Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") dated as of February
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19, 1998, is by and among KFI Holding Corporation, a Delaware corporation
("Holding"); AGI Acquisition Corporation, an Illinois corporation
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("Acquisition"); Klearfold, Inc., a Pennsylvania corporation ("Klearfold"); AGI
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Incorporated, an Illinois corporation (the "Company"); each of the holders of
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common stock and/or stock appreciation rights of the Company named on the
signature pages hereto as a "Principal Stockholder" (each, a "Principal
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Stockholder," and collectively, the "Principal Stockholders"); Heritage Fund I
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Investment Corporation, a Delaware corporation ("Heritage"); ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇;
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H. ▇▇▇▇▇ ▇▇▇▇▇▇; ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, not individually but as trustee under an
Indenture of Trust of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ dated June 4, 1996 (the "▇▇▇▇▇▇ Family
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Trust"); and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, not individually but as trustee under an
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Irrevocable Deed of Trust dated August 12, 1992, f/b/o H. ▇▇▇▇▇ ▇▇▇▇▇▇ (the
"▇▇▇▇▇ Trust") (collectively, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, H. ▇▇▇▇▇ ▇▇▇▇▇▇, the ▇▇▇▇▇▇
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Family Trust and the ▇▇▇▇▇ Trust are sometimes referred to herein as the "▇▇▇▇▇▇
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Stockholders").
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The parties desire that Acquisition be merged with and into the Company,
subject to the terms and conditions set forth in this Agreement.
Capitalized terms used and not otherwise defined upon first usage herein
are defined in Section 11.1 of this Agreement.
Accordingly, the parties hereby agree as follows:
1. THE MERGER.
1.1. CLOSING AND EFFECTIVE DATE OF MERGER. Subject to the provisions of
this Agreement, a closing (the "Closing") shall be held at the offices of ▇▇▇▇▇▇
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& ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ within five business
days after the satisfaction of the conditions precedent set forth in Sections 6
and 7, or on such other date before any termination of this Agreement pursuant
to Section 10 hereof, and/or at such other place, as may be agreed to by the
parties (the date on which the Closing actually occurs, the "Closing Date"). On
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the Closing Date, Acquisition and the Company shall execute Articles of Merger
(the "Articles of Merger") substantially in the form of the attached Exhibit 1.1
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and file them with the Office of the Secretary of State of the State of
Illinois, in order to cause the merger of Acquisition with and into the Company
(the "Merger") in accordance with the laws of the State of Illinois. The Merger
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shall be effective as of the time specified in the Articles of Merger (the
"Effective Time"). For all
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purposes, all of the document deliveries and other actions to occur at the
Closing shall be irrefutably presumed to have occurred at the same time,
immediately before the Effective Time.
1.2. EFFECT OF MERGER. At the Effective Time, automatically and without
further action:
(a) Acquisition shall be merged with and into the Company and the separate
existence of Acquisition shall cease.
(b) The Company shall continue as the Surviving Corporation, organized
under the laws of the State of Illinois, the authorized capital stock of which
shall be as set forth in the Articles of Incorporation of the Company as in
effect immediately before the Effective Time, as amended by the Articles of
Merger.
(c) The Company's Articles of Incorporation, as in effect immediately
before the Effective Time, shall be amended by the Articles of Merger (among
other things, to reduce the authorized number of shares of Company Common Stock
from 1,500,000 shares to 100 shares), and as so amended shall read in their
entirety as set forth in the attached Exhibit 1.2(c) and shall be the Articles
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of Incorporation of the Surviving Corporation; and the Company's by-laws, as in
effect immediately before the Effective Time, shall be amended and restated in
their entirety and as so amended and restated shall read in their entirety as
set forth in the attached Exhibit 1.2(c)(i) and shall be the by-laws of the
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Surviving Corporation.
(d) Each share of Company Common Stock that was issued and outstanding
immediately before the Effective Time, other than any Dissenting Shares (as
defined in Section 1.2(f) below) and other than any shares held by Holding
(including shares, if any, acquired by Holding pursuant to the Investment
Agreement referred to in Section 1.3 hereof) or by the Company (subject to such
exclusions, all such shares, the "Converted Shares"), shall be converted into
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and become the right to receive (subject to legal requirements with respect to
withholding for taxes) from the Surviving Corporation consideration in an amount
determined as follows:
(i) The aggregate consideration ("Aggregate Merger Consideration")
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payable by the Surviving Corporation in respect of the Converted Shares,
the stock appreciation rights identified on Exhibit 1.2(d) hereto (the
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"SARs") outstanding immediately prior to the Effective Time, and the
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▇▇▇▇▇▇▇▇ Option, shall equal the sum of the Aggregate Share Consideration
and the Aggregate Rightholder Consideration, as determined herein.
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(ii) The "Aggregate Share Consideration" shall be the product of (A)
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the sum (such amount also being referred to as the "Share Equity Value") of
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(I) $69,170,000, minus (II) the aggregate principal amount of the Dividend
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Notes (as defined in Section 3.7(d) below) outstanding immediately before
the Effective Time, minus (III) the amount of compensation payable to ▇▇▇▇▇
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& Company Incorporated in connection with the transactions contemplated
hereby and by the Investment Agreement, minus (IV) the Aggregate
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Rightholder Consideration, multiplied by (B) a fraction, the numerator of
which is the sum of the aggregate number of Converted Shares outstanding
immediately prior to the Effective Time, and the denominator of which is
the sum of the aggregate number of shares of Company Common Stock
outstanding immediately prior to the Effective Time.
(iii) The "Aggregate Rightholder Consideration" shall mean the
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difference of (A) the product of (I) the quotient of (1) the Rightholder
Equity Value (as defined below) divided by (2) the number of SARs, the
number of shares of Company Common Stock issuable upon exercise of the
▇▇▇▇▇▇▇▇ Option, and the number of shares of Company Common Stock
outstanding immediately prior to the Effective Time, such sum being
referred to herein as the "Fully Diluted Number of Shares", times (II) the
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sum of the number of SARs outstanding immediately prior to the Effective
Time and the number of shares of Company Common Stock issuable upon
exercise of the ▇▇▇▇▇▇▇▇ Option, minus (B) $3,084,936 (being the sum of the
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aggregate "Base Value" of the SARs as set forth on Exhibit 1.2(d) and the
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aggregate exercise price of the ▇▇▇▇▇▇▇▇ Option, and such sum being
referred to hereinafter as the "Aggregate Base Value"). The "Rightholder
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Equity Value" shall be the sum of (x) $69,170,000 plus (y) the Aggregate
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Base Value minus (z) the amount of compensation payable to ▇▇▇▇▇ & Company
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Incorporated in connection with the transactions contemplated hereby and by
the Investment Agreement.
(iv) Each Converted Share shall be converted into and exchanged
solely for the right to receive directly or in escrow, as set forth in
Section 1.3 below, the quotient of the Aggregate Share Consideration
divided by the sum of the number of Converted Shares outstanding
immediately prior to the Effective Time (the "Per Share Consideration").
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(v) Each SAR shall entitle the holder thereof to an amount equal to
the difference of (A) the quotient of (I) the Aggregate Rightholder
Consideration plus the Aggregate Base Value, divided by (II) the number of
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SARs outstanding immediately prior to the Effective Time, minus (B) the
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"Base Value" of such SAR.
(vi) The ▇▇▇▇▇▇▇▇ Option shall be converted into and exchanged solely
for the right to receive directly or in escrow, as set forth in Section 1.3
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below, an amount (the "Option Consideration") equal to the difference of
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(A) the product of (I) 25,000 times (II) the quotient of (1) the Aggregate
Rightholder Consideration plus the Aggregate Base Value, divided by (2) the
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Fully Diluted Number of Shares minus (B) $187,500 (being the aggregate
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exercise price of the ▇▇▇▇▇▇▇▇ Option).
(e) Each share of Company Common Stock that, immediately before the
Effective Time, was held by Holding or the Company shall be canceled and no
consideration shall be payable in respect thereof.
(f) Each share of Company Common Stock that, immediately before the
Effective Time, was held by any Person (such persons, collectively, the
"Dissenting Stockholders", and each individually a "Dissenting Stockholder") who
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has duly exercised the rights afforded to dissenting stockholders pursuant to
Sections 11.65 and 11.70 of the Illinois Business Corporation Act (such shares,
collectively, "Dissenting Shares") shall be converted into the right to receive
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the fair value of such shares as determined in accordance with the provisions of
such sections.
(g) Each share of the common stock, $0.01 par value per share, of
Acquisition that was issued and outstanding immediately before the Effective
Time shall be converted into and become one share of the common stock, $0.01 par
value, of the Surviving Corporation.
(h) From and after the Effective Time, the respective persons who were the
officers and directors of the Company immediately before the Effective Time
shall hold the same offices as officers and directors, respectively, of the
Surviving Corporation, each to hold such office(s), subject to the Articles of
Incorporation and the by-laws of the Surviving Corporation and to the
Stockholder Agreement, until the next annual meeting of directors or
stockholders, as the case may be, of the Surviving Corporation, and until his or
her successor is duly elected or appointed and qualified, or until his or her
earlier resignation, removal, incapacity, or death.
1.3. PAYMENT OF AGGREGATE MERGER CONSIDERATION. The Aggregate Merger
Consideration shall be payable as set forth below:
(a) At the Effective Time, Holding shall make available in cash, and each
Participating Stockholder listed on Exhibit 1.3(a) hereto (the Participating
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Stockholders so listed being referred to collectively as the "Escrowed
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Stockholders") shall be entitled to receive, upon surrender to the Surviving
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Company or its representatives of any Certificate of Certificates (as defined
below) evidencing such Participating Stockholder's Converted Shares for
cancellation in accordance with Section 2.1 hereof, an amount in cash equal to
the product of (i) the Per Share Consideration minus $3.3975 (the "Holdback
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Amount", being the
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Maximum AGI Indemnity Amount divided by the Fully Diluted Number of Shares)
times (ii) the number of Converted Shares represented by the Certificates so
surrendered. Further, at the Effective Time, Holding shall place into escrow
with the Escrow Agent, pursuant to the terms of the Escrow Agreement (each as
defined in Section 1.4(d) below), an amount equal to the product of the Holdback
Amount times the number of Converted Shares owned by each of the Escrowed
Stockholders immediately prior to the Effective Time, which amount otherwise
would be payable to the Escrowed Stockholders (the "Share Escrow Amount" and,
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collectively with the Aggregate Option Holdback Amount, as defined in Section
1.3(d) hereof, the "Escrow Amount"). The Escrow Amount shall be held in escrow
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by the Escrow Agent and distributed to the Escrowed Stockholders pursuant to and
in accordance with the terms of the Escrow Agreement, for the purpose of
providing payment with respect to claims for indemnification made against the
Escrowed Stockholders pursuant to Article 8 hereof. Any amounts remaining in
escrow under the Escrow Agreement one year after the Closing shall be
distributed to the Escrowed Stockholders, in accordance with the terms of the
Escrow Agreement, pro rata in accordance with the number of Converted Shares
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held by each Escrowed Stockholder immediately prior to the Effective Time,
except that if there is outstanding any claim pursuant to Article 8 for
indemnity from the Escrowed Stockholders, then Holding shall have the right to
require the Escrow Agent to retain an amount which equals the amount of such
claim and if, upon final resolution of such claim, a portion shall be
distributed to the Escrowed Stockholders, such portion shall be distributed in
accordance with the terms of the Escrow Agreement, pro rata in accordance with
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the number of Converted Shares held by each Escrowed Stockholder immediately
prior to the Effective Time. In the event of any inconsistency between the
description contained in this Section 1.3(a) regarding the distribution of the
Escrow Amount and the terms of the Escrow Agreement, the terms of the Escrow
Agreement shall prevail.
(b) At the Effective Time, Holding shall make available, and each
Participating Stockholder listed on Exhibit 1.3(b) hereto (the Participating
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Stockholders so listed being referred to collectively as the "Non-Escrowed
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Stockholders") shall be entitled to receive, upon surrender to the Surviving
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Company or its representatives of any Certificates for cancellation in
accordance with Section 2.1 hereof, an amount equal to the product of (i) the
Per Share Consideration times (ii) the number of shares of Converted Stock
represented by the Certificates so surrendered, which amounts shall be payable
in cash or by set-off against any amounts outstanding under notes issued by such
Non-Escrowed Stockholder and payable to Holding pursuant to the Investment
Agreement.
(c) At the Effective Time, Holding shall pay to each holder of SARs
(collectively, the "SAR Holders") an amount, with respect to each SAR held by
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such SAR Holder, the amount determined in accordance with Section 1.2(d)(i)(E)
hereof, such amounts to be paid by the Company by set-off against any amounts
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outstanding under notes issued by such SAR Holder and payable to Holding
pursuant to the Investment Agreement.
(d) At the Effective Time, Holding shall make available, and the holder of
the ▇▇▇▇▇▇▇▇ Option shall be entitled to receive, upon surrender to the
Surviving Corporation or its representative of the ▇▇▇▇▇▇▇▇ Option for
cancellation in accordance with Section 2.1 hereof, an amount in cash equal to
the Option Consideration minus the product (the "Aggregate Option Holdback
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Amount") of (i) the Holdback Amount times (ii) 25,000. Further, at the Effective
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Time, Holding shall place into escrow with the Escrow Agent, pursuant to the
terms of the Escrow Agreement, an amount equal to the Aggregate Option Holdback
Amount.
1.4. TRANSACTIONS AT OR BEFORE CLOSING. Concurrently with the execution and
delivery of this Agreement, Holding, the stockholders of Holding listed on
Schedule 1 hereto (the "Holding Stockholders"), certain of the Stockholders
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listed on Schedule 2 hereto (the "Continuing AGI Stockholders") and certain
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executive employees of the Company listed on Schedule 3 hereto (the "Other
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Investors") are executing and delivering an Investment Agreement (the
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"Investment Agreement") dated as of the date hereof. At or before the Closing,
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in addition to executing and delivering the other agreements and taking the
other actions contemplated by this Agreement:
(a) Subject to the terms and conditions of the Investment Agreement,
Holding, the Holding Stockholders, the Continuing AGI Stockholders and the Other
Investors shall consummate the transactions contemplated by the Investment
Agreement, pursuant to which, among other things, (i) the Holding Stockholders,
the Continuing AGI Stockholders and the Other Investors will acquire certain
securities of Holding, and (ii) Holding will acquire certain shares of Company
Common Stock from the Continuing AGI Stockholders, all as provided therein.
(b) Each of Holding, the Holding Stockholders, the Continuing AGI
Stockholders and the Other Investors shall execute and deliver a Stockholder
Agreement in the form of the attached Exhibit 1.4(b).
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(c) Holding, on the one hand, and each of ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇, on the other hand,
shall execute and deliver an Employment, Non-Competition and Stock Repurchase
Agreement substantially in the form of the attached Exhibit 1.4(c), with such
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modifications thereto as Holding and such employee shall mutually agree and
Holding, on the one hand, and each of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ on the other hand, shall execute and deliver an Employment, Non-
Competition and Stock Repurchase Agreement in the form mutually agreed between
Holding and such employee.
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(d) The Company, Holding, the Escrow Agent referred to therein (the
"Escrow Agent"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, who, in consultation with ▇▇▇▇▇▇▇ ▇▇▇▇▇,
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shall serve as the Escrowed Stockholder Representative (the "Escrowed
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Stockholder Representative"), shall execute and deliver an Escrow Agreement (the
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"Escrow Agreement") in the form of the attached Exhibit 1.4(d), pursuant to
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which the Escrow Amount shall be delivered to the Escrow Agent in accordance
with and subject to the terms and provisions thereof, and each of the Escrowed
Stockholders shall have appointed ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as his attorney-in-fact to
act as the Escrowed Stockholder Representative, in consultation with ▇▇▇▇▇▇▇
▇▇▇▇▇, in connection with the transactions referred to in the Escrow Agreement
and herein .
(e) Holding shall have made available, and deposited in escrow, the cash
required to be made available or deposited pursuant to Section 1.3 hereof.
(f) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall have consented irrevocably in writing to the
treatment of the ▇▇▇▇▇▇▇▇ Option pursuant to Sections 1.2, 1.3 and 2.1 hereof.
(g) The Company shall deliver to Holding the original minute books and
other corporate records of the Company.
(h) Each of the parties shall execute (if applicable) and deliver such
other customary closing certificates and other documents as any other party
shall have reasonably requested in writing not later than five business days
before the Closing.
2. PROCEDURES, ETC.
2.1. PROCEDURES.
(a) As of the Effective Time, each stock certificate representing one or
more shares of Company Common Stock issued and outstanding or held in the
Company's treasury immediately before the Effective Time (a "Certificate"),
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shall cease to represent such Company Common Stock and shall represent only (i)
in the case of Dissenting Shares, the rights of the holder thereof under
Sections 11.65 and 11.70 of the Illinois Business Corporation Act, or (ii) in
all other cases, subject to the provisions of Section 1.2(d)(ii) hereof, the
right to receive the Per Share Consideration into which such shares have been
converted pursuant to Section 1.2(d)(i) hereof. At the Effective Time, the
▇▇▇▇▇▇▇▇ Option shall cease to represent a right to purchase Company Common
Stock and shall represent only the right to receive the Option Consideration.
(b) As promptly as practicable after the Effective Time, the Surviving
Corporation or its agent shall send transmittal materials to each Person (other
than Holding or the Company) who, immediately before the Effective Time, was the
record holder of Company Common Stock, for use in exchanging the Certificates
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formerly representing Company Common Stock for the Per Share Consideration to
which such holder is entitled pursuant to Section 1.2(d)(i) hereof. Upon
surrender of a Certificate to the Surviving Corporation or such transfer agent,
together with a duly executed letter of transmittal and any other required
documents, the record holder of such Certificate shall be entitled, subject to
the provisions of Section 1.2(d)(ii) hereof, to receive in exchange therefor in
cash, escrow, or by set-off of against any amount outstanding under notes issued
by such holder and payable to Holding pursuant to the Investment Agreement, the
consideration to which such holder is entitled in respect of the Company Common
Stock formerly represented by such Certificate pursuant to and in accordance
with Section 1.3 hereof, and such Certificate shall be canceled; provided, that
in the case of any Certificate representing Dissenting Shares, such Certificate
shall be returned to the presenting Person.
(c) After the Effective Time, no transfers of shares of Company Common
Stock shall be recorded in the stock transfer books of the Surviving Corporation
or its transfer agent. If, after the Effective Time, there is presented to the
Surviving Corporation or its transfer agent for transfer:
(i) any Certificate formerly representing shares of Company Common Stock
(other than Dissenting Shares or shares that, immediately before the
Effective Time, were held by Holding or the Company), such Certificate
shall be canceled and exchanged for the consideration payable in respect
thereof pursuant to Section 1.2(d)(i)(D) hereof and in accordance with
Section 1.3 hereof;
(ii) any Certificate representing Dissenting Shares, such Certificate
shall be returned to the presenting Person; and
(iii) any Certificate formerly representing shares of Company Common Stock
held by Holding or the Company, such Certificate shall be canceled and no
consideration shall be payable or deliverable in respect thereof.
(d) After the Effective Time, holders of shares of Company Common Stock
shall cease to be, and shall have no rights as, stockholders of the Surviving
Corporation, other than (i) in the case of Dissenting Shares, the rights of the
holders thereof under Sections 11.65 and 11.70 of the Illinois Business
Corporation Act, or (ii) in all other cases, subject to the provisions of
Section 1.2(d)(ii) hereof, the rights of the holders thereof to receive the
consideration to which the holders thereof are entitled pursuant to and in
accordance with Section 1.3 hereof.
(e) Neither the Surviving Corporation nor any other Person shall be liable
to any holder or former holder of shares of Company Common Stock for any such
shares or any dividends, distributions, or other payments or consideration in
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respect thereof that were properly delivered to a public official pursuant to
applicable abandoned property, escheat, or similar laws.
(f) In the event that any Certificate has been lost, stolen, or destroyed,
Holding shall issue in exchange for such lost, stolen or destroyed Certificate,
promptly following Holding's receipt of an affidavit as to that fact in form and
substance acceptable to Holding made by the registered owner of the shares
represented by such Certificate, as shown on the Company's stock records
immediately before the Effective Time, the consideration to which such
registered owner would be entitled to receive pursuant to and in accordance with
Section 1.3 hereof; provided, however, that Holding may, in its reasonable
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discretion and as a condition precedent to the delivery of such consideration
require such registered owner of such lost, stolen or destroyed Certificate(s)
to execute a customary indemnification agreement against any claim that may be
made against Holding or the Surviving Corporation with respect to the
Certificate(s) alleged to have been lost, stolen or destroyed, and, to the
extent reasonably required by Holding, deliver a bond in an appropriate amount
as security therefor.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL
STOCKHOLDERS.
The Company and, solely as to any representations and warranties which
expressly relate to facts regarding any such individual or trust, each of the
Principal Stockholders, hereby severally and not jointly represent and warrant
to each of the Holding Stockholders, Holding and Acquisition, and, if the
transactions hereby are consummated, the Surviving Corporation, both as of the
date hereof and as of the Closing Date (immediately prior to the Closings
hereunder and under the Investment Agreement), as follows, subject to such
exceptions as are specifically contemplated by this Agreement or as are set
forth in (i) the attached Disclosure Schedule, or (ii) except as provided in the
final sentence of Section 5.15 hereof, the disclosure supplements contemplated
by that section, and provided that, notwithstanding the fact that the
representations and warranties in this Section 3 are made by the Company and, to
the limited extent applicable, the Principal Stockholders, the Company and the
Participating Stockholders shall indemnify against any and all Damages related
to or arising, directly or indirectly, out of or in connection with any breaches
of such representations and warranties to the extent, and subject to the
limitations, set forth in Section 8 hereof. Notwithstanding any other provision
of this Agreement (except the final sentence of Section 5.15), the Disclosure
Schedule, or any such disclosure supplement, each exception set forth in the
Disclosure Schedule or any such disclosure supplement shall be deemed to qualify
each representation and warranty set forth in this Agreement (x) that is
specifically identified (by cross-reference or otherwise) in the Disclosure
Schedule or such disclosure supplement as being qualified by such exception, or
(y) with respect to which the relevance of such exception is apparent on the
face of the
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disclosure of such exception set forth in the Disclosure Schedule or such
disclosure supplement, provided, in either case, that the relevant facts are set
forth in reasonable detail in the Disclosure Schedule or such disclosure
supplement.
3.1. INCORPORATION; AUTHORITY. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Illinois
and has all requisite corporate power and authority to own or lease and operate
its properties and to carry on its business as now conducted. The Company has
delivered to Holding or its counsel complete and correct copies of the Company's
Articles of Incorporation and by-laws, in each case with all amendments thereto.
3.2. AUTHORIZATION AND ENFORCEABILITY. Each of the Company (subject only to
the approval of the Merger by the Company's stockholders as contemplated hereby)
and the Principal Stockholders has all requisite corporate or individual power,
as the case may be, power and full legal right and authority (including, in the
case of the Company, due approval of its Board of Directors) to enter into this
Agreement and all of the Other Agreements to which it or he is or is to be a
party as contemplated hereby, to perform all of its or his agreements and
obligations hereunder and thereunder, each in accordance with its respective
terms, and to consummate the transactions contemplated hereby and thereby. Each
of this Agreement and such Other Agreements to which the Company and/or any of
the Principal Stockholders is or is to be a party has been, or upon execution
and delivery as contemplated hereby, will be, duly executed and delivered by the
Company and/or such Principal Stockholder, as the case may be, and constitutes
or will constitute the legal, valid, and binding obligation of it and/or him, as
the case may be, enforceable against it and/or him, as the case may be, in
accordance with its respective terms, except to the extent that (i) enforcement
may be limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium, or similar laws now or hereafter in effect relating to or limiting
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court or other similar Person before which
any proceeding therefor may be brought.
3.3. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 1,500,000
shares of Company Common Stock, 909,714 shares of which are issued and
outstanding on the date hereof, and will be issued and outstanding as of the
Closing Date. All of the outstanding shares of the capital stock of the Company
are duly authorized, validly issued, fully paid, and non-assessable, and are
owned of record as set forth in Section 3.3 of the Disclosure Schedule
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(b) All of the outstanding shares of Company Common Stock owned by the
Participating Stockholders are owned free and clear of all Liens, other than (i)
any restrictions on transfer arising under applicable securities laws solely by
reason of the fact that such shares were issued pursuant to exemptions from
registration under such securities laws, (ii) the rights of ▇▇▇▇ ▇▇▇▇▇▇▇ to
purchase up to ____ shares of Company Common Stock owned by ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Maranov Option"), and (iii) restrictions imposed pursuant to that certain
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Amended and Restated Shareholders Agreement, made as of July 1, 1993, by and
among the Company and the signatories thereto (the "Existing Shareholders
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Agreement"), which restrictions shall be terminated immediately before the
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Effective Time.
(c) Other than pursuant to the Existing Shareholders Agreement, the
Maranov Option and the ▇▇▇▇▇▇▇▇ Option, there is no agreement or other
obligation on the part of the Company or any of the Participating Stockholders
to purchase or sell any shares of capital stock or other securities of the
Company. Other than as set forth in Section 3.3 of the Disclosure Schedule,
there are no options, warrants, or other rights to subscribe for or purchase
from the Company or any of the Principal Stockholders any shares of capital
stock or other securities of the Company.
3.4. QUALIFICATION. The Company is duly qualified and in good standing as a
foreign corporation in all jurisdictions in which the character of its owned or
leased properties or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified or admitted and in good
standing does not and is not reasonably likely to have a material adverse effect
on the business, financial condition, or results of operations of the Company (a
"Material Adverse Effect").
-------- ------- ------
3.5. SUBSIDIARIES. Except as described in Section 3.5 of the Disclosure
Schedule, the Company does not own any equity securities or other legal and/or
beneficial interests in any corporations, partnerships, limited liability
companies, business trusts, or joint ventures, or in any other unincorporated
trade or business enterprises.
3.6. FINANCIAL STATEMENTS. Included in Section 3.6 of the Disclosure
Schedule are copies of the balance sheets of the Company as of December 31 in
each of the years 1995 through 1997, inclusive (such balance sheet as of
December 31, 1997, the "Audited Balance Sheet"), and the related statements of
------- ------- -----
income, retained earnings, and cash flows of the Company for the fiscal years
ended on such dates, certified by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, in the case of the 1995
and 1996 financial statements and Price Waterhouse, L.L.P., in the case of the
1997 financial statements. Each of such financial statements is true and
complete in all material respects and has been prepared (a) from, and is
consistent with, the Company's books and records (which themselves are true and
complete and properly reflect all
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transactions of the Company), and (b) in accordance with generally accepted
accounting principles applied on a basis consistent with prior periods; each of
such balance sheets fairly presents the financial condition of the Company as of
its respective date; and each of such statements of income, retained earnings,
and cash flows fairly presents the results of operations, retained earnings, or
cash flows, as the case may be, of the Company for the period covered thereby.
3.7. ABSENCE OF CERTAIN CHANGES. Except as set forth in Section 3.7 of the
Disclosure Schedule, or as expressly contemplated hereby and by the Investment
Agreement, since December 31, 1997, the Company has conducted its business only
in the ordinary course, and without limiting the foregoing, there has not been:
(a) any change in the assets, liabilities, sales, income, or business of the
Company, or in its relationships with suppliers, customers, or lessors, other
than changes that were both in the ordinary course of business and have not had,
either in any case or in the aggregate, a Material Adverse Effect; (b) except as
specifically contemplated by Section 3.7 of the Disclosure Schedule, any
acquisition or disposition by the Company of any asset or property (i) from or
to any Affiliate of the Company or (ii) other than in the ordinary course of
business, other than any acquisitions, on the one hand, or dispositions, on the
other hand, of assets the fair market value and book value of which do not in
the aggregate exceed $100,000, (c) any damage, destruction or loss, whether or
not covered by insurance, to the property of the Company which, after giving
effect to any insurance proceeds receivable in connection therewith, had or is
reasonably likely to have a Material Adverse Effect; (d) any declaration,
setting aside or payment of any dividend or any other distributions in respect
of any shares of capital stock of the Company, other than the declaration and
payment by the Company of a dividend (the "Note Dividend") payable to the
---- --------
holders of its Common Stock immediately prior to the Effective Date, in an
original principal amount not to exceed $23,000,000 and payable (other than an
amount not to exceed $150,000) in notes (collectively, the "Dividend Notes"),
-------- -----
and there has been no such declaration, setting aside or payment since June 30,
1997, other than the declaration by the Company of dividends payable in cash as
required pursuant to Section 3.03(a) of the Existing Shareholders Agreement (the
"Tax Dividends"); (e) any issuance of any shares of the capital stock of the
--- ---------
Company or any direct or indirect redemption, purchase, or other acquisition by
the Company of any such capital stock; (f) any increase in the compensation,
pension, or other benefits payable or to become payable by the Company to any of
its officers or employees, or any bonus payments or arrangements made to or with
any of them other than (i) increases occurring in the ordinary course of
business consistent with past practices or required by law and described in
Section 3.7 of the Disclosure Schedule, (ii) bonuses payable pursuant to the
Company's bonus plan in the ordinary course of business consistent with past
practices and described in Section 3.7 of the Disclosure Schedule, and, to the
extent required by Section 3.25 hereof, in Section 3.25 of the Disclosure
Schedule, and (iii) the accelerated vesting of the SARs in connection with the
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transactions contemplated hereby; (g) any forgiveness or cancellation of any
material debt or claim by the Company or any waiver of which the Company has
knowledge of any right of material value, other than compromises of accounts
receivable in the ordinary course of business; (h) except as specifically
contemplated hereby, any entry by the Company into any transaction with any
Affiliate other than in the ordinary course of business; (i) any incurrence by
the Company of any obligations or liabilities, whether absolute, accrued,
contingent or otherwise (including without limitation liabilities as guarantor
or otherwise with respect to obligations of others), other than obligations and
liabilities incurred in the ordinary course of business with Persons other than
any Affiliate of the Company; (j) any incurrence or imposition of any material
Lien other than a Permitted Lien on any of the assets, tangible or intangible,
of the Company; (k) any discharge or satisfaction by the Company of any material
Lien or payment by the Company of any obligation or liability (fixed or
contingent) other than (i) current liabilities included in the Audited Balance
Sheet, and (ii) current liabilities to Persons other than any Affiliate of the
Company incurred since the date of the Audited Balance Sheet in the ordinary
course of business; (l) any material change in the credit practices of the
Company; (m) any employment contract or collective bargaining agreement, whether
written or oral, entered into by the Company or any material modification of the
terms of any existing such contract or agreement; or (n) a commitment, whether
oral or written, by or on behalf of the Company to do any of the matters
described in clauses (a) through (m) of this Section 3.7.
3.8. TITLE TO PROPERTY, REAL PROPERTY LEASES, ETC.
(a) Personal Property. Except as set forth in Section 3.8 of the
-----------------
Disclosure Schedule, (i) the Company has good and marketable title to, or a
valid leasehold interest in, the personal property and assets it uses regularly
in the conduct of its business (including, without limitation, those reflected
on the Company's Audited Balance Sheet, except to the extent such properties and
assets have been disposed of since the date of such balance sheet in the
ordinary course of business), and none of such properties or assets owned by the
Company is subject to any Liens other than Permitted Liens, and (ii) all of the
properties, plant and equipment which are material to the Company's business
are, in all material respects, in satisfactory condition (subject, in the case
of tangible property, to normal wear, tear and maintenance) and as such are, in
the aggregate, adequate to conduct the business of the Company as presently
conducted. Section 3.8 of the Disclosure Schedule sets forth a complete list of
all capital assets owned by the Company having a net book value in excess of
$100,000.
(b) Real Property. Section 3.8 of the Disclosure Schedule sets forth a
-------------
legal description of each parcel of real property owned by the Company
(including all improvements thereon, the "Owned Real Property") and all real
----- ---- --------
property leased by the Company (including all leased improvements thereon, the
"Leased Real
------ ----
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Property" and collectively with the Owned Real Property, the "Real Property").
-------- ---- --------
The Real Property constitutes all of the real property owned, leased, occupied
or otherwise utilized in connection with the business of the Company (including,
without limitation, the Real Property reflected on the Company's Audited Balance
Sheet, except to the extent such Real Property has been disposed of since the
date of such balance sheet in the ordinary course of business). Except as set
forth in Section 3.8 of the Disclosure Schedule, (i) the Company has title to or
a valid leasehold interest in the Real Property, and none of the Real Property
is subject to any Liens other than Permitted Liens, (ii) other than the Company,
there are no parties in possession or parties having any current or future right
to occupy any of the Owned Real Property, (iii) the Company is in quiet
possession of the Leased Real Property, and (iv) the Real Property is adequate
to conduct the business of the Company as presently conducted. Except as set
forth in Section 3.8 of the Disclosure Schedule, the Company does not have
knowledge of (x) any proposed condemnation, requisition or other taking of any
of the Real Property by any public authority or (y) any public improvements
which may result in special assessments against or otherwise affecting any of
the Real Property.
(c) Leases. Section 3.8 of the Disclosure Schedule lists all lease and
------
other agreements affecting the rights or obligations of the Company with respect
to the Leased Real Property and any personal property and assets leased by the
Company, including without limitation, any master lease agreements, equipment
schedules, non-disturbance and recognition agreements, subordination agreements,
attornment agreements and agreements regarding the term or renewal of any of the
leases, and any amendments and modifications thereof (the "Leases"). Except as
------
set forth in Section 3.8 of the Disclosure Schedule all of the material Leases
are valid and enforceable and in full force and effect, except to the extent
that (i) enforcement may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium, or similar laws now or thereafter in effect relating
to or limiting creditors' rights generally, (ii) the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court or other Person
before which any proceeding therefor may be brought, or (iii) the enforcement
thereof may be contrary to public policy. Except as set forth in Section 3.8 of
the Disclosure Schedule, the Company is not, and to the knowledge of the
Company, no other party is, in default in any material respect, or in material
breach, of its obligations under any of the Leases, and the Company has neither
delivered nor received any notice of default under any such Lease, and, to the
Company's knowledge, no event has occurred which, with the giving of notice, the
passage of time or that, would constitute a default under any such Lease.
Complete and correct copies of all of the Leases have been delivered by the
Company to Holding or its counsel.
3.9. INDEBTEDNESS. The Company does not have any Indebtedness outstanding
except (a) the Dividend Notes (to the extent issued on or prior to the
-15-
date upon which such representation is made or deemed made), and (b) as set
forth in Section 3.9 of the Disclosure Schedule. The Company is not in default
with respect to any outstanding Indebtedness or any agreement, instrument, or
other obligation relating thereto and no such Indebtedness or any agreement,
instrument, or other obligation relating thereto purports to limit the issuance
of any securities by the Company or the operation of its businesses. Complete
and correct copies of all agreements, instruments, and other obligations
(including all amendments, supplements, waivers, and consents) relating to any
Indebtedness of the Company have been furnished to Holding or its counsel.
3.10. ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent (a)
reflected or reserved against in the Audited Balance Sheet, (b) incurred with
Persons other than Affiliates of the Company in the ordinary course of business
after the date of the Audited Balance Sheet, (c) incurred under contracts,
leases and instruments either (i) set forth in the Disclosure Schedule or (ii)
entered into in the ordinary course of the Company's business and otherwise not
required to be disclosed in any section of the Disclosure Schedule (but not, in
any such case, liabilities for breaches thereof), (d) of the Dividend Notes, or
(e) not included under clauses (a) - (d) above and aggregating not more than
$50,000, the Company does not have any liabilities or obligations of any nature,
whether accrued, absolute, contingent, or otherwise (including without
limitation liabilities, as guarantor or otherwise, in respect of obligations of
others).
3.11. TAXES.
(A) BASIS, ETC. Set forth in Section 3.11(a) of the Disclosure Schedule
are the net operating loss, net capital loss, credit, minimum tax, charitable
contribution, and other Tax carryforwards (by type of carryforward and
expiration date, if any) of the Company.
(B) ELECTIONS. All material elections with respect to Taxes (including
without limitation any elections under Sections 108(b)(5), 338(g), 565, 936(a),
or 936(e) of the Code, or Treasury Regulation Sections 1.1502-20(g) or 1.1502-
32(f)(2) (as in effect before January 1, 1995)) affecting the Company and/or
made by the Company, and in effect as of the date hereof, are described in
Section 3.11(b) of the Disclosure Schedule.
(C) FILING OF TAX RETURNS AND PAYMENT OF TAXES. The Company has timely
filed all Tax Returns required to be filed by it, each such Tax Return has been
prepared in compliance with all applicable laws and regulations, and all such
Tax Returns are true and accurate in all respects. All Taxes due and payable by
the Company have been paid, and the Company shall not be liable for any
additional Taxes in respect of any taxable period ending on or before the
Closing Date in an amount that exceeds the corresponding reserve therefor, if
any, reflected in the
-16-
accounting records of the Company at that date. The Company has delivered to
Holding correct and complete copies of all Tax Returns filed by or with respect
to it with respect to taxable periods ended on or after December 31, 1994, and
all relevant documents and information with respect thereto, including without
limitation work papers, records, examination reports, statements of deficiencies
assessed against or agreed to by the Company.
(D) AUDIT HISTORY. With respect to each taxable period of the Company
ended on or before December 31, 1991, either such taxable period has been
audited by the relevant taxing authority or the time for assessing or collecting
Tax with respect to each such taxable period has closed and such taxable period
is not subject to review by any relevant taxing authority.
(E) DEFICIENCIES. No deficiency or proposed adjustment in respect of
Taxes that has not been settled or otherwise resolved has been asserted,
assessed, or threatened in writing by any taxing authority against the Company.
(F) LIENS. There are no Liens for Taxes (other than current Taxes not
yet due and payable) on the assets of the Company.
(G) EXTENSIONS OF STATUTES OF LIMITATIONS ON ASSESSMENT OR COLLECTION OF
TAXES. The Company has not consented to extend the time in which any Tax may be
assessed or collected by any taxing authority.
(H) EXTENSIONS OF THE TIME FOR FILING TAX RETURNS. The Company has not
requested or been granted an extension of the time for filing any Tax Return to
a date on or after the Closing Date.
(I) PENDING PROCEEDINGS. There is no action, suit, taxing authority
proceeding, or audit with respect to any Tax now in progress, pending, or to the
Company's knowledge, threatened, against or with respect to (i) the Company, or
(ii) any Affiliated Group with respect to a taxable period during which the
Company was a member of such Affiliated Group.
(J) NO CLAIM OF FAILURE TO FILE TAX RETURNS. No claim has ever been
made by a taxing authority in a jurisdiction where the Company does not pay Tax
or file Tax Returns that the Company is or may be subject to Taxes assessed by
such jurisdiction.
(K) MEMBERSHIP IN AFFILIATED GROUPS, ETC. The Company has not been a
member of any Affiliated Group, or filed or been included in a combined,
consolidated, or unitary Tax Return.
(L) (INTENTIONALLY OMITTED)
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(M) ADJUSTMENTS UNDER SECTION 481. The Company will not be required,
as a result of a change in method of accounting for any period ending on or
before the Closing Date, to include any adjustment under Section 481(c) of the
Code (or any similar or corresponding provision or requirement under any Tax
law) in taxable income for any period ending on or after the Closing Date.
(N) TAX SHARING, ALLOCATION, OR INDEMNITY AGREEMENTS. The Company is
neither a party to nor bound by any Tax sharing or allocation agreement, nor
does the Company have any current or potential contractual obligation to
indemnify any other Person with respect to Taxes.
(O) WITHHOLDING TAXES. The Company has withheld and paid all Taxes
required to have been withheld and paid by it in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other Person.
(P) FOREIGN PERMANENT ESTABLISHMENTS AND BRANCHES. The Company does
not have a "permanent establishment" in any foreign country, as defined in the
relevant tax treaty between the United States of America and such foreign
country, or otherwise operates or conducts business through any branch in any
foreign country.
(Q) U.S. REAL PROPERTY HOLDING CORPORATION. The Company has not been
a United States real property holding corporation within the meaning of Code
Section 897(c)(2), during the applicable period specified in Code Section
897(c)(1)(A)(ii).
(R) SAFE HARBOR LEASE PROPERTY. None of the property owned or used by
the Company is subject to a tax benefit transfer lease executed in accordance
with Section 168(f)(8) of the Internal Revenue Code of 1954, as amended by the
Economic Recovery Tax Act of 1981.
(S) TAX-EXEMPT USE PROPERTY. None of the property owned by the
Company is "tax-exempt use property" within the meaning of Section 168(h) of the
Code.
(T) SECURITY FOR TAX-EXEMPT OBLIGATIONS. Except with respect to the
Jacksonville IRBs, as defined in Section 6.7(b), none of the assets of the
Company directly or indirectly secures any indebtedness, the interest on which
is tax-exempt under Section 103(a) of the Code, and the Company is not directly
or indirectly an obligor or a guarantor with respect to any such indebtedness.
(U) SECTION 341(F) CONSENT. The Company has not filed a consent under
Code Section 341(f) concerning collapsible corporations.
-18-
(V) PARACHUTE PAYMENTS. The Company has neither made any payments,
nor is obligated to make any payments, nor is a party to any agreement that
under certain circumstances could obligate it to make any payments, that will
not be deductible under Code Sections 162(m) or 280G.
(W) VALID S CORP. ELECTION. The Company is, and at all times since
December 31, 1987 has been, qualified as a corporation for which a valid
election to be taxed under the provisions of Subchapter S, Chapter 1, Subtitle A
of the Code has been filed and is in effect under such Subchapter S. The
Company has, and has had, a corresponding election in effect under the laws of
the State of Illinois for each taxable period during the period since December
31, 1987.
3.12. LITIGATION. Except as set forth in Section 3.12 of the Disclosure
Schedule, no litigation, arbitration, action, suit, proceeding, or investigation
(whether conducted by any judicial or regulatory body, arbitrator, or other
Person) is pending or to the knowledge of the Company, threatened against the
Company (nor is there any basis therefor known to the Company) which, seeks
damages in excess of $50,000 in any individual instance of $100,000 in the
aggregate, or which seek any form of equitable or injunctive relief, including
without limitation, seeking to prohibit, restrict or delay the consummation of
the transactions contemplated hereby. Except as set forth in Section 3.12 of the
Disclosure Schedule, neither the Company nor its properties and assets are
subject to any judicial or administrative order, judgment or decree.
3.13. SAFETY AND ENVIRONMENTAL MATTERS.
(a) Except as set forth in Sections 3.13 and 3.28 of the
Disclosure Schedule:
(i) the Company and all real property owned, leased, operated or
controlled by the Company currently or within the last five years is now, and at
all times within the last five years has been, in material compliance with all
Environmental and Safety Laws;
(ii) the Company has obtained all material permits, licenses, and
authorizations required pursuant to all applicable Environmental and Safety Laws
with respect to its properties and operations;
(iii) the Company has not received any notice from any third party
asserting that it is or may be liable under any Environmental and Safety Laws,
including without limitation in connection with any release or threatened
release of any hazardous or regulated substances or wastes;
-19-
(iv) Neither the Company nor, to the knowledge of the Company, any of its
predecessors or any other Person for which the Company may be obligated,
has disposed of or released any hazardous or regulated substance in a
manner that reasonably could be expected to result in any Person incurring
liability pursuant to Environmental and Safety Laws;
(v) there is no contamination from any hazardous or regulated substance,
or any other environmental defect, at, on, upon, or under the real property
currently owned, leased, operated, or controlled by the Company, or to the
Company's knowledge, any real property formerly owned, leased, operated, or
controlled by the Company, any of its predecessors or any other Person for
which the Company may be obligated, that reasonably could be expected to
result in any Person incurring any cleanup costs (including, without
limitation, any cost of investigation, abatement, removal, remediation, or
corrective action);
(vi) to the knowledge of the Company, there currently exist no conditions,
circumstances, or events that reasonably could be expected to result in the
Company, either now or with the passage of time, incurring any material
expenditure to comply with any Environmental and Safety Law or any permit
issued pursuant thereto; and
(vii) no environmental studies, reports, assessments, sampling results, or
audits with respect to real property owned, leased, operated or controlled
by the Company have been conducted during the period of its tenure at or
operation or control of such property or, to the Company's knowledge,
during any other time.
(b) For purposes of this Agreement, "Environmental and Safety Laws" means
all federal, state, local, and foreign statutes, regulations, ordinances, and
similar provisions having the force or effect of law, and all judicial and
administrative orders, judgments, decrees, and similar determinations,
concerning public health and safety, pollution, occupational health and safety,
and/or protection of the environment, including without limitation the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Federal Clean Water Act, the
Federal Clean Air Act, the Toxic Substances Control Act, and the Occupational
Safety and Health Act of 1970, as amended.
3.14. LABOR RELATIONS. The Company is and has been in compliance in all
material respects with all federal and state laws respecting employment and
employment practices, terms and conditions of employment, wages and hours, and
nondiscrimination in employment, and is not and has not been engaged in, or, to
-20-
the Company's knowledge, alleged to have been engaged in, any unfair labor
practice or any unlawful discrimination in employment practices. There is no
labor strike, dispute, concerted work slow-down, or concerted work stoppage
pending or, to the Company's knowledge, threatened against or involving the
Company. No one has petitioned within the last five years or is now petitioning
for union representation of any of the employees of the Company. None of the
employees of the Company is covered by any collective bargaining agreement, and
no collective bargaining agreement is currently being negotiated by or on behalf
of the Company or any of its employees. The Company has not experienced any
concerted work stoppage or other material labor difficulty during the last five
years. The Company has not implemented any plant closing or mass layoff of
employees that could implicate the Worker Adjustment Retraining and Notification
Act of 1988, as amended, or any similar state or local law or regulation.
3.15. CONTRACTS. Section 3.15 of the Disclosure Schedule sets forth a
complete and accurate list of all contracts to which the Company is a party or
by or to which it or any of its assets or properties is bound or subject and
which, with respect to any single contract or group of related contracts, call
for or potentially could call for payments to or from the Company in excess of
$50,000, or which grant exclusive dealing arrangements or which, in any manner,
restrict the Company's operations or business except (i) contracts (and related
correspondence and other documents) for the sale or purchase of goods and/or
services by the Company, entered into prior to the date hereof with customers or
suppliers in the ordinary course of business, (ii) contracts with Persons other
than any Affiliate of the Company, entered into in the ordinary course of
business after the date hereof and before the Closing, which will be identified
to Holding or its counsel before the Closing in a disclosure supplement pursuant
to Section 5.15 hereof, and (iii) contracts terminable by the Company upon 60
days' notice or less and without the payment of any termination fee or penalty.
As used in this Agreement, the word "contract" includes every agreement or
understanding of any kind, written or oral, that is legally enforceable by or
against or otherwise binding on the Company, and specifically includes: (a)
contracts and other agreements with any current or former officer, director,
employee, consultant, or stockholder, or any partnership, corporation, joint
venture, or any other entity in which any such Person has an interest; (b)
contracts and other agreements with any labor union or association representing
any employee; (c) contracts and other agreements for the provision of services
by or to the Company; (d) bonds or other security agreements provided by any
party in connection with the business of the Company; (e) contracts and other
agreements for the purchase or other acquisition or the sale or other
disposition of any of the assets or properties of the Company, in each case
other than in the ordinary course of business, or for the grant to any person of
any preferential rights to purchase any of such assets or properties; (f) joint
venture agreements relating to the assets, properties, or business of the
Company or by or to which the Company or any of its assets or properties are
bound or subject; (g) contracts and other
-21-
agreements under which the Company agrees to indemnify any party, to share tax
liability of any party, or to refrain from competing with any party; (h)
contracts or other agreements with regard to Indebtedness; or (i) any other
contract or other agreement, whether or not made in the ordinary course of
business. All of the contracts listed in Section 3.15 of the Disclosure Schedule
are in full force and effect, and the Company is not in default in any material
respect under, or material breach of, any of them, nor to the knowledge of the
Company is any other party to any such contract in default in any material
respect thereunder or in material breach thereof; nor does any event or
condition exist that after notice or lapse of time or both could constitute a
default in any material respect thereunder or a material breach thereof on the
part of the Company, or to the knowledge of the Company, any other party
thereto. Except as set forth in Section 3.15 of the Disclosure Schedule, no
approval or consent of any Person that has not already been obtained is needed
in order that the contracts listed in Section 3.15 of the Disclosure Schedule
continue in full force and effect following the consummation of the transactions
contemplated by this Agreement, and no such contract includes any provision, the
effect of which may be to terminate such contract or enlarge or accelerate any
obligations of the Company thereunder or to give additional rights to any other
party thereunder upon consummation of the transactions contemplated by this
Agreement. The Company has delivered to Holding or its counsel true, correct,
and complete copies of all contracts listed in Section 3.15 of the Disclosure
Schedule, together with copies of all modifications and supplements thereto.
3.16. EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Section 3.16 of the Disclosure Schedule,
neither the Company nor any of its Affiliates now maintains or contributes to,
or has in the current or preceding six calendar years maintained or contributed
to, any pension, profit-sharing, deferred compensation, bonus, stock option,
share appreciation right, severance, group or individual health, dental,
medical, life insurance, survivor benefit, or similar plan, policy, or
arrangement, whether formal or informal, for the benefit of any director,
officer, consultant or employee, whether active or terminated, of the Company or
any of its Affiliates. Each of the arrangements set forth in Section 3.16 of
the Disclosure Schedule is hereinafter referred to as an "Employee Benefit
-------- -------
Plan", except that any such arrangement which is a multi-employer plan shall be
----
treated as an Employee Benefit Plan only for purposes of Sections 3.16(d)(iv)
and (vi) and 3.16(g) below.
(b) The Company has delivered to Holding or its counsel true, correct,
and complete copies of each Employee Benefit Plan, and with respect to each such
Plan (i) any associated trust, custodial, insurance, or service agreements, (ii)
any annual report, actuarial report, or disclosure materials (including
specifically any summary plan descriptions) submitted to any governmental agency
or distributed to participants or beneficiaries thereunder in the current or any
of the three preceding
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calendar years, and (iii) the most recently received Internal Revenue Service
("IRS") determination letters and any governmental advisory opinions or rulings.
---
(c) Each Employee Benefit Plan is and has heretofore been maintained
and operated in all material respects in compliance with the terms of such Plan
and with the requirements prescribed (whether as a matter of substantive law or
as necessary to secure favorable tax treatment) by any and all statutes,
governmental or court orders, and governmental rules or regulations in effect
from time to time, including but not limited to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and the Internal Revenue Code of
-----
1986, as amended (the "Code") and applicable to such Plan. Each Employee
----
Benefit Plan that is intended to qualify under Section 401(a) of the Code has
been determined by the IRS to be so qualified, and to the knowledge of the
Company nothing has occurred since the date of the last such determination that
has resulted or is likely to result in the revocation of such determination.
(d) (i) There is no pending, or to the knowledge of the Company,
threatened, legal action, proceeding, or investigation, other than routine
claims for benefits, concerning any Employee Benefit Plan, or, to the
knowledge of the Company, any fiduciary or service provider thereof, and,
to the knowledge of the Company, there is no basis for any such legal
action, proceeding, or investigation concerning any Employee Benefit Plan
or any such fiduciary or service provider.
(ii) No liability (contingent or otherwise) to the Pension Benefit
Guaranty Corporation ("PBGC") has been incurred by the Company or any of
----
its Affiliates (other than insurance premiums satisfied in due course). No
Employee Benefit Plan (other than any multi-employer plan) is a plan
subject to Title IV of ERISA.
(iii) No Employee Benefit Plan (other than any multi-employer plan) nor
any party in interest with respect thereto, nor, to the knowledge of the
Company, any Employee Benefit Plan that is a multi-employer plan or any
party in interest with respect thereto, has engaged in a prohibited
transaction that could subject the Company directly or indirectly to
liability under Section 409 or 502(i) of ERISA or Section 4975 of the Code.
(iv) No Employee Benefit Plan provides welfare benefits subsequent to
termination of employment to employees or their beneficiaries (except to
the extent required by applicable state insurance laws and Title I, Part 6
of ERISA).
(v) Except as set forth in Section 3.16 of the Disclosure Schedule, no
benefits due under any Employee Benefit Plan have been forfeited subject to
-23-
the possibility of reinstatement (which possibility would still exist at or
after Closing).
(vi) The Company has not contracted or otherwise agreed to maintain or
contribute to any Employee Benefit Plan for any definite future period of
time, and each such Plan is terminable at the sole discretion of the
sponsor thereof, subject only to such constraints as may be imposed by
applicable law.
(e) With respect to each Employee Benefit Plan for which a separate fund
of assets is or is required to be maintained, full payment has been made of all
amounts that the Company is required, under the terms of each such Plan, to have
paid as contributions to that Plan, either as of the end of the most recently
ended plan year of that Plan or on all such amounts required to be paid through
the Closing. No Employee Benefit Plan is subject to Section 302 of ERISA or
Section 412 of the Code).
(f) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not result in any payment (whether of
severance pay or otherwise) becoming due from any Employee Benefit Plan to any
current or former director, officer, consultant, or employee of the Company or
result in the vesting, acceleration of payment, or increases in the amount of
any benefit payable to or in respect of any such current or former director,
officer, consultant, or employee.
(g) No Employee Benefit Plan is a multi-employer plan.
(h) For purposes of this Section 3.16, "multi-employer plan," "party in
interest," "current value," "accrued benefit," "reportable event," and "benefit
liability" have the same meaning assigned such terms under Sections 3, 4043(b)
or 4001(a) of ERISA, and "affiliate" means any entity that under Section 414 of
the Code is treated as a single employer with the Company.
3.17. POTENTIAL CONFLICTS OF INTEREST.
(a) No officer, director, or stockholder of the Company (i) owns,
directly or indirectly, any interest (excepting not more than 1% stock holdings
for investment purposes in securities of publicly held and traded companies) in,
or is an officer, director, employee, or consultant of, any Person that is a
competitor, lessor, lessee, customer, or supplier of the Company; (ii) owns,
directly or indirectly, in whole or in part, any tangible or intangible property
that the Company is using or the use of which is necessary for the business of
the Company; or (iii) has any cause of action or other claim whatsoever against,
or owes any amount to, the Company, except for claims in the ordinary course of
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business, such as for accrued vacation pay, accrued benefits under Employee
Benefit Plans, and similar matters and agreements.
(b) To the knowledge of the Company, no officer, director, employee, or
consultant of the Company is presently obligated under or bound by any agreement
or instrument, or any judgment, decree, or order of any court of administrative
agency, that (i) conflicts or may conflict with his or her agreements and
obligations to use his or her best efforts to promote the interests of the
Company, (ii) conflicts or may conflict with the business or operations of the
Company as presently conducted or as proposed to be conducted in the short term,
or (iii) restricts or may restrict the use or disclosure of any information that
may be useful to the Company.
3.18. INTELLECTUAL PROPERTIES.
(a) Section 3.18 of the Disclosure Schedule lists all patents, patent
applications, trademarks, trade names, service marks, logos, copyrights,
technology, know-how, trade secrets, processes, formulas, techniques, and
licenses (other than for off-the-shelf software programs that have not been
customized for the Company's use) used in or necessary to the business of the
Company as now being conducted (collectively, the "Intellectual Properties").
------------ ----------
The Company owns or is licensed or otherwise has the full and unrestricted
exclusive right to use throughout the world, without the payment of royalties or
other further consideration except as indicated in Section 3.18 of the
Disclosure Schedule, all of the Intellectual Properties. No intellectual
property rights, privileges, licenses, contracts or other agreements,
instruments or evidences of interest, other than (i) the Intellectual
Properties, and (ii) off-the-shelf software programs that have not been
customized for the Company's use, are necessary to or used in the conduct of the
business of the Company as now being conducted. All of the patents, trademarks
and copyrights owned by the Company have been duly registered in, filed in or
issued by the United States Patent and Trademark Office or Register of
Copyrights or the corresponding offices of other countries as identified in
Section 3.18 of the Disclosure Schedule, and have been properly maintained and
renewed, consistent with commercially reasonable business practices, in
accordance with all applicable provisions of law and administrative regulations
in the United States and each such country.
(b) In any instance where the Company's rights to Intellectual
Properties arise under a license or similar agreement (other than for off-the-
shelf software programs that have not been customized for its use), this is
indicated in Section 3.18 of the Disclosure Schedule, and to the knowledge of
the Company, such rights are licensed exclusively to the Company, except as
indicated in Section 3.18 of the Disclosure Schedule. To the knowledge of the
Company, no other Person has an interest in or right or license to use any of
the Intellectual Properties. To the Company's knowledge, none of the
Intellectual Properties is being infringed by
-25-
others, or is subject to any outstanding order, decree, judgment, or
stipulation. No litigation (or other proceedings in or before any court or other
governmental, adjudicatory, arbitral, or administrative body) relating to the
Intellectual Properties (other than any Intellectual Properties licensed by the
Company as licensee), or to the Company's knowledge, relating to any
Intellectual Properties licensed by the Company as a licensee, is pending, or to
the Company's knowledge, threatened, nor, to the knowledge of the Company, is
there any basis for any such litigation or proceeding. The Company maintains
reasonable security measures for the preservation of the secrecy and proprietary
nature of such of the Intellectual Properties as constitute trade secrets or
other confidential information.
(c) (i) Neither the Company nor, to the knowledge of the Company, any
employees of or consultants to the Company, has infringed or made unlawful use
of, or is infringing or making unlawful use of, any proprietary or confidential
information of any Person, including without limitation any former employer of
any past or present employee or consultant of the Company; and (ii) the
activities of the employees of or consultants to the Company in connection with
their employment do not violate any agreements or arrangements that any such
employees or consultants have with any former employer or any other Person.
Except as described in Section 3.18 of the Disclosure Schedule, no litigation
(or other proceedings in or before any court or other governmental,
adjudicatory, arbitral, or administrative body) charging the Company with
infringement or unlawful use of any license, patent, trademark, service ▇▇▇▇,
trade name, logo, copyright, trade secret or other proprietary right is pending,
or, to the knowledge of the Company, threatened; nor, to the knowledge of the
Company, is there any basis for any such litigation or proceeding.
3.19. ACCOUNTS RECEIVABLE. All accounts and notes receivable reflected on
the Audited Balance Sheet, and all accounts and notes receivable arising
subsequent to the date of such Audited Balance Sheet, have arisen in the
ordinary course of business, represent valid obligations to the Company, and
have been collected or are collectible in the aggregate recorded amounts thereof
in accordance with their terms, net of (i) the reserve for uncollected accounts
set forth in the accounting records of the Company, as the case may be, and (ii)
the proceeds of credit insurance with respect thereto payable to the Company.
3.20. INSURANCE. Section 3.20 of the Disclosure Schedule lists the
policies of theft, fire, liability, workmen's compensation, life, property and
casualty, and other insurance owned or held by the Company. Such policies of
insurance are maintained with financially sound and reputable insurance
companies, funds, or underwriters, and are of the kinds, cover such risks, and
are in such amounts and with such deductibles and exclusions, as are consistent
with prudent business practice. All such policies are in full force and effect;
are sufficient for compliance by the Company with all requirements of law and of
all agreements to which the
-26-
Company is a party; are valid, outstanding, and (subject to the qualifications
set forth in Sections 3.2(i) and (ii)) enforceable policies and provide that
they will remain in full force and effect through the respective dates set forth
in Section 3.20 of the Disclosure Schedule; and will not in any way be affected
by, or terminate or lapse by reason of, the transactions contemplated by this
Agreement. The Company has delivered to Holding or its representatives complete
and correct copies of all such policies together with all riders and amendments
thereto.
3.21. BANK ACCOUNTS, SIGNING AUTHORITY, POWERS OF ATTORNEY. Section 3.21
of the Disclosure Schedule sets forth a complete and accurate list of all bank,
brokerage, and other accounts, and all safe-deposit boxes, of the Company and
the Persons with signing or other authority to act with respect thereto. Except
as so listed, the Company does not have any account or safe deposit box in any
bank, and no Person has any power, whether singly or jointly, to sign any checks
on behalf of the Company, to withdraw any money or other property from any bank,
brokerage, or other account of the Company, or to act under any agency or power
of attorney granted by the Company at any time for any purpose. Section 3.21 of
the Disclosure Schedule also sets forth the names of all persons authorized to
borrow money or sign notes on behalf of the Company.
3.22. GOVERNMENTAL AND OTHER THIRD-PARTY CONSENTS, NON-CONTRAVENTION, ETC.
Except for (i) the approval of the stockholders of the Company as required by
the Illinois Business Corporation Act, (ii) the filing of the Articles of
Merger, and (iii) the filing of the notifications required on the part of
Holding (or its "ultimate parent entity") and the Company under the ▇▇▇▇-▇▇▇▇▇-
▇▇▇▇▇▇ Antitrust Improvement Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the "HSR Act"), and any further information
--- ---
required in connection therewith (as referred to in Section 12.1 below), no
consent, approval, or authorization of or registration, designation,
declaration, or filing with any governmental authority, federal or other, or any
other Person, on the part of the Company or, to the knowledge of the Company,
any of the Participating Stockholders is required in connection with the
execution, delivery, and performance of this Agreement by any of them or the
consummation by any of them of the transactions contemplated hereby. The
execution, delivery, and performance of this Agreement and the Other Agreements
executed and delivered or to be executed and delivered by the Company as
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, will not violate (a) any provision of the Articles of
Incorporation or by-laws of the Company, (b) any order, judgment, injunction,
award or decree of any court or state or federal governmental or regulatory body
applicable to the Company or any of the Participating Stockholders, or (iii) any
judgment, decree, order, statute, rule or regulation, or except as set forth in
Section 3.15 of the Disclosure Schedule any agreement, instrument, or other
obligation to which the Company or any of the
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Participating Stockholders is a party or by or to which any of them or any of
their respective assets is bound or subject.
3.23. INVENTORY. The inventory and supplies of the Company are adequate
for their present needs, and are, in all material respects, in usable or
saleable condition in the ordinary course of business, subject only to such
reserves for obsolescence, if any, as are reflected in the Company's accounting
records.
3.24. SUPPLIERS AND CUSTOMERS. Section 3.24 of the Disclosure Schedule
lists the five largest suppliers and ten largest customers of the Company during
the twelve months ended on the date of the Audited Balance Sheet. The
relationships of the Company with its suppliers and customers are good
commercial working relationships, and no supplier or customer of material
importance to the Company has canceled or otherwise terminated, or threatened in
writing to cancel or terminate, its relationship with the Company, or has during
the last 12 months decreased materially, or threatened to decrease or limit
materially, its services, supplies or materials to the Company, or its usage or
purchase of the services or products of the Company, except for normal cyclical
changes related to customers' businesses. To the Company's knowledge, no such
supplier or customer intends to cancel or otherwise substantially modify its
relationship with the Company or to decrease materially or limit its services,
supplies or materials to the Company, or its usage or purchase of the Company's
services or products, and the consummation of the transactions contemplated
hereby will not, to the knowledge of the Company, adversely affect the
relationship of the Company with any such supplier or customer.
3.25. EMPLOYMENT OF OFFICERS, EMPLOYEES. Section 3.25 of the Disclosure
Schedule lists the name and total annual compensation payable by the Company for
the calendar year ended December 31, 1997 to each exempt non-hourly employee (a)
whose base salary for the calendar year ended December 31, 1997 was $200,000 or
more, or (b) who received bonuses for the calendar year ended December 31, 1997
of $50,000 or more.
3.26. MINUTE BOOKS. The copies of the minute books of the Company made
available to Holding or its counsel for inspection accurately record therein all
material actions taken by the Board of Directors and stockholders of the
Company.
3.27. BROKERS. Except for ▇▇▇▇▇ & Company Incorporated, no finder,
broker, agent, or other intermediary has acted for or on behalf of the Company
or any of the Principal Stockholders in connection with the negotiation,
preparation, execution, or delivery of this Agreement or the consummation of the
transactions contemplated hereby.
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3.28. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Except with respect
to the matters that are the subject of the specific representations and
warranties set forth in Section 3.13 hereof ("Safety and Environmental
Matters"), the Company has complied with, and is in compliance with, (a) all
laws, statutes, governmental regulations and all judicial or administrative
tribunal orders, judgments, writs, injunctions, decrees or similar commands
applicable to its business, (b) all unwaived terms and provisions of all
contracts, agreements and indentures to which the Company is a party, or by
which the Company or any of its properties is subject, and (c) its charter and
by-laws, respectively, each as amended to date; in the case of the preceding
clauses (a) and (b), excepting only any such noncompliances that, both
individually and in the aggregate, have not resulted and will not result in a
Material Adverse Effect. The Company has not been charged with, or, to the
knowledge of the Company, been under investigation with respect to, any
violation of any provision of any federal, state, or local law or administrative
regulation. The Company has and maintains, and Section 3.28 of the Disclosure
Schedule sets forth a complete and correct list of, all such licenses, permits
and other authorizations of governmental authorities as are necessary for the
conduct of their respective businesses or in connection with the ownership or
use of its properties, all of which are in full force and effect, and true and
complete copies of all of which have previously been delivered to Holding or its
counsel. The Company does not have knowledge of any fact which would make it
reasonably likely that the Company would be unable to obtain the renewal of any
such license, permit or other authorization.
3.29. ASSETS AND PROPERTIES COMPLETE. The assets and properties of the
Company are and as of the Closing Date shall be in all material respects
adequate and sufficient to conduct the business of the Company as currently
conducted.
3.30. DISCLOSURE. No representation or warranty of the Company or any of
the Principal Stockholders in this Agreement (including the Exhibits and
Schedules hereto), or any of the Other Agreements to be executed and delivered
by any of them as contemplated hereby contains or shall contain any untrue
statement of a material fact or omits or shall omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein not false or misleading. There is no fact that the Company or the
Principal Stockholders have not disclosed to Holding in writing that has or is
reasonably likely to have a Material Adverse Effect, or materially adversely
affects the ability of the Company or any of the Principal Stockholders to
perform their respective obligations under this Agreement or to consummate any
of the transactions contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES OF HOLDING AND ACQUISITION. Holding,
Klearfold and Acquisition jointly and severally represent and warrant to the
Company, both as of the date hereof and as of the Closing Date, as follows:
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4.1. ORGANIZATION AND STANDING. Holding is a corporation, duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, and Acquisition is a corporation, duly organized, validly existing,
and in good standing under the laws of the State of Illinois. Each of Holding
and Acquisition has all requisite corporate power and authority to own or lease
and operate its properties and to carry on its business as now conducted.
4.2. AUTHORIZATION AND ENFORCEABILITY. Each of Holding, Klearfold and
Acquisition has all requisite corporate power and full legal right and authority
(including in each case due approval of its Board of Directors) to enter into
this Agreement and all of the Other Agreements to which it is or is to be a
party as contemplated hereby, to perform all of its agreements and obligations
hereunder and thereunder, each in accordance with its respective terms, and to
consummate the transactions contemplated hereby and thereby. Each of this
Agreement and such Other Agreements to which Holding, Klearfold and/or
Acquisition is or is to be a party has been, or upon execution and delivery as
contemplated hereby, will be, duly executed and delivered by Holding, Klearfold
and/or Acquisition, as the case may be, and constitutes or will constitute the
legal, valid, and binding obligation of each of them party hereto and/or
thereto, enforceable against each of them party hereto and/or thereto in
accordance with its respective terms, except to the extent that (i) enforcement
may be limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium, or similar laws now or hereafter in effect relating to or limiting
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court or other similar Person before which
any proceeding therefor may be brought.
4.3. NON-CONTRAVENTION. The execution, delivery, and performance by each
of Holding, Klearfold and Acquisition of this Agreement and the Other Agreements
to be executed and delivered by them at the Closing as contemplated hereby will
not result in any violation of or be in conflict with its charter or by-laws, or
any agreement, instrument, judgment, decree, order, statute, rule, or regulation
applicable to it, or be in conflict with or constitute a default or material
breach under any of the foregoing.
4.4. GOVERNMENT AND OTHER THIRD-PARTY CONSENTS, ETC. Except for (i) the
filing of the notification required on the part of Holding or its "ultimate
parent entity" under the HSR Act, and any further information required in
connection therewith (as referred to in Section 12.1 below), and (ii) the filing
of the Articles of Merger, no consent, approval, or authorization of or
registration, designation, declaration or filing with any governmental
authority, federal or other, or any other Person, on the part of Holding,
Klearfold or Acquisition is required in connection with the execution, delivery,
and performance by them of this Agreement or the consummation by them of the
transactions contemplated hereby.
-30-
4.5. BROKERS. Neither Holding nor Acquisition has retained, utilized, or
been represented by any broker or finder in connection with the negotiation,
preparation, execution, or delivery of this Agreement or the consummation of the
transactions contemplated hereby.
4.6 CONDUCT OF ACQUISITION. Acquisition has not incurred any
liabilities, conducted any business, or entered into any contracts or
commitments, except such as are in furtherance of or incidental to the
transactions contemplated by this Agreement and the Other Agreements.
5. CONDUCT OF THE COMPANY'S BUSINESS PENDING CLOSING. The Company and,
with respect to Sections 5.13 and 5.14 only, the Principal Stockholders
severally and not jointly covenant and agree that, from and after the date of
this Agreement and until the Closing, except as otherwise specifically
contemplated by this Agreement (including without limitation the attached
Disclosure Schedule) or otherwise specifically consented to or approved by
Holding in writing:
5.1. STOCKHOLDER APPROVAL. As promptly as practicable, the Company shall
(i) call, give notice, convene, and hold a special meeting, or solicit (in
accordance with Section 7.10 of the Illinois Business Corporation Act) written
consents, of its Stockholders for the purposes of approving this Agreement and
the Merger, (ii) recommend such approvals to its Stockholders and solicit
proxies or consents therefor, and (iii) use its best efforts to obtain such
approvals of its Stockholders. The Principal Stockholders shall vote, cause to
be voted or execute a written consent with respect to all shares directly or
indirectly owned by them in favor of such approvals, and shall use their best
efforts to cause the other Stockholders to vote or execute a written consent in
favor of such approvals.
5.2. FULL ACCESS. The Company shall afford to Holding and its authorized
representatives full access during normal business hours to all properties,
books, records, contracts, and documents of the Company and a full opportunity
to make such investigations as they shall desire to make of the Company, and the
Company shall furnish or cause to be furnished to Holding all such information
with respect to the affairs and businesses of the Company as Holding or its
counsel may reasonably request. No investigation pursuant to this Section 5.2
shall affect any representation or warranty in this Agreement of any party
thereto or any condition to the obligations of the parties hereto.
5.3. CARRY ON IN REGULAR COURSE. The Company shall maintain its owned
and leased properties in good operating condition and repair, shall make all
necessary renewals, additions, and replacements thereto which would otherwise be
made in the ordinary course of business in accordance with the Company's past
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practices, shall carry on its businesses diligently and substantially in the
same manner as heretofore, and shall not make or institute any new, unusual, or
novel methods of manufacture, purchase, sale, lease, management, accounting, or
operation (including, without limitation, the extension of the time for payment
of the Company's payables or rebates) or take or permit to occur or exist any
action or circumstance referred to in Section 3.7 hereof, other than (a) the
repayment of Indebtedness of the Company either (i) in the ordinary course of
business from cash generated by operations or (ii) pursuant to Section 6.6
hereof, and (b) the incurrence of Indebtedness through the guarantees of the
Indebtedness contemplated to be incurred pursuant to Sections 6.7 and 7.5
hereof.
5.4. NO DIVIDENDS, ISSUANCES, REPURCHASES, ETC. The Company shall not
declare, set aside, or pay any dividends (whether in cash, shares of stock,
other property, or otherwise) on, or make any other distribution in respect of,
any shares of its capital stock, or issue, purchase, redeem, or otherwise
acquire for value any shares of its capital stock, other than the declaration
and payment of the Note Dividend and the Tax Dividend.
5.5. NO GENERAL INCREASES. The Company shall not grant any general or
uniform increase in the rates of pay of its employees or grant any general or
uniform increase in the benefits under any bonus or pension plan or other
contract or commitment, or increase the compensation payable or to become
payable to its officers, directors, key employees or agents, or increase any
bonus, insurance, pension or other benefit plan, payment or arrangement made to,
for or with any such officers, directors, key employees or agents, other than
(i) increases occurring in the ordinary course of business consistent with the
Company's past practices or required by law and (ii) the accelerated vesting of
the SARs in connection with the transactions contemplated hereby.
5.6. CONTRACTS AND COMMITMENTS. The Company shall not enter into any
contract or commitment or engage in any transaction with any Affiliate other
than in the usual and ordinary course of business and consistent with its normal
business practices.
5.7. PURCHASE AND SALE OF CAPITAL ASSETS. The Company shall not purchase,
lease as lessee, license as licensee, or otherwise acquire any interest in, or
sell, lease as lessor, license as licensee, or otherwise dispose of any interest
in, any capital asset(s) (a) other than in the ordinary course of business, or
(b) having a market value in excess of $10,000 in any instance, or in excess of
$50,000 in the aggregate.
5.8. INSURANCE. The Company shall maintain with financially sound and
reputable insurance companies, funds or underwriters adequate insurance
(including without limitation the insurance referred to on Section 3.20 of the
Disclosure
-32-
Schedule) of the kinds, covering such risks, in such amounts, and with such
deductibles and exclusions, as are consistent with prudent business practice.
5.9. PRESERVATION OF ORGANIZATION. The Company shall use its best efforts
to preserve its business organization intact, to keep available for the benefit
of the Surviving Corporation its present key officers and employees, and to
preserve for the benefit of the Surviving Corporation the Company's present
business relationships with its suppliers and customers and others having
business relationships with the Company.
5.10. NO DEFAULT. The Company shall use commercially reasonable efforts
to avoid a default in any material respect under, or a material breach of, any
of its contracts, commitments or obligations.
5.11. COMPLIANCE WITH LAWS. The Company shall comply in all material
respects with all applicable laws, regulations, and orders.
5.12. ADVICE OF CHANGE. The Company shall promptly advise Holding in
writing of any change resulting in, or reasonably likely to result in, a
Material Adverse Effect.
5.13. CONSENTS OF THIRD PARTIES. The Company shall use its commercially
reasonable efforts to secure, as soon as possible but in any event on or before
the Closing Date, the consent, in form and substance satisfactory to Holding and
its counsel, to the consummation of the transactions contemplated by this
Agreement by each Person whose consent or approval thereof may be necessary to
permit such consummation, including without limitation each party to any
contract, commitment or obligation of the Company under which such transactions
would constitute a default in any material respect or a material breach, would
accelerate obligations of the Company, or would permit cancellation of any such
contract by a Person other than the Company.
5.14. NO SHOPPING. Neither the Company nor any of the Principal
Stockholders shall negotiate for, solicit, discuss, negotiate, or enter into any
agreement or understanding, whether or not binding, with respect to the
issuance, sale, or transfer of any of the capital stock or substantial part of
the assets of the Company (other than sales of inventory in the ordinary course
of business) or any merger or other business combination of the Company to or
with any Person other than Holding or a Subsidiary of Holding.
5.15. DISCLOSURE SUPPLEMENTS. From time to time before the Closing, and
in any event immediately before the Closing, the Company shall promptly advise
Holding in writing of any matter hereafter arising or becoming known to any of
them that, if existing, occurring, or known at the date of this Agreement, would
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have been required to be set forth or described in such Disclosure Schedule, or
that is necessary to correct any information in such Disclosure Schedule that is
or has become inaccurate. No such disclosure shall be taken into account in
determining whether the conditions to Holding's or Acquisition's obligations to
consummate the transactions contemplated by this Agreement have been satisfied,
but such disclosures shall be taken into account in determining whether, and if
the transactions contemplated hereby are consummated, the Participating
Stockholders, and, if the transactions contemplated hereby are not consummated,
the Company, are liable to indemnify Holding and/or Acquisition pursuant to
Section 8.1 hereof.
6. CONDITIONS TO OBLIGATIONS OF HOLDING AND ACQUISITION. The obligations
of each of Holding and Acquisition, respectively, to consummate the transactions
contemplated hereby are subject to the satisfaction (to the extent not
specifically waived in writing by Holding), on or before the Closing Date, of
each of the conditions precedent set forth below. The Company shall use its
commercially reasonable efforts to cause the satisfaction on or before the
Closing Date of all of such conditions that impose obligations, or require
actions on the part of, the Company or any Holding Indemnitees, and the
Principal Stockholders shall use their respective commercially reasonable
efforts to ensure their respective compliance with the last sentence of Section
5.1 above.
6.1. REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by the Company and/or the Principal Stockholders in or pursuant
to this Agreement or in any statement, certificate, or other document delivered
to Holding or Acquisition pursuant hereto or in connection with the transactions
contemplated hereby shall have been correct when made and shall be correct, in
all material respects, at and as of the Closing.
6.2. COMPLIANCE WITH AGREEMENT. The Company and each of the Principal
Stockholders shall have performed and complied with all of their respective
obligations under this Agreement to be performed or complied with by them before
or at the Closing, including without limitation the execution and delivery of
all documents to be executed and delivered by any of them, or which any of them
are to cause to be executed and delivered, pursuant to Section 1.4 hereof.
6.3. NO LITIGATION. No restraining order or injunction shall prevent the
transactions contemplated by this Agreement and no litigation, arbitration,
action, suit, or proceeding shall be pending or threatened before any court,
arbitrator, administrative body, or other Person in which it will be or is
sought to restrain or prohibit or obtain damages or other relief in connection
with this Agreement or the consummation of the transactions contemplated hereby.
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6.4. NO MATERIAL CHANGE. There shall not have been, and there shall not be
threatened, any material damage to or loss or destruction of any properties or
assets owned or leased by the Company (whether or not covered by insurance) or
any material adverse change in the condition (financial or otherwise),
operations, business, prospects or assets of the Company, or imposition of any
law, rule or regulation which is reasonably likely to have a Material Adverse
Effect.
6.5. CLOSING CERTIFICATE. The Company shall have executed and delivered to
Holding, at and as of the Closing, a certificate, in form and substance
satisfactory to Holding and its counsel, certifying that the conditions referred
to in Sections 6.1 through 6.4 hereof have been satisfied.
6.6. OUTSTANDING COMPANY INDEBTEDNESS. The Company's aggregate
Indebtedness for borrowed money, excluding any Indebtedness with respect to (a)
the Jacksonville IRBs (as defined in Section 6.7(b) below) and (b) the Dividend
Notes, outstanding immediately prior to the Closing shall not exceed
$24,000,000.
6.7 FINANCING.
(a) A Rule 144A private placement of senior subordinated notes on terms
satisfactory to Holding and the Holding Stockholders which generates gross
proceeds to Holding or a Subsidiary of Holding of not less than $93,500,000
shall have been consummated.
(b) There shall be in effect commitments providing to Acquisition and
Holding at least $40,000,000 of senior debt financing from Bank of America N.T.
& S.A. on the terms set forth in the letter of intent from such lender dated
January 12, 1998, and the term-sheet attached thereto dated January 5, 1998, or
from another lender or other lenders on substantially similar terms and
conditions, or on such other terms and conditions as may be satisfactory to
Holding in its sole discretion, and in any case providing for the issuance of a
replacement letter of credit in favor of, and in form and substance satisfactory
to, Bank One of Springfield, Illinois, in its capacity as Trustee under a Trust
Indenture dated as of January 1, 1995, with respect to $7,460,000 in original
principal amount of City of Jacksonville, Illinois, Multi-Mode Industrial
Project Revenue Bonds, Series 1995 (AGI Incorporated Project) (the "Jacksonville
------------
IRBs").
----
6.8. APPROVAL OF COMPANY STOCKHOLDERS; DISSENTING SHARES.
(a) The Company shall have duly obtained the favorable vote or consent of
the holders of a number of shares of Company Common Stock sufficient to approve
this Agreement and the Merger under the Illinois Business Corporation Act and
under the Existing Shareholders' Agreement.
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(b) None of the holders of issued and outstanding shares of Company
Common Stock shall have both (i) given due notice, pursuant to Section 11.70 of
the Illinois Business Corporation Act, of their intention to demand that they be
paid the fair value of their shares if the Merger is effectuated, and (ii)
refrained from voting in favor of the Merger, unless each such holder shall have
executed and delivered to the Company a release in form and substance reasonably
acceptable to Holding and its counsel and the President and Secretary of the
Company shall have delivered to Holding a certificate to the foregoing effect
dated as of the Closing Date.
6.9. (INTENTIONALLY OMITTED)
6.10. REPAYMENT OF LOANS TO AFFILIATES. Each of the Participating
Stockholders, their Related Parties and all other Affiliates of the Company
shall have repaid in full all amounts owing by them to the Company.
6.11. OPINIONS OF COUNSEL. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel to the
Company and the Principal Stockholders, respectively, shall have delivered to
Holding and Acquisition written legal opinions addressed to them and to the
lenders, underwriters and/or other sources involved in providing financing for
the transactions contemplated hereby and dated on and as of the Closing Date,
which opinions shall be acceptable in form and substance to Holding and such
lenders, underwriters and/or other sources of financing and their respective
counsel.
6.12. HSR ACT. The waiting period with respect to the HSR Act
notifications filed by Holding and the Company (or their respective "ultimate
parent entities"), respectively, pursuant to Section 12.1 hereof shall have
expired or been duly terminated without receipt from the Federal Trade
Commission or the Department of Justice of any objection or unwithdrawn notice
of possible objection to the Merger or the other transactions contemplated
hereby.
6.13. ESCROW AGREEMENT. The Company, the Escrow Agent and the Escrowed
Stockholder Representative shall have executed and delivered to Holding the
Escrow Agreement, in form and substance acceptable to Holding and its counsel,
and the Escrow Agreement shall be in full force and effect.
6.14. INVESTMENT AGREEMENT. Each of the Continuing AGI Stockholders and
the Other Investors (each as defined in the Investment Agreement) shall have
executed and delivered to Holding the Investment Agreement, in form and
substance acceptable to Holding and its counsel, all conditions to the
effectiveness of the Investment Agreement other than the Merger shall have been
completed, and the Investment Agreement and the transactions contemplated
thereby shall close simultaneously with the Merger.
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6.15. PAYABLES STATUS. Holding shall be reasonably satisfied that there
shall have been no extension of the average time for payment by the Company of
its payables and rebates from the average time for such payment applicable in
the three-month period ending December 31, 1997.
6.16. PROCEEDINGS AND DOCUMENTS SATISFACTORY. All proceedings in
connection with the transactions contemplated by this Agreement and all
certificates and documents delivered to Holding and/or Acquisition pursuant to
this Agreement, or otherwise in connection with the Closing, shall be reasonably
satisfactory to Holding and Acquisition and their counsel.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE PRINCIPAL
STOCKHOLDERS. The obligations of each of the Company and the Principal
Stockholders, respectively, to consummate the transactions contemplated hereby
are subject to the satisfaction of each of the conditions precedent set forth
below on or before the Closing Date (to the extent not specifically waived in
writing by the Company and the Principal Stockholders). Holding and Acquisition
shall use their respective commercially reasonable efforts to cause the
satisfaction on or before the Closing Date of all of such conditions that impose
obligations, or require actions on the part of, any of them.
7.1. REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by Holding and/or Acquisition in or pursuant to this Agreement
or in any statement, certificate, or other document delivered to the Company or
the Principal Stockholders pursuant hereto or in connection with the
transactions contemplated hereby shall have been correct when made and shall be
correct, in all material respects, at and as of the Closing.
7.2. COMPLIANCE WITH AGREEMENT. Holding and Acquisition shall have
performed and complied with all of their respective obligations under this
Agreement to be performed or complied with by them before or at the Closing,
including without limitation the execution and delivery of all documents to be
executed and delivered by any of them pursuant to Section 1.4 hereof.
7.3. NO LITIGATION. No restraining order or injunction shall prevent the
transactions contemplated by this Agreement and no litigation, arbitration,
action, suit, or proceeding shall be pending or threatened before any court,
arbitrator, administrative body, or other Person in which it will be or is
sought to restrain or prohibit or obtain damages or other relief in connection
with this Agreement or the consummation of the transactions contemplated hereby.
7.4. CLOSING CERTIFICATE. Holding and Acquisition shall have executed and
delivered to the Company and the Stockholders, at and as of the Closing,
certificates, in form and substance satisfactory to the Company and the
Principal
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Stockholders and their counsel, certifying that the conditions referred to in
Sections 7.1 through 7.3 hereof have been satisfied.
7.5. FINANCING.
(a) A Rule 144A private placement of senior subordinated notes which
generates gross proceeds to Holding or a Subsidiary of Holding of not less than
$93,500,000 shall have been consummated.
(b) There shall be in effect commitments providing to Acquisition and
Holding at least $40,000,000 of senior debt financing from Bank of America N.T.
& S.A. on the terms set forth in the letter of intent from such lender dated
January 12, 1998, and the term-sheet attached thereto dated January 5, 1998, or
from another lender or other lenders on substantially similar terms and
conditions, or on such other terms and conditions as may be satisfactory to
Holding in its sole discretion, and in any case providing for the issuance of a
replacement letter of credit in favor of, and in form and substance satisfactory
to, Bank One of Springfield, Illinois, as Trustee for the Jacksonville IRBs.
7.6. APPROVAL OF COMPANY STOCKHOLDERS; DISSENTING SHARES.
(a) The Company shall have duly obtained the favorable vote or consent of
the holders of a number of shares of Company Common Stock sufficient to approve
this Agreement and the Merger under the Illinois Business Corporation Act.
(b) None of the holders of issued and outstanding shares of Company Common
Stock shall have both (i) given due notice, pursuant to Section 11.70 of the
Illinois Business Corporation Act, of their intention to demand that they be
paid the fair value of their shares if the Merger is effectuated, and (ii)
refrained from voting in favor of the Merger, unless each such holder shall have
executed and delivered to the Company a release in form and substance reasonably
acceptable to the Company and its counsel.
7.7. (INTENTIONALLY OMITTED).
7.8. OPINION OF COUNSEL. ▇▇▇▇▇▇▇ ▇▇▇▇ LLP, counsel to Holding and
Acquisition, shall have delivered to the Company and the Principal Stockholders
a written legal opinion addressed to them and dated on and as of the Closing
Date, which opinion shall be acceptable in form and substance to the Company and
the Principal Stockholders and their counsel.
7.9. HSR ACT. The waiting period with respect to the HSR Act notifications
filed by Holding and the Company (or their respective "ultimate parent
-38-
entities"), respectively, pursuant to Section 12.1 hereof shall have expired or
been duly terminated without receipt from the Federal Trade Commission or the
Department of Justice of any objection or unwithdrawn notice of possible
objection to the Merger or the other transactions contemplated hereby.
7.10. ESCROW AGREEMENT. Holding and the Escrow Agent shall have executed
and delivered to the Escrowed Stockholder Representative the Escrow Agreement,
in form and substance acceptable to the Company and its counsel, and the Escrow
Agreement shall be in full force and effect.
7.11. INVESTMENT AGREEMENT. Holding and each of the Holding Stockholders
shall have executed and delivered to the Principal Stockholders the Investment
Agreement, in form and substance acceptable to the Company and the Principal
Stockholders and their counsel, all conditions to the effectiveness of the
Investment Agreement other than the Merger shall have been completed, and the
Investment Agreement and the transactions contemplated thereby shall close
simultaneously with the Merger.
7.12. GENERAL RELEASE AND AGREEMENT IN CONTEMPLATION OF MERGER. Each of
the Participating Stockholders shall have executed and delivered to the Company
a General Release and Agreement in Contemplation of Merger in substantially the
form attached hereto as Exhibit 7.12.
------- ----
7.13 PROCEEDINGS AND DOCUMENTS SATISFACTORY. All proceedings in
connection with the transactions contemplated by this Agreement and all
certificates and documents delivered to the Company and the Principal
Stockholders pursuant to this Agreement, or otherwise in connection with the
Closing, shall be reasonably satisfactory to the Company and the Principal
Stockholders and their counsel.
8. INDEMNIFICATION.
8.1. INDEMNIFICATION OF HOLDING AND AFFILIATES.
(a) Subject to the limitations set forth in Section 8.5 hereof, if the
transactions contemplated hereby are not consummated, the Company shall
indemnify, defend and hold harmless each of the Holding Indemnitees from and
against any and all Damages related to or arising, directly or indirectly, out
of or in connection with any AGI Indemnified Claims. Notwithstanding the
foregoing, in no event shall the aggregate damages payable pursuant to this
Section 8.1(a) by the Company exceed $3,500,000 or, if less, the aggregate
amount of all costs, expenses and disbursements of the Holding Indemnitees
incurred in connection with the transactions contemplated hereby and by the
Investment Agreement.
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(b) Subject to the limitations set forth in Section 8.5 hereof, if the
transactions contemplated hereby are consummated, each of the AGI Indemnitors
shall jointly and severally, but subject to the limitations set forth below in
this paragraph (b) and in Section 8.5, indemnify, defend and hold harmless each
of the Holding Indemnitees from and against any and all Damages related to or
arising, directly or indirectly, out of or in connection with any AGI
Indemnified Claims. Notwithstanding the foregoing, the aggregate liability of
any AGI Indemnitor with respect to any AGI Indemnified Claim shall not exceed:
(i) except for any Principal Stockholder with respect to AGI
Indemnified Claims resulting from a Principal-Stockholder-Specific Breach by
such Principal Stockholder, such AGI Indemnitor's Pro Rata Share of the
aggregate amount of Damages from such Claim; or
(ii) except for Principal Stockholders with respect to Unlimited
Claims, (x) such AGI Indemnitor's Pro Rata Share of the Maximum AGI Indemnity
Amount, minus (y) the amount of Damages with respect to all AGI Prior Claims
-----
which have been paid by or on behalf of such AGI Indemnitor;
provided that the aggregate liability of any Principal Stockholder with respect
to Damages (whether arising from Unlimited Claims or relating to Principal-
Stockholder-Specific Breaches or otherwise) shall be limited to such Principal
Stockholder's Total After-Tax Consideration. Each of the parties hereto
acknowledges and agrees that except for the Principal Stockholders' liabilities
with respect to Unlimited Claims (including, for the avoidance of doubt,
Unlimited Claims arising from Principal-Stockholder-Specific Breaches), no AGI
Indemnitor shall be liable for more than an aggregate of his Pro Rata Share of
the Maximum AGI Indemnity Amount with respect to any and all AGI Indemnified
Claims and claims under Section 8 of the Investment Agreement.
8.2. INDEMNIFICATION OF THE COMPANY AND ITS STOCKHOLDERS. Subject to the
limitations set forth in Section 8.5 hereof and in Section 8 of the Investment
Agreement, regardless of whether the transactions contemplated hereby are
consummated, the Holding Indemnitors jointly and severally shall indemnify,
defend, and hold harmless each of the AGI Indemnitees, from and against any and
all Damages related to or arising, directly or indirectly, out of any Holding-
Indemnified Claim, without duplication of any indemnification provided for under
the Investment Agreement. Notwithstanding the foregoing, the aggregate
liability of the Holding Indemnitors with respect to all Holding Indemnified
Claims other than Holding Unlimited Claims shall not exceed $2,305,882, minus
-----
the amount of all Damages with respect to all Holding Prior Claims which have
been paid by or on behalf of the Holding Indemnitors; provided, however, that
the aggregate liability of any Holding Indemnitor which is also an Investor (as
defined pursuant to the Investment Agreement) pursuant hereto and pursuant to
Section 8 of the
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Investment Agreement (including with respect to Holding Unlimited Claims) may
not exceed the Share Value of all shares of common stock of Holding owned by
such Investor immediately after consummation of the transactions contemplated by
the Investment Agreement.
8.3. CLAIMS. In the event that any party hereto (the "Indemnified Party")
----------- -----
desires to make a claim against another party hereto (the "Indemnifying Party,"
------------ -----
which term shall include all indemnifying parties if more than one) in
connection with any third-party litigation, arbitration, action, suit,
proceeding, claim, or demand at any time instituted against or made upon it for
which it may seek indemnification hereunder (a "Third-Party Claim"), the
----------- -----
Indemnified Party shall notify the Indemnifying Party of such Third-Party Claim
and of its claims of indemnification with respect thereto, provided, that
failure to give such notice shall not relieve the Indemnifying Party of its
indemnification obligations under this Section 8 except to the extent, if at
all, that the Indemnifying Party shall have been actually prejudiced thereby.
Upon receipt of such notice from the Indemnified Party, the Indemnifying Party
shall be entitled to participate in the defense of such Third-Party Claim, and
if and only if each of the following conditions is satisfied, the Indemnifying
Party may assume the defense of such Third-Party Claim, and in the case of such
an assumption the Indemnifying Party shall have the authority to negotiate,
compromise, and settle such Third-Party Claim, provided, that the Indemnifying
Party shall not agree to any settlement of such Third-Party Claim that does not
include an unconditional release of all liability of each Indemnified Party with
respect to such Third-Party Claim, or which imposes on any Indemnified Party the
burden of any injunctive or equitable relief, without in either case the prior
written consent of such Indemnified Party (such consent not to be unreasonably
withheld or delayed):
(i) the Indemnifying Party confirms in writing that it is obligated
hereunder to indemnify the Indemnified Party in full with respect to such
Third-Party Claim; and
(ii) the Indemnified Party does not give the Indemnifying Party
written notice that the Indemnified Party's counsel has determined, in its
reasonable opinion, that an irreconcilable conflict of interest make
separate representation by the Indemnified Party's counsel advisable.
The Indemnified Party shall retain the right to employ its own counsel and
to participate in the defense of any Third-Party Claim, the defense of which has
been assumed by an Indemnifying Party pursuant hereto, but such Indemnified
Party shall bear and shall be solely responsible for its own costs and expenses
in connection with such participation. The Indemnified Party shall make no
settlement or compromise in connection with any Third-Party Claim (whether or
not the defense thereof has been assumed by the Indemnifying Party) that would
impose
-41-
upon any Indemnifying Party the burden of any injunctive or equitable relief, or
would give rise to liability hereunder or otherwise on the part of any
Indemnifying Party, without the prior written consent of such Indemnifying Party
(such consent not to be unreasonably withheld or delayed).
8.4. PAYMENT OF CLAIMS.
(a) In the event of any claims for indemnification under this Section 8,
the claimant shall advise the party or parties who are required to provide
indemnification therefor in writing of the amount and circumstances surrounding
such claim. With respect to liquidated claims, if within thirty days the other
party has not contested such claim in writing, such other party shall (subject
to the provisions of Section 8.4(b) below) pay the full amount thereof within
ten days after the expiration of such thirty-day period. Any amount payable by
an Indemnifying Party in respect of indemnification pursuant to this Agreement
may be set off and deducted by the Indemnified Party from and against any
amounts that may otherwise be or become payable by such Indemnified Party to
such Indemnifying Party, including without limitation amounts payable pursuant
to any of the Other Agreements. No recourse shall be sought against the Escrow
Amount for any AGI Indemnified Claim unless, substantially simultaneously with
seeking recourse thereagainst, the applicable Indemnified Party uses
commercially reasonable efforts to seek recourse with respect to such AGI
Indemnified Claim against the Non-Escrowed Stockholders liable with respect
thereto. Amounts owed by any Escrowed Stockholder as an Indemnifying Party
hereunder shall be paid solely from the Escrow Amount pursuant to, and subject
to the limitations set forth in, the Escrow Agreement. The unpaid balance of
any claim for Damages under this Section 8 shall bear interest at the rate
announced from time to time by BankBoston, N.A., as its "Base Rate" plus two
----
percent, from the date notice of such claim is given by the Indemnified Party to
the Indemnifying Party.
(b) In the event an Indemnified Party is either a Holding Indemnitee or an
Investor under the Investment Agreement, and the Indemnifying Party is also an
Investor under, and acquires shares of Holding pursuant to, the Investment
Agreement, the Indemnifying Party shall have the option, upon final
determination of the dollar amount of a claim for indemnification payable to
such Indemnified Party in accordance with this Section 8, by written notice to
such Indemnified Party delivered within ten (10) business days after the date of
such determination, to elect to satisfy such claim, or any part thereof, by
transferring without further consideration to such Indemnified Party, free and
clear of all Liens, that number of shares of New Common Stock (as defined in the
Investment Agreement), rounded to the second decimal place, which is equal to:
(i) if the Indemnified Party is (A) a party other than an Investor
pursuant to the Investment Agreement or (B) an Investor pursuant to the
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Investment Agreement seeking indemnification other than on account of, or
related to, Damages suffered by Holding or any of its Subsidiaries, (x) the
final determined dollar amount of such claim (or such portion thereof as the
applicable Indemnifying Party is electing to satisfy pursuant to this Section
8.4(b)) divided by (y) the Share Value; and
(ii) if the Indemnified Party is an Investor pursuant to the
Investment Agreement and is seeking indemnification on account of Damages
suffered by Holding or any of its Subsidiaries, (x) such Investor's pro rata
directly- or indirectly-allocable portion of the dollar amount of the Damages
suffered by Holding or such Subsidiary (or such portion thereof as the
applicable Indemnifying Party is electing to satisfy pursuant to this Section
8.4(b)), calculated on the same basis as is set forth in Section 8.5(a) of the
Investment Agreement, divided by (y) the Adjusted Share Value (as defined
below).
For the purposes hereof, the term "Adjusted Share Value" shall mean the Share
-------- ----- -----
Value, reduced to reflect the per share reduction in the value of New Common
Stock solely as a result of the Damages on account of which indemnification is
being sought, and as appropriately adjusted from time to time to reflect stock
splits, combinations, recapitalizations or the like; provided, however, that (1)
-------- -------
with respect to AGI Indemnified Claims, other than Unlimited Claims, the
aggregate amount of the adjustment shall not exceed $3,500,000, and (2) with
respect to Holding Indemnified Claims, other than Holding Unlimited Claims, the
aggregate amount of the adjustment shall not exceed $2,305,882.
8.5. LIMITATIONS OF LIABILITY.
(a) No Indemnifying Party shall be required to indemnify an Indemnified
Party hereunder except to the extent that (i) the aggregate amount of Damages
(including Damages from Unlimited Claims) for which the Holding Indemnitees, on
the one hand, pursuant to Section 8.1 hereof and Section 8.2 of the Investment
Agreement, are otherwise entitled to indemnification, or would have been so
entitled but for the limitations on the liabilities of the AGI Indemnitors set
forth in Section 8.1(b) hereof, exceeds an aggregate of $150,000, or (ii) the
aggregate amount of Damages (including Damages from Unlimited Holding Claims, as
defined in the Investment Agreement) for which the AGI Indemnitees, on the other
hand, pursuant to Section 8.2 hereof and Section 8.1 of the Investment
Agreement, are otherwise entitled to indemnification exceeds an aggregate of
$100,000, whereupon such Indemnified Parties shall be entitled to
indemnification in the amount by which the aggregate amount of all such Damages
exceeds the applicable amounts referred to in clauses (i) or (ii) above, subject
to the limitations on maximum amount of recovery set forth in Sections 8.1 and
8.2 hereof, respectively.
-43-
(b) No Indemnifying Party shall be liable for any Damages pursuant to this
Section 8 unless a written claim for indemnification in accordance with Section
8.4 is given by the Indemnified Party to the Indemnifying Party with respect
thereto, subject to the following proviso, within (i) in the case of any Damages
related to or arising, directly or indirectly from any breach of the
representations and warranties in Section 3.13 hereof ("Safety and Environmental
Matters"), two years, and (ii) otherwise one year after the Closing; provided,
that these time limitations shall not apply to any Unlimited Claims, for which
indemnification shall have no time limitation except as otherwise imposed by
law.
(c) The amount of any Damages otherwise payable to any Indemnified Party
in respect of any breach of the representations and warranties set forth in
Sections 3 and/or 4 of this Agreement shall be reduced to the extent that such
Indemnified Party actually realizes, by reason of such Damages, any tax benefit
that is not offset by any corresponding adjustment of the tax attributes of such
Indemnified Party or any of his or its assets (e.g., any tax deduction available
to such Indemnified Party in respect of such Damages shall not be deemed to
result in a tax benefit to such Indemnified Party to the extent that such tax
deduction results in a decrease in such Indemnified Party's basis in any
securities or other assets). In the event that any such tax benefit is actually
realized by an Indemnified Party subsequent to the receipt by such Indemnified
Party of an indemnification payment hereunder in respect of the Damages to which
such tax benefit relates, appropriate refunds shall be made regarding the amount
of such indemnification payment.
(e) No Indemnifying Party shall be liable pursuant to this Section 8 for
lost profits or special or consequential Damages, even if notified in advance of
the possibility thereof.
(f) Each of the parties hereto agrees that its sole recourse for any
breach or default hereunder (other than any such breach or default under or with
respect to Section 9.1 or 9.2 hereof) or under the Investment Agreement, or for
any other matter as to which indemnification is provided to it in this Section 8
or in Section 8 of the Investment Agreement, shall be the indemnification
provisions set forth herein and therein, and, to the extent applicable, the
Escrow Agreement and the Escrow Amount held thereunder.
9. OTHER COVENANTS.
9.1. CONFIDENTIAL INFORMATION.
(A) BEFORE THE CLOSING. Any and all non-publicly available information
disclosed by or on behalf of the Company or the Principal Stockholders or their
representatives to Holding or Acquisition or their representatives, or by or on
behalf of Holding or Acquisition or their representatives to the Company or the
-44-
Principal Stockholders or their representatives, as part of or in connection
with the negotiations leading to the execution of this Agreement, or in
furtherance thereof, which information was not already known to the receiving
Person, as the case may be, shall remain confidential until the Closing Date,
except to the extent that Holding or Acquisition in its reasonable judgment
must disclose any such information to banks and other institutional lenders in
the process of obtaining financing for the transactions contemplated hereby. If
the Closing does not take place for any reason, each of the parties agrees not
to further divulge or disclose or use for their benefit or purposes any such
information of any other party at any time in the future unless it has otherwise
become public through no action or omission on the part of any party required
hereunder to keep such information confidential. The information intended to be
protected hereby shall include without limitation information with respect to
finances, customers, sales, representatives, and anything else having an
economic or pecuniary benefit to the disclosing party.
Notwithstanding the foregoing, if any party is required by law or
regulation to disclose any information covered by this Section 9.1(a), the party
under such disclosure obligation will provide the party who disclosed such
information with prompt notice of such disclosure obligation so that the
disclosing party may seek a protective order or take other appropriate action
and/or waive compliance with this Section 9.1(a) to the extent of such required
disclosure. In the absence of such a waiver, if any party is, in the opinion of
its counsel, compelled to disclose any such information of any other party upon
pain of liability for contempt or other censure or penalty, the party under such
disclosure obligation may disclose such information to the relevant court or
other tribunal or governmental authority without liability hereunder, but
notwithstanding such disclosure, such information shall remain confidential
under this Section 9.1(a) after such disclosure.
(B) AFTER THE CLOSING. If the transactions contemplated hereby are
consummated, each of the Principal Stockholders shall maintain the
confidentiality of all confidential, sensitive, or proprietary information of
the Surviving Corporation and/or any of its Subsidiaries, including without
limitation with respect to their respective businesses, finances, affairs, and
technology, which shall be and remain the exclusive property of the Surviving
Corporation and/or such Subsidiary, as the case may be, and unless previously
authorized in writing by Holding, and except with respect to information that
has otherwise become public through no action or omission on the part of any of
the Principal Stockholders, shall not disclose any such information to any third
party, or use it for any purpose other than in the discharge of such Principal
Stockholder's respective employment responsibilities in the ordinary course of
the Surviving Corporation's business.
Notwithstanding the foregoing, if any of the Principal Stockholders is
required by law or regulation to disclose any confidential, sensitive, or
proprietary information of the Surviving Corporation and/or any of its
Subsidiaries, such
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Principal Stockholder will provide each of the Surviving Corporation and Holding
with prompt notice of such disclosure obligation so that the Surviving
Corporation and/or Holding may seek a protective order or take other appropriate
action and/or waive compliance with this Section 9.1(b) to the extent of such
required disclosure. In the absence of such a waiver, if any of the Principal
Stockholders is, in the opinion of his counsel, compelled to disclose any such
information upon pain of liability for contempt or other censure or penalty,
such Principal Stockholder may disclose such information to the relevant court
or other tribunal or governmental authority without liability hereunder, but
notwithstanding such disclosure, such information shall remain confidential
under this Section 9.1(b) after such disclosure.
9.2. NON-COMPETITION, ETC. In order to induce Holding and Acquisition to
enter into this Agreement and to consummate the transactions contemplated
hereby, the Principal Stockholders hereby covenant as follows, which covenants
shall be in addition and without prejudice to any other noncompetition,
nonsolicitation, and/or similar covenants to which any of the Principal
Stockholders or any of their Affiliates may be subject from time to time,
including without limitation those set forth in the agreements referred to in
Section 1.4(c) hereof:
(A) NON-COMPETITION. Without limiting or restricting any Principal
Stockholder's non-competition or non-solicitation obligations under any other
agreement between such Principal Stockholder and Holding, the Company or any
Affiliate of either, for the period of two years following the Effective Time,
which period shall automatically be extended by a period of time equal to any
period in which any of the Principal Stockholders and/or any of their Affiliates
is in breach of any obligations under this Section 9.2 (including any such
extension, the "Restricted Period"), each of the Principal Stockholders and
---------- ------
their respective Affiliates shall not engage, directly or indirectly (except as
a stockholder, director, officer, and/or employee of Holding and/or the
Surviving Corporation), as a proprietor, equityholder, investor (except as a
passive investor holding not more than 3% of the outstanding capital stock of a
publicly held company), lender, partner, director, officer, employee,
consultant, or representative, or in any other capacity, in the manufacture,
design, printing or production of specialty packaging products for use in the
cosmetics, entertainment (including recorded music, video, software, multimedia
and electronic gaming) or tobacco markets, or in any other business presently
being conducted by the Company anywhere in the Restricted Area (each of the
Principal Stockholders hereby acknowledging that the Company is currently doing
business throughout the Restricted Area), provided that the provision of legal
or accounting professional services by any natural person who is an Affiliate of
a Principal Stockholder to any such business shall not by itself constitute a
breach by such Principal Stockholder or the applicable Affiliate of this Section
9.2.
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(B) NON-SOLICITATION OF EMPLOYEES, ETC. During the Restricted Period, none
of the Principal Stockholders nor any of their respective Affiliates shall
directly or indirectly recruit, solicit, induce, or attempt to induce any of the
employees or independent contractors of the Surviving Corporation or any of its
Subsidiaries to terminate their employment or contractual relationship with the
Surviving Corporation or such Subsidiary; and none of them shall assist any
other Person to do so, or be a proprietor, equityholder, investor (except as a
passive investor holding not more than 3% of the capital stock of a publicly
held company), lender, partner, director, officer, employee, consultant, or
representative of any Person who does or attempts to do so.
(C) NON-SOLICITATION OF CUSTOMERS, SUPPLIERS, ETC. During the Restricted
Period, none of the Principal Stockholders nor any of their respective
Affiliates shall directly or indirectly solicit, divert, take away, or attempt
to divert or take away, from the Surviving Corporation or any of its
Subsidiaries any of the business or patronage of any of their respective
customers, clients, accounts, vendors, or suppliers, or induce or attempt to
induce any such Person to reduce the amount of business it does with the
Surviving Corporation or any of its Subsidiaries, and none of the Principal
Stockholders nor any of their respective Affiliates shall assist any other
Person to do so, or be a proprietor, equityholder, investor (except as a passive
investor holding not more than 3% of the capital stock of a publicly held
company), lender, partner, director, officer, employee, consultant, or
representative of any Person who does or attempts to do so.
(D) NON-DISPARAGEMENT. None of the Principal Stockholders nor any of their
respective Affiliates shall disparage, deprecate or make any negative comment
with respect to the Company or the Surviving Corporation or their respective
businesses, operations or properties.
(E) EQUITABLE REMEDIES. Each of the Principal Stockholders hereby
acknowledges that any breach by him or any of his Affiliates of their respective
obligations under this Section 9.2 would cause substantial and irreparable
damage to the other parties to this Agreement, and that money damages would be
an inadequate remedy therefor, and accordingly, acknowledges and agrees that
each of the other parties shall be entitled to an injunction, specific
performance, and/or other equitable relief to prevent the breach of such
obligations (in addition to all other rights and remedies to which such party
may be entitled in respect of any such breach).
(F) MODIFICATION. In the event that a court of competent jurisdiction
determines that any of the provisions of this Section 9.2 would be unenforceable
as written because they cover too extensive a geographic area, too broad a range
of activities, or too long a period of time, or otherwise, then such provisions
shall automatically be modified to cover the maximum geographic area, range of
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activities, and period of time as may be enforceable, and in addition, such
court is hereby expressly authorized so to modify this Agreement and to enforce
it as so modified. No invalidity or unenforceability of any section of this
Agreement or any portion thereof shall affect the validity or enforceability of
any other section or of the remainder of such section.
9.3 CONDUCT OF ACQUISITION'S BUSINESS PENDING CLOSING. From and after the
date of this Agreement and until the Effective Time, except as specifically
contemplated by, in furtherance or, or incidental to the transactions
contemplated by this Agreement, or as otherwise specifically consented to by the
Company in writing, Acquisition shall not incur any liabilities, conduct any
business, or enter into any contracts or commitments.
9.4 PARTICIPATION IN POST-CLOSING AUDITS. If the Surviving Corporation
receives notice from a taxing authority of its intention to audit any return of
the Company for any period prior to the Effective Time, or any proposed
adjustment by any taxing authority with respect to any such period, the
Surviving Corporation shall inform the Stockholder Representatives in writing of
the intended audit or proposed adjustment promptly after receipt of such notice.
Upon notice from either Stockholder Representative, the Surviving Corporation
shall permit the Stockholder Representatives, at their own expense, to control
any such audit or contest any such proposed adjustment and shall cooperate in
providing access to any books, records or other documents or information
reasonably required by either Stockholder Representative with respect to such
audit or proposed adjustment provided that (a) the Stockholder Representatives
shall have confirmed in writing that the AGI Indemnitors shall indemnify the
Surviving Corporation with respect to all liability arising from such audit or
proposed adjustment, subject to the limitations set forth in Section 8 hereof
and in the Investment Agreement, (b) the Surviving Corporation shall have the
right, at its own expense, to participate in (but not control) any such audit or
proposed adjustment, and (c) the Stockholder Representatives shall not settle or
compromise any such audit or proposed adjustment without the prior written
consent of the Surviving Corporation, if for any reason (including the
limitations on indemnity set forth in Section 8 hereof or in the Investment
Agreement, or collateral effects of the audit or proposed adjustment that would
affect periods after the Effective Time) such settlement would adversely affect
the Surviving Corporation after the Effective Time.
9.5 TAX INDEMNITY. The Surviving Corporation shall indemnify, defend and
hold harmless the Participating Stockholders from and against their respective
liability with respect to Taxes resulting from any final determination (or
settlement) of an adjustment (by reason of an amended return, claim for refund,
audit or otherwise) resulting in a net increase in income or gain or a net
decrease in any loss or deduction with respect to the Company for any period
prior to the Effective Time, and a corresponding net decrease in the liability
for the Taxes payable by the
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Surviving Corporation; provided, however, the amount of any such indemnification
-------- -------
payment shall be reduced by an amount equal to the federal or state tax benefit,
including interest, arising due to deductions allowable for federal or state
taxes paid by the applicable Participating Stockholder in respect of any taxable
income shifted from a period prior to the Effective Date to a period after the
Effective Date. Moreover, and notwithstanding the foregoing, the amount of any
such indemnification payment required to be made by the Surviving Corporation
shall not exceed the amount, if any, by which (i) the amount of the reduction in
the liability for Taxes and interest thereon of the Surviving Corporation that
results form the adjustment exceeds (ii) all reasonable costs incurred by the
Surviving Corporation attributable to securing such reduction in liability for
Taxes.
9.6 INDEMNIFICATION OF AGI OFFICERS, DIRECTORS AND AGENTS. From and after
the Effective Time, Holding shall, and shall cause the Surviving Corporation to,
indemnify and hold harmless each and every present and former officer, director,
employee and agent of AGI (each a "Former Agent") against any and all Damages to
------ -----
such Former Agent arising at or prior to, or arising from conduct at or prior
to, the Effective Time, to the same extent, and on terms no less favorable to
such Former Agent, as would have been provided pursuant to any of AGI's By-laws
or Certificate of Incorporation, the Existing Shareholders' Agreement, or any
other contract between AGI and such Former Agent described in Section 9.6 of the
Disclosure Schedule, in each case as any such document or agreement is in effect
on the date hereof, provided that no such indemnification shall provide
indemnity against any Claim against any such Former Agent pursuant to Section 8
hereunder or Section 8 of the Investment Agreement.
10. TERMINATION.
(a) This Agreement may be terminated at any time by agreement of all of
the parties hereto.
(b) In the event that (i) the Federal Trade Commission or Department of
Justice raises any objection to the Merger or the other transactions
contemplated hereby, which objection is not withdrawn within 45 days after
notice thereof is given, (ii) any temporary restraining order, preliminary or
permanent injunction, or other order issued by any court of competent
jurisdiction, or other binding legal restraint or prohibition preventing the
consummation of the Merger or the other transactions contemplated hereby shall
at any time be in effect for a period of more than 20 consecutive days, or (iii)
the Closing does not occur on or before March 31, 1998, either Holding or the
Company may terminate this Agreement at any time after the close of business on
the date such termination right arises hereunder by delivering written notice to
the other, provided that such failure to close is not a result of a breach by
the terminating party (including, in the case of any such termination by
Holding, any such breach by Acquisition, or in the case of any such
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termination by the Company, any such breach by any of the Principal
Stockholders) of any obligations hereunder.
(c) Any termination of this Agreement shall not affect the rights or
obligations of any party arising, or based on actions or omissions occurring,
before such termination. The provisions of Sections 8 ("Indemnification"), 9.1
("Confidential Information"), and 12 ("General") (other than Section 12.1
("Cooperation")) hereof shall survive any termination of this Agreement.
11. DEFINITIONS.
11.1. CERTAIN DEFINED TERMS. As used in this Agreement, the following
terms have the following respective meanings:
"Affiliate" means, with respect to a specified Person, (i) any Person that
---------
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified Person and (ii)
any Person that is an officer, director, trustee, member or general partner of,
or serves in a similar capacity with respect to, the specified Person, or of
which the specified Person is an officer, director, trustee, member or general
partner, or with respect to which the specified Person serves in a similar
capacity or (iii) any Person who is a spouse, parent, sibling or lineal
descendant of such Person or any Person described in clauses (i) or (ii),
provided that for purposes of Section 9.2 hereof, this clause (iii) of the
definition of "Affiliate" shall only extend to include any Person who is a
spouse or a dependent child of such Person or any Person described in clauses
(i) or (ii). For purposes of this definition the term "control" when used with
-------
respect to a Person means (a) the beneficial ownership (as defined in Rule 13d-d
promulgated under the Securities and Exchange Act of 1934, as amended) of 50
percent or more of the voting interests in such Person, or (b) the possession,
direct or indirect, 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.
"Affiliated Group" has the meaning given to it in Section 1504 of the Code,
---------- -----
and in addition includes any analogous combined, consolidated, or unitary group,
as defined under any applicable state, local, or foreign income Tax law.
"AGI Indemnified Claims" means, collectively, any claim for Damages
--- ----------- ------
resulting from:
(i) any breach by the Company or any of the Principal Stockholders
of any representation, warranty, covenant, agreement, obligation, or
undertaking made by the Company or any of the Principal Stockholder in this
Agreement (including any schedule or exhibit hereto), or
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any other agreement, instrument, certificate, or other document delivered
by or on behalf of the Company or any of the Principal Stockholder in
connection with this Agreement or any of the transactions contemplated
hereby;
(ii) any actual or threatened litigation or other proceedings or
claims by or on behalf of any stockholder of the Company related to or
arising, directly or indirectly, out of or in connection with the
transactions contemplated by this Agreement, including without limitation
the Merger; and
(iii) all claims for damages consisting of the difference (if any,
but not less than zero) between (x) the aggregate amount of consideration
paid or payable by the Surviving Corporation in respect of all Dissenting
Shares, minus (y) the aggregate amount of cash consideration that the
-----
Surviving Corporation would have been required to pay in respect of such
shares had the holders thereof not exercised their appraisal rights under
Section 11.65 and 11.70 of the Illinois Business Corporation Act but
instead had accepted the cash consideration that would have been payable in
respect of such shares pursuant to Sections 1.2(d)(i) and 1.3 hereof.
"AGI Indemnitees" means the Participating Stockholders, the SAR Holders,,
--- -----------
and the holder of the ▇▇▇▇▇▇▇▇ Option and if the transactions contemplated
hereby are not consummated, also the Company and its directors, officers,
employees, representatives and other Affiliates, and each individually an "AGI
---
Indemnitee".
----------
"AGI Indemnitors" means, collectively, each of the Participating
---------------
Stockholders, the SAR Holders, and the holder of the ▇▇▇▇▇▇▇▇ Option, and each
individually, an "AGI Indemnitor".
--------------
"AGI Prior Claims" means, as of the date on which any Claim is to be paid,
--- ----- ------
(x) with respect to any AGI Indemnitor other than a Principal Stockholder, the
aggregate amount of Damages with respect to AGI Indemnified Claims (whether or
not Unlimited Claims or relating to Principal-Stockholder-Specific Breaches) for
which such AGI Indemnitor was liable pursuant hereto, and (y) with respect to
any Principal Stockholder, the aggregate amount of Damages with respect to (1)
AGI Indemnified Claims other than Unlimited Claims and (2) claims against such
Principal Stockholder pursuant to Section 8 of the Investment Agreement, (in
either case) for which such AGI Indemnitor was liable.
"Company Common Stock" means the Company's common stock, $1.00 par value
------- ------ -----
per share, prior to the Effective Time.
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"Damages" means, with respect to any Person, all claims, liabilities,
-------
obligations, losses, damages, costs and expenses, including without limitation
the fees and disbursements of counsel, of or to such Person.
"Holding-Indemnified Claims" means, collectively, any claim for Damages
------------------- ------
resulting from any failure or breach by Holding and/or Acquisition of any
representation, warranty, covenant, agreement, obligation, or undertaking made
by them or any of them in this Agreement (including any schedule or exhibit
hereto), or any other agreement, instrument, certificate, or other document
delivered by or on behalf of them or any of them in connection with this
Agreement or any of the transactions contemplated hereby.
"Holding Indemnitees" means, collectively, each of the Holding and
------- -----------
Acquisition, and each of their respective stockholders (without duplication),
directors, officers, employees, representatives and other Affiliates, together
with, if the Merger is consummated, the Surviving Corporation, and each of its
directors, officers, employees, representatives and other Affiliates, and each
individually a "Holding Indemnitee".
------- ----------
"Holding Indemnitors" means, collectively, (a) each of Holding and its
------- -----------
Subsidiaries, jointly and severally, if the transactions contemplated hereby are
not consummated, and (b) subject to the limitations set forth in Section 8.1(b)
of the Investment Agreement, Heritage and the ▇▇▇▇▇▇ Stockholders, if the
transactions contemplated hereby are consummated.
"Holding Prior Claims" means, as of any date, the aggregate amount of
------- ----- ------
Damages with respect to Holding Indemnified Claims and claims pursuant to
Section 8 of the Investment Agreement, other than Holding Unlimited Claims.
"Holding Unlimited Claims" shall mean, collectively, "Unlimited Holding
------- --------- ------
Claims" pursuant to and as defined in the Investment Agreement, and Holding
Indemnified Claims arising from any breach of the representations and warranties
made pursuant to Section 4.5 hereof.
"▇▇▇▇▇▇▇▇ Option" shall mean that certain stock option to purchase 25,000
-------- ------
shares of Company Common Stock for an aggregate exercise price of $187,500
issued by the Company to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
"Indebtedness", as applied to any Person, means (a) all indebtedness of
------------
such Person for borrowed money, whether current or funded, or secured or
unsecured, (b) all indebtedness of such Person for the deferred purchase price
of property or services represented by a note or other security, (c) all
indebtedness of such Person created or arising under any conditional sale or
other title retention agreement (even if the rights and remedies of the seller
or lender under such agreement in the
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event of default are limited to repossession or sale of specific property), (d)
all indebtedness of such Person secured by a purchase money mortgage or other
Lien to secure all or part of the purchase price of property subject to such
mortgage or other Lien, (e) all obligations of such Person under leases that
have been or must be, in accordance with generally accepted accounting
principles, recorded as capital leases in respect of which such Person is liable
as lessee, (f) any liability of such Person in respect of banker's acceptances
or letters of credit, and (g) all indebtedness referred to in clauses (a), (b),
(c), (d), (e), or (f) above that is directly or indirectly guaranteed by such
Person or which such Person has agreed (contingently or otherwise) to purchase
or otherwise acquire or in respect of which such Person has otherwise assured a
creditor against loss.
"knowledge", "known to", or similar terms, when used in this Agreement to
--------- --------
qualify any representation or warranty of the Company, mean that (at the time
the applicable representation or warranty is made or deemed made or repeated)
any of ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇ either has actual (and not imputed or constructive)
knowledge of certain specific facts or circumstances affecting such
representation or warranty, or is actually (and not imputedly or constructively)
aware of facts or circumstances which should have led a reasonable person with
similar business responsibilities to conduct a reasonably-detailed investigation
into such facts or circumstances and the legal consequences thereof, and such an
investigation would have resulted in the investigating party having actual (and
not imputed or constructive) knowledge of specific facts or circumstances
affecting such representation or warranty. Except as specifically described
above, no knowledge of any other stockholder, director, officer or employee of
the Company shall be imputed to the Company.
"Lien" means any lien, claim, mortgage, security interest, charge,
----
encumbrance, or restriction on transfer of any kind.
"Maximum AGI Indemnity Amount" means $3,500,000.
------- --- --------- ------
"Other Agreement(s)" means, when used with reference to a particular
----- ------------
Person, all of the agreements, instruments, certificates, and other documents
executed and delivered by such Person at the Closing or otherwise in connection
with this Agreement and/or the transactions contemplated hereby, and when used
without reference to any particular Person, means all such agreements,
instruments, certificates, and other documents of all Persons.
"Participating Stockholder" means each Stockholder other than a Dissenting
------------- -----------
Stockholder.
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"Permitted Liens" means, collectively, (a) Liens securing the payment of
---------------
taxes, either not yet due or the validity of which are being contested in good
faith by appropriate proceedings, and as to which the applicable party shall, if
appropriate under generally accepted accounting principles, have set aside on
its books and records adequate reserves, provided that such contest does not
have a Material Adverse Effect, (b) deposits under worker's compensation,
unemployment insurance, social security and other similar laws, or to secure the
performance of bids, tenders or contracts (other than for the repayment of
borrowed money) or to secure indemnity, performance or similar bonds for the
performance of bids, tenders or contracts (other than for the repayment of
borrowed money) or to secure statutory obligations or surety or appeal bonds, or
to secure indemnity, performance or other similar bonds in the ordinary course
of business, (c) statutory Liens of landlords, carriers, warehousemen,
mechanics, materialmen or suppliers incurred in the ordinary course of business
for sums not yet delinquent, (d) Liens securing the Indebtedness contemplated
pursuant to Sections 6.7(b) and 7.5(b) hereof, (e) zoning restrictions and non-
material easements, licenses, covenants and other restrictions affecting the use
of real property, and (f) Liens described in Section 3.8 of the Disclosure
Schedule as "Permitted Liens".
"Person" means any natural person, entity, or association, including
------
without limitation any corporation, partnership, limited liability company,
government (or agency or subdivision thereof), trust, joint venture or sole or
joint proprietorship.
"Principal-Stockholder-Specific Breach" means, with respect to any
------------------------------ ------
Principal Stockholder, a breach by such Principal Stockholder of any of (i) the
representations and warranties made by him pursuant to Section 3.2
(Authorization and Enforceability), and subsections (b) and (c) of Section 3.3
(Capitalization) hereof to the extent such representations and warranties
expressly relate to such Principal Stockholder solely in his individual capacity
(i.e., not in his capacity as an officer, director, employee or agent of the
Company), or (ii) obligations, covenants or agreements pursuant to the last
sentence of Section 5.1 (Stockholder Approval) and Section 9.2 (Non-Competition,
Etc.) hereof to be performed by him in his individual capacity (i.e., not those
required to be performed by him in his capacity as an officer, director,
employee or agent of the Company).
"Pro Rata Share" means, with respect to any AGI Indemnitor, such AGI
--- ---- -----
Indemnitor's share based on the proportion of the number of shares of Company
Common Stock, SARs, or shares of Company Common Stock issuable upon exercise of
the ▇▇▇▇▇▇▇▇ Option, as the case may be, owned by such AGI Indemnitor
immediately before the Effective Time to the aggregate number of issued and
outstanding shares of Company Common Stock, SARs and/or shares of Company Common
Stock issuable upon exercise of the ▇▇▇▇▇▇▇▇ Option, immediately before the
Effective Time.
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"Related Parties" shall mean with respect to any natural person, that
------- -------
person's spouse, parents, siblings and lineal descendants.
"Restricted Area" means the United States, Canada and Mexico.
---------- ----
"Share Value" means $340.00, being the value of each share of New Common
-----------
Stock as of the Closing Date, as agreed among the parties hereto for the
purposes of this Agreement, as such amount shall be appropriately adjusted from
time to time to reflect stock splits, combinations, recapitalizations or the
like.
"Stockholder" means any stockholder of the Company prior to the Effective
-----------
Time.
"Stockholder Representatives" means ▇▇▇▇▇▇▇ ▇▇▇▇▇ and the Escrowed
---------------------------
Stockholder Representative.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any
---------- ------------
corporation a majority (by number of votes) of the outstanding shares of any
class or classes of the capital stock of which shall at the time be owned by
such Person or by a Subsidiary of such Person, if the holders of the shares of
such class or classes of capital stock (a) are ordinarily, in the absence of
contingencies, entitled to vote for the election of at least a majority of the
directors (or persons performing similar functions) of the issuer thereof,
regardless of whether the right so to vote has been suspended by the happening
of such a contingency, or (b) are at the relevant time of reference entitled, as
such holders, to vote for the election of at least a majority of the directors
(or persons performing similar functions) of the issuer thereof, regardless of
whether the right so to vote exists by reason of the happening of a contingency.
"Tax" or "Taxes" means any federal, state, local, or foreign income, gross
--- -----
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties,
real property, personal property, capital stock, intangibles, social security,
unemployment, disability, payroll, license, employee, or other tax or levy, of
any kind whatsoever, including any interest, penalties, or additions to tax in
respect of the foregoing.
"Tax Return" means any return, declaration, report, claim for refund,
--- ------
information return, or other document (including any related or supporting
estimates, elections, schedules, statements, or information) filed or required
to be filed in connection with the determination, assessment, or collection of
any Tax or the administration of any laws, regulations, or administrative
requirements relating to any Tax.
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"Total After-Tax Consideration" means, as to any AGI Indemnitor, the amount
----- --------- -------------
calculated as the sum of (a) such AGI Indemnitor's portion of the Aggregate
Merger Consideration hereunder, plus (b) to the extent such AGI Indemnitor is
----
also an Investor under the Investment Agreement, an amount equal to the product
of the number of shares of New Common Stock acquired by such AGI Indemnitor
under the Investment Agreement times the Share Value, plus (c) the aggregate
----- ----
amount of the Note Dividend made to such AGI Indemnitor, all calculated after
deduction of all payments of Taxes required to be made by such AGI Indemnitor
with respect to such amounts, provided that in the event that such AGI
Indemnitor receives a Tax benefit during the then-applicable Tax year, or will
receive such a benefit in the following Tax year, as a result of the matter to
which such indemnification relates, then the amount of such AGI Indemnitor's
Total After-Tax Consideration shall be increased to reflect such benefit.
"Unlimited Claims" means all claims for Damages related to or arising
--------- ------
directly or indirectly out of or in connection with any inaccuracy in or breach
of any representation or warranty made by the Company or any of the Principal
Stockholders in Sections 3.2 ("Authorization and Enforceability"), 3.3
("Capitalization"), 3.11 ("Taxes"), 3.27 ("Brokers"), or (to the extent that it
relates to any of the foregoing) 3.31 ("Disclosure") hereof, and all claims for
damages arising from AGI Indemnified Claims arising under clause (iii) of the
definition thereof.
11.2. TERMS DEFINED ELSEWHERE. The following terms are defined herein in
the sections identified below:
TERM SECTION TERM SECTION
---- ------- ---- -------
Acquisition Preamble ▇▇▇▇▇▇ Family Trust Preamble
Adjusted Share Value 8.4 ▇▇▇▇▇▇ Stockholders Preamble
Aggregate Base Value 1.2(d)(iii) Holdback Amount 1.3(d)
Aggregate Exercise Price 1.2(d)(vi) Holding Preamble
Aggregate Merger Consideration 1.2(d)(i) Holding Stockholders 1.4
Aggregate Option Holdback HSR Act 3.22
Amount 1.3(d) Indemnified Party 8.3
Aggregate Rightholder Indemnifying Party 8.3
Consideration 1.2(d)(iii) Intellectual Properties 3.18(a)
Aggregate Share Consideration 1.2(d)(ii) Investment Agreement 1.4
Agreement Preamble IRS 3.16(b)
Articles of Merger 1.1 Jacksonville IRBs 6.7
Audited Balance Sheet 3.6 Klearfold Preamble
Certificate 2.1(a) Leased Real Property 3.8(b)
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Closing 1.1 Leases 3.8(b)
Closing Date 1.1 Maranov Option 3.3(b)
Code 3.16(c) Material Adverse Effect 3.4
Company Preamble Merger 1.1
Continuing AGI Stockholder 1.4 Non-Escrowed Stockholders 1.3(b)
Contract 3.15 Note Dividend 3.7
Converted Shares 1.2(d) Option Consideration 1.2(d)(vi)
Dissenting Shares 1.2(f) Other Investor 1.4
Dissenting Stockholder 1.2(f) Owned Real Property 3.8(b)
Dividend Notes 3.7 PBGC 3.16(d)(ii)
Effective Time 1.1 Per Share Consideration 1.2(d)(iv)
Employee Benefit Plan 3.16(a) Principal Stockholder Preamble
Environmental and Safety Laws 3.13(b) Process Agent 12.14
ERISA 3.16(c) Real Property 3.8(b)
Escrow Agent 1.4(d) Restricted Period 9.2(a)
Escrow Agreement 1.4(d) Rightholder Equity Value 1.2(d)(iii)
Escrow Amount 1.3(a) SARs 1.2(d)(i)
Escrowed Stockholders 1.3(a) SAR Holders 1.3(c)
Escrowed Stockholder ▇▇▇▇▇ Family Trust Preamble
Representative 1.4(d) Share Equity Value 1.2(d)(ii)
Existing Shareholders Share Escrow Amount 1.3(a)
Agreement 3.3(b) Tax Dividends 3.7
Fully Diluted Number of Shares 1.2(d)(iii) Third Party Claim 8.3
Heritage Preamble @@
12. GENERAL.
12.1. COOPERATION. Each of the parties shall cooperate with the others
and use all reasonable efforts to prepare all necessary documentation, to effect
all necessary filings, and to obtain all necessary permits, consents, approvals,
and authorizations of all third parties and governmental bodies necessary to
consummate the transactions contemplated by this Agreement, including without
limitation the notifications required on the part of Holding and the Principal
Stockholders (or other appropriate "ultimate parent entities" with respect to
each of them) under the HSR Act, and the furnishing of such further information
with respect thereto as the Federal Trade Commission or Department of Justice
may request in connection therewith. Each of Holding, on the one hand, and the
Principal Stockholders, on the other hand, shall be responsible for one-half of
the filing fees payable in connection with such notifications. Each party shall
have the right to review and approve in advance all descriptions of or with
respect to it that appear in any filing with any governmental body made in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, the parties shall act reasonably and as promptly as
practicable.
12.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the parties hereto contained in this Agreement or any of the Other
Agreements or otherwise made in writing in connection with the transactions
contemplated hereby shall be deemed material, and, notwithstanding any
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investigation by Holding or Acquisition, shall be deemed to have been relied on
by them, and, subject to the provisions of Section 8.5(c) hereof, shall survive
the Closing and the consummation of the transactions contemplated hereby.
12.3. EXPENSES.
(a) If the transactions contemplated hereby are not consummated before
the termination of this Agreement by reason of the non-satisfaction of either of
the conditions precedent set forth in Sections 6.8 or 6.13, then the Company
shall be responsible for and shall reimburse Holding, the Holding Stockholders
and Acquisition for the aggregate amount of their actual out-of-pocket costs and
expenses incurred after August 21, 1997 in connection with the transactions
contemplated hereby, including without limitation fees incurred in connection
with their efforts to obtain debt financing for such transactions (including so-
called "breakup" fees), legal and accounting expenses (including the legal and
accounting expenses of any lenders, underwriters or other financing sources,
prospective or otherwise, for which Holding, the Holding Stockholders and/or
Acquisition are liable), and environmental and other "due diligence" expenses.
(b) Except as expressly provided otherwise in this Agreement (including
without limitation in Section 12.3(a) hereof): (i) if the transactions
contemplated hereby are not consummated, (A) each of Holding, the Holding
Stockholders and Acquisition shall be responsible for and shall pay all of their
own expenses in connection with the negotiation and preparation of this
Agreement and the Other Agreements and the transactions contemplated hereby and
thereby, including without limitation the fees and expenses of their respective
counsel and accountants, and the costs and expenses incurred in connection with
the proposed offering of senior subordinated notes referred to in Sections 6.7
and 7.5 hereof (including costs of preparation, printing or reproducing any
offering materials relating thereto, any fees of bond rating agencies or other
similar fees and expenses incurred in the marketing or distribution of such
notes, and any legal and accounting expenses of any lenders, underwriters or
other financing sources, prospective or otherwise, for which any of Holding, the
Holding Stockholders and/or Acquisition are liable), and (B) the Company shall
be responsible for and shall pay all expenses of itself and the Principal
Stockholders in connection with the negotiation and preparation of this
Agreement and the Other Agreements and the consummation of the transactions
contemplated hereby and thereby, including without limitation the fees and
expenses of their counsel and accountants, all compensation payable to ▇▇▇▇▇ &
Company Incorporated and any other investment bank or other financial advisor
engaged by the Company and/or any of the Principal Stockholders in connection
with such transactions, and the costs and expenses incurred by the Company and
the Principal Stockholders, and their counsel and accountants, in co-operating
with and providing information to any lenders, underwriters or other financing
sources in connection with the proposed offering of
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senior subordinated notes referred to in Sections 6.7 and 7.5 hereof and (ii) if
the transactions contemplated hereby are consummated, the Surviving Corporation
shall be responsible for and shall pay all of the out-of-pocket expenses of each
of the parties hereto in connection with the negotiation and preparation of this
Agreement and the Other Agreements and the consummation of the transactions
contemplated hereby and thereby, including without limitation the fees and
expenses of their respective counsel and accountants, and all costs and expenses
incurred in connection with the proposed offering of senior subordinated notes
referred to in Sections 6.7 and 7.5 hereof, provided however that the
Participating Stockholders shall be responsible for and shall pay the fees and
expenses of any counsel other than ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ retained by any
of the Participating Stockholders individually in connection with the
negotiation and preparation of this Agreement or any of the Other Agreements and
the consummation of the transactions contemplated hereby and thereby, and all
compensation payable to ▇▇▇▇▇ & Company Incorporated in connection with such
transactions, the aggregate amount of such compensation being deducted in
calculating Aggregate Merger Consideration pursuant to Section 1.2(d)(i) hereof.
12.4. BENEFITS OF AGREEMENT; NO ASSIGNMENTS; NO THIRD-PARTY BENEFICIARIES.
(a) This Agreement shall bind and inure to the benefit of the parties
hereto and their respective heirs, successors, and permitted assigns.
(b) No party shall assign any rights or delegate any obligations
hereunder without the consent of the other parties, and any attempt to do so
shall be void; provided, that each of Holding and Acquisition, and in the case
of the following clause (ii) only, also each of the Company and/or the Surviving
Corporation, shall have the right (i) to assign its rights and delegate its
obligations hereunder to any Person controlling, under the control of, or under
common control with it, and (ii) to assign all or any part of its rights
hereunder by way of collateral assignment to any bank or financial institution
or public authority providing financing for the transactions contemplated
hereby; but no such assignment made pursuant to clauses (i) or (ii) shall
relieve any of Holding, Acquisition, the Company or the Surviving Corporation of
its respective obligations under this Agreement.
(c) Nothing in this Agreement is intended to or shall confer any rights
or remedies on any Person other than the parties hereto and their respective
heirs, successors, and permitted assigns.
12.5. NOTICES. All notices, requests, payments, instructions, or other
documents to be given hereunder shall be in writing or by written
telecommunication, and shall be deemed to have been duly given if (i) delivered
personally (effective upon delivery), (ii) mailed by registered or certified
mail,
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return receipt requested, postage prepaid (effective five business days after
dispatch), (iii) sent by a reputable, established courier service that
guarantees next business day delivery (effective the next business day), or (iv)
sent by telecopier followed within 24 hours by confirmation by one of the
foregoing methods (effective upon receipt of the telecopy in complete, readable
form), addressed as follows (or to such other address as the recipient party may
have previously furnished to the sending party in accordance with this section):
(a) If to Holding, Acquisition and/or the Surviving Corporation, to or in
care of:
KFI Holding Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: H. ▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
with copies sent at the same time and by the same means to:
Heritage Partners Management Company, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Managing Director
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
and to:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company, any of the Stockholders, or the Stockholder
Representatives, to or in care of:
AGI Incorporated
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
with copies sent at the same time and by the same means to:
-▇▇-
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇.
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
Suite 8000 Sears Tower
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to Klearfold or any of the Herrin Stockholders, as follows:
Klearfold, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: H. ▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
with copies sent at the same time and by the same means to the addresses
for copies set forth in paragraph (a) above and to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Ingersoll
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
(d) If to Heritage, to the addresses for copies set forth in paragraph (a)
above.
12.6. COUNTERPARTS. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument. In pleading or proving this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
12.7. CAPTIONS. The captions of sections or subsections of this Agreement
are for reference only and shall not affect the interpretation or construction
of this Agreement.
12.8. EQUITABLE RELIEF. Each of the parties hereby acknowledges that any
breach by it of its obligations under this Agreement would cause substantial and
irreparable damage to the other parties, and that money damages would be an
inadequate remedy therefor, and accordingly, acknowledges and agrees that each
of the other parties shall be entitled to an injunction, specific performance,
and/or other equitable relief to prevent the breach of such obligations (in
addition to all
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other rights and remedies to which such party may be entitled in respect of any
such breach).
12.9. CONSTRUCTION. The language used in this Agreement is the language
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party.
12.10. WAIVERS. No waiver of any breach or default hereunder shall be
valid unless in a writing signed by the waiving party. No failure or other delay
by any party exercising any right, power, or privilege hereunder shall be or
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege.
12.11. FURTHER ASSURANCES. From time to time on and after the Closing
Date, each party hereto shall promptly execute and deliver all such further
instruments and other documents, and shall promptly take all such further
actions, as any other party hereto may reasonably request in order more
effectively to effect or confirm the transactions hereby contemplated and to
carry out the purposes of this Agreement.
12.12. ENTIRE AGREEMENT. This Agreement, together with the exhibits and
schedules hereto and the other agreements, instruments, certificates, and other
documents referred to herein as having been or to be executed and delivered in
connection with the transactions contemplated hereby, contains the entire
understanding and agreement among the parties, and supersedes any prior
understandings or agreements among them, or between or among any of them, with
respect to the subject matter hereof.
12.13. GOVERNING LAW. This Agreement shall to the maximum lawful extent
be governed by and interpreted and construed in accordance with the internal
laws of the State of Illinois, as applied to contracts under seal made, and
entirely to be performed, within Illinois, and without reference to principles
of conflicts or choice of law.
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
SIGNATURE PAGE 1 OF 3 FOR MERGER AGREEMENT
IN WITNESS WHEREOF, each of the parties has executed and delivered to the
others this Agreement and Plan of Merger as an agreement under seal as of the
date first above written.
KFI HOLDING CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------
Name ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
KLEARFOLD, INC.
By /s/ H. ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------
Name: H. ▇▇▇▇▇ ▇▇▇▇▇▇
Title:
AGI ACQUISITION CORPORATION
By /s/ H. ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------
Name: H. ▇▇▇▇▇ ▇▇▇▇▇▇
Title:
AGI INCORPORATED
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title:
SIGNATURE PAGE 2 OF 3 FOR MERGER AGREEMENT
HERITAGE FUND I
INVESTMENT CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ H. ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
H. ▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, not individually
but as trustee under an Indenture
of Trust of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ dated
June 4, 1996
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, not individually
but as trustee under an Indenture
of Trust dated August 12, 1992
f/b/o H. ▇▇▇▇▇ ▇▇▇▇▇▇
PRINCIPAL STOCKHOLDERS:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
SIGNATURE PAGE 3 OF 3 FOR MERGER AGREEMENT
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Exhibits to the Merger Agreement (omitted herein).
--------------------------------------------------
Exhibit 1.1 Articles of Merger
Exhibit 1.2(c) Company's Amended and Restated Articles of Incorporation
Exhibit 1.2(c)(i) Company's Amended and Restated By-Laws
Exhibit 1.2(d) Stock Appreciation Rights
Exhibit 1.3(a) List of Escrowed Shareholders
Exhibit 1.3(b) List of Non-Escrowed Shareholders
Exhibit 1.4(b) Form of Stockholder Agreement
Exhibit 1.4(c) Form of Employment, Non-Competition and Stock Repurchase
Agreement
Exhibit 1.4(d) Form of Escrow Agreement
Exhibit 7.12 Form of General Release and Agreement
Schedules to the Merger Agreement (omitted herein).
---------------------------------------------------
Schedule 1 List of Holding Stockholders
Schedule 2 List of Continuing AGI Stockholders
Schedule 3 List of Other Investors
Disclosure Schedule for Representation and Warranties of
the Company
The Company will furnish supplementally a copy of any omitted schedule to the
Securities and Exchange Commission upon request.