ASSET PURCHASE AGREEMENT
DATED AS OF NOVEMBER 18, 1997
BY AND BETWEEN
S.D. ▇▇▇▇▇▇ COMPANY
AND
SPINNAKER INDUSTRIES, INC.
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
PAGE
ARTICLE 1 PURCHASE AND SALE........................................... 1
Section 1.1 Acquired Assets............................................. 1
Section 1.2 Excluded Assets............................................. 4
Section 1.3 Determinations as to Mixed-Use Assets....................... 5
ARTICLE 2 ASSUMPTION OF CERTAIN OBLIGATIONS........................... 5
ARTICLE 3 PURCHASE PRICE.............................................. 6
Section 3.1 Purchase Price.............................................. 6
Section 3.2 Purchase Price Adjustments.................................. 7
ARTICLE 4 CLOSING..................................................... 9
Section 4.1 Time and Place.............................................. 9
Section 4.2 Transactions at Closing..................................... 9
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER.................... 10
Section 5.1 Incorporation; Authority.................................... 10
Section 5.2 Rights to Sell Acquired Assets; Approvals; Binding Effect... 10
Section 5.3 No Defaults................................................. 10
Section 5.4 Title to Assets............................................. 11
Section 5.5 Financial Statements........................................ 11
Section 5.6 Absence of Certain Changes.................................. 11
Section 5.7 Litigation, Etc. ........................................... 12
Section 5.8 Labor Relations............................................. 13
Section 5.9 Contracts................................................... 13
Section 5.10 Pensions and Benefits....................................... 14
Section 5.11 Equipment; Acquired Assets.................................. 15
Section 5.12 Customers................................................... 15
Section 5.13 Intellectual Property....................................... 15
Section 5.14 Governmental Consent........................................ 16
Section 5.15 Compliance with Laws, Etc. ................................. 16
Section 5.16 Environmental Matters....................................... 16
Section 5.17 Brokers..................................................... 17
Section 5.18 Taxes....................................................... 17
Section 5.19 Employees................................................... 17
Section 5.20 Real Estate Matters......................................... 18
Section 5.21 Disclosure.................................................. 19
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYER..................... 19
Section 6.1 Organization and Standing of Buyer.......................... 19
Section 6.2 Corporate Approval; Binding Effect.......................... 19
Section 6.3 Non-Contravention........................................... 19
Section 6.4 Government Consents, Etc. .................................. 20
Section 6.5 Financing................................................... 20
Section 6.6 Brokers..................................................... 21
Section 6.7 Manufacturing Exemption..................................... 21
Section 6.8 Resale Exemption............................................ 21
ARTICLE 7 CERTAIN REGULATORY APPROVALS................................ 21
Section 7.1 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act....................................... 21
Section 7.2 Environmental Permits....................................... 21
ARTICLE 8 CONDUCT OF BUSINESS PENDING CLOSING......................... 22
Section 8.1 Full Access................................................. 22
Section 8.2 Carry on in Regular Course.................................. 23
Section 8.3 No General Increases........................................ 23
Section 8.4 Sale of Capital Assets; Capital Improvements................ 23
Section 8.5 Insurance................................................... 23
Section 8.6 Preservation of Organization................................ 23
Section 8.7 Advice of Change............................................ 23
Section 8.8 No Shopping................................................. 24
Section 8.9 Tax Covenants............................................... 24
Section 8.10 Preparation of Transaction Documents........................ 24
Section 8.11 Designated Inventory........................................ 24
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ARTICLE 9 CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS................. 24
Section 9.1 Representations and Warranties.............................. 24
Section 9.2 Compliance with Agreement................................... 25
Section 9.3 No Litigation............................................... 25
Section 9.4 HSR Clearance............................................... 25
Section 9.5 Environmental Matters....................................... 25
Section 9.6 Site Separation and Services Agreement...................... 25
Section 9.7 Site Lease; Space Lease..................................... 25
Section 9.8 Material Adverse Change..................................... 26
Section 9.9 Financing................................................... 26
ARTICLE 10 CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS................ 26
Section 10.1 Representations and Warranties.............................. 26
Section 10.2 Compliance with Agreement................................... 26
Section 10.3 No Litigation............................................... 26
Section 10.4 HSR Clearance............................................... 26
Section 10.5 Consent of Lenders.......................................... 27
Section 10.6 Environmental Matters....................................... 27
Section 10.7 Site Separation and Services Agreement...................... 27
Section 10.8 Site Lease; Space Lease..................................... 27
ARTICLE 11 EMPLOYEES AND EMPLOYEE BENEFITS............................. 27
Section 11.1 Hiring Employees............................................ 27
Section 11.2 Welfare Benefit Plans....................................... 28
Section 11.3 Investment & Retirement Plans............................... 28
Section 11.4 Benefit Maintenance......................................... 29
Section 11.5 Limitation on Rights........................................ 31
Section 11.6 Workmen's Compensation...................................... 31
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ARTICLE 12 CERTAIN COVENANTS ............................................. 31
SECTION 12.1 Obligation of Seller With Respect to Accounts
Receivable .............................................. 31
SECTION 12.2 Third Party Consents ..................................... 32
SECTION 12.3 Access to Books and Records .............................. 33
SECTION 12.4 Use of S.D. ▇▇▇▇▇▇ Name .................................. 33
SECTION 12.5 No Hiring ................................................ 33
SECTION 12.6 Audited Financials ....................................... 34
SECTION 12.7 Noncompetition ........................................... 34
SECTION 12.8 Financing ................................................ 35
ARTICLE 13 INDEMNITY ..................................................... 35
SECTION 13.1 Indemnification by the Seller ............................ 35
SECTION 13.2 Indemnification by the Buyer ............................. 37
SECTION 13.3 Indemnification Procedures ............................... 38
SECTION 13.4 Scope of Indemnity ....................................... 39
SECTION 13.5 Waiver of Statutory Claims ............................... 39
ARTICLE 14 TAX MATTERS ................................................... 39
SECTION 14.1 General .................................................. 39
SECTION 14.2 Cooperation on Tax Matters; Conduct of Proceedings ....... 40
SECTION 14.3 Scope of Article 14 ...................................... 40
ARTICLE 15 TERMINATION ................................................... 41
ARTICLE 16 CONFIDENTIALITY ............................................... 41
SECTION 16.1 Confidentiality Agreement ................................ 41
SECTION 16.2 Confidential Information Relating to the Pressure
Sensitive Business ...................................... 42
ARTICLE 17 DEFINITIONS ................................................... 42
ARTICLE 18 GENERAL ....................................................... 44
SECTION 18.1 Survival of Representations and Warranties ............... 44
SECTION 18.2 Arbitration .............................................. 45
SECTION 18.3 Expenses, Certain Taxes .................................. 45
SECTION 18.4 Assigns .................................................. 45
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SECTION 18.5 Entire Agreement, Etc. ................................... 46
SECTION 18.6 Waiver of Certain Damages ................................ 46
SECTION 18.7 Construction ............................................. 46
SECTION 18.8 Governing Law ............................................ 46
SECTION 18.9 Notices .................................................. 46
SECTION 18.10 Counterparts ............................................. 48
SECTION 18.11 Section Headings ......................................... 48
SECTION 18.12 Public Statements or Releases ............................ 48
SECTION 18.13 Disclosure in Schedules .................................. 48
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LIST OF EXHIBITS AND SCHEDULES
EXHIBITS:
A Target Statement
B Site Separation and Services Agreement
C Site Lease
D Resale Exemption
SCHEDULES:
1.1(a) Equipment
1.1(b) Inventories
1.1(d) Personal Property Leases
1.1(e) Contracts
1.1(g) Purchase Orders
1.1(i) Intellectual Property
1.1(o) Electrical Transformers
2 Liabilities and Obligations of Seller
3.1 Allocation of Purchase Price
5.4 Permitted Encumbrances
5.5 Financials
5.6 Absence of Certain Changes
5.7 Litigation
5.8 Labor Relations
5.9 Contracts
5.10 Employee Benefit Plans
5.11(a) Equipment
5.11(b) Acquired Assets
5.12 Customers List
5.13 Intellectual Property
5.14 Governmental Consents
5.15 Compliance with Laws
5.16 Environmental Matters
5.20 Real Property
11.1 Assumed Employees
13.1(a)(iii) Blanket Environmental Claims
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is dated as of the 18th
day of November, 1997, by and between S.D. ▇▇▇▇▇▇ Company, a Pennsylvania
corporation (the "SELLER"), and Spinnaker Industries, Inc., a Delaware
corporation (the "BUYER").
The Seller is in the business of manufacturing and selling certain
pressure sensitive paper products, including EDP Impact, EDP Non-Impact and
Roll Label Products (the "PRESSURE SENSITIVE BUSINESS"). The Pressure
Sensitive Business is conducted primarily as part of the Seller's operations at
its Westbrook, Maine facility (the "WESTBROOK FACILITY").
The Seller desires to sell and the Buyer desires to purchase the Pressure
Sensitive Business.
In connection with the negotiation and preparation of this Agreement, the
Seller has prepared, and the Buyer has reviewed, a set of disclosure schedules,
dated the date hereof and delivered separately as one or more volumes (the
"DISCLOSURE SCHEDULE", with any reference in this Agreement to a Schedule being
a reference to the Disclosure Schedule).
In consideration of the mutual agreements and covenants herein contained,
the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1. ACQUIRED ASSETS. Subject to the terms and conditions set forth in
this Agreement, at the Closing referred to in Article 4 hereof, the Seller
shall sell, assign, transfer and deliver to the Buyer, and the Buyer shall
purchase, acquire and take assignment and delivery of, all of the following
assets of the Seller used in or relating to the Pressure Sensitive Business,
with the exception of the Excluded Assets (as defined in Section 1.2) (all of
which assets are hereinafter referred to collectively as the "ACQUIRED
ASSETS"):
(a) All machinery, equipment, installations, fixtures, furniture,
tools, supplies, materials and other personal property used primarily in
connection with the Pressure Sensitive Business, including without
limitation
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those items described on SCHEDULE 1.1(a) hereto, with such additions
thereto and deletions therefrom as may hereafter arise in the ordinary
course of business prior to the Closing consistent with the Seller's
obligations under Article 8 hereof (the "EQUIPMENT");
(b) All of the Seller's inventories held for use primarily in the
Pressure Sensitive Business, including raw materials, stores and spare
parts, work in process and finished goods, including without limitation
those items described on SCHEDULE 1.1(b) hereto and the Designated
Inventory described in Section 3.2(b), with such additions thereto and
deletions therefrom as may hereafter arise in the ordinary course of
business prior to the Closing consistent with the Seller's obligations
under Article 8 hereof (the "INVENTORIES"), to the extent reflected on the
Closing Statement (as finally adjusted pursuant to Section 3.2) except as
provided in Section 3.2(b);
(c) All of the Seller's prepaid expenses relating primarily to the
Pressure Sensitive Business, to the extent reflected on the Closing
Statement (as finally adjusted pursuant to Section 3.2) (the "PREPAID
EXPENSES");
(d) All of the Seller's rights under all leases of personal property
used primarily in connection with the Pressure Sensitive Business,
including the leases listed on SCHEDULE 1.1(d) and any other leases for
personal property entered into by the Seller and an unaffiliated third
party in connection with the Pressure Sensitive Business prior to the
Closing consistent with the Seller's obligations under Article 8 hereof
(the "PERSONAL PROPERTY LEASES");
(e) All of the Seller's rights under all contracts and agreements,
including without limitation the supply agreements, entered into by the
Seller and an unaffiliated third party primarily in connection with the
Pressure Sensitive Business, including the contracts listed on
SCHEDULE 1.1(e) and any other such contracts entered into by the Seller
primarily in connection with the Pressure Sensitive Business prior to the
Closing consistent with the Seller's obligations under Article 8 hereof
(the "CONTRACTS");
(f) All of the Seller's rights under the 1997-2002 collective
bargaining agreement between the Seller and United Paperworkers
International Union AFL-CIO Local #1069 (the "UNION") solely as it governs
the terms of employment of current hourly employees of the Pressure
Sensitive Business (the "COLLECTIVE BARGAINING AGREEMENT"); provided, that
the Seller's rights under the Collective Bargaining Agreement shall not be
assumed by the Buyer if the Buyer and the Union enter into a mutually
acceptable substitute contract prior to Closing;
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(g) All of the Seller's rights under purchase orders outstanding on
the Closing Date and relating primarily to the Pressure Sensitive
Business, including the purchase orders listed on SCHEDULE 1.1(g) and any
other purchase orders issued or accepted by the Seller primarily in
connection with the Pressure Sensitive Business prior to the Closing
consistent with the Seller's obligations under Article 8 hereof (the
"PURCHASE ORDERS");
(h) All of the Seller's accounts receivable relating primarily to
the Pressure Sensitive Business outstanding on the Closing Date, to the
extent reflected on the Closing Statement (as finally adjusted pursuant to
Section 3.2) (the "ACCOUNTS RECEIVABLE");
(i) All of the Seller's rights with respect to all Intellectual
Property (as defined in Section 5.13) of the Seller used primarily, or
held primarily for use, in connection with the Pressure Sensitive Business
or as the Buyer may reasonably require to conduct the Pressure Sensitive
Business subsequent to the Closing, including the Intellectual Property
listed on SCHEDULE 1.1(i) hereto but excluding the Intellectual Property
to be used by the Seller to provide services pursuant to the Site
Separation and Services Agreement (as defined in Article 9);
(j) to the extent transferable, all of the Seller's rights with
respect to all computer software programs used primarily in the Pressure
Sensitive Business or as the Buyer may reasonably require to conduct the
Pressure Sensitive Business subsequent to the Closing but excluding the
computer software programs to be used by the Seller to provide services
pursuant to the Site Separation and Services Agreement;
(k) to the extent transferable, all of the Seller's rights with
respect to any licenses, permits, concessions, orders, authorizations,
approvals or registrations from, of or with any Governmental Entity (as
defined in Article 17) and relating primarily to the Pressure Sensitive
Business;
(l) subject to Section 12.3, all existing records of the Seller
relating primarily to the Pressure Sensitive Business, including, without
limitation, property records, production records, purchasing and sales
records, personnel and payroll records to the extent transferable under
applicable law, customer lists, credit records, accounting records and
such other records as the Buyer may reasonably require to conduct the
Pressure Sensitive Business subsequent to the Closing;
(m) all claims, choses in action or causes of action that relate to
the Pressure Sensitive Business;
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(n) all warranties or similar rights that relate to the Acquired
Assets; and
(o) all electrical transformers that relate primarily to the
Pressure Sensitive Business and identified on SCHEDULE 1.1(o).
1.2. EXCLUDED ASSETS. Notwithstanding the foregoing, the Seller is not
selling and the Buyer is not purchasing pursuant to this Agreement, and the
term "ACQUIRED ASSETS" shall not include, any of the following assets (the
"EXCLUDED ASSETS"):
(a) any of the Seller's title to, interest in or rights with respect
to any real property other than to the extent set forth in the Site Lease
or the Space Lease (each as hereinafter defined);
(b) any of the Seller's cash, marketable or other securities,
commercial paper and cash equivalents or other investments, on hand or in
bank accounts, and all of the Seller's bank accounts and intercompany
accounts;
(c) any computers not used primarily in the Pressure Sensitive
Business, and any software embodied in any such computers, any
communication or data network systems not used primarily in the Pressure
Sensitive Business, and any other equipment not reasonably required to
conduct the Pressure Sensitive Business (including assets required to
provide the support services to be provided by the Seller pursuant to the
Site Separation and Services Agreement) or used to support the Pressure
Sensitive Business but not located at the ▇▇▇▇▇▇▇▇▇ Facility;
(d) any insurance policies of the Seller, including any and all
rights to make any claims or receive any proceeds thereunder;
(e) all power transmission equipment other than the transformers
referred to in Section 1.1(o) and any trucks not listed on
SCHEDULE 1.1(a);
(f) any other assets of the Seller not reasonably required to
conduct the Pressure Sensitive Business subsequent to the Closing
(including assets required to provide the support services to be provided
by the Seller pursuant to the Site Separation and Services Agreement);
(g) any rights to the tradenames, trademarks or corporate name "S.D.
▇▇▇▇▇▇" and any derivations thereof;
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(h) any rights of the Seller under that certain Stock Purchase
Agreement, dated as of October 7, 1994, among ▇▇▇▇▇ Paper Company, Sappi
Limited and SDW Acquisition Corp.; and
(i) all corporate records of the Seller, all financial and tax
records of the Seller relating in whole or in part to the Pressure
Sensitive Business and all other records and files not reasonably required
to conduct the Pressure Sensitive Business subsequent to the Closing.
1.3. DETERMINATIONS AS TO MIXED-USE ASSETS. The Seller and the Buyer
shall cooperate in good faith to resolve any disputes as to whether any
specific assets (including, without limitation, any contracts and agreements)
of the Seller which relate to both the Pressure Sensitive Business and another
business of the Seller are used primarily in, or relate primarily to, the
Pressure Sensitive Business. With respect to any contracts or licenses
applicable to both the Pressure Sensitive Business and other businesses of the
Seller, the Seller and the Buyer will cooperate to structure contractual
arrangements providing them both with the relevant rights and obligations under
such contract or license. These arrangements may take the form of a
subcontract or sublicense or causing the other party to such contract or
license to agree to split the contract or license into two separate agreements.
ARTICLE 2
ASSUMPTION OF CERTAIN OBLIGATIONS
At the Closing, the Buyer shall assume, and agree to pay, perform, fulfill
and discharge, the obligations and liabilities of the Seller relating to the
Pressure Sensitive Business described on SCHEDULE 2 hereto. Notwithstanding
any provisions contained in this Agreement or the Disclosure Schedule to the
contrary, except as set forth on SCHEDULE 2 the Buyer shall specifically not
assume any other liabilities or obligations of the Seller, including without
limitation the following liabilities or obligations of the Seller:
(i) liabilities for Indebtedness (as defined in Article 17) of the
Seller;
(ii) those liabilities for Taxes (as defined in Article 17) that
remain the responsibility of the Seller pursuant to Article 14;
(iii) those liabilities of the Seller or any of its ERISA
Affiliates (defined as any other person that, together with the
Seller, would be treated as a single employer under Section 414 of
the Internal Revenue Code of 1986, as amended) under any and all of
the ERISA Plans and Non-ERISA Plans (both as defined in
Section 5.10(a) hereof) currently or at any time in the past
maintained or contributed to by Seller or any of its
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ERISA Affiliates, including but not limited to those plans retained
by the Seller pursuant to Sections 11.2(a) and 11.3(a);
(iv) liabilities of the Seller in respect of severance agreements,
arrangements or obligations with or to employees of the Seller who
are offered employment by the Buyer in accordance with Section 11.1
but who decline such offer;
(v) all liabilities incurred in connection with "stay-put"
arrangements implemented in connection with the sale of the Pressure
Sensitive Business, including without limitation "stay-put" bonuses
and special compensation for certain persons employed by the Seller;
(vi) liabilities or regulatory obligations with respect to
environmental matters referred to in Section 13.1(a)(iii), (iv) and
(v);
(vii) liabilities relating to claims for workmen's compensation
for work performed by employees of the Pressure Sensitive Business
prior to the Closing, only to the extent that any such claim has been
filed prior to Closing or within six (6) months from Closing;
(viii) liabilities with respect to any intercompany accounts; and
(ix) liabilities for product warranty claims for products sold by
the Seller prior to Closing, only to the extent such claims are made
prior to the first anniversary of the Closing.
The liabilities to be assumed by the Buyer under this Agreement are hereinafter
sometimes referred to as the "ASSUMED OBLIGATIONS" and the liabilities that are
not assumed by the Buyer under this Agreement are hereinafter sometimes
referred to as the "EXCLUDED LIABILITIES", which Excluded Liabilities the
Seller covenants it shall pay, satisfy and discharge in full when due, and
shall indemnify the Buyer against any Losses (as defined in Article 13) arising
therefrom as provided in Article 13. The assumption of the Assumed Obligations
by the Buyer shall not enlarge any rights of third parties under contracts or
arrangements with the Buyer or the Seller and nothing herein shall prevent any
party from contesting in good faith with any third party any of said
liabilities.
ARTICLE 3
PURCHASE PRICE
3.1. PURCHASE PRICE. At the Closing, the Buyer shall pay Fifty-Two
Million Seven Hundred Seventy Thousand and no/100 Dollars ($52,770,000) to the
Seller, as
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the aggregate purchase price for the Acquired Assets, subject to adjustment
as provided in Section 3.2 hereof (the "PURCHASE PRICE"), by wire transfer of
same day funds. The Purchase Price shall be allocated among the Acquired
Assets in the manner set forth on SCHEDULE 3.1 hereto. The Buyer and Seller
shall report the purchase and sale of the Acquired Assets, including, without
limitation, in all federal, foreign, state, local and other Tax Returns (as
defined in Article 17) prepared and filed by or for either of the Buyer or
the Seller, in accordance with the basis of allocation set forth on SCHEDULE
3.1 hereto. The Buyer and the Seller further agree that they will prepare
and file asset acquisition statements on Form 8594 reflecting such allocation
with their Federal income tax returns for the taxable year that includes the
Closing Date.
3.2. PURCHASE PRICE ADJUSTMENTS.
(a) Included as Exhibit A is a statement showing the net value of
the Accounts Receivable, Prepaid Expenses and Inventories (collectively,
the "CURRENT ASSETS") and all trade payables (excluding intercompany
payables) and accrued liabilities of the Pressure Sensitive Business, but
excluding all payables and expenses of the types set forth in clauses (i)
to (ix) of Article 2 (collectively, the "CURRENT LIABILITIES"). The
Current Assets and Current Liabilities are collectively referred to as the
"NET WORKING CAPITAL". Except as noted on EXHIBIT A, this statement (the
"TARGET STATEMENT") has been derived from the internal unaudited financial
records for the Pressure Sensitive Business and has been prepared on a
basis consistent with management's past practice. This statement also
shows that as of the applicable dates the net value of the Net Working
Capital was $14,608,000.
(b) Within sixty (60) days after the Closing Date, the Seller shall
prepare and deliver to the Buyer an unaudited statement as of the close of
business on the day immediately preceding the Closing Date of the Net
Working Capital (the "CLOSING STATEMENT"). The Closing Statement (i)
shall be prepared on the same basis as the Target Statement, except that
the book value of the Inventories (other than those identified in clause
(ii)) shall be established conclusively for purposes of this Section 3.2
by the Seller taking a physical inventory of the Inventories as of the
close of business on the day immediately preceding the Closing Date and
reducing the final balance by such amount, if any, as would reduce the
value of the Inventories to a value equal to the lower of cost or market,
calculated in accordance with generally accepted accounting principles and
otherwise applying the valuation methodology used in preparing the Target
Statement to the results of this physical inventory and (ii) that portion
of the Inventory, primarily instrument and electrical inventory, that
relates primarily to the Pressure Sensitive Business but was inadvertently
omitted from the Target Statement (the
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"DESIGNATED INVENTORY") will not be included on the Closing Statement.
The Designated Inventory will be designated as provided in Section 8.11.
(c) When the Seller delivers the Closing Statement, the Seller shall
also deliver a certificate of its Chief Financial Officer (i) certifying
that the Closing Statement was prepared in accordance with paragraph (b)
above, and (ii) containing the Seller's calculations, based on the Closing
Statement (the "SELLER'S PROPOSED CALCULATIONS"), of the Net Working
Capital as of the Closing Date.
(d) Within thirty (30) days after receipt of the Closing Statement
and the accompanying certificate, the Buyer shall notify the Seller of its
agreement or disagreement with the Closing Statement and the accuracy of
any of the Seller's Proposed Calculations; PROVIDED, that the Buyer may
only dispute the Closing Statement and the Seller's Proposed Calculations
to the extent that they deviate from the requirements of paragraphs (b)
and (c) above. If the Buyer disputes any such aspect of the Closing
Statement or the amount of any of the Seller's Proposed Calculations, then
the Buyer shall have the right to direct its independent accountants, at
the Buyer's expense, to review and test the Closing Statement. The
Buyer's accountants shall complete their review and test within thirty
(30) days after the date the Buyer disputes the Seller's Proposed
Calculations. If the Buyer and its independent accountants, after such
review and test, still disagree with the Seller's Proposed Calculations,
and the Seller does not accept the Buyer's proposed alternative
calculations (the "BUYER'S PROPOSED CALCULATIONS"), then, within thirty
(30) days after the date of the Seller's rejection of the Buyer's Proposed
Calculations, the Seller and the Buyer shall select a third nationally
recognized independent accounting firm (the "INDEPENDENT ACCOUNTING FIRM")
to resolve the remaining disputed items (the "REMAINING DISPUTED ITEMS")
by conducting its own review and test of the Closing Statement and
thereafter selecting either the Buyer's Proposed Calculation of the
Remaining Disputed Items or the Seller's Proposed Calculation of the
Remaining Disputed Items or an amount in between the two. The Independent
Accounting Firm shall be instructed (i) that the scope of its review shall
be limited solely to the Remaining Disputed Items, (ii) that it shall
accept the Closing Statement and the Seller's Proposed Calculations except
to the extent that they deviate from the requirements of paragraphs (b)
and (c) above, and (iii) that it is to use every reasonable effort to
complete such assignment and deliver copies of such opinion and, if
required, a revised Closing Statement to the Buyer and the Seller within
thirty (30) days following the date such Remaining Disputed Items are
referred to it. The Buyer and the Seller agree that they shall be bound
by the determination of the Remaining Disputed Items by the Independent
Accounting Firm. The fees and expenses of the Independent Accounting Firm
shall be paid jointly by the Buyer and the Seller.
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(e) Upon the determination pursuant to paragraph (d) of this
Section 3.2 of the definitive Closing Statement and the Net Working
Capital as of the Closing Date, the Purchase Price shall be either
(i) increased by the amount, if any, by which the amount of Net Working
Capital is greater than $14,065,000 or (ii) decreased by the amount, if
any, by which the amount of Net Working Capital is less than $14,065,000
(the "ADJUSTMENT"). The Seller and the Buyer acknowledge that the target
number for the Adjustment set forth in the preceding sentence is different
than the net value of the Net Working Capital reflected on the Target
Statement. If the Purchase Price is increased, the Buyer shall pay such
amount to the Seller, and if the Purchase Price is decreased, the Seller
shall pay such amount to the Buyer. Any such payment shall be made in
cash or same day funds within ten (10) days after the determination of the
Adjustment pursuant to paragraph (d).
ARTICLE 4
CLOSING
4.1. TIME AND PLACE. The closing of the transfer and delivery of all
documents and instruments necessary to consummate the transactions contemplated
by this Agreement (the "CLOSING") shall be held at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇
LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, on the third business day
following completion of the regulatory approvals referred to in Sections 7.1
and 7.2, or at such other time or such other place as the Buyer and the Seller
may agree. The date on which the Closing is actually held hereunder is
sometimes referred to herein as the "CLOSING DATE". The Closing will be deemed
to be effective for purposes of this Agreement as of the opening of business on
the Closing Date.
4.2. TRANSACTIONS AT CLOSING. At the Closing:
(a) The Seller shall duly execute and deliver to the Buyer or its
nominee or nominees such deeds, bills of sale, certificates of title and
other instruments of assignment or transfer with respect to the Acquired
Assets as the Buyer may reasonably request and as may be necessary to vest
in the Buyer all of the Seller's title to the Acquired Assets.
(b) The Buyer shall deliver the Purchase Price by wire transfer to
the Seller.
(c) The Buyer shall duly execute and deliver to the Seller such
instruments of assumption with respect to the Assumed Obligations as the
Seller may reasonably request.
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(d) The Buyer and the Seller, as applicable, shall each duly execute
and deliver the Site Separation and Services Agreement, the Site Lease and
the Space Lease (as each such term is defined in Article 9 hereof).
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller represents and warrants to the Buyer as follows:
5.1. INCORPORATION; AUTHORITY. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Pennsylvania and has all requisite corporate power and authority to carry on
the Pressure Sensitive Business as now conducted.
5.2. RIGHTS TO SELL ACQUIRED ASSETS; APPROVALS; BINDING EFFECT. The
Seller has all requisite corporate power and authority to enter into this
Agreement and the other agreements contemplated hereby (collectively, the
"TRANSACTION DOCUMENTS") to which the Seller is to be a party, to perform all
of its agreements and obligations hereunder and thereunder in accordance with
their respective terms, and to sell and transfer to the Buyer all of the
Acquired Assets. This Agreement has been duly executed and delivered by the
Seller and constitutes, and when each of the other Transaction Documents to
which the Seller is to be a party has been duly executed and delivered each of
such other Transaction Documents will constitute, the legal, valid and binding
obligation of the Seller, enforceable against the Seller in accordance with
each of their respective terms, except as such validity, binding effect or
enforcement may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally or by equitable principles relating to the
availability of remedies.
5.3. NO DEFAULTS. Except for consents to transfer with respect to any
agreement that is part of the Acquired Assets, and the consents referred to in
Sections 7.1 and 7.2 hereof, the entering into of this Agreement and the other
Transaction Documents to which the Seller is to be a party, the performance and
compliance by the Seller with the terms hereof and thereof, and the
consummation of all the transactions contemplated hereby and thereby, will not
either currently, or after notice or lapse of time or both:
(a) result in a violation of any provision of the charter, by-laws
or other organizational documents of the Seller; or
(b) result in a violation by the Seller of any statute, regulation,
order, law, ordinance or restriction applicable to the Seller, other than
any
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violation which would not have a Material Adverse Effect (as defined
in Article 17); or
(c) result in a violation by the Seller of any judgment, order or
decree of any court or judicial or quasi-judicial tribunal applicable to
the Seller, other than any violation which would not have a Material
Adverse Effect.
5.4. TITLE TO ASSETS. The Seller owns or has the right to transfer all of
the Acquired Assets, subject to obtaining the consents described on SCHEDULE
5.4. At and as of the Closing, the Seller will convey to the Buyer good and
marketable title to the Acquired Assets, and the Seller will lease the Primary
Real Property (as defined below) to the Buyer, in each instance, free and clear
of all Encumbrances (as defined in Article 17) except for Permitted
Encumbrances (as defined in Article 17) and except as set forth on
SCHEDULE 5.4.
5.5. FINANCIAL STATEMENTS. Attached as SCHEDULE 5.5 hereto are a statement
of net assets of the Pressure Sensitive Business as of August 26, 1997
(except as noted on SCHEDULE 5.5) and summary statements of contribution
after direct expenses for the Pressure Sensitive Business (the "SUMMARY
STATEMENTS") for the fiscal years of the Seller ended September 30, 1996 and
September 30, 1997. The statement of net assets was prepared on the basis
disclosed and using the assumptions described in the footnotes to such
statements. Except as noted in the footnotes, such statement of net assets
fairly presents in all material respects the financial condition of the
Pressure Sensitive Business, insofar as it relates to the categories of
assets and liabilities presented, as of the applicable dates. Except as
noted in the footnotes, the Summary Statements fairly present in all material
respects the results of operations of the Pressure Sensitive Business,
insofar as they relate to the revenues and types of costs presented, for the
periods covered thereby.
5.6. ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 5.6,
from September 30, 1997 to the date of this Agreement the Pressure Sensitive
Business has operated only in the ordinary course and there has not been:
(a) any change in the condition (financial or otherwise), results of
operations, assets, liabilities or business of the Pressure Sensitive
Business other than changes arising in the ordinary course of business,
none of which, individually or in the aggregate, has had a Material
Adverse Effect;
(b) any acquisition or disposition by the Seller outside the
ordinary course of business of any asset or property used primarily in, or
material to the operation of, the Pressure Sensitive Business;
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(c) any damage, destruction or casualty loss to any asset of the
Seller and relating to the Pressure Sensitive Business, whether or not
covered by insurance, which has had a Material Adverse Effect;
(d) any increase in (or commitment to increase) the compensation,
pension or other benefits payable or to become payable to any of the
officers, employees, agents or representatives of the Pressure Sensitive
Business or any bonus payments or arrangements made to or with any of
them, that will constitute an Assumed Obligation, other than (i) increases
amounting to less than $20,000 individually and effected on a basis
consistent with the past practice of the Seller and (ii) any increase
required under the terms of any of the benefit plans or other arrangements
listed on SCHEDULE 5.10 hereto;
(e) any voluntary forgiveness or cancellation of any debt or claim
of the Pressure Sensitive Business in excess of $5,000 or any voluntary
waiver of any right of material value other than compromises of accounts
receivable in the ordinary course of business;
(f) the imposition of any Encumbrance on any of the assets of the
Pressure Sensitive Business except for Permitted Encumbrances and any
Encumbrance that will be discharged prior to Closing;
(g) any disposition of or lapse of any intellectual property right
or termination of any agreement under which the Seller (insofar as it
relates to the Pressure Sensitive Business) has any right or license, the
disposition, lapse or termination of which would have a Material Adverse
Effect;
(h) any lapse, termination or expiration (other than in accordance
with its terms, except as a result of a breach thereof) of any contract or
agreement, including any joint venture agreement, teaming agreement,
distribution agreement, supply agreement, license agreement, personal
property lease or development contract, to which the Seller (insofar as it
relates to the Pressure Sensitive Business) had been a party, the lapse,
termination or expiration of which would have a Material Adverse Effect;
or
(i) any receipt by the Seller of written notice, or to the Seller's
knowledge, any other communication, from any customer of the Pressure
Sensitive Business that such customer intends to terminate or reduce its
purchase of products from the Seller, except for any such terminations or
reductions that individually or in the aggregate would not have a Material
Adverse Effect.
5.7. LITIGATION, ETC. As of the date of this Agreement, no proceeding,
arbitration, action or suit is pending or, to the knowledge of the Seller,
threatened
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against the Seller (insofar as it relates to the Pressure Sensitive
Business), except as set forth on SCHEDULE 5.7 hereto and except for any such
proceeding, arbitration, action, or suit that, singly or in the aggregate,
would not have a Material Adverse Effect. As of the date of this Agreement,
the Seller (insofar as it relates to the Pressure Sensitive Business) has not
received any written notice from any Governmental Entity of any pending or
threatened governmental investigation relating to the Pressure Sensitive
Business which, if concluded with a determination adverse to the Pressure
Sensitive Business, would have a Material Adverse Effect. As of the date of
this Agreement, except as set forth on SCHEDULE 5.7, the Acquired Assets are
not the subject of any continuing court or administrative order, award,
injunction or decree.
5.8. LABOR RELATIONS. Except as set forth on SCHEDULE 5.8, as of the date
of this Agreement there is no charge pending or, to the knowledge of the
Seller, threatened against the Seller alleging, with respect to any employee or
employees of the Pressure Sensitive Business, any violation of any statute or
regulation relating to employment and employment practices, or any violation of
any collective bargaining agreement, any unlawful discrimination in employment
practices or any unfair labor practices before any court, agency, or other
judicial or arbitral body, except for any such violation that would not have a
Material Adverse Effect. As of the date of this Agreement, there is no labor
strike, dispute, slow-down or work stoppage actually pending or, to the
Seller's knowledge, threatened against the Seller (with respect to employees of
the Pressure Sensitive Business). Except as set forth on SCHEDULE 5.8, no
employees of the Pressure Sensitive Business are covered by any collective
bargaining agreement, and no collective bargaining agreement or other labor
union agreement or agreement with organized labor for employees of the Pressure
Sensitive Business is currently being negotiated or pending negotiation.
Except as set forth on SCHEDULE 5.8 hereto, there has been no material
concerted work stoppage with respect to the Pressure Sensitive Business during
the last three years. To the knowledge of the Seller, except as set forth on
SCHEDULE 5.8, no former or current employee of the Pressure Sensitive Business
is a party to or is otherwise bound by any written agreement or arrangement
between such employee and any other entity that would materially adversely
affect (i) the performance of his duties as an employee of the Pressure
Sensitive Business of the Seller or the Buyer or (ii) the ability of the Seller
or the Buyer to conduct the Pressure Sensitive Business.
5.9. CONTRACTS. Except for contracts, commitments, plans, agreements and
licenses listed on SCHEDULE 5.9 or SCHEDULE 5.10, as of the date of this
Agreement the Seller (insofar as it relates primarily to the Pressure Sensitive
Business) is not a party to or otherwise bound by:
(a) except for purchase orders accepted in the ordinary course of
business, any contract or purchase order to sell products or provide
services to
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any customer (i) providing for payments in excess of $25,000 or (ii)
having a term greater than one calendar year;
(b) except for any contract or agreement that will not constitute an
Assumed Obligation, any written contract or agreement with any director,
officer or employee of the Pressure Sensitive Business;
(c) any contract for the lease or sublease as lessee, lessor,
sublessee or sublessor of real or personal property of the Pressure
Sensitive Business, or any license of computer software used primarily in
the Pressure Sensitive Business, requiring payments in excess of $25,000
per year;
(d) except for purchase orders issued in the ordinary course of
business, any contract requiring payments in excess of $25,000 for the
purchase or sale of any personal property used primarily in the Pressure
Sensitive Business;
(e) any contract or agreement containing non-competition covenants
limiting the freedom of the Seller to operate the Pressure Sensitive
Business;
(f) any contract or agreement for guaranty, indemnity or suretyship
of Indebtedness of the Pressure Sensitive Business in excess of $50,000;
or
(g) except for any purchase commitments made in the ordinary course
of business and in amounts less than $25,000 each, any outstanding
purchase commitments or take or pay agreements binding upon the Seller
which relate to the Pressure Sensitive Business.
Neither the Seller nor, to the knowledge of the Seller, any other party to
any contract, agreement, lease or instrument listed on SCHEDULE 5.9
(collectively, the "CONTRACTS") is, as of the date of this Agreement, in
default in complying with any provisions thereof, except for any such default
that would not have a Material Adverse Effect. As of the date of this
Agreement, except where the same would not, individually or in the aggregate,
have a Material Adverse Effect, the Seller has not received any written notice
of the intention of any party to terminate any Contract, whether as a
termination for convenience or for default of the Seller thereunder.
5.10. PENSIONS AND BENEFITS.
(a) Except as set forth on SCHEDULE 5.10 hereto, as of the date of
this Agreement, the Seller does not maintain or have any obligation to
make contributions to, any employee benefit plan (an "ERISA PLAN") within
the
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meaning of Section 3(3) of the United States Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or any other retirement, profit
sharing, stock option, stock bonus or other benefit program (a
"NON-ERISA PLAN"), in either case, for the benefit of any officers,
employees or consultants of the Pressure Sensitive Business. The Seller
has heretofore delivered or made available to the Buyer copies or summaries
of each such ERISA Plan and Non-ERISA Plan and any associated funding
instruments and, with respect to any such ERISA Plan, the most recently
completed annual report (with any required attachments), the most recent
IRS determination letter, and any other advisory opinions or rulings
applicable to such Plan.
(b) To the Seller's knowledge, the ERISA Plans and Non-ERISA Plans
have been maintained and operated in all material respects in accordance
with all federal, state, provincial and local laws applicable to such
plans, and the terms and conditions of the respective plan documents.
5.11. EQUIPMENT; ACQUIRED ASSETS. The Equipment, taken as a whole, is
in a condition suitable for its present use in the Pressure Sensitive Business.
Except as set forth on SCHEDULE 5.11(a), as of the date of this Agreement the
Seller has received no written notice of any OSHA violation relating to the
Equipment. Except as set forth on Schedule 5.11(b), the Acquired Assets, when
utilized by a labor force substantially similar to that utilized by the Seller
for the Pressure Sensitive Business immediately prior to Closing at the
▇▇▇▇▇▇▇▇▇ Facility, and together with the services and utilities to be provided
to the Buyer pursuant to the Site Separation Agreement, are adequate to conduct
the Pressure Sensitive Business as currently conducted.
5.12. CUSTOMERS. SCHEDULE 5.12 hereto sets forth a list of each
paying account in 1997 of the Pressure Sensitive Business.
5.13. INTELLECTUAL PROPERTY.
(a) Except as described in SCHEDULE 5.13, (i) the Seller owns or
licenses sufficient rights, title and interest in all material copyright,
trade secret, trademark, or other proprietary rights (collectively,
"INTELLECTUAL PROPERTY") required to conduct the Pressure Sensitive
Business as presently conducted; (ii) as of the date of this Agreement
there are no proceedings, arbitrations, actions or suits pending or to the
Seller's knowledge threatened, and no unresolved written claims
outstanding, which challenge the rights of the Seller in respect thereof
or charge the Seller with infringement of any adversely held Intellectual
Property, except for any proceedings, arbitrations, actions, suits or
claims that singly or in the aggregate would not have a Material Adverse
Effect; and (iii) except for any of the Excluded Assets to be made
available to the Buyer pursuant to the Site Separation and Services
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Agreement, the Seller has the right to use and to transfer to the Buyer,
in all material respects, all customer lists, designs, manufacturing or
other processes, computer software, systems, data compilations, research
results and other information required for the operation of the Pressure
Sensitive Business as presently conducted.
(b) To the Seller's knowledge, as of the date of this Agreement
there exists no infringement by others of any of the Seller's Intellectual
Property rights relating to the Pressure Sensitive Business, except for
any such infringement that would not have a Material Adverse Effect.
(c) To the Seller's knowledge, the Seller is not making unauthorized
use of any confidential information or trade secrets of any Person,
including without limitation any former employer of any past or present
employee of the Seller. Except as set forth in SCHEDULE 5.13, the Seller
(insofar as it relates to the Pressure Sensitive Business) is not
violating any confidentiality agreement with any third party, and to the
Seller's knowledge, none of its employees (with respect to the Seller,
insofar as it relates to the Pressure Sensitive Business) is violating any
such agreement.
5.14. GOVERNMENTAL CONSENT. Except for the approval required with
respect to the HSR Act (as defined in Section 7.1), consents to transfer
required with respect to contracts, if any, with governments or governmental
agencies and for those items set forth on SCHEDULE 5.14, no consent, approval
or authorization of or registration, designation, declaration or filing with
any Governmental Entity, on the part of the Seller, is required in connection
with the consummation of any of the transactions contemplated hereby, except
for any approval, authorization, registration, designation, declaration or
filing that, if not obtained or made, would not have a Material Adverse Effect,
and would not materially adversely affect the ability of the Seller to perform
its obligations under this Agreement.
5.15. COMPLIANCE WITH LAWS, ETC. Except as set forth on
SCHEDULE 5.15 hereto, the Seller (insofar as it relates to the operation of the
Pressure Sensitive Business) is in compliance with all laws, statutes,
governmental regulations and all judicial or administrative tribunal orders,
awards, decrees, warning letters, judgments, writs and injunctions applicable
to it, except for any non-compliance that would not have a Material Adverse
Effect.
5.16. ENVIRONMENTAL MATTERS. (a) Except as set forth on
SCHEDULE 5.16, the Seller (insofar as it relates to the Pressure Sensitive
Business) is in compliance with all applicable Environmental Laws except where
the failure to be in compliance would not have a Material Adverse Effect.
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(b) Except as set forth on SCHEDULE 5.16, the Seller has all
permits, licenses and operating authorities and has installed and/or
incorporated all compliant control technology on all sources, required
under Environmental Laws for the operation of the Pressure Sensitive
Business as presently conducted (the "ENVIRONMENTAL PERMITS") and there
are no violations, investigations or proceedings nor, to the knowledge of
the Seller, are any investigations or proceedings pending or threatened,
with respect to the Environmental Permits, except where the failure to
have such Environmental Permits or where the violation, investigation or
proceeding relating thereto would not have a Material Adverse Effect.
(c) Except as set forth on SCHEDULE 5.16, since December 31, 1996,
no notice, notification, demand, request for information, citation,
summons, complaint or order has been received by the Seller or, to the
knowledge of the Seller, is pending or threatened by any Person against,
the Seller relating to the Pressure Sensitive Business nor has any
material penalty been assessed against the Seller relating to the Pressure
Sensitive Business with respect to any alleged violation of any
Environmental Law or liability thereunder, other than where such notice,
notification, demand, request for information, citation, summons,
complaint or order has been fully resolved, or where resolution thereof
would not have a Material Adverse Effect.
(d) Except as set forth on SCHEDULE 5.16, no Hazardous Substance has
been discharged, generated, treated, manufactured, handled, stored,
transported, emitted, released or is present at any property now or
previously owned, leased or operated by the Seller (insofar as it relates
to the Pressure Sensitive Business) in violation of any Environmental Law,
except for any of the foregoing that would not have a Material Adverse
Effect.
5.17. BROKERS. Except for ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities
Corporation, whose fees and expenses will be paid by the Seller, no finder,
broker, agent or other intermediary has worked for or on behalf of the Seller
in connection with the negotiation or consummation of the transactions
contemplated hereby.
5.18. TAXES. All Taxes relating to the Pressure Sensitive Business
which are required to be paid by the Seller on or prior to the Closing Date
have been paid other than any Taxes being contested in accordance with
applicable law. The Seller is in compliance with all Tax laws with respect to
the Pressure Sensitive Business except where the failure to comply would not
have a Material Adverse Effect.
5.19. EMPLOYEES. The persons listed on SCHEDULE 11.1 are employees of
the Pressure Sensitive Business as of the date hereof.
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5.20. REAL ESTATE MATTERS.
(a) All improvements located on the real property subject to the Site
Lease (the "PRIMARY REAL PROPERTY") ("IMPROVEMENTS") were constructed and
installed in compliance in all material respects with then applicable laws,
statutes, ordinances and codes affecting the Primary Real Property at the time
of construction. Except as set forth on SCHEDULE 5.20, there are not, and as
of the Closing there will not be, any material structural or latent defects in
any of the Improvements known to Seller which have not been disclosed to Buyer.
Except as set forth on SCHEDULE 5.20, the heating, electrical, plumbing, and
other building equipment on the Primary Real Property are, and as of the
Closing will be, in working order sufficient in all material respects for the
operation of the Pressure Sensitive Business consistent with current practice.
(b) The Seller has not received any written notice from an insurance
company which has issued a policy or has been requested to issue a policy with
respect to any portion of the Improvements located on the Primary Real Property
or any board of fire underwriters or any other body exercising similar
functions requesting the performance of any repair, alterations or other work
which has not been complied with in all material respects.
(c) Except as described on SCHEDULE 5.7 or SCHEDULE 5.20, as of the date
of this Agreement there is no existing, pending or, to the Seller's knowledge,
threatened litigation or condemnation or sale in lieu thereof, with respect to
any portion of the Primary Real Property relating to or arising out of the
ownership of the Primary Real Property by any federal, state, county or
municipal department, commission, board, bureau or agency or other governmental
instrumentality. As of the date of this Agreement, except as set forth on
SCHEDULE 5.20 there is no proceeding pending for the reduction or increase of
the assessed valuation or taxes or other impositions payable in respect of any
portion of the Primary Real Property. As of the date of this Agreement, the
Seller has not received any written notice of a proposed increase in the
assessed valuation of any portion of the Primary Real Property.
(d) Except for the Buyer, no Person has any right or option to acquire
the Primary Real Property or any portion thereof.
(e) As of the date of this Agreement, the Seller has no knowledge of any
fact or condition existing which is reasonably likely to result in the
termination or reduction in any material respect of the current access from the
Primary Real Property to existing highways and roads.
(f) Between the date hereof and Closing, Seller will not enter into any
lease, nor any service, maintenance or management agreement with respect to all
or
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any portion of the Primary Real Property, except as contemplated by this
Agreement and except for any such contract that will not constitute an Assumed
Obligation.
5.21. DISCLOSURE. To the Seller's knowledge, the representations and
warranties of the Seller contained in this Section 5 do not misstate a material
fact or omit to state a material fact which would make the representations and
warranties contained in this Article 5 untrue in any material respect.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
6.1. ORGANIZATION AND STANDING OF THE BUYER. The Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Buyer has all required corporate power and authority to
enter into this Agreement, to perform all of its agreements and obligations
hereunder in accordance with its terms and to purchase the Acquired Assets from
the Seller.
6.2. CORPORATE APPROVAL; BINDING EFFECT. The Buyer has obtained all
necessary authorizations and approvals from its Board of Directors and
shareholders required for the execution and delivery of this Agreement and the
other Transaction Documents to which it is to be a party and the consummation
of the transactions contemplated hereby and thereby, except for the stockholder
authorization referred to in Section 6.2(d). This Agreement has been duly
executed and delivered by the Buyer and constitutes, and when each of the other
Transaction Documents to which the Buyer is to be a party has been duly
executed and delivered such other Transaction Documents will constitute, the
legal, valid and binding obligation of the Buyer enforceable against the Buyer
in accordance with their respective terms, except as such validity, binding
effect or enforcement may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally or by equitable principles relating to
the availability of remedies.
6.3. NON-CONTRAVENTION. The execution, delivery and performance by the
Buyer of this Agreement and the other Transaction Documents to which it is to
be a party will not result in any violation of or be in conflict with its
Certificate of Incorporation or By-Laws, or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
it, or be in conflict with or constitute a default under any of the foregoing,
except where such violation or conflict would not have a material adverse
effect on the Buyer or a material adverse effect on the ability of the Buyer to
perform its obligations under the Transaction Documents.
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6.4. GOVERNMENT CONSENTS, Etc. Except for the approvals referred to in
Section 5.14, no consent, approval or authorization of or registration,
designation, declaration or filing with any Governmental Entity, Federal or
other, on the part of the Buyer is required in connection with the purchase of
the Acquired Assets pursuant to this Agreement or the consummation of any other
transaction contemplated hereby.
6.5. FINANCING.
(a) The Buyer has delivered to Seller (i) a copy of a letter dated
November 18, 1997 (the "COMMITMENT LETTER") from BT Commercial
Corporation and TransAmerica Business Credit Corporation (the
"Lenders") providing for a $10,000,000 increase in the Buyer's
existing revolving credit facility (the "REVOLVING FACILITY"), (ii) a
"highly confident" letter from BT Alex.▇▇▇▇▇ Incorporated (the "HIGHLY
CONFIDENT LETTER") relating to the placement by BT Securities
Corporation of $15,000,000 in convertible preferred stock ("New
Preferred Stock") and (iii) a letter dated as of November 18, 1997
from ▇▇▇▇▇ Manufacturing Corporation to the Buyer (the "LMC LETTER").
The copies of the Commitment Letter, the Highly Confident Letter and
the LMC Letter are complete and correct, have not been amended or
waived and are in full force and effect. The Buyer intends to fund
the Purchase Price with (i) $770,000 in cash on hand, (ii) $37,000,000
in new borrowings under the Revolving Facility, as amended, and
(iii) $15,000,000 in proceeds from the New Preferred Stock.
(b) The Buyer and its Subsidiaries currently have approximately
$300,000 in outstanding borrowings under the Revolving Facility and an
additional approximately $37,000,000 available for borrowing based on
the Buyer's current borrowing base.
(c) The loans under the Revolving Facility are permitted under the
Indenture dated as of October 23, 1996 with respect to the Buyer's
Senior Secured Notes due 2006.
(d) The Buyer hereby represents and warrants to the Seller (i) that
its Board of Directors has approved the financing transactions
contemplated by the Commitment Letter and the Highly Confident Letter
(collectively, the "FUNDING LETTERS") and the LMC Letter, including
the issuance of the New Preferred Stock on the terms contemplated by
the Highly Confident Letter and the LMC Letter, subject to stockholder
approval and (ii) upon receipt of stockholder approval, the Buyer will
use its best efforts to enter into the financing transactions
contemplated by the Funding Letters on terms no less
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favorable to the Buyer than as set forth in the Funding Letters and the
LMC Letter.
6.6. BROKERS. No finder, broker, agent or other intermediary has worked
for or on behalf of the Buyer in connection with the negotiation or
consummation of the transactions contemplated hereby.
6.7. MANUFACTURING EXEMPTION. The Buyer represents that the Equipment
is being purchased for use by the Buyer in the manufacture of pressure
sensitive paper products. To that end, the Buyer represents that the purchase
of the Equipment will qualify for the manufacturer's exemption pursuant to 36
M.R.S.A. sec. 1760 (31) and that the Buyer does not intend to lease or grant
the use of said assets to another entity.
6.8. RESALE EXEMPTION. The Buyer represents that all product
inventories and all raw material inventories to be acquired as part of the
Acquired Assets are being purchased for use in the manufacturing process and
will be consumed or destroyed in the manufacturing process and/or will be
sold to third party purchasers. Accordingly, the Buyer's purchase of
inventory items in the contemplated transaction will qualify for the
manufacturer's exemption pursuant to 36 M.R.S.A. 1760 (31) or for the resale
exemption pursuant to Maine Regulation, Rule No. 301. The Buyer shall
provide the Seller at or prior to the Closing with a qualified resale
certificate in the form of EXHIBIT D hereto.
ARTICLE 7
CERTAIN REGULATORY APPROVALS
7.1. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT. As promptly as practicable, and in any
event within ten (10) business days following the execution and delivery of
this Agreement by the parties, the Seller and the Buyer shall each prepare
and file any required notification and report form under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), in connection with the transactions contemplated hereby; the Seller
and the Buyer shall request early termination of the waiting period
thereunder; and the Seller and the Buyer shall respond with reasonable
diligence and dispatch to any request for additional information made in
response to such filings.
7.2. ENVIRONMENTAL PERMITS.
(a) As promptly as practicable, and in any event within ten (10)
business days following the execution and delivery of this Agreement, the
Seller and the Buyer will file with the applicable state authority, an
application (the "AIR PERMIT APPLICATION") to transfer from the Seller to
the
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Buyer the portion of the Seller's State of Maine Air Emission License,
A-29-71-C-A/R, dated June 23, 1988, as amended ("Air Emission License"),
applicable to the Pressure Sensitive Business. The Buyer shall use its
best efforts to assist the Seller in the preparation and filing of the Air
Permit Application. The Seller and the Buyer shall respond with
reasonable diligence and dispatch to any request for additional
information made in response to such filing. In the event that the
applicable portion of the Seller's Air Emission License has not been
effectively transferred at the Closing Date, the Seller agrees to allow
the Buyer to operate the Equipment under the Seller's Air Emission License
until such transfer has become effective and the Buyer agrees to indemnify
and hold the Seller harmless with respect to any and all claims,
liabilities, losses, damages, costs and expenses associated with the
Buyer's operation of the Equipment subject to the terms of the Air
Emission License during such period.
(b) The Seller agrees to provide notice, as promptly as practicable,
to the applicable state and federal authorities that it will receive
wastewater from a new source pursuant to its State of Maine Waste
Discharge License No. 2224 and its Federal Permit No. ▇▇▇▇▇▇▇▇▇.
(c) As promptly as possible, and in any event within ten (10)
business days following the execution and delivery of this Agreement, the
Buyer agrees to file a Notice of Hazardous Waste Activity with the Maine
Department of Environmental Protection ("MDEP").
ARTICLE 8
CONDUCT OF BUSINESS PENDING CLOSING
The Seller covenants and agrees that, from and after the date of this
Agreement and until the Closing, except as otherwise specifically consented
to or approved by the Buyer in writing:
8.1. FULL ACCESS. The Seller shall afford to the Buyer and its
authorized representatives such access during normal business hours to all
properties, books, records, contracts and documents of the Pressure Sensitive
Business, including all material environmental, health and safety audits,
studies, reports, assessments and/or investigations performed by the Seller
in connection with the Pressure Sensitive Business as the Buyer shall
reasonably request in connection with its review of the Pressure Sensitive
Business, and the Seller shall furnish or cause to be furnished to the Buyer
and its authorized representatives all such information with respect to the
Pressure Sensitive Business as the Buyer may reasonably request. In
addition, the Buyer shall be granted reasonable access to contact any
employees of the Pressure Sensitive Business with the Seller's prior consent
(such consent not to be
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unreasonably withheld) and to conduct joint meetings with the ten largest
customers of the Seller in order to facilitate transition of the Pressure
Sensitive Business from the Seller to the Buyer. Any such access, contact or
meetings shall be on reasonable prior notice and shall be carried out in such
a manner as to minimize any disruption of the Pressure Sensitive Business.
8.2. CARRY ON IN REGULAR COURSE. Except as may be otherwise
contemplated by this Agreement or required by any of the documents listed in
any Schedule to this Agreement, the Seller shall carry on the Pressure
Sensitive Business in the ordinary course substantially in the same manner as
heretofore.
8.3. NO GENERAL INCREASES. Except for any increase required under the
terms of any employment agreement or benefit plan referred to in Section 5.10
and any increase in compensation that will not constitute an Assumed
Obligation, the Seller shall not (i) grant any general or uniform increase in
the rates of pay of employees of the Pressure Sensitive Business, except for
increases in salary or wages in the ordinary course of operation of the
Pressure Sensitive Business consistent with past practice, or (ii) grant any
general, uniform or individual increase in the benefits under any bonus or
pension plan or other contract or commitment for the benefit of any employee
of the Pressure Sensitive Business, or to increase the compensation payable
or to become payable to officers, key salaried employees or representatives
of the Pressure Sensitive Business, or (iii) increase any bonus, insurance,
pension or other benefit plan, payment or arrangement made to, for or with
any such officers, key salaried employees or representatives.
8.4. SALE OF CAPITAL ASSETs; CAPITAL IMPROVEMENTS. Except as may be
otherwise contemplated by this Agreement, the Seller shall not sell or
otherwise dispose of any capital assets of the Pressure Sensitive Business.
The Seller shall not commence or commit itself or the Buyer or any part of
the Acquired Assets to any capital project or projects with costs to the
Pressure Sensitive Business or the Buyer exceeding $50,000 in the aggregate
without the Buyer's prior written consent.
8.5. INSURANCE. The Seller shall maintain insurance coverage for the
Pressure Sensitive Business comparable to the insurance coverage currently in
effect.
8.6. PRESERVATION OF ORGANIZATION. Except as may be otherwise
contemplated by this Agreement, the Seller shall use reasonable efforts under
the applicable circumstances to keep the organization and material business
relationships of the Pressure Sensitive Business intact in all material
respects.
8.7. ADVICE OF CHANGE. The Seller shall advise the Buyer in writing,
promptly after becoming aware thereof, of any material adverse change in the
condition (financial or otherwise), operations or assets of the Pressure
Sensitive Business.
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8.8. NO SHOPPING. Prior to any termination of this Agreement pursuant
to Article 15 hereof, the Seller shall not solicit or enter into any
agreement with respect to the sale of any portion of the Pressure Sensitive
Business or of the Acquired Assets outside the ordinary course of business,
or any merger or other business combination of the Seller (solely as it
relates to or may affect the Pressure Sensitive Business), to or with any
Person other than the Buyer.
8.9. TAX COVENANTS.
(a) The Seller shall, at the request of the Buyer, provide to the
Buyer prior to the Closing Date a clearance certificate or similar
document, if any, which is required by any state taxing authority, in
order to relieve the Seller of any responsibility to withhold from the
Purchase Price.
(b) The Seller will pay timely all Taxes, recording and filing fees
attributable to the sale and transfer of the Acquired Assets from the
Seller to the Buyer. The Buyer will provide reasonable cooperation to
minimize the amount of such Taxes.
8.10. PREPARATION OF TRANSACTION DOCUMENTS. Each of the Buyer and
the Seller agrees to proceed expeditiously and in good faith to prepare and
finalize definitive forms of the Site Separation and Services Agreement, the
Site Lease and the Space Lease (each as defined in Article 9).
8.11. DESIGNATED INVENTORY. Prior to the Closing the Seller will
identify and prepare a list of the Designated Inventory. Based on its
identification to date, the Seller estimates that the Designated Inventory
has a book value of approximately $350,000 and the Seller and the Buyer agree
that it will not have a book value in excess of $400,000.
ARTICLE 9
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligation of the Buyer to consummate the Closing is subject to the
satisfaction prior to or at the Closing of each of the following conditions
(to the extent noncompliance is not waived in writing by the Buyer):
9.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Seller in this Agreement shall have been correct in all material
respects when made and shall be correct in all material respects at and as of
the Closing (in each case without giving duplicative effect to any
materiality qualification contained in such representation or warranty),
except to the extent that such representations and
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warranties are no longer correct due to the consummation prior to the Closing
of transactions not prohibited hereby.
9.2. COMPLIANCE WITH AGREEMENT. The Seller shall have performed and
complied in all material respects with all of its obligations under this
Agreement to be performed or complied with by it prior to or at the Closing
(in each case without giving duplicative effect to any materiality
qualification contained in such obligation).
9.3. NO LITIGATION. No restraining order or injunction shall prevent
the transactions contemplated by this Agreement and no action, suit or
proceeding shall be pending or threatened before any court or administrative
body in which it will be or is sought to restrain or prohibit or obtain
damages or other relief in connection with this Agreement or the consummation
of the transactions contemplated hereby.
9.4. HSR CLEARANCE. All required filings under the HSR Act shall have
been completed, and all applicable time limitations under the HSR Act shall
have expired or have been earlier terminated without a request for further
information by the relevant federal authorities under the HSR Act, or in the
event of such a request for further information, all applicable time
limitations under the HSR Act shall have expired without the objection of
such federal authorities.
9.5. ENVIRONMENTAL MATTERS. The Seller and Buyer shall have filed an
Air Permit Application as described in Section 7.2, the Buyer shall have
received evidence that the Seller has notified the applicable federal and
state authorities that it will receive wastewater from a new source pursuant
to its State of Maine Waste Discharge License No. 2224 and its Federal Permit
No. ▇▇▇▇▇▇▇▇▇, such that the Buyer will be permitted to transfer wastewater
to the Seller as contemplated by the Site Separation and Services Agreement,
and the Buyer shall have received from MDEP a hazardous waste identification
number.
9.6. SITE SEPARATION AND SERVICES AGREEMENT. The Seller shall have
entered into a Site Separation and Services Agreement having the terms set
forth in EXHIBIT B hereto and such other terms consistent therewith as are
mutually acceptable to the Buyer and the Seller (the "SITE SEPARATION AND
SERVICES AGREEMENT"), and the Site Separation and Services Agreement shall be
in full force and effect.
9.7. SITE LEASE; SPACE LEASE. The Seller shall have entered into a Site
Lease (the "SITE LEASE") and a Space Lease (the "SPACE LEASE"), each having
the terms set forth in EXHIBITS C-1 and C-2 hereto, respectively, and such
other terms consistent therewith as are mutually acceptable to the Buyer and
the Seller, and each of the Site Lease and the Space Lease shall be in full
force and effect.
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9.8. MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the business, operations or financial condition of the Pressure
Sensitive Business, including any such material adverse change that would
result directly from the proposed consummation of the Closing.
9.9. FINANCING. All conditions to funding of loans to the Buyer set
forth in the Commitment Letter, as in effect on the date hereof shall have
been satisfied or waived by the Lenders and the New Preferred Stock shall
have been issued as contemplated by the Highly Confident Letter and the LMC
Letter.
ARTICLE 10
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligation of the Seller to consummate the Closing is subject to the
satisfaction at or prior to the Closing of each of the following conditions
(to the extent noncompliance is not waived in writing by the Seller):
10.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Buyer in this Agreement shall have been correct in all
material respects when made and shall be correct in all material respects at
and as of the Closing (in each case without giving duplicative effect to any
materiality qualification contained in such representation or warranty).
10.2. COMPLIANCE WITH AGREEMENT. The Buyer shall have performed and
complied in all material respects with all of its obligations under this
Agreement to be performed or complied with by it prior to or at the Closing
(in each case without giving duplicative effect to any materiality
qualification contained in such obligation).
10.3. NO LITIGATION. No restraining order or injunction shall
prevent the transactions contemplated by this Agreement and no action, suit
or proceeding shall be pending or threatened before any court or
administrative body in which it will be or is sought to restrain or prohibit
or obtain damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby.
10.4. HSR CLEARANCE. All required filings under the HSR Act shall
have been completed, and all applicable time limitations under the HSR Act
shall have expired or have been earlier terminated without a request for
further information by the relevant federal authorities under the HSR Act, or
in the event of such a request for further information, all applicable time
limitations under the HSR Act shall have expired without the objection of
such federal authorities.
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10.5. CONSENT OF LENDERS. The Seller shall have obtained all
consents to the transactions contemplated hereby required under its credit
facilities with the group of banks led by Chase Manhattan Bank, N.A.
10.6. ENVIRONMENTAL MATTERS. The Seller and Buyer shall have filed
an Air Permit Application as described in Section 7.2 and the Seller shall
have notified the applicable federal and state authorities that it will
receive wastewater from a new source pursuant to its State of Maine Waste
Discharge License No. 2224 and its Federal Permit No. ▇▇▇▇▇▇▇▇▇ and the
Buyer shall have received from MDEP a hazardous waste identification number.
10.7. SITE SEPARATION AND SERVICES AGREEMENT. The Buyer shall have
entered into the Site Separation and Services Agreement, and the Site
Separation and Services Agreement shall be in full force and effect.
10.8. SITE LEASE; SPACE LEASE. The Buyer shall have entered into
each of the Site Lease and the Space Lease and the Site Lease and the Space
Lease shall be in full force and effect.
ARTICLE 11
EMPLOYEES AND EMPLOYEE BENEFITS
11.1. HIRING EMPLOYEES.
(a) At the Closing, the Buyer will offer employment to those
employees of the Pressure Sensitive Business listed on SCHEDULE 11.1.
Subject to the balance of this Article 11, all such offers shall be for
the same pay and comparable benefits as those in effect at Closing and
such offers and the benefits to be provided to the Assumed Employees shall
recognize the date of hire and time of service with the Seller for all
purposes. All employees accepting such offers are referred to in this
Agreement as "ASSUMED EMPLOYEES".
(b) The Buyer agrees that, for a period of 60 days after the Closing
Date, it will not cause any of the Assumed Employees hired by it to suffer
"employment loss" for purposes of the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. Section Section 2101-2109, and related
regulations (the "WARN ACT") if such employment loss could create any
liability for the Seller, unless the Buyer delivers notices under the WARN
Act in such a manner and at such a time that the Seller bears no liability
with respect thereto.
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11.2. WELFARE BENEFIT PLANS.
(a) LIABILITIES GENERALLY. Except as expressly provided otherwise
in this Article 11 and except for any accrued expenses or liabilities set
forth on the Closing Statement (as finally adjusted pursuant to Section
3.2), the Seller shall have and retain exclusive liability and
responsibility for providing any and all benefits due and payable to or in
respect of participants and other beneficiaries under any ERISA Plan or
Non-ERISA Plan in accordance with the terms of such plans and applicable
law.
(b) RETIREE COVERAGES FOR SALARIED EMPLOYEES. The Seller agrees it
will take such action as may be necessary to recognize the service of
Assumed Employees who are not members of the Union as of the Closing Date
(the "SALARIED EMPLOYEES") with the Buyer for purposes of determining the
Salaried Employees' eligibility for the continuation of and entitlement to
the benefits of the Seller's medical and life insurance coverage for an
employee and his or her spouse and eligible dependents, and reimbursement
of Medicare premiums of an employee and his or her spouse, subsequent to
retirement or death (the "RETIREE COVERAGES"), as such Retiree Coverages
are now or may be in effect from time to time hereafter. The parties
agree that an Assumed Employee's termination of employment with the Seller
at the Closing Date shall not constitute his or her retirement for
purposes of beginning any Retiree Coverages for which the Assumed Employee
is or may be eligible but instead that any Retiree Coverages for which an
Assumed Employee is or may qualify shall be provided only following his or
her termination of employment from the Buyer.
11.3. INVESTMENT & RETIREMENT PLANS.
(a) RESPONSIBILITY FOR EXISTING PLANS. Subject to the balance of
this section, the Seller will retain all liability and responsibility for
the disposition of interests under the S.D. ▇▇▇▇▇▇ Hourly Investment Plan
(the "HOURLY INVESTMENT PLAN"), the S. D. ▇▇▇▇▇▇ Salaried Investment Plan
(the "SALARIED INVESTMENT PLAN" and, together with the Hourly Investment
Plan, the "INVESTMENT PLANS"), the S.D. ▇▇▇▇▇▇ Company Cumberland ▇▇▇▇▇
Hourly Employees Retirement Plan (the "HOURLY RETIREMENT PLAN") and the
S.D. ▇▇▇▇▇▇ Company Retirement Plan for Salaried Continuing Employees (the
"SALARIED RETIREMENT PLAN", and together with the Hourly Retirement Plan,
the "PENSION PLANS") with respect to those employees (or their
beneficiaries) of the Pressure Sensitive Business who, as of the Closing
Date, are participants in any of the Investment Plans or Pension Plans.
No Assumed Employee who is such a participant will be eligible to make any
contributions to the Investment Plans or, except as provided in the
following sentence, accrue benefits under the Pension Plans, and the
Seller will not be obligated to make
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any contribution with respect to any such participant in either Investment
Plan, with respect to compensation earned by such Assumed Employees on or
after the Closing Date. The Seller agrees that it will amend the Pension
Plans as necessary to recognize the service of Assumed Employees with the
Buyer for purposes of vesting and eligibility for subsidized early
retirement and supplemental benefits with respect to their accrued
benefits under such Plans as of the Closing Date. The Seller agrees that
it will cause the entire account balance of each Assumed Employee who is
a participant in an Investment Plan to be fully vested as of the Closing
Date.
(b) ROLLOVER OF INVESTMENT PLAN BALANCES. Seller further agrees
that the entire vested account balance of each Assumed Employee in the
Investment Plans shall be distributed as promptly as practicable following
the Closing Date if the Assumed Employee consents thereto (if such consent
is required), which distribution, if an Assumed Employee so elects, may be
rolled over, directly or otherwise in accordance with applicable law and
regulations, to an individual retirement account or to one or more defined
contribution retirement plans qualified under Section 401(a) of the Code
maintained by Buyer or any of its subsidiaries or affiliates (the "BUYER
DEFINED CONTRIBUTION PLANS"). Buyer agrees it shall take or cause to be
taken all such action as may be necessary to cause the Buyer Defined
Contribution Plans to accept such rollovers, which shall consist solely of
cash or cash and any promissory note or notes representing an outstanding
loan from the Investment Plans to the Assumed Employee. The Seller
represents to the Buyer that (i) each of the Investment Plans has been
determined by the Internal Revenue Service to qualify under Section 401 of
the Code and (ii) that it has determined, after consulting with counsel,
that the distributions completed by this Section 11.3(b) are consistent
with applicable law, including specifically Section 401(k)(10) of the
Code.
11.4. BENEFIT MAINTENANCE.
(a) HOURLY EMPLOYEES. Commencing as of the Closing Date and
continuing as required pursuant to the Collective Bargaining Agreement (or
any agreement adopted in substitution therefor), the Buyer shall provide
and maintain for the benefit of the Assumed Employees who are members of
the Union (the "HOURLY EMPLOYEES") and their eligible spouses and
dependents compensation, employee welfare, employee pension, and other
employee benefits, including but not limited to Retiree Coverages, all in
accordance with the terms of the Collective Bargaining Agreement (or any
agreement adopted in substitution therefor). Any pension plan adopted or
maintained by the Buyer in satisfaction of the foregoing sentence shall be
substantially similar in its terms to the Hourly Retirement Plan as in
effect on the Closing Date and shall recognize service through the Closing
Date to the extent
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recognized under the Hourly Retirement Plan as of the Closing Date for all
purposes, with an offset in the benefit computation for the amount of
benefit payable under the terms of the Hourly Retirement Plan as in effect
on the Closing Date (but taking into consideration any amendment required
to effectuate Seller's commitments with respect to such Plan under this
Article 11).
(b) SALARIED EMPLOYEES. Commencing as of the Closing Date and
continuing through the second anniversary of the Closing Date, the Buyer
shall provide and maintain for the benefit of the Salaried Employees and
their eligible spouses and dependents compensation, employee welfare,
employee pension and other employee benefits (other than Retiree
Coverages) which are substantially comparable in the aggregate to the
compensation paid and benefits provided by the Seller to such Assumed
Employees as of the Closing Date. Any pension plan adopted or maintained
by the Buyer in satisfaction of the foregoing sentence shall be
substantially similar in its terms to the Salaried Retirement Plan as in
effect on the Closing Date and shall recognize service and compensation of
the Assumed Employees through the Closing Date to the extent recognized
under the Salaried Retirement Plan as of the Closing Date for all
purposes, with an offset in the benefit computation for the amount of
benefit payable under the terms of the Salaried Retirement Plan as in
effect on the Closing Date (but taking into consideration any amendment
required to effectuate Seller's commitments with respect to such Plan
under this Article 11). The Seller and the Buyer acknowledge that the
provisions of this Section 11.4(b) do not require the Buyer to provide the
Salaried Employees or their otherwise eligible spouses and dependents with
Retiree Coverages, nor shall the Retiree Coverages provided to Salaried
Employees by the Seller be taken into account in determining whether the
Buyer's other benefits for Salaried Employees are comparable in the
aggregate.
(c) MEDICAL BENEFITS. The medical and dental coverages to be
provided to the Assumed Employees and dependents and beneficiaries thereof
(the "ELIGIBLE INDIVIDUALS") in accordance with Section 11.4(a) and
Section 11.4(b) shall not apply any exclusion for a pre-existing condition
(other than conditions excluded as of the Closing Date as pre-existing
conditions under Seller's medical and dental coverage) and shall take into
account for purposes of any annual co-payment, deductible and limitation
on benefits, the payments made under Seller's comparable benefit plan in
respect of the Eligible Individuals for otherwise eligible medical and
dental services in the current calendar year through the Closing Date. In
the event the Buyer is unable to secure contracts with the specific
providers to the Seller of the medical and dental benefits now enjoyed by
Assumed Employees as employees of Seller, the foregoing requirement shall
be considered satisfied
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so long as Buyer makes reasonable efforts to provide as "seamless" medical
and dental benefits coverage as possible under the then circumstances.
11.5. LIMITATION ON RIGHTS. Except as expressly provided in Section
11.4, nothing contained in this Article 11 shall limit the rights of the
Buyer or the Seller to amend, modify or terminate from time to time or at any
time any of their respective benefit plans or confer on any third party,
including but not limited to any Assumed Employee, any rights as a
third-party beneficiary of the provisions herein.
11.6. WORKMEN'S COMPENSATION. The Seller shall retain as part of
the Excluded Liabilities all responsibility for any workmen's compensation
claims arising out of the Pressure Sensitive Business for work performed by
employees of the Pressure Sensitive Business prior to the Closing for which
claims have been filed prior to the Closing Date or within six (6) months
thereafter. All other workmen's compensation claims shall constitute part of
the Assumed Obligations.
ARTICLE 12
CERTAIN COVENANTS
12.1. OBLIGATIONS OF SELLER WITH RESPECT TO ACCOUNTS RECEIVABLE.
(a) During the period beginning on the Closing Date and ending 45
days thereafter (the "COLLECTION PERIOD"), the Seller will attempt to
collect all Accounts Receivable in accordance with the Seller's current
collection practices and procedures and will pay to the Buyer, on a weekly
basis, all of such collected Accounts Receivable. All payments received
by the Seller from any customers obligated in respect of any Account
Receivable shall be deemed to have been made in respect of, and shall be
applied to, the Accounts Receivable of such customer in accordance with
the order in which such Account Receivable of the Seller was billed to
such customer, except that (i) all payments shall be applied first to
accounts specified by such customer prior to the application to any
amounts not so specified, and (ii) in the absence of such specification,
all payments received shall be applied first to accounts which are not in
dispute prior to application to any accounts which are in dispute.
(b) The Buyer will not accept any returns of defective products or
give any credit for defective products with respect to any products
relating to the Accounts Receivable without the Seller's prior consent,
which consent will not be unreasonably withheld. The Buyer may accept
returns of products or give credits for products relating to the Accounts
Receivable for reasons other than the products being defective. For
purposes of paragraph (c) below, (i) any Accounts Receivable relating to
product returns or credits
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made in compliance with the first sentence of this paragraph (b) shall
be considered unpaid at the end of the Collection Period (as defined
below) and (ii) any Accounts Receivable relating to product returns or
credits made pursuant to the second sentence of this paragraph (b) or
made pursuant to the first sentence of this paragraph (b) but without
the Seller's consent, shall be considered paid in full.
(c) Within 10 days after the end of the Collection Period, the
Seller will deliver to the Buyer a final statement setting forth all
amounts collected by the Seller during the Collection Period with respect
to the Accounts Receivable and listing all Accounts Receivable (or portion
thereof) remaining unpaid, after giving effect to the provisions of
paragraph (b) above (the "UNPAID ACCOUNTS"). At the time of delivery of
such statement the Seller will pay to the Buyer, by wire transfer or
certified or bank check, the balance of the Unpaid Accounts, net of any
reserve for uncollected accounts set forth on the Closing Statement (as
finally adjusted pursuant to Section 3.2). Any amounts collected by the
Seller or the Buyer with respect to any Unpaid Accounts after the
Collection Period will be the property of the Seller.
(d) In the event that the Seller collects more with respect to the
Account Receivables than the total amount set forth for the Account
Receivables (net of any reserve) on the Closing Statement (as finally
adjusted pursuant to Section 3.2), the Seller will be entitled to keep
such excess amount.
12.2. THIRD PARTY CONSENTS.
(a) To the extent that any agreement constituting part of the
Acquired Assets is not capable of being transferred by the Seller to the
Buyer pursuant to this Agreement without the consent, approval or waiver
of a third Person, and such consent is not obtained prior to the Closing,
or if such transfer or attempted transfer would constitute a breach
thereof or a violation of any law, rule or regulation in the absence of
obtaining such an approval, nothing in this Agreement will constitute a
transfer or an attempted transfer thereof. Each of the Buyer and the
Seller shall use reasonable efforts at its own expense to obtain any such
approvals.
(b) In the event that such consents, approvals and waivers referred
to in paragraph (a) are not obtained then the Seller and the Buyer will
each use reasonable efforts, each at its own expense, to (i) provide to
the Buyer the benefits and burdens of any such agreement, (ii) cooperate
in any reasonable and lawful arrangement designed to provide such benefits
and burdens to the Buyer without incurring any obligation to any other
Person other than to
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provide such benefits to the Buyer, including without limitation the
appointment of the Buyer as the agent of the Seller for purposes of such
agreement, and (iii) enforce, at the request of the Buyer for the account
of the Buyer, any rights of the Seller arising from any such agreement.
12.3. ACCESS TO BOOKS AND RECORDS.
(a) The Buyer agrees to cooperate with and to make available to the
Seller such documents, books, records or information relating to the
Pressure Sensitive Business as the Seller may reasonably require after the
Closing.
(b) The Buyer agrees to preserve and protect all books, records,
files and data referred to in paragraph (a) above for a period of six (6)
years after the Closing Date.
(c) The Buyer agrees not to destroy any files or records which are
subject to this Section 12.3 (i) for the period described in clause (b) of
this Section 12.3, and (ii) thereafter, without giving at least thirty
(30) days' notice to the Seller. Upon receipt of such notice, the Seller
may (A) cause to be delivered to it the files or records intended to be
destroyed, at the Seller's expense, or (B) notify the Buyer that the
Seller will pay the cost of storing and maintaining such files or records
(including any necessary costs of moving such files or records to a
location under control of the Seller).
12.4. USE OF S.D. ▇▇▇▇▇▇ NAME. The Buyer agrees that on or prior to
the date which is one hundred eighty (180) days after the Closing Date it
will cease using any references to the Seller, or any of its respective
Affiliates, including any such use in connection with the use of existing
supplies of labels, signs, letterhead and other printed materials, except
that the Buyer may use up existing stocks of catalogs and other promotional
materials so long as they are stickered so as to indicate that the Pressure
Sensitive Business is no longer affiliated with the Seller.
12.5. NO HIRING.
(a) After the Closing, for a period of one year, the Seller shall
not solicit or hire any Assumed Employee.
(b) After the Closing, for a period of one year, except pursuant to
Section 11.1 or as described in Section IV 2. of EXHIBIT B hereto or with
respect to ▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇, the Buyer shall not solicit or hire
any individual who was an employee of the Seller at the ▇▇▇▇▇▇▇▇▇ Facility
or the Technology Center as of the date of this Agreement or on the
Closing Date.
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12.6. AUDITED FINANCIALS. (a) The Seller agrees that it will
provide audited financial statements for the Pressure Sensitive Business to
be used by the Buyer in connection with the preparation by the Buyer and its
independent public accountants of its securities law filings. The financial
statements will cover the fiscal year ended September 30, 1997 (the "1997
FINANCIALS"). The Seller agrees to provide the 1997 Financials on or before
December 3, 1997. In the event that the Seller delivers the 1997 Financials
after December 3, 1997, the "drop dead" date will be extended as provided in
Article 15. In addition, in the event that the Buyer will be required to
include in its filings with the Securities and Exchange Commission ("SEC")
audited financial statements for the Pressure Sensitive Business for periods
prior to the year ended September 30, 1997, the Seller will, to the extent
possible, prepare audited financial statements for the two fiscal years ended
September 30, 1996 (the "1995/1996 FINANCIALS" and together with the 1997
Financials, the "AUDITED FINANCIALS"). In the event that the Seller delivers
the 1995/1996 Financials after December 3, 1997 and the 1995/1996 Financials
are required to be included in the Proxy Materials (as defined in Section
12.8) then the "drop dead" date will be extended as provided in Article 15.
(b) The Seller and the Buyer agree to cooperate and use their best
efforts to eliminate or minimize the requirement that the Buyer include all
or part of the 1995/1996 Financials in the Proxy Materials, including
requesting the SEC to waive this requirement.
(c) The Seller agrees that it will provide reasonable cooperation
in connection with the preparation by the Buyer and its independent public
accountants of audited financial statements for the Pressure Sensitive
Business for periods other than as described above.
12.7. NONCOMPETITION. (a) From and after the Closing Date, and for
a period of three years thereafter, Seller shall not, directly or indirectly,
within the United States engage in the business of manufacturing and selling
pressure sensitive products similar to those currently manufactured by the
Seller in connection with the Pressure Sensitive Business (a "COMPETING
ACTIVITY").
(b) The provisions of paragraph (a) above shall not be deemed to
prohibit the Seller from (i) owning less than 10% of the voting securities of
any Person engaged in a Competing Activity, (ii) acquiring any business or
Person engaged in a Competing Activity so long as its primary business is not
a Competing Activity, (iii) acting as a supplier of liner, face sheet and
other components to any Person engaged in a Competing Activity and (iv)
continuing to manufacture and sell its specialty line of products.
(c) The Seller agrees that the agreements set forth in this
Section 12.7 constitute a separate agreement independently supported by good
and
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adequate consideration and shall be severable from the other provisions of,
and shall survive, this Agreement. The existence of any claim or cause of
action of Seller against Buyer, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Buyer of the
covenants and agreements of Seller contained in this Section 12.7.
(d) Seller acknowledges and recognizes that the enforcement of the
provisions of this Section 12.7 is necessary to ensure the preservation and
continuity of the business and good will of the Pressure Sensitive Business.
Seller furthers agree that due to the nature of such business, the
restrictions set forth in this Section 12.7 are reasonable as to time and
geographic area.
12.8. FINANCING. The Buyer agrees that it will use its best efforts to
obtain the financing contemplated by the Funding Letters and the LMC Letter,
including (i) proceeding diligently and in good faith to negotiate definitive
documents for the revolving loans contemplated by the Commitment Letter and
the placement of New Preferred Stock contemplated by the Highly Confident
Letter, (ii) proceeding diligently and in good faith to prepare disclosure
documents for the placement of the New Preferred Stock and any required proxy
statement or information statement in connection with the approval of
stockholders required to authorize an amendment to the Buyer's charter to
authorize the New Preferred Stock (collectively, "PROXY MATERIALS"), (iii)
filing the Proxy Materials with the SEC as promptly as practicable, but in no
event later than five days after delivery of that portion of the Audited
Financials required to be included in the Proxy Materials, (iv) conduct any
required stockholder meeting or stockholder consent as promptly as
practicable and (v) permitting the Seller to review and comment on any
disclosure materials relating to the placement of the New Preferred Stock or
the Proxy Materials, which the Seller agrees it will review in an expedited
manner consistent with the diligent pace contemplated by this Section 12.8.
ARTICLE 13
INDEMNITY
13.1. INDEMNIFICATION BY THE SELLER.
(a) The Seller agrees to indemnify and hold the Buyer (and its
directors, officers and employees) harmless from and with respect to any
and all claims, liabilities, losses, damages, costs and expenses
(including without limitation the reasonable fees and disbursements of
counsel), net of insurance proceeds received (collectively, "LOSSES"),
arising out of any of the following:
(i) any breach by the Seller of any representation or
warranty made by the Seller in this Agreement;
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(ii) any breach by the Seller of any covenant, obligation or
undertaking made by the Seller in this Agreement,
including without limitation the Seller's covenant in
Article 2 to satisfy and discharge the Excluded
Liabilities;
(iii) any of the matters set forth on SCHEDULE 13.1(a)(iii);
(iv) except for the matters referred to in clause (iii) above,
any actual liability for the cleanup or removal of any
Hazardous Substances, or for death or injury to person or
property as a result of the generation, transportation,
disposal, release, emission or discharge of any Hazardous
Substances on-site or off-site from or by the Seller or
any operation existing on the ▇▇▇▇▇▇▇▇▇ Facility, past or
present, solely to the extent that such liability arises
out of any matter that occurred or existed on or before
the Closing Date; and
(v) except for the matters referred to in clause (iii) above,
any actual liability and penalties for violations of,
and/or noncompliance with, Environmental Laws, to the
extent that such liability arises out of any matter that
occurred or existed on or before the Closing Date.
(b) No action or claim for Losses (a "CLAIM") pursuant to
paragraph (a)(i) above may be brought or made unless such action or claim
has been specified in reasonable detail in a written notice from the Buyer
to the Seller on or before the first anniversary of the Closing Date,
except that any claim under paragraph (a)(i) arising from a breach of
Seller's representations and warranties in Section 5.4 may be made at any
time in the future, subject to any applicable statute of limitations. No
Claim pursuant to paragraph (a)(iv) above or paragraph (a)(v) above,
including any Claim falling within the scope of paragraph (a)(iv) above or
paragraph (a)(v) above that also falls within the scope of paragraph
(a)(i) above or paragraph (a)(ii) above (with any such Claim falling
within the scope of paragraph (a)(iv) or paragraph (a)(v) above referred
to as a "LIMITED ENVIRONMENTAL CLAIM"), may be brought or made unless such
Limited Environmental Claim has been specified in reasonable detail in a
written notice from the Buyer to the Seller on or before the seventh
anniversary of the Closing Date; provided that notwithstanding the
foregoing, in the event that the Buyer performs any "Phase II"
environmental assessment subsequent to Closing at the Primary Real
Property in accordance with the terms of the Site Lease, a Limited
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Environmental Claim may be brought or made by the Buyer only for a period
of three (3) years from the date of commencement of the "Phase II"
environmental assessment but in any event no later than the seventh
anniversary of the Closing Date. Any claim under paragraph (a)(ii) above
(excluding any claim that also constitutes a Limited Environmental Claim)
or paragraph (a)(iii) above (excluding any Claim that also constitutes a
Limited Environmental Claim) ("BLANKET ENVIRONMENTAL CLAIMS") may be made
at any time in the future, subject to any applicable statute of
limitations.
(c) The Buyer shall not be entitled to indemnification under
paragraph (a)(i) above except to the extent that the cumulative amount of
Losses arising from Claims asserted under paragraph (a)(i) above exceeds
$100,000, and then only to the extent of such excess. In addition, in no
event shall the aggregate liability of the Seller for Losses under
paragraph (a)(i) above exceed fifteen percent (15%) of the Purchase Price
(as finally adjusted pursuant to Section 3.2) and in no event shall the
aggregate liability of the Seller for Losses with respect to Limited
Environmental Claims exceed $20,000,000; provided that notwithstanding the
foregoing, in the event that the Buyer performs any "Phase II" site
assessment subsequent to Closing at the Primary Real Property in
accordance with the terms of the Site Lease, the aggregate liability of
the Seller for Losses with respect to Limited Environmental Claims shall,
exclusive of Claims made in connection with any costs incurred with
respect to remediation required as a result of the "Phase II" site
assessment findings ("PHASE II REMEDIATION COSTS"), thereafter not exceed
$5,000,000; provided that in no event shall the aggregate liability of the
Seller for Losses with respect to Limited Environmental Claims exceed
$20,000,000 (including Phase II Remediation Costs). Any remediation to be
performed in connection with any findings arising from the Phase II site
assessment shall be performed by the Seller as described in the Site
Separation and Services Agreement. Any claims under paragraph (a)(ii)
above or Blanket Environmental Claims shall not be subject to any
deductible amount or ceiling on liability. Limited Environmental Claims
shall not be subject to any deductible amount.
13.2. INDEMNIFICATION BY THE BUYER.
(a) The Buyer agrees to indemnify and hold the Seller (and its
directors, officers and employees) harmless from and with respect to any
and all Losses arising out of any of the following:
(i) any breach by the Buyer of any representation or warranty
made by the Buyer in this Agreement, or
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(ii) any breach by the Buyer of any covenant, obligation or
undertaking made by the Buyer in this Agreement,
including without limitation the Buyer's covenant in
Article 2 to assume, pay, perform and discharge the
Assumed Obligations; and
(iii) the operation of the Pressure Sensitive Business or the
use of the Acquired Assets in the operation thereof after
the Closing Date.
(b) No action or claim for Losses pursuant to paragraph (a)(i) above
may be brought or made unless such action or claim (a "CLAIM") has been
specified in reasonable detail in a written notice from the Seller to the
Buyer on or before the first anniversary of the Closing Date. Any claims
under paragraphs (a)(ii) or (a)(iii) above may be made at any time in the
future, subject to any applicable statute of limitations.
(c) The Seller shall not be entitled to indemnification under
paragraph (a)(i) above for any Claim except to the extent that the
cumulative amount of Losses arising from Claims asserted under
paragraph (a)(i) above exceeds $100,000, and then only to the extent of
such excess. In addition, in no event shall the aggregate liability of
the Buyer for Losses under paragraph (a)(i) above exceed fifteen percent
(15%) of the Purchase Price (as finally adjusted pursuant to Section 3.2).
Any claims under paragraphs (a)(ii) or (a)(iii) above shall not be subject
to any deductible amount or ceiling on liability.
13.3. INDEMNIFICATION PROCEDURES.
(a) In the event that any party hereto (an "INDEMNIFIED PARTY")
desires to make a claim against another party hereto (the "INDEMNIFYING
PARTY", which term shall include all Indemnifying Parties if there be more
than one) in connection with any action, suit, proceeding or demand at any
time instituted against or made upon it for which it may seek
indemnification hereunder (a "THIRD-PARTY CLAIM"), the Indemnified Party
shall promptly notify the Indemnifying Party of such Third-Party Claim and
of its claims of indemnification with respect thereto; PROVIDED, HOWEVER,
that the failure to provide such notice shall not release the Indemnifying
Party from any obligation under this Article 13 except to the extent such
Indemnifying Party is prejudiced by such failure. Upon receipt of such
notice from the Indemnified Party, the Indemnifying Party shall be
entitled to participate in the defense of such Third-Party Claim, and
assume the defense of such Third-Party Claim, and in the case of such an
assumption the Indemnifying Party shall have the authority to negotiate,
compromise and settle such Third-Party
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Claim; PROVIDED, THAT the Indemnifying Party shall not be entitled to
settle any such Third-Party Claim without the consent of the Indemnified
Party unless as part of such settlement the Indemnified Party is released
from all liability with respect to such Third-Party Claim.
(b) The Indemnified Party shall retain the right to employ its own
counsel and to participate in the defense of any Third-Party Claim, the
defense of which has been assumed by an Indemnifying Party pursuant
hereto, but the claimant shall bear and shall be solely responsible for
its own costs and expenses in connection with such participation.
(c) With respect to any indemnification to be provided by the Seller
with respect to Limited Environmental Claims or Blanket Environmental
Claims, such indemnification shall be subject to the relevant procedures
set forth in the Site Separation and Services Agreement, and in the event
of any conflict between this Section 13.3 and the Site Separation and
Services Agreement, the provisions of the Site Separation and Services
Agreement shall control.
13.4. SCOPE OF INDEMNITY. Except as provided in Article 14, each of
the Seller and the Buyer acknowledges that, except for equitable relief,
including specific performance, its sole and inclusive remedy with respect to
any and all claims relating to the subject matter of this Agreement shall be
pursuant to the indemnification provisions of this Article 13.
13.5. Waiver of Statutory Claims. The Buyer hereby waives and releases
the Seller from any and all Losses, known or unknown, it may have under
CERCLA (as defined in Article 17) or any other statutes relating to
environmental matters now or hereafter in effect or any other statute if the
assertion of a right under such statute would circumvent the intended effect
of Section 13.4. The Seller hereby waives and releases the Buyer from any
and all Losses, known or unknown, it may have under CERCLA or any other
statutes relating to environmental matters now or hereafter in effect or any
other statute if the assertion of a right under such statute would circumvent
the intended effect of Section 13.4.
ARTICLE 14
TAX MATTERS
14.1. General.
(a) Except as provided in paragraph (b) below and except for any
accrued expenses for Taxes set forth on the Closing Statement (as finally
adjusted pursuant to Section 3.2), the Seller shall remain responsible for
all
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Taxes (as defined in Article 17) of the Seller payable in connection with
the operation of the Pressure Sensitive Business prior to the Closing.
The Seller shall also remain responsible for the preparation and timely
filing of all related Tax Returns (as defined in Article 17).
(b) With respect to any real property, AD VALOREM or similar Taxes
of the Seller relating to the Pressure Sensitive Business and attributable
to periods before and after the Closing, the Seller shall be responsible
for that portion of such Taxes attributable to the period prior to the
Closing and the Buyer shall be responsible for Taxes attributable to that
period commencing on and after the Closing.
14.2. COOPERATION ON TAX MATTERS; CONDUCT OF PROCEEDINGS.
(a) The Buyer and the Seller shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the
preparation and filing of Tax Returns pursuant to this Article 14 and any
audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably
relevant to such preparation and filing and to any audit, litigation or
other proceeding relating thereto and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder.
(b) The Seller shall be responsible for defending any audit,
litigation or other proceeding with respect to any Taxes of the Seller for
which the Seller is wholly or partially responsible for payment pursuant
to this Article 14 and shall have the authority to negotiate, compromise
and settle any such audit, litigation or other proceeding.
14.3. SCOPE OF ARTICLE 14.
(a) Notwithstanding the provisions of Article 13, the provisions of
this Article 14 (and not Article 13) shall govern the allocation of
responsibility between the Seller and the Buyer for Taxes of the Pressure
Sensitive Business.
(b) Claims under this Article 14 may be made by the Buyer and the
Seller at any time prior to the expiration of the statute of limitations
applicable to the Tax matter to which the Claim relates.
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ARTICLE 15
TERMINATION
This Agreement may be terminated by either the Buyer or the Seller in
writing, without liability to the terminating party on account of such
termination (provided the terminating party is not otherwise in default or in
breach of this Agreement), if the Closing shall not have occurred on or before
January 15, 1998, other than as a consequence of the intentional breach or the
intentional default by the terminating party; PROVIDED THAT (i) in the event
that the Seller does not deliver the Audited Financials as provided in Section
12.6 on or before December 3, 1997, this January 15, 1998 date will be extended
for each day after December 3, 1997 the Seller has failed to deliver that
portion of the Audited Financials required to be included in the Proxy
Materials and (ii) in the event that the SEC elects to review the Proxy
Materials, this January 15, 1998 date will be extended to reflect the period
required to clear all the SEC's comments and mail the Proxy Materials to the
Buyer's stockholders; PROVIDED FURTHER that in no event will this date be
extended pursuant to (i) or (ii) beyond March 31, 1998. This Agreement may be
terminated at any time prior to the Closing by mutual written consent of the
Seller and the Buyer. In the event of the termination and abandonment of this
Agreement by the Seller or the Buyer, as herein provided, written notice
thereof shall be given to the other party and this Agreement shall terminate
without any further action of the parties hereto. If this Agreement is
terminated as provided herein: (i) each party will redeliver all documents,
work papers and other material of the other party or parties relating to the
transactions contemplated hereby including such memoranda, notes, lists,
records or other documents compiled or derived from such material, whether so
obtained before or after the execution hereof, to the party furnishing the
same; (ii) all information received by any party hereto with respect to the
business of the other parties or their affiliated companies shall remain
subject to the terms of the Confidentiality Agreement (as defined in
Article 16); and (iii) no party shall have any liability or further obligation
to any other party to this Agreement except as provided by this Article 15 and
as provided with respect to certain expenses as provided in Section 18.3, and
except that any termination of this Agreement pursuant to the first sentence of
this Article 15 shall not relieve a defaulting or breaching party from any
liability to the other party hereto. In addition, the provisions of Article 18
shall survive any termination of this Agreement.
ARTICLE 16
CONFIDENTIALITY
16.1. CONFIDENTIALITY AGREEMENT. Any and all information disclosed by
the Buyer to the Seller or by the Seller to the Buyer as a result of the
negotiations leading to the execution of this Agreement, or in furtherance
thereof, which information was
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not already known to the Seller or to the Buyer, as the case may be, shall be
subject to the Confidentiality Agreement, dated as of September 8, 1997,
between the Buyer and the Seller (the "CONFIDENTIALITY AGREEMENT"), all of the
provisions of which are incorporated into this Section 16.1 by this reference.
Notwithstanding the foregoing, the Confidentiality Agreement shall terminate
upon the Closing.
16.2. CONFIDENTIAL INFORMATION RELATING TO THE PRESSURE SENSITIVE
BUSINESS. At all times from and after the Closing Date, the Seller shall not
use for its benefit or for the benefit of others any confidential or
proprietary information relating solely to the Pressure Sensitive Business
("PSB INFORMATION"), and shall use reasonable efforts, consistent with the
manner in which it keeps confidential its own sensitive business information,
to keep the PSB Information confidential, other than any of such PSB
Information that is in the public domain prior to the date of this Agreement or
thereafter comes into the public domain (unless any of such information is in
or becomes in the public domain in whole or in part due to action or inaction
of the Seller in violation of this Agreement). The foregoing shall not
prohibit use of such PSB Information as is required by applicable law, or as is
necessary to prepare Tax Returns or other filings with governmental
authorities, or to assert or protect any rights of the Seller under this
Agreement, PROVIDED that the Buyer is given notice and an adequate opportunity
to contest such disclosure or to use any means available to minimize such
disclosure (E.G., the "confidential treatment" provisions of Rule 24b-2
promulgated under the Securities Exchange Act of 1934, as amended).
ARTICLE 17
DEFINITIONS
As used herein the following terms not otherwise defined have the
following respective meanings:
"AFFILIATE" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person. As used
in this definition the term "CONTROL" (including the terms "CONTROLLED BY" and
"UNDER COMMON CONTROL WITH") means, with respect to the relationship between or
among two or more Persons, the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise, including, without limitation,
the ownership, directly or indirectly, of securities having the power to elect
a majority of the board of directors or similar body governing the affairs of
such Person.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
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"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder.
"ENCUMBRANCE" means all liens, security interests, pledges, charges,
mortgages, conditional sales agreements, title retention agreements and other
encumbrances.
"ENVIRONMENTAL LAW" means any applicable Federal, state, local or foreign
law, treaty, judicial decision, regulation, rule, judgment, order, decree,
injunction, policy or guideline, permit, agreement or governmental restriction,
each as in effect on or prior to the Closing Date, relating to the environment,
worker health or safety or to any Hazardous Substance.
"GOVERNMENTAL ENTITY" means any government or any court, arbitral
tribunal, administrative agency or commission or other governmental or other
regulatory authority or agency, Federal, state, local, transnational or
foreign.
"HAZARDOUS SUBSTANCE" means any substance, pollutant, contaminant,
chemical, waste or material, including petroleum, its derivatives, by-products,
and other hydrocarbons, that is listed, identified in, or regulated under any
applicable Federal, state, local or foreign law, treaty, judicial decision,
regulation, rule, policy or guideline, judgment, order, decree, injunction,
permit, agreement or governmental restriction. The term "Hazardous Substance"
shall also include asbestos.
"INCOME TAXES" means any Taxes based upon or related to income, including
any Taxes calculated in whole or in part based upon net revenues.
"INDEBTEDNESS" as applied to any Person, means all indebtedness of such
Person to any other Person for borrowed money, whether current or funded, or
secured or unsecured and all such Indebtedness of any other Person which is
directly or indirectly guaranteed by such Person or which such Person has
agreed (contingently or otherwise) to purchase or otherwise acquire or in
respect of which it has otherwise assured against loss, but not including the
endorsement of checks and similar instruments.
"KNOWLEDGE OF THE SELLER" or "to the Seller's knowledge" means and is
limited to the actual knowledge of the following persons: ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇.
"MATERIAL ADVERSE EFFECT" means any material adverse effect on the
operations, assets or financial condition of the Pressure Sensitive Business
taken as a whole.
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"NON-INCOME TAXES" means any Taxes other than Income Taxes.
"PERMITTED ENCUMBRANCES" means Encumbrances that (i) are excepted in title
commitments delivered to the Buyer in connection with the consummation of the
transactions contemplated by this Agreement, (ii) arise out of Taxes not in
default and payable without penalty or interest or the validity of which is
being contested in good faith by appropriate proceedings, (iii) represent the
rights of customers, vendors, suppliers and subcontractors in the ordinary
course of business under contracts or under general principles of commercial
law, (iv) that individually and in the aggregate could not reasonably be
expected to interfere with the use of the Acquired Assets in the conduct of
normal business operations of the Pressure Sensitive Business; or (v) in
connection with any agreement or instrument constituting part of the Acquired
Assets, relate to restrictions on transfer embodied in the terms of such
agreement or instrument.
"PERSON" means any corporation, association, partnership, limited
liability company, organization, business, individual, government or political
subdivision thereof or governmental agency.
"TAX" means any federal, state, provincial, local, foreign income and
other income, gross receipts, franchise, estimated, alternative minimum, add-on
minimum, sales, use, transfer, ad valorem, profits, registration, value added,
excise, natural resources, severance, stamp, occupation, premium, windfall
profit, environmental, customs, duties, real property, personal property,
capital stock, intangibles, social security, unemployment, disability, payroll,
license, lease, employee, withholding, or other tax or levy, of any kind
whatsoever, including any interest, penalties, or additions to any of the
foregoing.
"TAX RETURN" means any return, declaration, report, claim for refund,
information return, or other document (including any related or supporting
estimates, elections, schedules, statements, or information) filed or required
to be filed in connection with the determination, assessment, or collection of
any Tax or the administration of any laws, regulations, or administrative
requirements relating to any Tax.
ARTICLE 18
GENERAL
18.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the parties hereto contained in this
Agreement shall survive the Closing and shall expire on the first anniversary
of the Closing Date,
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except that the Seller's representations and warranties in Section 5.4 shall
survive indefinitely, subject to any applicable statute of limitations.
18.2. ARBITRATION. All disputes or claims arising under or in any way
relating to this Agreement shall be settled by arbitration in Wilmington,
Delaware before a panel of three arbitrators (with one designated by the Buyer
and one by the Seller, and the third arbitrator designated by the first two)
pursuant to the commercial arbitration rules of the American Arbitration
Association. The arbitrators shall be selected as prescribed above, but if
they do not so agree within 30 days after the date of the notice referred to
above, the selection shall be made pursuant to the rules from the panels of
arbitrators maintained by such Association. Any award rendered by the
arbitrators shall be conclusive and binding upon the parties hereto. However,
no arbitrator shall have the power to award incidental, consequential or
special (including punitive or multiple) damages. This provision for
arbitration shall be specifically enforceable by the parties and the decision
of the arbitrators in accordance herewith shall be final and binding and there
shall be no right of appeal therefrom. Each party shall pay its own expenses
of arbitration and the expenses of the arbitrators shall be equally shared;
PROVIDED, HOWEVER, that if in the opinion of the arbitrators any claim for
indemnification or any defense or objection thereto was unreasonable, the
arbitrators may assess, as part of the award, all or any part of the
arbitration expenses of the other party (including reasonable attorneys' fees)
and of the arbitrators against the party raising such unreasonable claim,
defense or objection.
18.3. EXPENSES; CERTAIN TAXES. Each party shall pay its own expenses
and costs incidental to the preparation of this Agreement and to the
consummation of the transactions contemplated hereby, except that in the event
that the Closing is not consummated as a result of the non-satisfaction of the
condition referred to in Section 9.9, then the Buyer shall reimburse the Seller
for all of its out-of-pocket expenses (including accounting, legal and
investment banking fees and expenses) incurred in connection with the
negotiation and preparation of this Agreement and the proposed consummation of
the transactions contemplated hereby, up to a maximum amount of $500,000. All
transfer and sales taxes payable with respect to the sale of the Acquired
Assets to the Buyer shall be borne by the Seller. Each of the Seller and the
Buyer agree to use reasonable efforts to minimize the amount of such Taxes.
18.4. ASSIGNS. This Agreement may not be assigned in whole or in part
by either party hereto without the prior written consent of the other party,
except that (i) the Seller may assign its rights hereunder to a wholly-owned
direct or indirect subsidiary of the Seller; provided that no such assignment
by the Seller hereunder shall release the Seller of any of its obligations
hereunder or under any of the other Transaction Documents; and (ii) the Buyer
may assign its rights hereunder (a) in connection with obtaining financing with
respect to the transactions contemplated hereby or (b) to a wholly-owned direct
or indirect subsidiary of the Buyer; provided
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that no such assignment by the Buyer thereunder shall relieve the Buyer of any
of its obligations hereunder or under any of the other Transaction Documents.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, successors and permitted assigns.
18.5. ENTIRE AGREEMENT, ETC. This Agreement (including the Schedules
and Exhibits and the Confidentiality Agreement) contains the entire
understanding of the parties, supersedes all prior agreements and
understandings relating to the subject matter hereof and shall not be amended
except by a written instrument hereafter signed by each of the parties hereto.
EXCEPT AS SET FORTH IN ARTICLE 5, SELLER MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE SALE OF THE ACQUIRED ASSETS
HEREUNDER OR THE PRESSURE SENSITIVE BUSINESS, INCLUDING WITHOUT LIMITATION ANY
REPRESENTATION OR WARRANTY REGARDING MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
18.6. WAIVER OF CERTAIN DAMAGES. EACH OF THE SELLER AND THE BUYER TO
THE FULLEST EXTENT PERMITTED BY LAW, IRREVOCABLY WAIVES ANY RIGHTS THAT THEY
MAY HAVE TO INCIDENTAL, CONSEQUENTIAL OR SPECIAL (INCLUDING PUNITIVE OR
MULTIPLE) DAMAGES BASED UPON, OR ARISING OUT OF, THIS AGREEMENT OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS OR ACTIONS OF ANY OF THEM RELATING
THERETO.
18.7. CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any party.
18.8. GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws (and not the choice-
of-law rules) of the State of Delaware.
18.9. NOTICES. All notices, requests, payments, instructions or other
documents to be given hereunder shall be in writing or by written
telecommunication, and shall be deemed to have been duly given if delivered
personally or if mailed by certified mail, return receipt requested, postage
prepaid, or sent by written telecommunication, as follows:
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If to the Seller, to:
S.D. ▇▇▇▇▇▇ Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
with a copy sent contemporaneously to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
If to the Buyer, to:
▇▇▇ ▇. ▇▇▇▇▇▇▇, III, President
Spinnaker Industries, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
with copies sent contemporaneously to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier: 214-022-4193
▇▇. ▇.▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-Bridge Industries, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
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18.10. COUNTERPARTS. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
18.11. SECTION HEADINGS. All enumerated subdivisions of this Agreement
are herein referred to as "section" or "subsection." The headings of sections
or subsections are for reference only and shall not limit or control the
meaning thereof.
18.12. PUBLIC STATEMENTS OR RELEASES. The parties hereto each agree that
prior to the Closing no party to this Agreement shall make, issue or release
any public announcement, statement or acknowledgment of the existence of, or
reveal the status of, this Agreement or the transactions provided for herein,
without first obtaining the consent of the other party hereto. Nothing
contained in this Section 18.12 shall prevent any party from making such public
announcements as such party may consider necessary in order to satisfy such
party's legal obligations, provided that such disclosing party shall to the
extent practicable give prior notice to the other party of the contents of, and
requirement for, such disclosure.
18.13. DISCLOSURE IN SCHEDULES. For purposes of this Agreement, with
respect to any matter that is clearly disclosed in any portion of the
Disclosure Schedule in such a way as to make its relevance to the information
called for by another Section of this Agreement readily apparent, such matter
shall be deemed to have been included in the Disclosure Schedule in response to
such other Section, notwithstanding the omission of any appropriate
cross-reference thereto.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as an instrument under seal as of the day and year first above written.
S.D. ▇▇▇▇▇▇ COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and
Chief Financial Officer
SPINNAKER INDUSTRIES, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇, III
--------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇, III
Title: President