3.2(k) of the Buyer Disclosure Schedule, the Buyer
has all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities required for the
conduct of the business of the Buyer as presently conducted, and such
licenses, permits, consents, approvals, authorizations, qualifications or
orders are in full force and effect, and the Buyer has received no notices
of any violation thereof except where the failure to have, or to keep in
full force and effect, such licenses, permits, consents, approvals,
authorizations, qualifications and orders in full force and effect would
not, individually or in the aggregate, have or reasonably be expected to
have a material adverse effect on the results of operations, financial
condition or business of the Buyer.
(l) Conduct of Business in Compliance with Regulatory and
Contractual Requirements. Except as described on Section 3.2(l) of the
<PAGE>
Buyer Disclosure Schedule, the Buyer has conducted its business so as to
comply in all material respects with all applicable laws, ordinances,
regulations or orders or other requirements of any governmental,
regulatory or administrative agency or authority or court, rights of
concession, licenses, know-how or other proprietary rights of others and
received no notice of any failure to comply with such laws, ordinances,
regulations, orders or rights, except where the failure to comply with
such laws, ordinances, regulations, orders or rights would not,
individually or in the aggregate, have or reasonably be expected to have a
material adverse effect on the results of operations, financial condition
or business of the Buyer.
(m) Employee Benefit Plans. (i) For purposes of this Agreement,
"Buyer Business Plans" shall mean all "employee benefit plans" (within the
meaning of Section 3(3) of ERISA, including, without limitation,
"multiemployer plans" (within the meaning of Sections 3(37) and 4001(a)(3)
of ERISA)), retirement, savings, stock purchase, stock option, severance,
employment, change-in-control, fringe benefit, collective bargaining,
bonus, incentive, deferred compensation and all other employee benefit
plans, agreements, programs, policies or other arrangements (A) under
which any employee or former employee of the Buyer (collectively, the
"Buyer Business Employees") has any present or future right to benefits
and (B) under which the Buyer has any present or future liability.
Section 3.2(m)(i) of the Buyer Disclosure Schedule is a list of each
material Buyer Business Plan.
(ii) With respect to each material Buyer Business Plan, the
Buyer has made available to the Seller a written description thereof.
(iii) Except as described on Section 3.2(m)(iii) of the
Buyer Disclosure Schedule, each material Buyer Business Plan sponsored by
the Buyer has been established and administered in accordance with its
<PAGE>
terms and in compliance with the applicable provisions of ERISA, the Code
and other applicable laws, rules and regulations, except where a failure
to do so would not, individually or in the aggregate, have or reasonably
be expected to have a material adverse effect on the results of
operations, financial condition or business of the Buyer.
(iv) The Buyer has performed all of its obligations under the
Buyer Business Plans and, except as reflected in the Buyer SEC Reports,
there were no unfunded liabilities of any of the Buyer Business Plans.
(n) Environmental Matters. Except as described on Section 3.2(n) of
the Buyer Disclosure Schedule, to the best knowledge of the Buyer: (i)
the Buyer is in compliance in all respects with applicable Environmental
Laws, except where the failure to comply with such laws, rules and
regulations would not, individually or in the aggregate, have or
reasonably be expected to have a material adverse effect on the results of
operations, financial condition or business of the Buyer; (ii) the Buyer
has obtained and is in compliance with all permits required under
Environmental Laws for the conduct of their respective businesses, except
as would not reasonably be expected to result, individually or in the
aggregate, in a material adverse effect on the results of operations,
financial condition or business of the Buyer; (iii) none of the operations
of the Buyer is subject to any judicial or administrative proceeding
alleging the violation of or liability under any Environmental Laws which
if adversely determined would, individually or in the aggregate, have or
reasonably be expected to have a material adverse effect on the results of
operations, financial condition or business of the Buyer; (iv) neither the
Buyer nor any other person has released or disposed of any material that
is defined as hazardous or toxic under any Environmental Law at any of
their respective real property and leasehold interests in real property,
including all buildings, structures and other improvements situated
<PAGE>
thereon (collectively, the "Buyer Plants"), except as would not reasonably
be expected to result, individually or in the aggregate, in a material
adverse effect on the results of operations, financial condition or
business of the Buyer; (v) none of the Buyer Plants has been listed on the
National Priorities List or the Comprehensive Environment Response Cleanup
Liability Information System list prepared pursuant to CERCLA; (vi) the
Buyer has not been identified in writing as a potentially responsible
party under CERCLA or any equivalent State statute; and (vii) the Buyer
has not received notification from any governmental bodies or other third
parties or is subject to any order or decree relating to any potential
liability under Environmental Laws or disposal of hazardous or toxic
material on or affecting any property owned or leased by the Buyer. The
Buyer has delivered to the Seller true and complete copies and results of
any reports, studies, analyses, tests, or monitoring possessed or
initiated by the Buyer pertaining to hazardous or toxic materials in, on
or under the plants of the Buyer, or concerning compliance by the Buyer or
any other person for whose conduct they are or may be held responsible,
with Environmental Laws.
(o) Tax Matters. (i) The Buyer has filed, or a filing extension
from the appropriate federal, state, local or foreign governments or
governmental agencies has been obtained with respect to, all returns
relating to any United States federal, state, provincial, local,
territorial and foreign income, profits, franchise, gross receipts,
payroll, sales, employment, use, property, real estate, excise, value
added, estimated, stamp, alternative or add-on minimum, environmental,
withholding and any other taxes, duties or assessments, together with all
interest, penalties and additions imposed with respect to such amounts
required to be filed on or prior to the date of this Agreement (the "Buyer
Tax Returns"), and all taxes shown as due on such the Buyer Tax Returns
<PAGE>
have been paid or adequate provision in accordance with generally accepted
accounting principles for the payment of all taxes shown to be due on such
the Buyer Tax Returns has been made. The Buyer Tax Returns are complete
and accurate in all material respects.
(ii) No audit or other proceeding by any court, governmental or
regulatory authority, or similar person is pending with respect to any
taxes due from or with respect to the Buyer, except to the extent that
such audit or proceeding would not have or reasonably be expected to have
a material adverse effect on the results of operations, financial
condition or business of the Buyer. No written assessment of tax is
proposed against the Buyer, except to the extent that such audit or
proceeding would not have or reasonably be expected to have a material
adverse effect on the results of operations, financial condition or
business of the Buyer or to the extent that any such written assessment is
being contested in good faith by appropriate proceedings.
(p) Contracts. The Buyer is not, and has not received any notice or
has any knowledge that any other party is, in default in any respect under
any material contract, agreement, commitment, arrangement, lease, policy
or other instrument to which it is a party or by which it is bound that
involves payment of more than $250,000 in the aggregate and is expiring,
is to be performed in or is terminable in (in each case without
significant continuing obligations) 120 days or longer (collectively,
"Buyer Material Contracts"), except for those defaults which would not,
either individually or in the aggregate, have or reasonably be expected to
have a material adverse effect on the results of operations, financial
condition or business of the Buyer; and there has not occurred any event
that with the lapse of time or the giving of notice or both would
constitute such a material default. Except as set forth on Section 3.2(p)
of the Buyer Disclosure Schedule, the transactions contemplated by this
<PAGE>
Agreement, the Governance Agreement and the Stockholders' Agreement will
not constitute a change of control under or require the consent from or
the giving of notice to a third party pursuant to the terms, conditions or
provisions of any Buyer Material Contract.
To the best of the Buyer's knowledge, except as specified on the
Buyer Disclosure Schedule, all contracts, maintenance and service
agreements, purchase commitments for materials and other services,
advertising and promotional agreements, leases and other agreements to
which the Buyer is a party are in full force and effect and are valid and
enforceable in accordance with their respective terms, except (i) as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the
enforcement of creditors' rights generally, by general equitable
principles (regardless of whether enforceability is considered in a
proceeding in equity or at law) or by an implied covenant of good faith
and fair dealing or (ii) where the failure to be in full force and effect
and valid and enforceable would not, individually or in the aggregate,
have or reasonably be expected to have a material adverse effect on the
results of operations, financial condition or business of the Buyer.
(q) Proxy Statement. None of the information to be supplied by or
through the Buyer for inclusion or incorporation by reference in (i) the
proxy statement on Schedule 14A, including any amendments or supplements
thereto (the "Proxy Statement"), to be delivered to the Buyer's
stockholders in connection with the Buyer Stockholder Approval, or
(ii) any other filings required to be made by the Buyer under the Exchange
Act, the Securities Act or any other state or federal securities laws in
connection with the Stock and Asset Purchase or the transactions
contemplated by this Agreement ("Other Filings") will, at the respective
times that the Proxy Statement or any Other Filings and any amendments or
<PAGE>
supplements thereto are filed with the SEC, at the time any amendment or
supplement thereto is mailed to the Buyer's stockholders, and at the time
of the stockholders' meeting of the Buyer to approve the issuance of the
Buyer Common Stock in connection with the Stock and Asset Purchase (the
"Stockholders' Meeting"), contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of
the circumstances under which they are made, not misleading. The Proxy
Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder.
(r) Affiliate Transactions. Except as set forth in Section 3.2(r)
of the Buyer Disclosure Schedule or as disclosed in the Buyer SEC Reports,
there are no material contracts, commitments, agreements, arrangements or
other transactions between the Buyer, on the one hand, and any (i) officer
or director of the Buyer, (ii) record or beneficial owner of five percent
or more of the voting securities of the Buyer or (iii) affiliate (as such
term is defined in Regulation 12b-2 promulgated under the Exchange Act) of
any such officer, director or beneficial owner, on the other hand.
(s) Vote Required. The affirmative vote of the holders of a
majority of the shares of the Buyer Common Stock present in person or
represented by proxy at the Stockholders' Meeting (provided that the
shares so present or represented constitute a majority of the outstanding
shares of the Buyer Common Stock), is the only vote of the holders of any
class or series of the Buyer's capital stock necessary to approve the
Stock and Asset Purchase and the issuance of shares of the Buyer Common
Stock pursuant thereto and the transactions contemplated thereby. The
shares of the Buyer Common Stock subject to the Stockholders Agreement
constitute 49.2% of the number of outstanding shares of the Buyer Common
<PAGE>
Stock and 43.8% of the fully diluted number of shares of the Buyer Common
Stock.
(t) DGCL Section 203 and Article Eleventh of the Certificate of
Incorporation. Prior to the date hereof, the Board of Directors of the
Buyer has approved this Agreement, the Governance Agreement and the
Stockholders Agreement and the Stock and Asset Purchase and the issuance
of shares of the Buyer Common Stock pursuant thereto and the transactions
contemplated thereby and the other transactions contemplated hereby and
thereby, and such approval is sufficient to render inapplicable to the
Stock and Asset Purchase and any of such other transactions, including, as
a result thereof, the acquisition by the Seller of more than 20% of the
outstanding shares of the Buyer Common Stock, the provisions of Section
203 of the Delaware General Corporation Law and the provisions of Article
Eleventh of the Amended Certificate of Incorporation of the Buyer. Prior
to the date hereof, the Board of Directors of the Buyer and the Stock
Option Committee of the Board of Directors of the Buyer (the "Buyer Stock
Option Committee") has taken such actions so that (i) the transactions
contemplated by this Agreement do not and shall not constitute a "change
in control" within the meaning of the AEP Industries Inc. 1995 Stock
Option Plan (the "Buyer Stock Option Plan") and (ii) the transactions
contemplated by this Agreement do not and shall not result in any payment
(i.e., change in control or otherwise) to any Buyer Business Employee
under any Buyer Business Plan.
(u) Certain Fees. With the exception of fees and expenses payable
to J.P. Morgan & Co., which shall be paid by the Buyer, neither the Buyer
nor any of its officers, directors or employees, on behalf of the Buyer,
has employed any broker or finder or incurred any other liability for any
brokerage fees, commissions or finders' fees in connection with the
transactions contemplated hereby.
<PAGE>
(v) Purchase for Investment. The Buyer is aware that no shares of
Subsidiary Stock are registered under the Securities Act or under any
state securities laws. The Buyer is not an underwriter, as such term is
defined under the Securities Act, and is purchasing such shares solely for
investment, with no present intention to distribute any such shares to any
person, and the Buyer will not sell or otherwise dispose of shares except
in compliance with the registration requirements or exemption provisions
under the Securities Act and the rules and regulations promulgated
thereunder, or any other applicable securities laws.
(w) Financial Capacity. The Buyer has in hand binding commitment
letters (the "Commitment Letters"), which are currently in effect and true
and correct copies of which are attached hereto as Section 3.2(w) of the
Buyer Disclosure Schedule, with a reputable financial institution or
institutions to obtain, all funds necessary to enable the Buyer to perform
this Agreement and the other agreements contemplated hereby (the
"Financing"), subject to the conditions set forth therein.
(x) No Other Representations or Warranties. Except for the
representations and warranties contained in this Section 3.2, neither the
Buyer nor any other person makes any other express or implied
representation or warranty on behalf of the Buyer.
3.3. Expiration of Representations and Warranties. The respective
representations and warranties of the Seller and the Buyer contained herein or
in any certificate or other document delivered prior to or on the Closing Date
shall expire and be terminated and extinguished on the day two years following
the Closing Date and thereafter the Seller and the Buyer shall have no
liability whatsoever with respect to any such representation or warranty.
Neither the officers, directors or affiliates of either the Seller or the Buyer
nor any controlling person, legal representative, heir, successor or assign of
any such officer, director or affiliate shall have any liability for any breach
<PAGE>
of any representation, warranty, covenant or agreement of the Seller or the
Buyer under this Agreement contained herein.
4. Transactions Prior to Closing
4.1. Access to Information Concerning Properties and Records;
Confidentiality.
(a) the Seller agrees that, during the period commencing on the date
hereof and ending on the Closing Date, (i) it will give or cause to be
given to the Buyer and its counsel, financial advisors, auditors and other
authorized representatives (collectively, "Representatives") such access,
during normal business hours and upon reasonable advance notice, to the
Plants, properties, books and records of the Seller and the Subsidiaries
relating to the Assets or the Packaging Business, as the Buyer may from
time to time reasonably request and (ii) it will furnish or cause to be
furnished to the Buyer such financial and operating data and other
information with respect to the business and properties of Borden Global
Packaging, as the Buyer may from time to time reasonably request. The
Buyer and its Representatives shall be entitled, in consultation with the
Seller, to such access to the representatives, officers and employees of
the Seller and the Subsidiaries to the extent they are involved in the
business of Borden Global Packaging as the Buyer may reasonably request.
(b) the Buyer agrees that, during the period commencing on the date
hereof and ending on the Closing Date, (i) it will give or cause to be
given to the Seller and its Representatives such access, during normal
business hours and upon reasonable advance notice, to the Buyer Plants,
properties, books and records of the Buyer, as the Seller may from time to
time reasonably request and (ii) it will furnish or cause to be furnished
to the Seller such financial and operating data and other information with
respect to the Buyer, as the Seller may from time to time reasonably
<PAGE>
request. The Seller and its Representatives shall be entitled, in
consultation with the Buyer, to such access to the representatives,
officers and employees of the Buyer as the Seller may reasonably request.
(c) Except as required by law, the Buyer will hold, and will cause
its respective directors, officers, partners, employees, accountants,
counsel, financial advisors and other representatives and affiliates to
hold, any nonpublic information obtained from the Seller in confidence to
the extent required by, and in accordance with, the provisions of the
letter dated February 2, 1996, between the Buyer and the Seller. Except
as required by law, the Seller will hold, and will cause its directors,
officers, partners, employees, accountants, counsel, financial advisors
and other representatives and affiliates to hold, any nonpublic
information obtained from the Buyer in confidence to the extent required
by, and in accordance with, the provisions of the letter dated May 30,
1996, between the Buyer and the Seller.
4.2. Conduct of the Packaging Business Pending the Closing Date. The
Seller agrees that, except as permitted, required or contemplated by this
Agreement or any of the Exhibits attached hereto, including, without
limitation, those actions contemplated on Section 4.2 of the Seller Disclosure
Schedule, or any actions accounted for in the post-Closing adjustment
provisions of Section 2.4, or as otherwise consented to or approved in writing
by the Buyer, during the period commencing on the date hereof and ending at the
Closing Date:
(a) it will, and will cause its Subsidiaries to, operate the
Packaging Business only in the usual, regular and ordinary manner, on a
basis consistent with past practice, including the making of necessary
capital expenditures; provided, that the Seller and its Subsidiaries may
refrain from making planned or necessary capital expenditures to the
extent agreed upon by the Buyer (including, without limitation,
<PAGE>
expenditures planned by the Seller with respect to management information
systems, which need not be made);
(b) no Transferred Subsidiary will amend its charter or by-laws (or
analogous organizational documents) and no Transferred Subsidiary shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property;
(c) no Transferred Subsidiary will issue or agree to issue any
additional shares of capital stock of any class or series, or any
securities convertible into or exchangeable for shares of capital stock or
issue any options, warrants or other rights to acquire any shares of
capital stock;
(d) no Transferred Subsidiary will (i) split, combine or reclassify
any shares of its outstanding capital stock, (ii) declare, set aside or
pay any dividend or other distribution payable in cash, stock or property,
(iii) directly or indirectly redeem or otherwise acquire any shares of its
capital stock or shares of the capital stock of any of its subsidiaries,
(iv) merge or consolidate with another entity, (v) acquire or purchase an
equity interest in or a substantial portion of the assets of another
corporation, partnership or other business organization or otherwise
acquire any assets outside the ordinary and usual course of business and
consistent with past practice or otherwise enter into any material
contract, commitment or transaction outside the ordinary and usual course
of business consistent with past practice, or (vi) make any loans,
advances or capital contributions to, or investments in, any other person,
other than to its subsidiaries;
<PAGE>
(e) the Seller will use its, and will cause the Subsidiaries to use
their, reasonable efforts to preserve intact the business organization of
Borden Global Packaging, to keep available the services of their present
officers and key employees and others having business relations with the
Seller or the Subsidiaries, and to preserve the goodwill of those having
business relationships with Borden Global Packaging;
(f) none of the Seller nor the Subsidiaries will (i) dispose of or
encumber any of their properties or assets pertaining to the Packaging
Business, other than (A) in the ordinary course of business, (B) any
property or asset which has been determined by the Seller to be obsolete,
worn out or no longer useful in the operation of the Packaging Business
and (C) transfers by a Subsidiary to the Seller or another Subsidiary of
the Seller or by the Seller to a Subsidiary; (ii) cancel any debts or
waive any claims or rights pertaining to the Packaging Business, except in
the ordinary course of business; (iii) enter into or modify any employment
agreement or grant any increase in the compensation of officers or
employees primarily engaged in the Packaging Business, except for
agreements and increases in the ordinary course of business and consistent
with past practice or as a result of collective bargaining, any industrial
award or as required by any Business Plan or any employee benefit plan,
agreement, program, policy or other arrangement that would have been a
Business Plan had it been in effect as of the date hereof; (iv) make any
capital expenditure or commitment pertaining to the Packaging Business,
other than (A) in the ordinary course of business, (B) pursuant to
existing commitments or (C) maintenance capital expenditures or capital
expenditures reasonably required to abate conditions endangering persons
or property; (v) except with respect to endorsement of negotiable
instruments in the ordinary course of its Packaging Business, incur,
assume or guarantee any indebtedness for borrowed money other than (A)
<PAGE>
purchase money borrowings, (B) indebtedness for borrowed money incurred in
the ordinary course of business, (C) refundings of existing indebtedness,
(D) indebtedness of a Subsidiary to the Seller or a subsidiary of the
Seller and (E) other indebtedness for borrowed money which is not material
to the results of operations, financial condition, or business of Borden
Global Packaging taken as a whole; (vi) enter into or modify, or engage in
any negotiations with respect to, any collective bargaining or union
agreement or commitment; or (vii) enter into or modify any agreement or
commitment or engage in any activity or transaction other than agreements,
commitments, and transactions in the ordinary course of business and
consistent with past practice;
(g) it will, and will cause its Subsidiaries to, maintain in full
force and effect all licenses from governmental authorities applicable to
the Seller and the Subsidiaries and comply, in all material respects, with
all laws, statutes, ordinances, rules, regulations, orders, writs,
injunctions, decrees, awards or other requirements of any court or other
governmental authority applicable to it or the conduct of its business;
(h) it will, and will cause its Subsidiaries to, perform all of its
material obligations under all material contracts, agreements, licenses,
permits, instruments, or undertakings; and
(i) none of the Seller nor the Subsidiaries will agree, whether in
writing or otherwise, to do any of the foregoing actions described in
paragraphs (b), (c), (d) or (f) of this Section 4.2.
4.3. Conduct of Business By the Buyer Pending the Closing Date. The
Buyer agrees that, except as permitted, required or contemplated by this
Agreement or any of the Exhibits attached hereto, including, without
limitation, those actions contemplated on Section 4.3 of the Buyer Disclosure
Schedule, or as otherwise consented to or approved in writing by the Seller,
during the period commencing on the date hereof and ending at the Closing Date:
<PAGE>
(a) it will operate its business only in the usual, regular and
ordinary manner, on a basis consistent with past practice;
(b) it will not amend its charter or by-laws (or analogous
organizational documents) or change the size or composition of its Board
of Directors;
(c) it will not issue or agree to issue any additional shares of
capital stock of any class or series, or any securities convertible into
or exchangeable for shares of capital stock or issue any options, warrants
or other rights to acquire any shares of capital stock;
(d) it will not (i) split, combine or reclassify any shares of its
outstanding capital stock, (ii) declare, set aside or pay any dividend or
other distribution payable in cash, stock or property, (iii) directly or
indirectly redeem or otherwise acquire any shares of its capital stock,
(iv) merge or consolidate with another entity, (v) acquire or purchase an
equity interest in or a substantial portion of the assets of another
corporation, partnership or other business organization or otherwise
acquire any assets outside the ordinary and usual course of business and
consistent with past practice or otherwise enter into any material
contract, commitment or transaction outside the ordinary and usual course
of business consistent with past practice, or (vi) make any loans,
advances or capital contributions to, or investments in, any other person;
(e) the Buyer will use its reasonable efforts to preserve intact the
present business organization, to keep available the services of their
present officers and key employees and others having business relations
with the Buyer, and to preserve the goodwill of those having business
relationships with it;
(f) the Buyer will not dispose of or encumber any of its properties
or assets, other than (A) in the ordinary course of business and (B) any
property or asset which is not material to the results of operations,
<PAGE>
financial condition or business of the Buyer; (ii) cancel any debts or
waive any claims or rights pertaining to or affecting its business, except
in the ordinary course of business; (iii) grant any increase in the
compensation of its officers or employees, except for increases in the
ordinary course of business and consistent with past practice or as a
result of collective bargaining, any industrial award or as required by
any Buyer Business Plan or any employee benefit plan, agreement, program,
policy or other arrangement that would have been a Buyer Business Plan had
it been in effect as of the date hereof; (iv) make any capital expenditure
or commitment, other than (A) in the ordinary course of business, (B)
pursuant to existing commitments or (C) which is not material to the
results of operations, financial condition or business of the Buyer; or
(v) except with respect to endorsement of negotiable instruments in the
ordinary course of its business, incur, assume or guarantee any
indebtedness for borrowed money other than (A) purchase money borrowings,
(B) indebtedness for borrowed money incurred in the ordinary course of
business, (C) refundings of existing indebtedness and (D) other
indebtedness for borrowed money which is not material to the results of
operations, financial condition, or business of the Buyer;
(g) the Board of Directors of the Buyer and the Buyer Stock Option
Committee (i) shall not, solely as a result of the transactions
contemplated by this Agreement, take any action to accelerate, release or
otherwise deem satisfied any restrictions or conditions on any awards
(including, without limitation, stock options and restricted stock)
granted under the Buyer Stock Option Plan and (ii) shall not, solely as a
result of the transactions contemplated by this Agreement, (A) take any
action to give effect to any change-in-control provisions under any Buyer
Business Plan or (B) make any payments to any Buyer Business Employee
under any Buyer Business Plan; and
<PAGE>
(h) agree, whether in writing or otherwise, to do any of the
foregoing actions described in paragraphs (b), (c), (d), (f) or (g) of
this Section 4.3.
4.4. Intercompany Transactions. On or prior to the Closing, all
intercompany receivables or payables and loans then existing between the
Seller, any Subsidiary (other than a Transferred Subsidiary) or any other
subsidiary or affiliate of the Seller which is not a Subsidiary (the "Non-
Packaging Affiliates") on the one hand, and the Transferred Subsidiaries, on
the other hand, shall be settled by way of capital contribution (with respect
to intercompany payables or loans due to the Seller, any Subsidiary (other than
a Transferred Subsidiary) or any Non-Packaging Affiliate) or by way of dividend
in kind (with respect to receivables of the Transferred Subsidiaries owed by
the Seller, any Subsidiary or any Non-Packaging Affiliate). Such settlement
shall be accomplished without any violation of any law or regulation or any
incurrence of any tax, penalties, interest or other charges (other than taxes
with respect to which the Seller has agreed to indemnify the Buyer).
4.5. Guarantees. The Buyer shall use its best efforts (which shall
not include agreeing to any modifications of the terms of the underlying
obligations) to cause itself or one or more of its affiliates to be substituted
in all respects for the Seller or the Subsidiaries (other than the Transferred
Subsidiaries), effective as of the Closing, in respect of all obligations of
the Seller and any of the Subsidiaries (other than the Transferred
Subsidiaries) under each of the guarantees, indemnities, surety bonds, letters
of credit and letters of comfort set forth on Section 4.5 of the Seller
Disclosure Schedule obtained by the Seller or the Subsidiaries (other than the
Transferred Subsidiaries) for the benefit of the Packaging Business (the
"Guarantees"). Subsequent to the Closing, with respect to any uncancelled
Guaranty for which no substitution is effected, the Buyer shall, pursuant to
<PAGE>
Section 9.4, indemnify the Seller or any of its affiliates against any
liability under any such Guarantee.
4.6. Further Actions. (a) Subject to the terms and conditions
hereof, the Seller and the Buyer agree to use their reasonable best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement, including using all reasonable
best efforts: (i) to obtain prior to the Closing Date all licenses,
certificates, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts with the Seller or
the Subsidiaries as are necessary for the consummation of the transactions
contemplated hereby, including but not limited to such consents and approvals
as may be required under the HSR Act as set forth below and any similar foreign
legislation; (ii) to effect all necessary registrations and filings; and (iii)
to furnish to each other such information and assistance as reasonably may be
requested in connection with the foregoing. The Seller or such Subsidiary and
the Buyer shall cooperate fully with each other to the extent reasonably
required to obtain such consents.
(b) the Buyer and the Seller shall timely and promptly make all
filings which may be required by each of them in connection with the
consummation of the transactions contemplated hereby under the HSR Act and any
similar foreign legislation. Each party shall furnish to each other such
necessary information and assistance as such party may reasonably request in
connection with the preparation of any necessary filings or submissions by it
to any U.S. or foreign governmental agency, including, without limitation, any
filings necessary under the provisions of the HSR Act and the Exchange Act.
Each party shall provide the other party the opportunity to make copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between such party or its representatives, on the one hand,
<PAGE>
and the Federal Trade Commission (the "FTC"), the Antitrust Division of the
United States Department of Justice (the "Antitrust Division") or any similar
foreign governmental agency or members of their respective staffs, on the other
hand, with respect to this Agreement or the transactions contemplated hereby.
(c) For purposes of this Section 4.6, the "reasonable best efforts"
of the Buyer shall not include acceptance by the Buyer of any divestitures of
any assets of the Buyer, but shall include acceptance of an agreement to hold
any assets of the Packaging Business separate, or divest any such assets of the
Packaging Business, in any lawsuit or other legal proceeding, whether judicial
or administrative and whether required by the FTC, the Antitrust Division or
any other applicable U.S. or foreign governmental entity in connection with the
transactions contemplated by this Agreement or the other agreements
contemplated hereby. Other than to the extent applicable law expressly
requires the Seller to obtain any license, permit, consent, approval,
authorization or order of any foreign governmental authority or to make any
registration or filing with any foreign governmental authority, the Buyer shall
be responsible for making all filings and giving all notices relating to, and
otherwise pursuing all licenses, permits, consents, approvals, authorizations
and orders of foreign governmental authorities and making all registrations and
filings with foreign governmental authorities (collectively, the "Foreign
Governmental Consents"), which, to the best knowledge of the Buyer, are
required in connection with the transactions contemplated hereby and shall
provide a copy of any such filings or notices to the Seller. The Buyer shall
be responsible for making or giving all Foreign Governmental Consents required
to be made or given subsequent to the Closing Date. In connection with and as
a condition to the Buyer's obligations under the preceding sentence, the
Sellers shall fully cooperate with and assist the Buyer in identifying and
obtaining all such licenses, permits, consents, approvals, authorizations or
orders and in making all such registrations and filings.
<PAGE>
(d) the Buyer agrees to comply with the provisions of Section 6 of
the Stockholders Agreement and not to register the transfer of any shares in
violation of the Stockholder Agreement.
(e) The Seller agrees to cause each of the Subsidiaries to take all
corporate and stockholder action necessary for the authorization, performance
and consummation of the transactions contemplated by this Agreement and the
agreements contemplated hereby.
(f) The Seller agrees that it will provide Hitachi with notice of
the transactions contemplated by this Agreement pursuant to the Hitachi Right
of First Refusal within five (5) business days of the date of this Agreement.
4.7. Notification. The Seller shall notify the Buyer and keep it
advised as to (i) any litigation or administrative proceeding pending and known
to the Seller or, to its knowledge, threatened against the Seller, any
Subsidiary or any Subsidiary Asset Seller which challenges the transactions
contemplated hereby, (ii) any material damage or destruction of any of the
Assets and (iii) any event or occurrence that would cause any representation or
warranty contained in Section 3.1 hereof to be false; provided that the failure
of the Seller to comply with clause (iii) shall not subject the Seller to any
liability hereunder except as and to the extent the Seller would be responsible
for a breach of such representations and warranties pursuant to Section
9.4(a)(iii) (including, without limitation, the limitations on recovery and the
time periods for bringing claims thereunder). The Buyer shall notify the
Seller and keep it advised as to (A) any notice or other communication from any
person or entity alleging that the consent of such person or entity is or may
be required in connection with the transactions contemplated by this Agreement
or (B) any litigation or administrative proceedings pending or known to the
Buyer or, to its knowledge, threatened against the Buyer which challenge the
transactions contemplated hereby.
<PAGE>
4.8. No Inconsistent Action. Subject to the provisions of
Sections 7.1 and 7.2, the Seller and the Buyer shall not take any action
inconsistent with their obligations under this Agreement or which could
materially hinder or delay the consummation of the transactions contemplated by
this Agreement.
4.9. Financing. (a) The Buyer will deliver to the Seller as soon
as reasonably practicable after the date of this Agreement true and correct
copies of definitive written agreements (the "Definitive Financing Agreements")
with reputable financial institutions to provide at the Closing, subject only
to customary conditions, all of the Financing, in form and substance reasonably
satisfactory to the Seller. The Buyer will deliver to the Seller drafts of the
Definitive Financing Agreements sufficiently prior to the execution thereof to
permit the Seller and its advisors the reasonable opportunity to review and
comment thereon. The Buyer intends that the terms and conditions of such
Financing shall be substantially the same as those previously set forth in the
Commitment Letters. In any event, the Definitive Financing Agreements (and any
other financing arrangements) will not contain any limitations (including
events of default) on sales or other transactions by the Seller or its
affiliates with respect to the Buyer Common Stock or any other limitation or
restriction applicable to the Seller or its affiliates. The Buyer shall use
its best efforts to satisfy at or before the Closing all requirements which are
conditions to its closing all transactions constituting the Financing and to
its drawing down the cash proceeds thereunder. Subject only to the Seller
being able to satisfy the conditions set forth in Section 5.2(a) hereof, the
Buyer will obtain the proceeds of the Financing no later than January 31, 1997.
In the event that any portion of the Financing provided for in the Definitive
Financing Agreements becomes unavailable, regardless of fault, the Buyer will,
subject only to the Seller being able to satisfy the conditions set forth in
Section 5.2(a) hereof, obtain from others as soon as practicable, but in no
<PAGE>
event later than January 31, 1997, the financing necessary for the consummation
of the transactions contemplated hereby, on and subject to substantially the
same terms and conditions as the portion of the Financing that has become
unavailable.
(b) Effective at the opening of business on the Closing Date, the
Buyer shall be responsible for funding all disbursements of the Packaging
Business. Any cash, cash equivalents, similar investments, certificates of
deposit, Treasury bills and other marketable securities held by the Packaging
Business at the Closing shall be treated by the parties consistent with Section
2.4(a) of the Seller Disclosure Schedule.
4.10. Borden-Hitachi Joint Venture. To the extent permitted
under the Joint Venture Agreement, the Seller will use reasonable efforts to
cause Hitachi-Borden to continue to include "Borden" as part of its name for a
period of up to the earlier of (a) six months following the Closing Date and
(b) the effective date of the exercise of the Hitachi Right of First Refusal.
4.11. Use of Corporate Name and Symbol; Transition License. (a)
Except as set forth in subsection (b) of this Section 4.11, after the Closing,
the Buyer shall not use the Borden trademarks and other Intellectual Property
set forth on Section 4.11 of the Seller Disclosure Schedule.
(b) On the Closing Date, the Buyer and the Seller shall execute and
deliver a transition license agreement (the "Transition License Agreement"),
substantially in the form of Exhibit F hereto, pursuant to which the Seller
shall grant to the Buyer a non-exclusive, non-assignable (except to a
subsidiary of the Buyer), royalty-free license (i) to use, for a period of six
months following the Closing Date, the Borden-related trademarks on products,
labels, packaging, promotional materials, signage, invoices and stationary and
(ii) to use, from the six-month anniversary of the Closing Date until the date
two years after the Closing Date, the Borden-related trademarks only in
connection with the Buyer's trademarks, provided that the Borden-related
<PAGE>
trademarks are not modified in any way, including the combining of the Borden-
related trademarks in a single design with the Buyer's trademarks. Following
the two-year period described in clause (ii) above, the Buyer shall cease all
use of any Borden-related trademarks.
4.12. Facilities Agreement. On the Closing Date, the Buyer and
the Seller shall execute and deliver an agreement (the "Shared Facilities
Agreement"), substantially in the form of Exhibit G hereto, with respect to
facilities shared by the Packaging Business and the Seller's chemicals business
at North Baddesley, United Kingdom, Edmonton, Alberta, Laval, Quebec and West
Hill, Ontario in order to coordinate the on-going operations at such
facilities, coordinate the "de-linking" of the operations of the Packaging
Business from the operations relating to the Seller's chemicals business at
such facilities and provide certain transitional services on the terms and
subject to the conditions set forth therein.
4.13. Transition Services Agreement. On the Closing Date, the
Buyer and the Seller shall execute and deliver an agreement (the "Transition
Services Agreement"), substantially in the form attached hereto as Exhibit H
pursuant to which the Seller agrees to provide certain transitional services on
the terms and subject to the conditions set forth therein.
4.14. Preparation of Proxy Statement; Stockholders' Meeting.
(a) Promptly following the date of this Agreement, the Buyer shall prepare and
file with the SEC a preliminary copy of the Proxy Statement and thereafter a
definitive copy of the Proxy Statement and all related solicitation materials.
The Seller and its representatives will be given an opportunity to review and
comment on drafts of the Proxy Statement and will provide to the Buyer all
information relating to the Packaging Business and the Seller necessary for the
preparation of the Proxy Statement and will participate in responding to
comments or requests from the SEC with respect to the Proxy Statement. The
Buyer shall use its reasonable best efforts as promptly as practicable to have
<PAGE>
the Proxy Statement cleared by the SEC and thereafter to cause the Proxy
Statement to be mailed to the Buyer's stockholders as promptly as practicable.
The information provided and to be provided by the Buyer and the Seller,
respectively, for use in the Proxy Statement shall, at the time the Proxy
Statement is mailed to the Buyer's stockholders and on the date of the
Stockholders' Meeting, be true and correct in all material respects and shall
not omit to state any material fact required to be stated therein or necessary
in order to make such information not misleading, and the Buyer and the Seller
each agree to correct any information provided by it for use in the Proxy
Statement which shall have become false or misleading.
(b) The Buyer, acting through its Board of Directors, shall promptly
and duly call, give notice of, convene and hold as soon as practicable
following the date upon which the Proxy Statement is cleared by the SEC the
Stockholders' Meeting for the purpose of obtaining the Buyer Stockholder
Approval and (i) recommend approval and adoption of this Agreement and the
transactions contemplated hereby, by the stockholders of the Buyer and include
in the Proxy Statement such recommendation and (ii) take all reasonable and
lawful action to solicit and obtain such approval, unless in the case only of
clause (i) above, the Board of Directors of the Buyer determines, based upon
advice of independent outside legal counsel to the Buyer, that making such
recommendation would constitute a breach of the fiduciary duty of the Board of
Directors of Buyer under applicable law.
4.15. No Solicitation. From the date hereof, until the earlier
of the Closing or the termination of this Agreement, the Seller agrees that
neither it, nor any of its Subsidiaries, affiliates or agents (i) will solicit
bids from any person or entity, other than the Buyer, for the purchase of, or
offer to sell, the Packaging Business or any significant part thereof, (ii)
will offer to sell to any person or entity, other than the Buyer, the Packaging
Business or any significant part thereof or (iii) will negotiate with, respond
<PAGE>
to any indications of interest from or provide any information to, any person
or entity, other than the Buyer.
4.16. Insurance. Prior to the Closing Date the Seller shall have
entered into an agreement with a financially sound and reputable insurer to
provide insurance covering such losses, liabilities, damages, expenses and
other risks relating to the assets, businesses, operations, conduct, products
and employees of the Packaging Business and having the terms set forth on
Section 4.16 to the Seller Disclosure Schedule and relating to or arising out
of occurrences prior to the Closing (the "Sunrise Policy"). The Seller shall
use its reasonable best efforts to have the Buyer named as an insured under the
Sunrise Policy. Prior to the Closing Date, and to the extent permitted by the
Seller's existing occurrence-based insurance policies, the Seller will use its
reasonable best efforts to have the Buyer named as an insured under such
occurrence-based policies. If the Seller is unable to have the Buyer named as
an insured under such occurrence-based policies or the Sunrise Policy or would
be required to accept conditions to the Buyer being so named or pay additional
premiums in connection therewith which the Seller deems unreasonable, then the
Seller shall to the extent permitted under such policies process any claims
arising thereunder and shall remit any proceeds actually received (in excess of
any loss, liability, damage or expense of the Seller related to such claim) to
the Buyer. If such policies do not permit the Seller to process such claims
which would otherwise have been covered by such policies because the liability
therefor had been transferred to the Buyer hereunder, then such liabilities
shall be deemed not to have been transferred to the Buyer hereunder and the
Buyer shall indemnify the Seller for the full amount by which such liability
exceeds any payments received by the Seller under such policies with respect to
such claims other than any amount of such liability that is not covered by such
policies which is directly attributable to the failure of the Seller to adhere
to the notice or procedural requirements of such policies. The Seller shall
<PAGE>
not be deemed to have failed to adhere to the notice or procedural requirements
of any such policies to the extent such failure is a result of the Buyer's
failure to notify the Seller with respect to any occurrence, event or action
covered by such policies.
5. Conditions Precedent
5.1. Conditions Precedent to Obligations of the Buyer and the Seller.
The respective obligations of the Buyer and the Seller to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing Date of the following conditions:
(a) No Injunction, etc. At the Closing Date, there shall be no
injunction, restraining order or decree of any nature of any court or
governmental agency or body of competent jurisdiction that is in effect
that restrains or prohibits the consummation of the Stock Purchase or the
transfer to the Buyer by the Seller or the Subsidiaries of any Assets,
except for the transfer of any Assets or Subsidiary Stock the failure to
transfer which would not, individually or in the aggregate with all
Subsidiary Stock which is not being transferred on or prior to the Closing
and all Assets for which Asset Purchases are not being consummated on or
prior to the Closing, be material, after giving effect to the interim
management provisions of Section 2.3, to the operations of Borden Global
Packaging taken as a whole; provided that for purposes of this paragraph
(a), any failure to consummate the Asset Purchases or Stock Purchases set
forth on Section 5.1 of the Seller Disclosure Schedule shall not be
regarded as material to the operations of Borden Global Packaging taken as
a whole so long as the aggregate net trade sales of all the businesses not
transferred do not exceed 10% of the total net trade sales for the
Packaging Business for the year ended December 31, 1995, and provided,
<PAGE>
further, that such Asset Purchases or Stock Purchases shall be subject to
the provisions of Section 2.3 hereof.
(b) Regulatory Authorizations. All (i) consents, approvals,
authorizations and orders of federal, state and foreign governmental and
regulatory authorities as are necessary in connection with the transfer of
the Assets or the Subsidiary Stock to the Buyer or which if not obtained
would be reasonably likely to subject the Buyer, the Seller or any
Subsidiary Asset Seller, or any officer, director or agent of any such
person to civil or criminal liability or could render such transfer void
or voidable (the "Required Consents") shall have been obtained, except for
Required Consents the failure to obtain which, individually or in the
aggregate, are not material to the operations of Borden Global Packaging
taken as a whole and are not otherwise likely to subject any such officer,
director or agent to civil or criminal liability; provided that for
purposes of this clause (b)(i), any failure to consummate the Asset
Purchase or Stock Purchases set forth on Section 5.1 of the Seller
Disclosure Schedule shall not be regarded as material to the operations of
Borden Global Packaging taken as a whole so long as the aggregate net
trade sales of all the businesses not transferred do not exceed 10% of the
total net trade sales for the Packaging Business for the year ended
December 31, 1995, and (ii) applicable waiting periods specified under the
HSR Act with respect to the transactions contemplated by this Agreement
shall have lapsed or been terminated, and provided, further, that such
Asset Purchases or Stock Purchases shall be subject to the provisions of
Section 2.3 hereof.
(c) Buyer Stockholder Approval. The Buyer Stockholder Approval
shall have been obtained.
(d) Consents. All third-party consents with respect to the
transactions contemplated hereby shall have been obtained, except those
<PAGE>
consents which, individually or in the aggregate, would not have or
reasonably be expected to have a material adverse effect on the results of
operations, financial condition or business of (i) Borden Global Packaging
taken as a whole or (ii) the Buyer. The Buyer shall be entitled to waive
this condition with respect to all third-party consents related to, or
required to be obtained by, the Seller, and the Seller shall be entitled
to waive this condition with respect to all third-party consents related
to, or required to be obtained by, the Buyer.
5.2. Conditions Precedent to Obligations of the Buyer. The
obligations of the Buyer under this Agreement are subject to the satisfaction
(or waiver by the Buyer) at or prior to the Closing Date of each of the
following conditions:
(a) Accuracy of Representations and Warranties. (i) All
representations and warranties of the Seller contained herein or in any
certificate or document delivered to the Buyer pursuant hereto, without
regard to any exceptions for materiality contained in such representations
and warranties, shall be true and correct in all respects on and as of the
Closing Date, with the same force and effect as though such
representations and warranties had been made on and as of the Closing
Date, except (i) as contemplated or permitted by this Agreement or as
disclosed in the Exhibits hereto or in the Seller Disclosure Schedule,
(ii) to the extent that any such representation or warranty is made as of
a specified date, in which case such representation or warranty shall have
been true and correct in all respects as of such date, (iii) to the extent
that any such representation or warranty, including, without limitation,
the representations and warranties contained in Section 3.1(f) hereof, is
untrue or incorrect as a result of an adverse change in the results of
operations of the Packaging Business, (iv) for changes to the Packaging
Business occurring in the ordinary course of business consistent in scope
<PAGE>
and kind with the prior experience of the Packaging Business and (v) after
giving effect to clauses (i), (ii), (iii) and (iv) for all such
inaccuracies which, individually or in the aggregate, would not have or
reasonably be expected to have a material adverse effect on the results of
operations, financial condition or business of Borden Global Packaging
taken as a whole.
(ii) No Material Adverse Change. Except as contemplated by or
set forth in this Agreement or in the Exhibits hereto or the Seller
Disclosure Schedule, including without limitation Sections 3.1(f)(i) and
3.1(f)(ii) thereof, subsequent to the date of this Agreement, there has
not occurred or arisen, with respect to the Packaging Business any
condition, event or occurrence which, individually or in the aggregate,
would have or would reasonably be expected to have a material adverse
effect on the financial condition or business of the Packaging Business
taken as a whole, other than such effects that are a result of an adverse
change in the results of operations of the Packaging Business.
(b) Performance of Agreements. The Seller shall in all material
respects have performed all obligations and agreements, and complied in
all material respects with all covenants and conditions, contained in this
Agreement to be performed or complied with by it prior to or at the
Closing Date.
(c) Officer's Certificate. The Buyer shall have received a
certificate, dated the Closing Date, of the President or a Vice President
of the Seller to the effect that, to the best of the knowledge,
information and belief of such officer after due inquiry, the conditions
specified in paragraphs (a) and (b) above have been fulfilled.
(d) Transition License Agreement. The Seller shall have executed
and delivered to the Buyer a Transition License Agreement substantially in
the form of Exhibit F hereto.
<PAGE>
(e) Shared Facilities Agreement. The Seller shall have executed and
delivered to the Buyer the Shared Facilities Agreement substantially in
the form of Exhibit G hereto.
(f) Transition Services Agreement. The Seller shall have executed
and delivered to the Buyer a Transition Services Agreement substantially
in the form of Exhibit H hereto.
(g) Governance Agreement. The Governance Agreement shall continue
to be in full force and effect and the Seller shall not have breached any
of its representations, warranties or covenants thereunder.
(h) Opinion of Counsel. The Buyer shall have received an opinion
from counsel to the Seller and its Subsidiaries, which may be the General
Counsel or the Corporate Counsel and Secretary of the Seller, or as
applicable such of its Subsidiaries, as to (i) the due authorization,
execution and delivery of this Agreement and the other agreements and
instruments contemplated hereby, (ii) the enforceability of this Agreement
and the other agreements and instruments contemplated hereby, and (iii)
the absence of any conflict with, or contravention of, any law, rule or
regulation of the United States, New York, Ohio or Delaware (but only with
respect to the General Corporation Law thereof), order of any court or
administrative body, charter or by-laws of the Seller or any of the
Subsidiaries, or agreement known to such counsel to which the Seller or
any of its Subsidiaries is subject or any of their respective property is
bound.
(i) Subsidiary Approvals. This Agreement and the transactions
contemplated hereby shall have been approved by the boards of directors
and, where required by applicable law, the shareholders of each of the
Subsidiary Asset Sellers.
5.3. Conditions Precedent to the Obligations of the Seller. The
obligations of the Seller under this Agreement are subject to the satisfaction
<PAGE>
(or waiver by the Seller) at or prior to the Closing Date of each of the
following conditions:
(a) (i) Accuracy of Representations and Warranties. All
representations and warranties of the Buyer contained herein or in any
certificate or document delivered to the Seller pursuant hereto, without
regard to any exceptions for materiality contained in such representations
and warranties, shall be true and correct in all respects on and as of the
Closing Date, with the same force and effect as though such
representations and warranties had been made on and as of the Closing
Date, except (i) as contemplated or permitted by this Agreement or as
disclosed in the Exhibits hereto or in the Buyer Disclosure Schedule, (ii)
to the extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall have
been true and correct in all respects as of such date, (iii) for changes
to the Buyer occurring in the ordinary course of business consistent in
scope and kind with the prior experience of the Buyer and (iv) after
giving effect to clauses (i), (ii) and (iii) for all such inaccuracies
which, individually or in the aggregate, would not have or reasonably be
expected to have a material adverse effect on the results of operations,
financial condition or business of the Buyer.
(ii) No Material Adverse Change. Except as reflected on Section
3.2(f) of the Buyer Disclosure Schedule or as otherwise contemplated by or
disclosed in this Agreement or the Exhibits hereto or the Buyer Disclosure
Schedule, subsequent to the date of this Agreement, there has not occurred
or arisen with respect to the Buyer any condition, event or occurrence
which, individually or in the aggregate, would have or would reasonably be
expected to have a material adverse effect on the results of operations,
financial condition or business of the Buyer.
<PAGE>
(b) Performance of Agreements. The Buyer shall in all material
respects have performed all obligations and agreements, and complied in
all material respects with all covenants and conditions, contained in this
Agreement to be performed or complied with by it prior to or at the
Closing Date.
(c) Officer's Certificate. The Seller shall have received a
certificate, dated the Closing Date, of the President or a Vice President
of the Buyer to the effect that, to the best of the knowledge, information
and belief of such officer after due inquiry, the conditions specified in
paragraphs (a) and (b) above have been fulfilled.
(d) Hitachi Right of First Refusal. The provisions of Section 2.2
shall have been applied with respect to Hitachi-Borden, to the extent
applicable.
(e) Assumption Agreement. The Buyer shall have executed and
delivered to the Seller the Assumption Agreement in the form of Exhibit E
hereto.
(f) Exemption Certificates. The Buyer shall have executed and
delivered to the Seller all certificates required by all relevant taxing
authorities that are necessary to support any exemption from the
imposition of any sales or similar tax on the transfer of the Assets.
(g) Shared Facilities Agreement. The Buyer shall have executed and
delivered to the Seller the Shared Facilities Agreement substantially in
the form of Exhibit G hereto.
(h) Transition Services Agreement. The Buyer shall have executed
and delivered to the Seller a Transition Services Agreement substantially
in the form of Exhibit H hereto.
(i) Employment Agreements. The Buyer shall have entered into
employment agreements with the individuals set forth on Section 5.3(i)(1)
<PAGE>
of the Seller Disclosure Schedule in the form set forth on Section
5.3(i)(2) of the Seller Disclosure Schedule.
(j) Governance Agreement. The Governance Agreement shall continue
to be in full force and effect and the Buyer shall not have breached any
of its representations, warranties or covenants thereunder.
(k) Stockholders Agreement. The Stockholders Agreement shall
continue to be in full force and effect and the Buyer shall not have
breached any of its representations, warranties or covenants thereunder.
(l) Opinion of Counsel. The Seller shall have received an opinion
from counsel to the Buyer as to (i) the due authorization, execution and
delivery of this Agreement and the other agreements and instruments
contemplated hereby, (ii) the enforceability of this Agreement and the
other agreements and instruments contemplated hereby, and (iii) the
absence of any conflict with, or contravention of, any law, rule or
regulation of the United States, New York or Delaware (but only with
respect to the General Corporation Law thereof), order of any court or
administrative body, charter or by-laws of the Buyer, or agreement known
to such counsel to which the Buyer is subject or any of its property is
bound.
6. Employee Relations and Benefits
6.1. Conduct Prior to the Effective Time. Prior to the Effective
Time, Buyer shall take no action to cause Seller or Borden Global Packaging to
terminate the employment of any Business Employee, and neither Seller nor
Borden Global Packaging shall be under any obligation to terminate any Business
Employee prior to or on the Effective Time.
6.2. Continuity of Employment. The parties hereto intend that there
shall be continuity of employment with respect to all Business Employees,
provided that nothing contained herein to the contrary shall prohibit the Buyer
<PAGE>
from subsequently terminating any employee. Except as set forth in Section 6.2
of the Seller Disclosure Schedule, Buyer shall offer employment no later than
the Effective Time to all non-union employees, including those on vacation,
leave of absence or disability (or not more than six months), who are employed
by Borden Global Packaging as of the Effective Time, on substantially the same
terms with respect to base salary, job responsibility and location to the
extent possible. Those persons who accept Buyer's offer of employment and who
commence working with Buyer within six months (including any period of leave of
absence or disability beginning prior to the Closing Date and continuing
through the Closing Date) of the Effective Time shall hereafter be referred to
as "Transferred Employees". Business Employees in receipt of disability
benefits as of the Effective Time will continue to receive benefits from the
Business Plans in accordance with the terms of those plans during such
disability.
6.3. Collective Bargaining Agreements. Buyer shall offer employment
to all Business Employees covered by any of the Collective Bargaining
Agreements listed on Section 6.3 of the Seller Disclosure Schedule (the
"Collective Bargaining Agreements") as of the Effective Time and shall assume
and be bound by the terms of such Collective Bargaining Agreements. The Buyer
may, with the agreement of the appropriate union or otherwise as provided by
law, substitute as of the Effective Time the Buyer Business Plans for the
Business Plans specified in the Collective Bargaining Agreements.
6.4. International Plans. Buyer shall, to the maximum extent
permitted by applicable law, assume and be liable for all liabilities and
obligations arising out of all Business Plans (including, without limitation,
plans providing for incentive, bonus, deferred compensation, pension,
retirement, savings, supplemental, welfare, retiree medical and retiree life
benefits) with respect to all Transferred Employees in Australia, Belgium,
Canada, France, Germany, Greece, Italy, Japan, Luxembourg, the Netherlands, New
<PAGE>
Zealand, Norway, South Africa, Spain, and the United Kingdom (collectively, the
"International Business Plans"). Section 6.4 of the Seller Disclosure Schedule
sets forth specific obligations of Buyer and Seller with respect to the
International Business Plans. To the extent that Section 6.4 of the Seller
Disclosure Schedule and this Section 6.4 are silent with respect to a given
issue, such issue shall be resolved in accordance with the other provisions of
this Section 6 (including, but not limited to, the provisions relating to the
U.S. Business Plans) and by reference to local laws.
6.5. U.S. Business Plan Participation. Except as expressly provided
in this Section 6.5 or except as otherwise required by applicable law,
Transferred Employees who are U.S. Business Employees (the "U.S. Transferred
Employees") shall (a) cease active participation in (and accrual of additional
benefits under) the U.S. Business Plans as of the Effective Time and (b)
commence participation in the Buyer Business Plans as of the Effective Time.
6.6. U.S. Business Plan Liabilities. Except as expressly provided in
this Section 6.6, Section 6.8(b) or Section 6.6 of the Seller Disclosure
Schedule, Seller shall retain all liabilities and obligations relating to the
participation of U.S. Transferred Employees in the U.S. Business Plans on or
prior to the Effective Time. Buyer shall be responsible and liable for all
liabilities and obligations relating to the participation of U.S. Transferred
Employees (including, but not limited to, such liabilities and obligations that
may exist or arise in connection with (a) the employment of any U.S.
Transferred Employee on or after the Effective Time and (b) the termination of
employment of any U.S. Transferred Employee on or after the Effective Time)
under the Buyer Business Plans and in connection with the offer and the
employment of the U.S. Transferred Employees on or after the Effective Time.
6.7. U.S. Defined Benefit Plan. As of the Effective Time, Seller
shall cause the active participation by the U.S. Transferred Employees in the
Borden, Inc. Employees Retirement Income Plan (the "Pension Plan") to cease.
<PAGE>
U.S. Transferred Employees shall continue to receive service credit for their
employment with the Buyer under the Pension Plan, but only for purposes of
vesting. Pursuant to Section A7.9 of the Pension Plan, a Transferred Employee
shall be considered terminated from employment with his or her "Employer"
within the meaning of the Pension Plan only when such Transferred Employee is
no longer employed by the Buyer.
6.8. U.S. Defined Contribution Plans. (a) As of the Effective Time,
Seller shall cause the active participation by the U.S. Transferred Employees
in the Borden, Inc. Retirement Savings Plan and the Borden, Inc. Associate
Savings Plan (collectively, the "Savings Plans") to cease. Seller shall (i) as
of the Effective Time cause the trustees of the Savings Plans to identify, in
accordance with the applicable spinoff provisions set forth under Section
414(l) of the Code, the assets of the Savings Plans representing the full
account balances of U.S. Transferred Employees for all periods of participation
through the Effective Time (including, as applicable, all employee
contributions, employer contributions and all earnings attributable thereto);
and (ii) as soon as practicable (but in no event later than 120 days) after the
Effective Time, make all required filings and submissions to appropriate
governmental agencies and all required amendments to the Savings Plans and
related trust agreements necessary to provide for the transfer of assets
described in this Section 6.8. The Savings Plans shall be amended to provide
that (i) there shall be no contributions thereto with respect to U.S.
Transferred Employees for periods after the Closing Date and (ii) all
transferred employer contributions shall be fully vested.
(b) Buyer shall (i) give Seller written notice of the name of the
trustee of the defined contribution plan designated by Buyer to which the
assets and liabilities for benefits of the Savings Plans are to be transferred
(the "Buyer Savings Plan"), accompanied by a copy of the most recent favorable
determination letter for such plan received by Buyer, as promptly as possible
<PAGE>
after the Effective Time, but in any event prior to the date on which such
transfer is to occur; and (ii) as soon as practicable (but in no event later
than 120 days) after the Effective Time, make all required filings and
submissions to appropriate governmental agencies. As soon as practicable after
the Effective Time, and pursuant to the procedures set forth below, Seller
shall cause the trustees of the Savings Plans to transfer to the trustee of the
Buyer Savings Plan the following amount (the "Total Transfer Amount"): (A) the
full account balances (in kind and notes for any loans to U.S. Transferred
Employees) of all U.S. Transferred Employees, whose account balances shall have
been credited with appropriate earnings and contributions, if any, attributable
to the period ending on the close of business on the day preceding the
Effective Time, plus (B) earnings on such account balances attributable to the
period from the Effective Time to the Transfer Date, reduced by (C) any benefit
or withdrawal payments in respect of U.S. Transferred Employees prior to the
Transfer Dates. The "Transfer Date" shall be the first day of the month
following a 15th day of a month by which Buyer has requested the transfer and
Seller has received copies of the applicable favorable determination letters
from the Service. On the Transfer Date, the Seller shall transfer 90% of its
good faith estimate of the Total Transfer Amount. Upon the completion of a
calculation of the Total Transfer Amount by the Seller's actuary (such
calculation to occur no later than 120 days after the Transfer Date and such
calculation to be binding on the Buyer), the Savings Plans shall transfer to
the Buyer Savings Plan an amount equal to the difference between the Total
Transfer Amount and any amounts previously transferred to the Buyer Savings
Plan or, if applicable, the Buyer Savings Plan shall transfer to the Savings
Plans an amount equal to the difference between any amounts previously
transferred to the Buyer Savings Plan and the Total Transfer Amount. In
consideration of the transfer of assets hereunder, Buyer shall, as of the
Transfer Date, cause the Buyer Savings Plan to assume the liabilities
<PAGE>
associated with the transferred assets (including notes) of the U.S.
Transferred Employees.
(c) Periods of employment by U.S. Transferred Employees with Seller
for which credit was given under the Savings Plans shall be taken into account
for all purposes under the Buyer Savings Plan to the same extent they were
taken into account under the Savings Plans. Buyer shall indemnify Seller, each
officer, employee and director of Seller and its affiliates and each fiduciary
of the Savings Plans against, and hold them harmless from, any and all damages
incurred or suffered by them arising out of, in respect of or in connection
with the qualified status of the Buyer Savings Plan on the dates of transfer
described above (including, without limitation, any liability, excise taxes,
penalties and damages arising with respect to the U.S. Transferred Employees).
The Seller shall indemnify the Buyer for any failure to transfer assets
pursuant to clause (b) of this Section 6.8, but only to the extent of the
liabilities assumed by the Buyer thereunder.
(d) The Buyer shall (i) permit repayment to the Buyer Savings Plan
of the outstanding loans of the U.S. Transferred Employees (under the Savings
Plans) by way of regular paycheck deductions and (ii) take all steps required
to effectuate such repayment (including amending its plans).
6.9. U.S. Post-Retirement Benefits. As of the Effective Time, no
U.S. Transferred Employee shall be eligible to receive post-retirement welfare
benefits from Seller unless such U.S. Transferred Employee (a) is eligible to
receive such benefits as of the Effective Time pursuant to the terms of the
Borden, Inc. Total Family Protection Plan and (b) terminates employment with
the Buyer on or prior to the first anniversary of the Effective Time.
6.10. U.S. Welfare Plans. With respect to any Buyer Business
Plan that is a "welfare benefit plan" (as defined in Section 3(1) of ERISA)
maintained for the benefit of U.S Transferred Employees on and after the
Effective Time, Buyer shall (a) cause there to be waived any pre-existing
<PAGE>
condition limitations and (b) give effect, in determining any deductible and
maximum out-of-pocket limitations, to claims incurred and amounts paid by, and
amounts reimbursed to, such employees with respect to similar plans maintained
by Seller immediately prior to the Closing Date.
6.11. U.S. Accrued Vacation. With respect to any accrued but
unused vacation time to which any U.S. Transferred Employee is entitled
pursuant to the vacation policy applicable to such employee immediately prior
to the Effective Time (the "Vacation Policy"), Buyer shall allow such U.S.
Transferred Employee to use such accrued vacation; provided, however, that if
Buyer deems it necessary to disallow such employee from taking such accrued
vacation, Buyer shall be liable for and pay in cash to such employee an amount
equal to such vacation time in accordance with terms of the Vacation Policy;
provided, further, that Buyer shall be liable for and pay in cash an amount
equal to such accrued vacation time to any U.S. Transferred Employee whose
employment terminates for any reason subsequent to the Effective Time;
provided, further, that Buyer shall be under no obligation to recognize any
unused vacation time accrued prior to the year in which the Closing occurs.
6.12. Severance. The Buyer shall provide severance benefits to U.S.
Transferred Employees (who are either salaried or non-union hourly employees)
terminated within 12 months of the Effective time for reasons other than
serious misconduct in the amount of one week of base pay for each full year of
service.
6.13. U.S. Service Credit. With respect to U.S. Transferred
Employees, Buyer shall recognize all service with Seller for purposes of
eligibility and vesting under the Buyer Business Plans.
6.14. U.S. WARN Act. Buyer agrees to provide any required notice
under the Worker Adjustment and Retraining Notification Act ("WARN") and any
other applicable law and to otherwise comply with any such statute with respect
to any "plant closing" or "mass layoff" (as defined in WARN) or similar event
<PAGE>
affecting employees and occurring on or after the Effective Time or arising as
a result of the transactions contemplated hereby. Buyer shall indemnify and
hold harmless Seller and its affiliates with respect to any liability under
WARN or other applicable law arising from the actions (or inactions) of Buyer
or its affiliates on or after the Effective Time or arising as a result of the
transactions contemplated hereby.
6.15. U.S. COBRA. Buyer agrees to provide any required notice
under the Consolidated Omnibus Budget Reconciliation Act of 1986 ("COBRA") and
any other applicable law on or after the Effective Time. Buyer shall indemnify
and hold harmless Seller and its affiliates with respect to any liability under
COBRA or other applicable law arising from the actions (or inactions) of Buyer
or its affiliates on or after the Effective Time or arising as a result of the
transactions contemplated hereby.
6.16. No Rights Conferred on Employees. Nothing herein,
expressed or implied, shall confer upon any employee or former employee of
Seller, Buyer, or any of their affiliates (including, without limitation, the
Transferred Employees, the Business Employees or the Buyer Business Employees),
any rights or remedies (including, without limitation, any right to employment
or continued employment for any specified period) of any nature or kind
whatsoever, under or by reason of this Agreement.
7. Termination
7.1. General. This Agreement may be terminated and the transactions
contemplated herein may be abandoned, (a) by mutual consent of the Buyer and
the Seller; (b) by the Buyer or the Seller by notice to the other party in the
event that the Closing Date shall not have occurred on or before January 31,
1997; provided, however, that if the Closing Date shall not have occurred on or
before such date due to the act or omission of the Buyer or the Seller, then
that party may not terminate the Agreement; (c) by the Seller, in its sole
<PAGE>
discretion, after the date which is five weeks after the date of this
Agreement, if Seller shall not have received copies of the Definitive Financing
Agreements or if at any time thereafter any such Definitive Financing
Agreements shall cease to be in full force and effect and Seller shall not have
replaced such Definitive Financing Agreements prior to the earlier of five
weeks thereafter and January 31, 1997, or (d) the Seller, if any required
approval by the stockholders of the Buyer shall not have been obtained by
reason of the failure to obtain the required vote upon a vote held at a duly
held meeting of stockholders or at any adjournment thereof except as a result
of a material breach of this Agreement by the Seller or an inability to satisfy
Section 5.2(a).
7.2. Effect of Termination. In the event of any termination of the
Agreement as provided in Section 7.1 above, this Agreement shall forthwith
become wholly void and of no further force and effect and there shall be no
liability on the part of the Buyer or the Seller, except that (i) the
obligations of the Buyer and the Seller under Sections 4.1(c) and 9.2 of this
Agreement shall remain in full force and effect and (ii) termination shall not
preclude either party from suing the other party for breach of this Agreement.
8. Transactions Subsequent to Closing
8.1. Access to Books and Records. (a) For a period of ten years
following the Closing Date, the Buyer shall retain and afford, and will cause
its affiliates to retain and afford, to the Seller and the Subsidiary Asset
Sellers, their counsel and their accountants, during normal business hours and
upon reasonable advance notice, reasonable access to the books, records and
other data of Borden Global Packaging with respect to the period prior to the
Closing Date to the extent that such access may be reasonably required by the
Seller or Subsidiary Asset Seller to facilitate (i) the preparation by any
Seller or such Subsidiary Asset Seller of such tax returns as it may be
required to file with respect to the operations of Borden Global Packaging, the
<PAGE>
making of any election related to taxes or in connection with any audit,
amended return, claim for refund or any suit or proceeding with respect
thereto, (ii) the investigation, litigation and final disposition of any
claims, suits or proceedings which may have been or may be made against the
Seller or such Subsidiary Asset Seller in connection with Borden Global
Packaging, and (iii) the payment of any amount pursuant to Section 9.4 or in
connection with any liabilities or obligations which have not been assumed by
the Buyer under this Agreement. The Buyer will not, and will cause its
affiliates not to, dispose of, alter or destroy any such books, records and
other data without giving thirty (30) days' prior notice to the Seller to
permit them, at their expense, to examine, duplicate or repossess such records,
files, documents and correspondence.
(b) the Buyer shall further cooperate with the Seller in the
preparation for and prosecution of the defense of any audit, claim, action or
cause of action arising out of or relating to any Excluded Liabilities which
have not been assumed by the Buyer under this Agreement including, without
limitation, by making available evidence within the control of the Buyer and
persons needed as witnesses employed by the Buyer, in each case as reasonably
needed for such defense. The Seller shall reimburse the Buyer for its
reasonable out-of-pocket costs relating to its cooperation under this
subparagraph.
(c) For a period of ten years following the Closing Date, the Seller
shall retain and afford, and will cause the Subsidiary Asset Sellers to retain
and afford, to the Buyer, its counsel and its accountants, during normal
business hours and upon reasonable advance notice, reasonable access to the
books, records and other data of such the Seller and the Subsidiary Asset
Sellers with respect to the period prior to the Closing Date to the extent that
such access may be reasonably required by the Buyer or any affiliate of the
Buyer (i) in connection with the ongoing operations of the Packaging Business
<PAGE>
(ii) to facilitate the preparation by the Buyer or such affiliate of such tax
returns as it may be required to file with respect to the operations of Borden
Global Packaging, the making of any election relating to taxes or in connection
with any audit, amended return, claim for refund or any suit or proceeding with
respect thereto, (iii) the investigation, litigation and final disposition of
any claims, suits or proceedings which may have been or may be made against the
Buyer or such affiliate in connection with Borden Global Packaging, and (iv)
the payment of any amount pursuant to Section 9.4 or in connection with any
liabilities or obligations which have not been assumed by the Buyer under this
Agreement. The Seller will not, and will cause its affiliates not to, dispose
of, alter or destroy any such books, records and other data without giving
thirty (30) days' prior notice to the Buyer to permit it, at its expense, to
examine, duplicate or repossess such records, files, documents and
correspondence.
(d) the Seller further agrees to cooperate with the Buyer in the
preparation for and prosecution of the defense of any audit, claim, action or
cause of action arising out of or relating to any liability relating to the
Packaging Business which acts arose by reason of acts or omissions occurring
prior to the Closing and which has been assumed by the Buyer, including,
without limitation, by making available evidence within the control of the
Seller and persons needed as witnesses employed by the Seller, in each case as
reasonably needed for such defense. The Buyer shall reimburse the Seller for
its reasonable out-of-pocket costs relating to its cooperation under this
subparagraph.
8.2. Further Agreements. The Seller authorizes and empowers the
Buyer on and after the Closing Date to receive and open all mail received by
the Buyer relating to the business of Borden Global Packaging or the Assets and
to deal with the contents of such communications in any proper manner. The
Seller shall, and shall cause the Subsidiary Asset Sellers to, promptly deliver
<PAGE>
to the Buyer any mail or other communication received by them after the Closing
Date pertaining to the business of Borden Global Packaging or the Assets and
any cash, checks or other instruments of payment to which the Buyer is
entitled. The Buyer shall promptly deliver to the Seller any mail or other
communication received by it after the Closing Date pertaining to the assets
and liabilities described in Sections 1.3 and 1.7 hereof, and any cash, checks
or other instruments of payment in respect thereof.
8.3. Asset Returns; Further Assurances. In the event that the Buyer
receives any assets of the Seller that are not intended to be transferred
pursuant to the terms of this Agreement, whether or not related to the
Packaging Business, the Buyer agrees to promptly return such assets to the
Seller at the Seller's expense. If, at any time after the Closing Date, the
Buyer determines that any deeds, bills of sale, assignments, assurances or any
other actions or things are necessary or desirable to transfer, vest, perfect
or confirm of record or otherwise in its right, title or interest in, to or
under any of the Subsidiary Stock or Assets acquired or to be acquired by the
Buyer as a result of, or in connection with, the Stock and Asset Purchase or
otherwise to carry out this Agreement, the officers of the Seller shall be
authorized to execute and deliver, all such deeds, bills of sale, assignments
and assurances and to take and do, in such names and on such behalves or
otherwise, all such other actions and things as may be necessary or desirable
to transfer, vest, perfect or confirm any and all right, title and interest in,
to and under such Subsidiary Stock or Assets or otherwise to carry out the
purposes of this Agreement. In the event that after the Closing Date the
Seller receives with respect to the Packaging Business any amount of cash paid
on an account receivable or as a result of a sale of Inventory included in the
Closing Balance Sheet, the Seller shall promptly forward such amount to the
Buyer.
<PAGE>
9. Miscellaneous
9.1. Public Announcements. Prior to the Closing Date, no news
release or other public announcement pertaining in any way to the transactions
contemplated by this Agreement will be made by either party without the prior
consent of the other party, unless based on the advice of counsel to such party
such party determines that such release or announcement is required by law or
any listing agreement with a securities exchange, in which case a copy of such
release will be provided to the other party.
9.2. Expenses. (a) Subject to the provisions of Section 9.2(b) and
Section 9.3, whether or not the transactions contemplated by this Agreement are
completed, each of the parties hereto shall pay the fees and expenses incurred
by it in connection with the negotiation, preparation, execution and
performance of this Agreement, including, without limitation, attorneys' fees
and accountants' fees.
(b) If (i) (x) the Board of Directors of the Buyer changes or
modifies (in a manner adverse to the Seller) its recommendation set forth in
Section 4.14(b) hereof, (y) the Buyer Stockholder Approval is not obtained
prior to, or fails to remain effective through, January 31, 1997 (or, if
earlier, the termination of this Agreement) and (z) the Seller is able prior to
January 31, 1997, to satisfy the condition contained in Sections 5.2(a) hereof
or (ii) the Stockholders Meeting shall not have occurred prior to January 31,
1997, then the Buyer shall pay to the Seller within three business days after
the earlier of the termination of this Agreement and January 31, 1997, an
amount, in cash, of $8,000,000.
9.3. Transfer Taxes and Recording Expenses. The Buyer, on the one
hand, and the Seller and the Subsidiary Asset Sellers, on the other hand, agree
to divide equally any payments required with respect to any and all U.S. or
foreign transfer, documentary, sales, excise, stamp duties, motor vehicle,
registration, value added or similar taxes and filing or recording expenses or
<PAGE>
fees, if any, required to be paid in connection with the transfer of the Assets
(including any interest charge, penalty or addition to tax with respect
thereto). The Buyer, on the one hand, and the Seller and the Subsidiary Asset
Sellers, on the other hand, agree to pay to the other party to the extent that
the other party pays in excess of one half of such taxes, expenses or fees.
9.4. Indemnification. (a) The Seller shall indemnify and hold the
Buyer harmless against and in respect of (i) all obligations and liabilities of
the Seller, whether accrued, absolute, fixed, contingent or otherwise, not
expressly assumed by the Buyer pursuant to this Agreement or the Assumption
Agreement; (ii) any actual loss, liability, damage, cost, expense or amount
paid in settlement (including reasonable attorneys' fees and other reasonable
costs of defense) (but excluding any liability for taxes of any kind or
interest or penalties thereon) (collectively, "Damages") incurred or sustained
by the Buyer as a result of any breach by the Seller of its covenants contained
herein, other than that contained in Section 4.7(iii), which survive the
Closing; and (iii) any actual Damages incurred or sustained by the Buyer as a
result of any breach by the Seller of Section 4.7(iii) or of its
representations and warranties contained in Section 3.1 hereof and made on the
date hereof but not on the Closing Date, without regard to any exceptions for
materiality contained in such representations and warranties; provided that (W)
the Seller shall be required to indemnify the Buyer pursuant to this clause
(iii) for such breaches only to the extent that the aggregate actual Damages
(as adjusted pursuant to Section 9.4(e) of this Agreement) resulting from such
breaches to the Buyer exceeds $5,750,000, (X) the Seller shall not be required
to indemnify the Buyer pursuant to this clause (iii) in an aggregate amount in
excess of $75,000,000, (Y) the Seller shall not be required to indemnify the
Buyer pursuant to this clause (iii) for any breach the Damages (as adjusted
pursuant to Section 9.4(e) of this Agreement) arising from which, in any
individual case, amount to $40,000 or less, and such Damages shall not be
<PAGE>
included in calculating the $5,750,000 threshold established in the preceding
subclause (W), and (Z) any claim for indemnification under this clause (iii)
must be made in writing with specificity to the Seller by the Buyer within two
years of the Closing Date.
(b) the Buyer shall indemnify and hold the Seller and the Subsidiary
Asset Sellers harmless against and in respect of (i) all obligations and
liabilities of the Seller and the Subsidiary Asset Sellers expressly assumed by
the Buyer pursuant to this Agreement or the Assumption Agreement; (ii) any
actual Damages incurred or sustained by the Seller or the Subsidiary Asset
Sellers as a result of any breach by the Buyer of its covenants contained
herein which survive the Closing; (iii) any actual Damages incurred or
sustained by the Seller or any of the Subsidiary Asset Sellers as a result of
any operations of the Borden Global Packaging business on or after the Closing
Date; (iv) any actual Damages incurred or sustained by the Seller or any of the
Subsidiary Asset Sellers as a result of any breach by the Buyer of its
representations and warranties contained in Section 3.2 hereof and made on the
date hereof but not on the Closing Date, without regard for any exceptions to
materiality contained in such representations and warranties; provided that (W)
the Buyer shall be required to indemnify the Seller pursuant to this clause
(iv) for such breaches only to the extent that the aggregate actual Damages (as
adjusted pursuant to Section 9.4(e) of this Agreement) resulting from such
breaches to the Seller exceeds $5,750,000, (X) the Buyer shall not be required
to indemnify the Seller pursuant to this clause (iv) in an aggregate amount in
excess of $75,000,000, (Y) the Buyer shall not be required to indemnify the
Seller pursuant to this clause (iv) for any breach the Damages (as adjusted
pursuant to Section 9.4(e) of this Agreement) arising from which, in any
individual case, amount to $40,000 or less, and such Damages shall not be
included in calculating the $5,750,000 threshold established in the preceding
subclause (W), and (Z) any claim for indemnification under this clause (iv)
<PAGE>
must be made in writing with specificity to the Buyer by the Seller within two
years of the Closing Date; and (v) any and all taxes and expenses described in
Section 9.3 of this Agreement.
(c) With respect to third-party claims, all claims for
indemnification by the Buyer or the Seller, as the case may be (an "Indemnified
Party") hereunder shall be asserted and resolved as set forth in this Section
9.4(c). In the event that any written claim or demand for which the Buyer or
the Seller, as the case may be (an "Indemnifying Party"), would be liable to
any Indemnified Party hereunder is asserted against or sought to be collected
from any Indemnified Party by a third party, such Indemnified Party shall
promptly notify the Indemnifying Party of such claim or demand and the amount
or the estimated amount thereof to the extent then feasible (which estimate
shall not be conclusive of the final amount of such claim or demand) ( the
"Claim Notice"). Failure to give prompt notice shall not affect the
indemnification obligations hereunder in the absence of actual prejudice. The
Indemnifying Party shall have 20 days from the personal delivery or mailing of
the Claim Notice (the "Notice Period") to notify the Indemnified Party (a)
whether or not the Indemnifying Party disputes the liability of the
Indemnifying Party to the Indemnified Party hereunder with respect to such
claim or demand and (b) whether or not it desires to defend the Indemnified
Party against such claim or demand. All costs and expenses incurred by the
Indemnifying Party in defending such claim or demand shall be a liability of,
and shall be paid by, the Indemnifying Party; provided, however, that the
amount of such costs and expenses that shall be a liability of the Indemnifying
Party hereunder shall be subject to the limitations set forth in Sections
9.4(a) and 9.4(b) hereof. Except as hereinafter provided, in the event that
the Indemnifying Party notifies the Indemnified Party within the Notice Period
that it desires to defend the Indemnified Party against such claim or demand,
the Indemnifying Party shall have the right to defend the Indemnified Party
<PAGE>
with counsel reasonably satisfactory to the Indemnified Party by appropriate
proceedings and shall have the sole power to direct and control such defense
and the Indemnifying Party shall not be liable to such Indemnified Party under
this Section 9.4 for any fees of other counsel or any other expenses, in each
case subsequently incurred by such Indemnified Party in connection with the
defense thereof, other than reasonable costs of investigation and costs and
expenses of legal counsel, if the Indemnified Party and the Indemnifying Party
are both parties to the action and the indemnified party has been advised by
counsel that there may be one or more defenses available to it and not
available to the Indemnifying Party. If any Indemnified Party desires to
participate in any such defense, it may do so at its sole cost and expense.
The Indemnified Party shall not settle a claim or demand without the consent of
the Indemnifying Party unless prior thereto or in connection therewith the
Indemnified Party unconditionally releases the Indemnifying Party for any
liability arising out of such claim or demand. The Indemnifying Party shall
not, without the prior written consent of the Indemnified Party, settle,
compromise or offer to settle or compromise any such claim or demand on a basis
which would result in the imposition of a consent order, injunction or decree
which would restrict the future activity or conduct of the Indemnified Party or
any subsidiary or affiliate thereof or if such settlement or compromise does
not include an unconditional release of the Indemnified Party for any liability
arising out of such claim or demand. If the Indemnifying Party elects not to
defend the Indemnified Party against such claim or demand, whether by not
giving the Indemnified Party timely notice as provided above or otherwise, then
the amount of any such claim or demand or, if the same be contested by the
Indemnified Party, that portion thereof as to which such defense is
unsuccessful (and the reasonable costs and expenses pertaining to such
defense), shall be the liability of the Indemnifying Party hereunder, subject
to the limitations set forth in Sections 9.4(a) and 9.4(b). The Buyer and the
<PAGE>
Seller shall each render to each other such assistance as may reasonably be
requested in order to insure the proper and adequate defense of any such claim
or proceeding.
(d) The indemnities provided in this Section 9.4 shall survive the
Closing. The indemnity provided in this Section 9.4 shall be the sole and
exclusive remedy of the Indemnified Party against the Indemnifying Party at law
or equity for any matter covered by paragraphs (a) and (b).
(e) The amount of any Damages for which indemnification is provided
under this Section 9.4 shall be computed net of any insurance proceeds received
by the Indemnified Party in connection with such Damages. If the amount with
respect to which any claim is made under this Section 9.4 (an "Indemnity
Claim") gives rise to a currently realizable Tax Benefit (as defined below) to
the party making the claim, the indemnity payment shall be reduced by the
amount of the Tax Benefit available to the party making the claim. To the
extent such Indemnity Claim does not give rise to a currently realizable Tax
Benefit, if the amount with respect to which any Indemnity Claim is made gives
rise to a subsequently realized Tax Benefit to the party that made the claim,
such party shall refund to the Indemnifying Party the amount of such Tax
Benefit when, as and if realized. For the purposes of this Agreement, any
subsequently realized Tax Benefit shall be treated as though it were a
reduction in the amount of the initial Indemnity Claim, and the liabilities of
the parties shall be redetermined as though both occurred at or prior to the
time of the indemnity payment. For purposes of this Section 9.4(e), a "Tax
Benefit" means an amount by which the tax liability of the party (or group of
corporations including the party) is reduced (including, without limitation, by
deduction, reduction of income by virtue of increased tax basis or otherwise,
entitlement to refund, credit or otherwise) plus any related interest received
from the relevant taxing authority. Where a party has other losses,
deductions, credits or items available to it, the Tax Benefit from any losses,
<PAGE>
deductions, credits or items relating to the Indemnity Claim shall be deemed to
be realized proportionately with any other losses, deductions, credits or
items. For the purposes of this Section 9.4(e), a Tax Benefit is "currently
realizable" to the extent it can be reasonably anticipated that such Tax
Benefit will be realized in the current taxable period or year or in any tax
return with respect thereto (including through a carryback to a prior taxable
period) or in any taxable period or year prior to the date of the Indemnity
Claim. In the event that there should be a determination disallowing the Tax
Benefit, the Indemnifying Party shall be liable to refund to the Indemnified
Party the amount of any related reduction previously allowed or payments
previously made to the Indemnifying Party pursuant to this Section 9.4(e). The
amount of the refunded reduction or payment shall be deemed a payment under
this Section 9.4 and thus shall be paid subject to any applicable reductions
under this Section 9.4(e).
(f) The parties agree that any indemnification payments that may be
due from the Seller to the Buyer pursuant to Section 9.4(a) hereof may be paid
at the option of Seller (i) in U.S. dollars in the amount of the Damages or
(ii) in such number of shares of Buyer Common Stock held by Seller or its
affiliates equal to the quotient obtained by dividing (a) the amount of Damages
by (b) the average of the closing prices of the Buyer Common Stock on The
Nasdaq National Market, as reported in The Wall Street Journal, for the 20
trading days immediately preceding the second trading day prior to the date of
payment thereof.
(g) The parties agree that any indemnification payments made
pursuant to this Agreement shall be treated for tax purposes as an adjustment
to the Purchase Price, unless otherwise required by applicable law. The Buyer
agrees not to make any election under Section 338 of the Code unless the Seller
consents to such election in writing.
<PAGE>
(h) Notwithstanding any of the foregoing, no Damages shall be due
pursuant to this Section 9.4 for any matters covered by the post-Closing
adjustment provisions of Section 2.4.
(i) Notwithstanding anything to the contrary contained herein,
neither party hereto nor any affiliate of either of them shall be liable for
any consequential, punitive or special damages pursuant to this Agreement or
any of the agreements contemplated hereby.
9.5. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, by mail
(registered or certified mail, postage prepaid, return receipt requested) or by
any courier service, such as Federal Express, providing proof of delivery. All
communications hereunder shall be delivered to the respective parties at the
following addresses:
(a) If to the Seller:
Borden, Inc.
180 East Broad Street
Columbus, Ohio 43215
Attention: Richard L. de Ney
with copies to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: David J. Sorkin, Esq.
and
Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, New York 10019
Attention: Scott M. Stuart
(b) If to the Buyer:
AEP Industries Inc.
125 Phillips Avenue
South Hackensack, New Jersey 07606
Attention: Paul M. Feeney, Executive Vice President
with a copy to:
<PAGE>
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
New York, New York 10017
Attention: Paul E. Gelbard, Esq.
or to such other address as either party shall have specified by notice in
writing to the other party. All such notices, requests, demands and
communications shall be deemed to have been received on the date of personal
delivery or telecopy or on the third Business Day after the mailing thereof.
9.6. Entire Agreement. This Agreement (including the Exhibits hereto
and the Disclosure Schedules) together with the Stockholders Agreement and the
Governance Agreement constitutes the entire agreement between the parties
hereto and supersedes all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof.
9.7. Binding Effect; No Third Party Beneficiaries. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns. Nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.8. Bulk Sales Law. The Buyer and the Seller each agree to waive
compliance by the other with the provisions of the bulk sales law of any
jurisdiction.
9.9. Assignability. This Agreement shall not be assignable by the
Seller without the prior written consent of the Buyer or by the Buyer without
the prior written consent of the Seller.
9.10. Amendment; Waiver. This Agreement may be amended,
supplemented or otherwise modified only by a written instrument executed by the
parties hereto. No waiver by either party of any of the provisions hereof
shall be effective unless explicitly set forth in writing and executed by the
party so waiving. Except as provided in the preceding sentence, no action
<PAGE>
taken pursuant to this Agreement, including without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants, or agreements contained herein, and in any documents
delivered or to be delivered pursuant to this Agreement and in connection with
the Closing hereunder. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
9.11. Schedules and Exhibits. Any fact or item which is clearly
disclosed on any Exhibit to this Agreement or in either Disclosure Schedule or
in the Financial Information or Interim Financial Information in such a way as
to make its relevance to a representation or representations made elsewhere in
this Agreement or to the information called for by an Exhibit or Exhibits to
this Agreement of either Disclosure Schedule readily apparent shall be deemed
to be an exception to such representation or representations or to be disclosed
on such Exhibit or Exhibits or Disclosure Schedule, as the case may be,
notwithstanding the omission of a reference or cross-reference thereto. Any
fact or item disclosed on any Exhibit hereto or either Disclosure Schedule
shall not by reason only of such inclusion be deemed to be material and shall
not be employed as a point of reference in determining any standard of
materiality under this Agreement.
9.12. Other Covenants. To the extent that any consents needed to
assign to the Buyer any of the Assets have not been obtained on or prior to the
Closing Date this Agreement shall not constitute an assignment or attempted
assignment thereof if such assignment or attempted assignment would constitute
a breach thereof. If any such consent shall not be obtained on or prior to the
Closing Date, then (i) the Seller and the Buyer, if required under applicable
law, shall use their reasonable efforts in good faith to obtain such consent as
promptly as practicable thereafter and (ii) if in the reasonable judgment of
<PAGE>
the Buyer such consent may not be obtained, the parties shall use reasonable
efforts in good faith to cooperate, and to cause each of their respective
affiliates to cooperate, in any lawful arrangement designed to provide for the
Buyer the benefits under any such Assets.
9.13. Section Headings; Table of Contents. The section headings
contained in this Agreement and the Table of Contents to this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
9.14. Severability. If any provision of this Agreement shall be
declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be affected and
shall remain in full force and effect.
9.15. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
9.16. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without regard
to conflicts of laws principles thereof.
9.17. Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, the first mentioned person;
(b) "person" means an individual, corporation, partnership,
association, trust, incorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act); and
(c) "subsidiary" or "subsidiaries" of the Buyer, the Seller or any
other person means any corporation, partnership, joint venture or other
legal entity of which the Buyer, the Seller or such other person, as the
<PAGE>
case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests the holder of which is generally entitled to vote
for the election of the board of directors or other governing body of such
corporation or other legal entity.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
BORDEN, INC.
By: /s/ Richard L. de Ney
------------------------------
Name: Richard L. de Ney
Title: Executive Vice President
AEP INDUSTRIES INC.
By: /s/ Paul M. Feeney
------------------------------
Name: Paul M. Feeney
Title: Executive Vice President
<PAGE>
============================================================================
PURCHASE AGREEMENT
between
BORDEN, INC.
and
AEP INDUSTRIES INC.
-------------------------
Dated as of June 20, 1996
-------------------------
============================================================================
<PAGE>
Exhibits
EXHIBIT A - Subsidiaries
EXHIBIT B-1 - Transferred Subsidiaries
EXHIBIT B-2 - Subsidiary Asset Sellers
EXHIBIT C-1 - Management Stockholders Agreement
EXHIBIT C-2 - Voting Agreement
EXHIBIT D - Governance Agreement
EXHIBIT E - Form of Assumption Agreement
EXHIBIT F - Form of Transition License Agreement
EXHIBIT G - Form of Shared Facilities Agreement
EXHIBIT H - Form of Transition Services Agreement
<PAGE>
TABLE OF CONTENTS
Page
1. Sale and Transfer of Subsidiary Stock; Purchase and Sale of Assets;
Assumption of Certain Liabilities . . . . . . . . . . . . . . . .
1.1. Sale and Transfer of Subsidiary Stock . . . . . . . . . .
1.2. Transfer of Assets . . . . . . . . . . . . . . . . . . .
1.3. Excluded Assets . . . . . . . . . . . . . . . . . . . . .
1.4. Instruments of Conveyance and Transfer . . . . . . . . .
1.5. Further Assurances . . . . . . . . . . . . . . . . . . .
1.6. Assumed Liabilities . . . . . . . . . . . . . . . . . . .
1.7. Excluded Liabilities . . . . . . . . . . . . . . . . . .
2. Closing; Payment of Purchase Price at Closing . . . . . . . . . .
2.1. Closing Date . . . . . . . . . . . . . . . . . . . . . .
2.2. Purchase Price and Payment . . . . . . . . . . . . . . .
2.3. Deferred Transfers . . . . . . . . . . . . . . . . . . .
2.4. Post-Closing Adjustment . . . . . . . . . . . . . . . . .
3. Representations and Warranties . . . . . . . . . . . . . . . . . .
3.1. Representations and Warranties of the Seller . . . . . .
3.2. Representations and Warranties of the Buyer . . . . . . .
3.3. Expiration of Representations and Warranties . . . . . .
4. Transactions Prior to Closing . . . . . . . . . . . . . . . . . .
4.1. Access to Information Concerning Properties and Records;
Confidentiality . . . . . . . . . . . . . . . . . . .
4.2. Conduct of the Packaging Business Pending the Closing Date
72
4.3. Conduct of Business By the Buyer Pending the Closing Date
4.4. Intercompany Transactions . . . . . . . . . . . . . . . .
4.5. Guarantees . . . . . . . . . . . . . . . . . . . . . . .
4.6. Further Actions . . . . . . . . . . . . . . . . . . . . .
4.7. Notification . . . . . . . . . . . . . . . . . . . . . .
4.8. No Inconsistent Action . . . . . . . . . . . . . . . . .
4.9. Financing . . . . . . . . . . . . . . . . . . . . . . . .
4.10. Borden-Hitachi Joint Venture. . . . . . . . . . . . . . .
4.11. Use of Corporate Name and Symbol; Transition License. . .
4.12. Facilities Agreement . . . . . . . . . . . . . . . . . .
4.13. Transition Services Agreement . . . . . . . . . . . . . .
4.14. Preparation of Proxy Statement; Stockholders' Meeting . .
4.15. No Solicitation . . . . . . . . . . . . . . . . . . . . .
4.16. Insurance . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
5. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . .
5.1. Conditions Precedent to Obligations of the Buyer and
the Seller . . . . . . . . . . . . . . . . . . . . . .
5.2. Conditions Precedent to Obligations of the Buyer . . . .
5.3. Conditions Precedent to the Obligations of the Seller . .
6. Employee Relations and Benefits . . . . . . . . . . . . . . . . .
6.1. Conduct Prior to the Effective Time . . . . . . . . . . .
6.2. Continuity of Employment . . . . . . . . . . . . . . . .
6.3. Collective Bargaining Agreements . . . . . . . . . . . .
6.4. International Plans . . . . . . . . . . . . . . . . . . .
6.5. U.S. Business Plan Participation . . . . . . . . . . . .
6.6. U.S. Business Plan Liabilities . . . . . . . . . . . . .
6.7. U.S. Defined Benefit Plan . . . . . . . . . . . . . . . .
6.8. U.S. Defined Contribution Plans . . . . . . . . . . . . .
6.9. U.S. Post-Retirement Benefits . . . . . . . . . . . . . .
6.10. U.S. Welfare Plans . . . . . . . . . . . . . . . . . . .
6.11. U.S. Accrued Vacation . . . . . . . . . . . . . . . . . .
6.12. Severance . . . . . . . . . . . . . . . . . . . . . . . .
6.13. U.S. Service Credit . . . . . . . . . . . . . . . . . . .
6.14. U.S. WARN Act . . . . . . . . . . . . . . . . . . . . . .
6.15. U.S. COBRA . . . . . . . . . . . . . . . . . . . . . . .
6.16. No Rights Conferred on Employees . . . . . . . . . . . .
7. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.1. General . . . . . . . . . . . . . . . . . . . . . . . . .
7.2. Effect of Termination . . . . . . . . . . . . . . . . . .
8. Transactions Subsequent to Closing . . . . . . . . . . . . . . . .
8.1. Access to Books and Records . . . . . . . . . . . . . . .
8.2. Further Agreements . . . . . . . . . . . . . . . . . . .
8.3. Asset Returns; Further Assurances . . . . . . . . . . . .
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . .
9.1. Public Announcements . . . . . . . . . . . . . . . . . .
9.2. Expenses . . . . . . . . . . . . . . . . . . . . . . . .
9.3. Transfer Taxes and Recording Expenses . . . . . . . . . .
9.4. Indemnification . . . . . . . . . . . . . . . . . . . . .
9.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . .
9.6. Entire Agreement . . . . . . . . . . . . . . . . . . . .
9.7. Binding Effect; No Third Party Beneficiaries . . . . . .
9.8. Bulk Sales Law . . . . . . . . . . . . . . . . . . . . .
9.9. Assignability . . . . . . . . . . . . . . . . . . . . . .
9.10. Amendment; Waiver . . . . . . . . . . . . . . . . . . . .
9.11. Schedules and Exhibits . . . . . . . . . . . . . . . . .
9.12. Other Covenants . . . . . . . . . . . . . . . . . . . . .
9.13. Section Headings; Table of Contents . . . . . . . . . . .
9.14. Severability . . . . . . . . . . . . . . . . . . . . . .
9.15. Counterparts . . . . . . . . . . . . . . . . . . . . . .
9.16. Applicable Law . . . . . . . . . . . . . . . . . . . . .
9.17. Certain Definitions . . . . . . . . . . . . . . . . . . .
GOVERNANCE AGREEMENT, dated as of June 20, 1996, between Borden,
Inc., a New Jersey corporation ("Borden"), and AEP Industries Inc., a Delaware
corporation (the "Company").
WHEREAS, concurrently herewith, Borden and the Company are entering
into a Purchase Agreement of even date herewith (as amended from time to time,
the "Purchase Agreement"); and
WHEREAS, the Boards of Directors of Borden and the Company have each
determined to engage in the transactions contemplated by the Purchase
Agreement, pursuant to which the Company will purchase from Borden and certain
subsidiaries of Borden the stock and assets of Borden and certain subsidiaries
of Borden relating to the business of the development, production, marketing,
distribution and sale of flexible and rigid plastic packaging materials in
North America, Europe, South Africa, Australia and Asia in consideration for a
combination of cash and shares of Common Stock (as defined herein); and
WHEREAS, Borden and the Company desire to establish in this Agreement
certain terms and conditions concerning the corporate governance of the Company
after the Closing Date (as defined in the Purchase Agreement) and certain terms
and conditions concerning the acquisition and disposition of securities of the
Company by Borden and its affiliates.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements contained herein, Borden and the Company hereby agree
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. As used in this Agreement, the following
terms have the following meanings:
(a) "Affiliate" has the same meaning as in Rule 12b-2 promulgated
under the Exchange Act.
(b) "Associate" has the same meaning as in Rule 12b-2 promulgated
under the Exchange Act.
(c) "Beneficial owner" and to "beneficially own" has the same
meaning as in Rule 13d-3 promulgated under the Exchange Act.
(d) "Board of Directors" means the Board of Directors of the
Company.
(e) "Borden Affiliate" means all persons controlled by Borden, any
person controlling Borden and any person acting in concert with Borden or
any person controlling Borden.
(f) "Borden's Interest" means the percentage of outstanding Common
Stock that is controlled directly or indirectly by Borden and the Borden
Affiliates.
<PAGE>
(g) "Business Combination" means any one of the following
transactions:
(i) Any merger or consolidation of the Company or any
Subsidiary of the Company with (A) Borden or (B) any corporation
(other than the Company) which is, or after such merger or
consolidation would be, an Affiliate or Associate of Borden;
(ii) Any sale, lease, exchange, mortgage, pledge, transfer or
other disposition by the Company (in one transaction or a series of
transactions) to or with Borden or any Affiliate or Associate of
Borden (other than the Company) of all or a Substantial Part of the
assets of the Company or any Subsidiary thereof; or
(iii) The adoption of any plan or proposal for the liquidation or
dissolution of the Company proposed by or on behalf of Borden or any
Affiliate or Associate of Borden (other than the Company); or
(iv) Any reclassification of securities (including any reverse
stock split), recapitalization of the Company, or any merger or
consolidation of the Company with any Subsidiary thereof or any other
transaction to which the Company is a party (whether or not with or
into or otherwise involving Borden or any Affiliate or Associate of
Borden) which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class of
equity or convertible securities of the Company or any Subsidiary
thereof which is directly or indirectly owned by Borden or any
Affiliate or Associate of Borden (other than the Company).
(h) "Common Stock" means the common stock, par value $.01 per share,
of the Company.
(i) "Director" means a member of the Board of Directors.
(j) "Equity Security" means any (i) Common Stock, (ii) securities of
the Company convertible into or exchangeable for Common Stock, and (iii)
options, rights, warrants and similar securities issued by the Company to
acquire Common Stock.
(k) "Exchange Act" means the Securities Exchange Act of 1934, and
the rules and regulations promulgated thereunder, as amended.
(l) "Fair Market Value" means: (i) in the case of a security, the
average of the closing sale prices during the thirty day period
immediately preceding the date in question of such security on the
Composite Tape for New York Stock Exchange ("NYSE") listed stocks or, if
such security is not quoted on the Composite Tape, on the NYSE or, if such
security is not listed on the NYSE, on the principal United States
securities exchange registered under the Exchange Act on which such
security is listed or, if such Security is not listed on any such
exchange, the average of the closing sale prices or the closing bid
quotations of such security during the thirty day period preceding the
date of determination on the Nasdaq National Market or any system then in
use or, if no such quotations are available, the fair market value on the
date in question of such security as determined by a majority of
Independent Directors in good faith; and (ii) in the case of property
other than cash or a security, the fair market value of such property on
<PAGE>
the date in question as determined by a majority of Independent Directors
in good faith.
(m) "Holder" shall mean any holder of Registrable Securities.
(n) "Independent Director" means a director of the Company (i) who
is not and has never been an officer or employee of the Company, any
Affiliate or Associate of the Company or an entity that derived 10% or
more of its revenues or earnings in its most recent fiscal year from
transactions involving the Company or any Affiliate or Associate of the
Company, (ii) who is not and has never been an officer, employee or
director of Borden any Affiliate or Associate of Borden or an entity that
derived more than 10% of its revenues or earnings in its most recent
fiscal year from transactions involving Borden or any Affiliate or
Associate of Borden, and (iii) who was on the Closing Date deemed to be,
or on or after the Closing Date was designated as, an Independent Director
in accordance with Section 4.1.
(o) "Initial Percentage" means the percentage of outstanding Common
Stock that Borden and the Borden Affiliates acquire from the Buyer on the
Closing Date pursuant to the Purchase Agreement.
(p) "Investor Directors" means Directors who are designated for such
position by Borden in accordance with Section 4.1.
(q) "Management Directors" means, at the Closing Date, Directors who
were deemed to be Management Directors in accordance with Section 4.1(b)
and, after the Closing Date, Directors who are designated for such
position by the then existing Management Directors in accordance with
Section 4.1.
(r) "New Security" means any Equity Security issued by the Company
for cash or cash equivalents; provided that "New Security" shall not
include (i) securities issuable upon conversion of any convertible Equity
Security, (ii) securities issuable upon exercise of any option, warrant or
other similar Equity Security, (iii) securities issuable at any time to
employees, directors or consultants of the Company, or any Subsidiary of
the Company, pursuant to any employee stock offering, plan, or arrangement
approved by the Board of Directors (or an appropriate committee thereof),
including, without limitation, the 401(k) Savings and Employee Stock
Ownership Plan (the "ESOP") and 1995 Employee Stock Purchase Plan (the
"Stock Purchase Plan") of the Company, and (iv) securities issuable in
connection with any stock split, stock dividend or recapitalization of the
Company.
(s) A "Permitted Acquisition Transaction" means either (i) a tender
or exchange offer for outstanding shares of Common Stock or (ii) a
Business Combination that is conditioned upon approval by at least a
majority of the Unaffiliated Stockholders, and which transaction, in the
case of either clause (i) or (ii) above, satisfies each of the following
conditions:
(A) the Board of Directors receives an opinion from a
nationally recognized independent investment banking firm selected by
the Board of Directors other than Investor Directors that the price
and other financial terms of the transaction are fair from a
financial point of view to the Unaffiliated Stockholders; and
<PAGE>
(B) a majority of the Board of Directors (other than the
Investor Directors) concludes that the price and other terms of the
transaction are fair to and in the best interests of the Unaffiliated
Stockholders and recommends that Unaffiliated Stockholders approve
the transaction; or
(iii) a merger following the consummation of a tender or exchange offer
described in clause (i) above that offers the same consideration as such
tender or exchange offer, whether or not such merger complies with
paragraph (A) or (B) above.
(t) "Pro Rata Share" means a fraction of an entire issuance of New
Securities, the numerator of which shall be the number of shares of Common
Stock owned by Borden immediately prior to such issuance of such New
Securities and the denominator of which shall be the aggregate number of
shares of Common Stock outstanding immediately prior to the issuance of
such New Securities.
(u) "Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act and the declaration
or ordering of effectiveness of such registration statement or document.
(v) "Registrable Securities" shall mean (i) any Equity Security held
by Borden that was issued to Borden by the Company pursuant to, or
otherwise acquired by Borden in accordance with, the terms of this
Agreement or the Purchase Agreement, (ii) any common stock issued as (or
issuable upon the conversion or exercise of any warrant, right, option or
other convertible security which is issued as) a dividend or other
distribution with respect to, or in exchange for, or in replacement of,
such Equity Security, and (iii) any common stock issued by way of a stock
split of the Equity Security referred to in clauses (i) or (ii) above.
For purposes of this Agreement, any Registrable Securities shall cease to
be Registrable Securities when (w) a registration statement covering such
Registrable Securities has been declared effective and such Registrable
Securities have been disposed of pursuant to such effective registration
statement, (x) such Registrable Securities shall have been distributed
pursuant to Rule 144 (or any similar provision then in effect) under the
Securities Act, (y) such Registrable Securities are sold by a person in a
transaction in which the rights under the provisions of this Agreement are
not assigned, or (z) such Registrable Securities shall cease to be
outstanding.
(w) "SEC" means the Securities and Exchange Commission.
(x) "Securities Act" means the Securities Act of 1933, and the rules
and regulations promulgated thereunder, as amended.
(y) "Standstill Period" means a period of time commencing at the
Closing Date and terminating on the three year anniversary of the Closing
Date.
(z) "Subsidiary" has the same meaning as in Rule 12b-2 promulgated
under the Exchange Act.
(aa) A "Substantial Part" of the Company means more than 10% of the
Fair Market Value of the total assets of the Company and its Subsidiaries
<PAGE>
as of the end of its most recent fiscal quarter ending prior to the time
the determination is made.
(ab) "Unaffiliated Stockholders" means stockholders of the Company
other than Borden or Borden Affiliates.
ARTICLE II
SUBSCRIPTION RIGHTS
SECTION 2.1. Subscription Rights. So long as Borden has the right
to designate at least two Investor Directors pursuant to Section 4.1(c), if the
Board of Directors shall authorize the issuance of New Securities, then, prior
to each such authorization of New Securities, the Company shall offer to Borden
a Pro Rata Share of such New Securities. Any offer of New Securities made to
Borden under this Section 2.1 shall be made by notice in writing (the
"Subscription Notice") at least 20 days prior to the date on which the Company
authorizes the issuance of such New Securities. The Subscription Notice shall
set forth (i) the number of New Securities proposed to be issued to persons
other than Borden and the terms of such New Securities, (ii) the consideration,
if any, for which such New Securities are proposed to be issued and the terms
of payment, (iii) the number of New Securities offered to Borden in compliance
with the provisions of this Article II, and (iv) the proposed date of issuance
of such New Securities. Not later than 20 days after receipt of the
Subscription Notice, Borden shall notify the Company in writing whether it
elects to purchase all or any portion of the New Securities offered to Borden
pursuant to the Subscription Notice. If Borden shall elect to purchase any
such New Securities, the New Securities which it shall have elected to purchase
shall be issued and sold to Borden by the Company at the same time and on the
same terms and conditions as the New Securities are issued and sold to third
parties. If, for any reason, the issuance of New Securities to third parties
is not consummated, Borden's right to its Pro Rata Share of such issuance shall
lapse, subject to Borden's ongoing subscription right with respect to issuances
of New Securities at later dates or times.
ARTICLE III
BUSINESS COMBINATIONS BETWEEN THE COMPANY AND BORDEN
SECTION 3.1. Purchases of Equity Securities. (a) During the
Standstill Period, Borden and the Borden Affiliates shall not, (i) directly or
indirectly, purchase or otherwise acquire, or propose or offer to purchase or
otherwise acquire, any Equity Securities whether by tender offer, market
purchase, privately negotiated purchase, Business Combination or otherwise, if,
immediately after such purchase or acquisition, Borden's Interest would equal
or exceed the Initial Percentage or (ii) directly or indirectly propose or
offer to enter into a Business Combination.
(b) The prohibitions contained in Section 3.1(a) shall not apply
(i) during any period in which Borden's Interest is less than 10%, (ii) to any
Permitted Acquisition Transaction following (X) the commencement by any third
party of (1) a bona fide tender or exchange offer to purchase in excess of 20%
of the outstanding shares of Common Stock that the Board of Directors either
recommends acceptance of, expresses no opinion and remains neutral toward or is
unable to take a position with respect to, (2) a bona fide proposal to acquire
<PAGE>
all or substantially all of the assets of the Company that the Board of
Directors is actively entertaining and the consummation of which would require
approval by the Stockholders of the Company pursuant to Section 271 of the
Delaware General Corporation Law or (3) a bona fide proposal to enter into any
acquisition or other business combination transaction with the Company that the
Board of Directors is actively entertaining, in the case of each of clauses
(1)-(3), which shall not have been approved in advance by the Company or the
Board of Directors, or (Y) the Company entering into (or announcing its
intention to do so) a definitive agreement, or an agreement contemplating a
definitive agreement, for any of the transactions described in clauses (1) -
(3) above or (iii) to any issuance of securities pursuant to Article II of this
Agreement.
SECTION 3.2. Additional Limitations. During the Standstill Period,
Borden and the Borden Affiliates shall not:
(a) other than in connection with an election contest to which Rule
14a-11 under the Exchange Act applies initiated by a third party or as
otherwise approved by a majority of the Board of Directors (other than the
Investor Directors), make, or in any way participate, directly or
indirectly, in any "solicitation" of "proxies" to vote (as such terms are
used in the proxy rules of the SEC) or seek to advise, encourage or
influence any person or entity with respect to the voting of any shares of
capital stock of the Company, initiate, propose or otherwise solicit
stockholders of the Company for the approval of one or more stockholder
proposals or induce or attempt to induce any other individual, firm,
corporation, partnership or other entity to initiate any stockholder
proposal;
(b) deposit any shares of Common Stock into a voting trust or
subject any shares of Common Stock to any arrangement or agreement with
respect to the voting of such securities or form, join or in any way
participate in a "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) with respect to any shares of Common Stock; or
(c) except in connection with a transaction permitted by Section
3.1(b) hereof, make any public announcement with respect to the
transactions referred to in Section 3.1(a) hereof.
ARTICLE IV
CORPORATE GOVERNANCE
SECTION 4.1. Composition of the Board of Directors. (a) Except as
otherwise provided herein, the Board of Directors shall consist of ten
Directors.
(b) Prior to the Closing Date, the Company shall cause one of the
six current Directors to resign his directorship. At the Closing Date, the
Board of Directors shall consist of (i) the five Directors on the Board of
Directors immediately prior to the Closing Date (of whom two shall be
independent directors as required by the rules of the Nasdaq National Market
System and who shall be deemed to be Independent Directors hereunder; the
remaining three current Directors shall be deemed to be Management Directors),
(ii) four Investor Directors designated by Borden, and (iii) one additional
Independent Director to be chosen by mutual agreement between the Management
<PAGE>
Directors and Borden. In the event that Borden and the Management Directors
cannot agree on the Independent Director specified in clause (iii) of the
preceding sentence, then the Management Directors shall select an Independent
Director to serve on the Board of Directors for the period from the Closing
Date until the later of (x) the date that is eighteen months thereafter or (y),
if consented to by the Management Directors, the expiration of the term of such
Independent Director (such eighteen month or longer period, the "Independent
Director Term") from a list prepared by Borden of three potential candidates
none of whom shall be or have been an employee, consultant or agent of Borden
or any of the Borden Affiliates. Following the expiration of the Independent
Director Term, in the event that Borden and the Management Directors cannot
agree on the continuation of such individual as an Independent Director or a
replacement for such Independent Director, then Borden shall select an
Independent Director to serve on the Board of Directors for the following
Independent Director Term from a list prepared by the Management Directors of
three potential candidates none of whom shall be or have been an employee,
consultant or agent of the Company or its Affiliates. The procedures set forth
in the preceding two sentences with respect to the selection of an Independent
Director by Borden and the Management Directors shall be followed, alternating
between the procedures set forth in the two preceding sentences for each
subsequent Independent Director Term, at all times during the term of this
Agreement that Borden's Interest is 10% or greater. The Investor Directors and
the Independent Director chosen pursuant to clause (iii) above shall be
apportioned, to the extent possible, equally among the three classes of
Directors.
(c) At all times during the term of this Agreement that Borden's
Interest is:
(i) below 10% Borden shall have no right to designate any
Directors, and the Management Directors shall have the right to
designate eight Management Directors and two Independent Directors;
(ii) 10% or above but less than 20%, Borden shall have the right
to designate one Investor Director, and the Management Directors
shall have the right to designate six Management Directors and two
Independent Directors;
(iii) 20% or above but less than 25%, Borden shall have the right
to designate two Investor Directors and the Management Directors
shall have the right to designate five Management Directors and two
Independent Directors;
(iv) 25% or above but less than 50%, Borden shall have the right
to designate four Investor Directors and the Management Directors
shall have the right to designate three Management Directors and two
Independent Directors;
(v) in the event that a Permitted Acquisition Transaction or
other transaction permitted by this Agreement results in Borden's
Interest being equal to or exceeding 50%, Borden shall have the right
to designate five Investor Directors and one Independent Director and
the Management Directors shall have the right to designate two
Management Directors and one Independent Director; and
<PAGE>
(vi) 10% or above, Borden and the Management Directors shall
select, by mutual agreement, one Independent Director pursuant to the
procedure set forth in Section 4.1(b) hereof.
(d) Notwithstanding the foregoing, Borden and the Company hereby
agree that the number of directorships on the Board of Directors may be
increased or decreased from time to time as the parties may mutually agree;
provided, however, that (i) there shall at all times be an even number of
Directors, (ii) the number of Directors shall not be fewer than eight or
greater than twelve, and (iii) at all times that Borden's Interest is 10% or
above, one Director shall be chosen pursuant to clause (vi) of subsection
4.1(c). In the event that Borden and the Company agree to increase or decrease
the number of directorships on the Board of Directors in accordance with the
foregoing, the composition of the Board will be as set forth on Exhibit A
hereto, based upon Borden's Interest at all times during the term of this
Agreement.
(e) In the event that Borden's Interest is such that there are more
Investor Directors, Independent Directors or Management Directors on the Board
of Directors than Borden or the Management Directors, as the case may be, has
the right to designate pursuant to Section 4.1(c) or 4.1(d), as the case may
be, Borden or the Management Directors, as the case may be, shall promptly
cause to resign, and take all other action reasonably necessary to cause the
prompt removal of, that number of Investor Directors, Independent Directors or
Management Directors, as the case may be, as required to make the remaining
number of Investor Directors, Independent Directors and Management Directors in
conformity with the provisions of Section 4.1(c) or 4.1(d), as the case may be.
Each of Borden and the Management Directors shall have the right to designate,
in accordance with Section 4.1(c) or 4.1(d), as the case may be, replacement
Directors for the Investor Directors, Independent Directors or Management
Directors, as the case may be, removed or whose resignation shall have been
obtained by the other party pursuant to this paragraph.
(f) Subject to Section 4.1(e), Borden and the Management Directors,
respectively, shall have the right to designate any replacement for a director
designated in accordance with Section 4.1 by Borden or the Management
Directors, respectively, at the termination of such director's term or upon
death, resignation, retirement, disqualification, removal from office or other
cause. The Board of Directors shall elect each person so designated upon
nomination by the Nominating Committee.
(g) No individual who is an officer, director, partner or principal
stockholder of any competitor of the Company or any of its Subsidiaries (other
than Borden and its Affiliates) shall serve as a Director.
(h) Each person designated as a nominee for Director pursuant to
this Section 4.1 shall be nominated for such position by the Nominating
Committee unless the Nominating Committee, in the execution of its fiduciary
duties, shall reasonably determine such designee is not qualified to serve on
the Board of Directors. If the Nominating Committee shall reasonably determine
that such designee is not so qualified, the designating person shall have the
opportunity to specify one or more additional designees who shall become
nominees subject to the qualification set forth in the immediately preceding
sentence.
SECTION 4.2. Solicitation and Voting of Shares. (a) The Company
shall use its best efforts to solicit from the stockholders of the Company
<PAGE>
eligible to vote for the election of Directors proxies in favor of the nominees
designated in accordance with Section 4.1.
(b) In any election of Directors or any meeting of the stockholders
of the Company called expressly for the removal of Directors, Borden and its
Affiliates will vote their shares of Common Stock for all nominees in
proportion to the votes cast by the other holders of shares of Common Stock;
provided that Borden and its Affiliates may cast any or all of their votes, in
their sole discretion, (i) in favor of any nominee designated by Borden
pursuant to Section 4.1 and (ii) in connection with any election contest to
which Rule 14a-11 under the Exchange Act applies. Subject to Section 4.8, in
all other matters submitted to a vote of the Company stockholders, Borden may
vote any or all of its shares in its sole discretion.
SECTION 4.3. Committees. (a) Subject to the general oversight and
authority of the full Board of Directors, the Board of Directors shall
establish, empower and maintain the committees of the Board of Directors
contemplated by this Section 4.3.
(b) The following committees shall be established, empowered and
maintained by the Board of Directors at all times during the term of this
Agreement that Borden's Interest is 15% or greater:
(i) an Audit Committee, consisting solely of Independent
Directors;
(ii) a Nominating Committee, responsible, among other things,
for the nomination, subject to Section 4.1(h), of Directors and the
solicitation of stockholder proxies, and consisting solely of an
equal number of Investor Directors and Management Directors;
(iii) a Compensation Committee, responsible, among other things,
for recommending to the Board of Directors, for approval by a
majority of the Board of Directors or such other percentage of the
Directors as provided in Section 4.4, the adoption and amendment of
all employee benefit plans and arrangements and the engagement of,
terms of any employment agreements and arrangements with, and
termination of, all corporate officers of the Company, and consisting
of an equal number of Investor Directors, Management Directors and
Independent Directors;
(iv) a Stock Option Committee, responsible, among other things,
for (A) recommending to the Board of Directors, for approval by a
majority of the Board of Directors or such other percentage of
Directors as provided in Section 4.4, the adoption and amendment of
all stock option plans of the Company and (B) for the administration
of such plans including grants of options thereunder, and, at all
times during the term of this Agreement that Borden's Interest is (x)
25% or greater, consisting solely of an equal number of Independent
Directors and Investor Directors who constitute disinterested persons
(as such term is defined in Rule 16b-3(d) under the Exchange Act) and
(y) 15% or greater but less than 25%, consisting solely of two (2)
Independent Directors and one (1) Investor Director who constitutes a
disinterested person; and
<PAGE>
(v) such other committees as the Board of Directors deems
necessary or desirable; provided that such committees are established
in accordance with the terms of this Agreement.
(c) No action by any committee of the Board shall be valid unless
taken at a meeting for which adequate notice has been duly given or waived by
the members of such committee. Such notice shall include a description of the
general nature of the business to be transacted at the meeting and no other
business may be transacted at each meeting. Any committee member unable to
participate in person at any meeting shall be given the opportunity to
participate by telephone. Any Investor Director serving on any committee may
designate as his alternate another Investor Director, provided that such
alternate, in the case of the Stock Option Committee, is deemed to be a
disinterested person (as such term is defined in Rule 16b-3(d) under the
Exchange Act). Each of the committees established by the Board of Directors
pursuant to this Section 4.3 shall establish such other rules and procedures
for its operation and governance as it shall see fit and may seek such
consultation and advice as to matters within its purview as it shall require.
(d) Prior to the Closing Date, the Board of Directors shall abolish
the Executive Committee of the Board of Directors and no Executive Committee
shall be maintained at any time that Borden's Interest is 15% or greater.
SECTION 4.4. Super-Majority Directors' Approval Required for Certain
Actions. The approval of that number of Directors that represents 66 2/3% of
the total number of Directors, rounded up to the nearest whole number shall be
required for the Board of Directors to approve and authorize any of the
following; provided that so long as Borden's Interest is 25% or greater, the
approval of at least one of the Investor Directors shall be required to take
any action pursuant to this Section 4.4:
(a) the entry by the Company or any of its Subsidiaries into any
merger or consolidation or the acquisition by the Company or any of its
Subsidiaries of any business or assets that would constitute a Substantial
Part of the business or assets of the Company, whether such acquisition be
by merger or consolidation or the purchase or sale of stock or assets or
otherwise;
(b) the sale, lease, pledge, grant of security interest in, license,
transfer or other disposal by the Company or any of its Subsidiaries of
all or a Substantial Part of the business or assets of the Company;
(c) the issuance of any debt or Equity Securities or other capital
stock of the Company or any debt or equity securities or other capital
stock of any of its Subsidiaries, except (i) to a wholly owned Subsidiary
of the Company or to the Company, as the case may be, and (ii) the
issuance of shares of capital stock of the Company or options to purchase
such shares pursuant to any employee compensation plan in existence at the
Closing Date, including, without limitation, the ESOP, the Stock Purchase
Plan and the Company's stock option plans, or approved by the Stock Option
Committee, the Compensation Committee and the Board of Directors pursuant
to this Section 4.4;
(d) a reclassification, combination, split, subdivision or
redemption, purchase or other acquisition, directly or indirectly, of any
of the debt or equity securities or other capital stock of the Company or
any of its Subsidiaries;
<PAGE>
(e) any amendment to the Certificate of Incorporation or By-Laws of
the Company or any change in the size or composition of the Board of
Directors of the Company or committee thereof except in accordance with
this Agreement;
(f) the establishment of any committee of the Board of Directors
other than as provided in Section 4.3(b)(i) through (iv);
(g) any significant change in accounting policies or procedures of
the Company or any of its Subsidiaries unless required under generally
accepted accounting principles;
(h) the payment, discharge or satisfaction of any claim, liability
or obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise) other than (i) in the ordinary course of business and
consistent with past practice or (ii) incurred other than in the ordinary
course of business where such claim, liability or obligation does not
exceed $5,000,000;
(i) the commencement or termination of any suit, litigation or
proceeding that involves a claim, liability or obligation in excess of
$5,000,000 or the outcome of which could be material to the business or
assets of the Company and its Subsidiaries, taken as a whole;
(j) any (i) incurrence of indebtedness for borrowed money (excluding
borrowings under existing revolving credit facilities for purposes
approved pursuant to this Section 4.4 to the extent herein required) or
(ii) capital expenditure by the Company or any of its Subsidiaries that
(x) in the case of (i) or (ii), if specifically contemplated by the Annual
Operating Plans (as defined below), is greater than $2,500,000 and (y) in
the case of (i) or (ii), if not specifically contemplated by the Annual
Operating Plans, is greater than $1,000,000;
(k) the institution by the Company or any of its Subsidiaries of any
shareholder rights plan or similar plan or device; or
(l) the dissolution of the Company; the adoption of a plan of
liquidation of the Company; any action by the Company or any Significant
Subsidiary (as such term is defined in Rule 12b-2 promulgated under the
Exchange Act) thereof to commence any suit, case, proceeding or other
action (A) under any existing or future law of any jurisdiction relating
to bankruptcy, insolvency, reorganization or relief of debtors seeking to
have an order for relief entered with respect to the Company or any
Significant Subsidiary thereof, or seeking to adjudicate the Company or
any Significant Subsidiary thereof a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to the Company or
any Significant Subsidiary thereof, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for the Company or
any Significant Subsidiary thereof, or for all or any Substantial Part of
the assets of the Company or any Significant Subsidiary thereof, or making
a general assignment for the benefit of the creditors of the Company or
any Significant Subsidiary thereof.
(m) the employment of the chief executive officer, chief operating
officer or chief financial officer of the Company (each a "Senior
Officer");
<PAGE>
(n) annual operating plans for the Company and its Subsidiaries,
which shall include all material capital expenditures and borrowing plans
applicable to the year in question (the "Annual Operating Plans"); and
(o) the adoption or amendment of any employee benefit or
compensation plan or arrangements or the engagement of, terms of any
employment agreements or arrangements with, or termination of, all
executive officers of the Company.
SECTION 4.5. Enforcement of this Agreement. The approval of a
majority of the Board of Directors or a majority of the Independent Directors
shall be all that is required for the Company to seek to enforce the terms of
this Agreement.
SECTION 4.6. Certificate of Incorporation and By-Laws. The Company
and Borden shall take or cause to be taken all lawful action necessary to
ensure at all times that the Company's Certificate of Incorporation and By-Laws
are not, at any time, inconsistent with the provisions of this Agreement. In
furtherance of the foregoing, at its first annual stockholders meeting
following the Closing Date, the Company agrees to submit to its stockholders,
at a duly held meeting of stockholders or pursuant to a written consent of
stockholders, certain amendments to the Company's Certificate of Incorporation
and By-Laws substantially in the Form of Exhibits B and C hereto.
SECTION 4.7. Board of Directors Meetings/Financial Information. The
Board of Directors shall meet at least quarterly at all times during the term
of this Agreement that Borden's Interest is 10% or greater. In addition to the
foregoing, from the Closing Date to the one year anniversary thereof, the Board
of Directors shall meet a minimum of nine (9) times and following the one year
anniversary of the Closing Date the Board of Directors shall meet as frequently
as mutually agreed upon by the Management Directors and Borden. At all times
during the term of this Agreement that Borden's Interest is 10% or greater the
Company shall provide the Directors as soon as available after the end of each
calendar month, copies of the unaudited interim financial statements of the
Company and its consolidated Subsidiaries as at the end of such month or fiscal
quarter, as the case may be, in each case in a form customarily distributed to
executives of the Company.
SECTION 4.8. Failure to Comply with this Article IV. In addition to
any other remedy at law or in equity Borden may have, in the event that any
action is taken or omitted to be taken in violation of this Article IV which
results in the failure to nominate or solicit proxies for the election of the
Investor Directors or the failure to elect Investor Directors, in each case as
set forth herein, the taking of any action specified in Section 4.4(a), (b) or
(e) (to the extent, with respect to Section 4.4(e), that such action amends
Exhibit A or B hereto) without the required approvals specified therein, the
establishment or maintenance of any committee of the Board of Directors in
violation of Section 4.3 hereof or the failure to comply with Sections 4.1(d)
and 4.1(e) hereof, the provisions of Articles III and V hereof shall as of the
date of such occurrence or omission be of no further force or effect.
<PAGE>
ARTICLE V
TRANSFER OF COMMON STOCK
SECTION 5.1. Transfer of Common Stock. (a) During the Standstill
Period, Borden will not, and will not permit any Borden Affiliate to, directly
or indirectly sell, transfer or otherwise dispose of any shares of Common
Stock, except (i) pursuant to a registered underwritten public offering in
accordance with Article VI, (ii) to the extent applicable, in accordance with
the volume and manner of sale limitations of Rule 144 promulgated under the
Securities Act, (iii) pursuant to an applicable exemption from the registration
requirements of the Securities Act or (iv) to a Borden Affiliate (or any
partner of a Borden Affiliate). Notwithstanding the foregoing, with respect to
any transfer or disposition of shares of Common Stock pursuant to clause (iii)
above, (x) Borden will not, and will not permit any Borden Affiliate to,
directly or indirectly, in one or more transactions or series of transactions,
sell, transfer or otherwise dispose of an aggregate number of shares of Common
Stock in excess of 5% of the then outstanding shares of Common Stock to any one
person or group (as defined in Section 13(d)(3) of the Exchange Act) and (y)
Borden will not, and will not permit any Borden Affiliate to, directly or
indirectly, in one or more transactions or series of transactions, sell,
transfer or otherwise dispose of in excess of 1% of the then outstanding shares
of Common Stock pursuant to clause (iii) above, to any person or entity (A) who
is not an "insurance company", an "investment company", a "small business
investment company", a "plan", an "employee benefit plan" or a "bank" (as such
terms are used in Rule 144A(a)(1)(i)(A) through (E) and (vi) promulgated under
the Securities Act) and (B) who, prior to an acquisition pursuant to
clause (iii) above, has a Schedule 13D (and not a Schedule 13G) on file with
the SEC with respect to the Common Stock.
(b) During the Standstill Period, Borden shall not sell, transfer or
otherwise dispose of any of the capital stock of any Subsidiary of Borden that
owns shares of Common Stock, except to an Affiliate of Borden or as otherwise
permitted pursuant to clause (a) of this Section 5.1.
(c) Proposed transfers of shares of Common Stock that are not in
compliance with this Article V shall be of no force or effect and the Company
shall not be required to register any such transfer.
ARTICLE VI
REGISTRATION RIGHTS
SECTION 6.1. Restrictive Legend. Each certificate representing
Registrable Securities shall, except as otherwise provided in this Section 6.1
or in Section 6.2, be stamped or otherwise imprinted with a legend
substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT
HAS BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION
IS AVAILABLE."
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company (it being agreed that Simpson Thacher & Bartlett
shall be satisfactory) the securities being sold thereby may be publicly sold
without registration under the Securities Act.
SECTION 6.2. Notice of Proposed Transfer. Prior to any proposed
transfer of any Registrable Securities (other than under the circumstances
<PAGE>
described in Section 6.3, 6.4 or 6.5), the Holder thereof shall give written
notice to the Company of its intention to effect such transfer. Each such
notice shall describe the manner of the proposed transfer and, if requested by
the Company, shall be accompanied by an opinion of counsel satisfactory to the
Company (it being agreed that Simpson Thacher & Bartlett shall be satisfactory)
to the effect that the proposed transfer does not violate the terms of this
Agreement and that the proposed transfer may be effected without registration
under the Securities Act, whereupon the Holder of such security shall be
entitled to transfer such security in accordance with the terms of its notice;
provided, however, that no such opinion of counsel shall be required for a
transfer to a Borden Affiliate. Each certificate for Registrable Securities
transferred as above provided shall bear the legend set forth in Section 6.1,
except that such certificate shall not bear such legend if (i) such transfer is
in accordance with the provisions of Rule 144 or Rule 144A (or any other rule
permitting public sale without registration under the Securities Act) or (ii)
the opinion of counsel referred to above is to the further effect that the
transferee and any subsequent transferee (other than an Affiliate of the
Company) would be entitled to transfer such securities in a public sale without
registration under the Securities Act. The restrictions provided for in this
Section 6.2 shall not apply to securities that are not required to bear the
legend prescribed by Section 6.1 in accordance with the provisions of that
Section.
SECTION 6.3. Request for Registration. (a) At any time, and from
time to time, on and after the Closing Date, the Holders of at least 25% of the
then Registrable Securities (the "Initiating Holders") may request in a written
notice that the Company file a registration statement under the Securities Act
(or a similar document pursuant to any other statute then in effect
corresponding to the Securities Act) covering the registration of any or all
Registrable Securities held by such Initiating Holders in the manner specified
in such notice. Following receipt of any notice under this Section 6.3 the
Company shall (x) within ten days notify all other Holders of such request in
writing and (y) thereupon will, as expeditiously as possible, use its best
efforts to cause to be registered under the Securities Act all Registrable
Securities that the Initiating Holders and such other Holders have, within ten
days after the Company has given such notice, requested be registered in
accordance with the manner of disposition specified in such notice by the
Initiating Holders; provided, however, that, notwithstanding anything to the
contrary contained herein, the Company shall not be required to have any such
registration statement be declared effective by the SEC prior to the six month
anniversary of the Closing Date.
(b) If the Initiating Holders intend to have the Registrable
Securities distributed by means of an underwritten offering, the Company shall
include such information in the written notice referred to in clause (x) of
Section 6.3(a) above. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwritten offering and the inclusion of such
Holder's Registrable Securities in the underwritten offering (unless otherwise
mutually agreed by a majority in interest of the Initiating Holders and such
Holder) to the extent provided below. All Holders proposing to distribute
Registrable Securities through such underwritten offering shall enter into an
underwriting agreement in customary form with the underwriter or underwriters.
Such underwriter or underwriters shall be selected by a majority in interest of
the Initiating Holders and shall be approved by the Company, which approval
shall not be unreasonably withheld. No Holder shall be required to make any
representations or warranties to or agreements with the Company or the
<PAGE>
underwriters other than representations, warranties or agreements regarding
such Holder, the Registrable Securities of such Holder and such Holder's
intended method of distribution and any other representations required by law
or reasonably required by the underwriter. If any Holder of Registrable
Securities disapproves of the terms of the underwriting, such Holder may elect
to withdraw all its Registrable Securities by written notice to the Company,
the managing underwriter and the Initiating Holders. The securities so
withdrawn also shall be withdrawn from registration.
(c) Notwithstanding any provision of this Agreement to the contrary,
the Company shall not be required to effect a registration pursuant to this
Section 6.3 during the period starting with the date of filing by the Company
of, and ending on a date 180 days following the effective date of, (i) any
registration statement requested under this Section 6.3(a) or Section 6.5 or
(ii) a registration statement pertaining to a public offering of securities for
the account of the Company or on behalf of the selling stockholders under any
other registration rights agreement, in each case which the Holders have been
entitled to join pursuant to Section 6.4; provided that (x) the Company shall
actively employ in good faith all reasonable efforts to cause any such
registration statement referred to in clause (i) or (ii) above to become
effective as soon as possible and (y) with respect to any such registration
statement involving an underwritten offering, the 180 day period referred to
above may be reduced or waived in the discretion of the managing underwriter
for such offering.
(d) A registration requested pursuant to this section 6.3 shall not
be deemed to have been effected pursuant to this Section 6.3 for purposes of
Section 6.8 unless (i) it has been declared effective by the Commission, (ii)
it has remained effective for the period set forth in Section 6.6(a), and (iii)
the offering of Registrable Securities pursuant to such registration is not
subject to any stop order, injunction or other order or requirement of the
Commission (other than any such stop order, injunction, or other requirement of
the Commission prompted by any act or omission of Holders of Registrable
Securities).
(e) Subject to the following sentence, if a requested registration
pursuant to this Section 6.3 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
securities requested to be included in such registration (including securities
of the Company which are not Registrable Securities) exceeds the number that
can be sold in such offering at a price reasonably related to the then current
market value of such securities, the Company will include in such registration
only the Registrable Securities requested to be included in such registration.
In the event that the number of Registrable Securities requested to be included
in such registration exceeds the number which, in the opinion of such managing
underwriter, may be sold at a price reasonably related to the then current
market value of such securities, the number of such Registrable Securities to
be included in such registration shall be allocated pro rata among all
requesting Holders on the basis of the relative number of shares of Registrable
Securities then held by each such Holder (provided that any shares hereby
allocated to any such Holder that exceed such Holder's request shall be
reallocated among the remaining requesting Holders in like manner). In the
event that the number of Registrable Securities requested to be included in
such registration is less than the number which, in the opinion of the managing
underwriter, may be sold at a price reasonably related to the then current
market value of such securities, the Company may include in such registration
the securities the Company proposes to sell up to the number of securities
<PAGE>
that, in the opinion of the managing underwriter, may be sold at a price
reasonably related to the then current market value of such securities. The
Company will not include in any requested registration pursuant to this Section
6.3 any securities which are not Registrable Securities (other than securities
of the Company) without the prior written consent of the holders of at least a
majority of the Registrable Securities included in such registration.
(f) If the Board of Directors of the Company, in its good faith
judgment, determines that any registration of Registrable Securities should not
be made or continued due to a valid need not to disclose confidential
information or because it would materially interfere with any material
financing, acquisition, corporate reorganization or merger or other transaction
involving the Company (collectively, a "Valid Business Reason"), the Company
may postpone filing a registration statement relating to a request for
registration under this Section 6.3 until such Valid Business Reason no longer
exists, but in no event for more than three months from the date of the notice
referred to below, and, in case any such registration statement has been filed
the Company may, with respect to a registration effected pursuant to this
Section 6.3, cause such registration statement to be withdrawn and its
effectiveness terminated or may, with respect to a registration effected
pursuant to this Section 6.3 or Section 6.5, postpone amending or supplementing
such registration statement; and the Company shall give written notice (a
"Delay Notice") of its determination to postpone or withdraw a registration
statement and of the fact that the Valid Business Reason for such postponement
or withdrawal no longer exists, in each case, promptly after the occurrence
thereof. Upon the request of any holder of Registrable Securities included or
to be included in any such registration statement, the Company will disclose to
such holder the nature of such Valid Business Reason in reasonable detail;
provided, that such holder executes a confidentiality agreement reasonably
satisfactory to the Company; provided, further, that any such confidentiality
agreement shall terminate upon the public disclosure of such Valid Business
Reason. Notwithstanding the foregoing provisions of this subparagraph (f), no
registration statement filed and subsequently withdrawn by reason of any
existing or anticipated Valid Business Reason as hereinabove provided shall
count as one of the four registration statements effected pursuant to this
Section 6.3 or Section 6.5 for purposes of Section 6.8 and the Company shall be
entitled to serve only one Delay Notice (i) within any period of 270
consecutive days, if such Delay Notice relates to a request under Section
6.3(a) (or 180 consecutive days, if such Delay Notice relates to a request
under Section 6.5) or (ii) with respect to any two consecutive registrations
requested pursuant to this Section 6.3 or Section 6.5.
SECTION 6.4. Incidental Registration. Subject to Section 6.9, if at
any time the Company determines that it shall file a registration statement
under the Securities Act (other than a registration statement on a Form S-4 or
S-8 or any successor or similar forms) on any form that also would permit the
registration of the Registrable Securities and such filing is to be on its
behalf and/or on behalf of selling holders of its securities for the general
registration of its Common Stock to be sold for cash, the Company shall each
such time promptly give each Holder written notice of such determination
setting forth the date on which the Company proposes to file such registration
statement, which date shall be no earlier than thirty days from the date of
such notice, and advising each Holder of its right to have Registrable
Securities included in such registration. Upon the written request of any
Holder received by the Company no later than fifteen days after the date of the
Company's notice, the Company shall use its best efforts to cause to be
registered under the Securities Act all of the Registrable Securities that each
<PAGE>
such Holder has so requested to be registered; provided that if, at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
proceed with the proposed registration of the securities to be sold by it, the
Company may, at its election, give written notice of such determination to each
Holder of Registrable Securities and, thereupon, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any Holder
to request such registration to be effected as a registration under Section
6.3. If, in the written opinion of the managing underwriter (or, in the case
of a non-underwritten offering, in the written opinion of the Company), the
total amount of such securities to be so registered, including such Registrable
Securities, will exceed the maximum amount of the Company's securities that can
be marketed at a price reasonably related to the then current market value of
such securities, then the Company shall include in such registration (i) first,
all the securities the Company proposes to sell for its own account or is
required to register on behalf of any third party exercising rights similar to
those granted in Section 6.3(a) and without having the adverse effect referred
to above, and (ii) second, to the extent that the number of securities which
the Company proposes to sell for its own account pursuant to this Section 6.4
or is required to register on behalf of any third party exercising rights
similar to those granted in Section 6.3(a) is less than the number of equity
securities which the Company has been advised can be sold in such offering
without having the adverse effect referred to above, all Registrable Securities
requested to be included in such registration by the Holders pursuant to this
Section 6.4 and all shares of Common Stock requested to be included by third
parties exercising the rights similar to those granted in this Section 6.4;
provided that if the number of Registrable Securities and other shares of
Common Stock requested to be included in such registration by the Holders
pursuant to this Section 6.4 and third parties exercising rights similar to
those granted in this Section 6.4, together with the number of securities to be
included in such registration pursuant to clause (i) of this Section 6.4,
exceeds the number which the Company has been advised can be sold in such
offering without having the adverse effect referred to above, the number of
such Registerable Securities requested to be included in such registration by
the Holders pursuant to this Section 6.4 shall be limited to such extent and
shall be allocated pro rata among all such requesting Holders and third parties
exercising rights similar to those granted in this Section 6.4 on the basis of
the relative number of Registrable Securities each such Holder has requested to
be included in such registration and the number of shares of Common Stock
requested to be included in such registration by such third parties.
SECTION 6.5. Registration on Form S-3. If at any time (a) any
Holder requests in writing that the Company file a registration statement on
Form S-3 or any successor thereto for a public offering of all or any portion
of the Registrable Securities held by such requesting Holder and (b) the
Company is a registrant entitled to use Form S-3 or any successor thereto, then
the Company shall use its best efforts to register under the Securities Act on
Form S-3 or any successor thereto, for public sale in accordance with the
method of disposition specified in such request, including, without limitation,
pursuant to Rule 415 under the Securities Act, the Registrable Securities
specified in such request. Whenever the Company is required by this Section
6.5 to use its best efforts to effect the registration of Registrable
Securities, each of the limitations, procedures and requirements of Section
6.3(b), (c), (e) and (f) (including but not limited to the requirement that the
<PAGE>
Company notify all Holders from whom a request has not been received and
provide them with the opportunity to participate in the offering) shall apply
to such registration.
SECTION 6.6. Obligations of the Company. Whenever required under
Section 6.3 or Section 6.5 to use its best efforts to effect the registration
of any Registrable Securities, the Company shall, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
with respect to such Registrable Securities and use its best efforts to
cause such registration statement to become and remain effective for the
period of the distribution contemplated thereby determined as provided
hereafter;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement, and furnish to the
Holders of the Registrable Securities copies of any such amendments and
supplements prior to their being used or filed with the Commission;
(c) furnish to the Holders such numbers of copies of the
registration statement and the prospectus included therein (including each
preliminary prospectus and any amendments or supplements thereto in
conformity with the requirements of the Securities Act) and such other
documents and information as they may reasonably request and make
available for inspection by the parties referred to in Section 6.6(d)
below such financial and other information and books and records of the
Company, and cause the officers, directors, employees, counsel and
independent certified public accountants of the Company to respond to such
inquiries, as shall be reasonably necessary, in the judgment of the
respective counsel referred to in such Section, to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act;
(d) provide (i) the Holders of the Registrable Securities to be
included in such registration statement, (ii) the underwriters (which
term, for purposes of this Agreement, shall include a person deemed to be
an underwriter within the meaning of Section 2(11) of the Securities Act),
if any, thereof, (iii) the sales or placement agent, if any, therefor,
(iv) counsel for such underwriters or agent, and (v) not more than one
counsel for all the Holders of such Registrable Securities the opportunity
to participate in the preparation of such registration statement, each
prospectus included therein or filed with the Commission, and each
amendment or supplement thereto;
(e) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United States
and Puerto Rico as shall be reasonably appropriate for the distribution of
the Registrable Securities covered by the registration statement;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business in or to
file a general consent to service of process in any jurisdiction wherein
it would not but for the requirements of this paragraph (e) be obligated
to do so; and provided further that the Company shall not be required to
<PAGE>
qualify such Registrable Securities in any jurisdiction in which the
securities regulatory authority requires that any Holder submit its
Registrable Securities to the terms, provisions and restrictions of any
escrow, lockup or similar agreement(s) for consent to sell Registrable
Securities in such jurisdiction unless such Holder agrees to do so;
(f) promptly notify the selling Holders of Registrable Securities,
the sales or placement agent, if any, therefor and the managing
underwriter or underwriters, if any, thereof and confirm such advice in
writing, (i) when such registration statement or the prospectus included
therein or any prospectus amendment or supplement or post-effective
amendment has been filed, and, with respect to such registration statement
or any post-effective amendment, when the same has become effective, (ii)
of any comments by the Commission or by any Blue Sky or securities
commissioner or regulator of any state with respect thereto or any request
by the Commission for amendments or supplements to such registration
statement or prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness
of such registration statement or the initiation or threatening of any
proceedings for that purpose, (iv) if at any time the representations and
warranties of the Company contained in any underwriting agreement or other
customary agreement cease to be true and correct in all material respects
or (v) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Registrable Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose;
(g) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date;
(h) promptly notify each Holder for whom such Registrable Securities
are covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make, in light of the circumstances
under which they were made, the statements therein not misleading, and at
the request of any such Holder promptly prepare and furnish to such Holder
a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make, in light of the circumstances
under which they were made, the statements therein not misleading;
(i) furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to Section 6.3 or Section 6.5, if the
method of distribution is by means of an underwriting, on the date that
the Registrable Securities are delivered to the underwriters for sale
pursuant to such registration, or if such Registrable Securities are not
being sold through underwriters, on the date that the registration
statement with respect to such Registrable Securities becomes effective,
(1) a signed opinion, dated such date, of the independent legal counsel
representing the Company for the purpose of such registration, addressed
to the underwriters, if any, and if such Registrable Securities are not
<PAGE>
being sold through underwriters, then to the Holders making such request,
as to such matters as such underwriters or the Holders holding a majority
of the Registrable Securities included in such registration, as the case
may be, may reasonably request and as would be customary in such a
transaction; and (2) letters dated such date and the date the offering is
priced from the independent certified public accountants of the Company,
addressed to the underwriters, if any, and if such Registrable Securities
are not being sold through underwriters, then to the Holders making such
request and, if such accountants refuse to deliver such letters to such
Holders, then to the Company (i) stating that they are independent
certified public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements and
other financial data of the Company included in the registration statement
or the prospectus, or any amendment or supplement thereto, comply as to
form in all material respects with the applicable accounting requirements
of the Securities Act and (ii) covering such other financial matters
(including information as to the period ending not more than five (5)
business days prior to the date of such letters) with respect to the
registration in respect of which such letter is being given as such
underwriters or the Holders holding a majority of the Registrable
Securities included in such registration, as the case may be, may
reasonably request and as would be customary in such a transaction;
(j) enter into customary agreements (including if the method of
distribution is by means of an underwriting, an underwriting agreement in
customary form, including, without limitation, customary indemnification
provisions consistent with Section 6.11) and take such other actions as
are reasonably required in order to expedite or facilitate the disposition
of the Registrable Securities to be so included in the registration
statement;
(k) use its best efforts to obtain the consent or approval of each
governmental agency or authority, whether federal, state or local, which
may be required to effect registration or the offering or sale in
connection therewith or to enable the selling Holder or Holders to offer,
or to consummate the disposition of, their Registrable Securities;
(l) cooperate with the Holders of the Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold,
which certificates shall be printed, lithographed or engraved, or produced
by any combination of such methods, on steel engraved borders and which
shall not bear any restrictive legends; and, in the case of an
underwritten offering, enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriters
may request at least two business days prior to any sale of the
Registrable Securities;
(m) otherwise comply with all applicable rules and regulations of
the Commission, and make available to its security holders, as soon as
reasonably practicable, but not later than eighteen months after the
effective date of the registration statement, an earnings statement
covering the period of at least twelve months beginning with the first
full month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act;
<PAGE>
(n) use its best efforts to list the Registrable Securities covered
by such registration statement with any securities exchange or quotation
system on which the Common Stock of the Company is then listed or quoted;
and
(o) use its best efforts to make available the executive officers of
the Company to participate with the Holders of Registrable Securities and
any underwriters in any "road shows" or other selling efforts that may be
reasonably requested by the Holders in connection with the methods of
distribution for the Registrable Securities.
For purposes of Sections 6.6(a) and 6.6(b), and with respect to (i)
registration required pursuant to Section 6.3, (A) the period of distribution
of Registrable Securities in a firm commitment underwritten public offering
shall be deemed to extend until each underwriter has completed the distribution
of all securities purchased by it and (B) the period of distribution of
Registrable Securities in any other registration shall be deemed to extend
until the earlier of the sale of all Registrable Securities covered thereby and
nine months after the effective date thereof and (ii) registrations required
pursuant to Section 6.5, the period of distribution of Registrable Securities
in any registration (firm commitment underwritten or otherwise) shall be deemed
to extend until the earlier of the sale of all Registrable Securities covered
thereby and two years after the effective date thereof.
Each Holder of Registrable Securities agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in clause (h) of this Section 6.6, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by clause (h) of this
Section 6.6, and, if so directed by the Company, such Holder will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice; provided,
however, that any period of time during which a Holder must discontinue
disposition of Registrable Securities shall not be included in the
determination of a period of distribution for purposes of Section 6.6(a) and
6.6(b).
SECTION 6.7. Furnish Information. It shall be a condition precedent
to the obligations of the Company to take any action pursuant to this Agreement
that the Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as the Company shall reasonably request and as
shall be required in connection with the action to be taken by the Company.
SECTION 6.8. Expenses of Registration. All expenses incurred in
connection with (i) each registration or attempted registration pursuant to
Section 6.4, (ii) the first four registrations effected pursuant to Section 6.3
or 6.5 and (iii) any attempted registration (or partial registration deemed not
to have been effected pursuant to Section 6.3 or 6.5 by operation of Sections
6.3(d) or (e)) occurring prior to the fourth registration effected pursuant to
Section 6.3 or 6.5 of this Agreement, excluding underwriters' discounts and
commissions and excluding the fees and disbursements of counsel selected
pursuant to Section 6.14 hereof by the Holders of the Registrable Securities
being registered to represent such Holders in connection with each such
registration, but including without limitation all registration, filing and
<PAGE>
qualification fees, word processing, duplicating, printers' and accounting fees
(including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance), fees of the
National Association of Securities Dealers, Inc. (the "NASD") or listing fees,
all fees and expenses of complying with state securities or blue sky laws, fees
and disbursements of counsel for the Company, any fees and disbursements of
underwriters customarily paid by the issuers or sellers of securities,
including liability insurance if the Company so desires or if the underwriters
so require, and the reasonable fees and expenses of any special experts
retained in connection with the requested registration and other reasonable
out-of-pocket expenses of Holders, shall be paid by the Company. The foregoing
provisions with respect to expenses shall in no way limit the rights of the
Holders to request registration pursuant to Sections 6.3 and 6.5 or the number
of registrations which may be requested thereunder.
SECTION 6.9. Underwriting Requirements. In connection with any
underwritten offering, the Company shall not be required under Section 6.4 to
include Registrable Securities in such underwritten offering unless the Holders
of such Registrable Securities accept the terms of the underwriting of such
offering that have been reasonably agreed upon between the Company and the
underwriters selected by the Company.
SECTION 6.10. Rule 144 and Rule 144A Information. With a view to
making available the benefits of certain rules and regulations of the
Commission which may at any time permit the sale of the Registrable Securities
to the public without registration, at all times, the Company agrees to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act; and
(iii) furnish to each Holder of Registrable Securities forthwith
upon request a written statement by the Company as to its compliance
with the reporting requirements of such Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual
or quarterly report of the Company, and such other reports and
documents so filed by the Company as such Holder may reasonably
request in availing itself of any rule or regulation of the
Commission allowing such Holder to sell any Registrable Securities
without registration.
SECTION 6.11. Indemnification. In the event any Registrable
Securities are included in a registration statement under this Agreement:
(a) The Company shall indemnify and hold harmless each Holder, such
Holder's directors and officers, and each person, if any, who controls
such Holder or participating person within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim) to
which they may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or proceedings in
respect thereof) arise out of or are based on any untrue or alleged untrue
<PAGE>
statement of a material fact contained in such registration statement,
preliminary prospectus, final prospectus or amendments or supplements
thereto or arise out of or are based upon any omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that the indemnity agreement contained in this Section 6.11(a)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld);
provided further that the Company shall not be liable to any Holder, such
Holder's directors and officers or controlling person in any such case for
any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in connection with such
registration statement, preliminary prospectus, final prospectus or
amendments or supplements thereto, in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, such Holder's directors and officers or
controlling person; provided, further, that as to any preliminary
prospectus or any final prospectus this indemnity agreement shall not
inure to the benefit of any Holder, such Holder's directors and officers
or controlling persons on account of any losses, claims, damages or
liability arising from the sale of Common Stock to any person by such
Holder if such Holder or its representatives failed to send or give a copy
of the final prospectus or a prospectus supplement, as the case may be
(excluding documents incorporated by reference therein), as the same may
be amended or supplemented, to that person within the time required by the
Securities Act, and the untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact in
such preliminary prospectus or final prospectus was corrected in the final
prospectus or such prospectus supplement, as the case may be (excluding
documents incorporated by reference therein), unless such failure resulted
from non-compliance by the Company with Section 6.6(c). Such indemnity
shall remain in full force and effect regardless of any investigation made
by or on behalf of any such Holder, such Holder's directors and officers,
participating person or controlling person, and shall survive the transfer
of such securities by such Holder.
(b) Each Holder requesting or joining in a registration severally
and not jointly shall indemnify and hold harmless the Company, each of its
directors and officers and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act to the same extent as the foregoing indemnity from
the Company to the Holders but only with reference to written information
relating to such Holder furnished to the Company expressly for use in
connection with such registration; provided, however, that the indemnity
agreement contained in this Section 6.11(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if
such settlement is effected without the consent of such Holder (which
consent shall not be unreasonably withheld); and provided further that the
liability of each Holder hereunder shall be limited to the proportion of
any such loss, claim, damage, liability or expense that is equal to the
proportion that the net proceeds from the sale of the shares sold by such
Holder under such registration statement bears to the total net proceeds
from the sale of all securities sold thereunder, but not in any event to
exceed the net proceeds received by such Holder from the sale of
Registrable Securities covered by such registration statement.
<PAGE>
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to either of the two preceding
paragraphs, such person (the "indemnified party") shall promptly notify
the person against whom such indemnity may be sought (the "indemnifying
party") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees
and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them.
It is understood that the indemnifying party shall not, in respect of the
legal expenses of any indemnified party in connection with any proceeding
or related proceedings in the same jurisdiction, be liable for the fees
and expenses of more than one separate firm (in addition to any local
counsel) for all such indemnified parties and that all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by the Holders, in the case of parties indemnified
pursuant to the second preceding paragraph, and by the Company, in the
case of parties indemnified pursuant to the first preceding paragraph.
The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the
second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding
effected without its written consent if (i) such settlement is entered
into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to
the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of
any pending or threatened proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in the first or second
paragraph of this Section 6.11 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such paragraph, in
lieu of indemnifying such indemnified party thereunder, shall contribute
to the amount paid or payable by such indemnified party as a result of
such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and
<PAGE>
indemnified party in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference
to, among other things, whether any action in question, including any
untrue or alleged untrue statement of material fact or omission or alleged
omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified party, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable
by a party as a result of the losses, claims, damages or liabilities
referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.11(d) were determined by pro rata
allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 6.11,
no Holder shall be required to contribute any amount in excess of the
amount of net proceeds received by such Holder from the sale of
Registrable Securities covered by such registration statement. No person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
remedies provided for in this Section 6.11 are not exclusive and shall not
limit any right or remedies that may otherwise be available to any
indemnified party at law or in equity.
SECTION 6.12. Lockup. Each Holder shall, in connection with any
registration of the Company's securities, upon the request of the Company or
the underwriters managing any underwritten offering of such securities, agree
in writing not to effect any sale, disposition or distribution of any
Registrable Securities (other than that included in the registration) without
the prior written consent of the managing underwriter for such period of time
(not to exceed 180 days) from the effective date of such registration as the
Company or the underwriters may specify; provided, however, that all executive
officers and directors of the Company (other than executive officers and
directors owning an aggregate of less than 1% of the outstanding Common Stock
as of the effective date of such registration statement) shall also have agreed
not to effect any sale, disposition or distribution of any Registrable
Securities under the circumstances and pursuant to the terms set forth in this
Section 6.12.
SECTION 6.13. Transfer of Registration Rights. The registration
rights of any Holder under this Agreement with respect to the Registrable
Securities may be transferred to any transferee of such Registrable Securities
who acquires any Registrable Securities of any Holder; provided that such
registration rights may not be transferred to a holder of less than 1% of the
outstanding Common Stock unless such transferee is a Borden Affiliate (or a
partner of a Borden Affiliate); provided, further, that (i) the transferring
Holder shall give the Company written notice at or prior to the time of such
transfer stating the name and address of the transferee and identifying the
securities with respect to which the rights under this Agreement are being
transferred, (ii) such transferee shall agree in writing, in form and substance
reasonably satisfactory to the Company, to be bound as a Holder by the
<PAGE>
provisions of this Section, and (iii) immediately following such transfer the
further disposition of such securities by such transferee is restricted under
the Securities Act.
SECTION 6.14. Selection of Counsel. In connection with any
registration of Registrable Securities pursuant to Sections 6.3, 6.4 and 6.5
hereof, the Holders of a majority of the Registrable Securities covered by any
such registration may select one counsel to represent all Holders of
Registrable Securities covered by such registration; provided, however, that in
the event that the counsel selected as provided above is also acting as counsel
to the Company in connection with such registration, the remaining Holders
shall be entitled to select one additional counsel to represent all such
remaining Holders.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.1. Representations of the Company. As of the date hereof
and as of the Closing Date the Company represents and warrants as follows:
(a) Authority Relative to This Agreement. The Company has all
necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby (the "Transactions"). The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
Transactions have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
Transactions. This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution
and delivery by Borden, constitutes legal, valid and binding obligations
of the Company.
(b) No Conflict. The execution and delivery by the Company of this
Agreement do not, and the performance of this Agreement by the Company
will not, (i) conflict with or violate the Certificate of Incorporation or
By-Laws of the Company or any of its Subsidiaries, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
the Company or any of its Subsidiaries or by which any property or asset
of the Company or any of its Subsidiaries is bound or affected, or (iii)
result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to
others any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any
property or asset of the Company or any of its Subsidiaries pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company
or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries or any property or asset of the Company or any of its
Subsidiaries is bound or affected, except for any such breaches, defaults
or other occurrences which would not, individually or in the aggregate,
have a material adverse effect on the results of operations, financial
condition or business of the Company and its Subsidiaries, taken as a
whole.
<PAGE>
(c) Required Filings and Consents. The execution and delivery by
the Company of this Agreement do not, and the performance of this
Agreement by the Company will not, require any consent, approval,
authorization or permit of, or filing by the Company with or notification
to, any governmental or regulatory authority, domestic or foreign, except
(i) for applicable requirements, if any, of the Securities Act, the
Exchange Act, state blue sky and takeover laws, and (ii) where failure to
obtain such consents, approvals, authorizations or permits, or to make
such filings or notifications, would not prevent or delay the Company from
performing its obligations under this Agreement and would not,
individually or in the aggregate, have a material adverse effect on the
results of operations, financial condition or business of the Company and
its Subsidiaries, taken as a whole.
SECTION 7.2. Representations of Borden. As of the date hereof and
as of the Closing Date Borden represents and warrants as follows:
(a) Authority Relative to This Agreement. Borden has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Transactions. The execution
and delivery of this Agreement by Borden and the consummation by Borden of
the Transactions have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Borden
are necessary to authorize this Agreement or to consummate the
Transactions. This Agreement has been duly and validly executed and
delivered by Borden and, assuming the due authorization, execution and
delivery by the Company constitutes legal, valid and binding obligations
of Borden.
(b) No Conflict. The execution and delivery by Borden of this
Agreement do not, and the performance of this Agreement by Borden will
not, (i) conflict with or violate the Certificate of Incorporation or
By-Laws of Borden or any of its Subsidiaries, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Borden or any of its Subsidiaries or by which any property or asset of
Borden or any of its Subsidiaries is bound or affected, or (iii) result in
any breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or other encumbrance on any property or
asset of Borden or any of its Subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Borden or any of its
Subsidiaries is a party or by which Borden or any of its Subsidiaries or
any property or asset of Borden or any of its Subsidiaries is bound or
affected, except for any such breaches, defaults or other occurrences
which would not, individually or in the aggregate, have a material adverse
effect on the results of operations, financial condition or business of
Borden Global Packaging (as such term is defined in the Purchase
Agreement), taken as a whole.
(c) Required Filings and Consents. The execution and delivery by
Borden of this Agreement do not, and the performance of this Agreement by
Borden will not, require any consent, approval, authorization or permit
of, or filing by Borden with or notification to, any governmental or
regulatory authority, domestic or foreign, except for (i) applicable
requirements, if any, of the Securities Act, the Exchange Act, state blue
<PAGE>
sky and takeover laws, and (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay Borden from performing its
obligations under this Agreement and would not, individually or in the
aggregate, have a material adverse effect on the results of operations,
financial condition or business of Borden Global Packaging, taken as a
whole.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly received if so given) by hand delivery, by
mail (registered or certified mail, postage prepaid, return receipt requested)
or by any courier service, such as Federal Express, providing proof of
delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
if to Borden, to:
Borden, Inc.
180 East Broad Street
Columbus, Ohio 43215
Attention: Richard L. de Ney
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: David J. Sorkin, Esq.
if to the Company, to:
AEP Industries Inc.
125 Phillips Avenue
South Hackensack, NJ 07606
Attention: Paul M. Feeney, Executive Vice President
with a copy to:
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
New York, New York 10017
Attention: Paul E. Gelbard, Esq.
If to a Transferee of Registrable Securities:
At the address set forth in the notice required to be
delivered pursuant to Section 6.13 hereof.
SECTION 8.2. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
<PAGE>
in writing and signed, in the case of an amendment, by Borden and the Company,
or in the case of a waiver, by the party against whom the waiver is to be
effective; provided that no such amendment or waiver by the Company shall be
effective without the approval of a majority of the Independent Directors.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 8.3. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the Transactions is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 8.4. Entire Agreement; Assignment. This Agreement, the
Purchase Agreement and the Stockholders Agreement (as defined in the Purchase
Agreement) and the agreements contemplated hereby and thereby constitute the
entire agreement among the parties with respect to the subject matter hereof
and thereof and supersede, except as set forth in the Purchase Agreement, all
prior agreements and undertakings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof. This Agreement shall
not be assigned by operation of law or otherwise, except that Borden may assign
all or any of its rights and obligations hereunder to any of its Affiliates in
connection with a transfer of Common Stock; provided that (a) no such
assignment shall relieve Borden of its obligations hereunder and (b) Borden may
assign its rights to the extent and as provided in Section 6.13.
SECTION 8.5. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 8.6. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 8.7. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York applicable
to contracts executed in and to be performed in the State of New York. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any New York state or federal court thereof.
<PAGE>
SECTION 8.8. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
SECTION 8.9. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which
when executed and delivered shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 8.10. Effectiveness; Termination. This Agreement shall be
effective as of the Closing Date and shall terminate at such time as Borden and
its Affiliates no longer own any such shares.
SECTION 8.11. Waiver of Jury Trial. Borden and the Company each
hereby irrevocably waive all right to trial by jury in any action, proceeding
or counterclaim (whether based on contract, tort or otherwise) arising out of
or relating to this Agreement or the actions of Borden or the Company in the
negotiation, administration, performance and enforcement thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
AEP INDUSTRIES INC.
By: /s/ Paul M. Feeney
Name: Paul M. Feeney
Title: Executive Vice President
BORDEN, INC.
By: /s/ Richard L. de Ney
Name: Richard L. de Ney
Title: Executive Vice President
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
8 Person Board of Directors
Borden's Ownership Interest
< 10% 10%+ but less than 20%+ but less than 25%+ but less than 50%+
20% 25% 50%
----- ------------------ ------------------ ------------------ --------
<S> <C> <C> <C> <C> <C>
# of Management 6 5 4 3 2
Directors
# of Management 2 1 1 1 0
Independent Directors
# of Investor 0 1 2 3 4
Directors
# of Investor 0 0 0 0 1
Independent Directors
# of 0 1 1 1 1
Management/Investor
Independent Directors
</TABLE>
<TABLE>
<CAPTION>
10 Person Board of Directors
Borden's Ownership Interest
< 10% 10%+ but less than 20%+ but less than 25%+ but less than 50%+
20% 25% 50%
------ ------------------ ------------------ ------------------ --------
<S> <C> <C> <C> <C> <C>
# of Management 8 6 5 3 2
Directors
# of Management 2 2 2 2 1
Independent Directors
# of Investor 0 1 2 4 5
Directors
# of Investor 0 0 0 0 1
Independent Directors
# of 0 1 1 1 1
Management/Investor
Independent Directors
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
12 Person Board of Directors
Borden's Ownership Interest
< 10% 10%+ but less than 20%+ but less than 25%+ but less than 50%+
20% 25% 50%
------ ------------------ ------------------ ------------------ -------
<S> <C> <C> <C> <C> <C>
# of Management 9 7 5 4 3
Directors
# of Management 3 2 2 2 1
Independent Directors
# of Investor 0 2 4 5 6
Directors
# of Investor 0 0 0 0 1
Independent Directors
# of 0 1 1 1 1
Management/Investor
Independent Directors
</TABLE>
<PAGE>
Exhibit D
GOVERNANCE AGREEMENT
Between
BORDEN, INC.
and
AEP INDUSTRIES INC.
Dated as of June 20, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . .
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . .
ARTICLE II
SUBSCRIPTION RIGHTS . . . . . . . . . . . .
SECTION 2.1. Subscription Rights . . . . . . . . . . . . . . . .
ARTICLE III
BUSINESS COMBINATIONS BETWEEN THE COMPANY AND BORDEN . . . .
SECTION 3.1. Purchases of Equity Securities . . . . . . . . . . .
SECTION 3.2. Additional Limitations . . . . . . . . . . . . . . .
ARTICLE IV
CORPORATE GOVERNANCE . . . . . . . . . . . .
SECTION 4.1. Composition of the Board of Directors . . . . . . .
SECTION 4.2. Solicitation and Voting of Shares . . . . . . . . .
SECTION 4.3. Committees . . . . . . . . . . . . . . . . . . . . .
SECTION 4.4. Super-Majority Directors' Approval Required for
Certain Actions . . . . . . . . . . . . . . . . .
SECTION 4.5. Enforcement of this Agreement . . . . . . . . . . .
SECTION 4.6. Certificate of Incorporation and By-Laws . . . . . .
SECTION 4.7. Board of Directors Meetings/Financial Information .
SECTION 4.8. Failure to Comply with this Article IV . . . . . . .
ARTICLE V
TRANSFER OF COMMON STOCK . . . . . . . . . . .
SECTION 5.1. Transfer of Common Stock . . . . . . . . . . . . . .
ARTICLE VI
REGISTRATION RIGHTS . . . . . . . . . . . .
SECTION 6.1. Restrictive Legend . . . . . . . . . . . . . . . . .
SECTION 6.2. Notice of Proposed Transfer . . . . . . . . . . . .
SECTION 6.3. Request for Registration . . . . . . . . . . . . . .
SECTION 6.4. Incidental Registration . . . . . . . . . . . . . .
SECTION 6.5. Registration on Form S-3 . . . . . . . . . . . . . .
SECTION 6.6. Obligations of the Company . . . . . . . . . . . . .
<PAGE>
SECTION 6.7. Furnish Information . . . . . . . . . . . . . . . .
SECTION 6.8. Expenses of Registration . . . . . . . . . . . . . .
SECTION 6.9. Underwriting Requirements . . . . . . . . . . . . .
SECTION 6.10. Rule 144 and Rule 144A Information . . . . . . . . .
SECTION 6.11. Indemnification . . . . . . . . . . . . . . . . . . .
SECTION 6.12. Lockup . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.13. Transfer of Registration Rights . . . . . . . . . . .
SECTION 6.14. Selection of Counsel . . . . . . . . . . . . . . . .
ARTICLE VII
REPRESENTATIONS AND WARRANTIES . . . . . . . . .
SECTION 7.1. Representations of the Company . . . . . . . . . . .
SECTION 7.2. Representations of Borden . . . . . . . . . . . . .
ARTICLE VIII
MISCELLANEOUS . . . . . . . . . . . . . .
SECTION 8.1. Notices . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.2. Amendments; No Waivers . . . . . . . . . . . . . . .
SECTION 8.3. Severability . . . . . . . . . . . . . . . . . . . .
SECTION 8.4. Entire Agreement; Assignment . . . . . . . . . . . .
SECTION 8.5. Parties in Interest . . . . . . . . . . . . . . . .
SECTION 8.6. Specific Performance . . . . . . . . . . . . . . . .
SECTION 8.7. Governing Law . . . . . . . . . . . . . . . . . . .
SECTION 8.8. Headings . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.9. Counterparts . . . . . . . . . . . . . . . . . . . .
SECTION 8.10. Effectiveness; Termination . . . . . . . . . . . . .
SECTION 8.11. Waiver of Jury Trial . . . . . . . . . . . . . . . .
Exhibits
Exhibit A - Table of Composition of the Board of Directors
Exhibit B - Form of Amended and Restated Certificate of
Incorporation
Exhibit C - Form of Amended By-Laws
