EXHIBIT 10.6
AGREEMENT OF MERGER
AMONG
WBT HOLDINGS LLC,
WB PARENT CORP.,
WB ACQUISITION CORP.
AND
AMERICAN FILTRONA CORPORATION
February 19, 1997
ARTICLE 1
THE BUSINESS COMBINATION..........................................................................................2
1.1 THE MERGER......................................................................................2
1.2 CLOSING.........................................................................................2
1.3 EFFECTIVE TIME OF THE MERGER....................................................................2
1.4 ARTICLES OF INCORPORATION; BYLAWS...............................................................2
1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.............................................2
ARTICLE 2
CONVERSION AND EXCHANGE OF SHARES; ADDITIONAL ACTION..............................................................3
2.1 CONVERSION OF SHARES............................................................................3
(a) AFC COMMON STOCK.......................................................................3
(b) SUBCORP STOCK..........................................................................3
(c) AFC COMMON STOCK HELD BY HOLDINGS......................................................3
2.2 MERGER CONSIDERATION............................................................................3
2.3 STOCK TRANSFER BOOKS............................................................................3
2.4 SURRENDER AND EXCHANGE OF CERTIFICATES REPRESENTING AFC COMMON STOCK...........................3
(a) EXCHANGE AGENT.........................................................................3
(b) SURRENDER OF CERTIFICATES..............................................................4
(c) LOST CERTIFICATES......................................................................4
(d) NO INTEREST............................................................................4
(e) WITHHOLDING RIGHTS.....................................................................5
ARTICLE 3
AFC STOCK OPTIONS.................................................................................................5
ARTICLE 4
REPRESENTATIONS AND WARRANTIES....................................................................................5
4.1 REPRESENTATIONS AND WARRANTIES BY AFC...........................................................5
(a) ORGANIZATION AND QUALIFICATION.........................................................5
(b) CAPITALIZATION.........................................................................6
(c) AUTHORITY..............................................................................6
(d) NON-CONTRAVENTION......................................................................6
(e) GOVERNMENTAL CONSENTS..................................................................7
(f) PERIODIC REPORTS.......................................................................7
(g) SUBSIDIARIES...........................................................................8
(h) FINANCIAL STATEMENTS...................................................................8
(i) ABSENCE OF CERTAIN CHANGES OR EVENTS..................................................10
(j) GOVERNMENTAL AUTHORIZATION AND COMPLIANCE WITH LAWS...................................11
(k) CONDUCT OF BUSINESS...................................................................12
(l) TAX MATTERS...........................................................................12
(m) PROPERTY..............................................................................12
(n) MATERIAL CONTRACTS....................................................................14
(o) LEGAL PROCEEDINGS.....................................................................16
(p) LABOR RELATIONS.......................................................................16
(q) INSIDER INTERESTS.....................................................................17
(r) INTELLECTUAL PROPERTY.................................................................17
(s) INSURANCE.............................................................................18
(t) PROXY STATEMENT.......................................................................19
(u) EMPLOYEE AND FRINGE BENEFIT PLANS.....................................................19
(v) MAJOR CUSTOMERS. ....................................................................22
(w) SECTIONS 13.1-725 THROUGH 13.1-727.1..................................................23
(x) ENVIRONMENTAL.........................................................................23
(y) ACCURACY OF SCHEDULES, CERTIFICATES AND DOCUMENTS.....................................25
(z) BROKERS, FINDERS AND INVESTMENT BANKERS...............................................25
(aa) INVENTORIES AND RAW MATERIALS OF FIBERS BUSINESS......................................26
(bb) RECEIVABLES OF THE FIBERS BUSINESS....................................................26
(cc) EMPLOYEES OF FIBERS BUSINESS..........................................................26
(dd) PRODUCTS OF THE FIBERS BUSINESS.......................................................26
(ee) INTRACOMPANY ACCOUNTS.................................................................26
(ff) FOREIGN CURRENCY EXPOSURES............................................................27
(gg) COMPANY NAME..........................................................................27
(hh) INDEBTEDNESS..........................................................................27
4.2 REPRESENTATIONS AND WARRANTIES BY HOLDINGS, PARENT AND SUBCORP.................................27
(a) ORGANIZATION AND QUALIFICATION, ETC...................................................27
(b) CAPITALIZATION........................................................................28
(c) AUTHORITY.............................................................................28
(d) NON-CONTRAVENTION.....................................................................28
(e) GOVERNMENTAL CONSENTS.................................................................29
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS..................................................29
(g) PROXY STATEMENT.......................................................................29
(h) ACTIVITIES OF SUBCORP.................................................................29
(i) LEGAL PROCEEDINGS.....................................................................30
(j) BROKERS, FINDERS AND INVESTMENT BANKERS...............................................30
(k) OBLIGATIONS TO FUND...................................................................30
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS..............................................................................30
5.1 CONDUCT OF BUSINESS............................................................................30
(a) OPERATION BY AFC IN THE ORDINARY COURSE OF BUSINESS...................................30
(b) FORBEARANCES BY AFC...................................................................31
(c) CONDUCT OF THE FIBERS BUSINESS........................................................33
(d) NOTICES OF CERTAIN EVENTS.............................................................33
5.2 AFC SHAREHOLDERS MEETING.......................................................................34
5.3 BEST EFFORTS; FURTHER ASSURANCES; COOPERATION..................................................34
(a) REGULATORY ACTION.....................................................................34
(b) CERTAIN LEGAL PROCEEDINGS.............................................................35
(c) NOTICE................................................................................35
5.4 INVESTIGATION; CONFIDENTIALITY.................................................................35
5.5 EXPENSES.......................................................................................36
5.6 PROXY STATEMENT................................................................................36
5.7 PERIODIC REPORTS...............................................................................36
5.8 PUBLIC ANNOUNCEMENTS...........................................................................36
5.9 ANTITRUST CHALLENGES...........................................................................37
5.10 EMPLOYEE MATTERS...............................................................................37
(a) STAY BONUSES AND SEVERANCE AGREEMENTS..................................................37
(b) EMPLOYEE BENEFIT PLAN MATTERS..........................................................37
(c) LABOR MATTERS..........................................................................39
5.11 ACCOUNTANT'S LETTERS...........................................................................39
5.12 NON SOLICITATION; COMPETING OFFERS.............................................................39
5.13 CONDITIONS IN FIBERS SALE AGREEMENT AND FINANCING.............................................39
5.14 INVESTMENT SECURITIES.........................................................................39
5.15 FILPAC INDEBTEDNESS............................................................................39
5.16 ACCESS TO INFORMATION..........................................................................39
5.17 SETTLEMENT OF LAWSUITS.........................................................................41
5.18 ASSUMPTION OF LIABILITIES......................................................................41
ARTICLE 6
CONDITIONS TO THE MERGER.........................................................................................41
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY........................................................41
(a) AFC SHAREHOLDER APPROVAL..............................................................41
(b) HSR ACT...............................................................................41
(c) PROXY STATEMENT.......................................................................41
(d) INJUNCTION, ETC.......................................................................41
6.2 CONDITIONS TO OBLIGATIONS OF HOLDINGS AND SUBCORP..............................................42
(a) CONSENTS, AUTHORIZATIONS, ETC.........................................................42
(b) REPRESENTATIONS AND WARRANTIES........................................................42
(c) CERTIFICATE...........................................................................42
(d) OPINION AND CONFIRMATION OF AFC'S COUNSEL.............................................42
(e) LETTERS FROM ACCOUNTANTS..............................................................42
(f) ADDITIONAL CERTIFICATES, ETC..........................................................42
(g) RESIGNATIONS..........................................................................43
(h) FINANCING.............................................................................43
(i) SATISFACTION OF CONDITIONS IN FIBERS SALE AGREEMENT...................................43
(j) MORGAN CONSULTING AND NON-COMPETITION AGREEMENT.......................................43
(k) MORGAN SEVERANCE AGREEMENT............................................................43
(l) TRANSFER AGENT'S CERTIFICATE..........................................................43
6.3 CONDITIONS TO OBLIGATIONS OF AFC...............................................................43
(a) CONSENTS, AUTHORIZATIONS, ETC.........................................................43
(b) REPRESENTATIONS AND WARRANTIES........................................................44
(c) CERTIFICATE...........................................................................44
(d) OPINION AND CONFIRMATION OF HOLDINGS', PARENT'S AND SUBCORP'S
COUNSEL...............................................................................44
(e) ADDITIONAL CERTIFICATES, ETC..........................................................44
(f) SATISFACTION OF CONDITIONS IN FIBERS SALE AGREEMENT...................................44
(g) FAIRNESS OPINION......................................................................44
ARTICLE 7
TERMINATION AND ABANDONMENT......................................................................................45
7.1 TERMINATION AND ABANDONMENT....................................................................45
7.2 SPECIFIC PERFORMANCE...........................................................................46
7.3 RIGHTS AND OBLIGATIONS UPON TERMINATION........................................................46
7.4 CERTAIN FEES AND EXPENSES......................................................................47
(a) EXPENSES..............................................................................47
(b) FEE...................................................................................47
(c) PAYMENT...............................................................................47
7.5 EFFECT OF TERMINATION..........................................................................48
ARTICLE 8
GENERAL PROVISIONS...............................................................................................48
8.1 WAIVER OF CERTAIN CONDITIONS...................................................................48
8.2 NOTICES........................................................................................48
8.3 TABLE OF CONTENTS; HEADINGS....................................................................49
8.4 AMENDMENT......................................................................................49
8.5 NO SURVIVAL OF REPRESENTATIONS, WARRANTIES OR COVENANTS........................................49
8.6 SEVERABILITY...................................................................................49
8.7 WAIVER.........................................................................................50
8.8 NO THIRD PARTY BENEFICIARIES; ASSIGNMENT.......................................................50
8.9 TIME OF THE ESSENCE; COMPUTATION OF TIME.......................................................50
8.10 COUNTERPARTS...................................................................................50
8.11 GOVERNING LAW..................................................................................50
8.12 ENTIRE AGREEMENT...............................................................................51
LIST OF EXHIBITS
Exhibit A Plan of Merger
Exhibit B Fibers Sale Agreement
Exhibit C Articles of Merger
Exhibit D Opinion and Confirmation of AFC's Counsel
Exhibit E Opinion and Confirmation of Holdings's and SubCorp's
Counsel
Exhibit F Wachovia Commitment Letter Dated _____________
LIST OF SCHEDULES
Schedule 3.1 AFC Stock Option Plans
4.1(b) Capitalization
4.1(d) Non-Contravention
4.1(e) Governmental Consents
4.1(g) AFC Subsidiaries
4.1(h)(iii) Fibers Business Liabilities
4.1(i) Certain Changes or Events
4.1(j) Governmental Authorizations and Compliance
with Laws
4.1(j)(ii) Permits
4.1(l) Tax Matters
4.1(m)(i) Possession of Properties
4.1(m)(ii) Fibers Real Property
4.1(m)(iii) Fibers Personal Property
4.1(m)(iv) Headquarters Property
4.1(n) Material Contracts
4.1(o) Legal Proceedings
4.1(p) Labor Relations
4.1(q) Insider Interests
4.1(r) Intellectual Property
4.1(s) Insurance
4.1(u) Employee and Fringe Benefit Plans
4.1(v) Major Customers of AFC
4.1(x) Environmental
4.1(cc) Fibers Business Employees
4.1(ee) Intracompany Accounts
4.1(ff)(i) Foreign Currency - Products
4.1(ff)(ii) Foreign Currency - Raw Materials
4.1(hh) Indebtedness
5.1 Conduct of Business
5.1(b)(vi) Capital Expenditures
5.10 Stay Bonuses and Severance Agreements
DEFINED TERMS
AFC....................................................................Preamble
AFC Common Stock...........................................Background Statement
AFC Financial Statements.........................................Section 4.1(h)
AFC Quarterly Report.............................................Section 4.1(h)
AFC Stock Option Plans..............................................Section 3.1
AFC Stock Options...................................................Section 3.1
AFC Shareholders Meeting...........................................Section 4(t)
Affiliate........................................................Section 4.1(n)
Agreement..............................................................Preamble
Applicable Plan Year-End.........................................Section 4.1(u)
Articles of Merger..................................................Section 1.3
Associate........................................................Section 4.1(n)
best of AFC's knowledge..........................................Section 4.1(j)
best of Holdings', Parents and SubCorp's knowledge...............Section 4.2(i)
Bunzl......................................................Background Statement
Certificates.....................................................Section 2.4(b)
Closing.............................................................Section 1.2
Closing Date........................................................Section 1.2
Code.............................................................Section 2.4(e)
Commission..........................................................Section 1.3
Competing Transaction...............................................Section 7.1
Confidentiality Agreement...........................................Section 5.4
EEOC.............................................................Section 4.1(p)
Effective Time......................................................Section 1.3
Employee Plans...................................................Section 4.1(u)
Environmental Laws...............................................Section 4.1(x)
ERISA............................................................Section 4.1(u)
ERISA Affiliate..................................................Section 4.1(u)
Exchange Act.....................................................Section 4.1(f)
Exchange Agent...................................................Section 2.4(a)
Expenses.........................................................Section 7.4(a)
Fee..............................................................Section 7.4(b)
Fibers Balance Sheet.............................................Section 4.1(h)
Fibers Balance Sheet Date........................................Section 4.1(h)
Fibers Business............................................Background Statement
Fibers Financial Statements......................................Section 4.1(h)
Fibers Intellectual Property Agreement...........................Section 4.1(r)
Fibers Intellectual Property Rights.............................Section 4.1(r)
Fibers Material Adverse Effect...................................Section 4.1(i)
Fibers Real Property.............................................Section 4.1(m)
Fibers Sale Agreement......................................Background Statement
FTC..............................................................Section 4.1(e)
Govermental Entity...............................................Section 4.1(e)
hazardous materials..............................................Section 4.1(x)
Hazardous Substance..............................................Section 4.1(x)
Holdings...............................................................Preamble
Holdings Material Contract.......................................Section 4.2(d)
HSR Act..........................................................Section 4.1(d)
"Immediate Family"...............................................Section 4.1(n)
Intellectual Property............................................Section 4.1(r)
Intellectual Property Agreement..................................Section 4.1(d)
Intellectual Property Agreements.................................Section 4.1(r)
IRS...........................................................Section 4.1(u)(i)
Justice..........................................................Section 4.1(e)
Lien.............................................................Section 4.1(d)
Material Adverse Change..........................................Section 4.1(i)
Material Adverse Effect..........................................Section 4.1(a)
Material Contract................................................Section 4.1(d)
Material Contracts...............................................Section 4.1(n)
Merger.....................................................Background Statement
Merger Consideration.............................................Section 2.1(a)
multi-employer plan..............................................Section 4.1(u)
NASDAQ...........................................................Section 2.4(b)
NLRB.............................................................Section 4.1(p)
Option Payment......................................................Section 3.1
Parent.................................................................Preamble
PBGC.............................................................Section 4.1(u)
Plan of Merger.............................................Background Statement
Plastics Business..........................................Background Statement
Performance Share Awards.........................................Section 4.1(b)
Permits..........................................................Section 4.1(j)
Permitted Liens..................................................Section 4.1(m)
Proxy Statement..................................................Section 4.1(t)
Registration Statement...........................................Section 4.1(u)
Rule 13e-3.......................................................Section 4.2(e)
second request...................................................Section 5.3(a)
SEC..............................................................Section 4.1(d)
Securities Act...................................................Section 4.1(f)
SubCorp................................................................Preamble
Subsidiary.......................................................Section 4.1(g)
Surviving Corporation...............................................Section 1.1
Super Fund........................................................Section 4.1(X)
Super Lien........................................................Section 4.1(X)
Tax Returns......................................................Section 4.1(l)
Taxes............................................................Section 4.1(l)
toxic substances.................................................Section 4.1(x)
VSCA................................................................Section 1.1
Waste............................................................Section 4.1(x)
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (this "Agreement") is made as of February 19,
1997 among AMERICAN FILTRONA CORPORATION, a Virginia corporation ("AFC"), WBT
HOLDINGS LLC, a Georgia limited liability company ("Holdings"), WB PARENT CORP.,
a Virginia corporation ("Parent"), which is a wholly-owned subsidiary of
Holdings, and WB ACQUISITION CORP., a Virginia corporation ("SubCorp"), which is
a wholly-owned subsidiary of Parent.
BACKGROUND STATEMENT
Holdings and AFC desire to effect a business combination of AFC and
SubCorp pursuant to the Plan of Merger attached hereto as Exhibit A (the "Plan
of Merger"), by which SubCorp will merge with and into AFC, and the holders of
shares of AFC common stock, $1.00 par value ("AFC Common Stock"), other than
Holdings and any of its Subsidiaries (as hereinafter defined), will receive cash
in exchange for AFC Common Stock, as provided in this Agreement (the "Merger").
The respective Boards of Directors of Parent, SubCorp and AFC each has, the
Managers of Holdings have, and Parent as the sole shareholder of SubCorp has,
approved this Agreement and the Plan of Merger. The Board of Directors of AFC
has directed that this Agreement and the Plan of Merger be submitted to the
shareholders of AFC for their approval.
The parties contemplate that shares of AFC Common Stock will be
acquired by Holdings from its affiliates and will be transferred by Holdings to
Parent.
The parties contemplate that the Closing (as hereinafter defined) of
the Merger will take place contemporaneously with, but immediately before, the
sale by the surviving corporation in the Merger to FIL Acquisition Corp., a
Delaware corporation ("Bunzl"), of the assets used by AFC in conducting the
business consisting of AFC's Bonded Fibers Segment (the "Fibers Business")
pursuant to the Fibers Sale Agreement of even date herewith between SubCorp and
Bunzl attached hereto as Exhibit B (the "Fibers Sale Agreement"). Following the
Closing of the Merger and the transactions contemplated under the Fibers Sale
Agreement, the surviving corporation in the Merger shall continue to conduct
AFC's business consisting of its Plastic Products Segment (the "Plastics
Business").
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, the parties hereto agree
as follows:
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ARTICLE 1
THE BUSINESS COMBINATION
1.1 THE MERGER. Subject to the terms and conditions of this Agreement
and the Plan of Merger, at the Effective Time (as defined in Section 1.3
hereof), SubCorp shall be merged with and into AFC in accordance with the
provisions of this Agreement and the Virginia Stock Corporation Act (the
"VSCA"), and the separate existence of SubCorp shall thereupon cease, and AFC,
as the surviving corporation in the Merger (hereinafter sometimes referred to as
the "Surviving Corporation"), shall continue its corporate existence under the
laws of the Commonwealth of Virginia as a wholly-owned subsidiary of Parent. The
Plan of Merger provides for the terms and conditions of the Merger, which terms
and conditions are incorporated herein and made a part of this Agreement by
reference. The Merger shall have the effects provided under the applicable laws
of the Commonwealth of Virginia including, but not limited to, Section 13.1-721
of the VSCA.
1.2 CLOSING. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Hunton & Williams,
Riverfront Plaza, 951 East Byrd Street, Richmond, Virginia 23219-4074, as soon
as possible after all conditions set forth in Article 6 have been satisfied or
waived in writing but in no event later than the third business day after all
such conditions shall have been satisfied or waived (the "Closing Date") or on
such other date or time as the parties shall agree.
1.3 EFFECTIVE TIME OF THE MERGER. If all the conditions set forth in
Article 6 shall have been fulfilled or waived in accordance with this Agreement
and provided that this Agreement and the Plan of Merger have not been terminated
pursuant to Article 7, the parties shall cause the articles of merger attached
hereto as Exhibit C (the "Articles of Merger") to be executed, delivered and
filed with the State Corporation Commission of the Commonwealth of Virginia (the
"Commission") in accordance with the provisions of the VSCA. The Merger shall
become effective at the time a certificate of merger is issued by the Commission
with respect to the Merger unless a later effective time and date is specified
in the Articles of Merger pursuant to the VSCA (the "Effective Time").
1.4 ARTICLES OF INCORPORATION; BYLAWS. The Articles of Incorporation
and Bylaws of SubCorp as in effect immediately prior to the Effective Time shall
be the Articles of Incorporation and Bylaws of the Surviving Corporation at the
Effective Time.
1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. At the
Effective Time, the persons who are directors and officers of SubCorp at the
Effective Time will become the directors and officers of the Surviving
Corporation.
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ARTICLE 2
CONVERSION AND EXCHANGE OF SHARES; ADDITIONAL ACTION
2.1 CONVERSION OF SHARES. In accordance with the Plan of Merger, at the
Effective Time, by virtue of the Merger and without any further action on the
part of any holder thereof:
(a) AFC COMMON STOCK. Each issued and outstanding share of AFC
Common Stock, excluding any such shares held by any of AFC's
Subsidiaries and excluding any such shares held by Holdings or any of
its Subsidiaries, shall automatically be converted into only the right
to receive the consideration for the Merger as set forth in Sections
2.2 and 2.4 (the "Merger Consideration").
(b) SUBCORP STOCK. Each share of AFC Common Stock held by any
of AFC's Subsidiaries and each issued and outstanding share of SubCorp
at the Effective Time shall be automatically canceled and extinguished,
and no payment shall be made in respect thereof.
(c) AFC COMMON STOCK HELD BY HOLDINGS. Each issued and
outstanding share of AFC Common Stock held by Holdings or any of its
Subsidiaries at the Effective Time shall thereafter continue to
represent one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation.
2.2 MERGER CONSIDERATION. In accordance with the Plan of Merger and
this Agreement, the Merger Consideration to be paid for each share of AFC Common
Stock shall be Forty Six Dollars and 52 cents ($46.52) in cash.
2.3 STOCK TRANSFER BOOKS. From and after the Effective Time, no
transfer of AFC Common Stock outstanding prior to the Effective Time shall be
registered on the stock transfer books of the Surviving Corporation. If, after
the Effective Time, certificates for AFC Common Stock other than shares held by
Holdings and its Subsidiaries are presented to the Surviving Corporation for
transfer, such certificates shall be canceled and exchanged for the
consideration as described in Sections 2.1 and 2.2 and in accordance with the
Plan of Merger.
2.4 SURRENDER AND EXCHANGE OF CERTIFICATES REPRESENTING AFC COMMON
STOCK.
(a) EXCHANGE AGENT. Prior to the mailing of the Proxy Statement
(as hereinafter defined) to the holders of record of AFC Common Stock,
Holdings shall appoint Wachovia Bank of North Carolina, N.A. to act as
exchange agent for the Merger (the "Exchange Agent") pursuant to an
exchange agent agreement reasonably acceptable to AFC and Holdings. At
the Effective Time, Holdings shall deposit with the Exchange Agent cash
in the amount of the Merger Consideration less the amount of cash and
3
cash-equivalents held by AFC at the Effective Time and, pursuant to
irrevocable instructions, direct the Exchange Agent to pay the Merger
Consideration.
(b) SURRENDER OF CERTIFICATES. Promptly after the Effective
Time, Holdings shall cause the Exchange Agent to mail and otherwise
make available to each record holder as of the Effective Time of an
outstanding certificate or certificates that immediately prior to the
Effective Time represented shares of AFC Common Stock (the
"Certificates"), a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates
to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates for payment therefor and conversion
thereof, which letter of transmittal shall comply with all applicable
rules and regulations of the NASDAQ Stock Market ("NASDAQ"). Upon
surrender to the Exchange Agent of the Certificates, together with such
letter of transmittal duly executed, the holder of such Certificates
shall be entitled to receive promptly in exchange therefor a check
representing the Merger Consideration to which such holder shall have
become entitled pursuant to Section 2.2 and the Plan of Merger, and the
Certificates so surrendered shall forthwith be canceled. If any portion
of the Merger Consideration to be received upon exchange of a
Certificate is to be paid to a person other than the person in whose
name the Certificate surrendered and exchanged therefor is registered,
it shall be a condition of such payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for
transfer and that the person requesting such exchange shall pay in
advance any transfer or other taxes required by reason of the issuance
of a check representing cash to such other person, or establish to the
reasonable satisfaction of the Exchange Agent that such tax has been
paid or that no such tax is applicable. From the Effective Time until
surrender in accordance with the provisions of this Section 2.4 and the
Plan of Merger, each Certificate (other than Certificates held by
Holdings or any of its Subsidiaries) shall represent for all purposes
only the right to receive the Merger Consideration. All payments in
respect of AFC Common Stock that are made in accordance with the terms
hereof shall be deemed to have been made in full satisfaction of all
rights pertaining to such securities.
(c) LOST CERTIFICATES. In the case of any lost, misplaced,
stolen or destroyed Certificate, the holder thereof may be required, as
a condition precedent to delivery to such holder of the Merger
Consideration, to deliver to Holdings an indemnity agreement and a bond
in such reasonable sum as Holdings may direct as indemnity against any
claim that may be made against the Exchange Agent, Holdings, Parent or
the Surviving Corporation with respect to the Certificate alleged to
have been lost, misplaced, stolen or destroyed.
(d) NO INTEREST. No interest shall be paid or accrued on
any portion of the Merger Consideration regardless of the cause for
delay in payment of the Merger Consideration.
4
(e) WITHHOLDING RIGHTS. Holdings or the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of shares of AFC
Common Stock and pay to the appropriate tax authority such amounts as
Holdings or the Exchange Agent is required to deduct, withhold and pay
with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended, (the "Code"), or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld by
Holdings or the Exchange Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of
the shares of AFC Common Stock in respect of which such deduction and
withholding was made by Holdings or the Exchange Agent.
ARTICLE 3
AFC STOCK OPTIONS
3.1 Schedule 3.1 lists all plans for the issuance of options to acquire
AFC Common Stock (the "AFC Stock Option Plans") and plans for awards of
performance shares, together with a list of all outstanding and unexercised
options and all awards of performance shares under those plans, including as to
each option or performance share award, the number of shares of AFC Common Stock
covered by such option or performance share award, the date of grant of such
option or performance share award and the date of expiration of such option.
True and correct copies of all plans, and a copy of each form of option and
performance share award listed on Schedule 3.1 have been delivered to Holdings.
All outstanding options to purchase AFC Common Stock granted pursuant to the AFC
Stock Option Plans shall be amended to provide that each such option shall
become exercisable at the Effective Time and that each holder shall receive, as
soon as practicable after the Effective Time, a payment equal to the per share
Merger Consideration less the applicable option exercise price for each share
subject to an outstanding option (each such payment an "Option Payment").
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES BY AFC. AFC represents and warrants
to and agrees with Holdings, Parent and SubCorp as of the date of this Agreement
and as of the Closing as follows:
(a) ORGANIZATION AND QUALIFICATION. AFC is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia, has the corporate power and authority to own
all of its properties and assets and to carry on its business as it is
now being conducted, and is duly qualified to do business and is in
good standing in each of the jurisdictions in which the failure to be
so qualified would
5
have a material adverse effect on the consolidated financial condition,
results of operations or business of AFC and its Subsidiaries, taken as
a whole (a "Material Adverse Effect"). The copies of AFC's Articles of
Incorporation and Bylaws, as amended to date, that have been delivered
to Holdings, are complete and correct, and such instruments, as so
amended, are in full force and effect at the date hereof.
(b) CAPITALIZATION. The authorized capital stock of AFC
consists of 10,000,000 shares of AFC Common Stock. All of the issued
and outstanding shares of AFC Common Stock are duly authorized, validly
issued, fully paid and nonassessable, and were not issued in violation
of any preemptive rights. As of the date hereof: (i) 3,816,629 shares
of AFC Common Stock are issued and outstanding; (ii) 258,800 shares of
AFC Common Stock are subject to outstanding options pursuant to the AFC
Stock Option Plans ; and (iii) there are no outstanding performance
share awards under the 1988 Performance Share Plan (the "Performance
Share Awards"). Except as set forth on Schedule 3.1 or Schedule 4.1(b)
and in this Section 4.1(b), there are no shares of capital stock of AFC
outstanding, and there are no subscriptions, options, convertible
securities, calls, rights, warrants, performance share awards or other
agreements, claims or commitments of any nature whatsoever obligating
AFC to issue, transfer, register with any securities commission or
other authority, deliver or sell or cause to be issued, transferred, so
registered, delivered or sold, additional shares of the capital stock
or other securities of AFC or obligating AFC to grant, extend or enter
into any such agreement or commitment.
(c) AUTHORITY. AFC has the corporate power and authority to
execute and deliver this Agreement and, subject to the receipt of the
approval of this Agreement and the Plan of Merger by the affirmative
vote of more than two-thirds of the outstanding shares of AFC Common
Stock, to consummate the Merger. The execution and delivery by AFC of
this Agreement and the consummation by AFC of the Merger in accordance
with the Plan of Merger have been duly authorized by its Board of
Directors. Except for the approval of this Agreement and the Plan of
Merger by the holders of AFC Common Stock, no other corporate action on
the part of AFC is necessary to authorize the execution and delivery of
this Agreement by AFC or the consummation by AFC of the Merger in
accordance with the Plan of Merger. This Agreement has been duly
executed and delivered by AFC and is a valid, binding and enforceable
agreement of AFC.
(d) NON-CONTRAVENTION. The execution and delivery of this
Agreement by AFC do not and, subject to the approval of this Agreement
and the Plan of Merger by the holders of AFC Common Stock, the filing
of all necessary forms with the Securities and Exchange Commission (the
"SEC") and the expiration of all applicable waiting periods after the
filings required by the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act") referred to in paragraph (e) below, the
consummation by AFC of the Merger, will not (A) violate or conflict
with any provision of the Articles of Incorporation or Bylaws of AFC or
any of its Subsidiaries, or (B) except as set forth on Schedule
6
4.1(d)(i) and except insofar as it would not have a Material Adverse Effect,
violate or conflict with, or result (with the giving of notice or the lapse of
time or both) in a violation of or constitute a default under any provision of,
or result in the acceleration or termination of or entitle any party to
accelerate or terminate (whether after the giving of notice or lapse of time or
both), any obligation or benefit under, or result in the creation or imposition
of any Lien (as hereinafter defined) upon any of the assets or properties of AFC
or any of its Subsidiaries or require consent, authorization or approval of any
person or entity pursuant to any provision of any "Material Contract" (as
hereinafter defined), "Intellectual Property Agreement" (as hereinafter
defined), or law, ordinance, regulation, order, arbitration award, judgment or
decree to which AFC or any of its Subsidiaries is a party or by which it or its
assets or properties are bound and will not constitute an event permitting
termination of any Material Contract or Intellectual Property Agreement to which
AFC or any of its Subsidiaries is a party or require any additional payment or
expense to avoid any such event. As used herein, a "Lien" with respect to any
property refers to any mortgage, lien, pledge, charge, security interest,
encumbrance or other adverse claim of any kind (including the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement) relating to such property. Except for violations,
conflicts, defaults, accelerations, terminations, entitlements, creations or
impositions of Liens or other encumbrances, conflicts or events described on
Schedule 4.1(d), no such event shall cause a Material Adverse Effect or cause
any material damage, additional cost or expense (including any payments or
expenses incurred to obtain consents or waivers) to Holdings or the Surviving
Corporation.
(e) GOVERNMENTAL CONSENTS. Except for the consents described in
Schedule 4.1(e), other than the filing of the Proxy Statement (as
hereinafter defined) with the SEC and, to the extent required, any
filings with or approvals by any state securities commissions or
authorities, filings with the Federal Trade Commission (the "FTC") and
the Department of Justice ("Justice") under the HSR Act and the filing
of the Articles of Merger with the Commission, no consent,
authorization, clearance, order or approval of, or filing or
registration with, any executive, judicial or other public authority,
agency, department, bureau, division, unit or court or other public
person or entity (any of which is hereinafter referred to as a
"Governmental Entity") is required for or in connection with the
execution and delivery of this Agreement by AFC and the consummation by
AFC of the Merger.
(f) PERIODIC REPORTS. Since January 1, 1993, AFC has timely
filed all forms and reports with the SEC required to be filed by it
pursuant to the Securities Act of 1933 (the "Securities Act") and the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the SEC rules and regulations thereunder, all of which have complied as
of their respective filing dates in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, and
the rules promulgated thereunder, except for such statements, if any,
as have been modified by subsequent filings. AFC has delivered
7
all such forms and reports to Holdings. None of such forms or reports
at the time filed contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except for
such statements, if any, as have been modified by subsequent filings.
(g) SUBSIDIARIES. AFC owns, directly or indirectly, all the
outstanding capital stock of each of its Subsidiaries, free and clear
of all Liens and all such capital stock is duly authorized, validly
issued and outstanding, fully paid and nonassessable, and except as set
forth in Schedule 4.1(g), neither AFC nor any of its Subsidiaries has
made any material investment in, or material advance of cash or other
extension of credit to, any person, corporation or other entity other
than its Subsidiaries. None of such Subsidiaries has any commitment to
issue or sell any shares of its capital stock or any securities or
obligations convertible into or exchangeable for, or giving any person
(other than AFC) any right to acquire from such Subsidiary, any shares
of its capital stock, and no such securities or obligations are
outstanding. Each of AFC's Subsidiaries is a corporation duly organized
and validly existing in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority
to own all of its properties and assets and to carry on its business as
it is now being conducted. Each of AFC's Subsidiaries is duly qualified
to do business and is in good standing in all jurisdictions where such
qualification is required and where failure to so qualify would have a
Material Adverse Effect. As used in this Agreement, the term
"Subsidiary" means, with respect to any person, corporation or other
entity, any corporation or other organization, whether incorporated or
unincorporated, of which at least a majority of the securities or
interests having by the terms thereof voting power to elect a majority
of the board of directors or others performing similar functions with
respect to such corporation or other organization is at that time
directly or indirectly owned or controlled by such person, corporation
or other entity, or by any one or more of its Subsidiaries, or by such
person, corporation or other entity, and one or more of its
Subsidiaries.
(h) FINANCIAL STATEMENTS.
(i) AFC has previously furnished Holdings with a true
and complete copy of the balance sheets of AFC as of December
31, 1994, 1995 and 1996 and the related statements of income,
shareholders' equity and cash flows for the years then ended,
including the notes thereto, certified or to be certified by
Coopers & Lybrand L.L.P., independent certified public
accountants, and the financial statements of AFC, including the
notes thereto, contained in the AFC Quarterly Report on Form
10-Q for the quarter ended September 30, 1996 in the form last
delivered to Holdings on or prior to the date of this Agreement
(the "AFC Quarterly Report"). AFC will furnish to Holdings as
soon as available true and complete copies of the comparable
financial statements of AFC as of March 31, 1997 and the fiscal
quarter then ended. All of the foregoing financial statements
are referred to
8
hereunder as the "AFC Financial Statements." The AFC Financial
Statements have been or will be prepared from, and are or will
be in accordance with, the books and records of AFC and present
or will present fairly the consolidated financial position,
results of operations and cash flows of AFC and its
Subsidiaries taken as a whole as of the dates and for the
periods indicated, in each case in conformity with generally
accepted accounting principles, consistently applied, except as
otherwise stated in the AFC Financial Statements and, for
statements covering interim periods, include or will include
all adjustments (consisting only of normal recurring accruals)
that are necessary for the fair presentation of the
consolidated financial position, results of operations and cash
flows of AFC and its Subsidiaries.
(ii) AFC has previously furnished Holdings with a true
and complete copy of the balance sheets of the Fibers Business
as of December 31, 1995, September 30, 1996 and December 31,
1996 and the related statements of income for the periods then
ended and will furnish to Holdings true and complete copies of
the comparable financial statements of the Fibers Business as
of March 31, 1997 and the fiscal quarter then ended (the
"Fibers Financial Statements"). The Fibers Financial Statements
have been or will be prepared from, and are or will be in
accordance with, the books and records of AFC and present or
will present fairly the financial position and results of
operations of the Fibers Business as of the dates and for the
periods indicated, in each case in conformity with generally
accepted accounting principles, consistently applied, except
that:
(A) The statements do not or will not contain
disclosure notes.
(B) The statements do not or will not reflect any
income taxes.
(C) The statements do not or will not reflect any
allocations of corporate overhead.
The Fibers Financial Statements covering interim periods
include or will include all adjustments (consisting only of
normal recurring accruals) that are necessary for the fair
presentation of the financial position and the results of
operations of the Fibers Business.
(iii) There are no liabilities of the Fibers Business of
any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, other than:
(A) liabilities provided for in the balance sheet
of the Fibers Business (the "Fibers Balance Sheet") at
September 30, 1996 (the "Fibers Balance Sheet Date")
included in the Fibers Financial Statements;
9
(B) liabilities disclosed or described on Schedule
4.1(h)(iii); and
(C) other liabilities incurred in the ordinary
course of business of the Fibers Business since the
Fibers Balance Sheet Date that, individually or in the
aggregate, are not material to the business, financial
condition or results of operations of the Fibers
Business, taken as a whole.
(i) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in Schedule 4.1(i) or in any report filed by AFC with the SEC prior to
the date of this Agreement, since December 31, 1995, there has not
been: (i) any Material Adverse Change (as used in this Agreement,
"Material Adverse Change" means any material adverse change in the
business, financial condition or results of operations of AFC and its
Subsidiaries taken as a whole); (ii) any damage, destruction, loss or
casualty to property or assets of AFC or any of its Subsidiaries,
whether or not covered by insurance, that would have a Material Adverse
Effect; (iii) any strike, work stoppage or slowdown or other labor
trouble involving AFC or any of its Subsidiaries that would have a
Material Adverse Effect; (iv) any declaration, setting aside or payment
of any dividend or distribution (whether in cash, capital stock or
property) with respect to the capital stock of AFC other than regular
quarterly cash dividends at the rate of $0.28 per share on AFC Common
Stock; (v) any redemption or other acquisition by AFC of any of the
capital stock of AFC (except for the acquisition of AFC Common Stock in
payment of the exercise price upon the exercise of AFC Stock Options
and payment of performance share related withholding taxes); (vi) any
split, combination, reclassification or other similar change in the
outstanding AFC Common Stock; (vii) any incurrence, assumption or
guarantee of any indebtedness for borrowed money with respect to the
Fibers Business; (viii) creation of any Lien involving an amount in
excess of $10,000 with respect to any assets of the Fibers Business;
(ix) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the Fibers Business or any asset of the
Fibers Business that, individually or in the aggregate, has had or
could reasonably be expected to have a material adverse effect of the
financial condition, results of operations or business of the Fibers
Business (a "Fibers Material Adverse Effect"); (x) any transaction or
commitment made, or any contract or agreement entered into, by AFC
relating to the Fibers Business or any asset of the Fibers Business
(including the acquisition or disposition of any assets) or any
relinquishment by AFC of any contract or other right, in either case
involving an amount in excess of $25,000, other than transactions and
commitments in the ordinary course of business consistent with past
practices and those contemplated by this Agreement; (xi) any change in
any method of accounting or accounting practice by AFC with respect to
the Fibers Business except for any such change required by reason of a
concurrent change in GAAP; (xii) any (A) employment, deferred
compensation, severance, retirement or other similar agreement entered
into with any employee of the Fibers Business (or any amendment to any
such existing agreement), (B) grant of any severance or termination pay
to any such employee or (C) change in compensation or other benefits
payable to any such employee pursuant to any severance or retirement
plans or policies, other than in the ordinary course
10
of business consistent with past practice; (xiii) any labor dispute,
other than routine individual grievances, or any activity or proceeding
by a labor union or representative thereof to organize any employees of
the Fibers Business, or any lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to such employees;
(xiv) any capital expenditure, or commitment for a capital expenditure,
for additions or improvements to property, plant and equipment with
respect to the Fibers Business exceeding $100,000 in the aggregate;
(xv) any disposition of any capital asset of the Fibers Business
involving an amount in excess of $25,000; (xvi) with respect to the
Fibers Business, any loss of any significant customer or customer
accounts or any significant decrease in the sales volume to any
significant customer; or (xvii) any agreement to do any of the
foregoing. Since December 31, 1995, there has not been any issuance by
AFC of any shares, or options, calls or commitments relating to shares
of its capital stock, or any securities or obligations convertible into
or exchangeable for, or giving any person any right to acquire from it,
any shares of its capital stock other than the issuance of stock
options, performance shares or shares of AFC Common Stock pursuant to
the AFC Stock Option Plans and except as set forth on Schedule 4.1(b).
(j) GOVERNMENTAL AUTHORIZATION AND COMPLIANCE WITH LAWS. Except
as set forth on Schedule 4.1(j) and except insofar as the failure to do
so would not have a Material Adverse Effect, AFC and its Subsidiaries
(i) are in compliance with all laws, orders, regulations, policies and
guidelines of all Governmental Entities applicable to AFC and its
Subsidiaries or their businesses or properties and assets, and (ii)
have all permits, certificates, licenses, approvals and other
authorizations required in connection with the operation of their
businesses. Schedule 4.1(j)(ii) correctly describes each license,
franchise, permit or other similar authorization affecting, or relating
in any way to the Fibers Business or, with respect to the business,
assets, or operations of AFC or any of its Subsidiaries, required by
any Environmental Law (as defined below), together with the name of the
Governmental Entity issuing such license or permit or requiring such
notice (the "Permits") with an indication of which Permits affect or
relate in any way to the Fibers Business. Except as set forth on
Schedule 4.1(j)(ii), such Permits are valid and in full force and
effect, and none of the Permits will be terminated or impaired or
become invalid, in whole or in part, as a result of the Merger. As of
the date hereof, no notice has been issued and, to the best of AFC's
knowledge (as defined below), no investigation or review is pending or
is contemplated or threatened by any Governmental Entity (Y) with
respect to any alleged violation by AFC or any Subsidiary of any law,
order, regulation, policy or guideline of any Governmental Entity, or
(Z) with respect to any alleged failure to have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of the business of AFC and its
Subsidiaries. Neither AFC nor any Subsidiary is in violation of any
judgment, decree, injunction, ruling or order of Governmental Entity
binding on AFC or such Subsidiary the violation of which would have a
Material Adverse Effect. As used in this Agreement, the "best of AFC's
knowledge" and any other reference to the knowledge of AFC or its
officers or directors shall mean the actual knowledge, without
independent investigation, of John L. Morgan,
11
Leo C. Drozeski, Jr., John D. Barlow Jr., Randall L. Hagan, Anthony M.
Vincent and Bruce A. Nylander.
(k) CONDUCT OF BUSINESS. Since December 31, 1995, AFC and its
Subsidiaries have conducted their businesses in the ordinary and usual
course consistent with prior practice.
(l) TAX MATTERS. Except as set forth on Schedule 4.1(l), (i)
all material Taxes (as defined below) due and payable by AFC and its
Subsidiaries have been paid and are not delinquent; (ii) to the extent
required by GAAP, estimates for all Taxes due but not yet payable for
all periods through December 31, 1996 have been accrued on the books of
AFC, and adequate reserves have been established therefor as of the end
of such periods; (iii) all material Taxes due and payable by AFC and
its Subsidiaries for all periods through December 31, 1996 have been
paid or provided for in the AFC Financial Statements and are not
delinquent; (iv) as of the date hereof, there are no pending claims
asserted for Taxes against AFC or any of its Subsidiaries or
outstanding agreements or waivers extending the statutory period of
limitation applicable to any tax return of AFC or any of its
Subsidiaries for any period; (v) AFC and each of its Subsidiaries have
duly and timely filed all material federal, state, local and foreign
tax returns and all other returns heretofore required to be filed ("Tax
Returns") with respect to all Taxes. AFC has delivered to Holdings true
and correct copies of all federal income Tax Returns for the 1994 and
1995 taxable periods. AFC has not filed a consent to the application of
Section 341(f) of the Code. AFC has made all estimated federal income
tax deposits and, for all currently open taxable periods, has complied
in all material respects with the tax withholding provisions and
employment tax provisions of all applicable federal, state, local and
other laws. "Taxes" shall mean all taxes arising under the Code or
arising under any federal, state, local or foreign law, rule,
regulation or order including, without limitation, any income, profits,
employment, sales, gross receipts, use, occupation, excise, real
property, personal property or ad valorem taxes or any license or
franchise fee or tax and all penalties and interest related thereto.
(m) PROPERTY. (i) AFC or one of its Subsidiaries has good and
marketable title to all properties and assets reflected in the balance
sheet dated December 31, 1995 (or acquired after that date), and valid
leasehold interests in all properties and assets not reflected on such
balance sheet but used by AFC or a Subsidiary in its business, free and
clear of any title defects, liens, charges, pledges, security
interests, adverse claims, or other encumbrances, except (A) mortgages
and liens securing debt reflected as liabilities on such balance sheet,
(B) liens for current taxes and assessments not in default, (C)
mechanics', carriers', workmen's, repairman's, statutory or common law
liens either not delinquent or being contested in good faith and (D)
Liens, encumbrances, covenants, rights-of-way, minor imperfections of
title, building or use restrictions, easements, exceptions, variances,
reservations and other matters or limitations of any kind, if any, that
do not have a Material Adverse Effect. Except as set forth on Schedule
4.1(m)(i), no person other than
12
AFC or one of its Subsidiaries is currently entitled to possession of
any of the properties of AFC, whether owned, leased or used by AFC or
one of its Subsidiaries. To the best of AFC's knowledge, the real
property, buildings, structures and improvements owned, leased or used
by AFC or any of its Subsidiaries conform to all applicable laws,
ordinances and regulations, including zoning regulations, none of which
would upon consummation of the Merger materially adversely interfere
with the use of such properties, buildings, structures or improvements
for the purposes for which they are now utilized. The properties and
assets owned or leased by AFC are adequate in all material respects for
the conduct of its businesses as presently conducted.
(ii) Schedule 4.1(m)(ii) correctly describes all real property
used in the Fibers Business (the "Fibers Real Property"), that AFC
owns, leases or subleases, any title insurance policies and surveys
with respect thereto, and any Liens thereon, specifying in the case of
leases or subleases, the name of the lessor or sublessor, the lease
term and the basic annual rent.
(iii) Schedule 4.1(m)(iii) constitutes a depreciation schedule
at December 31, 1996 of all machinery, equipment, furniture, vehicles,
storage tanks and other trade fixtures and fixed assets that are owned
by AFC and used in the Fibers Business.
(iv) Schedule 4.1.(m)(iv) constitutes a depreciation schedule
at December 31, 1996 of all machinery, equipment, furniture, vehicles,
storage tanks and other trade fixtures and fixed assets that are owned
by AFC and located in the headquarters building.
(v) AFC has good and marketable, indefeasible, fee simple title
(subject only to Permitted Liens) to, or in the case of leased property
has valid leasehold interests in, all property used in the Fibers
Business (whether real, personal, tangible or intangible) and reflected
on the Fibers Balance Sheet of AFC at December 31, 1995, or acquired
after that date, except for assets sold since that date in the ordinary
course of business consistent with past practices.
(vi) No property used in the Fibers Business is subject to
any Lien, except:
(A) Liens disclosed on the Fibers Balance Sheet;
(B) Liens for taxes not yet due or being contested in
good faith (and for which adequate accruals or reserves have
been established on the Fibers Balance Sheet); and
(C) Liens, covenants, rights-of-way, zoning restrictions
and other encumbrances or restrictions of record that do not
materially detract from the value of such assets as now used in
the Fibers Business, or materially interfere with any
13
present or intended use of such assets (clauses (A), (B) and
(C) are, collectively, the "Permitted Liens").
(vii) No violation of any law, regulation or ordinance
(including, without limitation, laws, regulations or ordinances
relating to zoning, city planning or similar matters) relating to the
Fibers Business or any asset used in the Fibers Business currently
exists or has existed at any time, except for violations which have not
had and would not reasonably be expected to have, individually or in
the aggregate, a Fibers Material Adverse Effect.
(n) MATERIAL CONTRACTS. Schedule 4.1(n) contains a correct
and complete list as of the date hereof, of the following (hereinafter
referred to as the "Material Contracts"):
(i) except for investment securities held by AFC or
any of its Subsidiaries, all bonds, debentures, loan
agreements, notes, mortgages, deeds to secure debt, deeds of
trust and guaranties to which AFC or any Subsidiary is a party
or by which AFC or any Subsidiary or its properties or assets
are bound;
(ii) all leases (whether capital or operating)
involving an annual commitment or annual payments of $25,000 or
more under which AFC or any Subsidiary is the lessee of real or
personal property, and all leases of property used in the
Fibers Business with a (A) book value in excess of $10,000 or
(B) fair market value in excess of $25,000, specifying the name
of the lessor or sublessor, the lease term and basic annual
rent;
(iii) all employment and consulting agreements between
AFC or any Subsidiary and any person or entity;
(iv) all existing contracts and commitments (other
than those described in subparagraphs (i), (ii) or (iii), and
any Employee Plans (as hereinafter defined) to which AFC or any
Subsidiary is a party or by which AFC or any Subsidiary or its
properties or assets may be bound involving either (A) annual
payments of $25,000 or more or (B) aggregate payments of
$50,000 or more;
(v) any collective bargaining agreements;
(vi) any agreement for the purchase of materials,
supplies, goods, services, equipment or other assets for the
Fibers Business providing for (A) annual payments of $25,000 or
more, (B) aggregate payments of $25,000 or more or (C) the
purchase of more than 90 days usage of raw materials;
(vii) any sales, distribution or other similar
agreement providing for the sale of materials, supplies, goods,
services, equipment or other assets of the Fibers
14
Business that provides for either (A) annual payments of
$25,000 or more or (B) aggregate payments of $50,000 or more;
(viii) any partnership, joint venture or other
similar agreement or arrangement with respect to the Fibers
Business;
(ix) any agreement relating to the deferred purchase
price of property of the Fibers Business (whether incurred,
assumed, guaranteed or secured by any asset), except any such
agreement with an aggregate outstanding principal amount not
exceeding $25,000 and which may be prepaid on not more than 30
days notice without the payment of any penalty;
(x) any option, license, franchise or similar
agreement with respect to the Fibers Business or any assets
used in the Fibers Business;
(xi) any agency, dealer, sales representative,
marketing or other similar agreement with respect to the Fibers
Business;
(xii) any agreement that limits the freedom of AFC to
compete in any line of business or with any person or entity or
in any area or to own, operate, sell, transfer, pledge or
otherwise dispose of or encumber any asset used in the Fibers
Business or that would so limit the freedom of AFC or Bunzl
after the Closing Date;
(xiii) any agreement providing for any purchase or sale
obligations with respect to the Fibers Business with a duration
of such obligations in excess of six months;
(xiv) any agreement with or for the benefit of (A) any
Affiliate (as defined below) of AFC; (B) any person or entity
directly or indirectly owning, controlling or holding with
power to vote, 5% or more of the outstanding voting securities
of AFC or any of its Affiliates, (C) any person or entity 5% or
more of whose outstanding voting securities are directly or
indirectly owned, controlled or held with power to vote by AFC
or any of its Affiliates or (D) any director or officer of AFC
or any of their respective Affiliates or any "Associates" or
members of the "Immediate Family" (as used herein, the terms
"Affiliate", "Associate" or "Member of the Immediate Family"
being respectively defined in Rule 12b-2 or Rule 16a-1 of the
Exchange Act) of such person or entity; and
(xv) any other agreement, commitment, arrangement or
plan with respect to the Fibers Business not made in the
ordinary course of business that is material to the business,
financial condition, results of operations or properties of the
Fibers Business.
15
True and complete copies of all Material Contracts, including all
amendments thereto, have been delivered to Holdings. Except as set
forth on Schedule 4.1(n): (i) all Material Contracts are in full force
and effect and constitute the valid and binding obligations of AFC and,
to the best of AFC's knowledge, the other parties thereto; (ii) there
has not been and there currently is no breach of any Material Contract
by AFC or any of its Subsidiaries or, to the best of AFC's knowledge,
any other party thereto in any material respect; (iii) no event has
occurred that (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default
by AFC or any of its Subsidiaries thereunder entitling another party to
terminate a Material Contract; and (iv) the continuation, validity and
effectiveness of all such Material Contracts under the current terms
thereof and the current rights and obligations of AFC or any of its
Subsidiaries thereunder will in no way be affected, altered or impaired
by the consummation of the Merger. Except as disclosed in Schedule
4.1(n), there are no contracts or options to sell or lease any material
properties or material assets of AFC or any of its Subsidiaries other
than in the ordinary course of business.
(o) LEGAL PROCEEDINGS. Except as set forth in Schedule 4.1(o):
(i) there is no claim, action, suit, proceeding or investigation
pending or, to the best of AFC's knowledge, contemplated or threatened
against AFC or any Subsidiary or any of its properties or assets (or
any of its officers or directors in connection with the business of AFC
and its Subsidiaries) before any arbitrator or Governmental Entity,
domestic or foreign, that, in the event of a final adverse
determination as to any claim made therein, considered individually or
in the aggregate with all such other unscheduled claims, actions, suits
or proceedings, would have a Material Adverse Effect, or that seeks
treble damages, seeks damages in connection with the Merger or the
Fibers Sale Agreement or seeks to prohibit, restrict or delay
consummation of the Merger or the Fibers Sale Agreement or any of the
conditions to consummation of the Merger or the Fibers Sale Agreement
or to limit in any material manner the right of Holdings or Parent to
control the Surviving Corporation or any aspect of the business of AFC
or its Subsidiaries after the Effective Time, nor is there any
judgment, decree, injunction, ruling or order of any Governmental
Entity, arbitrator or any other person outstanding against AFC or any
Subsidiary having any such effect; and (ii) neither AFC nor any
Subsidiary is a party to or bound by any judgment, decree, injunction,
ruling or order of any Governmental Entity, arbitrator or any other
person against AFC or any Subsidiary that, when considered individually
or in the aggregate with all such other judgments, decrees,
injunctions, rulings or orders, would have a Material Adverse Effect.
(p) LABOR RELATIONS. AFC is in compliance in all material
respects with all federal and state laws respecting employment and
employment practices, terms and conditions of employment, wages and
hours, and is not engaged in any unfair labor or unlawful employment
practice. Except as set forth in Schedule 4.1(p), (i) there is no
unlawful employment practice or discrimination charge pending before
the Equal Employment Opportunity Commission ("EEOC") or any EEOC
recognized state
16
"referral agency;" (ii) there is no unfair labor practice charge or
complaint against AFC or any Subsidiary pending before the National
Labor Relations Board ("NLRB"); (iii) there is no labor strike,
dispute, slowdown or stoppage actually pending or, to the best of AFC's
knowledge, threatened against or involving or affecting AFC or any
Subsidiary; (iv) there is no NLRB representation question respecting
any of its employees; (v) there is no grievance or arbitration
proceeding pending and no written claim therefor exists; and (vi) there
is no collective bargaining agreement that is binding on AFC or any
Subsidiary. Except for any Material Contract disclosed pursuant to
Section 4.1(n), neither AFC nor any Subsidiary is a party to or bound
by any agreement, arrangement or understanding with any employee or
consultant that cannot be terminated on notice of ninety (90) or fewer
days without liability to AFC or a Subsidiary or that entitles the
employee or consultant to receive any salary continuation or severance
payment or retain any specified position with AFC or a Subsidiary.
(q) INSIDER INTERESTS. Except for this Agreement and as
disclosed or incorporated by reference in the AFC's 1995 Annual Report
on Form 10-K, AFC's proxy statement for its 1995 annual meeting of
shareholders, or on Schedule 4.1(q), no known affiliate, officer or
director of AFC or any Subsidiary (i) has any agreement with AFC or any
Subsidiary or any interest in any property, real or personal, tangible
or intangible, including without limitation trade names or trademarks
used in or pertaining to the business of AFC or any Subsidiary, except
for the normal rights as a shareholder or (ii) as of the date hereof,
to the best of AFC's knowledge, has any claim or cause of action
against AFC or any Subsidiary, except for accrued compensation and
benefits, expenses and similar obligations incurred in the ordinary
course of business (including reimbursement of medical expenses
pursuant to Employee Plans) with respect to directors or employees of
AFC or any Subsidiary.
(r) INTELLECTUAL PROPERTY. Schedule 4.1(r) lists all patents,
trademarks, service marks, trade names, copyrights, or applications for
the foregoing and all computer programs, firmware and documentation
relating thereto used in the Fibers Business (other than computer
software generally available to the public and having a purchase price
of less than $1,000 per application) used by AFC or a Subsidiary
("Intellectual Property") with an indication of any that are owned or
licensed by or to AFC or any affiliate of AFC or used or held for use
in the Fibers Business currently (the "Fibers Intellectual Property
Rights"). AFC or a Subsidiary owns or, to the extent disclosed on
Schedule 4.1(r), has adequate rights to use all Intellectual Property
that is material to the operation of AFC's or any of its Subsidiaries'
businesses as of the date hereof (the Agreements relating thereto are
referred to as the "Intellectual Property Agreements", all of which are
listed on Schedule 4.1(r) with an indication of any such agreements
that relate to the Fibers Intellectual Property Rights, which
agreements are referred to herein as the "Fibers Intellectual Property
Agreements"). As to any Intellectual Property owned by AFC or any
Subsidiary, such Intellectual Property is owned free and clear of all
material claims of
17
others, including employees, former employees or independent
contractors of AFC or any Subsidiary, and neither AFC nor any
Subsidiary has received notice that the use of such Intellectual
Property in the business of AFC or the Subsidiaries violates or
infringes upon the claimed rights of others. As to the Intellectual
Property Agreements, except as set forth in Schedule 4.1(r), (i) all
such agreements are in full force and effect, (ii) neither AFC nor any
Subsidiary, nor to the best of AFC's knowledge any other party thereto,
is in material default under any such agreement, (iii) neither AFC nor
any Subsidiary is obligated to make any royalty or similar payments
under any such agreements except as stated therein, and (iv) the rights
of AFC or any Subsidiary under such agreements will not be affected by
the consummation of the Merger. Except as set forth in Schedule 4.1(r),
neither AFC nor any Subsidiary has granted to any person any license or
other right to use in any manner any of the Intellectual Property owned
by AFC or any Subsidiary or has granted any sublicense or right to use
any Intellectual Property licensed to AFC or any Subsidiary under the
Intellectual Property Agreements. Schedule 4.1(r) specifies as to each
Fibers Intellectual Property Right, as applicable: (i) the nature of
such Fibers Intellectual Property Right; (ii) the owner of such
Intellectual Property Right; (iii) the jurisdictions by or in which
such Fibers Intellectual Property Right is recognized without regard to
registration or has been issued or registered or in which an
application for such issuance or registration has been filed, including
the respective registration or application numbers; and (iv) licenses,
sublicenses and other agreements as to which AFC or any of its
affiliates is a party and pursuant to which any person or entity is
authorized to use such Fibers Intellectual Property Right, including
the identity of all parties thereto, a description of the nature and
subject matter thereof, the applicable royalty and the term thereof.
With respect to the Fibers Intellectual Property Rights, AFC has not
during the three years preceding the date of this Agreement been a
defendant in any action, suit, investigation or proceeding relating to,
or otherwise been notified of, any alleged claim or infringement of any
patents, trademarks, service marks or copyrights, and to the best of
AFC's knowledge there are no other claims or infringements by AFC or
any person or entity of any Fibers Intellectual Property Rights. No
Fibers Intellectual Property Right is subject to any outstanding
judgment, injunction, order, decree or agreement restricting the use
thereof by AFC with respect to the Fibers Business or restricting the
licensing thereof to any person or entity. AFC has not entered into any
agreement to indemnify any other person or entity against any charge of
infringement of any patent, trademark, service mark or copyright.
(s) INSURANCE. Schedule 4.1(s) lists all insurance policies or
contracts and fidelity bonds providing coverage to AFC and its
Subsidiaries as of the date hereof with an indication of any that
relate to the business, operations, employees or assets of the Fibers
Business. All such policies or contracts of insurance have been
provided to Holdings and are, in the opinion of AFC's Chief Financial
Officer, of a scope and in an amount usual and customary for businesses
engaged in the businesses of AFC and the Subsidiaries and are
sufficient for compliance with all requirements of law and of all
agreements to which AFC or any Subsidiary is a party as of the date
hereof. All insurance policies and fidelity bonds or other policies and
bonds providing substantially similar insurance coverage pursuant to
18
which any such insurance is provided have been in effect since 1992
and remain in full force and effect, and no effective notice of
cancellation or termination of any such insurance policies
has been given to AFC or any Subsidiary by the carrier of any such
policy or comparable insurance. Through the date hereof, all premiums
required to be paid in connection therewith have been timely paid in
full. There is no claim pending under any of such policies or bonds as
to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds or in respect of which such
underwriters have reserved their rights.
(t) PROXY STATEMENT. The information in the definitive proxy
statement ("Proxy Statement") that will be distributed to shareholders
of AFC in connection with the meeting of such shareholders to approve
this Agreement and the Plan of Merger (the "AFC Shareholders Meeting"),
other than information supplied by Holdings or its authorized
representatives for use in the Proxy Statement will not, on the date or
dates the Proxy Statement is first mailed to shareholders of AFC and at
the time of the AFC Shareholders Meeting, as the Proxy Statement is
then amended or supplemented, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading or necessary to
correct any statement in any earlier filing with the SEC of the Proxy
Statement or amendment thereto or any earlier communication in the
preparation of which AFC participated (including the Proxy Statement)
to shareholders of AFC with respect to the Merger.
(u) EMPLOYEE AND FRINGE BENEFIT PLANS.
(i) SCHEDULE OF PLANS. Schedule 4.1(u) to this
Agreement lists each of the following plans that AFC or any of
its Subsidiaries or any ERISA Affiliate (as defined below)
either maintains, is required to contribute to or otherwise
participates in (or at any time during the preceding three
years maintained, contributed to or otherwise participated in)
or as to which AFC or any of its Subsidiaries or any ERISA
Affiliate has any unsatisfied liability or obligation, whether
accrued, contingent or otherwise:
(A) any employee pension benefit plan (as such
term is defined in the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")),
(B) any "multi-employer plan" (as such term is
defined in ERISA), or
(C) any other generally applicable compensation
plan, written welfare or fringe benefit plan or any
stock, retirement or retiree medical plan, of any kind
whatsoever, not included in the foregoing and providing
for benefits for, or the welfare of, any or all of the
current or former employees or agents of
19
AFC or any of its Subsidiaries or any ERISA Affiliate or
their beneficiaries or dependents,
(all of the foregoing in items (A), (B), and (C) being referred
to as "Employee Plans"). "ERISA Affiliate" means each trade or
business (whether or not incorporated) which together with AFC
or any of its Subsidiaries is treated as a single employer
pursuant to Code Section 414(b), (c), (m) or (o). AFC has
provided to Holdings copies of the following: (1) each written
Employee Plan, as amended (including either the original plan
or the most recent restatement and all subsequent amendments);
(2) the most recent Internal Revenue Service ("IRS")
determination letter issued, if applicable; (3) the most recent
annual report on the Form 5500 series; (4) each trust
agreement, insurance contract or document setting forth any
other funding arrangement, if any, with respect to each
Employee Plan; (5) the most recent ERISA summary plan
description or other summary of plan provisions distributed to
participants or beneficiaries for each Employee Plan; (6) each
opinion or ruling from the IRS, the Department of Labor or the
Pension Benefit Guaranty Corporation ("PBGC") concerning any
Employee Plan; and (7) each current Registration Statement,
amendment thereto and prospectus relating thereto filed with
the SEC or furnished to participants in connection with any
Employee Plan if applicable.
(ii) QUALIFICATION. Except as set forth in Schedule
4.1(u), each Employee Plan that is intended to be a qualified
Plan under Code Section 401 or 501: (A) has received a current
favorable determination letter from the IRS to the effect that
the form of the plan satisfies Code Section 401(a) and that its
trust is tax-exempt under Code Section 501(a); (B) is not
currently subject to any assertion by any governmental agency
that it is not so qualified; and (C) to the best of AFC's
knowledge has been operated substantially in accordance with
its terms.
(iii) ACCRUALS; FUNDING.
(A) EMPLOYEE PENSION BENEFIT PLANS. AFC has
provided to Holdings copies of actuarial valuation
reports as of the end of each Employee Plan's most
recently ended fiscal year (or, each Employee Plan's
second most recently ended fiscal year if the required
information is not yet available for such Employee
Plan's most recently ended fiscal year) (such year end,
as applicable, being referred to as the "Applicable Plan
Year-End"), for each Employee Plan subject to ERISA
Title IV (including those for retired, terminated or
other former employees and agents). Except as set forth
in Schedule 4.1(u), none of the Employee Plans subject
to ERISA Title IV has: (I) incurred any "accumulated
funding deficiency" (as such term is defined in ERISA);
(II) incurred employer liability with respect to any of
such Plans as determined in accordance with ERISA
Sections 4062 or 4063; (III) become
20
subject to a Lien under Section 4.12(n); or (IV) been
the subject of a minimum funding waiver. Except as set
forth in Schedule 4.1(u), the actuarially computed
present value of the benefits of each such Employee
Plan, accrued to the Applicable Plan Year-End, does not
exceed the value of the assets of such Employee Plan.
There have been no material changes in the financial
condition of any of the Employee Plans since the
Applicable Plan Year-End.
(B) OTHER PLANS. AFC has provided to Holdings
information describing any liabilities under any retiree
medical, dental or life insurance arrangement.
(C) CONTRIBUTIONS. Except as disclosed in Schedule
4.1(u): (I) AFC, and its Subsidiaries and each ERISA
Affiliated have in all material respects made full and
timely payment of all amounts required to be contributed
under the terms of each Employee Plan and applicable
law, or required to be paid as expenses under such
Employee Plan, including PBGC premiums and amounts
required to be contributed under Code Section 412; and
(II) no excise taxes or Liens are assessable against
AFC, its Subsidiaries or any ERISA Affiliate as a result
of any nondeductible or other contributions made or not
made to an Employee Plan or any other plan of an ERISA
Affiliate.
(iv) REPORTING AND DISCLOSURE. Summary plan descriptions
and all other returns, reports, registration statements,
prospectuses, documents, statements and communications which
are required to have been filed, published or disseminated
under ERISA or other federal law and the rules and regulations
promulgated by the Department of Labor under ERISA and the
Treasury Department or by the SEC with respect to the Employee
Plans have been so filed, published or disseminated or if not
so filed, published or disseminated, such failure to file,
publish or disseminate will not result in a Material Adverse
Effect.
(v) PROHIBITED TRANSACTIONS; TERMINATIONS; OTHER
REPORTABLE EVENTS. Except as set forth in Schedule 4.1(u), with
respect to the Employee Plans neither AFC, any Subsidiary of
AFC, any ERISA Affiliate, any of the Employee Plans, any trust
or arrangement created under any of them, nor any trustee,
fiduciary, custodian, administrator nor any person or entity
holding or controlling assets of any of the Employee Plans has
engaged in any "prohibited transaction" (as such term is
defined in ERISA or the Code) for which there is no exception
which could subject any of the foregoing persons or entities,
or any person or entity dealing with them, to any tax, penalty
or other cost or liability of any kind except for any tax,
penalty, cost or liability that would not have a Material
Adverse Effect; and no "reportable event" (as such term is
defined in ERISA) has occurred with respect to any Employee
Plan subject to Title IV of ERISA; and no investigation by a
21
Governmental Entity is currently underway or threatened with
respect to any Employee Plan.
(vi) CLAIMS FOR BENEFITS. Except as set forth in
Schedule 4.1(u), with respect to the Employee Plans, other than
claims for benefits arising in the ordinary course of the
administration and operation of the Employee Plans, as of the
date hereof, no claims, investigations or arbitrations are
pending or threatened against any Employee Plan or against AFC,
any Subsidiary of AFC, any ERISA Affiliate, any trust or
arrangement created under or as part of any Employee Plan, any
trustee, fiduciary, custodian, administrator or other person or
entity holding or controlling assets of any Employee Plan, and
to the best of AFC's knowledge, no basis to anticipate any such
claim or claims exists.
(vii) OTHER. With respect to the Employee Plans, each
of AFC, each Subsidiary of AFC and all ERISA Affiliates have
substantially complied with all of their obligations under each
of the Employee Plans and with all provisions of ERISA and the
Code and any and all other law applicable to the Employee Plans
except insofar as a failure to comply would not have a Material
Adverse Effect. No written notice has been received by AFC or
any Subsidiary of AFC of any claim by any participant in the
Employee Plans of any violations of such laws, and to the best
of AFC's knowledge, no such claims are pending or threatened.
(viii) CREATION OF OBLIGATIONS BY REASON OF MERGER.
Except as set forth in such Schedule 4.1(u), the execution of
this Agreement or the consummation of the Merger will not
constitute an event under any Employee Plan that will or may
result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund
benefits with respect to any employee, including any obligation
to make a payment that would be nondeductible under Code
Section 280G or any other Code provision.
(ix) NO MULTI-EMPLOYER PLANS. Except as set forth in
Schedule 4.1(u), none of the Employee Plans is a Multi-Employer
Plan, and neither AFC, any Subsidiary of AFC nor any ERISA
Affiliate has any liability, joint or otherwise, for any
withdrawal liability (potential, contingent or otherwise) under
ERISA Title IV for a complete or partial withdrawal from any
Multi-Employer Plan.
(v) MAJOR CUSTOMERS. Schedule 4.1(v) sets forth (i) the name of
each customer of AFC or any of its Subsidiaries that during the year
ended December 31, 1996, generated revenue of $1,000,000 or more of
tobacco filters or $250,000 or more of medical diagnostic kit
components or other bonded fibers products or $1,000,000 or more of any
other products, (ii) the volume of such revenue from such customer for
such year, and (iii) the name of each such customer as to which AFC has
received a termination
22
notice or a notice of a decrease or intended decrease in sales volume
22 or any intent to terminate or adversely modify in any material
respect its contractual or business relationship with the relationship
with the Fibers Business as a result of the consummation of the Merger
or the Fibers Sale Agreement.
(w) SECTIONS 13.1-725 THROUGH 13.1-727.1. The Board of
Directors of AFC has taken all action necessary to make the provisions
of Sections 13.1-725 through 13.1- 727.1 of the VSCA inapplicable to
the Merger, including approval of the Merger and the acquisition, after
execution of the Agreement, by Holdings and by Parent of beneficial
ownership of more than 10% of the outstanding shares of AFC Common
Stock by a majority of AFC's "disinterested directors" (as defined in
Section 13.1-725 of the VSCA with respect to such acquisition by
Holdings and by Parent of beneficial ownership of more than 10% of the
outstanding shares of AFC Common Stock).
(x) ENVIRONMENTAL. Except as set forth in Schedule 4.1(x):
(i) no generation, storage, presence, contamination,
transport, emission, discharge or "release" (as such term is defined in
42 U.S.C. ss. 9601(22)) of any Hazardous Substance (as defined below)
exists or is occurring (or has existed or occurred) from, or upon, any
property owned, leased, used or controlled at any time by AFC or any
Subsidiary in any manner that constituted or constitutes a violation
of, or that reasonably could be expected to give rise to liabilities or
obligations under any applicable Environmental Law;
(ii) there is no past or present action, activity,
event, condition or circumstance (A) that could be reasonably expected
to require AFC or any Subsidiary to incur costs of removal,
remediation, response or corrective action (and the terms "removal,"
"remediation," "response" and "corrective action" include the types of
activities covered by CERCLA (as defined below) pursuant to any
Environmental Laws (as defined below) with respect to any Hazardous
Substances or Waste (as defined below) or (B) that could be reasonably
expected to give rise to any common law or statutory liability
(including punitive or exemplary damages and whether assessed with
respect to personal injury or property damage, damage to the natural
resources or the environment or otherwise) on the part of AFC or any of
its Subsidiaries;
(iii) Either AFC or a Subsidiary of AFC has obtained,
maintained and complied with all permits, registrations, licenses, and
other authorizations, has maintained all records and has made all
filings required by applicable Environmental Laws (as defined below)
with respect to storage, presence, contamination, generation,
transport, emission, discharge or release into the environment of any
substance (including solids, liquids and gases) and the proper disposal
of such materials (including solid waste materials and petroleum or any
fractions or by-products of it) required for AFC's or any of its
Subsidiary's operations at past or present operating levels;
23
(iv) Neither AFC nor any of its Subsidiaries has
received any notice of any action, activity, event, condition or
circumstance covered by any of clauses (i), (ii) or (iii) above or
otherwise alleging any liability under any Environmental Law;
(v) without limiting or being limited by the
foregoing, AFC and each of its Subsidiaries is (and has been) otherwise
in compliance with all Environmental Laws in respect of any of the
properties owned, leased, used or controlled at any time by AFC, of any
of the products, business operations or other activities of AFC and its
Subsidiaries, and no facts or circumstances exist that could be
reasonably expected to interfere with AFC's compliance with
Environmental Laws;
(vi) no polychlorinated biphenyls, radioactive material,
lead, asbestos-containing material, incinerator, surface impoundment,
lagoon, landfill, septic, wastewater treatment or other disposal system
or underground storage tank (active or abandoned) is or has been
present at any real property owned or leased by AFC or any of its
Subsidiaries in any manner that constituted or constitutes a violation
of, or that reasonably could be expected to give rise to liabilities or
obligations under any applicable Environmental Law;
(vii) no Hazardous Substance has been discharged,
disposed of, dumped, injected, deposited, spilled, leaked, emitted or
released at, on or under any real property owned or leased by AFC or
any of its Subsidiaries;
(viii) no real property owned or leased by AFC or any of
its Subsidiaries, nor any property to which Hazardous Substances
located on or resulting from the use of any asset or real property
owned or leased by AFC or any of its Subsidiaries have been transported
is listed or, to AFC's knowledge, proposed for listing on the National
Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined
in CERCLA) or on any similar federal, state, local or foreign list of
sites requiring investigation or cleanup;
(ix) there are no permits under Environmental Laws that
are either nontransferable or require consent, notification or other
action to remain in full force and effect following the consummation of
the transactions contemplated hereby;
(x) there has been no environmental investigation,
study, audit, test, review or other analysis conducted of which AFC has
knowledge in relation to the business or assets of AFC or any of its
Subsidiaries that has not been delivered to Holdings at least ten days
prior to the date hereof; and
(xi) none of the assets owned by AFC or any of its
Subsidiaries is located in New Jersey or Connecticut.
Schedule 4.1(x) lists all environmental site
assessments, internal audits, phase I audits, and tests and reports
regarding significant remediation or disposal activities, with respect
to the business, assets or operations of AFC or any of its Subsidiaries
or with
24
respect to any real property owned or operated at any time by
AFC or any of its Subsidiaries. "Environmental Laws" means and includes
all applicable laws relating to protection of the environment,
prevention or minimization of pollution, control and tracking of
Hazardous Substances and Wastes, protection of human health or similar
matters, including those relating to the generation, use, collection,
treatment, storage, transportation, recovery, removal, discharge or
disposal of Hazardous Substances and any record keeping, notification
and reporting requirements of them. "Hazardous Substance" means and
includes: [1] any toxic or hazardous wastes, materials, pollutants or
substances, including petroleum or petroleum-based or related products
and its fractions and by-products, flammables, explosives, radioactive
materials, asbestos, polychlorinated byphenyls, pesticides, herbicides,
pesticide or herbicide containers, untreated sewage, and industrial
process sludge; [2] any substances defined as "hazardous substances" or
"toxic substances" or similarly identified in or pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. ss. 9601 et seq., as amended; [3] "hazardous materials"
as identified in or pursuant to the Hazardous Materials Transportation
Act, 49 U.S.C. ss. 1801 et seq., as amended; [4] "hazardous wastes" and
"regulated substances" as identified in or pursuant to the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., as amended;
[5] any chemical substance or mixture regulated under the Toxic
Substance Control Act of 1976, 15 U.S.C. ss. 2601 et seq., as amended;
[6] any "toxic pollutant" under the Clean Water Act, 33 U.S.C. ss. 466
et seq., as amended; [7] any hazardous air pollutant under the Clean
Air Act, 42, U.S.C. ss. 7401 et seq., as amended; and [8] any toxic or
hazardous wastes, materials, pollutants or substances regulated under
any other applicable law, including any so-called "Super Fund" or
"Super Lien" legislation relating to environmental, pollution or
similar matters. "Waste" means and includes any garbage, refuse or
waste, whether or not involving Hazardous Substances. For purposes of
this Section, the term "AFC" shall include any entity which is, in
whole or in part, a predecessor of AFC.
(y) ACCURACY OF SCHEDULES, CERTIFICATES AND DOCUMENTS. All
information concerning AFC and its Subsidiaries contained in this
Agreement, in any certificate furnished to Holdings pursuant hereto and
in each schedule attached hereto is both complete (in that, except as
otherwise stated therein, it represents all the information called for
by the description of the respective schedule in this Agreement and
does not omit to state any material fact necessary to make the
statements contained therein not misleading) and accurate in all
material respects; and all documents furnished to Holdings pursuant to
this Agreement as being documents described in this Agreement or in any
schedule attached hereto are true and complete copies of the documents
that they purport to represent.
(z) BROKERS, FINDERS AND INVESTMENT BANKERS. None of AFC or
any of its Subsidiaries or any of its officers, directors or employees
have employed any broker, finder or investment banker or incurred any
liability for any investment banking fees, financial advisory fees,
brokerage fees or finders' fees in connection with the transactions
contemplated by this Agreement, except that AFC has arrangements with
Goldman, Sachs & Co., the complete terms of which have been disclosed
to Holdings.
25
(aa) INVENTORIES AND RAW MATERIALS OF FIBERS BUSINESS. The
inventories set forth in the Fibers Balance Sheet were properly stated
therein (after making provisions for obsolescent, obsolete, slow-moving
and similar items) at the lesser of cost or fair market value
determined in accordance with GAAP consistently maintained and applied.
Since the Fibers Balance Sheet Date, the level of inventories related
to the Fibers Business has been maintained in the ordinary course of
business. All of the inventories recorded on the Fibers Balance Sheet
consist of, and all inventories related to the Fibers Business on the
Closing Date will consist of, items of a quality usable or saleable in
the normal course of the Fibers Business consistent with past practices
and are and will be in quantities sufficient for the normal operation
of the Fibers Business in accordance with past practice. The level of
raw materials held for use in the Fibers Business as of the Closing
Date will not exceed the normal requirements of the Fibers Business for
such raw materials for a period of 90 days.
(bb) RECEIVABLES OF THE FIBERS BUSINESS. All accounts, notes
receivable and other receivables (other than receivables collected
since the Fibers Balance Sheet Date) reflected on the Fibers Balance
Sheet are, and all accounts and notes receivable arising from or
otherwise relating to the Fibers Business at the Closing Date will be,
valid and genuine. All accounts, notes receivable and other receivables
arising out of or relating to the Fibers Business at the Fibers Balance
Sheet Date have been included in the Fibers Balance Sheet in accordance
with GAAP applied on a consistent basis.
(cc) EMPLOYEES OF FIBERS BUSINESS. Schedule 4.1(cc) sets forth
a true and complete list of the names and titles of all employees of
the Fibers Business as of January 31, 1997 and the annual salaries and
other compensation of such employees as of December 31, 1996. No key
employee of the Fibers Business has indicated to AFC that he intends to
resign or retire as a result of the transactions contemplated by this
Agreement or otherwise within one year after the Closing Date.
(dd) PRODUCTS OF THE FIBERS BUSINESS. Each of the products
produced or sold in connection with the Fibers Business is, and at all
times up to and including the sale thereof has been, (i) in compliance
in all material respects with all applicable federal, state, local and
foreign laws and regulations and (ii) fit for the ordinary purposes for
which it is intended to be used and conforms in all material respects
to any promises or affirmations of fact made on the container or label
for such product or in connection with its sale. Each of such products
contains adequate warnings, presented in a reasonably prominent manner,
in accordance with applicable laws, rules and regulations and current
industry practice with respect to its contents and use.
(ee) INTRACOMPANY ACCOUNTS. Schedule 4.1(ee) contains a
complete list of all intracompany balances as of the Fibers Balance
Sheet Date between AFC and its respective Affiliates, on the one hand,
and the Fibers Business, on the other hand. Except as set forth on
Schedule 4.1(ee), since the Fibers Balance Sheet Date there has not
been any accrual of liability by the Fibers Business to AFC or any of
its respective Affiliates or other transaction between the Fibers
Business, on the one hand, and AFC or any of its
26
respective Affiliates on the other hand, except in the ordinary
course of business of the Fibers Business and on terms no less
favorable to the Fibers Business than obtainable on an arm's-length
basis.
(ff) FOREIGN CURRENCY EXPOSURES.
(i) Except as disclosed on Schedule 4.1(ff)(i), there
has been no sales within the three years ending on December 31,
1996 of the products of the Business to any person or entity
that denominated its pricing for such products in any currency
other than the United States dollar (other than any sales not
exceeding $50,000 per annum in the aggregate).
(ii) Except as disclosed on Schedule 4.1(ff)(ii), there
have been no purchases within the three years ending on
December 31, 1996, of any raw materials or inventory used in
the Fibers Business from any person or entity that denominated
its pricing for such raw materials or inventory in any currency
other than the United States dollar (other than any purchases
not exceeding $50,000 per annum in the aggregate).
(gg) COMPANY NAME. To the best of AFC's knowledge, AFC has the
exclusive right to use the name "Filtrona" and any derivations thereof
in the United States of America and Canada.
(hh) INDEBTEDNESS. Except as disclosed on Schedule 4.1(hh), AFC
does not have any Indebtedness, which in any case represents any lien,
encumbrance, obligation or other liability to which any asset of the
Fibers Business is subject or which was incurred in the operation of
the Fibers Business. As used in this Agreement, Indebtedness means, at
any date, without duplication, (i) all obligations of AFC for borrowed
money, (ii) all obligations of AFC evidenced by bonds, debentures,
notes or other similar instruments, (iii) all obligations of AFC to pay
the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business, (iv) all
obligations of AFC as lessee which are capitalized in accordance with
GAAP, (v) all non-contingent obligations of AFC to reimburse any bank
or other person or entity in respect of amounts paid under a letter of
credit or similar instrument, (vi) all indebtedness secured by a Lien
on any asset of AFC, whether or not such indebtedness is otherwise an
obligation of AFC and (vii) all guarantees by AFC of indebtedness of
another person or entity (each such guarantee to constitute
indebtedness in an amount equal to the amount of such other person's or
entity's indebtedness guaranteed thereby).
4.2 REPRESENTATIONS AND WARRANTIES BY HOLDINGS, PARENT AND SUBCORP.
Holdings, Parent and SubCorp, jointly and severally, represent and warrant to,
and agree with, AFC as of the date hereof and as of the Closing as follows:
(a) ORGANIZATION AND QUALIFICATION, ETC. Holdings is a limited
liability company validly existing and in good standing under the laws
of the State of Georgia and has the
27
necessary power and authority to own all its properties and assets and
to carry on its business as it is now being conducted. SubCorp and
Parent are corporations duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia and have the
corporate power and authority to own all their properties and assets
and to carry on their businesses as they are now being conducted. The
copies of Holdings's Articles of Organization and Parent's and
SubCorp's Articles of Incorporation and Bylaws, in each case, as
amended to date, which have been delivered to AFC, are complete and
correct, and such instruments, as so amended, are in full force and
effect at the date hereof.
(b) CAPITALIZATION. The authorized equity of Holdings consists
of percentage interests totaling 100%. The authorized capital stock of
Parent consists of 1,000 shares of common stock, no par value, of which
100 shares are validly issued and outstanding, fully paid and
non-assessable. The authorized capital stock of SubCorp consists of
1,000 shares of common stock, no par value, of which 100 shares are
validly issued and outstanding, fully paid and non-assessable. Holdings
owns all of the outstanding shares of Parent, and Parent owns all of
the outstanding shares of SubCorp.
(c) AUTHORITY. Each of Holdings, Parent and SubCorp has the
power and authority to execute and deliver this Agreement. SubCorp has
the power and authority to consummate the Merger. The execution and
delivery by Holdings of this Agreement has been duly authorized by its
Managers (or a duly authorized committee thereof). The execution and
delivery by each of Parent and SubCorp of this Agreement and the
consummation by SubCorp of the Merger in accordance with the Plan of
Merger has been duly authorized by its Board of Directors (or a duly
authorized committee thereof). No other action on the part of Holdings,
Parent or SubCorp is necessary to authorize the execution and delivery
of this Agreement by Holdings, Parent or SubCorp or the consummation by
SubCorp of the Merger in accordance with the Plan of Merger. This
Agreement has been duly executed and delivered by Holdings, Parent and
SubCorp and is a valid, binding and enforceable agreement of each of
Holdings, Parent and SubCorp. Parent as the sole shareholder of SubCorp
has approved this Agreement and the Plan of Merger.
(d) NON-CONTRAVENTION. The execution and delivery of this
Agreement by Holdings, Parent and SubCorp do not and, subject to the
expiration of the applicable waiting periods after the filings required
by the HSR Act referred to in paragraph (e) below, the consummation by
SubCorp of the Merger does not and will not (i) violate or conflict
with any provision of the Articles of Incorporation or Bylaws of Parent
or SubCorp or the Articles of Organization of Holdings or (ii) violate
or conflict with, or result (with the giving of notice or the lapse of
time or both) in a violation of or constitute a default under, any
provision of, or result in the acceleration or termination of or
entitle any party to accelerate or terminate (whether after the giving
of notice or lapse of time or both) any obligation or benefit under, or
result in the creation or imposition of any Lien upon any of the assets
or property of Holdings, Parent or SubCorp pursuant to any provision of
any contract, agreement, commitment, undertaking, arrangement or
28
understanding to which Holdings or any of its Subsidiaries is a party
or bound or to which any of their assets or properties are subject (a
"Holdings Material Contract"), law, ordinance, regulation, order,
arbitration award, judgment or decree to which Holdings, Parent or
SubCorp is a party or by which either of them or their respective
assets or properties is bound and do not and will not violate or
conflict with any other restriction of any kind or character to which
Holdings, Parent or SubCorp is subject or by which any of their assets
or properties may be bound, and the same does not and will not
constitute an event permitting termination of any Holdings Material
Contract, if such violation, conflict, default, acceleration,
termination, entitlement, creation or imposition of Liens would, when
taken together with all other such violations, conflicts, defaults,
accelerations, terminations, entitlements to accelerate, creations and
impositions of Liens and events, affect materially and adversely the
financial condition or results of operations of Holdings and its
Subsidiaries taken as a whole.
(e) GOVERNMENTAL CONSENTS. Except for the filing of the Proxy
Statement and filings under Rule 13e-3 promulgated by the SEC under the
Exchange Act ("Rule 13e-3") with the SEC and any required filings with
state securities commissions, filings with the FTC and Justice as
required by the HSR Act, and the filing of the Articles of Merger with
the Commission, no consent, authorization, order or approval, or filing
or registration with, any Governmental Entity is required for or in
connection with the execution and delivery of this Agreement by
Holdings, Parent or SubCorp and the consummation by SubCorp of the
Merger.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30,
1996, there has not been any material adverse change in the business,
financial condition or results of operations of Holdings, Parent and
its Subsidiaries, taken as a whole.
(g) PROXY STATEMENT. The information with respect to Holdings,
its managers, officers, and Subsidiaries (including Parent and SubCorp)
and its negotiations with Bunzl that shall have been supplied by
Holdings or its respective authorized representatives in writing for
use in the Proxy Statement will not, on the date or dates the Proxy
Statement is first mailed to shareholders of AFC and at the time of the
AFC Shareholders Meeting, as the Proxy Statement is then amended or
supplemented, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they are made, not misleading or necessary to correct statements in any
earlier filing with the SEC or amendment thereto or any earlier
communication (in the preparation of which Holdings participated) to
shareholders of AFC with respect to the Merger.
(h) ACTIVITIES OF SUBCORP. SubCorp was formed solely for the
purpose of engaging in the transactions contemplated in this Agreement.
Except for obligations or liabilities incurred in connection with its
incorporation or organization or the negotiation and consummation of
this Agreement and the transactions contemplated hereby, SubCorp has
neither incurred any obligations or liabilities nor engaged in any
business or activities
29
of any type or kind whatsoever or entered into any agreements or
arrangements with any person or entity.
(i) LEGAL PROCEEDINGS. There is no claim, action, suit,
proceeding or investigation pending or, to the best of Holdings',
Parent's and SubCorp's knowledge, contemplated or threatened against
Holdings, Parent's, SubCorp or any of their respective Subsidiaries (or
any of their respective officers, directors or managers) before any
arbitrator or Governmental Entity, foreign or domestic, that seeks to
prohibit, restrict or delay consummation of the Merger or any of the
conditions to consummation of the Merger nor is there any judgment,
decree, injunction, ruling or order of any Governmental Entity,
arbitrator or other person outstanding against Holdings, Parent,
SubCorp or any of their respective Subsidiaries having any such effect.
As used in this Agreement, the "best of Holdings', Parent's and
SubCorp's knowledge" and any other reference to the knowledge of
Holdings or its officers or managers or of Parent or SubCorp or their
officers or directors shall mean the actual knowledge, without
independent investigation, of Frances B. Bunzl and Bennett L. Kight.
(j) BROKERS, FINDERS AND INVESTMENT BANKERS. None of Holdings,
Parent, SubCorp or any of their respective Subsidiaries or any of their
respective officers, directors, managers or employees have employed any
broker, finder or investment banker or incurred any liability for any
investment banking fees, financial advisory fees, brokerage fees or
finders' fees in connection with the transactions contemplated by this
Agreement, except that SubCorp has arrangements with First Union
Capital Markets Corp., the complete terms of which have been disclosed
to AFC. SubCorp is solely responsible for and shall pay all of the fees
and expenses to which First Union Capital Markets Corp. is entitled in
connection with such arrangements.
(k) OBLIGATIONS TO FUND. Pursuant to the commitment referenced
in Section 6.2(h), SubCorp will have as of the Closing Date cash in an
amount sufficient to pay in U.S. dollars the Merger Consideration for
each share of AFC Common Stock upon surrender of all the shares of AFC
Common Stock after the consummation of the Merger and to fund the
payment of the Option Payments.
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 CONDUCT OF BUSINESS. During the period from the date hereof to the
Effective Time (except as required by law or as set forth on Schedule 5.1 and
except for the transactions contemplated by this Agreement):
(a) OPERATION BY AFC IN THE ORDINARY COURSE OF BUSINESS. AFC
shall, and shall cause each of its Subsidiaries to, (i) conduct its
operations according to its ordinary and usual course of business in
substantially the same manner as heretofore conducted and (ii) use its
reasonable efforts to preserve intact its business organization as
appropriate in
30
the ordinary course of business consistent with past practice, to keep
available the services of its officers and employees and to maintain
satisfactory relationships with licensors, suppliers, distributors,
customers and others having business relationships with it. AFC shall
prepare and file all federal, state, local and foreign Tax Returns and
other tax reports, filings and amendments thereto required to be filed
by it, and allow Holdings, at its request, to review all such returns,
reports, filings and amendments relating to income taxes at AFC's
offices prior to the filing thereof, which review shall not interfere
with the timely filing of such returns.
(b) FORBEARANCES BY AFC. Except as contemplated by this
Agreement, neither AFC nor any of its Subsidiaries shall, without the
prior written consent of Holdings, which consent shall not be
unreasonably withheld:
(i) except as otherwise permitted pursuant to clause
(vi) below, intentionally incur any debt, liability or
obligation, direct or indirect, whether accrued, absolute,
contingent or otherwise, other than current liabilities
incurred in the ordinary and usual course of business, pay any
debt, liability or obligation of any kind other than such
current liabilities and current maturities of existing
long-term debt (including interest when due) in each case only
in accordance with the terms of the document creating and
evidencing such debt, fail to pay any debt when due or take or
fail to take any action, the taking of which, or the failure to
take of which, would permit any debt to be accelerated;
(ii) assume, guarantee, endorse or otherwise become
responsible for the obligations of any other individual, firm
or corporation, or make any loans or advances to any
individual, firm or corporation other than a Subsidiary
notwithstanding the foregoing, AFC and each of its Subsidiaries
shall be entitled to endorse checks and to make cash advances
to, and reimburse the business expenses of, their respective
directors, officers, employees and agents, all in the ordinary
course of business consistent with past practice;
(iii) other than regular quarterly cash dividends at
the rate of $.28 per share on the AFC Common Stock consistent
with past practice, declare, set aside or pay any dividend
(whether in cash, capital stock or property) with respect to
its capital stock, or declare or make any distribution on,
redeem or purchase or otherwise acquire (other than the
acquisition of AFC Common Stock from optionees in payment of
the exercise price or withholding taxes upon the exercise of
employee stock options outstanding on the date hereof), any AFC
Common Stock, or split, combine or otherwise similarly change
the outstanding AFC Common Stock, or authorize the creation or
issuance of or issue or sell any shares of its capital stock or
any securities or obligations convertible into or exchangeable
for, or giving any person any right to acquire from it, any
shares of its capital stock, or agree to take any such action,
except for the issuance of AFC Common Stock upon the exercise
of options described in Section 4.1(b);
31
(iv) mortgage, pledge or otherwise encumber any
property or asset, except in the ordinary and usual course of
business;
(v) sell, lease, transfer or dispose of any of its
properties or assets, waive or release any rights or cancel,
compromise, release or assign any indebtedness owed to it or
any claims held by it, except that AFC in the ordinary and
usual course of business may make such sales, leases,
transfers, dispositions, waivers, releases, cancellations,
compromises or assignments other than with respect to the
Fibers Business;
(vi) make any capital expenditure or any investment
of a capital nature (other than to any of its Subsidiaries)
except as described in Schedule 5.1(b)(vi), either by purchase
of stock or securities, contributions to capital, property
transfers or otherwise, or by the purchase of any property or
assets of any other individual, firm or corporation; provided,
however, that AFC may make capital expenditures in the Fibers
Business not in excess of $50,000 per instance or in excess of
$200,000 in the aggregate and may make capital expenditures
other than in the Fibers Business not in excess of $50,000 per
instance or in excess of $300,000 in the aggregate.
(vii) fail to use commercially reasonable efforts to
perform in all material respects its obligations under Material
Contracts (except those being contested in good faith) or enter
into, assume or amend any contract or commitment that would
have been a Material Contract in effect on the date hereof
other than contracts to provide goods or services entered into
in the ordinary and usual course of business;
(viii) except for regularly scheduled increases in
accordance both as to timing and amount with normal prior
practice, increase in any manner the compensation or fringe
benefits of any of its officers or employees or pay or agree to
pay any pension or retirement allowance not required by any
existing plan or agreement to any such officers or employees,
or commit itself to or enter into any employment agreement or
any incentive compensation, deferred compensation, profit
sharing, stock option, stock appreciation rights, performance
shares, stock purchase, savings, consulting, severance,
retirement, pension or other "fringe benefit" plan, award or
arrangement with or for the benefit of any officer, employee or
other person or material consulting agreement;
(ix) permit any insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or
terminated or any of the coverage thereunder to lapse, unless
AFC makes reasonable efforts to obtain simultaneously with such
termination or cancellation replacement policies on
commercially reasonable terms providing substantially the same
coverage;
(x) amend its Articles of Incorporation or Bylaws;
(xi) enter into any union, collective bargaining or
similar agreement;
32
(xii) purchase or sell any raw materials, inventory or
product used in, or produced by, the Fibers Business in any
transaction where the pricing for such raw materials, inventory
or product is in any currency other than the United States
dollar;
(xiii)purchase any intangible assets, including, without
limitation, patents or trademarks;
(xiv) enter into an agreement to do any of the things
described in clauses (i) through (xiii);
provided, however, that notwithstanding any other provision of this Section
5.1(b), AFC will not enter into a contract for construction of a building in
connection with the proposed capital expenditures for a new facility at A&B
Plastics or the purchase or renovation of any building for Tri-Lite Plastics
without the prior written consent of Holdings, unless the chairman of the
Special Committee of the AFC Board determines otherwise after requesting, and
allowing a period of time determined by the chairman to receive, the views of
Holdings.
In connection with the continued operation of the business of AFC and its
Subsidiaries between the date of this Agreement and the Effective Time, AFC
shall confer in good faith on a regular basis with one or more representatives
of Holdings designated in writing to receive reports on operational matters of
materiality and the general status of ongoing operations. AFC acknowledges that
Holdings does not thereby waive any rights it may have under this Agreement as a
result of this covenant to engage in consultations nor shall Holdings be
responsible for any decisions made by AFC's officers and directors with respect
to matters that are the subject of such consultation. Any act or failure to act
by AFC or any of its Subsidiaries consented to in writing by Holdings shall not
constitute a breach by AFC of any representation, warranty, covenant or
agreement contained in this Agreement.
(c) CONDUCT OF THE FIBERS BUSINESS. From the date hereof until
the Closing Date, AFC will promptly notify Holdings of any development
or occurrence relating to the Fibers Business not in the ordinary
course of business consistent with past practices or that contravenes
or is reasonably likely to contravene the provisions of Section 4.1(i).
(d) NOTICES OF CERTAIN EVENTS. AFC shall promptly notify
Holdings of each of the following of which it has notice:
(i) any notice or other communication from any person or
entity alleging that the consent of such person or entity is or
may be required in connection with the Merger or the Fibers
Sale Agreement;
(ii) any notice or other communication from any
Governmental Entity in connection with the Merger or the Fibers
Sales Agreement;
33
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge threatened against,
relating to or involving or otherwise affecting AFC or the
Fibers Business that, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to any
provision of this Agreement or that relate to the consummation
of the Merger or the Fibers Sale Agreement; and
(iv) the damage or destruction by fire or other casualty
of any asset of the Fibers Business or in the event that any
asset of the Fibers Business becomes the subject of any
proceeding or, to the knowledge of AFC, threatened proceeding
for the taking thereof or any part thereof or of any right
relating thereto by condemnation, eminent domain or other
similar governmental action.
5.2 AFC SHAREHOLDERS MEETING. Subject to the provisions of Article 7,
AFC covenants and agrees that its Board of Directors shall (a) cause the AFC
Shareholders Meeting to be duly called and held in accordance with AFC's
Articles of Incorporation, its Bylaws and applicable law as soon as reasonably
practicable to consider and vote upon the approval of this Agreement and the
Plan of Merger; (b) recommend approval of this Agreement and the Plan of Merger
to the holders of the AFC Common Stock; and (c) use commercially reasonable
efforts to cause such meeting to take place and to obtain the approval by the
holders of the AFC Common Stock of this Agreement and the Plan of Merger in
accordance with its Articles of Incorporation, Bylaws and the VSCA.
5.3 BEST EFFORTS; FURTHER ASSURANCES; COOPERATION. Subject to the other
provisions in this Agreement, the parties hereto shall each use commercially
reasonable efforts to perform their respective obligations herein and to take,
or cause to be taken or do, or cause to be done, all things necessary, proper or
advisable under applicable law to obtain all regulatory approvals, consents,
authorizations and orders and satisfy all conditions to the obligations of the
parties under this Agreement and to cause the Merger to be carried out promptly
in accordance with the terms hereof and shall cooperate fully with each other
and their respective officers, directors, employees, agents, counsel,
accountants and other designees in connection with any steps required to be
taken as part of their respective obligations under this Agreement, including
without limitation:
(a) REGULATORY ACTION. AFC and Holdings shall each promptly,
but in no event later than 15 days after the date of this Agreement,
make the respective filings and submissions required under the
provisions of the HSR Act relating to the Merger and to the Fibers Sale
Agreement, and thereafter shall comply fully and promptly with any
request for additional information ("second request"), voluntary
request to submit information, third party subpoena or civil
investigative demand that might be issued to or served on such party in
connection with any investigation under the HSR Act. AFC and Holdings
shall each use commercially reasonably efforts to take, or cause to be
taken, all actions and do, or cause to be done, all things necessary,
proper or advisable under applicable law or regulations to obtain any
required approval, action, or inaction of any
34
Governmental Entity with jurisdiction over the Merger or the Fiber
Sales Agreement, so that the Merger may be permitted to close in
accordance with its terms.
(b) CERTAIN LEGAL PROCEEDINGS. In the event any claim, action,
suit, investigation or other proceeding by any Governmental Entity or
other person is commenced which questions the validity or legality of
the Merger or seeks damages in connection therewith, the parties agree
to cooperate and use their best efforts to defend against such claim,
action, suit, investigation or other proceeding and, if an injunction
or other order is issued in any such action, suit or other proceeding,
to use commercially reasonable efforts to have such injunction or other
order lifted or appealed and to cooperate reasonably regarding any
other impediment to the consummation of the Merger; provided, however,
that nothing in this subsection (b) shall require either Holdings,
Bunzl or AFC to divest any assets or business as a requirement of
consummating the Merger.
(c) NOTICE. Each party shall give prior written notice to the
other of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would cause, or any assertion or threatened
assertion of a claim that if pursued would cause any representation or
warranty of AFC, Holdings, Parent or SubCorp, as the case may be,
contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Closing Date or that
will result in the failure to satisfy any of the conditions specified
in Article 6 and (ii) any failure of AFC, Holdings or SubCorp, as the
case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
5.4 INVESTIGATION; CONFIDENTIALITY.
(a) AFC agrees to permit Holdings, Bunzl and their authorized
representatives to have or cause them to be permitted to have, after
the date hereof and until the Effective Time, reasonable access to the
premises, books and records of AFC and its Subsidiaries at reasonable
hours, and the officers of AFC and its Subsidiaries will furnish
Holdings and Bunzl with such financial and operating data and other
information with respect to AFC's and its Subsidiaries' businesses and
properties and permit Holdings and Bunzl to meet with such AFC
employees as Holdings or Bunzl shall from time to time reasonably
request; provided that AFC shall be permitted to restrict Bunzl's
access to commercially sensitive information regarding any business of
AFC. AFC will request its auditing firm to permit Holdings and its
representatives, including its auditing firm, to review the work papers
of the auditing firm of AFC relating to their examination of the AFC
Financial Statements. No investigation by Holdings heretofore or
hereafter made shall affect the representations and warranties of AFC,
and each such representation and warranty shall survive any such
investigation, subject to Section 7.5.
(b) Holdings agrees to permit AFC and its authorized
representatives to have or cause them to be permitted to have, after
the date hereof and until the Effective Time, such information with
respect to Holdings' business as AFC shall from time to time reasonably
request.
35
(c) Except as contemplated by this Agreement or as necessary to
carry out the transactions contemplated hereby, all information or
documents furnished hereunder shall be subject to the Confidentiality
Agreement between Holdings and AFC dated June 25, 1996, and the letter
agreement between Goldman, Sachs & Co., on behalf of AFC and Bunzl
dated December 13, 1996 (collectively, the "Confidentiality
Agreement").
5.5 EXPENSES. Except as otherwise provided in this Agreement, whether
or not the Merger is consummated, all costs and expenses (including any
brokerage commissions or any finder's or investment banker's fees and including
attorney's and accountants' fees) incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses.
5.6 PROXY STATEMENT. Holdings and AFC shall cooperate in taking steps
to (a) prepare and file with the SEC as soon as is practicable the Proxy
Statement, including all information required by Rule 13e-3 and (b) use
reasonable efforts to have the Proxy Statement cleared by the SEC as promptly as
practicable. Promptly after the Proxy Statement has been cleared by the SEC, AFC
shall mail the Proxy Statement to the holders of AFC Common Stock and AFC shall
use reasonable efforts to solicit proxies in favor of the approval of this
Agreement and the Plan of Merger. Holdings shall also take any action required
to be taken pursuant to Rule 13e-3 or under state blue sky or other securities
laws in connection with the Merger. If at any time prior to the AFC Shareholders
Meeting, Holdings or AFC reasonably believes that the Proxy Statement includes
an untrue statement of a material fact or omits a material fact required to be
stated therein, the parties shall cooperate to distribute any required
supplement or amendment to the Proxy Statement, and to comply with any
resolicitation requirements, and shall provide to each other all necessary
information for such amendment or supplement, all of which shall be true and
correct in all material respects and shall not omit any material fact required
to be included in such amendment or supplement.
5.7 PERIODIC REPORTS. Each of AFC and Holdings covenants that it will
file with the SEC on a timely basis all periodic reports and other filings
required to be filed by it by the federal securities laws and regulations of the
SEC thereunder from the date of this Agreement through the Effective Time, and
that each such report or filing will comply in all material respects with the
federal securities laws and regulations of the SEC and will not contain any
untrue statement of material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
5.8 PUBLIC ANNOUNCEMENTS. The timing and content of all public
announcements regarding any aspect of this Agreement or the Merger to the
financial community, government agencies, employees or the general public shall
be mutually agreed upon in advance unless Holdings or AFC is advised in writing
by legal counsel that any such announcement or other disclosure not mutually
agreed upon in advance is required to be made by applicable law or applicable
NASDAQ rules or regulations and then only after making a reasonable attempt to
comply with provisions of this Section 5.8.
36
5.9 ANTITRUST CHALLENGES. In the event a suit is instituted challenging
the Merger as violative of the antitrust laws, each of Holdings and AFC will use
commercially reasonable efforts to defend against such suit. Holdings and AFC
will use commercially reasonable efforts to take such action as may be required
by any federal or state court of the United States, in any suit brought by a
private party or Governmental Entity challenging the Merger or the Fibers Sale
Agreement as violative of the antitrust laws, in order to avoid the entry of, or
to effect the dissolution of, any injunction, temporary restraining order or
other order that has the effect of preventing the consummation of the Merger or
the Fibers Sale Agreement, including pursuing an appeal thereof; provided,
however, that nothing in this Section 5.9 shall require either Holdings or AFC
to divest any assets or business as a requirement of consummating the Merger or
the Fibers Sale Agreement.
5.10 EMPLOYEE MATTERS.
(a) STAY BONUSES AND SEVERANCE AGREEMENTS. Stay bonuses
and severance agreements for employees other than John Morgan will be
limited to those described on Schedule 5.10.
(b) EMPLOYEE BENEFIT PLAN MATTERS.
(i) Holdings agrees that AFC will continue in effect,
without amendment (except with respect to any amendment
required by the Code, ERISA or other applicable law or required
to carry out Holdings' undertakings hereinafter set out), until
December 31, 1997, the Employee Plans (other than the Employee
Stock Ownership Plan of American Filtrona Corporation (the
"ESOP")) covering employees who continue employment with
Holdings or an affiliate of Holdings.
(ii) With respect to the American Filtrona Corporation
401(k) Savings and Profit Sharing Plan (the "Profit Sharing
Plan"), Holdings will obtain and enforce an agreement by
Purchaser to make a contribution for 1997 to a substantially
comparable profit sharing plan for the employees of the Fibers
Business (the "Purchaser Profit Sharing Plan") equal to the
amount accrued on the books of the Fibers Business as of the
Closing Date as a liability (computed in accordance with past
practices) for a profit sharing contribution with respect to
the employees who accept employment with the purchaser of the
Fibers Business (the "Purchaser") (the "Transferred AFC
Employees") (such liability is hereafter referred to as the
"Fibers Profit Sharing Liability"). Holdings agrees that AFC
will make a profit sharing contribution to the Profit Sharing
Plan equal to at least the excess of (A) the amount accrued on
the books of AFC as of the Closing Date as a liability
(computed in accordance with past practices) for a profit
sharing contribution to the Profit Sharing Plan over (B) the
amount of the Fibers Profit Sharing Liability and will make a
total contribution comparable to the 1996 contribution for
employees of the Plastics Business if the 1997 earnings before
interest and taxes of the Plastics Business approximate such
earnings in 1996. Holdings agrees to obtain and enforce an
agreement by Purchaser that the Purchaser Profit Sharing Plan
shall have a salary
37
reduction arrangement under which all Transferred AFC Employees
will have all service credited under the Profit Sharing Plan
credited under the Purchaser Profit Sharing Plan for all plan
purposes, including eligibility and vesting, and to cause AFC
to transfer to the Purchaser Profit Sharing Plan the account
balances under the Profit Sharing Plan of all Transferred AFC
Employees.
(iii) Holdings agrees to obtain and enforce an agreement
by Purchaser to contribute to the Purchaser Profit Sharing Plan
an amount equal to the liability (computed in accordance with
past practices) accrued on the books of the Fibers Business as
of the Closing Date for a contribution to the ESOP with respect
to Transferred AFC Employees (the "Purchaser ESOP
Contribution"). Holdings agrees to cause AFC to contribute to
the ESOP an amount equal to the excess of (A) the liability
(computed in accordance with past practices) accrued on the
books of AFC as of the Closing Date over (B) the amount of the
Purchaser ESOP Contribution, and to amend the ESOP to provide
that all AFC employees, including all Transferred AFC
Employees, are 100% vested in their accrued benefits
thereunder.
(iv) Holdings agrees to use its best efforts to cause
Purchaser to assume sponsorship of the following plans covering
employees employed in the Fibers Business: the American
Filtrona Corporation Pension Plan for Hourly Employees and the
American Filtrona Corporation 401(k) Plan for Hourly Employees.
Holdings agrees to use its best efforts to cause Purchaser to
establish a defined benefit plan that (A) covers AFC's salaried
employees who become salaried Transferred AFC Employees; (B)
meets the requirements of Section 401(a) of the Code (the
"Purchaser Retirement Plan"); and (C) provides that all service
of such salaried Transferred AFC Employees credited with the
American Filtrona Corporation Retirement Plan (the "AFC
Retirement Plan") shall be credited under the Purchaser
Retirement Plan for all plan purposes, including eligibility,
vesting and benefit accrual. Holdings agrees to cause an amount
to be transferred from the trust maintained under the AFC
Retirement Plan to the trust under the Purchaser Retirement
Plan calculated pursuant to the applicable provisions of
Section 414(l) of the Code, with respect to salaried
Transferred AFC Employees.
(v) Holdings agrees to use its best efforts to cause
Purchaser (A) to establish and maintain through December 31,
1997 employee benefit plans (as defined in Section 3(3) of
ERISA) for Purchaser's employees that are in the aggregate
approximately equal to the Employee Plans sponsored and
maintained by AFC for its salaried and hourly employees; and
(B) to ensure that any of Purchaser's employee welfare benefit
plans (as defined in Section 3(1) of ERISA) credit Transferred
AFC Employees with any internal limits, deductibles or co-
payments satisfied by such employees under AFC's employee
welfare benefit plans.
(vi) Holdings will use its best efforts to cause
Purchaser to offer employment to all AFC employees who are
active employees at the Closing Date.
38
(c) LABOR MATTERS. Holdings agrees to use its best
efforts to cause Purchaser to assume any collective bargaining
agreement with respect to employees of the Fibers Business in effect as
of the date of the sale of the Fibers Business.
5.11 ACCOUNTANT'S LETTERS. AFC agrees to use commercially reasonable
efforts to cause to be delivered to Holdings a letter of Coopers & Lybrand
L.L.P., independent auditors for AFC, dated the date of the Proxy Statement and
the Closing Date (or such other dates reasonably acceptable to the parties) with
respect to certain financial statements and other financial information included
in the Proxy Statement, which letter shall be in form reasonably satisfactory to
Holdings.
5.12 NON SOLICITATION; COMPETING OFFERS. From the date of this
Agreement until the Closing Date, neither AFC nor its officers, directors or
agents shall be entitled to solicit or encourage, in any manner, including by
way of furnishing information, any merger, acquisition, or takeover proposal or
offer for AFC or its shares or any significant portion of its assets or
businesses, however structured or to be effected, unless the Board of Directors
of AFC concludes in good faith, after receiving the advice of its counsel, that
the failure to take such action would violate the fiduciary obligation of the
directors of AFC under applicable law; provided, however, that Holdings and
Bunzl shall be notified promptly of the principal terms of all bona fide
competing offers made to AFC, and AFC shall be subject to any applicable
obligation to pay the Expenses and the Fee set forth in Section 7.4 in the event
this Agreement is terminated.
5.13 CONDITIONS IN FIBERS SALE AGREEMENT AND FINANCING. Holdings shall
use its commercially reasonable efforts to have satisfied all conditions to the
obligations of Bunzl in the Fibers Sale Agreement and to the financing
obligations of Wachovia Bank of North Carolina, N.A. and other banks pursuant to
the commitment letter referenced in Section 6.2(h) except for such conditions
that are not within the control of Holdings and its Affiliates.
5.14 INVESTMENT SECURITIES. AFC agrees that at the Effective Time all
of its investment securities will be redeemable at par for cash within seven
days or in a form traded in established securities markets.
5.15 FILPAC INDEBTEDNESS. AFC agrees to document the indebtedness
of Filpac, Inc. to AFC to the reasonable satisfaction of Holdings promptly after
execution of this Agreement.
5.16 ACCESS TO INFORMATION.
(a) From the date hereof until the Closing Date, AFC (i) will
give Bunzl, its counsel, financial advisors, auditors and other
authorized representatives full access to the offices, properties,
books and records of AFC relating to the Fibers Business, (ii) will
furnish to Bunzl, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information relating to the Fibers Business as such persons or entities
may reasonably request and (iii) will instruct the employees, counsel
and financial advisors of AFC to cooperate with Bunzl in its
investigation of the Fibers Business. Any investigation pursuant to
this Section shall be
39
conducted in such manner as not to interfere unreasonably with the
conduct of the business of AFC.
(b) AFC will furnish, to Bunzl and its counsel copies of those
agreements, contracts and commitments of AFC relating to the Fibers
Business (and, if such agreements, contracts and commitments are not
reduced to writing, reasonable written details of the same) which (i)
have previously been withheld from Bunzl or (ii) include obligations of
confidentiality or impose restrictions on disclosure by AFC (clauses
(i) and (ii), collectively, the "Confidential Agreements") no less than
5 business days prior to the Closing. The Confidential Agreements shall
include, without limitation, agreements, contracts and commitments
relating to research and/or development work and projects or contracts
or agreements with or commitments to or understandings with suppliers
or customers of the Fibers Business. Bunzl shall, if requested, enter
into confidentiality undertakings with regard to such Confidential
Agreements on such terms as Bunzl may agree, with the counterparties to
such Confidential Agreements.
(c) AFC will disclose to Bunzl, its counsel, auditors and other
authorized representatives and/or give Bunzl, its counsel, auditors and
other authorized representatives, access to, not less than 5 business
days before the Closing:
(i) The commercial terms upon which products, goods,
materials and services are supplied by the Fibers Business to
its customers including, but not limited to, the price at which
such products, goods, materials and services are sold and
details of any rebates, discounts, commissions and extended
credit terms paid or given to customers;
(ii) The commercial terms upon which products, goods,
materials and devices are supplied to the Fibers Business by
its suppliers including, but not limited to, the price at which
such products, goods, materials and services are supplied to
the Fibers Business and details of any rebates, discounts and
commissions paid or given to the Fibers Business;
(iii) The financial budgets and forecasts and business
plans of or relating to the Fibers Business including, but not
limited to, full details of the 1997 forecast and budget and
the 1997 to 1999 plan and any notes and commentaries forming
part of or relating to such forecasts, budgets and plans;
(iv) The Jefferson Davis and White Pine facilities and
the Pine Glen warehouse and the Fibers Business; research and
development facilities;
(v) Written details of any significant business or
commercial arrangement, commitments or understandings (whether
or not reduced to writing and whether or not legally binding)
related to the Fibers Business; and
(vi) Such access to the employees and advisors of AFC as
may be necessary or useful in connection with any of the
foregoing.
40
5.17 SETTLEMENT OF LAWSUITS. In 1994, the Office of Federal Compliance
Programs issued a Notice of Violation in which it alleged that two employment
screening tests used by AFC were unlawful. AFC will not settle this matter
without the prior written consent of Holdings, and will not admit any liability
in connection therewith.
5.18 ASSUMPTION OF LIABILITIES. AFC acknowledges and agrees that, upon
the consummation of the Merger, the Surviving Corporation shall be the successor
to, and assume, all the obligations of SubCorp under the Fibers Sale Agreement.
ARTICLE 6
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of each of the following conditions:
(a) AFC SHAREHOLDER APPROVAL. This Agreement and the Plan of
Merger shall have been adopted at the AFC Shareholders Meeting duly
called and held in accordance with AFC's Articles of Incorporation and
Bylaws and the VSCA, by the holders of more than two-thirds of the
shares of AFC Common Stock outstanding and entitled to vote thereon.
(b) HSR ACT. All applicable waiting periods under the HSR Act
shall have expired or been terminated.
(c) PROXY STATEMENT. No proceedings under the proxy rules or
Rule 13e-3 of the SEC pursuant to the Exchange Act and with respect to
the Merger shall be pending before or threatened by the SEC.
(d) INJUNCTION, ETC. The consummation of the Merger will not
violate the provisions of any injunction, order, judgment, decree, law
or regulation applicable or effective with respect to AFC, Holdings,
Parent, SubCorp or their respective officers, managers and directors.
No suit or proceeding shall have been instituted by any person, or, to
the best AFC's or Holdings' knowledge, shall have been threatened by
any Governmental Entity, that seeks to (i) prohibit, restrict or delay
consummation of the Merger or to limit in any material respect the
right of Holdings to control any material aspect of the business of
Holdings and its Subsidiaries or AFC and its Subsidiaries after the
Effective Time, or (ii) to subject Holdings or AFC or their respective
directors or officers to material liability on the ground that it or
they have breached any law or regulation or otherwise acted improperly
in relation to the Merger; provided, however, that in the case of any
action, suit or proceeding instituted by a person other than a
Governmental Entity, such action, suit or proceeding has a substantial
likelihood of success in the opinion of legal counsel for the party
invoking this provision.
41
6.2 CONDITIONS TO OBLIGATIONS OF HOLDINGS AND SUBCORP. Consummation
of the Merger is subject to the fulfillment to the reasonable satisfaction of
Holdings, prior to or at the Closing, of each of the following conditions:
(a) CONSENTS, AUTHORIZATIONS, ETC. The consents required under
the items listed on Schedule 4.1(e) and all consents, authorizations,
orders and approvals of, and filings and registrations with, any
Governmental Entity or any nongovernmental third party (other than the
filing of the Articles of Merger with the Commission) that are required
for or in connection with the execution and delivery by AFC of this
Agreement and the consummation by AFC of the Merger shall have been
obtained or made, except where the failure to obtain such consent,
authorization, order or approval would not have a Material Adverse
Effect.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of AFC contained in this Agreement shall have been true and
correct in all respects at the date hereof and, except for changes
contemplated in this Agreement, shall also be true and correct in all
respects at and as of the Closing Date, with the same force and effect
as if made at and as of the Closing Date, except in either case as such
representations and warranties by their terms relate only to dates or
periods of time prior to the Closing Date, or, in any event, except
where the failure of representations or warranties to be true and
correct (determined for this purpose without taking into consideration
any materiality qualifier contained in such representation or warranty)
in the aggregate would not have a Material Adverse Effect, and AFC
shall have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed or
complied with by it at or prior to the Closing Date.
(c) CERTIFICATE. (i) AFC shall have delivered to Holdings a
certificate, dated as of the Closing Date, of the Chief Executive
Officer, the Chief Operating Officer, the Chief Financial Officer and
the Vice President, Bonded Fiber Products of AFC to the effect that to
the best of such officer's knowledge the conditions specified in
paragraph (b) of this Section 6.2 have been satisfied. Such certificate
shall also specify the number of issued and outstanding shares of AFC
Common Stock as of the Closing Date.
(d) OPINION AND CONFIRMATION OF AFC'S COUNSEL. Holdings, Parent
and SubCorp shall have received an opinion and confirmation, dated as
of the Closing Date, of Hunton & Williams, counsel to AFC,
substantially to the effect set forth in Exhibit E hereto, with such
exceptions and limitations as shall be reasonably satisfactory to
Holdings.
(e) LETTERS FROM ACCOUNTANTS. Holdings shall have received the
letter of Coopers & Lybrand L.L.P. contemplated by Section 5.11.
(f) ADDITIONAL CERTIFICATES, ETC. AFC shall have furnished to
Holdings such additional certificates, opinions and other documents as
Holdings may have reasonably requested as to any of the conditions set
forth in Sections 6.1 and 6.2.
42
(g) RESIGNATIONS. AFC shall have delivered to Holdings, to the
extent requested by Holdings, the written resignations of the directors
of AFC.
(h) FINANCING. All conditions in the commitment of financing
for the Merger from Wachovia Bank of North Carolina, N.A. and, if
applicable, other banks as set forth in that certain commitment letter
dated February ___, 1997 and attached hereto as Exhibit F that are not
within the control of SubCorp and its Affilliates shall have been
satisfied, all of which conditions SubCorp agrees to use its best
commercial efforts to have satisfied.
(i) SATISFACTION OF CONDITIONS IN FIBERS SALE AGREEMENT. All
conditions to the obligations of Bunzl in the Fibers Sale Agreement
that are not within the control of Holdings and its Affiliates shall
have been satisfied.
(j) MORGAN CONSULTING AND NON-COMPETITION AGREEMENT. John L.
Morgan shall have executed and delivered a Consulting and
Non-Competition Agreement with Bunzl in the form of Exhibit B to the
Fibers Sale Agreement.
(k) MORGAN SEVERANCE AGREEMENT. AFC and John L. Morgan shall
have executed a severance agreement providing for termination of his
employment by AFC and its Subsidiaries as of the Effective Time
providing for (i) a severance payment of $800,000 at Closing (in lieu
of all salary and bonuses payable after the Effective Time and all
additional accruals or contributions that would be payable after the
Effective Time with respect to his interest in the AFC Pension Plan,
SERP and Profit-Sharing and 401(k) Plan and in lieu of continued
participation in welfare plans other than health insurance plans); and
(ii) continued participation until December 31, 1999 as a retiree, in
AFC's medical insurance plan (if generally available for retirees
thereunder) on the same contributing basis as now in effect; provided,
however, that Mr. Morgan will pay any premiums in excess of $9,000 for
such medical insurance coverage during 1997 through 1999; and (iii)
indemnification holding Mr. Morgan harmless with respect to the
application of the provisions of Sections 280G and 4999 of the Code,
respectively, including indemnification for any excise tax obligations
and any federal, state or local income, employment-related and excise
tax obligations with respect to the indemnification payments.
(l) TRANSFER AGENT'S CERTIFICATE. AFC shall have delivered to
Holdings a certificate of the Transfer Agent for the AFC Common Stock
specifying the number of issued and outstanding shares as of the
Closing Date.
6.3 CONDITIONS TO OBLIGATIONS OF AFC. Consummation of the Merger is
subject to the fulfillment to the reasonable satisfaction of or waiver by AFC,
prior to or at the Effective Time, of each of the following conditions:
(a) CONSENTS, AUTHORIZATIONS, ETC. All consents,
authorizations, orders and approvals of, and filings and registrations
with, any Governmental Entity or non-governmental third party (other
than the filing of the Articles of Merger with the Commission), which
are required for or in connection with the execution and delivery of
43
this Agreement by Holdings, Parent and SubCorp and the consummation by
SubCorp of the Merger shall have been obtained or made except where the
failure to obtain such consent, authorization, or approval would not
have a material adverse effect on the consolidated financial condition,
results of operations, business or prospects of Holdings and its
Subsidiaries taken as a whole.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Holdings, Parent and SubCorp contained in this Agreement
shall have been true and correct in all respects at the date hereof and
shall also be true and correct in all respects at and as of the Closing
Date, except for changes contemplated in this Agreement, with the same
force and effect as if made at and as of the Closing Date or except as
such representations and warranties by their terms relate only to
periods of time prior to the Closing Date or except where the failure
of any representation or warranty to be true and correct would not have
a material adverse effect on the consolidated financial condition,
results of operation, business or prospects of Holdings and its
Subsidiaries taken as a whole; and Holdings shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or
prior to the Closing Date.
(c) CERTIFICATE. Holdings shall have delivered to AFC a
certificate, dated as of the Closing Date, of the Chief Executive
Officer of Holdings to the effect that the conditions specified in
paragraph (b) of this Section 6.3 have been satisfied.
(d) OPINION AND CONFIRMATION OF HOLDINGS', PARENT'S AND
SUBCORP'S COUNSEL. AFC shall have received an opinion and confirmation,
dated as of the Closing Date, of Sutherland, Asbill & Brennan, L.L.P.
counsel to Holdings, Parent and SubCorp, to the effect set forth in
Exhibit E hereto, with such exceptions and limitations as shall be
reasonably satisfactory to AFC.
(e) ADDITIONAL CERTIFICATES, ETC. Holdings shall have furnished
to AFC such additional certificates, opinions and other documents as
AFC may have reasonably requested as to any of the conditions set forth
in Sections 6.1 and 6.3.
(f) SATISFACTION OF CONDITIONS IN FIBERS SALE AGREEMENT. All
conditions to the obligations of Bunzl in the Fibers Sale Agreement
shall have been satisfied, and the cash consideration payable
thereunder to the Surviving Corporation at Closing shall have been made
available to the Surviving Corporation.
(g) FAIRNESS OPINION. The fairness opinion of Goldman,
Sachs & Co. with respect to the Merger shall not have been withdrawn.
44
ARTICLE 7
TERMINATION AND ABANDONMENT
7.1 TERMINATION AND ABANDONMENT. This Agreement and the Merger may be
terminated and abandoned at any time prior to the Effective Time:
(a) By mutual action of the Board of Directors of AFC and the
Managers of Holdings, whether before or after any action by AFC's
shareholders.
(b) By Holdings:
(i) if any event shall have occurred as a result of
which any condition set forth in Section 6.2 is no longer
capable of being satisfied;
(ii) if there has been a breach by AFC of any
representation or warranty contained in this Agreement that
would have a Material Adverse Effect, or there has been a
material breach of any of the covenants or agreements set forth
in this Agreement on the part of AFC, which breach is not
curable, or, if curable, is not cured within 15 days after
written notice of such breach is given by Holdings to AFC;
(iii) if AFC (or its Board of Directors) shall have
authorized, recommended, proposed or publicly announced its
intention to enter into a Competing Transaction (as defined
below) that has not been consented to in writing by Holdings;
or
(iv) if the Board of Directors of AFC shall have
withdrawn or materially modified its authorization, approval or
favorable recommendation to the shareholders of AFC with
respect to the Plan of Merger or this Agreement in a manner
adverse to Holdings or shall have failed to make such favorable
recommendation.
(c) By AFC:
(i) if any event shall have occurred as a result of
which any condition set forth in Section 6.3 is no longer
capable of being satisfied; or
(ii) if there has been a breach by Holdings, Parent
or SubCorp of any representation or warranty contained in this
Agreement which would have or would be reasonably likely to
have a material adverse effect on the consolidated financial
condition, results of operations or business of Holdings and
its Subsidiaries taken as a whole or the ability of Holdings,
Parent or SubCorp to consummate the Merger, or there has been a
material breach of any of the covenants or agreements set forth
in this Agreement on the part of Holdings, Parent or SubCorp,
which breach is not
45
curable or, if curable, is not cured within 15 days after
written notice of such breach is given by AFC to Holdings.
(d) By AFC if because of its receipt of a proposal with respect
to a Competing Transaction, the Board of Directors concludes, in good
faith, after receiving advice of its legal counsel that such
termination is in the best interests of AFC and its shareholders.
(e) By Holdings or AFC if there shall have occurred (i) any
general suspension of, or limitation on, trading in securities
generally on NASDAQ continuing for a period of fifteen (15) business
days, or (ii) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States continuing for a
period of fifteen (15) business days.
(f) By either Holdings or AFC if (i) any event shall have
occurred as a result of which any condition set forth in Section 6.1 is
no longer capable of being satisfied or (ii) the Merger shall not have
been consummated by June 30, 1997; provided, however, that, in either
case, the terminating party shall not have breached in any material
respect its obligations under this Agreement in any manner that
proximately contributed to the failure of any such condition to be
satisfied or the failure to consummate the Merger.
As used herein, a "Competing Transaction" shall mean (i) any merger,
consolidation, share exchange, business combination, or other similar
transaction involving AFC or a significant Subsidiary of AFC; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of 25% or more
of the assets of AFC, taken as a whole, in a single transaction or series of
transactions; (iii) any tender or exchange offer for 25% or more of the
outstanding shares of AFC Common Stock or the filing of a registration statement
under the Securities Act in connection therewith; or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
7.2 SPECIFIC PERFORMANCE. The parties acknowledge that the rights of
each party to consummate Merger are special, unique, and of extraordinary
character, and that, in the event that either violates or fails and refuses to
perform any covenant made by it herein, the other party or parties will be
without adequate remedy at law. Each party agrees, therefore, that, in the event
that it violates or fails and refuses to perform any covenant made by it herein,
the other party or parties so long as it or they are not in breach hereof, may,
in addition to any remedies at law, institute and prosecute an action in a court
of competent jurisdiction to enforce specific performance of such covenant or
seek any other equitable relief.
7.3 RIGHTS AND OBLIGATIONS UPON TERMINATION. If this Agreement is not
consummated for any reason, each party will redeliver all documents, work
papers, and other materials of any party relating to the Merger, whether
obtained before or after the execution hereof, to the party furnishing the same,
except to the extent previously delivered to third parties in connection with
the Merger, and no information received by any party hereto with respect to the
business of any other party shall be used for the advantage of, or disclosed to
third parties by, such party to the detriment of the party furnishing such
information; provided, however, that this Section 7.3 shall
46
not apply to any documents, work papers, material, or information that, through
no act or failure to act by any other party hereto (a) is a matter of public
knowledge or (b) heretofore has been or hereafter is published in any
publication for public distribution or filed as public information with any
Governmental Entity.
7.4 CERTAIN FEES AND EXPENSES. AFC acknowledges that Holdings has
spent, and will be required to spend, substantial time and effort in examining
the business, properties, affairs, financial condition and prospects of AFC and
its Subsidiaries and has incurred, and will continue to incur, substantial fees
and expenses in connection with such examination, the preparation of this
Agreement and the accomplishment of the Merger. Therefore, to induce
Holdings to enter this Agreement:
(a) EXPENSES. In the event that AFC terminates this Agreement
pursuant to Section 7.1(d) or Holdings terminates this Agreement
pursuant to Section 7.1(b)(iii) or Section 7.1(b)(iv) and at the time
there exists a Competing Transaction, then AFC shall reimburse Holdings
for the total amount of the Expenses. For purposes of this Section 7.4,
"Expenses" shall include all reasonable out-of-pocket expenses and fees
(including, without limitation, fees and expenses payable to all
investment banking firms and their respective agents and counsel, and
all reasonable fees of counsel, accountants, experts and consultants to
Holdings) actually incurred by Holdings or on its behalf or by Bunzl or
on its behalf in connection with the Merger and all transactions
contemplated by this Agreement, including the sale of the Fibers
Business to Bunzl; provided, however, that Expenses shall be limited to
1% of the product of the Merger Consideration multiplied by the total
number of shares of outstanding AFC Common Stock. The Expenses, if due,
shall be paid promptly after such termination.
(b) FEE. If this Agreement is terminated pursuant to Section
7.1(d) by AFC or pursuant to Section 7.1(b)(iii) or 7.1(b)(iv) by
Holdings and a Competing Transaction is consummated on or before
February 28, 1998, then AFC shall pay to Holdings promptly after the
consummation of the Competing Transaction a fee in the amount of 2% of
the product of the Merger Consideration multiplied by the total number
of shares of outstanding AFC Common Stock in addition to the amount of
any Expenses paid or payable under subsection (a) above (the "Fee"),
not as a penalty but as full and complete liquidated damages.
The Expenses and the Fee shall be payable to Holdings notwithstanding that any
action taken by the Board of Directors of AFC that may give rise to the
obligation to pay the Expenses and the Fee may have been taken in accordance
with the fiduciary duties of the Board of Directors.
(c) PAYMENT. Any payment required pursuant to this Section 7.4
shall be made as promptly as practicable, but in no event later than
three business days after Holdings' delivery to AFC of a statement
setting forth the amount payable and the facts causing such amount to
be payable, including (if applicable) the Expenses in reasonable
detail, and shall be made by wire transfer of immediately available
funds to an account designated by Holdings. In the event that Holdings
is entitled to the Expenses or the Fee, AFC shall
47
also pay to Holdings interest at the rate of 8.0% per year on any
amounts that are not paid when due, plus all costs and expenses in
connection with or arising out of the enforcement of the obligation of
AFC to pay the Expenses, the Fee or such interest.
7.5 EFFECT OF TERMINATION. Except for the provisions of Sections 5.4,
5.5, 5.12, 7.3, 7.4, this Section 7.5 and Article 8, which shall survive any
termination of this Agreement, in the event of the termination and abandonment
of this Agreement pursuant to Section 7.1, this Agreement shall forthwith become
void and have no further effect, without any liability on the part of any party
hereto or its respective officers, directors or shareholders; provided, however,
that except as expressly set forth in Section 7.4(b), nothing in this Section
7.5 shall relieve any party from liability for the knowing and intentional
breach of any of its representations, warranties, covenants or agreements set
forth in this Agreement.
ARTICLE 8
GENERAL PROVISIONS
8.1 WAIVER OF CERTAIN CONDITIONS. Any party may, at its option, waive
in writing any or all of the conditions herein contained to which its
obligations hereunder are subject, except that the conditions contained in
Section 6.1, and Section 6.2(a) (with respect to consents and authorizations,
orders and approvals of, and filings and registrations with, any Governmental
Entity) and Section 6.3(a) (with respect to consents and authorizations, orders
and approvals of, and filings and registrations with, any Governmental Entity)
may not be so waived.
8.2 NOTICES. All notices and other communications under this Agreement
shall be in writing and may be given by any of the following methods: (a)
personal delivery; (b) facsimile transmission; (c) registered or certified mail,
postage prepaid, return receipt requested; or (d) overnight delivery service
requiring acknowledgment of receipt. Any such notice or communication shall be
sent to the appropriate party at its address or facsimile number given below (or
at such other address or facsimile number for such party as shall be specified
by notice given hereunder):
If to Holdings, Parent or SubCorp, to:
WBT Holdings LLC
999 Peachtree Street, N.E. Suite 2300
Atlanta, Georgia 30309-3996
Telecopier: (404) 853-8806
Attention: Bennett L. Kight, President
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with a copy to:
Sutherland, Asbill & Brennan, L.L.P.
999 Peachtree Street, N.E., Suite 2300
Atlanta, Georgia 30309-3996
Fax No. (404) 853-8806
Attention: George L. Cohen, Esq.
If to AFC, to:
3951 Westerre Parkway, Suite 300
Richmond, Virginia 23233
Fax No. (804) 346-0164
Attention: John L. Morgan
with a copy to:
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219-4074
Fax No. (804) 788-8218
Attention: C. Porter Vaughan, III, Esquire
All such notices and communications shall be deemed received upon (i) actual
receipt thereof by the addressee, (ii) actual delivery thereof to the
appropriate address as evidenced by an acknowledged receipt, or (iii) in the
case of a facsimile transmission, upon transmission thereof by the sender and
confirmation of receipt. In the case of notices or communications sent by
facsimile transmission, the sender shall contemporaneously mail or deliver a
copy of the notice or communication to the addressee at the address provided for
above. However, such mailing shall in no way alter the time at which the
facsimile notice or communication is deemed received.
8.3 TABLE OF CONTENTS; HEADINGS. The Table of Contents, cross reference
pages and headings contained herein are for convenience of reference only, do
not constitute a part of this Agreement, and shall not be deemed to limit or
affect any of the provisions hereof.
8.4 AMENDMENT. Except as otherwise provided in Section 13.1-718(I) of
the VSCA, this Agreement or the Plan of Merger may be amended, at any time
before or after the approval of this Agreement and the Plan of Merger by the
holders of AFC Common Stock, by action of the respective Boards of Directors of
AFC, Parent and SubCorp and the Managers of Holdings, without action by the
shareholders or members thereof. Any variation, modification or amendment to
this Agreement must be made in writing and executed by each of the parties
hereto.
8.5 NO SURVIVAL OF REPRESENTATIONS, WARRANTIES OR COVENANTS. None of
the representations or warranties made in Article 4 or the covenants made in
Article 5 shall survive the Closing Date.
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8.6 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the Merger is not affected in any manner adverse to any party hereto. Upon any
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto will negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the Merger as
contemplated by the Plan of Merger is consummated.
8.7 WAIVER. The failure of any party hereto at any time or times to
require performance of any provision hereof shall in no manner affect the right
to enforce the same. No waiver by any party of any condition, or the breach of
any term, provision, warranty, representation, agreement or covenant contained
in this Agreement or the other agreements contemplated hereby, whether by
conduct or otherwise, in any one or more instances shall be deemed or construed
as a further or continuing waiver of any such condition or breach or a waiver of
any other condition or of the breach of any other term, provision, warranty,
representation, agreement or covenant herein or therein contained.
8.8 NO THIRD PARTY BENEFICIARIES; ASSIGNMENT. This Agreement shall
inure to the benefit of the parties and their respective successors and
permitted assignees. Nothing in this Agreement shall create or be deemed to
create any third party beneficiary rights in any person or entity; provided,
however, that all persons who are beneficiaries of Sections 5.4(a), 5.10 or 5.12
shall be entitled to enforce the provisions of those sections, respectively.
Except for assignments to wholly-owned subsidiaries (direct or indirect) of
Holdings, in which event Holdings shall remain liable for the performance of
this Agreement, no transfer or assignment (including by operation of law) of
this Agreement or of any rights or obligations under this Agreement may be made
by any party without the prior written consent of the other parties and any
attempted transfer or assignment without that required consent shall be void. No
transfer or assignment by a party of its rights under this Agreement shall
relieve it of any of its obligations to the other parties under this Agreement.
8.9 TIME OF THE ESSENCE; COMPUTATION OF TIME. Time is of the essence of
each and every provision of this Agreement. Whenever the last day for the
exercise of any right or the discharge of any duty under this Agreement shall
fall upon Saturday, Sunday or a public or legal holiday, the party having such
right or duty shall have until 5:00 p.m. Atlanta, Georgia time on the next
succeeding regular business day to exercise such right or to discharge such
duty.
8.10 COUNTERPARTS. This Agreement may be executed by each party upon a
separate copy, and in such case one counterpart of this Agreement shall consist
of enough of such copies to reflect the signatures of all of the parties. This
Agreement may be executed in two or more counterparts, each of which shall be an
original, and each of which shall constitute one and the same agreement. Any
party may deliver an executed copy of this Agreement and of any documents
contemplated hereby by facsimile transmission to another party and such delivery
shall have the same force and effect as any other delivery of a manually signed
copy of this Agreement or of such other documents.
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8.11 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia, without giving
effect to the conflicts of law principles thereof.
8.12 ENTIRE AGREEMENT. This Agreement (with its Schedules and Exhibits)
and the Confidentiality Agreement contain, and are intended as, a complete
statement of all the terms of the arrangements among the parties with respect to
the matters provided for, supersede any previous agreements and understandings
between the parties with respect to those matters and cannot be changed or
terminated orally.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
AMERICAN FILTRONA CORPORATION
/s/ JOHN L. MORGAN
-----------------------------------------
Name John L. Morgan
Title Chairman
WBT HOLDINGS LLC
/s/ BENNETT L. KIGHT
-----------------------------------------
Name Bennett L. Kight
Title President
WB PARENT CORP.
/s/ BENNETT L. KIGHT
-----------------------------------------
Name Bennett L. Kight
Title President
WB ACQUISITION CORP.
/s/ BENNETT L. KIGHT
-----------------------------------------
Name Bennett L. Kight
Title President