EXHIBIT 10.32
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STOCK PURCHASE AGREEMENT
DATED MAY 6, 2002
AMONG
MWL ACQUISITION CORP.
AS PURCHASER
AND
MAIL-WELL I CORPORATION
AS SELLER
AND
MAIL-WELL, INC.
AS PARENT OF SELLER
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TABLE OF CONTENTS
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PAGE
ARTICLE 1 DEFINITIONS.................................................................................1
1.1. Certain Defined Terms...............................................................1
1.2. Accounting Terms...................................................................12
1.3. Other Definitional Provisions......................................................13
ARTICLE 2 PURCHASE AND SALE OF THE SHARES............................................................13
2.1. Purchase and Sale of the Shares....................................................13
2.2. Purchase Price.....................................................................13
2.3. Payment of Initial Purchase Price..................................................14
2.4. Adjustment of Purchase Price.......................................................14
2.5. Closing............................................................................16
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER................................................16
3.1. Organization and Qualification.....................................................16
3.2. Authority..........................................................................16
3.3. Investment.........................................................................16
3.4. Litigation.........................................................................16
3.5. Brokerage Commission...............................................................17
3.6. Financing..........................................................................17
3.7. Competition Act (Canada)...........................................................17
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE SELLER...............................................17
4.1. Capitalization; Legal Status; Qualification; Title to Shares.......................17
4.2. Subsidiaries.......................................................................18
4.3. No Violation.......................................................................18
4.4. Power and Authority................................................................19
4.5. Due Authorization; Validity; Enforceability........................................19
4.6. Ownership of Assets................................................................19
4.7. Financial Statements; Other Information............................................19
4.8. Absence of Undisclosed Liabilities.................................................20
4.9. Leased Personal Property...........................................................20
4.10. Real Property; Leased Real Property................................................21
4.11. Contracts..........................................................................23
4.12. Intellectual Property..............................................................25
4.13. Insurance..........................................................................26
4.14. Environmental Matters and OSHA.....................................................26
4.15. Litigation.........................................................................27
4.16. Absence of Changes.................................................................28
4.17. Brokers and Finders................................................................30
4.18. Labor Matters......................................................................30
4.19. Tax Matters........................................................................31
4.20. Employee Benefit Plans.............................................................36
(i)
4.21. Compliance with Laws...............................................................39
4.22. Inventory..........................................................................39
4.23. Receivables........................................................................39
4.24. Suppliers..........................................................................39
4.25. Company Products...................................................................40
4.26. Potential Conflicts of Interest....................................................40
4.27. Banks, Brokers and Proxies.........................................................40
4.28. Full Disclosure....................................................................40
4.29. Competition Act (Canada)...........................................................41
4.30. [Intentionally Omitted]............................................................41
4.31. UK Real Property...................................................................41
4.32. UK Environmental Matters...........................................................43
4.33. UK Pension Matters.................................................................44
ARTICLE 5 COVENANTS..................................................................................47
5.1. Conduct of Business Prior to Closing...............................................47
5.2. Access and Information.............................................................48
5.3. Notification of Changes............................................................48
5.4. Certain Acts Prohibited............................................................48
5.5. Consents...........................................................................48
5.6. Supplemental Disclosure............................................................48
5.7. Conditions Precedent...............................................................49
5.8. Capital Expenditures...............................................................49
5.9. Governmental Filings...............................................................49
5.10. Certain Tax Matters................................................................49
5.11. Employee Benefit Plans.............................................................52
5.12. Seller and Parent Guarantee Releases...............................................53
5.13. Assignment of Contracts and Other Properties.......................................53
5.14. Name Change........................................................................54
5.15. Related Parties....................................................................54
5.16. Parent.............................................................................54
5.17. Intercompany Accounts..............................................................54
5.18. Transition Services Agreement......................................................54
5.19. Further Assurances.................................................................55
ARTICLE 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER...........................................55
6.1. Representations and Warranties.....................................................55
6.2. Compliance by Seller...............................................................55
6.3. Certified Resolutions..............................................................55
6.4. No Injunction; Etc.................................................................56
6.5. Incumbency.........................................................................56
6.6. Consents; Authorizations; Legal Matters............................................56
6.7. Proceedings........................................................................56
6.8. Opinion of Seller's Counsel........................................................56
6.9. Certified Documents, Good Standing.................................................56
6.10. Release from Security Interests....................................................56
(ii)
6.11. Release from Senior Subordinated Notes Guarantee and Senior Notes Guarantee........57
6.12. KEDFA Bond.........................................................................57
6.13. Tax Deed...........................................................................57
6.14. Non-Compete Agreement..............................................................57
6.15. 116 Clearance Certificate..........................................................57
6.16. U.S. Person Affidavit..............................................................58
6.17. Transition Services Agreement......................................................58
6.18. UK Label Shares Transfer...........................................................58
6.19. UK Additional Deliveries...........................................................58
6.20. Seller as Registered Holder........................................................59
ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER..........................................59
7.1. Certificate Regarding Representations and Warranties...............................60
7.2. Compliance by Purchaser............................................................60
7.3. Certified Resolutions..............................................................60
7.4. No Injunction; Etc.................................................................60
7.5. Incumbency.........................................................................60
7.6. Legal Matters......................................................................60
7.7. Proceedings........................................................................60
7.8. Opinion of Purchaser's Counsel.....................................................60
7.9. Good Standing......................................................................61
7.10. Non-Compete Agreement..............................................................61
7.11. Release Under BofA Security Documents..............................................61
ARTICLE 8 TERMINATION................................................................................61
8.1. Termination........................................................................61
8.2. Effect of Termination..............................................................61
ARTICLE 9 INDEMNIFICATION............................................................................62
9.1. Agreement of the Indemnitors to Indemnify..........................................62
9.2. Procedures for Indemnification.....................................................63
9.3. Third Party Claims.................................................................64
9.4. Other Rights and Remedies..........................................................65
9.5. Duration...........................................................................66
9.6. Limitations........................................................................66
9.7. Cooperation........................................................................67
9.8. Survival of Representations and Warranties.........................................67
9.9. Treatment..........................................................................67
9.10. Foreign Currency...................................................................67
ARTICLE 10 GENERAL PROVISIONS........................................................................67
10.1. Fees and Expenses..................................................................67
10.2. Notices............................................................................67
10.3. Assignment; Binding Effect.........................................................69
10.4. No Benefit to Others...............................................................69
10.5. Headings, Gender, and "Person" and Successor Laws..................................69
(iii)
10.6. Counterparts.......................................................................69
10.7. Integration of Agreement...........................................................69
10.8. Time of Essence....................................................................70
10.9. Governing Law......................................................................70
10.10. Partial Invalidity.................................................................70
10.11. Publicity and Confidentiality......................................................70
(iv)
EXHIBITS
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Exhibit A Statement of Accounting Principles
Exhibit B [Intentionally Omitted]
Exhibit C Opinion of Seller's Counsel
Exhibit D Non-Compete Agreement
Exhibit E Section 116 Escrow Agreement
Exhibit F [Intentionally Omitted]
Exhibit G Tax Deed
Exhibit H Transition Services Agreement
SCHEDULES
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Schedule 1.1 Officers of Targets
Schedule 2.5 Excluded Assets
Schedule 3.6 Purchaser's Financing Commitments
Schedule 4.1 Ownership of Shares
Schedule 4.2 Subsidiaries
Schedule 4.3 Required Consents and Notices
Schedule 4.6 Ownership of Assets
Schedule 4.7 Financial Statements
Schedule 4.8 Liabilities
Schedule 4.9 Leased Personal Property
Schedule 4.10(a) Owned Real Property
Schedule 4.10(g) Real Property Leases
Schedule 4.11(a) Contracts
Schedule 4.11(b) Commitments for Capital Expenditures
Schedule 4.11(d) Threatened Cancellations
Schedule 4.11(e) Related Party Indebtedness
Schedule 4.12 Intellectual Property
Schedule 4.13 Insurance
Schedule 4.14(b) Environmental Compliance Issues and Permits
Schedule 4.14(c) Underground Tanks and Disposals
Schedule 4.15 Litigation
Schedule 4.16 Absence of Changes
Schedule 4.17 Brokers and Finders
Schedule 4.18(a) Labor Matters
Schedule 4.18(b) Employees
Schedule 4.18(d) Employment Contracts
Schedule 4.19 Tax Matters
Schedule 4.20(a) Employee Benefit Plans
Schedule 4.20(e) Employee Benefit Plans Liabilities
Schedule 4.20(h) COBRA and ERISA Compliance
Schedule 4.20(k) Multi-employer Plans
Schedule 4.20(l) Severance Arrangements
Schedule 4.24 Suppliers
Schedule 4.26 Conflicts of Interest
(i)
Schedule 4.27 Bank Accounts
Schedule 4.31 UK Real Property
Schedule 4.32 UK Environmental Matters
Schedule 5.13(a) Assignment of Contracts
Schedule 5.13(b) Assignment of Incentive Agreements
(ii)
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is entered into on this 6th day of
May, 2002, by and among MWL Acquisition Corp., a Delaware corporation
("Purchaser"), Mail-Well I Corporation, a Delaware corporation ("Seller"),
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and Mail-Well, Inc. a Colorado corporation ("Parent").
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BACKGROUND
WHEREAS, Seller owns directly or indirectly (i) all 1,000 of the
issued and outstanding shares of common stock, $0.01 par value per share, of
US Label ("US Label Shares"), (ii) the one (1) issued and outstanding share,
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no par value, of Canada Label ("Canada Label Shares"), and (iii) all 500 of
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the issued and outstanding shares, par value 0.10 pound per share, of UK
Label ("UK Label Shares," and together with US Label Shares and Canada Label
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Shares, the "Shares");
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WHEREAS, Purchaser desires, upon the terms and conditions
hereinafter set forth, to purchase from Seller all of the Shares; and
WHEREAS, Seller desires, upon the terms and conditions hereinafter
set forth, to sell all of the Shares to Purchaser.
AGREEMENT
NOW, THEREFORE, in consideration of the promises and obligations
provided herein, Purchaser and Seller, intending to be legally bound, agree
as follows:
ARTICLE 1
DEFINITIONS
1.1. Certain Defined Terms.
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The following terms used in this Agreement have the
following meanings:
"Accounting Arbitrator" has the meaning set forth in
---------------------
Section 2.4(b).
--------------
"Act" means the Securities Act of 1933, as amended from
---
time to time, or any successor statute.
"Additional Canada Label Shares" has the meaning set forth
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in Section 4.19(jj).
"Adjustment Date" has the meaning set forth in Section
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2.4(f).
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"Affiliate" means, as to any Person, any other Person that
---------
directly or indirectly, through one or more intermediaries, controls, or is
under common control with, or is controlled by, such Person. As used in this
definition, "control" (including, with its correlative meanings, "controlled
by" and "under common control with") means possession, directly or
indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or otherwise), provided
that, in any event any Person that owns directly or indirectly
1
securities or ownership interests for the election of a majority of the
directors or other members of the governing body of any other Person will be
deemed to control such other Person.
"Affiliated Group" means any affiliated, combined,
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consolidated, unitary or other tax group within the meaning of Section
1504(a) of the Code or any similar provision of any jurisdiction applicable
to Taxes.
"Agreement" means this Stock Purchase Agreement, as it may
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be amended from time to time.
"Assets" has the meaning set forth in Section 4.6.
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"Board of Directors" means collectively the board of
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directors of the Targets or the board of directors of a particular Target,
as the context may require.
"BofA Credit Agreement" means that certain Credit
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Agreement dated as of February 18, 2000 (as amended, restated, supplemented
and modified from time to time), by and among Seller, Mail-Well, Inc. and
certain of its U.S. direct and indirect subsidiaries, the lenders from time
to time party thereto, the co-agents party thereto, and Bank of America,
N.A. as Agent.
"BofA Security Agreement" means that certain Security
-----------------------
Agreement dated as of February 18, 2000 (as amended, restated, supplemented
and modified from time to time), by and among Seller, Mail-Well, Inc. and
certain of its U.S. direct and indirect subsidiaries, the lenders from time
to time party thereto, the co-agents party thereto, and Bank of America,
N.A. as Agent.
"BofA Security Documents" means (i) the BofA Security
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Agreement; and (ii) any deeds of trust, pledges and other security
instruments executed pursuant to or in furtherance of the BofA Security
Agreement.
"Business" means the collective business of all of the
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Targets as presently conducted or as reflected in the Financial Statements.
"Business Day" means any day that is not a Saturday, a
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Sunday or a day on which commercial banks in Denver, Colorado, or New York,
New York, are required or permitted to be closed for business.
"Canada Label" means Mail-Well Label Company, a Nova
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Scotia unlimited liability company.
"Canada Label Shares" has the meaning set forth in the
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first recital of this Agreement, and shall include the Additional Canada
Label Shares, if issued.
"Canada Target" means Canada Label.
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"CERCLA" means the Comprehensive Environmental Response
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Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., as amended.
2
"Closing" has the meaning set forth in Section 2.5.
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"Closing Balance Sheet" has the meaning set forth in
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Section 2.4(a).
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"Closing Date" has the meaning set forth in Section 2.5.
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"Closing Schedule" has the meaning set forth in Section
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2.4(a).
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"Code" means the Internal Revenue Code of 1986, as amended
----
from time to time, or any successor statute.
"Consolidated Preclosing Returns" has the meaning set
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forth in Section 5.10(b).
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"Contract" or "Contracts" means all of the contracts,
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leases, agreements, instruments, and purchase and sales orders, whether oral
or written, to which a Target is a party, pursuant to which a Target enjoys
any right or benefit, or by which a Target or any of its assets or
properties is bound.
"Determination Materials" has the meaning set forth in
-----------------------
Section 2.4(b).
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"Dollars" and "$" mean the lawful money of the United
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States of America.
"Employee Benefit Plan" means:
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(a) with respect to US Label, any employee benefit
plan as defined in Section 3(3) of ERISA or under which the relevant
employer, with respect to the relevant employees, retirees, dependents,
spouses, directors, independent contractors or other beneficiaries, has any
outstanding, present, or future obligation or liability, or under which any
relevant employee, retiree, dependent, spouse, director, independent
contractor or other beneficiary has any present or future right to benefits
which are covered by ERISA;
(b) with respect to all Targets, other pension;
profit sharing; retirement; deferred compensation; stock purchase, stock
option, stock appreciation, phantom stock or other equity based; incentive;
bonus; performance; vacation; termination; retention; change of control;
severance; "golden parachute;" disability; hospitalization; medical; life
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insurance; cafeteria; flexible spending account; or other employee benefit
plan, program, policy, or arrangement, which the relevant employer maintains
or to which the relevant employer has any outstanding, present, or future
obligations to contribute or make payments under, whether or not they are or
are intended to be (1) covered or qualified under the Code, ERISA or any
other applicable law of any jurisdiction, (2) written or oral, (3) funded or
unfunded, (4) absolute or contingent, or (5) generally available to any or
all employees (including former employees) of the relevant employer, or
their beneficiaries or dependents; and
(c) with respect to Canada Label and UK Label,
shall also include, to the extent not included in the preceding clauses (a)
or (b), collectively all plans, arrangements, agreements, programs,
incentive compensation, hospitalization, health, dental, disability,
unemployment insurance, vacation pay, severance pay or other benefits with
respect to any or all of the Employees or former Employees of the Targets
and all statutory plans which the Targets
3
are required to comply with relating to Employees or former Employees of the
Targets, including plans administered pursuant to applicable health tax,
workers' compensation and unemployment insurance legislation.
"Employees" means the employees of the Targets as of the
---------
date hereof.
"Employer's Due Contributions" has the meaning set forth
----------------------------
in Section 5.11(g).
"Environmental Laws" means any Law, as amended or in
------------------
effect prior to, or on the Closing Date, concerning public health and
safety, pollution of the environment or protection of the environment,
including without limitation all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any material, substance, waste,
chemical, mixture, pesticide, pollutant, contaminant, toxic chemical,
petroleum product or byproduct, asbestos, polychlorinated biphenyl or
radiation.
"Environmental Permits" means all permits, licenses,
---------------------
approvals, franchises, certificates, consents, orders and authorizations
required under or pursuant to any Environmental Laws.
"Equipment" means all machinery, equipment, tools,
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Vehicles, computers, terminals, computer equipment, office equipment,
business machines, telephones and telephone systems, parts, accessories, and
the like, wherever located, and any and all warranties of third parties with
respect thereto.
"ERISA" means the Employee Retirement Income Security Act
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of 1974, as amended from time to time, or any successor statute.
"ERISA Affiliate" means any company which, as of a given
---------------
moment, is a member of a "controlled group of corporations" or a group of
--------------------------------
"trades or businesses (whether or not incorporated) which are under common
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control" (as defined in Sections 414(b) and (c) of the Code, respectively)
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of which Target is a member or any entity or person aggregated with Target
under the Code Section 414(m) or (o).
"Estimated Working Capital" has the meaning set forth in
-------------------------
Section 2.2(b).
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"Excluded Assets" means the assets of Target listed in
---------------
Schedule 2.5.
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"FA" followed by a year means the Finance Act of that
--
year.
"Final Working Capital" has the meaning set forth in
---------------------
Section 2.4(b).
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"Financial Statements" has the meaning set forth in
--------------------
Section 4.7.
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"Fiscal Year" means the fiscal year of Targets, which
-----------
shall be the twelve-month period ending on December 31.
4
"Furniture and Fixtures" means all furniture, fixtures,
----------------------
and leasehold improvements wherever located, and any and all warranties
covering such furniture, fixtures, and leasehold improvements owned by any
Target or in which any Target has an interest.
"GAAP" means generally accepted accounting principles, as
----
promulgated in the official publications of the American Institute of
Certified Public Accountants consistently applied to all relevant periods.
"Governmental Authority" means any bureau, department,
----------------------
agency, commission, board, tribunal, crown corporation, or court or other
entity or body having or purporting to have jurisdiction to make,
administer, interpret, apply or enforce any Law on behalf of any country,
state, province, municipality or other political subdivision thereof.
"Grossed-Up Basis" means, when used to describe the basis
----------------
on which the payment of a specified sum is to be made, a basis such that the
amount of the payment, after being reduced by the amount of all Taxes
imposed on the recipient of the payment as a result of the receipt of
accrual of the payment, will equal the specified sum.
"Guaranteed Indebtedness" of any Person means all
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Indebtedness of any other Person that is either (i) guaranteed directly or
indirectly in any manner by such Person, or (ii) secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including without
limitation accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness.
"Hazardous Materials" means any substance, material or
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waste, including without limitation, equipment or fixtures, with respect to
which liability or standards are imposed under any Environmental Law.
"Health and Safety Laws" means any Law including, without
----------------------
limitation, the Occupational Safety and Health Act (U.S.), as amended or in
effect prior to or on the Closing Date, concerning worker health and safety.
"ITA" means the Income Tax Act (Canada).
---
"Indebtedness" means, for any Person, without duplication,
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(a) all indebtedness or other obligations of such Person for borrowed money
or for purchase money indebtedness, (b) any other indebtedness of such
Person which is evidenced by a note, mortgage, bond, indenture or similar
instrument, (c) all obligations under leases that are or should be, in
accordance with GAAP, recorded as capital leases in respect of which such
Person is liable as lessee, (d) all obligations owed pursuant to any
interest rate hedging arrangement, (e) all Guaranteed Indebtedness and (f)
all other indebtedness secured by any Lien (other than Permitted
Encumbrances) on any property or asset owned or held by such Person.
"Indemnification Claim" means a claim for indemnification
---------------------
hereunder.
"Indemnitee" means the party or parties seeking
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indemnification hereunder.
5
"Indemnitor" means the party or parties against whom
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indemnification hereunder is sought.
"Indemnitor Representative" means Seller in the case of an
-------------------------
Indemnification Claim asserted by any of Purchaser Indemnitees, and
Purchaser in the case of an Indemnification Claim asserted by any of Seller
Indemnitees.
"Initial Purchase Price" has the meaning set forth in
----------------------
Section 2.2(a).
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"Initial Purchase Price Adjustment" has the meaning set
---------------------------------
forth in Section 2.2(a).
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"Intellectual Property" means all of the following as they
---------------------
exist in all jurisdictions: (i) patents and patent disclosures; (ii)
designs, art work, specifications, designs-in-progress, formulations,
know-how, prototypes, inventions, Internet addresses, domain names, websites
and web pages; (iii) trademarks, trade names, trade dress, service marks,
brand names, logos, slogans, and corporate names (and all translations,
adaptations, derivations and combinations of the foregoing); (iv) mask works
and copyrights; (v) all registrations and applications for (i), (ii) and
(iii), both registered and unregistered, foreign and domestic; (vi) all
trade secrets, technology and processes; (vii) all computer software
(including but not limited to documentation, data, databases and related
object and, if applicable, source codes); and (viii) all confidential or
proprietary information; and (ix) all licenses, sublicenses and other
agreements or permissions, including all income, the right to receive
royalties, damages and payments due or payable on the Closing Date or
thereafter (including, without limitation, damages and payments for past or
future infringements or misappropriations thereof), the right to ▇▇▇ and
recover for past infringements or misappropriations thereof, or any other
consideration related to the foregoing property.
"Intercompany Accounts" means amounts owed by and between
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any Targets or by and between any Target and Seller or any of its
Affiliates.
"IRS" means the Internal Revenue Service of the United
---
States.
"KEDFA" has the meaning set forth in Section 6.12.
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"KEDFA Program" means the tax credit program for rural
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economic development in Kentucky under which Seller owns the KEDFA Bond
issued by KEDFA that were used to finance the acquisition and construction
of US Label's Bowling Green, Kentucky facility.
"KEDFA Bond" means the Kentucky Economic Development
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Finance Authority's Taxable Economic Development Project Revenue Bond, 1992
series (International Paper Company Project), dated November 3, 1992,
maturing October 15, 2017 in the face value of $39,000,000, issued pursuant
to the provisions of Kentucky Revised Statutes Chapter 154.
"Knowledge" and the phrases "to the knowledge of," "to
--------- -------------------- --
Seller's knowledge," "Seller has not been notified" and other similar
------------------- ----------------------------
phrases used in this Agreement refer to the actual knowledge of and
knowledge that should have been learned through diligent inquiry by the
executive officers of the Seller, which officers are listed on the attached
Schedule 1.1.
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6
"Law" means any code, statute, ordinance, regulation,
---
by-law, rule, guideline, policy, notice, direction, judgment, Order, common
law rule or other requirement having the force or effect of law.
"Leased Real Property" means the real property subject to
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Real Property Leases.
"Liabilities" means liabilities or obligations of any
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nature, whether absolute, accrued, contingent or otherwise, whether due or
to become due, whether asserted or unasserted and whether or not required to
be reflected or reserved against on a balance sheet under GAAP, including
any liability for Taxes.
"Lien" means:
----
(a) with respect to any Target, any mortgage, pledge,
security interest, encumbrance, deed of trust, claim, lease, license,
option, right of first offer or refusal, easement, servitude, voting or
transfer restriction, lien, charge of any kind, whether voluntary or
involuntary, including any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of, or agreement
to give, any financing statement under the Uniform Commercial Code or any
other applicable Law providing for the encumbrance of personal property; and
(b) with respect to Canada Label and UK Label shall
also include to the extent not included in clause (a) hereinabove, any title
defect, hypothec, indenture, deemed trust, security agreement, title
retention agreement, adverse claim, proxy, shareholder agreement, voting
trust, warrant or right or claim of others of any kind whatsoever, voluntary
or involuntary and whether or not perfected or required to be perfected
pursuant to any public registration regime.
"Loan Relationship" shall have the same meaning as in
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Section 81(1) of the Finance ▇▇▇ ▇▇▇▇.
"Losses" means any and all demands, claims, actions or
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causes of action, assessments, losses, fines, judgments, costs, damages
(including special and consequential damages), liabilities, costs, Taxes
(including damages attributable to Taxes), removal and remediation
requirements and expenses, including without limitation, interest,
penalties, cost of investigation and defense, and reasonable attorneys' and
other professional fees and expenses.
"Material Adverse Effect" means any circumstances, change
-----------------------
in, or effect on the Targets or their business that, when taken together
with all other related circumstances, changes in or effects on the Targets
or the business taken as a whole, is materially adverse to the condition
(financial or otherwise), business, results of operations, or assets of the
Targets, taken as a whole.
"Objection" has the meaning set forth in Section 2.4(b).
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"Order" means any order, judgment, injunction, award,
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decree, or writ of any Governmental Authority.
7
"Organizational Documents" means the relevant certificate
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or articles of incorporation, bylaws, memoranda, constitutional,
organizational or other corporate governance documents.
"Parent" has the meaning set forth in the preamble to this
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Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or
----
any successor to its functions.
"Pension Plan" has the meaning set forth in Section
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4.21(f).
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"Permits" means licenses, franchises, permits, exemptions,
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certificates, consents, and other authorizations issued or administered by a
Governmental Authority.
"Permitted Encumbrances" means (i) liens for taxes not yet
----------------------
due and payable (other than taxes arising out of the transactions
contemplated by the Agreement) for which adequate provision has been made in
accordance with GAAP; (ii) minor imperfections of title that do not
adversely interfere with the present or future ownership or use of any of
the assets of the Targets; (iii) other non-monetary liens, claims, and
non-monetary encumbrances relating to the assets of the Targets that (A)
secure the liabilities of the Targets and (B) have been properly disclosed
to Purchaser on Schedule 4.6 to this Agreement; (iv) other statutory liens
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which are not yet due and payable for which adequate provision has been made
in accordance with GAAP; and (v) with respect to the Real Property of Canada
Label and UK Label, Permitted Encumbrances shall also include, to the extent
not included in clauses (i) to (iv) hereinabove: (a) all reservations,
limitations, provisos and conditions expressed in the original grant from
the Crown, provided that same do not constitute a Material Adverse Effect;
(b) any encroachments or defects, if any, which are or would be disclosed by
any survey of the Real Property; (c) any subdivision, development, site plan
or any other agreement with any Governmental Authority having jurisdiction
over the Real Property which plans or agreements are registered on title or
copies of which have been delivered to Purchaser, provided same have been
complied with; (d) any registered or unregistered licenses, easements,
rights-of-way, rights in the nature of easements and agreements with respect
thereto which relate to the provision of utilities or services to the Real
Property or any other lands (including, without limitation, agreements,
easements, licenses, rights-of-way and interests in the nature of easements
for access, sewers, drains, gas, steam, watermains, electrical light and
power, telephone or telegraphic conduits, poles, wires, cables and other
similar utilities or services); (e) all restrictions and restrictive
covenants that run with the land, provided same have been complied with and
do not constitute a Material Adverse Effect; (f) defects or irregularities
in title which are of a minor nature and in the aggregate will not
materially affect the use or marketability of the parcel of Real Property in
question, taken as a whole; (g) any notices of lease or leases and notices
of security interest against leasehold interests which are registered
against title to the Real Property, provided the tenant is in possession;
and (h) the qualifications contained in the Land Titles Act (Ontario), if
applicable.
"Person" means and includes natural persons, corporations,
------
limited liability companies, unlimited liability companies, limited
partnerships, general partnerships, joint stock
8
companies, joint ventures, associations, companies, business trusts and
other organizations, whether or not legal entities, and governments and
agencies and political subdivisions thereof.
"Post-Closing Period" means any taxable period or portion
-------------------
thereof beginning after the Closing Date or, as the context may require, all
such periods and portions. If a taxable period begins on or before the
Closing Date and ends after the Closing Date, then the portion of the
taxable period that begins on the day following the Closing Date shall
constitute a Post-Closing Period.
"Pre-Closing Period" means any taxable period or portion
------------------
thereof ending on or before the Closing Date or, as the context may require,
all such periods and portions. If a taxable period begins on or before the
Closing Date and ends after the Closing Date, then the portion of the
taxable period through the end of the Closing Date shall constitute a
Pre-Closing Period.
"Purchase Documents" means this Agreement and any other
------------------
agreements, documents, certificates, assignments or instruments to be
executed and delivered pursuant to this Agreement.
"Purchase Price" has the meaning set forth in Section
-------------- -------
2.4(c).
------
"Purchase Price Allocation" has the meaning set forth in
-------------------------
Section 2.2(a).
--------------
"Purchaser" has the meaning set forth in the preamble to
---------
this Agreement.
"Purchaser Indemnitees" means Purchaser, Target and their
---------------------
respective agents, representatives, employees, officers, directors,
shareholders and Affiliates.
"Purchaser Tax Indemnitee(s)" means Purchaser and its
---------------------------
Subsidiaries and Affiliates (including, after the Closing, each Target).
"Purchaser's Estimated Final Working Capital" has the
-------------------------------------------
meaning set forth in Section 2.4(a).
--------------
"Real Property" has the meaning set forth in Section
------------- -------
4.10(a).
-------
"Real Property Leases" has the meaning set forth in
--------------------
Section 4.10(g).
---------------
"Related Party" means any director, officer, shareholder,
-------------
Affiliate or any immediate family member of such Person.
"Release" shall have the same meaning ascribed thereto
-------
under CERCLA Section 101(22), except that it shall apply to any and all
Hazardous Materials, not just CERCLA hazardous substances.
"Rights" means all arrangements, calls, commitments,
------
contracts, options, rights to subscribe to, scrip, understandings, warrants,
or other binding obligations of any kind relating to, or securities or
rights convertible into or exchangeable or exercisable for, shares of the
capital
9
stock of a Person or by which a Person is or may be bound to issue
additional shares of its capital stock.
"Scheme Actuary" means the actuary appointed to the ▇▇▇▇▇▇
--------------
▇▇▇▇▇▇▇▇ plc Pension Scheme in pursuance of Section 47(1)(b) Pensions ▇▇▇
▇▇▇▇.
"Seller" has the meaning set forth in the preamble to this
------
Agreement.
"Seller Indemnitees" means Seller and its agents,
------------------
representatives, employees, officers, directors, shareholders and
Affiliates.
"Selling Party" means Seller and any Subsidiary or
-------------
Affiliate of Seller, other than Target.
"Senior Subordinated Notes Guarantee" means the guarantee
-----------------------------------
of US Label with respect to Seller's 8 3/4 percent Senior Subordinated Notes
due 2008, as described in that certain Indenture dated as of December 16,
1998, by and between Seller and State Street Bank and Trust Company as
Trustee (as amended, restated, supplemented and modified from time to time).
"Senior Notes Guarantee" means the guarantee of US Label
----------------------
with respect to Seller's 9 5/8 percent Senior Notes due 2012, as described
in that certain Indenture dated as of March 13, 2002, by and between Seller
and State Street Bank and Trust Company as Trustee (as amended, restated,
supplemented and modified from time to time).
"Shares" has the meaning set forth in the first recital of
------
this Agreement and shall include any dividends, distributions and securities
issued in respect of such Shares between the date hereof and the Closing
Date.
"Sterling" and "pound" means the lawful money of the
-------- -----
United Kingdom.
"Subsidiary" of any Person means (i) a corporation of
----------
which more than fifty percent (50%) of the outstanding shares of capital
stock of each class having ordinary voting power is owned by such Person, by
one or more Subsidiaries of such Person, or by such Person and one or more
of its Subsidiaries; or (ii) any other person (other than a corporation) in
which such Person, or one or more other Subsidiaries of such Person or such
Person and one or more other Subsidiaries thereof directly or indirectly has
more than fifty percent (50%) of the voting power thereof.
"Targets" means, collectively, US Label, Canada Label and
-------
UK Label and their respective subsidiaries and "Target" means any of the
------
Targets.
"Target Benefit Plan" means any Employee Benefit Plan
-------------------
maintained or contributed to by a Target or the Seller for the benefit of
Employees of the Targets or with respect to which any Target has any
Liability.
"Target Intellectual Property" shall have the meaning set
----------------------------
forth in Section 4.12.
------------
10
"Tax" (and, with correlative meaning, "Taxes," "Taxable"
--- ------ -------
and "Taxing") means (i) any net or gross income, receipts, franchise,
------
estimated, alternative minimum, add-on minimum, sales, use, transfer,
registration, consumption, capital, large corporations, goods and services,
workers compensation, ad valorem, withholding, production, health, value
added, excise, natural resources, severance, stamp, occupation, premium,
windfall profits, assets, environmental (including under Section 59A of the
Code), customs duty, real property, real property gains, personal property,
capital stock, social security, unemployment, pension, disability, payroll,
license, employee or other withholding or other tax, assessment, fee, levy
or other governmental charge of any kind whatever, whether disputed or not,
including any interest, penalties or additions to tax or additional amounts
in respect of the foregoing; (ii) any liability for or in respect of the
payment of any amount of a type described in clause (i) of this definition
arising as a result of being or having been a member of any Affiliated
Group; (iii) any liability for or in respect of the payment of any amount of
a type described in clause (i) or (ii) of this definition as a transferee or
successor, by contract or otherwise; and (iv) any charge imposed, in the
case of any of clauses (i), (ii) and (iii) above, under the Laws of any
jurisdiction, applicable to the Targets or their assets.
"Taxing Authority" means any Governmental Authority having
----------------
or purporting to exercise jurisdiction with respect to any Tax.
"Tax Deed" means the Deed of Covenant to be entered into
--------
at Closing between Seller and Purchaser in substantially the form as set
forth on Exhibit G attached hereto.
"Tax Return" means any return, declaration, report, claim
----------
for refund, information return or other document (including any related or
supporting schedules, statements or information) filed or required to be
filed in connection with the determination, assessment or collection of Tax
or the administration of any legal requirement relating to any Tax.
"Third Party Claim" means any claim, suit or proceeding
-----------------
(including, without limitation, a binding arbitration or an audit by any
Taxing Authority) that is instituted against the Indemnitee which, if
prosecuted successfully, would result in a Loss for which the Indemnitee is
entitled to indemnification hereunder.
"Threshold Amount" has the meaning set forth in Section
---------------- -------
9.6(a).
------
"Transfer Tax" means sales, use, transfer, real property
------------
transfer, filing, recording, stock transfer, stamp, stamp duty reserve,
value added, documentary and other similar Tax.
"Treasury regulations" means the regulations promulgated
--------------------
or proposed by the U.S. Treasury Department under the Code.
"UK" means the United Kingdom.
--
"UK Charges" means the charges, mortgages and/or
----------
guarantees of which are set out in Schedule 4.6.
------------
"UK Entities" means the UK Targets incorporated in the
-----------
United Kingdom.
11
"UK Environmental Law" has the meaning given in Section
-------------------- -------
4.32.
----
"UK Label" means MWL UK Limited, a private limited
--------
liability company incorporated in England and Wales, or such other UK Entity
as Purchaser and Seller shall mutually agree.
"UK Label Shares" has the meaning set forth in the first
---------------
recital of this Agreement.
"UK Pension Plans" has the meaning set forth in Section
---------------- -------
4.20(p).
-------
"UK Pension Provision" means the reserve in respect of the
--------------------
obligations of the UK Entities to contribute to the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ plc
Pension Scheme, which shall be included as a current liability in the
determination of Working Capital.
"UK Schemes" means each of the following: the Norwich
----------
Union Executive Pension Plan insured with Norwich Union under Policy Number
20935204-3; the Stampiton Limited Group Personal Pension Plan insured with
Scottish Mutual; the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Personal Pension Fund established by an
interim trust deed dated 18 August 1991; the Stampiton Limited Group Life
Assurance Scheme; and the Group Life Assurance Scheme insured with Sun Life
Financial of Canada (together "the Current UK Schemes") and the ▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇▇▇ plc Pension Scheme established by an interim trust deed dated 1
October 1959; the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Discretionary Pension Scheme; the
Treasures Old & New Pension Scheme; and the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Group Staff
Register Plan.
"UK Target" means UK Label and any of its Subsidiaries.
---------
"UK Title Documents List" the list in the approved form of
-----------------------
title deeds relating to the UK Property.
"US Label" means Mail-Well Label USA, Inc., a Colorado
--------
corporation.
"US Label Shares" has the meaning set forth in the first
---------------
recital of this Agreement.
"US Target" means US Label.
---------
"Vehicles" means all motor vehicles, trucks, and forklifts
--------
owned by the Targets or in which any Target has an interest, and all
warranties of third parties related thereto.
"Working Capital" has the meaning set forth in Section
--------------- -------
2.2(b).
------
"Working Capital Objective" has the meaning set forth in
-------------------------
Section 2.2(a).
--------------
"Working Capital Statement" has the meaning set forth in
-------------------------
Section 2.4(a).
--------------
1.2. Accounting Terms. For purposes of this Agreement,
----------------
all accounting terms not otherwise defined herein have the meanings assigned
to them in conformity with GAAP.
12
1.3. Other Definitional Provisions.
-----------------------------
(a) Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular and vice
versa. The term "including" is not limiting, and the words "hereof,"
"herein," "hereunder," and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
References to "Sections," "Appendices," "Exhibits" and "Schedules" are to
Sections, Appendices, Exhibits and Schedules, respectively, of this
Agreement, unless otherwise specifically provided. Terms defined herein may
be used in the singular or the plural.
(b) Accounting principles and practices under GAAP
shall be considered to be "consistently applied" when the accounting
--------------------
principles and practices observed in a current period are comparable in all
material respects to the accounting principles and practices applied in the
preceding period.
ARTICLE 2
PURCHASE AND SALE OF THE SHARES
2.1. Purchase and Sale of the Shares. Upon the terms and
-------------------------------
subject to the conditions contained herein, Purchaser agrees to purchase
from Seller at the Closing, and Seller agrees to sell to Purchaser at that
time (and, solely with regard to the UK Label Shares, with full title
guarantee), all of the Shares. Seller shall convey, and Purchaser shall
purchase, the Shares at the Closing, free and clear of any and all Liens.
2.2. Purchase Price.
--------------
(a) The Purchaser shall pay at Closing an aggregate
amount for the Shares ("Initial Purchase Price") equal to (i) $75,000,000
which shall be allocated to US Label Shares in the amount of $45.3 million;
Canada Label Shares in the amount of $20.3 million; and UK Label Shares in
the amount of $9.4 million ("Purchase Price Allocation") minus (ii) the
------------------------- -----
Initial Purchase Price Adjustment.
The "Initial Purchase Price Adjustment" shall be
---------------------------------
an amount equal to the sum of (i) all Indebtedness (excluding indebtedness
------
under the KEDFA Bond) of the Targets as of the Closing Date and (ii) (x) if
the Working Capital Objective exceeds the Estimated Working Capital, plus
the amount of such excess or, (y) if the Estimated Working Capital exceeds
the Working Capital Objective, minus the amount of such excess. "Working
----- -------
Capital Objective" means the sum of $19,500,000. Any portion of Initial
-----------------
Purchase Price Adjustment which relates to a particular Target shall be
allocated to such Target, and if the adjustment cannot be specifically
allocated to a particular Target, it shall then be allocated pro rata among
the US Label Shares, Canada Label Shares and UK Label Shares based on the
Purchase Price Allocation.
(b) Not later than three Business Days prior to the
Closing Date, Seller shall deliver to Purchaser a Certificate of the chief
financial officer of the Seller setting forth Seller's best estimate of a
consolidated balance sheet of the Targets as of the Closing Date and the
Working Capital of the Targets as of the Closing Date (the "Estimated
---------
Working Capital"), each determined in accordance with GAAP consistently
---------------
applied in accordance with the Statement of
13
Accounting Principles set forth as Exhibit A hereto. "Working Capital" shall
--------- ---------------
equal (i) the sum of all current assets, including all accounts receivable,
inventory, prepaid expenses, cash and cash equivalents, and minus (ii) the
-----
sum of all current liabilities, including all accounts payable, advance
▇▇▇▇▇▇▇▇, accrued payroll, accrued expenses and the Employer's Due
Contributions relating to the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ plc Pension Scheme, all
determined in accordance with GAAP and the Statement of Accounting
Principles.
2.3. Payment of Initial Purchase Price. At Closing, the
---------------------------------
Purchaser shall deliver the Initial Purchase Price to Seller in cash by wire
transfer of immediately available funds to an account designated by Seller,
and against delivery by Seller to Purchaser of the Shares.
2.4. Adjustment of Purchase Price.
----------------------------
(a) Within ninety (90) days after the Closing Date,
Purchaser shall prepare and deliver to Seller (i) an audited consolidated
balance sheet (the "Closing Balance Sheet") of Targets as of the Closing
---------------------
Date, and (ii) a statement (the "Working Capital Statement") derived from
-------------------------
the Closing Balance Sheet of the Working Capital of Targets as of the
Closing Date ("Purchaser's Estimated Final Working Capital"). The Closing
-------------------------------------------
Balance Sheet and the Working Capital Statement shall be prepared in
accordance with GAAP consistently applied in accordance with the Statement
of Accounting Principles. In connection with the Closing Balance Sheet and
Working Capital Statement, Purchaser shall prepare and furnish to Seller a
schedule (the "Closing Schedule") showing the difference, if any, between
----------------
the Estimated Working Capital and the Purchaser's Estimated Final Working
Capital. Any Indebtedness of the Targets as of the Closing Date (excluding
indebtedness under the KEDFA Bond) that was not included in the Estimated
Working Capital or did not otherwise reduce the Initial Purchase Price shall
be treated, without duplication, as a current liability for purposes of
calculating the Final Working Capital. The Inventory shall be valued in
accordance with GAAP consistent with past practice based on a physical count
taken by Purchaser and observed by Seller immediately following the Closing
Date.
(b) Seller shall have 60 days from the date of receipt
of the Closing Balance Sheet, the Working Capital Statement and the Closing
Schedule to review the Closing Balance Sheet, the Working Capital Statement
and the Closing Schedule and to agree or disagree as to the Purchaser's
Estimated Final Working Capital reflected thereon. The Purchaser's Estimated
Final Working Capital shall be conclusive and binding upon the parties
unless and to the extent Seller shall, within such 60 day period, deliver a
written objection to Purchaser which shall specify in reasonable detail the
nature of the objection and the basis therefor, and a computation of the
Working Capital of Targets as of the Closing Date asserted by Seller
(collectively, the "Objection"). Upon Purchaser's receipt of the Objection,
---------
Purchaser and Seller shall negotiate in good faith to resolve the Objection,
in which event the Closing Balance Sheet and the computation of the Working
Capital, as amended to the extent necessary to reflect the resolution of the
Objection, shall be conclusive and binding upon the parties. If the
Objection cannot be resolved by such negotiation within 20 days after
Purchaser's receipt of the Objection, Purchaser may cause the Closing
Balance Sheet, the Working Capital Statement, the Closing Schedule, the
Objection and all accounting work papers related thereto (collectively, the
"Determination Materials"), to be submitted to a nationally recognized
-----------------------
accounting firm (the "Accounting Arbitrator") selected by the Purchaser and
---------------------
reasonably acceptable to the Seller, provided that the
14
Accounting Arbitrator shall not be engaged in providing services to the
Seller, the Purchaser or any of their Affiliates. The Accounting Arbitrator
shall review the Determination Materials and shall determine any disputed
items, which may not be outside the range of the Working Capital reflected
on the Closing Balance Sheet and the Working Capital Statement asserted in
the Objection, and notify the parties of its determination within 30 days
following the receipt of the Determination Materials, which determination
shall be final and conclusive. The fees and expenses of the Accounting
Arbitrator shall be shared equally by Seller and Purchaser. All
determinations pursuant to this Section 2.4(b) shall be in writing and shall
--------------
be delivered to the parties hereto. The Working Capital of the Targets as of
the Closing Date as agreed or determined pursuant to this Section 2.4(b)
--------------
shall be the "Final Working Capital".
---------------------
(c) The Initial Purchase Price, as adjusted pursuant
to this Section 2.4(c), shall be the "Purchase Price," which shall be
-------------- --------------
allocated pro rata to the US Label Shares, Canada Label Shares and UK Label
Shares based on the Purchase Price Allocation. If the Estimated Working
Capital exceeds the Final Working Capital, the Seller shall pay the amount
of such excess to the Purchaser as a reduction to the Initial Purchase
Price, in the manner and with interest as provided in Sections 2.4(d) and
---------------
2.4(f) below. If the Final Working Capital exceeds the Estimated Working
------
Capital, the Purchaser shall pay the amount of such excess to the Seller as
an increase to the Initial Purchase Price, in the manner and with interest
as provided in Sections 2.4(e) and 2.4(f) below.
--------------- ------
(d) Any payment to be made to Purchaser pursuant to
Section 2.4(c) shall be made by wire transfer of immediately available funds
--------------
by Seller to an account designated by the Purchaser in an amount equal to
the payment due to Purchaser.
(e) Any payment to be made to Seller pursuant to
Section 2.4(c) shall be made by wire transfer of immediately available funds
--------------
by Purchaser to an account designated by Seller in an amount equal to the
payment due to Seller.
(f) Purchaser or Seller, as the case may be, shall
make any deliveries or payment required by Sections 2.4(d) or 2.4(e) within
--------------- ------
five (5) days after the earlier to occur of the date (i) the parties agree
as to the Final Working Capital or (ii) the Accounting Arbitrator notifies
the parties of its determination of the Final Working Capital according to
the provisions of Section 2.4(b) hereof (in either case, the "Adjustment
-------------- ----------
Date"). Any amount due to Seller or refund due to Purchaser pursuant to this
----
Section 2.4 shall be paid together with interest on each payment amount from
-----------
the Closing Date until the date of payment at an annual interest rate
(calculated on the basis of a 365-day year) equal to the prime rate
published by The Wall Street Journal on the Closing Date.
(g) For purposes of Seller's preparation of any
Objection, Purchaser shall afford, and shall cause each Target to afford to
Seller and Seller's accountants, reasonable access to the offices,
properties, books and records of each Target reasonably related to the
preparation of the Objection, and shall furnish such persons with all
information (including financial and operating data) concerning the
Objection and the calculation of Final Working Capital as they may
reasonably request. In such cases, "reasonable" access means access during
ordinary business hours upon at least three (3) Business Days' notice, and
without undue interruption of personnel.
15
2.5. Closing. The transactions provided for herein shall be
-------
consummated at a closing (the "Closing") to be held at the offices of
-------
Rothgerber ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP in Denver, Colorado, commencing at 10:00 a.m.
local time on the next business day following the satisfaction or waiver of
all the conditions set forth in Article 6 and Article 7 to consummate the
transactions contemplated hereby, or such later date as may be mutually
agreed upon by the parties (the "Closing Date").
------------
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller that the
statements contained in this Article 3 are true and correct as of the date
of this Agreement and will be true and correct as of the Closing Date,
except as set forth and identified in the Schedules to this Agreement:
3.1. Organization and Qualification. Purchaser is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with the requisite corporate power and authority to
conduct its business, and to own, lease or operate its properties in the
places where such business is conducted and such properties are owned,
leased or operated.
3.2. Authority. Purchaser has full power and authority to
---------
execute, deliver and perform its obligations under this Agreement and each
of the Purchase Documents to which it is a party, and consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Purchaser of this Agreement and each of the Purchase
Documents to which it is a party, has been duly and validly authorized and
approved by all necessary action on the part of Purchaser. This Agreement
and each of the Purchase Documents to which Purchaser is a party is the
legal, valid and binding obligation of Purchaser enforceable against
Purchaser in accordance with its terms. Neither the execution and delivery
by Purchaser of this Agreement and each other Purchase Document to which it
is a party nor the consummation by Purchaser of the transactions
contemplated hereby and thereby will (a) violate Purchaser's Certificate of
Incorporation, Bylaws or other Organizational Documents, (b) violate any Law
of any Governmental Authority to which Purchaser is subject, or by which its
assets are bound, or (c) conflict with, result in a breach of, or constitute
a default under any indenture, mortgage, lease, agreement or other
instrument to which Purchaser is a party or by which any of its assets or
properties are bound.
3.3. Investment. The Shares are being and will be acquired for
----------
investment purposes only for Purchaser's own account and not with a view to
the resale or distribution of any part thereof in violation of applicable
securities laws.
3.4. Litigation. No action, suit, proceeding or governmental
----------
investigation is pending or, to Purchaser's knowledge, threatened against
Purchaser, at law or in equity, which seeks to question, delay or prevent
the consummation of all or any portion of the transactions contemplated
hereby.
16
3.5. Brokerage Commission. The Purchaser has not taken any
--------------------
action which would entitle any person or entity to any brokerage commission,
finder's fee or like payment from Seller or any of its Affiliates in
connection with the transactions contemplated in this Agreement.
3.6. Financing. Purchaser has commitments from third parties to
---------
provide funds for the transactions contemplated by this Agreement, copies of
which are attached hereto as Schedule 3.6.
------------
3.7. Competition Act (Canada)
------------------------
The Purchaser together with its affiliates (as that term is
defined in the Competition Act (Canada), had:
(a) no assets in Canada, determined as of December 31,
2001 and in such manner as is prescribed for purposes of the Competition Act
(Canada); and
(b) no gross revenues from sales in, from or into
Canada, determined for the year ended December 31, 2001 and in such manner
as is prescribed for purposes of the Competition Act (Canada).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Seller hereby represents and warrants to Purchaser that the
statements contained in this Article 4 are true and correct as of the date
of this Agreement and will be true and correct as of the Closing Date,
except to the extent as set forth and identified in the Schedules to this
Agreement corresponding to the lettered and numbered sections contained in
this Article 4. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document, agreement or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with
the existence of the document or other item itself), except to the extent
the exception is reasonably apparent on the face of the document or
agreement.
The only representations, warranties or covenants given in relation
to Taxes of the UK Entities are those specified in the Tax Deed.
4.1. Capitalization; Legal Status; Qualification; Title to
-----------------------------------------------------
Shares.
------
(a) Each Target is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation and has all necessary corporate power,
authority and capacity to own all of its property and assets presently owned
and to carry on its business as presently conducted. Each Target is duly
qualified or licensed to do business and is in good standing as a foreign
corporation in all jurisdictions where the nature or conduct of its business
as now conducted requires such qualification. Seller has furnished to
Purchaser for each Target a complete and correct copy of the Organizational
Documents, each as amended or restated, as currently in effect and as in
effect as of the Closing. None of the Targets is in violation of any of the
provisions of its Organizational Documents. The minute books of each Target
contain in all material respects complete and accurate records of all
actions taken
17
and resolutions adopted by it's Board of Directors (and any committees
thereof) and shareholders since its organization. The stock transfer ledger
of each Target accurately reflects the ownership of its capital stock.
Complete and accurate copies of all the minute books of each Target and the
stock transfer ledger of each Target have been furnished to Purchaser.
Except as set forth on Schedule 4.1, statutory records and public filings of
------------
documents as required by law in respect of each UK Entity have been
completed correctly and filed on time.
(b) The authorized, allotted and issued capital stock
of each Target is set forth in Schedule 4.1 hereof. All of the shares of
------------
capital stock of each Target are fully paid and non-assessable and were
issued pursuant to a valid exemption from registration under applicable
securities laws, including under the Act where it is applicable. No shares
of the capital stock of any class or series of the Targets are reserved for
issuance. The Targets have no obligation to issue any additional shares of
their capital stock of any class or series, or securities convertible into
or exchangeable for shares of the capital stock of any class or series of
the Targets. There are no outstanding rights to either demand registration
of any shares of the capital stock of any class or series of the Targets
under applicable securities law or to sell any shares of the capital stock
of any class or series of the Targets in connection with such a
registration. No other class of capital stock or other ownership interests
of the Targets is authorized or outstanding. None of the outstanding shares
of capital stock of any class or series of the Targets on the date hereof
has been issued in violation of any preemptive rights of the current or past
shareholders of the Targets. No Rights relating to the capital stock of any
class or series of the Targets are issued or outstanding nor are there any
agreements, written or oral, providing for the issuance of any Rights
relating to the capital stock of any class or series of the Targets.
(c) Except as set forth on Schedule 4.1, Seller is the
------------
owner of all right, title and interest (legal and beneficial) in and to the
Shares, free and clear of all Liens and all shares of capital stock of each
Target which are not included in the definition of "Shares" are owned free
and clear of all Liens by Target or a direct or indirect Subsidiary of
Target. Upon delivery of certificates representing the Shares to be sold by
Seller hereunder and payment therefor pursuant to this Agreement, good,
valid and marketable title to such Shares, free and clear of all Liens or
equities will be transferred to Purchaser.
4.2. Subsidiaries. Except as set forth on Schedule 4.2, no
------------ ------------
Target has any Subsidiaries, nor does any Target, directly or indirectly,
own or have any interest in the capital stock of, or any other interest in,
any Person.
4.3. No Violation. Except as set forth in Schedule 4.3
------------ ------------
(collectively, the "Required Consents and Notices"), the execution and
-----------------------------
delivery by Seller of this Agreement or any other Purchase Document to which
it is a party, the consummation of the transactions contemplated hereby and
thereby, and the performance by Seller of this Agreement and each other
Purchase Document to which it is party in accordance with their respective
terms and conditions will not:
(a) conflict with the Organizational Documents of
Seller or any of the Targets;
18
(b) require Seller or any of the Targets to obtain
any consents, approvals, Permits, authorizations or actions of, or make any
filings with or give any notices to, any Governmental Authority or any other
Person;
(c) violate any Law of any Governmental Authority
applicable to Seller or to any of the Targets;
(d) violate any Orders of any court or Governmental
Authority applicable to Seller or any of the Targets or their respective
properties, assets or businesses;
(e) violate, conflict with or result in a breach of
any of the terms and conditions of, result in a material modification of the
effect of, otherwise cause the termination of or give any other contracting
party the right to terminate, accelerate, cancel, impose any fees or
penalties, or constitute (or with notice or lapse of time or both
constitute) a default under any contract, agreement, debt, note, lease,
bond, mortgage, indenture or other similar instrument or license or result
in the creation of any Lien upon the Shares or on any of the properties or
assets of the Seller or any of the Targets, except as set forth on Schedule
--------
4.3; or
---
(f) violate or result in the loss of any right under,
termination, revocation or suspension of any Permit.
4.4. Power and Authority. The Seller has the full power,
-------------------
capacity and authority necessary to (i) enter into and perform its
obligations under this Agreement and the other Purchase Documents to which
Seller is a party and (ii) to consummate the transactions contemplated
hereby and thereby.
4.5. Due Authorization; Validity; Enforceability. The Purchase
-------------------------------------------
Documents and all other instruments or documents executed by the Seller in
connection with the Purchase Documents have been duly executed and
delivered, and constitute legal, valid and binding obligations of the
Seller, enforceable in accordance with their respective terms. The
execution, delivery and performance of this Agreement and each other
Purchase Document have been duly authorized by the Seller and each Target,
as applicable.
4.6. Ownership of Assets. Except as set forth on Schedule 4.6,
------------------- ------------
the Targets have good and indefeasible or marketable, as appropriate, title
to, or a valid leasehold interest in, or valid license to use, the
properties and assets shown on the Most Recent Financial Statements or
acquired thereafter and all other properties and assets they use in and
which are necessary for the conduct of the Business (the "Assets"), except
------
for properties and assets disposed of in the ordinary course of business
since the date of the Most Recent Financial Statements, and subject to no
Liens except for Permitted Encumbrances. The buildings, Equipment and other
tangible and intangible assets of the Targets are sufficient to operate the
Business as presently conducted as an independent going concern from and
after the Closing Date, and all such tangible assets are in good operating
condition, subject to ordinary wear and tear, and are fit for use in the
ordinary course of business.
4.7. Financial Statements; Other Information. Attached to
---------------------------------------
Schedule 4.7 are the following financial statements (collectively, the
------------
"Financial Statements"): the unaudited consolidated balance sheets and
--------------------
statement of income for the Targets and their Subsidiaries as of
19
and for the years ending December 31, 2000 and December 31, 2001 and as of
and the period from January 1, 2002 through March 31, 2002 (the "Most Recent
-----------
Financial Statements"). The Financial Statements (including the notes
--------------------
thereto) are correct and complete, consistent with the books and records of
the Targets, have been prepared in accordance with GAAP, applied on a
consistent basis throughout the periods covered thereby, and present fairly
the financial condition as of the dates indicated and the results of
operations and the cash flows of the Targets and their Subsidiaries for the
periods then ended, except in the case of the unaudited financial statements
for (i) the absence of notes, (ii) the absence of a statement of cash flows,
and (iii) typical year-end adjustments. None of the Targets has used any
improper accounting practice that would have the effect of reflecting in the
Financial Statements or the books and records of the Targets any properties,
assets, liabilities, revenues or expenses, not in accordance with GAAP. The
books, records and accounts of the Targets maintained with respect to the
Business accurately and fairly reflect in reasonable detail the transactions
and the assets and liabilities of the Targets with respect to the Business.
None of the Targets has engaged in any transaction with respect to the
Business, maintained any bank account for the Business, or used any of its
funds in the conduct of the Business, except for transactions, bank
accounts, and funds which have been and are reflected in the normally
maintained books and records of the Targets.
4.8. Absence of Undisclosed Liabilities.
----------------------------------
(a) None of the Targets has any Liabilities, whether
contingent, liquidated or otherwise, nor any unrealized or anticipated
losses, except (i) Liabilities that are fully reflected or reserved against
in the Most Recent Financial Statements (including any notes thereto), which
reserves are in accordance with GAAP, and (ii) Liabilities incurred by the
Targets which (a) have arisen after the date of the Most Recent Financial
Statements in the ordinary course of business (none of which is a result of
any breach of contract, tort, breach of warranty or infringement or
violation of law by a Target) consistent with past practices or (b) are not
required by GAAP to be reflected or reserved against on a balance sheet.
Except as set forth on Schedule 4.8, none of the Targets is directly or
------------
indirectly liable, by guarantee, indemnity or otherwise, upon or with
respect to, or obligated, by discount or repurchase agreement or in any
other way, to provide funds with respect to, or obligated to guarantee or
assume, any Liability for any Person. Except as set forth on Schedule 4.8,
------------
none of the Targets has any Indebtedness. Schedule 4.8 further sets forth
------------
the outstanding principal amount, interest rate, maturity date, name of
lender and party with respect to all Indebtedness of the Targets.
(b) Since the date of the Most Recent Financial
Statements, (i) the Business of the Targets has been conducted in the
ordinary course consistent with past custom and practice including with
respect to the timely payment of accounts payable and collection of accounts
receivable, (ii) there has not occurred any event, change or development
which has had or is reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect and (iii) there has not been any action
or transaction that, if it were taken or occurred after the date hereof,
would constitute a breach of Section 5.1 hereof.
-----------
4.9. Leased Personal Property. Schedule 4.9 contains a true and
------------------------ ------------
correct list of each lease by a Target of any Vehicle, Equipment or
Furniture and Fixtures that requires payment by Target of $100,000 or more
during any Fiscal Year and is not terminable within 180 days of the date
hereof. Seller has delivered true, complete and correct copies of each lease
listed on
20
Schedule 4.9, and any amendments, extensions, and renewals thereof, to
------------
Purchaser. Each of the leases described on Schedule 4.9 is in full force and
------------
effect, and there are no existing defaults or events or default, real or
claimed, under any of such leases by a Target or, to the Seller's knowledge,
any other party to such leases or any event which, with notice or the lapse
of time, or both, will create a default thereunder by a Target or, to the
Seller's knowledge, any other party to such leases. No rights of a Target
under such leases have been assigned or otherwise transferred as security
for any obligation of the Target. Except as described on Schedule 4.9, the
------------
consummation of the transactions provided for herein will not create or
constitute a default or event of default under any such lease or require the
consent of any other party to any such lease in order to avoid a default or
event of default.
4.10. Real Property; Leased Real Property.
-----------------------------------
The representations and warranties set forth in this Section 4.10
shall not apply to the UK Entities.
(a) Schedule 4.10(a) contains a true and correct list
----------------
of each parcel of real property owned by a Target (the "Real Property") and
-------------
a summary description of all plants and structures located thereon. Each
Target owns good and marketable fee simple title to its Real Property free
and clear of any Liens except for Permitted Encumbrances. Except as set
forth on Schedule 4.10(a), no Target has granted, and no party has, any
right or option to acquire or occupy the Real Property or any portion
thereof other than Purchaser.
(b) The Real Property is in compliance with all laws,
rules, regulations, and ordinances, including, without limitation, zoning
and building codes.
(c) Each Target, as applicable, and the Real Property
are in material compliance with all Liens, encumbrances, easements,
restrictions, and other matters of record affecting the Real Property, and
no Target has received any notice alleging any default under any of such
Liens, encumbrances, easements, restrictions, or other matters.
(d) Each Target has obtained all Permits necessary
to operate the business currently being conducted on its respective Real
Property. All such Permits are valid and in full force and effect and each
Target has paid any fees that are currently due in connection therewith.
Seller has not received any notice alleging a violation under any of such
Permits. The consummation of the transactions provided for herein will not
violate the terms of, or create a default or event of default under, any
such Permit or require the consent of any other party in order to avoid a
violation or default.
(e) The Targets have not received any written notice
of any pending or threatened condemnation, eminent domain, expropriation or
other similar proceedings affecting any of the Real Property.
(f) The Real Property abuts public rights-of-way and
has direct access thereto or, if access is provided across adjoining
property, such access is provided by means of valid, existing and insurable
easement benefiting the Real Property.
21
(g) Attached hereto as Schedule 4.10(g) is a complete
----------------
and accurate list of the leases (including any and all modifications
thereof) of a Target related to real property (the "Real Property Leases").
--------------------
Each Real Property Lease is legal, valid, binding and enforceable by the
respective Target and is in full force and effect, except as such
enforceability against a third party may be limited by the effects of
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the rights and remedies of creditors, and the effects of general
principles of equity, whether applied by a court of law or equity. Seller
has delivered true, correct and complete copies of all Real Property Leases,
together with any and all modifications thereto, to Purchaser. Except as set
forth in Schedule 4.10(g), the respective Target owns all of the lessee's or
----------------
tenant's interest under the Real Property Leases and has not assigned,
pledged or otherwise hypothecated any such interest. There are no defaults
under the Real Property Leases by a Target or, to the Seller's knowledge,
the lessor or landlord thereunder, and there are no events which with the
passage of time or notice, or both, will create a default thereunder by a
Target or, to the Seller's knowledge, any other party to such Real Property
Leases. The Targets have not received any notice alleging any default under
any of the Real Property Leases, and there are no brokerage or leasing
commissions, or any similar charges or commissions, due in connection with
any of the Real Property Leases which will be binding on Purchaser after
Closing. Except as described on Schedule 4.10(g), the consummation of the
----------------
transactions provided for herein will not create or constitute a default or
event of default under any such lease or require the consent of any other
party to any such lease to avoid a default or event of default.
(h) Each property which comprises a portion of the
Real Property complies with all applicable subdivision and/or platting
requirements, and there are no material structural or other defects, latent
or otherwise, in any of the improvements. The Targets have not received any
notice alleging any defect or deficiencies therein.
(i) All contractors, subcontractors and other persons
or entities furnishing work, labor, materials or supplies to the Real
Property have been paid in full and, other than routine ongoing charges,
there are no claims against the Real Property or the Targets in connection
therewith.
(j) Neither Seller nor Target have received any notice
of the expropriation of all or any of the Real Property, and such parties
are not aware of any expropriation proceeding pending or threatened against
or affecting the Real Property or any part thereof nor of any discussions or
negotiations which could lead to any such expropriation.
(k) There are no agreements, undertakings or other
documents which affect or relate to the title to, or ownership of the Real
Property other than those registered on title against the Real Property.
(l) Target has not entered into any agreement to sell,
transfer, encumber, or otherwise dispose of or impair its right, title and
interest in and to the Real Property or the air, density and easement rights
relating to the Real Property.
(m) All accounts for work and services performed or
materials placed or furnished upon or in respect of the construction and
completion of any of the buildings, improvements or other structures
constructed on the Real Property have been fully paid and no
22
one is entitled to claim a lien under the Construction Lien Act (Ontario),
or similar U.S. or UK laws, or other similar legislation for such work
performed by or on behalf of Canada Label, Mail-Well Label USA, Inc., or
Mail-Well Holdings Limited and subsidiaries thereof.
(n) Canada Target has not made application for a
rezoning of any of the Real Property and Canada Label has no actual
knowledge of any pending change without obligation to inquire of any owners
or users or neighboring real properties of any Governmental Authority, to
any zoning affecting the Real Property.
(o) Canada Target's Real Property located in the
Province of Quebec does not form part of an immovable complex within the
meaning of the "Act respecting the Regie du Logement" (Quebec).
(p) No part of Canada Target's Real Property located
in the Province of Quebec is located within a designated agricultural region
under the "Act to Preserve Agricultural Land" (Quebec).
(q) No part of Canada Target's Real Property located
in the Province of Quebec is subject to any restriction under the "Cultural
Property Act" (Quebec).
4.11. Contracts.
---------
(a) Schedule 4.11(a) contains a true and correct list
----------------
of each Contract to which a Target is a party (other than purchase orders)
not otherwise listed on Schedules 4.8, 4.9, 4.10(g), 4.12, 4.13, 4.18, 4.20
------------- --- ------- ---- ---- ---- ----
or 4.31, that requires or could require any party thereto to pay $100,000 or
----
more in any Fiscal Year or is otherwise material to the Business of the
Targets when taken as a whole, and, without limiting the generality of the
foregoing, that:
(i) is with any present or former employee,
officer, director, shareholder, agent, consultant, or any entity in
which any of the foregoing is a controlling person;
(ii) is for the future purchase of, or payment
for, supplies, materials, goods, products or other personal
property, or for the furnishing or receipt of services by a third
party the performance of which will extend over a period of more
than one year;
(iii) requires a Target to sell, distribute,
supply, or otherwise market products or to perform maintenance,
services or similar duties;
(iv) is a distribution, dealer, representative,
or sales agency contract;
(v) is a note, debenture, bond, equipment trust
agreement, letter of credit agreement, loan agreement, or other
contract or commitment for the borrowing or lending of money or
agreement or arrangement for a line of credit or guarantee, pledge,
or undertaking of the indebtedness of any other person;
(vi) is for any charitable or political
contribution;
23
(vii) limits or restrains a Target or any
successor thereto from engaging or competing in any manner or in
any business or imposes confidentiality on a Target;
(viii) is between Target and any Affiliate
thereof;
(ix) relates to a joint venture, partnership,
shareholder arrangement or voting trust involving a Target;
(x) provides for a material indemnification
obligation of the Targets;
(xi) is a settlement, conciliation or similar
agreement; or
(xii) is with Seller and its Affiliates (other
than the Targets).
(b) Schedule 4.11(b) contains a true and correct list
----------------
of all commitments for capital expenditures by the Targets that have been
approved or made prior to the date of this Agreement in excess of $100,000
and that remain outstanding as of the date hereof.
(c) Each of the Contracts listed or described in
Schedule 4.11(a) (or Schedules 4.8, 4.9, 4.10(g), 4.12, 4.13, 4.18, or 4.20)
---------------- ------------- --- ------- ---- ---- ---- ----
(i) was entered into by a Target in the ordinary course of business
consistent with past practice, (ii) is legal, valid, binding and enforceable
by a Target, and is in full force and effect, except as such enforceability
against a third party may be limited by the effects of bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
rights and remedies of creditors, and the effects of general principles of
equity, whether applied by a court of law or equity; (iii) except as
provided in the above referenced Schedules or in Schedule 4.3, the
------------
consummation of the transactions contemplated hereby will not conflict with
or result in a breach of any of the terms and conditions of, result in a
modification of, or otherwise cause the termination of any such Contract;
(iv) there exists no breach, violation of, or default under any of such
Contracts by a Target or, to the Seller's knowledge, any other party to such
Contracts or any event which, with notice or the lapse of time, or both,
will create a breach or violation thereof or default thereunder by Target
or, to the Seller's knowledge, any other party to such Contracts.
(d) Except as set forth on Schedule 4.11(d), there
----------------
exists no actual or, to the Seller's knowledge, threatened termination,
cancellation, or limitation of, or any amendment, modification, or change to
any Contract listed in Schedule 4.11(a) (or Schedules 4.8, 4.9, 4.10(g),
---------------- ------------- --- -------
4.12, 4.13, 4.18 or 4.20).
---- ---- ---- ----
(e) No Related Party owns or has an interest in,
directly or indirectly, in whole or in part, any tangible or intangible
property used in the conduct of the Business. Except as described on
Schedule 4.11(e), Target does not currently, directly or indirectly,
----------------
guarantee or assume any indebtedness for borrowed money or otherwise to the
benefit of any Related Party. Except as described in Schedule 4.11(e), the
----------------
Targets do not have an agreement to make any loans, payments or transfers of
Target's assets to any Related Party.
24
4.12. Intellectual Property.
---------------------
(a) Schedule 4.12 contains a true and correct list of
-------------
the material Intellectual Property used or contemplated by Seller for use by
the Targets in the conduct of their business which a Target owns or has the
right to use. Except as set forth in Schedule 4.12, each Target owns or has
-------------
the right to use all Intellectual Property necessary for the conduct of its
Business as presently conducted, free and clear of any Liens other than
Permitted Encumbrances (the "Target Intellectual Property"). Except as set
----------------------------
forth in Schedule 4.12, all of the Target Intellectual Property rights are
-------------
valid and enforceable. No Related Party (other than any of the other
Targets) owns or has an interest in, directly or indirectly, in whole or in
part, any Target Intellectual Property.
(b) The use by Targets of the Target Intellectual
Property does not infringe upon or conflict with any rights claimed in any
Intellectual Property by any third party. No use by a Target of any
Intellectual Property licensed to it violates the terms of any agreement
pursuant to which it is licensed. No claim is pending or, to the Seller's
knowledge, threatened that alleges that any Intellectual Property owned or
licensed by a Target or that the Target otherwise has the right to use is
invalid or unenforceable by the Target. To the Seller's knowledge and except
as set forth on Schedule 4.12, no Person is infringing upon or otherwise
-------------
violating the Intellectual Property rights of a Target.
(c) Except for commercially available licenses with an
annual cost of $100,000 or less, true, correct, and complete copies of all
Contracts pursuant to which a Target is a licensor, licensee, reseller or
distributor of Intellectual Property, have been provided to Purchaser (the
"IP Licenses"). All such Contracts are in full force and effect and there
-----------
are no existing defaults under any of such Contracts by a Target or, to the
Seller's knowledge, any other party to such Contracts or any event which,
with notice or the lapse of time, or both, will create a breach or violation
thereof or default thereunder by the Target or, to the Seller's knowledge,
any other party to such Contracts that would give the non-defaulting party a
right to terminate any such Contract or a right to receive any payment
pursuant to such Contract. Except as set forth in Schedule 4.12, the
-------------
transactions contemplated by this Agreement will not result in the
termination of, or otherwise require the consent of any party to, any IP
License.
(d) Each UK Entity complies in full with, and has in
place all necessary registrations and procedures under, the Data Protection
▇▇▇ ▇▇▇▇ of the United Kingdom.
(e) Each UK Entity has put all necessary procedures in
place in order to comply with the Data Protection ▇▇▇ ▇▇▇▇ of the United
Kingdom.
(f) No UK Entity has received a notice from or been
subject to enquiries by the Data Protection Registrar or Commissioner
regarding non-compliance or alleged non-compliance by the Company with any
provision of the Data Protection Acts 1984 and 1998 (including, without
limitation, the data protection principles).
(g) No individual has alleged that any UK Entity has
failed to comply with the provisions of the Data Protection Acts 1984 and
1998 or claimed compensation from the Company under that Act including for
unauthorised disclosure of personal data.
25
(h) The data utilised by the UK Entity in its business
and/or transferred to the Company's customers and/or business partners
(including transfers to other companies within the group of companies of
which the UK Entity is part) has been lawfully obtained and each UK Entity
is entitled to use the same, transfer the same and grant such rights therein
as it grants to its customers and/or business partners in respect of the use
of such data.
4.13. Insurance. Schedule 4.13 lists all of the insurance
--------- -------------
policies held by or on behalf of the Targets, with the effective date and
coverage amounts indicated thereon and also indicates any self-insurance
plans or policies. Such policies and binders are valid and enforceable in
accordance with their terms and are in full force and effect. Schedule 4.13
-------------
further sets forth all obligations of the Targets to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policies under which such coverage is
provided.
4.14. Environmental Matters and OSHA.
------------------------------
The representations and warranties set forth in this Section 4.14
------------
shall not apply to the UK Entities.
(a) Seller has provided Purchaser true and complete
copies of, all environmental site assessments, test results, analytical
data, boring logs, and other environmental reports, studies or material
documents in the possession, custody or control of the Targets or Seller,
concerning any of the Real Property or the current or former facilities or
operations of the Targets.
(b) Except as set forth in Schedule 4.14(b) hereto,
----------------
each Target:
(i) has been and is in compliance with all
Environmental Laws and Health and Safety Laws, and has not (A) been
notified that it is potentially liable under or (B) received any
requests for information or other correspondence concerning its
current or former operation or facilities, under Environmental Law,
including without limitation CERCLA, the Environmental Protection
Act (Ontario), Ontario Water Resources Act (Ontario), Pesticides
Act (Ontario) and Gasoline Handling Act (Ontario);
(ii) has accurately prepared and timely filed
with the appropriate jurisdictions all reports and filings required
pursuant to any Environmental Laws applicable to the Target and its
Business;
(iii) has not entered into or received any
consent decree, compliance order, or administrative order, or
settlement, indemnification, or release agreement or proposed
agreement from any Governmental Authority or other third party
relating to environmental protection or any Liability under
Environmental Laws or Health and Safety Laws;
(iv) has not entered into or received, nor is the
Target in default under any judgment, order, writ, injunction or
decree of any federal, state, provincial, foreign, or municipal
court or other governmental authority relating to environmental
protection or any Liability under any Environmental Laws;
26
(v) has obtained all Environmental Permits
necessary in connection with the operations or the ownership, use,
or lease of any assets of the Target or its Business. The Target
and its Business is and has been in compliance with each such
Environmental Permit (including any information provided on the
applications therefor) and no such Environmental Permit restricts
the Target from operating any Equipment covered by such
Environmental Permit as currently being conducted.
(c) With respect to each Target, its predecessors and
Affiliates of the Business:
(i) neither Seller nor the Target has received
any oral or written notice of nor are there any actions, suits,
claims, arbitration proceedings, or complaints pending or, to the
Seller's knowledge, threatened by any Governmental Authority or any
other Person against Target relating to compliance with or any
Liabilities under Environmental Laws or Health and Safety Laws;
(ii) except as set forth on Schedule 4.14(c),
----------------
there has been no disposal, spillage, burial, placement, or other
Release of Hazardous Materials by Target or any of its predecessors
or any other party on, in, at, about, or from any of the Real
Property or Leased Real Property or any other facility or property
owned or operated by a Target or any of its predecessors;
(iii) none of the Targets, its predecessors or
affiliates has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or released any
Hazardous Materials in a manner that does not comply with all
applicable Environmental Laws or which has or would result in a
Liability or corrective, remedial or investigatory obligation to a
Target;
(iv) except as disclosed on Schedule 4.14(c), all
----------------
above-ground and underground storage tanks, oil/water separators,
sumps, septic systems, asbestos containing materials, landfills,
surface impoundments or disposal areas located at the Real Property
or the Leased Real Property are in compliance with Environmental
Laws; and
(v) There are no events, conditions or
circumstances with respect to the past or present facilities or
operations of Targets, their predecessors or Affiliates or the
Business which have resulted or would result in liability or
investigation, corrective or remedial obligation under
Environmental Laws.
(d) Each Target is in compliance with Health and
Safety Laws and none of the Targets has received any notice that past or
present conditions of its properties or assets violate any applicable Health
and Safety Laws or otherwise can be made the basis of any claim, citation,
proceeding, or investigation, based on or related to violations of Health
and Safety Laws.
4.15. Litigation. Except as set out in Schedule 4.15, and, in
---------- -------------
respect of labor claims, Schedule 4.18, (i) none of the Targets is subject
-------------
to any outstanding injunctions, judgments, orders, decrees or rulings; and
(ii) there are no claims, charges, arbitrations, grievances, actions, suits,
proceedings, or investigations pending, or to the Seller's knowledge,
threatened against any
27
of the properties or assets of any Target or it business operations, at law
or in equity, before or by arbitrator, court or Governmental Authority,
including without limitation, any claims opposing or attempting to cancel
any Target Intellectual Property rights, nor to the Seller's knowledge, is
there any basis for the foregoing.
4.16. Absence of Changes. Except as set forth on the face of
------------------
the Most Recent Financial Statements or on Schedule 4.16, each Target has
-------------
conducted its Business in the ordinary course, and since March 31, 2002,
there has not been any transaction or occurrence in which a Target has:
(a) suffered any change, effect or circumstance
(except for changes, effects and circumstances in the ordinary course of
business), in the business, operations, condition (financial or otherwise),
liabilities, assets, or earnings;
(b) incurred any obligations or liabilities of any
nature other than items incurred in the ordinary course of business or
increased (or experienced any change in the methods of calculating) any bad
debt, contingency, or other reserve, other than in the ordinary course of
business and consistent with GAAP;
(c) paid, discharged, or satisfied any claim, Lien or
Liability (whether absolute, accrued, contingent, and whether due or to
become due), other than the payment, discharge, or satisfaction in the
ordinary course of business of claims, Liens, or Liabilities of the type
reflected or reserved against in the Financial Statements or which were
incurred in the ordinary course of business;
(d) permitted, allowed, or suffered any of its
properties or assets (real, personal or mixed, tangible, or intangible) to
be subjected to any Lien, other than Permitted Encumbrances and purchase
money security interests in acquired assets (all of which purchase money
security interests are identified on Schedule 4.16);
-------------
(e) written down or written up the value of any
Inventory (including write-downs by reason of shrinkage or markdowns),
determined as collectible any Accounts Receivable or any portion thereof
which were previously considered uncollectable, or written off as
uncollectable any Accounts Receivable or any portion thereof except in the
ordinary course of business and consistent with GAAP;
(f) cancelled any debts or waived any claims or rights
other than in the ordinary course of business;
(g) incurred any Indebtedness other than in the
ordinary course of business;
(h) paid, loaned, distributed, or advanced any amounts
to, sold, transferred, or leased any properties or assets (real, personal or
mixed, tangible or intangible) to, purchased, leased, licensed, or otherwise
acquired any such properties or assets from, or entered into any other
agreement or arrangement with any Related Party (other than any of the
Targets or subsidiaries thereof) other than in the ordinary course of
business;
28
(i) entered into, terminated or materially modified
any collective bargaining or labor agreement (oral and legally binding or
written), made any material change to any Target Benefit Plan (including the
establishment of any new such plans or any amendment that extends the
extension of coverage under any such plans to new groups of employees or
other individuals not previously covered), or experienced any organized
slowdown, work interruption, strike, or work stoppage;
(j) sold, transferred, or otherwise disposed of any of
its material properties and assets except in the ordinary course of business
consistent with past practice, or made any acquisition of all or any part of
the properties, capital stock or business or any other Person;
(k) granted or incurred any obligation for any
increase in the compensation or benefits of any officer of Target or, except
in the ordinary course of business, any Employee (including, without
limitation, any increase pursuant to any bonus, pension, profit-sharing,
retirement, or other plan or commitment);
(l) made any material change in any method of
accounting or accounting principle, practice, or policy;
(m) suffered any casualty loss or damage in excess of
$100,000 in the aggregate (whether or not insured against);
(n) made or agreed to make any charitable
contributions, illegal payments, bribes or kickbacks or incurred or agreed
to incur any non-business expenses;
(o) amended any provision of its Organizational
Documents or changed any of its authorized or issued capital stock or any
rights with respect thereto;
(p) engaged in any material transaction other than in
the ordinary course of business;
(q) materially changed any of its business policies,
including advertising, investments, marketing, pricing, purchasing,
production, personnel, sales, returns, budget or product acquisition
policies, except in the ordinary course of business;
(r) terminated or failed to renew, or received any
written threat to terminate or fail to renew, any Contract or other
agreement material to the Business, except in the ordinary course of
business;
(s) Since December 31, 2001, no Target has made any
Tax election, adopted or changed any accounting method for Tax purposes,
filed any amended Tax Return, consented to or entered into any closing
agreement or similar agreement with any Taxing Authority, consented to or
settled or compromised any Tax claim or assessment or taken any position
inconsistent with any past practice on any Tax Return; or
(t) agreed, so as to legally bind Target whether in
writing or otherwise, to take any of the actions set forth in this Section
-------
4.16 and not otherwise permitted by this Agreement.
----
29
4.17. Brokers and Finders. Except as set forth on Schedule
------------------- --------
4.17, neither the Seller nor any of their Related Parties has employed any
----
investment banker, financial advisor, broker or finder in connection with
the transactions contemplated by this Agreement, and none of the Targets has
incurred any obligation or liability to any party for any brokerage fees,
agent's commissions, or finder's fees in connection with the transactions
contemplated by this Agreement.
4.18. Labor Matters.
-------------
(a) Except to the extent set forth in Schedule
--------
4.18(a), (i) there is no labor strike, dispute, slowdown, stoppage or
-------
lockout actually pending, or to the Knowledge of Seller, threatened against
or affecting any Target, (ii) no union claims to represent the employees of
any Target, (iii) no Target is a party to or is bound by any collective
bargaining or similar agreement with any labor organization, or work rules
or practices agreed to with any labor organization or employee association
applicable to employees of the Targets, (iv) to the Knowledge of Seller,
there are no current union organizing activities among the employees of a
Target, (v) true and correct copies of all personnel policies, rules or
procedures applicable to employees of each Target have heretofore been
delivered to Purchaser, (vi) each Target is, and has at all times been, in
compliance in all material respects with all applicable Laws with respect to
employment and employment practices, terms and conditions of employment,
wages, hours of work, employment standards, human rights, labor relations,
pay equity, employment equity, workers' compensation, workplace safety and
insurance and occupational safety and health, and are not engaged in any
unfair labor practices as defined under applicable Law, including without
limitation the National Labor Relations Act, (vii) there is no unfair labor
practice charge or complaint against any Target pending or, to the Knowledge
of Seller, threatened before or any Government Authority, including without
limitation the National Labor Relations Board, (viii) there is no grievance
arising out of any collective bargaining agreement or other grievance
procedure, (ix) no charges with respect to or relating to any Target are
pending before any Governmental Authority responsible for the prevention of
unlawful employment practices, including without limitation before the Equal
Opportunity Commission, (x) no Target has received notice of the intent of
any Governmental Authority responsible for the enforcement of labor or
employment Laws to conduct an investigation with respect to or relating to
the Target and no such investigation is in progress, (xi) there are no
complaints, lawsuits or other proceeding pending or to the Knowledge of
Seller threatened in any forum by or on behalf of any present or former
employee of a Target, any applicant for employment or classes of the
foregoing, alleging breach of any express or implied contract or employment,
any Law governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the
employment relationship, (xii) with respect to UK Target there is not a
material number of persons employed (or previously employed) by a Target who
are on secondment, maternity leave, absent on grounds of disability or other
leave of absent and have, or may have, a statutory or contractual right to
return to work, (xiii) UK Target has not within the period of two years
preceding the date of this Agreement been a party to any "relevant transfer"
(as defined in the Transfer of Undertakings (Protection of Employment)
Regulations 1981 (as amended)) or agreement for a relevant transfer nor been
a party to or been obliged to be a party to any consultation in relation to
any collective redundancies made pursuant to section 188 of the Trade Union
and Labour Relations (Consolidation) ▇▇▇ ▇▇▇▇. Except as set forth in
Schedule 4.18(a), there are no severance agreements with any employees of a
----------------
Target.
30
(b) Schedule 4.18(b) sets forth the approximate number
----------------
of employees in the aggregate, the approximate number of full-time personnel
and the approximate number of contract workers of each Target as of March
31, 2002.
(c) With respect to the transactions contemplated by
this Agreement, any notice required under any law or collective bargaining
agreement has been given, and all bargaining obligations with any employee
representative have been, or prior to the Closing will be, satisfied. Within
the past three years, no Target has implemented any plant closing or mass
layoff of employees as those terms are defined in the Worker Adjustment and
Retraining Notification Act of 1988, as amended, or any similar foreign,
state or local Law (collectively, "WARN"), and no such action will be
implemented without advance written notification to Purchaser.
(d) Except as disclosed on Schedule 4.18(d), no
----------------
employee is employed under a written contract providing annual compensation
in excess of $100,000 which cannot be terminated by a Target without payment
or penalty. Attached to Schedule 4.18(d) is a form of employment offer
----------------
letter generally provided to Target employees.
(e) All fees payable and assessments imposed by the
<< Commission de la sante et securite du travail, Commission des Normes du
travail, employment insurance, la Regie des rentes du Quebec >>, or any
other governmental authority with respect to Quebec employees have been paid
without subrogation.
4.19. Tax Matters
-----------
The representations and warranties set forth in this Section 4.19
------------
shall not apply to the UK Entities.
(a) Each Target and each Affiliated Group of which
each Target is a member has duly and timely filed all Tax Returns required
to be filed on or before the Closing Date and all such Tax Returns were
true, correct and complete, in all material respects, as filed. All Taxes
owed by of any of Target and any Affiliated Group of any Target (whether or
not shown on any Tax Return) and all installments thereof have been paid (or
if due between the date hereof and the Closing Date, will be duly and timely
paid). Seller has made available to Purchaser complete and correct copies of
all Tax Returns filed by the Targets during the last three years and all
notices of assessment and reassessment and the portions of all Tax Returns
relating to the Targets filed by any Affiliated Group of which a Target is a
member.
(b) Each Target, and each Affiliated Group of which
the Target is a member, has duly and timely withheld all employment,
withholding and other Taxes required to be withheld, and such withheld taxes
together with the related employer portion thereof have been duly and timely
paid to the proper Governmental Authorities or, if not yet due, properly set
aside in accounts for such purpose. Each Target, and each Affiliated Group
of which the Target is a member, has timely filed all information returns or
reports, including Forms 1099, that are required to be filed and has
accurately reported in all material respects all information required to be
included on such returns or reports.
31
(c) Schedule 4.19 lists all countries, states, cities
-------------
or other jurisdictions in which each Target, and each Affiliated Group of
which the Target is a member, has filed Tax Returns or paid Taxes within the
last three years. No claim has been asserted, raised, or to the Selling
Parties' knowledge, threatened by a Governmental Authority in a jurisdiction
in which the Target does not file Tax Returns or pay or collect Taxes.
(d) Except as set forth on Schedule 4.19, no Tax
-------------
Return filed by a Target or by any Affiliated Group of which the Target is a
member during the period that Target has been a member, is currently under
audit by any Governmental Authority. No Taxes that may become payable by a
Target have been asserted by any Governmental Authority to be due, and no
report or assessment for any Taxes that may be payable by a Target has been
issued by any Governmental Authority in the course of any audit. To the
Sellers' knowledge, except as set forth on Schedule 4.19, neither the
-------------
Internal Revenue Service nor any other Governmental Authority is now
asserting, raising or threatening against a Target or, with respect to the
period during which a Target has been a member, against any Affiliated Group
of which a Target is a member, any deficiency or claim for additional Taxes
or any adjustment of Taxes.
(e) Except as set forth on Schedule 4.19, none of the
-------------
Targets, and any Affiliated Group of which the Targets are a member, (i) is
the beneficiary of an extension of time within which to file any Tax Return,
or (ii) have (x) waived any statute of limitations, (y) agreed to any
extension of the period for assessment or collection of any Taxes, or (z)
executed or filed any power of attorney with respect to any Taxes, which
waiver, agreement or power of attorney is currently in force.
(f) No Target has filed a consent under Section 341(f)
of the Code concerning collapsible corporations.
(g) No Target is a party to, bound by or has any
obligation under any Tax allocation, sharing, indemnity or similar agreement
or arrangement.
(h) Purchaser will not be required, upon the transfer
of the Shares to Purchaser, to deduct and withhold any amount pursuant to
Sections 1445(a) or 3406 of the Code, or any other provision of Law.
(i) No Target has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
(j) Each Target (a) has not been a member of an
Affiliated Group and (b) has no liability for the Taxes of any person other
than itself under Section 1.1502-6 of the Treasury regulations (or any
similar provision of state, local or non-U.S. law), as a transferee or
successor, by contract or otherwise. Each Target does not own (directly or
indirectly) an interest in an entity that is treated as a corporation or
partnership, or an entity the separate existence of which is disregarded,
for U.S. federal income tax purposes.
(k) There are no Liens for Taxes upon the assets of
properties of any Target, except for statutory Liens for current Taxes not
yet due.
32
(l) No Target will be required: (A) as a result of a
change in method of accounting for a Pre-Closing Period, to include any
adjustment under Section 481 of the Code or other similar adjustment in
income for any Post-Closing Period, (B) as a result of any closing agreement
under Section 7121 of the Code (or other comparable agreement), to include
any item of income in, or to exclude any item of deduction from, any
Post-Closing Period, (C) as a result of any sale occurring during the
Pre-Closing Period and reported on the installment method, to include any
item of income in any Post-Closing Period or (D) as a result of any prepaid
amount received on or prior to the Closing Date (other than amounts prepaid
in the ordinary course of business consistent with past custom and
practice), to include any item of income in, or exclude any item of
deduction from, taxable income for any Post-Closing Period.
(m) No Target is subject to any private letter ruling
of the U.S. Internal Revenue Service or comparable ruling of any other
Taxing authority.
(n) No Target has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments, that will not be fully
deductible under Section 280G of the Code or under Section 162(m) of the
Code (or any similar provision of state, local or non-U.S. law).
(o) Target has proper receipts, within the meaning of
Treasury regulation Section 1.905-2, for any non-U.S. Tax that has been or
in the future may be claimed as a foreign tax credit for U.S. federal income
tax purposes. No non-U.S. Target has an investment in "United States
property" within the meaning of Section 956(c) of the Code. No non-U.S.
Target is, or at any time has been, engaged in the conduct of a trade or
business within the U.S. within the meaning of Section 864(b) or Section
882(a) of the Code, or treated as or considered to be so engaged under
Section 882(d) or Section 897 of the Code or otherwise. No non-U.S. Target
holds a U.S. real property interest within the meaning of Section 897(c)(1)
of the Code.
(p) No Target has any "excess loss accounts" within
the meaning of Sections 1.1502-19 of the Treasury regulations and does not
have any limitations (including limitations under Section 382 of the Code)
on its use of net operating losses or other carryovers. No Target is subject
to the dual consolidated loss provisions of Section 1503(d) of the Code.
(q) No Target has constituted a "distributing
corporation" or a "controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in an distribution of shares qualifying for
tax-free treatment under Section 355 of the Code (i) in the two years prior
to the date of this Agreement or (ii) in a distribution that could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with this acquisition.
(r) The unpaid Taxes of each Target, being current
Taxes not yet due and payable, (a) as of December 31, 2000, did not exceed
the amount of the reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and
Tax income) set out on the face of balance sheet of the 2001 Financial
Statements (rather than in any notes thereto) and (b) as of the Closing
Date, will not exceed the amount of that reserve, as adjusted for the
passage of time through the Closing Date in accordance with the
33
past custom (including customary accrual methods) and practice of each
Target in filing its Tax Returns.
(s) For purposes of the ITA or any applicable
provincial, municipal or foreign taxing statute, no Person or group of
Persons has ever acquired or had the right to acquire "control" within the
meaning of the ITA of Canada Target or the Seller.
(t) Except as disclosed in Schedule 4.19, there are no
-------------
Notices of Reassessment and related explanatory forms or correspondence
(whether or not the issue thereof may have been resolved and any related
additional or incremental Taxes paid by Canada Target) which have been
issued to or received by Canada Target or the Seller pursuant to the ITA
with respect to any taxation years ending on or prior to the Closing Date.
(u) Canada Target has been assessed and notices of
assessment have been issued by the relevant Governmental Authorities under
the ITA for all taxation years prior to and including the taxation year
ended 2000.
(v) Except as disclosed in Schedule 4.19, or as may be
-------------
required in connection with any arrangements made by the parties in
connection with the Closing regarding ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ Target has not
requested, or entered into any agreement or other arrangement or executed
any waiver providing for, any extension of time within which (i) to file any
Tax Return covering any Taxes for which Canada Target may be liable; (ii) to
file any elections, designations or similar things relating to Taxes for
which Canada Target may be liable; (iii) Canada Target is required to pay or
remit any Taxes or amounts on account of Taxes; or (iv) any Governmental
Authority may assess or collect Taxes for which Canada Target is or may be
liable.
(w) The Business is the only business conducted by
Canada Target. The "non-capital losses" (as defined in the ITA), if any,
were incurred by Canada Target only in carrying on the Business.
(x) Copies of all material elections filed by Canada
Target in relation to Taxes are listed in Schedule 4.19 hereto. For such
-------------
purpose, "election" does not include a choice of treatment which does not
entail the filing of a prescribed form with a Governmental Authority signed
by Canada Target.
(y) For all transactions between Canada Target and any
non-resident person with whom Canada Target was not dealing at arm's length
(as that term is defined in the ITA) during a taxation year commencing after
1998 and ending on or before the Closing Date, Target has made or obtained
records or documents that meet the requirements of paragraph 247(iv)(a) to
(c) of the ITA or any equivalent provision of the taxation legislation of
any province.
(z) There are no circumstances existing which could
result in the application to Canada Target of either section 160 of the ITA
or section 325 of the Excise Tax Act (Canada) or any equivalent section in
any other similar legislation relating to taxes.
(aa) Canada Label is duly registered under Part IX of
the Excise Tax Act (Canada) with respect to GST and harmonized sales tax.
Canada Label has collected and
34
remitted to the appropriate Governmental Authorities when required by
applicable Law to do so, all amounts required under applicable Law collected
and remitted by them on account of all taxes under Part IX of the Excise Tax
Act (Canada), and under the applicable retail sales tax legislation in any
province in Canada, and any other sales tax Law.
(bb) Canada Label has not filed any returns or paid
any Taxes imposed by the applicable provincial retail sales tax legislation
on the acquisition of its tangible personal property and none of its
tangible personal property has been transferred at any time on a Tax exempt
basis.
(cc) Canada Label has not acquired, or had the use of,
property or services from, or disposed of, or allowed the use of, property
or provided services to a non-arm's length person, within the meaning of the
ITA for consideration or value less than the fair market for such property
or services or have been deemed to have done so for the purposes of the ITA
or any equivalent provision of the taxation legislation of any province or
any other jurisdiction.
(dd) Canada Label is not required to include in income
(i) items in respect of any change in accounting principles, or (ii) any
installment sale gain, where the inclusion in income would result in a tax
liability in excess of the reserves therefor.
(ee) Canada Label has not claimed and it will not
claim any reserve under any one or more of subparagraph 40(1)(a)(iii) or
paragraphs 20(1)(m) or 20(1)(n) of the ITA or any equivalent provincial
provision with the result that such amount could be included in Canada
Label's income for any taxation year ending on or after the Closing Date.
(ff) None of Sections 79, 80, 80.01, 80.02, 80.03 or
80.04 of the ITA, or any equivalent provisions of the taxation legislation
of any province, have applied or will apply to Canada Label at any time up
to and including the Closing Date. Canada Label has not deducted any amounts
in computing its income in a taxation year which may be included in a
subsequent year under Section 78 of the ITA, or any equivalent provision of
the taxation legislation of any province.
(gg) Canada Label has not requested or received a
ruling from any Governmental Authority.
(hh) Canada Label has not filed any returns or paid
any Taxes imposed by the Retail Sales Tax Act (Ontario) on the acquisition
of their tangible personal property as defined in the Retail Sales Tax Act
(Ontario), and none of their tangible personal property has been transferred
at any time on a tax-exempt basis under the provisions of section 13 of
Regulation 1013 to the Retail Sales Tax Act (Ontario) or any predecessor
thereof.
(ii) Within the meaning of the ITA, the paid-up
capital of the Canada Label Share and the Additional Canada Label Share at
the time of Closing shall be in an amount that is not less than $30,000,000.
(jj) Prior to the time of Closing, (i) the Seller
shall subscribe for additional common shares in the capital of Canada Label
(the "Additional Canada Label Shares") the purchase price for which shall
------------------------------
equal an amount not less than the amount of any debts or other
35
liabilities of Canada Label to any Related Party and which purchase price
shall be in cash by wire transfer of immediately available funds (ii) or if
more mutually beneficial to both Seller and Purchaser as reasonably
determined, Seller shall cause another transaction to occur that results in
Canada Label having no Intercompany Amounts.
4.20. Employee Benefit Plans.
----------------------
(a) Schedule 4.20(a) contains a true and complete list
----------------
of all Target Benefit Plans which are presently in effect or which have
previously been in effect and which cover Employees, including, without
limitation, incentive, bonus, vacation and severance programs. Schedule
4.20(a) indicates which Target Benefit Plans, if any, are sponsored by a
Target.
(b) True and complete copies of all Target Benefit
Plans have been furnished to Purchaser for review, including correct and
complete copies of: (i) all current determination letters and, if any,
rulings, opinion letters, information letters, or advisory opinions issued
by any Governmental Authority, including without limitation, the IRS, the
United States Department of Labor, or the PBGC; (ii) annual reports or
returns, audited or unaudited financial statements, actuarial valuations and
reports, and summary annual reports prepared for any Target Benefit Plan
with respect to the most recent plan year; (iii) the most recent summary
plan descriptions and any modifications thereto; and (iv) any filing or
compliance action taken under Revenue Procedures 98-22, 99-13, 99-31, or
2000-16.
(c) All Target Benefit Plans and the related trusts
materially comply with and have been administered in compliance with, (i)
the applicable provisions of all applicable Laws, including, without
limitation, in relation to US Target only, ERISA, (ii) all applicable
provisions of the Code, (iii) all applicable securities laws, and (iv) all
other applicable Laws and collective bargaining agreements, and none of
Targets nor Seller has received any notice from any Governmental Authority
questioning or challenging such compliance. Each Target Benefit Plan
intended to be qualified under Code Section 401(a) has been determined by
the IRS to be so qualified and no event has occurred which will or could
adversely affect the qualified status of any such plan or the tax-exempt
status of any trust. No event has occurred which will or could result in the
loss of intended tax consequences under the Code for any Target Benefit Plan
of US Target. No event has occurred which will or could give rise to any Tax
payable by US Target under Section 511 of the Code.
(d) None of Targets, Seller, or any administrator or
fiduciary of any Target Benefit Plan (or any agent of any of the foregoing)
has engaged in any transaction, or acted in any manner that could subject
any Target to any material direct or indirect liability (by indemnity or
otherwise) for breach of any fiduciary, co-fiduciary or other duty under any
Law, including without limitation, in relation to US Target only, ERISA.
There are no material unresolved claims or disputes under the terms of, or
in connection with, the Target Benefit Plans other than claims for benefits
which are payable in the ordinary course and no litigation exists with
respect to any Target Benefit Plans.
(e) All Target Benefit Plan documents and annual
reports or returns, audited or unaudited financial statements, actuarial
valuations, summary annual reports, and summary plan descriptions issued
with respect to the Target Benefit Plans are correct and complete in all
36
material respects, have been timely filed with the relevant Governmental
Authority, including without limitation, in relation to US Target only, the
IRS and the United States Department of Labor (if applicable), and have been
timely distributed to participants in the Target Benefit Plans. Except as
set forth in Schedule 4.20(e), all amounts properly accrued as liabilities
----------------
to or expenses of any Benefit Plan have been properly reflected on each
Target's most recent financial statements to the extent required by GAAP.
Since March 31, 2002, there has been no amendment or change in
interpretation by a Target relating to any Target Benefit Plan which would
materially increase the cost thereof.
(f) In relation to US Target only, no "party in
interest" (as defined in Section 3(14) of ERISA) or "disqualified person"
(as defined in Code Section 4975) of any Target Benefit Plan has engaged in
any nonexempt "prohibited transaction" (described in Code Section 4975 or
ERISA Section 406). With respect to any Target Benefit Plan that is subject
to Title IV of ERISA ("Pension Plans"), there has been no (i) "reportable
-------------
event" (as defined in Section 4043 of ERISA), or event described in Sections
4041, 4042, 4062 (including ERISA Section 4062(e)), 4064, 4069 or 4063 of
ERISA; or (ii) with the exception of the American Business Products Profit
Sharing Plan, termination or partial termination, withdrawal or partial
withdrawal. The actions with respect to the American Business Products
Profit Sharing Plan were taken and completed in full material compliance
with all applicable Law. None of US Target, Seller or any ERISA Affiliate
has incurred any liability under Title IV of ERISA with respect to a pension
plan (as such term is defined under ERISA Section 3(2)).
(g) For any Pension Plan the fair market value of such
Pension Plan's assets equals or exceeds the present value of all benefits
(whether vested or not) accrued to date by all present or former
participants in such Pension Plan. For this purpose the term "benefits"
shall include the value of all benefits, rights and features protected under
Code Section 411(d)(6) or its successors and any ancillary benefits
(including disability, shutdown, early retirement and welfare benefits)
provided under any such Pension Plan and all "benefit liabilities" as
defined in ERISA Section 4001(a)(16). All contributions with respect to any
Target Benefit Plan that are subject to Code Section 412 or ERISA Section
302 have been, or will be, timely made and there is no lien under Code
Section 412(n) or ERISA Section 302(f) or tax under Code Section 4971. No
Target Benefit Plan of US Target has a "liquidity shortfall" as defined in
Code Section 412(m)(5). No event described in Code Section 401(a)(29) has
occurred or can reasonably be expected to occur with respect to such Target
Benefit Plans of US Target. All premiums required to be paid under ERISA
Section 4006 for the Pension Plan have been paid by Target, Seller or any
ERISA Affiliate (as appropriate).
(h) Except as set forth on Schedule 4.20(h), US Target
----------------
has complied in all material respects with the continuation coverage
requirements of Code Section 4980B, as amended, and ERISA Sections 601
through 608.
(i) To the Seller's knowledge, no Target Benefit Plan
is under audit or investigation by any Governmental Authority, including
without limitation the IRS, the U.S. Department of Labor, or the PBGC.
37
(j) All contributions and other payments required to
be made as of the date of this Agreement to, or pursuant to, the Target
Benefit Plans have been made or accrued for in the Financial Statements.
(k) Except as set forth on Schedule 4.20(k), US Target
----------------
has not contributed to, or been required to contribute to, a "multi-employer
plan" (as defined in Sections 3(37) and 4001(a)(3) of ERISA). No withdrawal
liability exists with respect to any multiemployer plan (as defined in
Section 3(37) of ERISA) to which the Seller or any ERISA Affiliate
contributes, including without limitation, any potential liability which
would exist if the Seller and its ERISA Affiliates withdrew from all
multiemployer plans to which contributions are made on behalf of Employees
as of the Closing Date.
(l) Except as set forth on Schedule 4.20(l), the
----------------
consummation of the acquisition contemplated in this Agreement will not
constitute an event under any Target Benefit Plan, employment or severance
agreement, trust, loan or other compensation or benefits agreement or
arrangement that will (a) result in any payment by or Liability to Targets
or Purchaser (whether of severance pay, unemployment compensation, golden
parachute or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any current or former employee, officer, director, agent or
consultant of a Target; (b) entitle any current or former employee of a
Target to severance pay, unemployment compensation or any similar payment;
(c) accelerate the time of the payment or vesting of, or increase the amount
of, any compensation due to any current or former employee of a Target. No
such payment, acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits will cause
a loss of tax deductions to US Label under Code Section 280G. No such
payment, acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits will constitute or
involve a prohibited transaction (as defined in ERISA Section 406 or Code
Section 4975) or a breach of fiduciary responsibility within the meaning of
ERISA Section 502(1) as to which Target has or reasonably could be expected
to have any direct or indirect actual material liability
(m) No Target has Liability, whether absolute or
contingent, including any material obligations under any Target Benefit
Plan, with respect to any misclassification of any person as an independent
contractor rather than as an employee, or with respect to any employee
leased from another employer.
(n) Each Target Benefit Plan of US Label which is a
"group health plan" (as defined in ERISA Section 607(1)) is in compliance
with the provisions of ERISA Section 601 et seq., the Health Insurance
Portability and Accountability Act and any other applicable, federal, state,
provincial, foreign or local law.
(o) There are no Target Benefit Plans maintained by US
Label pursuant to which welfare benefits are provided to current or former
employees beyond their retirement or other termination of service, other
than coverage mandated by the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended.
38
(p) In relation to Canada Target, Canada Target does
not have any Target Benefit Plan that is a "Registered Pension Fund or Plan"
as those terms are defined in subsection 248(1) of the ITA. Canada Target
does not have any formal plan or commitment, whether legally binding or not,
to create any additional Target Benefit Plan or to modify or change any
existing Target Benefit Plan that would affect any Employee or former
Employee of Canada Target, except such modification or amendment as may be
required to be made to secure the continued registration of any existing
Target Benefit Plan with each applicable Governmental Authority. With
respect to each Target Benefit Plan that is funded wholly or partially
through an insurance policy, there will be no liability of Canada Target as
of the Closing Date, under any such insurance policy or ancillary agreement
with respect to such insurance policy in the nature of a retroactive rate
adjustment, loss sharing arrangement or other actual or contingent liability
arising wholly or partially out of the events occurring prior to the Closing
Date. With respect to each Target Benefit Plan not funded through an
insurance policy, Canada Target has either fully funded such Target Benefit
Plan through a trust or has made appropriate provision for all of Canada
Target's liability thereunder in the Most Recent Financial Statements.
4.21. Compliance with Laws. Except as set forth on Schedule
-------------------- --------
4.21, no Target is engaging in any activity or omitting to take any action
----
so as to create a violation of any Law. No Target is subject to any
judgment, order, writ, injunction, or decree issued by any Governmental
Authority. No investigation by and Governmental Authority with respect to a
Target is pending or, to the knowledge of Seller, threatened. Except for
expenditures made in the ordinary course of business, no expenditure is
presently required for any Target to comply with any existing requirement of
Law or any Order. No Target has at any time during the last five (5) years
(a) made any unlawful contribution to any political candidate, or failed to
disclose fully any contribution in violation of law, or (b) made any payment
to any federal, state, provincial, foreign or local governmental, regulatory
or administrative officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or permitted
under applicable Laws. Neither Seller nor any of Targets has made any
illegal payment or given any other illegal consideration to any Person
including purchasing agents or other representatives of customers in respect
of sales made or to be made by a Target.
4.22. Inventory. Except as reserved for in the Final Working
---------
Capital, the inventory of the Targets is in good and merchantable condition,
and suitable and useable or salable in the ordinary course of business for
the purposes for which intended, and none of which is obsolete, damaged, or
defective. There is no material adverse condition affecting the supply of
materials available to the Targets.
4.23. Receivables. All accounts and notes receivable reflected
-----------
on the Final Working Capital, and all accounts and notes receivable arising
subsequent to the date of the Most Recent Financial Statements have arisen
in the ordinary course of business of the Targets from valid business
transactions.
4.24. Suppliers. Schedule 4.24 lists, by dollar volume paid for
--------- -------------
the three (3) months ended on the most recent balance sheet date the 10
largest suppliers of the Targets. The relationships of the Targets with such
suppliers are good commercial working relationships and, except as set forth
in Schedule 4.24, (i) no person listed on Schedule 4.24 within the last 12
------------- -------------
months has threatened to cancel or otherwise terminate, or to the knowledge
of the Seller,
39
intends to cancel or otherwise terminate, the relationship with such Person
with the Targets, (ii) no such Person has during the last 12 months
decreased materially or threatened to decrease or limit materially or to the
knowledge of the Seller, intends to modify materially its relationship with
the Targets or intends to decrease or limit materially its services or
supplies to the Targets and (iii) to the knowledge of the Seller, the
acquisition of the Shares by the Purchaser and the consummation of the
transactions contemplated by this Agreement will not materially adversely
affect the relationship of the Targets with any supplier listed on Schedule
--------
4.24.
----
4.25. Company Products. There are no statements, citations or
----------------
decisions by any Governmental Authority specifically stating that any
product produced or sold by or on behalf of the Targets is defective or
unsafe or fails to meet any standards promulgated by any such Governmental
Authority. There have been no recalls ordered by any such Governmental
Authority with respect to any such product. There is no (i) fact relating to
any such product that may impose upon the Target a duty to recall any such
product or a duty to warn customers of a defect or of any hazardous
substance in any such product, (ii) latent or overdesign, manufacturing or
other defect in any such product, (iii) reasonably foreseeable use of any
such product which may expose any person to any hazardous substance or (iv)
material liability for warranty claims or returns with respect to any such
product not fully reflected in the Most Recent Financial Statements.
4.26. Potential Conflicts of Interest. Except as set forth on
-------------------------------
Schedule 4.26, neither Seller nor any Related Party (other than a Target):
-------------
(i) owns, directly or indirectly, any interest in (excepting less than 5%
stockholdings for investment purposes in securities of publicly held and
traded companies) or is an officer, director, employee or consultant of, any
Person which is, or is engaged in a business as, a competitor, lessor,
lessee, supplier, distributor, sales agent or customer of the Targets; (ii)
owns, directly or indirectly, in whole or in part, any property that the
Targets use in the conduct of the Business; or (iii) has any claim
whatsoever, or owes any amount to, the Targets, except for claims in the
ordinary course of business such as for accrued vacation pay, accrued
benefits under Target Benefit Plans, and similar matters and agreements
existing on the date hereof.
4.27. Banks, Brokers and Proxies. Schedule 4.27 sets forth (i)
-------------------------- -------------
the name of each bank, trust company, securities or other broker or
financial institution with which a Target has an account, credit line or
safe deposit box or vault, or otherwise maintains relations; (ii) the name
of each Person authorized by the Target to draw thereon or to have access to
any safe deposit box or vault; (iii) the purpose of each such account, safe
deposit box or vault; and (iv) the names of all persons authorized by
proxies or powers of attorney to act on behalf of the Target in matters
concerning its business or affairs.
4.28. Full Disclosure. The Purchase Documents and the schedules
---------------
thereto do not contain any untrue statement of a material fact and do not
omit to state any material fact necessary to make the statements made, in
the context in which made, not false or misleading. There is no fact which
Seller has not disclosed to Purchaser in this Agreement or the schedules
hereto which would or could reasonably be expected, individually or in the
aggregate, to cause a Material Adverse Effect.
40
4.29. Competition Act (Canada). The Seller together with its
------------------------
affiliates (as that term is defined in the Competition Act (Canada)) did not
have, as the case may be:
(a) assets in Canada that exceeded C$400 million in
aggregate value, determined as of December 31, 2001 and in such manner as is
prescribed for purposes of the Competition Act (Canada); and
(b) gross revenues from sales in, from or into Canada,
determined for the year ended December 31, 2001 and in such manner as is
prescribed for purposes of the Competition Act (Canada), that exceeded C$40
million in aggregate value.
4.30. [Intentionally Omitted]
-----------------------
4.31. UK Real Property.
----------------
(a) The properties described in Schedule 4.31 ("the UK
------------- ------
Properties") comprise:
----------
(i) all the land and premises owned, occupied or
otherwise used by a UK Entity in England and Wales; and
(ii) all the estate interest right and title
whatsoever (including for the avoidance of doubt interests in the
nature of options) of a UK Entity in respect of any land or
premises in England and Wales.
(b) The UK Entities are the legal and beneficial owner
of the UK Properties and has good and marketable title to the UK Properties
and all information relating to the UK Properties in Schedule 4.31 is true
-------------
and accurate in all respects.
(c) No UK Entity has at any time assigned or otherwise
disposed of any freehold or leasehold property in respect of which any UK
Entity has any continuing liability either as original contracting party or
by virtue of any direct covenant or under an authorised guarantee agreement
given on a sale or assignment to or from any UK Entity or as a surety for
the obligations of any other person in relation to any real property and no
unsatisfied claim has been made against any UK Entity in respect of any
leasehold property formerly held by it or in respect of which it acted as a
guarantor.
(d) The UK Properties are free from any mortgage,
debenture or charge (whether specific or floating legal or equitable)
securing the payment of monies or other obligation or liability whether of
any UK Entity or any other party and from any agreement to create such
security interests.
(e) The UK Properties are not subject to any agreement
or right to acquire the same nor to any option.
(f) There is no person who is in occupation (other
than pursuant to any of the tenancies referred to in Schedule 4.31) or so
-------------
far as the Seller is aware who has or claims any rights or easements of any
kind in respect of the UK Properties adversely to the estate interest right
or title of the Company therein.
41
(g) For the purposes of this paragraph:
(i) "Planning Acts" means
(A) ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
(B) The Planning (Listed Buildings and
Conservation Areas) ▇▇▇ ▇▇▇▇
(C) The Planning (Hazardous Substances)
▇▇▇ ▇▇▇▇
(D) The Planning (Consequential Provisions)
▇▇▇ ▇▇▇▇
(E) The Planning and Compensation ▇▇▇ ▇▇▇▇
as the same have been from time to time
varied or amended and any other statute or
subordinate legislation relating to planning
matters;
(ii) "Building Regulations" means the regulations
defined in section 122 of the Building ▇▇▇ ▇▇▇▇.
(h) No UK Entity has received notice of breach of any
Planning Acts and Building Regulations and bylaw consents for the time being
in force in relation to the UK Properties.
(i) No UK Entity has received notice of breach of any
applicable statutory or bye-law requirement in respect of the UK Properties
and in particular (but without limitation) with requirements as to fire
precautions and means of escape in case of fire and with requirements under
the Public Health Acts, the Housing Acts, the Highways Acts, the Offices
Shops and Railway Premises ▇▇▇ ▇▇▇▇, the Health and Safety at Work etc ▇▇▇
▇▇▇▇, the Factory Acts and the London Building Acts.
(j) No UK Entity has received notice of any material
breach of any of the covenants on the part of the lessee contained in any
leases (which expression includes underleases) under which the UK Properties
are held and the last demands for rent (or receipts if issued) were
unqualified and all such leases are valid and in full force.
(k) Each UK Entity is in actual occupation of all
parts of the UK Properties (except those subject to any of the Tenancies
referred to in Schedule 4.31).
-------------
(l) The UK Properties are held subject to and with the
benefit of the tenancies (which expression includes subtenancies) full
details of which are set out in Schedule 4.31 and there is no agreement to
-------------
grant any tenancy affecting any of the UK Properties.
(m) No UK Entity has received notice of any breach of
covenant by the tenant of any of the UK Properties and the Seller is not
aware of any material or outstanding breaches of covenant by a tenant of any
of the UK Properties including the covenants to pay.
42
4.32. UK Environmental Matters.
------------------------
(a) The following terms used in this Section 4.32 have
------------
the following meanings:
"Environment" any air (including air within
natural structures below
ground), water (including
ground water and water in
drains and sewers) and land
(including surface land,
sub-surface land, river bed
under any water);
"UK Environmental all or any UK Laws from time to
Law" time with regard to
Environmental Matters having
effect and capable of
enforcement in the UK prior to
or on the Closing Date;
"Environmental Matters" all or any matters relating to
the pollution or protection of
the Environment or harm to or
the protection of human health
and safety or the result of
contact with or exposure to
Hazardous Substances;
"UK Environmental all or any permits, consents,
Permits" licences, approvals,
certificates, and other
authorisations required under
UK Environmental Law for the
operation of the UK Target's
business in the UK;
"Hazardous Substance" any matter, whether alone or in
combination with any other
matter, capable of causing harm
to man or any other living
organism or damage to the
Environment;
"UK Laws" all or any applicable law
(whether criminal, civil or
administrative), common law,
judgment, court order, statute,
statutory instrument, statutory
guidance, regulation,
directive, European Community
decision (insofar as legally
binding), or decision of any
competent regulatory body
(insofar as the same has the
force of law);
(b) Seller hereby represents and warrants to Purchaser
that the statements contained in this Section 4.32 are true and correct as
of the date of this Agreement and will be true and correct as of the Closing
Date, except as set forth and identified in the Schedule 4.32 to this
-------------
Agreement:
(i) There is no requirement for an UK
Environmental Permit in connection with the operation of the UK
Entities' business;
(ii) In relation to the carrying on by each UK
Entity of its business in the UK:
43
(A) each UK Entity has at all times up
until the Closing Date complied with
UK Environmental Law;
(B) no UK Entity has received prior to the
date hereof any communication in any
form from any statutory body having
authority under UK Environmental Laws
relating to any alleged breach of or
liability under UK Environmental Laws.
(iii) In relation to the carrying on by each UK
Entity of its business in the UK:
(A) there are no facts or circumstances
which may give rise to any actual or
potential liability (whether civil or
criminal) on the part of any UK Entity
in relation to Environmental Matters
or in relation to the health and
safety of those who work for and UK
Entity or who visit the UK Properties
in any capacity;
(B) no UK Entity has received any notice
or intimation of any complaint or
claim from any regulatory body or
owner or occupier of property which
adjoins or is a neighbour of any of
the UK Properties in respect of
Environmental Matters;
(C) UK Entities are not and have not been
engaged in any action, litigation,
arbitration or dispute resolution
proceedings or subject to any
investigation under UK Environmental
Law or otherwise in relation to
Environmental Matters and no UK Entity
is aware of any such matters pending
or being threatened or of any
circumstances or facts likely to give
rise to any such matters.
(iv) In relation to the carrying on of the
business by UK Entities in the UK, each UK Entity has at all times
properly supplied to the competent authorities such information
required by UK Environmental Law to be supplied, all such
information given (whether under a legal obligation or otherwise)
was so far as each UK Entity is aware correct at the time the
information was supplied.
(v) Copies of all material environmental audits
or assessments carried out by or on behalf of UK Entities in
relation to UK Property or UK Entities' business in the UK and in
the possession of the Seller have been made available to the
Purchaser.
4.33. UK Pension Matters.
------------------
(a) Except for the UK Schemes there are no agreements,
arrangements customs or practices (whether legally enforceable or not) in
operation in the United Kingdom for the payment of or contribution towards
any pensions, allowances, lump sums or other like
44
benefits on retirement or on death or during periods of sickness or
disablement for the benefit of any of the employees or directors or former
employees or former directors of any UK Entities or for the benefit of the
dependents of such individuals nor has any proposal to establish any such
agreement or arrangement been announced.
(b) All material details of the UK Schemes have been
given to the Purchaser including full details of the membership of the
Schemes as at the Closing Date.
(c) In relation to the Current UK Schemes:
(i) the current rates of all contributions and
premiums have been disclosed in writing to the Purchaser and there
are not at the date hereof any contributions thereto from or in
respect of Employees or other payments which have fallen due but
are unpaid;
(ii) employer and employee contributions have
been made promptly at the time that they were due and all
liabilities in respect of any costs and expenses in relation to the
Current UK Schemes will have been met by the Closing Date; and
(iii) there has been no agreement with any member
to increase the current rate of contributions paid by any UK Entity
for or in respect of any member.
(d) The Norwich Union Executive Pension Plan and the
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Personal Pension Fund are money purchase schemes (as defined
in section 181(1) Pension Schemes Act 1993) and the benefits payable under
the Schemes whether immediate, prospective or contingent, are solely the
benefits which can be provided by the funds available for each member under
the Schemes.
(e) The ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Personal Pension Fund is a
contracted-out scheme for the purposes of the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ and
has been administered in accordance with the contracting-out requirements of
Part III of that Act. UK Entities or, if members of the scheme are employees
of one of its subsidiaries, that subsidiary, holds or is named upon a
current contracting-out certificate relating to the relevant scheme issued
since 5 April 1997.
(f) The ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ plc Pension Scheme was
previously a contracted-out scheme for the purposes of the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ and it was, for the period during which it was a contracted-out
scheme, administered in accordance with the contracting-out requirements of
Part III of that Act.
(g) All benefits (other than refunds of contributions)
payable under the Norwich Union Executive Pension Plan and the ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Personal Pension Fund on the death of a member who is employed by
UK Entities or during periods of sickness or disability of such a member are
fully insured under a policy effected with an insurance company of good
repute and each such member has been covered for such insurance by such
insurance company at its normal rates and on its normal terms for persons in
good health and all insurance premiums payable have been paid.
45
(h) The Stampiton Limited Group Life Assurance Scheme
and the Group Life Assurance Scheme insured with Sun Life Financial of
Canada provide no benefits other than benefits on the death of a member who
is employed by UK Entities and all such benefits are fully insured under a
policy effected with an insurance company of good repute and each such
member has been covered for such insurance by such insurance company at its
normal rates and on its normal terms for persons in good health.
(i) The Norwich Union Executive Pension Plan, the
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Personal Pension Fund, the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ plc Pension
Scheme, the Stampiton Limited Group Life Assurance Scheme and the Group Life
Assurance Scheme insured with Sun Life Financial of Canada are approved by
the Commissioners of Inland Revenue as exempt approved schemes under Chapter
I Part XIV of ICTA 1988.
(j) The Stampiton Limited Group Personal Pension is a
personal pension scheme as defined in and approved under Chapter IV Part XIV
of ICTA 1988.
(k) The ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ plc Pension Scheme does not
distinguish between male and female members (except in relation to maternity
and Guaranteed Minimum Pensions) in the provision of benefits relating to
periods of pensionable service after 17th May 1990 and no adverse alteration
has been made to benefits already accrued at the date of announcing changes
designed to equalise benefits.
(l) Except as disclosed in Schedule 4.33 the Current
-------------
UK Schemes and the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ plc Pension Scheme have not at any time
excluded employees from eligibility for membership on the grounds of
specified hours of work.
(m) The Current UK Schemes and the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ plc
Pension Scheme have been administered in accordance with:
(i) the preservation requirements within the
meaning of section ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇;
(ii) the equal access requirements of section 62
▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇; and
(iii) subject thereto in accordance with their
trusts powers and provisions and all legislation.
(n) Save as disclosed in Schedule 4.20 no payment or
repayment of any of the assets of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ plc Pension Scheme has
been made to any employer participating in that scheme.
(o) No UK Entity has any "relevant employees" for the
purposes of Section 3 Welfare Reform and Pensions ▇▇▇ ▇▇▇▇.
(p) No UK Entity is liable to make any further payment
whatsoever to either the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Discretionary Pension Scheme or the
Treasures Old & New Pension Scheme or the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Group Staff
Register Plan.
46
(q) There are no circumstances which could result in
any penalty under the Pensions ▇▇▇ ▇▇▇▇ becoming payable by any UK Entity.
(r) There are no actions, proceedings, costs, claims,
damages and expenses brought or made against or incurred by the Purchaser or
any UK Entity insofaras the same arise from an indirect sex discrimination
claim brought by any employee, director, former employee or former director
of any UK Entity on the grounds that the claimant was, at any time after
April 8, 1996, unlawfully prevented from becoming a member of the ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ plc Pension Scheme by reason of the number of hours that he or she
worked.
ARTICLE 5
COVENANTS
The parties hereto covenant and agree as follows:
5.1. Conduct of Business Prior to Closing. On and after the
------------------------------------
date hereof to the Closing Date, except as expressly permitted or required
by this Agreement or as otherwise expressly consented to by Purchaser in
writing, Seller will cause each Target to:
(a) operate its business substantially as previously
operated and only in the regular and ordinary course;
(b) not purchase or acquire any assets or properties,
whether real or personal, tangible or intangible, and not sell or otherwise
dispose of any real or personal property or asset, except in the ordinary
course of business;
(c) not enter into, terminate or materially modify any
material Contract;
(d) maintain its assets in their present order and
condition, reasonable wear and use excepted, and maintain all policies of
insurance in amounts and on terms substantially equivalent to those in
effect on the date hereof;
(e) take all steps reasonably necessary to maintain
its Intellectual Property and other intangible assets, including without
limitation, prosecuting all pending applications for patents or registration
of trademarks and copyrights and maintaining, to the extent permitted by
law, each patent or registration owned by the Target;
(f) pay all accounts payable materially in accordance
with past practice and collect all accounts receivable materially in
accordance with past practice, but not less than in accordance with prudent
business practices;
(g) comply with all Laws in all material respects;
(h) maintain its books and records on a basis
consistent with past practices; and
(i) use reasonable efforts to preserve the goodwill
and patronage of its customers, employees, suppliers and others having a
business relationship with Target.
47
5.2. Access and Information. From the date hereof to the
----------------------
Closing Date and at such times and places as the parties shall agree, Seller
shall afford, and shall cause each Target to afford to Purchaser, its
lenders, counsel, accountants, and other representatives, reasonable access
to the offices, properties, books, contracts, commitments, records, vendors,
and customers of each Target, and shall furnish such persons with all
information (including financial and operating data) concerning Target as
they reasonably may request. From the Closing Date until the third
anniversary of the Closing Date, Purchaser shall afford, and shall cause
each Target to afford to Seller and Seller's accountants, reasonable access
to the offices, properties, books, contracts, commitments, records, vendors,
and customers of each Target, and shall furnish such persons with all
information (including financial and operating data) concerning Target as
they reasonably may request. For those records which relate to both Poser
Business Forms, Inc. and Lord Label that were formerly maintained in US
Label's Omaha, Nebraska plant prior to Seller's separation of the Omaha
plant's operations, Purchaser will and will cause Target to maintain such
records for a period of three (3) years after the Closing Date and shall
provide Seller (or any successor in interest to its Poser Business Forms
Division) reasonable access to such records. In such cases, "reasonable"
access means access during ordinary business hours upon at least three (3)
Business Days' notice, and without undue interruption of personnel. No
investigation by Purchaser or its representatives or lenders shall diminish
or obviate any of the representations, warranties, covenants or agreements
of the Seller contained in this Agreement. The provisions of this Section
5.2 shall not apply to any Objection to the Purchaser's Estimated Final
Working Capital set forth in Section 2.4 or in respect of indemnification
claims under Article 9, which access shall be covered in such respective
provisions.
5.3. Notification of Changes. Between the date hereof and the
-----------------------
Closing Date, Seller shall, subject to the Knowledge of Seller, promptly
notify Purchaser in writing of any change in the Business, affairs or
financial condition of each Target, any damage to or loss of any of its
assets, or the institution of or the threat of institution of legal,
administrative, or other proceedings against each Target, which, in each
case, may reasonably be expected to have a Material Adverse Effect on the
Targets, or any breach of a representation or warranty in this Agreement.
5.4. Certain Acts Prohibited. From the date hereof to the
-----------------------
Closing Date, Seller will not cause or permit Targets to take, without the
prior written consent of Purchaser, any of the actions described in Section
-------
4.16 hereof.
----
5.5. Consents. Seller and Purchaser (each at its sole expense)
--------
shall use commercially reasonable efforts to obtain, prior to the Closing,
all consents of third parties which, in the reasonable judgment of
Purchaser, are necessary or appropriate for the consummation of the
transactions contemplated by this Agreement. In any case where a necessary
consent or approval has not been obtained at or prior to the Closing, Seller
shall assist Purchaser, at Purchaser's request, after Closing in every
reasonable effort to obtain such consent or approval.
5.6. Supplemental Disclosure.
-----------------------
(a) Seller shall have the continuing obligation up to
and including the Closing Date to supplement promptly or amend the Schedules
with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to
be set forth or listed in the Schedule; provided, however, that for the
purpose of the rights and obligations of the parties hereunder, any such
supplemental disclosure
48
shall not be deemed to have been disclosed as of the date of this Agreement
or have any effect for the purpose of determining the accuracy of any
representation or warranty when made.
(b) Seller shall deliver to Purchaser on or prior to
May 10, 2002 Schedules setting forth and identifying any exceptions to the
representations and warranties set forth and corresponding to the lettered
and numbered sections contained in Article 4 with respect to the UK Entities
(the "UK Disclosures"). Within four days of receipt by Purchaser of the UK
Disclosures, Purchaser shall provide Seller with any comments on the UK
Disclosures and promptly thereafter Purchaser and Seller shall negotiate in
good faith and finalize the UK Disclosures in substantially the same manner
that disclosed matters have been accepted by Purchaser on the date hereof
with respect to US Targets and Canada Target.
(c) Seller shall as soon as reasonably practicable
following the signing of this Agreement but prior to Closing, deliver to
Purchaser (i) the audited consolidated balance sheets and statements of
income and cash flow of Targets and their Subsidiaries as of and for the
years ending December 31, 2000 and December 31, 2001 and (ii) the unaudited
consolidated balance sheets and statements of income and cash flow for
Targets and their Subsidiaries as of and for the period from January 1, 2002
through April 30, 2002. Upon delivery of such financial statements, the
representations and warranties set forth in Section 4.7 shall be read as if
such financial statements were referred to therein.
5.7. Conditions Precedent. The Parties hereto shall use their
--------------------
respective commercially reasonable efforts to satisfy the conditions
enumerated in Article 6 and Article 7 hereof.
5.8. Capital Expenditures. Seller shall cause the management of
--------------------
each Target to discuss with Purchaser any proposed material capital
expenditure to be made by each Target prior to the Closing Date prior to
entering into any contract or commitment for such capital expenditure, other
than emergency capital expenditures. No material capital expenditure (other
than emergency capital expenditures) shall be made by Target prior to the
Closing Date without the prior written consent of Purchaser, which consent
shall not be unreasonably withheld or delayed. Seller shall promptly notify
Purchaser of the nature and extent of emergency capital expenditures made by
a Target without the prior written consent of Purchaser.
5.9. Governmental Filings. Purchaser and Seller, to the extent
--------------------
legally required, shall promptly prepare, file, and diligently prosecute at
the earliest practicable time after the date hereof, all applications and
filings required by Law in order to effect the transactions contemplated by
this Agreement.
5.10. Certain Tax Matters.
-------------------
The covenants set forth in this Section 5.10 shall not apply to any
------------
UK Entity.
(a) Seller shall timely pay or cause to be paid to the
relevant Governmental Authorities, or shall timely reimburse or indemnify on
a Grossed-Up Basis, on a joint and several basis, Purchaser and its
Affiliates for, and shall hold Purchaser and its Affiliates harmless from
and against, all Losses arising in respect of (A) any Liability for Taxes of
a Target or any Affiliated Group of which a Target is a member, or
chargeable as a Lien upon the assets of a
49
Target, that is attributable to any period or a portion thereof ending on or
prior to the Closing Date, but only to the extent that any such Liability
has not been paid for prior to the Closing Date by Seller or the Target; and
(B) any obligation of a Target under any tax allocation, sharing, indemnity
or similar agreement or arrangement but only to the extent that any such
Liability has not been paid for prior to the Closing Date by Seller or
Target. For purposes of this Section 5.10, any Liability attributable to a
------------
taxable period which begins before and ends after the Closing Date shall be
apportioned between the portion of such period ending on the Closing Date
and the portion beginning on the day after the Closing Date (x) in the case
of (i) real and personal property Taxes, (ii) franchise Taxes based on
capitalization, debt or shares of stock authorized, issued or outstanding,
and (iii) ad valorem taxes, by apportioning such Taxes on a per diem basis
and (y) in the case of all other Taxes on the basis of the actual activities
of a Target, as the case may be, as determined from the books and records of
the Target for such partial period (i.e., based on a closing of the books at
the end of the Closing Date).
(b) For periods ending on or prior to the Closing
Date, Seller shall prepare and timely file at Seller's expense, or cause to
be prepared and timely filed, consistently with past practices all
consolidated, unitary or combined income Tax Returns for periods ending on
or prior to the Closing Date which are filed after the Closing Date on which
Seller will include the operations of each Target (the "Consolidated
------------
Preclosing Returns"). In connection therewith, Purchaser and Parent shall,
------------------
and shall cause each Target to, (i) provide to Seller and its accountants
and other Tax-related consultants reasonable access to any books and records
that Seller may need for preparing of the Consolidated Preclosing Returns,
(ii) cooperate with Seller and its accountants and other Tax-related
consultants as Seller may reasonably need in preparing the Consolidated
Preclosing Returns, and (iii) if necessary, cause a duly elected and
authorized officer of each Target (or its successor) to sign such
Consolidated Preclosing Returns as may require the signature of such an
officer. Also in connection therewith, neither any Target nor any Affiliated
Group of which Target is a member shall make any elections for Tax purposes
or any changes in the current accounting method with respect to a Target to
which the Target may be bound following the Closing Date. Seller will cause
the parent of the Affiliated Group that includes US Label (i) not to elect
to retain any net operating loss carryovers or capital loss carryovers of a
Target under Section 1.1502-20(g) of the Treasury Regulations or any
successor regulation and (ii) to include the applicable income of Target
(including any deferred income triggered into income by Sections 1.1502-13
and 1.1502-19 of the Treasury Regulations) on the applicable Consolidated
Preclosing Returns. In addition to the Consolidated Preclosing Returns,
Seller shall cause each Target to prepare consistently with past practices
and timely file any other Tax Return that is required to be filed prior to
the Closing Date, and pay any Tax due prior to the Closing Date with respect
to such Tax Returns. Seller will allow Purchaser the opportunity to review
and comment upon all Tax Returns discussed in this Section 5.10(b) to the
---------------
extent they relate to a Target.
(c) Purchaser shall prepare and timely file, or cause
to be prepared and timely filed, with the relevant taxing authorities all
Tax Returns relating to the business or non-Excluded Assets of each Target
other than those Tax Returns described in Section 5.10(b).
---------------
(d) Any premium or franchise Tax Returns that must be
filed by Purchaser pursuant to Section 5.10(d) for Tax periods (or portions
---------------
thereof) ending on or before the Closing Date shall be prepared by
Purchaser, with respect to such portion ending on or before the Closing
50
Date, in a manner that is, to the extent permitted by Law, consistent with
the last Tax Return filed prior to the Closing Date in each relevant
jurisdiction.
(e) Any Tax allocation or sharing agreement or
arrangement which, prior to the Closing Date, may have been entered into
between a Target on the one hand, and any one of Seller or any of its
Affiliates on the other hand, shall terminate with respect to the Target as
of the Closing Date.
(f) Notwithstanding Section 5.10(g), any refunds of
Taxes paid with respect to Tax periods or portions thereof ending on or
before the Closing Date that are received by Purchaser or a Target, and any
such amounts credited against Tax to which Purchaser or a Target become
entitled, shall be for the account of Seller, and Purchaser shall pay over
to Seller any such refund or the amount of any such credit within ten (10)
Business Days after receipt of any such refund or the filing of a Tax Return
reflecting any such credit but net of any Taxes imposed on Purchaser or a
Target with respect to such refund or credit. Notwithstanding the foregoing,
any refunds of sales or use Taxes recovered by a Target as a result of a
filing made after the Closing Date by Purchaser or a Target with respect to
taxes paid related to periods prior to the Closing Date shall be for the
benefit of Target or Purchaser and remain the sole property of Target or
Purchaser. Purchaser shall indemnify, defend and hold harmless Seller
Indemnitees from any Losses arising directly or indirectly from any filings
made by Purchaser or a Target after the Closing Date seeking refund of any
sales or use tax paid related to periods prior to the Closing Date.
(g) Subject to Section 5.10(f), any refund of Taxes,
or reduction in Tax Liability, (including any interest thereon) that relates
to Target shall be the property of Target. If any such refund or interest
thereon) is received, or reduction in Tax Liability is realized, by Seller,
Seller shall promptly pay such amount to Purchaser. Seller will cooperate
with Target in obtaining such refunds (or reduction in Tax Liability),
including through the filing of amended Tax Returns or refund claims.
Purchaser agrees to indemnity Seller for any Taxes resulting from the
disallowance of such post-acquisition Tax attribute on audit or otherwise.
(h) Each party hereto shall, and shall cause its
Subsidiaries and Affiliates to, provide to each of the other parties hereto
such cooperation and information as any of them reasonably may request in
filing any Tax Return, amended Tax Return or claim for refund, determining a
liability for Taxes or a right to refund of Taxes or in conducting any audit
or other proceeding in respect of Taxes. Such cooperation and information
shall include providing copies of all relevant portions of relevant Tax
Returns, together with relevant accompanying schedules and relevant work
papers, relevant documents relating to rulings or other determinations by
Taxing Authorities and relevant records concerning the ownership and Tax
basis of property, which any such party may possess. Each party will retain
all Tax Returns, schedules and work papers, and all material records and
other documents relating to Tax matters, of Target for its Tax period first
ending after the Closing Date and for all prior Tax periods until the later
of (i) the expiration of the statute of limitations for the Tax periods to
which the Tax Returns and other documents relate and (ii) eight years
following the due date (without extension) for such Tax Returns. Thereafter,
the party holding such Tax Returns or other documents may dispose of them;
provided that such party shall give to the other party notice and an
opportunity to take custody thereof prior to doing so. Each party shall make
its employees reasonably available on a
51
mutually convenient basis at its cost to provide explanation of any
documents or information so provided. Subject to the preceding sentence,
each party required to file Tax Returns pursuant to this Section 5.10 shall
------------
bear all costs of filing such Tax Returns.
(i) Seller and Purchaser shall share equally all
Transfer Taxes arising out of or in connection with the transactions
effected pursuant to this Agreement, and Seller shall indemnify, defend and
hold harmless each Purchaser Tax Indemnitee with respect to such Transfer
Taxes. Seller shall file all necessary documentation and Tax Returns with
respect to such Transfer Taxes.
5.11. Employee Benefit Plans.
----------------------
(a) The employees of each Target (and their covered
dependents) shall continue to participate under the medical, dental, vision,
employee assistance, life and long-term disability benefit coverages under
the Target Benefit Plans through May 31, 2002. Effective June 1, 2002, the
employees of each Target (and their covered dependents) shall cease active
participation under the Target Benefit Plans maintained by Seller. Neither
the Purchaser nor any Target will be liable for any costs relating to
coverage described in the first sentence of this paragraph. Seller will
retain obligations for medical continuation coverage under Code Section
4980B with respect to employees of Target (and their covered dependents) who
experience qualifying events (as such term is defined under Code Section
4980B(f)(3)) prior to June 1, 2002. Seller's long-term disability plan will
retain obligations for providing disability benefits, in accordance with its
terms, to eligible employees of each Target who become disabled prior to
June 1, 2002.
(b) From and after the Closing, Seller shall (i)
assume and remain solely responsible for, and shall reimburse and indemnify
Purchaser Indemnitees for, any and all Liabilities arising prior to the
Closing Date under each benefit plan maintained by or for the benefit of the
current or former employees of Seller or its ERISA Affiliates; and (ii)
promptly pay, when due, and cause the administrators of each Target Benefit
Plan maintained by Seller to promptly pay, when due, all benefits and
compensation payable or to be provided to all retired, current or former
employees of each Target and such individual's beneficiaries and dependents
in accordance with the terms of the applicable Target Benefit Plan to the
extent of such employee's participation therein prior to Closing.
(c) Following the Closing Date, Purchaser shall
recognize Target's employees' years of service through the Closing Date for
purposes of eligibility and vesting under the benefit plans provided to
Target's employees following the Closing Date and waive any pre-existing
medical condition to the extent allowable under Target's plans.
(d) Seller shall take such actions as are necessary to
(i) fully vest Employees in their account balances under the defined
contribution plans in which such Employees participate (ii) avoid placing
any Employee's plan loan into default as long as such Employee rolls over
their account balance (including, without limitation, the note relating to
the plan loan) to a defined contribution plan maintained by Purchaser within
90 days of the Closing Date.
52
(e) Seller shall transfer the medical-care and
dependent-care reimbursement account balances (including the related assets
and liabilities) to US Label. After such transfer takes place, US Label's
flexible spending account plan shall be liable for reimbursement of eligible
medical-care and dependent-care expenses incurred in 2002 on behalf of
eligible Employees and their covered dependents.
(f) Seller shall contribute (i) matching contributions
to the Mail-Well Corporation 401(k) Savings and Retirement Plan and the
Mail-Well I Corp. 401(k) Savings & Retirement Plan for Union Employees on
behalf of each participant in accordance with the terms of such plans and
(ii) non-discretionary profit sharing contributions to the Mail-Well
Corporation 401(k) Savings and Retirement Plan on behalf of each non-union
participant in accordance with the terms of such plan.
(g) The Seller shall use commercially reasonable
efforts to cause the trustees of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ plc Pension Scheme (for
the purposes of this Section 5.11(g), the "Scheme") to meet and resolve:
------
(i) to instruct the Scheme Actuary in compliance
with the requirements of the Occupational Pension Schemes
(Deficiency on Winding Up etc.) Regulations 1996, to value the
Scheme's assets and the amount of its liabilities and certify the
same, such certificate to be issued within eighty (80) days of
Closing;
(ii) to regard the effective date of the
valuation in (i) above as the "applicable time" for purposes of
Section 75 Pensions Act;
(iii) to regard the difference between the value
of the Scheme's assets and the amount of its liabilities as
certified by the Scheme Actuary under (i) above as the debt due
from the employer to the trustees under Section 75(1) Pensions Act
1995 (the "Employer's Due Contributions"); and
----------------------------
(iv) to formally request the payment of the
Employer's Due Contributions from Purchaser within eighty-five (85)
days of Closing.
If Seller does not satisfy all Liabilities arising under the Scheme
in the manner set forth in this Section 5.11(g) as provided herein, such
Liabilities shall be subject to the indemnification provisions set forth in
Section 9.1(a)(ix).
5.12. Seller and Parent Guarantee Releases. Purchaser shall use
------------------------------------
commercially reasonable efforts to cooperate with Seller and Parent to
obtain the release of Seller and Parent from any guarantees of obligations
of any Target under any leases related to real or personal property.
5.13. Assignment of Contracts and Other Properties.
--------------------------------------------
(a) On or prior to the Closing Date, the Seller shall
assign from Seller to a Target or Purchaser the contracts and other
properties listed in Schedule 5.13(a), in whole or in part, to the extent
----------------
necessary to allow the Targets to continue to operate under such contracts,
and
53
to the extent of such assignment, a Target or Purchaser, as the case may be,
shall assume all Liability under such contracts arising after the Closing
Date.
(b) Parent shall assign to Purchaser all rights with
respect to the severance agreements listed in Schedule 5.13(b), copies of
----------------
which have been made available to Purchaser, and Purchaser shall assume all
obligations under such agreements. Purchaser shall pay the compensation due
to ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ caused by the occurrence of the
transactions described in this Agreement. Seller shall remain solely
responsible for, or shall reimburse and indemnify Purchaser Indemnitees for,
any and all severance payments, stay bonuses and other incentive payments
under such employment agreements caused to be due and payable by the
occurrence of the transactions described in this Agreement.
5.14. Name Change. Within 365 days after the Closing Date,
-----------
Purchaser shall cause each Target to cease using any ▇▇▇▇, name, d/b/a or
other manner of identifying the Target or any product, service or unit
thereof, that includes the "Mail-Well" name or logo, or any permutation
thereof or marks or words that may be deceptively similar thereto
(collectively, the "Mail-Well Name"). Further, within 365 days after the
Closing Date, Purchaser shall cause each Target to legally change its name
and any registrations thereof (including ▇▇▇▇, name and d/b/a registrations)
to a name that does not include the Mail-Well Name. Upon and after the
Closing Date, Target shall have no right or power to license, sell, gift,
assign, distribute or otherwise transfer any right to or interest in the
Mail-Well Name. All of the Target's rights to and interests in the Mail-Well
Name shall terminate 365 days after the Closing Date, or on such earlier
date as Purchaser and each Target achieves compliance with the first two
sentences of this Section 5.14.
5.15. Related Parties. Except as provided in Section 5.13, the
---------------
Seller shall, prior to the Closing, pay or cause to be paid to each Target
all amounts owed to the Target by any Related Party (other than any of the
other Targets). At and as of the Closing, any debts or other Liabilities of
any Target owed to any Related Party (other than any of the other Targets)
shall be canceled. The Seller shall, prior to the Closing, terminate or
cause to be terminated all Contracts between each Target, on the one hand,
and any Related Party (other than any of the other Targets), on the other
hand, and the Targets shall retain no obligations under such Contracts.
Seller shall indemnify and hold Purchaser and Targets harmless from and
against any Liabilities arising from the termination of such Contracts.
5.16. Parent. The Parent shall cause the Seller to perform all
------
of its obligations under this Agreement.
5.17. Intercompany Accounts. All Intercompany Accounts between
---------------------
Seller or its Affiliates (other the Targets) and the Targets shall be
cancelled and extinguished as of the Closing Date except for accounts
receivable and accounts payable arising in the ordinary course of business
related to purchases or sales of products and services between Seller or its
Affiliates (other than Targets) and Targets, and Seller shall indemnify and
hold Purchaser and Targets harmless from and against any Liabilities arising
from the termination of any Intercompany Accounts.
5.18. Transition Services Agreement. Between signing of this
-----------------------------
Agreement and Closing, Seller and Purchaser shall use their reasonable
efforts to mutually agree the nature and terms of
54
the transition services to be provided by Seller to Purchaser to enable the
Purchaser to operate the Business as an independent going concern from and
after the Closing Date to be set forth on Appendix A to the Transition
Services Agreement.
5.19. Further Assurances. Seller and Purchaser each agree (at
------------------
each party's sole expense) to use their reasonable best efforts to take all
reasonable actions and to execute, acknowledge, affirm and deliver any and
all documents and instruments, prior to and after the Closing, to effect and
complete the transactions contemplated by this Agreement. If either Seller
or Purchaser desires to implement a reorganization (for tax or other
reasons) at any time prior to Closing with respect to the Targets, Seller
and Purchaser agree to reasonably assist the other party to structure and
implement any such reorganization in a mutually beneficial manner.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or
before the Closing Date, of each of the following conditions all or any of
which may be waived in writing, in whole or in part, by Purchaser:
6.1. Representations and Warranties. All information required
------------------------------
to be furnished or delivered by Seller or Target pursuant to this Agreement
or the Tax Deed shall have been furnished or delivered as of the date hereof
and as of the Closing Date, as required hereunder; the representations and
warranties made by Seller in Article 4 and in the Tax Deed shall be true and
correct in all material respects on and as of the Closing Date. For purposes
of this Section 6.1, (x) all representations and warranties shall be
interpreted without giving effect to the words "materiality" or "material"
or to any qualification based on such terms or based on the defined term
"Material Adverse Effect"; and (y) with the same force and effect as though
such representations and warranties had been made on and as of the Closing
Date except that the representations and warranties contained in Sections
4.1(b) and 4.1(c) shall be true and correct in all respects. Purchaser shall
have received a certificate dated as of the Closing Date, executed by an
authorized officer of Seller, to such effect.
6.2. Compliance by Seller. The Seller shall have duly performed
--------------------
in all material respects all of the covenants, agreements, and conditions
contained in this Agreement and each other Purchase Document to which it is
a party to be performed by the Seller on or prior to the Closing Date, and
Purchaser shall have received a certificate, dated as of the Closing Date,
executed by an authorized officer of Seller, to such effect.
6.3. Certified Resolutions. Purchaser shall have received from
---------------------
Seller a certificate executed by the Secretary or Assistant Secretary
thereof containing true and correct copies of resolutions duly adopted by
Seller's board of directors approving and authorizing this Agreement and
each of the other Purchase Documents to which it is a party and each of the
transactions contemplated hereby and thereby. The Secretary or Assistant
Secretary of Seller shall also certify that such resolutions have not been
rescinded, revoked, modified, or otherwise affected and remain in full force
and effect.
55
6.4. No Injunction; Etc. No action, proceeding, investigation,
------------------
regulation, or legislation shall be pending or threatened which seeks to
enjoin, restrain, or prohibit Purchaser, or to obtain damages from
Purchaser, in respect of the consummation of the transactions contemplated
hereby, or which seeks to enjoin the operation of any portion of any
Target's business.
6.5. Incumbency. Purchaser shall have received certificates of
----------
incumbency of Seller executed by the officers of Seller executing this
Agreement, and attested by the Secretary or Assistant Secretary of Seller
listing the officers of Seller authorized to execute this Agreement and the
other Purchase Documents to which Seller is a party and all instruments on
behalf of Seller and certifying the authority of each such officer to
execute the agreements, documents, and instruments on behalf of Seller in
connection with the consummation of the transactions contemplated herein.
6.6. Consents; Authorizations; Legal Matters. Purchaser shall
---------------------------------------
have received a true and correct copy of each consent and waiver identified
on any Schedule hereto that is (a) required for the transfer of the Shares;
(b) required for the operation of the Business of the Targets after Closing;
and (c) otherwise required for the execution, delivery, and performance of
this Agreement and the other Purchase Documents by Seller. All required
consents, notices, authorizations, orders, or approvals of any governmental
commission, board, or other regulatory body, shall have been obtained or
made. Purchaser shall have received a certificate dated as of the Closing
Date, executed by an authorized officer of Seller, to the foregoing effect.
6.7. Proceedings. The form and substance of all certificates,
-----------
assignments, orders and other documents and instruments hereunder shall be
satisfactory in all reasonable respects to Purchaser and its counsel.
6.8. Opinion of Seller's Counsel. Purchaser shall have received
---------------------------
the Opinion of Seller's Counsel dated the Closing Date and substantially in
the form attached hereto as Exhibit C.
6.9. Certified Documents, Good Standing. Purchaser shall have
----------------------------------
received (a) the Articles of Incorporation or memoranda and articles of
association, as applicable, of each Target (other than UK Label) as amended,
certified as of a recent date by a Governmental Authority (if such
certification is customarily available) and a copy of the Bylaws of each
Target, as amended, certified as of the Closing Date by the Secretary or an
Assistant Secretary of each Target; (b) a certificate of status, good
standing or existence with respect to each Target (other than UK Label)
applicable Governmental Authority under the laws of which the Target is
incorporated, organized or registered, and of each other jurisdiction in
which the Target is qualified or registered to do business, dated as of a
recent date acceptable to Purchaser's counsel; (c) a certificate of status,
good standing or existence from the Delaware Secretary of State with respect
to Seller; and (d) a Certificate of Attestation under "An Act Respecting the
Legal Publicity of Sole Proprietorships, Partnerships and Legal Persons"
(Quebec).
6.10. Release from Security Interests.
-------------------------------
(a) Any and all Liens on the Shares and on the assets,
properties and businesses of any Target pursuant to the BofA Security
Documents or otherwise shall have been released and discharged; and
56
(b) US Target shall have been released and discharged
from any and all obligations and liabilities as a guarantor under the BofA
Credit Agreement or otherwise on terms and conditions satisfactory to
Purchaser.
6.11. Release from Senior Subordinated Notes Guarantee and
-----------------------------------------------------
Senior Notes Guarantee. US Target shall have been released from any and all
----------------------
obligations under the Senior Subordinated Notes Guarantee and the Senior
Notes Guarantee on terms and conditions satisfactory to Purchaser.
6.12. KEDFA Bond. Seller shall have irrevocably assigned to
----------
Purchaser all of its rights to and interest in the KEDFA Program, including,
without limitation, the endorsement and assignment to Purchaser of the KEDFA
Bond in the form of endorsement and assignment reasonably acceptable to
Purchaser and in the manner provided in the Trust Indenture dated October
15, 1992 between Kentucky Economic Development Finance Authority ("KEDFA")
-----
and the Bank of New York as Trustee ("Trustee"), as amended in the First
-------
Supplemental Trust Indenture dated May 11, 1998 between KEDFA and the
Trustee, as well as all rights to receive all payments arising under the
KEDFA Bonds. Purchaser and Seller shall cooperate to obtain, as promptly as
possible thereafter, the ratification and approval of KEDFA and the Trustee
with respect to the assignment of the KEDFA Bonds and other rights to
Purchaser as provided herein. Seller shall be responsible for all costs and
expenses associated with such assignment.
6.13. Tax Deed. The Seller shall have executed and delivered the
--------
Tax Deed in the form of Exhibit G hereto and the Tax Deed shall be in full
force and effect.
6.14. Non-Compete Agreement. Seller shall have executed and
---------------------
delivered a non-compete agreement in a form to be mutually agreed upon prior
to the Closing by Purchaser and Seller.
6.15. 116 Clearance Certificate.
-------------------------
(a) Seller shall deliver to the Purchaser on or before
the Closing Date a certificate issued by the Minister of National Revenue
(Canada) under subsection 116 of the Income Tax Act (Canada) (the "ITA"), in
respect of those of the Shares constituting "taxable Canadian property" as
such term is defined in the ITA, and the Parties hereby acknowledge and
agree that the only Shares which constitute "taxable Canadian property" for
such purpose are the Canada Label Shares, which certificate shall identify
as the purchaser for purposes of the certificate "MWL Acquisition Corp."
and, for greater certainty, need not identify as the purchaser for purposes
of the certificate any other Person regardless of any change made on or
prior to Closing by the Purchaser in or to the Person who is to take or does
take legal and/or beneficial title to the Canada Label Shares at Closing,
for an amount equal to or greater than the portion of the Purchase Price
(the "Allocated Purchase Price") allocable to the Subject Property under
this Agreement.
(b) If Seller fails to deliver to Purchaser on or
before the time of Closing a certificate in accordance with the immediately
preceding sentence hereof, the parties shall at the time of Closing enter
into the Escrow Agreement annexed hereto as Schedule 6.17 and the Purchaser
will, at the time of Closing, withhold from the Purchase Price otherwise
payable at
57
Closing to the Seller an amount (the "Escrowed Amount") equal to the lesser
of (i) 25% of the Allocated Purchase Price and (ii) 25% of the difference
between the Allocated Purchase Price and the certificate limit fixed by any
certificate which has been obtained by the Seller in accordance with the
immediately preceding sentence hereof and in either case deliver the
Escrowed Amount to the Escrow Agent (as defined in the Section 116 Escrow
Agreement) to be dealt with in the manner set forth in the Escrow Agreement.
6.16. U.S. Person Affidavit. Seller shall deliver to Purchaser
---------------------
on the Closing Date an affidavit dated as of the Closing Date stating that
the Seller is not a foreign person pursuant to Section 1.1445-2(b) of the
Treasury regulations.
6.17. Transition Services Agreement. Seller shall have executed
-----------------------------
and delivered the Transition Services Agreement substantially in the form of
Exhibit H hereto, and the Transition Services Agreement shall be in full
force and effect.
6.18. UK Label Shares Transfer. Seller shall deliver to
------------------------
Purchaser on the Closing Date a pre-stamped stock transfer form in respect
of the UK Label Shares, and any associated stamp duty shall be shared
equally by Seller and Purchaser.
6.19. UK Additional Deliveries. Seller shall:
------------------------
(a) Deliver to the Purchaser:
(i) a duly executed transfer in favour of the
Purchaser (or as it may direct) in respect of all the UK Label
Shares and the relevant share certificate(s); and
(ii) the documents listed in the UK Title
Documents List.
(b) Deliver to the Purchaser as agent for UK Target:
(i) the duly signed minutes of the board meetings
at which the matters set out in Section 6.19 (c) are dealt with;
----------------
(ii) the resignations referred to in Sections
--------
6.19 (c)(iv) and (v);
------------ ---
(iii) all the statutory books, share certificate
books and minute books (each duly written up to date) of each UK
Entity and their respective certificates of incorporation,
certificates of incorporation on change of name or registration and
common seals (if any);
(iv) a letter from the auditors by which they
resign as auditors to the UK Label and the UK Subsidiaries and
confirm that there are no circumstances which ought to be brought
to the attention of the shareholders of any UK Target; and
58
(v) in respect of each of the UK Charges Form 53
or (as the case may be) the relevant form of discharge each duly
completed and executed by the beneficiary of the relevant UK
Charge.
(c) Procure:
(i) the registration (subject to being duly
stamped) of the transfers referred to in Sections 6.19(a)(i) and
(ii) notwithstanding any provision to the contrary in the articles
of association of UK Entities;
(ii) the valid appointment as additional
directors of each UK Target such persons as may be directed by
Purchaser upon one day's notice prior to the Closing Date;
(iii) the valid appointment as chairman of each
UK Entity such persons as may be directed by Purchaser upon one
day's notice prior to the Closing Date;
(iv) that the existing directors each cease to be
a director of each UK Entity and deliver to the Purchaser a duly
executed and delivered resignation letter;
(v) that each existing secretary ceases to be
secretary of each UK Entity and delivers to Purchaser a duly
executed and delivered resignation letter;
(vi) the appointment as the Secretary of each UK
Target such persons as may be directed by Purchaser upon one day's
notice prior to the Closing Date; and
(vii) so far as required by the Purchaser the
revocation of all authorities to the bankers of each UK Target
relating to bank accounts and authorise such persons as the
Purchaser may nominate to operate the same.
6.20. Seller as Registered Holder. The Seller declares that
---------------------------
with effect from Closing and for so long as it remains the registered holder
of any of the UK Label Shares it shall:
(a) stand and be possessed of the UK Label Shares and
the dividends and other distributions of profits or surplus or other assets
in respect of the UK Label Shares and all rights arising out of or in
connection with them in trust for the Purchaser and its successors in title;
and
(b) at all times deal with and dispose of the UK Label
Shares and all such dividends distributions and rights as the Purchaser or
any such successor may direct.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER
The obligation of Seller to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or
before the Closing Date hereunder, of each of the following conditions, all
or any of which may be waived, in whole or in part, by Seller:
59
7.1. Certificate Regarding Representations and Warranties. All
----------------------------------------------------
information required to be furnished or delivered by Purchaser pursuant to
this Agreement shall have been furnished or delivered as of the date hereof
and the Closing Date as required hereunder; the representations and
warranties made by Purchaser in Article 3 hereof shall be true and correct
in all material respects on and as of the Closing Date with the same force
and effect as though such representations and warranties had been made on
and as of the Closing Date; and Seller shall have received a certificate
dated the Closing Date, executed by authorized officers of Purchaser, to
such effect.
7.2. Compliance by Purchaser. Purchaser shall have duly
-----------------------
performed in all material respects all of the covenants, agreements, and
conditions contained in this Agreement and each other Purchase Document to
which it is a party to be performed by Purchaser on or before the Closing
Date (except that payment of the Purchase Price shall be performed in all
respects), and Seller shall have received certificates dated the Closing
Date, executed by authorized officers of Purchaser to such effect.
7.3. Certified Resolutions. Seller shall have received from
---------------------
Purchaser certificates executed by the Secretary or Assistant Secretary
thereof containing true and correct copies of resolutions duly adopted by
Purchaser's board of directors approving and authorizing this Agreement and
each of the other Purchase Documents to which it is a party and each of the
transactions contemplated hereby and thereby. The Secretary or Assistant
Secretary of Purchaser shall also certify that such resolutions have not
been rescinded, revoked, modified, or otherwise affected and remain in full
force and effect.
7.4. No Injunction; Etc. No action, proceeding, investigation,
------------------
regulation, or legislation shall be pending, which seeks to enjoin,
restrain, or prohibit Seller, or to obtain damages from Seller, in respect
of the consummation of the transactions contemplated hereby.
7.5. Incumbency. Seller shall have received certificates of
----------
incumbency of Purchaser executed by the officers of Purchaser executing this
Agreement, and attested by the Secretary or Assistant Secretary of Purchaser
listing the officers of Purchaser authorized to execute this Agreement and
the other Purchase Documents to which Purchaser is a party and all
instruments on behalf of Purchaser and certifying the authority of each such
officer to execute the agreements, documents, and instruments on behalf of
Purchaser in connection with the consummation of the transactions
contemplated herein.
7.6. Legal Matters. All authorizations, orders, or approvals of
-------------
any Governmental Authority required to consummate the transactions described
in this Agreement shall have been obtained.
7.7. Proceedings. The form and substance of all certificates,
-----------
assignments, orders and other documents and instruments hereunder shall be
satisfactory in all reasonable respects to Seller and its counsel.
7.8. Opinion of Purchaser's Counsel. Seller shall have received
------------------------------
a customary opinion of Purchaser's counsel dated the Closing Date in form
and substance reasonably acceptable to Seller.
60
7.9. Good Standing. Seller shall have received certificates of
-------------
status, good standing or existence from the Delaware Secretary of State with
respect to Purchaser.
7.10. Non-Compete Agreement. Purchaser shall have executed and
---------------------
delivered a non-compete agreement in a form to be mutually agreed upon prior
to the Closing by Purchaser and Seller.
7.11. Release Under BofA Security Documents. Seller shall have
-------------------------------------
received for the benefit of Targets full releases in respect of the BofA
Security Documents.
ARTICLE 8
TERMINATION
8.1. Termination. This Agreement may be terminated:
-----------
(a) by the mutual consent of Purchaser and Seller;
(b) by Purchaser, so long as Purchaser is not then in
material breach of its obligations hereunder, upon a breach of any
representation, warranty, covenant or agreement set forth herein on the part
of Seller, and in each such case, where the breach would result in the
failure to satisfy the conditions set forth in Article 6, and such breach is
incapable of being cured or if capable of being cured, has not been cured
within 30 days of the date on which Seller receives written notice thereof
from Purchaser;
(c) by Seller, so long as Seller is not then in
material breach of its obligations hereunder, upon a breach of any
representation, warranty, covenant or agreement set forth herein on the part
of Purchaser, and in each such case, where the breach would result in the
failure to satisfy the conditions set forth in Article 7, and such breach is
incapable of being cured or, if capable of being cured, has not been cured
within 30 days of the date on which Purchaser receives written notice
thereof from Seller; or
(d) by either Purchaser or Seller (unless such party
is in material breach of its obligations under this Agreement) if the
Closing shall not have occurred on or before May 24, 2002, unless the
failure to consummate the Closing by such date shall be primarily due to the
failure of the party seeking to terminate the Agreement to have fulfilled
any of its obligations under this Agreement.
8.2. Effect of Termination. As to any damages of any party
---------------------
arising from the effect of wrongful termination or abandonment of this
Agreement by any other party, such party shall be entitled to pursue its
rights or remedies against the other party or parties to the extent such
rights or remedies may be available at law or in equity, and shall also be
entitled to reimbursement of all reasonable costs and fees, including
attorneys' fees, related to enforcement of this Agreement and/or seeking
remedies for breach.
61
ARTICLE 9
INDEMNIFICATION
9.1. Agreement of the Indemnitors to Indemnify.
-----------------------------------------
(a) Subject to the terms and conditions of this
Article 9, Seller agrees to indemnify, defend and hold harmless Purchaser
Indemnitees from, against, for and in respect of the Losses asserted
against, or paid, suffered or incurred by Purchaser Indemnitees, or any of
them in any action or proceeding between the Indemnitor and the Indemnitee
or between the Indemnitor and any third party or otherwise, and resulting
from, based upon, or arising out of:
(i) the breach or inaccuracy of any
representation or warranty of Seller contained in this Agreement or
any other Purchase Document other than the Tax Deed;
(ii) a breach of or failure to perform any
covenant or agreement of Seller or Target made pursuant to this
Agreement or any other Purchase Document other than the Tax Deed;
(iii) (a) the Environmental Protection Agency
claim against US Label with respect to the Tremont City Landfill
Site, described on Schedule 4.14(b), and (b) any violations of, or
----------------
any Liabilities (including without limitation any investigatory,
corrective or remedial obligations) arising under or relating to,
Environmental Laws or UK Environmental Laws with respect to the
past or current properties, facilities or operations of Seller, a
Target or the Business, and any of their respective predecessors or
Affiliates (in each case, whether or not constituting a breach of
any representation or warranty hereunder and whether or not listed
on a Schedule to this Agreement or otherwise disclosed to Purchaser
prior to the Closing Date or identified by Purchaser or its agents
or representatives through their due diligence investigations prior
to the Closing Date) except to the extent the facts or
circumstances underlying any such violations or Liabilities are
caused by the operation of a Target after the Closing Date;
(iv) any liability, cost, claim or expense
relating to the termination of the American Business Products
Profit Sharing Plan;
(v) any claims described on Schedule 9.1(a)(v);
------------------
(vi) any claims arising under any Benefit Plan
maintained by Seller or any Target prior to the Closing Date or out
of a violation of Law relating to COBRA or ERISA compliance prior
to the Closing Date, including but not limited to, those matter
described on Schedule 4.21(h);
----------------
(vii) except as provided on Schedule 9.1(vii),
any claims for stay bonuses, incentive payments or severance
payments under agreements with employees resulting from the
occurrence of the transactions contemplated by this Agreement;
(viii) any claims in respect of royalties, taxes,
interest and other liabilities relating to the ▇▇▇▇▇▇▇ Patent
License Agreement dated April 1992 made
62
between Mid American Division of Menasha Corporation and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Inc. with respect to U.S. Patent No 4,479,838 issued on
October 30, 1984 for the period prior to Closing; and
(ix) unless all obligations relating to or
arising under the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ plc Pension Scheme have been
satisfied in the manner set forth in Section 5.11(g)(i) to (iv),
Seller shall indemnify Purchaser (for itself and as agent and
trustee for the UK Entities) in respect of any Liability payable by
Purchaser to the trustees of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ plc Pension Scheme
pursuant to Section 75(1) ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ or otherwise, less an
amount equal to the UK Pension Provision.
(b) Subject to the terms and conditions of this
Article 9, Purchaser agrees to indemnify, defend and hold harmless, Seller
Indemnitees or any of them from, against, for and in respect of the Losses
asserted against, or paid, suffered or incurred by Seller Indemnitees and
resulting from, based upon, or arising out of:
(i) the breach or inaccuracy of any
representation or warranty of Purchaser contained in this Agreement
or any other Purchase Document;
(ii) a breach of or failure to perform any
covenant or agreement of Purchaser made pursuant to this Agreement
or any other Purchase Document;
(iii) any Liability arising after the Closing
Date incurred in connection with any guarantee by Seller or Parent
in connection with the obligations of any Target under any lease
related to real or personal property or other obligations; and
(iv) any violations of, or any Liabilities
(including without limitation any investigatory, corrective or
remedial obligations) arising under, or relating to, Environmental
Laws or UK Environmental Laws, in each case, in existence as of or
after the Closing Date to the extent caused by the operation of a
Target after the Closing Date, except to the extent the facts or
circumstances underlying any such violations or Liabilities are
caused by the operation of a Target prior to the Closing Date.
9.2. Procedures for Indemnification.
------------------------------
(a) An Indemnification Claim shall be made by the
Indemnitee by delivery of a written notice to the Indemnitor Representative
requesting indemnification and specifying the basis on which indemnification
is sought and the amount of asserted Losses and, in the case of a Third
Party Claim, containing (by attachment or otherwise) such other information
as the Indemnitee shall have concerning such Third Party Claim. No
Indemnification Claim or series of related claims shall be made for an
amount less than $10,000.
(b) If the Indemnification Claim involves a Third
Party Claim, the procedures set forth in Section 9.3 hereof shall be
-----------
observed by the Indemnitee and the Indemnitor Representative.
(c) If the Indemnification Claim involves a matter
other than a Third Party Claim, the Indemnitor Representative shall have
sixty (60) days to investigate such claim and, if
63
applicable, to object to such Indemnification Claim by delivery of a written
notice of such objection to the Indemnitee specifying in reasonable detail
the basis for such objection. Failure to timely so object shall constitute a
final and binding acceptance of the Indemnification Claim by the Indemnitor
Representative, and the Indemnification Claim shall be paid in accordance
with Section 9.2(d) hereof. If an objection is timely interposed by the
--------------
Indemnitor Representative, the Indemnitee and the Indemnitor Representative
shall use their reasonable commercial efforts to resolve such dispute within
thirty (30) days from the date the Indemnitee receives such objection.
(d) Upon determination of the amount of an
Indemnification Claim whether by agreement between the Indemnitor
Representative and the Indemnitee or by settlement or final adjudication,
the amount of such Indemnification Claim shall be paid within ten (10) days
of the date such amount is determined. If the Indemnitor responsible for
payment of such Indemnification Claim is Purchaser, such payment shall be
made by wire transfer to Seller. If the Indemnitor responsible for payment
of such indemnification is Seller, such payment shall be made by wire
transfer to Purchaser.
(e) If the Indemnification Claim involves a clean-up
or remediation of Owned Real Property or the Leased Real Property pursuant
to applicable requirements of Law, the Purchaser shall have sole control and
management authority over the resolution of any such claim (including
hiring, at reasonable expense, legal counsel and environmental consultants,
conducting environmental investigations and cleanups), provided; however,
that Purchaser shall reasonably consult with Indemnitor Representative
concerning the status of such claim. Notwithstanding anything herein to the
contrary, no settlement of any such claim or action shall be made by
Purchaser without the prior written consent by or on behalf of the
Indemnitor Representative, which consent shall not be unreasonably withheld
or delayed.
9.3. Third Party Claims. The obligations and liabilities of the
------------------
Indemnitee and Indemnitor hereunder with respect to a Third Party Claim
shall be subject to the following terms and conditions:
(a) The Indemnitee seeking indemnification for such
Third Party Claim shall give the Indemnitor Representative written notice of
the Third Party Claim promptly after receipt by the Indemnitee of notice
thereof, and the Indemnitor Representative may undertake, at Indemnitor's
expense, the defense, compromise and settlement thereof by representatives
of its own choosing, reasonably acceptable to the Indemnitee. The failure of
the Indemnitee to promptly notify the Indemnitor Representative of such
claim shall not relieve the Indemnitor of any liability that the Indemnitor
may have with respect to such claim except to the extent that the defense of
such claim is actually and materially prejudiced by such failure. In
addition, in any Third Party Claim in which both the Indemnitor, on the one
hand, and an Indemnitee, on the other hand, are, or are reasonably likely to
become, a party, such Indemnitee shall have the right to employ separate
counsel and to control its own defense of such Third Party Claim if, in the
reasonable opinion of counsel to such Indemnitee, either (x) one or more
defenses are available to the Indemnitee that are not available to the
Indemnitor or (y) a conflict or potential conflict exists between the
Indemnitor, on the one hand, and such Indemnitee, on the other hand, that
would make such separate representation advisable; provided, however, that
the Indemnitor shall reimburse the Indemnitee for all of such fees and
expenses of such counsel incurred in any action
64
between the Indemnitor and the Indemnitee or between the Indemnitor and any
third party so long as the Indemnitor's obligation to indemnify hereunder is
mutually agreed or established by a court of competent jurisdiction. If the
Indemnitee desires to participate in, but not control, any such defense,
compromise and settlement, it may do so at its sole cost and expense. If the
Indemnitor undertakes the defense of any Third Party Claim, the Indemnitor
is liable to indemnify the Indemnitee for the Third Party Claim. If the
Indemnitor Representative fails or refuses to undertake the defense of such
Third Party Claim within ninety (90) days after written notice of such claim
has been given to the Indemnitor Representative by the Indemnitee or the
Indemnitor fails to conduct the defense of such Third Party Claim actively
and diligently, the Indemnitee shall have the right to undertake the
defense, compromise and settlement of such claim with reasonably competent
counsel of its own choosing. Either party, if and to the extent necessary to
meet statutes of limitations, or procedural deadlines, or otherwise to
preserve any defense or counterclaim, may file an answer or otherwise make
an appearance in a relevant proceeding, without electing or waiving its
rights hereunder. If the Indemnitee undertakes the defense of a Third Party
Claim, the Indemnitee shall, promptly upon its assumption of the defense of
such claim, make an Indemnification Claim as specified in Section 9.2 which
-----------
shall be deemed an Indemnification Claim that is not a Third Party Claim for
the purposes of the procedures set forth in this Section 9.3. With respect
-----------
to any Third Party Claim in respect of Taxes pertaining to a Straddle
Period, Purchaser shall control and undertake the defense, compromise and
settlement thereof by reasonably competent representatives of its own
choosing.
(b) No settlement of a Third Party Claim involving the
asserted Liability of the Indemnitor under this Article 9 shall be made
without the prior written consent by or on behalf of the Indemnitor
Representative, which consent shall not be unreasonably withheld or delayed.
If the Indemnitor Representative assumes the defense of such a Third Party
Claim, no compromise or settlement thereof may be effected by the Indemnitor
Representative without the Indemnitees' consent, which shall not be
unreasonably withheld or delayed, unless (A) there is no finding or
admission of any violation of law or any violation of the rights of any
person and no effect on any other claim that may be made against the
Indemnitee, (B) the sole relief provided is monetary damages that are paid
in full by the Indemnitor, and (C) the compromise or settlement includes, as
an unconditional term thereof, the giving by the claimant or the plaintiff
to the Indemnitee of a release, in form and substance satisfactory to the
Indemnitee, from all liability in respect of such Third Party Claim.
(c) In connection with the defense, compromise or
settlement of any Third Party Claim, the Indemnitee and the Indemnitor
Representative shall execute such powers of attorney as may reasonably be
necessary or appropriate to permit participation of counsel selected by such
Indemnitee or Indemnitor Representative. As may reasonably be related to any
such Third Party Claim or other claim between Indemnitee and Indemnitor
under this Section 9, the Indemnitee and the Indemnitor Representative shall
provide access to the counsel, accountants and other representatives of such
Indemnitee or Indemnitor during normal business hours to all properties,
personnel, books, tax records, contracts, commitments and all other business
records of such Indemnitee or Indemnitor and will furnish to such Indemnitee
or Indemnitor copies of all such documents as may reasonably be requested.
9.4. Other Rights and Remedies. The rights of Indemnitees under
-------------------------
this Article 9 and the Tax Deed are the sole and exclusive remedies of
Indemnitees for any Losses incurred in
65
connection with the Purchase Documents and the transactions contemplated
thereby, except for Losses resulting from fraud or intentional
misrepresentations of Seller or Purchaser under this Agreement.
9.5. Duration. Notwithstanding any right of the Purchaser to
--------
investigate fully the affairs of the Targets and notwithstanding any
knowledge of facts determined or determinable by the Purchaser pursuant to
such investigation or right of investigation, the Purchaser has the right to
rely fully upon the representations, warranties, covenants and agreements of
the Seller contained in this Agreement or in any Purchase Document. The
indemnification rights of the parties under Section 9.1(a) or Section 9.1(b)
-------------- --------------
for Losses is subject to the condition that the Indemnitor Representative
shall have received written notice of the Losses for which indemnity is
sought within eighteen (18) months of the Closing Date, except (i) the
indemnification rights of the parties hereto for Losses related to Tax
matters arising from a breach of the covenants or representations or
warranties set forth in Section 5.10 or Section 4.19, respectively, is
subject to the condition that the Indemnitor Representative shall have
received written notice of the Losses for which indemnity is sought within
ninety (90) days after the expiration of the applicable period for the
assessment of deficiencies (including all periods of extension, whether
automatic or permissive); (ii) the indemnification rights for Losses arising
from or related to environmental matters arising from a breach of the
representations or warranties set forth in Section 4.14 or for which
indemnity is sought under Sections 9.1(a)(iii) and 9.1(b)(iv) is subject to
the condition that the Indemnitor Representative shall have received written
notice of the Losses within five (5) years of the Closing Date; and (iii)
this paragraph shall not apply to Losses arising from a breach of the
representations and warranties contained in Section 4.1 (Capitalization;
-----------
Legal Status; Qualification; Title to Shares), Section 4.5 (Due
-----------
Authorization; Validity; Enforceability) or are indemnifiable under Sections
--------
9.1(a)(ii), 9.1(a)(iv) through (ix) or Sections 9.1(b)(ii) and 9.1(b)(iii),
---------- ----------------------- -----------------------------------
and claims for such Losses may be brought at any time after the Closing,
without limitation.
9.6. Limitations.
-----------
(a) The Indemnitor shall be obligated to indemnify the
Indemnitee under Section 9.1(a) or Section 9.1(b), as applicable, only when
-------------- --------------
the aggregate of all Losses suffered or incurred by the Indemnitee as to
which a right of indemnification is provided under this Article 9 exceeds
$500,000 (the "Threshold Amount"). After the aggregate of all indemnifiable
----------------
Losses suffered or incurred by the Indemnitee exceeds the Threshold Amount,
the Indemnitor shall be obligated to indemnify the Indemnitee for all Losses
in excess of the Threshold Amount. In no event shall the aggregate liability
of Seller under this Article 9 exceed $50,000,000. The limitations set forth
in this Section 9.6 shall not apply to Losses that are indemnifiable under
-----------
Sections 9.1(a)(ii) through (ix) or Section 9.1(b)(ii) through (iv) or under
-------------------------------- -------------------------------
the Tax Deed or result from the fraud or intentional misrepresentation of
Seller or Purchaser under this Agreement or arise under Sections 4.14, 4.19,
--------------------
4.20 and 4.32 and such Losses shall not be considered in determining whether
-------------
the Threshold Amount has been reached.
(b) The Indemnitor shall not be liable for Losses in
excess of the actual out-of-pocket Losses suffered by the Indemnitee as a
result of the act, circumstance, or condition for which indemnification is
sought net of any insurance proceeds actually received by the Indemnitee as
a result of the Losses for which indemnification is claimed. Seller shall
not be
66
liable for any Losses if and to the extent such Losses were set forth or
otherwise reflected in the Final Working Capital, and such Losses should not
be considered in determining whether the Threshold Amount has been reached.
(c) Seller shall have no right of contribution from
Target with respect to any Losses paid or payable by Seller as a Indemnitor
under the provisions of Article 9.
(d) Where any Purchaser Indemnitee has a claim under
this Section 9 or the Tax Deed and in addition, any other Purchaser
Indemnitee has a claim in respect of the same matter under Section 9 or
under the Tax Deed, the Seller shall not be obligated to pay any amount to
the extent such payment would cause the Purchaser Indemnitees to receive an
aggregate amount which is in excess of the losses suffered by all Purchaser
Indemnitees with respect to such claim.
9.7. Cooperation. Seller and Purchaser shall cooperate with
-----------
each other in all reasonable respects in connection with the defense of any
claim; provided, however, that the foregoing right to cooperation shall not
be exercisable by one party in such a manner as to interfere unreasonably
with the normal operations and business of the other party.
9.8. Survival of Representations and Warranties. All of the
------------------------------------------
representations, covenants, warranties and agreements of the parties set
forth in this Agreement shall survive the consummation of the transactions
provided for herein for such period of time as a claim for indemnification
for breach of any such representation and warranty may be made as provided
in Section 9.5 above.
-----------
9.9. Treatment. The parties agree to treat any indemnity
---------
payment made under this Agreement as an adjustment to the Purchase Price for
all purposes.
9.10. Foreign Currency. For purposes of applying any dollar
----------------
limitations, thresholds or other amounts related to any Losses or claims
made hereunder in a foreign currency, such Losses incurred or claims made in
foreign currency shall be converted into United States dollars at the most
recent applicable rate of exchange as set forth in the "Exchange Rate"
section of the Wall Street Journal (National Edition) on the date of
incurrence, as related to any Losses, or as related to claims made under
this Section 9, the earlier of the date (a) any payment is required to be
made under the terms of this Agreement; or (b) a judgment is entered by a
court or competent jurisdiction concerning any such payment.
ARTICLE 10
GENERAL PROVISIONS
10.1. Fees and Expenses. Except as specifically provided in
-----------------
this Agreement, Purchaser and Seller each shall pay their respective fees
and expenses, and Seller shall also pay all fees and expenses which Target
incurred prior to the Closing Date, in connection with the transactions
contemplated by this Agreement.
10.2. Notices. All notices, request, demands, and other
-------
communications hereunder shall be in writing and shall be delivered (a) in
person or by courier or nationally recognized
67
overnight courier service, (b) mailed by first class registered or certified
mail, postage prepaid, return receipt requested, or (c) by facsimile
transmission, as follows:
(a) If to Seller or Parent:
c/o Mail-Well, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President and CEO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
Mail-Well, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Vice President
and General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Purchaser:
MWL Acquisition Corp.
One DTC
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Arsenal Capital Management LP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
Citigroup Center
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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Moye, Giles, ▇'▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change the address to which notices are to be sent by giving
written notice of such change of address to the other parties in the manner
above provided for giving notice. If delivered personally or by courier, the
date on which the notice, request, instruction or document is delivered
shall be the date of deemed receipt; if delivered by nationally recognized
overnight courier service, the Business Day after the date such notice,
request, instruction or document is delivered shall be the date of deemed
receipt; if delivered by facsimile transmission there shall be no deemed
receipt unless a confirming copy is sent by another permissible means, and
the date of deemed receipt shall occur in accordance with such other
permissible means; and if delivered by mail as aforesaid, three Business
Days after the date on which such notice, request, instruction or document
is delivered shall be the date of deemed receipt.
10.3. Assignment; Binding Effect. This Agreement shall not be
--------------------------
assignable by any of the parties hereto without the written consent of the
other parties; provided, however, that Purchaser may assign any or all of
its rights and interests hereunder to one or more of its Affiliates. This
Agreement shall be binding upon, and inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
10.4. No Benefit to Others. The representations, warranties,
--------------------
covenants, and agreements contained in this Agreement are for the sole
benefit of the parties hereto and their successors and permitted assigns,
and in the case of Article 9 hereof, Indemnitees, and they shall not be
construed as conferring any rights on any other persons.
10.5. Headings, Gender, and "Person" and Successor Laws. All
-------------------------------------------------
section headings contained in this Agreement are for convenience of
reference only, do not form a part of this Agreement and shall not affect in
any way the meaning or interpretation of this Agreement. Words used herein,
regardless of the number and gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other
gender, masculine, feminine, or neuter, as the context requires. References
to a statute, regulation or other law are also references to such statute,
regulation or other law as are, from time to time until the Closing Date,
amended, modified or supplemented, unless otherwise noted.
10.6. Counterparts. This Agreement may be executed in two (2)
------------
or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one counterpart has been signed
by each party and delivered to the other party hereto.
10.7. Integration of Agreement. This Agreement supersedes all
------------------------
prior agreements, oral and written, between the parties hereto with respect
to the subject matter hereof. Neither this Agreement, nor any provision
hereof, may be changed, waived, discharged, supplemented, or terminated
orally, but only by an agreement in writing signed by the party against
which the enforcement of such change, waiver, discharge, or termination is
sought.
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10.8. Time of Essence. Time is of the essence in this
---------------
Agreement.
10.9. Governing Law. This Agreement shall be construed under
-------------
the laws of the State of Colorado, United States of America and the federal
laws of the United States of America applicable therein, in each case
without regard to principles of conflicts of laws. The parties hereby
irrevocably and unconditionally submit to the exclusive jurisdiction of any
State or Federal court sitting in Denver, Colorado over any suit, action or
proceeding arising out of or relating to this letter. The parties hereby
irrevocably and unconditionally waive any objection to the laying of venue
of any such suit, action or proceeding brought in any such court and any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum. Each of the parties agrees that a
final judgment that has not been timely appealed by a party in any such
suit, action or proceeding brought in any such court shall be conclusive and
binding upon it and may be enforced in any other courts to whose
jurisdiction such party is or may be subject, by suit upon such judgment.
10.10. Partial Invalidity. Whenever possible, each provision
------------------
hereof shall be interpreted in such manner as to be effective and valid
under applicable law, but in case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provisions of this Agreement,
and this Agreement shall be construed as if such invalid, illegal, or
unenforceable provision or provisions had never been contained herein unless
the deletion of such provision or provisions would result in such a material
change as to cause completion of the transactions contemplated hereby to be
unreasonable.
10.11. Publicity and Confidentiality.
-----------------------------
(a) Except as may be required by Law, no public
release, announcement or other form of publicity concerning this Agreement
or the transaction contemplated herein shall be issued by any party without
the prior written consent of all other parties hereto; provided, however,
that after Closing, any party may in its discretion announce completion of
the transaction. Each party will reasonably cooperate in approving any
statement required by Laws applicable to the other party.
(b) For a period of five (5) years from the Closing
Date, the Seller, on one hand, and Purchaser, on the other hand (in each
case, in their roles as parties disclosing confidential information, the
"disclosing parties," and in their roles as parties receiving confidential
information, the "receiving parties"), agree to maintain the confidentiality
and privacy of, and agree not to use for their own benefit or to the
detriment of the disclosing parties, the disclosing parties' "confidential
information." The term "confidential information" includes any information
that is non-public, confidential or proprietary in nature, regardless of the
form in which it is communicated or maintained, that contains or otherwise
reflects information concerning the disclosing parties that the receiving
parties or their agents, advisors or representatives may be or may have been
provided by or on behalf of the disclosing parties in connection with the
evaluation and negotiation of this Agreement and the other Purchase
Documents and the transactions contemplated hereby and thereby. The term
"confidential information" also includes all information relating to Target
that is being transferred to Purchaser in the transactions described in this
Agreement (and Purchaser shall be regarded as the
70
"disclosing party" for any such information). The term "confidential
information" also includes all reports, analyses, notes or other information
that are based on, contain or reflect any confidential information. The
receiving parties shall not be required to maintain the confidentiality of
those portions of the disclosing parties' confidential information that: (i)
become generally available to the public other than as result of a
disclosure by the receiving parties or any of their agents, advisors or
representatives; (ii) were available to the receiving parties on a
non-confidential basis prior to the disclosure of such confidential
information by or on behalf of the disclosing parties; (iii) become
available to the receiving parties on a non-confidential basis from a source
other than the disclosing parties or their agents, advisors or
representatives; or (iv) were independently developed by the receiving
parties prior to the disclosure of such confidential information by or on
behalf of the disclosing parties. Notwithstanding any provision to the
contrary in this Section 10.11, from and after the Closing, Purchaser shall
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have no obligation to Seller to maintain confidential any information
regarding the Targets, so long as such information relates exclusively to
Target.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, each party hereto has caused this Agreement to
be executed on its behalf by its duly authorized officer, all as of the day
and year first above written.
PURCHASER:
MWL ACQUISITION CORP.
By:
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Name:
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Title:
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SELLER:
MAIL-WELL I CORPORATION
By:
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Name:
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Title:
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PARENT:
MAIL-WELL, INC.
By:
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Name:
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Title:
----------------------------------