Exhibit 10.01

ASSET PURCHASE AGREEMENT

BETWEEN

SONOCO PRODUCTS COMPANY

AND

CARAUSTAR INDUSTRIAL & CONSUMER PRODUCTS GROUP, INC.

OCTOBER 1, 2007

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TABLE OF CONTENTS

 

I.   DEFINITIONS   1 II.   COVENANTS AND UNDERTAKINGS   11   2.1   PURCHASE AND
SALE OF ASSETS   11   2.2   CONSIDERATION   13   2.3   INVENTORY VALUATION AT
CLOSING   13   2.4   ALLOCATION OF PURCHASE PRICE   14   2.5   LIABILITIES OF
SELLER   14   2.6   EXAMINATION OF RECORDS   15   2.7   EMPLOYEES   15   2.8  
SUPPLYING OF FINANCIAL STATEMENTS   17   2.9   NEGOTIATION WITH OTHERS   17  
2.10   CONFIDENTIALITY   18   2.11   COVENANT NOT TO COMPETE OR SOLICIT BUSINESS
  18   2.12   ACCESS TO RECORDS AFTER CLOSING   19   2.13   OPERATION OF THE
BUSINESS OF SELLER   19   2.14   REQUIRED APPROVALS   20   2.15   NOTIFICATION  
20   2.16   PRORATIONS   21   2.17   SUPPLY AGREEMENT   21   2.18   TRANSITION
SERVICES AGREEMENT   21   2.19   GUARANTY AGREEMENT   21   2.20   TITLE
INSURANCE AND SURVEYS   21   2.21   ANTITRUST   21 III.   REPRESENTATIONS AND
WARRANTIES OF SELLER   24   3.1   ORGANIZATION AND STANDING   24   3.2  
AUTHORITY AND STATUS   24   3.3   LIABILITIES WHICH COULD CREATE A LIEN   24  
3.4   OWNERSHIP OF ASSETS   24   3.5   AGREEMENT DOES NOT VIOLATE OTHER
INSTRUMENTS; CONSENTS   24   3.6   CONTRACTS, ETC   25   3.7   PATENTS,
TRADEMARKS, TRADENAMES, ETC   26   3.8   LITIGATION   26   3.9   ENVIRONMENTAL
MATTERS   26   3.10   FINANCIAL STATEMENTS   27   3.11   ABSENCE OF CHANGES   27
  3.12   REAL PROPERTY   28   3.13   SOLVENCY   31   3.14   APPLICABLE LAWS AND
PERMITS   32   3.15   LABOR MATTERS   32   3.16   EMPLOYEE BENEFITS PLANS   33  
3.17   EMPLOYEES   35   3.18   TAXES   35   3.19   INVENTORY   35   3.20  
UNDISCLOSED LIABILITIES   36   3.21   LICENSES AND PERMITS; COMPLIANCE WITH LAW
  36   3.22   CUSTOMERS AND SUPPLIERS   36   3.23   DISCLAIMER OF OTHER
REPRESENTATIONS AND WARRANTIES   36   3.24   DISCLOSURE   36

 

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IV.   REPRESENTATIONS AND WARRANTIES OF PURCHASER   37   4.1   ORGANIZATION AND
STANDING   37   4.2   CORPORATE POWER AND AUTHORITY   37   4.3   AGREEMENT DOES
NOT VIOLATE OTHER INSTRUMENTS; CONSENTS   37   4.4   LITIGATION   37   4.5  
TRANSFEROR PLAN   37 V.   CONDITIONS TO CLOSING AND CLOSING   38   5.1  
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER TO CLOSE   38   5.2  
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER TO CLOSE   41   5.3   TIME AND
PLACE OF CLOSING   42   5.4   SELLER’S PERFORMANCE AT CLOSING   42   5.5  
PERFORMANCE BY PURCHASER AT CLOSING   42 VI.   SURVIVAL OF REPRESENTATIONS AND
WARRANTIES AND INDEMNIFICATION   43   6.1   SURVIVAL OF REPRESENTATIONS AND
WARRANTIES OF SELLER   43   6.2   SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF
PURCHASER   43   6.3   DEFENSE OF CLAIMS   44   6.4   LIMITATIONS ON
INDEMNIFICATION   47 VII.   TERMINATION   49   7.1   TERMINATION   49   7.2  
NOTICE OR TERMINATION   50   7.3   EFFECT OF TERMINATION   50 VIII.   GENERAL
PROVISIONS   50   8.1   NOTICES   50   8.2   BROKERS   51   8.3   FURTHER
ASSURANCE   52   8.4   WAIVER   52   8.5   TAXES AND EXPENSES   52   8.6  
BINDING EFFECT   52   8.7   HEADINGS   52   8.8   ENTIRE AGREEMENT   52   8.9  
GOVERNING LAW   53   8.10   CONFIDENTIALITY   53   8.11   COUNTERPARTS   53  
8.12   PRONOUNS   53   8.13   EXHIBITS INCORPORATED   53 LIST OF SCHEDULES   55
LIST OF EXHIBITS   56

 

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT entered into this 1st day of October, 2007, to be
effective as of 12:01 a.m. on the date hereof between Sonoco Products Company, a
South Carolina corporation (hereinafter sometimes referred to as “Purchaser”),
and Caraustar Industrial & Consumer Products Group, Inc., a Delaware corporation
(hereinafter sometimes referred to as “Seller”).

WITNESSETH:

WHEREAS, as part of its overall business, Seller is in the business of
(i) manufacturing and selling composite cans and caulk cartridges in Covington,
Georgia, Orrville, Ohio, St. Paris, Ohio, and Stevens Point, Wisconsin (the
“Composite Cans Business”) and (ii) manufacturing and selling injection molded
and extruded carriers and containers in New Smyrna Beach, Florida and Union,
South Carolina but specifically excluding the business of manufacturing tackle
boxes and tackle box components pursuant to the Tackle Box IP (the “Paragon
Business”) (the Composite Can Business and the Paragon Business being jointly
referred to as the “Business”); and

WHEREAS, Purchaser desires to purchase and Seller desires to sell certain of the
assets used by Seller and Paragon in the Business.

NOW, THEREFORE, in consideration of the premises and the mutual promises,
representations, warranties and covenants hereinafter set forth, the parties
hereto agree as follows:

I. DEFINITIONS.

As used herein, the following terms shall have the following meanings unless the
context otherwise requires:

1.1 “Accounts Receivable” shall mean all accounts and notes receivable and other
claims for money due to the Seller arising from the rendering of services or the
sale of goods or materials.

1.2 “Affiliates” shall mean, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediates Controls or is
controlled by, or is under common Control with, such person.

1.3 “Agreement” shall mean this Asset Purchase Agreement including the Schedules
and Exhibits hereto, as originally executed and as subsequently amended from
time to time in accordance with the provisions hereof.

1.4 “Agreement Termination Date” shall have the meaning assigned to such term in
Section 7.1.

1.5 “Assets” shall have the meaning assigned such term in Section 2.1.2.

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1.6 “Board of Arbitration” shall have the meaning assigned to such term in
Section 6.3.3.

1.7 “Business” shall have the meaning assigned to such term in the recitals of
this Agreement.

1.8 “Business Employees” shall mean all current officers, directors, employees
or consultants who are employed or otherwise compensated by Seller in connection
with the Business, including all employees on temporary leave of absence,
including family medical leave, military leave, temporary disability or sick
leave or workers compensation leave, but excluding employees on long-term
disability leave, on the Closing Date.

1.9 “CERCLA” shall mean the federal Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. § 9601 et seq.), as amended.

1.10 “Claim” shall mean any claim, demand, Order or Proceeding, whether based in
contract, tort, implied duty of one party to the other, violation of a law or
regulation, or any other theory of liability and whether at law or in equity,
arising out of or relating to this Agreement or otherwise relating to the
transaction between the parties that is the subject of this Agreement, including
any claim alleging negligent or intentional misrepresentation or non-disclosure
in the inducement of a contract or in the execution or performance of a
contract.

1.11 “Claim Notice Period” shall have the meaning assigned to such term in
Section 6.3.2.

1.12 “Closing” shall mean the consummation of the transactions provided for in
this Agreement.

1.13 “Closing Date” shall mean the date on which the Closing occurs pursuant to
Section 5.3 hereof.

1.14 “Code” shall mean the Internal Revenue Code of 1986, as amended.

1.15 “Collective Bargaining Agreements” shall have the meaning assigned to such
term in Section 3.6.7.

1.16 “Competing Business” shall have the meaning assigned to such term in
Section 2.10.1.

1.17 “Composite Can Business” shall have the meaning assigned to such term in
the recitals of this Agreement.

 

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1.18 “Confidential Information” shall have the meaning assigned such term in
Section 8.10.

1.19 “Consent” shall mean any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).

1.20 “Contemplated Transactions” shall mean all of the transactions contemplated
by this Agreement including the purchase of the Assets and the performance by
Purchaser and Seller of their respective covenants and obligations under this
Agreement.

1.21 “Control” (including, with its correlative meanings, “Controlled by” and
“under common Control with”) shall mean, with respect to any Person, any of the
following: (i) ownership, directly or indirectly, by such Person of equity
securities entitling it to exercise in the aggregate more than 50% of the voting
power of the entity in question, or (ii) the possession by such Person of the
power, directly or indirectly, (A) to elect a majority of the board of directors
(or equivalent governing body) of the entity in question; or (B) to direct or
cause the direction of the management and policies of or with respect to the
entity in question, whether through ownership of securities, by contract or
otherwise.

1.22 “Contracts” shall mean each contract, agreement or instrument, whether oral
or written, to which Seller is a party relating to the Business or the Assets.

1.23 “Employee Benefit Plan” shall mean any “employee benefit plan” (as such
term is defined in ER1SA §3(3)) and any other material employee benefit plan,
program or arrangement of any kind.

1.24 “Employee Pension Benefit Plan” shall have the meaning assigned to such
term in ERISA Section 3(2).

1.25 “Employee Welfare Benefit Plan” shall have the meaning assigned to such
term in ERISA Section 3(1).

1.26 “Encumbrance” shall mean and includes any security interest, mortgage,
Lien, pledge, Claim, charge, escrow, encumbrance, cloud, option, security
agreement or other similar agreement, arrangement, Agreement, understanding or
obligation, whether written or oral and whether or not relating in any way to
credit or the borrowing of money.

1.27 “Encumbrance Documents” shall have the meaning assigned to such term in
Section 3.12.3.8.

1.28 “Environmental Laws” shall mean all current federal, state and local
statutory laws, ordinances and regulations relating to environmental protection,
or the use, analysis, generation, manufacture, storage, discharge, release,
disposal or transportation of Hazardous Materials (including, but not limited
to, on-site or off-site contamination by Hazardous Materials).

 

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1.29 “Environmental Liabilities” or “Environmental Liabilities” shall mean any
claims by any Person or Governmental Entity that are based upon:

(i) any Environmental Laws; or

(ii) any judgment, order, writ, decree, permit, requirement or injunction
imposed by any Governmental Entity with respect to any Environmental Laws,

The term “Environmental Liabilities” shall include, but not be limited to:
(a) fines, penalties, judgments, awards, settlements, compromises, losses,
damages, interest, costs, reasonable fees (including reasonable attorneys’ and
consultants’ fees), expenses and disbursements; and (b) financial responsibility
for (i) cleanup costs, including any removal, remedial or other response
actions, and natural resource damages, and (ii) any other compliance or remedial
measures, provided, however, that all such costs or measures are required by
law, court order or governmental agency, or are in settlement of a claim,
demand, notice, complaint or lawsuit by a governmental agency or private party.

1.30 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.

1.31 “ERISA Affiliate” shall mean each Person that is treated as a single
employer with Seller for purposes of Code Section 414.

1.32 “Estoppel Certificates” shall have the meaning assigned to such term in
Section 5.1.15.

1.33 “Fiduciary” shall have the meaning assigned to such term in ERISA
Section 3(21).

1.34 “Financial Statements” shall have the meaning assigned to such term in
Section 3.10.

1.35 “FIRPTA Affidavit” shall have the meaning assigned to such term in
Section 5.1.16.

1.36 “GAAP” shall mean U.S. generally accepted accounting principles and
practices set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or
such other statements by such other entity as may be approved by a significant
segment of the accounting profession that are applicable to the circumstances as
of the date of determination.

 

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1.37 “Governmental Authorization” means any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Entity or pursuant to
any Legal Requirement.

1.38 “Governmental Entity” shall mean any federal, state, local, foreign or
other governmental or administrative authority, agency, entity, body, court or
tribunal.

1.39 “Guaranty Agreement” shall have the meaning assigned to such term in
Section 2.19.

1.40 “Hazardous Materials” shall mean petroleum and any Hazardous Substance (as
such term is defined in CERCLA).

1.41 “Improvements” shall have the meaning assigned to such term in Section
3.12.3.2.

1.42 “Indemnifiable Loss” shall mean any item or matter eligible for
indemnification pursuant to Sections 6.1 or 6.2, as applicable, hereunder,
whether or not indemnification is sought.

1.43 “Indemnifying Party” shall have the meaning assigned to such term in
Section 6.3.1.1.

1.44 “Indemnitee” shall have the meaning assigned to such term in
Section 6.3.1.1.

1.45 “Indemnity Notice” shall have the meaning assigned to such term in Section
6.3.2.

1.46 “Indemnity Response Period” shall have the meaning assigned to such term in
Section 63.2.

1.47 “Intellectual Property” shall have the meaning assigned to such term in
Section 2.1.2.5 hereof.

1.48 “Inventory” shall have the meaning assigned to such term in
Section 2.1.2.3.

1.49 “Inventory Statement” shall have the meaning assigned to such term in
Section 2.3.

1.50 “Law” shall mean all statutes, laws, ordinances, regulations, rules,
resolutions, orders, determinations, writs, injunctions, awards (including
without limitation awards of any arbitrator), judgments and decrees applicable
to the specified persons or entities and to the businesses and assets thereof
(including without, limitation Laws relating to securities registration and
regulation; the sale, leasing, ownership or management of real property;
employment practices, terms and conditions, and wages and hours; building
standards, land use and zoning; safety, health and fire prevention; and
environmental protection).

 

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1.51 “Leased Real Property” shall mean the leasehold or subleasehold estates and
other rights to use or occupy any land, buildings, structures, improvements,
fixtures, or other interests in real property by Seller exclusively in
connection with the Business.

1.52 “Legal Requirement” shall mean any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.

1.53 “Lease Consents” shall have the meaning assigned to such term in
Section 5.1.14.

1.54 “Lien” shall mean, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or Encumbrance of any kind, or any agreement to give
the foregoing in respect of such asset.

1.55 “Material Adverse Effect” or “Material Adverse Change” means any effect or
change that would be materially adverse to the Business, taken as a whole, or to
the ability of any party to consummate timely the Contemplated Transactions;
provided that none of the following shall be deemed to constitute, and none of
the following shall be taken into account in determining whether there has been,
a Material Adverse Effect or Material Adverse Change: (a) any adverse change,
event, development, or effect arising from or relating to (1) general business
or economic conditions, including such conditions related to the Assets,
(2) national or international political or social conditions, including the
engagement by the United States in hostilities, whether or not pursuant to the
declaration of a national emergency or war, or the occurrence of any military or
terrorist attack upon the United States, or any of its territories, possessions,
or diplomatic or consular offices or upon any military installation, equipment
or personnel of the United States, (3) financial, banking, or securities markets
(including any disruption thereof and any decline in the price of any security
or any market index), (4) changes in United States generally accepted accounting
principles, (5) changes in laws, rules, regulations, orders, or other binding
directives issued by any governmental entity or (6) the taking of any action
contemplated by this Agreement and the other agreements contemplated hereby,
(b) any existing event, occurrence, or circumstance with respect to which
Purchaser has knowledge as of the date hereof and (c) any adverse change in or
effect on the Business that is cured by Seller before the earlier of (1) the
Closing Date and (2) the date on which this Agreement is terminated pursuant to
Article 7 hereof.

1.56 “Order” or “Orders” shall mean any judgments, writs, decrees, injunctions,
orders, compliance agreements or settlement agreements of or with any
Governmental Entity,

1.57 “Offered Employees” shall have the meaning assigned to such term in Section
2.6.

1.58 “Ordinary Course of Business” shall mean, with respect to any Person,
ordinary course of business consistent with past practices of such Person and
prudent customary business operations.

 

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1.59 “Organizational Documents” means (a) the articles or certificate of
incorporation and the bylaws or code of regulations of a corporation; (b) the
partnership agreement and any certificate or statement of partnership of a
general partnership; (c) the limited partnership agreement and the certificate
of limited partnership of a limited partnership; (d) the articles or certificate
of organization of a limited liability company and the operating agreement or
limited liability company agreement of a limited liability company; (e) any
charter or similar document adopted or filed in connection with the creation,
formation or organization of a Person; and (f) any amendment to any of the
foregoing.

1.60 “Owned Real Property” shall have the meaning assigned to such term in
Section 2.1.2.2.

1.61 “Paragon” shall mean Paragon Plastics, Inc. a South Carolina corporation
and wholly-owned subsidiary of Seller.

1.62 “Paragon Business” shall have the meaning assigned to such term in the
recitals of this Agreement.

1.63 “PBGC” shall mean the Pension Benefit Guaranty Corporation.

1.64 “Permitted Liens” or “Permitted Lien” shall mean (i) any Lien for Taxes not
yet due or delinquent or being contested in good faith by appropriate
proceedings, (ii) any statutory Lien arising in the Ordinary Course of Business
by operation of law with respect to a liability that is not yet due or
delinquent, (iii) mechanics’ liens and similar liens for labor, materials, or
supplies provided with respect to Owned Real Property incurred in the Ordinary
Course of Business for amounts that are not delinquent and that are not material
or being contested by appropriate proceedings; (iv) any minor imperfection of
title or recorded easements, covenants or other restrictions effecting Owned
Real Property which individually or in the aggregate with other such items do
not or would not materially impair the use or occupancy of such Owned Real
Property in the operation of the Business; and (v) any Lien for obligations
which are Assumed Liabilities.

1.65 “Permits” shall mean all permits, licenses, authorizations, registrations,
franchises, approvals, consents, certificates, variances and similar rights
obtained, or required to be obtained, from Governmental Entities.

1.66 “Person” shall mean any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Entity.

1.67 “Personal Property Leases” shall have the meaning assigned to such term in
Section 3.12.2.

 

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1.68 “Plant Closing Laws” shall have the meaning assigned to such term in
Section 3.17.1.

1.69 “Proceeding” shall mean any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Entity or arbitrator.

1.70 “Prohibited Transaction” shall have the meaning assigned to such term in
ERISA Section 406 and Code Section 4975.

1.71 “Purchase Price” shall have the meaning assigned to such term in
Section 2.2.

1.72 “Purchaser” shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.

1.73 “Purchaser’s Knowledge” shall mean the actual knowledge of Kevin P.
Mahoney, Rick Maloney and Steve Heisler after reasonable inquiry.

1.74 “Real Estate Impositions” shall have the meaning assigned to such term in
Section 3.12.3.9.

1.75 “Real Property Laws” shall have the meaning assigned to such term in
Section 3.12.3.4.

1.76 “Real Property Lease” shall have the meaning assigned to such term in
Section 3.12.2.

1.77 “Real Property” shall mean the Owned Real Property and the Leased Real
Property.

1.78 “Real Property Permits” shall have the meaning assigned to such term in
Section 3.12.3.6.

1.79 “Reportable Event” shall have the meaning assigned to such term in ERISA
Section 4043.

1.80 “Representative” means, with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.

 

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1.81 “Restricted Contract” means any Contract that may not be assigned to
Purchaser by reason of the absence of a consent to assignment.

1.82 “Rules of Arbitration” shall have the meaning assigned to such term in
Section 6.3.3.

1.83 “Section” shall mean a section (or a subsection) of this Agreement.

1.84 “Seller” shall have the meaning assigned to such term in the introductory
paragraph of this Agreement.

1.85 “Seller Employee Liabilities” shall mean any claims, liabilities, costs,
expenses or compensation which exist, which arise by reason of, or which are in
any way connected with or based on (1) an employee’s employment relationship
with Seller and/or the termination of such relationship including, but not
limited to, Seller’s obligation to pay its employees incentive payments under
any Employee Benefit Plan of Seller, (2) any fair employment practices act of
any Governmental Entity and/or any law, ordinance or regulation promulgated by
any such Governmental Entity as applied to employees of Seller in connection
with their employment or other relationship with Seller, (3) interference with
and/or breach of contract with employees of Seller in connection with their
employment or other relationship with Seller, (4) retaliatory or wrongful
discharge of any employee of Seller in connection with their employment or other
relationship with Seller, (5) intentional or negligent infliction of emotional
distress or mental anguish upon employees of Seller in connection with their
employment or other relationship with Seller, (6) outrageous conduct with
respect to employees of Seller in connection with their employment or other
relationship with Seller, (7) interference with business relationships,
contractual relationships or employment relationships involving employees of
Seller in connection with their employment or other relationships with Seller
and any third party, (8) breach of duty, fraud, fraudulent inducement to
contract, breach of right of privacy, libel, slander, or tortuous conduct of any
kind with respect to employees of Seller in connection with their employment or
other relationship with Seller, (9) violations of Title VII of the Civil Rights
Act of 1964 and/or the Civil Rights Act of 1991 and/or 42 U.S.C. §1981 with
respect to employees of Seller in connection with their employment or other
relationship with Seller, (10) violations of Age Discrimination in Employment
Act of 1967, the Age Discrimination Claims Assistance Act of 1988 and/or the
Older Workers’ Benefit Protection Act with respect to employees of Seller in
connection with their employment or other relationship with Seller,
(11) violations of the handicap or disability discrimination laws or acts of any
Governmental Entity, including, but not limited to, the Rehabilitation Act of
1973 and the Americans with Disabilities Act with respect to employees of Seller
in connection with their employment or other relationship with Seller,
(12) discriminatory or wrongful acts against employees of Seller in connection
with their employment or other relationship with Seller, (13) violations of
ERISA or the Family and Medical Leave Act or the Fair Labor Standards Act with
respect to employees of Seller in connection with their employment or other
relationship with Seller, (14) violations of the workers’ compensation laws of
any Governmental Entity by Seller or with respect to

 

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employees of Seller in connection with their employment or other relationship
with Seller, (15) violations of any other law or regulations of any Governmental
Entity with respect to employees of Seller in connection with their employment
or other relationship with Seller, or (16) incorrect classification by Seller of
individuals as either employees or independent contractors.

1.86 “Seller’s Knowledge” shall mean the actual knowledge of Ronald J. Domanico,
Wilma Elizabeth Beaty, Steven L. Kelchen, Frank S. Snyder, J. Randy Kelley, Kim
Robinson and Andrew C. McGowan after reasonable inquiry.

1.87 “Seller’s Union Facility” shall mean the real property listed as item 1 on
Schedule 2.1.2.2.

1.88 “Supply Agreement” shall have the meaning assigned to such term in
Section 2.17.

1.89 “Surveys” shall have the meaning assigned to such term in Section 5.1.13.

1.90 “Tackle Box IP” shall have the meaning assigned to such term in Section
2.1.3.

1.91 “Taxes” means all taxes (including, without limitation, income,
corporation, capital, sales, withholding, franchise, customs duties, profits,
gross receipts, excise, property, stamp, transfer, water, business, and goods
and services taxes), imposts, duties, levies, deductions, withholdings, charges,
assessments, reassessments or fees of any nature (including, without limitation,
interest, penalties and additions) that are imposed by any relevant taxing
authority; and “Tax” shall mean any one of them.

1.92 “Tax Return” means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereto.

1.93 “Third Party Claim” shall have the meaning assigned to such term in Section
6.3.1.1.

1.94 “Title Commitments” shall have the meaning assigned to such term in Section
5.1.11.

1.95 “Title Company” shall have the meaning assigned to such term in Section
5.1.11.

1.96 “Title Policies” shall have the meaning assigned to such term in Section
5.1.12.

1.97 “Transition Services Agreement” shall have the meaning assigned to such
term in Section 2.18.

 

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1.98 “Transferred Employee” shall have the meaning assigned to such term in
Section 2.73.

1.99 “Transferred Employee Benefit Assets” shall have the meaning assigned to
such term in Section 2.7.3.

1.100 “Transferred Employee Benefit Liabilities” shall have the meaning assigned
to such term in Section 2.7.3.

1.101 “Transferee Plan” shall have the meaning assigned to such term in
Section 2.7.3.

1.102 “Transferor Plan” shall mean the defined contribution Employee Pension
Benefit Plan, currently sponsored and maintained by Seller for the benefit of
the Offered Employees and other employees of Seller.

II. COVENANTS AND UNDERTAKINGS

2.1 Purchase and Sale of Assets.

2.1.1 Subject to the terms and conditions hereinafter set forth, at the Closing,
Seller shall sell, assign, transfer, convey, and deliver to Purchaser, and
Purchaser shall purchase and assume from Seller, in consideration of the payment
of the Purchase Price, the Assets, free and clear of all liens, claims, charges
and encumbrances of any nature whatsoever, except for Permitted Liens.

2.1.2 The assets to be purchased hereunder (the “Assets”) shall consist of the
following, in each case owned by the Seller or Paragon, in existence on the
Closing Date wherever located, irrespective of whether actually in use on that
date:

2.1.2.1 all tangible personal property and fixtures of the Seller used primarily
in the Business including, but not limited to, those items listed on Schedule
2.1.2.1 and all assignable warranties of” third parties with respect thereto;

2.1.2.2 the real property listed on Schedule 2.1.2.2 (the “Owned Real
Property”);

2.1.2.3 all inventories of raw materials, finished goods, work in progress, and
spare parts and supplies of the Seller used primarily in the Business wherever
located and in existence on the Closing Date (“Inventory”) and Seller’s right to
receive refunds or rebates in connection with its purchase of any Inventory;

 

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2.1.2.4 all data and records related primarily to the operations of the
Business, including, without limitation, all lists of customers and suppliers
and related customer and supplier records (wherever located) of the Business,
manuals, price lists (either in hard copy form or by access to computer files),
referral sources, research and development reports and records, production
reports and records, service and warranty records, equipment logs and
maintenance records, operating guides and manuals, financial and accounting
records, creative materials, advertising materials, promotional materials,
studies, reports, correspondence and other similar documents and records and
copies of all personnel records, and all other documents of or primarily
relating to the Business);

2.1.2.5 all intangible rights and property, trademarks (including trade dress,
etc.), trademark registrations, trademark applications, service marks, service
mark registrations, service mark applications, trade names, product names,
copyrights, copyright registrations, copyright applications, United States and
foreign patent rights (including, without limitation, issued patents,
applications, divisions, continuations and continuations-in-part, reissues,
patents of addition, utility models and inventors’ certificates), maskworks and
registrations and applications or registration thereof, licenses, processes,
formulae, trade secrets, drawings, designs, inventions, whether patentable or
unpatentable and whether or not reduced to practice, manufacturing and
production processes and techniques, research and development information,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and know-how, including all rights to sue for past
infringement (together with good will pertaining thereto) used primarily in the
Business including, but not limited to, those items listed on Schedule 2.1.2.5
attached hereto (the “Intellectual Property”); and

2.1.2.6 all Contracts assumed under Section 2.5, and all outstanding offers or
solicitations made by or to Seller to enter into any prospective contract
relating exclusively to the Business;

2.1.2.7 all claims of Seller against third parties relating to the Assets,
whether choate or inchoate, known or unknown, contingent or noncontingent;

2.1.2.8 the transferable Permits;

2.1.2.9 all insurance benefits, including rights and proceeds, arising from or
relating to the Assets or the Assumed Liabilities prior to the Closing Date,
unless expended in accordance with this Agreement;

2.1.2.10 all rights of Seller relating to deposits and prepaid expenses of the
Business, claims for refunds and rights to offset in respect thereof of the
Business; and

2.1.2.11 all going concern value and goodwill of the Business.

 

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Notwithstanding the foregoing, the transfer of the Assets pursuant to this
Agreement shall not include the assumption of any liability related to the
Assets unless Purchaser expressly assumes that Liability pursuant to
Section 2.4.

2.1.3 All assets of Seller and Paragon not included in Section 2.1.2 shall
remain the property of Seller or Paragon, as the case may be, included, but not
limited to the name “Caraustar” and “Caraustar Industrial & Consumer Products
Group” or any derivations therefrom and any other trademarks or service marks
associated with the business of Seller and its Affiliates not used primarily in
the Business, cash and cash equivalents, negotiable instruments, Accounts
Receivable, the patents and trademarks listed on Schedule 2.1.3 (the “Tackle Box
IP”), the assets of Seller or Paragon not primarily related to the Business, any
contracts of Seller or Paragon not relating to the Business and expressly
including the contracts included on Schedule 3.6 which are designated as not
being assigned or assumed, the minute books, corporate seals, stock register and
short-term investments, corporate charter of Seller or Paragon, all claims for
refund of Taxes which relate to the period prior to the Closing Date, the shares
of capital stock of Seller or Paragon held in treasury, all insurance policies
and rights thereunder and all claims for refunds of insurance premiums paid by
Seller or Paragon which relate to the period following the Closing Date, all
rights of Seller or Paragon in connection with and assets of the Employee
Benefits Plans, the rights of Seller or Paragon under this Agreement and the
agreements contemplated herein and any personnel records and other documents
that Seller or Paragon is required by applicable Law to retain in their
respective possession (collectively, the “Excluded Assets”).

2.2 Consideration. In consideration of the sale, transfer, conveyance,
assignment and delivery of the Business and the Assets, the delivery and
performance under the covenant not to compete or solicit business in
Section 2.5, and in reliance upon the representations and warranties made herein
by Seller, at Closing Purchaser shall pay to Seller an amount equal to
$20,900,000 reduced to the extent severance to be paid by Seller as provided in
Section 2.7.2 is less than $900,000 (the “Purchase Price”) by wire transfer at
Closing.

2.3 Inventory Valuation at Closing. On or before Closing, the Purchaser and the
Seller shall perform a joint physical count of the Inventory. At Closing, or no
later than 14 calendar days after Closing, Seller shall prepare and deliver to
the Purchaser a statement showing the value of the Inventory of the Business as
of the Closing Date (“Inventory Statement”) along with all working papers used
to calculate such valuation. The Inventory shall be valued pursuant to GAAP or
otherwise consistent with Seller’s policies applicable to the Financial
Statements and Interim Financial Statements. In the event Purchaser does not
object by written notice to Seller to such Inventory Statement within thirty
(30) days from receipt thereof by Purchaser, the Inventory Statement shall be
deemed accepted. If Purchaser makes a timely objection to the Inventory
Statement, Purchaser and the Seller shall have fourteen (14) calendar days from
receipt of such objection by Seller in which to reach agreement as to the value
of the Inventory for the Inventory Statement. If no agreement is reached in said
fourteen (14) calendar day period, at the end of such period, Purchaser and the
Seller shall appoint KPMG LLP to arbitrate the dispute and calculate the
Inventory Statement. The determination shall be binding on the parties.
Purchaser on the one hand

 

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and Seller on the other hand shall each pay one-half of the fees and expenses of
KPMG LLP. Within fourteen (14) calendar days after the final determination of
the final Inventory value as shown on the Inventory Statement as determined by
KPMG LLP, the Seller shall pay to Purchaser by wire transfer, the amount, if
any, by which the final Inventory value is less than $7,200,000.

2.4 Allocation of Purchase Price. The Purchase Price shall be allocated among
the Assets and Covenant not to Compete as set forth on Schedule 2.4. After the
Closing, the parties shall make consistent use of the allocations specified in
Schedule 2.4 for all Tax purposes and in all filings, declarations and reports
with the Internal Revenue Service in respect thereof, including the reports
required to be filed under Section 1060 of the Code. Purchaser shall prepare and
deliver Internal Revenue Service Form 8594 to Seller within 60 days after the
Closing Date to be filed with the Internal Revenue Service. In any proceeding
related to the determination of any Taxes, neither Purchaser nor Seller shall
contend or represent that such allocation is not a correct allocation.

2.5 Liabilities of the Seller. Except for the Assumed Liabilities, Purchaser
assumes no debt, liability or obligation (whether absolute, accrued, contingent,
known, unknown or otherwise) of the Seller, its Affiliates or any other Person
and it is expressly understood and agreed that all debts, liabilities and
obligations of the Seller, its Affiliates and the Business not expressly assumed
in this Section shall remain the sole obligation of Seller and its Affiliates,
Purchaser shall assume the following liabilities of Seller and no other (the
“Assumed Liabilities”):

2.5.1 All obligations arising under purchase agreements for raw materials,
supplies, services and other products under purchase orders, releases, and
supply contracts issued to suppliers of the Seller which have been entered into
in the Ordinary Course of Business and if such obligations meet the threshold in
Section 3.6 for disclosure they are disclosed on Schedule 3.6 or entered into in
the Ordinary Course of Business after the date hereof);

2.5.2 Obligations to supply and warrant finished goods to customers of the
Seller on and after the Closing, where such obligations have been entered into
in the Ordinary Course of Business and if such obligations meet the threshold in
Section 3.6 for disclosure they are disclosed on Schedule 3.6 or entered into in
the Ordinary Course of Business after the date hereof);

2.5.3 Liabilities incurred under or in respect of (i) the Permitted Liens;
(ii) the Personal Property Leases; and (iii) the Contracts listed on Schedule
2.5.3 to the extent assigned with appropriate consents obtained in each case
where required in respect of the period commencing at the Closing Date;

2.5.4 Subject to, and to the extent of, the transfer of Transferred Employee
Benefit Assets from the Transferor Plan to the Transferee Plan pursuant to
Section 2.7.3, all liabilities incurred by Seller, its Affiliates or any other
Person employed by, or performing services for, the Seller or its Affiliates,
and any fiduciary of the Transferor Plan (i) arising by

 

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reason of any fiduciary or non-fiduciary decisions made to effectuate the
transfer of Transferred Employee Benefit Liabilities and Transferred Employee
Benefit Assets from the trustee of the Transferor Plan to the trustee of the
Transferee Plan pursuant to Section 2.7.3 of this Agreement, (ii) arising by
reason of any actions taken by Seller, its Affiliates, or any other Person
employed by, or performing services for, the Seller or its Affiliates, to
effectuate such actual transfer of assets and liabilities (iii) arising with
respect to the Transferred Employee Benefit Liabilities and the Transferred
Employee Benefit Assets, the holding thereof, and any fiduciary responsibilities
associated with such transferred assets and liabilities, after such transfer has
occurred, or (iv) any liability associated with the Transferee Plan, whether
such liability is imposed on the Purchaser, the Transferee Plan, its
fiduciaries, or any other Person; and

2.5.5 Subject to, and to the extent of, the transfer of assets and liabilities
from the Transferor Plan to the Transferee Plan as described in Section 2.7.3 of
this Agreement, all Transferred Employee Benefit Liabilities associated with any
Transferred Employee Benefit Assets actually transferred from the trustee of the
Transferor Plan to the trustee of the Transferee Plan pursuant to Section 2.7.3
of this Agreement.

2.6 Examination of Records. Between the date of this Agreement and the Closing
Date, Seller will allow Purchaser and its counsel and other representatives
reasonable access to the Real Property, all books, records, files, documents,
assets, other properties, contracts and agreements of the Business, including
without limitation records regarding environmental, occupation, safety and
health matters, relating to the Assets and the Business which may be reasonably
requested, and shall furnish Purchaser, its officers and representatives during
such period with all information concerning the Assets and the Business which
may be reasonably requested; provided that, Purchaser and its counsel and other
representatives shall not interview or otherwise communicate with (i) any
employee of the Business or (ii) any customer of the Business concerning the
acquisition of the Business without, in the case of (i) and (ii), obtaining the
prior written consent of Seller. Purchaser will conduct any such investigation
in a manner which will not unreasonably interfere with the business of Seller.

2.7 Employees and Employee Benefits.

2.7.1 Effective as of the close of business on the last business day immediately
prior to the Closing Date, Seller shall terminate the employment of each of
(i) its hourly employees of the Business and (ii) those salaried employees of
the Business designated by Purchaser in writing (the “Offered Employees”).
Purchaser shall offer employment to all Offered Employees on terms in
Purchaser’s absolute discretion. Any Offered Employee is and shall be terminable
at the will of Purchaser or as otherwise agreed to between Purchaser and Offered
Employee. Purchaser shall have the sole and complete discretion to change any of
the terms or conditions of employment, compensation or benefits relating to any
Offered Employee at any time. Purchaser shall not have any responsibility,
liability or obligation, whether primarily or as a successor employer, with
respect to any Seller Employee Liabilities. Seller hereby consents to the hiring
of the Offered Employees and waives, with respect to the

 

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employment of such Offered Employees, any claims or rights Seller may have
against Purchaser or Offered Employee under any non-competition, confidentiality
or employment agreement pertaining principally to the Business. Seller shall
promptly pay directly to each of the Offered Employees and to any Employee
Benefit Plans with respect to the Offered Employees that portion of those wages
and benefits which have been accrued on behalf of the Offered Employees as of
and through the Closing Date, said payments to be made within a reasonable time,
and Purchaser shall have or assume no liability therefore. Any Offered Employees
of Seller hired by Purchaser shall have the right to participate in such benefit
programs as may be established by Purchaser, in its sole discretion, for
similarly situated employees of the Purchaser.

2.7.2 Schedule 2.7.2 lists each salaried employee of the Business and the
compensation and severance payable to such employee as of the Closing Date. At
Closing, Purchaser may, but is not required to, offer employment to one or more
of such salaried employees. Seller represents and warrants to Purchaser that no
severance will be payable to such salaried employees under any Employee Benefit
Plan of Seller, Applicable Law or otherwise to the extent Purchaser offers such
salaried employees employment at the annual compensation listed on Schedule
2.7.2. Except as provided herein, Purchaser shall pay to Seller after Closing,
any severance required to be paid by Seller to such salaried employees in excess
of $900,000. For purposes of calculating total severance paid by Seller for
purposes of the preceding sentence, severance in excess of the amount shown on
Schedule 2.7.2 shall not be considered. Purchaser shall pay Seller such amounts
within 10 calendar days after Seller provides written support that such
severance has actually been paid. Such written support shall detail each
salaried employee paid, the date of payment, the amount actually paid, and the
amount shown for such employees on Schedule 2.7.2. In the event Seller pays
severance to a salaried employee although Purchaser made such employee an offer
of employment under the conditions provided above, such severance shall not be
considered for purposes of calculating any amounts due Seller under this
Section 2.7.2.

2.7.3 As of the Closing, the Seller shall cause each of the Offered Employees
who accept employment with the Purchaser (the “Transferred Employees”) to become
fully vested in his or her benefits accrued under the Transferor Plan. As soon
as administratively practicable following the Closing, Purchaser shall establish
and maintain or designate a previously established and maintained defined
contribution profit-sharing plan (the “Transferee Plan”) for the benefit of all
Transferred Employees and, if desired by Purchaser, other employees of
Purchaser. Upon receipt of a legal opinion from Seller’s counsel (in a form
acceptable to Seller) that the transfer of assets and liabilities provided in
this Section 2.7.3 will have no adverse effect on any of the Transferor Plan,
Seller or Caraustar Industries, Inc. and any of Seller’s or Caraustar
Industries, Inc.’s fiduciaries or trustees and a receipt of a copy of
resolutions of the Purchaser by which the Purchaser directs and authorizes the
trustee of the Transferee Plan to accept a transfer from the trustee of the
Transferor Plan of (i) the accrued benefit liabilities of the Transferor Plan
for the benefit of the Transferred Employees (the “Transferred Employee Benefit
Liabilities”), and (ii) those assets held by the trustee of the Transferor Plan
which are attributable to the Transferred Employee Benefit Liabilities (the
“Transferred Employee Benefit Assets”), the Seller shall cause the trustee of
the Transferor Plan to transfer the Transferred Employee Benefit Assets and the

 

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Transferred Employee Benefit Liabilities to the Transferee Plan. The Transferee
Plan shall satisfy the representations and warranties made by Purchaser pursuant
to Section 4.5 hereof, and shall provide all optional forms of benefit with
respect to the Transferred Employee Benefit Assets and Transferred Employee
Benefit Liabilities as were available under the Transferor Plan, except to the
extent that, in accordance with applicable Treasury regulations, an optional
form of benefit has been eliminated. The transfer of assets and liabilities
provided in this Section 2.7.3 shall satisfy the requirements of Sections
411(d)(6) and 414(1) of the Code, and shall be effectuated in accordance with
the notification requirements of Section 101 of ERISA. The transfer of assets as
provided in this Section 2.7.3 shall be made in cash, except that account
balances or portions thereof invested in a promissory note of a Transferor Plan
participant shall be transferred in kind to the Transferee Plan.

2.7.4 Seller agrees that for a period of 24 months after Closing that it will
not solicit for employment of any of the Transferred Employees.

2.8 Supplying of Financial Statements. Seller covenants to deliver to Purchaser
all financial statements of the Business prepared by Seller in the normal course
after the date of this Agreement through the Closing Date and as otherwise
requested by Purchaser.

2.9 Negotiation with Others. From and after the date of this Agreement until the
Closing or earlier termination of this Agreement pursuant to Section 7.1, Seller
shall not directly or indirectly:

2.9.1 solicit, encourage, entertain, initiate discussions or engage in
negotiations regarding any inquiries or proposals from any person or entity, or
provide any nonpublic information to or consider the merits of any inquiries or
proposals from any person or entity, or take any action to facilitate the
efforts of any person or entity, other than Purchaser, relating to the possible
acquisition of all or a substantial part of the Business (whether by way of
merger, purchase of capital stock, purchase of assets or otherwise);

2.9.2 except for information furnished to Purchaser or to third parties as
required for Seller to obtain all necessary consents in connection with the
transactions contemplated by this Agreement provide information with respect to
the Seller to any person or entity, other than Purchaser, relating to the
possible acquisition of all or a substantial part of the Business (whether by
way of merger, purchaser of capital stock, purchase of assets or otherwise);

2.9.3 enter into any agreement with any person or entity, other than Purchaser,
providing for the possible acquisition or all of a substantial part of the
Business (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise); or

2.9.4 make or authorize any statement, recommendation or solicitation in support
of any possible acquisition by any person or entity, other than Purchaser, of
all or a substantial part of the Business (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise).

 

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Seller shall notify, Purchaser of any inquiries or proposals which Seller
reasonably believes to be serious inquiries with a reasonable possibility of
fruition within 3 business days of receipt or awareness of the same by Seller.

2.10 Confidentiality. In the event the Closing does not occur, the parties’
obligations under the confidentiality agreement among them dated April 9, 2007,
shall continue in accordance with the terms of such agreement.

2.11 Covenant Not to Compete or Solicit Business.

2.11.l In furtherance of the sale of the Business to Purchaser and to protect
the value and goodwill of the Business and in consideration of the Purchase
Price, the Seller covenants and agrees that, after the Closing for a period
ending on the 5th anniversary of the Closing, Seller and its Affiliates will not
directly or indirectly (whether as principal, agent, independent contractor,
partner or otherwise) own, manage, operate, control, participate in, or
otherwise carry on, a business that is the same as, or is substantially similar
to, the Business (a “Competing Business”) in the United States.

2.11.2 Notwithstanding Section 2.11.1, (i) the ownership of 10% or less of a
publicly-traded company which is a Competing Business in the United States shall
not be a violation of Section 2.10.1 and (iii) the acquisition, directly or
indirectly, by a Person engaged in a Competing Business of 80% or more of the
Capital Stock of the Seller or any Affiliate in a stock purchase, merger,
consolidation or similar transaction shall not be a violation of Section 2.11.1.

2.11.3 In the event Seller or any Affiliate of Seller violates any of such
Person’s obligations under this Section 2.11, Purchaser may proceed against such
Person in law or in equity for such damage or other relief as a court may deem
appropriate. Seller acknowledges that a violation of this Section 2.11 may cause
Purchaser irreparable harm which may not be adequately compensated for by money
damages. Seller therefore agrees that in the event of any actual or threatened
violation of this Section 2.11, Purchaser shall be entitled, in addition to
other remedies that it may have, to a temporary restraining order and to
preliminary and final injunctive relief against Seller or such Affiliate of
Seller to prevent any violations of this Section 2.11, without the necessity of
posting a bond. The prevailing party in any action commenced under this
Section 2.11 shall also be entitled to receive reasonable attorneys’ fees and
court costs.

2.11.4 It is the intent and understanding of each party hereto that if, in any
Proceeding before any Governmental Entity or arbitrator legally empowered to
enforce this Section 2.11 any term, restriction, covenant or promise in this
Section 2.11 is found to be unreasonable and for that reason unenforceable, then
such term, restriction, covenant or promise shall be deemed modified to the
extent necessary to make it enforceable by such Governmental Entity.

 

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2.12 Access to Records after Closing.

2.12.1 For a period of 7 years after the Closing, Seller and its Representatives
shall have reasonable access to all of the books and records of the Business to
the extent that such access may reasonably be required by Seller in connection
with matters relating to or affected by the operations of the Business prior to
the Closing Date. Such access shall be afforded by Purchaser upon receipt of
reasonable advance notice and during normal business hours. Seller shall be
solely responsible for any costs or expenses incurred by it pursuant to this
Section 2.12.1. If Purchaser or any of its affiliates shall desire to dispose of
any of such books and records prior to the expiration of such seven-year period,
Purchaser shall, prior to such disposition, give Seller a reasonable
opportunity, at Seller’s expense, to segregate and remove such books and records
as Seller may select.

2.12.2 For a period of 7 years after the Closing, Purchaser and its
Representatives shall have reasonable access to all of the books and records of
the Business that are retained by the Seller to the extent that such access may
reasonably be required by Purchaser in connection with matters relating to or
affected by the operations of the Business on or after the Closing Date. Such
access shall be afforded by Seller upon receipt of reasonable advance notice and
during normal business hours. Purchaser shall be solely responsible for any
costs or expenses incurred by it pursuant to this Section 2.12.2. If Seller or
any of its affiliates shall desire to dispose of any of such books and records
prior to the expiration of such seven-year period, Seller shall, prior to such
disposition, give Purchaser a reasonable opportunity, at Purchaser’s expense, to
segregate and remove such books and records as Purchaser may select.

2.13 Operation of the Business of Seller. Between the date of this Agreement and
the Closing, Seller shall:

2.13.1 conduct the Business only in the Ordinary Course of Business;

2.13.2 except as otherwise directed by Purchaser in writing, and without making
any commitment on Purchaser’s behalf, use commercially reasonable efforts to
preserve intact its current business organization, keep available the services
of its officers, employees and agents and maintain its relations and goodwill
with suppliers, customers, landlords, creditors, employees, agents and others
having business relationships with it;

2.13.3 maintain the Assets in a state of repair and condition that complies with
Legal Requirements and is consistent with the requirements and normal conduct of
the Business except in the Ordinary Course of Business;

2.13.4 keep in full force and effect, without amendment, all material rights
relating to the Business;

2.13.5 comply with all Legal Requirements and contractual obligations applicable
to the operations of the Business;

 

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2.13.6 continue in full force and effect the insurance coverage on the Assets in
the Ordinary Course of Business;

2.13.7 cooperate with Purchaser and assist Purchaser in identifying the
Governmental Authorizations required by Purchaser to operate the Business from
and after the Closing Date and transferring existing Governmental Authorizations
of Seller to Purchaser, where permissible;

2.13.8 upon request from time to time, execute and deliver all documents and do
all other acts that may be reasonably necessary to consummate the Contemplated
Transactions;

2.13.9 maintain all books and records of Seller relating to the Business in the
Ordinary Course of Business; and

2.13.10 not materially modify any compensation paid to any of the Seller’s
employees without the express written consent of Purchaser, other than annual
salary or wage increases which are in the Ordinary Course of Business of Seller;
provided however, that Seller may not make any changes to compensation which
will increase severance obligations shown on Schedule 2.7.2.

2.14 Required Approvals. As promptly as practicable after the date of this
Agreement, Seller shall make all filings required by Legal Requirements to be
made by it in order to consummate the Contemplated Transactions. Each party
shall cooperate with the other party and its representatives with respect to all
filings that said party elects to make or, pursuant to Legal Requirements, shall
be required to make in connection with the Contemplated Transactions. Each Party
also shall cooperate with the other party and its representatives in obtaining
all material consents.

2.15 Notification. Between the date of this Agreement and the Closing, each
party shall promptly notify the other party in writing if it becomes aware of
(a) any fact or condition that causes or constitutes a breach of any of its
representations and warranties made as of the date of this Agreement, or (b) the
occurrence after the date of this Agreement of any fact or condition that would
or be reasonably likely to (except as expressly contemplated by this Agreement)
cause or constitute a breach of any such representation or warranty had that
representation or warranty been made as of the time of the occurrence of, or its
discovery of, such fact or condition. Should any such fact or condition require
any change to any Schedule delivered by a party hereunder, said party shall
promptly deliver to the other party a supplement to such Schedule specifying
such change. Such delivery shall not affect any rights of the other party under
Section 7.1 (Termination) and Article VI (Indemnification). During the same
period, each party also shall promptly notify the party of the occurrence of any
breach of any covenant of said party in this Article II or of the occurrence of
any event that may make the satisfaction of the conditions in Section 5.1
(Conditions Precedent to Obligations of Purchaser to Close) impossible or
unlikely.

 

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2.16 Prorations. Seller and Purchaser agree to prorate all taxes and lease
payments owed with respect to the Assets or with respect to any period of time
that begins before the Closing Date hereof and ends after the Closing Date.
Seller shall pay all such liabilities on or with respect to the Assets to the
extent such liabilities and obligations relate to any time period ending 12:00
a.m. on the day immediately before the Closing Date except for the Assumed
Liabilities and Purchaser shall pay all Assumed Liabilities and all liabilities
and obligations on or with respect to the Assets to the extent such liabilities
related to periods on and after the Closing Date. Any amounts owing by Purchaser
to Seller or Seller to Purchaser under this Section 2.16 shall be due and paid
at Closing. Prorations with respect to the Real Property transfers may be set
forth on a separate settlement statement or statements thereforeg.

2.17 Supply Agreement. At Closing, the Purchaser and Seller shall execute a
supply agreement in the form of Exhibit 2.17 (the “Supply Agreement”).

2.18 Transition Services Agreement. At Closing, the Purchaser and Seller shall
execute a transition services agreement in the form of Exhibit 2.18 (the
“Transition Services Agreement”).

2.19 Guaranty Agreement. At Closing, the Seller shall deliver the guaranty of
Caraustar Industries, Inc. in the form of Exhibit 2.19 (the “Guaranty
Agreement”).

2.20 Title Insurance and Surveys. Seller shall use commercially reasonable
efforts to assist Purchaser in obtaining the Title Commitments, Title Policies
and Surveys in form and substance as set forth in Section 5.1.11, 5.1.12 and
5.1.13 of this Agreement, within the time periods set forth therein, including
removing from title any Liens which are not Permitted Liens. Seller shall
provide the Title Company with any customary owner’s affidavits, to delete
exceptions for parties in possession (other than tenants under leases) and such
other customary gap and owner’s affidavits as reasonably requested by the Title
Company to issue the Title Policies in forms reasonably acceptable to Seller.
Purchaser will pay all title exam fees, commitment related fees and charges, the
cost of all title insurance policies, and related Title Company charges, and the
costs of recording any mortgage or security instruments of Purchaser’s lender
and any such lender’s title policy and endorsements.

2.21 Antitrust. Each party will cooperate in good faith with the other (i) in
resolving any inquiry, investigation, or litigation regarding the legality of
the Contemplated Transactions under any antitrust law pending or threatened on
the part of any Governmental Entity, including the U.S. Department of Justice,
the Federal Trade Commission, and state attorney general, or any other unit of
government, and (ii) in resolving any litigation regarding the legality of the
Contemplated Transactions under any antitrust law pending or threatened on the
part of any private party.

 

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Each party will consult with counsel for the other party as to, and permit such
counsel to participate in, any investigation or litigation referred to in this
Section 2.20 above. Each party, acting through outside counsel, will
(i) promptly notify the other party of any communication to that party from any
Governmental Entity, and subject to applicable law, permit the other party to
review in advance any proposed written communication to such Governmental Entity
and incorporate the other party’s reasonable comments, (ii) not agree to
participate in any substantive meeting or discussion with any such Governmental
Entity in respect to any inquiry, investigation, or litigation concerning the
Contemplated Transactions unless it consults with the other party and provide it
the opportunity to attend, and (iii) furnish the other party with copies of all
correspondence, filings and written communications between them and their
Affiliates and their respective representatives on the one hand, and any such
Governmental Entity or its respective staff on the other hand, with respect to
the Transactions. The obligations of this Section shall survive the closing of
the Contemplated Transactions.

2.22 Consents. Notwithstanding anything in this Agreement to the contrary, this
Agreement shall not constitute an agreement to sell, assign, transfer, convey or
deliver any Asset or any benefit arising under or resulting from such Asset if
the sale, assignment, transfer, conveyance or delivery thereof, without the
consent of a third party, (i) would constitute a breach or other contravention
of the rights of such third party, (ii) would be ineffective with respect to any
party to a contract concerning such Asset, or (iii) would, upon transfer, in any
way adversely affect the rights of Purchaser under such Asset. If the sale,
assignment, transfer, conveyance or delivery by Seller or Paragon to, or any
assumption by Purchaser of, any interest in, or liability under, any Asset
requires the consent of a third party, then such sale, assignment, transfer,
conveyance, delivery or assumption shall be subject to such consent being
obtained. To the extent that any consent in respect of a Restricted Contract, or
any other Asset shall not have been obtained on or before the Closing Date,
Seller shall continue to use commercially reasonable efforts to obtain any such
consent after the Closing Date until such time as it shall have been obtained.
Seller shall cooperate with Purchaser in any economically feasible arrangement
proposed by Purchaser to provide that Purchaser shall receive the interest of
Seller in the benefits under such Restricted Contract or other Asset. As soon as
a consent for the sale, assignment, transfer, conveyance, delivery or assumption
of a Restricted Contract or other Asset is obtained, Seller and Paragon, as the
case may be, shall promptly assign, transfer convey and deliver such Restricted
Contract or Asset to Purchaser, and Purchaser shall assume the Assumed
Liabilities under any such Restricted Contract from and after the date of
assignment to Purchaser pursuant to a special-assignment and assumption
agreement acceptable to Purchaser. Nothing contained in this Section 2.22 or
elsewhere in this Agreement shall be deemed a waiver by Purchaser of its rights
to have received on the Closing Date an effective assignment of all of the
Assets or of the covenant of Seller to obtain all consents, not shall this
Section 2.22 or any other provision of this Agreement be deemed to constitute an
agreement to exclude from the Assets any contracts or other Asset as to which a
consent may be necessary.

2.23 Incentive Payments. On or before October 22, 2007, Seller shall provide to
Purchaser (i) a schedule of all incentive payments payable to Transferred
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otherwise due for the period through the Closing Date due under the Seller’s
Employee Benefit Plans, (ii) the supplying documentation for such schedule, and
(iii) cash in immediately available funds in an amount equal to the total of
such payments plus the employer’s share of any withholding taxes due on such
amounts. Purchaser shall pay the amounts shown on the schedule to the
Transferred Employees on the next scheduled pay day after receipt of such items.

2.24 Equipment in Ashland Ohio. Within 30 days after Closing, the Seller shall
deliver to the Orrville, Ohio facility or the St. Paris, Ohio facility (at the
direction of Purchaser) the Angelas 69P seamer which is currently stored at
Seller’s Ashland, Ohio location.

2.25 Rebates. Rebates due under Contracts with customers of the Seller set forth
on Schedule 2.25 due for a period of time which includes the Closing Date shall
be pro-rated between the Seller and Purchaser based on volume purchased prior to
and after Closing. After Purchaser pays the customers such rebate, it shall send
Seller its calculation of the amount of the pro-rated rebate due from Seller
along with its calculations and supporting documentation. Seller shall pay
Purchaser within 30 days of Seller’s receipt of Purchaser’s notice of Seller’s
amount due (the “Rebate Notice”). If Seller makes an objection within 30 days of
its receipt of the Rebate Notice, Purchaser and the Seller shall have fourteen
(14) calendar days from receipt of such objection by Purchaser in which to reach
agreement as to the rebate due and payable by Seller under the Contracts with
customers in affect as of the Closing. If no agreement is reached in said
fourteen (14) calendar day period, at the end of such period, Purchaser and the
Seller shall appoint KPMG LLP to arbitrate the dispute and calculate the rebate
due and payable by Seller pursuant to this Section 2.25. The determination shall
be binding on the parties. Purchaser on the one hand and Seller on the other
hand shall each pay one-half of the fees and expenses of KPMG LLP. Within
fourteen (14) calendar days after the final determination of the rebate amount
due from Seller as determined by KPMG LLP, the Seller shall pay to Purchaser by
wire transfer, the amount owed by Seller for the rebates pursuant to this
Section 2.25. Notwithstanding anything to the contrary, the calculation of
Seller’s pro-rated rebate amount calculated hereunder shall only be in
accordance with the terms of the respective customer contracts in effect as of
the Closing and notwithstanding any modifications made to said contracts
post-Closing. Notwithstanding anything to the contrary, the pro-rated rebate
amounts due from Seller to customers hereunder shall only be calculated based on
product produced for customers at facilities being sold to Purchaser pursuant to
this Agreement and not aggregated with product produced and sold to customers at
other facilities of Purchaser or its Affiliates.

2.26 Forms and Inventory. For a period not to exceed 60 days after Closing, the
Purchaser may continue to use forms and packing materials which may be
pre-printed with “Caraustar” or any derivatives thereof.

 

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III. REPRESENTATIONS AND WARRANTIES OF SELLER.

Seller represents and warrants to Purchaser as follows:

3.1 Organization and Standing. Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and has
the full corporate power and authority to carry on the Business in the places
and as it is now being conducted and to own and lease the Assets and perform all
of its obligations under the Contracts. Seller is duly qualified or licensed as
a foreign corporation authorized to do business in each of the states in which
the Business is conducted, except where such non-qualification would not be
reasonably expected to have a Material Adverse Effect on the Business.

3.2 Authority and Status. Seller has the power, capacity and authority to
execute and deliver this Agreement, to perform hereunder, and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Seller of this Agreement and the agreements and transactions contemplated hereby
have been duly authorized by the Seller. This Agreement and each and every
agreement, document and instrument to be executed, delivered and performed by
Seller in connection herewith, constitute or will, when executed and delivered,
constitute the valid and legally binding obligations of the respective party,
enforceable against the respective party in accordance with their respective
terms, except as enforceability may be limited by applicable equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws from time to time in effect affecting the enforcement of creditors’ rights
generally.

3.3 Liabilities Which Could Create a Lien. There shall be as of the Closing Date
no unsatisfied debts, liabilities or obligations of any nature (whether
absolute, accrued, contingent, determined, undetermined, known, unknown, or
otherwise) of the Seller, that, if not satisfied, could result in a Lien upon
the Assets, except for a Permitted Lien.

3.4 Ownership and Condition of Assets. Seller has good title to, or valid
leasehold interest in, all of the Assets, in each case free and clear of any
liens, claims, charges, options, rights of tenants or other encumbrances, except
Permitted Liens. Except as set forth in Schedule 3.4, all of the Assets, and the
assets which are subject to the Personal Property Leases, are in good operating
condition having regard to the use and age thereof, are properly maintained,
reasonable wear and tear excepted, are useable in the Ordinary Course of
Business and are in compliance in all material respects with all Applicable Law.
No Person has a written or oral agreement, option, understanding or commitment
or any right or privilege capable of becoming such for the purchase or other
acquisition from the Seller of any of the Assets. The Seller has made available
to the Purchaser all existing data regarding the operating and maintenance
history of the Assets, and the assets which are subject to the Personal Property
Leases.

3.5 Agreement Does Not Violate Other Instruments. The execution and delivery of
this Agreement and each and every agreement, document and instrument to be
executed, delivered and performed by Seller does not, and the consummation of
the transactions contemplated hereby will not, violate any provision of the
Organization Documents of Seller or violate or constitute an occurrence of
default under any provision of, or conflict with, or result in acceleration of
any obligation under, or give rise to a right by any party to terminate its
obligations under, any mortgage, deed of trust, conveyance to secure debt, note,
loan, lease, agreement, instrument, or any order, judgment, decree or other
arrangement to which Seller is a party or is bound or by which the Assets or the
Business are affected.

 

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3.6 Contracts, Etc. Schedule 3.6 attached hereto consists of a true and complete
list of each Contract as follows:

3.6.1 any agreement (or group of related agreements) for the lease of personal
property to or from any Person (“Personal Property Leases”);

3.6.2 any agreement (or group of related agreements) for the purchase or sale of
raw materials, commodities, supplies, products, or other personal property, or
for the furnishing or receipt of services, the performance of which will extend
over a period of more than one year or involve consideration in excess of
$50,000;

3.6.3 any agreement concerning a partnership or joint venture;

3.6.4 any agreement (or group of related agreements) under which it has created,
incurred, assumed, or guaranteed any indebtedness for borrowed money, or any
capitalized lease obligation, in excess of $50,000 or under which it has imposed
a Lien on any of the Assets;

3.6.5 any agreement concerning confidentiality or non-competition;

3.6.6 any profit sharing, stock option, stock purchase, stock appreciation,
deferred compensation, severance, or other plan or arrangement for the benefit
of its current or former Business Employees;

3.6.7 any collective bargaining agreement covering any current or former
Business Employee (the “Collective Bargaining Agreements”);

3.6.8 any agreement for the employment of any Business Employee on a full-time,
part-time, consulting, or other basis providing severance benefits;

3.6.9 any agreement under which it has advanced or loaned any amount to any
Business Employee outside the Ordinary Course of Business; or

3.6.10 any other agreement (or group of related agreements) the performance of
which involves consideration in excess of $50,000.

Seller has delivered to Purchaser a correct and complete copy of each written
agreement listed in Schedule 3.6 and a written summary setting forth the terms
and conditions of each oral agreement referred to in Schedule 3.6 . With respect
to each such agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (B) the agreement will continue

 

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to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) the Seller is not in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default, or
permit termination, modification, or acceleration, under the agreement, (D) to
the Seller’s Knowledge no other party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
agreement; and (E) no party has repudiated any provision of the agreement.

3.7 Patents, Trademarks, Tradenames, Etc. Seller owns or has the right to use
all of the Intellectual Property free of any liens or security interests. To the
Seller’s Knowledge, the conduct of the Business as now being conducted does not
conflict with or violate any valid rights of third parties, including any
patents, trademarks, trade names, copyrights or trade secrets of others. Seller
has not received any written notice of a conflict with asserted rights of others
in connection with any patent, trademark, trade name, copyright, trade secret or
other item of Intellectual Property. To the extent Seller holds registrations of
trademarks, copyrights or issued patents, Seller has filed all appropriate
renewals, extensions, affidavits of continued use and/or incontestability, and
has paid all fees associated therewith, necessary to maintain such Intellectual
Property. To the Seller’s Knowledge, none of the Intellectual Property has been
or is being infringed by a third party. Seller is not obligated to pay any
amount, whether it is a royalty, license fee or other payment to any Person in
order to use any of the Intellectual Property.

3.8 Litigation. Except as disclosed on Schedule 3.8, there is no suit, action,
proceeding, claim or investigation pending, or to the Seller’s Knowledge
threatened against, or affecting the Assets or the Business at law or in equity,
or before or by any Governmental Entity, whether or not fully covered by
insurance, and (b) to the Seller’s Knowledge, it is not in default concerning
any order, writ, injunction or decree of any Governmental Entity, applicable to
Seller or the Assets or the Business.

3.9 Environmental Matters. Except as set forth in Schedule 3.9 attached hereto,
(i) neither the Seller nor any Affiliate of Seller has generated, manufactured,
stored, transported, treated, recycled, disposed of or otherwise handled in any
way any Hazardous Materials at any of the Real Property except in material
compliance with Environment Laws, (ii) the Seller has not and to Seller’s
Knowledge, no other person, has caused any material release, threat of release
or unlawful discharge, of Hazardous Materials into the environment relating to
or resulting from the operation of the Business or the Assets or otherwise
originating from any of the Real Property except where such release, or threat
of release or discharge was in compliance with all Environmental Laws and other
applicable laws, (iii) the Seller has not, and to Seller’s Knowledge, no other
person has received any written notice, complaint, claim, suit proceeding,
investigation, order or action from any Person, relating to Hazardous Materials
or environmental problems, impairments or Environmental Liabilities or advising
the Seller that it is potentially responsible for response costs or remediation
with respect to a release or threatened release, discharge, spillage or disposal
of any Hazardous Materials as the result of operation of the Business or related
in any way

 

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to any of the Real Property or the Assets, (iv) to Seller’s Knowledge, there are
no other locations where any Hazardous Materials generated by the Seller from
the operation of the Business or any of the Owned Real Property are reasonably
expected to result in an Environmental Liability (v) to Seller’s Knowledge,
there are not and there have been no underground storage tanks on any of the
Real Properly, (vi) to Seller’s Knowledge, there are no, and there have been no,
open dumps or landfills on any of the Real Properly, and (vii) none of the Owned
Real Property, and, to the Seller’s Knowledge, none of the Leased Real Property
nor any other Asset is subject to any private or governmental lien or claim
relating to Hazardous Materials or Environmental Liabilities, (viii) neither the
Seller nor any Affiliate of Seller nor, to Seller’s Knowledge, any other Person
has filed any notice under any Environmental Law in connection with the
operation of the Business by the Seller indicating past or present treatment,
storage or disposal of a Hazardous Material at any of the Real Property or solid
waste or reporting a spill or release of any Hazardous Material into the
environment at any of the Real Property in violation of any applicable
Environmental Law; and (ix) to the Seller’s Knowledge, no building or other
improvement included in any of the Real Property contains any exposed, friable
asbestos-containing materials.

3.10 Financial Statements. Attached hereto as Schedule 3.10 are true, correct
and complete copies of certain internally generated financial statements as of
and for the periods ending December 31, 2004, December 31, 2005 and December 31,
2006 consisting of (i) an unaudited balance sheet for the Business, as of
December 31, 2004, December 31, 2005 and December 31, 2006 and (ii) statements
of income for the 12-month periods ending on December 31, 2004, December 31,
2005 and December 31, 2006 (the “Financial Statements”). Attached to Schedule
3.10 are also interim financial statements for the 8- month period ending on
August 30, 2007 (the “Interim Financial Statements”). The Financial Statements
present, or will present, fairly in accordance with GAAP the financial condition
for the Business as of each such date and results of operation for the Business
for each such period, are consistent with the books and records of the Seller
and disclose all liabilities of the Seller existing as of the dates thereof
which are of a nature required to be reflected in financial statements prepared
in accordance with GAAP. The Interim Financial Statements present, or will
present, fairly in accordance with GAAP the financial condition for the Business
as of each such date and results of operation for the Business for the
applicable period, and are consistent with the books and records of Seller.

3.11 Absence of Changes. Since June 30, 2007, the Seller has not, except as
disclosed on Schedule 3.11 attached hereto:

3.11.1 transferred, assigned, conveyed or liquidated any of the Assets or any
portion of the Business or entered into any transaction, other than the
transactions contemplated by this Agreement, or incurred any liability or
obligation which would affect the Assets or be included in the Assumed
Liabilities, other than in the Ordinary Course of Business;

 

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3.11.2 suffered any materially adverse change in the Business, operations, or
financial condition in the Business or become aware of any event which would be
reasonably expected to result in any such material adverse change;

3.11.3 suffered any destruction, damage or loss, relating to the Assets or the
Business whether or not covered by insurance;

3.11.4 committed, suffered, permitted or incurred any default in any liability
or obligation which could impose a lien or other encumbrance on any of the
Assets;

3.11.5 made or agreed to any change in the terms of any contract or instrument
to which it is a party which is included in the Assumed Liabilities;

3.11.6 waived, cancelled, sold or otherwise disposed of, for less than the face
amount thereof, any material claim or right which it has against others valued
in excess of $10,000 or other than in the Ordinary Course of Business;

3.11.7 paid, agreed to pay or incurred any obligation for any payment for, any
contribution or other amount to, or with respect to, any Employee Benefit Plan
covering any of the Business Employees other than in the Ordinary Course of
Business consistent with prior practice, or paid any bonus to any of the
Business Employees other than in the Ordinary Course of Business consistent with
prior practice, or made any increase in the pension, retirement or other benefit
plans or policies of the Business Employees other than in the Ordinary Course of
Business;

3.11.8 committed, suffered, permitted or incurred any transaction or event which
would increase Seller’s tax liability for any prior taxable year;

3.11.9 incurred any other material liability or obligation or entered into any
material transaction other than in the Ordinary Course of Business; or

3.11.10 permitted or allowed any of the Assets to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction, or charge of any
kind, other than Permitted Liens.

3.12 Real Property.

3.12.1 Owned Real Property. Except as disclosed on Schedule 3.12.1 with respect
to the Owned Real Property:

3.12.1.1 Seller has good and marketable fee simple title to the Owned Real
Property, free and clear of all Liens and Encumbrances, except Permitted Liens;

 

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3.12.1.2 Seller has not leased or otherwise granted to any Person the right to
use or occupy the Owned Real Property or any portion thereof;

3.12.1.3 There are no outstanding options, rights of first offer or rights of
first refusal to purchase the Owned Real Property or any portion thereof or
interest therein granted by Seller.

3.12.2 Leased Real Property. Schedule 3.12.2 sets forth the address of each
parcel of Leased Real Property, and a true and complete list of all Leases for
each such Leased Real Property (including the date and name of the parties to
such Lease document) (the “Real Property Leases”). Seller has delivered to
Purchaser a true and complete copy of each Real Property Lease, and in the case
of any oral lease, a written summary of the material terms of such lease. With
respect to each of such leases:

3.12.2.1 such lease is legal, valid, binding, enforceable and in full force and
effect;

3.12.2.2 Seller’s possession and quiet enjoyment of the Leased Real Property
under such Real Property Lease has not been disturbed and there are no disputes
with respect to such Real Property Lease;

3.12.2.3 neither Seller nor, to Seller’s Knowledge, any other party to the Real
Property Lease is in breach or default under such Real Property Lease, and to
Seller’s Knowledge no event has occurred or circumstance exists which, with the
delivery of notice, the passage of time or both, would constitute such a breach
or default, or permit the termination, modification or acceleration of rent
under such Real Property Lease;

3.12.2.4 no security deposit or portion thereof deposited with respect to any
Real Property Lease has been applied in respect of a breach or default under
Real Property Leases which has not been re-deposited in full;

3.12.2.5 Seller does not owe any brokerage commissions or finder’s fees with
respect to any Real Property Lease;

3.12.2.6 the other party to any Real Property Lease is not an Affiliate of the
Seller;

3.12.2.7 the Seller has not subleased, licensed or otherwise granted any Person
the right to use or occupy any Leased Real Property or any portion thereof;

3.12.2.8 there are no presently effective collateral assignments by Seller or
grants by Seller of any other Lien in any Real Property Lease or any interest
therein; and

 

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3.12.2.9 there are no Liens on the Seller’s estate or interest created by any
Real Property Lease.

3.12.3 General.

3.12.3.1 The Owned Real Property and the Leased Real Property comprises all of
the real property used in the Business.

3.12.3.2 All buildings, structures, fixtures, building systems and equipment,
and all components thereof, including the roof, foundation, load-bearing walls,
and other structural elements thereof; heating, ventilation, air conditioning,
mechanical, electrical, plumbing and other building systems, environmental
control, remediation and abatement systems; sewer, storm, and waste water
systems, irrigation and other water distribution systems, parking facilities,
fire protection, security and surveillance systems, and telecommunications,
computer, wiring, and cable installations, included in the Real Property (the
“Improvements”) are in operating condition and repair and sufficient for the
operation of the Business as operated by the Seller immediately prior to
Closing. There are no structural deficiencies or latent defects affecting any of
the Improvements and, to Seller’s Knowledge, there are no facts or conditions
affecting any of the Improvements which would, individually or in the aggregate,
interfere in any respect with the use or occupancy of the Improvements or any
portion thereof in the operation of the Business as currently conducted thereon.

3.12.3.3 There is no condemnation, expropriation or other proceeding in eminent
domain, pending or, to Seller’s Knowledge, threatened, affecting the Real
Property or any portion thereof or interest therein. There is no injunction,
decree, order, writ or judgment outstanding, nor any claims, litigation,
administrative actions or similar proceedings, pending or threatened, relating
to the ownership, lease, use or occupancy of the Real Property or any portion
thereof, or the operation of the Business as currently conducted thereon.

3.12.3.4 To Seller’s Knowledge, the Real Property is in compliance with all
applicable building, zoning, subdivision, health and safety and other land use
laws, including The Americans with Disabilities Act of 1990, as amended, and all
insurance requirements affecting the Real Property (collectively, the “Real
Property Laws”), and the current use and occupancy of the Real Property and
operation of the Business thereon do not violate any Real Property Laws. The
Seller has not received any notice of violation of any Real Property Law and
there is no basis for the issuance of any such notice or the taking of any
action for such violation. To the Seller’s Knowledge, there is no pending or
anticipated change in any Real Property Law that will materially impair on the
ownership, lease, use or occupancy of the Real Property or any portion thereof
in the continued operation of the Business as currently conducted thereon.

3.12.3.5 All water, oil, gas, electrical, steam, compressed air,
telecommunications, sewer, storm and waste water systems and other utility
services or systems

 

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for the Real Property have been installed and are operational and sufficient for
the operation of the Business as currently conducted thereon. Each such utility
service enters the Real Property from an adjoining public street or valid
private easement in favor of the supplier of such utility service or appurtenant
to the Real Property, and is not dependent for its access, use or operation on
any land, building, improvement or other real property interest which is not
included in the Real Property.

3.12.3.6 Except as provided on Schedule 3.12.3.6, all certificates of occupancy,
permits, licenses, franchises, approvals and authorizations (collectively, the
“Real Property Permits”) of all governmental authorities, board of fire
underwriters, association or any other entity having jurisdiction over the Real
Property, which are required to be held by Seller for its use or occupy the Real
Properly have been issued and are in full force and effect. Schedule 3.12.3.6
lists all material Real Property Permits held by the Seller with respect to the
Real Property. The Seller has delivered to Purchaser a true and complete copy of
all Real Property Permits. The Seller has not received any notice from any
governmental authority or other entity having jurisdiction over the Real
Property threatening a suspension, revocation, modification or cancellation of
any Real Property Permit and, to the Seller’s Knowledge, there is no basis for
the issuance of any such notice or the taking of any such action.

3.12.3.7 To Seller’s Knowledge, the classification of the Real Property under
applicable zoning laws, ordinances and regulations permits the use and occupancy
of such parcel and the operation of the Business as currently conducted thereon,
and permits the Improvements located thereon as currently constructed, used and
occupied. To Seller’s Knowledge, Seller’s use or occupancy of the Real Property
or any portion thereof or the operation of the Business as currently conducted
thereon is not dependent on a “permitted non-conforming use” or “permitted
non-conforming structure” or similar variance, exemption or approval from any
governmental authority.

3.12.3.8 To Seller’s Knowledge, the current use and occupancy of the Real
Property and the operation of the Business as currently conducted thereon do not
violate any easement, covenant, condition, restriction or similar provision in
any instrument of record or other unrecorded agreement affecting the Real
Property (the “Encumbrance Documents”). The Seller has not received any written
notice of violation of any Encumbrance Documents, and, to the Seller’s
Knowledge, there is no basis for the issuance of any such notice or the taking
of any action for such violation.

3.13 Solvency.

3.13.1 Seller is not now insolvent and will not be rendered insolvent by any of
the Contemplated Transactions. As used in this section, “insolvent” means that
the sum of the debts and other probable liabilities of Seller exceeds the
present fair saleable value of Seller’s assets.

 

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3.13.2 Immediately after giving effect to the consummation of the Contemplated
Transactions: (i) Seller will be able to pay its liabilities as they become due
in the usual course of its business; (ii) Seller will not have unreasonably
small capital with which to conduct its present or proposed business;
(iii) Seller will have assets (calculated at fair market value) that exceed its
liabilities; and (iv) taking into account all pending and threatened litigation,
final judgments against Seller in actions for money damages are not reasonably
anticipated to be rendered at a time when, or in amounts such that, Seller will
be unable to satisfy any such judgments promptly in accordance with their terms
(taking into account the maximum probable amount of such judgments in any such
actions and the earliest reasonable time at which such judgments might be
rendered) as well as all other obligations of Seller. The cash available to
Seller, after taking into account all other anticipated uses of the cash, will
be sufficient to pay all such debts and judgments promptly in accordance with
their terms.

3.14 Applicable Laws and Permits. Except as listed in Schedule 3.14: (i) Seller
has full power, authority and legal right and have all licenses, permits,
qualifications and other documentation necessary to own and/or operate the
Assets and to carry on the Business as being conducted on the date hereof;
(ii) the Business is now being conducted and the Assets are being owned and/or
operated in compliance in all material respects with all applicable laws,
ordinances, rules and regulations of any Governmental Entity, all applicable
court or administrative agency decrees, awards and orders and all such licenses,
permits, qualifications and other documentation, except for any conflicts,
defaults or violations that, individually or in the aggregate, would not cause
the Business to lose any material benefit or incur any material liability, and
(iii) Seller has received no notice of a violation of any such laws, ordinances,
rules, regulations, licenses, permits, qualifications or documentation or a
liability or default thereunder.

3.15 Labor Matters.

3.15.1 Except as listed in Schedule 3.15, Seller: (i) has not experienced any
organized slowdown, organized work interruption, strike or work stoppage by
employees of Seller engaged in the Business; (ii) is not a party to, nor is it
obligated by, any oral or written agreement, collective bargaining or otherwise,
regarding the rates of pay or working conditions of any of the employees of
Seller engaged in the Business; and (iii) is not obligated under any agreement
to recognize or bargain with any labor organization or union on behalf of the
employees of the Business.

3.15.2 Except as listed in Schedule 3.15: (i) Seller, with respect to the
Business, nor any of its officers, directors, or employees has not received
written notice that it has been charged or, to Seller’s Knowledge, threatened
with the charge of any unfair labor practice with respect to the Business; and
(ii) Seller, with respect to the Business, is in material compliance with all
applicable federal, state and foreign laws and regulations concerning the
employer-employee relationship and with all agreements relating to the
employment of Seller’s employees, including applicable wage and hour laws,
workers’ compensation laws, unemployment laws and social security laws.

 

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3.15.3 Except as listed in Schedules 3.15: (i) all officers, employees, and
agents of Seller engaged in the Business are employees at-will and for
indefinite terms, and (ii) there are no outstanding agreements or arrangements
with respect to severance payments.

3.16 Employee Benefits Plans.

3.16.1 Schedule 3.16 lists each Employee Benefit Plan that Seller or any of its
Affiliates maintains, to which Seller or any of its Affiliates contributes or
has any obligation to contribute, or with respect to which Seller or any of its
Affiliates has any Liability or potential Liability which includes any Business
Employee as a participant or eligible employee.

3.16.1.1 Each such Employee Benefit Plan (and each related trust, insurance
contract, or fund) has been maintained, funded and administered in all material
respects in accordance with the terms of such Employee Benefit Plan and the
terms of any applicable collective bargaining agreement and complies in form and
in operation in all material respects with the applicable requirements of ERISA,
the Code, and other applicable laws.

3.16.1.2 All required reports and descriptions (including Form 5500 annual
reports, summary annual reports, and summary plan descriptions) have been timely
filed and/or distributed in accordance with the applicable requirements of ERISA
and the Code with respect to each such Employee Benefit Plan. The requirements
of COBRA have been met with respect to each such Employee Benefit Plan and each
Employee Benefit Plan maintained by an ERISA Affiliate which is an Employee
Welfare Benefit Plan subject to COBRA.

3.16.1.3 All contributions (including all employer contributions and employee
salary reduction contributions) that are due have been made within the time
periods prescribed by ERISA and the Code to each such Employee Benefit Plan that
is an Employee Pension Benefit Plan and all contributions for any period ending
on or before the Closing Date which are not yet due have been made to each such
Employee Pension Benefit Plan or accrued in accordance with the past custom and
practice of Seller. All premiums or other payments for all periods ending on or
before the Closing Date have been paid with respect to each such Employee
Benefit Plan that is an Employee Welfare Benefit Plan.

3.16.1.4 Each such Employee Benefit Plan which is intended to meet the
requirements of a “qualified plan” under Code §401 (a) has either obtained from
the Internal Revenue Service (“IRS”) a favorable determination letter as to its
qualified status under the Code, or he expiration of the requisite period under
applicable regulations promulgated by the IRS under the Code (“Treasury
Regulations”) or IRS pronouncements in which to apply for such determination
letter and to make any amendments necessary to obtain a favorable determination
letter has not occurred or has been established under a prototype plan for which
an IRS opinion letter has been obtained by the plan sponsor and is valid to the
adopting employer, and nothing has occurred since the date of such determination
that could adversely affect the qualified status

 

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of any such Employee Benefit Plan. All such Employee Benefit Plans have been or
will be timely amended for the requirements of the Tax legislation commonly
known as “GUST” and have been or will be submitted to the Internal Revenue
Service for a favorable determination letter on the GUST requirements within the
remedial amendment period prescribed by GUST.

3.16.1.5 To the Seller’s Knowledge, there have been no Prohibited Transactions
with respect to any such Employee Benefit Plan or any Employee Benefit Plan
maintained by an ERISA Affiliate. To the Seller’s Knowledge, no Fiduciary has
any liability for breach of fiduciary duty or any other failure to act or comply
in connection with the administration or investment of the assets of any such
Employee Benefit Plan. To Seller’s Knowledge, no action, suit, proceeding,
hearing, or investigation with respect to the administration or the investment
of the assets of any such Employee Benefit Plan (other than routine claims for
benefits) is pending or threatened.

3.16.1.6 Seller has delivered to Purchaser correct and complete copies of the
plan documents and summary plan descriptions, the most recent determination
letter received from the Internal Revenue Service, the most recent annual report
(Form 5500, with all applicable attachments), and to the extent applicable, all
related trust agreements, insurance contracts, and other funding arrangements
which implement each such Employee Benefit Plan.

3.16.2 With respect to each Employee Benefit Plan that Seller, any of its
Affiliates, and any ERISA Affiliate maintains, to which any of them contributes
or has any obligation to contribute, or with respect to which any of them has
any Liability or potential Liability which includes any Business Employee as a
participant or eligible employee:

3.16.2.1 No such Employee Benefit Plan that is an Employee Pension Benefit Plan
has been completely or partially terminated or been the subject of a Reportable
Event. To the Seller’s Knowledge, no proceeding by the PBGC to terminate any
such Employee Pension Benefit Plan has been instituted or threatened. The market
value of assets under each such Employee Benefit Plan that is an Employee
Pension Benefit Plan equals or exceeds the present value of all vested and
non-vested Liabilities thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination.

3.16.2.2 Neither Seller nor any of its Affiliates has incurred any Liability to
the PBGC (other than with respect to PBGC premium payments not yet due) or
otherwise under Title IV of ERISA or under the Code with respect to any such
Employee Benefit Plan which is an Employee Pension Benefit Plan.

3.16.3 Neither Seller, nor any of its Affiliates, nor any ERISA Affiliate
contributes to, has any obligation to contribute to, or has any Liability
(including withdrawal liability as defined in ERISA §4201) under or with respect
to any Multiemployer Plan which covers any Business Employee.

 

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3.16.4 Neither Seller nor any of its Affiliates maintains, contributes to or has
an obligation to contribute to, or has any Liability or potential Liability with
respect to, any Employee Welfare Benefit Plan providing health or life insurance
or other welfare-type benefits for current or future retired or terminated
Business Employees other than in accordance with COBRA,

3.17 Employees. The information provided to Purchaser regarding Business
Employees, including, without limitation, information pertaining to leaves of
absence or layoff status; name; job title; date of hiring or engagement; date of
commencement of employment or engagement; current compensation paid or payable
and any change in compensation since September 14, 2007, sick and vacation leave
that is accrued but unused; and service credited for purposes of vesting and
eligibility to participate under any Employee Benefit Plan, or any other
employee or director benefit plan is accurate and complete in all material
respects.

3.17.1 Seller will not violate by consummating the Contemplated Transactions the
Worker Adjustment and Retraining Notification Act or any similar state or local
Legal Requirement (“Plant Closing Law”).

3.17.2 To the Seller’s Knowledge, no Business Employee is bound by any contract
that purports to limit the ability of such Business Employee (i) to engage in or
continue or perform any conduct, activity, duties or practice relating to the
Business or (ii) to assign to Seller or to any other Person any rights to any
invention, improvement, or discovery. To the Seller’s Knowledge, no former or
current employee of the Business is a party to, or is otherwise bound by, any
contract that in any way adversely affected, affects, or will affect the ability
of Seller or Purchaser to conduct the Business as heretofore carried on by
Seller.

3.18 Taxes. Seller has no liability with respect to Taxes that would have a
Material Adverse Effect upon Purchaser’s right, title and interest in or
Purchaser’s right to use or enjoy (free and clear of any Lien or restriction,
other than Permitted Liens) any of the Assets, any Assumed Liabilities or any
aspect of the Business acquired by Purchaser pursuant to this Agreement. Except
for the Permitted Liens, Seller has not received any notice of any claim,
whether pending or threatened, for Taxes which would create a Lien on the Assets
or could be reasonably expected to have a Material Adverse Effect on the
Business.

3.19 Inventory. The Inventory consists of raw materials and supplies,
manufactured and processed parts, work in process, and finished goods, all of
which is merchantable and fit for the purpose for which it was procured or
manufactured, and none of which is slow-moving, obsolete, damaged, or defective,
subject only to the reserve for inventory write-down set forth on the face of
the Financial Statements (rather than in any notes thereto) as adjusted for
operations and transactions through the Closing Date in accordance with the past
custom and practice of Seller.

 

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3.20 Undisclosed Liabilities. Seller does not have any liability relating to the
Business (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due, including any liability for
Taxes) that could result in a Lien on the Assets (except for Permitted Liens).

3.21 Licenses and Permits; Compliance With Law. Except as disclosed on Schedule
3.21, the Seller holds all licenses, certificates, permits, franchises and
rights from all appropriate federal, state or other public authorities necessary
for the conduct of the Business except for those which would not have a Material
Adverse Effect on the Business and the use of the Assets as currently conducted
and used by Seller. Seller is presently conducting the Business so as to comply
in all material respects with all applicable statutes, ordinances, rules,
regulations, permits and orders of any Governmental Entity except where
non-compliance, individually or in the aggregate, would not cause the Business
to lose any material benefit or incur any material liability. Seller is not
presently charged with nor, to Seller’s Knowledge, is under investigation by any
Governmental Entity with respect to any actual or alleged violation of any Legal
Requirement, nor is presently the subject of any pending or to Seller’s
Knowledge threatened adverse proceeding by any Governmental Entity or regulatory
authority having jurisdiction over the Assets or the Business.

3.22 Customers and Suppliers. Schedule 3.22 contains a true, correct and
complete list of the Seller’s customers and the suppliers of the Seller, and as
to each such customer which accounts for sales revenue in excess of $100,000
annually or among the top-20 customers by dollar volume and each such supplier
which accounts for supply expense in excess of $100,000 annually, the gross
sales by Seller to each customer and purchases by Seller from each supplier for
the years indicated on such schedule. To Seller’s Knowledge, there are no
customer or supplier disputes and, Seller has not received any written notice
that any of its customers or suppliers identified on Schedule 3.20 has taken or
threatened to take any steps which would be reasonably likely to result in any
material loss of sales to customers or supply from suppliers.

3.23 Disclaimer of other Representations and Warranties. EXCEPT AS EXPRESSLY SET
FORTH IN THIS ARTICLE III, SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF THE ASSETS INCLUDING WITH RESPECT
TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, AND ANY SUCH
REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.

3.24 Disclosure. No representation or warranty or other statement made by Seller
in this Agreement, any Schedule, any supplement to any Schedule, or otherwise in
connection with the Contemplated Transactions contains any untrue statement or
omits to slate a material fact necessary to make any of them, in light of the
circumstances in which it was made, not misleading.

 

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IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER.

Purchaser represents and warrants to Seller as follows:

4.1 Organization and Standing. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of South
Carolina. Purchaser has the full corporate power and authority to carry on its
business in the places and as it is now being conducted and to own and lease the
properties and assets which it now owns or leases.

4.2 Corporate Power and Authority. Purchaser has the corporate power, capacity
and authority to execute and deliver this Agreement, to perform hereunder, and
to consummate the transactions contemplated hereby. The execution, delivery and
performance by Purchaser of this Agreement and each and every agreement,
document and instrument provided for herein have been duly authorized and
approved. This Agreement, and each and every other agreement, document and
instrument to be executed, delivered and performed by Purchaser in connection
herewith, constitutes the valid and legally binding obligation of Purchaser
enforceable against it in accordance with their respective terms, except as
enforceability may be limited by applicable equitable principles, or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws from time to
time in effect affecting the enforcement of creditors’ rights generally.

4.3 Agreement Does Not Violate Other Instruments. The execution and delivery of
this Agreement and each and every agreement, document and instrument to be
executed and delivered in connection herewith by Purchaser does not violate any
provisions of the Certificate of Incorporation, as amended, or Bylaws, as
amended, of Purchaser or violate or constitute an occurrence of default under
any provision of, or conflict with, result in acceleration of any obligation
under, or give rise to a right by any party to terminate its obligations under,
any mortgage, deed of trust, conveyance to secure debt, note, loan, lien, lease,
agreement, instrument, or any order, judgment, decree or other arrangement to
which Purchaser is a party or is bound or by which its assets are affected.

4.4 Litigation. There is no suit, action, proceeding, claim or investigation
pending, or threatened against, or affecting the Purchaser at law or in equity,
or before or by any Governmental Entity that could restrict Purchaser from
fulfilling its obligations herein to consummate the Contemplated Transactions,
and (b) it is not in default concerning any order, writ, injunction or decree of
any Governmental Entity, applicable to Purchaser that could restrict Purchaser
from fulfilling its obligations herein to consummate the Contemplated
Transactions.

4.5 Transferor Plan.

4.5.1 Purchaser shall make available to Seller a copy of the Transferor Plan and
related material plan documents (including trust documents, insurance policies
or contracts, employee booklets, summary plan descriptions, summary of material
modifications and other authorizing documents) and shall make available copies
of the Form 5500 reports filed with the IRS for the last three (3) plan years.
The Transferor Plan (A) either (i) has obtained from the IRS a

 

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favorable determination letter as to its qualified status under the Code, or
(ii) the expiration of the requisite period under applicable regulations
promulgated by the IRS under the Code or IRS pronouncements in which to apply
for such determination letter and to make any amendments necessary to obtain a
favorable determination has not occurred or (B) has been established under a
prototype plan for which an IRS opinion letter has been obtained by the plan
sponsor and is valid as to the adopting employer. Purchaser shall also furnish
or make available to Seller the most recent IRS determination, notification,
advisory, or opinion letter issued with respect to the Transferor Plan, and to
the knowledge of the Purchaser, nothing has occurred since the issuance of each
such letter which could reasonably be expected to cause the loss of the
tax-qualified status of the Transferor Plan subject to Code Section 401(a).

4.5.2 To Purchaser’s Knowledge, there has been no material non-exempt
“prohibited transaction,” as such term is defined in Section 406 of ERISA and
Section 4975 of the Code, with respect to the Transferor Plan. To Purchaser’s
Knowledge, no fiduciary of the Transferor Plan has any liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of the Transferor Plan. The
Transferor Plan (and its accompanying trust) has been administered in accordance
with its terms and in material compliance with the requirements prescribed by
any and all applicable statutes, rules, and regulations (including ERISA and the
Code). Neither the Purchaser nor any of its ERISA Affiliates is subject to any
liability or penalty under Sections 4976 through 4980 of the Code or Title I of
ERISA with respect to the Transferor Plan. All contributions required to be made
by the Purchaser or any of its ERISA Affiliates to the Transferor Plan have been
made on or before their due dates. With respect to the Transferor Plan, the
Purchaser has prepared in good faith and timely filed all the requisite
governmental reports (which, to the knowledge of the Purchaser, were true and
correct in all material respects as of the date filed). No suit, administrative
proceeding, action or other litigation has been brought, or to the knowledge of
the Purchaser, is threatened, against or with respect to the Transferor Plan,
including any audit or inquiry by the IRS or United Stated Department of Labor
other than requests for payments in the ordinary course.

4.5.3 No amounts paid by the Purchaser to the Transferor Plan would fail to be
deductible under Sections 404 or 404A of the Code. The Transferor Plan satisfies
the bonding requirements of Section 412 of ERISA.

V. CONDITIONS TO CLOSING AND CLOSING.

5.1 Conditions Precedent to Obligations of Purchaser to Close. The obligations
of Purchaser to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction, on or before the Closing Date, of each and every
one of the following conditions.

5.1.1 Covenants of Seller. Seller shall have duly performed in all material
respects all of the covenants, acts and undertakings to be performed by it on or
prior to the Closing

 

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Date and an authorized officer of Seller shall deliver to Purchaser a
certificate dated as of the Closing Date certifying to the fulfillment of this
condition and the condition set forth in Section 5.1.3;

5.1.2 No Injunction, Etc. No action, proceeding, investigation, regulation or
legislation shall have been instituted, before any court, governmental agency or
legislative body to enjoin, restrain, prohibit, or obtain substantial damages in
respect of, this Agreement or the Contemplated Transactions;

5.1.3 Representations True at Closing. The representations and warranties made
by Seller to Purchaser in this Agreement, the Schedules and exhibits hereto or
any document or instrument delivered to Purchaser hereunder on the Closing Date
shall be true and correct in all material respects (except for representations
and warranties which contain materiality limitations shall be true and correct
in all respects) on the Closing Date with the same force and effect as though
such representations and warranties had been made on and as of such time (except
for changes contemplated by this Agreement);

5.1.4 Documents to be Delivered. Seller shall have obtained for delivery at
Closing the documents set forth in Section 5.4;

5.1.5 No Conflict. Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), contravene or conflict with or result in a violation of or
cause Purchaser to suffer any adverse consequence under (i) any applicable Legal
Requirement or Order or (ii) any Legal Requirement or Order that has been
published, introduced or otherwise proposed by or before any Governmental
Entity;

5.1.6 Governmental Authorizations and Investigations. Purchaser shall have
received such Governmental Authorizations as are necessary to allow Purchaser to
operate the Business from and after the Closing. No inquiry, investigation, or
litigation regarding the legality of the Contemplated Transactions under any
antitrust Law shall be pending or threatened on the part of any Governmental
Entity, including the U.S. Department of Justice, the Federal Trade Commission,
any state attorney general, or any other unit of government, and no litigation
regarding the legality of the Contemplated Transactions under any antitrust law
shall be pending or threatened on the part of any private party;

5.1.7 Board Consents. All necessary board of directors and shareholders
resolutions, waivers and consents required to be obtained by Seller and
Purchaser to consummate the Contemplated Transactions shall have been adopted or
executed;

5.1.8 No Material Adverse Change. There shall not have occurred a material
adverse change, or Seller’s Knowledge, an event involving a prospective material
adverse change, in the Business, properties, operations, condition (financial or
otherwise), prospects, assets or liabilities of Seller since the date of the
most recent Financial Statements;

 

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5.1.9 Environmental Report. Purchaser shall have obtained such environmental
analyses of the Real Property as Purchaser deems appropriate, which
environmental analyses shall disclose no material environmental problems or
concerns, as determined in Purchaser’s reasonable discretion;

5.1.10 Payment of Taxes. Seller shall have satisfied all accrued sales and
payroll taxes (and any related penalties and interest) through the Closing Date,
shall have caused the discharge of all Encumbrances (other than Permitted
Encumbrances) on the Acquired Assets and shall have furnished evidence
satisfactory to Purchaser of such payment and discharge, including without
limitation evidence of payment of accrued payroll taxes (and any related
penalties and interest);

5.1.11 Title Commitments. Purchaser shall have obtained, no later than ten days
prior to the Closing, a commitment for a 1992 ALTA Owner’s Title Insurance
Policy or other form of policy reasonably acceptable to Purchaser for each Owned
Real Property, issued by Lawyers Title (the “Title Company”), together with a
copy of all exceptions documents referenced therein (the “Title Commitments”);

5.1.12 Title Policies. At Closing, Purchaser shall have obtained title insurance
policies from the Title Company (which may be in the form of a mark-up of a pro
forma of the Title Commitments) in accordance with the Title Commitments,
insuring Purchaser’s fee simple title to each Owned Real Property as of the
Closing Date (including all recorded appurtenant easements, insured as separate
legal parcels), with gap coverage through the date of recording, subject only to
Permitted Encumbrances, in such amount as Purchaser reasonably determines to be
the value of the Real Property insured thereunder (the “Title Policies”);

5.1.13 Surveys. Purchaser shall have obtained, no later than ten days prior to
the Closing, a survey for each Owned Real Property, dated no earlier than the
date of this Agreement, prepared by a surveyor licensed in the jurisdiction
where the real property is located, satisfactory to Purchaser (the “Surveys”);
the Surveys shall not disclose any material encroachment from or onto any of the
Real Property or any portion thereof or any other survey defect which has not
been cured or insured over to Purchaser’s reasonable satisfaction prior to the
Closing other than Permitted Liens;

5.1.14 Lease Consents. Seller shall have obtained and delivered to Purchaser a
written consent for the assignment of each of the Real Property Leases, from the
landlord whose consent thereto is required under the terms of such Lease (the
“Lease Consents”), in form and substance satisfactory to Purchaser, Seller and
the Landlord, but without warranty;

5.1.15 Estoppel Certificates. Seller shall have obtained and delivered to
Purchaser non-disturbance agreement and an estoppel certificate with respect to
each of the Real

 

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Property Leases, dated no more than 30 days prior to the Closing Date, from the
other party to such Real Property Lease, in form and substance satisfactory to
Buyer (the “Estoppel Certificates”);

5.1.16 FIRPTA Affidavit. Seller shall deliver to Purchaser a non-foreign
affidavit dated as of the Closing Date, sworn under penalty of perjury and in
form and substance required under Treasury Regulations issued pursuant to Code
Section 1445 stating that Seller is not a “foreign person” as defined in Code
Section 1445 (the “FIRPTA Affidavit”);

5.1.17 Actions Taken. All actions to be taken by Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
Purchaser; and

5.1.18 Certificates or Instruments. Seller shall have delivered to Purchaser
such other certificates or instruments as Purchaser may reasonably request in a
form and substance reasonably satisfactory to Purchaser.

5.2 Conditions Precedent to the Obligations of Seller to Close. The obligations
of Seller to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each and every
one of the following conditions.

5.2.1 Covenants of Purchaser. Purchaser shall have duly performed in all
material respects all of the covenants, acts and undertakings to be performed by
it on or prior to the Closing Date, and a duly authorized officer of Purchaser
shall deliver to Seller certificates dated as of the Closing Date certifying to
the fulfillment of this condition and the condition set forth in Section 5.2.3;

5.2.2 No Injunction, Etc. No action, proceeding, investigation, regulation or
legislation shall have been instituted, before any court, governmental agency or
legislative body to enjoin, restrain, prohibit, or obtain substantial damages in
respect of, this Agreement or the Contemplated Transactions;

5.2.3 Representations True at Closing. The representations and warranties made
by Purchaser in this Agreement to Seller and the Exhibits hereto or any document
or instrument delivered to Seller hereunder or on the Closing Date shall be true
and correct in all material respects (except for representations and warranties
which contain materiality limitations shall be true and correct in all respects)
on the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of such time (except for
changes contemplated by this Agreement); and

5.2.4 Documents to be Delivered. Purchaser shall have obtained for delivery at
Closing the documents set forth in Section 5.5.

 

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5.3 Time and Place of Closing. The Closing shall be held at the offices of
Morris, Manning & Martin, LLP, 1600 Atlanta Financial Center, 3343 Peachtree
Road, N.E., Atlanta, Georgia commencing at: 10:00 a.m., Eastern Time, on a date
mutually agreed to by the parties on or before October 1. 2007 (the “Closing
Date”).

5.4 Seller’s Performance at Closing. At the Closing, Seller shall deliver to
Purchaser, where appropriate, the following:

5.4.1 such good and sufficient bills of sale, assignments (including the
required consents), certificates, deeds and other good and sufficient
instruments of sale, conveyance, transfer and assignment as required by
Purchaser in order to effectively vest in Purchaser good title to the Assets
free and clear of all liens, security interests and encumbrances of whatever
nature and termination statements for all liens on the Assets;

5.4.2 Certificate referenced in Section 5.1,1;

5.4.3 Legal opinion in a form satisfactory to Purchaser;

5.4.4 Certified copies of all board and shareholder resolutions approving the
Contemplated Transactions;

5.4.5 Lease Consents referenced in Section 5.1.14;

5.4.6 Estoppel Certificates referenced in Section 5.1.15;

5.4.7 FIRPTA Affidavit referenced in Section 5.1.16;

5.4.8 the Transition Services Agreement;

5.4.9 the Guaranty Agreement duly executed by Caraustar Industries, Inc.

5.4.10 the Supply Agreement; and

5.4.11 Appropriate sales and other tax clearance certificates from all
applicable taxing authorities.

5.5 Performance by Purchaser at Closing. At the Closing, Purchaser shall deliver
to Seller, where appropriate, the following:

5.5.1 cash payable to the Seller as set out in Section 2.2;

5.5.2 Certificate referenced in Section 5.2.1;

 

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5.5.3 Legal opinion in a form satisfactory to Seller;

5.5.4 the Transition Services Agreement; and

5.5.5 the Supply Agreement.

VI. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION.

6.1 Survival of Representations and Warranties of Seller. All representations,
warranties, agreements, covenants and obligations made or undertaken by Seller
in this Agreement or in any document or instrument executed and delivered
pursuant hereto are material, have been relied upon by Purchaser and shall
survive the Closing hereunder and shall not merge in the performance of any
obligation by any party hereto, and will remain in full force and effect.
Subject to the terms of this Article VI, Seller hereby releases, discharges, and
agrees to indemnify and hold Purchaser, its Affiliates, their successors and
assigns, and the respective officers, employees, agents and representatives of
all of the foregoing harmless from and against any and all liability, loss,
actual, punitive or exemplary damages, fines, penalties, obligations, payments,
costs and expenses or injury and all reasonable costs and expenses (including
reasonable counsel and expert fees and costs of any suit, action, claim, demand,
investigation, assessment, judgment, remediation, settlement or compromise
related thereto by any Person, including without limitation, any Governmental
Entity) suffered or incurred by Purchaser arising from –

6.1.1 any claim, suit, cause of action, investigation or proceeding of any kind
whatsoever which relates to, or arises from, Seller, the Business or Assets
before the Closing Date;

6.1.2 any misrepresentation, or breach of any covenant or warranty of Seller
contained in this Agreement, the Schedules or Exhibits attached hereto or in any
certificate or other instrument furnished or to be furnished by Seller at
Closing hereunder; and,

6.1.3 any claim or debt, obligation or liability of Seller existing on or before
the Closing Date which is not an Assumed Liability.

6.2 Survival of Representations and Warranties of Purchaser. All
representations, warranties, agreements, covenants and obligations made or
undertaken by Purchaser in this Agreement or in any document or instrument
executed and delivered pursuant hereto are material, have been relied upon by
the Seller and shall survive the Closing hereunder and shall not merge in the
performance of any obligation by any party hereto, and will remain in full force
and effect. Subject to the terms of this Article VI, Purchaser releases,
discharges and agrees to indemnify and hold the Seller and its Affiliates, their
successors and assigns, and their respective directors, shareholders, officers,
employees, agents and representatives harmless from and against all liability,
loss, damage or injury and all reasonable costs and expenses (including
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expert fees and costs of any suit, action, claim, demand, investigation,
assessment, judgment, remediation, settlement or compromise related thereto by
any Person, including without limitation, any Governmental Entity) suffered or
incurred by the Seller or any Shareholder arising from –

6.2.1 any claim, suit, course of action, investigation or proceeding of any kind
whatsoever which relates to, or arises from, Purchaser or the Business or Assets
after the Closing Date;

6.2.2 any misrepresentation, or breach of any covenant or warranty of Purchaser
contained in this Agreement or any certificate or other instrument furnished or
to be furnished by Purchaser hereunder;

6.2.3 the Assumed Liabilities; and

6.2.4 the operation of the Business and the ownership of the Assets following
the Closing.

6.3 Defense of Claims.

6.3.1 Third Party Claims.

6.3.1.1 If any party entitled to indemnification under this Agreement (an
“Indemnitee”) receives notice of the assertion of any claim or of the
commencement of any action or proceeding by any entity who is not a party to
this Agreement or an affiliate of such a party (a “Third Party Claim”) against
such Indemnitee, against which a party is obligated to provide indemnification
under this Agreement (an “Indemnifying Party”), the Indemnitee will give such
Indemnifying Party reasonably prompt written notice thereof, but in any event no
later than thirty (30) calendar days after receipt of such notice of such Third
Party Claim (the “Third Party Claim Notice Period”). Such Notice will describe
the Third Party Claim in reasonable detail, and will indicate the estimated
amount, if reasonably practicable, of the Indemnifiable Loss that has been or
may be sustained by the Indemnitee. The Indemnifying Party will have the right
to participate in or, by giving written notice to the Indemnitee no later than
thirty (30) calendar days after receipt of the above-described notice of such
Third Party Claim, to elect to assume the defense of (and to irrevocably agree
to provide indemnification for) any Third Party Claim at such Indemnifying
Party’s own expense and by such Indemnifying Party’s own counsel (reasonably
satisfactory to the Indemnitee), and the Indemnitee will cooperate in good faith
in such defense. If the Indemnifying Party does not elect to assume the defense
by giving notice within thirty (30) calendar days after receipt of the
above-described notice of such Third Party Claim, as provided in the preceding
sentence, the Indemnifying Party thereafter may elect, by providing the
Indemnitee written notice, to later assume the defense of (and to irrevocably
agree to provide indemnification for) such third Party Claim at such
Indemnifying Party’s own expense and by such Indemnifying Party’s own counsel
(reasonably satisfactory to Indemnitee), and the Indemnitee will cooperate in
good faith in such defense. The Indemnitee will have the right to participate in
the defense of any Third Party

 

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Claim assisted by counsel of its own choosing, provided that, if the named
parties to any such proceeding (including any impleaded parties) include both
the Indemnifying Party and the Indemnitee or if the Indemnifying Party proposes
that the same counsel represent both the Indemnitee and the Indemnifying Party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them, then the Indemnitee
shall have the right to retain its own counsel. If the Indemnitee has not
received written notice within such 30 calendar day period that the Indemnifying
Party has elected to assume the defense of such Third Party Claim, the
Indemnitee may, at its option, elect to settle or assume such defense, assisted
by counsel of its own choosing, and the Indemnifying Party will be liable for
all costs, expenses, settlement amounts or other Indemnifiable Losses paid or
incurred in connection therewith to the extent provided for in this Agreement.

6.3.1.2 If, within the 30 calendar days set forth above, an Indemnitee receives
written notice from an Indemnifying Party that such Indemnifying Party has
elected to assume the defense of (and to irrevocably agree to provide
indemnification for) any Third Party Claim as provided in Section 6.3.1.1, the
Indemnifying Party will not be liable for any legal expenses subsequently
incurred by the Indemnitee in connection with the defense thereof; provided,
however, that if the Indemnifying Party fails to take reasonable steps necessary
to defend diligently such Third Party Claim within 30 calendar days after
receiving written notice from the Indemnitee that the Indemnitee believes the
Indemnifying Party has failed to take such steps, the Indemnitee may, at its
option, after giving the Indemnifying Party a reasonable opportunity to justify
its litigation strategy, elect to settle or assume its own defense, assisted by
counsel of its own choosing, and the Indemnifying Party will be liable for all
costs, expenses, settlement amounts or other Indemnifiable Losses paid or
incurred in connection therewith. Without the prior written consent of the
Indemnitee, the Indemnifying Party will not enter into any settlement of any
Third Party Claim or cease to defend against such claim, if pursuant to or as a
result of such settlement or cessation, injunctive or other equitable relief
would be imposed against the Indemnitee. The Indemnifying Party shall not
consent to the entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to each Indemnitee of a release from all liability in respect of such claim. The
Indemnifying Party shall not be entitled to control, and the Indemnitee shall be
entitled to have sole control over, the defense or settlement of any claim to
the extent that claim seeks an order, injunction or other equitable relief
against the Indemnitee which, if successful, would be reasonably likely to
materially interfere with the business, operations, assets, condition (financial
or otherwise) or prospects of the Indemnitee (and the cost of such defense shall
constitute an amount for which the Indemnitee is entitled to indemnification
hereunder). If a firm offer is made to settle a Third Party Claim which offer
the Indemnifying Party is permitted to settle under this Section 6.3.1.2, and
the Indemnifying Party desires to accept and agree to such offer, the
Indemnifying Party will give written notice to the Indemnitee to that effect. If
the Indemnitee fails to consent to such firm offer within 30 calendar days after
its receipt of such notice, the Indemnitee may continue to contest or defend
such Third Party Claim and, in such event, the maximum liability of the
Indemnifying Party as to such Third Party Claim will not exceed the amount of
such settlement offer, plus costs and expenses paid or incurred by the
Indemnitee through the end of such 30-day period. If the Indemnifying Party

 

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chooses not to accept and agree to any such firm offer which is acceptable and
agreeable to the Indemnitee, then the Indemnifying Party shall separately
indemnify and hold Indemnitee harmless from and against any and all
Indemnifiable Losses in excess of such firm offer amount, and any such excess
Indemnifiable Losses shall be due and payable.

6.3.1.3 Each party hereunder who has assumed the defense of a Third Party Claim
shall use all reasonable effort to diligently defend such claim.

6.3.2 Other Claims. In the event any Indemnitee should have a claim under this
Article VI against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnitee shall promptly give written notice (the “Indemnity
Notice”) and the details thereof, including copies of all relevant information
and documents to the Indemnifying Party within a period of thirty (30) days
following the discovery of the claim by the Indemnitee (the “Claim Notice
Period”). The failure by any Indemnitee to give the Indemnity Notice within the
Claim Notice Period shall not impair the Indemnitee’s rights hereunder except to
the extent that an Indemnifying party demonstrates that it has been prejudiced
thereby. The Indemnifying Party will notify the Indemnitee within a period of
thirty (30) days after the receipt of the Indemnity Notice by the Indemnifying
Party (the “Indemnity Response Period”) whether the Indemnifying Party disputes
its liability to the Indemnitee under this Article VI with respect to such
claim. If the Indemnifying Party notifies the Indemnitee that it does not
dispute the claim described in such Indemnity Notice or fails to notify the
Indemnitee within the Indemnity Response Period whether the Indemnifying Party
disputes the claim described in such Indemnity Notice, the actual Losses as
finally determined will be conclusively deemed to be a liability of the
Indemnifying Party under this Article VIII and the Indemnifying Party shall pay
the amount of such Losses to the Indemnitee on demand. If the Indemnifying Party
notifies the Indemnitee within the Indemnity Response Period that the
Indemnifying Party disputes its liability with respect to such claim, the
Indemnifying Party and the Indemnitee will proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through negotiations within a
period of thirty (30) days from the date of such notice, such dispute shall be
resolved by arbitration in accordance with Section 6.3.3 hereof.

6.3.3 Resolution of Disputes, Any dispute required to be submitted to
arbitration pursuant to this Article VI shall be finally and conclusively
determined in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the “Rules of Arbitration”) then in effect by the
decision of three (3) arbitrators (the “Board of Arbitration”) selected in
accordance with the Rules of Arbitration. The Board of Arbitration shall meet in
Charlotte, North Carolina and shall render a decision in writing (concurred in
by a majority of the members of the Board of Arbitration) with respect to and
stating the amount, if any, which the Indemnifying Party is required to pay to
the Indemnitee in respect of the claim made by the Indemnitee. The decision of
the Board of Arbitration shall be rendered as soon as practical following
commencement of proceedings with respect thereto. The Board of Arbitration shall
cause its written decision to be delivered to the Indemnitee and the
Indemnifying Party. Any decision made by the Board of Arbitration shall be
final, binding and conclusive on the Indemnitee and the Indemnifying Party and
entitled to be enforced to the fullest extent permitted by law and entered in
any court of competent jurisdiction.

 

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The parties hereto agree that all service of process may be made on any such
party by personal delivery or by registered or certified mail addressed to the
appropriate party at the address for such party set forth in Section 8.1 hereof.

All fees, costs and expenses of the prevailing party in any arbitration,
including, but not limited to, attorneys’ fees shall be paid as determined and
included as part of the decision of the Board of Arbitration. Each and every
arbitration proceeding commenced pursuant to this Section 6.3.3 shall be
consolidated with any arbitration proceeding simultaneously or previously
commenced (but not concluded) under this Section 6.3.3.

6.4 Limitations on Indemnification.

6.4.1 Notwithstanding the provisions of Section 6.1 and 6.2, with respect to
indemnification and hold harmless, no Indemnitee (as hereafter defined) will be
entitled to make a claim against an Indemnifying Party (as hereafter defined)
unless and until the aggregate amount of claims which may be asserted against
such Indemnifying Party for Indemnifiable Losses therefore exceeds $250,000
after which point the Indemnifying Party shall be obligated to indemnify the
Indemnitee from and against all indemnification obligations in excess of
$250,000. The limitations in this Section 6.4.1 shall not apply to amounts due
with respect to the Assumed Liabilities or to amounts due as payment hereunder
for the Assets.

6.4.2 All claims for indemnity under Sections 6.1.1, 6.1.3, 6.2.1, 6.2.3 and
under 6.1.2 and 6.2.2 relating to 3.1, 3.2, 3.3, 3.4 (first sentences only),
3.9, 3.12.1, 3.16, 3.18,4.1, 4.2 and 4.3 shall survive Closing until the
ninetieth day following the date upon which any matter covered by such
representations and warranties are barred by all applicable statutes of
limitations (or if no applicable statute of limitations, without time
limitation). Claims for indemnity under 6.1.2 relating to all other sections in
Article III shall survive for eighteen (18) months after Closing. The respective
obligations of Seller and Purchaser shall survive the date set forth in
Section 6.4.2, if applicable, only with respect to claims for indemnification or
hold harmless properly raised hereunder on or prior to the applicable date.

6.4.3 Further notwithstanding the provisions of Sections 6,1 and 6.2 hereof, the
total liability of Seller to Purchaser under Section 6.1 hereof or of Purchaser
to Seller under Section 6.2 hereof shall be limited in the aggregate (for each
of Sections 6.1 and 6.2, not combined) to $10,000,000.00. The limitations in
this Section 6.4.3 shall not apply to amounts due with respect to the Excluded
Liabilities, Assumed Liabilities or to amounts due as payment hereunder for the
Assets.

6.4.4 The remedies for any item or matter eligible for indemnification pursuant
to Sections 6.1 or 6.2, as applicable, hereunder, whether or not indemnification
is sought, and whether

 

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or not such remedies exceed the limitations set forth in Sections 6.3
(“Indemnifiable Losses”), other than for fraudulent or intentional
misrepresentation shall be limited to recoveries under Article VI of this
Agreement, and shall be subject to the limitations and recoveries provided in
this Section 6.4. Each party to this Agreement hereby acknowledges and agrees
that its sole remedy against the other party to this Agreement for such
Indemnifiable Losses under this Agreement shall be solely under Article VI of
this Agreement and each party expressly waives any and all rights, in law, by
statute or in equity (including, but not limited to, any right of contribution
pursuant to Section 113 of CERCLA) that it had, now has, or may have in the
future, for such Indemnifiable Losses of the other party, it being agreed by the
parties that (other than for any intentional misrepresentation or a
representation known to be false to Seller’s Knowledge) the amounts under this
Section 6.4 shall be the absolute maximum liability of any party hereunder.
Notwithstanding the foregoing, an Indemnitee’s remedies for any Indemnifiable
Losses hereunder arising out of an intentional or knowing misrepresentation
shall be cumulative, and the exercise by Indemnitee of its right to
indemnification hereunder with respect to Indemnifiable Losses from such
intentional misrepresentation shall not affect or diminish the right of
Indemnitee to exercise any rights or remedies under Article VI hereof or any
other remedy at law or in equity, to recover damages, or to obtain equitable or
other relief.

6.4.5 In the event an Indemnifiable Losses hereunder results in a Tax Benefit to
the Indemnitee which is reasonably certain of realization and utility in
Indemnitee’s then current tax year, the Indemnifying Party shall be entitled to
a credit against the Indemnification liability for such Indemnifiable Loss under
this Article VI, said credit to be adjusted for the time value of money using as
a discount rate the rate applicable to underpayments under Code
Section 6621(a)(2). If the Indemnitee reasonably concludes that the Tax Benefit
will not occur in the then current tax year, the amount payable by the
Indemnifying Party to the Indemnitee hereunder shall not be reduced by the Tax
Benefit but the Indemnitee shall pay to the Indemnifying Party promptly after
utilization of such Tax Benefit an amount equal to such Tax Benefit up to the
amount of such indemnification previously paid to the Indemnitee. If any Tax
Benefit is subsequently disallowed by a final administrative determination or
adjudication, the Indemnifying Party shall repay to the Indemnitee the amount by
which such Tax Benefit is reduced up to the amount of such Tax Benefit
previously paid or allowed as a credit to the Indemnifying Party.

6.4.6 An Indemnitee shall act in good faith and in a commercially reasonable
manner to mitigate any Losses it may suffer. Except as expressly provided for
herein, in no event shall either party be liable to the other for lost profits,
lost revenues, lost opportunity costs, costs of financing, or consequential,
punitive, special, or incidental damages of such other party. No Indemnitee
shall be indemnified, or have any other recovery, for Losses arising from any
inaccuracy in, or breach of, any representation or warranty by the Indemnifying
Party to the extent the Indemnitee had actual knowledge (which in the case of
Purchaser shall be limited to the actual knowledge of Kevin P. Mahoney) at or
before the Closing of the facts as a result of which such representation or
warranty was inaccurate or breached. The amount of any Losses suffered by a
party under this Agreement shall be reduced by the amount, if any, of the
recovery or benefit (net of reasonable expenses incurred in obtaining such
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Indemnitee shall have received or otherwise enjoyed with respect thereto under
any unaffiliated, third party insurance coverage with respect thereto.
Notwithstanding the above, the Purchaser shall have no obligation to make a
claim under insurance policies covering the Purchaser after the Closing.

6.5 Environmental Remediation. Preliminary results from Environmental Resource
Management’s (“ERM’s”) Phase II Environmental Site Assessment (“the Phase II
Report”) has identified certain environmental conditions at Seller’s Union
Facility. Notwithstanding Schedule 3.9 which shall not limit Seller’s
responsibilities under this Section 6.5, Seller shall promptly reimburse
Purchaser for all costs incurred in connection with conducting additional
environmental investigations to define the scope and extent of environmental
impacts at Seller’s Union Facility which are identified in ERM’s Phase II report
attached hereto as Schedule 6.5, as well as any environmental impacts
subsequently discovered in the course of this investigation, so long as such
costs are incurred after Purchaser has obtained Seller’s written approval of
such investigation. Notwithstanding the foregoing, Purchaser and Seller shall
mutually agree that the environmental investigations set forth in ERM’s Phase II
report may be conducted by any environmental contractor selected by Purchaser
pursuant to this Section 6.5. Purchaser and Seller further agree that, upon the
request of Seller, Seller may request another estimate of the costs of the
environmental investigations from an environmental consulting firm reasonably
acceptable to Purchaser. In the event such further estimates result in lower
costs for the environmental investigations and the scope of such work in such
estimates is acceptable to Purchaser, Purchaser and Seller may agree to use
another environmental consultant to perform such environmental investigations.
Purchaser shall have sole authority to direct and authorize this and future
environmental investigations, if necessary. Seller shall indemnify and hold
Purchaser harmless against any and all costs, including expert fees,
consultants’ fees, and attorneys’ fees, for all necessary and appropriate
additional environmental investigation and removal and remediation required by
Environmental Laws or government authorities in connection with the
environmental conditions at Seller’s Union Facility. This indemnity shall
include, but not be limited to, costs of required investigation, required
removal actions, required remedial actions, operations, operations and
maintenance, government oversight costs, natural resource damages claims and
claims by third parties for contribution. The obligations of this Section 6.5
shall not be subject to the limitations in Section 6.4.

VII. TERMINATION.

7.1 Termination. Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated at any time prior to the
Closing Date (the “Agreement Termination Date”).

7.1.1 by mutual consent of Purchaser and Seller;

7.1.2 by Purchaser or Seller, if such party is not in default under this
Agreement, if the Closing shall not have occurred on or before October 10, 2007
(or such later date as may be mutually agreed to by the Purchaser and Seller);

 

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7.1.3 by Purchaser in the event of any material breach by Seller of any of
Seller’s agreements, covenants, representations or warranties contained herein
and the failure of Seller to cure such breach within seven days after receipt of
notice from Purchase requesting such breach to be cured; or,

7.1.4 by Seller in the event of any material breach by Purchaser of any of
Purchaser’s agreements, covenants, representations or warranties contained
herein and the failure of Purchaser to cure such breach within seven days after
receipt of notice from Seller requesting such breach to be cured.

7.2 Notice of Termination. Any party desiring to terminate this Agreement
pursuant to Section 7.1 shall give notice of such termination to the other party
to this Agreement.

7.3 Effect of Termination. In the event this Agreement shall be terminated
pursuant to Section 7.1.1, each party shall pay all expenses incurred by it in
connection with this Agreement, and no party shall have any further obligations
or liability for any damages or expenses under this Agreement. In the event of
any other termination, all further obligations of the parties under this
Agreement (other than as provided in Section 8.10 below) shall be terminated
without further liability of any party to the other, but each party shall retain
any and all rights incident to a breach by the other party of any covenant,
representation or warranty under this Agreement.

VIII. GENERAL PROVISIONS

8.1 Notices. All notices, requests, demands and other communications shall be in
writing and shall be delivered by hand or mailed by registered or certified
mail, return receipt requested, first class postage prepaid, or sent by telecopy
confirmed by a copy sent by the sender registered or certified mail, first class
postage prepaid, in each case, addressed as follows:

8.1.1 If to Purchaser:

Sonoco Products Company

1 North Second Street

Hartsville, South Carolina 29550

Attn: President

Telecopier: (843) 383-7478

 

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and to

Haynsworth Sinkler Boyd, P.A.

1201 Main Street, Suite 2200

Columbia, South Carolina 29201

Attn: William C, Boyd, Esq.

Telecopier: (803) 540-7878

8.1.2 If to Seller:

Caraustar Industries, Inc.

Attn: Ronald J. Domanico

Austell-Powder Springs Road, Suite 300

Austell, GA 30106

Telephone: 770-745-3745

Facsimile: 770-732-3401

Copy to:

John F. Sandy Smith, Esq.

Morris, Manning & Martin, LLP

Suite 1600, 3343 Peachtree Road, N.E.

Atlanta, GA 30326-1044

Telephone: 404-233-7000

Facsimile: 404-365-9532

Copy to:

Caraustar Industries, Inc.

Caraustar Legal Department

Attn: Wilma Elizabeth Beaty, Esq.

Vice President, General Counsel and Secretary

Post Office Box 115

Austell, Georgia 30168-0115

Telephone: 770-745-3745

Facsimile: 770-799-5990

8.1.3 If delivered personally, the date on which a notice, request, instruction
or document is delivered shall be the date on which such delivery is made and,
if delivered by mail, the date on which such notice, request, instruction or
document is received shall be the date of delivery, and in the case of telecopy,
when the telecopy or the confirmed copy is received, whichever is earlier,

8.1.4 Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 8.1.

8.2 Brokers. Purchaser represents and warrants to Seller and Seller represents
and warrants to Purchaser, that no broker or finder has acted for it or them or
any entity controlling,

 

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controlled by or under common control with it or them in connection with this
Agreement. Purchaser releases, discharges and agrees to indemnify and hold
harmless Seller against any fee, loss or expense arising out of any claim by any
broker or finder employed or alleged to have been employed by them. Seller
agrees to indemnify and hold harmless Purchaser against any fee, loss, or
expense arising out of any claim by any broker or finder employed or alleged to
have been employed by it.

8.3 Further Assurance. Each party covenants that at any time, and from time to
time, after the Closing Date, it will execute such additional instruments and
take such actions as may be reasonably requested by the other parties to confirm
or perfect or otherwise to carry out the intent and purposes of this Agreement.

8.4 Waiver. Any failure on the part of either party hereto to comply with any of
its obligations, agreements or conditions hereunder may be waived by the other
party hereto. No waiver of any provision of this Agreement shall be deemed, or
shall constitute, a waiver of any other provisions, whether or not similar, nor
shall any waiver constitute a continuing waiver.

8.5 Taxes and Expenses. All expenses incurred by the parties hereto in
connection with or related to the authorization, preparation and execution of
this Agreement and the Closing of the Contemplated Transactions, including,
without limitation of the generality of the foregoing, all fees and expenses of
agents, representatives, counsel and accountants employed by any such party,
shall be borne solely and entirely by the party which has incurred the same. Any
and all sales taxes shall be the responsibility of the Seller. Without limiting
the generality of the foregoing, all transfer, documentary, sales, use, stamp,
registration and other such Taxes, and all conveyance fees, recording charges
and other fees and charges (including any penalties and interest) incurred in
connection with the consummation of the Contemplated Transactions shall be paid
by Purchaser when due, and Purchaser will, at its own expense, file all
necessary Tax Returns and other documentation with respect to all such Taxes,
fees and charges, and, if required by applicable law, the parties will, and will
cause their Affiliates to, join in the execution of any such Tax Returns and
other documentation.

8.6 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, legal representatives,
executors, administrators, successors and assigns.

8.7 Headings. The section and other headings in this Agreement are inserted
solely as a matter of convenience and for reference, and are not a part of this
Agreement.

8.8 Entire Agreement. This Agreement constitutes the entire agreement among the
parties hereto and supersedes and cancels any prior agreements, representations,
warranties, or communications, whether oral or written, among the parties hereto
relating to the transactions contemplated hereby or the subject matter herein.
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only by an agreement in writing signed by
the party against whom or which the enforcement of such change, waiver,
discharge or termination is sought.

 

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8.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of South Carolina.

8.10 Confidentiality. Each party hereto shall, and shall cause its affiliates
to, and shall use reasonable commercial efforts to cause its representatives to
(a) hold in strict confidence and not utilize in its respective business or
otherwise all information and documents concerning any other party hereto or any
of its Affiliates (“Confidential Information”) furnished to it by such other
party or its Representatives in connection with this Agreement or the
transactions contemplated hereby and to (b) hold in strict confidence and not
disclose the fact that the parties have entered into this Agreement or any
documents executed pursuant hereto, except where disclosure may be required by
judicial or administrative process or law or as may be necessary for each party
to enforce its rights under this Agreement (or any documents executed pursuant
hereto). Notwithstanding the foregoing, the following will not constitute
Confidential Information for purposes of this Agreement: (i) information which
was already in the possession of the disclosing party or its Affiliate prior to
the date hereof and which was not acquired or obtained from any other party or
its Affiliates, (ii) information which is independently developed by the
disclosing party or any Affiliate thereof without access to the Confidential
Information, (iii) information which is obtained or was previously obtained by
the disclosing party from a third Person who, insofar as is known to the
disclosing party or its Affiliate, is not prohibited from transmitting the
information to the other party or such Affiliate by a contractual, legal or
fiduciary obligation to the other party or any of its Affiliates, and
(iv) information which is or becomes generally available to the public other
than as a result of a disclosure by the disclosing party or any Affiliate
thereof or their agents or employees. Notwithstanding the foregoing, following
the Closing, the foregoing restrictions shall not apply to Purchaser’s use of
documents and information concerning the Business or the Assets furnished by the
Seller hereunder.

8.11 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

8.12 Pronouns. All pronouns used herein shall be deemed to refer to the
masculine, feminine or neuter gender as the context requires.

8.13 Exhibits Incorporated. All Exhibits attached hereto are incorporated herein
by reference, and all blanks in such Exhibits, if any, will be filled in as
required in order to consummate the transactions contemplated herein and in
accordance with this Agreement.

 

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IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
date first above mentioned to be effective when executed by Seller in
Hartsville, South Carolina.

 

SONOCO PRODUCTS COMPANY

(“Purchaser”)

By:  

/s/ Kevin P. Mahoney

Name:   Kevin P. Mahoney Title:   Vice President

CARAUSTAR INDUSTRIAL & CONSUMER

PRODUCTS GROUP, INC.

(“Seller”)

By:  

/s/ Ronald J. Domanico

Name:   Ronald J. Domanico Title:   Vice President

 

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LIST OF SCHEDULES

 

2.1.2.1    Tangible Personal Property 2.1.2.2    Owned Real Property 2.1.2.5   
Intellectual Property 2.1.3    Tackle Box IP 2.4    Purchase Price Allocation
2.5.3    Contracts to be Assigned 2.7.2    Salaried Employee Severance 3.4   
Condition of Assets 3.6    List of Contracts 3.8    Litigation 3.9   
Environmental 3.10    Financial Statements 3.11    Changes Since June 30, 2007
3.12.1    Owned Real Property Exceptions 3.12.2    Leased Real Property 3.12.3.6
   Real Property Permits 3.14    Exceptions – Applicable Laws and Permits 3.15
   Exceptions – Labor Matters 3.16    Employee Benefit Plans 3.21    Exceptions
– Licenses and Permits 3.22    Customers and Supplies 6.5    Phase II Report

 

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