SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): June 20, 1996
AEP INDUSTRIES INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State of Other Jurisdiction of Incorporation)
0-14450 22-1916107
(Commission File No.) (I.R.S. Employer Identification No.)
125 Phillips Avenue, South Hackensack, New Jersey 07606
(Address of Principal Executive Offices (Zip Code)
(201) 641-6600
(Registrant's Telephone Number, Including Area Code)
<PAGE>
5. Other Events.
On June 20, 1996, Registrant entered into a Purchase Agreement
with Borden, Inc. ("Borden") pursuant to which Registrant agreed to acquire the
Global Packaging Business of Borden ("Borden Packaging") for a total
consideration consisting of (a) $280,000,000 in cash, subject to adjustment
based on certain changes in working capital and long term liabilities, and (b)
$80,000,000 by delivery of the greater of (x) 2,412,818 shares of Common Stock
of Registrant, and (y) a number of shares of Common Stock of Registrant (rounded
up to the nearest whole share) equal to the quotient obtained by dividing
$80,000,000 by the "Registrant Stock Price", provided that in no event will the
Registrant be required to deliver in excess of 4,000,000 shares. The "Registrant
Stock Price" is equal to the average of the closing prices of shares of Common
Stock of Registrant on The Nasdaq National Market for the 50 trading days
immediately preceding the second trading day prior to the stockholders' meeting
of Registrant to be called to approve the issuance of the shares or such shorter
number of trading days between June 20, 1996, and the second trading day prior
to such stockholders' meeting. Assuming issuance of 2,412,818 shares, Borden
would acquire 34% of the outstanding Common Stock of Registrant after the
transaction.
The closing is subject to certain conditions, including
regulatory approval and the approval of the issuance of shares of Common Stock
of Registrant to Borden by AEP shareholders. Holders of 49.2% of the shares of
Registrant's Common Stock have agreed to vote in favor of such issuance.
Borden Packaging is a producer of flexible and rigid plastic
packaging materials for the food and industrial markets. Its major product lines
include: polyvinyl chloride stretch films for food packages and for food wrap,
polyethylene based stretch wrap films for unitizing pallet loads, polypropylene
films for flexible packaging of foods, and polypropylene films for process
cheese products.
Pursuant to a Governance Agreement also entered into on June
20, 1996, by Registrant and Borden, following the closing of the transaction the
Board of Directors of Registrant will consist of ten directors, of which three
current management persons and two independent directors will be selected by
Registrant's management, four directors will be selected by Borden, and an
independent director will be selected jointly by Registrant's management and
Borden. The number of directors to be designated by Borden will be subject to
change depending on the percentage of stock ownership of Registrant by Borden.
Also, pursuant to the Governance Agreement a super-majority (66-2/3%) and a vote
of at least one Borden- designated director will be required for certain
specified Board actions, Borden-designated directors shall serve on specified
committees, Borden will have the equivalent of preemptive rights under certain
conditions, and Borden has agreed to certain standstill provisions, all of which
are subject to Borden owning specified minimum percentages of the outstanding
Common Stock of Registrant. In addition, Borden has been granted registration
rights with respect to the Common Stock to be received by it pursuant to the
Purchase Agreement.
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<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
1. Purchase Agreement between Borden, Inc. and
AEP Industries Inc., dated as of June 20, 1996, without exhibits.
2. Governance Agreement between Borden, Inc.
and AEP Industries Inc., dated as of June 20, 1996.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
AEP INDUSTRIES INC.
Dated: July 1, 1996
/S/ PAUL M. FEENEY
----------------------------
Paul M. Feeney
Executive VP - Financing
Principal Financial Officer
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EXHIBIT 1
---------
================================================================================
PURCHASE AGREEMENT
between
BORDEN, INC.
and
AEP INDUSTRIES INC.
-------------------------------
Dated as of June 20, 1996
-------------------------------
================================================================================
<PAGE>
EXHIBITS
EXHIBIT A - Subsidiaries
EXHIBIT B-1 - Transferred Subsidiaries
EXHIBIT B-2 - Subsidiary Asset Sellers
EXHIBIT C-1 - Management Stockholders Agreement
EXHIBIT C-2 - Voting Agreement
EXHIBIT D - Governance Agreement
EXHIBIT E - Form of Assumption Agreement
EXHIBIT F - Form of Transition License Agreement
EXHIBIT G - Form of Shared Facilities Agreement
EXHIBIT H - Form of Transition Services Agreement
<PAGE>
TABLE OF CONTENTS
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PAGE
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1. Sale and Transfer of Subsidiary Stock; Purchase and Sale of Assets;
Assumption of Certain Liabilities...................................... 3
1.1. Sale and Transfer of Subsidiary Stock........................ 3
1.2. Transfer of Assets........................................... 3
1.3. Excluded Assets.............................................. 7
1.4. Instruments of Conveyance and Transfer....................... 9
1.5. Further Assurances........................................... 9
1.6. Assumed Liabilities.......................................... 9
1.7. Excluded Liabilities......................................... 11
2. Closing; Payment of Purchase Price at Closing.......................... 13
2.1. Closing Date................................................. 13
2.2. Purchase Price and Payment................................... 13
2.3. Deferred Transfers........................................... 16
2.4. Post-Closing Adjustment...................................... 20
3. Representations and Warranties......................................... 25
3.1. Representations and Warranties of the Seller................. 25
3.2. Representations and Warranties of the Buyer.................. 45
3.3. Expiration of Representations and Warranties................. 66
4. Transactions Prior to Closing.......................................... 67
4.1. Access to Information Concerning Properties and Records;
Confidentiality.................................................... 67
4.2. Conduct of the Packaging Business Pending the Closing Date... 68
4.3. Conduct of Business By the Buyer Pending the Closing Date.... 71
4.4. Intercompany Transactions.................................... 74
4.5. Guarantees................................................... 74
4.6. Further Actions.............................................. 75
4.7. Notification................................................. 77
4.8. No Inconsistent Action....................................... 78
4.9. Financing.................................................... 78
4.10. Borden-Hitachi Joint Venture................................. 79
4.11. Use of Corporate Name and Symbol; Transition License......... 79
4.12. Facilities Agreement......................................... 80
4.13. Transition Services Agreement................................ 80
4.14. Preparation of Proxy Statement; Stockholders' Meeting........ 81
4.15. No Solicitation.............................................. 82
4.16. Insurance.................................................... 82
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<PAGE>
PAGE
----
5. Conditions Precedent.................................................... 83
5.1. Conditions Precedent to Obligations of the Buyer and the
Seller........................................................ 83
5.2. Conditions Precedent to Obligations of the Buyer.............. 85
5.3. Conditions Precedent to the Obligations of the Seller......... 88
6. Employee Relations and Benefits......................................... 91
6.1. Conduct Prior to the Effective Time........................... 91
6.2. Continuity of Employment...................................... 91
6.3. Collective Bargaining Agreements.............................. 92
6.4. International Plans........................................... 92
6.5. U.S. Business Plan Participation.............................. 93
6.6. U.S. Business Plan Liabilities................................ 93
6.7. U.S. Defined Benefit Plan..................................... 93
6.8. U.S. Defined Contribution Plans............................... 94
6.9. U.S. Post-Retirement Benefits................................. 96
6.10. U.S. Welfare Plans............................................ 97
6.11. U.S. Accrued Vacation......................................... 97
6.12. Severance........................................................ 97
6.13. U.S. Service Credit........................................... 98
6.14. U.S. WARN Act................................................. 98
6.15. U.S. COBRA.................................................... 98
6.16. No Rights Conferred on Employees.............................. 98
7. Termination............................................................. 99
7.1. General....................................................... 99
7.2. Effect of Termination......................................... 99
8. Transactions Subsequent to Closing......................................100
8.1. Access to Books and Records...................................100
8.2. Further Agreements............................................102
8.3. Asset Returns; Further Assurances.............................102
9. Miscellaneous...........................................................103
9.1. Public Announcements..........................................103
9.2. Expenses......................................................103
9.3. Transfer Taxes and Recording Expenses.........................104
9.4. Indemnification...............................................104
9.5. Notices.......................................................110
9.6. Entire Agreement..............................................112
9.7. Binding Effect; No Third Party Beneficiaries..................112
9.8. Bulk Sales Law................................................112
9.9. Assignability.................................................112
9.10. Amendment; Waiver.............................................112
9.11. Schedules and Exhibits........................................113
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<PAGE>
PAGE
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9.12. Other Covenants.............................................113
9.13. Section Headings; Table of Contents.........................114
9.14. Severability................................................114
9.15. Counterparts................................................114
9.16. Applicable Law..............................................114
9.17. Certain Definitions.........................................114
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<PAGE>
PURCHASE AGREEMENT
------------------
PURCHASE AGREEMENT, dated as of June 20, 1996, between BORDEN,
INC., a New Jersey corporation (the "SELLER") and AEP INDUSTRIES INC., a
Delaware corporation (the "BUYER").
W I T N E S S E T H :
---------------------
WHEREAS, the Seller, and the Seller's subsidiaries listed on
Exhibit A hereto (the "SUBSIDIARIES", and collectively with the Seller, the
"COMPANY") are engaged, in part, in the business of the development, production,
marketing, distribution and sale of flexible and rigid plastic packaging
materials in North America, Europe, South Africa, Australia and Asia (the
"PACKAGING BUSINESS" or "BORDEN GLOBAL PACKAGING");
WHEREAS, in consideration for a combination of cash and
newly-issued or treasury shares of common stock of the Buyer (a) the Buyer
desires to purchase from the Seller and the Seller desires to sell to the Buyer
the assets (other than assets excluded pursuant hereto), subject to the
assumption of all related liabilities, of the Packaging Business held by Borden,
Inc. (the "BORDEN INC. ASSETS") upon the terms and subject to the conditions set
forth herein (the "BORDEN INC. ASSET PURCHASE") and (b) the Buyer desires to
purchase from the Seller and its Subsidiaries, and the Seller desires to sell,
or to cause its respective Subsidiaries to sell, to the Buyer (i) all of the
outstanding shares of stock owned by the Company (collectively, the "SUBSIDIARY
STOCK") of the Subsidiaries listed on Exhibit B-1 hereto (the "TRANSFERRED
SUBSIDIARIES") (the sale and purchase of the Stock being referred to herein as
the "STOCK PURCHASE") and (ii) the packaging assets of the Packaging Business
(other than the assets
<PAGE>
2
excluded pursuant hereto), subject to the assumption of all related liabilities,
held by the Subsidiaries listed on Exhibit B-2 hereto (such Subsidiaries, the
"SUBSIDIARY ASSET SELLERS" and together with the Seller, the "ASSET SELLERS";
such assets, the "SUBSIDIARY ASSETS", and together with the Borden, Inc. Assets,
the "ASSETS"; such purchase the "SUBSIDIARIES ASSET PURCHASE", and together with
the Borden, Inc. Asset Purchase, the "ASSET PURCHASE"; the Stock Purchase and
the Asset Purchase are collectively referred to herein as the "STOCK AND ASSET
PURCHASE"), each purchase and sale described in clauses (a) and (b) to be upon
the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to the Seller's willingness to enter
into this Agreement, the Seller and certain stockholders of the Buyer have
entered into a stockholders agreement (the "MANAGEMENT STOCKHOLDERS AGREEMENT")
dated as of the date hereof attached as Exhibit C-1 hereto and the Seller and
certain other stockholders of the Buyer have entered into a voting agreement
(together with the Management Stockholders Agreement, the "STOCKHOLDERS
AGREEMENT") dated as of the date hereof attached as Exhibit C-2 hereto; and
WHEREAS, Concurrently With The Execution And Delivery Of This
Agreement And As A Condition And Inducement To The Seller's Willingness To Enter
Into This Agreement, And As A Condition To The Buyer's Willingness To Enter Into
This Agreement, The Buyer And The Seller Have Entered Into A Governance
Agreement (The "Governance Agreement") Dated As Of The Date Hereof Attached As
Exhibit D Hereto And Relating To The Establishment Of Certain Terms And
Conditions Concerning The Corporate Governance Of The Buyer After The Closing
Date (As Defined
<PAGE>
3
herein) and certain terms and conditions concerning the acquisition and
disposition of securities of the Buyer by the Seller and its affiliates.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants of the parties hereto, it is hereby agreed as follows:
1. SALE AND TRANSFER OF SUBSIDIARY STOCK; PURCHASE AND SALE OF ASSETS;
ASSUMPTION OF CERTAIN LIABILITIES
1.1. SALE AND TRANSFER OF SUBSIDIARY STOCK. On the basis of
the representations, warranties, covenants and agreements and subject to the
satisfaction or waiver of the conditions set forth in this Agreement and subject
to Section 2.2, on the Closing Date (as defined in Section 2.1), the Seller
shall cause to be delivered to the Buyer certificates representing the
Subsidiary Stock, duly endorsed, or accompanied by stock powers duly executed,
with all necessary stock transfer stamps attached thereto and cancelled, or such
other assignments, deeds, share transfer forms, endorsements, notarial deeds of
transfer or other instruments or documents, duly stamped where necessary, as
required by the jurisdiction of organization of each Transferred Subsidiary as
set forth on Schedule 1.1 of the disclosure schedule delivered by the Seller to
the Buyer on the date hereof (the "SELLER DISCLOSURE SCHEDULE").
1.2. TRANSFER OF ASSETS. On the basis of the representations,
warranties, covenants and agreements and subject to the satisfaction or waiver
of the conditions set forth in this Agreement, on the Closing Date, and subject
to the provisions of Section 1.3, the Seller shall sell, convey, assign,
transfer and deliver to the Buyer, or shall cause the Subsidiary Asset Sellers
to sell, convey, assign, transfer and deliver to the Buyer, and the Buyer shall
purchase and acquire from the Asset Sellers, all of the assets, rights,
properties, claims, contracts and
<PAGE>
4
business of the Asset Sellers at the Closing Date which are principally utilized
in the Packaging Business, of every kind, nature, character and description,
tangible and intangible, real, personal or mixed, wherever located, including,
without limitation, the following:
(a) Each Asset Seller's right, title and interest in and to
the patents, patent registrations, patent applications, trademarks,
trademark registrations, trademark applications, tradenames,
copyrights, copyright applications, copyright registrations,
franchises, permits, licenses (both as licensor and licensee),
processes, formulae, inventions and royalties described on Section
1.2(a) of the Seller Disclosure Schedule, including all rights to sue
for past infringement, together with the goodwill associated therewith;
(b) The real property and leasehold interests in real property
described on Section 1.2(b) of the Seller Disclosure Schedule owned by
the Asset Sellers, including all buildings, structures and other
improvements situated thereon (individually, a "PLANT" and
collectively, the "PLANTS"), and all easements, privileges,
rights-of-way, riparian and other water rights, lands underlying any
adjacent streets or roads and appurtenances pertaining to or accruing
to the benefit of such property to which the Asset Sellers have title,
in each case subject to the exceptions described on Section 1.2(b) of
the Seller Disclosure Schedule;
(c) Each Asset Seller's right, title and interest in and to
the equipment, furniture, furnishings, fixtures, machinery, vehicles,
tools and other tangible personal property described on Section 1.2(c)
of the Seller Disclosure Schedule pertaining to the operation of the
Packaging Business (collectively, the "EQUIPMENT") and all warranties
<PAGE>
5
and guarantees, if any, express or implied, existing for the benefit of
the Asset Sellers in connection with the Equipment to the extent
transferable;
(d) The inventory of Borden Global Packaging finished products
on hand at the Plants, in transit or in the distribution system of the
Asset Sellers on the Closing Date (the "FINISHED GOODS") and the raw
materials, packaging materials and work in process for Borden Global
Packaging products on hand at the Plants, in transit or in the
distribution system of the Asset Sellers on the Closing Date, together
with each Asset Seller's right, title and interest in and to the spare
parts, supplies and promotional materials that are used in connection
with the manufacture or sale of Borden Global Packaging products (the
"MATERIALS", and together with the Finished Goods, the "INVENTORY");
(e) All management information systems and software, to the
extent that such systems and software are transferable by the Asset
Sellers and relate principally to the operations of the Plants, the
ownership of the Assets or the manufacture and sale of Borden Global
Packaging products, customer lists, vendor lists, catalogs, research
material, technical information, trade secrets, technology, know-how,
specifications, designs, drawings, processes, and quality control data,
if any;
(f) Except for those contracts, agreements and commitments set
forth on Section 1.3(g) of the Seller Disclosure Schedule, each Asset
Seller's right, title and interest in and to contracts, maintenance and
service agreements, purchase commitments for materials and other
services, advertising and promotional agreements, leases and other
agreements (including but not limited to, any agreements of the Asset
Sellers with
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6
suppliers, sales representatives, distributors, agents, personal
property lessors, personal property lessees, licensors, licensees,
consignors and consignees specified therein) that relate to the
Packaging Business, whether or not entered into in the ordinary course
of the Packaging Business, that are listed on Section 1.2(f) of the
Seller Disclosure Schedule and those contracts pertaining to the
Packaging Business that are not Material Contracts (as defined in
Section 3.1(q) hereof);
(g) Each Asset Seller's licenses, permits or franchises issued
by any federal, state, municipal or foreign authority relating to the
development, use, maintenance or occupation of the Plants or the
manufacture or sale of Borden Global Packaging products which are
listed on Section 1.2(g) of the Seller Disclosure Schedule, to the
extent that such licenses, permits or franchises are transferable and
relate to the operations of the Plants, the ownership of the Assets or
the manufacture and sale of Borden Global Packaging products;
(h) Accounts receivable and other receivables of the Asset
Sellers in existence prior to the Closing Date (whether or not billed)
to the extent attributable to Borden Global Packaging Products sold
prior to 12:01 A.M. on the Closing Date (the "EFFECTIVE TIME");
(i) Each Asset Seller's rights to goods and services and all
other economic benefits to be received subsequent to the Closing Date
arising out of prepayments and payments in advance by the Asset Sellers
prior to the Closing Date to the extent related to the Plants or the
manufacturing, marketing or sale of Borden Global Packaging
<PAGE>
7
products or the Packaging Business (collectively, the "PREPAID ASSETS")
and reflected on the Closing Balance Sheet;
(j) Each Asset Seller's right, title and interest in deposits
on contracts relating principally to the Packaging Business that
require shipments on dates subsequent to the Closing Date; and
(k) All Borden Global Packaging customer lists, vendor lists,
catalogs, research material, technical information, trade secrets,
technology, know-how, specifications, designs, drawings, processes, and
quality control data, if any, and other materials and documents
relating to the Packaging Business (or copies thereof to the extent not
principally related to the Packaging Business).
1.3. EXCLUDED ASSETS. It is expressly understood and
agreed that the Assets shall not include the following (each, an "EXCLUDED
ASSET"):
(a) The assets (including, without limitation, all rights,
properties, claims, contracts and business) of all businesses other
than the Packaging Business conducted by the Asset Sellers to the
extent not principally used in the Packaging Business;
(b) The capital stock of all Subsidiaries of the Seller other
than the Transferred Subsidiaries;
(c) Cash and cash equivalents or similar type investments,
bank accounts, certificates of deposit, Treasury bills and other
marketable securities (excluding deposits and prepayments to be
transferred pursuant to Section 1.2(j) hereof);
(d) All real property, leasehold interests in real property,
equipment, machinery, vehicles, tools and other tangible personal
property (other than the Plants and
<PAGE>
8
the Equipment) of the Asset Sellers used for the transportation,
storage, distribution or sale of Inventory outside the Plants;
PROVIDED, HOWEVER, any contracts related to such transportation,
storage, distribution or sale of Inventory shall, to the extent
permitted thereby, be assigned to the Buyer pursuant to Section 1.2(f);
(e) Any Equipment as is used, transferred or otherwise
disposed of by the Asset Sellers in the ordinary course of business
consistent with past business practice of Borden Global Packaging
through the Closing Date;
(f) Any refunds or credits with respect to any taxes paid or
incurred by the Asset Sellers (plus any related interest received from
the relevant taxing authority), except to the extent reflected on the
Closing Balance Sheet;
(g) Each Asset Seller's right, title and interest in and to
the contracts listed on Section 1.3(g) of the Seller Disclosure
Schedule;
(h) The trademarks, names and corporate logos of the Asset
Sellers listed on Section 4.11 of the Seller Disclosure Schedule, which
trademarks, names and corporate logos may appear on certain products
and other materials only to the extent permitted pursuant to Section
4.11;
(i) The real property, including all buildings, structures and
other improvements situated thereon, and other assets listed on Section
1.3(i) of the Seller Disclosure Schedule;
(j) All of the Asset Sellers' right, title and interest to the
assets pertaining to the production, marketing, distribution and sale
of flexible and rigid plastic packaging materials in South America;
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9
(k) Except as otherwise provided in Section 4.16 hereof, all
right, title and interest of the Seller in any insurance policies
relating to the Packaging Business and all rights of the Seller to
insurance claims and proceeds arising from or related to (i) the
operation of the Packaging Business prior to the Closing and (ii) the
Excluded Assets and Excluded Liabilities;
(l) All assets relating to the Business Plans (as defined in
Section 3.1(n) (i) hereof), except as expressly provided in Sections
6.4 and 6.8 hereof and in Section 6.4 of the Seller Disclosure
Schedule; and
(m) The office lease for the office used by the Packaging
Business in Singapore.
1.4. INSTRUMENTS OF CONVEYANCE AND TRANSFER. On the Closing
Date, the Asset Sellers shall (a) deliver or cause to be delivered to the Buyer
such general or special warranty deeds, bills of sale, endorsements, consents,
assignments, licenses, and other good and sufficient instruments of transfer,
conveyance and assignment as the parties and their respective counsel shall deem
necessary or appropriate or as may be required by the jurisdiction of
organization of each Subsidiary Asset Seller to vest in the Buyer good and
marketable title to, or a binding leasehold interest in, the Assets, free and
clear of all liens, claims and encumbrances other than Permitted Liens (as
defined in Section 3.1(e) hereof) and (b) transfer to the Buyer all the
contracts, agreements, commitments, books, records, files and other data (or
copies thereof) relating to the Assets as, and to the extent, set forth in
Section 1.2(k).
1.5. FURTHER ASSURANCES. From time to time after the Closing
Date, the Seller will execute and deliver, or cause to be executed and
delivered, such other instruments of
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10
conveyance, assignment, transfer and delivery and will take such other actions
as the Buyer may reasonably request in order more effectively to transfer,
convey, assign, and deliver to the Buyer any of the Assets, or to enable the
Buyer to exercise and enjoy all rights and benefits of the Asset Sellers with
respect thereto.
1.6. ASSUMED LIABILITIES. On the Closing Date, the Buyer shall
deliver to the Seller an undertaking (the "ASSUMPTION AGREEMENT") in the form
attached hereto as Exhibit E whereby the Buyer, on and as of the Closing Date,
assumes and agrees to pay, perform and discharge when due, upon the terms and
subject to the conditions of this Agreement, the following debts, liabilities
and obligations, other than Excluded Liabilities, arising out of or pertaining
to the Packaging Business or the Assets whether arising before or after the
Closing:
(a) all liabilities of the Packaging Business reflected on the
Closing Balance Sheet,
(b) debts, obligations and liabilities in respect of the
Packaging Business or the Assets arising or incurred by the Buyer on
and after the Closing Date (other than as a result of any breach by the
Asset Sellers of any of their obligations to the Buyer),
(c) all debts, obligations and liabilities of the Asset
Sellers which arise on account of the Buyer's operation of the
Packaging Business, the use of the Assets, and/or sale of any products
manufactured and/or sold by the Buyer on and after the Closing Date,
(d) all obligations relating to the Packaging Business or the
Assets under the contracts, commitments and agreements transferred
pursuant to Section 1.2(f);
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11
(e) all liabilities and obligations for post-Closing returns
of Borden Global Packaging products sold prior to, on or after the
Closing Date;
(f) all liabilities and obligations for trade promotion
programs (including, without limitation, trade allowance programs) and
marketing programs and commitments applicable to Borden Global
Packaging products incurred in the ordinary course of business,
consistent with past practice;
(g) all liabilities and obligations under the licenses,
permits or franchises disclosed on Section 1.2(g) of the Seller
Disclosure Schedule;
(h) all liabilities and obligations arising out of the
operations of the Plants prior to the Closing Date (including, without
limitation, (i) all products liability claims with respect to products
manufactured by the Asset Sellers prior to the Closing Date where such
claims were not made prior to the Closing Date and (ii) all liabilities
and obligations related to the presence, disposal, escape, seepage,
leakage, discharge, emission, release or threatened release of any
substances or materials);
(i) all liabilities and obligations in respect of employee
relations and benefits pursuant to and to the extent set forth in
Section 6 hereof;
(j) all liabilities and obligations for any taxes and expenses
described in Section 9.3 hereof to the extent set forth therein;
(k) all liabilities with respect to all actions, suits,
proceedings, disputes, claims or investigations arising out of or
related to the Packaging Business or that otherwise arise out of or are
related to the Assets;
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12
(l) all liabilities for claims relating to the Packaging
Business under the Seller's self-insurance arrangements; and
(m) all other liabilities and obligations arising out of or
related to the Packaging Business or the Assets.
The debts, liabilities and obligations assumed by the Buyer in
accordance with this Section 1.6 are sometimes hereinafter referred to as the
"ASSUMED LIABILITIES".
1.7. EXCLUDED LIABILITIES. It is expressly understood and
agreed that, notwithstanding anything to the contrary in this Agreement,
Assumed Liabilities shall not include the following (collectively, the
"EXCLUDED LIABILITIES"):
(a) all liabilities arising out of or relating to the Excluded
Assets;
(b) all liabilities and obligations for which the Seller has
expressly assumed responsibility pursuant to this Agreement;
(c) all debts, liabilities or obligations of the Asset Sellers
that principally do not arise out of or are not related to the
Packaging Business or that principally do not otherwise arise out of or
are not otherwise related to the Assets;
(d) any liability for federal, state or local taxes, charges,
fees, levies, or other similar assessments, including without
limitation income, gross receipts, ad valorem, premium, excise, real
property, personal property, windfall profit, sales, use, transfer,
licensing, withholding, employment, payroll, estimated and franchise
taxes or any claim by any federal, state or local taxing authority, in
each case, relating to any taxable period ending on or prior to the
Closing Date;
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13
(e) liabilities required under generally accepted accounting
principles, applied as of the Closing Date consistent with Section 2.4,
to be reflected on the Closing Balance Sheet and are not so reflected,
but only if and to the extent such liabilities BOTH (i) exceed the
applicable reserves reflected on the Closing Balance Sheet and (ii)
with respect to liabilities which had they been reflected on the
Closing Balance Sheet would have been reflected as Closing Other
Non-Current Liabilities (as defined in Section 2.4(a) hereof), exceed,
together with the Closing Other Non-Current Liabilities reflected on
the Closing Balance Sheet, $9,450,000;
(f) liabilities relating to the participation of U.S.
Transferred Employees in the U.S. Business Plans on or prior to the
Effective Time, except as otherwise set forth, and to the extent set
forth, in Section 6 hereof (including, but not limited to, Sections 6.6
or 6.8(b) hereof);
(g) to the extent that the Seller, in its sole discretion,
decides to retain liabilities subject to insurance coverage for which
claims have been made to insurance carriers prior to the Closing
("RETAINED INSURANCE CLAIMS"), all liabilities principally arising out
of or related to such Retained Insurance Claims, provided that nothing
in this Agreement requires Seller to retain any such Retained Insurance
Claims;
(h) liabilities which the Seller has agreed to retain under
and to the extent set forth in Section 4.16; and
(i) liabilities represented by the "Debt payable in one year"
line item under the heading Current Liabilities contained on the
Closing Balance Sheet.
2. CLOSING; PAYMENT OF PURCHASE PRICE AT CLOSING
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14
2.1. CLOSING DATE. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 7.1 hereof, the closing with respect to the transactions
provided for in this Agreement (the "CLOSING") shall take place at the offices
of Simpson Thacher & Bartlett located at 425 Lexington Avenue, New York, New
York 10017-3954, at 10:00 a.m., New York City time, on a mutually agreed upon
date not later than January 31, 1997. The actual time and date of the Closing
are herein called the "Closing Date".
2.2. PURCHASE PRICE AND PAYMENT. (a) Subject to Section 2.4
hereof, regardless of whether the transfer of any Assets or Subsidiary Stock
have been deferred pursuant to the provisions of Section 2.3 of this Agreement,
in consideration for the sale and transfer of the Assets and the Subsidiary
Stock, and subject to the terms and conditions of this Agreement, the Buyer
shall on the Closing Date assume the Assumed Liabilities as provided in Section
1.6 hereof and shall transfer to or, in whole or in part, as directed by the
Seller: (i) certificates representing the greater of (A) 2,412,818 shares (the
"FIXED SHARES") of common stock, par value $0.01 per share (the "BUYER COMMON
STOCK"), of the Buyer and (B) a number of shares of Buyer Common Stock (rounded
up to the nearest whole share) equal to the quotient obtained by dividing (x)
$80.0 million by (y) the Buyer Stock Price; PROVIDED, HOWEVER, that in the case
of clause (B), in no event will the Buyer be required to deliver in excess of
4.0 million shares of Buyer Common Stock (the "EQUITY CONSIDERATION"), all of
which shares shall have been duly authorized, validly issued, fully paid and
nonassessable, and (ii) $280.0 million of cash in immediately available funds
(the "CASH CONSIDERATION"; and together with the Equity Consideration,
collectively referred to as the "PURCHASE PRICE"). The "Buyer Stock Price" shall
<PAGE>
15
be equal to the average of the closing prices of Buyer Common Stock on The
Nasdaq National Market, as reported in The Wall Street Journal, for the 50
trading days immediately preceding the second trading day prior to the
Stockholders' Meeting (as defined in Section 3.2(q)) or such shorter number of
trading days between the date hereof and the second trading day prior to the
Stockholders' Meeting.
(b) The Buyer and the Seller agree that if Hitachi Chemical
Company Ltd. ("HITACHI") exercises its right to purchase the shares of Hitachi -
Borden Chemical Products, Inc. ("HITACHI-BORDEN") owned by the Seller (the
"HITACHI SHARES") pursuant to the Joint Venture Basic Agreement dated as of June
23, 1972 (the "JOINT VENTURE AGREEMENT") between the Seller and Hitachi (the
"HITACHI RIGHT OF FIRST REFUSAL"), then (i) the Purchase Price shall be equal to
the amount set forth above less $30.0 million (the "HITACHI AMOUNT") and (ii) at
the Seller's option, the deduction of the Hitachi Amount from the Purchase Price
may be effected by means of a reduction of the Cash Consideration in an amount
equal to the Hitachi Amount (the "HITACHI CASH REDUCTION") or a reduction in the
number of shares of Buyer Common Stock constituting the Equity Consideration
equal to the quotient obtained by dividing (a) the Hitachi Amount by (b) the
Average Buyer Common Stock Price (the "HITACHI EQUITY REDUCTION"). The "Average
Buyer Common Stock Price" shall be equal to the average of the closing prices of
Buyer Common Stock on The Nasdaq National Market, as reported in The Wall Street
Journal, for the 20 trading days immediately preceding the second trading day
prior to the Closing Date. In the event that the Closing takes place prior to
the date that Hitachi has either exercised the Hitachi Right of First Refusal or
waived the Hitachi Right of First Refusal and the Hitachi Right of First Refusal
has not theretofore expired pursuant to its terms, the Buyer may withhold the
Hitachi
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16
Amount from the Purchase Price at the Closing, at the Seller's option, in the
form of the Hitachi Cash Reduction or the Hitachi Equity Reduction, and the
Closing will occur without any transfer by the Seller of the Hitachi Shares;
PROVIDED that within one business day following notice from the Seller to the
Buyer of any waiver by Hitachi of the Hitachi Right of First Refusal or of the
expiration of such right pursuant to its terms, the Buyer shall transfer to the
Seller in immediately available funds the Hitachi Cash Reduction (in the event
of a Hitachi Cash Reduction) or that number of shares of Buyer Common Stock
equal to the Hitachi Equity Reduction (in the event of a Hitachi Equity
Reduction) in the form so withheld and, subject to Section 2.3, the Seller shall
transfer to the Buyer the Hitachi Shares; and PROVIDED, FURTHER, that at the
Closing, in the event that the payment of the Hitachi Amount is deferred in the
form of the Hitachi Cash Reduction, the Buyer shall deliver to the Seller credit
support or other evidence of its ability to pay the Hitachi Amount in cash.
(c) The parties to this Agreement agree to allocate the
Purchase Price (the "1060 ALLOCATION") in accordance with the rules under
Section 1060 of the Internal Revenue Code of 1986, as amended (the "CODE"), and
the Treasury Regulations promulgated thereunder. To the extent possible, the
parties agree to provide the 1060 Allocation at the Closing. The parties
recognize that the Purchase Price does not include the Buyer's acquisition
expenses and that the Buyer will allocate such expenses appropriately. The
Seller and the Buyer agree to act in accordance with the computations and
allocations in the 1060 Allocation (including any modifications thereto
reflecting any post-Closing adjustments) in any relevant tax returns or filings
(including any forms or reports required to be filed pursuant to Section 1060 of
the Code, the Treasury Regulations promulgated thereunder or any provisions of
local, state and foreign
<PAGE>
17
law ("1060 FORMS")), and to cooperate in the preparation of any 1060 Forms and
to file such 1060 Forms in the manner required by applicable law.
2.3. DEFERRED TRANSFERS. (a) If, on the Closing Date, (i) the
Seller or the Buyer has not obtained any authorization, approval, order,
license, permit, franchise or consent from any foreign government or
governmental authority (an "APPROVAL") with respect to a transfer of Assets or
Subsidiary Stock of a Subsidiary organized outside the United States or Canada
in the absence of which Approval the conditions precedent to the Closing set
forth in Section 5 would nevertheless be satisfied and which Approval is either
necessary in order to transfer the relevant Assets or Subsidiary Stock or the
failure to obtain which would subject the Buyer, the Seller or any subsidiary,
or any officer, director or agent of any such person to civil or criminal
liability or could render such transfer void or voidable or (ii) there is in
effect any injunction, restraining order or decree of any nature of any court or
governmental agency or body of competent jurisdiction that would not prevent the
conditions precedent to the Closing set forth in Section 5 from being satisfied
and that restrains or prohibits the transfer to the Buyer of any Assets or
Subsidiary Stock of a Subsidiary organized outside the United States and that is
not permanent and non-appealable (a "NON-FINAL INJUNCTION"), such Assets or
Subsidiary Stock (the "DEFERRED ITEMS") shall be withheld from sale without any
reduction in the Purchase Price and, if necessary, be transferred by dividend or
otherwise, to the extent such transfer would not subject the Seller to any
taxes, from a Subsidiary to the Seller immediately prior to the Closing. From
and after the Closing, the Seller and/or the Buyer shall continue to use
reasonable efforts to obtain all Approvals, relating to the Deferred Items or
the transfer thereof, and/or to cause all Non-Final Injunctions relating to the
Deferred Items or the transfer thereof to be lifted. To
<PAGE>
18
the extent consistent with applicable law and this Agreement, the Buyer and the
Seller will enter into a mutually reasonably acceptable agreement or agreements
governing the management by Buyer of the Assets or Subsidiaries comprising the
Deferred Items.
(b) Until such time as any Deferred Items have been
transferred to the Buyer pursuant to Section 2.3(c) or otherwise disposed of in
accordance with Section 2.3(d) (each, a "DEFERRED TRANSFER"), the Deferred Items
shall be held for the Buyer's benefit and the Assets or Subsidiaries comprising
Deferred Items shall be managed and operated by the Seller for the Buyer's
benefit and account in the manner hereinafter provided from the Closing to the
time of the respective Deferred Transfers, with all gains, income, losses, taxes
or other items generated thereby to be for the Buyer's account. Neither the
Seller nor any Subsidiary shall have any liability to the Buyer arising out of
the management or operation by the Seller of any Assets or Subsidiaries
comprising Deferred Items other than for gross negligence, wilful misconduct or
failure to follow the Buyer's instructions if such instructions are permitted
under applicable law and do not require the Seller to violate any applicable
law.
The Buyer shall reimburse the Seller and shall hold the Seller
harmless from and against all liabilities incurred or asserted as a result of
the Seller's post-Closing direct or indirect ownership, management, operation or
sale (other than to the Buyer) of the Deferred Items, including, without
limitation, the amount of any additional taxes payable by the Seller (whether
currently or in the future), after application of the terms of this Agreement,
as a result thereof in excess of the amount of taxes which would have been
payable by the Seller, after application of the terms of this Agreement, if the
Deferred Items had been transferred to the Buyer or any of its affiliates on the
Closing Date. Such reimbursement shall be made by the Buyer and
<PAGE>
19
received by the Seller within ten business days of the Buyer receiving any bill,
claim, invoice or other request for payment from the Seller, together with
appropriate documentation showing the calculation of the amount claimed due.
From the Closing to the date of the Deferred Transfer, the
Seller shall hold the Deferred Items and hold or operate the Assets or
Subsidiaries comprising the Deferred Items only in the ordinary course
substantially consistent with past practice, except as otherwise specified in
the Buyer's instructions in accordance with Section 2.3(d) hereof; PROVIDED,
HOWEVER, that the Seller shall not be required to finance the operations of any
such Subsidiary directly or indirectly. Subject to applicable law and
regulations (including, without limitation, all laws and regulations requiring
investment approvals or consents or antimonopoly clearances, exemptions or
waivers in connection with any disposition of the Deferred Items, and all
exchange controls and laws concerning foreign corrupt practices, expatriation of
funds or otherwise), the Seller shall, in respect of any Deferred Items, use all
reasonable efforts to follow and implement the reasonable written instructions
and policies of the Buyer relating to the holding of the Deferred Items and the
management and operation of any Subsidiaries to which any such Deferred Items
relate. The Seller shall give the Buyer reasonable notice of all material
proposed financings with respect to the operations of the Assets or Subsidiaries
comprising the Deferred Items.
(c) Unless otherwise disposed of upon the Buyer's instructions
in accordance with Section 2.3(d) hereof, the certificates for the relevant
Subsidiary Stock comprising any Deferred Items, duly endorsed in blank and with
all necessary transfer stamps affixed thereto or such other assignments, deeds,
share transfer forms, endorsements, notarial deeds of transfer
<PAGE>
20
or other instruments or documents, duly stamped where necessary, as are
necessary under the laws of the jurisdiction of organization of each Transferred
Subsidiary as set forth on Section 1.1 of the Seller Disclosure Schedule in
order to effectively transfer such Deferred Items, will be delivered to the
Buyer free and clear of all liens (except for liens which had existed on the
Closing Date and had been disclosed and liens which were created for the Buyer's
benefit during the period the Deferred Items were being held for the Buyer's
benefit), on the date which is fifteen (15) business days after all Approvals
relating to any such Deferred Item or the transfer thereof shall have been
obtained and/or after any Non-Final Injunction relating to any such Deferred
Items or the transfer thereof has been lifted or on such other date as the
parties hereto may mutually agree.
(d) At any time prior to the Deferred Transfer relating to any
of the Deferred Items, the Seller shall, (i) on the Buyer's written instructions
(subject to applicable law and regulations), or may at any time after 10 years
from the Closing Date, with the Buyer's consent (which shall not be unreasonably
withheld), for the Buyer's benefit, dispose of the Deferred Items or, in the
case of Subsidiary Stock, the assets of the Subsidiaries to which such Deferred
Items relate, and remit the proceeds of such sale (less withholding or similar
taxes, if any, payable with respect to such disposition or remittance) to the
Buyer and (ii) for a period of 10 years following the Closing Date, operate that
portion of the Packaging Business related to the Deferred Items in accordance
with instructions from the Buyer if such instructions are permitted under
applicable law and do not require the Seller to violate any applicable law;
PROVIDED that in the event of either clause (i) or (ii) above (x) the Seller
shall have no liability to any such third party arising out of such transactions
or operations other than for gross negligence, willful
<PAGE>
21
misconduct or failure to follow the Buyer's instructions if such instructions
are permitted under applicable law and do not require the Seller to violate any
applicable law; and (y) any amount so remitted to the Buyer pursuant to this
Section 2.3(d) shall be reduced by the sum of (I) the amount by which the taxes
payable by the Seller (whether currently or in the future), after application of
the terms of this Agreement, with respect to the initial transfer, if any, to
the Seller pursuant to Section 2.3(a) and the subsequent disposition exceed the
amount of taxes which would have been payable by the Seller, after application
of the terms of this Agreement, with respect to the Deferred Items had they been
transferred on the Closing Date by the owner thereof (prior to their transfer,
if any, to the Seller) without regard to this Section 2.3, and (II) to the
extent not previously paid by or on behalf of the Buyer pursuant to Section
2.3(b) hereof, the amount of any liabilities imposed upon or incurred by the
Seller as a result of the Seller's post-Closing direct or indirect ownership,
management, operation or sale of the Deferred Items, including, without
limitation, the amount of any taxes (other than taxes previously paid by the
Buyer pursuant to Section 2.3(b)) payable by the Seller as a result thereof.
2.4. POST-CLOSING ADJUSTMENT. (a) Within 60 days following the
Closing, the Seller shall, at its expense, prepare, or cause to be prepared, and
deliver to the Buyer a balance sheet (the "CLOSING BALANCE SHEET") which shall
set forth those assets and liabilities of the Packaging Business relevant to the
adjustments contemplated by this Section 2.4 on the basis set forth on Section
2.4(a) of the Seller Disclosure Schedule as of the Effective Time. Subject to
Section 2.4(a) of the Seller Disclosure Schedule, the Closing Balance Sheet
shall be prepared in accordance with generally accepted accounting principles
using the same accounting principles, methods, practices and estimation
methodologies as were utilized in the preparation
<PAGE>
22
of the consolidated balance sheet of the Packaging Business as at December 31,
1995 (the "PRE- CLOSING BALANCE SHEET") included as part of the Financial
Information previously delivered to the Buyer. The Seller shall also deliver
within 60 days from the Closing a calculation of (i) working capital derived
from the Closing Balance Sheet on the basis set forth on Section 2.4(a) of the
Seller Disclosure Schedule (the "CLOSING WORKING CAPITAL") and (ii) Closing
Other Non- Current Liabilities. The term "CLOSING OTHER NON-CURRENT LIABILITIES"
shall mean "Long-Term Liabilities", other than "Deferred income taxes", as set
forth on the Closing Balance Sheet, consistent with this Section 2.4(a) and
Section 2.4(a) of the Seller Disclosure Schedule. The term "CLOSING FIGURES"
shall mean, collectively, the Closing Working Capital and the Closing Other
Non-Current Liabilities.
(b) The Buyer and the Buyer's accountants shall, within 30
days after the delivery by the Seller of the Closing Balance Sheet and
calculation of the Closing Figures, complete their review of the Closing
Figures, PROVIDED that the Seller has furnished to the Buyer all information
reasonably requested by the Buyer necessary for its review of the Closing
Figures. In the event that the Buyer determines that either of the components of
the Closing Figures has not been stated or determined in accordance with this
Section 2.4 and Section 2.4(a) of the Seller Disclosure Schedule, the Buyer
shall inform the Seller in writing (the "BUYER'S OBJECTION"), setting forth the
basis of the Buyer's Objection in reasonable detail and to the extent
practicable the adjustments to the Closing Figures which the Buyer believes
should be made, on or before the last day of such 30-day period. The Seller
shall then have 30 days to review and respond to the Buyer's Objection. If the
Seller and the Buyer are unable to resolve all of their disagreements with
respect to the determination of the foregoing items within 30 days following
<PAGE>
23
the completion of the Seller's review of the Buyer's Objection, they shall refer
their remaining differences to Ernst & Young LLP or another internationally
recognized firm of independent public accountants as to which the Seller and the
Buyer mutually agree (the "CPA FIRM"), which shall, acting as experts in
accounting and not as arbitrators, determine on the basis of the standards set
forth on Section 2.4(a) of the Seller Disclosure Schedule, and only with respect
to the specific remaining accounting related differences so submitted, whether
and to what extent, if any, either of the components of the Closing Figures
requires adjustment. The Seller and the Buyer shall direct the CPA Firm to use
its best efforts to render its determination within 45 days. The CPA Firm's
determination shall be conclusive and binding upon the Buyer and the Seller. The
fees and disbursements of the CPA Firm shall be shared equally by the Buyer, on
the one hand, and the Seller, on the other hand. The Buyer and the Seller shall
make readily available to the CPA Firm all relevant books and records and any
work papers (including those of the parties' respective accountants) relating to
the Pre-Closing Balance Sheet, the Closing Balance Sheet, the Closing Working
Capital, the Closing Other Non-Current Liabilities and all other items
reasonably requested by the CPA Firm. The "Adjusted Closing Working Capital"
shall be (i) the Closing Working Capital in the event that (x) no the Buyer's
Objection is delivered to the Seller during the 30-day period specified above,
or (y) the Seller and the Buyer so agree, (ii) the Closing Working Capital,
adjusted in accordance with the Buyer's Objection in the event that the Seller
does not respond to the Buyer's Objection within the 30-day period following
receipt by the Seller of the Buyer's Objection, or (iii) the Closing Working
Capital, as adjusted by either (x) the agreement of the Seller and the Buyer or
(y) the CPA Firm. The "Adjusted Closing Other Non-Current Liabilities" shall be
(i) the Closing Other Non-Current
<PAGE>
24
Liabilities in the event that (x) no the Buyer's Objection is delivered to the
Seller during the 30- day period specified above, or (y) the Seller and the
Buyer so agree, (ii) the Closing Other Non- Current Liabilities, adjusted in
accordance with the Buyer's Objection in the event that the Seller does not
respond to the Buyer's Objection within the 30-day period following receipt by
the Seller of the Buyer's Objection, or (iii) the Closing Other Non-Current
Liabilities, as adjusted by either (x) the agreement of the Seller and the Buyer
or (y) the CPA Firm. "Adjusted Closing Figures" shall include the Adjusted
Closing Working Capital and the Adjusted Closing Other Non-Current Liabilities.
(c) The Buyer shall provide the Seller and its accountants
full access to the books and records of the Packaging Business, to any other
information, including work papers of their accountants, and to any employees to
the extent necessary for the Seller to prepare the Closing Balance Sheet and
determine the Closing Figures. The Buyer and its accountants shall have the
opportunity to observe the taking of the Inventory (which may begin prior to the
Closing Date on a date mutually agreed to by the Buyer and the Seller and which
shall be taken on a year-end basis consistent with past practice) in connection
with the preparation of the Closing Balance Sheet and the Closing Figures and
shall have full access to all information used by the Seller in preparing the
1995 Balance Sheet (as defined below), Closing Balance Sheet and Closing
Figures, including the procedures, books, records and work papers of its
accountants.
(d) Within 10 business days following determination of the
Adjusted Closing Figures, the Buyer or the Seller, as the case may be, shall
make an adjustment payment (the "ADJUSTMENT AMOUNT") equal to the difference
between the Buyer Adjustment Amount and the Seller Adjustment Amount. The "Buyer
Adjustment Amount" shall equal the sum of (i) the
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25
amount, if any, by which (A) the Adjusted Closing Working Capital exceeds (B)
the Pre-Closing Working Capital and (ii) the amount, if any, by which the
Adjusted Closing Other Non-Current Liabilities is less than $7,450,000. The
"Pre-Closing Working Capital" shall be equal to the working capital of the
Packaging Business at December 31, 1995 as set forth on Section 2.4(d) of the
Seller Disclosure Schedule. The "Seller Adjustment Amount" shall equal the sum
of (i) the amount, if any, by which (A) the Adjusted Closing Working Capital is
less than (B) the Pre- Closing Working Capital and (ii) the amount, if any, by
which the Adjusted Closing Other Non- Current Liabilities exceeds $9,450,000.
(e) The Adjustment Amount will be payable (x) by the Seller to
the Buyer to the extent that the Seller Adjustment Amount exceeds the Buyer
Adjustment Amount at the Seller's option (i) in U.S. dollars in the amount of
the Adjustment Amount or (ii) in such number of shares of the Buyer Common Stock
equal to the quotient obtained by dividing (a) the Adjustment Amount by (b) the
Average Buyer Common Stock Price (the "ADJUSTMENT SHARES"), and (y) by the Buyer
to the Seller to the extent that the Buyer Adjustment Amount exceeds the Seller
Adjustment Amount in the form of U.S. dollars, plus, in either case, interest,
payable in cash, on the Adjustment Amount from the Closing Date through the date
of payment at the "base rate" of Citibank, N.A. or any successor thereto in New
York, New York on the Closing Date. The Adjustment Amount payable pursuant to
this Section 2.4(e) shall be paid, in the case of clauses (x)(i) and (y) above,
by wire transfer of immediately available funds to an account designated by the
Buyer, on the one hand, or the Seller, on the other hand, as the case may be
and, in the case of clause (x)(ii) above, by delivery to the Buyer of stock
certificates representing the Adjustment Shares, duly endorsed for transfer to
the Buyer or accompanied by stock powers
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26
duly executed in favor of the Buyer, together with evidence of payment of any
applicable transfer and documentary stamp taxes and other fees.
3. REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The
Seller represents and warrants to the Buyer as follows:
(a) DUE ORGANIZATION; GOOD STANDING AND POWER. The Seller and
each of the Subsidiaries is a corporation duly organized, validly
existing and has the requisite power and authority to own, lease and
operate its property to be sold hereunder and to conduct the Packaging
Business as now conducted by it and, with respect to each U.S.
corporation, is in good standing under the laws of the jurisdiction of
its incorporation. The Seller has all requisite power and authority to
enter into this Agreement and the Governance Agreement and the Seller
and each Subsidiary Asset Seller has all requisite power and authority
to enter into the other agreements contemplated hereby and to perform
its obligations hereunder and thereunder, and the Seller and each
Subsidiary Asset Seller has all requisite power and authority to convey
good and marketable title to the Buyer with respect to the Assets owned
by it. Each of the Seller and the Subsidiaries is duly authorized,
qualified or licensed to do business as a foreign corporation, and with
respect to each U.S. corporation is in good standing, in each of the
jurisdictions in which its right, title or interest in or to any of the
Assets held by it, or the conduct of the Packaging Business by it,
requires such authorization, qualification or licensing, except where
the failure to so qualify or to be in good standing would not,
individually or in the aggregate, have or reasonably be expected to
have a material adverse effect on the results
<PAGE>
27
of operations, financial condition or business of Borden Global
Packaging taken as a whole. Other than the Subsidiaries, (i) the Seller
has no direct or indirect subsidiaries that engage directly or
indirectly in the Packaging Business and (ii) the Seller and the
Subsidiaries do not own in excess of 5% of the outstanding capital
stock or equity interests of any entity that engages directly or
indirectly in the Packaging Business. Except for Hitachi-Borden,
neither the Seller nor any of the Subsidiaries is a party to any joint
venture or partnership agreement relating to the Packaging Business,
and none of the Transferred Subsidiaries is a party to any joint
venture or partnership agreement.
(b) AUTHORIZATION AND VALIDITY OF AGREEMENT. The execution,
delivery and performance by the Seller of this Agreement and the
Governance Agreement and the other agreements contemplated hereby and
the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by the Board of Directors of the
Seller. No other corporate or stockholder action is necessary for the
authorization, execution, delivery and performance by the Seller of
this Agreement and the Governance Agreement and the other agreements
contemplated hereby and the consummation by the Seller and the
Subsidiaries of the transactions contemplated hereby or thereby, other
than certain corporate approvals of the foreign Subsidiaries set forth
on Section 3.1(b) of the Seller Disclosure Schedule, which corporate
approvals shall have been obtained by the Closing Date. This Agreement
has been duly executed and delivered by the Seller and constitutes a
valid and legally binding obligation of the Seller, enforceable against
it in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting the
<PAGE>
28
enforcement of creditors' rights generally, by general equitable
principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law) or by an implied covenant of good
faith and fair dealing.
(c) NO GOVERNMENTAL APPROVALS OR NOTICES REQUIRED; NO CONFLICT
WITH INSTRUMENTS TO WHICH THE SELLER IS A PARTY. Except as required by
the terms of the Hitachi Right of First Refusal and except as described
on Section 3.1(c) of the Seller Disclosure Schedule, the execution,
delivery and performance of this Agreement and the other agreements
contemplated hereby by the Seller and the consummation by it and the
Subsidiaries of the transactions contemplated hereby and thereby (i)
will not violate (with or without the giving of notice or the lapse of
time or both) or require any consent, approval, filing or notice to be
made by any Asset Seller or Transferred Subsidiary under, any provision
of any law, rule or regulation, court order, judgment or decree
applicable to the Seller or any such Subsidiary, except for (x) the
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR ACT"), and (y) such violations the
occurrence of which, and such consents, approvals, filings or notices
the failure of which to obtain or make, would not, individually or in
the aggregate, have or reasonably be expected to have a material
adverse effect on the results of operations, financial condition or
business of Borden Global Packaging taken as a whole, and (ii) will not
conflict with, or result in the breach or termination of any provision
of, or constitute a default under, or result in the acceleration of the
performance of the obligations of the Seller or any such Subsidiary
under, or require the consent or approval of any person under, or
result in the creation of a lien, charge or
<PAGE>
29
encumbrance upon a portion of the properties, assets or business of
Borden Global Packaging pursuant to, the charter or by-laws (or
analogous organizational documents) of the Seller or any such
Subsidiary, or any indenture, mortgage, deed of trust, lease, licensing
agreement, contract, instrument or other agreement to which the Seller
or any such Subsidiary is a party or by which the Seller or any such
Subsidiary or any of the Assets held by the Seller or any such
Subsidiary is bound, except for such conflicts, breaches, terminations,
defaults, accelerations, liens, charges or encumbrances which would
not, individually or in the aggregate, have or reasonably be expected
to have a material adverse effect on the results of operations,
financial condition or business of Borden Global Packaging taken as a
whole.
(d) ENTIRE BUSINESS. Except as set forth on Section 3.1(d) of
the Seller Disclosure Schedule, the Assets and the Subsidiary Stock,
together with the services and arrangements described in Sections 4.10,
4.11 and 4.12 (subject to the limitations therein and in the related
Exhibits) constitute all the assets, properties and rights used in or
necessary to conduct the Packaging Business in all material respects as
currently conducted.
(e) TITLE TO PROPERTIES. The Seller and the Subsidiaries have
(x) good title to the Subsidiary Stock and (y) good, valid and
marketable title to property owned, and a valid and binding leasehold
interest in property leased, included in the Assets or otherwise
pertaining to the Packaging Business, in the case of each of clauses
(x) and (y), free and clear of all liens, charges and other
encumbrances, except (i) as set forth on Section 3.1(e) of the Seller
Disclosure Schedule or any Exhibit hereto; (ii) as disclosed
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30
in the Financial Information; (iii) liens for taxes, assessments and
other governmental charges not yet due and payable or, if due, (A) not
delinquent or (B) being contested in good faith by appropriate
proceedings during which collection or enforcement against the property
is stayed; (iv) mechanics', workmen's, repairmen's, warehousemen's,
carriers' or other like liens arising or incurred in the ordinary
course of business if the underlying obligations are not past due,
original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course of
business; (v) with respect to real property, (A) easements, licenses,
covenants, rights-of-way and other similar restrictions, including,
without limitation, any other agreements, conditions or restrictions
which would be shown by a current title report or other similar report
or listing, (B) any conditions that may be shown by a current survey,
title report or physical inspection and (C) zoning, building and other
similar restrictions, so long as none of (A), (B) or (C) render the
title of such real property unmarketable or prevent the use of such
real property substantially as currently used; and (vi) liens, charges
or other encumbrances which, individually or in the aggregate, would
not have or reasonably be expected to have a material adverse effect on
the results of operations, financial condition or business of Borden
Global Packaging taken as a whole (such liens, charges and encumbrances
described in clauses (i)-(vi) hereof are referred to herein as
"PERMITTED LIENS"). The buildings, plants, structures and equipment of
the Seller included in the Assets are in good operating condition and
repair, ordinary wear and tear expected, and are adequate for the
present and contemplated uses to which they are being, or are
contemplated to be, put except for such conditions or inadequacy that,
individually or in
<PAGE>
31
the aggregate, would not have or reasonably be expected to have a
material adverse effect on the results of operations financial
condition or business of Borden Global Packaging taken as a whole.
(f) FINANCIAL INFORMATION; ABSENCE OF CERTAIN CHANGES. (i) The
Seller has delivered to the Buyer audited balance sheets of Borden
Global Packaging as at December 31 for each of the years 1993, 1994 and
1995 (for 1995, the "1995 BALANCE SHEET"), and the related audited
statements of income and retained earnings and cash flows for each of
the fiscal years then ended, together with the report thereon of
independent certified public accountants, including notes thereto
attached as Section 3.1(f)(i) of the Seller Disclosure Schedule (the
"FINANCIAL INFORMATION"). Such financial statements and notes fairly
present the financial condition and results of operations of Borden
Global Packaging as at the respective dates thereof and for the periods
therein referred to, all in accordance with generally accepted
accounting principles consistently applied by the Seller throughout the
periods involved. Except (x) as and to the extent set forth on the 1995
Balance Sheet, including the notes thereto, or in the Interim Financial
Information (as defined in Section 3.1(f)(ii)) or (y) as disclosed in
this Agreement or the Seller Disclosure Schedule, neither the Seller
nor any of its Subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) which would
be required to be reflected on a balance sheet or in the notes thereto
prepared in accordance with generally accepted accounting principles
other than liabilities or obligations incurred in the ordinary course
of business since December 31, 1995 which would not, individually or in
the aggregate, have or
<PAGE>
32
reasonably be expected to have a material adverse effect on the results
of operations, financial condition or business of Borden Global
Packaging taken as a whole; PROVIDED that no breach of the foregoing
representation shall be deemed to have occurred with respect to
liabilities or obligations (or that portion thereof to the extent that
such breach has an effect not fully reflected on the Closing Balance
Sheet) ultimately reflected on the Closing Balance Sheet. All of the
liabilities reflected on the 1995 Balance Sheet are related to the
Packaging Business and arose out of or were incurred in the conduct of
the Packaging Business.
(ii) TheSeller has delivered to the Buyer an unaudited balance
sheet of Borden Global Packaging as at May 31, 1996, and the related
unaudited statements of income and retained earnings and cash flows for
the period then ended including notes thereto attached as Section
3.1(f)(ii) of the Seller Disclosure Schedule (the "INTERIM FINANCIAL
INFORMATION"). The Interim Financial Information was prepared on a
basis consistent with prior practice for the preparation of interim
monthly financial statements for Borden Global Packaging and fairly
presents, consistent with such method of preparation, the financial
condition and results of operations of Borden Global Packaging at May
31, 1996, and for the period then ended;
(iii) Except as reflected in Sections 3.1(f)(i) or
3.1(f)(ii) of the Seller Disclosure Schedule or otherwise contemplated
by or disclosed in this Agreement, the Seller Disclosure Schedule
(including, without limitation, Section 3.1(f)(iii) thereof) or the
Exhibits hereto, since the date of the 1995 Balance Sheet, the Seller
has conducted the Packaging Business in the ordinary course consistent
with past practice, and other
<PAGE>
33
than in the ordinary course, there has not occurred or arisen, with
respect to the Packaging Business: (i) any material adverse changes in
or any condition, event or occurrence which, individually or in the
aggregate, would cause, or would reasonably be expected to cause, a
material adverse change in the results of operations, financial
condition or business of the Packaging Business taken as a whole, (ii)
any notice of non-renewal, cancellation or termination from any
existing customers with respect to any material contracts of the
Packaging Business, (iii) any sale, assignment, pledge, hypothecation
or other transfer of any of the Assets, other than such sales,
assignments, pledges, hypothecations or other transfers which would not
have or reasonably be expected to have a material adverse effect on the
results of operations, financial condition or business of Borden Global
Packaging taken as a whole and other than transfers between Borden,
Inc. or a Subsidiary, on the one hand, and Borden, Inc. or a
Subsidiary, on the other hand, (iv) any termination or material
amendment of, or any notice of termination of, any contract or other
agreement that is material to the Packaging Business taken as a whole,
(v) any damage, destruction or other casualty loss (not covered by
insurance) which would have or reasonably be expected to have a
material adverse effect on the results of operations, financial
condition or business of Borden Global Packaging taken as a whole, (vi)
except for salary administration, bonuses and incentive compensation in
the ordinary course of business, any increase in the compensation
payable or to become payable by Borden Global Packaging to any
employees or any increase in any employee benefit plan, payment or
arrangement for any such employee, (vii) any incurrence or assumption
of any indebtedness for borrowed
<PAGE>
34
money or the guaranty by the Seller or any of the Subsidiaries of any
indebtedness or other obligation of another person relating to the
Packaging Business, other than borrowings or guarantees between Borden,
Inc. or a Subsidiary, on the one hand, and Borden, Inc. or a
Subsidiary, on the other hand, (viii) the cancellation of any debts to
or waiver of any claims or rights of value to the Seller relating to
the Packaging Business, (ix) any capital expenditures or additions to
property, plant or equipment or the acquisition of any other property
or assets (other than raw materials, supplies and inventory) at a cost
in excess of $1,000,000 in the aggregate, by the Seller and the
Subsidiaries relating to the Packaging Business, (x) any lease to the
Seller or any of the Subsidiaries of any of the properties or assets
relating to the Packaging Business, (xi) the entering into of any
Material Contract (as defined in Section 3.1(q) hereof) or (xii) the
entering into of an agreement to do any of the foregoing; PROVIDED that
no breach of the foregoing representation shall be deemed to have
occurred to the extent that such occurrence or event (or that portion
thereof to the extent that such breach has an effect not fully
reflected on the Closing Balance Sheet) is reflected as a liability on
the Closing Balance Sheet.
(g) CAPITALIZATION. All of the outstanding shares of capital
stock or other equity interests of each of the Subsidiaries, including,
without limitation, the Transferred Subsidiaries, have been validly
issued and are fully paid and nonassessable and, except as set forth on
Section 3.1(g) of the Seller Disclosure Schedule and except for
directors' qualifying shares and other nominal share interests issued
to third parties to comply with requirements of law, are owned by the
Seller and/or one or more of its subsidiaries free
<PAGE>
35
and clear of all liens, claims, charges, security interests, options or
other legal or equitable encumbrances. Section 3.1(g)(i) of the Seller
Disclosure Schedule sets forth for each of the Transferred Subsidiaries
the authorized capital stock, the number of shares of outstanding
capital stock, the number of shares of such outstanding capital stock
owned by each owner thereof and the name of each such owner. The Seller
has the right to cause all such director's qualifying shares and other
nominal share interests to be transferred to the Buyer or its designee
in accordance with the terms hereof. Except as indicated on Section
3.1(g)(ii) of the Seller Disclosure Schedule, there are no outstanding
options, warrants or other rights of any kind relating to the sale,
issuance or voting of any shares of capital stock of any class of, or
other ownership interests in, the Subsidiaries which have been issued,
granted or entered into by the Seller or any of the Subsidiaries or any
securities convertible into or evidencing the right to purchase any
shares of capital stock of any class of, or other ownership interests
in, any of the Subsidiaries.
(h) DEFECTS. Except as described on Section 3.1(h) of the
Seller Disclosure Schedule or as reflected in the Financial Information
or the Interim Financial Information, (i) there are no defects in the
normal operating condition and repair of the Plants or Equipment
currently used in connection with the Borden Global Packaging business,
which defects individually or in the aggregate would materially
interfere with the current use thereof in the normal operation of any
single Plant or of such Plants or Equipment in the Packaging Business
taken as a whole as presently conducted; (ii) the Finished Goods of the
Seller relating to the Packaging Business are, in all material
<PAGE>
36
respects, good and merchantable in the ordinary course of business; and
(iii) the Materials of the Seller relating to the Packaging Business
are, in all material respects, in good condition and usable in the
ordinary course of business.
(i) LEGAL PROCEEDINGS. Except as described on Section 3.1(i)
of the Seller Disclosure Schedule, there is no litigation, proceeding,
tax audit or governmental investigation or inquiry relating to Borden
Global Packaging to which the Seller or any of the Subsidiaries is a
party, or to which any of the Assets is subject, pending or, to the
knowledge of the Seller, threatened against it or any of the
Subsidiaries or relating to the Assets or the Packaging Business or the
transactions contemplated by this Agreement which, if determined or
resolved adversely or in accordance with the plaintiff's demands,
would, individually or in the aggregate, result, or would reasonably be
expected to result, in any material adverse effect on the results of
operations, financial condition or business of Borden Global Packaging
taken as a whole. Neither the Seller nor any Subsidiary has received
any notice of any event or occurrence which could result, or could
reasonably be expected to result, in any such litigation, inquiry,
proceeding or investigation, nor to the knowledge of the Seller or any
of the Subsidiaries has there been any event or occurrence which could
result, or could reasonably be expected to result, in any such
litigation, inquiry, proceeding or investigation.
(j) LABOR CONTROVERSIES. Except as described on Section 3.1(j)
of the Seller Disclosure Schedule, (a) the Seller and the Subsidiaries
with respect to the Packaging Business are in compliance in all
material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages
<PAGE>
37
and hours, and neither the Seller nor any Subsidiary with respect to
the Packaging Business has been engaged in any unfair labor practice,
(b) there is no unfair labor practice complaint against the Seller or
the Subsidiaries with respect to the Packaging Business pending before
the National Labor Relations Board, (c) there is no labor strike,
dispute, slowdown or stoppage actually pending or threatened against or
affecting the Seller or the Subsidiaries with respect to the Packaging
Business, (d) neither the Seller nor any Subsidiary with respect to the
Packaging Business has experienced any strike, work stoppage or other
labor difficulty, (e) neither the Seller nor any Subsidiary with
respect to the Packaging Business is a party to, or subject to, a
collective bargaining agreement, and no collective bargaining agreement
relating to employees of the Seller or any Subsidiary with respect to
the Packaging Business is currently being negotiated, which in the case
of any of the foregoing would, individually or in the aggregate, have
or reasonably be expected to have a material adverse effect on the
results of operations, financial condition or business of Borden Global
Packaging taken as a whole.
(k) PATENTS, TRADEMARKS AND SIMILAR RIGHTS. Except as
described on Section 3.1(k) of the Seller Disclosure Schedule, the
Seller or the Subsidiaries own, or are licensed to use subject to
Section 4.11, all material patents, trade names, trademarks,
copyrights, technology, know-how and processes used in the business of
Borden Global Packaging as presently conducted, and the consummation of
the transactions contemplated hereby will not alter or impair any such
rights in any material respect. Neither the Seller and the Subsidiaries
nor to the best of the Seller and the Subsidiaries' knowledge any other
person is in default under any license or other agreement relating to
such
<PAGE>
38
Intellectual Property, except for such default which would individually
or in the aggregate, not have or reasonably be expected to have a
material adverse effect on the results of operations, financial
condition or business of Borden Packaging taken as a whole, and all
such material licenses and agreements are valid, enforceable and in
full force and effect. To the best knowledge of the Seller and the
Subsidiaries, the use of such Intellectual Property does not violate or
infringe the rights of any person in any material respect and no person
is infringing any Intellectual Property of the Seller and its
Subsidiaries in any material respect. The Seller has received no notice
of any such alleged infringement. The patents, trade names, trademarks,
copyrights, technology, know-how and processes (the "INTELLECTUAL
PROPERTY") described on Section 1.2(a) of the Seller Disclosure
Schedule and the Intellectual Property owned by the Transferred
Subsidiaries constitute, in all material respects, the Intellectual
Property used in or necessary to conduct the Borden Global Packaging
business as currently conducted. The Seller has made all filings
required under the laws of the jurisdictions listed on Section 1.2(a)
of the Seller Disclosure Schedule necessary to preserve its rights in
such Intellectual Property.
(l) GOVERNMENT LICENSES, PERMITS AND RELATED APPROVALS. Except
as described on Section 3.1(l) of the Seller Disclosure Schedule, the
Seller or the Subsidiaries have all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental
authorities required for the conduct of the business of Borden Global
Packaging as presently conducted, and such licenses, permits, consents,
approvals, authorizations, qualifications or orders are in full force
and effect, and the
<PAGE>
39
Seller has received no notices of any violation thereof except where
the failure to have, or to keep in full force and effect such licenses,
permits, consents, approvals, authorizations, qualifications and orders
would not, individually or in the aggregate, have or reasonably be
expected to have a material adverse effect on the results of
operations, financial condition or business of Borden Global Packaging
taken as a whole.
(m) CONDUCT OF BUSINESS IN COMPLIANCE WITH REGULATORY AND
CONTRACTUAL REQUIREMENTS. Except as described on Section 3.1(m) of the
Seller Disclosure Schedule, the Seller has conducted the Packaging
Business so as to comply in all material respects with all applicable
laws, ordinances, regulations or orders or other requirements of any
governmental, regulatory or administrative agency or authority or
court, rights of concession, licenses, know-how or other proprietary
rights of others and received no notice of any failure to comply with
such laws, ordinances, regulations, orders or rights, except where the
failure to comply with such laws, ordinances, regulations, orders or
rights would not, individually or in the aggregate, have or reasonably
be expected to have a material adverse effect on the results of
operations, financial condition or business of Borden Global Packaging
taken as a whole.
(n) EMPLOYEE BENEFIT PLANS. (i) For purposes of this
Agreement, "BUSINESS PLANS" shall mean all "employee benefit plans"
(within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), including, without
limitation, "multiemployer plans" (within the meaning of Sections 3(37)
and 4001(a)(3) of ERISA)), retirement, savings, stock purchase, stock
option, severance, employment, change-in-control, fringe benefit,
collective bargaining, bonus,
<PAGE>
40
incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements (A) under which
any employee or former employee of Borden Global Packaging
(collectively, the "BUSINESS EMPLOYEES") has any present or future
right to benefits and (B) under which the Seller has any present or
future liability. For purposes of this Agreement, "U.S. Business Plans"
shall mean all Business Plans under which any Business Employee who is
or was primarily employed in the United States (collectively, the "U.S.
BUSINESS EMPLOYEES") has any present or future right to benefits.
Section 3.1(n)(i) of the Seller Disclosure Schedule sets forth a list
of each material Business Plan.
(ii) With respect to each material Business Plan, the
Seller has made available to the Buyer a written description thereof.
(iii) Except as described on Section 3.1(n)(iii) of
the Seller Disclosure Schedule, each material Business Plan sponsored
by the Seller or its Subsidiaries has been established and administered
in accordance with its terms and in compliance with the applicable
provisions of ERISA, the Code and other applicable laws, rules and
regulations, except where a failure to do so would not, individually or
in the aggregate, have or reasonably be expected to have a material
adverse effect on the results of operations, financial condition or
business of Borden Global Packaging taken as a whole.
(iv) Except as reflected in the Financial Information
or the Interim Financial Information and except as set forth in Section
3.1(n)(iv) of the Seller Disclosure Schedule, to the best of the
Seller's and the Subsidiaries' knowledge, there
<PAGE>
41
were no unfunded liabilities of the Transferred Subsidiaries in respect
of any of the Business Plans that are required by law, rule or
regulation to be funded.
(o) ENVIRONMENTAL MATTERS. Except as described on Section
3.1(o) of the Seller Disclosure Schedule, to the best knowledge of the
Seller: (i) the Packaging Business complies in all respects with
applicable federal, state, local or foreign laws, rules and regulations
relating to environmental matters, pollution, waste disposal or
industrial hygiene as in effect on the date hereof (including, without
limitation, the Federal Resource Conservation and Recovery Act and the
Federal Water Pollution Control Act) (collectively, "ENVIRONMENTAL
LAWS"), except where the failure to comply with such laws, rules and
regulations would not, individually or in the aggregate, have or
reasonably be expected to have a material adverse effect on the results
of operations, financial condition or business of Borden Global
Packaging taken as a whole; (ii) the Seller has obtained and is in
compliance with all permits required under Environmental Laws for the
conduct of the Packaging Business, except as would not reasonably be
expected to result, individually or in the aggregate, in a material
adverse effect on the results of operations, financial condition or
business of Borden Global Packaging taken as a whole; (iii) none of the
Borden Global Packaging operations is subject to any judicial or
administrative proceeding alleging the violation of or liability under
any Environmental Laws which if adversely determined would,
individually or in the aggregate, have or reasonably be expected to
have a material adverse effect on the results of operations, financial
condition or business of Borden Global Packaging taken as a whole; (iv)
neither the Seller nor any other person has not released or disposed of
any
<PAGE>
42
material that is defined as hazardous or toxic under any Environmental
Law at any of the Plants, except as would not reasonably be expected to
result, individually or in the aggregate, in a material adverse effect
on the results of operations, financial condition or business of Borden
Global Packaging taken as a whole; (v) none of the Plants has been
listed on the National Priorities List or the Comprehensive Environment
Response Cleanup Liability Information System list prepared pursuant to
the federal Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA"); (vi) in connection with Borden Global
Packaging operations, the Seller has not been identified in writing as
a potentially responsible party under CERCLA or any equivalent State
statute and (vii) neither the Seller nor any Subsidiary has received
notification from any governmental bodies or other third parties or is
subject to any order or decree relating to any potential liability
under Environmental Laws or disposal of hazardous or toxic material on
or affecting any property owned or leased by the Packaging Business.
The Seller has made available to the Buyer true and complete copies of
any material reports, studies, analyses, tests, or monitoring possessed
or initiated by the Seller or the Subsidiaries pertaining to hazardous
or toxic materials in, on or under the Plants, or concerning compliance
by the Seller, the Subsidiaries or any other person for whose conduct
they are or may be responsible, with Environmental Laws.
(p) TAX MATTERS. (i) There has been filed by or on behalf of
the Subsidiaries, or a filing extension from the appropriate federal,
state, local or foreign governments or governmental agencies has been
obtained with respect to, all returns relating to any United States
federal, state, provincial, local, territorial and foreign income,
profits,
<PAGE>
43
franchise, gross receipts, payroll, sales, employment, use, property,
real estate, excise, value added, estimated, stamp, alternative or
add-on minimum, environmental, withholding and any other taxes, duties
or assessments, together with all interest, penalties and additions
imposed with respect to such amounts required to be filed on or prior
to the date of this Agreement (the "TAX RETURNS"), and all taxes shown
as due on such Tax Returns have been paid or adequate provision in
accordance with generally accepted accounting principles for the
payment of all taxes shown to be due on such Tax Returns has been made.
The Tax Returns are complete and accurate in all material respects.
(ii) No audit or other proceeding by any court, governmental
or regulatory authority, or similar person is pending with respect to
any taxes due from or with respect to any Subsidiary, except to the
extent that such audit or proceeding would not have or reasonably be
expected to have a material adverse effect on the results of
operations, financial condition or business of Borden Global Packaging
taken as a whole. No written assessment of tax is proposed against any
Subsidiary, except to the extent that such audit or proceeding would
not have or reasonably be expected to have a material adverse effect on
the results of operations, financial condition or business of Borden
Global Packaging taken as a whole or to the extent that any such
written assessment is being contested in good faith by appropriate
proceedings.
(q) CONTRACTS. Section 1.2(f) of the Seller Disclosure
Schedule lists all contracts, agreements or commitments of the Asset
Sellers (other than ordinary course purchase and sale orders for
Inventory) that relate principally to the Packaging Business
<PAGE>
44
that involve payment of more than $250,000 in the aggregate and are
expiring, are to be performed in or are terminable in (in each case
without significant continuing obligations) 120 days or longer
("MATERIAL CONTRACTS"). To the best knowledge of the Seller after due
inquiry, all contracts, agreements or commitments of Borden Global
Packaging were entered into on an arm's length basis and in good faith
or are disclosed on Section 3.1(q) of the Seller Disclosure Schedule.
To the best of the Seller's knowledge, except as specified on the
Seller Disclosure Schedule, all contracts, maintenance and service
agreements, purchase commitments for materials and other services,
advertising and promotional agreements, leases and other agreements
pertaining to Borden Global Packaging that are being transferred
pursuant to the terms of Section 1.2(f) are in full force and effect
and are valid and enforceable in accordance with their respective
terms, except (i) as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting the enforcement of creditors' rights
generally, by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law) or by
an implied covenant of good faith and fair dealing or (ii) where the
failure to be in full force and effect and valid and enforceable would
not, individually or in the aggregate, have or reasonably be expected
to have a material adverse effect on the results of operations,
financial condition or business of Borden Global Packaging taken as a
whole. Except as specified on the Seller Disclosure Schedule, the
Seller and its Subsidiaries are not in breach or default in the
performance of, and to the best of the Seller's knowledge, no other
person is in breach or default of, any obligation thereunder and no
event has
<PAGE>
45
occurred or has failed to occur whereby any of the other parties
thereto have been or will be released therefrom or will be entitled to
refuse to perform thereunder, except for such breaches, defaults and
events which, individually or in the aggregate, would not have or
reasonably be expected to have a material adverse effect on the results
of operations, financial condition or business of Borden Global
Packaging taken as a whole.
Except as set forth on Section 3.1(q) of the Seller Disclosure
Schedule, there is no material lease, agreement or commitment or
transactions between the Seller and the Subsidiaries, on the one hand,
and any affiliate of the Seller, on the other hand, and no affiliate of
the Seller has any material interest in any property, real or personal,
tangible or intangible, including, without limitation, any Intellectual
Property, used in or pertaining to the Packaging Business.
(r) INSURANCE. Section 3.1(r) of the Seller Disclosure
Schedule contains an accurate and complete description of all material
policies of liability insurance covering the Seller or the Subsidiaries
that relate to the Packaging Business. All such policies are in full
force and effect, all premiums with respect thereto (or with respect to
new policies that, in the ordinary course of business, have replaced
such policies listed on Section 3.1(r) of the Seller Disclosure
Schedule) covering all periods up to and including the Closing Date
have been paid, to the extent due prior to the Closing Date, or accrued
on the Seller's financial statements and books and records and no
notice of cancellation or termination has been received with respect to
any such policy (other than any policy that expires, is cancelled or is
terminated in accordance with its terms and has been continued,
extended or reinstated on substantially similar terms or is replaced
with
<PAGE>
46
another policy with substantially similar terms). Such policies are
sufficient for compliance with all requirements of law and all
agreements to which the Seller is a party and are valid, outstanding
and enforceable policies. No insurance has been refused with respect to
any of the operations, properties or assets of the Seller, nor has the
Seller received notice that the coverage of any insurance has been
limited by any insurance carrier which has carried, or received any
application for, any such insurance during the last three years.
(s) RETURNS. Since December 31, 1995, the dollar amount of
products returned to the Seller and its Subsidiaries with respect to
the Packaging Business has not been materially greater than the dollar
amount of returns experienced by the Seller and its Subsidiaries during
equivalent periods in previous years.
(t) CERTAIN FEES. With the exception of fees and expenses
payable to Morgan Stanley & Co. Incorporated ("MORGAN STANLEY"), which
shall be paid by the Seller, neither the Seller nor any of the
Subsidiaries nor any of their respective officers, directors or
employees, on behalf of the Seller or such Subsidiaries, has employed
any broker or finder or incurred any other liability for any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated hereby.
(u) BUYER COMMON STOCK HELD FOR INVESTMENT. The Seller is
aware that no shares of the Buyer Common Stock to be received by the
Seller in partial consideration for the Stock and Asset Purchase are
registered under the Securities Act or under any state securities laws.
The Seller is not an underwriter, as such term is defined under the
Securities Act, and is acquiring such shares solely for investment,
with no present
<PAGE>
47
intention to distribute any such shares to any person, and the Seller
will not sell or otherwise dispose of shares except in compliance with
the registration requirements or exemption provisions under the
Securities Act and the rules and regulations promulgated thereunder, or
any other applicable securities laws.
(v) INFORMATION SUPPLIED. None of the information supplied or
to be supplied by the Seller to the Buyer in writing specifically for
inclusion in the Proxy Statement (as defined in Section 3.2(q)) will to
the extent included in the Proxy Statement, at the date the Proxy
Statement is first mailed to the Buyer's stockholders or at the time of
the Stockholders' Meeting, contains any untrue statement of a material
fact or omits to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading.
(w) NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Section 3.1, neither
the Seller nor any other person makes any other express or implied
representation or warranty on behalf of the Seller or the Subsidiaries.
3.2. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The
Buyer represents and warrants to the Seller as follows:
(a) DUE ORGANIZATION; GOOD STANDING AND POWER. The Buyer is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has the requisite
corporate power and authority and any necessary governmental approvals
to own, lease and operate its properties and to carry on its
<PAGE>
48
business as it is now being conducted, except where the failure to have
such power, authority and governmental approvals would not,
individually or in the aggregate, have or reasonably be expected to
have a material adverse effect on the results of operations, financial
condition or business of the Buyer. The Buyer is duly qualified or
licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties
owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, except for such failures to
be so duly qualified or licensed or in good standing which would not,
individually or in the aggregate, have or reasonably be expected to
have a material adverse effect on the results of operations, financial
condition or business of the Buyer.
(b) AUTHORIZATION AND VALIDITY OF AGREEMENT. The Buyer has all
necessary corporate power and authority to execute and deliver this
Agreement and the Governance Agreement, to perform its obligations
hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and
performance by the Buyer of this Agreement and the Governance Agreement
and the other agreements contemplated hereby and the consummation by
the Buyer of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of the Buyer are necessary to
authorize this Agreement and the Governance Agreement or to consummate
the transactions so contemplated (other than the approval of the
issuance of the Buyer Common Stock in connection with the Stock and
Asset Purchase by the affirmative vote of the holders of a majority of
the shares of the Buyer Common Stock present in person
<PAGE>
49
or represented by proxy, and entitled to vote thereon at the meeting of
holders of the Buyer Common Stock to be called therefor (provided that
the shares so present or represented constitute a majority of the
outstanding shares of the Buyer Common Stock) (the "BUYER STOCKHOLDER
APPROVAL")). No other corporate or stockholder action is necessary for
the authorization, execution, delivery and performance by the Buyer of
this Agreement and the other agreements contemplated hereby and the
consummation by the Buyer of the transactions contemplated hereby or
thereby. This Agreement has been duly executed and delivered by the
Buyer and constitutes a valid and legally binding obligation of the
Buyer, enforceable against the Buyer in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, by general equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) or by an implied covenant of good faith
and fair dealing. The Board of Directors of the Buyer (at a meeting
duly called and held) has (i) determined that the Stock and Asset
Purchase and the Governance Agreement are fair to and in the best
interests of the Buyer and its stockholders, (ii) approved this
Agreement and the Governance Agreement and the transactions
contemplated hereby and thereby (including but not limited to the Stock
and Asset Purchase and the issuance of the Buyer Common Stock in
connection therewith), (iii) resolved to recommend approval of the
issuance of the Buyer Common Stock in connection with the Stock and
Asset Purchase by the Buyer's stockholders, and (iv) directed that
approval of the issuance of the Buyer Common Stock to the Seller in
connection with the Stock and Asset Purchase be
<PAGE>
50
submitted to the Buyer's stockholders. The Buyer hereby agrees to the
inclusion in the Proxy Statement (as defined in Section 3.2(q)) of the
recommendations of the Board of Directors of the Buyer described in
this Section 3.2(b).
(c) NO GOVERNMENTAL APPROVALS OR NOTICES REQUIRED; NO CONFLICT
WITH INSTRUMENTS TO WHICH THE BUYER IS A PARTY. Except as described on
Section 3.2(c) of the disclosure schedule delivered by Buyer to Seller
on the date hereof (the "BUYER DISCLOSURE SCHEDULE" and, together with
the Seller Disclosure Schedule, the "DISCLOSURE SCHEDULES"), the
execution, delivery and performance of this Agreement, the Governance
Agreement and the other agreements contemplated hereby by the Buyer and
the consummation by the Buyer of the transactions contemplated hereby
and thereby (i) will not violate (with or without the giving of notice
or the lapse of time or both) or require any consent, approval, filing
or notice under, any provision of any law, rule or regulation, court
order, judgment or decree applicable to the Buyer, except for (x) the
applicable requirements of the HSR Act and the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT"), and the rules and regulations
promulgated thereunder and (y) such violations the occurrence of which,
and such consents, approvals, filings or notices the failure of which
to obtain or make, would not, individually or in the aggregate, have or
reasonably be expected to have a material adverse effect on the results
of operations, financial condition or business of the Buyer, and (ii)
will not conflict with, or result in the breach or termination of any
provision of, or constitute a default under, or result in the
acceleration of the performance of the obligations of the Buyer under,
or require the consent or approval of any person under, or result in
the creation of a lien,
<PAGE>
51
charge or encumbrance upon a portion of the properties, assets or
business of the Buyer pursuant to, the charter or by-laws of the Buyer
or any indenture, mortgage, deed of trust, lease, licensing agreement,
contract, instrument or other agreement to which the Buyer is a party
or by which the Buyer or any of its assets or properties is bound,
except for such conflicts, breaches, terminations, defaults,
accelerations or liens which would not, individually or in the
aggregate, have or reasonably be expected to have a material adverse
effect on the results of operations, financial condition or business of
the Buyer.
(d) TITLE TO PROPERTIES. Except as set forth on Section 3.2(d)
of the Buyer Disclosure Schedule, the Buyer has good, valid and
marketable title to property owned and a valid leasehold interest in
property leased, all of its material properties and assets (real,
personal and mixed, tangible and intangible), including, without
limitation, all the properties and assets reflected in the balance
sheet of the Buyer as at April 30, 1996 included in the Buyer's
Quarterly Report on Form 10-Q for the period ended on such date (except
for properties and assets disposed of in the ordinary course of
business and consistent with past practices since April 30, 1996). None
of such properties or assets are subject to any liens, charges and
other encumbrances, except (i) as set forth on Section 3.2(d) of the
Buyer Disclosure Schedule; (ii) as specifically disclosed in the Buyer
SEC Reports (as defined in Section 3.2(e)); (iii) liens for taxes,
assessments and other governmental charges not yet due and payable or,
if due, (A) not delinquent or (B) being contested in good faith by
appropriate proceedings during which collection or enforcement against
the property is stayed; (iv) mechanics', workmen's, repairmen's,
warehousemen's, carriers' or other like liens arising or incurred in
the ordinary course
<PAGE>
52
of business if the underlying obligations are not past due, original
purchase price conditional sales contracts and equipment leases with
third parties entered into in the ordinary course of business; (v) with
respect to real property, (A) easements, licenses, covenants,
rights-of-way and other similar restrictions, including, without
limitation, any other agreements, conditions or restrictions which
would be shown by a current title report or other similar report or
listing, (B) any conditions that may be shown by a current survey,
title report or physical inspection and (C) zoning, building and other
similar restrictions, so long as none of (A), (B) or (C) render the
title of such real property unmarketable or prevent the use of such
real property substantially as currently used; and (vi) liens, charges
or other encumbrances which, individually or in the aggregate, would
not have or reasonably be expected to have a material adverse effect on
the results of operations, financial condition or business of the
Buyer. The buildings, plants, structures and equipment of the Buyer are
in good operating condition and repair, ordinary wear and tear
excepted, and are adequate for the present and contemplated uses to
which they are being, or are contemplated to be, put except for such
conditions or inadequacy that, individually or in the aggregate, would
not have or reasonably be expected to have a material adverse effect on
the results of operations financial condition or business of the Buyer.
(e) SEC FILINGS; ABSENCE OF CERTAIN CHANGES. (i) The Buyer
and, to the extent applicable, each of its then subsidiaries, has filed
all forms, reports, statements and documents required to be filed with
the Securities and Exchange Commission (the "SEC") since October 31,
1992 (collectively, the "BUYER SEC REPORTS"), each of which
<PAGE>
53
has complied in all material respects with the applicable requirements
of the Securities Act of 1933, as amended (the "SECURITIES ACT"), and
the rules and regulations promulgated thereunder, or the Exchange Act
and the rules and regulations promulgated thereunder, each as in effect
on the date so filed. The Buyer has heretofore delivered or (in the
case of any such document not yet filed with the SEC) promptly will
deliver to the Seller, in the form filed with the SEC (including any
amendments thereto), true and complete copies of the Buyer SEC Reports.
None of such Buyer SEC Reports (including but not limited to any
financial statements or schedules included or incorporated by reference
therein) contained, when filed, any untrue statement of a material fact
or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, which misstatement or omission continues to
expose the Buyer to liability under the United States federal
securities laws or the securities laws of any state of the United
States. Except to the extent revised or superseded by a subsequent
filing with the SEC (a copy of which has been provided to the Seller
prior to the date hereof), none of the Buyer SEC Reports filed by the
Buyer since October 31, 1992 and prior to the date hereof, contains any
untrue statement of a material fact or omits to state a material fact
required to be stated or incorporated by reference therein or necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(ii) Each of the audited and unaudited financial statements of
the Buyer (including any related notes thereto) included in the Buyer
SEC Reports, complies or, if not yet
<PAGE>
54
filed, will comply as to form in all material respects with all
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto; has been or, if not yet
filed, will have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited quarterly
statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and fairly presents or, if not yet
filed, will fairly present the financial position of the Buyer at the
respective date thereof and the results of its and their operations and
changes in cash flows for the periods indicated (subject, in the case
of unaudited quarterly statements, to normal year-end audit
adjustments).
(iii) Except as and to the extent set forth on the balance
sheet of the Buyer at October 31, 1995, including the notes thereto,
included in the Buyer's Annual Report on Form 10-K for the fiscal year
ended October 31, 1996, or on the balance sheet of the Buyer at April
30, 1996, including the notes thereto, included in the Buyer's
Quarterly Report on Form 10-Q for the fiscal quarter ended April 30,
1996, the Buyer has no liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) which would be
required to be reflected on a balance sheet or in the notes thereto
prepared in accordance with generally accepted accounting principles,
except for liabilities or obligations incurred in the ordinary course
of business since October 31, 1995, which would not, individually or in
the aggregate, have or reasonably be expected to have a material
adverse effect on the results of operations, financial condition or
business of the Buyer.
<PAGE>
55
(iv) The Buyer has heretofore furnished to the Seller a
complete and correct copy of any amendments or modifications which have
not yet been filed with the SEC to agreements, documents or other
instruments which previously had been filed by the Buyer with the SEC
pursuant to the Securities Act and the rules and regulations
promulgated thereunder or the Exchange Act and the rules and
regulations promulgated thereunder.
(f) CONDUCT OF BUSINESS. Except as reflected in Section 3.2(f)
of the Buyer Disclosure Schedule or otherwise contemplated by or
disclosed in this Agreement, the Buyer Disclosure Schedule or the
Exhibits hereto or otherwise disclosed in the Buyer SEC Reports filed
and publicly available prior to the date of this Agreement, since
October 31, 1995, the Buyer has conducted its business in the ordinary
course consistent with past practice, and other than in the ordinary
course, there has not occurred or arisen, with respect to its business:
(i) any material adverse changes in or any condition, event or
occurrence which, individually or in the aggregate, would cause, or
would reasonably be expected to cause, a material adverse change in the
results of operations, financial condition or business of the Buyer;
(ii) any notice of non-renewal, cancellation or termination from any
existing customers with respect to any material contracts of the
business of the Buyer; (iii) any sale, assignment, pledge,
hypothecation or other transfer of any assets, businesses or
operations, other than such sales, assignments, pledges, hypothecations
or other transfers which would not, individually or in the aggregate
have or reasonably be expected to have a material adverse effect on the
results of operations, financial condition or business of the Buyer,
(iv) any termination or material amendment
<PAGE>
56
of, or any notice of termination of, any contract or other agreement
that is material to the business of the Buyer, (v) any damage,
destruction or other casualty loss (not covered by insurance) which
would have or reasonably be expected to have a material adverse effect
on the results of operations, financial condition or business of the
Buyer, (vi) except for salary administration, bonuses and incentive
compensation in the ordinary course of business, any increase in the
compensation payable or to become payable by the Buyer to any employees
or any increase in any employee benefit plan, payment or arrangement
for any such employee, (vii) any incurrence or assumption of any
indebtedness for borrowed money or the guaranty by the Buyer of any
indebtedness or other obligation of another person; (viii) the
cancellation of any debts to or waiver of any claims or rights of value
to the Buyer; (ix) any capital expenditures or additions to property,
plant or equipment or the acquisition of any other property or assets
(other than raw materials, supplies and inventory) at a cost in excess
of $1,000,000 in the aggregate, by the Buyer; (x) any lease to the
Buyer of any of its properties or assets; (xi) the entering into of any
Buyer Material Contract (as defined in Section 3.2(p)) or (xii) the
entering into of an agreement to do any of the foregoing.
(g) CAPITALIZATION; SUBSIDIARIES. (i) The authorized capital
stock of the Buyer consists of 21,000,000 shares, consisting of (a)
1,000,000 shares of a class designated as preferred stock, par value
$1.00 per share ("PREFERRED STOCK") and (b) 20,000,000 shares of the
Buyer Common Stock. As of the date hereof, (i) 4,667,901 shares of the
Buyer Common Stock were issued and outstanding, all of which shares
were duly authorized, validly issued, fully paid and nonassessable and
were issued free of
<PAGE>
57
preemptive (or similar) rights, (ii) 2,801,000 shares of the Buyer
Common Stock were held in the treasury of the Buyer, (iii) an aggregate
of 411,000 shares of the Buyer Common Stock were reserved for issuance
and issuable upon or otherwise deliverable in connection with the
exercise of authorized but unissued stock options of the Buyer (the
"BUYER STOCK OPTIONS") issued pursuant to any stock option, performance
unit or similar plan of the Buyer (the "BUYER STOCK PLANS"), (iv)
582,875 shares of the Buyer Common Stock issuable upon exercise of
outstanding the Buyer Stock Options (with an average exercise price of
$17.56), (v) up to 300,000 shares of the Buyer Common Stock were
reserved for issuance pursuant to the 1995 Employee Stock Purchase Plan
of Buyer and (vi) an indeterminate number of shares of Buyer Common
Stock were reserved for issuance pursuant to the 401(K) Savings and
Employee Stock Ownership Plan of the Buyer. All of the shares of the
Buyer Common Stock which may be issued pursuant to the Buyer Stock
Plans will be, when issued, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive (or similar) rights.
Except (i) as set forth above or (ii) as a result of the exercise of
stock options pursuant to the Buyer Stock Plans outstanding as of the
date hereof, there are outstanding (a) no shares of capital stock or
other voting securities of the Buyer, (b) no securities of the Buyer
convertible into or exchangeable for shares of capital stock or voting
securities of the Buyer, (c) no options, warrants or other rights to
acquire from the Buyer, and no obligation of the Buyer to issue, any
capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Buyer and
(d) no equity equivalents, interests in the ownership or earnings of
the Buyer or other similar rights
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58
(collectively, the "BUYER SECURITIES"). Except as set forth in Section
3.2(g) of the Buyer Disclosure Schedule, (i) there are no outstanding
obligations of the Buyer to repurchase, redeem or otherwise acquire any
the Buyer Securities and (ii) there is no voting trust or other
agreement or understanding to which the Buyer is a party or is bound
with respect to the voting of the capital stock of the Buyer. There are
no other options, calls, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or
unissued capital stock of the Buyer to which the Buyer is a party. As
of the date hereof, the Fixed Shares represent approximately 34.08% of
the issued and outstanding shares of the Buyer Common Stock (after
giving effect to the issuance of the Fixed Shares) and approximately
31.5% of the fully diluted shares of the Buyer Common Stock (after
giving effect to the issuance of the Fixed Shares).
(ii) The Buyer has no subsidiaries and does not own, directly
or indirectly, any capital stock or other equity interests in any
entity in excess of 5% of the outstanding capital stock or equity
interests of such entity.
(h) LEGAL PROCEEDINGS. Except as described on Section 3.2(h)
of the Buyer Disclosure Schedule or as disclosed on the Buyer SEC
Reports filed and publicly available prior to the date of this
Agreement, there is no litigation, proceeding, tax audit or
governmental investigation or inquiry to which the Buyer is a party, or
to which any of its assets is subject, pending or, to the knowledge of
the Buyer, threatened against or affecting it or relating to the
transactions contemplated by this Agreement which, if determined or
resolved adversely or in accordance with the plaintiff's demands,
would, individually or in the aggregate, result, or would reasonably be
expected to result, in any
<PAGE>
59
material adverse effect on the results of operations, financial
condition or business of the Buyer. The Buyer has not received any
notice of any event or occurrence which could result, or could
reasonably be expected to result, in any such litigation, inquiry,
proceeding or investigation, nor to the knowledge of the Buyer has
there been any event or occurrence which could result, or could
reasonably be expected to result, in any such litigation, inquiry,
proceeding or investigation.
(i) LABOR CONTROVERSIES. Except as described on Section 3.2(i)
of the Buyer Disclosure Schedule, (a) the Buyer is in compliance in all
material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and
hours, and the Buyer has not been engaged in any unfair labor practice,
(b) there is no unfair labor practice complaint against the Buyer
pending before the National Labor Relations Board, (c) there is no
labor strike, dispute, slowdown or stoppage actually pending or
threatened against or affecting the Buyer, (d) the Buyer has not
experienced any strike, work stoppage or other labor difficulty, (e)
the Buyer is not a party to, or subject to, a collective bargaining
agreement, and no collective bargaining agreement relating to employees
of the Buyer is currently being negotiated, which in the case of any of
the foregoing would, individually or in the aggregate, have or
reasonably be expected to have a material adverse effect on the results
of operations, financial condition or business of the Buyer.
(j) PATENTS, TRADEMARKS AND SIMILAR RIGHTS. Except as
described on Section 3.2(j) of the Buyer Disclosure Schedule, the Buyer
owns, or is licensed to use, all material patents, trade names,
trademarks, copyrights, technology, know-how and
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60
processes used in the business of the Buyer as presently conducted, and
the consummation of the transactions contemplated hereby will not alter
or impair any such rights in any material respect. Neither the Buyer
nor, to the best of the Buyer's knowledge, any other person is in
default under any license or other agreement relating to such
Intellectual Property, except for such default which would individually
or in the aggregate, not have or reasonably be expected to have a
material adverse effect on the results of operations, financial
condition or business of the Buyer, and all such material licenses and
agreements are valid, enforceable and in full force and effect. To the
best knowledge of the Buyer, the use of such Intellectual Property does
not violate or infringe the rights of any person in any material
respect and no person is infringing any Intellectual Property of the
Buyer in any material respect. The Buyer has received no notice of any
such alleged infringement. The patents, trade names, trademarks,
copyrights, technology, know-how and processes owned by the Buyer
constitute, in all material respects, the intellectual property used in
or necessary to conduct the business of the Buyer as currently
conducted. The Buyer has made all filings required necessary to
preserve its rights in such intellectual property.
(k) GOVERNMENT LICENSES, PERMITS AND RELATED APPROVALS. Except
as described on Section 3.2(k) of the Buyer Disclosure Schedule, the
Buyer has all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities required for the
conduct of the business of the Buyer as presently conducted, and such
licenses, permits, consents, approvals, authorizations, qualifications
or orders are in full force and effect, and the Buyer has received no
notices of any violation thereof
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61
except where the failure to have, or to keep in full force and effect,
such licenses, permits, consents, approvals, authorizations,
qualifications and orders in full force and effect would not,
individually or in the aggregate, have or reasonably be expected to
have a material adverse effect on the results of operations, financial
condition or business of the Buyer.
(l) CONDUCT OF BUSINESS IN COMPLIANCE WITH REGULATORY AND
CONTRACTUAL REQUIREMENTS. Except as described on Section 3.2(l) of the
Buyer Disclosure Schedule, the Buyer has conducted its business so as
to comply in all material respects with all applicable laws,
ordinances, regulations or orders or other requirements of any
governmental, regulatory or administrative agency or authority or
court, rights of concession, licenses, know-how or other proprietary
rights of others and received no notice of any failure to comply with
such laws, ordinances, regulations, orders or rights, except where the
failure to comply with such laws, ordinances, regulations, orders or
rights would not, individually or in the aggregate, have or reasonably
be expected to have a material adverse effect on the results of
operations, financial condition or business of the Buyer.
(m) EMPLOYEE BENEFIT PLANS. (i) For purposes of this
Agreement, "BUYER BUSINESS PLANS" shall mean all "employee benefit
plans" (within the meaning of Section 3(3) of ERISA, including, without
limitation, "multiemployer plans" (within the meaning of Sections 3(37)
and 4001(a)(3) of ERISA)), retirement, savings, stock purchase, stock
option, severance, employment, change-in-control, fringe benefit,
collective bargaining, bonus, incentive, deferred compensation and all
other employee benefit plans,
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62
agreements, programs, policies or other arrangements (A) under which
any employee or former employee of the Buyer (collectively, the "BUYER
BUSINESS EMPLOYEES") has any present or future right to benefits and
(B) under which the Buyer has any present or future liability. Section
3.2(m)(i) of the Buyer Disclosure Schedule is a list of each material
Buyer Business Plan.
(ii) With respect to each material Buyer Business
Plan, the Buyer has made available to the Seller a written description
thereof.
(iii) Except as described on Section 3.2(m)(iii) of
the Buyer Disclosure Schedule, each material Buyer Business Plan
sponsored by the Buyer has been established and administered in
accordance with its terms and in compliance with the applicable
provisions of ERISA, the Code and other applicable laws, rules and
regulations, except where a failure to do so would not, individually or
in the aggregate, have or reasonably be expected to have a material
adverse effect on the results of operations, financial condition or
business of the Buyer.
(iv) The Buyer has performed all of its obligations
under the Buyer Business Plans and, except as reflected in the Buyer
SEC Reports, there were no unfunded liabilities of any of the Buyer
Business Plans.
(n) ENVIRONMENTAL MATTERS. Except as described on Section
3.2(n) of the Buyer Disclosure Schedule, to the best knowledge of the
Buyer: (i) the Buyer is in compliance in all respects with applicable
Environmental Laws, except where the failure to comply with such laws,
rules and regulations would not, individually or in the aggregate, have
or reasonably be expected to have a material adverse effect on the
results
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63
of operations, financial condition or business of the Buyer; (ii) the
Buyer has obtained and is in compliance with all permits required under
Environmental Laws for the conduct of their respective businesses,
except as would not reasonably be expected to result, individually or
in the aggregate, in a material adverse effect on the results of
operations, financial condition or business of the Buyer; (iii) none of
the operations of the Buyer is subject to any judicial or
administrative proceeding alleging the violation of or liability under
any Environmental Laws which if adversely determined would,
individually or in the aggregate, have or reasonably be expected to
have a material adverse effect on the results of operations, financial
condition or business of the Buyer; (iv) neither the Buyer nor any
other person has released or disposed of any material that is defined
as hazardous or toxic under any Environmental Law at any of their
respective real property and leasehold interests in real property,
including all buildings, structures and other improvements situated
thereon (collectively, the "BUYER PLANTS"), except as would not
reasonably be expected to result, individually or in the aggregate, in
a material adverse effect on the results of operations, financial
condition or business of the Buyer; (v) none of the Buyer Plants has
been listed on the National Priorities List or the Comprehensive
Environment Response Cleanup Liability Information System list prepared
pursuant to CERCLA; (vi) the Buyer has not been identified in writing
as a potentially responsible party under CERCLA or any equivalent State
statute; and (vii) the Buyer has not received notification from any
governmental bodies or other third parties or is subject to any order
or decree relating to any potential liability under Environmental Laws
or disposal of hazardous or toxic material on or affecting any property
owned or leased by
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64
the Buyer. The Buyer has delivered to the Seller true and complete
copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by the Buyer pertaining to hazardous
or toxic materials in, on or under the plants of the Buyer, or
concerning compliance by the Buyer or any other person for whose
conduct they are or may be held responsible, with Environmental Laws.
(o) TAX MATTERS. (i) The Buyer has filed, or a filing
extension from the appropriate federal, state, local or foreign
governments or governmental agencies has been obtained with respect to,
all returns relating to any United States federal, state, provincial,
local, territorial and foreign income, profits, franchise, gross
receipts, payroll, sales, employment, use, property, real estate,
excise, value added, estimated, stamp, alternative or add-on minimum,
environmental, withholding and any other taxes, duties or assessments,
together with all interest, penalties and additions imposed with
respect to such amounts required to be filed on or prior to the date of
this Agreement (the "BUYER TAX RETURNS"), and all taxes shown as due on
such the Buyer Tax Returns have been paid or adequate provision in
accordance with generally accepted accounting principles for the
payment of all taxes shown to be due on such the Buyer Tax Returns has
been made. The Buyer Tax Returns are complete and accurate in all
material respects.
(ii) No audit or other proceeding by any court, governmental
or regulatory authority, or similar person is pending with respect to
any taxes due from or with respect to the Buyer, except to the extent
that such audit or proceeding would not have or reasonably be expected
to have a material adverse effect on the results of operations,
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65
financial condition or business of the Buyer. No written assessment of
tax is proposed against the Buyer, except to the extent that such audit
or proceeding would not have or reasonably be expected to have a
material adverse effect on the results of operations, financial
condition or business of the Buyer or to the extent that any such
written assessment is being contested in good faith by appropriate
proceedings.
(p) CONTRACTS. The Buyer is not, and has not received any
notice or has any knowledge that any other party is, in default in any
respect under any material contract, agreement, commitment,
arrangement, lease, policy or other instrument to which it is a party
or by which it is bound that involves payment of more than $250,000 in
the aggregate and is expiring, is to be performed in or is terminable
in (in each case without significant continuing obligations) 120 days
or longer (collectively, "BUYER MATERIAL CONTRACTS"), except for those
defaults which would not, either individually or in the aggregate, have
or reasonably be expected to have a material adverse effect on the
results of operations, financial condition or business of the Buyer;
and there has not occurred any event that with the lapse of time or the
giving of notice or both would constitute such a material default.
Except as set forth on Section 3.2(p) of the Buyer Disclosure Schedule,
the transactions contemplated by this Agreement, the Governance
Agreement and the Stockholders' Agreement will not constitute a change
of control under or require the consent from or the giving of notice to
a third party pursuant to the terms, conditions or provisions of any
Buyer Material Contract.
To the best of the Buyer's knowledge, except as specified on
the Buyer Disclosure Schedule, all contracts, maintenance and service
agreements, purchase commitments for
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materials and other services, advertising and promotional agreements,
leases and other agreements to which the Buyer is a party are in full
force and effect and are valid and enforceable in accordance with their
respective terms, except (i) as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting the enforcement of creditors'
rights generally, by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity or at
law) or by an implied covenant of good faith and fair dealing or (ii)
where the failure to be in full force and effect and valid and
enforceable would not, individually or in the aggregate, have or
reasonably be expected to have a material adverse effect on the results
of operations, financial condition or business of the Buyer.
(q) PROXY STATEMENT. None of the information to be supplied by
or through the Buyer for inclusion or incorporation by reference in (i)
the proxy statement on Schedule 14A, including any amendments or
supplements thereto (the "PROXY STATEMENT"), to be delivered to the
Buyer's stockholders in connection with the Buyer Stockholder Approval,
or (ii) any other filings required to be made by the Buyer under the
Exchange Act, the Securities Act or any other state or federal
securities laws in connection with the Stock and Asset Purchase or the
transactions contemplated by this Agreement ("OTHER FILINGS") will, at
the respective times that the Proxy Statement or any Other Filings and
any amendments or supplements thereto are filed with the SEC, at the
time any amendment or supplement thereto is mailed to the Buyer's
stockholders, and at the time of the stockholders' meeting of the Buyer
to approve the issuance of the Buyer Common Stock in connection with
the Stock and Asset Purchase (the
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"STOCKHOLDERS' MEETING"), contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of
the circumstances under which they are made, not misleading. The Proxy
Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations
thereunder.
(r) AFFILIATE TRANSACTIONS. Except as set forth in Section
3.2(r) of the Buyer Disclosure Schedule or as disclosed in the Buyer
SEC Reports, there are no material contracts, commitments, agreements,
arrangements or other transactions between the Buyer, on the one hand,
and any (i) officer or director of the Buyer, (ii) record or beneficial
owner of five percent or more of the voting securities of the Buyer or
(iii) affiliate (as such term is defined in Regulation 12b-2
promulgated under the Exchange Act) of any such officer, director or
beneficial owner, on the other hand.
(s) VOTE REQUIRED. The affirmative vote of the holders of a
majority of the shares of the Buyer Common Stock present in person or
represented by proxy at the Stockholders' Meeting (provided that the
shares so present or represented constitute a majority of the
outstanding shares of the Buyer Common Stock), is the only vote of the
holders of any class or series of the Buyer's capital stock necessary
to approve the Stock and Asset Purchase and the issuance of shares of
the Buyer Common Stock pursuant thereto and the transactions
contemplated thereby. The shares of the Buyer Common Stock subject to
the Stockholders Agreement constitute 49.2% of the number of
outstanding shares of the Buyer Common Stock and 43.8% of the fully
diluted number of shares of the Buyer Common Stock.
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(t) DGCL SECTION 203 AND ARTICLE ELEVENTH OF THE CERTIFICATE
OF INCORPORATION. Prior to the date hereof, the Board of Directors of
the Buyer has approved this Agreement, the Governance Agreement and the
Stockholders Agreement and the Stock and Asset Purchase and the
issuance of shares of the Buyer Common Stock pursuant thereto and the
transactions contemplated thereby and the other transactions
contemplated hereby and thereby, and such approval is sufficient to
render inapplicable to the Stock and Asset Purchase and any of such
other transactions, including, as a result thereof, the acquisition by
the Seller of more than 20% of the outstanding shares of the Buyer
Common Stock, the provisions of Section 203 of the Delaware General
Corporation Law and the provisions of Article Eleventh of the Amended
Certificate of Incorporation of the Buyer. Prior to the date hereof,
the Board of Directors of the Buyer and the Stock Option Committee of
the Board of Directors of the Buyer (the "BUYER STOCK OPTION
COMMITTEE") has taken such actions so that (i) the transactions
contemplated by this Agreement do not and shall not constitute a
"change in control" within the meaning of the AEP Industries Inc. 1995
Stock Option Plan (the "BUYER STOCK OPTION PLAN") and (ii) the
transactions contemplated by this Agreement do not and shall not result
in any payment (i.e., change in control or otherwise) to any Buyer
Business Employee under any Buyer Business Plan.
(u) CERTAIN FEES. With the exception of fees and expenses
payable to J.P. Morgan & Co., which shall be paid by the Buyer, neither
the Buyer nor any of its officers, directors or employees, on behalf of
the Buyer, has employed any broker or
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finder or incurred any other liability for any brokerage fees,
commissions or finders' fees in connection with the transactions
contemplated hereby.
(v) PURCHASE FOR INVESTMENT. The Buyer is aware that no shares
of Subsidiary Stock are registered under the Securities Act or under
any state securities laws. The Buyer is not an underwriter, as such
term is defined under the Securities Act, and is purchasing such shares
solely for investment, with no present intention to distribute any such
shares to any person, and the Buyer will not sell or otherwise dispose
of shares except in compliance with the registration requirements or
exemption provisions under the Securities Act and the rules and
regulations promulgated thereunder, or any other applicable securities
laws.
(w) FINANCIAL CAPACITY. The Buyer has in hand binding
commitment letters (the "COMMITMENT LETTERS"), which are currently in
effect and true and correct copies of which are attached hereto as
Section 3.2(w) of the Buyer Disclosure Schedule, with a reputable
financial institution or institutions to obtain, all funds necessary to
enable the Buyer to perform this Agreement and the other agreements
contemplated hereby (the "FINANCING"), subject to the conditions set
forth therein.
(x) NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Section 3.2, neither
the Buyer nor any other person makes any other express or implied
representation or warranty on behalf of the Buyer.
3.3. EXPIRATION OF REPRESENTATIONS AND WARRANTIES. The
respective representations and warranties of the Seller and the Buyer contained
herein or in any certificate or other document delivered prior to or on the
Closing Date shall expire and be terminated and
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extinguished on the day two years following the Closing Date and thereafter the
Seller and the Buyer shall have no liability whatsoever with respect to any such
representation or warranty. Neither the officers, directors or affiliates of
either the Seller or the Buyer nor any controlling person, legal representative,
heir, successor or assign of any such officer, director or affiliate shall have
any liability for any breach of any representation, warranty, covenant or
agreement of the Seller or the Buyer under this Agreement contained herein.
4. TRANSACTIONS PRIOR TO CLOSING
4.1. ACCESS TO INFORMATION CONCERNING PROPERTIES AND
RECORDS; CONFIDENTIALITY.
(a) the Seller agrees that, during the period commencing on
the date hereof and ending on the Closing Date, (i) it will give or
cause to be given to the Buyer and its counsel, financial advisors,
auditors and other authorized representatives (collectively,
"REPRESENTATIVES") such access, during normal business hours and upon
reasonable advance notice, to the Plants, properties, books and records
of the Seller and the Subsidiaries relating to the Assets or the
Packaging Business, as the Buyer may from time to time reasonably
request and (ii) it will furnish or cause to be furnished to the Buyer
such financial and operating data and other information with respect to
the business and properties of Borden Global Packaging, as the Buyer
may from time to time reasonably request. The Buyer and its
Representatives shall be entitled, in consultation with the Seller, to
such access to the representatives, officers and employees of the
Seller and the Subsidiaries to the extent they are involved in the
business of Borden Global Packaging as the Buyer may reasonably
request.
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(b) the Buyer agrees that, during the period commencing on the
date hereof and ending on the Closing Date, (i) it will give or cause
to be given to the Seller and its Representatives such access, during
normal business hours and upon reasonable advance notice, to the Buyer
Plants, properties, books and records of the Buyer, as the Seller may
from time to time reasonably request and (ii) it will furnish or cause
to be furnished to the Seller such financial and operating data and
other information with respect to the Buyer, as the Seller may from
time to time reasonably request. The Seller and its Representatives
shall be entitled, in consultation with the Buyer, to such access to
the representatives, officers and employees of the Buyer as the Seller
may reasonably request.
(c) Except as required by law, the Buyer will hold, and will
cause its respective directors, officers, partners, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information obtained from the Seller
in confidence to the extent required by, and in accordance with, the
provisions of the letter dated February 2, 1996, between the Buyer and
the Seller. Except as required by law, the Seller will hold, and will
cause its directors, officers, partners, employees, accountants,
counsel, financial advisors and other representatives and affiliates to
hold, any nonpublic information obtained from the Buyer in confidence
to the extent required by, and in accordance with, the provisions of
the letter dated May 30, 1996, between the Buyer and the Seller.
4.2. CONDUCT OF THE PACKAGING BUSINESS PENDING THE CLOSING
DATE. The Seller agrees that, except as permitted, required or contemplated by
this Agreement or any of the
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72
Exhibits attached hereto, including, without limitation, those actions
contemplated on Section 4.2 of the Seller Disclosure Schedule, or any actions
accounted for in the post-Closing adjustment provisions of Section 2.4, or as
otherwise consented to or approved in writing by the Buyer, during the period
commencing on the date hereof and ending at the Closing Date:
(a) it will, and will cause its Subsidiaries to, operate the
Packaging Business only in the usual, regular and ordinary manner, on a
basis consistent with past practice, including the making of necessary
capital expenditures; PROVIDED, that the Seller and its Subsidiaries
may refrain from making planned or necessary capital expenditures to
the extent agreed upon by the Buyer (including, without limitation,
expenditures planned by the Seller with respect to management
information systems, which need not be made);
(b) no Transferred Subsidiary will amend its charter or
by-laws (or analogous organizational documents) and no Transferred
Subsidiary shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property;
(c) no Transferred Subsidiary will issue or agree to issue any
additional shares of capital stock of any class or series, or any
securities convertible into or exchangeable for shares of capital stock
or issue any options, warrants or other rights to acquire any shares of
capital stock;
(d) no Transferred Subsidiary will (i) split, combine or
reclassify any shares of its outstanding capital stock, (ii) declare,
set aside or pay any dividend or other
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73
distribution payable in cash, stock or property, (iii) directly or
indirectly redeem or otherwise acquire any shares of its capital stock
or shares of the capital stock of any of its subsidiaries, (iv) merge
or consolidate with another entity, (v) acquire or purchase an equity
interest in or a substantial portion of the assets of another
corporation, partnership or other business organization or otherwise
acquire any assets outside the ordinary and usual course of business
and consistent with past practice or otherwise enter into any material
contract, commitment or transaction outside the ordinary and usual
course of business consistent with past practice, or (vi) make any
loans, advances or capital contributions to, or investments in, any
other person, other than to its subsidiaries;
(e) the Seller will use its, and will cause the Subsidiaries
to use their, reasonable efforts to preserve intact the business
organization of Borden Global Packaging, to keep available the services
of their present officers and key employees and others having business
relations with the Seller or the Subsidiaries, and to preserve the
goodwill of those having business relationships with Borden Global
Packaging;
(f) none of the Seller nor the Subsidiaries will (i) dispose
of or encumber any of their properties or assets pertaining to the
Packaging Business, other than (A) in the ordinary course of business,
(B) any property or asset which has been determined by the Seller to be
obsolete, worn out or no longer useful in the operation of the
Packaging Business and (C) transfers by a Subsidiary to the Seller or
another Subsidiary of the Seller or by the Seller to a Subsidiary; (ii)
cancel any debts or waive any claims or rights pertaining to the
Packaging Business, except in the ordinary course of business; (iii)
enter into or modify any employment agreement or grant any increase in
the compensation of
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officers or employees primarily engaged in the Packaging Business,
except for agreements and increases in the ordinary course of business
and consistent with past practice or as a result of collective
bargaining, any industrial award or as required by any Business Plan or
any employee benefit plan, agreement, program, policy or other
arrangement that would have been a Business Plan had it been in effect
as of the date hereof; (iv) make any capital expenditure or commitment
pertaining to the Packaging Business, other than (A) in the ordinary
course of business, (B) pursuant to existing commitments or (C)
maintenance capital expenditures or capital expenditures reasonably
required to abate conditions endangering persons or property; (v)
except with respect to endorsement of negotiable instruments in the
ordinary course of its Packaging Business, incur, assume or guarantee
any indebtedness for borrowed money other than (A) purchase money
borrowings, (B) indebtedness for borrowed money incurred in the
ordinary course of business, (C) refundings of existing indebtedness,
(D) indebtedness of a Subsidiary to the Seller or a subsidiary of the
Seller and (E) other indebtedness for borrowed money which is not
material to the results of operations, financial condition, or business
of Borden Global Packaging taken as a whole; (vi) enter into or modify,
or engage in any negotiations with respect to, any collective
bargaining or union agreement or commitment; or (vii) enter into or
modify any agreement or commitment or engage in any activity or
transaction other than agreements, commitments, and transactions in the
ordinary course of business and consistent with past practice;
(g) it will, and will cause its Subsidiaries to, maintain in
full force and effect all licenses from governmental authorities
applicable to the Seller and the Subsidiaries
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75
and comply, in all material respects, with all laws, statutes,
ordinances, rules, regulations, orders, writs, injunctions, decrees,
awards or other requirements of any court or other governmental
authority applicable to it or the conduct of its business;
(h) it will, and will cause its Subsidiaries to, perform all
of its material obligations under all material contracts, agreements,
licenses, permits, instruments, or undertakings; and
(i) none of the Seller nor the Subsidiaries will agree,
whether in writing or otherwise, to do any of the foregoing actions
described in paragraphs (b), (c), (d) or (f) of this Section 4.2.
4.3. CONDUCT OF BUSINESS BY THE BUYER PENDING THE CLOSING
DATE. The Buyer agrees that, except as permitted, required or contemplated by
this Agreement or any of the Exhibits attached hereto, including, without
limitation, those actions contemplated on Section 4.3 of the Buyer Disclosure
Schedule, or as otherwise consented to or approved in writing by the Seller,
during the period commencing on the date hereof and ending at the Closing Date:
(a) it will operate its business only in the usual, regular
and ordinary manner, on a basis consistent with past practice;
(b) it will not amend its charter or by-laws (or analogous
organizational documents) or change the size or composition of its
Board of Directors;
(c) it will not issue or agree to issue any additional shares
of capital stock of any class or series, or any securities convertible
into or exchangeable for shares of capital stock or issue any options,
warrants or other rights to acquire any shares of capital stock;
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76
(d) it will not (i) split, combine or reclassify any shares of
its outstanding capital stock, (ii) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property,
(iii) directly or indirectly redeem or otherwise acquire any shares of
its capital stock, (iv) merge or consolidate with another entity, (v)
acquire or purchase an equity interest in or a substantial portion of
the assets of another corporation, partnership or other business
organization or otherwise acquire any assets outside the ordinary and
usual course of business and consistent with past practice or otherwise
enter into any material contract, commitment or transaction outside the
ordinary and usual course of business consistent with past practice, or
(vi) make any loans, advances or capital contributions to, or
investments in, any other person;
(e) the Buyer will use its reasonable efforts to preserve
intact the present business organization, to keep available the
services of their present officers and key employees and others having
business relations with the Buyer, and to preserve the goodwill of
those having business relationships with it;
(f) the Buyer will not dispose of or encumber any of its
properties or assets, other than (A) in the ordinary course of business
and (B) any property or asset which is not material to the results of
operations, financial condition or business of the Buyer; (ii) cancel
any debts or waive any claims or rights pertaining to or affecting its
business, except in the ordinary course of business; (iii) grant any
increase in the compensation of its officers or employees, except for
increases in the ordinary course of business and consistent with past
practice or as a result of collective bargaining, any industrial award
or as required by any Buyer Business Plan or any employee benefit plan,
agreement,
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77
program, policy or other arrangement that would have been a Buyer
Business Plan had it been in effect as of the date hereof; (iv) make
any capital expenditure or commitment, other than (A) in the ordinary
course of business, (B) pursuant to existing commitments or (C) which
is not material to the results of operations, financial condition or
business of the Buyer; or (v) except with respect to endorsement of
negotiable instruments in the ordinary course of its business, incur,
assume or guarantee any indebtedness for borrowed money other than (A)
purchase money borrowings, (B) indebtedness for borrowed money incurred
in the ordinary course of business, (C) refundings of existing
indebtedness and (D) other indebtedness for borrowed money which is not
material to the results of operations, financial condition, or business
of the Buyer;
(g) the Board of Directors of the Buyer and the Buyer Stock
Option Committee (i) shall not, solely as a result of the transactions
contemplated by this Agreement, take any action to accelerate, release
or otherwise deem satisfied any restrictions or conditions on any
awards (including, without limitation, stock options and restricted
stock) granted under the Buyer Stock Option Plan and (ii) shall not,
solely as a result of the transactions contemplated by this Agreement,
(A) take any action to give effect to any change-in-control provisions
under any Buyer Business Plan or (B) make any payments to any Buyer
Business Employee under any Buyer Business Plan; and
(h) agree, whether in writing or otherwise, to do any of the
foregoing actions described in paragraphs (b), (c), (d), (f) or (g) of
this Section 4.3.
4.4. INTERCOMPANY TRANSACTIONS. On or prior to the
Closing, all intercompany receivables or payables and loans then existing
between the Seller, any Subsidiary (other than
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a Transferred Subsidiary) or any other subsidiary or affiliate of the Seller
which is not a Subsidiary (the "NON-PACKAGING AFFILIATES") on the one hand, and
the Transferred Subsidiaries, on the other hand, shall be settled by way of
capital contribution (with respect to intercompany payables or loans due to the
Seller, any Subsidiary (other than a Transferred Subsidiary) or any
Non-Packaging Affiliate) or by way of dividend in kind (with respect to
receivables of the Transferred Subsidiaries owed by the Seller, any Subsidiary
or any Non-Packaging Affiliate). Such settlement shall be accomplished without
any violation of any law or regulation or any incurrence of any tax, penalties,
interest or other charges (other than taxes with respect to which the Seller has
agreed to indemnify the Buyer).
4.5. GUARANTEES. The Buyer shall use its best efforts (which
shall not include agreeing to any modifications of the terms of the underlying
obligations) to cause itself or one or more of its affiliates to be substituted
in all respects for the Seller or the Subsidiaries (other than the Transferred
Subsidiaries), effective as of the Closing, in respect of all obligations of the
Seller and any of the Subsidiaries (other than the Transferred Subsidiaries)
under each of the guarantees, indemnities, surety bonds, letters of credit and
letters of comfort set forth on Section 4.5 of the Seller Disclosure Schedule
obtained by the Seller or the Subsidiaries (other than the Transferred
Subsidiaries) for the benefit of the Packaging Business (the "GUARANTEES").
Subsequent to the Closing, with respect to any uncancelled Guaranty for which no
substitution is effected, the Buyer shall, pursuant to Section 9.4, indemnify
the Seller or any of its affiliates against any liability under any such
Guarantee.
4.6. FURTHER ACTIONS. (a) Subject to the terms and
conditions hereof, the Seller and the Buyer agree to use their reasonable best
efforts to take, or cause to be taken, all action
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and to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement,
including using all reasonable best efforts: (i) to obtain prior to the Closing
Date all licenses, certificates, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Seller or the Subsidiaries as are necessary for the consummation of the
transactions contemplated hereby, including but not limited to such consents and
approvals as may be required under the HSR Act as set forth below and any
similar foreign legislation; (ii) to effect all necessary registrations and
filings; and (iii) to furnish to each other such information and assistance as
reasonably may be requested in connection with the foregoing. The Seller or such
Subsidiary and the Buyer shall cooperate fully with each other to the extent
reasonably required to obtain such consents.
(b) the Buyer and the Seller shall timely and promptly make
all filings which may be required by each of them in connection with the
consummation of the transactions contemplated hereby under the HSR Act and any
similar foreign legislation. Each party shall furnish to each other such
necessary information and assistance as such party may reasonably request in
connection with the preparation of any necessary filings or submissions by it to
any U.S. or foreign governmental agency, including, without limitation, any
filings necessary under the provisions of the HSR Act and the Exchange Act. Each
party shall provide the other party the opportunity to make copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between such party or its representatives, on the one hand,
and the Federal Trade Commission (the "FTC"), the Antitrust Division of the
United States Department of Justice (the "ANTITRUST DIVISION") or any similar
foreign governmental agency or
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members of their respective staffs, on the other hand, with respect to this
Agreement or the transactions contemplated hereby.
(c) For purposes of this Section 4.6, the "reasonable best
efforts" of the Buyer shall not include acceptance by the Buyer of any
divestitures of any assets of the Buyer, but shall include acceptance of an
agreement to hold any assets of the Packaging Business separate, or divest any
such assets of the Packaging Business, in any lawsuit or other legal proceeding,
whether judicial or administrative and whether required by the FTC, the
Antitrust Division or any other applicable U.S. or foreign governmental entity
in connection with the transactions contemplated by this Agreement or the other
agreements contemplated hereby. Other than to the extent applicable law
expressly requires the Seller to obtain any license, permit, consent, approval,
authorization or order of any foreign governmental authority or to make any
registration or filing with any foreign governmental authority, the Buyer shall
be responsible for making all filings and giving all notices relating to, and
otherwise pursuing all licenses, permits, consents, approvals, authorizations
and orders of foreign governmental authorities and making all registrations and
filings with foreign governmental authorities (collectively, the "FOREIGN
GOVERNMENTAL CONSENTS"), which, to the best knowledge of the Buyer, are required
in connection with the transactions contemplated hereby and shall provide a copy
of any such filings or notices to the Seller. The Buyer shall be responsible for
making or giving all Foreign Governmental Consents required to be made or given
subsequent to the Closing Date. In connection with and as a condition to the
Buyer's obligations under the preceding sentence, the Sellers shall fully
cooperate with and assist the Buyer in identifying and obtaining all such
licenses, permits, consents, approvals, authorizations or orders and in making
all such registrations and filings.
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(d) the Buyer agrees to comply with the provisions of Section
6 of the Stockholders Agreement and not to register the transfer of any shares
in violation of the Stockholder Agreement.
(e) The Seller agrees to cause each of the Subsidiaries to
take all corporate and stockholder action necessary for the authorization,
performance and consummation of the transactions contemplated by this Agreement
and the agreements contemplated hereby.
(f) The Seller agrees that it will provide Hitachi with notice
of the transactions contemplated by this Agreement pursuant to the Hitachi Right
of First Refusal within five (5) business days of the date of this Agreement.
4.7. NOTIFICATION. The Seller shall notify the Buyer and keep
it advised as to (i) any litigation or administrative proceeding pending and
known to the Seller or, to its knowledge, threatened against the Seller, any
Subsidiary or any Subsidiary Asset Seller which challenges the transactions
contemplated hereby, (ii) any material damage or destruction of any of the
Assets and (iii) any event or occurrence that would cause any representation or
warranty contained in Section 3.1 hereof to be false; PROVIDED that the failure
of the Seller to comply with clause (iii) shall not subject the Seller to any
liability hereunder except as and to the extent the Seller would be responsible
for a breach of such representations and warranties pursuant to Section
9.4(a)(iii) (including, without limitation, the limitations on recovery and the
time periods for bringing claims thereunder). The Buyer shall notify the Seller
and keep it advised as to (A) any notice or other communication from any person
or entity alleging that the consent of such person or entity is or may be
required in connection with the transactions contemplated by this Agreement or
(B) any litigation or administrative proceedings pending or known to the
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Buyer or, to its knowledge, threatened against the Buyer which challenge the
transactions contemplated hereby.
4.8. NO INCONSISTENT ACTION. Subject to the provisions of
Sections 7.1 and 7.2, the Seller and the Buyer shall not take any action
inconsistent with their obligations under this Agreement or which could
materially hinder or delay the consummation of the transactions contemplated by
this Agreement.
4.9. FINANCING. (a) The Buyer will deliver to the Seller as
soon as reasonably practicable after the date of this Agreement true and correct
copies of definitive written agreements (the "DEFINITIVE FINANCING AGREEMENTS")
with reputable financial institutions to provide at the Closing, subject only to
customary conditions, all of the Financing, in form and substance reasonably
satisfactory to the Seller. The Buyer will deliver to the Seller drafts of the
Definitive Financing Agreements sufficiently prior to the execution thereof to
permit the Seller and its advisors the reasonable opportunity to review and
comment thereon. The Buyer intends that the terms and conditions of such
Financing shall be substantially the same as those previously set forth in the
Commitment Letters. In any event, the Definitive Financing Agreements (and any
other financing arrangements) will not contain any limitations (including events
of default) on sales or other transactions by the Seller or its affiliates with
respect to the Buyer Common Stock or any other limitation or restriction
applicable to the Seller or its affiliates. The Buyer shall use its best efforts
to satisfy at or before the Closing all requirements which are conditions to its
closing all transactions constituting the Financing and to its drawing down the
cash proceeds thereunder. Subject only to the Seller being able to satisfy the
conditions set forth in Section 5.2(a) hereof, the Buyer will obtain the
proceeds of the Financing
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no later than January 31, 1997. In the event that any portion of the Financing
provided for in the Definitive Financing Agreements becomes unavailable,
regardless of fault, the Buyer will, subject only to the Seller being able to
satisfy the conditions set forth in Section 5.2(a) hereof, obtain from others as
soon as practicable, but in no event later than January 31, 1997, the financing
necessary for the consummation of the transactions contemplated hereby, on and
subject to substantially the same terms and conditions as the portion of the
Financing that has become unavailable.
(b) Effective at the opening of business on the Closing Date,
the Buyer shall be responsible for funding all disbursements of the Packaging
Business. Any cash, cash equivalents, similar investments, certificates of
deposit, Treasury bills and other marketable securities held by the Packaging
Business at the Closing shall be treated by the parties consistent with Section
2.4(a) of the Seller Disclosure Schedule.
4.10. BORDEN-HITACHI JOINT VENTURE. To the extent permitted
under the Joint Venture Agreement, the Seller will use reasonable efforts to
cause Hitachi-Borden to continue to include "Borden" as part of its name for a
period of up to the earlier of (a) six months following the Closing Date and (b)
the effective date of the exercise of the Hitachi Right of First Refusal.
4.11. USE OF CORPORATE NAME AND SYMBOL; TRANSITION LICENSE.
(a) Except as set forth in subsection (b) of this Section 4.11, after the
Closing, the Buyer shall not use the Borden trademarks and other Intellectual
Property set forth on Section 4.11 of the Seller Disclosure Schedule.
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(b) On the Closing Date, the Buyer and the Seller shall
execute and deliver a transition license agreement (the "TRANSITION LICENSE
AGREEMENT"), substantially in the form of Exhibit F hereto, pursuant to which
the Seller shall grant to the Buyer a non-exclusive, non- assignable (except to
a subsidiary of the Buyer), royalty-free license (i) to use, for a period of six
months following the Closing Date, the Borden-related trademarks on products,
labels, packaging, promotional materials, signage, invoices and stationary and
(ii) to use, from the six-month anniversary of the Closing Date until the date
two years after the Closing Date, the Borden-related trademarks only in
connection with the Buyer's trademarks, provided that the Borden-related
trademarks are not modified in any way, including the combining of the Borden-
related trademarks in a single design with the Buyer's trademarks. Following the
two-year period described in clause (ii) above, the Buyer shall cease all use of
any Borden-related trademarks.
4.12. FACILITIES AGREEMENT. On the Closing Date, the Buyer and
the Seller shall execute and deliver an agreement (the "SHARED FACILITIES
AGREEMENT"), substantially in the form of Exhibit G hereto, with respect to
facilities shared by the Packaging Business and the Seller's chemicals business
at North Baddesley, United Kingdom, Edmonton, Alberta, Laval, Quebec and West
Hill, Ontario in order to coordinate the on-going operations at such facilities,
coordinate the "de-linking" of the operations of the Packaging Business from the
operations relating to the Seller's chemicals business at such facilities and
provide certain transitional services on the terms and subject to the conditions
set forth therein.
4.13. TRANSITION SERVICES AGREEMENT. On the Closing Date, the
Buyer and the Seller shall execute and deliver an agreement (the "TRANSITION
SERVICES AGREEMENT"),
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substantially in the form attached hereto as Exhibit H pursuant to which the
Seller agrees to provide certain transitional services on the terms and subject
to the conditions set forth therein.
4.14. PREPARATION OF PROXY STATEMENT; STOCKHOLDERS' MEETING.
(a) Promptly following the date of this Agreement, the Buyer shall prepare and
file with the SEC a preliminary copy of the Proxy Statement and thereafter a
definitive copy of the Proxy Statement and all related solicitation materials.
The Seller and its representatives will be given an opportunity to review and
comment on drafts of the Proxy Statement and will provide to the Buyer all
information relating to the Packaging Business and the Seller necessary for the
preparation of the Proxy Statement and will participate in responding to
comments or requests from the SEC with respect to the Proxy Statement. The Buyer
shall use its reasonable best efforts as promptly as practicable to have the
Proxy Statement cleared by the SEC and thereafter to cause the Proxy Statement
to be mailed to the Buyer's stockholders as promptly as practicable. The
information provided and to be provided by the Buyer and the Seller,
respectively, for use in the Proxy Statement shall, at the time the Proxy
Statement is mailed to the Buyer's stockholders and on the date of the
Stockholders' Meeting, be true and correct in all material respects and shall
not omit to state any material fact required to be stated therein or necessary
in order to make such information not misleading, and the Buyer and the Seller
each agree to correct any information provided by it for use in the Proxy
Statement which shall have become false or misleading.
(b) The Buyer, acting through its Board of Directors, shall
promptly and duly call, give notice of, convene and hold as soon as practicable
following the date upon which the Proxy Statement is cleared by the SEC the
Stockholders' Meeting for the purpose of obtaining
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the Buyer Stockholder Approval and (i) recommend approval and adoption of this
Agreement and the transactions contemplated hereby, by the stockholders of the
Buyer and include in the Proxy Statement such recommendation and (ii) take all
reasonable and lawful action to solicit and obtain such approval, unless in the
case only of clause (i) above, the Board of Directors of the Buyer determines,
based upon advice of independent outside legal counsel to the Buyer, that making
such recommendation would constitute a breach of the fiduciary duty of the Board
of Directors of Buyer under applicable law.
4.15. NO SOLICITATION. From the date hereof, until the earlier
of the Closing or the termination of this Agreement, the Seller agrees that
neither it, nor any of its Subsidiaries, affiliates or agents (i) will solicit
bids from any person or entity, other than the Buyer, for the purchase of, or
offer to sell, the Packaging Business or any significant part thereof, (ii) will
offer to sell to any person or entity, other than the Buyer, the Packaging
Business or any significant part thereof or (iii) will negotiate with, respond
to any indications of interest from or provide any information to, any person or
entity, other than the Buyer.
4.16. INSURANCE. Prior to the Closing Date the Seller shall
have entered into an agreement with a financially sound and reputable insurer to
provide insurance covering such losses, liabilities, damages, expenses and other
risks relating to the assets, businesses, operations, conduct, products and
employees of the Packaging Business and having the terms set forth on Section
4.16 to the Seller Disclosure Schedule and relating to or arising out of
occurrences prior to the Closing (the "Sunrise Policy"). The Seller shall use
its reasonable best efforts to have the Buyer named as an insured under the
Sunrise Policy. Prior to the Closing Date, and to the extent permitted by the
Seller's existing occurrence-based insurance policies,
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the Seller will use its reasonable best efforts to have the Buyer named as an
insured under such occurrence-based policies. If the Seller is unable to have
the Buyer named as an insured under such occurrence-based policies or the
Sunrise Policy or would be required to accept conditions to the Buyer being so
named or pay additional premiums in connection therewith which the Seller deems
unreasonable, then the Seller shall to the extent permitted under such policies
process any claims arising thereunder and shall remit any proceeds actually
received (in excess of any loss, liability, damage or expense of the Seller
related to such claim) to the Buyer. If such policies do not permit the Seller
to process such claims which would otherwise have been covered by such policies
because the liability therefor had been transferred to the Buyer hereunder, then
such liabilities shall be deemed not to have been transferred to the Buyer
hereunder and the Buyer shall indemnify the Seller for the full amount by which
such liability exceeds any payments received by the Seller under such policies
with respect to such claims other than any amount of such liability that is not
covered by such policies which is directly attributable to the failure of the
Seller to adhere to the notice or procedural requirements of such policies. The
Seller shall not be deemed to have failed to adhere to the notice or procedural
requirements of any such policies to the extent such failure is a result of the
Buyer's failure to notify the Seller with respect to any occurrence, event or
action covered by such policies.
5. CONDITIONS PRECEDENT
5.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER AND THE
SELLER. The respective obligations of the Buyer and the Seller to consummate the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing Date of the following conditions:
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(a) NO INJUNCTION, ETC. At the Closing Date, there shall be no
injunction, restraining order or decree of any nature of any court or
governmental agency or body of competent jurisdiction that is in effect
that restrains or prohibits the consummation of the Stock Purchase or
the transfer to the Buyer by the Seller or the Subsidiaries of any
Assets, except for the transfer of any Assets or Subsidiary Stock the
failure to transfer which would not, individually or in the aggregate
with all Subsidiary Stock which is not being transferred on or prior to
the Closing and all Assets for which Asset Purchases are not being
consummated on or prior to the Closing, be material, after giving
effect to the interim management provisions of Section 2.3, to the
operations of Borden Global Packaging taken as a whole; PROVIDED that
for purposes of this paragraph (a), any failure to consummate the Asset
Purchases or Stock Purchases set forth on Section 5.1 of the Seller
Disclosure Schedule shall not be regarded as material to the operations
of Borden Global Packaging taken as a whole so long as the aggregate
net trade sales of all the businesses not transferred do not exceed 10%
of the total net trade sales for the Packaging Business for the year
ended December 31, 1995, and PROVIDED, FURTHER, that such Asset
Purchases or Stock Purchases shall be subject to the provisions of
Section 2.3 hereof.
(b) REGULATORY AUTHORIZATIONS. All (i) consents, approvals,
authorizations and orders of federal, state and foreign governmental
and regulatory authorities as are necessary in connection with the
transfer of the Assets or the Subsidiary Stock to the Buyer or which if
not obtained would be reasonably likely to subject the Buyer, the
Seller or any Subsidiary Asset Seller, or any officer, director or
agent of any such person
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to civil or criminal liability or could render such transfer void or
voidable (the "REQUIRED CONSENTS") shall have been obtained, except for
Required Consents the failure to obtain which, individually or in the
aggregate, are not material to the operations of Borden Global
Packaging taken as a whole and are not otherwise likely to subject any
such officer, director or agent to civil or criminal liability;
PROVIDED that for purposes of this clause (b)(i), any failure to
consummate the Asset Purchase or Stock Purchases set forth on Section
5.1 of the Seller Disclosure Schedule shall not be regarded as material
to the operations of Borden Global Packaging taken as a whole so long
as the aggregate net trade sales of all the businesses not transferred
do not exceed 10% of the total net trade sales for the Packaging
Business for the year ended December 31, 1995, and (ii) applicable
waiting periods specified under the HSR Act with respect to the
transactions contemplated by this Agreement shall have lapsed or been
terminated, and PROVIDED, FURTHER, that such Asset Purchases or Stock
Purchases shall be subject to the provisions of Section 2.3 hereof.
(c) BUYER STOCKHOLDER APPROVAL. The Buyer Stockholder Approval
shall have been obtained.
(d) CONSENTS. All third-party consents with respect to the
transactions contemplated hereby shall have been obtained, except those
consents which, individually or in the aggregate, would not have or
reasonably be expected to have a material adverse effect on the results
of operations, financial condition or business of (i) Borden Global
Packaging taken as a whole or (ii) the Buyer. The Buyer shall be
entitled to waive this condition with respect to all third-party
consents related to, or required to be obtained
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by, the Seller, and the Seller shall be entitled to waive this
condition with respect to all third-party consents related to, or
required to be obtained by, the Buyer.
5.2. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER. The
obligations of the Buyer under this Agreement are subject to the satisfaction
(or waiver by the Buyer) at or prior to the Closing Date of each of the
following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. (i) All
representations and warranties of the Seller contained herein or in any
certificate or document delivered to the Buyer pursuant hereto, without
regard to any exceptions for materiality contained in such
representations and warranties, shall be true and correct in all
respects on and as of the Closing Date, with the same force and effect
as though such representations and warranties had been made on and as
of the Closing Date, except (i) as contemplated or permitted by this
Agreement or as disclosed in the Exhibits hereto or in the Seller
Disclosure Schedule, (ii) to the extent that any such representation or
warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct in all
respects as of such date, (iii) to the extent that any such
representation or warranty, including, without limitation, the
representations and warranties contained in Section 3.1(f) hereof, is
untrue or incorrect as a result of an adverse change in the results of
operations of the Packaging Business, (iv) for changes to the Packaging
Business occurring in the ordinary course of business consistent in
scope and kind with the prior experience of the Packaging Business and
(v) after giving effect to clauses (i), (ii), (iii) and (iv) for all
such inaccuracies which, individually or in the aggregate, would
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not have or reasonably be expected to have a material adverse effect on
the results of operations, financial condition or business of Borden
Global Packaging taken as a whole.
(ii) NO MATERIAL ADVERSE CHANGE. Except as
contemplated by or set forth in this Agreement or in the Exhibits
hereto or the Seller Disclosure Schedule, including without limitation
Sections 3.1(f)(i) and 3.1(f)(ii) thereof, subsequent to the date of
this Agreement, there has not occurred or arisen, with respect to the
Packaging Business any condition, event or occurrence which,
individually or in the aggregate, would have or would reasonably be
expected to have a material adverse effect on the financial condition
or business of the Packaging Business taken as a whole, other than such
effects that are a result of an adverse change in the results of
operations of the Packaging Business.
(b) PERFORMANCE OF AGREEMENTS. The Seller shall in all
material respects have performed all obligations and agreements, and
complied in all material respects with all covenants and conditions,
contained in this Agreement to be performed or complied with by it
prior to or at the Closing Date.
(c) OFFICER'S CERTIFICATE. The Buyer shall have received a
certificate, dated the Closing Date, of the President or a Vice
President of the Seller to the effect that, to the best of the
knowledge, information and belief of such officer after due inquiry,
the conditions specified in paragraphs (a) and (b) above have been
fulfilled.
(d) TRANSITION LICENSE AGREEMENT. The Seller shall have
executed and delivered to the Buyer a Transition License Agreement
substantially in the form of Exhibit F hereto.
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(e) SHARED FACILITIES AGREEMENT. The Seller shall have
executed and delivered to the Buyer the Shared Facilities Agreement
substantially in the form of Exhibit G hereto.
(f) TRANSITION SERVICES AGREEMENT. The Seller shall have
executed and delivered to the Buyer a Transition Services Agreement
substantially in the form of Exhibit H hereto.
(g) GOVERNANCE AGREEMENT. The Governance Agreement shall
continue to be in full force and effect and the Seller shall not have
breached any of its representations, warranties or covenants
thereunder.
(h) OPINION OF COUNSEL. The Buyer shall have received an
opinion from counsel to the Seller and its Subsidiaries, which may be
the General Counsel or the Corporate Counsel and Secretary of the
Seller, or as applicable such of its Subsidiaries, as to (i) the due
authorization, execution and delivery of this Agreement and the other
agreements and instruments contemplated hereby, (ii) the enforceability
of this Agreement and the other agreements and instruments contemplated
hereby, and (iii) the absence of any conflict with, or contravention
of, any law, rule or regulation of the United States, New York, Ohio or
Delaware (but only with respect to the General Corporation Law
thereof), order of any court or administrative body, charter or by-laws
of the Seller or any of the Subsidiaries, or agreement known to such
counsel to which the Seller or any of its Subsidiaries is subject or
any of their respective property is bound.
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(i) SUBSIDIARY APPROVALS. This Agreement and the transactions
contemplated hereby shall have been approved by the boards of directors
and, where required by applicable law, the shareholders of each of the
Subsidiary Asset Sellers.
5.3. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER.
The obligations of the Seller under this Agreement are subject to the
satisfaction (or waiver by the Seller) at or prior to the Closing Date of each
of the following conditions:
(a) (i) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Buyer contained herein or in any
certificate or document delivered to the Seller pursuant hereto,
without regard to any exceptions for materiality contained in such
representations and warranties, shall be true and correct in all
respects on and as of the Closing Date, with the same force and effect
as though such representations and warranties had been made on and as
of the Closing Date, except (i) as contemplated or permitted by this
Agreement or as disclosed in the Exhibits hereto or in the Buyer
Disclosure Schedule, (ii) to the extent that any such representation or
warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct in all
respects as of such date, (iii) for changes to the Buyer occurring in
the ordinary course of business consistent in scope and kind with the
prior experience of the Buyer and (iv) after giving effect to clauses
(i), (ii) and (iii) for all such inaccuracies which, individually or in
the aggregate, would not have or reasonably be expected to have a
material adverse effect on the results of operations, financial
condition or business of the Buyer.
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(ii) NO MATERIAL ADVERSE CHANGE. Except as reflected
on Section 3.2(f) of the Buyer Disclosure Schedule or as otherwise
contemplated by or disclosed in this Agreement or the Exhibits hereto
or the Buyer Disclosure Schedule, subsequent to the date of this
Agreement, there has not occurred or arisen with respect to the Buyer
any condition, event or occurrence which, individually or in the
aggregate, would have or would reasonably be expected to have a
material adverse effect on the results of operations, financial
condition or business of the Buyer.
(b) PERFORMANCE OF AGREEMENTS. The Buyer shall in all material
respects have performed all obligations and agreements, and complied in
all material respects with all covenants and conditions, contained in
this Agreement to be performed or complied with by it prior to or at
the Closing Date.
(c) OFFICER'S CERTIFICATE. The Seller shall have received a
certificate, dated the Closing Date, of the President or a Vice
President of the Buyer to the effect that, to the best of the
knowledge, information and belief of such officer after due inquiry,
the conditions specified in paragraphs (a) and (b) above have been
fulfilled.
(d) HITACHI RIGHT OF FIRST REFUSAL. The provisions of Section
2.2 shall have been applied with respect to Hitachi-Borden, to the
extent applicable.
(e) ASSUMPTION AGREEMENT. The Buyer shall have executed and
delivered to the Seller the Assumption Agreement in the form of Exhibit
E hereto.
(f) EXEMPTION CERTIFICATES. The Buyer shall have executed and
delivered to the Seller all certificates required by all relevant
taxing authorities that are necessary to
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support any exemption from the imposition of any sales or similar tax
on the transfer of the Assets.
(g) SHARED FACILITIES AGREEMENT. The Buyer shall have executed
and delivered to the Seller the Shared Facilities Agreement
substantially in the form of Exhibit G hereto.
(h) TRANSITION SERVICES AGREEMENT. The Buyer shall have
executed and delivered to the Seller a Transition Services Agreement
substantially in the form of Exhibit H hereto.
(i) EMPLOYMENT AGREEMENTS. The Buyer shall have entered into
employment agreements with the individuals set forth on Section
5.3(i)(1) of the Seller Disclosure Schedule in the form set forth on
Section 5.3(i)(2) of the Seller Disclosure Schedule.
(j) GOVERNANCE AGREEMENT. The Governance Agreement shall
continue to be in full force and effect and the Buyer shall not have
breached any of its representations, warranties or covenants
thereunder.
(k) STOCKHOLDERS AGREEMENT. The Stockholders Agreement shall
continue to be in full force and effect and the Buyer shall not have
breached any of its representations, warranties or covenants
thereunder.
(l) OPINION OF COUNSEL. The Seller shall have received an
opinion from counsel to the Buyer as to (i) the due authorization,
execution and delivery of this Agreement and the other agreements and
instruments contemplated hereby, (ii) the enforceability of this
Agreement and the other agreements and instruments contemplated hereby,
and (iii) the absence of any conflict with, or contravention of, any
law, rule or
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regulation of the United States, New York or Delaware (but only with
respect to the General Corporation Law thereof), order of any court or
administrative body, charter or by-laws of the Buyer, or agreement
known to such counsel to which the Buyer is subject or any of its
property is bound.
6. EMPLOYEE RELATIONS AND BENEFITS
6.1. CONDUCT PRIOR TO THE EFFECTIVE TIME. Prior to the
Effective Time, Buyer shall take no action to cause Seller or Borden Global
Packaging to terminate the employment of any Business Employee, and neither
Seller nor Borden Global Packaging shall be under any obligation to terminate
any Business Employee prior to or on the Effective Time.
6.2. CONTINUITY OF EMPLOYMENT. The parties hereto intend that
there shall be continuity of employment with respect to all Business Employees,
PROVIDED that nothing contained herein to the contrary shall prohibit the Buyer
from subsequently terminating any employee. Except as set forth in Section 6.2
of the Seller Disclosure Schedule, Buyer shall offer employment no later than
the Effective Time to all non-union employees, including those on vacation,
leave of absence or disability (or not more than six months), who are employed
by Borden Global Packaging as of the Effective Time, on substantially the same
terms with respect to base salary, job responsibility and location to the extent
possible. Those persons who accept Buyer's offer of employment and who commence
working with Buyer within six months (including any period of leave of absence
or disability beginning prior to the Closing Date and continuing through the
Closing Date) of the Effective Time shall hereafter be referred to as
"TRANSFERRED EMPLOYEES". Business Employees in receipt of disability benefits as
of the
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Effective Time will continue to receive benefits from the Business Plans in
accordance with the terms of those plans during such disability.
6.3. COLLECTIVE BARGAINING AGREEMENTS. Buyer shall offer
employment to all Business Employees covered by any of the Collective Bargaining
Agreements listed on Section 6.3 of the Seller Disclosure Schedule (the
"COLLECTIVE BARGAINING AGREEMENTS") as of the Effective Time and shall assume
and be bound by the terms of such Collective Bargaining Agreements. The Buyer
may, with the agreement of the appropriate union or otherwise as provided by
law, substitute as of the Effective Time the Buyer Business Plans for the
Business Plans specified in the Collective Bargaining Agreements.
6.4. INTERNATIONAL PLANS. Buyer shall, to the maximum extent
permitted by applicable law, assume and be liable for all liabilities and
obligations arising out of all Business Plans (including, without limitation,
plans providing for incentive, bonus, deferred compensation, pension,
retirement, savings, supplemental, welfare, retiree medical and retiree life
benefits) with respect to all Transferred Employees in Australia, Belgium,
Canada, France, Germany, Greece, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, South Africa, Spain, and the United Kingdom (collectively, the
"INTERNATIONAL BUSINESS PLANS"). Section 6.4 of the Seller Disclosure Schedule
sets forth specific obligations of Buyer and Seller with respect to the
International Business Plans. To the extent that Section 6.4 of the Seller
Disclosure Schedule and this Section 6.4 are silent with respect to a given
issue, such issue shall be resolved in accordance with the other provisions of
this Section 6 (including, but not limited to, the provisions relating to the
U.S. Business Plans) and by reference to local laws.
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6.5. U.S. BUSINESS PLAN PARTICIPATION. Except as expressly
provided in this Section 6.5 or except as otherwise required by applicable law,
Transferred Employees who are U.S. Business Employees (the "U.S. TRANSFERRED
EMPLOYEES") shall (a) cease active participation in (and accrual of additional
benefits under) the U.S. Business Plans as of the Effective Time and (b)
commence participation in the Buyer Business Plans as of the Effective Time.
6.6. U.S. BUSINESS PLAN LIABILITIES. Except as expressly
provided in this Section 6.6, Section 6.8(b) or Section 6.6 of the Seller
Disclosure Schedule, Seller shall retain all liabilities and obligations
relating to the participation of U.S. Transferred Employees in the U.S. Business
Plans on or prior to the Effective Time. Buyer shall be responsible and liable
for all liabilities and obligations relating to the participation of U.S.
Transferred Employees (including, but not limited to, such liabilities and
obligations that may exist or arise in connection with (a) the employment of any
U.S. Transferred Employee on or after the Effective Time and (b) the termination
of employment of any U.S. Transferred Employee on or after the Effective Time)
under the Buyer Business Plans and in connection with the offer and the
employment of the U.S. Transferred Employees on or after the Effective Time.
6.7. U.S. DEFINED BENEFIT PLAN. As of the Effective Time,
Seller shall cause the active participation by the U.S. Transferred Employees in
the Borden, Inc. Employees Retirement Income Plan (the "PENSION PLAN") to cease.
U.S. Transferred Employees shall continue to receive service credit for their
employment with the Buyer under the Pension Plan, but only for purposes of
vesting. Pursuant to Section A7.9 of the Pension Plan, a Transferred Employee
shall be considered terminated from employment with his or her "Employer" within
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the meaning of the Pension Plan only when such Transferred Employee is no longer
employed by the Buyer.
6.8. U.S. DEFINED CONTRIBUTION PLANS. (a) As of the Effective
Time, Seller shall cause the active participation by the U.S. Transferred
Employees in the Borden, Inc. Retirement Savings Plan and the Borden, Inc.
Associate Savings Plan (collectively, the "SAVINGS PLANS") to cease. Seller
shall (i) as of the Effective Time cause the trustees of the Savings Plans to
identify, in accordance with the applicable spinoff provisions set forth under
Section 414(l) of the Code, the assets of the Savings Plans representing the
full account balances of U.S. Transferred Employees for all periods of
participation through the Effective Time (including, as applicable, all employee
contributions, employer contributions and all earnings attributable thereto);
and (ii) as soon as practicable (but in no event later than 120 days) after the
Effective Time, make all required filings and submissions to appropriate
governmental agencies and all required amendments to the Savings Plans and
related trust agreements necessary to provide for the transfer of assets
described in this Section 6.8. The Savings Plans shall be amended to provide
that (i) there shall be no contributions thereto with respect to U.S.
Transferred Employees for periods after the Closing Date and (ii) all
transferred employer contributions shall be fully vested.
(b) Buyer shall (i) give Seller written notice of the name of
the trustee of the defined contribution plan designated by Buyer to which the
assets and liabilities for benefits of the Savings Plans are to be transferred
(the "BUYER SAVINGS PLAN"), accompanied by a copy of the most recent favorable
determination letter for such plan received by Buyer, as promptly as possible
after the Effective Time, but in any event prior to the date on which such
transfer is
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to occur; and (ii) as soon as practicable (but in no event later than 120 days)
after the Effective Time, make all required filings and submissions to
appropriate governmental agencies. As soon as practicable after the Effective
Time, and pursuant to the procedures set forth below, Seller shall cause the
trustees of the Savings Plans to transfer to the trustee of the Buyer Savings
Plan the following amount (the "TOTAL TRANSFER AMOUNT"): (A) the full account
balances (in kind and notes for any loans to U.S. Transferred Employees) of all
U.S. Transferred Employees, whose account balances shall have been credited with
appropriate earnings and contributions, if any, attributable to the period
ending on the close of business on the day preceding the Effective Time, plus
(B) earnings on such account balances attributable to the period from the
Effective Time to the Transfer Date, reduced by (C) any benefit or withdrawal
payments in respect of U.S. Transferred Employees prior to the Transfer Dates.
The "TRANSFER DATE" shall be the first day of the month following a 15th day of
a month by which Buyer has requested the transfer and Seller has received copies
of the applicable favorable determination letters from the Service. On the
Transfer Date, the Seller shall transfer 90% of its good faith estimate of the
Total Transfer Amount. Upon the completion of a calculation of the Total
Transfer Amount by the Seller's actuary (such calculation to occur no later than
120 days after the Transfer Date and such calculation to be binding on the
Buyer), the Savings Plans shall transfer to the Buyer Savings Plan an amount
equal to the difference between the Total Transfer Amount and any amounts
previously transferred to the Buyer Savings Plan or, if applicable, the Buyer
Savings Plan shall transfer to the Savings Plans an amount equal to the
difference between any amounts previously transferred to the Buyer Savings Plan
and the Total Transfer Amount. In consideration of the transfer of assets
hereunder, Buyer shall, as of the Transfer Date, cause the
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Buyer Savings Plan to assume the liabilities associated with the transferred
assets (including notes) of the U.S. Transferred Employees.
(c) Periods of employment by U.S. Transferred Employees with
Seller for which credit was given under the Savings Plans shall be taken into
account for all purposes under the Buyer Savings Plan to the same extent they
were taken into account under the Savings Plans. Buyer shall indemnify Seller,
each officer, employee and director of Seller and its affiliates and each
fiduciary of the Savings Plans against, and hold them harmless from, any and all
damages incurred or suffered by them arising out of, in respect of or in
connection with the qualified status of the Buyer Savings Plan on the dates of
transfer described above (including, without limitation, any liability, excise
taxes, penalties and damages arising with respect to the U.S. Transferred
Employees). The Seller shall indemnify the Buyer for any failure to transfer
assets pursuant to clause (b) of this Section 6.8, but only to the extent of the
liabilities assumed by the Buyer thereunder.
(d) The Buyer shall (i) permit repayment to the Buyer Savings
Plan of the outstanding loans of the U.S. Transferred Employees (under the
Savings Plans) by way of regular paycheck deductions and (ii) take all steps
required to effectuate such repayment (including amending its plans).
6.9. U.S. POST-RETIREMENT BENEFITS. As of the Effective Time,
no U.S. Transferred Employee shall be eligible to receive post-retirement
welfare benefits from Seller unless such U.S. Transferred Employee (a) is
eligible to receive such benefits as of the Effective Time pursuant to the terms
of the Borden, Inc. Total Family Protection Plan and (b) terminates employment
with the Buyer on or prior to the first anniversary of the Effective Time.
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6.10. U.S. WELFARE PLANS. With respect to any Buyer Business
Plan that is a "welfare benefit plan" (as defined in Section 3(1) of ERISA)
maintained for the benefit of U.S Transferred Employees on and after the
Effective Time, Buyer shall (a) cause there to be waived any pre-existing
condition limitations and (b) give effect, in determining any deductible and
maximum out-of-pocket limitations, to claims incurred and amounts paid by, and
amounts reimbursed to, such employees with respect to similar plans maintained
by Seller immediately prior to the Closing Date.
6.11. U.S. ACCRUED VACATION. With respect to any accrued but
unused vacation time to which any U.S. Transferred Employee is entitled pursuant
to the vacation policy applicable to such employee immediately prior to the
Effective Time (the "VACATION POLICY"), Buyer shall allow such U.S. Transferred
Employee to use such accrued vacation; PROVIDED, HOWEVER, that if Buyer deems it
necessary to disallow such employee from taking such accrued vacation, Buyer
shall be liable for and pay in cash to such employee an amount equal to such
vacation time in accordance with terms of the Vacation Policy; PROVIDED,
FURTHER, that Buyer shall be liable for and pay in cash an amount equal to such
accrued vacation time to any U.S. Transferred Employee whose employment
terminates for any reason subsequent to the Effective Time; PROVIDED, FURTHER,
that Buyer shall be under no obligation to recognize any unused vacation time
accrued prior to the year in which the Closing occurs.
6.12. SEVERANCE. The Buyer shall provide severance benefits to
U.S. Transferred Employees (who are either salaried or non-union hourly
employees) terminated within 12 months of the Effective time for reasons other
than serious misconduct in the amount of one week of base pay for each full year
of service.
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6.13. U.S. SERVICE CREDIT. With respect to U.S. Transferred
Employees, Buyer shall recognize all service with Seller for purposes of
eligibility and vesting under the Buyer Business Plans.
6.14. U.S. WARN ACT. Buyer agrees to provide any required
notice under the Worker Adjustment and Retraining Notification Act ("WARN") and
any other applicable law and to otherwise comply with any such statute with
respect to any "plant closing" or "mass layoff" (as defined in WARN) or similar
event affecting employees and occurring on or after the Effective Time or
arising as a result of the transactions contemplated hereby. Buyer shall
indemnify and hold harmless Seller and its affiliates with respect to any
liability under WARN or other applicable law arising from the actions (or
inactions) of Buyer or its affiliates on or after the Effective Time or arising
as a result of the transactions contemplated hereby.
6.15. U.S. COBRA. Buyer agrees to provide any required notice
under the Consolidated Omnibus Budget Reconciliation Act of 1986 ("COBRA") and
any other applicable law on or after the Effective Time. Buyer shall indemnify
and hold harmless Seller and its affiliates with respect to any liability under
COBRA or other applicable law arising from the actions (or inactions) of Buyer
or its affiliates on or after the Effective Time or arising as a result of the
transactions contemplated hereby.
6.16. NO RIGHTS CONFERRED ON EMPLOYEES. Nothing herein,
expressed or implied, shall confer upon any employee or former employee of
Seller, Buyer, or any of their affiliates (including, without limitation, the
Transferred Employees, the Business Employees or the Buyer Business Employees),
any rights or remedies (including, without limitation, any right
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to employment or continued employment for any specified period) of any nature or
kind whatsoever, under or by reason of this Agreement.
7. TERMINATION
7.1. GENERAL. This Agreement may be terminated and the
transactions contemplated herein may be abandoned, (a) by mutual consent of the
Buyer and the Seller; (b) by the Buyer or the Seller by notice to the other
party in the event that the Closing Date shall not have occurred on or before
January 31, 1997; provided, however, that if the Closing Date shall not have
occurred on or before such date due to the act or omission of the Buyer or the
Seller, then that party may not terminate the Agreement; (c) by the Seller, in
its sole discretion, after the date which is five weeks after the date of this
Agreement, if Seller shall not have received copies of the Definitive Financing
Agreements or if at any time thereafter any such Definitive Financing Agreements
shall cease to be in full force and effect and Seller shall not have replaced
such Definitive Financing Agreements prior to the earlier of five weeks
thereafter and January 31, 1997, or (d) the Seller, if any required approval by
the stockholders of the Buyer shall not have been obtained by reason of the
failure to obtain the required vote upon a vote held at a duly held meeting of
stockholders or at any adjournment thereof except as a result of a material
breach of this Agreement by the Seller or an inability to satisfy Section
5.2(a).
7.2. EFFECT OF TERMINATION. In the event of any termination of
the Agreement as provided in Section 7.1 above, this Agreement shall forthwith
become wholly void and of no further force and effect and there shall be no
liability on the part of the Buyer or the Seller, except that (i) the
obligations of the Buyer and the Seller under Sections 4.1(c) and 9.2 of this
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Agreement shall remain in full force and effect and (ii) termination shall not
preclude either party from suing the other party for breach of this Agreement.
8. TRANSACTIONS SUBSEQUENT TO CLOSING
8.1. ACCESS TO BOOKS AND RECORDS. (a) For a period of ten
years following the Closing Date, the Buyer shall retain and afford, and will
cause its affiliates to retain and afford, to the Seller and the Subsidiary
Asset Sellers, their counsel and their accountants, during normal business hours
and upon reasonable advance notice, reasonable access to the books, records and
other data of Borden Global Packaging with respect to the period prior to the
Closing Date to the extent that such access may be reasonably required by the
Seller or Subsidiary Asset Seller to facilitate (i) the preparation by any
Seller or such Subsidiary Asset Seller of such tax returns as it may be required
to file with respect to the operations of Borden Global Packaging, the making of
any election related to taxes or in connection with any audit, amended return,
claim for refund or any suit or proceeding with respect thereto, (ii) the
investigation, litigation and final disposition of any claims, suits or
proceedings which may have been or may be made against the Seller or such
Subsidiary Asset Seller in connection with Borden Global Packaging, and (iii)
the payment of any amount pursuant to Section 9.4 or in connection with any
liabilities or obligations which have not been assumed by the Buyer under this
Agreement. The Buyer will not, and will cause its affiliates not to, dispose of,
alter or destroy any such books, records and other data without giving thirty
(30) days' prior notice to the Seller to permit them, at their expense, to
examine, duplicate or repossess such records, files, documents and
correspondence.
(b) the Buyer shall further cooperate with the Seller in the
preparation for and prosecution of the defense of any audit, claim, action or
cause of action arising out of or relating
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to any Excluded Liabilities which have not been assumed by the Buyer under this
Agreement including, without limitation, by making available evidence within the
control of the Buyer and persons needed as witnesses employed by the Buyer, in
each case as reasonably needed for such defense. The Seller shall reimburse the
Buyer for its reasonable out-of-pocket costs relating to its cooperation under
this subparagraph.
(c) For a period of ten years following the Closing Date, the
Seller shall retain and afford, and will cause the Subsidiary Asset Sellers to
retain and afford, to the Buyer, its counsel and its accountants, during normal
business hours and upon reasonable advance notice, reasonable access to the
books, records and other data of such the Seller and the Subsidiary Asset
Sellers with respect to the period prior to the Closing Date to the extent that
such access may be reasonably required by the Buyer or any affiliate of the
Buyer (i) in connection with the ongoing operations of the Packaging Business
(ii) to facilitate the preparation by the Buyer or such affiliate of such tax
returns as it may be required to file with respect to the operations of Borden
Global Packaging, the making of any election relating to taxes or in connection
with any audit, amended return, claim for refund or any suit or proceeding with
respect thereto, (iii) the investigation, litigation and final disposition of
any claims, suits or proceedings which may have been or may be made against the
Buyer or such affiliate in connection with Borden Global Packaging, and (iv) the
payment of any amount pursuant to Section 9.4 or in connection with any
liabilities or obligations which have not been assumed by the Buyer under this
Agreement. The Seller will not, and will cause its affiliates not to, dispose
of, alter or destroy any such books, records and other data without giving
thirty (30) days' prior notice to the Buyer to permit
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it, at its expense, to examine, duplicate or repossess such records, files,
documents and correspondence.
(d) the Seller further agrees to cooperate with the Buyer in
the preparation for and prosecution of the defense of any audit, claim, action
or cause of action arising out of or relating to any liability relating to the
Packaging Business which acts arose by reason of acts or omissions occurring
prior to the Closing and which has been assumed by the Buyer, including, without
limitation, by making available evidence within the control of the Seller and
persons needed as witnesses employed by the Seller, in each case as reasonably
needed for such defense. The Buyer shall reimburse the Seller for its reasonable
out-of-pocket costs relating to its cooperation under this subparagraph.
8.2. FURTHER AGREEMENTS. The Seller authorizes and empowers
the Buyer on and after the Closing Date to receive and open all mail received by
the Buyer relating to the business of Borden Global Packaging or the Assets and
to deal with the contents of such communications in any proper manner. The
Seller shall, and shall cause the Subsidiary Asset Sellers to, promptly deliver
to the Buyer any mail or other communication received by them after the Closing
Date pertaining to the business of Borden Global Packaging or the Assets and any
cash, checks or other instruments of payment to which the Buyer is entitled. The
Buyer shall promptly deliver to the Seller any mail or other communication
received by it after the Closing Date pertaining to the assets and liabilities
described in Sections 1.3 and 1.7 hereof, and any cash, checks or other
instruments of payment in respect thereof.
8.3. ASSET RETURNS; FURTHER ASSURANCES. In the event that the
Buyer receives any assets of the Seller that are not intended to be transferred
pursuant to the terms of this
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Agreement, whether or not related to the Packaging Business, the Buyer agrees to
promptly return such assets to the Seller at the Seller's expense. If, at any
time after the Closing Date, the Buyer determines that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to transfer, vest, perfect or confirm of record or otherwise in its
right, title or interest in, to or under any of the Subsidiary Stock or Assets
acquired or to be acquired by the Buyer as a result of, or in connection with,
the Stock and Asset Purchase or otherwise to carry out this Agreement, the
officers of the Seller shall be authorized to execute and deliver, all such
deeds, bills of sale, assignments and assurances and to take and do, in such
names and on such behalves or otherwise, all such other actions and things as
may be necessary or desirable to transfer, vest, perfect or confirm any and all
right, title and interest in, to and under such Subsidiary Stock or Assets or
otherwise to carry out the purposes of this Agreement. In the event that after
the Closing Date the Seller receives with respect to the Packaging Business any
amount of cash paid on an account receivable or as a result of a sale of
Inventory included in the Closing Balance Sheet, the Seller shall promptly
forward such amount to the Buyer.
9. MISCELLANEOUS
9.1. PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, no news
release or other public announcement pertaining in any way to the transactions
contemplated by this Agreement will be made by either party without the prior
consent of the other party, unless based on the advice of counsel to such party
such party determines that such release or announcement is required by law or
any listing agreement with a securities exchange, in which case a copy of such
release will be provided to the other party.
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9.2. EXPENSES. (a) Subject to the provisions of Section 9.2(b)
and Section 9.3, whether or not the transactions contemplated by this Agreement
are completed, each of the parties hereto shall pay the fees and expenses
incurred by it in connection with the negotiation, preparation, execution and
performance of this Agreement, including, without limitation, attorneys' fees
and accountants' fees.
(b) If (i) (x) the Board of Directors of the Buyer changes or
modifies (in a manner adverse to the Seller) its recommendation set forth in
Section 4.14(b) hereof, (y) the Buyer Stockholder Approval is not obtained prior
to, or fails to remain effective through, January 31, 1997 (or, if earlier, the
termination of this Agreement) and (z) the Seller is able prior to January 31,
1997, to satisfy the condition contained in Sections 5.2(a) hereof or (ii) the
Stockholders Meeting shall not have occurred prior to January 31, 1997, then the
Buyer shall pay to the Seller within three business days after the earlier of
the termination of this Agreement and January 31, 1997, an amount, in cash, of
$8,000,000.
9.3. TRANSFER TAXES AND RECORDING EXPENSES. The Buyer, on the
one hand, and the Seller and the Subsidiary Asset Sellers, on the other hand,
agree to divide equally any payments required with respect to any and all U.S.
or foreign transfer, documentary, sales, excise, stamp duties, motor vehicle,
registration, value added or similar taxes and filing or recording expenses or
fees, if any, required to be paid in connection with the transfer of the Assets
(including any interest charge, penalty or addition to tax with respect
thereto). The Buyer, on the one hand, and the Seller and the Subsidiary Asset
Sellers, on the other hand, agree to pay to the other party to the extent that
the other party pays in excess of one half of such taxes, expenses or fees.
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9.4. INDEMNIFICATION. (a) The Seller shall indemnify and hold
the Buyer harmless against and in respect of (i) all obligations and liabilities
of the Seller, whether accrued, absolute, fixed, contingent or otherwise, not
expressly assumed by the Buyer pursuant to this Agreement or the Assumption
Agreement; (ii) any actual loss, liability, damage, cost, expense or amount paid
in settlement (including reasonable attorneys' fees and other reasonable costs
of defense) (but excluding any liability for taxes of any kind or interest or
penalties thereon) (collectively, "DAMAGES") incurred or sustained by the Buyer
as a result of any breach by the Seller of its covenants contained herein, other
than that contained in Section 4.7(iii), which survive the Closing; and (iii)
any actual Damages incurred or sustained by the Buyer as a result of any breach
by the Seller of Section 4.7(iii) or of its representations and warranties
contained in Section 3.1 hereof and made on the date hereof but not on the
Closing Date, without regard to any exceptions for materiality contained in such
representations and warranties; PROVIDED that (W) the Seller shall be required
to indemnify the Buyer pursuant to this clause (iii) for such breaches only to
the extent that the aggregate actual Damages (as adjusted pursuant to Section
9.4(e) of this Agreement) resulting from such breaches to the Buyer exceeds
$5,750,000, (X) the Seller shall not be required to indemnify the Buyer pursuant
to this clause (iii) in an aggregate amount in excess of $75,000,000, (Y) the
Seller shall not be required to indemnify the Buyer pursuant to this clause
(iii) for any breach the Damages (as adjusted pursuant to Section 9.4(e) of this
Agreement) arising from which, in any individual case, amount to $40,000 or
less, and such Damages shall not be included in calculating the $5,750,000
threshold established in the preceding subclause (W), and (Z) any claim for
indemnification under this
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clause (iii) must be made in writing with specificity to the Seller by the Buyer
within two years of the Closing Date.
(b) the Buyer shall indemnify and hold the Seller and the
Subsidiary Asset Sellers harmless against and in respect of (i) all obligations
and liabilities of the Seller and the Subsidiary Asset Sellers expressly assumed
by the Buyer pursuant to this Agreement or the Assumption Agreement; (ii) any
actual Damages incurred or sustained by the Seller or the Subsidiary Asset
Sellers as a result of any breach by the Buyer of its covenants contained herein
which survive the Closing; (iii) any actual Damages incurred or sustained by the
Seller or any of the Subsidiary Asset Sellers as a result of any operations of
the Borden Global Packaging business on or after the Closing Date; (iv) any
actual Damages incurred or sustained by the Seller or any of the Subsidiary
Asset Sellers as a result of any breach by the Buyer of its representations and
warranties contained in Section 3.2 hereof and made on the date hereof but not
on the Closing Date, without regard for any exceptions to materiality contained
in such representations and warranties; PROVIDED that (W) the Buyer shall be
required to indemnify the Seller pursuant to this clause (iv) for such breaches
only to the extent that the aggregate actual Damages (as adjusted pursuant to
Section 9.4(e) of this Agreement) resulting from such breaches to the Seller
exceeds $5,750,000, (X) the Buyer shall not be required to indemnify the Seller
pursuant to this clause (iv) in an aggregate amount in excess of $75,000,000,
(Y) the Buyer shall not be required to indemnify the Seller pursuant to this
clause (iv) for any breach the Damages (as adjusted pursuant to Section 9.4(e)
of this Agreement) arising from which, in any individual case, amount to $40,000
or less, and such Damages shall not be included in calculating the $5,750,000
threshold established in the preceding subclause (W), and (Z) any claim for
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indemnification under this clause (iv) must be made in writing with specificity
to the Buyer by the Seller within two years of the Closing Date; and (v) any and
all taxes and expenses described in Section 9.3 of this Agreement.
(c) With respect to third-party claims, all claims for
indemnification by the Buyer or the Seller, as the case may be (an "INDEMNIFIED
PARTY") hereunder shall be asserted and resolved as set forth in this Section
9.4(c). In the event that any written claim or demand for which the Buyer or the
Seller, as the case may be (an "INDEMNIFYING PARTY"), would be liable to any
Indemnified Party hereunder is asserted against or sought to be collected from
any Indemnified Party by a third party, such Indemnified Party shall promptly
notify the Indemnifying Party of such claim or demand and the amount or the
estimated amount thereof to the extent then feasible (which estimate shall not
be conclusive of the final amount of such claim or demand) ( the "CLAIM
NOTICE"). Failure to give prompt notice shall not affect the indemnification
obligations hereunder in the absence of actual prejudice. The Indemnifying Party
shall have 20 days from the personal delivery or mailing of the Claim Notice
(the "NOTICE PERIOD") to notify the Indemnified Party (a) whether or not the
Indemnifying Party disputes the liability of the Indemnifying Party to the
Indemnified Party hereunder with respect to such claim or demand and (b) whether
or not it desires to defend the Indemnified Party against such claim or demand.
All costs and expenses incurred by the Indemnifying Party in defending such
claim or demand shall be a liability of, and shall be paid by, the Indemnifying
Party; PROVIDED, HOWEVER, that the amount of such costs and expenses that shall
be a liability of the Indemnifying Party hereunder shall be subject to the
limitations set forth in Sections 9.4(a) and 9.4(b) hereof. Except as
hereinafter provided, in the event that the Indemnifying Party notifies the
Indemnified
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Party within the Notice Period that it desires to defend the Indemnified Party
against such claim or demand, the Indemnifying Party shall have the right to
defend the Indemnified Party with counsel reasonably satisfactory to the
Indemnified Party by appropriate proceedings and shall have the sole power to
direct and control such defense and the Indemnifying Party shall not be liable
to such Indemnified Party under this Section 9.4 for any fees of other counsel
or any other expenses, in each case subsequently incurred by such Indemnified
Party in connection with the defense thereof, other than reasonable costs of
investigation and costs and expenses of legal counsel, if the Indemnified Party
and the Indemnifying Party are both parties to the action and the indemnified
party has been advised by counsel that there may be one or more defenses
available to it and not available to the Indemnifying Party. If any Indemnified
Party desires to participate in any such defense, it may do so at its sole cost
and expense. The Indemnified Party shall not settle a claim or demand without
the consent of the Indemnifying Party unless prior thereto or in connection
therewith the Indemnified Party unconditionally releases the Indemnifying Party
for any liability arising out of such claim or demand. The Indemnifying Party
shall not, without the prior written consent of the Indemnified Party, settle,
compromise or offer to settle or compromise any such claim or demand on a basis
which would result in the imposition of a consent order, injunction or decree
which would restrict the future activity or conduct of the Indemnified Party or
any subsidiary or affiliate thereof or if such settlement or compromise does not
include an unconditional release of the Indemnified Party for any liability
arising out of such claim or demand. If the Indemnifying Party elects not to
defend the Indemnified Party against such claim or demand, whether by not giving
the Indemnified Party timely notice as provided above or otherwise, then the
amount of any such claim or demand or,
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if the same be contested by the Indemnified Party, that portion thereof as to
which such defense is unsuccessful (and the reasonable costs and expenses
pertaining to such defense), shall be the liability of the Indemnifying Party
hereunder, subject to the limitations set forth in Sections 9.4(a) and 9.4(b).
The Buyer and the Seller shall each render to each other such assistance as may
reasonably be requested in order to insure the proper and adequate defense of
any such claim or proceeding.
(d) The indemnities provided in this Section 9.4 shall survive
the Closing. The indemnity provided in this Section 9.4 shall be the sole and
exclusive remedy of the Indemnified Party against the Indemnifying Party at law
or equity for any matter covered by paragraphs (a) and (b).
(e) The amount of any Damages for which indemnification is
provided under this Section 9.4 shall be computed net of any insurance proceeds
received by the Indemnified Party in connection with such Damages. If the amount
with respect to which any claim is made under this Section 9.4 (an "INDEMNITY
CLAIM") gives rise to a currently realizable Tax Benefit (as defined below) to
the party making the claim, the indemnity payment shall be reduced by the amount
of the Tax Benefit available to the party making the claim. To the extent such
Indemnity Claim does not give rise to a currently realizable Tax Benefit, if the
amount with respect to which any Indemnity Claim is made gives rise to a
subsequently realized Tax Benefit to the party that made the claim, such party
shall refund to the Indemnifying Party the amount of such Tax Benefit when, as
and if realized. For the purposes of this Agreement, any subsequently realized
Tax Benefit shall be treated as though it were a reduction in the amount of the
initial Indemnity Claim, and the liabilities of the parties shall be
redetermined as though
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both occurred at or prior to the time of the indemnity payment. For purposes of
this Section 9.4(e), a "Tax Benefit" means an amount by which the tax liability
of the party (or group of corporations including the party) is reduced
(including, without limitation, by deduction, reduction of income by virtue of
increased tax basis or otherwise, entitlement to refund, credit or otherwise)
plus any related interest received from the relevant taxing authority. Where a
party has other losses, deductions, credits or items available to it, the Tax
Benefit from any losses, deductions, credits or items relating to the Indemnity
Claim shall be deemed to be realized proportionately with any other losses,
deductions, credits or items. For the purposes of this Section 9.4(e), a Tax
Benefit is "currently realizable" to the extent it can be reasonably anticipated
that such Tax Benefit will be realized in the current taxable period or year or
in any tax return with respect thereto (including through a carryback to a prior
taxable period) or in any taxable period or year prior to the date of the
Indemnity Claim. In the event that there should be a determination disallowing
the Tax Benefit, the Indemnifying Party shall be liable to refund to the
Indemnified Party the amount of any related reduction previously allowed or
payments previously made to the Indemnifying Party pursuant to this Section
9.4(e). The amount of the refunded reduction or payment shall be deemed a
payment under this Section 9.4 and thus shall be paid subject to any applicable
reductions under this Section 9.4(e).
(f) The parties agree that any indemnification payments that
may be due from the Seller to the Buyer pursuant to Section 9.4(a) hereof may be
paid at the option of Seller (i) in U.S. dollars in the amount of the Damages or
(ii) in such number of shares of Buyer Common Stock held by Seller or its
affiliates equal to the quotient obtained by dividing (a) the amount of Damages
by (b) the average of the closing prices of the Buyer Common Stock on The
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Nasdaq National Market, as reported in The Wall Street Journal, for the 20
trading days immediately preceding the second trading day prior to the date of
payment thereof.
(g) The parties agree that any indemnification payments made
pursuant to this Agreement shall be treated for tax purposes as an adjustment to
the Purchase Price, unless otherwise required by applicable law. The Buyer
agrees not to make any election under Section 338 of the Code unless the Seller
consents to such election in writing.
(h) Notwithstanding any of the foregoing, no Damages shall be
due pursuant to this Section 9.4 for any matters covered by the post-Closing
adjustment provisions of Section 2.4.
(i) Notwithstanding anything to the contrary contained herein,
neither party hereto nor any affiliate of either of them shall be liable for any
consequential, punitive or special damages pursuant to this Agreement or any of
the agreements contemplated hereby.
9.5. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, by mail
(registered or certified mail, postage prepaid, return receipt requested) or by
any courier service, such as Federal Express, providing proof of delivery. All
communications hereunder shall be delivered to the respective parties at the
following addresses:
(a) If to the Seller:
Borden, Inc.
180 East Broad Street
Columbus, Ohio 43215
Attention: Richard L. de Ney
with copies to:
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Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: David J. Sorkin, Esq.
and
Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, New York 10019
Attention: Scott M. Stuart
(b) If to the Buyer:
AEP Industries Inc.
125 Phillips Avenue
South Hackensack, New Jersey 07606
Attention: Paul M. Feeney, Executive Vice President
with a copy to:
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
New York, New York 10017
Attention: Paul E. Gelbard, Esq.
or to such other address as either party shall have specified by notice in
writing to the other party. All such notices, requests, demands and
communications shall be deemed to have been received on the date of personal
delivery or telecopy or on the third Business Day after the mailing thereof.
9.6. ENTIRE AGREEMENT. This Agreement (including the Exhibits
hereto and the Disclosure Schedules) together with the Stockholders Agreement
and the Governance Agreement constitutes the entire agreement between the
parties hereto and supersedes all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof.
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9.7. BINDING EFFECT; NO THIRD PARTY BENEFICIARIES. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
9.8. BULK SALES LAW. The Buyer and the Seller each agree to
waive compliance by the other with the provisions of the bulk sales law of any
jurisdiction.
9.9. ASSIGNABILITY. This Agreement shall not be assignable by
the Seller without the prior written consent of the Buyer or by the Buyer
without the prior written consent of the Seller.
9.10. AMENDMENT; WAIVER. This Agreement may be amended,
supplemented or otherwise modified only by a written instrument executed by the
parties hereto. No waiver by either party of any of the provisions hereof shall
be effective unless explicitly set forth in writing and executed by the party so
waiving. Except as provided in the preceding sentence, no action taken pursuant
to this Agreement, including without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representations, warranties, covenants, or
agreements contained herein, and in any documents delivered or to be delivered
pursuant to this Agreement and in connection with the Closing hereunder. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.
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119
9.11. SCHEDULES AND EXHIBITS. Any fact or item which is
clearly disclosed on any Exhibit to this Agreement or in either Disclosure
Schedule or in the Financial Information or Interim Financial Information in
such a way as to make its relevance to a representation or representations made
elsewhere in this Agreement or to the information called for by an Exhibit or
Exhibits to this Agreement of either Disclosure Schedule readily apparent shall
be deemed to be an exception to such representation or representations or to be
disclosed on such Exhibit or Exhibits or Disclosure Schedule, as the case may
be, notwithstanding the omission of a reference or cross-reference thereto. Any
fact or item disclosed on any Exhibit hereto or either Disclosure Schedule shall
not by reason only of such inclusion be deemed to be material and shall not be
employed as a point of reference in determining any standard of materiality
under this Agreement.
9.12. OTHER COVENANTS. To the extent that any consents needed
to assign to the Buyer any of the Assets have not been obtained on or prior to
the Closing Date this Agreement shall not constitute an assignment or attempted
assignment thereof if such assignment or attempted assignment would constitute a
breach thereof. If any such consent shall not be obtained on or prior to the
Closing Date, then (i) the Seller and the Buyer, if required under applicable
law, shall use their reasonable efforts in good faith to obtain such consent as
promptly as practicable thereafter and (ii) if in the reasonable judgment of the
Buyer such consent may not be obtained, the parties shall use reasonable efforts
in good faith to cooperate, and to cause each of their respective affiliates to
cooperate, in any lawful arrangement designed to provide for the Buyer the
benefits under any such Assets.
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120
9.13. SECTION HEADINGS; TABLE OF CONTENTS. The section
headings contained in this Agreement and the Table of Contents to this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
9.14. SEVERABILITY. If any provision of this Agreement shall
be declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be affected and
shall remain in full force and effect.
9.15. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
9.16. APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without regard
to conflicts of laws principles thereof.
9.17. CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "AFFILIATE" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, the first mentioned person;
(b) "PERSON" means an individual, corporation, partnership,
association, trust, incorporated organization, other entity or group
(as defined in Section 13(d)(3) of the Exchange Act); and
(c) "SUBSIDIARY" or "SUBSIDIARIES" of the Buyer, the Seller or
any other person means any corporation, partnership, joint venture or
other legal entity of which the Buyer, the Seller or such other person,
as the case may be (either alone
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121
or through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests the
holder of which is generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other
legal entity.
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122
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
BORDEN, INC.
By: /S/ RICHARD L. DE NEY
-----------------------------
Name:Richard L. de Ney
Title: Executive Vice President
AEP INDUSTRIES INC.
By: /S/ PAUL M. FEENEY
------------------------------
Name: Paul M. Feeney
Title: Executive Vice President
Exhibit 2
----------
GOVERNANCE AGREEMENT
Between
BORDEN, INC.
and
AEP INDUSTRIES INC.
Dated as of June 20, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS...................... 1
SECTION 1.1. Definitions................................................... 1
ARTICLE II
SUBSCRIPTION RIGHTS.................. 6
SECTION 2.1. Subscription Rights........................................... 6
ARTICLE III
BUSINESS COMBINATIONS BETWEEN THE COMPANY AND BORDEN.......... 6
SECTION 3.1. Purchases of Equity Securities................................ 6
SECTION 3.2. Additional Limitations........................................ 7
ARTICLE IV
CORPORATE GOVERNANCE.................. 8
SECTION 4.1. Composition of the Board of Directors......................... 8
SECTION 4.2. Solicitation and Voting of Shares............................. 10
SECTION 4.3. Committees.................................................... 11
SECTION 4.4. Super-Majority Directors' Approval
Required for Certain Actions....................................... 12
SECTION 4.5. Enforcement of this Agreement................................. 14
SECTION 4.6. Certificate of Incorporation and By-Laws...................... 14
SECTION 4.7. Board of Directors Meetings/Financial
Information........................................................ 15
SECTION 4.8. Failure to Comply with this Article IV........................ 15
ARTICLE V
TRANSFER OF COMMON STOCK................ 15
SECTION 5.1. Transfer of Common Stock...................................... 15
ARTICLE VI
REGISTRATION RIGHTS.................. 16
SECTION 6.1. Restrictive Legend............................................ 16
SECTION 6.2. Notice of Proposed Transfer................................... 17
SECTION 6.3. Request for Registration...................................... 17
SECTION 6.4. Incidental Registration....................................... 20
SECTION 6.5. Registration on Form S-3...................................... 21
SECTION 6.6. Obligations of the Company.................................... 22
SECTION 6.7. Furnish Information........................................... 26
SECTION 6.8. Expenses of Registration...................................... 27
SECTION 6.9. Underwriting Requirements..................................... 27
SECTION 6.10. Rule 144 and Rule 144A Information........................... 27
SECTION 6.11. Indemnification.............................................. 28
SECTION 6.12. Lockup....................................................... 31
i
<PAGE>
SECTION 6.13. Transfer of Registration Rights............................. 32
SECTION 6.14. Selection of Counsel........................................ 32
ARTICLE VII
REPRESENTATIONS AND WARRANTIES............ 32
SECTION 7.1. Representations of .......................................... 32
SECTION 7.2. Representations of Borden.................................... 34
ARTICLE VIII
MISCELLANEOUS.................... 35
SECTION 8.1. Notices...................................................... 35
SECTION 8.2. Amendments; No Waivers....................................... 36
SECTION 8.3. Severability................................................. 36
SECTION 8.4. Entire Agreement; Assignment................................. 36
SECTION 8.5. Parties in Interest.......................................... 37
SECTION 8.6. Specific Performance......................................... 37
SECTION 8.7. Governing Law................................................ 37
SECTION 8.8. Headings..................................................... 37
SECTION 8.9. Counterparts................................................. 37
SECTION 8.10. Effectiveness; Termination.................................. 37
SECTION 8.11. Waiver of Jury Trial........................................ 37
Exhibits
Exhibit A - Table of Composition of the Board of Directors
Exhibit B - Form of Amended and Restated Certificate of Incorporation
Exhibit C - Form of Amended By-Laws
ii
<PAGE>
1
GOVERNANCE AGREEMENT, dated as of June 20, 1996, between
Borden, Inc., a New Jersey corporation ("BORDEN"), and AEP Industries Inc., a
Delaware corporation (the "COMPANY").
WHEREAS, concurrently herewith, Borden and the Company are
entering into a Purchase Agreement of even date herewith (as amended from time
to time, the "PURCHASE AGREEMENT"); and
WHEREAS, the Boards of Directors of Borden and the Company
have each determined to engage in the transactions contemplated by the Purchase
Agreement, pursuant to which the Company will purchase from Borden and certain
subsidiaries of Borden the stock and assets of Borden and certain subsidiaries
of Borden relating to the business of the development, production, marketing,
distribution and sale of flexible and rigid plastic packaging materials in North
America, Europe, South Africa, Australia and Asia in consideration for a
combination of cash and shares of Common Stock (as defined herein); and
WHEREAS, Borden and the Company desire to establish in this
Agreement certain terms and conditions concerning the corporate governance of
the Company after the Closing Date (as defined in the Purchase Agreement) and
certain terms and conditions concerning the acquisition and disposition of
securities of the Company by Borden and its affiliates.
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises and agreements contained herein, Borden and the Company hereby
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. As used in this
Agreement, the following terms have the following meanings:
(a) "AFFILIATE" has the same meaning as in Rule 12b-2
promulgated under the Exchange Act.
(b) "ASSOCIATE" has the same meaning as in Rule 12b-2
promulgated under the Exchange Act.
(c) "BENEFICIAL OWNER" and to "BENEFICIALLY OWN" has the same
meaning as in Rule 13d-3 promulgated under the Exchange Act.
(d) "BOARD OF DIRECTORS" means the Board of Directors
of the Company.
(e) "BORDEN AFFILIATE" means all persons controlled by Borden,
any person controlling Borden and any person acting in concert with
Borden or any person controlling Borden.
<PAGE>
2
(f) "BORDEN'S INTEREST" means the percentage of outstanding
Common Stock that is controlled directly or indirectly by Borden and
the Borden Affiliates.
(g) "BUSINESS COMBINATION" means any one of the
following transactions:
(iAny merger or consolidation of the Company
or any Subsidiary of the Company with (A) Borden or (B) any
corporation (other than the Company) which is, or after such
merger or consolidation would be, an Affiliate or Associate of
Borden;
(iiAny sale, lease, exchange, mortgage, pledge,
transfer or other disposition by the Company (in one
transaction or a series of transactions) to or with Borden or
any Affiliate or Associate of Borden (other than the Company)
of all or a Substantial Part of the assets of the Company or
any Subsidiary thereof; or
(iiiThe adoption of any plan or proposal for the
liquidation or dissolution of the Company proposed by or on
behalf of Borden or any Affiliate or Associate of Borden
(other than the Company); or
(ivAny reclassification of securities
(including any reverse stock split), recapitalization of the
Company, or any merger or consolidation of the Company with
any Subsidiary thereof or any other transaction to which the
Company is a party (whether or not with or into or otherwise
involving Borden or any Affiliate or Associate of Borden)
which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class
of equity or convertible securities of the Company or any
Subsidiary thereof which is directly or indirectly owned by
Borden or any Affiliate or Associate of Borden (other than the
Company).
(h) "COMMON STOCK" means the common stock, par value
$.01 per share, of the Company.
(i) "DIRECTOR" means a member of the Board of
Directors.
(j) "EQUITY SECURITY" means any (i) Common Stock, (ii)
securities of the Company convertible into or exchangeable for Common
Stock, and (iii) options, rights, warrants and similar securities
issued by the Company to acquire Common Stock.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
and the rules and regulations promulgated thereunder, as amended.
<PAGE>
3
(l) "FAIR MARKET VALUE" means: (i) in the case of a security,
the average of the closing sale prices during the thirty day period
immediately preceding the date in question of such security on the
Composite Tape for New York Stock Exchange ("NYSE") listed stocks or,
if such security is not quoted on the Composite Tape, on the NYSE or,
if such security is not listed on the NYSE, on the principal United
States securities exchange registered under the Exchange Act on which
such security is listed or, if such Security is not listed on any such
exchange, the average of the closing sale prices or the closing bid
quotations of such security during the thirty day period preceding the
date of determination on the Nasdaq National Market or any system then
in use or, if no such quotations are available, the fair market value
on the date in question of such security as determined by a majority of
Independent Directors in good faith; and (ii) in the case of property
other than cash or a security, the fair market value of such property
on the date in question as determined by a majority of Independent
Directors in good faith.
(m) "HOLDER" shall mean any holder of Registrable
Securities.
(n) "INDEPENDENT DIRECTOR" means a director of the Company (i)
who is not and has never been an officer or employee of the Company,
any Affiliate or Associate of the Company or an entity that derived 10%
or more of its revenues or earnings in its most recent fiscal year from
transactions involving the Company or any Affiliate or Associate of the
Company, (ii) who is not and has never been an officer, employee or
director of Borden any Affiliate or Associate of Borden or an entity
that derived more than 10% of its revenues or earnings in its most
recent fiscal year from transactions involving Borden or any Affiliate
or Associate of Borden, and (iii) who was on the Closing Date deemed to
be, or on or after the Closing Date was designated as, an Independent
Director in accordance with Section 4.1.
(o) "INITIAL PERCENTAGE" means the percentage of outstanding
Common Stock that Borden and the Borden Affiliates acquire from the
Buyer on the Closing Date pursuant to the Purchase Agreement.
(p) "INVESTOR DIRECTORS" means Directors who are designated
for such position by Borden in accordance with Section 4.1.
(q) "MANAGEMENT DIRECTORS" means, at the Closing Date,
Directors who were deemed to be Management Directors in accordance with
Section 4.1(b) and, after the Closing Date, Directors who are
designated for such position by the then existing Management Directors
in accordance with Section 4.1.
<PAGE>
4
(r) "NEW SECURITY" means any Equity Security issued by the
Company for cash or cash equivalents; PROVIDED that "New Security"
shall not include (i) securities issuable upon conversion of any
convertible Equity Security, (ii) securities issuable upon exercise of
any option, warrant or other similar Equity Security, (iii) securities
issuable at any time to employees, directors or consultants of the
Company, or any Subsidiary of the Company, pursuant to any employee
stock offering, plan, or arrangement approved by the Board of Directors
(or an appropriate committee thereof), including, without limitation,
the 401(k) Savings and Employee Stock Ownership Plan (the "ESOP") and
1995 Employee Stock Purchase Plan (the "STOCK PURCHASE PLAN") of the
Company, and (iv) securities issuable in connection with any stock
split, stock dividend or recapitalization of the Company.
(s) A "PERMITTED ACQUISITION TRANSACTION" means either (i) a
tender or exchange offer for outstanding shares of Common Stock or (ii)
a Business Combination that is conditioned upon approval by at least a
majority of the Unaffiliated Stockholders, and which transaction, in
the case of either clause (i) or (ii) above, satisfies each of the
following conditions:
(A) the Board of Directors receives an opinion from a
nationally recognized independent investment banking firm
selected by the Board of Directors other than Investor
Directors that the price and other financial terms of the
transaction are fair from a financial point of view to the
Unaffiliated Stockholders; and
(B) a majority of the Board of Directors (other than
the Investor Directors) concludes that the price and other
terms of the transaction are fair to and in the best interests
of the Unaffiliated Stockholders and recommends that
Unaffiliated Stockholders approve the transaction; or
(iii) a merger following the consummation of a tender or exchange offer
described in clause (i) above that offers the same consideration as
such tender or exchange offer, whether or not such merger complies with
paragraph (A) or (B) above.
(t) "PRO RATA SHARE" means a fraction of an entire issuance of
New Securities, the numerator of which shall be the number of shares of
Common Stock owned by Borden immediately prior to such issuance of such
New Securities and the denominator of which shall be the aggregate
number of shares of Common Stock outstanding immediately prior to the
issuance of such New Securities.
<PAGE>
5
(u) "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to
a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act and
the declaration or ordering of effectiveness of such registration
statement or document.
(v) "REGISTRABLE SECURITIES" shall mean (i) any Equity
Security held by Borden that was issued to Borden by the Company
pursuant to, or otherwise acquired by Borden in accordance with, the
terms of this Agreement or the Purchase Agreement, (ii) any common
stock issued as (or issuable upon the conversion or exercise of any
warrant, right, option or other convertible security which is issued
as) a dividend or other distribution with respect to, or in exchange
for, or in replacement of, such Equity Security, and (iii) any common
stock issued by way of a stock split of the Equity Security referred to
in clauses (i) or (ii) above. For purposes of this Agreement, any
Registrable Securities shall cease to be Registrable Securities when
(w) a registration statement covering such Registrable Securities has
been declared effective and such Registrable Securities have been
disposed of pursuant to such effective registration statement, (x) such
Registrable Securities shall have been distributed pursuant to Rule 144
(or any similar provision then in effect) under the Securities Act, (y)
such Registrable Securities are sold by a person in a transaction in
which the rights under the provisions of this Agreement are not
assigned, or (z) such Registrable Securities shall cease to be
outstanding.
(w) "SEC" means the Securities and Exchange
Commission.
(x) "SECURITIES ACT" means the Securities Act of 1933, and the
rules and regulations promulgated thereunder, as amended.
(y) "STANDSTILL PERIOD" means a period of time commencing at
the Closing Date and terminating on the three year anniversary of the
Closing Date.
(z) "SUBSIDIARY" has the same meaning as in Rule 12b-2
promulgated under the Exchange Act.
(aa) A "SUBSTANTIAL PART" of the Company means more than 10%
of the Fair Market Value of the total assets of the Company and its
Subsidiaries as of the end of its most recent fiscal quarter ending
prior to the time the determination is made.
(bb) "UNAFFILIATED STOCKHOLDERS" means stockholders of the
Company other than Borden or Borden Affiliates.
<PAGE>
6
ARTICLE II
SUBSCRIPTION RIGHTS
SECTION 2.1. SUBSCRIPTION RIGHTS. So long as Borden has the
right to designate at least two Investor Directors pursuant to Section 4.1(c),
if the Board of Directors shall authorize the issuance of New Securities, then,
prior to each such authorization of New Securities, the Company shall offer to
Borden a Pro Rata Share of such New Securities. Any offer of New Securities made
to Borden under this Section 2.1 shall be made by notice in writing (the
"SUBSCRIPTION NOTICE") at least 20 days prior to the date on which the Company
authorizes the issuance of such New Securities. The Subscription Notice shall
set forth (i) the number of New Securities proposed to be issued to persons
other than Borden and the terms of such New Securities, (ii) the consideration,
if any, for which such New Securities are proposed to be issued and the terms of
payment, (iii) the number of New Securities offered to Borden in compliance with
the provisions of this Article II, and (iv) the proposed date of issuance of
such New Securities. Not later than 20 days after receipt of the Subscription
Notice, Borden shall notify the Company in writing whether it elects to purchase
all or any portion of the New Securities offered to Borden pursuant to the
Subscription Notice. If Borden shall elect to purchase any such New Securities,
the New Securities which it shall have elected to purchase shall be issued and
sold to Borden by the Company at the same time and on the same terms and
conditions as the New Securities are issued and sold to third parties. If, for
any reason, the issuance of New Securities to third parties is not consummated,
Borden's right to its Pro Rata Share of such issuance shall lapse, subject to
Borden's ongoing subscription right with respect to issuances of New Securities
at later dates or times.
ARTICLE III
BUSINESS COMBINATIONS BETWEEN THE COMPANY AND BORDEN
SECTION 3.1. PURCHASES OF EQUITY SECURITIES. (a) During the
Standstill Period, Borden and the Borden Affiliates shall not, (i) directly or
indirectly, purchase or otherwise acquire, or propose or offer to purchase or
otherwise acquire, any Equity Securities whether by tender offer, market
purchase, privately negotiated purchase, Business Combination or otherwise, if,
immediately after such purchase or acquisition, Borden's Interest would equal or
exceed the Initial Percentage or (ii) directly or indirectly propose or offer to
enter into a Business Combination.
(b) The prohibitions contained in Section 3.1(a) shall not
apply (i) during any period in which Borden's Interest is less than 10%, (ii) to
any Permitted Acquisition Transaction following (X) the commencement by any
third party of (1) a bona
<PAGE>
7
fide tender or exchange offer to purchase in excess of 20% of the outstanding
shares of Common Stock that the Board of Directors either recommends acceptance
of, expresses no opinion and remains neutral toward or is unable to take a
position with respect to, (2) a bona fide proposal to acquire all or
substantially all of the assets of the Company that the Board of Directors is
actively entertaining and the consummation of which would require approval by
the Stockholders of the Company pursuant to Section 271 of the Delaware General
Corporation Law or (3) a bona fide proposal to enter into any acquisition or
other business combination transaction with the Company that the Board of
Directors is actively entertaining, in the case of each of clauses (1)-(3),
which shall not have been approved in advance by the Company or the Board of
Directors, or (Y) the Company entering into (or announcing its intention to do
so) a definitive agreement, or an agreement contemplating a definitive
agreement, for any of the transactions described in clauses (1) - (3) above or
(iii) to any issuance of securities pursuant to Article II of this Agreement.
SECTION 3.2. ADDITIONAL LIMITATIONS. During the
Standstill Period, Borden and the Borden Affiliates shall not:
(a) other than in connection with an election contest to which
Rule 14a-11 under the Exchange Act applies initiated by a third party
or as otherwise approved by a majority of the Board of Directors (other
than the Investor Directors), make, or in any way participate, directly
or indirectly, in any "solicitation" of "proxies" to vote (as such
terms are used in the proxy rules of the SEC) or seek to advise,
encourage or influence any person or entity with respect to the voting
of any shares of capital stock of the Company, initiate, propose or
otherwise solicit stockholders of the Company for the approval of one
or more stockholder proposals or induce or attempt to induce any other
individual, firm, corporation, partnership or other entity to initiate
any stockholder proposal;
(b) deposit any shares of Common Stock into a voting trust or
subject any shares of Common Stock to any arrangement or agreement with
respect to the voting of such securities or form, join or in any way
participate in a "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) with respect to any shares of Common Stock; or
(c) except in connection with a transaction permitted by
Section 3.1(b) hereof, make any public announcement with respect to the
transactions referred to in Section 3.1(a) hereof.
<PAGE>
8
ARTICLE IV
CORPORATE GOVERNANCE
SECTION 4.1. COMPOSITION OF THE BOARD OF DIRECTORS.
(a) Except as otherwise provided herein, the Board of Directors
shall consist of ten Directors.
(b) Prior to the Closing Date, the Company shall cause one of
the six current Directors to resign his directorship. At the Closing Date, the
Board of Directors shall consist of (i) the five Directors on the Board of
Directors immediately prior to the Closing Date (of whom two shall be
independent directors as required by the rules of the Nasdaq National Market
System and who shall be deemed to be Independent Directors hereunder; the
remaining three current Directors shall be deemed to be Management Directors),
(ii) four Investor Directors designated by Borden, and (iii) one additional
Independent Director to be chosen by mutual agreement between the Management
Directors and Borden. In the event that Borden and the Management Directors
cannot agree on the Independent Director specified in clause (iii) of the
preceding sentence, then the Management Directors shall select an Independent
Director to serve on the Board of Directors for the period from the Closing Date
until the later of (x) the date that is eighteen months thereafter or (y), if
consented to by the Management Directors, the expiration of the term of such
Independent Director (such eighteen month or longer period, the "Independent
Director Term") from a list prepared by Borden of three potential candidates
none of whom shall be or have been an employee, consultant or agent of Borden or
any of the Borden Affiliates. Following the expiration of the Independent
Director Term, in the event that Borden and the Management Directors cannot
agree on the continuation of such individual as an Independent Director or a
replacement for such Independent Director, then Borden shall select an
Independent Director to serve on the Board of Directors for the following
Independent Director Term from a list prepared by the Management Directors of
three potential candidates none of whom shall be or have been an employee,
consultant or agent of the Company or its Affiliates. The procedures set forth
in the preceding two sentences with respect to the selection of an Independent
Director by Borden and the Management Directors shall be followed, alternating
between the procedures set forth in the two preceding sentences for each
subsequent Independent Director Term, at all times during the term of this
Agreement that Borden's Interest is 10% or greater. The Investor Directors and
the Independent Director chosen pursuant to clause (iii) above shall be
apportioned, to the extent possible, equally among the three classes of
Directors.
(c) At all times during the term of this Agreement
that Borden's Interest is:
<PAGE>
9
(ibelow 10% Borden shall have no right to
designate any Directors, and the Management Directors shall
have the right to designate eight Management Directors and two
Independent Directors;
(ii10% or above but less than 20%, Borden shall
have the right to designate one Investor Director, and the
Management Directors shall have the right to designate six
Management Directors and two Independent Directors;
(iii20% or above but less than 25%, Borden shall
have the right to designate two Investor Directors and the
Management Directors shall have the right to designate five
Management Directors and two Independent Directors;
(iv25% or above but less than 50%, Borden shall
have the right to designate four Investor Directors and the
Management Directors shall have the right to designate three
Management Directors and two Independent Directors;
(vin the event that a Permitted Acquisition
Transaction or other transaction permitted by this Agreement
results in Borden's Interest being equal to or exceeding 50%,
Borden shall have the right to designate five Investor
Directors and one Independent Director and the Management
Directors shall have the right to designate two Management
Directors and one Independent Director; and
(vi10% or above, Borden and the Management
Directors shall select, by mutual agreement, one Independent
Director pursuant to the procedure set forth in Section 4.1(b)
hereof.
(d) Notwithstanding the foregoing, Borden and the Company
hereby agree that the number of directorships on the Board of Directors may be
increased or decreased from time to time as the parties may mutually agree;
provided, however, that (i) there shall at all times be an even number of
Directors, (ii) the number of Directors shall not be fewer than eight or greater
than twelve, and (iii) at all times that Borden's Interest is 10% or above, one
Director shall be chosen pursuant to clause (vi) of subsection 4.1(c). In the
event that Borden and the Company agree to increase or decrease the number of
directorships on the Board of Directors in accordance with the foregoing, the
composition of the Board will be as set forth on Exhibit A hereto, based upon
Borden's Interest at all times during the term of this Agreement.
(e) In the event that Borden's Interest is such that
there are more Investor Directors, Independent Directors or
<PAGE>
10
Management Directors on the Board of Directors than Borden or the Management
Directors, as the case may be, has the right to designate pursuant to Section
4.1(c) or 4.1(d), as the case may be, Borden or the Management Directors, as the
case may be, shall promptly cause to resign, and take all other action
reasonably necessary to cause the prompt removal of, that number of Investor
Directors, Independent Directors or Management Directors, as the case may be, as
required to make the remaining number of Investor Directors, Independent
Directors and Management Directors in conformity with the provisions of Section
4.1(c) or 4.1(d), as the case may be. Each of Borden and the Management
Directors shall have the right to designate, in accordance with Section 4.1(c)
or 4.1(d), as the case may be, replacement Directors for the Investor Directors,
Independent Directors or Management Directors, as the case may be, removed or
whose resignation shall have been obtained by the other party pursuant to this
paragraph.
(f) Subject to Section 4.1(e), Borden and the Management
Directors, respectively, shall have the right to designate any replacement for a
director designated in accordance with Section 4.1 by Borden or the Management
Directors, respectively, at the termination of such director's term or upon
death, resignation, retirement, disqualification, removal from office or other
cause. The Board of Directors shall elect each person so designated upon
nomination by the Nominating Committee.
(g) No individual who is an officer, director, partner or
principal stockholder of any competitor of the Company or any of its
Subsidiaries (other than Borden and its Affiliates) shall serve as a Director.
(h) Each person designated as a nominee for Director pursuant
to this Section 4.1 shall be nominated for such position by the Nominating
Committee unless the Nominating Committee, in the execution of its fiduciary
duties, shall reasonably determine such designee is not qualified to serve on
the Board of Directors. If the Nominating Committee shall reasonably determine
that such designee is not so qualified, the designating person shall have the
opportunity to specify one or more additional designees who shall become
nominees subject to the qualification set forth in the immediately preceding
sentence.
SECTION 4.2. SOLICITATION AND VOTING OF SHARES. (a) The
Company shall use its best efforts to solicit from the stockholders of the
Company eligible to vote for the election of Directors proxies in favor of the
nominees designated in accordance with Section 4.1.
(b) In any election of Directors or any meeting of the
stockholders of the Company called expressly for the removal of Directors,
Borden and its Affiliates will vote their shares of Common Stock for all
nominees in proportion to the votes cast by the other holders of shares of
Common Stock; provided that Borden and its Affiliates may cast any or all of
their votes, in their
<PAGE>
11
sole discretion, (i) in favor of any nominee designated by Borden pursuant to
Section 4.1 and (ii) in connection with any election contest to which Rule
14a-11 under the Exchange Act applies. Subject to Section 4.8, in all other
matters submitted to a vote of the Company stockholders, Borden may vote any or
all of its shares in its sole discretion.
SECTION 4.3. COMMITTEES. (a) Subject to the general
oversight and authority of the full Board of Directors, the Board
of Directors shall establish, empower and maintain the committees
of the Board of Directors contemplated by this Section 4.3.
(b) The following committees shall be established, empowered
and maintained by the Board of Directors at all times during the term of this
Agreement that Borden's Interest is 15% or greater:
(ian Audit Committee, consisting solely of
Independent Directors;
(iia Nominating Committee, responsible, among
other things, for the nomination, subject to Section 4.1(h),
of Directors and the solicitation of stockholder proxies, and
consisting solely of an equal number of Investor Directors and
Management Directors;
(iiia Compensation Committee, responsible, among
other things, for recommending to the Board of Directors, for
approval by a majority of the Board of Directors or such other
percentage of the Directors as provided in Section 4.4, the
adoption and amendment of all employee benefit plans and
arrangements and the engagement of, terms of any employment
agreements and arrangements with, and termination of, all
corporate officers of the Company, and consisting of an equal
number of Investor Directors, Management Directors and
Independent Directors;
(iva Stock Option Committee, responsible, among
other things, for (A) recommending to the Board of Directors,
for approval by a majority of the Board of Directors or such
other percentage of Directors as provided in Section 4.4, the
adoption and amendment of all stock option plans of the
Company and (B) for the administration of such plans including
grants of options thereunder, and, at all times during the
term of this Agreement that Borden's Interest is (x) 25% or
greater, consisting solely of an equal number of Independent
Directors and Investor Directors who constitute disinterested
persons (as such term is defined in Rule 16b-3(d) under the
Exchange Act) and (y) 15% or greater but less than 25%,
consisting solely of two (2) Independent Directors and one (1)
Investor Director who constitutes a disinterested person; and
<PAGE>
12
(vsuch other committees as the Board of
Directors deems necessary or desirable; PROVIDED that such
committees are established in accordance with the terms of
this Agreement.
(c) No action by any committee of the Board shall be valid
unless taken at a meeting for which adequate notice has been duly given or
waived by the members of such committee. Such notice shall include a description
of the general nature of the business to be transacted at the meeting and no
other business may be transacted at each meeting. Any committee member unable to
participate in person at any meeting shall be given the opportunity to
participate by telephone. Any Investor Director serving on any committee may
designate as his alternate another Investor Director, provided that such
alternate, in the case of the Stock Option Committee, is deemed to be a
disinterested person (as such term is defined in Rule 16b-3(d) under the
Exchange Act). Each of the committees established by the Board of Directors
pursuant to this Section 4.3 shall establish such other rules and procedures for
its operation and governance as it shall see fit and may seek such consultation
and advice as to matters within its purview as it shall require.
(d) Prior to the Closing Date, the Board of Directors shall
abolish the Executive Committee of the Board of Directors and no Executive
Committee shall be maintained at any time that Borden's Interest is 15% or
greater.
SECTION 4.4. SUPER-MAJORITY DIRECTORS' APPROVAL REQUIRED FOR
CERTAIN ACTIONS. The approval of that number of Directors that represents 662/3%
of the total number of Directors, rounded up to the nearest whole number shall
be required for the Board of Directors to approve and authorize any of the
following; PROVIDED that so long as Borden's Interest is 25% or greater, the
approval of at least one of the Investor Directors shall be required to take any
action pursuant to this Section 4.4:
(a) the entry by the Company or any of its Subsidiaries into
any merger or consolidation or the acquisition by the Company or any of
its Subsidiaries of any business or assets that would constitute a
Substantial Part of the business or assets of the Company, whether such
acquisition be by merger or consolidation or the purchase or sale of
stock or assets or otherwise;
(b) the sale, lease, pledge, grant of security interest in,
license, transfer or other disposal by the Company or any of its
Subsidiaries of all or a Substantial Part of the business or assets of
the Company;
(c) the issuance of any debt or Equity Securities or other
capital stock of the Company or any debt or equity securities or other
capital stock of any of its Subsidiaries, except (i) to a wholly owned
Subsidiary of the
<PAGE>
13
Company or to the Company, as the case may be, and (ii) the issuance of
shares of capital stock of the Company or options to purchase such
shares pursuant to any employee compensation plan in existence at the
Closing Date, including, without limitation, the ESOP, the Stock
Purchase Plan and the Company's stock option plans, or approved by the
Stock Option Committee, the Compensation Committee and the Board of
Directors pursuant to this Section 4.4;
(d) a reclassification, combination, split, subdivision or
redemption, purchase or other acquisition, directly or indirectly, of
any of the debt or equity securities or other capital stock of the
Company or any of its Subsidiaries;
(e) any amendment to the Certificate of Incorporation or
By-Laws of the Company or any change in the size or composition of the
Board of Directors of the Company or committee thereof except in
accordance with this Agreement;
(f) the establishment of any committee of the Board of
Directors other than as provided in Section 4.3(b)(i)
through (iv);
(g) any significant change in accounting policies or
procedures of the Company or any of its Subsidiaries unless required
under generally accepted accounting principles;
(h) the payment, discharge or satisfaction of any claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) other than (i) in the ordinary course of
business and consistent with past practice or (ii) incurred other than
in the ordinary course of business where such claim, liability or
obligation does not exceed $5,000,000;
(i) the commencement or termination of any suit, litigation or
proceeding that involves a claim, liability or obligation in excess of
$5,000,000 or the outcome of which could be material to the business or
assets of the Company and its Subsidiaries, taken as a whole;
(j) any (i) incurrence of indebtedness for borrowed money
(excluding borrowings under existing revolving credit facilities for
purposes approved pursuant to this Section 4.4 to the extent herein
required) or (ii) capital expenditure by the Company or any of its
Subsidiaries that (x) in the case of (i) or (ii), if specifically
contemplated by the Annual Operating Plans (as defined below), is
greater than $2,500,000 and (y) in the case of (i) or (ii), if not
specifically contemplated by the Annual Operating Plans, is greater
than $1,000,000;
<PAGE>
14
(k) the institution by the Company or any of its
Subsidiaries of any shareholder rights plan or similar plan
or device; or
(l) the dissolution of the Company; the adoption of a plan of
liquidation of the Company; any action by the Company or any
Significant Subsidiary (as such term is defined in Rule 12b-2
promulgated under the Exchange Act) thereof to commence any suit, case,
proceeding or other action (A) under any existing or future law of any
jurisdiction relating to bankruptcy, insolvency, reorganization or
relief of debtors seeking to have an order for relief entered with
respect to the Company or any Significant Subsidiary thereof, or
seeking to adjudicate the Company or any Significant Subsidiary thereof
a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to the Company or any Significant Subsidiary
thereof, or (B) seeking appointment of a receiver, trustee, custodian
or other similar official for the Company or any Significant Subsidiary
thereof, or for all or any Substantial Part of the assets of the
Company or any Significant Subsidiary thereof, or making a general
assignment for the benefit of the creditors of the Company or any
Significant Subsidiary thereof.
(m) the employment of the chief executive officer, chief
operating officer or chief financial officer of the Company (each a
"SENIOR OFFICER");
(n) annual operating plans for the Company and its
Subsidiaries, which shall include all material capital expenditures and
borrowing plans applicable to the year in question (the "ANNUAL
OPERATING PLANS"); and
(o) the adoption or amendment of any employee benefit or
compensation plan or arrangements or the engagement of, terms of any
employment agreements or arrangements with, or termination of, all
executive officers of the Company.
SECTION 4.5. ENFORCEMENT OF THIS AGREEMENT. The approval of a
majority of the Board of Directors or a majority of the Independent Directors
shall be all that is required for the Company to seek to enforce the terms of
this Agreement.
SECTION 4.6. CERTIFICATE OF INCORPORATION AND BY-LAWS. The
Company and Borden shall take or cause to be taken all lawful action necessary
to ensure at all times that the Company's Certificate of Incorporation and
By-Laws are not, at any time, inconsistent with the provisions of this
Agreement. In furtherance of the foregoing, at its first annual stockholders
meeting following the Closing Date, the Company agrees to submit to its
stockholders, at a duly held meeting of stockholders or
<PAGE>
15
pursuant to a written consent of stockholders, certain amendments to the
Company's Certificate of Incorporation and By-Laws substantially in the Form of
Exhibits B and C hereto.
SECTION 4.7. BOARD OF DIRECTORS MEETINGS/FINANCIAL
INFORMATION. The Board of Directors shall meet at least quarterly at all times
during the term of this Agreement that Borden's Interest is 10% or greater. In
addition to the foregoing, from the Closing Date to the one year anniversary
thereof, the Board of Directors shall meet a minimum of nine (9) times and
following the one year anniversary of the Closing Date the Board of Directors
shall meet as frequently as mutually agreed upon by the Management Directors and
Borden. At all times during the term of this Agreement that Borden's Interest is
10% or greater the Company shall provide the Directors as soon as available
after the end of each calendar month, copies of the unaudited interim financial
statements of the Company and its consolidated Subsidiaries as at the end of
such month or fiscal quarter, as the case may be, in each case in a form
customarily distributed to executives of the Company.
SECTION 4.8. FAILURE TO COMPLY WITH THIS ARTICLE IV. In
addition to any other remedy at law or in equity Borden may have, in the event
that any action is taken or omitted to be taken in violation of this Article IV
which results in the failure to nominate or solicit proxies for the election of
the Investor Directors or the failure to elect Investor Directors, in each case
as set forth herein, the taking of any action specified in Section 4.4(a), (b)
or (e) (to the extent, with respect to Section 4.4(e), that such action amends
Exhibit A or B hereto) without the required approvals specified therein, the
establishment or maintenance of any committee of the Board of Directors in
violation of Section 4.3 hereof or the failure to comply with Sections 4.1(d)
and 4.1(e) hereof, the provisions of Articles III and V hereof shall as of the
date of such occurrence or omission be of no further force or effect.
ARTICLE V
TRANSFER OF COMMON STOCK
SECTION 5.1. TRANSFER OF COMMON STOCK. (a) During the
Standstill Period, Borden will not, and will not permit any Borden Affiliate to,
directly or indirectly sell, transfer or otherwise dispose of any shares of
Common Stock, except (i) pursuant to a registered underwritten public offering
in accordance with Article VI, (ii) to the extent applicable, in accordance with
the volume and manner of sale limitations of Rule 144 promulgated under the
Securities Act, (iii) pursuant to an applicable exemption from the registration
requirements of the Securities Act or (iv) to a Borden Affiliate (or any partner
of a Borden Affiliate). Notwithstanding the foregoing, with respect to any
transfer or disposition of shares of Common Stock pursuant
<PAGE>
16
to clause (iii) above, (x) Borden will not, and will not permit any Borden
Affiliate to, directly or indirectly, in one or more transactions or series of
transactions, sell, transfer or otherwise dispose of an aggregate number of
shares of Common Stock in excess of 5% of the then outstanding shares of Common
Stock to any one person or group (as defined in Section 13(d)(3) of the Exchange
Act) and (y) Borden will not, and will not permit any Borden Affiliate to,
directly or indirectly, in one or more transactions or series of transactions,
sell, transfer or otherwise dispose of in excess of 1% of the then outstanding
shares of Common Stock pursuant to clause (iii) above, to any person or entity
(A) who is not an "insurance company", an "investment company", a "small
business investment company", a "plan", an "employee benefit plan" or a "bank"
(as such terms are used in Rule 144A(a)(1)(i)(A) through (E) and (vi)
promulgated under the Securities Act) and (B) who, prior to an acquisition
pursuant to clause (iii) above, has a Schedule 13D (and not a Schedule 13G) on
file with the SEC with respect to the Common Stock.
(b) During the Standstill Period, Borden shall not sell,
transfer or otherwise dispose of any of the capital stock of any Subsidiary of
Borden that owns shares of Common Stock, except to an Affiliate of Borden or as
otherwise permitted pursuant to clause (a) of this Section 5.1.
(c) Proposed transfers of shares of Common Stock that are not
in compliance with this Article V shall be of no force or effect and the Company
shall not be required to register any such transfer.
ARTICLE VI
REGISTRATION RIGHTS
SECTION 6.1. RESTRICTIVE LEGEND. Each certificate representing
Registrable Securities shall, except as otherwise provided in this Section 6.1
or in Section 6.2, be stamped or otherwise imprinted with a legend substantially
in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED
OF UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE."
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company (it being agreed that Simpson Thacher & Bartlett
shall be satisfactory) the securities being sold thereby may be publicly sold
without registration under the Securities Act.
<PAGE>
17
SECTION 6.2. NOTICE OF PROPOSED TRANSFER. Prior to any
proposed transfer of any Registrable Securities (other than under the
circumstances described in Section 6.3, 6.4 or 6.5), the Holder thereof shall
give written notice to the Company of its intention to effect such transfer.
Each such notice shall describe the manner of the proposed transfer and, if
requested by the Company, shall be accompanied by an opinion of counsel
satisfactory to the Company (it being agreed that Simpson Thacher & Bartlett
shall be satisfactory) to the effect that the proposed transfer does not violate
the terms of this Agreement and that the proposed transfer may be effected
without registration under the Securities Act, whereupon the Holder of such
security shall be entitled to transfer such security in accordance with the
terms of its notice; PROVIDED, HOWEVER, that no such opinion of counsel shall be
required for a transfer to a Borden Affiliate. Each certificate for Registrable
Securities transferred as above provided shall bear the legend set forth in
Section 6.1, except that such certificate shall not bear such legend if (i) such
transfer is in accordance with the provisions of Rule 144 or Rule 144A (or any
other rule permitting public sale without registration under the Securities Act)
or (ii) the opinion of counsel referred to above is to the further effect that
the transferee and any subsequent transferee (other than an Affiliate of the
Company) would be entitled to transfer such securities in a public sale without
registration under the Securities Act. The restrictions provided for in this
Section 6.2 shall not apply to securities that are not required to bear the
legend prescribed by Section 6.1 in accordance with the provisions of that
Section.
SECTION 6.3. REQUEST FOR REGISTRATION. (a) At any time, and
from time to time, on and after the Closing Date, the Holders of at least 25% of
the then Registrable Securities (the "INITIATING HOLDERS") may request in a
written notice that the Company file a registration statement under the
Securities Act (or a similar document pursuant to any other statute then in
effect corresponding to the Securities Act) covering the registration of any or
all Registrable Securities held by such Initiating Holders in the manner
specified in such notice. Following receipt of any notice under this Section 6.3
the Company shall (x) within ten days notify all other Holders of such request
in writing and (y) thereupon will, as expeditiously as possible, use its best
efforts to cause to be registered under the Securities Act all Registrable
Securities that the Initiating Holders and such other Holders have, within ten
days after the Company has given such notice, requested be registered in
accordance with the manner of disposition specified in such notice by the
Initiating Holders; PROVIDED, HOWEVER, that, notwithstanding anything to the
contrary contained herein, the Company shall not be required to have any such
registration statement be declared effective by the SEC prior to the six month
anniversary of the Closing Date.
(b) If the Initiating Holders intend to have the
Registrable Securities distributed by means of an underwritten
<PAGE>
18
offering, the Company shall include such information in the written notice
referred to in clause (x) of Section 6.3(a) above. In such event, the right of
any Holder to include its Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwritten offering and
the inclusion of such Holder's Registrable Securities in the underwritten
offering (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided below. All Holders
proposing to distribute Registrable Securities through such underwritten
offering shall enter into an underwriting agreement in customary form with the
underwriter or underwriters. Such underwriter or underwriters shall be selected
by a majority in interest of the Initiating Holders and shall be approved by the
Company, which approval shall not be unreasonably withheld. No Holder shall be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding such Holder, the Registrable Securities of such Holder and such
Holder's intended method of distribution and any other representations required
by law or reasonably required by the underwriter. If any Holder of Registrable
Securities disapproves of the terms of the underwriting, such Holder may elect
to withdraw all its Registrable Securities by written notice to the Company, the
managing underwriter and the Initiating Holders. The securities so withdrawn
also shall be withdrawn from registration.
(c) Notwithstanding any provision of this Agreement to the
contrary, the Company shall not be required to effect a registration pursuant to
this Section 6.3 during the period starting with the date of filing by the
Company of, and ending on a date 180 days following the effective date of, (i)
any registration statement requested under this Section 6.3(a) or Section 6.5 or
(ii) a registration statement pertaining to a public offering of securities for
the account of the Company or on behalf of the selling stockholders under any
other registration rights agreement, in each case which the Holders have been
entitled to join pursuant to Section 6.4; PROVIDED that (x) the Company shall
actively employ in good faith all reasonable efforts to cause any such
registration statement referred to in clause (i) or (ii) above to become
effective as soon as possible and (y) with respect to any such registration
statement involving an underwritten offering, the 180 day period referred to
above may be reduced or waived in the discretion of the managing underwriter for
such offering.
(d) A registration requested pursuant to this section 6.3
shall not be deemed to have been effected pursuant this Section 6.3 for purposes
of Section 6.8 unless (i) it has been declared effective by the Commission, (ii)
it has remained effective for the period set forth in Section 6.6(a), and (iii)
the offering of Registrable Securities pursuant to such registration is not
subject to any stop order, injunction or other order or requirement of the
Commission (other than any such
<PAGE>
19
stop order, injunction, or other requirement of the Commission prompted by any
act or omission of Holders of Registrable Securities).
(e) Subject to the following sentence, if a requested
registration pursuant to this Section 6.3 involves an underwritten offering and
the managing underwriter advises the Company in writing that, in its opinion,
the number of securities requested to be included in such registration
(including securities of the Company which are not Registrable Securities)
exceeds the number that can be sold in such offering at a price reasonably
related to the then current market value of such securities, the Company will
include in such registration only the Registrable Securities requested to be
included in such registration. In the event that the number of Registrable
Securities requested to be included in such registration exceeds the number
which, in the opinion of such managing underwriter, may be sold at a price
reasonably related to the then current market value of such securities, the
number of such Registrable Securities to be included in such registration shall
be allocated pro rata among all requesting Holders on the basis of the relative
number of shares of Registrable Securities then held by each such Holder
(provided that any shares hereby allocated to any such Holder that exceed such
Holder's request shall be reallocated among the remaining requesting Holders in
like manner). In the event that the number of Registrable Securities requested
to be included in such registration is less than the number which, in the
opinion of the managing underwriter, may be sold at a price reasonably related
to the then current market value of such securities, the Company may include in
such registration the securities the Company proposes to sell up to the number
of securities that, in the opinion of the managing underwriter, may be sold at a
price reasonably related to the then current market value of such securities.
The Company will not include in any requested registration pursuant to this
Section 6.3 any securities which are not Registrable Securities (other than
securities of the Company) without the prior written consent of the holders of
at least a majority of the Registrable Securities included in such registration.
(f) If the Board of Directors of the Company, in its good
faith judgment, determines that any registration of Registrable Securities
should not be made or continued due to a valid need not to disclose confidential
information or because it would materially interfere with any material
financing, acquisition, corporate reorganization or merger or other transaction
involving the Company (collectively, a "VALID BUSINESS REASON"), the Company may
postpone filing a registration statement relating to a request for registration
under this Section 6.3 until such Valid Business Reason no longer exists, but in
no event for more than three months from the date of the notice referred to
below, and, in case any such registration statement has been filed the Company
may, with respect to a registration effected pursuant to this Section 6.3, cause
such
<PAGE>
20
registration statement to be withdrawn and its effectiveness terminated or may,
with respect to a registration effected pursuant to this Section 6.3 or Section
6.5, postpone amending or supplementing such registration statement; and the
Company shall give written notice (a "DELAY NOTICE") of its determination to
postpone or withdraw a registration statement and of the fact that the Valid
Business Reason for such postponement or withdrawal no longer exists, in each
case, promptly after the occurrence thereof. Upon the request of any holder of
Registrable Securities included or to be included in any such registration
statement, the Company will disclose to such holder the nature of such Valid
Business Reason in reasonable detail; PROVIDED, that such holder executes a
confidentiality agreement reasonably satisfactory to the Company; PROVIDED,
FURTHER, that any such confidentiality agreement shall terminate upon the public
disclosure of such Valid Business Reason. Notwithstanding the foregoing
provisions of this subparagraph (f), no registration statement filed and
subsequently withdrawn by reason of any existing or anticipated Valid Business
Reason as hereinabove provided shall count as one of the four registration
statements effected pursuant to this Section 6.3 or Section 6.5 for purposes of
Section 6.8 and the Company shall be entitled to serve only one Delay Notice (i)
within any period of 270 consecutive days, if such Delay Notice relates to a
request under Section 6.3(a) (or 180 consecutive days, if such Delay Notice
relates to a request under Section 6.5) or (ii) with respect to any two
consecutive registrations requested pursuant to this Section 6.3 or Section 6.5.
SECTION 6.4. INCIDENTAL REGISTRATION. Subject to Section 6.9,
if at any time the Company determines that it shall file a registration
statement under the Securities Act (other than a registration statement on a
Form S-4 or S-8 or any successor or similar forms) on any form that also would
permit the registration of the Registrable Securities and such filing is to be
on its behalf and/or on behalf of selling holders of its securities for the
general registration of its Common Stock to be sold for cash, the Company shall
each such time promptly give each Holder written notice of such determination
setting forth the date on which the Company proposes to file such registration
statement, which date shall be no earlier than thirty days from the date of such
notice, and advising each Holder of its right to have Registrable Securities
included in such registration. Upon the written request of any Holder received
by the Company no later than fifteen days after the date of the Company's
notice, the Company shall use its best efforts to cause to be registered under
the Securities Act all of the Registrable Securities that each such Holder has
so requested to be registered; PROVIDED that if, at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to proceed with the
proposed registration of the securities to be sold by it, the Company may, at
its election, give written notice
<PAGE>
21
of such determination to each Holder of Registrable Securities and, thereupon,
shall be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith), without prejudice, however, to
the rights of any Holder to request such registration to be effected as a
registration under Section 6.3. If, in the written opinion of the managing
underwriter (or, in the case of a non-underwritten offering, in the written
opinion of the Company), the total amount of such securities to be so
registered, including such Registrable Securities, will exceed the maximum
amount of the Company's securities that can be marketed at a price reasonably
related to the then current market value of such securities, then the Company
shall include in such registration (i) first, all the securities the Company
proposes to sell for its own account or is required to register on behalf of any
third party exercising rights similar to those granted in Section 6.3(a) and
without having the adverse effect referred to above, and (ii) second, to the
extent that the number of securities which the Company proposes to sell for its
own account pursuant to this Section 6.4 or is required to register on behalf of
any third party exercising rights similar to those granted in Section 6.3(a) is
less than the number of equity securities which the Company has been advised can
be sold in such offering without having the adverse effect referred to above,
all Registrable Securities requested to be included in such registration by the
Holders pursuant to this Section 6.4 and all shares of Common Stock requested to
be included by third parties exercising the rights similar to those granted in
this Section 6.4; PROVIDED that if the number of Registrable Securities and
other shares of Common Stock requested to be included in such registration by
the Holders pursuant to this Section 6.4 and third parties exercising rights
similar to those granted in this Section 6.4, together with the number of
securities to be included in such registration pursuant to clause (i) of this
Section 6.4, exceeds the number which the Company has been advised can be sold
in such offering without having the adverse effect referred to above, the number
of such Registerable Securities requested to be included in such registration by
the Holders pursuant to this Section 6.4 shall be limited to such extent and
shall be allocated pro rata among all such requesting Holders and third parties
exercising rights similar to those granted in this Section 6.4 on the basis of
the relative number of Registrable Securities each such Holder has requested to
be included in such registration and the number of shares of Common Stock
requested to be included in such registration by such third parties.
SECTION 6.5. REGISTRATION ON FORM S-3. If at any time (a) any
Holder requests in writing that the Company file a registration statement on
Form S-3 or any successor thereto for a public offering of all or any portion of
the Registrable Securities held by such requesting Holder and (b) the Company is
a registrant entitled to use Form S-3 or any successor thereto, then the Company
shall use its best efforts to register under the
<PAGE>
22
Securities Act on Form S-3 or any successor thereto, for public sale in
accordance with the method of disposition specified in such request, including,
without limitation, pursuant to Rule 415 under the Securities Act, the
Registrable Securities specified in such request. Whenever the Company is
required by this Section 6.5 to use its best efforts to effect the registration
of Registrable Securities, each of the limitations, procedures and requirements
of Section 6.3(b), (c), (e) and (f) (including but not limited to the
requirement that the Company notify all Holders from whom a request has not been
received and provide them with the opportunity to participate in the offering)
shall apply to such registration.
SECTION 6.6. OBLIGATIONS OF THE COMPANY. Whenever required
under Section 6.3 or Section 6.5 to use its best efforts to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as possible:
(a) prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its best
efforts to cause such registration statement to become and remain
effective for the period of the distribution contemplated thereby
determined as provided hereafter;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions
of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement, and
furnish to the Holders of the Registrable Securities copies of any such
amendments and supplements prior to their being used or filed with the
Commission;
(c) furnish to the Holders such numbers of copies of the
registration statement and the prospectus included therein (including
each preliminary prospectus and any amendments or supplements thereto
in conformity with the requirements of the Securities Act) and such
other documents and information as they may reasonably request and make
available for inspection by the parties referred to in Section 6.6(d)
below such financial and other information and books and records of the
Company, and cause the officers, directors, employees, counsel and
independent certified public accountants of the Company to respond to
such inquiries, as shall be reasonably necessary, in the judgment of
the respective counsel referred to in such Section, to conduct a
reasonable investigation within the meaning of Section 11 of the
Securities Act;
(d) provide (i) the Holders of the Registrable
Securities to be included in such registration statement,
<PAGE>
23
(ii) the underwriters (which term, for purposes of this Agreement,
shall include a person deemed to be an underwriter within the meaning
of Section 2(11) of the Securities Act), if any, thereof, (iii) the
sales or placement agent, if any, therefor, (iv) counsel for such
underwriters or agent, and (v) not more than one counsel for all the
Holders of such Registrable Securities the opportunity to participate
in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment or
supplement thereto;
(e) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions within the
United States and Puerto Rico as shall be reasonably appropriate for
the distribution of the Registrable Securities covered by the
registration statement; PROVIDED, HOWEVER, that the Company shall not
be required in connection therewith or as a condition thereto to
qualify to do business in or to file a general consent to service of
process in any jurisdiction wherein it would not but for the
requirements of this paragraph (e) be obligated to do so; and PROVIDED
FURTHER that the Company shall not be required to qualify such
Registrable Securities in any jurisdiction in which the securities
regulatory authority requires that any Holder submit its Registrable
Securities to the terms, provisions and restrictions of any escrow,
lockup or similar agreement(s) for consent to sell Registrable
Securities in such jurisdiction unless such Holder agrees to do so;
(f) promptly notify the selling Holders of Registrable
Securities, the sales or placement agent, if any, therefor and the
managing underwriter or underwriters, if any, thereof and confirm such
advice in writing, (i) when such registration statement or the
prospectus included therein or any prospectus amendment or supplement
or post-effective amendment has been filed, and, with respect to such
registration statement or any post-effective amendment, when the same
has become effective, (ii) of any comments by the Commission or by any
Blue Sky or securities commissioner or regulator of any state with
respect thereto or any request by the Commission for amendments or
supplements to such registration statement or prospectus or for
additional information, (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of such registration statement
or the initiation or threatening of any proceedings for that purpose,
(iv) if at any time the representations and warranties of the Company
contained in any underwriting agreement or other customary agreement
cease to be true and correct in all material respects or (v) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the
<PAGE>
24
Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such
purpose;
(g) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date;
(h) promptly notify each Holder for whom such Registrable
Securities are covered by such registration statement, at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make, in
light of the circumstances under which they were made, the statements
therein not misleading, and at the request of any such Holder promptly
prepare and furnish to such Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make, in light of the circumstances under which they were
made, the statements therein not misleading;
(i) furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to Section 6.3 or
Section 6.5, if the method of distribution is by means of an
underwriting, on the date that the Registrable Securities are delivered
to the underwriters for sale pursuant to such registration, or if such
Registrable Securities are not being sold through underwriters, on the
date that the registration statement with respect to such Registrable
Securities becomes effective, (1) a signed opinion, dated such date, of
the independent legal counsel representing the Company for the purpose
of such registration, addressed to the underwriters, if any, and if
such Registrable Securities are not being sold through underwriters,
then to the Holders making such request, as to such matters as such
underwriters or the Holders holding a majority of the Registrable
Securities included in such registration, as the case may be, may
reasonably request and as would be customary in such a transaction; and
(2) letters dated such date and the date the offering is priced from
the independent certified public accountants of the Company, addressed
to the underwriters, if any, and if such Registrable Securities are not
being sold through underwriters, then to the Holders making such
request and, if such accountants refuse to deliver such letters to such
Holders, then to the Company (i) stating that they are
<PAGE>
25
independent certified public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the
financial statements and other financial data of the Company included
in the registration statement or the prospectus, or any amendment or
supplement thereto, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and (ii)
covering such other financial matters (including information as to the
period ending not more than five (5) business days prior to the date of
such letters) with respect to the registration in respect of which such
letter is being given as such underwriters or the Holders holding a
majority of the Registrable Securities included in such registration,
as the case may be, may reasonably request and as would be customary in
such a transaction;
(j) enter into customary agreements (including if the method
of distribution is by means of an underwriting, an underwriting
agreement in customary form, including, without limitation, customary
indemnification provisions consistent with Section 6.11) and take such
other actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Securities to be so
included in the registration statement;
(k) use its best efforts to obtain the consent or approval of
each governmental agency or authority, whether federal, state or local,
which may be required to effect registration or the offering or sale in
connection therewith or to enable the selling Holder or Holders to
offer, or to consummate the disposition of, their Registrable
Securities;
(l) cooperate with the Holders of the Registrable Securities
and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall be printed,
lithographed or engraved, or produced by any combination of such
methods, on steel engraved borders and which shall not bear any
restrictive legends; and, in the case of an underwritten offering,
enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters may request at
least two business days prior to any sale of the Registrable
Securities;
(m) otherwise comply with all applicable rules and regulations
of the Commission, and make available to its security holders, as soon
as reasonably practicable, but not later than eighteen months after the
effective date of the registration statement, an earnings statement
covering the period of at least twelve months beginning with the first
full month after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section 11(a)
of the Securities Act;
<PAGE>
26
(n) use its best efforts to list the Registrable Securities
covered by such registration statement with any securities exchange or
quotation system on which the Common Stock of the Company is then
listed or quoted; and
(o) use its best efforts to make available the executive
officers of the Company to participate with the Holders of Registrable
Securities and any underwriters in any "road shows" or other selling
efforts that may be reasonably requested by the Holders in connection
with the methods of distribution for the Registrable Securities.
For purposes of Sections 6.6(a) and 6.6(b), and with respect to (i) registration
required pursuant to Section 6.3, (A) the period of distribution of Registrable
Securities in a firm commitment underwritten public offering shall be deemed to
extend until each underwriter has completed the distribution of all securities
purchased by it and (B) the period of distribution of Registrable Securities in
any other registration shall be deemed to extend until the earlier of the sale
of all Registrable Securities covered thereby and nine months after the
effective date thereof and (ii) registrations required pursuant to Section 6.5,
the period of distribution of Registrable Securities in any registration (firm
commitment underwritten or otherwise) shall be deemed to extend until the
earlier of the sale of all Registrable Securities covered thereby and two years
after the effective date thereof.
Each Holder of Registrable Securities agrees that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in clause (h) of this Section 6.6, such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by clause (h)
of this Section 6.6, and, if so directed by the Company, such Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice; PROVIDED, HOWEVER, that any period of time during which a Holder must
discontinue disposition of Registrable Securities shall not be included in the
determination of a period of distribution for purposes of Section 6.6(a) and
6.6(b).
SECTION 6.7. FURNISH INFORMATION. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Agreement that the Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as the Company shall reasonably request
and as shall be required in connection with the action to be taken by the
Company.
<PAGE>
27
SECTION 6.8. EXPENSES OF REGISTRATION. All expenses incurred
in connection with (i) each registration or attempted registration pursuant to
Section 6.4, (ii) the first four registrations effected pursuant to Section 6.3
or 6.5 and (iii) any attempted registration (or partial registration deemed not
to have been effected pursuant to Section 6.3 or 6.5 by operation of Sections
6.3(d) or (e)) occurring prior to the fourth registration effected pursuant to
Section 6.3 or 6.5 of this Agreement, excluding underwriters' discounts and
commissions and excluding the fees and disbursements of counsel selected
pursuant to Section 6.14 hereof by the Holders of the Registrable Securities
being registered to represent such Holders in connection with each such
registration, but including without limitation all registration, filing and
qualification fees, word processing, duplicating, printers' and accounting fees
(including the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance), fees of the National
Association of Securities Dealers, Inc. (the "NASD") or listing fees, all fees
and expenses of complying with state securities or blue sky laws, fees and
disbursements of counsel for the Company, any fees and disbursements of
underwriters customarily paid by the issuers or sellers of securities, including
liability insurance if the Company so desires or if the underwriters so require,
and the reasonable fees and expenses of any special experts retained in
connection with the requested registration and other reasonable out-of-pocket
expenses of Holders, shall be paid by the Company. The foregoing provisions with
respect to expenses shall in no way limit the rights of the Holders to request
registration pursuant to Sections 6.3 and 6.5 or the number of registrations
which may be requested thereunder.
SECTION 6.9. UNDERWRITING REQUIREMENTS. In connection with any
underwritten offering, the Company shall not be required under Section 6.4 to
include Registrable Securities in such underwritten offering unless the Holders
of such Registrable Securities accept the terms of the underwriting of such
offering that have been reasonably agreed upon between the Company and the
underwriters selected by the Company.
SECTION 6.10. RULE 144 AND RULE 144A INFORMATION. With a view
to making available the benefits of certain rules and regulations of the
Commission which may at any time permit the sale of the Registrable Securities
to the public without registration, at all times, the Company agrees to:
(imake and keep public information available,
as those terms are understood and defined in Rule 144 under
the Securities Act;
(iiuse its best efforts to file with the
Commission in a timely manner all reports and other documents
required of the Company under the Securities Act and the
Exchange Act; and
<PAGE>
28
(iiifurnish to each Holder of Registrable
Securities forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements
of such Rule 144 and of the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents so filed by
the Company as such Holder may reasonably request in availing
itself of any rule or regulation of the Commission allowing
such Holder to sell any Registrable Securities without
registration.
SECTION 6.11. INDEMNIFICATION. In the event any
Registrable Securities are included in a registration statement
under this Agreement:
(a) The Company shall indemnify and hold harmless each Holder,
such Holder's directors and officers, and each person, if any, who
controls such Holder or participating person within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any
such action or claim) to which they may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or proceedings in respect thereof) arise out of or are
based on any untrue or alleged untrue statement of a material fact
contained in such registration statement, preliminary prospectus, final
prospectus or amendments or supplements thereto or arise out of or are
based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading; PROVIDED, HOWEVER, that the indemnity agreement
contained in this Section 6.11(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld); PROVIDED FURTHER that the
Company shall not be liable to any Holder, such Holder's directors and
officers or controlling person in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of
or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in connection with such registration
statement, preliminary prospectus, final prospectus or amendments or
supplements thereto, in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by any such Holder, such Holder's directors and officers
or controlling person; PROVIDED, FURTHER, that as to any preliminary
prospectus or any final prospectus this indemnity agreement shall not
inure to the benefit of any Holder, such Holder's directors
<PAGE>
29
and officers or controlling persons on account of any losses, claims,
damages or liability arising from the sale of Common Stock to any
person by such Holder if such Holder or its representatives failed to
send or give a copy of the final prospectus or a prospectus supplement,
as the case may be (excluding documents incorporated by reference
therein), as the same may be amended or supplemented, to that person
within the time required by the Securities Act, and the untrue
statement or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact in such preliminary
prospectus or final prospectus was corrected in the final prospectus or
such prospectus supplement, as the case may be (excluding documents
incorporated by reference therein), unless such failure resulted from
non-compliance by the Company with Section 6.6(c). Such indemnity shall
remain in full force and effect regardless of any investigation made by
or on behalf of any such Holder, such Holder's directors and officers,
participating person or controlling person, and shall survive the
transfer of such securities by such Holder.
(b) Each Holder requesting or joining in a registration
severally and not jointly shall indemnify and hold harmless the
Company, each of its directors and officers and each person, if any,
who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to the Holders but only with
reference to written information relating to such Holder furnished to
the Company expressly for use in connection with such registration;
PROVIDED, HOWEVER, that the indemnity agreement contained in this
Section 6.11(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is
effected without the consent of such Holder (which consent shall not be
unreasonably withheld); and PROVIDED FURTHER that the liability of each
Holder hereunder shall be limited to the proportion of any such loss,
claim, damage, liability or expense that is equal to the proportion
that the net proceeds from the sale of the shares sold by such Holder
under such registration statement bears to the total net proceeds from
the sale of all securities sold thereunder, but not in any event to
exceed the net proceeds received by such Holder from the sale of
Registrable Securities covered by such registration statement.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to either of the two preceding
paragraphs, such person (the "INDEMNIFIED PARTY") shall promptly notify
the person against whom such indemnity may be sought (the "INDEMNIFYING
PARTY") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably
<PAGE>
30
satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party and the indemnified party shall
have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in
respect of the legal expenses of any indemnified party in connection
with any proceeding or related proceedings in the same jurisdiction, be
liable for the fees and expenses of more than one separate firm (in
addition to any local counsel) for all such indemnified parties and
that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by the Holders, in
the case of parties indemnified pursuant to the second preceding
paragraph, and by the Company, in the case of parties indemnified
pursuant to the first preceding paragraph. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a
final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability
by reason of such settlement or judgment. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated by the second and third sentences
of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of
such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
<PAGE>
31
(d) If the indemnification provided for in the first or second
paragraph of this Section 6.11 is unavailable to an indemnified party
or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then each indemnifying party under
such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified party in
connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party
and indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or
payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6.11(d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to
in the immediately preceding paragraph. Notwithstanding the provisions
of this Section 6.11, no Holder shall be required to contribute any
amount in excess of the amount of net proceeds received by such Holder
from the sale of Registrable Securities covered by such registration
statement. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 6.11 are
not exclusive and shall not limit any right or remedies that may
otherwise be available to any indemnified party at law or in equity.
SECTION 6.12. LOCKUP. Each Holder shall, in connection with
any registration of the Company's securities, upon the request of the Company or
the underwriters managing any underwritten offering of such securities, agree in
writing not to effect any sale, disposition or distribution of any Registrable
Securities (other than that included in the registration) without the prior
written consent of the managing underwriter for such period of time (not to
exceed 180 days) from the effective date of such registration as the Company or
the underwriters may
<PAGE>
32
specify; PROVIDED, HOWEVER, that all executive officers and directors of the
Company (other than executive officers and directors owning an aggregate of less
than 1% of the outstanding Common Stock as of the effective date of such
registration statement) shall also have agreed not to effect any sale,
disposition or distribution of any Registrable Securities under the
circumstances and pursuant to the terms set forth in this Section 6.12.
SECTION 6.13. TRANSFER OF REGISTRATION RIGHTS. The
-------------------------------
registration rights of any Holder under this Agreement with
respect to the Registrable Securities may be transferred to any
transferee of such Registrable Securities who acquires any
Registrable Securities of any Holder; PROVIDED that such
--------
registration rights may not be transferred to a holder of less
than 1% of the outstanding Common Stock unless such transferee is
a Borden Affiliate (or a partner of a Borden Affiliate);
PROVIDED, FURTHER, that (i) the transferring Holder shall give
- -------- -------
the Company written notice at or prior to the time of such
transfer stating the name and address of the transferee and
identifying the securities with respect to which the rights under
this Agreement are being transferred, (ii) such transferee shall
agree in writing, in form and substance reasonably satisfactory
to the Company, to be bound as a Holder by the provisions of this
Section, and (iii) immediately following such transfer the
further disposition of such securities by such transferee is
restricted under the Securities Act.
SECTION 6.14. SELECTION OF COUNSEL. In connection with any
registration of Registrable Securities pursuant to Sections 6.3, 6.4 and 6.5
hereof, the Holders of a majority of the Registrable Securities covered by any
such registration may select one counsel to represent all Holders of Registrable
Securities covered by such registration; PROVIDED, HOWEVER, that in the event
that the counsel selected as provided above is also acting as counsel to the
Company in connection with such registration, the remaining Holders shall be
entitled to select one additional counsel to represent all such remaining
Holders.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.1. REPRESENTATIONS OF THE COMPANY. As of the date
hereof and as of the Closing Date the Company represents and warrants as
follows:
(a) AUTHORITY RELATIVE TO THIS AGREEMENT. The Company
has all necessary power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby (the
"TRANSACTIONS"). The execution and delivery of this
Agreement by the Company and the consummation by the Company
<PAGE>
33
of the Transactions have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or to
consummate the Transactions. This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Borden, constitutes legal,
valid and binding obligations of the Company.
(b) NO CONFLICT. The execution and delivery by the Company of
this Agreement do not, and the performance of this Agreement by the
Company will not, (i) conflict with or violate the Certificate of
Incorporation or By-Laws of the Company or any of its Subsidiaries,
(ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Company or any of its Subsidiaries
or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of
the Company or any of its Subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any property or asset of the Company or any of its
Subsidiaries is bound or affected, except for any such breaches,
defaults or other occurrences which would not, individually or in the
aggregate, have a material adverse effect on the results of operations,
financial condition or business of the Company and its Subsidiaries,
taken as a whole.
(c) REQUIRED FILINGS AND CONSENTS. The execution and delivery
by the Company of this Agreement do not, and the performance of this
Agreement by the Company will not, require any consent, approval,
authorization or permit of, or filing by the Company with or
notification to, any governmental or regulatory authority, domestic or
foreign, except (i) for applicable requirements, if any, of the
Securities Act, the Exchange Act, state blue sky and takeover laws, and
(ii) where failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not prevent
or delay the Company from performing its obligations under this
Agreement and would not, individually or in the aggregate, have a
material adverse effect on the results of operations, financial
condition or business of the Company and its Subsidiaries, taken as a
whole.
<PAGE>
34
SECTION 7.2. REPRESENTATIONS OF BORDEN. As of the
date hereof and as of the Closing Date Borden represents and
warrants as follows:
(a) AUTHORITY RELATIVE TO THIS AGREEMENT. Borden has all
necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the Transactions.
The execution and delivery of this Agreement by Borden and the
consummation by Borden of the Transactions have been duly and validly
authorized by all necessary corporate action and no other corporate
proceedings on the part of Borden are necessary to authorize this
Agreement or to consummate the Transactions. This Agreement has been
duly and validly executed and delivered by Borden and, assuming the due
authorization, execution and delivery by the Company constitutes legal,
valid and binding obligations of Borden.
(b) NO CONFLICT. The execution and delivery by Borden of this
Agreement do not, and the performance of this Agreement by Borden will
not, (i) conflict with or violate the Certificate of Incorporation or
By-Laws of Borden or any of its Subsidiaries, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable
to Borden or any of its Subsidiaries or by which any property or asset
of Borden or any of its Subsidiaries is bound or affected, or (iii)
result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give
to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Borden or any of its
Subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Borden or any of its Subsidiaries is
a party or by which Borden or any of its Subsidiaries or any property
or asset of Borden or any of its Subsidiaries is bound or affected,
except for any such breaches, defaults or other occurrences which would
not, individually or in the aggregate, have a material adverse effect
on the results of operations, financial condition or business of Borden
Global Packaging (as such term is defined in the Purchase Agreement),
taken as a whole.
(c) REQUIRED FILINGS AND CONSENTS. The execution and delivery
by Borden of this Agreement do not, and the performance of this
Agreement by Borden will not, require any consent, approval,
authorization or permit of, or filing by Borden with or notification
to, any governmental or regulatory authority, domestic or foreign,
except for (i) applicable requirements, if any, of the Securities Act,
the Exchange Act, state blue sky and takeover laws, and (ii) where
failure to obtain such consents, approvals,
<PAGE>
35
authorizations or permits, or to make such filings or notifications,
would not prevent or delay Borden from performing its obligations under
this Agreement and would not, individually or in the aggregate, have a
material adverse effect on the results of operations, financial
condition or business of Borden Global Packaging, taken as a whole.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. NOTICES. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly received if so given) by hand delivery, by
mail (registered or certified mail, postage prepaid, return receipt requested)
or by any courier service, such as Federal Express, providing proof of delivery.
All communications hereunder shall be delivered to the respective parties at the
following addresses:
if to Borden, to:
Borden, Inc.
180 East Broad Street
Columbus, Ohio 43215
Attention: Richard L. de Ney
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: David J. Sorkin, Esq.
if to the Company, to:
AEP Industries Inc.
125 Phillips Avenue
South Hackensack, NJ 07606
Attention: Paul M. Feeney, Executive Vice President
with a copy to:
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
New York, New York 10017
Attention: Paul E. Gelbard, Esq.
<PAGE>
36
If to a Transferee of Registrable Securities:
At the address set forth in the notice required to be
delivered pursuant to Section 6.13 hereof.
SECTION 8.2. AMENDMENTS; NO WAIVERS. (a) Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by Borden and the Company,
or in the case of a waiver, by the party against whom the waiver is to be
effective; PROVIDED that no such amendment or waiver by the Company shall be
effective without the approval of a majority of the Independent Directors.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 8.3. SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the Transactions is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
Transactions be consummated as originally contemplated to the fullest extent
possible.
SECTION 8.4. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the
Purchase Agreement and the Stockholders Agreement (as defined in the Purchase
Agreement) and the agreements contemplated hereby and thereby constitute the
entire agreement among the parties with respect to the subject matter hereof and
thereof and supersede, except as set forth in the Purchase Agreement, all prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof. This Agreement shall not be
assigned by operation of law or otherwise, except that Borden may assign all or
any of its rights and obligations hereunder to any of its Affiliates in
connection with a transfer of Common Stock; PROVIDED that (a) no such assignment
shall relieve Borden of its obligations hereunder and (b) Borden may assign its
rights to the extent and as provided in Section 6.13.
<PAGE>
37
SECTION 8.5. PARTIES IN INTEREST. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
SECTION 8.6. SPECIFIC PERFORMANCE. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
SECTION 8.7. GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York
applicable to contracts executed in and to be performed in the State of New
York. All actions and proceedings arising out of or relating to this Agreement
shall be heard and determined in any New York state or federal court thereof.
SECTION 8.8. HEADINGS. The descriptive headings
contained in this Agreement are included for convenience of
reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.9. COUNTERPARTS. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 8.10. EFFECTIVENESS; TERMINATION. This
Agreement shall be effective as of the Closing Date and shall
terminate at such time as Borden and its Affiliates no longer own
any such shares.
SECTION 8.11. WAIVER OF JURY TRIAL. Borden and the Company
each hereby irrevocably waive all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to this Agreement or the actions of Borden or the
Company in the negotiation, administration, performance and enforcement thereof.
<PAGE>
38
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
AEP INDUSTRIES INC.
By: /S/ PAUL M. FEENEY
----------------------------
Name: Paul M. Feeney
Title: Executive Vice President
BORDEN, INC.
By: /S/ RICHARD L. DE NEY
-------------------------------
Name: Richard L. de Ney
Title: Executive Vice President
<PAGE>
EXHIBIT A
8 PERSON BOARD OF DIRECTORS
---------------------------
Borden's Ownership Interest
<TABLE>
less than 10%+ but less than 20%+ but less than 25%+ but less than 50%+
10% 20% 25% 50%
---------- ------------------ ------------------ ------------------- -------
<S> <C> <C> <C> <C> <C>
# of Management 6 5 4 3 2
Directors
# of Management 2 1 1 1 0
Independent Directors
# of Investor 0 1 2 3 4
Directors
# of Investor 0 0 0 0 1
Independent Directors
# of 0 1 1 1 1
Management/Investor
Independent Directors
======================================== ===================== ===================== ===================== ==================
</TABLE>
10 PERSON BOARD OF DIRECTORS
----------------------------
Borden's Ownership Interest
<TABLE>
less than 10%+ but less than 20%+ but less than 25%+ but less than 50%+
10% 20% 25% 50%
----------- ------------------- ------------------ ------------------- ---------
<S> <C> <C> <C> <C> <C>
# of Management 8 6 5 3 2
Directors
# of Management 2 2 2 2 1
Independent Directors
# of Investor 0 1 2 4 5
Directors
# of Investor 0 0 0 0 1
Independent Directors
# of 0 1 1 1 1
Management/Investor
Independent Directors
======================== ==================== ===================== ===================== ===================== ================
</TABLE>
<PAGE>
12 PERSON BOARD OF DIRECTORS
----------------------------
Borden's Ownership Interest
<TABLE>
less than 10%+ but less than 20%+ but less than 25%+ but less than 50%+
10% 20% 25% 50%
--------- -------------------- -------------------- -------------------- ----------
<S> <C> <C> <C> <C> <C>
# of Management 9 7 5 4 3
Directors
# of Management 3 2 2 2 1
Independent Directors
# of Investor 0 2 4 5 6
Directors
# of Investor 0 0 0 0 1
Independent Directors
# of 0 1 1 1 1
Management/Investor
Independent Directors
========================= =================== ===================== ===================== ===================== ==================
</TABLE>
