Exhibit 10.2
EXECUTION COPY
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
DURANGO GEORGIA CONVERTING LLC
AND
TST IMPRESO, INC.
- --------------------------------------------------------------------------------
Dated as of April 5, 2001
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS...................................................1
1.1 Certain Defined Terms.........................................1
1.2 Certain Rules of Construction.................................8
ARTICLE II. PURCHASE AND SALE.............................................8
2.1 Purchase and Sale.............................................8
2.2 Assumed Liabilities...........................................9
2.3 Purchase Price...............................................10
2.4 Purchase Price Adjustment....................................10
2.5 Allocation of Purchase Price.................................11
2.6 Taxes........................................................11
2.7 The Closing..................................................12
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLER.................12
3.1 Organization; Power..........................................12
3.2 Authorization; Effect of Agreement...........................12
3.3 Subsidiaries and Equity Interests............................13
3.4 Consents.....................................................13
3.5 Financial Statements.........................................13
3.6 Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions...............................13
3.7 No Undisclosed Liabilities...................................15
3.8 Title to Assets..............................................15
3.9 Permits......................................................16
3.10 Real Property................................................16
3.11 Compliance with Laws.........................................17
3.12 Contracts....................................................17
3.13 No Violations................................................18
3.14 Intellectual Property........................................19
3.15 Litigation...................................................19
3.16 Employee Benefit Plans.......................................19
3.17 Tax Matters..................................................21
3.18 Environmental Matters........................................21
3.19 Labor Matters................................................22
3.20 Receivables..................................................23
3.21 Inventories..................................................23
3.22 Certain Interests............................................24
3.23 Brokers......................................................24
3.24 Accuracy of Information Furnished............................24
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE BUYER..................24
4.1 Organization; Power..........................................24
4.2 Authorization; Effect of Agreement...........................24
4.3 Consents.....................................................25
4.4 No Violations................................................25
4.5 Litigation...................................................25
4.6 Availability of Funds........................................25
4.7 Brokers......................................................26
ARTICLE V. COVENANTS OF THE SELLER......................................26
5.1 Action by the Seller.........................................26
5.2 Conduct of the Sky Division's Business.......................26
5.3 Access.......................................................27
5.4 Publicity....................................................27
5.5 Notices of Certain Events....................................27
5.6 Exclusivity..................................................27
5.7 Employees....................................................27
ARTICLE VI. COVENANTS OF THE BUYER.......................................28
6.1 Action by the Buyer..........................................28
6.2 Publicity....................................................28
6.3 Confidentiality..............................................28
6.4 Notice.......................................................28
ARTICLE VII. ADDITIONAL COVENANTS.........................................29
7.1 Further Assurances...........................................29
7.2 Books and Records............................................29
7.3 Insurance....................................................29
7.4 Payments from Third Parties..................................29
7.5 Tax Matters..................................................29
7.6 Covenant Not to Compete......................................29
7.7 Emkay Assignment.............................................30
ARTICLE VIII. CONDITIONS TO THE BUYER'S OBLIGATIONS........................31
8.1 Representations and Warranties; Performance..................31
8.2 Consents.....................................................31
8.3 Absence of Certain Proceedings...............................31
8.4 Environmental Assessment.....................................31
8.5 Opinion of Counsel...........................................31
8.6 Availability of Funds........................................31
8.7 License Agreement............................................31
8.8 Transamerica Lease...........................................32
8.9 Assignment of Bank Accounts..................................32
8.10 Warehouse Letters............................................32
8.11 Payment of Aged Receivables..................................32
ARTICLE IX. CONDITIONS TO THE SELLER'S OBLIGATIONS.......................32
9.1 Representations and Warranties; Performance..................32
9.2 Absence of Certain Proceedings...............................32
9.3 Opinion of Counsel...........................................32
9.4 Security Agreement...........................................32
9.5 Supply Agreement.............................................33
9.6 License Agreement............................................33
9.7 Intercreditor Agreement......................................33
ARTICLE X. EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS................33
10.1 Transferred Employees........................................33
10.2 Employee Benefit Plans.......................................33
10.3 Worker's Compensation........................................34
ARTICLE XI. TERMINATION..................................................34
11.1 Termination and Abandonment..................................34
11.2 Effect of Termination........................................35
ARTICLE XII. SURVIVAL AND INDEMNIFICATION.................................35
12.1 Survival.....................................................35
12.2 Indemnification by the Seller................................35
12.3 Indemnification by the Buyer.................................38
12.4 Procedure for Indemnification................................38
12.5 Payment......................................................39
12.6 Adjustment Amounts...........................................39
12.7 Indemnification..............................................39
12.8 Exclusivity..................................................39
12.9 Tax Treatment................................................40
ARTICLE XIII. MISCELLANEOUS................................................40
13.1 Fees and Expenses ...........................................40
13.2 Amendments...................................................40
13.3 Entire Agreement.............................................40
13.4 Assignment, Binding Effect; Benefit..........................40
13.5 Headings.....................................................41
13.6 Governing Law; Arbitration...................................41
13.7 Notices......................................................42
13.8 Counterparts.................................................43
13.9 Severability.................................................43
SCHEDULES
Schedule 2.1(a) Tangible Personal Property
Schedule 2.1(c) Real Property
Schedule 2.1(h) Permits and Contracts
Schedule 2.4 Form of Closing Statement
Schedule 2.5 Allocation of Purchase Price
Schedule 3.1 Organization; Power
Schedule 3.4 Consents
Schedule 3.5 Financial Statements
Schedule 3.6 Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions
Schedule 3.7 No Undisclosed Liabilities
Schedule 3.8 Title to Assets
Schedule 3.9 Permits
Schedule 3.10(a) Owned Real Property
Schedule 3.10(b) Leases
Schedule 3.11 Compliance with Laws
Schedule 3.12(a) Material Contracts
Schedule 3.12(b) Material Contracts (Enforceability)
Schedule 3.12(c) Material Contracts (Breach/Default)
Schedule 3.13 No Violations
Schedule 3.14 Intellectual Property
Schedule 3.15 Litigation
Schedule 3.16(a) Employee Benefit Plans
Schedule 3.18 Environmental Matters
Schedule 3.19(a) Labor Matters
Schedule 3.19(b) Active Employees/Inactive Employees
Schedule 3.21 Inventories
Schedule 3.22 Certain Interests
Schedule 5.2 Conduct of the Sky Division's Business
Schedule 8.10 Warehouse Letters
EXHIBITS
Exhibit A-1 Form of Note
Exhibit A-2 Form of Press Note
Exhibit A-3 Form of Security Agreement
Exhibit B-1 Commitment Letter of Congress Financial Corporation
Exhibit B-2 Commitment Letter of General Electric Business Asset Funding
Corporation
Exhibit B-3 Commitment Letter of General Electric Business Asset Funding
Corporation
Exhibit C Form of Opinion of Seller's Counsel
Exhibit D Form of License Agreement
Exhibit E Matters for Opinion of Buyer's Counsel
Exhibit F Form of Supply Agreement
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of April 5, 2001 (this
"Agreement"), by and between DURANGO GEORGIA CONVERTING LLC, a Delaware limited
liability company (the "Seller"), and TST IMPRESO, INC., a Delaware corporation
(the "Buyer"). The Buyer and the Seller are referred to collectively herein as
the "Parties."
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Seller owns and operates a converting facility located in
Greencastle, Pennsylvania (the "Converting Facility"), which primarily produces
stock tab continuous feed computer paper (the "Sky Division"); and
WHEREAS, upon the terms and subject to the conditions contained in this
Agreement, the Seller desires to sell to the Buyer, and the Buyer desires to
purchase from the Seller, substantially all of the Sky Division as set forth
herein.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained in this Agreement, the Parties hereby agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"Acquired Assets" shall have the meaning set forth in Section 2.1.
"Action" shall mean any action, suit, arbitration, inquiry, proceeding
or investigation by or before any Governmental Authority.
"Active Employee" shall have the meaning set forth in Section 10.1.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person. A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such other Person, whether through the ownership
of voting securities, by contract or otherwise.
"Agreement" shall have the meaning set forth in the Preamble.
"Arbiter" shall mean KPMG LLP, or such other Person as may be mutually
agreed by the Parties.
"Assumed Liabilities" shall have the meaning set forth in Section 2.2.
"Bank Accounts" shall means, collectively, the bank account maintained
by Durango Georgia Converting Corporation at Mellon Bank N.A. (acct. # 2929016)
and the bank accounts maintained by the Seller at First national Bank of
Greencastle (acct. # 1-48202, acct. # 1-21983 and acct. # 1-66855).
"Business Day" shall mean any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by law to be closed in New
York, New York.
"Business Intellectual Property" shall mean all patents, trademarks,
service marks, trade names and copyrights and each registration and application
for any of the foregoing owned, used or held by the Seller for use in connection
with the conduct of the business of the Sky Division.
"Buyer" shall have the meaning set forth in the Preamble.
"Buyer Indemnitees" shall have the meaning set forth in Section
12.2(a).
"Buyer Material Adverse Effect" shall mean a material adverse effect
on (a) the business, operations, results of operations or condition (financial
or otherwise) of the Buyer or (b) the ability of the Buyer to perform its
obligations under this Agreement, the Note, the Security Agreement, the Press
Note or the Supply Agreement or to consummate the transactions contemplated
hereby or thereby.
"Buyer's 401(k) Plan" shall have the meaning set forth in Section
10.2(a).
"Claimant" shall have the meaning set forth in Section 13.6(a)(ii).
"Claims Notice" shall have the meaning set forth in Section
12.2(b)(ii)(A).
"Closing" shall have the meaning set forth in Section 2.7.
"Closing Date" shall have the meaning set forth in Section 2.7.
"Closing Statement" shall have the meaning set forth in Section
2.4(a).
"COBRA" shall have the meaning set forth in Section 10.2(c).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commercially Reasonable" shall have the meaning set forth in Section
12.2(b)(ii)(E).
"Commitment Letters" shall have the meaning set forth in Section 4.6.
"Competing Transaction" shall have the meaning set forth in Section
5.6.
"Consents" shall mean any consent, approval, authorization or other
order of, or action or exemption by, or filing with or notification of, any
Person.
"Continuation Coverage" shall have the meaning set forth in Section
10.2(c).
"Contract" shall mean any agreement, contract, instrument, license,
lease, sublease, or binding understanding, arrangement or commitment, but
excluding all contracts and agreements relating to or forming a part of an
Employee Benefit Plan.
"Converting Facility" shall have the meaning set forth in the
Recitals.
"Covered Persons" shall have the meaning set forth in Section 10.2(c).
"Emkay Agreement" means the Master Lease between Emkay, Inc. and
Gilman Paper Company, dated September 15, 1976, as amended.
"Employee Benefit Plan" shall mean any: (a) "employee benefit plan"
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"); (b) bonus, stock option, stock purchase,
restricted stock, incentive, fringe benefit, voluntary employees' beneficiary
associations under Section 501(c)(9) of the Code, profit-sharing, pension, or
retirement, deferred compensation, medical, life, disability, accident, salary
continuation, severance, accrued leave, vacation, sick pay, sick leave,
supplemental retirement and unemployment benefit plans (whether or not insured);
and (c) employment, consulting, termination, and severance contracts or
agreements, in each case maintained or contributed to by the Seller, or any
other corporation or trade or business under common control with the Seller or
treated as a single employer with the Seller as determined under Sections
414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate"), or under which the
Seller or any ERISA Affiliate has any current or future obligation or liability
with respect to a present or former officer, employee, agent or consultant of
the Sky Division or under which any present or former officer, employee, agent
or consultant of the Sky Division, or such present or former officer's
employee's, agent's or consultant's dependents or beneficiaries, have any
current or future right to benefits.
"Employees" shall mean all current employees (including those on
layoff, disability or leave of absence, whether paid or unpaid), former
employees and retired employees of the Sky Division.
"Encumbrance" shall mean any lien, security interest, mortgage,
pledge, adverse claim, title defect or other encumbrance.
"Environmental Claim" shall have the meaning set forth in Section
12.2(b)(ii)(A).
"Environmental Laws" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., the
Emergency Planning and Community Right-to-Know Act of 1986,42 U.S.C. Sections
11001 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Sections
6901 et seq., the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq.,
the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Sections 136
et seq., the Clean Air Act, 42 U.S.C. Sections 7401 et seq., the Clean Water Act
(Federal Water Pollution Control Act), 33 U.S.C. Sections 1251 et seq., the Safe
Drinking Water Act, 42 U.S.C. Sections 300f et seq., the Occupational Safety and
Health Act, 29 U.S.C. Sections 641, et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 1801, et seq., the Safe Drinking Water
and Toxic Enforcement Act of 1986, California Health and Safety Code Division
20, Chapter 6.6 Sections 25249.5-25249.13, the rules and regulations promulgated
pursuant to any of the above statutes, and any other federal, state or local
laws, statutes, ordinances, orders, directives, rules or regulations governing
Environmental Matters, as the same have been amended and as in effect as of the
Closing Date.
"Environmental Matters" shall mean any matter arising out of or
relating to pollution or protection of the environment, human health or safety
of employees.
"Environmental Permits" shall mean all Permits required pursuant to
applicable Environmental Laws currently in effect for the operation of the Sky
Division.
"Excluded Assets" shall mean: (a) all cash, cash equivalents,
securities and insurance policies and rights thereunder; (b) all assets or
properties of the Seller that are not used or held for use in connection with
the Sky Division; (c) all rights of the Seller arising under this Agreement or
the transactions contemplated hereby; (d) all assets or properties of the Seller
that are sold or otherwise disposed of in the ordinary course of business,
consistent with the Seller's obligations hereunder, or as otherwise permitted by
this Agreement during the period from the date hereof until the Closing Date;
(e) all intercompany receivables (other than those arising through product
sales); (f) all accounts receivable over ninety (90) days past due as of the
Closing Date; (g) all refunds, credits and claims for refunds of any Taxes of
the Seller or any of its Affiliates; and (h) all items of Business Intellectual
Property which incorporate "Durango", "Gilman", "Converting" or any derivation
in whole or in part thereof, individually or in combination.
"Facility" shall mean any real property or leasehold currently or
formerly owned or operated by the Seller in connection with the Sky Division.
"Final Amount" shall mean the amount of the current assets included in
the Acquired Assets as at the Closing Date less the amount of the current
liabilities included in the Assumed Liabilities as at the Closing Date, as set
forth on the Closing Statement.
"Financial Statements" shall have the meaning set forth in Section
3.5(a).
"Governmental Authority" shall mean any governmental, public or
self-regulatory body or authority.
"Governmental Order" shall mean any order, judgment, injunction,
decree or stipulation entered by or with a Governmental Authority.
"Hazardous Materials" shall mean any substance or material which is
defined as, or considered to be, a "hazardous waste," "hazardous substance,"
"pollutant" or "contaminant" under any Environmental Law, or which is otherwise
regulated by any Environmental Laws, including asbestos, polychlorinated
biphenyls, petroleum and petroleum products.
"Indebtedness" of any Person shall mean at any date, without
duplication, (a) all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person to pay the deferred purchase
price of property or services, except trade accounts payable or accruals arising
in the ordinary course of business, (d) all obligations of such Person as lessee
that are capitalized in accordance with applicable generally accepted accounting
principles, (e) all Indebtedness of others secured by an Encumbrance on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person, and (f) all obligations of such Person in the nature of guarantees of
the obligations described in clauses (a) through (e) above of any other Person.
"Indemnified Environmental Losses" shall mean any Losses suffered by
the Buyer as a result of any breach of Section 3.18 or any liability or
obligation relating to Environmental Matters arising prior to the Closing Date.
"Indemnitee" shall have the meaning set forth in the definition of
"Losses".
"Indemnitor" shall have the meaning set forth in the definition of
"Losses".
"Knowledge" shall mean, with respect to any Person, the actual
knowledge, after due inquiry, of the Officers of such Person.
"Law" shall mean any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, judgment, decree or other requirement
or rule of law.
"Leased Real Property" shall have the meaning set forth in Section
3.10(b).
"Leases" shall have the meaning set forth in Section 3.10(b).
"License Agreement" shall have the meaning set forth in Section 8.7
"Loss" or "Losses" shall mean all claims, losses (net of any insurance
recovery received), liabilities, obligations, payments, actual damages,
judgments, fines, penalties, Taxes, amounts paid in settlement, and any related
reasonable costs and expenses (including, without limitation, interest which may
be imposed in connection therewith, costs and expenses of investigation, and
remediation, actions, suits, proceedings, demands, assessments and reasonable
fees and disbursements of counsel, environmental consultants and other experts)
incurred by the Person seeking indemnification (the "Indemnitee") (whether
relating to claims asserted by or against third parties or to claims asserted
against the Person providing indemnification (the "Indemnitor")).
"Material Contracts" shall have the meaning set forth in Section
3.12(a).
"Non-competition Period" shall have the meaning set forth in Section
7.6(b).
"Note" shall have the meaning set forth in Section 2.3.
"Notice" shall have the meaning set forth in Section 12.4.
"Notification" shall have the meaning set forth in Section
12.2(b)(i)(B).
"Officer" shall mean any executive officer or director of the Seller.
"Owned Real Property" shall have the meaning set forth in Section
3.10(a).
"Parties" shall have the meaning set forth in the Preamble.
"Permit" shall mean any permit, license, order or authorization
issued, granted or given or otherwise made available by or under the authority
of any Governmental Authority.
"Permitted Encumbrances" shall mean (a) Encumbrances set forth on
Schedule 3.8, (b) liens of Taxes not yet due and payable or due but not
delinquent or being contested in good faith by appropriate proceedings and (c)
Encumbrances which individually or in the aggregate could not reasonably be
expected to have a Seller Material Adverse Effect.
"Person" shall mean any individual, firm, corporation, partnership,
limited liability company, trust, joint venture, association, unincorporated
organization, Governmental Authority or other entity.
"Preliminary Amount" shall mean $10,289,310.
"Press" shall mean that certain 1996 Hamilton Press 33" by 48" wide
one color dry offset press, Wide Trac Model 110, Hiline Press five forms wide
with serial number 595157 that is located at 151 Commerce Avenue, Greencastle,
Pennsylvania 17225 as of the date of this Agreement
"Press Lease" shall mean that certain Master Lease between PNC Leasing
Corp. and Gilman Paper Company, dated April 24, 1995, as amended by that certain
Lease for Press between PNC Leasing Corp., Kentucky and Gilman Paper Company,
dated October 5, 1995.
"Press Note" shall have the meaning set forth in Section 2.3.
"Purchase Price" shall have the meaning set forth in Section 2.3.
"Purchase Price Adjustment" shall mean the difference between the
Preliminary Amount and the Final Amount, whether a positive or negative number.
"Purchase Price Allocation" shall have the meaning set forth in
Section 2.5.
"Real Property" shall have the meaning set forth in Section 3.10(b).
"Reference Balance Sheet" shall have the meaning set forth in Section
3.5(a).
"Request" shall have the meaning set forth in Section 13.6(a)(ii).
"Respondent" shall have the meaning set forth in Section 13.6(a)(ii).
"Response Action" shall mean any order, directive, decree, claim,
demand, notice of potential liability, or complaint, seeking monetary relief or
the performance of any action to investigate, test, monitor or remediate any
Hazardous Materials.
"Security Agreement" shall mean the Security Agreement, dated as of
the Closing Date, between the Buyer and the Seller, substantially in the form
attached hereto as Exhibit A-3.
"Seller" shall have the meaning set forth in the Preamble.
"Seller Indemnitees" shall have the meaning set forth in Section 12.3.
"Seller Material Adverse Effect" shall mean a material adverse effect
on (a) the business, operations, results of operations or condition (financial
or otherwise) of the Sky Division or (b) the ability of the Seller to perform
its obligations under this Agreement or the Supply Agreement or to consummate
the transactions contemplated hereby or thereby.
"Seller's 401(k) Plans" shall have the meaning set forth in Section
10.2(a).
"Sky Division" shall have the meaning set forth in the Recitals.
"Straddle Taxes" shall have the meaning set forth in Section 2.6(a).
"Subsidiary" shall mean any Person, with respect to which a specified
Person owns 50% or more of the capital stock or other equity interests of such
Person, the holders of which are generally entitled to vote for the election of
the board of directors or other governing body of such Person, directly or
through one or more Subsidiaries.
"Supply Agreement" shall have the meaning set forth in Section 9.4
"Tangible Personal Property" shall mean all machinery, equipment,
vehicles, office furniture, tools and other tangible property owned, used or
held by the Seller for use primarily or exclusively in connection with the
business of the Sky Division.
"Tax or Taxes" shall mean (a) any taxes, assessments, duties, fees,
levies, imposts, deductions, withholdings or other governmental charges of any
nature whatsoever imposed by any taxing authority of any country or political
subdivision of any country, including any interest, penalties, additions to tax
or additional amounts imposed by any taxing authority with respect thereto,
whether disputed or not, and (b) any liability of the Seller for payment of any
amounts for the type described in clause (a) above as a result of being a member
of an affiliated, consolidated, combined or unitary group for any period of time
prior to Closing.
"Tax Return" shall mean any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto.
"Third-Party Claim" shall have the meaning set forth in Section 12.4.
"Trade Secrets" shall have the meaning set forth in Section 7.6(a).
"Transamerica Lease" shall mean the Schedule, dated May 28, 1996, to
the Master Lease between PNC Leasing Corp. and Gilman Paper Company, dated April
24, 1995.
"Transfer Taxes" shall mean all transfer, transfer gains, documentary,
sales, use, stamp, registration and other similar Taxes and fees (including
penalties, interest and additions to tax attributable thereto and costs and
expenses relating to such Taxes).
"Transferred Employee" shall have the meaning set forth in Section
10.1.
"U.S. GAAP" shall mean United States generally accepted accounting
principles applied on a basis consistent with the past practices of the Sky
Division.
"WARN Act" shall mean the Worker Adjustment and Retraining
Notification Act of 1988, as amended.
1.2 Certain Rules of Construction.
(a) When used herein, the words "hereof," "herein" and "hereunder" and
words of similar import shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. References to the Preamble, Recitals,
Articles, Sections, Schedules or Exhibits shall refer respectively to the
Preamble, Recitals, Articles, Sections, Schedules or Exhibits of this Agreement,
unless otherwise expressly provided.
(b) When used herein, the terms "include", "includes", and "including"
are not limiting.
(c) Unless the context requires otherwise, derivative forms of any
term defined herein shall have a comparable meaning to that of such term.
(d) When a Party's consent is required hereunder, such Party's consent
may be granted or withheld in such Party's sole discretion, unless otherwise
specified.
ARTICLE II.
PURCHASE AND SALE
2.1 Purchase and Sale. Upon the terms and subject to the conditions of this
Agreement, the Seller shall sell, convey, transfer, assign and deliver to the
Buyer, and the Buyer shall purchase from the Seller, at the Closing, all of the
Seller's right, title and interest in, to and under all of the assets and
properties used or held by the Seller for use primarily or exclusively in
connection with the business of the Sky Division (other than the Excluded
Assets) (each and all of such assets and properties being herein referred to as
the "Acquired Assets"), including, without limitation, all right, title and
interest of the Seller in, to and under the following:
(a) all Tangible Personal Property, which is set forth on Schedule
2.1(a), including the location thereof;
(b) all raw materials, inventories, including inventories of work in
process, samples and finished goods, spare parts relating to manufacturing
equipment, products and supplies owned, used or held by the Seller for use in
connection with the business of the Sky Division;
(c) all Real Property, which is set forth on Schedule 2.1(c);
(d) all claims, deposits, prepayments, refunds, and rights of
recovery, set off and recoupment;
(e) all accounts, notes and other receivables (other than accounts
receivable that are over ninety (90) days past due as of the Closing Date and
intercompany receivables, except those intercompany receivables arising through
product sales);
(f) all Business Intellectual Property, intangibles and goodwill of
the Sky Division;
(g) all books, records, technical manuals, and other documents
necessary to or used primarily or exclusively in the conduct of the Sky
Division's business;
(h) all rights arising or otherwise relating to any period on or after
the Closing Date in respect of all Permits and Contracts obtained or entered
into regarding the Sky Division, which are set forth on Schedule 2.1(h);
(i) all of Seller's right, title and interest in and to the Bank
Accounts.
2.2 Assumed Liabilities. The Buyer shall assume on and as of the Closing
Date, and shall thereafter pay, perform and discharge when due (or cause to be
paid, performed and discharged when due), the following liabilities and
obligations of the Seller, relating to or arising out of the conduct of the Sky
Division's business (collectively, the "Assumed Liabilities"):
(a) all liabilities and obligations of the Seller arising or otherwise
relating to any period on or after the Closing Date under or pursuant to the
Contracts and the Permits included in the Acquired Assets; and
(b) all accounts payable of the Seller in respect of the Sky Division
(other than accounts payable that are over thirty (30) days old as of the
Closing Date and intercompany payables, except those intercompany payables
arising through product sales).
The Buyer shall not assume or be responsible for the payment,
performance and discharge of any obligations or liabilities of the Seller other
than the Assumed Liabilities, including but not limited to any liability or
obligation relating to or arising from any Employee Benefit Plan (except as
expressly set forth in Article X), or any contract, agreement or other
arrangement relating thereto or forming a part thereof.
2.3 Purchase Price. The Buyer shall pay to the Seller or its designees at
the Closing $12,340,231.50 (as adjusted pursuant to Section 2.4, the "Purchase
Price") by delivery of: (i) cash in an amount equal to $11,399,653, by wire
transfer of immediately available funds to an account specified in writing by
the Seller to the Buyer prior to the Closing Date (ii) the unsecured promissory
note of the Buyer, in the principal amount of $300,000 and bearing interest at
the prime rate of interest as quoted by The Chase Manhattan Bank on the day
prior to the Closing Date, payable in twenty (20) consecutive quarterly
principal payments of $15,000 each, plus accrued interest, in the form of
Exhibit A-1 (the "Note"), and (iii) the secured promissory note of the Buyer, in
the principal amount of $640,578.50, bearing no interest and payable in
twenty-five (25) consecutive monthly payments of $16,024.10 each and a final
payment in the amount of $239,976.00, in the form of Exhibit A-2 (the "Press
Note").
2.4 Purchase Price Adjustment.
(a) Prior to the Closing Date, the Buyer shall retain the Arbiter to
prepare and deliver, as promptly as practicable but in any event within 45 days
following the Closing Date, to the Seller and the Buyer an unaudited statement,
substantially in the form of Schedule 2.4, setting forth the current assets
included in the Acquired Assets and the current liabilities included in the
Assumed Liabilities as at the Closing Date (the "Closing Statement"). The
Closing Statement shall be prepared using the same accounting methods, policies,
practices and procedures, with consistent classification, judgments, and
estimation methodology, as used in the preparation of the Reference Balance
Sheet, except that the Closing Statement shall not include (i) any current Tax
assets or any current Tax liabilities or (ii) any LIFO reserve or any
intercompany profit on inventory reserve, except to the extent included on the
balance sheet of the Seller as at October 31, 2000. Notwithstanding anything
contained herein to the contrary, for purposes of the Closing Statement, ,
storeroom inventory and spare parts will be determined on the day immediately
preceding the Closing Date and all inventory shall be valued at the invoice cost
of raw materials plus manufacturing costs with respect thereto, determined in
accordance with U.S. GAAP.
(b) The Closing Statement delivered by the Arbiter to the Buyer and
the Seller shall be conclusive and binding upon the Parties, absent manifest
error. The fees, costs and expenses of the Arbiter shall be borne equally by the
Buyer and the Seller. The Buyer and the Seller shall make available to the
Arbiter their respective work papers generated in connection with the
preparation or review of the Closing Statement.
(c) If the Final Amount exceeds the Preliminary Amount, the Buyer
shall pay to the Seller the dollar amount of the Purchase Price Adjustment in
accordance with the provisions of paragraph (d) of this Section 2.4. If the
Final Amount is less than the Preliminary Amount, the Seller shall pay to the
Buyer the dollar amount of the Purchase Price Adjustment in accordance with the
provisions of paragraph (d) of this Section 2.4.
(d) Any amount payable as the Purchase Price Adjustment shall be paid
by wire transfer of immediately available funds to an account designated in
writing by the Buyer or the Seller, as the case may be, except as provided in
Section 2.4 of the Note. The payments contemplated in this Section 2.4(d) shall
be made prior to the tenth Business Day following the receipt of the report of
the Arbiter.
2.5 Allocation of Purchase Price. The Seller and the Buyer shall use their
reasonable best efforts to agree upon an allocation of the Purchase Price and
other relevant items (the "Purchase Price Allocation") for Federal, state, local
and foreign tax purposes on or prior to the Closing, which allocation shall be
annexed as Schedule 2.5 of this Agreement at the Closing. Promptly, after the
date hereof, the Seller shall deliver to the Buyer a proposed allocation of the
Purchase Price and other relevant items for the Buyer's review and approval, and
the Buyer shall promptly review and approve or disapprove of such allocation. If
the Buyer disapproves of the proposed allocation, then the Buyer shall promptly
deliver to the Seller a written adjustment to the Seller's proposed allocation.
The Seller and the Buyer shall use their reasonable best efforts to agree upon
any adjustments to the Purchase Price Allocation. If the Buyer and the Seller
agree upon an allocation pursuant to this Section 2.5, neither the Buyer nor the
Seller shall take any position inconsistent with such allocation, except as may
be required by law, without the consent of the other Party. The Purchase Price
Allocation determined in accordance with this Section 2.5 shall be appropriately
adjusted to reflect any subsequent adjustment to the Purchase Price based upon
the particular tax asset to which such adjustment relates. Such adjusted
Purchase Price Allocation shall be determined in a manner consistent with the
procedures set forth in this Section 2.5.
2.6 Taxes. (a) Taxes that are imposed on a periodic basis with respect to
the Sky Division and the Acquired Assets and are payable for any taxable period
that begins on or before but ends after the Closing Date, other than Taxes based
on (or measured by) net income ("Straddle Taxes"), shall (i) in the case of any
sales, use, employment, payroll and other similar Straddle Taxes which are based
on or related to sales, receipts or disbursements, be allocated between the
Seller and the Buyer based upon the amount which would be payable if the
relevant taxable period ended at the close of business on the Closing Date, and
(ii) in the case of all other Straddle Taxes (including real property and
personal property Taxes), be allocated between the Seller and the Buyer based
upon the relative number of days in the portion of the taxable period up to and
including the Closing Date and the relative number of days in the portion of the
taxable period subsequent to the Closing Date. Any refund or credit of Straddle
Taxes shall be allocated between the Seller and the Buyer in a manner consistent
with the preceding sentence. In the case of any Straddle Taxes prepaid by the
Seller, the Buyer shall (after review and approval of such Taxes, which approval
shall not be unreasonably withheld) pay to the Seller at the Closing, the
Seller's allocable share of such Straddle Taxes. In the case of all other
Straddle Taxes, the Party paying such Straddle Taxes shall provide a written
notice to the other Party indicating the amount of such Straddle Taxes so paid
(including a copy of any return relating to, and evidence of payment of, such
Straddle Taxes) and such other Party shall (after review and approval of such
Taxes, which approval shall not be unreasonably withheld) promptly pay to the
paying Party such other Party's allocable share of such Straddle Taxes.
(b) All Transfer Taxes incurred in connection with the consummation of the
transactions contemplated by this Agreement shall be borne by the Seller. The
Seller shall prepare and timely file all necessary tax returns and other
documentation with respect to all such Transfer Taxes. The Buyer shall
reasonably cooperate with the Seller in the preparation and filing of any such
tax returns and other documentation.
2.7 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of White & Case LLP,
200 South Biscayne Boulevard, Miami, Florida 33131, or Gardere Wynne Sewell LLP
1601 Elm Street, Suite 3000, Dallas, Texas 75201, as may be agreed to between
the Parties, at 10:00 a.m. local time, on April 11, 2001 or as promptly as
practicable following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the Parties will take at the
Closing itself), or at such other place, time and/or date as the Parties may
mutually agree (the date of the Closing, the "Closing Date"). At the Closing,
(a) the Seller shall deliver to the Buyer the various certificates, instruments
and documents referred to in Article VIII, (b) the Buyer shall deliver to the
Seller the various certificates, instruments and documents referred to in
Article IX, (c) the Seller shall execute, acknowledge (if appropriate) and
deliver to the Buyer (i) assignments of the Business Intellectual Property,
Permits and Contracts in form and substance reasonably satisfactory to the Buyer
and (ii) such other instruments of sale, transfer conveyance and assignment as
the Buyer may reasonably request, (d) the Buyer shall execute, acknowledge (if
appropriate) and deliver to the Seller (i) an assumption of the Assumed
Liabilities in form and substance reasonably satisfactory to the Seller and (ii)
such other instruments of assumption as the Seller may reasonably request, and
(e) the Buyer shall pay $12,340,231.50 to the Seller, as set forth in Section
2.3.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer as of the date hereof and
as of the Closing Date as follows:
3.1 Organization; Power. The Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite limited liability company power and authority to
carry on its business as it is now being conducted, to execute, deliver and
perform this Agreement, the Supply Agreement and the License Agreement, to carry
out its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The Seller is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the properties
owned or leased by it or the operation of its business makes such licensing or
qualification necessary, except to the extent that the failure to be so licensed
or qualified would not adversely affect the ability of the Seller to carry out
its obligations under, and to consummate the transactions contemplated by this
Agreement, the Supply Agreement and the License Agreement. The jurisdictions in
which the Seller is qualified to transact business as a result of the operations
of the Sky Division are set forth on Schedule 3.1.
3.2 Authorization; Effect of Agreement. The execution, delivery and
performance by the Seller of this Agreement, the Supply Agreement and the
License Agreement, the performance by the Seller of its obligations hereunder
and thereunder and the consummation by the Seller of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
limited liability company action on the part of the Seller. This Agreement has
been, and upon its execution the Supply Agreement and the License Agreement
shall have been, duly and validly executed and delivered by the Seller. This
Agreement constitutes (assuming due authorization, execution and delivery by the
Buyer), and upon its execution the Supply Agreement and the License Agreement
will constitute (assuming due authorization execution and delivery by all
parties other than the Seller), a valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, except to the
extent that such enforceability (i) may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally, and (ii) is subject to general principles of equity.
3.3 Subsidiaries and Equity Interests. There are no Subsidiaries of the
Seller included within the Sky Division and the Seller does not have any equity
interest in any other Person that is material to the business of the Sky
Division.
3.4 Consents. Except as set forth on Schedule 3.4, no Consent is required
to be obtained or made by the Seller in connection with the execution, delivery
and performance by the Seller of this Agreement, the Supply Agreement and the
License Agreement, or the consummation by it of the transactions contemplated
hereby or thereby.
3.5 Financial Statements.
(a) The Seller has delivered to the Buyer (i) the unaudited combined
statements of net assets of the Sky Division as of December 31, 2000, December
31, 1999, December 31, 1998 and December 31, 1997; (ii) the unaudited combined
statements of revenues and expenses of the Sky Division for each of the years
ended December 31, 2000, December 31, 1999, December 31, 1998 and December 31,
1997; (iii) an unaudited combined balance sheet of the Sky Division as of
October 31, 2000 (the "Reference Balance Sheet"); and (iv) an unaudited
statement of revenues and expenses of the Sky Division for the period ended
October 31, 2000 (collectively, with the notes and supplementary information
thereto, the "Financial Statements"), copies of which are included on Schedule
3.5. Except as set forth on Schedule 3.5 or in the notes to the Financial
Statements, the Financial Statements (w) were prepared in accordance with the
books of account and other financial records of the Sky Division, (x) present
fairly the combined financial condition and results of operations of the Sky
Division as of the dates thereof or for the periods covered thereby, (y) have
been prepared in accordance with U.S. GAAP and (z) include all adjustments
(consisting only of normal recurring accruals) that are necessary for a fair
presentation of the financial condition and the results of the operations
(subject, in the case of the statements referred to in clauses (iii) and (iv),
to normal year-end adjustments) of the Sky Division as of the dates therefor or
for the periods covered thereby.
(b) The books of account and other financial records of the Sky
Division are in all material respects complete and correct.
3.6 Conduct in the Ordinary Course; Absence of Certain Changes, Events and
Conditions. Except as permitted or contemplated by this Agreement, since October
31, 2000 (a) the Sky Division has conducted its business in the ordinary and
usual course consistent with past practice and there has not been any
development or combination of developments that, individually or in the
aggregate, could reasonably be expected to have a Seller Material Adverse Effect
and (b) the Seller has not:
(i) permitted or allowed any of the assets or properties used or held
for use in connection with the Sky Division (whether tangible or
intangible) to be subjected to any Encumbrance, except for Permitted
Encumbrances;
(ii) except as set forth on Schedule 3.6, permitted the Sky Division
to enter into any Contract involving more than $250,000;
(iii) permitted the Sky Division to make any capital investment in,
any loan to, or any acquisition of the securities or assets, of any other
Person outside the ordinary course of business or involving more than
$250,000;
(iv) permitted the Sky Division to delay or postpone the payment of
any accounts payable or liabilities outside the ordinary course of
business;
(v) made any capital expenditure or contract for any capital
expenditure in connection with the Sky Division in excess of $250,000
individually or $1 million in the aggregate;
(vi) except as set forth on Schedule 3.6, issued any sales orders or
otherwise agreed to make any purchases in connection with the Sky Division,
other than in the ordinary course of business, involving exchanges in value
in excess of $250,000 individually or $1 million in the aggregate;
(vii) except as set forth on Schedule 3.6, sold, transferred, leased,
subleased, licensed or otherwise disposed of any properties or assets used
or held for use in connection with the Sky Division, real, personal or
mixed (including, without limitation, leasehold interests and intangible
assets) having a value in excess of $250,000 individually or $1 million in
the aggregate, other than the sale of inventories or obsolete equipment in
the ordinary course of business;
(viii) except as set forth on Schedule 3.6, increased the wages,
salaries, compensation, pension or other benefits payable, or to become
payable by the Sky Division, to any of its officers, employees or agents,
including, without limitation, any bonus payments or severance or
termination pay (other than increases in wages and salaries that are (y)
required by employment arrangements existing on the date hereof or (z) made
in the ordinary course of business and represent increases of no more than
ten percent (10%));
(ix) allowed any Permit or Environmental Permit that was issued or
relates to the Sky Division or otherwise relates to any Acquired Asset
(other than any Permit or Environmental Permit that is not material to the
Sky Division) to lapse or terminate or failed to renew any such Permit or
Environmental Permit or any insurance policy that is scheduled to terminate
or expire within 45 calendar days prior to the Closing Date;
(x) except as set forth on Schedule 3.6, materially amended, modified
or consented to the termination of any Material Contract or any of the Sky
Division's rights thereunder to the extent arising or otherwise relating to
any period on or after the Closing Date;
(xi) terminated, discontinued, closed or disposed of any plant,
facility or other business operation relating to the Sky Division, or laid
off any employees (other than layoffs of less than 50 employees in any
six-month period in the ordinary course of business consistent with past
practice) or implemented any early retirement, separation or program
providing early retirement window benefits within the meaning of Section
1.401(a)-4 of the Treasury Regulations promulgated under Section 401 of the
Code or announced or planned any such action or program for the future;
(xii) permitted to lapse or go abandoned any Business Intellectual
Property (or any registration or grant thereof or any application relating
thereto) to which, or under which, the Sky Division has any right, title,
interest or license, except for lapses that individually or in the
aggregate could not reasonably be expected to have a Seller Material
Adverse Effect;
(xiii) suffered any casualty loss or material damage with respect to
any of the Acquired Assets which has a replacement cost of more than
$250,000, whether or not such loss or damage shall have been covered by
insurance; or
(xiv) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 3.6 or granted any options to purchase,
rights of first refusal, rights of first offer or any other similar rights
or contracts with respect to any of the actions specified in this Section
3.6.
3.7 No Undisclosed Liabilities. The Seller does not have any liabilities
affecting the Sky Division, other than liabilities (i) reflected or reserved
against on the Reference Balance Sheet, (ii) disclosed on Schedule 3.7, (iii)
incurred or arising since the date of this Agreement in the ordinary course of
business of the Sky Division or (iv) that are not material to the Sky Division.
3.8 Title to Assets.
(a) The Seller owns or leases the Acquired Assets. Except as set forth
on Schedule 3.8, the Seller has good and marketable title to all of the
properties and assets included in the Acquired Assets other than any leased
property (including, without limitation, those properties and assets included in
the Acquired Assets which are reflected as owned by the Seller on the balance
sheet as of October 31, 2000 included in the Financial Statements, except for
properties and assets sold, consumed or otherwise disposed of in the ordinary
course of business or otherwise as permitted by this Agreement since October 31,
2000) or, in the case of the Leased Real Property and any other leased property
included in the Acquired Assets, valid and subsisting leasehold interests in
such property free and clear of all Encumbrances other than the encumbrances set
forth on Schedule 3.8 and Permitted Encumbrances.
(b) The Acquired Assets constitute all properties, assets and rights
which are necessary to conduct the business of the Sky Division in the manner
conducted as of the date hereof, and the Tangible Personal Property is in such
physical condition and state of repair, ordinary wear and tear excepted, as to
enable the Sky Division to conduct its operations as currently conducted without
material disruption. Except as set forth in this Section 3.8, all machinery and
equipment is being sold "as is and where is".
(c) Immediately following the Closing (and assuming the obtaining of
all Consents), the Buyer will own, free and clear of all Encumbrances (other
than Permitted Encumbrances and Encumbrances imposed at the direction of the
Buyer), or lease, under valid and subsisting leases, the interest of the Seller
in, to and under the Acquired Assets.
3.9 Permits. The Seller has all Permits that are required for the operation
of the Sky Division as presently conducted and for the ownership of the Acquired
Assets, except where the absence thereof individually or in the aggregate could
not reasonably be expected to have a Seller Material Adverse Effect, which
Permits are listed on Schedule 3.9. The Seller has not received any written
notice from any Governmental Authority revoking, canceling, rescinding,
materially modifying or refusing to renew any Permit or advising of violations
under any Law which individually or in the aggregate could reasonably be
expected to have a Seller Material Adverse Effect. Except as set forth on
Schedule 3.9, the Sky Division is in compliance with the Permits and the
requirements of the Permits, except where the failure to comply therewith
individually or in the aggregate could not reasonably be expected to have a
Seller Material Adverse Effect. Schedule 3.9 identifies all Permits (other than
any Permit that is not material to the Sky Division) that are nontransferable or
which will require the consent of any Governmental Authority in the event of the
consummation of the transactions contemplated by this Agreement.
3.10 Real Property.
(a) Schedule 3.10(a) sets forth a list of all of the real property
owned by the Seller in respect of the Sky Division (the "Owned Real Property")
on the date hereof.
(b) Schedule 3.10(b) sets forth a list of all leases (the "Leases") of
real property in respect of the Sky Division (the "Leased Real Property") to
which the Seller is a party on the date hereof (the Leased Real Property
together with the Owned Real Property, is collectively, the "Real Property").
Each Lease is in full force and effect and, to the Seller's Knowledge,
represents the entire agreement between the respective landlord and the Seller
with respect to the use and occupancy of such Leased Real Property. In addition,
the Seller has not (i) received any notice of cancellation or termination under
any such Lease, (ii) received any notice of a breach or default under such
Lease, which breach or default has not been cured, and (iii) other than as set
forth on Schedule 3.10(b), granted to any other Person any rights, adverse or
otherwise, under any such Lease.
3.11 Compliance with Laws. Except as set forth on Schedule 3.11, the Seller
is in compliance with all Laws applicable with respect to the Sky Division, in
each case, as in effect as of the date hereof, except where the failure to
comply therewith individually or in the aggregate could not reasonably be
expected to have a Seller Material Adverse Effect.
3.12 Contracts.
(a) Schedule 3.12(a) sets forth a list of each of the following
Contracts of the Sky Division (such Contracts, being the "Material Contracts"):
(i) each Contract for the purchase of inventory, spare parts, other
materials or personal property with any supplier or for the furnishing of
services to the Seller related to the Sky Division: (A) under the terms of
which the Seller may be required to purchase goods or services in an amount
in excess of $250,000 in the aggregate over the remaining term of such
Contract and (B) which cannot be canceled by the Seller without penalty and
without more than 90 days' notice;
(ii) each Contract for the sale of inventory or other personal
property or for the furnishing of services by the Seller related to the Sky
Division: (A) under the terms of which the Seller may be required to
provide goods or services in an amount in excess of $250,000 in the
aggregate over the remaining term of such Contract and (B) which cannot be
canceled by the Seller without penalty and without more than 90 days'
notice;
(iii) all broker, distributor, dealer, manufacturer's representative,
franchise, agency, sales promotion, market research, marketing consulting
and advertising contracts related to the Sky Division: (A) under the terms
of which the Seller may be required to purchase goods or services, or pay
commissions or similar payments of more than $250,000 in the aggregate over
the remaining term of such Contract and (B) which cannot be canceled by the
Seller without penalty and without more than 90 days' notice;
(iv) all management Contracts and Contracts with independent
contractors or consultants (or similar arrangements) related to the Sky
Division: (A) under the terms of which the Seller may be required to pay
salaries or fees for services or similar payments of more than $250,000 in
the aggregate over the remaining term of such Contract and (B) which cannot
be canceled by the Seller without penalty and without more than 90 days'
notice;
(v) each Contract relating to the operation of the Real Property: (A)
under the terms of which the Seller may be required to make rental payments
or other payments for the provision of services of more than $250,000 in
the aggregate over the remaining term of such Contract and (B) which cannot
be canceled by the Seller without penalty and without more than 90 days'
notice;
(vi) all Contracts relating to any Indebtedness of the Sky Division;
(vii) all Contracts related to the Sky Division with any Governmental
Authority to which the Seller is a party;
(viii) all Contracts related to the Sky Division that limit or purport
to limit the ability of the Sky Division to compete with any Person or in
any geographic area or during any period of time;
(ix) all Contracts related to the Sky Division between or among the
Seller or any Affiliate of the Seller; and
(x) all Contracts related to the Sky Division which are not made in
the ordinary course of business, and which are material to the conduct of
the Sky Division's business.
(b) Except as disclosed on Schedule 3.12(b), each Material Contract:
(i) is valid and binding and enforceable against the Seller, except to the
extent that such enforceability (A) may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally, and (B) is subject to general principles of equity, (ii) is in full
force and effect, and (iii) upon consummation of the transactions contemplated
by this Agreement, except to the extent that any Consents set forth on Schedule
3.4 are not obtained, shall continue in full force and effect without penalty or
other adverse consequence. The Seller is not in breach of, or default under, any
Material Contract, except for breaches or defaults which individually or in the
aggregate could not reasonably be expected to have a Seller Material Adverse
Effect.
(c) Except as disclosed on Schedule 3.12(c), (i) to the Seller's
Knowledge, no other party to any Material Contract is in breach thereof or
default thereunder and (ii) to the Seller's Knowledge, no other party to any
Material Contract has indicated in writing its intention not to perform
thereunder.
(d) The Seller has not received notice in writing of any plan or
intention of any other party to any Material Contract to exercise any right to
cancel or terminate such Material Contract. Except as disclosed on Schedule
3.12, to the Seller's Knowledge, none of the customers or suppliers of the Sky
Division has refused, or communicated in writing that it intends to refuse, to
purchase or supply goods or services, or has communicated in writing that it
intends to substantially reduce the amounts of goods or services that it is
willing to purchase from or sell to Seller.
3.13 No Violations. Except as set forth on Schedule 3.13, the execution,
delivery and performance by the Seller of this Agreement and the Supply
Agreement and the consummation by the Seller of the transactions contemplated
hereby and thereby will not, with or without the giving of notice or the lapse
of time, or both, (a) violate, conflict with or result in breach of any
provisions of the Certificate of Formation or the Limited Liability Company
Agreement of the Seller, (b) conflict with or violate any Law or Governmental
Order applicable to the Seller or any of its respective assets, properties or
businesses, including, without limitation, the Acquired Assets and the Sky
Division, (c) assuming the obtaining of all Consents, conflict with, result in
any breach of, constitute a default (or event which with the giving of notice or
lapse of time, or both, would become a default) under, or give to others any
right of termination or acceleration under, or result in the creation of any
Encumbrance on any of the Acquired Assets pursuant to, any Contract to which the
Seller is a party or by which any of the Acquired Assets is bound or affected,
other than Permitted Encumbrances.
3.14 Intellectual Property. Schedule 3.14 sets forth a list of all items of
Business Intellectual Property. Except as disclosed on Schedule 3.14, or except
as could not reasonably be expected to have a Seller Material Adverse Effect:
(a) the Seller owns or possesses rights to use all Business Intellectual
Property and upon the consummation of this transaction, the Buyer will own such
rights to use the Business Intellectual Property; (b) to the Seller's Knowledge,
no third party has questioned the validity of any Business Intellectual Property
or the Sky Division's title thereto; and (c) to the Seller's Knowledge, the
conduct of the Sky Division does not infringe upon any intellectual property
rights of third parties.
3.15 Litigation. Except as set forth on Schedule 3.15 (which with respect
to each Action disclosed therein sets forth the parties, nature of the
proceeding and status thereof), there are no Actions by or against the Seller
affecting any of the Acquired Assets or the Sky Division pending before any
Governmental Authority (or, to the Seller's Knowledge, threatened to be brought
by or before any Governmental Authority). To the Seller's Knowledge, no facts or
circumstances exist which could reasonably be expected to result in the filing
of any Action which could reasonably be expected to have a Seller Material
Adverse Effect. None of the matters disclosed on Schedule 3.15 could reasonably
be expected to have a Seller Material Adverse Effect or could reasonably be
expected to affect the legality, validity or enforceability of this Agreement,
the Supply Agreement or the License Agreement. Neither the Sky Division nor any
of the Acquired Assets is subject to any Governmental Order (nor, to the
Seller's Knowledge, are there any such Governmental Orders threatened to be
imposed by any Governmental Authority) which could reasonably be expected to
have a Seller Material Adverse Effect.
3.16 Employee Benefit Plans.
(a) Schedule 3.16(a) sets forth a true, complete and correct list of
each Employee Benefit Plan.
(b) Neither the Seller nor an ERISA Affiliate has within the past six
years had an obligation to contribute to a "defined benefit plan," as defined in
Section 3(35) of ERISA, a pension plan subject to the minimum funding standards
of Section 302 of ERISA or Section 412 of the Code, or a "multiemployer plan,"
as defined in Section 3(37) of ERISA with respect to which the Buyer could
reasonably be expected to have any liability or obligation.
(c) The Seller's 401(k) Plans have been maintained, operated and
administered in all material respects in accordance with their respective terms
and in compliance with all applicable Laws. All reports, notices and other
documents required to be filed or furnished under the Code, ERISA or the terms
of the Seller's 401(k) Plans set forth on Schedule 3.16(a) have been duly and
timely filed or furnished. Neither the Seller nor any ERISA Affiliate has
participated in any voluntary compliance or self-correction programs established
by the Internal Revenue Service, or entered into a closing agreement with the
Internal Revenue Service with respect to the form or operation of the Seller's
401(k) Plans.
(d) The Seller's 401(k) Plans have been determined by the Internal
Revenue Service to be qualified under Section 401(a) of the Code, and the trusts
created thereunder which are intended to be exempt from federal income tax under
the provisions of Section 501(a) of the Code have been determined by the
Internal Revenue Service to be so exempt and no event has occurred or condition
exists that is reasonably likely to adversely affect the qualified status of the
Seller's 401(k) Plans or the exempt status of such trusts. The Seller has
delivered or made available to the Buyer a copy of the most recent determination
letter received with respect to the J.D. Sky Corporation 401(k) Profit Sharing
Plan. The Seller has delivered or made available to the Buyer a copy of the most
recent determination letter received with respect to the 401(k) plan established
by the Gilman Paper Company. The Durango-Georgia Paper Company 401(k) Plan is
substantially identical to the 401(k) plan established by the Gilman Paper
Company and Durango Georgia Paper Company intends to obtain a determination
letter with respect to the Durango-Georgia Paper Company 401(k) Plan during
calendar year 2001. Durango Georgia Paper Company also intends to obtain a
determination letter during calendar year 2001 with respect to the
Durango-Georgia Paper Company Money Purchase Pension Plan, a master and
prototype arrangement sponsored by T. Rowe Price, except to the extent that
Durango Georgia Paper Company determines that it may rely on the determination
letter obtained by T. Rowe Price with respect to such plan. Upon receipt of such
determination letter, the Seller will deliver a copy of such determination
letter to the Buyer. No event has occurred that is reasonably likely to subject
the Seller's 401(k) Plans to tax under Section 511 of the Code. Each Employee
Benefit Plan that is intended to be qualified under Section 401(a) of the Code
may be amended currently during an applicable remedial amendment period to
request and receive a favorable determination letter from the Internal Revenue
Service with respect to all provisions applicable to each such Employee Benefit
Plan.
(e) No lien has been filed by any person or entity and no lien exists
by operation of law or otherwise on the Acquired Assets relating to, or as a
result of, the operation or maintenance of any Employee Benefit Plan or any
other similar plan maintained, or contributed to, by the Seller or any ERISA
Affiliate, and neither the Seller nor any ERISA Affiliate is aware of the
existence of facts or circumstances that would reasonably be expected to result
in the imposition of such lien on such assets.
(f) The Buyer will incur no liability, cost or expense arising from,
or with respect to, any Employee Benefit Plan or any other similar plan or
arrangement maintained, or contributed to, by the Seller or any ERISA Affiliate.
(g) (i) The execution of this Agreement and the consummation of the
transactions contemplated hereby do not constitute a triggering event under any
Employee Benefit Plan which will result in the payment of any termination,
retention, severance or similar benefit or in any acceleration of the payment or
vesting of any benefits to any Employee or in any increase in benefits provided
under the Employee Benefit Plans; and (ii) no liability, claim, action,
litigation, audit, examination, investigation or administrative proceeding has
been made, commenced or, to the Seller's Knowledge, threatened with respect to
any Employee Benefit Plan (other than routine claims for benefits payable in the
ordinary course) which event under clause (i) or (ii) above could result in a
liability for which the Buyer could reasonably be expected to be liable.
(h) The Seller has delivered or caused to be delivered to the Buyer or
its counsel true and complete copies of (i) each Employee Benefit Plan, together
with all amendments thereto, (ii) to the extent required by applicable Law, all
current summary plan descriptions and (iii) each trust agreement and insurance
contract relating to the Seller's 401(k) Plans.
3.17 Tax Matters.
(a) The Seller has filed all Tax Returns that it was required to file,
and has paid all Taxes due, with respect to the Sky Division and the Acquired
Assets, and such Tax Returns are accurate and complete in all material respects.
(b) Neither the Seller nor any of its Affiliates has waived any
statute of limitations in respect of Taxes relating to the Sky Division or the
Acquired Assets or agreed to any extension of time with respect to any Tax
assessment or deficiency relating to the Sky Division or the Acquired Assets.
(c) Neither the Seller nor any of its Affiliates is a party to any Tax
allocation or sharing agreement which relates to the Sky Division or the
Acquired Assets. There are no pending audits, actions, proceedings,
investigations, disputes or claims with respect to any Taxes payable by or
asserted in writing against the Seller relating to the Sky Division or the
Acquired Assets, and the Seller has not received notice in writing from any
taxing authority of its intent to examine or audit any of its Tax Returns. No
material claim has been made in writing against the Seller by any taxing
authority in any jurisdiction in which the Seller did not file sales, use,
value-added or similar Tax Returns or did not pay sales, use, value-added, goods
and services, or similar Taxes, that the Seller is or may be subject to sales,
use, value-added, or similar Tax by that jurisdiction.
(d) There are no liens upon any of the Acquired Assets that have
arisen as a result of any failure to pay any Tax.
(e) All Taxes required to be withheld and paid by the Seller in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party have been timely withheld and paid,
except where the failure to do so could not reasonably be expected to have a
Seller Material Adverse Effect.
3.18 Environmental Matters.
(a) Except as set forth in Schedule 3.18 or except for such of the
following as individually or in the aggregate could not reasonably be expected
to have a Seller Material Adverse Effect: (i) the Sky Division is in compliance
with applicable Environmental Laws; (ii) the Seller has all Environmental
Permits required under applicable Environmental Laws for the operation of the
Sky Division as presently conducted; (iii) since January 1, 1997, in connection
with the Sky Division, the Seller has not received any written order or notice
or other written communication from any (A) Governmental Authority, (B) Person
purporting to act pursuant to any citizen suit provision of any Environmental
Law, or (C) current or prior owner or operator of any Facility; in each case
alleging the violation of or failure to comply with any Environmental Law; (iv)
there are no pending or, to the Seller's Knowledge, threatened Actions, in each
case relating to any Environmental Matters with respect to the Sky Division and
the Acquired Assets; and to the Seller's Knowledge (v) there has been no release
of any Hazardous Materials into the environment (A) at or from any Acquired
Assets or (B) any other location where the Sky Division generated, transported,
stored or disposed of Hazardous Materials; in each case requiring investigation
or remediation under any Environmental Law.
(b) The Seller has made available to the Buyer true and complete
copies of any material reports, studies, Permits, analyses, tests or monitoring
in the possession of the Seller, in each case relating to any Environmental
Matters with respect to the Sky Division and the Acquired Assets.
3.19 Labor Matters.
(a) Except as set forth on Schedule 3.19(a) and except as may result
from the permitted announcement of the execution of this Agreement: (i) the
Seller is not a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Sky Division and currently,
to the Seller's Knowledge, there are no organizational campaigns, petitions or
other unionization activities seeking recognition of a collective bargaining
unit which could reasonably be expected to have a Seller Material Adverse
Effect; (ii) there are no controversies, strikes, slowdowns or work stoppages
pending or, to the Seller's Knowledge, threatened between the Sky Division and
any of its respective employees, and the Sky Division has not experienced any
such controversy, strike, slowdown or work stoppage within the past twelve
months; (iii) the Sky Division has not breached or otherwise failed to comply
with the provisions of any collective bargaining or union contract and there are
no grievances outstanding against the Sky Division under any such agreement or
contract which could have a Seller Material Adverse Effect; (iv) to the Seller's
Knowledge, there are no unfair labor practice complaints pending against the Sky
Division before the National Labor Relations Board or any other Governmental
Authority involving employees of the Sky Division; (v) the Sky Division is
currently in compliance in all material respects with all applicable Laws
relating to the employment of labor, including those related to wages, hours,
collective bargaining and the payment and withholding of taxes as required by
the appropriate Governmental Authority and has withheld and paid to the
appropriate Governmental Authority or are holding for payment not yet due to
such Governmental Authority all amounts required to be withheld from employees
of the Sky Division and are not liable for any material arrears of wages, taxes,
penalties or other sums for failure to comply with any of the foregoing, and
(vi) to the Seller's Knowledge, there are no pending charges of discrimination
with the Equal Employment Opportunity Commission, or any such charges which have
been dismissed within the previous 90 days, involving employees of the Sky
Division.
(b) Schedule 3.19(b) contains, under the caption "Active Employees," a
list of all Active Employees as of March 22, 2001, setting forth each Active
Employee's name, title, base compensation level, and accrued vacation and sick
leave. Schedule 3.19(b) also contains, under the caption "Inactive Employees," a
list of all Inactive Employees as of March 22, 2001, setting forth each Inactive
Employee's name, title, base compensation level, accrued vacation and sick
leave, and a brief description of the event or events resulting in such person
becoming an Inactive Employee (including the length of such person's status as
an Inactive Employee).
(c) None of the Officers of the Seller nor Dwight Staubs, the General
Manager of the Sky Division, has actual knowledge that any Employee or
consultant of the Sky Division will not accept employment or a consulting
arrangement with the Buyer following the Closing Date, if offered on a basis no
less favorable than that upon which such Employee or consultant is currently
retained by the Seller.
3.20 Receivables. Except to the extent, if any, reserved for on the
Reference Balance Sheet, all accounts receivable reflected on the Reference
Balance Sheet arose from, and the accounts receivable existing on the Closing
Date will have arisen from, the sale of inventory or services to Persons not
affiliated with the Sky Division and in the ordinary course of the business of
the Sky Division.
3.21 Inventories.
(a) Subject to amounts reserved therefor on the Reference Balance
Sheet, the values at which all inventories are carried on the Reference Balance
Sheet reflect the inventory valuation policy of the Sky Division of stating such
inventories at the lower of cost (determined on the last-in, first-out method)
or market value. Except as set forth on Schedule 3.21, the Sky Division has good
and marketable title to the inventories free and clear of all Encumbrances other
than Permitted Encumbrances. The inventories do not consist of any items held on
consignment. The Sky Division is under no obligation or liability with respect
to accepting returns of items of inventory or merchandise in the possession of
its customers other than in the ordinary course of business consistent with past
practice. No clearance sale of the inventories has been conducted since October
31, 2000. The Sky Division has not acquired or committed to acquire or
manufacture inventory for sale which is not of a quality and quantity usable in
the ordinary course of the business of Sky Division, nor has the Sky Division
changed the price of any inventory except for (i) price reductions to reflect
any reduction in the cost thereof to the Sky Division, (ii) reductions and
increases responsive to normal competitive conditions and consistent with the
Sky Division's past sales practices and (iii) increases to reflect any increase
in the cost thereof to the Sky Division.
(b) The inventories are in good and merchantable condition in all
material respects, are suitable and usable for the purposes for which they are
intended and are in a condition such that they can be sold in the ordinary
course of the business of the Sky Division.
3.22 Certain Interests. Except as set forth on Schedule 3.22, no Officer of
the Seller or the Sky Division and no relative or spouse (or relative of such
spouse) who resides with, or is a dependent of, any such Officer:
(a) has any direct or indirect financial interest in any competitor,
supplier or customer of the Sky Division; provided, however, that ownership of
shares representing less than 5% of the outstanding voting power of any
competitor, supplier or customer, which are listed on any national securities
exchange or traded actively in the national over-the-counter market, shall not
be deemed to be a "financial interest" so long as the Person owning such
securities has no other connection or relationship with such competitor,
supplier or customer; or
(b) owns, directly or indirectly, in whole or in part, or has any
other interest in any tangible or intangible property which the Seller uses or
has used in the conduct of the business of the Sky Division or otherwise.
3.23 Brokers. Except for the fees payable to Banc of America Securities
LLC, which are the sole responsibility of the Seller, the Seller has not paid or
become obligated to pay any fee or commission to any broker, finder, or
intermediary in connection with the transactions contemplated hereby. The Buyer
shall not, through the transfer of the Acquired Assets, the assumption of the
Assumed Liabilities or otherwise, have any obligations in respect of any such
fees or commissions.
3.24 Accuracy of Information Furnished. To the Seller's Knowledge, all
information furnished in writing to the Buyer by the Seller in connection with
the transactions contemplated herein was, as of the date thereof, true, correct
and complete in all material respects.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as of the date hereof and
as of the Closing Date as follows:
4.1 Organization; Power. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as it is now being conducted, to execute, deliver and perform this
Agreement, the Supply Agreement, the License Agreement, the Note, the Security
Agreement and the Press Note, to carry out its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
4.2 Authorization; Effect of Agreement. The execution, delivery and
performance by the Buyer of this Agreement, the Supply Agreement, the License
Agreement, the Note, the Security Agreement and the Press Note, the performance
by the Buyer of its obligations hereunder and thereunder and the consummation by
the Buyer of the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate action on the part of the Buyer. This
Agreement has been, and upon its execution the Supply Agreement, the License
Agreement, the Note, the Security Agreement and the Press Note shall have been,
duly and validly executed and delivered by the Buyer. This Agreement constitutes
(assuming due authorization, execution and delivery by the Seller), and upon
their execution the Supply Agreement, the License Agreement, the Note, the
Security Agreement and the Press Note will constitute (assuming due
authorization execution and delivery by all parties other than the Buyer), a
valid and binding obligation of the Buyer, enforceable against the Buyer in
accordance with its terms, except to the extent that such enforceability (i) may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights generally, and (ii) is subject to
general principles of equity.
4.3 Consents. No Consent is required to be obtained or made by the Buyer in
connection with the execution, delivery and performance by the Buyer of this
Agreement, the Supply Agreement, the License Agreement, the Note, the Security
Agreement or the Press Note or the consummation by it of the transactions
contemplated hereby or thereby.
4.4 No Violations. The execution, delivery and performance by the Buyer of
this Agreement, the Supply Agreement, the Note, the Security Agreement and the
Press Note and the consummation by the Buyer of the transactions contemplated
hereby and thereby will not, with or without the giving of notice or the lapse
of time, or both, (a) violate, conflict with or result in the breach of any
provision of the Certificate of Incorporation or By-laws of the Buyer, (b)
conflict with, or violate any Law or Governmental Order applicable to the Buyer
or any of its respective assets, properties or businesses, or (c) assuming the
obtaining of all Consents, conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, or give to others any right of termination or
acceleration under, or result in the creation of any Encumbrance on any of the
Acquired Assets pursuant to, any Contract to which the Buyer is a party.
4.5 Litigation. There are no Actions by or against the Buyer pending before
any Governmental Authority (or, to the Buyer's Knowledge, threatened to be
brought by or before any Governmental Authority) which could reasonably be
expected to have a Buyer Material Adverse Effect or could reasonably be expected
to affect the legality, validity or enforceability of this Agreement, the Supply
Agreement, the License Agreement, the Note, the Security Agreement or the Press
Note. The Buyer is not subject to any Governmental Order (nor, to the Buyer's
Knowledge, are there any such Governmental Orders threatened to be imposed by
any Governmental Authority) which could reasonably be expected to have a Buyer
Material Adverse Effect or could reasonably be expected to affect the legality,
validity or enforceability of this Agreement, the Supply Agreement, the License
Agreement, the Note, the Security Agreement or the Press Note.
4.6 Availability of Funds. The Buyer has received commitment letters from
Congress Financial Corporation (a copy of which is attached as Exhibit B-1) and
General Electric Business Asset Funding Corporation (copies of which are
attached as Exhibit B-2 and Exhibit B-3) (the "Commitment Letters"), and, upon
the satisfaction of the conditions set forth therein, the Buyer will have
sufficient funds on the Closing Date to enable it to pay the Purchase Price.
4.7 Brokers. The Buyer has not paid or become obligated to pay any fee or
commission to any broker, finder or intermediary in connection with the
transactions contemplated hereby. The Seller shall not, through the transfer of
the Acquired Assets or otherwise, have any obligations in respect of any such
fees or commissions.
ARTICLE V.
COVENANTS OF THE SELLER
The Seller hereby covenants and agrees with the Buyer as follows:
5.1 Action by the Seller. From the date hereof until the Closing, the
Seller will use commercially reasonable efforts, and the Buyer will reasonably
cooperate with the Seller, to secure all Consents of the Seller from third
parties as shall be required, on behalf of the Seller, in order to enable the
Seller to effect the transactions contemplated hereby and by the Supply
Agreement, the Note, the Security Agreement and the Press Note, and the Seller
will otherwise use its commercially reasonable efforts to cause the consummation
of such transactions in accordance with the terms and conditions hereof and
thereof.
5.2 Conduct of the Sky Division's Business. Except as otherwise permitted
by this Agreement or consented to by the Buyer (which consent shall not be
unreasonably withheld or delayed), from the date hereof until the Closing, the
Seller shall not conduct the business of the Sky Division other than in the
ordinary course and consistent with the Seller's prior practice. Without
limiting the generality of the foregoing, except as set forth on Schedule 5.2,
the Sky Division shall (i) continue its advertising and promotional activities,
and pricing and purchasing policies, substantially in accordance with past
practice; (ii) not materially shorten or lengthen the customary payment cycles
for any of its payables or receivables; (iii) use its commercially reasonable
best efforts to (A) preserve intact its business organization and the business
organization of the Sky Division, (B) retain the services of the employees (as a
group) of the Sky Division, (C) continue in full force and effect without
material modification all existing policies or binders of insurance currently
maintained in respect of the Sky Division and (D) preserve its current
relationships with its customers, suppliers and other persons with which it has
significant business relationships, (iv) exercise, but only after notice to the
Buyer and receipt of the Buyer's prior Consent, any rights of renewal pursuant
to the terms of any of the leases or subleases set forth on Schedule 3.10(b)
which by their terms would otherwise expire; and (v) not engage in any practice,
take any action, fail to take any action or enter into any transaction which
could cause any representation or warranty of the Seller or the Sky Division to
be untrue or result in a breach of any covenant made by the Seller in this
Agreement. Notwithstanding the foregoing, the Buyer agrees and understands, that
the Seller is entitled to (i) transfer cash out of the Sky Division and that it
is intended that at the Closing there shall be a cash balance of zero in the
accounts of the Sky Division, (ii) terminate, satisfy and/or settle any and all
transactions with any Affiliate of the Sky Division, (iii) assume all rights and
obligations of any Affiliate of the Sky Division under the Contracts listed on
Schedule 3.12(a), and (iv) terminate the Transamerica Lease and acquire the
assets leased thereunder.
5.3 Access. From the date hereof until the Closing, the Seller shall
provide the Buyer with such information as the Buyer may from time to time
reasonably request with respect to the Sky Division and the transactions
contemplated by this Agreement and the Supply Agreement, and shall provide the
Buyer and its accountants, counsel, consultants and other representatives access
during regular business hours and upon reasonable notice to the personnel,
properties, books and records of the Sky Division as the Buyer may from time to
time reasonably request; provided that such access shall not unduly interfere
with the conduct of the Sky Division and the Seller shall not be obligated to
(i) provide the Buyer with any information relating to trade secrets or which
would violate any law, rule or regulation or any term of any Contract of the
Seller or which may subject the Seller to risk of liability, or if the provision
thereof would adversely affect the ability of the Seller or any of its
Affiliates to assert attorney-client, attorney work product or other similar
privilege or (ii) provide the Buyer with access to any property or information
of the Sky Division for purposes of conducting any invasive sampling or testing.
Any disclosure whatsoever during such investigation by the Buyer shall not
constitute an enlargement of or additional representations or warranties of the
Seller or the Sky Division beyond those specifically set forth in this
Agreement.
5.4 Publicity. The Seller will not release, generate or permit any press
release, public statement or other publicity concerning this Agreement, the
Supply Agreement, the Note, the Security Agreement , the Security Agreement or
the Press Note, or the transactions contemplated hereunder or thereunder nor
submit this Agreement, the Supply Agreement, the Note, the Security Agreement or
the Press Note or any document relating hereto or thereto to any Governmental
Authority, without first consulting with and obtaining the consent of the Buyer,
except as required by Law or legal authorities.
5.5 Notices of Certain Events. From the date hereof until the Closing Date,
the Seller shall give prompt notice to the Buyer of any material adverse
development of which the Seller has Knowledge and which causes a breach of any
of the Seller's representations and warranties in Article III.
5.6 Exclusivity. The Seller will not, and will not authorize any Officer or
any other Person on its behalf to, solicit, encourage, negotiate or accept any
offer from any Person concerning (i) the possible disposition of all or any
substantial portion of the business or assets of the Sky Division or (ii) any
other agreement or arrangement that would be inconsistent with the consummation
of the transactions contemplated by this Agreement (each a "Competing
Transaction"), nor will they participate in any discussions or negotiations
regarding, or furnish any information with respect to, or facilitate in any
other manner, any Competing Transaction, and they will immediately terminate any
discussions or negotiations regarding any Competing Transaction that are
currently underway, if any, with any Person other than the Buyer.
5.7 Employees. The Seller will use commercially reasonable efforts to
encourage all Active Employees of the Sky Division to accept employment with the
Buyer on the Closing Date.
ARTICLE VI.
COVENANTS OF THE BUYER
The Buyer hereby covenants and agrees with the Seller as follows:
6.1 Action by the Buyer. From the date hereof until the Closing, the Buyer
will use commercially reasonable efforts, and the Seller will reasonably
cooperate with the Buyer, to secure all Consents, from third parties as shall be
required, on behalf of the Buyer, in order to enable the Buyer to effect the
transactions contemplated hereby and by the Supply Agreement, the Note, the
Security Agreement and the Press Note, and the Buyer will otherwise use its
commercially reasonable efforts to cause the consummation of such transactions
in accordance with the terms and conditions hereof and thereof. The Buyer will
use best efforts to satisfy the conditions of the borrowing set forth in the
Commitment Letters or, if such conditions are not satisfied and such borrowing
does not occur, to obtain, as promptly as practicable, alternative financing
upon substantially similar terms.
6.2 Publicity. Prior to the Closing, the Buyer will not release, generate
or permit any press release, public statement or other publicity concerning this
Agreement, the Supply Agreement, the Note, the Security Agreement or the Press
Note or the transactions contemplated hereunder or thereunder nor submit this
Agreement, the Supply Agreement, the Note, the Security Agreement or the Press
Note or any document relating hereto or thereto to any Governmental Authority,
without first consulting with and obtaining the consent of the Seller, except as
required by Law or legal authorities (provided that the Buyer shall give prior
notice of such disclosure to the Seller); and provided that in no event shall
the Buyer disclose any financial or other results of the Seller (other than with
respect to the Sky Division after the Closing).
6.3 Confidentiality. Prior to the Closing, the Buyer may disclose
non-public information relating to the Sky Division and the Seller only (i) to
those officers, directors and employees of the Buyer who need to know such
information for the purpose of evaluating the Sky Division and the transactions
contemplated hereby and by the Transition Services Agreement and who agree to
keep it confidential; (ii) to those advisors of the Buyer who need to know such
information for the purpose of evaluating the Sky Division and the transactions
contemplated hereby and by the Supply Agreement, the Note, the Security
Agreement and the Press Note and who agree to keep it confidential; and (iii) to
the extent required by any Law (provided that the Buyer gives prior notice of
such disclosure to the Seller). The Buyer shall be prohibited at all times from
disclosing non-public information relating to the Seller (other than with
respect to the Sky Division as permitted above). The Buyer shall be responsible
for any failure by any officer, director or employee of the Buyer or any advisor
of the Buyer to maintain the confidentiality of any such information.
6.4 Notice. From the date hereof until the Closing, Buyer will give prompt
notice to the Seller of any material adverse development of which the Buyer has
Knowledge and which causes a breach of any of the Buyer's representations and
warranties in Article IV.
ARTICLE VII.
ADDITIONAL COVENANTS
7.1 Further Assurances. The Buyer and the Seller shall each, from time to
time after the Closing, at the reasonable request of the other and without
further consideration, execute and deliver such further documents and
instruments of assignment, transfer, license or assumption and take such further
action in order more effectively to transfer, reduce to possession and record
title to any of the Acquired Assets, to permit the Buyer to operate the Sky
Division or to implement the assumption of the Assumed Liabilities
7.2 Books and Records. The Buyer, on the one hand, and the Seller, on the
other hand, shall each, on the request of the other, make available to such
other Party from time to time on a reasonable basis records and other documents
substantially relating to the Acquired Assets and the Sky Division (including
records or documents relating to Straddle Taxes or Transfer Taxes). Such records
and other documents shall be held by the Party in possession of such documents
for seven years after the Closing Date and copies shall be delivered to the
other Party upon such other Party's request at any time and at such other
party's out-of-pocket expense.
7.3 Insurance. As of the Closing Date, the coverage under all insurance
policies related to the Sky Division shall continue in force only for the
benefit of the Seller, and not for the benefit of the Buyer or the Sky Division.
As of the Closing Date, the Buyer shall arrange for new insurance policies with
respect to the Sky Division covering all periods and agrees not to seek, through
any means, to benefit from any of the Seller's insurance policies which may
provide coverage for claims relating in any way to the Sky Division on or prior
to the Closing Date.
7.4 Payments from Third Parties. In the event that, on or after the Closing
Date, either the Buyer or the Seller shall receive any payments or other funds
due to another Party pursuant to the terms hereof or otherwise, then the Party
receiving such funds shall promptly forward such funds to the proper Party.
7.5 Tax Matters. After the Closing Date, the Parties shall cooperate with
one another in connection with the preparation and filing of tax returns and any
audits or proceedings relating to Straddle Taxes or Transfer Taxes, including
furnishing or making available books and records relating to such Taxes and
making employees available on a mutually convenient basis to provide
explanations of any such books and records.
7.6 Covenant Not to Compete.
(a) The Seller has had access to and become familiar with various
trade secrets consisting of, but not limited to, financial statements,
processes, computer programs, compilations of information, records, sales
procedures, customer requirements, customer lists and other confidential
information (collectively referred to as the "Trade Secrets"), which have been
used in the operation of the business of the Sky Division. After the Closing
Date, the Seller shall not use in any way or disclose any of the Trade Secrets,
directly or indirectly.
(b) Until two years following the Closing Date (the "Non-competition
Period"), the Seller and its Affiliates shall not, directly or indirectly, in
any capacity, within the United States and Canada, invest or engage in any
business that is in competition with that of the Sky Division as of the date
hereof and the Closing Date. Notwithstanding the foregoing, no owner of less
than 5% of the outstanding capital stock of any publicly traded corporation
shall be deemed to engage solely by reason of such ownership in any such
business. In addition, in the event that the Seller or any of its Affiliates
acquires a business that is in competition with that of the Sky Division, then
the Seller will not be in breach of this Section 7.6(b) if the Seller or such
Affiliate offers to sell to the Buyer or its Affiliates such competing business
and negotiates in good faith with the Buyer with respect thereto for a period of
at least ninety (90) days (it being agreed that such acquisition may involve
assets or businesses which are not in competition with the Sky Division, in
which case such assets or businesses shall be exempt in all respects from this
Section 7.6). If such transaction with respect to such competing business is not
consummated between the Seller and the Buyer or their Affiliates, the Seller or
its Affiliate shall use commercially reasonable efforts to dispose of such
competing business within one year from the acquisition thereof. The Buyer also
acknowledges that Corporacion Durango, through one or more of its Subsidiaries,
(i) operates paper mills and other businesses in the United States and that its
engaging in any such activities shall not constitute a violation of this Section
7.6 and (ii) currently ships products to customers in the United States and that
continuing to ship products to those established customers shall not constitute
a violation of this Section 7.6.
(c) During the Non-competition Period, the Seller and its Affiliates
shall not, on their own behalf or on behalf of any other Person, hire or solicit
or in any manner attempt to influence or induce any Active Employee to leave the
employment of the Buyer, nor use or disclose to any Person any information
concerning the names and addresses of such employee for such purpose.
(d) The Seller agrees that the agreements set forth in this Section
each constitute separate agreements independently supported by good and adequate
consideration and shall be severable from the other provisions of, and shall
survive, this Agreement. The existence of any claim or cause of action of the
Seller against the Buyer, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Buyer of the covenants
and agreements of the Seller contained in this Section.
(e) The Seller acknowledges and recognizes that the enforcement of the
provisions of this Section is necessary to ensure the preservation and
continuity of the business and good will of the Sky Division. The Seller further
agrees that due to the nature of such business, the noncompetition restrictions
set forth in this Section are reasonable as to time and geographic area.
7.7 Emkay Assignment. If the Seller has been unable to obtain the Consent
of Emkay, Inc. to the assignment of the Emkay Agreement as it relates to the
vehicles included on Schedule 2.1(a) on or prior to the Closing Date, the Seller
will use its commercially reasonable efforts to obtain such Consent on or prior
to the 30th day following the Closing. If the Seller obtains such Consent within
such time period, the Seller shall, as soon as practicable after obtaining such
Consent, assign all of Buyer's right, title and interest in and to such vehicles
to the Buyer and the Buyer shall assume the obligations and liabilities under
the Emkay Agreement with respect to such vehicles set forth in this Agreement.
If the Seller is unable to obtain such Consent within such time, such vehicles
will be deemed to be Excluded Assets and Schedule 2.1(a) will be deemed to be
amended as of the date hereof to exclude such vehicles.
ARTICLE VIII.
CONDITIONS TO THE BUYER'S OBLIGATIONS
The obligations of the Buyer hereunder to purchase the Acquired Assets and
assume the Assumed Liabilities shall be subject to the satisfaction (or waiver
by the Buyer) on or prior to the Closing Date of all of following conditions:
8.1 Representations and Warranties; Performance. All representations and
warranties made by the Seller in this Agreement, the Supply Agreement and the
License Agreement shall be true in all material respects at and as of the time
when made, and at and as of the time of the Closing as though such
representations and warranties were made at and as of said time. The Seller
shall have performed and complied in all material respects with all the terms,
provisions and conditions of this Agreement, the Supply Agreement and the
License Agreement to be complied with and performed by the Seller at or before
the Closing. The Buyer shall have received a certificate of the President or a
Vice President of the Seller dated the Closing Date in form and substance
reasonably satisfactory to the Buyer, certifying to such effect.
8.2 Consents. All Consents specified in Schedule 3.4 shall have been
obtained.
8.3 Absence of Certain Proceedings. No Action in effect preventing or
rendering illegal consummation of the transactions contemplated by this
Agreement and the Supply Agreement shall be pending.
8.4 Environmental Assessment. The Buyer shall be satisfied, in its
reasonable discretion, with the results of a Phase I Environmental Assessment
relating to any real property included in the Acquired Assets or subject to any
lease assumed by the Buyer pursuant to this Agreement.
8.5 Opinion of Counsel. The Buyer shall have received an opinion of
counsel, dated as of the Closing Date, from White & Case LLP (or appropriate
local counsel), counsel to the Seller, as to the authorization, execution,
delivery and enforceability of this Agreement and the Supply Agreement,
substantially in the form of Exhibit C.
8.6 Availability of Funds. The Buyer shall have available funds pursuant to
terms substantially similar to those contained in the Commitment Letters.
8.7 License Agreement. The Seller shall have executed and delivered to the
Buyer a License Agreement, dated as of the Closing Date and substantially in the
form of Exhibit D (the "License Agreement"). --------- -----------------
8.8 Transamerica Lease. The Seller shall, simultaneously with the Closing,
deliver to Transamerica Equipment Financial Services all amounts due with
respect to the Press pursuant to the Press Lease.
8.9 Assignment of Bank Accounts. The Seller shall simultaneously with the
Closing, assign the Bank Accounts to the Buyer or cause the Bank Accounts to be
assigned to the Buyer.
8.10 Warehouse Letters. The Seller shall have delivered to Buyer a duly
executed assignment from Bank of America, N.A. to Congress Financial Corporation
or one of its Affiliates of the waiver letters received by Bank of America, N.A.
from the operators of the warehouses set forth on Schedule 8.10.
8.11 Payment of Aged Receivables. The Seller shall prior to or
simultaneously with the Closing, pay all accounts payable of the Seller in
respect of the Sky Division that are over thirty (30) days old as of the Closing
Date.
ARTICLE IX.
CONDITIONS TO THE SELLER'S OBLIGATIONS
The obligations of the Seller hereunder to sell the Acquired Assets shall
be subject to the satisfaction (or waiver by the Seller) on or prior to the
Closing Date of all of the following conditions:
9.1 Representations and Warranties; Performance. All representations and
warranties made by the Buyer in this Agreement, the Supply Agreement and the
License Agreement shall be true in all material respects at and as of the time
when made, and at and as of the time of the Closing as though such
representations and warranties were made at and as of said time. The Buyer shall
have performed and complied in all material respects with all the terms,
provisions and conditions of this Agreement, the Supply Agreement and the
License Agreement to be complied with and performed by the Buyer at or before
the Closing. The Seller shall have received a certificate of an officer of the
Buyer dated the Closing Date in form and substance reasonably satisfactory to
the Seller, certifying to such effect.
9.2 Absence of Certain Proceedings. No Action in effect preventing or
rendering illegal consummation of the transactions contemplated by this
Agreement, the Supply Agreement, the Note, the Security Agreement or the Press
Note shall be pending.
9.3 Opinion of Counsel. The Seller shall have received an opinion of
counsel, dated as of the Closing Date, from Gardere Wynne Sewell LLP, counsel to
the Buyer, in form and substance reasonably satisfactory to the Seller with
respect to the matters set forth on Exhibit E, with customary qualifications and
exceptions.
9.4 Security Agreement. The Buyer shall have executed and delivered to the
Seller the Security Agreement.
9.5 Supply Agreement. The Buyer shall have executed and delivered to the
Seller a Supply Agreement (the "Supply Agreement") with respect to the purchase
of paper and boxes, substantially in the form of Exhibit F.
9.6 License Agreement. The Buyer shall have executed and delivered to the
Seller the License Agreement.
9.7 Intercreditor Agreement. Congress Financial Corporation or one of its
Affiliates shall have executed and delivered to the Seller an Intercreditor
Agreement with respect to the Press in form and substance reasonably
satisfactory to the Seller.
ARTICLE X.
EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS
10.1 Transferred Employees. The Seller has delivered to the Buyer a list of
all of the Employees as of March 22, 2001. The Buyer shall offer employment to
not less than 90% of the Employees whose principal place of employment is at the
Sky Division who are actively at work on the Closing Date (each an "Active
Employee"). For purposes hereof, any Employee who is not actively at work on the
Closing Date due to a short-term absence (including due to vacation, holiday,
illness or injury of shorter duration than a long-term disability, jury duty or
death leave) in accordance with applicable policies of the Seller shall be
deemed an Active Employee herein. The Buyer shall also offer employment to any
Employee on disability or authorized leave whose principal place of performance
was at the Sky Division (as set forth on Schedule 3.19(b)) and who has a right
to become reemployed in the Sky Division under applicable law upon conclusion of
such disability or leave. Such Employees who are offered and accept employment
with the Buyer shall be referred to as "Transferred Employees."
10.2 Employee Benefit Plans.
(a) On or before the expiration of 30 days following the Closing Date,
the Buyer shall have in effect a defined contribution plan that includes a
qualified cash or deferred arrangement within the meaning of Section 401(k) of
the Code in which each Transferred Employee who was participating in the
Durango-Georgia Paper Company 401(k) Plan or the J.D. Sky Corporation 401(k)
Profit Sharing Plan (collectively, the "Seller's 401(k) Plans") as of the
Closing Date shall be eligible to participate (the "Buyer's 401(k) Plan") on the
later of (i) the effective date of the Buyer's 401(k) Plan or (ii) the Closing
Date. Transferred Employees shall receive credit for all service with the Seller
and its Affiliates for purposes of eligibility and vesting under the Buyer's
401(k) Plan. The Seller's 401(k) Plans shall retain all assets and liabilities
with respect to the accounts of Employees who are not Transferred Employees and
who are participants in the Seller's 401(k) Plans, including retirees or other
former employees of the Sky Division.
As soon as reasonably practicable following the Closing Date, Seller
shall, unless prohibited by Law, provide for distribution to the Transferred
Employees of their respective account balances in Seller's 401(k) Plans and the
Durango-Georgia Paper Company Money Purchase Pension Plan. In such event, the
Buyer's 401(k) Plan shall be amended to the extent necessary to accept rollovers
of such distributed account balances by the Transferred Employees other than
rollovers of notes evidencing loans to Transferred Employees.
(b) The Buyer agrees to provide any required notice under the WARN
Act, and any similar statute, and otherwise to comply with any such statute with
respect to any "plant closing" or "mass layoff" (as defined in the WARN Act) or
similar event affecting Transferred Employees or former employees and occurring
after the Closing Date.
(c) If, immediately prior to the Closing, the Seller maintains a group
health plan that is subject to continuation health coverage requirements
("Continuation Coverage") under Section 4980B of the Code, Section 601 et. seq.
of ERISA ("COBRA") or other applicable Law, the Seller shall maintain such
health plan for the purpose of providing, or, if the Seller does not maintain
such a health plan or desires to terminate such health plan, otherwise to
provide Continuation Coverage under COBRA or such other applicable Law for the
benefit of (a) all Employees of the Seller and their eligible beneficiaries and
dependents who are receiving Continuation Coverage at the time of the Closing
and (b) all Employees and their eligible beneficiaries and dependents who elect
Continuation Coverage as the result of termination of employment with the Seller
upon consummation of the transactions contemplated hereby (such individuals
identified in clauses (a) and (b) above, collectively referred to as "Covered
Persons"). In the event the Seller is unable or fails to maintain its health
plan or otherwise provide Continuation Coverage for any Covered Person and as a
result, the Buyer is required under COBRA or other applicable Law to provide
Continuation Coverage for such Covered Person, the Seller shall reimburse and
fully indemnify the Buyer for any reasonable costs, expenses or other liability
incurred, directly or indirectly by the Buyer as a result of the Seller's
failure to provide Continuation Coverage.
10.3 Worker's Compensation. The Buyer shall assume the responsibility for
all worker's compensation claims made by the Transferred Employees arising from
events occurring after the Closing. The Seller shall retain the responsibility
for all worker's compensation claims made by its Employees or former Employees
(whether or not Transferred Employees) that arise from events that occurred
before the Closing.
ARTICLE XI.
TERMINATION
11.1 Termination and Abandonment. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any time prior
to the Closing:
(a) by mutual written consent of the Parties; or
(b) by the Buyer, on the one hand, or the Seller, on the other hand,
if the Closing shall not have occurred on or before the 30th day following the
date hereof, provided, however, that the right to terminate this Agreement under
this Section 11.1(b) shall not be available to any Party whose failure to
fulfill any obligations under this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date; or
(c) by the Buyer by giving notice to the Seller at any time prior to
the Closing in the event that the Seller has breached any material
representation, warranty or covenant contained in this Agreement in any material
respect, the Buyer has notified the Seller of such breach and the breach has
continued without cure for a period of 30 days after the notice of breach; or
(d) by the Seller by giving notice to the Buyer at any time prior to
the Closing in the event that the Buyer has breached any material
representation, warranty or covenant contained in this Agreement in any material
respect, the Seller has notified the Buyer of such breach and the breach has
continued without cure for a period of 30 days after the notice of breach.
11.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 11.1, this Agreement shall forthwith cease to be
of any further force and effect (except for Section 6.3, this Article XI and
Article XII, which shall survive such termination), and there shall be no
liability or obligation on the part of any Party.
ARTICLE XII.
SURVIVAL AND INDEMNIFICATION
12.1 Survival. The representations and warranties of the Seller contained
in Article III of this Agreement shall survive the Closing until nine months
after the Closing Date and shall thereupon expire, together with any right to
indemnification in respect thereof, provided, however, that the representations
and warranties of the Seller set forth in Section 3.18 with respect to
Environmental Matters shall survive the Closing Date until the third anniversary
of the Closing Date and the representations and warranties of the Seller set
forth in Section 3.17 with respect to Taxes shall survive until the expiration
of the applicable statute of limitations period. The representations and
warranties of the Buyer contained in Article IV of this Agreement shall survive
the Closing until nine months after the Closing Date and shall thereupon expire,
together with any right to indemnification in respect thereof. Neither the
period of survival nor the liability of a Party with respect to its
representations and warranties shall be reduced by any investigation made at any
time by or on behalf of the other Party. The covenants and agreements contained
herein to be performed or complied with prior to the Closing shall expire at the
Closing. The covenants and agreements contained herein to be performed or
complied with at or after the Closing shall survive the Closing until the
expiration of the applicable statute of limitations. If notice of a claim has
been given prior to the expiration of the applicable survival period by a Party
to the other Party, then the relevant representations, warranties and covenants
shall survive as to such claim, until such claim has been finally resolved.
12.2 Indemnification by the Seller.
(a) From and after the Closing Date, the Seller shall indemnify and
hold harmless the Buyer, its Affiliates, and their respective officers,
directors, employees, agents, consultants, representatives and successors
(collectively, the "Buyer Indemnitees") from and against any and all Losses
incurred by any of them arising out of or resulting from (i) any breach by the
Seller of the representations and warranties of the Seller contained in this
Agreement as each such representation or warranty (except the representations
and warranties contained in Sections 3.16, 3.17 and 3.18) would read if all
qualifications as to materiality were deleted therefrom, (ii) any failure by the
Seller to perform any of its covenants or agreements contained in this
Agreement, the Supply Agreement or the License Agreement, (iii) any failure to
pay when due any liabilities not assumed by the Buyer under Section 2.2, or (iv)
any Straddle Tax or Transfer Tax payable by the Seller pursuant to Section 2.6.
(b) (i) In addition to any other limitations on the Seller's
indemnification obligations under this Article XII:
(A) the Seller shall have no indemnification obligations with respect
to any Indemnified Environmental Losses resulting, in whole or in part,
from any voluntary actions by any of the Buyer Indemnitees (or their
agents) to investigate or remediate Hazardous Materials at or under any of
the Facility or Acquired Assets; provided, however, that the limitation
contained in this Section 12.2(b)(i)(A) shall not apply to Indemnified
Environmental Losses which result from (1) the discovery of Hazardous
Materials in the soil or groundwater on or under any of the Facility or
Acquired Assets in the ordinary course of any excavation activities
conducted for the purpose of repair, renovation or expansion of the
Facility or Acquired Assets; or (2) the discovery by any of the Buyer
Indemnitees of Hazardous Materials in the soil or groundwater on or under
any of the Facility or Acquired Assets in the course of any Commercially
Reasonable voluntary investigation. Commercially Reasonable voluntary
investigation shall not include, for example, any investigation of the soil
or groundwater performed by any of the Buyer Indemnitees after the Closing
Date for the purpose of establishing a baseline with respect to any
Hazardous Materials on or under any of the Facility or Acquired Assets;
(B) the Seller shall have no indemnification obligations with respect
to any Indemnified Environmental Losses resulting, in whole or in part,
from any disclosure, report or other communication (whether oral or
written) from any of the Buyer Indemnitees (or their agents) to any
Governmental Authority or other third party ("Notification"), unless such
Notification was, in the opinion of Buyer Indemnitees' counsel, required by
Environmental Law at the time it was made. The Buyer Indemnitees (or their
agents) shall provide notice to the Seller seven days prior to any
Notification; provided, however, that in the event any such Notification is
necessary to abate promptly any immediate threat to human health or the
environment, notice to the Seller shall be by telephone or similar means at
the earliest possible opportunity and shall be followed by written notice;
(C) the Seller's indemnification obligations with respect to any
Indemnified Environmental Losses shall be reduced to the extent that any
act, omission or negligence of any of the Buyer Indemnitees on or after the
Closing Date adversely affects such obligations;
(D) the Seller shall have no indemnification obligations with respect
to Indemnified Environmental Losses, unless such Indemnified Environmental
Losses are actually expended or incurred by the Buyer Indemnitees, or any
of them, or are the subject of a Claims Notice given in accordance with
Section 12.2(b)(ii) (other than a Claims Notice solely in connection with
an investigation) within three years of the Closing Date.
(ii) As a condition to the Seller's indemnification obligations under
this Section 12.2:
(A) promptly after receipt by any of the Buyer Indemnitees of notice
of Response Action by any Governmental Authority or third party, in each
case that may result in Indemnified Environmental Losses ("Environmental
Claim"), the Buyer Indemnitees promptly shall give notice thereof (a
"Claims Notice") to the Seller. The Claims Notice shall describe the
Environmental Claim in reasonable detail and shall indicate, to the extent
that may be reasonably determined, the amount (estimated, if necessary) of
any Indemnified Environmental Losses that have been or may be incurred by
any of the Buyer Indemnitees;
(B) the Seller may at any time, in its reasonable discretion, assume
the defense (including litigation or negotiation) of any Environmental
Claim with counsel reasonably acceptable to the Buyer; provided, however,
that for so long as the Seller is assuming the defense, the Seller shall
have no indemnification obligation hereunder to pay any costs or expenses
of consultants, experts or legal counsel of the Buyer Indemnitees expended
or incurred by any of the Buyer Indemnitees in connection with such
defense. No compromise or settlement with respect to any Environmental
Claim may be agreed to by the Seller without the Buyer Indemnitees prior
written consent, which consent shall not be unreasonably withheld or
delayed;
(C) the Buyer Indemnitees and the Seller shall cooperate with and
render each other assistance as may reasonably be requested in order to
ensure the proper and adequate defense of any such Environmental Claim,
which assistance shall include making appropriate personnel reasonably
available for any discovery, trial or the completion of any Response
Action. The Buyer shall provide access to the Seller necessary for the
performance of any Response Action; provided, however, that the Seller
shall not unreasonably interfere with the normal business operations of the
Buyer;
(D) if the Seller elects not to defend any Environmental Claim or
fails to diligently pursue the defense of any Environmental Claim, the
Buyer Indemnitees shall assume the defense (including litigation or
negotiation) of any such Environmental Claim, with counsel selected by the
Buyer Indemnitees reasonably acceptable to the Seller, and the Seller shall
pay all reasonable costs and expenses thereof. The Seller shall have no
indemnification obligation hereunder with respect to any defense effected
without the Seller's prior consent, which consent shall not be unreasonably
withheld; and
(E) with respect to any Claims Notice that is given in accordance with
Section 12.2(b)(ii), the Seller or the Buyer Indemnitees, as the case may
be, having undertaken to defend such Environmental Claim, shall undertake
such defense (including litigation, negotiation or the performance of any
Response Action) in a manner that is Commercially Reasonable. "Commercially
Reasonable" shall be determined from the perspective of a reasonable
business person acting (without regard to the availability of
indemnification hereunder) to achieve compliance (based on reasonable
reliance on the advice of expert third-party consultants or counsel) with
Environmental Law or avoid or mitigate a loss or liability or potential
loss or liability with respect to Environmental Law or Environmental
Matters. The Buyer Indemnitees' rights with respect to Indemnified
Environmental Losses under this Article XII shall be reduced to the extent
that actions undertaken by them are not Commercially Reasonable and such
actions (1) increase the amount of Indemnified Environmental Losses, or (2)
result in Indemnified Environmental Losses, which but for such actions
would not have been expended or incurred.
12.3 Indemnification by the Buyer. From and after the Closing Date, the
Buyer shall indemnify and hold harmless the Seller, its Affiliates, and their
respective officers, directors, employees, agents, consultants, representatives
and successors (collectively, the "Seller Indemnitees") from and against any and
all Losses incurred by any of them arising out of or resulting from (i) any
breach by the Buyer of the representations and warranties of the Buyer contained
in this Agreement as each such representation or warranty would read if all
qualifications as to materiality were deleted therefrom, (ii) any failure by the
Buyer to perform any of its covenants or agreements contained in this Agreement,
the Supply Agreement or the License Agreement, (iii) any failure to pay when due
the Assumed Liabilities, (iv) any Straddle Tax or Transfer Tax payable by the
Buyer pursuant to Section 2.6, or (v) any illegal hiring practices utilized by
the Buyer with respect to offering employment to Active Employees.
12.4 Procedure for Indemnification. In the event that any Indemnitee shall
incur or suffer any Losses in respect of which indemnification (other than by
the Seller pursuant to Section 12.2(b)) may be sought hereunder by the Seller,
on the one hand, or Buyer, on the other hand, the Indemnitee shall assert a
claim for indemnification by notice (the "Notice") to the Indemnitor stating the
nature and basis of such claim. Promptly after receipt by an Indemnitee of
Notice of the assertion of a claim or the commencement of any action, litigation
or proceeding by any third party (a "Third-Party Claim") with respect to a
matter for which indemnification is or may be owing pursuant to Section 12.2 or
12.3, the Indemnitee shall give Notice to the Indemnitor and shall thereafter
keep the Indemnitor informed of all other information it receives with respect
thereto; provided, however, that failure of the Indemnitee to give the
Indemnitor prompt Notice and such other information as provided herein shall not
relieve the Indemnitor of any of its obligations hereunder unless and then only
to the extent that the Indemnitor shall have been actually prejudiced thereby.
The Indemnitor shall have the right, at its option and at its own expense, to
participate in or, by giving written notice to the Indemnitee no later than
thirty (30) days after delivery of the Notice, to take exclusive control of, the
defense, negotiations and/or settlement of any such Third-Party Claim, with
counsel chosen by the Indemnitor and reasonably satisfactory to the Indemnitee.
After the Indemnitor takes exclusive control of the defense, negotiation and/or
settlement of any such Third-Party Claim, the Indemnitee shall have the right to
participate therein, at its own expense and with counsel of its own choosing;
provided, however, that the Indemnitor shall pay for the costs and expenses of
such separate counsel if the Indemnitor's counsel determines that it cannot
represent both the Indemnitor and the Indemnitee. The Parties each shall
cooperate and shall cause each Indemnitor to cooperate with and render such
assistance as may reasonably be requested in order to insure the proper and
adequate defense of any such Third-Party Claim or proceeding, which assistance
shall include, without limitation, making appropriate personnel reasonably
available for any discovery or trial. If the Indemnitor fails or refuses to
undertake the defense of any such Third-Party Claim within thirty (30) days
after delivery of the Notice, the Indemnitee shall have the right to take
exclusive control of the defense, negotiation and/or settlement of such
Third-Party Claim at the Indemnitor's expense. Neither the Indemnitor nor the
Indemnitee shall settle or compromise any Third-Party Claim without the consent
of the other, which consent shall not be unreasonably withheld or delayed;
provided, however, that any settlement or compromise includes an unconditional
release of the Indemnitee from all liabilities or obligations relating to the
Third-Party Claim.
12.5 Payment. With respect to Third-Party Claims for which indemnification
is payable under this Agreement, such indemnification shall be paid by the
Indemnitor promptly upon (i) the entry of a final judgment against the
Indemnitee and the expiration of any applicable appeal period; (ii) the entry of
a non-appealable judgment or final appellate decision against the Indemnitee;
provided that the Indemnitor shall be required to post any bond required by law
in connection with any appeal of a final judgment (iii) the entering into of any
settlement agreement in accordance with the provisions of this Article XII; or
(iv) the entry of any consent order or decree binding upon the Indemnitee.
12.6 Adjustment Amounts. Notwithstanding anything to the contrary set forth
herein, the Buyer shall not be deemed to have suffered or incurred any Loss to
the extent such Loss was included in the computation of the Purchase Price
Adjustment or any subsequent adjustment provided for in Section 2.4 and the
payment in respect thereof was made by the Seller to the Buyer.
12.7 Indemnification. Notwithstanding any other provision of this Article
XII, (i) the aggregate liability of the Seller under Section 12.2 shall in no
event exceed the aggregate amount of the Purchase Price, as adjusted, paid to
the Seller hereunder and (ii) no amount shall be payable for indemnification
pursuant to Section 12.2 except to the extent the aggregate amount payable under
Section 12.2 exceeds $350,000.
12.8 Exclusivity. Except as specifically set forth in this Agreement,
effective as of the Closing, the Buyer waives any rights and claims it may have
against the Seller and any of its Affiliates, whether in law or in equity,
relating to the Sky Division or the Acquired Assets or the transactions
contemplated hereby, other than the Supply Agreement. The rights and claims
waived by the Buyer include, without limitation, claims for contribution or
other rights of recovery arising out of or relating to any Environmental Law,
claims for breach of contract, breach of representation or warranty, negligent
misrepresentation and all other claims for breach of duty. After the Closing,
the indemnification provisions of this Agreement shall provide the exclusive
remedy to the Buyer for any misrepresentation, breach of warranty, covenant or
other agreement or other claim arising out of this Agreement or the transactions
contemplated hereby (other than the Supply Agreement) in the absence of fraud.
12.9 Tax Treatment. The Parties shall treat all indemnification payments
made pursuant to this Agreement as adjustments to the Purchase Price for all Tax
purposes; provided, however, that any indemnification payment made pursuant
solely to Section 12.2(a)(iii) shall not result in an adjustment to the Purchase
Price.
ARTICLE XIII.
MISCELLANEOUS
13.1 Fees and Expenses . Except as otherwise provided herein, each of the
Parties shall pay its own expenses incurred in connection with the transactions
contemplated hereby, including legal, accounting and other fee; provided that
the Seller shall reimburse the Buyer for one-half of its title insurance costs
not exceeding an aggregate of $4,200 relating to the transactions contemplated
hereby.
13.2 Amendments. This Agreement shall not be modified or otherwise amended
except pursuant to an ---------- instrument in writing executed and delivered by
each of the Parties.
13.3 Entire Agreement. This Agreement (including the Schedules, Exhibits
and other documents referred to herein), the Supply Agreement, the Note, the
Security Agreement and the Press Note constitute the entire understanding and
agreement between the Parties with respect to the subject matter hereof and
thereof and supersede any and all prior agreements and understandings, whether
oral or written, between the Parties, with respect to the subject matter, all of
which are merged herein. The Parties acknowledge that in deciding to enter into
this Agreement and to consummate the transactions contemplated hereby they have
not relied upon any statements, promises or representations, written or oral,
express or implied, other than those explicitly set forth in this Agreement, the
Supply Agreement, the Note, the Security Agreement and the Press Note. In
furtherance and not in limitation of the foregoing, the Buyer acknowledges that
the Seller has not made any representations or warranties, of any kind, either
express or implied, except as expressly set forth in Article III of this
Agreement. THE BUYER AGREES THAT THE REPRESENTATIONS AND WARRANTIES GIVEN HEREIN
BY THE SELLER ARE IN LIEU OF, AND THE BUYER HEREBY EXPRESSLY WAIVES ALL RIGHTS
TO, ANY IMPLIED WARRANTIES WHICH MAY OTHERWISE BE APPLICABLE BECAUSE OF THE
PROVISIONS OF THE UNIFORM COMMERCIAL CODE OR ANY OTHER STATUTE, INCLUDING,
WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
13.4 Assignment, Binding Effect; Benefit. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any Party
(whether by operation of law or otherwise) without the prior written consent of
the other Party (other than by the Buyer to a wholly-owned Subsidiary). Subject
to the preceding sentence, this Agreement shall be binding upon and shall inure
to the benefit of the Parties and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing in
this Agreement, express or implied, is intended to confer on any Person other
than the Parties or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
13.5 Headings. Headings of the Articles, Sections, Schedules and Exhibits
of this Agreement are for the convenience of the parties only, and shall be
given no substantive or interpretive effect whatsoever.
13.6 Governing Law; Arbitration.
(a) This Agreement shall be governed in all respects, including as to
validity, interpretation and effect, by the internal laws of the State of New
York, without giving effect to its principles or rules of conflict of laws (to
the extent that such principles or rules would require the application of the
laws of another jurisdiction to the interpretation of the Parties' rights and
obligations hereunder).
(i) Except as otherwise provided herein, any dispute, controversy
or claim arising out of, relating to, or in connection with, this
Agreement, or the breach, termination or validity thereof, shall be
finally settled by arbitration. The arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association in effect at the time of the arbitration,
except as they may be modified herein or by mutual agreement of the
Parties. The seat of the arbitration shall be Dallas, Texas, and it
shall be conducted in the English language, provided that either Party
may submit testimony or documentary evidence in Spanish and shall, on
the request of the other Party, furnish a translation or
interpretation into the other language of any such testimony or
documentary evidence. Notwithstanding Section 13.6(a), the arbitration
and this clause shall be governed by the U.S. Federal Arbitration Act,
9 U.S.C. Sections 1 et seq.
(ii) The arbitration shall be conducted by three arbitrators. The
Party initiating arbitration (the "Claimant") shall appoint an
arbitrator in its request for arbitration (the "Request"). The other
Party (the "Respondent") shall appoint an arbitrator within 10 days of
receipt of the Request and shall notify the Claimant of such
appointment in writing. If within 10 days of receipt of the Request by
the Respondent, either Party has not appointed an arbitrator, then the
arbitrator shall be appointed by the American Arbitration Association.
The first two arbitrators appointed in accordance with this provision
shall appoint a third arbitrator within 10 days after the Respondent
has notified Claimant of the appointment of the Respondent's
arbitrator or, in the event of a failure by a Party to appoint, within
10 days after the American Arbitration Association has notified the
Parties and any arbitrator already appointed of its appointment of an
arbitrator on behalf of the Party failing to appoint. When the third
arbitrator has accepted the appointment, the two arbitrators making
the appointment shall promptly notify the Parties of the appointment.
If the first two arbitrators appointed fail to appoint a third
arbitrator or so to notify the Parties of the appointment, the
American Arbitration Association shall appoint the third arbitrator
and shall promptly notify the Parties of the appointment. The third
arbitrator shall act as Chair of the tribunal.
(iii) The arbitral award shall be in writing, state the reasons
for the award, and be final and binding on the Parties. The award may
include an award of costs, including reasonable attorneys' fees and
disbursements and the expenses of any witnesses, to the prevailing
Party. Judgment upon the award may be entered by any court having
jurisdiction thereof or having jurisdiction over the relevant Party or
its assets. A request for interim measures by a Party to a court shall
not be deemed incompatible with, or a waiver of, this agreement to
arbitrate.
13.7 Notices. Any notice, request, claim, instruction or other document to
be given hereunder by any party hereto to any other party shall be in writing
and delivered personally, by telecopy or sent by registered or certified mail
(postage prepaid return receipt requested),
If to the Seller, to:
Durango Georgia Converting LLC
c/o Corporacion Durango
Potasio No. 150
Ciudad Industrial
Durango, Durango
Mexico CP 34220
Attention: C.P. Mayela Rincon de Velasco
Telecopier: 011-521-814-0048
with a copy to:
White & Case LLP
200 S. Biscayne Boulevard
Suite 4900 Miami, Florida 33131
Attention: Emilio J. Alvarez-Farre
Telecopier: (305) 358-5744
If to the Buyer, to:
TST Impreso, Inc.
652 Southwestern Blvd.
Coppell, Texas 75019
Attention: Marshall Sorokwasz and Tammy Yahiel
Telecopier: (972) 462-7764
with a copy to:
Gardere Wynne Sewell LLP
1601 Elm Street, Suite 3000
Dallas, Texas 75201-4761
Attention: David R. Earhart
Telecopier: (214) 999-3645
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered in the manner provided herein shall be deemed to have
been duly given to the party to whom it is directed upon actual receipt by such
party (evidenced, in the case of a telecopy, by the receipt of the correct
answer back).
13.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.
13.9 Severability. If any provision of this Agreement or the application of
any such provision to a person or circumstances shall be held invalid, illegal
or unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof and this Agreement shall remain in force and be effectuated as if such
illegal, invalid or unenforceable provision is not a part of this Agreement.
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IN WITNESS WHEREOF, the Parties have entered into this Agreement as of the
date first above written.
DURANGO GEORGIA CONVERTING LLC,
a Delaware limited liability company
By:
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Name:______________________________
Title:_____________________________
TST IMPRESO, INC.,
a Delaware corporation
By:
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Name:______________________________
Title:_____________________________