EXHIBIT 10.23
ASSET PURCHASE AGREEMENT
dated July 22, 2002
By and Between
CARAUSTAR INDUSTRIES, INC.
and
JEFFERSON SMURFIT CORPORATION (U.S.)
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
1.01 Previously Defined Terms................................................................................ 6
1.02 General Definitions..................................................................................... 6
1.03 Interpretation.......................................................................................... 17
ARTICLE II
[THIS ARTICLE INTENTIONALLY OMITTED]
ARTICLE III
PURCHASE AND SALE, PURCHASE PRICE, ALLOCATION AND OTHER RELATED MATTERS
3.01 Purchase and Sale....................................................................................... 17
3.02 Consideration........................................................................................... 17
3.03 Closing Payment......................................................................................... 18
3.04 Closing Balance Sheet................................................................................... 18
3.05 Purchase Price Settlement............................................................................... 19
3.06 Assumed Liabilities..................................................................................... 19
3.07 Sales and Transfer Taxes................................................................................ 21
3.08 Proration............................................................................................... 21
ARTICLE IV
CLOSING AND CLOSING DATE DELIVERIES
4.01 Closing................................................................................................. 22
4.02 Closing Deliveries by Seller............................................................................ 22
4.03 Closing Deliveries by Purchaser......................................................................... 24
4.04 Cooperation............................................................................................. 25
ARTICLE V
PRE-CLOSING FILINGS
5.01 HSR Act Filing.......................................................................................... 26
5.02 Government Filings...................................................................................... 26
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ARTICLE VI
PRE-CLOSING COVENANTS
6.01 Seller Cooperation...................................................................................... 27
6.02 Pending Closing......................................................................................... 28
6.03 Consents................................................................................................ 30
6.04 Efforts to Satisfy Closing.............................................................................. 30
6.05 Surveys................................................................................................. 30
6.06 Evidence of Zoning...................................................................................... 31
6.07 Plans and Specifications................................................................................ 31
6.08 Lien Searches........................................................................................... 31
6.09 Title Issues............................................................................................ 32
ARTICLE VII
FINANCIAL STATEMENTS; OTHER PRIOR DELIVERIES AND PRE-CLOSING DELIVERIES
7.01 Pre-Signing Deliveries.................................................................................. 32
ARTICLE VIII
WARRANTIES AND REPRESENTATIONS OF THE SELLER
8.01 Due Incorporation....................................................................................... 33
8.02 Authority............................................................................................... 33
8.03 No Violations and Consents.............................................................................. 34
8.04 Brokers................................................................................................. 34
8.05 Required Assets......................................................................................... 35
8.06 Contracts............................................................................................... 35
8.07 Financial Statements and Related Matters................................................................ 36
8.08 [Reserved].............................................................................................. 37
8.09 Properties and Title Thereto............................................................................ 37
8.10 Title to Tangible Assets................................................................................ 37
8.11 Intellectual Property................................................................................... 38
8.12 Litigation.............................................................................................. 39
8.13 Compliance With Laws.................................................................................... 39
8.14 Labor Matters........................................................................................... 40
8.15 Employee Benefit Matters................................................................................ 41
8.16 Taxes................................................................................................... 41
8.17 Licenses and Permits.................................................................................... 42
8.18 Environmental Compliance................................................................................ 42
8.19 Properties.............................................................................................. 45
8.20 Assets.................................................................................................. 47
8.21 Customers and Suppliers................................................................................. 48
8.22 Transactions With Affiliates............................................................................ 48
8.23 No Material Adverse Change.............................................................................. 49
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ARTICLE IX
WARRANTIES AND REPRESENTATIONS OF THE PURCHASER
9.01 Due Incorporation....................................................................................... 50
9.02 Authority............................................................................................... 50
9.03 No Violations........................................................................................... 50
9.04 Brokers................................................................................................. 51
9.05 Litigation.............................................................................................. 51
ARTICLE X
CONDITIONS TO CLOSING APPLICABLE TO PURCHASER
10.01 No Termination.......................................................................................... 51
10.02 Bring-Down of Seller Warranties......................................................................... 51
10.03 No Material Adverse Change.............................................................................. 52
10.04 Pending Actions......................................................................................... 52
10.05 Consents and Approvals.................................................................................. 52
10.06 HSR Act................................................................................................. 52
10.07 Liens................................................................................................... 52
10.08 Surveys, Title Insurance and Zoning..................................................................... 53
10.09 All Necessary Documents................................................................................. 54
ARTICLE XI
CONDITIONS TO CLOSING APPLICABLE TO SELLER
11.01 No Termination.......................................................................................... 54
11.02 Bring-Down of Purchaser Warranties...................................................................... 54
11.03 Pending Actions......................................................................................... 55
11.04 HSR Act................................................................................................. 55
11.05 All Necessary Documents................................................................................. 55
ARTICLE XII
TERMINATION
12.01 Termination............................................................................................. 55
12.02 No Limitation on Remedies............................................................................... 56
ARTICLE XIII
INDEMNIFICATION
13.01 Seller Indemnification.................................................................................. 56
13.02 Limitation.............................................................................................. 57
13.03 Purchaser Indemnification............................................................................... 63
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13.04 Indemnification Notice.................................................................................. 64
13.05 Indemnification Procedure............................................................................... 64
13.06 Effect of Indemnity Payments............................................................................ 69
13.07 Other Agreements........................................................................................ 69
ARTICLE XIV
CONFIDENTIALITY
14.01 Confidentiality of Materials............................................................................ 70
14.02 Remedy.................................................................................................. 71
ARTICLE XV
EMPLOYEE MATTERS
15.01 Obligation to Offer Employment.......................................................................... 71
15.02 Seller's Reliance....................................................................................... 72
15.03 Health Care............................................................................................. 72
15.04 Past Service and Vacations.............................................................................. 73
15.05 Participation in Purchaser's Plans...................................................................... 73
15.06 Welfare Plans........................................................................................... 74
15.07 No Third Party Beneficiaries............................................................................ 74
15.08 401(k) Plan Rollovers................................................................................... 74
ARTICLE XVI
CERTAIN OTHER UNDERSTANDINGS
16.01 Post Closing Access to Records and Records Retention.................................................... 74
16.03 Consents Not Obtained at Closing........................................................................ 75
16.04 Bulk Sale Waiver and Indemnity.......................................................................... 76
16.05 Removal of Trademarks, Etc.............................................................................. 76
16.06 Remittance of Collections............................................................................... 76
ARTICLE XVII
MISCELLANEOUS
17.01 Cost and Expenses....................................................................................... 76
17.02 Entire Agreement........................................................................................ 77
17.03 Counterparts............................................................................................ 77
17.04 Assignment, Successors and Assigns...................................................................... 77
17.05 Savings Clause.......................................................................................... 78
17.06 Headings................................................................................................ 78
17.07 Risk of Loss............................................................................................ 78
17.08 Governing Law........................................................................................... 78
17.09 Press Releases.......................................................................................... 78
17.10 U.S. Dollars............................................................................................ 79
17.11 Survival................................................................................................ 79
17.12 Notices................................................................................................. 79
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement made and entered into this 22 day of
July, 2002 (this "Agreement") by and between Jefferson Smurfit Corporation
(U.S.), a Delaware corporation ("Seller"), and Caraustar Industries, Inc., a
North Carolina corporation ("Purchaser").
RECITALS:
A. Seller owns and operates 17 papertube plants, three uncoated
recycled paperboard ▇▇▇▇▇, and three partition manufacturing plants as set forth
on Exhibit A hereto (the "Facilities"). The business of the Seller conducted at
the Facilities is referred to in this Agreement as the "Business."
B. Seller desires to sell the Business and certain assets and
properties relating to the Business hereinafter described as Purchased Assets
and Purchaser desires to acquire the Business and the Purchased Assets, on the
terms and subject to the conditions hereinafter set forth.
Now, Therefore, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 Previously Defined Terms. Each term defined in the first
paragraph and Recitals shall have the meaning set forth above whenever used
herein, unless otherwise expressly provided or unless the context clearly
requires otherwise.
1.02 General Definitions. In addition to the terms defined in the
first paragraph and Recitals, whenever used herein, the following terms shall
have the meanings set forth below unless otherwise expressly provided or unless
the context clearly requires otherwise:
"Affiliate" shall mean a Person which, directly or indirectly is
controlled by, controls, or is under common control with another Person. As used
in the preceding sentence, "control" shall mean and include, but not necessarily
be limited to, (i) the ownership of more than 50% of the voting securities or
other voting interest of any Person, or (ii) the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"Assumed Liabilities" - See Section 3.06(a).
"Audited Financial Statements" - See Section 7.01.
"Balance Sheet" - See Section 7.01.
"Balance Sheet Date" - See Section 7.01.
"Business" - See Recital A.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in Missouri or Georgia are generally closed
for business.
"Closing" - See Section 4.01.
"Closing Balance Sheet" - See Section 3.04.
"Closing Date" - See Section 4.01.
"Closing Payment" - See Section 3.03(a).
"COBRA" - See Section 15.03.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Contract" means any agreement, contract, obligation, commitment,
promise or undertaking (whether oral or written), including but not limited to
contracts, agreements,
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indentures, deeds of trust, leases and notes, which relates to the Business and
to which the Seller is a party or beneficiary or pursuant to which any Purchased
Asset is subject.
"Current Assets" shall mean the types of assets described as current
assets on the Pro Forma Balance Sheet.
"Current Liabilities" shall mean the types of liabilities described as
current liabilities on the Pro Forma Balance Sheet.
"Date of the Notice of Claim" - See Section 13.05(c).
"Disclosure Schedule" shall mean the letter dated even date herewith
delivered to Purchaser from the Seller pursuant to Section 7.01(d) of this
Agreement simultaneously with the execution and delivery of this Agreement.
"DOJ" shall mean the United States Department of Justice.
"Employee Plans" - See Section 8.15.
"Environmental Laws" shall mean any applicable Law in force and effect
as of the Closing Date relating to: (a) releases or threatened releases of
Hazardous Substances; (b) the manufacture, handling, transport, use, treatment,
storage or disposal of Hazardous Substances or materials containing Hazardous
Substances; (c) the current use, occupancy or operation of the Purchased Assets
and the Business, as the same pertain to the environment; or (d) otherwise
relating to pollution of the environment or the protection of human health.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"Excluded Receivables" means, as of any date, all trade accounts
receivable that arise or are generated prior to such date which (i) have been,
are or would be sold or otherwise transferred to Jefferson Smurfit Finance
Corporation in the ordinary course of business
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consistent with Seller's past practices, or (ii) are due from "exchange
partners" with respect to certain payment-in-kind transactions, excluding in
each case for the determination on the Closing Date any receivables reflected on
the Closing Balance Sheet.
"Facilities" - See Recital A.
"Financial Statements" shall mean, collectively, the Audited Financial
Statements and the Unaudited Financial Statements.
"FTC" shall mean the Federal Trade Commission.
"GAAP" means generally accepted accounting principles as recognized by
the American Institute of Certified Public Accountants, applied on a consistent
basis.
"Governmental Authority" shall mean the government of the United States
or any foreign country or any state or political subdivision thereof and any
entity, body or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, including
the Pension Benefit Guaranty Corporation and other quasi-governmental entities
established to perform such functions.
"▇▇▇▇▇ Bros. Agreement" - See Section 4.02(g).
"Hazardous Substances" shall mean any pollutant, toxic substance,
hazardous waste, hazardous substance, polychlorinated biphenyls ("PCBs"), oil or
petroleum products as defined in or pursuant to Environmental Laws.
"Hourly Employees" - See Section 15.01.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"Improvements" - See Section 8.19(a). "Indemnified Party" - See Section
13.04.
"Indemnified Party" - See Section 13.04.
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"Indemnifying Party" - See Section 13.04.
"Information" - See Section 14.01.
"Intellectual Property" - See definition of "Purchased Assets."
"Inventory" - See definition of "Purchased Assets."
"IRS" shall mean the Internal Revenue Service.
"Knowledge" means the actual or constructive knowledge of (i) any
member of the board of directors of the Seller, (ii) any executive officer of
the Seller, or (iii) any management employee employed at any of the Facilities.
As used in this definition, the constructive knowledge of an individual means
the knowledge such individual should have in the reasonable exercise of his or
her duties with the Seller and includes information available in the books,
records and files of the Seller to which such individual has reasonable access
and with respect to which such individual would reasonably be expected to be
familiar.
"Law" shall mean any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, agreed or imposed by any
Governmental Authority.
"Lien" shall mean any mortgage, lien (except for any lien for taxes not
yet due and payable), charge, restriction, pledge, security interest, option,
lease or sublease, claim, right of any third party, easement, right of way,
restrictions, servitude, encroachment or encumbrance or other charges or rights
of others of any kind or nature.
"Material Adverse Effect" shall mean any change in, or effect on, the
Business as currently conducted by Seller that is or is reasonably likely to be
materially adverse to the results of operations or financial condition of the
Business or to the Purchased Assets, taken as a whole, after giving effect to
this Agreement other than effects caused by (i) changes resulting from
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conditions affecting the industry the Business is in generally, or (ii)
conditions or effects resulting from the announcement of the transactions
contemplated by this Agreement.
"Material Contracts" - See Section 8.06(a).
"Net Current Assets" shall mean the difference between the Current
Assets minus the Current Liabilities.
"Non-Assumed Liabilities" - See Section 3.06(b).
"Non-Union Employees" - See Section 15.01.
"Notice of Claim" - See Section 13.04.
"Permit" - See Section 8.17.
"Permitted Exceptions" shall mean with respect to the Properties, the
following:
(a) liens or encumbrances relating to the Assumed Liabilities;
(b) all liens for Taxes, assessments, both general and special,
and other governmental charges which are not due and payable as of the Closing
Date;
(c) unviolated building codes and zoning ordinances and other Laws
heretofore, now or hereafter enacted, made or issued by any Governmental
Authority affecting the Properties, that do not, individually or in the
aggregate, render title to any of the Properties unmarketable and or materially
impair the use or value of any of the Properties as presently utilized;
(d) all easements, rights-of-way, covenants, conditions,
restrictions, reservations, licenses, agreements, and other similar matters of
record in the appropriate governmental offices and granted in the usual course
of business that do not, individually or in the aggregate, render title to any
of the Properties unmarketable or materially impair the use or value of any of
the Properties as presently utilized;
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(e) all encroachments, overlaps, boundary line disputes, shortages
in area, drainage and other easements, cemeteries and burial grounds and other
similar matters not of record which would be disclosed by an accurate survey or
inspection of the Properties that do not, individually or in the aggregate,
render title to any of the Properties unmarketable or materially impair the use
or value of any of the Properties as presently utilized;
(f) all electric, telephone, gas, sanitary sewer, storm sewer,
water and other utility lines, pipelines, service lines and facilities of any
nature now located on, over or under the Properties, and all licenses,
easements, rights-of-way and other similar agreements relating thereto granted
in the ordinary course of business that do not, individually or in the
aggregate, render title to any of the Properties unmarketable or materially
impair the use or value of any of the Properties as presently utilized;
(g) all existing public and private roads and streets (whether
dedicated or undedicated), and all railroad lines and rights-of-way affecting
the Properties that do not, individually or in the aggregate, render title to
any of the Properties unmarketable or materially impair the use or value of any
of the Properties as presently utilized;
(h) all rights with respect to the ownership, mining, extraction
and removal of minerals of whatever kind and character (including, all coal,
iron ore, oil, gas, sulfur, methane gas in coal seams, limestone and other
minerals, metals and ores) which have been granted, leased, excerpted or
reserved prior to the date hereof that do not, individually or in the aggregate,
render title to any of the Properties unmarketable or materially impair the use
or value of the Properties as presently utilized; and
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(i) inchoate mechanic's and materialmen's liens for construction
in progress and workmen's, repairmen's, warehousemen's and carrier's liens
arising in the ordinary course of business.
"Person" shall mean any natural person, corporation (including any
limited liability company), partnership, joint venture, trust, association or
unincorporated entity of any kind.
"Pro Forma Balance Sheet" - See Section 7.01(c).
"Properties" - See clause (v) of definition of Purchased Assets.
"Purchase Price" - See Section 3.02.
"Purchased Assets" shall mean all the business, properties, assets,
goodwill and rights of Seller of whatever kind and nature, located on any of the
Properties or used, held for use or intended to be used primarily in the
operation or conduct of the Business, except for the Retained Assets, including
the following:
(i) the accounts, notes, contract or other receivables of
Seller related to or arising out of the operation of the Business, but
excluding in any event the Excluded Receivables as of the Closing Date;
(ii) the deposits and advances, prepaid expenses and other
prepaid items of Seller related to or arising out of the operation of
the Business;
(iii) the inventories of Seller, including all such
inventories of raw materials, work-in-progress and finished goods
located on the Properties or used, held for use or intended to be used
primarily in the operation or conduct of the Business ("Inventory");
(iv) the tangible assets, machinery, equipment, tools,
dies, molds, spare parts, vehicles, transportation equipment, furniture
and office equipment, construction-in-progress, computer hardware and
computer software of Seller located on the Properties or
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used, held for use or intended to be used primarily in the operation or
conduct of the Business;
(v) the Seller's rights, title and interest (A) in and to
the real properties described in Section 8.09(a) of the Disclosure
Schedule ("Real Property") together with all buildings, other
improvements, fixtures and appurtenances, and all other rights and
privileges thereunto belonging or appertaining, and (B) under the
leased real property described in Section 8.09(b) of the Disclosure
Schedule (together with the Real Property, the "Properties" and each, a
"Property");
(vi) the Seller's right, title and interest in, to or
under the Contracts;
(vii) the Seller's right, title and interest in and to the
intellectual property located on the Properties or used, held for use
or intended to be used primarily in the operation or conduct of the
Business including: (A) trade names, trademarks, trademark
registrations, trademark applications, service marks, service ▇▇▇▇
registrations, service ▇▇▇▇ applications; (B) copyrights, copyright
registrations, copyright applications; (C) patent rights (including
issued patents, applications, divisions, continuations and
continuations-in-part, reissues, patents of addition, utility models
and inventors' certificates); (D) licenses with respect to any of the
foregoing; (E) trade secrets, proprietary manufacturing information and
inventions, drawings and designs; and (F) customer and vendor lists and
the goodwill associated with any of the foregoing (collectively, the
"Intellectual Property");
(viii) any permits and licenses of the Seller relating
primarily to the Business or to any of the Facilities to the extent any
of the same are transferable or assignable to the Purchaser;
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(ix) all of the Seller's files, papers, documents and
records relating primarily to the Business, including credit, sales and
accounting records, price sheets, catalogues and sales literature,
books, processes, formulae, manufacturing data, advertising material,
stationery, office supplies, forms, catalogues, manuals,
correspondence, production records, employment records and any other
information reduced to writing relating to the Business of the Seller;
and
(x) the Business as a going concern.
"Real Property" - See clause (v) of the definition of Purchased Assets.
"Retained Assets" shall mean the following described assets, rights and
properties of Seller:
(i) all cash and cash equivalents including bank
overdrafts;
(ii) the Excluded Receivables and any non-trade accounts
receivable or inter-company obligations owed to Seller by any Affiliate
of Seller;
(iii) all insurance policies of Seller or acquired or
assumed by Seller prior to the Closing Date pertaining to the Business
and all rights of Seller of every nature and description under or
arising out of such insurance policies;
(iv) all rights to use the name "Jefferson Smurfit,"
"Smurfit-Stone" and all derivatives thereof and the Seller's logo;
(v) claims for refunds of Taxes paid by Seller arising
prior to the Closing Date;
(vi) all past, present and future claims, causes of
action, chooses in action, rights of recovery and rights of set-off of
any kind, except to the extent, but only to the extent,
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such claims or causes of action offset the liabilities assumed by
Purchaser pursuant to this Agreement or the Assumption Agreement;
(vii) any rights, interest or assets not included in the
Purchased Assets;
(viii) the assets, properties, rights and interests of the
Business listed in Section 1.02 of the Disclosure Schedule;
(ix) all rights of Seller under this Agreement and the
agreements and instruments delivered to Seller by Purchaser pursuant to
this Agreement; and
(x) the Seller's corporate seal, minute books and stock
record books, the general ledgers and books of original entry, all
income Tax returns and other income Tax records, reports, data, files
and documents.
"Seller IRB" means the City of Beardstown, Illinois Industrial
Development Revenue Bonds (Jefferson Smurfit Project Series 1996) issued for the
benefit of the Seller on October 4, 1996 with respect to the Facility located in
Beardstown, Illinois under the Indenture of Trust, dated October 1, 1996,
between the City of Beardstown, Cass County, Illinois and UMB Bank of St. Louis,
N.A., in the initial principal amount of $2,000,000.
"Supply Agreements" - See Section 4.02(e).
"Taxes" shall mean all taxes, charges, fees, duties (including custom
duties), levies or other assessments, including income, gross receipts, net
proceeds, ad valorem, turnover, real and personal property (tangible and
intangible), sales, use, franchise, excise, value added, stamp, leasing, lease,
user, transfer, fuel, excess profits, occupational, interest equalization,
windfall profits, license, payroll, environmental, capital stock, disability,
severance, employee's income withholding, other withholding unemployment and
Social Security taxes, which are imposed by
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any Governmental Authority, and such term shall include any interest, penalties
or additions to tax attributable thereto.
"Threshold" - See Section 13.02(b).
"Transferring Employees" - See Section 15.01.
"Transition Services Agreement" - See Section 4.02(f).
"Unaudited Financial Statements" - See Section 7.01.
1.03 Interpretation. Unless the context of this Agreement otherwise
requires, (a) words of any gender shall be deemed to include each other gender,
(b) words using the singular or plural number shall also include the plural or
singular number, respectively, (c) references to "hereof," "herein," "hereby"
and similar terms shall refer to this entire Agreement, and (d) "including" and
"include" shall mean without limitation.
ARTICLE II
[THIS ARTICLE INTENTIONALLY OMITTED]
ARTICLE III
PURCHASE AND SALE, PURCHASE PRICE,
ALLOCATION AND OTHER RELATED MATTERS
3.01 Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, at the Closing on the Closing Date, the Seller
shall sell, assign, convey, transfer and deliver to Purchaser and Purchaser
shall acquire from Seller the Purchased Assets, free and clear of all Liens
(other than Permitted Exceptions).
3.02 Consideration.
(a) The purchase price (the "Purchase Price") payable by Purchaser
for the Purchased Assets shall be $90,000,000 (i) (x) plus the amount, if any,
by which the Net Current Assets as
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reflected on the Closing Balance Sheet are greater than the Net Current Assets
reflected on the Pro Forma Balance Sheet, or (y) minus the amount, if any, by
which the Net Current Assets as reflected on the Closing Balance Sheet are less
than the Net Current Assets reflected on the Pro Forma Balance Sheet; (ii) minus
the outstanding amount of principal and interest owing on the Seller IRB as of
the Closing Date (to the extent not reflected in the determination of Net
Current Assets) (which principal amount the parties agree is $1,745,000 as of
the date hereof) and (iii) minus the value of the Excluded Receivables as of
December 31, 2001 (which amount the parties agree is $10,157,000).
(b) At the Closing on the Closing Date Purchaser shall assume the
obligations and liabilities of Seller relating to the Business which are to be
assumed by Purchaser pursuant to Section 3.06(a) hereof.
3.03 Closing Payment.
(a) At the Closing on the Closing Date, Purchaser shall pay to
Seller an amount equal to $90,000,000 minus the adjustments set forth in clauses
(ii) and (iii) of Section 3.02(a) ("Closing Payment").
(b) The Closing Payment shall be paid by wire transfer of
immediately available federal funds for credit to the Seller to a bank account
or accounts designated by Seller in writing prior to Closing.
3.04 Closing Balance Sheet. Promptly after the Closing, the Seller
shall prepare and deliver to Purchaser within forty-five (45) days after the
Closing Date (i) an audited balance sheet of the Business as of the Closing
Date, setting forth the Purchased Assets and Assumed Liabilities as of such
date, which shall be prepared in accordance with GAAP and in a manner consistent
with the preparation of the Pro Forma Balance Sheet provided that the Closing
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Balance Sheet shall contain no reserves for Taxes or breaches of warranties for
the Seller ("Closing Balance Sheet"); and (ii) a calculation of the Net Current
Assets as reflected on the Closing Balance Sheet. Purchaser shall reimburse
Seller for one-half of the reasonable fees charged by Seller's accountants for
the preparation of the Closing Balance Sheet.
3.05 Purchase Price Settlement.
(a) In the event the Net Current Assets as reflected on the
Closing Balance Sheet is greater than the Net Current Assets as reflected on the
Pro Forma Balance Sheet then Purchaser shall pay to the Seller within ten (10)
Business Days after Purchaser's receipt of the Closing Balance Sheet an amount
equal to such excess. In the event the Net Current Assets as reflected on the
Pro Forma Balance Sheet is greater than the Net Current Assets as reflected on
the Closing Balance Sheet then Seller shall pay to Purchaser within ten (10)
Business Days after delivery of the Closing Balance Sheet an amount equal to
such excess.
(b) Any payment required pursuant to this Section 3.05 shall be by
certified check or cashier's check, or, at the option of the recipient of the
payment, by the transfer of immediately available federal funds for credit to
the recipient, at a bank account designated by such recipient in writing.
3.06 Assumed Liabilities.
(a) As additional consideration for the purchase of the Purchased
Assets, the Purchaser shall, at the Closing on the Closing Date, assume, agree
to perform, and in due course pay and discharge, the following debts,
obligations and liabilities of the Seller relating to the Business
(collectively, the "Assumed Liabilities"):
(i) any current liabilities of the Seller incurred in the
ordinary course of business to the extent such liabilities are set
forth on the face of the Closing Balance
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Sheet (rather than in any notes thereto) and are of the type of the
current liabilities shown on the face of the Pro Forma Balance Sheet
(rather than in any notes thereto);
(ii) obligations of the Seller under those Contracts
included in the Purchased Assets that arise after the Closing, except
to the extent that any such obligations arise out of a breach or
default by the Seller thereunder prior to the Closing; and
(iii) the obligations of Seller under the Seller IRB.
(b) All liabilities of the Seller of any nature whatsoever,
whether accrued or unaccrued, known or unknown, fixed or contingent, that are
not Assumed Liabilities are "Non-Assumed Liabilities." Except to the extent
expressly included in the definition of "Assumed Liabilities," the Non-Assumed
Liabilities include all liabilities of the Seller: (i) relating to Taxes, (ii)
relating to any breach or alleged breach of contract, default, breach or alleged
breach of warranty by the Seller (including any warranty claims with respect to
products manufactured or sold by the Seller prior to the Closing Date), tort,
derelict, infringement, or violation or alleged violation of Law by the Seller,
including violations of ERISA or any other Law applicable to any employee
benefit plan of the Seller including the Employee Plans (iii) relating to
Hazardous Substances or arising under Environmental Laws and specifically
relating to any matter set forth on Section 3.06 of the Disclosure Schedule;
(iv) arising from or relating to Seller's termination of, or any
employment-related claim asserted by, an employee of the Seller, including
claims for wrongful or illegal termination, severance pay, accrued vacation or
sick days (except as specifically set forth above), payments owed to any
employee pursuant to any employer-matching provision of any Employee Plan, or
other employment-related claims, together with all costs or liabilities
associated with any such employees, (v) related to the ownership of the Seller,
20
and (vi) for indebtedness for money borrowed of the Seller. Purchaser shall not
assume or become liable for the payment or performance of any Non-Assumed
Liability.
(c) This Section 3.06 is not intended to and shall not benefit any
Person other than Seller and Purchaser.
(d) All of the Non-Assumed Liabilities shall remain and be the
debts, obligations and liabilities of the Seller, and Purchaser shall have no
liability or responsibility for any of the debts, obligations or liabilities
arising therefrom. Seller covenants and agrees with Purchaser that it shall
timely perform and discharge the Non-Assumed Liabilities, subject to the terms
and conditions of this Agreement.
3.07 Sales and Transfer Taxes. The Purchaser and the Seller each
agree to pay fifty percent (50%) of the cost of any (a) real property transfer
or similar Tax imposed under the Laws of the United States, or any state or
political subdivision thereof, which arises out of the transfer of the real
property which constitutes part of the Purchased Assets; and (b) all other
transfer, sales, purchase, use, value added, excise or similar Tax imposed under
any Law which arises out of the transfer of any other of the Purchased Assets.
The Purchaser agrees to provide the Seller with such resale exemption
certificates and manufacturing exemption certificates as the Seller may
reasonably request.
3.08 Proration. The Seller agrees to pay in full on the Closing
Date all expenses regarding the Purchased Assets and the Business arising or
related to periods ending on the Closing Date to the extent that such expenses
are not Assumed Liabilities. The Seller agrees that all expenses, charges,
bills, or trade accounts maintained or incurred by the Seller or its agents in
connection with the Business or the Purchased Assets or otherwise accrued for
the period prior to the Closing Date that are not Assumed Liabilities will be
paid by the Seller in full when due.
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Without limiting the generality of the foregoing, the following items, to the
extent that they are not Assumed Liabilities, will be adjusted as of the Closing
Date (or as soon thereafter as is reasonably feasible, and the appropriate party
promptly will pay adjustment amounts as necessary to prorate such amounts as of
the Closing Date):
(a) rent and other charges payable under any lease for the
calendar month in which the Closing Date occurs;
(b) municipal Taxes, water and utility charges, sanitary sewer
Taxes and unpaid real and personal property Taxes, if any; and
(c) charges under service, management or other agreements, if any,
that remain in effect after the Closing Date and are Contracts assumed by the
Purchaser hereunder.
ARTICLE IV
CLOSING AND CLOSING DATE DELIVERIES
4.01 Closing. The term "Closing" as used herein shall refer to the
actual conveyance, transfer, assignment and delivery of the Purchased Assets to
Purchaser in exchange for the Closing Payment to the Seller pursuant to Section
3.03(a) of this Agreement. The Closing shall take place at such place as may be
agreed upon by Seller and Purchaser at 10:00 a.m. local time on the fifth
business day following the date upon which all of the conditions precedent set
forth in Articles X and XI of this Agreement are satisfied or waived by the
appropriate party hereto, subject to Article XII of this Agreement ("Closing
Date"), or at such other place and time or on such other date as is mutually
agreed to in writing by Seller and Purchaser.
4.02 Closing Deliveries by Seller. At the Closing on the Closing
Date the Seller shall deliver to the Purchaser:
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(a) A special warranty deed for all Real Property owned by the
Seller and described in Section 8.09(a) of the Disclosure Schedule;
(b) All such bills of sale, lease assignments, trademark
assignments, copyright assignments, patent assignments, contract assignments and
other documents and instruments of sale, assignment, conveyance and transfer, as
the Purchaser or its counsel may deem necessary or desirable (including any
assignment documents necessary for each Affiliate of Seller that is party to a
Material Contract to, prior to closing, assign its interest in such Material
Contract to Seller);
(c) An affidavit certifying that, as of the Closing Date, there
are no outstanding unsatisfied judgments, Tax liens or bankruptcies against or
involving any of the Properties, and that there are no leases of any kind in
respect to any of the Properties and no other unrecorded interests in the
Properties of any kind other than Permitted Exceptions;
(d) For the Properties, a standard title affidavit sufficient in
form and content to permit the deletion of any exception for mechanics' and
similar liens and the customary standard ALTA general exceptions from the
commitment or policy of title insurance for the Properties;
(e) The supply agreements attached as Exhibits ▇-▇, ▇-▇, ▇-▇, ▇-▇
and D-5 (the "Supply Agreements"), duly executed by the Seller;
(f) The transition services agreement attached as Exhibit E (the
"Transition Services Agreement"), duly executed by the Seller;
(g) The corrugated medium purchase agreement attached as Exhibit F
(the "▇▇▇▇▇ Bros. Agreement"), duly executed by the Seller;
(h) A certificate of existence or good standing of the Seller,
dated not more than ten (10) Business Days prior to the Closing Date, from the
State of Delaware and from each other jurisdiction in which the Seller has
qualified, with respect to the Business, to do business;
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(i) A certificate of the Secretary of the Seller, in form and
substance satisfactory to the Purchaser, certifying (i) that attached thereto
as an exhibit is a true and complete copy of the certificate of incorporation
of the Seller and all amendments thereto, certified by the Secretary of State
of Delaware as of a date not more than ten (10) Business Days prior to the
Closing Date, (ii) that attached thereto as an exhibit is a true and complete
copy of the bylaws of the Seller and all amendments thereto, (iii) that
attached thereto as exhibits are true and correct copies of minutes or
unanimous written consents of the Board of Directors of the Seller and the
stockholders of Seller, approving the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated by this
Agreement; and (iv) as to the incumbency and signatures of the officers of the
Seller executing this Agreement and the other certificates and agreements being
or to be delivered pursuant hereto.
(j) A certificate, dated the Closing Date, executed by the
appropriate officers of the Seller, required by Section 10.02 of this
Agreement; and
(k) Such other documents as the Purchaser or its counsel may
reasonably request to carry out the purposes of this Agreement, including, but
not limited to, the documents to be delivered pursuant to Article X of this
Agreement.
4.03 Closing Deliveries by Purchaser. At the Closing on the
Closing Date the Purchaser shall deliver to the Seller.
(a) The Closing Payment to be delivered by the Purchaser pursuant
to Section 3.03(a) of this Agreement;
(b) The Supply Agreements duly executed by Purchaser (or its
appropriate Affiliates as set forth on ▇▇▇▇▇▇▇▇ ▇-▇, ▇-▇, ▇-▇ and D-4);
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(c) The Transition Services Agreement duly executed by Purchaser
(or its appropriate Affiliate as set forth on Exhibit E);
(d) Certified copies of the Purchaser's articles of incorporation
and all amendments thereto, certified by the Secretary of State of the State of
North Carolina as of date not more than ten Business Day prior to the Closing
Date;
(e) Certified copies of minutes or unanimous written consents of
the Board of Directors of the Purchaser approving the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated under this Agreement;
(f) A Certificate, dated the Closing Date, executed by the
appropriate officer of the Purchaser, required by Section 11.02 of this
Agreement;
(g) An agreement executed by the Purchaser reflecting the
assumption of the liabilities set forth in Section 3.06(a) of this Agreement,
in the form attached hereto as Exhibit G; and
(h) Such other documents as the Seller or its counsel may
reasonably request to carry out the purposes of this Agreement, including, but
not limited to, the documents to be delivered pursuant to Article XI of this
Agreement.
4.04 Cooperation. The Seller and the Purchaser shall, on request,
on and after the Closing Date, cooperate with one another by furnishing any
additional information, executing and delivering any additional documents
and/or instruments and doing any and all such other things as may be reasonably
required by the parties or their counsel to consummate or otherwise implement
the transactions contemplated by this Agreement.
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ARTICLE V
Pre-Closing Filings
5.01 HSR Act Filing. Within ten (10) Business Days after the
execution of this Agreement, Seller and Purchaser shall each file with DOJ and
FTC the pre-merger notification form required pursuant to the HSR Act with
respect to the transactions contemplated hereby, together with a request for
early termination of the waiting period. The parties hereto covenant and agree
with each other that with respect to such filing each shall: (a) promptly file
any information or documents requested by the FTC or DOJ; and (b) furnish each
other with any correspondence from or to, and notify each other of any other
communications with, the FTC or DOJ which relates to the transactions
contemplated hereunder, and (c) to the extent practicable, to permit the other
to participate in any conferences with the FTC or DOJ. Seller shall, promptly
upon request, reimburse Purchaser for one-half of all filing fees required
pursuant to the HSR Act and paid by Purchaser in connection with the filing of
the pre-merger notification form.
5.02 Government Filings. Seller and Purchaser covenant and agree
with each other to (a) promptly file, or cause to be promptly filed, with any
Governmental Authority, all such notices, applications or other documents as
may be necessary to consummate the transactions contemplated hereby (including
notification by Purchaser under the Investment Canada Act) and (b) thereafter
diligently pursue all consents or approvals from any such Governmental
Authorities as may be necessary to consummate the transactions contemplated
hereby; provided that Seller shall be ultimately responsible for obtaining all
necessary authorizations, consents and approvals as may be necessary to
consummate the transactions contemplated hereby (with the exception of
authorizations, consents and approvals that Purchaser must obtain solely in
Purchaser's own name and that the same must not result in any substantial
interference with the operation of the Facilities or the Business after the
Closing in the same manner as currently
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conducted. Seller shall give Purchaser reasonable notice in advance of all
meetings scheduled between Seller and any Governmental Authority pertaining to
any such notices, applications, consents, approvals and other documents, and
Purchaser and its representatives shall have the right, without the obligation,
to attend and participate in all such meetings. Seller shall provide Purchaser
with an opportunity to review and comment upon all documents and correspondence
to such Governmental Authorities relating to such notices, applications,
consents, approvals and other documents and shall promptly provide to Purchaser
copies of all documents and correspondence to or from such Governmental
Authorities relating to such matters.
ARTICLE VI
Pre-Closing Covenants
6.01 Seller Cooperation.
(a) Pending Closing, the Seller shall at all reasonable times and
upon reasonable prior notice make the Properties, the Facilities, the Purchased
Assets, and other assets, books and records pertaining or relating to the
Business reasonably available for examination, inspection and review by the
Purchaser and its lenders, agents and representatives; provided, however,
Purchaser inspections and examinations at the Facilities shall not unreasonably
disrupt the normal operations of the Business. Seller shall have the right to
review and approve all examinations, inspections and tests Purchaser or its
agents propose to conduct prior to Closing on any of the Properties, Facilities
or Purchased Assets, including without limitation the collection and/or
analysis of any environmental samples.
(b) Purchaser covenants and agrees with Seller to promptly, and
in any event prior to Closing, notify Seller if Purchaser or its
representatives, in the course of their due diligence, determine that there are
any inaccuracies in, or breaches or violations of, any of the Seller's
27
representations, warranties or covenants contained in this Agreement; provided,
however, that Purchaser's failure to so notify the Seller shall not limit or
otherwise affect the validity or enforceability of the Seller's
representations, warranties or covenants contained in this Agreement or
Purchaser's rights to indemnification or any other rights hereunder.
6.02 Pending Closing. Pending the Closing, the Seller shall:
(a) conduct and carry on the Business only in the ordinary
course, consistent with past practices;
(b) not purchase, sell, lease, mortgage, pledge or otherwise
acquire or dispose of any properties or assets of or in connection with the
Business, except for Inventory purchased, sold or otherwise disposed of in the
ordinary course of the Business;
(c) not increase or otherwise change the rate or nature of the
compensation (including wages, salaries, bonuses, and benefits under pension,
profit sharing, deferred compensation and similar plans or programs) which is
paid or payable to any employee of the Seller who is employed in connection
with the Business, except in the ordinary course of business and in accordance
with past practices, and not terminate any employee at any of the Facilities
without cause without the prior written consent of the Purchaser;
(d) not enter into, or become obligated under, any contract,
agreement or commitment with respect to the Business except for (i) any
agreements for the purchase of supplies or Inventory items or the sale of
Inventory in the ordinary course of business or (ii) any other lease, contract,
agreement or commitment having a term of sixty (60) days or less and involving
aggregate payments either by or to the Seller or the Business of less than
$50,000;
(e) not materially change, amend, or otherwise modify or
terminate any Material Contract;
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(f) not make any changes in its accounting systems, policies,
principles or practices;
(g) not authorize or make any capital expenditures which in the
aggregate exceed $50,000 without prior notice to Purchaser;
(h) furnish to the Purchaser within fifteen (15) days after the
end of each fiscal month an unaudited balance sheet and related unaudited
statement of income of the Business for such period;
(i) deal exclusively with Purchaser with respect to the sale of
the Purchased Assets and not solicit or encourage, directly or indirectly
through agents (by way of furnishing information, or otherwise), any inquiries
or proposals for the acquisition of all or any part of the Purchased Assets or
the Business;
(j) promptly notify Purchaser in writing of any inquiry or
proposal for the acquisition of all or any part of the Purchased Assets or the
Business;
(k) promptly notify Purchaser in writing if it becomes aware of
any fact or condition that (i) causes or constitutes a breach of any
representations and warranties set forth in Article VIII, or (ii) would have
caused or constituted a breach of any such representation or warranty had such
representation or warranty been made as of the time of the occurrence or
discovery of such fact or condition;
(l) use commercially reasonable efforts to preserve the Business'
relationships with its customers, suppliers and others with whom the Seller
deals and to keep available the services of the Business' officers and
employees; or
(m) not agree to do any of the items prohibited by Section
6.02(b), (c), (d), (e), (f), (g) or (i).
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6.03 Consents. Prior to the Closing Date, (a) the Seller shall
proceed with all reasonable diligence and use its best efforts to obtain the
written consents, authorizations or approvals to the consummation of this
Agreement which are set forth in or required to be set forth in Section 8.03 of
the Disclosure Schedule; and (b) the Purchaser shall make such notifications
concerning, and obtain such written consents, authorizations or approvals of,
the consummation of this Agreement as are required under the Investment Canada
Act to be made or obtained prior to the Closing Date.
6.04 Efforts to Satisfy Closing. Between the date hereof and the
Closing Date, Seller and Purchaser shall use their reasonable best efforts to
cause the conditions set forth in Articles X and XI to be satisfied in a timely
manner.
6.05 Surveys. Purchaser shall order and shall have completed in a
timely manner such accurate as-built surveys (the "Surveys") of the Properties
as the Purchaser shall deem necessary or advisable in its investigation of the
Properties. To the extent so obtained by Purchaser, the Surveys shall (a) be
sufficient to eliminate any general survey exception in Purchaser's title
insurance commitments and/or policies for the property in question, (b) show
all setback or building lines and all Liens (with recording information
provided) that are locatable and shown as exceptions in Purchaser's title
insurance commitments and/or policies for the property in question, (c) show
access to a public street, and the distances and bearings to the nearest
intersection of public streets if not a point on the boundary of the property
in question, (d) certify as to whether or not the property is located in a
flood hazard area, and (e) be made in accordance with the requirements for an
Urban Survey under the "Minimum Standard Detail Requirements for ALTA/ACSM Land
Title Surveys" jointly established and adopted by ALTA and ACSM in 1997,
including Table A thereof. If Closing does not occur because this Agreement is
terminated
30
due to action (other than by reason of Purchaser's default) or default by
Seller, Seller shall reimburse Purchaser for the reasonable cost of the
Surveys.
6.06 Evidence of Zoning. Purchaser may request and exercise
reasonable efforts to obtain: (i) pursuant to applicable Law for each parcel of
the Properties and the Improvements thereon from the local governmental
authorities with appropriate jurisdiction a certificate of occupancy or its
equivalent and zoning permit or equivalent evidence that the existing use of
such Property and Improvements and the existing buildings and structures
constituting the Improvements thereon are in compliance with all applicable
zoning Laws and that the existing uses of such Property and the Improvements
may continue; and (ii) to the extent applicable, such opinions and
certifications as may be necessary or proper to obtain a zoning endorsement to
Purchaser's title insurance policy for such Property. If repairs are required
for the issuance of any such certificate of occupancy or zoning permit, or if
Seller has received any notice or communication, written or oral, of any
violation of Law issued against or affecting any Property or the Improvements
thereon, Seller shall perform such repairs as are necessary to obtain such
certificate of occupancy or zoning permit and cure such violations.
6.07 Plans and Specifications. Prior to the Closing Date, Seller
shall make available for inspection and copying by Purchaser all plans,
specifications, as built drawings, plans and specifications for mechanical,
electrical, plumbing or security systems, operating manuals, warranties and
guarantees in Seller's possession or reasonably available to Seller and
pertaining to the Properties and/or the Improvements.
6.08 Lien Searches. Within fifteen (15) days after the date
hereof, Seller shall order, and deliver the results thereof to Purchaser, (i)
Uniform Commercial Code and Tax Lien searches for the State of Delaware and
each United States jurisdiction in which any of the
31
Purchased Assets is located, and (ii) such comparable Lien searches as are
customarily obtained in similar types of transactions in any other jurisdiction
in which any of the Purchased Assets are located.
6.09 Title Issues. On or before the Closing Date, Seller (i) shall
take all necessary action to (x) cure or resolve any violation of the Planning
Act with respect to the Ontario, Canada Property, and (y) record the original
leases (or memoranda thereof) with respect to the leased real property located
in the following cities and towns: Columbus, Ohio; Houston, Texas; and Lufkin,
Texas, (ii) use its best efforts to record the original leases (or memoranda
thereof) with respect to Mobile, Alabama; Vacaville, California; Litchfield,
Illinois; and Eufala, Alabama.
ARTICLE VII
FINANCIAL STATEMENTS; OTHER PRIOR DELIVERIES
AND PRE-CLOSING DELIVERIES
7.01 Pre-Signing Deliveries. The Seller has heretofore delivered
to the Purchaser:
(a) The audited balance sheet (the "Balance Sheet") of the
Business as of December 31, 2001 (the "Balance Sheet Date") and the related
audited statement of income for the year then ended (collectively, the "Audited
Financial Statements");
(b) The unaudited balance sheet of the Business as of March 31,
2002 and the related unaudited statement of income for the three-month period
then ended;
(c) The unaudited balance sheet of the Business as of the Balance
Sheet Date prepared on a pro forma basis to exclude all Retained Assets and
Non-Assumed Liabilities, a copy of which is set forth in Section 7.01(c) of the
Disclosure Schedule (the "Pro Forma Balance Sheet" and, together with the
unaudited balance sheet and statement of income delivered pursuant to Section
7.01(b) above, the "Unaudited Financial Statements"); and
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(d) The Disclosure Schedule, addressed to the Purchaser and
signed by the Seller.
ARTICLE VIII
WARRANTIES AND REPRESENTATIONS OF THE SELLER
The Seller warrants and represents to the Purchaser (which warranties
and representations shall survive for the periods set forth in Section 13.02(a)
hereof) as follows:
8.01 Due Incorporation. The Seller is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
its incorporation and has full corporate power and authority to own or lease
its properties and to carry on the Business as presently conducted. Seller is
qualified as a foreign corporation in the States and Provinces set forth in
Section 8.01 of the Disclosure Schedule and is in good standing in each such
jurisdiction, which are all the States and Provinces in which either the
ownership or use of the Purchased Assets or the operation of the Business
requires such qualification, except to the extent the failure to so qualify in
any such jurisdiction would not have a Material Adverse Effect.
8.02 Authority. The Seller has full right and power to enter into,
and perform its obligations under this Agreement; and has taken all requisite
corporate action to authorize the execution, delivery and performance of this
Agreement and the consummation of the sale of the Purchased Assets and other
transactions contemplated by this Agreement; and this Agreement has been duly
authorized, executed and delivered by the Seller and is binding upon, and
enforceable against, the Seller in accordance with its terms; except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar Laws affecting enforcement of creditors' rights
generally and by general principles of equity (whether applied in a proceeding
at law or in equity.)
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8.03 No Violations and Consents.
(a) Except as set forth in Section 8.03(a) of the Disclosure
Schedule, neither the execution, delivery and performance of this Agreement by
the Seller nor the consummation of the sale of the Purchased Assets or any
other transaction contemplated by this Agreement, does or will, after the
giving of notice, or the lapse of time, or otherwise, (i) conflict with, result
in a breach of, or constitute a default under, the Certificate/Articles of
Incorporation or By-laws of the Seller, any Law, any Permit or any Material
Contract; (ii) result in the creation of any Lien upon any of the Purchased
Assets; (iii) terminate, amend or modify, or give any party the right to
terminate, amend, modify, abandon, or refuse to perform, any Permit or any
Material Contract; or (iv) accelerate or modify, or give any party the right to
accelerate or modify, the time within which, or the terms under which, any
duties or obligations are to be performed, or any rights or benefits are to be
received, under any Material Contract.
(b) The execution and delivery by Seller of this Agreement does
not, and compliance by Seller with the terms hereof and consummation by Seller
of the transactions contemplated hereby will not, require Seller to obtain any
consent, approval, authorization or other action of, or make any filing with or
give any notice to, any Governmental Authority or other Person, except (i) as
disclosed in Section 8.03(b) of the Disclosure Schedule, (ii) pursuant to the
applicable requirements of the HSR Act, or (iii) as may be necessary as a
result of any facts or circumstances relating solely to Purchaser.
8.04 Brokers. Neither this Agreement nor the sale of the Purchased
Assets or any other transaction contemplated by this Agreement was induced or
procured through any Person acting on behalf of, or representing the Seller or
any of its Affiliates as broker, finder, investment banker, financial advisor
or in any similar capacity.
34
8.05 Required Assets. Except for the Retained Assets, all of the
rights, properties and assets used by the Seller in connection with owning and
operating the Business are (i) either owned by the Seller or licensed or leased
to the Seller under one of the Contracts conveyed to the Purchaser under this
Agreement; and (ii) included in the Purchased Assets. With the exception of the
assets identified in Section 1.02 of the Disclosure Schedule (consisting of the
Retained Assets used by the Business but owned or leased by Seller and utilized
in connection with businesses of Seller other than the Business), the Purchased
Assets are sufficient for the continued operation of the Business by the
Purchaser after the Closing in substantially the same manner as presently
conducted by the Seller.
8.06 Contracts.
(a) Section 8.06(a) of the Disclosure Schedule contains a true
and complete schedule setting forth all Contracts except (i) leases, contracts,
agreements or commitments entered into in the ordinary course of business which
may be terminated by the Seller on thirty (30) days or less written notice
without penalty to Seller; or (ii) leases, contracts, agreements or commitments
which have a term of one year or less and involve payment by or to Seller of
$50,000 or less. The Contracts set forth in Section 8.06(a) of the Disclosure
Schedule are hereinafter collectively referred to as the "Material Contracts."
(b) The Seller has delivered to the Purchaser true and correct
copies of each written Material Contract and a summary of each oral Material
Contract. Each Material Contract is valid, binding, and in full force and
effect and is enforceable by the Seller and, to the Knowledge of the Seller,
each other party thereto. The Seller is not in default under any Material
Contract nor does there exist any condition or event which after notice, lapse
of time or both would constitute a default by any Seller under any Material
Contract. To the Knowledge of the Seller,
35
no other party to any Material Contract is in default or breach, or alleged to
be in default or breach, under any Material Contract nor does there exist any
condition or event which, after notice, lapse of time or both, would constitute
a default or breach by any other party to any Material Contract. The Seller has
not received notice that it is in default under or in breach of any Material
Contract or of the election of any party to any Material Contract to cancel,
terminate or not to renew any Material Contract, whether in accordance with the
terms of such Material Contract or otherwise. The Seller has not given notice
to any other party to any Material Contract that such other party is in default
thereunder or in breach thereof or given notice of the termination thereof.
Assuming that the consents set forth on Section 8.03 of the Disclosure Schedule
are obtained prior to Closing, the enforceability of the Material Contracts
(including the enforceability by the Purchaser after the Closing) will not be
affected by the transactions contemplated by this Agreement.
8.07 Financial Statements and Related Matters.
(a) The Financial Statements (i) present fairly in all material
respects the financial position and results of operations of the Business at
the dates and for the periods indicated therein, all in accordance with GAAP
consistently applied throughout the periods referred to in the Financial
Statements, subject in the case of the Unaudited Financial Statements, to
normal recurring year-end adjustments the effect of which would not,
individually or in the aggregate, have a Material Adverse Effect and the
absence of notes that, if presented, would not differ materially from those
included in the Audited Financial Statements, and (ii) are consistent with the
books and records of the Seller.
(b) On the Balance Sheet Date, the Seller had no material
liability of any nature relating to the Business (whether accrued, absolute,
contingent or otherwise) which was not fully
36
disclosed, reflected or reserved against in the Balance Sheet; and except for
liabilities which have been incurred since the Balance Sheet Date in the
ordinary and regular course of the Business and are of the same type and nature
as those included in the Balance Sheet, since the Balance Sheet Date, the
Seller has not incurred any material liability of any nature (whether accrued,
absolute, contingent or otherwise), except as set forth in Section 8.07(b) of
the Disclosure Schedule.
8.08 [Reserved].
8.09 Properties and Title Thereto.
(a) Section 8.09(a) of the Disclosure Schedule sets forth all
real property owned by the Seller and currently used in the operation of the
Business.
(b) Section 8.09(b) of the Disclosure Schedule sets forth all
real property leased by the Seller and currently used in the operation of the
Business (and lists the leases pursuant to which such Properties are leased,
true and complete copies of which have previously been delivered to the
Purchaser).
(c) Seller has good and marketable fee simple title to the Real
Property, and each of the real property leases described in Section 8.09(b) of
the Disclosure Schedule grants to Seller a binding leasehold interest in the
real property described therein with full rights of quiet enjoyment and is not
subject to any other party's leasehold rights or rights of use, in each case
free and clear of all Liens, except (i) for the Permitted Exceptions, or (ii)
as set forth in Section 8.09(c) of the Disclosure Schedule, with respect to
which such Liens shall be discharged at or prior to Closing.
8.10 Title to Tangible Assets. Seller has good and marketable
title to all the Purchased Assets consisting of tangible personal property
owned by Seller and valid and subsisting leases
37
with respect to all of the Purchased Assets consisting of tangible personal
property leased by Seller. All such owned tangible personal property is owned
free and clear of all Liens, except: (a) Liens set forth in Section 8.10(a) of
the Disclosure Schedule, all of which shall be discharged at or prior to
Closing; (b) Liens for Taxes and assessments not yet payable; (c) Liens
securing or relating to liabilities or obligations which are to be assumed by
Purchaser pursuant to this Agreement or the Assumption Agreement; and (d) Liens
the existence of which do not, individually or in the aggregate, render title
to any tangible personal property unmarketable or materially impair the use or
value of any tangible personal property as presently utilized.
8.11 Intellectual Property.
(a) Section 8.11(a) of the Disclosure Schedule lists all of the
Intellectual Property included in the Purchased Assets, including the
registration or application numbers (if applicable) for such Intellectual
Property. Section 8.11(a) of the Disclosure Schedule identifies any such
Intellectual Property which is leased from another Person and sets forth with
respect to each item of such leased Intellectual Property the owner thereof and
the source of the Seller's rights therein. The Seller has good and marketable
title to all the Intellectual Property included in the Purchased Assets, free
and clear of all Liens.
(b) Except as set forth in Section 8.11(b) of the Disclosure
Schedule, (i) to the Knowledge of Seller, there is not now and has not been
during the past three (3) years any infringement, misuse or misappropriation by
the Seller of any Intellectual Property right which relates to the Business and
which is owned by any third party, and the continued operation of the Business
by the Purchaser in the same manner as heretofore conducted by the Seller will
not result in any such infringement, misuse or misappropriation by the
Purchaser; (ii) there is not now any existing or, to the Knowledge of the
Seller, threatened claim against the Seller, which
38
relates to the Business, of infringement, misuse or misappropriation of any
patent, trademark, tradename, servicemark, copyright or trade secret by any
third party and (iii) the Seller has no obligation to make any payments by way
of royalty, fee or otherwise to any Person in connection with any Intellectual
Property included in the Purchased Assets.
(c) Except as set forth on Section 8.11(c) of the Disclosure
Schedule, there is no pending or threatened claim by the Seller against others
for infringement, misuse or misappropriation of any trademark, tradename,
servicemark, copyright or trade secret owned by the Sellers and which is
utilized in the conduct of the Business and included in the Purchased Assets,
and to Seller's Knowledge, no basis exists for any such claim.
8.12 Litigation. Except as set forth in Section 8.12 of the
Disclosure Schedule, (a) there are no actions, claims, proceedings
investigations, arbitrations, audits, hearings or other like matters pending
or, to the Knowledge of the Seller, threatened against the Seller relating to
the Business, any of the Purchased Assets or the transactions contemplated
hereby at law or in equity, before or by any federal, state, or municipal
court, agency or other Governmental Authority, or before any arbitrator; and
(b) neither the Seller in respect of the Business nor any of the Purchased
Assets is subject to any order, judgment or decree of any court or Governmental
Authority.
8.13 Compliance With Laws. Seller is not in violation of any Law
applicable to the Business or by which any of the Purchased Assets are bound or
affected, except as set forth in Section 8.13 of the Disclosure Schedule.
Except as set forth in Section 8.13 of the Disclosure Schedule, in the past
three (3) years, the Seller has not received written notice that the Business
is in violation of or in default under any Law applicable to it.
39
8.14 Labor Matters.
(a) Section 8.14(a) of the Disclosure Schedule contains a list of
the name, location of employment, job title, continuous service date, and
current annual compensation of (i) each individual employed by Seller at each of
the Facilities and (ii) each other individual employed by Seller primarily in
connection with the Business (who shall be so identified on Section 8.14(a) of
the Disclosure Schedule). To the Knowledge of the Seller, no such employee is a
party to, or otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
employee and any other Person that in any way adversely affects or shall affect
(i) the performance of his or her duties as an employee of the Seller or the
Purchaser, (ii) the ability of the Purchaser to conduct the Business after the
Closing, or (iii) the ability of such individual to assign to the Purchaser any
rights under any invention, improvement or discovery. The parties agree that
Section 8.14(a) of the Disclosure Schedule shall be updated by Seller as of the
Closing Date to reflect changes in the identities of employees required to be
listed thereon that occur between the date of this Agreement and the Closing
Date in the ordinary course of business and that such revised Section 8.14(a) of
the Disclosure Schedule shall be delivered to Purchaser at the Closing.
(b) Section 8.14(b) of the Disclosure Schedule contains a list of
the collective bargaining agreements to which Seller is a party, relating to
employees employed by Seller in connection with the Business and a list of all
applications for certification of a collective bargaining agent for any of the
Seller's employees in connection with the Business. Except as disclosed in
Section 8.14(b) of the Disclosure Schedule, throughout the previous three (3)
years, (a) there are and have been no strikes, slowdowns, picketings, work
stoppages, lockouts or other labor controversies pending or, to the Knowledge of
Seller, threatened against or with respect to
40
the Business and (b) there are and have been no grievances outstanding or unfair
labor practice complaints pending before the National Labor Relations Board
against Seller in respect of employees employed by Seller in connection with the
Business under any such agreement or contract.
8.15 Employee Benefit Matters. Section 8.15 of the Disclosure
Schedule lists all employee benefit plans, including, but not limited to,
pension, profit sharing, incentive, bonus, deferred compensation, retirement,
stock option, stock purchase, medical and hospitalization, insurance, salary
continuation, sick pay, welfare, fringe benefit, and other employee benefit
plans, contracts, programs, policies and arrangements which Seller maintains or
under which Seller has any obligations with respect to any employee or former
employee of the Business (the "Employee Plans"), and the Purchaser has received
copies of each Employee Plan document (including each most recent summary plan
description for Employee Plans for which a summary plan description is
required), or has had an opportunity to review such documents. The Seller has
not incurred (and no event has occurred that could result in the Seller
incurring) any liability in connection with any existing or previously existing
Employee Plan that could become, on or after the Closing Date, an obligation or
liability of the Purchaser.
8.16 Taxes. Seller has duly and timely filed all federal, state and
local Tax reports and returns required to be filed by it in respect of the
Business (all such reports and returns being true, correct and complete in all
material respects) and has duly and timely calculated and paid all Taxes shown
thereon to be due. Seller has not received notice that the Internal Revenue
Service or any other taxing authority has asserted against Seller any deficiency
or claim for additional property Taxes related to the Business or the Purchased
Assets. Seller has duly withheld and, if payable, paid all Taxes which it is
required to withhold from, and pay relating
41
to, compensation paid to employees of Seller employed by Seller in connection
with the Business. There are no Liens with respect to Taxes on the Purchased
Assets, except for Liens for Taxes not yet due, and Seller has paid all such
Taxes, rates and like assessments that have become due and payable which, if not
so paid, could result in a Lien on the Purchased Assets.
8.17 Licenses and Permits. Except as set forth in Section 8.17 of
the Disclosure Schedule and except for those required by the Environmental Laws
which is provided for in Section 8.18 hereof, Seller has all governmental
licenses, franchises, permits, approvals, authorizations, exemptions,
certificates, registrations and similar documents or instruments necessary to
own the Purchased Assets and to carry on the Business as it is currently
conducted (the "Permits"). Each such Permit is listed in Section 8.17 of the
Disclosure Schedule, along with the Facility to which such Permit relates.
Except as set forth in Section 8.17 of the Disclosure Schedule, the Seller is
not in violation of any such Permit, each such Permit is in full force and
effect, Seller has fulfilled and performed in all material respects its
obligations thereunder, and each such Permit is assignable to Purchaser without
the consent of any other Person and will remain in full force and effect
following the consummation of the transactions contemplated herein.
8.18 Environmental Compliance.
(a) Except as set forth on Section 8.18 (a) of the Disclosure
Schedule, Seller in connection with the Business (i) is in compliance in all
material respects with all Environmental Laws, and (ii) has not received any
communication (written or oral), demand, letter, claim or request for
information from a Governmental Authority or other third party that alleges that
(x) Seller is not in compliance with Environmental Laws or that (y) Seller has
caused bodily injury
42
or property damage to any Person as a result of an alleged release of any
Hazardous Substance into the environment.
(b) Seller has provided or made available for Purchaser's review
all non-privileged environmental reports, audits and assessments that relate to
the Business, the Facilities or the Properties undertaken by governmental
agencies or other parties, or by Seller, or by any of its lenders, agents,
independent contractors or representatives of which the Seller has Knowledge.
(c) Except as set forth in Section 8.18(c) of the Disclosure
Schedule, to the Knowledge of Seller, (i) there is not occurring, and there has
not occurred at any time any generation, storage, treatment, release or disposal
of any Hazardous Substance on, in or from any of the Properties so as to cause a
material violation under any Environmental Law, nor are any of the Properties
contaminated by any Hazardous Substance in a manner that violates any
Environmental Law or that requires disclosure, investigation or remediation
under applicable Environmental Law; and (ii) Seller has not received any
communication (written or oral), demand, letter, or claim alleging that there is
any Property which pursuant to any Environmental Law, (w) has been placed on the
"National Priorities List" pursuant to the Comprehensive Environmental
Compensation and Liability Act of 1980 or any other similar list maintained by
any Governmental Authority of sites contaminated by any Hazardous Substance, (x)
is or has been subject to a claim, administrative order or other request to take
investigative, removal or remedial action under any Environmental Law, (y) is
otherwise the subject of any federal, state or private investigation,
remediation or cost recovery or contribution effort or claim relating to
Environmental Laws, or (z) is the subject of any Lien in favor of any Person
relating to or arising out of any Environmental Law. Section 8.18(c) of the
Disclosure Schedule identifies, to the Knowledge of Seller, (i) all underground
storage tanks, and the capacity and contents of such
43
tanks, located or formerly located on any of the Properties, and (ii) all
polychlorinated biphenyls ("PCB's") used or present at any of the Properties.
(d) Except as set forth in Section 8.18(d) of the Disclosure
Schedule, Seller currently holds or has applied for all the Permits required
under any Environmental Laws to operate the Business, copies of which have been
delivered to the Purchaser or made available for Purchaser's review. Each such
Permit is listed in Section 8.18(d) of the Disclosure Schedule, along with the
Facility to which such Permit relates and a description of any compliance
schedules relating thereto. Except as set forth in Section 8.18(d) of the
Disclosure Schedule, the Seller is not in violation of any such Permit, each
such Permit is in full force and effect, Seller has fulfilled and performed in
all material respects its obligations thereunder. Seller shall cooperate with
Purchaser to help Purchaser arrange for the assignment, transfer or reissuance
of the Permits described in this Section 8.18(d), as applicable.
(e) Phase I environmental site assessments have been conducted in
connection with this transaction by a consultant selected by Purchaser, approved
and engaged by Seller, and managed by both Seller and Purchaser at the
Facilities located in Tacoma, Washington; Philadelphia, Pennsylvania; Lafayette,
Indiana; Mobile, Alabama; Cedartown, Georgia (mill); Cedartown, Georgia
(converting plant); Grand Rapids, Michigan; and Saginaw, Michigan (collectively,
the "Phase I Properties"). Seller makes no representations or warranties under
Section 8.18(c) with regard to the Phase I Properties.
(f) This Section 8.18 contains the exclusive representations and
warranties of Seller regarding Hazardous Substances or Environmental Laws and no
other representations or warranties of Seller set forth in this Agreement are
intended to apply, or shall be applicable, to Hazardous Substances or
Environmental Laws. Section 8.18 does not contain any
44
representations and warranties regarding other matters, including those relating
to worker safety or asbestos, with respect to which the other representations
and warranties set forth herein apply.
8.19 Properties.
(a) The Properties, and the improvements, buildings and structures
thereon, including the Facilities (the "Improvements"), whether owned or leased,
constitute all of the real property used by Seller in the operation of the
Business, do not violate and may continue to be used for the operation of the
Business as currently operated, and may be conveyed or assigned to Purchaser as
required by this Agreement without violating any federal, state, or local
building, zoning, health, safety, platting, subdivision or other statute,
ordinance or regulation, or any resolution or approval issued by any local
planning or zoning board or any condition imposed thereby, or any permit of
occupancy, or any applicable private restriction, and no notice of any violation
of any such legal requirement has been received by Seller.
(b) Seller has received no notice, and it has no Knowledge, of any
pending, threatened, or contemplated condemnation, expropriation or like
proceeding, or of any administrative agency action, litigation, or other
material proceeding of any kind (nor is there any basis for any such action),
affecting any of the Properties.
(c) Within the past five (5) years, except as set forth on Section
8.19(c) of the Disclosure Schedule, Seller has not received and has no Knowledge
or information or notice from any insurance company or board of fire
underwriters requesting the performance of any work or alteration with respect
to any of the Properties, or requiring an increase in the insurance rates
applicable to the same outside of the ordinary course of business, consistent
with past practice.
45
(d) Except as set forth on Section 8.19(d) of the Disclosure
Schedule, Seller does not own or hold, and is not obligated under or a party to,
any option, right of first refusal or other contractual right to purchase,
acquire, sell or dispose of any of the Properties, or any portion thereof or
interest therein.
(e) Seller has received no notice, and it has no Knowledge, that
any of the Improvements are in violation of any zoning Law.
(f) Seller has no Knowledge of any inadequacies with respect to
the utility services to any of the Properties and the Improvements, including
water, sewage, gas, electricity and telephone. All water, rail, gas, electrical,
steam, compressed air, telecommunication, sanitary and storm sewage lines and
systems and other similar systems serving any of the Properties and/or the
Improvements are installed and operating and are sufficient to enable the same
to continue to be used and operated in the manner currently being used and
operated, and any so-called hookup fees or other associated charges have been
fully paid. Each such utility or other service is provided by a public or
private utility or service company and enters the applicable one of the
Properties from an adjacent public street or valid private easement owned by the
supplier of such utility or other service. All of the Properties are fully
accessible by public roads and to Seller's Knowledge, no fact or condition
exists which would result in the termination of the current access from the same
to any presently existing adjoining highways and roads. Each Improvement has
direct or indirect access to a public street adjoining the property on which
such Improvement is situated over existing driveways and accessways or private
roads sufficient to allow such Improvement to be operated as currently being
used in connection with the Business, and no existing accessway crosses or
encroaches upon any property or property interest not
46
owned or leased by Seller. No Improvement or portion thereof is dependent for
its access, operation or utility on any land, building or other improvement not
included in the Properties.
(g) Seller has delivered to Purchaser complete and correct copies
of the following to the extent the same are in its possession or under its
control:
(i) all deeds, leases, memoranda of lease, trust
agreements and other documents and instruments, under which any of the
Properties was conveyed or leased to Seller or under which the same may
be leased to or held for the benefit of Seller;
(ii) all title reports, title opinions, title insurance
policies, title binders, survey documents and other non-privileged data
affording information or opinions with respect to, certifying to, or
evidencing the current title, title history, title marketability, use,
possession, restriction or regulation, if any (governmental or
otherwise), and compliance with applicable Laws, of the Properties; and
(iii) all assignments, leases or subleases relating to the
Properties, and all documents relating thereto, including any
amendments thereto and any assignments thereof.
8.20 Assets.
(a) Section 8.20 of the Disclosure Schedule lists all of the
machinery, equipment, vehicles and other tangible personal property of the
Seller included in the Purchased Assets and the location thereof and indicates
whether any such assets are leased by the Seller.
(b) Except to the extent reserved on the face of the Balance Sheet
and the Closing Balance Sheet (rather than in any notes thereto), all of the
Inventory is of good, usable and merchantable quality and includes no items
obsolete, discontinued or surplus to the needs of the Business in the ordinary
course, and all of the Inventory consisting of raw materials or work in
47
process can, by application of the normal and customary manufacturing procedures
of the Business in a manner consistent with past practice, be converted into
finished goods. All Inventory is reflected in both the books and records of the
Business and the Financial Statements at the lower of cost or market in
accordance with GAAP. The amount of each type of Inventory and the amount of the
purchase orders outstanding for the purchase of raw materials and other
Inventory items, respectively, are such amounts as are reasonably necessary for
the conduct of the Business in the ordinary course and are not materially
excessive.
(c) All of the accounts, notes and other receivables of the Seller
that are part of the Purchased Assets (i) represent valid and bona fide claims,
(ii) were acquired or arose in the ordinary course of business, and (iii) will
be fully collectible in the aggregate face amounts thereof in the ordinary
course of business, subject to a reasonable reserve to be set forth on the
Closing Balance Sheet.
8.21 Customers and Suppliers. Section 8.21 of the Disclosure
Schedule lists each customer and supplier representing aggregate ▇▇▇▇▇▇▇▇ or
payments by the Seller in excess of $100,000 in the 12-month period ending
December 31, 2001. The Seller has not received any notice, and the Seller has no
reason to believe, that, were it not for the transactions contemplated by this
Agreement (i) the Business's relationship or Contract with any such customer or
supplier would be terminated or would be considered for termination or
nonrenewal or (ii) any such customer or supplier would consider any material
reduction of its relationship with the Business.
8.22 Transactions With Affiliates. In the three (3) years prior to
the date of this Agreement, except for compensation and benefits payable to
employees in the ordinary course of business, no director, officer, stockholder
or Affiliate of the Seller has had, and no such Person currently has, a direct
or indirect material interest in any Contract, in any Purchased Asset, or in
48
any property, real, personal or mixed, tangible or intangible, used in or
pertaining to the Business or any claim or other right against the Seller
pertaining to the Business.
8.23 No Material Adverse Change. Except as set forth on Section
8.23 of the Disclosure Schedule, since the Balance Sheet Date there has not been
(i) any change in the business or operations of the Business which would result
in a Material Adverse Effect; (ii) any loss or damage (whether or not covered by
insurance) to any of the Purchased Assets, or any other event or condition of
any character which has had a Material Adverse Effect; (iii) any mortgage or
pledge of, or any other grant of a security interest in or encumbrance on, any
of the Purchased Assets; (iv) any Contract or other transaction entered into,
amended or terminated by the Seller relating to, or otherwise negatively
affecting in any way, the Business or the operation thereof, except in the
ordinary course of business; (v) any sale or transfer of any of the Purchased
Assets or any cancellation of any debts or claims of the Business, except in the
ordinary course of business; (vi) any acquisition of additional Purchased
Assets, except in the ordinary course of business; (vii) any waiver by the
Seller of any rights which have any material value to the Business; (viii) any
change in the accounting practices of the Business or the manner in which it
maintains its books of account and records; (ix) any increase in the rate or
terms of compensation payable to the employees of the Business except in the
ordinary course of business, or any modifications in employee benefits to the
Seller's employees; (x) any loss or termination of any customer contracts
representing ▇▇▇▇▇▇▇▇ in excess of $100,000 during the 12-month period prior to
such loss or termination; or (xi) any agreement by Seller to do any of the
things described in the preceding clauses (i) through (x).
49
ARTICLE IX
WARRANTIES AND REPRESENTATIONS OF THE PURCHASER
The Purchaser warrants and represents to the Seller (which warranties
and representations shall survive the Closing) as follows:
9.01 Due Incorporation. The Purchaser is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
its incorporation.
9.02 Authority. The Purchaser has full right and power to enter
into, and perform its obligations under this Agreement, and has taken all
requisite corporate action to authorize the execution, delivery and performance
of this Agreement and the consummation of the purchase of the Purchased Assets
and other transactions contemplated by this Agreement; and this Agreement has
been duly executed and delivered by the Purchaser and each is binding upon, and
enforceable against, the Purchaser in accordance with its terms; except as such
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar Laws affecting enforcement of creditors' rights generally and
by general principles of equity (whether applied in a proceeding at law or in
equity.)
9.03 No Violations. Neither the execution, delivery or performance
of this Agreement by the Purchaser, nor the consummation of the purchase of the
Purchased Assets or any other transaction contemplated by this Agreement, does
or will, after the giving of notice, or the lapse of time, or otherwise,
conflict with, result in a breach of, or constitute a default under, the
Articles/Certificate of Incorporation or By-laws of the Purchaser, or any Law or
any court or administrative order or process, or any material contract,
agreement, commitment or plan to which the Purchaser is a party or by which the
Purchaser or any of its rights, properties or assets is subject or is bound.
50
9.04 Brokers. Neither this Agreement nor the purchase of the
Purchased Assets or any other transaction contemplated by this Agreement was
induced or procured through any Person acting on behalf of, or representing, the
Purchaser or any of its Affiliates as broker, finder, investment banker,
financial advisor or in any similar capacity under circumstances which could
result in any liability of Seller for the fees of, or any other liability to,
any such Person.
9.05 Litigation. There are no actions, claims, proceedings or
governmental investigations pending against Purchaser or any of its assets or
properties at law or in equity, before or by any federal, state, or municipal
court, agency or other Governmental Authority, or by any other Person, which,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on Purchaser or its ability to consummate the
transactions contemplated hereby.
ARTICLE X
CONDITIONS TO CLOSING APPLICABLE TO PURCHASER
The obligations of Purchaser hereunder (including the obligation of
Purchaser to close the transactions herein contemplated) are subject to the
following conditions precedent:
10.01 No Termination. Neither Purchaser nor Seller shall have
terminated this Agreement pursuant to Section 12.01 hereof.
10.02 Bring-Down of Seller Warranties. The warranties and
representations made by the Seller herein to Purchaser shall be true and correct
in all material respects on and as of the Closing Date with the same effect as
if such warranties and representations had been made on and as of the Closing
Date and the Seller shall have performed and complied with, in all material
respects, all agreements, covenants and conditions on their part required to be
performed or
51
complied with on or prior to the Closing Date; and at the Closing, Purchaser
shall have received a certificate executed by the President or any Vice
President of Seller to the foregoing effect.
10.03 No Material Adverse Change. Between the date of this Agreement
and the Closing Date there shall have been no change in the business or
operations of the Business or the Purchased Assets which has resulted or would
result in a Material Adverse Effect, without regard to clause (i) of the
definition thereof.
10.04 Pending Actions. No investigation, action, suit or proceeding
by any Governmental Authority and no action, suit or proceeding by any other
Person, shall be pending on the Closing Date which challenges this Agreement and
seeks to modify, prohibit or enjoin the consummation of the transactions
contemplated hereby.
10.05 Consents and Approvals. All consents, approvals or
authorizations of the Governmental Authorities and other Persons set forth or
required to be set forth in Section 8.03 of the Disclosure Schedule (other than
Reemay, Georgia Pacific, Exxon Mobil or Illinois Tool Works) shall have been
obtained and delivered to Purchaser.
10.06 HSR Act. The waiting period applicable to the consummation of
the transactions contemplated hereunder required pursuant to the provisions of
the HSR Act shall have expired.
10.07 Liens. The Purchaser shall have received evidence satisfactory
to it that prior to or substantially concurrent with the consummation of the
transactions contemplated by this Agreement all of the Liens to which any of the
Purchased Assets may be subject shall be released and any related filings
terminated of record, other than (a) with respect to the Properties, Permitted
Exceptions, and (b) with respect to tangible Purchased Assets, Liens described
in clauses (b) through (d) of Section 8.10.
52
10.08 Surveys, Title Insurance and Zoning. Purchaser shall have
received such Surveys as it shall have elected to obtain and which comply with
the requirements of Section 6.05 above. To the extent available in any
jurisdiction in which any Property is located, Purchaser shall have received
fully effective and binding title insurance commitments (in form and substance
satisfactory to Purchaser and marked-up and endorsed by ▇▇▇▇▇▇▇ Title Guaranty
Company at Closing to reflect conveyance to Purchaser of the Real Property and
assignment to Purchaser of the real property leases described in Section 8.09(b)
of the Disclosure Schedule) to issue title insurance policies, in amount and
form, and from ▇▇▇▇▇▇▇ Title Guaranty Company or such other title insurance
company selected by Purchaser, reasonably acceptable to Purchaser, and agreeing
to insure (at regular rates) fee simple title to the Real Property in Purchaser
and binding leasehold interest in the real property described in the real
property leases described in Section 8.09(b) of the Disclosure Schedule, free
and clear of Liens other than the Permitted Exceptions, without any conditions,
requirements or other exceptions. Without limiting the foregoing provisions: (i)
Seller shall have met or caused to be met each of the requirements set forth in
Schedule B-Section I of Purchaser's title insurance commitment for the
Properties other than requirements pertaining to payment of the Purchase Price,
payment of the premium for such title insurance or any document or instrument
related to any financing obtained by Purchaser; (ii) Purchaser shall have
obtained from the local governmental authorities with appropriate jurisdiction
over each of the Properties and the Improvements thereon a certificate of
occupancy or its equivalent and zoning permit or equivalent evidence that the
existing use of such Property and the existing buildings and structures
constituting the Improvements thereon are in compliance with all applicable
zoning Laws and that the existing uses of such Property and the Improvements may
continue; and (iii) to the extent available in any jurisdiction in which the
53
Property is located, Purchaser's title insurance policy shall contain a zoning
endorsement which is reasonably satisfactory to Purchaser.
10.09 All Necessary Documents. All proceedings to be taken in
connection with the consummation of the transactions contemplated by this
Agreement and all documents incident thereto, shall be reasonably satisfactory
in form and substance to Purchaser and its counsel, and Purchaser shall have
received copies of such documents as Purchaser and its counsel may reasonably
request in connection with said transactions, including those documents to be
delivered pursuant to Section 4.02 hereof.
Purchaser shall have the right to waive any of the foregoing conditions
precedent, except for the condition set forth in Section 10.06 hereof.
ARTICLE XI
CONDITIONS TO CLOSING APPLICABLE TO SELLER
The obligations of Seller hereunder (including the obligation of Seller
to close the transactions herein contemplated) are subject to the following
conditions precedent:
11.01 No Termination. Neither Purchaser nor Seller shall have
terminated this Agreement pursuant to Section 12.01 hereof.
11.02 Bring-Down of Purchaser Warranties. All warranties and
representations made by Purchaser herein to the Seller shall be true and correct
in all material respects on and as of the Closing Date with the same effect as
if such warranties and representations had been made on and as of the Closing
Date, and Purchaser shall have performed and complied in all material respects
(except for the payment of money which shall be absolute) with all agreements,
covenants and conditions on its part required to be performed or complied with
on or prior to the
54
Closing Date, and at the Closing, Seller shall have received a certificate
executed by the President or any Vice President of Purchaser to the foregoing
effect.
11.03 Pending Actions. No investigation, action, suit or proceeding
by any Governmental Authority and no action, suit or proceeding by any other
Person shall be pending on the Closing Date which challenges this Agreement and
seeks to modify, prohibit or enjoin the consummation of the transactions
contemplated hereby.
11.04 HSR Act. The waiting period applicable to the consummation of
the transactions contemplated hereunder required pursuant to the HSR Act shall
have expired.
11.05 All Necessary Documents. All proceedings to be taken in
connection with the consummation of the transactions contemplated by this
Agreement, and all documents incident thereto, shall be reasonably satisfactory
in form and substance to Seller and its counsel, and Seller and its counsel
shall have received copies of such documents as it and its counsel may
reasonably request in connection with said transactions, including those
documents to be delivered pursuant to Section 4.03 hereof.
Seller shall have the right to waive any of the foregoing conditions
precedent, except for the condition set forth in Section 11.04 hereof.
ARTICLE XII
TERMINATION
12.01 Termination. This Agreement may be terminated at any time
prior to the Closing as follows, and in no other manner:
(a) by mutual consent of Purchaser and Seller;
(b) by Purchaser or by Seller, if at or before the Closing any
conditions set forth herein for the benefit of the Purchaser or Seller,
respectively, shall not have been timely met in
55
all material respects or cannot be timely met in all material respects;
provided, the party seeking to terminate is not in material breach of or
material default under this Agreement;
(c) by Purchaser or by the Seller if the Closing of the
transactions contemplated by this Agreement shall not have occurred on or before
September 15, 2002, or such later date as may have been agreed upon in writing
by the parties hereto; provided, the party seeking to terminate is not in
material breach of or material default under this Agreement; or
(d) by Purchaser or by Seller if any representation or warranty
made herein for the benefit of Purchaser or Seller, respectively, or in any
certificate, schedule or documents furnished to Seller or Purchaser,
respectively, pursuant to this Agreement is untrue in any material respect, or
if Purchaser or Seller, respectively, shall have defaulted in any material
respect in the performance of any material obligation under this Agreement.
12.02 No Limitation on Remedies. Any termination pursuant to this
Article XII shall not limit or restrict the rights or other remedies of any
party hereto.
ARTICLE XIII
INDEMNIFICATION
13.01 Seller Indemnification. The Seller agrees to indemnify and
hold the Purchaser, its subsidiaries and Affiliates, and each of their officers,
directors, successors and assigns, harmless against any loss, damage or expense
(including reasonable attorneys' fees), which may arise out of or be in respect
of (a) any breach of any of the covenants or agreements made by the Seller in
this Agreement; (b) any inaccuracy or misrepresentation in or breach of, or
alleged inaccuracy or misrepresentation in or breach of, any of the warranties
or representations made by Seller in this Agreement, any exhibit, the Disclosure
Schedule, Financial Statements, Closing Balance Sheet
56
or any other certificate, document, instrument or affidavit furnished by the
Seller in accordance with the provisions of this Agreement, and (c) any and all
Non-Assumed Liabilities.
13.02 Limitation. The Purchaser's right to indemnification pursuant
to Section 13.01 of this Agreement is subject to the following limitations:
(a) Subject to Section 13.02(d), the Purchaser shall not be
entitled to assert any right of indemnification pursuant to Section 13.01 for
any loss, damage or expense for which the Purchaser has not delivered notice of
the factual basis giving rise to such loss, damage or expense on or before the
date eighteen months after the Closing Date, except that (i) any indemnification
claim arising from the breach of any of the representations and warranties set
forth in Section 8.16 may be asserted so long as the Purchaser has provided such
notice prior to the expiration of the statute of limitations applicable to such
claim, and (ii) any indemnification claim arising from the breach of any of the
representations and warranties set forth in Section 8.18 may be asserted so long
as the Purchaser has provided such notice prior to the third anniversary of the
Closing Date.
(b) Subject to Section 13.02(d), no indemnification claim may be
made against Seller for indemnification pursuant to Section 13.01 with respect
to any liability or damage, unless the aggregate of all such liabilities and
damages under Section 13.01 shall exceed $500,000 ("Threshold"), and then Seller
shall only be required to pay or be liable for the excess over the Threshold.
(c) Subject to Section 13.02(d), the Seller's maximum liability to
Purchaser pursuant to Section 13.01 shall be equal to $13,000,000.
(d) The limitations set forth in subsections (a), (b) and (c) of
this Section 13.02 shall not in any way be deemed to limit the Seller's
obligation for indemnification under subsections
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(a) or (c) of Section 13.01 or its liability under subsection (b) for any
indemnification claim arising from the breach or alleged breach of any of the
representations and warranties set forth in Section 8.01, 8.02, 8.04, 8.09(c) or
8.10. In addition, the limitations set forth in Section 13.02(b) shall not in
any way be deemed to limit the Seller's liability for any indemnification claim
arising from the breach of any of the representations and warranties set forth
in Section 8.20(b) or 8.20(c).
(e)
(i) The limitations set forth in subsections (a), (b) and
(c) of this Section 13.02 shall not in any way be deemed to limit the
Seller's obligation for indemnification for any loss, damage or expense
arising under this Article XIII and relating to the release of No. 6
fuel oil from, or the proper abandonment or closure of, the
10,000-gallon underground storage tank (commonly referred to as "Tank
3") at the Property located in Tacoma, Washington (the "Tacoma Tank
Matter"). Subject to Section 13.02(i), Seller covenants to conduct all
work related to the Tacoma Tank Matter required by Environmental Law.
(ii) Seller further covenants to sample for possible
contamination or release from the 18,800 gallon heating oil underground
storage tank at the mill Property located in Cedartown, Georgia
("Cedartown Tank") as described in the scope of work from ATC
Associates, Inc. dated July 19, 2002. If a release is determined to
have occurred from the Cedartown Tank, then the limitations set forth
in subsections (a), (b) and (c) of this Section 13.02 shall not in any
way be deemed to limit the Seller's obligation for indemnification for
any loss, damage or expense arising under this Article XIII and
relating to the Cedartown Tank matter. Furthermore, if a release is
determined to have
58
occurred from the Cedartown Tank, then subject to Section 13.02(i),
Seller covenants to conduct all work related to the Cedartown Tank
required by Environmental Law.
(iii) Seller's indemnification obligation with respect to
all losses, damages or expenses arising under this Article XIII and
relating to Environmental Laws or Hazardous Substances (collectively,
"Indemnified Environmental Losses"), other than the Tacoma Tank Matter
or, if a release is determined to have occurred (as described in
Section 13.02(e)(ii)), the Cedartown Tank Matter, shall be subject to
each of the limitations set forth in subsections (a), (b) and (c) of
this Section 13.02; except that, Purchaser shall be entitled to assert
a right of indemnification for Indemnified Environmental Losses arising
from (y) the Tacoma Fill Matter (as defined in Schedule 3.06) so long
as Purchaser has provided notice of the factual basis giving rise to
such Indemnified Environmental Losses on or before the later of (A) the
date that Purchaser or one of its Affiliates ceases to own the Property
in Tacoma, Washington or (B) the third anniversary of the Closing Date,
and (z) the Cedartown Mill Legacy Matter (as defined in Schedule 3.06)
so long as Purchaser has provided notice of the factual basis giving
rise to such Indemnified Environmental Losses on or before the later of
(A) the date that Purchaser or one of its Affiliates ceases to own the
mill Property in Cedartown, Georgia or (B) the third anniversary of the
Closing Date. Except as provided in Section 17.04 below, Seller shall
have no obligation under this Agreement to indemnify any Person other
than Purchaser or its Affiliates, including, without limitation, any
lessee or subsequent owner of any Property.
(f) For the purposes of this Article XIII, in computing such
individual or aggregate amounts of claims, the amount of each claim shall be
deemed to be an amount net of any
59
insurance proceeds and any indemnity, contribution or other similar payment
recoverable by Purchaser or any Affiliate from any third party with respect
thereto.
(g) Purchaser hereby acknowledges and agrees that its sole and
exclusive remedy with respect to any and all claims relating to the subject
matter of this Agreement and the Assumption Agreement shall be pursuant to the
indemnification provisions set forth in this Article XIII. In furtherance of the
foregoing, Purchaser hereby waives, to the fullest extent permitted under
applicable Law, any and all rights, claims and causes of action it may have
against Seller arising under or based upon any federal, state, provincial or
local Law (including, without limitation, any such rights, claims or causes of
action arising under or based upon common law or otherwise) or Environmental
Laws, including, but not limited to, the Resource Conservation and Recovery Act
and the Comprehensive Environmental Response, Compensation and Liability Act of
1980, to the extent any such claim allows for recovery beyond that provided for
in this Agreement.
(h) Except as set forth in this Agreement, Seller is not making
any representation, warranty, covenant or agreement with respect to the matters
contained herein. Anything herein to the contrary notwithstanding, no breach of
any representation, warranty, covenant or agreement contained herein shall give
rise to any right on the part of Purchaser, after the consummation of the
purchase and sale of the Business and the Purchased Assets contemplated hereby,
to rescind this Agreement or any of the transactions contemplated hereby.
(i) Seller shall have no liability under any provision of this
Agreement for any liabilities and damages, including costs for environmental
investigation or remediation, to the extent that such liabilities and damages
are attributable to actions taken or not taken by Purchaser or its Affiliates
after the Closing Date. Purchaser shall take commercially reasonable steps to
60
mitigate all such liabilities and damages upon and after becoming aware of any
event which could reasonably be expected to give rise to such liabilities and
damages. If Seller is required under this Article XIII to indemnify Purchaser
for any environmental investigation or remediation, Seller shall only be
required to indemnify Purchaser to the extent that investigation or remediation
of Hazardous Substances is required by a Governmental Authority pursuant to an
applicable Environmental Law. The remediation standard required under this
Agreement shall be the least stringent levels established under applicable
Environmental Law and acceptable to all Governmental Authorities with
jurisdiction that are applied to facilities operated consistent with the type of
operations taking place at the relevant Purchased Asset at the time of Closing.
Purchaser agrees that it shall accept engineering controls or institutional
controls, including, if appropriate, deed restrictions or limitations on the
drilling and use of ▇▇▇▇▇ or the use of the Purchased Assets to use consistent
with the type of operations taking place at the relevant Purchased Asset at the
time of Closing, as an acceptable means of such environmental remediation to the
extent such controls are (x) necessary to complete a remediation to the least
stringent standards, (y) permitted under applicable Environmental Law and (z)
acceptable to all Governmental Authorities with jurisdiction; provided that such
engineering or institutional controls do not result in any material loss, cost,
expense, loss of production or profits, loss of value, interference with
operations (whether existing or planned) of Purchaser or the Purchased Assets
(or any of them). If the costs of an investigation or remediation at any of the
Properties that is subject to an indemnity by Seller hereunder are increased due
to an act or omission (after Closing) by a Person other than Seller or one of
its Affiliates, Seller shall not be responsible for any such increase in costs
incurred.
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(j) Seller shall have no indemnification obligations with respect
to any Indemnified Environmental Losses to the extent resulting from any
voluntary investigation or remediation by Purchaser (or its consultants, agents,
representatives or other third parties acting with the permission or
authorization of Purchaser) at any of the Properties; provided, however, that
the limitation contained in this Section 13.02(j) shall not apply to Indemnified
Environmental Losses which (1) result from the discovery by Purchaser (or its
consultants, agents, representatives or other third parties acting with the
permission or authorization of Purchaser) of Hazardous Substances in the course
of activities conducted for the purpose of any renovation or expansion of a
Facility; (2) result from the discovery of Hazardous Substances in the course of
any commercially reasonable "Phase II" investigation conducted or authorized by
Purchaser (or its consultants, agents, representatives or other third parties
acting with the permission or authorization of Purchaser) in order to sell such
Properties; or (3) result from work conducted by Purchaser (or its consultants,
agents, representatives or other third parties acting with the permission or
authorization of Purchaser) in preparing a Baseline Environmental Assessment, as
defined in the Michigan Natural Resources and Environmental Protection Act
("BEA"), or participating in a similar codified state or federal prospective
purchaser liability protection program. "Commercially reasonable" for purposes
of this Section 13.02(j) shall be determined from the perspective of a
reasonably prudent person acting to determine whether a recognized environmental
concern (as defined by ASTM Standard E 1527-00) has resulted in a release of
Hazardous Substances from, in, on or under the Properties that requires
notification, investigation, or remediation pursuant to Environmental Law.
Further, Seller shall have no indemnification obligations with respect to any
Environmental Losses resulting from any disclosure, report or other
communication (whether oral or written) from the Purchaser (or its
62
agents) to any Governmental Authority or other third party ("Notification"),
unless Purchaser (or its consultants, agents, representatives or other third
parties acting with the permission or authorization of Purchaser) reasonably
determines such Notification was required by Environmental Law at the time it
was made or was made by Purchaser (or its consultants, agents, representatives
or other third parties acting with the permission or authorization of Purchaser)
in preparing a BEA or participating in similar codified state or federal
prospective purchaser liability protection program. In the event that Purchaser
(or its consultants, agents, representatives or other third parties acting with
the permission or authorization of Purchaser) determines that such Notification
is permitted under this Agreement, Purchaser will first notify Seller of its
intention to provide such Notification and allow Seller a reasonable opportunity
under the circumstances to determine if it concurs that Notification is required
under Environmental Law; provided that, failure of Purchaser to provide such
notice to Seller shall not relieve Seller of any indemnification obligation
under this Agreement except to the extent Seller is materially prejudiced by
Purchaser's failure to give notice to Seller.
13.03 Purchaser Indemnification. The Purchaser agrees to indemnify
and hold the Seller, its subsidiaries and Affiliates, and each of their
officers, directors, successors and assigns, harmless against any loss, damage
or expense (including reasonable attorneys' fees), which may arise out of or be
in respect of (a) any material breach or material violation of this Agreement by
the Purchaser, (b) any material inaccuracy or misrepresentation in or material
breach of any of the warranties, representations, covenants or agreements made
by the Purchaser in this Agreement (c) any material inaccuracy or
misrepresentation in any certificate, document, instrument or affidavit
furnished by the Purchaser in accordance with the provisions of this Agreement,
and (d) any and all Assumed Liabilities.
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13.04 Indemnification Notice. Promptly upon obtaining knowledge of
any claim, event, statements of facts or demand which has given rise to, or
could reasonably give rise to, a claim for indemnification hereunder (including
in the case of a claim pursuant to Section 13.01 any claim which is not payable
due to the limitations set forth in Section 13.02(b) hereof), any party seeking
indemnification under this Article XIII (an "Indemnified Party") shall give
written notice of such claim or demand ("Notice of Claim") to the party from
which indemnification is sought (an "Indemnifying Party"), setting forth the
amount of the claim. The Indemnified Party shall furnish to the Indemnifying
Party, in reasonable detail, such information as it may have with respect to
such indemnification claim (including copies of any summons, complaint or other
pleading which may have been served on it and any written claim, demand,
invoice, billing or other document evidencing or asserting the same). No failure
or delay by the Indemnified Party in the performance of the foregoing shall
reduce or otherwise affect the obligation of any Indemnifying Party to indemnify
and hold the Indemnified Party harmless, except to the extent that such failure
or delay shall have adversely affected the Indemnifying Party's ability to
defend against, settle or satisfy any liability, damage, loss, claim or demand
for which the Indemnified Party is entitled to indemnification hereunder.
13.05 Indemnification Procedure.
(a) If the claim or demand set forth in the Notice of Claim given
by the Indemnified Party pursuant to Section 13.04 of this Agreement is a claim
or demand asserted by a third party, the Indemnifying Party shall have fifteen
(15) days after the Date of the Notice of Claim to notify the Indemnified Party
in writing of its election to defend such third party claim or demand on behalf
of the Indemnified Party; provided, however, that the Indemnifying Party shall
not have a right to assume the defense of any such claim unless (i) it shall
provide the Indemnified Party with a written acknowledgement of its obligations
to indemnify the Indemnified
64
Party hereunder, and (ii) if the Indemnifying Party is a party to the
proceeding, the Indemnified Party has not determined in good faith that joint
representation would be inappropriate. If the Indemnifying Party elects to
defend such third party claim or demand, the Indemnified Party shall make
available to the Indemnifying Party and its agents and representatives all
records and other materials which are reasonably required in the defense of such
third party claim or demand and shall otherwise cooperate with, and assist the
Indemnifying Party in the defense of, such third party claim or demand, and so
long as the Indemnifying Party is defending such third party claim or demand in
good faith, the Indemnified Party shall not pay, settle or compromise such third
party claim or demand. If the Indemnifying Party elects to defend such third
party claim or demand, the Indemnified Party shall have the right to participate
in the defense of such third party claim or demand, at its own expense. If the
Indemnifying Party does not elect to defend such third party claim or demand, or
does not defend such third party claim in good faith, the Indemnified Party
shall have the right, in addition to any other right or remedy it may have
hereunder, at the Indemnifying Party's expense, to defend such third party claim
or demand; provided, however, that (i) the Indemnified Party shall not have any
obligation to participate in the defense of, or defend, any such third party
claim or demand; and (ii) the Indemnified Party's defense of or its
participation in the defense of any such third party claim or demand shall not
in any way diminish or lessen the obligations of the Indemnifying Party under
the agreements of indemnification set forth in this Article XIII. If the
Indemnifying Party assumes the defense of a proceeding, (x) no compromise or
settlement of such claims may be effected by the Indemnifying Party without the
Indemnified Party's consent unless (i) there is no finding or admission of any
violation of Law or any violation of the rights of any Person and no effect on
65
any other claims that may be made against the Indemnified Party and (ii) the
sole relief provided is monetary damages that are paid in full by the
Indemnifying Party, and (y) the Indemnified Party shall have no liability with
respect to any compromise or settlement of such claims effected without its
consent.
(b) Except for third party claims being defended in good faith,
the Indemnifying Party shall satisfy its obligations hereunder in cash within
thirty (30) days after the Date of Notice of Claim.
(c) The term "Date of the Notice of Claim" as used in this Article
XIII shall mean the date the Notice of Claim is deemed delivered pursuant to
Section 17.12 hereof.
(d) Claims involving environmental investigation or remediation
that are subject to indemnification pursuant to this Agreement ("Post-Closing
Environmental Work") shall be handled in accordance with the following
procedures as well as those described in Section 13.05(a) through (c).
(i) Seller must notify Purchaser within fifteen (15) days of
receipt of notice of Purchaser's claim for indemnification of such matter, that
(i) Seller intends to undertake said responsibility, or (ii) more information is
needed from Purchaser before Seller can reasonably determine that Purchaser's
claim is subject to indemnification pursuant to this Agreement. Purchaser shall
promptly respond to such requests for information and, within fifteen (15) days
of receipt of such information, Seller shall notify Purchaser as to whether it
shall undertake the Post-Closing Environmental Work. Prior to a determination by
Seller that it will undertake the claimed Post-Closing Environmental Work
pursuant to this Section 13.05(d), Purchaser shall take only those actions
necessary to comply with applicable Environmental Laws and the
66
requirements of Governmental Authorities or to address conditions that pose an
imminent and substantial endangerment to the environment or human health.
(ii) Upon having notified Purchaser that it intends to undertake
the Post-Closing Environmental Work, Seller shall have the right to control the
management of any Post-Closing Environmental Work, as provided herein. Seller
shall comply with all applicable Environmental Laws with respect to its
performance pursuant to this Section 13.05(d). At Purchaser's request, Seller
shall (i) promptly provide copies to Purchaser of all notices, correspondence,
draft reports, laboratory analyses, submissions, work plans, and final reports,
and (ii) give Purchaser a reasonable opportunity (at Purchaser's own expense) to
comment on any submissions Seller intends to deliver or submit to the
appropriate Governmental Authority prior to said submissions. Seller shall use
commercially reasonable efforts to address Purchaser's commercially reasonable
concerns regarding the time, place and manner in which such Post-Closing
Environmental Work is to be performed. Seller shall provide Purchaser with
advance written notice of any proposed material meeting with Governmental
Authorities (provided that failure to do so shall not result in a claim of
breach of this covenant to provide advance notice unless Purchaser has been
materially prejudiced), and Purchaser shall have the right, but not the
obligation, to attend and participate in all meetings between Seller and any
Governmental Authority regarding the Post-Closing Environmental Work; provided
Purchaser shall not contest or object before any Governmental Authority to those
Seller decisions regarding any Post-Closing Work for which Seller has provided
Purchaser with advance notice unless Purchaser first raises such objections with
Seller and provides Seller a reasonable opportunity to address Purchaser's
objections.
(iii) Seller shall undertake any work required herein in a manner
designed to minimize any interference with the reasonable use and enjoyment of
any Property, and to minimize
67
disruption to the conduct of operations at the Property. Purchaser shall not
take any actions that shall unreasonably interfere with Seller's performance of
the Post-Closing Environmental Work, or make the same significantly more
expensive; provided, however, that in no case shall Purchaser's operations in
the normal and ordinary course of conducting its business be considered an
unreasonable interference with Seller's performance of the Post-Closing
Environmental Work.
(iv) Purchaser hereby grants Seller reasonable access to any
Property as necessary to perform the Post-Closing Environmental Work. Purchaser
shall cooperate with Seller in the performance of the Post-Closing Environmental
Work, including, but not limited to, providing Seller with access to employees
and documents as necessary; provided that such cooperation does not require
Purchaser to incur any material out-of-pocket expenses. Seller shall provide
Purchaser with a minimum of five (5) Business Days' advance notice and a written
description in reasonable detail of the nature and scope of the work to be
conducted prior to commencing performance of any Post-Closing Environmental
Work. Any work in connection with the inside structures of any Properties, or on
other portions of the Properties used for ongoing operations, shall take place
only after having received Purchaser's prior approval as to time, manner and
place, which such approval shall not be unreasonably conditioned, delayed or
withheld.
(v) If Seller declines or otherwise fails within the timeframe
provided herein to undertake the performance of an investigation or remediation
hereunder, Purchaser shall have the right to control the management of any such
actions and shall comply with all applicable Environmental Laws with respect to
its performance pursuant to this Section 13.05. Purchaser shall notify Seller of
the material facts as then known to Purchaser prior to investigating or
remediating Hazardous Substances pursuant to this Section 13.05(d); provided,
however, that
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Purchaser's failure to provide such notice shall not relieve Seller of any
indemnification obligation hereunder except to the extent Seller is materially
prejudiced by Purchaser's failure to give notice. At Seller's request Purchaser
shall (x) provide Seller with advance written notice of any proposed material
meeting with Governmental Authorities, (y) provide copies to Seller of all
notices, correspondence, draft reports, submissions, work plans, and final
reports, and (z) give Seller a reasonable opportunity (at Seller's own expense)
to comment on any submissions Purchaser intends to deliver or submit to the
appropriate Governmental Authority prior to said submissions; provided that
failure of Purchaser to provide the advance written notice provided in (x) shall
not relieve Seller of any indemnification obligation under this Agreement except
to the extent Seller is materially prejudiced by Purchaser's failure to do so.
Purchaser shall respond to any commercially reasonable comments by or requests
from Seller for information regarding an indemnified claim within a reasonable
time.
(vi) If Seller undertakes performance of the Post-Closing
Environmental Work, Seller shall promptly repair at its sole expense any and all
damage caused in connection with the performance of the Post-Closing
Environmental Work, reasonable wear and tear excepted. If Seller undertakes
performance of the Post-Closing Environmental Work, Seller shall indemnify,
defend and hold harmless Purchaser against any and all claims, costs or
liabilities arising out of Seller's performance of the Post-Closing
Environmental Work.
13.06 Effect of Indemnity Payments. The parties agree to treat all
payments made under the indemnity provisions of Article XIII of this Agreement
as adjustments to the Purchase Price for Tax purposes and that such agreed
treatment shall govern for purposes hereof.
13.07 Other Agreements. Notwithstanding anything to the contrary set
forth herein, this Article XIII, and any limitations set forth herein, shall not
be applicable to the breach of any
69
representation, warranty or covenant set forth in the Supply Agreements, the
Transition Services Agreement, or the ▇▇▇▇▇ Bros. Agreement.
ARTICLE XIV
CONFIDENTIALITY
14.01 Confidentiality of Materials. The parties hereto agree with
respect to all technical, commercial and other information that is furnished or
disclosed by another party, including, but not limited to, information regarding
such party's (and its subsidiaries' and affiliates') organization, personnel,
business activities, customers, policies, assets, finances, costs, sales,
revenues, technology, rights, obligations, liabilities and strategies
("Information"), that, unless and until the transaction contemplated by this
Agreement shall have been consummated, (a) such Information is confidential
and/or proprietary to the furnishing/disclosing party and entitled to and shall
receive treatment as such by the receiving party; (b) the receiving party will
hold in confidence and not disclose nor use (except in respect of the
transactions contemplated by this Agreement or as may be required by Law) any
such Information, treating such Information with the same degree of care and
confidentiality as it accords its own confidential and proprietary Information;
provided, however, that the receiving party shall not have any restrictive
obligation with respect to any Information which (i) is contained in a printed
publication available to the general public, (ii) is or becomes publicly known
through no wrongful act or omission of the receiving party, or (iii) is known by
the receiving party without any proprietary restrictions by the
furnishing/disclosing party at the time of receipt of such Information; and (c)
all such Information furnished to either party by the other, unless otherwise
specified in writing, shall remain the property of the furnishing/disclosing
party and, in the event this Agreement is terminated, shall be returned to it,
together with any and all copies made
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thereof, upon request for such return by it (except for documents submitted to a
governmental agency with the consent of the furnishing/disclosing party or upon
subpoena and which cannot be retrieved with reasonable effort) and in the case
of (i) oral information furnished to any party by the other which shall have
been reduced to writing by the receiving party and (ii) all internal documents
of any party describing, analyzing or otherwise containing Information furnished
by the other party, all such writings and documents shall be destroyed, upon
request, in the event this Agreement is terminated, and each party shall confirm
in writing to the other compliance with any such request.
14.02 Remedy. Each party hereto acknowledges that the remedy at law
for any breach by either party of its obligations under Section 14.01 of this
Agreement is inadequate and that the other party shall be entitled to equitable
remedies, including an injunction, in the event of breach by any other party.
ARTICLE XV
EMPLOYEE MATTERS
15.01 Obligation to Offer Employment. Effective on the Closing Date,
subject to the terms and conditions set forth in the Transition Services
Agreement, Purchaser agrees to offer employment to all of the salaried and
non-union hourly personnel then employed by the Seller at any of the Facilities
or primarily in connection with the Business, other than those employees
designated by Seller in Section 15.01 of the Disclosure Schedule and any such
employees on leave of absence or layoff as of the Closing Date (the "Non-Union
Employees"), at a comparable job and at a comparable rate of pay (or in the case
of those employees with employment agreements, Purchaser shall assume such
agreements) and agrees to offer employment to all of Seller's unionized hourly
personnel currently employed at any of the Facilities (the "Hourly
71
Employees") subject to the terms and conditions of the collective bargaining
agreement applicable to such employees. Those Non-Union Employees and Hourly
Employees who accept employment positions offered by Purchaser and are hired by
Purchaser are referred to herein as the "Transferring Employees." Except for the
Assumed Liabilities or as is specifically set forth in this Article XV, the
Purchaser shall have no liability for any claim of any employee of the Seller
based on events occurring on or before the Closing Date.
15.02 Seller's Reliance. Purchaser understands and acknowledges that
Seller is relying on Purchaser's agreement to offer employment to all of the
Non-Union Employees and Hourly Employees as of the Closing Date. In that regard,
Purchaser retains sole responsibility for any obligations or liabilities to the
Transferring Employees under the Worker Adjustment and Retraining Notification
Act, Pub. Law 100-379, 102 Stat. 890 (1988) and other similar applicable Laws,
and agrees to hold Seller harmless from same and from any and all liabilities
relating to claims for severance benefits by any Transferring Employee arising
out of such Transferring Employee's termination by Purchaser after the Closing
Date. Purchaser's indemnification of Seller in this regard specifically
includes, but not by way of limitation, any claim by any such Transferring
Employee for back pay, front pay, benefits or compensatory or punitive damages,
any claim by any governmental unit for penalties regarding any issue of prior
notification (or any lack thereof) of any plant closing or mass layoff, as well
as Seller's defense costs, including attorneys' fees, in defending any such
claim.
15.03 Health Care. Seller shall be responsible for health care
continuation coverage of any former employees of the Business and their
qualified dependents who, as of the Closing, are receiving continuation of
health care coverage as required by the Consolidated Omnibus Reconciliation Act
of 1985 and any comparable Canadian Law (collectively, "COBRA") under
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affected welfare plans of Seller. After the Closing Date, Seller shall extend to
all employees of the Business the option of continuing health care coverage
under Seller's welfare plans if, and to the extent, required by COBRA. Purchaser
shall be responsible for providing health care continuation coverage as required
by COBRA to any Transferring Employees who are terminated by Purchaser after the
Closing Date.
15.04 Past Service and Vacations. Transferring Employees will
receive credit for Past Service (as hereinafter defined) in determining vacation
and severance entitlement under Purchaser's applicable vacation and severance
policies. "Past Service" means service (i) as an employee of Seller or Seller's
subsidiaries or parent corporation and (ii) as an employee of predecessor
companies prior to the acquisition of the Business by Seller, but only to the
extent that such service is continuous through the Closing Date. Purchaser
agrees to assume as of the Closing, Seller's liability for accrued vacation and
sick pay to the extent reflected on the Closing Balance Sheet.
15.05 Participation in Purchaser's Plans. Subject to the terms and
conditions set forth in the Transition Services Agreement, (a) Transferring
Employees in the United States shall be eligible for participation in any health
coverage, insurance, retirement and other benefit plans or arrangements
(including all "employee benefit plans," as defined by Section 3(3) of ERISA)
for which similarly situated employees of Purchaser are eligible, and (b)
Transferring Employees in other jurisdictions shall be eligible for
participation in such health coverage, insurance, retirement and other benefit
plans or arrangements as Purchaser may elect to establish for them. Purchaser
will give credit for Past Service for purposes of (i) determining eligibility
for participation in the above referenced plans or arrangements, (ii)
determining the duration and amount, if any, of short-term disability benefits
due, and (iii) vesting under any retirement plans
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covering the Transferring Employees. Transferring Employees will also receive
credit toward any deductible under Purchaser's medical plans for expenses
incurred under Seller's corresponding plans. Purchaser will waive any
pre-existing condition restrictions under Purchaser's welfare plans with respect
to Transferring Employees.
15.06 Welfare Plans. Purchaser assumes no obligations under Seller's
medical and other welfare plans. Claims for expenses incurred by employees of
the Business or their dependents prior to the Closing Date shall be covered
under Seller's welfare plans. The amount and type of benefits payable in any
case shall be determined in accordance with the terms of the applicable welfare
plan.
15.07 No Third Party Beneficiaries. Except as otherwise expressly
provided for in this Agreement, nothing in this Agreement, expressed or implied,
is intended or shall be construed to confer upon or give to any Person, other
than the parties hereto, any rights, remedies or other benefits under or by
reason of this Agreement.
15.08 401(k) Plan Rollovers. Purchaser agrees that Purchaser's
401(k) plan will accept rollovers, in accordance with applicable Law, in the
form of cash and any outstanding loan (provided that such loan is in good
standing as of the date of the rollover) from Seller's 401(k) plan on behalf of
each Transferring Employee who directs that a rollover be made.
ARTICLE XVI
CERTAIN OTHER UNDERSTANDINGS
16.01 Post Closing Access to Records and Records Retention.16.02
(a) Each party agrees to provide the other with access to all
relevant documents and other information which may be needed by such other party
for purposes of preparing Tax returns or responding to an audit by any
Governmental Authority or for any other reasonable
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purpose. Such access will be during normal business hours and not unreasonably
interfere with the business or operations of the other party.
(b) Without limiting Section 16.01(a) above, in order to
facilitate the resolution of any claims made by or against or incurred by Seller
after the Closing, upon reasonable notice and during normal business hours,
Purchaser shall, after the Closing: (i) afford the officers, employees and
authorized agents and representatives of the Seller reasonable access, during
normal business hours, to the offices, properties, books and records of
Purchaser with respect to the Business, (ii) furnish to the officers, employees
and authorized agents and representatives of Seller such additional financial
and other information regarding the Business as it existed prior to the Closing
Date as Seller may from time to time reasonably request and (iii) at Seller's
expense, make available to Seller, the employees of Purchaser whose assistance,
testimony or presence of such persons as witnesses in hearings or trials for
such purposes; provided, however, that such investigation shall not unreasonably
interfere with the business or operations of Purchaser and Purchaser shall not
be required to furnish any confidential materials to Seller.
(c) The Purchaser agrees for a period extending six (6) years
after the Closing Date not to destroy or otherwise dispose of any records
relating to the period prior to its acquisition of the Purchased Assets.
16.03 Consents Not Obtained at Closing. The Seller agrees to attempt
diligently to obtain any necessary consents which may be required to effect the
assignment to the Purchaser of the contract obligations transferred to the
Purchaser under this Agreement and the Purchaser will diligently cooperate with
the Seller in obtaining the same, and will take such steps as reasonably
requested by the Seller with respect thereto. In such cases where such consents
have not been obtained by the Closing Date and the Purchaser determines to waive
the closing
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condition set forth in Section 10.05 with respect thereto, this Agreement, to
the extent permitted by Law, shall constitute an equitable assignment by the
Seller to the Purchaser of all of the Sellers rights, benefits, title and
interest in and to the assigned contracts and commitments, and the Purchaser
shall be deemed to be the Seller's agent for the purpose of completing,
fulfilling and discharging all of the Seller's rights and liabilities arising
after the Closing Date under such assigned contracts and commitments, and the
Seller shall take all necessary steps and actions to provide the Purchaser with
the benefits of such contracts and commitments.
16.04 Bulk Sale Waiver and Indemnity. The parties hereto acknowledge
and agree that no filings with respect to any bulk sales or similar Laws have
been made, nor are they intended to be made, nor are such filings a condition
precedent to the Closing.
16.05 Removal of Trademarks, Etc. As promptly as practicable after
the Closing, and in no event later than sixty (60) days after the Closing Date,
Purchaser agrees not to use and to delete, remove or otherwise obliterate from
the Purchased Assets all trade names and trademarks of Seller, including, but
not limited to, references to "Jefferson Smurfit" and "Smurfit-Stone" and
derivatives thereof, including all logos.
16.06 Remittance of Collections. As set forth in, and subject to the
terms and conditions of, the Transition Services Agreement, after the Closing,
Seller shall remit to Purchaser all receivables of the Business that Seller
collects and that are not Excluded Receivables, and Purchaser shall remit to
Seller all Excluded Receivables that Purchaser collects.
ARTICLE XVII
MISCELLANEOUS
17.01 Cost and Expenses. Except as otherwise provided herein,
Purchaser will pay its own costs and expenses (including attorneys' fees,
accountants' fees and other professional fees
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and expenses) in connection with the negotiation, preparation, execution and
delivery of this Agreement and the consummation of the purchase of the Purchased
Assets and the other transactions contemplated by this Agreement (except as
otherwise specifically provided for herein); and the Seller will pay its own
costs and expenses (including attorneys' fees, accountants' fees and other
professional fees and expenses) in connection with the negotiation, preparation,
execution and delivery of this Agreement and the consummation of the sale of the
Purchased Assets and the other transactions contemplated by this Agreement
(except as otherwise specifically provided for herein).
17.02 Entire Agreement. The Disclosure Schedule and the Exhibits
referenced in this Agreement are incorporated into this Agreement and together
contain the entire agreement between the parties hereto with respect to the
transactions contemplated hereunder, and supersede all negotiations,
representations, warranties, commitments, offers, contracts and writings prior
to the date hereof. No waiver and no modification or amendment of any provision
of this Agreement shall be effective unless specifically made in writing and
duly signed by the party to be bound thereby.
17.03 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which,
together, shall constitute one and the same instrument.
17.04 Assignment, Successors and Assigns. The respective rights and
obligations of the parties hereto shall not be assignable without the prior
written consent of the other parties; provided, however, that the Purchaser may
assign all or part of its rights under this Agreement and delegate all or part
of its obligations under this Agreement to one or more corporations who are
Affiliates, in which event all the rights and powers of the Purchaser and
remedies available to
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it under this Agreement shall extend to and be enforceable by each such
Affiliate. Any such assignment and delegation shall not release the Purchaser
from its obligations under this Agreement, and further the Purchaser guarantees
to the Seller the performance by each such Affiliate of its obligations under
this Agreement. In the event of any such assignment and delegation the term
"Purchaser" as used in this Agreement shall be deemed to refer to each such
Affiliate of the Purchaser where reference is made to actions taken or to be
taken with respect to the acquisition of the business or Purchased Assets, and
shall be deemed to include both the Purchaser and each such Affiliate where
appropriate. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their permitted successors and assigns.
17.05 Savings Clause. If any provision hereof shall be held invalid
or unenforceable by any court of competent jurisdiction or as a result of future
legislative action, such holding or action shall be strictly construed and shall
not affect the validity or effect of any other provision hereof.
17.06 Headings. The captions of the various Articles and Sections of
this Agreement have been inserted only for convenience of reference and shall
not be deemed to modify, explain, enlarge or restrict any of the provisions of
this Agreement.
17.07 Risk of Loss. Risk of loss, damage or destruction to the
Purchased Assets shall be upon the Seller until the Closing, and shall
thereafter be upon the Purchaser.
17.08 Governing Law. The validity, interpretation and effect of this
Agreement shall be governed exclusively by the laws of the State of North
Carolina, excluding the "conflict of laws" rules thereof.
17.09 Press Releases. Pending Closing, all notices to third parties
and all other publicity relating to the transactions contemplated by this
Agreement shall be jointly planned, coordinated,
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and agreed to by the Purchaser and the Seller, except to the extent disclosures
are required by Law.
17.10 U.S. Dollars. All amounts expressed in this Agreement and all
payments required by this Agreement are in United States dollars.
17.11 Survival. All representations and warranties made by any party
in this Agreement shall be deemed made for the purpose of inducing the other
party to enter into this Agreement and shall survive the Closing, subject to
Section 13.02(a) hereof.
17.12 Notices.
(a) all notices, requests, demand and other communications under
this Agreement shall be in writing and delivered in person, or sent by facsimile
or sent by certified mail, postage prepaid, and properly addressed as follows:
To The Seller:
Jefferson Smurfit Corporation (U.S.)
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: F. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
With Copy To:
Jefferson Smurfit Corporation (U.S.)
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: E. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
To The Purchaser:
Caraustar Industries, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: H. ▇▇▇ ▇▇▇▇▇▇, III
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With Copy To:
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: S. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(b) Any party may from time to time change its address for the
purpose of notices to that party by a similar notice specifying a new address,
but no such change shall be deemed to have been given until it is actually
received by the party sought to be charged with its contents.
(c) All notices and other communications required or permitted
under this Agreement which are addressed as provided in this Section 17.12 if
delivered personally or by air courier, shall be effective upon delivery; if
sent by facsimile, shall be effective upon receipt of proof of transmission and
if delivered by mail, shall be effective on the third Business Day after deposit
in the United States mail, postage prepaid.
[Signatures on following page.]
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IN WITNESS WHEREOF, the parties hereto have executed this Asset
Purchase Agreement the day and year first above written.
JEFFERSON SMURFIT CORPORATION (U.S.)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Title: Vice President
----------------------------------------
CARAUSTAR INDUSTRIES, INC.
By: /s/ H. ▇▇▇ ▇▇▇▇▇▇, III
----------------------------------------
Name: H. ▇▇▇ ▇▇▇▇▇▇, III
----------------------------------------
Title: Vice President Planning/Development and
----------------------------------------
Chief Financial Officer
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EXHIBITS
EXHIBIT DESCRIPTION SECTION REFERENCE
------- ----------- -----------------
A List of Facilities Recital A
B [Reserved]
C [Reserved]
D-1 Core Supply Agreement 4.02(e)
D-2 Uncoated Recycled Boxboard Supply Agreement 4.02(e)
D-3 Recovered Fiber Supply Agreement 4.02(e)
D-4 Side Trim Supply Agreement 4.02(e)
D-5 Supply and Public Warehouse Agreements (Tyco) 4.02(e)
E Transition Services Agreement 4.02(f)
F ▇▇▇▇▇ Bros. Agreement 4.02(g)
G Assumption Agreement 4.03(g)
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