EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
ROCK-TENN COMPANY,
ROCK-TENN PACKAGING AND PAPERBOARD, LLC
AND
GULF STATES PAPER CORPORATION
GSPC ENTERPRISES, INC.
GULF STATES-TEXAS, L.L.C.
GULF STATES-TEXAS, L.P.
AS OF APRIL 27, 2005
TABLE OF CONTENTS
Page
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ARTICLE I. PURCHASE AND SALE......................................................................... 1
Section 1.1. Agreement to Purchase and Sell....................................................... 1
Section 1.2. Included Assets...................................................................... 2
Section 1.3. Excluded Assets...................................................................... 4
Section 1.4. Assumption of Assumed Liabilities.................................................... 5
Section 1.5. Excluded Liabilities................................................................. 6
Section 1.6. Assets Owned By Affiliates........................................................... 7
Section 1.7. Designation of Buyer Affiliates...................................................... 7
ARTICLE II. PURCHASE PRICE............................................................................ 7
Section 2.1. Purchase Price....................................................................... 7
Section 2.2. Payment of Purchase Price............................................................ 7
Section 2.3. Adjustment of Purchase Price......................................................... 9
Section 2.4. Physical Inventory................................................................... 10
Section 2.5. Sales and Transfer Taxes and Fees; Reporting and Payment;
Other Closing Costs and Expenses.............................................................. 10
Section 2.6. Proration of Ad Valorem Taxes and Other Expenses..................................... 11
Section 2.7. Certain Assignments.................................................................. 11
Section 2.8. Accounts Receivable.................................................................. 12
Section 2.9. Pre-Closing Capital Expenditures..................................................... 13
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER.................................................. 13
Section 3.1. Organization......................................................................... 13
Section 3.2. Authorization........................................................................ 13
Section 3.3. Absence of Restrictions and Conflicts................................................ 14
Section 3.4. Subsidiaries; Joint Venture.......................................................... 15
Section 3.5. Ownership of Assets and Related Matters.............................................. 15
Section 3.6. Financial Statements................................................................. 20
Section 3.7. No Undisclosed Liabilities........................................................... 20
Section 3.8. Absence of Certain Changes........................................................... 21
Section 3.9. Legal Proceedings.................................................................... 22
Section 3.10. Compliance with Law.................................................................. 22
Section 3.11. Contracts............................................................................ 23
Section 3.12. Tax Returns; Taxes................................................................... 24
Section 3.13. Employees............................................................................ 25
Section 3.14. Employee Benefit Plans............................................................... 26
Section 3.15. Labor Relations...................................................................... 28
Section 3.16. Insurance............................................................................ 29
Section 3.17. Environmental, Health and Safety Matters............................................. 29
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Section 3.18. Patents, Trademarks, Trade Names..................................................... 32
Section 3.19. Transactions with Associates......................................................... 32
Section 3.20. Customer and Supplier Relations...................................................... 33
Section 3.21. Brokers, Finders and Investment Bankers.............................................. 33
Section 3.22. Product Warranties and Liability..................................................... 34
Section 3.23. Rebates.............................................................................. 34
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER................................................... 35
Section 4.1. Organization......................................................................... 35
Section 4.2. Authorization........................................................................ 35
Section 4.3. Absence of Restrictions and Conflicts................................................ 35
Section 4.4. Brokers and Finders.................................................................. 36
Section 4.5. Litigation........................................................................... 36
ARTICLE V. CERTAIN COVENANTS AND AGREEMENTS.......................................................... 36
Section 5.1. Conduct of Business by Seller........................................................ 36
Section 5.2. Inspection and Access to Information................................................. 39
Section 5.3. No Solicitation; Acquisition Proposals............................................... 40
Section 5.4. Reasonable Efforts; Further Assurances; Cooperation.................................. 40
Section 5.5. Public Announcements................................................................. 42
Section 5.6. Real Property Title Reports.......................................................... 42
Section 5.7. Casualty............................................................................. 42
Section 5.8. Condemnation......................................................................... 43
Section 5.9. HSR Filings.......................................................................... 43
Section 5.10. Bulk Sales Waiver.................................................................... 44
Section 5.11. Notification of Changes.............................................................. 44
Section 5.12. Transition Services Agreement........................................................ 44
Section 5.13. Litigation Support................................................................... 44
Section 5.14. Handling of Excluded Assets.......................................................... 44
Section 5.15. Seller JV Tax Matter................................................................. 45
Section 5.16. SEC Financial Statements............................................................. 45
Section 5.17. Chip Supply Agreement................................................................ 46
Section 5.18. Customer and Supplier Visits......................................................... 46
Section 5.19. Release of Obligations and Replacement Arrangements.................................. 46
Section 5.20. Excluded Mill Property............................................................... 47
Section 5.21. Net Worth and Sale Agreement......................................................... 48
Section 5.22. Release of Encumbrances.............................................................. 48
Section 5.23. Option Agreement..................................................................... 48
Section 5.24. Maplesville Agreement................................................................ 48
Section 5.25. Headquarters Lease................................................................... 49
ARTICLE VI. EMPLOYEES AND EMPLOYEE BENEFIT PLANS...................................................... 49
Section 6.1. Employment of Seller's Employees..................................................... 49
Section 6.2. Welfare and Fringe Benefit Plans..................................................... 50
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Section 6.3. Workers' Compensation; Disability.................................................... 51
Section 6.4. Employment Taxes; Filing Requirements................................................ 51
Section 6.5. Access to Records.................................................................... 51
Section 6.6. 401(k) Plan.......................................................................... 52
Section 6.7. Pension Plan for Business Employees, Labor Agreement................................. 52
Section 6.8. Post-Retirement Life Insurance Benefits.............................................. 53
Section 6.9. WARN Act............................................................................. 53
Section 6.10. Deferred Compensation Plans.......................................................... 53
ARTICLE VII. CONFIDENTIAL INFORMATION AND TRADE SECRETS................................................ 54
Section 7.1. Definitions.......................................................................... 54
Section 7.2. Trade Secrets........................................................................ 54
Section 7.3. Confidential Information............................................................. 54
Section 7.4. Severability......................................................................... 55
Section 7.5. Injunctive Relief.................................................................... 55
ARTICLE VIII. CONDITIONS................................................................................ 55
Section 8.1. Conditions to Each Party's Obligations............................................... 55
Section 8.2. Conditions to Obligations of Buyer................................................... 56
Section 8.3. Conditions to Obligations of Seller.................................................. 56
ARTICLE IX. CLOSING................................................................................... 57
Section 9.1. The Closing.......................................................................... 57
Section 9.2. Documents to be Delivered by Seller.................................................. 57
Section 9.3. Documents to be Delivered by Buyer................................................... 59
ARTICLE X. INDEMNIFICATION........................................................................... 59
Section 10.1. Indemnification Obligations of Seller................................................ 59
Section 10.2. Indemnification Obligations of the Buyer Parties..................................... 60
Section 10.3. Indemnification Procedure............................................................ 61
Section 10.4. Claims Period........................................................................ 63
Section 10.5. Indemnification Basket and Cap....................................................... 63
Section 10.6. Indemnification Limits............................................................... 64
Section 10.7. Other Matters........................................................................ 66
Section 10.8. Treatment of Indemnification Payments................................................ 67
Section 10.9. No Waiver............................................................................ 67
ARTICLE XI. TERMINATION............................................................................... 68
Section 11.1. Termination.......................................................................... 68
Section 11.2. Effect of Termination................................................................ 69
Section 11.3. Termination Fee...................................................................... 69
ARTICLE XII. MISCELLANEOUS PROVISIONS.................................................................. 70
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Section 12.1. Notices.............................................................................. 70
Section 12.2. Amendment............................................................................ 71
Section 12.3. Extension; Waiver.................................................................... 71
Section 12.4. Exhibits; Schedules; Entire Agreement................................................ 71
Section 12.5. Assignment; Successors in Interest; Joint and Several................................ 72
Section 12.6. Number; Gender....................................................................... 72
Section 12.7. Captions............................................................................. 72
Section 12.8. Controlling Law...................................................................... 72
Section 12.9. Seller Knowledge..................................................................... 72
Section 12.10. Severability......................................................................... 72
Section 12.11. Facsimile Signature; Counterparts.................................................... 72
Section 12.12. Third-Party Beneficiaries............................................................ 73
Section 12.13. No Presumption Against Drafter....................................................... 73
Section 12.14. Consent to Jurisdiction, Etc......................................................... 73
EXHIBITS
Exhibit A Transition Services Agreement
Exhibit B Chip Supply Agreement
Exhibit C Option Agreement
Exhibit D Maplesville Agreement
Exhibit E Headquarters Lease
Exhibit F Rooster Bridge Lease
Exhibit G Seller Opinion
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of April 27,
2005, by and between ROCK-TENN COMPANY, a Georgia corporation ("Buyer Parent"),
ROCK-TENN PACKAGING AND PAPERBOARD, LLC, a Georgia limited liability company and
a wholly-owned indirect subsidiary of Buyer Parent ("Buyer," and together with
Buyer Parent, the "Buyer Parties"), and GULF STATES PAPER CORPORATION, a
Delaware corporation ("Seller Parent"), GSPC ENTERPRISES, INC., a Delaware
corporation, and a wholly-owned subsidiary of Seller Parent ("Seller Sub I"),
GULF STATES-TEXAS, L.L.C., a Delaware limited liability company, whose member
interests are wholly owned by Seller Sub I ("Seller Sub II"), GULF STATES-TEXAS,
L.P., a Delaware limited partnership, whose partners are Seller Sub I and Seller
Sub II ("Seller Sub III") (Seller Parent, Seller Sub I, Seller Sub II and Seller
Sub III are collectively, and individually where the context so requires or
permits, referred to as "Seller").
W I T N E S S E T H:
WHEREAS, Seller is engaged, among other things, in the production and sale
of paperboard and packaging; and
WHEREAS, Seller wishes to sell its Pulp and Paperboard Division,
Paperboard Packaging Division, Resolution Packaging operations and ▇▇▇▇▇▇▇▇▇▇
Box operations (collectively, the "Business") and its joint venture interest
(the "Seller JV Interest") in GSD Packaging, L.L.C., a Delaware limited
liability company ("Seller JV"), including, without limitation, all of the
assets used or held for use in connection with the Business as described herein
and Buyer desires to purchase the Business and the Seller JV Interest, all
subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
ARTICLE I.
PURCHASE AND SALE
Section 1.1. AGREEMENT TO PURCHASE AND SELL. Subject to the terms and
conditions of this Agreement, at the Closing (as hereinafter defined) and except
for the Excluded Assets (as hereinafter defined), Seller shall grant, sell,
assign, transfer and deliver to Buyer, and Buyer will purchase and acquire from
Seller, all right, title and interest of Seller in and to (a) the Business, (b)
the Seller JV Interest and (c) all of the assets, properties and rights of
Seller, of every kind and description, real, personal and mixed, tangible and
intangible, wherever situated and used or held for use in connection with the
Business (which Business, Seller JV Interest, assets, properties and rights are
hereinafter more particularly defined collectively as the "Assets"), free and
clear of all mortgages, liens, pledges, security interests, charges, claims,
restrictions and encumbrances of any nature whatsoever, except Permitted
Encumbrances (as hereinafter defined) and Assumed Liabilities (as hereinafter
defined).
Section 1.2. INCLUDED ASSETS. Except as otherwise expressly set forth in
Section 1.3 hereof, the Assets shall include, without limitation, the following
assets, properties and rights of Seller as of the Closing Date (as hereinafter
defined):
(a) all accounts receivable, notes receivable and related
instruments, prepaid expenses, deposits, sureties, advances, and credits of the
Business;
(b) all inventories, including finished products,
work-in-process, raw materials, spare parts, replacement parts, component parts,
stores and supplies, office supplies and other inventory items of the Business
including, without limitation, such inventory (i) located on the Seller Real
Property (as hereinafter defined), and (ii) located in the warehouse facility
owned by Seller in Maplesville, Alabama (the "Maplesville Facility")
(collectively, the "Inventory");
(c) all apparatus, machinery, equipment, business machines,
computers, vehicles, furniture, fixtures, tools, dies, molds, parts, rolling
stock, and other tangible personal property of the Business (together with the
Inventory, collectively, the "Tangible Personal Property");
(d) unless not assigned pursuant to Section 2.7(b), all right,
title and interest of Seller in (i) the Material Contracts (as hereinafter
defined) of Seller identified on Schedule 1.2(d) and (ii) all contracts (other
than Material Contracts, whether written or oral) of the Business in the
ordinary course, including, without limitation, all purchase orders, and
contracts with customers and suppliers (collectively, the "Assumed Contracts");
(e) all real property identified as "Fee Parcels" on Schedule
1.2(e) (the "Fee Parcels") and Seller Sub I's leasehold estate in the real
property located in Demopolis, Alabama and identified as "Leasehold Parcels" on
Schedule 1.2(e) (the "IDB Leasehold Parcel") pursuant to the applicable leases
described on Schedule 1.2(e) (the "IDB Leases") and the other "Leasehold
Parcels" described on Schedule 1.2(e) (together with the IDB Leasehold Parcel,
the "Leasehold Parcels"), including, without limitation, all easements and other
rights appurtenant to the Fee Parcels and the Leasehold Parcels, and including,
without limitation, all buildings, structures, fixtures and improvements located
on the Fee Parcels and the Leasehold Parcels, but expressly excluding the
"Excluded Mill Property" as defined in Section 5.20 (collectively, the Fee
Parcels, the Leasehold Parcels and such improvements (but excluding the Excluded
Mill Property), the "Seller Real Property");
(f) all goodwill, customer lists, patents, copyrights,
software, technical documentation, inventories, know-how, designs, shop and
royalty rights, trade secrets, trademarks, servicemarks, website addresses,
brand names and UPC codes, and trade names (and all registrations and rights
thereto and applications therefor, including all rights under contracts granting
any right, title, license or privilege under the intellectual property rights of
any third party), of the Business, including, without limitation, those set
forth on Schedule 1.2(f);
(g) except as provided in Section 1.3(d), all rights to causes
of action, lawsuits, judgments, claims and demands of any nature available to or
being pursued by Seller
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with respect to any Asset or the ownership, use, function or value of any Asset
or otherwise relating to the Business, whether arising by way of direct claim,
counterclaim or otherwise;
(h) except as provided in Section 1.3(e), all guarantees,
warranties, indemnities and similar rights in favor of Seller with respect to
any Asset or any Assumed Liability, and all proceeds under insurance policies
with respect to any Asset or any Assumed Liability (except to the extent such
proceeds constitute a reimbursement of Seller for amounts expended by Seller in
repairing or replacing any Asset);
(i) except as provided in Section 1.3(f), all permits,
licenses, approvals, authorizations, or similar rights of the Business
including, without limitation, those set forth on Schedule 1.2(i);
(j) all other tangible and intangible assets of any kind or
description of the Business, wherever located;
(k) all information, files, correspondence, records, data,
plans, contracts and recorded knowledge, wherever located, and whether in hard
copy, electronic or other form, including, without limitation, all customer,
supplier and vendor information, accounting books and records, property records,
production records, engineering records, environmental records, purchasing and
sale records, personnel and payroll records, medical, dental and 401(k) records
(including, but not limited to, current operational and administrative
information relating thereto and the individual participant's and dependent's
participation and experience therein) technical information, marketing and
advertising materials and information, data, operating and maintenance manuals,
credit data, marketing information, correspondence, invoices, forms, and
warranty information, of the Business; provided, however, that (i) Seller may
retain copies of any of the foregoing if necessary to comply with applicable law
or necessary in connection with the preparation of tax returns or financial
statements or in connection with the rights and obligations of Seller hereunder,
provided that Seller's retention of such copies shall be subject to Article VII
hereof and (ii) to the extent any of the foregoing relates primarily, but not
solely, to the Business or the Assets, Seller may omit, redact or otherwise keep
confidential any part of such information that relates solely to matters other
than the Business or the Assets;
(l) the Seller JV Interest;
(m) the IDB bonds related to the IDB Leasehold Parcel (the
"Bonds"); and
(n) the assets listed on Schedule 1.2(n).
For purposes of this Agreement, "Affiliates" shall mean with respect to any
party, a party, person or entity that, directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, such party, where "control", "controlled by" and "under common control
with" means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such party, whether
through the ownership of voting securities, by voting trust, contract or similar
arrangement, as trustee or executor, or otherwise.
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Section 1.3. EXCLUDED ASSETS. Notwithstanding anything to the contrary set
forth herein, the Assets shall not include the following assets, properties and
rights of Seller as of the Closing Date (collectively, the "Excluded Assets"):
(a) the purchase timber tracts set forth on Schedule 1.3(a);
(b) all cash of the Business;
(c) all assets, properties or rights of Seller with respect to
which each of the following are true: (i) not used or held for use exclusively
in connection with the Business that are described on Schedule 1.3(c), (ii) not
carried on the books of the Business and (iii) not located on the Real Property;
(d) all rights to causes of action, lawsuits, judgments,
claims and demands of any nature available to or being pursued by Seller with
respect to any Excluded Asset or to the extent involving any Excluded Liability
or as otherwise as set forth on Schedule 1.3(d);
(e) all guarantees, warranties, indemnities and similar rights
in favor of Seller with respect to any other Excluded Asset or to the extent
involving any Excluded Liability that are available to or are being pursued by
Seller based on events, occurrences or conditions occurring or existing prior to
Closing, whether first asserted before or after the Closing Date;
(f) subject to Section 2.7(b), all permits, licenses,
approvals, authorizations, or similar rights of the Business that by their terms
are not assignable to Buyer;
(g) all rights to refunds of Taxes (as hereinafter defined)
(i) imposed upon and paid by Seller or its Affiliates or (ii) paid by Seller and
arising out of or relating to the Assets or the Business with respect to taxable
periods, or portions thereof, ending prior to the Closing Date (except for any
such refund that is included in the determination of Net Working Capital in the
Final Working Capital Schedule);
(h) the tradename `Gulf States Paper Corporation' and all
derivatives thereof;
(i) Seller's equity in and rights with respect to the "On
Point" joint venture;
(j) any contracts, agreements or instruments between the
Business and Seller or any of Seller's Affiliates, other than Seller JV Leases
and other contracts, agreements or instruments described in Schedule 1.3(j);
(k) that certain recovery boiler and other assets held for
sale described on Schedule 1.3(k);
(l) any assets and contracts listed on Schedule 1.3(l);
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(m) the Maplesville Facility;
(n) the rights that accrue to Seller under this Agreement and
the Ancillary Agreements (hereinafter defined);
(o) (i) any letters of credit, surety bonds, guarantees and
performance bonds listed on Schedule 1.3(o);
(p) the Excluded Mill Property; and
(q) all insurance policies and all proceeds thereunder (except
as set forth in Section 1.2(h)).
Section 1.4. ASSUMPTION OF ASSUMED LIABILITIES. Except as expressly
provided in this Section 1.4, notwithstanding anything to the contrary contained
in this Agreement, and regardless of whether such liability is disclosed in this
Agreement, or on any Schedule or Exhibit hereto, the Buyer Parties shall not
assume, agree to pay, perform and discharge, bear the economic burden of or in
any way be responsible for any debts, liabilities or obligations of Seller
(whether known or unknown, accrued or unaccrued, fixed or contingent), or any of
Seller's Affiliates, of any kind or nature whatsoever, arising out of, relating
to, resulting from, or caused by any transaction, status, event, condition,
occurrence or situation relating to, arising out of or in connection with the
Business or otherwise. As the sole exception to the foregoing, effective as of
the Closing Date, Buyer shall assume and agree to pay, discharge or perform, as
appropriate, the following liabilities and obligations of Seller existing as of
the Closing Date arising out of the conduct of the Business prior to the Closing
Date (collectively, the "Assumed Liabilities"):
(a) obligations of Seller under Assumed Contracts (including,
without limitation, obligations under the Labor Agreement) to the extent such
obligations arise or relate to periods after the Closing, are not required to be
performed prior to the Closing, do not arise or result from any breach or
default under such Assumed Contracts prior to the Closing and are disclosed on
the face of such Assumed Contracts;
(b) Current Liabilities (as hereinafter defined) relating to
the operation of the Business, but only to the extent such liabilities are
included in the determination of Net Working Capital in the Final Working
Capital Schedule (as determined in accordance with Section 2.2(a)); except that
(i) liabilities and obligations of Seller JV included in Current Liabilities
shall not be Assumed Liabilities (but sixty percent (60%) of the current
liabilities of the Seller JV shall be included in determining Net Working
Capital pursuant to Sections 2.2 and 2.3) and shall remain liabilities or
obligations of Seller JV after the Closing; and (ii) Assumed Liabilities shall
not include any reserves included in the Current Liabilities, but such reserves
shall be included in determining Net Working Capital pursuant to Sections 2.2
and 2.3. Seller will serve as paying agent for the Buyer as to all accounts
payable of the Business, and Buyer will assume all such accounts payable and
will advance funds to Seller to fund accounts payable payments as such payments
become due.
(c) obligations of Seller set forth on Schedule 1.4(c); and
(d) the IDB Leases.
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Section 1.5. EXCLUDED LIABILITIES. Notwithstanding any other provision of
this Agreement, Buyer will not assume any, and Seller shall have responsibility
for and shall satisfy, all of the liabilities and obligations of Seller which
are not assumed by Buyer hereunder pursuant to Section 1.4 of this Agreement
(collectively, the "Excluded Liabilities"). The Excluded Liabilities shall
include, without limitation, the following:
(a) all liabilities relating to the Excluded Assets;
(b) all bank or other long-term liabilities of Seller or its
Affiliates whether or not related to the Business, other than (i) the IDB Leases
and (ii) the long-term liabilities assumed by Buyer as described in Section
1.4(c);
(c) any liability or obligation of Seller relating to or
arising from the breach of, default under or failure to comply with, at any time
on or prior to the Closing Date, any Assumed Contract or the failure to timely
pay or perform any other liability or obligation at any time on or prior to the
Closing Date;
(d) any liability or obligation under Seller's Plans, except
with respect to Assumed Liabilities described in Sections 1.4(b) and 1.4(c)
hereof;
(e) except with respect to Assumed Liabilities described in
Sections 1.4(b) and 1.4(c), all liabilities and obligations with respect to any
claim, demand, damage, injury, death, action, suit, arbitration, inquiry,
proceeding, dispute, or investigation, alleged, asserted or otherwise,
regardless of whether any filing with or any action has been brought of any
nature, civil, criminal, regulatory, or otherwise, in law or in equity
(collectively, the "Actions") by or before any Authority (as hereinafter
defined) and based on events, occurrences or conditions occurring or existing
prior to Closing, whether first asserted before or after the Closing Date, at
law, in equity or otherwise, including without limitation any such matters
relating to any of Seller's employees, suppliers, contractors/subcontractors or
customers of the Business;
(f) except with respect to Assumed Liabilities described in
Section 1.4(b) or as otherwise provided in Section 2.5 or 2.6, all liabilities
for Taxes (as hereinafter defined) (i) imposed upon Seller or its Affiliates or
(ii) arising out of or relating to the Business or the Assets with respect to
taxable periods, or portions thereof, ending prior to the Closing Date;
(g) except as otherwise provided in this Agreement, any
liability or obligation of Seller arising or incurred in connection with the
negotiation, preparation and execution of this Agreement and the transactions
contemplated hereby and any fees and expenses of counsel, accountants, brokers,
financial advisors or other experts of Seller or any of its Affiliates;
(h) except with respect to Assumed Liabilities described in
Sections 1.4(b) and 1.4(c), any workers' compensation or employment claims
relating to the Business arising from the operation of the Business prior to the
Closing (whether asserted prior to or after the Closing);
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(i) except with respect to Assumed Liabilities described in
Section 1.4(b) or on Schedule 1.5(i), any liabilities or obligations owed by the
Business to Seller or any of its Affiliates;
(j) except with respect to Assumed Liabilities described in
Sections 1.4(b) and 1.4(c), any liabilities or obligations to any of Seller's
employees or former employees for or relating to periods prior to the Closing
Date;
(k) any Excluded Current Liability (hereinafter defined); and
(l) all liabilities and obligations of Seller and its
Affiliates not relating to the operation of the Business.
All liabilities or obligations of Seller JV shall remain liabilities or
obligations of Seller JV after the Closing.
Section 1.6. ASSETS OWNED BY AFFILIATES. To the extent that any Assets are
owned by any Affiliate of Seller (other than the assets of Seller JV reflected
on the Financial Statements), Seller shall cause such Affiliate to transfer such
Assets to Buyer on or before the Closing Date.
Section 1.7. DESIGNATION OF BUYER AFFILIATES. The Buyer Parties may
designate one or more Affiliates to acquire at the Closing all or part of the
Assets or to assume all or part of the Assumed Liabilities; provided, however,
that the Buyer Parties shall remain jointly and severally liable to Seller for
the Assumed Liabilities and all of their other obligations under this Agreement.
ARTICLE II.
PURCHASE PRICE
Section 2.1. PURCHASE PRICE. Subject to adjustment pursuant to Section
2.2, the aggregate amount of cash consideration to be paid for the Business and
the Assets (the "Purchase Price") shall be (w) Five Hundred Forty Million
Dollars ($540,000,000), plus (x) the Pre-Closing Capital Expenditures
(hereinafter defined), minus (y) the AR Bad Debt Reserve (hereinafter defined)
to the extent that Buyer has elected to reduce the Purchase Price by such amount
pursuant to Section 2.8(b) minus (z) $18,982 (which amount has been calculated
as provided in Schedule 2.1).
Section 2.2. Payment of Purchase Price.
(a) Prior to the Closing, Seller and Buyer shall agree upon
the estimated Working Capital Deficit or Working Capital Surplus, as the case
may be. For purposes of this Agreement, the term "Working Capital Deficit" shall
mean the amount by which the Net Working Capital is less than Eighty-Three
Million, Eight Hundred Eighty-Five Thousand Dollars ($83,885,000) (the "Target
Working Capital") and the term "Working Capital Surplus" shall mean the amount
by which the Net Working Capital exceeds the Target Working Capital. Seller
represents that the Target Working Capital has been determined in accordance
with the calculations set forth on Schedule 2.2(a) attached hereto, which
calculations are based upon the
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relevant accounts of Seller and Seller JV as of October 31, 2004 and in
accordance with Seller's divisional accounting policies and principles described
on Schedule 2.2(a) (the "Divisional Accounting Policies") applied consistently
with past practices. Buyer and Seller agree that the determination of the amount
of Net Working Capital as described in Section 2.2(a) shall be calculated in the
same manner as the Target Working Capital as shown on Schedule 2.2(a), including
adjustments set forth therein, and in accordance with the Divisional Accounting
Policies applied consistently with past practices. For purposes of this
Agreement, the term "Net Working Capital" shall mean an amount equal to the
Current Assets (hereinafter defined) on the Closing Date, minus the Current
Liabilities (hereinafter defined) on the Closing Date. For purposes of this
Agreement, "Current Assets" shall mean all current assets of the Business and
60% of the current assets of Seller JV as described on Schedule 2.2(a) hereto,
other than the Excluded Assets. "Current Liabilities" shall mean the current
liabilities of the Business and 60% of the current liabilities of Seller JV as
described on Schedule 2.2(a) hereto other than the Excluded Liabilities and
shall include 50% of the Demopolis maintenance outage reserve (100% of the
weekly accrual of which is $90,000) for the Combined Business for the period
commencing on January 3, 2005 and ending on the Closing Date; provided, however,
that Buyer may elect not to assume any current liability by giving written
notice to Seller prior to Closing specifying the current liability which Buyer
elects not to assume (the "Excluded Current Liability"), in which case such
Excluded Current Liability shall not be an Assumed Liability for any purposes
including for the purpose of the determination of Net Working Capital in the
Final Working Capital Schedule. In the event Buyer and Seller are unable to
reach agreement regarding the estimated amount of the Working Capital Deficit or
the Working Capital Surplus, as the case may be, the estimated amount of the
Working Capital Deficit or the Working Capital Surplus, as the case may be,
shall be the arithmetical average of the amounts reasonably estimated in good
faith by Buyer and Seller.
(b) On the Closing Date, Buyer shall pay or cause to be paid
to Seller an amount equal to the Purchase Price minus the estimated Working
Capital Deficit, if any, determined in accordance with Section 2.2(a), or plus
the estimated Working Capital Surplus, if any, determined in accordance with
Section 2.2(a).
(c) Within five (5) business days following the determination
of the Final Working Capital Schedule (hereinafter defined) in accordance with
Section 2.3:
(1) If there is a Working Capital Deficit, then Seller
shall pay to Buyer an amount equal to the Working Capital Deficit minus the
amount subtracted from the Purchase Price with respect to an estimated Working
Capital Deficit, if any, determined in accordance with Section 2.2(a) or plus
the amount added to the Purchase Price with respect to an estimated Working
Capital Surplus, if any, determined in accordance with Section 2.2(a).
Notwithstanding the foregoing, in the event the estimated Working Capital
Deficit determined in accordance with Section 2.2(a) exceeds the Working Capital
Deficit, Buyer shall pay Seller an amount equal to the excess of the estimated
Working Capital Deficit determined in accordance with Section 2.2(a) over the
Working Capital Deficit. If a dispute exists between the parties regarding the
amount of the Working Capital Deficit, the party owing payment shall pay to the
other party the uncontested amount at the time the dispute is submitted to the
Arbitrator (as hereinafter defined) for determination pursuant to Section
2.3(c).
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(2) In the event there is a Working Capital Surplus,
then Buyer shall pay to Seller an amount equal to the Working Capital Surplus
minus the amount added to the Purchase Price with respect to an estimated
Working Capital Surplus, if any, determined in accordance with Section 2.2(a) or
plus the amount subtracted from the Purchase Price with respect to an estimated
Working Capital Deficit, if any, determined in accordance with Section 2.2(a).
Notwithstanding the foregoing, in the event the estimated Working Capital
Surplus determined in accordance with Section 2.2(a) exceeds the Working Capital
Surplus, Seller shall pay to Buyer an amount equal to the excess of the
estimated Working Capital Surplus determined in accordance with Section 2.2(a)
over the Working Capital Surplus. If a dispute exists between the parties
regarding the amount of Working Capital Surplus, the party owing payment shall
pay to the other party the uncontested amount at the time the dispute is
submitted to the Arbitrator for determination pursuant to Section 2.3(c).
(3) Any payment made pursuant to this Section 2.2(c)
shall include simple interest from the Closing Date through the date of such
payment at a per annum rate equal to the Federal Funds Rate plus 100 basis
points on the Closing Date (the "Agreed Rate") .
(d) All payments required under this Section 2.2 or any other
provision hereof shall be made in cash by wire transfer of immediately available
funds to such bank account(s) as shall be designated in writing by the
recipient.
Section 2.3. ADJUSTMENT OF PURCHASE PRICE.
(a) As soon as practicable, but in any event within sixty (60)
days after the Closing Date, Seller shall prepare, or cause to be prepared, and
deliver to Buyer a statement of the Net Working Capital (the "Preliminary
Working Capital Schedule"). Such statement shall be prepared in accordance with
the Divisional Accounting Policies consistently applied.
(b) Buyer shall have sixty (60) days following receipt of the
Preliminary Working Capital Schedule during which to notify Seller in writing of
any dispute of any item contained in the Preliminary Working Capital Schedule,
which notice shall set forth in reasonable detail the basis for such dispute. In
the event Buyer does not notify Seller in writing of any such dispute within
such 60-day period, the Preliminary Working Capital Schedule shall be deemed to
be the "Final Working Capital Schedule." In the event that Buyer does notify
Seller of a dispute within such 60-day period, Buyer and Seller shall cooperate
in good faith to resolve such dispute as promptly as possible, and if such
dispute is resolved, the Final Working Capital Schedule shall be prepared in
accordance with the agreement of Buyer and Seller with respect thereto.
(c) In the event Buyer and Seller are unable to resolve any
dispute regarding the Preliminary Working Capital Schedule within fifteen (15)
days following notice of such dispute, such dispute shall be submitted to, and
all issues having a bearing on such dispute shall be resolved by Deloitte or a
nationally recognized accounting firm selected by Buyer and Seller (such
identified accounting firm or, if applicable, the firm so selected, the
"Arbitrator"). Such resolution shall be final and binding on the parties. The
Arbitrator shall be instructed to use
9
commercially reasonable efforts to complete its work within thirty (30) days
following its engagement. Each of Seller and Buyer shall pay one-half of the
expenses of the Arbitrator.
(d) Seller, Buyer and their respective accountants and other
representatives shall fully cooperate with the other in the preparation and
review of the Preliminary Working Capital Schedule including, without
limitation, by providing access to accountant's work papers relevant to the
Preliminary Working Capital Schedule, as well as the books and records related
thereto.
Section 2.4. PHYSICAL INVENTORY. For purposes of calculating the Net
Working Capital, the identification and valuation of the Inventory purchased by
Buyer hereunder and the inventory of Seller JV shall be determined based upon a
physical inventory jointly conducted by Buyer and Seller on or before the
Closing Date; provided, however, that the value of the Inventory set forth on
the books of the Business as of the Closing Date and the inventory of Seller JV
shall only be adjusted for (a) any quantity discrepancies and (b) any
adjustments necessary to conform the value of Inventory to the Divisional
Accounting Policies. If in connection with determining the Net Working Capital,
Buyer determines in good faith that the inventory value of any inventory should
be adjusted downward to conform to the Divisional Accounting Policies, then
Seller shall have the option to exclude the affected Inventory not yet sold by
Buyer from the Assets by written notice to Seller prior to calculation of the
Net Working Capital, and promptly following such notice, such Inventory will be
transferred back to Seller and shall not be included in the Net Working Capital
included on the Final Working Capital Schedule and thereafter not included in
the definition of "Inventory" hereunder (any inventory so excluded being
referred to as "Excluded Inventory"). At Seller's request, Buyer shall use
commercially reasonable efforts to sell any Excluded Inventory in the ordinary
course of business for up to 120 days after the Closing Date and shall pay over
to Seller the net proceeds of any such sale actually collected by Buyer, less
customer discounts and freight charges or any other amounts paid or payable by
Buyer with respect thereto, and as to any unsold Excluded Inventory, Buyer shall
make Excluded Inventory available to Seller, at Seller's expense, at the
expiration of the 120-day period; provided, however, that Buyer shall have no
liability to Seller if such Excluded Inventory is not sold or is sold at a
discount with the prior written consent of Seller.
Section 2.5. SALES AND TRANSFER TAXES AND FEES; REPORTING AND PAYMENT;
OTHER CLOSING COSTS AND EXPENSES. Seller and Buyer shall each pay when due one
half of any and 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 transactions contemplated by this Agreement, and Seller
shall, at its own expense, timely file all necessary Tax Returns (as defined in
Section 3.12(b)) and other documentation with respect to all such Taxes, fees,
and charges. Buyer will pay all costs and expenses incurred by Buyer in
connection with any title insurance examinations or title policy premiums,
surveys, environmental assessments, and all other diligence conducted by Buyer
in connection herewith. Buyer and Seller shall each pay one-half of the filing
fee to be paid in connection with the filings to be made pursuant to Section 5.9
to comply with the requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended (the "HSR Act"). All other costs and expenses shall be
borne by the party incurring such costs or expenses.
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Section 2.6. PRORATION OF AD VALOREM TAXES AND OTHER EXPENSES.
(a) All ad valorem Taxes levied with respect to all Real
Property and all personal property constituting the Assets and any portion
thereof for the year in which the Closing occurs shall be prorated per diem as
of the Closing Date, with Seller responsible for all Taxes applicable to the
period prior to the Closing Date and with Buyer responsible for all Taxes
applicable to the period on and after the Closing Date. The portion of such
Taxes applicable to the period prior to the Closing Date shall be included as
accrued liabilities of the Business for purposes of determining the Net Working
Capital on the Preliminary Working Capital Schedule and the Final Working
Capital Schedule and to the extent so included shall be paid when due by Buyer.
If the amount of any such Taxes is not known as of the Closing Date, such Taxes
shall be prorated based on the Tax bills for the immediately preceding year, and
the parties will, on a post-closing basis, reprorate such Taxes once the actual
Taxes are known, and shall remit to each other any amounts owed, which
obligation shall survive the Closing hereunder. Seller shall, prior to the
Closing Date, pay all assessments and ad valorem Taxes levied with respect to
the Assets due and payable for all periods prior to the Closing Date.
(b) All other expenses of the Business that are incurred for a
period that relate to a period before or after the Closing Date and of the type
where benefit is received by both Buyer and Seller shall be prorated on a daily
basis between Seller and Buyer as of the Closing Date, and the portion relating
to the periods prior to the Closing Date shall be included as accrued
liabilities of the Business for purposes of determining the Net Working Capital
on the Preliminary Working Capital Schedule and the Final Working Capital
Schedule. Seller agrees that all expenses, charges, bills, or trade accounts
maintained or incurred by Seller or its agents in connection with the management
or operation of the Business or otherwise accrued for the period prior to the
Closing Date that are not Assumed Liabilities will be paid in full by Seller in
a timely manner; provided, however, that all such expenses, charges, bills, or
trade accounts that have accrued but have not been billed as of the Closing
Date, that are not Assumed Liabilities, will be paid in full by Seller at the
▇▇▇▇ ▇▇▇▇▇▇ receives the bills. Without limiting the generality of the
foregoing, the following items will be adjusted as of the Closing Date:
(1) rent (excluding rents due under the IDB Leases,
which match the interest payments on the Bonds) and other charges payable under
leases for any leased real property or leased personal property and all service
charges under the IDB Leases;
(2) water and utility charges and sanitary sewer Taxes;
(3) charges under service, management or other
agreements, if any, that remain in effect after the Closing Date and are
expressly assumed by Buyer; and
(4) other operating expenses not covered by any of the
above subparagraphs.
Section 2.7. CERTAIN ASSIGNMENTS.
(a) Buyer and Seller shall use commercially reasonable efforts
to obtain each consent necessary to assign any Asset, including the Assumed
Contracts, to Buyer, and Buyer
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and Seller shall use commercially reasonable efforts to obtain all requisite
consents under the IDB Leases in order to assign the IDB Leases to Buyer.
(b) Notwithstanding anything to the contrary in this
Agreement, this Agreement shall not constitute an agreement to assign or
transfer any governmental approval, instrument, contract, lease, Permit or other
agreement or arrangement or any claim, right or benefit arising thereunder or
resulting therefrom if an assignment or transfer or an attempt to make such an
assignment or transfer without the consent of a third party or Authority (as
hereinafter defined) would constitute a breach or violation thereof or affect
adversely the right of Buyer or Seller thereunder; and any transfer or
assignment to Buyer by Seller of any interest under any such instrument,
contract, lease, Permit or other agreement or arrangement that requires the
consent of a third party or Authority shall be made subject to such consent or
approval being obtained. In the event any such consent or approval is not
obtained on or prior to the Closing Date, Seller and Buyer shall continue to use
all commercially reasonable efforts to obtain any such approval or consent after
the Closing Date until such time as such consent or approval has been obtained,
and Seller will cooperate with Buyer in any lawful or economically feasible
arrangement to provide that Buyer shall receive the interest of Seller in the
benefits under any such instrument, contract, lease, Permit or other agreement
or arrangement, including, without limitation, performance by Seller as agent,
if economically feasible; provided that if Buyer shall receive the interest of
Seller in the benefits under any such instrument, contract, lease, Permit or
other agreement or arrangement prior to such time as consent or approval has
been obtained, Buyer shall undertake to pay or satisfy the corresponding
liabilities for the enjoyment of such benefit to the extent Buyer would have
been responsible therefor hereunder if such consent or approval had been
obtained. Notwithstanding the foregoing, if any consent or approval has not been
obtained as of the Closing with respect to any instrument, contract, lease,
Permit or other agreement or arrangement of the Combined Business, then, at
Buyer's request, Seller shall transfer and assign to Buyer such instrument,
contract, lease, Permit or other agreement or arrangement with a disclaimer of
any warranties with respect to such assignment.
Section 2.8. ACCOUNTS RECEIVABLE.
(a) Prior to the Closing Date, Seller agrees to review its
accounts receivable and to write off long delinquent accounts and other accounts
of doubtful collectability.
(b) Prior to the Closing Date, Buyer agrees to notify Seller
in writing that it elects one of the following, which election shall be binding
on the parties:
(1) at the Closing, the Purchase Price shall be reduced
by an amount equal to the bad debt reserve for accounts receivables determined
in accordance with the methodology for establishing bad debt reserves reflected
in the Carve Out Audited Financial Statements (the "AR Bad Debt Reserve"); or
(2) if accounts receivable outstanding at the Closing
included in the Net Working Capital on the Final Working Capital Schedule are
not collected within one year after the Closing Date, then Seller Parent will
pay to Buyer the gross book value of such uncollected accounts receivable in
excess of One Million Dollars ($1,000,000) and Buyer will promptly transfer back
to Seller such uncollected accounts receivable.
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Section 2.9. PRE-CLOSING CAPITAL EXPENDITURES. In the event that Seller
proposes after the date hereof and prior to the Closing Date to make any new
discretionary, non-maintenance capital expenditures with respect to the Business
that individually or in the aggregate exceed $100,000, Seller will promptly
provide written notice to Buyer containing a description of the purpose for any
such capital expenditure, the estimated amount of any such capital expenditure
and such other information as Buyer may reasonably request. Buyer shall notify
Seller in writing as promptly as practicable after receipt of such notice
whether or not Buyer approves any such proposed capital expenditure by Seller.
If Buyer disagrees with Seller with regard to the need for any such capital
expenditure, the amount of any such capital expenditure or any other issue
relating to such capital expenditure, Buyer shall promptly notify Seller, and
the parties shall promptly discuss any such disagreement and attempt in good
faith to reach a mutual agreement with respect to the proposed capital
expenditure. If the parties reach a mutual agreement with respect to any such
proposed capital expenditure, Seller shall make the approved capital
expenditures in accordance with the agreement of the parties and shall deliver
to Buyer immediately prior to Closing a statement of all expenditures actually
made by Seller in connection with such capital expenditures approved by Buyer,
and the amount of such approved capital expenditures actually paid by Seller in
excess of $100,000 shown on such statement (the "Pre-Closing Capital
Expenditures") shall be added to the Purchase Price in accordance with Section
2.1. In the event that the project in respect of any such approved capital
expenditures is not completed on or before the Closing Date, Buyer shall assume
all obligations of Seller with respect to any remaining costs of such approved
capital expenditure as of Closing and such costs shall be Assumed Liabilities
hereunder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to the Buyer Parties as follows:
Section 3.1. ORGANIZATION. Each of Seller Parent and Seller Sub I is a
corporation duly organized, each of Seller Sub II and Seller JV is a limited
liability company duly formed, Seller Sub III is a limited partnership duly
formed, and each of Seller and Seller JV is validly existing and in good
standing under the laws of Delaware and has all requisite power and authority
(corporate and other) to own, lease and operate its properties and to carry on
its business as now being conducted, including, without limitation, the
Business. Each of Seller and Seller JV is duly qualified to transact business
and is in good standing as a foreign corporation or foreign limited liability
company or foreign limited partnership in each jurisdiction where the character
of its activities requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect. Each of Seller and Seller JV
has heretofore made available to Buyer true, correct and complete copies of its
certificates of incorporation, certificates of formation, bylaws and operating
or partnership agreements in effect as of the date hereof.
Section 3.2. AUTHORIZATION. Each Seller has the full power and authority
to execute and deliver this Agreement and any other certificate, agreement,
document or other instrument to be executed and delivered by it in connection
with the transactions contemplated hereby and the consummation hereof at Closing
(collectively, the "Seller Ancillary Documents") and to perform
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its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Seller Ancillary Documents by each Seller and the performance by each
Seller of its obligations hereunder and thereunder and the consummation of the
transactions provided for herein and therein have been duly and validly
authorized by all necessary corporate or other action on the part of each
Seller. The board of directors, the stockholders, the partners and the members
of each Seller have approved the execution, delivery and performance of this
Agreement and the Seller Ancillary Documents and the transactions contemplated
hereby and thereby. This Agreement has been, and the applicable Seller Ancillary
Documents will be as of the Closing Date, duly executed and delivered by each
Seller and assuming the due and valid authorization, execution and delivery
thereof by the other parties thereto, do or will, as the case may be, constitute
the valid and binding agreements of such Seller, enforceable against such Seller
in accordance with their respective terms, subject to applicable bankruptcy,
insolvency and other similar Laws (as defined herein) affecting the
enforceability of creditors' rights generally, general equitable principles and
the discretion of courts in granting equitable remedies.
Section 3.3. ABSENCE OF RESTRICTIONS AND CONFLICTS. Except as set forth in
Schedule 3.3, the execution, delivery and performance of this Agreement and the
Seller Ancillary Documents, the consummation of the transactions contemplated by
this Agreement and the Seller Ancillary Documents and the fulfillment of and
compliance with the terms and conditions of this Agreement and the Seller
Ancillary Documents do not or will not, with the passing of time or the giving
of notice or both, violate or conflict with, constitute a breach of or default
under, result in the loss of any benefit under, or permit the acceleration of
any obligation under, (a) any term or provision of any certificate of
incorporation, certificates of formation, bylaws or operating or partnership
agreements of Seller or Seller JV, (b) any Assumed Contract, (c) any contract or
agreement to which Seller JV is a party, including, without limitation, the
Seller JV Leases (as hereinafter defined), (d) any judgment, decree or order of
any Authority to which Seller or Seller JV is a party or by which Seller, Seller
JV or any of the Assets or the assets of Seller JV is bound or (e) any Law
applicable to Seller, Seller JV or their respective businesses, excluding from
the foregoing clauses (d) and (e) such conflicts, losses of benefits or
accelerations (i) that are not material to the Combined Business or (ii) that
become applicable as a result of the lines of business in which Buyer is engaged
(to the extent different from the Combined Business) or as a result of any acts
or omissions by Buyer (other than actions required or contemplated by this
Agreement). Except as set forth on Schedule 3.3 hereof, no consent or approval
is required for the transfer or assignment of any Assumed Contract to Buyer.
Except for (i) compliance with the applicable requirements of the HSR Act and
(ii) consents required under IDB Leases, no consent, approval, order or
authorization of, or registration, declaration or filing with, any Authority
with respect to Seller or Seller JV is required in connection with the
execution, delivery or performance of this Agreement or the Seller Ancillary
Documents by Seller or the consummation of the transactions contemplated by this
Agreement or the Seller Ancillary Documents by Seller, excluding those consents,
approvals, orders, authorizations, registrations or declarations (i) that are
not material to the Combined Business or (ii) that become applicable as a result
of the line of business in which Buyer is engaged (to the extent different from
the Combined Business) or as a result of any acts or omissions by Buyer (other
than actions required or contemplated by this Agreement).
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Section 3.4. SUBSIDIARIES; JOINT VENTURE. Seller Parent owns 100% of the
issued and outstanding equity of Seller Sub I and no other Person has any right,
title or interest in or to Seller Sub I. Seller Sub I owns 100% of the issued
and outstanding equity of Seller Sub II and no other Person has any right, title
or interest in or to Seller Sub II. Seller Sub I and Seller Sub II own all of
the partnership interests in Seller Sub III, and no other Person has any right,
title or interest in Seller Sub III. Schedule 3.4 sets forth each of the owners
of Seller JV and their respective equity interests and no other person has any
right, title or interest in or the Seller JV. Other than the Seller JV Interest
and the wholly-owned subsidiaries of Seller Parent listed on Schedule 3.4,
Seller does not own, directly or indirectly, any capital stock or any other
equity or debt securities of any corporation, firm, partnership, limited
liability company, joint venture, association or other entity that owns any
portion of the Business or any of Assets or any other assets or property
utilized in or necessary to the operation of the Business or the Assets. Seller
has delivered to Buyer a true and correct copy of the Limited Liability Company
Agreement of GSD Packaging, LLC dated as of August 31, 1998, as amended by (i)
that certain First Amendment to Limited Liability Company Agreement of GSD
Packaging, LLC effective as of October 1, 1999, (ii) that certain Second
Amendment to Limited Liability Company Agreement of GSD Packaging, LLC effective
December 30, 2001, and (iii) that certain Third Amendment to Limited Liability
Company Agreement of GSD Packaging, LLC effective March 3, 2002 (as amended, the
"JV Agreement") and the JV Agreement is in full force and effect. Except for the
amendments set forth in the preceding sentence, the JV Agreement has not been
amended, modified or otherwise revised. The representations and warranties of
Seller set forth in the JV Agreement were true and correct in all material
respects when made and Seller has performed its covenants and agreements set
forth in the JV Agreement in all material respects that are required to be
performed prior to the date hereof.
Section 3.5. OWNERSHIP OF ASSETS AND RELATED MATTERS.
(a) REAL PROPERTY.
(1) Schedule 3.5(a) sets forth the street addresses of
and true, correct and complete legal descriptions of (a) the Seller Real
Property, which includes the Columbus, Georgia and Hazelton, Pennsylvania Fee
Parcels that are owned by Seller Parent and leased to Seller JV (the "Seller JV
Leased Parcels") pursuant to the leases (the "Seller JV Leases") described on
Schedule 3.5(a), and (b) the real property, the easements, and appurtenances
thereto, and all buildings, structures, fixtures and improvements located
thereon owned by Seller JV (the "Seller JV Fee Parcel") (the items described in
(a) through (b) are collectively referred to as the "Real Property"). Except for
the Real Property, there is no other real property or improvements that are used
in connection with the operation of the Business other than Seller's corporate
headquarters in Tuscaloosa, Alabama ("Seller's Corporate Offices") and other
than as set forth on Schedule 3.5(a). Seller has good, marketable and insurable
fee simple title to the Fee Parcels, and a valid, enforceable and insurable
leasehold estate in the Leasehold Parcels, and Seller JV has good, marketable,
and insurable fee simple title to the Seller JV Fee Parcel and Seller JV has a
valid, enforceable, and insurable leasehold estate in the Seller JV Leased
Parcels, all free and clear of all liens, pledges, mortgages, security
interests, charges, claims, leasehold interests, tenancies, restrictions and
encumbrances of any nature whatsoever other than (A) liens for Taxes not yet due
and payable or that are properly being contested in good faith, (provided that
Schedule 3.5(a) only lists such liens as of the date of this
15
Agreement), (B) statutory liens of landlords and liens of carriers,
warehousemen, mechanics, materialmen and repairmen incurred in the ordinary
course of business and not yet delinquent by more than thirty (30) days or that
are being properly contested in good faith, as listed on Schedule 3.5(a)
(provided that Schedule 3.5(a) only lists such liens as of the date of this
Agreement), (C) zoning, building or other restrictions, variances, covenants,
rights-of-way, easements and other nonmonetary encumbrances to title
(collectively, "NonMonetary Encumbrances"), none of which NonMonetary
Encumbrances, individually or in the aggregate, (1) materially interfere with
the present use or occupancy of any of the Real Property, (2) have a material
adverse effect on the value thereof or its use or (3) would materially impair
the ability of Buyer or Seller JV to use, occupy or sell the Fee Parcel or the
Seller JV Fee Parcel or to use, occupy or sublet the Leasehold Parcels or the
Seller JV Leased Parcels or to assign the IDB Leases or the Seller JV Leases, in
each case for its respective present use, (D) the lien associated with the
indebtedness relating to Seller's facility located in Hazelton, Pennsylvania
(the "▇▇▇▇▇▇▇▇ ▇▇▇▇"), which lien Seller shall cause to be satisfied at or prior
to Closing and (E) those items listed as Permitted Encumbrances on Schedule
3.5(a) to the extent constituting an encumbrance on the Real Property; provided,
however, as to items listed on Schedule 3.5(a) as Permitted Encumbrances, such
items shall not be Permitted Encumbrances if such items, when considered solely
in light of information with respect thereto reflected on surveys of the
applicable Real Property secured by Buyer pursuant to Section 5.6 hereof, fail
to satisfy either or both of clause (1) and clause (3) of the definition of
NonMaterial Encumbrances set forth in this Section 3.5(a) (the matters described
in clauses (A) through (E) hereof, subject to the proviso set forth immediately
following (E), are collectively "Permitted Encumbrances");
(2) Seller has heretofore delivered to Buyer true,
correct and complete copies of all deeds, certificates of occupancy, title
insurance policies, title reports, surveys, zoning reports, environmental
assessments or reports and all other similar documents (including all amendments
thereof) in the possession or control of Seller relating to the Real Property,
including, without limitation, the IDB Leases and the Seller JV Leases;
(3) Except for Permitted Encumbrances, (A) no portion of
the Real Property is subject to any recorded rights of way, building use
restrictions, exceptions, variances, reservations or limitations of any nature
whatsoever (each a "Restriction"), or (B) to the knowledge of Seller, no portion
of the Real Property is subject to any unrecorded Restriction;
(4) The buildings, structures, fixtures and improvements
on the Real Property (collectively, the "Improvements") currently are and have
continuously been maintained in good order and repair, ordinary wear and tear
excepted, but except for and subject to the representations and warranties set
forth in this Agreement, are otherwise being transferred on a "where is" and, as
to the condition, "as is" basis;
(5) There are no eminent domain, condemnation, taking,
or other similar proceedings pending or, to the knowledge of Seller or Seller
JV, threatened, with respect to or affecting any portion of the Real Property or
access thereto or any Improvements by any governmental or quasi-governmental
entity or agency or any utility company having similar rights or powers of
eminent domain;
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(6) There are no writs, injunctions, decrees, orders or
judgments outstanding, nor any actions, claims, suits or proceedings pending,
or, to the knowledge of Seller or Seller JV, threatened, relating to the
ownership, lease, use, occupancy or operation of the Real Property or any
portion thereof or the Improvements;
(7) Seller and Seller JV, respectively, are in
possession of all of the Real Property and all Improvements located thereon, and
except as set forth on Schedule 3.5(a), there are no leases, subleases, Permits
or other agreements granting rights to possession of the Real Property or any
portion thereof to which Seller or Seller JV is a party or by which Seller,
Seller JV or the Real Property or the Improvements are bound, and there are no
outstanding options or rights of first refusal to purchase the Real Property or
any portion thereof or interest therein to which Seller or Seller JV is a party
or by which Seller, Seller JV or the Real Property or the Improvements are
bound;
(8) The use and operation of the Real Property and the
Improvements in the conduct of the Business do not violate in any material
respect any instrument of record or agreement affecting the Real Property and
the Improvements or any portion thereof, including without limitation the
Permitted Encumbrances. There are no material violations of any covenant,
condition, restriction, easement or order of any Authority having jurisdiction
over the Real Property or the Improvements or any other person entitled to
enforce the same affecting the Real Property, the Improvements, or the use or
occupancy thereof;
(9) The Real Property and Improvements comply in all
material respects with all applicable building, zoning, subdivision and other
land use and similar applicable Laws affecting the Real Property (collectively,
the "Real Property Laws"), and Seller and Seller JV have not received any notice
in writing of any material violation or claimed violation of any Real Property
Law. To the knowledge of Seller, there are no pending changes in any Real
Property Law affecting the ownership, alteration, use, occupancy or operation of
any portion of the Real Property or the Improvements. All Improvements have
received all material approvals of Authorities (including, without limitation,
licenses and Permits) required in connection with the operation thereof and have
been operated and maintained in all material respects in accordance with all
applicable Laws;
(10) Each parcel of land constituting a portion of the
Real Property is assessed for real property Tax purposes as a wholly independent
Tax lot, separate from adjoining land or improvements not constituting a part of
that parcel. There are no pending Tax appeals or appeals therefrom with respect
to any portion of the Real Property;
(11) All utilities, including gas, electricity, water,
telephone, sanitary sewer and storm sewer, necessary for the operation of the
Business are available at the Real Property in quantities sufficient for the
conduct of the Business in the ordinary course as it is conducted by Seller in
the ordinary course and are provided to the Real Property via public rights of
way or via easements that are appurtenant easements benefiting the applicable
portion thereof and, to the knowledge of Seller, such easements are permanent
and irrevocable (subject to any future actions by any Authority that could
adversely affect any such easements); and
17
(12) Each parcel of land constituting a portion of the
Real Property abuts upon and has direct vehicular access to a paved public right
of way and access to such public right of way is available with curb cuts to
service the Business as it is conducted by Seller.
(b) NECESSARY ASSETS. Other than the Excluded Assets described
on Schedule 1.3(c), all assets owned by Seller, Seller JV, and their respective
Affiliates that are used or held for use in the operation of the Business are
included in the Assets or are owned by Seller JV. Other than the Excluded Assets
described on Schedule 1.3(c), the Assets constitute all of the assets necessary
and sufficient to conduct the operations of the Combined Business (as defined in
Section 3.6) as it is conducted by Seller in the ordinary course. Seller has and
will convey to Buyer at the Closing good and marketable title to the Assets free
and clear of all liens, pledges, security interests, charges, claims,
restrictions and encumbrances of any nature whatsoever other than Permitted
Encumbrances and Assumed Liabilities, if applicable. Except as set forth on
Schedule 3.5(b), there are no letters of credit or performance bonds required to
conduct the Combined Business as they are currently conducted.
(c) TANGIBLE PERSONAL PROPERTY. Each item of Tangible Personal
Property of Seller and each item of personal property of Seller JV ("Seller JV
Personal Property") has been maintained in the ordinary course of business and
is in good operating condition, ordinary wear and tear excepted, in light of the
age and use made of such Tangible Personal Property in conducting the operation
of the Business or of such Seller JV Personal Property in connection with the
operation of Seller JV's business, but, except for and subject to the
representations and warranties set forth in this Agreement, is otherwise being
transferred on a "where is" and, as to condition, "as is" basis. Except as set
forth on Schedule 3.5(c), Seller and Seller JV are the fee simple owners,
respectively, of the Tangible Personal Property and Seller JV Personal Property
and no person other than Seller or Seller JV owns any equipment or other
tangible assets or properties situated on the Real Property or the Improvements.
Except as set forth on Schedule 3.5(c), since December 31, 2003, Seller and
Seller JV have not sold, transferred or disposed of any assets related to the
Business for an aggregate purchase price in excess of $250,000 other than sales
of Inventory in the ordinary course of business.
(d) INVENTORIES. The portion of the Tangible Personal Property
consisting of Inventory of Seller and Seller JV Personal Property consisting of
inventory of Seller JV, respectively, included in the Assets (i) are sufficient
for the operation of the Combined Business as it is conducted in the ordinary
course by Seller, (ii) consist of items which are good and merchantable within
normal trade tolerances, (iii) are of a quality and quantity presently usable or
saleable in the ordinary course of business of Seller and Seller JV (subject to
applicable reserves consistent with the Divisional Accounting Policies applied
consistently with past practice), and (iv) are valued on the books and records
of Seller and Seller JV on the FIFO basis at the lower of cost or market with
the cost determined under methods consistent with the Divisional Accounting
Policies applied consistently with past practice.
(e) LEASES. Seller and Seller JV have delivered true, correct
and complete copies of the IDB Leases, the Seller JV Leases, the sublease for
the "Rooster Bridge Chip Mill" property (the "Chip Mill Lease") and all
documents, instruments and files material thereto. The IDB Leases, the Chip Mill
Lease and the Seller JV Leases are in full force and
18
effect and have not been modified or amended in any respect. Seller and Seller
JV, respectively, are not now, nor have Seller or Seller JV ever been, in
default under the IDB Leases, the Chip Mill Lease or the Seller JV Leases,
respectively, and there are no events or circumstances known to Seller which,
with the giving of notice or passage of time, or both, would constitute defaults
under the IDB Leases, the Chip Mill Lease or the Seller JV Leases, respectively,
and Seller and Seller JV have never received any notice (oral or written)
alleging any such default. To the knowledge of Seller, the landlord under each
of the IDB Leases or the Chip Mill Lease is not now nor has such landlord ever
been, in default of their obligations under the IDB Leases or the Chip Mill
Lease nor are there any events or circumstances which, with the giving of notice
or passage of time, or both, would constitute defaults thereunder. There are no
consents required under the IDB Leases or the Chip Mill Lease to the assignment
of the IDB Leases or the Chip Mill Lease to Buyer or Buyer's acquisition of the
Seller JV Interests, except as set forth on Schedule 3.5(e). Seller Parent is
the owner and holder of all of the interest of the landlord under the Seller JV
Leases and has not pledged or assigned such interest or any rent payable
thereunder.
(f) IDB BONDS. Seller Parent is the registered owner and
holder of all of the Bonds, free and clear of all liens, claims and encumbrances
other than transfer restrictions in the Bond Documents (hereinafter defined),
and Seller Parent has not transferred or assigned the Bonds or any interest
therein and has not pledged or encumbered the Bonds or Seller Parent's interest
therein or any right to payments thereunder. Schedule 3.5(f) contains a listing
of all of the Bonds and the outstanding principal and interest amounts payable
thereunder. Seller has delivered to Buyer true, correct and complete copies of
the Bonds and all documents, instruments and files material thereto
(collectively, the "Bond Documents"). The Bond Documents are in full force and
effect and have not been redeemed, modified or amended in any respect. The Bonds
have not been redeemed in whole or in part. Seller Parent has received all
payments due under the Bonds in full as and when due and in a timely fashion. To
Seller's knowledge there are no defaults or events which, with the giving of
notice or passage of time, or both, would constitute a default by the Board or
the Trustee (as such terms are defined in the Bonds, respectively) under the
Bonds, the Indentures (as defined in the Bonds) or any of the documents or
instruments delivered in connection therewith. Legal title to the IDB Leasehold
Parcel is in the Board, and by reason thereof the IDB Leasehold Parcel is, on
the date of this Agreement, treated as exempt from state and local ad valorem
taxes, subject to payment of the service payments referenced in Article X of the
IDB Leases. Seller has not paid any ad valorem taxes with respect to the IDB
Leasehold Parcel during the entire period that the IDB Leases has been in
effect, although the service payments referenced in Article X of the IDB Leases
were timely paid as and when due, and Seller has not received any notice (oral
or written) from the Tax Assessor of Marengo County, Alabama, the Revenue
Commissioner of Marengo County, Alabama, or the Alabama Department of Revenue,
or any other Authority questioning in any matter whether the IDB Leasehold
Parcel is exempt from ad valorem taxation. Seller has not received any notice of
any change in the status of the tax exemptions relating to the Bonds and there
is no Action pending or, to Seller's knowledge, threatened with respect to the
Bonds or the tax exemptions relating thereto.
(g) ACCOUNTS RECEIVABLE. The accounts receivable of Seller
included in the Assets and the accounts receivable of Seller JV shown in the
Carve Out Audited Financial Statements arose from bona fide transactions in the
ordinary course of business, have been
19
executed on terms consistent with the past practice of Seller and Seller JV and
are not subject to any counterclaims or setoffs (except for the amount of any
applicable existing reserves for counterclaims or setoffs).
(h) NO THIRD PARTY OPTIONS. Except as set forth on Schedule
3.5(h), there are no existing agreements, options, commitments or rights with,
of or to any person to acquire (i) any part of or interest in the Combined
Business or (ii) any of the Assets owned by Seller or (iii) to the knowledge of
Seller, any of the Assets leased to Seller or (iv) any of Seller JV's assets
(other than in connection with the sale of Inventory in the ordinary course of
business).
Section 3.6. FINANCIAL STATEMENTS.
(a) Seller has delivered to Buyer the following: (i) the
audited balance sheets of the Business and the Seller JV (collectively, the
"Combined Business") as of January 2, 2005 and December 28, 2003 and (ii) the
audited statements of income, shareholders' equity and cash flows of the
Combined Business for the fiscal years ended January 2, 2005, December 28, 2003
and June 2, 2002 and the seven-month period ended December 29, 2002
(collectively, including the notes thereto, the "Carve Out Audited Financial
Statements"). In addition, Seller has delivered to Buyer: (i) the unaudited
balance sheets of the Combined Business as of April 3, 2005 and (ii) the
unaudited statements of income, shareholders' equity and cash flows of the
Combined Business for the three-month periods ended April 3, 2005, which
financial statements have been prepared in a manner consistent with the Carve
Out Audited Financial Statements (collectively, including the notes thereto, the
"Interim Financial Statements" and, together with the Carve Out Audited
Financial Statements, the "Financial Statements"). The Financial Statements
fairly present, in all material respects, the financial condition and results of
operations of the Combined Business as of the dates and for the fiscal periods
presented, reflect the minority interest in Seller JV not owned by Seller, and
have been prepared in accordance with generally accepted accounting principles,
consistently applied in the periods presented (except as noted therein) and in
accordance with the requirements of the Securities Act of 1933, as amended, the
Securities and Exchange Act of 1934, as amended, and the rules and regulations
of the Securities and Exchange Commission promulgated thereunder, including,
without limitation, Regulation S-X.
(b) Except as disclosed on Schedule 3.6(b), Seller has not
engaged in any securitization transactions or "off-balance sheet arrangements"
(as defined in Item 303(a) of Regulation S-K of the Securities and Exchange
Commission).
Section 3.7. NO UNDISCLOSED LIABILITIES. Except as disclosed in Schedule
3.7, Seller and Seller JV do not have any liabilities or obligations related to
the Combined Business, contingent or otherwise which are not adequately
reflected, noted or provided for in the Financial Statements, except liabilities
and obligations incurred since April 3, 2005 in the ordinary course of business
consistent with past practices.
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Section 3.8. ABSENCE OF CERTAIN CHANGES.
(a) Except as set forth on Schedule 3.8(a), since January 2,
2005, nothing has occurred with respect to the Combined Business that has had
Material Adverse Effect and to the knowledge of Seller, nothing has occurred
with respect to the Combined Business that is reasonably likely to have a
Material Adverse Effect. Except as set forth on Schedule 3.8(a), since January
2, 2005, Seller and Seller JV, respectively, have each:
(1) used its commercially reasonable efforts to preserve
intact the goodwill and business organization of the Combined Business, and
preserve the relationships of the Combined Business with customers, suppliers,
employees, and others having business relationships with Seller or Seller JV
relating to the Combined Business;
(2) maintained Tangible Personal Property, including
Inventory, and otherwise maintained the Assets at ordinary levels and otherwise
in the ordinary course of business consistent with past practice;
(3) extended credit to customers, collected accounts
receivable and paid accounts payable and similar obligations in the ordinary
course of business consistent with past practice; and
(4) conducted the Combined Business in the ordinary
course on a basis consistent with past practice.
(b) Except as set forth on Schedule 3.8(b), since December 31,
2003, with respect to the Combined Business, Seller and Seller JV, respectively,
each have not:
(1) received notification in writing of a material
violation of any Law applicable to the Combined Business or the Assets;
(2) made any change in pricing its Inventory for resale
other than changes made in the ordinary course of business;
(3) made a disposition of assets relating to the
Combined Business in excess of $100,000, other than dispositions of Inventory in
the ordinary course of business;
(4) entered into employment, severance, compensation or
similar agreements with employees of the Combined Business except for (A)
incentive programs that by their terms expire at or before Closing or (B) in the
ordinary course of business;
(5) made increases in compensation or benefits payable
to any employees of the Combined Business other than in the ordinary course of
business;
(6) granted any license or sublicense of any rights
under or with respect to any patents, copyrights, software or other intellectual
property;
21
(7) suffered any extraordinary loss, damage, destruction
or casualty loss to the Combined Business or waived any rights of value, whether
or not covered by insurance and whether or not in the ordinary course of
business; or
(8) entered into any commitment to make capital
expenditures with an aggregate value in excess of $250,000, that has not been
fully paid or satisfied.
Section 3.9. LEGAL PROCEEDINGS. Except as set forth in Schedule 3.9 or
Schedule 3.15, as of the date of this Agreement, there are no suits, actions,
claims, proceedings or investigations pending or, to the knowledge of Seller and
Seller JV, threatened against, relating to or involving the Combined Business or
any of the Assets, before any Authority that, if finally determined adversely,
would reasonably be expected to result in a payment to the claimant in excess of
$100,000. None of such suits, actions, claims, proceedings or investigations, if
finally determined adversely, are reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect (as hereinafter defined). Except as
set forth on Schedule 3.9, Seller and Seller JV are not subject to any judgment,
decree, injunction, rule or order of any Authority, Seller and Seller JV are not
subject to any governmental restriction expressly applicable to Seller or Seller
JV which is reasonably likely to (a) have a Material Adverse Effect or (b) to
cause a material limitation on Buyer's ability to operate the Combined Business
after the Closing as it is conducted by Seller and Seller JV in the ordinary
course. For purposes of this Agreement, "Material Adverse Effect" means any
effects, events, occurrences or states of facts that, individually or in the
aggregate, (a) are, or would reasonably be expected to be, materially adverse to
the business prospects, operations, assets, liabilities, results of operations
or condition (financial or otherwise) of the Combined Business, Seller JV and
Assets taken as a whole, (b) are, or would reasonably be expected to be,
materially adverse to the value, serviceability, condition, or operation of the
mill and related Improvements located on the Leased Parcel in Demopolis,
Alabama, or (c) is likely to prevent or materially delay consummation of any of
the transactions contemplated by this Agreement; provided that in each case a
Material Adverse Effect will not be deemed to include effects, events,
occurrences or states of facts (1) generally affecting the paper, paperboard or
packaging industries, (2) resulting from general economic, business, political
or financial conditions (including changes in interest levels or prices of
securities), (3) arising from 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, (4) resulting from a change
in Buyer's credit rating or a change in the market price of Buyer's common
stock, or (5) any Customer Disruption (hereinafter defined) with respect to a
customer of the Combined Business resulting from any proposed change
communicated prior to the Closing Date by Buyer to such customer with respect to
service levels, pricing or plant locations serving or applicable to such
customer after the Closing Date.
Section 3.10. COMPLIANCE WITH LAW. Except as set forth on Schedule 3.10,
Seller and Seller JV have all material authorizations, approvals, licenses,
permits and orders of and from all governmental and regulatory officers and
bodies necessary to carry on the Combined Business as it is conducted by Seller
and Seller JV in the ordinary course, to own or hold under lease the properties
and assets it owns or holds under lease and to perform all of its obligations
under the agreements to which each is a party (collectively, "Permits"). Since
January 1, 2000, Seller and Seller JV have operated the Combined Business in
compliance in all material respects with all
22
applicable Laws, regulations, policies and orders (including, without
limitation, Laws relating to employment of labor or use or occupancy of
properties or any part thereof) of any Authority applicable to or having
jurisdiction over the Assets or the Combined Business. For purposes of this
Agreement, "Authority" means any tribunal or arbitrator(s) of competent
jurisdiction, any self-regulatory organization, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including any governmental or quasi-governmental
authority, agency, department, board, commission or instrumentality of the
United States, any foreign nation or government, or any domestic or foreign
state, county, city or other political subdivision. Schedule 3.10 sets forth a
true, correct and complete list of all material Permits of Seller and Seller JV
related to the Combined Business. For purposes of this Agreement, "Law" shall
mean any federal, state or local law (including, without limitation, common
law), rule, regulation or governmental requirement of any kind, and the rules,
regulations, guidelines, directives, rulings, policies and orders thereunder or
pursuant thereto.
Section 3.11. CONTRACTS.
(a) Schedule 3.11 contains a correct and complete list of
every contract, agreement, relationship, commitment or arrangement in effect on
the date hereof (collectively, the "Material Contracts"), written or oral,
relating to the Combined Business to which any of Seller or Seller JV is a party
or by which the Combined Business, the Assets or assets of Seller JV are bound
and which is:
(1) an agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for lease
payments reasonably expected to require an annual commitment or payment of more
than $100,000 in 2005 or any year thereafter;
(2) an agreement for the purchase or lease of any real
property reasonably expected to require an annual commitment or payment of more
than $100,000 in 2005 or any year thereafter (including, without limitation, the
Seller JV Leases);
(3) an agreement for the purchase or lease of any
machinery, equipment or other capital assets with a value in excess of $500,000;
(4) an 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, (A) the
performance of which will extend over a period of more than one year or involve
consideration in excess of $500,000, or (B) that constitutes a requirements or
output contract;
(5) an agreement concerning a partnership, limited
liability company or joint venture;
(6) an 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 $100,000;
23
(7) an agreement concerning confidentiality,
exclusivity, exclusive dealing or noncompetition or otherwise restricting or
limiting the conduct of the Combined Business;
(8) an agreement between the Combined Business, on the
one hand, and Seller or its Affiliates or Seller JV or its Affiliates, on the
other hand;
(9) a collective bargaining agreement;
(10) an agreement for the employment of any individual
employed in the Business on a full-time, part-time, consulting, or other basis
or providing severance benefits that involve compensation or severance benefits
in excess of $50,000 or that has a term in excess of 6 months;
(11) an agreement with a sales representative or broker
or any other agreement requiring the payment of any commissions, fees or other
compensation to third parties relating to the purchase or sale of any products
or services of or relating to the Combined Business;
(12) an agreement under which the consequences of a
default or termination would have a Material Adverse Effect;
(13) any other agreement (or group of related
agreements) the performance of which involves consideration in excess of
$500,000;
(14) any other material agreement, contract or
commitment outside the ordinary course of business.
(b) Seller has delivered to Buyer a correct and complete copy
of each written Material Contract (as amended to date) and a written summary
setting forth the terms and conditions of each oral Material Contract. With
respect to each such Material Contract (other than oral agreements), to the
knowledge of Seller, the agreement is legal, valid, binding, enforceable, and in
full force and effect. Neither Seller nor Seller JV is in breach or default, and
to the knowledge of Seller, no event has occurred which with notice or lapse of
time would constitute a breach or default by Seller or Seller JV, or permit
termination, modification, or acceleration, under any Material Contract. To the
knowledge of Seller, 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
by Seller or Seller JV, or permit termination, modification, or acceleration,
under any Material Contract.
Section 3.12. TAX RETURNS; TAXES.
(a) (i) Seller Parent has been an S corporation (within the
meaning of Section Section 1361(a)(1) of the Code) since December 30, 2002, (ii)
Seller Sub I is a C corporation (within the meaning of Section 1361(a)(2) of the
Code), and (iii) Seller Sub II has been disregarded as an entity separate from
its owner for federal income tax purposes pursuant to Treasury Regulations
section 301.7701-3(b)(ii) at all relevant times. Seller JV qualifies (and has
since the day of its formation qualified) to be treated as a partnership for
federal income Tax
24
purposes and none of Seller JV or its members or any Authority has taken a
position inconsistent with such treatment. Each of Seller and Seller JV has duly
and timely filed all Tax Returns required to be filed by it, and all such Tax
Returns were correct and complete in all material respects, except for such
failure of compliance as would not, individually or in the aggregate, have a
Material Adverse Effect. All material Taxes owed by Seller or Seller JV (whether
or not shown on any Tax Returns), which, if unpaid, may result in a Lien on the
Assets or for which Buyer is or may be liable in the capacity of transferee of
the Assets, have been paid. Except as set forth on Schedule 3.12(a), since
December 31, 2001, no material Tax deficiencies have been asserted against
Seller or Seller JV as a result of any examination by the Internal Revenue
Service (the "IRS") or any other Authority. To the knowledge of Seller, there
are no pending material claims asserted for any Taxes of Seller or Seller JV or
outstanding agreements or waivers extending the statutory period of limitation
applicable to any Tax Return of Seller or Seller JV for any period. Seller JV
has made all required estimated and other Tax payments and deposits and has
complied for all prior periods in all material respects with the Tax withholding
and related reporting provisions of all applicable federal, state, local,
foreign and other Laws. Each of Seller and Seller JV has made available to Buyer
true, correct and complete copies of such Tax Returns as have been requested by
Buyer. Each of Seller and Seller JV has timely made and transmitted to the
appropriate authorities all required employee withholding payments and reports.
There are no Tax liens upon the Assets or the assets, properties, and rights of
Seller JV, except for current Taxes not yet due and payable. None of Seller JV's
payroll, property, or receipts, or other factors used in a particular state's
apportionment or allocation formula results in an apportionment or allocation of
business income to any state other than as set forth on Schedule 3.12(a) and
Seller JV has no nonbusiness income that is allocated, apportioned, or otherwise
sourced to any state other than as separately identified as such on Schedule
3.12(a).
(b) For purposes of this Agreement:
(1) "Tax" or "Taxes" means any federal, state, local, or
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including Taxes
under Section 59A of the Code), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other Tax of any kind
whatsoever, whether computed on a separate or consolidated, unitary or combined
basis or in any other manner, including any interest, penalty, or addition
thereto, whether disputed or not and including any obligation to or addition
thereto, whether disputed or not and including any obligation to indemnify or
otherwise assume or succeed to the Tax liability of any other Person; and
(2) "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
thereof.
Section 3.13. EMPLOYEES. Seller has provided to Buyer a true and complete
list as of the date of such list of all of the employees of Seller and Seller JV
involved in the operation of the Combined Business as of a recent date
specifying their job title, hire date, vacation accrual date, vesting service
date, annual salary or hourly wages, bonus or commission terms and any other
material terms of employment, together with an appropriate notation next to the
name of
25
any employee on such list to whom Seller and Seller JV has made commitments for
any compensation in excess of $100,000 or for any period in excess of six months
which are binding on Seller and Seller JV, other than commitments for benefits
pursuant to plans disclosed in Section 3.14 hereof. Seller has also provided
Buyer with a list of all employees of Seller or Seller JV engaged in the
Combined Business that were as of the dates of such information on leave,
together with an indication of the type of leave for each such employee and such
list will be updated as of a date within five (5) business days of the Closing
Date.
Section 3.14. EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.14 sets forth a true and complete list of each
"employee benefit plan," as such term is defined in section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), whether or not
subject to ERISA, and each bonus, incentive or deferred compensation, 401(k),
severance, termination, retention, change of control, stock option, stock
appreciation, stock purchase, phantom stock or other equity-based, performance
or other employee or retiree benefit or compensation plan, program, arrangement,
agreement, policy or understanding that provides welfare, personal monetary
benefits or compensation in respect of any employee or former employee employed
or formerly employed in the operation of the Combined Business (whether as a W-2
employee, an independent contractor, a consultant or otherwise) or the
beneficiaries or dependents of any such employee or former employee (such
employees, former employees, beneficiaries and dependents collectively the
"Employees") or under which any Employee is or may become eligible to
participate or derive a benefit and that is or has been maintained or
established by Seller or Seller JV or any other trade or business, whether or
not incorporated, which, together with Seller or Seller JV, is or would have
been at any date of determination occurring within the preceding six (6) years
treated as a single employer, or multiple employer, under section 414 of the
Code (such other trades and businesses collectively the "Related Persons"), or
to which Seller or Seller JV or any Related Person contributes or is or has been
within the preceding six (6) years obligated or required to contribute or with
respect to which Seller, Seller JV or the Combined Business may have any
liability or obligation (collectively, the "Plans" and each Plan in which
employees of Seller JV have participated or currently participate, a "Seller JV
Plan"). For purposes of this Agreement, the Seller JV Plans, Gulf States Paper
Corporation Retirement Plan, (the "Pension Plan"), the Gulf States Paper
Corporation Savings and Investment Plan, the Gulf States Paper Corporation
Demopolis Enhanced Savings and Investment Plan, the Gulf States Paper
Corporation Savings and Investment Plan - ▇▇▇▇▇▇▇▇▇▇ Box Employees and the Gulf
States Paper Corporation Demopolis Hourly Employee Savings and Investment Plan
are referred to as the "Qualified Plans".
(b) Seller has provided to Buyer true, correct and complete
copies of all material documents relating to the Plans and Employees, including
but not limited to: (i) all current plan documents, amendments, trust
instruments and other material agreements adopted or entered into in connection
with each of the Plans; (ii) with respect to the Seller JV Plans, all insurance
and annuity contracts related to any Plans; (iii) with respect to the Seller JV
Plans, all administrative notices and forms used for the Plans, including the
notices and election forms used to notify Employees and their dependents of
their continuation coverage rights under any Plans which are group health plans;
and (iv) the most recently available Form 5500 annual reports, actuarial
reports, summary plan descriptions and favorable determination letters or
26
opinion letters for the Plans. Except as set forth on Schedule 5.1(l), since the
date these documents and information were supplied to Buyer, no plan amendments
have been adopted, no changes to these documents have been made, and no
amendments or changes will be adopted or made prior to the Closing Date.
(c) Each Qualified Plan intended to be qualified under section
401(a) of the Code, and the trust (if any) forming a party thereof, has received
a favorable determination letter from the IRS as to its qualification under the
Code, or with respect to any prototype plans, the prototype sponsor has received
an opinion letter from the IRS that the form of the plan satisfied section
401(a) of the Code and the plan sponsor has not altered the prototype plan, and
to the effect that each such trust is exempt from taxation under section 501(a)
of the Code, and to the knowledge of Seller nothing has occurred since the date
of such determination letter that could adversely affect such qualification or
tax-exempt status.
(d)
(1) No material liability has been or is expected to be
incurred by Seller or Seller JV, any Related Person, any related individual who
is a fiduciary of any Plan or the Combined Business (either directly or
indirectly, including as a result of an indemnification obligation) under or
pursuant to Title I or IV of ERISA or the penalty, excise Tax or joint and
several liability provisions of the Code relating to employee benefit plans that
could, following the Closing, become or remain a liability of the Combined
Business or become a liability of Buyer or of any employee benefit plan
established or contributed to by Buyer and to the knowledge of Seller, no event,
transaction or condition has occurred or exists that could reasonably be
expected to result in any such liability to the Combined Business or, following
the Closing, Buyer. To the knowledge of Seller, no party in interest (as defined
in ERISA) or disqualified person (as defined in the Code) of any Plan has
engaged in any prohibited transaction (within the meaning of section 406 of
ERISA or section 4975 of the Code).
(2) Each of the Qualified Plans has been drafted,
amended, operated and administered in all material respects in compliance with
all applicable Laws. Without limiting the foregoing, the Pension Plan is in
compliance with section 412 of the Code and section 302 and Title IV of ERISA.
There are no pending or, to the knowledge of Seller, threatened claims by or on
behalf of any of the Qualified Plans or by any Employee, former Employee, Plan
participant, beneficiary of an Employee, former Employee or Plan participant, or
any other Person involving any such Qualified Plan or the assets of any
Qualified Plan (other than routine claims for benefits). No material lien exists
or, to the knowledge of Seller, can reasonably be expected to exist, and no Tax
has been imposed or can reasonably be expected to be imposed, with respect to
any Qualified Plan.
(3) No Plan is a "multiemployer plan" within the meaning
of section 4001(a)(3) of ERISA or is a "multiple employer plan" within the
meaning of sections 4063 or 4064 of ERISA.
(4) No Plan provides welfare benefits, including,
without limitation, death or medical benefits (whether or not insured), with
respect to current or former Employees beyond their retirement or other
termination of service, other than (A) coverage
27
provided pursuant to the terms of any Plan specifically identified as providing
such coverage in Schedule 3.14 or mandated by section 4980B of the Code, or (B)
the post-retirement life insurance benefits set forth in Schedule 1.4(c). Except
as set forth in this Agreement, the consummation of the transactions
contemplated by this Agreement will not result in any increase in the amount of
compensation or benefits or the acceleration of the vesting, except as may be
required as a result of a partial termination of the Pension Plan, or timing of
payment of any compensation or benefits payable to or in respect of any New
Employee.
(5) All contributions required to be made to any
Qualified Plan by applicable Law or by any plan document or other contractual
undertaking, and all premiums due or payable with respect to insurance policies
funding or providing benefits pursuant to any Qualified Plans, have been timely
made or paid.
(e) Notwithstanding the foregoing provisions of this Section
3.14, or any other provision of this Agreement to the contrary, except as
expressly provided in Sections 6.6, 6.7 and 6.8 hereof, Buyer (i) shall not
assume the sponsorship of any of the Plans, (ii) shall not become a
participating employer under any of the Plans, and (iii) except as expressly
provided in Section 1.4(c), shall have no duties or responsibilities under, or
with respect to, any of the Plans.
(f) Levels of insurance reserves, trust funding, and accrued
liabilities with regard to all Plans which are maintained by or for Seller JV
and to which such reserves or liabilities do or should apply are described on
Schedule 3.14, and such levels are reasonable and sufficient to provide for all
incurred but unreported claims and any retroactive or prospective premium
adjustments.
Section 3.15. LABOR RELATIONS. Except as set forth in Schedule 3.15, as of
the date hereof, with respect to the Combined Business since January 1, 2001:
(a) employees of Seller and Seller JV have not been and are not represented by a
labor organization which was either National Labor Relations Board ("NLRB")
certified or voluntarily recognized, (b) Seller and Seller JV have not been and
are not a signatory to a collective bargaining agreement with any labor
organization; (c) Seller has not received notice of and, to the knowledge of
Seller, no representation election petition has been filed by employees of
Seller or Seller JV or is pending with the NLRB and no union organizing campaign
involving employees of Seller or Seller JV has occurred or is in progress; (d)
Seller has not received notice of and, to the knowledge of Seller, no NLRB
unfair labor practice claims have been filed and are presently pending against
Seller or Seller JV or any labor organization representing their employees; (e)
no grievance or arbitration demand, whether or not filed pursuant to a
collective bargaining agreement is pending against Seller or Seller JV; (f) no
strike, handbilling, picketing, work stoppage (sympathetic or otherwise), work
slowdown, lockout, or other known "concerted action" involving the employees of
Seller or Seller JV has occurred or is in progress; (g) no breach of contract
and/or denial of fair representation claim has been filed or is pending against
Seller or Seller JV, and none is known to Seller to be pending against any labor
organization representing their employees; (h) no claim for unpaid wages or
overtime or for child labor or record keeping violations have been filed or are
pending against Seller or Seller JV under the Fair Labor Standards Act,
▇▇▇▇▇-▇▇▇▇▇ Act, ▇▇▇▇▇-▇▇▇▇▇▇ Act, or Service Contract Act or any other Federal,
state or local Law, regulation, or ordinance; (i) to the knowledge of Seller, no
28
discrimination and/or retaliation claim has been filed or is pending against
Seller or Seller JV under the 1866 or 1964 Civil Rights Acts, the Equal Pay Act,
the Age Discrimination in Employment Act, as amended, the Americans with
Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards
Act, the Employee Retirement Security Act or any other federal Law or any
comparable state law regulating discrimination or any other aspect of the
workplace; (j) if Seller or Seller JV are a federal or state contractor
obligated to develop and maintain an affirmative action plan, to the knowledge
of Seller, no discrimination claim, show cause notice, conciliation proceeding,
sanctions or debarment proceeding has been filed or is pending with Office of
Federal Contract Compliance Programs ("OFCCP") or any other federal agency or
any comparable state agency or court and no desk audit or on-site review is in
progress; (k) no citation has been issued in writing by Occupational Safety and
Health Administration ("OSHA") against Seller or Seller JV which has not been
cured in all material respects and to the knowledge of Seller, no notice of
contest or OSHA administrative enforcement proceeding involving Seller or Seller
JV has been filed and is pending or is uncured; (l) no workers' compensation or
retaliation claim is pending against Seller or Seller JV; and/or (m) no citation
of Seller or Seller JV has been issued in writing and no enforcement proceeding
has been initiated or is pending under any federal immigration Law; Seller or
Seller JV have not taken any action that would constitute a "mass layoff" or
"plant closing" within the meaning of the Worker Adjustment and Retraining
Notification Act ("WARN Act") or otherwise trigger notice requirements or
liability under any local or state plant closing notice Law. Seller and Seller
JV are in compliance in all material respects with all federal, state and local
Laws respecting employment and employment practices, terms and conditions of
employment, wages and hours, and are not engaged in any unfair labor or unlawful
employment practice, and Seller and Seller JV have received no notice in writing
of any such violation which has not been cured in full.
Section 3.16. INSURANCE. The insurance policies maintained by Seller and
Seller JV for the benefit of or in connection with the Assets or the Combined
Business are in full force and effect as of the date hereof and provide
coverages that insure the Combined Business and the Assets in accordance with
industry practices. Seller and Seller JV have complied in all material respects
with the terms and provisions of the Insurance Policies. There are no claims
pending or, to the best knowledge of Seller or Seller JV, threatened, under any
of the Insurance Policies in respect of the Combined Business, no disputes with
underwriters are pending or, to the best knowledge of Seller or Seller JV,
threatened. Seller and Seller JV have not been refused any insurance with
respect to the Combined Business by any insurance carrier to which either has
applied for insurance or with which they have carried insurance since January 1,
2000.
Section 3.17. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS.
(a) To the knowledge of Seller, Seller has delivered to Buyer
or provided to Buyer an opportunity to review, true and complete copies of, all
environmental site assessments, test results, analytical data, boring logs of
the Real Property, and other environmental reports and studies of the Real
Property or the Combined Business. In this regard, Seller has made inquiry of
Seller JV and has provided Buyer such information known to Seller relating to
the Seller JV and its operations and Assets.
(b) Other than as set forth on Schedule 3.17(b):
29
(1) To the knowledge of Seller, except in compliance in
all material respects with applicable Environmental Laws, (A) there has not
been, during the applicable period during which Seller or Seller JV,
respectively, have owned, leased, operated, managed or occupied each parcel of
the Real Property and the Improvements (the "Ownership Period"), any Pollution
(as hereinafter defined) at or from the Real Property and the Improvements or
any other facilities used for or in connection with the Combined Business, (B)
there was no Pollution at the Real Property or the Improvements prior to the
respective date of commencement of the Ownership Period therefor, and (C) during
the respective Ownership Period, there have been no actions, activities,
circumstances, conditions, events or incidents that could reasonably be expected
to form the basis of any claim against Seller, Seller JV or Buyer under any
Environmental Law (as hereinafter defined);
(2) To the knowledge of Seller, during each respective
Ownership Period, the use, storage, disposal and transportation of all Hazardous
Materials (as hereinafter defined) by Seller or Seller JV to, at and from each
parcel of Real Property has been in material compliance with all applicable
Laws, and Seller and Seller JV have not transported or arranged for
transportation or disposal of any Hazardous Material at a designated CERCLA
(Superfund) (as hereinafter defined) site or any site similarly designated by
any state, and Seller and Seller JV have not received any notice in writing
alleging, or obtained any information indicating, that any Pollution exists upon
any portion of the Real Property;
(3) To the knowledge of Seller, Seller and Seller JV are
in material compliance with all Environmental Laws. In addition, since January
1, 2000, Seller and Seller JV have obtained all Permits, licenses, approvals,
consents, orders, and authorizations which are required under Environmental Laws
("Environmental Permits") for the Combined Business or the ownership, use or
lease of the Assets as the Combined Business has been operated during such time
period, and Seller has provided Buyer an opportunity to review all such permits.
Except as otherwise described in Schedule 3.17(b), Seller and Seller JV are in
material compliance with each such Environmental Permit, Seller and Seller JV
have not received notice in writing from any Authority that Seller or Seller JV
are alleged to have violated any Environmental Permit or that any Environmental
Permit will be modified, suspended, canceled or revoked or cannot be renewed in
the ordinary course of business; and
(4) since January 1, 2000, or except as disclosed on
Schedule 3.17(b), Seller and Seller JV have not entered into or received, nor to
the knowledge of Seller, is Seller or Seller JV in default under, any consent
decree, compliance order, or administrative order issued by any agency, or any
judgment, order, writ, injunction or decree of any federal, state, or municipal
court or other Authority relating to Environmental Laws.
(c) With respect to the Combined Business, the Assets the Real
Property,
(1) To the knowledge of Seller, there are no Actions
pending or, to Seller's and Seller JV's knowledge, threatened by any Authority,
municipality, community, citizen, group or other person or entity against Seller
or Seller JV relating to environmental protection, compliance with Environmental
Laws or the condition of the Real Property, nor are Seller or Seller JV aware of
any unasserted Action, the assertion of which is
30
probable. Seller and Seller JV have not been notified in writing that they are
potentially liable under or received any requests for information or other
correspondence concerning any portion of the Real Property or the Improvements,
nor have Seller or Seller JV received any notice in writing that either is
considered potentially liable under CERCLA, HSRA, or any similar Law;
(2) To the knowledge of Seller, all underground storage
tanks, oil/water separators, sumps, and septic systems located on the Real
Property have been identified in Schedule 3.17(c), together with a description
of the materials stored therein and a statement as to whether such tanks are
currently used by Seller or Seller JV;
(3) all transformers located on the Real Property
containing polychlorinated biphenyls (PCBs) have been identified in Schedule
3.17(c);
(4) except as disclosed on Schedule 3.17(c), no material
work, repair, construction or capital expenditure is required or planned in
respect of the Assets or the Real Property pursuant to or to comply with any
Environmental Law, nor have Seller or Seller JV received any notice in writing
of any such requirement; and
(5) to the knowledge of Seller or Seller JV, none of the
asbestos-containing materials located on the Real Property is in a friable
condition.
(d) No lien has arisen or is, to the knowledge of Seller or
Seller JV, threatened on or against any of the Real Property under or as a
result of any Environmental Laws.
(e) To the knowledge of Seller, except as set forth in
Schedule 3.17(e), Seller, Seller JV and the Assets and Real Property are in
material compliance with all applicable Laws relating to employee health and
safety (including, without limitation, all applicable Laws regarding actual or
potential exposure to Hazardous Materials, and all applicable OSHA regulations
and all applicable state Laws regulating work place health or safety); and
Seller and Seller JV have not received any notice in writing that conditions of
the Assets or Real Property violate in any material respect any applicable Laws
or otherwise can be made the basis of any material claim, citation, proceeding
or investigation based on or related to violations of employee health and safety
requirements.
(f) For purposes of this Agreement:
(1) "Environmental Laws" shall mean all Laws, judgments
and orders of any Authority, and Permits relating to: (A) any aspect of the
environment; (B) preservation or reclamation of natural resources; (C) the
management, release, and threatened release of Hazardous Materials; (D) response
actions and corrective actions regarding Hazardous Materials; (E) the ownership,
operation, and maintenance of personal and real property which manages or
releases Hazardous Materials or at which Hazardous Materials are managed; and
(F) common law torts, including so-called "toxic torts." Environmental Laws
include, but are not limited to, CERCLA (as herein defined) and similar or
implementing state or local laws and all amendments and regulations promulgated
thereunder.
31
(2) "Hazardous Material" or "Hazardous Materials" shall
mean any and all substances, wastes, materials, chemicals, pollutants,
contaminants, equipment or fixtures defined or classified as "toxic,"
"hazardous," "hazardous waste" or other words of similar import by or otherwise
regulated under any Environmental Law, including, without limitation, all
dibenzodioxins and dibenzofurans, asbestos, petroleum and petroleum-based
products or byproducts and any constituents thereof, polychlorinated biphenyls
(PCBs), and all substances, wastes and materials defined or classified as a
"solid waste" or "hazardous waste" as those terms are defined in the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act, as
amended (42 U.S.C. 6901 et seq.) ("RCRA"); any "pollutant" or "toxic pollutant"
as those terms are defined under the Clean Water Act, as amended (33 U.S.C. 1251
et seq.); any "air pollutant" or "hazardous air pollutant" as those terms are
defined under the Clean Air Act, as amended (42 U.S.C. 7401 et seq.); "hazardous
substance" as that term is defined in the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. 9601 et seq.) and amendments thereto
("CERCLA") and any other substance, waste or material regulated under applicable
state Laws relating to the prevention and control of surface water, land,
groundwater, wetland, sediment or air pollution and contamination; and
(3) "Pollution" shall mean the presence, discharge,
disposal, dumping, spillage, burial, migration, leakage, placement, release or
emission of any Hazardous Materials in, at, from, upon, over, under or across
any parcel of land or air, groundwater, surface water or sediments.
Section 3.18. PATENTS, TRADEMARKS, TRADE NAMES. Schedule 3.18 sets forth a
true and complete list of: (a) all patents, trademarks, trade names, copyrights,
technology and processes (including all federal, state and foreign registrations
pertaining thereto) and all copyright registrations owned by Seller or Seller JV
as of the date hereof and used or held for use in conducting the Combined
Business (collectively, the "Proprietary Intellectual Property"), and (b) all
patents, trademarks, trade names, copyrights, technology and processes used or
held for use by Seller and Seller JV as of the date hereof in conducting the
Combined Business that are used pursuant to a license or other right granted by
a third party (collectively, the "Licensed Intellectual Property", and together
with the Proprietary Intellectual Property herein referred to as the
"Intellectual Property"). Seller and Seller JV own, or have the right to use
pursuant to valid and effective agreements set forth in Schedule 3.18, all
Intellectual Property. No claims or demands are pending against Seller or Seller
JV by any person with respect to the use of any Intellectual Property or
challenging or questioning the validity or effectiveness of any license or
agreement relating to the same, and the current use by Seller and Seller JV of
all Intellectual Property does not infringe in any material respect on the
rights of any third party. Schedule 3.18 sets forth a list of all jurisdictions
in which Seller and Seller JV are operating the Combined Business as of the date
hereof under a trade name, and each jurisdiction in which any such trade name is
registered.
Section 3.19. TRANSACTIONS WITH ASSOCIATES. Except as set forth in
Schedule 3.19, to the knowledge of Seller, no stockholder, officer, director or
member of Seller or Seller JV or any Affiliate of Seller or Seller JV, or any
person with whom any such stockholder, officer, director or member has any
direct or indirect relation by blood, marriage or adoption, or any entity in
which any such person owns any beneficial interest (other than a publicly held
corporation
32
whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 5% of the stock of which is beneficially
owned by all such persons) or any current or former Associate (as hereinafter
defined) of any of the foregoing has any interest in: (a) any contract,
arrangement or understanding with, or relating to, Seller or Seller JV related
to the Combined Business (including any Assumed Contract); or (b) any property
(real, personal or mixed), tangible or intangible, used or currently intended to
be used in the Combined Business in each case (i) pursuant to which payments of
at least $50,000 per calendar year are made or reasonably expected to be made or
(ii) which have a remaining term in excess of 12 months. Any accounts due and
payable from Seller or Seller JV to any Associate of Seller or Seller JV are
recorded on the books and records of the Combined Business at the fair market
value thereof in accordance with Divisional Accounting Policies applied
consistently with past practices. For purposes of this Agreement, "Associate" of
any specified Person means any other Person directly or indirectly controlling
or controlled by or under direct or indirect common control with such specified
Person. For purposes of this definition, "control", when used with respect to
any specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. In addition, for
purposes of this definition, "Person" means any individual, corporation,
partnership, joint venture, trust, unincorporated organization or government or
any agency or political subdivision thereof.
Section 3.20. CUSTOMER AND SUPPLIER RELATIONS. Except as set forth on
Schedule 3.20(a), since December 30, 2003, neither Seller nor Seller JV has
received any notice that (a) any single folding carton or pail customer of
Seller or Seller JV that accounted for more than (i) $1.5 million of Seller's or
Seller JV's net sales related to the Specialty Division or (ii) $3.0 million
related to the Core Division, in each case for the twelve-month period ending on
January 2, 2005, or (b) any single paperboard or pulp customer that accounted
for more than 2,500 tons of Seller's paperboard or pulp sales related to the
Business for the twelve-month period ending on January 2, 2005, intends to
terminate or materially modify its business relations with Seller or Seller JV
or intends to seek requests for quotes or engaged in other bid processes. Except
as set forth on Schedule 3.20(b), since December 30, 2003, neither Seller nor
Seller JV has received any notice that any raw materials supplier of Seller or
Seller JV that had net sales to Seller or Seller JV in excess of (i) $1.5
million related to the Specialty Division or (ii) $3.0 million related to the
Core Division, each case for the twelve month period ending January 2, 2005,
intends to terminate or materially modify its business relations with Seller or
Seller JV. "Specialty Division" means the business conducted by Seller and
Seller JV in the ▇▇▇▇▇▇▇▇▇▇ Box, Resolution Packaging and GSD Packaging
divisions of the Combined Business. "Core Division" means all packaging business
conducted by the Combined Business that is not part of the Specialty Division.
Section 3.21. BROKERS, FINDERS AND INVESTMENT BANKERS. Except as described
on Schedule 3.21, neither Seller, Seller JV nor any of their respective
officers, directors or employees have employed any broker, finder or investment
banker or incurred any liability for any investment banking fees, financial
advisory fees, brokerage fees or finders' fees in connection with the
transactions contemplated herein.
33
Section 3.22. PRODUCT WARRANTIES AND LIABILITY. Except for warranties as
to product manufactured to customer specifications, warranties under applicable
Law or as otherwise set forth on Schedule 3.22, (a) since December 31, 2004,
Seller and Seller JV have made no warranties, express or implied, written or
oral, with respect to the products designed, manufactured, marketed, imported,
sold or distributed in connection with the Combined Business and (b) there is no
claim pending or, to the knowledge of Seller and Seller JV, threatened against
Seller or Seller JV under any warranty that, if decided adversely, would result
in Seller's having liability in excess of $100,000 and, to the knowledge of
Seller and Seller JV, there is no reasonable basis for any such claim. To the
knowledge of Seller and Seller JV, there is no reasonable basis for any material
present or future action, suit, proceeding, hearing, investigation, charge,
compliant, claim or demand against Seller or Seller JV arising out of any injury
to individuals or property as a result of the ownership, possession or use of
any product designed, manufactured, marketed, imported, sold or distributed by
Seller or Seller JV in connection with the Combined Business that, if decided
adversely, would result in Seller's having liability in excess of $100,000.
Section 3.23. REBATES. Except as set forth on Schedule 3.23 as of the date
hereof, since December 31, 2004, Seller and Seller JV have not entered into, or
offered to enter into, any agreement, contracts, commitment, ▇▇▇▇-▇▇▇▇▇,
buy-ins, co-ops or other arrangement (whether written or oral) pursuant to which
Seller or Seller JV is or will be obligated to make any rebates, discounts,
promotional allowances or similar payment or arrangements to any customer of the
Combined Business in an amount in excess of $25,000 per calendar year.
Section 3.24. SCHEDULES.
(a) Disclosure of any fact or item in any Schedule referenced
by a particular section or subsection in this Agreement shall be deemed to have
been disclosed only with respect to such section or subsection, and shall not
modify or supplement any other section in this Agreement. The specification of
any dollar amount in the representations or warranties contained in this
Agreement or the inclusion of any specific item in any Schedules hereto is not
intended to imply that such amounts, or higher or lower amounts or the items so
included or other items, are or are not material, and no party to this Agreement
shall use the fact of the setting of such amounts or the inclusion of any such
item in any dispute or controversy as to whether any obligation, items or matter
not described herein or included in a Schedule is or is not material for
purposes of this Agreement.
(b) At any time on or before five (5) business days prior to
the Closing Date, Seller may supplement or change any Schedule by providing
written notice to Buyer pursuant to Section 12.1 (a "Schedule Update"), and any
Schedule Update shall be taken into account in determining whether the
conditions set forth in Section 8.2 have been satisfied and whether Seller shall
have breached any representation or warranty made by Seller herein unless Buyer
shall object to any such Schedule Update (or any portion thereof) within five
(5) business days of receiving such Schedule Update, in which case such Schedule
Update (or the portion thereof to which Buyer shall object) shall have no
effect.
34
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Each Buyer Party, for itself and its successors and assigns, represents
and warrants to Seller as follows:
Section 4.1. ORGANIZATION. Buyer Parent is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Georgia and
has all requisite power and authority (corporate and other) to own, lease and
operate its properties and to carry on its business as now being conducted.
Buyer is a limited liability company duly organized, validly existing and in
good standing under the Laws of the State of Georgia and has all requisite power
and authority (limited liability company and other) to own, lease and operate
its properties and to carry on its business as now being conducted. Such Buyer
Party is duly qualified to transact business and is in good standing as a
foreign corporation or limited liability company in each jurisdiction where the
character of its activities requires such qualification except where the failure
to be so qualified would not have a material adverse effect on such Buyer Party.
Buyer Parent has heretofore made available to Seller true, correct and complete
copies of its articles of incorporation and bylaws as currently in effect. Buyer
has heretofore made available to Seller true, correct and complete copies of its
articles of organization and operating agreement as currently in effect.
Section 4.2. AUTHORIZATION. Such Buyer Party has the full corporate power
or limited liability company power and authority to execute and deliver this
Agreement and any other certificate, agreement, document or other instrument to
be executed and delivered by it in connection with the transactions contemplated
hereby (collectively, the "Buyer Ancillary Documents") and to perform its
obligations hereunder and thereunder and to consummate this Agreement and the
other transactions contemplated hereby. The execution and delivery of this
Agreement and the Buyer Ancillary Documents by such Buyer Party and the
performance by such Buyer Party of its obligations hereunder and thereunder and
the consummation of the transactions provided for herein and therein have been
duly and validly authorized by all necessary corporate or limited liability
company action on the part of such Buyer Party. The board of directors of Buyer
Parent and the member of Buyer have approved the execution, delivery and
performance of this Agreement and the Buyer Ancillary Documents and the
consummation of the transactions contemplated hereby and thereby and the consent
of the shareholders of Buyer Parent is not required. This Agreement has been,
and the applicable Buyer Ancillary Documents will be as of the Closing Date,
duly executed and delivered by such Buyer Party and, assuming the due and valid
authorization, execution and delivery thereof by the other parties thereto, do
or will, as the case may be, constitute the valid and binding agreements of such
Buyer Party, enforceable against it in accordance with their respective terms,
subject to applicable bankruptcy, insolvency and other similar Laws affecting
the enforceability of creditors' rights generally, general equitable principles
and the discretion of courts in granting equitable remedies.
Section 4.3. ABSENCE OF RESTRICTIONS AND CONFLICTS. The execution,
delivery and performance of this Agreement and the Buyer Ancillary Documents,
the consummation of the transactions contemplated by this Agreement and the
Buyer Ancillary Documents and the
35
fulfillment of and compliance with the terms and conditions of this Agreement
and the Buyer Ancillary Documents do not or will not (as the case may be), with
the passing of time or the giving of notice or both, violate or conflict with,
constitute a breach of or default under, result in the loss of any material
benefit under, or permit the acceleration of any obligation under, (a) any term
or provision of the articles of incorporation or bylaws or articles of
organization or operating agreement, as applicable, of such Buyer Party, (b) any
material contract to which such Buyer Party is a party, (c) any judgment, decree
or order of any Authority or agency to which such Buyer Party is a party or by
which such Buyer Party or any of its respective properties is bound or (d) any
Law applicable to such Buyer Party. Except for compliance with the applicable
requirements of the HSR Act, and Securities Exchange Act of 1934, as amended, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any governmental agency or public or regulatory unit, agency, body
or authority with respect to such Buyer Party is required in connection with the
execution, delivery or performance of this Agreement or the Buyer Ancillary
Documents by such Buyer Party or the consummation of the transactions
contemplated by this Agreement or the Buyer Ancillary Documents by such Buyer
Party.
Section 4.4. BROKERS AND FINDERS. Neither Buyer Parent, Buyer nor any of
their Affiliates nor anyone acting on their behalf has done anything to cause or
incur any liability to any party for any brokers' or finders' fees in connection
with this Agreement nor any transaction contemplated herein, except for
liability for fees and expenses to Banc of America Securities LLC, Buyer
Parent's financial advisor, which fees and expenses shall be the responsibility
of Buyer Parent.
Section 4.5. LITIGATION. As of the date hereof, there is no claim, action,
suit, proceeding or governmental investigation pending or, to the knowledge of
Buyer, threatened against Buyer, by or before any Authority or by any third
party that challenges the validity of this Agreement or which would be
reasonably likely to adversely affect or restrict Buyer's ability to consummate
the transactions contemplated by this Agreement.
ARTICLE V.
CERTAIN COVENANTS AND AGREEMENTS
Section 5.1. CONDUCT OF BUSINESS BY SELLER. From the date hereof until the
Closing, Seller will (and will cause Seller JV to), except as required in
connection with the transactions contemplated by this Agreement and except as
required by Law or otherwise consented to in writing by Buyer:
(a) use its commercially reasonable efforts to carry on the
Combined Business substantially as it is and has been for the prior year
conducted by Seller and not cause the Combined Business to engage in any new
line of business;
(b) not dispose of or permit to lapse any rights to the use of
any material patent, trademark, trade name, license or copyright, including,
without limitation, any of the Intellectual Property, or dispose of or disclose
to any person, any material trade secret, formula, process, technology or
know-how of Seller or Seller JV used by or relating to the Combined Business;
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(c) not sell, dispose of, transfer or encumber any of the
Assets or the assets of Seller JV material to the Combined Business except in
the ordinary course of business;
(d) except as set forth on Schedule 5.1(d), not make any
acquisition of assets with respect to the Combined Business having an aggregate
purchase price in excess of $100,000 other than in the ordinary course of
business or as contemplated by this Agreement;
(e) not amend, modify or cancel any contract, agreement or
commitment included in the Assets except in the ordinary course of business;
provided that the amendment, modification or cancellation of any contract with a
remaining term in excess of 12 months or which provides for aggregate payments
in excess of $1,000,000 shall not be deemed to be in the ordinary course;
(f) not enter into any employment, severance, compensation or
similar agreements with any employee of the Combined Business other than in the
ordinary course of business or as may be required by Law or existing contractual
arrangements;
(g) not increase the compensation of, or benefits payable to,
the employees of the Combined Business other than in the ordinary course of
business or as may be required by Law or existing contractual arrangements;
(h) not dispose of or permit to lapse any right to the
possession, use or enjoyment of any Intellectual Property or dispose of or
disclose to any unauthorized person any information concerning the Intellectual
Property other than with respect to Intellectual Property having a value of less
than $10,000;
(i) not enter into or renew any collective bargaining or labor
agreement (oral and legally binding or written) with respect to the Combined
Business or any portion thereof;
(j) except as set forth on Schedule 5.1(j), not acquire or
enter into an agreement to acquire, by merger, consolidation or purchase of
stock or assets, any business or entity, or enter into any, or agree to enter
into any, joint venture;
(k) use its commercially reasonable efforts to preserve intact
the goodwill and business organization of the Combined Business, keep employees
of the Combined Business available to be employed by Buyer (if Buyer so elects
pursuant to Article VI hereof) and preserve all material relationships of the
Combined Business with customers, suppliers and others having business relations
with Seller or Seller JV relating to the Combined Business;
(l) except as set forth on Schedule 5.1(l), not enter into,
modify or extend in any manner the terms of any employment, severance or similar
agreements with employees of the Combined Business, whether now or hereafter
payable, including any such increase pursuant to any option, bonus, stock
purchase, pension, profit-sharing, deferred compensation, retirement or other
plan, arrangement, contract or commitment, except periodic bonuses paid in the
ordinary course, consistent with past practices or as may be required by Law or
existing contractual arrangements;
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(m) perform in all material respects all of its obligations
under all of the Assumed Contracts (except those being contested in good faith)
and not enter into, assume or amend any contract or commitment that would be an
Assumed Contract other than contracts entered into in the ordinary course of
business;
(n) maintain in full force and effect and in the same amounts
policies of insurance comparable in all material respects in amount and scope of
coverage now maintained by Seller and Seller JV relating to the Assets, the
Combined Business and the Real Property to the extent available on commercially
reasonable terms other than changes in such policies effected in the ordinary
course of business;
(o) continue to collect the accounts receivable and pay the
accounts payable of the Combined Business in the ordinary course of business and
consistent with past practices;
(p) prepare and file all Tax Returns and any other Tax
reports, filings and amendments thereto required to be filed by it;
(q) continue to maintain and service the Assets used in the
conduct of the Combined Business in the ordinary course and consistent with past
practice;
(r) continue to maintain the books and records of the Combined
Business in accordance with past practice;
(s) not modify or amend any agreement relating to the Seller
JV Interest or make any additional material commitments to Seller JV;
(t) comply in all material respects with all Laws applicable
to the Combined Business or Seller JV;
(u) use its commercially reasonable efforts to maintain and
protect all material Intellectual Property;
(v) not take, or agree to take, any action that would make any
of the representations or warranties of Seller contained in this Agreement
untrue in any material respect or would result in any of the conditions set
forth in this Agreement to not be satisfied; or
(w) not agree or commit to do any of the foregoing that it is
prohibited from hereunder.
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Section 5.2. INSPECTION AND ACCESS TO INFORMATION.
(a) Subject to Sections 5.2(c) and (d), between the date of
this Agreement and the Closing Date, Seller will provide and will cause Seller
JV to provide Buyer and its accountants, counsel and other authorized
representatives reasonable access, during reasonable business hours and under
reasonable circumstances to any and all of its employees, premises, properties,
contracts, books, records and other information relating to the Combined
Business, and Seller JV and will furnish to Buyer and its authorized
representatives any and all financial, technical and operating data and other
information pertaining to the Combined Business and Seller JV, as Buyer shall
from time to time reasonably request; provided, however, that Buyer shall not
have the right and shall not conduct (i) any review of any corporate minutes of
Seller or (ii) any further environmental inspection or testing, without
receiving Seller's express prior written consent therefor (to be determined in
Seller's reasonable discretion); provided further, however, that any such
access, testing and inspection shall be conducted at Buyer's expense, under the
supervision of Seller's personnel, and that copies of any environmental reports
prepared in connection therewith shall be simultaneously delivered to Seller.
(b) Information obtained by Buyer or Seller or any of their
respective representatives pursuant to this Agreement shall be subject to the
provisions of the confidentiality agreement between Buyer Parent and Seller
Parent dated November 16, 2004, as amended (the "Confidentiality Agreement"),
which Confidentiality Agreement remains in full force and effect except to the
extent that it would expressly prohibit Buyer or Seller from taking any of the
actions contemplated by this Agreement. The parties hereby agree that the
Confidentiality Agreement shall terminate at Closing.
(c) Notwithstanding anything contained in this Agreement or
the Confidentiality Agreement, neither Seller nor any of its Affiliates, or any
of their respective officers, directors, employees, representatives, auditors
and agents, shall have any obligation to disclose any particular information to
Buyer (other than as expressly required in the proviso set forth in this Section
5.2(c) below) if such disclosure would (i) cause significant competitive harm to
Seller or any of its Affiliates assuming the transactions contemplated by this
Agreement are not consummated, (ii) jeopardize any attorney-client or other
legal privilege, or (iii) violate any applicable Laws, fiduciary duty or binding
agreement entered into prior to the date hereof (including any confidentiality
agreement to which Seller or any of its Affiliates is a party); provided,
however, in any such instance in which Seller is withholding particular
information from Buyer based on this Section 5.2(c), Seller shall (A) promptly
so advise Buyer in writing, describing the basis for it withholding such
information and (B) provide Buyer all information related to the subject matter
of such withheld information to the extent that Seller can provide such related
information (including aggregated or summary information) as Buyer may request
provided that disclosure of such related information would not be restricted by
clause (i), (ii) or (iii) of this Section 5.2(c).
(d) Subject to Section 5.13 and Article VII hereof, following
the Closing, for so long as such information is retained by Buyer (which shall
be for a period of at least six (6) years), Buyer shall permit Seller and its
authorized representatives to have reasonable access and duplicating rights
during normal business hours, upon reasonable prior
39
notice to Buyer, to the books, records and personnel relating to the Combined
Business with respect to the period prior to Closing, to the extent that such
access may be reasonably required (i) in connection with the preparation of
Seller's accounting records or with any audits, (ii) in connection with any
suit, claim, action, proceeding or investigation relating to the Combined
Business prior to the Closing, (iii) in connection with any regulatory filing or
matter, or (iv) in connection with any other valid legal or business purpose of
Seller; provided that Seller shall reimburse Buyer promptly for all reasonable
and necessary costs and expenses incurred by the Buyer in connection with any
such request.
(e) Buyer shall, at a Seller's request, cooperate with Seller
(including making its employees available at reasonable times to respond to
inquiries or to provide testimony to the extent applicable) as may be reasonably
required in connection with the investigation and defense of any suit, claim,
action, proceeding or investigation relating to the Combined Business that is
pending at Closing or is brought by a third party other than Buyer or any
Affiliate of Buyer against Seller or any of its Affiliates at any time after the
Closing; provided, however, that Seller shall reimburse Buyer promptly for all
reasonable costs and expenses incurred by Buyer arising out of Buyer taking any
action that Buyer reasonably determines is necessary to respond to any such
request, including fees and expenses of legal counsel engaged in connection
therewith.
Section 5.3. NO SOLICITATION; ACQUISITION PROPOSALS. From the date hereof
until the first to occur of the Closing or until this Agreement is terminated in
accordance with Article XI hereof, Seller shall not, directly or indirectly (a)
solicit or initiate (including by way of furnishing any information) discussions
with, or (b) enter into negotiations or agreements with, or (c) furnish any
information to, any corporation, partnership, person or other entity or group
(other than Buyer or its authorized representatives pursuant to this Agreement)
concerning any inquiry or proposal for a merger, consolidation, business
combination, reorganization, recapitalization, liquidation, dissolution,
spin-off transaction, sale of any substantial portion of its assets, sale of
shares of stock or securities or other takeover or business combination
transaction (an "Acquisition Proposal") involving any part of the Combined
Business, Seller JV or the Assets, and Seller will instruct and cause its
officers, directors, employees, agents, Affiliates, and other financial and
legal representatives and consultants (collectively, "Seller Agents") not to
take any action contrary to the foregoing provisions of this sentence. Seller
will notify Buyer promptly of any proposals (including the terms thereof) that
are received by, any information that is requested from, or any negotiations or
discussions that are sought to be initiated with Seller or any Seller Agent with
respect to an Acquisition Proposal, provided that Seller shall not have any
obligation to disclose the identity of any Person making such a proposal or
request. Seller shall, and shall cause each Seller Agent to, immediately cease
any existing activities, discussions or negotiations with any third parties
which may have been conducted on or prior to the date hereof with respect to an
Acquisition Proposal and shall direct and cause its officers, advisors and
representatives not to engage in any such activities, discussions or
negotiations.
Section 5.4. REASONABLE EFFORTS; FURTHER ASSURANCES; COOPERATION. Subject
to the other provisions of this Agreement, the parties hereto shall each use
their commercially reasonable efforts to perform their obligations herein and to
take, or cause to be taken or do, or cause to be done, all things necessary,
proper or advisable under applicable Law to obtain all regulatory approvals and
satisfy all conditions to the obligations of the parties under this
40
Agreement and to cause the transactions contemplated herein to be effected, in
accordance with the terms hereof and shall cooperate fully with each other and
their respective officers, directors, employees, agents, counsel, accountants
and other designees in connection with any steps required to be taken as a part
of their respective obligations under this Agreement, including without
limitation:
(a) Seller and Buyer shall promptly make their respective
filings and submissions and shall take, or cause to be taken, all actions and
do, or cause to be done, all things necessary, proper or advisable under
applicable Laws to obtain any required approval of any Authority with
jurisdiction over the transactions contemplated by this Agreement. Subject to
Section 5.2(c), each party shall furnish to each other all information required
for any application or other filing to be made pursuant to any applicable Law in
connection with the transactions contemplated hereby. Each party shall promptly
inform the other parties of any oral communication with, and provide copies of
written communications with, any Authority regarding any such filings or any
such transaction. No party shall independently participate in any formal meeting
with any Authority in respect of any such filings, investigation, or other
inquiry without giving the other party prior notice of the meeting and, to the
extent permitted by such Authority, the opportunity to attend and/or
participate.
(b) In the event any claim, action, suit, investigation or
other proceeding by any governmental body or other person is commenced which
questions the validity or legality of this Agreement or any of the other
transactions contemplated hereby or seeks damages in connection therewith, the
parties agree to cooperate and use all reasonable efforts to defend against such
claim, action, suit, investigation or other proceeding and, if an injunction or
other order is issued in any such action, suit or other proceeding, to use all
reasonable efforts to have such injunction or other order lifted, and to
cooperate reasonably regarding any other impediment to the consummation of the
transactions contemplated by this Agreement.
(c) During the period commencing from the date hereof and
ending on the Closing Date, Buyer shall (and shall cause its officers,
directors, employees, agents and representatives to) not take any action that
could reasonably be expected to impede the ability of such Buyer to consummate
the transactions contemplated hereby except as otherwise permitted or required
by this Agreement. During the period commencing from the date hereof and ending
on the Closing Date, Seller shall (and shall cause its officers, directors,
employees, agents, and representatives to) not take any action that could
reasonably be expected to impede the ability of such Seller to consummate the
transactions contemplated hereby (except as otherwise permitted or required by
this Agreement). If at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, including,
without limitation, the execution of additional instruments, the parties to this
Agreement shall take all such necessary action as the other party may reasonably
request (with the cost of such action to be borne by the party responsible for
such action hereunder).
(d) Without limiting the provisions of Sections 5.4(a), each
party shall use its commercially reasonable efforts to obtain, to assist any
other party in obtaining, or to cause to be obtained, any consent or approval
required by or from any person (other than a Authority) in connection with the
consummation of the transactions contemplated hereby.
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(e) Each party shall give prompt written notice to the other
of (i) the occurrence, or failure to occur, of any event known to such party
which occurrence or failure would be likely to cause any representation or
warranty of Seller or Buyer, as the case may be, contained in this Agreement to
be untrue or inaccurate in any material respect at any time from the date hereof
to the Closing or that will or may result in the failure to satisfy any of the
conditions specified in Article VIII and (ii) any failure of Seller or Buyer, as
the case may be, to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it hereunder.
Section 5.5. PUBLIC ANNOUNCEMENTS. The timing and content of all
announcements regarding any aspect of this Agreement or the transactions
contemplated herein to the financial community, government agencies, employees
or the general public shall be mutually agreed upon by Buyer and Seller in
advance (unless Buyer or Seller is advised by counsel that any such announcement
or other disclosure not mutually agreed upon in advance is required to be made
by Law or applicable rule of the New York Stock Exchange and then only after
consulting the other party and making a reasonable attempt to comply with the
provisions of this Section).
Section 5.6. REAL PROPERTY TITLE REPORTS. Buyer shall have the right to
order title insurance commitments and as-built surveys for all or a portion of
the Real Property. Buyer shall have the right to notify Seller in writing within
20 days following receipt of both the title insurance commitment and survey for
any parcel of Real Property if such title insurance commitment or survey
contains (a) any exception to good and marketable fee simple title other than a
Permitted Encumbrance or (b) any matter that is a breach of a representation or
warranty of Seller set forth in this Agreement (collectively, a "Title/Survey
Objection"). To the extent Buyer notifies Seller of any Title/Survey Objection
consisting of a lien for monies owed, then Seller shall be obligated to satisfy
the obligation secured by such lien (or to otherwise cause such lien to be
discharged) prior to the Closing. To the extent Buyer notifies Seller of any
other Title/Survey Objection, Seller shall use commercially reasonable efforts
to promptly cure such Title/Survey Objection after receipt of notice thereof. If
Seller fails to cure any Title/Survey Objection within 20 days after receipt of
notice thereof that (i) would constitute a Material Adverse Effect, or (ii) as
to any parcel of Real Property (A) would have a material effect on the value of
such parcel, or (B) would materially impair the ability of Buyer or Seller JV to
use, occupy or sell such parcel or to assign its interest in such parcel, in
each case for its respective present use, then Buyer shall have the right to
terminate this Agreement pursuant to Section 11.1(c) hereof. In the event Buyer
elects to close the transactions contemplated by this Agreement notwithstanding
Seller's failure to cure any Title/Survey Objection, Buyer shall retain its
rights to pursue a claim against Seller for any breach of representation or
warranty by Seller, and nothing herein shall limit any representations or
warranties of Seller with respect to the Real Property.
Section 5.7. CASUALTY. In the event that prior to the Closing Date any of
the Assets are damaged or destroyed by fire or other casualty to any extent
(other than such damage as may be fully repaired by Seller prior to the Closing
Date), then Seller shall promptly give Buyer notice of such event and Seller
shall assign to Buyer at the Closing all insurance proceeds payable under the
insurance policies of Seller on account of such damage or destruction and pay to
Buyer all such insurance proceeds previously paid, and pay to Buyer at the
Closing an amount equal to the amount which the insurer is entitled pursuant to
the terms of the applicable insurance policy
42
to deduct from the proceeds otherwise payable to Seller on account of such
casualty loss; provided, however, that, if, the casualty would constitute a
Material Adverse Effect, the Closing condition set forth in Section 8.2(e) shall
not be satisfied (unless waived in writing by Buyer) and Buyer shall have the
right to terminate this Agreement pursuant to Section 11.1(c).
Section 5.8. CONDEMNATION. In the event that prior to the Closing Date
there shall be instituted against any portion of the Real Property any
proceeding in condemnation, eminent domain or any written request for a
conveyance in lieu thereof, or limiting or restricting access thereto or should
Seller receive notice that such proceedings are threatened or have been
commenced against such Real Property (hereinafter collectively referred to as
"Condemnation Proceedings"), then Seller shall promptly give Buyer notice of
such Condemnation Proceedings and Seller shall assign or pay to Buyer at the
Closing all of Seller's right, title and interest in any award payable on
account of such Condemnation Proceedings and pay to Buyer all such awards
previously paid and Seller shall have no obligation to repair or restore the
Real Property to be taken by said Condemnation Proceedings; provided, however,
that, if, the Condemnation Proceedings would constitute a Material Adverse
Effect, then the Closing condition set forth in Section 8.2(e) shall not be
satisfied (unless waived in writing by Buyer) and Buyer shall have the right to
terminate this Agreement pursuant to Section 11.1(c).
Section 5.9. HSR FILINGS. Seller and Buyer shall each (a) take promptly
all actions necessary to make the filings required of it or any of its
Affiliates under the applicable Antitrust Laws, including the HSR Act, (b)
comply at the earliest practicable date with any request for additional
information or documentary material received by it or any of its Affiliates from
the Federal Trade Commission or the Antitrust Division of the Department of
Justice pursuant to the HSR Act and (c) cooperate in connection with any filing
or submission under applicable Antitrust Laws and in connection with resolving
any investigation or other inquiry, including consulting with the other party in
advance of arranging for or participating in any meeting with any Authority,
concerning the transactions contemplated by this Agreement commenced by any of
the Federal Trade Commission, the Antitrust Division of the Department of
Justice or the Attorney General of any state. Seller and Buyer shall each use
all reasonable efforts to resolve such objections, if any, as may be asserted
with respect to the transactions contemplated by this Agreement under any
Antitrust Law. Notwithstanding anything to the contrary herein, neither Buyer
Parties nor Seller shall be required to (i) divest or hold separate, or accept
any condition or limitation upon, any portion of their businesses, or (ii)
divest or hold separate, or accept any condition or limitation upon, any portion
of their respective businesses, products lines or assets. Seller and Buyer shall
each promptly inform the other party of any material communication made to, or
received by such party from, the Federal Trade Commission, the Department of
Justice or any other Authority regarding any of the transactions contemplated
hereby. Neither Buyer nor Seller shall enter into any proposed understanding,
undertaking, or agreement with any Authority in connection with the transactions
contemplated by this Agreement without the prior written consent of the other
party. For purposes of this Agreement, "Antitrust Laws" means the ▇▇▇▇▇▇▇ Act,
as amended, the ▇▇▇▇▇▇▇ Act, as amended, the HSR Act, the Federal Trade
Commission Act, as amended, and all other federal, state, foreign and
multinational statutes, rules, regulations, orders, decrees, administrative and
judicial doctrines, and other Laws that are designed or intended to prohibit,
restrict or regulate actions having the purpose or effect of monopolization or
restraint of trade.
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Section 5.10. BULK SALES WAIVER. In reliance upon Article X hereof, Seller
and Buyer hereby waive compliance with the provisions of any applicable bulk
transfer Laws.
Section 5.11. NOTIFICATION OF CHANGES. Between the date hereof and the
Closing Date, Seller shall promptly notify Buyer in writing of any event or
occurrence known to Seller that has had or may reasonably be expected to have a
Material Adverse Effect, or if known to Seller, the institution of or the threat
of institution of legal, administrative or other proceedings against Seller
related to the Combined Business, in which an adverse outcome could reasonably
be expected to have a Material Adverse Effect, or the occurrence or existence of
any unasserted proceedings known to Seller or Seller JV that are probable of
assertion in which an adverse outcome could reasonably be expected to have a
Material Adverse Effect. In addition, Seller shall give Buyer prompt written
notice of any material adverse developments known to Seller that cause, or would
be reasonably expected, with the passage of time, to cause a breach of any
representation, warranty or covenant of Seller, or to interfere with the ability
of Seller to perform its respective obligations hereunder; provided, however,
that such disclosure shall not be deemed to amend or supplement the Schedules.
Section 5.12. TRANSITION SERVICES AGREEMENT. At the Closing, Buyer and
Seller shall enter into a transition services agreement (the "Transition
Services Agreement") in the form attached hereto as Exhibit A.
Section 5.13. LITIGATION SUPPORT. In the event and for so long as any
party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand (other than to the
extent the parties are adverse to each other in such matter) in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Combined Business, the other party will
cooperate with the contesting or defending party and its counsel in the contest
or defense, make available its personnel, and provide such testimony and access
to its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending party
(unless the contesting or defending party is entitled to indemnification
therefor pursuant to Article X hereof).
Section 5.14. HANDLING OF EXCLUDED ASSETS. Any Excluded Assets located
physically on the Real Property shall be removed by Seller in compliance with
all Laws at Seller's sole cost and expense and without interruption of the
Combined Business. To the extent that the removal of such Excluded Assets
requires any modifications or repairs to any of the Assets, Buyer and Seller
shall discuss the nature and costs of such modifications or repairs, and Seller
shall be responsible for all costs of such modifications or repairs whether
occurring before or after the Closing. Seller shall be responsible for any
damage to the Assets or any liability resulting from the removal of the Excluded
Assets from the Real Property. Notwithstanding the foregoing, Buyer will
cooperate with Seller in connection with Seller performing its obligations under
its agreement with Smurfit Carton relating to the removal of the Recovery Boiler
from the Real Property located in Demopolis, Alabama; provided that Seller will
reimburse Buyer for all reasonably necessary costs and expenses incurred in
connection therewith. For the period commencing on the Closing Date and ending
on the date the recovery boiler is removed from the Real Property, Seller shall
pay to Buyer a storage fee of $7,500 monthly; provided, however, that
44
Buyer shall not have any responsibility with respect to such recovery boiler
during such storage period.
Section 5.15. SELLER JV TAX MATTER. Buyer and Seller shall assist and
cooperate with one another in good faith in the joint preparation of, and Seller
shall cause to be filed when due, all income Tax Returns that are required to be
filed by or with respect to Seller JV for the taxable year ended on the Closing
Date, which income Tax Returns shall include (unless Buyer determines otherwise,
in its discretion) a valid and binding election under Section 754 of the Code or
the corresponding election under governing state or local Law and shall be
prepared in a manner consistent with prior practice and in accordance with
applicable Law.
Section 5.16. SEC FINANCIAL STATEMENTS. Seller shall cooperate in good
faith with the Buyer Parties in connection with the preparation by the Buyer
Parties and its accountants of financial information and other financial
disclosure of Buyer Parties relating to the transactions contemplated by this
Agreement and the Combined Business, including without limitation, the
Management's Discussion and Analysis of Financial Condition and Results of
Operations disclosure required by Regulation S-K relating to the Combined
Business ("MD&A"). Buyer will draft and have responsibility for preparing the
MD&A, and Seller will support the preparation of the MD&A by providing
information, explaining variances and reviewing drafts of this disclosure.
Seller will provide to Buyer within the timeframes listed below unaudited
balance sheets and statements of income (which shall include income statements
that allocate to the applicable fiscal periods matters and adjustments that are
typically only made at fiscal year end), shareholders' equity and cash flow of
the Combined Business, including the notes thereto (collectively, the "Quarterly
Financial Statements"): (a) for each fiscal 2005 quarter ended prior to the
Closing Date (other than the quarter ended April 3, 2005, which is included in
the Financial Statements), which financial statements shall be provided to Buyer
no later than 40 days after the Closing Date, (b) for (i) the fourth fiscal
quarter in the fiscal year ended December 28, 2003, and (ii) each of the four
fiscal quarters in the fiscal year ended January 2, 2005, which financial
statements shall be provided to Buyer no later than June 30, 2005, and (c) for
the stub period from the end of the last fiscal 2005 quarter ended prior to the
Closing Date to the Closing Date, which financial statements for such stub
period shall include a balance sheet and income statement, without notes
thereto, and which financial statements shall be provided to Buyer no later than
40 days after the Closing Date; provided that if the Closing occurs on or before
June 30, 2005, Seller will provide Buyer with the financial information
described in clauses (a) and (c) above by the earlier of (x) July 22, 2005 and
(y) 40 days after the Closing Date. The Quarterly Financial Statements shall be
prepared in a manner consistent with the Carve Out Audited Financial Statements.
If at any time prior to seven (7) months after the Closing Date the Buyer
Parties (in order to comply with the requirements of any Authority or Laws) or
Buyer's lender require any additional financial information (other than the
Financial Statements and the Quarterly Financial Statements) or any revisions or
supplements to such financial statements, Seller will use its good faith efforts
to provide such financial information as promptly as reasonably practicable;
provided, however, that any auditing fees or expenses of Seller's outside
auditor incurred in connection therewith shall be paid by Buyer; provided,
further, that if such additional information is requested after the Closing
Date, in addition to paying all outside auditing costs, Buyer shall reimburse
Seller for Seller's other reasonable costs relating thereto. All such additional
financial information provided by Seller shall be, to the knowledge of Seller,
accurate in all material respects as of the dates of or for the periods covered
by such additional
45
financial information. Notwithstanding anything to the contrary contained herein
(but without limiting any representation or warranty contained herein), Seller
shall not be liable for any filing made or failed to be made by Buyer with the
SEC or any other Authority with respect to the Assets or the Combined Business.
Seller's obligation to incur out-of-pocket costs in connection with preparing
the financial statements (other than the Financial Statements) and additional
financial information contemplated by this Section 5.16 shall not exceed in the
aggregate $250,000.
Section 5.17. CHIP SUPPLY AGREEMENT. At the Closing, Buyer and Seller
shall enter into a softwood supply agreement (the "Chip Supply Agreement") in
the form attached hereto as Exhibit B.
Section 5.18. CUSTOMER AND SUPPLIER VISITS.
(a) Seller will contact the principal customers and principal
suppliers of the Combined Business prior to Closing in order to respond to
customer and supplier inquiries and to solicit any necessary customer or
supplier consents or approvals and will keep Buyer reasonably updated as to the
status of such contacts. If any such customer or supplier requests to Seller to
meet or have contact with Buyer, Seller shall not unreasonably object to such
meeting or contact.
(b) During the period commencing on the date hereof and ending
on the Closing Date, except as contemplated by this Section 5.18 and
communication with customers or suppliers of Buyer Parties who are also
customers or suppliers of Seller or Seller JV (each such customer or supplier, a
"Common Party"), without the prior written consent of Seller (which may be
withheld in its sole discretion), Buyer shall not, and shall cause its officers,
directors, employees and other representatives not to, contact any suppliers to,
or customers of, the Combined Business in connection with or pertaining to the
transactions contemplated by this Agreement. In the event Seller provides such
consent, a management employee of Seller, reasonably satisfactory to Buyer,
shall at all times accompany Buyer's representative(s) to any meeting with such
suppliers or customers and shall participate with Buyer's representative in any
such discussions.
(c) If a Common Party requests a meeting with Buyer regarding
the transactions contemplated hereby or the relationship between Buyer and such
Common Party in respect of the Combined Business ("Sale Transaction Matters"),
Buyer shall be permitted to have contact with such Common Party or meet with
such Common Party without the consent of Seller, provided that Buyer shall
exercise best efforts to notify Seller of Buyer's intention to have contact or
meet with such Common Party with respect to Sale Transaction Matters. With
respect to any other substantive communication by Buyer with a Common Party
regarding Sale Transaction Matters, Buyer shall exercise best efforts to advise
Seller of such communication promptly following such communication.
Section 5.19. RELEASE OF OBLIGATIONS AND REPLACEMENT ARRANGEMENTS. Buyer
shall cooperate with Seller in Seller's efforts to obtain Seller's release from
its obligations under the IDB Lease. Buyer shall also (a) cooperate with Seller
in obtaining Seller's release from its obligations under the letters of credit,
surety bonds, guarantees and performance bonds listed on
46
Schedule 1.3(o) and (b) use commercially reasonable efforts to enter into
commercially reasonable replacement arrangements for such letters of credit,
surety bonds, guarantees and performance bonds with the counterparties thereto
as necessary to obtain Seller's release from such letters of credit, surety
bonds and performance bonds.
Section 5.20. EXCLUDED MILL PROPERTY. Buyer and Seller acknowledge that
certain portions of the IDB Leasehold Parcel and the Fee Parcels located
approximately as cross-hatched on the drawing attached hereto as Schedule 5.20
are intended by Buyer and Seller to be Excluded Assets hereunder for all
purposes (the "Excluded Mill Property"), except as set forth in the last
sentence of this Section 5.20. In order to facilitate such exclusion, Buyer and
Seller agree that prior to Closing, at Seller's expense, (a) Seller shall cause
the boundaries of the Excluded Mill Property to be staked and pinned by a
surveyor licensed in the State of Alabama, based upon the cross-hatched location
shown on the drawing attached hereto as Schedule 5.20, but with such minor
variations thereto as Buyer and Seller shall reasonably agree based upon the
surveyor's reasonable recommendations in connection with any physical obstacles
or other logistical difficulties encountered as the staking and pinning is
performed, (b) Seller shall cause the surveyor to prepare ALTA surveys to be
completed with respect to the Excluded Mill Property, which surveys shall be
jointly certified to Buyer and Seller, (c) Seller shall cause the surveyor
preparing such surveys to prepare accurate and complete metes and bounds legal
descriptions of the Excluded Mill Property, to be included on the face of the
surveys, (d) Seller shall, prior to the Closing, comply with any and all
applicable Real Property Laws required to be complied with in order for the
Excluded Mill Property to constitute legally separate parcels of land from the
remainder of the Seller Real Property, including without limitation obtaining
any necessary permits and approvals from any applicable Authority having
jurisdiction with respect thereto and (e) Seller shall use its commercially
reasonable efforts to obtain any consents or approvals required under the Bonds
and the IDB Leases for the removal of the Excluded Mill Property to the extent
any portion thereof is located on the IDB Leasehold Parcel and shall pay any and
all costs or fees in connection therewith, including without limitation any
defeasance or prepayment fees or expenses, any release prices and any attorneys
fees and expenses in connection therewith, and in connection therewith Seller
shall cause such portion of the Excluded Mill Property to be conveyed to Seller
simultaneously with the Closing. Seller and Buyer agree that, as promptly as
practicable after the Closing, Seller shall cause any and all applicable
Authorities to recognize the Excluded Mill Property as separate and distinct tax
parcels from the Seller Real Property such that all Taxes therefor shall be due
and payable by Seller and no lien with respect thereto shall affix to the Seller
Real Property after the Closing (other than Permitted Encumbrances), and if
necessary for Seller to access the Excluded Mill Property, Seller and Buyer
shall negotiate reasonable access easements to provide Seller with reasonable
rights of ingress and egress to the Excluded Mill Property, and the locations of
such easements shall be shown on the survey, provided that such easement shall
provide that Buyer shall reserve the right to reasonably relocate such easements
at any time and from time to time and the easements shall contain language
requiring Seller to carry appropriate insurance and to indemnify Buyer in
connection with Seller's use of the easement areas. Seller shall do or cause to
be done any and all other actions or obtain any and all other consents as may be
reasonably necessary or appropriate to further the foregoing and the treatment
in all respects of the Excluded Mill Parcel as separate and distinct legal
parcels from the Seller Real Property. If Buyer requests access rights,
easements or similar rights or interests in or with respect to the portion of
the Excluded Mill Parcel described as the "Black Liquor Ponds" or the "Dumps" on
Schedule 5.20 in order to maintain, modify or
47
obtain an Environmental Permit in connection with the operation of the Combined
Business for industrial use, Seller will grant such rights, easements or
interest to Buyer at Closing for no additional consideration and otherwise on
terms and conditions reasonably acceptable to Buyer, including that such rights,
easements or interest will run with the land.
Section 5.21. NET WORTH AND SALE AGREEMENT. For a period ending five (5)
years after the Closing, (a) Seller and its subsidiaries will at all times keep
and maintain Consolidated Net Worth (hereinafter defined) at an amount not less
than $200,000,000, unless and until Seller completes a sale in accordance with
subsection (b), and (b) Seller shall not sell all or substantially all of its
assets (including the assets of its subsidiaries), unless (i) the buyer of such
assets agrees to assume the obligations of Seller to Buyer under this Agreement
(including, without limitation, the net worth obligations set forth in
subsection (a) of this Section 5.21) and (ii) Seller provides Buyer with
advanced notice of such sale and a copy of an instrument of assumption with such
buyer that is in compliance with this provision. "Consolidated Net Worth" means,
as of the date of any determination thereof, the amount of the Seller's
shareholders' equity as determined in accordance with generally accepted
accounting principles and consistent with Seller's historical audited
consolidated financial statements based on the balance sheet of Seller at the
end of Seller's immediately preceding fiscal quarter. For a period ending five
(5) years after the Closing, (i) within 45 days after the end of each of
Seller's fiscal quarters, Seller shall deliver to Buyer a certificate of
Seller's Chief Financial Officer certifying that Seller is in compliance with
the covenants in this Section 5.21 and (ii) within 90 days after the end of each
of Seller' fiscal years, Seller shall deliver to Buyer (A) a letter from
Seller's independent accountants confirming that Seller's Consolidated Net Worth
is not less than $200,000,000 or (B) a copy of its audited financial statements,
reflecting a Consolidated Net Worth of not less than $200,000,000. Seller shall
not declare or pay a dividend or make any distribution to its stockholders or
otherwise transfer any assets to or engage in any transactions with its
stockholders or their affiliates (other than transfers for fair value) if, at
the time of or immediately following such dividend, distribution, transfer or
transaction, Seller is not or would not be in compliance with the foregoing
covenants (any such action being a "Prohibited Transaction"). Any Prohibited
Transaction shall be void and any funds or assets of Seller so distributed,
dividended or transferred shall be held in a constructive trust for the benefit
of Buyer hereunder.
Section 5.22. RELEASE OF ENCUMBRANCES. Prior to or at the time of the
Closing, Seller shall pay and otherwise satisfy any obligations secured by any
liens or other encumbrances affecting any real or personal property constituting
a part of the Assets (other than Permitted Encumbrances and those encumbrances
relating solely to Assumed Liabilities) and Seller shall cause the release of
all such liens or other encumbrances. Seller shall use commercially reasonable
efforts to satisfy its obligations under Section 5.22 prior to the Closing and,
if any such obligations are not satisfied by the Closing, Seller shall cause
them to be satisfied promptly as practicable thereafter.
Section 5.23. OPTION AGREEMENT. At the Closing, Buyer and Seller shall
enter into an option agreement (the "Option Agreement") in the form attached
hereto as Exhibit C.
Section 5.24. MAPLESVILLE AGREEMENT. At the Closing, Buyer and Seller
shall enter into a warehouse services agreement related to warehousing services
provided by Seller to Buyer at
48
Seller's facility in Maplesville (the "Maplesville Agreement") in the form
attached hereto as Exhibit D.
Section 5.25. HEADQUARTERS LEASE. At the Closing, Buyer and Seller shall
enter into a lease for office space in Seller's corporate headquarters in
Tuscaloosa, Alabama (the "Headquarters Lease") in the form attached hereto as
Exhibit E.
Section 5.26. ROOSTER BRIDGE LEASE. At the Closing, Buyer and Seller shall
enter into a lease allowing Buyer to use and purchase pursuant to an option
Seller's wastewood disposal site located in Sumter County, Alabama (the "Rooster
Bridge Lease") in the form attached hereto as Exhibit F.
Section 5.27. PRIMACY RELOCATION PROCEEDS. From and after the Closing
Date, Buyer will promptly pay Seller all proceeds from the sale of an Employee
Home (as such term is defined in the Agreement for Relocation Services, dated as
of May 8, 2000, between Seller and Primacy Relocation, LLC (the "Relocation
Agreement")) that was acquired by Seller in accordance with the Relocation
Agreement on or prior to the Closing Date.
ARTICLE VI.
EMPLOYEES AND EMPLOYEE BENEFIT PLANS
Section 6.1. EMPLOYMENT OF SELLER'S EMPLOYEES.
(a) Seller shall use commercially reasonable efforts to retain
through the Closing the services of all employees employed principally in the
operation of the Business and Seller shall not discourage or dissuade any such
employee from making available their employment services to Buyer. Except as set
forth in Schedule 6.1(a), Seller agrees that to the extent Seller agrees to
provide additional compensation (such as a stay bonus) to any employee if such
employee continues employment for a period of time prior to the Closing, then
the payment of such additional compensation shall be conditioned on such
employee not rejecting an offer of employment by Buyer provided that the
salary/wage compensation offered to such employee by Buyer is comparable to such
employee's current salary/wage compensation.
(b) Effective as of the Closing Date, Buyer (or its designated
Affiliate) shall have the right (but not the obligation) to offer employment to
any employee who is employed by Seller directly in connection with the Business
on terms established by Buyer, in its sole discretion, but subject to Section
6.2. On or before the Closing Date, Buyer shall deliver a written offer of
employment to all employees of the Business whom Buyer desires to hire. To the
extent permitted by applicable Laws, Buyer shall complete all of Buyer's
pre-hiring procedures (including, but not limited to, drug tests and background
investigations) for such employees prior to Closing. Those employees who accept
such offers of employment effective as of the Closing Date shall be referred to
herein as the "New Employees." Buyer's hiring practices in connection with the
employees offered employment by Buyer shall be conducted in compliance with all
applicable Laws. To the extent that any of Buyer's pre-hiring procedures cannot
be completed under applicable Laws prior to Buyer making an offer to any
employee, then if such person begins employment with Buyer but, during the two
weeks following the
49
Closing, subsequently fails to satisfy such pre-hiring procedures, such person
shall not be a New Employee under the terms of this Agreement.
(c) From and after the Closing Date, Seller shall remain
solely responsible for any and all liabilities in respect of the New Employees
and their beneficiaries and dependents relating to or arising in connection with
or as a result of (i) the employment or the actual or constructive termination
of employment of any New Employee by Seller (including, without limitation, in
connection with the consummation of the transactions contemplated by this
Agreement), (ii) the participation in, or accrual of benefits or compensation
under, or the failure to participate in or to accrue compensation or benefits
under, any employee or retiree benefit or compensation plan, program, practice,
policy, agreement or arrangement of Seller relating to periods prior to the
Closing Date, or (iii) except as provided in Section 6.2(c), accrued but unpaid
salaries, wages, bonuses, severance payments, incentive compensation, vacation
or sick pay, or other compensation or payroll items (including, without
limitation, deferred compensation) relating to periods prior to the Closing
Date. Notwithstanding the foregoing, Buyer shall assume and pay any such
liabilities that are included in the Current Liabilities on the Final Working
Capital Schedule, but only up to the amount so included.
(d) For a period commencing on the date hereof and ending two
(2) years after the Closing Date, without the prior written consent of Seller,
Buyer shall not, and shall not cause its affiliates to, in any manner directly
or indirectly, solicit for employment or attempt to solicit for employment, on
its behalf or on behalf of any other person, any employee of Seller who was not
principally employed by Seller or Seller JV in the operation of the Combined
Business prior to the Closing Date (a "Non-Business Employee"); provided,
however, that nothing herein shall prevent Buyer from soliciting or hiring, on
its behalf or on behalf of any other person, a Non-Business Employee after such
person ceases to be an employee of Seller, so long as Buyer did not solicit such
person to leave the employ of Seller. Prior to Closing, Seller shall deliver to
Buyer a list of all Non-Business Employees, and shall supplement such list upon
request from Buyer.
Section 6.2. WELFARE AND FRINGE BENEFIT PLANS.
(a) From and after the Closing Date, the New Employees and
their eligible dependents shall be eligible to participate in such employee
benefit plans, programs, policies and arrangements that Buyer or its Affiliates
establishes for and makes available to New Employees generally. Without limiting
the generality of the foregoing, Buyer shall provide group health care coverage
to New Employees comparable to group health benefits provided to other similarly
situated employees of Buyer as such benefits may be modified from time to time.
In no event shall Buyer be responsible for any claims for group health benefits
or other welfare benefits that are incurred before the Closing. For purposes of
the foregoing sentence, a claim shall be considered incurred when the services
are rendered or the supplies or medications are provided, and not when the
condition arose.
(b) Seller shall be solely responsible for and retain all
liabilities under all of Seller's post-retirement welfare Plans covering the New
Employees other than pursuant to Section 6.8. Subject to Buyer's obligations
pursuant to paragraph (a) above, Seller shall continue on and after the Closing
Date to be solely responsible for COBRA continuation
50
coverage for all employees of Seller (and their eligible dependents) terminated
at or prior to the Closing and Seller shall be responsible for any other COBRA
obligations imposed on Seller or any obligations of Buyer arising as a result of
Seller terminating any such Plans. The term "COBRA" refers to the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended.
(c) As soon as practicable following the Closing Date, Seller
shall make all payments to New Employees required under and in accordance with
the terms of any Seller welfare benefit plan or payroll practice, including,
without limitation, any severance pay and flexible spending account plans. In
addition, as soon as practicable after the Closing Date, Seller shall pay to all
New Employees all accrued but unused vacation and other paid time off pay,
reimbursements and other similar payments, for which New Employees were approved
before the Closing Date, even if they complete the requirements for such
payments after the Closing Date; and a pro-rated portion of all bonus or other
incentive amounts earned for the period in which the Closing Date occurs.
Notwithstanding the foregoing, solely with respect to New Employees covered by
the Labor Agreement (as hereinafter defined), Buyer shall assume and honor all
vacation pay or leave that accrued prior to the Closing and shall provide such
pay or leave in accordance with the Labor Agreement, and proper accruals for
such items shall be included in the Preliminary and Final Working Capital
Schedule.
Section 6.3. WORKERS' COMPENSATION; DISABILITY. From and after the Closing
Date, Seller shall remain solely responsible for any and all liabilities to or
in respect of any of its employees, including any New Employee, relating to or
arising in connection with any and all claims for workers' compensation benefits
arising in connection with any occupational injury or disease occurring prior to
the Closing Date in accordance with Seller's Plans. From and after the Closing
Date, Seller shall remain solely responsible for any and all liabilities to or
in respect of any of its employees, including any New Employee, relating to or
arising in connection with any and all claims for short-term or long-term
disability benefits arising in connection with any injury or disease occurring
or existing on or prior to the Closing Date whether reported before or after the
Closing Date in accordance with Seller's Plans.
Section 6.4. EMPLOYMENT TAXES; FILING REQUIREMENTS. Seller shall be
responsible for all Taxes imposed, and withholding or deductions to be made from
wages as required by Law, with respect to Seller's employees for all wages
earned for work performed as an employee of Seller prior to the Closing Date.
Buyer shall have no liability for, or obligation in relation to, any Taxes or
withholdings described in the previous sentence, including, but not limited to,
Taxes imposed under the United States Federal Insurance Contributions Act (FICA)
and the United States Federal Unemployment Tax Act (FUTA), except to the extent
such Taxes are included in the Current Liabilities on the Final Working Capital
Schedule, but only up to the amount so included. Seller shall be responsible for
the filing of all required filings, including Forms W-2, with respect to all
employees of the Business for all periods prior to the Closing Date, and Buyer
shall have no responsibility with respect thereto. Seller and Buyer agree that
the provisions of the "Standard Procedure" of section 4 of Revenue Procedure
2004-53, 2004-34 Internal Revenue Bulletin 320, shall apply with respect to all
of the New Employees.
Section 6.5. ACCESS TO RECORDS. To the extent that Seller has not provided
to Buyer business and employee records and files related to the conduct of the
Business prior to the Closing Date (including, without limitation, personnel
files and accounting, payroll, purchasing
51
and sales records), Seller shall maintain such records for seven years and Buyer
shall be entitled to inspect or obtain copies of such records from Seller
promptly following Buyer's request therefor.
Section 6.6. 401(k) PLAN.
(a) As soon as practicable following the Closing Date, Seller
shall cause the vested account balances of all New Employees in any Qualified
Plan that is qualified under section 401(k) of the Code to be distributed in
accordance with the terms of such Qualified Plans (treating the New Employees as
having severed from employment within the meaning of such plans), and Buyer
shall permit such New Employees to directly roll over such distributions
(including outstanding loan balances) to a plan of Buyer that is a defined
contribution plan qualified under sections 401(a) and 401(k) of the Code.
(b) On or before the Closing Date, Seller shall direct and
cause Vanguard Fiduciary Trust Company, the trustee of the GSPC Master Savings
and Investment Trust, to transfer the assets it holds in said master trust with
respect to the Seller JV 401(k) plan on the Closing Date or as promptly as
practicable after the Closing Date to a separate, stand-alone tax-exempt trust
for which Vanguard Fiduciary Trust Company serves as trustee.
Section 6.7. PENSION PLAN FOR BUSINESS EMPLOYEES, LABOR AGREEMENT.
(a) Buyer shall not assume any of Seller's rights and
obligations with respect to the Pension Plan. As of the Closing: (i) the
employees of the Business shall cease active participation in the Pension Plan
and no additional benefits shall accrue for them thereunder and (ii) Seller
shall retain all assets, liabilities and obligations under the Pension Plan.
(b) At the Closing, any New Employees covered by the Labor
Agreement (as hereinafter defined) who are accruing benefits under the Pension
Plan immediately prior to the Closing shall become participants in a pension
plan sponsored by Buyer or one of its Affiliates that shall provide benefits as
required under the Labor Agreement with respect to periods of employment with
Buyer and its Affiliates following the Closing.
(c) Buyer has reviewed all terms of the Labor Agreement by and
between GSPC Enterprises, Inc. (Demopolis Plant) and Paper Allied-Industrial
Chemical & Energy Workers International Union, AFL-CIO and its Locals No. 719
and No. 1835, effective December 13, 2004 (the "Labor Agreement"), including
specifically the following provision in the Labor Agreement:
The Company agrees that, if during the life of this Agreement, it
discontinues operations, sells, leases, transfers, or assigns the
operations covered by this Agreement, it shall inform the purchaser,
lessee, transferee or assignee of the exact terms of this Agreement
and shall make the sale, lease, transfer or assignment conditional
upon the purchaser, lessee, transferee or assignee, assuming all the
obligations of the Agreement until its expiration date and treating
the affected employees of the Bargaining Unit in accordance with the
terms of the Agreement.
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Buyer agrees that effective as of the Closing Date and subject to the conditions
and limitations of Sections 1.4(a) and 1.4(c) hereof, Buyer will assume all
rights, obligations and liabilities under the Labor Agreement in compliance with
the language set forth above and will offer continued employment to all
bargaining unit employees at the Demopolis plant, subject to the provisions of
the Labor Agreement.
(d) Following the Closing, Seller shall amend the Pension Plan
to provide that any New Employee covered by the Labor Agreement who is subject
to the cost of living adjustment under Section 5.1 of the Pension Plan shall be
entitled to such adjustment as of December 31, 2005 and each December 31
thereafter through December 31, 2008, provided that such New Employee is
employed by the Buyer or any of its Affiliates as of such December 31. On or
before each December 31, 2005, and on or before each December 31 thereafter to
and including December 31, 2008, Buyer will notify Seller after any such New
Employee ceases to be employed by Buyer. Buyer and Seller acknowledge that the
Purchase Price will be adjusted at Closing pursuant to clause (z) of Section 2.1
to compensate Seller for certain payments described in Schedule 2.1 made or to
be made by Seller after the Closing Date under the Labor Agreement. Seller
agrees that such adjustment of the Purchase Price shall satisfy in full Buyer's
obligation to reimburse Seller in respect of such payments and that Buyer will
be fully discharged from any further obligation relating thereto.
Section 6.8. POST-RETIREMENT LIFE INSURANCE BENEFITS. Buyer shall be
responsible for providing the post-retirement life insurance benefits as set
forth on Schedule 1.4(c). Buyer and Seller acknowledge that the Purchase Price
will be adjusted at Closing pursuant to clause (z) of Section 2.1 to compensate
Buyer for the assumption by Buyer of certain obligations of Seller to pay
post-retirement benefits to New Employees described in Schedule 2.1. Buyer
agrees that such adjustment of the Purchase Price shall satisfy in full Seller's
obligation to reimburse Buyer in respect of such post-retirement life insurance
benefits and that Seller will be fully discharged from any further obligation
relating thereto.
Section 6.9. WARN ACT.
(a) Buyer shall be responsible for all liabilities or
obligations arising under the WARN Act ("WARN Act Liabilities") arising out of
or resulting from any decision by Buyer to reduce the number of employees at the
Real Property included in the Assets (including New Employees) on or after the
Closing Date. Notwithstanding the foregoing, if any WARN Act Liabilities are
incurred as a result of employees at the Real Property not accepting an offer of
employment by Buyer or failing to satisfy Buyer's reasonable pre-hiring process,
Seller shall be responsible for such liabilities.
(b) Except as set forth in Section 6.8(a), Seller shall be
responsible for any WARN Act Liabilities arising out of or resulting from
Seller's termination of any employees of the Business not hired by Buyer in
connection with the Closing (whether or not such employees were employed by the
Business), including, without limitation, any employees located at Seller's
facilities in Tuscaloosa, Alabama.
Section 6.10. DEFERRED COMPENSATION PLANS. Effective as of the Closing
Date, Seller shall cause all New Employees to become fully vested in their
accounts or benefits under any
53
nonqualified deferred compensation plans of Seller or its Affiliates, and such
accounts or benefits shall be distributed to such New Employees in accordance
with the terms of such plans.
ARTICLE VII.
CONFIDENTIAL INFORMATION AND TRADE SECRETS
Section 7.1. DEFINITIONS. For the purposes of this Article VII, the
following definitions shall apply:
(a) "Confidential Information" shall mean any data or
information of Seller or Seller JV (including data or information that
constitutes a part of the Assets), other than Trade Secrets, which is valuable
to the operation of a business and not generally known to competitors; provided
that "Confidential Information" shall not include information that (i) is in the
public domain, (ii) is published or otherwise becomes part of the public domain
through no fault of Seller or Buyer, as the case may be, or (iii) becomes
available to Seller or Buyer after the Closing on a non-confidential basis from
a source that did not acquire such information (directly or indirectly) from
Seller or Buyer, as the case may be, on a confidential basis.
(b) "Trade Secrets" shall mean all technical or nontechnical
data, a formula, pattern, compilation, program, including, without limitation,
computer software and related source codes, device, method, technique, drawing,
process, financial data, financial plan, product plan, list of actual or
potential customers or suppliers of Seller or Seller JV, or other information of
Seller or Seller JV similar to any of the foregoing (including data or
information that constitutes a part of the Assets), which derives economic
value, actual or potential, from not being generally known to, and not being
readily ascertainable by proper means by, other persons who can derive economic
value from its disclosure or use. For purposes of this Article VII, the term
Trade Secrets shall not include information that Seller or Buyer can show by
competent proof becomes generally known to the public after the Closing Date
through no act or omission of such party.
Section 7.2. TRADE SECRETS. From and after the Closing Date, Seller shall
hold in confidence all Trade Secrets related to the Combined Business ("Business
Trade Secrets"), and shall not disclose, publish or make use of Business Trade
Secrets at any time after the date hereof without the prior written consent of
Buyer. Nothing in this Agreement shall diminish the rights of Buyer regarding
the protection of Business Trade Secrets and other intellectual property
pursuant to applicable Law. From and after the Closing Date, Buyer shall hold in
confidence all Trade Secrets of Seller other than Business Trade Secrets
("Non-Business Trade Secrets"), and shall not disclose, publish or make use of
Non-Business Trade Secrets at any time after the date hereof without the prior
written consent of Seller. Nothing in this Agreement shall diminish the rights
of Seller regarding the protection of Non-Business Trade Secrets and other
intellectual property pursuant to applicable Law.
Section 7.3. CONFIDENTIAL INFORMATION. Seller hereby agrees that, for a
period of three (3) years following the Closing Date, Seller shall hold in
confidence all Confidential Information related to the Combined Business and
will not disclose, publish or make use of such Confidential Information without
the prior written consent of Buyer. Buyer hereby agrees that, for a period of
54
three (3) years following the Closing Date, Buyer shall hold in confidence all
Confidential Information of Seller (other than Business Trade Secrets and
Confidential Information related to the Combined Business) and will not
disclose, publish or make use of such Confidential Information without the prior
written consent of Seller.
Section 7.4. SEVERABILITY. If a judicial or arbitral determination is made
that any of the provisions of this Article VII constitutes an unreasonable or
otherwise unenforceable restriction against Seller or Buyer, the provisions of
this Article VII shall be rendered void only to the extent that such judicial or
arbitral determination finds such provisions to be unreasonable or otherwise
unenforceable with respect to Seller or Buyer. In this regard, Seller and Buyer
hereby agree that any judicial Authority construing this Agreement shall be
empowered to sever any portion of any time period from the coverage of this
Article VII and to apply the provisions of this Article VII to the remaining
portion of the remaining time period not so severed by such judicial or arbitral
Authority. Moreover, notwithstanding the fact that any provision of this Article
VII is determined not to be specifically enforceable, Buyer or Seller, as
applicable, shall nevertheless be entitled to recover monetary damages as a
result of the breach of such provision by Seller or Buyer. The time period
during which the prohibitions set forth in this Article VII shall apply shall be
tolled and suspended for a period equal to the aggregate time during which
Seller or Buyer violates such prohibitions in any respect.
Section 7.5. INJUNCTIVE RELIEF. Seller and Buyer hereby agree that any
remedy at law for any breach of the provisions contained this Article VII shall
be inadequate and that the Buyer Parties or Seller shall each be entitled to
injunctive relief in addition to any other remedy such Buyer Parties or Seller
might have under this Agreement.
ARTICLE VIII.
CONDITIONS
Section 8.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to effect the transactions contemplated in this
Agreement shall be subject to the fulfillment at or prior to the Closing of each
of the following conditions:
(a) On the Closing Date, there shall be no injunction, writ or
preliminary restraining order or any order of any nature in effect issued by any
Authority to the effect that the transactions contemplated hereby may not be
consummated as herein provided, no proceeding or lawsuit shall have been
commenced by any Authority for the purpose of obtaining any such injunction,
writ or preliminary restraining order or other material equitable relief with
respect to the transactions contemplated hereby, and no written notice shall
have been received from any such agency indicating an intent to restrain,
prevent, materially delay or restructure the transactions contemplated by this
Agreement.
(b) The applicable waiting period under the HSR Act shall have
expired or shall have been terminated.
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Section 8.2. CONDITIONS TO OBLIGATIONS OF BUYER. The obligation of Buyer
to effect the transactions contemplated under this Agreement shall be subject to
the fulfillment at or prior to the Closing of each of the following additional
conditions:
(a) The representations and warranties of each Seller set
forth in this Agreement (i) if qualified in any respect as to materiality
(including, without limitation, references to all material respects), shall be
true and correct, and (ii) if not qualified as to materiality, shall have been
true and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, unless any such representation or warranty is made only as of a specific
date, in which event such representation and warranty shall be true and correct
as of such specified date.
(b) Each Seller shall have complied with or performed in all
material respects all covenants and agreements required to be performed by it
under this Agreement at or prior to the Closing.
(c) Each Seller shall have furnished Buyer with a certificate
executed by its President and Chief Financial Officer, as to compliance with the
conditions set forth in Sections 8.2(a) and (b).
(d) Buyer shall have received an opinion of King & Spalding
LLP, dated the Closing Date, substantially in the form attached hereto as
Exhibit G (the "Seller Opinion").
(e) Between the date of this Agreement and the Closing, there
shall not have been any Material Adverse Effect.
(f) All consents, approvals and other requirements (i) for the
assignment of the IDB Leases and the transfer of the Bonds and (ii) for the
subdivision of the IDB Leasehold Parcel and the transfer of the Excluded Mill
Property to Seller shall have been obtained or satisfied.
(g) Seller shall have delivered to Buyer evidence of a lien
release instrument reasonably satisfactory to Buyer's title company that the
obligations secured by the ▇▇▇▇▇▇▇▇ ▇▇▇▇ have been satisfied.
(h) Seller shall have executed and delivered to Buyer a copy
of the Transition Services Agreement in the form attached hereto as Exhibit A,
the Chip Supply Agreement in the form attached hereto as Exhibit B, the Option
Agreement in the form attached hereto as Exhibit C, the Maplesville Agreement in
the form attached hereto as Exhibit D, the Headquarters Lease in the form
attached hereto as Exhibit E and the Rooster Bridge Lease in the form attached
hereto as Exhibit F.
Section 8.3. CONDITIONS TO OBLIGATIONS OF SELLER. The obligation of Seller
to effect the transactions contemplated under this Agreement shall be subject to
the fulfillment at or prior to the Closing of each of the following additional
conditions:
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(a) The representations and warranties of the Buyer Parties
set forth in this Agreement (i) if qualified in any respect as to materiality
(including, without limitation, references to all material respects), shall be
true and correct, and (ii) if not qualified as to materiality, shall have been
true and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, unless any such representation or warranty is made only as of a specific
date, in which event such representation and warranty shall be true and correct
as of such specified date.
(b) Each Buyer Party shall have complied with or performed in
all material respects all covenants and agreements required to be performed by
it under this Agreement prior to the Closing.
(c) Each Buyer Party shall have furnished Seller with a
certificate of its President and Chief Financial Officer as to compliance with
the conditions set forth in Sections 8.3(a) and (b).
(d) Buyer shall have executed and delivered to Seller a copy
of the Transition Services Agreement in the form attached hereto as Exhibit A,
the Chip Supply Agreement in the form attached hereto as Exhibit B, the Option
Agreement in the form attached hereto as Exhibit C, the Maplesville Agreement in
the form attached hereto as Exhibit D, the Headquarters Lease in the form
attached hereto as Exhibit E and the Rooster Bridge Lease in the form attached
hereto as Exhibit F.
ARTICLE IX.
CLOSING
Section 9.1. THE CLOSING. The consummation of the transactions
contemplated by this Agreement are herein referred to as the "Closing." The
"Closing Date" shall be the date on which the Closing occurs. The Closing shall
occur as soon as practicable (and in any event, within ten (10) business days),
following the satisfaction or waiver of the conditions set forth in Article
VIII, or on such other date as shall be mutually agreed by the parties. The
Closing shall take place at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, or at such other
place as Seller and Buyer shall agree. The effective time of the Closing shall
be 12:01 a.m. on the Closing Date.
Section 9.2. DOCUMENTS TO BE DELIVERED BY SELLER. At the Closing, Seller
shall deliver, or cause to be delivered, to Buyer the following:
(a) limited or special warranty deeds (or the equivalent
thereof in each jurisdiction where real property is being transferred) in
recordable form which conveys to Buyer title to the Fee Parcels and assignment
and assumption of the IDB Lease, each to be subject to any Permitted
Encumbrances and the Assumed Liabilities, together with such bills of sale,
patent, trademark and other instruments of assignment, and other conveyance
documents reasonably requested by Buyer, dated the Closing Date, transferring to
Buyer all of Seller's right, title and interest in and to the Assets together
with possession of the Assets all in a form reasonably satisfactory to Buyer;
Seller will provide to Buyer's title insurance company (i) customary good
standing certificates and corporate authorizations, (ii) owner's affidavits
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acceptable to such title insurer to remove any exception for (A) mechanics' or
materialmans' liens and (B) rights of parties in possession, (iii) a gap
indemnity acceptable to such title insurer for insuring over the "gap" (i.e.,
the time period from the effective date of this title company's last checkdown
of title to the date of recording of the deed); and (iv) any other certificates,
affidavits, indemnities or other documents or instruments reasonably requested
by Buyer's title insurance company to allow Buyer to receive title policies at
the Closing in form reasonably acceptable to Buyer; provided that none of such
documents, agreements or instruments shall expand the warranties of Seller to
Buyer hereunder with respect to the Assets, including the Fee Parcels or the
Assumed Liabilities;
(b) documents evidencing the assignment and assumption of the
Assumed Contracts and of any liabilities or obligations assumed by Buyer
pursuant to Sections 6.7(c) hereof and the assignment of any assignable Permits;
(c) a copy of resolutions of the board of directors,
shareholders, partners and members of each Seller authorizing the execution,
delivery and performance of this Agreement by each Seller and a certificate of
the secretary or assistant secretary of each Seller, dated the Closing Date,
that such resolutions were duly adopted and are in full force and effect;
(d) certificates from the Secretary of State of the State of
Delaware evidencing the good standing of each Seller and Seller JV;
(e) a certificate, dated the Closing Date, executed by the
President and Chief Financial Officer of each Seller certifying to the
fulfillment of the conditions specified in Sections 8.2(a) and 8.2(b);
(f) the affidavit of each Seller required by Section 1445
(b)(2) of the Code;
(g) the Seller Opinion;
(h) certificates or other documents evidencing the transfer of
the Seller JV Interest to Buyer including; without limitation, all instruments
and approvals necessary to substitute Buyer as a member in Seller JV with all of
the rights and privileges that Seller has with respect to its membership
interest in Seller JV immediately prior to the Closing;
(i) landlord estoppel certificates with respect to the IDB
Lease, and all required consents under the IDB Lease;
(j) the Transition Services Agreement;
(k) the Chip Supply Agreement;
(l) the Option Agreement;
(m) the Maplesville Agreement;
(n) the Headquarters Lease;
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(o) the Rooster Bridge Lease;
(p) owner's affidavits (in customary form) reasonably
necessary to enable Buyer to obtain any title insurance policies;
(q) an instrument granting the easement or other instrument
contemplated by Section 5.20; and
(r) all other documents required to be entered into by Seller
pursuant to this Agreement or reasonably requested by Buyer to convey the Assets
and the Business to Buyer or to otherwise consummate the transactions
contemplated hereby.
Section 9.3. DOCUMENTS TO BE DELIVERED BY BUYER. At the Closing, Buyer
shall deliver to Seller the following:
(a) the Purchase Price, as adjusted in accordance with Article
II;
(b) documents evidencing the assignment and assumption of the
Assumed Contracts and of any liabilities and obligations assumed by Buyer
pursuant to Sections 6.7(c) hereof, the acceptance of assignable Permits, and
the assumption of the Assumed Liabilities;
(c) a copy of the resolutions of the board of directors or
member of each Buyer Party authorizing the execution, delivery and performance
of this Agreement by such Buyer Party, and a certificate of its secretary or
assistant secretary, dated the Closing Date, that such resolutions were duly
adopted and are in full force and effect;
(d) a certificate, dated the Closing Date executed by the
President and Chief Financial Officer of each Buyer Party certifying to the
fulfillment of the conditions specified in Section 8.3(a) and 8.3(b); and
(e) the Transition Services Agreement;
(f) the Chip Supply Agreement;
(g) the Option Agreement;
(h) the Maplesville Agreement;
(i) the Headquarters Lease; and
(j) the Rooster Bridge Lease.
ARTICLE X.
INDEMNIFICATION
Section 10.1. INDEMNIFICATION OBLIGATIONS OF SELLER. From and after the
Closing Date, subject to the terms and conditions hereof, Seller shall
indemnify, defend and hold harmless the
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Buyer Parties from, against and in respect of any and all claims, debts,
payments, liabilities, obligations, losses, costs, expenses, penalties, fines
and judgments (at equity or at law) and damages whenever arising or incurred,
including, without limitation, consequential damages, diminution in value,
amounts paid in settlement, costs of investigation and reasonable attorneys'
fees and expenses (collectively, "Covered Liabilities") of either of the Buyer
Parties or their subsidiaries and Affiliates, each of their respective officers,
directors, employees, agents, shareholders and representatives and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "Buyer Indemnified Parties") arising out of or relating to:
(a) any Excluded Liability;
(b) any breach or inaccuracy of any representation or warranty
made by Seller in this Agreement (such breach or inaccuracy to be determined as
to the representations and warranties set forth in Sections 3.4, 3.12 and 3.14
giving no regard to any materiality qualifier (including, without limitation,
any qualification or reference as to material, materiality or Material Adverse
Effect) included in such representation or warranty);
(c) any breach of any covenant, agreement or undertaking made
by Seller in this Agreement;
(d) the non-compliance with any bulk transfer Law (other than
claims with respect to Assumed Liabilities); or
(e) Pre-existing Environmental Conditions (hereinafter
defined).
"Pre-existing Environmental Conditions" shall mean: (i) Hazardous Materials
present at, or released at or from, the Real Property prior to Closing; (ii) any
leaching, leaking, or migrating of such Hazardous Materials, at any time
(whether prior to or after Closing) and anywhere, whether or not such Hazardous
Materials become commingled with other Hazardous Materials; (iii) any disposal
prior to Closing of Hazardous Materials by Seller or Seller JV or otherwise from
the Real Property; (iv) environmental conditions and claims and violations under
Environmental Laws arising from or in connection with the operation of, or the
failure to properly operate, the Real Property or the Assets prior to Closing,
including any continuation of any such condition, claim or violation after the
Closing; and (v) claims or violations with respect to environmental matters
pursuant to (A) any consent agreement, consent order, or consent decree with any
Authority or other persons relating to or affecting the Real Property or the
Assets and existing as of the Closing Date or (B) any judicial order, judgment,
writ, injunction, or decree of any federal, state, or municipal court or other
Authority or any administrative order of any Authority with respect to
environmental matters and relating to or affecting the Real Property or the
Assets and existing as of the Closing Date.
The Covered Liabilities of the Buyer Indemnified Parties described in this
Section 10.1 as to which the Buyer Indemnified Parties are entitled to
indemnification are hereinafter collectively referred to as "Buyer Losses."
Section 10.2. INDEMNIFICATION OBLIGATIONS OF THE BUYER PARTIES. From and
after the Closing Date, subject to the terms and conditions hereof, the Buyer
Parties, jointly and severally, shall indemnify and hold harmless Seller from,
against and in respect of any and all Covered
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Liabilities of Seller or its subsidiaries and Affiliates, each of their
respective officers, directors, employees, agents, shareholders and
representatives and each of the heirs, executors, successors and assigns of any
of the foregoing (collectively, the "Seller Indemnified Parties") arising out of
or relating to:
(a) any Assumed Liability;
(b) any breach or inaccuracy of any representation or warranty
made by the Buyer Parties in this Agreement (such breach or inaccuracy to be
determined as to all representations and warranties giving no regard to any
materiality qualifier (including, without limitation, any qualification or
reference as to material, materiality or Material Adverse Effect) included in
such representation or warranty); or
(c) any breach of any covenant, agreement or undertaking made
by the Buyer Parties in this Agreement.
The Covered Liabilities of the Seller Indemnified Parties described in
this Section 10.2 as to which the Seller Indemnified Parties are entitled to
indemnification are hereinafter collectively referred to as "Seller Losses."
Section 10.3. INDEMNIFICATION PROCEDURE.
(a) As promptly as practicable after receipt by a Buyer Party
or Seller (hereinafter collectively referred to as an "Indemnified Party") of
notice of any complaint or the commencement of any action or proceeding or such
Indemnified Party otherwise becoming aware of an obligation or matter with
respect to which such Indemnified Party may be entitled to indemnification for
any Buyer Losses or Seller Losses (as the case may be), but in any event within
thirty (30) days of such complaint or of the commencement of such action or
proceeding, such Indemnified Party shall notify Buyer Parties or Seller, whoever
is the appropriate indemnifying party hereunder (the "Indemnifying Party") in
writing; provided, however, that the failure to so notify the Indemnifying Party
shall not relieve the Indemnifying Party from liability for such claim arising
otherwise than under this Agreement and such failure to so notify the
Indemnifying Party shall relieve the Indemnifying Party promptly or within such
30-day period from liability under this Agreement with respect to such claim
only if, and only to the extent that, such failure to notify the Indemnifying
Party results in such Indemnifying Party being materially prejudiced as a result
thereof. The Indemnifying Party shall have the right, upon written notice
delivered to the Indemnified Party within thirty (30) days thereafter, to assume
the defense of such action or proceeding, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of the fees and
disbursements of such counsel (including separate counsel for any Seller
Indemnified Parties or Buyer Indemnified Parties, as applicable, if such parties
have sufficiently differing or conflicting interest in such proceeding so as to
make representation by counsel to the other Seller Indemnified Parties or Buyer
Indemnified Parties, as applicable, inappropriate in the circumstances). In the
event, however, that the Indemnifying Party declines or fails to assume the
defense of the action or proceeding or to employ counsel reasonably satisfactory
to the Indemnified Party, in either case within such 30-day period, then such
Indemnified Party may employ counsel to represent or defend it in any such
action or proceeding and the Indemnifying Party shall pay the reasonable fees
and disbursements of such
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counsel as incurred. In any action or proceeding with respect to which
indemnification is being sought hereunder, the Indemnified Party or the
Indemnifying Party, whichever is not assuming the defense of such action, shall
have the right to participate in such litigation and to retain its own counsel
at such party's own expense. The Indemnifying Party or the Indemnified Party, as
the case may be, shall at all times use reasonable efforts to keep the
Indemnifying Party or the Indemnified Party, as the case may be, reasonably
apprised of the status of the defense of any action the defense of which they
are maintaining and to cooperate in good faith with each other with respect to
the defense of any such action. Notwithstanding anything to the contrary
contained herein, whether or not an Indemnifying Party assumes the defense of
any claim hereunder shall not constitute a presumption or admission with respect
to whether the losses related to such claim are, in fact, subject to
indemnification hereunder.
(b) No Indemnified Party may settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification is
being sought hereunder without the prior written consent of the Indemnifying
Party, unless (i) the Indemnifying Party fails to assume and maintain the
defense of such claim pursuant to Section 10.3(a) or (ii) such settlement,
compromise or consent includes an unconditional release of the Indemnifying
Party from all liability arising out of such claim, including any liability to
such Indemnifying Party and anyone claiming liability on behalf of such
Indemnifying Party, and does not contain any equitable order, judgment or term
which in any manner affects, restrains or interferes with the business of the
Indemnifying Party or any of the Indemnifying Party's respective Affiliates. An
Indemnifying Party may not, without the prior written consent of the Indemnified
Party, settle or compromise any claim or consent to the entry of any judgment
with respect to which indemnification is being sought hereunder unless such
settlement, compromise or consent includes an unconditional release of the
Indemnified Party from all liability arising out of such claim and does not
contain any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Indemnified Party or any of the
Indemnified Party's respective Affiliates.
(c) In the event an Indemnified Party shall claim a right to
payment pursuant to this Agreement (other than a third party claim), such
Indemnified Party shall send written notice of such claim to the appropriate
Indemnifying Party. Such notice shall specify the basis for such claim. As
promptly as possible after the Indemnified Party has given such notice, such
Indemnified Party and the appropriate Indemnifying Party shall establish the
merits and amount of such claim (by mutual agreement, litigation, arbitration or
otherwise) and, within five business days of the final determination of the
merits and amount of such claim, the Indemnifying Party shall pay to the
Indemnified Party immediately available funds in an amount equal to such claim
as determined hereunder. Thereafter, the Indemnifying Party shall promptly pay
the Indemnified Party any additional amount due under this Article X. If the
Indemnifying Party desires to appeal from an adverse judgment, then the
Indemnifying Party shall post and pay the cost of the security or bond required
to stay execution of the judgment pending appeal.
(d) Upon judgment, determination, settlement or compromise of
any third party claim, the Indemnifying Party shall pay promptly on behalf of
the Indemnified Party, and/or to the Indemnified Party in reimbursement of any
amount theretofore required to be paid by it, the amount so determined by
judgment, determination, settlement or compromise and all other claims of the
Indemnified Party with respect thereto, unless in the case of a judgment an
62
appeal is made from the judgment. Upon the payment in full by the Indemnifying
Party of such amounts, the Indemnifying Party shall succeed to the rights of
such Indemnified Party, to the extent not waived in settlement, against the
third party who made such third party claim.
Section 10.4. CLAIMS PERIOD. For purposes of this Agreement, a "Claims
Period" shall be the period after the Closing Date during which a claim for
indemnification may be asserted under this Agreement by an Indemnified Party.
The Claims Periods under this Agreement shall commence on the Closing Date and
shall terminate as follows:
(a) with respect to Buyer Losses arising under Section 10.1(b)
with respect to any breach or inaccuracy of any representation or warranty in
Sections 3.1, 3.2, 3.3, 3.5 or 3.21 (collectively, the "Seller Surviving
Representations") or under Sections 10.1(a), 10.1(c), 10.1(d) or 10.1(e), the
Claims Period shall continue indefinitely and shall not be limited;
(b) with respect to Buyer Losses arising under Section 10.1(b)
with respect to any breach or inaccuracy of any representation or warranty in
Section 3.12, the Claims Period shall terminate on the first date that the
underlying Tax obligation is barred by the applicable period of limitation under
federal and state Laws relating thereto (as such period may be extended by
waiver);
(c) with respect to Buyer Losses arising under Section 10.1(b)
with respect to any breach or inaccuracy of any representation or warranty in
Section 3.17, the Claims Period shall terminate on the date that is five (5)
years after the Closing Date;
(d) with respect to Seller Losses arising under Section
10.2(b) with respect to any breach or inaccuracy of any representation or
warranty in Section 4.1, 4.2, 4.3 or 4.4 or under Sections 10.2(a) or 10.2(c),
the Claims Period shall continue indefinitely and shall not be limited; and
(e) with respect to all other Buyer Losses or Seller Losses
arising under this Agreement, the Claims Period shall terminate on the date that
is two (2) years and six (6) months after the Closing Date.
Notwithstanding the foregoing, if prior to the close of business on the last day
of the applicable Claims Period, an Indemnifying Party shall have been properly
notified as provided hereunder of a claim for indemnity hereunder and such claim
shall not have been finally resolved or disposed of at such date, such claim
shall continue to survive and shall remain a basis for indemnity hereunder until
such claim is finally resolved or disposed of in accordance with the terms
hereof. If any act, omission, disclosure or failure to disclosure shall form the
basis for a claim for breach of more than one representation or warranty, and
such claims have different periods of survival hereunder, the termination of the
survival period of one claim shall not affect a party's right to make a claim
based on the breach of representation or warranty still surviving.
Section 10.5. INDEMNIFICATION BASKET AND CAP. Notwithstanding anything to
the contrary set forth herein:
(a) Seller shall only be liable for Buyer Losses arising under
Sections 10.1(b), 10.1(c) and 10.1(e) to the extent that any such Buyer Losses
exceed, in the aggregate,
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Ten Million Dollars ($10,000,000) (the "Seller Basket") and such liability shall
be only for amounts in excess of the Seller Basket; provided, however, that the
Seller Basket shall not apply with respect to Buyer Losses arising from (i) the
breach or inaccuracy of any Seller Surviving Representations, (ii) the breach or
inaccuracy of any representation, warranty, covenant, agreement or undertaking
made by Seller in this Agreement to the extent that such breach or inaccuracy is
willful or arises out of or results from the gross negligence of Seller, or
(iii) the breach of the covenants of Seller set forth in Section 1.1, 1.4, 1.5,
1.6, 2.2, 2.3, 2.4, 2.5, 2.6, 2.7 2.8, 5.1(b), 5.1(g), 5.1(h), 5.1(i), 5.1(s),
5.1(t), 5.1(u) 5.2, 5.4, 5.7, 5.8, 5.13, 5.14, 5.15, 5.16, 5.20, 5.21, 5.22,
6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.10, 7.2, 7.3 and 12.5
(collectively, the "Seller Excepted Provisions");
(b) the total aggregate amount of the liability of the Seller
for Buyer Losses arising under Sections 10.1(b), 10.1(c) and 10.1(e) shall be
limited to Two Hundred Million Dollars ($200,000,000) (the "Indemnity Cap");
provided, however, that the Indemnity Cap shall not apply to any claim arising
out of (i) the breach or inaccuracy in any representation, warranty, covenant,
agreement or undertaking of Seller in this Agreement to the extent such breach
is willful or arises out of or results from the gross negligence of Seller, (ii)
the breach or inaccuracy of any Seller Surviving Representation, or (iii) the
breach of any Seller Excepted Provision;
(c) Buyer shall only be liable for Seller Losses arising under
Sections 10.2(b) and 10.2(c) to the extent that any such Seller Losses exceed,
in the aggregate, Ten Million Dollars ($10,000,000) (the "Buyer Basket") and
such liability shall be only for amounts in excess of the Buyer Basket;
provided, however, that the Buyer Basket shall not apply with respect to Seller
Losses arising out of (i) the breach or inaccuracy of any representation,
warranty, covenant, agreement or undertaking made by Buyer in this Agreement to
the extent that such breach or inaccuracy is willful or arises out of or results
from the gross negligence of Buyer; or (ii) the breach of any Seller Excepted
Provision; provided, further, that the Buyer Basket shall not limit Buyer's
obligation to pay the Termination Fee if due and payable pursuant to Section
11.3; and
(d) any costs or expenses incurred by an Indemnified Party in
enforcing its rights to indemnification against an Indemnifying Party or any
costs or expenses incurred by an Indemnifying Party in investigating or
defending a claim against one or more Indemnified Parties as required hereunder
shall not be subject to the limitations set forth in Section 10.5.(a) or
10.5(c).
Section 10.6. INDEMNIFICATION LIMITS
(a) CALCULATION. In calculating amounts payable to an
Indemnified Party, the amount of the Buyer Losses or Seller Losses (i) shall not
be duplicative of any other loss for which an indemnification claim has been
made; (ii) shall be computed net of any amounts actually recovered by such
Indemnified Party under any insurance policy with respect to such loss and net
of any recovery under any guarantee, warranty, indemnity or similar right in
favor of Buyer; (iii) shall include interest from the date of such Buyer Loss or
Seller Loss at the Agreed Rate; and (iv) shall be adjusted to take into account
any Tax Benefit actually saved or recovered by the Indemnified Party relating to
the Buyer Loss or Seller Loss (as applicable) and
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any Taxes payable by the Indemnified Party relating to the Buyer Loss or Seller
Loss (as applicable). For purposes hereof, "Tax Benefit" means the net Tax
savings attributable to such Buyer Loss or Seller Loss and actually realized or
recovered by an Indemnified Party at the time a claim is settled or otherwise
finally resolved under Article X hereof or the net Tax savings attributable to
such Buyer Loss or Seller Loss and actually realized or received after taking
into consideration the assessed taxes of such Indemnified Party for the taxable
year in which a claim is settled or otherwise finally resolved under Article X
hereof as a result of any relief, allowance, deduction, credit or right to
repayment of Taxes after taking into consideration all costs and expenses
incurred in obtaining such Tax savings, including, without limitation, all
benefits which may be lost for any taxable year as a result of obtaining such
Tax savings. If any Buyer Loss or Seller Loss subject to indemnification is
payable hereunder by the Indemnifying Party prior to the time any Tax Benefit is
realized, the Indemnifying Party shall pay such loss in its entirety and the
Indemnified Party shall thereafter return any portion of such payment that
constitutes a Tax Benefit actually realized, if and when such Tax Benefit is
realized.
(b) NO PUNITIVE DAMAGES; CONSEQUENTIAL DAMAGES RECOVERABLE FOR
CERTAIN BREACHES.
(1) Notwithstanding anything to the contrary set forth
herein, no Indemnified Party shall be entitled to indemnification pursuant to
this Article X or otherwise for any punitive damages arising out of or resulting
from this Agreement (other than punitive damages paid or payable by an
Indemnified Party to a third party for which such Indemnified Party shall be
entitled to make a claim for indemnification pursuant to Section 10.1 or 10.2,
as applicable).
(2) Except as provided in this Section 10.6(b) and
Section 11.3, no Indemnified Party shall be entitled to indemnification pursuant
to this Article X or otherwise for any special or consequential damages (which
may include, if applicable in the particular case, diminution in value damages
based upon a multiple of earnings) ("Consequential Damages") arising out of or
resulting from this Agreement (other than any Consequential Damages paid or
payable by an Indemnified Party to a third party for which such Indemnified
Party shall be entitled to make a claim for indemnification pursuant to Section
10.1 or 10.2, as applicable).
(3) An Indemnified Party shall be entitled to make an
indemnification claim pursuant to Section 10.1 or 10.2 for all Buyer Losses or
Seller Losses, as applicable, including all Consequential Damages arising out of
or resulting from a breach or inaccuracy of any representation, warranty,
covenant, agreement or undertaking in this Agreement that is willful or that
arises out of or results from the gross negligence of the Indemnifying Party.
(4) In the event that Buyer is entitled to
indemnification from Seller pursuant to Section 10.1(b) for Buyer Losses
resulting from a breach by Seller of Section 3.6 (a "Section 3.6 Breach"), Buyer
shall be entitled to make an indemnification claim for all Buyer Losses
resulting from such Section 3.6 Breach, including Consequential Damages;
provided that Buyer shall not be entitled to recover Consequential Damages (and
Seller shall not be liable for such Consequential Damages) for a Section 3.6
Breach to the extent that such breach arises out of or results from the Seller's
methodology for the allocation of corporate
65
overhead expenses to the Combined Business for the fiscal periods and in the
manner set forth on Schedule 10.6(b)(iv) (the "Allocations"). Buyer acknowledges
that it has reviewed the Allocations and had an opportunity to ask questions of
Seller with respect to the Allocations and related information. To the extent
that a Section 3.6 Breach relates to the existence or the amount of any
corporate overhead (as opposed to the allocation of the corporate overhead to
the Combined Business as reflected on Schedule 10.6(b)(iv)) (e.g., corporate
human resources expense of the Seller is materially understated), then Buyer
shall be entitled to make an indemnification claim for Consequential Damages
resulting from such Section 3.6 Breach.
(5) For avoidance of doubt, the parties acknowledge that
Seller's liability under Section 10.1(b) for a Section 3.6 Breach shall be
subject to Sections 10.5(a) and (b).
Section 10.7. OTHER MATTERS.
(a) The parties hereby agree that their sole and exclusive
remedy after the Closing with respect to any and all claims for breach of any
representation, warranty, covenant or undertaking in this Agreement or in
respect of the sale of the Assets and the Business shall be pursuant to the
indemnification provisions set forth in this Article X; provided, however, that
the foregoing exclusivity provision and the exclusivity provision set forth in
Section 10.7(b) shall in no way limit any party's right to (i) pursue any
available remedy at law or in equity with respect to any breach of this
Agreement by any other party hereto if such breach is willful or arises out of
or results from the gross negligence of the breaching party; (ii) seek specific
performance or any other equitable relief or (iii) pursue any available remedy
arising out of the breach of any Seller Ancillary Documents or Buyer Ancillary
Documents.
(b)
(1) Buyer's sole and exclusive right to indemnification
under this Agreement for Buyer Losses with respect to Pre-existing Environmental
Conditions shall be, at Buyer's election, an indemnification claim pursuant to
either Section 10.1(e) or, if applicable, Section 10.1(b).
(2) If a Buyer Indemnified Party makes a claim for
indemnity under Section 10.1(b) for a breach of warranty in Section 3.17 or
under Section 10.1(e) regarding Buyer Losses and such Buyer Losses involve
remedial action on the Real Property, Seller shall not be required to indemnify
Buyer Indemnified Parties with respect to any cost of any specific remedial
action for which the indemnity is sought to the extent that such remedial action
is not commercially reasonable for the continuing industrial use of the Real
Property, consistent with the protection of persons, property or the environment
to comply with applicable Environmental Laws. If a Buyer Indemnified Party makes
a claim for indemnity under Section 10.1(b) for a breach of warranty in Section
3.17 or under Section 10.1(e) regarding a Buyer Loss concerning the operation of
Assets or the Real Property which involves a violation of Environmental Law or a
violation of an Environmental Permit (other than with respect to remedial action
on the Real Property), Seller shall not be required to indemnify Buyer
Indemnified Parties with respect to any cost of any specific action taken to
correct the violation of Environmental Law or the violation of the Environmental
Permits for which indemnity is sought to the extent such action is
66
not commercially reasonable for compliance with Environmental Laws or
Environmental Permits to operate the Assets or the Real Property in accordance
with their existing capacities. Buyer's failure to satisfy the standard of this
Section 10.7(b)(ii) with respect to any remedial or corrective action shall not
preclude Buyer from recovering those costs of a remedial or corrective action
that would have complied with the standards of this Section 10.7(b)(ii) had the
Buyer Indemnified Party pursued such remedial or corrective action. Buyer shall
keep Seller informed as to any remedial action Buyer intends to take regarding a
Pre-existing Environmental Condition for which Buyer may seek indemnity from
Seller, as reasonably requested by Seller. Seller shall be permitted (A) to
participate, at its expense, in meetings with Authorities or other claimants
concerning such Pre-existing Environmental Condition on the Real Property, and
Buyer shall provide Seller with reasonable advance notice of any such meetings,
(B) to review in advance and provide comments to Buyer on any documents or other
materials that Buyer proposes to submit to any Authority or other claimant
concerning such Pre-existing Environmental Condition on the Real Property; and
(C) upon reasonable notice to Buyer, to have reasonable access during normal
business hours to the affected portion of the Real Property to view such
Pre-existing Environmental Condition and any remedial action taken as to such
Pre-existing Environmental Condition. This Section 10.7(b) shall not limit any
rights of Seller or Buyer under Section 10.3.
(c) Notwithstanding anything to the contrary contained in this
Article X, to the extent that the individuals set forth on Schedule 10.7(c)
hereof have, as of the date hereof, actual knowledge of facts that such person
knows constitute a breach by Seller of any of Seller's representations or
warranties contained in this Agreement, then such facts cannot be asserted by
Buyer as a basis for indemnification under this Article X relating to such known
breach of such representation or warranty of Seller. For purposes of this
Section 10.7(c), the terms "actual knowledge" and "knows" means the actual and
current awareness by such persons of such matters, and such terms do not mean or
include any form of constructive knowledge or refer to any information such
persons should have known. The parties agree and acknowledge that Buyer has no
affirmative obligation to undertake any investigation with respect to the
Combined Business, the Real Property, the Assets or as to ay other matter, and
it shall not be a defense to any claim by Buyer hereunder that Buyer failed to
discover any particular fact or circumstances or failed to undertake any
particular investigation or inquiry.
Section 10.8. TREATMENT OF INDEMNIFICATION PAYMENTS. The parties agree
that any indemnification payments made pursuant to this Agreement shall be
treated for Tax purposes as an adjustment to the Purchase Price unless otherwise
required by applicable law.
Section 10.9. NO WAIVER. The Closing of the transactions contemplated by
this Agreement shall not constitute a waiver by any Indemnified Party of its
rights to indemnification hereunder, regardless of whether the Indemnified Party
seeking indemnification has knowledge of the breach, violation or failure of
condition constituting the basis of the claim at or before the Closing, and
regardless of whether such breach, violation or failure is deemed to be
"material."
67
ARTICLE XI.
TERMINATION
Section 11.1. TERMINATION. This Agreement may be terminated at any time
before the Closing:
(a) by mutual written consent of the parties hereto;
(b) by either Seller or the Buyer Parties, if there has been a
material breach on the part of the other of a material representation, warranty
or agreement contained herein which remains uncured for thirty (30) days after
notice of such breach is given by the non-breaching party; provided, however,
that if such breach cannot reasonably be cured within thirty (30) days and the
breaching party is diligently proceeding to cure such breach, this Agreement may
not be terminated pursuant to this Section 11.1(b) until such time as is 90 days
following such notice or, if shorter, for such period during which such
breaching party shall continue to diligently seek to cure such breach during
such ninety (90) day period;
(c) by either Seller or the Buyer Parties, if any condition
specified in Article VIII, becomes incapable of being satisfied, provided that
the terminating party shall not have caused the failure of such condition by
such party's breach of any covenant or agreement contained herein;
(d) by either Seller or the Buyer Parties, if any Authority
shall have issued an order, decree or ruling or taken any other action, in each
case, permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree or other
action shall have become final and nonappealable; provided, however, that in the
event that such ruling, order or injunction or other action has been entered,
the party seeking to terminate this Agreement pursuant to this Section 11.1(d)
shall have used its commercially reasonable efforts to remove such injunction,
order or decree, in all material respects in accordance with Section 5.4 hereof;
or
(e) by Seller or the Buyer Parties if the Closing has not
occurred by sixty (60) days after the date of this Agreement (the "Cut-Off
Date"); provided, however, that such sixty (60) day period may be extended for
up to an additional thirty (30) days (i) by Buyer, by written notice to Seller,
if Buyer requires additional time to complete its financing of the transaction,
or (ii) by Buyer or Seller, by written notice to the other party, if the HSR
waiting period (including any extension thereof) will not expire within the
initial sixty (60) day period, provided, however, that the right to terminate
this Agreement under this Section 11.1(e) shall not be available to any party
whose failure to fulfill any obligation under this Agreement caused or resulted
in the failure of the transaction to have been consummated on or before such
date. Notwithstanding the foregoing, if the Closing has not occurred by the
Cut-Off Date (as the same may be extended as set forth above, such extended
date, the "Extended Cut-Off Date") as a result of the closing condition in
Section 8.1(a) not being satisfied as of such date (unless such closing
condition is not satisfied as the result of the entry of a final, non-appealable
order permanently enjoining the transactions contemplated hereby), then Buyer
and Seller shall have the option of extending the Cut-Off Date or Extended
Cut-Off Date, as applicable, for up to an additional 30
68
days; provided that if the Cut-Off Date or Extended Cut-Off Date is so extended
then the Closing shall be consummated within ten (10) business days after the
closing condition in Section 8.1(a) is satisfied or waived by the parties
hereto. Seller will provide to Buyer prior to each Cut-Off Date or Extended
Cut-Off Date with a description of all Customer Disruptions known to Seller
occurring between the date of this Agreement and such Cut-Off Date or Extended
Cut-Off Date, as applicable (the "Customer Disruption Statement"). For this
purpose, a "Customer Disruption" means any loss of a customer of the Combined
Business or reduction in business from such customer or adverse change in
pricing to such customer or notice from such customer that it intends to offer
any business with Seller or Seller JV to other suppliers for bids or other
similar adverse development with respect to such customer. Notwithstanding
anything to the contrary here, if Buyer elects to extend the Cut-Off Date or the
Extended Cut-Off Date pursuant to this Section 11.1(e), Buyer shall not be
entitled to claim for any purpose under this Agreement that a Material Adverse
Effect has occurred based in whole or in part on any Customer Disruption
described in the Customer Disruption Statement or, unless such breach is willful
or arises out of or results from the gross negligence of Seller, to assert that
Seller is in breach of any representation, warranty, covenant, agreement or
undertaking under this Agreement as a result of any such Customer Disruption.
Section 11.2. EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 11.1, this Agreement shall become of no further force and
effect, the transactions contemplated hereby shall be abandoned without further
action by the parties hereto; provided, however, that such termination shall not
relieve any party hereto of any liability for breach of this Agreement prior to
the date of the termination; and provided, further, that in connection with any
such termination each party shall be and shall remain liable to pay such
expenses and amounts as are required of it pursuant to Section 2.5 hereof, and
to comply with the confidentiality provisions of Section 5.2. Notwithstanding
the foregoing, if this Agreement is terminated prior to Closing in accordance
with Section 11.1, no party shall be liable for any special, indirect or
consequential damages for any breach of this Agreement prior to the date of
termination unless such breach was willful or arose out of or resulted from the
gross negligence of the breaching party.
Section 11.3. TERMINATION FEE. If all of the conditions of Buyer's
obligations to close set forth in Sections 8.1 and 8.2 are fully satisfied and
Buyer is unable or unwilling to acquire the Assets at the Closing and such
failure to close constitutes a breach by Buyer of its obligations under this
Agreement (including, without limitation, Buyer's inability to close due to its
failure to secure financing for the acquisition of the Assets), then Buyer or
Seller may terminate this Agreement upon written notice to the other and upon
such termination, Buyer shall pay to Seller, as liquidated damages for the loss
of the transaction, an aggregate termination fee of Sixteen Million Two Hundred
Thousand Dollars ($16,200,000) (the "Termination Fee") payable in cash with two
(2) business days after the effective date of termination of this Agreement,
and, notwithstanding anything in Article X to the contrary, the Termination Fee
shall be Seller's sole and exclusive remedy and upon payment in full of the
Termination Fee in accordance with this Section 11.3, Seller shall not have any
right to any other damages or to any equitable relief, including specific
performance under this Agreement or otherwise.
69
ARTICLE XII.
MISCELLANEOUS PROVISIONS
Section 12.1. NOTICES. All notices, communications and deliveries
hereunder shall be made in writing signed by the party making the same, and
shall be delivered personally or by telecopy transmission (with original to
follow by national overnight courier service) or sent by registered or certified
mail or by any national overnight courier service (with postage and other fees
prepaid) as follows:
To Buyer Parties:
Rock-Tenn Company
Rock-Tenn Packaging and Paperboard, LLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Rock-Tenn Company
Rock-Tenn Packaging and Paperboard, LLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: General Counsel
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
and to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
2700 International Tower
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
To Seller:
Gulf States Paper Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
70
Gulf States Paper Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: General Counsel
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
King & Spalding LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other representative or at such other address of a party as
such party hereto may furnish to the other parties in writing.
The date of service of such notices shall be (i) the date such notice is
personally delivered, (ii) upon receipt if sent by certified or registered mail,
(iii) one day after the date of delivery to the overnight courier, if sent by
overnight courier, or (iv) the date the telecopy transmission is made (provided
that on such date delivery is also made to an overnight courier).
Section 12.2. AMENDMENT. This Agreement may be amended at any time but
only by a written amendment executed on behalf of Seller and the Buyer Parties.
Section 12.3. EXTENSION; WAIVER. At any time before the Closing, either
Seller or the Buyer Parties may (a) extend the time for the performance of any
of the obligations of the other party hereto, (b) waive any misrepresentation
(including an omission) or breach of a representation or warranty of the other
party hereto, whether contained herein or in any Exhibit, Schedule or document
delivered pursuant hereto, or (c) waive compliance of the other party hereto
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party. A waiver
by one party of the performance of any covenant, agreement, obligation,
condition, representation or warranty shall not be construed as a waiver of any
other covenant, agreement, obligation, condition, representation or warranty. A
waiver by any party of the performance of any act shall not constitute a waiver
of the performance of any other act or an identical act required to be performed
at a later time.
Section 12.4. EXHIBITS; SCHEDULES; ENTIRE AGREEMENT. All Schedules and
Exhibits hereto are hereby incorporated into this Agreement and are hereby made
a part hereof as if set out in full in this Agreement. This Agreement, together
with the Schedules and Exhibits hereto, the Confidentiality Agreement, the
confidentiality agreement dated as of April 27, 2005 between the Buyer Parties
and the Seller and any other agreement expressly referenced herein embodies the
entire agreement between the parties hereto with respect to the transactions
contemplated herein.
71
Section 12.5. ASSIGNMENT; SUCCESSORS IN INTEREST; JOINT AND SEVERAL. No
assignment or transfer by the Buyer Parties or Seller of their respective rights
and obligations hereunder prior to the Closing shall be made except with the
prior written consent of the other parties hereto; provided that the Buyer
Parties shall be permitted to assign all or part of their rights and obligations
hereunder to any Affiliate of the Buyer Parties; provided, further, that the
Buyer Parties shall remain liable for its obligations hereunder notwithstanding
such assignment. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their permitted successors and assigns, and
any reference hereto shall also be a reference to a permitted successor or
assign. Buyer Parent has joined in this Agreement for the purpose of joining
Buyer in making the representations and covenants of Buyer herein contained and
for the purpose of being jointly and severally liable for compliance by Buyer of
its obligations hereunder. The obligations of Seller under this Agreement,
including, without limitation, all representations and covenants of Seller,
shall be the joint and several obligation of Seller Parent, Seller Sub I, Seller
Sub II and Seller Sub III.
Section 12.6. NUMBER; GENDER. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other genders.
Section 12.7. CAPTIONS. The titles, captions and table of contents
contained in this Agreement are inserted herein only as a matter of convenience
and for reference and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. Unless otherwise specified
to the contrary, all references to Articles and Sections are references to
Articles and Sections of this Agreement, all references to Exhibits are
references to Exhibits to this Agreement and all references to Schedules are
references to Schedules to this Agreement.
Section 12.8. CONTROLLING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal Laws of the State of
North Carolina without reference to choice of law rules thereof.
Section 12.9. SELLER KNOWLEDGE. As used in this Agreement, the terms "the
knowledge of Seller," or words of similar import used herein with respect to
Seller shall mean the actual knowledge of the individuals listed on Schedule
12.9 after reasonable inquiry.
Section 12.10. SEVERABILITY. Any provision hereof which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by Law, the parties hereto waive any
provision of Law which renders any such provision prohibited or unenforceable in
any respect.
Section 12.11. FACSIMILE SIGNATURE; COUNTERPARTS. This Agreement may be
executed by facsimile signature and in two or more counterparts, each of which
shall be deemed an original, and it shall not be necessary in making proof of
this Agreement or the terms hereof to produce or account for more than one of
such counterparts.
72
Section 12.12. THIRD-PARTY BENEFICIARIES. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon or give any
person, firm or corporation other than the parties hereto, and their successors
or assigns, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, or result in such person, firm or corporation being deemed a
third party beneficiary of this Agreement.
Section 12.13. NO PRESUMPTION AGAINST DRAFTER. Each of the parties hereto
has jointly participated in the negotiation and drafting of this Agreement. In
the event of an ambiguity or a question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by each of the parties hereto
and no presumptions or burdens of proof shall arise favoring any party by virtue
of the authorship of any of the provisions of this Agreement.
Section 12.14. CONSENT TO JURISDICTION, ETC. Each party hereby irrevocably
agrees that any legal dispute shall be brought only in, and shall be subject to
the exclusive jurisdiction of, the federal courts located in Charlotte, North
Carolina in the United States District Court for the Western District of North
Carolina, Charlotte Division or, if such court does not have subject matter
jurisdiction then such legal dispute shall be brought in the Superior Court of
the State of North Carolina in Mecklenburg County (and the parties agree to seek
an assignment of any such case to the North Carolina Business Court), and each
party hereby consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocable waives, to the fullest extent permitted by Law, any objection that
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding that
is brought in any such court has been brought in an inconvenient forum. During
the period a legal dispute that is filed in accordance with this Section 12.14
is pending before a court, all actions, suits or proceedings with respect to
such legal dispute or any other legal dispute, including any counterclaim,
cross-claim or interpleader, shall be subject to the exclusive jurisdiction of
such court. Each party hereby waives, and shall not assert as a defense in any
legal dispute, that (a) such party is not subject thereto, (b) such action, suit
or proceeding may not be brought or is not maintainable in such court, (c) such
party's property is exempt or immune from execution, (d) such action, suit or
proceeding is brought in an inconvenient forum or (e) the venue of such action,
suit or proceeding is improper. A final judgment in any action, suit or
proceeding described in this Section 12.14 following the expiration of any
period permitted for appeal and subject to any stay during appeal shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by applicable Laws.
73
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the date and year first above written.
ROCK-TENN COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
ROCK-TENN PACKAGING AND PAPERBOARD, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
GULF STATES PAPER CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
GSPC ENTERPRISES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
GULF STATES-TEXAS, L.L.C.
By: GSPC ENTERPRISES, INC., its sole member
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
GULF STATES-TEXAS, L.P.
By: GSPC ENTERPRISES, INC., its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
DEFINED TERMS
A
Acquisition Proposal............................... 41
Actions............................................ 6
actual knowledge................................... 70
Affiliates......................................... 4
Agreed Rate........................................ 9
Agreement.......................................... 1
Allocations........................................ 68
Antitrust Laws..................................... 45
AR Bad Debt Reserve................................ 13
Arbitrator......................................... 10
Assets............................................. 1
Associate.......................................... 34
Assumed Contracts.................................. 2
Assumed Liabilities................................ 5
Authority.......................................... 24
B
Bond Documents..................................... 20
Bonds.............................................. 3
Buyer.............................................. 1
Buyer Ancillary Documents.......................... 36
Buyer Basket....................................... 67
Buyer Indemnified Parties.......................... 62
Buyer Losses....................................... 63
Buyer Parent....................................... 1
Buyer Parties...................................... 1
C
Carve Out Audited Financial Statements............. 21
Chip Mill Lease.................................... 19
Chip Supply Agreement.............................. 47
Claims Period...................................... 65
Closing............................................ 60
Closing Date....................................... 60
COBRA.............................................. 53
Combined Business.................................. 21
Condemnation Proceedings........................... 44
Confidential Information........................... 56
Confidentiality Agreement.......................... 40
Consolidated Net Worth............................. 50
Control............................................ 34
Controlled......................................... 34
Controlling........................................ 34
Core Division...................................... 35
Covered Liabilities................................ 62
Current Assets..................................... 8
Current Liabilities................................ 8
D
Divisional Accounting Policies..................... 8
E
Employees.......................................... 27
Environmental Laws................................. 33
Environmental Permits.............................. 31
ERISA.............................................. 27
Excluded Assets.................................... 4
Excluded Current Liability......................... 8
Excluded Inventory................................. 11
Excluded Liabilities............................... 6
Excluded Mill Property............................. 48
F
Fee Parcels........................................ 2
Final Working Capital Schedule..................... 10
Financial Statements............................... 21
H
Hazardous Materials................................ 33
▇▇▇▇▇▇▇▇ ▇▇▇▇...................................... 17
Headquarters Lease................................. 51
HSR Act............................................ 11
I
IDB Lease.......................................... 2
IDB Leasehold Parcel............................... 2
Improvements....................................... 17
Indemnified Party.................................. 64
Indemnifying Party................................. 64
Indemnity Cap...................................... 67
Intellectual Property.............................. 33
Interim Financial Statements....................... 21
Inventory.......................................... 2
IRS................................................ 26
J
JV Agreement....................................... 16
K
knows.............................................. 70
L
Labor Agreement.................................... 54
Law................................................ 24
Leasehold Parcels.................................. 2
Licensed Intellectual Property..................... 33
M
Maplesville Agreement.............................. 50
Maplesville Facility............................... 2
Material Adverse Effect............................ 23
Material Contracts................................. 24
MD&A............................................... 46
1
N
Net Working Capital................................ 8
New Employees...................................... 51
NLRB............................................... 29
Non-Business Employee.............................. 52
NonMonetary Encumbrances........................... 16
O
OFCCP.............................................. 30
Option Agreement................................... 50
OSHA............................................... 30
Ownership Period................................... 31
P
Pension Plan....................................... 27
Permits............................................ 24
Permitted Encumbrances............................. 17
Person............................................. 34
Pre-Closing Capital Expenditures................... 14
Pre-existing Date Environmental Conditions......... 63
Preliminary Working Capital Schedule............... 10
Prohibited Transaction............................. 50
Proprietary Intellectual Property.................. 33
Purchase Price..................................... 8
Q
Qualified Plans.................................... 27
Quarterly Financial Statements..................... 47
R
Real Property...................................... 16
Real Property Laws................................. 18
Related Persons.................................... 27
Relocation Agreement............................... 51
Restriction........................................ ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Lease............................... 51
S
Schedule Update.................................... 36
Seller............................................. 1
Seller Agents...................................... 42
Seller Ancillary Documents......................... 14
Seller Basket...................................... 66
Seller Indemnified Parties......................... 63
Seller JV.......................................... 1
Seller JV Fee Parcel............................... 16
Seller JV Interest................................. 1
Seller JV Leased Parcels........................... 16
Seller JV Leases................................... 16
Seller JV Personal Property........................ 19
Seller JV Plan..................................... 27
Seller Losses...................................... 64
Seller Opinion..................................... 59
Seller Parent...................................... 1
Seller Real Property............................... 2
Seller Sub I....................................... 1
Seller Sub II...................................... 1
Seller Surviving Representations................... 66
Seller's Corporate Offices......................... 16
Specialty Division................................. 35
Standard Procedure................................. 53
T
Tangible Personal Property......................... 2
Target Working Capital............................. 8
Tax................................................ 26
Tax Benefit........................................ 67
Tax Return......................................... 26
Taxes.............................................. 26
Termination Fee.................................... 72
the knowledge of Seller............................ 75
Title/Survey Objection............................. 43
Trade Secrets...................................... 56
Transition Services Agreement...................... 45
W
WARN Act........................................... 30
WARN Act Liabilities............................... 56
Working Capital Deficit............................ 8
Working Capital Surplus............................ 8
2
AMENDMENT NO. 1
TO ASSET PURCHASE
AGREEMENT
THIS AMENDMENT NO. 1 (this "Amendment"), dated as of June 5,2005, to
the ASSET PURCHASE AGREEMENT (the "Asset Purchase Agreement"), dated as of April
27, 2005, between and among ROCK-TENN COMPANY, a Georgia corporation ("Buyer
Parent"), ROCK-TENN PACKAGING AND PAPERBOARD, LLC, a Georgia limited liability
company and a wholly-owned indirect subsidiary of Buyer Parent ("Buyer," and
together with Buyer Parent, the "Buyer Parties"), and GULF STATES PAPER
CORPORATION, a Delaware corporation ("Seller Parent"), GSPC ENTERPRISES, INC., a
Delaware corporation, and a wholly-owned subsidiary of Seller Parent ("Seller
Sub I"), GULF STATES-TEXAS, L.L.C., a Delaware limited liability company, whose
member interests are wholly owned by Seller Sub I ("Seller Sub II"), GULF
STATES-TEXAS, L.P., a Delaware limited partnership, whose partners are Seller
Sub I and Seller Sub II ("Seller Sub III") (Seller Parent, Seller Sub I, Seller
Sub II and Seller Sub III are collectively, and individually where the context
so requires or permits, referred to as "Seller").
RECITALS
A. The parties have previously executed the Asset Purchase Agreement;
B. Pursuant to Section 12.2 of the Asset Purchase Agreement, the parties
may amend the Asset Purchase Agreement by a written instrument executed on
behalf of Seller and the Buyer Parties; and
C. The parties desire to amend the Asset Purchase Agreement as set forth
in this Amendment.
NOW THEREFORE, in consideration of the mutual promises contained in this
Amendment, the parties agree as follows:
1. Amendments.
(a) The last sentence of Section 9.1 of the Asset Purchase Agreement is
superseded and replaced in its entirety with the following:
"The effective time of the Closing shall be 12:01 a.m. CDT on the
Closing Date; provided, however, that the effective time of the
Closing with respect to all Assets and Assumed Liabilities located
at, or otherwise directly relating to, Seller's facilities in
Demopolis, Alabama or Rooster Bridge, Alabama shall be 7:00 a.m. CDT
on the Closing Date. The parties agree that the foregoing effective
times shall be taken into account in determining (a) the rights and
responsibilities of a party under this Agreement with respect to any
asset, matter, obligation, or liability to the extent that such
party's rights or responsibilities with respect to such asset,
matter, obligation or liability are determined in reference to such
asset,
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matter, obligation or liability being in existence or arising prior
to, before, as of or on or after the Closing Date or the Closing, or
words of similar import and (b) the appropriate cut-off time for the
determination of Net Working Capital and the cut-off time for the
determination of other accounting periods or calculations that
commence, end or are determined as of the Closing Date. The parties
acknowledge that the Closing will actually occur during regular
business hours on the Closing Date, and hence will occur after the
above-referenced "effective times." All representations and
warranties of the parties (and the closing certificates of the
parties pursuant to Sections 8.2(c) and 8.3(c)) that are made or
delivered as of the Closing Date or the Closing, and all covenants
and agreements of the parties that are in effect through and until
the Closing Date or the Closing, shall be made and shall be in
effect through and until the actual time of the Closing on the
Closing Date, and all covenants and agreements of the parties that
arise from and after the Closing Date or the Closing, shall be made
and shall be in effect from and after the actual time of the Closing
on the Closing Date, and in connection therewith, no party shall be
relieved of its obligations to, among other things: (i) disclose any
matter arising or in existence after the aforesaid "effective time"
but prior to the actual time of the Closing or (ii) to perform its
pre-Closing obligations and agreements pursuant to this Agreement
with respect to time periods after such "effective times" through
and until the time of the Closing, even if the term of such
obligations or agreements expires at Closing or on the Closing
Date."
(b) In the first sentence of Section 6.1 (b), the
words "Effective as of the Closing Date," are
replaced with "Effective as of the effective time
of the Closing (determined in accordance with
Section 9.1),".
(c) Disclosure Schedule 5.20 is superseded and
replaced in its entirety with the schedule
attached as Exhibit A hereto.
(d) In the Disclosure Schedules, all references to
"Agreement for Lease of Real Estate, by and
between Canal Chip Corporation and ▇▇▇▇▇ ▇. ▇▇▇▇▇,
individually and as trustee under the Last Will
and Testament of ▇▇▇ ▇. ▇▇▇▇▇, deceased, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇ and Prather Pipes ▇▇▇▇▇▇▇, dated April
1,1993, assigned by Canal Chip Corporation to Gulf
States Paper Corporation, September 25,2001" shall
be followed by the words ", and assigned by Gulf
States Paper Corporation to GSPC Enterprises,
Inc.,
4
December 29,2002, and as amended on June 3, 2005."
(e) A new Section 5.28 is added as follows:
Section 5.28. IDB BONDS AND IDB LEASES. As part of Buyer's obligation
under Section 5.19 to cooperate with Seller in Seller's efforts to obtain
Seller's release from its obligations under the IDB Leases, Buyer Parent agrees
that members of its senior management will be
5
available at a mutually convenient time following the Closing Date to join
representatives of Seller to meet in person with the Demopolis Industrial
Development Board, and at that meeting to cooperate with Seller in Seller's
efforts to secure from such Board a full release from Seller's obligations under
the IDB Leases. Buyer Parent and Seller will cooperate in efforts to schedule
such a meeting with the Demopolis Industrial Development Board promptly
following the Closing Date.
2. FULL FORCE AND EFFECT. Except as expressly amended by this Amendment,
the Asset Purchase Agreement remains in full force and effect.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Amendment
as of the date and year first above written.
ROCK-TENN COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
ROCK-TENN PACKAGING AND PAPERBOARD, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
GULF STATES PAPER CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
GSPC ENTERPRISES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
GULF STATES-TEXAS, L.L.C.
By: GSPC ENTERPRISES, INC., its sole member
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
GULF STATES-TEXAS, L.P.
By: GSPC ENTERPRISES, INC., its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
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