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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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):
October 31, 1996
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Specialty Paperboard, Inc.
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Delaware 0-20231 82-0429330
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
161 Brudies Road, Brattleboro, Vermont 05302
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(802) 257-0365
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Item 2. Acquisition or Disposition of Assets
------------------------------------
On October 31, 1996 the merger (the "Merger") of CPG Acquisition Company
("Acquisition"), a wholly owned subsidiary of Specialty Paperboard, Inc.
("SPI"), with and into CPG Investors Inc. ("Investors") was consummated pursuant
to the terms of a Merger Agreement, dated August 28, 1996, among SPI,
Acquisition and Investors (the "Merger Agreement"). As a result of the Merger,
Investors is a wholly owned subsidiary of SPI.
Each share of common stock of Investors (the "Common Stock") issued and
outstanding immediately prior to the effective time of the Merger (the
"Effective Time") was converted into the right to receive, in cash, subject to
an aggregate of $3.3 million to be held in an escrow account to cover potential
indemnification claims, a per share amount equal to (A) $53.0 million less
approximately $9.8 million in outstanding indebtedness of Investors at the
Effective Time (B) divided by the number of issued and outstanding shares of
Common Stock immediately prior to the Effective Time. In addition, SPI is
required under the terms of the Merger Agreement to pay to the former
shareholders of Investors an amount equal to the amount by which the net worth
of Investors exceeds approximately $22.8 million when such amount is determined.
Through its operating subsidiaries, Investors operates five paper mills and
manufactures a diverse portfolio of specialty papers for industrial and
technical markets. Its products include filtration products for internal
combustion engines, electrical insulating paper used in the manufacture of power
distribution transformers, mat boards for picture mounting applications, base
paper for industrial abrasive/sanding products, and photographic packaging
materials. SPI currently intends that the assets of Investors and its operating
subsidiaries will be used by SPI in a manner generally consistent with the use
of such assets by Investors or its operating subsidiaries immediately prior to
the consummation of the Merger.
On October 31, 1996, SPI also purchased (the "Stock Purchase") all of the
outstanding capital stock of Arcon Holdings Corp. ("Holdings"), the parent
company of Arcon Coating Mills, Inc. ("Arcon Mills") pursuant to the terms of a
Stock Purchase Agreement, dated as of August 28, 1996, among SPI, Holdings,
Arcon Mills, the stockholders of Holdings and various other parties. The
aggregate purchase price was $32 million in cash, subject to $2 million to be
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held in an escrow account to cover potential indemnification claims, less
approximately $8.5 million in outstanding indebtedness of Holdings at closing.
Arcon Mills is a manufacturer of colored binding and stripping tapes and
edge cover materials sold primarily into the office products, checkbook and book
binding markets. SPI currently intends that the assets of Holdings and its
operating subsidiaries will be used by SPI in a manner generally consistent with
the use of such assets by Holdings or its operating subsidiaries immediately
prior to the consummation of the Stock Purchase.
The Merger and the Stock Purchase were financed through a $100 million
offering of ten year non-amortizing senior notes carrying a fixed 9-3/8%
interest rate.
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Financial statements of business as acquired.
1. To be filed by amendment as soon as is practicable, but no later
than 60 days after this report on Form 8-K must be filed.
(b) Pro forma financial information.
1. To be filed by amendment as soon as is practicable, but no later
than 60 days after this report on Form 8-K must be filed.
(c) Exhibits.
2.1 Merger Agreement, dated as of August 28, 1996, among Specialty
Paperboard, Inc., CPG Investors Inc. and CPG Acquisition Company,
together with exhibits thereto.
2.2 Stock Purchase Agreement, dated as of August 28, 1996, among
Specialty Paperboard, Inc., Arcon Holdings Corp. ("Holdings"),
Arcon Coating Mills, Inc., the stockholders of Holdings and
various other parties, together with exhibits thereto.
99.1 Press Release dated November 1, 1996.
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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.
SPECIALTY PAPERBOARD, INC.
Date 11/13/96 By: /s/ Bruce P. Moore
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Bruce P. Moore
Vice President and
Chief Financial Officer
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EX-2.1
Merger Agreement
================================================================================
MERGER AGREEMENT
Dated as of August 28, 1996
By and Among
SPECIALTY PAPERBOARD, INC.,
CPG ACQUISITION COMPANY,
and
CPG INVESTORS INC.
================================================================================
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TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS................................................................ 2
ARTICLE II
THE MERGER................................................................. 9
ss.2.1 The Merger................................................... 9
ss.2.2 Consummation of the Merger................................... 10
ss.2.3 Effects of the Merger........................................ 10
ss.2.4 Certificate of Incorporation; By-laws........................ 10
ss.2.5 Directors and Officers....................................... 10
ss.2.6 Conversion of Securities..................................... 11
ss.2.7 Closing of Transfer Records.................................. 13
ss.2.8 Payment of Merger Consideration.............................. 13
ss.2.9 Determination of Adjustment to Each
Shareholder's Closing Payment.............................. 15
ss.2.10 Adjustments to Closing Payments.............................. 18
ss.2.11 Payment of Bank Debt......................................... 20
ss.2.12 Dissenting Shares............................................ 20
ss.2.13 Closing...................................................... 22
ARTICLE III
REPRESENTATIONS OF THE COMPANY............................................. 23
ss.3. Representations of the Company............................... 23
ss.3.1 Existence and Good Standing.................................. 23
ss.3.2 Capital Stock................................................ 23
ss.3.3 Authorization and Validity of this
Agreement.................................................. 24
ss.3.4 Subsidiaries and Investments................................. 25
ss.3.5 Financial Statements; No Material Changes.................... 26
ss.3.6 Books and Records............................................ 28
ss.3.7 Title to Properties; Encumbrances............................ 29
ss.3.8 Real Property................................................ 29
ss.3.9 Intellectual Property........................................ 30
ss.3.10 Leases....................................................... 31
ss.3.11 Material Contracts........................................... 31
ss.3.12 Consents and Approvals; No Violations........................ 33
ss.3.13 Litigation................................................... 34
ss.3.14 Taxes........................................................ 35
ss.3.15 Liabilities.................................................. 38
ss.3.16 Insurance.................................................... 39
(i)
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Page
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ss.3.17 Compliance with Laws......................................... 40
ss.3.18 Employment Relations......................................... 40
ss.3.19 Employee Benefit Plans....................................... 41
ss.3.20 Interests in Customers, Suppliers, etc....................... 52
ss.3.21 Environmental Laws and Regulations........................... 53
ss.3.22 Bank Accounts, Powers of Attorney............................ 57
ss.3.23 Compensation of Employees.................................... 58
ss.3.24 Conduct of Business.......................................... 58
ss.3.25 Customer Relations........................................... 59
ss.3.26 Condition of Assets.......................................... 59
ss.3.27 Broker's or Finder's Fees.................................... 59
ARTICLE IV
[INTENTIONALLY OMITTED]............................................. ...... 60
ARTICLE V
REPRESENTATIONS OF THE PARENT AND ACQUISITION.............................. 60
ss.5. Representations of the Parent and
Acquisition................................................ 60
ss.5.1 Existence and Good Standing; Power and
Authority.................................................. 60
ss.5.2 Restrictive Documents........................................ 61
ss.5.3 Broker's or Finder's Fees.................................... 61
ARTICLE VI
TRANSACTIONS PRIOR TO THE CLOSING DATE..................................... 61
ss.6.1 Conduct of Business of the Company........................... 61
ss.6.2 Exclusive Dealing............................................ 64
ss.6.3 Review of the Company........................................ 64
ss.6.4 Reasonable Efforts........................................... 66
ss.6.6 Environmental Audit; Escrow; Reporting....................... 67
ARTICLE VII
CONDITIONS TO THE PARENT'S AND ACQUISITION'S OBLIGATIONS................... 69
ss.7. Conditions to the Parent's and Acquisition's
Obligations................................................ 69
ss.7.1 Opinions of Counsel.......................................... 70
ss.7.2 Good Standing and Other Certificates......................... 70
ss.7.3 No Material Adverse Change................................... 71
ss.7.4 Truth of Representations and Warranties...................... 71
ss.7.5 Performance of Agreements.................................... 72
(ii)
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Page
ss.7.6 No Litigation Threatened..................................... 72
ss.7.7 Third Party Consents; Governmental ..........................
Approvals.................................................. 72
ss.7.8 Repayment of Indebtedness to Third Parties; .................
Termination of Security Interests.......................... 73
ss.7.9 Financing.................................................... 73
ss.7.10 Termination of Stock Option Plan; Other
Arrangements............................................... 73
ss.7.11 FIRPTA....................................................... 73
ss.7.12 HSR Act...................................................... 74
ss.7.13 Escrow Agreement............................................. 74
ss.7.14 Environmental Assessments; Rochester
Environmental Escrow Amount................................ 74
ss.7.15 Customer/Supplier and Tax Diligence.......................... 74
ss.7.16 Adoption of Flexible Benefits Plan
Document................................................... 75
ss.7.17 Correction of Noncompliance by Employee
Benefit Plans With Terms of Plan and/or
Law........................................................ 75
ss.7.18 Tax Indemnification Agreement................................ 75
ARTICLE VIII
CONDITIONS TO THE COMPANY'S OBLIGATIONS.................................... 76
ss.8. Conditions to the Company's Obligations...................... 76
ss.8.1 Opinions of Counsel.......................................... 76
ss.8.2 Truth of Representations and Warranties...................... 76
ss.8.3 Third Party Consents; Governmental
Approvals.................................................. 77
ss.8.4 Performance of Agreements.................................... 77
ss.8.5 No Litigation Threatened..................................... 77
ss.8.6 HSR Act...................................................... 77
ss.8.7 Shareholder Approval......................................... 78
ss.8.8 Environmental Matters........................................ 78
ARTICLE IX
TAX MATTERS................................................................ 78
ss.9.1 Tax Returns.................................................. 78
ss.9.2 Apportionment of Taxes....................................... 80
ss.9.3 Cooperation; Audits.......................................... 81
ss.9.4 Controversies................................................ 81
ss.9.5 Transfer Taxes............................................... 83
ss.9.6 Amended Returns.............................................. 84
ss.9.7 Indemnification.............................................. 84
(iii)
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ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION............................... 86
ss.10.1 Survival of Representations.................................. 86
ss.10.2 Indemnification.............................................. 87
ss.10.3 Indemnification Procedure.................................... 94
ARTICLE XI
TERMINATION................................................................ 97
ss.11.1 Termination.................................................. 97
ss.11.2 Effect of Termination........................................ 99
ss.11.3 Effect of Waiver of Condition Precedent...................... 99
ARTICLE XII
MISCELLANEOUS.............................................................. 100
ss.12.1 Knowledge of the Company..................................... 100
ss.12.2 Expenses..................................................... 100
ss.12.3 Governing Law................................................ 100
ss.12.4 Captions..................................................... 100
ss.12.5 Publicity.................................................... 101
ss.12.6 Notices...................................................... 101
ss.12.7 Parties in Interest.......................................... 102
ss.12.8 Counterparts................................................. 103
ss.12.9 Entire Agreement............................................. 103
ss.12.10 Amendments................................................... 103
ss.12.11 Severability............................................... 103
ss.12.12 Third Party Beneficiaries.................................. 103
EXHIBITS
Exhibit I Shareholders
Exhibit II Unaudited Statements
Exhibit III Form of Escrow Agreement
Exhibit IV Form of Tax Indemnification Agreement
SCHEDULES
Schedule 3.2 Equity Rights
Schedule 3.4 Subsidiaries
Schedule 3.5 Preparation of Unaudited Statements; Material
Adverse Changes
Schedule 3.7 Title to Properties
Schedule 3.8 Real Property
Schedule 3.9 Intellectual Property
(iv)
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Schedule 3.10 Leases
Schedule 3.11 Material Contracts
Schedule 3.12 Consents and Approvals; Violations
Schedule 3.13 Litigation
Schedule 3.14 Other Tax Matters
Schedule 3.15 Liabilities
Schedule 3.16 Insurance
Schedule 3.18 Employment Relations
Schedule 3.19 Employer Benefit Plans
Schedule 3.20 Interests in Customers and Suppliers
Schedule 3.21 Environmental Laws and Regulations
Schedule 3.22 Bank Accounts, Powers of Attorney
Schedule 3.23 Compensation of Employees
Schedule 3.24 Conduct of Business
Schedule 3.27 Broker's or Finder's Fees
Schedule 6.3 Contracts and other Arrangements Restricting
Disclosure
Schedule 7.8 Indebtedness; Security Interests
(v)
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MERGER AGREEMENT
MERGER AGREEMENT (this "Agreement") dated as of August 28, 1996 by and
among SPECIALTY PAPERBOARD, INC., a Delaware corporation (the "Parent"), CPG
ACQUISITION COMPANY, a Delaware corporation and a wholly-owned subsidiary of the
Parent ("Acquisition"), and CPG INVESTORS INC., a Delaware corporation (the
"Company").
W I T N E S S E T H :
WHEREAS, the persons named on Exhibit I attached hereto under Column A
(the "Shareholders") own an aggregate of 520,058 shares of common stock of the
Company as specified and described thereon (collectively the "Stock"), such
shares of the Shareholders being all of the outstanding shares of the capital
stock of the Company;
WHEREAS, the Company has granted options (the "Options") to purchase
54,500 shares of Class A Common Stock of the Company to certain of its employees
(the "Optionholders") pursuant to the CPG Investors Inc. Stock Option Plan, all
of which are outstanding;
WHEREAS, each of the Optionholders is the holder of Options to acquire the
number of shares of Class A Common Stock set forth opposite such Optionholder's
name in Exhibit
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I attached hereto under Column A, which Options constitute all of the issued and
outstanding options to purchase Common Stock or any other capital stock of the
Company;
WHEREAS, subject to the terms and conditions hereof, at or prior to the
Closing, the Optionholders will exercise all of their respective Options;
WHEREAS, the parties hereto desire Acquisition to be merged with and into
the Company pursuant to this Agreement with the Company as the surviving
corporation (the "Merger"); and
WHEREAS, it is the intention of the parties hereto that, upon consummation
of the Merger pursuant to this Agreement, the Parent shall own all of the
outstanding shares of capital stock of the Surviving Corporation.
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
DEFINITIONS
ss.1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the respective meanings specified
therefor below (such meanings to be equally applicable to both the singular and
plural forms of the terms defined).
"Acquisition" shall have the meaning specified in the preamble to this
Agreement.
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"Agreement" shall mean this Agreement, as amended, modified or
supplemented from time to time.
"Arbitrator" shall have the meaning specified in Section 2.9(b)(i).
"Audited Balance Sheets" shall have the meaning specified in Section 3.5.
"Audited Statements" shall have the meaning specified in Section 3.5.
"Balance Sheet" shall have the meaning specified in Section 3.5.
"Balance Sheet Date" shall have the meaning specified in Section 3.5.
"Base Net Worth" shall have the meaning specified in Section 2.10(a).
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which banks located in New York, New York shall be authorized or required by
law to close.
"Claim" shall have the meaning specified in Section 10.3.
"Closing" shall have the meaning specified in Section 2.13.
"Closing Balance Sheet" shall have the meaning specified in Section
2.9(a)(i).
"Closing Date" shall have the meaning specified in Section 2.13.
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"Closing Net Worth" shall have the meaning specified in Section 2.9(a).
"Code" shall have the meaning specified in Section 3.14.
"Common Stock" shall have the meaning specified in Section 3.2.
"Company" shall have the meaning specified in the preamble to this
Agreement.
"Company Property" shall have the meaning specified in Section 3.21.
"Confidentiality Agreement" shall have the meaning specified in Section
6.3.
"CPG Holdings" shall have the meaning specified in Section 3.5(a).
"Crestar" shall have the meaning specified in Section 2.6(a).
"Crestar Loan" shall have the meaning specified in Section 2.6(a).
"Damages" shall have the meaning specified in Section 10.2(a).
"DGCL" shall have the meaning specified in Section 2.1.
"Dissenting Shareholders" shall have the meaning specified in Section
12.12.
"Effective Time" shall have the meaning specified in Section 2.2.
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"Employee Benefit Plans" shall have the meaning specified in Section 3.19.
"Encumbrances" shall have the meaning specified in Section 3.7.
"ENSR" shall mean ENSR Corporation.
"Environment" shall have the meaning set forth in Section 3.21.
"Environmental Claim" shall have the meaning specified in Section 3.21.
"Environmental Law" shall have the meaning specified in Section 3.21.
"Equity Rights" shall have the meaning specified in Section 3.2.
"ERISA" shall have the meaning specified in Section 3.19.
"Escrow Account" shall have the meaning specified in Section 2.8(b).
"Escrow Agent" shall have the meaning specified in Section 2.8(b).
"Escrow Agreement" shall have the meaning specified in Section 7.13.
"GAAP" shall have the meaning specified in Section 3.5.
"Governmental Authority" shall have the meaning specified in Section 3.21.
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"Hazardous Materials" shall have the meaning specified in Section 3.21.
"HSR Act" shall have the meaning specified in Section 6.4.
"Indemnified Party" shall have the meaning specified in Section 10.3(a).
"Indemnifying Party" shall have the meaning specified in Section 10.3(a).
"ISRA" shall have the meaning set forth in Section 3.21.
"Intellectual Property" shall have the meaning specified in Section 3.9.
"Material Adverse Effect" shall have the meaning specified in Section 3.1.
"Merger" shall have the meaning specified in the preamble to this
Agreement.
"Merger Consideration" shall have the meaning specified in Section 2.6(a).
"Multiemployer Plan" shall have the meaning specified in Section 3.19.
"Notice of Objection" shall have the meaning specified in Section
2.9(a)(ii).
"Optionholders" shall have the meaning specified in the preamble to this
Agreement.
"Options" shall have the meaning specified in the preamble to this
Agreement.
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"Overlap Period" shall have the meaning specified in Section 9.4.
"Parent" shall have the meaning specified in preamble to this Agreement.
"Parent Indemnities" shall have the meaning specified in Section 10(b).
"PBGC" shall have the meaning specified in Section 3.19.
"Person" shall have the meaning specified in Section 3.11.
"Pre-Closing Period" shall have the meaning specified in Section 3.14.
"Real Property" shall have the meaning specified in Section 3.8.
"Release" shall have the meaning specified in Section 3.21.
"Remedial Work" shall have the meaning specified in Section 3.21.
"Returns" shall have the meaning specified in Section 3.14.
"Rochester Environmental Escrow Account" shall have the meaning specified
in Section 2.8(c).
"Rochester Environmental Escrow Amount" shall have the meaning specified
in Section 6.6(a).
"Shareholder's Closing Payment" shall have the meaning specified in
Section 2.8(a).
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"Shareholders" shall have the meaning specified in the preamble to this
Agreement.
"Shareholders' Payment Agent" shall have the meaning specified in Section
2.8(a).
"Shareholder's Percentage" shall have the meaning specified in Section
2.10(a).
"Shareholders' Representative" shall mean SCI Investors Inc. or a
replacement representative of the Shareholders appointed by vote of a majority
in interest of the Shareholders determined based on their holdings of Stock as
set forth in Exhibit I attached hereto.
"Single Employer Plan" shall have the meaning specified in Section 3.19.
"Stock" shall have the meaning specified in the preamble to this
Agreement.
"Subsidiary" shall have the meaning specified in Section 3.4.
"Surviving Corporation" shall have the meaning specified in Section 2.1.
"Tax Indemnification Agreement" shall have the meaning specified in
Section 7.18.
"Tax Matter" shall have the meaning specified in Section 9.4.
"Taxes" means all taxes, assessments, charges, duties, fees, levies or
other governmental charges, including,
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without limitation, all Federal, state, local, foreign and other income,
franchise, profits, capital gains, capital stock, transfer, sales, use,
occupation, property, excise, severance, windfall profits, stamp, license,
payroll, withholding and other taxes, assessments, charges, duties, fees, levies
or other governmental charges of any kind whatsoever (whether payable directly
or by withholding and whether or not requiring the filing of a Return), all
estimated taxes, deficiency assessments, additions to tax, penalties and
interest and shall include any liability for such amounts as a result either of
being a member of a combined, consolidated, unitary or affiliated group or of a
contractual obligation to indemnify any person or other entity.
"Unaudited Statements" shall have the meaning specified in Section 3.5.
ARTICLE II
THE MERGER
ss.2.1 The Merger. Subject to and in accordance with the terms and
conditions of this Agreement and in accordance with the Delaware General
Corporation Law (the "DGCL") at the Effective Time, Acquisition shall be merged
with and into the Company. As a result of the Merger, the separate corporate
existence of Acquisition shall cease and the Company shall continue as the
surviving corporation (sometimes referred to
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herein as the "Surviving Corporation") and shall succeed to and assume all of
the rights and obligations of Acquisition in accordance with the DGCL.
ss.2.2 Consummation of the Merger. As soon as practicable on the Closing
Date, the parties hereto will cause the Merger to be consummated by filing with
the Delaware Secretary of State a certificate of merger, in form reasonably
satisfactory to the Company, Parent and Acquisition, executed in accordance with
the relevant provisions of the DGCL, and shall make all other filings or
recordings required under the DGCL. The "Effective Time" as that term is used in
this Agreement shall mean the date on which the certificate of merger is filed
in accordance with the DGCL.
ss.2.3 Effects of the Merger. The Merger shall have the effects set forth
in Section 259 of the DGCL.
ss.2.4 Certificate of Incorporation; By-laws. The Certificate of
Incorporation and By-laws of Acquisition, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation and By-laws of the
Surviving Corporation and thereafter shall continue to be its Certificate of
Incorporation and By-Laws until amended as provided therein and under the DGCL.
ss.2.5 Directors and Officers. The directors of Acquisition immediately
prior to the Effective Time shall be
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the initial directors of the Surviving Corporation each to hold office in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation and until their respective successors are duly elected or appointed
and qualified. The officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation, each to hold
office until their respective successors are duly elected or appointed and
qualified.
ss.2.6 Conversion of Securities. Subject to the terms and conditions of
this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of the Company, the Parent, Acquisition or their respective
shareholders (including without limitation, the Shareholders):
(a) Each share of Common Stock issued and outstanding immediately
prior to the Effective Time as set forth (and, with respect to the
Optionholders, as to be set forth on or prior to the Closing upon exercise of
their respective Options) on Exhibit I under Column B shall be converted into
the right to receive, in cash, subject to the sums to be held in the Escrow
Account and in the Rochester Environmental Escrow Account pursuant to Section
2.8, a per share amount equal to (i)(A) $53,000,000 less the amount to be repaid
on the Closing Date in accordance with Section 2.11
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by the Company to Crestar Bank ("Crestar") and certain other banks for which
Crestar acts as agent under the Credit Agreement, dated as of November 5, 1993
(the "Crestar Loan"), between the Company and Crestar divided by (B) the number
of issued and outstanding shares of Common Stock immediately prior to the
Effective Time (after taking into consideration the exercise of Options), plus
or minus (ii) the adjustment determined and payable pursuant to Sections 2.9 and
2.10. The aggregate consideration payable as described above for all of the
shares of Common Stock shall be referred to herein as the "Merger
Consideration."
(b) As of the Effective Time, all Common Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any shares of Common Stock
shall cease to have any rights with respect thereto, except the right to receive
such holder's appropriate portion of the Merger Consideration as set forth in
Section 2.6(a), upon surrender of such certificate in accordance with Section
2.6(d).
(c) Each share of Common Stock held in the treasury of the Company
immediately prior to the Effective Time shall be cancelled and extinguished at
the Effective Time without any conversion thereof and no payment shall be made
with respect thereto.
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(d) At the Effective Time, each holder of an outstanding certificate
that prior thereto represented Common Stock shall be entitled, upon surrender
thereof to the Parent, to receive in exchange therefor such holder's appropriate
portion of the Merger Consideration pursuant to Section 2.6(a).
(e) Each share of common stock, par value $.001 per share, of
Acquisition issued and outstanding immediately prior to the Effective Time shall
automatically without any action on the part of the holder thereof be converted
into one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation.
ss.2.7 Closing of Transfer Records. After the close of business on the
Closing Date, transfers of Common Stock outstanding prior to the Effective Time
shall not be made on the stock transfer books of the Surviving Corporation.
ss.2.8 Payment of Merger Consideration. Subject to the adjustment provided
for in Sections 2.9 and 2.10, payment of the Merger Consideration shall be made
by the Parent by wire transfer in immediately available funds as follows:
(a) to Crestar or such other bank as the Shareholders' Representative may
designate, as payment agent for the Shareholders (the "Shareholders' Payment
Agent"), the sum of $53,000,000, less (i) the amount to be repaid to Crestar
pursuant to Section 2.11 hereof with respect to the Crestar
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Loan, (ii) the sum of $3,000,000 to be placed in the Escrow Account pursuant to
Section 2.8(b) hereof, and (iii) such amount as the Parent and the Company agree
to place in the Rochester Environmental Escrow Account pursuant to Section
2.8(c) hereof, such sum to be divided among the Shareholders on a pro rata basis
according to the number of shares of Common Stock held by each such Shareholder,
as listed on Exhibit I attached hereto and, with respect to the Optionholders,
as to be set forth on Exhibit I on or before the Closing upon the exercise of
their Options (each such amount, the "Shareholder's Closing Payment") to the
account designated by the Shareholders' Payment Agent to the Parent at least two
Business Days prior to the Closing;
(b) to the escrow agent (the "Escrow Agent") to be held in an escrow
account (the "Escrow Account") pursuant to the provisions of the Escrow
Agreement as contemplated by Section 10.2 hereof, the sum of $3,000,000; and
(c) to the Escrow Agent to be held in an environmental escrow account (the
"Rochester Environmental Escrow Account") pursuant to the provisions of the
Escrow Agreement as contemplated by Section 10.2 hereof, such amount as is
mutually agreed upon by the Parent and the Company pursuant to Section 6.6
hereof to be held as the Rochester Environmental Escrow Amount.
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Each Shareholder's Closing Payment shall be subject to adjustment in
accordance with Section 2.9 below.
ss.2.9 Determination of Adjustment to Each Shareholder's Closing Payment.
(a) Closing Balance Sheet. (i) As soon as practicable (and in no event
later than 45 days after the Closing) the Company shall prepare and deliver to
the Parent and the Shareholders' Representative a proposed actual closing
consolidated balance sheet of the Company and its subsidiaries as of the opening
of business on the Closing Date (the "Closing Balance Sheet"). The Closing
Balance Sheet will be prepared in accordance with GAAP on a basis consistent
with the Audited Balance Sheets. Simultaneously with the preparation and
delivery of the Closing Balance Sheet, the Company shall prepare and deliver to
the Parent and the Shareholders' Representative a statement of "Closing Net
Worth," defined herein as total assets, including cash, less total liabilities,
excluding the outstanding balance of the Crestar Loan, each as set forth in the
Closing Balance Sheet.
(ii) If neither the Parent nor the Shareholders' Representative
objects to the determination by the Company of the Closing Net Worth by written
notice of objection (the "Notice of Objection") delivered to the other party
within 20 days after the receipt of such statement, such Notice of
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Objection to describe in reasonable detail such party's proposed adjustments to
the Closing Net Worth, the proposed Closing Net Worth shall be deemed final and
binding.
(iii) If either party delivers a Notice of Objection in respect of
the Closing Net Worth, then any dispute shall be resolved in accordance with
paragraph (b) of this Section 2.9.
(iv) During the period that the Parent and the Shareholders'
Representative are conducting their review of the determination of the Closing
Net Worth, and subsequent to issuance of the Closing Balance Sheet, Parent and
the Shareholders' Representative and their respective representatives shall have
reasonable access during normal business hours to the workpapers, schedules,
memoranda, and all of the documents, including accounting records and other
information arising after the Closing Date, prepared or reviewed by the Company
and its employees related to or arising in connection with the preparation of
the Closing Balance Sheet and the determination of the Closing Net Worth.
(v) The Company will make the work papers prepared in connection
with its preparation of the Closing Balance Sheet available to each of the
Parent and the Shareholders' Representative and their respective representatives
at reasonable times and upon reasonable notice subsequent to the completion of
their review of the Closing Balance Sheet and
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at any time during the resolution of any objections raised by any party with
respect to the Closing Balance Sheet and the determination of the Closing Net
Worth.
(b) Resolution of Disputes. (i) If either Parent or the Shareholders'
Representative objects to the Closing Balance Sheet or the determination of the
Closing Net Worth as determined by the Company, then the Parent and the
Shareholders' Representative shall promptly endeavor to agree upon the Closing
Net Worth. In the event that a written agreement as to the Closing Net Worth has
not been reached within 20 days after the date of receipt by the Parent or the
Shareholders' Representative, as the case may be, of a Notice of Objection
thereto, then the determination of the Closing Net Worth shall be submitted to a
mutually agreed nationally recognized accounting firm (the "Arbitrator").
(ii) Within 45 days of the submission of any dispute concerning the
preparation of the Closing Balance Sheet or the determination of Closing Net
Worth to the Arbitrator, the Arbitrator shall render a decision in accordance
with this paragraph (b) hereof along with a statement of reasons therefor. The
decision of the Arbitrator shall be final and binding upon the parties hereto.
(iii) The fees and expenses of the Arbitrator for any determination
under this paragraph (b) shall be shared equally by the Parent and the
Shareholders' Representative.
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(iv) Nothing herein shall be construed to authorize or permit the
Arbitrator to determine (A) any question or matter whatever under or in
connection with this Agreement, except the determinations of what adjustments,
if any, must be made in one or more of the items reflected in the Closing
Balance Sheet delivered by the Company in order for the Closing Balance Sheet to
be prepared in accordance with the provisions of this Agreement. Nothing herein
shall be construed to require the Arbitrator to follow any rules or procedures
of any arbitration association.
ss.2.10 Adjustments to Closing Payments. (a) Upon the final determination
of the Closing Net Worth, the parties shall make the following adjustments:
(i) If the Closing Net Worth is greater than $22,771,000 (the "Base
Net Worth"), then each Shareholder's Closing Payment shall be increased by the
amount of such difference multiplied by a fraction, the numerator of which is
the number of shares of Common Stock owned by such Shareholder as set forth
(and, with respect to the Optionholders, as to be set forth on or prior to the
Closing upon exercise of their respective Options) on Exhibit I attached hereto,
and the denominator of which is the total number of issued and outstanding
shares of Common Stock (after taking into account the exercise of Options) (the
"Shareholder's Percentage").
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(ii) If the Closing Net Worth is less than the Base Net Worth, then
each Shareholder's Closing Payment shall be decreased by the amount of such
difference multiplied by the Shareholder's Percentage.
(b) Any adjustment to any Shareholder's Closing Payment required
under this Section 2.10 shall bear interest from the Closing Date to the date of
payment thereof at a per annum rate equal to the "prime lending rate" as
published in The Wall Street Journal as of the Closing Date based upon the
actual number of days elapsed on a 365 day year. Any adjustment required
pursuant to Section 2.10(a)(i) shall be paid by the Parent to the Shareholders'
Payment Agent in cash in the manner set forth in Section 2.8(a). Any adjustment
required pursuant to Section 2.10(a)(ii) shall be paid by each Shareholder to
the Parent in cash by wire transfer in immediately available funds to an account
specified by the Parent at least two Business Days prior to the date on which
such payment is required to be made hereunder. Such adjustment shall be made on
such of the following dates as may be applicable: (A) if neither Parent nor the
Shareholders' Representative shall have objected to the preparation of the
Closing Balance Sheet, the earlier of (1) 25 days after delivery to the Parent
and the Shareholders' Representative of the Closing Balance Sheet or (2) 5 days
after each of the Parent and the Shareholders' Representative
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have each indicated that it has no objections to the Closing Balance Sheet or
(B) if the Parent or the Shareholders' Representative shall have objected to the
Closing Balance Sheet, within 5 days following final agreement or decision with
respect to the Closing Balance Sheet as provided above.
ss.2.11 Payment of Bank Debt. In addition to the payment of the Merger
Consideration pursuant to Article II hereof, at Closing, Parent shall, by wire
transfer, pay or cause the Company to repay the outstanding balance of the
Crestar Loan as of the opening of business on the Closing Date.
ss.2.12 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, but only to the extent required by the DGCL, shares of Common
Stock that are issued and outstanding immediately prior to the Effective Time
and are held by Shareholders who comply with all the provisions of the DGCL
concerning the right of Shareholders to dissent from the Merger and require
appraisal of their shares of Common Stock ("Dissenting Shareholders") shall not
be converted into the right to receive the Merger Consideration but shall become
the right to receive such consideration as may be determined to be due such
Dissenting Shareholder pursuant to the law of the State of Delaware; provided,
however, that (i) if any Dissenting Shareholder shall subsequently deliver a
written withdrawal of his or her demand for appraisal (with the written approval
of the Surviving
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Corporation, if such withdrawal is not tendered within 60 days after the
Effective Time), or (ii) if any Dissenting Shareholder fails to establish and
perfect his or her entitlement to appraisal rights as provided by applicable
law, or (iii) if within 120 days of the Effective Time neither any Dissenting
Shareholder nor the Surviving Corporation has filed a petition demanding a
determination of the value of all shares of Common Stock outstanding at the
Effective Time and held by Dissenting Shareholders in accordance with applicable
law, then such Dissenting Shareholder or Shareholders, as the case may be, shall
forfeit the right to appraisal of such shares and such shares shall thereupon be
deemed to have been converted into the right to receive, as of the Effective
Time, the Merger Consideration, without interest. The Company shall give the
Parent, Acquisition and the Shareholders' Representative prompt notice of any
written demands for appraisal, withdrawals of demands for appraisal and any
other related instruments received by the Company, and shall give the
Shareholders' Representative, after consultation with the Parent, the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal. The Company will not voluntarily make any payment with respect to
any demands for appraisal and will not, except with the prior written consent of
the Parent and the Shareholders' Representative, settle or offer to settle any
demand for an
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amount in excess of the sum described in the next succeeding paragraph of this
Section 2.12.
If at the conclusion of the appraisal procedure set forth in Section
262 of the DGCL, the Surviving Corporation is ordered to make any payment in
respect of any of the shares of Common Stock of any Dissenting Shareholder in an
amount in excess of the product of (A) the number of any such shares of any such
Dissenting Stockholder and (B) the per share Merger Consideration, then, upon
the making of any such payment, the Surviving Corporation shall be entitled to
be repaid out of the Escrow Account the amount of such payment, together with
the fees, costs and expenses suffered or reasonably incurred by the Surviving
Corporation, including, without limitation, any costs taxed to it by the court
in such proceedings, relating to the demand for and the implementation and
conduct of such proceedings.
ss.2.13 Closing. The closing of the Merger referred to in Section 2.1 (the
"Closing") shall take place at 10:00 A.M. at the offices of White & Case, New
York, New York on September 30, 1996, or at such other time and date (not later
than October 15, 1996) as the parties hereto shall designate in writing. Such
date is herein referred to as the "Closing Date".
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ARTICLE III
REPRESENTATIONS OF THE COMPANY
ss.3. Representations of the Company. The Company hereby represents and
warrants to the Parent as follows:
ss.3.1 Existence and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has the requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. The Company is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the character or location of the
properties owned, leased or operated by the Company or the nature of the
business conducted by the Company makes such qualification or license necessary,
except where the failure to be so duly qualified or licensed would not have a
material adverse effect on the business, operations, financial condition or
results of operations of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect").
ss.3.2 Capital Stock. The Company has an authorized capitalization
consisting of 577,201 shares of common stock, par value $0.01 per share, of
which 462,814 are designated as Class A Common Stock, 10,101 are designated as
Class B Common Stock and 104,286 are designated as Class C Common Stock
(collectively, the "Common Stock"), of which 405,671 shares
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of Class A Common Stock, 10,101 shares of Class B Common Stock and 104,286
shares of Class C Common Stock are issued and outstanding on the date hereof and
460,171 shares of Class A Common Stock, 10,101 shares of Class B Common Stock
and 104,286 shares of Class C Common Stock will be issued and outstanding at
Closing. All outstanding shares of capital stock of the Company have been, or
will be when issued, duly authorized and validly issued and are fully paid and
non-assessable. As of the date of this Agreement, except as set forth on
Schedule 3.2, there are no outstanding subscriptions, options, warrants, rights,
calls, commitments, conversion rights, rights of exchange, plans or other
agreements (collectively "Equity Rights") of any character providing for the
purchase, issuance or sale of any shares of the capital stock of the Company. At
closing, there will be no outstanding Equity Rights.
ss.3.3 Authorization and Validity of this Agreement. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement by the Company and the performance of its
obligations hereunder have been duly authorized and approved by its Board of
Directors and by the holders of a requisite amount of the Stock and no other
corporate action on the part of the Company or action by the
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stockholders of the Company is necessary to authorize the execution, delivery
and performance of this Agreement by the Company. This Agreement has been duly
executed and delivered by the Company and, assuming due execution of this
Agreement by the Parent, is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except to the
extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
ss.3.4 Subsidiaries and Investments. Set forth on Schedule 3.4 is a list
of each corporation, partnership and other business entity in which the Company
owns, directly or indirectly, any equity security or other equity interest and
which is controlled, directly or indirectly, by the Company (a "subsidiary").
Except as set forth on Schedule 3.4 each subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation (as set forth on Section 3.4), and has all
requisite power to own its property and to carry on its business as now being
conducted. Set forth on Schedule 3.4 is a list of jurisdictions in which each
subsidiary is qualified as a foreign corporation. Such jurisdictions are the
only jurisdictions in which the character or location of
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the properties owned or leased by each subsidiary, or the nature of the business
conducted by each subsidiary, makes each qualification necessary, except where
the failure to be so qualified would not have a Material Adverse Effect. All of
the outstanding shares of capital stock and other equity interests of each
subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable, and, except as set forth on Schedule 3.4, are owned, of record
and beneficially, by the Company or a subsidiary, free and clear of all liens,
encumbrances, restrictions and claims of every kind. No shares of capital stock
and other equity interests of any subsidiary are reserved for issuance and there
are no outstanding options, warrants, rights, subscriptions, claims, agreements,
obligations, convertible or exchangeable securities or other commitments,
contingent or otherwise, relating to the capital stock of any subsidiary or
pursuant to which any subsidiary is or may become obligated to issue or exchange
any shares of capital stock or other equity interests. Neither the Company nor
any subsidiary owns, directly or indirectly, any capital stock or other equity
or ownership or proprietary interest in any corporation, partnership,
association, trust, joint venture or other entity except as set forth on
Schedule 3.4.
ss.3.5 Financial Statements; No Material Changes.
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(a) The Company has heretofore furnished the Parent with audited
consolidated balance sheets of its wholly-owned subsidiary, CPG Holdings Inc.
("CPG Holdings") and its subsidiaries as of December 31, 1994 and December 31,
1995 (the "Audited Balance Sheets"), together with related consolidated
statements of income and retained earnings and cash flows for the years then
ended, together with the report of Coopers & Lybrand L.L.P. (collectively with
the Audited Balance Sheets, the "Audited Statements"). The Audited Statements,
including the footnotes thereto, have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
indicated ("GAAP") and fairly present in all material respects the financial
position of CPG Holdings its subsidiaries at the respective dates thereof, and
the results of the operations and cash flows of CPG Holdings and its
subsidiaries for the respective periods indicated.
(b) The Company has also heretofore furnished the Parent with an unaudited
consolidated balance sheet of CPG Holdings and its subsidiaries as of June 2,
1996, together with related consolidated statements of income and retained
earnings and cash flows for the period then ended, a copy of which is attached
hereto as Exhibit II (collectively, the "Unaudited Statements"). Except as
described on Schedule 3.5, the Unaudited Statements have been prepared in
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accordance with GAAP and fairly present in all material respects the financial
position of CPG Holdings and its subsidiaries at the date thereof, and the
results of the operations and cash flows of CPG Holdings and its subsidiaries
for the period indicated. The unaudited balance sheet of CPG Holdings and its
subsidiaries dated June 2, 1996, is hereinafter referred to as the "Balance
Sheet" and June 2, 1996, is hereinafter referred to as the "Balance Sheet Date."
(c) Except as set forth on Schedule 3.5, since December 31, 1995, there
has been no (i) material adverse change in the business, operations, financial
condition or results of operations of the Company and its subsidiaries taken as
a whole or (ii) material damage, destruction or loss to any asset or property,
tangible or intangible, of the Company or any of its subsidiaries which
materially affects the ability of the Company or any of its subsidiaries to
conduct its business.
(d) The Company has no assets (other than 100% of the issued and
outstanding capital stock of CPG Holdings) and has no liabilities.
ss.3.6 Books and Records. The minute books of the Company and each of its
subsidiaries, as previously made available to the Parent and its
representatives, contain materially accurate records of all meetings of, and
corporate actions taken by (including action taken by written consent),
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the respective shareholders and Board of Directors of the Company and each of
such subsidiaries. At Closing all of the books and records of the Company and
its subsidiaries will be in the possession of the Company.
ss.3.7 Title to Properties; Encumbrances. Except as set forth on Schedule
3.7 attached hereto and except for such properties and assets which have been
sold or otherwise disposed of in the ordinary course of business, the Company
and each of its subsidiaries have good title to their material properties and
assets (real and personal, tangible and intangible), including, without
limitation, the material properties and assets reflected in the Balance Sheet,
subject to no encumbrance, lien, charge or other restriction of any kind or
character ("Encumbrances"), except for (i) Encumbrances reflected in the Balance
Sheet or the Audited Statements, (ii) Encumbrances for current taxes,
assessments or governmental charges or levies on property not yet due and
delinquent, (iii) Encumbrances arising by operation of law and (iv) Encumbrances
described on Schedule 3.7 attached hereto.
ss.3.8 Real Property. Schedule 3.8 attached hereto contains an accurate
and complete list of all real property owned in whole or in part by the Company
or any of its subsidiaries (the "Real Property"). With respect to all of the
buildings, structures and appurtenances situated on the
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Real Property, the Company and its subsidiaries have adequate rights of ingress
and egress for operation of the business of the Company and its subsidiaries in
the ordinary course consistent with past practice. None of such buildings,
structures or appurtenances, or the operation or maintenance thereof, violates
any restrictive covenant or encroaches on any property owned by others, except
for such violations, encumbrances or encroachments which would not have a
Material Adverse Effect.
ss.3.9 Intellectual Property. Schedule 3.9 attached hereto sets forth a
list of all licenses, patents, trade names, trademarks and service marks
(collectively, the "Intellectual Property") owned by the Company and its
subsidiaries and/or used in the conduct of its business as presently conducted.
The Company knows of no license, patent, trade name, trademark or service mark
which is not included within the Intellectual Property and which is necessary
for the continued conduct of its business as presently conducted. Except as
described on Schedule 3.9, all such Intellectual Property is in full force and
effect and neither the Company nor any of its subsidiaries has received written
notice of any event, inquiry, investigation or proceeding threatening the rights
of the Company or any of its subsidiaries in any such Intellectual Property.
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ss.3.10 Leases. Schedule 3.10 attached hereto contains a list of all
leases or sub-leases to which the Company or any of its subsidiaries is a party
requiring an annual aggregate payment of at least $50,000. Except as otherwise
set forth in Schedule 3.10 attached hereto, each lease or sub-lease set forth in
Schedule 3.10 is in full force and effect; all rents and additional rents due to
date from the Company or any of its subsidiaries on each such lease or sublease
have been paid; neither the Company nor any of its subsidiaries has received
written (or, to the Company's knowledge, oral) notice that it is in material
default under any such lease or sub-lease; and, to the knowledge of the Company,
there exists no event, occurrence, condition or act (including the consummation
of the transactions contemplated by this Agreement) which, with the giving of
notice, the lapse of time or the happening of any further event or condition,
would become a material default by the Company or any of its subsidiaries under
such lease or sub-lease.
ss.3.11 Material Contracts. Except as set forth on Schedule 3.10 and
Schedule 3.11 attached hereto, neither the Company nor any of its subsidiaries
has or is bound by (a) any agreement, contract or commitment that involves the
performance of services or the delivery of goods and/or materials by it of an
amount or value in excess of $50,000 other than open sales orders and purchase
orders entered into
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in the ordinary course of business, (b) any agreement, contract or commitment
not in the ordinary course of business, (c) any agreement, indenture or other
instrument which contains restrictions with respect to payment of dividends or
any other distribution in respect of its capital stock, (d) any agreement,
contract or commitment relating to capital expenditures in excess of $50,000,
(e) any agreement, indenture or instrument relating to indebtedness, liability
for borrowed money or the deferred purchase price of property (excluding trade
payables in the ordinary course of business), (f) any loan or advance to, or
investment in, any individual, partnership, joint venture, corporation, trust,
unincorporated organization, government or other entity (each a "Person"), any
agreement, contract or commitment relating to the making of any such loan,
advance or investment or any agreement, contract or commitment involving a
sharing of profits, (g) any guarantee or other contingent liability in respect
of any indebtedness or obligation of any Person (other than in the ordinary
course of business), (h) any management service, consulting or any other similar
type of contract, (i) any agreement, contract or commitment limiting the ability
of the Company or any of its subsidiaries to engage in any line of business or
to compete with any Person, (j) any warranty, guaranty or other similar
undertaking with respect to a contractual performance extended by the Company
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or any of its subsidiaries other than in the ordinary course of business, or (k)
any amendment, modification or supplement in respect of any of the foregoing.
Except as otherwise set forth on Schedule 3.11, each contract or agreement set
forth on Schedule 3.11 is in full force and effect and there exists no material
default or event of default by the Company or any of its subsidiaries thereunder
or, to the knowledge of the Company, event, occurrence, condition or act
(including the consummation of the transactions contemplated hereby) which, with
the giving of notice, the lapse of time or the happening of any other event or
condition, would become a material default or event of default thereunder.
ss.3.12 Consents and Approvals; No Violations. Except as set forth in
Schedule 3.12 attached hereto, the execution and delivery of this Agreement by
the Company and the consummation of the transactions contemplated hereby (a)
will not violate or contravene any provision of the Certificate of Incorporation
or By-laws of the Company or any of its subsidiaries, (b) will not violate or
contravene any statute, rule, regulation, order or decree of any public body or
authority by which the Company or any of its subsidiaries is bound or by which
any of their respective properties or assets are bound, (c) will not require any
filing with, or permit, consent or approval of, or the giving of any notice to,
any governmental or regulatory body, agency or authority,
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or any other Person and (d) will not result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation, payment or
acceleration) under, or result in the creation of any Encumbrance upon any of
the properties or assets of the Company or any of its subsidiaries under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, agreement, lease, franchise agreement or any other
instrument or obligation to which the Company or any of its subsidiaries is a
party, or by which it or any of their respective properties or assets may be
bound, except, in the case of clauses (b), (c) and (d), for such filing, permit,
consent or approval, the absence of which, and violations, breaches, defaults,
conflicts and encumbrances which, in the aggregate would not have a Material
Adverse Effect.
ss.3.13 Litigation. Except as set forth on Schedule 3.13 attached hereto,
there is no action, suit, proceeding at law or in equity, arbitration or
administrative or other proceeding by or before (or to the knowledge of the
Company any investigation by) any governmental or other instrumentality or
agency, pending, or, to the knowledge of the Company, threatened, against or
affecting the Company or any of its subsidiaries or their respective properties
or rights
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which could materially and adversely affect the right or ability of the Company
or any of its subsidiaries to carry on their respective business as now
conducted, or which could have a Material Adverse Effect; and the Company knows
of no valid basis for any such action, proceeding or investigation. Neither the
Company nor any of its subsidiaries is subject to any judgment, order or decree
entered in any lawsuit or proceeding which could reasonably be likely to have a
Material Adverse Effect.
ss.3.14 Taxes. (a) Tax Returns. The Company and each of its subsidiaries
have timely filed or caused to be timely filed or will timely file or cause to
be timely filed with the appropriate taxing authorities all returns, statements,
forms and reports for Taxes ("Returns") that are required to be filed by, or
with respect to, the Company and its subsidiaries on or prior to the Closing
Date. The Returns have accurately reflected and will accurately reflect all
material liability for Taxes of the Company and its subsidiaries for the periods
covered thereby.
(b) Payment of Taxes. All material Taxes and Tax liabilities of the
Company and each of its subsidiaries for all taxable years or periods that end
as of or before the opening of business on the Closing Date and, with respect to
any taxable year or period beginning before and ending after the Closing Date,
the portion of such taxable year or period
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ending as of the opening of business on the Closing Date ("Pre-Closing Periods")
have been timely paid or accrued and adequately disclosed and fully provided for
on the books and records of the Company in accordance with GAAP.
(c) Other Tax Matters. (i) Schedule 3.14 attached hereto sets forth (A)
each taxable year or other taxable period of the Company and each of its
subsidiaries for which an audit or other examination of Taxes by the appropriate
tax authorities of any nation, state or locality is currently in progress (or
scheduled as of the Closing Date to be conducted) together with the names of the
respective tax authorities conducting (or scheduled to conduct) such audits or
examinations and a description of the subject matter of such audits or
examinations, (B) the most recent taxable year or other taxable period for which
an audit or other examination relating to Federal income taxes of the Company
has been finally completed and the disposition of such audits or examinations,
(C) the taxable years or other taxable periods of the Company and each of its
subsidiaries which will not be subject to the normally applicable statute of
limitations by reason of the existence of circumstances that would cause any
such statute of limitations for applicable Taxes to be extended, (D) the amount
of any proposed adjustments (and the principal reason therefor) relating to any
Returns for Tax liability of the Company and its subsidiaries which have been
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proposed or assessed by any taxing authority and (E) a list of all notices
received by the Company and its subsidiaries from any taxing authority relating
to any issue which could affect the Tax liability of the Company and its
subsidiaries, which issue has not been finally determined and which, if
determined adversely to the Company or such subsidiary, could result in a Tax
liability.
(ii) Except as set forth on Schedule 3.14, neither the Company nor
any of its subsidiaries has been included in any "consolidated," "unitary" or
"combined" Return provided for under the law of the United States, any foreign
jurisdiction or any state or locality with respect to Taxes for any taxable
period for which the statute of limitations has not expired.
(iii) All Taxes which the Company or any of its subsidiaries is (or
was) required by law to withhold or collect have been duly withheld or
collected, and have been timely paid over to the proper authorities to the
extent due and payable.
(iv) Neither the Company nor any of its subsidiaries is a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (the "Code").
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(v) There are no tax sharing, allocation, indemnification or similar
agreements or arrangements in effect as between the Company or any predecessor
or affiliate thereof and any other party (including any of the Shareholders and
any predecessor or affiliate thereof) under which the Parent, the Company or any
of its subsidiaries could be liable for any Taxes or other claims of any party.
(vi) Neither the Company nor any of its subsidiaries has applied
for, been granted, or agreed to any accounting method change for which it will
be required to take into account any adjustment under Section 481 of the Code or
any similar provision of the Code or the corresponding tax laws of any nation,
state or locality.
(vii) No indebtedness of the Company or any of the subsidiaries
consists of "corporate acquisition indebtedness" within the meaning of Section
279 of the Code.
(viii) Neither the Company nor any of its subsidiaries is a party to
any agreement that would require it to make any payment that would constitute an
"excess parachute payment" for purposes of Sections 280G and 4999 of the Code.
ss.3.15 Liabilities. Neither the Company nor any of its subsidiaries has
any outstanding material claims, liabilities or indebtedness, contingent or
otherwise, which are required to be disclosed in accordance with GAAP, except as
set forth
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in the Balance Sheet or the Audited Statements or referred to in the footnotes
thereto, other than (a) liabilities incurred subsequent to the Balance Sheet
Date in the ordinary course of business or (b) as disclosed on Schedule 3.15
attached hereto.
ss.3.16 Insurance. Schedule 3.16 contains an accurate and complete list of
all policies of property, fire and casualty, product liability, workers
compensation and other forms of insurance owned or held by the Company or any of
its subsidiaries together with a summary description thereof. Neither the
Company nor any of its subsidiaries has received (i) any written notice of
cancellation of any policy described in such Schedule or refusal of coverage
thereunder, (ii) any written notice that any issuer of such policy has filed for
protection under applicable bankruptcy laws or is otherwise in the process of
liquidating or has been liquidated, or (iii) to the knowledge of the Company,
any other indication that such policies are no longer in full force or effect or
that the issuer of any such policy is no longer willing or able to perform its
obligations thereunder. To the knowledge of the Company, since the last renewal
date of any insurance policy, there has not been any material adverse change in
the relationship of the Company or any its subsidiaries with its insurers or in
the premiums payable pursuant to such policies.
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ss.3.17 Compliance with Laws. The Company and each of its subsidiaries is
in compliance with all applicable laws, regulations, orders, judgments and
decrees, except where the failure to so comply would not have a Material Adverse
Effect. Notwithstanding the foregoing, this Section 3.17 shall not apply to
Environmental Laws, which are covered exclusively by Section 3.21 hereof, or to
compliance with ERISA and the Code in connection with Employee Benefit Plans,
which are covered exclusively by Section 3.19 hereof.
ss.3.18 Employment Relations. (a) The Company and each of its subsidiaries
is in material compliance with all Federal, state or other applicable laws,
domestic or foreign, respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not, and is not, engaged
in any unfair labor practice;
(b) no unfair labor practice complaint against the Company or any of its
subsidiaries is pending before the National Labor Relations Board;
(c) there is no labor strike, dispute, slowdown or stoppage actually
pending or, to the knowledge of the Company, threatened against or involving the
Company or any of its subsidiaries;
(d) except as set forth in Section 3.18, neither the Company nor any of
its subsidiaries is a party to any collective bargaining agreement and no
collective bargaining
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agreement is currently being negotiated by the Company or any of its
subsidiaries; and
(e) except as provided on Schedule 3.18, no claim in respect of the
employment of any employee has been asserted or, to the knowledge of the
Company, threatened, against the Company or any of its subsidiaries.
ss.3.19 Employee Benefit Plans. (a) List of Plans. Set forth in Schedule
3.19 attached hereto is an accurate and complete list of all domestic and
foreign (i) "employee benefit plans," within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations thereunder ("ERISA"); (ii) bonus, stock option, stock purchase,
restricted stock, incentive, profit-sharing, pension, retirement, deferred
compensation, medical, life, disability, accident, accrued leave, vacation, sick
pay, sick leave, supplemental retirement and unemployment benefit plans,
programs, arrangements, commitments and/or practices; (whether or not insured);
and (iii) employment, consulting, termination, and severance contracts or
agreements; for active, retired or former employees or directors, whether or not
any such plans, programs, arrangements, commitments, contracts, agreements
and/or practices (referred to in (i), (ii) or (iii)) are in writing or are
otherwise exempt from the provisions of ERISA; that have been established,
maintained or contributed to (or
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with respect to which an obligation to contribute has been undertaken) or with
respect to which any potential liability is borne by the Company or any of its
subsidiaries (including, for this purpose and for the purpose of all of the
representations in this Section 3.19, any predecessors to the Company or to any
of its subsidiaries and all employers (whether or not incorporated) that are by
reason of common control treated together with the Company, any of its
subsidiaries and/or the Shareholders as a single employer (i) within the meaning
of Section 414 of the Code or (ii) as a result of the Company or any subsidiary
and/or any of the Shareholders being or having been a general partner of any
such employer), since September 2, 1974 ("Employee Benefit Plans").
(b) Status of Plans. Except as set forth on Schedule 3.19 or, except with
respect to an event or condition of noncompliance which would not result in a
Material Adverse Effect, each Employee Benefit Plan has at all times been
maintained and operated in compliance in all material respects with its terms
and the requirements of all applicable laws, including, without limitation,
ERISA and the Code. No complete or partial termination of any Employee Benefit
Plan has occurred or is expected to occur. Neither the Company nor any of its
subsidiaries has any commitment, intention or understanding to create, modify or
terminate any
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Employee Benefit Plan. Except as required by applicable law or the terms of a
current collective bargaining agreement, no condition or circumstance exists
that would prevent the amendment or termination of any Employee Benefit Plan.
Except for scheduled benefit increases under the Company's defined benefit
pension plan required by the current collective bargaining agreements listed in
Schedule 3.18, copies of which have been furnished to the Parent, no event has
occurred and no condition or circumstance has existed that could result in a
material increase in the benefits under or the expense of maintaining any
Employee Benefit Plan from the level of benefits or expense incurred for the
most recent fiscal year ended thereof.
(c) Liabilities. No Employee Benefit Plan subject to Section 412 or 418B
of the Code or Section 302 of ERISA has incurred any accumulated funding
deficiency within the meaning of Section 412 or 418B of the Code or Section 302
of ERISA, respectively, or has applied for or obtained a waiver from the
Internal Revenue Service of any minimum funding requirement under Section 412 of
the Code. Except for payments of premiums to the Pension Benefit Guaranty
Corporation ("PBGC"), neither the Company nor any of its subsidiaries has
incurred any liability (including, for this purpose and for the purpose of all
of the representations in this Section 3.19, any indirect, contingent, or
secondary
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liability) to the PBGC in connection with any Employee Benefit Plan covering any
active, retired or former employees or directors of the Company or any of its
subsidiaries, including, without limitation, any liability under Section 4069 or
4212(c) of ERISA or any penalty imposed under Section 4071 of ERISA, or ceased
operations at any facility or withdrawn from any such Plan in a manner which
could subject it to liability under Section 4062, 4063 or 4064 of ERISA, or
knows of any facts or circumstances that might give rise to any liability of the
Company or any of its subsidiaries to the PBGC under Title IV of ERISA that
could reasonably be anticipated to result in any claims being made against
Parent by the PBGC.
Neither the Company nor any of its subsidiaries has incurred any
withdrawal liability (including any contingent or secondary withdrawal
liability) within the meaning of Section 4201 or 4204 of ERISA to any Employee
Benefit Plan which is a "multiemployer plan" (as such term is defined in Section
4001(a)(3) of ERISA) ("Multiemployer Plan"), and no event has occurred and no
condition or circumstance has existed, that presents a material risk of the
occurrence of any withdrawal from or the partition, termination, reorganization
or insolvency of any such Multiemployer Plan which could result in any liability
of the Company or any of its subsidiaries to any such Multiemployer Plan.
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Neither the Company nor any of its subsidiaries maintains any Employee
Benefit Plan which is a "group health plan" (as such term is defined in Section
5000(b)(1) of the Code) that has not been administered and operated in all
material respects in compliance with the applicable requirements of Section 601
of ERISA and Section 4980B(f) of the Code and neither the Company nor any of its
subsidiaries is subject to any liability, including, without limitation,
additional contributions, fines, penalties or loss of tax deduction as a result
of such administration and operation. Except as set forth in Schedule 3.19,
neither the Company nor any of its subsidiaries maintains any Employee Benefit
Plan (whether qualified or nonqualified within the meaning of Section 401(a) of
the Code) providing for retiree health and/or life benefits and having unfunded
liabilities. Neither the Company nor any of its subsidiaries maintains any
Employee Benefit Plan which is an "employee welfare benefit plan" (as such term
is defined in Section 3(1) of ERISA) that has provided any "disqualified
benefit" (as such term is defined in Section 4976(b) of the Code) with respect
to which an excise tax could be imposed.
Except as set forth on Schedule 3.19, neither the Company nor any of its
subsidiaries has any unfunded liabilities pursuant to any Employee Benefit Plan
that is not intended to be qualified under Section 401(a) of the Code.
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Except as set forth on Schedule 3.19, neither the Company nor any of its
subsidiaries has incurred any liability for any tax or excise tax arising under
Section 4971, 4977, 4978, 4978B, 4979, 4980 or 4980B of the Code, and no event
has occurred and no condition or circumstance has existed that could give rise
to any such liability.
No asset of the Company or any of its subsidiaries is subject to any lien
arising under Section 302(f) of ERISA or Section 412(n) of the Code, and no
event has occurred and no condition or circumstance has existed that could give
rise to any such lien. Neither the Company nor any of its subsidiaries has been
required to provide any security under Section 307 of ERISA or Section
401(a)(29) or 412(f) of the Code, and no event has occurred and no condition or
circumstance has existed that could give rise to any such requirement to provide
any such security.
There are no actions, suits or claims pending, or, to the knowledge of the
Company, threatened, anticipated or expected to be asserted against any Employee
Benefit Plan or the assets of any such plan (other than routine claims for
benefits and appeals of denied routine claims). No civil or criminal action
brought pursuant to the provisions of Title I, Subtitle B, Part 5 of ERISA is
pending, threatened, anticipated, or expected to be asserted against the Company
or any of its subsidiaries or any fiduciary of any Employee
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Benefit Plan, in any case with respect to any Employee Benefit Plan. Except as
set forth on Schedule 3.19, no Employee Benefit Plan or any fiduciary thereof
has been the direct or indirect subject of an audit, investigation or
examination by any governmental or quasi-governmental agency.
(d) Contributions. Except as set forth on Schedule 3.19, full payment has
been made of all amounts which the Company or any of its subsidiaries is
required, under applicable law or under any Employee Benefit Plan or any
agreement relating to any Employee Benefit Plan to which the Company or any of
its subsidiaries is a party, to have paid as contributions thereto as of the
last day of the most recent fiscal year of such Employee Benefit Plan ended
prior to the date hereof. All such contributions have been fully deducted for
income tax purposes or will be deducted for the Company's taxable year on
account of which such contributions were made and no such deduction has been
challenged or disallowed by any governmental authority, and to the knowledge of
the Company, no event has occurred and no condition or circumstance has existed
that could give rise to any such challenge or disallowance. Except as set forth
on Schedule 3.19, the Company has made adequate provision for reserves to make
Employee Benefit Plan contributions that have accrued through the Closing Date,
but that have not been made because they are not yet due under the terms of any
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Employee Benefit Plan or related agreements. Benefits under all Employee Benefit
Plans are as represented and have not been increased subsequent to the date as
of which documents have been provided.
(e) Funded Status; Withdrawal Liability. Except as set forth on Schedule
3.19, as of the date of this Agreement, the current value of the accumulated
benefit obligations (based upon actuarial assumptions which are in the aggregate
reasonable in all respects and which have been furnished to and relied upon by
the Parent) under each Employee Benefit Plan which is covered by Title IV of
ERISA and which is a "Single Employer Plan" (as such term is defined in Section
4001(a)(15) of ERISA) ("Single Employer Plan") did not exceed the current fair
value of the assets of each such Single Employer Plan allocable to such accrued
benefits. Except as set forth on Schedule 3.19, since the Balance Sheet Date,
there has been (i) no material adverse change in the financial condition of any
Single Employer Plan, (ii) no change in the actuarial assumptions with respect
to any Single Employer Plan and (iii) no increase in benefits under any Single
Employer Plan as a result of plan amendments, written interpretations or
announcements (whether written or not), change in applicable law or otherwise,
which individually or in the aggregate, would result in the current value of any
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Single Employer Plan's accrued benefits exceeding the current value of all such
Single Employer Plan's assets.
As of the date of this Agreement, using actuarial assumptions and
computation methods consistent with Subpart 1 of Subtitle E of Title IV of
ERISA, the aggregate liabilities of the Company and its subsidiaries to all
Multi-employer Plans in the event of a complete withdrawal therefrom, as of the
close of the most recent fiscal year of each Multiemployer Plan ended prior to
the date hereof, would not exceed $50,000. To the knowledge of the Company,
there has been no material change in the financial condition of any
Multiemployer Plan, in any such actuarial assumption or computation method or in
the benefits under any Multiemployer Plan as a result of collective bargaining
or otherwise since the close of each such fiscal year which, individually or in
the aggregate, would materially increase such liability.
(f) Tax Qualification. Each Employee Benefit Plan intended to be qualified
under Section 401(a) of the Code has been determined to be so qualified, as to
design, by the Internal Revenue Service, but solely as to plan provisions
required as of December 31, 1994. Each trust established in connection with any
Employee Benefit Plan which is intended to be exempt from Federal income
taxation under Section 501(a) of the Code has been determined to be so exempt by
the Internal Revenue Service. Since the date of each most recent
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determination referred to in this paragraph (f), to the knowledge of the
Company, no event has occurred and no condition or circumstance has existed that
resulted or is likely to result in the revocation of any such determination or
that could adversely affect the qualified status of any such Employee Benefit
Plan or the exempt status of any such trust.
(g) Transactions. No "reportable event" (as such term is defined in
Section 4043 of ERISA) for which the 30-day notice requirement has not been
waived by the PBGC has occurred or is expected to occur with respect to any
Employee Benefit Plan. Neither the Company nor any of its subsidiaries nor any
of their respective directors, officers, employees or, to the knowledge of the
Company, other persons who participate in the operation of any Employee Benefit
Plan or related trust or funding vehicle, has engaged in any transaction with
respect to any Employee Benefit Plan or breached any applicable fiduciary
responsibilities or obligations under Title I of ERISA that would subject any of
them to a tax, penalty or liability for prohibited transactions under ERISA or
the Code or would result in any claim being made under, by or on behalf of any
such Employee Benefit Plan by any party with standing to make such claim.
(h) Triggering Events. The execution of this Agreement and the
consummation of the transactions contemplated hereby,
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do not constitute a triggering event under any Employee Benefit Plan, policy,
arrangement, statement, commitment or agreement, whether or not legally
enforceable, which (either alone or upon the occurrence of any additional or
subsequent event) will or may result in any payment (whether of severance pay or
otherwise), acceleration, vesting or increase in benefits to any employee or
former employee or director of the Company or any of its subsidiaries. Except as
set forth on Schedule 3.19, no Employee Benefit Plan provides for the payment of
severance benefits upon the termination of an employee's employment.
(i) Documents. The Company has delivered or caused to be delivered to the
Parent and its counsel true and complete copies of all material documents in
connection with each Employee Benefit Plan, including, without limitation (where
applicable): (i) all Employee Benefit Plans as in effect on the date hereof,
together with all amendments thereto, including, in the case of any Employee
Benefit Plan not set forth in writing, a written description thereof; (ii) all
current summary plan descriptions, summaries of material modifications, and
material communications; (iii) all current trust agreements, declarations of
trust and other documents establishing other funding arrangements (and all
amendments thereto and the latest financial statements thereof); (iv) the most
recent Internal Revenue Service determination letter
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obtained with respect to each Employee Benefit Plan intended to be qualified
under Section 401(a) of the Code or exempt under Section 501(a) of the Code; (v)
the annual report on Internal Revenue Service Form 5500-series for each of the
last three years for each Employee Benefit Plan required to file such form; (vi)
the most recently prepared actuarial valuation report for each Employee Benefit
Plan covered by Title IV of ERISA; (vii) the most recently prepared financial
statements; and (viii) all contracts relating to each Employee Benefit Plan,
including, without limitation, service provider agreements, insurance contracts,
annuity contracts, investment management agreements, subscription agreements,
participation agreements, and recordkeeping agreements.
ss.3.20 Interests in Customers, Suppliers, etc. Except as set forth on
Schedule 3.20 attached hereto, none of the Shareholders nor any officer or
director of the Company or any of its subsidiaries possesses, directly or
indirectly, any ownership interest in, or is a director, officer or employee of,
any Person which is a supplier, customer, lessor, lessee, licensor, developer,
competitor or potential competitor of the Company or any of its subsidiaries.
Ownership of securities of a company whose securities are registered under the
Securities Exchange Act of 1934 of 5% or less of any class of such securities
shall not be deemed to be a financial interest for purposes of this Section
3.20.
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ss.3.21 Environmental Laws and Regulations. Except as set forth on
Schedule 3.21 and except for that which would not have a Material Adverse
Effect:
(a) To the knowledge of the Company, Hazardous Materials have not been
generated, used, treated, stored or Released on, or transported to or from, any
Company Property, except in compliance with Environmental Law.
(b) The Company and each of its subsidiaries is in compliance in all
material respects with Environmental Law (as hereinafter defined) and the
requirements of any permits issued under such Environmental Laws with respect to
any Company Property.
(c) There are no pending or, to the knowledge of the Company, threatened
Environmental Claims against the Company, its subsidiaries or any Company
Property.
(d) There are no facts, circumstances, conditions or occurrences regarding
the Company's past or present business or operations or any Company Property or
former Company Property, that could reasonably be anticipated (i) to form the
basis of an Environmental Claim against the Company, its subsidiaries or any
Company Property or (ii) to cause such Company Property to be subject to any
legal restrictions on its ownership, occupancy, use or transferability under any
Environmental Law. Notwithstanding anything herein to the contrary, the matters
covered in subparagraphs (a), (b), (c)
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and (e) of this Section 3.21 shall be excluded from the scope of this
subparagraph (d), it being the intent of the parties that the representations
made pursuant to such other subparagraphs shall be the exclusive representations
and warranties made in this Agreement with respect to the matters addressed
therein.
(e) To the knowledge of the Company, there are not now and never have been
any underground storage tanks located on any Company Property or on any property
adjoining or adjacent to any Company Property.
(f) For purposes of this Agreement, the following words and phrases shall
have the following meanings:
"Company Property" means any real property and improvements owned,
leased, used, operated or occupied by the Company or any of its subsidiaries.
"Hazardous Materials" means (i) any petroleum or petroleum products,
radioactive materials, friable asbestos and transformers or other equipment that
contain dielectric fluid containing polychlorinated biphenyls; and (ii) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," or words of similar import, under any applicable Environmental Law.
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"Environment" means soil, sediment, surface waters, groundwater and
air.
"Environmental Claim" means (i) any (a) Remedial Work, to the extent
required by Environmental Law, or (b) a judicial or administrative proceeding
under any Environmental Law, commenced by a Governmental Authority, or by a
third party, seeking damages, injunctive relief, reimbursement of costs,
response costs or penalties, in the case of (a) or (b) arising from the Release
prior to Closing of Hazardous Materials on Company Property or from the
Company's conduct prior to Closing, (ii) a directive by a Governmental Authority
requiring that Remedial Work be undertaken pursuant to an Environmental Law to
address a Release of Hazardous Materials on Company Property, which Release
occurred prior to Closing, or (iii) a written notice from a Governmental
Authority that an investigation has commenced, will commence or must be
commenced concerning the Release or suspected Release of Hazardous Materials on
Company Property, which Release is ultimately determined to have occurred prior
to Closing. Notwithstanding the foregoing, "Environmental Claim" shall not
include any directive or judicial, administrative or regulatory proceeding, or
investigation, to the extent that it relates to (x) laws or regulations which
have as their primary mission the protection of employee health and safety and
which are administered or enforced by
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the Occupational Safety and Health Administration or other Governmental
Authority, (y) Remedial Work required pursuant to ISRA that relates to a
condition created on any Company property subsequent to Closing, or (z)
obligations (including, without limitation, closure obligations under RCRA) that
are incurred or arise because of the cessation of some or all of the operations
at any Company Property subsequent to the Closing Date (except obligations that
relate to the presence of Hazardous Materials on Company Property prior to
Closing in circumstances that could have given rise to an Environmental Claim
prior to Closing had such circumstances been known to the relevant Governmental
Authorities).
"Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code, written and binding guideline or policy, or
rule of common law, in effect and, in each case as amended as of the Closing
Date, and any judicial or administrative interpretation thereof as of the
Closing Date, applicable to the Company or Company Property, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, health, safety or Hazardous Materials, including the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. ss. 9601 et seq.; the Resource Conservation and Recovery Act ("RCRA"), as
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amended, 42 U.S.C. ss. 6901 et seq.; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. ss. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C.
ss. 2601 et seq.; the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the Safe
Drinking Water Act, 42 U.S.C. ss. 300f et seq.; the Oil Pollution Act of 1990,
33 U.S.C ss.2701 et seq.; the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. ss. 651 et seq.;and their state and local counterparts and
equivalents, and the New Jersey Industrial Site Recovery Act, N.J.S.A. ss.
13.6:1k-6, et seq. ("ISRA").
"Governmental Authority" means any federal, state, or local agency,
department or political subdivision of government that has jurisdiction to
administer and enforce an Environmental Law.
"Release" means disposing, discharging, injecting, spilling,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing and
the like, or otherwise entering, into the Environment.
"Remedial Work" means any investigation, monitoring, clean-up,
containment, restoration, remedial, removal or other work concerning or relating
to Hazardous Materials that is required by any Governmental Authority, judicial
order or decree, or by any Environmental Law.
ss.3.22 Bank Accounts, Powers of Attorney. Set forth on Schedule 3.22
attached hereto is an accurate and complete
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list showing (a) the name and address of each bank in which the Company or any
of its subsidiaries has a material account or safe deposit box, the number of
any such account or any such box and the names of all persons authorized to draw
thereon or to have access thereto and (b) the names of all persons, if any,
holding powers of attorney from the Company or any of its subsidiaries.
ss.3.23 Compensation of Employees. Set forth on Schedule 3.23 attached
hereto is an accurate and complete list for fiscal year 1995 showing the names
of all persons employed by the Company and/or any of its subsidiaries who
received more than $50,000 in 1995 cash compensation (including, without
limitation, salary, commission and bonus) and who are expected to be employed by
the Company and/or any of its subsidiaries on the Closing Date. Such list sets
forth the present salary or hourly wage, total in 1995 and expected 1996 cash
compensation (including, without limitation, salary, commission and bonus), of
each such person.
ss.3.24 Conduct of Business. Except as disclosed on Schedule 3.24 attached
hereto and except as expressly contemplated by this Agreement, since December
31, 1995, the Company has taken no action which, if taken subsequent to the
execution of this Agreement and on or prior to the Closing Date, would
constitute a breach of the Company's agreements set forth in Section 6.1
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ss.3.25 Customer Relations. To the knowledge of the Company, there has not
been any change in relations with customers of the Company and its subsidiaries
as a result of the transactions contemplated by this Agreement which could have
a Material Adverse Effect and the Company has no knowledge of any plans by any
of its customers to make any such change.
ss.3.26 Condition of Assets. The assets and properties utilized in and
material to the conduct of the Company's and its subsidiaries' business, whether
owned or leased, are, in the aggregate, in good operating condition and repair
(normal wear and tear excepted) and, in the opinion of the Company, are suitable
for the purposes for which they are presently being used.
ss.3.27 Broker's or Finder's Fees. Except as described on Schedule 3.27
(whose fees and expenses will be paid by the Company prior to Closing or by the
Shareholders), no agent, broker, person or firm acting on behalf of the Company
or the Shareholders, is, or will be, entitled to any commission or broker's or
finder's fees from the Company or any of its subsidiaries in connection with any
of the transactions contemplated by this Agreement.
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ARTICLE IV
[INTENTIONALLY OMITTED]
ARTICLE V
REPRESENTATIONS OF THE PARENT AND ACQUISITION
ss.5. Representations of the Parent and Acquisition. Each of the Parent
and Acquisition represents and warrants to the Company and the Shareholders as
follows:
ss.5.1 Existence and Good Standing; Power and Authority. Each of the
Parent and Acquisition is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of the Parent and
the Acquisition has the requisite corporate power and authority to enter into,
execute and deliver this Agreement and perform its obligations hereunder. This
Agreement has been duly authorized and approved by each of the Parent and
Acquisition and, assuming the due execution of this Agreement by the Company, is
a valid and binding obligation of each of the Parent and Acquisition enforceable
against it in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
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ss.5.2 Restrictive Documents. Neither the Parent nor Acquisition is
subject to any mortgage, lien, lease, agreement, instrument, order, law, rule,
regulation, judgment or decree, or any other restriction of any kind or
character which would prevent consummation by it of the transactions
contemplated by this Agreement.
ss.5.3 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Parent or Acquisition is, or will be, entitled to any
commission or broker's or finder's fees from the Company or any of the
Shareholders in connection with any of the transactions contemplated by this
Agreement.
ARTICLE VI
TRANSACTIONS PRIOR TO THE CLOSING DATE
ss.6.1 Conduct of Business of the Company. During the period from the date
of this Agreement to the Closing Date, the Company and each of its subsidiaries
shall conduct its operations only according to its ordinary and usual course of
business; use its reasonable efforts to preserve intact its business
organizations, keep available the services of its officers and employees and
maintain its relationships and goodwill with licensors, suppliers, distributors,
customers, landlords, employees, agents and others having business relationships
with it; subject to applicable laws relating to
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the exchange of information, confer with the Parent concerning operational
matters of a material nature and report periodically to the Parent concerning
the business, operations and financial condition of the Company and its
subsidiaries. Notwithstanding the immediately preceding sentence, prior to the
Closing Date, except as may be first approved in writing by the Parent or as is
otherwise permitted or required by this Agreement, the Company shall, and shall
cause each of its subsidiaries to, (a) refrain from amending or modifying its
Certificate of Incorporation or ByLaws from its form on the date of this
Agreement, (b) refrain from paying or increasing any bonuses, salaries, or other
compensation to any director, officer, employee or stockholder or entering into
any employment, severance, or similar agreement with any director, officer, or
employee other than, in each case, in the ordinary course of business consistent
with past practice, (c) refrain from the adopting or increasing of any profit
sharing, bonus, deferred compensation, savings, insurance, pension, retirement,
or other employee benefit plan for or with any of its employees, (d) refrain
from entering into any material contract or commitment except material contracts
and commitments in the ordinary course of business consistent with past
practice, (e) refrain from increasing its indebtedness for borrowed money,
except current borrowings in the ordinary course of
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business, (f) refrain from cancelling or waiving any claim or right of
substantial value which, individually or in the aggregate, is material, (g)
refrain from declaring or paying any dividends in respect of its capital stock
or redeeming, purchasing or otherwise acquiring any of its capital stock, (h)
refrain from making any material change in accounting methods or practices,
except as required by law or generally accepted accounting principles, (i) other
than in connection with the exercise of Options, refrain from issuing or selling
any shares of capital stock or any other securities, or issuing any securities
convertible into, or options, warrants or rights to purchase or subscribe to, or
entering into any arrangement or contract with respect to the issue and sale of,
any shares of its capital stock or any other securities, or making any other
changes in its capital structure, (j) other than inventory sold in the ordinary
course of business, refrain from selling, leasing or otherwise disposing of any
asset or property having a value in excess of $100,000 in the aggregate, unless
pursuant to an existing contract or commitment to do so which has been listed on
Schedule 3.11 attached hereto, (k) refrain from entering into any commitment for
the making of a capital expenditure in excess of $100,000, (l) refrain from
writing off as uncollectible any notes or accounts receivable, except write-offs
in the ordinary course of business charged to applicable reserves,
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none of which individually or in the aggregate is material and (m) refrain from
agreeing in writing to do any of the foregoing.
ss.6.2 Exclusive Dealing. During the period from the date of this
Agreement to the Closing Date, neither the Company or any of its subsidiaries,
nor any officer or director of the Company or any of its subsidiaries nor the
Shareholders' Representative shall take any action to, directly or indirectly,
encourage, initiate or engage in discussions or negotiations with, or provide
any information to, any Person, other than the Parent, concerning any purchase
of any capital stock of the Company or any of its subsidiaries or any merger,
sale of substantial assets or similar transaction involving the Company or its
subsidiaries.
ss.6.3 Review of the Company. Subject to applicable laws relating to the
exchange of information, the Parent may, prior to the Closing Date, directly or
through its representatives, review the properties, books and records of the
Company and its subsidiaries and their respective financial and legal condition
to the extent they deem necessary or advisable to familiarize itself with such
properties and other matters; such review shall not, however, affect the
representations and warranties made by the Company in this Agreement or the
remedies of the Parent for breaches
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of those representations and warranties. Subject to applicable laws relating to
the exchanges of information, upon reasonable notice, the Company shall permit
the Parent and its representatives to have, after the date of execution of this
Agreement, full access to the premises and to all the books and records of the
Company and its subsidiaries and to cause the officers of the Company to furnish
the Parent with such financial and operating data and other information with
respect to the business and properties of the Company as the Parent shall from
time to time reasonably request. The Company shall deliver or cause to be
delivered to the Parent such additional instruments, documents, certificates and
opinions as the Parent may reasonably request for the purpose of (a) verifying
the information set forth in this Agreement or on any Schedule attached hereto
and (b) consummating or evidencing the transactions contemplated by this
Agreement. Notwithstanding anything herein to the contrary, neither the Company
nor any of its subsidiaries shall be required to provide access to, or to
disclose, information where such access or disclosure would violate the rights
of any customer of the Company or any of its subsidiaries under a written
contract with the Company or any of its subsidiaries which is listed on Schedule
6.3, jeopardize the attorney-client privilege, or contravene any judgment,
decree or agreement which is binding on the Company entered into prior to the
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date of this Agreement and which is listed on Schedule 6.3. The Company and its
subsidiaries will endeavor to make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply. The parties hereto acknowledge that the Parent and Custom Papers
Group Inc. have entered into a Confidentiality Agreement dated May 21, 1996 (the
"Confidentiality Agreement") and that information obtained during any such
review will be subject to the terms of the Confidentiality Agreement.
ss.6.4 Reasonable Efforts. Each of the Company, the Shareholders'
Representative and the Parent shall cooperate and use their respective
reasonable best efforts to take, or cause to be taken, all appropriate actions,
and to make, or cause to be made, all filings necessary, proper or advisable
under applicable laws and regulations (including, without limitation, the filing
of Notification and Report Forms under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") with the Federal Trade
Commission and the Antitrust Division of the Department of Justice) to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, their respective reasonable best efforts to
obtain, prior to the Closing Date, all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental
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authorities and parties to contracts with the Company or its subsidiaries as are
necessary for consummation of the transactions contemplated by the Agreement and
to fulfill the conditions to the sale contemplated hereby.
ss.6.5 ISRA Filings. Prior to Closing, the Company shall obtain, or cause
to be obtained, in connection with the transactions contemplated by this
Agreement, from the New Jersey Department of Environmental Protection ("NJDEP"),
in accordance with the provisions of the New Jersey Industrial Site Recovery
Act, N.J.S.A. ss. 13.6:1k-8 et seq., a "Negative Declaration," "No Further
Action Letter," a remedial action workplan, a remediation agreement, or a
determination that the transaction contemplated by this Agreement may proceed
without further approvals by NJDEP and without further actions by the Company
and/or the Shareholders with respect to the Company Property located in
Hughesville and Warren Glen, New Jersey.
ss.6.6 Environmental Audit; Escrow; Reporting. (a) Promptly after
execution of this Agreement, the Parent and the Company shall instruct ENSR to
perform a Phase II environmental assessment with respect to (i) the two settling
ponds located on the north side of the Company's Rochester, Michigan facility
and (ii) the earthen bermed tank storage area located in the southeast corner of
the Company's Rochester, Michigan facility; the scope of which review shall
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be in accordance with the Phase II framework prepared by ENSR as set forth in a
memorandum dated, August 23, 1996 which has been agreed to by the Parent and the
Company on or prior to the date hereof. The costs and expenses of such
environmental assessment shall be borne equally by the Company and the Parent.
Upon completion of such environmental assessment, the Parent shall cause a copy
of all written reports and analytical results to be delivered to the Company and
the Parent and the Company shall engage in a good faith effort to mutually agree
in writing on an amount to be deposited into the Rochester Environmental Escrow
Account to provide the indemnification set forth in Section 10.2(b)(i)(B) (the
"Rochester Environmental Escrow Amount").
(b) The Company agrees to (i) report promptly to the appropriate
Governmental Authorities events relating to the release on or about February
1995 of approximately 3,000 gallons of polyvinyl acetate resin; and (ii)
complete all sampling, testing and other investigation of the two settling ponds
located on the north side of the Company's Rochester, Michigan facility as
required by applicable Environmental Laws or otherwise sufficient to determine
whether such ponds have been closed in full compliance with applicable
Environmental Laws, including whether notice to or involvement by Governmental
Authorities may be required under applicable Environmental Laws, and, in the
event notice or
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involvement is required, provide appropriate and timely notice or initiate such
involvement after consultation with the Parent. In the event the Company
believes, after conducting sufficient sampling, testing or other investigation
in connection with clause (ii) above, that the ponds have been closed in full
compliance with applicable Environmental Laws and that no notice to or
involvement by a Governmental Authority is required, the Company shall provide
to the Parent a legal opinion to that effect, in form and substance, and from
counsel, reasonably acceptable to the Parent.
ss.6.7 Schedule Supplements and Amendments. From time to time prior to the
Closing Date with the prior written consent of the Parent which may be withheld
in the Parent's sole discretion, the Company may supplement or amend any of the
Schedules attached hereto with respect to any matter hereafter arising which, if
existing or occurring at or prior to the date of this Agreement would have been
required to be set forth or described in any such Schedule.
ARTICLE VII
CONDITIONS TO THE PARENT'S AND ACQUISITION'S OBLIGATIONS
ss.7. Conditions to the Parent's and Acquisition's Obligations. The
obligation of the Parent and Acquisition to consummate the Merger and purchase
the Stock contemplated by
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this Agreement are conditioned upon satisfaction, at or prior to the Closing, of
the following conditions:
ss.7.1 Opinions of Counsel. The Company shall have furnished the Parent
with an opinion, dated the Closing Date, of Williams, Mullen, Christian &
Dobbins, a Professional Corporation, in form and substance reasonably
satisfactory to Parent and its counsel.
ss.7.2 Good Standing and Other Certificates. The Parent shall have
received (a) copies of the charter, including all amendments thereto, in each
case certified by the Secretary of State or other appropriate official of the
jurisdiction of incorporation of the Company and each of its subsidiaries, (b) a
certificate from the Secretary of State or other appropriate official of the
jurisdiction of incorporation of the Company to the effect that the Company and
each of its subsidiaries is in good standing and listing all charter documents
of the Company and such subsidiaries on file, (c) a certificate from the
Secretary of State or other appropriate official in each State in which the
Company or any of its subsidiaries is qualified to do business to the effect
that the Company or such subsidiary is so qualified in such State, (d) if
available and not otherwise covered in Section 7.2(b) above, a certificate as to
the tax status of the Company and/or each of its subsidiaries from the
appropriate official in its jurisdiction of incorporation and
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each state in which the Company or such subsidiary is qualified to do business
and (e) a copy of the By-Laws of the Company and each of its subsidiaries
certified by the Secretary of the Company as being true and correct and in
effect on the Closing Date.
ss.7.3 No Material Adverse Change. Prior to the Closing there shall have
been no material adverse change in the business, operations, financial condition
or results of operations or of the Company and its subsidiaries taken as a whole
and the Company shall have delivered to the Parent an officer's certificate,
dated the Closing Date, to the foregoing effect. Without limiting the foregoing,
the loss of one or more of the top ten customers of the Company and its
subsidiaries taken as a whole (based on the Company's consolidated 1995
revenues) or one or more of the top ten suppliers of the Company and its
subsidiaries taken as a whole (based on the Company's consolidated 1995 direct
cost of goods sold) of the Company or any of its subsidiaries (or receipt of
notification from a major customer or supplier that the Company or any of its
subsidiaries would lose such customer or supplier) during such period shall be
deemed a material adverse change in the business of the Company and its
subsidiaries taken as a whole.
ss.7.4 Truth of Representations and Warranties. The representations and
warranties of the Company and the
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representations and warranties of the Shareholders' Representative contained in
this Agreement shall be true and correct on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of such date, and the Company and the Shareholders' Representative shall have
each delivered to the Parent a certificate, dated the Closing Date, to such
effect.
ss.7.5 Performance of Agreements. All of the agreements of the Company and
the Shareholders to be performed prior to the Closing pursuant to the terms of
this Agreement shall have been duly performed in all material respects, or
waived in writing by Parent, and the Company shall have each delivered to the
Parent a certificate, dated the Closing Date, to such effect.
ss.7.6 No Litigation Threatened. No action or proceedings shall have been
instituted or, to the knowledge of the Company, threatened before a court or
other government body or by any public authority to restrain or prohibit any of
the transactions contemplated hereby.
ss.7.7 Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, disclosed on any Schedule attached hereto or
required in connection with the consummation of the transactions contemplated by
this Agreement shall have been received. All of the consents, approvals,
authorizations, exemptions and waivers from
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governmental agencies that shall be required in order to enable the Parent to
consummate the transactions contemplated hereby shall have been obtained.
ss.7.8 Repayment of Indebtedness to Third Parties; Termination of Security
Interests. The Crestar Loan shall be repaid at Closing as provided in Section
2.11 hereof. Documents and instruments necessary to release all security
interests, liens, mortgages, claims or other encumbrances of any kind securing
the Crestar Loan shall be delivered at Closing. Neither the Company nor any of
its subsidiaries has any outstanding indebtedness for borrowed money except for
the Crestar Loan.
ss.7.9 Financing. The Parent and Acquisition shall have received financing
on substantially the same terms and conditions as set forth in the commitment
letter of Bankers Trust Company, dated August 9, 1996, a copy of which has been
delivered to the Shareholders' Representative.
ss.7.10 Termination of Stock Option Plan; Other Arrangements. The Company
shall have terminated its stock option plan, its financial and advisory service
arrangements with SCI Investors Inc. and the contracts listed on Schedule 3.11
attached hereto which are signified by an asterisk("*").
ss.7.11 FIRPTA. The Company shall have furnished to the Parent, on or
within thirty (30) days prior to the Closing Date, an affidavit issued by the
Company pursuant to Treasury
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Regulation ss. 1.897-2(h), certifying that the Company is not and has not been
at any time during the past 5 years a United States real property holding
corporation as required by Section 1445 of the Code.
ss.7.12 HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the transactions contemplated by this Agreement shall have
expired or terminated.
ss.7.13 Escrow Agreement. The Shareholders' Representative, the Parent and
the Escrow Agent shall have entered into an escrow agreement substantially in
the form of Exhibit III hereto (the "Escrow Agreement").
ss.7.14 Environmental Assessments; Rochester Environmental Escrow Amount.
The Parent's environmental consultants shall have completed to Parent's
reasonable satisfaction the Phase II environmental assessment referred to in
Section 6.6(a) and the Parent and the Company shall have agreed upon the
Rochester Environmental Escrow Amount.
ss.7.15 Customer/Supplier and Tax Diligence. The Parent shall have
completed, to Parent's reasonable satisfaction, its customer/supplier and tax
diligence; provided, however, that this condition precedent shall lapse and be
of no further effect to the extent Parent has not notified the
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Company of its objections, if any, in connection with such matters by September
15, 1996.
ss.7.16 Adoption of Flexible Benefits Plan Document. The Company shall
have prepared and adopted a plan document, in compliance with the applicable
provisions of the Code and ERISA, under which the Company's Flexible Benefits
Plan, including, among other features, its Health Care Expense Reimbursement
Account Plan and Dependent Care Expense Reimbursement Account Plan, shall be set
forth, and the Parent shall have received a copy of such plan document.
ss.7.17 Correction of Noncompliance by Employee Benefit Plans With Terms
of Plan and/or Law. The Company shall have corrected, in a manner reasonably
satisfactory to the Parent, each instance disclosed in Schedule 3.19(b) attached
hereto which is signified by an asterisk ("*") of the failure of an Employee
Benefit Plan, and/or the sponsor of an Employee Benefit Plan, to comply with
applicable law and/or the terms of such Employee Benefit Plan.
ss.7.18 Tax Indemnification Agreement. Not less than ninety-eight percent
(98%) of the Shareholders shall have executed and delivered a tax indemnity
agreement in substantially the form of Exhibit IV attached hereto (the "Tax
Indemnfication Agreement") providing for indemnification after the Survival
Expiration Date (as defined in the Escrow Agreement) equivalent to the
indemnification described in
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Section 9.7; provided that the Shareholders' indemnification obligations under
the Tax Indemnification Agreement shall not exceed the aggregate amount
distributed to the Shareholders from the Escrow Account in accordance with the
Escrow Agreement on the Survival Expiration Date (as defined in the Escrow
Agreement).
ARTICLE VIII
CONDITIONS TO THE COMPANY'S OBLIGATIONS
ss.8. Conditions to the Company's Obligations. The obligations of the
Company to effect the transactions contemplated by this Agreement on the Closing
Date are conditioned upon satisfaction or waiver, at or prior to the Closing, of
the following conditions:
ss.8.1 Opinions of Counsel. The Parent shall have furnished the Company
and the Shareholders with an opinion, dated the Closing Date, of White & Case,
in form and substance reasonably satisfactory to the Company and its counsel.
ss.8.2 Truth of Representations and Warranties. The representations and
warranties of the Parent and Acquisition contained in this Agreement shall be
true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such date, and
the Parent and Acquisition shall have
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delivered to the Shareholders' Representative an officer's certificate, dated
the Closing Date, to such effect.
ss.8.3 Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, required in connection with the consummation of
the transactions contemplated by this Agreement shall have been received. All of
the consents, approvals, authorizations, exemptions and waivers from government
agencies that shall be required in order to permit the consummation of the
transactions contemplated hereby shall have been obtained.
ss.8.4 Performance of Agreements. All of the agreements of the Parent and
Acquisition to be performed prior to the Closing pursuant to the terms of this
Agreement shall have been duly performed in all material respects, and the
Parent and Acquisition shall have delivered to the Shareholders' Representative
an officer's certificate, dated the Closing Date, to such effect.
ss.8.5 No Litigation Threatened. No action or proceeding shall be
instituted or, to the knowledge of the Parent, threatened before a court or
other government body or any public authority to restrain or prohibit any of the
transactions contemplated hereby.
ss.8.6 HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the transactions
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contemplated by this Agreement shall have expired or terminated.
ss.8.7 Shareholder Approval. The transactions contemplated by this
Agreement shall have been approved by the Shareholders to the extent required by
law; provided, however, that this condition precedent shall lapse and be of no
further effect to the extent that such approval of the Shareholders has not been
obtained by September 6, 1996, and, on or prior to such date, the Company shall
not have notified Parent that the Shareholders have refused to give such
approval.
ss.8.8 Environmental Matters. The Company and the Parent shall have agreed
upon the Rochester Environmental Escrow Amount.
ARTICLE IX
TAX MATTERS
I ss.9.1 Tax Returns. The Parent shall prepare and timely file, or cause to
be prepared and timely filed, all Returns of the Company and its subsidiaries.
Such authority shall include, but not be limited to, the determination of the
manner in which any items of income, gain, deduction, loss or credit arising out
of the income, properties and operations of the Company and its subsidiaries
shall be reported or disclosed on such Returns; provided, however, with respect
to
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Returns to be filed by the Parent pursuant to this Section 9.1 for taxable
periods beginning before the Closing Date, items set forth on such Returns shall
be treated in a manner consistent with the past practices with respect to such
items, unless otherwise required by law. The Parent shall provide to the
Sellers' Representative drafts of all Returns of the Company to be filed by the
Parent pursuant to this Section 9.1 with respect to taxable years or other
taxable periods beginning before the Closing Date and ending after the Closing
Date at least thirty (30) days prior to the due date for the filing of such
Returns. At least fifteen (15) days prior to the due date for the filing of such
Returns, the Sellers' Representative shall notify the Parent of the existence of
any objection (specifying in reasonable detail the nature and basis of such
objection) the Sellers' Representative may have to any items set forth on such
draft Returns. The Parent and the Sellers' Representative agree to consult and
to resolve in good faith any such objection within such 15 day period. The
Parent shall not file any such Return with respect to taxable years or other
taxable periods beginning before the Closing Date and ending after the Closing
Date without the prior consent of the Sellers' Representative, which consent
shall not be unreasonably withheld or delayed.
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ss.9.2 Apportionment of Taxes. All Taxes and Tax liabilities with respect
to the income, property or operations of the Company that relate to a taxable
year or other taxable period beginning before and ending after the Closing Date
shall be apportioned between the Pre-Closing Period and the post-closing period
as follows: (A) in the case of Taxes other than income Taxes and sales and use
Taxes, on a per diem basis, and (B) in the case of income Taxes and sales and
use Taxes, as determined from the books and records of the Company, to the
portion of such period ending on the Closing Date as though the taxable year of
the Company terminated at the opening of business on the Closing Date, and based
on accounting methods, elections and conventions that do not have the effect of
distorting income and expenses. All Taxes of the Company which are attributable
(as determined under this Section 9.2) to any taxable year or other taxable
period (or portion thereof) ending on or prior to the Closing Date, reduced by
liability accruals or other applicable reserves or provisions set forth in the
Closing Balance Sheet shall, be payable out of the Escrow Account to the extent
provided in Section 9.7 hereof or by the Shareholders to the extent provided in
the Tax Indemnification Agreement, subject to the applicable limitations set
forth in Section 9.7 hereof. The Parent shall be liable for the payment of Taxes
which are
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attributable to taxable years and other taxable periods (or portions thereof)
beginning on the Closing Date, except as provided for in clause (iii) of Section
9.7.
ss.9.3 Cooperation; Audits. In connection with the preparation of Returns,
audit examinations and any administrative or judicial proceedings relating to
the Tax liabilities imposed on the Company for all Pre-Closing Periods, the
Parent and the Company on the one hand, and the Sellers' Representative on the
other hand, will cooperate fully with each other, including, but not limited to,
the furnishing or making available during normal business hours of records,
personnel (as reasonably required), books of account, powers of attorney or
other materials necessary or helpful for the preparation of such Returns, the
conduct of audit examinations or the defense of claims by Tax authorities as to
the imposition of Taxes.
ss.9.4 Controversies. The Parent shall promptly notify the Shareholders'
Representative in writing upon receipt by the Parent or any affiliate of the
Parent (including the Company and its subsidiaries after the Closing Date) of
written notice of any inquiries, claims, assessments, audits or similar events
with respect to Taxes relating to a taxable period ending on or prior to the
Closing Date for which the Parent or the Company may be entitled to
indemnification under Section 9.7 hereof or under the Tax Indemnification
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Agreement (any such inquiry, claim, assessment, audit or similar event, a "Tax
Matter"). The Shareholders' Representative shall have the authority to represent
the interests of the Company and its subsidiaries with respect to any Tax Matter
before the Internal Revenue Service, any other taxing authority, any other
governmental agency or authority or any court and shall have the sole right to
control the defense, compromise or other resolution of any Tax Matter, including
responding to inquiries, filing Tax returns and settling audits; provided,
however, that the Shareholders' Representative shall not enter into any
settlement of or otherwise compromise any Tax Matter that affects or may affect
the Tax liability of the Parent, the Company, its subsidiaries, or any affiliate
of the foregoing for any period ending after the Closing Date, including the
portion of a period beginning before the Closing Date and ending after the
Closing Date (the "Overlap Period") that is after the Closing Date, without the
prior written consent of the Parent, which consent shall not be unreasonably
withheld. The Shareholders' Representative shall keep the Parent fully and
timely informed with respect to the commencement, status and nature of any Tax
Matter. The Shareholders' Representative shall, in good faith, allow the Parent
to make comments to the Shareholders' Representative regarding the conduct of or
positions taken in any such proceeding. During
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such period as the Escrow Account is being held, all reasonable expenses of the
Shareholders' Representative incurred in connection with any Tax Matter
hereunder shall be paid out of such Escrow Account.
Except as otherwise provided in this Section 9.4, the Parent shall have
the sole right to control any audit or examination by any taxing authority,
initiate any claim for refund or amend any Return, and contest, resolve and
defend against any assessment for additional Taxes, notice of Tax deficiency or
other adjustment of Taxes of, or relating to, the income, assets or operations
of the Company or any of its subsidiaries for all taxable periods; provided,
however, that the Parent shall not, and shall cause its affiliates (including
the Company and its subsidiaries) not to, enter into any settlement of any
contest or otherwise compromise any issue with respect to the portion of the
Overlap Period ending on or prior to the Closing Date without the prior written
consent of the Shareholders' Representative, which consent shall not be
unreasonably withheld.
ss.9.5 Transfer Taxes. All transfer, sales and use, registration, stamp
and similar Taxes imposed in connection with the sale of the Stock or any other
transaction that occurs pursuant to this Agreement shall be borne equally by the
Shareholders, on the one hand, and the Parent, on the other hand.
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ss.9.6 Amended Returns. None of the Shareholders, the Company, nor any of
its subsidiaries shall file or cause to be filed any amended Return relating to
the Company or any of its subsidiaries without the prior written consent of the
Parent, which consent shall not be unreasonably withheld.
ss.9.7 Indemnification. The Parent, its affiliates (including the
Surviving Corporation and its subsidiaries) and the successors to the foregoing
(and their respective shareholders, officers, directors, employees and agents)
shall be indemnified out of the available proceeds held in the Escrow Account on
an after-tax basis against (i) all Taxes, losses, claims and expenses resulting
from, arising out of, or incurred with respect to, any claims that may be
asserted by any party based upon, attributable to, or resulting from the failure
of any representation or warranty made pursuant to Section 3.14 to be true and
correct as of the Closing Date; (ii) all Taxes imposed on or asserted against
the properties, income or operations of the Company or any of its subsidiaries
for all Pre-Closing Periods to the extent such Taxes have not been paid prior to
Closing or are not fully disclosed and reserved for, accrued, or otherwise
provided for in the Closing Balance Sheet; and (iii) all Taxes imposed on the
Company or any of its subsidiaries, or for which the Company or any of its
subsidiaries may be liable, as a result of any transaction contemplated by this
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Agreement; provided, however, that to the extent the Tax liability of the
Company with respect to a Pre-Closing Period is adjusted and such adjustment
gives rise to an obligation under this Section 9.7 to make an indemnification
payment, the amount of such indemnification payment shall be reduced by the
amount of Tax savings resulting from such adjustment (the "Tax Savings")
actually realized by the Parent or the Company on or prior to the date when such
indemnification payment is due, as determined by the Parent in its sole
discretion (it being understood that the Company and the Parent shall not be
obligated to disclose any information with respect to the income, results of
operations, or Taxes or Returns of the Company or the Parent with respect to any
period after the Closing Date, other than as expressly provided for in Section
9.1). If the Tax liability of the Company or Parent is adjusted after filing a
Return in which the Tax Savings are realized by the Company or the Parent and
such adjustment reduces the amount of such Tax Savings realized by the Company
and/or the Parent, the Company and/or the Parent shall be reimbursed out of the
Escrow Account or by the Shareholders pursuant to the Tax Indemnfication
Agreement, subject to the applicable limitations of this Section 9.7, for the
amount of such reduced Tax Savings, as determined by the Parent, within 10 days
after receipt by Sellers' Representative from the Parent of a certificate
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setting forth the amount of such reduced Tax Savings. The Parent shall promptly
give the Shareholders' Representative or his representative written notice of
all Taxes, losses, claims and expenses which the Parent has reasonably
determined may give rise to a right of indemnification under this Section 9.7,
including a computation of the amount of the required indemnification with
sufficient detail and particularity to enable the Shareholders to reasonably
determine the amount of such required indemnification. All claims for indemnity
under this Section 9.7 shall be subject to the provisions of Section 10.3 and to
Sections 10.1 and 10.2, in each case to the extent expressly provided therein.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
ss.10.1 Survival of Representations. The respective representations,
warranties and indemnities of the Company, the Parent and Acquisition contained
in this Agreement shall survive the Closing for a period of eighteen (18)
months, except for the representations, warranties and indemnities of the
Company contained in Sections 3.14 and 9.7, which shall survive for the
applicable statute of limitations period; provided, however, that to the extent
that prior to the expiration of the applicable survival date described above, a
party asserts a claim for indemnification in accordance
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with this Agreement and, if applicable, the Escrow Agreement, then such party's
right to indemnification with respect to such claim shall not terminate as of
the expiration of the survival date, but shall continue for such period
thereafter (subject to Section 3(j) of the Escrow Agreement) as may be required
to finally resolve such claim.
ss.10.2 Indemnification. (a) To the extent of the proceeds held in the
Escrow Account, the Parent, its affiliates (including, without limitation, the
Surviving Corporation and its subsidiaries) and the successors to the foregoing
(and their respective shareholders, officers, directors, employees and agents)
shall be indemnified and held harmless from damages, losses, costs or expenses
(including, without limitation, reasonable attorneys' and consultants' fees and
expenses), in each case reduced by any amounts actually recovered under
insurance policies (net of related costs of collection) and, with respect to any
particular damage, loss, cost or exposure, by any applicable reserves or
allowances reflected on the Closing Balance Sheet with respect to such
particular damage, loss, cost or exposure, and determined on an after-tax basis
("Damages") incurred or suffered as a result of or arising out of (i) the
failure of any representation or warranty made by the Company in this Agreement
(without regard to any "materiality" or any "material adverse effect" exception
contained therein) to be
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true and correct as of the Closing Date, (other than a breach of Section 3.14
with respect to Taxes which shall be governed by Section 9.7 and a breach of
Section 3.21 which shall be governed by paragraph (b) of this Section 10.2) or
(ii) the breach of any covenant or agreement made or to be performed by the
Company pursuant to this Agreement; provided, however, that the Parent, its
affiliates and successors, shall have no right to seek any indemnity under this
Section 10.2(a) unless the aggregate amount of Damages (together with Damages
under Section 10.2(b)(i)(A)) exceeds $300,000 and then only to the extent of
such excess; provided, further, however, that the maximum indemnity proceeds to
which the Parent, its affiliates and successors shall be eligible to receive
under Section 9.7, this Section 10.2(a) and Section 10.2(b)(i)(A) and Section
10.2(b)(i)(B), to the extent of any indemnity pursuant to such Section in excess
of the Rochester Environmental Escrow Account, shall not exceed $3,000,000 in
the aggregate.
(b) (i)(A) To the extent of the proceeds held in the Escrow Account, the
Parent, its affiliates (including, without limitation, the Surviving Corporation
and its subsidiaries) and the successors to the foregoing (and their respective
shareholders, officers, directors, employees and agents) and/or to the Parent's
or the Company's interest in the chain-of-title to Company Property
(collectively the
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"Parent Indemnitees"), shall be indemnified and held harmless from Damages
incurred or suffered as a result of or arising out of (x) the failure of any
representation or warranty made by the Company in Section 3.21 (without regard
to any "materially" or "material adverse effect" exception contained therein) or
(y) any Environmental Claim; provided, however, that the Parent Indemnitees
shall have no right to seek any indemnity under this Section 10.2(b)(i)(A)
unless the aggregate amount of Damages (together with Damages under Section
10.2(a)) exceeds $300,000 and then only to the extent of such excess; and
provided, further, however, that the maximum indemnity proceeds to which the
Parent Indemnitees shall be eligible to receive under Section 9.7, Section
10.2(a) and this Section 10.2(b)(i)(A) and Section 10.2(b)(i)(B), to the extent
of any indemnity pursuant to such Section in excess of the Rochester
Environmental Escrow Account, shall not exceed $3,000,000 in the aggregate.
(B) Notwithstanding clause (A) above, to the extent of the proceeds held
in the Rochester Environmental Escrow Account and, if not adequate therefor,
also to the extent of the proceeds in the Escrow Account, the Parent Indemnitees
shall be indemnified and held harmless from dollar one from Damages incurred or
suffered as a result of or arising out of any Environmental Claim relating to or
arising from (i) the areas associated with or affected by, or any events or acts
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or omissions of the Company relating to (a) the two settling ponds located on
the north side of the Company's Rochester, Michigan facility, or (b) the earthen
bermed tank storage area located in the southeast corner of the Company's
Rochester, Michigan facility; or (ii) any action by a Governmental Authority
arising from a notice or report filed by the Company in accordance with Section
6.6(b) (including, without limitation, any investigation or oversight by a
Governmental Authority resulting from such notice or report with respect to the
subject matter thereof); provided, however, that the maximum indemnity proceeds
to which the Parent Indemnitees shall be eligible to receive under this Section
10.2(b)(i)(B) shall not exceed, in the aggregate, (x) the Rochester
Environmental Escrow Amount, plus (y) the sum of $3,000,000, reduced by the
aggregate indemnity proceeds received prior to such time by the Parent
Indemnitees pursuant to Sections 9.7, 10.2(a), 10.2(b)(i)(A) and, other than
proceeds paid from the Rochester Environmental Escrow Account, this Section
10.2(b)(i)(B).
(ii) As to any Remedial Work for which indemnity is provided under this
section 10.2(b), Parent, in consultation with Shareholders' Representative,
shall have the right to plan, implement and control such Remedial Work. Parent
and Shareholders' Representative shall cooperate fully and in good faith with
each other in connection with such Remedial
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Work. Parent shall act in good faith, in planning, implementing and controlling
any such Remedial Work, and any disagreement between Parent and Shareholders'
Representative shall be resolved in good faith.
(iii) Any Remedial Work undertaken for which Parent Indemnitees seek
indemnity shall be limited solely to that which is necessary to achieve
compliance with Environmental Laws in effect at the Closing. In no event shall
Parent Indemnitees be entitled to indemnity for Remedial Work that (1) exceeds
applicable cleanup levels established by or under Environmental Laws or by the
applicable Governmental Authority or (2) arises from any change in Environmental
Laws after the Closing.
(iv) Upon any "transferring ownership or operations" or "closing
operations" (as such terms are defined in ISRA) of or at the Hughesville or
Warren Glen mills, or either of them, subsequent to the Closing Date, Parent and
the Company shall be solely responsible for any costs necessary to comply with
ISRA at the mill or mills so sold, transferred or closed other than such costs
which are imposed by ISRA as a result of the transactions contemplated by this
Agreement for which the Shareholders have agreed to provide indemnity and which
are payable out of the Escrow Account pursuant to subsection (b)(i)(A) above.
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(v) The Parent Indemnitees' right to indemnity pursuant to this Section
10.2(b) shall be reduced to the extent that the negligent acts or omissions of
any of the Parent Indemnitees after the Closing materially and adversely affect
a Release prior to Closing and the amount of Damages for which indemnity is
sought.
(vi) The provisions of this Section 10.2(b) set forth the sole right of
Parent Indemnitees against the Shareholders and/or the Escrow Account or the
Rochester Environmental Escrow Account with respect to indemnity for all matters
relating to the Environment, including, but not limited to, Environmental Claims
and the warranties and representations set forth in Section 3.21 above. Except
for the obligations expressly undertaken by Shareholders' Representative in this
Agreement and the rights of the Parent Indemnitees under this Agreement and the
Escrow Agreement, Parent, for itself, and its affiliates and successors
(including, without limitation the Surviving Corporation) and their respective
officers, directors, employees, agents, affiliates, subsidiaries, successors and
assigns hereby releases Shareholders from any claims, damages, costs, losses,
response costs or other liabilities concerning or relating to the Environment,
including, but not limited to, claims for contribution or other response costs
under the Comprehensive Environmental Response, Compensation and Liability Act.
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(c) The Parent hereby agrees to indemnify and hold the Shareholders
harmless from Damages incurred or suffered as a result of or arising out of (i)
the failure of any representation or warranty made by the Parent or Acquisition
in this Agreement to be true and correct as of the Closing Date or (ii) the
breach of any covenant or agreement made or to be performed by the Parent or
Acquisition pursuant to this Agreement; provided, however, that the Parent and
Acquisition shall not be liable under clause (i) of this Section unless the
aggregate amount of Damages exceeds $300,000 and then only to the extent of such
excess; provided, further, however, that the Parent's and Acquisition's
liability under Section 10.2(c) shall not exceed $3,000,000 in the aggregate.
(d) Except with respect to the Company's right to repayment under Section
2.12, after the Closing the foregoing indemnification provisions, and the
indemnification for Taxes provided in Section 9.7 and in the Tax Indemnification
Agreement, shall be the exclusive remedy for any breach of the covenants,
obligations, representations or warranties set forth in this Agreement;
provided, however, that the provisions of this Section 10.2(d) shall not prevent
the Shareholders or the Parent from seeking the remedies of specific performance
or injunctive relief in connection with a breach of a covenant or agreement of
any party contained herein. The Shareholders have no personal liability
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hereunder to Parent, its affiliates or successors, beyond such party's right to
obtain indemnity payments from the Escrow Account as provided herein, from the
Rochester Environmental Escrow Account and under the Tax Indemnification
Agreement to the extent set forth therein, and, absent fraud, Parent agrees that
the sole and exclusive recourse possessed by it and its affiliates and
successors is to seek indemnity from the proceeds of the Escrow Account, and
from the proceeds of the Rochester Environmental Escrow Account, and to the
extent set forth therein, from the Shareholders under the Tax Indemnification
Agreement.
(e) The Indemnified Party shall use all reasonable efforts to recover
amounts under its insurance policies, if any, in respect of Claims for Damages
for which indemnification is provided for under this Agreement.
ss.10.3 Indemnification Procedure. (a) Any party seeking indemnification
(the "Indemnified Party") from any other party (the "Indemnifying Party") with
respect to any claim, demand, action, proceeding or other matter pursuant to
this Agreement (the "Claim") shall promptly notify the Indemnifying Party of the
existence of the Claim, setting forth in reasonable detail the facts and
circumstances pertaining thereto and the basis for the Indemnified Party's right
to indemnification, including, in the case of Remedial Work required by
Environmental Law, the particular provision or
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provisions of Environmental Law which form the basis of such Environmental
Claim. For the purposes of this Agreement any claim by Parent against the Escrow
Account shall be deemed to be the seeking of indemnification from the
Shareholders.
(b) If any third party shall notify any Indemnified Party with respect to
any matter which may give rise to a Claim for indemnification against the
Indemnifying Party under this Agreement, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof (which notice, in the case of a
Claim against the Shareholders, shall be given to the Shareholders'
Representative); provided, however, that no delay on the part of the Indemnified
Party in notifying any Indemnifying Party shall relieve the Indemnifying Party
from any liability or obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is materially prejudiced by such failure
or delay to give notice. In the event that any Indemnifying Party notifies the
Indemnified Party within 30 days after the Indemnified Party has given notice of
the matter that the Indemnifying Party would be required to indemnify the
Indemnified Party in full against any such Claim and is assuming the defense
thereof:
(i) the Indemnifying Party may elect to defend the Indemnified Party
against the matter with counsel of its choice reasonably satisfactory to the
Indemnified Party or,
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in the alternative, may elect to allow the Indemnified Party to conduct its own
defense;
(ii) if the Indemnifying Party elects to conduct the defense of a Claim,
the Indemnified Party may retain separate co-counsel at its sole cost and
expense (except that the Indemnifying Party will be responsible for the
reasonable fees and expenses of the separate co-counsel (a) to the extent the
Indemnified Party concludes reasonably based upon advice of counsel that a
conflict of interest exists between the Indemnified Party and Indemnifying Party
or (b) the named parties to any such action (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party and such
Indemnified Party shall have been advised by counsel that there may be one or
more legal defenses available to the Indemnified Party which are not available
to the Indemnifying Party, or available to the Indemnifying Party, but the
assertion of which would be adverse to the interest of the Indemnified Party);
(iii) the Indemnified Party will not consent to the entry of any judgment
or enter into any settlement with respect to the matter without the written
consent of the Indemnifying Party (not to be withheld unreasonably); and
(iv) the Indemnifying Party will not consent to the entry of any judgment
or enter into any settlement, without
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the written consent of the Indemnified Party (not to be withheld unreasonably).
(c) If no Indemnifying Party notifies the Indemnified Party within 30 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, then the Indemnified Party may defend
against, or enter into any settlement with respect to, the matter in any manner
it reasonably may deem appropriate, without prejudice to any of its rights
hereunder.
(d) The Indemnified Party shall be entitled to reimbursement of reasonable
expenses included in Damages with respect to any Claim (including, without
limitation, the cost of defense, preparation and investigation relating to such
Claim) as such expenses are incurred by the Indemnified Party.
(e) The reasonable costs and expenses of the Shareholders and/or
Shareholders Representative in connection with any indemnity Claim by Parent
shall be paid out of the Escrow Account in accordance with the provisions set
forth therein.
ARTICLE XI
TERMINATION
ss.11.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
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(a) by the mutual written consent of the Parent and the Company;
(b) by the Parent, if there has been a material violation or breach by the
Company of any covenant, representation or warranty contained in this Agreement
which has prevented the satisfaction of any condition to the obligations of the
Parent at the Closing and such violation or breach has not been waived by the
Parent or, in the case of a covenant breach, cured by the Company within the
earlier of ten days after written notice thereof from the Parent or the Closing
Date;
(c) by the Company, if there has been a material violation or breach by
the Parent of any covenant, representation or warranty contained in this
Agreement which has prevented the satisfaction of any condition to the
obligation of the Company at the Closing and such violation or breach has not
been waived by the Company or, with respect to a covenant breach, cured by the
Parent within the earlier of ten days after written notice thereof by the
Company or the Closing Date; or
(d) by either the Parent or the Company if the transactions contemplated
hereby have not been consummated by October 15, 1996; provided, however, that
(i) neither the Parent nor the Company shall be entitled to terminate this
Agreement pursuant to this Section 11.1(d) if such Person's
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breach of this Agreement has prevented the consummation of the transactions
contemplated hereby.
ss.11.2 Effect of Termination. In the event that this Agreement shall be
terminated pursuant to Section 11.1, all further obligations of the parties
hereto under this Agreement (other than pursuant to Sections 12.2 and 12.5,
which shall continue in full force and effect) shall terminate without further
liability or obligation of either party to the other party hereunder; provided,
however, that no party shall be released from liability hereunder if this
Agreement is terminated and the transactions abandoned by reason of (i) willful
failure of such party to have performed its obligations hereunder or (ii) any
intentional and knowing misrepresentation made by such party of any material
matter set forth herein.
ss.11.3 Effect of Waiver of Condition Precedent. If any party expressly
waives in writing any condition to its obligation to consummate the Merger in
Article VII or Article VIII hereof and elects to proceed with the Closing and
the consummation of the Merger, then such party shall be deemed to have waived
any right to seek indemnification with respect to the condition so waived (and
with respect to any event, occurrence or circumstance which gave rise to the
failure of such condition).
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ARTICLE XII
MISCELLANEOUS
ss.12.1 Knowledge of the Company. Where any representa- tion or warranty
made by the Company contained in this Agreement is expressly qualified by
reference to its knowl- edge, such knowledge shall be deemed to exist if the
matter is within the actual knowledge of James E. Rogers, James O. Eubanks,
Robert F. Yousey, Jr. or William W. Huffman, Jr.
ss.12.2 Expenses. The parties hereto shall pay their own expenses relating
to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel and financial
advisers, it being understood that all expenses of the Company incurred in
connection with the transactions contemplated by this Agreement shall be paid by
the Company at or prior to the Closing or, otherwise shall be paid by the
Shareholders.
ss.12.3 Governing Law. THE INTERPRETATION AND CONSTRUCTION OF THIS
AGREEMENT, AND ALL MATTERS RELATING HERETO, SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO AGREEMENTS EXECUTED AND TO BE PERFORMED SOLELY
WITHIN SUCH STATE.
ss.12.4 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
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ss.12.5 Publicity. Except as otherwise required by law, none of the
parties hereto shall issue, prior to the Closing, any press release or make any
other public statement, in each case relating to, connected with or arising out
of this Agreement or the matters contained herein, without obtaining the prior
approval of the Shareholders' Representative, on the one hand, and the Parent,
on the other hand, to the contents and the manner of presentation and
publication thereof. Except as otherwise required by law, after the Closing the
Shareholders shall not issue any press release or make any other public
statement, in each case relating to, connected with or arising out of this
Agreement or the matters contained herein, without obtaining the prior approval
of the Parent. Unless required by applicable law or regulation, Parent shall not
disclose the nature or amount of the consideration paid under this Agreement
without consultation with the Shareholders' Representative.
ss.12.6 Notices. Any notice or other communication required or permitted
under this Agreement shall be sufficiently given if delivered in person or sent
by telecopy (if promptly confirmed by a copy thereof delivered by mail or by
courier as provided herein) or by registered or certified mail, or by a
nationally recognized overnight courier service, postage or fees prepaid or
billing therefor arranged to the sender, addressed as follows: if to the Parent,
to
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Specialty Paperboard, Inc., Brudies Road, P.O. Box 498, Brattleboro, Vermont
05302 (Facsimile Number (802) 257-5900) Attention: Chief Financial Officer, with
a copy to its counsel, White & Case, 1155 Avenue of the Americas, New York, New
York 10036 (Facsimile Number (212) 354-8113), Attention: Frank L. Schiff, Esq.;
and if to the Company or the Shareholders, to SCI Investors, Inc. 101 Stockoe
Slip, Suite 0, Richmond, VA 23219, with copies to Harris Williams & Co., 1313
East Main Street, Suite 300, Richmond, VA 23219, Attention: Mr. Christopher H.
Williams, and to Williams, Mullen, Christian & Dobbins, 1021 E. Carty Street,
16th Floor, Richmond, VA 23219 (mailing address: P.O. Box 1320, Richmond, VA
23210) Attention: Randolph H. Lickey, Esq. or such other address or number as
shall be furnished in writing by any such party, and such notice or
communication shall be deemed to have been given as of the date so delivered,
sent by facsimile or mailed.
ss.12.7 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
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ss.12.8 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
ss.12.9 Entire Agreement. This Agreement, including the other documents
referred to herein and therein which form a part hereof and thereof, contain the
entire understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
ss.12.10 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by the parties hereto.
ss.12.11 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
ss.12.12 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto, the Shareholders and the
Indemnified Parties.
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IN WITNESS WHEREOF, each of the Parent, Acquisition and the Company has
caused this Agreement to be executed on its behalf by its respective officer
thereunto duly authorized, all as of the day and year first above written.
SPECIALTY PAPERBOARD, INC.
By /s/ Alex Kwader
------------------------------
Name: Alex Kwader
Title: President
CPG ACQUISITION COMPANY
By /s/ Alex Kwader
------------------------------
Name: Alex Kwader
Title: President
CPG INVESTORS INC.
By /s/ James B. Rogers
------------------------------
Name: James B. Rogers
Title: Chairman
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EXHIBIT I
List of Shareholders
No. of
Name Shares
Class A Holders
- ---------------
Diliwyn P. Paiste, IV 22,500
William W. Huffman, Jr. 22,500
Peter R. Hoppe 17,500
J. J. Lacina 7,000
Stanley S. Luczycki 10,000
Lawrence E. McEnroe 15,000
Homan B. Kinsley, Jr. 7,500
Brenton S. Halsey 20,000
James E. Rogers 44,000
Ronald Shapiro 20,000
James O. Eubanks 42,500
AEA Investors Inc. 50,000
Winston Capital Fund I, LP 25,000
Robert F. Yousey 27,500
A. William Hamill 49,000
AWA Paper Mfg. Co., Ltd. 2,268
Miki Sangyo (USA) Inc. 3,403
The Tredegar Trust
Company Trustee u/a
dated 12/2/86 f/b/o Blake F.
Hamill (EIN 13-6880133) 10,000
The Tredegar Trust
Company Trustee u/a
dated 1 2/2/86 f/b/o Carter B.
Ham (EIN 13-6880134) 10,000
Class B Holders
- ---------------
James O. Eubank 492
Robert F. Yousey 410
Dillwyn P. Paiste, IV 328
William W. Huffman, Jr. 328
Peter R. Hoppe 164
Stanley S. Luczycki 164
Lawrence E. McEnroe 328
Homan B. Kinsley, Jr. 246
James E. Rogers 1,442
Ronald Shapiro 656
AEA Investors Inc. 1,639
Winston Capital Fund I, LP 820
<PAGE>
J. J. Lacina 66
Brenton S. Halsey 656
A. William Hamill 2,261
AWA Paper Mfg. Co., Ltd. 40
Miki Sangyo (USA) Inc. 61
Class C Holders
- ---------------
A. William Hamill 52,143
James E. Rogers 52,143
-------
Total Shares 520,058
Option Holders
- --------------
James O. Eubanks 17,000
Robert F. Yousey 8,500
Diltwyn P. Paiste 6,500
William W. Huffman, Jr. 5,000
Peter R. Hoppe 4,000
J. J. Lacina 3,500
Stanley S. Luczycki 3,500
Lawrence E. McEnroe 4,000
Robert C. Wardwell 1,500
Murray E. Spruce 1,000
-------
Total Options 54,500
<PAGE>
EXHIBIT II
Balance Sheet
Unaudited consolidated balance sheets of CPG Holdings Inc. and its subsidiaries
are attached hereto.
<PAGE>
Exhibit II
CPG HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 2,1996
(Unaudited)
ASSETS June 2,
1996,
June 2,1996 Adjustments Adjusted
----------- ----------- --------
Current assets:
Cash and cash equivalents $ 1,453 ($ 1,453) $ --
Accounts receivable, less allowances 8,494 8,494
Inventories 7,700 7,700
Prepaid expenses 439 439
Deferred income taxes 716 -- 716
-------- -------- --------
Total current assets 18,802 (1453) 17,349
-------- -------- --------
Properly, plant and equipment, net 18,142 18,142
Other assets 1,063 1,063
Deferred income taxes 136 -- 136
-------- -------- --------
$ 38,143 $ (1453) $ 36,690
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,134 $ -- $ 4,134
Current portion of long-term debt 1,250 (1,250)
Accrued liabilities 5,322 -- 5,322
-------- -------- --------
Total current liabilities 10,706 (1,250) 9,456
-------- -------- --------
Long-term debt 10,000 (10,000)
Other liabilities 4,463 4,463
Stockholders' equity:
Common stock 4,570 9,797 14,367
Retained earnings 8,469 8,469
Minimum pension liability adjustment (65) -- (65)
-------- -------- --------
Total stockholders' equity 12,974 9,797 22,771
-------- -------- --------
$ 38,143 $ (1,453) $ 36,690
======== ======== ========
<PAGE>
Exhibit II, continued
CPG HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
for the period (22 weeks) ended June 2,1996
(Unaudited)
Net sales $39,827
Costs and expenses:
Cost of goods sold 33,549
Selling and administrative expenses 2,477
-------
Income from operations 3,801
Interest expense 462
-------
Income before income taxes 3,339
Income tax expense 1,336
-------
Net income 2,003
Retained earnings, beginning of period 6,466
-------
Retained earnings, end of period $ 8,469
=======
<PAGE>
Exhibit II, continued
CPG HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the period (22 weeks) ended June 2, 1996
(Unaudited)
Cash provided by (used for) operating activities:
Net income $ 2,003
Items not affecting cash:
Depreciation 735
Amortization 95
-------
2,833
Change in current assets and liabilities:
Accounts receivable 697
Inventory 533
Prepaid expenses (36)
Accounts payable (1,364)
Accrued expenses 320
Other, net 130
-------
280
-------
Cash provided by operating activities 3,113
Cash used for investing activities:
Expenditures for property, plant and equipment (1,595)
-------
Cash used for financing activities:
Reduction of long-term debt (645)
-------
Increase in cash 873
Cash and cash equivalents, beginning of period 580
-------
Cash and cash equivalents, end of period $ 1,453
=======
<PAGE>
EXHIBIT III
Escrow Agreement
<PAGE>
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of ________, 1996 (the "Escrow Agreement"),
is made and entered into by and among SPECIALTY PAPERBOARD, INC., a Delaware
corporation ("SPI"), CPG ACQUISITION COMPANY, a Delaware corporation and a
wholly-owned subsidiary of SPI ("Acquisition Company"), CPG INVESTORS INC., a
Delaware corporation ("CPG"), SCI INVESTORS INC., a Virginia corporation,
solely in its capacity as Shareholders' Representative and agent on behalf of
the shareholders of CPG (the "Shareholders' Representative"), and [CRESTAR BANK,
a national banking association], as escrow agent (the "Escrow Agent").
RECITALS
A. SPI, Acquisition Company and CPG have entered into a certain Merger
Agreement, dated as of August 28, 1996 (the "Merger Agreement"), whereby
Acquisition Company will merge (the "Merger") with and into CPG and CPG will
become a wholly-owned subsidiary of SPI (sometimes referred to herein as the
"Surviving Corporation") and the shareholders of CPG (other than those
exercising appraisal rights, if any) would collectively receive the Merger
Consideration as provided in the Merger Agreement.
B. Section 2.8(b) of the Merger Agreement provides that, at the Closing,
the sum of Three Million Dollars ($3,000,000.00) (the "Base Escrow Amount"),
shall be delivered to the Escrow Agent and Section 2.8(c) of the Merger
Agreement provides that, at the Closing, the Rochester Environmental Escrow
Amount (the amount of which shall be set forth on Exhibit B hereto) shall be
delivered to the Escrow Agent, in each case to be held and distributed pursuant
to the terms of the Merger Agreement and this Escrow Agreement in connection
with claims for indemnity made by an SPI Indemnitee.
C. The parties hereto desire to set forth the terms and conditions relating
to the holding and distribution of the Escrowed Cash (as hereinafter defined) by
the Escrow Agent.
TERMS OF AGREEMENT
In connection with the consummation of the transactions contemplated in the
Merger Agreement, the parties hereto, intending to be legally bound, agree as
follows:
<PAGE>
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. Capitalized terms used herein and not otherwise
defined shall have the same meaning given to them in the Merger Agreement. The
following terms shall have the indicated meanings, unless the context requires
otherwise:
Acknowledgement shall mean a written statement of the Shareholders'
Representative acknowledging receipt of a Request or a Notice.
Acquisition shall mean the consummation of the transactions
contemplated in the Merger Agreement.
Base Escrow Amount shall have the meaning set forth in the Recitals to
this Escrow Agreement.
Claim shall mean any claim made by an SPI Indemnitee for recovery from
the Escrowed Cash pursuant to such SPI Indemnitee's rights to indemnification
under, and in accordance with the terms of, the Merger Agreement. Claims shall
include (i) Third Party Claims made against an SPI Indemnitee directly by a
Third Party Claimant for which the SPI Indemnitee may seek recovery from the
Escrowed Cash pursuant to the SPI Indemnitee's rights to indemnification under,
and in accordance with the terms of, the Merger Agreement, and (ii) any other
claim made by an SPI Indemnitee for recovery from the Escrowed Cash pursuant to
the SPI Indemnitee's rights under, and in accordance with the terms of, the
Merger Agreement, including claims with respect to Taxes pursuant to Section 9.7
of the Merger Agreement and claims for Damages pursuant to Sections 10.2(a) or
10.2(b) of the Merger Agreement.
Closing shall mean the closing of the transactions contemplated in the
Merger Agreement to take place on the Closing Date.
Closing Date shall mean the date on which the Closing shall occur
under the Merger Agreement.
Damages shall have the meaning set forth in Section 10.2(a) of the
Merger Agreement.
Days shall mean calendar days.
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<PAGE>
Escrowed Cash shall mean the portion of the Merger Consideration
delivered by wire transfer to the Escrow Agent on the Closing Date, to be held
and distributed by the Escrow Agent under the terms of this Escrow Agreement,
comprised of the Base Escrow Amount and the Rochester Environmental Escrow
Amount. Escrowed Cash shall also include any Retained Escrowed Cash held
pursuant to the terms of this Escrow Agreement after the Survival Expiration
Date.
Merger Agreement shall mean the Merger Agreement, dated as of August
28, 1996, by and between SPI, the Acquisition Company and CPG.
Merger Consideration shall mean the total cash consideration to be
paid and delivered by SPI to the Shareholders in connection with the Merger in
accordance with the Merger Agreement.
Notice shall have the meaning Set forth in Section 3.2(b) of this
Escrow Agreement.
Person shall mean an individual, corporation, partnership, joint
venture, trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
Reply shall mean a written response by the Shareholders'
Representative to a Request or to a Notice in which the Shareholders'
Representative, on behalf of the Shareholders, either (i) agrees to and accepts
all of the Claim set forth in a Request, or (ii) objects to all or part of the
Claim set forth in a Request, and which, in the case of such objection, sets
forth (1) the amount in the Request to which the Shareholders' Representative
objects, (2) the amount in the Request, if any, which is not subject to
objection, and (3) the reasons for the objection. In the case of Third Party
Claims of which the Shareholders' Representative is notified in a Notice, the
Shareholders' Representative shall specify in its Reply whether or not the
Shareholders' Representative, on behalf of the Shareholders, elects to assume
the defense of the Third Party Claim as provided in Section 3.2(b) of this
Escrow Agreement. If the Reply is silent regarding the election by the
Shareholders' Representative to assume the defense of the Third Party Claim,
then the Shareholders Representative shall be deemed to have elected not to
assume such defense. If the Shareholders' Representative elects to assume the
defense of a Third Party Claim, the Shareholders' Representative shall specify
in the Reply the name and address of the counsel who shall be retained to
conduct such defense. A Reply shall be delivered by the Shareholders'
Representative to both SPI and the Escrow Agent.
Retained Escrowed Cash shall have the meaning set forth in Section
3.3(b) hereof.
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Request shall mean a written request of an SPI Indemnitee pursuant to
which the Escrow Agent is requested to transfer and deliver to such SPI
Indemnitee all or part of the Escrowed Cash as reimbursement or payment for a
Claim made under the Merger Agreement, and which sets forth (i) the dollar
amount claimed, (ii) the provisions of the Merger Agreement upon which SPI
Indemnitee bases its Claim, and (iii) a description of the facts and
circumstances which such SPI Indemnitee asserts give rise to its Claim
(including in the case of Remedial Work required by Environmental Law, the
particular provisions of Environmental Law which form the basis of the
Environmental Claim).
Shareholders shall mean the shareholders of CPG immediately prior to
the effective time of the Merger1 as more particularly set forth on Exhibit A
attached hereto.
Shareholder's Percentage shall have the meaning given to that term in
Section 2.10 of the Merger Agreement.
SPI Indemnitees shall mean SPI, its affiliates (including, without
limitation, the Surviving Corporation and its subsidiaries) and the successors
to the foregoing, and their respective shareholders, employees, directors,
officers and agents.
Survival Expiration Date shall mean _________, 1998, the date that is
eighteen (18) months after the date of this Escrow Agreement.
Third Party Claim shall mean any claim, demand, action, lawsuit or
other legal proceeding filed, delivered or otherwise asserted against an SPI
Indemnitee by a Third Party Claimant seeking recovery for, or asserting rights
in connection with, any matter for which an SPI Indemnitee may seek
indemnification under the Merger Agreement.
Third Party Claimant shall mean any Person, other than SPI or its
Affiliates, who or which files, delivers or otherwise asserts a Third Party
Claim against an SPI Indemnitee.
ARTICLE 2
APPOINTMENT OF ESCROW AGENT
AND DEPOSIT OF ESCROWED CASH
Section 2.1 Appointment of Escrow Agent. SPI, CPG and the Shareholders'
Representative hereby appoint and direct the Escrow Agent to act as escrow agent
in accordance with the terms of this Escrow Agreement and the Merger Agreement,
and the Escrow Agent hereby accepts such appointment and agrees to hold,
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safeguard and disburse the Escrowed Cash pursuant to the terms and conditions
hereof.
Section 2.2 Deposit of Escrowed Cash.
(a) SPI, CPG and the Shareholders' Representative hereby consent to
and acknowledge the deposit of the Escrowed Cash with the Escrow Agent and the
Escrow Agent acknowledges receipt thereof. The Escrowed Cash deposited with the
Escrow Agent shall be held and disposed of by the Escrow Agent in accordance
with the terms and provisions of this Escrow Agreement or as jointly directed in
writing by SPI and the Shareholders' Representative.
(b) SPI, CPG and the Shareholders' Representative hereby authorize and
direct the Escrow Agent to keep and preserve the Escrowed Cash in its
possession, free and clear of any and all claims, liens and encumbrances
whatsoever, pending the disbursement thereof in accordance with the terms of
this Escrow Agreement.
ARTICLE 3
PAYMENT OF CLAIMS AND
DISBURSEMENT OF ESCROWED CASH
Section 3.1 Distribution of Escrowed Cash.
(a) Subject to the limitations contained in the Merger Agreement and
Section 3.1(b) hereof, SPI Indemnitees may make Claims for recovery from the
Escrowed Cash pursuant to their rights under, and in accordance with the terms
and conditions of, the Merger Agreement and in accordance with the procedures
set forth in the Merger Agreement and this Escrow Agreement. The Escrow Agent
shall disburse such Escrowed Cash, or portions thereof, to satisfy Claims in
accordance with and only in accordance with: (i) the terms and provisions of
this Escrow Agreement, (ii) the mutual written direction of SPI and the
Shareholders' Representative, or (iii) the decision of a court of competent
jurisdiction as provided in this Article 3.
(b) Recovery of any amounts of the Escrowed Cash for the purpose of
indemnification with respect to any Claim shall be limited to the satisfaction
of Claims, the aggregate amount of which shall exceed Three Hundred Thousand
Dollars ($300,000.00) (the "Threshold Amount"), and then such recovery shall
only be allowable to the extent of the excess of the aggregate amount of such
Claims over the Threshold Amount; provided, however, that in the event the SPI
Indemnitees are entitled to indemnification pursuant to Section 9.7 of the
Merger Agreement or Section 10.2(b)(i)(B) of the Merger Agreement, such
Threshold Amount shall not
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apply. Notwithstanding anything herein to the contrary, as provided in Section
10.2 of the Merger Agreement, the maximum indemnity which the SPI Indemnitees
shall be entitled to receive shall not exceed Three Million Dollars
($3,000,000.00) in the aggregate; provided, however that with respect to
indemnity pursuant to Section 10.2(b)(i)(B) of the Merger Agreement the
foregoing limitation shall apply only after the Rochester Environmental Escrow
Amount has been fully disbursed in accordance with the terms of this Escrow
Agreement.
Section 3.2 Disbursement of Escrowed Cash to Satisfy Claims.
(a) Any SPI Indemnitee seeking indemnification with respect to any
Claim shall promptly notify the Shareholders' Representative and the Escrow
Agent of the existence of the Claim by delivery of a Request.
(b) If any third party shall notify any SPI Indemnitee with respect to
any matter which may give rise to a Third Party Claim, then the SPI Indemnitee
shall promptly notify the Shareholders' Representative and the Escrow Agent
thereof in writing , which notice shall set forth (i) the name and address of
the Third Party Claimant, (ii) the amount of such Third Party Claim, and (iii)
the provisions of the Merger Agreement upon which the SPI Indemnitee bases its
claim that indemnity may be sought with respect to such Third Party Claim, and
such notice shall also include a copy of the documents pursuant to which such
Third Party Claimant has asserted such Third Party Claim, and a copy of any
other documents possessed by the SPI Indemnitee which relate to such Third Party
Claim or to the subject matter thereof (a "Notice"); provided, however, that no
delay on the part of such SPI Indemnitee in delivering a Notice to the
Shareholders' Representative or the Escrow Agent shall relieve the Shareholders
from any liability or obligation under the Merger Agreement unless (and then
solely to the extent) the Shareholders (or the Shareholders' Representative
acting on their behalf) are materially prejudiced by such failure or delay to
give such Notice. In the event that the Shareholders' Representative notifies
the SPI Indemnitee in a Reply (delivered within 30 days after receipt by the
Shareholders' Representative of the Notice relating to such Third Party Claim)
that it is assuming the defense thereof:
(i) the Shareholders' Representative, on behalf of the Shareholders,
will defend the SPI Indemnitee against the Third Party Claim with counsel
of its choice reasonably satisfactory to such SPI Indemnitee;
(ii) the SPI Indemnitee may retain separate co-counsel at its sole
cost and expense (except that the Shareholders, to the extent of the
Escrowed Cash, will be responsible for the reasonable fees and expenses of
the separate co-counsel (a) to the extent such SPI Indemnitee concludes,
reasonably based upon advice of counsel, that a conflict of interest exists
between the SPI Indemnitee and the Shareholders or (b) the named parties to
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any such action (including any impleaded parties) include both such SPI
Indemnitee and the Shareholders (or the Shareholders' Representative) and
such SPI Indemnitee shall have been advised by counsel that there may be
one or more legal defenses available to the SPI Indemnitee which are not
available to the Shareholders (or the Shareholders' Representative), or
available to the Shareholders (or the Shareholders' Representative), but
the assertion of which would be adverse to the interest of such SPI
Indemnitee; provided, however that the Shareholders shall not be
responsible for the fees and expenses of more than one co-counsel for all
SPI Indemnitees);
(iii) such SPI Indemnitee will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without
the written consent of the Shareholders' Representative (not to be withheld
unreasonably); and
(iv) the Shareholders' Representative will not consent to the entry of
any judgment or enter into any settlement, without the written consent of
such SPI Indemnitee (not to be withheld unreasonably).
(c) If the Shareholders' Representative does not notify such SPI
Indemnitee in a Reply (delivered within 30 days after receipt by the
Shareholders' Representative of the Notice relating to a Third Party Claim) that
the Shareholders' Representative is assuming the defense of a Third Party Claim
as provided in paragraph (b) of this Section 3.2, or if Shareholders'
Representative expressly stales in a Reply that it will not assume the defense
of any such Third Party Claim, then such SPI Indemnitee may defend against the
Third Party Claim in any manner it reasonably may deem appropriate, without
prejudice to any of its rights hereunder; provided that such SPI Indemnitee
shall not consent to the entry of any judgment or enter into any settlement with
respect to the matter without the written consent of the Shareholders'
Representative (not to be withheld unreasonably).
(d) Any SPI Indemnitee shall be entitled to reimbursement of
reasonable expenses incurred in connection with the defense of any Third Party
Claim with respect to which such SPI Indemnitee is entitled to conduct under
paragraph (c) of this Section 3.2, as such expenses are incurred by such SPI
Indemnitee, unless the Shareholders' Representative has notified SPI of any
objection with respect to such Third Party Claim in a Reply delivered pursuant
to the provisions of this Escrow Agreement, in which case such costs and
expenses shall be paid only in accordance with paragraph (h) of this Section
3.2.
(e) The reasonable costs and expenses of the Shareholders'
Representative in connection with the defense or other handling of any Third
Party Claim shall be paid out of the Escrowed Cash as such costs and expenses
are incurred by it. The costs and expenses of the Shareholders' Representative
incurred in
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connection with investigating, defending against, or otherwise handling on
behalf of the Shareholders any other Claim asserted by an SPI Indemnitee shall
not be paid to the Shareholders' Representative out of the Escrowed Cash, but
may be paid out of any undistributed interest or other income earned on the
Escrowed Cash as provided in Section 5.2 below.
(f) If, within five (5) days after the date upon which the Escrow
Agent first receives a copy of a Request or a Notice, the Escrow Agent has not
received an Acknowledgement from the Shareholders' Representative with respect
to that Request or Notice, the Escrow Agent shall promptly deliver to the
Shareholders' Representative a copy of such Request or Notice. If within thirty
(30) days after the date upon which Escrow Agent receives a copy of a Request or
Notice, the Escrow Agent has not received a Reply from the Shareholders'
Representative with respect to such Request or Notice, Escrow Agent shall (i)
promptly notify SPI that no Reply was received from the Shareholders'
Representative within such thirty (30) day period, and (ii) thereafter, upon
written direction from SPI stating that it has also not received a Reply which
objects to its Request or Notice, Escrow Agent shall promptly (A) transfer and
deliver to the SPI Indemnitee such portion of the Escrowed Cash as is set forth
and claimed in the Request, or (B) pay any sums thereafter requested by such SPI
Indemnitee pursuant to paragraph (d) of this Section 3.2 in connection with the
defense of the Third Party Claim described in the Notice.
(g) If, within thirty (30) days after the date upon which the Escrow
Agent receives a copy of the Request or the Notice, the Escrow Agent receives a
Reply from the Shareholders' Representative, the Escrow Agent shall (i) promptly
notify SPI of its receipt of the Reply and provide SPI a copy thereof, and (ii)
transfer and deliver to SPI Indemnitee such portion of the Escrowed Cash as is
necessary to satisfy the amount1 if any, claimed in the Request which is not
stated to be the subject of an objection or disagreement by Shareholders'
Representative in the Reply. The amount of any Request to be paid pursuant to
Section 3.2(f), or the amount of any Request not the subject of disagreement to
be paid pursuant to this Section 3.2(g), shall be promptly paid to SPI from the
Escrowed Cash held by the Escrow Agent, subject to the limitations referred to
in Section 3.1(b) of this Escrow Agreement.
(h) The Escrow Agent shall not transfer and deliver Escrowed Cash to
an SPI Indemnitee to satisfy the portion of any Claim or to defend any Third
Party Claim to which the Shareholders' Representative objects in a Reply until
the earlier to occur of (i) SPI and the Shareholders' Representative direct the
Escrow Agent, in a writing signed by both, to transfer and deliver the requisite
portion of the Escrowed Cash to SPI to satisfy the amount claimed, or (ii) the
Escrow Agent receives a certified copy of a final decision of a court of
competent jurisdiction with respect to the disposition of the Claim or the right
to indemnity with respect to the Third Party Claim, in either case holding in
favor of the SPI Indemnity, and the period for the filing
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of any available appeals with respect thereto shall have expired. Upon receipt
of either a jointly signed direction or a certified copy of such a decision, the
Escrow Agent shall promptly take the action as set forth therein.
(i) The Escrow Agent shall confirm its disbursements from the Escrowed
Cash as soon as practicable by telephone and fax transmission to the
Shareholders' Representative and SPI and shall at the end of each calendar month
deliver a written account statement to each of the Shareholders' Representative
and SPI. The Shareholders' Representative or SPI shall advise the Escrow Agent
in writing of any discrepancies which it believes to exist in any such account
statement within thirty (30) days after receipt thereof. Failure to inform the
Escrow Agent in writing of any discrepancies in any such account statement
within such thirty-day period shall conclusively be deemed confirmation by the
party failing to so inform of the correctness of such account statement.
(j) With respect to any Request or Notice which has resulted in the
holding of any Retained Escrowed Cash pursuant to Section 3.3(b) hereof and with
respect to which the Shareholders' Representative has notified SPI in a Reply of
an objection with respect thereto, unless within one hundred twenty (120) days
following the delivery of the Reply setting forth such objection (i) SPI and the
Shareholders' Representative notify the Escrow Agent in writing that they have
resolved such objection and instruct the Escrow Agent as to the continued
holding and/or disbursement of such Retained Escrowed Cash, or (ii) the SPI
Indemnitee who delivered such Request or Notice files suit in a court of
competent jurisdiction seeking resolution of such objection and delivers a copy
of the pleadings filed in connection therewith to the Shareholders'
Representative and the Escrow Agent, the Escrow Agent shall promptly following
the expiration of such 120 day period, distribute such Retained Escrowed Cash to
the Shareholders in the manner provided in Section 3.3(a) and the SPI
Indemnitees shall have no further right with respect to such sums after the
expiration of such 120 day period. If any SPI Indemnitee shall file a suit
pursuant to this paragraph (j), which suit is thereafter dismissed or otherwise
terminated (which dismissal or termination is final and, if appealable, the
period for the filing of an appeal with respect thereto has expired) without
final determination on the merits by the court of the objection with respect to
which the suit was filed, then upon delivery by the Shareholders' Representative
to the Escrow Agent of a copy of the court order or other document evidencing
such dismissal or termination, the Escrow Agent shall disburse the Retained
Escrowed Cash to the Shareholders in accordance with Section 3.3(a), unless in
connection with such dismissal or termination SPI and the Shareholders'
Representative have agreed in writing to a different disposition or handling of
such sum, in which case the Escrow Agent shall comply with the terms of such
written agreement.
(k) Any sums held as Retained Escrowed Cash pursuant to Section 3.3(b)
hereof shall only be subject to the specific Claim or Claims with respect to
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which it was retained and shall not be disbursed to any SPI Indemnitee in
connection with any other Claim.
Section 3.3 Final Distribution.
(a) Except as otherwise provided in subsection (b) hereof, on the
Survival Expiration Date the Escrow Agent shall pay and deliver to the
Shareholders all Escrowed Cash then held by it, in accordance with their
respective Shareholder's Percentages.
(b) If, prior to the Survival Expiration Date, the Escrow Agent
receives a Request or a Notice in accordance with Section 3.2 hereof and the
right to indemnity for the Claim or Third Party Claim to which such Request or
Notice relates has not been finally resolved in accordance with Section 3.2 by
the Survival Expiration Date, Escrow Agent shall, notwithstanding the expiration
of the Survival Expiration Date, retain custody of such portion of the Escrowed
Cash as is equal to the amount claimed in the Request and/or the amount claimed
in any Third Party Claim with respect to which the Notice relates (the "Retained
Escrowed Cash") and shall distribute the remaining portion of the Escrowed Cash
to the Shareholders pursuant to subsection (a) hereof. Escrow Agent shall
thereafter continue to hold the Retained Escrowed Cash pursuant to the terms and
conditions of this E6crow Agreement and shall only distribute the Retained
Escrowed Cash in accordance with Section 3.2 hereof.
(c) Upon the final distribution by the Escrow Agent of all Escrowed
Cash and all Retained Escrowed Cash as provided in this Escrow Agreement, the
Escrow Agent shall thereafter be discharged of any further duties or obligations
under this Escrow Agreement.
ARTICLE 4
TERMINATION OF ESCROW AGREEMENT
Section 4.1 Termination. This Escrow Agreement shall terminate upon the
final transfer and delivery by the Escrow Agent of all amounts of the Escrowed
Cash in accordance with either (i) the provisions of Article 3 hereof or (ii) a
joint written direction of the Shareholders' Representative and SPI directing
the disposition of the Escrowed Cash.
ARTICLE 5
INVESTMENT OF ESCROWED CASH
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Section 5.1 Investment of Escrowed Cash. Except as SPI and the
Shareholders' Representative may from time to time direct in writing, the Escrow
Agent shall invest the Escrowed Cash, to the extent possible, in United States
Treasury Bills having a remaining maturity of 90 days or less and repurchase
obligations secured by such United States Treasury Bills, with the remainder
being deposited and maintained in a money market deposit account with Escrow
Agent until disbursement in accordance with this Escrow Agreement. The Escrow
Agent is authorized to liquidate in accordance with its customary procedures any
portion of the Escrowed Cash consisting of investments in order to provide for
payments required to be made in accordance with this Escrow Agreement.
Section 5.2 Interest on Escrowed Cash. All interest or other income
income") received or paid on or with respect to any of the Escrowed Cash shall
be the property of the Shareholders (who shall be considered the owners thereof
for the purpose of all local, state and federal taxes, on a pro rata basis based
on their respective Shareholder's Percentage) and shall not become a part of the
Escrowed Cash, but shall be held by the Escrow Agent free of any claims of any
SPI Indemnitee. Such income shall be distributed, from time to time, as follows:
(i) to the Shareholders' Representative, upon written request by it to the
Escrow Agent, such portion of any earned income then held by the Escrow Agent
which is necessary to reimburse the Shareholders' Representative for any costs
or expenses incurred by it in connection with any Claim asserted by any SPI
Indemnitee, which pursuant to Section 3.2(e) may be paid out of such income; and
(ii) to the Shareholders, on a pro rata basis based upon their respective
Shareholder's Percentage, on a quarterly basis, the amount of any income then
held by the Escrow Agent, less the amount of any sums then due to the
Shareholders' Representative pursuant to clause (i) of this Section 5.2 and less
such amount, if any, as the Shareholders' Representative may request in writing
to be held in reserve to provide for the payment of any future sums which may be
payable to it in accordance with such clause (i). As soon as practicable after
the end of each calendar year or part of a calendar year during which this
Escrow Agreement shall remain in effect, the Escrow Agent shall prepare and
deliver to each Shareholder a Form 1099 reflecting all interest and other income
earned or paid on the Escrowed Cash for the account of the Shareholders. The
Escrow Agent may condition any payment of interest or other income to any
Shareholder hereunder upon such Shareholder's execution and delivery of a
completed Form W-9 to the Escrow Agent.
ARTICLE 6
ESCROW AGENT
Section 6.1 Limitation of Duties. The Escrow Agent undertakes to perform
only such duties as are expressly set forth herein, and no implied covenants or
obligations shall be read into this Escrow Agreement against the Escrow Agent.
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Section 6.2 Permissible Reliance.
(a) The Escrow Agent may rely and shall be protected in acting or
refraining from acting upon any written notice, instruction or request furnished
to it hereunder and reasonably believed by it to be genuine and to have been
signed or presented by the proper party or parties.
(b) The Escrow Agent shall be deemed to have properly delivered the
Escrowed Cash upon (i) placing the monies in the United States mail in a
suitable package or envelope with first class prepaid postage affixed, addressed
to the addressee at such addressee's address as set forth in this Escrow
Agreement or such other address as such Person shall have furnished to the
Escrow Agent in writing; (ii) delivery in person at the offices of the Escrow
Agent; or (iii) delivery in any other manner pursuant to written instructions of
SPI or the Shareholders' Representative, as applicable.
(c) Payment of monies hereunder shall be made by check or by wire
transfer of immediately available funds in accordance with instructions
contained in the applicable disbursement notice to the Escrow Agent.
Section 6.3 Liability of Escrow Agent. Absent gross negligence or willful
misconduct, the Escrow Agent shall not be liable to SPI, CPG, the Shareholders,
the Shareholders' Representative, the Surviving Corporation or any other Person
for any action taken by it in good faith and believed by it to be authorized or
within the rights and powers conferred upon it by this Escrow Agreement, and may
consult with counsel of its own choice and shall have full and complete
authorization and protection for any action taken or suffered by it hereunder in
good faith and in accordance with the opinion of such counsel. The Escrow Agent
is authorized by each of SPI, CPG, and the Shareholders' Representative to rely
upon all representations, both actual and implied, of each of SPI and the
Shareholders' Representative and all other persons relating to this Escrow
Agreement and/or the Escrowed Cash including, without limitation,
representations as to authority to execute and deliver this Escrow Agreement,
notifications, receipts or instructions hereunder, and the Escrow Agent shall
not be liable to any person in any manner by reason of such reliance.
Section 6.4 Resignation of Escrow Agent. The Escrow Agent may resign at any
time upon 30 days prior written notice to SPI and to the Shareholders'
Representative. In such event, the Shareholders' Representative shall appoint a
successor escrow agent with the consent of SPI (not to be unreasonably withheld)
and shall give the Escrow Agent notice of the address of, a successor Escrow
Agent within such 30 day notice period. Upon the effective date of its
resignation, the Escrow Agent shall either (i) deliver the Escrowed Cash to such
successor escrow agent selected by the Shareholders' Representative with SPI's
consent as provided
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above, or (ii) if it has not been notified of such a selected successor escrow
agent, deliver the Escrowed Cash, if any is still being held, to a successor
escrow agent appointed by a court of competent jurisdiction upon the petition of
the Escrow Agent.
Section 6.5 Fees and Expenses of Escrow Agent In consideration of its
services hereunder the Escrow Agent shall be paid an escrow fee of ___________.
($________) (the "Escrow Fee"). SPI and the Shareholders shall each pay fifty
percent (50.0%) of the Escrow Fee to the Escrow Agent and shall deliver their
respective portions of the Escrow Fee to Escrow Agent simultaneously with the
delivery of the Escrowed Cash.
Section 6.6 Reliance on Counsel. Escrow Agent may from time to time consult
with legal counsel of its own choosing in the event of any disagreement, or
controversy, or question or doubt as to the construction of any of the
provisions of this Escrow Agreement or its duties hereunder; provided, however,
that prior to consulting any such counsel Escrow Agent shall give prior written
notice to SPI and Shareholders' Representative of its intent to do so. Unless
SPI and Shareholders' Representative jointly notify Escrow Agent in writing
within thirty (30) days after the date of such notice from Escrow Agent of their
agreement with Escrow Agent as to the resolution of the disagreement,
controversy, or question or doubt as to the construction of the Escrow Agreement
or Escrow Agent's duties hereunder, Escrow Agent may proceed to consult its
legal counsel and shall be entitled to be reimbursed for the fees and expenses
of such counsel.
ARTICLE 7
SHAREHOLDERS' REPRESENTATIVE
Section 7.1 Representatives. The initial Shareholders' Representative shall
be SC Investors, Inc., a Virginia corporation. The Shareholders may appoint a
new Shareholders' Representative by the affirmative vote of Shareholders who
held a majority of the shares of stock in CPG.
Section 7.2 Actions by the Shareholders' Representative. The signature of
the president, secretary, or any other duly authorized officer of the
Shareholders' Representative shall be sufficient to constitute an act of the
Shareholders' Representative.
ARTICLE 8
MISCELLANEOUS PROVISIONS
Section 8.1 Notices. All notices and communications hereunder shall be in
writing and shall be deemed to be duly given when delivered by hand or when
mailed
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by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Escrow Agent, to: _________________________
_________________________
_________________________
_________________________
If to the Shareholders'
Representative or CPG, to: SCI Investors, Inc.
101 Shockoe Slip, Suite O
Richmond, Virginia 23219
Attention: James E. Rogers
With a copy to: Williams, Mullen, Christian & Dobbins
P.O. Box 1320
Richmond1 Virginia 23210-1320
Attention: Randolph H. Lickey, Esq.
If to SPI, to: Specialty Paperboard, Inc.
Brudies Road
P.O. Box 498
Brattleboro, Vermont 05302
Attention: Chief Financial Officer
With a copy to: White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
or at such other address as any of the above may have furnished to the other
parties in writing in the manner described above.
Section 8.2 Integration. This Escrow Agreement and the Merger Agreement
shall constitute the entire agreement between the parties hereto with respect to
the escrow agent transactions contemplated hereby. With respect to the
obligations of the Escrow Agent hereunder, if any term of this Escrow Agreement
expressly conflicts with any term of the Merger Agreement, the term contained
within the Merger Agreement shall govern.
Section 8.3 Controlling Law. This Escrow Agreement shall be construed
under, and governed by, the laws of [Delaware].
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Section 8.4 Binding Agreement1 Assignment This Escrow Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, personal representatives, successors,
and assigns; provided, however, that no assignment of this Escrow Agreement or
any of the rights or obligations hereof shall relieve any party of its
obligations under this Escrow Agreement.
Section 8.5 Amendment. This Escrow Agreement may be amended only by a
written agreement executed by all of the parties hereto.
Section 8.6 Warranty of Authority. Each party executing this Escrow
Agreement warrants his, her or its authority to execute this Escrow Agreement.
Section 8.7 Execution in Counterparts. This Escrow Agreement may be
executed in multiple counterparts, each of which shall be deemed an original,
but all of which constitute one and the same instrument.
Section 8.8 Exhibits. All Exhibits attached hereto are made a part hereof
by this reference.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be executed as of the date and year first above written.
SPECIALTY PAPERBOARD, INC.
By:________________________________
Title:_____________________________
CPG ACQUISITION COMPANY
By:________________________________
Title:_____________________________
CPG INVESTORS INC.
By:________________________________
Title:_____________________________
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SCI INVESTORS INC.
By:________________________________
Title:_____________________________
[CRESTAR BANK]
By:________________________________
Title:_____________________________
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EXHIBIT A
SHAREHOLDERS
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EXHIBIT B
ROCHESTER ENVIRONMENTAL ESCROW AMOUNT
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<PAGE>
Exhibit IV
================================================================================
TAX INDEMNIFICATION AGREEMENT
Dated as of October 31, 1996
By and Among
SPECIALTY PAPERBOARD, INC.,
and
THE SHAREHOLDERS NAMED HEREIN
================================================================================
<PAGE>
INDEMNIFICATION AGREEMENT (this "Agreement") dated as of October 31, 1996
by and among Specialty Paperboard, Inc. (the "Parent"), and the former
stockholders of CPG Investors Inc. (the "Company") listed on the signature pages
hereof (each a "Shareholder" and collectively the "Shareholders"). Capitalized
terms herein which are not otherwise defined herein shall have the meanings
therefor set forth in the Merger Agreement described below.
WITNESSETH:
WHEREAS, the Parent, CPG Acquisition Company ("Acquisition") and the
Company have entered into a certain Merger Agreement, dated as of August 28,
1996 (the "Merger Agreement") whereby Acquisition will merge (the "Merger") with
and into the Company the Company will become a wholly-owned subsidiary of the
Parent (sometimes referred to herein as the "Surviving Corporation") and the
shareholders of the Company (other than those exercising appraisal rights)
collectively receive the Merger Consideration as provided in the Merger
Agreement;
WHEREAS, this Agreement is entered into pursuant to Section 2.18 of the
Merger Agreement as a condition precedent to the obligations of the Parent and
Acquisition to consummate the Merger; and
WHEREAS, capitalized terms used but not defined herein shall have the
respective meanings ascribed to such terms in the Merger Agreement.
NOW, THEREFORE, IT IS AGREED:
ARTICLE I.
INDEMNIFICATION
Section 1.1 Indemnification. The Shareholders hereby agree severally, to
indemnify and hold the Parent, its affiliates (including, without limitation,
the Surviving Corporation and its subsidiaries) and the successors to the
foregoing and their respective shareholders, officers, directors, employees and
agents, harmless on an after-tax basis from and against all Taxes, losses,
claims and expenses (including, without limitation, reasonable attorneys' fees
and expenses) to the extent of the indemnification provided in Section 9.7 of
the Merger Agreement; provided, however, that the limitations of such
indemnification to available proceeds held in the Escrow Account provided in
Section 9.7 of the Merger Agreement shall
<PAGE>
be disregarded for purposes of this Agreement; and provided, further, that in no
event shall the aggregate amount of each Shareholders' liability under this
Agreement exceed the product of (a) such Shareholder's Percentage and (b) the
aggregate amount distributed to the Shareholders pursuant to the Escrow
Agreement (excluding therefrom the distribution of any income earned on such
Escrow Account and excluding therefrom any amount distributed to the
Shareholders from the Rochester Environmental Escrow Amount).
Section 1.2 Indemnification Procedure. Procedures for notification,
cooperation and controversies shall be as set forth in Sections 9.3 and, 9.4 and
10.3 of the Merger Agreement; provided that in the event of a conflict between
Section 9.3 or 9.4 of the Merger Agreement, on the one hand, and Section 10.3 of
the Merger Agreement on the other hand, the provisions of Section 9.3 or 9.4 of
the Merger Agreement, as applicable, shall govern.
ARTICLE II
REPRESENTATIONS OF THE SHAREHOLDERS
Representations of the Shareholders. Each of Shareholders, severally, as to
such Shareholder, represents, warrants and agrees as follows:
Section 2.1 Authorization and Validity of Agreement. Such Shareholders has
the requisite power and authority to enter into this Agreement and to perform
such Shareholder's obligations hereunder. This Agreement has been duly executed
and delivered by such Shareholder and is a valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except to the extent that enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and to general equitable
principles.
Section 2.2 No Conflicts. The execution, delivery and performance of this
Agreement by such Shareholder will not (a) result in a violation of any law,
rule, ordinance, regulation, order, judgement or decree by which such
Shareholder is bound or (b) conflict with or result in a material breach of or
default under any mortgage, lien, lease, license, permit, agreement, contract or
instrument to which such Shareholder is a party or by which such Shareholder is
bound.
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<PAGE>
ARTICLE III
TERMINATION
Section 3.1 Termination. This Agreement shall terminate upon the expiration
of all statutes of limitations applicable to the matters contained in Section
3.14 of the Merger Agreement.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of Delaware applicable to agreements executed and to be performed solely
within such State.
Section 4.2 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 4.3 Notices. Any notice or other communication required or
permitted under this Agreement shall be sufficiently given if delivered in
person or sent by telecopy or by registered or certified mail, postage prepaid,
addressed as follows: if to the Parent, to Specialty Paperboard, Inc., Brudies
Road, P.O. Box 498, Brattleboro, Vermont 05302 (Facsimile Number (802) 257-5900)
Attention: Chief Financial Officer, with a copy to its counsel, White & Case,
1155 Avenue of the Americas, New York, New York 10036 (Facsimile Number (212)
354-8113), Attention: Frank L. Schiff, Esq.; if to the Shareholders, to SCI
Investors, Inc., 101 Stockoe Slip, Suite 0, Richmond, Virginia 23219, with
copies to Harris Williams & Co., 1313 East Main Street, Suite 300, Richmond,
Virginia 23219, Attention: Mr. Christopher H. Williams, and to Williams, Mullen,
Christian & Dobbins, 1021 E. Carey Street, 16th Floor, Richmond, Virginia 23219
(mailing address: P.O. Box 1320, Richmond, Virginia 23210), Attention Randolph
H. Lickey, Esq., or such other address or number as shall be furnished in
writing by any such party, and such notice or communication shall be deemed to
have been given as of the date so delivered, sent by facsimile or mailed.
Section 4.4 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
Section 4.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
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<PAGE>
Section 4.6 Entire Agreement. This Agreement, including the other documents
referred to herein and therein which form a part hereof and thereof, contain the
entire understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
Section 4.7 Amendments. This Agreement may not be changed orally, but only
by an agreement in writing signed by the Parent and the Shareholders.
Section 4.8 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
Section 4.9 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
Section 4.10 Jurisdiction. Any judicial proceeding brought against any of
the parties to this Agreement or any dispute arising out of this Agreement or
any matter related hereto shall be brought in the courts of the State of
Delaware or in a United States District Court for a District of Delaware, and,
by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the jurisdiction of such courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. The
foregoing consent to jurisdiction shall not be deemed to confer rights on any
Person other than the respective parties to this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Parent and the Shareholders have signed this
Agreement and the Company has caused its corporate name to be hereunto
subscribed by its officers thereunto duly authorized, all as of the day and year
first above written.
THE SHAREHOLDERS:
By:_____________________________
Dillwyn P. Paiste, IV
By:_____________________________
William W. Huffman, Jr.
By:_____________________________
Peter R. Hoppe
By:_____________________________
J. J. Lacina
By:_____________________________
Stanley S. Luczycki
By:_____________________________
Lawrence E. McEnroe
By:_____________________________
Homan B. Kinsley, Jr.
By:_____________________________
Brenton S. Halsey
<PAGE>
By:_____________________________
James E. Rogers
By:_____________________________
Ronald Shapiro
By:_____________________________
James O. Eubanks
AEA Investors Inc.
By:_____________________________
Name:
Title:
Winston Capital Fund I, LP
By:_____________________________
Name:
Title:
By:_____________________________
Robert F. Yousey
By:_____________________________
A. William Hamill
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<PAGE>
AWA Paper Mfg. Co., Ltd.
By:_____________________________
Name:
Title:
Miki Sangyo (USA) Inc.
By:_____________________________
Name:
Title:
The Tredegar Trust Company
Trustee u/a dated 12/2/86
f/b/o Blake F. Hamill
(EIN 13-6880133)
By:_____________________________
Name:
Title:
The Tredegar Trust Company
Trustee u/a dated 12/2/86
f/b/o Carter B. Hamill
(EIN 13-6880134)
By:_____________________________
Robert C. Wardwell
By:_____________________________
Murray E. Spruce
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<PAGE>
THE PURCHASER:
SPECIALTY PAPERBOARD, INC.
By:_____________________________
Name:
Title:
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<PAGE>
EX-2.2
Stock Purchase Agreement
================================================================================
STOCK PURCHASE AGREEMENT
Dated as of August 28, 1996
By and Among
SPECIALTY PAPERBOARD, INC.,
ARCON COATING MILLS, INC.,
ARCON HOLDINGS CORP.,
THE STOCKHOLDERS OF
ARCON HOLDINGS CORP.
and
VARIOUS OTHER PARTIES
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS........................................................... 4
ss.1.1 Definitions............................................. 4
ARTICLE II
PURCHASE OF STOCK; CANCELLATION OF OPTIONS AND WARRANTS............... 11
ss.2.1 Purchase of Stock; Cancellation of Option
and Warrants............................................ 11
ss.2.2 Price................................................... 12
ss.2.3 Cash on Hand............................................ 14
ss.2.4 Closing................................................. 15
ARTICLE III
REPRESENTATIONS OF THE COMPANIES...................................... 15
ss.3. Representations of the Company.......................... 15
ss.3.1 Existence and Good Standing............................. 15
ss.3.2 Capital Stock........................................... 16
ss.3.3 Authorization and Validity of this
Agreement............................................... 17
ss.3.4 Subsidiaries and Investments............................ 18
ss.3.5 Financial Statements; No Material Changes............... 18
ss.3.6 Books and Records....................................... 20
ss.3.7 Title to Properties; Encumbrances....................... 20
ss.3.8 Real Property........................................... 22
ss.3.9 Intellectual Property................................... 22
ss.3.10 Leases................................................. 22
ss.3.11 Material Contracts..................................... 23
ss.3.12 Consents and Approvals; No Violations.................. 25
ss.3.13 Litigation............................................. 26
ss.3.14 Taxes.................................................. 27
ss.3.15 Liabilities............................................ 30
ss.3.16 Insurance.............................................. 30
ss.3.17 Compliance with Laws................................... 31
ss.3.18 Employment Relations................................... 31
ss.3.19 Employee Benefit Plans................................. 32
ss.3.20 Interests in Customers, Suppliers, etc................. 40
(i)
<PAGE>
Page
----
ss.3.21 Environmental Laws and Regulations..................... 41
ss.3.22 Bank Accounts, Powers of Attorney...................... 44
ss.3.23 Compensation of Employees.............................. 44
ss.3.24 Conduct of Business.................................... 45
ss.3.25 Customer Relations..................................... 45
ss.3.26 Condition of Assets.................................... 45
ss.3.27 Broker's or Finder's Fees.............................. 46
ARTICLE IV
REPRESENTATIONS OF THE SELLERS........................................ 46
ss.4. Representations of the Seller........................... 46
ss.4.1 Ownership of Stock...................................... 46
ss.4.2 Authorization and Validity of Agreement................. 47
ss.4.3 Restrictive Documents................................... 48
ss.4.4 Consents................................................ 48
ss.4.5 Broker's or Finder's Fees............................... 49
ARTICLE V
REPRESENTATIONS OF THE PURCHASER...................................... 49
ss.5. Representations of the Purchaser........................ 49
ss.5.1 Existence and Good Standing; Power and
Authority............................................... 49
ss.5.2 Restrictive Documents; No Legal Bar..................... 50
ss.5.3 Purchase for Investment................................. 50
ss.5.4 Broker's or Finder's Fees............................... 51
ss.5.5 Litigation; Disputes.................................... 51
ss.5.6 Consents................................................ 51
ARTICLE VI
TRANSACTIONS PRIOR TO THE CLOSING DATE................................ 52
ss.6.1 Conduct of Business of the Companies.................... 52
ss.6.2 Exclusive Dealing....................................... 54
ss.6.3 Review of the Companies................................. 55
ss.6.4 Reasonable Efforts...................................... 55
ss.6.5 Agreement by the Purchaser Regarding No
Other Representations or Warranties by the
Sellers................................................. 56
ss.6.6 Satisfaction of Financing Condition..................... 56
ARTICLE VII
CONDITIONS TO THE PURCHASER'S OBLIGATIONS............................. 57
ss.7. Conditions to the Purchaser's Obligations............... 57
(ii)
<PAGE>
Page
----
ss.7.1 Opinions of Counsel..................................... 57
ss.7.2 Good Standing and Other Certificates.................... 57
ss.7.3 [Intentionally Omitted]................................. 58
ss.7.4 Truth of Representations and Warranties................. 58
ss.7.5 Performance of Agreements............................... 58
ss.7.6 No Litigation Threatened................................ 59
ss.7.7 Third Party Consents; Governmental
Approvals............................................... 59
ss.7.8 Termination of Security Interests....................... 59
ss.7.9 Resignations............................................ 59
ss.7.10 Financing.............................................. 59
ss.7.11 [Intentionally omitted]................................ 60
ss.7.12 FIRPTA................................................. 60
ss.7.13 HSR Act................................................ 60
ss.7.14 Escrow Agreement....................................... 60
ARTICLE VIII
CONDITIONS TO THE COMPANIES AND
THE SELLERS' OBLIGATIONS.............................................. 60
ss.8. Conditions to the Seller's Obligations.................. 60
ss.8.1 Opinions of Counsel..................................... 60
ss.8.2 Truth of Representations and Warranties................. 61
ss.8.3 Third Party Consents; Governmental
Approvals............................................... 61
ss.8.4 Performance of Agreements............................... 61
ss.8.5 No Litigation Threatened................................ 62
ss.8.6 HSR Act................................................. 62
ss.8.7 Warrants................................................ 62
ARTICLE IX
TAX MATTERS........................................................... 62
ss.9.1 Tax Returns............................................. 62
ss.9.2 Overlap Period, Refunds, Tax Benefits................... 68
ss.9.3 Cooperation; Audits..................................... 71
ss.9.4 Controversies........................................... 73
ss.9.5 Transfer Taxes.......................................... 75
ss.9.6 Amended Returns......................................... 75
ss.9.7 Non-foreign Person Affidavit............................ 76
ss.9.8 Indemnification......................................... 76
ss.9.9 FSE Tax Indemnity....................................... 78
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION........................ 80
(iii)
<PAGE>
Page
----
ss.10.1 Survival of Representations............................ 80
ss.10.2 Indemnification........................................ 81
ss.10.3 Indemnification Procedure.............................. 85
ARTICLE XI
TERMINATION........................................................... 91
ss.11.1 Termination............................................ 91
ss.11.2 Effect of Termination.................................. 92
ARTICLE XII
MISCELLANEOUS......................................................... 93
ss.12.1 Knowledge.............................................. 93
ss.12.2 Expenses............................................... 93
ss.12.3 Governing Law.......................................... 94
ss.12.4 Captions............................................... 94
ss.12.5 Publicity.............................................. 94
ss.12.6 Notices................................................ 95
ss.12.7 Parties in Interest.................................... 96
ss.12.8 Counterparts........................................... 96
ss.12.9 Entire Agreement....................................... 96
ss.12.10 Amendments............................................ 97
ss.12.11 Severability.......................................... 97
ss.12.12 Third Party Beneficiaries............................. 98
ss.12.13 Jurisdiction.......................................... 98
ss.12.14 Action by Sellers..................................... 98
ss.12.15 Sellers' Representative............................... 99
ss.12.16 Assignment............................................100
ss.12.17 Construction..........................................100
ss.12.18 Schedules.............................................100
SCHEDULES
Schedule 3.2 Capital Stock
Schedule 3.5(b) Financial Statements
Schedule 3.7 Title to Properties; Encumbrances.
Schedule 3.8 Real Property.
Schedule 3.9 Intellectual Property
Schedule 3.10 Leases
Schedule 3.11 Material Contracts
Schedule 3.12 Consents and Approvals; No Violations
Schedule 3.13 Litigation
Schedule 3.14 Taxes
(iv)
<PAGE>
Schedule 3.15 Liabilities
Schedule 3.16 Insurance
Schedule 3.17 Compliance with Laws
Schedule 3.18 Employment Relations
Schedule 3.19 Employee Benefit Plans
Schedule 3.20 Interests in Customers, Suppliers, etc.
Schedule 3.21 Environmental Laws and Regulations
Schedule 3.22 Bank Accounts, Powers of Attorney
Schedule 3.23 Compensation of Employees
Schedule 3.24 Conduct of Business
Schedule 3.25 Customer Relations
Schedule 4.4 Consents
Schedule 5.6 Third Party Consents
EXHIBITS
Exhibit A Form of Escrow Agreement
ANNEXES
Annex I Stock Ownership
Annex II Percentage Interests
(v)
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of August 28, 1996 by
and among SPECIALTY PAPERBOARD, INC., a Delaware corporation (the "Purchaser"),
the stockholders (the "Stockholders") of ARCON HOLDINGS CORP., a Delaware
corporation ("Arcon Holdings") and the sole stockholder of ARCON COATING MILLS,
INC., a Delaware corporation (the "Company"), the option holders ("the
Optionholders") listed on Annex I attached hereto, Arcon Holdings and the
Company. Each of the Stockholders and the Optionholders shall be referred to
herein individually as a "Seller" and collectively as the "Sellers."
W I T N E S S E T H :
WHEREAS, Arcon Holdings owns all of the issued and outstanding shares of
common stock, $.01 par value, of the Company (collectively the "Company Stock"),
such shares being all of the outstanding shares of the capital stock of the
Company;
WHEREAS, each of the Sellers identified as a Common Stock Seller under
Column A of Annex I attached hereto (the "Common Stock Holders") is the holder
of the number of shares of common stock, $0.01 par value, of Arcon Holdings (the
"Common Stock"), set forth opposite such Seller's name in
<PAGE>
Column B of Annex I attached hereto, which shares of Common Stock constitute all
of the issued and outstanding shares of Common Stock of Arcon Holdings;
WHEREAS, each of the Sellers identified as a Series A Holder under Column
A of Annex I attached hereto (the "Series A Stock Holders") is the holder of the
number of shares of Series A Non-Voting Convertible Preferred Stock, $0.01 par
value, of Arcon Holdings (the "Series A Stock") set forth opposite such Seller's
name in Column B of Annex I attached hereto, which shares of Series A Stock
constitute all of the issued and outstanding shares of Series A Stock of Arcon
Holdings;
WHEREAS, each of the Sellers identified as a Series B Holder under Column
A of Annex I attached hereto (the "Series B Stock Holders") is the holder of the
number of shares of Series B (Voting) Convertible Preferred Stock, $0.01 par
value, of Arcon Holdings (the "Series B Stock" and together with the Series A
Stock, the "Preferred Stock" and together with the Common Stock and the Series A
Stock, the "Stock") set forth opposite such Seller's name in Column B of Annex I
attached hereto, which shares of Series B Stock constitute all of the issued and
outstanding shares of Series B Stock of Arcon Holdings;
WHEREAS, each of the Optionholders (collectively with the Common Stock
Holders, the Series A Stock Holders and the
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<PAGE>
Series B Stock Holders, the "Common Stock Sellers") is the holder of options
(the "Options") to acquire the number of shares of Common Stock set forth
opposite such Seller's name in Column B of Annex I attached hereto, which
Options constitute all of the issued and outstanding options to purchase Common
Stock or any other capital stock of Arcon Holdings;
WHEREAS, the Bank is the holder of warrants (the "Warrants") to acquire
85,000 shares of Common Stock, which Warrants constitute all of the issued and
outstanding warrants to purchase Common Stock or any other capital stock of
Arcon Holdings;
WHEREAS, the Optionholders desire to cancel the Options in consideration
of payment by the Purchaser to each Optionholder of the Net Option Payment;
WHEREAS, prior to the Closing, Arcon Holdings intends to repurchase the
Warrants from the Bank and cancel the Warrants; and
WHEREAS, it is the intention of the parties hereto that, upon consummation
of the purchase and sale of the Stock, the payment of the Net Option Payment and
the cancellation of the Options and the Warrants pursuant to this Agreement, the
Purchaser shall own all of the outstanding shares (and rights to acquire shares)
of capital stock of Arcon Holdings.
NOW, THEREFORE, IT IS AGREED:
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<PAGE>
ARTICLE I
DEFINITIONS
ss.1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the respective meanings specified
therefor below (such meanings to be equally applicable to both the singular and
plural forms of the terms defined).
"Aggregate Closing Payment" shall have the meaning specified in Section
2.2.
"Agreement" shall mean this Agreement, as amended, modified or
supplemented from time to time.
"Arcon Holdings" shall have the meaning specified in the preamble to this
Agreement.
"Audited Statements" shall have the meaning specified in Section 3.5.
"Balance Sheet" shall have the meaning specified in Section 3.5.
"Balance Sheet Date" shall have the meaning specified in Section 3.5.
"Bank" shall mean Heller Financial, Inc.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which banks located in New York, New York shall be authorized or required by
law to close.
"Claim" shall have the meaning specified in Section 10.3
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<PAGE>
"Closing" shall have the meaning specified in Section 2.4.
"Closing Date" shall have the meaning specified in Section 2.4.
"Code" shall have the meaning specified in Section 3.14.
"Common Stock" shall have the meaning specified in the preamble to this
Agreement.
"Common Stock Holders" shall have the meaning specified in the preamble to
this Agreement.
"Common Stock Sellers" shall have the meaning specified in the preamble to
this Agreement.
"Companies" shall have the meaning specified in Article III.
"Company" shall have the meaning specified in the preamble to this
Agreement.
"Company Property" shall have the meaning specified in Section 3.21.
"Company Stock" shall have the meaning specified in the preamble to this
Agreement.
"Confidentiality Agreement" shall have the meaning specified in Section
6.3.
"Damages" shall have the meaning specified in Section 10.2.
"Deductions" shall have the meaning specified in Section 9.2.
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<PAGE>
"Determination" shall have the meaning specified in Section 10.3.
"Dispute Notice" shall have the meaning specified in Section 9.1.
"Employee Benefit Plans" shall have the meaning specified in Section 3.19.
"Encumbrances" shall have the meaning specified in Section 3.7.
"Environmental Claims" shall have the meaning specified in Section 3.21.
"Environmental Law" shall have the meaning specified in Section 3.21.
"ERISA" shall have the meaning specified in Section 3.19.
"Escrow Account" shall have the meaning specified in Section 2.2.
"Escrow Agent" shall have the meaning specified in Section 2.2.
"Escrow Agreement" shall have the meaning specified in Section 7.14.
"Escrow Amount" shall have the meaning specified in Section 2.2(b).
"FSE Tax Indemnity" shall mean the Stock Purchase Agreement among Arcon
Holdings, Arcon Acquisition Corp., FSE Holdings, Inc. and the Company, dated as
of April 14, 1994.
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<PAGE>
"FSE Indemnifiable Amounts" shall have the meaning specified in Section
9.9.
"GAAP" shall have the meaning specified in Section 3.5. "Hazardous
Materials" shall have the meaning specified in Section 3.21.
"HSR Act" shall have the meaning specified in Section 6.4.
"Indemnified Party" shall have the meaning specified in Section 10.3.
"Indemnifiable Amounts" shall have the meaning specified in Section
10.3(f).
"Indemnifying Party" shall have the meaning specified in Section 10.3.
"Indemnity Response" shall have the meaning specified in Section 10.3.
"Independent Auditor" shall have the meaning specified in Section 9.1.
"Insurable Amounts" shall have the meaning specified in Section 10.3(f).
"Intellectual Property" shall have the meaning specified in Section 3.9.
"IRS" shall have the meaning set forth in Section 3.19.
"Material Adverse Effect" shall have the meaning specified in Section 3.1.
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<PAGE>
"Net Option Payment" shall mean, as to each Optionholder, the portion of
the Aggregate Closing Payment payable to each Optionholder pursuant to Section
2.2(d) plus his respective portion of the Escrow Amount set forth under Column C
of Annex I.
"Option" shall have the meaning specified in the preamble to this
Agreement.
"Optionholders" shall have the meaning specified in the preamble to this
Agreement.
"Outstanding Indebtedness" shall mean the outstanding indebtedness for
borrowed money of Arcon Holdings and the Company at the Closing (including
unpaid interest thereon and penalties, if any, associated with the repayment
thereof).
"Overlap Period" shall have the meaning specified in Section 9.2.
"PBGC" shall have the meaning set forth in Section 3.19.
"Percentage Interest" of any Person shall mean the percentages as set
forth across from such Person's name on Annex II attached hereto.
"Permitted Encumbrances" shall have the meaning specified in Section 3.7.
"Person" shall have the meaning specified in Section 3.11.
"Personal Liability Amount" shall have the meaning specified in Section
10.2.
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<PAGE>
"Pre-Closing Period" shall have the meaning specified in Section 3.14.
"Preferred Stock" shall have the meaning specified in the preamble to this
Agreement.
"Purchaser" shall have the meaning specified in the preamble to this
Agreement.
"Real Property" shall have the meaning set forth in Section 3.8.
"Refund Requests" shall have the meaning specified in Section 9.1(a).
"Required Sellers" shall mean such Sellers who hold in the aggregate more
than 50% of the then issued and outstanding Common Stock held by all Sellers as
of immediately prior to the Closing (calculated (i) as if all issued and
outstanding shares of Preferred Stock were converted into shares of Common Stock
and (ii) as if all Options have been fully exercised into shares of Common
Stock).
"Returns" shall have the meaning specified in Section 3.14.
"Seller" and "Sellers" shall have the meanings specified in the preamble
to this Agreement.
"Sellers' Liability Amount" shall have the meaning set forth in Section
10.2.
"Sellers' Representative" shall have the meaning specified in Section 9.1.
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<PAGE>
"Series A Stock" shall have the meaning specified in the preamble to this
Agreement.
"Series A Stock Holders" shall have the meaning specified in the preamble
to this Agreement.
"Series B Stock" shall have the meaning specified in the preamble to this
Agreement.
"Series B Stock Holders" shall have the meaning specified in the preamble
to this Agreement.
"Single Employer Plan" shall have the meaning set forth in Section 3.19.
"Stock" shall have the meaning specified in the preamble to this
Agreement.
"Stockholder" shall have the meaning specified in the preamble to this
Agreement.
"Tax Matter" shall have the meaning specified in Section 9.4.
"Taxes" means all taxes, assessments, charges, duties, fees, levies or
other governmental charges, including, without limitation, all Federal, state,
local, foreign and other income, capital, franchise, profits, capital gains,
capital stock, transfer, sales, use, occupation, property, excise, severance,
windfall profits, stamp, license, payroll, withholding and other taxes,
assessments, charges, duties, fees, levies or other governmental charges of any
kind whatsoever (whether payable directly or by withholding and whether or
-10-
<PAGE>
not requiring the filing of a Return), all estimated taxes, deficiency
assessments, additions to tax, penalties and interest and shall include any
liability for such amounts as a result either of being a member of a combined,
consolidated, unitary or affiliated group or of a contractual obligation to
indemnify any person or other entity.
"Termination Date" shall have the meaning specified in Section 2.4.
"Unaudited Statements" shall have the meaning specified in Section 3.5.
"Warrants" shall have the meaning specified in the preamble to this
Agreement.
ARTICLE II
PURCHASE OF STOCK; CANCELLATION OF OPTIONS AND WARRANTS
ss.2.1 Purchase of Stock; Cancellation of Option and Warrants. Subject to
the terms and conditions set forth in this Agreement, the Purchaser agrees to
purchase from each of the Sellers on the Closing Date and each of the Sellers
agrees to sell, assign, transfer and deliver to the Purchaser on the Closing
Date, the shares of Stock so owned by such Seller. Subject to the terms and
conditions of this Agreement, each of the Optionholders agrees to cancel such
Optionholder's Options and to deliver to the Purchaser on the Closing Date, the
cancelled Options. Subject to the terms of
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this Agreement, the Company agrees to cancel the Warrants and to deliver to the
Purchaser on the Closing Date the cancelled Warrants. The certificates
representing the Stock shall be duly endorsed in blank, or accompanied by stock
powers duly executed in blank by each of the Sellers, transferring the same to
the Purchaser with all necessary transfer tax and other revenue stamps affixed
and cancelled. Each of the Sellers agrees to cure any deficiencies with respect
to the endorsement of the certificates representing the Stock or with respect to
the stock power accompanying any such certificates.
ss.2.2 Price. In consideration for the sale to the Purchaser by Sellers of
the Stock and the cancellation by the Optionholders of the Options, the
Purchaser shall deliver at the Closing an aggregate cash amount equal to
$32,000,000 (such amount, the "Aggregate Closing Payment") by wire transfer in
immediately available funds as follows:
(a) to the escrow agent (the "Escrow Agent") to be held in an escrow
account (the "Escrow Account") pursuant to the provisions of the Escrow
Agreement as contemplated by Section 10.2 hereof, an amount equal to $2,000,000
(the "Escrow Amount"), representing the sum of that portion of the Aggregate
Closing Payment to be held in the Escrow Account as set forth under Column C of
Annex I attached hereto;
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(b) to the Bank, the amount of Outstanding Indebtedness owed to the Bank
on the Closing Date to an account specified to the Purchaser at least two
Business Days prior to the Closing (it being acknowledged and agreed that it is
the intent of the parties hereto that such amount shall be deemed to have been
paid to the Bank immediately prior to the Closing);
(c) to the Shareholders' Representative an amount equal to $300,000 to an
account specified by the Shareholders' Representative at least two Business Days
prior to the Closing; and each Seller hereby acknowledges and agrees that such
amount, together with any and all earnings in respect thereof (collectively, the
"Sellers Amount"), will be used by the Sellers' Representative in its sole
discretion to pay any and all costs and expenses of the Sellers' under this
Agreement or in connection with the execution, delivery, performance or
consummation of the transactions contemplated hereby, including, without
limitation, to pay all costs and expenses of the Sellers' attorneys and
accountants, to pay Taxes, expenses and other liabilities of the Sellers arising
under Article IX (including, without limitation in connection with the
preparation and filing of Tax Returns and Refund Requests) and Article X, and to
pay the costs and expenses incurred by the Sellers' Representative in connection
with or relating to its acting as Sellers' Representative hereunder
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or under the Escrow Agreement. Each Seller hereby irrevocably and
unconditionally authorizes the Sellers' Representative to utilize in its sole
discretion the Sellers Amount to make any and all of the foregoing payments and
to otherwise utilize the Sellers Amount as provided above. In addition, each
Seller acknowledges that the Sellers' Representative shall not be responsible
for determining the foregoing amounts and that the Sellers Amount may not be
sufficient to pay in full all of the foregoing amounts;
(d) to each of the Optionholders (i) the balance of the Aggregate Closing
Payment multiplied by his Percentage Interest minus (ii) the aggregate exercise
price of the Options held by such Optionholder to the account specified by each
of the Optionholders at least two Business Days prior to Closing; each of the
Sellers hereby acknowledges and consents to the payment of the Net Option
Payment to each of the Optionholders; and
(e) to each of the Sellers (other than the Optionholders) the balance of
the Aggregate Closing Payment multiplied by the Percentage Interest of such
Seller to the account specified by each of the Sellers to the Purchaser at least
two Business Days prior to Closing.
ss.2.3 Cash on Hand. The Purchaser agrees and acknowledges that, any and
all cash on hand of the Companies (or either of them) at or prior to the Closing
shall be
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utilized in the sole discretion of the Companies including, without limitation,
to pay bonuses to employees of the Companies, to prepay Outstanding Indebtedness
and/or to purchase the Warrants.
ss.2.4 Closing. The purchases and sales referred to in Section 2.1 (the
"Closing") shall take place at 10:00 A.M. at the offices of White & Case, New
York, New York within 10 Business Days after the later of the termination or
expiration of the applicable waiting period (and any extension thereof) under
the HSR Act or the satisfaction or waiver of all other conditions precedent set
forth in Articles VII and VIII hereof, or at such other time and date (not later
than October 31, 1996 (the "Termination Date")) as the parties hereto shall
designate in writing. Such date is herein referred to as the "Closing Date."
ARTICLE III
REPRESENTATIONS OF THE COMPANIES
ss.3. Representations of the Company. Each of Arcon Holdings and the
Company (collectively, the "Companies") hereby jointly and severally represents
and warrants as of the date hereof to the Purchaser as follows:
ss.3.1 Existence and Good Standing. Each of the Companies is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
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Each of the Companies has the requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. Each of the Companies is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the character or location
of the properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or license necessary, except where the
failure to be so duly qualified or licensed would not have a material adverse
effect on the business, operations, financial condition or results of operations
of the Companies taken as a whole (a "Material Adverse Effect").
ss.3.2 Capital Stock. Arcon Holdings has an authorized capitalization
consisting of (i) 1,500,000 shares of Common Stock of which 41,175.1 shares are
issued and outstanding, (ii) 100,000 shares of Class B Common Stock, $0.01 par
value per share, none of which are issued and outstanding on the date hereof and
none of which will be issued and outstanding at Closing, (iii) 32,000 shares of
Series A Stock of which 31,944.8 shares are issued and outstanding, and (iv)
6,500 shares of Series B Stock of which 6,225.3 shares are issued and
outstanding. The Company has an authorized capitalization consisting of 1,000
shares of Company Stock, of which 1,000 shares are issued and outstanding and
held of record and beneficially by Arcon Holdings. All outstanding shares
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of capital stock of each of Arcon Holdings and the Company have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
set forth on Schedule 3.2 attached hereto, there are no outstanding
subscriptions, options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or other agreements of any character providing for the
purchase, issuance or sale of any shares of the capital stock of Arcon Holdings
or the Company.
ss.3.3 Authorization and Validity of this Agreement. Each of the Companies
has the requisite corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement by each of the Companies and the performance of
their respective obligations hereunder have been duly authorized and approved by
their respective Board of Directors and no other corporate action on the part of
the Companies or action by the stockholders of the Companies is necessary to
authorize the execution, delivery and performance of this Agreement by the
Companies. This Agreement has been duly executed and delivered by each of the
Companies and, assuming due execution of this Agreement by the Purchaser, is a
valid and binding obligation of each of the Companies enforceable against each
of the Companies in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy,
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insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
ss.3.4 Subsidiaries and Investments. Neither Arcon Holdings (except for
its ownership of the Company Stock) nor the Company owns any capital stock or
other equity or ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity.
ss.3.5 Financial Statements; No Material Changes. (a) The Company has
heretofore furnished the Purchaser with consoli- dated audited balance sheets of
Arcon Holdings and the Com- pany and audited balance sheets of the Company as of
October 31, 1994, and October 31, 1995, respectively, together with related
consolidated statements of operation, stockholders' equity and cash flows for
the periods then ended, together with the report of Price Waterhouse LLP
(collectively, the "Audited Statements"). The Audited Statements, including the
footnotes thereto, have been prepared in accordance with generally accepted
accounting principles consistently applied by the Companies throughout the
periods indicated ("GAAP") and fairly present in all material respects the
consolidated financial position of the Companies and the financial position of
the Company, as applicable, at the respective dates thereof, and the
consolidated results of the operations and cash flows of the Companies and the
results of operations
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and cash flows of the Company for the respective periods indicated.
(b) The Company has also heretofore furnished the Purchaser with a
consolidated unaudited balance sheet of the Companies as of June 30, 1996,
together with related consolidated statements of operations for the period then
ended (collectively, the "Unaudited Statements"). The Unaudited Statements have
been prepared in accordance with GAAP (except that the Unaudited Statements do
not contain footnotes and do not reflect normal year end adjustments) and,
except as disclosed on Schedule 3.5(b), fairly present in all material respects
the consolidated financial position of the Companies at its date thereof and the
results of the operations of the Companies for the period indicated. The
unaudited balance sheet of the Companies dated June 30, 1996, is hereinafter
referred to as the "Balance Sheet" and June 30, 1996, is hereinafter referred to
as the "Balance Sheet Date."
(c) Since October 31, 1995, there has been no (i) material adverse change
in the business, operations, financial condition or results of operations of the
Companies or (ii) material damage, destruction or loss to any asset or property,
tangible or intangible, of the Companies which materially and adversely affects
the ability of the Companies to conduct their respective business.
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ss.3.6 Books and Records. The minute books of Arcon Holdings, as
previously made available to the Purchaser and its representatives, contain
materially accurate records of all meetings of, and corporate actions taken by
(including action taken by written consent), their respective shareholders and
Boards of Directors. At Closing all of the books and records of Arcon Holdings
will be in the possession of Arcon Holdings and the Company.
ss.3.7 Title to Properties; Encumbrances. Except as set forth on Schedule
3.7 attached hereto and except for such properties and assets which have been
sold or otherwise disposed of in the ordinary course of business, each of Arcon
Holdings and the Company has good title to its material properties and assets
(real and personal, tangible and intangible) owned by it (and good leasehold
title to the material properties and assets leased by it), including, without
limitation, the material properties and assets reflected in the Balance Sheet,
subject to no encumbrance, lien, charge or other restriction of any kind or
character ("Encumbrances"), except for (i) Encumbrances reflected in the Balance
Sheet, (ii) Encumbrances for current taxes, assessments or governmental charges
or levies on property not yet due and delinquent, (iii) Encumbrances arising by
operation of law, (iv) pledges or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insur-
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ance and other social security legislation, (v) easements, rights-of-way,
restrictions and other similar Encumbrances previously incurred in the ordinary
course of business which, in respect of properties or assets of the Companies
are not material and which, in the case of such encumbrances on the assets or
properties of the Companies, do not materially detract from the value of any
such properties or assets or materially interfere with any present use of such
properties or assets, (vi) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Encumbrances arising in the ordinary course of
business which are not overdue for a period of more than 90 days or which are
being contested in good faith by appropriate proceedings, (vii) deposits to
secure the performance of bids, contracts (other than for borrowed money),
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business,
(viii) statutory and contractual Encumbrances on the property of the Companies
in favor of landlords securing leases, and (ix) Encumbrances in existence on the
Closing Date and described on Schedule 3.7 attached hereto (Encumbrances of the
type described in clauses (i) through (ix) above are hereinafter sometimes
referred to as "Permitted Encumbrances").
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ss.3.8 Real Property. Schedule 3.8 attached hereto contains an accurate
and complete list of all real property owned in whole or in part by Arcon
Holdings or the Company (the "Real Property"). With respect to all of the
buildings, structures and appurtenances situated on the Real Property, each of
the Companies has adequate rights of ingress and egress for operation of the
business of the Companies in the ordinary course consistent with past practice.
None of such buildings, structures or appurtenances, nor the operation or
maintenance thereof, violates any restrictive covenant or encroaches, on any
property owned by others, except for such violations, encumbrances or
encroachments which would not have a Material Adverse Effect.
ss.3.9 Intellectual Property. All licenses, patents, trade names,
trademarks and service marks (collectively, the "Intellectual Property") owned
by Arcon Holdings or the Company are set forth on Schedule 3.9 attached hereto.
All such Intellectual Property is, to the Companies' knowledge, in full force
and effect and neither Arcon Holdings nor the Company has received any written,
or to its knowledge, oral notice of any event, inquiry, investigation or
proceeding threatening the validity of any such Intellectual Property, except as
set forth on Schedule 3.9.
ss.3.10 Leases. Schedule 3.10 attached hereto contains a list of all
leases or sub-leases to which Arcon Holdings or
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the Company is a party requiring an annual aggregate payment of at least
$25,000. Except as otherwise set forth in Schedule 3.10 attached hereto, each
lease or sub-lease set forth in Schedule 3.10 is in full force and effect; all
rents and additional rents due to date from Arcon Holdings or the Company on
each such lease or sub-lease have been paid; neither Arcon Holdings nor the
Company has received written notice (nor, to the knowledge of the Companies,
oral notice) that it is in material default under any such lease or sublease;
and, to the knowledge of the Companies, there exists no default by either of the
Companies or any other party under such lease or sub-lease, except for such
defaults which would not have a Material Adverse Effect.
ss.3.11 Material Contracts. Except as set forth on Schedule 3.10 and
Schedule 3.11 attached hereto, neither Arcon Holdings nor the Company is bound
by (a) any agreement, contract or commitment that involves the performance of
services or the delivery of goods and/or materials by it of an amount or value
in excess of $25,000, (b) any agreement, contract or commitment not in the
ordinary course of business, (c) any agreement, indenture or other instrument
which contains restrictions with respect to payment of dividends or any other
distribution in respect of its capital stock, (d) any agreement, contract or
commitment relating to capital expenditures in excess of $25,000, (e) any
agreement,
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indenture or instrument relating to indebtedness, liability for borrowed money
or the deferred purchase price of property (excluding trade payables in the
ordinary course of business), (f) any loan or advance to, or investment in, any
individual, partnership, joint venture, corporation, trust, unincorporated
organization, government or other entity (each a "Person"), any agreement,
contract or commitment relating to the making of any such loan, advance or
investment or any agreement, contract or commitment involving a sharing of
profits, other than loans or advances to employees of Arcon Holdings and the
Company in the ordinary course of business not in excess of $5,000 in any
individual instance (g) any guarantee or other contingent liability in respect
of any indebtedness or obligation of any Person (other than in the ordinary
course of business), (h) any management service, consulting or any other similar
type of contract, (i) any agreement, contract or commitment limiting the ability
of Arcon Holdings or the Company to engage in any line of business or to compete
with any Person, (j) any warranty, guaranty or other similar undertaking with
respect to a contractual performance extended by Arcon Holdings or the Company
other than in the ordinary course of business, or (k) any amendment,
modification or supplement in respect of any of the foregoing. Except as
otherwise set forth on Schedule 3.11, each contract or agreement set forth on
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Schedule 3.11 is, to the knowledge of the Companies, in full force and effect
and there exists no default or event of default by the Companies thereunder,
except for such defaults which would not have a Material Adverse Effect.
ss.3.12 Consents and Approvals; No Violations. Except as set forth in
Schedule 3.12 attached hereto, the execution and delivery of this Agreement by
Arcon Holdings and the Company and the consummation of the transactions
contemplated hereby to be consummated by the Companies (a) will not violate or
contravene any provision of the Certificate of Incorporation or By-laws of Arcon
Holdings or the Company, (b) except as may be required under the HSR Act will
not violate or contravene any statute, rule, regulation, order or decree of any
public body or authority by which Arcon Holdings or the Company is bound or by
which any of its respective properties or assets are bound, (c) except as may be
required under the HSR Act will not require by Arcon Holdings or the Company any
filing with, or permit, consent or approval of, or the giving of any notice to,
any governmental or regulatory body, agency or authority, or any other Person
and (d) will not result in a violation or breach of, conflict with, constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation, payment or acceleration) under, or
result in the creation of any Encumbrance upon any of the properties or assets
of Arcon
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Holdings or the Company under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, franchise, permit, agreement, lease,
franchise agreement or any other instrument or obligation to which Arcon
Holdings or the Company is a party, or by which it or any of their respective
properties or assets is bound, except, in the case of clauses (c) and (d), for
such filing, permit, consent or approval, the absence of which, and violations,
breaches, defaults, conflicts and Encumbrances which, in the aggregate would not
have a Material Adverse Effect.
ss.3.13 Litigation. Except as set forth on Schedule 3.13 attached hereto,
there is no action, suit, proceeding at law or in equity, arbitration or
administrative or other proceed- ing by or before (or to the knowledge of the
Companies any investigation by) any governmental or other instrumentality or
agency, pending, or, to the knowledge of the Companies, threatened, against
Arcon Holdings or the Company or any material portion of their respective
properties or rights which, if adversely determined, would materially and
adversely affect the right or ability of Arcon Holdings or the Company to carry
on its business as now conducted, or which would have a Material Adverse Effect;
and neither Arcon Holdings nor the Company knows of any valid basis for any such
action, proceeding or investigation. Neither Arcon
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Holdings nor the Company is subject to any judgment, order or decree entered in
any lawsuit or proceeding which would have a Material Adverse Effect.
ss.3.14 Taxes. Except as set forth in Schedule 3.14: (a) Tax Returns. Each
of Arcon Holdings and the Company has timely filed or caused to be timely filed
or will timely file or cause to be timely filed with the appropriate taxing
authorities all returns, statements, forms and reports for Taxes ("Returns")
that are required to be filed by, or with respect to, either of them on or prior
to the Closing Date. The Returns have accurately reflected and will accurately
reflect all material liability for Taxes of Arcon Holdings and the Company for
the periods and the type covered thereby.
(b) Payment of Taxes. All material Taxes and Tax liabilities of Arcon
Holdings and the Company for all taxable years or periods that end on or before
the Closing Date and, with respect to any taxable year or period beginning
before and ending after the Closing Date, the portion of such taxable year or
period ending on and including the Closing Date ("Pre-Closing Periods") have
been timely paid or accrued and adequately disclosed on the books and records of
the Companies in accordance with GAAP.
(c) Other Tax Matters. (i) (A) there are no audits or other examinations
of Taxes by the appropriate tax authori- ties of any nation, state or locality
currently in progress
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(or to the knowledge of Companies scheduled as of the Closing Date to be
conducted), (B) there have been no audits or other examinations relating to
Federal income taxes of Arcon Holdings or the Company which have resulted in an
adjustment in Federal income tax liability, (C) there are no taxable years or
other taxable periods of Arcon Holdings or the Company which will not be subject
to the normally applicable statute of limitations by reason of the existence of
circumstances that would cause any such statute of limitations for applicable
Taxes to be extended, (D) no taxing authority has notified Arcon Holdings or the
Company that it has proposed or assessed any adjustments or assessed any
deficiency relating to any Returns for Tax liability of Arcon Holdings or the
Company and (E) neither Arcon Holdings nor the Company has received any written
notice from any taxing authority relating to any issue which could affect the
Tax liability of Arcon Holdings or the Company, which issue has not been finally
determined and which, if determined adversely to Arcon Holdings or the Company,
could result in a Tax liability.
(ii) Except for the consolidated, unitary or combined Returns filed
by Arcon Holdings that have included the Company, as set forth on Schedule 3.14
hereto, the Companies have not been included in any "consolidated," "unitary" or
"combined" Return provided for under the law of
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the United States, any foreign jurisdiction or any state or locality with
respect to Taxes for any taxable period for which the statute of limitations has
not expired.
(iii) All Taxes which Arcon Holdings or the Company is (or was)
required by law to withhold or collect have been duly withheld or collected, and
have been timely paid over to the proper authorities to the extent due and
payable.
(iv) Neither Arcon Holdings nor the Company is a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code").
(v) There are no tax sharing, allocation, indemnification or similar
agreements or arrangements in effect as between Arcon Holdings or the Company or
any predecessor or affiliate thereof and any other party (including any of the
Sellers and any predecessor or affiliate thereof) under which the Purchaser,
Arcon Holdings or the Company could be liable for any Taxes or other claims of
any party.
(vi) Neither Arcon Holdings nor the Company has applied for, been
granted, or agreed to any accounting method change for which it will be required
to take into account any adjustment under Section 481 of the Code or any similar
pro-
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vision of the Code or the corresponding tax laws of any nation, state or
locality.
(vii) At and after giving effect to Closing there will not be any
indebtedness of Arcon Holdings or the Company that consists of "corporate
acquisition indebtedness" within the meaning of Section 279 of the Code.
(viii) Neither Arcon Holdings nor the Company is a party to any
agreement that would require it to make any payment that would constitute an
"excess parachute payment" for purposes of Sections 280G and 4999 of the Code.
ss.3.15 Liabilities. Neither Arcon Holdings nor the Company has any
outstanding indebtedness or other liabilities, contingent or otherwise, except
(i) as set forth in the Balance Sheet or referred to in the footnotes in the
Audited Statements, (ii) liabilities incurred subsequent to the Balance Sheet
Date in the ordinary course of business, (iii) as set forth in Schedule 3.15 and
(iv) liabilities which would not have a Material Adverse Effect.
ss.3.16 Insurance. Schedule 3.16 contains an accurate listing of all
policies of property, fire and casualty, product liability, workers compensation
and other forms of insurance owned or held by Arcon Holdings or the Company. The
Companies have not received (i) any written notice of cancellation of any policy
described in such Schedule or refusal of coverage thereunder, (ii) any written
notice that
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any issuer of such policy has filed for protection under applicable bankruptcy
laws or is otherwise in the process of liquidating or has been liquidated, or
(iii) any other written notice that such policies are no longer in full force or
effect.
ss.3.17 Compliance with Laws. Except as set forth on Schedule 3.17, the
Companies are in compliance with all applicable laws, regulations, orders,
judgments and decrees, except where the failure to so comply would not have a
Material Adverse Effect.
ss.3.18 Employment Relations. Except as set forth on Schedule 3.18: (a)
The Companies are in compliance with all Federal, state or other applicable
laws, domestic or foreign, respecting employment and employment practices, and
are not engaged in any unfair labor practice, except where the failure to so
comply would not have a Material Adverse Effect;
(b) no unfair labor practice complaint against the Companies is pending
before the National Labor Relations Board;
(c) there is no labor strike, slowdown or stoppage actually pending or to
the Companies' knowledge, threatened against the Companies;
(d) neither Arcon Holdings nor the Company is a party to any collective
bargaining agreement and no collective bar-
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gaining agreement is currently being negotiated by the Companies; and
(e) except for written claims for benefits in the ordinary course, no
claim in respect of the employment of any employee has been asserted or, to the
knowledge of the Companies, threatened, against the Companies.
ss.3.19 Employee Benefit Plans. (a) List of Plans. Set forth in Schedule
3.19 attached hereto is an accurate and complete list of all domestic and
foreign (i) "employee benefit plans," within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations thereunder ("ERISA"); (ii) bonus, stock option, stock purchase,
restricted stock, incentive, profit-sharing, pension, retirement, deferred
compensation, medical, life, disability, accident, accrued leave, vacation, sick
pay, sick leave, supplemental retirement and unemployment benefit plans and/or
programs (whether or not insured); and (iii) employment, consulting,
termination, and severance contracts or agreements; for active, retired or
former employees or directors, whether or not any such plans, programs,
arrangements, commitments, contracts, agreements and/or practices (referred to
in (i), (ii) or (iii)) are in writing or are otherwise exempt from the
provisions of ERISA; that have been established, maintained or contributed to
(or with respect to which an obligation to contribute has been
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undertaken by Arcon Holdings or the Company or with respect to which any
potential liability is borne by Arcon Holdings or the Company (including, for
this purpose and for the purpose of all of the representations in Sections
3.19(c) and (d), any predecessors to Arcon Holdings or the Company and all
employers (whether or not incorporated) that are by reason of common control
treated together with Arcon Holdings or the Company as a single employer (A)
within the meaning of Section 414 of the Code or (B) as a result of Arcon
Holdings or the Company being or having been a general partner of any such
employer in each case while treated as a single employer with Arcon Holdings or
the Company, within the last six years from the date hereof ("Employee Benefit
Plans").
(b) Status of Plans. Each Employee Benefit Plan has at all times been
maintained and operated in compliance with its terms and the requirements of all
applicable laws, including, without limitation, ERISA and the Code except where
failure to so comply will not have a Material Adverse Affect. Except as set
forth on Schedule 3.19 attached hereto, (i) no complete or partial termination
of any Employee Benefit Plan has occurred or is expected to occur and (ii)
neither Arcon Holdings nor the Company has any commitment, intention or
understanding to create, modify or terminate any Employee Benefit Plan. Except
as required by applicable law, no condition or, to the Company's or Arcon
Holding's knowledge,
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circumstance exists, that would prevent the amendment or termination of any
Employee Benefit Plan. No event has occurred and, to the Company's or Arcon
Holding's knowledge, no condition or circumstance has existed, that could result
in a material increase in the benefits under or the expense of maintaining any
Employee Benefit Plan from the level of benefits or expense incurred for the
most recent fiscal year ended thereof other than premium increases in the normal
course.
(c) Liabilities. No Employee Benefit Plan subject to Section 412 of the
Code or Section 302 of ERISA has incurred any accumulated funding deficiency
within the meaning of Section 412 of the Code or Section 302 of ERISA,
respectively, or has applied for or obtained a waiver from the Internal Revenue
Service ("IRS") of any minimum funding requirement under Section 412 of the
Code. Except as set forth in Schedule 3.19, neither Arcon Holdings nor the
Company currently maintains, sponsors or is required to make contributions, nor
within the previous six years maintained, contributed to, or was required to
make contributions, to any "employee pension benefit plan" (within the meaning
of Section 3(2) of ERISA) which is subject to Title IV of ERISA. Neither Arcon
Holdings nor the Company has ever contributed to or had any obligation to
contribute to (or borne any
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liability with respect to) any "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA).
Neither Arcon Holdings nor the Company maintains any Employee
Benefit Plan which is a "group health plan" (as such term is defined in Section
5000(b)(1) of the Code) that has not been administered and operated in all
respects in substantial compliance with the applicable requirements of Section
601 of ERISA and Section 4980B(f) of the Code and neither Arcon Holdings nor the
Company is subject to any material liability, including, without limitation,
additional contributions, fines, penalties or loss of tax deduction as a result
of such administration and operation. Except as set forth on Schedule 3.19,
neither Arcon Holdings nor the Company maintains any Employee Benefit Plan
(whether qualified within the meaning of Section 401(a) of the Code or
nonqualified) providing for retiree health and/or life benefits and having
unfunded liabilities. Neither Arcon Holdings nor the Company maintains any
Employee Benefit Plan which is an "employee welfare benefit plan" (as such term
is defined in Section 3(1) of ERISA) that has provided any "disqualified
benefit" (as such term is defined in Section 4976(b) of the Code) with respect
to which an excise tax could be imposed.
Except as set forth in Schedule 3.19, neither Arcon Holdings nor the
Company has any unfunded liabilities
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pursuant to any Employee Benefit Plan that is not intended to be qualified under
Section 401(a) of the Code.
Neither Arcon Holdings nor the Company has incurred any liability
for any tax or excise tax arising under Section 4971, 4977, 4978, 4978B, 4979,
4980 or 4980B of the Code, and no event has occurred and is continuing and, to
each of their knowledge, no condition or circumstance has existed and is
continuing that could give rise to any such liability.
There are no actions, suits or claims pending, or, to the knowledge
of Arcon Holdings and the Company, threatened, anticipated or expected to be
asserted against any Employee Benefit Plan or the assets of any such plan (other
than routine claims for benefits and appeals of denied routine claims). No civil
or criminal action brought pursuant to the provisions of Title I, Subtitle B,
Part 5 of ERISA is pending, or to the knowledge of Arcon Holdings and the
Company, threatened, anticipated, or expected to be asserted against Arcon
Holdings or the Company or any fiduciary of any Employee Benefit Plan, in any
case with respect to any Employee Benefit Plan. No Employee Benefit Plan or, to
the knowledge of Arcon Holdings and the Company, any fiduciary thereof has been
the direct or indirect subject of an audit, investigation or examination by any
governmental or quasi-governmental agency which audit, investigation or
examination has not been settled.
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(d) Contributions. Full payment has been made of all amounts which Arcon
Holdings or the Company is required, under applicable law or under any Employee
Benefit Plan or any agreement relating to any Employee Benefit Plan to which
Arcon Holdings or the Company is a party, to have paid as contributions thereto
as of the last day of the most recent fiscal year of such Employee Benefit Plan
ended prior to the date hereof which are required to be contributed as of the
date hereof. All such contributions have been fully deducted for income tax
purposes to the extent permitted by applicable law and no such deduction has
been challenged or, to the knowledge of the Company and Arcon Holdings after due
inquiry, disallowed, by any governmental entity, and to the knowledge of Arcon
Holdings and the Company no event has occurred and no condition or circumstance
has existed that could give rise to any such challenge or disallowance. Each of
Arcon Holdings and the Company has made adequate provision for reserves to meet
contributions that have accrued but that have not been made because they are not
yet due under the terms of any Employee Benefit Plan or related agreements.
Except as set forth in Schedule 3.19, benefits under all Employee Benefit Plans
are as represented and have not been increased subsequent to the date as of
which documents have been provided.
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(e) Tax Qualification. Each Employee Benefit Plan intended to be qualified
under Section 401(a) of the Code has been determined to be so qualified by the
Internal Revenue Service. Each trust established in connection with any Employee
Benefit Plan which is intended to be exempt from Federal income taxation under
Section 501(a) of the Code has been determined to be so exempt by the Internal
Revenue Service. Since the date of each most recent determination referred to in
this paragraph (f), no event has occurred and no condition or, to the knowledge
of Arcon Holdings and the Company, circumstance has existed that resulted or is
likely to result in the revocation of any such determination or that could
adversely affect the qualified status of any such Employee Benefit Plan or the
exempt status of any such trust.
(f) Transactions. No "reportable event" (as such term is defined in
Section 4043 of ERISA) for which the 30-day notice requirement has not been
waived by the PBGC has occurred or is expected to occur with respect to any
Employee Benefit Plan. Neither Arcon Holdings nor the Company nor any of their
respective directors, officers, employees or, to the knowledge of Arcon Holdings
and the Company, other persons who participate in the operation of any Employee
Benefit Plan or related trust or funding vehicle, has engaged in any transaction
with respect to any Employee Benefit Plan or breached any applicable fiduciary
responsibilities or obligations
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under Title I of ERISA that would subject any of them to a tax, penalty or
liability for prohibited transactions under ERISA or the Code or would result in
any claim being made under, by or on behalf of any such Employee Benefit Plan by
any party with standing to make such claim.
(g) Triggering Events. The execution of this Agreement and the
consummation of the transactions contemplated hereby, do not constitute a
triggering event under any Employee Benefit Plan or program, whether or not
legally enforceable, which will or may result in any payment (whether of
severance pay or otherwise), acceleration, vesting or increase in benefits to
any employee or former employee or director of Arcon Holdings and/or the
Company. Except as set forth in Schedule 3.19, no Employee Benefit Plan provides
for the payment of severance benefits upon the termination of an employee's
employment.
(h) Documents. Arcon Holdings and/or the Company has delivered or caused
to be delivered to Purchaser and its counsel true and complete copies of the
following documents in connection with each Employee Benefit Plan (where
applicable): (i) all Employee Benefit Plans as in effect on the date hereof,
together with all amendments thereto, including, in the case of any Employee
Benefit Plan not set forth in writing, a written description thereof; (ii) all
current summary plan descriptions, summaries of material modifica-
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tions thereof, and material written employee communications; (iii) all current
trust agreements, declarations of trust and other documents establishing other
funding arrangements (and all amendments thereto and the latest financial
statements thereof); (iv) the most recent Internal Revenue Service determination
letter obtained with respect to each Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code or exempt under Section 501(a) of the
Code; (v) the annual report on Internal Revenue Service Form 5500-series for
each of the last three plan years for each Employee Benefit Plan required to
file such form; (vi) the most recently prepared financial statements; and (vii)
all contracts relating to each Employee Benefit Plan, including, without
limitation, service provider agreements, insurance contracts, annuity contracts,
investment management agreements, subscription agreements, participation
agreements, and recordkeeping agreements.
ss.3.20 Interests in Customers, Suppliers, etc. Except as set forth on
Schedule 3.20 attached hereto, none of the Sellers nor, to the knowledge of the
Companies or any officer or director of Arcon Holdings or the Company,
possesses, directly or indirectly, any ownership interest in, or is a director,
officer or employee of, any Person which is a supplier, customer, lessor,
lessee, licensor, developer or competitor of Arcon Holdings or the Company.
Ownership of
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securities of a company whose securities are registered under the Securities
Exchange Act of 1934 of 5% or less of any class of such securities shall not be
deemed to be a financial interest for purposes of this Section 3.20.
ss.3.21 Environmental Laws and Regulations. Except as set forth on
Schedule 3.21 and except for that which would not have a Material Adverse
Effect:
(a) Hazardous Materials (as hereinafter defined) have not been generated,
used, treated stored, released or disposed by Arcon Holdings or the Company or,
to the knowledge of the Companies, by any other Person on any Company Property,
except in substantial compliance with Environmental Laws.
(b) Each of Arcon Holdings and the Company is in substantial compliance
with Environmental Laws (as hereinafter defined) and the requirements of permits
issued under such Environmental Laws with respect to the Companies' business,
operations and any Company Property.
(c) There are no pending or, to the knowledge of the Companies, threatened
Environmental Claims (as hereinafter defined) against Arcon Holdings, the
Company or any Company Property.
(d) There are no facts, circumstances, conditions or occurrences regarding
the Companies' past or present business or operations or any Company Property or
former Company
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Property that could reasonably be anticipated (i) to form the basis of an
Environmental Claim against Arcon Holdings, the Company or any Company Property
or (ii) to cause such Company Property to be subject to any restrictions on its
ownership, occupancy, use or transferability under any Environmental Law.
(e) For purposes of this Section 3.21 the following definitions shall
apply:
"Company Property" means any real property and improvements owned,
leased, used, operated or occupied by Arcon Holdings or the Company.
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is friable, urea formaldehyde
foam insulation, transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls, and radon gas; and (b) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," or words of similar import, under any applicable Environmental Law.
"Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code, policy or rule of common law in effect and in
each case as amended
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as of the Closing Date, and any judicial or administrative interpretation
thereof as of the Closing Date, including any judicial or administrative order,
consent decree or judgment, relating to the environment, health, safety or
Hazardous Materials, including the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. ss. 6901 et seq.;
the Resource Conservation and Recovery Act, as amended, 42 U.S.C. ss. 9601 et
seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss. 1251 et
seq.; the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.; the Clean
Air Act, 42 U.S.C. ss. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. ss.
300f et seq.; the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq.; the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. ss.651 et
seq.; and their state and local counterparts and equivalents.
"Environmental Claims" means administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, investigations or proceedings by, from or in favor
of any governmental or regulatory authorities or any other party or entity
alleging liability (a) for enforcement, cleanup, investigatory, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) for damages, contribution, indemnification, cost
recovery, com-
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pensation or injunctive relief resulting from Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.
(e) The Purchaser agrees that the only representations and warranties of
Arcon Holdings and the Company or the Sellers herein as to Environmental Laws,
Environmental Claims and all other environmental-related matters are those
contained in this Section 3.21.
ss.3.22 Bank Accounts, Powers of Attorney. Set forth on Schedule 3.22
attached hereto is an accurate and complete list showing (a) the name and
address of each bank in which Arcon Holdings or the Company has a material
account or safe deposit box, the number of any such account or any such box and
the names of all persons authorized to draw thereon or to have access thereto
and (b) the names of all persons, if any, holding powers of attorney from Arcon
Holdings or the Company.
ss.3.23 Compensation of Employees. The Company has previously provided the
Purchaser with an accurate and complete list for fiscal year 1995 showing the
names of all persons employed by the Company who received more than $50,000 in
1995 cash compensation (including, without limitation, salary, commission and
bonus) and who are employed by the Companies as of the date hereof. Such list
sets forth the present salary or hourly wage (including, without limitation,
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salary, commission and bonus) and fringe benefits (excluding Employee Benefit
Plans set forth on Schedule 3.19), of each such person.
ss.3.24 Conduct of Business. Except as disclosed on Schedule 3.24 attached
hereto and except as expressly contemplated by this Agreement, since October 31,
1995, neither Arcon Holdings nor the Company has taken any action which, if
taken subsequent to the execution of this Agreement and on or prior to the
Closing Date, would constitute a breach of the Companies' agreements set forth
in clauses (a) through and including (m) of Section 6.1.
ss.3.25 Customer Relations. Except as set forth on Schedule 3.25 attached
hereto, neither Arcon Holdings nor the Company has, since June 30, 1996,
received written notice (nor, to the knowledge of the Companies, any oral
notice) from any of the top ten customers of Arcon Holdings or the Company
(based on 1995 revenues of the Companies) that any such customer intends to
reduce the volume or dollar amount of purchases from Arcon Holdings or Company
which could have a Material Adverse Effect.
ss.3.26 Condition of Assets. The assets and properties utilized in and
material to the conduct of the Companies' business, whether owned or leased, are
in the aggregate adequate operating condition and repair (normal wear and tear
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excepted) and are adequate for the purposes for which they are presently being
used.
ss.3.27 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of Arcon Holdings, the Company or the Sellers, is, or will be,
entitled to any commission or broker's or finder's fees from Arcon Holdings or
the Company, or from any Person controlling, controlled by or under common
control with the Company, in connection with any of the transactions
contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS OF THE SELLERS
ss.4. Representations of the Sellers. Each of the Sellers represents and
warrants as of the date hereof (severally and not jointly and with each Seller's
personal liability expressly limited as set forth in Article X) as to such
Seller to the Purchaser as follows:
ss.4.1 Ownership of Stock. Each of the Sellers is the lawful owner of the
Stock and/or the Options listed under column B on Annex I attached hereto, free
and clear of all liens, encumbrances, restrictions and claims of every kind.
Such Seller has the (partnership in the case of Northwood Ventures and Kuhn,
Loeb & Co.; and limited liability company in the case of Northwood Capital
Partners LLC) full legal right, power and authority to enter into this Agreement
and
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to sell, assign, transfer and convey such shares of Stock pursuant to this
Agreement, and the delivery to the Purchaser of such shares of Stock pursuant to
the provisions of this Agreement will transfer to the Purchaser good title
thereto, free and clear of all Encumbrances, except for those encumbrances
created by the Purchaser or its affiliates in connection with the acquisition by
the Purchaser of such shares pursuant to this Agreement.
ss.4.2 Authorization and Validity of Agreement. Northwood Ventures is a
limited partnership validly existing and in good standing under the laws of the
State of New York. Kuhn, Loeb & Co. is a general partnership, validly existing
and in good standing under the laws of the State of New York. Northwood Capital
Partners, LLC is a limited liability company, validly existing and in good
standing under the laws of the State of New York. Such Seller has the requisite
(partnership in the case of Northwood Ventures and Kuhn, Loeb & Co.; and limited
liability company in the case of Northwood Capital Partners LLC) power and
authority to execute and deliver this Agreement, to perform its respective
obligations hereunder and to consummate the transactions contemplated to be
performed by it hereby. This Agreement has been duly executed and delivered by
such Seller and, assuming the due execution of this Agreement by the Purchaser,
is a valid and binding obligation of such Seller, enforceable against such
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Seller in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization and similar laws affecting the enforcement of creditors' rights
generally and to general equitable principles. The representations and
warranties of Northwood Ventures, Kuhn, Loeb & Co. and Northwood Capital
Partners, LLC set forth in this Section 4.2 are made only by Northwood Ventures,
Kuhn, Loeb & Co. and Northwood Capital Partners LLC, respectively, as to itself,
and not by any other Seller.
ss.4.3 Restrictive Documents. Subject to the termination or expiration of
all applicable waiting periods under the HSR Act, such Seller is not subject to
any mortgage, lien, lease, agreement, instrument, order, law, rule, regulation,
judgment or decree, or any other restriction of any kind or character which
would prevent consummation by such Seller of the transactions contemplated by
this Agreement.
ss.4.4 Consents. Except as may be required under the HSR Act or as set
forth on Schedule 4.4 hereto, no consents, approvals or authorizations of, or
filings with, any governmental authority or any other person or entity are
required in connection with the execution and delivery of this Agreement by such
Seller and the consummation of the transactions contemplated hereby to be
consummated by it.
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ss.4.5 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of such Seller is, or will be, entitled to any commission or broker's
or finder's fees from Arcon Holdings, the Company, or from any Person
controlling, controlled by or under common control with the Company, in
connection with any of the transactions contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS OF THE PURCHASER
ss.5. Representations of the Purchaser. The Purchaser represents and
warrants as of the date hereof to the Companies and each of the Sellers as
follows:
ss.5.1 Existence and Good Standing; Power and Authority. The Purchaser is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Purchaser has the requisite corporate power
and authority to enter into, execute and deliver this Agreement and perform its
obligations hereunder. This Agreement has been duly authorized and approved by
the Purchaser and, assuming the due execution of this Agreement by each of the
Sellers, is a valid and binding obligation of the Purchaser enforceable against
it in accordance with its terms, except to the extent that its enforceability
may be subject to applicable bankruptcy, insolvency, reorganization, moratorium
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and other similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles.
ss.5.2 Restrictive Documents; No Legal Bar. The Purchaser is not subject
to any mortgage, lien, lease, agreement, instrument, order, law, rule,
regulation, judgment or decree, or any other restriction of any kind or
character which would prevent consummation by it of the transactions
contemplated by this Agreement. Neither the execution and delivery of this
Agreement by the Purchaser, nor the consummation of the transactions
contemplated hereby by the Purchaser, (i) violates any provision of the
certificate of incorporation or by-laws of the Purchaser, (ii) except for the
termination or expiration of all applicable waiting periods under the HSR Act,
constitutes a violation of any applicable law, or (iii) violates or conflicts
with, or results in any breach of any of the terms of any material contract,
commitment, agreement, or lease of any kind to which the Purchaser is a party or
by which the Purchaser or any of its assets are bound including, without
limitation, the financing documents contemplated by the commitment letter
referred to in Section 7.10.
ss.5.3 Purchase for Investment. The Purchaser will acquire the Stock for
its own account for investment and not with a view toward any resale or
distribution of all or any part thereof; provided, however, that the disposition
of the
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Purchaser's property shall at all times remain within the sole control of the
Purchaser.
ss.5.4 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Purchaser is, or will be, entitled to any commission or
broker's or finder's fees from the Seller in connection with any of the
transactions contemplated by this Agreement.
ss.5.5 Litigation; Disputes. There is no action, suit, proceeding at law
or in equity, arbitration or administrative or other proceeding by or before
(or, to the knowledge of the Purchaser any investigation by) any governmental or
other instrumentality or agency, pending, or, to the knowledge of the Purchaser,
threatened, against the Purchaser which challenges the validity of this
Agreement, or which if adversely determined, would adversely materially affect
its ability to consummate the transactions contemplated by this Agreement; and
the Purchaser knows of no valid basis for any such action, proceeding or
investigation.
ss.5.6 Consents. Except as may be required under the HSR Act or as set
forth on Schedule 5.6 hereto, no consents, approvals or authorizations of, or
filings with, any governmental authority or any other person or entity are
required in connection with the execution and delivery of this Agreement by the
Purchaser and the consummation of the transactions contemplated hereby to be
consummated by it.
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ARTICLE VI
TRANSACTIONS PRIOR TO THE CLOSING DATE
ss.6.1 Conduct of Business of the Companies. During the period from the
date of this Agreement to the Closing Date, the Companies shall conduct their
operations only according to its ordinary course of business; use their
reasonable efforts to preserve intact its business organizations, keep available
the services of their officers and employees and maintain its relationships and
goodwill with licensors, suppliers, distributors, customers, landlords, agents
and others having business relationships with it; confer with the Purchaser (as
reasonably requested by the Purchaser during normal business hours without undue
interruption) concerning the business, operations and finances of the Companies.
Notwithstanding the immediately preceding sentence, prior to the Closing Date,
except as permitted in Section 2.3 and otherwise except as may be first approved
in writing by the Purchaser, each of Arcon Holdings and the Company shall, (a)
refrain from amending or modifying its Certificate of Incorporation or By-Laws
from its form on the date of this Agreement, (b) refrain from paying or
increasing any bonuses, salaries, or other compensation to any director,
officer, employee or stockholder or entering into any employment, severance, or
similar agreement with any
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director, officer, or employee other than, in each case, in the ordinary course
of business consistent with past practice or as disclosed to the Purchaser
pursuant to Section 3.23 hereof, (c) except as set forth on Schedule 3.19,
refrain from the adopting or increasing of any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or other employee benefit
plan for or with any of its employees, (d) refrain from entering into any
material contract or commitment except material contracts and commitments in the
ordinary course of business consistent with past practice, (e) refrain from
increasing its indebtedness for borrowed money, except borrowings in the
ordinary course of business, (f) refrain from cancelling or waiving any claim or
right of substantial value which individually or in the aggregate is material
other than in the ordinary course of business, (g) refrain from declaring or
paying any dividends in respect of its capital stock or redeeming, purchasing or
otherwise acquiring any of its capital stock, (h) refrain from making any
material change in accounting methods or practices, except as required by law or
generally accepted accounting principles, (i) refrain from issuing or selling
any shares of capital stock or any other securities, or issuing any securities
convertible into, or options, warrants or rights to purchase or subscribe to, or
entering into any arrangement or contract with respect to the issue and sale
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of, any shares of its capital stock or any other securities, or making any other
changes in its capital structure, except pursuant to outstanding options or
other rights disclosed on Schedule 3.2 attached hereto, (j) refrain from
selling, leasing or otherwise disposing of any material asset or property other
than the sale of inventory and other assets in the ordinary course of business
consistent with past practices, (k) refrain from entering into any commitment
for the making of a capital expenditure, except in the ordinary course of
business consistent with past practice, (l) refrain from writing off as
uncollectible any notes or accounts receivable, except write-offs in the
ordinary course of business charged to applicable reserves, none of which
individually or in the aggregate is material and (m) refrain from agreeing in
writing to do any of the foregoing.
ss.6.2 Exclusive Dealing. During the period from the date of this
Agreement to the earlier of the termination of this Agreement and the Closing
Date, none of the Sellers, Arcon Holdings or the Company shall take any action
to, directly or indirectly, encourage, initiate or engage in discussions or
negotiations with, or provide any information to, any Person, other than the
Purchaser, concerning any purchase of any capital stock of Arcon Holdings or the
Company or any merger, sale of all or substantially all assets or similar
transaction involving Arcon Holdings or the Company.
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ss.6.3 Review of the Companies. Upon reasonable notice, during normal
business hours and without undue interruption, the Companies shall permit the
Purchaser and its representatives to have, after the date of execution of this
Agreement, full access to the premises and to all the books and records of the
Companies and to cause the officers of the Companies to furnish the Purchaser
with such financial and operating data and other information with respect to the
business and properties of the Company as the Purchaser shall from time to time
reasonably request. The parties hereto acknowledge that the Purchaser, Arcon
Holdings, the Company and the Sellers have entered into a Confidentiality
Agreement dated December 6, 1995 (the "Confidentiality Agreement") and that
information obtained during any such review will be subject to the terms of the
Confidentiality Agreement.
ss.6.4 Reasonable Efforts. Each of Arcon Holdings, the Company, the
Sellers and the Purchaser shall reasonably cooperate and use their respective
reasonable best efforts to cause to be made the filing of Notification and
Report Forms under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") with the Federal Trade Commission and the Antitrust
Division of the Department of Justice) and to obtain, prior to the Closing Date,
all required consents and approvals of parties to contracts with Arcon Holdings
or the Company set forth in Schedule 3.12
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attached hereto and designated by an asterisk and to fulfill the conditions to
the sale contemplated hereby.
ss.6.5 Agreement by the Purchaser Regarding No Other Representations or
Warranties by the Sellers. The Purchaser agrees that except for the
representations and warranties expressly set forth in Articles II and III of
this Agreement, neither Arcon Holdings, the Company nor any of the Sellers nor
any affiliate thereof has made and shall not be construed as having made to the
Purchaser or to any representative or affiliate thereof any representation or
warranty of any kind. Without limiting the generality of the foregoing, the
Purchaser agrees that neither Arcon Holdings, the Company nor any of the Sellers
nor any affiliate thereof makes or has made any representation or warranty to
the Purchaser or to any representative or affiliate thereof with respect to any
projections, estimates or budgets heretofore or hereafter delivered to or made
available to the Purchaser or its counsel, accountants, advisors, lenders,
representatives or affiliates of future revenues, expenses or expenditures,
future results of operations (or any component thereof), future cash flows (or
any component thereof) or future financial condition (or any component thereof)
of the Companies or the future business, operations or affairs of the Companies.
ss.6.6 Satisfaction of Financing Condition. The Purchaser shall use all
reasonable efforts to satisfy the
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condition set forth in Section 7.10 on or prior to the Termination Date.
ARTICLE VII
CONDITIONS TO THE PURCHASER'S OBLIGATIONS
ss.7. Conditions to the Purchaser's Obligations. The obligation of the
Purchaser to purchase the Stock contemplated by this Agreement is conditioned
upon satisfaction, at or prior to the Closing, of the following conditions:
ss.7.1 Opinions of Counsel. The Companies shall have furnished the
Purchaser with an opinion, dated the Closing Date, of Haythe & Curley, in form
and in substance reasonably acceptable to the Purchaser and its counsel.
ss.7.2 Good Standing and Other Certificates. The Purchaser shall have
received (a) copies of the charters, including all amendments thereto, in each
case certified by the Secretary of State or other appropriate official of the
jurisdiction of incorporation of each of Arcon Holdings and the Company, (b) a
certificate from the Secretary of State or other appropriate official of the
jurisdiction of incorporation of each of Arcon Holdings and the Company to the
effect that such company is in good standing and listing all charter documents
of such company on file, (c) a certificate from the Secretary of State or other
appropriate official in each State in which each of Arcon Holdings and the
Company is
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qualified to do business to the effect that such company is in good standing in
such State, (d) a certificate as to the tax status of each of Arcon Holdings and
the Company from the appropriate official in their respective jurisdictions of
incorporation and each state in which such company is qualified to do business
and (e) a copy of the By-Laws of Arcon Holdings and the Company certified by the
Secretary of such company as being true and correct and in effect on the Closing
Date.
ss.7.3 [Intentionally Omitted].
ss.7.4 Truth of Representations and Warranties. The representations and
warranties of the Companies contained in this Agreement and the representations
and warranties of the Sellers contained in this Agreement shall be true and
correct in all material respects (other than those representations and
warranties of the Companies and the Sellers which are qualified by
"materiality," "material adverse effect" or words of equivalent import, which
shall be true and correct) on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date,
and the Companies and the Seller shall have each delivered to the Purchaser a
certificate, dated the Closing Date, to such effect.
ss.7.5 Performance of Agreements. All of the agreements of the Companies
and the Sellers to be performed prior to the
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Closing pursuant to the terms of this Agreement shall have been duly performed
in all material respects, and the Companies and the Sellers shall have each
delivered to the Purchaser a certificate, dated the Closing Date, to such
effect.
ss.7.6 No Litigation Threatened. No action or proceedings shall have been
instituted or, to the knowledge of the Companies or the Sellers, threatened
before a court or other government body or by any public authority to restrain
or prohibit any of the transactions contemplated hereby.
ss.7.7 Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, disclosed on Schedules 3.12 or 5.6 attached hereto
and designated by an asterisk or required in connection with the consummation of
the transactions contemplated by this Agreement shall have been received.
ss.7.8 Termination of Security Interests. All security interests, liens,
mortgages, claims or other encumbrances of any kind securing Outstanding
Indebtedness shall be released.
ss.7.9 Resignations. All members of the Board of Directors of the
Companies shall have tendered their resignation from such positions effective at
the Closing.
ss.7.10 Financing. The Purchaser shall have received financing on
substantially the same terms and conditions as set forth in the commitment
letter of Bankers Trust company
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dated August 27, 1996, a copy of which has been delivered to the Seller's
Representative.
ss.7.11 [Intentionally omitted]
ss.7.12 FIRPTA. The Sellers shall have furnished to the Purchaser, on or
prior to the Closing Date, a non-foreign person affidavit required by Section
1445 of the Code.
ss.7.13 HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the transactions contemplated by this Agreement shall have
expired or terminated.
ss.7.14 Escrow Agreement. The Sellers, the Purchaser and the Escrow Agent
shall have entered into an escrow agreement substantially in the form of Exhibit
A hereto (the "Escrow Agreement").
ARTICLE VIII
CONDITIONS TO THE COMPANIES AND
THE SELLERS' OBLIGATIONS
ss.8. Conditions to the Seller's Obligations. The obligations of the
Companies and the Sellers to effect the transactions contemplated by this
Agreement on the Closing Date are conditioned upon satisfaction or waiver, at or
prior to the Closing, of the following conditions:
ss.8.1 Opinions of Counsel. The Purchaser shall have furnished the Sellers
with an opinion, dated the Closing
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Date, of White & Case, in form and in substance reasonably acceptable to the
Sellers' Representative and its counsel.
ss.8.2 Truth of Representations and Warranties. The representations and
warranties of the Purchaser contained in this Agreement shall be true and
correct in all material respects (other than those representations and
warranties of the Companies and the Sellers which are qualified by
"materiality," "material adverse effect" or words of equivalent import, which
shall be true and correct) on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date,
and the Purchaser shall have delivered to the Sellers an officer's certificate,
dated the Closing Date, to such effect.
ss.8.3 Third Party Consents; Governmental Approvals. All consents,
approvals or waivers, if any, disclosed on Schedule 3.12 and Schedule 4.4 and
designated by an asterisk shall have been received.
ss.8.4 Performance of Agreements. All of the agreements of the Purchaser
to be performed prior to the Closing pursuant to the terms of this Agreement
shall have been duly performed in all material respects, and the Purchaser shall
have delivered to the Sellers an officer's certificate, dated the Closing Date,
to such effect.
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ss.8.5 No Litigation Threatened. No action or proceeding shall be
instituted or, to the knowledge of the Purchaser, threatened before a court or
other government body or any public authority to restrain or prohibit any of the
transactions contemplated hereby, and the Purchaser shall have delivered to the
Sellers an officer's certificate, dated the Closing Date, to such effect.
ss.8.6 HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the transactions contemplated by this Agreement shall have
expired or terminated.
ss.8.7 Warrants. The Bank shall have executed and delivered an agreement
with Arcon Holdings providing for the purchase by Arcon Holdings of the Warrants
from the Bank, in form and substance reasonably acceptable to Arcon Holdings and
such purchase shall have been consummated.
ARTICLE IX
TAX MATTERS
ss.9.1 Tax Returns. (a) The Sellers, acting through an appointed
representative (the "Sellers' Representative"), shall have the exclusive
authority and obligation, subject to compliance by the Purchaser and the
Companies with their obligations under this Article IX, to prepare and timely
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file, or cause to be prepared and timely filed, (i) all Returns of the Company
and Arcon Holdings that are due and (ii) at its sole option and discretion, all
applications or requests for refunds ("Refund Requests") of Taxes paid by or on
behalf of the Company and Arcon Holdings, in each case, with respect to any
taxable year or other taxable period ending on or prior to the Closing Date.
Such authority shall include, but not be limited to, the determination of the
manner in which any items of income, gain, deduction, loss or credit arising out
of the income, properties and operations of the Company and Arcon Holdings shall
be reported or disclosed in such Returns and Refund Requests; provided, however,
that such Returns and Refund Requests shall be prepared by treating items on
such Returns and Refund Requests in a manner consistent with the past practices
with respect to such items, unless otherwise required by law. The Sellers'
Representative shall provide to the Purchaser drafts of all Returns and Refund
Requests of the Company and Arcon Holdings required or permitted to be prepared
and filed by the Sellers' Representative under this Section 9.1(a) at least
thirty (30) days prior to the due date (including extensions) for the filing of
such Returns or Refund Requests. No later than fifteen (15) days after receipt
of such draft, the Purchaser shall give written notice (the "Dispute Notice") of
the existence of any objection the
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Purchaser may have to any items set forth on such draft Returns or Refund
Requests to the Sellers' Representative, which Dispute Notice shall specify in
reasonable detail the nature and basis for such objection (and in the absence of
any such Dispute Notice, the Purchaser shall be deemed to have no objection to
the filing of such Return or Refund Request). The Purchaser and the Sellers'
Representative agree to consult and use their best efforts to resolve in good
faith any such objection within 15 days of receipt by the Sellers'
Representative of the Dispute Notice. If the Sellers' Representative and the
Purchaser are unable to resolve the disputed matters within such 15-day period
all disputed matters raised in the Dispute Notice and not so resolved shall be
submitted to such nationally recognized independent accounting firm as is chosen
by mutual agreement of the Sellers' Representative and the Purchaser acting in
good faith (such firm which accepts the engagement, the ("Independent Auditor"),
for final resolution. Each party shall be permitted to submit to the Independent
Auditor a written statement in support of its position with respect to the
disputed matters raised in the Dispute Notice and not resolved. The Sellers'
Representative and the Purchaser shall use their respective reasonable best
efforts to cause the Independent Auditor to make its determination as soon as
possible, but in no event later than 30 days after receipt of
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the disputed matters. Such determination shall be final and binding upon all
parties hereto. The Independent Auditor's determination shall be limited to
matters of dispute which are raised in the Dispute Notice and not resolved by
the Sellers' Representative and the Purchaser. The Independent Auditor's
resolution of any such dispute shall be reflected in a written report which
shall be delivered to the Sellers' Representative and the Purchaser. All fees
and disbursements of the Independent Auditor and any interest or penalties
attributable to the late filing of a Return that results from the failure of the
parties to resolve such issues prior to the due date of such Return, shall be
borne by the party whose position with respect to such issues is most at
variance from the position with respect to such issues determined by the
Independent Auditor. The Sellers' Representative shall not file any Return or
Refund Request without the prior consent of the Purchaser, which consent shall
not be unreasonably withheld or delayed; provided, however, that no such consent
shall be required if the Purchaser shall not have delivered a Dispute Notice or
if the objections contained in a Dispute Notice shall have been finally
resolved, in each case in accordance with this Article IX. None of Purchaser,
the Company, Arcon Holdings, nor any affiliate of the foregoing shall file any
application or request to extend, or consent to the extension of, the
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time to file any Return of the Company or Arcon Holdings with respect to any
taxable year or other taxable period ending on or prior to the Closing Date,
including any Return of the Company or Arcon Holdings for the short taxable year
ending on the Closing Date, unless requested to do so by the Sellers'
Representative (provided, however, that no such extended period shall extend
beyond the termination of the Escrow Account pursuant to the Escrow Agreement).
(b) Except as provided in Section 9.1(a), the Purchaser shall have the
exclusive authority and obligation to prepare and timely file, or cause to be
prepared and timely filed, all Returns and Refund Requests of the Company and
Arcon Holdings. Such authority shall include, but not be limited to, the
determination of the manner in which any items of income, gain, deduction, loss
or credit arising out of the income, properties and operations of the Company
and Arcon Holdings shall be reported or disclosed on such Returns and Refund
Requests; provided, however, with respect to Returns and Return Requests to be
filed by the Purchaser pursuant to this Section 9.1 for taxable periods
beginning before the Closing Date and ending after the Closing Date, items set
forth on such Returns and Return Requests shall be treated in a manner
consistent with the past practices of the Companies with respect to such items,
unless otherwise required by law. The Purchaser shall provide to the Sellers'
Representative
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drafts of all Returns and Refund Requests of the Company and Arcon Holdings
required or permitted to be filed by the Purchaser pursuant to this Section
9.1(b) with respect to taxable years or other taxable periods beginning before
the Closing Date and ending after the Closing Date at least thirty (30) days
prior to the due date (including extensions) for the filing of such Returns or
Refund Requests. No later than fifteen (15) days after receipt of such draft,
the Sellers' Representative shall give the Purchaser a Dispute Notice with
respect to the existence of any objection (which Dispute Notice shall specify in
reasonable detail the nature and basis of such objection) the Sellers'
Representative may have to any items set forth on such draft Returns or Refund
Requests (and in the absence of any such timely objection, the Sellers'
Representative shall be deemed to have no objection to the filing of such Return
or Refund Request). The Purchaser and the Sellers' Representative agree to
consult and use their best efforts to resolve in good faith any such objection
within such 15-day period. In the event that the Purchaser and the Sellers'
Representative are unable to resolve such objection within such 15-day period,
the dispute resolution and cost allocation procedure set forth in Section 9.1(a)
shall apply. None of the Purchaser, Arcon Holdings, the Company, nor any
affiliate of the foregoing shall file any such Return or Refund Request with
respect to
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taxable years or other taxable periods beginning before the Closing Date and
ending after the Closing Date without the prior consent of the Sellers'
Representative, which consent shall not be unreasonably withheld or delayed;
provided, however, that no such consent shall be required if the Sellers'
Representative shall not have delivered a Dispute Notice or if the objections
contained in a Dispute Notice shall have been finally resolved, in each case in
accordance with this Article IX. None of the Purchaser, Arcon Holdings, the
Company, or any affiliate of the foregoing will make any election under Treasury
Regulation ss.1.1502-76(c) to file a separate return for the entire taxable year
ending October 31, 1996.
ss.9.2 Overlap Period, Refunds, Tax Benefits. All Taxes and Tax
liabilities with respect to the income, property or operations of the Company
and Arcon Holdings that relate to a taxable year or other taxable period
beginning before and ending after the Closing Date (an "Overlap Period") shall
be apportioned between the Pre-Closing Period and the portion of such Overlap
Period after the Closing Date (the "Post-Closing Period") as follows: (A) in the
case of Taxes other than income Taxes and sales and use Taxes, on a per diem
basis, and (B) in the case of income Taxes (including income Taxes based on
capital or other alternative bases) and sales and use Taxes, as determined from
the books and records of the
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Company and Arcon Holdings, between the Pre-Closing Period and the Post-Closing
Period as though the taxable year of Arcon Holdings or the Company terminated at
the close of business on the Closing Date, and based on accounting methods,
elections and conventions that do not have the effect of distorting income and
expenses.
To the extent the Company or Arcon Holdings has made a payment of
Taxes on or prior to the Closing Date with respect to Taxes attributable to a
Pre-Closing Period in excess of the liability of the Companies for such Taxes
for such Pre-Closing Period, the Purchaser and the Companies will, if requested
by the Sellers' Representative, use their reasonable best efforts to obtain a
prompt refund of such overpayment. The Purchaser or the Companies shall remit
any refund received pursuant to the preceding sentence (and any refunds under
Section 9.1(a)), net of any Taxes of the Purchaser, the Company or Arcon
Holdings arising from the receipt of such refund, to the Sellers' Representative
for the benefit of the Sellers within 10 days of the receipt of such refund.
Further, to the extent any deductions attributable to unamortized
original issue discount attributable to the Warrants and the exercise or
cancellation of the Options (the "Deductions") are included as deductions in any
Return of the Company or Arcon Holdings for any taxable year or other
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taxable period ending after the Closing Date, the Purchaser, the Company or
Arcon Holdings shall remit to the Sellers' Representative for the benefit of the
Sellers the amount of the actual reduction in the Tax liability of the Company
and/or Arcon Holdings (the "Tax Benefit") attributable to the Deductions (a) for
taxable years or other taxable periods commencing on or after the day following
the Closing Date, and (b) with respect to an Overlap Period, for the portion of
such Overlap Period commencing on the day following the Closing Date (it being
understood and agreed that the parties intend that for purposes of preparing the
Returns provided for in Section 9.1, the Purchaser, the Companies and the
Sellers shall treat the Deductions as being attributable to a Pre-Closing
Period). The Purchaser, the Company or Arcon Holdings shall remit such amount
within 10 days after the filing of a Return in which any such Deduction is
utilized. The Purchaser shall determine and shall certify to the Sellers the
amount of the Tax Benefit and the timing of the utilization of such Tax Benefit
in its reasonable discretion (provided, however, the Purchaser and the Companies
shall not be obligated to disclose any information with respect to the income,
results of operations, or Taxes or Returns of the Companies with respect to any
period after the Closing Date, other than the information with respect to an
Overlap Period provided for in Section 9.1(b) and other than contemplated by
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Section 9.3). If the Tax liability of the Company or Arcon Holdings is adjusted
by the appropriate taxing authority after filing a Return in which the
Deductions are utilized and such adjustment reduces the amount of the Tax
Benefit realized by the Company and/or Arcon Holdings from the Deductions, the
Sellers shall reimburse the Purchaser for the amount of such reduced Tax Benefit
to the extent that the Purchaser or the Companies previously remitted such
reduced Tax Benefit to the Sellers (but not in excess of the amount paid by the
Purchaser and the Companies to the Sellers' Representative pursuant to this
Section 9.2), as reasonably determined by the Purchaser (provided, however, the
Purchaser and the Companies shall not be obligated to disclose any information
with respect to the income, results of operations, or Taxes or Returns of the
Companies with respect to any period after the Closing Date, other than the
information with respect to an Overlap Period provided for in Section 9.1(b) and
other than contemplated by Section 9.3), within 10 days after receipt by
Sellers' Representative from the Purchaser of a certificate setting forth the
amount of such reduced Tax Benefit.
ss.9.3 Cooperation; Audits. In connection with the preparation of Returns,
Refund Requests, audit examinations and any administrative or judicial
proceedings relating to the Tax liabilities imposed on the Company and Arcon
Holdings
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for all Pre-Closing Periods, the Purchaser, the Company and Arcon Holdings on
the one hand, and the Sellers' Representative on the other hand, will cooperate
fully with each other, including, but not limited to, the furnishing or making
available during normal business hours, at no cost to Sellers or Sellers'
Representative (except out-of-pocket costs, excluding salaries and wages of
personnel, provided such cooperation does not interfere with normal operations
of the Company, Arcon Holdings or the Purchaser), of records, personnel (as
reasonably required), books of account, powers of attorney or other materials
with respect to Pre-Closing Periods and the Post-Closing Period necessary or
helpful for the preparation of such Returns or Refund Requests, the conduct of
audit examinations or the defense of claims by Tax authorities as to the
imposition of Taxes. Without limiting the generality of the foregoing, the
Sellers' Representative and its accountants and attorneys shall be entitled to
examine books and records of the Company and Arcon Holdings, with respect to any
Pre-Closing Period and the Post-Closing Period, and shall have reasonable access
to personnel of the Company and Arcon Holdings, including their cooperation in
timely signing Returns and Refund Requests and applying any current liability
accruals to the payment of Taxes shown due thereon, to the extent necessary or
helpful for purposes of
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preparing or filing any Tax Returns or obtaining Tax refunds with respect to all
Pre-Closing Periods.
ss.9.4 Controversies. The Purchaser shall promptly notify the Sellers'
Representative in writing upon receipt by the Purchaser or any affiliate of the
Purchaser (including Arcon Holdings and the Company after the Closing Date) of
written notice of any inquiries, claims, assessments, audits or similar events
with respect to Taxes relating to a taxable period ending on or prior to the
Closing Date for which the Sellers may be liable under this Agreement (any such
inquiry, claim, assessment, audit or similar event, a "Tax Matter"). The
Sellers' Representative, at the sole expense of the Sellers, shall have the
exclusive authority to represent the interests of the Companies with respect to
any Tax Matter before the Internal Revenue Service, any other taxing authority,
any other governmental agency or authority or any court and shall have the sole
right to extend or waive the statute of limitations with respect to a Tax Matter
and to control the defense, compromise or other resolution of any Tax Matter,
including responding to inquiries, filing Tax returns and settling audits;
provided, however, that the Sellers' Representative shall not enter into any
settlement of or otherwise compromise any Tax Matter that affects or may affect
the Tax liability of the Purchaser, Arcon Holdings, or the Company or any
affiliate of the foregoing for any period
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ending after the Closing Date, including the Post-Closing Period, without the
prior written consent of the Purchaser, which consent shall not be unreasonably
withheld or delayed. The Sellers' Representative shall keep the Purchaser
reasonably informed with respect to the commencement, status and nature of any
Tax Matter. The Sellers' Representative shall, in good faith, allow the
Purchaser to make comments to the Sellers' Representative regarding the conduct
of or positions taken in any such proceeding.
Except as otherwise provided in Section 9.1, this Section 9.4, Section 9.8
and Section 9.9 the Purchaser shall have the sole right to control any audit or
examination by any taxing authority, initiate any claim for refund or amend any
Return, and contest, resolve and defend against any assessment for additional
Taxes, notice of Tax deficiency or other adjustment of Taxes of, or relating to,
the income, assets or operations of the Companies for all taxable periods;
provided, however, that the Purchaser shall not, and shall cause its affiliates
(including the Companies) not to, enter into any settlement of any contest or
otherwise compromise any issue that affects or may affect the Tax liability of
the Sellers, Arcon Holdings or the Company for any Pre-Closing Period, including
the portion of an Overlap Period ending on or prior to the Closing Date, without
the prior written consent of the Sellers' Representative, which
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consent shall not be unreasonably withheld or delayed. The Purchaser shall keep
the Sellers' Representative reasonably informed with respect to the
commencement, status and nature of any Tax matter conducted by Purchaser with
respect to the Overlap Period. The Purchaser shall, in good faith, allow
Sellers' Representative to make comments to the Purchaser regarding the conduct
of or position taken in any such proceeding with respect to the Overlap Period.
ss.9.5 Transfer Taxes. All transfer, sales and use, registration, stamp
and similar Taxes imposed in connection with the sale of the Stock or any other
transaction that occurs pursuant to this Agreement shall be borne equally by the
Sellers, on the one hand, and the Purchaser, on the other hand.
ss.9.6 Amended Returns. None of the Sellers or the Sellers'
Representative, shall file or cause to be filed any amended Return of or
including the Company or Arcon Holdings without the prior written consent of the
Purchaser, which consent shall not be unreasonably withheld or delayed. None of
the Purchaser, the Company, Arcon Holdings, nor any affiliate of the foregoing
shall file or cause to be filed any amended Return relating to or including any
Pre-Closing Period, including the portion of an Overlap Period ending on or
prior to the Closing Date, of the Company or Arcon Holdings without the prior
written consent of the Sellers'
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Representative, which consent shall not be unreasonably withheld or delayed.
ss.9.7 Non-foreign Person Affidavit. Each Seller shall furnish to the
Purchaser on or before the Closing Date a non- foreign person affidavit as
required by Section 1445 of the Code.
ss.9.8 Indemnification. Subject to Section 9.3, Section 9.4 and Section
9.9, each of the Sellers agrees severally (on the basis of such Seller's
Percentage Interest and with each Seller's personal liability expressly limited
as set forth in Section 10.2(c)) to indemnify, defend and hold harmless the
Purchaser, its affiliates (including Arcon Holdings and the Company) and the
successors to the foregoing (and their respective shareholders, officers,
directors, employees and agents) on an after-tax basis against (i) all Taxes,
losses, claims and expenses resulting from, arising out of, or incurred with
respect to, any claims that may be asserted by any party based upon,
attributable to, or resulting from the failure of any representation or warranty
made pursuant to Section 3.14 (other than Section 3.14(b)) to be true and
correct as of the Closing Date; and (ii) all unpaid Taxes imposed on or asserted
against the properties, income or operations of Arcon Holdings and the Company
at any time after the Closing Date to the extent such Taxes relate to any
Pre-Closing Period. Notwithstanding any of the foregoing,
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(v) any indemnification provided under any clause of the preceding sentence
shall be without duplication of any indemnification provided under the other
clause of the preceding sentence, (w) the indemnification provided under clause
(ii) above shall not apply to any Tax liability paid to the appropriate taxing
authority on or prior to the Closing Date to the extent such amount is not
refunded or otherwise returned to any of the Sellers, the Sellers'
Representative, the Company or Arcon Holdings, (x) the indemnification provided
under the preceding sentence shall not apply to income Tax and sales or use
Taxes to the extent of the current liability accruals attributable to income
Taxes and sales and use Taxes disclosed to the Purchaser and set forth on the
books and records of the Company or Arcon Holdings at the Closing Date
(maintained in accordance with past practices), (y) the indemnification provided
in the preceding sentence for any liability that is related to an income Tax or
sales or use Tax shall be subject to and included in the $4,000,000 limit on the
Sellers' indemnification liabilities (but not the $400,000 "Deductible")
provided for in ss.10.2 hereof, and (z) the indemnification provided in the
preceding sentence for any liability that is not related to an income Tax or
sales or use Tax shall be subject to and included within the $400,000
"Deductible" and the $4,000,000 limit on the Sellers'
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indemnification liabilities provided for in ss.10.2 hereof. The Purchaser shall
promptly give the Sellers' Representative written notice of all Taxes, losses,
claims and expenses which the Purchaser has reasonably determined may give rise
to a right of indemnification under this Section 9.8, including a computation of
the amount of the required indemnification with sufficient detail and
particularity to enable the Sellers' Representative to reasonably determine the
amount of such required indemnification. The Sellers shall not be liable for any
Tax or payment hereunder to the extent that the Purchaser's failure timely to
notify the Sellers' Representative as required by the preceding sentences or in
Section 9.4 causes or increases a Tax or other payment to be due or otherwise
materially prejudices the ability of the Sellers to contest such Tax liability.
ss.9.9 FSE Tax Indemnity. The Purchaser and the Companies shall cooperate
reasonably and in good faith, at Sellers' sole expense, with Sellers and the
Sellers' Representative to enforce any and all rights Purchaser or the Companies
may have under the FSE Tax Indemnity in respect of Taxes and liabilities which
are otherwise indemnifiable amounts of the Sellers under this Article IX (such
indemnifiable amounts recoverable under the FSE Tax Indemnity (the "FSE
Indemnifiable Amount")), all without prejudice to the Sellers' agreements and
obligations under this Article IX
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or under the Escrow Agreement. The Purchaser and the Companies shall, subject to
the terms and conditions of this Section 9.9, at Sellers' sole expense, seek to
recover all FSE Indemnifiable Amounts under the FSE Tax Indemnity first, before
proceeding to enforce against the Sellers any of their rights under this Article
IX. Subject to Sellers' obligation to advance, in reasonable increments as
mutually agreed in good faith by the Purchaser and the Sellers' Representatives,
all of the Companies' reasonable costs and expenses (including, without
limitation, reasonable attorney's fees) of such enforcement, the Purchaser and
the Companies shall pursue all available remedies to enforce the FSE Tax
Indemnity, including by recourse to appropriate judicial proceedings); provided,
however that neither the Purchaser nor the Companies shall be obligated to
pursue any such legal proceeding unless the Sellers shall have paid the FSE
Indemnifiable Amounts to the Purchaser in accordance with this Agreement and the
Escrow Agreement whereupon the Sellers shall be subrogated to the rights of the
Companies under the FSE Tax indemnity. Any amounts actually recovered by the
Purchaser and the Companies pursuant to the FSE Tax Indemnity (i) shall be
without duplication of any indemnification provided in Section 9.8 hereof, (ii)
shall be excluded from the $400,000 "Deductible" and the $4,000,000 limitation
on Sellers' indemnification liabilities provided for in Section
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10.2 hereof and (iii) which constitute reimbursement or other payment of costs
and expenses of the Sellers, the Purchaser and the Companies incurred in
connection with pursuing FSE Indemnifiable Amounts which have been paid by or on
behalf of the Sellers shall be promptly paid to the Sellers' Representative upon
receipt by the Purchaser or the Companies. Notwithstanding anything to the
contrary herein, the Purchaser and the Companies agree that the Sellers'
Representative, at Sellers' sole expense, shall have the exclusive authority to
represent the interests of the Companies with respect to any FSE Tax Indemnity
matter and to control the prosecution, compromise and resolution of any such
matter (including with attorneys and other advisors chosen by the Sellers'
Representative) and the Purchaser and each of the Companies shall cooperate
reasonably and in good faith with the Sellers and the Sellers' Representative in
the prosecution of any such FSE Tax Indemnity matter.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
ss.10.1 Survival of Representations. The respective representations and
warranties of the Companies, the Sellers and the Purchaser contained in this
Agreement shall survive the Closing for a period of 18 months except for the
repre-
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sentations and warranties contained in Section 3.14 (other than the
representations and warranties contained in Section 3.14(b) which shall not
survive the Closing), which shall survive for the applicable statute of
limitations period (subject to Section 9.1(a)), and the representations and
warranties of the Sellers in Section 4.1 which shall survive indefinitely.
ss.10.2 Indemnification. (a) Following the Closing, each of the Sellers,
severally and not jointly (based upon their respective Percentage Interest and
with each Sellers's personal liability expressly limited as set forth in Section
10.2(b) and 10.2(c)) hereby agrees to indemnify and hold the Purchaser and its
officers, directors, affiliates (including, without limitation, Arcon Holdings
and the Company) and agents, and any successors thereto, harmless from damages,
losses, costs or expenses (including, without limitation, reasonable attorneys'
fees and expenses) ("Damages") incurred or suffered as a result of or arising
out of (i) the failure of any representation or warranty made by the Company in
this Agreement (without regard to any "materiality" or any "material adverse
effect" exception contained in any such representation and warranty other than
the representations and warranties contained in Section 3.5 and Section 3.24
(but only as to clauses (d), (h) and (l) of Section 6.1 incorporated by
reference into such Section 3.24) and Section
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3.25) to be true and correct as of the Closing Date with the same effect as
though such representation and warranty had been made on and as of the Closing
Date, (other than a breach of Section 3.14 with respect to Taxes which shall be
governed by Section 9.8), or (ii) the breach of any covenant or agreement made
or to be performed by the Sellers pursuant to this Agreement; provided, however,
that the Sellers shall not be liable under clause (i) of this Section unless the
aggregate amount of Damages exceeds $400,000 and then only to the extent of such
excess; provided further, however, that, except as set forth in Section 10.2(b)
below, the Sellers' aggregate liability under this Article X and Article IX
shall not exceed $4,000,000 in the aggregate (the "Sellers Liability Amount").
(b) Following the Closing, each of the Sellers, severally as to itself and
not jointly, hereby agrees to indemnify and hold the Purchaser and its officers,
directors, affiliates (including without limitation, Arcon Holdings and the
Company) and agents, and any successors thereto, harmless from Damages incurred
or suffered as a result of or arising out of the failure of any representation
or warranty made by such Seller in Article IV of this Agreement to be true and
correct as of the Closing Date; provided, however, that aggregate liability of
the Sellers under this Section 10.2(b) shall not exceed the Aggregate Closing
Payment (net of the
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amount of Outstanding Indebtedness paid to the Bank pursuant to Section 2.2(b)
and amounts recovered under Sections 10.2(a) and 9.8 of such Seller) and the
liability of each of the Sellers under this Section 10.2(b) shall not exceed, as
to each Seller, the product of the Aggregate Closing Payment and the Percentage
Interest (net of the amount of Outstanding Indebtedness paid to the Bank
pursuant to Section 2.2(b) and amounts recovered under Sections 10.2(a) and 9.8
of such Seller).
(c) Personal Liability of the Sellers. Except as set forth in Section
10.2(b), the aggregate personal liability (the "Personal Liability Amount") of
each of the Sellers with respect to the subject matter of this Agreement and the
transactions contemplated hereby is, and shall be, limited to an aggregate
amount equal to the product of the Sellers' Liability Amount and the Percentage
Interest of such Seller. No Seller shall have any personal liability in excess
of the applicable Personal Liability Amount for the performance or observance of
the covenants, agreements, representations and warranties of Sellers, the
Sellers' Representative, Arcon Holdings or the Company contained in this
Agreement (including, without limitation, Article IX hereof and, except as set
forth in ss.10.2(b), this Article X or in any document executed in connection
herewith and the Purchaser, on behalf of itself and its affiliates (including,
without limitation,
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each of the Companies), covenants and, absent fraud, agrees not to seek any
Damages or personal money judgment against any or all Sellers, in excess of the
Sellers' Liability Amount with respect to all of the Sellers (except as set
forth in Section 10.2(b)) or the applicable Personal Liability Amount with
respect to any Seller (except as set forth in Section 10.2(b)), for any Damage
sustained by the Purchaser, for any default or breach under this Agreement or
any other document executed in connection herewith or otherwise. To the extent
any term or provision of this Agreement provides for the joint and several
liability of the Sellers, such joint and several liability shall be limited in
the aggregate, in all respects with respect to all of the Sellers, to the
Sellers' Liability Amount (except as set forth in Section 10.2(b)), and in all
respects with respect to any of the Sellers, to the applicable Personal
Liability Amount (except as set forth in Section 10.2(b)).
(d) After the Closing, the Purchaser hereby agrees to indemnify and hold
the Sellers harmless from Damages incurred or suffered as a result of or arising
out of (i) the failure of any representation or warranty made by the Purchaser
in this Agreement to be true and correct as of the Closing Date with the same
effect as though such representation and warranty had been made on and as of the
Closing Date or (ii) the breach of any covenant or agreement made or to be
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performed by the Purchaser or the Companies pursuant to this Agreement after the
Closing; provided, however, that the Purchaser shall not be liable under clause
(i) of this Section unless the aggregate amount of Damages exceeds $400,000 and
then only to the extent of such excess; provided further, however, that the
Purchaser's aggregate liability under this Article X shall not exceed $4,000,000
in the aggregate.
(e) The foregoing indemnification provisions in this Article X and the
indemnification by Sellers provided in Section 9.8 shall be the sole and
exclusive remedy for any breach of the covenants, obligations, representations
or warranties or other agreements set forth in this Agreement or any other
agreement or other document executed in connection herewith; provided, however,
that the provisions of this Section 10.2(e) shall not prevent the Seller or the
Purchaser from seeking the remedies of specific performance or injunctive relief
prior to Closing in connection with a breach of a covenant or agreement of any
party contained herein.
ss.10.3 Indemnification Procedure. (a) Any party seeking indemnification
(the "Indemnified Party") from any other party (the "Indemnifying Party") with
respect to any claim, demand, action, proceeding or other matter pursuant to
this Agreement other than a claim by Purchaser with respect to Taxes (a "Claim")
shall promptly notify the Indemnifying Party of the existence of the Claim,
setting forth in
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reasonable detail the facts and circumstances pertaining thereto, the basis for
the Indemnified Party's right to indemnification, the amount of Damages for
which indemnification is being asserted, if known, and, in the case of third
party claims, such notice shall be accompanied by copies of all relevant
pleadings, demands and other papers, if any, served on the Indemnified Party.
(b) If any third party shall notify any Indemnified Party with respect to
any matter which may give rise to a Claim for indemnification against the
Indemnifying Party under this Agreement, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent) the Indemnifying Party thereby is
materially prejudiced by such failure to give notice. In the event that any
Indemnifying Party notifies the Indemnified Party within 30 days after the
Indemnified Party has given notice of the matter that the Indemnifying Party
would be required to indemnify the Indemnified Party in full against any such
Claim and is assuming the defense thereof:
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(i) the Indemnifying Party will defend the Indemnified Party against
the matter with counsel of its choice reasonably satisfactory to the Indemnified
Party;
(ii) the Indemnified Party may retain separate co-counsel at its
sole cost and expense (except that the Indemnifying Party will be responsible
for the reasonable fees and expenses of the separate co-counsel (a) to the
extent the Indemnified Party concludes reasonably based upon written advice of
counsel that a conflict of interest exists between the Indemnified Party and
Indemnifying Party or (b) the named parties to any such action (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party and such Indemnified Party shall have been advised in writing by counsel
that there may be one or more material legal defenses available to the
Indemnified Party which are not available to the Indemnifying Party, or
available to the Indemnifying Party, but the assertion of which would be
materially adverse to the interest of the Indemnified Party);
(iii) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld or delayed
unreasonably);
(iv) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement (other
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than with respect to a judgement or settlement involving exclusively money
damages), without the written consent of the Indemnified Party (not to be
withheld or delayed unreasonably), provided, that, in the case of entry of any
such judgement or settlement (to the extent involving exclusively money
damages), the claimant or plaintiff in the matter shall have provided the
Indemnified Party a written release from all liability with respect thereto; and
(v) subject to Section 10.3(d), within 30 days after the
Determination Date with respect to a third party Claim, the Indemnifying Party
shall pay the Indemnified Party the amount of Damages incurred by the
Indemnified Party. As used herein, the term "Determination Date" shall mean the
date on which the Determination is final, legally binding, and non-appealable.
As used herein, the term "Determination" shall mean (i) the final non-appealable
judgment by a court of competent jurisdiction with respect to any third party
Claim covered by this Article X or (ii) a compromise and settlement agreement
executed and delivered by both Indemnifying Party and Indemnified Party with
respect to any third party Claim covered by this Article X.
(c) If no Indemnifying Party notifies the Indemnified Party within 30 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, then the Indemnified Party may defend
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against, or enter into any settlement with respect to (subject to subsection
(b)(iii) above), the matter in any manner it reasonably may deem appropriate,
without prejudice to any of its rights hereunder.
(d) The Indemnified Party shall be entitled to reimbursement of reasonable
out-of-pocket expenses included in Damages with respect to any Claim (including,
without limitation, the reasonable out-of-pocket cost of defense, preparation
and investigation relating to such Claim) as such expenses are incurred by the
Indemnified Party following receipt by the Indemnifying Party of appropriate
invoices with respect thereto.
(e) In the event that liability hereunder does not involve a third party
claim, the Indemnifying Party shall within 30 days after the date of an
Indemnity Notice respond in writing to the Indemnified Party (the "Indemnity
Response") and set forth with reasonable specificity those items in the
Indemnity Notice to which the Indemnified Party does not agree as well as the
summary basis upon which such disagreement is founded. Within 30 days following
the delivery of the Indemnity Response to the Indemnified Party, representatives
of the Indemnifying Party and Indemnified Party shall meet to attempt to resolve
through good faith negotiations the applicable indemnification claims.
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(f) The amount of any Damages for which indemnification is provided under
this Article X shall be net of the amount of Tax benefits actually realized by
the Indemnified Party in the tax year in which payments in respect of
indemnification are received, and net of any amounts actually recovered by the
Indemnified Party under insurance policies (other than premiums paid and related
costs of collection) with respect to such Damages. The Indemnified Party shall
use all reasonable efforts to recover amounts under its insurance policies, if
any, in respect of Claims for Damages for which indemnification is provided
under this Agreement ("Insurable Amounts"). To the extent Insurable Amounts are
actually recovered by the Purchaser after the Purchaser has recovered from the
Escrow Account or the Sellers amounts in respect of the same Claims for Damages
for which the Purchaser has actually received such Insurable Amounts
("Indemnifiable Amount"), the Purchaser shall promptly pay to the Sellers'
Representative for the benefit of the Sellers out of such Insurable Amounts
actually recovered an amount equal to such Indemnifiable Amount.
(g) Except for Claims that the Purchaser may have pursuant to this Article
X or Article IX and Claims for fraud, the Purchaser, on behalf of itself and its
successors and assigns, hereby waives and releases from and after the Closing
the other parties hereto and their respective
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successors and assigns from any and all claims of any kind or nature (including,
without limitation, claims for contribution, cost recovery or reimbursement)
which the Purchaser may otherwise have under any laws, rules or regulations
(including, without limitation, Environmental Laws) applicable to the Companies,
any of the Sellers or the Company Property.
ARTICLE XI
TERMINATION
ss.11.1 Termination. This Agreement may be terminated in writing at any
time prior to the Closing:
(a) by the mutual written consent of the Purchaser and the Required
Sellers;
(b) by the Purchaser, if there has been a material breach by Arcon
Holdings, the Company or any of the Sellers of any material covenant,
representation or warranty contained in this Agreement which has prevented the
satisfaction of any condition to the obligations of the Purchaser at the Closing
and such breach has not been waived by the Purchaser or, in the case of a
covenant breach, cured by Arcon Holdings, the Company or any of the Sellers
within the earlier of 30 days after written notice thereof from the Purchaser or
the Termination Date;
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(c) by the Required Sellers, if there has been a material breach by the
Purchaser of any material covenant, representation or warranty contained in this
Agreement which has prevented the satisfaction of any condition to the
obligation of the Sellers or the Companies at the Closing and such breach has
not been waived by the Required Sellers or, with respect to a covenant breach,
cured by the Purchaser within the earlier of 30 days after written notice
thereof by the Sellers or the Companies or the Termination Date;
(d) by either the Purchaser or the Required Sellers if (i) the
transactions contemplated hereby have not been consummated by the Termination
Date; provided, however, that neither the Purchaser nor the Sellers shall be
entitled to terminate this Agreement pursuant to this Section 11.1(d) if such
Person's breach of this Agreement has prevented the consummation of the
transactions contemplated hereby.
(e) by either the Purchaser or the Required Sellers if any governmental
authority shall have issued an order, decree, ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and nonappealable.
ss.11.2 Effect of Termination. In the event that this Agreement shall be
terminated pursuant to Section 11.1, all further obligations of the parties
hereto under this Agree-
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ment or otherwise (other than pursuant to Sections 12.2 and 12.5 and the
Confidentiality Agreement, which shall continue in full force and effect in
accordance with their terms) shall terminate without further liability or
obligation of the Sellers or the Companies, on the one hand and the Purchaser on
the other hand; provided, however, that no party shall be released from
liability hereunder if this Agreement is terminated pursuant to Section 11.1(b),
11.1(c) or 11.1(d) and the transactions abandoned by reason of (i) willful
failure of such party to have performed its obligations hereunder or (ii) any
knowing material misrepresentation made by such party of any matter set forth in
Article III, IV or V, as applicable.
ARTICLE XII
MISCELLANEOUS
ss.12.1 Knowledge. Where any representation or warranty made by the
Companies or either of them contained in this Agreement is expressly qualified
by reference to its knowledge, such knowledge shall be deemed to exist if the
matter is within the actual knowledge of any of the Sellers and/or the executive
officers of Arcon Holdings or the Company.
ss.12.2 Expenses. Subject to Section 9.3 the parties hereto shall pay
their own expenses relating to the transac- tions contemplated by this
Agreement, including, without
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limitation, the fees and expenses of their respective counsel and financial
advisers, it being understood that all third party out-of-pocket expenses of the
Companies incurred prior to the Closing in connection with the transactions
contemplated by this Agreement shall be paid by the Sellers prior to the Closing
Date (it being understood and agreed by the parties, without limiting the
generality of the foregoing in this Section 12.2, that all accounting fees and
expenses of the Companies incurred in connection with the Purchaser's financing
of the transaction contemplated by this Agreement, whether or not the Closing
occurs, shall be borne by the Purchaser).
ss.12.3 Governing Law. THE INTERPRETATION AND CONSTRUC- TION OF THIS
AGREEMENT, AND ALL MATTERS RELATING HERETO, SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS EXECUTED AND TO BE PERFORMED SOLELY
WITHIN SUCH STATE.
ss.12.4 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
ss.12.5 Publicity. Except as otherwise required by law, none of the
parties hereto shall issue, prior to the Closing, any press release or make any
other public statement, in each case relating to, connected with or arising out
of this Agreement or the matters contained herein, without obtaining
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the prior approval of the Companies, on the one hand, and the Purchaser, on the
other hand, to the contents and the manner of presentation and publication
thereof. Except as otherwise required by law, after the Closing the Sellers
shall not issue any press release or make any other public statement, in each
case relating to, connected with or arising out of this Agreement or the matters
contained herein, without obtaining the prior approval of the Purchaser which
shall not be unreasonably withheld or delayed.
ss.12.6 Notices. Any notice or other communication required or permitted
under this Agreement shall be sufficiently given if delivered in person or sent
by telecopy or by registered or certified mail, postage prepaid, addressed as
follows: if to the Purchaser, to Specialty Paperboard, Inc., Brudies Road, P.O.
Box 498, Brattleboro, Vermont 05302 (Facsimile Number (802) 257-5900) Attention:
Chief Financial Officer, with a copy to its counsel, White & Case, 1155 Avenue
of the Americas, New York, New York 10036 (Facsimile Number (212) 354-8113),
Attention: Frank L. Schiff, Esq.; and if to the Sellers, to the Sellers'
Representative, initially Northwood Ventures, 485 Underhill Boulevard, Syosset,
New York 11791 (Facsimile Number (516) 364-0879), Attention: Peter G. Schiff,
with a copy to their counsel, Haythe & Curley, 237 Park Avenue, New York, New
York 10017 (Facsimile Number (212) 682-0200), Attention: Bradley P.
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Cost, Esq. or such other address or number as shall be furnished in writing by
any such party, and such notice or communication shall be deemed to have been
given as of the date so delivered, sent by facsimile or mailed.
ss.12.7 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
ss.12.8 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
ss.12.9 Entire Agreement. This Agreement (including the Schedules hereto)
and the Confidentiality Agreement, including the other documents referred to
herein and therein which form a part hereof and thereof, contain the entire
understanding of the parties hereto with respect to the subject matter contained
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter other
than the Confidentiality Agreement which, in accordance with its terms, shall
survive termination hereof but shall terminate and be of no further force and
effect on and after the Closing.
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ss.12.10 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by the Purchaser, the Companies and each of the
Sellers.
ss.12.11 Severability. Should any provision of this Agreement be held by a
court of competent jurisdiction to be enforceable only if modified, such holding
shall not affect the validity of the remainder of this Agreement, the balance of
which shall continue to be binding upon the parties hereto with any such
modification to become a part hereof and treated as though originally set forth
in this Agreement. The parties further agree that any such court is expressly
authorized to modify any such unenforceable provision of this Agreement in lieu
of severing such unenforceable provision from this Agreement in its entirety,
whether by rewriting the offending provision, deleting any or all of the
offending provision, adding additional language to this Agreement, or by making
such other modifications as it deems warranted to carry out the intent and
agreement of the parties as embodied herein to the maximum extent permitted by
law. The parties expressly agree that this Agreement as so modified by such
court shall be binding upon and enforceable against each of them. In any event,
should one or more of the provisions of this Agreement be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions hereof,
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and if such provision or provisions are not modified as provided above, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provisions had never been set forth herein.
ss.12.12 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
ss.12.13 Jurisdiction. Any judicial proceeding brought against any of the
parties to this Agreement or any dispute arising out of this Agreement or any
matter related hereto shall be brought in the courts of the State of New York,
or in the United States District Court for the Southern District of New York,
and, by execution and delivery of this Agreement, each of the parties to this
Agreement accepts the exclusive jurisdiction of such courts, and irrevocably
agrees to be bound by any judgment rendered thereby in connection with this
Agreement. The foregoing consent to jurisdiction shall not be deemed to confer
rights on any Person other than the respective parties to this Agreement.
ss.12.14 Action by Sellers. Except as expressly set forth herein, whenever
this Agreement requires or permits action to be taken by the Sellers, such
action shall be sufficient if taken by the Required Sellers. Each of the Sellers
hereby consents and agrees to all actions or inac-
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tions taken or omitted to be taken by the Required Sellers and agrees to
indemnify and hold harmless the Required Sellers from and against all costs and
expenses (including, without limitation, reasonable attorneys fees and expenses
incurred by the Required Sellers in any claim, action or proceeding between the
Required Sellers and the Sellers (or any of them) or between the Required
Sellers and any third party (including, without limitation, the Purchaser or the
Companies) or otherwise) incurred or suffered as a result of or arising out of
such actions or inactions.
ss.12.15 Sellers' Representative. By the execution and delivery of this
Agreement, each Seller hereby irrevocably constitutes and appoints Northwood
Ventures, a New York limited partnership, as the Sellers' Representative with
the exclusive authority and power to take all actions required or permitted to
be taken by the Sellers' Representative under this Agreement including, without
limitation, under Article IX hereof and the Escrow Agreement. Each of the
Sellers hereby consents and agrees to all actions or inactions taken or omitted
to be taken by the Sellers' Representative under this Agreement and the Escrow
Agreement hereby agrees to indemnify and hold harmless the Sellers'
Representative from and against all costs and expenses (including, without
limitation, reasonable attorneys' fees and accountants' expenses) incurred by
the Sellers' Representative in any
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claim, action or proceeding between the Sellers' Representative and the Sellers
(or any of them) or between the Sellers' Representative and any third party
(including, without limitation, the Purchaser or the Companies) or otherwise
incurred or suffered as a result of or arising out of such actions or inactions.
Upon written notice to the Purchaser, the Sellers may change the identity of the
Sellers' Representative by written consent signed by the Required Sellers.
ss.12.16 Assignment. This Agreement shall not be assignable by any of the
parties hereto except pursuant to a writing executed by all of the parties
hereto.
ss.12.17 Construction. The parties hereto agree that this Agreement is the
product of negotiations between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in, and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentem.
ss.12.18 Schedules. All Schedules, Exhibit A and Annex I and Annex II to
this Agreement are integral parts of this Agreement. Without limiting the
generality of the foregoing,
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the fact that any disclosure on any of the Schedules is not required to be
disclosed in order to render the applicable representation or warranty to which
it relates true, or that the absence of such disclosure on the Schedule would
not constitute a breach of such representation or warranty, shall not be deemed
or construed to expand the scope of any representation or warranty hereunder or
to establish a standard of disclosure in respect of any representation or
warranty.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed on its behalf by its respective officer thereunto duly
authorized, all as of the day and year first above written.
SPECIALTY PAPERBOARD, ARCON HOLDINGS CORP.
INC.
By: /s/ Alex Kwader By /s/ Peter G. Schiff
--------------------- -----------------------------
Name: Alex Kwader Name: Peter G. Schiff
Title: President Title: Chairman
ARCON COATING MILLS, INC.
By /s/ David R. Kruft
-----------------------------
Name: David R. Kruft
Title: President - CEO
NORTHWOOD VENTURES
By /s/ Peter G. Schiff
-----------------------------
Name: Peter G. Schiff
Title: General Partner
NORTHWOOD CAPITAL PARTNERS LLC
By /s/ Peter G. Schiff
-----------------------------
Name: Peter G. Schiff
Title: Chairman and CEO
<PAGE>
KUHN, LOEB & CO.
By /s/ David T. Schiff
-----------------------------
Name: David T. Schiff
Title: Managing Partner
/s/ Rodney B. Berens
-------------------------------
Rodney B. Berens
/s/ Richard C. Webel
-------------------------------
Richard C. Webel
/s/ William Dunn
-------------------------------
William Dunn
/s/ Alexander J. Smith
-------------------------------
Alexander J. Smith
/s/ Henry T. Wilson
-------------------------------
Henry T. Wilson
/s/ David R. Kruft
-------------------------------
David R. Kruft
/s/ Thomas S. Ablum
-------------------------------
Thomas S. Ablum
/s/ David M. Knott
-------------------------------
David M. Knott
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ANNEX I
A B C
Sellers'
Shares of Stock/ Escrow
Name Options Owned Payment
- ---------------------------------- ---------------- --------
Preferred Stock Holders
Series A Holders
Northwood Ventures 21,239.2 --
Northwood Capital Partners LLC 10,610.1 --
Henry T. Wilson 95.5 --
Series B Holders
Kuhn, Loeb & Co. 2,387.5 --
Rodney B. Berens 955.0 --
Richard C. Webel 955.0 --
Alexander J. Smith 382.0 --
David R. Kruft 238.8 --
Thomas S. Ablum 382.0 --
David M. Knott 955.0 --
Common Stock Sellers
Northwood Ventures 22,893.3 1,030,630
Northwood Capital Partners LLC 11,436.4 514,906
Kuhn, Loeb & Co. 2,573.4 115,856
Rodney B. Berens 1,029.4 46,342
Richard C. Webel 1,029.4 46,342
Alexander J. Smith 411.8 18,536
Henry T. Wilson 102.9 4,644
David R. Kruft 257.3 124,102
Thomas S. Ablum 411.8 18,536
David M. Knott 1,029.4 46,342
William Dunn -- 33,764
Optionholders
David R. Kruft 55,556 N/A
William Dunn 16,667 N/A
<PAGE>
ANNEX II
Percentage
Interest
----------
Northwood Ventures 51.5333
Northwood Capital Partners LLC 25.7455
Kuhn, Loeb & Co. 5.7928
Rodney B. Berens 2.3171
Richard C. Webel 2.3171
Alexander J. Smith .9268
Henry T. Wilson .2322
David R. Kruft 6.2051
Thomas S. Ablum .9268
David M. Knott 2.3171
William Dunn 1.6882
Total 100%
<PAGE>
Exhibit A
FORM OF ESCROW AGREEMENT
ESCROW AGREEMENT (this "Escrow Agreement") made this 31st day of
October, 1996 by and among SPECIALTY PAPERBOARD, INC., a Delaware corporation
(the "Purchaser"), each of the Persons listed on Exhibit A hereto (each a
"Seller" and, collectively, the "Sellers"), former owners of all of the
outstanding Stock, Options and Warrants of ARCON HOLDINGS CORP., a Delaware
corporation ("Arcon Holdings"), and The Bank of New York, a New York banking
corporation (the "Escrow Agent").
WHEREAS, the Sellers and the Purchaser have entered into a Stock
Purchase Agreement dated as of August 28, 1996 (the "Agreement");
WHEREAS, the Agreement provides that the Purchasers shall put into
escrow with the Escrow Agent the amount of Two Million Dollars ($2,000,000) (the
"Escrow Amount"), to be used to satisfy claims arising out of and under Article
IX and/or Article X of the Agreement during the period from the date hereof
until a date which is eighteen months after the date hereof; and
WHEREAS, the parties to this Escrow Agreement have agreed upon and
wish to set forth the terms and conditions with respect to the Escrow Amount
held by the Escrow Agent.
NOW THEREFORE, in consideration of the premises and for other good
and valuable consideration the receipt and sufficiency of which are hereby
acknowledged the parties agree as follows:
1. Definitions. Capitalized terms used but not defined herein shall
have the respective meanings set forth in the Agreement. The following terms
shall have the following meanings when used herein:
"Agreed Amount" shall have the meaning specified in Section 7(a)
hereof.
"Arcon Holdings" shall have the meaning specified in the
introductory paragraph hereof.
<PAGE>
"Claim Notice" shall have the meaning specified in Section 7(a)
hereof.
"Escrow Account" shall have the meaning specified in Section 3.
"Escrow Agent" shall have the meaning specified in the introductory
paragraph hereof.
"Escrow Agreement" shall have the meaning specified in the
introductory paragraph hereof.
"Escrow Amount" shall have the meaning specified in the third
WHEREAS clause of this Escrow Agreement.
"Escrow Deposit" shall have the meaning specified in Section 4(b)
hereof.
"Expiration Date" shall have the meaning
specified in Section 4(a) hereof.
"Final Judgment" shall have the meaning specified in Section 8
hereof.
"Judgment Amount" shall have the meaning specified in Section 7(b)
hereof.
"Purchaser" shall have the meaning specified in the introductory
paragraph hereof.
"Required Sellers" shall mean such Sellers who hold in the aggregate
more than 50% of the then issued and outstanding Common Stock held by all
Sellers as of the Closing Date (calculated (i) as if all issued and outstanding
shares of Preferred Stock were converted into shares of Common Stock and (ii) as
if all Options have been fully exercised into shares of Common Stock).
"Seller" or "Sellers" shall have the meaning specified in the
introductory paragraph hereof.
"Sellers' Representative" shall mean the representative of the
Sellers appointed pursuant to Section 19 of this Escrow Agreement.
2. Escrow Agent. The Sellers and Purchaser hereby designate and
appoint the Escrow Agent to serve in accordance with the terms, conditions and
provisions of this Escrow Agreement, and the Escrow Agent hereby agrees
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<PAGE>
to act as such, upon the terms, conditions and provisions provided in this
Escrow Agreement.
3. Deposit of Escrow Amount. Concurrently with the execution of this
Escrow Agreement, the Purchaser has deposited for the account of the Sellers
with the Escrow Agent the Escrow Amount, to be held in a separate account (the
"Escrow Account") subject to the terms and provisions herein contained.
Subject to the removal of the Escrow Agent or the right of the
Escrow Agent to resign as hereinafter provided, the Escrow Agent shall hold the
funds placed in escrow pursuant to this Escrow Agreement to satisfy certain
contingent indemnity obligations of the Sellers to the Purchaser and funds
representing the payment thereof shall not be disbursed except as herein
provided.
4. Termination of Escrow Agreement; Release of Escrow Amount. (a)
This Escrow Agreement shall terminate and the Purchaser and the Sellers'
Representative shall give joint written notice to the Escrow Agent of such
termination, on the later of (i) April 30, 1998 (the "Expiration Date"), or (ii)
if on such Expiration Date, a written claim shall have been previously delivered
to the Sellers' Representative and the Escrow Agent and not theretofore
determined pursuant to a written agreement between Purchaser and the Sellers'
Representative or pursuant to a Final Judgment, the date when such claim shall
have been finally determined as provided herein and payment thereof, if any,
shall have been made to the Purchaser or the Sellers, as the case may be.
(b) The Escrow Agent shall release the Escrow Amount and all
interest, earnings and proceeds therefrom (collectively, the "Escrow Deposit")
to the Sellers upon termination pursuant to Section 4(a); provided, however,
(i) that if on the Expiration Date, a written claim shall have been
delivered to the Sellers' Representative and the Escrow Agent in an
amount less than the remaining Escrow Amount, the Escrow Agent shall
release to the Sellers all interest, earnings and proceeds from the
Escrow Amount plus the difference between the remaining Escrow
Amount and the asserted claim; and
(ii) that if on the Expiration Date, a written claim shall have been
delivered to the Sellers' Representative and the Escrow Agent in an
amount
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<PAGE>
greater than the remaining Escrow Amount, the Escrow Agent shall
release to the Sellers an amount determined in accordance with
Section 4(a)(ii) hereof (except that the Escrow Agent shall release
to the Sellers all interest, earnings and proceeds from the Escrow
Amount on the Expiration Date).
5. Investment of Escrow Amount. The Escrow Agent shall invest and
reinvest the funds in the Escrow Account as directed from time to time in
writing by the Sellers' Representative in any one or more of the following
investments: in United States treasury bills or United States treasury notes, in
any other direct obligation issued by or guaranteed in full as to principal and
interest by the United States of America, or in certificates of deposit issued
by a commercial bank having capital, surplus and undivided profits of not less
than One Hundred Million Dollars ($100,000,000) (including the Escrow Agent) or
in such other interest-bearing security or account as shall be approved in
writing by the Purchaser and the Sellers; provided, however, that any such
obligations shall have maturities of no more than 90 days. The Escrow Agent
shall not be liable or responsible in any manner for any loss or depreciation
resulting from any such investment, or for any costs in connection therewith
other than due to its gross negligence, bad faith or willful misconduct, and all
of said losses and costs shall be borne by the Escrow Account. The Escrow Agent
shall hold all securities in the Escrow Account in the name of one or more of
its nominees. The Escrow Agent shall have the power to sell or liquidate the
investments described in this Section 5 whenever the Escrow Agent shall be
directed in writing to release all or any portion of the Escrow Deposit
hereunder.
6. Investment Income. All income, interest, earnings and gains of
all kinds from amounts held in the Escrow Account shall be a part of the Escrow
Account. All interest, earnings and proceeds accrued or paid upon amounts held
in the Escrow Account shall be disbursed quarterly to the Sellers on the last
day of March, June, September and December of each year. The Escrow Agent shall
prepare for and deliver to each Seller Forms 1099 for the applicable periods
occurring during the term of this Escrow Agreement.
7. Claims by Purchaser under Agreement. If at any time or from time
to time while this Escrow Agreement continues in effect:
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(a) the Purchaser has notified the Sellers' Representative and the
Escrow Agent in writing (a "Claim Notice") that the Purchaser is entitled
to indemnification under Article IX and/or Article X of the Agreement, in
a specified amount on or prior to the Expiration Date, and the Sellers
agree in writing that the Purchaser is entitled to such indemnification in
such amount (the "Agreed Amount"); or
(b) with respect to a claim made on or prior to the Expiration Date,
the Purchaser delivers to the Sellers a copy of a Final Judgment entered
by a court of competent jurisdiction in favor of the Purchaser assessing
Damages in favor of the Purchaser, as certified by an officer of the
Purchaser in a written certificate delivered to the Sellers (the aggregate
of the amount of such Damages approved pursuant to such Final Judgment are
hereinafter referred to as the "Judgment Amount");
and copies of appropriate documentation verifying the Agreed Amount or the
Judgment Amount, as the case may be, shall have been delivered (in the case of
subsection (a) above, pursuant to the joint written instructions of the
Purchaser and the Sellers' Representative) to the Escrow Agent and the Sellers'
Representative, the Escrow Agent shall deliver to the Purchaser the Agreed
Amount or the Judgment Amount within five (5) Business Days after receipt of
such appropriate documentation. If a Final Judgment in respect of a claim made
by the Purchaser prior to the Expiration Date for indemnification under Article
IX and/or Article X of the Agreement is entered in favor of the Sellers, the
Escrow Agent shall deliver the amount of money approved pursuant to such Final
Judgement upon receipt by the Escrow Agent of copies of appropriate
documentation verifying such amount within five (5) Business Days after receipt
of such appropriate documentation. The Purchaser shall deliver each Claim Notice
to the Escrow Agent and the Sellers' Representative. Upon receipt by the Escrow
Agent of each Claim Notice, the Escrow Agent shall send a copy thereof to the
Sellers' Representative within three (3) Business Days of such receipt.
8. Responsibilities of the Escrow Agent. The Escrow Agent shall have
no duties or responsibilities except those expressly set forth herein. The
Escrow Agent shall have no responsibility for the validity of any agreements
referred to in this Escrow Agreement, or for the performance of any such
agreements by any party thereto or for interpretation of any of the provisions
of any of such
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<PAGE>
agreements. The liability of the Escrow Agent hereunder shall be limited solely
to bad faith, willful misconduct or gross negligence on its part. The Escrow
Agent shall be protected in acting upon any certificate, notice or other
instrument whatsoever received by the Escrow Agent under this Escrow Agreement,
not only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth and accuracy of any information therein
contained, which the Escrow Agent in good faith believes to be genuine and to
have been signed or presented by a proper person or persons or their counsel.
If a controversy arises between two or more of the parties hereto,
or between any of the parties hereto and any person not a party hereto, as to
whether or not or to whom the Escrow Agent shall deliver the Escrow Deposit or
any portion thereof or as to any other matter arising out of or relating to this
Escrow Agreement, the Escrow Agent shall not be required to determine same and
need not make any delivery of the Escrow Deposit held in escrow or any portion
thereof but may retain the same until the rights of the parties to the dispute
shall have finally been determined by written agreement of the Purchaser and the
Sellers' Representative or by final judgment of a court of competent
jurisdiction after all appeals have been finally determined or the time for
further appeals has expired without an appeal having been made (for purposes of
this Agreement, a "Final Judgment"). The Escrow Agent shall be entitled to
assume that no such controversy has arisen unless it has received a written
notice that such a controversy has arisen which refers specifically to this
Escrow Agreement and identifies the adverse claimants to the controversy.
Except as provided herein the Escrow Agent shall have no
responsibility as to the validity, collectibility or value of any cash and
securities held by it in escrow pursuant to this Escrow Agreement, and the
Escrow Agent may rely on any notice, instruction, certificate, statement,
request, consent, confirmation, agreement or other instrument which it believes
to be genuine and to have been signed or presented by a proper person or
persons. In the event that the Escrow Agent shall be uncertain as to its duties
or rights hereunder or shall receive instructions from any of the undersigned
with respect to any portion of the Escrow Deposit held by it in escrow pursuant
to this Escrow Agreement which, in the opinion of the Escrow Agent, are in
conflict with any of the provisions of this Escrow Agreement, the Escrow Agent
shall be entitled to refrain from taking any action until it shall be directed
otherwise
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<PAGE>
in writing by all of the other parties hereto or by an order of a court of
competent jurisdiction. The Escrow Agent shall be deemed to have no notice of,
or duties with respect to, any agreement or agreements with respect to the
Escrow Deposit (or any portion thereof) held by it in escrow pursuant to this
Escrow Agreement other than this Escrow Agreement or except as otherwise
provided herein. This Escrow Agreement and the Agreement (to the extent referred
to herein) sets forth the entire agreement between the parties hereto and the
Escrow Agent as escrow agent with respect to the Escrow Account and the
distribution of the Escrow Deposit (or any portion thereof) held therein.
Notwithstanding any provision to the contrary contained in any other agreement
(excluding any amendment to this Escrow Agreement) between any of the parties
hereto, the Escrow Agent shall have no interest in the Escrow Deposit (or any
portion thereof) held by it in escrow pursuant to this Escrow Agreement. With
respect to the Escrow Account, in the event that any of the terms and provisions
of any other agreement (excluding any amendment to this Escrow Agreement)
between any of the parties hereto conflict or are inconsistent with any of the
terms and provisions of this Escrow Agreement, the terms and provisions of this
Escrow Agreement shall govern and control in all respects.
9. Amendment and Cancellation. The Escrow Agent shall not be bound
by any cancellation, waiver, modification or amendment of this Escrow Agreement,
including the transfer of any interest hereunder, unless such modification is in
writing and signed by each of the Purchaser and the Sellers' Representative and,
if the duties of the Escrow Agent hereunder are affected, unless the Escrow
Agent also shall have given its written consent thereto.
10. Legal Counsel. The Escrow Agent may consult with, and obtain
advice from, legal counsel in the event of any question as to any of the
provisions hereof or its duties hereunder, and it shall incur no liability and
shall be fully protected in acting in good faith in accordance with the opinion
and instructions of such counsel.
11. Resignation and Removal. The Escrow Agent shall have the right,
in its discretion, to resign as escrow agent hereunder at any time, by giving at
least thirty (30) days' prior written notice of such resignation to the Sellers'
Representative and the Purchaser. The Escrow Agent may be removed at any time by
an instrument or concurrent instruments in writing delivered to the Escrow Agent
and signed by each of the Sellers' Representative and Purchaser. Such
resignation or removal, as the case may
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<PAGE>
be, shall take effect upon the appointment of a successor escrow agent in
accordance with the provisions of this Section 11 and the acceptance of such
appointment by the successor escrow agent. Upon such resignation or removal, as
the case may be, each of the Sellers and the Purchaser shall use their best
efforts to appoint another bank with capital, surplus and undivided profits of
not less than One Hundred Million Dollars ($100,000,000) as successor Escrow
Agent. Upon acceptance of such appointment, each of the Sellers and the
Purchaser will enter into an agreement with such successor escrow agent in
substantially the form of this Escrow Agreement. Resignation by or removal of,
as the case may be, the Escrow Agent shall relieve the Escrow Agent of any
responsibility or duty thereafter arising hereunder, but shall not relieve the
Escrow Agent of responsibility to deliver the Escrow Deposit as provided for in
this Section 11. Immediately upon the effectiveness of such resignation or
removal, as the case may be, the Escrow Agent shall deliver to the successor
escrow agent the Escrow Deposit then held in the Escrow Account. In the event of
the resignation of the Escrow Agent, if a substitute for the Escrow Agent
hereunder shall not have been selected as aforesaid within the 30-Business Day
notice period referred to in the first sentence of this Section 11, the Escrow
Agent shall be entitled to petition any court of competent jurisdiction for the
appointment of a substitute for it hereunder or, in the alternative, it may
transfer and deliver the Escrow Deposit then held in the Escrow Account to or
upon the order of such court. The Escrow Agent shall be discharged from all
further duties hereunder upon the effectiveness of such resignation or removal
as set forth above and upon transfer and delivery of the Escrow Deposit in the
Escrow Account to or upon the order of any such court, as the case may be.
12. Fees. The Sellers (severally, and not jointly, in accordance
with such seller's percentage interest as set forth in Exhibit A hereto), on the
one hand, and the Purchaser, on the other hand, agree to share equally the
Escrow Agent's annual fee (such fees to be based upon the anniversary date of
this Escrow Agreement) and all other fees and expenses of the Escrow Agent
pursuant to the fee schedule attached hereto as Exhibit B. Each of the Sellers
hereby agrees that the Sellers' Representative may pay such Seller's percentage
interest of such fees from the Sellers Amount, as provided for in Section 2.2(c)
of the Agreement. This Section 12 shall survive the termination of this
Agreement.
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<PAGE>
13. Payments. At any time the Escrow Agent is required to distribute
or pay over any amounts held by or received by it under any of the provisions of
this Escrow Agreement to the Sellers, such distribution and payment shall be
effected by issuance of the Escrow Agent's check in the appropriate amount
payable to such Seller and by mailing of such check to such Seller at the
address of such Seller set forth in Exhibit A hereto, provided that:
A. Any Seller may, by written notice delivered to the Escrow Agent, direct
that payment of amounts required to be distributed to such Seller be effected by
wire transfer in immediately available funds to an account established by such
Seller for such purpose, or by mailing the Escrow Agent's check for such amounts
to any other or changed address specified in such notice, and payments
thereafter (but not theretofore) made by the Escrow Agent to such Seller
hereunder shall thereafter be made in accordance with such notice (until changed
by subsequent notice delivered to the Escrow Agent as herein provided);
B. In the event of any transfer or assignment, by death, divorce or
otherwise by operation of law, or by sale, assignment, contract, security
agreement or otherwise, of any right to receive payment of any part of any
amounts held by the Escrow Agent (notice of which sale, transfer or assignment
shall be given by such Seller to the Escrow Agent) the Escrow Agent shall
nevertheless be entitled to withhold payment of any amounts to such assignee,
transferee or successor in interest until written instructions from such
assignee, transferee or successor in interest are delivered to the Escrow Agent
specifying the mailing address or account of such assignee, transferee or
successor in interest pursuant to the foregoing provisions of this Section; and
C. All payments and distributions of all kinds required to be made to the
Sellers in accordance with the terms hereof shall be made according to each such
Seller's Percentage Interest as set forth in Exhibit A hereto.
14. Notices. All communications and disbursements required
pursuant to this Escrow Agreement shall be addressed to the Escrow Agent, the
Purchaser and the Sellers, respectively, as follows:
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If to the Escrow Agent:
The Bank of New York
Insurance Trust and Escrow Department
101 Barclay Street, 12-E
New York, New York 10286
If to the Purchaser:
Specialty Paperboard, Inc.
161 Brudies Road
Brattleboro, Vermont 05302
Attention: Glenn S. McKenzie
If to the Sellers:
To the respective addresses of the Sellers
shown in Exhibit A to this Escrow Agreement.
with a copy to:
Haythe & Curley
237 Park Avenue
20th Floor
New York, New York 10017-3142
Attention: Joseph J. Romagnoli, Esq.
If to the Sellers' Representative:
Northwood Ventures
485 Underhill Boulevard
Suite 205
Syosset, New York 11791-3419
with a copy to:
Haythe & Curley
237 Park Avenue
20th Floor
New York, New York 10017-3142
Attention: Joseph J. Romagnoli, Esq.
Any notice or instructions under any of the provisions of this Escrow Agreement
shall be deemed effectively given only if such notice is in writing and is
received by the recipient thereof if notice is personally delivered or sent by
courier or three (3) Business Days after date of mailing, if sent by certified
mail, return receipt requested. Any delivery under this Escrow Agreement shall
be made by
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<PAGE>
hand delivery, or by courier with receipt acknowledged, or by certified mail,
return receipt requested, addressed to the respective addresses of the parties
hereto as set forth in this Section 14 or at such other address as any of the
parties hereto may hereafter specify to the others in writing. Notwithstanding
any of the foregoing, no notice or instructions to the Escrow Agent shall be
deemed to have been received by the Escrow Agent prior to actual receipt by the
Escrow Agent, and any computation of a time period which is to begin after
receipt of a notice by the Escrow Agent shall run from the date of such receipt
by the Escrow Agent.
15. Parties in Interest. This Escrow Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
16. Headings. The Section headings used herein are for reference
purposes only, and shall not in any way affect the meaning or interpretation of
this Escrow Agreement.
17. Execution by Escrow Agent. The execution of this Escrow
Agreement by the Escrow Agent shall constitute a receipt for the Escrow Amount
and shall evidence its acceptance and agreement to the terms hereof.
18. Indemnification of Escrow Agent. Sellers, on the one hand, and
the Purchaser, on the other hand, hereby jointly and severally agree to
indemnify the Escrow Agent and its officers, directors, employees,
representatives and agents form and hold each of them harmless against any and
all liabilities, obligations (including removal or remedial actions), losses,
damages, penalties, claims, actions, judgments, suits, costs, expenses and
disbursements incurred by any of them as a result of, or arising out of, or in
any way related to, or by reason of any investigation, litigation or other
proceeding (whether or not the Escrow Agent is a party thereto) related to the
entering into and/or performance of this Agreement, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the bad faith, gross negligence or willful misconduct of the Escrow
Agent). The foregoing indemnities in this Section shall survive termination of
this Escrow Agreement.
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19. Sellers' Representative. The initial Sellers' Representative
shall be Northwood Ventures, a New York limited partnership. Upon written notice
to the Purchaser and the Escrow Agent, the Sellers may change the identity of
the Sellers' Representative by written consent signed by the Required Sellers.
20. Governing Law. This Escrow Agreement shall be construed and
interpreted in accordance with the law of the State of New York. Any judicial
proceeding brought against any of the parties to this Escrow Agreement or any
dispute arising out of this Escrow Agreement or any matter related hereto shall
be brought in the courts of the State of New York, or in the United States
District Court for the Southern District of New York, and, by execution and
delivery of this Escrow Agreement, each of the parties to this Escrow Agreement
accepts the exclusive jurisdiction of such courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Escrow Agreement.
The foregoing consent to jurisdiction shall not be deemed to confer rights on
any Person other than the respective parties to this Escrow Agreement.
21. Counterparts. This Escrow Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one instrument.
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IN WITNESS WHEREOF, the parties hereunto have duly caused this
Escrow Agreement to be executed as of the day first above written.
SPECIALTY PAPERBOARD, THE BANK OF NEW YORK
INC.
By______________________ By___________________________
Name: Bruce P. Moore Name:
Title: Vice President Title:
and Chief Financial
Officer
ARCON HOLDINGS CORP.
By___________________________
Name:
Title:
ARCON COATING MILLS, INC.
By___________________________
Name:
Title:
NORTHWOOD VENTURES
By__________________________
Name:
Title:
NORTHWOOD CAPITAL
PARTNERS LLC
By__________________________
Name:
Title:
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KUHN, LOEB & CO.
By__________________________
Name:
Title:
____________________________
Rodney B. Berens
____________________________
Richard C. Webel
____________________________
William Dunn
____________________________
Alexander J. Smith
____________________________
Henry T. Wilson
____________________________
David R. Kruft
____________________________
Thomas S. Ablum
____________________________
David M. Knott
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<PAGE>
EXHIBIT A
ADDRESS PERCENTAGE INTEREST
------- -------------------
Northwood Ventures 51.5333
Suite 205
485 Underhill Blvd.
Syosset, New York 11791-3419
Attention: Peter G. Schiff
General Partner
Telephone: (516) 364-5544
Facsimile: (516) 364-0879
Northwood Capital Partners LLP 25.7455
Suite 205
485 Underhill Blvd.
Syosset, New York 11791-3419
Attention: Peter G. Schiff
General Partner
Telephone: (516) 364-5544
Facsimile: (516) 364-0879
Kuhn, Loeb & Co. 5.7928
20th Floor
485 Madison Avenue
New York, New York 10022
Attention: David T. Schiff
Telephone: (516) 935-4995
Facsimile: (516) 826-1093
Rodney B. Berens 2.3171
Salomon Brothers Inc.
40th Floor
7 World Trade Center
New York, New York 10048
Telephone: (212) 783-4218
Facsimile: (212) 783-2254
<PAGE>
EXHIBIT A
Page 2
Richard C. Webel 2.3171
Innocenti & Webel
85 Forest Avenue
P.O. Box 506
Locust Valley, New York 11560
Telephone: (516) 674-4200
Facsimile: (516) 674-4241
William Dunn 1.6882
Arcon Coating Mills, Inc.
3067 New Street
Oceanside, New York 11572
Telephone: (516) 766-8800
Facsimile: (516) 766-1775
Alexander J. Smith .9268
John Hassall Inc.
Contiague Rock Road
P.O. Box 698
Westbury, New York 11590
Telephone: (516) 249-9191
Facsimile: (516) 249-4161
Henry T. Wilson .2322
Suite 205
485 Underhill Blvd.
Syosset, New York 11791
Telephone: (516) 364-5544
Facsimile: (516) 364-0879
David R. Kruft 6.2051
Arcon Coating Mills, Inc.
3067 New Street
Oceanside, New York 11572
Telephone: (516) 766-8800
Facsimile: (516) 766-1775
<PAGE>
EXHIBIT A
Page 1
Thomas S. Ablum .9268
Alblum, Brown & Co.
Suite 205
175 North Franklin
Chicago, Illinois 60606
Telephone: (312) 372-8529
Facsimile: (312) 372-6288
David M. Knott 2.3171
Suite 205
485 Underhill Blvd.
Syosset, New York 11791
Telephone: (516) 364-5544
Facsimile: (516) 364-0879
<PAGE>
EXHIBIT B
ESCROW AGENT FEE SCHEDULE
Acceptance Fee........................................................$1,500.00
Review Escrow Agreement and supporting documents
Establish Account
Annual Administration Fee.............................................$5,000.00
(pro rated for partial years subject to a minimum of
$2,500.00)
Investment Transaction Fee, (if applicable)..............................$25.00
Wire Transfers and Checks, each (if applicable)..........................$15.00
Preparation of Forms 1099......................................$250.00 per year
<PAGE>
[SPECIALTY PAPERBOARD LOGO]
SPECIALTY
PAPERBOARD
Brudies Road P.O. Box 498 Brattleboro, VT 05302 USA Tel: 802/257-0365
Fax:802/257-5900
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE Contact: Bruce Moore, Vice President
and Chief Financial Officer
or David E. Rousse,
Vice President Marketing and
Business Development
Specialty Paperboard, Inc.
(800)-451-4378
SPECIALTY PAPERBOARD ANNOUNCES COMPLETION OF CPG AND ARCON
ACQUISITIONS
- --------------------------------------------------------------------------------
BRATTLEBORO, VERMONT (November 1, 1996)--Specialty Paperboard, Inc.
(NASDAQ/NM:SPBI) announced today the completion of its acquisitions of CUSTOM
PAPERS GROUP, INC. and ARCON COATING MILLS, INC., both manufacturers of
specialty paper products.
The simultaneous closings on October 31,1996, followed the early termination of
the waiting period under the Hart-Scott-Rodino Act (HSR) relating to the CPG
acquisition. The HSR waiting period relating to the Arcon acquisition had
previously been terminated.
CUSTOM PAPERS GROUP (CPG) is a $95 million wholly-owned subsidiary of CPG
Investors Inc. CPG operates five paper mills and manufactures a diverse
portfolio of specialty papers for industrial and technical markets, often
designing and supplying distinctive products for unique customer applications.
The Company is a leader in the supply of filtration products for internal
combustion engines, electrical insulating paper used in the manufacture of power
distribution transformers, mat boards for picture mounting applications, base
paper for industrial abrasive/sanding products, and photographic packaging
materials. Its mills are located in Fitchburg, Massachusetts; Warren Glen, New
Jersey; Hughesville, New Jersey; Richmond, Virginia; and Rochester, Michigan.
These mills were once a part of James River Corporation.
ARCON COATING MILLS is a manufacturer of colored binding and stripping tapes and
edge cover materials sold primarily into the office products, checkbook and book
binding markets. It has annual revenues of approximately $28 million and has
facilities in Oceanside, New York and Springfield, Ohio. On November 1,
Specialty Paperboard will sell the small Springfield, Ohio unit of Arcon to
local management. Specialty Paperboard supplies some saturated paper base to
Arcon from its Endura division. A significant portion of Arcon products are
combined with Specialty Paperboard's pressboard cover materials by office
products manufacturers.
The two acquisitions were financed through a $100 million offering of ten year
non-amortizing senior notes carrying a fixed 9-3/8% interest rate.
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"We are delighted to have completed these two acquisitions essentially as
scheduled," said Alex Kwader, President and Chief Executive Officer. "Together,
they will effectively double the revenues of our company and provide synergics
that will add to our overall profitability. Combining this with our 1994
acquisition of the Endura Products Division of W.R. Grace & Co., we are well
along on our growth strategy in specialty fiber based materials. CPG and Arcon
bring us several new specialty market niches that complement our base business
and help to further insulate us from the cyclical nature of the broader
commodity paper industry. We are maintaining in place a strong management team
from both Arcon and CPG to help us conduct a seamless integration of these
businesses into our structure."
Kwader continues, "We are in the early stages of reorganizing our business into
four major operating units: Office Products, Technical Specialty Products,
Saturated Specialty Products, and Filtration Products. We will be consolidating
at our Brattleboro facility most of the strategic and business responsibilities
of this larger enterprise. We are also developing a new corporate identity to
be launched early in 1977 to unify our various businesses and better reflect our
image as a leading producer of specialty fiber-based materials. These are
exciting times for our growing company."
The company is a leading manufacturer of specialty fiber-based materials for
demanding industrial and consumer applications. Key products include:
pressboard and edge binding tapes used in filing products and report covers for
office and school use, filtration materials for car and truck engines,
insulation materials for power transformers and printed circuit boards, and
saturated base materials for masking tapes and book covers.
SPBI is now on-line! Our address is "http://www.spbi.com".
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