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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 15, 1996
----------------------
CARAUSTAR INDUSTRIES, INC.
--------------------------
(Exact Name of Registrant as Specified in its Charter)
North Carolina 0-20646 58-1388387
- --------------------------------- ------------------------ -----------------
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
3100 Washington Street
Austell, Georgia 30001
----------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(770) 948-3101
------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
--------------------------------------------------------------
(Former name or address, if changed from last report)
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Item 2. Acquisition or Disposition of Assets.
On July 15, 1996, the Company entered into a partnership
("Partnership") with Tenneco Packaging Inc. ("TPI"), a wholly-owned subsidiary
of Tenneco, Inc., pursuant to a Contribution Agreement and a Partnership
Agreement dated as of June 21, 1996 by and between the Company and TPI. The
Partnership will be operated as a general partnership between wholly-owned
subsidiaries of the Company and TPI. Under the terms of the Partnership
Agreement, the Company contributed approximately $114.5 million in exchange for
an 80% interest in the Partnership. Simultaneously, TPI contributed to the
Partnership the assets and liabilities of its clay-coated recycled paperboard
mills in Rittman, Ohio and Tama, Iowa, as well as a recovered fiber recycling
and brokerage business with operations in Rittman and Cleveland, Ohio in
exchange for proceeds of approximately $114.5 million and a 20% interest in the
Partnership. Of the Company's contribution, $110 million was funded by
borrowings under the Company's existing revolving credit facility from a
syndicate of banks for whom NationsBank, N.A. is acting as agent and the
balance was funded from the Company's internally generated cash. The total
consideration paid in the acquisition of the Company's 80% Partnership interest
was determined through arm's length negotiations between representatives of the
Company and TPI.
The assets contributed to the Partnership by TPI will continue to be
used in the clay-coated recycled paperboard and recovered fiber recycling and
brokerage businesses.
For financial reporting purposes, the assets, liabilities, results of
operations and cash flows of the Partnership will be included in the Company's
consolidated financial statements from the date of formation. The Partnership
interest of TPI will be included in the Company's financial statements as
minority interest.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements and Pro Forma Financial Information
The financial statements and pro forma financial information
required to be filed by Item 7 of Form 8-K in connection with the Company's
entry into this Partnership are not currently available. The Company
anticipates that such financial statements and pro forma financial information
will be filed on or about September 13, 1996.
(b) Exhibits
Exhibit 2 Contribution Agreement between Tenneco
Packaging Inc. and Caraustar Industries,
Inc. regarding the formation of a Partnership,
dated as of June 21, 1996 (including Annex
A, form of Partnership Agreement), as amended
by Amendment to Contribution Agreement dated
July 15, 1996.
The Company agrees to furnish supplementally to the Commission upon
request any Schedule or Exhibit to this Exhibit 2 omitted from the copy
attached hereto.
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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.
Date: July 26, 1996
CARAUSTAR INDUSTRIES, INC.
By: /s/ H. Lee Thrash, III
------------------------------------------
H. Lee Thrash, III
Vice President and Chief Financial Officer
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INDEX TO EXHIBITS
Documents filed under Item 7
(b) Exhibit 2 Contribution Agreement between Tenneco
Packaging Inc. and Caraustar Industries,
Inc. regarding the formation of a Partnership,
dated as of June 21, 1996 (including Annex A,
form of Partnership Agreement), as amended by
Amendment to Contribution Agreement dated July
15, 1996.
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EXHIBIT 2
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CONTRIBUTION AGREEMENT
BETWEEN
TENNECO PACKAGING INC.
AND
CARAUSTAR INDUSTRIES INC.
REGARDING THE FORMATION OF
A PARTNERSHIP
DATED AS OF JUNE 21, 1996
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TABLE OF CONTENTS
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ARTICLE I
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DEFINITIONS AND TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Specific Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.3 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II
FORMATION OF PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Formation of Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Contributions to the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Contributed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.6 Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.7 Tax Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.8 Post-Closing Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.9 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.10 Deliveries by Caraustar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.11 Deliveries by TPI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.12 Deliveries by the Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.13 Transfer Taxes and Recording Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TPI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.2 Corporate Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.4 Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.6 Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.7 Litigation and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.9 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.12 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.13 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.14 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.15 Entire Business; Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.16 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.17 No Other Representations or Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CARAUSTAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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4.2 Corporate Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.4 Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.6 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.7 Financial Capability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.8 No Other Representations or Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE V
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.1 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.2 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.3 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.4 Post-Closing Obligations to Certain Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.5 Compliance with WARN and Similar Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.7 Use of TPI Marks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.8 Computer Services Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.9 Purchase and Brokerage Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.10 Rittman Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.11 Certain Matters Related to Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to the Obligations of Caraustar and TPI . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.2 Conditions to the Obligations of Caraustar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.3 Conditions to the Obligations of TPI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VII
SURVIVAL; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.2 Indemnification by Caraustar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.3 Indemnification by TPI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.4 Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.5 Characterization of Indemnification Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.6 Computation of Losses Subject to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE VIII
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.2 Amendment; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
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9.3 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.5 Fulfillment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.6 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.7 Public Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.8 Return of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.9 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.10 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.11 Bulk Transfer Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.12 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM . . . . . . . . . . . . . . . . . . . 61
9.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
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SCHEDULES AND EXHIBITS
ANNEXES
Annex A - Joint Venture Agreement
Annex B - Computer Services Agreement
Annex C - CCN Purchase Agreement
Annex D - DLK Brokerage Agreement
Annex E - Mill Procurement Agreement
Annex F - Rittman Lease Space
Annex G - License Agreement
SCHEDULES
Schedule 1.1(a) - Fixtures and Equipment
Schedule 1.1(__) - Property Owned by Third Parties
Schedule 1.1(b) - Knowledge
Schedule 1.1(c) - Leased Real Property
Schedule 1.1(d) - Exceptions to Material Adverse
Change or Effect
Schedule 1.1(e) - Owned Real Property
Schedule 1.1(f) - Rotogravure Employees
Schedule 1.1(g) - Rotogravure Real Property
Schedule 2.3(e) - Certain Assumed Litigation
Schedule 2.4(c) - Excluded Litigation
Schedule 3.3 - Consent and Approvals
Schedule 3.4 - Non-Contravention
Schedule 3.6(a) - Financial Information
Schedule 3.6(c) - Changes since March Statement of
Assets and Liabilities
Schedule 3.7(a) - Litigation and Claims
Schedule 3.7(b) - Orders and Judgments
Schedule 3.9 - Plans
Schedule 3.10 - Compliance with Laws
Schedule 3.11 - Environmental Matters
Schedule 3.12(a) - Registered Intellectual Property
Schedule 3.12(b) - Restrictions on Use of Intellectual
Property
Schedule 3.12(c) - Claims Affecting Intellectual
Property
Schedule 3.13 - Labor Matters
Schedule 3.14(a) - Contracts
Schedule 3.14(b) - Contracts in Default
Schedule 3.15(a) - Exceptions to Entire Business
Schedule 3.15(b) - Encumbrances
Schedule 4.3 - Consent and Approvals
Schedule 4.4 - Non-Contravention
Schedule 5.2 - Conduct of Business
Schedule 5.4(a) - Employees
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CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT dated as of June 21, 1996, between TENNECO
PACKAGING INC., a Delaware corporation ("TPI"), and CARAUSTAR INDUSTRIES, INC.
a North Carolina corporation ("Caraustar").
PRELIMINARY STATEMENT
A. TPI is engaged, in part, in the business of (i)
manufacturing, marketing and distributing recycled paperboard at mills located
at Rittman, Ohio (the "Rittman Mill") and at Tama, Iowa (the "Tama Mill", and
together with the Rittman Mill, the "Mills"), and (ii) procuring, brokering,
and processing paperstock from a recycling center located in Cleveland, Ohio
(the "Cleveland Center") and at the Rittman Mill (the business of TPI
conducted at the Mills and the Cleveland Center are referred to herein as the
"Business").
B. TPI and Caraustar desire to form a partnership to operate
the Business. In connection with such formation, (i) TPI will contribute
substantially all of the assets and liabilities of the Business to such
partnership, (ii) Caraustar shall make a capital contribution of cash to such
partnership, and (iii) the partnership shall make an equalization payment to
TPI, so that the relative value of TPI's and Caraustar's contributions are in
accordance with their interests in the partnership, all as more specifically
provided herein.
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NOW, THEREFORE, TPI and Caraustar agree as follows:
AGREEMENT
ARTICLE I
DEFINITIONS AND TERMS
1.1 SPECIFIC DEFINITIONS. As used in this Agreement, the
following terms shall have the meanings set forth or as referenced below:
"ADJUSTED CLOSING STATEMENT OF ASSETS AND LIABILITIES" shall have
the meaning set forth in Section 2.8(b).
"AFFILIATES" shall mean, with respect to any Person, any Persons
directly or indirectly controlling, controlled by, or under common control
with, such other Person as of the date on which, or at any time during the
period for which, the determination of affiliation is being made.
"AGREEMENT" shall mean this Agreement, including the Annexes and
Schedules, as the same may be amended or supplemented from time to time in
accordance with the terms hereof.
"ANCILLARY AGREEMENTS" shall mean the Computer Services Agreement,
the CCN Purchase Agreement, the Mill Procurement Agreement, the DLK Brokerage
Agreement, and the License Agreement.
"ASSUMED LIABILITIES" shall have the meaning set forth in Section
2.5.
"BASE RATE" shall mean the "base rate" of interest of Citibank,
N.A. or any successor thereto in New York, New York on the Closing Date.
"BOOKS AND RECORDS" shall mean all lists, files and documents
Relating to customers, suppliers and products of the Business and all general
ledgers and underlying books of original entry and other financial records of
the Business, except to the extent included in or Related to any Excluded
Assets.
"BUMPED EMPLOYEE" shall mean an Employee at the Rittman Mill (other
than a Rotogravure Employee) who, pursuant to the terms of the collective
bargaining agreement
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covering such Employee, would be subject to lay-off if a Rotogravure Employee
whose job is being eliminated as a result of TPI's ceasing to operate the
Rotogravure Assets elected to accept a position at the Rittman Mill.
"BUSINESS" shall have the meaning set forth in the preliminary
statement of this Agreement.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday
or a day on which banks in New York City are authorized or obligated by law or
executive order to close.
"CARAUSTAR" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"CCN PURCHASE AGREEMENT" shall have the meaning set forth in
Section 5.9.
"CLAIM NOTICE" shall have the meaning set forth in Section 7.4.
"CLOSING" shall mean the closing of the transactions contemplated
by this Agreement.
"CLOSING DATE" shall have the meaning set forth in Section 2.9(a).
"CLOSING STATEMENT OF ASSETS AND LIABILITIES" shall have the
meaning set forth in Section 2.8(a).
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, or
any successor law.
"COMPUTER SERVICES AGREEMENT" shall have the meaning set forth in
Section 5.8.
"CONFIDENTIALITY AGREEMENT" shall mean the Confidentiality
Agreement dated February 2, 1996, between Caraustar and TPI.
"CONTRACTS" shall mean all agreements, contracts, leases, purchase
orders, trade billback, refund and other arrangements, incentive agreements,
commitments, collective bargaining agreements, and licenses that are Related to
the Business or to which the Contributed Assets are subject, except to the
extent included in the Excluded Assets.
"CONTRIBUTED ASSETS" shall have the meaning set forth in Section
2.3.
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"CPA FIRM" shall have the meaning set forth in Section 2.8(b).
"CURRENT ASSETS" shall mean, as of the Closing Date, Inventory and
all other current assets of the Business other than cash and any other current
assets that are Excluded Assets.
"CURRENT LIABILITIES" shall mean, as of the Closing Date, all
current liabilities of the Business other than accrued and unpaid or deferred
federal, state, local and foreign income Taxes with respect to the taxable
periods, or portions thereof ending on or before the Closing Date and any other
current liabilities that are Excluded Liabilities.
"DETERMINATION DATE" shall mean the close of business on the date
immediately preceding the Closing Date.
"DLK BROKERAGE AGREEMENT" shall have the meaning set forth in
Section 5.9.
"EMPLOYEES" shall mean Persons who are exclusively employed by TPI
in the Business as of the Closing Date, including Inactive Employees and any
employees on lay-off or leave of absence.
"ENCUMBRANCES" shall mean liens, charges, encumbrances, security
interests, options or any other restrictions or third-party rights.
"ENVIRONMENTAL CLAIM" shall mean any written claim, notice of
violation, assertion of liability or obligation to remediate, or administrative
or judicial action by any governmental authority or other Person resulting from
or alleging the violation of any Environmental Law or any contamination of the
environment by TPI in connection with the operations of the Business.
"ENVIRONMENTAL LAW" shall mean any federal, state, local or foreign
law, statute, ordinance, rule, regulation, code, order, judgment, decree or
injunction in effect on the date hereof relating to (x) the protection of the
environment (including air, water vapor, surface water, groundwater, drinking
water supply, surface or subsurface land) or (y) the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing,
handling, labelling, protection, release or disposal of, Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EQUALIZATION PAYMENT" shall have the meaning set forth in Section
2.2.
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"EXCLUDED ASSETS" shall have the meaning set forth in Section 2.4.
"EXCLUDED ENVIRONMENTAL LIABILITIES" shall have the meaning set
forth in Section 2.6(b).
"EXCLUDED LIABILITIES" shall have the meaning set forth in Section
2.6.
"FINANCIAL INFORMATION" shall have the meaning set forth in Section
3.6(a).
"FIXTURES AND EQUIPMENT" shall mean all furniture, fixtures,
furnishings, machinery, vehicles, equipment (including research and development
equipment), and other tangible personal property Related to the Business,
including Fixtures and Equipment listed on Schedule 1.1(a), except in each case
to the extent included in the Excluded Assets.
"FORMER EMPLOYEES" shall mean Persons whose employment in the
Business terminated prior to the Closing Date.
"GOVERNMENTAL AUTHORIZATIONS" shall mean all licenses, permits,
certificates, registrations and other authorizations and approvals required to
carry on the Business as currently conducted under the applicable laws,
ordinances or regulations of any federal, state, local or foreign governmental
authority.
"HAZARDOUS SUBSTANCES" shall mean (i) any "hazardous substances,"
within the meaning of 101(14) of CERCLA, 42 U.S.C. Section 9601(14), (ii) any
"hazardous waste," as defined by the Resource Conservation and Recovery Act, as
amended, (iii) any petroleum product or fractions thereof; or (iv) any
pollutant or contaminant or hazardous, dangerous or toxic chemical, material or
substance within the meaning of any other applicable Federal, state or local
Environmental Laws.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"INACTIVE EMPLOYEES" shall mean all employees of TPI who are
employed in the Business and temporarily absent from active employment by
reason of disability, illness, injury, or workers' compensation and who are
receiving or eligible to receive disability or workers' compensation payments
as a result of such disability, illness or injury, and employees on
non-compensated leave of absences, such as pursuant to the terms of the Family
Medical Leave Act.
"INDEMNIFIED PARTIES" shall have the meaning set forth in Section
7.3(a).
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"INDEMNIFYING PARTY" shall have the meaning set forth in Section
7.4.
"INTELLECTUAL PROPERTY" shall mean (except to the extent included
in the Excluded Assets) the following intellectual property (and the rights
associated therewith) Related to the Business: trademarks, service marks, brand
names, certification marks, trade dress, assumed names, trade names and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of
any such registration or application; patents, applications for patents
(including divisions, continuations, continuations-in-part and renewal
applications), and any renewals, extensions or reissues thereof, in any
jurisdiction; non-public information, trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any Person; copyrighted works and registrations or applications for
registration of copyrights in any jurisdiction, and any renewals or extensions
thereof; any similar intellectual property or proprietary rights; and any
claims or causes of action arising out of or related to any infringement or
misappropriation of any of the foregoing.
"INVENTORY" shall mean all inventory held for resale, all raw
materials, work in process, finished products, operating and repair materials,
spares, wrapping, supply and packaging items Related to the Business, except to
the extent included in the Excluded Assets. Inventory shall exclude the
materials listed on Schedule 1.1G, which materials are located at the Real
Property but owned by third parties.
"KNOWLEDGE" or any similar phrase means the actual knowledge of
those management employees of TPI identified on Schedule 1.1(b).
"LAWS" shall include any federal, state, foreign or local law,
statute, ordinance, rule, regulation, order, judgment or decree in effect on
the date hereof.
"LEASED REAL PROPERTY" shall mean all real property leased on the
date hereof by TPI as lessee, including any buildings, structures and
improvements thereon or appurtenances thereto, Related to the Business,
including the Leased Real Property identified on Schedule 1.1(c).
"LICENSE AGREEMENT" shall have the meaning set forth in Section
5.11.
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"LOSSES" shall have the meaning set forth in Section 7.2.
"MARCH STATEMENT OF ASSETS AND LIABILITIES" shall mean the
Statement of Assets and Liabilities as of March 31, 1996 included in Schedule
3.6(a).
"MATERIAL ADVERSE CHANGE" shall mean a change that is materially
adverse to the value of the Contributed Assets taken as a whole or materially
adverse to the business, financial condition or expected annual results of
operations of the Business taken as a whole; provided, however, that any change
that affects the paperboard industry generally (including any change in general
economic conditions or any change in paper, waste paper or wood prices) and any
change identified on Schedule 1.1(d) shall not constitute a Material Adverse
Change.
"MATERIAL ADVERSE EFFECT" shall mean an effect that is materially
adverse to the value of the Contributed Assets taken as a whole or materially
adverse to the business, financial condition or expected annual results of
operations of the Business taken as a whole; provided, however, that any effect
arising from matters that affect the paperboard industry generally (including
any change in general economic conditions or any change in paper, waste paper
or wood prices) and any effect arising from or attributable to any condition,
event or circumstance identified on Schedule 1.1(d) shall not constitute a
Material Adverse Effect.
"MILL PROCUREMENT AGREEMENT" shall have the meaning set forth in
Section 5.9.
"NOTICE PERIOD" shall have the meaning set forth in Section 7.4.
"OBJECTIONS" shall have the meaning set forth in Section 2.8(b).
"OWNED REAL PROPERTY" shall mean all real property owned by TPI and
Related to the Business, including any buildings, structures and improvements
thereon or appurtenances thereto, Related to the Business, including the
Rotogravure Real Property and the Owned Real Property identified on Schedule
1.1(e).
"PARTNERSHIP" shall have the meaning set forth in Section 2.1.
"PARTNERSHIP INDEMNIFIED PARTIES" shall have the meaning set forth
in Section 7.3(a).
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"PENSION PLANS" shall mean the Tenneco Inc. Retirement Plan (for
salaried employees) and the Pension Plan for Certain Hourly Rated Employees of
Packaging Corporation of America.
"PERMITTED ENCUMBRANCES" shall have the meaning set forth in
Section 3.15(b).
"PERSON" shall mean an individual, a corporation, a partnership, an
association, a trust or other entity or organization.
"PLANS" shall have the meaning set forth in Section 3.9.
"REAL PROPERTY" shall mean the Owned Real Property and the Leased
Real Property.
"RELATED TO" OR "RELATING TO" shall mean primarily related to, or
used primarily in connection with, prior to the Closing.
"REQUIRED APPROVALS" shall mean the consents, approvals, waivers,
authorizations, notices and filings referred to in Sections 3.3 and 4.3 and
Schedules 3.3 and 4.3.
"RITTMAN LEASE" shall have the meaning set forth in Section 5.10.
"ROTOGRAVURE ASSETS" shall mean those assets of TPI Related to
TPI's Rittman, Ohio folding carton operations, including all Inventory,
accounts receivable, fixed assets, and other assets Related thereto, but
excluding the Rotogravure Real Property.
"ROTOGRAVURE EMPLOYEES" shall mean those Employees of TPI who are
primarily engaged in operating TPI's rotogravure operations at TPI's Rittman,
Ohio, facility, a list of whom are set forth on Schedule 1.1(f).
"ROTOGRAVURE REAL PROPERTY" shall mean the real property described
on Schedule 1.1(g).
"SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership, joint venture or other legal entity of which such
Person, either directly or through or together with any other Subsidiary of
such Person, owns 50% or more of the equity interests.
"TAX RETURNS" shall mean all reports and returns required to be
filed with respect to Taxes.
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"TAXES" shall mean all federal, state, local or foreign taxes, and
any other governmental fees or charges of any nature whatsoever and however
denominated, including income, gross receipts, windfall profits, goods and
services, value added, severance, property, production, sales, use, license,
excise, franchise, employment, withholding or similar taxes, together with any
interest, additions or penalties with respect thereto and any interest in
respect of such additions or penalties.
"TEMPORARY OFFICE SPACE" shall mean that office space used by
employees of TPI, who shall become employees of the Partnership, which is being
actively used for the conduct of the Business prior to the Closing Date and
shared with TPI's employees who are not part of the Business, located at 1603
Orrington, Evanston, Illinois, and at 2740 East Kemper Road, Cincinnati, Ohio.
"TPI" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"TPI INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 7.2.
"TPI MARK" shall mean any mark that includes the word "Tenneco" or
"Packaging Corporation of America" or any trademark, symbol or logo that uses
or incorporates any mark used by Tenneco Inc. or any of its Affiliates that is
not used exclusively in the Business.
"TRANSFER COSTS" shall have the meaning set forth in Section 2.13.
"UNION EMPLOYEE" shall mean an Employee the terms of whose
employment is governed, at least in part, by a collective bargaining agreement.
"WARN" shall mean the Worker Adjustment and Retraining Notification
Act.
1.2 OTHER TERMS. Other terms may be defined elsewhere in the text
of this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
1.3 OTHER DEFINITIONAL PROVISIONS.
(a) The words "hereof", "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as
a whole and not to any
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particular provision of this Agreement. The word "including" means "including
without limitation."
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States
dollars.
ARTICLE II
FORMATION OF PARTNERSHIP
2.1 FORMATION OF PARTNERSHIP. On the terms and subject to the
conditions set forth herein, at the Closing, TPI and Caraustar shall form a
partnership, on the terms of the Joint Venture Agreement attached hereto as
Annex A (the "Partnership").
2.2 CONTRIBUTIONS TO THE PARTNERSHIP. On the terms and subject to
the conditions set forth herein, at the Closing:
(a) TPI shall contribute to the Partnership the Contributed
Assets (the "TPI Contribution") and in consideration of such contribution
shall receive a 20% interest in the Partnership.
(b) Caraustar shall contribute to the Partnership $115 million
(the "Caraustar Contribution") and in consideration of such contribution shall
receive a 80% interest in the Partnership.
(c) Simultaneously with the contributions by TPI and
Caraustar, in order that the interests of each of TPI and Caraustar in the
Partnership are in accordance with the
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agreed upon value of each party's contribution, the Partnership shall make an
equalization payment to TPI of $115 million (the "Equalization Payment").
The amount of the Equalization Payment shall be subject to adjustment after
Closing as provided in Section 2.8.
2.3 CONTRIBUTED ASSETS. For purposes of this Agreement, the
Contributed Assets shall be all right, title and interest of TPI in and to
the assets Related to the Business, whether tangible or intangible, real or
personal, as they exist on the date hereof (except for the Excluded Assets)
with such changes, deletions or additions thereto as may occur from the date
hereof to the Closing Date consistent with the terms and conditions of this
Agreement (the "Contributed Assets"). The Contributed Assets shall include
all of the right, title and interest of TPI in the following:
(i) the Real Property;
(ii) the Fixtures and Equipment;
(iii) the Current Assets;
(iv) the Intellectual Property;
(v) the Contracts;
(vi) the Books and Records;
(vii) all prepaid Taxes to the extent such Taxes, if not prepaid,
would be Assumed Liabilities;
(viii) all refunds, receivables and credits of Taxes to the extent
such Taxes are, or if not paid would be, Assumed Liabilities; and
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(ix) all transferrable Governmental Authorizations.
2.4 EXCLUDED ASSETS. Notwithstanding anything herein to the
contrary, from and after the Closing, TPI shall retain all of its right, title
and interest in and to, and there shall be excluded from the contribution to
the Partnership, and the Contributed Assets shall not include, the following
(collectively, the "Excluded Assets"):
(a) the assets (including real property, tangible personal
property, accounts receivable, intellectual property and contracts) of all
businesses other than the Business conducted by TPI and any of its Affiliates,
including their specialty packaging (including molded fiber, pressed
paperboard, and aluminum foil), folding carton, recycling operations at
Jackson, Tennessee, and Nashville, Tennessee plastics, containerboard and
associated converting operations, woodlands operations, and solid wood
operations;
(b) the capital stock of all Subsidiaries of TPI;
(c) all cash, investment securities and other short-term and
medium-term investments;
(d) all prepaid Taxes to the extent such Taxes are, or if not
prepaid would be, Excluded Liabilities;
(e) all refunds, receivables and credits of Taxes to the extent
such Taxes are, or if not paid would be, Excluded Liabilities;
(f) the computer software and hardware that is used by TPI in
performing the services to be provided by TPI
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to the Partnership pursuant to the Computer Services Agreement;
(g) all Tax Returns of TPI;
(h) the Mark and the Patent Rights as defined in the License
Agreement;
(i) the Rotogravure Assets;
(j) any rights of TPI against any third parties with respect to
indemnification for actions taken or assets acquired prior to the Closing Date;
(k) all Books and Records which Relate to any Excluded Asset or
Excluded Liability, all Books and Records that TPI is required by law to
retain, and any employee files; and
(l) the Plans, including Pension Plans, and all assets of the
Plans.
2.5 ASSUMPTION OF LIABILITIES. On the terms and subject to the
conditions set forth herein, at the Closing, the Partnership shall assume and
discharge, or perform or pay when due, all debts, liabilities or obligations
whatsoever, other than Excluded Liabilities, that arise out of or are Related
to the Business or that otherwise arise out of or are Related to the
Contributed Assets, whether arising before or after the Closing and whether
known or unknown, fixed or contingent (the "Assumed Liabilities"), including
the following:
(a) the Contracts;
(b) the Current Liabilities;
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(c) the Transfer Costs;
(d) except as provided in Section 2.6(b), all liabilities under
Environmental Laws arising out of or Related to the conduct of the Business
or the Real Property, including liabilities for any obligation to remediate
contamination associated with the Business, whether on-site or off-site;
(e) except as provided in Section 2.6(c), all liabilities
(other than liabilities covered by clause (d) above) with respect to all
actions, suits, proceedings, disputes, arbitrations, grievances, claims or
investigations arising out of or Related to the Business or that otherwise
arise out of or are Related to the Contributed Assets, at law, in equity or
otherwise, including all warranty claims, product liability matters and the
matters identified on Schedule 2.5(e); and
(f) all liabilities and obligations relating to the employment
or termination of employment of Employees, including any obligations to
Employees under COBRA, and all other liabilities and obligations relating to
Employees with respect to periods commencing on the Closing Date (except as set
forth in Section 2.5(e)), including disability benefits and retiree medical and
life benefits except for short-term disability, long-term disability and
workers' compensation benefits for Inactive Employees prior to their employment
by the Partnership.
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2.6 EXCLUDED LIABILITIES. Notwithstanding any other provision
of this Agreement, the liabilities and obligations of TPI which are not to be
assumed by the Partnership hereunder (the "Excluded Liabilities") are the
following:
(a) all liabilities arising out of or Relating to the Excluded
Assets;
(b) all liabilities resulting from or related to (i) the
assertion, existence or imposition of any obligation under any Environmental
Law to investigate, remove, or remediate or to contribute or pay any amount
towards investigation, removal or remediation at any off-site property to
which the Business transported disposed or arranged for the transport or
disposal of Hazardous Substances prior to the Closing, (ii) contamination by
Hazardous Substances at the Real Property with respect to which investigation,
removal or remedial activities have been actively conducted within one year
prior to the Closing, and (iii) any Environmental Claims pending or, to the
Knowledge of TPI, threatened, as of the Closing (collectively, the "Excluded
Environmental Liabilities"). Caraustar acknowledges that the costs of (i)
replacing the coal burning boilers at the Rittman Mill with non-coal burning
boilers, (ii) the closure of the landfill located at the Rittman Mill, and
(iii) continuing the groundwater monitoring at the Tama Mill, are Assumed
Liabilities, and none of such costs shall be deemed Excluded Environmental
Liabilities;
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(c) all liabilities arising out of the actions, suits,
proceedings, disputes, claims or investigations identified in Schedule 2.6(c);
(d) all liabilities, if any, for severance payments to
Rotogravure Employees and to Bumped Employees who shall be laid off as a
result of TPI's ceasing to operate the Rotogravure Assets;
(e) all liabilities to Former Employees;
(f) all liabilities to Employees under the Plans with respect
to periods ending on or before the Closing Date, all liabilities under the
Pension Plans, and any short-term disability, long-term disability and workers
compensation benefits under the Plans for Inactive Employees for periods prior
to their employment by the Partnership;
(g) all liabilities for income Taxes imposed with respect to
the taxable periods, or portions thereof, ending on or before the Closing Date;
(h) all other liabilities and obligations for which TPI has
expressly assumed responsibility pursuant to this Agreement; and
(i) all debts, liabilities or obligations whatsoever, that do
not arise out of or are not Related to the Business or that do not otherwise
arise out of or are not otherwise Related to the Contributed Assets.
2.7 TAX ALLOCATIONS. The value of the Contributed Assets for
federal income tax purposes shall be agreed upon by TPI and Caraustar within
thirty days after the final
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determination of Adjusted Closing Statement of Assets and Liabilities by letter
agreement. Each party agrees to complete IRS Form 8594 consistently with the
agreed allocation and to furnish the other party with a draft copy of such
form within a reasonable period before the filing due date of such form.
Neither TPI nor Caraustar shall file any return, on their own behalf or on
behalf of the Partnership, with a tax authority that is inconsistent with such
allocation.
2.8 POST-CLOSING ADJUSTMENT. The amount of the Equalization
Payment shall be adjusted after the Closing to reflect changes from the March
Statement of Assets and Liabilities to the Adjusted Closing Statement of
Assets and Liabilities (as defined below) as set forth in this Section 2.8.
(a) Within 45 days following the Closing Date, TPI shall, at
its expense, prepare, or cause to be prepared, and deliver to Caraustar an
unaudited Statement of Assets and Liabilities which shall set forth the assets
and liabilities of the Business as of the Determination Date (the "Closing
Statement of Assets and Liabilities"), prepared on a consistent basis with
the March Statement of Assets and Liabilities.
(b) Caraustar and Caraustar's accountants shall, within 45 days
after the delivery by TPI of the Closing Statement of Assets and Liabilities,
complete their review of the Closing Statement of Assets and Liabilities. In
the
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event that Caraustar determines that the Closing Statement of Assets and
Liabilities does not fairly present the assets and liabilities of the Business
in accordance with Section 2.8(a), Caraustar shall inform TPI in writing (the
"Objections"), setting forth a specific description of the basis of the
Objections and the adjustments to the Closing Statement of Assets and
Liabilities which Caraustar believes should be made, on or before the last day
of such 45-day period. TPI shall then have 20 days to review and respond to
the Objections. If TPI and Caraustar are unable to resolve all of their
disagreements with respect to the determination of the foregoing items within
10 Business Days following the completion of TPI's review of the Objections,
they shall refer their remaining differences to an internationally recognized
firm of independent public accountants as to which TPI and Caraustar mutually
agree (the "CPA Firm"), who shall, acting as experts and not as arbitrators,
determine, only with respect to the remaining differences so submitted,
whether and to what extent, if any, the Closing Statement of Assets and
Liabilities requires adjustment. TPI and Caraustar shall direct the CPA Firm
to use its best efforts to render its determination within 45 days. In
resolving any disputed item, the CPA Firm may not assign a value to an item
greater than the greatest value for such item classified by either party or
less than the smallest value for such item claimed by either party. The CPA
Firm's determination shall be conclusive and binding upon Caraustar and TPI.
The fees
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and disbursements of the CPA Firm shall be shared by Caraustar and TPI in
proportion to the extent to which the parties prevail on the issues submitted
to the CPA Firm, as determined by the CPA Firm. Caraustar and TPI 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 March Statement of Assets and Liabilities and the Closing Statement of
Assets and Liabilities and all other items reasonably requested by the CPA
Firm. The "Adjusted Closing Statement of Assets and Liabilities" shall be
either: (i) the Closing Statement of Assets and Liabilities in the event that
(x) no Objections are delivered to TPI during the 45-day period specified
above, or (y) TPI and Caraustar so agree, (ii) the Closing Statement of Assets
and Liabilities, adjusted in accordance with the Objections in the event that
TPI does not respond to the Objections within the 20-day period following
receipt by TPI of the Objections, or (iii) the Closing Statement of
Assets and Liabilities, as adjusted by either (x) the agreement of TPI and
Caraustar or (y) the CPA Firm.
(c) Caraustar shall provide TPI and its accountants full access
to the Books and Records, any other information, including work papers of its
accountants, and to any employees to the extent necessary for TPI to prepare
the Closing Statement of Assets and Liabilities. Caraustar and its accountants
shall have the opportunity to observe the taking of a physical inventory of
inventory items, to include
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specifically raw materials, work in process and finished goods, and a select
sample of physical inventory of supplies and material items with an item value
over $500 at the Rittman and Tama Mills (which may begin prior to the Closing
Date) taken in connection with the preparation of the Closing Statement of
Assets and Liabilities and shall have full access to all information used by
TPI in preparing the Closing Statement of Assets and Liabilities including the
work papers of its accountants.
(d) In reviewing the Objections, TPI and its accountants shall
have full access to all information used by Caraustar in preparing the
Objections, including the work papers of Caraustar's accountants.
(e) If (x) the net amount reflected on the March Statement of
Assets and Liabilities is less than (y) the net amount reflected on the
Adjusted Closing Statement of Assets and Liabilities, then within 10 Business
Days following issuance of the Adjusted Closing Statement of Assets and
Liabilities, Caraustar shall make an adjustment payment to the Partnership
equal to 80% of the net change plus interest on such amount from the Closing
Date through the date of payment at the Base Rate, and the Partnership shall
simultaneously make an equalization adjustment payment in such amount to TPI.
(f) If (x) the net amount reflected on the March Statement
exceeds (y) the net amount reflected on the Adjusted Closing Statement of
Assets and Liabilities, then
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within 10 Business Days following issuance of the Adjusted Closing Statement of
Assets and Liabilities, TPI shall make an adjustment payment to the
Partnership equal to 80% of the net change plus interest on such amount from
the Closing Date through the date of payment at the Base Rate, and the
Partnership shall simultaneously make an equalization adjustment payment in
such amount to Caraustar.
(g) The equalization adjustment payments payable pursuant to
this Section 2.8(e) shall be paid by wire transfer of immediately available
funds to the Partnership, and by the Partnership to an account designated by
Caraustar or TPI, as the case may be.
2.9 CLOSING.
(a) The Closing shall take place at the offices of Jenner &
Block, One IBM Plaza, Chicago, Illinois 60611 at 10:00 A.M. (Chicago time),
on July 15, 1996, or the second Business Day following the satisfaction or
waiver (by the party entitled to waive the condition) of all conditions to
the Closing set forth in Article VI, or at such other time and place as the
parties hereto may mutually agree, but in no event later than July 20, 1996.
The date on which the Closing occurs is called the "Closing Date."
(b) Notwithstanding anything to the contrary contained in this
Agreement, to the extent that the sale, assignment, transfer, conveyance or
delivery or attempted sale, assignment, transfer, conveyance or delivery to the
Partnership of any Contributed Asset is prohibited by any
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applicable law or would require any governmental or third-party authorizations,
approvals, consents or waivers and such authorizations, approvals, consents or
waivers shall not have been obtained prior to the Closing, such Contributed
Asset shall not be sold, assigned, transferred, conveyed or delivered at
Closing. Following the Closing, and without limiting the provisions set forth
in Section 5.3, the parties shall use reasonable efforts, and cooperate with
each other, to obtain promptly such authorizations, approvals, consents or
waivers; provided, however, that neither TPI nor the Partnership shall be
required to pay any consideration therefor, other than filing, recordation or
similar fees payable to any governmental authority, which fees shall be paid
by the Partnership. Pending such authorization, approval, consent or waiver,
the parties shall cooperate with each other in any reasonable and lawful
arrangements designed to provide to the Partnership the benefits and
liabilities of use of such Contributed Asset. Once such authorization,
approval, consent or waiver for the sale, assignment, transfer, conveyance or
delivery of a Contributed Asset not sold, assigned, transferred, conveyed or
delivered at the Closing is obtained, TPI shall promptly assign, transfer,
convey and deliver, or cause to be assigned, transferred, conveyed and
delivered, such Contributed Asset to the Partnership for no additional
consideration. To the extent that any such Contributed Asset cannot be
transferred or the full benefits and liabilities of use of any such Contributed
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Asset cannot be provided to the Partnership following the Closing pursuant to
this Section 2.9(b), then the Partnership and TPI shall enter into such
arrangements (including subleasing or subcontracting if permitted) to provide
to the Partnership the economic (taking into account Tax costs and benefits)
and operational equivalent of obtaining such authorization, approval, consent
or waiver and the performance by the Partnership of the obligations thereunder,
or, of such an arrangement is not feasible, the Adjusted Closing Statement of
Assets and Liabilities shall be further adjusted to reflect the deletion of
such Contributed Asset, and the amount of the equalization adjustment payments
made pursuant to Section 2.8 hereof shall be adjusted accordingly.
2.10 DELIVERIES BY CARAUSTAR. At the Closing, Caraustar shall
deliver to the Partnership or TPI the following:
(a) to TPI, a duly executed copy of the Partnership Agreement;
(b) to the Partnership, the Caraustar Contribution in
immediately available funds by wire transfer;
(c) to TPI, the opinion of the Caraustar's counsel, dated as of
the Closing Date, addressed to TPI, in form and substance reasonably
satisfactory to TPI;
(d) to TPI, the certificates and other documents to be
delivered pursuant to Section 6.3; and
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(e) to TPI and the Partnership, such other instruments and
documents, in form reasonably acceptable to TPI, as may be necessary to effect
the Closing.
2.11 DELIVERIES BY TPI. At the Closing, TPI shall deliver to the
Partnership or Caraustar the following:
(a) To Caraustar, a duly executed copy of the Partnership
Agreement;
(b) to the Partnership, assignments, in form reasonably
acceptable to Caraustar, assigning to the Partnership all Intellectual
Property included in the Contributed Assets;
(c) to the Partnership, deeds, in limited warranty or other
similar form, in form and substance reasonably acceptable to Caraustar
transferring all Owned Real Property to the Partnership subject to any and all
Permitted Encumbrances;
(d) to the Partnership, assignments, or where necessary
subleases, in form and substance reasonably acceptable to Caraustar, assigning
or subleasing to the Partnership all Leased Real Property;
(e) to the Partnership, bills of sale, in form reasonably
acceptable to Caraustar transferring to the Partnership all other Contributed
Assets, subject to any and all Permitted Encumbrances;
(f) to Caraustar, the opinion of TPI's counsel, dated as of the
Closing Date, addressed to Caraustar, in form and substance reasonably
satisfactory to Caraustar;
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(g) to the Partnership, a duly executed copy of each of the
Ancillary Agreements;
(h) to Caraustar and the Partnership, the certificates and
other documents to be delivered pursuant to Section 6.2; and
(i) such other instruments or documents, in form reasonably
acceptable to Caraustar, as may be necessary to effect the Closing.
2.12 DELIVERIES BY THE PARTNERSHIP. At the Closing, the
Partnership shall deliver to TPI and Caraustar the following:
(a) to TPI, the initial Equalization Payment in the amount of
$115 million, in immediately available funds by wire transfer to an account
designated by TPI not less than two Business Days prior to the Closing;
(b) to TPI, such instruments of assumption and other
instruments or documents, in form and substance reasonably acceptable to TPI,
as may be necessary to effect the Partnership's assumption of the Assumed
Liabilities;
(c) to TPI, a duly executed copy of each of the Ancillary
Agreements; and
(d) to TPI and Caraustar, such other instruments and documents,
in form and substance reasonably acceptable to TPI and Caraustar as may be
necessary to effect the Closing.
2.13 TRANSFER TAXES AND RECORDING FEES. All Taxes other than
income Taxes, including sales Taxes, transfer Taxes and recording Taxes and
fees, imposed upon the transfer
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of the Contributed Assets hereunder and the filing of any instruments (the
"Transfer Costs") shall be the responsibility of, and shall be paid by, the
Partnership.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TPI
TPI represents and warrants to Caraustar as follows:
3.1 ORGANIZATION AND QUALIFICATION. TPI is a corporation duly
organized, validly existing and in good standing under the laws of the state
of Delaware and has all requisite corporate power and authority to own and
operate the Contributed Assets and to carry on the Business as currently
conducted. TPI is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the ownership or operation of
the Contributed Assets or the conduct of the Business requires such
qualification, except where the failure to be so qualified or in good standing,
as the case may be, would not have a Material Adverse Effect.
3.2 CORPORATE AUTHORIZATION. TPI has full corporate power and
authority to execute and deliver this Agreement and each of the Ancillary
Agreements, and to perform its obligations hereunder and thereunder. The
execution, delivery and performance by TPI of this Agreement and each of the
Ancillary Agreements have been duly and validly authorized and no additional
corporate authorization or consent is required in connection with the execution,
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delivery and performance by TPI of this Agreement and each of the Ancillary
Agreements.
3.3 CONSENTS AND APPROVALS. Except as specifically set forth
in Schedule 3.3 or as required by the HSR Act, no consent, approval, waiver
or authorization is required to be obtained by TPI from, and no notice or
filing is required to be given by TPI to or made by TPI with, any federal,
state, local or foreign governmental authority or other Person in connection
with the execution, delivery and performance by TPI of this Agreement and
each of the Ancillary Agreements, other than in all cases where the failure
to obtain such consent, approval, waiver or authorization, or to give or make
such notice or filing, would not have a Material Adverse Effect or materially
impair or delay the ability of TPI to effect the Closing or materially impair
the ability of the Partnership to conduct the Business from and after Closing.
3.4 NON-CONTRAVENTION. Except as set forth on Schedule 3.4,
the execution, delivery and performance by TPI of this Agreement and each of
the Ancillary Agreements, and the consummation of the transactions contemplated
hereby and thereby, does not and will not (i) violate any provision of the
certificate of incorporation or bylaws of TPI, (ii) subject to obtaining the
consents referred to in Section 3.3, conflict with, or result in the breach of,
or constitute a default under, or result in the termination, cancellation or
acceleration (whether after the filing of notice or the lapse
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of time or both) of any right or obligation of TPI under, or to a loss of any
benefit to which TPI is entitled under, any Contract or result in the creation
of any Encumbrance upon any of the Contributed Assets; or (iii) assuming
compliance with the matters set forth in Sections 3.3 and 4.3, violate, or
result in a breach of or constitute a default under any law, rule, regulation,
judgment, injunction, order, decree or other restriction of any court or
governmental authority to which TPI is subject, including any Governmental
Authorization, other than, in the cases of clauses (ii) and (iii), any
conflict, breach, termination, default, cancellation, acceleration, loss,
violation or Encumbrance which, individually or in the aggregate, would not
have a Material Adverse Effect or materially impair or delay the ability of
TPI to perform its obligations hereunder.
3.5 BINDING EFFECT. This Agreement constitutes, and each of
the Ancillary Agreements when executed and delivered by the parties thereto
will constitute, a valid and legally binding obligation of TPI, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors, rights and to general equity principles.
3.6 FINANCIAL INFORMATION.
(a) The unaudited Statement of Assets and Liabilities and the
unaudited statement of operating profit of the Business as of and for the
year ended December 31, 1995,
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and the unaudited Statement of Assets and Liabilities and the unaudited
statement of operating profit of the Business as of and for the three months
ended March 31, 1996, attached as Schedule 3.6(a)(collectively, the "Financial
Information") fairly present, in all material respects, the selected assets and
liabilities of the Business as of the dates thereof, and the revenues and
expenses of the Business, taken as a whole, for the periods then ended. Such
unaudited Financial Information has been prepared using the historical
accounting policies and practices of TPI applied consistently to the periods
presented. Schedule 3.6(b) sets forth such historical accounting policies and
practices and also sets forth all categories of items and procedures not taken
in the preparation of such Financial Information that, pursuant to such
policies and practices, are not included in such Financial Information that,
under generally accepted accounting principles, would be included or taken in
preparation of such Financial Information.
(b) All of the liabilities reflected on the March Statement of
Assets and Liabilities are Related to the Business and arose out of or were
incurred in the conduct of the Business.
(c) Except as set forth in Schedule 3.6(c) or otherwise disclosed
in this Agreement, since March 31, 1996, TPI has conducted the Business in the
ordinary and usual course and, other than in the ordinary and usual course,
has not, with respect to the Business: (i) sold, assigned,
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pledged, hypothecated or otherwise transferred any assets used primarily in
connection with the Business, other than sales, assignments, pledges,
hypothecations or other transfers in the ordinary course of business which
would not have a Material Adverse Effect; (ii) terminated or materially
amended any Contract that is material to the Business, taken as a whole;
(iii) suffered any damage, destruction or other casualty loss which
would have a Material Adverse Effect; (iv) except for normal salary
administration for Employees, increases pursuant to collective bargaining
agreements, or other compensation increases (including bonuses) in the
ordinary course of business, increased the compensation payable or to
become payable by TPI to any of the Employees or increased any bonus,
insurance, pension or other employee benefit plan, payment or arrangement
made by TPI, for or with any such Employees; or (v) entered into an agreement
to do any of the foregoing.
3.7 LITIGATION AND CLAIMS.
(a) Except as set forth in Schedule 3.7(a), there is no civil,
criminal or administrative action, suit, demand, claim, hearing, proceeding
or investigation pending involving the Business or any of the Contributed
Assets. To the Knowledge of TPI, except as set forth in Schedule 3.7(a),
there is no civil, criminal or administrative action, suit, demand, claim,
hearing, proceeding or investigation threatened involving the Business or any
of the Contributed Assets other than those which, individually or in the
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aggregate, would not have a Material Adverse Effect or materially impair or
delay the ability of TPI to effect the Closing or materially impair the
ability of the Partnership to conduct the Business from and after Closing.
(b) Except as set forth in Schedule 3.7(b), none of the
Contributed Assets is subject to any order, writ, judgment, award, injunction,
or decree of any court or governmental or regulatory authority of competent
jurisdiction or any arbitrator or arbitrators.
3.8 TAXES. TPI has paid or caused to be paid all Taxes, rates
and like assessments on it and its assets that have become due and payable
which if not so paid could result in an Encumbrance upon the Contributed
Assets except (i) Taxes, rates and like assessments which are being contested
in good faith, (ii) Taxes due which are not delinquent, and (iii) Taxes which
are the responsibility of the Partnership pursuant to this Agreement.
3.9 EMPLOYEE BENEFITS. Schedule 3.9 lists each employee
benefit plan, as defined in Section 3(3) of ERISA, and each bonus or other
incentive compensation, severance, reduction in force, relocation, salary
continuation for sickness or other disability, vacation or educational
assistance program which TPI maintains, contributes to or has an obligation
to contribute to on behalf of Employees (collectively, the "Plans"). None of
the Plans constitutes a "multiemployer plan" (as defined in Section 4001(a)(3)
of ERISA). Neither TPI, nor any trade or business (whether or
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not incorporated) which together with TPI is treated as a single employer under
Section 414(b), (c), (m), or (o) of the Code (a "related party") has incurred
(nor has any event occurred that could result in TPI or any related entity
incurring) any liability in connection with any existing or previously existing
Plan that could become, on or after the Closing Date, an obligation or
liability of the Partnership. Neither TPI nor any related entity has had any
complete or partial withdrawal, from any multiemployer plan, and the
consummation of the transaction contemplated by this Agreement will not result
in any such complete or partial withdrawal that could result, directly or
indirectly, in any withdrawal liability under Title IV of ERISA to the
Partnership.
3.10 COMPLIANCE WITH LAWS. Except as set forth in Schedule
3.10, (a) the Business is being conducted in compliance with all Laws, and (b)
TPI has all Governmental Authorizations necessary for the conduct of the
Business as currently conducted; it being understood that nothing in this
representation is intended to address any issue relating to Taxes or any
compliance issue that is the subject of any other representation or warranty
set forth herein.
3.11 ENVIRONMENTAL MATTERS. Except as set forth on Schedule
3.11, and in each case other than as Related to an Excluded Liability, as it
is Related to the Business:
(a) TPI (i) is, and at all times has been, in compliance in all
material respects with all Environmental
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Laws, (ii) has not received any written communication (or, to TPI's Knowledge,
oral) that alleges that it is not, or at any time has not been, in such
compliance, or has caused exposure of any person or the environment to any
Hazardous Substance, other than non-compliance which has been cured, and
(iii) has all material permits and other approvals required by the
Environmental Laws for the conduct of the Business.
(b) Other than in compliance with applicable law, to the TPI's
Knowledge there is not occurring, and there has not occurred at any time, any
generation, storage, treatment, release or disposal of any Hazardous Substance
on, in or from any real property currently or formerly owned, leased or
operated by TPI in connection with the Business (a "TPI Facility"), nor is any
such TPI Facility contaminated by any Hazardous
Substance.
(c) TPI has heretofore delivered to Caraustar true and complete copies
of each environmental report, audit, and assessment, and each occupational
health study, identified in Schedule 3.11. To TPI's Knowledge, there are no
other existing environmental reports, audits or assessments, or occupational
health studies relating to any TPI Facility that contain information relating
to environmental or occupational health or safety matters that could have a
Material Adverse Effect.
(d) TPI does not own or operate (nor did it formerly own or operate)
any site which, pursuant to CERCLA or any other Environmental Law, (i)
has been placed on the "National
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Priorities List" or any other list of sites suspected to be contaminated by any
Hazardous Substance, (ii) is or has been subject to a claim, administrative
order or other request to take investigative, removal or remedial action under
CERCLA or any other Environmental Law, or (iii) to the Knowledge of TPI is
otherwise the subject of any federal, state or private investigation,
remediation or cost recovery or contribution effort or claim relating to
Environmental Laws.
(e) Schedule 3.11 sets forth, with respect to each facility owned or
operated by TPI, all material environmental licenses, permits, approvals,
authorizations, exemptions, classifications, certificates and registrations
(collectively the "Permits") made or held by TPI together with a description
of any compliance schedules relating thereto, all of which Permits shall be
transferred to or otherwise available to Caraustar without material cost or
material adverse affect as a result of the transaction contemplated herein.
(f) Schedule 3.11 identifies (i) all on-site locations where TPI has
stored, disposed or arranged for the disposal of hazardous substances or
wastes, (ii) all underground storage tanks, and the capacity and contents of
such tanks, located or formerly located on any TPI Facility, (iii) all asbestos
contained in or forming part of any building, building component, structure or
office space owned, leased or otherwise occupied by TPI, none of which is
friable and
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(iv) all polychlorinated biphenyls (PCB's) used or present at any property
owned, leased or otherwise occupied by TPI.
3.12 INTELLECTUAL PROPERTY.
(a) Schedule 3.12(a) sets forth a list and description
(including the country of registration) of all registered Intellectual Property.
(b) To the Knowledge of TPI, except as set forth in Schedule
3.12(b), no product (or component thereof or process) currently used, sold or
manufactured by the Business infringes on or otherwise violates a valid and
enforceable patent or registered trademark or registered copyright of any other
Person.
(c) Except as set forth in Schedule 3.12(c), there are no
actions or proceedings pending challenging the Intellectual Property. To the
Knowledge of TPI, except as set forth in Schedule 3.12(c), there are no
actions or proceedings threatened challenging the Intellectual Property, no
Person is infringing or otherwise violating, the Intellectual Property, except
for challenges, infringements or violations which, individually or in the
aggregate, would not have a Material Adverse Effect.
3.13 LABOR MATTERS. Except as disclosed on Schedule 3.13:
(a) TPI is not a party to any labor or collective bargaining
agreement with respect to Employees, no Employees are represented by any labor
organization and, to the
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Knowledge of TPI, there are no organizing activities (including any demand for
recognition or certification proceedings pending or threatened in writing to
be brought or filed with the National Labor Relations Board or other labor
relations tribunal) involving TPI;
(b) there are no strikes, work stoppages, slowdowns, lockouts,
unfair labor practice charges, arbitrations or grievances pending or
threatened in writing against or involving TPI except for those which,
individually or in the aggregate, would not have a Material Adverse Effect;
(c) there are no complaints, charges or claims against TPI
pending or, to the Knowledge of TPI, threatened in writing to be brought or
filed with any governmental authority, arbitrator or court based on or arising
out of the employment by TPI of any Employee except for those which,
individually or in the aggregate, would not have a Material Adverse Effect; and
(d) TPI is in compliance with all laws and orders relating to
the employment of labor, including all such laws and orders relating to wages,
hours, collective bargaining, discrimination, civil rights, safety and health,
workers' compensation and the collection and payment of withholding and/or
Social Security Taxes and similar employment Taxes except for non-compliance
which, individually or in the aggregate, would not have a Material Adverse
Effect.
3.14 CONTRACTS. Schedule 3.14(a) sets forth a list, as of the
date hereof, of each Contract that is Related
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to the Business (other than (i) purchase orders in the ordinary and usual
course of business, (ii) any Contract involving the payment of less than
$250,000 in the aggregate or with a term of less than one year or cancelable
by TPI on prior notice of one year or less, and (iii) confidentiality
agreements entered into in the usual course of business) and such Schedule
does not omit any Contract that is of material significance to the operation
of the Business. Each material Contract is a valid and binding agreement of
TPI and, to the Knowledge of TPI, is in full force and effect. Except as
otherwise provided in Schedule 3.14(b), TPI is in material compliance
with all such Contracts and TPI has no Knowledge of any material default by
any other party under any Contract listed on Schedule 3.14(a) which default
has not been cured or waived and which default would have a Material Adverse
Effect.
3.15 ENTIRE BUSINESS; TITLE TO PROPERTY.
(a) Except as set forth in Schedule 3.15(a), the Contributed
Assets and the TPI Marks constitute all the assets, properties and rights
necessary to conduct the Business in all material respects as currently
conducted.
(b) TPI has good (and, in the case of Owned Real Property,
marketable) title to, or a valid and binding leasehold interest in, the
Contributed Assets, free and clear of all Encumbrances, except (i) as set
forth in Schedule 3.15(b); (ii) liens for Taxes, assessments and other
governmental charges not yet due and payable or due but not
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delinquent or being contested in good faith by appropriate proceedings; (iii)
mechanic's, workmen's, repairmen's, warehousemen's, carriers, or other like
liens arising or incurred in the ordinary course of business, original purchase
price conditional sales contracts and equipment leases with third parties
entered into in the ordinary course of business; and (iv) with respect to the
Real Property, (A) easements, quasi-easements, licenses, covenants, rights-of-
way and other similar restrictions, including 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; and (v) other Encumbrances which do not secure
financial obligations, interfere with TPI's current use of the Real Property,
and otherwise neither individually or in the aggregate would have a Material
Adverse Effect (all items included in (i) through (v), including any matter
set forth in Schedule 3.15(b), are referred to collectively herein as the
"Permitted Encumbrances").
(c) TPI makes no representation in this Agreement as to the
physical condition or usefulness for a particular purpose of the real or
tangible personal property included in the Contributed Assets.
3.16 FINDERS' FEES. Except for Salomon Brothers Inc whose fees
will be paid by TPI, there is no investment
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banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of TPI who might be entitled to any fee or
commission from TPI in connection with the transactions contemplated by this
Agreement.
3.17 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article III, neither TPI nor
any other Person makes any other express or implied representation or warranty
on behalf of TPI.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CARAUSTAR
Caraustar represents and warrants to TPI as follows:
4.1 ORGANIZATION AND QUALIFICATION. Caraustar is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own and operate and to carry on its business as currently
conducted. Caraustar is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction where the ownership of its
properties or the operation of its business requires such qualification.
4.2 CORPORATE AUTHORIZATION. Caraustar has full corporate
power and authority to execute and deliver this Agreement and each of the
Ancillary Agreements, and to perform its obligations hereunder and thereunder.
The
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execution, delivery and performance by Caraustar of this Agreement and each of
the Ancillary Agreements have been duly and validly authorized and no
additional corporate authorization or consent is required in connection with the
execution, delivery and performance by Caraustar of this Agreement and each of
the Ancillary Agreements.
4.3 CONSENTS AND APPROVALS. Except as specifically set forth
in Schedule 4.3 or as required by the HSR Act, no consent, approval, waiver
or authorization is required to be obtained by Caraustar or any Subsidiary of
Caraustar from, and no notice or filing is required to be given by Caraustar or
any Subsidiary of Caraustar to, or made by Caraustar or any Subsidiary of
Caraustar with, any federal, state, local or other governmental authority or
other Person in connection with the execution, delivery and performance by
Caraustar of this Agreement and each of the Ancillary Agreements, other than
in all cases where the failure to obtain such consent, or to give or make such
notice or filing, would not have a Material Adverse Effect or materially
impair or delay the ability of Caraustar to effect the Closing.
4.4 NON-CONTRAVENTION. Except as set forth in Schedule 4.4,
the execution, delivery and performance by Caraustar of this Agreement and
each of the Ancillary Agreements, and the consummation of the transactions
contemplated hereby and thereby, does not and will not (i) violate any
provision of the charter, bylaws or other
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organizational documents of Caraustar or (ii) assuming compliance with the
matters set forth in Sections 3.4 and 4.3, violate or result in a breach of
or constitute a default under any law, rule, regulation, judgment, injunction,
order, decree or other restriction of any court or governmental authority to
which Caraustar is subject, including any Governmental Authorization, other
than any conflict, breach, termination, default, cancellation, acceleration,
loss, violation or Encumbrance which, individually or in the aggregate, would
not have a Material Adverse Effect or materially impair or delay the ability
of Caraustar to perform its obligations hereunder.
4.5 BINDING EFFECT. This Agreement constitutes, and each of
the Ancillary Agreements when executed and delivered by the parties thereto
will constitute, a valid and legally binding obligation of Caraustar
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles.
4.6 FINDERS' FEES. Except for Donaldson, Lufkin & Jenrette
Securities Corporation and First Analysis, whose fees will be paid by
Caraustar, there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of Caraustar or
any Subsidiary of Caraustar who might be entitled to any fee
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or commission from Caraustar in connection with the transactions contemplated
by this Agreement.
4.7 FINANCIAL CAPABILITY. Caraustar has, and on the Closing
Date will have, sufficient funds to effect the Closing and all other
transactions contemplated by this Agreement.
4.8 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article IV, neither Caraustar
nor any other Person makes any other express or implied representation or
warranty on behalf of Caraustar.
ARTICLE V
COVENANTS
5.1 ACCESS. Prior to the Closing, TPI shall permit Caraustar
and its representatives to have access, during regular business hours and upon
reasonable advance notice, to the Contributed Assets, subject to reasonable
rules and regulations of TPI, and shall furnish, or cause to be furnished, to
Caraustar, any financial and operating data and other information that is
available with respect to the Business as Caraustar shall from time to time
reasonably request. Caraustar shall abide by the terms of the Confidentiality
Agreement with respect to such access and any information furnished to it or
its representatives pursuant to this Section 5.1. Notwithstanding anything
herein to the contrary, Caraustar shall not be permitted to perform any
invasive testing of any of the Real Property. TPI shall
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permit Caraustar access to all records and information concerning all Hazardous
Substances used, stored, generated, treated, or disposed of by the TPI, all
environmental or safety studies conducted by or on behalf of the TPI and all
reports, correspondence, or filings to governmental agencies with jurisdiction
over Environmental Laws concerning the compliance of TPI or the Real Property
or the operation of the Real Property with respect to the Business, to the
extent currently owned or operated by the TPI, with Environmental Laws, all
policies and procedures manuals or guidelines utilized by the TPI to comply
with Environmental Laws, and any other information reasonably requested by
Caraustar pertaining to environmental, health, and safety issues (provided
that nothing herein shall require TPI to disclose any such information that
is legally privileged or that is subject to a confidentiality agreement or
requirement with any third party).
5.2 CONDUCT OF BUSINESS. During the period from the date
hereof to the Closing, except as otherwise contemplated by this Agreement or as
Caraustar shall otherwise agree in writing in advance, TPI shall conduct the
Business in the ordinary and usual course, and use its reasonable efforts to
preserve intact the business organization of the Business, and its
relationships with third parties. During the period from the date hereof to
the Closing, except as otherwise provided for in this Agreement or as
Caraustar shall otherwise consent (which consent shall
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not be unreasonably withheld), with respect to the Business, other than in the
ordinary and usual course or as set forth in Schedule 5.2, TPI shall not:
(i) enter into commitments for new capital
expenditures in excess of $500,000 in the aggregate;
(ii) dispose of or incur, create or assume any
Encumbrance on any individual fixed asset of the Business if the greater of
the book value or the fair market value of such fixed asset exceeds $100,000,
other than Permitted Encumbrances;
(iii) enter into any material transaction;
(iv) grant material salary or wage increases or (as it
relates to Employees) materially change or amend any Plan; or
(v) agree, in writing or otherwise, to do any of the
foregoing.
Notwithstanding the foregoing, this Section 5.2 shall not restrict
the ability of TPI to make distributions of cash or short-term investments to
holders of its capital stock or otherwise to engage in cash management
activities in the ordinary course of business.
5.3 BEST EFFORTS. TPI and Caraustar will cooperate and use
their respective best efforts to fulfill the conditions precedent to the other
party's obligations hereunder, including securing as promptly as practicable
all consents, approvals, waivers and authorizations required in connection
with the transactions contemplated hereby. If
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required, TPI and Caraustar will file within one Business Days of the date
hereof the notice (including all documentary materials) under the HSR Act and
promptly file any additional information requested as soon as practicable
after receipt of request therefor.
5.4 POST-CLOSING OBLIGATIONS TO CERTAIN EMPLOYEES.
(a) Schedule 5.4(a) sets forth a correct and complete list, as
of April 19, 1996, of all Employees, indicating each Employee who (x) is an
Inactive Employee and (y) is a Union Employee. Such Schedule sets forth the
respective position, job location, salary rate and date of hire of each
Employee listed thereon.
(b) (i) The Partnership shall offer employment effective
the Closing Date to all Union Employees immediately prior to the Closing Date.
Each offer of employment to a Union Employee shall be under the terms of the
applicable collective bargaining agreement for such Union Employee, and
otherwise at the same compensation rate, position and place of employment held
by such Union Employee immediately prior to the Closing Date; provided, however,
that any Inactive Employee who is absent from active service on the Closing
Date by reason of such Inactive Employee's entitlement to short-term
disability, long-term disability or workers' compensation benefits shall be
offered employment by the Partnership effective upon such Inactive Employee's
availability to return to active service.
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(ii) The Partnership shall offer employment on an
"at-will basis" effective as of the Closing Date to all Persons who are
Employees other than Union Employees immediately prior to the Closing Date;
provided, however, that any Inactive Employee who is absent from active
service on the Closing Date by reason of such Inactive Employee's entitlement
to short-term disability, long-term disability or workers' compensation
benefits shall be offered employment by the Partnership effective upon such
Inactive Employee's availability to return to active service. Each offer of
employment to an Employee other than a Union Employee shall be at the same
base salary or commission rate, position and place of employment held by such
Employee immediately prior to the Closing Date and upon such other terms
and conditions of employment as may be determined by the Partnership in its
sole discretion; provided, however, that the Partnership shall make a
reasonable accommodation in the case of any Inactive Employee who returns to
work following a period of disability and is not fully capable of performing
the functions of his or her former position. Employees who are hired by the
Partnership shall be treated no less favorably than similarly situated
employees of Caraustar.
(iii) Notwithstanding the foregoing, the Partnership shall
not be obligated to offer employment to any Rotogravure Employees (other than
Rotogravure Employees exercising bumping rights to accept a position at the
Rittman mill) or to any Bumped Employees.
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(c) The Partnership shall grant all Employees credit for
purposes of eligibility and vesting (but not benefit accrual) under the
Partnership's employee benefit plans (including vacation and severance) for
their service with TPI prior to the Closing Date, to the same extent such
service had been taken into account under the Plans.
(d) The Partnership shall provide a medical plan as of the
Closing Date so as to ensure uninterrupted coverage of those Employees who
accept offers of employment with the Partnership as of the Closing Date.
Such medical plan shall grant credit for deductibles and co-pays paid and any
other payments paid by such Employees during the applicable plan year
(including for purposes of computing any out-of-pocket maximum), including
the Closing Date, and shall not exclude pre-existing conditions of such
Employee or his or her covered dependents.
(e) TPI shall retain sponsorship of the Plans, including the
Pension Plans, and the Partnership shall not be entitled to any assets of the
Plans, including the Pension Plans, for all periods prior to Closing. If the
Partnership maintains or establishes a defined contribution plan, such plan
shall, subject to applicable law, accept transfers of account balances by
Employees and employee loans by Employees.
5.5 COMPLIANCE WITH WARN AND SIMILAR LAWS. The Partnership
will timely give all notices required to be given under WARN or other similar
statutes or regulations of any
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jurisdiction relating to any plant closing or mass layoff, under COBRA, or as
otherwise required by any such statutes. For this purpose, the Partnership
shall be deemed to have caused a mass layoff if the mass layoff would not have
occurred but for the Partnership's failure to employ the Employees in
accordance with the terms of this Agreement.
5.6 FURTHER ASSURANCES. At any time after the Closing Date,
TPI and Caraustar shall, and shall cause the Partnership to, promptly execute,
acknowledge and deliver any other assurances or documents reasonably requested
by Caraustar or TPI, as the case may be, and necessary for them or it to satisfy
their or its respective obligations hereunder or obtain the benefits
contemplated hereby.
5.7 USE OF TPI MARKS. Except as set forth in this Section 5.7,
after the Closing, the Partnership shall not use the TPI Marks, except that
the Partnership may (i) use, for a period of six months following the Closing
Date, the TPI Marks on products, labels, packaging and promotional materials
that are in existence as of the Closing Date and bearing a TPI Mark, and (ii)
use, for a period of 45 days following the Closing Date, signage, invoices and
stationery in existence as of the Closing Date bearing a TPI Mark. Following
the six-month and 45-day periods described above, the Partnership shall cease
all use of any TPI Marks.
5.8 COMPUTER SERVICES AGREEMENT. On the Closing Date, the
Partnership shall execute and deliver, and TPI or an Affiliate of TPI shall
execute and deliver, a computer
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services agreement (the "Computer Services Agreement") in the form of Annex B
attached hereto, pursuant to which, for the specified periods following the
Closing Date set forth therein, TPI or an Affiliate of TPI shall provide certain
computer support services to the Partnership as more defined in the Computer
Services Agreement.
5.9 PURCHASE AND BROKERAGE AGREEMENTS. On the Closing Date,
the Partnership and TPI shall execute and deliver a (i) a CCN Purchase
Agreement (the "CCN Purchase Agreement") in the form of Annex C attached
hereto, (ii) a Double Lined Kraft Brokerage Agreement (the "DLK Brokerage
Agreement") in the form of Annex D attached hereto, and (iii) a Mill
Procurement Agreement (the "Mill Procurement Agreement") in the form of
Annex E attached hereto.
5.10 RITTMAN LEASE AND TEMPORARY OFFICE SPACE.
(a) Effective on the Closing Date, the Partnership and TPI
shall enter into a lease for the space depicted on Annex F attached hereto
(the "Rittman Lease") whereby the Partnership will lease to TPI, for the rent of
$1.00 per month, the Rotogravure Real Property, for the purpose of operating
the Rotogravure Assets. The Rittman Lease shall be in effect for a period of
ten years, provided that TPI may terminate such lease upon 60 days prior written
notice, whereupon TPI shall remove, in an orderly fashion consistent with good
business practice, the Rotogravure Assets from the Rotogravure Real Property.
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(b) TPI shall allow the Partnership to continue to occupy and
use the Temporary Office Space for a period of time up to and including one
year from the Closing Date. The Partnership shall pay no rent to TPI for the
use of the Temporary Office Space, but the Partnership shall pay directly, or
reimburse TPI for, all out-of-pocket costs associated with or arising from the
Partnership's operations in the Temporary Office Space, including all long-
distance phone charges, shipping and mailing costs, copying costs, and any
other similar individual costs associated with the Partnership's operations
in the Temporary Office Space. The Partnership acknowledges that its right
to occupy the Temporary Office Space shall terminate if the lease under which
TPI is currently occupying the property shall be terminated, for any reason,
or if the landlord under such lease shall require that the Partnership vacate
the premises.
(c) TPI acknowledges that the Partnership shall not be liable
for any damage or harm to TPI's property or employees while such property or
employee is located on the Rotogravure Real Property. TPI further agrees to
indemnify, defend and hold harmless the Partnership and its affiliates from,
against and in respect of any damages, claims, losses, charges, actions,
suits, reasonable attorneys' fees and expenses imposed on, or alleged against
the Partnership for any harm or damage to the Partnership's property or
employees, or to any other person or property, arising out of
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TPI's use or occupation of the Rotogravure Real Property after the Closing
Date.
(d) the Partnership acknowledges that TPI shall not be liable
for any damage or harm to the Partnership's property or employee while such
property or employee is located on the Temporary Office Space. The
Partnership further agrees to indemnify, defend and hold harmless TPI and its
affiliates from, against and in respect of any damages, claims, losses,
charges, actions, suits, reasonable attorneys' fees and expenses imposed on,
or alleged against TPI for any harm or damage to TPI's property or employees,
or to any other person or property, arising out of the Partnership's use or
occupation of the Temporary Office Space.
5.11 LICENSE AGREEMENT. On the Closing Date, the Partnership
and TPI shall execute and deliver a license agreement (the "License Agreement")
in the form of Annex G attached hereto.
5.12 CERTAIN MATTERS RELATED TO EXCLUDED LIABILITIES.
(a) TPI shall have the right, which may be exercised in its
sole discretion, to manage and control the handling of, to assume the defense
of and to settle or otherwise compromise claims relating to Excluded Liabilities
where settlement involves only the payment of monetary damages, it being
understood that with respect to other settlements of claims relating to
Excluded Liabilities, the
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Partnership shall have the right to consent to the entry of any settlement,
which consent shall not be unreasonably withheld.
(b) With respect to all Excluded Liabilities, the Partnership
Indemnified Parties shall cooperate with TPI, provide TPI as promptly as
possible with notices and other information received by such parties as well
as all relevant materials, information and data requested by TPI and shall
grant TPI, without charge, reasonable access to employees of the Business and,
in the case of Excluded Environmental Liabilities, to the Real Property,
including the right to conduct environmental tests thereon and to take samples
therefrom. The Partnership Indemnified Parties shall not defend, settle,
compromise or make any payments with respect to claims relating to Excluded
Liabilities.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 CONDITIONS TO THE OBLIGATIONS OF CARAUSTAR AND TPI. The
obligations of the parties hereto to effect the Closing are subject to the
satisfaction (or waiver) prior to the Closing of the following conditions:
(a) HSR ACT. All filings, if any, under the HSR Act shall have
been made and any required waiting period under such laws (including any
extensions thereof obtained by request or other action of any governmental
authority)
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applicable to the transactions contemplated hereby shall have expired or been
earlier terminated.
(b) NO INJUNCTIONS. No court or governmental authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, non-appealable judgment, decree,
injunction or other order which is in effect on the Closing Date and prohibits
the consummation of the Closing.
(c) CONSENTS AND APPROVAL. All Required Approvals shall have
been obtained.
6.2 CONDITIONS TO THE OBLIGATIONS OF CARAUSTAR. The obligation
of Caraustar to effect the Closing is subject to the satisfaction (or waiver)
prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of TPI contained herein shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects as of the Closing, as if made as of the Closing (except that
representations and warranties that are made as of a specific date need be
true in all material respects only as of such date), and Caraustar shall
have received certificates to such effect dated the Closing Date and executed
by a duly authorized officer of TPI.
(b) COVENANTS. The covenants and agreements of TPI to be
performed on or prior to the Closing shall have been duly performed in all
material respects, and Caraustar
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shall have received certificates to such effect dated the Closing Date and
executed by a duly authorized officer of TPI.
(c) NO MATERIAL ADVERSE CHANGE. Since March 31, 1996, the
Business shall not have suffered a Material Adverse Change.
6.3 CONDITIONS TO THE OBLIGATIONS OF TPI. The obligation of
TPI to effect the Closing is subject to the satisfaction (or waiver) prior to
the Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Caraustar contained herein shall have been true and correct in
all material respects when made and shall be true and correct in all material
respects as of the Closing, as if made as of the Closing (except that
representations and warranties that are made as of a specific date need be
true in all material respects only as of such date), and TPI shall have
received a certificate to such effect dated the Closing Date and executed by
a duly authorized officer of Caraustar.
(b) COVENANTS. The covenants and agreements of Caraustar to
be performed on or prior to the Closing shall have been duly performed in all
material respects, and TPI shall have received a certificate to such effect
dated the Closing Date and executed by a duly authorized officer of Caraustar.
ARTICLE VII
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SURVIVAL; INDEMNIFICATION
7.1 SURVIVAL. The representations and warranties of TPI
contained in this Agreement shall survive the Closing for the period set forth
in this Section 7.1. All of the representations and warranties of TPI
contained in this Agreement shall terminate upon expiration of 2 years after
the Closing Date, except that the representations and warranties Section 3.11
shall terminate upon expiration of 3 years after the Closing Date. The
representations and warranties of Caraustar contained in this Agreement shall
have no expiration date. Any claim for indemnification arising out of a
breach of a representation or warranty made by TPI must be made during the
applicable survival period. In the event notice of any claim for
indemnification under Section 7.2(a) or Section 7.3(a)(i) is given (within the
meaning of Section 9.1) within the applicable survival period, the
representations and warranties that are the subject of such indemnification
claim shall survive until such time as such claim is
finally resolved.
7.2 INDEMNIFICATION BY CARAUSTAR. Caraustar shall indemnify,
defend and hold harmless TPI, its Affiliates and, if applicable, their
respective directors, officers, shareholders, partners, attorneys, accountants,
agents and employees and their heirs, successors and assigns (the "TPI
Indemnified Parties") from, against and in respect of any damages, claims,
losses, charges, actions, suits, proceedings, deficiencies, Taxes, interest,
penalties, and
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reasonable direct costs and incremental costs (including reasonable attorneys'
fees, removal costs, remediation costs, closure costs, fines, penalties and
expenses of investigation and ongoing monitoring) (collectively, the "Losses")
imposed on, sustained, incurred or suffered by or asserted against any of the
TPI Indemnified Parties, directly or indirectly, relating to or arising out of
(i) any breach of any representation or warranty made by Caraustar contained
in this Agreement, (ii) the Assumed Liabilities, and (iii) the breach of any
covenant or agreement of Caraustar contained in this Agreement. With respect
to the Assumed Liabilities, Caraustar may satisfy its obligations hereunder
by causing the Partnership to indemnify TPI.
7.3 INDEMNIFICATION BY TPI.
(a) TPI shall indemnify, defend and hold harmless the
Partnership, its Affiliates and, if applicable, their respective directors,
officers, shareholders, partners, attorneys, accountants, agents and employees
(other than the Employees) and their heirs, successors and assigns (the
"Partnership Indemnified Parties" and, collectively with the TPI Indemnified
Parties, the "Indemnified Parties") from, against and in respect of any Losses
imposed on, sustained, incurred or suffered by or asserted against any of the
Partnership Indemnified Parties, directly or indirectly, relating to or
arising out of (i) subject to Section 7.3(b), any breach of any representation
or warranty made by TPI contained in this Agreement for the period such
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representation or warranty survives, (ii) all Excluded Liabilities, and (iii)
subject to Section 7.3(b), the breach of any covenant or agreement of TPI
contained in this Agreement. The Partnership and Caraustar acknowledge that
this Article VII constitutes the sole remedy with respect to any of the matters
referred to herein including any Losses or liability under any Environmental
Law or with respect to any Hazardous Substance and expressly waives any other
rights or causes of action, including under any Environmental Law or with
respect to any claim involving the presence of or exposure to any Hazardous
Substance, provided that nothing in this Section 7.3(a) shall be deemed a
waiver of any of Caraustar's or the Partnership's rights with respect to the
Excluded Environmental Liabilities.
(b) TPI shall not be liable to the Partnership Indemnified
Parties for any Losses with respect to the matters contained in Section 7.3(a)
(i) and (iii) except to the extent (and then only to the extent) the Losses
therefrom exceed an aggregate amount equal to $1,500,000, and then only for
all such Losses in excess thereof, up to an aggregate amount equal to
$15,000,000.
7.4 INDEMNIFICATION PROCEDURES. With respect to third-party
claims, all claims for indemnification by any Indemnified Party hereunder
shall be asserted and resolved as set forth in this Section 7.4. In the event
that any written claim or demand for which Caraustar or TPI, as the case may
be (an "Indemnifying Party"), would be liable to any
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Indemnified Party hereunder is asserted against or sought to be collected from
any Indemnified Party by a third party, such Indemnified Party shall promptly,
but in no event more than 15 days following such Indemnified Party's receipt of
such claim or demand, 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"). The Indemnifying Party shall have 90 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 Section 7.3(b). Except as hereinafter provided,
in the event that the Indemnifying Party notifies the Indemnified
Party within the Notice Period that it desires to defend the Indemnified Party
against such claim or demand, the Indemnifying Party shall have the right to
defend the Indemnified Party by appropriate proceedings
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and shall have the sole power to direct and control such defense. 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. 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,
decree or other restriction which would restrict the future activity or
conduct of the Indemnified Party or any Subsidiary or Affiliate thereof. If
the Indemnifying Party elects not to defend the Indemnified Party against such
claim or demand, whether by not giving the Indemnified Party timely notice as
provided above or otherwise, then the amount of any such claim or demand or,
if the same be contested by the Indemnified Party, then 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 Section
7.3(b). To the extent the Indemnifying Party shall direct, control or
participate in the defense or settlement of any third-party claim or demand,
the Indemnified Party will give the Indemnifying Party and its counsel access
to, during normal business hours, the relevant business records and other
documents, and shall permit them to consult with the employees and counsel of
the
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Indemnified Party. The Indemnified Party shall use its best efforts in the
defense of all such claims.
7.5 CHARACTERIZATION OF INDEMNIFICATION PAYMENTS. All amounts
paid by Caraustar or TPI, as the case may be, under this Article VII shall be
treated as adjustments to the parties' contributions to the Partnership for
all Tax purposes.
7.6 COMPUTATION OF LOSSES SUBJECT TO INDEMNIFICATION. The
amount of any Loss for which indemnification is provided under this Article
VII shall be computed net of any insurance proceeds or Tax benefits received
by the Indemnified Party in connection with such Loss. No Indemnified Party
shall be entitled to assert directly against an Indemnifying Party any claim
for punitive, exemplary or similar damages, nor shall an Indemnified Party be
entitled to recover, on direct claims against an Indemnifying Party,
consequential damages in excess of $3,000,000. The foregoing sentence shall
not limit an Indemnified Party's rights hereunder to be indemnified against
any Losses (including punitive, exemplary or consequential damages) arising
out of a third-party claim against it.
ARTICLE VIII
TERMINATION
8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) by agreement of Caraustar and TPI;
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(b) by either Caraustar or TPI by giving written notice of such
termination to the other party if the Closing shall not have occurred on or
prior to July 22, 1996, provided that the terminating party is not in material
breach of its obligations under this Agreement;
(c) by either Caraustar or TPI if there shall be in effect any
law or regulation that prohibits the consummation of the Closing or if
consummation of the Closing would violate any non-appealable final order,
decree or judgment of any court or governmental body having competent
jurisdiction; or
(d) by TPI if, as a result of action or inaction by the
Caraustar, the Closing shall not have occurred on or prior to the date that
is 10 Business Days following the date on which all of the conditions to
Closing set forth in Section 6.1 or 6.2 are satisfied or waived.
8.2 EFFECT OF TERMINATION. Each party's right to terminate
under Section 8.1 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated pursuant to Section
8.1, all further obligations of the parties under this Agreement will
terminate, except that the obligations of the parties under Sections 9.7, 9.8,
and 9.9 will survive; provided, however, that if this Agreement is terminated
by a party because of a breach of this Agreement by the other party, or
because one or more conditions to the terminating party's obligations to
close under this Agreement is not satisfied as a result of the other party's
failure to comply with its obligations under this Agreement, the terminating
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party's right to pursue all legal remedies will survive such termination
unimpaired.
8.3 BREAK-UP FEE. In the event that TPI shall refuse to close
hereunder (other than as a result of a breach of this Agreement by Caraustar,
or because one or more conditions to TPI's obligations to close under this
Agreement is not satisfied as a result of Caraustar's failure to comply with
its obligations under this Agreement) and TPI thereafter shall sell or
transfer the Contributed Assets to any other Person (other than an Affiliate
of TPI) within 180 days following such action, TPI shall pay Caraustar a
break-up fee of $5,000,000.
ARTICLE IX
MISCELLANEOUS
9.1 NOTICES. All notices or other communications hereunder
shall be deemed to have been duly given and made if in writing and if served
by personal delivery upon the party for whom it is intended, if delivered by
registered or certified mail, return receipt requested, or by a national
courier service, or if sent by facsimile transmission; provided that the
facsimile transmission is promptly confirmed by telephone confirmation thereof,
to the person at the address set forth below, or such other address as may be
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designated in writing hereafter, in the same manner, by such person:
To Caraustar: 3100 Washington Street
P.O. Box 115
Austell, GA 30001
Telephone: 770-948-3101
Fax: 770-732-3401
Attn: President
With a copy to: Robinson, Bradshaw & Hinson
101 N. Tryon Street, Suite 1900
Charlotte, NC 28246
Telephone: 704-377-8301
Fax: 704-378-4000
Attn: Robert G. Griffin
To TPI: TENNECO PACKAGING INC.
1603 Orrington Ave.
Evanston, Illinois 60201
Telephone: (847) 492-5736
Fax: (847) 570-4793
Attn: Chief Financial Officer
With a copy to: TENNECO PACKAGING INC.
1603 Orrington Ave.
Evanston, Illinois 60201
Telephone: (847) 492-4418
Fax: (847) 570-6498
Attn: General Counsel
9.2 AMENDMENT; WAIVER. 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 Caraustar and TPI, or in the case of a
waiver, by the party against whom the waiver is to be effective. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the
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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.
9.3 ASSIGNMENT. No party to this Agreement may assign any of
its rights or obligations under this Agreement without the prior written
consent of the other party hereto, provided that either party may, on notice
to but without the consent of, the other party, cause its interest in the
Partnership to be acquired and held in the name of a wholly-owned subsidiary
of such party.
9.4 ENTIRE AGREEMENT. This Agreement (including all Schedules
hereto and the Ancillary Agreements) contains the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral or written, with respect to such
matters, except for the Confidentiality Agreement which will remain in full
force and effect for the term specified therein.
9.5 FULFILLMENT OF OBLIGATIONS. Any obligation of any party to
any other party under this Agreement or any of the Ancillary Agreements, which
obligation is performed, satisfied or fulfilled by an Affiliate of such party,
shall be deemed to have been performed, satisfied or fulfilled by such party.
9.6 PARTIES IN INTEREST. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.
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Nothing in this Agreement, express or implied, is intended to confer upon any
Person other than Caraustar, TPI or their respective successors or permitted
assigns, any rights or remedies under or by reason of this Agreement.
9.7 PUBLIC DISCLOSURE. Notwithstanding anything herein to the
contrary, except as may be required to comply with the requirements of any
applicable Laws and the rules and regulations of each stock exchange upon
which the securities of one of the parties (or its Affiliate) is listed, no
press release or similar public announcement or communication shall ever,
whether prior to or subsequent to the Closing, be made or caused to be made
concerning the execution or performance of this Agreement unless specifically
approved in advance by all parties hereto.
9.8 RETURN OF INFORMATION. If for any reason whatsoever the
transactions contemplated by this Agreement are not consummated, Caraustar
shall promptly return to TPI all Books and Records furnished by TPI, the
Business or any of their respective agents, employees or representatives
(including all copies, if any, thereof), and shall not use or disclose the
information contained in such Books and Records for any purpose or make such
information available to any other entity or person.
9.9 EXPENSES. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, all costs and expenses incurred in connection with this Agreement
and the
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transactions contemplated hereby shall be borne by the party incurring such
expenses.
9.10 SCHEDULES. The disclosure of any matter in any schedule to
this Agreement shall be deemed to be a disclosure for all purposes of this
Agreement to which such matter could reasonably be expected to be pertinent
(provided an appropriate cross reference is made on such Schedule), but shall
expressly not be deemed to constitute an admission by Caraustar or TPI or to
otherwise imply that any such matter is material for the purposes of this
Agreement.
9.11 BULK TRANSFER LAWS. Caraustar acknowledges that TPI has
not taken, and does not intend to take, any action required to comply with
any applicable bulk sale or bulk transfer laws or similar laws and Caraustar
waives the right to institute any claim, suit or action with respect to such
non-compliance.
9.12 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF
FORUM. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF ILLINOIS. EACH PARTY HERETO AGREES THAT IT SHALL
BRING ANY ACTION OR PROCEEDING IN RESPECT OF ANY CLAIM ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY
THIS AGREEMENT, WHETHER IN TORT OR CONTRACT OR AT LAW OR IN EQUITY,
EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS OR ANY STATE COURT LOCATED IN COOK COUNTY, ILLINOIS (THE "CHOSEN
COURTS") AND (I) IRREVOCABLY SUBMITS TO THE EXCLUSIVE
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JURISDICTION OF THE CHOSEN COURTS, (II) WAIVES ANY OBJECTION TO LAYING VENUE IN
ANY SUCH ACTION OR PROCEEDING IN THE CHOSEN COURTS, (III) WAIVES ANY OBJECTION
THAT THE CHOSEN COURTS ARE AN INCONVENIENT FORUM OR DO NOT HAVE JURISDICTION
OVER ANY PARTY HERETO AND (IV) AGREES THAT SERVICE OF PROCESS UPON SUCH PARTY
IN ANY SUCH ACTION OR PROCEEDING SHALL BE EFFECTIVE IF NOTICE IS GIVEN IN
ACCORDANCE WITH SECTION 9.1 OF THIS AGREEMENT.
9.13 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and all of which
shall constitute one and the same Agreement.
9.14 HEADINGS. The heading references herein and the table of
contents hereto are for convenience purposes only, do not constitute a part of
this Agreement and shall not be deemed to limit or affect any of the
provisions hereof.
9.15 SEVERABILITY. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If
any provision of this Agreement, or the application thereof to any Person or
any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may
be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of
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this Agreement and the application of such provision to other Persons or
circumstances shall not be affected by such invalidity or unenforceability,
nor shall such invalidity or unenforceability affect the validity or
enforceability of such provision, or the application thereof, in any other
jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Contribution
Agreement as of the date first written
above.
TENNECO PACKAGING INC.
By: /s/ P.T. Stecko
--------------------------------
Name: Paul T. Stecko
Title: President & CEO
CARAUSTAR INDUSTRIES, INC.
By: /s/ Thomas V. Brown
--------------------------------
Name: Thomas V. Brown
Title: President & CEO
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ANNEX A
================================================================================
PARTNERSHIP AGREEMENT
OF
[PAPERBOARD VENTURE]
================================================================================
<PAGE> 75
PARTNERSHIP AGREEMENT
OF
[PAPERBOARD VENTURE]
THIS PARTNERSHIP AGREEMENT (this "Agreement") is made and entered into
as of the ___ day of July, 1996, by and between ________________________
("TSub"), a _________ corporation and a wholly-owned subsidiary of Tenneco
Packaging Inc., a Delaware corporation ("TPI"), and ____________________
("CSub"), a(n) ______________ corporation and a wholly- owned subsidiary of
Caraustar Industries, Inc. ("Caraustar) a(n) ______________ corporation (TSub
and CSub are hereinafter referred to collectively as "Partners" and
individually a "Partner").
W I T N E S S E T H:
WHEREAS, TPI and Caraustar desire to cause a partnership (the
"Partnership") to be formed for the purpose of owning and operating the
recycled paperboard manufacturing, marketing and distribution operations
presently conducted by TPI at and from its Rittman, Ohio and its Tama, Iowa
paperboard mills and the paper recycling collection, distribution and brokerage
operations presently conducted by TPI at its Cleveland, Ohio recycling center
and its Rittman, Ohio paperboard mill (collectively, the "Business");
WHEREAS, Caraustar, CSub, TPI and TSub have executed and delivered and
Contribution Agreement dated June 21, 1996 (the "Contribution Agreement")
pursuant to which the parties thereto have agreed to form the Partnership, upon
the terms and subject to the conditions stated therein;
WHEREAS, TPI formed TSub as a wholly-owned corporation, and Caraustar
formed CSub as a wholly-owned corporation;
WHEREAS, the Board of Directors of each of TPI, TSub, Caraustar and
CSub has approved the formation of the Partnership and the acquisition of the
Business under the terms of the Contribution Agreement.
WHEREAS, the conditions to the obligations of each of the parties to
the Contribution Agreement have been satisfied or waived, and CSub and TSub
desire to form the Partnership;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms and subject to the
conditions hereinafter set forth, the parties do hereby agree as follows:
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ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
following definitions:
1.1 Act shall have the meaning assigned to that term in Section
2.1.
1.2 Adjustment Period shall mean a period of time as determined
below. The first Adjustment Period shall commence on the Closing Date. Each
succeeding Adjustment Period shall commence on the day immediately following
the last day of the immediately preceding Adjustment Period. Each Adjustment
Period shall end on the earliest to occur after the commencement of such
Adjustment Period of the last day of each Fiscal Year, a Capital Date, the day
immediately preceding the date of an increase in the Ownership Interest of a
Partner, the day immediately preceding the date of the "liquidation" of a
Partner's interest in the Partnership (within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations), or the date on which the Partnership
is terminated under Article VII hereof.
1.3 Affiliate shall mean, as to any person, any other person who
controls, is controlled by or under common control with the first person.
1.4 Agreement shall have the meaning assigned to that term in the
introductory paragraph of this Partnership Agreement.
1.5 Allocation Regulations shall mean Regulations promulgated
under Section 704(b) of the Code as the same may be revised or amended from
time to time.
1.6 Assumed Liabilities shall mean the liabilities and obligations
of TPI assumed by the Partnership pursuant to the Contribution Agreement.
1.7 Book Depreciation for each Adjustment Period shall mean an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to a Partnership asset for such Adjustment Period,
except that if the Book Value of an asset differs from its adjusted basis for
federal income tax purposes at the beginning of such Adjustment Period, Book
Depreciation with respect to that asset shall be an amount that bears the same
ratio to such beginning Book Value as the federal income tax depreciation,
amortization or other cost recovery deduction with respect to that asset for
such Adjustment Period bears to such beginning adjusted tax basis; provided
however, that if the federal income tax depreciation, amortization or other
cost recovery deduction with respect to that asset for such Adjustment Period
is zero, Book Depreciation shall be determined with reference to such beginning
Book Value using any reasonable method Approved by the Partnership Manager.
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1.8 Book Gain and Book Loss shall mean the gain or loss recognized
by the Partnership for book purposes in any Adjustment Period by reason of a
sale or other disposition of all or part of the Property. Such Book Gain and
Book Loss shall be computed by reference to the Book Value of the Property as
of the date of such sale or other disposition, rather than by reference to the
tax basis of the Property as of such date. If a Partnership asset is
distributed to a Partner, the difference between the fair market value of such
asset and its Book Value shall be considered a Book Gain or a Book Loss.
1.9 Book Value of the Property shall mean, as of any particular
date, the value at which the Property is properly reflected on the books of the
Partnership, as of such date in accordance with the provisions of Section
1.704- 1(b) of the Regulations. The initial Book Values of the Property shall
be the gross fair market value of such assets (without reduction for
indebtedness to which such Property may be subject) as determined in accordance
with the provisions of the Contribution Agreement. Such Book Value shall be
adjusted for Book Depreciation with respect to the Property, rather than for
the cost recovery deductions to which the Partnership is entitled for income
tax purposes with respect to the Property.
1.10 Business shall have the meaning assigned to that term in the
recitals to this Agreement.
1.11 Buyout Notice shall have the meaning assigned to that term in
Section 8.6.
1.12 Call shall have the meaning assigned to that term in Section
8.6.
1.13 Intentionally omitted.
1.14 Capital Account shall mean the Capital Account established by
the Partnership for each Partner and maintained in a manner as to correspond
with the Allocation Regulations. The balance of each Partner's Capital
Account, as of any particular date, shall be an amount equal to the sum of the
following:
(a) The cumulative amount of cash that has been
contributed to the capital of the Partnership by such Partner as of
such date; plus
(b) The net fair market value as of the date of
contribution of any property other than cash that has been contributed
to the capital of the Partnership by such Partner as of such date;
plus
(c) The cumulative amount of the Net Profit and other
items of income and gain for all Adjustment Periods ending prior to
such date that have been, or are required to be, allocated to such
Partner under Section 5.3 hereof; minus
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(d) The cumulative amount of the Partnership's Net Loss
and other items of loss and deduction for all Adjustment Periods
ending prior to such date that have been, or are required to be,
allocated to such Partner under Section 5.3 hereof; and minus
(e) The cumulative amount of cash and the agreed upon net
fair market value (as of the date of distribution) of all other
property that has been distributed to such Partner by the Partnership
as of such date under Section 3.3 hereof.
1.15 Capital Contributions shall mean the capital contributions of
the Partners pursuant to Section 3.2(a).
1.16 Capital Date, when used with respect to any Book Gain or Book
Loss recognized by the Partnership during any Adjustment Period, shall mean the
date on which such Book Gain or Book Loss is recognized by the Partnership.
1.17 Capital Transaction shall mean the sale, exchange or other
disposition of all or any portion of the property of the Partnership other than
in the ordinary course of business of the Partnership. Capital Transactions
include the financing or refinancing of Partnership property which creates
excess funds not needed for Partnership operations and which funds, in the
opinion of the Partnership Manager, are available for distribution to the
Partners.
1.18 Capitalized Lease Obligation shall mean any obligation of the
partnership, as lessee or guarantor, to pay rent under a lease of real or
personal property, which obligation, in the judgment of the Partnership
Manager, is required to be capitalized on the balance sheet of the Partnership
in accordance with generally accepted accounting principles.
1.19 Closing Date shall mean the date of closing under the
Contribution Agreement.
1.20 Code shall mean the Internal Revenue Code of 1986, as amended.
All references herein to specific sections of the Code shall be deemed to refer
also to any corresponding provisions of succeeding law.
1.21 Contribution Agreement shall have the meaning assigned to that
term in the recitals to this Agreement.
1.30 Contributed Assets shall mean the assets transferred by TPI to
the Partnership pursuant to the Contribution Agreement.
1.31 Covered Sale shall have the meaning assigned to that term in
Section 8.8(a).
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1.32 Debt of a person shall mean (i) indebtedness of the person for
money borrowed including any guaranty by the person of any indebtedness for
money borrowed of any other person, (ii) Capitalized Lease Obligations, (iii)
indebtedness incurred, assumed or guaranteed by the person in connection with
the acquisition or improvement of any property or asset or the acquisition by
it of any other business; provided, however, that Debt shall not in any case
include indebtedness incurred in connection with the purchase of materials or
services in the ordinary course of business or indebtedness representing
amounts recorded as accounts payable on the books of the person.
1.33 EBITDA shall mean for any period, without duplication (a) the
sum of (i) the net income of the Partnership and (ii) to the extent the same
were deducted in determining the amount in clause (i), total interest, income
tax, depreciation and amortization expense of the Partnership, less (b)
non-cash income to the extent included in determining net income, and all as
determined in accordance with generally accepted accounting principles.
1.34 Election Notice shall have the meaning assigned to that term
in Section 8.7(b).
1.35 Enterprise Value as of any date shall mean the product of (A)
six times (B) the EBITDA of the Partnership for the four quarters ended on the
last day of the preceding calendar quarter, less the amount, if any, of the
outstanding principal balance plus accrued interest on any Partnership Debt as
of the date immediately preceding the date on which the first of such quarters
began.
1.36 Fiscal Year shall mean each fiscal year of the Partnership.
The first Fiscal Year shall commence on the Closing Date, and each succeeding
Fiscal Year shall commence on the day immediately following the last day of the
immediately preceding Fiscal Year, Each Fiscal Year shall end on the earlier to
occur after the commencement of such Fiscal Year of December 31 or the date on
which the Partnership is terminated under Article VII hereof.
1.37 Gross Income shall mean, for each Adjustment Period, an amount
equal to the Partnership's gross income as determined for federal income tax
purposes for such Adjustment Period, but computed with the adjustments in
Sections 1.39(a) and 1.39(d).
1.38 Loan shall mean any Loan to the Partnership, including a
Partner Loan.
1.39 Management Committee shall have the meaning assigned to that
term in Section 4.1.
1.40 Net Cash Flow shall mean all cash funds from operations of the
Partnership on hand or on deposit from time to time after (i) payment of all
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operating expenses payable as of the date in question, (ii) provision for
payment of all outstanding and unpaid Partnership obligations due and payable
as of the date in question or within sixty (60) days thereafter, and (iii) the
establishment of such reasonable reserves as the Partnership Manager believes
in good faith to be appropriate for the operating needs and capital spending
needs of the Partnership. "Net Cash Flow" shall include the net proceeds
received by the Partnership in connection with a Capital Transaction after
payment of all costs and expenses incurred by the Partnership in connection
with such Capital Transaction, including, without limitation, brokers'
commissions, loan fees, other closing costs, the cost of any alteration,
improvement, restoration or repair of Partnership assets necessitated by or
incurred in connection with such Capital Transaction, any reserves that the
General Partner believes in good faith should be established and the payment of
any loans owed by the Partnership to any of the Partners, plus any other loans
that should be appropriately paid, as determined by the Partnership Manager in
its reasonable discretion.
1.41 Net Profit or Net Loss shall mean, for each Adjustment Period,
the Partnership's taxable income or taxable loss for such Adjustment Period, as
determined under Section 703(a) of the Code, and Section 1.703-1 of the
Regulations (and for this purpose all items of income, gain, loss, or deduction
required to be stated separately pursuant to Section 703(a)(1) of the Code
shall be included in taxable income or taxable loss), but with the following
adjustments:
(a) Any tax-exempt income, as described in Section
705(a)(1)(B) of the Code, realized by the Partnership during such
Adjustment Period shall be taken into account in computing such
taxable income or taxable loss as if it were taxable income.
(b) Any expenditures of the Partnership described in
Section 705(a)(2)(B) of the Code for such Adjustment Period, including
any items treated under Section 1.704(b)(2)(iv)(i) of the Regulations
as items described in Section 705(a)(2)(B) of the Code, shall be taken
into account in computing such taxable income or taxable loss as if
they were deductible items.
(c) Book Depreciation for such Adjustment Period shall be
taken into account in computing such taxable income or taxable loss in
lieu of any amortization, depreciation or cost recovery deduction to
which the Partnership is entitled for such Adjustment Period with
respect to Partnership assets.
(d) Any Book Loss or Book Gain recognized by the
Partnership during such Adjustment Period by reason of a sale or other
disposition of all or part of the Property shall be taken into account
in computing such taxable income or taxable loss in lieu of any tax
gain or tax loss recognized by the Partnership during any Adjustment
Period by reason of such sale or other disposition.
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(e) Any item of income, gain, loss or deduction required
to be allocated to the Partners under Section 5.3 shall not be taken
into account in computing such taxable income or taxable loss.
If the Partnership's taxable income or taxable loss for such Adjustment Period,
as adjusted in the manner provided in Sections 1.41(a) through 1.41(e) above,
is a positive amount, such amount shall be the Partnership's Net Profit for
such Adjustment Period; and if negative, such amount shall be the Partnership's
Net Loss for such Adjustment Period.
1.42 Ownership Interests shall have the meaning assigned to that
term in Section 3.1.
1.43 Partner shall have the meaning assigned to that term in the
introductory paragraph of this Agreement.
1.44 Partner Loan shall have the meaning assigned to that term in
Section 3.2(c).
1.45 Partnership shall have the meaning assigned to that term in
the recitals to this Agreement.
1.46 Partnership Manager shall have the meaning assigned to that
term in Section 4.5.
1.47 Intentionally omitted.
1.48 Permitted Transferee shall have the meaning assigned to that
term in Section 8.2.
1.49 Prime Rate shall mean the rate of interest announced from time
to time by Nations Bank as its prime rate.
1.50 Property shall mean individually or collectively the assets of
the Partnership.
1.51 Put shall have the meaning assigned to that term in Section
8.5.
1.52 Put Notice shall have the meaning assigned to that term in
Section 8.5.
1.53 Put/Call Price shall mean the greater of (A) product of (i)
the Enterprise Value, and (ii) the percentage Ownership Interest in the
Partnership as to which the Put or Call has been exercised and (B) the product
of (i) $140 million and (i) the percentage Ownership Interest in the
Partnership to which the Put or Call has been exercised.
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1.54 Put Closing shall have the meaning assigned to that term in
Section 8.6.
1.55 Regulations shall mean the federal income tax regulations
promulgated under the Code, as such Regulations may be amended from time to
time. All references herein to specific sections of the Regulations shall be
deemed to refer also to any corresponding provisions of succeeding Regulations.
1.56 Intentionally omitted.
1.57 Tag-Along Notice shall have the meaning assigned to that term
in Section 8.7(a).
1.58 Tax Matters Partner shall mean CSub.
1.59 TPI shall have the meaning assigned to that term in
introductory paragraph to this Agreement.
1.60 TSub shall have the meaning assigned to that term in
introductory paragraph to this Agreement.
1.61 Unaffiliated Purchaser shall have the meaning assigned to that
term in Section 8.7.
ARTICLE II
FORMATION AND PURPOSE
OF THE PARTNERSHIP
2.1 Formation of the Partnership. CSub and TSub hereby enter into
and form the Partnership for the purposes and scope set forth herein. Except
as expressly provided herein to the contrary, the rights and obligations of the
Partners and the administration and termination of the Partnership shall be
governed by the Delaware Uniform Partnership Law (the "Act").
2.2 Name. The name of the Partnership shall be [Paperboard
Venture].
2.3 Principal Place of Business. The principal place of business
of the Partnership shall be [3100 Washington Street, Austell, Georgia] or such
other location as a majority of the Management Committee may from time to time
determine.
2.4 Purpose and Scope. The purpose and scope of this Partnership
shall be to acquire, finance, own, operate and manage the Business and to do
any and all acts and things that may be necessary, incidental or convenient to
carry out the business of the Partnership as expressed herein. The Partnership
shall be strictly limited to the purposes herein described and shall not be
extended by implication or otherwise.
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2.5 Nature of the Obligation Created Hereby. The obligations of
each of the Partners, other than with respect to the Partnership, shall be in
every case several and not joint or joint and several. The obligations of the
Partners with respect to the Partnership are joint and several.
Notwithstanding the foregoing, as among themselves, the Partners hereby agree
that each Partner shall be solely and individually responsible only for its pro
rata share of the liabilities and obligations of the Partnership in accordance
with its Ownership Interest, and any Partner who incurs liability in accordance
with the terms of this Agreement in excess of its pro rata share shall be
entitled to contribution from the other Partner.
2.6 Effective Date and Term of Partnership. The Partnership shall
be effective from the date hereof and, unless sooner terminated pursuant to
Article VII hereof, shall continue in existence for fifty years from the date
hereof.
2.7 Assumed Name Certificate. The parties hereto shall promptly
execute and file assumed name certificates as and if required by any applicable
laws of the States of Iowa and Ohio and any other states in which the
Partnership conducts business.
ARTICLE III
OWNERSHIP, CAPITAL ACCOUNTS, CAPITALIZATION
AND PARTICIPATION IN PROFITS AND LOSSES
3.1 Ownership. The undivided ownership interests (the "Ownership
Interests") of the Partners in the Partnership shall be eighty percent for CSub
and twenty percent for TSub.
3.2 Capitalization. Simultaneously with or immediately following
the execution of this Agreement,
(a) On the Closing Date, CSub, pursuant to the provisions
of the Contribution Agreement, shall make an initial capital
contribution to the Partnership in the amount of One Hundred Fifteen
Million Dollars ($115,000,000). The Capital Account of CSub shall be
credited with the amount of such initial capital contribution. On the
Closing Date, TSub, pursuant to the provisions of the Contribution
Agreement, shall contribute all of the Contributed Assets to the
Partnership, and the Partnership shall assume the Assumed Liabilities.
Immediately following such contribution and assumption, the
Partnership shall distribute One Hundred Fifteen Million Dollars
($115,000,000) to TSub as an equalizing payment. The above
contribution by TSub and distribution and assumption by the
Partnership shall be treated as a part contribution and part sale for
federal income tax purposes. For Capital Account maintenance purposes
and for federal income tax purposes, an undivided 20% of the
Contributed Assets shall be treated as having been contributed to the
Partnership by TSub in the amount of $28,750,000 and an
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undivided 80% of the Contributed Assets shall be treated as having
been sold to the Partnership. No expenditures by either Partner in
organizing this Partnership shall be treated as capital contributions
and no additional capital contributions shall be required of the
Partners, unless in either case unanimously approved by the Management
Committee.
(b) In the event the Management Committee determines that
the Partnership requires additional capital in addition to the Loans,
the Management Committee may request that the Partners lend to the
Partnership additional funds (the "Partner Loans"). If either Partner
decides not to lend additional funds to the Partnership, the other
Partner may lend any or all of the amount requested to the
Partnership. The Partner Loans shall bear interest per annum at the
Prime Rate on the date of such Partner Loan plus 3%, and shall
otherwise be on terms approved by the Management Committee.
3.3 Nonliquidating Distributions.
(a) Application and Distribution of Net Cash Flow.
Subject to Sections 3.3(b) and 7.2 hereof, the Net Cash Flow for each
calendar month commencing with the month of September 1996 (or such
earlier month as the Partnership Manager shall determine) shall be
distributed to the Partners or applied by the Partnership within 20
days after the end of each calendar month in the following manner and
in the following order of priority:
(i) to the Partners in repayment of any
outstanding Partner Loans; and then
(ii) to the Partners pro rata in accordance with
their Ownership Interests.
(b) Withholding. If any provision of the Code or the
Regulations requires the Partnership to withhold any tax with respect
to a Partner's distributive share of partnership income, gain, loss,
deduction or credit, the Partnership shall withhold the required
amount and pay the same over to the taxing authorities as required by
the Code and the Regulations. The amount withheld shall be deducted
from the amount that would otherwise be distributed to that Partner
with respect to which the Partnership is required to withhold. If at
any time the amount required to be withheld by the Partnership exceeds
the amount of money that would otherwise be distributed to the Partner
with respect to which the withholding requirement applies, then that
Partner shall make a capital contribution to the Partnership equal to
the excess of the amount required to be withheld over the amount, if
any, of money that would otherwise be distributed to that Partner and
which is available to be applied against the withholding requirement.
Each of the Partners acknowledge that they are not aware of any
provision of the Code or Regulation which currently requires
withholding of any tax with respect to the Partnership.
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3.4 Return of Contributions. Each Partner will look solely to the
assets of the Partnership for the return of its Capital Contribution and if the
assets of the Partnership are insufficient to return its Capital Contribution,
it shall have no recourse against the other Partner for that purpose. No
Partner shall be entitled to the return of its Capital Contribution except to
the extent, if any, that distributions made pursuant to the express terms of
this Agreement may be considered as such by law, or by mutual agreement of the
Partners, or upon dissolution and liquidation of the Partnership, and then only
to the extent expressly permitted by law.
ARTICLE IV
MANAGEMENT
4.1 Management Committee. The overall management and control of
the business and affairs of the Partnership shall be vested in a management
committee (the "Management Committee"). The Management Committee may exercise
all such powers of the Partnership and do all such lawful acts as permitted by
law or by this Agreement. The Management Committee shall consist of three
members. Two members shall be appointed by CSub and must be employees of CSub
or an affiliate of CSub, and one member shall be appointed by TSub and must be
an employee of TSub or an affiliate of TSub. CSub and TSub shall designate in
writing to the other Partner the name of the individuals to be appointed to
such Management Committee from time to time by each of them. Each Partner may
replace any member designated by it or make substitute appointments or
designate in writing an alternate member to the Management Committee at any
time in its discretion.
4.2 Officers. A majority of the Management Committee may appoint
such officers as it determines, with such duties and responsibilities as the
Management Committee shall determine. All officers shall be subject to removal
by the Management Committee.
4.3 Meetings of the Management Committee.
(a) The Management Committee will hold its meetings at
the offices of the Partnership, 3100 Washington Street, Austell,
Georgia, or at such other locations as a majority of the Management
Committee may from time to time determine.
(b) An annual meeting of the Management Committee
commencing with the year 1997, shall be held each year at such time
and date during the month of July, to be selected by the Management
Committee or such other time and date as the Management Committee may
determine, at which the Management Committee will transact such
business as may properly be brought before the meeting.
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(c) Regular meetings of the Management Committee shall be
held not less than quarterly, at a place, day and hour determined by
the Management Committee. Notice of such meetings shall be given as
set forth in Section 9.1 hereof.
(d) Special meetings of the Management Committee may be
called by any member of the Management Committee or by the Partnership
Manager on forty-eight hours notice to each member of the Management
Committee. Such notice shall state the place, day, hour and purpose
or purposes of the meeting and shall be delivered as set forth in
Section 9.1 hereof.
(e) Whenever any notice is required to be given to a
member of the Management Committee under this Section 4.3, a waiver
thereof in writing, signed by such member, whether before or after the
time stated in such notice, shall be deemed equivalent to the giving
of such notice. Attendance at a meeting shall constitute a waiver of
notice of such meeting, except where a person attends for the express
purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
(f) Members of the Management Committee may participate
in and hold a meeting of the Management Committee by means of
conference telephone or similar communications equipment by which all
persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this section shall constitute
presence in person at such meeting, except where a person participates
in the meeting for the express purpose of objecting to the transaction
of any business on the ground that the meeting is not lawfully called
or convened.
4.4 Quorum and Manner of Acting.
(a) At all meetings of the Management Committee, the
presence of a majority of the members shall be necessary and
sufficient to constitute a quorum for the transaction of business
except as otherwise provided herein. The act of a majority of the
members present at a meeting at which a quorum is present shall be the
act of the Management Committee except as otherwise provided herein.
Any action required or permitted to be taken at a meeting of the
Management Committee may be taken without a meeting if a written
consent setting forth the action so taken is signed by all the members
of the Management Committee. Minutes will be kept of all meetings of
the Management Committee. Notwithstanding anything herein to the
contrary, the required quorum for any action requiring unanimous
consent shall include the member of the Management Committee
designated by TSub.
(b) The following actions and decisions require the
unanimous vote of the members of the Management Committee:
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(i) acquisition of any property or interest
therein (other than capital contributions of the Partners)
which requires an investment by the Partnership in the
aggregate in an amount in excess of $20,000,000 per year;
(ii) sale or other disposition of any assets or
group of assets in a single transaction that (A) constitute
less than all (or less than substantially all) of the
Partnership's assets, and (B) are to be sold or disposed of
for $10,000,000 or more;
(iii) incurrence of Debt that would cause the
aggregate principal amount of all Debt of the Partnership then
outstanding to exceed $30,000,000;
(iv) entrance into any contract, agreement or
transaction by the Partnership with either Partner or any
Affiliate of either Partner except for transactions in the
ordinary course of business and except for other transactions
not involving more than $1,000,000 per year, in either case on
terms that are not less favorable than those available from
unrelated third parties;
(v) admission of any person as a partner of the
Partnership except as provided in Section 8.4; and
(vi) such other matters as may be required
pursuant to the terms of this Partnership Agreement.
4.5 Partnership Manager. The day-to-day affairs of the
Partnership shall be managed the Partnership Manager appointed by the
Management Committee, subject in each case to the Management Committee. The
initial Partnership Manager shall be CSub.
(a) The Partnership Manager shall be responsible for the
implementation of the decisions of the Management Committee and shall
have power and authority to, and shall, conduct all of the ordinary
and usual business and affairs of the Partnership and its Business
including, without limitation, procurement of raw materials,
manufacture of products and performance of services, marketing and
distribution of products and services, financing the Partnership's
operations, procuring and maintaining capital assets, insuring against
risks normally insured against in the Partnership's lines of business,
employment of personnel and the provision of compensation and benefits
thereto, provision of accounting, budgeting, planning and tax
functions, collection of receivables and other amounts owed to the
Partnership, procurement of accounting, legal and other professional
services, maintaining banking relationships, and such other functions
as are necessary for the conduct of the business and affairs of the
Partnership. The Partnership Manager shall at
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all times conform to the policies of the Management Committee. The
Partnership Manager shall keep the Management Committee informed as to
all matters concerning the Partnership. Without limiting the
generality of the foregoing, the partners hereby grant to the
Partnership Manager the power without joinder of the Partners, to
execute any and all agreements, contracts, evidences of indebtedness,
security agreements, financing statements, and other instruments and
documents as may be necessary or expedient to carry out and effectuate
the purposes of the Partnership, in accordance with this Agreement, on
behalf of the Partnership and the execution and delivery of any such
agreements, instruments or documents by the Partnership Manager on
behalf of the Partnership, shall be as to third parties conclusive
evidence that the execution of such agreement, document or instrument
has been authorized in accordance with this Agreement.
(b) On or before September 1, 1996 and at least 30 days
prior to the commencement of each fiscal year after the fiscal year
ending December 31, 1997, the Partnership Manager shall prepare and
deliver to the Management Committee draft budgets for the fiscal year
ending December 31, 1997 and for each subsequent fiscal year, as
applicable. One of the budgets will address the operations of the
Partnership and the other will address capital expenditures. The
capital expenditures budget shall be subject to review and approval by
the Management Committee. Following Management Committee approval of
the capital expenditures budget, the Partnership Manager shall prepare
final capital expenditures and operating budgets for such fiscal year
and deliver copies thereof to the Partners, and such final budgets
shall be the budgets for such fiscal year. The Partnership Manager
may, prior to or during any fiscal year, if in its reasonable judgment
then existing circumstances warrant the same, amend the budgets. The
Partnership Manager shall promptly deliver a copy of any such amended
budget to the Partners.
(c) In performing its duties hereunder, the Partnership
Manager shall do so in a manner and with a degree of care and skill
comparable to those employed by the Partnership Manager in the conduct
of its own business operations of similar nature and scope, and
Partnership Manager shall not be responsible to manage the business
and affairs of the Partnership to any high standard of performance.
(d) In the performance of its duties hereunder, the
Partnership Manager may utilize the personnel, assets and other
resources of the Partnership, and to the extent assets, personnel,
funds and other resources of the Partnership are, in the judgment of
the Partnership Manager, not appropriate or are insufficient to allow
it to accomplish the performance of its management functions hereunder
or, in the judgment of the Partnership Manager, such functions can be
better performed by the use of the personnel, assets and other
resources of the Partnership Manager or its Affiliates, the
Partnership Manager may use such other personnel, assets and other
resources. If such personnel,
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assets or other resources of the Partnership Manager or its Affiliates
are so used, the costs thereof shall be reimbursable to the
Partnership Manager under Section 4.5(e). Nothing contained herein
shall obligate the Partnership Manager to so use its own personnel,
assets and other resources to perform its functions hereunder.
(e) The Partnership manager shall not be entitled to
receive any management fee or other compensation for its services but
shall be entitled to reimbursement on a monthly basis, on or before
the 15th day of each month, of all out-of-pocket costs and all
expenses (including a portion of the expenses of the Partnership
Manager and its Affiliates) incurred on behalf of, or in the conduct
of the operations of, the Partnership for the preceding month, in
accordance with this Section 4.5(e).
(i) Partnership Manager shall keep appropriate
records of all out-of-pocket costs incurred by Partnership
Manager and its Affiliates on behalf of, or in the conduct of
the operations of, the Partnership, on the same basis as it
records out-of-pocket costs incurred in its own operations.
(ii) Partnership Manager and its Affiliates shall
be entitled to be reimbursed for its incremental expenses
incurred in providing the following functions to the
Partnership:
(A) Accounting;
(B) Payroll;
(C) Credit and collections;
(D) Management information systems;
(E) Human resources; and
(F) Any other function mutually agreed to by
Partnership Manager and the Partners.
(iii) The Partnership Manager shall prepare and
deliver to the Partners, on an annual basis, a detailed
reconciliation of all amounts paid to the Partnership Manager
pursuant to this Section 4.5(e). If any Partner objects to
such reconciliation, such Partner may, at its expense, have a
review performed by an independent auditor. In no instance,
will the incremental expenses charged be higher than
allocation methods used by Caraustar for charge-out of similar
expenses to any of Partnership Manager's Affiliates.
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4.6 Indemnification. In carrying out their duties hereunder, the
Partners, the Partnership Manager, the Management Committee, any officers or
employees of the Partnership, and any directors, officers or employees of the
Partnership Manager who are engaged in activities on behalf of, or who are
performing functions for, the Partnership shall not be liable to the
Partnership nor to any Partner for their good-faith actions, or failure to act,
nor for any errors of judgment, nor for any act or omission believed in good
faith to be within the scope of authority conferred by this Agreement, but only
for willful misconduct or gross negligence. The Partnership shall indemnify
and hold harmless any such persons, their agents and employees against and from
any loss, liability or damage incurred as a result of any act or omission such
persons believed in good faith to be within the scope of authority conferred by
this Agreement, or as a result of any such party's relationship to the
Partnership, except for willful misconduct or gross negligence.
Notwithstanding the foregoing, the Partnership's indemnification of such
persons shall be only with respect to such loss, liability or damage which is
not otherwise compensated for by insurance carried for the benefit of the
Partnership.
ARTICLE V
ACCOUNTING AND TAX MATTERS
5.1 Books of Account.
(a) The Partnership Manager shall, in accordance with
applicable laws and GAAP, keep accurate books of account covering all
activities carried on by the Partnership. The Partnership Manager will prepare
and deliver to both Partners such management, operational and financial reports
as requested by either Partner, including monthly profit and loss statements.
(b) The books of account shall be maintained at the
Partnership's principal office.
5.2 Tax Status and Reports.
(a) Any provision hereof to the contrary notwithstanding, solely
for United States federal income tax purposes, each of the Partners hereby
recognizes that the Partnership will be subject to all provisions of Subchapter
K of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended
(the "Code"); provided, however, that the filing of income tax returns on
behalf of the Partnership shall not be construed to extend the purposes of the
Partnership or expand the obligations or liabilities of the Partners. Except
as unanimously agreed to the contrary by the Management Committee, the
Partnership shall make such elections and adopt such methods of accounting for
tax purposes as shall minimize taxable income and gain and maximize credits,
deductions and losses, and the Partnership shall utilize the method or election
which maximizes Partnership or Partner cash flow.
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(b) The Partnership Manager shall prepare or cause to be prepared
all tax returns and statements, if any, which must be filed on behalf of the
Partnership with any taxing authority and shall make timely filing thereof.
Within ninety days following the end of each tax year, the Partnership Manager
shall cause to be furnished to each Partner such tax information with respect
to the Partnership for such tax year as is reasonably required by the Partners
for completion of their federal income tax returns.
(c) The Partnership Manager shall prepare or cause to be prepared
such financial reports as of the end of each month and as of the end of each
fiscal quarter as the Management Committee shall designate from time to time.
Such reports shall be certified by the Partnership Manager and shall be
delivered to the Partners and to the members of the Management Committee within
thirty days of the end of such period.
(d) The Partnership Manager shall select and engage as auditors
for the Partnership a firm of nationally known independent certified public
accountants selected by the unanimous vote of the Management Committee. Such
auditors shall at the end of each fiscal year (i) audit the records and
accounts of the Partnership and (ii) render their opinion on the statement of
financial condition of the Partnership as of the end of each fiscal year and of
the results of its operations, changes in financial condition, its income and
its Net Cash Flow for each fiscal year.
5.3 Allocation Provisions.
(a) Generally. Except as otherwise provided herein, income, gain,
loss, deduction or credit will be computed in accordance with the Allocation
Regulations. Unless otherwise provided by the Allocation Regulations, all
items of income, gain, loss, deduction or credit shall be allocated to the
Partners pro rata in accordance with their Ownership Interests.
(b) Tax Allocations - Code Section 704(c). In accordance with
Code Section 704(c) and the related Regulations, income, gain, loss and
deduction with respect to any property contributed to the capital of the
Partnership, solely for tax purposes, will be allocated among the Partners so
as to take account of any variation between the adjusted basis to the
Partnership of the property for federal income tax purposes and the Book Value
of the property. The Partnership shall use the traditional method to eliminate
disparities between book and tax items with respect to Property contributed to
the Partnership. Allocations under this Section 5.3(b) are solely for purposes
of federal, state and local taxes and will not affect, or in any way be taken
into account in computing, any Partner's Capital Account or share of Net
Profit, Net Loss or other items or distributions under any provision of this
Agreement.
(b) Other Allocation Rules. For purposes of determining the Net
Profit, Net Loss, or any other item allocable to any period, Net Profit, Net
Loss, and any such other item shall be determined on a daily, monthly, or other
basis, as determined by the Partnership Manager using any permissible method
under Section 706 of the Code and the Regulations thereunder.
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5.4 Right to Examine Books of Partnership. Each Partner shall
have the right at any time to examine the books and records of the Partnership
and to audit the accounts of the Partnership. No Partner will be entitled,
however, to examine the cost or other proprietary information of the other
Partner without the consent of such Partner, except that TSub shall be entitled
to have an independent auditor examine cost information of Caraustar to verify
that Section 4.5(e) has been complied with. Such auditor may report its
conclusions to TSub but shall not disclose detailed cost information to TSub.
Any such detailed cost information developed by the auditor may be presented in
any arbitration proceeding under Section 9.9.
5.5 Partnership Level Tax Audits. CSub is designated as the "Tax
Matters Partner" within the meaning of Section 623(a)(7) of the Code. The
general duties of the Tax Matters Partner shall be to inform the other parties
of all matters which shall come to its attention in its capacity as Tax Matters
Partner by giving the other parties notice thereof within 10 days after
becoming so informed. In general, the Tax Matters Partner shall not take any
action contemplated by Section 6221 through 6233 of the Code unless it has
first given the other parties notice of the contemplated action and received
the unanimous consent of the parties to such contemplated action. This
provision is not intended to authorize the Tax Matters Partner to take any
action which is left to the determination of an individual party under Section
6221 and 6223 of the Code. More specifically, the duties of the Tax Matters
Partner and all of the parties individually shall include, without limitation,
the items enumerated in Sections 5.5(a) through 5.5(i) below:
(a) The parties shall furnish the Tax Matters Partner with such
information including, without limitation, information specified in Section
6230(e) of the Code as it may reasonably request to permit it to provide the
Internal Revenue Service with sufficient information to allow proper notice to
the parties in accordance with Section 6223 of the Code. The parties shall
also furnish to each other copies of all correspondence with the Internal
Revenue Service or the Department of the Treasury regarding any aspect of
"partnership items", as defined in Code Section 6231(a)(3), or the Partnership
tax return. The Tax Matters Partner shall keep each party informed of all
administrative and judicial proceedings for the adjustment at the Partnership
level of partnership items in accordance with Section 6223(g) of the Code.
(b) The parties shall promptly notify the Tax Matters Partner at
least ten days in advance of their treatment of any partnership item on their
federal income tax return in a manner which is inconsistent with the treatment
of that item on the Joint Venture's tax return.
(c) The Tax Matters Partner shall not enter into any extension of
the period of limitations as provided under Section 6229 of the Code without
first giving reasonable advance notice to all other parties of such intended
action and obtaining their unanimous consent.
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(d) No party shall file pursuant to Section 6227 of the Code, a
request for an administrative adjustment of partnership items for any
Partnership taxable year without first giving reasonable advance notice to all
other parties. If all of the parties agree with the requested adjustment, the
Tax Matters Partner shall file the request for administrative adjustment on
behalf of the Partnership. If unanimous consent is not obtained within thirty
days, or within the period required to timely file the request for
administrative adjustment, if shorter, any party, including the Tax Matters
Partner, may file a request for administrative adjustment on its own behalf.
(e) Any party intending to file a petition under Code Sections
6226 and 6228, or other sections of the Code with respect to any partnership
item, or other tax matters involving the Partnership, shall give reasonable
advance notice to the other parties of such intention and the nature of the
contemplated proceeding. In the case where the Tax Matters Partner is the
party intending to file such petition, such notice shall be given within a
reasonable time to allow the other parties to participate in the choosing of
the forum in which such petition shall be filed. If the parties do not agree
on the appropriate forum, then the appropriate forum shall be decided by a
majority vote. Each party shall have a vote in accordance with their
Percentage Interest. If a majority cannot agree, the Tax Matters Partner shall
choose the forum. If any party intends to seek review of any court decision
rendered as a result of a proceeding instituted under this Section, such party
shall notify all of the other parties of such intended action.
(f) The Tax Matters Partner shall not enter into settlement
negotiations with respect to the tax treatment of partnership items without
first giving reasonable advance notice of such intended action (including any
proposal for settlement) to the other parties. The Tax Matters Partner shall
not bind any other party to a settlement agreement without obtaining the
written concurrence of any such party who would be bound by such agreement.
Unless prohibited, any other party who enters into a settlement agreement with
the Internal Revenue Service or the Secretary of the Treasury with respect to
any partnership items shall notify the other parties of such settlement
agreement within ninety days from the date of settlement.
(g) The Tax Matters Partner shall have the right to engage legal
counsel, certified public accountants, or other assistance without the prior
written consent of a majority of the parties with respect to partnership level
tax audits and contests. Any reasonable item of expense with respect to such
matters, including but not limited to fees and expenses for legal counsel,
certified public accountants, and other experts which the Tax Matters Partner
incurs in connection with any Partnership level audit, assessment, litigation,
or other proceedings regarding any partnership item, shall be borne by the
Partnership.
(h) The provisions of this Section 5.5, including but not limited
to the obligation to pay fees and expenses contained in Section 5.5(g), shall
survive the termination of the Partnership and the termination of any party's
interest in the Partnership and shall remain binding for a period of time
necessary to resolve with the
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Internal Revenue Service or the Department of Treasury any and all matters
regarding the federal income taxation of the Partnership for the applicable tax
year.
(i) The provisions of this Section 5.5 shall extend to other taxes
measured by or computed with respect to income to the extent rules similar to
Code Sections 6221 through 6223 are applicable to such taxes.
ARTICLE VI
OUTSIDE INTERESTS OF THE PARTIES
6.1 Outside Interests. Notwithstanding any other provision of
this Agreement, each Partner hereby acknowledges and agrees that:
(a) each Partner may engage, directly or indirectly, in
the manufacture and sale of any products, the provision of any
services or any other business or activities, whether or not the same
is or may be deemed to be in competition with the Business of the
Partnership;
(b) each Partner shall have the right to acquire, develop
and exploit any and all properties, businesses and activities that
such Partner determines to acquire, develop and exploit, and shall
have no obligation to represent any such opportunity to the
Partnership;
(c) neither Partner shall be obligated to make any
accounting to the Partnership with respect to such activities; and
(d) neither Partner shall have any claim or cause of
action against the other Partner for engaging in such activities.
6.2 Prohibition of Exchange of Financial or Production Data. CSub
and TSub hereby agree that the parties shall not in fact nor shall they agree
to exchange cost and pricing data, financial information, production and labor
cost information, burden rate information or any similar information which
would impair the maintenance of a valid competitive posture between the parties
with respect to competition for business outside the scope of the Partnership.
ARTICLE VII
TERM AND DISSOLUTION
7.1 Term. The Partnership shall commence as of the date of this
Agreement and shall continue until the first to occur of the following events
of dissolution and thereafter for so long as is necessary to complete the
winding up of the business of the Partnership:
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(a) the Partnership has been dissolved by the unanimous consent to
the Partners;
(b) the Partnership has been dissolved pursuant to express
provisions of this Agreement;
(c) the Partnership has been dissolved pursuant to law;
(d) the fiftieth anniversary of the date of this Agreement; or
(e) any event has occurred which makes it unlawful for the
business of the Partnership to be carried on or for the Partners to carry it on
as a partnership.
7.2 Dissolution.
(a) Upon dissolution of the Partnership, a full and general
accounting of the Partnership's assets, liabilities and transactions shall at
once be taken and the Partnership's business shall be wound up. Such assets
shall be sold as soon as possible, the Partnership's obligations shall be
discharged or adequately provided for, and all debts and other amounts due the
Partnership shall be collected. The Partnership Manager shall be responsible
for liquidating the Partnership and shall have all powers and authority granted
and delegated to the Partnership Manager under Article IV and as are necessary
to effect the purpose of this Section 7.2. The proceeds thereof shall be
distributed as follows:
(i) to the repayment of debts and liabilities of the Partnership,
other than debts and liabilities to any of the Partners; then
(ii) to repayment of any Partner Loans; then
(iii) to the establishment of such cash reserves as the Partnership
Manager deems appropriate for any contingent or unforeseen liabilities of the
Partnership; provided, however, that at the expiration of such period as the
General Partner deems advisable, the balance of such cash reserves shall be
distributed to the Partners in the manner hereinafter provided; then
(iv) to the Partners in accordance with the positive balances of
their Capital Accounts; and then
(v) to the Partners in accordance with their Ownership Interests.
(b) Negative Capital Accounts. If any Partner has a deficit
balance in its Capital Account (upon liquidation of the Partnership or
otherwise), such Partner shall have no obligation to restore such negative
balance or to make any Capital Contribution to the Partnership by reason
thereof, and such negative balance shall not be considered an asset of the
Partnership or of any Partner.
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ARTICLE VIII
TRANSFER OF INTERESTS
8.1 Prohibited Transfers. Except as otherwise provided in this
Agreement, TSub may not assign, transfer, pledge or hypothecate its interest in
the Partnership, or any part thereof, or its interest in any assets or property
of the Partnership except with the prior written consent of CSub, which consent
will not be unreasonably withheld. Any assignment, transfer, pledge or
hypothecation in violation of this Section shall be void. Nothing in this
Agreement shall, or shall be deemed to, prohibit or restrict any assignment,
transfer, pledge or hypothecation by CSub of any interest in the Partnership,
or any part thereof, or its interest in any assets or properties of the
Partnership.
8.2 Permitted Transfers. Notwithstanding any other provision of
this Agreement, TSub, without the consent of CSub, may assign its interest in
the Partnership to TPI or another subsidiary wholly-owned, directly or
indirectly, by TPI (a "Permitted Transferee"); provided, however, that TSub
shall notify CSub in writing not less than five days prior to such assignment.
8.3 Assumption by Assignee. Any assignment of a Partner's
interest in the Partnership permitted under this Agreement shall be in writing
and shall be subject to all of the provisions of this Agreement and constitute
an assignment and transfer of all of the assignor's rights hereunder with
respect to such interest or part thereof, and the assignee shall expressly
agree in writing to be bound by all of the terms of this Agreement and assume
and agree to perform all of the assignor's agreements and obligations existing
or arising at the time of and subsequent to such assignment; provided, however,
that the assignor shall at all times remain fully responsible and liable for
its obligations and liabilities hereunder, unless the nonassigning Partner
shall agree to a novation.
8.4 Admission of Assignee as Partner. Any assignee of a Partner's
interest in the Partnership shall if (i) the transfer is permitted hereunder
and (ii) the assignee has assumed the assignor's agreements and obligations in
accordance with this Agreement, be admitted as a partner of the Partnership in
the place and stand of the assignor and shall have the same capital account,
Ownership Interest and other rights and obligations as the assignor hereunder.
8.5 Other Restrictions on Transfer. It is expressly acknowledged
and agreed that the interests in the Partnership do not, and are not intended
to, constitute "securities" under state or federal securities laws.
Nevertheless, each Partner acknowledges that the interests in the Partnership
have not been registered under the Securities Act of 1933 or the securities act
of any state. Further, each Partner represents and warrants that it is
acquiring its interest in the Partnership for its own account, for investment
and without a view to the sale or distribution thereof within the meaning of
any applicable securities laws. Notwithstanding any other provision of this
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Agreement, each Partner agrees that its interest in the Partnership shall be
sold, transferred, assigned or otherwise disposed of only under circumstances
such that if it constituted a "security" as above provided, the transaction
would nevertheless be exempt from the registration requirements of any
applicable securities laws. As a result of the foregoing, each Partner
acknowledges that it must hold its interest in the Partnership indefinitely,
assuming the entire risk of investment thereon, unless it is subsequently
registered under applicable securities laws or unless an exemption from such
registration is available.
8.6 Put.
(a) At any time after three years from the date of this Agreement,
TSub may, by giving irrevocable written notice (the "Put Notice") to CSub,
require CSub to purchase all of TSub's Ownership Interest in the Partnership at
a cash price equal to the Put/Call Price (the "Put"). The Put Notice shall
contain appropriate terms regarding the assumptions of, and indemnification and
release with respect to, the liabilities and obligations of the Partnership and
the repayment of loans to the Partner selling its interest (the "Put Terms").
Any purchase or sale pursuant to the Put shall be subject to the Put Terms
outlined in the Put Notice.
(b) The closing of any sale of an Ownership Interest in the
Partnership pursuant to this Section 8.6 (the "Put Closing") shall be held at
the principal offices of the Partnership, unless otherwise mutually agreed by
the Partners, on a mutually acceptable date. Such date of Put Closing shall not
be less than 90 days after the date of the Put Notice unless otherwise agreed
in writing by CSub. Unless otherwise mutually agreed by the Partners, the
Put/Call Price for the purchase of an interest in the Partnership pursuant to
this Section 8.6 shall be paid in cash at the Closing and the Partners shall
execute such documents as are reasonably necessary to satisfy the Terms.
(c) If CSub is restricted or prevented from consummating the
purchase of all or a portion of TSub's Ownership Interest pursuant to the
exercise of the Put by the terms of any agreement to which the Partnership or
CSub is a party, then Caraustar shall purchase the Ownership Interests in
accordance with the terms of this Section 8.6.
(d) CSub may, before or after the giving the Put Notice and prior
to the Put Closing, designate any Affiliate of CSub as the person to purchase
the Ownership Interest that is the subject of the Put, and such Affiliate shall
thereafter, in lieu of CSub, acquire the Ownership Interest subject to the Put.
(e) Each Partner shall make all filings necessary to comply with
the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended in
connection with the exercise of the Put.
(f) Any Partner Loans owed by the Partnership to TSub will be
repaid in full upon the consummation of the purchase pursuant to the Put, and
the Partners shall cause the Partnership to repay such loans.
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8.7 Call.
(a) At any time after four years from the date of this Agreement,
CSub may, by giving irrevocable written notice (the "Call Notice") to TSub,
require TSub to sell all of TSub's Ownership Interest in the Partnership at a
cash price equal to the Put/Call Price (the "Call"). The Call Notice shall
contain appropriate terms regarding the assumptions of, and indemnification and
release with respect to, the liabilities and obligations of the Partnership and
the repayment of loans to the Partner selling its interest (the "Call Terms").
Any purchase or sale pursuant to the Call shall be subject to the Call Terms
outlined in the Call Notice.
(b) The closing of any sale of an Ownership Interest in the
Partnership pursuant to this Section 8.7 (the "Call Closing") shall be held at
the principal offices of the Partnership, unless otherwise mutually agreed by
the Partners, on a mutually acceptable date. Such date of Call Closing shall
not be less than 90 days after the date of the Call Notice unless otherwise
agreed in writing by CSub. Unless otherwise mutually agreed by the Partners,
the Put/Call Price for the purchase of an interest in the Partnership pursuant
to this Section 8.7 shall be paid in cash at the Closing and the Partners shall
execute such documents as are reasonably necessary to satisfy the Call Terms.
(c) CSub may, before or after the giving the Call Notice and prior
to the Call Closing, designate any Affiliate of CSub as the person to purchase
the Ownership Interest that is the subject of the Call, and such Affiliate
shall thereafter, in lieu of CSub, acquire the Ownership Interest subject to
the Call.
(e) Each Partner shall make all filings necessary to comply with
the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended in
connection with the exercise of the Call.
(f) Any Partner Loans owed by the Partnership to TSub will be
repaid in full upon the consummation of the purchase pursuant to the Call, and
the Partners shall cause the Partnership to repay such loans.
8.8 Drag-Along Rights. If CSub proposes to sell to any person
other than an Affiliate of CSub (an "Unaffiliated Purchaser") all of its
Ownership Interest in the Partnership, CSub shall have the right to require
TSub and its Permitted Transferees to participate in such sale. Such rights
shall be exercised by delivering a notice (the "Buyout Notice") to TSub stating
that CSub proposes to effect such transaction, the name and address of the
Unaffiliated Purchaser and the proposed purchase price for its Ownership
Interest. TSub and its permitted transferees agree that, upon receipt of the
Buyout Notice, they shall be obligated to sell all of their Ownership Interest
to the Unaffiliated Purchaser (a) at a price equal to the product of (i) the
price to be paid to CSub for its Ownership Interest times (ii) a fraction, the
numerator of which is the percentage of TSub's Ownership Interest and the
denominator of which is the percentage of the Ownership Interests held by CSub
and all other persons selling in
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such transaction other than TSub, and (b) subject to the same terms and
conditions as the terms and conditions applicable to the sale by CSub of its
Ownership Interest.
8.9 Tag-Along Rights. If CSub proposes to sell a majority of its
Ownership Interest to an Unaffiliated Purchaser, TSub shall have the right to
participate in such sale in accordance with the procedures set forth below:
(a) If CSub proposes to sell any of its Ownership Interest in a
transaction subject to this Section 8.9 (a "Covered Sale"), CSub shall deliver
a written notice to TSub stating that it proposes to effect a Covered Sale, the
name and address of the proposed purchaser, the terms and conditions of the
Covered Sale, including the purchase price for the portion of CSub's Ownership
Interest to be sold, together with a copy of all writings, if any, between the
proposed purchaser and CSub necessary to establish the terms of the Covered
Sale (the "Tag-Along Notice").
(b) TSub shall have a period of thirty (30) days after delivery by
CSub of the Tag-Along Notice within which to deliver written notice (the
"Election Notice") to CSub of TSub's election to participate in the Coverage
Sale by selling to the proposed purchaser the same proportion of TSub's
Ownership Interest as CSub is selling of its Ownership Interest. By delivering
the Election Notice to CSub within the thirty (30) day notice period, TSub
shall be obligated to sell to such purchaser such proportion of its Ownership
Interest (a) at a price equal to the product of (i) the price to be paid to
CSub for its Ownership Interest times (ii) a fraction, the numerator of which
is the percentage of TSub's Ownership Interest and the denominator of which is
the percentage of the Ownership Interests held by CSub and all other persons
selling in such transaction other than TSub, and (b) subject to the same terms
and conditions as the terms and conditions applicable to the sale by CSub of
its Ownership Interest.
8.10 Specific Performance. Each Partner acknowledges and agrees
that the restrictions contained in Article VIII are a reasonable and necessary
protection of the legitimate interests of the parties hereto that any failure
of either Partner to comply with the requirements of this Agreement will cause
the other Partner irreparable injury. Accordingly, each Partner agrees that
the other shall be entitled as a matter of right to specific performance of the
requirements of Article VIII or to temporary or permanent injunctive relief
against any breach or attempted breach of any provision of the Article VIII by
the other Partner without the necessity of posting bond or proving actual
damages. Such right to specific performance or to an injunction, however,
shall be cumulative and in addition to any other remedies a Partner may have.
The breaching Partner agrees to pay all court costs and reasonable attorneys'
fees incurred by the other Partner in obtaining specific performance of, or any
injunction against violation of, the requirements of this Article VIII.
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ARTICLE IX
GENERAL
9.1 Notices.
(a) All notices or requests provided for or permitted to be given
pursuant to this Agreement must be in writing and may be given or served by
telegram, by depositing the same in the United States mail, addressed to the
party to be notified, postpaid, and registered or certified with return receipt
requested, or by delivering such notice in person to such party. Notices given
or served pursuant hereto shall be effective upon receipt by the party to be
notified.
(b) All notices to be sent to CSub shall be sent or delivered to
the following address:
To Caraustar: 3100 Washington Street
P.O. Box 115
Austell, GA 30001
Telephone: 770-948-3101
Fax: 770-732-3401
Attn: President
With a copy to: Robinson, Bradshaw & Hinson
101 N. Tryon Street, Suite 1900
Charlotte, NC 28246
Telephone: 704-377-8301
Fax: 704-378-4000
Attn: Robert G. Griffin
(c) All notices to be sent to TSub shall be sent or delivered to
the following address:
Tenneco Packaging Inc.
1603 Orrington Avenue
Evanston, Illinois 60201
Attn: Chief Financial Officer
9.2 Governing Laws. This Agreement and the obligations of the
Partners hereunder shall be interpreted, construed and enforced in accordance
with the laws of the State of Delaware (other than its choice of law
principles).
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9.3 Entire Agreement. This Agreement contains the entire
agreement between the parties hereto relative to the formation of the
Partnership. No variations, modifications, or changes herein or hereof shall
be binding upon any party hereto unless set forth in a document duly executed
by or on behalf of such party.
9.4 Waiver. No consent or waiver, express or implied, by any
Partner to or of any breach or default by the other in the performance by the
other of its obligations hereunder shall be deemed or construed to be a consent
or waiver to or of any other breach or default in the performance by such other
party of the same or any other obligations of such Partner hereunder. Failure
on the part of any Partner to complain of any act or failure to act of any of
the other Partners or to declare any of the other Partners in default,
irrespective of how long such failure continues, shall not constitute a waiver
of such Partner of its rights hereunder.
9.5 Severability. If any provisions of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such remaining provisions to other persons or circumstances
shall not be affected thereby and shall be enforced to the greatest extent
permitted by law.
9.6 Binding Agreement. Subject to the restrictions on transfers
and encumbrances set forth herein, this Agreement shall inure to the benefit of
and be binding upon the undersigned Partners and their respective heirs,
executors, legal representatives, successors and assigns. Whenever in this
Agreement a reference to any party or Partner is made, such reference shall be
deemed to include a reference to the heirs, executors, legal representatives,
successors, and assigns of such party or Partner.
9.7 Multiple Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original and
together shall constitute a single instrument.
9.8 Further Assurances. Each Partner shall execute such documents
and shall give such further assurances as shall be necessary or desirable to
perform its obligations hereunder.
9.9 Arbitration. Any disagreement with respect to any matter
arising under the Agreement shall be resolved by arbitration in accordance with
the then existing rules of the American Arbitration Association before a board
of three arbitrators named in accordance with such rules. All costs and
expenses of arbitration shall be paid by the Partnership.
9.10 Notices of Transactions With Affiliates. Each Partner shall
give the other Partner prompt written notice of any transactions between such
Partner or any Affiliate thereof and the Partnership involving more than
$1,000,000.
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<PAGE> 102
IN WITNESS WHEREOF, this Agreement has been executed as of the date first above
written.
CSub
By:
--------------------------------
Title:
-----------------------------
TSub
By:
--------------------------------
Title:
-----------------------------
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<PAGE> 103
AMENDMENT TO CONTRIBUTION AGREEMENT
between
TENNECO PACKAGING INC.
and
CARAUSTAR INDUSTRIES I
AMENDMENT dated as of July 15, 1996 between TENNECO PACKAGING INC.,
a Delaware corporation ("TPI"), and CARAUSTAR INDUSTRIES INC., a North
Carolina corporation ("Caraustar").
PRELIMINARY STATEMENT
A. TPI and Caraustar have entered into a Contribution Agreement
dated as of June 21, 1996 (the "Contribution Agreement"), pursuant to which TPI
and Caraustar agreed to form a partnership to operate the Business (as defined
in the Contribution Agreement).
B. TPI and Caraustar desire to amend the Contribution Agreement,
as follows:
AGREEMENT
1. Section 1.1 is amended by replacing the definitions of "Current
Assets", "Current Liabilities", and Determination Date" with the following:
""Current Assets shall mean, as of the Effective Date, Inventory" and
all other current assets of the Business other than cash and any other current
assets that are Excluded Assets."
""Current Liabilities" shall mean, as of the Effective Date, all
current liabilities of the Business other accrued and unpaid or deferred
federal, state, local and foreign income Taxes with respect to taxable periods,
or any portions thereof, ending on or before the Effective Date, and any other
current liabilities that are Excluded Liabilities."
""Determination Date" shall mean the close of business on June 30,
1996."
2. Section 2.1 is amended to read as follows:
"2.1 Formation of Partnership. On the terms and subject to the
conditions set forth herein, as of the Effective Date TPI and Caraustar shall
form a partnership, on the terms of the Joint Venture Agreement attached hereto
as Annex A (the "Partnership")"
3. Section 2.2(b) is amended by replacing the term "$115 million"
with "$114.5 million".
<PAGE> 104
4. Section 2.2(c) is amended by replacing the
term "$115 million" with "$114.5 million".
5. Section 2.6(g) is amended to read as follows:
"(g) all liabilities for income Taxes imposed
with respect to the taxable periods, or portions
thereof, ending on or before the Effective Date;"
6. Section 2.9 is amended by adding the following as subsection
(c):
"(c) TPI and Caraustar agree that, as between the parties, the
Partnership shall be deemed formed, and the Closing will be deemed
effective, as of 6:30 a.m. on July 1, 1996, with respect to the
Rittman Mill, the recycling operations at the Rittman Mill, and the
Cleveland Center, and 8:00 a.m. on July 1, 1996, with respect to the
Tama Mill (the "Effective Date"). Accordingly, TPI and the
Partnership shall make appropriate adjustments and payments with
respect to the operations of the Business between the Effective Date
and the Closing Date so that the Partnership receives all profits,
and bears all losses (subject to the last sentence of this Section
9(c)) as of the Effective Date. The parties agree that title to the
Contributed Assets and risk of loss with respect thereto, and all
interest in profits and losses of from the operation of the Business,
shall be deemed to have transferred to the Partnership as of the
Effective Date. Notwithstanding the foregoing, (i) the parties'
representations and warranties shall be deemed made on the actual
Closing Date for all purposes under this Agreement, and (ii) any
liabilities arising between the Closing Date and the Effective Date
which would be Excluded Liabilities shall be deemed Excluded
Liabilities and retained by TPI."
7. Section 2.12(a) is amended by replacing the term "$115
million" with "$114.5 million".
8. Section 5.4(c) shall be amended to read as follows:
"The Partnership shall grant all Employees credit for purposes
of eligibility and vesting (but, except as provided in the
following paragraph, not benefit accrual) under the Partnership's
employee benefit plans (including vacation and severance) for their
service with TPI prior to the Closing Date, to the same extent such
service had been taken into account under the Plans.
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<PAGE> 105
The Partnership shall grant Union Employees credit for all
purposes, including benefit accrual, under the defined benefit pension
plan or plans which cover the Union Employees of the Partnership (the
"Partnership Union Pension Plan") for their service with TPI prior to
the Closing Date, to the same extent such service had been taken into
account under the Pension Plan for Certain Hourly Rated Employees of
Packaging Corporation of America (the "TPI Hourly Pension Plan"). The
Partnership Union Pension Plan may provide for an offset of a Union
Employee's accrued benefit under the TPI Hourly Pension Plan,
determined as of the Closing Date; provided, that the application of
such offset shall not produce a benefit which is less than the benefit
the Union Employee would have accrued under the Partnership Union
Pension Plan absent the provisions of this paragraph. The provisions
of this paragraph shall, in all respects, be construed consistently
with the Partnership's obligations under Sections 2.5(a) and 5.4(b)(i)
hereof."
9. Schedules 2.6(c) and 3.11 are each amended to add the
following:
Complaint filed June 26, 1996, by the U.S. Environmental
Protection Agency titled "In the Matter of Tenneco Packaging
Corporation, Rittman, Ohio, facility CAA Docket No. 5CAA 96-006.
10. Schedule 3.14 is amended to add the following:
Agreement dated June 19, 1996 (effective June 1, 1996) between
3M Specialty Chemicals Division and TPI relating to the purchase of
Scotchban (TM) Protector products FC-807A, FC-807, and FC-845.
11. Except as amended hereby, the Contribution Agreement is in
full force and effect, and as amended hereby, is hereby ratified and
confirmed.
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<PAGE> 106
IN WITNESS WHEREOF, the parties have executed this
Amendment to the Contribution Agreement as of the date set
forth above.
TENNECO PACKAGING INC.
By: /s/ Robert D. Harlow
-----------------------------
Title: Senior Vice President
-----------------------------
CARAUSTAR INDUSTRIES INC.
By: /s/ H. Lee Thrash, III
-----------------------------
Title: Vice President & CFO
-----------------------------
