ASSET PURCHASE AGREEMENT

Exhibit 10.04

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (the “ Agreement ”) is made and entered into as of February 27, 2006, by and among RTS PACKAGING, LLC, a Delaware limited liability company (“ Purchaser ”), and CARAUSTAR INDUSTRIAL AND CONSUMER PRODUCTS GROUP, INC., a Delaware corporation (“ Seller ”), and, for the limited purpose of fully guaranteeing the performance, payment and all other obligations of Seller contemplated by this Agreement, CARAUSTAR INDUSTRIES, INC., a North Carolina corporation (“ Guarantor ”). Purchaser and Seller may hereinafter be referred to, from time to time, individually as a “ Party ” and collectively as the “ Parties ”.

RECITALS :

A. Seller is engaged in the business of manufacturing, selling and distributing solid fiber partitions (the “ Products ”) from various facilities throughout the United States (the “ Business ”);

B. Subject to the terms and conditions set forth in this Agreement, the Parties desire to enter into this Agreement pursuant to which Seller shall sell to Purchaser, and Purchaser shall purchase from Seller, substantially all of the assets used or held for use by Seller primarily in the conduct of the Business, and Purchaser shall assume only certain specified liabilities and obligations of such Business as described in this Agreement (collectively, the “ Transactions ”); and

C. The Parties desire to make certain representations, warranties, covenants and agreements in connection with this Agreement and the Transactions, all as more particularly set forth herein and in the documents to be delivered hereunder.

AGREEMENT :

NOW THEREFORE, in consideration of the foregoing recitals and the mutual promises and agreements contained in this Agreement, the Parties, intending to be legally bound, agree as follows:

1. PURCHASE AND SALE OF ASSETS .

1.1 Purchase and Sale . On the terms and subject to the conditions set forth in this Agreement, Purchaser hereby purchases from Seller, and Seller hereby sells, transfers and conveys to Purchaser (and shall cause Seller’s Affiliates to sell, transfer and convey to Purchaser), all of Seller’s and its Affiliates’ right, title and interest as of the Effective Time (as defined in Section 2.1 below) in and to all of the tangible and intangible assets of every kind and description (real, personal and mixed), wherever situated, used or held for use by Seller or its Affiliates primarily in the operation of the Business, exclusive of the Excluded

Assets as defined in Section 1.3 below (collectively, the “ Purchased Assets ”), free and clear of all Liens (as defined in Section 3.7(a) below) other than Permitted Liens (as defined in Section 3.6 below). Except for the Excluded Assets expressly set forth in Section 1.3 hereof, the Purchased Assets shall include, without limitation, the following assets:

(a) All assets owned, used or held for use by Seller of its Affiliates primarily in the operation of the Business, including, but not limited to, (i) those assets reflected on the Interim Balance Sheet (as hereinafter defined), subject to changes to reflect the acquisition or disposition of assets of the Business that have been sold or acquired by Seller between November 30, 2005 and the Effective Time in bona fide transactions entered into in the ordinary course of business consistent with past practices of the Seller and (ii) the Financed Assets (as hereinafter defined);

(b) All inventories used solely in the operation of the Business, consisting of finished products, work-in-process, roll stock, raw materials and other inventory items (collectively, the “ Purchased Inventory ”), excluding any inventories which are obsolete or other than first quality as determined in accordance with Section 1.4(b) hereof;

(c) All advances, prepaid expenses, deposits and credits of or to Seller or its Affiliates relating solely to the Assumed Contracts (as hereinafter defined);

(d) All fixed assets, equipment, spare parts, furniture, furnishings, computer hardware (including, without limitation, servers and personal computers), software, vehicles, fixtures, parts, tooling, supplies and other tangible personal property of Seller used primarily in the operation of the Business (the “ Personal Property Assets ”);

(e) All of Seller’s and its Affiliates’ right, title and interest in and to the contracts, agreements, leases, open purchase orders and customer orders arising solely out of the operation of the Business that are listed on Schedule 1.1(e) hereto (collectively, the “ Assumed Contracts ”);

(f) All goodwill, patents, patent applications, copyrights, copyright applications, methods, know-how, software, technical documentation, processes, procedures, inventions, trade secrets, trademarks, trade names, service marks, service names, registered user names, technology, research records, data, designs, plans, drawings, manufacturing know-how and formulas, whether patentable or unpatentable, and other intellectual or proprietary rights or property of Seller or its Affiliates (and all rights thereto and applications therefor) used by Seller or its Affiliates primarily in connection with the operation of the Business (collectively, the “ Intellectual Property ”);

 

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(g) All rights in and under all express or implied guarantees, warranties, representations, covenants, indemnities, choses in action and similar rights in favor of Seller relating primarily to the Business, except to the extent (but only to the extent) relating to the Excluded Liabilities or arising under Excluded Contracts or other Excluded Assets (as such terms are hereinafter defined);

(h) To the extent transferable by Seller or its Affiliates to Purchaser, all licenses, permits (including environmental, construction and operation permits), franchises, certificates, approvals, exemptions, classifications, registrations and other similar documents and authorizations issued with respect to Seller or its Affiliates relating solely to the Business by any governmental entity or authority, and all applications therefor (collectively, “ Licenses, Permits and Registrations ”);

(i) All information, books and records of Seller or its Affiliates to the extent related solely to the operation of the Business, including all files, correspondence, records, data, plans, reports, recorded knowledge or information, including customer, supplier, price and mailing lists, personnel records relating to the Transferred Employees, and all financial, accounting and property tax records, maintenance and equipment records, and all correspondence with and documents pertaining to transactions with suppliers, customers, governmental entities and authorities and other third parties in whatever media retained or stored, including computer data, programs and disks ( provided , however , that copies of the same may be retained by Seller) to the extent that such information, books and records are in the possession of Seller or its Affiliates and were prepared or produced solely in connection with the Business;

(j) All customer lists and customer information of the Business; and

(k) All other tangible and intangible assets of Seller and its Affiliates of any kind or description, wherever located, that are used by Seller or its Affiliates primarily in the operation of the Business.

1.2 Assumption of Liabilities . Subject to the terms and conditions of this Agreement and in addition to the liabilities and obligations of Purchaser under Purchaser’s Ancillary Documents, Purchaser hereby assumes and agrees to perform and discharge only the following liabilities and obligations of Seller or its Affiliates arising out of the operation of the Business (the “ Assumed Liabilities ”): liabilities and obligations of Seller and its Affiliates arising under the Assumed Contracts (but only to the extent such

 

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contracts do not constitute Excluded Assets and are properly and effectively assigned to Purchaser) to the extent such liabilities and obligations arise solely after the Effective Time and do not result from a default or breach by Seller or its Affiliates prior to the Effective Time. Notwithstanding any other provision of this Agreement, Purchaser shall not assume any, and Seller hereby expressly retains responsibility for all, of the liabilities and obligations of Seller and its Affiliates, whether or not accrued, whether fixed or contingent, whether or not disclosed, and whether known or unknown, that are not expressly assumed by Purchaser pursuant to this Section 1.2 (collectively, the “ Excluded Liabilities ”). In no event shall Purchaser assume, agree to pay, discharge or satisfy any of the Excluded Liabilities or otherwise have any responsibility for any Excluded Liabilities. For purposes of clarification, the Excluded Liabilities shall include, but not be limited to, the following liabilities and obligations of Seller and its Affiliates:

(a) All liabilities and obligations relating to the Excluded Assets (as hereinafter defined);

(b) Any debt, obligation, responsibility or liability of Seller, whether known or unknown, contingent or absolute, or fixed or otherwise, owed to any of its Affiliates. “ Affiliates ” shall mean with respect to any party, a party, person or entity that, directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such party, where “ control ”, “ controlled by ” and “ under common control with ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such party, whether through the ownership of voting securities, by voting trust, contract or similar arrangement, as trustee or executor, or otherwise.

(c) All liabilities and obligations arising out of or pertaining to any Environmental Law (as defined in Section 3.8) with respect to Seller, the Business, the Purchased Assets or the Leased Real Property (as defined in Section 3.7(a)) that relate to events, omissions, occurrences, conditions or other matters occurring or existing prior to the Effective Time, regardless of whether any claims, proceedings, suits, investigations, inquiries, violations, assessments, filings, orders, decrees, notices, notifications, citations or complaints with respect to such events, omissions, occurrences, conditions or other matters are first asserted before or after the Effective Time (including, but not limited to, those items set forth or required to be set forth on Schedule 3.8(a) , Schedule 3.8(b) or Schedule 3.8(c) hereof);

(d) All liabilities and obligations arising out of, relating to or with respect to all actions, suits, proceedings, disputes, claims or investigations (at law, in equity or otherwise) against Seller or its Affiliates with respect to their employees;

 

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(e) All liabilities and obligations arising out of, relating to or with respect to all actions, suits, proceedings, disputes, claims or investigations (at law, in equity or otherwise) that are based on events, occurrences, acts, omissions, breaches, defaults or conditions relating to the Business occurring or existing prior to the Effective Time, whether such claims or other items are first asserted before or after the Effective Time (including, but not limited to, those matters set forth or required to be set forth on Schedule 3.10 hereof and any liability of Seller or its Affiliates based on Seller’s or its Affiliates’ breach of or default under the Coors’ Agreement);

(f) All liabilities for employment and withholding taxes imposed upon Seller or any of its Affiliates with respect to their employees;

(g) All liabilities for taxes of any type, kind or nature whatsoever (collectively, “ Taxes ”), including, but not limited to, income, sales and use, and employment and withholding taxes, imposed upon Seller or any of its Affiliates;

(h) All liabilities and obligations with respect to indebtedness of Seller or its Affiliates with respect to borrowed money, including any interest, penalties or other charges accrued thereon;

(i) All liabilities and obligations of Seller or its Affiliates arising under all Excluded Contracts (as hereinafter defined);

(j) All liabilities and obligations with respect to Seller’s or Seller’s Affiliates’ employees for or relating to the periods on or before the Effective Time if such employees become Transferred Employees; provided , that Seller and its Affiliates shall remain fully and solely responsible for all liabilities and obligations with respect to their employees who do not become employees of Purchaser as of the Effective Time relating to all periods, whether prior to, at or after the Effective Time;

(k) All liabilities and obligations, whether or not arising prior to or after the Effective Time, arising under or relating to any of the following (collectively, the “ Seller Benefit Plans ”): (i) each Employee Benefit Plan (as hereinafter defined) of any Seller Entity and (ii) each severance plan or agreement, each bonus program or other incentive compensation plan or agreement, health, vacation, earned time off, supplemental unemployment benefit, hospitalization insurance, medical, dental and each other employee benefit plan, fund, program, agreement or arrangement of Seller or its Affiliates that does not qualify as an Employee Benefit Plan;

 

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(l) All liabilities and obligations of Seller or its Affiliates arising or incurred in connection with the negotiation, preparation and execution of this Agreement, Seller’s Ancillary Documents (as defined in Section 4.2) and the consummation of the Transactions and any fees and expenses of counsel, accountants, brokers, financial advisors or other consultants or experts of Seller or its Affiliates;

(m) All liabilities and obligations of Seller or its Affiliates solely relating to, resulting from, or arising out of any portion of the Business that was discontinued or disposed of prior to the Effective Time;

(n) All liabilities and obligations of Seller or its Affiliates arising prior to the Effective Time, whether or not pursuant to an Assumed Contract; provided, Purchaser acknowledges Purchaser’s obligation to make payment of Purchaser’s Share of the Rebate under the Coors Agreement as provided in Section 1.6 hereof;

(o) Any liabilities, obligations or damages arising out of or pertaining to the Leased Real Property or any leases with respect to the Leased Real Property that occurred, accrued or otherwise relate to periods prior to the Effective Time;

(p) All liabilities and obligations arising out of any claims, actions, litigation or proceedings relating to any or all of the foregoing Excluded Liabilities and all costs and expenses (including without limitation attorneys’ fees) in connection therewith; and

(q) All liabilities, damages or obligations arising out of, resulting from or relating to the failure of Seller or any of its Affiliates (i) to qualify or register to transact business as a foreign corporation in the State of New Jersey or (ii) to obtain any necessary permits, approvals, licenses or other authorizations with respect to the installation or operation of the septic sewer system relating to the Frenchtown Property (as defined in Section 5.6(a)(i) hereof).

1.3 Excluded Assets . In no event shall the Purchased Assets include any of the following assets, properties and rights of Seller or its Affiliates (collectively, the “ Excluded Assets ”): (i) the cash, cash equivalents and investments of Seller (except for any normal and customary cash deposits made by or to third parties and held by Seller or such third parties related to Products to be sold by Seller after the Effective Time or security deposits made with any lessor of the Leased Real Property (as hereinafter defined) or any Personal Property Assets); (ii) all accounts receivable, trade accounts receivable and notes receivable of Seller and all claims, remedies, and rights relating thereto; (iii) any inventory of Seller relating to the Business that is not Purchased Inventory; (iv) any

 

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contracts, agreements or leases of Seller or any of its Affiliates other than the Assumed Contracts ( “ Excluded Contracts”); (v) all federal and state income tax, franchise tax and sales and use tax returns of Seller and all claims and rights to refunds, credits and deposits relating thereto; (vi) all ownership and other rights with respect to the Seller Benefit Plans; (vii) any Licenses, Permits and Registrations that by their terms are not transferable to Purchaser, including those listed on Schedule 1.3(vii) as not being transferable to Purchaser; (viii) the charter documents of Seller, stock records and minute books, tax identification numbers, books of account and other constituent records relating to the corporate organization of Seller; (ix) the rights that accrue to Seller under this Agreement; (x) all insurance policies of Seller and any of its rights thereunder; and (xi) the assets, rights and properties of Seller, if any, set forth on Schedule 1.3(xi) .

1.4 Purchase Price .

(a) Amount; Manner of Payment . In consideration of Seller’s sale of the Purchased Assets to Purchaser and, subject to the terms and conditions contained herein and the indemnification obligations under Section 6, at Closing, Purchaser agrees to pay to Seller an amount equal to Six Million Ninety One Thousand Three Hundred Twenty-Five and 97/100 Dollars ($6,091,325.97) (“ Fixed Purchase Price ”), by wire transfer of immediately available funds to an account designated by Seller in writing prior to Closing. The Fixed Purchase Price, as adjusted upward or downward, as the case may be, in accordance with the terms of Sections 1.4(b) below shall be referred to herein as the “ Purchase Price ”. To the extent the Closing Inventory Value is determined in accordance with Section 1.4(b) at the time of the wire transfer of the Fixed Purchase Price, then the Parties agree that the amount of such wire transfer shall equal the Purchase Price, as adjusted pursuant to Section 1.4(b). Otherwise, any amounts owed by Seller or Purchaser, as the case may be, pursuant to Section 1.4(b) shall be paid in accordance with Section 1.4(b). In addition to payment of the Purchase Price, as consideration for the grant, sale, assignment, transfer and delivery of the Purchased Assets by Seller, Purchaser shall assume, perform and discharge the Assumed Liabilities and make the reimbursements provided for in Section 5.1(f).

(b) Adjustment to Fixed Purchase Price; Purchased Inventory Determination .

(i) Seller and Purchaser agree that the Fixed Purchase Price was determined and agreed upon by the Parties based upon the assumption that the Purchased Inventory (as hereinafter defined) included in the Purchased Assets will have a value on the Closing Date of $1,751,000 (the “ Estimated Inventory Value ”).

(ii) In connection with the Closing, the Parties shall jointly conduct a physical count of Seller’s inventory with respect to the Business as of the Closing

 

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Date and attempt to mutually determine and agree upon (x) the items of inventory qualifying as Purchased Inventory and (y) the actual value of all items which will comprise the Purchased Inventory. Such physical inventory count shall be conducted by the Parties in accordance with the inventory valuation policies and procedures described on Schedule 1.4(b)(ii) , which description shall include principles, policies and methodologies for determining, writing off, marking down or discounting obsolete, slow moving or other than first quality items of inventory.

(iii) Within seven (7) days after the Closing Date, Seller shall deliver to Purchaser a written statement (“ Seller’s Inventory Statement ”) setting forth in reasonable detail Seller’s determination of the value of the items to be included in the Purchased Inventory as of the Closing (following the same principles, policies and methodologies set forth on Schedule 1.4(b)(ii) ). If Purchaser disagrees with Seller’s determination of the value of the items to be included in the Purchased Inventory as of the Closing set forth on Seller’s Inventory Statement, Purchaser shall, within fifteen (15) days after receipt of Seller’s Inventory Statement, deliver to Seller written notice of Purchaser’s objection thereto (the “ Inventory Objection Notice ”). The Inventory Objection Notice shall state Purchaser’s determination of the value of the items of Purchased Inventory and any other matters relating to Seller’s Inventory Statement to which Purchaser disagrees. If an Inventory Objection Notice is not delivered by Purchaser within the allotted time period, then the Purchased Inventory and the value thereof set forth on Seller’s Inventory Statement shall be conclusive and binding upon the Parties. The value of the items of inventory included in the Purchased Inventory as finally determined pursuant to the provisions of this Section 1.4 shall be referred to as the “ Closing Inventory Value ”. At the written request of either Party, the non-requesting Party shall provide copies and access to the requesting Party of all supporting books, records, calculations and other relevant materials that relate to the inventory determinations described in this Section 1.4(b), and the applicable time periods or deadlines provided for in this Section 1.4(b) shall be extended by one day for each day in which the requesting Party fails or is otherwise unable to provide copies and/or access to the information and materials reasonably requested by the requesting Party pursuant hereto.

(iv) If an Inventory Objection Notice is timely delivered by Purchaser, Purchaser and Seller shall, during the ten (10) day period following the receipt by Seller of such notice, use their reasonable best efforts to reach agreement on the disputed items or amounts in order to determine, as may be required, the items comprising the Purchased Inventory and/or the Closing Inventory Value, but if they do not obtain a final resolution within ten (10) days after Purchaser has received the Inventory Objection Notice, Purchaser and Seller will jointly retain a reputable nationally recognized accounting firm who has not provided services to either Party

 

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or their respective Affiliates (the “ Accounting Firm ”) to resolve any remaining disagreements. Purchaser and Seller shall direct the Accounting Firm to render a determination within 30 days of its retention and the Parties and their respective employees shall cooperate with the Accounting Firm during its engagement. The Accounting Firm shall consider only those items and/or amounts set forth in or omitted from Seller’s Inventory Statement which are listed in the Inventory Objection Notice which Purchaser and Seller are unable to resolve by themselves. The Accounting Firm’s determination shall be made in accordance with the policies, procedures and methodologies set forth on Schedule 1.4(b)(ii) . The determination of the Accounting Firm will be conclusive and binding upon the Parties. The cost of such review and report by the Accounting Firm shall be borne equally by the Parties.

(v) If the Closing Inventory Value is less than the Estimated Inventory Value, the Fixed Purchase Price shall be reduced on a dollar-for-dollar basis by the difference between the Estimated Inventory Value and the Closing Inventory Value. If the Closing Inventory Value is greater than the Estimated Inventory Value, the Fixed Purchase Price shall be increased on a dollar-for-dollar basis by the difference between the Closing Inventory Value and the Estimated Inventory Value; provided , however , that Purchaser shall have the sole and absolute right to elect not to purchase Inventory to the extent the Closing Inventory Value exceeds $1,850,000 and Purchaser shall identify those items of inventory that it will not purchase in connection therewith. Payment of any amounts owed by Purchaser or Seller, as the case may be, shall be made to the other Party within ten (10) days after a the Closing Inventory Value becomes conclusive and binding under the provisions of this Section 1.4(b).

(c) Allocation of Purchase Price . The Purchase Price and the other relevant items will be allocated to the Purchased Assets for all purposes (including the filing of Form 8594 with the Internal Revenue Service, as required by Section 1060 of the Internal Revenue Code of 1986, as amended (the “ Code ”) and the Treasury Regulations promulgated thereunder, and other federal and state income tax and financial accounting purposes) in accordance with the valuation methods and terms set forth on Exhibit 1.4(c) attached hereto. Purchaser and Seller will file all tax returns (including amended returns and claims for refund) and information reports in a manner that is consistent with such allocation.

1.5 Prorations; Allocations . Except as elsewhere set forth in this Agreement, all items of income and expense arising from the operation of the Business and ownership of the Purchased Assets on or before the Effective Time shall be for the account of Seller and thereafter shall be for the account of Purchaser, with such items being prorated on a per diem basis accordingly. With respect to certain expenses incurred with respect to the

 

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Purchased Assets in the operation of the Business, the following allocations shall be made between Seller and Purchaser:

(a) Taxes . If applicable, real and ad valorem property taxes shall be apportioned at the Closing based upon the amounts set forth in the current tax bills therefor and the number of days in the taxable period prior to the Effective Time and in the taxable period following the Effective Time. If any of the current tax bills are not available at the Closing, then the Parties agree to apportion such taxes as provided in the preceding sentence based upon the amounts set forth in the tax bills for the immediately preceding tax year (the “ Estimated Tax Apportionments ”). Upon receipt of the current tax bills by Purchaser after the Closing, Purchaser shall promptly deliver a copy of such tax bills to Seller along with a calculation of the apportionment based on such tax bills (the “ Actual Tax Apportionments ”). Whichever Party underpaid pursuant to the Estimated Tax Apportionments shall make payment in the amount of such underpayment to the Party that overpaid within fifteen (15) days after delivery of the Actual Tax Apportionments.

(b) Utilities . Utilities, water and sewer charges shall be apportioned based upon the number of business days occurring prior to the Effective Time and following the Effective Time during the billing period for each such charge.

(c) Salaries/Wages . Salary and wages paid by Seller or any of its Affiliates to any Transferred Employees for time periods after the Effective Time shall be reimbursed by Purchaser to Seller or its Affiliate, as the case may be, within five (5) calendar days after the Closing.

(d) Leased Real Property Rent Payments . Rent payments shall be apportioned at Closing based upon the number of days occurring prior to the Effective Time and following the Effective Time during the month of February under the real property leases with respect to the Facilities located in Litchfield, Illinois and Frenchtown, New Jersey.

If any such amounts are not due until after the Closing Date, Purchaser shall assume the responsibility of paying such amounts when bills are submitted and Seller shall promptly remit Seller’s prorated amount for the period up to and including the Closing Date to Purchaser with respect to all such bills. Otherwise, appropriate cash payments by Purchaser or Seller, as the case may require, shall be made hereunder from time to time as soon as practicable after the facts giving rise to the obligation for such payments are known in the amounts necessary to give effect to the allocations provided for in this Section 1.5.

1.6 Coors Supply Agreement; Coors Rebate . Under an undated agreement styled “Goods Purchase Order Terms and Conditions” entered into by and between Coors Brewing Company (“ Coors ”) and Seller (the “ Coors Agreement ”), Coors is eligible to

 

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receive a rebate of four percent (4%) on all purchases of certain Products (the “Rebate” ), provided that Coors meets certain stipulated conditions. One such condition is that Coors purchase a minimum of $3,100,000 of such Products during the term of the Coors Agreement that commenced on May 1, 2005 and expires on April 30, 2006 (the “Minimum Purchase Amount” ). In the event that aggregate sales of Products by Seller or its Affiliates, Purchaser or third parties (provided that such third party sales consisted of Products that Seller and its Affiliates were not qualified to provide under the Coors Agreement) are equal to or greater than the Minimum Purchase Amount, then (i) Purchaser shall deliver a written statement to Seller setting forth in reasonable detail the total amount of sales of Products to Coors made by Purchaser and its Affiliates after the Closing and the amount of the Rebate owed to Coors under the Coors Agreement, (ii) Purchaser shall timely pay to Coors the amount of such Rebate as reflected on such written statement, and (iii) Seller’s pro rata portion of such Rebate shall be equal to $119,560.00, which amount Seller shall pay to Purchaser within seven (7) calendar days after Seller’s receipt of the written statement by wire transfer of immediately available funds to an account designated by Purchaser, provided, that Purchaser has paid the Rebate to Coors.

1.7 Procedures for Non-Transferable Assets .

(a) If any Assumed Contracts are not assignable without the consent of one or more third persons and such consent has not been obtained as of the Closing, the parties hereto shall use commercially reasonable efforts to obtain, as soon as possible after the Closing, any such consents requested by Purchaser that were not previously obtained and assign such Assumed Contracts to Purchaser on the effective date for any such consent obtained. With respect to any such Assumed Contract for which a necessary consent has not been obtained as of the Closing, if requested by Purchaser and permitted by the terms of such Assumed Contract, Seller and its Affiliates shall subcontract to Purchaser such Assumed Contract (a) until the earlier of (i) the date on which such consent is obtained and is effective or (ii) the date on which the term of such Assumed Contract ends, (b) at the price specified in such Assumed Contract without any additional mark-up, and (c) otherwise on the same terms and conditions as are included in such Assumed Contract, and Purchaser, under such subcontract, shall be responsible for the liabilities associated with the performance of such Assumed Contract to the extent those liabilities would otherwise constitute Assumed Liabilities and will be entitled to and shall receive all of the benefits from such Assumed Contract. If subcontracting such Assumed Contract is not permitted under its terms, the parties hereto shall cooperate with one another in any reasonable arrangement acceptable to the parties designed to give Purchaser the practical benefits of such Assumed Contract and the obligations arising under such Assumed Contract that would otherwise constitute Assumed Liabilities.

(b) The Parties acknowledge and agree that, although the Parties intend for Seller and its Affiliates to assign to Purchaser as of the Effective Time certain leases for

 

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IBM computer equipment listed on Attachment 1 to Schedule 1.1(e) (the “ IBM Computers ”) and included in the identified Lease Supplements to the Term Lease Master Agreement, dated March 24, 1995, between IBM Credit Corporation and Caraustar Industries, Inc. (the “ IBM Lease ”), IBM Credit Corporation may desire for Purchaser to enter into a new lease agreement for the IBM Computers as of the Effective Time, on substantially the same terms as those contained in the IBM Lease, rather than consent to a partial assignment of the IBM Lease to Purchaser. In such event, the IBM Lease shall not constitute an Assumed Contract hereunder, notwithstanding any listing of such contract on Schedule 1.1(e) , and the Parties shall cooperate in good faith to evidence Purchaser’s lease of the IBM Computers from IBM Credit Corporation and the termination of Seller’s and its Affiliates’ lease of the IBM Computers, as of the Effective Time, in form and substance reasonably acceptable to the Parties.

(c) The Parties acknowledge and agree that, as of or prior to the Closing Date, Seller shall purchase (i) a Ford Explorer and a Pontiac Bonneville from GE Fleet Services, and (ii) two Chrysler 300 sedans from LeasePlan, each of which shall be conveyed to Purchaser as Purchased Assets as of the Effective Time pursuant to this Agreement. The Parties acknowledge and agree that, as of the Effective Time, Seller may be unable to document the transfer of title to such vehicles to Purchaser and, in such event, Seller and Purchaser shall cooperate in good faith to take such actions as the other Party may reasonably request to evidence and consummate such transfer, including the endorsement of certificates of title and the filing of any certificates of lost title or other similar documentation with appropriate governmental authorities.

(d) The Parties acknowledge and agree that, as of the Effective Time, (i) Seller and its Affiliates shall terminate their lease with respect to the Frenchtown Property with Anthony DeSapio and 869 Associates, LLC, and such lease shall not constitute an Assumed Contract hereunder, and (ii) Purchaser shall enter into a new lease agreement with respect to the Frenchtown Property with 869 Associates, LLC.

2. CLOSING; DELIVERIES .

2.1 Closing . The closing (the “ Closing ”) of the transactions contemplated in this Agreement shall be deemed to have taken place as of 12:01 a.m. local time in Atlanta, Georgia on the date hereof (the “ Effective Time ”). The date on which the Closing occurs shall be referred to as the “ Closing Date ”.

2.2 Documents Delivered by Seller at Closing . Contemporaneously with the execution of this Agreement, Seller shall deliver to Purchaser the following:

(a) All bills of sale, instruments of assignment, certificates of title, licenses and other conveyance documents, dated as of the Effective Time, transferring to Purchaser all

 

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of Seller’s right, title and interest in and to the Purchased Assets together with possession of the Purchased Assets, all in a form reasonably satisfactory to Purchaser and Seller and executed by a duly authorized representative of Seller;

(b) A document evidencing the assignment to Purchaser of the Assumed Contracts, in form and substance reasonably satisfactory to Purchaser and Seller (the “ Assignment and Assumption Agreement ”), executed by a duly authorized representative of Seller and its applicable Affiliates;

(c) As necessary, documents evidencing the assignment to Purchaser of certain intangible Purchased Assets, including any Intellectual Property, in form and substance reasonably satisfactory to Purchaser and Seller, executed by a duly authorized representative of Seller;

(d) A copy of (i) resolutions (the “ Seller Resolutions ”) of the Board of Directors of Seller authorizing the execution, delivery and performance of this Agreement, the Seller’s Ancillary Documents and any other instruments, approvals, or certificates tendered by Seller pursuant to this Agreement and the Transactions, and (ii) a certificate, dated as of the Closing Date, executed by the secretary or assistant secretary or other duly authorized officer of Seller stating that the Seller Resolutions adopted by Seller were duly adopted and are in full force and effect;

(e) Unless otherwise agreed to by the Parties, written consents (or waivers with respect thereto) in form reasonably satisfactory to Purchaser for each Assumed Contract, including, without limitation, a assignment and assumption agreement with respect to the Coors Agreement executed by an duly authorized representative of Purchaser (or its Affiliate) and an authorized representative of Coors evidencing Coors’ written consent to assignment of the Coors Agreement to Purchaser (the “ Coors Consent ”);

(f) Evidence reasonably satisfactory to Purchaser that all Liens (other than Permitted Liens) affecting the Purchased Assets have been released;

(g) A sublease agreement with respect to 25% of the space at Seller’s Covington, Georgia facility in a form mutually satisfactory to Purchaser and Seller (the “ Sublease ”), executed by a duly authorized representative of Seller;

(h) [Intentionally Omitted] ;

(i) A transition services agreement relating to Purchaser’s post-closing transitional access to and/or use of certain information technology and other computer based systems and applications of Seller or its Affiliates as specified in such agreement (the “ Transition Services Agreement ”), executed by a duly authorized representative of Seller;

 

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(j) Intellectual property assignments relating to the assignment of the trademarks, service marks and/or patents (or any application therefor) of Seller or any Affiliate of Seller as described on Schedule 3.15(a) , executed by a duly authorized representative of Seller (the “ Intellectual Property Assignments ”); and

(k) All other documents reasonably requested by Purchaser to convey the Purchased Assets to Purchaser or to otherwise consummate the Transactions in accordance with the terms and conditions of this Agreement.

2.3 Documents Delivered by Purchaser at Closing . Contemporaneously with the execution of this Agreement, Purchaser shall deliver to Seller the following:

(a) The Fixed Purchase Price;

(b) The Assignment and Assumption Agreement, executed by a duly authorized representative of Purchaser;

(c) The Sublease, executed by a duly authorized representative of Purchaser;

(d) [Intentionally Omitted] ;

(e) The Transition Services Agreement, executed by a duly authorized representative of Purchaser;

(f) The Intellectual Property Assignments, each executed by a duly authorized representative of Purchaser;

(g) The Coors Consent, executed by a duly authorized representative of Purchaser; and

(h) A copy of (i) the resolutions (the “ Purchaser Resolutions ”) of the Managing Board of Purchaser authorizing the execution, delivery and performance of this Agreement, the Purchaser’s Ancillary Documents (as hereinafter defined) and any other instruments, approvals, or certificates tendered by Purchaser pursuant to this Agreement and the Transactions, and (ii) a certificate, dated as of the Closing Date, of the secretary, assistant secretary or other duly authorized officer of Purchaser stating that the Purchaser Resolutions were duly adopted and are in full force and effect.

 

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3. REPRESENTATIONS AND WARRANTIES OF SELLER . As an inducement to Purchaser to enter into this Agreement and to consummate the Transactions, Seller hereby represents and warrants to Purchaser each of the following representations and warranties and acknowledges that each of said representations and warranties has been relied upon by Purchaser and is material to Purchaser’s decision to enter into this Agreement and to consummate the Transactions:

3.1 Organization and Good Standing . Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Seller has all requisite corporate power and authority to own, lease and operate its assets used in the operations of the Business and to conduct the business of the Business as Seller is now conducting the Business. Seller is duly qualified or registered as a foreign corporation to transact business and is in good standing in Illinois and Georgia, but is not qualified or registered as a foreign corporation to transact business in New Jersey.

3.2 Authority and Binding Effect . Seller has the full corporate power and authority to enter into this Agreement, to perform its obligations under this Agreement and to consummate the transactions to be consummated by it hereunder, including the power and authority to execute and deliver any other certificate, document or other instrument to be executed and delivered by Seller in connection with the Transactions (collectively, the “ Seller’s Ancillary Documents ”) and to perform its respective obligations hereunder and thereunder. The execution and delivery of this Agreement and the Seller’s Ancillary Documents by Seller and the performance by Seller of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereunder and thereunder to be consummated by Seller have been duly and validly authorized by all necessary formal action on the part of Seller and its Board of Directors. Each of this Agreement and the Seller’s Ancillary Documents to which Seller is a party has been duly executed and delivered by Seller and constitutes the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws relating to creditors’ rights and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

3.3 Consents; Compliance with Other Instruments .

(a) Except as set forth on Schedule 3.3(a) or for matters that are not reasonably likely to cause a material adverse effect on the Business or the Purchased Assets, none of the execution, delivery and performance by Seller of this Agreement or the Seller’s Ancillary Documents, the consummation by Seller of the transactions contemplated hereby or thereby, or the fulfillment of and compliance with the terms and conditions hereof and thereof violates, breaches, is in conflict with, or constitutes a breach or default under (or an event that with notice, lapse of time or both would result in any such breach or default),

 

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results in the loss of any benefit under, permits the termination, modification or cancellation of or the acceleration or maturity of any obligation under, or results in the imposition of any Lien (other than Permitted Liens) upon any Purchased Asset pursuant to (i) any provision of any of its charter, bylaws or other governing documents, (ii) any note, bond, indenture, mortgage, deed of trust, evidence of indebtedness, loan or lease agreement, other agreement or instrument to which Seller or any of its Affiliates is bound, (iii) any statute, rule, regulation, ordinance, or code applicable to Seller or the Business, or (iv) any judgment, order, injunction, or decree by which either Seller or any of its Affiliates is bound, to which either is a party, or to which the Business or any of the Purchased Assets is subject.

(b) Except as contemplated elsewhere herein and except as set forth in Schedule 3.3(b) , neither Seller nor any of its Affiliates is required to submit any notice, declaration, report or other filing or registration with any governmental or regulatory authority or instrumentality in connection with the execution and delivery of this Agreement or Seller’s Ancillary Documents or the consummation of the Transactions, where the failure to make such submissions, filings or registrations would be reasonably likely to cause a material adverse effect on the Business or the Purchased Assets.

(c) Except as contemplated elsewhere herein and except as set forth in Schedule 3.3(c) , no license, permit, franchise, exemption, waiver, consent, approval or authorization of any governmental or regulatory authority or instrumentality is required to be obtained or made by Seller or any Affiliate of Seller in connection with the execution and delivery of this Agreement or the consummation of the Transactions, where the failure to make obtain or make such items would be reasonably likely to cause a material adverse effect on the Business or the Purchased Assets.

3.4 Financial Statements of the Business .

(a) Attached hereto as Schedule 3.4(a)(i) are (i) an unaudited profit and loss statement for the Business for each of the fiscal years ended December 31, 2003 and 2004 and an unaudited interim profit and loss statement for the Business for the eleven-month period ended November 30, 2005 (collectively, the “ Income Statements ”), (ii) an unaudited balance sheet of the Business for each of the fiscal years ended December 31, 2003 and 2004 (the “ Balance Sheets ”) and an unaudited interim balance sheet for the Business for the eleven-month period ended November 30, 2005 (the “ Interim Balance Sheet ”). Except as set forth on Schedule 3.4(a)(ii) , the Income Statements, the Balance Sheets and the Interim Balance Sheet have been prepared from, and are in accordance with, the accounting principles used by Seller in the normal operation of the Business and with the books and records of Seller (which books and records are complete and accurate in all material respects). Except as set forth on Schedule 3.4(a)(iii) , each of the Income Statements (1) has been prepared in accordance with generally accepted accounting

 

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principles (“ GAAP ”), consistently applied since January 1, 2004 and (2) fairly and accurately presents, in all material respects, the revenues and expenses of the Business for the period then ended. Except as set forth on Schedule 3.4(a)(iv) , each of the Balance Sheets and the Interim Balance Sheet fairly and accurately present, in all material respects, the financial condition of the Business as of the period then ended and each has been prepared in accordance with GAAP, consistently applied since January 1, 2004. For purposes of this Agreement, November 30, 2005 shall be the “ Interim Balance Sheet Date .”

(b) Except as and to the extent (i) reflected in the Interim Balance Sheet and adequately reserved against in the Interim Balance Sheet, (ii) set forth on Schedule 3.4(b) , and (iii) arising between the Interim Balance Sheet Date and the Closing Date in the ordinary and regular course of business and consistent with Seller’s past practice, or (iv) arising under contracts of Seller and its Affiliates (excluding liabilities for breaches thereof), there are no liabilities of Seller or its Affiliates with respect to the Business as of the date hereof of any kind or nature whatsoever, whether or not accrued, determined or determinable, known or unknown, fixed or contingent, matured or unmatured.

3.5 Absence of Certain Changes . Except as set forth in Schedule 3.5 hereto, and with respect to the Business, since the Interim Balance Sheet Date:

(a) There has not been any state of facts, change, event, effect or occurrence (i) that (when taken together with all other states of fact, changes, events, effects or occurrences) is, or is reasonably likely to be, materially adverse to the financial condition, results of operations, prospects , properties, assets or liabilities (including contingent liabilities) of the Business or the Purchased Assets, or (ii) that has occurred or been threatened that (when taken together with all other states of facts, changes, events, effects or occurrences that have occurred or been threatened) will, or is reasonably likely to, prevent or materially delay the performance by Seller of any of its obligations under this Agreement or any of the Seller’s Ancillary Documents or the consummation of the Transactions;

(b) Seller has conducted the Business in the ordinary course on a basis consistent with Seller’s past practice and has not entered into any agreement, transaction or activity or made any commitment with respect to the Business or the Purchased Assets, except those in the ordinary and regular course of business, consistent with Seller’s past practice;

(c) Seller has used its commercially reasonable efforts to preserve and foster the relationships and goodwill of the Business with customers, distributors, suppliers, employees and other persons or entities having business relations with the Business;

 

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(d) Seller has maintained in good working condition and repair (ordinary wear and tear excepted), consistent with past practices, all Personal Property Assets and any other tangible personal property that is included in the Purchased Assets;

(e) Seller has not written-down or written-up the value of any of the Purchased Assets on the books or records of the Seller, except for continued depreciation, continued amortization, write-downs or write-ups made in the ordinary and regular course of business and consistent with Seller’s past practice with respect to the Business;

(f) Seller has not suffered any damage, destruction, casualty or loss (whether or not such loss or damage shall have been covered by insurance) which materially adversely affects the ability of Seller to conduct the Business in substantially the same manner as it was conducted by Seller prior to the date hereof;

(g) Seller has not incurred any material liability or obligation of any nature (whether absolute, accrued, contingent or otherwise) with respect to the Business except in the ordinary and regular course of business consistent with Seller’s past practice;

(h) Seller has not materially increased any reserves for contingent liabilities with respect to the Business (excluding any adjustment to bad debt reserves in the ordinary and regular course of business and consistent with Seller’s past practice) and has not materially increased or experienced any material change in any assumptions underlying, or methods of calculating, any bad debt, contingency or other reserves with respect to the Business;

(i) No material claim, liability or obligation (whether absolute, accrued, contingent or otherwise) of Seller with respect to the Business has been paid, discharged or satisfied other than by payment, discharge or satisfaction in the ordinary and regular course of business consistent with Seller’s past practice;

(j) Seller has not cancelled, waived or written off any material claims or rights of value relating to the Business, except in the ordinary and regular course of business and consistent with Seller’s past practice;

(k) Seller has not sold, transferred, distributed or otherwise disposed of any assets or properties materially necessary for Seller or any of its Affiliates to manufacture and sell the Products and to conduct the Business, except for finished goods sold in the ordinary and regular course of business and consistent with Seller’s past practice;

(l) Except for annual pay increases in the ordinary and regular course of business in amounts and at times consistent with Seller’s past practices, Seller has not materially increased, in any manner, the compensation of any Transferred Employees;

 

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(m) Seller has not made any commitment for any capital expenditure with respect to the Business in excess of $10,000 that has not yet been fully paid;

(n) Seller has continued to extend customers credit, collect accounts receivable and pay accounts payable and similar obligations with respect to the Business in the ordinary and regular course of business and consistent with Seller’s past practice; and

(o) Seller has not agreed, whether in writing or not, to do any of the foregoing described in Section 3.5(a)-(n) above that would be required to be listed on Schedule 3.5 .

3.6 Title to Assets; Related Matters . Seller has (and pursuant to this Agreement does hereby convey to Purchaser) good and valid title to all of the Purchased Assets, free and clear of all Liens, except for those Liens described on Schedule 3.6(i) (the “ Permitted Liens ”). Except as expressly set forth on Schedule 3.6(ii) , no person or entity other than Seller owns any equipment or other tangible personal property or assets that are necessary to the operation of the Business as conducted by Seller. Except as set forth on Schedule 3.6(iii) , on or before the Effective Time, Seller has purchased all of the assets (the “ Financed Assets ”) used in the operation of the Business that were being leased from GE Capital Corporation and its Affiliates (formerly Bank of America prior to its assignment of the leasing documents with respect to the Financed Assets to GE Capital Corporation and its Affiliates).

3.7 Leased Real Property .

(a) Schedule 3.7 sets forth a list of and describes all real property currently leased by Seller or its Affiliates relating to the Business or the Purchased Assets (the “ Leased Real Property ”). Except for the Leased Real Property identified on Schedule 3.7 , neither Seller nor any Affiliate of Seller presently owns or leases, nor does either have any interest in, any real property used primarily in the Business. Seller or one of its Affiliates has a valid leasehold interest in all of the Leased Real Property, free and clear of all mortgages, liens, pledges, security interests, charges, claims, tenancies, restrictions and encumbrances of any nature or kind whatsoever (“ Liens ”), except for (i) imperfections of title that do not materially impair the present use by Seller of the Leased Real Property subject thereto, (ii) zoning laws, land use restrictions and other applicable legal requirements, (iii) items that would be reflected on an accurate survey of the Leased Real Property, and (iv) all Lien restrictions, reservations of rights and other matters disclosed in deeds, surveys, policies of title insurance and title commitments that have been provided to, or have been obtained by, Purchaser. There is no material default or claim of material default (or an event that with notice, lapse of time or both would result in any such default) by Seller, any of its Affiliates or, to Seller’s Knowledge, any other party thereto, under any lease agreement relating to the Leased Real Property. All lease agreements relating to the Leased Real Property are legal,

 

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valid, and binding obligations of Seller or one of its Affiliates enforceable against such entity in accordance with their respective terms and, to Seller’s Knowledge, each other party thereto, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws relating to creditors’ rights and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

(b) All of the buildings, structures, improvements and fixtures comprising the Leased Real Property are in a good state of repair, maintenance and operating condition, ordinary wear and tear excepted, are adequate and suitable for the purposes for which they are currently being used and there are no defects with respect thereto, either patent or latent, which would materially impair the day-to-day use of any such buildings, structures, improvements or fixtures or which would subject Seller or any of its Affiliates to any liability under applicable law. All utilities necessary to service the Business as operated by Seller or its Affiliates are connected and functioning at the Leased Real Property.

(c) The Leased Real Property is zoned to permit the uses for which it is presently used by Seller or its Affiliates without variances or conditional use permits. The Leased Real Property is in material compliance with all applicable zoning and other land use and similar laws, codes, ordinances, rules, regulations and orders (collectively, “ Real Estate Laws ”). Neither Seller nor any of its Affiliates has received any written notice of any violation from any governmental entity or authority of any Real Estate Law on the use, occupancy or operation of the Leased Real Property or with respect to any potential eminent domain efforts contemplated by any governmental entity or authority. No Real Estate Law materially prohibits, limits or conditions the use or operation of the Leased Real Property as currently used or operated by Seller or its Affiliates. Neither Seller nor any of its Affiliates has received any written notice of any pending or threatened termination or impairment of access of Seller or its Affiliates to the Leased Real Property or discontinuation of necessary sewer, water, electrical, gas, telephone or other utilities or services.

3.8 Environmental Matters .

(a) Except as set forth on Schedule 3.8(a) :

(i) None of the Leased Real Property is currently being used by Seller, any of its Affiliates or, to Seller’s Knowledge, any other party nor has it ever been used by Seller, any of its Affiliates or, to Seller’s Knowledge, any other party, to make, store, handle, treat, dispose, generate, or transport Hazardous Substances (as hereinafter defined) in violation of any applicable Environmental Law (as hereinafter defined);

 

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(ii) There has never been a Release (as hereinafter defined) of Hazardous Substances on or from any of the Leased Real Property by Seller, any of its Affiliates or, to Seller’s Knowledge, by any other party that has caused Contamination (as hereinafter defined);

(iii) Seller and its Affiliates, with respect to their operation of the Business and ownership of the Purchased Assets, are in material compliance with all applicable Environmental Laws;

(iv) No proceeding arising under or relating to any Environmental Law or any Environmental, Health, and Safety Liabilities (as hereinafter defined), is pending, or to Seller’s Knowledge, threatened, against Seller, any of its Affiliates or any other party with respect to the Business or any of the Leased Real Property;

(v) Seller has not received any written notification, citation, complaint, violation, notice or order of any kind from any governmental entity or authority or any third party relating or pertaining to any Environmental, Health, and Safety Liabilities with respect to the Leased Real Property, the Purchased Assets, the Business or the importation, making, storing, handling, treating, disposing, generating, transporting or Release of any Hazardous Substances on, under or adjacent to the Leased Real Property in violation of any Environmental Law;

(vi) With respect to the Leased Real Property, the Purchased Assets or the Business, none of Seller, its Affiliates or, to Seller’s Knowledge, any other party is subject to any judgment, decree or judicial or administrative order relating to compliance with, or the cleanup of Hazardous Substances under, any applicable Environmental Law;

(vii) Neither Seller nor any of its Affiliates has paid any fine, penalty or assessment with respect to environmental matters relating to the Leased Real Property, the Purchased Assets or the Business;

(viii) No Leased Real Property, improvement or equipment included in the Purchased Assets contains any asbestos or polychlorinated biphenyls and the Leased Real Property does not contain any open or closed pits or sumps; and

(ix) No Hazardous Substance handled, treated, disposed, generated or transported by Seller or any Affiliate of Seller in connection with the Business or any third party transporter retained by Seller or any Affiliate of Seller in connection with the Business has contributed to any Contamination at any other property or site, or has otherwise come to be located at a property or site that is listed or is proposed for listing under any Environmental Law as a site requiring remedial action.

 

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(b) Storage Tanks . Schedule 3.8(b) sets forth a complete and accurate list of all above ground or under ground storage tanks presently in use by Seller or any of its Affiliates, or formerly used by Seller or any of its Affiliates, or to Seller’s Knowledge, any other party on the Leased Real Property for the storage of any Hazardous Substances. To Seller’s Knowledge, no other above gro