<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 5)*
American Filtrona Corporation
- --------------------------------------------------------------------------------
(NAME OF ISSUER)
Common Stock
- --------------------------------------------------------------------------------
(TITLE OF CLASS OF SECURITIES)
026042101
- --------------------------------------------------------------------------------
(CUSIP NUMBER)
Bennett L. Knight, Esq., 999 Peachtree Street, Atlanta, GA 30309 (404) 853-8000
- --------------------------------------------------------------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
February 19, 1997
- --------------------------------------------------------------------------------
(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,
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).
(continued on following pages)
(Page 1 of 11 Pages)
<PAGE> 2
CUSIP No. 026042101 SCHEDULE 13D Page 2 of 11 Pages
--------------------- -------- --------
(1) Names of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
Bennett L. Kight
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(2) Check the Appropriate Box if a Member of a Group* (a) [ X ]
(b) [ X ]
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(3) SEC Use Only
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(4) SOURCE OF FUNDS*
00, SC, BK
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(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
Not Applicable
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(6) Citizenship or Place of Organization
United States of America
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(7) Sole Voting Power
Number of -0-
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by See response to Item 5 of attached Schedule 13D
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With -0-
--------------------------------------------------------
(10) Shared Dispositive Power
See response to Item 5 of attached Schedule 13D
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
996,164 shares
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(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
Not Applicable
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
26.1%
---------------------------------------------------------------------
(14) Type of Reporting Person*
IN
---------------------------------------------------------------------
*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> 3
CUSIP No. 02604201 SCHEDULE 13D Page 3 of 11 Pages
--------------------- -------- --------
(1) Names of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
Frances B. Bunzi
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(2) Check the Appropriate Box if a Member of a Group* (a) [ X ]
(b) [ X ]
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(3) SEC Use Only
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(4) SOURCE OF FUNDS*
00, SC, BK
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
Not Applicable
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
United States of America
---------------------------------------------------------------------
(7) Sole Voting Power
Number of -0-
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by See response to Item 5 on attached Schedule 13D
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With -0-
--------------------------------------------------------
(10) Shared Dispositive Power
See response to Item 5 on attached Schedule 13D
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
996,164 shares
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
Not Applicable
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
26.1%
---------------------------------------------------------------------
(14) Type of Reporting Person*
IN
---------------------------------------------------------------------
*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> 4
CUSIP No. 026042101 SCHEDULE 13D Page 4 of 11 Pages
--------------------- -------- --------
(1) Names of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
WBT Holdings LLC
58-2275883
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(2) Check the Appropriate Box if a Member of a Group* (a) [ X ]
(b) [ ]
---------------------------------------------------------------------
(3) SEC Use Only
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(4) SOURCE OF FUNDS*
00, SC, BK
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
Not Applicable
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
Georgia
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(7) Sole Voting Power
Number of -0-
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by -0-
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With -0-
--------------------------------------------------------
(10) Shared Dispositive Power
-0-
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
0
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
Not Applicable
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
0%
---------------------------------------------------------------------
(14) Type of Reporting Person*
00
---------------------------------------------------------------------
*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> 5
This Amendment No. 5 to Schedule 13D relates to the Schedule 13D filed
on February 22, 1989 on behalf of Mrs. Frances B. Bunzl and Mr. Bennett L.
Kight, as co-executors of the Estate of Walter H. Bunzl (the "Bunzl Estate").
This Amendment No. 5 to Schedule 13D is now filed on behalf of Mrs. Bunzl and
Mr. Kight in their capacities as general trustees or members of trust committees
of various trusts and as directors of a private charitable foundation, as well
as on behalf of WBT Holdings, LLC ("WBT Holdings"), with regard to beneficial
ownership of shares of common stock of American Filtrona Corporation ("AFC").
Mr. Kight is a director of AFC.
ITEM 1. SECURITY AND ISSUER.
The information set forth in Amendment No.3 to Schedule 13D in response
to this item has not changed as of the date of this Amendment.
ITEM 2. IDENTITY AND BACKGROUND.
The information set forth in Amendment No. 4 to Schedule 13D in
response to this item has not changed as of the date of this Amendment.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
At the time of his death in July 1988, Walter H. Bunzl had sole voting
and dispositive power with respect to 429,298 shares of the common stock of AFC
(the "Marital Trust Shares"), which are now part of the property of the Trust
established under the Will of Walter H. Bunzl for the benefit of Frances B.
Bunzl (the "Marital Trust"). Mrs. Bunzl and Mr. Kight acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934) of the Marital Trust Shares as co-executors of the Estate
of Walter H. Bunzl (the "Bunzl Estate"), and not individually, on July 26, 1988,
the date on which they were qualified under Georgia law as co-executors of the
Bunzl Estate, and no consideration was paid by either of them. On September 12,
1995 the Bunzl Estate distributed the 429,298 shares of the common stock of AFC
held by it to the Marital Trust pursuant to the terms of Mr. Bunzl's will. Mrs.
Bunzl and Mr. Kight continue to have beneficial ownership (within the meaning of
Rule 13d-3) of the Marital Trust Shares as the members of the trust committee of
the Marital Trust.
Mrs. Bunzl and Mr. Kight have served as directors of the Walter H. and
Frances B. Bunzl Foundation (the "Foundation"), a private foundation exempt from
federal income tax, since its organization in 1981. During his lifetime, Walter
Bunzl typically made an annual gift of AFC common stock to the Foundation, the
last of such gifts being made in 1987. The Foundation is the record holder of
36,800 shares of the common stock of AFC (the "Foundation Shares").
<PAGE> 6
On October 19, 1989, Rudolph H. Bunzl, the former Chairman of the Board
of AFC, established two irrevocable trusts for the benefit of his wife and
others (the "R. H. Bunzl Trusts") and transferred by gift 64,000 shares and
16,000 shares of AFC common stock, respectively, to such trusts. Mr. Kight
acquired beneficial ownership (within the meaning of Rule 13d-3) of these 80,000
shares on that date as a member of each of the trust committees for the R. H.
Bunzl Trusts, and not individually, and no consideration was paid by Mr. Kight.
On November 1, 1989, Mrs. Bunzl succeeded Rudolph H. Bunzl as a general
trustee under two trusts established for the benefit of Walter H. Bunzl's
children (the "Walter Bunzl Family Trusts"), which hold an aggregate of 505,892
shares of AFC common stock. Mrs. Bunzl acquired beneficial ownership (within the
meaning of Rule 13d-3) of these 505,892 shares on that date in her capacity as a
general trustee of each of the Walter Bunzl Family Trusts, and not individually,
and no consideration was paid by Mrs. Bunzl.
On August 20, 1990, Mr. Kight succeeded Herbert R. Elsas as a general
trustee or trust committee member under (i) the Walter Bunzl Family Trusts, (ii)
two trusts established for the benefit of Rudolph H. Bunzl's children (the
"Rudolph Bunzl Family Trusts"), which hold an aggregate of 513,540 shares of AFC
common stock, and (iii) two trusts for the benefit of Walter H. Bunzl's children
established under the wills of Robert M. Bunzl and Nellie M. Bunzl (the
"Testamentary Trusts"), which hold an aggregate of 24,174 shares of AFC common
stock. Mr. Kight acquired beneficial ownership (within the meaning of Rule
13d-3) of these shares on that date in his capacity as a general trustee or
trust committee member for the Walter Bunzl Family Trusts, the Rudolph Bunzl
Family Trusts and the Testamentary Trusts, and not individually, and no
consideration was paid by Mr. Kight.
On September 25, 1992, Mrs. Bunzl succeeded Rudolph H. Bunzl as a trust
committee member under the Testamentary Trusts. Mrs. Bunzl acquired beneficial
ownership (within the meaning of Rule 13d-3) of the shares on that date in her
capacity as a member of the trust committee of each of the Testamentary Trusts,
and no consideration was paid by Mrs. Bunzl.
On November 25, 1996, Mr. Kight resigned as trustee or member of the
trust committee for the R. H. Bunzl Trusts and the Rudolph Bunzl Family Trusts,
which hold an aggregate of 593,540 shares of AFC common stock, and thus Mr.
Kight no longer has beneficial ownership (within the meaning of Rule 13d-3) of
such shares. Mr. Kight's resignation was effected by execution and delivery by
Mr. Kight of an instrument of resignation addressed to the administrative
trustees of such trusts.
See Item 4 for a description of the financing that will be used as
consideration for the proposed merger.
<PAGE> 7
ITEM 4. PURPOSE OF TRANSACTION
As fiduciary owners of AFC stock in various capacities (general
trustees of each of the Walter Bunzl Family Trusts, trust committee members of
the Marital Trust and the Testamentary Trusts (all such trusts collectively, the
"Walter Bunzl Trusts"), and directors of the Foundation), Mrs. Bunzl and Mr.
Kight believe that the value of the investment in AFC of the Walter Bunzl Trusts
and Foundation can best be preserved and increased by maintaining ownership of
AFC's plastics products business. The Walter Bunzl Trusts and Foundation have
organized WBT Holdings, a limited liability company wholly-owned by such
entities, to hold (either directly or through one or more wholly-owned
subsidiaries) all of the AFC common stock owned by them as fiduciaries. Mrs.
Bunzl serves as chairman of WBT Holdings, and Mr. Kight serves as its president.
The purpose of the creation of WBT Holdings is to further the objective
of maintaining the ownership interests of the Walter Bunzl Family in AFC's
plastics products business. This purpose is supported by Walter Bunzl's
children, Richard C. Bunzl and Suzanne B. Wilner, who are the adult
beneficiaries of the Walter Bunzl Trusts, and who own individually 31,778 shares
each of AFC stock. In total, these 63,556 shares represent 1.7% of the 3,816,629
outstanding shares of AFC stock as of February 19, 1997.
On February 19, 1997, WBT Holdings, WB Parent Corp., a wholly-owned
subsidiary of WBT Holdings ("Parent") and WB Acquisition Corp., a wholly-owned
indirect subsidiary of WBT Holdings ("SubCorp") executed a definitive agreement
with AFC pursuant to which, and subject to the conditions set forth therein,
SubCorp will merge with and into AFC, and all of the shares of AFC, other than
shares held by AFC's subsidiaries, WBT Holdings, Parent or SubCorp, will be
converted into the merger consideration of $46.52 in cash per share of AFC
common stock. Also, on February 19, 1997, SubCorp executed a definitive
agreement with FIL Acquisition Corp., a wholly-owned indirect subsidiary of
Bunzl plc (an English public limited company) for the sale of the bonded fibers
business of AFC for $72,450,000.00, subject to adjustment. It is contemplated
that the sale of the bonded fibers business will occur contemporaneously with
the merger of SubCorp and AFC.
The funds required for the merger consideration, in addition to cash
held by AFC, will be provided by the sales price of the bonded fibers business
of AFC and financing to be provided by Wachovia Bank of Georgia, N.A. and
Wachovia Bank of North Carolina, N.A., pursuant to a commitment dated February
19, 1997.
The transactions are subject to regulatory approvals and submission to
the shareholders of AFC for approval by the vote of more than two-thirds of all
outstanding shares, as required by Virginia law. If consummated, the proposed
merger of SubCorp and AFC would result in the private ownership of AFC, and AFC
common stock would no longer be traded in the public securities markets.
<PAGE> 8
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) and (b) Mrs. Bunzl and Mr. Kight, as members of the trust committee
of the Marital Trust, and not individually, beneficially own within the meaning
of Rule 13d-3, the 429,298 Marital Trust Shares which represent 11.2% of the
3,816,629 shares of AFC common stock outstanding as of February 19, 1997. As
such, their actions with respect to the Marital Trust Shares are governed by the
terms of the trust instrument and the general obligations of fiduciaries. In
particular, Mr. Kight and Mrs. Bunzl may consult with each other and act in
concert with respect to the voting and disposition of these shares. Mr. Kight
expressly disclaims any pecuniary interest in the Marital Trust Shares.
Mrs. Bunzl and Mr. Kight, as directors, and not individually, also may
be deemed to have beneficial ownership (within the meaning of Rule 13d-3) of the
36,800 Foundation Shares. Mrs. Bunzl and Mr. Kight, as directors, and not
individually, share voting and dispositive power with respect to the Foundation
Shares, along with Mrs. Bunzl's two adult children, who are also directors.
These shares represent 1.0% of the outstanding shares of AFC common stock as of
February 19, 1997. Mrs. Bunzl and Mr. Kight expressly disclaim any pecuniary
interest in the Foundation Shares.
In their capacities as general trustees of each of the Walter Bunzl
Family Trusts, and not individually, Mrs. Bunzl and Mr. Kight may also be deemed
to have beneficial ownership (within the meaning of Rule 13d-3) of 505,892
shares of AFC common stock held by the Walter Bunzl Family Trusts. As general
trustees, Mrs. Bunzl's and Mr. Kight's actions with respect to these 505,892
shares are governed by the terms of the trust instruments and the general
obligations of fiduciaries. In particular, Mrs. Bunzl and Mr. Kight may consult
with each other and act in concert with respect to the voting and disposition of
these shares. These shares represent 13.3% of the outstanding shares of AFC
common stock as of February 19, 1997. Mrs. Bunzl and Mr. Kight expressly
disclaim any pecuniary interest in the shares of AFC common stock held by the
Walter Bunzl Family Trusts.
In their capacities as members of the trust committees of each of the
Testamentary Trusts, and not individually, Mrs. Bunzl and Mr. Kight may also be
deemed to have beneficial ownership (within the meaning of Rule 13d-3) of the
24,174 shares of AFC common stock held in the Testamentary Trusts. As members of
the trust committees, Mrs. Bunzl's and Mr. Kight's actions with respect to these
24,174 shares are governed by the terms of the trust instruments and the general
obligations of fiduciaries. In particular, Mrs. Bunzl and Mr. Kight may consult
with each other and act in concert with respect to the voting and disposition of
these shares. These shares represent 0.6% of the outstanding shares of AFC
common stock as of February 19, 1997. Mr. Kight expressly disclaims any
pecuniary interest in these shares.
The Marital Trust Shares, the Foundation Shares, the 505,892 shares of
AFC common stock held in the Walter Bunzl Family Trusts and the 24,174 shares of
AFC common
<PAGE> 9
stock held in the Testamentary Trusts total 996,164 shares, representing 26.1%
of the 3,816,629 AFC common stock outstanding as of February 19, 1997.
Upon contribution of the shares of AFC common stock held by the Walter
Bunzl Trusts and the Foundation to WBT Holdings, WBT Holdings or one of its
subsidiaries will own and hold the sole power to vote and dispose of 996,164
shares, representing 26.1% of the 3,816,629 shares of AFC common stock
outstanding as of February 19, 1997.
(c) Not applicable.
(d) Any dividends paid on or proceeds from the sale of (i) the Marital
Trust Shares will be paid to the Marital Trust, (ii) the Foundation Shares will
be paid to the Foundation, (iii) the 505,892 shares held by the Walter Bunzl
Family Trusts will be paid to such trusts, and (iv) the 24,174 shares held by
the Testamentary Trusts will be paid to such trusts.
Upon contribution of the shares of AFC common stock held by the Walter
Bunzl Trusts and the Foundation to WBT Holdings, WBT Holdings will have the
right to receive or the power to direct receipt of dividends from or the
proceeds of the sale of its shares of AFC common stock.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
The information set forth in Amendment No.4 to Schedule 13D in response
to this item has not changed as of the date of this Amendment.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS
The following exhibits were filed on February 22, 1989 as part of the
original Schedule 13D filed by Mrs. Bunzl and Mr. Kight:
Exhibit A: Agreement regarding the joint
filing of this Schedule 13D.
Exhibit B: Power of attorney authorizing
Bennett L. Kight to sign this
Schedule 13D and any amendments
thereto on behalf of Frances B. Bunzl.
<PAGE> 10
Exhibit C: Evidence of the qualification of
Frances B. Bunzl and Bennett L. Kight
as Co-Executors of the Estate of
Walter H. Bunzl
Exhibit D: Memorandum of Understanding, dated August
26, 1981, by and among certain members of
the Bunzl family.
The following exhibits were filed on December 27, 1996 as part of
Amendment No. 4 to this Schedule 13D filed by Mrs. Bunzl, Mr. Kight and WBT
Holdings:
Exhibit E: Agreement of WBT Holdings, LLC regarding
the joint filing of this Schedule 13D
Exhibit F: Letter, dated December 12, 1996, from WBT
Holdings, LLC to Gilbert M. Rosenthal,
Chairman of the Special Committee of the
Board of Directors of American Filtrona
Corporation
The following are filed as exhibits to this Schedule 13D:
Exhibit G: Agreement of Merger among WBT Holdings, LLC,
WB Parent Corp., WB Acquisition Corp. and
American Filtrona Corporation, dated as of
February 19, 1997. (The exhibits and
schedules to this agreement have been
omitted and will be furnished to the
Securities and Exchange Commission upon
request.)
Exhibit H: Mandate and Commitment letter agreement
among Wachovia Bank of Georgia, N.A.,
Wachovia Bank of North Carolina, N.A. and WB
Acquisition Corp., a wholly-owned subsidiary
of WBT Holdings, LLC
Exhibit I: Fibers Sale Agreement between FIL
Acquisition Corp. and WB Acquisition Corp.
dated as of February 19, 1997. (The exhibits
and schedules to this agreement have been
omitted and will be furnished to the
Securities and Exchange Commission upon
request.)
<PAGE> 11
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information in this statement is true, complete and correct.
February 28, 1997 Frances B. Bunzl, as trust committee
member and as trustee, and not
individually
/s/ Bennett L. Kight
---------------------
Bennett L. Kight
Attorney-in-Fact
February 28, 1997 /s/ Bennett L. Kight
---------------------
Bennett L. Kight, as trust committee
member and as trustee, and not
individually
February 28, 1997 /s/ Bennett L. Kight
---------------------
WBT Holdings, LLC
Bennett L. Kight,
President
<PAGE> 12
EXHIBIT G
================================================================================
AGREEMENT OF MERGER
AMONG
WBT HOLDINGS LLC,
WB PARENT CORP.,
WB ACQUISITION CORP.
AND
AMERICAN FILTRONA CORPORATION
================================================================================
February 19, 1997
<PAGE> 13
<TABLE>
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ARTICLE 1
THE BUSINESS COMBINATION.....................................................................................................2
1.1 THE MERGER.................................................................................................2
1.2 CLOSING....................................................................................................2
1.3 EFFECTIVE TIME OF THE MERGER...............................................................................2
1.4 ARTICLES OF INCORPORATION; BYLAWS..........................................................................2
1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION........................................................2
ARTICLE 2
CONVERSION AND EXCHANGE OF SHARES; ADDITIONAL ACTION.........................................................................3
2.1 CONVERSION OF SHARES.......................................................................................3
(a) AFC COMMON STOCK..................................................................................3
(b) SUBCORP STOCK.....................................................................................3
(c) AFC COMMON STOCK HELD BY HOLDINGS.................................................................3
2.2 MERGER CONSIDERATION.......................................................................................3
2.3 STOCK TRANSFER BOOKS.......................................................................................3
2.4 SURRENDER AND EXCHANGE OF CERTIFICATES REPRESENTING AFC COMMON STOCK.......................................3
(a) EXCHANGE AGENT....................................................................................3
(b) SURRENDER OF CERTIFICATES.........................................................................4
(c) LOST CERTIFICATES.................................................................................4
(d) NO INTEREST.......................................................................................4
(e) WITHHOLDING RIGHTS................................................................................5
ARTICLE 3
AFC STOCK OPTIONS............................................................................................................5
ARTICLE 4
REPRESENTATIONS AND WARRANTIES...............................................................................................5
4.1 REPRESENTATIONS AND WARRANTIES BY AFC......................................................................5
(a) ORGANIZATION AND QUALIFICATION....................................................................5
(b) CAPITALIZATION....................................................................................6
(c) AUTHORITY.........................................................................................6
(d) NON-CONTRAVENTION.................................................................................6
(e) GOVERNMENTAL CONSENTS.............................................................................7
(f) PERIODIC REPORTS..................................................................................7
(g) SUBSIDIARIES......................................................................................8
(h) FINANCIAL STATEMENTS..............................................................................8
(i) ABSENCE OF CERTAIN CHANGES OR EVENTS.............................................................10
</TABLE>
<PAGE> 14
<TABLE>
<S> <C>
(j) GOVERNMENTAL AUTHORIZATION AND COMPLIANCE WITH LAWS..............................................11
(k) CONDUCT OF BUSINESS..............................................................................12
(l) TAX MATTERS......................................................................................12
(m) PROPERTY.........................................................................................12
(n) MATERIAL CONTRACTS...............................................................................14
(o) LEGAL PROCEEDINGS................................................................................16
(p) LABOR RELATIONS..................................................................................16
(q) INSIDER INTERESTS................................................................................17
(r) INTELLECTUAL PROPERTY............................................................................17
(s) INSURANCE........................................................................................18
(t) PROXY STATEMENT..................................................................................19
(u) EMPLOYEE AND FRINGE BENEFIT PLANS................................................................19
(v) MAJOR CUSTOMERS. ...............................................................................22
(w) SECTIONS 13.1-725 THROUGH 13.1-727.1.............................................................23
(x) ENVIRONMENTAL....................................................................................23
(y) ACCURACY OF SCHEDULES, CERTIFICATES AND DOCUMENTS................................................25
(z) BROKERS, FINDERS AND INVESTMENT BANKERS..........................................................25
(aa) INVENTORIES AND RAW MATERIALS OF FIBERS BUSINESS.................................................26
(bb) RECEIVABLES OF THE FIBERS BUSINESS...............................................................26
(cc) EMPLOYEES OF FIBERS BUSINESS.....................................................................26
(dd) PRODUCTS OF THE FIBERS BUSINESS..................................................................26
(ee) INTRACOMPANY ACCOUNTS............................................................................26
(ff) FOREIGN CURRENCY EXPOSURES.......................................................................27
(gg) COMPANY NAME.....................................................................................27
(hh) INDEBTEDNESS.....................................................................................27
4.2 REPRESENTATIONS AND WARRANTIES BY HOLDINGS, PARENT AND SUBCORP............................................27
(a) ORGANIZATION AND QUALIFICATION, ETC..............................................................27
(b) CAPITALIZATION...................................................................................28
(c) AUTHORITY........................................................................................28
(d) NON-CONTRAVENTION................................................................................28
(e) GOVERNMENTAL CONSENTS............................................................................29
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS.............................................................29
(g) PROXY STATEMENT..................................................................................29
(h) ACTIVITIES OF SUBCORP............................................................................29
(i) LEGAL PROCEEDINGS................................................................................30
(j) BROKERS, FINDERS AND INVESTMENT BANKERS..........................................................30
(k) OBLIGATIONS TO FUND..............................................................................30
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS.........................................................................................30
5.1 CONDUCT OF BUSINESS.......................................................................................30
(a) OPERATION BY AFC IN THE ORDINARY COURSE OF BUSINESS..............................................30
</TABLE>
<PAGE> 15
<TABLE>
<S> <C>
(b) FORBEARANCES BY AFC..............................................................................31
(c) CONDUCT OF THE FIBERS BUSINESS...................................................................33
(d) NOTICES OF CERTAIN EVENTS........................................................................33
5.2 AFC SHAREHOLDERS MEETING..................................................................................34
5.3 BEST EFFORTS; FURTHER ASSURANCES; COOPERATION.............................................................34
(a) REGULATORY ACTION................................................................................34
(b) CERTAIN LEGAL PROCEEDINGS........................................................................35
(c) NOTICE...........................................................................................35
5.4 INVESTIGATION; CONFIDENTIALITY............................................................................35
5.5 EXPENSES..................................................................................................36
5.6 PROXY STATEMENT...........................................................................................36
5.7 PERIODIC REPORTS..........................................................................................36
5.8 PUBLIC ANNOUNCEMENTS......................................................................................36
5.9 ANTITRUST CHALLENGES......................................................................................37
5.10 EMPLOYEE MATTERS..........................................................................................37
(a) STAY BONUSES AND SEVERANCE AGREEMENTS............................................................37
(b) EMPLOYEE BENEFIT PLAN MATTERS....................................................................37
(c) LABOR MATTERS....................................................................................39
5.11 ACCOUNTANT'S LETTERS......................................................................................39
5.12 NON SOLICITATION; COMPETING OFFERS........................................................................39
5.13 CONDITIONS IN FIBERS SALE AGREEMENT AND FINANCING.........................................................39
5.14 INVESTMENT SECURITIES.....................................................................................39
5.15 FILPAC INDEBTEDNESS.......................................................................................39
5.16 ACCESS TO INFORMATION.....................................................................................39
5.17 SETTLEMENT OF LAWSUITS....................................................................................41
5.18 ASSUMPTION OF LIABILITIES.................................................................................41
ARTICLE 6
CONDITIONS TO THE MERGER....................................................................................................41
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY...................................................................41
(a) AFC SHAREHOLDER APPROVAL.........................................................................41
(b) HSR ACT..........................................................................................41
(c) PROXY STATEMENT..................................................................................41
(d) INJUNCTION, ETC..................................................................................41
6.2 CONDITIONS TO OBLIGATIONS OF HOLDINGS AND SUBCORP.........................................................42
(a) CONSENTS, AUTHORIZATIONS, ETC....................................................................42
(b) REPRESENTATIONS AND WARRANTIES...................................................................42
(c) CERTIFICATE......................................................................................42
(d) OPINION AND CONFIRMATION OF AFC'S COUNSEL........................................................42
(e) LETTERS FROM ACCOUNTANTS.........................................................................42
(f) ADDITIONAL CERTIFICATES, ETC.....................................................................42
(g) RESIGNATIONS.....................................................................................43
</TABLE>
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<TABLE>
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(h) FINANCING........................................................................................43
(i) SATISFACTION OF CONDITIONS IN FIBERS SALE AGREEMENT..............................................43
(j) MORGAN CONSULTING AND NON-COMPETITION AGREEMENT..................................................43
(k) MORGAN SEVERANCE AGREEMENT.......................................................................43
(l) TRANSFER AGENT'S CERTIFICATE.....................................................................43
6.3 CONDITIONS TO OBLIGATIONS OF AFC..........................................................................43
(a) CONSENTS, AUTHORIZATIONS, ETC....................................................................43
(b) REPRESENTATIONS AND WARRANTIES...................................................................44
(c) CERTIFICATE......................................................................................44
(d) OPINION AND CONFIRMATION OF HOLDINGS', PARENT'S AND SUBCORP'S
COUNSEL..........................................................................................44
(e) ADDITIONAL CERTIFICATES, ETC.....................................................................44
(f) SATISFACTION OF CONDITIONS IN FIBERS SALE AGREEMENT..............................................44
(g) FAIRNESS OPINION.................................................................................44
ARTICLE 7
TERMINATION AND ABANDONMENT.................................................................................................45
7.1 TERMINATION AND ABANDONMENT...............................................................................45
7.2 SPECIFIC PERFORMANCE......................................................................................46
7.3 RIGHTS AND OBLIGATIONS UPON TERMINATION...................................................................46
7.4 CERTAIN FEES AND EXPENSES.................................................................................47
(a) EXPENSES.........................................................................................47
(b) FEE..............................................................................................47
(c) PAYMENT..........................................................................................47
7.5 EFFECT OF TERMINATION.....................................................................................48
ARTICLE 8
GENERAL PROVISIONS..........................................................................................................48
8.1 WAIVER OF CERTAIN CONDITIONS..............................................................................48
8.2 NOTICES...................................................................................................48
8.3 TABLE OF CONTENTS; HEADINGS...............................................................................49
8.4 AMENDMENT.................................................................................................49
8.5 NO SURVIVAL OF REPRESENTATIONS, WARRANTIES OR COVENANTS...................................................49
8.6 SEVERABILITY..............................................................................................49
8.7 WAIVER....................................................................................................50
8.8 NO THIRD PARTY BENEFICIARIES; ASSIGNMENT..................................................................50
8.9 TIME OF THE ESSENCE; COMPUTATION OF TIME..................................................................50
8.10 COUNTERPARTS..............................................................................................50
8.11 GOVERNING LAW.............................................................................................50
8.12 ENTIRE AGREEMENT..........................................................................................51
</TABLE>
<PAGE> 17
LIST OF EXHIBITS
Exhibit A Plan of Merger
Exhibit B Fibers Sale Agreement
Exhibit C Articles of Merger
Exhibit D Opinion and Confirmation of AFC's Counsel
Exhibit E Opinion and Confirmation of Holdings's and SubCorp's Counsel
Exhibit F Wachovia Commitment Letter Dated _____________
LIST OF SCHEDULES
Schedule 3.1 AFC Stock Option Plans
4.1(b) Capitalization
4.1(d) Non-Contravention
4.1(e) Governmental Consents
4.1(g) AFC Subsidiaries
4.1(h)(iii) Fibers Business Liabilities
4.1(i) Certain Changes or Events
4.1(j) Governmental Authorizations and Compliance
with Laws
4.1(j)(ii) Permits
4.1(l) Tax Matters
4.1(m)(i) Possession of Properties
4.1(m)(ii) Fibers Real Property
4.1(m)(iii) Fibers Personal Property
4.1(m)(iv) Headquarters Property
4.1(n) Material Contracts
4.1(o) Legal Proceedings
4.1(p) Labor Relations
4.1(q) Insider Interests
4.1(r) Intellectual Property
4.1(s) Insurance
4.1(u) Employee and Fringe Benefit Plans
4.1(v) Major Customers of AFC
4.1(x) Environmental
4.1(cc) Fibers Business Employees
4.1(ee) Intracompany Accounts
4.1(ff)(i) Foreign Currency - Products
4.1(ff)(ii) Foreign Currency - Raw Materials
4.1(hh) Indebtedness
5.1 Conduct of Business
<PAGE> 18
5.1(b)(vi) Capital Expenditures
5.10 Stay Bonuses and Severance Agreements
DEFINED TERMS
<TABLE>
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AFC...................................................................................................................Preamble
AFC Common Stock..........................................................................................Background Statement
AFC Financial Statements........................................................................................Section 4.1(h)
AFC Quarterly Report............................................................................................Section 4.1(h)
AFC Stock Option Plans.............................................................................................Section 3.1
AFC Stock Options..................................................................................................Section 3.1
AFC Shareholders Meeting..........................................................................................Section 4(t)
Affiliate.......................................................................................................Section 4.1(n)
Agreement.............................................................................................................Preamble
Applicable Plan Year-End........................................................................................Section 4.1(u)
Articles of Merger.................................................................................................Section 1.3
Associate.......................................................................................................Section 4.1(n)
best of AFC's knowledge.........................................................................................Section 4.1(j)
best of Holdings', Parents and SubCorp's knowledge..............................................................Section 4.2(i)
Bunzl.....................................................................................................Background Statement
Certificates....................................................................................................Section 2.4(b)
Closing............................................................................................................Section 1.2
Closing Date.......................................................................................................Section 1.2
Code............................................................................................................Section 2.4(e)
Commission.........................................................................................................Section 1.3
Competing Transaction..............................................................................................Section 7.1
Confidentiality Agreement..........................................................................................Section 5.4
EEOC............................................................................................................Section 4.1(p)
Effective Time.....................................................................................................Section 1.3
Employee Plans..................................................................................................Section 4.1(u)
Environmental Laws..............................................................................................Section 4.1(x)
ERISA...........................................................................................................Section 4.1(u)
ERISA Affiliate.................................................................................................Section 4.1(u)
Exchange Act....................................................................................................Section 4.1(f)
Exchange Agent..................................................................................................Section 2.4(a)
Expenses........................................................................................................Section 7.4(a)
Fee.............................................................................................................Section 7.4(b)
Fibers Balance Sheet............................................................................................Section 4.1(h)
Fibers Balance Sheet Date.......................................................................................Section 4.1(h)
Fibers Business...........................................................................................Background Statement
Fibers Financial Statements.....................................................................................Section 4.1(h)
Fibers Intellectual Property Agreement..........................................................................Section 4.1(r)
Fibers Intellectual Property Rights............................................................................Section 4.1(r)
Fibers Material Adverse Effect..................................................................................Section 4.1(i)
</TABLE>
<PAGE> 19
<TABLE>
<S> <C>
Fibers Real Property............................................................................................Section 4.1(m)
Fibers Sale Agreement ....................................................................................Background Statement
FTC.............................................................................................................Section 4.1(e)
Governmental Entity.............................................................................................Section 4.1(e)
hazardous materials.............................................................................................Section 4.1(x)
Hazardous Substance.............................................................................................Section 4.1(x)
Holdings..............................................................................................................Preamble
Holdings Material Contract......................................................................................Section 4.2(d)
HSR Act.........................................................................................................Section 4.1(d)
"Immediate Family"..............................................................................................Section 4.1(n)
Intellectual Property...........................................................................................Section 4.1(r)
Intellectual Property Agreement.................................................................................Section 4.1(d)
Intellectual Property Agreements................................................................................Section 4.1(r)
IRS..........................................................................................................Section 4.1(u)(i)
Justice.........................................................................................................Section 4.1(e)
Lien............................................................................................................Section 4.1(d)
Material Adverse Change.........................................................................................Section 4.1(i)
Material Adverse Effect.........................................................................................Section 4.1(a)
Material Contract...............................................................................................Section 4.1(d)
Material Contracts..............................................................................................Section 4.1(n)
Merger....................................................................................................Background Statement
Merger Consideration............................................................................................Section 2.1(a)
multi-employer plan.............................................................................................Section 4.1(u)
NASDAQ..........................................................................................................Section 2.4(b)
NLRB............................................................................................................Section 4.1(p)
Option Payment.....................................................................................................Section 3.1
Parent................................................................................................................Preamble
PBGC............................................................................................................Section 4.1(u)
Plan of Merger............................................................................................Background Statement
Plastics Business.........................................................................................Background Statement
Performance Share Awards........................................................................................Section 4.1(b)
Permits.........................................................................................................Section 4.1(j)
Permitted Liens.................................................................................................Section 4.1(m)
Proxy Statement.................................................................................................Section 4.1(t)
Registration Statement..........................................................................................Section 4.1(u)
Rule 13e-3......................................................................................................Section 4.2(e)
second request..................................................................................................Section 5.3(a)
SEC.............................................................................................................Section 4.1(d)
Securities Act..................................................................................................Section 4.1(f)
SubCorp...............................................................................................................Preamble
Subsidiary......................................................................................................Section 4.1(g)
Surviving Corporation..............................................................................................Section 1.1
Super Fund......................................................................................................Section 4.1(x)
Super Lien......................................................................................................Section 4.1(x)
</TABLE>
<PAGE> 20
<TABLE>
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Tax Returns.....................................................................................................Section 4.1(l)
Taxes...........................................................................................................Section 4.1(l)
toxic substances................................................................................................Section 4.1(x)
VSCA...............................................................................................................Section 1.1
Waste...........................................................................................................Section 4.1(x)
</TABLE>
<PAGE> 21
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (this "Agreement") is made as of February 19,
1997 among AMERICAN FILTRONA CORPORATION, a Virginia corporation ("AFC"), WBT
HOLDINGS LLC, a Georgia limited liability company ("Holdings"), WB PARENT CORP.,
a Virginia corporation ("Parent"), which is a wholly-owned subsidiary of
Holdings, and WB ACQUISITION CORP., a Virginia corporation ("SubCorp"), which is
a wholly-owned subsidiary of Parent.
BACKGROUND STATEMENT
Holdings and AFC desire to effect a business combination of AFC and
SubCorp pursuant to the Plan of Merger attached hereto as Exhibit A (the "Plan
of Merger"), by which SubCorp will merge with and into AFC, and the holders of
shares of AFC common stock, $1.00 par value ("AFC Common Stock"), other than
Holdings and any of its Subsidiaries (as hereinafter defined), will receive cash
in exchange for AFC Common Stock, as provided in this Agreement (the "Merger").
The respective Boards of Directors of Parent, SubCorp and AFC each has, the
Managers of Holdings have, and Parent as the sole shareholder of SubCorp has,
approved this Agreement and the Plan of Merger. The Board of Directors of AFC
has directed that this Agreement and the Plan of Merger be submitted to the
shareholders of AFC for their approval.
The parties contemplate that shares of AFC Common Stock will be
acquired by Holdings from its affiliates and will be transferred by Holdings to
Parent.
The parties contemplate that the Closing (as hereinafter defined) of
the Merger will take place contemporaneously with, but immediately before, the
sale by the surviving corporation in the Merger to FIL Acquisition Corp., a
Delaware corporation ("Bunzl"), of the assets used by AFC in conducting the
business consisting of AFC's Bonded Fibers Segment (the "Fibers Business")
pursuant to the Fibers Sale Agreement of even date herewith between SubCorp and
Bunzl attached hereto as Exhibit B (the "Fibers Sale Agreement"). Following the
Closing of the Merger and the transactions contemplated under the Fibers Sale
Agreement, the surviving corporation in the Merger shall continue to conduct
AFC's business consisting of its Plastic Products Segment (the "Plastics
Business").
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, the parties hereto agree
as follows:
<PAGE> 22
ARTICLE 1
THE BUSINESS COMBINATION
1.1 THE MERGER. Subject to the terms and conditions of this Agreement
and the Plan of Merger, at the Effective Time (as defined in Section 1.3
hereof), SubCorp shall be merged with and into AFC in accordance with the
provisions of this Agreement and the Virginia Stock Corporation Act (the
"VSCA"), and the separate existence of SubCorp shall thereupon cease, and AFC,
as the surviving corporation in the Merger (hereinafter sometimes referred to as
the "Surviving Corporation"), shall continue its corporate existence under the
laws of the Commonwealth of Virginia as a wholly-owned subsidiary of Parent. The
Plan of Merger provides for the terms and conditions of the Merger, which terms
and conditions are incorporated herein and made a part of this Agreement by
reference. The Merger shall have the effects provided under the applicable laws
of the Commonwealth of Virginia including, but not limited to, Section 13.1-721
of the VSCA.
1.2 CLOSING. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Hunton & Williams,
Riverfront Plaza, 951 East Byrd Street, Richmond, Virginia 23219-4074, as soon
as possible after all conditions set forth in Article 6 have been satisfied or
waived in writing but in no event later than the third business day after all
such conditions shall have been satisfied or waived (the "Closing Date") or on
such other date or time as the parties shall agree.
1.3 EFFECTIVE TIME OF THE MERGER. If all the conditions set forth in
Article 6 shall have been fulfilled or waived in accordance with this Agreement
and provided that this Agreement and the Plan of Merger have not been terminated
pursuant to Article 7, the parties shall cause the articles of merger attached
hereto as Exhibit C (the "Articles of Merger") to be executed, delivered and
filed with the State Corporation Commission of the Commonwealth of Virginia (the
"Commission") in accordance with the provisions of the VSCA. The Merger shall
become effective at the time a certificate of merger is issued by the Commission
with respect to the Merger unless a later effective time and date is specified
in the Articles of Merger pursuant to the VSCA (the "Effective Time").
1.4 ARTICLES OF INCORPORATION; BYLAWS. The Articles of Incorporation
and Bylaws of SubCorp as in effect immediately prior to the Effective Time shall
be the Articles of Incorporation and Bylaws of the Surviving Corporation at the
Effective Time.
1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. At the
Effective Time, the persons who are directors and officers of SubCorp at the
Effective Time will become the directors and officers of the Surviving
Corporation.
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<PAGE> 23
ARTICLE 2
CONVERSION AND EXCHANGE OF SHARES; ADDITIONAL ACTION
2.1 CONVERSION OF SHARES. In accordance with the Plan of Merger, at the
Effective Time, by virtue of the Merger and without any further action on the
part of any holder thereof:
(a) AFC COMMON STOCK. Each issued and outstanding share of AFC
Common Stock, excluding any such shares held by any of AFC's
Subsidiaries and excluding any such shares held by Holdings or any of
its Subsidiaries, shall automatically be converted into only the right
to receive the consideration for the Merger as set forth in Sections
2.2 and 2.4 (the "Merger Consideration").
(b) SUBCORP STOCK. Each share of AFC Common Stock held by any
of AFC's Subsidiaries and each issued and outstanding share of SubCorp
at the Effective Time shall be automatically canceled and extinguished,
and no payment shall be made in respect thereof.
(c) AFC COMMON STOCK HELD BY HOLDINGS. Each issued and outstanding
share of AFC Common Stock held by Holdings or any of its Subsidiaries
at the Effective Time shall thereafter continue to represent one
validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation.
2.2 MERGER CONSIDERATION. In accordance with the Plan of Merger and
this Agreement, the Merger Consideration to be paid for each share of AFC Common
Stock shall be Forty Six Dollars and 52 cents ($46.52) in cash.
2.3 STOCK TRANSFER BOOKS. From and after the Effective Time, no
transfer of AFC Common Stock outstanding prior to the Effective Time shall be
registered on the stock transfer books of the Surviving Corporation. If, after
the Effective Time, certificates for AFC Common Stock other than shares held by
Holdings and its Subsidiaries are presented to the Surviving Corporation for
transfer, such certificates shall be canceled and exchanged for the
consideration as described in Sections 2.1 and 2.2 and in accordance with the
Plan of Merger.
2.4 SURRENDER AND EXCHANGE OF CERTIFICATES REPRESENTING AFC COMMON
STOCK.
(a) EXCHANGE AGENT. Prior to the mailing of the Proxy Statement
(as hereinafter defined) to the holders of record of AFC Common Stock,
Holdings shall appoint Wachovia Bank of North Carolina, N.A. to act as
exchange agent for the Merger (the "Exchange Agent") pursuant to an
exchange agent agreement reasonably acceptable to AFC and Holdings. At
the Effective Time, Holdings shall deposit with the Exchange Agent cash
in the amount of the Merger Consideration less the amount of cash and
cash-
3
<PAGE> 24
equivalents held by AFC at the Effective Time and, pursuant to
irrevocable instructions, direct the Exchange Agent to pay the Merger
Consideration.
(b) SURRENDER OF CERTIFICATES. Promptly after the Effective
Time, Holdings shall cause the Exchange Agent to mail and otherwise
make available to each record holder as of the Effective Time of an
outstanding certificate or certificates that immediately prior to the
Effective Time represented shares of AFC Common Stock (the
"Certificates"), a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates
to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates for payment therefor and conversion
thereof, which letter of transmittal shall comply with all applicable
rules and regulations of the NASDAQ Stock Market ("NASDAQ"). Upon
surrender to the Exchange Agent of the Certificates, together with such
letter of transmittal duly executed, the holder of such Certificates
shall be entitled to receive promptly in exchange therefor a check
representing the Merger Consideration to which such holder shall have
become entitled pursuant to Section 2.2 and the Plan of Merger, and the
Certificates so surrendered shall forthwith be canceled. If any portion
of the Merger Consideration to be received upon exchange of a
Certificate is to be paid to a person other than the person in whose
name the Certificate surrendered and exchanged therefor is registered,
it shall be a condition of such payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for
transfer and that the person requesting such exchange shall pay in
advance any transfer or other taxes required by reason of the issuance
of a check representing cash to such other person, or establish to the
reasonable satisfaction of the Exchange Agent that such tax has been
paid or that no such tax is applicable. From the Effective Time until
surrender in accordance with the provisions of this Section 2.4 and the
Plan of Merger, each Certificate (other than Certificates held by
Holdings or any of its Subsidiaries) shall represent for all purposes
only the right to receive the Merger Consideration. All payments in
respect of AFC Common Stock that are made in accordance with the terms
hereof shall be deemed to have been made in full satisfaction of all
rights pertaining to such securities.
(c) LOST CERTIFICATES. In the case of any lost, misplaced,
stolen or destroyed Certificate, the holder thereof may be required, as
a condition precedent to delivery to such holder of the Merger
Consideration, to deliver to Holdings an indemnity agreement and a bond
in such reasonable sum as Holdings may direct as indemnity against any
claim that may be made against the Exchange Agent, Holdings, Parent or
the Surviving Corporation with respect to the Certificate alleged to
have been lost, misplaced, stolen or destroyed.
(d) NO INTEREST. No interest shall be paid or accrued on any
portion of the Merger Consideration regardless of the cause for delay
in payment of the Merger Consideration.
4
<PAGE> 25
(e) WITHHOLDING RIGHTS. Holdings or the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of shares of AFC
Common Stock and pay to the appropriate tax authority such amounts as
Holdings or the Exchange Agent is required to deduct, withhold and pay
with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended, (the "Code"), or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld by
Holdings or the Exchange Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of
the shares of AFC Common Stock in respect of which such deduction and
withholding was made by Holdings or the Exchange Agent.
ARTICLE 3
AFC STOCK OPTIONS
3.1 Schedule 3.1 lists all plans for the issuance of options to acquire
AFC Common Stock (the "AFC Stock Option Plans") and plans for awards of
performance shares, together with a list of all outstanding and unexercised
options and all awards of performance shares under those plans, including as to
each option or performance share award, the number of shares of AFC Common Stock
covered by such option or performance share award, the date of grant of such
option or performance share award and the date of expiration of such option.
True and correct copies of all plans, and a copy of each form of option and
performance share award listed on Schedule 3.1 have been delivered to Holdings.
All outstanding options to purchase AFC Common Stock granted pursuant to the AFC
Stock Option Plans shall be amended to provide that each such option shall
become exercisable at the Effective Time and that each holder shall receive, as
soon as practicable after the Effective Time, a payment equal to the per share
Merger Consideration less the applicable option exercise price for each share
subject to an outstanding option (each such payment an "Option Payment").
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES BY AFC. AFC represents and warrants
to and agrees with Holdings, Parent and SubCorp as of the date of this Agreement
and as of the Closing as follows:
(a) ORGANIZATION AND QUALIFICATION. AFC is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia, has the corporate power and authority to own
all of its properties and assets and to carry on its business as it is
now being conducted, and is duly qualified to do business and is in
good standing in each of the jurisdictions in which the failure to be
so qualified would
5
<PAGE> 26
have a material adverse effect on the consolidated financial condition,
results of operations or business of AFC and its Subsidiaries, taken as
a whole (a "Material Adverse Effect"). The copies of AFC's Articles of
Incorporation and Bylaws, as amended to date, that have been delivered
to Holdings, are complete and correct, and such instruments, as so
amended, are in full force and effect at the date hereof.
(b) CAPITALIZATION. The authorized capital stock of AFC
consists of 10,000,000 shares of AFC Common Stock. All of the issued
and outstanding shares of AFC Common Stock are duly authorized, validly
issued, fully paid and nonassessable, and were not issued in violation
of any preemptive rights. As of the date hereof: (i) 3,816,629 shares
of AFC Common Stock are issued and outstanding; (ii) 258,800 shares of
AFC Common Stock are subject to outstanding options pursuant to the AFC
Stock Option Plans; and (iii) there are no outstanding performance
share awards under the 1988 Performance Share Plan (the "Performance
Share Awards") covering 48,000 shares of AFC Common Stock. Except as
set forth on Schedule 3.1 or Schedule 4.1(b) and in this Section
4.1(b), there are no shares of capital stock of AFC outstanding, and
there are no subscriptions, options, convertible securities, calls,
rights, warrants, performance share awards or other agreements, claims
or commitments of any nature whatsoever obligating AFC to issue,
transfer, register with any securities commission or other authority,
deliver or sell or cause to be issued, transferred, so registered,
delivered or sold, additional shares of the capital stock or other
securities of AFC or obligating AFC to grant, extend or enter into any
such agreement or commitment.
(c) AUTHORITY. AFC has the corporate power and authority to
execute and deliver this Agreement and, subject to the receipt of the
approval of this Agreement and the Plan of Merger by the affirmative
vote of more than two-thirds of the outstanding shares of AFC Common
Stock, to consummate the Merger. The execution and delivery by AFC of
this Agreement and the consummation by AFC of the Merger in accordance
with the Plan of Merger have been duly authorized by its Board of
Directors. Except for the approval of this Agreement and the Plan of
Merger by the holders of AFC Common Stock, no other corporate action on
the part of AFC is necessary to authorize the execution and delivery of
this Agreement by AFC or the consummation by AFC of the Merger in
accordance with the Plan of Merger. This Agreement has been duly
executed and delivered by AFC and is a valid, binding and enforceable
agreement of AFC.
(d) NON-CONTRAVENTION. The execution and delivery of this
Agreement by AFC do not and, subject to the approval of this Agreement
and the Plan of Merger by the holders of AFC Common Stock, the filing
of all necessary forms with the Securities and Exchange Commission (the
"SEC") and the expiration of all applicable waiting periods after the
filings required by the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act") referred to in paragraph (e) below, the
consummation by AFC of the Merger, will not (A) violate or conflict
with any provision of the Articles of Incorporation or Bylaws of AFC or
any of its Subsidiaries, or (B) except as set forth on Schedule
6
<PAGE> 27
4.1(d)(i) and except insofar as it would not have a Material Adverse
Effect, violate or conflict with, or result (with the giving of notice
or the lapse of time or both) in a violation of or constitute a default
under any provision of, or result in the acceleration or termination of
or entitle any party to accelerate or terminate (whether after the
giving of notice or lapse of time or both), any obligation or benefit
under, or result in the creation or imposition of any Lien (as
hereinafter defined) upon any of the assets or properties of AFC or any
of its Subsidiaries or require consent, authorization or approval of
any person or entity pursuant to any provision of any "Material
Contract" (as hereinafter defined), "Intellectual Property Agreement"
(as hereinafter defined), or law, ordinance, regulation, order,
arbitration award, judgment or decree to which AFC or any of its
Subsidiaries is a party or by which it or its assets or properties are
bound and will not constitute an event permitting termination of any
Material Contract or Intellectual Property Agreement to which AFC or
any of its Subsidiaries is a party or require any additional payment or
expense to avoid any such event. As used herein, a "Lien" with respect
to any property refers to any mortgage, lien, pledge, charge, security
interest, encumbrance or other adverse claim of any kind (including the
interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement) relating to such
property. Except for violations, conflicts, defaults, accelerations,
terminations, entitlements, creations or impositions of Liens or other
encumbrances, conflicts or events described on Schedule 4.1(d), no such
event shall cause a Material Adverse Effect or cause any material
damage, additional cost or expense (including any payments or expenses
incurred to obtain consents or waivers) to Holdings or the Surviving
Corporation.
(e) GOVERNMENTAL CONSENTS. Except for the consents described in
Schedule 4.1(e), other than the filing of the Proxy Statement (as
hereinafter defined) with the SEC and, to the extent required, any
filings with or approvals by any state securities commissions or
authorities, filings with the Federal Trade Commission (the "FTC") and
the Department of Justice ("Justice") under the HSR Act and the filing
of the Articles of Merger with the Commission, no consent,
authorization, clearance, order or approval of, or filing or
registration with, any executive, judicial or other public authority,
agency, department, bureau, division, unit or court or other public
person or entity (any of which is hereinafter referred to as a
"Governmental Entity") is required for or in connection with the
execution and delivery of this Agreement by AFC and the consummation by
AFC of the Merger.
(f) PERIODIC REPORTS. Since January 1, 1993, AFC has timely
filed all forms and reports with the SEC required to be filed by it
pursuant to the Securities Act of 1933 (the "Securities Act") and the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the SEC rules and regulations thereunder, all of which have complied as
of their respective filing dates in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, and
the rules promulgated thereunder, except for such statements, if any,
as have been modified by subsequent filings. AFC has delivered
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all such forms and reports to Holdings. None of such forms or reports
at the time filed contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except for
such statements, if any, as have been modified by subsequent filings.
(g) SUBSIDIARIES. AFC owns, directly or indirectly, all the
outstanding capital stock of each of its Subsidiaries, free and clear
of all Liens and all such capital stock is duly authorized, validly
issued and outstanding, fully paid and nonassessable, and except as set
forth in Schedule 4.1(g), neither AFC nor any of its Subsidiaries has
made any material investment in, or material advance of cash or other
extension of credit to, any person, corporation or other entity other
than its Subsidiaries. None of such Subsidiaries has any commitment to
issue or sell any shares of its capital stock or any securities or
obligations convertible into or exchangeable for, or giving any person
(other than AFC) any right to acquire from such Subsidiary, any shares
of its capital stock, and no such securities or obligations are
outstanding. Each of AFC's Subsidiaries is a corporation duly organized
and validly existing in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority
to own all of its properties and assets and to carry on its business as
it is now being conducted. Each of AFC's Subsidiaries is duly qualified
to do business and is in good standing in all jurisdictions where such
qualification is required and where failure to so qualify would have a
Material Adverse Effect. As used in this Agreement, the term
"Subsidiary" means, with respect to any person, corporation or other
entity, any corporation or other organization, whether incorporated or
unincorporated, of which at least a majority of the securities or
interests having by the terms thereof voting power to elect a majority
of the board of directors or others performing similar functions with
respect to such corporation or other organization is at that time
directly or indirectly owned or controlled by such person, corporation
or other entity, or by any one or more of its Subsidiaries, or by such
person, corporation or other entity, and one or more of its
Subsidiaries.
(h) FINANCIAL STATEMENTS.
(i) AFC has previously furnished Holdings with a true
and complete copy of the balance sheets of AFC as of December
31, 1994, 1995 and 1996 and the related statements of income,
shareholders' equity and cash flows for the years then ended,
including the notes thereto, certified or to be certified by
Coopers & Lybrand L.L.P., independent certified public
accountants, and the financial statements of AFC, including
the notes thereto, contained in the AFC Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996 in the form
last delivered to Holdings on or prior to the date of this
Agreement (the "AFC Quarterly Report"). AFC will furnish to
Holdings as soon as available true and complete copies of the
comparable financial statements of AFC as of March 31, 1997
and the fiscal quarter then ended. All of the foregoing
financial statements are referred to
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<PAGE> 29
hereunder as the "AFC Financial Statements." The AFC Financial
Statements have been or will be prepared from, and are or will
be in accordance with, the books and records of AFC and
present or will present fairly the consolidated financial
position, results of operations and cash flows of AFC and its
Subsidiaries taken as a whole as of the dates and for the
periods indicated, in each case in conformity with generally
accepted accounting principles, consistently applied, except
as otherwise stated in the AFC Financial Statements and, for
statements covering interim periods, include or will include
all adjustments (consisting only of normal recurring accruals)
that are necessary for the fair presentation of the
consolidated financial position, results of operations and
cash flows of AFC and its Subsidiaries.
(ii) AFC has previously furnished Holdings with a
true and complete copy of the balance sheets of the Fibers
Business as of December 31, 1995, September 30, 1996 and
December 31, 1996 and the related statements of income for the
periods then ended and will furnish to Holdings true and
complete copies of the comparable financial statements of the
Fibers Business as of March 31, 1997 and the fiscal quarter
then ended (the "Fibers Financial Statements"). The Fibers
Financial Statements have been or will be prepared from, and
are or will be in accordance with, the books and records of
AFC and present or will present fairly the financial position
and results of operations of the Fibers Business as of the
dates and for the periods indicated, in each case in
conformity with generally accepted accounting principles,
consistently applied, except that:
(A) The statements do not or will not contain
disclosure notes.
(B) The statements do not or will not reflect
any income taxes.
(C) The statements do not or will not reflect
any allocations of corporate overhead.
The Fibers Financial Statements covering interim periods
include or will include all adjustments (consisting only of
normal recurring accruals) that are necessary for the fair
presentation of the financial position and the results of
operations of the Fibers Business.
(iii) There are no liabilities of the Fibers Business
of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, other than:
(A) liabilities provided for in the balance
sheet of the Fibers Business (the "Fibers Balance
Sheet") at September 30, 1996 (the "Fibers Balance
Sheet Date") included in the Fibers Financial
Statements;
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<PAGE> 30
(B) liabilities disclosed or described on
Schedule 4.1(h)(iii); and
(C) other liabilities incurred in the ordinary
course of business of the Fibers Business since the
Fibers Balance Sheet Date that, individually or in the
aggregate, are not material to the business, financial
condition or results of operations of the Fibers
Business, taken as a whole.
(i) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in Schedule 4.1(i) or in any report filed by AFC with the SEC prior to
the date of this Agreement, since December 31, 1995, there has not
been: (i) any Material Adverse Change (as used in this Agreement,
"Material Adverse Change" means any material adverse change in the
business, financial condition or results of operations of AFC and its
Subsidiaries taken as a whole); (ii) any damage, destruction, loss or
casualty to property or assets of AFC or any of its Subsidiaries,
whether or not covered by insurance, that would have a Material Adverse
Effect; (iii) any strike, work stoppage or slowdown or other labor
trouble involving AFC or any of its Subsidiaries that would have a
Material Adverse Effect; (iv) any declaration, setting aside or payment
of any dividend or distribution (whether in cash, capital stock or
property) with respect to the capital stock of AFC other than regular
quarterly cash dividends at the rate of $0.28 per share on AFC Common
Stock; (v) any redemption or other acquisition by AFC of any of the
capital stock of AFC (except for the acquisition of AFC Common Stock in
payment of the exercise price upon the exercise of AFC Stock Options
and payment of performance share related withholding taxes); (vi) any
split, combination, reclassification or other similar change in the
outstanding AFC Common Stock; (vii) any incurrence, assumption or
guarantee of any indebtedness for borrowed money with respect to the
Fibers Business; (viii) creation of any Lien involving an amount in
excess of $10,000 with respect to any assets of the Fibers Business;
(ix) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the Fibers Business or any asset of the
Fibers Business that, individually or in the aggregate, has had or
could reasonably be expected to have a material adverse effect of the
financial condition, results of operations or business of the Fibers
Business (a "Fibers Material Adverse Effect"); (x) any transaction or
commitment made, or any contract or agreement entered into, by AFC
relating to the Fibers Business or any asset of the Fibers Business
(including the acquisition or disposition of any assets) or any
relinquishment by AFC of any contract or other right, in either case
involving an amount in excess of $25,000, other than transactions and
commitments in the ordinary course
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<PAGE> 31
of business consistent with past practices and those contemplated by
this Agreement; (xi) any change in any method of accounting or
accounting practice by AFC with respect to the Fibers Business except
for any such change required by reason of a concurrent change in GAAP;
(xii) any (A) employment, deferred compensation, severance, retirement
or other similar agreement entered into with any employee of the Fibers
Business (or any amendment to any such existing agreement), (B) grant
of any severance or termination pay to any such employee or (C) change
in compensation or other benefits payable to any such employee pursuant
to any severance or retirement plans or policies, other than in the
ordinary course of business consistent with past practice; (xiii) any
labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to
organize any employees of the Fibers Business, or any lockouts,
strikes, slowdowns, work stoppages or threats thereof by or with
respect to such employees; (xiv) any capital expenditure, or commitment
for a capital expenditure, for additions or improvements to property,
plant and equipment with respect to the Fibers Business exceeding
$100,000 in the aggregate; (xv) any disposition of any capital asset of
the Fibers Business involving an amount in excess of $25,000; (xvi)
with respect to the Fibers Business, any loss of any significant
customer or customer accounts or any significant decrease in the sales
volume to any significant customer; or (xvii) any agreement to do any
of the foregoing. Since December 31, 1995, there has not been any
issuance by AFC of any shares, or options, calls or commitments
relating to shares of its capital stock, or any securities or
obligations convertible into or exchangeable for, or giving any person
any right to acquire from it, any shares of its capital stock other
than the issuance of stock options, performance shares or shares of AFC
Common Stock pursuant to the AFC Stock Option Plans and except as set
forth on Schedule 4.1(b).
(j) GOVERNMENTAL AUTHORIZATION AND COMPLIANCE WITH LAWS. Except
as set forth on Schedule 4.1(j) and except insofar as the failure to do
so would not have a Material Adverse Effect, AFC and its Subsidiaries
(i) are in compliance with all laws, orders, regulations, policies and
guidelines of all Governmental Entities applicable to AFC and its
Subsidiaries or their businesses or properties and assets, and (ii)
have all permits, certificates, licenses, approvals and other
authorizations required in connection with the operation of their
businesses. Schedule 4.1(j)(ii) correctly describes each license,
franchise, permit or other similar authorization affecting, or relating
in any way to the Fibers Business or, with respect to the business,
assets, or operations of AFC or any of its Subsidiaries, required by
any Environmental Law (as defined below), together with the name of the
Governmental Entity issuing such license or permit or requiring such
notice (the "Permits") with an indication of which Permits affect or
relate in any way to the Fibers Business. Except as set forth on
Schedule 4.1(j)(ii), such Permits are valid and in full force and
effect, and none of the Permits will be terminated or impaired or
become invalid, in whole or in part, as a result of the Merger. As of
the date hereof, no notice has been issued and, to the best of AFC's
knowledge (as defined below), no investigation or review is pending or
is contemplated or threatened by any Governmental Entity (Y) with
respect to any alleged violation by AFC or any Subsidiary of any law,
order, regulation, policy or guideline of any Governmental Entity, or
(Z) with respect to any alleged failure to have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of the business of AFC and its
Subsidiaries. Neither AFC nor any Subsidiary is in violation of any
judgment, decree, injunction, ruling or order of Governmental Entity
binding on AFC or such Subsidiary the violation of which would have a
Material Adverse Effect. As used in this Agreement, the "best of AFC's
knowledge" and any other reference to the knowledge of AFC or its
officers or directors shall mean the actual knowledge, without
independent investigation, of John L. Morgan,
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Leo C. Drozeski, Jr., John D. Barlow Jr., Randall L. Hagan, Anthony M.
Vincent and Bruce A. Nylander.
(k) CONDUCT OF BUSINESS. Since December 31, 1995, AFC and its
Subsidiaries have conducted their businesses in the ordinary and usual
course consistent with prior practice.
(l) TAX MATTERS. Except as set forth on Schedule 4.1(l), (i)
all material Taxes (as defined below) due and payable by AFC and its
Subsidiaries have been paid and are not delinquent; (ii) to the extent
required by GAAP, estimates for all Taxes due but not yet payable for
all periods through December 31, 1996 have been accrued on the books of
AFC, and adequate reserves have been established therefor as of the end
of such periods; (iii) all material Taxes due and payable by AFC and
its Subsidiaries for all periods through December 31, 1996 have been
paid or provided for in the AFC Financial Statements and are not
delinquent; (iv) as of the date hereof, there are no pending claims
asserted for Taxes against AFC or any of its Subsidiaries or
outstanding agreements or waivers extending the statutory period of
limitation applicable to any tax return of AFC or any of its
Subsidiaries for any period; (v) AFC and each of its Subsidiaries have
duly and timely filed all material federal, state, local and foreign
tax returns and all other returns heretofore required to be filed ("Tax
Returns") with respect to all Taxes. AFC has delivered to Holdings true
and correct copies of all federal income Tax Returns for the 1994 and
1995 taxable periods. AFC has not filed a consent to the application of
Section 341(f) of the Code. AFC has made all estimated federal income
tax deposits and, for all currently open taxable periods, has complied
in all material respects with the tax withholding provisions and
employment tax provisions of all applicable federal, state, local and
other laws. "Taxes" shall mean all taxes arising under the Code or
arising under any federal, state, local or foreign law, rule,
regulation or order including, without limitation, any income, profits,
employment, sales, gross receipts, use, occupation, excise, real
property, personal property or ad valorem taxes or any license or
franchise fee or tax and all penalties and interest related thereto.
(m) PROPERTY. (i) AFC or one of its Subsidiaries has good and
marketable title to all properties and assets reflected in the balance
sheet dated December 31, 1995 (or acquired after that date), and valid
leasehold interests in all properties and assets not reflected on such
balance sheet but used by AFC or a Subsidiary in its business, free and
clear of any title defects, liens, charges, pledges, security
interests, adverse claims, or other encumbrances, except (A) mortgages
and liens securing debt reflected as liabilities on such balance sheet,
(B) liens for current taxes and assessments not in default, (C)
mechanics', carriers', workmen's, repairman's, statutory or common law
liens either not delinquent or being contested in good faith and (D)
Liens, encumbrances, covenants, rights-of-way, minor imperfections of
title, building or use restrictions, easements, exceptions, variances,
reservations and other matters or limitations of any kind, if any, that
do not have a Material Adverse Effect. Except as set forth on Schedule
4.1(m)(i), no person other than
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<PAGE> 33
AFC or one of its Subsidiaries is currently entitled to possession of
any of the properties of AFC, whether owned, leased or used by AFC or
one of its Subsidiaries. To the best of AFC's knowledge, the real
property, buildings, structures and improvements owned, leased or used
by AFC or any of its Subsidiaries conform to all applicable laws,
ordinances and regulations, including zoning regulations, none of which
would upon consummation of the Merger materially adversely interfere
with the use of such properties, buildings, structures or improvements
for the purposes for which they are now utilized. The properties and
assets owned or leased by AFC are adequate in all material respects for
the conduct of its businesses as presently conducted.
(ii) Schedule 4.1(m)(ii) correctly describes all real property
used in the Fibers Business (the "Fibers Real Property"), that AFC
owns, leases or subleases, any title insurance policies and surveys
with respect thereto, and any Liens thereon, specifying in the case of
leases or subleases, the name of the lessor or sublessor, the lease
term and the basic annual rent.
(iii) Schedule 4.1(m)(iii) constitutes a depreciation schedule
at December 31, 1996 of all machinery, equipment, furniture, vehicles,
storage tanks and other trade fixtures and fixed assets that are owned
by AFC and used in the Fibers Business.
(iv) Schedule 4.1.(m)(iv) constitutes a depreciation schedule
at December 31, 1996 of all machinery, equipment, furniture, vehicles,
storage tanks and other trade fixtures and fixed assets that are owned
by AFC and located in the headquarters building.
(v) AFC has good and marketable, indefeasible, fee simple
title (subject only to Permitted Liens) to, or in the case of leased
property has valid leasehold interests in, all property used in the
Fibers Business (whether real, personal, tangible or intangible) and
reflected on the Fibers Balance Sheet of AFC at December 31, 1995, or
acquired after that date, except for assets sold since that date in
the ordinary course of business consistent with past practices.
(vi) No property used in the Fibers Business is subject to any
Lien, except:
(A) Liens disclosed on the Fibers Balance Sheet;
(B) Liens for taxes not yet due or being contested in
good faith (and for which adequate accruals or reserves have
been established on the Fibers Balance Sheet); and
(C) Liens, covenants, rights-of-way, zoning restrictions
and other encumbrances or restrictions of record that do not
materially detract from the value of such assets as now used
in the Fibers Business, or materially interfere with any
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<PAGE> 34
present or intended use of such assets (clauses (A), (B) and
(C) are, collectively, the "Permitted Liens").
(vii) No violation of any law, regulation or ordinance
(including, without limitation, laws, regulations or ordinances
relating to zoning, city planning or similar matters) relating to the
Fibers Business or any asset used in the Fibers Business currently
exists or has existed at any time, except for violations which have not
had and would not reasonably be expected to have, individually or in
the aggregate, a Fibers Material Adverse Effect.
(n) MATERIAL CONTRACTS. Schedule 4.1(n) contains a correct and
complete list as of the date hereof, of the following (hereinafter
referred to as the "Material Contracts"):
(i) except for investment securities held by AFC or
any of its Subsidiaries, all bonds, debentures, loan
agreements, notes, mortgages, deeds to secure debt, deeds of
trust and guaranties to which AFC or any Subsidiary is a party
or by which AFC or any Subsidiary or its properties or assets
are bound;
(ii) all leases (whether capital or operating)
involving an annual commitment or annual payments of $25,000
or more under which AFC or any Subsidiary is the lessee of
real or personal property, and all leases of property used in
the Fibers Business with a (A) book value in excess of $10,000
or (B) fair market value in excess of $25,000, specifying the
name of the lessor or sublessor, the lease term and basic
annual rent;
(iii) all employment and consulting agreements
between AFC or any Subsidiary and any person or entity;
(iv) all existing contracts and commitments (other
than those described in subparagraphs (i), (ii) or (iii), and
any Employee Plans (as hereinafter defined) to which AFC or
any Subsidiary is a party or by which AFC or any Subsidiary or
its properties or assets may be bound involving either (A)
annual payments of $25,000 or more or (B) aggregate payments
of $50,000 or more;
(v) any collective bargaining agreements;
(vi) any agreement for the purchase of materials,
supplies, goods, services, equipment or other assets for the
Fibers Business providing for (A) annual payments of $25,000
or more, (B) aggregate payments of $25,000 or more or (C) the
purchase of more than 90 days usage of raw materials;
(vii) any sales, distribution or other similar
agreement providing for the sale of materials, supplies,
goods, services, equipment or other assets of the Fibers
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<PAGE> 35
Business that provides for either (A) annual payments of
$25,000 or more or (B) aggregate payments of $50,000 or more;
(viii) any partnership, joint venture or other
similar agreement or arrangement with respect to the Fibers
Business;
(ix) any agreement relating to the deferred
purchase price of property of the Fibers Business (whether
incurred, assumed, guaranteed or secured by any asset),
except any such agreement with an aggregate outstanding
principal amount not exceeding $25,000 and which may be
prepaid on not more than 30 days notice without the payment
of any penalty;
(x) any option, license, franchise or similar
agreement with respect to the Fibers Business or any assets
used in the Fibers Business;
(xi) any agency, dealer, sales representative,
marketing or other similar agreement with respect to the
Fibers Business;
(xii) any agreement that limits the freedom of AFC
to compete in any line of business or with any person or
entity or in any area or to own, operate, sell, transfer,
pledge or otherwise dispose of or encumber any asset used in
the Fibers Business or that would so limit the freedom of
AFC or Bunzl after the Closing Date;
(xiii) any agreement providing for any purchase or
sale obligations with respect to the Fibers Business with a
duration of such obligations in excess of six months;
(xiv) any agreement with or for the benefit of (A)
any Affiliate (as defined below) of AFC; (B) any person or
entity directly or indirectly owning, controlling or holding
with power to vote, 5% or more of the outstanding voting
securities of AFC or any of its Affiliates, (C) any person or
entity 5% or more of whose outstanding voting securities are
directly or indirectly owned, controlled or held with power to
vote by AFC or any of its Affiliates or (D) any director or
officer of AFC or any of their respective Affiliates or any
"Associates" or members of the "Immediate Family" (as used
herein, the terms "Affiliate", "Associate" or "Member of the
Immediate Family" being respectively defined in Rule 12b-2 or
Rule 16a-1 of the Exchange Act) of such person or entity; and
(xv) any other agreement, commitment, arrangement
or plan with respect to the Fibers Business not made in the
ordinary course of business that is material to the business,
financial condition, results of operations or properties of
the Fibers Business.
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True and complete copies of all Material Contracts, including all
amendments thereto, have been delivered to Holdings. Except as set
forth on Schedule 4.1(n): (i) all Material Contracts are in full force
and effect and constitute the valid and binding obligations of AFC and,
to the best of AFC's knowledge, the other parties thereto; (ii) there
has not been and there currently is no breach of any Material Contract
by AFC or any of its Subsidiaries or, to the best of AFC's knowledge,
any other party thereto in any material respect; (iii) no event has
occurred that (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default
by AFC or any of its Subsidiaries thereunder entitling another party to
terminate a Material Contract; and (iv) the continuation, validity and
effectiveness of all such Material Contracts under the current terms
thereof and the current rights and obligations of AFC or any of its
Subsidiaries thereunder will in no way be affected, altered or impaired
by the consummation of the Merger. Except as disclosed in Schedule
4.1(n), there are no contracts or options to sell or lease any material
properties or material assets of AFC or any of its Subsidiaries other
than in the ordinary course of business.
(o) LEGAL PROCEEDINGS. Except as set forth in Schedule 4.1(o):
(i) there is no claim, action, suit, proceeding or investigation
pending or, to the best of AFC's knowledge, contemplated or threatened
against AFC or any Subsidiary or any of its properties or assets (or
any of its officers or directors in connection with the business of AFC
and its Subsidiaries) before any arbitrator or Governmental Entity,
domestic or foreign, that, in the event of a final adverse
determination as to any claim made therein, considered individually or
in the aggregate with all such other unscheduled claims, actions, suits
or proceedings, would have a Material Adverse Effect, or that seeks
treble damages, seeks damages in connection with the Merger or the
Fibers Sale Agreement or seeks to prohibit, restrict or delay
consummation of the Merger or the Fibers Sale Agreement or any of the
conditions to consummation of the Merger or the Fibers Sale Agreement
or to limit in any material manner the right of Holdings or Parent to
control the Surviving Corporation or any aspect of the business of AFC
or its Subsidiaries after the Effective Time, nor is there any
judgment, decree, injunction, ruling or order of any Governmental
Entity, arbitrator or any other person outstanding against AFC or any
Subsidiary having any such effect; and (ii) neither AFC nor any
Subsidiary is a party to or bound by any judgment, decree, injunction,
ruling or order of any Governmental Entity, arbitrator or any other
person against AFC or any Subsidiary that, when considered individually
or in the aggregate with all such other judgments, decrees,
injunctions, rulings or orders, would have a Material Adverse Effect.
(p) LABOR RELATIONS. AFC is in compliance in all material
respects with all federal and state laws respecting employment and
employment practices, terms and conditions of employment, wages and
hours, and is not engaged in any unfair labor or unlawful employment
practice. Except as set forth in Schedule 4.1(p), (i) there is no
unlawful employment practice or discrimination charge pending before
the Equal Employment Opportunity Commission ("EEOC") or any EEOC
recognized state
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<PAGE> 37
"referral agency;" (ii) there is no unfair labor practice charge or
complaint against AFC or any Subsidiary pending before the National
Labor Relations Board ("NLRB"); (iii) there is no labor strike,
dispute, slowdown or stoppage actually pending or, to the best of AFC's
knowledge, threatened against or involving or affecting AFC or any
Subsidiary; (iv) there is no NLRB representation question respecting
any of its employees; (v) there is no grievance or arbitration
proceeding pending and no written claim therefor exists; and (vi) there
is no collective bargaining agreement that is binding on AFC or any
Subsidiary. Except for any Material Contract disclosed pursuant to
Section 4.1(n), neither AFC nor any Subsidiary is a party to or bound
by any agreement, arrangement or understanding with any employee or
consultant that cannot be terminated on notice of ninety (90) or fewer
days without liability to AFC or a Subsidiary or that entitles the
employee or consultant to receive any salary continuation or severance
payment or retain any specified position with AFC or a Subsidiary.
(q) INSIDER INTERESTS. Except for this Agreement and as
disclosed or incorporated by reference in the AFC's 1995 Annual Report
on Form 10-K, AFC's proxy statement for its 1995 annual meeting of
shareholders, or on Schedule 4.1(q), no known affiliate, officer or
director of AFC or any Subsidiary (i) has any agreement with AFC or any
Subsidiary or any interest in any property, real or personal, tangible
or intangible, including without limitation trade names or trademarks
used in or pertaining to the business of AFC or any Subsidiary, except
for the normal rights as a shareholder or (ii) as of the date hereof,
to the best of AFC's knowledge, has any claim or cause of action
against AFC or any Subsidiary, except for accrued compensation and
benefits, expenses and similar obligations incurred in the ordinary
course of business (including reimbursement of medical expenses
pursuant to Employee Plans) with respect to directors or employees of
AFC or any Subsidiary.
(r) INTELLECTUAL PROPERTY. Schedule 4.1(r) lists all patents,
trademarks, service marks, trade names, copyrights, or applications for
the foregoing and all computer programs, firmware and documentation
relating thereto used in the Fibers Business (other than computer
software generally available to the public and having a purchase price
of less than $1,000 per application) used by AFC or a Subsidiary
("Intellectual Property") with an indication of any that are owned or
licensed by or to AFC or any affiliate of AFC or used or held for use
in the Fibers Business currently (the "Fibers Intellectual Property
Rights"). AFC or a Subsidiary owns or, to the extent disclosed on
Schedule 4.1(r), has adequate rights to use all Intellectual Property
that is material to the operation of AFC's or any of its Subsidiaries'
businesses as of the date hereof (the Agreements relating thereto are
referred to as the "Intellectual Property Agreements", all of which are
listed on Schedule 4.1(r) with an indication of any such agreements
that relate to the Fibers Intellectual Property Rights, which
agreements are referred to herein as the "Fibers Intellectual Property
Agreements"). As to any Intellectual Property owned by AFC or any
Subsidiary, such Intellectual Property is owned free and clear of all
material claims of
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others, including employees, former employees or independent
contractors of AFC or any Subsidiary, and neither AFC nor any
Subsidiary has received notice that the use of such Intellectual
Property in the business of AFC or the Subsidiaries violates or
infringes upon the claimed rights of others. As to the Intellectual
Property Agreements, except as set forth in Schedule 4.1(r), (i) all
such agreements are in full force and effect, (ii) neither AFC nor any
Subsidiary, nor to the best of AFC's knowledge any other party thereto,
is in material default under any such agreement, (iii) neither AFC nor
any Subsidiary is obligated to make any royalty or similar payments
under any such agreements except as stated therein, and (iv) the rights
of AFC or any Subsidiary under such agreements will not be affected by
the consummation of the Merger. Except as set forth in Schedule 4.1(r),
neither AFC nor any Subsidiary has granted to any person any license or
other right to use in any manner any of the Intellectual Property owned
by AFC or any Subsidiary or has granted any sublicense or right to use
any Intellectual Property licensed to AFC or any Subsidiary under the
Intellectual Property Agreements. Schedule 4.1(r) specifies as to each
Fibers Intellectual Property Right, as applicable: (i) the nature of
such Fibers Intellectual Property Right; (ii) the owner of such
Intellectual Property Right; (iii) the jurisdictions by or in which
such Fibers Intellectual Property Right is recognized without regard to
registration or has been issued or registered or in which an
application for such issuance or registration has been filed, including
the respective registration or application numbers; and (iv) licenses,
sublicenses and other agreements as to which AFC or any of its
affiliates is a party and pursuant to which any person or entity is
authorized to use such Fibers Intellectual Property Right, including
the identity of all parties thereto, a description of the nature and
subject matter thereof, the applicable royalty and the term thereof.
With respect to the Fibers Intellectual Property Rights, AFC has not
during the three years preceding the date of this Agreement been a
defendant in any action, suit, investigation or proceeding relating to,
or otherwise been notified of, any alleged claim or infringement of any
patents, trademarks, service marks or copyrights, and to the best of
AFC's knowledge there are no other claims or infringements by AFC or
any person or entity of any Fibers Intellectual Property Rights. No
Fibers Intellectual Property Right is subject to any outstanding
judgment, injunction, order, decree or agreement restricting the use
thereof by AFC with respect to the Fibers Business or restricting the
licensing thereof to any person or entity. AFC has not entered into any
agreement to indemnify any other person or entity against any charge of
infringement of any patent, trademark, service mark or copyright.
(s) INSURANCE. Schedule 4.1(s) lists all insurance policies or
contracts and fidelity bonds providing coverage to AFC and its
Subsidiaries as of the date hereof with an indication of any that
relate to the business, operations, employees or assets of the Fibers
Business. All such policies or contracts of insurance have been
provided to Holdings and are, in the opinion of AFC's Chief Financial
Officer, of a scope and in an amount usual and customary for businesses
engaged in the businesses of AFC and the Subsidiaries and are
sufficient for compliance with all requirements of law and of all
agreements to which AFC or any Subsidiary is a party as of the date
hereof. All insurance policies and fidelity bonds or other policies and
bonds providing substantially similar insurance coverage pursuant to
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<PAGE> 39
which any such insurance is provided have been in effect since 1992 and
remain in full force and effect, and no effective notice of
cancellation or termination of any such insurance policies has been
given to AFC or any Subsidiary by the carrier of any such policy or
comparable insurance. Through the date hereof, all premiums required to
be paid in connection therewith have been timely paid in full. There is
no claim pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds or in respect of which such underwriters have
reserved their rights.
(t) PROXY STATEMENT. The information in the definitive proxy
statement ("Proxy Statement") that will be distributed to shareholders
of AFC in connection with the meeting of such shareholders to approve
this Agreement and the Plan of Merger (the "AFC Shareholders Meeting"),
other than information supplied by Holdings or its authorized
representatives for use in the Proxy Statement will not, on the date or
dates the Proxy Statement is first mailed to shareholders of AFC and at
the time of the AFC Shareholders Meeting, as the Proxy Statement is
then amended or supplemented, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading or necessary to
correct any statement in any earlier filing with the SEC of the Proxy
Statement or amendment thereto or any earlier communication in the
preparation of which AFC participated (including the Proxy Statement)
to shareholders of AFC with respect to the Merger.
(u) EMPLOYEE AND FRINGE BENEFIT PLANS.
(i) SCHEDULE OF PLANS. Schedule 4.1(u) to this
Agreement lists each of the following plans that AFC or any of
its Subsidiaries or any ERISA Affiliate (as defined below)
either maintains, is required to contribute to or otherwise
participates in (or at any time during the preceding three
years maintained, contributed to or otherwise participated in)
or as to which AFC or any of its Subsidiaries or any ERISA
Affiliate has any unsatisfied liability or obligation, whether
accrued, contingent or otherwise:
(A) any employee pension benefit plan (as such
term is defined in the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")),
(B) any "multi-employer plan" (as such term is
defined in ERISA), or
(C) any other generally applicable compensation
plan, written welfare or fringe benefit plan or any
stock, retirement or retiree medical plan, of any
kind whatsoever, not included in the foregoing and
providing for benefits for, or the welfare of, any
or all of the current or former employees or agents
of
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<PAGE> 40
AFC or any of its Subsidiaries or any ERISA Affiliate
or their beneficiaries or dependents,
(all of the foregoing in items (A), (B), and (C) being
referred to as "Employee Plans"). "ERISA Affiliate" means each
trade or business (whether or not incorporated) which together
with AFC or any of its Subsidiaries is treated as a single
employer pursuant to Code Section 414(b), (c), (m) or (o). AFC
has provided to Holdings copies of the following: (1) each
written Employee Plan, as amended (including either the
original plan or the most recent restatement and all
subsequent amendments); (2) the most recent Internal Revenue
Service ("IRS") determination letter issued, if applicable;
(3) the most recent annual report on the Form 5500 series; (4)
each trust agreement, insurance contract or document setting
forth any other funding arrangement, if any, with respect to
each Employee Plan; (5) the most recent ERISA summary plan
description or other summary of plan provisions distributed to
participants or beneficiaries for each Employee Plan; (6) each
opinion or ruling from the IRS, the Department of Labor or the
Pension Benefit Guaranty Corporation ("PBGC") concerning any
Employee Plan; and (7) each current Registration Statement,
amendment thereto and prospectus relating thereto filed with
the SEC or furnished to participants in connection with any
Employee Plan if applicable.
(ii) QUALIFICATION. Except as set forth in Schedule
4.1(u), each Employee Plan that is intended to be a qualified
Plan under Code Section 401 or 501: (A) has received a current
favorable determination letter from the IRS to the effect that
the form of the plan satisfies Code Section 401(a) and that
its trust is tax-exempt under Code Section 501(a); (B) is not
currently subject to any assertion by any governmental agency
that it is not so qualified; and (C) to the best of AFC's
knowledge has been operated substantially in accordance with
its terms.
(iii) ACCRUALS; FUNDING.
(A) EMPLOYEE PENSION BENEFIT PLANS. AFC has
provided to Holdings copies of actuarial valuation
reports as of the end of each Employee Plan's most
recently ended fiscal year (or, each Employee Plan's
second most recently ended fiscal year if the
required information is not yet available for such
Employee Plan's most recently ended fiscal year)
(such year end, as applicable, being referred to as
the "Applicable Plan Year-End"), for each Employee
Plan subject to ERISA Title IV (including those for
retired, terminated or other former employees and
agents). Except as set forth in Schedule 4.1(u), none
of the Employee Plans subject to ERISA Title IV has:
(I) incurred any "accumulated funding deficiency" (as
such term is defined in ERISA); (II) incurred
employer liability with respect to any of such Plans
as determined in accordance with ERISA Sections 4062
or 4063; (III) become
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<PAGE> 41
subject to a Lien under Section 4.12(n); or (IV) been
the subject of a minimum funding waiver. Except as
set forth in Schedule 4.1(u), the actuarially
computed present value of the benefits of each such
Employee Plan, accrued to the Applicable Plan
Year-End, does not exceed the value of the assets of
such Employee Plan. There have been no material
changes in the financial condition of any of the
Employee Plans since the Applicable Plan Year-End.
(B) OTHER PLANS. AFC has provided to
Holdings information describing any liabilities under
any retiree medical, dental or life insurance
arrangement.
(C) CONTRIBUTIONS. Except as disclosed in
Schedule 4.1(u): (I) AFC, and its Subsidiaries and
each ERISA Affiliated have in all material respects
made full and timely payment of all amounts required
to be contributed under the terms of each Employee
Plan and applicable law, or required to be paid as
expenses under such Employee Plan, including PBGC
premiums and amounts required to be contributed under
Code Section 412; and (II) no excise taxes or Liens
are assessable against AFC, its Subsidiaries or any
ERISA Affiliate as a result of any nondeductible or
other contributions made or not made to an Employee
Plan or any other plan of an ERISA Affiliate.
(iv) REPORTING AND DISCLOSURE. Summary plan
descriptions and all other returns, reports, registration
statements, prospectuses, documents, statements and
communications which are required to have been filed,
published or disseminated under ERISA or other federal law and
the rules and regulations promulgated by the Department of
Labor under ERISA and the Treasury Department or by the SEC
with respect to the Employee Plans have been so filed,
published or disseminated or if not so filed, published or
disseminated, such failure to file, publish or disseminate
will not result in a Material Adverse Effect.
(v) PROHIBITED TRANSACTIONS; TERMINATIONS; OTHER
REPORTABLE EVENTS. Except as set forth in Schedule 4.1(u),
with respect to the Employee Plans neither AFC, any Subsidiary
of AFC, any ERISA Affiliate, any of the Employee Plans, any
trust or arrangement created under any of them, nor any
trustee, fiduciary, custodian, administrator nor any person or
entity holding or controlling assets of any of the Employee
Plans has engaged in any "prohibited transaction" (as such
term is defined in ERISA or the Code) for which there is no
exception which could subject any of the foregoing persons or
entities, or any person or entity dealing with them, to any
tax, penalty or other cost or liability of any kind except for
any tax, penalty, cost or liability that would not have a
Material Adverse Effect; and no "reportable event" (as such
term is defined in ERISA) has occurred with respect to any
Employee Plan subject to Title IV of ERISA; and no
investigation by a
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<PAGE> 42
Governmental Entity is currently underway or threatened with
respect to any Employee Plan.
(vi) CLAIMS FOR BENEFITS. Except as set forth in
Schedule 4.1(u), with respect to the Employee Plans, other
than claims for benefits arising in the ordinary course of the
administration and operation of the Employee Plans, as of the
date hereof, no claims, investigations or arbitrations are
pending or threatened against any Employee Plan or against
AFC, any Subsidiary of AFC, any ERISA Affiliate, any trust or
arrangement created under or as part of any Employee Plan, any
trustee, fiduciary, custodian, administrator or other person
or entity holding or controlling assets of any Employee Plan,
and to the best of AFC's knowledge, no basis to anticipate any
such claim or claims exists.
(vii) OTHER. With respect to the Employee Plans,
each of AFC, each Subsidiary of AFC and all ERISA Affiliates
have substantially complied with all of their obligations
under each of the Employee Plans and with all provisions of
ERISA and the Code and any and all other law applicable to
the Employee Plans except insofar as a failure to comply
would not have a Material Adverse Effect. No written notice
has been received by AFC or any Subsidiary of AFC of any
claim by any participant in the Employee Plans of any
violations of such laws, and to the best of AFC's knowledge,
no such claims are pending or threatened.
(viii) CREATION OF OBLIGATIONS BY REASON OF MERGER.
Except as set forth in such Schedule 4.1(u), the execution of
this Agreement or the consummation of the Merger will not
constitute an event under any Employee Plan that will or may
result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund
benefits with respect to any employee, including any
obligation to make a payment that would be nondeductible under
Code Section 280G or any other Code provision.
(ix) NO MULTI-EMPLOYER PLANS. Except as set forth
in Schedule 4.1(u), none of the Employee Plans is a
Multi-Employer Plan, and neither AFC, any Subsidiary of AFC
nor any ERISA Affiliate has any liability, joint or otherwise,
for any withdrawal liability (potential, contingent or
otherwise) under ERISA Title IV for a complete or partial
withdrawal from any Multi-Employer Plan.
(v) MAJOR CUSTOMERS. Schedule 4.1(v) sets forth (i) the name of
each customer of AFC or any of its Subsidiaries that during the year
ended December 31, 1996, generated revenue of $1,000,000 or more of
tobacco filters or $250,000 or more of medical diagnostic kit
components or other bonded fibers products or $1,000,000 or more of any
other products, (ii) the volume of such revenue from such customer for
such year, and (iii) the name of each such customer as to which AFC has
received a termination
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notice or a notice of a decrease or intended decrease in sales volume
or any intent to terminate or adversely modify in any material respect
its contractual or business relationship with the Fibers Business as a
result of the consummation of the Merger or the Fibers Sale Agreement.
(w) SECTIONS 13.1-725 THROUGH 13.1-727.1. The Board of
Directors of AFC has taken all action necessary to make the provisions
of Sections 13.1-725 through 13.1-727.1 of the VSCA inapplicable to the
Merger, including approval of the Merger and the acquisition, after
execution of the Agreement, by Holdings and by Parent of beneficial
ownership of more than 10% of the outstanding shares of AFC Common
Stock by a majority of AFC's "disinterested directors" (as defined in
Section 13.1-725 of the VSCA with respect to such acquisition by
Holdings and by Parent of beneficial ownership of more than 10% of the
outstanding shares of AFC Common Stock).
(x) ENVIRONMENTAL. Except as set forth in Schedule 4.1(x):
(i) no generation, storage, presence, contamination,
transport, emission, discharge or "release" (as such term is defined in
42 U.S.C. Section 9601(22)) of any Hazardous Substance (as defined
below) exists or is occurring (or has existed or occurred) from, or
upon, any property owned, leased, used or controlled at any time by AFC
or any Subsidiary in any manner that constituted or constitutes a
violation of, or that reasonably could be expected to give rise to
liabilities or obligations under any applicable Environmental Law;
(ii) there is no past or present action, activity,
event, condition or circumstance (A) that could be reasonably expected
to require AFC or any Subsidiary to incur costs of removal,
remediation, response or corrective action (and the terms "removal,"
"remediation," "response" and "corrective action" include the types of
activities covered by CERCLA (as defined below) pursuant to any
Environmental Laws (as defined below) with respect to any Hazardous
Substances or Waste (as defined below) or (B) that could be reasonably
expected to give rise to any common law or statutory liability
(including punitive or exemplary damages and whether assessed with
respect to personal injury or property damage, damage to the natural
resources or the environment or otherwise) on the part of AFC or any of
its Subsidiaries;
(iii) Either AFC or a Subsidiary of AFC has obtained,
maintained and complied with all permits, registrations, licenses, and
other authorizations, has maintained all records and has made all
filings required by applicable Environmental Laws (as defined below)
with respect to storage, presence, contamination, generation,
transport, emission, discharge or release into the environment of any
substance (including solids, liquids and gases) and the proper disposal
of such materials (including solid waste materials and petroleum or any
fractions or by-products of it) required for AFC's or any of its
Subsidiary's operations at past or present operating levels;
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(iv) Neither AFC nor any of its Subsidiaries has
received any notice of any action, activity, event, condition or
circumstance covered by any of clauses (i), (ii) or (iii) above or
otherwise alleging any liability under any Environmental Law;
(v) without limiting or being limited by the
foregoing, AFC and each of its Subsidiaries is (and has been) otherwise
in compliance with all Environmental Laws in respect of any of the
properties owned, leased, used or controlled at any time by AFC, of any
of the products, business operations or other activities of AFC and its
Subsidiaries, and no facts or circumstances exist that could be
reasonably expected to interfere with AFC's compliance with
Environmental Laws;
(vi) no polychlorinated biphenyls, radioactive
material, lead, asbestos-containing material, incinerator, surface
impoundment, lagoon, landfill, septic, wastewater treatment or other
disposal system or underground storage tank (active or abandoned) is
or has been present at any real property owned or leased by AFC or
any of its Subsidiaries in any manner that constituted or constitutes
a violation of, or that reasonably could be expected to give rise to
liabilities or obligations under any applicable Environmental Law;
(vii) no Hazardous Substance has been discharged,
disposed of, dumped, injected, deposited, spilled, leaked, emitted or
released at, on or under any real property owned or leased by AFC or
any of its Subsidiaries;
(viii) no real property owned or leased by AFC or any of
its Subsidiaries, nor any property to which Hazardous Substances
located on or resulting from the use of any asset or real property
owned or leased by AFC or any of its Subsidiaries have been transported
is listed or, to AFC's knowledge, proposed for listing on the National
Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined
in CERCLA) or on any similar federal, state, local or foreign list of
sites requiring investigation or cleanup;
(ix) there are no permits under Environmental Laws
that are either nontransferable or require consent, notification or
other action to remain in full force and effect following the
consummation of the transactions contemplated hereby;
(x) there has been no environmental investigation,
study, audit, test, review or other analysis conducted of which AFC has
knowledge in relation to the business or assets of AFC or any of its
Subsidiaries that has not been delivered to Holdings at least ten days
prior to the date hereof; and
(xi) none of the assets owned by AFC or any of its
Subsidiaries is located in New Jersey or Connecticut.
Schedule 4.1(x) lists all environmental site
assessments, internal audits, phase I audits, and tests and reports
regarding significant remediation or disposal activities, with respect
to the business, assets or operations of AFC or any of its Subsidiaries
or with
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respect to any real property owned or operated at any time by AFC or
any of its Subsidiaries. "Environmental Laws" means and includes all
applicable laws relating to protection of the environment, prevention
or minimization of pollution, control and tracking of Hazardous
Substances and Wastes, protection of human health or similar matters,
including those relating to the generation, use, collection, treatment,
storage, transportation, recovery, removal, discharge or disposal of
Hazardous Substances and any record keeping, notification and reporting
requirements of them. "Hazardous Substance" means and includes: [1] any
toxic or hazardous wastes, materials, pollutants or substances,
including petroleum or petroleum-based or related products and its
fractions and by-products, flammables, explosives, radioactive
materials, asbestos, polychlorinated byphenyls, pesticides, herbicides,
pesticide or herbicide containers, untreated sewage, and industrial
process sludge; [2] any substances defined as "hazardous substances" or
"toxic substances" or similarly identified in or pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Section 9601 et seq., as amended; [3] "hazardous
materials" as identified in or pursuant to the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq., as amended; [4]
"hazardous wastes" and "regulated substances" as identified in or
pursuant to the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., as amended; [5] any chemical substance or mixture
regulated under the Toxic Substance Control Act of 1976, 15 U.S.C.
Section 2601 et seq., as amended; [6] any "toxic pollutant" under the
Clean Water Act, 33 U.S.C. Section 466 et seq., as amended; [7] any
hazardous air pollutant under the Clean Air Act, 42, U.S.C. Section
7401 et seq., as amended; and [8] any toxic or hazardous wastes,
materials, pollutants or substances regulated under any other
applicable law, including any so-called "Super Fund" or "Super Lien"
legislation relating to environmental, pollution or similar matters.
"Waste" means and includes any garbage, refuse or waste, whether or not
involving Hazardous Substances. For purposes of this Section, the term
"AFC" shall include any entity which is, in whole or in part, a
predecessor of AFC.
(y) ACCURACY OF SCHEDULES, CERTIFICATES AND DOCUMENTS. All
information concerning AFC and its Subsidiaries contained in this
Agreement, in any certificate furnished to Holdings pursuant hereto and
in each schedule attached hereto is both complete (in that, except as
otherwise stated therein, it represents all the information called for
by the description of the respective schedule in this Agreement and
does not omit to state any material fact necessary to make the
statements contained therein not misleading) and accurate in all
material respects; and all documents furnished to Holdings pursuant to
this Agreement as being documents described in this Agreement or in any
schedule attached hereto are true and complete copies of the documents
that they purport to represent.
(z) BROKERS, FINDERS AND INVESTMENT BANKERS. None of AFC or any
of its Subsidiaries or any of its officers, directors or employees have
employed any broker, finder or investment banker or incurred any
liability for any investment banking fees, financial advisory fees,
brokerage fees or finders' fees in connection with the transactions
contemplated by this Agreement, except that AFC has arrangements with
Goldman, Sachs & Co., the complete terms of which have been disclosed
to Holdings.
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(aa) INVENTORIES AND RAW MATERIALS OF FIBERS BUSINESS. The
inventories set forth in the Fibers Balance Sheet were properly stated
therein (after making provisions for obsolescent, obsolete, slow-moving
and similar items) at the lesser of cost or fair market value
determined in accordance with GAAP consistently maintained and applied.
Since the Fibers Balance Sheet Date, the level of inventories related
to the Fibers Business has been maintained in the ordinary course of
business. All of the inventories recorded on the Fibers Balance Sheet
consist of, and all inventories related to the Fibers Business on the
Closing Date will consist of, items of a quality usable or saleable in
the normal course of the Fibers Business consistent with past practices
and are and will be in quantities sufficient for the normal operation
of the Fibers Business in accordance with past practice. The level of
raw materials held for use in the Fibers Business as of the Closing
Date will not exceed the normal requirements of the Fibers Business for
such raw materials for a period of 90 days.
(bb) RECEIVABLES OF THE FIBERS BUSINESS. All accounts, notes
receivable and other receivables (other than receivables collected
since the Fibers Balance Sheet Date) reflected on the Fibers Balance
Sheet are, and all accounts and notes receivable arising from or
otherwise relating to the Fibers Business at the Closing Date will be,
valid and genuine. All accounts, notes receivable and other receivables
arising out of or relating to the Fibers Business at the Fibers Balance
Sheet Date have been included in the Fibers Balance Sheet in accordance
with GAAP applied on a consistent basis.
(cc) EMPLOYEES OF FIBERS BUSINESS. Schedule 4.1(cc) sets forth
a true and complete list of the names and titles of all employees of
the Fibers Business as of January 31, 1997 and the annual salaries and
other compensation of such employees as of December 31, 1996. No key
employee of the Fibers Business has indicated to AFC that he intends to
resign or retire as a result of the transactions contemplated by this
Agreement or otherwise within one year after the Closing Date.
(dd) PRODUCTS OF THE FIBERS BUSINESS. Each of the products
produced or sold in connection with the Fibers Business is, and at all
times up to and including the sale thereof has been, (i) in compliance
in all material respects with all applicable federal, state, local and
foreign laws and regulations and (ii) fit for the ordinary purposes for
which it is intended to be used and conforms in all material respects
to any promises or affirmations of fact made on the container or label
for such product or in connection with its sale. Each of such products
contains adequate warnings, presented in a reasonably prominent manner,
in accordance with applicable laws, rules and regulations and current
industry practice with respect to its contents and use.
(ee) INTRACOMPANY ACCOUNTS. Schedule 4.1(ee) contains a
complete list of all intracompany balances as of the Fibers Balance
Sheet Date between AFC and its respective Affiliates, on the one hand,
and the Fibers Business, on the other hand. Except as set forth on
Schedule 4.1(ee), since the Fibers Balance Sheet Date there has not
been any accrual of liability by the Fibers Business to AFC or any of
its respective Affiliates or other transaction between the Fibers
Business, on the one hand, and AFC or any of its
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respective Affiliates, on the other hand, except in the ordinary course
of business of the Fibers Business and on terms no less favorable to
the Fibers Business than obtainable on an arm's-length basis.
(ff) FOREIGN CURRENCY EXPOSURES.
(i) Except as disclosed on Schedule 4.1(ff)(i), there
has been no sales within the three years ending on December 31,
1996 of the products of the Business to any person or entity
that denominated its pricing for such products in any currency
other than the United States dollar (other than any sales not
exceeding $50,000 per annum in the aggregate).
(ii) Except as disclosed on Schedule 4.1(ff)(ii), there
have been no purchases within the three years ending on
December 31, 1996, of any raw materials or inventory used in
the Fibers Business from any person or entity that denominated
its pricing for such raw materials or inventory in any currency
other than the United States dollar (other than any purchases
not exceeding $50,000 per annum in the aggregate).
(gg) COMPANY NAME. To the best of AFC's knowledge, AFC has
the exclusive right to use the name "Filtrona" and any derivations
thereof in the United States of America and Canada.
(hh) INDEBTEDNESS. Except as disclosed on Schedule 4.1(hh),
AFC does not have any Indebtedness, which in any case represents any
lien, encumbrance, obligation or other liability to which any asset of
the Fibers Business is subject or which was incurred in the operation
of the Fibers Business. As used in this Agreement, Indebtedness means,
at any date, without duplication, (i) all obligations of AFC for
borrowed money, (ii) all obligations of AFC evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations
of AFC to pay the deferred purchase price of property or services,
except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of AFC as lessee which are capitalized
in accordance with GAAP, (v) all non-contingent obligations of AFC to
reimburse any bank or other person or entity in respect of amounts
paid under a letter of credit or similar instrument, (vi) all
indebtedness secured by a Lien on any asset of AFC, whether or not
such indebtedness is otherwise an obligation of AFC and (vii) all
guarantees by AFC of indebtedness of another person or entity (each
such guarantee to constitute indebtedness in an amount equal to the
amount of such other person's or entity's indebtedness guaranteed
thereby).
4.2 REPRESENTATIONS AND WARRANTIES BY HOLDINGS, PARENT AND SUBCORP.
Holdings, Parent and SubCorp, jointly and severally, represent and warrant to,
and agree with, AFC as of the date hereof and as of the Closing as follows:
(a) ORGANIZATION AND QUALIFICATION, ETC. Holdings is a
limited liability company validly existing and in good standing under
the laws of the State of Georgia and has the
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necessary power and authority to own all its properties and assets and
to carry on its business as it is now being conducted. SubCorp and
Parent are corporations duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia and have the
corporate power and authority to own all their properties and assets
and to carry on their businesses as they are now being conducted. The
copies of Holdings's Articles of Organization and Parent's and
SubCorp's Articles of Incorporation and Bylaws, in each case, as
amended to date, which have been delivered to AFC, are complete and
correct, and such instruments, as so amended, are in full force and
effect at the date hereof.
(b) CAPITALIZATION. The authorized equity of Holdings consists
of percentage interests totaling 100%. The authorized capital stock of
Parent consists of 1,000 shares of common stock, no par value, of which
100 shares are validly issued and outstanding, fully paid and
non-assessable. The authorized capital stock of SubCorp consists of
1,000 shares of common stock, no par value, of which 100 shares are
validly issued and outstanding, fully paid and non-assessable. Holdings
owns all of the outstanding shares of Parent, and Parent owns all of
the outstanding shares of SubCorp.
(c) AUTHORITY. Each of Holdings, Parent and SubCorp has the
power and authority to execute and deliver this Agreement. SubCorp has
the power and authority to consummate the Merger. The execution and
delivery by Holdings of this Agreement has been duly authorized by its
Managers (or a duly authorized committee thereof). The execution and
delivery by each of Parent and SubCorp of this Agreement and the
consummation by SubCorp of the Merger in accordance with the Plan of
Merger has been duly authorized by its Board of Directors (or a duly
authorized committee thereof). No other action on the part of Holdings,
Parent or SubCorp is necessary to authorize the execution and delivery
of this Agreement by Holdings, Parent or SubCorp or the consummation by
SubCorp of the Merger in accordance with the Plan of Merger. This
Agreement has been duly executed and delivered by Holdings, Parent and
SubCorp and is a valid, binding and enforceable agreement of each of
Holdings, Parent and SubCorp. Parent as the sole shareholder of SubCorp
has approved this Agreement and the Plan of Merger.
(d) NON-CONTRAVENTION. The execution and delivery of this
Agreement by Holdings, Parent and SubCorp do not and, subject to the
expiration of the applicable waiting periods after the filings required
by the HSR Act referred to in paragraph (e) below, the consummation by
SubCorp of the Merger does not and will not (i) violate or conflict
with any provision of the Articles of Incorporation or Bylaws of Parent
or SubCorp or the Articles of Organization of Holdings or (ii) violate
or conflict with, or result (with the giving of notice or the lapse of
time or both) in a violation of or constitute a default under, any
provision of, or result in the acceleration or termination of or
entitle any party to accelerate or terminate (whether after the giving
of notice or lapse of time or both) any obligation or benefit under, or
result in the creation or imposition of any Lien upon any of the assets
or property of Holdings, Parent or SubCorp pursuant to any provision of
any contract, agreement, commitment, undertaking, arrangement or
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understanding to which Holdings or any of its Subsidiaries is a party
or bound or to which any of their assets or properties are subject (a
"Holdings Material Contract"), law, ordinance, regulation, order,
arbitration award, judgment or decree to which Holdings, Parent or
SubCorp is a party or by which either of them or their respective
assets or properties is bound and do not and will not violate or
conflict with any other restriction of any kind or character to which
Holdings, Parent or SubCorp is subject or by which any of their assets
or properties may be bound, and the same does not and will not
constitute an event permitting termination of any Holdings Material
Contract, if such violation, conflict, default, acceleration,
termination, entitlement, creation or imposition of Liens would, when
taken together with all other such violations, conflicts, defaults,
accelerations, terminations, entitlements to accelerate, creations and
impositions of Liens and events, affect materially and adversely the
financial condition or results of operations of Holdings and its
Subsidiaries taken as a whole.
(e) GOVERNMENTAL CONSENTS. Except for the filing of the Proxy
Statement and filings under Rule 13e-3 promulgated by the SEC under the
Exchange Act ("Rule 13e-3") with the SEC and any required filings with
state securities commissions, filings with the FTC and Justice as
required by the HSR Act, and the filing of the Articles of Merger with
the Commission, no consent, authorization, order or approval, or filing
or registration with, any Governmental Entity is required for or in
connection with the execution and delivery of this Agreement by
Holdings, Parent or SubCorp and the consummation by SubCorp of the
Merger.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30,
1996, there has not been any material adverse change in the business,
financial condition or results of operations of Holdings, Parent and
its Subsidiaries, taken as a whole.
(g) PROXY STATEMENT. The information with respect to Holdings,
its managers, officers, and Subsidiaries (including Parent and SubCorp)
and its negotiations with Bunzl that shall have been supplied by
Holdings or its respective authorized representatives in writing for
use in the Proxy Statement will not, on the date or dates the Proxy
Statement is first mailed to shareholders of AFC and at the time of the
AFC Shareholders Meeting, as the Proxy Statement is then amended or
supplemented, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they are made, not misleading or necessary to correct statements in any
earlier filing with the SEC or amendment thereto or any earlier
communication (in the preparation of which Holdings participated) to
shareholders of AFC with respect to the Merger.
(h) ACTIVITIES OF SUBCORP. SubCorp was formed solely for the
purpose of engaging in the transactions contemplated in this Agreement.
Except for obligations or liabilities incurred in connection with its
incorporation or organization or the negotiation and consummation of
this Agreement and the transactions contemplated hereby, SubCorp has
neither incurred any obligations or liabilities nor engaged in any
business or activities
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of any type or kind whatsoever or entered into any agreements or
arrangements with any person or entity.
(i) LEGAL PROCEEDINGS. There is no claim, action, suit,
proceeding or investigation pending or, to the best of Holdings',
Parent's and SubCorp's knowledge, contemplated or threatened against
Holdings, Parent's, SubCorp or any of their respective Subsidiaries (or
any of their respective officers, directors or managers) before any
arbitrator or Governmental Entity, foreign or domestic, that seeks to
prohibit, restrict or delay consummation of the Merger or any of the
conditions to consummation of the Merger nor is there any judgment,
decree, injunction, ruling or order of any Governmental Entity,
arbitrator or other person outstanding against Holdings, Parent,
SubCorp or any of their respective Subsidiaries having any such effect.
As used in this Agreement, the "best of Holdings', Parent's and
SubCorp's knowledge" and any other reference to the knowledge of
Holdings or its officers or managers or of Parent or SubCorp or their
officers or directors shall mean the actual knowledge, without
independent investigation, of Frances B. Bunzl and Bennett L. Kight.
(j) BROKERS, FINDERS AND INVESTMENT BANKERS. None of Holdings,
Parent, SubCorp or any of their respective Subsidiaries or any of their
respective officers, directors, managers or employees have employed any
broker, finder or investment banker or incurred any liability for any
investment banking fees, financial advisory fees, brokerage fees or
finders' fees in connection with the transactions contemplated by this
Agreement, except that SubCorp has arrangements with First Union
Capital Markets Corp., the complete terms of which have been disclosed
to AFC. SubCorp is solely responsible for and shall pay all of the fees
and expenses to which First Union Capital Markets Corp. is entitled in
connection with such arrangements.
(k) OBLIGATIONS TO FUND. Pursuant to the commitment referenced
in Section 6.2(h), SubCorp will have as of the Closing Date cash in an
amount sufficient to pay in U.S. dollars the Merger Consideration for
each share of AFC Common Stock upon surrender of all the shares of AFC
Common Stock after the consummation of the Merger and to fund the
payment of the Option Payments.
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 CONDUCT OF BUSINESS. During the period from the date hereof to the
Effective Time (except as required by law or as set forth on Schedule 5.1 and
except for the transactions contemplated by this Agreement):
(a) OPERATION BY AFC IN THE ORDINARY COURSE OF BUSINESS. AFC
shall, and shall cause each of its Subsidiaries to, (i) conduct its
operations according to its ordinary and usual course of business in
substantially the same manner as heretofore conducted and (ii) use its
reasonable efforts to preserve intact its business organization as
appropriate in
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the ordinary course of business consistent with past practice, to keep
available the services of its officers and employees and to maintain
satisfactory relationships with licensors, suppliers, distributors,
customers and others having business relationships with it. AFC shall
prepare and file all federal, state, local and foreign Tax Returns and
other tax reports, filings and amendments thereto required to be filed
by it, and allow Holdings, at its request, to review all such returns,
reports, filings and amendments relating to income taxes at AFC's
offices prior to the filing thereof, which review shall not interfere
with the timely filing of such returns.
(b) FORBEARANCES BY AFC. Except as contemplated by this
Agreement, neither AFC nor any of its Subsidiaries shall, without the
prior written consent of Holdings, which consent shall not be
unreasonably withheld:
(i) except as otherwise permitted pursuant to clause
(vi) below, intentionally incur any debt, liability or
obligation, direct or indirect, whether accrued, absolute,
contingent or otherwise, other than current liabilities
incurred in the ordinary and usual course of business, pay any
debt, liability or obligation of any kind other than such
current liabilities and current maturities of existing
long-term debt (including interest when due) in each case only
in accordance with the terms of the document creating and
evidencing such debt, fail to pay any debt when due or take or
fail to take any action, the taking of which, or the failure
to take of which, would permit any debt to be accelerated;
(ii) assume, guarantee, endorse or otherwise become
responsible for the obligations of any other individual, firm
or corporation, or make any loans or advances to any
individual, firm or corporation other than a Subsidiary
notwithstanding the foregoing, AFC and each of its
Subsidiaries shall be entitled to endorse checks and to make
cash advances to, and reimburse the business expenses of,
their respective directors, officers, employees and agents,
all in the ordinary course of business consistent with past
practice;
(iii) other than regular quarterly cash dividends at
the rate of $.28 per share on the AFC Common Stock consistent
with past practice, declare, set aside or pay any dividend
(whether in cash, capital stock or property) with respect to
its capital stock, or declare or make any distribution on,
redeem or purchase or otherwise acquire (other than the
acquisition of AFC Common Stock from optionees in payment of
the exercise price or withholding taxes upon the exercise of
employee stock options outstanding on the date hereof), any
AFC Common Stock, or split, combine or otherwise similarly
change the outstanding AFC Common Stock, or authorize the
creation or issuance of or issue or sell any shares of its
capital stock or any securities or obligations convertible
into or exchangeable for, or giving any person any right to
acquire from it, any shares of its capital stock, or agree to
take any such action, except for the issuance of AFC Common
Stock upon the exercise of options described in Section
4.1(b);
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(iv) mortgage, pledge or otherwise encumber any
property or asset, except in the ordinary and usual course of
business;
(v) sell, lease, transfer or dispose of any of its
properties or assets, waive or release any rights or cancel,
compromise, release or assign any indebtedness owed to it or
any claims held by it, except that AFC in the ordinary and
usual course of business may make such sales, leases,
transfers, dispositions, waivers, releases, cancellations,
compromises or assignments other than with respect to the
Fibers Business;
(vi) make any capital expenditure or any investment
of a capital nature (other than to any of its Subsidiaries)
except as described in Schedule 5.1(b)(vi), either by purchase
of stock or securities, contributions to capital, property
transfers or otherwise, or by the purchase of any property or
assets of any other individual, firm or corporation; provided,
however, that AFC may make capital expenditures in the Fibers
Business not in excess of $50,000 per instance or in excess of
$200,000 in the aggregate and may make capital expenditures
other than in the Fibers Business not in excess of $50,000 per
instance or in excess of $300,000 in the aggregate.
(vii) fail to use commercially reasonable efforts to
perform in all material respects its obligations under
Material Contracts (except those being contested in good
faith) or enter into, assume or amend any contract or
commitment that would have been a Material Contract in effect
on the date hereof other than contracts to provide goods or
services entered into in the ordinary and usual course of
business;
(viii) except for regularly scheduled increases in
accordance both as to timing and amount with normal prior
practice, increase in any manner the compensation or fringe
benefits of any of its officers or employees or pay or agree
to pay any pension or retirement allowance not required by any
existing plan or agreement to any such officers or employees,
or commit itself to or enter into any employment agreement or
any incentive compensation, deferred compensation, profit
sharing, stock option, stock appreciation rights, performance
shares, stock purchase, savings, consulting, severance,
retirement, pension or other "fringe benefit" plan, award or
arrangement with or for the benefit of any officer, employee
or other person or material consulting agreement;
(ix) permit any insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or
terminated or any of the coverage thereunder to lapse, unless
AFC makes reasonable efforts to obtain simultaneously with such
termination or cancellation replacement policies on
commercially reasonable terms providing substantially the same
coverage;
(x) amend its Articles of Incorporation or Bylaws;
(xi) enter into any union, collective bargaining or
similar agreement;
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(xii) purchase or sell any raw materials, inventory
or product used in, or produced by, the Fibers Business in any
transaction where the pricing for such raw materials,
inventory or product is in any currency other than the United
States dollar;
(xiii) purchase any intangible assets, including,
without limitation, patents or trademarks;
(xiv) enter into an agreement to do any of the
things described in clauses (i) through (xiii);
provided, however, that notwithstanding any other provision of this Section
5.1(b), AFC will not enter into a contract for construction of a building in
connection with the proposed capital expenditures for a new facility at A&B
Plastics or the purchase or renovation of any building for Tri-Lite Plastics
without the prior written consent of Holdings, unless the chairman of the
Special Committee of the AFC Board determines otherwise after requesting, and
allowing a period of time determined by the chairman to receive, the views of
Holdings.
In connection with the continued operation of the business of AFC and its
Subsidiaries between the date of this Agreement and the Effective Time, AFC
shall confer in good faith on a regular basis with one or more representatives
of Holdings designated in writing to receive reports on operational matters of
materiality and the general status of ongoing operations. AFC acknowledges that
Holdings does not thereby waive any rights it may have under this Agreement as a
result of this covenant to engage in consultations nor shall Holdings be
responsible for any decisions made by AFC's officers and directors with respect
to matters that are the subject of such consultation. Any act or failure to act
by AFC or any of its Subsidiaries consented to in writing by Holdings shall not
constitute a breach by AFC of any representation, warranty, covenant or
agreement contained in this Agreement.
(c) CONDUCT OF THE FIBERS BUSINESS. From the date hereof until
the Closing Date, AFC will promptly notify Holdings of any development
or occurrence relating to the Fibers Business not in the ordinary
course of business consistent with past practices or that contravenes
or is reasonably likely to contravene the provisions of Section 4.1(i).
(d) NOTICES OF CERTAIN EVENTS. AFC shall promptly notify
Holdings of each of the following of which it has notice:
(i) 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 Merger
or the Fibers Sale Agreement;
(ii) any notice or other communication from any
Governmental Entity in connection with the Merger or the
Fibers Sales Agreement;
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(iii) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge threatened against,
relating to or involving or otherwise affecting AFC or the Fibers
Business that, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to any
provision of this Agreement or that relate to the consummation of
the Merger or the Fibers Sale Agreement; and
(iv) the damage or destruction by fire or other
casualty of any asset of the Fibers Business or in the event
that any asset of the Fibers Business becomes the subject of any
proceeding or, to the knowledge of AFC, threatened proceeding for
the taking thereof or any part thereof or of any right relating
thereto by condemnation, eminent domain or other similar
governmental action.
5.2 AFC SHAREHOLDERS MEETING. Subject to the provisions of Article 7,
AFC covenants and agrees that its Board of Directors shall (a) cause the AFC
Shareholders Meeting to be duly called and held in accordance with AFC's
Articles of Incorporation, its Bylaws and applicable law as soon as reasonably
practicable to consider and vote upon the approval of this Agreement and the
Plan of Merger; (b) recommend approval of this Agreement and the Plan of Merger
to the holders of the AFC Common Stock; and (c) use commercially reasonable
efforts to cause such meeting to take place and to obtain the approval by the
holders of the AFC Common Stock of this Agreement and the Plan of Merger in
accordance with its Articles of Incorporation, Bylaws and the VSCA.
5.3 BEST EFFORTS; FURTHER ASSURANCES; COOPERATION. Subject to the other
provisions in this Agreement, the parties hereto shall each use commercially
reasonable efforts to perform their respective obligations herein and to take,
or cause to be taken or do, or cause to be done, all things necessary, proper or
advisable under applicable law to obtain all regulatory approvals, consents,
authorizations and orders and satisfy all conditions to the obligations of the
parties under this Agreement and to cause the Merger to be carried out promptly
in accordance with the terms hereof and shall cooperate fully with each other
and their respective officers, directors, employees, agents, counsel,
accountants and other designees in connection with any steps required to be
taken as part of their respective obligations under this Agreement, including
without limitation:
(a) REGULATORY ACTION. AFC and Holdings shall each promptly,
but in no event later than 15 days after the date of this Agreement,
make the respective filings and submissions required under the
provisions of the HSR Act relating to the Merger and to the Fibers Sale
Agreement, and thereafter shall comply fully and promptly with any
request for additional information ("second request"), voluntary
request to submit information, third party subpoena or civil
investigative demand that might be issued to or served on such party in
connection with any investigation under the HSR Act. AFC and Holdings
shall each use commercially reasonably efforts to take, or cause to be
taken, all actions and do, or cause to be done, all things necessary,
proper or advisable under applicable law or regulations to obtain any
required approval, action, or inaction of any
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Governmental Entity with jurisdiction over the Merger or the Fiber
Sales Agreement, so that the Merger may be permitted to close in
accordance with its terms.
(b) CERTAIN LEGAL PROCEEDINGS. In the event any claim, action,
suit, investigation or other proceeding by any Governmental Entity or
other person is commenced which questions the validity or legality of
the Merger or seeks damages in connection therewith, the parties agree
to cooperate and use their best efforts to defend against such claim,
action, suit, investigation or other proceeding and, if an injunction
or other order is issued in any such action, suit or other proceeding,
to use commercially reasonable efforts to have such injunction or other
order lifted or appealed and to cooperate reasonably regarding any
other impediment to the consummation of the Merger; provided, however,
that nothing in this subsection (b) shall require either Holdings,
Bunzl or AFC to divest any assets or business as a requirement of
consummating the Merger.
(c) NOTICE. Each party shall give prior written notice to the
other of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would cause, or any assertion or threatened
assertion of a claim that if pursued would cause any representation or
warranty of AFC, Holdings, Parent or SubCorp, as the case may be,
contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Closing Date or that
will result in the failure to satisfy any of the conditions specified
in Article 6 and (ii) any failure of AFC, Holdings or SubCorp, as the
case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
5.4 INVESTIGATION; CONFIDENTIALITY.
(a) AFC agrees to permit Holdings, Bunzl and their authorized
representatives to have or cause them to be permitted to have, after
the date hereof and until the Effective Time, reasonable access to the
premises, books and records of AFC and its Subsidiaries at reasonable
hours, and the officers of AFC and its Subsidiaries will furnish
Holdings and Bunzl with such financial and operating data and other
information with respect to AFC's and its Subsidiaries' businesses and
properties and permit Holdings and Bunzl to meet with such AFC
employees as Holdings or Bunzl shall from time to time reasonably
request; provided that AFC shall be permitted to restrict Bunzl's
access to commercially sensitive information regarding any business of
AFC. AFC will request its auditing firm to permit Holdings and its
representatives, including its auditing firm, to review the work papers
of the auditing firm of AFC relating to their examination of the AFC
Financial Statements. No investigation by Holdings heretofore or
hereafter made shall affect the representations and warranties of AFC,
and each such representation and warranty shall survive any such
investigation, subject to Section 7.5.
(b) Holdings agrees to permit AFC and its authorized
representatives to have or cause them to be permitted to have, after
the date hereof and until the Effective Time, such information with
respect to Holdings' business as AFC shall from time to time reasonably
request.
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(c) Except as contemplated by this Agreement or as necessary to
carry out the transactions contemplated hereby, all information or
documents furnished hereunder shall be subject to the Confidentiality
Agreement between Holdings and AFC dated June 25, 1996, and the letter
agreement between Goldman, Sachs & Co., on behalf of AFC and Bunzl
dated December 13, 1996 (collectively, the "Confidentiality
Agreement").
5.5 EXPENSES. Except as otherwise provided in this Agreement, whether
or not the Merger is consummated, all costs and expenses (including any
brokerage commissions or any finder's or investment banker's fees and including
attorney's and accountants' fees) incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses.
5.6 PROXY STATEMENT. Holdings and AFC shall cooperate in taking steps
to (a) prepare and file with the SEC as soon as is practicable the Proxy
Statement, including all information required by Rule 13e-3 and (b) use
reasonable efforts to have the Proxy Statement cleared by the SEC as promptly as
practicable. Promptly after the Proxy Statement has been cleared by the SEC, AFC
shall mail the Proxy Statement to the holders of AFC Common Stock and AFC shall
use reasonable efforts to solicit proxies in favor of the approval of this
Agreement and the Plan of Merger. Holdings shall also take any action required
to be taken pursuant to Rule 13e-3 or under state blue sky or other securities
laws in connection with the Merger. If at any time prior to the AFC Shareholders
Meeting, Holdings or AFC reasonably believes that the Proxy Statement includes
an untrue statement of a material fact or omits a material fact required to be
stated therein, the parties shall cooperate to distribute any required
supplement or amendment to the Proxy Statement, and to comply with any
resolicitation requirements, and shall provide to each other all necessary
information for such amendment or supplement, all of which shall be true and
correct in all material respects and shall not omit any material fact required
to be included in such amendment or supplement.
5.7 PERIODIC REPORTS. Each of AFC and Holdings covenants that it will
file with the SEC on a timely basis all periodic reports and other filings
required to be filed by it by the federal securities laws and regulations of the
SEC thereunder from the date of this Agreement through the Effective Time, and
that each such report or filing will comply in all material respects with the
federal securities laws and regulations of the SEC and will not contain any
untrue statement of material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
5.8 PUBLIC ANNOUNCEMENTS. The timing and content of all public
announcements regarding any aspect of this Agreement or the Merger to the
financial community, government agencies, employees or the general public shall
be mutually agreed upon in advance unless Holdings or AFC is advised in writing
by legal counsel that any such announcement or other disclosure not mutually
agreed upon in advance is required to be made by applicable law or applicable
NASDAQ rules or regulations and then only after making a reasonable attempt to
comply with provisions of this Section 5.8.
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5.9 ANTITRUST CHALLENGES. In the event a suit is instituted challenging
the Merger as violative of the antitrust laws, each of Holdings and AFC will use
commercially reasonable efforts to defend against such suit. Holdings and AFC
will use commercially reasonable efforts to take such action as may be required
by any federal or state court of the United States, in any suit brought by a
private party or Governmental Entity challenging the Merger or the Fibers Sale
Agreement as violative of the antitrust laws, in order to avoid the entry of, or
to effect the dissolution of, any injunction, temporary restraining order or
other order that has the effect of preventing the consummation of the Merger or
the Fibers Sale Agreement, including pursuing an appeal thereof; provided,
however, that nothing in this Section 5.9 shall require either Holdings or AFC
to divest any assets or business as a requirement of consummating the Merger or
the Fibers Sale Agreement.
5.10 EMPLOYEE MATTERS.
(a) STAY BONUSES AND SEVERANCE AGREEMENTS. Stay bonuses and
severance agreements for employees other than John Morgan will be
limited to those described on Schedule 5.10.
(b) EMPLOYEE BENEFIT PLAN MATTERS.
(i) Holdings agrees that AFC will continue in effect,
without amendment (except with respect to any amendment
required by the Code, ERISA or other applicable law or
required to carry out Holdings' undertakings hereinafter set
out), until December 31, 1997, the Employee Plans (other than
the Employee Stock Ownership Plan of American Filtrona
Corporation (the "ESOP")) covering employees who continue
employment with Holdings or an affiliate of Holdings.
(ii) With respect to the American Filtrona Corporation
401(k) Savings and Profit Sharing Plan (the "Profit
Sharing Plan"), Holdings will obtain and enforce an agreement
by Purchaser to make a contribution for 1997 to a
substantially comparable profit sharing plan for the
employees of the Fibers Business (the "Purchaser Profit
Sharing Plan") equal to the amount accrued on the books of
the Fibers Business as of the Closing Date as a liability
(computed in accordance with past practices) for a profit
sharing contribution with respect to the employees who accept
employment with the purchaser of the Fibers Business (the
"Purchaser") (the "Transferred AFC Employees") (such
liability is hereafter referred to as the "Fibers Profit
Sharing Liability"). Holdings agrees that AFC will make a
profit sharing contribution to the Profit Sharing Plan equal
to at least the excess of (A) the amount accrued on the books
of AFC as of the Closing Date as a liability (computed in
accordance with past practices) for a profit sharing
contribution to the Profit Sharing Plan over (B) the amount
of the Fibers Profit Sharing Liability and will make a total
contribution comparable to the 1996 contribution for
employees of the Plastics Business if the 1997 earnings
before interest and taxes of the Plastics Business
approximate such earnings in 1996. Holdings agrees to obtain
and enforce an agreement by Purchaser that the Purchaser
Profit Sharing Plan shall have a salary
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reduction arrangement under which all Transferred AFC
Employees will have all service credited under the Profit
Sharing Plan credited under the Purchaser Profit Sharing Plan
for all plan purposes, including eligibility and vesting, and
to cause AFC to transfer to the Purchaser Profit Sharing Plan
the account balances under the Profit Sharing Plan of all
Transferred AFC Employees.
(iii) Holdings agrees to obtain and enforce an
agreement by Purchaser to contribute to the Purchaser Profit
Sharing Plan an amount equal to the liability (computed in
accordance with past practices) accrued on the books of the
Fibers Business as of the Closing Date for a contribution to
the ESOP with respect to Transferred AFC Employees (the
"Purchaser ESOP Contribution"). Holdings agrees to cause AFC
to contribute to the ESOP an amount equal to the excess of (A)
the liability (computed in accordance with past practices)
accrued on the books of AFC as of the Closing Date over (B)
the amount of the Purchaser ESOP Contribution, and to amend
the ESOP to provide that all AFC employees, including all
Transferred AFC Employees, are 100% vested in their accrued
benefits thereunder.
(iv) Holdings agrees to use its best efforts to
cause Purchaser to assume sponsorship of the following plans
covering employees employed in the Fibers Business: the
American Filtrona Corporation Pension Plan for Hourly
Employees and the American Filtrona Corporation 401(k) Plan
for Hourly Employees. Holdings agrees to use its best efforts
to cause Purchaser to establish a defined benefit plan that
(A) covers AFC's salaried employees who become salaried
Transferred AFC Employees; (B) meets the requirements of
Section 401(a) of the Code (the "Purchaser Retirement Plan");
and (C) provides that all service of such salaried Transferred
AFC Employees credited with the American Filtrona Corporation
Retirement Plan (the "AFC Retirement Plan") shall be credited
under the Purchaser Retirement Plan for all plan purposes,
including eligibility, vesting and benefit accrual. Holdings
agrees to cause an amount to be transferred from the trust
maintained under the AFC Retirement Plan to the trust under
the Purchaser Retirement Plan calculated pursuant to the
applicable provisions of Section 414(l) of the Code, with
respect to salaried Transferred AFC Employees.
(v) Holdings agrees to use its best efforts to
cause Purchaser (A) to establish and maintain through
December 31, 1997 employee benefit plans (as defined in
Section 3(3) of ERISA) for Purchaser's employees that are in
the aggregate approximately equal to the Employee Plans
sponsored and maintained by AFC for its salaried and hourly
employees; and (B) to ensure that any of Purchaser's employee
welfare benefit plans (as defined in Section 3(1) of ERISA)
credit Transferred AFC Employees with any internal limits,
deductibles or co-payments satisfied by such employees under
AFC's employee welfare benefit plans.
(vi) Holdings will use its best efforts to cause
Purchaser to offer employment to all AFC employees who are
active employees at the Closing Date.
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(c) LABOR MATTERS. Holdings agrees to use its best
efforts to cause Purchaser to assume any collective bargaining
agreement with respect to employees of the Fibers Business in effect as
of the date of the sale of the Fibers Business.
5.11 ACCOUNTANT'S LETTERS. AFC agrees to use commercially reasonable
efforts to cause to be delivered to Holdings a letter of Coopers & Lybrand
L.L.P., independent auditors for AFC, dated the date of the Proxy Statement and
the Closing Date (or such other dates reasonably acceptable to the parties) with
respect to certain financial statements and other financial information included
in the Proxy Statement, which letter shall be in form reasonably satisfactory to
Holdings.
5.12 NON SOLICITATION; COMPETING OFFERS. From the date of this
Agreement until the Closing Date, neither AFC nor its officers, directors or
agents shall be entitled to solicit or encourage, in any manner, including by
way of furnishing information, any merger, acquisition, or takeover proposal or
offer for AFC or its shares or any significant portion of its assets or
businesses, however structured or to be effected, unless the Board of Directors
of AFC concludes in good faith, after receiving the advice of its counsel, that
the failure to take such action would violate the fiduciary obligation of the
directors of AFC under applicable law; provided, however, that Holdings and
Bunzl shall be notified promptly of the principal terms of all bona fide
competing offers made to AFC, and AFC shall be subject to any applicable
obligation to pay the Expenses and the Fee set forth in Section 7.4 in the event
this Agreement is terminated.
5.13 CONDITIONS IN FIBERS SALE AGREEMENT AND FINANCING. Holdings shall
use its commercially reasonable efforts to have satisfied all conditions to the
obligations of Bunzl in the Fibers Sale Agreement and to the financing
obligations of Wachovia Bank of North Carolina, N.A. and other banks pursuant to
the commitment letter referenced in Section 6.2(h) except for such conditions
that are not within the control of Holdings and its Affiliates.
5.14 INVESTMENT SECURITIES. AFC agrees that at the Effective Time all
of its investment securities will be redeemable at par for cash within seven
days or in a form traded in established securities markets.
5.15 FILPAC INDEBTEDNESS. AFC agrees to document the indebtedness of
Filpac, Inc. to AFC to the reasonable satisfaction of Holdings promptly after
execution of this Agreement.
5.16 ACCESS TO INFORMATION.
(a) From the date hereof until the Closing Date, AFC (i) will
give Bunzl, its counsel, financial advisors, auditors and other
authorized representatives full access to the offices, properties,
books and records of AFC relating to the Fibers Business, (ii) will
furnish to Bunzl, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information relating to the Fibers Business as such persons or entities
may reasonably request and (iii) will instruct the employees, counsel
and financial advisors of AFC to cooperate with Bunzl in its
investigation of the Fibers Business. Any investigation pursuant to
this Section shall be
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conducted in such manner as not to interfere unreasonably with the
conduct of the business of AFC.
(b) AFC will furnish, to Bunzl and its counsel copies of those
agreements, contracts and commitments of AFC relating to the Fibers
Business (and, if such agreements, contracts and commitments are not
reduced to writing, reasonable written details of the same) which (i)
have previously been withheld from Bunzl or (ii) include obligations of
confidentiality or impose restrictions on disclosure by AFC (clauses
(i) and (ii), collectively, the "Confidential Agreements") no less than
5 business days prior to the Closing. The Confidential Agreements shall
include, without limitation, agreements, contracts and commitments
relating to research and/or development work and projects or contracts
or agreements with or commitments to or understandings with suppliers
or customers of the Fibers Business. Bunzl shall, if requested, enter
into confidentiality undertakings with regard to such Confidential
Agreements on such terms as Bunzl may agree, with the counterparties to
such Confidential Agreements.
(c) AFC will disclose to Bunzl, its counsel, auditors and other
authorized representatives and/or give Bunzl, its counsel, auditors and
other authorized representatives, access to, not less than 5 business
days before the Closing:
(i) The commercial terms upon which products, goods,
materials and services are supplied by the Fibers Business to
its customers including, but not limited to, the price at
which such products, goods, materials and services are sold
and details of any rebates, discounts, commissions and
extended credit terms paid or given to customers;
(ii) The commercial terms upon which products, goods,
materials and devices are supplied to the Fibers Business by
its suppliers including, but not limited to, the price at
which such products, goods, materials and services are
supplied to the Fibers Business and details of any rebates,
discounts and commissions paid or given to the Fibers
Business;
(iii) The financial budgets and forecasts and
business plans of or relating to the Fibers Business
including, but not limited to, full details of the 1997
forecast and budget and the 1997 to 1999 plan and any notes
and commentaries forming part of or relating to such
forecasts, budgets and plans;
(iv) The Jefferson Davis and White Pine facilities
and the Pine Glen warehouse and the Fibers Business; research
and development facilities;
(v) Written details of any significant business or
commercial arrangement, commitments or understandings (whether
or not reduced to writing and whether or not legally binding)
related to the Fibers Business; and
(vi) Such access to the employees and advisors of AFC
as may be necessary or useful in connection with any of the
foregoing.
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5.17 SETTLEMENT OF LAWSUITS. In 1994, the Office of Federal Compliance
Programs issued a Notice of Violation in which it alleged that two employment
screening tests used by AFC were unlawful. AFC will not settle this matter
without the prior written consent of Holdings, and will not admit any liability
in connection therewith.
5.18 ASSUMPTION OF LIABILITIES. AFC acknowledges and agrees that, upon
the consummation of the Merger, the Surviving Corporation shall be the successor
to, and assume, all the obligations of SubCorp under the Fibers Sale Agreement.
ARTICLE 6
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
of each party to effect the Merger shall be subject to the fulfillment at or
prior to the Closing of each of the following conditions:
(a) AFC SHAREHOLDER APPROVAL. This Agreement and the Plan of
Merger shall have been adopted at the AFC Shareholders Meeting duly
called and held in accordance with AFC's Articles of Incorporation and
Bylaws and the VSCA, by the holders of more than two-thirds of the
shares of AFC Common Stock outstanding and entitled to vote thereon.
(b) HSR ACT. All applicable waiting periods under the HSR Act
shall have expired or been terminated.
(c) PROXY STATEMENT. No proceedings under the proxy rules or
Rule 13e-3 of the SEC pursuant to the Exchange Act and with respect to
the Merger shall be pending before or threatened by the SEC.
(d) INJUNCTION, ETC. The consummation of the Merger will not
violate the provisions of any injunction, order, judgment, decree, law
or regulation applicable or effective with respect to AFC, Holdings,
Parent, SubCorp or their respective officers, managers and directors.
No suit or proceeding shall have been instituted by any person, or, to
the best AFC's or Holdings' knowledge, shall have been threatened by
any Governmental Entity, that seeks to (i) prohibit, restrict or delay
consummation of the Merger or to limit in any material respect the
right of Holdings to control any material aspect of the business of
Holdings and its Subsidiaries or AFC and its Subsidiaries after the
Effective Time, or (ii) to subject Holdings or AFC or their respective
directors or officers to material liability on the ground that it or
they have breached any law or regulation or otherwise acted improperly
in relation to the Merger; provided, however, that in the case of any
action, suit or proceeding instituted by a person other than a
Governmental Entity, such action, suit or proceeding has a substantial
likelihood of success in the opinion of legal counsel for the party
invoking this provision.
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6.2 CONDITIONS TO OBLIGATIONS OF HOLDINGS AND SUBCORP. Consummation of
the Merger is subject to the fulfillment to the reasonable satisfaction of
Holdings, prior to or at the Closing, of each of the following conditions:
(a) CONSENTS, AUTHORIZATIONS, ETC. The consents required under
the items listed on Schedule 4.1(e) and all consents, authorizations,
orders and approvals of, and filings and registrations with, any
Governmental Entity or any nongovernmental third party (other than the
filing of the Articles of Merger with the Commission) that are required
for or in connection with the execution and delivery by AFC of this
Agreement and the consummation by AFC of the Merger shall have been
obtained or made, except where the failure to obtain such consent,
authorization, order or approval would not have a Material Adverse
Effect.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of AFC contained in this Agreement shall have been true and
correct in all respects at the date hereof and, except for changes
contemplated in this Agreement, shall also be true and correct in all
respects at and as of the Closing Date, with the same force and effect
as if made at and as of the Closing Date, except in either case as such
representations and warranties by their terms relate only to dates or
periods of time prior to the Closing Date, or, in any event, except
where the failure of representations or warranties to be true and
correct (determined for this purpose without taking into consideration
any materiality qualifier contained in such representation or warranty)
in the aggregate would not have a Material Adverse Effect, and AFC
shall have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed or
complied with by it at or prior to the Closing Date.
(c) CERTIFICATE. (i) AFC shall have delivered to Holdings a
certificate, dated as of the Closing Date, of the Chief Executive
Officer, the Chief Operating Officer, the Chief Financial Officer and
the Vice President, Bonded Fiber Products of AFC to the effect that to
the best of such officer's knowledge the conditions specified in
paragraph (b) of this Section 6.2 have been satisfied. Such certificate
shall also specify the number of issued and outstanding shares of AFC
Common Stock as of the Closing Date.
(d) OPINION AND CONFIRMATION OF AFC'S COUNSEL. Holdings,
Parent and SubCorp shall have received an opinion and confirmation,
dated as of the Closing Date, of Hunton & Williams, counsel to AFC,
substantially to the effect set forth in Exhibit E hereto, with such
exceptions and limitations as shall be reasonably satisfactory to
Holdings.
(e) LETTERS FROM ACCOUNTANTS. Holdings shall have received the
letter of Coopers & Lybrand L.L.P. contemplated by Section 5.11.
(f) ADDITIONAL CERTIFICATES, ETC. AFC shall have furnished to
Holdings such additional certificates, opinions and other documents as
Holdings may have reasonably requested as to any of the conditions set
forth in Sections 6.1 and 6.2.
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(g) RESIGNATIONS. AFC shall have delivered to Holdings, to the
extent requested by Holdings, the written resignations of the directors
of AFC.
(h) FINANCING. All conditions in the commitment of financing
for the Merger from Wachovia Bank of North Carolina, N.A. and, if
applicable, other banks as set forth in that certain commitment letter
dated February ___, 1997 and attached hereto as Exhibit F that are not
within the control of SubCorp and its Affilliates shall have been
satisfied, all of which conditions SubCorp agrees to use its best
commercial efforts to have satisfied.
(i) SATISFACTION OF CONDITIONS IN FIBERS SALE AGREEMENT. All
conditions to the obligations of Bunzl in the Fibers Sale Agreement
that are not within the control of Holdings and its Affiliates shall
have been satisfied.
(j) MORGAN CONSULTING AND NON-COMPETITION AGREEMENT. John L.
Morgan shall have executed and delivered a Consulting and
Non-Competition Agreement with Bunzl in the form of Exhibit B to the
Fibers Sale Agreement.
(k) MORGAN SEVERANCE AGREEMENT. AFC and John L. Morgan shall
have executed a severance agreement providing for termination of his
employment by AFC and its Subsidiaries as of the Effective Time
providing for (i) a severance payment of $800,000 at Closing (in lieu
of all salary and bonuses payable after the Effective Time and all
additional accruals or contributions that would be payable after the
Effective Time with respect to his interest in the AFC Pension Plan,
SERP and Profit-Sharing and 401(k) Plan and in lieu of continued
participation in welfare plans other than health insurance plans); and
(ii) continued participation until December 31, 1999 as a retiree, in
AFC's medical insurance plan (if generally available for retirees
thereunder) on the same contributing basis as now in effect; provided,
however, that Mr. Morgan will pay any premiums in excess of $9,000 for
such medical insurance coverage during 1997 through 1999; and (iii)
indemnification holding Mr. Morgan harmless with respect to the
application of the provisions of Sections 280G and 4999 of the Code,
respectively, including indemnification for any excise tax obligations
and any federal, state or local income, employment-related and excise
tax obligations with respect to the indemnification payments.
(l) TRANSFER AGENT'S CERTIFICATE. AFC shall have delivered to
Holdings a certificate of the Transfer Agent for the AFC Common Stock
specifying the number of issued and outstanding shares as of the
Closing Date.
6.3 CONDITIONS TO OBLIGATIONS OF AFC. Consummation of the Merger
is subject to the fulfillment to the reasonable satisfaction of or waiver by
AFC, prior to or at the Effective Time, of each of the following conditions:
(a) CONSENTS, AUTHORIZATIONS, ETC. All consents,
authorizations, orders and approvals of, and filings and registrations
with, any Governmental Entity or non-governmental third party (other
than the filing of the Articles of Merger with the Commission), which
are required for or in connection with the execution and delivery of
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this Agreement by Holdings, Parent and SubCorp and the consummation by
SubCorp of the Merger shall have been obtained or made except where the
failure to obtain such consent, authorization, or approval would not
have a material adverse effect on the consolidated financial condition,
results of operations, business or prospects of Holdings and its
Subsidiaries taken as a whole.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Holdings, Parent and SubCorp contained in this Agreement
shall have been true and correct in all respects at the date hereof and
shall also be true and correct in all respects at and as of the Closing
Date, except for changes contemplated in this Agreement, with the same
force and effect as if made at and as of the Closing Date or except as
such representations and warranties by their terms relate only to
periods of time prior to the Closing Date or except where the failure
of any representation or warranty to be true and correct would not have
a material adverse effect on the consolidated financial condition,
results of operation, business or prospects of Holdings and its
Subsidiaries taken as a whole; and Holdings shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or
prior to the Closing Date.
(c) CERTIFICATE. Holdings shall have delivered to AFC a
certificate, dated as of the Closing Date, of the Chief Executive
Officer of Holdings to the effect that the conditions specified in
paragraph (b) of this Section 6.3 have been satisfied.
(d) OPINION AND CONFIRMATION OF HOLDINGS', PARENT'S AND
SUBCORP'S COUNSEL. AFC shall have received an opinion and confirmation,
dated as of the Closing Date, of Sutherland, Asbill & Brennan, L.L.P.
counsel to Holdings, Parent and SubCorp, to the effect set forth in
Exhibit E hereto, with such exceptions and limitations as shall be
reasonably satisfactory to AFC.
(e) ADDITIONAL CERTIFICATES, ETC. Holdings shall have
furnished to AFC such additional certificates, opinions and other
documents as AFC may have reasonably requested as to any of the
conditions set forth in Sections 6.1 and 6.3.
(f) SATISFACTION OF CONDITIONS IN FIBERS SALE AGREEMENT. All
conditions to the obligations of Bunzl in the Fibers Sale Agreement
shall have been satisfied, and the cash consideration payable
thereunder to the Surviving Corporation at Closing shall have been made
available to the Surviving Corporation.
(g) FAIRNESS OPINION. The fairness opinion of Goldman, Sachs &
Co. with respect to the Merger shall not have been withdrawn.
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ARTICLE 7
TERMINATION AND ABANDONMENT
7.1 TERMINATION AND ABANDONMENT. This Agreement and the Merger may
be terminated and abandoned at any time prior to the Effective Time:
(a) By mutual action of the Board of Directors of AFC and the
Managers of Holdings, whether before or after any action by AFC's
shareholders.
(b) By Holdings:
(i) if any event shall have occurred as a result of
which any condition set forth in Section 6.2 is no longer
capable of being satisfied;
(ii) if there has been a breach by AFC of any
representation or warranty contained in this Agreement that
would have a Material Adverse Effect, or there has been a
material breach of any of the covenants or agreements set
forth in this Agreement on the part of AFC, which breach is
not curable, or, if curable, is not cured within 15 days after
written notice of such breach is given by Holdings to AFC;
(iii) if AFC (or its Board of Directors) shall have
authorized, recommended, proposed or publicly announced its
intention to enter into a Competing Transaction (as defined
below) that has not been consented to in writing by Holdings;
or
(iv) if the Board of Directors of AFC shall have
withdrawn or materially modified its authorization, approval
or favorable recommendation to the shareholders of AFC with
respect to the Plan of Merger or this Agreement in a manner
adverse to Holdings or shall have failed to make such
favorable recommendation.
(c) By AFC:
(i) if any event shall have occurred as a result of
which any condition set forth in Section 6.3 is no longer
capable of being satisfied; or
(ii) if there has been a breach by Holdings, Parent
or SubCorp of any representation or warranty contained in this
Agreement which would have or would be reasonably likely to
have a material adverse effect on the consolidated financial
condition, results of operations or business of Holdings and
its Subsidiaries taken as a whole or the ability of Holdings,
Parent or SubCorp to consummate the Merger, or there has been a
material breach of any of the covenants or agreements set forth
in this Agreement on the part of Holdings, Parent or SubCorp,
which breach is not
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curable or, if curable, is not cured within 15 days after
written notice of such breach is given by AFC to Holdings.
(d) By AFC if because of its receipt of a proposal with
respect to a Competing Transaction, the Board of Directors concludes,
in good faith, after receiving advice of its legal counsel that such
termination is in the best interests of AFC and its shareholders.
(e) By Holdings or AFC if there shall have occurred (i) any
general suspension of, or limitation on, trading in securities
generally on NASDAQ continuing for a period of fifteen (15) business
days, or (ii) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States continuing for a
period of fifteen (15) business days.
(f) By either Holdings or AFC if (i) any event shall have
occurred as a result of which any condition set forth in Section 6.1 is
no longer capable of being satisfied or (ii) the Merger shall not have
been consummated by June 30, 1997; provided, however, that, in either
case, the terminating party shall not have breached in any material
respect its obligations under this Agreement in any manner that
proximately contributed to the failure of any such condition to be
satisfied or the failure to consummate the Merger.
As used herein, a "Competing Transaction" shall mean (i) any merger,
consolidation, share exchange, business combination, or other similar
transaction involving AFC or a significant Subsidiary of AFC; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of 25% or more
of the assets of AFC, taken as a whole, in a single transaction or series of
transactions; (iii) any tender or exchange offer for 25% or more of the
outstanding shares of AFC Common Stock or the filing of a registration statement
under the Securities Act in connection therewith; or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
7.2 SPECIFIC PERFORMANCE. The parties acknowledge that the rights of
each party to consummate Merger are special, unique, and of extraordinary
character, and that, in the event that either violates or fails and refuses to
perform any covenant made by it herein, the other party or parties will be
without adequate remedy at law. Each party agrees, therefore, that, in the event
that it violates or fails and refuses to perform any covenant made by it herein,
the other party or parties so long as it or they are not in breach hereof, may,
in addition to any remedies at law, institute and prosecute an action in a court
of competent jurisdiction to enforce specific performance of such covenant or
seek any other equitable relief.
7.3 RIGHTS AND OBLIGATIONS UPON TERMINATION. If this Agreement is not
consummated for any reason, each party will redeliver all documents, work
papers, and other materials of any party relating to the Merger, whether
obtained before or after the execution hereof, to the party furnishing the same,
except to the extent previously delivered to third parties in connection with
the Merger, and no information received by any party hereto with respect to the
business of any other party shall be used for the advantage of, or disclosed to
third parties by, such party to the detriment of the party furnishing such
information; provided, however, that this Section 7.3 shall
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not apply to any documents, work papers, material, or information that, through
no act or failure to act by any other party hereto (a) is a matter of public
knowledge or (b) heretofore has been or hereafter is published in any
publication for public distribution or filed as public information with any
Governmental Entity.
7.4 CERTAIN FEES AND EXPENSES. AFC acknowledges that Holdings has
spent, and will be required to spend, substantial time and effort in examining
the business, properties, affairs, financial condition and prospects of AFC and
its Subsidiaries and has incurred, and will continue to incur, substantial fees
and expenses in connection with such examination, the preparation of this
Agreement and the accomplishment of the Merger. Therefore, to induce Holdings to
enter this Agreement:
(a) EXPENSES. In the event that AFC terminates this Agreement
pursuant to Section 7.1(d) or Holdings terminates this Agreement
pursuant to Section 7.1(b)(iii) or Section 7.1(b)(iv) and at the time
there exists a Competing Transaction, then AFC shall reimburse Holdings
for the total amount of the Expenses. For purposes of this Section 7.4,
"Expenses" shall include all reasonable out-of-pocket expenses and fees
(including, without limitation, fees and expenses payable to all
investment banking firms and their respective agents and counsel, and
all reasonable fees of counsel, accountants, experts and consultants to
Holdings) actually incurred by Holdings or on its behalf or by Bunzl or
on its behalf in connection with the Merger and all transactions
contemplated by this Agreement, including the sale of the Fibers
Business to Bunzl; provided, however, that Expenses shall be limited to
1% of the product of the Merger Consideration multiplied by the total
number of shares of outstanding AFC Common Stock. The Expenses, if due,
shall be paid promptly after such termination.
(b) FEE. If this Agreement is terminated pursuant to Section
7.1(d) by AFC or pursuant to Section 7.1(b)(iii) or 7.1(b)(iv) by
Holdings and a Competing Transaction is consummated on or before
February 28, 1998, then AFC shall pay to Holdings promptly after the
consummation of the Competing Transaction a fee in the amount of 2% of
the product of the Merger Consideration multiplied by the total number
of shares of outstanding AFC Common Stock in addition to the amount of
any Expenses paid or payable under subsection (a) above (the "Fee"),
not as a penalty but as full and complete liquidated damages.
The Expenses and the Fee shall be payable to Holdings notwithstanding that any
action taken by the Board of Directors of AFC that may give rise to the
obligation to pay the Expenses and the Fee may have been taken in accordance
with the fiduciary duties of the Board of Directors.
(c) PAYMENT. Any payment required pursuant to this Section 7.4
shall be made as promptly as practicable, but in no event later than
three business days after Holdings' delivery to AFC of a statement
setting forth the amount payable and the facts causing such amount to
be payable, including (if applicable) the Expenses in reasonable
detail, and shall be made by wire transfer of immediately available
funds to an account designated by Holdings. In the event that Holdings
is entitled to the Expenses or the Fee, AFC shall
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also pay to Holdings interest at the rate of 8.0% per year on any
amounts that are not paid when due, plus all costs and expenses in
connection with or arising out of the enforcement of the obligation of
AFC to pay the Expenses, the Fee or such interest.
7.5 EFFECT OF TERMINATION. Except for the provisions of Sections 5.4,
5.5, 5.12, 7.3, 7.4, this Section 7.5 and Article 8, which shall survive any
termination of this Agreement, in the event of the termination and abandonment
of this Agreement pursuant to Section 7.1, this Agreement shall forthwith become
void and have no further effect, without any liability on the part of any party
hereto or its respective officers, directors or shareholders; provided, however,
that except as expressly set forth in Section 7.4(b), nothing in this Section
7.5 shall relieve any party from liability for the knowing and intentional
breach of any of its representations, warranties, covenants or agreements set
forth in this Agreement.
ARTICLE 8
GENERAL PROVISIONS
8.1 WAIVER OF CERTAIN CONDITIONS. Any party may, at its option, waive
in writing any or all of the conditions herein contained to which its
obligations hereunder are subject, except that the conditions contained in
Section 6.1, and Section 6.2(a) (with respect to consents and authorizations,
orders and approvals of, and filings and registrations with, any Governmental
Entity) and Section 6.3(a) (with respect to consents and authorizations, orders
and approvals of, and filings and registrations with, any Governmental Entity)
may not be so waived.
8.2 NOTICES. All notices and other communications under this Agreement
shall be in writing and may be given by any of the following methods: (a)
personal delivery; (b) facsimile transmission; (c) registered or certified mail,
postage prepaid, return receipt requested; or (d) overnight delivery service
requiring acknowledgment of receipt. Any such notice or communication shall be
sent to the appropriate party at its address or facsimile number given below (or
at such other address or facsimile number for such party as shall be specified
by notice given hereunder):
If to Holdings, Parent or SubCorp, to:
WBT Holdings LLC
999 Peachtree Street, N.E. Suite 2300
Atlanta, Georgia 30309-3996
Telecopier: (404) 853-8806
Attention: Bennett L. Kight, President
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with a copy to:
Sutherland, Asbill & Brennan, L.L.P.
999 Peachtree Street, N.E., Suite 2300
Atlanta, Georgia 30309-3996
Fax No. (404) 853-8806
Attention: George L. Cohen, Esq.
If to AFC, to:
3951 Westerre Parkway, Suite 300
Richmond, Virginia 23233
Fax No. (804) 346-0164
Attention: John L. Morgan
with a copy to:
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219-4074
Fax No. (804) 788-8218
Attention: C. Porter Vaughan, III, Esquire
All such notices and communications shall be deemed received upon (i) actual
receipt thereof by the addressee, (ii) actual delivery thereof to the
appropriate address as evidenced by an acknowledged receipt, or (iii) in the
case of a facsimile transmission, upon transmission thereof by the sender and
confirmation of receipt. In the case of notices or communications sent by
facsimile transmission, the sender shall contemporaneously mail or deliver a
copy of the notice or communication to the addressee at the address provided for
above. However, such mailing shall in no way alter the time at which the
facsimile notice or communication is deemed received.
8.3 TABLE OF CONTENTS; HEADINGS. The Table of Contents, cross reference
pages and headings contained herein are for convenience of reference only, do
not constitute a part of this Agreement, and shall not be deemed to limit or
affect any of the provisions hereof.
8.4 AMENDMENT. Except as otherwise provided in Section 13.1-718(I) of
the VSCA, this Agreement or the Plan of Merger may be amended, at any time
before or after the approval of this Agreement and the Plan of Merger by the
holders of AFC Common Stock, by action of the respective Boards of Directors of
AFC, Parent and SubCorp and the Managers of Holdings, without action by the
shareholders or members thereof. Any variation, modification or amendment to
this Agreement must be made in writing and executed by each of the parties
hereto.
8.5 NO SURVIVAL OF REPRESENTATIONS, WARRANTIES OR COVENANTS. None of
the representations or warranties made in Article 4 or the covenants made in
Article 5 shall survive the Closing Date.
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8.6 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 terms and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the Merger is not affected in any manner adverse to any party hereto. Upon any
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto will negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the Merger as
contemplated by the Plan of Merger is consummated.
8.7 WAIVER. The failure of any party hereto at any time or times to
require performance of any provision hereof shall in no manner affect the right
to enforce the same. No waiver by any party of any condition, or the breach of
any term, provision, warranty, representation, agreement or covenant contained
in this Agreement or the other agreements contemplated hereby, whether by
conduct or otherwise, in any one or more instances shall be deemed or construed
as a further or continuing waiver of any such condition or breach or a waiver of
any other condition or of the breach of any other term, provision, warranty,
representation, agreement or covenant herein or therein contained.
8.8 NO THIRD PARTY BENEFICIARIES; ASSIGNMENT. This Agreement shall
inure to the benefit of the parties and their respective successors and
permitted assignees. Nothing in this Agreement shall create or be deemed to
create any third party beneficiary rights in any person or entity; provided,
however, that all persons who are beneficiaries of Sections 5.4(a), 5.10 or 5.12
shall be entitled to enforce the provisions of those sections, respectively.
Except for assignments to wholly-owned subsidiaries (direct or indirect) of
Holdings, in which event Holdings shall remain liable for the performance of
this Agreement, no transfer or assignment (including by operation of law) of
this Agreement or of any rights or obligations under this Agreement may be made
by any party without the prior written consent of the other parties and any
attempted transfer or assignment without that required consent shall be void. No
transfer or assignment by a party of its rights under this Agreement shall
relieve it of any of its obligations to the other parties under this Agreement.
8.9 TIME OF THE ESSENCE; COMPUTATION OF TIME. Time is of the essence of
each and every provision of this Agreement. Whenever the last day for the
exercise of any right or the discharge of any duty under this Agreement shall
fall upon Saturday, Sunday or a public or legal holiday, the party having such
right or duty shall have until 5:00 p.m. Atlanta, Georgia time on the next
succeeding regular business day to exercise such right or to discharge such
duty.
8.10 COUNTERPARTS. This Agreement may be executed by each party upon a
separate copy, and in such case one counterpart of this Agreement shall consist
of enough of such copies to reflect the signatures of all of the parties. This
Agreement may be executed in two or more counterparts, each of which shall be an
original, and each of which shall constitute one and the same agreement. Any
party may deliver an executed copy of this Agreement and of any documents
contemplated hereby by facsimile transmission to another party and such delivery
shall have the same force and effect as any other delivery of a manually signed
copy of this Agreement or of such other documents.
50
<PAGE> 71
8.11 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia, without giving
effect to the conflicts of law principles thereof.
8.12 ENTIRE AGREEMENT. This Agreement (with its Schedules and Exhibits)
and the Confidentiality Agreement contain, and are intended as, a complete
statement of all the terms of the arrangements among the parties with respect to
the matters provided for, supersede any previous agreements and understandings
between the parties with respect to those matters and cannot be changed or
terminated orally.
51
<PAGE> 72
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
AMERICAN FILTRONA CORPORATION
/s/ John L. Morgan
------------------------------------
Name: John L. Morgan
Title: Chairman
WBT HOLDINGS LLC
/s/ Bennett L. Kight
------------------------------------
Name: Bennett L. Kight
Title: President
WB PARENT CORP.
/s/ Bennett L. Kight
------------------------------------
Name: Bennett L. Kight
Title: President
WB ACQUISITION CORP.
/s/ Bennett L. Kight
------------------------------------
Name: Bennett L. Kight
Title: President
<PAGE> 73
EXHIBIT H
[WACHOVIA LETTERHEAD]
FEBRUARY 19,1997
WB Acquisition Corp.
999 Peachtree Street, N.E.
Atlanta, GA 30309-3996
Attn: Mr. Bennett Kight
President, WB Acquisition Corp
Re: Mandate and Commitment Letter: $100,000,000 term loan and revolving
credit facility (the "Facility') from Wachovia Bank of Georgia, N.A. as
Agent ("WBGA") and Wachovia Bank of North Carolina, N.A. as a Bank
("WBNC") (WBGA and WBNC are collectively referred to herein as
"Wachovia), and certain other Banks, in favor of WB Acquisition Corp.
(the "Borrower') in connection with its merger (the "Merger') with
American Filtrona Corporation ("AFC")
Dear Bennett:
Wachovia is pleased to confirm to the Borrower the commitment of WBNC
(the "Wachovia Commitment"), subject to satisfactory completion of due
diligence, to arrange and fund the Facility in an amount not to exceed
$100,000,000, upon the terms and conditions described in this letter and in the
Term Sheet (the "Term Sheet"). Wachovia reserves the right to exercise its
commercially reasonable efforts to bring together a group of Banks (including
WBNC) to fund the Facility, whereby WBGA would serve as the agent (in such
capacity, the "Agent"), and the Banks would collectively issue several
commitments to fund the Facility; provided that, WBNC's commitment to fund the
Facility is not contingent upon Wachovia's ability to bring together such a
group of Banks. In connection with such efforts, Wachovia will periodically
advise the Borrower as to the progress of the syndication process. This letter
and the Term Sheet shall presume that such a group of Banks will be assembled by
Wachovia. If WBNC is the only Bank to fund the Facility, references in this
letter and the Term Sheet which relate solely to the Facility being funded by a
group of Banks will be without meaning and shall be ignored. Capitalized terms
contained in either this letter or the Term Sheet, but not defined in either
this letter or the Term Sheet, shall be defined in and have the meanings
attributed thereto in the definitive Credit Agreement.
Without the prior written consent of Wachovia, the contents or the
existence of this letter and the Term Sheet may not be disclosed to any person
(including, without limitation, any other Bank), either orally or in writing
(except by the Borrower (i) to the Borrower's and its respective Affiliates'
directors, officers, employees, legal counsel, financial advisors and
accountants on a confidential basis, (ii) to American Filtrona Corporation,
Bunzl Plc, and their respective advisors on a confidential basis, and (iii) as
required by law). The confidentiality agreement set forth in the preceding
sentence shall be effective regardless of whether this letter is signed by the
Borrower.
<PAGE> 74
WB Acquisition Corp.
February 19,1997
Page 2
A. Terms and Conditions of the Facility.
The principal terms and conditions of the Facility will include those
set forth herein and in the Term Sheet. Certain other customary terms and
conditions found in transactions of the type contemplated hereby may be required
by Wachovia as a condition precedent to the funding of the Facility although
such terms and conditions may not be specifically stated herein or in the Term
Sheet. The Wachovia Commitment is further subject to (i) completion of a due
diligence review satisfactory to Wachovia in all respects regarding the
acquisition of AFC and the condition (financial, business and other),
operations, assets, nature of assets, prospects, books, records and liabilities
of AFC; (ii) the conditions that no material adverse change shall have occurred
in the condition (financial, business or other), operations, assets, nature of
assets, prospects, or liabilities of AFC since December 31, 1995; (iii) there
shall have been no material adverse change in the market for syndicated bank
credit facilities generally or a material adverse change in banking conditions
generally; and (iv) the simultaneous closing of the Merger and the sale of the
bonded fibers business of AFC to Bunzl Plc pursuant to a definitive agreement
for the sale of the bonded fibers business of AFC to Bunzl Plc the terms and
conditions of which must be reviewed and approved by Wachovia.
The Borrower agrees to pay to Wachovia the fees set forth in that
certain fee letter agreement to be entered into by the Borrower and Wachovia of
even date.
B. General.
1. Indemnity; Expenses. The Borrower agrees to indemnify and hold
harmless Wachovia and its affiliates and the officers, directors, employees,
attorneys and agents of, and Persons controlling any of them or any of its
affiliates within the meaning of the Securities Act of 1933 or the Securities
Exchange Act of 1934 (all such persons being hereinafter referred to as
"Indemnified Persons"), whether or not the Loan Documents are executed by
Wachovia or any other Bank or Loans are actually made under the Facility by
Wachovia or any other Bank, from and against all losses, damages, liabilities or
expenses of any kind or nature whatsoever, caused by any act or omission to act
by the Borrower or any of the Borrower's agents, that may be incurred by or
asserted against or involve any Indemnified Person in any and all actions,
suits, proceedings (including any investigations or inquiries) or claims with
respect to the transactions contemplated hereby (whether or not consummated) or
the preparation, execution and delivery of this letter and the preparation,
filing and dissemination of all documents in connection therewith, and, upon
demand by Wachovia, to pay or reimburse any such Indemnified Person for any
reasonable legal or other expenses incurred in connection with investigating,
defending or preparing to defend any such action, suit, proceeding (including
any inquiry or investigation) or claim, it being understood that Wachovia shall
have the right to select its own counsel in connection with such matters;
provided however, that the Borrower shall not be responsible to any such
Indemnified Person for any losses, damages, liabilities or expenses which are
finally judicially determined to have resulted from such Indemnified Person's
gross negligence or willful misconduct. The indemnification provisions set forth
herein shall apply whether or not Wachovia, is a party to any such action, suit,
proceeding or
<PAGE> 75
WB Acquisition Corp.
February 19, 1997
Page 3
claim and are expressly intended to cover, but not be limited to, reimbursement
of legal and other expenses, including expenses incurred in depositions or
other discovery proceedings. The indemnity obligations of the Borrower hereunder
shall be in addition to, and not in limitation of, any other liability or
obligation that the Borrower or any other Person may have.
The out-of-pocket costs and expenses of Wachovia (including, without
limitation, the reasonable fees and expenses of counsel to Wachovia) incurred in
connection with Wachovia's due diligence efforts, the syndication of the
Facility, the preparation, execution and delivery of this letter, the Term
Sheet, the definitive Credit Agreement, the other Loan Documents, and the
transaction contemplated hereby and thereby shall be paid by the Borrower,
regardless of whether the Loan documents are executed or any funding of the
Facility occurs.
2. CONSEQUENTIAL DAMAGES. WACHOVIA SHALL NOT BE RESPONSIBLE OR LIABLE TO
THE BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF THIS LETTER, THE TERM
SHEET, THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
3. Survival; Effectiveness. The confidentiality agreement contained in the
second paragraph of this letter, together with the provisions of Paragraph A.2.
(regarding the Agent's Structuring Fee), this Paragraph 3 and Paragraphs B.1 and
B.2. hereof shall survive any termination or expiration of this letter.
4. Acceptance; Termination. If you are in agreement with the foregoing,
please sign and return this letter to Wachovia Bank of North Carolina, N.A., 100
North Main Street, Winston-Salem NC 27150-7202; Attention: Mr. Haywood
Edmundson. Unless you have signed and Wachovia shall have received this letter
prior to 5:00 p.m., Atlanta, Georgia time, February 20, 1997, Wachovia's
obligations hereunder shall terminate as of such time on such date. Wachovia
shall not have any obligation to serve as agent for the Facility or fund the
Wachovia Commitment unless the definitive Loan Documents are executed and
delivered by all parties on or before June 30, 1997 (the "Expiration Date"),
provided that the Borrower may extend the Expiration Date until July 31, 1997
by providing to Wachovia on or before June 15, 1997: (1) written notice of the
Borrower's desire to extend the Expiration Date for one month; and (2) payment
to Wachovia of $25,000 for such one month extension. In addition to the
foregoing, this letter may be terminated (including, without limitation, any
and all obligations of Wachovia hereunder) prior to the Expiration Date (i) by
mutual agreement, (ii) by Wachovia if Wachovia determines that any condition
precedent to the funding obligations contemplated by this letter, the Term
Sheet or the definitive Loan Documents cannot or will not be satisfied prior to
the Expiration Date, (iii) by Wachovia if the Merger Agreement is not executed
by the Borrower and AFC on or before February 28, 1997, or (iv) by Wachovia in
the event that Wachovia determines as a result of its due diligence review of
AFC or the acquisition of AFC or its negotiation of the Loan Documents, that
any matter which under the terms and conditions hereof must be acceptable to
Wachovia is not, as of the proposed time of closing, will not be, acceptable to
Wachovia.
<PAGE> 76
WB Acquisition Corp.
February 19, 1997
Page 4
5. Miscellaneous. This letter may be executed in any number of
counterparts which, taken together, shall constitute one original. This letter
is solely for the benefit of the Borrower and Wachovia and no provision hereof
shall be deemed to confer rights on any other Person. This letter may not be
assigned by the Borrower to any other person or entity, but all of the
obligations of the Borrower hereunder shall be binding upon the successors of
the Borrower. This letter will be governed by and construed in accordance with
the law of the State of Georgia without regard to principles of conflicts of
law. No portion of this letter shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have drafted,
structured, or dictated such provision. This letter and the Term Sheet embody
the entire agreement and understanding between the parties hereto in respect of
the transactions contemplated hereby and supersede all prior negotiations,
understandings and agreements between such parties in respect of such
transactions. no condition or other term of this letter or the Term Sheet may be
waived or modified except by a writing signed by the Borrower and Wachovia. The
requirement of a writing to waive or modify provisions of this letter cannot
itself be waived or otherwise negated by any agreement or other conduct of the
parties, express or implied, other than by a writing to that effect signed by
both parties.
6. Loan Documents. This letter and the Term Sheet do not contain all of
the terms and provisions pertaining to the Facility. This Borrower's definitive
rights, duties, obligations and liabilities and those of Wachovia and any other
Banks will be more particularly described in the definitive Loan Documents. If
there is any conflict between the provisions of this letter or the Term Sheet
and the provisions of the Loan Documents, the provisions of the Loan Documents
will control.
Very truly yours,
WACHOVIA BANK OF GEORGIA, N.A.,
as Agent
By: /s/ Katherine W. Howland
----------------------------
Title: Vice President
-----------------------
WACHOVIA BANK OF NORTH
CAROLINA, N.A., as a Bank
By: /s/ Haywood Edmundson, V
----------------------------
Title: Vice President
-----------------------
Accepted and Agreed to as of this
19th day of February, 1997
WB Acquisition Corp
By: /s/ Bennett L. Kight
-------------------------
Title: President
-------------------
<PAGE> 77
EXHIBIT I
FIBERS SALE AGREEMENT
dated as of
February 19, 1997
between
FIL ACQUISITION CORP.
and
WB ACQUISITION CORP.
<PAGE> 78
TABLE OF CONTENTS(1)
ARTICLE 1
DEFINITIONS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
PURCHASE AND SALE
2.01. Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.02. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.03. Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.04. Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.05. Assignment of Contracts and Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.06. Purchase Price; Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . 11
2.07. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.08. Closing Date Working Capital; Closing Date Fixed Assets; Purchase Price
Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
3.01. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.02. Corporate Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.03. Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.04. Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.05. Required and Other Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.06. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.07. Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.08. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
_______________________
1 The Table of Contents is not a part of this
Agreement.
i
<PAGE> 79
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
3.09. Sufficiency of and Title to the Purchased Assets . . . . . . . . . . . . . . . . . . . 19
3.10. No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.11. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.12. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.13. Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.14. Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.15. Compliance with Laws and Court Orders . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.16. Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.17. Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.18. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.19. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.20. Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.21. Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.22. Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.23. Intracompany Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.24. Foreign Currency Exposures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.25. Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
4.01. Organization and Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.02. Corporate Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.03. Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.04. Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.05. Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.06. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 5
COVENANTS OF SELLER
5.01. Conduct of the Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.02. Access to Information; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 31
5.03. Notices of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.04. Noncompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.05. Amendment of Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.06. Supplemental Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.07. Certain Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.08. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
ii
<PAGE> 80
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
5.09. Intracompany Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.10. Trademarks; Tradenames . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.11. OFCCP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.12. Post-Closing Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 6
COVENANTS OF BUYER
6.01. Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.02. Use of Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 7
COVENANTS OF BOTH PARTIES
7.01. Best Efforts; Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.02. Certain Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.03. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.04. WARN Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.05. Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.06. Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 8
TAX MATTERS
8.01. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.02. Tax Cooperation; Allocation of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 9
EMPLOYEE BENEFITS
9.01. Employees and Offers of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.02. Severance Obligations and COBRA Costs . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.03. Collective Bargaining Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.04. Seller's Employee Benefits Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.05. Buyer Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
iii
<PAGE> 81
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
9.06. Hourly Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.07. Salaried Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.08. Hourly 401(k) Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.09. Salaried 401(k) Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.10. Certain Salaried Employee Benefit Services . . . . . . . . . . . . . . . . . . . . . . 49
9.11. Sharing of Benefits-Related Information . . . . . . . . . . . . . . . . . . . . . . . 50
9.12. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 10
CONDITIONS TO CLOSING
10.01. Conditions to the Obligations of Each Party . . . . . . . . . . . . . . . . . . . . . . 50
10.02. Conditions to Obligation of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.03. Conditions to Obligation of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 11
SURVIVAL; INDEMNIFICATION
11.01. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
11.02. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.03. Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.04. Exclusive Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 12
TERMINATION
12.01. Grounds for Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.02. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
iv
<PAGE> 82
ARTICLE 13
MISCELLANEOUS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
13.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
13.02. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
13.03. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
13.04. Governing Law; Arbitration; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . 59
13.05. Counterparts; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.06. Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.07. Bulk Sales Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.08. Captions; Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Exhibit A -- Form of Assumption and Assignment Agreement
Exhibit B -- Form of Consulting and Non-Competition Agreement
Schedule 1.01 Seller Employees
Schedule 2.01(x) Shared Tangible or Intangible Property
Schedule 2.02 Excluded Assets
Schedule 2.08 Computation of Closing Date Working
Capital, Closing Date Fixed Assets and
Purchase Price Adjustments
Schedule 3.05(a) Required Consents
Schedule 3.05(b) Other Consents
Schedule 3.06(a) Financial Statements
Schedule 3.06(c) Exceptions to GAAP
Schedule 3.07(a) Absence of Certain Changes Since
December 31, 1995
Schedule 3.07(b) Absence of Certain Changes Since
the Balance Sheet Date
Schedule 3.08(a) Real Property
Schedule 3.08(b) Personal Property
Schedule 3.10 Undisclosed Liabilities
Schedule 3.11 Litigation
Schedule 3.12 Material Contracts
Schedule 3.13 Licenses and Permits
Schedule 3.15 Noncompliance with Laws and Court Orders
Schedule 3.18 Intellectual Property
Schedule 3.19(a) Employees
Schedule 3.19(b) Employee Plans
Schedule 3.19(d) Benefit Arrangements
Schedule 3.19(e) Employee Benefits
Schedule 3.21 Finders' Fees
Schedule 3.22 Environmental Compliance
Schedule 3.23 Intracompany Accounts
</TABLE>
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<TABLE>
<S> <C>
Schedule 3.24(b) Foreign Currency Exposures
Schedule 9.02 Employee Benefits or Compensation
Arrangements
Schedule 9.07(b) Salaried Employees
Schedule 10.02 Customers of the Business
</TABLE>
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FIBERS SALE AGREEMENT
AGREEMENT dated as of February 19, 1997 between WB Acquisition
Corp., a Virginia corporation ("SELLER"), and FIL Acquisition Corp., a Delaware
corporation ("BUYER").
W I T N E S S E T H :
WHEREAS, American Filtrona Corporation, a Virginia corporation
("AFC"), conducts a business which manufactures, sells and distributes tobacco
filters, writing instrument components, healthcare device components and
components of household products which, in each case, are manufactured using
the bonded fibers technology (the "BUSINESS");
WHEREAS, Seller intends to merge with and into AFC (the
"MERGER") pursuant to the Merger Agreement (as defined below); and
WHEREAS, Buyer desires to purchase substantially all of the
assets and certain of the liabilities of the Business from Seller, and Seller
desires to sell substantially all of the assets and certain of the liabilities
of the Business to Buyer, upon the terms and subject to the conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.01. DEFINITIONS. (a) The following terms, as used
herein, have the following meanings:
"ACCOUNTING REFEREE" means Price Waterhouse LLP, or if such
firm declines to act in such capacity, Arthur Andersen LLP.
"AFFILIATE" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with such other Person.
<PAGE> 85
"BALANCE SHEET" means the balance sheet of the Business as of
the Balance Sheet Date included in the Reference Financial Statements.
"BALANCE SHEET DATE" means September 30, 1996.
"BENEFIT ARRANGEMENT" means any employment, severance or
similar contract or arrangement (whether or not written), or any plan, policy,
fund, program or contract or arrangement (whether or not written) providing for
compensation, bonus, profit-sharing, stock option, or other stock related
rights or other forms of incentive or deferred compensation, vacation benefits,
insurance coverage (including any self-insured arrangements), health or medical
benefits, disability benefits, workers' compensation, supplemental unemployment
benefits, severance benefits and post- employment or retirement benefits
(including compensation, pension, health, medical or life insurance or other
benefits) that is not an Employee Plan.
"BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in New York are authorized by law to close.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and any rules or
regulations promulgated thereunder.
"CLOSING BALANCE SHEET" means a balance sheet of the Purchased
Assets and the Assumed Liabilities as of the close of business as at the
Closing Date, to be prepared in accordance with Section 2.08 and Schedule 2.08.
"CLOSING DATE" means the date of the Closing.
"CLOSING DATE FIXED ASSETS" means the fixed assets of the
Business as at the Closing Date extracted from the Closing Balance Sheet and
shown on the Closing Date Fixed Assets Statement.
"CLOSING DATE WORKING CAPITAL" means the working capital of
the Business as at the Closing Date extracted from the Closing Balance Sheet
and shown on the Closing Date Working Capital Statement.
"CODE" means the Internal Revenue Code of 1986, as amended.
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<PAGE> 86
"EMPLOYEE PLAN" means any "employee benefit plan", as defined
in Section 3(3) of ERISA, that is subject to any provision of ERISA.
"ENVIRONMENTAL LAWS" means any federal, state, local or
foreign law (including, without limitation, common law), treaty, judicial
decision, regulation, rule, judgment, order, decree, injunction, permit or
governmental restriction or any agreement or contract with any governmental
authority or other third party, whether now or hereafter in effect, relating to
the environment, human health and safety or to pollutants, contaminants, waste
or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or
otherwise hazardous substances, wastes or materials.
"ENVIRONMENTAL PERMITS" means all permits, licenses,
authorizations, certificates and approvals of governmental authorities relating
to or required by Environmental Laws and necessary or proper for the Business
as currently conducted.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" of any entity means any other entity which,
together with such entity, would be treated as a single employer under Section
414 of the Code.
"GAAP" means generally accepted accounting principles in the
United States.
"HAZARDOUS SUBSTANCES" means any pollutant, contaminant, waste
or chemical or any toxic, radioactive, ignitable, corrosive, reactive or
otherwise hazardous substance, waste or material or any substance, waste or
material having any constituent elements displaying any of the foregoing
characteristics including, without limitation, petroleum, its derivatives,
by-products and other hydrocarbons, and any substance, waste or material
regulated under any Environmental Law.
"HEALTH LIABILITIES" means all liabilities and obligations of
the Business arising from or related to any actual, alleged or asserted damage
to human health or to health related exposures or public health exposures or
human safety exposures, in each case arising from or related to cigarettes or
other tobacco products which in any manner use any of the products
manufactured, distributed, sold or
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delivered by AFC on or prior to the Closing Date for use in the United States
market.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"INDEBTEDNESS" of any Person means, at any date, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising
in the ordinary course of business, (iv) all obligations of such Person as
lessee which are capitalized in accordance with GAAP, (v) all non-contingent
obligations of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit or similar instrument, (vi) all
Indebtedness secured by a Lien on any asset of such Person, whether or not such
Indebtedness is otherwise an obligation of such Person and (vii) all guarantees
by such Person of Indebtedness of another Person (each such guarantee to
constitute Indebtedness in an amount equal to the amount of such other Person's
Indebtedness guaranteed thereby).
"INTELLECTUAL PROPERTY RIGHT" means any trademark, service
mark, trade name, invention, patent, trade secret, know-how, copyright,
(including any registration or applications for registration of any of the
foregoing) or any other similar type of proprietary intellectual property
right, in each case which is owned or licensed by or to Seller or any Affiliate
of Seller and used or held for use in the Business.
"LIEN" means, with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest, encumbrance or other adverse
claim of any kind in respect of such property or asset. For the purposes of
this Agreement, a Person shall be deemed to own subject to a Lien any property
or asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property or asset.
"MATERIAL ADVERSE CHANGE" means a material adverse change in
the trading, business, assets, condition (financial or otherwise), result of
operations or prospects of the Business (other than the Excluded Assets) taken
as a whole.
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"MATERIAL ADVERSE EFFECT" means a material adverse effect on
the trading, business, assets, condition (financial or otherwise), result of
operations or prospects of the Business taken as a whole.
"MERGER AGREEMENT" means the Agreement and Plan of Merger
dated as of February 19, 1997, among WBT, WB Parent Corp., a Virginia
corporation, WB Acquisition Corp. and AFC.
"MULTIEMPLOYER PLAN" means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA.
"1934 ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, corporation, partnership,
association, trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"PRE-CLOSING TAX PERIOD" means (i) any Tax period ending on or
before the Closing Date and (ii) with respect to a Tax period that commences
before but ends after the Closing Date, the portion of such period up to and
including the Closing Date.
"PRIME RATE" means a rate per annum equal to the rate of
interest announced from time to time by Citibank, N.A., in New York City as its
prime rate in effect from time to time during the period from the Closing Date
to the date of payment.
"REFERENCE FINANCIAL STATEMENTS" means (i) the financial
statements delivered to Buyer prior to the date hereof and included in Schedule
3.06(a) hereto and (ii) any financial statements related to the Business
delivered to Buyer by Seller after the date hereof in accordance with the
provisions of this Agreement.
"SELLER EMPLOYEE" means the employees of AFC, who are (i)
employed in the Business on the Closing Date and listed on Schedule 1.01 or
(ii) hired and employed in the Business after January 31, 1997 (with respect to
the Salaried Employees) or after the date hereof (with respect to all other
Seller Employees) (the lists of such employees to be delivered by Seller to
Buyer at the Closing Date), in
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each case including any employee on a leave of absence approved by AFC, but
excluding any person who is not employed by AFC as of the Closing Date.
"TAX" means (i) any net income, alterative or add-on minimum
tax, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, license, registration, recording, documentary,
conveyancing, gains, withholding on amounts paid to or by Seller or AFC or any
of their respective Subsidiaries, payroll, employment, excise, severance,
stamp, occupation, premium, property, environmental or windfall profit tax,
custom duty or other tax, governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest, penalty, addition to tax or
additional amount imposed by any governmental authority (a "TAXING AUTHORITY")
responsible for the imposition of any such tax (domestic or foreign), or (ii)
liability for the payment of any amounts of the type described in (i) as a
result of being party to any agreement or any express or implied obligation to
indemnify any other Person.
"TITLE IV PLAN" means an Employee Plan subject to Title IV of
ERISA other than any Multiemployer Plan.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
active employee 9.01
Allocation Statement 2.06
Assumed Liabilities 2.03
Benefit Transition Period 9.10
Books and Records 7.06
Bulk Sales 13.07
Bulk Transfer 13.07
Buyer 401(k) Plan 9.09
Closing 2.07
Confidential Agreements 5.02
Contracts 2.01
Conveyance Documents 2.07
Excluded Assets 2.02
Excluded Liabilities 2.03
Hourly 401(k) Plan 9.08
Indemnified Party 11.03
Indemnifying Party 11.03
Inventories 2.01
IRS 3.19
Loss 11.02
Other Consent 3.05
Pension Plan Transition Period 9.07
</TABLE>
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<TABLE>
<S> <C>
Permits 3.13
Permitted Liens 3.08
Personnel 3.18
Post-Closing Tax Period 8.02
Purchased Assets 2.01
Purchase Price 2.06
Real Property 3.08
Required Consent 3.05
Retirement Plan 9.07
RP Amount 9.07
Salaried Employees 9.07
Seller 401(k) Plan 9.09
Seller ESOP 9.04
Seller Hourly Plan 9.06
Seller Retirement Plan 9.07
Severance Payments 9.02
Transfer Taxes 8.02
Transferred Employees 9.01
WARN Act 7.04
Welfare Plans 9.10
</TABLE>
ARTICLE 2
PURCHASE AND SALE
2.01. PURCHASE AND SALE. Except as otherwise provided below,
upon the terms and subject to the conditions of this Agreement, Buyer agrees to
purchase from Seller and Seller agrees to sell, convey, transfer, assign and
deliver, or cause to be sold, conveyed, transferred, assigned and delivered, to
Buyer at Closing, free and clear of all Liens, other than Permitted Liens, all
of Seller's right, title and interest in, to and under the assets, properties
and business, of every kind and description, wherever located, real, personal
or mixed, tangible or intangible, owned, held, used or to be used in the
conduct of the Business by AFC or Seller as the same shall exist on the Closing
Date, including all assets shown on the Balance Sheet and not disposed of in
the ordinary course of business, and all assets of the Business acquired by AFC
or Seller after the Balance Sheet Date (the "PURCHASED ASSETS"), and including,
without limitation, all right, title and interest of Seller in, to and under:
(a) all real property and leases of, and other interests in,
real property owned, held, used or to be used in the Business, in each
case, together with all buildings, fixtures, and improvements erected
thereon, including, without limitation, the items listed on Schedule
3.08(a);
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(b) all personal property and interests therein owned, held, used
or to be used in the Business, including plant, machinery, equipment,
furniture, office equipment, communications equipment, vehicles, storage
tanks, spare and replacement parts, fuel and other tangible property,
including, without limitation, the items listed on Schedule 3.08(b);
(c) all raw materials, work-in-process, finished goods, supplies,
packaging and other inventories, in each case, owned, held, used or to be
used in the Business(the "INVENTORIES");
(d) all rights under all contracts, agreements, leases, licenses,
commitments, sales and purchase orders and other instruments, in each case,
owned, held, used or to be used in the Business (whether written or oral),
including, without limitation, the items listed on Schedule 3.12
(collectively, the "CONTRACTS");
(e) all accounts, notes and other receivables, in each case,
owned, held, used or to be used in the Business;
(f) all prepaid expenses, including but not limited to ad valorem
taxes, leases and rentals, in each case, owned, held, used or to be used in
the Business;
(g) all petty cash on hand at operating facilities of the
Business;
(h) all of Seller's rights, claims, credits, causes of action or
rights of set-off against third parties relating to the Purchased Assets,
including, without limitation, unliquidated rights under manufacturers' and
vendors' warranties;
(i) all patents, copyrights, trademarks, trade names,
servicemarks, service names, technology, know-how, processes, trade
secrets, inventions, proprietary data, formulae, research and development
data, computer software programs and other intangible property and any
applications for the same, in each case, owned or licensed by or to Seller
or any Affiliate of Seller or AFC and used or held or held for use in the
Business within the period of the last 10 years, including, without
limitation, the items listed on Schedule 3.18;
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<PAGE> 92
(j) all transferable licenses, permits or other governmental
authorizations affecting, or relating in any way to, the Business,
including, without limitation, the items listed on Schedules 3.13 and 3.18;
(k) all rights to the benefits of the insurance policies, as in
effect immediately prior to the Closing, related to any of the Purchased
Assets;
(l) all of Seller's and its Affiliates' rights, title and
interest to the name "Filtrona" and any derivations thereof;
(m) all books, records, files and papers, whether in hard copy or
computer format, used in or needed to carry on the Business, including,
without limitation, engineering information, manufacturing records, sales
and promotional literature, manuals and data, sales and purchase
information and correspondence, lists of present and former suppliers,
lists of present and former customers, personnel and employment records,
and any information relating to Tax imposed on the Purchased Assets; and
(n) all goodwill associated with the Business or the Purchased
Assets, together with the right to represent to third parties that Buyer is
the successor to the Business;
provided, however, that arrangements will be made as described in Schedule
2.01(x) for the sharing of items of tangible or intangible property that are
used with respect to both the Business and to other business activities of AFC.
2.02. EXCLUDED ASSETS. Buyer expressly understands and agrees
that (i) any Purchased Assets sold or otherwise disposed of in the ordinary
course of business (it being understood that such ordinary course of business
does not include any dispositions of capital assets except with the prior
written consent of Buyer) and not in violation of any provisions of this
Agreement during the period from the date hereof until the Closing Date and
(ii) any assets listed or described on Schedule 2.02 (collectively, the
"EXCLUDED ASSETS") shall be excluded from the Purchased Assets.
2.03. ASSUMED LIABILITIES. Upon the terms and subject to the
conditions of this Agreement, Buyer agrees, effective at the time of Closing,
to assume all liabilities
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and obligations of the Business of whatever nature, whether presently in
existence or arising hereafter, except for those liabilities and obligations of
whatever nature, whether presently in existence or arising hereafter, which are
Excluded Liabilities (the "ASSUMED LIABILITIES"). Notwithstanding any
provision in this Agreement or any other writing to the contrary, Buyer is
assuming only the Assumed Liabilities and is not assuming any other liability
or obligation of Seller or AFC (or any predecessor of AFC or prior owner of all
or part of its businesses and assets) of whatever nature, whether presently in
existence or arising hereafter and all such other liabilities and obligations
shall be retained by and remain obligations and liabilities of Seller (all such
liabilities and obligations not being assumed being herein referred to as the
"EXCLUDED LIABILITIES").
2.04. EXCLUDED LIABILITIES. None of the following, whether or
not the liabilities or obligations of the Business, shall be Assumed
Liabilities for the purposes of this Agreement:
(a) any obligation or liability for Tax arising from or with
respect to the Purchased Assets or the operations of the Business which is
incurred in or attributable to the Pre-Closing Tax Period;
(b) except as specifically provided in Section 9.07, any
liabilities or obligations relating to employee benefits or compensation
arrangements existing on or prior to the Closing Date related to all
employees of AFC who are not Seller Employees, including, without
limitation, any such liabilities or obligations under any of Seller's
employee benefit agreements, plans or other arrangements listed on Schedule
9.02;
(c) any Health Liability;
(d) any liability or obligation relating to any Excluded Asset;
(e) all liabilities and obligations of the Business arising from
or relating to any of its liabilities to Seller, AFC or any of their
respective Affiliates; and
(f) any liability or obligation arising from any Indebtedness
incurred on or prior to the Closing Date or any checks outstanding as of
the Closing Date.
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For the avoidance of doubt and without limiting the generality of
the foregoing, Buyer is not assuming any liabilities or obligations with
respect to any liability or obligation of Seller or AFC (or any predecessor of
AFC or prior owner of all or part of its business or assets) that is not an
Assumed Liability (including without limitation, any claims that have been or
may in the future be asserted that relate in any way to the matters, events or
transactions resulting in the litigation captioned Ingersoll-Rand Company v.
Flair Corporation). It is further understood and agreed that Buyer shall have
no responsibility or liability to Seller in respect of any payments made by
Seller (whether before or after the Closing Date) to any officer of the
Business pursuant to (i) the Articles of Incorporation or Bylaws of AFC or (ii)
any indemnification agreement between employees of AFC and AFC.
2.05. ASSIGNMENT OF CONTRACTS AND RIGHTS. Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign any Purchased Asset or any claim or right or any benefit
arising thereunder or resulting therefrom if an attempted assignment thereof,
without the consent of a third party thereto, would constitute a breach or
other contravention thereof or in any way adversely affect the rights of Buyer
or Seller thereunder. Seller and Buyer will use their best efforts (but
without any payment of money by Seller or Buyer) to obtain the consent of the
other parties to any such Purchased Asset or any claim or right or any benefit
arising thereunder for the assignment thereof to Buyer as Buyer may request.
If such consent is not obtained, or if an attempted assignment thereof would be
ineffective or would adversely affect the rights of Seller thereunder so that
Buyer would not in fact receive all such rights, Seller and Buyer will
cooperate in a mutually agreeable arrangement under which Buyer would obtain
the benefits and assume the obligations thereunder in accordance with this
Agreement, including sub-contracting, sub-licensing, or sub-leasing to Buyer,
or under which Seller would enforce for the benefit of Buyer, with Buyer
assuming Seller's obligations, any and all rights of Seller against a third
party thereto. Seller will promptly pay to Buyer when received all monies
received by Seller under any Purchased Asset or any claim or right or any
benefit arising thereunder.
2.06. PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE. (a) The
purchase price for the Purchased Assets (the "PURCHASE PRICE") is the amount in
cash equal to $72,450,000, subject to adjustment as provided in Section 2.08.
The Purchase Price shall be paid as provided in Section 2.07.
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<PAGE> 95
(b) As soon as practicable after the Closing, Buyer shall deliver
to Seller a statement (the "ALLOCATION STATEMENT"), setting forth the values
allocated among the Purchased Assets and the value allocated to the covenant
not to compete described in Section 5.04 hereof, which shall be used for the
allocation of the Purchase Price (together with the Assumed Liabilities) among
the Purchased Assets and the covenant not to compete.
(c) Seller shall have a period of 15 Business Days after the
delivery of the Allocation Statement to present in writing to Buyer notice of
any objections Seller may have to the allocation set forth in the Allocation
Statement. Unless Seller timely objects, the Allocation Statement shall be
binding on the parties without further adjustment.
(d) If Seller shall raise any objections within the 15 day
period, Buyer and Seller shall negotiate in good faith and use their best
efforts to resolve such dispute. If the parties fail to agree within 5
Business Days after the delivery of the notice, then the disputed items shall
be resolved by the Accounting Referee. The Accounting Referee shall resolve
the dispute within 30 days of having the item referred to it. The costs, fees
and expenses of the Accounting Referee shall be borne equally by Seller and
Buyer.
(e) Any adjustment made with respect to the Purchase Price
pursuant to Section 2.08 of this Agreement shall be allocated in accordance
with the determination mutually agreed by Seller and Buyer. In the event that
an agreement is not reached within 5 Business Days after such adjustment, the
disputed item(s) shall be resolved pursuant to Section 2.06(d) hereof.
(f) Seller and Buyer agree to (i) be bound by the Allocation,
(ii) act in accordance with the Allocation in the preparation of financial
statements and filing of all Tax returns (including, without limitation, filing
Form 8594 with its Federal income Tax return for the taxable year that includes
the date of the Closing) and in the course of any Tax audit, Tax review or Tax
litigation relating thereto and (iii) take no position and cause their
Affiliates to take no position inconsistent with the Allocation for tax
purposes.
(g) Not later than 30 days prior to the filing of their
respective Forms 8594 relating to this transaction, each party shall deliver to
the other party a copy of its Form 8594.
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2.07. CLOSING. The closing (the "CLOSING") of the purchase and
sale of the Purchased Assets and the assumption of the Assumed Liabilities
hereunder shall take place at the offices of Hunton & Williams, Riverfront
Plaza, Richmond, Virginia, concurrently with the consummation of the
transactions contemplated by the Merger Agreement. At the Closing,
(a) Buyer shall pay the Purchase Price by causing to be credited
to such bank account of Seller as may be designated by Seller at least two
Business Days prior to the Closing the amount of the Purchase Price in
immediately available funds.
(b) Seller and Buyer shall enter into an Assignment and
Assumption Agreement substantially in the form attached hereto as Exhibit A,
and Seller shall deliver to Buyer such deeds (special warranty deeds or local
equivalent thereof), bills of sale, endorsements, consents, assignments and
other good and sufficient instruments of conveyance and assignment (the
"CONVEYANCE DOCUMENTS") as the parties and their respective counsel shall deem
reasonably necessary or appropriate to vest in Buyer all right, title and
interest in, to and under the Purchased Assets.
2.08. CLOSING DATE WORKING CAPITAL; CLOSING DATE FIXED ASSETS;
PURCHASE PRICE ADJUSTMENT. The respective amounts of (i) the Closing Date
Working Capital, (ii) the Closing Date Fixed Assets and (iii) the Purchase
Price adjustment, if any, shall be determined and, to the extent applicable,
paid in accordance with Schedule 2.08.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date hereof and
as of the Closing Date that:
3.01. CORPORATE EXISTENCE AND POWER. Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all material
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted. Seller is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary, except
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for those jurisdictions where failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. Seller has
heretofore delivered to Buyer true and complete copies of the certificate of
incorporation and bylaws of Seller as currently in effect.
3.02. CORPORATE AUTHORIZATION. The execution, delivery and
performance by Seller of this Agreement are within Seller's corporate powers
and have been duly authorized by all necessary corporate action on the part of
Seller. This Agreement constitutes a valid and binding agreement of Seller.
3.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Seller of this Agreement require no action by or in respect of,
or filing with, any governmental body, agency or official other than compliance
with any applicable requirements of the HSR Act.
3.04. NON-CONTRAVENTION. The execution, delivery and
performance by Seller of this Agreement do not and will not (a) violate the
certificate of incorporation or bylaws of Seller, (b) assuming compliance with
the matters referred to in Section 3.03, violate any applicable law, rule,
regulation, judgment, injunction, order or decree; (c) assuming the obtaining
of all Required and Other Consents, constitute a default under or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of Seller or to a loss of any benefit relating to the Business to
which Seller is entitled under any provision of any agreement, contract or
other instrument binding upon Seller or by which any of the Purchased Assets is
or may be bound or any Permit or (d) result in the creation or imposition of
any Lien on any Purchased Asset, other than Permitted Liens.
3.05. REQUIRED AND OTHER CONSENTS. (a) Schedule 3.05(a) sets
forth each agreement, contract or other instrument binding upon Seller or any
Permit requiring a consent as a result of the execution, delivery and
performance of this Agreement, except such consents as would not, individually
or in the aggregate, have a Material Adverse Effect if not received by the
Closing Date (each such consent, a "REQUIRED CONSENT" and together the
"REQUIRED CONSENTS").
(b) Schedule 3.05(b) sets forth every other consent (each such
consent, an "OTHER CONSENT" and together the "OTHER CONSENTS") under such
agreements, contracts or other instruments or such Permits that is necessary
with
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respect to the execution, delivery and performance of this Agreement.
3.06. FINANCIAL STATEMENTS. (a) Schedule 3.06(a) lists the
financial statements of AFC and the Business that constitute the Reference
Financial Statements. The Reference Financial Statements fairly present, in
conformity with GAAP applied on a consistent basis (except (i) as may be
indicated in the notes thereto and (ii) as set forth or described on Schedule
3.06(c) with respect to the financial statements of the Business), the
financial position of the Business or AFC, as the case may be, taken as a whole
as of the dates thereof and its results of operations, changes in financial
position and cash flows for the periods then ended (subject to normal year-end
adjustments in the case of any unaudited interim financial statements).
(b) As soon as available and in any event prior to the Closing
Date, Seller will deliver the financial statements of the Business and AFC
which will fairly present, in conformity with GAAP applied on a consistent
basis (except (i) as may be indicated in the notes thereto and (ii) as set
forth or described on Schedule 3.06(c) with respect to the financial statements
of the Business), the financial position of the Business or AFC, as the case
may be, taken as a whole as of March 31, 1997 and its results of operations,
changes in financial position and cash flows for the periods then ended
(subject to normal year-end adjustments in the case of any unaudited interim
financial statements).
(c) The financial statements of the Business delivered or to
be delivered hereunder have been or will be prepared in accordance with GAAP as
applied in the audited financial statements of AFC included in the Reference
Financial Statements of the same date, except as set forth in Schedule 3.06(c).
(d) Books and records of the Business accurately reflect the
transactions related to the Business and such books and records contain full,
true and correct entries which are made in at least so much detail as to enable
Seller to provide true and accurate Reference Financial Statements.
3.07. ABSENCE OF CERTAIN CHANGES. (a) Since December 31, 1995,
except as set forth on Schedule 3.07(a) or with the prior written consent of
Buyer, the Business has been conducted in the ordinary course consistent with
past practices.
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(b) Since the Balance Sheet Date, except as set forth on Schedule
3.07(b) or with the prior written consent of Buyer, the Business has been
conducted in the ordinary course consistent with past practices, and there has
not been:
(i) any event, occurrence, development or fact which
has had or could reasonably be expected to have a Material Adverse Effect;
(ii) any incurrence, assumption or guarantee of any
indebtedness for borrowed money with respect to the Business;
(iii) any creation or other incurrence of any Lien on any
Purchased Asset other than in the ordinary course of business consistent
with past practices;
(iv) any damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the Business or any
Purchased Asset which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect;
(v) any transaction or commitment made, or any contract
or agreement entered into, by Seller or AFC relating to the Business or any
Purchased Asset (including the acquisition or disposition of any assets) or
any relinquishment by Seller or AFC of any contract or other right, in
either case, other than transactions and commitments in the ordinary course
of business consistent with past practices and those contemplated by this
Agreement;
(vi) any change in any method of accounting or
accounting practice by AFC with respect to the Business except for any such
change after the date hereof required by reason of a concurrent change in
GAAP;
(vii) any (A) employment, deferred compensation,
severance, retirement or other similar agreement entered into with any
employee of the Business (or any amendment to any such existing agreement),
(B) grant of any severance or termination pay to any such employee, (C)
change in compensation or other benefits payable to any such employee, or
(D) change in compensation or other benefits payable to any such employee
pursuant to any severance or retirement
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plans or policies, other than in the ordinary course of business consistent
with past practice;
(viii) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of the Business, or any
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to such employees;
(ix) any capital expenditure, or commitment for a capital
expenditure, for additions or improvements to property, plant and equipment
exceeding $50,000 individually or $200,000 in the aggregate;
(x) (A) any distribution in respect of the capital stock of
AFC or (B) any payment or declaration of any dividend in respect of the
capital stock of AFC other than regular quarterly cash dividends at the
rate of $.28 per share;
(xi) any issuance of AFC capital stock or securities, or any
warrant, option or other right to purchase shares of AFC capital stock or
any security convertible into AFC capital stock;
(xii) any disposition (whether by means of sale, transfer,
lease or otherwise) of any capital asset of the Business;
(xiii) any loss of any significant customer or customer
accounts or any significant decrease in the volume of sales to any
significant customer and Seller has no reason to believe (including,
without limitation, by reason of any written notice from such customer)
that any such loss or decrease should be anticipated or expected;
(xiv) any change in any material terms of any Contract or
arrangement with (or any commitment to) any customer or supplier of the
Business, in each case, providing for payments in the aggregate equal to or
greater than $100,000; or
(xv) any material alteration in the payment terms of any
Contract, arrangement or commitment related to the Business, in each case,
providing for payments in the aggregate equal to or greater than $100,000.
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3.08. PROPERTIES. (a) Schedule 3.08(a) correctly describes all
real property used in the Business included in the Purchased Assets (the "REAL
PROPERTY"), which Seller owns, leases or subleases, any title insurance
policies and surveys with respect thereto, and any Liens thereon, specifying in
the case of leases or subleases, the name of the lessor or sublessor, the lease
term and basic annual rent.
(b) Schedule 3.08(b) correctly describes all personal property
with (a) book value in excess of $10,000 or (b) fair market value in excess of
$25,000, in each case, used in the Business included in the Purchased Assets,
including but not limited to machinery, equipment, furniture, vehicles, storage
tanks, spare and replacement parts, fuel and other trade fixtures and fixed
assets, which is owned, leased or subleased in the Business, and any Liens
thereon, specifying in the case of leases or subleases, the name of the lessor
or sublessor, the lease term and basic annual rent.
(c)(i) Seller has good and marketable, indefeasible, fee simple
title (subject only to Permitted Liens) to, or in the case of leased Real
Property has valid leasehold interests in, all Purchased Assets (whether real,
personal, tangible or intangible) reflected on the Balance Sheet or acquired
after the Balance Sheet Date, except for assets sold since the Balance Sheet
Date in the ordinary course of business consistent with past practices.
(ii) The Real Property includes all real property used or held
for use in connection with the conduct and operations of the Business as
heretofore conducted.
(iii) All leases of Real Property or personal property are in
good standing and are valid, binding and enforceable in accordance with their
respective terms, and there does not exist under any such lease of real
property or personal property any default or any event which with notice or
lapse of time or both would constitute a default.
(iv) The plants, buildings, structures and equipment included in
the Purchased Assets have no material defects, are in good operating condition
and repair and have been reasonably maintained consistent with standards
generally followed in the industry (giving due account to the age and length of
use of same, ordinary wear and tear excepted), are suitable for their present
uses and, in the case of plants, buildings and other structures (including,
without limitation, the roofs thereof), are structurally sound.
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(v) The plants, buildings and structures included in the
Purchased Assets currently have access to (i) public roads or valid easements
over private streets or private property for such ingress to and egress from
all such plants, buildings and structures and (ii) water supply, storm and
sanitary sewer facilities, telephone, gas and electrical connections, fire
protection, drainage and other public utilities, in each case as is necessary
for the conduct of the Business.
(vi) None of the structures on the Real Property encroaches upon
real property of another person, and no structure of any other person
substantially encroaches upon any Real Property.
(d) No Purchased Asset is subject to any Lien, except:
(i) Liens disclosed on the Balance Sheet;
(ii) Liens for taxes not yet due or being contested in good
faith (and for which adequate accruals or reserves have been established on
the Balance Sheet); or
(iii) Liens, covenants, rights-of-way and other restrictions of
record which do not materially detract from the value of such Purchased
Asset as now used, or materially interfere with any present or intended use
of such Purchased Asset (clauses (i), (ii) and (iii) are, collectively, the
"PERMITTED LIENS").
(e) No violation of any law, regulation or ordinance
(including, without limitation, laws, regulations or ordinances relating to
zoning, city planning or similar matters) relating to the Business or any
Purchased Asset currently exists or has existed at any time, except for
violations which have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. There are no
developments affecting any of the Purchased Assets pending or, to the knowledge
of Seller threatened, which, as a result of any law, regulation or ordinance,
might materially detract from the value of such Purchased Assets, materially
interfere with any present or intended use of any such Purchased Assets or
materially adversely affect the marketability of such Purchased Assets.
3.09. SUFFICIENCY OF AND TITLE TO THE PURCHASED ASSETS. (a) The
Purchased Assets constitute, and on the Closing Date will constitute, all of
the assets or property
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used or held for use in or required for the conduct of the Business and are
generally adequate to conduct such business.
(b) Upon consummation of the transactions contemplated hereby,
Buyer will have acquired good and marketable title in and to, or a valid
leasehold interest in, each of the Purchased Assets, free and clear of all
Liens, except for Permitted Liens and any Liens created by operation of any
after-acquired property clause (i) entered into by Buyer or any of its
Affiliates or (ii) resulting from any judicial decree or decision entered
against Buyer prior to the date hereof.
3.10. NO UNDISCLOSED LIABILITIES. There are no liabilities of
the Business of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
fact, events or development which could reasonably be expected to result in
such a liability, other than:
(a) liabilities provided for in the Balance Sheet;
(b) liabilities disclosed or described on Schedule 3.10; and
(c) other undisclosed liabilities which, individually or in the
aggregate are not material to the Business, taken as a whole.
3.11. LITIGATION. Except as disclosed in Schedule 3.11, there is
no claim, action, suit, investigation or proceeding pending against, or to the
knowledge of Seller, threatened against or affecting, the Business or any
Purchased Asset before any court or arbitrator or any governmental body, agency
or official or which in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the transactions contemplated hereby.
3.12. MATERIAL CONTRACTS. (a) Except for the Contracts
disclosed in Schedule 3.12 or any other schedule to this Agreement, with
respect to the Business, neither Seller nor AFC is a party to or bound by:
(i) any lease (whether of real or personal property) providing
for annual rentals of $25,000 or more;
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(ii) any agreement for the purchase of materials,
supplies, goods, services, equipment or other assets providing for (A)
annual payments of $25,000 or more, (B) aggregate payments of $50,000
or more or (C) the purchase of more than 90 days usage of raw
materials;
(iii) any sales, distribution or other similar agreement
providing for the sale of materials, supplies, goods, services,
equipment or other assets that provides for either (A) annual payments
of $25,000 or more or (B) aggregate payments of $50,000 or more;
(iv) any partnership, joint venture or other similar
agreement or arrangement;
(v) any agreement relating to indebtedness for borrowed
money (whether incurred, assumed, guaranteed or secured by any asset);
(vi) any agreement relating to the deferred purchase price
of property (whether incurred, assumed, guaranteed or secured by any
asset), except any such agreement with an aggregate outstanding
principal amount not exceeding $25,000 and which may be prepaid on not
more than 30 days notice without the payment of any penalty;
(vii) any option, license, franchise or similar agreement;
(viii) any agency, dealer, sales representative, marketing
or other similar agreement;
(ix) any agreement that limits the freedom of Seller or
AFC to compete in any line of business or with any Person or in any
area or to own, operate, sell, transfer, pledge or otherwise dispose
of or encumber any Purchased Asset or which would so limit the freedom
of Buyer after the Closing Date;
(x) any agreement providing for any purchase or sale
obligations with a duration of such obligations in excess of six
months;
(xi) any agreement with or for the benefit of (A) AFC or
Seller or any Affiliate of AFC or Seller, (B) any Person directly or
indirectly owning, controlling or holding with power to vote, 5% or
more of the outstanding voting securities of AFC, Seller or any of
their respective Affiliates, (C) any Person 5% or more of whose
outstanding voting securities are directly or
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indirectly owned, controlled or held with power to vote by AFC, Seller
or any of their respective Affiliates or (D) any director or officer
of AFC, Seller or any of their respective Affiliates or any
"associates" or members of the "immediate family" (as such terms are
respectively defined in Rule 12b-2 and Rule 16a-1 of the 1934 Act) of
such Person; or
(xii) any other agreement, commitment, arrangement or plan
not made in the ordinary course of business which is material to the
Business taken as a whole.
(b) Each Contract disclosed in any schedule to this
Agreement or required to be disclosed pursuant to this Section except as
specifically disclosed in such schedule is a valid and binding agreement of
Seller and is in full force and effect, and neither Seller nor, to the
knowledge of Seller, any other party thereto is in default or breach in any
material respect under the terms of any such Contract, nor, to the knowledge of
Seller, has any event or circumstance occurred that, with notice or lapse of
time or both, would constitute any event of default thereunder. True and
complete copies of each such contract have been delivered to Buyer.
3.13. LICENSES AND PERMITS. Schedule 3.13 correctly
describes each license, franchise, permit or other similar authorization
affecting, or relating in any way to, the Business or any Purchased Asset,
together with the name of the government agency or entity issuing such license
or permit (the "PERMITS"). Except as set forth on the Schedule 3.13, such
Permits are valid and in full force and effect and, assuming the related
Required Consents and Other Consents have been obtained prior to the Closing
Date, are transferable by Seller, and none of the Permits will, assuming the
related Required Consents and Other Consents have been obtained prior to the
Closing Date, be terminated or impaired or become invalid, in whole or in part,
as a result of the transactions contemplated hereby. Upon consummation of such
transactions, Buyer will, assuming the related Required Consents and Other
Consents have been obtained prior to the Closing Date, have all of the right,
title and interest in all the Permits.
3.14. INSURANCE COVERAGE. Seller has furnished to Buyer a
list of, and true and complete copies of, all insurance policies and fidelity
bonds relating to the Purchased Assets, the business and operations of the
Business and its employees. There is no claim pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such
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policies or bonds or in respect of which such underwriters have reserved their
rights. All premiums payable under all such policies and bonds have been
timely paid and AFC and Seller has otherwise complied fully with the terms and
conditions of all such policies and bonds. Such policies of insurance and
bonds (or other policies and bonds providing substantially similar insurance
coverage) have been in effect since January 1, 1992 and remain in full force
and effect. Such policies and bonds are of the type and in amounts customarily
carried by Persons conducting businesses similar to the Business.
3.15. COMPLIANCE WITH LAWS AND COURT ORDERS. Except as
disclosed in Schedule 3.15 neither Seller nor AFC is in violation of, has since
January 1, 1992 violated, or, to Seller's knowledge, is under investigation
with respect to or has been threatened to be charged with or given notice of
any violation of, any law, rule, regulation, judgment, injunction, order or
decree applicable to the Purchased Assets or the conduct of the Business which
violation could be reasonably expected to (i) result in any loss or damage to
the Business or (ii) interfere with the operations of the Business, in each
case, after the Closing Date.
3.16. INVENTORIES. (a) The inventories set forth in the
Balance Sheet (including, without limitation, the Inventories) were properly
stated therein (after making provisions for obsolescent, obsolete, slow- moving
and similar items) at the lesser of cost or fair market value determined in
accordance with GAAP consistently maintained and applied. Since the Balance
Sheet Date, the level of inventories related to the Business has been
maintained in the ordinary course of business. All of the inventories recorded
on the Balance Sheet consist of, and all inventories related to the Business on
the Closing Date will consist of, items of a quality usable or saleable in the
normal course of the Business consistent with past practices and are and will
be in quantities sufficient for the normal operation of the Business in
accordance with past practices and to fulfill current requirements of the
Business. As of the Closing Date, all Inventories will be in physical
possession of Seller and held on the Real Property other than (i) Inventories
purchased by Seller and in transit to the Real Property, (ii) the Inventories
held at Seller's facilities at Columbia, South Carolina (which shall not exceed
$50,000 in value in the aggregate) and (iii) the Inventories in transit to the
customers of the Business.
(b) The level of raw materials held for use in the
Business as of the Closing Date does not exceed the
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normal requirements of the Business for such raw materials for a period of 90
days.
3.17. RECEIVABLES. All accounts, notes receivable and
other receivables (other than receivables collected since the Balance Sheet
Date) reflected on the Balance Sheet are, and all accounts and notes receivable
arising from or otherwise relating to the Business at the Closing Date will be,
valid and genuine in the aggregate amount thereof, subject to normal and
customary trade discounts, less any reserves for doubtful accounts recorded on
the Balance Sheet. All accounts, notes receivable and other receivables
arising out of or relating to the Business at the Balance Sheet Date have been
included in the Balance Sheet, and all accounts, notes receivable and other
receivables arising out of or relating to the Business at the Closing Date will
be included in the Closing Balance Sheet, in accordance with GAAP applied on a
consistent basis.
3.18. INTELLECTUAL PROPERTY. (a) Schedule 3.18 sets forth
a list of all Intellectual Property Rights, specifying as to each, as
applicable: (i) the nature of such Intellectual Property Right; (ii) the owner
of such Intellectual Property Right; (iii) the jurisdictions by or in which
such Intellectual Property Right is recognized without regard to registration
or has been issued or registered or in which an application for such issuance
or registration has been filed, including the respective registration or
application numbers; and (iv) licenses, sublicenses and other agreements as to
which Seller or any of its Affiliates is a party and pursuant to which any
Person (including Seller or AFC) is authorized to use such Intellectual
Property Right, including the identity of all parties thereto, a description of
the nature and subject matter thereof, the applicable royalty and the term
thereof.
(b)(i) Neither Seller nor AFC has during the three years
preceding the date of this Agreement been a defendant in any claim, action,
suit, investigation or proceeding relating to, or otherwise has been notified
of, any alleged claim or infringement of any patents, trademarks, service marks
or copyrights, and Seller has no knowledge of any other claim or infringement
by Seller, in each case, with respect to the Intellectual Property Rights, and
(ii) Seller has no knowledge of any continuing infringement by any other Person
of any Intellectual Property Rights. No Intellectual Property Right is subject
to any outstanding judgment, injunction, order, decree or agreement restricting
the use thereof by Seller with respect to the Business or restricting the
licensing thereof to any
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Person. Neither Seller nor AFC has entered into any agreement to indemnify any
other Person against any charge of infringement of any patent, trademark,
service mark or copyright.
(c) None of the processes and formulae, research and
development results and other know-how relating to the Business, the value of
which is contingent upon maintenance of the confidentiality thereof, has been
disclosed by AFC, Seller or any Affiliate thereof to any Person other than
employees, representatives and agents of Seller or other Persons subject to
confidentiality obligations to Seller in respect of such information.
(d) All Purchased Assets consisting of Intellectual
Property have been maintained in confidence in accordance with protection
procedures customarily used in the industry to protect rights of like
importance. All former and current members of management and key personnel of
Seller, AFC or any Affiliates of the Seller or AFC, including all former and
current employees, agents, consultants and independent contractors who have
contributed to or participated in the conception and development of
Intellectual Property (collectively, the "PERSONNEL"), have executed and
delivered to AFC or one of its Affiliates a proprietary information agreement
restricting such person's right to disclose proprietary information of the
Business. Other than Mr. Richard Berger, all former and current Personnel of
the Business either (i) have been party to a "work-for-hire" arrangement or
agreement with AFC, in accordance with all applicable laws, that has accorded
AFC full, effective, exclusive and original ownership of all tangible and
intangible property thereby arising or (ii) have executed appropriate
instruments of assignment in favor of AFC as assignee that have conveyed to AFC
full, effective and exclusive ownership of all tangible and intangible property
thereby arising. No former or current Personnel of the Seller or AFC have any
claim in connection with such person's involvement in the conception and
development of any Intellectual Property and no such claim has been asserted or
is threatened. None of the current officers and employees of Seller or AFC has
any patents issued or applications pending for any device, process, design or
invention of any kind now used or needed by Buyer, Seller or AFC in the
furtherance of the Business, which patents or applications have not been
assigned to Seller or AFC and with such assignment duly recorded in the United
States Patent and Trademark Office.
(e) The Purchased Assets include the "Filtrona" name and
the goodwill associated therewith and the exclusive
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right to use the name "Filtrona" and any derivations thereof in the United
States of America and Canada, and AFC has not granted any such right to any
third party.
(f) At the time of Closing, Seller shall execute and
deliver, or cause to be executed and delivered to Buyer, assignments, in
recordable form for each of the jurisdictions, transferring all of Seller's
right, title and interest in the Intellectual Property Rights identified in
Schedule 3.18.
3.19. EMPLOYEES. (a) Schedule 3.19(a) sets forth a true
and complete list as of December 31, 1996 of the names, titles, annual salaries
and other compensation provided by AFC during 1996 calendar year of all Seller
Employees. No key employee of the Business has indicated to Seller that he
intends to resign or retire as a result of the transactions contemplated by
this Agreement or otherwise within one year after the Closing Date.
(b) Schedule 3.19(b) identifies each Employee Plan that
(i) is entered into, maintained, administered or contributed to, as the case
may be, by Seller or any of its ERISA Affiliates and (ii) covers any Seller
Employee or any former employee of the Seller. Seller has furnished or made
available to Buyer copies of such Employee Plans (and, if applicable, related
trust agreements) and all amendments thereto and written interpretations
thereof together with the most recent annual report (Form 5500 including, if
applicable, Schedule B thereto) and the most recent actuarial valuation report
prepared in connection with any such Employee Plan. Neither Seller nor any of
its ERISA Affiliates has engaged in, or is a successor or parent corporation to
an entity that has engaged in, a transaction described in Sections 4069 of
ERISA.
(c) Each Employee Plan that is intended to be qualified
under Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service (the "IRS") and, to the knowledge of Seller,
no event has occurred since the date of such determination letter to adversely
affect the qualified status of such Employee Plan. Each such Employee Plan has
been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Code.
(d) Schedule 3.19(d) identifies each Benefit Arrangement
that (i) is entered into, maintained, administered or contributed to, as the
case may be, by
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Seller or any of its ERISA Affiliates and (ii) covers any Seller Employee or
any former employee of the Seller. Seller has furnished or made available to
Buyer copies or descriptions of each such Benefit Arrangement (and, if
applicable, related trust agreements) and all amendments thereto and written
interpretations thereof. Each such Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements prescribed by
any and all applicable statutes, orders, rules and regulations and has been
maintained in good standing with applicable regulatory authorities.
(e) Except as otherwise set forth in Schedule 3.19(e),
neither the execution and delivery of this Agreement or the Merger Agreement
nor the consummation of the transactions contemplated hereby or thereby will
(i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due under
any Employee Plan, (ii) materially increase any benefits otherwise payable
under any Employee Plan or (iii) result in the acceleration of the time of
payment or vesting of any such benefits to any material extent.
(f) There are no Multiemployer Plans to which Seller or
any of its ERISA Affiliates is required to contribute with respect to any
current or former Seller Employee.
(g) As of the Closing Date, the aggregate fair market
value of the assets held in the Seller Hourly Plan shall not be less than the
projected benefit obligation under such Plan, based on the actuarial
assumptions set forth in Schedule B to Form 5500 for 1995 filed with respect to
the Seller Hourly Plan, provided that the 1983 Group Annuity Table shall be
used in lieu of the 1971 Group Annuity Mortality Table.
3.20. PRODUCTS. Each of the products produced or sold in
connection with the Business is, and at all times up to and including the sale
thereof has been, (a) in compliance in all material respects with all
applicable federal, state, local and foreign laws and regulations and (b) fit
for the ordinary purposes for which it is intended to be used and conforms in
all material respects to any promises or affirmations of fact made on the
container or label for such product or in connection with its sale. There is
no design defect with respect to any of the products produced or sold in
connection with the Business prior to the Closing Date or, manufactured in
conformance with the design in effect as of the Closing Date during the
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period ending twelve months after the Closing Date, and each of such products
contains adequate warnings, presented in a reasonably prominent manner, in
accordance with applicable laws, rules and regulations and current industry
practice with respect to its contents and use.
3.21. FINDERS' FEES. Except for Goldman Sachs & Co., whose
fees will be paid by AFC, and First Union Capital Markets, whose fees will be
paid by Seller, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
AFC or Seller who might be entitled to any fee or commission in connection with
the transactions contemplated by this Agreement or the Merger Agreement. The
fees of each of Goldman Sachs & Co. and First Union Capital Markets are set
forth on Schedule 3.21.
3.22. ENVIRONMENTAL COMPLIANCE. (a) Except as disclosed on
Schedule 3.22:
(i) in connection with or relating to the Purchased
Assets, Business or Real Property, no notice, notification, demand,
request for information, citation, summons or order has been issued,
no complaint has been filed, no penalty has been assessed and no
investigation or review is pending, or to Seller's knowledge,
threatened by any governmental entity or other Person with respect to
matters arising out of or relating to any Environmental Law;
(ii) there are no liabilities of or relating to the
Purchased Assets, Business or Real Property of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or
otherwise, arising under or relating to any Environmental Law, and
there are no facts, conditions, situations or set of circumstances
which could reasonably be expected to result in or be the basis for
any such liability;
(iii) no incinerator, sump, surface impoundment, lagoon,
landfill, septic, wastewater treatment or other disposal system or
underground storage tank (active or abandoned) is or has been present
at any Real Property;
(iv) no Hazardous Substance has been discharged, disposed
of, dumped, injected, deposited, spilled, leaked, emitted or released
at, on or under any Real Property;
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(v) no Real Property nor any property to which Hazardous
Substances located on or resulting from the use of any Purchased Asset
or Real Property have been transported is listed or, to Seller's
knowledge, proposed for listing on the National Priorities List
promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or
on any similar federal, state, local or foreign list of sites
requiring investigation or cleanup;
(vi) the Purchased Assets, Business and Real Property are
and have been in compliance in all material respects with all
Environmental Laws and have been and are in compliance in all material
respects with all Environmental Permits; and
(vii) there are no Environmental Permits that are either
nontransferable or require consent, notification or other action to
remain in full force and effect following the consummation of the
transactions contemplated hereby.
(b) There has been no environmental investigation, study,
audit, test, review or other analysis conducted of which Seller has knowledge
in relation to the Business, any Purchased Asset or Real Property which has not
been delivered to Buyer prior to the date hereof.
(c) None of the Purchased Assets or the Real Property is
located in New Jersey or Connecticut.
(d) For purposes of this Section, the term "Seller" shall
include any entity which is, in whole or in part, a predecessor of Seller.
3.23. INTRACOMPANY ACCOUNTS. Schedule 3.23 contains a
complete list of all intracompany balances as of the Balance Sheet Date between
Seller, AFC and their respective Affiliates, on the one hand, and the Business,
on the other hand. Except as set forth on Schedule 3.23, since the Balance
Sheet Date there has not been any accrual of liability by the Business to
Seller, AFC or any of their respective Affiliates or other transaction between
the Business, on the one hand, and Seller, AFC or any of their respective
Affiliates, on the other hand.
3.24. FOREIGN CURRENCY EXPOSURES. (a) There have been no
sales within the three years ending on December 31, 1996 of the products of the
Business to any Person which paid for such products in any currency other than
the United
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States dollars (other than any sales not exceeding $50,000 per annum in the
aggregate).
(b) Except as disclosed on Schedule 3.24(b), there have
been no purchases within the three years ending on December 31, 1996 of any raw
materials or inventory used in the Business from any Person which denominated
its pricing for such raw materials or inventory in any currency other than the
United States dollars (other than any purchases not exceeding $50,000 per annum
in the aggregate).
3.25. REPRESENTATIONS. The representations and warranties
of Seller contained in this Agreement, disregarding all qualifications and
exceptions contained therein relating to materiality or Material Adverse
Effect, are true and correct with only such exceptions as would not in the
aggregate reasonably be expected to have a Material Adverse Effect.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date hereof
and as of the Closing Date that:
4.01. ORGANIZATION AND EXISTENCE. Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of
Delaware and has all corporate powers and all material governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted.
4.02. CORPORATE AUTHORIZATION. The execution, delivery and
performance by Buyer of this Agreement are within the corporate powers of Buyer
and have been duly authorized by all necessary corporate action on the part of
Buyer. This Agreement constitutes a valid and binding agreement of Buyer.
4.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery
and performance by Buyer of this Agreement require no material action by or in
respect of, or material filing with, any governmental body, agency or official
other than compliance with any applicable requirements of the HSR Act.
4.04. NON-CONTRAVENTION. The execution, delivery and
performance by Buyer of this Agreement do not and will not (a) violate the
certificate of incorporation or bylaws of Buyer or (b) assuming compliance with
the matters
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referred to in Section 4.03, violate any applicable law, rule, regulation,
judgment, injunction, order or decree.
4.05. FINDERS' FEES. There is no investment banker,
broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of Buyer who might be entitled to any fee or
commission from Seller or any of its Affiliates upon consummation of the
transactions contemplated by this Agreement.
4.06. LITIGATION. There is no claim, action, suit,
investigation or proceeding pending against, or to the knowledge of Buyer
threatened against or affecting, Buyer before any court or arbitrator or any
governmental body, agency or official which in any manner challenges or seeks
to prevent, enjoin, alter or materially delay the transactions contemplated
hereby.
ARTICLE 5
COVENANTS OF SELLER
Seller agrees that:
5.01. CONDUCT OF THE BUSINESS. From the date hereof until
the Closing Date, Seller (i) will promptly notify the Buyer of any development
or occurrence of which Seller has notice relating to the Business not in the
ordinary course of business consistent with past practices or which contravenes
or is reasonably likely to contravene the provisions of Section 3.07, (ii)
will, at the request of Buyer, use its commercially reasonable best efforts to
learn of any development or occurrence described in clause (i) above, as
reasonably specified in such request, and (iii) will, at the request of Buyer,
promptly enforce all of its rights against AFC under the Merger Agreement if
AFC shall fail to perform, observe and comply with any of the covenants or
agreements set forth in the Merger Agreement.
5.02. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) From the
date hereof until the Closing Date, Seller (i) will give, and will cause AFC to
give, Buyer, its counsel, financial advisors, auditors and other authorized
representatives full access to the offices, properties, books and records of
Seller and AFC relating to the Business, (ii) will furnish, and will add a
provision to the Merger Agreement that requires AFC to furnish, to Buyer, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information relating to the Business as
such Persons may
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reasonably request and will enforce such provision of the Merger Agreement at
Buyer's request and (iii) will instruct the employees, counsel and financial
advisors of Seller or AFC to cooperate with Buyer in its investigation of the
Business; provided that no investigation by Buyer or other information received
by Buyer shall operate as a waiver or otherwise affect any representation,
warranty or agreement given or made by Seller hereunder. Any investigation
pursuant to this Section shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of AFC or Seller.
(b) Seller will add a provision to the Merger Agreement
that requires AFC to furnish to Buyer and its counsel copies of those
agreements, contracts and commitments of AFC relating to the Business (and, if
such agreements, contracts and commitments are not reduced to writing,
reasonable written details of the same) which (i) have previously been withheld
from Buyer or (ii) include obligations of confidentiality or impose
restrictions on disclosure by AFC (clauses (i) and (ii), collectively, the
"CONFIDENTIAL AGREEMENTS") no less than 5 Business Days prior to the Closing.
The Confidential Agreements shall include, without limitation, agreements,
contracts and commitments relating to research and/or development work and
projects or contracts or agreements with or commitments to or understandings
with suppliers or customers of the Business. Buyer shall, if requested, enter
into confidentiality undertakings with regard to such Confidential Agreements
on such terms as Buyer may agree, with the counterparties to such Confidential
Agreements. Seller shall enforce such provision of the Merger Agreement at
Buyer's request.
(c) Seller shall add a provision to the Merger Agreement that
requires AFC to disclose to Buyer, its counsel, auditors and other authorized
representatives and/or to give Buyer, its counsel, auditors and other
authorized representatives, access to, not less than 5 Business Days before the
Closing:
(i) The commercial terms upon which products, goods,
materials and services are supplied by the Business to its
customers including, but not limited to, the price at which
such products, goods, materials and services are sold and
details of any rebates, discounts, commissions and extended
credit terms paid or given to customers;
(ii) The commercial terms upon which products, goods,
materials and devices are supplied to the
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Business by its suppliers including, but not limited to, the
price at which such products, goods, materials and services
are supplied to the Business and details of any rebates,
discounts and commissions paid or given to the Business;
(iii) The financial budgets and forecasts and business
plans of or relating to the Business including, but not
limited to, full details of the 1997 forecast and budget and
the 1997 to 1999 plan and any notes and commentaries forming
part of or relating to such forecasts, budgets and plans;
(iv) The Jefferson Davis and White Pine facilities and the
Pine Glen warehouse and the Business research and development
facilities;
(v) Written details of any significant business or
commercial arrangement, commitments or understandings (whether
or not reduced to writing and whether or not legally binding)
related to the Business; and
(vi) Such access to the employees and advisors of AFC as
may be necessary or useful in connection with any of the
foregoing.
Seller shall enforce such provision of the Merger Agreement at
Buyer's request.
5.03. NOTICES OF CERTAIN EVENTS. Seller shall promptly
notify Buyer of each of the following of which it has knowledge (and, at
Buyer's request, Seller shall use its commercially reasonable best efforts to
acquire such knowledge, as reasonably specified in such request):
(a) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement;
(b) any notice or other communication from any
governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement;
(c) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge threatened against,
relating to or involving or otherwise affecting Seller, AFC or the
Business that, if pending on the date of this Agreement, would have
been required
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to have been disclosed pursuant to Section 3.11 or that relate to the
consummation of the transactions contemplated by this Agreement; and
(d) the damage or destruction by fire or other casualty
of any Purchased Asset or part thereof or in the event that any
Purchased Asset or part thereof becomes the subject of any proceeding
or, to the knowledge of Seller, threatened proceeding for the taking
thereof or any part thereof or of any right relating thereto by
condemnation, eminent domain or other similar governmental action.
5.04. NONCOMPETITION. (a) Seller agrees that for a period
of five full years from the Closing Date, neither it nor any of its Affiliates
shall:
(i) engage, either directly or indirectly, as a principal
or for its own account or solely or jointly with others, or as
stockholders in any corporation or joint stock association, in any
business that competes with the Business as it exists on the Closing
Date within the United States of America, Canada, Germany, Ireland,
France, United Kingdom, Peru, Mexico, Brazil, Venezuela, Colombia,
Australia, Israel, South Korea, India, Thailand, Singapore, Malaysia,
Taiwan, Indonesia and Japan; provided that nothing herein shall
prohibit the acquisition by Seller or any of its Affiliates of a
diversified company having not more than 5% of its sales (based on
its latest published annual audited financial statements) attributable
to any business that competes with the Business; or
(ii) employ or solicit, or receive or accept the
performance of services by, any Transferred Employee.
(b) If any provision contained in this Section shall for
any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provisions of this Section, but this Section shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
It is the intention of the parties that if any of the restrictions or covenants
contained herein is held to cover a geographic area or to be for a length of
time which is not permitted by applicable law, or in any way construed to be
too broad or to any extent invalid, such provision shall not be construed to be
null, void and of no effect, but to the extent such provision would be valid or
enforceable under applicable law, a court of competent jurisdiction shall
construe and interpret or reform this
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Section to provide for a covenant having the maximum enforceable geographic
area, time period and other provisions (not greater than those contained
herein) as shall be valid and enforceable under such applicable law. Seller
acknowledges that Buyer would be irreparably harmed by any breach of this
Section and that there would be no adequate remedy at law or in damages to
compensate Buyer for any such breach. Seller agrees that Buyer shall be
entitled to injunctive relief requiring specific performance by Seller of this
Section, and Seller consents to the entry thereof.
5.05. AMENDMENT OF MERGER AGREEMENT. Seller shall not
amend, modify, terminate or waive any of the terms, representations,
warranties, covenants or conditions of the Merger Agreement without the prior
written consent of the Buyer.
5.06. SUPPLEMENTAL DISCLOSURE. Seller shall furnish to
Buyer, immediately upon receipt or becoming aware of, any information that
would have been required to be included in the Schedules to this Agreement if
available on the date hereof. No disclosure pursuant to the immediately
preceding sentence shall amend, supplement or modify the Schedules to this
Agreement or otherwise limit or affect any right of Buyer to decline to
consummate the Closing.
5.07. CERTAIN PERMITS. Prior to the Closing Date, Seller
shall have obtained, in a form reasonably satisfactory to Buyer, consent to the
transfer of any Permit listed or described on Schedule 3.13 or issuance of a
comparable new permit to Buyer, such transferred or new Permit to have terms
and conditions that are at least as favorable in the aggregate to the Business
as the terms and conditions of such Permit as in effect on the date hereof.
5.08. INSURANCE. Seller will cooperate with Buyer with
respect to making claims under any insurance policies written by insurance
companies, to the extent such policies were owned by AFC or any of its
Subsidiaries prior to the Closing Date. Such cooperation shall include,
without limitation, (i) making all reasonable claims and demands against such
insurance companies with respect to any matters that might be covered by such
insurance policies and pursuing such claims and demands in a commercially
reasonable manner; (ii) providing Buyer with all information reasonably
requested by Buyer with respect to such insurance policies for a period of not
less than ten years prior to the Closing Date, such information to include,
without limitation, the insurance company providing the policy, the number of
the policy, the dates of the effectiveness of the
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policy and, to the extent available, the insurance policy; and (iii) requesting
such insurance companies to name Buyer (or its appropriate Affiliates) as
additional insureds on such policies as Buyer's (or its Affiliates') interests
may appear, and cooperating in a commercially reasonable manner in obtaining
such additional insured coverage.
5.09. INTRACOMPANY INDEBTEDNESS. At least five Business
Days prior to the Closing Date, Seller shall prepare and deliver to Buyer a
statement setting out in reasonable detail the calculation of all intracompany
balances between Seller, AFC and their respective Affiliates, on the one hand,
and the Business, on the other hand, based upon the latest available financial
information as of such date, and, to the extent requested by Buyer, provide
Buyer with supporting documentation to verify the underlying intracompany
charges and transactions. All such intracompany account balances which
constitute liabilities of the Business shall be canceled prior to the Closing
Date.
5.10. TRADEMARKS; TRADENAMES. (a) Except as specifically
set forth herein, after the Closing, Seller and its Affiliates shall not use
any trademark or tradename listed on Schedule 3.18, any other name or mark that
may reasonably be confused therewith or any logo, format or style that includes
any such mark or name.
(b) After the Closing, Seller and its Affiliates as of
the date hereof (but only in the case of the Affiliates while the Affiliates
remain Affiliates of Seller) shall have the right to sell existing inventory
and to use existing packaging, labeling, containers, supplies, brochures and
technical data sheets bearing or including the tradename "Filtrona", and to use
the tradename "Filtrona" or any tradename including the name "Filtrona" on
buildings, cars, trucks and other fixed assets, until the earlier of (i) six
months after the Closing Date and (ii) the date existing stocks are exhausted.
Except as specifically provided herein, neither Seller nor any of its
Affiliates shall have the right to use the tradename "Filtrona" or any
tradename including the word "Filtrona" in any advertising or public relations
materials. Seller and its Affiliates shall comply with all applicable laws or
regulations in any use of packaging or labeling containing the tradename
"Filtrona" or any tradename including the word "Filtrona" and shall maintain
the quality of goods and services provided under the tradename "Filtrona" or
any tradename including the word "Filtrona".
(c) After the Closing, Southern Plastics Company, A&B
Plastics Southwest Inc. and Tri-Lite Plastics Inc. shall
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have the right (i) to sell existing inventory and to use existing packaging,
labeling, containers, supplies, brochures and technical data sheets bearing the
trademark or tradename "Filtrona Lighting Group", and to use the trademark or
tradename "Filtrona Lighting Group" on buildings, cars, trucks and other fixed
assets, solely in connection with acrylic and styrene lighting fixture lenses
for fluorescent and other lighting fixtures in the United States until the
earlier of (x) six months after the Closing Date and (y) the date existing
stock are exhausted, and (ii) to use the trademark or tradename "Filtrona
Lighting Group" solely in connection with the sale of acrylic and styrene
lighting fixture lenses for fluorescent and other lighting fixtures in the
United States until six months after the Closing Date. Except as specifically
provided herein, neither Seller nor any of its Affiliates shall have the right
to use the trademark or tradename "Filtrona Lighting Group" in any advertising
or public relations materials. Seller, Southern Plastics Company, A&B Plastics
Southwest Inc. and Tri-Lite Plastics Inc. shall comply with all applicable laws
or regulations in any use of packaging or labeling containing the trademark or
tradename "Filtrona Lighting Group" and shall maintain the quality of goods and
services provided under the trademark or tradename "Filtrona Lighting Group".
In the event that any of the Affiliates of Seller specified in this Section
5.10(c) shall cease to be an Affiliate of Seller, the rights granted by Buyer
to such Affiliate in respect of the tradename "Filtrona Lighting Group"
pursuant to this Section 5.10(c) shall terminate immediately.
(d) Seller shall not be obligated to change the tradename
"Filtrona" or any tradename including the word "Filtrona" or the trademark or
tradename "Filtrona Lighting" on goods in the hands of dealers, distributors
and customers at the time of the expiration of a time period set forth in this
Section 5.10(b) or 5.10(c) above, respectively.
(e) The prohibitions set forth in this Section 5.10 may
be amended or extended only pursuant to the prior written consent of Buyer.
5.11. OFCCP. Without the prior written consent of Buyer,
Seller shall not permit AFC (i) to settle any claims arising out of or in
connection with the matters described in the Notice of Violation issued to
American Filtrona Company, a division of AFC, by the Office of Federal Contract
Compliance Programs or (ii) to admit any liability in connection therewith.
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5.12. POST-CLOSING PAYMENTS. Seller agrees that it shall (i)
promptly deliver to Buyer all checks in respect of the Business that are
received by Seller after the Closing Date in respect of the Business, with such
endorsements as may be reasonably required by Buyer to allow Buyer to present
such checks and (ii) promptly upon receipt of any other payment in respect of
the Business that is received by Seller after the Closing Date, deliver the
funds so received to the bank account designated by Buyer.
ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
6.01. ACCESS. On and after the Closing Date, Buyer will
afford promptly to Seller and its agents reasonable access to its properties,
books, records, employees and auditors to the extent necessary to permit Seller
to determine any matter relating to its rights and obligations hereunder or to
any period ending on or before the Closing Date; provided that any such access
by Seller shall not unreasonably interfere with the conduct of the business of
Buyer. Seller will hold, and will use its best efforts to cause its officers,
directors, employees, accountants, counsel, consultants, advisors and agents to
hold, in confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all confidential documents and
information concerning Buyer or the Business provided to it pursuant to this
Section.
6.02. USE OF NAME. Buyer agrees that it is likely that the
customers of Filtrona Lighting Group will be confused if Buyer uses that name
in a business competing with certain of Seller's businesses as described below
and that therefore for a period of two full years from the Closing Date,
neither Buyer nor any of its Affiliates shall:
(i) use the name "Filtrona Lighting Group" in the United
States in connection with the manufacture, sale or distribution of
acrylic and styrene lighting fixture lenses for fluorescent and other
lighting fixtures; or
(ii) employ or solicit, or receive or accept the
performance of services by, any salaried employee of Seller who is not
a Seller Employee unless such employee responds to general
solicitation for employment by Buyer or any of its Affiliates.
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ARTICLE 7
COVENANTS OF BOTH PARTIES
Buyer and Seller agree that:
7.01. BEST EFFORTS; FURTHER ASSURANCES. (a) Subject to the
terms and conditions of this Agreement, Buyer and Seller will each use its best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary or desirable under applicable laws and regulations
to consummate the transactions contemplated by this Agreement. Seller and
Buyer each agree to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be
necessary or desirable in order to consummate or implement expeditiously the
transactions contemplated by this Agreement and to vest in Buyer good and
marketable title to the Purchased Assets.
(b) Subject to the provisions of Section 11.03, Seller
hereby constitutes and appoints, effective as of the Closing Date, Buyer and its
successors and assigns as the true and lawful attorney of Seller with full
power of substitution in the name of Buyer or in the name of Seller, but for
the benefit of Buyer (i) to collect for the account of Buyer any items of
Purchased Assets and (ii) to institute and prosecute all proceedings which
Buyer may in its sole discretion deem proper in order to assert or enforce any
right, title or interest in, to or under the Purchased Assets, and to defend or
compromise any and all claims, actions, suits or proceedings in respect of the
Purchased Assets. Buyer shall be entitled to retain for its own account any
amounts collected pursuant to the foregoing powers, including any amounts
payable as interest in respect thereof.
7.02. CERTAIN FILINGS. Seller and Buyer shall cooperate
with one another (a) in determining whether any action by or in respect of, or
filing with, any governmental body, agency, official or authority is required,
or any actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (b) in taking such actions or
making any such filings, furnishing information required in connection
therewith and seeking timely to obtain any such actions, consents, approvals or
waivers. Buyer and Seller shall promptly, but in no event later than 30 days
after the date of this Agreement, make the
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respective filings and submissions required under the provisions of the HSR Act
relating to the Merger and to this Agreement, and thereafter shall comply fully
and promptly with any request for additional information ("second request"),
voluntary request to submit information or civil investigative demand that
might be issued to or served on such party in connection with any investigation
under the HSR Act. Buyer and Seller shall further take, or cause to be taken,
all actions and do, or cause to be done, all things necessary, proper or
advisable under applicable laws or regulations to obtain any required approval,
action, or inaction of any governmental body, entity or agency with
jurisdiction, so that both the Merger and this Agreement may be permitted to
close in accordance with their respective terms, provided that neither Buyer
nor Seller shall be required pursuant to the foregoing to agree to any
commitment or obligation that would (1) impose material limitations on the
ability of Buyer to effectively control, operate, or enjoy full rights of
ownership with respect to (i) the business, assets or operations of the
Business or (ii) any other material business, assets or operations of Buyer or
its Affiliates, (2) require the divestiture of any other material business or
assets by Buyer or its Affiliates or (3) require the prior approval by either
the Federal Trade Commission or the Antitrust Division of the Department of
Justice of future acquisitions by Buyer or its Affiliates.
7.03. PUBLIC ANNOUNCEMENTS. The parties agree to consult
with each other before issuing any press release or making any public statement
with respect to this Agreement or the transactions contemplated hereby and,
except as may be required by applicable law or any listing agreement with any
national securities exchange, will not issue any such press release or make any
such public statement prior to such consultation.
7.04. WARN ACT. The parties agree to cooperate in good
faith to determine whether any notification may be required under the Worker
Adjustment and Retraining Notification Act (the "WARN ACT") as a result of the
transactions contemplated by this Agreement. Buyer will be responsible for
providing any notification that may be required under the WARN Act with respect
to any Seller Employee.
7.05. NOTICE OF CERTAIN EVENTS. Buyer or Seller shall
promptly notify the other party of (i) any breach of any representation or
warranty made by it or made or deemed made by Buyer or Seller, as the case may
be, that is contained herein or (ii) any breach of any representation,
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warranty, covenant or agreement made or deemed made by AFC or Seller, as the
case may be, that is contained in the Merger Agreement.
7.06. ACCESS. (a) Each party agrees that it will
cooperate with and make available to the other party, during normal business
hours, all books of account and other financial records (including, without
limitation, accountant's work papers) pertaining to the Business ("BOOKS AND
RECORDS"), information and employees (without substantial disruption of
employment) retained and remaining in existence after the Closing Date which
are necessary or useful in connection with any inquiry relating to Taxes or any
audit, investigation or dispute, any litigation or investigation or any other
matter requiring any such Books and Records, information or employees for any
reasonable business purpose. The party requesting any such Books and Records,
information or employees shall bear all of the out-of-pocket costs and
expenses (including, without limitation, attorneys' fees, but excluding
reimbursement for general overhead, salaries and employee benefits) reasonably
incurred in connection with providing such Books and Records, information or
employees. The Seller may require certain financial information relating to
the Business for periods prior to the Closing Date for the purpose of filing
federal, state, local and foreign Tax Returns and other governmental reports,
and the Buyer agrees to furnish such information to the Seller at the Seller's
request and expense.
(b) Each party agrees that it will cooperate with and
afford promptly to the Accounting Referee reasonable access to its properties,
Books and Records, employees and auditors to the extent necessary to permit the
Accounting Referee to resolve any dispute arising between Buyer and Seller in
connection with the calculation of any Purchase Price adjustment pursuant to
Section 2.08 and Schedule 2.08; provided that any such access by the Accounting
Referee shall not unreasonably interfere with the conduct of the business of
Buyer or Seller.
ARTICLE 8
TAX MATTERS
8.01. TAX MATTERS. Seller hereby represents and warrants
to Buyer that:
(a) Seller has timely paid all Taxes, and all interest
and penalties due thereon and payable by it or AFC
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for the Pre-Closing Tax Period which will have been required to be paid on or
prior to the Closing Date, the non-payment of which would result in a Lien on
any Purchased Asset, would otherwise adversely affect the Business or would
result in Buyer becoming liable or responsible therefor.
(b) Seller has established, in accordance with generally
accepted accounting principles applied on a basis consistent with that of
preceding periods, adequate reserves for the payment of, and will timely pay
all Tax liabilities, assessments, interest and penalties which arise from or
with respect to the Purchased Assets or the operation of the Business and are
incurred in or attributable to the Pre-Closing Tax Period, the non-payment of
which would result in a Lien on any Purchased Asset, would otherwise adversely
affect the Business or would result in Buyer becoming liable therefor.
8.02. TAX COOPERATION; ALLOCATION OF TAXES. (a) All
excise, sales, use, value added, registration stamp, recording, documentary,
conveyancing, franchise, property, transfer, gains and similar Taxes, levies,
charges and fees (collectively, "TRANSFER TAXES") incurred in connection with
the transactions contemplated by this Agreement shall be borne by Seller.
Buyer and Seller shall cooperate in providing each other with any appropriate
resale exemption certifications and other similar documentation. The party
that is required by applicable law to make the filings, reports, or returns
with respect to any applicable Transfer Taxes shall do so, and the other party
shall cooperate with respect thereto as necessary.
(b) All real property taxes, personal property taxes and
similar ad valorem obligations levied with respect to the Purchased Assets for
a taxable period which includes (but does not end on) the Closing Date shall be
apportioned between Seller and Buyer based on the number of days of such
taxable period included in the Pre-Closing Tax Period and the number of days of
such taxable period after the Closing Date (with respect to any such taxable
period, the "POST-CLOSING TAX PERIOD"). Seller shall be liable for the
proportionate amount of such taxes that is attributable to the Pre-Closing Tax
Period, and Buyer shall be liable for the proportionate amount of such taxes
that is attributable to the Post-Closing Tax Period. Upon receipt of any bill
for real or personal property taxes relating to the Purchased Assets, each of
Seller and Buyer shall present a statement to the other setting forth the
amount of reimbursement to which each is entitled under this Section 8.02
together with such supporting evidence as is reasonably necessary to calculate
the proration amount. The proration
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amount shall be paid by the party owing it to the other within 10 days after
delivery of such statement. In the event that either Seller or Buyer shall
make any payment for which it is entitled to reimbursement under this Section
8.02, the other party shall make such reimbursement promptly but in no event
later than 10 days after the presentation of a statement setting forth the
amount of reimbursement to which the presenting party is entitled along with
such supporting evidence as is reasonably necessary to calculate the amount of
reimbursement.
(c) Buyer and Seller agree to furnish or cause to be
furnished to each other, upon request, as promptly as practicable, such
information and assistance relating to the Business and the Purchased Assets
(including, without limitation, access to personnel and books and records) as
is reasonably necessary for the filing of all Tax returns, the making of any
election relating to Taxes, the preparation for any audit by any taxing
authority, and the prosecution or defense of any claim, suit or proceeding
relating to any Tax. Buyer and Seller shall retain all books and records with
respect to Taxes pertaining to the Purchased Assets for a period of at least
six years following the Closing Date. At the end of such period, each party
shall provide the other with at least ten days prior written notice before
destroying any such books and records, during which period the party receiving
such notice can elect to take possession, at its own expense, of such books and
records. Seller and Buyer shall cooperate with each other in the conduct of
any audit or other proceeding relating to Taxes involving the Purchased Assets
or the Business.
ARTICLE 9
EMPLOYEE BENEFITS
9.01. EMPLOYEES AND OFFERS OF EMPLOYMENT. (a) On the
Closing Date, Buyer shall offer employment to all Seller Employees who are
active employees; provided, that Buyer may terminate at any time after the
Closing Date the employment of any Seller Employee who accepts such offer. For
purposes of this Article 9, the term "ACTIVE EMPLOYEE" shall mean any Person
who, on the Closing Date, is actively employed by Seller or who is on
short-term disability leave, authorized leave or absence, including leave under
the Family and Medical Leave Act, military service or lay-off with recall
rights as of the Closing Date (such inactive employees shall be offered
employment by Buyer as of the date they return to active employment), but shall
exclude any other inactive or former employee including any Person who as of
the Closing
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Date is on unauthorized leave of absence or who has terminated his or her
employment, retired or died on or before the Closing Date. Except as provided
in this Article 9, any such offers shall be at such salary or wage and benefit
levels and on such other terms and conditions as are substantially comparable
in the aggregate to those offered to each such Transferred Employee by the
Seller prior to the Closing Date. The employees who accept and commence
employment with Buyer are hereinafter collectively referred to as the
"TRANSFERRED EMPLOYEES". Seller will not take and will cause each of its
subsidiaries not to take, any action which would impede, hinder, interfere or
otherwise compete with Buyer's effort to hire any Transferred Employees.
9.02. SEVERANCE OBLIGATIONS AND COBRA COSTS. Buyer shall
be responsible for all severance payments and stay bonus payments ("SEVERANCE
PAYMENTS") pursuant to the stay and severance plans and arrangements set forth
on Schedule 9.02 hereto, to Seller Employees who are or become entitled to
benefits thereunder. Buyer shall also reimburse Seller for the net
out-of-pocket cost of providing COBRA coverage to any Seller Employee who does
not become a Transferred Employee; provided that any such Seller Employee pays
the maximum "applicable premium" (within the meaning of Section 4980B(f)(4) of
the Code) in respect of such COBRA coverage.
9.03. COLLECTIVE BARGAINING AGREEMENT. Buyer will assume
all obligations with respect to the collective bargaining agreements between
AFC on the one hand and the (i) Bakery, Confectionary and Tobacco Workers
International Union, AFL-CIO-CLC, Local Union No. 321-T, and (ii) International
Association of Machinists and Aerospace Workers, AFL-CIO, Local Lodge No. 10,
on the other.
9.04. SELLER'S EMPLOYEE BENEFITS PLANS.
(a) Seller shall continue to operate in accordance with
past practices, including past accounting practices, all of the Employee Plans
and Benefit Arrangements until the Closing Date. Except as otherwise provided
in this Article 9, Buyer shall assume all obligations and liabilities existing
on or after the Closing Date under the Employee Plans and Benefit Arrangements
and all other employment related obligations and liabilities in respect of each
Seller Employee, including any beneficiary or dependent thereof, and all
obligations and liabilities under Seller's retiree medical plan or arrangement
for both former hourly and salaried employees who were employed in the
Business. Seller shall pay to Buyer on the Closing Date an amount equal to the
amount accrued on the books of account of
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Seller and/or the Business, as the case may be, as of such date as a liability
for a profit-sharing contribution to Seller's 401(k) Plan with respect to
Transferred Employees, and Buyer agrees to contribute such amount as a profit-
sharing contribution for Transferred Employees to the profit-sharing plan with
salary reduction arrangement adopted or designated by Buyer for such employees
pursuant to Section 9.09 hereof. Except as expressly set forth in this Article
9, no assets of any Employee Plan or Benefit Arrangement shall be transferred
to Buyer or to any plan of Buyer. Accrued benefits or account balances of
Transferred Employees under the Employee Plans and Benefit Arrangements shall
be fully vested as of the Closing Date.
(b) Seller shall amend the Employee Stock Ownership Plan
of American Filtrona Corporation ("SELLER ESOP") to provide that each Seller
Employee participating therein shall be 100% vested in their accrued benefit
thereunder and to provide for the distribution or rollover of such benefits
following the Closing. Buyer shall have no obligation to provide to
Transferred Employees benefits similar to those provided under the ESOP.
Seller shall pay to Buyer on or promptly after the Closing Date an amount equal
to the amount accrued on the accounting records of Seller and/or the Business,
as the case may be, as of such date as a liability for a contribution to
Seller's ESOP with respect to Transferred Employees, and Buyer agrees to
contribute such amount as a profit-sharing contribution for Transferred
Employees to the profit-sharing plan with salary reduction arrangement adopted
or designated by Buyer for such employees pursuant to Section 9.09 hereof.
(c) Seller shall pay Buyer on the Closing Date $22,000 as
the estimated present value of the contingent projected benefit of Randall
Hagan under Seller's Supplemental Benefit Plan as of the Closing Date and shall
have no further liability for such benefit for Mr. Hagan under such Plan.
Buyer shall assume all such liabilities under such Supplemental Benefit Plan
for Mr. Hagan.
(d) Buyer shall not assume any liability under stock
option, stock purchase or any other incentive or bonus plans sponsored or
maintained by Seller.
9.05. BUYER BENEFIT PLANS. Except as expressly set forth
herein, Buyer or one of its Affiliates will recognize all service of the
Transferred Employees with Seller or any of its Affiliates, only for purposes
of eligibility to participate in those employee benefit plans (within the
meaning of Section 3(3) of ERISA) in which the
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Transferred Employees are enrolled by Buyer or one of its Affiliates
immediately after the Closing Date.
9.06. HOURLY PENSION PLAN. (a) Subject to sub-section (b)
below, Buyer shall adopt and assume all assets and liabilities for and under
the American Filtrona Corporation Pension Plan for Hourly Employees (the
"SELLER HOURLY PLAN") as of the Closing Date.
(b) Seller shall pay to Buyer on or promptly after the
Closing Date an amount equal to the amount accrued on the books of account of
Seller and/or the Business, as the case may be, as of such date as a pension
cost computed in accordance with past practice with respect to Seller's Hourly
Plan for the 1997 plan year, and Buyer agrees to contribute such amount to
Seller's Hourly Plan for the 1997 plan year. Buyer and Seller shall cooperate
with each other at all times to ensure the ongoing operation and administration
of the Seller Hourly Plan.
9.07. SALARIED PENSION PLAN. (a) Seller shall retain the
responsibility for pensions under the American Filtrona Corporation Retirement
Plan (the "SELLER RETIREMENT PLAN") for former employees of the Seller who have
retired or terminated employment prior to the Closing Date except for persons
listed on Schedule 9.07(b). Prior to the Closing Date, but contingent on the
Closing, Seller shall fully vest all Seller Employees in their accrued benefits
under the Seller Retirement Plan effective as of the Closing Date.
(b) (i) Within 90 days following the Closing Date, Buyer
shall adopt or designate a defined benefit plan that covers the persons listed
on Schedule 9.07(b) who are participants in the Seller Retirement Plan
("SALARIED EMPLOYEES") and meets the requirements of Section 401(a) of the Code
(the "RETIREMENT PLAN"). Buyer agrees that all service credited under the
Seller Retirement Plan as of such adoption or designation with respect to
Salaried Employees shall be credited under the Retirement Plan for all plan
purposes, including eligibility, vesting and benefit accrual.
(ii) Within 90 days after the adoption or designation of
the Retirement Plan by Buyer, Seller shall cause an amount in cash determined
as of the Closing Date pursuant to subparagraph (iii) below (the "RP AMOUNT"),
adjusted as set forth in subparagraph (iv) below, to be transferred from the
trust maintained under the Seller Retirement Plan to the trust maintained under
the Retirement Plan. Such transfer of assets shall be made only after
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(1) Seller has supplied to Buyer (A) either (i) a
copy of an IRS determination letter finding the Seller Retirement Plan
to be a qualified plan meeting the requirements of Section 401(a) of
the Code or (ii) an opinion of counsel or a written representation
from Seller (with appropriate indemnities), in either case, to the
effect that the Seller Retirement Plan has been established in
accordance with the Code and ERISA, and an agreement that Seller will
request a determination letter from the IRS and make any and all
changes to the Seller Retirement Plan necessary to receive a favorable
determination letter and (B) information enabling the enrolled actuary
for the Retirement Plan to issue the certification required by Section
414(l) of the Code (Form 5310-A); and
(2) Buyer has supplied to Seller (A) either (i) a
copy of an IRS determination letter finding the Retirement Plan to be
a qualified plan meeting the requirements of Section 401(a) of the
Code or (ii) an opinion of counsel or a written representation from
Buyer (with appropriate indemnities), in either case, to the effect
that the Retirement Plan has been established in accordance with the
Code and ERISA, and an agreement that Buyer will request a
determination letter from the IRS and make any and all changes to the
Retirement Plan necessary to receive a favorable determination letter
and (B) information enabling the enrolled actuary for the Seller
Retirement Plan to issue the certification required by Section 414(l)
of the Code (Form 5310-A).
Buyer and Seller shall cooperate with each other during the period beginning on
the date hereof and ending on the date the assets are transferred to the trust
maintained under the Retirement Plan (the "PENSION PLAN TRANSITION PERIOD") to
ensure the ongoing operation and administration of the Seller Retirement Plan
and the Retirement Plan with respect to the Salaried Employees.
(iii) Buyer and Seller agree that the RP Amount, as
calculated pursuant to Section 414(1) of the Code and regulations thereunder
and based on the actuarial assumptions used by the Pension Benefit Guaranty
Corporation as if the Seller Retirement Plan had terminated on the Closing
Date, is $2,195,810.
(iv) The RP Amount shall be adjusted (A) to reflect
payments made to Salaried Employees from the Seller Retirement Plan during the
period beginning on January 1, 1997 and ending on the date the assets are
transferred, and
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(B) as may be required by the PBGC and the IRS to maintain the status of the
Retirement Plan or the Seller Retirement Plan as an employee pension plan
meeting the requirements of Section 401(a) of the Code. In addition to the RP
Amount, Seller shall cause to be transferred from the Seller Retirement Plan to
the Retirement Plan interest on the RP Amount at a rate equal to 7.5%
calculated from and including the Closing Date but excluding the actual date of
transfer. Within 60 days after the Closing Date or as soon as practicable
thereafter, Seller and Buyer shall make any required governmental filings
necessary to effect the asset transfer described herein, including the filing
of IRS Form 5310-A.
(c) Seller shall pay to Buyer on the Closing Date an
amount equal to the amount accrued on the books of account of Seller and/or the
Business, as the case may be, as of such date as a pension cost with respect to
Seller's Retirement Plan for the 1997 plan year attributable to Seller
Employees computed in accordance with past practice, and Buyer agrees to
contribute such amount to one of its corresponding plans or a new plan covering
the Salaried Employees for the 1997 plan year.
9.08. HOURLY 401(K) PLAN. (a) Effective as of the Closing
Date, Buyer shall adopt and assume all assets and liabilities for and under the
American Filtrona Corporation 401(k) Plan for Hourly Employees ("HOURLY 401(K)
PLAN"). Seller and Buyer shall execute all documents and make any required
governmental filings required to effect the assumption of the Hourly 401(k)
Plan as described herein.
(b) Seller shall pay to Buyer on or promptly after the
Closing Date an amount equal to the amount (if any) accrued on the books of
account of Seller and/or the Business, as the case may be, as of such date as
the liability of the Hourly 401(k) Plan.
9.09. SALARIED 401(K) PLAN. (a) (i) As soon as practicable
after and effective as of the Closing Date, Buyer shall adopt or designate a
profit-sharing plan with a salary reduction arrangement that covers the
Transferred Employees participating in the American Filtrona Corporation 401(k)
Savings & Profit-Sharing Plan ("SELLER 401(K) PLAN") and meets the requirements
of Sections 401(a) and 401(k) of the Code ("BUYER 401(K) PLAN"). Buyer agrees
that all service credited under the Salaried 401(k) Plan as of the Closing Date
with respect to such Transferred Employees shall be credited under the Buyer
401(k) Plan for all plan purposes, including eligibility and vesting.
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(ii) Within 30 days after the adoption or designation of
the Buyer 401(k) Plan by Buyer, Seller shall cause an amount, in cash
equivalent to the account balances of all Transferred Employees under the
Seller 401(k) Plan as of the date of the transfer, to be transferred from the
trust maintained under the Seller 401(k) Plan to the trust maintained under
the Buyer 401(k) Plan. Such transfer of assets shall be made only after
(1) Seller has supplied to Buyer either (A) a copy of an
IRS determination letter finding the Seller 401(k) Plan to be
a qualified plan meeting the requirements of Sections 401(a)
and 401(k) of the Code or (B) an opinion of counsel or written
representation from Seller (with appropriate indemnities), in
either case, to the effect that the Seller 401(k) Plan has
been established in accordance with the Code and ERISA, and an
agreement that Seller will request a determination letter from
the IRS and make any and all changes to the Seller 401(k) Plan
necessary to receive a favorable determination letter; and
(2) Buyer has supplied to Seller either (A) a copy of an
IRS determination letter finding the Buyer 401(k) Plan to be a
qualified plan meeting the requirements of Sections 401(a) and
401(k) of the Code or (B) an opinion of counsel or written
representation from Buyer (with appropriate indemnities), in
either case, to the effect that the Buyer 401(k) Plan has been
established in accordance with the Code and ERISA, and an
agreement that Buyer will request a determination letter from
the IRS and make any and all changes to the Buyer 401(k) Plan
necessary to receive a favorable determination letter.
Any Seller Employee who does not become a Transferred Employee
shall continue as a participant in Seller 401(k) Plan, and Buyer shall have no
responsibility or liability for such individual benefits under such Plan.
Seller and Buyer shall cooperate with each other during the period beginning on
the date hereof and ending on the date the assets are transferred to the trust
maintained under the Buyer 401(k) Plan to ensure the ongoing operation and
administration of the Buyer 401(k) Plan and the Seller 401(k) Plan with respect
to such Transferred Employees.
(b) Seller shall pay to Buyer on or promptly after the
Closing Date an amount equal to the amount (if any) accrued on the books of
account of Seller and/or the
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Business, as the case may be, as of such date as a liability for the
Transferred Employees to the Seller 401(k) Plan for matching contributions and
CODA contributions.
9.10. CERTAIN SALARIED EMPLOYEE BENEFIT SERVICES. During
the period beginning on the Closing Date and ending 90 days thereafter (the
"BENEFIT TRANSITION PERIOD"), Seller shall permit Salaried Transferred
Employees to continue to participate in the Seller Retirement Plan, the Seller
401(k) Plan and the "WELFARE PLANS" (within the meaning of Section 3(1) of
ERISA) in which such Transferred Employees participated immediately prior to
the Closing Date. Buyer shall promptly reimburse Seller for all contributions
and premiums paid by Seller and reasonable out of pocket expenses incurred by
Seller, in each case in respect of participation during the Benefit Transition
Period of such Transferred Employees in the Welfare Plans.
9.11. SHARING OF BENEFITS-RELATED INFORMATION. Buyer and
Seller will cooperate in providing at their own expense employee-related and
plan-related data to facilitate accomplishment of the provisions of this
Article 9.
9.12. NO THIRD PARTY BENEFICIARIES. No provision of this
Article shall create any third party beneficiary or other rights in any
employee or former employee (including any beneficiary or dependent thereof) of
Seller or of any of its subsidiaries in respect of continued employment (or
resumed employment) with either Buyer or the Purchased Assets or any of their
Affiliates and no provision of this Article 9 shall create any such rights in
any such Person in respect of any benefits that may be provided, directly or
indirectly, under any Employee Plan or Benefit Arrangement or any plan or
arrangement which may be established by Buyer or any of its Affiliates. No
provision of this Agreement shall constitute a limitation on rights to amend,
modify or terminate after the Closing Date any such plans or arrangements of
Buyer or any of its Affiliates.
ARTICLE 10
CONDITIONS TO CLOSING
10.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The
obligations of Buyer and Seller to consummate the Closing are subject to the
satisfaction of the following conditions:
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(a) Any applicable waiting period under the HSR Act relating
to the transactions contemplated hereby shall have expired or been
terminated.
(b) No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall (i) prohibit the consummation
of the Closing or (ii) restrain, prohibit or otherwise interfere in any
material respect with the effective operation or enjoyment by Buyer of all
or any material portion of the Purchased Assets.
(c) No proceeding challenging this Agreement or the
transactions contemplated hereby or seeking to prohibit, alter, prevent or
materially delay the Closing shall have been instituted by any Person
before any court, arbitrator or governmental body, agency or official and
be pending.
(d) All actions by or in respect of or filings with any
governmental body, agency, official or authority required to permit the
consummation of the Closing shall have been taken, made or obtained.
(e) Buyer and Seller as the owner of the Reserved Property
(defined in Schedule 3.08(a)) shall have entered into an easement agreement
relating to the Easement Property (defined in Schedule 3.08(a)) in form and
substance reasonably satisfactory to Buyer and Seller, including provisions
for the apportionment of maintenance costs and real estate taxes with
respect to the Easement Property.
(f) The consummation of the transactions contemplated by the
Merger Agreement in accordance with the terms thereof.
10.02. CONDITIONS TO OBLIGATION OF BUYER. The obligation of
Buyer to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a)(i) Seller and AFC shall have performed in all material
respects or shall perform in all material respects at a closing held
simultaneously with the Closing, all of their respective obligations hereunder
and under the Merger Agreement required to be performed by each of them on or
prior to the Closing Date, (ii) the representations and warranties of Seller
contained in this Agreement, the representations and warranties of AFC
contained in the Merger Agreement, and in any certificate or other writing
delivered by Seller or AFC pursuant hereto or the Merger
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Agreement, disregarding all qualifications and exceptions relating to
materiality or Material Adverse Effect, shall be materially correct at and as
of the Closing Date, as if made at and as of such date, and (iii) Buyer shall
have received a certificate signed by the President of Seller to the foregoing
effect.
(b) Buyer shall have received an opinion of Sutherland, Asbill &
Brennan, L.L.P., counsel to Seller, dated the Closing Date to the effect
specified in Sections 3.01 through 3.04, 3.09(b) and 3.11. In rendering such
opinion, such counsel may rely upon certificates of public officers, as to
matters governed by the laws of jurisdictions other than Georgia or the federal
laws of the United States of America, upon opinions of counsel reasonably
satisfactory to Buyer, copies of which shall be contemporaneously delivered to
Buyer, and as to matters of fact, upon certificates of officers of Seller.
(c) Mr. John Morgan shall have executed and delivered a
Consulting and Non-Competition Agreement substantially in the form of Exhibit B
hereto.
(d) Buyer and Seller shall have executed and delivered such
agreements with respect to the Business or the employees of the Business as
Buyer may reasonably request.
(e) Seller shall have received all Required Consents and all
consents, authorizations or approvals from the governmental agencies referred
to in Section 3.03, in each case in form and substance reasonably satisfactory
to Buyer, and no such consent, authorization or approval shall have been
revoked.
(f) (i) Buyer shall have obtained at its sole cost an ALTA
extended coverage form of owner's or leasehold owner's title insurance and
flood insurance policies at the current levels of such flood insurance
policies, or binders to issue the same, dated the Closing Date and in amounts
satisfactory to Buyer insuring or committing to insure, at ordinary premium
rates without any requirement for additional premiums, good and marketable
title to the Real Property being transferred pursuant to the terms of this
Agreement free and clear of any Liens, except for Permitted Liens and
containing such endorsements and affirmative coverages required by Buyer and
available in the jurisdiction where the Real Property is located and otherwise
in form and substance reasonably satisfactory to Buyer and (ii) any easements
necessary for the use by Buyer
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of the transferred Real Property shall have been obtained by Buyer.
(h) Buyer shall have received evidence reasonably satisfactory
to Buyer that none of the customers of the Business (including, without
limitation, the customers listed on Schedule 10.02) which, within any of the
last three years, have placed orders for or purchased products of the Business
with an average annual value in excess of (i) $1,000,000 for the Tobacco
Filters division of the Business or Writing Instrument Components division of
the Business and (ii) $250,000 for the Healthcare Device Component and Other
Bonded Products division of the Business will terminate or materially and
adversely modify its contractual or business relationship with the Business as
a result of the transactions contemplated hereunder, except to the extent
disclosed in item 1 of Schedule 3.07(b).
(i) Since the Balance Sheet Date, there has been no Material
Adverse Change.
(j) No facts, events or circumstances have come to the
attention of Buyer as a result of information disclosed pursuant to Section
5.02(b)-(c) which facts, events or circumstances, as determined by Buyer in its
reasonable judgment, materially affect the Business, it being understood and
agreed that any information disclosing that (i) the Confidential Agreements are
not arm's-length contracts with terms consistent with industry practices; (ii)
the Confidential Agreements do not reflect terms, including without limitation,
pricing, volumes, duration, commitments to expend funds, discounts, rebates,
commissions and other material terms consistent with those previously
represented by AFC to Buyer, (iii) the agreements, arrangements and
understandings so disclosed do not contain all of the Confidential Agreements
previously represented to exist by AFC to Buyer, (iv) the agreements,
arrangements and understandings so disclosed do not reflect the terms and
conditions of the Confidential Agreements as such terms and conditions were
previously represented by AFC to Buyer; (v) the information so disclosed
indicates that a material reduction in either the sales volume or the profits
in the aggregate of the Business can be reasonably expected by Buyer or (vi)
the information so disclosed reflects that the status of the properties, plant,
equipment or machinery is (x) not consistent with the customary requirements of
the customers of the Business in respect of the products produced by such
properties, plant, equipment or machinery or (y) as previously represented by
AFC to Buyer, shall, in each case, be deemed to materially affect the Business.
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(k) Buyer shall have received all documents it may reasonably
request relating to the existence of Seller and the authority of Seller for
this Agreement, all in form and substance reasonably satisfactory to Buyer.
10.03. CONDITIONS TO OBLIGATION OF SELLER. The obligation of
Seller to consummate the Closing is subject to the satisfaction of the
following further conditions:
(a)(i) Buyer shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Closing Date, (ii) the representations and warranties of Buyer contained in
this Agreement and in any certificate or other writing delivered by Buyer
pursuant hereto shall be true in all material respects at and as of the Closing
Date, as if made at and as of such date and (iii) Seller shall have received a
certificate signed by any Vice-President of Buyer to the foregoing effect.
(b) Seller shall have received an opinion of Davis Polk &
Wardwell, counsel to Buyer, dated the Closing Date to the effect specified in
Sections 4.01 through 4.04. In rendering such opinion, such counsel may rely
upon certificates of public officers, as to matters governed by the laws of
jurisdictions other than the State of New York, General Corporation Law of the
State of Delaware or the federal laws of the United States of America, upon
opinions of counsel reasonably satisfactory to Seller, copies of which shall be
contemporaneously delivered to Seller, and as to matters of fact, upon
certificates of officers of Buyer.
(c) Buyer shall have received all consents, authorizations or
approvals from governmental agencies referred to in Section 4.03, in each case
in form and substance reasonably satisfactory to Seller, and no such consent,
authorization or approval shall have been revoked.
(d) Seller shall have received all documents it may reasonably
request relating to the existence of Buyer and the authority of Buyer for this
Agreement, all in form and substance reasonably satisfactory to Seller.
ARTICLE 11
SURVIVAL; INDEMNIFICATION
11.01. SURVIVAL. The representations and warranties of the
parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant
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hereto or in connection herewith shall not survive the Closing; provided that
the representations and warranties contained in Article 8 shall survive until
expiration of the applicable statutory period of limitations (giving effect to
any waiver, mitigation or extension thereof), if later. The indemnification
provisions contained in Section 11.02 shall survive the Closing indefinitely.
Notwithstanding the foregoing, any representation or warranty in respect of
which indemnity may be sought under this Agreement and any claim of
indemnification of Buyer shall survive the time at which it would otherwise
terminate pursuant to the preceding sentence, if notice of the claim (providing
reasonable details of such claim) giving rise to such right to indemnity shall
have been given to the party against whom such indemnity may be sought prior to
such time.
11.02. INDEMNIFICATION. Seller hereby indemnifies Buyer and its
Affiliates against and agrees to hold each of them harmless from any and all
damage, loss, liability and expense (including, without limitation, reasonable
expenses of investigation and reasonable attorneys' fees and expenses in
connection with any claim, action, suit or proceeding) (collectively, "LOSS")
incurred or suffered by Buyer or any of its Affiliates arising out of:
(i) any breach of representation, warranty, covenant or
agreement contained in Article 8 hereof made or to be performed by Seller
pursuant to this Agreement;
(ii) any Excluded Liability described in Sections 2.04(a), (d)
and (f); or
(iii) any claim, action, suit or proceeding brought by any party
(other than Seller) arising out of or related to the covenant of Buyer set
forth in Section 6.02.
11.03. PROCEDURES. (a) The party seeking indemnification under
Section 11.02 (the "INDEMNIFIED PARTY") agrees to give prompt notice to the
party against whom indemnity is sought (the "INDEMNIFYING PARTY") of the
assertion of any claim, or the commencement of any suit, action or proceeding
in respect of which indemnity may be sought under such Section. The
Indemnifying Party may, and at the request of the Indemnified Party shall,
assume and control the defense of any such suit, action or proceeding at its
own expense. In case of such assumption by the Indemnifying Party, the
Indemnified Party may participate in
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such suit, action or proceeding, provided that it does so solely at its own
expense.
(b) If the Indemnifying Party wishes to assume the defense of
such claim, action, suit or proceeding, then the Indemnifying Party shall give
written notice to the Indemnified Party within 30 days after notice from the
Indemnified Party of such claim, action, suit or proceeding (unless the claim,
action, suit or proceeding reasonably requires a response in less than 30 days
after the notice is given to the Indemnifying Party, in which event it shall
notify the Indemnified Party at least 10 days prior to such reasonably required
response date) and the Indemnifying Party shall thereafter assume and control
the defense of any such claim, action, suit or proceeding. The Indemnified
Party shall cooperate with the Indemnifying Party in any claim, action, suit or
proceeding covered by the indemnification hereunder. The Indemnifying Party
shall not settle, or enter into any agreement to settle, any such claim,
action, suit or proceeding, unless (i) the Indemnifying Party shall have first
given the Indemnified Party not less than ten days' written notice and (ii)
such agreement contains a complete release of all claims against the
Indemnified Party and is otherwise not adverse to the interests of the
Indemnified Party.
(c) If the Indemnifying Party fails to assume the defense of any
such claim, action, suit or proceeding in accordance with the procedure
referred to in Section 11.03(b), or if after assuming the same the Indemnifying
Party fails to defend such claim, action, suit or proceeding, the Indemnified
Party may defend and control the defense of such claim, action, suit or
proceeding at the Indemnifying Party's expense. The Indemnifying Party shall
not be liable under Section 11.02 for any settlement effected without its
consent of any claim, litigation or proceeding in respect of which indemnity
may be sought hereunder; provided that if the Indemnifying Party does not
assume and continue the defense of any claim, litigation or proceeding as
aforesaid, the Indemnified Party shall have the right to settle such claim,
action, suit or proceeding on such terms as it may reasonably deem appropriate
and the Indemnifying Party shall be fully liable under Section 11.02 for such
settlement.
(d) Subject to the Indemnified Party complying with the
procedures set forth in Sections 11.03(a), 11.03(b) and 11.03(c), if a judgment
is rendered against the Indemnified Party in any action covered by the
indemnification hereunder, or any lien in respect of such judgment attaches to
any of the assets of the Indemnified
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Party, the Indemnifying Party shall as soon as reasonably practicable upon
notification of such entry or attachment pay such judgment in full or discharge
such lien unless, at the expense and direction of the Indemnifying Party, an
appeal is taken under which the execution of the judgment or satisfaction of
the lien is stayed. If and when a final judgment is rendered against the
Indemnified Party in any such action, the Indemnifying Party shall pay such
judgment or discharge such lien as soon as practicable.
11.04. EXCLUSIVE REMEDIES. If the Closing occurs, then the
remedies provided in this Article 11 constitute the sole and exclusive remedies
for recoveries against another party for breaches of the representations and
warranties in this Agreement and for the matters specifically listed in this
Article 11 as being indemnified against, but neither the foregoing nor anything
else in this Agreement shall limit the right of a party to enforce the
performance of this Agreement or of any contract, document or other instrument
executed and delivered pursuant to this Agreement by any remedy available to it
in equity.
ARTICLE 12
TERMINATION
12.01. GROUNDS FOR TERMINATION. This Agreement may be terminated
at any time prior to the Closing:
(a) by either Seller or Buyer if the Closing shall not have
been consummated on or before June 30, 1997;
(b) by either Seller or Buyer if there shall be any law or
regulation that makes the consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if consummation of the
transactions contemplated hereby would violate any nonappealable final
order, decree or judgment of any court or governmental body having
competent jurisdiction; or
(c) by either Buyer or Seller upon the termination of the
Merger Agreement pursuant to any provision of Article 7 thereof.
The party desiring to terminate this Agreement shall give notice
of such termination to the other party.
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12.02. EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 12.01, such termination shall be without liability of
either party (or any stockholder, director, officer, employee, agent,
consultant or representative of such party) under this Agreement or any writing
delivered pursuant hereto to the other party to this Agreement; provided that
if such termination shall result from the willful failure of either party to
fulfill a condition to the performance of the obligations of the other party,
willful failure of Seller to fulfill a condition to the performance of
obligations of AFC under the Merger Agreement, failure to perform a covenant or
agreement contained herein, intentional breach by either party to this
Agreement of any representation or warranty contained herein, failure by Seller
to perform a covenant or agreement contained in the Merger Agreement or
intentional breach by Seller of any representation or warranty contained in the
Merger Agreement, such party shall be fully liable for any and all Losses
incurred or suffered by the other party as a result of such failure or breach.
The provisions of Sections 5.02 and 6.01 shall survive any termination hereof
pursuant to Section 12.01.
ARTICLE 13
MISCELLANEOUS
13.01. NOTICES. All notices, requests and other communications
to either party hereunder shall be in writing (including facsimile
transmission) and shall be given,
if to Buyer, to:
FIL Acquisition Corp.
c/o Bunzl plc
110 Park Street
London W1Y 3RB
Telecopy: 011-44-171-495-2527
Attention: Company Secretary
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
Attention: John J. McCarthy, Jr.
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if to Seller, to:
WB Acquisition Corp.
999 Peachtree Street, N.E.
Suite 2300
Atlanta, Georgia 30309
Telecopy: (404) 853-8806
Attention: Bennett L. Kight, President
with a copy to:
Sutherland, Asbill & Brennan, L.L.P.
999 Peachtree Street, N.E.
Suite 2300
Atlanta, Georgia 30309
Telecopy: (404) 853-8806
Attention: George L. Cohen
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a Business Day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to
have been received until the next succeeding Business Day in the place of
receipt.
13.02. AMENDMENTS AND WAIVERS. (a) Any provision of this
Agreement may be amended or waived prior to the Closing Date if, but only if,
such amendment or waiver is in writing and is signed, in the case of an
amendment, by each party to this Agreement, or in the case of a waiver, by the
party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
13.03. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto except that Buyer may transfer
or assign, in whole or from time to time in part, to one or more of its
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Affiliates, the right to purchase all or a portion of the Purchased Assets or
any of its other rights hereunder, but no such transfer or assignment will
relieve Buyer of its obligations hereunder.
13.04. GOVERNING LAW; ARBITRATION; CONSENT TO JURISDICTION. (a)
This Agreement shall be governed by and construed in accordance with the laws
of the State of New York, without regard to the conflict of law rules of such
state.
(b) Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
(AAA), and judgment upon the award rendered by the Arbitration Tribunal may be
entered in any court having jurisdiction, pursuant to clause (h) below.
(c) Any arbitration shall be conducted in New York, New York.
(d) Any arbitrator shall be selected from the AAA National
panel of Arbitrators for Large Complex Cases, and shall be experienced in the
arbitration of commercial cases involving businesses comparable to the
businesses in which the parties are engaged at the time of the arbitration.
(e) The Arbitration Tribunal shall permit and facilitate such
discovery as it shall determine is appropriate in the circumstances, taking
into account the needs of the parties and the desirability of making discovery
expeditious and cost-effective.
(f) Any award shall be in writing and shall state the
reasoning on which the award rests, unless the parties agree otherwise. When
there are three arbitrators, the award shall be made and signed by at least a
majority of the arbitrators; and if the award decides a number of issues, the
part of the award relating to each issue shall be made and signed by at least a
majority of the arbitrators.
(g) Any arbitration may include, by consolidation or joinder,
any third party which has signed an arbitration agreement with either party,
where the presence of such third party is necessary for complete relief to be
accorded in arbitration; provided that such arbitration shall continue to be
conducted pursuant to rules set forth in clauses (b) - (f) above. Any
arbitration which includes a third party shall be administered by the AAA in
such a manner that all parties are treated equally in such matters
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as the selection or arbitrators and other procedural aspects of the arbitration.
(h) No provision of this Section 13.04 shall limit the right
of any party to this Agreement to obtain provisional or ancillary remedies from
a court of competent jurisdiction before the pendency of any arbitration or
other proceeding. The exercise of such remedy does not waive the right of any
party to resort to arbitration.
(i) Each party hereby submits to the non-exclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State court sitting in New York City for purposes
of all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. Each party irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any proceeding brought in such a court has been brought in
an inconvenient forum. Each party agrees that a final judgment in any such
proceeding shall be conclusive and binding upon it and may be enforced in any
court of the jurisdiction to which it is subject by a suit upon such judgment
or in any manner provided by law.
13.05. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto.
13.06. THIRD PARTY BENEFICIARIES. No representation, inducement,
promise, understanding, condition or warranty not set forth herein has been
made or relied upon by either party hereto. Neither this Agreement nor any
provision hereof is intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
13.07. BULK SALES LAWS. Buyer and Seller each hereby waive
compliance by Seller with the provisions of the "BULK SALES", "BULK TRANSFER"
or similar laws of any state. Seller agrees to indemnify and hold Buyer
harmless against any and all claims, losses, damages, liabilities, costs and
expenses incurred by Buyer or any of its Affiliates as a result of any failure
to comply with any such "bulk sales", "bulk transfer" or similar laws.
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13.08. CAPTIONS; SCHEDULES. (a) The captions herein are
included for convenience of reference only and shall be ignored in the
construction or interpretation hereof.
(b) Any matter that Seller discloses in any section or
subsection of the schedules to this Agreement shall be deemed to have been
disclosed by Seller only for purposes of the corresponding section or
subsection of this Agreement unless this Agreement or such schedule expressly
states otherwise.
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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.
FIL ACQUISITION CORP.
By /s/ A.T. Habgood
---------------------------------------
Name: A.T. Habgood
Title: Authorized Representative
WB ACQUISITION CORP.
By /s/ Bennett L. Kight
---------------------------------------
Name: Bennett L. Kight
Title: President
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