ASSET PURCHASE AGREEMENT
by and among
WESTVACO CORPORATION
and
TEMPLE-INLAND FOREST PRODUCTS CORPORATION,
INLAND EASTEX EXTRUSION COMPANY, TEMPLE-INLAND RECAUSTISIZING
COMPANY, TEMPLE-INLAND RECOVERY COMPANY,
TEMPLE-INLAND STORES COMPANY
Execution Copy
October 3, 1999
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions 1
ARTICLE II
SALE OF ASSETS
2.1 Assets to be Acquired 11
2.2 Excluded Assets 14
2.3 Assumed Liabilities 15
2.4 Excluded Liabilities 16
2.5 Consideration 16
2.6 Designation of Affiliates by Buyer 16
2.7 Purchase Price Allocation 17
ARTICLE III
PURCHASE PRICE ADJUSTMENTS
3.1 Estimated Adjustment 17
3.2 Post-Closing Adjustment 17
3.3 Corrective Actions 19
3.4 Guarantee of Receivables 20
ARTICLE IV
RELATED AND ADDITIONAL AGREEMENTS
4.1 Fiber Supply Agreement 21
4.2 Parent Guarantee 21
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
5.1 Organization; Qualification 21
5.2 Authority Relative to this Agreement and the
Fiber Supply Agreement 21
5.3 Consents and Approvals 22
5.4 Non-Contravention 22
5.5 Compliance with Laws 22
5.6 Environmental Matters 22
5.7 Licenses and Permits 23
5.8 Financial Statements 23
5.9 Litigation 23
5.10 Title to Properties 24
5.11 Leases 24
5.12 Intellectual Property 25
5.13 Listed Contracts 25
5.14 Tangible Assets 26
5.15 Labor Matters 26
5.16 Employee Benefit Plans 27
5.17 Conduct of Business and Management of Assets 28
5.18 Finders 29
5.19 Sufficiency of Assets 29
5.20 Customers 29
5.21 Year 2000 Problems 29
5.22 Industrial Revenue Bonds 29
5.23 Purchased Subsidiaries Capitalization 30
5.24 Tax Matters 30
5.25 Disclosure 31
5.26 No Other Representations 32
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
6.1 Organization; Qualification 32
6.2 Authority Relative to this Agreement and the
Fiber Supply Agreement 32
6.3 Consents and Approvals 33
6.4 Non-Contravention 33
6.5 Litigation 33
6.6 Finders 33
6.7 Financing 33
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Conduct of Business and Management of Assets 33
7.2 Forbearances by Seller 34
7.3 Mail Received after Closing 35
7.4 Expenses 35
7.5 Confidentiality and Public Announcements 35
7.6 Efforts to Consummate 35
7.7 Further Assurances 36
7.8 Use of Seller Name 36
7.9 No Solicitation of Employees 36
7.10 Antitrust Filings 37
7.11 Title Matters 37
7.12 Access to Assets and Business Employees 38
7.13 IRB Obligations 39
7.14 Consents and Approvals 39
7.15 Year 2000 Compliance Program 40
7.16 Transitional Services 40
7.17 Capital Expenditures 40
7.18 Temple-Inland Canal 41
7.19 Bulk Sales Waiver 42
7.20 Product Liability Claims 42
7.21 Other 42
ARTICLE VIII
BUSINESS EMPLOYEE AND EMPLOYEE BENEFIT MATTERS
8.1 Employment of Seller's Employees 43
8.2 Certain Compensation Liabilities 43
8.3 Severance Costs 43
8.4 Welfare Benefits 44
8.5 Pension and Savings Benefits 44
8.6 Benefits Generally 45
8.7 Plant Closing Laws 45
8.8 Miscellaneous 45
8.9 Employee Records 45
ARTICLE IX
TAX MATTERS
9.1 Tax Sharing and Allocation Agreements 46
9.2 Survival of Certain Representations 46
9.3 Returns for Periods Through the Closing Date 46
9.4 Audits 46
9.5 Carrybacks and Refunds 46
9.6 Section 338(h)(10) Election 47
9.7 Allocation of Purchase Price for Purchased
Subsidiaries Assets 48
9.8 Tax Periods Ending on or Before the Closing Date 48
9.9 Tax Periods Beginning Before and Ending after
the Closing Date 48
9.10 Cooperation on Tax Matters 49
9.11 Tax Indemnification 49
9.12 Allocation of Certain Taxes 50
9.13 Certain Taxes 51
ARTICLE X
CONDITIONS TO OBLIGATIONS OF BUYER
10.1 Representations and Warranties 51
10.2 Performance of this Agreement 51
10.3 Proceedings 51
10.4 Consents and Approvals 52
10.5 Injunction, Litigation, etc. 52
10.6 Fiber Supply Agreement 52
10.7 Officer's Certificate 52
10.8 Memorandum 52
ARTICLE XI
CONDITIONS TO OBLIGATIONS OF SELLER
11.1 Representations and Warranties 52
11.2 Performance of this Agreement 52
11.3 Proceedings 53
11.4 Consents and Approvals 53
11.5 Injunction, Litigation, etc. 53
11.6 Fiber Supply Agreement 53
11.7 Officer's Certificate 53
ARTICLE XII
DELIVERIES, ETC., IN CONNECTION WITH CLOSING
12.1 Time and Place of Closing 53
12.2 Deliveries by Seller 53
12.3 Deliveries by Buyer 55
ARTICLE XIII
INDEMNIFICATION
13.1 Indemnification by Seller 55
13.2 Indemnification by Buyer 56
13.3 Article VIII Rights and Obligations and Certain
Product Liability and Employee Claims Excluded 56
13.4 Survival Date 57
13.5 Third-Party Claims 57
13.6 Subrogation Rights; No Duplication 58
13.7 Punitive Damages; Mitigation 58
ARTICLE XIV
TERMINATION, AMENDMENT AND WAIVER
14.1 Termination 58
14.2 Effect of Termination 59
14.3 Amendment 59
14.4 Extension; Waiver 59
ARTICLE XV
GENERAL PROVISIONS
15.1 Notices 59
15.2 Interpretation 60
15.3 Severability 60
15.4 Counterparts 61
15.5 Miscellaneous 61
15.6 Third-Party Beneficiaries 61
15.7 Specific Performance 61
15.8 Remedies Cumulative 61
15.9 Arbitration 61
15.10No Presumption Against Drafter 62
SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 1.1(a) Chip Quality Standards
Schedule 1.1(b) Seller's Knowledge
Schedule 1.1(c) Permitted Encumbrances
Schedule 2.1(a) Paperboard Mill
Schedule 2.1(b) Extruder Site
Schedule 2.1(c) Temple-Inland Canal
Schedule 2.1(e) Other Real Property
Schedule 2.1(r) Additional Purchased Assets
Schedule 2.2 Excluded Assets
Schedule 2.3 Assumed Liabilities
Schedule 2.4 Excluded Liabilities
Schedule 3.2 Working Capital Calculation
Schedule 5.8(b) Balance Sheet
Schedule 5.8(c) Income Statements
Schedule 7.13 IRB Obligations
Schedule 7.16 Transitional Services
Schedule 8.1 Employees Not Transferred
Schedule 8.3 Retained Severance
EXHIBITS
Exhibit A Fiber Supply Agreement
Exhibit B Parent Guarantee
ANNEXES
Annex A CapX Plan
Annex B Phase I Expenditure Schedule
DISCLOSURE SCHEDULE
Section 5.3 Consents and Approvals
Section 5.5 Compliance
Section 5.6 Environmental Matters
Section 5.7 Licenses and Permits
Section 5.9 Litigation
Section 5.10 Title to Properties
Section 5.11(a) Leases
Section 5.11(b) Lease Defaults
Section 5.12 Intellectual Property
Section 5.13 Listed Contracts
Section 5.15(a) Collective Bargaining Agreements
Section 5.15(b) Labor Disputes
Section 5.15(c) Employee Actions
Section 5.16(a) Employee Benefit Plans
Section 5.16(b) ERISA
Section 5.16(d) Employee Contracts
Section 5.20 Customers and Brokers
Section 5.22 Industrial Revenue Bonds
Section 5.23 Purchased Subsidiaries Shares
Section 5.24 Tax Matters
Section 6.3 Buyer Consents
1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, dated as of October 3, 1999,
is by and among TEMPLE-INLAND FOREST PRODUCTS CORPORATION, a
Delaware corporation ("Seller"), INLAND EASTEX EXTRUSION COMPANY,
a Delaware corporation and wholly owned subsidiary of Seller
("Sub One"), TEMPLE-INLAND RECAUSTISIZING COMPANY, a Delaware
corporation and wholly owned subsidiary of Seller ("Sub Two"),
TEMPLE-INLAND RECOVERY COMPANY, a Delaware corporation and wholly
owned subsidiary of Seller ("Sub Three"), TEMPLE-INLAND STORES
COMPANY, a Delaware corporation and wholly owned of Seller ("Sub
Four," and collectively with Sub One, Sub Two and Sub Three, the
"Subs") and WESTVACO CORPORATION, a Delaware corporation
("Buyer").
WHEREAS, Seller, directly or through wholly-owned
subsidiaries and affiliates, engages in the manufacture and sale
of various grades and weights of coated and uncoated bleached
paperboard for use in printing and publishing applications,
greeting cards, office supplies, foodware and similar products
(the "Business");
WHEREAS, Seller owns and through wholly-owned subsidiaries
and affiliates operates a paperboard mill used exclusively in the
Business that produces all the bleached paperboard for the
Business (the "Paperboard Mill");
WHEREAS, Seller wishes to sell, or cause its subsidiaries to
sell, the Paperboard Mill and the assets related to the Business
to Buyer, and Buyer wishes to purchase such Paperboard Mill and
assets from Seller, upon the terms and conditions and for the
consideration, including the assumption of certain liabilities,
set forth in this Agreement;
WHEREAS, in connection with such sale and purchase, Seller
and Buyer (and their respective Affiliates, as applicable) desire
to enter into a long-term fiber supply agreement as provided
herein; and
WHEREAS, as an important condition to Buyer's willingness to
enter into this Agreement, Temple-Inland, Inc., a Delaware
corporation ("Temple-Inland Parent"), has agreed to guarantee the
performance of the obligations, including for indemnification, of
Seller and its subsidiaries under this Agreement.
NOW THEREFORE, in consideration of the foregoing and the
representations, warranties, and covenants contained herein, and
for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used herein, the following terms have the
following meanings:
2
"Action" means any action, suit, arbitration, inquiry,
proceeding or investigation by or before any Authority of any
nature, civil, criminal, regulatory or otherwise, in law or in
equity.
"Additional Cluster Remediation" means the obligation to
conduct or pay for remedial action intended to bring the
Purchased Assets into compliance under the Environmental
Protection Agency's Pulp and Paper Cluster Rules, other than
obligations with respect to the Phase I Cluster Remediation.
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, amounts paid in
settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable
attorneys' fees and expenses.
"Affiliate" with respect to any party, means 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.
"Affiliated Group" means any affiliated group within the
meaning of Section 1504(a) of the Code or any similar group
defined under a similar provision of state, local or foreign law.
"Agreement" means this Asset Purchase Agreement, all
exhibits and schedules hereto, and all amendments made hereto and
thereto by written agreement between the parties.
"Antitrust Laws" means the Xxxxxxx Act, as amended, the
Xxxxxxx Act, as amended, the HSR Act, the Federal Trade
Commission Act, as amended, and all other federal, state, foreign
and multinational (including European Community) 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.
"Assignment and Assumption Agreement" means a Xxxx of Sale,
Assignment and Assumption Agreement in such form as may be
reasonably satisfactory to Buyer and Seller.
"Assumed Contracts" has the meaning set forth in Section
2.1(j).
"Assumed Liabilities" has the meaning set forth in Section
2.3.
"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 government 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.
3
"Balance Sheet" means the unaudited balance sheet for the
Business, including, without limitation, the Paperboard Mill and
all other Purchased Assets, as of August 31, 1999, reflecting the
Business as proposed to be transferred hereunder, previously
delivered by Seller to Buyer and included as Schedule 5.8(b)
hereto.
"Base Purchase Price" has the meaning set forth in Section
2.5.
"Basket" has the meaning set forth in Section 13.1(b).
"Bonuses" has the meaning set forth in Section 8.2.
"Business" has the meaning set forth in the recitals hereto.
"Business Assets" has the meaning set forth in Section 2.1.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York City are
authorized or required by law to close. Any event the scheduled
occurrence of which would fall on a day that is not a Business
Day shall be deferred until the next succeeding Business Day.
"Business Employees" has the meaning set forth in Section
8.1.
"Business Intellectual Property" has the meaning set forth
in Section 2.1(i).
"Business 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 value, condition (financial or
otherwise), assets, Liabilities or results of operations of the
Business taken as a whole, (b) are, or would reasonably be
expected to be, materially adverse to the value, serviceability,
condition, or operation of the Paperboard Mill, or (c) prevent or
materially delay consummation of any of the transactions
contemplated by this Agreement; provided that a "Business
Material Adverse Effect" shall exclude any change or effect due
to (i) United States or global economic conditions or financial
markets in general; (ii) prices in the international or national
markets for bleached paperboard, pulp stock, or wood fibers, or
(iii) announcement of the transactions contemplated hereby.
"Buyer" has the meaning set forth in the recitals hereto.
"Buyer Savings Plans" has the meaning set forth in Section
8.5(b).
"Buyer Tax Indemnitee(s)" means Buyer and its Subsidiaries
and Affiliates (including, after the Closing, the Purchased
Subsidiaries).
"CapX Plan" has the meaning set forth in Section 7.17(a).
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act codified at 42 U.S.C. Section
9601 et seq. (including the amendments made by the Superfund
Amendments and Reauthorization Act of 1986).
4
"Claims" means all rights, demands, claims, Actions and
causes of action (whether for personal injuries or property,
consequential or other damages of any kind).
"Closing" has the meaning set forth in Section 12.1.
"Closing Balance Sheet" has the meaning set forth in Section
3.2(b).
"Closing Date" has the meaning set forth in Section 12.1.
"Closing Working Capital" has the meaning set forth in
Section 3.2(b).
"COBRA Coverage" has the meaning set forth in Section 8.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consent" and "Consents" have the meaning set forth in
Section 7.14(a).
"Correction Cost Deadline" has the meaning set forth in
Section 3.3(b).
"Correction Cost Notice" has the meaning set forth in
Section 3.3(b).
"Correction Costs" has the meaning set forth in Section
3.3(b).
"Disputed Items" has the meaning set forth in Section
3.2(d).
"Election Allocations" has the meaning set forth in Section
9.7.
"Employee Plans" has the meaning set forth in Section
5.16(a).
"Encumbrances" means mortgages, liens, encumbrances,
security interests, restrictions upon voting or transfer,
covenants, restrictions, adverse claims, boundary disputes,
pledges, lease, levy, charges, options, title defects, rights of
first refusal, rights of way, use or occupancy or other legal or
equitable encumbrances (including, in the case of real property,
rights-of-way, easements, and encroachments).
"Environmental Condition" means any condition existing at
any Purchased Asset that relates to (i) the emission, discharge,
disposal, release or threatened release of any Hazardous
Substance into the environment, (ii) the treatment, storage,
recycling or other handling of any Hazardous Substance, or (iii)
the presence of any Hazardous Substance, including, but not
limited to, asbestos, any polychlorinated biphenyl or dioxin, in
any building, structure or workplace or on any of the Purchased
Assets.
5
"Environmental Laws" means Environmental Statutes and any
common law governing the contamination, pollution or protection
of the environment or allocating liabilities in respect thereof.
"Environmental Statutes" means federal, state and local
statutes, whenever enacted, and regulations promulgated
thereunder, intended to provide protection for public health and
the environment, including, without limitation, the Clean Air
Act, the Clean Water Act, CERCLA, the Solid Waste Disposal Act
(including the Resource Conservation and Recovery Act), the Toxic
Substances Control Act, their state statutory and regulatory
counterparts and other substantially similar foreign statutes and
regulations.
"ERISA Affiliate" means any member of a controlled group of
corporations, a group of trades or businesses under common
control, or an affiliated service group, in each case with any of
Sellers, within the meaning of Section 414(b), (c), (m), or (o)
of the Code, or Section 4001(a)(14) of ERISA.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Estimated Closing Working Capital" has the meaning set
forth in Section 3.1.
"Estimated Working Capital Adjustment" has the meaning set
forth in Section 3.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section
2.3(b).
"Extruder Facility" has the meaning set forth in Section
2.1(b).
"Extruder Site" has the meaning set forth in Section 2.1(b).
"Fiber Supply Agreement" has the meaning set forth in
Section 4.1.
"Final Closing Working Capital" has the meaning set forth in
Section 3.2(e).
"Final Working Capital Adjustment" has the meaning set forth
in Section 3.2(f).
"FIRPTA Certificate" means a certificate in form and
substance reasonably satisfactory to Buyer duly executed and
acknowledged certifying facts that would exempt the sale of the
Purchased Assets hereunder from the provisions of the Foreign
Investment in Real Property Tax Act.
"GAAP" means United States generally accepted accounting
principles.
"Hazardous Substance" means (i) any hazardous substance,
extremely hazardous substance, hazardous material, hazardous
waste, regulated substance or toxic substance (as those terms are
defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, or petroleum, crude oil or
any fraction thereof.
6
"Hire Date" has the meaning set forth in Section 8.1.
"HSR Act" has the meaning set forth in Section 5.3.
"Inactive Employee" has the meaning set forth in Section
8.1.
"Income Statements" has the meaning set forth in Section
5.8(b).
"Indemnitee" has the meaning set forth in Section 13.4(a).
"Indemnitor" has the meaning set forth in Section 13.4(a).
"Intellectual Property" means (i) trade names, trademarks
and service marks, together with the associated goodwill, letters
patent, copyrights, design registrations and inventor
certificates as well as applications, registrations, and
certificates for any of the foregoing or any other intellectual
property embodied in a form which is filed or registered with any
Authority, and (ii) unpatented technology, inventions, research,
trade secrets, processes, know-how, designs and formulae and
unfiled trade names, trademarks and service marks, together with
the associated goodwill, unregistered copyrights and other
industrial or intellectual property which is not filed or
registered with an Authority.
"Inventory" has the meaning set forth in Section 2.1(g).
"IRB Amount" means the aggregate dollar amount of principal
and accrued and unpaid interest under the IRBs as of the Closing
Date.
"IRB Obligation" means an amount of principal and interest
equal to the IRB Amount, and any other payment obligation arising
as a result of the failure, after the Closing Date, of the
Purchased Subsidiary that is an obligor under the applicable IRB
to make any such payment and any obligation under the IRBs to pay
redemption premiums, make whole payments or other penalties that
arise as a result of any event, circumstance or occurrence that
occurs after, but did not occur on or prior to, the Closing Date;
provided, however, that none of the following is an IRB
Obligation:
(a) any obligation to make any payment of principal or
interest that is or was due on or prior to the Closing
Date but was not made;
(b) any obligation to make any payment of principal in
excess of the principal amounts reflected in the IRB
Amount;
(c) any obligation to make any payment of accrued interest
as of the Closing Date in excess of the amount of
accrued interest reflected in the IRB Amount;
(d) any obligation to pay any interest other than interest
accruing after the Closing Date in respect of the
amounts set forth in clauses (b) and (c) above;
7
(e) any obligation arising as a result of (x) any default
or event of default or any other failure to comply with
the terms of such IRB that occurred on or prior to the
Closing Date, or (y) any event, circumstance or
occurrence that occurred on or prior to the Closing
Date that results in (i) a default, (ii) an event of
default or (iii) the failure of the interest paid on
the IRB to qualify for the exclusion from income under
section 103 of the Code; or
(f) any payment or penalty arising as a result of any of
the items described in clauses (a) through (e) above.
"IRBs" has the meaning set forth in Section 5.22.
"Knowledge of Seller" means the actual knowledge, after
reasonable inquiry, of those officers and employees of Sellers
listed on Schedule 1.1(b) and, in addition, with respect to
Sections 5.24(a) and 5.24(c) of this Agreement, the actual
knowledge of those officers and employees of Temple-Inland Parent
listed on Schedule 1.1(b).
"Leases" has the meaning set forth in Section 5.11(a).
"Liability" means any and all debts, losses, liabilities,
claims (including claims as defined in the Bankruptcy Code),
damages, fines, costs, royalties, deficiencies or obligations
(including those arising out of any Action, such as any
settlement or compromise thereof or judgment or award therein),
of any nature, whether known or unknown, accrued or unaccrued,
liquidated or unliquidated, absolute, contingent or otherwise and
whether due or to become due, and whether or not resulting from
third-party claims, and any out-of-pocket costs and expenses,
including any liability for Taxes.
"Listed Contract" has the meaning set forth in Section 5.13.
"Losses" means, without duplication, any and all actual
damages, fines, fees, penalties, deficiencies, loss of profits,
diminution in value of investment, claims, Liabilities, liens,
losses or other obligations, together with costs and expenses,
including, without limitation, reasonable fees and disbursements
of counsel and any consultants or experts and expenses of
investigation incurred in the course of litigation or other
proceedings or of any claim, default or assessment.
"MADSP" means the modified aggregate deemed sales price at
which each of the Purchased Subsidiaries is deemed to have sold
its assets for Tax purposes as a result of a Section 338(h)(10)
Election (or a similar state or local election).
"Material Personalty Leases" has the meaning set forth in
Section 5.11(a).
"Mill Assets" has the meaning set forth in Section 2.1.
"Mill Real Property" has the meaning set forth in Section
2.1(a).
"Neutral Auditors" has the meaning set forth in Section
3.2(e).
8
"New Plans" has the meaning set forth in Section 8.6.
"Old Plans" has the meaning set forth in Section 8.6.
"Paperboard Mill" has the meaning set forth in the recitals
hereto.
"Parent Guarantee" has the meaning set forth in Section 4.2.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permit" and "Permits" have the meaning set forth in 2.1(k).
"Permitted Exceptions" means (a) Encumbrances for taxes and
assessments or governmental charges not yet delinquent or which
are being contested in good faith and by appropriate proceedings,
(b) Encumbrances in favor of landlords, carriers, warehousemen,
mechanics, workmen and materialmen and construction or similar
liens arising by operation of law or incurred in the ordinary
course of business for sums not yet delinquent or that are being
contested in good faith and by appropriate proceedings, (c)
rights reserved to or vested in any governmental authority to
control or regulate any Real Property or interests therein in any
manner, and all laws of any governmental authority, (d) Title
Defects to which Buyer has been deemed to have waived its rights
pursuant to Section 7.11(b), and (e) Encumbrances listed in
Schedule 1.1(c).
"Person" means an individual, partnership (general or
limited), corporation, limited liability company, association or
other form of business organization (whether or not regarded as a
legal entity under applicable law), trust, estate or any other
entity.
"Phase I Cluster Remediation" means performance of the scope
and specification of work in Phase I of Seller's plan, the
"Process Description of Facilities," Xxxxxxx Xxxxx & Root Spec.
No. 00-00-000, previously delivered to Buyer by Seller, including
the modifications, addition of facilities, installation of
equipment, undertakings and projects described therein, which are
intended to achieve compliance with the Best Available Technology
wastewater standards of the Environmental Protection Agency's
Pulp and Paper Cluster Rules, as defined in the April 15, 1998
Federal Register vol. 63, no. 72 beginning at page 18504, at the
Paperboard Mill.
"Post-Closing Period" means each taxable period that starts
after the Closing Date and the portion of each Straddle Period
that starts after the Closing Date.
"Pre-Closing Period" means each taxable period that ends on
or before the Closing Date and the portion, ending on the Closing
Date, of a Straddle Period.
"Purchased Assets" has the meaning set forth in Section 2.1.
"Purchase Price" has the meaning set forth in Section
2.5(a).
"Purchase Price Allocation" has the meaning set forth in
Section 2.7.
"Purchased Subsidiaries" has the meaning set forth in
Section 2.1(s).
9
"Purchased Subsidiaries Shares" has the meaning set forth in
Section 5.23(a).
"Real Property" has the meaning set forth in Section 2.1(e).
"Real Property Title Commitment" has the meaning set forth
in Section 7.11(a).
"Real Property Title Package" has the meaning set forth in
Section 7.11(a).
"Recorded Area" means (x) the approximately 100,000 acres of
timberland agreed to by the parties prior to the Closing or, if
no such agreement is reached prior to the Closing, (y) the
timberlands owned by Seller in Jasper County, Texas.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing into the environment.
"Remedial Action" means an action required under
Environmental Laws to clean up or to contain or otherwise to
ameliorate or remedy any Environmental Condition, including but
not limited to preventing a Release or threatened Release and
performing studies, investigations and monitoring.
"Resolution Period" has the meaning set forth in Section
3.2(d).
"Retained Severance" has the meaning set forth in Section
8.3.
"Section 338(h)(10) Election" has the meaning set forth in
Section 9.6.
"Section 338 Forms" has the meaning set forth in Section
9.6.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Seller" has the meaning set forth in the recitals hereto;
and "Sellers" means Seller, the Subs, the Purchased Subsidiaries
and each of Seller's Subsidiaries engaged in the Business or
which own any of the Purchased Assets.
"Seller Tax Indemnitee" means Sellers and their Subsidiaries
and Affiliates other than the Purchased Subsidiaries.
"Seller Corporate Designations" has the meaning set forth in
Section 7.8.
"Seller's Accountant" has the meaning set forth in Section
3.1.
"Seller Savings Plans" has the meaning set forth in Section
8.5(b).
"Selling Entities" means Sellers other than the Purchased
Subsidiaries.
"Significant Brokers" has the meaning set forth in Section
5.20.
10
"Significant Customers" has the meaning set forth in Section
5.20.
"Specified Systems" has the meaning set forth in Section
3.3(a).
"Straddle Period" has the meaning set forth in Section 9.9.
"Sub Four" has the meaning set forth in the recitals hereto.
"Sub One" has the meaning set forth in the recitals hereto.
"Sub Three" has the meaning set forth in the recitals
hereto.
"Sub Two" has the meaning set forth in the recitals hereto.
"Subs" has the meaning set forth in the recitals hereto.
"Subsidiary" when used with respect to Seller, means any
corporation or other business entity, whether or not
incorporated, of which Seller holds, directly or indirectly, all
of the securities or interests having, by their terms, ordinary
voting power to elect members of the Board of Directors, or other
persons performing similar functions with respect to such entity;
and with respect to any other Person, means any corporation or
other business entity, whether or not incorporated, of which such
Person holds, directly or indirectly, more than 50% of the
securities or interests having, by their terms, ordinary voting
power to elect members of the Board of Directors, or other
persons performing similar functions with respect to such entity.
"Systems" means hardware, firmware or software systems
associated with information processing and delivery, billing,
payables, management and tracking, operations or services (e.g.,
emission monitoring, product testing, security and alarms,
elevators, communications, and HVAC), including, without
limitation, equipment containing embedded microchips, operated
by, provided to or otherwise reasonably necessary to the Business
or the Purchased Assets.
"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, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Authority" means Authority having or purporting to
exercise jurisdiction with respect to any Tax.
"Tax Indemnitee" means a Buyer Tax Indemnitee or Seller Tax
Indemnitee.
"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.
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"Temple-Inland Canal" means the discharge canal running from
the Paperboard Mill to the Neches River and the lagoon at the
juncture with the Neches River, plus all associated dikes,
structures, improvements and appurtenances thereto.
"Temple-Inland Canal Easement" has the meaning set forth in
Section 2.1(c).
"Temple-Inland Canal Fee Lands" has the meaning set forth in
Section 2.1(c).
"Temple-Inland Group" means the Affiliated Group of
corporations, within the meaning of Section 1504(a) of the Code,
of which Temple-Inland Parent is the common parent corporation.
"Temple-Inland Parent" has the meaning set forth in the
recitals hereto.
"Temple-Inland Party" means Temple-Inland Parent and any
Subsidiary or Affiliate of Temple-Inland Parent, other than the
Purchased Subsidiaries.
"Texas surveys" has the meaning set forth in Section
7.11(a).
"Title Commitment" has the meaning set forth in Section
7.11(a).
"Title Defect" has the meaning set forth in Section 7.11(a).
"Title Defect Notice" has the meaning set forth in Section
7.11(b).
"Transfer Fees" has the meaning set forth in Section 7.4(b).
"Transferred Employees" has the meaning set forth in Section
8.1.
"WARN Act" has the meaning set forth in Section 8.7.
"Water Easements" has the meaning set forth in Section
2.1(d).
"Welfare Benefits" has the meaning set forth in Section 8.4.
"Well Site Easements" has the meaning set forth in Section
2.1(d).
"Westvaco Cluster Remediation Costs" has the meaning set
forth in Section 7.17(b).
"Westvaco Party" means the Buyer and any of its respective
Subsidiaries and Affiliates, other than the Purchased
Subsidiaries.
"Y2K Plan" has the meaning set forth in Section 5.21.
"Year 2000 Problems" means costs, problems, and
uncertainties associated with the inability of the Systems of
Sellers to effectively handle data, including dates, prior to,
during, and after the calendar year 2000 A.D., as such inability
affects the Business.
12
ARTICLE II
SALE OF ASSETS
2.1 Assets to be Acquired. Subject to the terms, conditions and
provisions hereinafter set forth, at the Closing, the Selling
Entities shall sell, assign, convey, transfer and deliver to
Buyer, or cause to be sold, assigned, conveyed, transferred and
delivered to Buyer, as the case may be, and Buyer shall purchase,
acquire, accept and pay for, after excluding in each instance the
Excluded Assets, all of the rights, properties and assets of the
Selling Entities, including the Paperboard Mill (the "Mill
Assets"), used primarily in the Business (the "Business Assets,"
and collectively with the Mill Assets, the "Purchased Assets").
Except as set forth in Section 2.2, Purchased Assets shall
include, without limitation, the following:
(a) the Paperboard Mill, including the land on which the
Paperboard Mill is located described in Schedule 2.1(a), and the
buildings, fixtures and other improvements situated thereon and
the appurtenances thereto (the "Mill Real Property");
(b) the assets associated with the extruder facility located in
Xxxxxx County, Texas, including the land on which the extruder
facility is located as described in Schedule 2.1(b), and the
buildings, fixtures and other improvements situated thereon and
appurtenances thereto (the "Extruder Site") and personal property
situated thereon used primarily in connection with the extruder
facility (the "Extruder Facility");
(c) the Temple-Inland Canal, which (i) shall include (x) an area
of land that includes the Temple-Inland Canal, the levees on each
side of the Temple-Inland Canal, and approximately twenty (20)
feet of land on the opposite side of each levee from the Temple-
Inland Canal (or the entire width of such real property owned by
the Selling Entity if less) except for such land as is covered by
the Temple-Inland Canal Easement, and (y) an area of land with a
width of approximately twenty (20) feet past the road and dike
that runs along the perimeter of the lagoon at the juncture of
the Temple-Inland Canal with the Neches River, plus all
associated dikes, structures, improvements and appurtenances
thereto (the "Temple-Inland Canal Fee Lands"), and (ii) shall
include all rights, title and interests, including rights-of-way,
easements, and encroachments, of the Selling Entities in and to
the Temple-Inland Canal (the "Temple-Inland Canal Easement"), all
as more fully set forth in Schedule 2.1(c).
(d) for each water well that, as of the date of this Agreement
or the Closing Date, supplies water to the Paperboard Mill and
that is located on real property owned by the Selling Entities
but not comprising the Paperboard Mill Site, (i) all of the
Selling Entities' rights, title and interest in and to the water
well equipment and machinery, including all pipelines running
from or between such xxxxx and the Paperboard Mill, (ii) an
easement for the operation, repair and maintenance of surface and
subsurface water well machinery and equipment for each such water
well site, including access thereto across the lands of the
Selling Entities (the "Well Site Easements"), and (iii) a water
pipeline easement 20 feet in width (or such greater width as is
reasonably necessary for the operation and maintenance of such
pipeline) across the lands of the Selling Entities for each
pipeline running from or between such xxxxx and the Paperboard
Mill (together with the Well Site Easements, the "Water
Easements");
13
(e) all other real property, other than timber and timberlands,
used primarily in connection with the Business including that
described in Schedule 2.1(e), and the buildings, fixtures and
other improvements situated thereon and the appurtenances thereto
(together with the Mill Real Property, the Extruder Site, the
Temple-Inland Canal Fee Lands, the "Real Property");
(f) all apparatus, machinery, equipment, furniture, computers,
vehicles, tools, supplies and other tangible personal property,
to the extent of the Selling Entities' rights, title and interest
therein, which is ordinarily located at the Paperboard Mill or
used primarily in connection with the Business;
(g) all inventories of raw materials, work-in-process, finished
goods, stores, supplies, spare parts, and replacement and
component parts, to the extent of the Selling Entities' rights,
title and interest therein, located at the Paperboard Mill, or in
transit thereto or which are located elsewhere and relate
primarily to the Business (the "Inventory");
(h) all rights in and to products of the Business sold (to the
extent that such products are hereafter returned or repossessed
and unpaid rights of rescission, replevin, reclamation and rights
to stoppage in transit);
(i) the Intellectual Property used primarily in connection with
or necessary to the operation of the Paperboard Mill or the
Business as operated on the date hereof or the Closing Date (the
"Business Intellectual Property");
(j) except as set forth in Schedule 2.2, all of the rights of
the Selling Entities under (i) the Listed Contracts, (ii) the
Leases and (iii) all other contracts, agreements and commitments
in effect on the Closing Date and relating primarily to the
Business or any Purchased Asset other than mortgages, indentures,
notes, bonds, guaranties, installment obligations, or other
instruments evidencing indebtedness (together with (i) and (ii),
and excluding the items set forth in Schedule 2.2, the "Assumed
Contracts");
(k) to the extent assignable, all federal, state, local and
foreign governmental licenses, permits, approvals and
authorizations (each a "Permit" and collectively, the "Permits")
held by the Selling Entities in connection with the Paperboard
Mill or the Business;
(l) all accounts receivable, notes receivable, and other
evidences of indebtedness of and rights to receive payments from
any Person related primarily to the Business, including
receivables from Transferred Employees;
(m) all copies of property records, production records, written
technical information, data, specifications, operating and
maintenance manuals, engineering records, purchasing and sales
records, credit data, marketing information, correspondence,
invoices, forms, warranty information, customer and vendor lists
and other books, records, papers, accounts and files, wherever
located, whether in hard copy, magnetic or other format
(including, but not limited to, any such records maintained in
connection with any computer system) used primarily in the
Business or relating primarily to the Purchased Assets; a co-
ownership interest in any of the foregoing assets which are used
14
only in part in the Business or with respect to the Purchased
Assets, but only to the extent of such use;
(n) all personnel and payroll records for Transferred Employees
and accounting records (of which the Selling Entities may retain
the originals);
(o) subject to the provisions of Section 7.8, all purchase
orders, forms, labels, stationery, shipping materials,
catalogues, brochures, art work, photographs and advertising
materials which are located at the Paperboard Mill or which
relate primarily to the Business;
(p) all prepaid expenses, sureties, deposits, advances and
deferred charges paid or created and related primarily to the
Business or the Purchased Assets;
(q) all rights, choses in action and claims, known or unknown,
matured or unmatured, accrued or contingent, against third
parties arising primarily out of the Business or the ownership or
operation of the Purchased Assets;
(r) the assets listed on Schedule 2.1(r); and
(s) all outstanding shares of capital stock or membership
interests or other ownership interests of TEEC Inc., Inc., a
Texas Corporation, and Temple-Eastex Incorporated, a Delaware
Corporation (collectively, the "Purchased Subsidiaries").
2.2 Excluded Assets. Notwithstanding anything to the contrary
herein, the Selling Entities' right, title and interest in any of
the following properties, assets and other rights (the "Excluded
Assets") shall be excluded from the Purchased Assets:
(a) all cash and cash equivalents, including cash on hand or in
bank accounts, certificates of deposit, commercial paper and
securities, except xxxxx cash funds located at the Paperboard
Mill;
(b) all Claims which Sellers may have against any Authority for
refund or credit with respect to taxes paid by Sellers;
(c) any Claims, counter claims or rights of set-off of Sellers
which relate primarily to the Excluded Liabilities;
(d) the Employee Plans and the assets of the Employee Plans;
(e) employment and personnel records of Seller and the Subs,
including for Business Employees, other than Transferred
Employees;
(f) all intercompany receivables other than those associated
with the intercompany payables listed on Schedule 2.3;
(g) the corporate books and records of Seller and the Subs,
including a copy of all business records that Seller is required
to retain by law, rule or regulation of any Authority;
15
(h) the "Inland Paperboard and Packaging, Inc." names and
trademarks, the "Temple-Inland Forest Products Corporation" names
and trademarks, any combined names or trademarks containing
"Temple-Inland," "Inland Eastex" or "Inland" and any similar
trade names, trademarks, service marks or logos and derivatives
thereof;
(i) insurance policies covering losses in connection with the
Purchased Assets or the Business;
(j) Systems not used primarily in the Business;
(k) timber and timberlands, except to the extent situated on or
comprising the real property described in Schedules 2.1(a), (b),
(c) or (e); and
(l) the assets listed on Schedule 2.2.
2.3 Assumed Liabilities.
(a) Buyer shall assume, at the Closing, all the following
Liabilities of the Selling Entities (collectively, the "Assumed
Liabilities"):
(i) all accounts and trade payables (other than payables arising
in connection with Phase I Cluster Remediation, except to the
extent assumed pursuant to Section 7.17(b)) of the Selling
Entities related primarily to the Business or the Purchased
Assets to the extent included in the Final Closing Working
Capital;
(ii) all Liabilities of the Selling Entities for the delivery of
goods (other than Liabilities of Seller under Section 7.20) or
services to customers in the ordinary course of the Business on
or after the Closing Date;
(iii) all Liabilities of the Selling Entities under the
Assumed Contracts and Permits to the extent each of the foregoing
is actually transferred to Buyer and all Liabilities assumed by
Buyer pursuant to Section 7.14(b);
(iv) all Liabilities, including any obligation to undertake
Remedial Actions, arising from the conduct of the Business after
the Closing Date, including all Liabilities resulting from
Environmental Conditions or arising under the Environmental Laws
in connection with facts, conditions, actions or omissions coming
into existence or occurring after the Closing Date with respect
to the Purchased Assets;
(v) intercompany payables owed to the Purchased Subsidiaries
that are listed on Schedule 2.3, in the amounts set forth
thereon;
(vi) intercompany payables for wood fiber delivered to the
Paperboard Mill prior to Closing;
16
(vii) the Liabilities of the Selling Entities relating to
Business Employees and employee benefits of Business Employees,
to the extent such liabilities and obligations are specifically
assumed by Buyer pursuant to Article VIII;
(viii) the Liabilities of the Selling Entities for property
Taxes, to the extent such liabilities and obligations are assumed
by Buyer pursuant to the last sentence of Section 9.12(b) hereof;
and
(ix) the Liabilities of the Selling Entities listed on Schedule
2.3.
(b) Except as specifically provided for in this Section 2.3, the
parties hereto agree that Buyer shall not and does not assume or
become liable for the payment or performance of any Liability or
alleged Liability of Sellers of any nature whatsoever, whether
accrued or unaccrued, known or unknown, fixed or contingent,
whether arising from the conduct of the Business or otherwise and
any and all such Liabilities shall be deemed to remain with the
Selling Entities (the "Excluded Liabilities").
2.4 Excluded Liabilities. Notwithstanding anything to the
contrary herein, Buyer shall not and does not assume any of the
following Liabilities of Sellers (each of which shall be included
within the definition of "Excluded Liabilities"):
(a) all Liabilities relating to or arising from the Excluded
Assets;
(b) all Liabilities for federal, state and local income and
franchise taxes and any other taxes incurred by Sellers in the
conduct of the Business or with respect to the Purchased Assets
before Closing, except as is otherwise provided in this
Agreement;
(c) all Liabilities, including any obligation to undertake
Remedial Actions, resulting from Environmental Conditions or
arising under the Environmental Laws in connection with facts,
events, conditions, actions or omissions existing or occurring
prior to Closing with respect to the Purchased Assets, provided,
however, that the obligation to undertake Additional Cluster
Remediation and Phase I Cluster Remediation to the extent
specifically assumed by Buyer under Section 7.17(b) shall not be
Excluded Liabilities;
(d) the Liabilities listed on Schedule 2.4;
(e) intercompany payables, except for intercompany payables
assumed pursuant to Sections 2.3(a)(v) and (vi); and
(f) all Liabilities of Sellers relating to Business Employees
and employee benefits for Business Employees, except to the
extent such liabilities and obligations are assumed by Buyer
pursuant to Article VIII.
2.5 Consideration. In consideration for the transfer to Buyer
of the Purchased Assets and the Business and the other warranties
and agreements set forth herein, the purchase price shall be SIX
HUNDRED AND TWENTY-FIVE MILLION DOLLARS ($625,000,000) (the "Base
17
Purchase Price"), subject to adjustment as provided for in
Article III. Subject to the terms and conditions hereof, at the
Closing, Buyer shall:
(a) pay to Seller, by wire transfer of immediately available
funds to such bank account or accounts as may be designated in
writing not less than two Business Days prior to the Closing by
Seller, an amount equal to (i) the Base Purchase Price plus (ii)
the Estimated Working Capital Adjustment (whether such amount is
positive or negative) less (iii) the IRB Amount (the "Purchase
Price"); and
(b) assume the Assumed Liabilities pursuant to the Assignment
and Assumption Agreement.
2.6 Designation of Affiliate by Buyer. Prior to the Closing,
upon not less than ten days' written notice to Seller, Buyer may
designate one or more Affiliates to acquire at the Closing all or
part of the Purchased Assets, in which event all references
herein to "Buyer" shall be deemed to refer to such Affiliates, as
appropriate; provided, however, that no such designation shall
limit or affect the obligations of Buyer under this Agreement to
the extent not performed by such Affiliates and Buyer enters into
a guaranty agreement guaranteeing the performance of such
Affiliate or Affiliates under this Agreement.
2.7 Purchase Price Allocation. The Purchase Price shall be
allocated among the Purchased Assets in accordance with Section
1060 of the Code (the "Purchase Price Allocation"). Buyer and
Seller shall each file Form 8594 (Asset Acquisition Statement
Under Section 1060) on a timely basis reporting the allocation of
the Purchase Price consistent with such Purchase Price
Allocation. Buyer and Seller shall file on a timely basis any
amendments required to such Form 8594 as a result of a subsequent
increase or decrease of the Purchase Price. At least 120 days
prior to the latest date for filing such Form 8594, Seller shall
prepare and submit to Buyer a draft of such Form 8594 setting
forth the Purchase Price Allocation. Neither Seller nor Buyer
shall file, or permit to be filed, any Form 8594 unless it shall
have obtained the consent of the other, which consent shall not
be unreasonably withheld or delayed. On or prior to the
thirtieth day after Buyer's receipt of the draft of Form 8594,
Buyer shall either (i) consent to the filing of Form 8594 or (ii)
notify Seller that it disagrees with the Purchase Price
Allocation as set forth on the draft Form 8594 or other matters
contained on the draft Form 8594. If Seller and Buyer have been
unable to resolve their differences within thirty days after
Seller has been notified of Buyer's disagreement with the
Purchase Price Allocation or other matters contained on draft
Form 8594, then any remaining disputed issues shall be submitted
to a mutually agreed upon independent national accounting firm to
resolve in a final binding manner after hearing the views of both
Parties. The fees and expenses of the mutually agreed upon
independent national accounting firm shall be shared equally
between Seller and Buyer. Except as may be required by law,
Seller, Temple-Inland Parent and Buyer will (i) file, or cause to
be filed, all Tax Returns in a manner consistent with the
Purchase Price Allocation, as adjusted as a result of a
subsequent increase or decrease in the Purchase Price, if any,
and (ii) may not take any action inconsistent therewith.
18
ARTICLE III
PURCHASE PRICE ADJUSTMENTS
3.1 Estimated Adjustment. Not less than two Business Days prior
to the Closing Date, Seller shall deliver to Buyer a statement by
an officer of Seller setting forth an estimate of the Closing
Working Capital made in good faith (the "Estimated Closing
Working Capital"), based upon a review of any monthly, weekly or
other operating or financial information made available to or
prepared from time to time by the Chief Executive Officer, the
Chief Financial Officer, General Counsel or Controller of Seller.
The "Estimated Working Capital Adjustment" shall be the amount of
the difference, whether positive or negative, determined by
subtracting (a) $50,000,000 from (b) the Estimated Closing
Working Capital.
3.2 Post-Closing Adjustment.
(a) At or immediately prior to the Closing Date, Seller and
Buyer shall conduct a joint inventory of the Business, the
results of which will serve as the quantitative basis for the
calculation of inventory pursuant to Schedule 3.2.
(b) Immediately after the Closing, Seller shall prepare a
balance sheet of the Business as of the Closing Date (with the
notes thereto, the "Closing Balance Sheet") and schedules setting
forth the Closing Working Capital (as defined hereafter) as of
the end of the last shift on the Closing Date. Seller shall have
Ernst & Young, LLP ("Seller's Accountant") perform procedures
agreed upon among Seller, Buyer and Seller's Accountant on the
Closing Balance Sheet. The "Closing Working Capital" shall equal
the current assets less current liabilities (including the
intercompany payables referred to in Section 2.3(a)(vi)) as
reflected on the Closing Balance Sheet and prepared in accordance
with Schedule 3.2. The Closing Balance Sheet (together with
Schedules setting forth Closing Working Capital) shall be
completed and delivered to the Buyer as soon as practicable, but
in any event no later than 60 days following the Closing Date.
Except as provided for in Schedule 3.2, the Closing Balance Sheet
shall be prepared on a basis consistent with the methods,
principles, practices and policies employed in the preparation
and presentation of Temple-Inland Parent's publicly filed
financial statements and the Balance Sheet, and shall not reflect
(i) any purchase accounting adjustments arising from the purchase
of the Business by Buyer, or (ii) any assets and liabilities
retained by the Selling Entities pursuant to this Agreement.
(c) During the preparation of the Closing Balance Sheet and the
period of any dispute within the contemplation of this
Section 3.2, Buyer shall, upon reasonable notice, during normal
business hours, provide Seller and Seller's authorized
representatives with access to the books, records, facilities and
employees of the Paperboard Mill and the Business necessary to or
useful in preparing the Closing Balance Sheet.
(d) After receipt of the Closing Balance Sheet, Buyer shall have
20 days to review the Closing Balance Sheet, together with
Seller's and Seller's Accountant's (so long as Buyer executes a
customary agreement in accordance therewith) workpapers used in
the preparation thereof, to determine if it has any objection to
the calculation of the Closing Working Capital. Buyer and its
authorized representatives shall have full access to all relevant
19
books and records and employees of Seller to the extent
reasonably required to complete their review of the Closing
Working Capital. Unless Buyer delivers written notice to Seller
on or prior to the 20th day after Buyer's receipt of the Closing
Balance Sheet specifying all disputed items, Buyer shall be
deemed to have accepted and agreed to the Closing Working
Capital. If Buyer so notifies Seller of its objection to the
Closing Working Capital, Buyer and Seller shall, within 15 days
(or such longer period as the parties may agree) following such
notice (the "Resolution Period"), attempt to resolve their
differences and any resolution by them as to any disputed amounts
shall be final, binding and conclusive. If, at the end of the
Resolution Period, the amounts remaining in dispute ("Disputed
Items") do not exceed $500,000, the Closing Balance Sheet with
such changes as are agreed by Buyer and Seller shall be deemed to
be final, binding and conclusive.
(e) If, at the conclusion of the Resolution Period, the Disputed
Items equal at least $500,000, the Disputed Items shall be
submitted to Xxxxxx Xxxxxxxx & Co. (the "Neutral Auditors")
within 10 days after the expiration of the Resolution Period.
Each party agrees to execute, if requested by the Neutral
Auditors, a reasonable engagement letter. All fees and expenses
relating to the work, if any, to be performed by the Neutral
Auditors shall be borne pro rata by Seller and Buyer in
proportion to the allocation of the dollar amount of the Disputed
Items between Buyer and Seller made by the Neutral Auditors such
that the prevailing party pays a lesser proportion of the fees
and expenses. The Neutral Auditors shall act as an arbitrator to
determine, based solely on the provisions of this Section 3.2 and
related schedules and the presentations by Seller and Buyer, and
not by independent review, only the Disputed Items. The Neutral
Auditors' determination of the Disputed Items shall be made
within 30 days of the submission of the Disputed Items thereto,
shall be set forth in a written statement delivered to Seller and
Buyer and shall be final, binding and conclusive. The term
"Final Closing Working Capital", as used in this Agreement, shall
mean the definitive Closing Working Capital determined in
accordance with Section 3.2(d) or this Section 3.2(e) (in each
case in addition to those items theretofore agreed to by Seller
and Buyer).
(f) The "Final Working Capital Adjustment" shall be the amount
of the difference, whether positive or negative, determined by
subtracting (a) $50,000,000 from (b) the Final Closing Working
Capital. If the mathematical result determined by subtracting
(a) the Estimated Working Capital Adjustment from (b) Final
Working Capital Adjustment is positive then, Buyer shall promptly
pay to (or as directed by) Seller, in the manner and with
interest as provided in Section 3.2(g), the amount of such
difference. If the mathematical result determined by subtracting
(a) the Estimated Working Capital Adjustment from (b) Final
Working Capital Adjustment is negative then, Seller shall
promptly pay to (or as directed by) Buyer, in the manner and with
interest as provided in Section 3.2(g), the absolute value of
such difference. Any such payment pursuant to this Section
3.2(f) shall be made at a mutually convenient time and place
within five business days after the Final Closing Working Capital
is determined.
(g) Any payments pursuant to Section 3.2(f) shall be made by
causing such payments to be credited in immediately available
funds to such bank account or accounts as may be designated by
the receiving party in writing not less than two Business Days
prior to transfer. The amount of any payment to be made pursuant
to Section 3.2(f) shall bear interest from and including the
Closing Date to but excluding the date of payment at a rate per
20
annum equal to the Prime Rate as published by The Chase Manhattan
Bank. Such interest shall be payable at the same time as the
payment to which it relates and shall be calculated daily on the
basis of a year of 365 days and the actual number of days for
which interest is due.
3.3 Corrective Actions.
(a) Buyer shall undertake a review of the following systems of
the Paperboard Mill:
(i) systems for bleaching and washing fibers;
(ii) systems and equipment in contact with pulp stock and
filtrates from pulp stock;
(iii) recovery, power island and electrical distribution
systems; and
(iv) systems for handling and screening chips (items (i) through
(iv) collectively, the "Specified Systems").
(b) Following its review of the Specified Systems, Buyer shall
have until one year after the Closing Date to notify Seller in
writing (the "Correction Cost Notice") of any costs and expenses
incurred by Buyer, if any, to repair or rectify any defect,
deficiency or inadequacy in the Specified Systems (including,
without limitation, repairing damage, excessive corrosion, or
design or functional deficiencies) to the extent necessary for
operation of the Paperboard Mill at a volume of 2,000 tons of
paperboard per day on an annual average, and to modify or upgrade
the systems described in item (iv) above to adequately assure and
verify that the chips exiting the chip handling and screening
systems meet or exceed Buyer's chip quality standards as set
forth on Schedule 1.1(a), in each case as determined by Buyer in
good faith (collectively, "Correction Costs"). The Correction
Cost Notice shall include complete information regarding the
Correction Costs and a description of the corrective action.
Buyer shall have up to two years after the date of the Correction
Cost Notice (the "Correction Cost Deadline") to complete the work
described in the notice. Buyer shall provide Seller the
opportunity to audit (which audit shall be completed not later
than 60 days following the Correction Cost Deadline) the purpose
of the Correction Costs and verify the amount of the Correction
Costs. If the Correction Costs were actually incurred by Buyer
(i) in good faith, (ii) with respect to the Specified Systems,
(iii) consistent with practices in the industry, and (iv) in
accordance with the Correction Cost Notice, the Seller shall
reimburse Buyer (within 10 days following completion of the
audit) up to an amount of FIFTEEN MILLION DOLLARS ($15,000,000)
for the total amount of Correction Costs actually incurred by
Buyer prior to the Correction Cost Deadline.
(c) Except with respect to Liabilities resulting from
Environmental Conditions or arising under Environmental Laws in
connection with facts, events, conditions, actions or omissions
existing or occurring prior to Closing, with respect to the
Specified Systems, the rights accorded under this provision shall
be in lieu of any rights to payment (and not in lieu of the
rights set forth in Article X) that Buyer may have under any
other provisions of this Agreement or at law or in equity for any
Losses or expenses with respect to operations resulting from the
21
performance or condition of the Specified Systems, regardless of
the actual costs and expenses paid by Buyer with respect to the
Specified Systems.
(d) Following the Closing, the representation of Seller and the
Subs set forth in Section 5.14 shall be of no significance, force
or effect with respect to the Specified Systems. Buyer further
acknowledges that it has been made aware by Seller of facts and
circumstances on the Specified Systems contrary to the
representation in Section 5.14, and that with respect to the
Specified Systems the representation set forth in Section 5.14 is
included for the period prior to the Closing solely for the
purpose of determining the existence of a Business Material
Adverse Effect.
3.4 Guarantee of Receivables. As reflected in Schedule 3.2,
Seller shall not be required to include reserves on accounts
receivable. Seller guarantees payment of the accounts receivable
at the amounts set forth in the Final Closing Working Capital,
and, if, following reasonable collection efforts by Buyer
consistent with its customary practice, any amounts under the
accounts receivables remain unpaid 120 days after Closing, Seller
shall promptly pay to Buyer the aggregate of all such unpaid
amounts and Buyer shall assign to Seller the unpaid portion of
any such account along with the right to collect for Seller's own
account any payments received with respect thereto, providecd
Seller shall use only such collection procedures as it uses with
its own customers.
ARTICLE IV
RELATED AND ADDITIONAL AGREEMENTS
4.1 Fiber Supply Agreement. In connection with the consummation
of the transactions contemplated hereby, at or prior to the
Closing, Seller and Buyer shall enter into a fiber supply
agreement (the "Fiber Supply Agreement") in the form set forth in
Exhibit A hereto. Prior to the Closing, Buyer and Seller shall
negotiate in good faith to create Schedule 4.1 of the Fiber
Supply Agreement and determine the fair market initial prices for
the Products (as defined in the Fiber Supply Agreement) and the
Region (as defined in the Fiber Supply Agreement), which is
generally contemplated to be an area of sufficient size in
eastern Texas and possibly parts of Louisiana that provides a
fair representation of fair market prices for the Products and
that is relatively free of local price distortions and excessive
fluctuations. If Buyer and Seller cannot agree upon Schedule 4.1
within 45 days following the date hereof, they shall submit the
issue to arbitration in accordance with the procedures set forth
in Section 4.4 of the Fiber Supply Agreement.
4.2 Parent Guarantee. In connection with and as a condition to
the execution of this Agreement, Temple-Inland Parent has
executed a guarantee of the performance of Seller and the Subs
under this Agreement (the "Parent Guarantee") in the form set
forth in Exhibit B hereto.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Except for effects, events, occurrences, or states of facts
that, taken in the aggregate, do not have a Business Material
Adverse Effect, Seller and the Subs hereby represent and warrant
to Buyer that:
5.1 Organization; Qualification. Each of the Seller, Subs and
Purchased Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction
of incorporation and has corporate power and authority to own all
of its properties and assets and to carry on its business as it
is now being conducted. Each of the Sellers is duly qualified
and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary.
5.2 Authority Relative to this Agreement and the Fiber Supply
Agreement. Each of Sellers has the corporate power and authority
to execute and deliver this Agreement and each agreement or other
document to be executed by it in connection with the transactions
contemplated by this Agreement and to consummate the transactions
contemplated on its part thereby. The execution and delivery by
any Sellers of this Agreement and each agreement or other
document to be executed by it in connection with the transactions
contemplated by this Agreement, and the consummation by it of any
transactions contemplated on its part hereby and thereby, have
been duly authorized by such Person's Board of Directors and no
other corporate proceedings on the part of such Person are
necessary with respect thereto. Assuming the due authorization,
execution and delivery by Buyer of this Agreement, this Agreement
constitutes, and each agreement or other document to be executed
by any Sellers in connection with the transactions contemplated
by this Agreement (when executed and delivered by such Person)
will constitute, valid and binding obligations of such Person,
enforceable in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general
applicability relating to or affecting the enforcement of
creditors' rights and subject to the qualification that general
equitable principles may limit the availability of equitable
remedies, including without limitation the remedy of specific
performance.
5.3 Consents and Approvals. Except as set forth in Section 5.3
of the Disclosure Schedule, there is no requirement applicable to
any Sellers to make any filing with, or to obtain any permit,
authorization, consent or approval from, any third-party
(including any Authority) as a condition to the consummation by
Sellers of the transactions contemplated by this Agreement, other
than filings required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvement Act of 1976, as amended ("HSR Act"), notice to the
PBGC, and any notice required under the WARN Act.
5.4 Non-Contravention. The execution and delivery by Seller,
the Subs and the Purchased Subsidiaries of this Agreement and the
other agreements and documents to be executed in connection with
the transactions contemplated by this Agreement and the
consummation of the transactions contemplated thereby will not
(a) violate or result in a breach of any provision of the
charters or bylaws of any Sellers, as the case may be, (b) result
in a default (or give rise to any right of termination,
23
cancellation or acceleration) under the terms, conditions or
provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which any
Sellers, as the case may be, is a party or by which any Sellers,
as the case may be, or any of the Purchased Assets may be bound,
except for such defaults (or rights of termination, cancellation
or acceleration) as to which requisite waivers or consents have
been or shall be obtained by Sellers before the Closing, or (c)
violate any order, writ, injunction, decree, statute, rule or
regulation applicable to any Sellers or any of the Purchased
Assets or the Business (other than any applicable bulk sales
laws).
5.5 Compliance with Laws. Sellers have operated the Business in
compliance with all laws, regulations, policies, guidelines,
orders, judgments or decrees of any Authority applicable to, or
having jurisdiction over, any Sellers with respect to the
Purchased Assets or the Business. Except as set forth in Section
5.5 of the Disclosure Schedule, with respect to the Business, (a)
no Sellers have received from any Authority any notice of any
failure to so comply, and (b) no Sellers are currently subject to
any sanction for any noncompliance.
5.6 Environmental Matters. Except as described in Section 5.6
of the Disclosure Schedule, Sellers have obtained all federal,
state and local permits, licenses and other authorizations and
have submitted all notices, which are required under applicable
Environmental Laws enacted as of the date hereof in connection
with: (i) the Purchased Assets and the Business, and (ii) the
operation of the Paperboard Mill at a volume of at least 2,000
tons of bleached paperboard per day on an annual average. Except
as described in Section 5.6 of the Disclosure Schedule, the
Purchased Assets and the Business have been and are being
operated in compliance with all terms and conditions of such
permits, licenses and authorizations, and also have been and are
being operated in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables of any Environmental Law or
order, decree, judgment notice or demand letter entered,
promulgated or approved thereunder, and no action is pending to
revoke or modify any such permit, license or authorization.
Except as described in Section 5.6 of the Disclosure Schedule,
none of Sellers have received written notice, or to the Knowledge
of Seller oral notice, from any Authority of any failure of the
Purchased Assets or the Business to comply with, or of any
liability or any alleged potential liability of the Purchased
Assets or the Business under, any Environmental Law. Except as
set forth in Section 5.6 of the Disclosure Schedule: (i) none of
the Paperboard Mill, the Purchased Assets or the Business has
released or disposed of any Hazardous Substances, and no Sellers
know of any such prior releases or disposal of Hazardous
Substances in violation of any Environmental Law on the
Paperboard Mill or related to the Purchased Assets or the
Business for which remedial action has not been completed, and
(ii) there are no physical conditions or Environmental Conditions
that would give rise to obligations to conduct or to pay for any
Remedial Action or any obligation to correct or to pay a penalty
for failure to comply with Environmental Laws with respect to the
Paperboard Mill, the Purchased Assets or the Business.
5.7 Licenses and Permits. All material federal, state and local
permits and licenses that Sellers are required to obtain in
relation to the Business or the ownership or operation of the
Purchased Assets have been obtained and are currently in full
force and effect. All material federal, state and local permits
and licenses that Sellers need in order to permit the Paperboard
24
Mill to produce at least 2,000 tons of bleached paperboard per
day on an annual average have been obtained and are currently in
full force and effect. Except as set forth in Section 5.7 of the
Disclosure Schedule, no Sellers have violated the terms or
conditions of any such license or permit, no notice of a
violation of any such license or permit has been received by any
Sellers or recorded or published, and no proceeding is pending,
to revoke, prevent the renewal of, or limit any such license or
permit.
5.8 Financial Statements.
(a) Seller has previously furnished Buyer with the Balance
Sheet. The Balance Sheet (i) has been prepared (except as
otherwise set forth in the comments accompanying such balance
sheet) on a basis consistent with Seller's historical accounting
policies and procedures with respect to the Business used in the
preparation of the publicly filed financial statements of Temple-
Inland Parent and (ii) presents fairly the financial position of
the Business as of August 31, 1999.
(b) Seller has previously furnished Buyer with an unaudited
profit and loss statement for the Business for the years ended
January 2, 1999 and January 3, 1998 and for the period ended July
3, 1999, copies of which are attached as Schedule 5.8(c) (the
"Income Statements"). Such unaudited Income Statements (i) have
been prepared (except as otherwise set forth in the comments
accompanying such Income Statement) on a basis consistent with
Seller's historical accounting policies and procedures with
respect to the Business used in the preparation of the publicly
filed financial statements of Temple-Inland Parent and
(ii) present fairly the results of operations of the Business for
the respective periods set forth therein.
5.9 Litigation. Except as set forth in Section 5.9 of the
Disclosure Schedule, there are (a) no actions, suits, claims or
proceedings (legal, administrative or arbitrative) pending or, to
the Knowledge of Seller, threatened, and no investigations, to
the Knowledge of Seller, pending or threatened, against any
Sellers which relate to the Purchased Assets or the Business,
whether at law or in equity and whether civil or criminal in
nature, before any federal, state, municipal, foreign country's
or other court, arbitrator, governmental department, commission,
agency or instrumentality, and (b) no judgments, decrees or
orders of any such court, arbitrator, governmental department,
commission, agency or instrumentality outstanding against Seller
or any of its Subsidiaries which relate to the Purchased Assets
or the Business.
5.10 Title to Properties. Except as set forth in Section 5.10 of
the Disclosure Schedule:
(a) Sellers have good and marketable fee simple title to the
Real Property, and have the right to use the Temple-Inland Canal
Easement, free and clear of all Encumbrances except for Permitted
Exceptions. Sellers have good and valid title to the personal
property included in the Purchased Assets, free and clear of all
Encumbrances except for Permitted Exceptions.
(b) Sellers are in actual and peaceful possession of the real
and personal property included in the Purchased Assets.
25
(c) No applicable zoning or building law, ordinance,
administrative regulation, urban redevelopment law, or any other
law, regulation, rule, order, decree or use restriction,
prohibits or interferes with, limits or impairs the use,
operation, maintenance of or access to, the Real Property, as now
used, operated or maintained by Sellers. No written notice of
any violation of any applicable zoning or building law,
ordinance, administrative regulation, or any other law,
regulation, rule, order, decree or use restriction has been
received by any Sellers, and to the Knowledge of Seller no
condemnation proceeding has been instituted or is threatened with
respect to any of the Real Property.
(d) The Real Property and the Temple-Inland Canal Easement are
suitable, sufficient and appropriate in all respects for their
current uses, and, except with respect to the Temple-Inland
Canal, are located adjacent to roads or streets with adequate
lawful ingress and egress available between such roads or streets
and the Real Property for the current uses of the Business.
(e) Except for Permitted Exceptions and matters listed in
Section 5.10 of the Disclosure Schedule, Sellers have not granted
any outstanding options or entered into any outstanding contracts
with others for or in connection with the sale, mortgage, pledge,
hypothecation, assignment, sublease, lease or other transfer of
all or any part of the Real Property or any interest in the real
property covered by the Temple-Inland Canal Easement and the
Water Easement. No person or entity has any right or option to
acquire, or right of first refusal or opportunity (or any similar
right) with respect to, the interest of any Sellers in or to the
Real Property or any real property covered by the Temple-Inland
Canal Easement and the Water Easement.
5.11 Leases.
(a) Section 5.11(a) of the Disclosure Schedule sets forth a true
and complete list of all leases, agreements and other rights of
possession or commitments to lease or otherwise possess, under
which Seller or any of its Subsidiaries is the lessor, licensor
or otherwise grants use or occupancy, and under which any Sellers
have a leasehold interest or other contractual rights in or to
any Purchased Asset, which in the case of leases for personal
property provides for annual rental payments of more than
$250,000 (collectively "Material Personalty Leases") and which
includes all leases for Real Property and leases related to the
Temple-Inland Canal Easement or the Water Easement and which is
not terminable without penalty upon notice of 12 months or less,
such list including, for each such Lease: (i) an identification
of the lease, sublease or license agreement therefor (or any
other agreement with respect to the use or occupancy thereof) and
any and all amendments or modifications thereof or side letters
with respect thereto (collectively, the "Leases"); (ii) the type
of property leased thereunder, and with respect to Leases for
real property, the approximate size of the premises leased
thereunder; (iii) the term thereunder, including any extension
options; (iv) with respect to Leases for real property, the use
of such premises and the nature of any improvements located
thereon; and (v) the recording information of any Leases which
have been recorded in the applicable real estate records offices.
With respect to any Leases for real property under which any
Sellers have a leasehold interest or other contractual rights,
such Person has good and valid leasehold title, free and clear of
all Encumbrances except for Permitted Exceptions.
26
(b) Except as set forth on Section 5.11(b) of the Disclosure
Schedule: (i) there is no material past due payment obligation or
other material default under any of the Leases; (ii) no Sellers
have received any notice (oral or written) of, or know of, any
act, omission or condition which constitutes a material default,
or with the passage of time and/or the giving of notice would
constitute a material default, under any of the Leases; and (iii)
each of the Leases is in full force and effect, valid and
enforceable against the parties thereto in accordance with its
terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general applicability relating to or affecting
the enforcement of creditors' rights and subject to the
qualification that general equitable principles may limit the
availability of equitable remedies, including without limitation
the remedy of specific performance.
5.12 Intellectual Property. Section 5.12 of the Disclosure
Schedule sets forth a complete and correct list of (x) all items
of Business Intellectual Property that are the subject of
licenses (whether Sellers are licensees or licensors) and (y) all
items of the Business Intellectual Property described in clause
(i) of the definition of Intellectual Property (other than
goodwill) that are owned by Sellers. All such Business
Intellectual Property is subsisting on the date hereof. Except
as set forth in Section 5.12 of the Disclosure Schedule, (i)
there are no licenses of Business Intellectual Property to third
parties, (ii) there is no claim, suit, action or proceeding
pending or, to the Knowledge of Seller, threatened against any
Sellers asserting that its use of any Business Intellectual
Property infringes upon the rights of any third parties, (iii)
the conduct of the Business does not infringe or otherwise
conflict with any rights of any person in respect of any patents,
copyrights or other Intellectual Property, and (iv) to the
Knowledge of Seller there are no third parties infringing upon
the Business Intellectual Property.
5.13 Listed Contracts. Section 5.13 of the Disclosure Schedule
contains a complete and correct list of every contract, agreement
or commitment of any Sellers, including any attachments,
amendments, waivers, modifications and supplements thereto,
related primarily to the Business or the Purchased Assets, other
than the Leases (each, a "Listed Contract"):
(a) which provides for aggregate future payments by the Business
or to the Business of more than $400,000, except for purchase
orders, sales orders or customer orders arising in the ordinary
course of business, in which case such contract, agreement or
commitment is listed only if any party thereto is obligated to
make payments during the term thereof which will exceed $500,000
in the aggregate;
(b) which provides for the sale, lease to a third party (other
than Leases listed in Section 5.11 of the Disclosure Schedule) or
other disposition, after the date hereof and other than in the
ordinary course of business, of any of the Purchased Assets;
(c) which is an agreement or other arrangement for the purchase
of any real estate, machinery, equipment, or other capital assets
with a value in excess of $1,000,000;
(d) which is an agreement imposing material non-competition or
exclusive dealing obligations on the Business; or
27
(e) which is an agreement or other arrangement with a
distributor or manufacturer's representative that is not
terminable upon twelve months' notice.
Seller has, prior to the date hereof, delivered to Buyer true and
complete copies of all Listed Contracts (or, if not in writing,
reasonably complete and accurate written descriptions), together
with all amendments and supplements thereto and any waiver of
terms thereof. Except as set forth in Section 5.13 of the
Disclosure Schedule, all of the Listed Contracts are in full
force and effect and there has not occurred, with respect to any
Listed Contract, any material default or event of default on the
part of any Sellers or, to the Knowledge of Seller, any other
party thereto.
5.14 Tangible Assets. Subject to the acknowledgments provided
for in Section 3.3(d), the tangible Purchased Assets are in good
operating condition, and do not require any maintenance or
repairs except for day-to-day maintenance or repairs arising with
respect to ordinary wear and tear. The Paperboard Mill is
designed to have a production capacity of at least 2,000 tons of
paperboard per day on an annual average, although it has never
been operated at such level. The inventories of the Business are
good, safe, merchantable and in usable condition, and of a
quantity that is useable or saleable in the ordinary course of
the Business.
5.15 Labor Matters.
(a) Section 5.15(a) of the Disclosure Schedule sets forth a
complete and correct list of every collective bargaining
agreement covering Business Employees. Seller has provided Buyer
with true, complete and correct copies of each of such collective
bargaining agreements and all amendments and modifications
(excluding exhibits) thereto.
(b) Except as set forth in Section 5.15(b) of the Disclosure
Schedule, and except for grievances that have not ripened into
arbitration or litigation, as of the date hereof there are no
controversies, disagreements or disputes pending between any
Sellers and any of their respective employees or union
representatives.
(c) Except as set forth in Section 5.15(c) of the Disclosure
Schedule:
(i) during the last three years immediately preceding the date
of this Agreement, with respect to the Business Employees, there
have been no labor strikes, slow downs, lockouts, employment
suits by any Person related to labor matters or administrative
proceedings or investigations related to labor matters brought by
any Authority in connection with the Business;
(ii) within the past three years immediately preceding the date
of this Agreement, there have not been (A) any events that have
legally required any Sellers to hold a union election related to
the Business or (B) to the Knowledge of Seller, any union
organizing activities, or any demand for recognition from a labor
organization related to the Business; and
(iii) within the past three years immediately preceding the
date of this Agreement, there have not been any unfair labor
practice charges filed with the National Labor Relations Board
28
against any Sellers related to the Business or the Purchased
Assets.
5.16 Employee Benefit Plans.
(a) Section 5.16(a) of the Disclosure Schedule lists all of the
material employee benefit and compensation plans, programs and
arrangements, including without limitation (i) all retirement,
savings and other pension plans other than "multiemployer plans,"
(as defined in Section 4001(a)(3) of ERISA), (ii) all health,
severance, insurance, disability and other employee welfare
plans, and (iii) all employment, incentive, vacation and other
similar plans, in each case that are maintained by Seller or any
ERISA Affiliates with respect to Business Employees, or to which
Seller or any ERISA Affiliates contributes on behalf of the
Business Employees (collectively, the "Employee Plans").
(b) Except as set forth in Section 5.16(b) of the Disclosure
Schedule: (i) the Employee Plans that are maintained by any
Sellers are in material compliance with applicable laws and
regulations, including, to the extent applicable, ERISA and the
Code, (ii) Seller and, to the extent applicable, each of the
ERISA Affiliates has administered the Employee Plans in
accordance with applicable laws and regulations, including, to
the extent applicable, ERISA and the Code, and (iii) to the
Knowledge of Seller each Employee Plan that is intended to be
qualified under Section 401(a) of the Code is so qualified.
(c) Seller has made available to Buyer copies of all Employee
Plans and, where applicable, summary plan descriptions and annual
reports filed within the last year pursuant to ERISA or the Code
with respect to the Employee Plans.
(d) Section 5.16(d) of the Disclosure Schedule contains a true
and correct list of all employment and consulting contracts with
an original term in excess of 180 days, providing for
compensation on a yearly basis in excess of $175,000, and not
otherwise listed on Section 5.13 or 5.16(a) of the Disclosure
Schedule, to which any of Sellers or any ERISA Affiliates is a
party in connection with the Business. Except as set forth in
Section 5.16(d) of the Disclosure Schedule, each of such
contracts is in full force and effect and there has not occurred,
with respect to any such contract, any material default or event
of default on the part of any of Sellers or any ERISA Affiliates,
as applicable, or, to the Knowledge of Seller, any other party to
such contracts.
5.17 Conduct of Business and Management of Assets.
(a) Between August 31, 1999 and the date hereof, Sellers have
conducted the Business, and have managed the Purchased Assets in
the ordinary course of business consistent with past practice.
(b) Between August 31, 1999 and the date hereof, with respect to
the Business and the Purchased Assets, Sellers have not:
(i) made capital expenditures, other than substantially in
accordance with the CapX Plan or with their obligations under
this Agreement;
29
(ii) made a disposition of assets in excess of $1,000,000, other
than dispositions of inventory in the ordinary course of business
of the Business;
(iii) made loans or advances to, or investments in, other
parties in excess of $500,000 in the aggregate;
(iv) entered into employment, severance, compensation or similar
agreements with Business Employees, except (A) for incentive
programs that by their terms expire at or before Closing or (B)
in the ordinary course of business;
(v) made increases in compensation or benefits payable to
Business Employees other than in the ordinary course of business;
(vi) suffered or incurred any significant damage, destruction of
property or other loss, whether or not insured; or
(vii) without reference to qualification set forth in the
introduction to this Article V, suffered a Business Material
Adverse Effect.
(c) Between August 31, 1999 and the date hereof, with respect to
the Business and the Purchased Assets, Sellers have:
(i) maintained their books and records in accordance with past
accounting practices;
(ii) maintained the same level and types of insurance as
previously maintained; and
(iii) used commercially reasonable efforts to preserve the
Business and the Purchased Assets.
5.18 Finders. No broker, finder or investment banker is entitled
to any fee or commission from any Sellers for services rendered
on behalf of such Person in connection with the transactions
contemplated by this Agreement.
5.19 Sufficiency of Assets. The Purchased Assets to be
transferred pursuant to Article II, together with the Buyer's
rights under the Fiber Supply Agreement and Section 7.16, are
sufficient to enable the Buyer to conduct the Business in
substantially the same manner as it is presently being conducted;
subject to Buyer's understanding and acknowledgment that the
fiber to be supplied by Seller pursuant to the Fiber Supply
Agreement will not supply all the fiber required to conduct the
Business and the Paperboard Mill does not have fiber procurement
operations.
5.20 Customers. Section 5.20 of the Disclosure Schedule sets
forth: (i) a list of the twenty largest customers of the
Business (the "Significant Customers"), determined by dollar
volume of gross sales for the most recently ended fiscal year,
and the dollar volume of sales to each such customer during the
most recently ended fiscal year, and (ii) a list of the brokers
and distributors of the Business that accounted for at least
$1,000,000 in sales by the Business during the most recently
30
ended fiscal year (the "Significant Brokers"), and the dollar
volume of the sales of the Business to or through each
Significant Broker during the most recently ended fiscal year.
Except as described in Section 5.20 of the Disclosure Schedule as
of the date hereof, no Significant Customer or Significant Broker
has terminated, or given notice that it intends to terminate, its
existing relationship with respect to the Business with any
Sellers.
5.21 Year 2000 Problems. Sellers have (a) engaged in a process
of assessment of the existence of the Year 2000 Problems
appropriate to the scope and complexity of the Systems, and (b)
adopted and are implementing a plan of correction ("Y2K Plan")
intended to eliminate Year 2000 Problems. Seller's Y2K Plan will
be substantially completed on or prior to December 1, 1999.
Assuming the successful completion of its Y2K Plan in a timely
manner, Seller expects any Year 2000 Problems that occur, should
there be any, will be minor and not material to the Business.
Seller has contacted key vendors whose noncompliance, either
individually or cumulatively, could materially impact the
Business. Substantially all have indicated they have addressed
or expect to address their Year 2000 Problems in a timely manner.
Seller cannot provide assurance that the Year 2000 compliance
plans of its vendors and customers, particularly those providing
broad infrastructural services or those in international markets,
will be successfully completed in a timely manner.
5.22 Industrial Revenue Bonds. Section 5.22 of the Disclosure
Schedule sets forth a list of industrial revenue bonds (the
"IRBs") of the Purchased Subsidiaries undertaken in connection
with the Business or the Purchased Assets and indicates for each
the debtor and the principal balance outstanding. Except for
outstanding principal and accrued interest not yet due and
payable, no unpaid interest, fees, dues, penalties, damages or
other obligations are outstanding on any IRBs, and Sellers have
previously delivered to Buyer true and complete copies of all
indentures and agreements with respect to the IRBs, including all
attachments, amendments, waivers, consents and supplements
thereto.
5.23 Purchased Subsidiaries Capitalization.
(a) Section 5.23 of the Disclosure Schedule sets forth the
number of authorized and outstanding shares of capital stock or
membership interests or other ownership interests of each
Purchased Subsidiary ("Purchased Subsidiaries Shares"). All
outstanding Purchased Subsidiaries Shares are (i) duly
authorized, validly issued, fully paid, nonassessable and free of
preemptive rights and (ii) owned by Seller, or an indirect wholly
owned subsidiary of Seller, free and clear of any pledge, lien,
Taxes, security interests, purchase rights, contracts,
commitments, equities, claims, and demands, or encumbrance. There
are no stock appreciation rights, phantom stock or similar rights
with respect to any Purchased Subsidiaries Shares or any options,
warrants, calls, rights or agreements to issue, deliver, sell,
purchase, redeem or acquire, or cause to be issued, delivered,
sold, purchased, redeemed or acquired, any Purchased Subsidiaries
Shares, or securities convertible into or exchangeable for such
Purchased Subsidiaries Shares or obligating any Purchased
Subsidiary or other Person to grant, extend or enter into any
such option, warrant, call, right or agreement. Except as set
forth in Section 5.23 of the Disclosure Schedule, there are no
outstanding contractual obligations of any Sellers (i)
restricting the transfer of, (ii) affecting the voting rights of,
(iii) requiring the repurchase, redemption or disposition of,
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(iv) requiring the registration for sale of, or (v) granting any
preemptive or antidilutive right with respect to, any Purchased
Subsidiaries Shares being transferred to Buyer hereunder.
(b) At the Closing, Sellers will deliver, or cause to be
delivered, good and marketable title to the Purchased
Subsidiaries Shares to be transferred to Buyer hereunder, free
and clear of any pledge, lien, Taxes, security interests,
options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands, or encumbrance. The Purchased
Subsidiaries have no Subsidiaries.
(c) Neither Purchased Subsidiary has any Liability other than
Liabilities pursuant to the IRBs to which it is a party, and at
the Closing, neither of the Purchased Subsidiaries will have any
Liabilities other than, in the aggregate, Liabilities pursuant to
the IRBs in the amount of the IRB Amount.
5.24 Tax Matters.
(a) Each Purchased Subsidiary has filed all Tax Returns that it
was required to file. All such Tax Returns were correct and
complete in all respects. All Taxes shown thereon as owing by
each Purchased Subsidiary have been paid. Except as disclosed on
Section 5.24 of the Disclosure Schedule, none of the Purchased
Subsidiaries is currently the beneficiary of any extension of
time within which to file any Tax Return. To the Knowledge of
Seller, no written claim has ever been made by a Tax Authority in
a jurisdiction where one or both of the Purchased Subsidiaries
does not file Tax Returns that one or both of the Purchased
Subsidiaries is or may be subject to taxation by that
jurisdiction. There are no liens or security interests on any of
the assets of a Purchased Subsidiary that arose in connection
with any failure (or alleged failure) to pay any Tax.
(b) Each Purchased Subsidiary has withheld and paid all Taxes
required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
(c) To the Knowledge of Seller, there is no expectation that any
Tax Authority will assess any additional Taxes with respect to
the Purchased Subsidiaries for any period for which Tax Returns
have been filed. There is no dispute or claim concerning any Tax
liability of any of the Purchased Subsidiaries either (A) claimed
or raised by any Tax Authority in writing or (B) to the Knowledge
of Seller. Section 5.24 of the Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed with
respect to the Purchased Subsidiaries for taxable periods ended
on or after December 31, 1996, indicates those Tax Returns that
have been audited, and indicates those Tax Returns that currently
are the subject of audit. Seller delivered or made available to
Buyer correct and complete copies of the portions of all federal
income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by and pertaining to
the Purchased Subsidiaries since December 31, 1996.
(d) Except as disclosed on Section 5.24 of the Disclosure
Schedule, no Purchased Subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
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(e) No Purchased Subsidiary has filed a consent under Section
341(f) of the Code concerning collapsible corporations. No
Purchased Subsidiary has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will
not be deductible under Section 280G of the Code. None of the
Sellers is a foreign person within the meaning of Section
1445(b)(2) of the Code. None of the Purchased Subsidiaries has
ever (A) been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group the
common parent of which was Temple-Inland Parent) or (B) had or
has any liability for the Taxes of any Person (other than the
several liability for federal income Taxes of the Temple-Inland
Group,) under Section 1.1502-6 of the Treasury Regulations (or
any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(f) The Temple-Inland Group has filed all income Tax Returns
that it was required to file for each taxable period during which
any of the Purchased Subsidiaries was a member of the Temple-
Inland Group. All such Tax Returns were correct and complete in
all respects. All income Taxes shown thereon as owing by any
Affiliated Group have been paid for each taxable period during
which any of the Purchased Subsidiaries was a member of the
Temple-Inland Group.
(g) Except as disclosed on Section 5.24 of the Disclosure
Schedule, the Temple-Inland Group has not waived any statute of
limitations in respect of any income Taxes or agreed to any
extension of time with respect to an income Tax assessment or
deficiency for any taxable period during which any of the
Purchased Subsidiaries was a member of the Temple-Inland Group.
(h) The Purchased Subsidiaries are members of the Temple-Inland
Group of corporations that file a consolidated federal income tax
return with Temple-Inland Parent as the common parent.
5.25 Disclosure. To the Knowledge of Seller, no representation
or warranty made by any Seller in this Agreement, nor any
document, written information, financial statement, certificate
or exhibit prepared and furnished or to be prepared and furnished
by such Person or their respective representatives pursuant
hereto or in connection with the transactions contemplated
hereby, when taken together and giving effect to corrections
contained in such materials, contains any untrue statement of a
material fact.
5.26 No Other Representations. EXCEPT FOR THE REPRESENTATIONS
AND WARRANTIES EXPRESSLY SET FORTH IN ARTICLE V, THE PURCHASED
ASSETS ARE BEING SOLD AND TRANSFERRED "AS IS, WHERE IS," AND THE
SELLERS ARE NOT MAKING ANY OTHER REPRESENTATIONS OR WARRANTIES,
WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, INCLUDING, IN
PARTICULAR, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE (AS DEFINED IN THE NEW YORK COMMERCIAL CODE),
ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED AND DISCLAIMED.
33
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Except for effects, events, occurrences, or states of facts
that, taken in the aggregate, do not prevent or materially delay
consummation of any of the transactions contemplated by this
Agreement, Buyer hereby represents and warrants to Seller that:
6.1 Organization; Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the
General Corporation Law of the state of Delaware. Buyer has the
corporate power and authority to own all of its properties and
assets and to carry on its business as it is now being conducted
and as is contemplated to be carried on hereunder. Buyer is duly
qualified and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by
it or the nature of the Business makes such qualification
necessary except in those jurisdictions where the failure to be
duly qualified and in good standing would not have a material
adverse effect on Buyer.
6.2 Authority Relative to this Agreement and the Fiber Supply
Agreement. Buyer has the corporate power and authority to
execute and deliver this Agreement and the Fiber Supply Agreement
and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by Buyer of this Agreement
and the Fiber Supply Agreement and the consummation by Buyer of
the transactions contemplated hereby and thereby, have been duly
authorized by its Board of Directors and no other corporate
proceedings on its part are necessary with respect thereto. This
Agreement and the Fiber Supply Agreement, when executed and
delivered by Buyer, each constitutes a valid and binding
obligation of Buyer, enforceable in accordance with its terms
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws of
general applicability relating to or affecting the enforcement of
creditors' rights and subject to the qualification that general
equitable principles may limit the availability of equitable
remedies, including without limitation the remedy of specific
performance.
6.3 Consents and Approvals. Except for applicable filings under
the HSR Act or as set forth in Section 6.3 of the Disclosure
Schedule hereto, there is no requirement applicable to Buyer to
make any filing with, or to obtain any permit, authorization,
consent or approval from, any third-party (including any
Authority) as a condition to the consummation by Buyer of the
transactions contemplated by this Agreement.
6.4 Non-Contravention. The execution and delivery by Buyer of
this Agreement does not, and its execution and delivery of the
Fiber Supply Agreement and the consummation of the transactions
contemplated hereby and thereby will not (a) violate or result in
a breach of any provision of such Buyer's Certificate of
Incorporation or Bylaws, (b) result in a default (or give rise to
any right of termination, cancellation or acceleration) under the
terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement, lease or other instrument or
obligation to which such Buyer is a party or by which such Buyer
34
may be bound, or (c) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Buyer (other than any
applicable bulk sales laws).
6.5 Litigation. There are no actions, suits, claims,
investigations or proceedings (legal, administrative or
arbitrative) pending or threatened against Buyer, whether at law
or in equity and whether civil or criminal in nature before any
federal, state, municipal or other court, arbitrator,
governmental department, commission, agency or instrumentality,
nor are there any judgments, decrees or orders of any such court,
arbitrator, governmental department, commission, agency or
instrumentality outstanding against Buyer which have, or, if
adversely determined, could be reasonably expected to have, a
material adverse effect on Buyer's ability to consummate the
transactions contemplated hereunder, or which seek specifically
to prevent, restrict or delay the consummation of the transaction
as contemplated hereby or the fulfillment of any of the
conditions of this Agreement.
6.6 Finders. Except for Xxxxxxx, Xxxxx & Co., no broker, finder
or investment banker is entitled to any fee or commission from
Buyer for services rendered on behalf of Buyer in connection with
the transactions contemplated by this Agreement.
6.7 Financing. Buyer will, at the Closing, have sufficient
immediately available funds, in cash, to pay the Base Purchase
Price.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Conduct of Business and Management of Assets. From and
after the date hereof and until the Closing, each of Seller and
the Subs shall use its reasonable best efforts (a) to conduct the
Business in the ordinary course of business consistent with past
practice (which shall include execution of the Paperboard Mill
outage and related undertakings on dates substantially similar to
those presently scheduled and communicated to Buyer); (b) to
preserve intact the present business organization and operations
of the Business, except for any such changes made in good faith
to facilitate the transactions contemplated by this Agreement;
(c) to keep available the services of its employees; and (d) to
preserve its relationships with licensors, suppliers, dealers,
customers and others having business relationships with the
Business.
7.2 Forbearances by Seller. Except as specifically contemplated
by this Agreement, Seller shall not, and shall cause each of its
Subsidiaries not to, from the date hereof until the Closing,
without the written consent of Buyer:
(a) sell, dispose of, transfer or encumber any of the Purchased
Assets except in the ordinary course of business;
(b) make any significant acquisition of assets with respect to
the Business other than in the ordinary course of business or as
contemplated by this Agreement;
35
(c) amend, modify or cancel any contract, agreement or
commitment included in the Purchased 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 six months or which provides for aggregate
payments in excess of $250,000 shall not be deemed to be in the
ordinary course;
(d) enter into any employment, severance, compensation or
similar agreements with any Business Employee other than in the
ordinary course of business or as may be required by law or
existing contractual arrangements;
(e) increase the compensation of, or benefits payable to,
Business Employees other than in the ordinary course of business
or as may be required by law or existing contractual
arrangements;
(f) change the assumptions underlying or the methods of
calculating any contingency or other reserve (excluding the
reserve for doubtful accounts receivable and excluding any LIFO
reserve to the extent necessary to be consistent with the Balance
Sheet) relating to the Business except in accordance with this
Agreement or as required by changes in GAAP; provided that no
such change in GAAP shall be recognized for purposes of Article
III of this Agreement;
(g) dispose of or permit to lapse any right to the possession,
use or enjoyment of any Business Intellectual Property or dispose
of or disclose to any unauthorized person any information
concerning the Business Intellectual Property;
(h) enter into or renew any collective bargaining or labor
agreement (oral and legally binding or written) with respect to
the Business;
(i) cancel or reduce any insurance coverage relating to the
Purchased Assets, unless such coverage is replaced; or
(j) agree, so as to legally bind Buyer whether in writing or
otherwise, to take any of the actions set forth in this Section
7.2 and not otherwise permitted by this Agreement.
7.3 Mail Received after Closing. Following the Closing, Buyer
may receive and open all mail addressed to any Sellers and may
deal with the contents thereof in its reasonable discretion to
the extent that such mail and the contents thereof relate to the
Business. Buyer shall deliver or cause to be delivered to the
Selling Entities, promptly after receipt by Buyer, all mail,
including, without limitation, payments of accounts or claims
receivable, addressed to any Selling Entity which does not relate
to the Business.
7.4 Expenses.
(a) Except as otherwise provided in this Agreement, all costs
and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
36
(b) All sales, use, transfer taxes and other non-income taxes
and any fees (including deed recordation fees and filing fees, if
any) incurred in connection with this Agreement and the
transactions contemplated hereby (the "Transfer Fees") will be
borne by Buyer. At Seller's direction, Buyer will file all
necessary tax returns and other documents required to be filed
with respect to all such Transfer Fees. Seller will cooperate
with Buyer to the extent reasonably necessary to enable Buyer to
make such filings and join in the execution of any tax returns or
other documents as may be required in order for Buyer to comply
with the provisions of this Section.
7.5 Confidentiality and Public Announcements. Each party shall
keep this Agreement and its terms confidential, and shall make no
press release or public disclosure, either written or oral,
regarding the transactions contemplated by this Agreement without
the prior knowledge and consent of the other party hereto;
provided that the foregoing shall not prohibit any disclosure (i)
by press release, filing or otherwise that is required by federal
securities laws or the rules of the New York Stock Exchange, (ii)
to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the
transactions contemplated by this Agreement and (iii) by Buyer in
connection with obtaining financing for the transactions
contemplated by this Agreement and conducting an examination of
the operations and assets of the Seller. If the transactions
contemplated hereby are not consummated for any reason
whatsoever, the parties hereto agree not to disclose or use any
confidential information they may have concerning the affairs of
the other party, except for information that is required by law
to be disclosed. If the transactions contemplated hereby are
consummated, the Selling Entities agree not to disclose or use
any confidential information they have pertaining to the
Purchased Assets, except for information that is required by law
to be disclosed. Confidential information includes, but is not
limited to: financial records, surveys, reports, plans,
proposals, financial information, environmental data, information
relating to personnel, contracts, pricing information, customer
lists, stock ownership, liabilities and litigation; provided that
should the transactions contemplated hereby not be consummated,
nothing contained in this Section 7.5 shall be construed to
prohibit the parties hereto from operating businesses in
competition with each other.
7.6 Efforts to Consummate. Subject to the terms and conditions
of this Agreement, each of the parties hereto shall use its
reasonable best efforts to take, or to cause to be taken, all
action and to do, or to cause to be done, all things necessary,
proper or advisable to consummate, as promptly as practicable,
the transactions contemplated hereby, including, but not limited
to, the satisfaction of the conditions listed in Article X or
Article XI that are within the control of such party and the
obtaining of all consents, waivers, authorizations, orders and
approvals of third parties, whether private or governmental,
required of it by this Agreement; provided however, that neither
Buyer nor any of its subsidiaries shall be required to (A) divest
or hold separate, or accept any condition or limitation upon, any
material portion of the Paperboard Mill or the Business, or (B)
divest or hold separate, or accept any condition or limitation
upon, any portion of their respective businesses, products lines
or assets material in relation to the size and operation of the
Paperboard Mill. Each party shall cooperate fully with the other
party hereto in assisting such party to comply with this Section
7.6.
37
7.7 Further Assurances.
(a) At the request of Buyer, Seller will, at or after the
Closing, promptly execute and deliver, or cause to be so executed
and delivered, such documents and take such further action as
Buyer may deem reasonably necessary or desirable to facilitate or
better evidence the consummation of the transactions contemplated
hereby.
(b) At the request of Seller, Buyer will, at or after the
Closing, promptly execute and deliver, or cause to be so executed
and delivered, such documents and take such further action as
Seller may deem reasonably necessary or desirable to facilitate
or better evidence the consummation of the transactions
contemplated hereby.
(c) Prior to, and for a period of 12 months after, the Closing
Date, the Selling Entities agree to reasonably cooperate with
Buyer's efforts to obtain any consents or Permits from any Person
or Authority necessary in connection with the transfer of the
Business or the Purchased Assets as contemplated hereby.
7.8 Use of Seller Name. As soon as practicable after the
Closing, but in any event no later than six months following such
date, Buyer (a) shall remove all names, logos or marks which
include the words "Inland Eastex" or "Inland Paperboard and
Packaging, Inc." ("Seller Corporate Designations") (which shall
at all times remain the property of the Seller) from, or render
the same illegible on, all Purchased Assets on which such Seller
Corporate Designations are imprinted or legible or (b) shall
discontinue use of any asset described in clause (a) bearing
Seller Corporate Designations, provided that Buyer shall have
absolutely no right to use the names "Temple-Inland" or "Temple-
Inland Forest Products Corporation" or use of Seller's "T-Wheel
Logo" and (c) Buyer shall change the names of the Purchased
Subsidiaries. Notwithstanding the foregoing, Buyer shall be
permitted to use the Seller Corporate Designations for no more
than six months following the Closing with respect to Purchased
Assets on which a Seller Corporate Designation is imprinted or
affixed at the Closing and in the conduct of the Business solely
to the extent of such use immediately prior to the Closing.
7.9 No Solicitation of Employees.
(a) Except in accordance with Section 8.1 hereof, for a period
of one year after the Closing, neither party nor any
representative of such party shall, in any manner, directly or
indirectly, (i) solicit any employee of the other party or any
Affiliate of the other party to terminate his or her employment
with such party or its Affiliate, or (ii) otherwise recruit or
encourage any such employee to become, or hire any such employee
as, an employee of, or a consultant to, the party bound hereby.
(b) Notwithstanding clause (a) of this Section 7.9, no party
hereto shall be restricted from soliciting for employment or
hiring any employee of any other party hereto who has left the
employment of such other party other than as a result of the
breach of this Section 7.9 by any party hereto.
38
7.10 Antitrust Filings.
(a) Seller and Buyer shall each (i) take promptly all actions
necessary to make the filings required of it or any of its
Affiliates under the applicable Antitrust Laws, including the
payment by Buyer of the filing fee required by the HSR Act, (ii)
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 (iii) 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.
Subject to Section 14.1, 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.
(b) Notwithstanding anything to the contrary herein, neither
Buyer nor any of its subsidiaries shall be required to (A) divest
or hold separate, or accept any condition or limitation upon, any
material portion of the Paperboard Mill or the Business, or (B)
divest or hold separate, or accept any condition or limitation
upon, any portion of their respective businesses, products lines
or assets material in relation to the size and operation of the
Paperboard Mill.
(c) 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 governmental or regulatory authority regarding any of
the transactions contemplated hereby. Seller shall not 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 Buyer.
7.11 Title Matters.
(a) Seller and Buyer will, as soon as practicable after the
execution and delivery of this Agreement, cause to be issued one
or more title commitments (whether one or more, the "Title
Commitment") for policies of owner's title insurance with respect
to the Real Property (the "Real Property Title Commitment") and
current surveys prepared by a duly licensed surveyor in
accordance with Category 1A of the Texas Society of Professional
Surveyors specifications (as currently in effect) in each case in
form and substance reasonably satisfactory to Buyer ("Texas
surveys"). Seller and Buyer shall each bear 50% of the cost of
the Title Commitment and Texas surveys. Buyer shall procure and
pay premiums for such title insurance as it requires. At Buyer's
request, the Closing may be postponed until the date that is 15
days after the date of the delivery to Buyer of the Real Property
Title Commitment together with copies of all recorded documents
listed as title exceptions in the Real Property Title Commitment
or Texas surveys (collectively, the "Real Property Title
Package"). Within 10 days of the date of the delivery to Buyer
of the Real Property Title Package, Buyer shall notify Seller of
any title matter reflected in the Real Property Title Commitment
or Texas surveys that constitutes a breach of the representation
39
set forth in Section 5.10 (without giving effect to the
materiality qualification contained in the first clause of
Article V) (any such title matter being a "Title Defect").
(b) Within ten days of receiving notice from Buyer of any Title
Defect, Seller shall notify Buyer, with respect to each such
Title Defect, whether Seller has elected to cure such matter to
the reasonable satisfaction of Buyer or otherwise cause the same
to be deleted from, or insured over in, the Title Commitment, or
if Seller has elected to take no action; provided Seller shall be
required to remove any Encumbrance (which is not a Permitted
Exception) securing a monetary obligation which can be removed by
the payment of money the amount of which is ascertainable from
the face of the document or which has been determined in writing
from the holder of such obligation; provided further that if such
Encumbrance relates to a mechanic's or materialman's lien that is
being contested in good faith by Seller, Seller may agree to
indemnify Buyer for any and all Losses actually incurred due to
such Encumbrance in lieu of removing such Encumbrance. If Buyer
does not deliver written notice of its objections to any Title
Defect within the time specified above for such notice, Buyer
shall be deemed to have waived all rights it may have against
Seller (including the right to refuse to consummate the
transactions called for in this Agreement or the right otherwise
to claim breach of the representation set forth in Section 5.10)
with respect to such Title Defect and each such defect shall then
constitute a "Permitted Exception." If Seller fails to respond,
within the time set forth above, to any objection to Title
Defects timely delivered by Buyer as set forth above, Seller
shall be deemed to have elected to cure the Title Defects at
issue. If Seller elects to take no action with respect to one or
more Title Defects that in the aggregate would constitute a
Business Material Adverse Effect, Buyer may terminate this
Agreement within 10 days of notice of such election.
7.12 Access to Assets and Business Employees.
(a) From the date hereof until Closing or the earlier
termination or expiration of this Agreement, Sellers shall
provide Buyer, and Buyer's counsel, accountants, and
representatives with reasonable opportunities to further
investigate the Purchased Assets and interview Business Employees
during normal business hours upon prior notice from Buyer, for
reasonable purposes, including to conduct Phase I environmental
assessments and such Phase II environmental assessments as may be
necessary or desirable based on the results of the Phase I
environmental assessments, provided that no such investigations
or interviews shall unreasonably (in relation to the nature of
the investigations) interfere with the operation of the Business
or Seller's other businesses. Before starting any Phase II
environmental assessment, Buyer will present to Seller a proposed
plan for conducting the Phase II environmental assessment and
will not start the Phase II environmental assessment until Seller
grants its consent, which shall not be unreasonably withheld.
(b) From the date hereof until Closing or the earlier
termination or expiration of this Agreement, Sellers shall
deliver to Buyer, (i) as soon as available and in any event
within five Business Days after each fiscal month-end after the
date hereof, the profit and loss statement and cash flows of the
Business for the period from the beginning of the then current
fiscal year to the end of such month prepared in a manner
consistent with past practice, and (ii) monthly updates setting
forth a comparison of actual expenditures to budgeted
40
expenditures with respect to each item in the CapX Plan. Prior
to the Closing Date, Seller shall also provide Buyer with its
plan of operations for the Business for year 2000.
(c) Following the Closing Date, the Selling Entities shall make
available to Buyer, and Buyer's counsel, accountants, and
representatives copies of such files and records as are retained
on the Closing Date and relate to the Business or the Purchased
Assets during normal business hours upon prior notice as Buyer
may reasonably request.
(d) Following the Closing Date, if any party hereto requires
information or access to the employees, books and records of
another party hereto in order prepare tax returns or another
filing or report to be made for any period after the Closing
Date, including, without limitation, amended tax returns, claims
for refunds, audits or other proceedings, such possessing party
shall furnish the information and access as practicable and to
the extent reasonably required.
(e) Upon the request of Buyer, Seller (and Temple-Inland Parent)
will cooperate and use reasonable efforts (i) to prepare or cause
its independent accountants to prepare, and cause such
accountants to audit and report on, financial statements related
to the Business, the Purchased Assets and the Assumed
Liabilities, (ii) to execute and deliver, and cause its officers
to execute and deliver, such "representation" letters as are
customarily delivered in connection with audits, reasonably
acceptable to Seller and as Seller's independent accountants may
reasonably request under the circumstances and (iii) cause its
independent accountants to consent to the use of such financial
statements in any registration, proxy or information statement or
other document filed by Buyer or any of its Affiliates under the
Securities Act of 1933, as amended. Buyer will promptly
reimburse Seller (and Temple-Inland Parent) for all reasonable
costs and expenses (including without limitation internal costs
and expenses) incurred in connection with such cooperation,
consent and efforts.
7.13 IRB Obligations. Effective as of the Closing, Buyer shall
procure substitute letters of credit and shall fully cooperate
with Seller to cause itself to be substituted in all respects for
Temple-Inland Parent on any letter of credit or guarantees,
related to any IRB, listed on Schedule 7.13.
7.14 Consents and Approvals.
(a) Anything to the contrary herein notwithstanding, this
Agreement shall not constitute an agreement to assign any asset
or any claim or right or any benefit arising under such asset or
resulting from such asset if any attempted assignment thereof,
without the consent of a third-party thereto, would constitute a
breach or other contravention thereof or in any way adversely
affect the rights of Buyer or Seller or its transferring
Subsidiary under such Purchased Asset. Except for any consents,
waivers, authorizations or approvals the failure of which to
obtain would not be material, Seller shall use its reasonable
best efforts to obtain all necessary consents, waivers,
authorizations and approvals of all Authorities and of all other
Persons reasonably required in connection with the execution,
delivery and performance by it of this Agreement (each a
"Consent" and, collectively the "Consents"), including but not
limited to, consents to assign the contracts, agreements and
commitments included in the Purchased Assets.
41
(b) If any Consent is not obtained, or if an attempted
assignment thereof would be ineffective or would adversely affect
the rights of Seller or a transferring Subsidiary so that the
Buyer would not in fact receive all such rights or Seller or the
transferring Subsidiary would forfeit or otherwise substantially
lose the benefit of rights which Seller or its Subsidiary are
entitled to retain, Seller shall provide an arrangement
reasonably acceptable to Buyer under which the Buyer would obtain
the benefits and assume the obligations thereunder in accordance
with this Agreement, including subcontracting, sublicensing, or
subleasing to the Buyer or under which Seller or its transferring
Subsidiary would enforce (at Buyer's expense) for the benefit of
Buyer with Buyer assuming the obligations of Seller or its
transferring Subsidiary, as the case may be, and all rights
against a third-party thereto. Seller or its transferring
Subsidiary will promptly pay to Buyer when received all monies
received under any such Purchased Asset or any claim or right or
any benefit arising thereunder. Buyer shall use its reasonable
efforts to obtain the unconditional release of Seller or its
transferring Subsidiary, as the case may be, from any obligation
or liability under or with respect to any contract being assigned
hereunder; provided that, neither Buyer nor Seller shall be
required to make payment or agree to any material undertaking in
connection therewith.
7.15 Year 2000 Compliance Program. Sellers shall continue to
implement through the Closing Date, in accordance with the CapX
Plan, its existing program with respect to Year 2000 compliance
in connection with the Business, with such adjustments and
additional expenditures as may be necessary to prevent the
representation in Section 5.21 from becoming untrue.
7.16 Transitional Services. For a period of up to six months
following the Closing: Sellers shall provide, or cause to be
provided, information systems services on an as needed basis in
connection with the Business or the Purchased Assets, including
billing, receivables collection, payroll, and process control
services, and Buyer shall have access to and the right to use
certain office space, equipment, information systems, software,
databases and related fixed assets to the extent used in
connection with the Business prior to the Closing as set forth in
Schedule 7.16, to facilitate the orderly separation and transfer
of the Business, Purchased Assets and Transferred Employees with
minimal business disruption; provided, that Seller shall not be
required to act in contravention or violation of any order,
consent, judgment, decree or other binding determination of law
enjoining or restricting Seller from providing such services or
use. Buyer shall reimburse Seller on a monthly basis for any and
all costs and expenses, including internal costs and expenses
consistent with the historical rates reflected in the Income
Statements, incurred by Seller in providing such services to
Buyer.
7.17 Capital Expenditures.
(a) From the date hereof until the Closing Date, Seller shall
expend the funds described in the capital expenditures plan
previously provided to Buyer and set forth on Annex A (the "CapX
Plan") for the purposes and in accordance with the timetable
reflected therein.
(b) From the date hereof until the Closing Date, Seller shall
perform all work and pay any related costs and expenses necessary
to pursue completion of the Phase I Cluster Remediation in
accordance with the spending plan set forth in Annex B. From and
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after the Closing Date, Buyer shall assume performance of work
and payment of any related costs and expenses, for the Phase I
Cluster Remediation, and shall continue such performance and
payments in accordance with the spending plan set forth in Annex
B and until such time as substantial compliance with the
objectives of the Phase I Cluster Remediation has been verified
by third party testing (such payments in the aggregate, the
"Westvaco Cluster Remediation Costs"); provided, however, that
Westvaco Cluster Remediation Costs shall not include expenditures
authorized by Seller or Buyer after the Closing outside of the
scope of work set forth in the Phase I Cluster Remediation.
Buyer shall diligently pursue such completion of the Phase I
Cluster Remediation. If the Westvaco Cluster Remediation Costs
are less than $15,000,000, Buyer shall promptly pay to (or as
directed by) Seller, the amount of the difference. If the
Westvaco Cluster Remediation Costs are more than $15,000,000,
Seller shall promptly pay to (or as directed by) Buyer, the
amount of the difference. Any such payment pursuant to this
Section 7.17(b) shall be made at a mutually convenient time and
place within five Business Days after finalization of the
Westvaco Cluster Remediation Costs. Any payments pursuant to
this Section 7.17(b) shall be made by causing such payments to be
credited in immediately available funds to such bank account or
accounts as may be designated by the receiving party in writing
not less than two Business Days prior to transfer.
7.18 Temple-Inland Canal.
(a) At the Closing, (i) Sellers shall grant and convey to Buyer
and its Affiliates and their respective successors and assigns
access rights across the real property of Sellers, including any
structures, improvements, bridges, roads, streets, appurtenances
and access ways thereof, and the benefit of all rights-of-way,
easements, encroachments, and other real property interests
belonging to Sellers across the real property of third parties,
as are necessary to provide Buyer with substantially the same
rights of access to the Temple-Inland Canal as currently
exercised by Seller; and (ii) Seller will retain from its
conveyance of the Temple-Inland Canal Fee Lands access rights
across the Temple-Inland Canal, including any structures,
improvements, bridges, roads, streets, appurtenances and access
ways thereof, as are necessary to provide Sellers with rights of
access to Sellers' real property adjacent to the Temple-Inland
Canal for purposes of timber management, harvesting, fire
protection and other timberlands operations.
(b) The access rights described in Section 7.17(a) to be granted
by Sellers to Buyer at the Closing will be subject to Buyer's
agreement that Buyer will not damage or remove timber from the
real property of Seller, will repair any damage to roads or other
property on the real property of Seller, will not interfere with
Seller's use of its real property, and will defend and indemnify
Seller for property damage or personal injuries occurring on
Seller's real property as a result of the actions of Buyer. The
access rights described in Section 7.17(a) to be retained by
Sellers at the Closing will be subject to Seller's agreement that
Seller will not damage or remove timber from the real property
transferred to Buyer, will repair any damage to roads or other
property on the real property transferred to Buyer, will not
interfere with Buyer's use of the real property transferred to
it, and will defend and indemnify Buyer for property damage or
personal injuries occurring on the real property transferred to
Buyer as a result of the actions of Seller.
(c) If upon the advice of counsel, Buyer determines to restrict
public access to Temple-Inland Canal, Sellers shall grant and
convey to Buyer and its Affiliates such access rights across the
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real property of Sellers, including any structures, improvements,
bridges, roads, streets, appurtenances and access ways thereof,
and the benefit of such rights-of-way, easements, encroachments,
and other real property interests belonging to Sellers across the
real property of third parties, as are necessary to permit Buyer
to erect reasonable barriers to public access to the Temple-
Inland Canal, subject to the same limitations and indemnity
provisions set forth in the first sentence of subsection 7.18
(b).
(d) For a period of four years following the Closing Date,
Seller and Temple-Inland Parent will cooperate with and assist
Buyer in connection with any government evaluation of a project
involving construction of a dam on the lower Neches River. In
the event a dam is approved for construction at a site (i)
downstream from the discharge point of the Temple-Inland Canal
into the Neches River, or (ii) upstream from such discharge point
within sufficient proximity to adversely impact the Temple-Inland
Canal's lagoon, Seller agrees to share equally the costs and
expenses incurred by Buyer resulting from such location of the
dam provided that Seller's share of such costs and expenses shall
in no event exceed TWO-MILLION DOLLARS ($2,000,000) in the
aggregate, such payments to be made within 10 days after receipt
of a written demand accompanied by reasonable substantiation.
7.19 Bulk Sales Waiver. The Selling Entities and Buyer hereby
waive compliance with the provisions of any applicable bulk
transfer laws. The Selling Entities further agree to indemnify
and hold Buyer harmless from all claims made by Sellers'
creditors and all Liabilities and expenses (including reasonable
attorneys' fees and disbursements, including those related to the
enforcement of this indemnity) with respect to non-compliance
with any bulk transfer law.
7.20 Product Liability Claims. Subject to the limitations
contained in this Section 7.20, effective upon the Closing,
product liability claims under $100,000 for products manufactured
by Seller shall be paid by Buyer. Buyer shall have the sole
right to defend, negotiate or settle all such product liability
claims including undertaking appeals and reviews. Product
liability claims of $100,000 or more for products manufactured by
Seller shall be paid 100% by Seller. Seller shall have the sole
right to defend, negotiate or settle all such product liability
claims including undertaking appeals and reviews.
7.21 Other. As soon as practicable, but in any event prior to
the Closing, the income statements attached hereto as Schedule
5.8(b) as of the date hereof will be replaced by one Income
Statement, prepared by Seller and agreed to by Buyer (which
agreement will not be unreasonably withheld) that reflects the
combined results of operation of the Business to be transferred
to the Buyer, rather than the results of operation of the
subsidiaries named in those income statements that are attached
hereto as Schedule 5.8(b) as of the date hereof (which income
statements reflect the operational impact of certain assets that
will be Excluded Assets and certain liabilities that will be
Excluded Liabilities).
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ARTICLE VIII
BUSINESS EMPLOYEE AND EMPLOYEE BENEFIT
MATTERS
8.1 Employment of Seller's Employees. (a) Immediately prior to
the Closing Date, Buyer shall offer employment effective as of
the Closing Date to all employees of Sellers who are, on the
Closing Date, employed principally in the Business ("Business
Employees") other than Inactive Employees and the Business
Employees that Buyer, in its discretion causes to be set forth in
Schedule 8.1 at any time prior to the Closing Date; provided,
however, that any Inactive Employee may be offered employment by
Buyer in its discretion upon such Inactive Employee's
availability to return to active service; and provided, further,
that Buyer shall offer employment to any Inactive Employee who
has, on the Closing Date, a legal right to return to work at the
conclusion of his or her leave under applicable workers'
compensation laws, the Family Medical Leave Act or the Americans
with Disabilities Act, if such Inactive Employee in fact
exercises such right to return to work and is able and willing to
do so. Each offer of employment to a Business Employee shall be
at such base salary or commission rate and on such other terms
and conditions as Buyer may determine in its reasonable
discretion. All Business Employees who accept offers of
employment with Buyer shall hereafter be referred to as
"Transferred Employees," and the "Hire Date" for a Transferred
Employee means (i) in the case of an Inactive Employee, the date
he or she actually returns to active service with Buyer, and (ii)
in the case of all other Transferred Employees, the Closing Date.
"Inactive Employees" shall mean all Business Employees who are,
on the Closing Date, temporarily absent from active employment by
reason of disability, illness, injury, or workers' compensation
and who are receiving or eligible to receive disability or
workers' compensation payments as a result of such disability,
illness or injury, and employees on non-compensated leave of
absences, such as pursuant to the terms of the Family Medical
Leave Act.
8.2 Certain Compensation Liabilities. Effective as of the
applicable Hire Date, Buyer shall assume the liability of Sellers
in respect of the Transferred Employees for accrued and unpaid
salaries, wages and vacation and sick pay, but only to the extent
such liability is reflected on the Closing Working Capital.
Sellers shall remain responsible for payment of any and all
retention, change in control or other similar compensation or
benefits which are or may become payable to Business Employees in
connection with the consummation of the transactions contemplated
by this Agreement. Sellers shall remain responsible for, and
shall pay, all bonuses, incentive compensation and commissions
that are earned by Transferred Employees under Employee Plans
(collectively, the "Bonuses"); provided, that if any Transferred
Employee would forfeit his or her right to receive any Bonus by
reason of the termination of his or her employment with Sellers
in connection with the consummation of the transactions
contemplated hereby, such Transferred Employee shall be entitled
to receive from Sellers not less than a percentage of such Bonus
determined by dividing (i) the number of days in the year or
other period to which such Bonus relates that precede the Closing
Date by (ii) the total number of days in such year or other
period.
8.3 Severance Costs. Seller shall remain solely responsible for
any and all Liabilities relating to or arising out of the
following: (i) any pay, benefits, damages or other Claims to, by
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or on behalf of Business Employees who are not Transferred
Employees, including without limitation involving compensation or
benefits or otherwise arising out of employment or the
termination of employment, and whether incurred before, on or
after the Closing Date, and including without limitation pursuant
to the individual agreements listed in Section 5.16(a) of the
Disclosure Schedule (ii) any benefits, damages or other Claims
to, by or on behalf of any Transferred Employee, including
without limitation involving compensation or benefits or
otherwise arising out of employment or the termination of
employment, incurred before or on the applicable Hire Date,
except as specifically provided otherwise elsewhere in this
Article VIII; and (iii) any severance pay and severance benefits
payable to any Transferred Employee or Business Employee listed
on Schedule 8.1 under the circumstances set forth in Schedule 8.3
(the "Retained Severance"); provided, that with respect to
Transferred Employees, Buyer shall pay the Retained Severance as
and when it becomes due, and Seller shall reimburse Buyer
therefor promptly upon receiving invoices from Buyer. Seller's
liabilities under this Section 8.3 shall not include any
Liability for any suits, actions or claims against Buyer based on
violations of any constitutional right, age discrimination or any
other form of hiring or employment discrimination, under every
applicable federal, state or local law, rule or regulation,
including any and all state antidiscrimination laws, the Age
Discrimination in Employment Act of 1967, as amended, Title VII
of the Civil Rights Act of 1964, as amended, the Civil Rights Act
of 1991, and the Americans With Disabilities Act.
8.4 Welfare Benefits. Seller shall be responsible for claims
for workers compensation and welfare benefits (as described in
Section 3(1) of ERISA (whether or not covered by ERISA, but
excluding severance pay) ("Welfare Benefits") that are incurred
on or prior to 8:00 a.m. local time on the applicable Hire Date
by Transferred Employees, including without limitation pursuant
to continuation of health coverage required pursuant to Section
4980B of the Code or Part 6 of Subtitle B of Title I of ERISA
("COBRA Coverage") with respect to any Transferred Employees and
their beneficiaries and dependents. Buyer shall be solely
responsible for claims for workers compensation benefits and
Welfare Benefits for Transferred Employees for claims incurred
after 8:00 a.m. local time on the applicable Hire Date, including
without limitation pursuant to COBRA Coverage with respect to
Transferred Employees and their beneficiaries and dependents.
For purposes of the foregoing, a medical/dental claim shall be
considered incurred when the medical services are rendered or
medical supplies are provided, and not when the condition arose.
A disability or workers compensation claim shall be considered
incurred on or prior to the applicable Hire Date if the injury or
condition giving rise to the claim occurs on or prior to the
applicable Hire Date, but only if such claim is actually filed on
or before the first anniversary of the applicable Hire Date.
8.5 Pension and Savings Benefits.
(a) Seller shall cause all accrued benefits of Transferred
Employees under all Employee Plans that are "pension plans"
within the meaning of Section 3(3) of ERISA (whether or not such
Employee Plans are subject to ERISA) to be vested in full
immediately before the applicable Hire Date.
46
(b) To the extent that a Transferred Employee who participates
in Temple-Inland Employee Thrift Plan and the Temple-Inland
Savings Plan for Union Employees (the "Seller Savings Plans") is
permitted, immediately after the Closing, to participate in a tax-
qualified defined contribution plan of Buyer or any of its
Affiliates (such plan(s), the "Buyer Savings Plans"), Seller
shall cause the applicable Seller Savings Plan to offer
distributions of all such account balances as soon as practicable
after the Closing. The Buyer Savings Plans shall accept direct
or indirect rollovers of any such distributions from the Seller
Savings Plans, and Seller and Buyer shall cooperate to ensure
that direct rollovers in kind of participant loans are permitted.
8.6 Benefits Generally. For purposes of eligibility to
participate and vesting of benefits under the employee benefit
plans of Buyer and its Affiliates providing benefits after a
Transferred Employee's Hire Date, such Transferred Employee shall
be credited with his or her years of service with Seller and its
Affiliates before such Hire Date, to the same extent as such
Transferred Employee was entitled, before such Hire Date, to
vesting credit for such service under any similar Employee Plans.
In addition, and without limiting the generality of the
foregoing: (i) each Transferred Employee shall be immediately
eligible to participate, without any waiting time, in any and all
employee benefit plans sponsored by Buyer and its Affiliates for
the benefit of Transferred Employees (such plans, collectively,
the "New Plans") to the extent coverage under such New Plan
replaces coverage under a comparable Employee Plan in which such
Transferred Employee participated immediately before such Hire
Date (such plans, collectively, the "Old Plans"); and (ii) for
purposes of each New Plan providing medical, dental,
pharmaceutical and/or vision benefits to any Transferred
Employee, Buyer shall cause all pre-existing condition exclusions
and actively-at-work requirements of such New Plan to be waived
for such Transferred Employee and his or her covered dependents,
and Buyer shall cause any eligible expenses incurred by such
Transferred Employee and his or her covered dependents during the
portion of the plan year of the Old Plan ending on the date such
Transferred Employee's participation in the corresponding New
Plan begins to be taken into account under such New Plan for
purposes of satisfying all deductible, coinsurance and maximum
out-of-pocket requirements applicable to such employee and his or
her covered dependents for the applicable plan year as if such
amounts had been paid in accordance with such New Plan.
8.7 Plant Closing Laws. Seller shall be responsible for
providing any notice required, pursuant to the United States
Federal Worker Adjustment and Retraining Act of 1988, as amended
("WARN Act"), any successor United States federal law, and any
applicable plant closing notification law with respect to a
layoff or plant closing relating to the Business that occurs
before or as a result of the Closing. Buyer shall cooperate with
Seller, to the extent practicable, to enable Seller to comply
with the foregoing in advance of the Closing to the extent made
necessary by the actions contemplated by Section 8.1 hereof.
Buyer shall be responsible for providing any notice required
pursuant to the Plant Closing Laws with respect to a layoff or
plant closing affecting Transferred Employees that occurs after
the Closing.
8.8 Miscellaneous. Seller and Buyer agree to furnish each other
with such information concerning Business Employees and the
Employee Plans, and to take all such other reasonable action, as
is necessary and appropriate to effect the transactions
contemplated by this Article VIII, in each case, to the extent
permitted under applicable law.
47
8.9 Employee Records. Buyer shall be responsible for, and
indemnify Seller against any Losses arising out of, claims made
by Transferred Employees arising as a result of, and to the
extent such claims relate to, the transfer from Sellers to Buyer
of records described in Section 2.1(n).
ARTICLE IX
TAX MATTERS
9.1 Tax Sharing and Allocation Agreements. As of the
Closing Date, any Tax sharing or allocation agreement between
Temple-Inland Parent, Seller and any of their Subsidiaries on the
one hand and the Purchased Subsidiaries on the other hand is
terminated with respect to the Purchased Subsidiaries and will
have no further effect with respect to the Purchased Subsidiaries
for any taxable year (whether the current year, a future year, or
a past year).
9.2 Survival of Certain Representations. All of the
representations and warranties of the Sellers contained in
Section 5.24 shall survive the Closing hereunder and continue in
full force and effect until 30 days after the expiration of any
applicable statutes of limitations.
9.3 Returns for Periods Through the Closing Date. Temple-Inland
Parent will include the income of the Purchased Subsidiaries
(including any deferred income triggered into income by Section
1.1502-13 and Section 1.1502-14 of the Treasury Regulations and
any excess loss accounts taken into income under Section
1.1502-19 of the Treasury Regulations) on the Temple-Inland
Parent consolidated federal income Tax Returns and on any other
consolidated, unitary and combined Tax Returns consistent with
past practice for all periods through the Closing Date and will
pay any Taxes attributable to such income. The Purchased
Subsidiaries will furnish Tax information to Temple-Inland Parent
for inclusion in Temple-Inland Parent's Tax Returns for the
period which includes the Closing Date in accordance with the
Purchased Subsidiaries' past custom and practice. Temple-Inland
Parent will allow the Buyer an opportunity to review and comment
upon such Tax Returns (including any amended returns) to the
extent that they relate to a Purchased Subsidiary and a
jurisdiction in which no Section 338(h)(10) Election pursuant to
this Agreement was made or recognized. Temple-Inland Parent will
take no position on such Tax Returns that relates to the
Purchased Subsidiaries that would adversely affect Purchased
Subsidiaries after the Closing Date. The income of Purchased
Subsidiaries will be apportioned to the period up to and
including the Closing Date and the period after the Closing Date
in accordance with Section 9.12.
9.4 Audits. Temple-Inland Parent will allow Purchased
Subsidiaries and its counsel to participate at its own expense in
any audits of Temple-Inland Parent consolidated federal income
Tax Returns and any other consolidated, unitary and combined Tax
Returns to the extent that such Tax Returns relate to the
Purchased Subsidiaries and adversely affect Purchased
Subsidiaries after the Closing Date. Temple-Inland Parent will
not settle any such audit in a manner which would adversely
affect the Purchased Subsidiaries after the Closing Date without
the prior written consent of the Buyer, which consent shall not
unreasonably be withheld.
48
9.5 Carrybacks and Refunds. (a) As soon as reasonably
practicable, Temple-Inland Parent will pay to the Buyer any Tax
refund (or reduction in Tax liability) resulting from a carryback
of a post-acquisition Tax attribute of any of the Purchased
Subsidiaries into a consolidated, combined or unitary group that
includes a Temple-Inland Party, when such refund is received or
reduction is actually realized by a Temple-Inland Party. A
carryback of post-acquisition Tax attributes of a Purchased
Subsidiary is considered to produce a refund (or a reduction of a
Tax liability) only after all Tax attributes of Temple-Inland
Parent and its Subsidiaries have been used or deemed used.
Temple-Inland Parent will cooperate with the Purchased
Subsidiaries and its Subsidiaries in obtaining such refunds (or
reduction in Tax liability), including through the filing of
amended Tax Returns or refund claims. Buyer agrees to indemnify
Temple-Inland Parent for any Taxes resulting from the
disallowance of such post-acquisition Tax attribute on audit or
otherwise.
(b) Except as provided in (a) hereof and except for any
refunds (or credits) that result from a carryback of post-
acquisition Tax attributes of a Purchased Subsidiary, any Tax
refunds that are received by Buyer or the Purchased Subsidiaries
(and an amount equal to any actual reduction in the Tax liability
of a Purchased Subsidiary in a Pre-Closing Period that results
from the use of a credit) that relate to a Pre-Closing Period of
a Purchased Subsidiary shall be for the account of Seller, and
Buyer shall pay over to Seller any such refund or the amount of
any such credit within fifteen days after receipt thereof and
shall pay to Seller the actual reduction in Tax liability that
resulted from the use of the credit within fifteen days after the
date on which the benefit of the credit is actually realized. In
determining whether a credit with respect to a Pre-Closing Period
results in an actual reduction of the Tax liability of Purchased
Subsidiary for a Pre-Closing, and whether a refund or credit is
the result of a carryback of a post-acquisition Tax attribute of
a Purchased Subsidiary, all Tax attributes of Buyer and its
Subsidiaries shall be treated as being used or deemed used first.
In addition, to the extent that a claim for refund or a
proceeding results in a payment or credit against a Tax by a
Taxing Authority to the Buyer or the Purchased Subsidiaries of
any amount reflected in the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the Final
Closing Working Capital, the Buyer shall pay such amount to
Seller within fifteen days after receipt thereof and to the
extent such payment or credit was shown on the Final Working
Capital as an asset, it shall be retained by the Buyer.
9.6 Section 338(h)(10) Election. Temple-Inland Parent will join
with the Buyer in making an election under Section 338(h)(10) of
the Code (and any corresponding elections under state or local
tax law) (each, a "Section 338(h)(10) Election") with respect to
the purchase and sale of the stock of each of the Purchased
Subsidiaries hereunder. Temple-Inland Parent will pay any and
all Taxes attributable to the making of the Section 338(h)(10)
Election and will indemnify each Westvaco Party and the Purchased
Subsidiaries against any Adverse Consequences arising out of any
failure to pay such Taxes. Temple-Inland Parent will also pay
any state or local Tax (and indemnify each Westvaco Party and
Purchased Subsidiaries against any Adverse Consequences arising
out of any failure to pay such Tax) attributable to an election
under state or local law similar to the election available under
Section 338(g) of the Code (or which results from the making of
an election under Section 338(g) of the Code) with respect to the
purchase and sale of the stock of one or both of the Purchased
Subsidiaries hereunder. Each of Temple-Inland Parent and Buyer
49
will, and will cause their respective Subsidiaries and Affiliates
to, treat each Section 338(h)(10) Election as valid, not take any
action inconsistent with such treatment and file all Tax Returns
in a manner consistent with the Section 338(h)(10) Election. As
requested from time to time (whether before, at or after the
Closing), Temple-Inland Parent and Buyer shall assist one another
in, and shall provide (or cause to be provided) to one another
such information as is reasonably requested in connection with,
the preparation of any form or document required to effect a
valid and timely Section 338(h)(10) Election, including any
schedules or attachments thereto (collectively, "Section 338
Forms").
9.7 Allocation of Purchase Price for Purchased Subsidiaries
Assets. Sellers and Buyer agree that the portion of the Purchase
Price allocated to the stock of Purchased Subsidiaries pursuant
to Section 2.7 shall be further allocated in the manner described
in this Section. With respect to the Section 338(h)(10) Election
(or similar state or local election) Buyer and Seller shall agree
on the MADSP and (ii) the allocation of MADSP among the assets of
each of the Purchased Subsidiaries for which a Section 338(h)(10)
is being made (collectively, the "Election Allocations"). The
Election Allocations shall be reasonable and shall be determined
in accordance with Section 338 of the Code and the applicable
Treasury regulations thereunder. At least 120 days prior to the
latest date for the filing of each Section 338 Form, Seller shall
prepare and submit to Buyer a draft of such Section 338 Form
setting forth the Election Allocations. Neither Buyer nor Seller
shall file, or permit to be filed, any Section 338 Form unless it
shall have obtained the consent of the other, which consent shall
not be unreasonably withheld or delayed. On or prior to the
thirtieth day after Buyer's receipt of a draft Section 338 Form,
Buyer shall either (i) consent to the filing of the Section 338
Form or (ii) notify Seller that it disagrees with the Election
Allocations as set forth on the draft Section 338 Form or other
matters contained in the draft Section 338 Form. If Buyer and
Seller have been unable to resolve their differences within 30
days after Buyer has been notified of Seller's disagreement with
the Election Allocations or other matters as set forth on the
draft Section 338 Form, then any remaining disputed issues shall
be submitted to a mutually agreed upon independent national
accounting firm to resolve in a final binding manner after
hearing the views of both Parties. The fees and expenses of the
mutually agreed upon independent national accounting firm shall
be shared equally between Buyer and Seller. Except as may be
required by law, Seller, Temple-Inland Parent and Buyer will (i)
file, or cause to be filed, all Tax Returns in a manner
consistent with the Election Allocations and (ii) not take any
action inconsistent therewith.
9.8 Tax Periods Ending on or Before the Closing Date. Buyer
shall prepare or cause to be prepared and file or cause to be
filed all Tax Returns for the Purchased Subsidiaries for all
taxable periods ending on or prior to the Closing Date which are
filed after the Closing Date other than income Tax Returns with
respect to taxable periods for which a consolidated, unitary or
combined income Tax Return of Temple-Inland Parent (or any of its
Subsidiaries other than the Purchased Subsidiaries) will include
the operations of the Purchased Subsidiaries pursuant to Section
9.3. Buyer shall permit Seller to review and comment on each
such Tax Return described in the preceding sentence prior to
filing. Seller shall pay to Buyer (or cause to be paid to Buyer)
an amount equal to the total of all Taxes of the Purchased
Subsidiaries shown to be due on such Tax Returns no later than
the due date for payment of such Taxes to the extent such Taxes
are not reflected in the reserve for Tax liability (rather than
any reserve for deferred Taxes established to reflect timing
50
differences between book and Tax income) shown on the Final
Closing Working Capital.
9.9 Tax Periods Beginning Before and Ending after the Closing
Date. Buyer shall prepare or cause to be prepared and file or
cause to be filed any Tax Returns of the Purchased Subsidiaries
for a taxable period which begin on or before the Closing Date
and ends after the Closing Date (such a taxable period, a
"Straddle Period"). Buyer shall permit Seller to review and
comment on each such Tax Return described in the preceding
sentence prior to filing. Seller shall pay (or cause to be paid)
to Buyer an amount equal to the portion of such Taxes which are
allocated to the portion of such Taxable period ending on the
Closing Date no later than the due date for payment of such Taxes
to the extent such Taxes are not reflected in the reserve for Tax
liability (rather than any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) shown
on the Final Closing Working Capital.
9.10 Cooperation on Tax Matters.
(i) Buyer, Purchased Subsidiaries, Temple-Inland Parent and
Sellers shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of
Tax Returns pursuant to this Article and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other party's request) the
provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and
making employees available on a mutually convenient basis to
provide additional information and explanation of any material
provided hereunder. Purchased Subsidiaries, Temple-Inland Parent
and Sellers agree (A) to retain all books and records with
respect to Tax matters pertinent to the Purchased Subsidiaries
relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the
extent notified by Buyer or Sellers, any extensions thereof) of
the respective taxable periods, and to abide by all record
retention agreements entered into with any Taxing Authority, and
(B) to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and records
and, if the other party so requests, the Purchased Subsidiaries,
Temple-Inland Parent or Sellers, as the case may be, shall allow
the other party to take possession of such books and records.
(ii) Buyer, Temple-Inland Parent and Sellers further agree, upon
request, to use their best efforts to obtain any certificate or
other document from any Authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be
imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
(iii) Buyer, Temple-Inland Parent and Sellers further agree,
upon request, to provide the other party with all information
that either party may be required to report pursuant to Section
6043 of the Code and all Treasury Department Regulations
promulgated thereunder.
9.11 Tax Indemnification.
(a) From and after the Closing Date, Sellers shall pay or cause
to be paid, and jointly and severally shall indemnify each Buyer
Tax Indemnitee and protect, save and hold each Buyer Tax
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Indemnitee harmless from and against any Adverse Consequences
resulting from, arising out of, relating to, in the nature of, or
caused by:
(i) any Tax imposed upon or relating to any Temple-Inland Party
for any period (whether before or after the Closing Date),
including any such Tax for which a Westvaco Party or a Purchased
Subsidiary may be liable (w) under Section 1.1502-6 of the
Treasury regulations (or any similar provision of state, local or
foreign law), (x) as a transferee or successor, (y) by contract
or (z) otherwise, to the extent such Tax is not reflected in the
reserve for income Tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between
book and Tax income) shown on the Final Closing Working Capital;
(ii) any Tax (other than those Taxes described in Section
9.11(a)(i)) imposed upon or relating to any Purchased Subsidiary,
the Business or any Business Asset for (x) any Pre-Closing
Period and (y) any actions or transactions undertaken by Temple-
Inland Parent or Seller not in the ordinary course of business
occurring on the Closing Date after the Closing; and
(iii) any Tax (other than the Taxes described in Section
9.11(a)(i) and (a)(ii)) resulting from a breach of any
representation contained in Section 5.24 provided that Buyer
makes a written claim for indemnification against any of the
Sellers pursuant to Section 15.1 within the survival period
contained in Section 9.2.
(b) From and after the Closing Date, Buyer shall pay or cause to
be paid, and jointly and severally shall indemnify each Seller
Tax Indemnitee and protect, save and hold each Seller Tax
Indemnitee harmless from and against Adverse Consequences
relating to, except as provided in Section 9.11(a), any Tax
imposed upon or relating to the Purchased Subsidiaries for any
Post-Closing Period.
(c) Buyer agrees to indemnify Sellers for any Adverse
Consequences the Sellers shall suffer resulting from any
additional Tax imposed upon Sellers resulting from any actions or
transactions undertaken by Buyer or any of the Purchased
Subsidiaries not in the ordinary course of business occurring on
the Closing Date after Buyer's purchase of the stock of the
Purchased Subsidiaries.
(d) Payment in full of any amount due from Sellers or Buyer
under this Section 9.11 shall be made by such Person to the
affected Tax Indemnitee in immediately available funds at least
two Business Days before the date payment of the Taxes to which
such payment relates is due, or, if no Tax is payable, within
fifteen days after written demand is made for such payment.
9.12 Allocation of Certain Taxes.
(a) If a Purchased Subsidiary is permitted but not required
under applicable state, local or foreign income tax laws to treat
the Closing Date as the last day of a taxable period, then the
parties shall cause such Purchased Subsidiary to treat that day
as the last day of a taxable period.
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(b) In the case of Taxes arising in a taxable period of a
Purchased Subsidiary that includes but does not end on the
Closing Date, except as provided in Section 9.12(c), the
allocation of such Taxes between the Pre-Closing Period and the
Post-Closing Period shall be made on the basis of an interim
closing of the books as of the end of the Closing Date. For the
avoidance of doubt, for purposes of this Article IX, any Tax on
gain or income resulting from the triggering into income of
deferred intercompany transactions under Section 1.1502-13 of the
Treasury regulations or excess loss accounts under Section 1.1502-
19 of the Treasury regulations is attributable to the Pre-Closing
Period. Any credits relating to a Taxable period that begins
before and ends after the Closing Date shall be taken into
account as though the relevant Taxable period ended on the
Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with
prior practice of the Purchased Subsidiary. Buyer assumes all
property Taxes resulting from the change in use or ownership of
the Temple-Inland Canal Fee Lands after the Closing Date or on
the Closing Date after the Closing.
(c) In the case of (i) franchise Taxes based on capitalization,
debt or shares of stock authorized, issued or outstanding and
(ii) ad valorem Taxes, in either case attributable to any taxable
period that includes but does not end on the Closing Date, the
portion of such Taxes attributable to the Pre-Closing Period
shall be the amount of such Taxes for the entire taxable period,
multiplied by a fraction the numerator of which is the number of
calendar days in such taxable period ending on and including the
Closing Date and the denominator of which is the entire number of
calendar days in such taxable period, and the balance of such
Taxes shall be attributable to the Post-Closing Period; provided,
however, that if any property, asset or other right of Purchased
Subsidiaries is sold or otherwise transferred prior to the
Closing Date, then ad valorem Taxes pertaining to such property,
asset or other right shall be attributed entirely to the Pre-
Closing Period.
9.13 Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including
penalties and interest) incurred in connection with this
Agreement shall be paid by Buyer when due, and Buyer will, at its
own expense, file all necessary Tax Returns and other
documentation with respect to such transfer, documentary, sales,
use, stamp, registration and other such Taxes and fees, and, if
required by applicable law, Seller will, and will cause its
Affiliates to, join in the execution of such Tax Returns and
other documentation.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions
contemplated by this Agreement shall be subject, to the extent
not waived, to the satisfaction of each of the following
conditions before or at the Closing:
10.1 Representations and Warranties. The representations and
warranties of Seller and the Subs contained in this Agreement
shall be true and correct without giving effect to any
materiality qualification contained therein or applicable
thereto, except as would not in the aggregate have a Business
53
Material Adverse Effect, in each case at and as of the date of
this Agreement and as of the Closing, provided that
representations and warranties made as of a specified date need
be so true and correct (as described above) only as of the
specified date.
10.2 Performance of this Agreement. Seller and the Subs shall
have performed, or caused to be performed, in all material
respects all obligations and complied in all material respects
with all conditions required by this Agreement to be performed or
complied with by Seller or the Subs prior to the Closing, to the
extent not waived.
10.3 Proceedings. All corporate and other proceedings to be
taken by Sellers in connection with the transactions contemplated
hereby shall have been completed, all such proceedings and all
documents incident thereto shall be reasonably satisfactory in
substance and form to Buyer and Buyer shall have received all
such counterpart originals or certified or other copies of such
documents as Buyer may reasonably request.
10.4 Consents and Approvals. All Consents shall have been
obtained by Sellers and all waiting periods specified by law with
respect thereto shall have passed, other than any such consents,
authorizations, orders or approvals for which, collectively, the
failure to so obtain would not have a Business Material Adverse
Effect.
10.5 Injunction, Litigation, etc. No order of any court or
administrative agency shall be in effect which restrains or
prohibits the consummation of the transactions contemplated
hereby, nor shall there be any statute, rule, or regulation, or
pending by or before any Authority any action or proceeding,
which is likely to prohibit, restrict or successfully challenge
the validity of any of the transactions contemplated by this
Agreement.
10.6 Fiber Supply Agreement. Seller shall have executed and
delivered the Fiber Supply Agreement and the representations and
warranties of Seller contained therein shall be true and complete
in all material respects as of the Closing Date.
10.7 Officer's Certificate. Buyer shall have received a
certificate, dated the Closing Date, signed by the Chief
Executive Officer or any Vice President of Seller and each Sub,
certifying that the conditions specified in Sections 10.1 and
10.2 have been fulfilled.
10.8 Memorandum. Seller shall have executed, acknowledged, and
delivered to Buyer the Memorandum (as such term is defined in the
Fiber Supply Agreement), in form and substance satisfactory for
recordation against the Recorded Area in the land records of all
counties in which any portion of the Recorded Area is located.
ARTICLE XI
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller and the Subs to consummate the
transactions contemplated by this Agreement shall be subject, to
the extent not waived, to the satisfaction of each of the
following conditions before or at Closing:
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11.1 Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and
correct without giving effect to any materiality qualification
contained therein or applicable thereto, except as would not
prevent or materially delay consummation of any of the
transactions contemplated by this Agreement, in each case at and
as of the date of this Agreement and as of the Closing, provided
that representations and warranties made as of a specified date
need be so true and correct (as described above) only as of the
specified date.
11.2 Performance of this Agreement. Buyer shall have performed
in all material respects all obligations and complied in all
material respects with all conditions required by this Agreement
to be performed or complied with prior to the Closing, to the
extent not waived.
11.3 Proceedings. All corporate and other proceedings to be
taken by Buyer in connection with the transactions contemplated
hereby shall have been completed, all such proceedings and all
documents incident thereto shall be reasonably satisfactory in
substance and form to Seller, and Seller shall have received all
such counterpart originals or other copies of such documents as
Seller may reasonably request.
11.4 Consents and Approvals. All consents, authorizations,
orders or approvals of any Authority which Buyer is required to
obtain in order to consummate the transactions contemplated by
this Agreement shall have been obtained by Buyer and all waiting
periods specified by law with respect thereto shall have passed.
11.5 Injunction, Litigation, etc. No order of any court or
administrative agency shall be in effect which restrains or
prohibits the consummation of the transactions contemplated
hereby, nor shall there be any statute, rule, or regulation, or
pending by or before any Authority any action or proceeding,
which is likely to prohibit, restrict or successfully challenge
the validity of any of the transactions contemplated by this
Agreement.
11.6 Fiber Supply Agreement. Buyer shall have executed and
delivered the Fiber Supply Agreement.
11.7 Officer's Certificate. Seller shall have received a
certificate, dated the Closing Date, signed by the Chief
Executive Officer or any Vice President of Buyer, certifying that
the conditions specified in Sections 11.1 and 11.2 have been
fulfilled.
ARTICLE XII
DELIVERIES, ETC., IN CONNECTION WITH CLOSING
12.1 Time and Place of Closing. The closing (the "Closing")
shall occur upon the later of (x) five business days following
the satisfaction of the conditions set forth in Articles X and
XI, or (y) December 29, 1999, at the offices of Wachtell, Lipton,
Xxxxx & Xxxx, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx, or at the
request of either party, such other date and place as the parties
shall agree. If the Closing takes place, the Closing and all of
the transactions contemplated by this Agreement shall be deemed
to have occurred simultaneously and become effective as of 11:59
55
P.M. on the date of Closing. The date on which the Closing shall
occur is referred to herein as the "Closing Date." If the time
set forth in subclause (x) of this Section occurs sooner than the
time set forth in subclause (y), then Buyer shall pay to Seller
at the Closing interest on the Purchase Price for each additional
day the Closing is delayed by the inclusion of subclause (y).
The interest to be paid pursuant to this Section shall be equal
to the Prime Rate as published by The Chase Manhattan Bank. Such
interest shall be payable at the Closing and shall be calculated
daily on the basis of a year of 365 days and the actual number of
days for which interest is due.
12.2 Deliveries by Seller. At or before the Closing, Seller
shall deliver to Buyer, as applicable, the following:
(a) duly executed general warranty deeds (or their equivalent in
the state the property is located) in recordable form which
convey to Buyer title to the Real Property, subject only to
Permitted Exceptions and to the exceptions and exclusions
contained in the Title Commitment as of the Closing, other than
any Title Defect which Seller has elected to cure or otherwise
delete pursuant to Section 7.11(b). Seller will provide to
Buyer's title insurance company (i) customary good standing
certificates and corporate authorizations, (ii) owner's
affidavits acceptable to such title insurer to remove any
exception for (A) mechanics' or materialmens' 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 the 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 insure over any Title Defects existing as of
the Closing which are not Permitted Exceptions or to otherwise
allow Buyer to receive title policies at the Closing in form
reasonably acceptable to Buyer.
(b) a duly executed assignment, in recordable form, from Seller
to Buyer of the Temple-Inland Canal Easement;
(c) duly executed easements, in recordable form and in form
reasonably satisfactory to Buyer and Seller, from Seller granting
Buyer the Water Easements;
(d) a xxxx of sale and such other document or documents
(suitable for filing, registration or recording, if applicable)
as are necessary to transfer to Buyer the Purchased Assets other
than the Real Property and the Temple-Inland Canal Easement and
the Water Easements;
(e) evidence that all of the proceedings contemplated by Section
10.3 have been completed;
(f) copies of any consents obtained as contemplated by Section
10.4;
(g) certificates from the Secretary of State of the state of
Delaware evidencing the good standing of Seller and its
Subsidiaries engaged in the Business from their state of
jurisdiction as of a recent date;
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(h) FIRPTA Certificate;
(i) the Fiber Supply Agreement executed by Seller;
(j) a stock certificate or certificates evidencing the Purchased
Subsidiaries Shares of each Purchased Subsidiary duly endorsed in
blank or accompanied by stock powers duly executed in blank or
such other appropriate transfer document, assignment agreement or
deed, as applicable, all in proper form for transfer, with all
required stock or other transfer tax stamps affixed or provided
for;
(k) a good-standing certificate for each Purchased Subsidiary
from the Secretary of State or other appropriate governmental
official of the respective jurisdiction or organization of each
Purchased Subsidiary, dated as of a date not earlier than 10
Business Days prior to the Closing Date;
(l) the minute books and stock certificate and transfer books
(with all canceled and unused stock certificates attached) and
the corporate seal of each Purchased Subsidiary; and
(m) such additional documents as Buyer may reasonably request.
12.3 Deliveries by Buyer. At or before the Closing, Buyer shall
deliver to Seller, as applicable, the following:
(a) the Purchase Price;
(b) a duly executed assumption of the Assumed Liabilities;
(c) evidence that all of the proceedings contemplated by Section
11.3 have been completed;
(d) certificates from the Secretary of State of the state of
Delaware as to the good standing of Buyer (or any Affiliate of
Buyer designated pursuant to Section 2.6) in the state of
Delaware as of a recent date;
(e) the Fiber Supply Agreement duly executed by the Buyer;
(f) evidence of substitute letters of credit as required by
Section 7.13; and
(g) such additional documents as Seller may reasonably request.
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ARTICLE XIII
INDEMNIFICATION
13.1 Indemnification by Seller.
(a) Subject to the limitations contained in this Article XIII,
effective upon the Closing, Seller shall indemnify and hold Buyer
harmless against all Losses arising out of:
(i) any breach of a representation or warranty, determined
without giving effect to any materiality qualification contained
therein or applicable thereto, made by Seller or the Subs in this
Agreement;
(ii) the breach of any covenant or agreement of any Sellers
contained in this Agreement (but not the Fiber Supply Agreement,
or obligations under Article VIII hereof, which shall stand on
their own);
(iii) all claims made by Sellers' creditors and all
liabilities and expenses (including reasonable attorneys' fees
and disbursements, including those related to the enforcement of
this indemnity) in any such case with respect to non-compliance
with any bulk transfer law;
(iv) any Excluded Liabilities, or the failure of Sellers to
discharge any Excluded Liabilities; or
(v) any Liability, other than the IRB Obligations, of the
Purchased Subsidiaries that is not an Assumed Liability (or would
not be an Assumed Liability if the term "Sellers" were
substituted for "Selling Entities" in Section 2.3).
(b) Notwithstanding the foregoing, in the case of Losses
incurred as a result of the events described in Section
13.1(a)(i), Seller shall not be liable for indemnification except
to the extent that the aggregate amount of such Losses exceeds
$8,000,000 (the "Basket"), in which event Buyer shall be entitled
to indemnification as set forth above for the amount of such
Losses in excess of the Basket. In no event shall Seller's
aggregate obligation to indemnify the Buyer for Losses incurred
as a result of the events described in Section 13.1(a)(i) exceed
$312,500,000. The Basket shall not apply to Losses under Section
13.1(a)(ii), (iii), (iv) or (v) above.
13.2 Indemnification by Buyer.
(a) Subject to the limitations contained in this Article XII,
effective upon the Closing, Buyer shall indemnify and hold Seller
harmless against all Losses arising out of:
(i) any breach of a representation or warranty, determined
without giving effect to any materiality qualification contained
therein, made by Buyer in this Agreement;
58
(ii) the breach of any covenant or agreement of Buyer contained
in this Agreement (but not the Fiber Supply Agreement, or
obligations under Article VIII hereof, which shall stand on their
own);
(iii) any Assumed Liability or the failure by Buyer to
discharge any Assumed Liability; or
(iv) the IRB Obligations.
(b) Notwithstanding the foregoing, in the case of Losses
incurred as a result of the events described in Section
13.2(a)(i), Buyer shall not be liable for indemnification except
to the extent that the aggregate amount of such Losses exceeds
the Basket, in which event Seller shall be entitled to
indemnification as set forth above for the amount of such Losses
in excess of the Basket. In no event shall Buyer's aggregate
obligation to indemnify the Sellers for Losses incurred as a
result of the events described in Section 13.2(a)(i) exceed
$312,500,000. The Basket shall not apply to Losses under Section
13.2(a)(ii), (iii) or (iv) above.
13.3 Article VIII Rights and Obligations and Certain Product
Liability and Employee Claims Excluded. The rights and
obligations of Seller and Buyer under Article VIII hereof shall
not be subject to the Basket, or any other provisions of this
Article XIII, but shall apply separately in accordance with their
terms. The provisions of this Article XIII shall not apply to
employee claims of the type described in Section 8.9, which shall
be subject solely to the terms of Section 8.9. The provisions of
this Article XIII shall not apply to product liability claims
under $100,000 for products manufactured by Seller, which shall
be subject solely to the terms of Section 7.20.
13.4 Survival Date.
(a) The indemnification obligations of each party (the
"Indemnitor") obligated to provide indemnification to the other
(the "Indemnitee") under Section 13.1(a)(i) and (iii) or Section
13.2(a)(i) shall lapse and become of no further force and effect
with respect to all claims not made by Indemnitee's delivery to
the Indemnitor of written notice containing details reasonably
sufficient to disclose to Indemnitor the nature and scope of the
claim by the end of the 18th month after the Closing, except with
respect to claims for breach of the representations and
warranties contained in Section 5.6 which shall survive without
limitation as to time.
(b) The indemnification obligations under Sections 13.1(a)(ii),
(iv) and (v) and Sections 13.2(a)(ii) and (iii) shall not be
limited by time, but shall survive in accordance with the terms
of the underlying obligations or liabilities to which they
relate.
13.5 Third-Party Claims.
(a) Each of the parties must follow the procedures set forth in
the following paragraphs of this Section 13.5 in order to be
entitled to indemnification with respect to claims resulting from
the assertion of liability by persons or entities not parties to
this Agreement, including claims by any Authority for penalties,
fines and assessments.
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(b) The party seeking indemnification shall give written notice
to the party from whom indemnification is sought of any assertion
of liability by a third-party which might give rise to a claim by
the indemnified party against the indemnifying party based on the
indemnity agreements contained in this Agreement, stating the
nature and basis of the assertion and the amount thereof, to the
extent known. Such notice shall qualify as the notice required
under Section 13.4(a).
(c) In the event that any Action is brought against an
indemnified party with respect to which the indemnifying party
may have liability under an indemnity agreement contained in this
Agreement, the Action shall, upon the written agreement of the
indemnifying party that it is obligated to indemnify under such
an indemnity agreement, be defended by the indemnifying party and
such defense shall include all appeals or reviews which counsel
for the indemnifying party shall deem appropriate. In any such
Action the indemnified party shall have the right to be
represented by advisory counsel and accountants, at its own
expense, and the indemnifying party shall keep the indemnified
party fully informed as to such proceeding, at all stages
thereof, whether or not the indemnified party is represented by
its own counsel.
(d) Until the indemnifying party shall have assumed the defense
of any Action, or if the indemnified and indemnifying parties are
both named parties in such Action and the indemnified party shall
have reasonably concluded that there may be defenses available to
it that are materially different from or in addition to the
defenses available to the indemnifying party (in which case the
indemnifying party shall not be entitled to assume the defense of
such Action, but shall remain responsible for its obligation as
an indemnitor), all legal and other reasonable expenses incurred
by the indemnified party as a result of such Action shall be
borne by the indemnifying party. In such event, the indemnified
party shall make available to the indemnifying party and its
attorneys and accountants, for review and copying and in a manner
so as not to compromise privilege, its books and records relating
to such Action and the parties shall render to each other such
assistance as may reasonably be requested to facilitate the
proper and adequate defense of any such Action.
(e) The indemnifying party shall not make any settlement of any
claim without the written consent of the indemnified party, which
consent shall not be unreasonably withheld. Without limiting the
generality of the foregoing, it shall not be deemed unreasonable
to withhold consent to a settlement involving injunctive or other
equitable relief against the indemnified party or its assets,
employees, business or methods of doing business.
(f) The indemnifying party shall be relieved of its obligation
to indemnify the indemnified party to the extent that any failure
to give or delay in giving timely notice as required by this
Section 13.5 prejudices the indemnifying party.
13.6 Subrogation Rights; No Duplication.
(a) Any Indemnitor required to make a payment under this Article
XIII shall be subrogated, to the extent of such payment, to the
rights of the entity to which such payment has been made for
reimbursement or indemnification against third parties relating
to the claim on which such payment has been based.
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(b) Notwithstanding anything in this Article XIII to the
contrary, the obligations of each Indemnitor and its Affiliates
pursuant to this Article XIII shall be without duplication as
between entities to which such Indemnitor and its Affiliates are
required to make payments.
13.7 Punitive Damages; Mitigation.
(a) Neither the Buyer nor Seller shall have the right to claim
punitive or exemplary damages, or to recover more than once for
the same Loss, under this Agreement.
(b) Each party agrees to use commercially reasonable efforts to
mitigate indemnifiable Losses.
(c) The indemnification provided for in this Article XIII shall
be the sole and exclusive remedy against an indemnifying party
with respect to the matters covered by this Article XIII.
ARTICLE XIV
TERMINATION, AMENDMENT AND WAIVER
14.1 Termination. This Agreement may be terminated at any time
before the Closing:
(i) by mutual written consent of the parties hereto;
(ii) by either Seller or Buyer, if there has been a material
breach on the part of the other of a representation, warranty or
agreement contained herein, or in any writing delivered pursuant
to the provisions of this Agreement, which remains uncured for 30
days after notice of such breach is given by the non-breaching
party;
(iii) by either Seller or Buyer, if any condition specified
in Article X or IX, as the case may be, 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;
(iv) by either Seller or Buyer, 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; or
(v) by Seller or Buyer if the Closing has not occurred by March
31, 2000, provided, however, that the right to terminate this
Agreement under this Section 14.1(v) 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.
14.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 14.1, this Agreement shall become of no
further force and effect, and the transactions contemplated
61
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; 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 7.4 hereof, and to comply with the confidentiality
provisions of Section 7.5.
14.3 Amendment. This Agreement may be amended at any time but
only by a written amendment executed on behalf of Seller and
Buyer.
14.4 Extension; Waiver. At any time before the Closing, any
party to this Agreement which is entitled to the benefits thereof
may (a) extend the time for the performance of any of the
obligations of another party hereto, (b) waive any
misrepresentation (including an omission) or breach of a
representation or warranty of another party hereto, whether
contained herein or in any exhibit, schedule or document
delivered pursuant hereto, or (c) waive compliance of another
party hereto with any of the agreements or conditions contained
herein. Any such extension or waiver shall be valid only if set
forth in a written instrument signed by Seller and Buyer.
ARTICLE XV
GENERAL PROVISIONS
15.1 Notices. All notices and other communications required or
permitted hereunder shall be in writing (including telefax or
similar writing) and shall be given,
(a) if to Seller, to:
Temple-Inland Forest Products Corporation
000 Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Attn: M. Xxxxxxx Xxxxxx
Vice President and Secretary
Telecopy: (000) 000-0000
with copies to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
0000 Xxx Xxxx Xxx., XX
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx Xxxxxxxx
Telecopy: (000) 000-0000
62
(b) if to Buyer, to:
Westvaco Corporation
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx, II
Senior Vice President and General Counsel
Telecopy: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx
Telecopy: (000) 000-0000
or (c) in either case, to such other person or to such other
address or telefax number as the party to whom notice is to be
given may have furnished the other parties in writing by like
notice. If mailed, any such communication shall be deemed to
have been given on the third business day following the day on
which the communication is posted by registered or certified mail
(return receipt requested). If given by any other means it shall
be deemed to have been given when delivered to the address
specified in this Section 15.1.
15.2 Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement. Unless the context
otherwise requires, terms (including defined terms) used in the
plural include the singular, and vice versa.
15.3 Severability. Any provision hereof which is prohibited or
unenforceable in any jurisdiction shall, 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 shall not invalidate or render unenforceable such
provision in any other jurisdiction. To the extent permitted by
applicable Law, the Parties hereby waive any provision of Law
which may render any provision hereof prohibited or unenforceable
in any respect.
15.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
15.5 Miscellaneous. This Agreement (a) and the Fiber Supply
Agreement and the Parent Guarantee together constitute the entire
agreement and supersede all other prior agreements and
understandings, both written and oral, between the parties with
respect to the subject matter hereof; (b) is not intended to and
shall not confer upon any person, association or entity, other
than the parties hereto, any rights or remedies with respect to
the subject matter or any provision hereof; (c) shall not be
assigned directly or indirectly by operation of law or otherwise,
except that Buyer may assign this Agreement to a wholly-owned
subsidiary of Buyer provided that Buyer remains obligated under
the terms hereunder; and (d) shall be governed in all respects by
the laws of the state of New York without regard to any choice of
63
law or conflict of law provision that would cause the application
of any jurisdiction other than the State of New York, except to
the extent that the laws of the state of Texas may govern the
rights of the parties with respect to real estate located
therein.
15.6 Third-Party Beneficiaries. Nothing herein contained,
whether express or implied, is intended to confer any right or
remedy under or by reason of this Agreement other than to the
parties hereto and their respective successors and assigns, and
no action may be brought by a third-party claiming as a third-
party beneficiary to this Agreement or the transactions
contemplated herein.
15.7 Specific Performance. The parties hereto each acknowledge
that, in view of the uniqueness of the subject matter hereof,
each of the parties would not have an adequate remedy at law for
money damages in the event that this Agreement were not performed
in accordance with its terms, and therefore agree that each party
shall be entitled to specific enforcement of the terms hereof in
addition to any other remedy to which the parties hereto may be
entitled at law or in equity.
15.8 Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect
hereof at law shall be cumulative and not alternative, and the
exercise or beginning of the exercise of any thereof by any party
shall not preclude the simultaneous or later exercise of such
right, power or remedy by such party.
15.9 Arbitration.
(a) Except as otherwise provided herein, all controversies,
disputes or claims arising among the parties in connection with,
or with respect to, any provision of this Agreement which has not
been resolved within twenty (20) days after either Buyer, on the
one hand, or Seller, on the other hand, have notified the other
in writing of such controversy, dispute or claim, shall be
submitted for arbitration in accordance with the rules of the
American Arbitration Association or any successor thereof except
to the extent the procedures specified in this Section conflict
with, modify or add to such rules, in which case, the procedures
specified in this Section shall control. Arbitration shall take
place at an appointed time and place in Chicago, Illinois. Except
as set forth below, each party shall bear its own expenses with
respect to arbitration and the parties shall share equally the
fees and expenses of the American Arbitration Association and the
arbitrators.
(b) Buyer, on the one hand, and Seller, on the other hand, each
shall select one arbitrator (who shall not be counsel for such
party), and the two so designated shall select a third
arbitrator. If either party shall fail to designate an
arbitrator within seven days after arbitration is requested, or
if the two arbitrators shall fail to select a third arbitrator
within 14 days after arbitration is requested, then such
arbitrator shall be selected by the American Arbitration
Association or any successor thereto upon application of either
party. The arbitrators shall be bound by and strictly enforce the
terms of the Agreement and may not limit, extend, or otherwise
modify the terms of this Agreement. The arbitrators shall make a
good faith effort to apply applicable law, but an arbitration
decision and award shall not be subject to review because of
errors of law. The arbitrators shall have the sole authority to
resolve issues of the arbitrability of any dispute, including the
64
applicability or running of any statute of limitations. The
arbitrators shall have the power (i) to order reasonable pre-
hearing exchange by the parties of documents strictly limited to
those relevant to the specific disputes at issue, (ii) to order
the taking of up to three depositions per side, and (iii) to
issue subpoenas to accomplish the foregoing. The arbitrators may
likewise compel the attendance of witnesses and the production of
documents at the hearing. Judgment upon any award of the
majority of arbitrators shall be binding and shall be entered in
a court of competent jurisdiction. Subject to the provisions of
this Agreement, the award of the arbitrators may grant any relief
that a court of general jurisdiction has authority to grant,
including, without limitation, an award of damages and/or
injunctive relief, and shall assess, in addition, the cost of the
arbitration, including the reasonable fees of the arbitrator and
reasonable attorneys' fees pro rata between Seller and Buyer in
proportion to the allocation of the dollar amount of award
between Buyer and Seller such that the prevailing party pays a
lesser proportion of the fees and expenses.
(c) Nothing herein contained shall bar the right of any of the
parties to seek and obtain temporary injunctive relief from a
court of competent jurisdiction in accordance with applicable law
against threatened conduct that will cause loss or damage,
pending completion of the arbitration, and the prevailing party
therein shall be entitled to an award of its reasonable
attorneys' fees and costs.
(d) Except as otherwise provided in this Agreement, this Section
shall be interpreted, governed by and enforced in accordance with
the United States Arbitration Act, 9 U.S.C. Section 1-14.
15.10 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.
65
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be executed by their duly authorized officers.
Westvaco Corporation
By: /s/ Xxxx X. Xxxx, Xx.
Name: Xxxx X. Xxxx, Xx.
Title: Chairman, President and
Chief Executive Officer
Temple-Inland Forest Products
Corporation
By: /s/M. Xxxxxxx Xxxxxx
Name: M. Xxxxxxx Xxxxxx
Title: Vice President and
Secretary
Inland Eastex Extrusion Company
By: /s/M. Xxxxxxx Xxxxxx
Name: M. Xxxxxxx Xxxxxx
Title: Secretary
Temple-Inland Recaustisizing Company
By: /s/M. Xxxxxxx Xxxxxx
Name: M. Xxxxxxx Xxxxxx
Title: Secretary
Temple-Inland Recovery Company
By: /s/M. Xxxxxxx Xxxxxx
Name: M. Xxxxxxx Xxxxxx
Title: Secretary
x00
Xxxxxx-Xxxxxx Stores Company
By: /s/M. Xxxxxxx Xxxxxx
Name: M. Xxxxxxx Xxxxxx
Title: Secretary
