JOINT VENTURE AGREEMENT
AMONG
GEORGIA-PACIFIC CORPORATION,
CHESAPEAKE CORPORATION,
WISCONSIN TISSUE MILLS INC., AND
GEORGIA-PACIFIC TISSUE, LLC
DATED AS OF OCTOBER 4, 1999
TABLE OF CONTENTS
ARTICLE I ORGANIZATION OF THE COMPANY.......................................1
1.1 FORMATION OF THE COMPANY.............................................1
ARTICLE II CONTRIBUTION OF THE BUSINESSES...................................2
2.1 CONTRIBUTION OF ASSETS; ASSUMPTION OF LIABILITIES....................2
2.2 RETAINED G-P ASSETS AND LIABILITIES..................................3
2.3 RETAINED WISCO ASSETS AND LIABILITIES................................3
2.4 CLOSING OF TRANSACTION...............................................3
2.5 POST-CLOSING ADJUSTMENT..............................................6
2.6 TRANSFER TAXES AND RECORDING FEES....................................9
2.7 REQUIRED CONSENTS....................................................9
2.8 OWNERSHIP OF THE COMPANY; SPECIAL DISTRIBUTION......................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF CSK PARTIES..................10
3.1 ORGANIZATION AND QUALIFICATION......................................11
3.2 CORPORATE AUTHORIZATION.............................................11
3.3 CONSENTS AND APPROVALS..............................................11
3.4 NON-CONTRAVENTION...................................................11
3.5 BINDING EFFECT......................................................12
3.6 FINANCIAL STATEMENTS: ABSENCE OF CERTAIN CHANGES....................12
3.7 LITIGATION AND CLAIMS...............................................13
3.8 TAXES...............................................................13
3.9 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS..........................14
3.10 COMPLIANCE WITH LAWS...............................................17
3.11 ENVIRONMENTAL MATTERS..............................................17
3.12 INTELLECTUAL PROPERTY..............................................18
3.13 LABOR MATTERS......................................................19
3.14 CONTRACTS..........................................................20
3.15 REAL ESTATE LEASES.................................................21
3.16 ENTIRE BUSINESS; TITLE TO PROPERTY.................................21
3.17 FINDER'S FEES......................................................22
3.18 INSURANCE..........................................................22
3.19 NO UNDISCLOSED LIABILITIES.........................................22
3.20 NO MATERIAL ADVERSE CHANGE.........................................23
3.21 INDEBTEDNESS FOR BORROWED MONEY....................................24
3.22 KNOWLEDGE AS OF CLOSING DATE.......................................24
3.23 NO OTHER REPRESENTATIONS OR WARRANTIES.............................24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF G-P...........................25
4.1 ORGANIZATION AND QUALIFICATION......................................25
4.2 CORPORATE AUTHORIZATION.............................................25
4.3 CONSENTS AND APPROVALS..............................................25
4.4 NON-CONTRAVENTION...................................................25
4.5 BINDING EFFECT......................................................26
4.6 FINANCIAL STATEMENTS: ABSENCE OF CERTAIN CHANGES....................26
4.7 LITIGATION AND CLAIMS...............................................27
4.8 TAXES...............................................................27
4.9 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS..........................28
4.10 COMPLIANCE WITH LAWS...............................................30
4.11 ENVIRONMENTAL MATTERS..............................................30
4.12 INTELLECTUAL PROPERTY..............................................31
4.13 LABOR MATTERS......................................................31
4.14 CONTRACTS..........................................................32
4.15 REAL ESTATE LEASES.................................................33
4.16 ENTIRE BUSINESS; TITLE TO PROPERTY.................................33
4.17 FINDER'S FEES......................................................33
4.18 INSURANCE..........................................................33
4.19 NO UNDISCLOSED LIABILITIES.........................................34
4.20 NO MATERIAL ADVERSE CHANGE.........................................34
4.21 INDEBTEDNESS FOR BORROWED MONEY....................................36
4.22 KNOWLEDGE AS OF CLOSING DATE.......................................36
4.23 ORGANIZATION OF COMPANY............................................36
4.24 AUTHORIZATION OF COMPANY...........................................36
4.25 ACTIVITIES OF COMPANY..............................................36
4.26 NO OTHER REPRESENTATIONS OR WARRANTIES.............................36
ARTICLE V COVENANTS........................................................36
5.1 COVENANTS REGARDING EMPLOYEES.......................................36
5.2 COMPLIANCE WITH WARN AND SIMILAR LAWS...............................37
5.3 FURTHER ASSURANCES..................................................37
5.4 USE OF G-P INTELLECTUAL PROPERTY AND CSK MARKS......................37
5.5 CERTAIN MATTERS RELATED TO RETAINED AND ASSUMED LIABILITIES.........37
5.6 INTERCOMPANY AGREEMENTS.............................................37
5.7 RECORDS AND RETENTION AND ACCESS....................................38
5.8 INSURANCE...........................................................38
5.9 SPECIAL CSK RETAINED LIABILITY......................................39
5.10 PREPARATION OF REGISTRATION STATEMENT..............................39
5.11 USE OF WISCO NAME..................................................39
5.12 PRORATION OF CERTAIN CHARGES.......................................39
ARTICLE VI CONDITIONS TO CLOSING...........................................40
[Intentionally Deleted].................................................40
ARTICLE VII SURVIVAL; INDEMNIFICATION......................................40
7.1 SURVIVAL............................................................40
7.2 INDEMNIFICATION BY G-P..............................................40
7.3 INDEMNIFICATION BY CSK..............................................41
7.4 INDEMNIFICATION BY THE COMPANY......................................42
7.5 INDEMNIFICATION PROCEDURES..........................................42
7.6 ACKNOWLEDGMENT REGARDING ENVIRONMENTAL LIABILITIES..................44
7.7 CHARACTERIZATION OF INDEMNIFICATION PAYMENTS........................44
ARTICLE VIII TAX COVENANTS.................................................45
8.1 LIABILITY FOR TAXES.................................................45
8.2 PREPARATION OF TAX RETURNS..........................................46
8.3 AMENDED TAX RETURNS.................................................48
8.4 CARRY BACKS AND CARRY FORWARDS......................................48
8.5 ADDITIONAL TAX MATTERS..............................................49
8.6 TAX CONTROVERSIES; COOPERATION......................................50
ARTICLE IX TERMINATION.....................................................51
[Intentionally Deleted].................................................51
ARTICLE X MISCELLANEOUS....................................................51
10.1 NOTICES............................................................51
10.2 AMENDMENT; WAIVER..................................................52
10.3 ASSIGNMENT.........................................................52
10.4 ENTIRE AGREEMENT...................................................52
10.5 FULFILLMENT OF OBLIGATIONS.........................................52
10.6 PARTIES IN INTEREST................................................52
10.7 PUBLIC DISCLOSURE..................................................53
10.8 EXPENSES...........................................................53
10.9 SCHEDULES..........................................................53
10.10 BULK TRANSFER LAWS................................................53
10.11 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM.....53
10.12 COUNTERPARTS......................................................53
10.13 HEADINGS..........................................................53
10.14 SEVERABILITY......................................................54
10.15 INJUNCTIVE RELIEF.................................................54
ARTICLE XI DEFINITIONS AND TERMS...........................................54
11.1 SPECIFIC DEFINITIONS...............................................54
11.2 OTHER TERMS........................................................70
11.3 OTHER DEFINITIONAL PROVISIONS......................................70
JOINT VENTURE AGREEMENT
This JOINT VENTURE AGREEMENT (the "Agreement") dated as of October 4,
1999, among Chesapeake Corporation, a Virginia corporation ("CSK"), Wisconsin
Tissue Mills Inc., a Delaware corporation and a wholly owned subsidiary of CSK
("WISCO"), Georgia-Pacific Corporation, a Georgia corporation ("G-P"), and
Georgia-Pacific Tissue, LLC, a Delaware limited liability company (the
"Company").
PRELIMINARY STATEMENTS
WHEREAS, G-P is engaged, in part, in the business of producing,
selling, licensing and manufacturing tissue products for the "away from home"
markets and certain related products (the "Commercial Tissue Business");
WHEREAS, G-P has determined that it will contribute certain assets and
liabilities of its Commercial Tissue Business to the Company;
WHEREAS, WISCO is engaged in the Commercial Tissue Business through
WISCO and its Contributed Subsidiaries (the "WISCO Business"); and
WHEREAS, G-P and CSK have determined that it is in the best interests
of their respective shareholders to engage in the Commercial Tissue Business
through a joint venture.
NOW, THEREFORE, G-P, the CSK Parties and the Company agree as follows:
ARTICLE I
ORGANIZATION OF THE COMPANY
1.1 FORMATION OF THE COMPANY. G-P has caused each of the following to
occur:
(a) ORGANIZATION OF THE COMPANY. The Company is organized as a
limited liability company under the laws of the State of
Delaware.
(b) ORGANIZATIONAL DOCUMENTS. The Company's Certificate of
Formation was filed with the Secretary of State of Delaware, a
copy of which is set forth as Exhibit 1.1A hereto.
ARTICLE II
CONTRIBUTION OF THE BUSINESSES
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2.1 CONTRIBUTION OF ASSETS; ASSUMPTION OF LIABILITIES. On the terms and
subject to the conditions set forth herein and in the Ancillary
Agreements, at the Closing the parties shall take the following
actions, which shall be deemed to take place simultaneously with the
execution of this Agreement as part of the Closing:
(a) WISCO CONTRIBUTION; ASSUMPTION OF LIABILITIES. (i) WISCO shall
contribute, convey, transfer, assign and deliver to the
Company, and the Company shall accept and acquire from WISCO,
all right, title and interest of the CSK Parties in and to the
WISCO Contributed Assets, free and clear of all Encumbrances
(other than Permitted Encumbrances); and (ii) WISCO shall
assign to the Company and the Company shall assume and agree
to pay, honor, discharge and perform the WISCO Assumed
Liabilities. The parties agree that the WISCO Assumed
Liabilities are intended to be, and the parties shall treat
them as, "qualified liabilities" under Section 1.707-5(a)(6)
of the Treasury Regulations unless different treatment is
required under applicable law.
(b) BORROWING BY THE COMPANY; SPECIAL DISTRIBUTION. The Company
will incur the Company Debt in such amounts and on such terms
as set forth on Exhibit 2.8A and will use the net proceeds of
the Company Debt solely (after deducting borrowing expenses
consisting of legal fees, accounting fees, printing fees,
filing fees and underwriting fees, not to exceed $8 million,
including refinancings and replacements thereof) to fund the
Special Distribution to WISCO in the amount of $755,200,000
which shall be declared and paid to WISCO immediately after
the contribution of the WISCO Contributed Assets in accordance
with Section 2.8 hereof. The parties agree that Company Debt
(other than amounts borrowed and used to pay expenses incurred
in connection with the related borrowing expenses) is
allocable to, and shall be allocated to, WISCO under Sections
1.752-2 and 1.707-5(b) of the Treasury Regulations.
(c) G-P CONTRIBUTION; ASSUMPTION OF LIABILITIES. (i) G-P shall
contribute, convey, transfer, assign and deliver to the
Company, and the Company shall accept and acquire from G-P,
all right, title and interest of G-P in and to the G-P
Contributed Assets, free and clear of all Encumbrances (other
than Permitted Encumbrances); and (ii) G-P shall assign to the
Company and the Company shall assume and agree to pay, honor,
discharge and perform the G-P Assumed Liabilities. The parties
agree that the G-P Assumed Liabilities are intended to be, and
the parties shall treat them as, "qualified liabilities" under
Section 1.707-5(a)(6) of the Treasury Regulations unless
different treatment is required under applicable law.
(d) ISSUANCE OF UNITS. The Company will issue to WISCO and G-P the
number of Units, evidencing their respective equity interests
in the Company, in accordance with Section 2.8(b) hereof.
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(e) OPERATING AGREEMENT. G-P and WISCO shall enter into an
Operating Agreement, substantially in the form of Exhibit 2.1E
hereto, the terms of which shall govern the management and
operations of the Company.
2.2 RETAINED G-P ASSETS AND LIABILITIES. Notwithstanding anything herein to
the contrary, (i) from and after the Closing each of G-P and its
Affiliates shall retain all of its direct or indirect right, title and
interest in and to, and there shall be excluded from the sale,
conveyance, assignment or transfer to the Company hereunder, the G-P
Retained Assets and the G-P Retained Liabilities, and (ii) the G-P
Retained Liabilities shall not be assumed by the Company hereunder.
2.3 RETAINED WISCO ASSETS AND LIABILITIES. Notwithstanding anything herein
to the contrary, (i) from and after the Closing each of the CSK Parties
and their Affiliates shall retain all of its direct or indirect right,
title and interest in and to, and there shall be excluded from the
sale, conveyance, assignment or transfer to the Company hereunder, the
WISCO Retained Assets and the WISCO Retained Liabilities, and (ii) the
WISCO Retained Liabilities shall not be assumed by the Company
hereunder.
2.4 CLOSING OF TRANSACTION. The Closing of the transactions contemplated by
this Agreement shall take place at the offices of G-P at 10:00 a.m.
(Atlanta time), on October 4, 1999, or at such other time and place as
the parties hereto may mutually agree. The date on which the Closing
occurs is called the "Closing Date." The Closing shall be deemed
effective at 12:01 a.m. (Atlanta time), on October 3, 1999 (the
"Effective Time"). To effect the steps set forth in Section 2.1 hereof,
the parties shall execute and deliver to each other and to third
parties, as appropriate, all documents reasonably necessary to effect
the Closing. Without limiting the generality of the foregoing,
(a) CSK PARTIES' DELIVERIES. The appropriate CSK Parties shall
execute and deliver:
(i) to the Company, limited warranty deeds, in form and
substance reasonably acceptable to G-P, transferring
all WISCO Owned Real Property to the Company;
(ii) to the Company, assignments, or where necessary
subleases, in form and substance reasonably
acceptable to G-P, assigning or subleasing to the
Company all WISCO Real Property Leases;
(iii) to the Company, assignments, in form and substance
reasonably acceptable to G-P, assigning to the
Company all WISCO Intellectual Property;
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(iv) to the Company, bills of sale, certificates of title,
assignments, and all other instruments of transfer,
in form and substance reasonably acceptable to G-P,
transferring to the Company all WISCO Contributed
Assets other than the WISCO Real Property or the
WISCO Intellectual Property which are being
transferred to the Company pursuant to the conveyance
documents described in clauses (i) - (iii) above;
(v) to the Company, such instruments of assumption and
other instruments or documents, in form and substance
reasonably acceptable to G-P, as may be necessary to
effect assignment of the WISCO Assumed Liabilities to
the Company;
(vi) to the Company or G-P, as appropriate, a duly
executed copy of each of the Ancillary Agreements to
which any CSK Party is a party;
(vii) to G-P and the Company, the opinion of Hunton & Williams, counsel to the CSK Parties, substantially
in the form of Exhibit 2.4A(vii) hereto;
(viii) to the Company, evidence reasonably satisfactory to
G-P that all Encumbrances other than Permitted
Encumbrances on any of the WISCO Contributed Assets
have been released;
(ix) to the Company, stock certificates or other evidence
of ownership of each of the Contributed Subsidiaries,
in each case duly endorsed for transfer to the
Company;
(x) to G-P and the Company from WISCO, a duly executed
Operating Agreement;
(xi) to G-P, the WISCO Debt Indemnity;
(xii) to G-P, current title reports for all WISCO owned
Real Property;
(xiii) to G-P, evidence that all officers (other than
officers of WMex) and directors of the WISCO
Contributed Subsidiaries have resigned, effective as
of the Closing, except as G-P shall otherwise
request; and
(xiv) to G-P and/or the Company, as appropriate, such other
instruments or documents, in form and substance
reasonably acceptable to G-P, as may be necessary to
effect the Closing and the contribution of the WISCO
Contributed Assets in accordance with this Agreement.
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(b) G-P DELIVERIES. G-P shall execute and deliver:
(i) to the Company, limited warranty deeds, in
form and substance reasonably acceptable to
WISCO, transferring all G-P Owned Real
Property to the Company;
(ii) to the Company, assignments, or where
necessary subleases, in form and substance
reasonably acceptable to WISCO, assigning or
subleasing to the Company all G-P Real
Property Leases;
(iii) to the Company, a royalty free license,
substantially in the form set forth in
Schedule 5.4, licensing to the Company the
G-P Intellectual Property;
(iv) to the Company, bills of sale, certificates
of title, assignments, and all other
instruments of transfer, in form and
substance reasonably acceptable to WISCO,
transferring to the Company all G-P
Contributed Assets other than the G-P Real
Property or the G-P Intellectual Property
which are being transferred or licensed to
the Company pursuant to the conveyance
documents described in clauses (i) - (iii)
above;
(v) to the Company, such instruments of
assumption and other instruments or
documents, in form and substance reasonably
acceptable to WISCO, as may be necessary to
effect assignment of the G-P Assumed
Liabilities to the Company;
(vi) to the Company or WISCO, as appropriate, a
duly executed copy of each of the Ancillary
Agreements, including the G-P Guarantee, to
which G-P is a party;
(vii) to the Company, WISCO and CSK, a copy of the
opinion of the General Counsel of G-P,
substantially in the form of Exhibit
2.4B(vii) hereto;
(viii) to the Company, evidence reasonably
satisfactory to WISCO that all Encumbrances
other than Permitted Encumbrances on any of
the G-P Contributed Assets have been
released;
(ix) to WISCO and the Company, a duly executed
Operating Agreement;
(x) to WISCO, current title reports for all G-P
owned Real Property; and
(xi) to WISCO and/or the Company, as appropriate,
such other
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instruments or documents, in form and
substance reasonably acceptable to WISCO, as
may be necessary to effect the Closing and
the contribution of the G-P Contributed
Assets in accordance with this Agreement.
(c) DELIVERIES BY THE COMPANY. The Company shall execute
and deliver:
(i) to the CSK Parties and G-P, such instruments
of assumption and other instruments or
documents, in form and substance reasonably
acceptable to WISCO and G-P, as may be
necessary to effect the Company's assumption
of the Assumed Liabilities;
(ii) to G-P or the CSK Parties, as appropriate, a
duly executed copy of each of the Ancillary
Agreements to which the Company is a party;
(iii) to G-P, certificates representing the number
of Units issuable to G-P as determined in
accordance with Section 2.8 hereof;
(iv) to WISCO, certificates representing the
number of Units issuable to WISCO as
determined in accordance with Section 2.8
hereof;
(v) to WISCO, the Special Distribution; and
(vi) to G-P and WISCO, as appropriate, such other
instruments or documents, in form and
substance reasonably acceptable to WISCO and
G-P, as may be necessary to effect the
Closing.
2.5 POST-CLOSING ADJUSTMENT
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(a) Within 90 days following the Closing, the Company shall
prepare, or cause to be prepared, and deliver to G-P and WISCO
a statement (the "Closing Working Capital Statement") which
shall set forth the Working Capital of each of the G-P
Business and the WISCO Business as of the Determination Date
(the "Closing Working Capital"). The amounts so computed shall
be used to determine the final amount of the Working Capital
of each of the Businesses (the "Post-Closing Adjustment"). The
Closing Working Capital Statement shall be prepared in
accordance with GAAP using the same principles, practices and
procedures that were used in preparing the WISCO Financial
Statements and the G-P Financial Statements.
(b) G-P, WISCO and their respective accountants and the Company's
accountants shall have 30 days after the delivery of the
Closing Working Capital Statement to review the Closing
Working Capital Statement. In the event that G-P or WISCO
determines that the Closing Working Capital for either party,
as derived from the Closing Working Capital Statement, has not
been determined on the basis set forth in Section 2.5(a), G-P
or WISCO shall inform the other in writing (the "Objection"),
setting forth a specific description of the basis of the
Objection and the adjustments to the Closing Working Capital
which either G-P or WISCO believes should be made, which
Objection must be delivered to the other party on or before
the last day of such 30-day period. The party receiving an
Objection shall then have 30 days to review and respond to the
Objection. The parties shall attempt in good faith to reach an
agreement with respect to any matters in dispute. If the
parties are unable to resolve all of their disagreements with
respect to the determination of the foregoing items within 45
days following the delivery of an Objection, they shall refer
their remaining differences to Ernst & Young LLP or such other
firm mutually agreed to by the parties (the "CPA Firm"), who
shall, acting as experts and not as arbitrators, determine in
accordance with this Agreement, and only with respect to the
remaining differences so submitted, whether and to what
extent, if any, the Closing Working Capital as derived from
the Closing Working Capital Statement requires adjustment. The
parties shall direct the CPA Firm to use its best efforts to
render its determination within 30 days after such submission.
The CPA Firm's determination shall be conclusive and binding
upon G-P, WISCO and the Company. The fees and disbursements of
the CPA Firm shall be paid one-half by G-P and one-half by
WISCO. G-P, the Company and WISCO shall make readily available
to the CPA Firm all relevant Books and Records and any work
papers (including those of the parties' respective
accountants) Relating to the Closing Working Capital Statement
and all other items reasonably requested by the CPA Firm. The
"Final Working Capital Statement" shall be deemed to be (i)
the Closing Working Capital Statement in the event that no
Objection is delivered by G-P or WISCO during the 30-day
period specified above, or (ii) if an objection is
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delivered by G-P or WISCO, the Closing Working Capital
Statement, as adjusted by either (A) the agreement of the
parties or (B) the CPA Firm.
(c) G-P and WISCO shall have the opportunity to participate in the
preparation of the Closing Working Capital Statement by (i)
observing the physical inventory taken in connection therewith
(which may begin prior to the Closing Date), (ii) attending
any audit planning meetings in connection therewith, (iii)
meeting with and discussing procedures with the Company and
its accountants, and (iv) otherwise having full access to all
information used by the Company in preparing the Closing
Working Capital Statement, including the Books and Records and
the work papers of its accountants (subject to execution of
any necessary waivers or indemnifications required by the
Company's accountants).
(d) In reviewing any Objection, G-P and WISCO and their respective
accountants shall have full access to all information used by
the other party in preparing such Objection, including the
work papers of the other party's and the Company's accountants
(subject to the reviewing party executing any necessary
waivers or indemnifications required by the objecting party's
accountants).
(e) If the Closing Working Capital of either Business as reflected
on the Final Working Capital Statement is less than
$32,515,000 with respect to the G-P Business or $73,218,000
with respect to the WISCO Business (the "Target Working
Capital"), then within 10 Business Days following issuance of
the Final Working Capital Statement, any party whose Closing
Working Capital is below its Target Working Capital shall (as
an additional contribution to the Company) make a payment in
immediately available funds to the Company equal to the
difference between such Business' Target Working Capital, plus
interest at the prime rate (as set forth in the "Money Rates"
section of The Wall Street Journal) on such amount from the
Closing Date through the date of payment. If the Closing
Working Capital of either Business as reflected on the Final
Working Capital Statement is greater than the Target Working
Capital of such Business, then within 10 Business Days
following issuance of the Final Working Capital Statement, the
Company shall refund such excess by (i) making a payment to
any party whose Closing Working Capital exceeded its Target
Working Capital, in immediately available funds, equal to such
excess to the extent of the sum of the amount of cash
theretofor contributed to the Company by such party plus the
amount of accounts receivable contributed by such party to and
collected by the Company, and (ii) if the excess is greater
than the amount described in (i), the remainder of the excess
shall be refunded by the Company's reassignment to such party
of accounts receivable (theretofor contributed by such party)
in an aggregate amount equal to such remainder. In addition,
the Company shall pay such party interest at the prime rate
(as
8
set forth in the "Money Rates" section of The Wall Street
Journal) on such excess from the Closing Date through the date
of payment.
(f) In preparing the Closing Working Capital Statement, (i)
liabilities of the Company Related to this transaction shall
not be treated as liabilities, and (ii) no liabilities or
reserves shall be established for matters for which G-P, CSK
or the Company is (or but for the Cap or the Deductible would
be) entitled to indemnification hereunder.
(g) Any payments made to or from the Company pursuant to Section
2.5(e) shall not result in any change in the value of either
party's Business as set forth in Section 2.8 hereof or either
party's Capital Account or Percentage Interest (as both terms
are defined in the Operating Agreement).
2.6 TRANSFER TAXES AND RECORDING FEES. Each party shall be responsible for
any and all Taxes or fees imposed or incurred by reason of the transfer
of its Contributed Assets and Assumed Liabilities hereunder and/or the
filing or recording of any instruments necessary to effect the transfer
of its Contributed Assets and Assumed Liabilities hereunder, regardless
of when such Taxes or fees are levied or imposed, including sales, use,
value-added, excise, real estate transfer, lease assignment, stamp,
documentary and similar Taxes and fees (the "Transfer Cost"). To the
extent under applicable law the transferee is responsible for filing
Tax Returns in respect of Transfer Costs, the Company shall prepare all
such Tax Returns. The parties shall provide such certificates and other
information and otherwise cooperate to the extent reasonably required
to minimize Transfer Costs.
2.7 REQUIRED CONSENTS. Each of G-P and the CSK Parties shall use
commercially reasonable efforts to obtain, at its sole expense, each
Consent Related to its own Business listed on Schedule 3.3(a) for the
CSK Parties and Schedule 4.3(a) for G-P (other than those Consents
marked with an asterisk on either such Schedule), and any other
material Consent not listed on Schedule 3.3 or Schedule 4.3, if any, if
such Consent is required to operate such Business after Closing as such
Business has been operated over the 12-month period immediately prior
to Closing. If a party has not obtained a Consent (other than a
Required Consent), the Closing of the transactions contemplated by this
Agreement shall not constitute a transfer, or any attempted transfer,
of any Contract or asset, the transfer of which requires such Consent.
Rather, following the Closing, such party shall use commercially
reasonable efforts at its sole expense, and the other party (or
parties) and the Company shall cooperate in such efforts, to obtain
promptly such Consent or to enter into reasonable and lawful
arrangements (including subleasing or subcontracting if permitted)
reasonably acceptable to the other party to provide to the Company the
full economic (taking into account Tax Costs and benefits) and
operational benefits and liabilities and for substantially similar time
periods, as the Company would have had if such Consent had been
obtained as of Closing. Once such Consent for the transfer of a
Contributed
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Asset not transferred at the Closing is obtained, the party receiving
such Consent shall promptly transfer, or cause to be transferred, such
Contributed Asset to the Company for no additional consideration and
without changing any party's Capital Account or Percentage Interest (as
both terms are defined in the Operating Agreement).
2.8 OWNERSHIP OF THE COMPANY; SPECIAL DISTRIBUTION.
(a) The value of contributions of each of G-P and WISCO has been
determined by multiplying 7.38 by the actual 1998 EBITDA for
the G-P Business and the WISCO Business respectively. The
value of the WISCO Business for purposes of this Agreement
shall be $775,000,000 and the value of the G-P Business for
purposes of this Agreement shall be $376,400,000.
(b) Simultaneously with the Closing, the Company shall incur debt
in an amount sufficient to fund a special distribution to
WISCO (the "Company Debt") that will result in a reduction in
WISCO's Percentage Interest (as defined in the Operating
Agreement) in the Company to a 5% equity interest in the
Company (the "Special Distribution") immediately after payment
of the Special Distribution. The Company Debt shall be in such
amount and on such terms as is set forth on Exhibit 2.8A. G-P
shall provide to the Company's lenders a full and
unconditional guaranty of payment of the Company Debt
substantially in the form of Exhibit 2.8B hereto (the "G-P
Guarantee"). WISCO shall provide to G-P an indemnity
substantially in the form of Exhibit 2.8C hereto (the "WISCO
Debt Indemnity") indemnifying G-P against certain amounts
which may be incurred or paid by, or assessed against, G-P
under the G-P Guarantee.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CSK PARTIES
The CSK Parties represent and warrant to G-P and the Company as
follows:
10
3.1 ORGANIZATION AND QUALIFICATION.
(a) Each of the CSK Parties is a corporation or limited liability
company, duly organized, validly existing and in good standing
under the laws of its state of organization as set forth on
Schedule 3.1. The CSK Parties collectively have all requisite
corporate or limited liability company power and authority to
own and operate the WISCO Contributed Assets and to carry on
the WISCO Business as currently conducted.
(b) Each of the CSK Parties is duly qualified to do business and
is in good standing as a foreign corporation or limited
liability company in the jurisdictions listed on Schedule 3.1,
which are the only jurisdictions where the ownership or
operation of the WISCO Contributed Assets or the conduct of
the WISCO Business requires such qualification, except where
the failure to be so qualified would not have a Material
Adverse Effect.
3.2 CORPORATE AUTHORIZATION. Each of the CSK Parties has full corporate
power and authority to execute and deliver this Agreement, and to
perform its obligations hereunder and under any agreement or contract
contemplated hereby, including the Ancillary Agreements. The execution,
delivery and performance by the CSK Parties of this Agreement and any
agreement or contract contemplated hereby has been duly and validly
authorized by all necessary corporate action and no additional
corporate authorization is required in connection with the execution,
delivery and performance by each of the CSK Parties of this Agreement
and any agreement or contract contemplated hereby.
3.3 CONSENTS AND APPROVALS. Except as specifically set forth in Schedule
3.3 or as required by the HSR Act, no Consent is required to be
obtained by the CSK Parties from, and no notice or filing is required
to be given by the CSK Parties to, or made by the CSK Parties with, any
Governmental Authority or other Person or under any Contract listed, or
required to be listed, on Schedule 3.14 in connection with the
execution, delivery and performance by the CSK Parties of this
Agreement, each of the Ancillary Agreements, any other agreement or
contract contemplated hereby and the contribution of the WISCO
Contributed Assets, except where the failure to obtain any such Consent
or Consents, give any such notice or notices or make any such filing or
filings would not have a Material Adverse Effect.
3.4 NON-CONTRAVENTION. Except as set forth on Schedule 3.3, the execution,
delivery and performance by the CSK Parties of this Agreement and each
of the Ancillary Agreements, and the consummation of the transactions
contemplated hereby and thereby, does not and will not (i) violate any
provision of the certificate of incorporation or bylaws of any of the
CSK Parties or any Contributed Subsidiary; (ii) subject to obtaining
the Consents referred to in Section 3.3, conflict with, or result in
the breach of, or constitute a default under, or result in the
termination, cancellation or
11
acceleration (whether after the filing of notice or the lapse of time
or both) of any right or obligation of any of the CSK Parties or any
Contributed Subsidiary under, or to a loss of any benefit to which any
of the CSK Parties or any Contributed Subsidiary is entitled under, any
Contract or result in the creation of any Encumbrance (other than a
Permitted Encumbrance) upon any of the WISCO Contributed Assets; or
(iii) assuming compliance with the matters set forth in Section 3.3,
violate, or result in a breach of or constitute a default under any
Law, rule, regulation, judgment, injunction, order, decree or other
restriction of any court or Governmental Authority to which any of the
CSK Parties or any Contributed Subsidiary is subject, including any
Governmental Authorization, except in each case, such matter or matters
that would not have a Material Adverse Effect.
3.5 BINDING EFFECT. This Agreement constitutes, and each of the Ancillary
Agreements when executed and delivered by the parties thereto will
constitute, a valid and legally binding obligation of each of the CSK
Parties that is a party thereto, enforceable with respect to such party
in accordance with its terms, except as the enforceability thereof may
be limited or otherwise effected by bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
Relating to, or affecting, creditors rights and to general equity
principles.
3.6 FINANCIAL STATEMENTS: ABSENCE OF CERTAIN CHANGES.
(a) Attached as Schedule 3.6(a) are the following financial
statements of the WISCO Business: Unaudited Balance Sheet,
Statement of Income and Statement of Cash Flows, as of and for
(i) the years ended December 31, 1997 and 1998 (the "WISCO
Annual Financial Statements"); and (ii) the period ended April
30, 1999 (the "WISCO April Financial Statements").
(Collectively the financial statements described in this
Section 3.6(a) shall be referred to as the "WISCO Financial
Statements.")
(b) Exhibit 3.6(b) sets forth the line items and a definition for
each such line item contained in each of the WISCO Financial
Statements.
(c) The WISCO Financial Statements are true and correct in all
material respects, present fairly the combined financial
position and results of operation, divisional equity and cash
flows of the WISCO Business as of the dates and for the
periods presented, and were prepared in accordance with GAAP
applied on a basis consistent with past practice of the WISCO
Business. The WISCO Financial Statements reflect the
underlying Books and Records of the WISCO Business, which are
complete and accurate in all material respects. Except as
described on Schedule 3.6(c), consistent accounting policies
and accrual methods were used in all periods presented. All
non-recurring or unusual income or expense items over
$500,000, as reflected in the 1998 Statement of Income of
WISCO, have been disclosed
12
in footnotes to the WISCO Financial Statements.
(d) Except as described in the notes to the WISCO Financial
Statements, all accounts receivable reflected on the WISCO
Financial Statements are bona fide receivables, accounted for
in accordance with GAAP (including, without limitation,
appropriate reserves), and represent amounts due with respect
to actual transactions in the operation of the WISCO Business;
it being understood that this representation shall not be
deemed to constitute a warranty or guaranty that all such
accounts receivable shall be collected.
3.7 LITIGATION AND CLAIMS. Except as disclosed on Schedule 3.7:
(a) There is no action (whether civil, criminal or
administrative), suit, demand, claim, dispute, hearing,
proceeding (including condemnation or other proceeding in
eminent domain) or investigation pending or, to the Knowledge
of any of the CSK Parties, threatened, Related to the WISCO
Business or any of the WISCO Contributed Assets or included in
the WISCO Assumed Liabilities, that individually or in the
aggregate is reasonably expected to have a Material Adverse
Effect.
(b) None of the WISCO Contributed Assets is subject to any order,
writ, judgment, award, injunction, or decree of or settlement
enforceable in any court or governmental or regulatory
authority of competent jurisdiction or any arbitrator or
arbitrators.
3.8 TAXES. Except as disclosed on Schedule 3.8:
(a) The CSK Parties have duly and timely filed (or have caused to
be duly and timely filed), taking into account any valid
extension of the time for filing, each Tax Return required to
be filed with any Tax Authority which includes or is based
upon the WISCO Contributed Assets, or the operations,
ownership or activities of the WISCO Business, and all Taxes
due and payable (whether or not shown on or required to be
shown on a Tax Return) have been paid prior to their due
dates; provided, however, that the representations and
warranties set forth in this paragraph are made only to the
extent that (i) such Taxes are or may become Encumbrances on
the WISCO Contributed Assets, or (ii) the Company is or may be
liable in the capacity of transferee of the Contributed
Assets.
(b) The CSK Parties have duly and timely filed (or have caused to
be duly and timely filed), taking into account any valid
extension of the time for filing, each Tax Return which
includes or is based upon the assets, operations, ownership or
activities of any of the WISCO Contributed Subsidiaries, and
all Taxes due and payable (whether or not shown on or required
to be shown on a Tax Return) have been paid prior to their due
dates.
13
(c) None of the WISCO Contributed Assets, including the assets of
the WISCO Contributed Subsidiaries (i) is subject to any lien
(other than a Permitted Encumbrance) arising in connection
with any failure or alleged failure to pay any Taxes, (ii)
secures any debt the interest on which is tax-exempt under
Section 103(a) of the Code, (iii) is required to be or is
being depreciated under the alternative depreciation system
under Section 168(g)(2) of the Code, (iv) is "limited use
property" with the meaning of Revenue Procedure 76-30, or (v)
will be treated as owned by any other Person pursuant to the
provisions of former Section 168(f)(8) of the Code.
(d) The CSK Parties (with respect to the WISCO Business) or the
WISCO Contributed Subsidiaries have withheld and paid all
material Taxes required to have been withheld and paid in
connection with amounts paid or owing to any Employee,
independent contractor, creditor, shareholder or other party.
(e) There are no pending, proposed or, to the knowledge of WISCO,
threatened audits, assessments or claims from any Tax
Authority for deficiencies, penalties or interest against any
of the CSK Parties (with respect to the WISCO Contributed
Assets or the WISCO Business), any of the WISCO Contributed
Subsidiaries or any of their assets, operations or activities;
provided, however, that the representations and warranties set
forth in this paragraph are made only to the extent that (i)
such Taxes are or may become Encumbrances on the WISCO
Contributed Assets, or (ii) the Company is or may be liable in
the capacity of transferee of the Contributed Assets.
(f) No CSK Party nor any WISCO Contributed Subsidiary owns,
directly or indirectly, and none of the WISCO Contributed
Assets consists of, any interest in any entity classified as a
partnership for United States federal income Tax purposes.
(g) With respect to the WISCO Business, other than WMex, the CSK
Parties do not have and have not had a permanent establishment
in any foreign country as defined in any applicable Tax treaty
or convention between the United States and such foreign
country.
3.9 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS.
(a) Schedule 3.9(a) lists all the Employees who, as of August 31,
1999, were employed by WISCO or the WISCO Contributed
Subsidiaries with respect to the WISCO Business, together with
their respective positions, years of
14
employment, and rates of remuneration, as of August 31, 1999.
(b) Except as disclosed on Schedule 3.9(b), no CSK Party is a
party to nor does it sponsor, maintain, or contribute to any
Employee Plans that provide benefits to Employees or Retired
Employees of the WISCO Business.
(c) WISCO has delivered to G-P true, complete and up-to-date
copies of all documents embodying the CSK Plans including,
without limitation, all amendments thereto, all funding
agreements thereunder (including, but not limited to, trust
agreements), all summaries of such CSK Plans provided to
Employees, Retired Employees, directors, officers,
shareholders or their dependents with respect to the WISCO
Business, and all material communications received from or
sent to regulatory authorities within the prior two (2) plan
years with respect to each such CSK Plan as well as the most
recent valuation for each defined contribution retirement plan
maintained by any of the CSK Parties and the most recent
actuarial valuation for each of the CSK Plans for which such
valuations are required. The applicable CSK Party has
delivered to G-P a complete written description of all
unwritten CSK Plans, and will deliver such other documentation
with respect to any CSK Plan as is reasonably requested by
G-P.
(d) Except as disclosed on Schedule 3.9(d), no promise or
commitment has been made by any CSK Party (i) to amend any of
the CSK Plans or to provide increased benefits thereunder to
any Employees, Retired Employees, directors, officers,
shareholders of the WISCO Business or the WISCO Contributed
Subsidiaries, or their dependents, except pursuant to the
requirements, if any, of the CSK Plans or any collective
bargaining agreement, or (ii) to establish any new Employee
Plan. Except as disclosed on Schedule 3.9(d), no amendment to
any CSK Plan has been adopted by any CSK Party since June 30,
1999. Except as disclosed on Schedule 3.9(d), one or more of
the CSK Parties has the right pursuant to the terms of each
CSK Plan and all agreements Related to such plan unilaterally
to terminate such plan (or its participation in such plan) or
to amend the terms of such plan at any time except as provided
under a collective bargaining agreement. Except as disclosed
on Schedule 3.6(a) or Schedule 3.9(d) or as set forth in the
Human Resources Agreement, the transactions contemplated by
this Agreement will not result in any additional payments to,
or increase the vested interest of, any Employee, Retired
Employee, director, officer, shareholder, or their dependents
under any CSK Plan; and the transactions contemplated by this
Agreement will not result in any payment to any Employee or
Retired Employee, director, officer, or shareholder of any CSK
Party which will be subject to Section 280G of the Code.
15
(e) Each CSK Plan has been established, maintained, and
administered in substantial compliance with its terms and all
related documents or agreements and in substantial compliance
with applicable provisions of ERISA, the Code, and other
applicable Laws.
(f) Except as disclosed on Schedule 3.9(f), all required employer
contributions, premium payments and employee contributions
under the CSK Plans have been made and remitted to the funding
agents or accrued or booked thereunder within the time
prescribed by any such CSK Plan and the Laws. All insurance
premiums required with respect to any CSK Plan, including any
premiums payable to the Pension Benefit Guarantee Corporation,
have been paid, made, accrued or booked within the time
prescribed by any such CSK Plan and the applicable Law. All
benefits, expenses and other amounts due and payable to or
under any CSK Plan, and all contributions, transfers or
payments required to be made to any CSK Plan, have been paid,
made, accrued or booked within the time prescribed by any such
CSK Plan and the Laws. Except as disclosed on Schedule 3.9(f),
all of the assets which have been set aside in a trust or
account (other than an account which is part of a CSK Party's
general assets) to satisfy any obligation under any CSK Plan
are shown on the books and records of each such trust and each
such account at their fair market value, such current fair
market value as of the last valuation date is equal to or
exceeds the present value of any obligation under the CSK
Plan, and the liabilities for all other obligations under any
CSK Plan are accurately set forth in the WISCO Financial
Statements.
(g) Except as disclosed on Schedule 3.9(g), there is no pending
or, to the Knowledge of the CSK Parties, threatened claim with
respect to a CSK Plan (other than routine and reasonable
claims for benefits made in the ordinary course of the WISCO
Business) or with respect to the terms and conditions of
employment or termination of employment by any Employee, or
Retired Employee, and no audit or investigation by any
governmental or other law enforcement agency is pending or has
been proposed with respect to any CSK Plan.
(h) Except as disclosed on Schedule 3.9(h), no CSK Plan is subject
to Title IV of ERISA. Neither any of the CSK Parties nor any
Related Person has incurred any material liability under or
pursuant to Title I or IV of ERISA or the penalty, excise tax
or joint and several liability provisions of the Code relating
to employee benefit plans and, to the Knowledge of the CSK
Parties, no event or condition has occurred or exists which
could result in any material liability to a CSK Party, such
Related Person or the Company or G-P under or pursuant to
Title I or IV of ERISA or such penalty, excise tax or joint
and several liability provisions of the Code. No CSK Plan has
incurred an "accumulated funding deficiency" within the
meaning of such sections of the Code and ERISA, whether or not
waived; and no such CSK
16
Plan has been terminated. Except as disclosed on Schedule
3.9(h), none of the CSK Parties contribute to, nor do they
have any obligation to contribute to, a multiemployer plan as
defined in Section 4001(a)(3) of ERISA with regard to the
Employees or Retired Employees.
(i) Each of the CSK Plans that is intended to be qualified under
Section 401(a) of the Code, and the trust, if any, forming a
part thereof, has received a favorable determination letter
from the Internal Revenue Service as to the qualification of
its form under the Code and to the effect that each such trust
is exempt from taxation under Section 501(a) of the Code and,
to the Knowledge of the CSK Parties, nothing has occurred
since the date of such determination letter that adversely
affects such qualification or tax-exempt status. Except as
disclosed in Schedule 3.9(i), all reports and other documents
required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including,
but not limited to, actuarial reports, audits or Tax Returns)
have been duly filed or distributed on a timely basis, and
copies thereof have been or will be furnished to G-P prior to
the Closing.
3.10 COMPLIANCE WITH LAWS. Except as set forth in Schedule 3.10, the WISCO
Business is being conducted in compliance with all Laws applicable to
the WISCO Business and, as of the Closing, the Company will have
(subject to obtaining the Consents) all Governmental Authorizations
necessary for the conduct of the WISCO Business as currently conducted,
except for such non-compliance or the failure to obtain such Consent or
Consents which would not have a Material Adverse Effect; it being
understood that nothing in this representation is intended to address
any compliance issue that is the subject of the representations and
warranties set forth in Sections 3.7, 3.8, 3.9, 3.11, 3.12, or 3.13
hereof, and that the CSK Parties make no representations in this
Section 3.10 as to the transferability or assignability of any such
Governmental Authorizations. None of the CSK Parties has received
written notice that any material Governmental Authorization may be
suspended, revoked, modified or canceled.
3.11 ENVIRONMENTAL MATTERS.
(a) Schedule 3.11(a) sets forth a list of all material
Environmental Permits in connection with the WISCO Business.
(b) Except as would not have a Material Adverse Effect, or as
disclosed on Schedule 3.11(b):
17
(i) The Environmental Permits are all the permits,
licenses, certificates and authorizations of, and
registrations with, any of the Environmental
Authorities pursuant to the Environmental Laws
necessary to conduct the WISCO Business substantially
as presently conducted. The Environmental Permits are
in full force and effect and the CSK Parties are in
compliance in all respects thereunder. The
consummation of the transactions contemplated
hereunder will not require any renewal, consent,
amendment or other action in connection with any of
the Environmental Permits. The CSK Parties are in
compliance with the Environmental Laws applicable to
the conduct of the WISCO Business.
(ii) There is no claim, suit, action or other proceeding,
including appeals and applications for review,
outstanding or pending against any CSK Party pursuant
to any of the Environmental Laws Relating to the
WISCO Business.
(iii) No CSK Party has any liability for any release,
spill, leakage, pumping, emission, emptying,
discharge, injection, escape, leaching, disposal or
dumping of any Hazardous Substances on or from any of
the WISCO Real Property, except in such manner or
quantity as would not constitute a violation of any
of the Environmental Laws or Environmental Permits.
(iv) The CSK Parties have maintained all records in
respect of the WISCO Business required by the
Environmental Laws and Environmental Permits in the
manner and for the time periods so required.
(v) Since June 30, 1994, no CSK Party has received any
notice of investigation or non-compliance or written
order from any of the Environmental Authorities,
including any notice of contamination or clean-up
requirements, pursuant to any of the Environmental
Laws with respect to the WISCO Business.
3.12 INTELLECTUAL PROPERTY
(a) Schedule 3.12 sets forth a list and description (including the
country of registration) of all issued or registered foreign and domestic
Intellectual Property currently (or, to the Knowledge of the CSK Parties, within
the last 12 months) used in the WISCO Business (other than "shrink wrap"
consumer software licenses). No third party has rights in, or otherwise has the
right to restrict use of, WISCO Intellectual Property owned by any CSK Party,
and, to the Knowledge of the CSK Parties, no third party has rights in, or
otherwise has the right to restrict
18
the Company's use of, the WISCO Intellectual Property owned by any CSK Party as
of and following the Closing.
(b) To the Knowledge of the CSK Parties, no product, component,
method, process, or material (including computer software) used, sold or
manufactured by the WISCO Business infringes on, misappropriates, or otherwise
violates a valid and enforceable intellectual property right of any other
Person.
(c) There are no demands, actions or proceedings pending or, to
the Knowledge of the CSK Parties, threatened, against the CSK Parties Relating
to the WISCO Business alleging infringement, misappropriation, or violation of
any intellectual property right of any other Person, and, to the Knowledge of
the CSK Parties, no Person is infringing, misappropriating, challenging or
violating, the Intellectual Property owned by any CSK Party, except for
challenges, infringements, misappropriation or violations which, individually or
in the aggregate, would not have a Material Adverse Effect.
(d) All of the WISCO Intellectual Property will be transferred to
the Company at Closing, except to the extent certain Intellectual Property used
by the CSK Parties to provide services under the Transition Services Agreement
is specifically excluded thereunder. The CSK Parties agree that Intellectual
Property provided under the Transition Services Agreement will be provided to
the Company on and after Closing on the same terms and conditions under which it
was available to the WISCO Business prior to the Closing in accordance with the
terms of the Transition Services Agreement.
(e) Schedule 3.12(e) sets forth the CSK Parties' efforts at
addressing the Year 2000 issue in the WISCO Business. The information set forth
therein is accurate as of the date hereof, in all material respects. The CSK
Parties have developed and begun implementing a Project Plan to remediate and/or
replace Computer Systems that are used or relied upon in the WISCO Business but
are not Year 2000 Ready. Such remediation and/or replacement is scheduled to be
completed in 1999.
3.13 LABOR MATTERS. Except as disclosed on Schedule 3.13:
(a) As of the date hereof, none of the CSK Parties is a party to
any labor or collective bargaining agreement or similar agreement with respect
to Employees of the WISCO Business, no such Employees are represented by any
labor organization and, to the Knowledge of the CSK Parties, there are no
organizing or de-certification activities (including any demand for recognition
or certification proceedings pending or threatened to be brought or filed with
the National Labor Relations Board or other labor relations tribunal) involving
the WISCO Business;
(b) As of the date hereof, there are no strikes, work stoppages,
slowdowns, lockouts, unfair labor practice charges pending or, to the Knowledge
of the CSK Parties, threatened against or involving the Employees of the WISCO
Business;
19
(c) Within the 90-day period immediately preceding the Effective
Time, no Employee of the WISCO Business has been laid off or terminated for
reasons other than a discharge for cause, voluntary resignation or retirement.
(d) There are no complaints, charges, claims or grievances against
the CSK Parties pending or, to the Knowledge of the CSK Parties, threatened to
be brought or filed with any Governmental Authority, arbitrator or court based
on or arising out of the employment by the CSK Parties of any Employee of the
WISCO Business, except for those which, individually or in the aggregate, would
not have a Material Adverse Effect;
(e) The CSK Parties are in compliance with all Laws Relating to
the employment of labor, including all such Laws Relating to wages, hours,
collective bargaining, discrimination, civil rights, safety and health,
immigration, workers' compensation, layoffs, and the collection and payment of
withholding and/or Social Security Taxes and similar Taxes, except where the
failure to be in compliance would not have a Material Adverse Effect; and
(f) The CSK Parties have given all notices required to be given
prior to the Closing Date under the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. Section 2101 et seq. ("WARN"), or under any similar
provision of any federal, state, regional, foreign, or local Law, rule, or
regulation (referred to collectively with WARN as "WARN Obligations") Relating
to any plant closing or mass layoff that occurred during the 90 days immediately
preceding the Effective Time and pertaining to the WISCO Business.
3.14 CONTRACTS. Schedule 3.14 sets forth a list, as of the date
hereof, of each Contract that is Related to the WISCO Business other than (a)
WISCO Leased Real Property, which are listed on Schedule 3.15, and collective
bargaining agreements which are listed on Schedule 3.13, (b) purchase orders or
similar agreements for the purchase or sale of goods or services in the ordinary
course of business, (c) confidentiality agreements entered into in the ordinary
course of business in connection with the purchase and sale of Inventory, and
(d) any Contract which requires a payment or imposes an obligation on either
party thereto of less than $1,000,000 in the aggregate. Schedule 3.14 also
identifies any Contract that contains a non-compete covenant or similar
provision that could materially restrict the Company in its conduct of the WISCO
Business following Closing, any employment agreement with any Employee of the
WISCO Business, any employment agreement included in the WISCO Contributed
Assets or WISCO Assumed Liabilities, any Contract between any Affiliates of CSK,
on one hand, and any of the CSK Parties or any of the WISCO Contributed
Subsidiaries, on the other, any agreements Related to payments in lieu of taxes,
any agreement or license Related to Intellectual Property (other than "shrink
wrap" consumer software licenses), leases and license agreements for any
Computer Systems (other than "shrink wrap" consumer software licenses), all
material agreements for telecommunications voice (including without limitation,
local, long distance and toll free service) and data services, Internet access,
hosting and use services. Schedule 3.14 also identifies any Contract concerning
any environmental liability with respect to the WISCO Business. Each Contract
set forth on Schedule 3.14 is a valid and binding agreement of the applicable
CSK Party and, to the Knowledge of the CSK Parties, is in full force and effect.
Except as otherwise provided in Schedule 3.14, no CSK Party is, and, to their
Knowledge, no
20
other party thereto is, in default in any material respect under
any Contract listed on Schedule 3.14 or any collective bargaining agreement
listed on Schedule 3.13.
3.15 REAL ESTATE LEASES. Schedule 3.15 sets forth a list, as of the
date hereof, of each written WISCO Real Estate Lease with a term of more than
one month that is Related to the WISCO Business. Each WISCO Real Estate Lease
set forth on Schedule 3.15 is a valid and binding agreement of a CSK Party and
is in full force and effect. There are no defaults by the applicable CSK Party
under any WISCO Real Estate Lease listed on Schedule 3.15 which defaults have
not been cured or waived and which would, individually or in the aggregate, have
a Material Adverse Effect.
3.16 ENTIRE BUSINESS; TITLE TO PROPERTY.
(a) Except as set forth in Schedule 3.16(a) and Schedule 3.6(a),
the WISCO Contributed Assets, the assets held by the WISCO Contributed
Subsidiaries, the WISCO Retained Assets (including cash and cash accounts,
disbursement accounts, invested securities and other short and medium term
investments, the CSK Marks and CSK Plans, and WISCO's and CSK's insurance
policies), and the rights specifically provided or made available to the Company
under the Ancillary Agreements, include all of the buildings, machinery,
equipment and other assets (whether tangible or intangible) necessary for the
Company immediately after Closing to conduct in all material respects the WISCO
Business as conducted as of the date hereof, and as conducted during the
12-month period prior to the date hereof (subject to changes expressly permitted
by the terms hereof to be made after the date hereof); provided, however, that
no representation is made as to the assignability of Government Authorizations.
(b) A CSK Party has good (and, in the case of its Owned Real
Property, marketable) title to, or a valid and binding leasehold interest in,
the WISCO Contributed Assets, free and clear of all Encumbrances, except (i) as
set forth in Schedule 3.16(b), and (ii) any Permitted Encumbrances.
(c) The capital structure of each of the WISCO Contributed
Subsidiaries is as set forth in Schedule 3.16(c). The shares of stock or
membership interests, as applicable, of the WISCO Contributed Subsidiaries
included in the WISCO Contributed Assets constitute 100% of the issued and
outstanding shares of stock or membership interests, as applicable, of each
WISCO Contributed Subsidiary. All shares of stock , membership interests or
other form of ownership of the WISCO Contributed Subsidiaries included in the
WISCO Contributed Assets are validly issued, fully paid and non-assessable.
Except as set forth on Schedule 3.16(c), (i) there are no options, warrants, or
similar rights to purchase any of the shares or membership interests of any of
the WISCO Contributed Subsidiaries, and no obligations binding upon any WISCO
Contributed Subsidiary to issue, sell, redeem, purchase or exchange any of its
capital stock or membership interests or any right relating thereto, and (ii)
there are no shareholders' agreements, voting agreements, voting trusts or other
agreements or rights of third parties with respect to or affecting any of the
WISCO Contributed Subsidiaries or any of their shares of stock or membership
interests, as applicable. Wisconsin Tissue Management, LLC has entered into no
agreements and conducted no business and contains only those assets and
liabilities specifically set forth in
21
Schedule 3.16(c), except, in each case, as set forth in the Human Resources
Agreement. WMex assumed no liabilities or obligations of any other CSK Party
Related to or arising from the sale of its capital stock to WISCO. CSK has
provided G-P with true and correct copies of all documentation Related to such
sale.
(d) The WISCO Contributed Assets and the assets of the WISCO
Contributed Subsidiaries are in good operating condition and repair (subject to
normal wear and tear). Except as set forth on Schedule 3.16(d), the CSK Parties
have no Knowledge of any material structural or mechanical defects with respect
to any buildings, improvements or equipment included in the WISCO Contributed
Assets, which defects are reasonably likely to have a Material Adverse Effect.
(e) None of the WISCO Owned Real Property or the WISCO Leased Real
Property or other assets of the WISCO Business (except as set forth in the
Transition Services Agreement) are owned, used or occupied in whole or in part
by CSK or any of its Affiliates other than in connection with the operation of
the WISCO Business.
3.17. FINDER'S FEES. Except for Salomon Smith Barney & Co., whose
fees will be paid by CSK, there is no investment banker, broker or finder which
has been retained by or is authorized to act on behalf of any CSK Party who
might be entitled to any fee or commission from G-P or the Company in connection
with the transactions contemplated by this Agreement.
3.18 INSURANCE. Schedule 3.18 attached hereto sets forth the
following information with respect to each insurance policy to which any CSK
Party or a WISCO Contributed Subsidiary, with respect to the WISCO Business, has
been a party, a named insured, or otherwise the beneficiary of coverage at any
time within the past five years:
(a) the name of the insurer, the name of the policyholder, and the name
of each covered insured;
(b) the scope, period and amount of coverage; and
(c) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
Schedule 3.18 also describes any self insurance arrangements affecting
the WISCO Business. As of the date hereof, no CSK Party has received any written
notice of any retroactive premium increase or assessment applicable to the WISCO
Business. Except as disclosed on Schedule 3.18, all of such policies are in full
force and effect.
3.19 NO UNDISCLOSED LIABILITIES. With respect to the WISCO Business
no CSK Party has any obligations or liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether or not known to such CSK Party,
whether due or to become due and regardless of when asserted) arising out of
transactions entered into at or prior to the Closing, or any action or inaction
at or prior to the Closing, or any state of facts existing at or prior to the
22
Closing other than: (a) liabilities set forth on the WISCO Financial Statements
(including any notes thereto, if any); (b) liabilities and obligations arising
from or in connection with matters disclosed pursuant to the CSK Parties'
representations and warranties in this Agreement or in the Disclosure Schedules
(none of which, except as set forth on Schedule 3.7, is a liability resulting
from a breach of contract, breach of warranty, tort, infringement claim or
lawsuit), other than liabilities and obligations arising from or in connection
with matters disclosed pursuant to Section 3.11; (c) liabilities and obligations
arising from or in connection with matters disclosed pursuant to Section 3.11;
(d) liabilities and obligations which have arisen after April 30, 1999 in the
ordinary course of business (none of which, except as set forth on Schedule 3.7,
is a liability resulting from a breach of contract, breach of warranty, tort,
infringement claim or lawsuit); and (e) such other liabilities or obligations
that do not have a Material Adverse Effect.
3.20 NO MATERIAL ADVERSE CHANGE. Except as disclosed on Schedule
3.20, since April 30, 1999, the CSK Parties have conducted the WISCO Business in
the ordinary course and in a manner consistent with the practices applied during
the periods specified in the WISCO Financial Statements, and there has been no
Material Adverse Effect in the WISCO Business. Except as set forth on Schedule
3.20, and except as such does not have a Material Adverse Effect, no CSK Party
has with respect to the WISCO Business:
(a) been a party to any corporate reorganization, restructuring or
merger or amalgamation or amended its certificate or articles of incorporation
or bylaws;
(b) declared or paid any dividend or declared or made any other
distribution (whether in cash, stock or property) on any of the shares of its
capital stock;
(c) incurred or discharged any obligation or liability (whether
accrued, absolute or contingent) other than in the ordinary course of and in a
manner consistent with past practices for the WISCO Business;
(d) entered into any transaction, contract, agreement, indenture,
instrument or commitment other than in the ordinary course of and in a manner
consistent with past practices for the WISCO Business;
(e) suffered or incurred any material damage, destruction, loss or
liability (whether or not covered by any insurance);
(f) experienced any strike, lockout or other labor trouble such as
slow down or work stoppage, or any loss of any of its key Employees, customers,
suppliers or distributors;
(g) suffered any shortage or cessation or interruption of raw
materials, supplies or utilities that could have a Material Adverse Effect on
the WISCO Business;
(h) made any change in its accounting principles, policies and
practices as utilized in the preparation of the WISCO Financial Statements;
23
(i) made any loan or advance, or assumed, guaranteed, endorsed or
otherwise become liable with respect to the liabilities or obligations of any
other Person or entity, or permitted any of its assets to be subjected to any
lien or security interest (except for Permitted Encumbrances);
(j) granted to any customer any allowance or discount or changed
its pricing, credit or payment policies other than in the ordinary course of and
in a manner consistent with past practices for the WISCO Business (except for
non-material variations therefrom in the aggregate);
(k) incurred any indebtedness, liability or obligation (absolute,
accrued, contingent or otherwise) other than in the ordinary course of and in a
manner consistent with past practices for the WISCO Business;
(l) sold, leased or otherwise disposed of any of its assets or any
right, title or interest therein other than in the ordinary course of and in a
manner consistent with past practices for the WISCO Business;
(m) made any payment to, or for the benefit of, any present or
former Employee, director, officer or shareholder otherwise than at the regular
rates payable to them, by way of salary, pension, bonus or other remuneration
consistent with past practices for the WISCO Business;
(n) committed to any capital expenditure project or made any
investment, in either case in excess of Five Hundred Thousand Dollars ($500,000)
not disclosed to G-P prior to the date of this Agreement; or
(o) authorized or agreed to do any of the foregoing matters referred to
in this Section 3.20.
3.21 INDEBTEDNESS FOR BORROWED MONEY. There is no indebtedness for
borrowed money included in the WISCO Assumed Liabilities.
3.22 KNOWLEDGE AS OF CLOSING DATE. The CSK Parties have no Knowledge,
as of the Closing Date, that any representation or warranty made by G-P in
Article IV (and related schedules) is untrue.
3.23 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article III, no CSK Party nor
any other Person makes any other express or implied representation or warranty
on behalf of the CSK Parties.
24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF G-P
G-P represents and warrants to the CSK Parties and the Company as
follows:
4.1 ORGANIZATION AND QUALIFICATION. G-P is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia and has all requisite corporate power and authority to own and operate
the G-P Contributed Assets and to carry on the G-P Business as currently
conducted. G-P is duly qualified to do business and is in good standing as a
foreign corporation in the jurisdictions listed on Schedule 4.1, which are the
only jurisdictions where the ownership or operation of the G-P Contributed
Assets or the conduct of the G-P Business requires such qualification, except
where the failure to be so qualified would not have a Material Adverse Effect.
4.2 CORPORATE AUTHORIZATION. G-P has full corporate power and
authority to execute and deliver this Agreement, and to perform its obligations
hereunder and under any agreement or contract contemplated hereby, including the
Ancillary Agreements. The execution, delivery and performance by G-P of this
Agreement and the agreements and contracts contemplated hereby has been duly and
validly authorized by all necessary corporate action and no additional corporate
authorization is required in connection with the execution, delivery and
performance by G-P of this Agreement and the agreements and contracts
contemplated hereby.
4.3 CONSENTS AND APPROVALS. Except as specifically set forth in
Schedule 4.3 or as required by the HSR Act, no Consent is required to be
obtained by G-P from, and no notice or filing is required to be given by G-P to
or made by G-P with, any Governmental Authority or other Person or under any
Contract listed, or required to be listed, on Schedule 4.14 in connection with
the execution, delivery and performance by G-P of this Agreement, each of the
Ancillary Agreements, any other agreement or contract contemplated hereby and
the contribution of the G-P Contributed Assets, except where the failure to
obtain any such Consent or Consents, give any such notice or notices or make any
such filing or filings would not have a Material Adverse Effect.
4.4 NON-CONTRAVENTION. Except as set forth on Schedule 4.3, the
execution, delivery and performance by G-P of this Agreement and each of the
Ancillary Agreements, and the consummation of the transactions contemplated
hereby and thereby, does not and will not (i) violate any provision of the
certificate of incorporation or bylaws of G-P; (ii) subject to obtaining the
Consents referred to in Section 4.3, conflict with, or result in the breach of,
or constitute a default under, or result in the termination, cancellation or
acceleration (whether after the filing of notice or the lapse of time or both)
of any right or obligation of G-P under, or to a loss of any benefit to which
G-P is entitled under, any Contract or result in the creation of any Encumbrance
(other than a Permitted Encumbrance) upon any of the G-P Contributed Assets; or
(iii) assuming compliance with the matters set forth in Section 4.3, violate, or
result in a breach of or constitute a default under any Law, rule, regulation,
judgment, injunction, order, decree or other restriction of any court or
Governmental Authority to which G-P is subject, including any Governmental
25
Authorization, except in each case, such matter or matters that would not have a
Material Adverse Effect.
4.5 BINDING EFFECT. This Agreement constitutes, and each of the
Ancillary Agreements when executed and delivered by the parties thereto will
constitute, a valid and legally binding obligation of G-P, enforceable with
respect to G-P in accordance with its terms, except as the enforceability
thereof may be limited or otherwise effected by bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability Relating
to, or affecting, creditors rights and to general equity principles.
4.6 FINANCIAL STATEMENTS; ABSENCE OF CERTAIN CHANGES.
(a) Attached as Schedule 4.6(a) are the following financial
statements of the G-P Business: Unaudited Balance Sheet, Statement of Income and
Statement of Cash Flows, as of and for (i) the years ended December 31, 1997 and
1998 (the "G-P Annual Financial Statements"); and (ii) the period ended April
30, 1999 (the "G-P April Financial Statements"). (Collectively the financial
statements described in this Section 4.6(a) shall be referred to as the "G-P
Financial Statements.")
(b) Exhibit 3.6(b) sets forth the line items and a definition for
each such line item contained in each of the G-P Financial Statements.
(c) The G-P Financial Statements are true and correct in all
material respects, present fairly the combined financial position and results of
operation, divisional equity and cash flows of the G-P Business as of the dates
and for the periods presented, and were prepared in accordance with GAAP applied
on a basis consistent with past practice of the G-P Business. The G-P Financial
Statements reflect the underlying Books and Records of the G-P Business, which
are complete and accurate in all material respects. Except as described in the
footnotes to the G-P Financial Statements, consistent accounting policies and
accrual methods were used in all periods presented. All non-recurring or unusual
income or expense items over $500,000, as reflected in the 1998 Statement of
Income of G-P, have been disclosed in footnotes to the G-P Financial Statements.
(d) Except as described in the notes to the G-P Financial
Statements, all accounts receivable reflected on the G-P Financial Statements
are bona fide receivables, accounted for in accordance with GAAP (including,
without limitation, appropriate reserves), representing amounts due with respect
to actual transactions in the operation of the G-P Business; it being understood
that this representation shall not be deemed to constitute a warranty or
guaranty that all such accounts receivable shall be collected.
26
4.7 LITIGATION AND CLAIMS. Except as disclosed on Schedule 4.7:
(a) There is no action (whether civil, criminal or
administrative), suit, demand, claim, dispute, hearing, proceeding (including
condemnation or other proceeding in eminent domain) or investigation pending or,
to the Knowledge of G-P, threatened, Related to the G-P Business or any of the
G-P Contributed Assets or included in the G-P Assumed Liabilities, that
individually or in the aggregate is reasonably expected to have a Material
Adverse Effect.
(b) None of the G-P Contributed Assets is subject to any order,
writ, judgment, award, injunction, or decree of or settlement enforceable in any
court or governmental or regulatory authority of competent jurisdiction or any
arbitrator or arbitrators.
4.8 TAXES. Except as disclosed on Schedule 4.8:
(a) G-P has duly and timely filed (or has caused to be duly and
timely filed) taking into account any valid extension of the time for filing,
each Tax Return required to be filed with any Tax Authority which includes or is
based upon the G-P Contributed Assets, or the operations, ownership or
activities of the G-P Business, and all Taxes due and payable (whether or not
shown on or required to be shown on a Tax Return) have been paid prior to their
due dates; provided, however, that the representations and warranties set forth
in this paragraph are made only to the extent that (i) such Taxes are or may
become Encumbrances on the G-P Contributed Assets, or (ii) the Company is or may
be liable in the capacity of transferee of the Contributed Assets.
(b) G-P has duly and timely filed (or has caused to be duly and
timely filed), taking into account any valid extension of the time for filing,
each Tax Return which includes or is based upon the assets, operations,
ownership or activities of the G-P Business, and all Taxes due and payable
(whether or not shown on or required to be shown on a Tax Return) have been paid
prior to their due dates.
(c) None of the G-P Contributed Assets (i) is subject to any lien
(other than a Permitted Encumbrance) arising in connection with any failure or
alleged failure to pay any Taxes, (ii) secures any debt the interest on which is
Tax-exempt under Section 103(a) of the Code, (iii) is required to be or is being
depreciated under the alternative depreciation system under Section 168(g)(2) of
the Code, (iv) is "limited use property" with the meaning of Revenue Procedure
76-30, or (v) will be treated as owned by any other Person pursuant to the
provisions of former Section 168(f)(8) of the Code.
(d) G-P (with respect to the G-P Business) has withheld and paid
all material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any Employee, independent contractor, creditor,
shareholder or other party.
(e) There are no pending, proposed or, to the Knowledge of G-P,
threatened audits, assessments or claims from any Tax Authority for
deficiencies, penalties or interest against G-P (with respect to the G-P
Contributed Assets or the G-P Business or any of its assets, operations
27
or activities); provided, however, that the representations and warranties set
forth in this paragraph are made only to the extent that (i) such Taxes are or
may become Encumbrances on the G-P Contributed Assets, or (ii) the Company is or
may be liable in the capacity of transferee of the Contributed Assets.
(f) None of the G-P Contributed Assets consists of any interest in
any entity classified as a partnership for United States federal income Tax
purposes.
(g) With respect to the G-P Business, G-P does not have and has
not had a permanent establishment in any foreign country, as defined in any
applicable Tax treaty or convention between the United States and such foreign
country.
4.9 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS.
(a) Schedule 4.9(a) lists all the Employees who, as of October 1,
1999, were employed by G-P with respect to the G-P Business, together with their
respective positions, years of employment, and rates of remuneration, as of
August 20, 1999.
(b) Except as disclosed on Schedule 4.9(b), G-P is not a party to
nor does it sponsor, maintain, or contribute to any Employee Plans that provide
benefits to Employees or Retired Employees of the G-P Business.
(c) G-P has delivered to CSK true, complete and up-to-date copies
of all documents embodying the G-P Plans including, without limitation, all
amendments thereto, all funding agreements thereunder (including, but not
limited to, trust agreements), all summaries of such G-P Plans provided to any
of their Employees, directors, officers, shareholders or their dependents with
respect to the G-P Business, as well as the most recent valuation for each
defined contribution retirement plan maintained by G-P and the most recent
actuarial valuation for each of the G-P Plans for which such valuations are
required. G-P has delivered to CSK a complete written description of all
unwritten G-P Plans, and will deliver such other documentation with respect to
any G-P Plan as is reasonably requested by CSK.
(d) Except as disclosed on Schedule 4.6(a) or Schedule 4.9(d) or
as set forth in the Human Resources Agreement, the transactions contemplated by
this Agreement will not result in any additional payments to, or increase the
vested interest of, any Employee, Retired Employee, director, officer,
shareholder, or their dependents under any G-P Plan; and the transactions
contemplated by this Agreement will not result in any payment to any Employee or
Retired Employee, director, officer, or shareholder of G-P which will be subject
to Section 280G of the Code.
(e) Each G-P Plan has been established, maintained and
administered in substantial compliance with its terms and all related documents
or agreements and in substantial compliance with applicable provisions of ERISA,
the Code, and other applicable Laws.
(f) Except as disclosed on Schedule 4.9(f), all required employer
contributions, premium payments and employee contributions under the G-P Plans
have been made and
28
remitted to the funding agents or accrued or booked thereunder within the time
prescribed by any such G-P Plan and the Laws. All insurance premiums required
with respect to any G-P Plan, including any premiums payable to the Pension
Benefit Guarantee Corporation, have been paid, made, accrued or booked within
the time prescribed by any such G-P Plan and the applicable Law. All benefits,
expenses and other amounts due and payable to or under any G-P Plan, have been
paid, made, accrued or booked within the time prescribed by any such G-P Plan
and the Laws. Except as disclosed on Schedule 4.9(f), all of the assets which
have been set aside in a trust or account (other than an account which is part
of G-P's general assets) to satisfy any obligation under any G-P Plan are shown
on the books and records of each such trust and each such account at their fair
market value, such current fair market value as of the last valuation date is
equal to or exceeds the present value of any obligation under the G-P Plan, and
the liabilities for all other obligations under any G-P Plan are accurately set
forth in the G-P Financial Statements.
(g) Except as disclosed on Schedule 4.9(g), there is no pending
or, to the Knowledge of G-P, threatened claim with respect to a G-P Plan (other
than routine and reasonable claims for benefits made in the ordinary course of
the G-P Business) or with respect to the terms and conditions of employment or
termination of employment by any Employee, or Retired Employee, and no audit or
investigation by any governmental or other law enforcement agency is pending or
has been proposed with respect to any G-P Plan.
(h) Except as disclosed on Schedule 4.9(h), no G-P Plan is subject
to Title IV of ERISA. Neither G-P nor any Related Person has incurred any
material liability under or pursuant to Title I or IV of ERISA or the penalty,
excise tax or joint and several liability provisions of the Code Relating to
employee benefit plans and, to the Knowledge of G-P, no event or condition has
occurred or exists which could result in any material liability to G-P, such
Related Person or the Company or a CSK Party under or pursuant to Title I or IV
of ERISA or such penalty, excise tax or joint and several liability provisions
of the Code. No G-P Plan has incurred an "accumulated funding deficiency" within
the meaning of such sections of the Code and ERISA, whether or not waived; and
no such G-P Plan has been terminated. Except as disclosed on Schedule 4.9(h),
G-P does not contribute to, or have any obligation to contribute to, a
multiemployer plan as defined in Section 4001(a)(3) of ERISA with regard to the
Employees or Retired Employees.
(i) Each of the G-P Plans that is intended to be qualified under
Section 401(a) of the Code, and the trust, if any, forming a part thereof, has
received a favorable determination letter from the Internal Revenue Service as
to the qualification of its form under the Code and to the effect that each such
trust is exempt from taxation under Section 501(a) of the Code and, to the
Knowledge of G-P nothing has occurred since the date of such determination
letter that adversely affects such qualification or tax-exempt status. Except as
disclosed in Schedule 4.9(i), all reports and other documents required to be
filed with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, actuarial reports, audits or Tax
Returns) have been duly filed or distributed on a timely basis, and copies
thereof have been or will be furnished to CSK upon reasonable request.
29
4.10 COMPLIANCE WITH LAWS. Except as set forth in Schedule 4.10,
the G-P Business is being conducted in compliance with all applicable Laws to
the G-P Business and, as of the Closing, the Company will have (subject to
obtaining the Consents) all Governmental Authorizations necessary for the
conduct of the G-P Business as currently conducted, except for such
non-compliance or the failure to obtain such Consent or Consents which would not
have a Material Adverse Effect; it being understood that nothing in this
representation is intended to address any compliance issue that is the subject
of the representations and warranties set forth in Sections 4.7, 4.8, 4.9, 4.11,
4.12, or 4.13 hereof, and that G-P makes no representations in this Section 4.10
as to the transferability or assignability of any such Governmental
Authorizations. G-P has not received written notice that any Governmental
Authorization may be suspended, revoked, materially modified or canceled.
4.11 ENVIRONMENTAL MATTERS.
(a) Schedule 4.11(a) sets forth a list of all material Environmental
Permits in connection with the G-P Business.
(b) Except as would not have a Material Adverse Effect, or as
disclosed on Schedule 4.11(b):
(i) The Environmental Permits are all the permits, licenses,
certificates and authorizations of, and registrations with, any of the
Environmental Authorities pursuant to the Environmental Laws necessary to
conduct the G-P Business substantially as presently conducted. The Environmental
Permits are in full force and effect and G-P is in compliance in all respects
thereunder. The consummation of the transactions contemplated hereunder will not
require any renewal, consent, amendment or other action in connection with any
of the Environmental Permits. G-P is in compliance with the Environmental Laws
applicable to the conduct of the G-P Business.
(ii) There is no claim, suit, action or other proceeding,
including appeals and applications for review, outstanding or pending against
G-P pursuant to any of the Environmental Laws Relating to the G-P Business.
(iii) G-P has no liability for any release, spill, leakage,
pumping, emission, empty, discharge, injection, escape, leaching, disposal or
dumping of any Hazardous Substances on or from any of the G-P Real Property,
except in such manner or quantity as would not constitute a violation of any of
the Environmental Laws or Environmental Permits.
(iv) G-P has maintained all records in respect of the G-P
Business required by the Environmental Laws and Environmental Permits, in the
manner and for the time periods as so required.
(v) Since June 30, 1994, G-P has received no notice of
investigation or non-compliance or written order from any of the Environmental
Authorities, including any notice of contamination or clean-up requirements,
pursuant to any of the Environmental Laws with respect to the G-P Business.
30
(c) G-P has no liability for release of PCB's and other Hazardous
Substances into the Fox River, Wisconsin or its associated waterways.
4.12 INTELLECTUAL PROPERTY.
(a) Schedule 4.12 sets forth a list and description (including the
country of registration) of all issued or registered U.S., Canadian and Mexican
patents and trademarks comprising the owned G-P Intellectual Property currently
(or, to the Knowledge of G-P, within the last 12 months) used in the G-P
Business (other than "shrink wrap" consumer software licenses). No third party
has rights in, or otherwise has the right to restrict G-P's use of, G-P
Intellectual Property owned by G-P, and, to G-P's Knowledge, no third party has
rights in, or otherwise has the right to restrict the Company's use of the G-P
Intellectual Property as of and following the Closing.
(b) To the Knowledge of G-P, no product, component, method,
process, or material (including computer software) used, sold or manufactured by
the G-P Business infringes on, misappropriates, or otherwise violates a valid
and enforceable intellectual property right of any other Person.
(c) There are no demands, actions or proceedings pending or, to
the Knowledge of G-P, threatened, against G-P Relating to the G-P Business
alleging infringement, misappropriation or violation of any intellectual
property right of any other Person, and, to the Knowledge of G-P, no Person is
infringing, misappropriating, challenging, or violating, the Intellectual
Property owned by G-P, except for challenges, infringements, misappropriation or
violations which, individually or in the aggregate, would not have a Material
Adverse Effect.
(d) All of the G-P Intellectual Property will be licensed to the
Company at Closing, except to the extent certain Intellectual Property used by
G-P to provide services under the Operational Support Agreement is specifically
excluded thereunder. G-P agrees that Intellectual Property provided under the
Operational Support Agreement will be provided to the Company on and after
Closing on the same terms and conditions under which it was available to the G-P
Business prior to the Closing in accordance with the terms of the Transition
Services Agreement.
(e) Schedule 4.12(e) sets forth G-P's efforts at addressing the
Year 2000 issue in the G-P Business. The information set forth therein is
accurate as of the date hereof, in all material respects. G-P has developed and
begun implementing a Project Plan to remediate and/or replace Computer Systems
that are used or relied upon in the G-P Business but are not Year 2000 Ready.
Such remediation and/or replacement is scheduled to be completed in 1999.
4.13 LABOR MATTERS. Except as disclosed on Schedule 4.13:
(a) As of the date hereof, G-P is not a party to any labor or
collective bargaining agreement or similar agreement with respect to Employees
of the G-P Business, no such Employees are represented by any labor organization
and, to the Knowledge of G-P, there are no organizing or de-certification
activities (including any demand for recognition or certification
31
proceedings pending or threatened to be brought or filed with the National Labor
Relations Board or other labor relations tribunal) involving the G-P Business;
(b) As of the date hereof, there are no strikes, work stoppages,
slowdowns, lockouts, unfair labor practice charges pending or, to the Knowledge
of G-P, threatened against or involving the Employees of the G-P Business;
(c) There are no complaints, charges, claims or grievances against G-P
pending or, to the Knowledge of G-P, threatened to be brought or filed with any
Governmental Authority, arbitrator or court based on or arising out of the
employment by G-P of any Employee of the G-P Business, except for those which,
individually or in the aggregate, would not have a Material Adverse Effect;
(d) G-P is in compliance with all Laws Relating to the employment of
labor, including all such Laws Relating to wages, hours, collective bargaining,
discrimination, civil rights, safety and health, immigration, workers'
compensation, layoffs, and the collection and payment of withholding and/or
Social Security Taxes and similar Taxes, except where the failure to be in
compliance would not have a Material Adverse Effect; and
(e) G-P has given all notices required to be given prior to the Closing
Date under WARN Obligations Relating to any plant closing or mass layoff that
occurred during the 90 days immediately preceding the Effective Time pertaining
to the G-P Business.
4.14 CONTRACTS. Schedule 4.14 sets forth a list, as of the date hereof,
of each Contract that is Related to the G-P Business other than (a) G-P Real
Property Leases, which are listed on Schedule 4.15, and collective bargaining
agreements, which are listed on Schedule 4.13, (b) purchase orders or similar
agreements for the purchase or sale of goods or services in the ordinary course
of business, (c) confidentiality agreements entered into in the ordinary course
of business in connection with the purchase and sale of Inventory, and (d) any
Contract which requires a payment or imposes an obligation on either party
thereto of less than $1,000,000 in the aggregate. Schedule 4.14 also identifies
any Contract that contains a non-compete covenant or similar provision that
could materially restrict the Company in its conduct of the G-P Business
following Closing, any employment agreement with any Employee of the G-P
Business, any employment agreement included in the G-P Contributed Assets or G-P
Assumed Liabilities, any Contract between any Affiliates of G-P, on one hand,
and G-P on the other hand, any agreements Related to payments in lieu of taxes,
any agreement or license Related to Intellectual Property (other than "shrink
wrap" consumer software licenses), leases and license agreements for any
Computer Systems (other than "shrink wrap" consumer software licenses), all
material agreements for telecommunications voice (including without limitation,
local, long distance and toll free service) and data services, Internet access,
hosting and use services. Each Contract set forth on Schedule 4.14 is a valid
and binding agreement of G-P and, to the Knowledge of G-P, is in full force and
effect. Except as otherwise provided in Schedule 4.14, G-P is not, and, to G-P's
Knowledge, no other party thereto is, in default in any material respect under
any Contract listed on Schedule 4.14 or any collective bargaining agreement
listed on Schedule 4.13.
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4.15 REAL ESTATE LEASES. Schedule 4.15 sets forth a list, as of the
date hereof, of each material written G-P Real Estate Lease with a term of more
than one month that is Related to the G-P Business. Each G-P Real Estate Lease
set forth on Schedule 4.15 is a valid and binding agreement of G-P and is in
full force and effect. There are no defaults under any G-P Real Estate Lease
listed on Schedule 4.15 which defaults have not been cured or waived and which
would, individually or in the aggregate, have a Material Adverse Effect.
4.16 ENTIRE BUSINESS; TITLE TO PROPERTY
(a) Except as set forth in Schedule 4.16(a) and Schedule 4.6(a),
the G-P Contributed Assets, the G-P Retained Assets (including cash and cash
accounts, disbursement accounts, invested securities and other short and medium
term investments, the G-P Marks, the G-P Plans, and G-P's insurance policies),
and the rights specifically provided or made available to the Company under the
Ancillary Agreements, include all of the buildings, machinery, equipment and
other assets (whether tangible or intangible) necessary for the Company
immediately after Closing to conduct in all material respects the G-P Business
as conducted as of the date hereof, and as conducted during the 12-month period
prior to the date hereof (subject to changes expressly permitted by the terms
hereof to be made after the date hereof); provided, however, that no
representation is made as to the assignability of Government Authorizations.
(b) G-P has good (and, in the case of its Owned Real Property,
marketable) title to, or a valid and binding leasehold interest in, the G-P
Contributed Assets, free and clear of all Encumbrances, except (i) as set forth
in Schedule 4.16(b) and (ii) any Permitted Encumbrances.
(c) G-P Contributed Assets do not include any equity interest in
any Subsidiary.
(d) The G-P Contributed Assets are in good operating condition and
repair (subject to normal wear and tear). Except as set forth on Schedule
4.16(d), to G-P's Knowledge, there are no material structural or mechanical
defects with respect to any buildings, improvements or equipment included in the
G-P Contributed Assets, which defects are reasonably likely to have a Material
Adverse Effect.
4.17 FINDER'S FEES. Except for Morgan Stanley Dean Witter Co.,
whose fees will be paid by G-P, there is no investment banker, broker or finder
which has been retained by or is authorized to act on behalf of G-P who might be
entitled to any fee or commission from G-P or the Company in connection with the
transactions contemplated by this Agreement.
4.18 INSURANCE. Schedule 4.18 attached hereto sets forth the
following information with respect to each insurance policy to which G-P, with
respect to the G-P Business, has been a party, a named insured, or otherwise the
beneficiary of coverage at any time with in the past five years:
(a) the name of the insurer, the name of the policyholder, and the name
of each covered insured;
33
(b) the scope, period and amount of coverage; and
(c) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
Schedule 4.18 also describes any self insurance arrangements affecting the G-P
Business. As of the date hereof, G-P has not received any written notice of any
retroactive premium increase or assessment applicable to the G-P Business.
Except as disclosed on Schedule 4.18, all of such policies are in full force and
effect.
4.19 NO UNDISCLOSED LIABILITIES. With respect to the G-P Business,
G-P does not have any obligations or liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether or not known to G-P, whether due
or to become due and regardless of when asserted) arising out of transactions
entered into at or prior to the Closing, or any action or inaction at or prior
to the Closing, or any state of facts existing at or prior to the Closing other
than: (a) liabilities set forth on G-P's Financial Statements (including any
notes thereto, if any); (b) liabilities and obligations arising from or in
connection with matters disclosed pursuant to G-P's representations and
warranties in this Agreement or in the Disclosure Schedules (none of which,
except as set forth on Schedule 4.7, is a liability resulting from a breach of
contract, breach of warranty, tort, infringement claim or lawsuit), other than
liabilities and obligations arising from or in connection with matters disclosed
pursuant to Section 4.11; (c) liabilities and obligations arising from or in
connection with matters disclosed pursuant to Section 4.11; (d) liabilities and
obligations which have arisen after April 30, 1999 in the ordinary course of
business (none of which, except as set forth on Schedule 4.7, is a liability
resulting from a breach of contract, breach of warranty, tort, infringement
claim or lawsuit); and (e) such other liabilities or obligations that do not
have a Material Adverse Effect.
4.20 NO MATERIAL ADVERSE CHANGE. Except as disclosed on Schedule 4.20,
since April 30, 1999, G-P has conducted the G-P Business in the ordinary course
and in a manner consistent with the practices applied during the periods
specified in the G-P Financial Statements, and there has been no Material
Adverse Effect in the G-P Business. Except as set forth on Schedule 4.20, and
except as such does not have a Material Adverse Effect, G-P has not with respect
to the G-P Business:
(a) been a party to any corporate reorganization, restructuring or
merger or amalgamation or amended its certificate or articles of incorporation
or bylaws;
(b) declared or paid any dividend or declared or made any other
distribution (whether in cash, stock or property) on any of the shares of its
capital stock;
(c) incurred or discharged any obligation or liability (whether
accrued, absolute or contingent) other than in the ordinary course of and in a
manner consistent with past practices for the G-P Business;
34
(d) entered into any transaction, contract, agreement, indenture,
instrument or commitment other than in the ordinary course of and in a manner
consistent with past practices for the G-P Business;
(e) suffered or incurred any material damage, destruction, loss or
liability (whether or not covered by any insurance);
(f) experienced any strike, lockout or other labor trouble such as slow
down or work stoppage, or any loss of any of its key Employees, customers,
suppliers or distributors;
(g) suffered any shortage or cessation or interruption of raw
materials, supplies or utilities that could have a Material Adverse Effect on
the G-P Business;
(h) made any change in its accounting principles, policies and
practices as utilized in the preparation of the G-P Financial Statements;
(i) made any loan or advance, or assumed, guaranteed, endorsed or
otherwise become liable with respect to the liabilities or obligations of any
other Person or entity, or permitted any of its assets to be subjected to any
lien or security interest (except for Permitted Encumbrances);
(j) granted to any customer any allowance or discount or changed its
pricing, credit or payment policies other than in the ordinary course of and in
a manner consistent with past practices for the G-P Business (except for
non-material variations therefrom in the aggregate;
(k) incurred any indebtedness, liability or obligation (absolute,
accrued, contingent or otherwise) other than in the ordinary course of and in a
manner consistent with past practices for the G-P Business;
(l) sold, leased or otherwise disposed of any of its assets or any
right, title or interest therein other than in the ordinary course of and in a
manner consistent with past practices for the G-P Business;
(m) made any payment to, or for the benefit of, any present or former
Employee, director, officer or shareholder otherwise than at the regular rates
payable to them, by way of salary, pension, bonus or other remuneration
consistent with past practices for the G-P Business;
(n) committed to any capital expenditure project or made any
investment, in either case in excess of Five Hundred Thousand Dollars ($500,000)
not disclosed to CSK prior to the date of this Agreement; or
(o) authorized or agreed to do any of the foregoing matters referred to
in this Section 4.20.
35
4.21 INDEBTEDNESS FOR BORROWED MONEY There is no indebtedness for
borrowed money included in the G-P Assumed Liabilities.
4.22 KNOWLEDGE AS OF CLOSING DATE. G-P has no Knowledge, as of the
Closing Date, that any representation or warranty made by the CSK Parties in
Article III (and related schedules) is untrue.
4.23 ORGANIZATION OF COMPANY. The Company is a limited liability
company, duly organized, validly existing and in good standing under the laws of
the State of Delaware.
4.24 AUTHORIZATION OF COMPANY. The Company has full limited liability
company power and authority to execute and deliver this Agreement, and to
perform its obligations hereunder and under any agreement or contract
contemplated hereby, including the Ancillary Agreements. The execution, delivery
and performance by the Company of this Agreement and the agreements and
contracts contemplated hereby has been duly and validly authorized and no
additional limited liability company authorization or consent is required in
connection with the execution, delivery and performance by the Company of this
Agreement and the agreements and contracts contemplated hereby.
4.25 ACTIVITIES OF COMPANY. Other than entering into this Agreement and
the agreements and contracts contemplated hereby, the Company has not entered
into any agreements or conducted any other business.
4.26 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article IV, neither G-P, nor
any other Person makes any other express or implied representation or warranty
on behalf of G-P.
ARTICLE V
COVENANTS
5.1 COVENANTS REGARDING EMPLOYEES.
(a) At the Closing, G-P, the CSK Parties and the Company shall enter
into the Human Resources Agreement, and shall take all actions required by them
pursuant to such Human Resources Agreement.
(b) CSK shall retain sponsorship of the CSK Plans, and neither the
Company nor G-P shall be entitled to any assets or be liable for any obligations
of the CSK Plans except as provided in the Human Resources Agreement.
36
(c) G-P shall retain sponsorship of the G-P Plans and no CSK Party
shall be entitled to any assets or be liable for any obligations of the G-P
Plans except as provided in the Human Resources Agreement.
5.2 COMPLIANCE WITH WARN AND SIMILAR LAWS. The Company will timely give
all notices required to be given with respect to WARN Obligations Relating to
actions taken on and after the Closing Date.
5.3 FURTHER ASSURANCES. At any time after the Closing Date, the CSK
Parties, G-P and the Company shall promptly execute, acknowledge and deliver any
other assurances or documents reasonably requested by the Company, G-P or the
CSK Parties, as the case may be, and necessary for them or it to satisfy their
or its respective obligations hereunder or obtain the benefits contemplated
hereby. Without limiting the generality of the foregoing, the Company agrees
that if any of the Contributed Subsidiaries are found to own assets that are not
part of the WISCO Contributed Assets, or if any Retained Assets are
inadvertently transferred to the Company, the Company shall transfer such assets
to G-P or the appropriate CSK Party, as applicable, at G-P's or such CSK Party's
expense, as applicable, but without consideration. If after the Closing either
the Company, a CSK Party or G-P identifies any assets of any CSK Party or G-P
that Relates to the Business and is not a Retained Asset of the CSK Party or GP,
the party retaining any such assets shall transfer such assets to the Company at
the transferring party's expense without further consideration.
5.4 USE OF G-P INTELLECTUAL PROPERTY AND CSK MARKS. At Closing, G-P
shall provide to the Company a non-exclusive license, substantially in the form
set forth in Schedule 5.4(a) hereto, to use the G-P Intellectual Property.
5.5 CERTAIN MATTERS RELATED TO RETAINED AND ASSUMED LIABILITIES.
(a) With respect to all Retained Liabilities and in particular
indemnification under Sections 7.2(a)(ii) and 7.3(a)(ii), the Company shall, at
the expense of the CSK Parties or G-P as applicable, provide reasonable
cooperation including providing the CSK Parties or G-P, as applicable, as
promptly as practicable with any notices and other information received by the
Company as well as all relevant materials, information and data requested by the
CSK Parties or G-P, as applicable, including reasonable access (without charge)
to Employees of the Company and to the Real Property.
(b) With respect to all Assumed Liabilities, G-P or the CSK Parties,
as the case may be, shall, at the Company's expense, reasonably cooperate with
the Company, provide the Company as promptly as possible with any notices and
other information received by such parties as well as all relevant materials,
information and data requested by the Company and shall grant the Company,
without charge, reasonable access to Employees of the CSK Parties or G-P, as
applicable.
5.6 INTERCOMPANY AGREEMENTS.
37
(a) As of the Effective Time, G-P shall terminate and shall cause its
Affiliates to terminate, any and all agreements between G-P and its Affiliates
to the extent such agreements Relate to the G-P Business, except as contemplated
in the Ancillary Agreements. Without limiting the foregoing, all intercompany
loans between G-P and any of its Affiliates Relating to the G-P Business shall
be paid or otherwise eliminated prior to the Effective Time.
(b) As of the Effective Time, the CSK Parties shall terminate and shall
cause its Affiliates to terminate, any and all agreements between any of the CSK
Parties and its Affiliates to the extent such agreements Relate to the WISCO
Business, except as contemplated in the Ancillary Agreements. Without limiting
the foregoing, all intercompany loans between the CSK Parties and any of its
Affiliates Relating to the WISCO Business shall be paid or otherwise eliminated
prior to the Effective Time.
5.7 RECORDS AND RETENTION AND ACCESS. The Company shall keep and
preserve in an organized and retrievable manner the Books and Records it
receives from either party for at least seven years from the Closing Date. The
Company shall neither dispose of nor destroy such Books and Records without
first offering to turn over possession thereof to the party that contributed
such Books and Records by written notice to such party at least thirty (30) days
prior to the proposed date of such disposition or destruction. While such Books
and Records remain in existence, each party shall allow the other party, its
representatives, attorneys and accountants, at the requesting party's expense,
access to the Books and Records upon reasonable request and advance notice and
during normal business hours for the purpose of interviewing, examining and
copying in connection with such parties' preparation of financial statements.
5.8 INSURANCE.
(a) G-P and the CSK Parties shall use commercially reasonable efforts
to assign to the Company, to the fullest extent, all of the benefits and rights
under any insurance policies held by them and/or any of their Affiliates with
respect to any Losses arising out of, Related to or in connection with the
Contributed Assets, the Assumed Liabilities and their respective Businesses
(other than benefits and rights to the extent Related to Retained Assets or
Liabilities) with respect to events occurring prior to the Closing Date (it
being understood that to the extent rights under such insurance policies include
claims for Losses related to Contributed Assets, then such claims shall be
reflected as an insurance receivable on the Closing Working Capital Statement).
The Company shall have the right to such benefits and rights only to the extent
actually paid or payable, and exclusive of any deductibles (including pass
through deductibles for which either party or any Affiliate of such party is
required to reimburse the insurer). To the extent such assignment is not
permitted, G-P or the CSK Parties, as applicable, shall use commercially
reasonable efforts on the Company's behalf to obtain such proceeds or benefits
for the Company, or otherwise to provide the Company with the benefit equivalent
to that which would have been available had such assignment been permitted.
(b) The CSK Parties and G-P shall cooperate with the Company in
obtaining insurance policies for the Business to be in effect from and after
Closing. Notwithstanding such
38
assistance, all decisions with respect to such policies shall be made solely by
the Company, and neither the CSK Parties nor G-P shall have any liability,
whether to the Company or to any other Person, whether as an advisor, broker or
otherwise, under any other theory, in connection with providing such assistance
and cooperation. The CSK Parties and G-P make no assurances whatsoever with
respect to such insurance coverage, including the availability or price thereof.
5.9 SPECIAL CSK RETAINED LIABILITY. Notwithstanding Section 2.1(a)
hereof, CSK shall retain and be solely responsible for, and CSK and WISCO shall
indemnify and hold harmless the Company, G-P and all G-P Affiliates from and
against, any and all costs, liabilities, damages, expenses or Losses of any kind
whatsoever which may be incurred by or assessed against any of them arising out
of or in any way related to the release, spill, leak, pumping, pouring,
emitting, emptying, discharge, injecting, escaping, leaching, dumping, disposal
or arranging for disposal (hereinafter "release") of (i) PCBs and/or any other
Hazardous Substance into, on or around the Fox River in Wisconsin and its
associated waterways by any CSK Parties, and (ii) PCBs into, on or around any
landfill, disposal site or dump located in Wisconsin, by CSK, WISCO or any of
their Affiliates or successors or predecessors in interest (the "Fox River
Liability"). The Company shall provide reasonable cooperation to CSK, WISCO and
their predecessors or successors in interest in their defense of any liability
for the release of PCBs and/or other Hazardous Substances into, on or around the
Fox River and its associated waterways, and all costs incurred by the Company in
so cooperating will be reimbursed to it by CSK or WISCO. Such indemnification
shall not be limited by any Survival Period, Deductible or WISCO Cap set forth
in Article VII. For purposes of this Section 5.9, the term "Fox River Liability"
shall not include liability for dumping or disposal of Hazardous Substances by
WISCO at the Vinland #1 and #2 disposal sites owned by WISCO.
5.10 PREPARATION OF REGISTRATION STATEMENT. As soon as practicable
after the execution and delivery of this Agreement, the Company and G-P shall
prepare and file with the Securities and Exchange Commission the Registration
Statement in connection with the registration under the Securities Act of debt
to be incurred by the Company to refinance the Company Debt. The CSK Parties
each shall cooperate to the extent such cooperation is reasonably required to
file such Registration Statement; provided that the CSK Parties shall not be
required to execute any documents other than a WISCO debt indemnity as
contemplated in the Operating Agreement.
5.11 USE OF WISCO NAME. As soon as practicable and in any event within
three months following the Closing, WISCO shall change its corporate name, and
immediately following the Closing neither WISCO, CSK nor any Subsidiary or
Affiliate of CSK shall make use of the names "Wisconsin Tissue Mills",
"Wisconsin Tissue" or "WISCO" or any names confusingly similar to such names
other than in connection with the defense of litigation.
5.12 PRORATION OF CERTAIN CHARGES. The following charges and payments
may be prorated on a per diem basis and apportioned between each party
transferring Contributed Assets on the one hand and the Company on the other, as
of the Closing Date: property taxes, utility charges, prepaid items, license and
permit fees, and similar charges imposed with respect to the Contributed Assets.
To the extent not reflected on the Final Working Capital Statement, each
39
party transferring Contributed Assets shall be liable for (and shall reimburse
the Company to the extent the Company shall have paid) that portion of such
charges Relating to, or arising in respect to, periods on or prior to the
Closing Date, and the Company shall be liable for (and shall reimburse the Party
contributing such assets to the extent the contributing party shall have paid)
that portion of the charges Relating to, or arising in respect to, periods after
the Closing Date.
ARTICLE VI
CONDITIONS TO CLOSING
[Intentionally Deleted]
ARTICLE VII
SURVIVAL; INDEMNIFICATION
7.1 SURVIVAL. The representations and warranties contained in this
Agreement shall survive the Closing (regardless of any investigation, inquiry or
examination made by or on behalf of, or any Knowledge of any party hereto or the
acceptance of any party or on its behalf of a certificate and opinion) for the
respective periods (each, a "Survival Period") set forth in this Section 7.1.
All of the representations and warranties of the CSK Parties and G-P contained
in this Agreement and all claims and causes of action with respect thereto shall
terminate on April 30, 2001, except that (a) the representations and warranties
set forth in Section 3.11, 3.19(c) and 4.11(a)-(b) shall terminate upon the
expiration of the 36 month period commencing on the Closing Date, (b) the
representations and warranties set forth in Sections 3.8, 3.9, 3.12, and 4.8,
4.9, and 4.12 shall survive until the expiration of the applicable statute of
limitation (including any extension thereof), and (c) the representations and
warranties set forth in Sections 3.1, 3.2, 3.5, 3.17, and 4.1, 4.2, 4.5,
4.11(c), and 4.17 shall have no expiration date. Any claim for indemnification
for breach of a representation and warranty must be made during the applicable
Survival Period. In the event notice (within the meaning of Section 7.5(a)) of
any claim for indemnification for a breach of a representation or warranty is
given within the applicable Survival Period, an Indemnifying Party's obligations
with respect to such indemnification claim shall survive until such time as such
claim is finally resolved.
7.2 INDEMNIFICATION BY G-P.
(a) G-P shall indemnify, defend and hold harmless CSK, WISCO, their
Affiliates and, if applicable, their respective directors, officers,
shareholders, partners, members, attorneys, accountants, agents and Employees
and their heirs, successors and assigns (the "WISCO Indemnified Parties") and
the Company from, against and in respect of any damages, claims, losses,
charges, actions, suits, proceedings, deficiencies, Taxes, interest, penalties,
and reasonable costs and expenses (including reasonable attorneys' fees, removal
costs, remediation costs, closure costs, fines, penalties and expenses of
investigation and ongoing monitoring) (collectively, the "Losses") imposed on,
sustained, incurred or suffered by or asserted against any
40
of the WISCO Indemnified Parties or the Company, directly or indirectly,
Relating to or arising out of:
(i) subject to Section 7.2(b), any breach of any representation or
warranty made by G-P in this Agreement;
(ii) the G-P Retained Liabilities; and
(iii) the breach of any covenant or agreement of G-P contained in
this Agreement.
(b) G-P shall not be liable to the WISCO Indemnified Parties or the
Company for any Losses with respect to the matters contained in Section
7.2(a)(i) (other than the representation in Section 4.6) until the Losses
therefrom first exceed an aggregate amount equal to $3,760,000 (the "G-P
Deductible"), and in that event, G-P shall be liable for all Losses in excess
thereof up to an aggregate amount equal to 50% of the value of the G-P Business
as set forth in Section 2.8(a) hereof (the "G-P Cap"); PROVIDED, HOWEVER, that
the G-P Deductible and the G-P Cap shall not apply to claims arising out of the
breach of a representation or warranty, if such representation or warranty was
made fraudulently by G-P or if such representation or warranty was, to the
Knowledge of G-P, false at the time made.
7.3 INDEMNIFICATION BY CSK.
(a) CSK and its Affiliates shall indemnify, defend and hold harmless
G-P, its Affiliates and, if applicable, their respective directors, officers,
shareholders, partners, members, lenders, attorneys, accountants, agents and
Employees and their heirs, successors and assigns (the "G-P Indemnified
Parties") and the Company from, against and in respect and to the extent of any
Losses imposed on, sustained, incurred or suffered by or asserted against each
of the G-P Indemnified Parties or the Company, directly or indirectly, Relating
to or arising out of:
(i) subject to Section 7.3(b), any breach of any representation or
warranty made by any CSK Party in this Agreement;
(ii) the WISCO Retained Liabilities; and
(iii) the breach of any covenant or agreement of any CSK Party
contained in this Agreement.
(b) CSK shall not be liable to the G-P Indemnified Parties or the
Company for any Losses with respect to the matters contained in Section
7.3(a)(i) (other than the representation in Section 3.6) until the Losses
therefrom first exceed an aggregate amount equal to $7,750,000 (the "WISCO
Deductible"), and in that event, WISCO shall be liable for all Losses in excess
thereof paid or suffered by G-P or the Company up to an aggregate amount equal
to 50% of the value of the WISCO Business as set forth in Section 2.8 hereof
(the "WISCO Cap"); PROVIDED, HOWEVER, that the WISCO Deductible and the WISCO
Cap shall not apply to claims arising out of the
41
breach of a representation or warranty, if such representation or warranty was
made fraudulently by WISCO or if such representation or warranty was, to the
Knowledge of WISCO, false at the time made.
7.4 INDEMNIFICATION BY THE COMPANY.
The Company shall indemnify, defend and hold harmless the G-P
Indemnified Parties or the WISCO Indemnified Parties, as the case may be, from
and against and in respect and to the extent of any Losses imposed on,
sustained, incurred or suffered by or asserted against either the G-P
Indemnified Parties or the WISCO Indemnified Parties, directly or indirectly,
Relating to or arising out of (i) the breach of any covenant or agreement of the
Company in this Agreement; or (ii) the Assumed Liabilities; provided that the
Company shall have no indemnification obligations hereunder for any Losses
resulting from a payment of a claim made pursuant to clauses (i) and (ii) above
and incurred or suffered by any Person solely in such Person's capacity as a
member of the Company, equity owner or debt holder of the Company, including
Losses for diminution of the value of such equity, debt or member interest.
7.5 INDEMNIFICATION PROCEDURES.
(a) Any Indemnified Person making a claim for indemnification pursuant
to Section 7.2, 7.3 or 7.4 above (an "Indemnified Party") must give the party
from whom indemnification is sought (an "Indemnifying Party") notice of such
claim (in a manner consistent with Section 10.1 hereof) describing such claim
with reasonable particularity and the nature and amount of the Loss to the
extent that the nature and amount of such Loss is known at such time (an
"Indemnification Claim Notice") promptly after the Indemnified Party receives
any written notice of any action, lawsuit, proceeding, investigation or other
claim (a "Proceeding") against or involving the Indemnified Party by a
Governmental Authority or other third party or otherwise discovers the
liability, obligations or facts giving rise to such claim for indemnification;
provided that the failure to notify or delay in notifying an Indemnifying Party
will not relieve the Indemnifying Party of its obligations pursuant to Section
7.2, 7.3 or 7.4, as applicable, except to the extent that (and only to the
extent that) such failure shall have (i) caused or materially increased the
Indemnifying Party's liability, (ii) resulted in the forfeiture by the
Indemnifying Party of substantial rights and defenses or (iii) otherwise
materially prejudiced the Indemnifying Party.
(b) The Indemnifying Party shall have 30 days from the date the
Indemnification Claim Notice is deemed given pursuant to Section 10.1 hereof
(the "Notice Period") to notify the Indemnified Party (i) whether or not the
Indemnifying Party disputes the liability of the Indemnifying Party to the
Indemnified Party with respect to such claim or demand and (ii) whether or not
it desires to defend the Indemnified Party against such claim or demand.
(c) If (i) the Indemnifying Party agrees in writing that the subject
matter of the claim is subject to indemnification under this Article VII and
(ii) the claim for indemnification does not relate to a matter (A) that, if
determined adversely, could reasonably be expected to expose the Indemnified
Party to criminal prosecution or penalties, (B) that, if determined adversely,
could
42
reasonably be expected to result in the imposition of a consent order,
injunction or decree which would significantly restrict the activity or conduct
of the Indemnified Party or any Affiliate thereof, or (C) as to which the
Indemnified Party shall have reasonably concluded, in good faith, after
consultation with the Indemnifying Party, that such representation is likely to
result in a conflict of interest or materially jeopardize the viability of such
defense, then the Indemnifying Party shall have the right to defend the
Indemnified Party by appropriate proceedings and shall have the sole power to
direct and control such defense. If any Indemnified Party desires to participate
in any such defense, it may do so at its sole cost and expense.
(d) If the claim relates to a matter for which both the Indemnifying
Party and any Indemnified Party could be liable or responsible hereunder, such
as a Loss for which both parties could be partially liable due to the applicable
Cap and the Deductible, the Indemnifying Party and the Indemnified Parties shall
cooperate in good faith in the defense of such action. In such event, no party
shall settle any claim without the prior consent of the other party (which
consent shall not be unreasonably withheld); provided, however, that neither an
Indemnified Party nor an Indemnifying Party shall be required to consent to any
settlement if the proposed settlement (i) does not provide for a full release of
all claims against such party, (ii) is on a basis which would result in the
imposition of a consent order, injunction or decree or any other restriction on
the activity or conduct of such party, or (iii) is on a basis which could, in
such party's judgment, expose such party to criminal liability or requires an
admission of wrongdoing by such party. If an Indemnified Party or an
Indemnifying Party does not consent to a definitive settlement proposed by the
other party (with respect to which a settlement agreement has been agreed to by
all parties other than such party) which settlement satisfies the foregoing
clauses (i) through (iii), then the party declining such settlement shall
thereafter have full control of the defense of such claim, and the maximum
liability of the party that proposed such settlement shall be as though such
matter had settled on the terms so proposed, including the amount of the
proposed settlement, together with all legal costs and expenses incurred in
connection with such matter through and including the proposed settlement date.
For purposes of Section 7.2 or 7.3, the actual amount of the Loss up to the
amount of such party's maximum liability (determined in accordance with the
preceding sentence) shall be the amount of the Loss of such Party for purposes
of determining whether the applicable Deductible has been met. Notwithstanding
anything in Section 7.2 or 7.3 to the contrary, if an Indemnified Party and all
other parties other than the Indemnifying Parties have reached a definitive
settlement agreement which satisfies the foregoing clauses (i) through (iii),
the amount of the Loss for purposes of determining whether the applicable Cap
has been met shall equal the amount contemplated by such definitive settlement
regardless of the actual amount of such Loss. If the parties agree to the
settlement, the relative liabilities of the parties for such Losses shall be
determined as provided in the other provisions of this Article VII.
(e) All costs and expenses incurred by the Indemnifying Party in
defending a claim or demand under Section 7.4(c), and all costs and expenses
incurred by the Indemnified Party in defending a claim or demand which the
Indemnifying Party has elected not to defend (including by virtue of its failure
to give timely notice to the Indemnified Party) or is not permitted to defend
under Section 7.4(c) shall be a liability of, and shall be paid by, the
Indemnifying Party, subject to any applicable Deductible and Cap.
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(f) To the extent the Indemnifying Party shall direct, control or
participate in the defense or settlement of any third-party claim or demand, the
Indemnified Party will give the Indemnifying Party and its counsel access to,
during normal business hours, the relevant business records and other documents,
and shall permit them to consult with the Employees and counsel of the
Indemnified Party. The Indemnifying Party and Indemnified Parties shall use
their best efforts in the defense of all such claims.
(g) In connection with the indemnification obligations set forth in
Sections 7.2(a)(ii) and 7.3(a)(ii), CSK Parties, G-P and the Company shall
comply with the obligations contained in Section 5.5.
7.6 ACKNOWLEDGMENT REGARDING ENVIRONMENTAL LIABILITIES. G-P and each of
the CSK Parties acknowledge the allocation of relative responsibility for
liabilities under Environmental Laws under this Agreement is a material term of
this Agreement, and that (i) they have taken such matters into consideration in
determining the financial and other terms of this transaction, and (ii) they
understand that the Company is accepting all risks resulting or arising in any
way from any known or unknown liabilities in connection with such matters
arising in connection with or in any way relating to the Businesses (other than
the Retained Environmental Liabilities of either G-P or the CSK Parties) and
that CSK and WISCO are retaining all risks Relating to the Retained
Environmental Liabilities and indemnifying G-P and the Company for certain
Losses Relating to environmental matters under Section 7.3(a) and Section 5.9.
G-P and the CSK Parties acknowledge that none of them shall have any claim of
any nature against the other or the other's Affiliates in connection with any
matters Relating to known or unknown soil or groundwater contamination or any
other claims under any Environmental Laws, other than as set forth herein.
7.7 CHARACTERIZATION OF INDEMNIFICATION PAYMENTS. (a) To the extent the
Company is an Indemnified Party, any payments to the Company pursuant to this
Article VII shall not result in an adjustment to any party's capital account in
the Company or percentage of ownership interest of the Company; and (b) all
amounts paid to G-P, or CSK, as the case may be, under this Article VII shall
not be treated as adjustments to the amount contributed to the Company by G-P or
CSK, pursuant to Section 2.4(a) or (b) hereof.
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ARTICLE VIII
TAX COVENANTS
8.1 LIABILITY FOR TAXES.
(a) CSK shall be liable for, and shall indemnify, defend and hold the
Company harmless from and against, and shall be entitled to all refunds of, any
and all Taxes imposed on or with respect to the WISCO Contributed Subsidiaries,
or their respective assets, operations or activities for any Pre-Closing Period,
except to the extent that any such Taxes are reflected on the Final Working
Capital Statement or result from a carryback from any Post-Closing Period;
provided, however, that the amount of any indemnity obligation of CSK shall be
reduced by the amount of any Tax Benefits (for any period) realized or to be
realized by the Company, G-P or its Affiliates, or any Contributed Subsidiary as
a result of any adjustment to a Tax item for any Pre-Closing Period.
(b) The Company shall be liable for, and shall indemnify, defend and
hold CSK harmless from and against, any and all Taxes imposed on or with respect
to the Contributed Subsidiaries or their respective operations, ownership,
assets or activities for any Post-Closing Period.
(c) Tax items shall be apportioned between Pre-Closing Periods and
Post-Closing Periods based on a closing of the Books and Records of the relevant
entity or entities as of the Closing Date (provided that (i) depreciation,
amortization and depletion for any Straddle Period shall be apportioned on a
daily pro rata basis and (ii) any Taxes imposed on a periodic basis (including
Real Property Taxes, but not including Taxes based on income and receipts) for
any Straddle Period shall be apportioned on a daily pro rata basis).
Notwithstanding anything to the contrary in the preceding sentence, the parties
agree that for U.S. federal income Tax purposes, Tax items for any Straddle
Period shall be apportioned between Pre-Closing Periods and Post-Closing Periods
in accordance with U.S. Treasury Regulation Section 1.1502-76(b), which
regulation shall be reasonably interpreted by the parties in a manner intended
to achieve the method of apportionment described in the preceding sentence.
Neither CSK nor G-P will exercise any option or election (including any election
to ratably allocate a Tax year's items under Treasury Regulation Section
1.1502-76(b) (2) (ii)) to allocate Tax items in a manner inconsistent with this
section.
(d) G-P shall be liable for, and shall indemnify, defend and hold the
Company harmless from and against, and shall be entitled to all refunds of, any
and all Taxes imposed on or with respect to the G-P Contributed Subsidiaries, or
their respective assets, operations or activities for any Pre-Closing Period,
except to the extent that any such Taxes are reflected on the Final Working
Capital Statement or result from a carryback from any Post-Closing Period;
provided, however, that the amount of any indemnity obligation of G-P shall be
reduced by the amount of any Tax Benefits (for any period) realized or to be
realized by the Company, CSK or its Affiliates, or any Contributed Subsidiary as
a result of any adjustment to a Tax item for any Pre-Closing Period.
45
(e) The Company shall be liable for, and shall indemnify, defend and
hold G-P harmless from and against, any and all Taxes imposed on or with respect
to the Contributed Subsidiaries or their respective operations, ownership,
assets or activities for any Post-Closing Period.
(f) Tax items shall be apportioned between Pre-Closing Periods and
Post-Closing Periods based on a closing of the Books and Records of the relevant
entity or entities as of the Closing Date (provided that (i) depreciation,
amortization and depletion for any Straddle Period shall be apportioned on a
daily pro rata basis and (ii) any Taxes imposed on a periodic basis (including
Real Property Taxes, but not including Taxes based on income and receipts) for
any Straddle Period shall be apportioned on a daily pro rata basis).
Notwithstanding anything to the contrary in the preceding sentence, the parties
agree that for U.S. federal income Tax purposes, Tax items for any Straddle
Period shall be apportioned between Pre-Closing Periods and Post-Closing Periods
in accordance with U.S. Treasury Regulation Section 1.1502-76(b), which
regulation shall be reasonably interpreted by the parties in a manner intended
to achieve the method of apportionment described in the preceding sentence.
Neither G-P nor CSK will exercise any option or election (including any election
to ratably allocate a Tax year's items under Treasury Regulation Section
1.1502-76(b) (2) (ii)) to allocate Tax items in a manner inconsistent with this
section.
8.2 PREPARATION OF TAX RETURNS.
(a) CSK shall have the right and obligation to timely prepare and file,
and cause to be timely prepared and filed, when due (taking into account any
valid extension of the time for filing), any Tax Return that is required to
include the operations, ownership, assets or activities of WISCO, with respect
to the WISCO Contributed Assets, or of any WISCO Contributed Subsidiary for Tax
Periods ending on or before the Closing Date. CSK shall provide the Company with
copies of any such Tax Returns (to the extent that they relate to the WISCO
Contributed Assets or the Business and reasonably may have a material effect on
the Company's or its Affiliates' liability for Taxes) at least 30 days prior to
the due date (as extended) for filing such Tax Returns. In the event that the
Company reasonably determines that any such Tax Return should be modified, the
Company shall notify CSK of the Company's proposed modifications no later than
15 days from the date of receipt of such Tax Return. To the extent that CSK
disagrees with such modifications, the Company and CSK shall endeavor to agree
on the positions to be taken on such return. To the extent that they are unable
to do so, a CPA Firm (other than the regular auditor of CSK, G-P or the Company)
shall be retained to determine the position to be taken, with the fees and
expenses of such CPA Firm to be borne equally by WISCO and the Company. Any such
Tax Return which CSK is required to prepare under the terms hereof shall (to the
extent such Tax Return relates to the WISCO Contributed Assets or the Business
and reasonably may have a material effect on the Company or its Affiliates' Tax
liability) be prepared in accordance with past Tax accounting practices used
with respect to the Tax Returns in question (unless such past practices are no
longer permissible under the Applicable Tax Law), and to the extent any item is
not covered by such past practices (or such past practices are no longer
permissible under the Applicable Tax Law), in accordance with reasonable Tax
accounting practices selected by CSK. The Company shall have the right and
46
obligation to timely prepare and file, or cause to be timely prepared and filed,
when due (taking into account any valid extension of the time for filing), all
Tax Returns that are required to include the operations, ownership, assets or
activities Related to the Business after the Closing Date or of any WISCO
Contributed Subsidiary for any Tax Period ending after the Closing Date
(including, solely with respect to the WISCO Contributed Subsidiaries, Straddle
Period Tax Returns). The Company shall provide CSK with copies of any Straddle
Period Tax Returns required to be filed by the Company hereunder at least 30
days prior to the due date (as extended) for filing such Tax Returns. In the
event CSK reasonably determines that any Straddle Period Tax Return should be
modified, CSK shall notify the Company of CSK's proposed modifications no later
than fifteen days from the date of receipt of such Tax Return. To the extent
that the Company disagrees with such modifications, the Company and CSK shall
endeavor to agree on the positions to be taken on such return. To the extent
that they are unable to do so, a CPA Firm (other than the regular auditor of
CSK, the Company or G-P) shall be retained to determine the position to be
taken, with the fees and expenses of such accounting firm to be borne equally by
CSK and the Company. Any Straddle Period Tax Return which the Company is
required to prepare under the terms hereof shall be prepared in accordance with
past Tax accounting practices used with respect to the Tax Returns in question
(unless such past practices are no longer permissible under the Applicable Tax
Law), and to the extent any item is not covered by such past practices (or such
past practices are no longer permissible under the Applicable Tax Law), in
accordance with reasonable Tax accounting practices selected by the Company and
CSK.
(b) CSK and the Company shall prepare and provide to each other such
Tax information as is reasonably requested by the other party with respect to
the operations, ownership, assets or activities of the WISCO Business, with
respect to the WISCO Contributed Assets, or of any WISCO Contributed Subsidiary
to the extent such information is relevant to any Tax Return which CSK or the
Company has the right and obligation hereunder to file.
(c) To the extent necessary to comply with the provisions of Section
8.1, as between CSK and the Company, the party not preparing a Tax Return shall
pay the party preparing such Tax Return an amount equal to the non-preparing
party's share of the Taxes shown on such Tax Return, if any, determined in
accordance with the principles of Section 8.1, not later than 2 Business Days
before the filing of such Tax Return.
47
8.3 AMENDED TAX RETURNS.
(a) Any amended Tax Return or claim for Tax refund for any WISCO
Contributed Subsidiary for any Pre-Closing Period other than a Straddle Period
shall be filed, or caused to be filed, only by CSK, who shall not be obligated
to make (or cause to be made) such filing. CSK shall not, without the prior
written consent of the Company (which consent shall not be unreasonably withheld
or delayed), make or cause to be made, any such filing, to the extent such
filing, if accepted, reasonably might change the Tax liability of the Company or
any Affiliate of the Company for any Post-Closing Period. At the Company's
request, CSK shall file an amended Tax Return with respect to Taxes accrued on
the Final Working Capital Statement, except to the extent CSK reasonably
objects.
(b) Any amended Tax Return or claim for Tax refund for any Straddle
Period shall be filed by the party responsible for filing the original Tax
Return hereunder if either the Company or CSK so requests, except that such
filing shall not be done without the consent (which shall not be unreasonably
withheld or delayed) of the Company (if the request is made by CSK) or of CSK
(if the request is made by the Company).
(c) Any amended Tax Return or claim for Tax refund for any Post-Closing
Period other than a Straddle Period shall be filed, or caused to be filed, only
by the Company, who shall not be obligated to make (or cause to be made) such
filing. The Company shall not, without the prior written consent of CSK file, or
cause to be filed, any such filing to the extent that such filing, if accepted,
reasonably might change the Tax liability of CSK or any Affiliates of CSK for
any Pre-Closing Period or otherwise under this Agreement.
8.4 CARRY BACKS AND CARRY FORWARDS.
(a) Unless CSK, in its sole and absolute discretion, consents, the
Company shall not and shall not permit any WISCO Contributed Subsidiary to carry
back any Losses or credits accruing after the Closing Date to any Tax Return of
CSK, a WISCO Contributed Subsidiary, or any Affiliate of either CSK or a WISCO
Contributed Subsidiary for any Pre-Closing Period. To the extent permitted by
Applicable Tax Law, the Company shall and shall cause each WISCO Contributed
Subsidiary to make any elections and take all such actions necessary to avoid
any such carry back. To the extent that, under Applicable Tax Law, and with
CSK's consent, a WISCO Contributed Subsidiary carries back any Losses or credits
accruing after the Closing Date to any Tax Return of CSK or its Affiliates, CSK
shall pay to the Company the excess of the amount of (i) any Tax Benefit
actually realized by CSK and its Affiliates as a result of such carry back
promptly after such Tax Benefits are realized, over (ii) the amount of any Taxes
incurred by CSK and its Affiliates as a result of such carryback (including
without limitation, any Taxes incurred or to be incurred as a result of any
refund of Taxes or interest thereon). The amount of any Tax Benefit shall be
determined (i) by comparing the liability of CSK and its Affiliates for Taxes,
determined without the carry back, to the liability of CSK and its Affiliates
for Taxes, taking into account the carry back and (ii) by treating the carry
back as the last item claimed by CSK and its Affiliates in any given Tax Period.
48
(b) CSK shall not be liable hereunder for any decrease to any net
operating loss carry forward or any other Tax attributes available to a WISCO
Contributed Subsidiary resulting from adjustments by any Tax Authority to any
item of income, deduction, credit, or exclusion on Tax Returns for which CSK is
responsible.
8.5 ADDITIONAL TAX MATTERS.
(a) As of the Closing Date, CSK shall cause all Tax allocation, Tax
sharing, Tax reimbursement and similar arrangements or agreements applicable to
the WISCO Business between CSK and any Affiliates, on the one hand, and any of
the WISCO Contributed Subsidiaries, on the other, to be extinguished and
terminated with respect to such WISCO Contributed Subsidiaries and any rights or
obligations existing under any such agreement or arrangement to be no longer
enforceable, except to the extent reflected on the Final Working Capital
Statement.
(b) After the Closing Date, the Company will cause appropriate
Employees of the WISCO Contributed Subsidiaries to prepare usual and customary
Tax Return packages with respect to the Tax Period beginning January 1, 1999 and
ending as of the Closing Date. The Company will use its commercially reasonable
efforts to cause such Tax Return packages to be delivered to CSK on or before
March 1, 2000, but in any event not later that May 1, 2000.
(c) CSK and G-P agree that the Company will acquire hereunder
substantially all of the property used in the WISCO Business and that in
connection therewith the Company will employ individuals who immediately before
the Closing Date were employed in such trade or business by WISCO or the WISCO
Contributed Subsidiaries. Accordingly, pursuant to the Alternate Procedure
permitted by Rev. Proc. 96-60, 1996-2 C.B. 399, provided that the applicable CSK
Party makes available to the Company all necessary payroll records for the
calendar year that includes the Closing Date, the Company will furnish a Form
W-2 to each Employee employed by the Company who had been employed by the WISCO
Business, disclosing all wages and other compensation paid for such calendar
year, and Taxes withheld therefrom, and WISCO and the applicable CSK Party will
be relieved of the responsibility to do so.
(d) If the Company or any WISCO Contributed Subsidiary receives a
refund with respect to Taxes of any WISCO Contributed Subsidiary attributable to
a Pre-Closing Period (other than a Tax refund accrued as an asset on the Final
Working Capital Statement) or a refund of Taxes accrued as a liability on the
Final Working Capital Statement, the Company shall pay, within the thirty (30)
days following the receipt of such Tax refund, the amount of such Tax refund
(reduced by the amount of any Taxes it incurs or will incur as a result of its
accrual or receipt of such refund or any interest thereon), to CSK. If CSK
receives a Tax refund with respect to Taxes of any WISCO Contributed Subsidiary
attributable to any Post-Closing Period or any Tax refund accrued as an asset on
the Final Working Capital Statement, CSK will pay, within thirty (30) days
following the receipt of such refund, the amount of such Tax refund (reduced by
the amount of any Taxes it incurs or will incur as a result of its accrual or
receipt of such refund or any interest thereon), to the Company. In the case of
any refund with respect to
49
Taxes of a WISCO Contributed Subsidiary attributable to a Straddle Period, the
Tax refund shall be apportioned between Pre-Closing Periods and Post-Closing
Periods in accordance with the principles of Section 8.1(c) hereof; provided
that to the extent any Tax refund for a Straddle Period was accrued on the Final
Working Capital Statement, such refund shall be for the account of the Company.
8.6 TAX CONTROVERSIES; COOPERATION.
(a) CSK shall control any audit, dispute, administrative, judicial or
other proceeding Related to Tax Returns filed for Pre-Closing Periods, and the
Company shall control any audit, dispute, administrative, judicial or other
proceeding Related to Tax Returns filed for Post-Closing Periods and Straddle
Periods of any WISCO Contributed Subsidiary. Subject to the preceding sentence,
in the event an adverse determination may result in each party having
responsibility for any amount of Taxes, each party shall be entitled to fully
participate in that portion of the proceedings Relating to the Taxes with
respect to which it may incur liability hereunder. For purposes of this Section
8.6(a), the term "participation" shall include (i) participation in conferences,
meetings or proceedings with any Tax Authority, the subject matter of which
includes an item for which such party may have liability hereunder, (ii)
participation in appearances before any court or tribunal, the subject matter of
which includes an item for which a party may have liability hereunder, and (iii)
with respect to the matters described in the preceding clauses (i) and (ii),
participation in the submission and determination of the content of the
documentation, protests, memorandum of fact and law, briefs, and the conduct of
oral arguments and presentations.
(b) The Company and CSK shall not agree to settle any Tax liability or
compromise any claim with respect to Taxes, which settlement or compromise may
affect the liability for Taxes (or right to a Tax Benefit) hereunder of the
other party, without such other party's consent (which consent shall not be
unreasonably withheld or delayed).
(c) G-P and CSK shall bear their own expenses incurred in connection
with audits and other administrative judicial proceedings Relating to Taxes for
which such party or its Affiliates are liable.
(d) The CSK Parties, G-P, the Company, and the Contributed Subsidiaries
shall cooperate (and cause their Affiliates to cooperate) with each other and
with each other's agents, including accounting firms and legal counsel, in
connection with Tax matters Relating to the Contributed Assets or the
Contributed Subsidiaries, including (i) preparation and filing of Tax Returns,
(ii) determining the liability and amount of any Taxes due or the right to and
amount of any refund of Taxes, (iii) examinations of Tax Returns, and (iv) any
administrative or judicial proceeding in respect of Taxes assessed or proposed
to be assessed. Such cooperation shall include (without limitation) each party
making all information and documents in its possession relating to the
Contributed Subsidiaries available to the other party. The parties shall retain
all Tax Returns, schedules and work papers, and all material records and other
documents Relating thereto, until one year after the expiration of the
applicable statute of limitations (including, to the extent notified by any
party, any extension thereof) of the Tax Period to which such Tax
50
Returns and other documents and information relate. Each of the parties shall
also make available to the other party, as reasonably requested and available,
personnel (including officers, directors, Employees and agents) responsible for
preparing, maintaining, and interpreting information and documents relevant to
Taxes, and personnel reasonably required as witnesses or for purposes of
providing information or documents in connection with any administrative or
judicial proceedings Relating to Taxes.
ARTICLE IX
TERMINATION
[Intentionally Deleted]
ARTICLE X
MISCELLANEOUS
10.1 NOTICES. All notices and other communications required or
permitted by this Agreement shall be in writing and shall be delivered by
personal delivery, by nationally recognized overnight carrier service, by
facsimile, by first class mail or by certified or registered mail, return
receipt requested, addressed to the party for whom it is intended at its address
below, or such other address as may be designated in writing hereafter by such
Person. Notices shall be deemed given one day after sent, if sent by overnight
courier; when delivered and receipted for, if hand delivered; when received, if
sent by facsimile or other electronic means or by first class mail; or when
receipted for (or upon the date of attempted delivery where delivery is refused
or unclaimed), if sent by certified or registered mail, return receipt
requested.
To G-P: GEORGIA-PACIFIC CORPORATION
133 Peachtree Street, N.E.
Atlanta, GA 30303
Attn: General Counsel
Facsimile: (404) 230-7543
To CSK or WISCO: CHESAPEAKE CORPORATION
1021 East Cary Street
Richmond, VA 23218-2350
Attn: General Counsel
Facsimile: (804) 697-1192
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To the Company: GEORGIA-PACIFIC TISSUE, LLC
55 Park Place
Atlanta, GA 30303
Attn: President
Facsimile: (404) 230-1763
With a copy to: GEORGIA-PACIFIC CORPORATION
133 Peachtree Street, N.E.
Atlanta, GA 30303
Attn: General Counsel
Facsimile: (404) 230-7543
10.2 AMENDMENT; WAIVER. Any provision of this Agreement may be amended
or waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by G-P, CSK and the Company, or in the case of a
waiver, by the party against whom the waiver is to be effective. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by Law.
10.3 ASSIGNMENT. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written consent of
the other party hereto (which consent shall not be unreasonably withheld),
except that (i) G-P may collaterally assign its rights and obligations under
this Agreement to a lender as security for the Company Debt and (ii) following
Closing, G-P and CSK may assign their rights, but not their obligations, to any
Person to whom G-P or CSK may transfer their Units in the Company if permitted
under the Operating Agreement.
10.4 ENTIRE AGREEMENT. This Agreement (including the Preliminary
Statements, all Schedules and Exhibits hereto and the Ancillary Agreements)
contains the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
oral or written, with respect to such matters, except for the obligations of the
parties under the Confidentiality Agreement.
10.5 FULFILLMENT OF OBLIGATIONS. Any obligation of any party to any
other party under this Agreement or any of the Ancillary Agreements, which
obligation is performed, satisfied or fulfilled by an Affiliate of such party,
shall be deemed to have been performed, satisfied or fulfilled by such party.
10.6 PARTIES IN INTEREST. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, express or implied, is intended to
confer upon any Person other than G-P, the CSK Parties, the Company or their
respective successors or permitted assigns, any rights or remedies under or by
reason of this Agreement.
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10.7 PUBLIC DISCLOSURE. Notwithstanding anything herein to the
contrary, except as may be required to comply with the requirements of any
applicable Laws and the rules and regulations of any stock exchange upon which
the securities of one of the parties (or its Affiliate) is listed, no press
release or similar public announcement or communication shall, prior to the
Closing, be made or caused to be made concerning the execution or performance of
this Agreement unless specifically approved in advance by all parties hereto
which approval shall not be unreasonably withheld, conditioned or delayed.
10.8 EXPENSES. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be borne by the party incurring
such expenses.
10.9 SCHEDULES. The disclosure of any matter in any Disclosure Schedule
shall not be deemed to constitute an admission by G-P or the CSK Parties or to
otherwise imply that any such matter is material for the purposes of this
Agreement.
10.10 BULK TRANSFER LAWS. The parties acknowledge that none of them has
taken, and none of them intends to take, any action required to comply with any
applicable bulk sale or bulk transfer laws or similar laws; provided that the
CSK parties on the one hand and G-P on the other shall indemnify the other party
and the Company for any Losses arising from such non-compliance.
10.11 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM.
This Agreement shall be governed by, and construed in accordance with, the laws
of the State of Delaware. Each party hereto agrees that it shall bring any
action or proceeding in respect of any claim arising out of or Related to this
Agreement or the transactions contained in or contemplated by this Agreement,
whether in tort or contract or at law or in equity, exclusively in the United
States District Court or the state court sitting in New Castle County, Delaware
(the "Chosen Court") and (i) irrevocably submits to the exclusive jurisdiction
of the Chosen Court, (ii) waives any objection to laying venue in any such
action or proceeding in the Chosen Court, (iii) waives any objection that the
Chosen Courts are an inconvenient forum or do not have jurisdiction over any
party hereto, and (iv) agrees that service of process upon such party in any
such action or proceeding shall be effective if notice is given in accordance
with Section 10.1 of this Agreement.
10.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
10.13 HEADINGS. The heading references herein and the table of contents
hereto are for convenience purposes only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
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10.14 SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
10.15 INJUNCTIVE RELIEF. The parties hereto acknowledge and agree that
in the event of breach or non-compliance with any of the provisions of this
Agreement monetary damages shall not constitute a sufficient remedy.
Consequently, in the event of such a breach, G-P, the Company, WISCO or CSK, as
the aggrieved party shall be entitled to injunctive or other equitable relief,
including specific performance, in order to enforce or prevent any violation of
such provisions, in addition to any other rights or remedies to which it may be
entitled at law or otherwise.
ARTICLE XI
DEFINITIONS AND TERMS
11.1 SPECIFIC DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth or as referenced below:
11.1.1 "AFFILIATES" shall mean, with respect to any Person, any Persons
directly or indirectly controlling, controlled by or under common control with,
such other Person as of the date on which, or at any time during the period for
which, the determination of affiliation is being made. For the purpose of this
definition, "control" means (i) the ownership or control of 50% or more of the
equity interest in any Person, or (ii) the ability to direct or cause the
direction of the management or affairs of a Person, whether through the direct
or indirect ownership of voting interests, by contract or otherwise.
11.1.2 "AGREEMENT" shall mean this Agreement (including the Preliminary
Statements set forth above and all Schedules and Exhibits), as the same may be
amended or supplemented from time to time in accordance with the terms hereof.
11.1.3 "ANCILLARY AGREEMENTS" shall mean the Human Resources Agreement,
the Operating Agreement, the Parent Roll Supply Agreement, the Management
Support Agreement, the Operational Support Agreement, the Transition Services
Agreement, the G-P Guarantee and the WISCO Debt Indemnity.
11.1.4 "APPLICABLE TAX LAW" shall mean any Law of any nation, state,
region, province, locality, municipality or other jurisdiction Relating to
Taxes, including regulations and
54
other official pronouncements of any governmental entity or political
subdivision of such jurisdiction charged with interpreting such Laws.
11.1.5 "ASSUMED LIABILITIES" shall mean all debts, liabilities,
commitments, or obligations whatsoever, other than Retained Liabilities, Related
to either WISCO's or G-P's Business or Related to either WISCO's or G-P's
Contributed Assets, whether arising before or after the Closing and whether
known or unknown, fixed or contingent, including the following:
(i) all debts, liabilities, obligations or commitments Related to or
arising under the Contracts to the extent such Contracts are assigned to the
Company, including the Real Estate Leases;
(ii) all debts, liabilities, obligations or commitments Related to the
Real Property;
(iii) the current liabilities;
(iv) except for the Retained Environmental Liabilities, all liabilities
under Environmental Laws Related to the ownership, operation or conduct of the
Business or the Real Property; and
(v) all liabilities with respect to all actions, suits, proceedings,
disputes, claims or investigations Related to the Business or that otherwise are
Related to the Contributed Assets, at law, in equity or otherwise.
11.1.6 "BOOKS AND RECORDS" shall mean originals or true and correct
copies of all lists, files, data and databases and documents Relating to
customers, suppliers and products of the Business, the Contributed Assets, or
the Assumed Liabilities, all personnel records or files regarding any Employee
of the WISCO Business or the G-P Business as applicable, all environmental audit
reports (and similar documentation) and assessments with respect to the
Business, and all general ledgers and underlying books of original entry and
other financial records of the Business, except to the extent included in the
Retained Assets.
11.1.7 "BUSINESS" shall mean with respect to either G-P on the one
hand, or the CSK Parties on the other hand, its Commercial Tissue Business.
11.1.8 "BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a day on which banks in New York City are authorized or obligated by
law or executive order to close.
11.1.9 "CHOSEN COURT" shall have the meaning set forth in Section
10.11.
11.1.10 "CLOSING" shall mean the closing of the transactions
contemplated by this Agreement.
11.1.11 "CLOSING DATE" shall have the meaning set forth in Section 2.4.
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11.1.12 "CLOSING WORKING CAPITAL" shall have the meaning set forth in
Section 2.5(a).
11.1.13 "CLOSING WORKING CAPITAL STATEMENT" shall have the meaning set
forth in Section 2.5(a).
11.1.14 "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
11.1.15 "COMMERCIAL TISSUE BUSINESS" shall have the meaning set forth
in the Preliminary Statements to this Agreement.
11.1.16 "COMPANY" shall have the meaning set forth in the preamble to
this Agreement.
11.1.17 "COMPANY DEBT" shall have the meaning set forth in Section
2.8(b).
11.1.18 "COMPUTER SYSTEM" shall mean any and all computers (including
without limitation personal computers, mid-range computers and mainframes),
process and distributed control systems and software applications and operating
systems and any other hardware, equipment, and facilities and infrastructure
systems containing an embedded computer chip.
11.1.19 "CONFIDENTIALITY AGREEMENT" shall mean the Confidentiality
Agreement between CSK and G-P dated as of November 4, 1997, as amended by letter
dated June 11, 1999.
11.1.20 "CONSENT" shall mean any consent, approval, authorization,
waiver, permit, grant, franchise, concession, agreement, license, exemption or
order of, registration, certificate, declaration or filing with, or report or
notice to any Person, including any Governmental Authority, including those
identified on Schedules 3.3 and 4.3.
11.1.21 "CONTRACTS" shall mean all agreements, contracts, leases,
purchase orders, trade billback, refund and other arrangements, incentive
agreements, commitments, collective bargaining agreements, and licenses that are
related to the G-P Business or the WISCO Business or their respective
Contributed Assets or to which such Contributed Assets are subject, except to
the extent included in such party's Retained Assets.
11.1.22 "CONTRIBUTED ASSETS" shall mean all of the assets of a party
which Relate to the G-P Business or the WISCO Business, whether tangible or
intangible, real or personal, as they exist on the date hereof, with such
changes, deletions or additions thereto as may occur from the date hereof to the
Closing Date in the ordinary course of business or are otherwise permitted by
this Agreement (except, in each case, for the Retained Assets), including the
following:
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(i) the Real Property;
(ii) the Fixtures and Equipment;
(iii) the current assets;
(iv) in the case of WISCO, the WISCO Intellectual Property;
(v) the Books and Records;
(vi) the Contracts;
(vii) the stock or other ownership interests of the Contributed
Subsidiaries;
(viii) all Governmental Authorizations which are transferable without
obtaining any Consent; and
(ix) with respect to the WISCO Business, all computer hardware and
peripherals, audio-visual equipment, RF and barcode scanning and
telecommunications equipment, whether owned or leased by any of the CSK Parties,
and all software (including without limitation all operating system and
application software), whether owned or licensed by any of the CSK Parties.
11.1.23 "CPA FIRM" shall have the meaning set forth in Section 2.5(b).
11.1.24A "CSK" shall have the meaning set forth in the preamble to this
Agreement.
11.1.24B "CSK MARKS" shall mean any mark that is owned by CSK and that
is described in the license agreement between CSK and WISCO that is among the
Contracts assigned by WISCO to the Company at Closing pursuant to Section
2.4(a)(iv) hereof.
11.1.24C "CSK PARTIES" or "CSK PARTY" shall mean, as the context
requires, CSK, WISCO and the WISCO Contributed Subsidiaries, or as the context
requires, any one of the foregoing.
11.1.24D "CSK PLAN" shall mean those Employee Plans (including all
assets and liabilities Related to such Employee Plans) pursuant to which any
Employee or Retired Employee of the WISCO Business or the WISCO Contributed
Subsidiaries is entitled to benefits.
11.1.25 "DEDUCTIBLE" shall have the meaning set forth in Section
7.2(b).
11.1.26 "DETERMINATION DATE" as used in Section 2.5(a) shall mean the
Effective Time.
11.1.27 "DISCLOSURE SCHEDULES" shall mean the Disclosure Schedules
dated the date hereof delivered by G-P or the CSK Parties in connection with
this Agreement.
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11.1.28 "EFFECTIVE TIME" shall have the meaning set forth in Section
2.4.
11.1.29 "EMPLOYEE" shall mean, with respect to the G-P Business or the
WISCO Business, an individual who is employed by such party, whether salaried or
hourly and whether on lay-off or medical, family or other authorized leave of
absence; provided that, with respect to the G-P Business, Employee shall not
include any Employee located at G-P's Palatka, Florida, Crossett, Arkansas, Port
Hudson, Louisiana, Plattsburgh, New York or Bellingham, Washington facilities.
11.1.29A "EMPLOYEE PLANS" shall mean as to any party all "employee
welfare benefit plans" and "employee pension benefit plans" as respectively
defined in Sections 3(1) and 3(2) of ERISA, all employee benefit and pension
plans, all other bonus, deferred compensation, retirement, savings, excess
benefit, stock option or purchase, retention, termination, severance and
incentive plans, contracts, programs, funds, arrangements, policies, or
practices and all other plans, contracts, programs, funds, arrangements,
policies, or practices (whether voluntary or compulsory) that provide or may
provide money (other than as current salary or wages), services, property or
other benefits, whether written or oral and whether funded or unfunded,
including (without limitation) any that have been frozen or terminated since
April 30, 1999, and any trust, escrow or similar agreement related thereto,
whether written or oral and whether funded or unfunded, which are established
and maintained by any of the parties hereto with respect to any of their
Employees, Retired Employees, independent contractors, directors, officers,
shareholders, or their dependents or which are established or maintained by any
party (or any Person that together with any party is or would have been as of
the date of the Agreement treated as a single employer under Section 414 of the
Code) (the "Related Persons") or with respect to which any party or any
Affiliate thereof have made or are required to make payments, transfers or
contributions.
11.1.30 "ENCUMBRANCES" shall mean liens, charges, encumbrances,
security interests, options or any other restrictions or third-party rights,
including any required third party consents.
11.1.31A "ENVIRONMENT" means soil, land, water and air in their natural
state, including, without limitation, land surface or subsurface strata, surface
water, ground water and ambient air.
11.1.31B "ENVIRONMENTAL AUTHORITIES" means all federal, state or local
governmental bodies or regulatory agencies, foreign or domestic, charged with
enforcing any of the Environmental Laws.
11.1.31C "ENVIRONMENTAL LAW" shall mean any applicable federal, state,
local, common or foreign law, statute, ordinance, rule, regulation, code, order,
judgment, decree or injunction Relating to (i) the protection of the Environment
(including air, water vapor, surface water, groundwater, drinking water supply,
surface or subsurface land), (ii) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling,
58
protection, release, spill or discharge or disposal of Hazardous Substances, or
(iii) workplace safety or health.
11.1.31D "ENVIRONMENTAL PERMITS" means all permits, licenses,
certificates and authorizations of, and registrations with, any of the
Environmental Authorities pursuant to any of the Environmental Laws, issued or
granted to any of the CSK Parties or G-P, as the context requires for the
purpose of conducting the WISCO Business or the G-P Business as presently
conducted.
11.1.32 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and regulations promulgated thereunder.
11.1.33 "FINAL WORKING CAPITAL STATEMENT" shall have the meaning set
forth in Section 2.5(b).
11.1.34 "FINANCIAL STATEMENTS" shall mean the WISCO Financial
Statements, the G-P Financial Statements or both, as the context may require, as
defined in Sections 3.6 and 4.6 respectively.
11.1.35 "FIXTURES AND EQUIPMENT" shall mean all furniture, fixtures,
furnishings, machinery, vehicles, equipment (including computer hardware,
computer terminals, network servers, and research and development equipment) and
other tangible personal property Related to either the G-P Business or the WISCO
Business.
11.1.36 "FORMER FACILITY" shall mean a facility or property previously
owned or operated by a party or its predecessors in the conduct of the G-P
Business or the WISCO Business that is not located on the Real Property or the
Retained Real Property.
11.1.37 "FOX RIVER LIABILITY" shall have the meaning set forth in
Section 5.9.
11.1.38 "GAAP" shall mean United States generally accepted accounting
principles, consistently applied.
11.1.39A "G-P" shall have the meaning set forth in the preamble to this
Agreement.
11.1.39B "G-P APRIL FINANCIAL STATEMENTS" shall have the meaning set
forth in Section 4.6(a).
11.1.39C "G-P ASSUMED LIABILITIES" shall mean the Assumed Liabilities
transferred to the Company by G-P.
11.1.39D "G-P BUSINESS" shall mean all of the business of G-P conducted
at its Gary, Indiana, Battleboro, Vermont, and LaGrange, Georgia facilities,
together with certain assets and liabilities associated with its Crossett,
Arkansas, and Palatka, Florida facilities, as more fully described in Schedule
2.1(c) hereof.
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11.1.39E "G-P CAP" shall have the meaning set forth in Section 7.2(b).
11.1.39F "G-P CONTRIBUTED ASSETS" shall mean the Contributed Assets
transferred to the Company by G-P as set forth on Schedule 2.1(c).
11.1.39G "G-P FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 4.6(a).
11.1.39H "G-P GUARANTEE" shall have the meaning set forth in Section
2.8(b).
11.1.39I "G-P INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 7.3(a).
11.1.39J "G-P INTELLECTUAL PROPERTY" shall mean the Intellectual
Property of G-P.
11.1.39K "G-P OWNED REAL PROPERTY" shall mean the Owned Real Property
of the G-P Business.
11.1.39L "G-P PLAN" shall mean those Employee Plans (including all
assets and liabilities Related to such Employee Plans) of G-P or any Affiliate
of G-P pursuant to which any Employee or Retired Employee of the G-P Business is
entitled to benefits.
11.1.39M "G-P REAL PROPERTY" shall mean the Real Property of the G-P
Business.
11.1.39N "G-P REAL PROPERTY LEASES" shall mean the leases Relating to
the Leased Real Property of the G-P Business.
11.1.39O "G-P RETAINED ASSETS" shall mean the Retained Assets of the
G-P Business as described in Section 11.1.74 hereof.
11.1.39P "G-P RETAINED LIABILITIES" shall mean the Retained Liabilities
of the G-P Business.
11.1.40 "GOVERNMENTAL AUTHORITY" shall mean any nation or government,
any state, province or other political subdivision thereof 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 State of the United States or any political subdivision thereof.
11.1.41 "GOVERNMENTAL AUTHORIZATIONS" shall mean all licenses, permits,
franchises, certificates of occupancy, other certificates and other
authorizations and approvals required to carry on a Business as currently
conducted under the applicable laws, ordinances or regulations of any
Governmental Authority.
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11.1.42 "HAZARDOUS SUBSTANCES" shall mean (i) petroleum, petroleum
byproducts and any petroleum fractions; (ii) any substance or any material
containing a substance, defined as hazardous or toxic or words of similar
meaning or effect under the following United States federal statutes and their
state counterparts, as well as such statutes' implementing regulations: the
Hazardous Materials Transportation Act, the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the
Toxic Substances Control Act, the Federal Insecticide, Fungicide, and
Rodenticide Act, and the Clean Air Act; and (iii) any other materials as to
which liability or standards of conduct are imposed pursuant to any
Environmental Law.
11.1.43 "HSR ACT" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
11.1.44 "HUMAN RESOURCES AGREEMENT" shall mean an agreement to be
entered into on the Closing Date by and among G-P, WISCO, CSK and the Company
substantially in the form of Exhibit 11.1.44 attached hereto.
11.1.45 "INDEMNIFICATION CLAIM NOTICE" shall have the meaning set forth
in Section 7.5(a).
11.1.46 "INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 7.5(a).
11.1.47 "INDEMNIFYING PARTY" shall have the meaning set forth in
Section 7.5(a).
11.1.48 "INTELLECTUAL PROPERTY" shall mean (except to the extent
included in the Retained Assets) the following intellectual property (and the
rights associated therewith) Related to the G-P Business or the WISCO Business
or their Contributed Assets:
(a) trademarks, service marks, brand names, certification marks, trade
dress, assumed names, Internet domain names, trade names and other indications
of origin, the goodwill associated with the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to register, the foregoing
(including any extension, modification or renewal of any such registration or
application);
(b) patents, applications for patents (including provisional,
divisional, continuation, and continuation-in-part applications), and any
renewals, extensions or reissues thereof, in any jurisdiction;
(c) invention disclosures and innovations (whether or not patentable
and whether or not reduced to practice);
61
(d) non-public information, trade secrets confidential information,
know how, proprietary technology and rights in any jurisdiction to limit the use
or disclosure thereof by any Person;
(e) copyrighted works and registrations or applications for
registration of copyrights in any jurisdiction, and any renewals or extensions
thereof;
(f) any similar intellectual property or proprietary rights; and
(g) any claims or causes of action arising out of or Related to any
infringement or misappropriation of any of the foregoing occurring before or
after the Closing.
11.1.49 "INVENTORY" shall mean all inventory held for resale in
connection with the G-P Business or the WISCO Business, all raw materials, work
in process, finished products, office supplies, storeroom inventory, spare parts
and equipment, wrapping, supply and packaging items, of such Business.
11.1.50 "IRS" shall mean the Internal Revenue Service.
11.1.51 "KNOWLEDGE" or any similar phrase means the actual knowledge
without investigation of those management employees of G-P, CSK and WISCO
identified on Exhibit 11.1.51.
11.1.52 "LAWS" shall mean any federal, state, foreign or local law,
statute, ordinance, rule, code, regulation, order, judgment or decree of any
Governmental Authority.
11.1.53 "LEASED REAL PROPERTY" shall mean all land (including, to the
extent included in any such lease, any timberlands and tree farms associated
with the Contributed Assets), buildings, fixtures and other Real Property leased
on the date hereof by a party or one of the Contributed Subsidiaries as lessee
pursuant to the Real Estate Leases used by the G-P Business or the WISCO
Business.
11.1.54 "LOSSES" shall have the meaning set forth in Section 7.2.
11.1.55 "MANAGEMENT SUPPORT AGREEMENT" shall mean the agreement
substantially in the form set forth as Exhibit 11.1.55 attached hereto between
G-P and the Company pursuant to which G-P shall supply management services to
the Company.
11.1.56 "MATERIAL ADVERSE EFFECT" shall mean any and all events,
changes or effects that have occurred which have a material adverse effect upon
the value of the Contributed Assets or the G-P Business or the WISCO Business,
as the case may be, taken as a whole, involving an aggregate amount equal to or
exceeding $350,000.
11.1.57 "NOTICE PERIOD" shall have the meaning set forth in Section
7.5(b).
11.1.58 "OBJECTION" shall have the meaning set forth in Section 2.5(b).
62
11.1.59 "OPERATING AGREEMENT" shall mean that certain Operating
Agreement among G-P, CSK and the Company to be dated as of the Closing
substantially in the form of Exhibit 2.1E, that shall govern the rights and
obligations of the Members of the Company.
11.1.60 "OPERATIONAL SUPPORT AGREEMENT" shall mean the agreement
substantially in the form set forth as Exhibit 11.1.60 attached hereto by and
among G-P, WISCO, CSK and the Company.
11.1.61 "OWNED REAL PROPERTY" shall mean all land and all buildings,
fixtures, and other improvements owned by either the WISCO Business or the G-P
Business.
11.1.62 "PARENT ROLL SUPPLY AGREEMENT" shall mean the agreement
substantially in the form of Exhibit 11.1.62 attached hereto pursuant to which
G-P shall supply paper products to the Company.
11.1.63 "PERMITTED ENCUMBRANCES" shall mean, with respect to any
party's Encumbrances, (i) those expressly disclosed in the G-P or WISCO
Financial Statements; (ii) liens for Taxes (which are not related to income,
sales or withholding Taxes), assessments and other governmental charges not yet
due and payable or due but not delinquent as of the Closing Date or being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established on the Final Working Capital Statement; (iii)
mechanic's, workmen's, repairmen's, warehousemen's, carriers, or other like
liens arising or incurred in the ordinary course of business for amounts which
are not delinquent and which will not individually or in the aggregate have a
Material Adverse Effect, original purchase price conditional sales contracts and
equipment leases with third parties entered into in the ordinary course of
business; (iv) with respect to either the G-P Real Property or the WISCO Real
Property, (A) easements, quasi-easements, licenses, covenants, rights-of-way and
other similar restrictions, including any other agreements, conditions,
restrictions, or other matters which would be shown by a current title report or
other similar report or listing, (B) any conditions that may be shown by a
current survey, title report or physical inspection, and (C) zoning, building
and other similar restrictions; and (v) Encumbrances not described in the
foregoing clauses (i) through (iv) and which, individually or in the aggregate,
would not have a Material Adverse Effect (all items included in the foregoing
clauses (i) through (v), including any matter set forth in Schedules 3.16(b) or
4.16(b), are referred to collectively herein as the "Permitted Encumbrances").
11.1.64 "PERSON" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization.
11.1.65 "POST-CLOSING PERIOD" shall mean, with respect to any
Contributed Subsidiary, any Tax Period commencing after the Closing Date and the
portion of any Straddle Period commencing after the Closing Date.
63
11.1.66 "PRE-CLOSING PERIOD" shall-mean, with respect to any
Contributed Subsidiary, any Tax Period ending on or before the Closing Date and
the portion of any Straddle Period ending on the Closing Date.
11.1.67 "PROCEEDING" shall have the meaning set forth in Section
7.5(a).
11.1.68 "PROJECT PLAN" shall mean a plan to remediate and/or replace
Computer Systems that are not Year 2000 Ready.
11.1.69 "REAL ESTATE LEASES" shall mean those agreements pursuant to
which a party or one or more of its Contributed Subsidiaries leases, subleases,
licenses, or otherwise uses or licenses, Real Property, including land (and
everything growing upon the land, to the extent included in such Real Estate
Lease), buildings, structures and improvements thereon or appurtenances thereto,
which are identified on Schedules 3.15 and 4.15.
11.1.70 "REAL PROPERTY" shall mean the Owned Real Property and the
Leased Real Property.
11.1.71 "REGISTRATION STATEMENT" shall mean the Registration Statement
on Form S-1, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the Securities and
Exchange Commission by the Company under the Securities Act with respect to the
Company Debt.
11.1.72 "RELATED TO" OR "RELATING TO" shall mean primarily related to,
or used primarily in connection with.
11.1.73 "REQUIRED CONSENT" shall mean any Consents specifically
identified on Schedule 3.3 or Schedule 4.3 as a "Required Consent" and each
other material Consent, which may be a Consent listed on Schedule 3.3 or
Schedule 4.3.
11.1.74 "RETAINED ASSETS" shall mean
(i) the assets (including Real Property, tangible personal property,
accounts receivable, intellectual property and contracts) Related to all
businesses conducted by CSK or G-P and any of their respective Affiliates other
than the Commercial Tissue Business, provided, however, with respect to G-P, all
tangible assets located at G-P's Palatka, Florida, Crossett, Arkansas, Port
Hudson, Louisiana, Plattsburgh, New York, Bellingham, Washington and Atlanta,
Georgia facilities and any tangible asset used in part in the consumer tissue
business at G-P's offices located in Atlanta, Georgia shall constitute G-P
Retained Assets, except for the assets specifically listed on Schedule 2.1(c)
consisting of dedicated commercial tissue converting lines which shall be
included in the G-P Contributed Assets, and all G-P Intellectual Property;
(ii) the stock or other ownership interests of all Subsidiaries of
either G-P or CSK other than the Contributed Subsidiaries;
64
(iii) all cash and cash accounts, disbursement accounts, outstanding
checks and disbursements, investment securities and other short-term and
medium-term investments and non-trade accounts receivable from either G-P or CSK
or their respective Affiliates and owing to the G-P Business or WISCO Business,
respectively;
(iv) all deferred Tax assets of G-P or CSK;
(v) all prepaid Taxes to the extent such prepaid Taxes are not
reflected on the Final Working Capital Statement;
(vi) all refunds of Taxes to the extent such Taxes are not reflected on
the Final Working Capital Statement;
(vii) all Tax Returns and related work papers of G-P, CSK or their
respective Affiliates;
(viii) all Books and Records which G-P or the CSK Parties are required
by law to retain, provided that G-P, CSK or WISCO shall provide the Company with
complete copies of such Books and Records;
(ix) all G-P Plans, all CSK Plans, and all assets of such Plans except
as contemplated by the Human Resources Agreement;
(x) all Governmental Authorizations to the extent not transferable
without obtaining a Consent;
(xi) the CSK Marks subject to the license assigned pursuant hereto;
(xii) the Retained Real Property and any financial instruments Related
to the Retained Real Property;
(xiii) all of G-P's or CSK's insurance policies, subject to the rights
of WISCO or any Contributed Subsidiary under such insurance policies of CSK and
the rights of the Company if any under such policies;
(xiv) all contracts between either G-P or CSK and their respective
Subsidiaries other than the Contributed Subsidiaries, including Georgia-Pacific
S.A.; and
(xv) those assets of the CSK Parties specifically identified on
Schedule 2.3.
11.1.75 "RETAINED ENVIRONMENTAL LIABILITIES" has the meaning set forth
in the definition of "Retained Liabilities."
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11.1.76 "RETAINED LIABILITIES" shall mean all of the following debts,
liabilities, commitments or obligations, whether arising before or after the
Closing and whether known or unknown, fixed or contingent:
(i) all liabilities Related to the Retained Assets;
(ii) all (A) liabilities under Environmental Laws with respect to any
Former Facility, (B) liabilities in connection with the Retained Real Property
and (C) with respect to WISCO and CSK, the Fox River Liability (collectively,
the "Retained Environmental Liabilities");
(iii) all liabilities which are retained by G-P or WISCO or CSK under
the Ancillary Agreements;
(iv) all liabilities under the G-P or CSK Plans, except to the extent
such liabilities are specifically assumed by the Company or G-P pursuant to the
Human Resources Agreement;
(v) all liabilities for Taxes imposed with respect to the taxable
periods, or portions thereof, ending on or before the Closing Date except to the
extent that any such Taxes are reflected on the Final Working Capital Statement;
(vi) all liabilities for non-trade accounts payable to CSK or G-P or
their respective Affiliates which arise prior to the Closing Date;
(vii) all liabilities for indebtedness for borrowed money and any other
obligation which are fixed as to amount and certainty as of the Closing or which
are secured by a lien that is not a Permitted Encumbrance on any of the
Contributed Assets, but not including liabilities under Contracts included in
the Contributed Assets and Assumed Liabilities;
(viii) all severance, termination, change of control and similar
agreements, payments, debts, obligations or liabilities with respect to any
director, officer, employee or consultant of G-P, the CSK Parties or any of
their Subsidiaries which exist as of or prior to the Closing (after taking into
account the transactions contemplated by this Agreement), other than (i)
obligations under any collective bargaining agreement, and (ii) obligations
under any severance employment, consulting, or other agreement entered into or
assumed by the Company;
(ix) all liabilities and obligations with respect to G-P's interest in
Georgia-Pacific S.A., including all contractual obligations;
(x) all liabilities and obligations that any party hereto agrees to
retain in any Ancillary Agreement;
(xi) all other liabilities and obligations for which CSK, WISCO or G-P
has expressly assumed responsibility pursuant to this Agreement or the Ancillary
Agreements;
66
(xii) all debts, liabilities or obligations whatsoever, that do not
Relate to the G-P Business or the WISCO Business or that do not otherwise Relate
to the Contributed Assets; and
(xiii) all liabilities and obligations of the WISCO Business described
on Schedule 2.3.
11.1.77 "RETAINED REAL PROPERTY" shall mean the Real Property retained
by WISCO or G-P.
11.1.78 "RETIRED EMPLOYEE" means as to any party, former Employees who
retain rights under any of such party's Employee Plans.
11.1.79 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
11.1.80 "STRADDLE PERIOD" shall mean, with respect to any Contributed
Subsidiary, any Tax Period that begins before and ends after the Closing Date.
11.1.81 "SPECIAL DISTRIBUTION" shall have the meaning set forth in
Section 2.8(b).
11.1.82 "SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership, joint venture or other legal entity of which such
Person, either directly or through or together with any other Subsidiary of such
Person, owns any equity interests.
11.1.83 "SURVIVAL PERIOD" shall have the meaning set forth in Section
7.1.
11.1.84 "TARGET WORKING CAPITAL" shall have the meaning set forth in
Section 2.5(e).
11.1.85 "TAX" or "TAXES" shall mean all federal, state, local or
foreign taxes, including but not limited to income, gross receipts, windfall
profits, goods and services, value added, severance, property, production,
sales, use, license, excise, franchise, employment, withholding or similar
taxes, together with any interest, additions or penalties with respect thereto
and any interest in respect of such additions or penalties.
11.1.86 "TAX AUTHORITY" shall mean, with respect to any Tax, the
governmental entity or political subdivision thereof that imposes such Tax, and
the agency (if any) charged with the administration or collection of such Taxes
for such entity or subdivision.
11.1.87 "TAX BENEFIT" shall mean the amount by which a Person's Tax
liability is actually reduced (including any related interest actually received
from a Tax Authority in connection therewith).
11.1.88 "TAX PERIOD" shall mean, with respect to any Tax, the period
for which the Tax is reported as provided under Applicable Tax Laws.
67
11.1.89 "TAX RETURN" shall mean, with respect to any Tax, any
information return with respect to such Tax, any report, statement, declaration
or document required to be filed under the Applicable Tax Law in respect of such
Tax, any claim for refund of Taxes paid, and any amendment or supplement to any
of the foregoing.
11.1.90 "TRANSFER COSTS" shall have the meaning set forth in Section
2.6.
11.1.91 "TRANSITION SERVICES AGREEMENT" shall mean the agreement
substantially in the form of Exhibit 11.1.91 attached hereto to be entered into
at the Closing among the Company, CSK and WISCO under which CSK and its
Affiliates will provide transition services requested by the Company in order to
allow it to operate the WISCO Business after the Closing in a manner consistent
with past practices.
11.1.92 "WARN" shall have the meaning set forth in Section 3.13(e).
11.1.93 "WARN OBLIGATIONS" shall have the meaning set forth in Section
3.13(e).
11.1.94A "WISCO" shall have the meaning set forth in the preamble to
this Agreement.
11.1.94B "WISCO APRIL FINANCIAL STATEMENTS" shall have the meaning set
forth in Section 3.6(a).
11.1.94C "WISCO ASSUMED LIABILITIES" shall mean all Assumed Liabilities
transferred to the Company by WISCO.
11.1.94D "WISCO BUSINESS" shall have the meaning set forth in the
Preliminary Statements to this Agreement.
11.1.94E "WISCO CAP" shall have the meaning set forth in Section
7.3(b).
11.1.94F "WISCO CONTRIBUTED ASSETS" shall mean all assets used directly
and predominantly in the Commercial Tissue Business conducted by CSK whether
directly or through WISCO or its Contributed Subsidiaries.
11.1.94G "WISCO CONTRIBUTED SUBSIDIARIES" shall mean the Contributed
Subsidiaries of WISCO as set forth on Schedule 3.16(c).
11.1.94H "WISCO DEBT INDEMNITY" shall have the meaning set forth in
Section 2.8(b).
11.1.94I "WISCO FINANCIAL STATEMENTS" shall have the meaning set forth
in Section 3.6(a).
11.1.94J "WISCO INDEMNIFIED PARTIES" shall have the meaning set forth
in Section 7.2(a).
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11.1.94K "WISCO INTELLECTUAL PROPERTY" shall mean the Intellectual
Property of WISCO (and CSK to the extent utilized in the WISCO Business) and
includes, without limitation, the WISCO Marks.
11.1.94L "WISCO LEASED REAL PROPERTY" shall mean the Leased Real
Property of WISCO.
11.1.94M "WISCO MARKS" shall mean any mark currently owned by the WISCO
Business and any mark owned by the CSK Parties that include the words, phrases
and names "Wisconsin Tissue Mills", "Wisconsin Tissue" or "WISCO", or any
variation thereof, and any trademark, service mark, trade dress, symbol or logo
using such words, phrases or names and any variation thereof.
11.1.94N "WISCO OWNED REAL PROPERTY" shall mean the Owned Real Property
Related to the WISCO Business.
11.1.94O "WISCO REAL PROPERTY" shall mean the Real Property used in
connection with the WISCO Business.
11.1.94P "WISCO REQUIRED CONSENT" shall mean the Required Consents
pursuant to the WISCO Business and set forth on Schedule 3.3.
11.1.94Q "WISCO RETAINED ASSETS" shall mean the Retained Assets of the
WISCO Business as described in Section 11.1.74 hereof.
11.1.94R "WISCO RETAINED LIABILITIES" shall mean the Retained
Liabilities of the WISCO Business.
11.1.95 "WMEX" shall mean Wisconsin Tissue de Mexico, S.A. de C.V., a
corporation organized under the laws of Mexico and a wholly owned subsidiary of
WISCO.
11.1.96 "WORKING CAPITAL" shall mean the excess of current assets over
current liabilities at the Determination Date on a consolidated basis as
determined in accordance with Section 2.5.
11.1.97 "YEAR 2000 READY" shall mean that the Computer System when used
in accordance with its associated documentation, will not be materially
adversely affected by date data but instead will process such date data
accurately with the implementation of a tested procedure, or is not Year 2000
compliant but will not cause any such processing problem. Year 2000 Ready also
means that the applicable Computer System when used in accordance with its
associated documentation will accurately process date data such that, no value
for a date prior to year 2028 will cause any interruption in processing;
date-based functionality operates consistently for dates prior to, during and
after Year 2000 (through year 2027); in all interfaces and data storage, the
century or any other date is specified either explicitly or by algorithms or
69
inferencing rules; and leap years will be accurately recognized and processed.
If implemented properly, the Project Plan should be successful in making all
material Computer Systems Year 2000 Ready, except to the extent that a Computer
System interfaces or exchanges data with other software, firmware, hardware or
other similar or related items of automated, computerized or software systems
that are not Year 2000 compliant.
11.2 OTHER TERMS. Other terms may be defined elsewhere in the text of
this Agreement, and unless otherwise indicated shall have such meanings
throughout this Agreement.
11.3 OTHER DEFINITIONAL PROVISIONS.
(a) The words "whereof", "herein", and "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. The word
"including" means "including without limitation."
(b) The terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States dollars.
IN WITNESS WHEREOF, the parties have executed this Joint Venture
Agreement as of the date first written above.
WISCONSIN TISSUE MILLS INC.
By: /s/William T. Tolley
Name: William T. Tolley
Title: Vice President
GEORGIA-PACIFIC CORPORATION
By: /s/Michael C. Burandt
Name: Michael C. Burandt
Title: Senior Vice President -
Packaged Products
CHESAPEAKE CORPORATION
By: /s/William T. Tolley
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Name: William T. Tolley
Title: Senior Vice President - Finance
and Chief Financial Officer
GEORGIA-PACIFIC TISSUE, LLC
By: /s/Michael C. Burandt
Name: Michael C. Burandt
Title: Manager
71
EXHIBIT 3.6(b)
-- The "Unaudited Balance Sheet" should be defined to include the
following line items, with specific representations for each line item:
-- Receivables (Represents amounts due from sales to outside
customers; determined in accordance with GAAP; stated at
estimated net realizable value with adequate reserves for
customer deductions, cash rebates, and uncollectible
accounts).
-- Inventories (Represents raw materials, operating supplies and
packaging materials, storeroom parts and supplies, work in
process, and finished goods held for resale; determined in
accordance with GAAP stated at cost without LIFO reserves, and
with adequate reserves for obsolescence).
-- Prepaid Expenses and Other Current Assets (all known prepaid
expenses, deferred expenses and other current assets; expected
to be amortized or settled within one year; excluding income
taxes and debt.
-- Current Assets (Represents the sum total of Receivables plus
Inventories plus Prepaid Expenses and Other Current Assets as
defined above).
-- Property, Plant and Equipment (Represents land, buildings,
machinery and equipment, and construction in progress; owned
or leased under capital leases; stated at cost less
accumulated depreciation in accordance with GAAP).
-- Other Noncurrent Assets (Represents all known other noncurrent
assets; excluding any noncurrent assets related to income
taxes and debt).
-- Total Assets (Represents the sum total of Current Assets plus
Property, Plant and Equipment plus Other Noncurrent Assets as
defined above).
-- Accounts Payable (Represents all known amounts payable to
vendors; payable within one year; incurred in the normal
conduct of business).
-- Accrued Expenses and Other Current Liabilities (Represents all
known other accrued expenses, deferred revenues and current
liabilities; expected to be amortized or settled within one
year; incurred in the normal conduct of business; including
adequate provision for the current portion of any loss
contingencies required to be accrued in accordance with SFAS
No. 5; excluding any liabilities related to income taxes and
debt).
-- Current Liabilities (Represents the sum total of Accounts
Payable plus Accrued Expenses and Other Current Liabilities as
defined above).
-- Long-term Liabilities (Represents all known long-term
liabilities; incurred in the normal conduct of business;
including adequate provision for the non-current portion of
any loss contingencies required to be accrued in accordance
with SFAS No. 5; excluding any liabilities related to income
taxes and debt).
-- Total Liabilities (Represents the sum total of Current
Liabilities plus Long-term Liabilities as defined above).
-- Equity (Represents Total Assets minus Total Liabilities as
defined above).
-- Total Liabilities and Equity (Represents the sum total of
Total Liabilities plus Equity as defined above).
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-- Working Capital (Represents Current Assets minus Current
Liabilities as defined above).
-- : The "Unaudited Statement of Income" should be defined to include the
following income statement line items, with specific representations
for each line item:
-- Net Sales (Represents net revenues from sales to outside
customers; determined in accordance with GAAP; excluding sales
to Affiliates).
-- Cost of Sales (Represents all known costs for procuring,
manufacturing and handling products sold to outside customers;
excluding depreciation and amortization expenses;
-- Selling, General and Administrative Expenses (Represents all
known selling, general and administrative expenses for the
period; excluding depreciation and amortization expenses);
-- Other Income (Represents all known other income for the
period).
-- Other Expense (Represents all known other expenses for the
period; excluding depreciation and amortization expenses;
excluding interest expense; and excluding income taxes).
-- Earnings Before Interest, Income Taxes, Depreciation and
Amortization (Represents Net Sales minus Cost of Sales minus
Selling, General and Administrative Expenses plus Other Income
minus Other Expense as defined above).
-- Depreciation and Amortization Expenses (Represents all known
depreciation and amortization expenses for the period,
including the depreciation expense component of tissue parent
roll manufacturing costs).
-- Earnings Before Interest and Income Taxes (Represents Earnings
Before Interest, Income Taxes, Depreciation and Amortization
minus Depreciation and Amortization Expenses as defined
above).
-- The "Unaudited Statement of Cash Flows" should be defined to include
the following cash flow statement line items:
-- Earnings Before Interest and Income Taxes (As defined above).
-- Depreciation and Amortization Expenses (As defined above).
-- Earnings Before Interest, Income Taxes, Depreciation and
Amortization (As defined above).
-- Income Tax Expense (Represents the provision for income taxes,
based on the estimated effective tax rate for the period).
-- Change in Working Capital (Represents Working Capital as of
the beginning of the period minus Working Capital as of the
end of the period).
-- Cash Provided by Operations (Represents Earnings Before
Interest, Income Taxes, Depreciation and Amortization minus
Income Tax Expense)
-- Capital Expenditures (Represents all known capitalizable
expenditures for property, plant and equipment in the period).
-- Other Investing Activities (Represents other cash provided or
used in the period, not reflected elsewhere in the Statement
of Free Cash Flows; excluding cash provided by or used for
financing activities).
-- Free Cash Flow (Cash Provided by Operations minus Capital
Expenditures minus Other Investing Activities as defined
above).
SCHEDULES AND EXHIBITS
SCHEDULES
---------
Schedule 2.1(c) G-P Contributed Assets
Schedule 2.3 WISCO Retained Assets and Retained Liabilities
Schedule 3.1 CSK Parties Qualifications
Schedule 3.3 WISCO Consent and Approvals
Schedule 3.6(a) Financial Statements
Schedule 3.6(c) Changes in Accounting Methods
Schedule 3.7 Litigation and Claims
Schedule 3.8 Taxes
Schedule 3.9(a) Employees
Schedule 3.9(b) Employee Plans
Schedule 3.9(d) Changes to Plans
Schedule 3.9(f) Funding of Plans
Schedule 3.9(g) Claims Regarding Plans
Schedule 3.9(h) Multi-Employer Plans
Schedule 3.9(i) Plan Documents
Schedule 3.10 Compliance with Laws
Schedule 3.11(a) Environmental Permits
Schedule 3.11(b) Environmental Matters
Schedule 3.12 Intellectual Property
Schedule 3.12(e) Year 2000
Schedule 3.13 Labor Matters
Schedule 3.14 Material Contracts
Schedule 3.15 WISCO Real Estate Leases
Schedule 3.16(a) Exceptions to Entire Business
Schedule 3.16(b) Encumbrances
Schedule 3.16(c) Contributed Subsidiaries
Schedule 3.16(d) Condition of Assets
Schedule 3.18 Insurance
Schedule 3.20 Material Adverse Change
Schedule 4.1 G-P Qualifications
Schedule 4.3 G-P Consent and Approvals
Schedule 4.6(a) Financial Statements
Schedule 4.7 Litigation and Claims
Schedule 4.8 Taxes
Schedule 4.9(a) Employees
Schedule 4.9(b) Employee Plans
Schedule 4.9(d) Changes to Plans
Schedule 4.9(f) Funding of Plans
Schedule 4.9(g) Claims Regarding Plans
Schedule 4.9(h) Multi-Employer Plans
Schedule 4.9(i) Plan Documents
Schedule 4.10 Compliance with Laws
Schedule 4.11(a) Environmental Permits
Schedule 4.11(b) Environmental Matters
Schedule 4.12 Intellectual Property
Schedule 4.12(e) Year 2000
Schedule 4.13 Labor Matters
Schedule 4.14 Material Contracts
Schedule 4.15 G-P Real Estate Leases
Schedule 4.16(a) Exceptions to Entire Business
Schedule 4.16(b) Encumbrances
Schedule 4.16(c) Condition of Assets
Schedule 4.18 Insurance
Schedule 4.20 Material Adverse Changes
Schedule 5.4(a) G-P Intellectual Property
EXHIBITS
--------
Exhibit 1.1A Certificate of Formation
Exhibit 2.1E Form of Operating Agreement
Exhibit 2.4A(vii) Opinion of Hunton & Williams
Exhibit 2.4B(vii) Opinion of General Counsel of G-P
Exhibit 2.8A Company Debt Commitment Letter and Promissory Note
Exhibit 2.8B G-P Guarantee
Exhibit 2.8C WISCO Debt Indemnity
Exhibit 3.6(b) Financial Statement Line Items
Exhibit 11.1.44 Form of Human Resources Agreement
Exhibit 11.1.51 Individuals with Knowledge
Exhibit 11.1.55 Form of Management Support Agreement
Exhibit 11.1.60 Form of Operational Support Agreement
Exhibit 11.1.62 Form of Parent Roll Supply Agreement
Exhibit 11.1.91 Form of Transition Services Agreement
EX-10.16
19
OPERATING AGREEMENT
EXHIBIT 10.16
OPERATING AGREEMENT
OF
GEORGIA-PACIFIC TISSUE, LLC
Dated As Of:
October 4, 1999
TABLE OF CONTENTS
Page No.
ARTICLE I DEFINITIONS AND TERMS
Section 1.1 . Certain Definitions 1
Section 1.2 Rules of Construction 10
ARTICLE II GENERAL MATTERS
Section 2.1 Formation 11
Section 2.2 Purpose and Business 11
Section 2.3 Offices 11
Section 2.4 Name 11
Section 2.5 Term 11
Section 2.6 Members 11
ARTICLE III FINANCIAL AND TAX MATTERS
Section 3.1 Capital Contributions 12
Section 3.2 Loans from Members 13
Section 3.3 Restrictions Relating to Capital; Company Property 13
Section 3.4 Tax Treatment 14
Section 3.5 Allocation of Profits 14
Section 3.6 Section 3.6 14
Section 3.7 Special Allocations 14
Section 3.8 Offsetting Special Allocations 16
Section 3.9 Other Allocation Rules. 16
Section 3.10 Tax Elections. 17
Section 3.11 Tax Allocations; Code Section 704(c). 17
Section 3.12 Tax Matters Member. 18
Section 3.13 Regular Distribution Policy 18
Section 3.14 Special Distribution. 18
Section 3.15 Accelerated Gains Tax Liability of WISCO. 18
Section 3.16 Sharing of Company Tax Benefits. 21
Section 3.17 Permanent Company Debt 23
ARTICLE IV MANAGEMENT
Section 4.1 General 25
Section 4.2 Board Composition 25
Section 4.3 Terms; Removal; Vacancies 25
Section 4.4 Notice; Quorum 25
Section 4.5 Voting 26
Section 4.6 TelephonicMeeting; Written Consents 26
Section 4.7 Committees of the Board; Officers 27
Section 4.8 Executionof Documents 27
Section 4.9 Reliance on Documents and Reports. 28
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Section 4.10 Standard of Care; Indemnification 28
Section 4.11 Member Action. 28
Section 4.12 Certain Transactions. 29
ARTICLE V ACCOUNTING, BOOKS AND RECORDS
Section 5.1 Fiscal Year 29
Section 5.2 Books and Records. 30
Section 5.3 Auditors. 30
Section 5.4 Reporting 30
Section 5.5 Banking. 30
Section 5.6 Tax Return Information. 30
Section 5.7 Delegation of Responsibility for Accounting and Reports. 31
ARTICLE VI CONFIDENTIALITY
Section 6.1 Confidentiality Obligation 31
Section 6.2 Exceptions from Confidentiality Obligation 32
Section 6.3 Employees, Agents and Advisers 32
Section 6.4 Return of Confidential Information 32
Section 6.5 Survival After Termination 33
ARTICLE VII TRANSFER OF UNITS; PUT AND CALL RIGHTS
Section 7.1 General 33
Section 7.2 Put and Call Rights 34
Section 7.3 Member Transfers 35
Section 7.4 Retirement. 35
ARTICLE VIII DISSOLUTION AND WINDING UP; BUY OUT RIGHTS
Section 8.1 Dissolution 35
Section 8.2 Winding Up. 36
Section 8.3 In-Kind Distributions 36
Section 8.4 Cancellation of Certificate of Formation 36
Section 8.5 Buy Out Rights. 37
ARTICLE IX CERTIFICATES EVIDENCING UNITS
Section 9.1 Certificates 37
Section 9.2 Register. 37
Section 9.3 New Certificates. 37
Section 9.4 Interest as a Security 37
Section 9.5 Legends 38
ARTICLE X MISCELLANEOUS
Section 10.1 Notices 38
Section 10.2 Amendment; Waiver 38
Section 10.3 Assignment. 39
Section 10.4 Entire Agreement 39
Section 10.5 Public Disclosure. 39
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Section 10.6 Parties in Interest. 39
Section 10.7 Governing Law; Submission to Jurisdiction;
Selection of Forum. 39
Section 10.8 Counterparts. 40
Section 10.9 Severability. 40
Section 10.10 Equitable Relief. 40
Section 10.11 No Agency. 40
Section 10.12 Limitation of Liability 40
Section 10.13 Non-Exclusive Business 40
Section 10.14 Dispute Resolution. 41
EXHIBIT A Form of Unit Certificate
SCHEDULE 1 Identification of Members
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OPERATING AGREEMENT
OF
GEORGIA-PACIFIC TISSUE, LLC
THIS OPERATING AGREEMENT of GEORGIA-PACIFIC TISSUE, LLC, a Delaware
limited liability company (the "Company"), is made and entered into as of
October 4, 1999, among WISCONSIN TISSUE MILLS INC., a Delaware corporation and a
wholly owned subsidiary of Chesapeake Corporation ("WISCO"), GEORGIA-PACIFIC
CORPORATION, a Georgia corporation ("G-P"), and such other Persons that become
Members as herein provided.
RECITALS
WHEREAS, the Company, G-P, WISCO and certain WISCO Affiliates are
parties to that certain Joint Venture Agreement, dated as of October 4, 1999
(the "Joint Venture Agreement");
WHEREAS, pursuant to and subject to the terms and conditions of the
Joint Venture Agreement, each of WISCO and G-P will contribute, or cause to be
contributed, to the Company certain assets and liabilities in exchange for
equity interests in the Company;
WHEREAS, the Members desire to enter into this Agreement, which shall
constitute the limited liability company agreement of the Members under the
Delaware Act, for the purpose of setting forth the agreements of the Members as
to the affairs of the Company and the conduct of its business;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and undertakings contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
SECTION 1.1 CERTAIN DEFINITIONS.
As used herein, the following terms shall have the meanings set forth
or as referenced below:
"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant Fiscal Year, after giving effect to the following adjustments:
(i) Add to such Capital Account any amounts which such Member is
treated as obligated to restore pursuant to Regulations Section
1.704-1(b)(2)(ii)(c) by virtue of such Member's guarantee or indemnity agreement
with respect to the Company Debt or is deemed to be obligated to restore
pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(ii) Subtract from such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
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The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 3.5(e);
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with such first Person as of the date on which, or at any time
during the period for which, the determination of affiliation is being made. For
the purpose of this definition, "control" means (i) the direct or indirect
ownership or control of more than 50% of the voting stock or general partnership
interest or other voting interest in any Person, or (ii) the ability to direct
or cause the direction of the management or affairs of a Person, whether through
the direct or indirect ownership of voting interests, by contract or otherwise.
"Affiliate Member" shall have the meaning set forth in Section 7.3(a).
"Agreed Value" means the Fair Market Value of Contributed Assets;
provided that the initial Agreed Value of Contributed Assets that a Member is
obligated to transfer, or cause to be transferred, to the Company pursuant to
the Joint Venture Agreement shall be the amount set forth in, or determined
pursuant to, Section 3.1 of this Agreement.
"Agreement" shall mean this Operating Agreement, including the
schedules and exhibits hereto, as the same may be amended or supplemented from
time to time in accordance with the terms hereof.
"Ancillary Agreements" shall have the meaning set forth in the Joint
Venture Agreement.
"Board" means the governance board of the Company consisting of all
Managers or, as may be applicable, any duly appointed committee of the Board.
"Built In Gain" means, with respect to any Contributed Asset, the
excess of the Fair Market Value of such Contributed Asset on the Closing Date as
determined under Section 3.1(a) over the Company's adjusted basis for federal
income tax purposes in such Contributed Asset immediately following its
contribution to the Company.
"Business Day" means a day, other than a Saturday or Sunday, on which
banks generally are open in New York City for a full range of business.
"Call Price" shall have the meaning set forth in Section 7.2(b).
"Capital Account" means, with respect to any Member, the Capital
Account maintained for such Member in accordance with the following provisions:
(i) To each Member's Capital Account there shall be added the
amount of money and the initial Gross Asset Value of any property (other than
money) contributed to the Company by such Member (or its predecessors in
interest) with respect to the Interest in the Company held by such Member, such
Member's distributive share of Profits and any items in the nature of income or
gain which are specially allocated pursuant to Section 3.7 or Section 3.8, and
the amount of any Company liabilities assumed by such Member or which are
secured by any Company property distributed to such Member.
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(ii) From each Member's Capital Account there shall be subtracted
the amount of money and the Gross Asset Value of any property distributed to
such Member pursuant to any provision of this Agreement, such Member's
distributive share of Losses and any items in the nature of expense or loss
which are specially allocated pursuant to Section 3.7 or Section 3.8, and the
amount of any liabilities of such Member assumed by the Company or which are
secured by any property contributed by such Member to the Company.
(iii) In the event all or a portion of an Interest in the Company
is transferred in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent it relates
to the transferred Interest.
(iv) In determining the amount of any liability for purposes of
subparagraphs (i) and (ii) above, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Board shall determine that it
is necessary to modify the manner in which the Capital Accounts, or any debits
or credits thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributions or distributed property or which
are assumed by the Company or any Member) are computed in order to comply with
such Regulations, the Board may make such modification, provided that such
modification is not likely to have a material adverse effect on the amounts
distributed to any Member upon the dissolution of the Company. The Board also
shall (i) make any adjustments that are necessary or appropriate to maintain
equality between the Capital Accounts of the Members and the amount of Company
capital reflected on the Company's balance sheet, as computed for book purposes
in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any
appropriate modifications in the event unanticipated events might otherwise
cause this Agreement not to comply with Regulations Section 1.704-1(b), provided
that, to the extent that any such adjustment is inconsistent with other
provisions of this Agreement and would have a material adverse effect on any
Member, such adjustment shall require the consent of such Member.
"Capital Contribution" means, with respect to any Member, the amount of
cash and the Agreed Value of Contributed Assets contributed by such Member to
the Company in accordance with Section 3.1.
"Cash Balances" means all cash accounts on a balance sheet representing
paper currency and coins, negotiable money orders, checks and bank balances as
well as cash equivalents in the form of highly liquid securities with a known
market value and a maturity, when acquired, of less than three months.
"Certificate" means a certificate evidencing Units substantially in the
form of Exhibit A to this Agreement.
"Certificate of Formation" shall have the meaning set forth in Section
2.1.
"Closing" and "Closing Date" shall have the respective meanings set
forth in the Joint Venture Agreement.
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"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor to such statute.
"Commercial Tissue Business" shall have the meaning set forth in the
Joint Venture Agreement.
"Company" shall have the meaning set forth in the preamble hereto.
"Company Business" means the business intended to be carried on by the
Company Group, as described in Section 2.2 hereof.
"Company Debt" means the debt incurred by the Company on or about the
Closing Date solely to fund the Special Distribution, as further described in
Section 2.8(b) of the Joint Venture Agreement, and refinancing or replacement
therefor (including up to $8 million of related expenses, including legal fees,
accounting fees, printing fees, filing fees, and underwriting fees).
"Company Group" means the Company and any Subsidiaries of the Company
from time to time.
"Company Group Affiliate" means any Person that is an Affiliate of the
Company.
"Company Property" means any and all property of whatsoever nature,
tangible or intangible, real or personal, of the Company Group from time to
time.
"Confidential Information" shall have the meaning set forth in Section
6.1.
"Contributed Assets" means the property or other consideration (other
than cash) contributed to the Company in exchange for Units in the Company.
"CPA Firm" means the independent public auditor determined pursuant to
Section 5.3.
"CSK" means Chesapeake Corporation, a Virginia corporation, of which
WISCO is a wholly-owned subsidiary.
"CSK Group" means CSK, WISCO, and all other CSK Subsidiaries from time
to time.
"CSK Group Affiliate" means any Person that is an Affiliate of CSK.
"Debt" means any liability of the Company (including, without
limitation, liabilities to Members) for borrowed money, or any liability for the
payment of money by the Company in connection with any guarantees, surety
agreements, letters of credit, or other interest bearing liabilities evidenced
by any bond, debenture, note or other similar instrument, excluding any trade
liabilities or any non-interest bearing liabilities or obligations; capital
lease (but not operating lease) liabilities and other liabilities which are in
the nature of financing; and any interest bearing off-balance sheet liabilities
and the net liability of off balance sheet derivative contracts.
"Delaware Act" means the Delaware Limited Liability Company Act, 6 Del.
C.ss.ss. 18-101 et seq., as amended from time to time, and any successor to such
statute.
"Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable for
federal income tax purposes with respect to
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an asset for such Fiscal Year, except that if the Gross Asset Value of an asset
differs from its adjusted basis for federal income tax purposes at the beginning
of such Fiscal Year, Depreciation shall be determined by the Board in the manner
described in Regulations Section 1.704-1(b)(2)(iv)(g)(3).
"Distributable Cash" means the amount of cash that the Board reasonably
determines is available for distribution to Members at any applicable time,
taking into account available cash and anticipated cash flow and current and
anticipated expenses of the Company and after setting aside reserves in an
amount reasonably deemed necessary to provide for the Company's planned capital
expenditures, debt service and working capital.
"EBITDA" means, at any time of determination as specified in this
Agreement, the earnings before interest, taxes, depreciation and amortization of
the Company Group, computed on a consolidated basis in accordance with GAAP
consistently applied, for the four fiscal quarters next preceding such date of
determination, excluding any one time, unusual or extraordinary items (and, if
determined at a time prior to the expiration of four fiscal quarters following
the Closing Date, then such EBITDA shall be deemed to be the EBITDA of the
Company Group for post-Closing completed fiscal quarters of the Company plus
combined EBITDA of the WISCO Business and the G-P Business for such number of
pre-Closing fiscal quarters as, together with the completed fiscal quarters of
the Company, shall equal four (4)).
"Exercise Notice" shall have the meaning set forth in Section 7.2(c).
"Fair Market Value" means, with respect to property, as of any date of
determination, the price for such property that could be negotiated in an
arm's-length free market transaction, for cash, between a willing seller and a
willing buyer, neither of whom is under pressure or compulsion to complete the
transaction, as of such date of determination, as determined in good faith by
the Board using a reasonable valuation method, which determination must include
the vote or consent of the WISCO Member; provided that if the full Board is
unable to reach such a determination with the vote or consent of the WISCO
Member, the WISCO Member and the G-P Member shall each select an independent and
nationally recognized accounting firm as its representative, and such accounting
firms shall select one independent and nationally recognized investment banking
firm, accounting firm or appraisal company as they deem appropriate and in the
best position to determine the Fair Market Value, whose determination of the
Fair Market Value shall be final and binding.
"Final Determination" means (i) a decision, judgment, decree or other
order by any court of competent jurisdiction, which binds WISCO or CSK and has
become final and not subject to further appeal, (ii) a closing agreement which
binds WISCO or CSK entered into under Section 7121 of the Code or any other
binding settlement agreement with the Internal Revenue Service entered into in
connection with or in contemplation of an administrative or judicial proceeding,
or (iii) the completion of Internal Revenue Service administrative proceedings
which binds WISCO or CSK and if a judicial contest is not or is no longer
available or, in the sole discretion of WISCO or CSK, is not to be commenced or
continued.
"Financing Agreements" means any agreement pursuant to which the
Company or any Company Affiliate incurs Debt.
"Fiscal Year" means the fiscal year of the Company as specified in 5.1.
"Formula Price" means, at any date of determination, the EBITDA of the
Company less Net Debt as of such date multiplied by 7.38.
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"G-P Books" means any books and records of G-P Related to calculation
of volume, price or cost allocation methodology for purposes of the Ancillary
Agreements.
"G-P Call" shall have the meaning set forth in Section 7.2(b).
"G-P Group" means G-P and its Subsidiaries from time to time.
"G-P Group Affiliate" means any Person that is an Affiliate of G-P.
"G-P Guarantee" shall have the meaning set forth in Section 3.17.
"G-P Member" means, collectively if more than one, the G-P Group
Affiliate(s) who from time to time is (are) Member(s) of the Company.
"Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Member to Company shall be the Agreed Value of such asset except as otherwise
provided in Section 3.1;
(ii) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross Fair Market Values as of the following
times: (A) the acquisition of an additional Interest in the Company by any new
or existing Member in exchange for more than a de minimis capital contribution;
(B) the distribution by the Company to a Member of more than a de minimis amount
of money or other property as consideration for an Interest in the Company; and
(C) the liquidation of the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses
(A) and (B) above shall be made only if such adjustments are reasonably
necessary or appropriate to reflect the relative economic interests of the
Members in the Company;
(iii) The Gross Asset Value of any Company asset distributed to
any Member shall be adjusted to equal the gross Fair Market Value of such asset
on the date of distribution; and
(iv) The Gross Asset Values of Company assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulation Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the
definition of "Profits" and "Losses" or Section 3.7(g); provided, however, that
Gross Asset Values shall not be adjusted pursuant to this subparagraph (iv) to
the extent the Board makes an adjustment pursuant to subparagraph (ii) that
would otherwise result in an adjustment pursuant to this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraphs (i), (ii), or (iv), such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
"Group" means the Company Group, the CSK Group or the G-P Group, or
both, as the context may require.
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"Independent Third Party" means any Person who, immediately prior to
the contemplated transaction, is not the owner of in excess of a 5% Percentage
Interest in the Company and who is not a Member of any such 5% Owner.
"Indemnitee" shall have the meaning set forth in Section 4.10.
"Interest" means the ownership interest of a Member in the Company
(which shall be considered personal property for all purposes), consisting of
(i) such Member's interest in profits, losses, allocations and distributions,
(ii) such Member's right to vote or grant or withhold consents with respect to
Company matters as provided herein or in the Delaware Act and (iii) such
Member's other rights and privileges as provided herein or under the Delaware
Act.
"Involuntary Dissolution Event" shall mean any event described in
Section 8.1(d) hereof if no Member filed a motion, petition, or other request
before a court or an administrative agency seeking a dissolution of the Company.
"Joint Venture Agreement" shall have the meaning set forth in the
recitals hereto.
"Law" means any federal, state, foreign or local law, constitutional
provision, code, statute, ordinance, rule, regulation, order, judgment or decree
of any governmental authority.
"Manager" means a person duly elected to the Board pursuant to the
provisions of Section 4.2 or Section 4.3 hereof. Each Manager shall constitute a
"manager" of the Company as such term is defined in Section 18-101 of the
Delaware Act.
"Members" mean WISCO and G-P and all other Persons admitted as
additional or substituted Members pursuant to this Agreement, so long as they
remain Members. Each Member shall constitute a "Member" of the Company, as such
term is defined in Section 18-101 of the Delaware Act.
"Net Debt" means, at any date of determination, the amount of all Debt
of the Company Group on such date, less all Cash Balances held by or on behalf
of any Company Group Member and less loans made to the Members as of such date.
"Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) and 1.704-2(c) of the Regulations.
"Obligations" shall have the meaning set forth in Section 3.17(b).
"Nonrecourse Liability" has the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
"Option Closing" shall have the meaning set forth in Section 7.2(c).
"Option Right" shall have the meaning set forth in Section 7.2(c).
"Partner Nonrecourse Debt" has the same meaning as the term "partner
nonrecourse debt" set forth in Section 1.704-2(b)(4) of the Regulations.
"Partner Nonrecourse Debt Minimum Gain" means an amount, with respect
to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that
would result if such Partner
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Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Section 1.704-2(i)(3) of the Regulations.
"Partner Nonrecourse Deductions" has the same meaning as the term
"partner nonrecourse deductions" set forth in Sections 1.704-2(i)(1) and
1.704-2(i)(2) of the Regulations.
"Partnership Minimum Gain" has the meaning set forth in Sections
1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"Percentage Interests" means the respective proportions in which the
Members hold their Interests in the Company, determined for any Member as of any
date by dividing the number of Units held by such Member on such date by the
total number of Units outstanding and held by all Members as of such date.
"Permanent Company Debt" shall mean the indebtedness incurred by the
Company to refinance the Company Debt, as further described in Section 3.17
hereof, and shall include, where the context requires, any replacement or
refinancing thereof.
"Person" shall mean an individual, a corporation, a partnership, an
association, a trust, a limited liability company, a governmental authority or
any other entity or organization.
"Products" shall have the meaning set forth in Section 10.13(a).
"Profits" and "Losses" means, for each Fiscal Year, an amount equal to
the Company's taxable income or loss for such Fiscal Year, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(i) Any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses pursuant
to this definition of "Profits" and "Losses" shall be added to such taxable
income or loss;
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B), or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Profits or Losses pursuant to this definition of "Profits" and
"Losses" shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraphs (ii) or (iii) of the definition of "Gross
Asset Value," the amount of such adjustment shall be taken into account as gain
or loss from the disposition of such asset for purposes of computing Profits or
Losses;
(iv) Gain or loss resulting from any disposition of property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Allocation Year,
computed in accordance with the definition of "Depreciation";
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(vi) To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account
in determining Capital Accounts as a result of a distribution other than in
complete liquidation of a Member's Interest, the amount of such adjustment shall
be treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases the basis of the asset) from the
disposition of the asset and shall be taken into account for purposes of
computing Profits or Losses; and
(vii) Any items which are specially allocated pursuant to Section
3.7 or Section 3.8 shall not be taken into account in computing Profits or
Losses.
The amounts of the items of Company income, gain, loss or deduction available to
be specially allocated pursuant to Sections 3.7 and 3.8 shall be determined by
applying rules analogous to those set forth in subparagraphs (i) through (vi)
above.
"Put Price" shall have the meaning set forth in Section 7.2(a).
"Regulations" means the regulations promulgated by the U.S. Treasury
Department pursuant to the Code.
"Regulatory Allocations" shall have the meaning set forth in Section
3.8.
"Special Distribution" shall have the meaning set forth in Section
2.8(b) of the Joint Venture Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, trust, limited liability company or other legal entity
or organization of which such person, either directly or indirectly or through
or together with any other Subsidiary of such Person, owns more than 50% of the
equity interests.
"Tax Matters Member" shall have the meaning set forth in Section 3.12.
"Tax Opinion" means an opinion of CSK's legal counsel or public
accounting firm to the effect that it is substantially more likely than not that
(1) the transfer of the WISCO Business constituted a sale to the Company (in
whole or in part) for federal income tax purposes, or (2) the Special
Distribution is taxable to WISCO in whole or in part. Such opinion must be based
upon an addition, amendment, or other modification to the Code or the
Regulations, the issuance by the Internal Revenue Service (or any other
administrative agency or authority having jurisdiction over the interpretation,
administration, or enforcement of federal income tax laws) of a ruling, notice,
or other administrative pronouncement, or the issuance or publication of a
decision by a court, in any such event occurring after the Closing but before
the eighth anniversary of the Closing Date.
"Transfer" shall have the meaning set forth in Section 7.1.
"Units" means the equal proportional units into which Interests in the
Company shall be divided, which term may include fractions of Units as well as
whole Units. Subject to the Capital Contribution obligations of the Members
hereunder, all Units issued hereunder shall be fully paid and non-assessable.
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"Voluntary Dissolution Event" shall mean any event described in Section
8.1 hereof other than an Involuntary Dissolution Event.
"Voluntary Dissolution Event Without WISCO's Consent" shall mean any
Voluntary Dissolution Event which is described in Section 8.1 hereof if the
event occurs without the consent of the WISCO Member. For this purpose, the
WISCO Member shall be deemed to have consented to (i) any action approved by the
Manager designated by the WISCO Member, (ii) any reduction of the WISCO Member's
(or the CSK Group's) ownership of the outstanding Units below 5% if such
reduction occurs because of an exercise of the WISCO Put, and (iii) the
dissolution of the Company under Section 8.1(d) hereof at the request of the
WISCO Member.
"WISCO" shall have the meaning set forth in the preamble hereto.
"WISCO Business" shall have the meaning set forth in the Joint Venture
Agreement.
"WISCO Indemnity Period" shall have the meaning set forth in Section
3.17.
"WISCO Manager" shall mean a Manager designated by the WISCO Member.
"WISCO Member" means, collectively if more than one, the CSK Group
Affiliate(s) which from time to time is (are) Member(s) of the Company.
"WISCO Put" shall have the meaning set forth in Section 7.2(a).
SECTION 1.2 RULES OF CONSTRUCTION.
(a) Words used herein, regardless of the number and gender used, shall
be deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context requires, and, as
used herein, unless the context requires otherwise, the words "hereof",
"herein", and "hereunder" and words of similar import shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
(b) A reference to any statute or statutory provision shall be
construed as a reference to the same as it may have been, or may from time to
time be, amended, modified or re-enacted.
(c) The terms "dollars" and "$" shall mean United States dollars.
(d) The term "including" shall be deemed to mean "including without
limitation."
(e) Article and section headings used in this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement is among financially sophisticated and knowledgeable
parties and is entered into by the parties in reliance upon the economic and
legal bargains contained herein and shall be interpreted and construed in a fair
and impartial manner without regard to such factors as the party who prepared,
or caused the preparation of, this Agreement or the relative bargaining power of
the parties.
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ARTICLE II
GENERAL MATTERS
SECTION 2.1 FORMATION.
The Members have caused the formation of the Company as a Delaware
Limited Liability Company pursuant to the Delaware Act by filing a Certificate
of Formation of the Company (the "Certificate of Formation") with the Delaware
Secretary of State in accordance with the Delaware Act and, in connection
therewith, each Member has contributed $10.00 to the capital of the Company
prior to the date hereof. The rights and liabilities of the Members shall be as
provided in the Delaware Act, except as otherwise provided in this Agreement.
SECTION 2.2 PURPOSES AND BUSINESS.
Except as may otherwise be approved by the Board (which approval must
include the affirmative vote or consent of the WISCO Manager), the purpose of
the Company and the Company Group shall be to engage in any lawful business in
any way related to the business of producing, licensing for production and
selling commercial tissue products and related products for the "away from home"
market, on a worldwide basis. The Company shall have all powers necessary or
desirable to accomplish the aforesaid purposes. In connection therewith, the
Company may engage in and enter into any and all activities, contracts and
agreements related or incident to the above-stated purposes as the Board may
determine to be appropriate from time to time. The Company shall have the power
to do all things necessary, appropriate, advisable, convenient, or incidental in
connection with the fulfillment of its business purposes. The Company shall not,
and shall not permit any of its Subsidiaries to, engage in any other activity or
business except to the extent approved by the Board (which approval must include
the affirmative vote or consent of the WISCO Manager).
SECTION 2.3 OFFICES.
(a) The principal executive offices of the Company shall be located at
55 Park Place, Atlanta, Georgia at the offices of G-P or such other location as
determined by the Board from time to time.
(b) The registered office of the Company in the State of Delaware is
located at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware
19801. The registered agent of the Company for service of process at such
address is The Corporation Trust Company. Such registered office or registered
agent may be changed by the Board from time to time.
SECTION 2.4 NAME.
The name of the Company shall be Georgia-Pacific Tissue, LLC or such
other name as the Board may from time to time select.
SECTION 2.5 TERM.
The existence of the Company commenced on the date its Certificate of
Formation was filed with the Secretary of State of the State of Delaware, and
shall continue in perpetuity unless dissolved in accordance with Section 8.1.
SECTION 2.6 MEMBERS.
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The name and business or mailing address of each Member of the Company
are set forth on Schedule 1 to this Agreement. The Board shall cause Schedule 1
to be amended from time to time to reflect the addition or retirement of
Members, or transfers of Units, in accordance with the terms of this Agreement.
Except in connection with a permitted redemption or transfer of a Member's
entire Interest in accordance with the terms of this Agreement, no Member shall
have the right to retire from the Company prior to the termination of the
Company following dissolution and winding up.
ARTICLE III
FINANCIAL AND TAX MATTERS
SECTION 3.1 CAPITAL CONTRIBUTIONS.
(a) Simultaneously with the execution of this Agreement, WISCO is
contributing to the Company the WISCO Business, as defined and identified in the
Joint Venture Agreement, with an aggregate agreed value of $775,000,000 in
exchange for 5 Units, which number of Units reflects the Special Distribution.
Specifically, the various categories of assets comprising the Contributed Assets
of WISCO are as follows:
Shares of Wisconsin Tissue
de Mexico, S.A.
Shares of Wisconsin Tissue
Management LLC
Interest in Alsip Condominium Association
Working Capital
Land
Buildings
Equipment
Inventory
Goodwill
For purposes of maintaining the Company's books in accordance with Regulations
Section 1.704-1(b)(2)(iv), the initial Gross Asset Value of each asset within
each of the above categories shall be based on the relative Fair Market Values
of the assets within each category.
(b) Simultaneously with the execution of this Agreement, G-P is
contributing to the Company the G-P Contributed Assets, as defined and
identified in the Joint Venture Agreement, with an aggregate agreed value of
$376,400,000 in exchange for 95 Units, which number of Units reflects the
Special Distribution. Specifically, the various categories of assets comprising
the Contributed Assets of G-P are as follows:
Working Capital
Land
Buildings
Equipment
Inventory
Goodwill
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For purposes of maintaining the Company's books in accordance with Regulations
Section 1.704-1(b)(2)(iv), the initial Gross Asset Value of each asset within
each of the above categories shall be based on the relative Fair Market Values
of the assets within each category.
(c) Except as may otherwise be unanimously agreed to in writing by the
Members, the Members shall have no right or obligation to make any additional
Capital Contributions to the Company.
(d) Unless otherwise unanimously agreed by the Members, any additional
Capital Contributions made by the Members shall be made in accordance with the
Members' respective Percentage Interests, and additional Units shall be issued
in respect of any such additional Capital Contributions pro rata based on the
Members' respective Percentage Interests.
SECTION 3.2 LOANS FROM MEMBERS.
Loans by a Member to the Company shall not be considered Capital
Contributions. Such loans shall bear interest at arm's length market rates and
may contain other customary commercial terms as agreed by the Company and the
Member; provided, however, that any such loans shall be fully subordinated to
the Company Debt and the Permanent Company Debt in accordance with terms that
are reasonably acceptable to each Member. If any Member shall advance funds to
the Company in excess of the amounts required hereunder to be contributed by
such Member to the capital of the Company, such advances shall not increase the
Capital Account of such Member. The amounts of any such advances shall be a debt
of the Company to such Member and shall be payable or collectible only out of
Company assets in accordance with the terms and conditions upon which such
advances are made. The repayment of debt owed to a Member upon liquidation of
the Company shall be subject to the order of priority set forth in Section 8.2.
SECTION 3.3 RESTRICTIONS RELATING TO CAPITAL; COMPANY PROPERTY.
(a) Except as otherwise provided herein or by the Delaware Act, no
Member shall have the right to withdraw, or receive any return of, all or a
portion of such Member's Capital Contribution, nor shall any Member have the
right to demand and receive property other than cash in return for its Capital
Contribution, except as provided in Section 8.3(a).
(b) No interest shall be paid by the Company on Capital Contributions
or on balances in Members' Capital Accounts.
(c) All Company Property, whether contributed by a Member or otherwise
acquired by the Company, shall be owned by the Company as a separate legal
entity and no Member shall have any right of partition with respect to any
Company Property. The Board shall cause the Company to execute, file and record
such documents as may be necessary or appropriate to reflect the Company's
ownership of Company Property in appropriate public offices.
(d) No Member shall be liable to the Company or to any other Member to
restore any deficit balance in its Capital Account (except as may be required by
the Delaware Act) or to reimburse any other Member for any portion of such other
Member's investment in the Company. No Member shall have priority over any other
Member, either as to the return of its Capital Contribution or as to income,
losses, interest, returns, or distributions, except for the priority of the
WISCO Member with respect to the Special Distributions and as set forth in
Section 8.3(a).
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(e) The Company shall not enter into any transaction, other than the
Ancillary Agreements, with any Member or any Affiliate of any Member except on
arms length terms.
SECTION 3.4 TAX TREATMENT.
It is the intention of the Members that the Company shall be taxed as a
"partnership" for United States federal, state and local income tax purposes,
and, except as otherwise required by law, no Member shall take any action
inconsistent with the classification of the Company as a partnership for U.S.
tax purposes, including any action to cause the Company to be treated as an
association taxable as a corporation for U.S. tax purposes.
SECTION 3.5 ALLOCATION OF PROFITS.
After giving effect to the special allocations set forth in Sections
3.7 and 3.8, Profits for any Fiscal Year shall be allocated among the Members in
proportion to their respective Percentage Interests.
SECTION 3.6 ALLOCATION OF LOSSES.
After giving effect to the special allocations set forth in Sections
3.7 and 3.8, Losses for any Fiscal Year shall be allocated as set forth in
Section 3.6(a), subject to the limitation in Section 3.6(b).
(a) Losses for any Fiscal Year shall be allocated among the Members in
proportion to their respective Percentage Interests.
(b) The Losses allocated pursuant to Section 3.6(a) shall not exceed
the maximum amount of Losses that can be so allocated without causing any Member
to have an Adjusted Capital Account Deficit at the end of any Fiscal Year. In
the event some but not all of the Members would have Adjusted Capital Account
Deficits as a consequence of an allocation of Losses pursuant to Section 3.6(a),
the limitation set forth in this Section 3.6(b) shall be applied on a Member by
Member basis so as to allocate the maximum permissible Losses to each Member
under Section 1.704-1(b)(2)(ii)(d) of the Regulations.
SECTION 3.7 SPECIAL ALLOCATIONS.
The following special allocations shall be made in the following order:
(a) Minimum Gain Chargeback Except as otherwise provided in Section
1.704-2(f) of the Regulations, notwithstanding any other provision of this
Article III, if there is a net decrease in Partnership Minimum Gain during any
Fiscal Year, each Member shall be specially allocated items of Company income
and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an
amount equal to such Member's share of the net decrease in Partnership Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Sections 1.704-2(f)(6)
and 1.704-2(j)(2) of the Regulations. This Section 3.7(a) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-2(f) of the
Regulations and shall be interpreted consistently therewith.
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(b) Partner Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of
this Article III, if there is a net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to a Partner Nonrecourse Debt during any Fiscal Year, each
Member who has a share of the Partner Nonrecourse Debt Minimum Gain attributable
to such Partner Nonrecourse Debt, determined in accordance with Section
1.704-2(i)(5) of the Regulations, shall be specially allocated items of Company
income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal
Years) in an amount equal to such Member's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Sections 1.704-2(i)(4)
and 1.704-2(j)(2) of the Regulations. This Section 3.7(b) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the
Regulations and shall be interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5) or Section
1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company income and gain
shall be specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the Adjusted
Capital Account Deficit of such Member as quickly as possible, provided that an
allocation pursuant to this Section 3.7(c) shall be made only if and to the
extent that such Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article III have been tentatively made as
if this Section 3.7(c) were not in the Agreement.
(d) Gross Income Allocation. In the event any Member has a deficit
Capital Account at the end of any Fiscal Year which is in excess of the sum of
(i) the amount such Member is treated as obligated to restore pursuant to
Regulations Section 1.704-1(b)(2)(ii)(c) by virtue of such Partner's guarantee
or indemnity with respect to the Company Debt, and (ii) the amount such Member
is deemed to be obligated to restore pursuant to the penultimate sentences of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be
specially allocated items of Company income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 3.7(d) shall be made only if and to the extent that such Member would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Article III have been made as if Section 3.7(c) and this
Section 3.7(d) were not in the Agreement.
(e) Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions
for any Fiscal Year shall be allocated to the Member who bears the economic risk
of loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Regulations Section
1.704-2(i)(1).
(f) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year
shall be allocated to the Members in proportion to their respective Percentage
Interests.
(g) Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as the result of a
distribution to a Member in complete liquidation of its interest in the Company,
the amount of such adjustment to Capital Accounts shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment
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decreases such basis) and such gain or loss shall be specially allocated to the
Members in accordance with their Interests in the Company in the event that
Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom
such distribution was made in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) In the event that the Company makes a distribution to WISCO
pursuant to Section 3.15 hereof, then WISCO shall be specially allocated items
of Company income and gain from each Fiscal Year in which such distribution is
made (and, if necessary, subsequent Fiscal Years in the case of distributions
under Section 3.15(a) or (b)) in an amount equal to the total of such
distributions made to WISCO.
SECTION 3.8 OFFSETTING SPECIAL ALLOCATIONS.
The allocations set forth in Sections 3.6(b), and 3.7(a), (b), (c),
(d), (e), (f), and (g) (the "Regulatory Allocations") are intended to comply
with certain requirements of the Regulations. It is the intent of the Members
that, to the extent possible, all Regulatory Allocations shall be offset either
with other Regulatory Allocations or with special allocations of other items of
Company income, gain, loss or deduction pursuant to this Section 3.8. Therefore,
notwithstanding any other provision of this Article III (other than the
Regulatory Allocations), the Board shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner it
determines appropriate so that, after such offsetting allocations are made, each
Member's Capital Account balance is, to the extent possible, equal to the
Capital Account balance such Member would have had if the Regulatory Allocations
were not part of the Agreement and all Company items were allocated pursuant to
Sections 3.5, 3.6(a) and 3.7(h). In exercising its discretion under this Section
3.8, the Board shall take into account future Regulatory Allocations under
Sections 3.7(a) and 3.7(b) that, although not yet made, are likely to offset
other Regulatory Allocations previously made under Sections 3.7(e) and 3.7(f).
SECTION 3.9 OTHER ALLOCATION RULES.
(a) Profits, Losses, and any other items of income, gain, loss or
deduction shall be allocated to the Members pursuant to this Article III as of
the last day of each Fiscal Year; provided that Profits, Losses and such other
items shall also be allocated at such times as the Gross Asset Values of Company
Property are adjusted pursuant to subparagraph (ii) of the definition of Gross
Asset Value.
(b) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Board using
any permissible method under Code Section 706 and the Regulations thereunder.
(c) All allocations to the Members pursuant to this Article III shall,
except as otherwise provided, be divided among them in proportion to their
respective Percentage Interests.
(d) The Members are aware of the income tax consequences of the
allocations made by this Article III and hereby agree to be bound by the
provisions of this Article III in reporting their shares of Company income and
loss for income tax purposes, except to the extent otherwise required by law.
(e) Solely for purposes of determining a Member's proportionate share
of the "excess nonrecourse liabilities" of the Company within the meaning of
Regulations
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Section 1.752-3(a)(3), the Members' interests in Company profits are
in proportion to their Percentage Interests.
(f) To the extent permitted by Section 1.704-2(h)(3) of the
Regulations, the Board shall endeavor to treat distributions as having been made
from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse Debt only
to the extent that such distributions would cause or increase an Adjusted
Capital Account Deficit for any Member.
SECTION 3.10 TAX ELECTIONS.
The Company shall make the following elections on the appropriate tax
returns:
(a) to adopt the accrual method of accounting, if permitted by the
Code, and to keep the Company's books and records in a manner consistent
therewith;
(b) to elect to amortize the organizational expenses and the start-up
expenditures of the Company ratably over a period of sixty (60) months as
permitted by Sections 709(b) and 195(b) of the Code;
(c) if so requested by any Member, an election under Section 754 of the
Code to adjust the basis of the Company's property in the circumstances
described therein; and
(d) any other election not inconsistent with this Agreement or the
Joint Venture Agreement that the Tax Matters Member may deem appropriate and in
the best interests of the Members.
Neither the Company nor any Member may make an election for the Company to be
excluded from the application of the provisions of subchapter K of chapter 1 of
subtitle A of the Code or any similar provisions of applicable state law.
SECTION 3.11 TAX ALLOCATIONS; CODE SECTION 704(C).
In accordance with Code Section 704(c) and the Regulations thereunder,
income, gain, loss, and deduction with respect to any Contributed Asset shall,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such Contributed Asset to the
Company for federal income tax purposes and its initial Gross Asset Value
(computed in accordance with subparagraph (i) of the definition of "Gross Asset
Value").
In addition, in the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraph (ii) of the definition of the "Gross Asset
Value," subsequent allocations of income, gain, loss, and deduction with respect
to such asset shall take account of any variation between the adjusted basis of
such asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Regulations thereunder.
The Company shall adopt and use only the "traditional method" permitted
by the Regulations under Code Section 704(c), and therefore shall not make any
curative allocations and/or remedial allocations. Allocations pursuant to this
Section 3.11 are solely for purposes of federal, state, and local taxes and
shall not affect, or in any way be taken into account in computing, any Member's
Capital Account or share of Profits, Losses, other items, or distributions
pursuant to any provision of this Agreement.
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Except as otherwise provided in this Agreement, all items of Company
income, gain, loss, deduction, and any other allocations not otherwise provided
for shall be divided among the Members in the same proportions as the Percentage
Interest for the Fiscal Year.
SECTION 3.12 TAX MATTERS MEMBER.
The Member having the highest Percentage Interest shall be the tax
matters partner (the "Tax Matters Member") of the Company pursuant to Section
6231(a)(7) of the Code. Such Member shall take such action as may be necessary
to cause each other Member to become a notice partner within the meaning of
Section 6223 of the Code. Such Member shall inform each other Member of all
significant matters that may come to its attention in its capacity as Tax
Matters Member by giving prompt notice thereof. The Company agrees to defend,
indemnify and hold harmless the Tax Matters Member from and against all claims
and damages relating to actions taken in good faith in discharging its
responsibilities as Tax Matters Member.
SECTION 3.13 REGULAR DISTRIBUTION POLICY.
(a) The Board shall determine from time to time, in its complete
discretion whether and to what extent the Company shall distribute any portion
of available Distributable Cash to Members; provided, however, that aside from
the Special Distribution, distributions declared or made on or before January 1,
2002 shall not exceed the Company's "net cash flow from operations" as
determined under Section 1.707-4(b), unless unanimously approved by the Members.
All funds distributed to the Members pursuant to this Section 3.12 shall be
distributed to them in accordance with their respective Percentage Interests.
(b) Subject to Section 8.3 hereof, to the extent that the Board
approves any distribution that consists of property of a type or in a form other
than cash, the types and forms of such property shall be allocated in an
equitable manner among the Members entitled thereto, such that each Member
shall, except for immaterial variances, receive the same type or form of
property.
(c) Any distributions to be made by the Company shall be made only to
the extent permitted by the Company Debt and any other Financing Agreements to
which any Company Group Affiliate is a party and only if and to the extent
permitted by applicable Law (including, without limitation, Sections 18-607 and
18-804 of the Delaware Act).
SECTION 3.14 SPECIAL DISTRIBUTION.
Simultaneous with the Closing, the Company shall use the net proceeds
of the Company Debt (after deducting borrowing expenses) to make the Special
Distribution to the WISCO Member in an amount that will result in the WISCO
Member's Percentage Interest equaling 5%. The amount of the Special Distribution
shall be determined in accordance with Section 2.1(b) of the Joint Venture
Agreement.
SECTION 3.15 ACCELERATED GAINS TAX LIABILITY OF WISCO.
(a) If (on one or more occasions) prior to the tenth anniversary of the
Closing Date, the Company sells or otherwise disposes of all or any part of the
WISCO Contributed Assets, and if WISCO therefore incurs and pays (either
directly or as an offset against a tax refund or overpayment of tax) federal
and/or state income tax liabilities (on a cumulative basis, taking into account
all such sales or other dispositions) exceeding $22 million as a result of the
allocation to it of income or gain(s)
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recognized by the Company from such sales or dispositions (up to the total Built
In Gain with respect to the WISCO Contributed Assets sold or disposed of,
determined by assuming, absent a Final Determination or receipt by CSK of a Tax
Opinion, that no income or gain is recognized by WISCO on the transfer of such
assets to the Company), then the Company shall distribute to WISCO (after each
such occasion and within 10 days after WISCO has demonstrated to the Company's
reasonable satisfaction the appropriate amount to be distributed) an amount of
money equal to the actual amount, if any, of WISCO's total federal and state
income tax liability in excess of $22 million resulting from the allocation to
it of income or gain so recognized by the Company. No distribution to WISCO
under this Section 3.15(a), however, shall be made with respect to the Company's
sale of inventory, the collection or disposition of accounts receivable, or the
retirement of other assets in the ordinary course of operating the WISCO
Business (it being understood that the disposition or partial liquidation of a
manufacturing facility or of any stock or other equity interest in any WISCO
Contributed Subsidiary shall not be considered to be a transaction in the
ordinary course of business) regardless of whether the $22 million limit
otherwise has been exceeded.
(b) (i) Subject to the compliance of WISCO with its obligations under
clause (ii) of this Section 3.15(b), if (on one or more occasions) the Company
or G-P (other than satisfying its obligations under the G-P Guarantee) pays all
or any part of the principal amount of the Permanent Company Debt prior to the
thirtieth (30th) anniversary of the Closing Date, or if the Company takes any
action prior to such thirtieth (30th) anniversary that would result in a
reduction, after the funding of the Permanent Company Debt, of the portion of
such debt for which WISCO "bears the economic risk of loss" within the meaning
of Section 1.752-2 of the Regulations, then the Company shall distribute to
WISCO (after each such occasion and within 10 days after WISCO has demonstrated
to the Company's reasonable satisfaction the appropriate amount to be
distributed) an amount of money equal to the actual increase, if any, in WISCO's
total federal and state income tax liability incurred and paid by WISCO (either
directly or as an offset against a tax refund or overpayment of tax) as a result
of such payment or other action by the Company. Similar principles shall apply
if the Company repays the principal amount of the Company Debt other than by
replacing such debt with the Permanent Company Debt as provided in Section 3.17
hereof. WISCO has determined that it "bears the economic risk of loss" within
such meaning for the Company Debt up to the amount of the Special Distribution
as of the Closing Date and acknowledges that it will need to make a similar
determination with respect to the Permanent Company Debt, and the Members
acknowledge that no distribution will be made pursuant to this Section 3.15(b)
to compensate WISCO for any tax liability attributable to the incorrectness of
WISCO's determinations.
(ii) The Members acknowledge that the Company shall replace the Company
Debt and may replace the Permanent Company Debt from time to time with other
indebtedness so long as (x) such replacement does not result in a reduction in
the total amount of Company indebtedness for which WISCO "bears the economic
risk of loss," (y) such indebtedness is on terms that are no less favorable to
the Company (taking into account the Company's credit rating) than prevailing
terms in the credit markets in all material respects at the time such
indebtedness is incurred, and (z) the Company shall have provided notice to
WISCO of the terms of such indebtedness as soon after agreeing to such terms as
is reasonably practicable. WISCO hereby agrees to cooperate to the extent
reasonably required to facilitate such one or more refinancings, including but
not limited to, executing agreements (in form and substance reasonably
satisfactory to WISCO) necessary for it to "bear the economic risk of loss" for
such replacement indebtedness in an amount not less than the Special
Distribution. In such event, any such replacement indebtedness (and any and all
subsequent replacement indebtedness) shall be treated as Permanent Company Debt
for purposes of this Section 3.15(b).
(c) For the avoidance of doubt, the Members acknowledge that no
distribution will be made pursuant to this Section 3.15 as a result of the
exercise of the WISCO Put, nor shall any
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distribution be made pursuant to this Section 3.15 to compensate WISCO for any
tax liability resulting from any treatment of the contribution of the WISCO
Contributed Assets to the Company as a sale in whole or in part for federal
and/or state income tax purposes (such treatment being evidenced by a Final
Determination or by a Tax Opinion). In making any determination of the
appropriate amount to be distributed pursuant to this Section 3.15, any effect
on WISCO's taxable income and/or gain resulting from any distribution made to
WISCO pursuant to this Section 3.15, or from any corresponding special
allocation of income under Section 3.7(h), shall be disregarded.
(d) If G-P purchases WISCO's Interest in the Company pursuant to
Section 7.2(b) hereof, or if a Voluntary Dissolution Event Without WISCO's
Consent occurs, then the Company shall distribute to WISCO an amount of money
equal to the lesser of the following two amounts: (i) the amount of federal and
state income tax liability that WISCO actually incurred and paid (either
directly or as an offset against a tax refund or overpayment of tax) as a result
of the income and/or gain it recognized on the sale of its Interest to G-P (or
an Affiliate of G-P) pursuant to Section 7.2(b) or Section 8.5(b) hereof, or
upon the receipt of distributions in liquidation of its Interest pursuant to
Section 8.2 hereof, or (ii) the amount of federal and state income tax liability
that WISCO would have incurred on the sale of its Interest to G-P (or an
Affiliate of G-P), or upon the receipt of distributions in liquidation of its
Interest, if the income or gain recognized from such sale or liquidation were an
amount equal to the excess of (x) the aggregate Built In Gain in all of the
WISCO Contributed Assets over (y) any such Built In Gain previously recognized
by WISCO. For purposes of clause (y) of the preceding sentence, the following
items shall be treated as recognized Built In Gain: (1) any gain actually
recognized by WISCO from action taken by the Company with respect to the Company
Debt if such action would give rise to a distribution obligation under Section
3.15(b) and (2) any Built In Gain in WISCO Contributed Assets consisting of
inventory or accounts receivable (whether or not recognized). For purposes of
this Section 3.15(d), in computing the amount of income and/or gain recognized
by WISCO on the sale its Interest pursuant to Section 7.2(b) or Section 8.5(b)
hereof, or upon the receipt of distributions in liquidation of its Interest
pursuant to Section 8.2 hereof, there shall be included in the amount realized
by WISCO the entire amount of Company Debt (including for this purpose the
Permanent Company Debt) for which WISCO "bears the economic risk of loss" within
the meaning of Section 1.752-2 of the Regulations immediately before such sale
or liquidation, regardless of whether the indemnity agreement or other
arrangement causing WISCO to "bear the economic risk of loss" remains in effect
after such sale or liquidation. The Company shall distribute to WISCO the amount
determined in this Section 3.15(d) within 10 days after WISCO has demonstrated
to the Company's reasonable satisfaction the amount to be distributed. If,
following a Voluntary Dissolution Event Without WISCO's Consent, the Company
does not have sufficient funds to make the distribution to WISCO required under
this Section 3.15(d), G-P shall pay WISCO the amount of any shortfall.
(e) If any distribution to WISCO pursuant to this Section 3.15 is
smaller than it otherwise would have been because the event triggering the
Company's obligation to make the distribution reduced, eliminated, or prevented
the creation of or addition to a net operating loss carryover, capital loss
carryover, tax credit carryover, or other tax attribute of WISCO (collectively,
a "WISCO Tax Attribute"), then the Company shall distribute to WISCO (within 10
days after WISCO has demonstrated to the Company's reasonable satisfaction the
amount to be distributed) an amount equal to any actual increase in WISCO's
federal and state income tax liability in one or more prior or subsequent
taxable years of WISCO, but only to the extent that such increased liability is
attributable to the decrease in such WISCO Tax Attribute.
(f) Upon the occurrence of an event requiring a distribution to WISCO
under Section 3.15(b) or (d), the amount of such distribution shall be increased
pursuant to this Section 3.15(f) if WISCO has theretofore incurred and paid
(either directly or as an offset against a tax refund or
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overpayment of tax), and has not been indemnified by the Company pursuant to
Section 3.15(a) (due to the $22 million limit), federal and/or state income tax
liabilities resulting from the allocation to WISCO of Built In Gain in the WISCO
Contributed Assets upon the Company's sale or other disposition of all or any
part of such assets. The amount of the increased distribution, if any, under
this Section 3.15(f) shall be determined by multiplying (i) the federal and/or
state income tax liabilities actually incurred and paid by WISCO (either
directly or as an offset against a tax refund or overpayment of tax) from asset
sales or other dispositions by the Company to the extent that such liabilities
were not indemnified by the Company under Section 3.15(a) by reason of the $22
million limit times (ii) the "Built In Gain Percentage." For purposes of this
Section 3.15(f), the "Built In Gain Percentage" in the case of a distribution to
WISCO pursuant to Section 3.15(b) is the percentage obtained by dividing (i) the
income or gain actually recognized by WISCO from action taken by the Company
with respect to the Company Debt or the Permanent Company Debt if such action
would give rise to a distribution obligation under Section 3.15(b) by (ii) the
aggregate Built In Gain in all of the WISCO Contributed Assets. In the case of a
distribution to WISCO pursuant to Section 3.15(d), the "Built In Gain
Percentage" is 100%.
(h) Notwithstanding anything to the contrary in this Section 3.15, no
distribution shall be made to WISCO pursuant to this Section 3.15 prior to the
day after the second anniversary of the Closing Date. If a distribution
otherwise would have been due to WISCO under this Section 3.15 before the second
anniversary of the Closing Date, the amount of the distribution shall be
increased by an amount computed like interest at the prime rate published in the
"Money Rates" table (or any successor thereto) of The Wall Street Journal from
time to time from the date such distribution otherwise would have been due.
(i) For purposes of applying this Section 3.15, the Company's adjusted
basis for federal and state income tax purposes in the stock of Wisconsin Tissue
de Mexico, S.A. de C.V. immediately after the contribution of such stock to the
Company shall be increased by the amount of any intercompany loss with respect
to such stock recognized by the CSK Group as a result of the contribution. WISCO
shall inform the Company of the amount of any such recognized loss on or before
September 15, 2000, and shall inform the Company of any adjustments to the
amount of such recognized loss promptly after any such adjustment is made
(whether by the CSK Group or by the Internal Revenue Service).
SECTION 3.16 SHARING OF COMPANY TAX BENEFITS.
(a) (i) The Members believe that the contribution of the WISCO Business
constitutes a nonrecognition transaction pursuant to Section 721(a) of the Code,
and the Members and the Company shall report and otherwise treat the transfer of
the WISCO Contributed Assets to the Company as solely a nonrecognition
transaction pursuant to Section 721(a) of the Code on all relevant tax returns
and reports unless there is a Final Determination to the contrary or CSK
receives a Tax Opinion to the contrary. In addition, unless there is a Final
Determination to the contrary or CSK receives a Tax Opinion to the contrary, the
Members and the Company agree to treat any excess of the Special Distribution
over WISCO's "allocable share" of the Company Debt (within the meaning of
Regulations Section 1.707-5(b)), and any excess of the Special Distribution over
WISCO's "allocable share" of the Permanent Company Debt (within the meaning of
Regulations Section 1.707-5(b)), as reimbursements of capital expenditures
incurred by WISCO with respect to the WISCO Contributed Assets during the
two-year period prior to the Closing Date to the extent permitted by Regulations
Section 1.707-4(d). If CSK receives a Tax Opinion or, prior to the eighth
anniversary of the Closing Date, there is a Final Determination that the
transfer of the WISCO Business to the Company constituted a sale to the Company
(in whole or in part) for federal income tax purposes, then WISCO and G-P shall
jointly
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determine the change in the Company's adjusted basis for federal income
tax purposes in the WISCO Contributed Assets (such change being referred to
herein as the "Sale Step-Up").
(ii) If the Company is dissolved because of an Involuntary Dissolution
Event and WISCO recognizes taxable income and/or gain resulting from the receipt
of liquidating distributions pursuant to Section 8.2 hereof or upon the sale of
its Interest pursuant to Section 8.5 hereof, then WISCO and G-P shall jointly
determine the change, if any, in the Company's (or G-P's) adjusted basis for
federal income tax purposes in the WISCO Contributed Assets (such change being
referred to herein as the "Involuntary Dissolution Step-Up," and together with
the Sale Step-Up, the "Step-Up").
(b) Within 10 days after G-P or an Affiliate of G-P files any federal
or state income tax return (including for this purpose any amended return or
claim for refund) with the Internal Revenue Service or the applicable state
income tax authority, G-P shall pay to WISCO an amount equal to one-half of the
net income tax benefit to G-P or the Affiliate reflected on such return to the
extent that such benefit is attributable to the Step-Up. In the case of any tax
return described in the preceding sentence in which a net operating loss or a
net capital loss is reported, the net income tax benefit attributable to the
Step-Up shall be determined as if each deduction or recognized loss of G-P (or
its Affiliate) claimed on such return were used in proportion to (i) the total
amount of deductions or losses claimed on such return BEFORE creating any net
operating loss or net capital loss, divided by (ii) the total amount of
deductions or losses claimed on such return (taking into account the amount of
deductions and losses resulting in a net operating loss or net capital loss for
the year). Any deduction resulting from a net operating loss carryover, and any
net capital loss carryover used to offset a recognized capital gain, shall be
treated as a deduction or loss attributable to the Step-Up in proportion to a
fraction, the numerator of which is any portion of a deduction or loss
attributable to the Step-Up that is deemed not to have been used previously and
the denominator of which is the total amount of the deduction resulting from the
net operating loss carryover or, as the case may be, the total amount of the
capital loss carryover that is used to offset a recognized capital gain. To the
extent that G-P or its Affiliate receives (either directly or as an offset
against a liability) a payment of interest or realizes a reduction in interest
expense as a result of filing a tax return described in the first sentence of
this Section 3.16(b), G-P shall pay to WISCO an amount computed in the same
manner as such interest on the amount described in such sentence.
(c) If CSK receives a Tax Opinion or, prior to the eighth anniversary
of the Closing Date, there is a Final Determination that the transfer of the
WISCO Business to the Company constituted a sale to the Company (in whole or in
part) for federal income tax purposes, and the WISCO Put is exercised in full
following receipt of such Tax Opinion or such Final Determination, G-P shall
continue to make payments to WISCO pursuant to Section 3.16(b) hereof until the
net income tax benefit attributable to the Step-Up is exhausted. If, however,
WISCO exercises the WISCO Put (in whole or in part) prior to CSK's receipt of a
Tax Opinion or prior to a Final Determination that the transfer of the WISCO
Business to the Company constituted a sale to the Company (in whole or in part)
for federal income tax purposes, G-P's payment obligation under Section 3.16(b)
shall not apply to any income tax deductions or losses attributable to the
Step-Up which are claimed in any taxable year (or portion thereof, determined by
pro rating the number of days in such taxable year) of G-P (or its Affiliate)
that occurs after the first such exercise of the WISCO Put.
(d) If G-P makes a payment to WISCO under this Section 3.16 and if
WISCO and G-P jointly determine that there should have been no change in the
basis of assets or that the change was more or less than the amount they
originally determined, then (i) the amount of G-P's income tax savings
previously determined shall be redetermined to reflect the correct change (or no
change) in the basis of assets, and (ii) WISCO shall refund to G-P or G-P shall
pay to WISCO, as appropriate, the difference between the total amount previously
paid by G-P to WISCO under this Section 3.16 and the total amount
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that should have been paid based on the redetermined tax savings. To facilitate
the application of this Section 3.16(d), each party shall promptly notify the
other of any event (of which the party becomes aware) that the party believes
likely would give rise to a redetermination under this Section 3.16(d).
SECTION 3.17 PERMANENT COMPANY DEBT.
The Company shall refinance the Company Debt (in accordance with
Section 3.15(b)(ii)) with new non-amortizing indebtedness that remains
outstanding for an aggregate term (taking into account the initial refinancing
and any subsequent refinancings) of 30 years from the maturity date of the
Company Debt (the "Permanent Company Debt"). The principal amount of the
Permanent Company Debt shall be equal to the Company Debt plus an amount of
expenses incurred in obtaining the Permanent Company Debt (including any
refinancings thereof) that does not exceed the difference between (i) $8,000,000
in the aggregate and (ii) the amount of any borrowing expenses that were
incurred to obtain the Company Debt and added to the principal amount thereof.
After deducting such expenses, the net proceeds of the Permanent Company Debt
shall be used solely to repay in full the principal amount of the Company Debt
(or, in the case of refinancings of Permanent Company Debt, such refinanced
Debt). In accordance with Section 3.15(b)(ii), WISCO hereby agrees to cooperate
to the extent reasonably required to facilitate the obtaining of the Permanent
Company Debt, including but not limited to, executing agreements (in form and
substance reasonably satisfactory to WISCO) necessary for it to "bear the
economic risk of loss" for such debt in an amount not less than the Special
Distribution. The Company agrees that the Permanent Company Debt shall be issued
pursuant to an indenture or credit agreement that contains covenants that are
substantially similar to those contained in the G-P Member's public bond
indenture dated March 1, 1983, from G-P to Chase Manhattan Bank National
Association, as trustee, a copy of which has been provided to the WISCO Member.
Further, the G-P Member shall fully and unconditionally guarantee all
refinancings of the Company Debt or Permanent Company Debt (such guarantee to be
in substance sufficient for G-P to bear the "economic risk of loss" for such
Debt, but for the WISCO Debt Indemnity (the "G-P Guarantee")), subject to an
indemnity from WISCO on substantially the same terms as the WISCO Debt
Indemnity.
In addition, at all times that WISCO is subject to any continuing
liability under a WISCO debt indemnity (the "WISCO Indemnity Period"), the
Company agrees (and each of the G-P Member and WISCO Member agrees to cause the
Company) to abide by the following covenants:
(a) Notwithstanding Section 3.13 hereof, in the event the Company or
any of its Subsidiaries sells any assets (other than sales of inventory in the
ordinary course of its business) or incurs any indebtedness in addition to the
Permanent Company Debt, the proceeds of such sales or borrowings may not be
distributed to Members, or loaned or contributed to any Person (including,
without limitation, Subsidiaries of the Company); provided, however, that the
Company or any of its Subsidiaries shall be permitted to lend such proceeds to
G-P or a Subsidiary of the Company (such loan to be evidenced by a G-P note or
Company Subsidiary note, as the case may be, that is not subordinated to G-P's
or such Company Subsidiary's, as the case may be, other senior unsecured debt).
(b) Neither the Company nor any of its Subsidiaries shall guarantee the
debt or other obligations (the "Obligations") of any other Person (including,
without limitation, Subsidiaries of the Company) other than in the ordinary
course, consistent with the past practices of either Business, except that (i)
the Company or such Subsidiary shall be permitted to guarantee the Obligations
of G-P (including, without limitation, Obligations pursuant to G-P's senior bank
credit agreement), and (ii) the Company or such Subsidiary shall be permitted to
guarantee the Obligations of other Persons, provided that, with respect to
clause (ii) hereof, G-P has also guaranteed such Obligations on terms that
provide that the beneficiaries of such guarantees will exhaust their rights and
remedies against G-P before
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exercising any rights or remedies against the Company or such Subsidiary, as the
case may be, pursuant to its guarantee.
(c) In addition to the negative pledge provisions to be included in the
indenture or credit agreement for the Permanent Company Debt, neither the
Company nor any Subsidiary of the Company shall grant any liens or encumbrances
on any of its assets to secure Obligations of any other Person (including,
without limitation, Subsidiaries of the Company), except (i) the Company or such
Subsidiary of the Company shall be permitted to grant liens to secure
Obligations of G-P, and (ii) the Company or such Subsidiary of the Company shall
be permitted to grant liens on its assets to secure Obligations of other
Persons, provided that with respect to clause (ii), G-P has guaranteed such
Obligations on terms that provide that the beneficiaries of such Obligations
will exhaust their rights and remedies against G-P before exercising any rights
or remedies with respect to the pledged assets of the Company or such Subsidiary
of the Company, as the case may be.
(d) In connection with the G-P guarantees referred to in the provisos
of clauses (b) and (c) of this section, G-P agrees to provide the WISCO Member
with the proposed form of such guarantee (which shall be the same in all
material respects as the actual guarantee entered into by G-P in connection with
the subject transaction) as soon as practicable, but in any event within five
(5) Business Days prior to G-P's execution of such guarantee.
(e) If the WISCO Debt Indemnity has terminated in accordance with its
terms, this Section 3.17 shall have no further effect.
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ARTICLE IV
MANAGEMENT
SECTION 4.1 GENERAL.
Subject to the delegation of rights and powers provided herein, the
Board shall have the sole right to manage the business of the Company and shall
have all powers and rights necessary, appropriate or advisable to effectuate and
carry out the purposes and business of the Company. No Member, by reason of its
status as such, shall have any authority to act for or bind the Company or
otherwise take part in the management of the Company, but shall have only the
right to vote on or approve the matters specifically provided herein or in the
Delaware Act (or hereafter specified by the Board) to be voted on or approved or
determined by the Members.
SECTION 4.2 BOARD COMPOSITION.
The Board shall consist of 5 Managers or such other number as the Board
shall determine. Each Member shall have the right to designate such number of
Managers (rounded up or down to the nearest whole number) as is in proportion to
its respective Percentage Interest; provided that the WISCO Member shall, so
long as it holds any Units in the Company, be entitled to appoint at least one
Manager to the Board. Each of CSK and G-P shall provide notice of its initial
designations of Managers in writing to the other on or prior to the Closing
Date. Each Manager shall hold office until such Manager's resignation, removal,
death or incapacity; provided, however, that if the number of Managers that a
Member is entitled to designate is reduced by reason of a change in Unit
ownership, the one or more affected Managers appointed by such Member shall
automatically cease to be Managers (if more than one, in the reverse order of
the date of their respective appointments).
SECTION 4.3 TERM; REMOVAL; VACANCIES.
Managers shall hold office at the pleasure of the Member that
designated them. Any Member may at any time, by written notice to the other
Members and the Company, remove (with or without cause) any Manager designated
by such Member. Subject to applicable Law and to the provisions of Section 4.2,
a Manager may not be removed except by written request of the Member that
designated the Manager. In the event a vacancy occurs on the Board for any
reason, the vacancy will be filled by the written designation of the Member that
designated the Manager creating the vacancy.
SECTION 4.4 NOTICE; QUORUM.
Meetings of the Board may be called by any Manager on two Business
Days' prior written notice to all Managers stating in general the purpose or
purposes thereof; provided, however, that any Manager may waive such notice
prior to, at or after the meeting. The presence in person of a majority of the
Managers shall constitute a quorum for the transaction of business at any
meeting of the Board. Each Member shall use its reasonable efforts to ensure
that a quorum is present at any duly convened meeting of the Board and each
Member may designate by written notice to the others an alternate to act in the
absence of any of its previously designated Managers at any such meeting. If at
any meeting of the Board a quorum is not present, a majority of the Managers
present may, without further notice, adjourn the meeting from time to time until
a quorum is obtained.
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SECTION 4.5 VOTING.
(a) Each Manager shall be entitled to cast one vote on each matter
considered by the Board. Except as otherwise expressly provided by this
Agreement, the act of a majority of the Managers present at any meeting at which
a quorum is present shall constitute an act of the Board.
(b) The following matters shall require, in addition to any other vote
required by applicable Law or as otherwise provided for herein, the affirmative
vote of a majority of the Board in attendance, which majority must include a
Manager designated by the WISCO Member:
(i) except as provided in Article VIII hereof, and subject to
applicable Law, any dissolution or liquidation of the Company;
(ii) any merger, consolidation, conversion or other
reorganization involving the Company, or the sale or other disposition of all or
substantially all of the assets of the Company in one transaction or a series of
related transactions;
(iii) the admission of an additional Member except as provided in
Section 7.1; and
(iv) any amendment to or waiver or termination of, any Ancillary
Agreement, which amendment or waiver or termination would have the effect of
adversely altering the methodology for establishing the price of goods or the
cost allocation of services provided to the Company in the Ancillary Agreements
(other than the Parent Roll Supply Agreement) or adversely amend or waive
Section 4.1 of the Parent Roll Supply Agreement or terminate the Parent Roll
Supply Agreement.
(c) Any Manager, when making any determination in such capacity,
including voting or acting by consent with respect to any matter, shall be
entitled to act in his or her discretion, considering only such interests and
factors as such Manager desires, and such Manager shall have no duty or
obligation to give any consideration to any interest of, or other factors
affecting, the Company or any Member. Further, a Manager may consider and act in
accordance with the interests of the Member appointing him or her, without
regard to the other interests or factors, including any fiduciary duties, when
acting on any matter presented to the Board for determination, and to the extent
permitted by the Delaware Limited Liability Company Act, the Members hereby
eliminate and waive any and all fiduciary duties and liabilities of the Manager
and their Affiliates to the Company and any other Members.
SECTION 4.6 TELEPHONIC MEETING; WRITTEN CONSENTS.
(a) Any meeting of the Board may be held by conference telephone or
similar communication equipment so long as all Managers participating in the
meeting can hear one another. All Managers participating by telephone or similar
communication equipment shall be deemed to be present in person at the meeting.
(b) Any action to be taken by the Managers at a meeting of the Board
may be taken without such meeting by the written consent of a majority of the
Managers then in office (or such higher number of Managers as is required take
such action under the terms of this Agreement or applicable Law). Any such
written consent may be executed and given by telecopy or similar electronic
means and shall be filed with the minutes of the proceedings of the Board. If
any action is so taken by the Board by the written consent of less than all of
the Managers, prior notice of the taking of such action shall be furnished to
each Manager, which notice shall include a copy of the proposed consent, as well
as any
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other information provided by the Company to any Manager with such consent
(provided that the effectiveness of such action shall not be impaired by any
delay or failure to furnish such notice).
SECTION 4.7 COMMITTEES OF THE BOARD; OFFICERS.
(a) The Managers may, by resolution (which resolution shall have been
approved by the WISCO Manager), delegate any of the Board's powers to one or
more committees of the Board, each consisting of one or more Managers (other
than the power to take the actions specified in Section 4.5(b)). The Board, by
resolution, may adopt further procedures relating to the conduct of business by
any of the committees established by it.
(b) The Company shall have such officers as shall be appointed by the
Board, each having such powers and duties as shall be provided by resolution of
the Board. In addition, the Board may appoint, employ or otherwise cause the
Company to contract with such other Persons for the transaction of the business
of the Company or the performance of services for or on behalf of the Company as
it shall determine in its discretion from time to time. The Board may delegate
to any officer of the Company or to any such other Person such authority to act
on behalf of the Company as the Board may from time to time determine
appropriate in its discretion. The salaries or other compensation, if any, of
the officers and agents of the Company shall be fixed from time to time by the
Board. The Managers shall not be responsible for any misconduct or negligence on
the part of any officer, agent or other Person to whom authority is delegated,
provided that such Person was appointed by the Managers with reasonable care.
SECTION 4.8 EXECUTION OF DOCUMENTS.
No Manager (acting solely in his capacity as such) shall have any
authority to bind the Company to any third party with respect to any action
except pursuant to a resolution authorizing such action. Any Manager or officer
of the Company, or any other persons specifically authorized by the Board, may
execute any contract or other agreement or document on behalf of the Company and
may execute on behalf of the Company and file with the Secretary of State of the
State of Delaware any certificates or filings provided for in the Delaware Act.
The filing of the Certificate of Formation with the Secretary of State of the
State of Delaware by the authorized person therein specified is hereby ratified
and confirmed.
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SECTION 4.9 RELIANCE ON DOCUMENTS AND REPORTS.
A Manager shall be fully protected in relying in good faith upon the
records of the Company and upon such information, opinions, reports or
statements presented to the Company by any of its other Managers, Members,
officers, employees or committees, or by any other Person, as to matters the
Manager reasonably believes are within such other Person's professional or
expert competence and who has been selected with reasonable care by or on behalf
of the Company (including, without limitation, information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits, or
losses of the Company or any other facts pertinent to the existence and amount
of assets from which distributions to Members might properly be paid). In
addition, the Managers may consult with legal counsel, accountants, appraisers,
management consultants, investment bankers and other consultants and advisors
selected by them, and reliance upon any opinion of any such Person as to matters
which the Managers reasonably believe to be within such Person's professional or
expert competence shall be full and complete protection in respect of any action
taken or suffered or omitted by the Managers hereunder in good faith and in
accordance with such opinion.
SECTION 4.10 STANDARD OF CARE; INDEMNIFICATION.
Subject to Section 4.5(c), in carrying out his duties, a Manager or
officer of the Company shall not be liable to the Company or to any Member for
any actions taken in good faith and reasonably believed by the Manager or
officer to be in, or not opposed to, the best interests of the Company Group, or
for errors of judgment, neglect or omission, including any losses sustained,
liabilities incurred, or benefits not derived by Members in connection with any
action or inaction of the Manager, provided, however, that a Manager or officer
shall be liable for his willful misconduct or gross negligence.
(a) Each Manager shall, and each officer at the discretion of the Board
may (as so indemnified, an "Indemnitee") be indemnified and held harmless by the
Company from and against any and all losses, claims, damages, liabilities,
expenses (including legal fees and disbursements), judgments, fines, settlements
and all other amounts arising from any and all claims, demands, actions, suits
or proceedings, civil, criminal, administrative or investigative, in which the
Indemnitee may be involved, or threatened to be involved, as a party or
otherwise by reason of his status as a Manager or officer, or his management of
the affairs of the Company, or which relate to the Company, its property,
business or affairs, whether or not the Indemnitee continues to be a Manager or
officer at the time any such liability or expense is paid or incurred, if the
Indemnitee (i) acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the Company Group and, (ii) with
respect to any criminal proceeding, had no reasonable cause to believe his
conduct to be unlawful; provided however, that no Indemnitee shall be entitled
to indemnification if it shall be finally determined that such Indemnitee's act
or omission constituted willful misconduct or gross negligence.
(b) Expenses (including legal fees and disbursements) incurred in
defending any proceeding shall be paid by the Company in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf of
the Indemnitee to repay such amount if it is ultimately determined by a court of
competent jurisdiction that the Indemnitee is not entitled to be indemnified by
the Company as authorized hereunder.
SECTION 4.11 MEMBER ACTION.
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In the event that any matter is required to be submitted to the Members
for their approval under the terms of this Agreement or the Delaware Act, the
following provisions shall apply:
(a) The Members may vote on any such matter at a meeting to be held at
such time and place as shall be designated by the Board. Any meeting of the
Members may be held by conference telephone or similar communication equipment
so long as all Members participating in the meeting can hear one another. All
Members participating by telephone or similar communication equipment shall be
deemed to be present in person at the meeting. Members shall be given at least
three Business Days' prior notice of any meeting; provided that any Member may
waive such notice prior to, at or after the meeting. The notice shall specify
the place, date and hour of the meeting and the general nature of the business
to be transacted. Every Member entitled to vote or act on any matter at a
meeting of Members shall have the right to do so either in person or by proxy.
(b) Each Member shall be entitled to one vote for each Unit owned by
it. At any meeting of Members, the presence in person or by proxy of Members
having the right to vote more than 50% of the Units entitled to vote at such
meeting shall constitute a quorum for the transaction of business. Except as
otherwise required by this Agreement or applicable Law, the affirmative vote of
Members having the right to cast more than 50% of the votes present at a meeting
of Members at which a quorum is present is required to approve any action
requiring the Members' approval at such meeting.
(c) Any action that may be taken at any meeting of Members may be taken
without a meeting and without prior notice if a consent in writing setting forth
the action so taken is signed by all Members. Any such written consent may be
executed and given by telecopy or similar electronic means and such consents
shall be filed with the minutes of the proceedings of the Members.
SECTION 4.12 CERTAIN TRANSACTIONS.
(a) Without requirement of further consent or action of the Members or
Managers of the Company, the Company is authorized to enter into the Joint
Venture Agreement and each of the Ancillary Agreements and all other documents
and agreements to be delivered by the Company at the Closing pursuant to the
Joint Venture Agreement, to perform the Company's obligations thereunder, and to
consummate the transactions contemplated thereby, all of which actions are
approved, ratified and confirmed by the Members. Without limiting the foregoing,
it is understood and agreed that, pursuant to the Management Agreement (as
defined in the Joint Venture Agreement) G-P shall, subject to the authority of
the Board, be responsible for the management and operations of the Company.
(b) Notwithstanding anything herein to the contrary, prior to agreeing
to terminate any Ancillary Agreement (other than the Parent Roll Supply
Agreement, which may not be terminated at any time that WISCO is a Member of the
Company without the WISCO Manager's consent thereto), the Board must make a good
faith determination that it no longer requires the services provided by G-P in
such Ancillary Agreement.
ARTICLE V
ACCOUNTING, BOOKS AND RECORDS
SECTION 5.1 FISCAL YEAR.
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The fiscal year and fiscal periods of the Company shall be the same as
the fiscal year and fiscal periods of G-P, as the same may be changed or
modified from time to time. The G-P Member shall give the WISCO Member prompt
notice of any material change in the fiscal year or fiscal periods of G-P.
SECTION 5.2 BOOKS AND RECORDS.
The Company shall keep at its principal executive offices books and
records typically maintained by Persons engaged in similar businesses and which
shall set forth a true, and complete account of the Company Business and affairs
of the Company Group in all material respects. Such books and records shall be
kept in accordance with GAAP in a manner reasonably designed to provide such
information as well as permit preparation by Members of their Federal and State
tax returns and to calculate EBITDA of the Company. Each of the Members and
their respective authorized representatives (and with respect to the G-P Books
the WISCO Member) shall have the right, at all reasonable times and upon
reasonable advance written notice to the Company, at such Member's expense, to
inspect, audit and copy the books and records of the Company Group (and with
respect to the G-P Books the WISCO Member) for any purpose reasonably related to
the Member's interests as a Member of the Company. A Member requesting any such
access to books and records shall reimburse the Company or G-P, as the case may
be, for any costs reasonably incurred by it in connection therewith.
SECTION 5.3 AUDITORS.
The CPA Firm of the Company shall be the same firm used by G-P, as such
CPA Firm may be changed from time to time so long as it is an auditing firm of
national standing.
SECTION 5.4 REPORTING.
The Company shall use reasonable commercial efforts to deliver to each
Member (i) prior to each fiscal quarter, a quarterly forecast of the results of
operations of the Company Group for such quarter, and, as soon as practicable,
any material changes to such forecast; (ii) within 15 days after the close of
each fiscal quarter, estimated financial statements for the Company Group; (iii)
within 30 days after the close of each fiscal quarter, an Unaudited Balance
Sheet, Statement of Income and Statement of Cash Flows for the Company Group,
together with the notes related thereto; and (iv) within 60 days after the close
of each Fiscal Year, an Audited Balance Sheet, Statement of Income and Statement
of Cash Flows for the Company Group for such Fiscal Year, together with the
notes related thereto. The Members acknowledge and agree that the Members shall
have no recourse against the Company or each other in the event the forecast is
incorrect and that no Member shall be entitled to rely on such forecast for any
purpose.
SECTION 5.5 BANKING.
All funds of the Company received from any and all sources shall be
deposited in the Company's name in such separate checking or other such accounts
as shall be determined by the Board. In connection with the maintenance of such
bank accounts, the Board shall designate those individuals who will have
authority to write checks or otherwise disburse funds from such bank accounts on
behalf of the Company in connection with its activities. Nothing contained
herein shall be construed to limit the ability of the Company to obtain and
utilize cash management services pursuant to the Management Agreement, as
defined in the Joint Venture Agreement.
SECTION 5.6 TAX RETURN INFORMATION.
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The Company shall prepare all federal, foreign, state and local income
tax returns that the Company is required to file. Within 120 days following the
close of each Fiscal Year, the Company shall send or deliver to each Person that
was a Member at any time during such year such tax information as shall
reasonably be required for the preparation by such Person of its federal,
foreign, state and local income and other income tax returns.
SECTION 5.7 DELEGATION OF RESPONSIBILITY FOR ACCOUNTING AND REPORTS.
Subject to the provisions of Section 5.3, the Board may cause the
Company to contract with any other Person for the provision of any of the
accounting, cash management and tax services required under Article III or this
Article V and may pay reasonable compensation for such services.
ARTICLE VI
CONFIDENTIALITY
SECTION 6.1 CONFIDENTIALITY OBLIGATION.
The WISCO Member (and, in the case of Section 6.1(c) below, the
Company) shall use (and shall ensure that each of its Affiliates shall use) all
reasonable efforts to keep confidential (and to ensure that its officers,
employees, agents and professional and other advisers keep confidential) the
following ("Confidential Information"):
(a) all technical information, formulae, designs, specifications,
drawings, data, manuals, instructions and other know-how relating to the
products and technical processes of the Company Group, the Company Business or
the business of any other Member;
(b) any information which the WISCO Member may have or acquire before
or after the date of this Agreement with respect to the customers, business,
assets or affairs of any G-P Group Affiliate, or any Company Group Affiliate,
resulting from:
(i) negotiating this Agreement, the Joint Venture Agreement or
any other agreement referred to in or entered into pursuant to this Agreement or
the Joint Venture Agreement;
(ii) being a Member in the Company;
(iii) appointing Managers to the Board and their exercise of
their duties; or
(iv) exercising its rights or performing its obligations under
this Agreement;
(c) any information which the Company may have or acquire before or
after the date of this Agreement in relation to the customers, business, assets
or affairs of any G-P Group Affiliate or any CSK Group Affiliate resulting from
the exercise of its rights or performance of its obligations under this
Agreement, the Joint Venture Agreement or any other agreement referred to in or
entered into pursuant to this Agreement or the Joint Venture Agreement; or
(d) any information which such Member may have or acquire before or
after the date of this Agreement with respect to the customers, business, assets
or affairs of the Company Business.
The WISCO Member (and, in the case of Section 6.1(c), the Company)
shall not (and shall cause its Affiliates not to) disclose to any third party
any Confidential Information without the consent of the
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G-P Member. In performing its obligations under this Article VI, the WISCO
Member and the Company shall (and shall cause its Affiliates to) apply no lesser
confidentiality standards and procedures than it applies generally in relation
to its own confidential information. Notwithstanding anything herein to the
contrary, for purposes of this Agreement, the term Confidential Information
shall not include information of the type described in Sections 6.2(b) and
6.2(g).
SECTION 6.2 EXCEPTIONS FROM CONFIDENTIALITY OBLIGATION.
The obligation not to disclose Confidential Information to any third
party under this Article VI does not apply to:
(a) the disclosure (subject to Section 6.3) on a 'need to know' basis
to a company which is another CSK Group Member where the disclosure is for a
purpose reasonably incidental to this Agreement; including, without limitation,
as necessary for the performance of its obligations under any Ancillary
Agreement, in which case such company shall be subject to the confidentiality
obligations of Article VI in this Agreement;
(b) information which is independently developed by the WISCO Member or
acquired from a third party to the extent that it is acquired with the right to
disclose the same after the date hereof;
(c) the disclosure of information to the extent required to be
disclosed by law, any stock exchange regulation or any binding judgment, order
or requirement of any court or other competent authority (subject to the
obligation to consult with the G-P Member in advance and to take account of its
reasonable requirements);
(d) disclosure of information to lenders and rating agencies;
(e) the disclosure of information to any tax authority to the extent
reasonably required for the purposes of the tax affairs of the WISCO Member
concerned or any Member of its Group;
(f) the disclosure (subject to Section 6.3) in confidence to the WISCO
Member's professional advisers of information reasonably required to be
disclosed for a purpose reasonably incidental to this Agreement; or
(g) information which becomes within the public domain (otherwise than
as a result of a breach of Article VI).
SECTION 6.3 EMPLOYEES, AGENTS AND ADVISERS.
The WISCO Member shall inform (and shall ensure that each of its
Subsidiaries or Affiliates shall inform) any officer, employee or agent or any
professional or other adviser advising it in relation to the matters referred to
in this Agreement, or any other Person to whom it provides Confidential
Information, that such information is confidential and shall instruct them (i)
to keep it confidential and (ii) not to disclose it to any third party (other
than those persons to whom it has already been disclosed in accordance with the
terms of this Agreement). The disclosing Member is responsible for any breach of
this Article VI by the person to whom the Confidential Information is disclosed.
SECTION 6.4 RETURN OF CONFIDENTIAL INFORMATION.
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If the Company dissolves and terminates, either the WISCO Member or the
G-P Member may by notice to any other Member require the other Member to destroy
or return the first Member's (but not the Company's) Confidential Information.
In addition, if at any time either the WISCO Member or the G-P Member shall
cease directly or indirectly to be a Member, the other Member may, by notice to
the first Member, require the first Member to destroy or return the other
Member's Confidential Information. If so, the first Member shall (and shall
ensure that its Affiliates and its officers and employees shall):
(a) destroy or return all documents containing Confidential Information
which have been provided by or on behalf of the Member demanding the return of
Confidential Information; and
(b) destroy or return any copies of such documents and any document or
other record (including in electronic form) reproducing, containing or made from
or with reference to the Confidential Information
(except, in each case, for a record of any submission to or filings with
governmental, tax or regulatory authorities or papers required for a Member's
board or other corporate records or documents required in connection with
litigation). The first Member shall return or destroy the Confidential
Information as soon as practicable after receiving notice and, in the case of
destruction, shall provide a certificate of an officer of that Member confirming
that destruction.
(c) The provisions of Section 6.4(a) shall not apply in the event of a
dissolution and termination in which the Board has expressed its rights under
Section 8.3(a) hereof.
SECTION 6.5 SURVIVAL AFTER TERMINATION.
The provisions of this Section 6.5 shall survive the dissolution and
termination of the Company and any Transfer of a Member's Units. If either the
WISCO Member or the G-P Member shall cease to be a Member following a Transfer
of Units pursuant to this Agreement, then:
(a) the term Confidential Information for the purposes of this Article
VI shall extend to and include all Confidential Information held by CSK Group
Members or G-P Group Members (as the case may be) about the other (excluding the
Company) and the confidentiality obligations set out in Section 6.1 shall
(subject to Section 6.2) thereafter apply to each CSK Group Member ceasing to be
a Member (as the case may be) as if it were a Member; and
(b) the provisions of Section 6.4 relating to return or destruction of
Confidential Information shall similarly apply to such extended application of
the term Confidential Information, pursuant to Section 6.5(a), as if it were
Confidential Information of the remaining Member.
ARTICLE VII
TRANSFER OF UNITS; PUT AND CALL RIGHTS
SECTION 7.1 GENERAL.
Except as permitted by Section 7.2, or with the prior written consent
of all other Members, no Member will directly or indirectly (i) sell, assign,
pledge, encumber, hypothecate, dispose of or otherwise transfer (collectively,
"Transfer") any Units, or any interest in any Units, (ii) agree to any such
Transfer or (iii) permit or suffer any such interest to be subject to Transfer,
directly or indirectly, by
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merger or other operation of law, agreement or otherwise. Any purported Transfer
in any manner not permitted by this Article VII shall be null and void and shall
not be recognized or given effect by the Company or any Member; provided,
however, that a change of control of CSK or G-P shall not be deemed to be a
Transfer.
SECTION 7.2 PUT AND CALL RIGHTS.
(a) At any time on or after the third anniversary of the Closing Date,
the WISCO Member shall have a right to sell to G-P, or to obligate the Company
to redeem, in WISCO's sole discretion, all or any portion of the WISCO Member's
Units (the "WISCO Put") at a purchase or redemption price, as the case may be,
equal to the Formula Price multiplied by a fraction, the numerator of which
shall be the number of Units being sold or redeemed and the denominator of which
shall be the total number of Units of the Company then outstanding (the "Put
Price"); provided, however, that WISCO shall not have the right to exercise the
WISCO Put on more than (3) three occasions.
(b) At any time commencing after the tenth anniversary of the Closing,
G-P shall have the right to purchase, and the WISCO Member shall be obligated to
sell, all but not less than all of the Units owned by the WISCO Member (the "G-P
Call") at a purchase price equal to the Formula Price multiplied by a fraction,
the numerator of which shall be the number of Units then owned by the WISCO
Member and the denominator of which shall be the total number of Units of the
Company then outstanding (the "Call Price").
(c) In the event the WISCO Put or the G-P Call (either being referred
to as "Option Right") is exercised, the following procedure shall be applicable:
(i) The Member exercising its Option Right shall deliver a
written notice to the other Member and the Company (the "Exercise Notice").
(ii) The Exercise Notice shall: (a) specify the identity of each
Member electing to exercise an Option Right; (b) specify the number of Units to
be sold, purchased or redeemed pursuant to such Exercise Notice; and (c) be
executed by a duly authorized officer of such Member.
(iii) In the event of exercise of a WISCO Put, the G-P Member or
the Company, as specified in any Exercise Notice regarding such WISCO Put, shall
purchase and the WISCO Member shall sell the Units specified in the Exercise
Notice. In the event of exercise of the G-P Call, the WISCO Member shall sell
and the G-P Member shall purchase all Units owned by the WISCO Member.
(iv) The closing of a Transfer pursuant to exercise of an Option
Right (an "Option Closing") shall take place at a time and place to be
designated by mutual agreement between the Members; provided, however, that the
date designated for the Option Closing shall not be more than ten (10) Business
Days from the date of receipt by the Company of the Exercise Notice. At the
Option Closing, the WISCO Member shall deliver to the Company certificates
representing the Units subject to the Exercise Notice (free and clear of all
liens, charges and encumbrances) and the Company or the G-P Member, as
applicable, shall pay to the WISCO Member the Put Price or the Call Price, as
applicable, by cashier's or certified check payable to any such WISCO Member, or
by wire transfer of immediately available funds to an account designated by such
WISCO Member.
(v) At the Option Closing, the WISCO Member shall execute and
deliver such documents as reasonably requested by the G-P Member to fully
transfer title to the Units subject to
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such Exercise Notice, including documents representing and warranting good and
marketable title to such Units and that such Units are owned free and clear of
all liens, charges and encumbrances.
SECTION 7.3 MEMBER TRANSFERS.
(a) Upon not less than fifteen (15) days advance written notice to the
Company and effective as of the first day of the next calendar month, any Member
may Transfer any of the Units held by it to any of its Affiliates and such
transferee shall become a Member hereunder (an "Affiliate Member"), provided
that (i) such transferee shall execute a counterpart of this Agreement, agreeing
thereby to be bound by all of the provisions hereof and (ii) in the event that
such transferee would at any time thereafter cease to be an Affiliate of the CSK
Group or the G-P Group, as the case may be, then the Units so transferred to
such former Affiliate shall be Transferred back to CSK or G-P, or an Affiliate
of their respective Groups, as applicable, prior to such CSK Group Affiliate or
G-P Group Affiliate ceasing to be such (and if such transfer back does not occur
prior to the Affiliate ceasing to be such, the transaction which results in the
transferee ceasing to be an Affiliate shall be deemed a Transfer which is
subject to the restrictions of this Section 7.3).
(b) Notwithstanding anything herein to the contrary, G-P or an
Affiliate Member of G-P may transfer its Units or interests in its Units to any
third party at any time after the tenth anniversary of the date hereof, provided
that such transferee shall execute a counterpart of this Agreement, agreeing
thereby to be bound by all of the provisions hereof.
SECTION 7.4 RETIREMENT.
Any Member that Transfers all of its Units pursuant to the terms hereof
shall be deemed to have retired and to have ceased to be a Member as of the
effective date of such Transfer.
ARTICLE VIII
DISSOLUTION AND WINDING UP; BUY OUT RIGHTS
SECTION 8.1 DISSOLUTION.
Subject to Section 8.5 hereof, the Company may, at the sole discretion
of the Board, be dissolved and its affairs wound up and terminated upon the
first to occur of the following:
(a) the unanimous consent of all Members to dissolve the Company, it
being expressly understood that Section 18-801(a)(3) of the Delaware Act shall
not apply to the Company;
(b) the sale or other disposition of all or substantially all of the
assets of the Company in one transaction or a series of related transactions;
(c) the date the WISCO Member or the CSK Group holds less than 5% of
the outstanding Units; and
(d) the occurrence of an event causing a dissolution of the Company
under Section 18-801 of the Delaware Act, unless the Company is continued as
permitted under the Delaware Act.
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SECTION 8.2 WINDING UP.
If the Company is dissolved pursuant to Section 8.1, this Agreement
shall remain in full force and effect and shall continue to govern the rights
and obligations of the Members and Managers and the conduct of the Company
during the period of winding up the Company's affairs. The Board shall apply and
distribute the assets of the Company in the following order of priority (subject
to Section 8.3), unless otherwise required by mandatory provisions of applicable
law:
(a) to satisfy the Company Debt or the Permanent Company Debt;
(b) to other creditors, including Members who are creditors, to the
extent otherwise permitted by law, in satisfaction of the liabilities of the
Company (whether by payment, by the establishment of reserves of cash or other
assets of the Company for contingent liabilities in amounts, if any, determined
by the Board to be appropriate for such purposes or by other reasonable
provision for payment), other than liabilities for distributions to Members and
former Members under Sections 18-601 or 18-604 of the Delaware Act;
(c) to Members and former Members in satisfaction of liabilities for
distributions under 18-601 or 18-604 of the Delaware Act; and
(d) thereafter to the Members in proportion to the positive balances of
their respective Capital Accounts (determined after allocating all income, gain,
deduction, loss and other like items arising in connection with the liquidation
of Company assets and otherwise making all Capital Account adjustments required
under the definition of Capital Account);
SECTION 8.3 IN-KIND DISTRIBUTIONS.
In the event of a dissolution or winding up of the Company, the Board
shall, to the extent permitted by law, (a) distribute to the G-P Member the
amount required by Section 8.2 in kind, from the Company's assets, and to the
WISCO Member the amount required by Section 8.2 in cash, or (b) if the Board
determines (which determination must include the affirmative vote or consent of
the WISCO Manager) that a prompt sale of part or all of the Company's assets
would be impractical or would cause undue loss to the value of Company assets,
the Board may defer for a reasonable time (up to three (3) years) the
liquidation of any assets, except those necessary to timely satisfy liabilities
of the Company (other than those to Members), and/or may distribute to the
Members, in lieu of cash, as tenants in common, undivided interests in such
Company assets as the Board deems not suitable for liquidation. Any such in-kind
distributions shall be made in accordance with the priorities set forth in
Section 8.2 as if cash equal to the Fair Market Value of the distributed assets
were being distributed. Any such distributions in kind shall be subject to such
conditions relating to the disposition and management of such properties as are
reasonable and equitable and to any joint operating agreements or other
agreements governing the operation of such properties at such time. The
liquidating distributions to be made pursuant to this section shall be made
within the time set forth in Regulations Section 1.704-1(b)(2)(ii)(b)(2).
SECTION 8.4 CANCELLATION OF CERTIFICATE OF FORMATION.
Upon the completion of the distribution of Company Property as provided
in Sections 8.2 and 8.3, the Company shall be terminated, and the Board shall
cause the cancellation of the Certificate of Formation and all qualifications of
the Company as a foreign limited liability company and shall take such other
actions as may be necessary to terminate the Company.
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SECTION 8.5 BUY OUT RIGHTS.
In the event of the occurrence of any of the events described in
Section 8.1, G-P shall have the option to either (a) cause the dissolution and
wind up the Company pursuant to this Article VIII; or (b) cause a Subsidiary of
G-P to purchase the Units held by the WISCO Member at a purchase price
calculated by multiplying the Formula Price times the WISCO Member's Percentage
Interest, in which case the Company shall not be dissolved; or (c) to the extent
legally permissible, take no action and continue the existence of the Company.
Such option shall be exercised, and notice of such exercise provided to the
WISCO Member, within 120 days after the occurrence of any of such events
described in Section 8.1.
ARTICLE IX
CERTIFICATES EVIDENCING UNITS
SECTION 9.1 CERTIFICATES.
The Units owned by each Member shall be evidenced by one or more
Certificates. Each Certificate shall be executed by such Managers or such
officers of the Company as the Board shall designate.
SECTION 9.2 REGISTER.
The Company shall keep or cause to be kept a register in which, subject
to such regulations as the Board may adopt, the Company will provide for the
registration of Units and the registration of Transfers of Units. Upon surrender
for registration of Transfer of any Certificate, and subject to the further
provisions of this Section 9.2 and Section 9.3 and the limitations on Transfer
contained elsewhere in this Agreement, the Company will cause the execution, in
the name of the registered holder or the designated transferee, of one or more
new Certificates, evidencing the same aggregate number of Units as did the
Certificate surrendered or such other number as is appropriate in the event such
Transfer is pursuant to exercise of an Option Right. Every Certificate
surrendered for registration of Transfer shall be duly endorsed, or be
accompanied by a written instrument of Transfer in form satisfactory to the
Board, duly executed by the registered holder thereof or such holder's
authorized attorney.
SECTION 9.3 NEW CERTIFICATES.
The Company shall issue a new Certificate in place of any Certificate
previously issued if the record holder of the Certificate (i) makes proof by
affidavit, in form and substance satisfactory to the Board, that a previously
issued Certificate has been lost, destroyed or stolen, (ii) requests the
issuance of a new Certificate before the Company has received notice that the
Certificate has been acquired by a purchaser for value in good faith and without
notice of an adverse claim, (iii) if requested by the Board, delivers to the
Company a bond, in form and substance satisfactory to the Board, with such
surety or sureties and with fixed or open liability as the Board may direct, to
indemnify the Company, as registrar, against any claim that may be made on
account of the alleged loss, destruction or theft of the Certificate, and (iv)
satisfies any other reasonable requirements imposed by the Board.
SECTION 9.4 INTEREST AS A SECURITY.
A Unit in the Company evidenced by a Certificate shall
constitute a security for all purposes of Article 8 of the Uniform Commercial
Code promulgated by the National Conference of
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Commissioners on Uniform State Laws, as in effect in Delaware or any other
applicable jurisdiction. Delaware law shall constitute the local law of the
Company's jurisdiction in its capacity as the issuer of Units.
SECTION 9.5 LEGENDS.
A copy of this Agreement shall be kept with the records of the Company.
Each of the Members hereby agrees that each outstanding Certificate shall bear a
conspicuous legend reading substantially as follows:
The Units represented by this Certificate have not been
registered under the Securities Act of 1933 or applicable
state and other securities laws and may not be sold, pledged,
hypothecated, encumbered, disposed of or otherwise transferred
without compliance with the Securities Act of 1933 or any
exemption thereunder and applicable state and other securities
laws. The Units represented by this Certificate are subject to
the restrictions on transfer and other provisions of an
Operating Agreement dated as of October 4, 1999 (as amended
from time to time, the "Agreement") by and among Company and
its Members, and may not be sold, pledged, hypothecated,
encumbered, disposed of or otherwise transferred except in
accordance therewith. A copy of the Agreement is on file at
the principal executive offices of the Company.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 NOTICES.
All notices and other communications required or permitted by this
Agreement shall be in writing and shall be delivered by personal delivery, by
nationally recognized overnight courier service, by facsimile, by first class
mail or by certified or registered mail, return receipt requested, addressed, to
any Member at its address as set forth on Schedule 1 (as the same may be updated
from time to time at the direction of such Member) or to the Company at 55 Park
Place, Atlanta, Georgia 30303 (or to such other address as the Company shall
have designated to each of the Members by written notice given in the manner
hereinabove set forth). Notices shall be deemed given one day after sent, if
sent by overnight courier; when delivered and receipted for, if hand delivered;
when received, if sent by facsimile or other electronic means or by first class
mail; or when receipted for (or upon the date of attempted delivery where
delivery is refused or unclaimed), if sent by certified or registered mail,
return receipt requested.
SECTION 10.2 AMENDMENT; WAIVER.
Any provision of this Agreement may, (i) in the case of an amendment,
be amended if, and only if, such amendment is in writing and signed by each
Member, or (ii) in the case of a waiver, be waived if such waiver is contained
in a writing, and signed by the party against whom the waiver is to be
effective. No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single
exercise thereof preclude any other or further exercise thereof or of any other
right, power or privilege. Except as otherwise provided rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
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SECTION 10.3 ASSIGNMENT.
Except as otherwise expressly provided herein, no party to this
Agreement may assign any of its rights or obligations under this Agreement
without the prior written consent of the other parties hereto.
SECTION 10.4 ENTIRE AGREEMENT.
This Agreement, the Joint Venture Agreement and the Ancillary
Agreements (including the schedules and exhibits hereto and thereto) contain the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters.
SECTION 10.5 PUBLIC DISCLOSURE.
Each Member hereby agrees that, except as may be required to comply
with the requirements of any applicable Laws or the rules and regulations of any
exchange upon which its securities (or the securities of one of its Affiliates)
are traded, it shall not make or permit to be made any press release or similar
public announcement or communication concerning the execution or performance of
this Agreement unless specifically approved in advance by all parties hereto,
which approval shall not be unreasonably withheld, conditioned or delayed. In
the event that, in the absence of such approval, legal counsel for any party is
of the opinion that a press release or similar public announcement or
communication is required by Law or by the rules and regulations of any exchange
on which such party's securities (or the securities of one of its Affiliates)
are traded, then such party may issue a public announcement limited solely to
that which legal counsel for such party advises is required under such Law or
such rules and regulations (and the party making any such announcement shall
provide a copy thereof to the other parties for review before issuing such
announcement).
SECTION 10.6 PARTIES IN INTEREST.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. Nothing in
this Agreement, express or implied, is intended to confer upon any Person other
than the Company, WISCO, G-P or their respective successors or permitted
assigns, any rights or remedies under or by reason of this Agreement. The
Company is executing this Agreement as a party, and this Agreement shall
constitute a contract among the Members and between the Company and each of the
Members.
SECTION 10.7 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF
FORUM.
This Agreement shall be governed by, and construed and enforced in
accordance with the laws of the State of Delaware without giving effect to any
choice of law provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the Laws of any jurisdiction
other than the internal Laws of the State of Delaware. Each of the Parties
agrees that any legal action between the parties, or any of them, relating to
this Agreement, the interpretation of the terms hereof or the performance hereof
or the consummation of the transactions contemplated hereby, whether in tort or
contract or at law or in equity, shall exclusively be brought in a Federal or
State Court located in New Castle County, Delaware, having jurisdiction of the
subject matter thereof, and each party irrevocably (i) consents to personal
jurisdiction in any such Federal or State Court, (ii) waives any objection to
laying venue in any such action or proceeding in any such Court, (iii) waives
any immunity from suit and any objection that any such Court is an inconvenient
forum or does not have jurisdiction
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over any party hereto and (iv) agrees that service of complaint or other process
may be made by certified or registered mail addressed to such party at its
address determined in accordance with Section 10.1 of this Agreement.
SECTION 10.8 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same Agreement.
SECTION 10.9 SEVERABILITY.
The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof. If any provision of this
Agreement, or the application thereof to any Person or any circumstance, is
invalid or unenforceable (i) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (ii) the remainder of this Agreement and the application of such provision
to other Persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
SECTION 10.10 EQUITABLE RELIEF.
Each party acknowledges that money damages would be inadequate to
protect against any actual or threatened breach of this Agreement by any party
and that each party shall be entitled to equitable relief, including specific
performance and/or injunction, without posting bond or other security, in order
to enforce or prevent any violations of the provisions of this Agreement.
SECTION 10.11 NO AGENCY.
This Agreement shall not constitute an appointment of any party as the
agent of any other party, nor shall any party have any right or authority to
assume, create or incur in any manner any obligation or other liability of any
kind, express or implied, against, in the name or on behalf of, any other party.
Nothing herein or in the transactions contemplated by this Agreement shall be
construed as, or deemed to be, the formation of a partnership by or among the
parties hereto (provided that nothing in this Section 10.11 shall affect the tax
treatment of the Company under Article III hereof).
SECTION 10.12 LIMITATION OF LIABILITY.
The debts, obligations and liabilities of the Company, whether arising
in contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and no Member, Manager or officer of the Company
shall be obligated personally for any such debt, obligation or liability of the
Company solely by reason of being a Member, Manager and/or officer.
SECTION 10.13 NON-EXCLUSIVE BUSINESS.
(a) Notwithstanding anything herein to the contrary, the parties hereto
agree that the Company shall not be the exclusive vehicle for G-P to engage in
the manufacture or sale of commercial tissue products or "away from home" tissue
products (the "Products"), or to engage in the Commercial Tissue Business and
that G-P shall have the right to engage in the manufacture or sale of Products
and
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otherwise engage in the Commercial Tissue Business, whether directly or
through other Affiliates, without regard to the Company or any requirement that
G-P make such opportunity or Commercial Tissue Business available to the Company
in any way.
(b) Notwithstanding anything herein to the contrary, the parties hereto
agree that the Company may provide to any member of the G-P Group the right to
use intangible Company Property, and such member of the G-P Group will have no
obligation to reimburse the Company for such use.
(c) In the event G-P or a G-P Affiliate uses production equipment and
machines owned by the Company to produce products for G-P or a G-P Affiliate,
all costs, revenues and profits relating to such products shall be allocated to
the Company.
(d) In the event G-P or a G-P Affiliate uses production equipment or
machines it owns that are located in facilities owned or operated by the Company
to produce products for G-P or a G-P Affiliate, G-P shall reimburse to the
Company an amount equal to the allocated overhead (including facility costs)
determined pursuant to the cost allocation methodology set forth in Exhibit B to
the Operating Support Services Agreement.
SECTION 10.14 DISPUTE RESOLUTION.
Except as otherwise provided in this Agreement, any dispute among the
Members hereto, including disputes related to the Ancillary Agreements and the
review of G-P Books related thereto, shall be resolved by the Members through
good faith negotiations. If such dispute cannot be resolved by such negotiation
it shall be submitted to non-binding commercial arbitration pursuant to the
commercial arbitration rules then in effect of the American Arbitration
Association, before a panel of not less than three arbitrators. All costs and
expenses incurred in connection with such proceeding shall be shared equally by
the Members, however each Member shall bear the cost of its legal fees. Only
upon the conclusion of arbitration proceedings in which a decision was rendered
may the Members bring an action in connection with such dispute in the United
States District Court or the state court sitting in New Castle County, Delaware.
Each Member agrees to irrevocably submit to the exclusive jurisdiction of such
court and agrees to waive any objection to laying venue in such court or that
such court is an inconvenient forum or does not have jurisdiction over the
Member.
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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the date first written above.
GEORGIA-PACIFIC CORPORATION
By: /s/Michael C. Burandt
Name: Michael C. Burandt
Title: Senior Vice President - Packaged Products
WISCONSIN TISSUE MILLS INC.
By: /s/William T. Tolley
Name: William T. Tolley
Title: Senior Vice President -
Finance and Chief Financial Officer
Consented/Agreed To
By the Company as Referenced
In Section 10.6
GEORGIA-PACIFIC TISSUE, LLC
By: /s/Michael C. Burandt
Name: Michael C. Burandt
Title: Manager
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EX-10.17
20
CREDIT AGREEMENT
EXHIBIT 10.17
CREDIT AGREEMENT
AMONG
GEORGIA-PACIFIC CORPORATION
THE LENDERS NAMED HEREIN
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS ADMINISTRATIVE AGENT,
COMMERZBANK AG,
NEW YORK BRANCH,
AS DOCUMENTATION AGENT,
AND
THE CHASE MANHATTAN BANK
AND
CITIBANK, N.A.,
AS CO-SYNDICATION AGENTS
BANC OF AMERICA SECURITIES LLC,
SOLE BOOK MANAGER AND SOLE LEAD ARRANGER
$1,000,000,000
DATED AS OF JULY 22, 1999
TABLE OF CONTENTS
Joint Venture Agreement - Georgia-Pacific Corp., Chesapeake Corp., Wisconsin Tissue Mills Inc. and Georgia-Pacific Tissue LLC
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