UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report: October 5, 1999
Date of Earliest Event Reported: October 3, 1999
WESTVACO CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 1-3013 13-1466285
(State or other) (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
299 PARK AVENUE, NEW YORK, NEW YORK 10171
(Zip Code)
Registrant's telephone number, including area code (212) 688-5000
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Westvaco issued a news release on October 4, 1999, announcing a
definitive agreement to acquire Temple-Inland Inc.'s bleached
paperboard mill in Evadale, TX, for $575 million for the fixed
assets and approximately $50 million in working capital. The
company will initially finance the acquisition with short-term debt
backed by a revolving credit facility. In addition the company
will soon file a shelf-registration and expect to replace the short-
term debt with long-term debt as market conditions permit. A copy
of the news release is filed as Exhibit 99a.
ITEM 5. OTHER EVENTS
Westvaco issued a news release on October 4, 1999, announcing a
series of actions to improve the company's performance and a
related pretax charge against fiscal fourth quarter 1999 earnings
that is expected to total $85 million. The charge is primarily a
noncash write-down of assets. A copy of the news release is filed
as Exhibit 99b.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 2,10 Asset Purchase Agreement
Exhibit 99a News release issued by the Company on October 4, 1999
Exhibit 99b News release issued by the Company on October 4, 1999
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
WESTVACO CORPORATION
By _______________________
John W. Hetherington
Vice President and Secretary
Date: October 5, 1999
EXHIBIT INDEX
Exhibit 2,10 Asset Purchase Agreement
Exhibit 99a News release issued by the Company on October 4, 1999
Exhibit 99b News release issued by the Company on October 4, 1999
Exhibit 2 & 10
ASSET PURCHASE AGREEMENT
by and among
WESTVACO CORPORATION
and
TEMPLE-INLAND FOREST PRODUCTS CORPORATION,
INLAND EASTEX EXTRUSION COMPANY, TEMPLE-INLAND RECAUSTISIZING
COMPANY, TEMPLE-INLAND RECOVERY COMPANY,
TEMPLE-INLAND STORES COMPANY
Execution Copy
October 3, 1999
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions 1
ARTICLE II
SALE OF ASSETS
2.1 Assets to be Acquired 11
2.2 Excluded Assets 14
2.3 Assumed Liabilities 15
2.4 Excluded Liabilities 16
2.5 Consideration 16
2.6 Designation of Affiliates by Buyer 16
2.7 Purchase Price Allocation 17
ARTICLE III
PURCHASE PRICE ADJUSTMENTS
3.1 Estimated Adjustment 17
3.2 Post-Closing Adjustment 17
3.3 Corrective Actions 19
3.4 Guarantee of Receivables 20
ARTICLE IV
RELATED AND ADDITIONAL AGREEMENTS
4.1 Fiber Supply Agreement 21
4.2 Parent Guarantee 21
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
5.1 Organization; Qualification 21
5.2 Authority Relative to this Agreement and the Fiber
Supply Agreement 21
5.3 Consents and Approvals 22
5.4 Non-Contravention 22
5.5 Compliance with Laws 22
5.6 Environmental Matters 22
5.7 Licenses and Permits 23
5.8 Financial Statements 23
5.9 Litigation 23
5.10 Title to Properties 24
5.11 Leases 24
5.12 Intellectual Property 25
5.13 Listed Contracts 25
5.14 Tangible Assets 26
5.15 Labor Matters 26
5.16 Employee Benefit Plans 27
5.17 Conduct of Business and Management of Assets 28
5.18 Finders 29
5.19 Sufficiency of Assets 29
5.20 Customers 29
5.21 Year 2000 Problems 29
5.22 Industrial Revenue Bonds 29
5.23 Purchased Subsidiaries Capitalization 30
5.24 Tax Matters 30
5.25 Disclosure 31
5.26 No Other Representations 32
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
6.1 Organization; Qualification 32
6.2 Authority Relative to this Agreement and the Fiber
Supply Agreement 32
6.3 Consents and Approvals 33
6.4 Non-Contravention 33
6.5 Litigation 33
6.6 Finders 33
6.7 Financing 33
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Conduct of Business and Management of Assets 33
7.2 Forbearances by Seller 34
7.3 Mail Received after Closing 35
7.4 Expenses 35
7.5 Confidentiality and Public Announcements 35
7.6 Efforts to Consummate 35
7.7 Further Assurances 36
7.8 Use of Seller Name 36
7.9 No Solicitation of Employees 36
7.10 Antitrust Filings 37
7.11 Title Matters 37
7.12 Access to Assets and Business Employees 38
7.13 IRB Obligations 39
7.14 Consents and Approvals 39
7.15 Year 2000 Compliance Program 40
7.16 Transitional Services 40
7.17 Capital Expenditures 40
7.18 Temple-Inland Canal 41
7.19 Bulk Sales Waiver 42
7.20 Product Liability Claims 42
7.21 Other 42
ARTICLE VIII
BUSINESS EMPLOYEE AND EMPLOYEE BENEFIT MATTERS
8.1 Employment of Seller's Employees 43
8.2 Certain Compensation Liabilities 43
8.3 Severance Costs 43
8.4 Welfare Benefits 44
8.5 Pension and Savings Benefits 44
8.6 Benefits Generally 45
8.7 Plant Closing Laws 45
8.8 Miscellaneous 45
8.9 Employee Records 45
ARTICLE IX
TAX MATTERS
9.1 Tax Sharing and Allocation Agreements 46
9.2 Survival of Certain Representations 46
9.3 Returns for Periods Through the Closing Date 46
9.4 Audits 46
9.5 Carrybacks and Refunds 46
9.6 Section 338(h)(10) Election 47
9.7 Allocation of Purchase Price for Purchased
Subsidiaries Assets 48
9.8 Tax Periods Ending on or Before the Closing Date 48
9.9 Tax Periods Beginning Before and Ending after the
Closing Date 48
9.10 Cooperation on Tax Matters 49
9.11 Tax Indemnification 49
9.12 Allocation of Certain Taxes 50
9.13 Certain Taxes 51
ARTICLE X
CONDITIONS TO OBLIGATIONS OF BUYER
10.1 Representations and Warranties 51
10.2 Performance of this Agreement 51
10.3 Proceedings 51
10.4 Consents and Approvals 52
10.5 Injunction, Litigation, etc. 52
10.6 Fiber Supply Agreement 52
10.7 Officer's Certificate 52
10.8 Memorandum 52
ARTICLE XI
CONDITIONS TO OBLIGATIONS OF SELLER
11.1 Representations and Warranties 52
11.2 Performance of this Agreement 52
11.3 Proceedings 53
11.4 Consents and Approvals 53
11.5 Injunction, Litigation, etc. 53
11.6 Fiber Supply Agreement 53
11.7 Officer's Certificate 53
ARTICLE XII
DELIVERIES, ETC., IN CONNECTION WITH CLOSING
12.1 Time and Place of Closing 53
12.2 Deliveries by Seller 53
12.3 Deliveries by Buyer 55
ARTICLE XIII
INDEMNIFICATION
13.1 Indemnification by Seller 55
13.2 Indemnification by Buyer 56
13.3 Article VIII Rights and Obligations and Certain
Product Liability and Employee Claims Excluded 56
13.4 Survival Date 57
13.5 Third-Party Claims 57
13.6 Subrogation Rights; No Duplication 58
13.7 Punitive Damages; Mitigation 58
ARTICLE XIV
TERMINATION, AMENDMENT AND WAIVER
14.1 Termination 58
14.2 Effect of Termination 59
14.3 Amendment 59
14.4 Extension; Waiver 59
ARTICLE XV
GENERAL PROVISIONS
15.1 Notices 59
15.2 Interpretation 60
15.3 Severability 60
15.4 Counterparts 61
15.5 Miscellaneous 61
15.6 Third-Party Beneficiaries 61
15.7 Specific Performance 61
15.8 Remedies Cumulative 61
15.9 Arbitration 61
15.10No Presumption Against Drafter 62
SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 1.1 (a) Chip Quality Standards
Schedule 1.1 (b) Seller's Knowledge
Schedule 1.1 (c) Permitted Encumbrances
Schedule 2.1 (a) Paperboard Mill
Schedule 2.1 (b) Extruder Site
Schedule 2.1 (c) Temple-Inland Canal
Schedule 2.1 (e) Other Real Property
Schedule 2.1 (r) Additional Purchased Assets
Schedule 2.2 Excluded Assets
Schedule 2.3 Assumed Liabilities
Schedule 2.4 Excluded Liabilities
Schedule 3.2 Working Capital Calculation
Schedule 5.8 (b) Balance Sheet
Schedule 5.8 (c) Income Statements
Schedule 7.13 IRB Obligations
Schedule 7.16 Transitional Services
Schedule 8.1 Employees Not Transferred
Schedule 8.3 Retained Severance
EXHIBITS
Exhibit A Fiber Supply Agreement
Exhibit B Parent Guarantee
ANNEXES
Annex A CapX Plan
Annex B Phase I Expenditure Schedule
DISCLOSURE SCHEDULE
Section 5.3 Consents and Approvals
Section 5.5 Compliance
Section 5.6 Environmental Matters
Section 5.7 Licenses and Permits
Section 5.9 Litigation
Section 5.10 Title to Properties
Section 5.11 (a) Leases
Section 5.11 (b) Lease Defaults
Section 5.12 Intellectual Property
Section 5.13 Listed Contracts
Section 5.15 (a) Collective Bargaining Agreements
Section 5.15 (b) Labor Disputes
Section 5.15 (c) Employee Actions
Section 5.16 (a) Employee Benefit Plans
Section 5.16 (b) ERISA
Section 5.16 (d) Employee Contracts
Section 5.20 Customers and Brokers
Section 5.22 Industrial Revenue Bonds
Section 5.23 Purchased Subsidiaries Shares
Section 5.24 Tax Matters
Section 6.3 Buyer Consents
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, dated as of October 3, 1999, is
by and among TEMPLE-INLAND FOREST PRODUCTS CORPORATION, a Delaware
corporation ("Seller"), INLAND EASTEX EXTRUSION COMPANY, a
Delaware corporation and wholly owned subsidiary of Seller ("Sub
One"), TEMPLE-INLAND RECAUSTISIZING COMPANY, a Delaware
corporation and wholly owned subsidiary of Seller ("Sub Two"),
TEMPLE-INLAND RECOVERY COMPANY, a Delaware corporation and wholly
owned subsidiary of Seller ("Sub Three"), TEMPLE-INLAND STORES
COMPANY, a Delaware corporation and wholly owned of Seller ("Sub
Four," and collectively with Sub One, Sub Two and Sub Three,
the "Subs") and WESTVACO CORPORATION, a Delaware corporation
("Buyer").
WHEREAS, Seller, directly or through wholly-owned subsidiaries
and affiliates, engages in the manufacture and sale of various
grades and weights of coated and uncoated bleached paperboard for
use in printing and publishing applications, greeting cards, office
supplies, foodware and similar products (the "Business");
WHEREAS, Seller owns and through wholly-owned subsidiaries and
affiliates operates a paperboard mill used exclusively in the
Business that produces all the bleached paperboard for the Business
(the "Paperboard Mill");
WHEREAS, Seller wishes to sell, or cause its subsidiaries to
sell, the Paperboard Mill and the assets related to the Business to
Buyer, and Buyer wishes to purchase such Paperboard Mill and assets
from Seller, upon the terms and conditions and for the
consideration, including the assumption of certain liabilities, set
forth in this Agreement;
WHEREAS, in connection with such sale and purchase, Seller and
Buyer (and their respective Affiliates, as applicable) desire to
enter into a long-term fiber supply agreement as provided herein;
and
WHEREAS, as an important condition to Buyer's willingness to
enter into this Agreement, Temple-Inland, Inc., a Delaware corporation
("Temple-Inland Parent"), has agreed to guarantee the performance of
the obligations, including for indemnification, of Seller and its
subsidiaries under this Agreement.
NOW THEREFORE, in consideration of the foregoing and the
representations, warranties, and covenants contained herein, and
for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
DEFINITIONS
Definitions. As used herein, the following terms have the
following meanings:
"Action" means any action, suit, arbitration, inquiry,
proceeding or investigation by or before any Authority of any
nature, civil, criminal, regulatory or otherwise, in law or in
equity.
"Additional Cluster Remediation" means the obligation to
conduct or pay for remedial action intended to bring the Purchased
Assets into compliance under the Environmental Protection Agency's
Pulp and Paper Cluster Rules, other than obligations with respect
to the Phase I Cluster Remediation.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including
court costs and reasonable attorneys' fees and expenses.
"Affiliate" with respect to any party, means a party, person
or entity that, directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common
control with, such party, where "control", "controlled by" and
"under common control with" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such party, whether through the
ownership of voting securities, by voting trust, contract or
similar arrangement, as trustee or executor, or otherwise.
"Affiliated Group" means any affiliated group within the
meaning of Section 1504(a) of the Code or any similar group defined
under a similar provision of state, local or foreign law.
"Agreement" means this Asset Purchase Agreement, all exhibits
and schedules hereto, and all amendments made hereto and thereto by
written agreement between the parties.
"Antitrust Laws" means the Sherman Act, as amended, the
Clayton Act, as amended, the HSR Act, the Federal Trade Commission
Act, as amended, and all other federal, state, foreign and
multinational (including European Community) statutes, rules,
regulations, orders, decrees, administrative and judicial
doctrines, and other laws that are designed or intended to
prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade.
"Assignment and Assumption Agreement" means a Bill of Sale,
Assignment and Assumption Agreement in such form as may be
reasonably satisfactory to Buyer and Seller.
"Assumed Contracts" has the meaning set forth in Section 2.1(j).
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Authority" means any tribunal or arbitrator(s) of competent
jurisdiction, any self-regulatory organization, and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including
any government authority, agency, department, board, commission or
instrumentality of the United States, any foreign nation or
government, or any domestic or foreign state, county, city or other
political subdivision.
"Balance Sheet" means the unaudited balance sheet for the
Business, including, without limitation, the Paperboard Mill and
all other Purchased Assets, as of August 31, 1999, reflecting the
Business as proposed to be transferred hereunder, previously
delivered by Seller to Buyer and included as Schedule 5.8(b)
hereto.
"Base Purchase Price" has the meaning set forth in Section 2.5.
"Basket" has the meaning set forth in Section 13.1(b).
"Bonuses" has the meaning set forth in Section 8.2.
"Business" has the meaning set forth in the recitals hereto.
"Business Assets" has the meaning set forth in Section 2.1.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York City are authorized
or required by law to close. Any event the scheduled occurrence of
which would fall on a day that is not a Business Day shall be
deferred until the next succeeding Business Day.
"Business Employees" has the meaning set forth in Section 8.1.
"Business Intellectual Property" has the meaning set forth in
Section 2.1(i).
"Business Material Adverse Effect" means any effects, events,
occurrences or states of facts that, individually or in the
aggregate, (a) are, or would reasonably be expected to be,
materially adverse to the value, condition (financial or
otherwise), assets, Liabilities or results of operations of the
Business taken as a whole, (b) are, or would reasonably be expected
to be, materially adverse to the value, serviceability, condition,
or operation of the Paperboard Mill, or (c) prevent or materially
delay consummation of any of the transactions contemplated by this
Agreement; provided that a "Business Material Adverse Effect" shall
exclude any change or effect due to (i) United States or global
economic conditions or financial markets in general; (ii) prices in
the international or national markets for bleached paperboard, pulp
stock, or wood fibers, or (iii) announcement of the transactions
contemplated hereby.
"Buyer" has the meaning set forth in the recitals hereto.
"Buyer Savings Plans" has the meaning set forth in Section 8.5(b).
"Buyer Tax Indemnitee(s)" means Buyer and its Subsidiaries and
Affiliates (including, after the Closing, the Purchased
Subsidiaries).
"CapX Plan" has the meaning set forth in Section 7.17(a).
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act codified at 42 U.S.C. Section 9601
et seq. (including the amendments made by the Superfund Amendments
and Reauthorization Act of 1986).
"Claims" means all rights, demands, claims, Actions and causes
of action (whether for personal injuries or property, consequential
or other damages of any kind).
"Closing" has the meaning set forth in Section 12.1.
"Closing Balance Sheet" has the meaning set forth in Section 3.2(b).
"Closing Date" has the meaning set forth in Section 12.1.
"Closing Working Capital" has the meaning set forth in Section 3.2(b).
"COBRA Coverage" has the meaning set forth in Section 8.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consent" and "Consents" have the meaning set forth in Section 7.14(a).
"Correction Cost Deadline" has the meaning set forth in
Section 3.3(b).
"Correction Cost Notice" has the meaning set forth in Section 3.3(b).
"Correction Costs" has the meaning set forth in Section 3.3(b).
"Disputed Items" has the meaning set forth in Section 3.2(d).
"Election Allocations" has the meaning set forth in Section 9.7.
"Employee Plans" has the meaning set forth in Section 5.16(a).
"Encumbrances" means mortgages, liens, encumbrances, security
interests, restrictions upon voting or transfer, covenants,
restrictions, adverse claims, boundary disputes, pledges, lease,
levy, charges, options, title defects, rights of first refusal,
rights of way, use or occupancy or other legal or equitable
encumbrances (including, in the case of real property, rights-of-
way, easements, and encroachments).
"Environmental Condition" means any condition existing at any
Purchased Asset that relates to (i) the emission, discharge,
disposal, release or threatened release of any Hazardous Substance
into the environment, (ii) the treatment, storage, recycling or
other handling of any Hazardous Substance, or (iii) the presence of
any Hazardous Substance, including, but not limited to, asbestos,
any polychlorinated biphenyl or dioxin, in any building, structure
or workplace or on any of the Purchased Assets.
"Environmental Laws" means Environmental Statutes and any
common law governing the contamination, pollution or protection of
the environment or allocating liabilities in respect thereof.
"Environmental Statutes" means federal, state and local
statutes, whenever enacted, and regulations promulgated thereunder,
intended to provide protection for public health and the
environment, including, without limitation, the Clean Air Act, the
Clean Water Act, CERCLA, the Solid Waste Disposal Act (including
the Resource Conservation and Recovery Act), the Toxic Substances
Control Act, their state statutory and regulatory counterparts and
other substantially similar foreign statutes and regulations.
"ERISA Affiliate" means any member of a controlled group of
corporations, a group of trades or businesses under common control,
or an affiliated service group, in each case with any of Sellers,
within the meaning of Section 414(b), (c), (m), or (o) of the Code,
or Section 4001(a)(14) of ERISA.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Estimated Closing Working Capital" has the meaning set forth
in Section 3.1.
"Estimated Working Capital Adjustment" has the meaning set
forth in Section 3.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.3(b).
"Extruder Facility" has the meaning set forth in Section 2.1(b).
"Extruder Site" has the meaning set forth in Section 2.1(b).
"Fiber Supply Agreement" has the meaning set forth in Section 4.1.
"Final Closing Working Capital" has the meaning set forth in
Section 3.2(e).
"Final Working Capital Adjustment" has the meaning set forth
in Section 3.2(f).
"FIRPTA Certificate" means a certificate in form and substance
reasonably satisfactory to Buyer duly executed and acknowledged
certifying facts that would exempt the sale of the Purchased Assets
hereunder from the provisions of the Foreign Investment in Real
Property Tax Act.
"GAAP" means United States generally accepted accounting
principles.
"Hazardous Substance" means (i) any hazardous substance,
extremely hazardous substance, hazardous material, hazardous waste,
regulated substance or toxic substance (as those terms are defined
by any applicable Environmental Laws) and (ii) any chemicals,
pollutants, contaminants, or petroleum, crude oil or any fraction
thereof.
"Hire Date" has the meaning set forth in Section 8.1.
"HSR Act" has the meaning set forth in Section 5.3.
"Inactive Employee" has the meaning set forth in Section 8.1.
"Income Statements" has the meaning set forth in Section 5.8(b).
"Indemnitee" has the meaning set forth in Section 13.4(a).
"Indemnitor" has the meaning set forth in Section 13.4(a).
"Intellectual Property" means (i) trade names, trademarks and
service marks, together with the associated goodwill, letters
patent, copyrights, design registrations and inventor certificates
as well as applications, registrations, and certificates for any of
the foregoing or any other intellectual property embodied in a form
which is filed or registered with any Authority, and (ii)
unpatented technology, inventions, research, trade secrets,
processes, know-how, designs and formulae and unfiled trade names,
trademarks and service marks, together with the associated
goodwill, unregistered copyrights and other industrial or
intellectual property which is not filed or registered with an
Authority.
"Inventory" has the meaning set forth in Section 2.1(g).
"IRB Amount" means the aggregate dollar amount of principal
and accrued and unpaid interest under the IRBs as of the Closing
Date.
"IRB Obligation" means an amount of principal and interest
equal to the IRB Amount, and any other payment obligation arising
as a result of the failure, after the Closing Date, of the
Purchased Subsidiary that is an obligor under the applicable IRB to
make any such payment and any obligation under the IRBs to pay
redemption premiums, make whole payments or other penalties that
arise as a result of any event, circumstance or occurrence that
occurs after, but did not occur on or prior to, the Closing Date;
provided, however, that none of the following is an IRB Obligation:
(a) any obligation to make any payment of principal or
interest that is or was due on or prior to the Closing
Date but was not made;
(b) any obligation to make any payment of principal in excess
of the principal amounts reflected in the IRB Amount;
(c) any obligation to make any payment of accrued interest as
of the Closing Date in excess of the amount of accrued
interest reflected in the IRB Amount;
(d) any obligation to pay any interest other than interest
accruing after the Closing Date in respect of the amounts
set forth in clauses (b) and (c) above;
(e) any obligation arising as a result of (x) any default or
event of default or any other failure to comply with the
terms of such IRB that occurred on or prior to the
Closing Date, or (y) any event, circumstance or
occurrence that occurred on or prior to the Closing Date
that results in (i) a default, (ii) an event of default
or (iii) the failure of the interest paid on the IRB to
qualify for the exclusion from income under section 103
of the Code; or
(f) any payment or penalty arising as a result of any of the
items described in clauses (a) through (e) above.
"IRBs" has the meaning set forth in Section 5.22.
"Knowledge of Seller" means the actual knowledge, after
reasonable inquiry, of those officers and employees of Sellers
listed on Schedule 1.1(b) and, in addition, with respect to
Sections 5.24(a) and 5.24(c) of this Agreement, the actual
knowledge of those officers and employees of Temple-Inland Parent
listed on Schedule 1.1(b).
"Leases" has the meaning set forth in Section 5.11(a).
"Liability" means any and all debts, losses, liabilities,
claims (including claims as defined in the Bankruptcy Code),
damages, fines, costs, royalties, deficiencies or obligations
(including those arising out of any Action, such as any settlement
or compromise thereof or judgment or award therein), of any nature,
whether known or unknown, accrued or unaccrued, liquidated or
unliquidated, absolute, contingent or otherwise and whether due or
to become due, and whether or not resulting from third-party
claims, and any out-of-pocket costs and expenses, including any
liability for Taxes.
"Listed Contract" has the meaning set forth in Section 5.13.
"Losses" means, without duplication, any and all actual
damages, fines, fees, penalties, deficiencies, loss of profits,
diminution in value of investment, claims, Liabilities, liens,
losses or other obligations, together with costs and expenses,
including, without limitation, reasonable fees and disbursements of
counsel and any consultants or experts and expenses of
investigation incurred in the course of litigation or other
proceedings or of any claim, default or assessment.
"MADSP" means the modified aggregate deemed sales price at
which each of the Purchased Subsidiaries is deemed to have sold its
assets for Tax purposes as a result of a Section 338(h)(10)
Election (or a similar state or local election).
"Material Personalty Leases" has the meaning set forth in
Section 5.11(a).
"Mill Assets" has the meaning set forth in Section 2.1.
"Mill Real Property" has the meaning set forth in Section 2.1(a).
"Neutral Auditors" has the meaning set forth in Section 3.2(e).
"New Plans" has the meaning set forth in Section 8.6.
"Old Plans" has the meaning set forth in Section 8.6.
"Paperboard Mill" has the meaning set forth in the recitals hereto.
"Parent Guarantee" has the meaning set forth in Section 4.2.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permit" and "Permits" have the meaning set forth in 2.1(k).
"Permitted Exceptions" means (a) Encumbrances for taxes and
assessments or governmental charges not yet delinquent or which are
being contested in good faith and by appropriate proceedings,
(b) Encumbrances in favor of landlords, carriers, warehousemen,
mechanics, workmen and materialmen and construction or similar
liens arising by operation of law or incurred in the ordinary
course of business for sums not yet delinquent or that are being
contested in good faith and by appropriate proceedings, (c) rights
reserved to or vested in any governmental authority to control or
regulate any Real Property or interests therein in any manner, and
all laws of any governmental authority, (d) Title Defects to which
Buyer has been deemed to have waived its rights pursuant to Section
7.11(b), and (e) Encumbrances listed in Schedule 1.1(c).
"Person" means an individual, partnership (general or
limited), corporation, limited liability company, association or
other form of business organization (whether or not regarded as a
legal entity under applicable law), trust, estate or any other
entity.
"Phase I Cluster Remediation" means performance of the scope
and specification of work in Phase I of Seller's plan, the "Process
Description of Facilities," Kellogg Brown & Root Spec. No. 50-97-
191, previously delivered to Buyer by Seller, including the
modifications, addition of facilities, installation of equipment,
undertakings and projects described therein, which are intended to
achieve compliance with the Best Available Technology wastewater
standards of the Environmental Protection Agency's Pulp and Paper
Cluster Rules, as defined in the April 15, 1998 Federal Register
vol. 63, no. 72 beginning at page 18504, at the Paperboard Mill.
"Post-Closing Period" means each taxable period that starts
after the Closing Date and the portion of each Straddle Period that
starts after the Closing Date.
"Pre-Closing Period" means each taxable period that ends on or
before the Closing Date and the portion, ending on the Closing
Date, of a Straddle Period.
"Purchased Assets" has the meaning set forth in Section 2.1.
"Purchase Price" has the meaning set forth in Section 2.5(a).
"Purchase Price Allocation" has the meaning set forth in
Section 2.7.
"Purchased Subsidiaries" has the meaning set forth in Section 2.1(s).
"Purchased Subsidiaries Shares" has the meaning set forth in
Section 5.23(a).
"Real Property" has the meaning set forth in Section 2.1(e).
"Real Property Title Commitment" has the meaning set forth in
Section 7.11(a).
"Real Property Title Package" has the meaning set forth in
Section 7.11(a).
"Recorded Area" means (x) the approximately 100,000 acres of
timberland agreed to by the parties prior to the Closing or, if no
such agreement is reached prior to the Closing, (y) the timberlands
owned by Seller in Jasper County, Texas.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing into the environment.
"Remedial Action" means an action required under Environmental
Laws to clean up or to contain or otherwise to ameliorate or remedy
any Environmental Condition, including but not limited to
preventing a Release or threatened Release and performing studies,
investigations and monitoring.
"Resolution Period" has the meaning set forth in Section 3.2(d).
"Retained Severance" has the meaning set forth in Section 8.3.
"Section 338(h)(10) Election" has the meaning set forth in
Section 9.6.
"Section 338 Forms" has the meaning set forth in Section 9.6.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Seller" has the meaning set forth in the recitals hereto; and
"Sellers" means Seller, the Subs, the Purchased Subsidiaries and
each of Seller's Subsidiaries engaged in the Business or which own
any of the Purchased Assets.
"Seller Tax Indemnitee" means Sellers and their Subsidiaries
and Affiliates other than the Purchased Subsidiaries.
"Seller Corporate Designations" has the meaning set forth in
Section 7.8.
"Seller's Accountant" has the meaning set forth in Section 3.1.
"Seller Savings Plans" has the meaning set forth in Section 8.5(b).
"Selling Entities" means Sellers other than the Purchased
Subsidiaries.
"Significant Brokers" has the meaning set forth in Section 5.20.
"Significant Customers" has the meaning set forth in Section 5.20.
"Specified Systems" has the meaning set forth in Section 3.3(a).
"Straddle Period" has the meaning set forth in Section 9.9.
"Sub Four" has the meaning set forth in the recitals hereto.
"Sub One" has the meaning set forth in the recitals hereto.
"Sub Three" has the meaning set forth in the recitals hereto.
"Sub Two" has the meaning set forth in the recitals hereto.
"Subs" has the meaning set forth in the recitals hereto.
"Subsidiary" when used with respect to Seller, means any
corporation or other business entity, whether or not incorporated,
of which Seller holds, directly or indirectly, all of the
securities or interests having, by their terms, ordinary voting
power to elect members of the Board of Directors, or other persons
performing similar functions with respect to such entity; and with
respect to any other Person, means any corporation or other
business entity, whether or not incorporated, of which such Person
holds, directly or indirectly, more than 50% of the securities or
interests having, by their terms, ordinary voting power to elect
members of the Board of Directors, or other persons performing
similar functions with respect to such entity.
"Systems" means hardware, firmware or software systems
associated with information processing and delivery, billing,
payables, management and tracking, operations or services (e.g.,
emission monitoring, product testing, security and alarms,
elevators, communications, and HVAC), including, without
limitation, equipment containing embedded microchips, operated by,
provided to or otherwise reasonably necessary to the Business or
the Purchased Assets.
"Tax" or "Taxes" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Section 59A of the Code),
customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration,
value added, alternative or add-on minimum, estimated, or other tax
of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Authority" means Authority having or purporting to
exercise jurisdiction with respect to any Tax.
"Tax Indemnitee" means a Buyer Tax Indemnitee or Seller Tax
Indemnitee.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
"Temple-Inland Canal" means the discharge canal running from
the Paperboard Mill to the Neches River and the lagoon at the
juncture with the Neches River, plus all associated dikes,
structures, improvements and appurtenances thereto.
"Temple-Inland Canal Easement" has the meaning set forth in
Section 2.1(c).
"Temple-Inland Canal Fee Lands" has the meaning set forth in
Section 2.1(c).
"Temple-Inland Group" means the Affiliated Group of
corporations, within the meaning of Section 1504(a) of the Code, of
which Temple-Inland Parent is the common parent corporation.
"Temple-Inland Parent" has the meaning set forth in the
recitals hereto.
"Temple-Inland Party" means Temple-Inland Parent and any
Subsidiary or Affiliate of Temple-Inland Parent, other than the
Purchased Subsidiaries.
"Texas surveys" has the meaning set forth in Section 7.11(a).
"Title Commitment" has the meaning set forth in Section 7.11(a).
"Title Defect" has the meaning set forth in Section 7.11(a).
"Title Defect Notice" has the meaning set forth in Section 7.11(b).
"Transfer Fees" has the meaning set forth in Section 7.4(b).
"Transferred Employees" has the meaning set forth in Section 8.1.
"WARN Act" has the meaning set forth in Section 8.7.
"Water Easements" has the meaning set forth in Section 2.1(d).
"Welfare Benefits" has the meaning set forth in Section 8.4.
"Well Site Easements" has the meaning set forth in Section 2.1(d).
"Westvaco Cluster Remediation Costs" has the meaning set forth
in Section 7.17(b).
"Westvaco Party" means the Buyer and any of its respective
Subsidiaries and Affiliates, other than the Purchased Subsidiaries.
"Y2K Plan" has the meaning set forth in Section 5.21.
"Year 2000 Problems" means costs, problems, and uncertainties
associated with the inability of the Systems of Sellers to
effectively handle data, including dates, prior to, during, and
after the calendar year 2000 A.D., as such inability affects the
Business.
ARTICLE II
SALE OF ASSETS
Assets to be Acquired. Subject to the terms, conditions and
provisions hereinafter set forth, at the Closing, the Selling
Entities shall sell, assign, convey, transfer and deliver to Buyer,
or cause to be sold, assigned, conveyed, transferred and delivered
to Buyer, as the case may be, and Buyer shall purchase, acquire,
accept and pay for, after excluding in each instance the Excluded
Assets, all of the rights, properties and assets of the Selling
Entities, including the Paperboard Mill (the "Mill Assets"), used
primarily in the Business (the "Business Assets," and collectively
with the Mill Assets, the "Purchased Assets"). Except as set forth
in Section 2.2, Purchased Assets shall include, without limitation,
the following:
the Paperboard Mill, including the land on which the Paperboard
Mill is located described in Schedule 2.1(a), and the buildings,
fixtures and other improvements situated thereon and the
appurtenances thereto (the "Mill Real Property");
the assets associated with the extruder facility located in Hardin
County, Texas, including the land on which the extruder facility is
located as described in Schedule 2.1(b), and the buildings,
fixtures and other improvements situated thereon and appurtenances
thereto (the "Extruder Site") and personal property situated
thereon used primarily in connection with the extruder facility
(the "Extruder Facility");
the Temple-Inland Canal, which (i) shall include (x) an area of
land that includes the Temple-Inland Canal, the levees on each side
of the Temple-Inland Canal, and approximately twenty (20) feet of
land on the opposite side of each levee from the Temple-Inland
Canal (or the entire width of such real property owned by the
Selling Entity if less) except for such land as is covered by the
Temple-Inland Canal Easement, and (y) an area of land with a width
of approximately twenty (20) feet past the road and dike that runs
along the perimeter of the lagoon at the juncture of the Temple-
Inland Canal with the Neches River, plus all associated dikes,
structures, improvements and appurtenances thereto (the "Temple-
Inland Canal Fee Lands"), and (ii) shall include all rights, title
and interests, including rights-of-way, easements, and
encroachments, of the Selling Entities in and to the Temple-Inland
Canal (the "Temple-Inland Canal Easement"), all as more fully set
forth in Schedule 2.1(c).
for each water well that, as of the date of this Agreement or the
Closing Date, supplies water to the Paperboard Mill and that is
located on real property owned by the Selling Entities but not
comprising the Paperboard Mill Site, (i) all of the Selling
Entities' rights, title and interest in and to the water well
equipment and machinery, including all pipelines running from or
between such wells and the Paperboard Mill, (ii) an easement for
the operation, repair and maintenance of surface and subsurface
water well machinery and equipment for each such water well site,
including access thereto across the lands of the Selling Entities
(the "Well Site Easements"), and (iii) a water pipeline easement 20
feet in width (or such greater width as is reasonably necessary for
the operation and maintenance of such pipeline) across the lands of
the Selling Entities for each pipeline running from or between such
wells and the Paperboard Mill (together with the Well Site
Easements, the "Water Easements");
all other real property, other than timber and timberlands, used
primarily in connection with the Business including that described
in Schedule 2.1(e), and the buildings, fixtures and other
improvements situated thereon and the appurtenances thereto
(together with the Mill Real Property, the Extruder Site, the
Temple-Inland Canal Fee Lands, the "Real Property");
all apparatus, machinery, equipment, furniture, computers,
vehicles, tools, supplies and other tangible personal property, to
the extent of the Selling Entities' rights, title and interest
therein, which is ordinarily located at the Paperboard Mill or used
primarily in connection with the Business;
all inventories of raw materials, work-in-process, finished goods,
stores, supplies, spare parts, and replacement and component parts,
to the extent of the Selling Entities' rights, title and interest
therein, located at the Paperboard Mill, or in transit thereto or
which are located elsewhere and relate primarily to the Business
(the "Inventory");
all rights in and to products of the Business sold (to the extent
that such products are hereafter returned or repossessed and unpaid
rights of rescission, replevin, reclamation and rights to stoppage
in transit);
the Intellectual Property used primarily in connection with or
necessary to the operation of the Paperboard Mill or the Business
as operated on the date hereof or the Closing Date (the "Business
Intellectual Property");
except as set forth in Schedule 2.2, all of the rights of the
Selling Entities under (i) the Listed Contracts, (ii) the Leases
and (iii) all other contracts, agreements and commitments in effect
on the Closing Date and relating primarily to the Business or any
Purchased Asset other than mortgages, indentures, notes, bonds,
guaranties, installment obligations, or other instruments
evidencing indebtedness (together with (i) and (ii), and excluding
the items set forth in Schedule 2.2, the "Assumed Contracts");
to the extent assignable, all federal, state, local and foreign
governmental licenses, permits, approvals and authorizations (each
a "Permit" and collectively, the "Permits") held by the Selling
Entities in connection with the Paperboard Mill or the Business;
all accounts receivable, notes receivable, and other evidences of
indebtedness of and rights to receive payments from any Person
related primarily to the Business, including receivables from
Transferred Employees;
all copies of property records, production records, written
technical information, data, specifications, operating and
maintenance manuals, engineering records, purchasing and sales
records, credit data, marketing information, correspondence,
invoices, forms, warranty information, customer and vendor lists
and other books, records, papers, accounts and files, wherever
located, whether in hard copy, magnetic or other format (including,
but not limited to, any such records maintained in connection with
any computer system) used primarily in the Business or relating
primarily to the Purchased Assets; a co-ownership interest in any
of the foregoing assets which are used only in part in the Business
or with respect to the Purchased Assets, but only to the extent of
such use;
all personnel and payroll records for Transferred Employees and
accounting records (of which the Selling Entities may retain the
originals);
subject to the provisions of Section 7.8, all purchase orders,
forms, labels, stationery, shipping materials, catalogues,
brochures, art work, photographs and advertising materials which
are located at the Paperboard Mill or which relate primarily to the
Business;
all prepaid expenses, sureties, deposits, advances and deferred
charges paid or created and related primarily to the Business or
the Purchased Assets;
all rights, choses in action and claims, known or unknown, matured
or unmatured, accrued or contingent, against third parties arising
primarily out of the Business or the ownership or operation of the
Purchased Assets;
the assets listed on Schedule 2.1(r); and
all outstanding shares of capital stock or membership interests or
other ownership interests of TEEC Inc., Inc., a Texas Corporation,
and Temple-Eastex Incorporated, a Delaware Corporation
(collectively, the "Purchased Subsidiaries").
Excluded Assets. Notwithstanding anything to the contrary
herein, the Selling Entities' right, title and interest in any of
the following properties, assets and other rights (the "Excluded
Assets") shall be excluded from the Purchased Assets:
all cash and cash equivalents, including cash on hand or in bank
accounts, certificates of deposit, commercial paper and securities,
except petty cash funds located at the Paperboard Mill;
all Claims which Sellers may have against any Authority for refund
or credit with respect to taxes paid by Sellers;
any Claims, counter claims or rights of set-off of Sellers which
relate primarily to the Excluded Liabilities;
the Employee Plans and the assets of the Employee Plans;
employment and personnel records of Seller and the Subs, including
for Business Employees, other than Transferred Employees;
all intercompany receivables other than those associated with the
intercompany payables listed on Schedule 2.3;
the corporate books and records of Seller and the Subs, including a
copy of all business records that Seller is required to retain by
law, rule or regulation of any Authority;
the "Inland Paperboard and Packaging, Inc." names and trademarks,
the "Temple-Inland Forest Products Corporation" names and
trademarks, any combined names or trademarks containing "Temple-
Inland," "Inland Eastex" or "Inland" and any similar trade names,
trademarks, service marks or logos and derivatives thereof;
insurance policies covering losses in connection with the Purchased
Assets or the Business;
Systems not used primarily in the Business;
timber and timberlands, except to the extent situated on or
comprising the real property described in Schedules 2.1(a), (b),
(c), (d) or (e); and
the assets listed on Schedule 2.2.
Assumed Liabilities.
Buyer shall assume, at the Closing, all the following Liabilities
of the Selling Entities (collectively, the "Assumed Liabilities"):
all accounts and trade payables (other than payables arising in
connection with Phase I Cluster Remediation, except to the extent
assumed pursuant to Section 7.17(b)) of the Selling Entities
related primarily to the Business or the Purchased Assets to the
extent included in the Final Closing Working Capital;
all Liabilities of the Selling Entities for the delivery of goods
(other than Liabilities of Seller under Section 7.20) or services
to customers in the ordinary course of the Business on or after the
Closing Date;
all Liabilities of the Selling Entities under the Assumed Contracts
and Permits to the extent each of the foregoing is actually
transferred to Buyer and all Liabilities assumed by Buyer pursuant
to Section 7.14(b);
all Liabilities, including any obligation to undertake Remedial
Actions, arising from the conduct of the Business after the Closing
Date, including all Liabilities resulting from Environmental
Conditions or arising under the Environmental Laws in connection
with facts, conditions, actions or omissions coming into existence
or occurring after the Closing Date with respect to the Purchased
Assets;
intercompany payables owed to the Purchased Subsidiaries that are
listed on Schedule 2.3, in the amounts set forth thereon;
intercompany payables for wood fiber delivered to the Paperboard
Mill prior to Closing;
the Liabilities of the Selling Entities relating to Business
Employees and employee benefits of Business Employees, to the
extent such liabilities and obligations are specifically assumed by
Buyer pursuant to Article VIII;
the Liabilities of the Selling Entities for property Taxes, to the
extent such liabilities and obligations are assumed by Buyer
pursuant to the last sentence of Section 9.12(b) hereof; and
the Liabilities of the Selling Entities listed on Schedule 2.3.
Except as specifically provided for in this Section 2.3, the
parties hereto agree that Buyer shall not and does not assume or
become liable for the payment or performance of any Liability or
alleged Liability of Sellers of any nature whatsoever, whether
accrued or unaccrued, known or unknown, fixed or contingent,
whether arising from the conduct of the Business or otherwise and
any and all such Liabilities shall be deemed to remain with the
Selling Entities (the "Excluded Liabilities").
Excluded Liabilities. Notwithstanding anything to the
contrary herein, Buyer shall not and does not assume any of the
following Liabilities of Sellers (each of which shall be included
within the definition of "Excluded Liabilities"):
all Liabilities relating to or arising from the Excluded Assets;
all Liabilities for federal, state and local income and franchise
taxes and any other taxes incurred by Sellers in the conduct of the
Business or with respect to the Purchased Assets before Closing,
except as is otherwise provided in this Agreement;
all Liabilities, including any obligation to undertake Remedial
Actions, resulting from Environmental Conditions or arising under
the Environmental Laws in connection with facts, events,
conditions, actions or omissions existing or occurring prior to
Closing with respect to the Purchased Assets, provided, however,
that the obligation to undertake Additional Cluster Remediation and
Phase I Cluster Remediation to the extent specifically assumed by
Buyer under Section 7.17(b) shall not be Excluded Liabilities;
the Liabilities listed on Schedule 2.4;
intercompany payables, except for intercompany payables assumed
pursuant to Sections 2.3(a)(v) and (vi); and
all Liabilities of Sellers relating to Business Employees and
employee benefits for Business Employees, except to the extent such
liabilities and obligations are assumed by Buyer pursuant to
Article VIII.
Consideration. In consideration for the transfer to Buyer of
the Purchased Assets and the Business and the other warranties and
agreements set forth herein, the purchase price shall be SIX
HUNDRED AND TWENTY-FIVE MILLION DOLLARS ($625,000,000) (the "Base
Purchase Price"), subject to adjustment as provided for in Article
III. Subject to the terms and conditions hereof, at the Closing,
Buyer shall:
pay to Seller, by wire transfer of immediately available funds to
such bank account or accounts as may be designated in writing not
less than two Business Days prior to the Closing by Seller, an
amount equal to (i) the Base Purchase Price plus (ii) the Estimated
Working Capital Adjustment (whether such amount is positive or
negative) less (iii) the IRB Amount (the "Purchase Price"); and
assume the Assumed Liabilities pursuant to the Assignment and
Assumption Agreement.
Designation of Affiliate by Buyer. Prior to the Closing, upon
not less than ten days' written notice to Seller, Buyer may
designate one or more Affiliates to acquire at the Closing all or
part of the Purchased Assets, in which event all references herein
to "Buyer" shall be deemed to refer to such Affiliates, as
appropriate; provided, however, that no such designation shall
limit or affect the obligations of Buyer under this Agreement to
the extent not performed by such Affiliates and Buyer enters into a
guaranty agreement guaranteeing the performance of such Affiliate
or Affiliates under this Agreement.
Purchase Price Allocation. The Purchase Price shall be
allocated among the Purchased Assets in accordance with Section
1060 of the Code (the "Purchase Price Allocation"). Buyer and
Seller shall each file Form 8594 (Asset Acquisition Statement Under
Section 1060) on a timely basis reporting the allocation of the
Purchase Price consistent with such Purchase Price Allocation.
Buyer and Seller shall file on a timely basis any amendments
required to such Form 8594 as a result of a subsequent increase or
decrease of the Purchase Price. At least 120 days prior to the
latest date for filing such Form 8594, Seller shall prepare and
submit to Buyer a draft of such Form 8594 setting forth the
Purchase Price Allocation. Neither Seller nor Buyer shall file, or
permit to be filed, any Form 8594 unless it shall have obtained the
consent of the other, which consent shall not be unreasonably
withheld or delayed. On or prior to the thirtieth day after
Buyer's receipt of the draft of Form 8594, Buyer shall either (i)
consent to the filing of Form 8594 or (ii) notify Seller that it
disagrees with the Purchase Price Allocation as set forth on the
draft Form 8594 or other matters contained on the draft Form 8594.
If Seller and Buyer have been unable to resolve their differences
within thirty days after Seller has been notified of Buyer's
disagreement with the Purchase Price Allocation or other matters
contained on draft Form 8594, then any remaining disputed issues
shall be submitted to a mutually agreed upon independent national
accounting firm to resolve in a final binding manner after hearing
the views of both Parties. The fees and expenses of the mutually
agreed upon independent national accounting firm shall be shared
equally between Seller and Buyer. Except as may be required by
law, Seller, Temple-Inland Parent and Buyer will (i) file, or cause
to be filed, all Tax Returns in a manner consistent with the
Purchase Price Allocation, as adjusted as a result of a subsequent
increase or decrease in the Purchase Price, if any, and (ii) may
not take any action inconsistent therewith.
ARTICLE III
PURCHASE PRICE ADJUSTMENTS
Estimated Adjustment. Not less than two Business Days prior
to the Closing Date, Seller shall deliver to Buyer a statement by
an officer of Seller setting forth an estimate of the Closing
Working Capital made in good faith (the "Estimated Closing Working
Capital"), based upon a review of any monthly, weekly or other
operating or financial information made available to or prepared
from time to time by the Chief Executive Officer, the Chief
Financial Officer, General Counsel or Controller of Seller. The
"Estimated Working Capital Adjustment" shall be the amount of the
difference, whether positive or negative, determined by subtracting
(a) $50,000,000 from (b) the Estimated Closing Working Capital.
Post-Closing Adjustment.
At or immediately prior to the Closing Date, Seller and Buyer shall
conduct a joint inventory of the Business, the results of which
will serve as the quantitative basis for the calculation of
inventory pursuant to Schedule 3.2.
Immediately after the Closing, Seller shall prepare a balance sheet
of the Business as of the Closing Date (with the notes thereto, the
"Closing Balance Sheet") and schedules setting forth the Closing
Working Capital (as defined hereafter) as of the end of the last
shift on the Closing Date. Seller shall have Ernst & Young, LLP
("Seller's Accountant") perform procedures agreed upon among
Seller, Buyer and Seller's Accountant on the Closing Balance Sheet.
The "Closing Working Capital" shall equal the current assets less
current liabilities (including the intercompany payables referred
to in Section 2.3(a)(vi)) as reflected on the Closing Balance Sheet
and prepared in accordance with Schedule 3.2. The Closing Balance
Sheet (together with Schedules setting forth Closing Working
Capital) shall be completed and delivered to the Buyer as soon as
practicable, but in any event no later than 60 days following the
Closing Date. Except as provided for in Schedule 3.2, the Closing
Balance Sheet shall be prepared on a basis consistent with the
methods, principles, practices and policies employed in the
preparation and presentation of Temple-Inland Parent's publicly
filed financial statements and the Balance Sheet, and shall not
reflect (i) any purchase accounting adjustments arising from the
purchase of the Business by Buyer, or (ii) any assets and
liabilities retained by the Selling Entities pursuant to this
Agreement.
During the preparation of the Closing Balance Sheet and the period
of any dispute within the contemplation of this Section 3.2, Buyer
shall, upon reasonable notice, during normal business hours,
provide Seller and Seller's authorized representatives with access
to the books, records, facilities and employees of the Paperboard
Mill and the Business necessary to or useful in preparing the
Closing Balance Sheet.
After receipt of the Closing Balance Sheet, Buyer shall have 20
days to review the Closing Balance Sheet, together with Seller's
and Seller's Accountant's (so long as Buyer executes a customary
agreement in accordance therewith) workpapers used in the
preparation thereof, to determine if it has any objection to the
calculation of the Closing Working Capital. Buyer and its
authorized representatives shall have full access to all relevant
books and records and employees of Seller to the extent reasonably
required to complete their review of the Closing Working Capital.
Unless Buyer delivers written notice to Seller on or prior to the
20th day after Buyer's receipt of the Closing Balance Sheet
specifying all disputed items, Buyer shall be deemed to have
accepted and agreed to the Closing Working Capital. If Buyer so
notifies Seller of its objection to the Closing Working Capital,
Buyer and Seller shall, within 15 days (or such longer period as
the parties may agree) following such notice (the "Resolution
Period"), attempt to resolve their differences and any resolution
by them as to any disputed amounts shall be final, binding and
conclusive. If, at the end of the Resolution Period, the amounts
remaining in dispute ("Disputed Items") do not exceed $500,000, the
Closing Balance Sheet with such changes as are agreed by Buyer and
Seller shall be deemed to be final, binding and conclusive.
If, at the conclusion of the Resolution Period, the Disputed Items
equal at least $500,000, the Disputed Items shall be submitted to
Arthur Andersen & Co. (the "Neutral Auditors") within 10 days after
the expiration of the Resolution Period. Each party agrees to
execute, if requested by the Neutral Auditors, a reasonable
engagement letter. All fees and expenses relating to the work, if
any, to be performed by the Neutral Auditors shall be borne pro
rata by Seller and Buyer in proportion to the allocation of the
dollar amount of the Disputed Items between Buyer and Seller made
by the Neutral Auditors such that the prevailing party pays a
lesser proportion of the fees and expenses. The Neutral Auditors
shall act as an arbitrator to determine, based solely on the
provisions of this Section 3.2 and related schedules and the
presentations by Seller and Buyer, and not by independent review,
only the Disputed Items. The Neutral Auditors' determination of
the Disputed Items shall be made within 30 days of the submission
of the Disputed Items thereto, shall be set forth in a written
statement delivered to Seller and Buyer and shall be final, binding
and conclusive. The term "Final Closing Working Capital", as used
in this Agreement, shall mean the definitive Closing Working
Capital determined in accordance with Section 3.2(d) or this
Section 3.2(e) (in each case in addition to those items theretofore
agreed to by Seller and Buyer).
The "Final Working Capital Adjustment" shall be the amount of the
difference, whether positive or negative, determined by subtracting
(a) $50,000,000 from (b) the Final Closing Working Capital. If the
mathematical result determined by subtracting (a) the Estimated
Working Capital Adjustment from (b) Final Working Capital
Adjustment is positive then, Buyer shall promptly pay to (or as
directed by) Seller, in the manner and with interest as provided in
Section 3.2(g), the amount of such difference. If the mathematical
result determined by subtracting (a) the Estimated Working Capital
Adjustment from (b) Final Working Capital Adjustment is negative
then, Seller shall promptly pay to (or as directed by) Buyer, in
the manner and with interest as provided in Section 3.2(g), the
absolute value of such difference. Any such payment pursuant to
this Section 3.2(f) shall be made at a mutually convenient time and
place within five business days after the Final Closing Working
Capital is determined.
Any payments pursuant to Section 3.2(f) shall be made by causing
such payments to be credited in immediately available funds to such
bank account or accounts as may be designated by the receiving
party in writing not less than two Business Days prior to transfer.
The amount of any payment to be made pursuant to Section 3.2(f)
shall bear interest from and including the Closing Date to but
excluding the date of payment at a rate per annum equal to the
Prime Rate as published by The Chase Manhattan Bank. Such interest
shall be payable at the same time as the payment to which it
relates and shall be calculated daily on the basis of a year of 365
days and the actual number of days for which interest is due.
Corrective Actions.
Buyer shall undertake a review of the following systems of the
Paperboard Mill:
systems for bleaching and washing fibers;
systems and equipment in contact with pulp stock and filtrates from
pulp stock;
recovery, power island and electrical distribution systems; and
systems for handling and screening chips (items (i) through (iv)
collectively, the "Specified Systems").
Following its review of the Specified Systems, Buyer shall have
until one year after the Closing Date to notify Seller in writing
(the "Correction Cost Notice") of any costs and expenses incurred
by Buyer, if any, to repair or rectify any defect, deficiency or
inadequacy in the Specified Systems (including, without limitation,
repairing damage, excessive corrosion, or design or functional
deficiencies) to the extent necessary for operation of the
Paperboard Mill at a volume of 2,000 tons of paperboard per day on
an annual average, and to modify or upgrade the systems described
in item (iv) above to adequately assure and verify that the chips
exiting the chip handling and screening systems meet or exceed
Buyer's chip quality standards as set forth on Schedule 1.1(a), in
each case as determined by Buyer in good faith (collectively,
"Correction Costs"). The Correction Cost Notice shall include
complete information regarding the Correction Costs and a
description of the corrective action. Buyer shall have up to two
years after the date of the Correction Cost Notice (the "Correction
Cost Deadline") to complete the work described in the notice.
Buyer shall provide Seller the opportunity to audit (which audit
shall be completed not later than 60 days following the Correction
Cost Deadline) the purpose of the Correction Costs and verify the
amount of the Correction Costs. If the Correction Costs were
actually incurred by Buyer (i) in good faith, (ii) with respect to
the Specified Systems, (iii) consistent with practices in the
industry, and (iv) in accordance with the Correction Cost Notice,
the Seller shall reimburse Buyer (within 10 days following
completion of the audit) up to an amount of FIFTEEN MILLION DOLLARS
($15,000,000) for the total amount of Correction Costs actually
incurred by Buyer prior to the Correction Cost Deadline.
Except with respect to Liabilities resulting from Environmental
Conditions or arising under Environmental Laws in connection with
facts, events, conditions, actions or omissions existing or
occurring prior to Closing, with respect to the Specified Systems,
the rights accorded under this provision shall be in lieu of any
rights to payment (and not in lieu of the rights set forth in
Article X) that Buyer may have under any other provisions of this
Agreement or at law or in equity for any Losses or expenses with
respect to operations resulting from the performance or condition
of the Specified Systems, regardless of the actual costs and
expenses paid by Buyer with respect to the Specified Systems.
Following the Closing, the representation of Seller and the Subs
set forth in Section 5.14 shall be of no significance, force or
effect with respect to the Specified Systems. Buyer further
acknowledges that it has been made aware by Seller of facts and
circumstances on the Specified Systems contrary to the
representation in Section 5.14, and that with respect to the
Specified Systems the representation set forth in Section 5.14 is
included for the period prior to the Closing solely for the purpose
of determining the existence of a Business Material Adverse Effect.
Guarantee of Receivables. As reflected in Schedule 3.2,
Seller shall not be required to include reserves on accounts
receivable. Seller guarantees payment of the accounts receivable
at the amounts set forth in the Final Closing Working Capital, and,
if, following reasonable collection efforts by Buyer consistent
with its customary practice, any amounts under the accounts
receivables remain unpaid 120 days after Closing, Seller shall
promptly pay to Buyer the aggregate of all such unpaid amounts and
Buyer shall assign to Seller the unpaid portion of any such account
along with the right to collect for Seller's own account any
payments received with respect thereto, providecd Seller shall use
only such collection procedures as it uses with its own customers.
ARTICLE IV
RELATED AND ADDITIONAL AGREEMENTS
Fiber Supply Agreement. In connection with the consummation
of the transactions contemplated hereby, at or prior to the
Closing, Seller and Buyer shall enter into a fiber supply agreement
(the "Fiber Supply Agreement") in the form set forth in Exhibit A
hereto. Prior to the Closing, Buyer and Seller shall negotiate in
good faith to create Schedule 4.1 of the Fiber Supply Agreement and
determine the fair market initial prices for the Products (as
defined in the Fiber Supply Agreement) and the Region (as defined
in the Fiber Supply Agreement), which is generally contemplated to
be an area of sufficient size in eastern Texas and possibly parts
of Louisiana that provides a fair representation of fair market
prices for the Products and that is relatively free of local price
distortions and excessive fluctuations. If Buyer and Seller cannot
agree upon Schedule 4.1 within 45 days following the date hereof,
they shall submit the issue to arbitration in accordance with the
procedures set forth in Section 4.4 of the Fiber Supply Agreement.
Parent Guarantee. In connection with and as a condition to
the execution of this Agreement, Temple-Inland Parent has executed
a guarantee of the performance of Seller and the Subs under this
Agreement (the "Parent Guarantee") in the form set forth in Exhibit
B hereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Except for effects, events, occurrences, or states of facts
that, taken in the aggregate, do not have a Business Material
Adverse Effect, Seller and the Subs hereby represent and warrant to
Buyer that:
Organization; Qualification. Each of the Seller, Subs and
Purchased Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has corporate power and authority to own all of
its properties and assets and to carry on its business as it is now
being conducted. Each of the Sellers is duly qualified and in good
standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary.
Authority Relative to this Agreement and the Fiber Supply Agreement.
Each of Sellers has the corporate power and authority to
execute and deliver this Agreement and each agreement or other
document to be executed by it in connection with the transactions
contemplated by this Agreement and to consummate the transactions
contemplated on its part thereby. The execution and delivery by
any Sellers of this Agreement and each agreement or other document
to be executed by it in connection with the transactions
contemplated by this Agreement, and the consummation by it of any
transactions contemplated on its part hereby and thereby, have been
duly authorized by such Person's Board of Directors and no other
corporate proceedings on the part of such Person are necessary with
respect thereto. Assuming the due authorization, execution and
delivery by Buyer of this Agreement, this Agreement constitutes,
and each agreement or other document to be executed by any Sellers
in connection with the transactions contemplated by this Agreement
(when executed and delivered by such Person) will constitute, valid
and binding obligations of such Person, enforceable in accordance
with its terms except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general applicability relating to or affecting the
enforcement of creditors' rights and subject to the qualification
that general equitable principles may limit the availability of
equitable remedies, including without limitation the remedy of
specific performance.
Consents and Approvals. Except as set forth in Section 5.3 of
the Disclosure Schedule, there is no requirement applicable to any
Sellers to make any filing with, or to obtain any permit,
authorization, consent or approval from, any third-party (including
any Authority) as a condition to the consummation by Sellers of the
transactions contemplated by this Agreement, other than filings
required under the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended ("HSR Act"), notice to the PBGC, and any notice
required under the WARN Act.
Non-Contravention. The execution and delivery by Seller, the
Subs and the Purchased Subsidiaries of this Agreement and the other
agreements and documents to be executed in connection with the
transactions contemplated by this Agreement and the consummation of
the transactions contemplated thereby will not (a) violate or
result in a breach of any provision of the charters or bylaws of
any Sellers, as the case may be, (b) result in a default (or give
rise to any right of termination, cancellation or acceleration)
under the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, agreement, lease or other instrument
or obligation to which any Sellers, as the case may be, is a party
or by which any Sellers, as the case may be, or any of the
Purchased Assets may be bound, except for such defaults (or rights
of termination, cancellation or acceleration) as to which requisite
waivers or consents have been or shall be obtained by Sellers
before the Closing, or (c) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to any Sellers or
any of the Purchased Assets or the Business (other than any
applicable bulk sales laws).
Compliance with Laws. Sellers have operated the Business in
compliance with all laws, regulations, policies, guidelines,
orders, judgments or decrees of any Authority applicable to, or
having jurisdiction over, any Sellers with respect to the Purchased
Assets or the Business. Except as set forth in Section 5.5 of the
Disclosure Schedule, with respect to the Business, (a) no Sellers
have received from any Authority any notice of any failure to so
comply, and (b) no Sellers are currently subject to any sanction
for any noncompliance.
Environmental Matters. Except as described in Section 5.6 of
the Disclosure Schedule, Sellers have obtained all federal, state
and local permits, licenses and other authorizations and have
submitted all notices, which are required under applicable
Environmental Laws enacted as of the date hereof in connection
with: (i) the Purchased Assets and the Business, and (ii) the
operation of the Paperboard Mill at a volume of at least 2,000 tons
of bleached paperboard per day on an annual average. Except as
described in Section 5.6 of the Disclosure Schedule, the Purchased
Assets and the Business have been and are being operated in
compliance with all terms and conditions of such permits, licenses
and authorizations, and also have been and are being operated in
compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables of any Environmental Law or order, decree, judgment
notice or demand letter entered, promulgated or approved
thereunder, and no action is pending to revoke or modify any such
permit, license or authorization. Except as described in Section
5.6 of the Disclosure Schedule, none of Sellers have received
written notice, or to the Knowledge of Seller oral notice, from any
Authority of any failure of the Purchased Assets or the Business to
comply with, or of any liability or any alleged potential liability
of the Purchased Assets or the Business under, any Environmental
Law. Except as set forth in Section 5.6 of the Disclosure
Schedule: (i) none of the Paperboard Mill, the Purchased Assets or
the Business has released or disposed of any Hazardous Substances,
and no Sellers know of any such prior releases or disposal of
Hazardous Substances in violation of any Environmental Law on the
Paperboard Mill or related to the Purchased Assets or the Business
for which remedial action has not been completed, and (ii) there
are no physical conditions or Environmental Conditions that would
give rise to obligations to conduct or to pay for any Remedial
Action or any obligation to correct or to pay a penalty for failure
to comply with Environmental Laws with respect to the Paperboard
Mill, the Purchased Assets or the Business.
Licenses and Permits. All material federal, state and local
permits and licenses that Sellers are required to obtain in
relation to the Business or the ownership or operation of the
Purchased Assets have been obtained and are currently in full force
and effect. All material federal, state and local permits and
licenses that Sellers need in order to permit the Paperboard Mill
to produce at least 2,000 tons of bleached paperboard per day on an
annual average have been obtained and are currently in full force
and effect. Except as set forth in Section 5.7 of the Disclosure
Schedule, no Sellers have violated the terms or conditions of any
such license or permit, no notice of a violation of any such
license or permit has been received by any Sellers or recorded or
published, and no proceeding is pending, to revoke, prevent the
renewal of, or limit any such license or permit.
Financial Statements.
Seller has previously furnished Buyer with the Balance Sheet. The
Balance Sheet (i) has been prepared (except as otherwise set forth
in the comments accompanying such balance sheet) on a basis
consistent with Seller's historical accounting policies and
procedures with respect to the Business used in the preparation of
the publicly filed financial statements of Temple-Inland Parent and
(ii) presents fairly the financial position of the Business as of
August 31, 1999.
Seller has previously furnished Buyer with an unaudited profit and
loss statement for the Business for the years ended January 2, 1999
and January 3, 1998 and for the period ended July 3, 1999, copies
of which are attached as Schedule 5.8(c) (the "Income Statements").
Such unaudited Income Statements (i) have been prepared (except as
otherwise set forth in the comments accompanying such Income
Statement) on a basis consistent with Seller's historical
accounting policies and procedures with respect to the Business
used in the preparation of the publicly filed financial statements
of Temple-Inland Parent and (ii) present fairly the results of
operations of the Business for the respective periods set forth
therein.
Litigation. Except as set forth in Section 5.9 of the
Disclosure Schedule, there are (a) no actions, suits, claims or
proceedings (legal, administrative or arbitrative) pending or, to
the Knowledge of Seller, threatened, and no investigations, to the
Knowledge of Seller, pending or threatened, against any Sellers
which relate to the Purchased Assets or the Business, whether at
law or in equity and whether civil or criminal in nature, before
any federal, state, municipal, foreign country's or other court,
arbitrator, governmental department, commission, agency or
instrumentality, and (b) no judgments, decrees or orders of any
such court, arbitrator, governmental department, commission, agency
or instrumentality outstanding against Seller or any of its
Subsidiaries which relate to the Purchased Assets or the Business.
Title to Properties. Except as set forth in Section 5.10 of
the Disclosure Schedule:
Sellers have good and marketable fee simple title to the Real
Property, and have the right to use the Temple-Inland Canal
Easement, free and clear of all Encumbrances except for Permitted
Exceptions. Sellers have good and valid title to the personal
property included in the Purchased Assets, free and clear of all
Encumbrances except for Permitted Exceptions.
Sellers are in actual and peaceful possession of the real and
personal property included in the Purchased Assets.
No applicable zoning or building law, ordinance, administrative
regulation, urban redevelopment law, or any other law, regulation,
rule, order, decree or use restriction, prohibits or interferes
with, limits or impairs the use, operation, maintenance of or
access to, the Real Property, as now used, operated or maintained
by Sellers. No written notice of any violation of any applicable
zoning or building law, ordinance, administrative regulation, or
any other law, regulation, rule, order, decree or use restriction
has been received by any Sellers, and to the Knowledge of Seller no
condemnation proceeding has been instituted or is threatened with
respect to any of the Real Property.
The Real Property and the Temple-Inland Canal Easement are
suitable, sufficient and appropriate in all respects for their
current uses, and, except with respect to the Temple-Inland Canal,
are located adjacent to roads or streets with adequate lawful
ingress and egress available between such roads or streets and the
Real Property for the current uses of the Business.
Except for Permitted Exceptions and matters listed in Section 5.10
of the Disclosure Schedule, Sellers have not granted any
outstanding options or entered into any outstanding contracts with
others for or in connection with the sale, mortgage, pledge,
hypothecation, assignment, sublease, lease or other transfer of all
or any part of the Real Property or any interest in the real
property covered by the Temple-Inland Canal Easement and the Water
Easement. No person or entity has any right or option to acquire,
or right of first refusal or opportunity (or any similar right)
with respect to, the interest of any Sellers in or to the Real
Property or any real property covered by the Temple-Inland Canal
Easement and the Water Easement.
Leases.
Section 5.11(a) of the Disclosure Schedule sets forth a true and
complete list of all leases, agreements and other rights of
possession or commitments to lease or otherwise possess, under
which Seller or any of its Subsidiaries is the lessor, licensor or
otherwise grants use or occupancy, and under which any Sellers have
a leasehold interest or other contractual rights in or to any
Purchased Asset, which in the case of leases for personal property
provides for annual rental payments of more than $250,000
(collectively "Material Personalty Leases") and which includes all
leases for Real Property and leases related to the Temple-Inland
Canal Easement or the Water Easement and which is not terminable
without penalty upon notice of 12 months or less, such list
including, for each such Lease: (i) an identification of the lease,
sublease or license agreement therefor (or any other agreement with
respect to the use or occupancy thereof) and any and all amendments
or modifications thereof or side letters with respect thereto
(collectively, the "Leases"); (ii) the type of property leased
thereunder, and with respect to Leases for real property, the
approximate size of the premises leased thereunder; (iii) the term
thereunder, including any extension options; (iv) with respect to
Leases for real property, the use of such premises and the nature
of any improvements located thereon; and (v) the recording
information of any Leases which have been recorded in the
applicable real estate records offices. With respect to any Leases
for real property under which any Sellers have a leasehold interest
or other contractual rights, such Person has good and valid
leasehold title, free and clear of all Encumbrances except for
Permitted Exceptions.
Except as set forth on Section 5.11(b) of the Disclosure Schedule:
(i) there is no material past due payment obligation or other
material default under any of the Leases; (ii) no Sellers have
received any notice (oral or written) of, or know of, any act,
omission or condition which constitutes a material default, or with
the passage of time and/or the giving of notice would constitute a
material default, under any of the Leases; and (iii) each of the
Leases is in full force and effect, valid and enforceable against
the parties thereto in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general
applicability relating to or affecting the enforcement of
creditors' rights and subject to the qualification that general
equitable principles may limit the availability of equitable
remedies, including without limitation the remedy of specific
performance.
Intellectual Property. Section 5.12 of the Disclosure
Schedule sets forth a complete and correct list of (x) all items of
Business Intellectual Property that are the subject of licenses
(whether Sellers are licensees or licensors) and (y) all items of
the Business Intellectual Property described in clause (i) of the
definition of Intellectual Property (other than goodwill) that are
owned by Sellers. All such Business Intellectual Property is
subsisting on the date hereof. Except as set forth in Section 5.12
of the Disclosure Schedule, (i) there are no licenses of Business
Intellectual Property to third parties, (ii) there is no claim,
suit, action or proceeding pending or, to the Knowledge of Seller,
threatened against any Sellers asserting that its use of any
Business Intellectual Property infringes upon the rights of any
third parties, (iii) the conduct of the Business does not infringe
or otherwise conflict with any rights of any person in respect of
any patents, copyrights or other Intellectual Property, and (iv) to
the Knowledge of Seller there are no third parties infringing upon
the Business Intellectual Property.
Listed Contracts. Section 5.13 of the Disclosure Schedule
contains a complete and correct list of every contract, agreement
or commitment of any Sellers, including any attachments,
amendments, waivers, modifications and supplements thereto, related
primarily to the Business or the Purchased Assets, other than the
Leases (each, a "Listed Contract"):
which provides for aggregate future payments by the Business or to
the Business of more than $400,000, except for purchase orders,
sales orders or customer orders arising in the ordinary course of
business, in which case such contract, agreement or commitment is
listed only if any party thereto is obligated to make payments
during the term thereof which will exceed $500,000 in the
aggregate;
which provides for the sale, lease to a third party (other than
Leases listed in Section 5.11 of the Disclosure Schedule) or other
disposition, after the date hereof and other than in the ordinary
course of business, of any of the Purchased Assets;
which is an agreement or other arrangement for the purchase of any
real estate, machinery, equipment, or other capital assets with a
value in excess of $1,000,000;
which is an agreement imposing material non-competition or
exclusive dealing obligations on the Business; or
which is an agreement or other arrangement with a distributor or
manufacturer's representative that is not terminable upon twelve
months' notice.
Seller has, prior to the date hereof, delivered to Buyer true and
complete copies of all Listed Contracts (or, if not in writing,
reasonably complete and accurate written descriptions), together
with all amendments and supplements thereto and any waiver of terms
thereof. Except as set forth in Section 5.13 of the Disclosure
Schedule, all of the Listed Contracts are in full force and effect
and there has not occurred, with respect to any Listed Contract,
any material default or event of default on the part of any Sellers
or, to the Knowledge of Seller, any other party thereto.
Tangible Assets. Subject to the acknowledgments provided for
in Section 3.3(d), the tangible Purchased Assets are in good
operating condition, and do not require any maintenance or repairs
except for day-to-day maintenance or repairs arising with respect
to ordinary wear and tear. The Paperboard Mill is designed to have
a production capacity of at least 2,000 tons of paperboard per day
on an annual average, although it has never been operated at such
level. The inventories of the Business are good, safe,
merchantable and in usable condition, and of a quantity that is
useable or saleable in the ordinary course of the Business.
Labor Matters.
Section 5.15(a) of the Disclosure Schedule sets forth a complete
and correct list of every collective bargaining agreement covering
Business Employees. Seller has provided Buyer with true, complete
and correct copies of each of such collective bargaining agreements
and all amendments and modifications (excluding exhibits) thereto.
Except as set forth in Section 5.15(b) of the Disclosure Schedule,
and except for grievances that have not ripened into arbitration or
litigation, as of the date hereof there are no controversies,
disagreements or disputes pending between any Sellers and any of
their respective employees or union representatives.
Except as set forth in Section 5.15(c) of the Disclosure Schedule:
during the last three years immediately preceding the date of this
Agreement, with respect to the Business Employees, there have been
no labor strikes, slow downs, lockouts, employment suits by any
Person related to labor matters or administrative proceedings or
investigations related to labor matters brought by any Authority in
connection with the Business;
within the past three years immediately preceding the date of this
Agreement, there have not been (A) any events that have legally
required any Sellers to hold a union election related to the
Business or (B) to the Knowledge of Seller, any union organizing
activities, or any demand for recognition from a labor organization
related to the Business; and
within the past three years immediately preceding the date of this
Agreement, there have not been any unfair labor practice charges
filed with the National Labor Relations Board against any Sellers
related to the Business or the Purchased Assets.
Employee Benefit Plans.
Section 5.16(a) of the Disclosure Schedule lists all of the
material employee benefit and compensation plans, programs and
arrangements, including without limitation (i) all retirement,
savings and other pension plans other than "multiemployer plans,"
(as defined in Section 4001(a)(3) of ERISA), (ii) all health,
severance, insurance, disability and other employee welfare plans,
and (iii) all employment, incentive, vacation and other similar
plans, in each case that are maintained by Seller or any ERISA
Affiliates with respect to Business Employees, or to which Seller
or any ERISA Affiliates contributes on behalf of the Business
Employees (collectively, the "Employee Plans").
Except as set forth in Section 5.16(b) of the Disclosure Schedule:
(i) the Employee Plans that are maintained by any Sellers are in
material compliance with applicable laws and regulations,
including, to the extent applicable, ERISA and the Code, (ii)
Seller and, to the extent applicable, each of the ERISA Affiliates
has administered the Employee Plans in accordance with applicable
laws and regulations, including, to the extent applicable, ERISA
and the Code, and (iii) to the Knowledge of Seller each Employee
Plan that is intended to be qualified under Section 401(a) of the
Code is so qualified.
Seller has made available to Buyer copies of all Employee Plans
and, where applicable, summary plan descriptions and annual reports
filed within the last year pursuant to ERISA or the Code with
respect to the Employee Plans.
Section 5.16(d) of the Disclosure Schedule contains a true and
correct list of all employment and consulting contracts with an
original term in excess of 180 days, providing for compensation on
a yearly basis in excess of $175,000, and not otherwise listed on
Section 5.13 or 5.16(a) of the Disclosure Schedule, to which any of
Sellers or any ERISA Affiliates is a party in connection with the
Business. Except as set forth in Section 5.16(d) of the Disclosure
Schedule, each of such contracts is in full force and effect and
there has not occurred, with respect to any such contract, any
material default or event of default on the part of any of Sellers
or any ERISA Affiliates, as applicable, or, to the Knowledge of
Seller, any other party to such contracts.
Conduct of Business and Management of Assets.
Between August 31, 1999 and the date hereof, Sellers have conducted
the Business, and have managed the Purchased Assets in the ordinary
course of business consistent with past practice.
Between August 31, 1999 and the date hereof, with respect to the
Business and the Purchased Assets, Sellers have not:
made capital expenditures, other than substantially in accordance
with the CapX Plan or with their obligations under this Agreement;
made a disposition of assets in excess of $1,000,000, other than
dispositions of inventory in the ordinary course of business of the
Business;
made loans or advances to, or investments in, other parties in
excess of $500,000 in the aggregate;
entered into employment, severance, compensation or similar
agreements with Business Employees, except (A) for incentive
programs that by their terms expire at or before Closing or (B) in
the ordinary course of business;
made increases in compensation or benefits payable to Business
Employees other than in the ordinary course of business;
suffered or incurred any significant damage, destruction of
property or other loss, whether or not insured; or
without reference to qualification set forth in the introduction to
this Article V, suffered a Business Material Adverse Effect.
Between August 31, 1999 and the date hereof, with respect to the
Business and the Purchased Assets, Sellers have:
maintained their books and records in accordance with past
accounting practices;
maintained the same level and types of insurance as previously
maintained; and
used commercially reasonable efforts to preserve the Business and
the Purchased Assets.
Finders. No broker, finder or investment banker is entitled
to any fee or commission from any Sellers for services rendered on
behalf of such Person in connection with the transactions
contemplated by this Agreement.
Sufficiency of Assets. The Purchased Assets to be transferred
pursuant to Article II, together with the Buyer's rights under the
Fiber Supply Agreement and Section 7.16, are sufficient to enable
the Buyer to conduct the Business in substantially the same manner
as it is presently being conducted; subject to Buyer's
understanding and acknowledgment that the fiber to be supplied by
Seller pursuant to the Fiber Supply Agreement will not supply all
the fiber required to conduct the Business and the Paperboard Mill
does not have fiber procurement operations.
Customers. Section 5.20 of the Disclosure Schedule sets
forth: (i) a list of the twenty largest customers of the Business
(the "Significant Customers"), determined by dollar volume of gross
sales for the most recently ended fiscal year, and the dollar
volume of sales to each such customer during the most recently
ended fiscal year, and (ii) a list of the brokers and distributors
of the Business that accounted for at least $1,000,000 in sales by
the Business during the most recently ended fiscal year (the
"Significant Brokers"), and the dollar volume of the sales of the
Business to or through each Significant Broker during the most
recently ended fiscal year. Except as described in Section 5.20 of
the Disclosure Schedule as of the date hereof, no Significant
Customer or Significant Broker has terminated, or given notice that
it intends to terminate, its existing relationship with respect to
the Business with any Sellers.
Year 2000 Problems. Sellers have (a) engaged in a process of
assessment of the existence of the Year 2000 Problems appropriate
to the scope and complexity of the Systems, and (b) adopted and are
implementing a plan of correction ("Y2K Plan") intended to
eliminate Year 2000 Problems. Seller's Y2K Plan will be
substantially completed on or prior to December 1, 1999. Assuming
the successful completion of its Y2K Plan in a timely manner,
Seller expects any Year 2000 Problems that occur, should there be
any, will be minor and not material to the Business. Seller has
contacted key vendors whose noncompliance, either individually or
cumulatively, could materially impact the Business. Substantially
all have indicated they have addressed or expect to address their
Year 2000 Problems in a timely manner. Seller cannot provide
assurance that the Year 2000 compliance plans of its vendors and
customers, particularly those providing broad infrastructural
services or those in international markets, will be successfully
completed in a timely manner.
Industrial Revenue Bonds. Section 5.22 of the Disclosure
Schedule sets forth a list of industrial revenue bonds (the "IRBs")
of the Purchased Subsidiaries undertaken in connection with the
Business or the Purchased Assets and indicates for each the debtor
and the principal balance outstanding. Except for outstanding
principal and accrued interest not yet due and payable, no unpaid
interest, fees, dues, penalties, damages or other obligations are
outstanding on any IRBs, and Sellers have previously delivered to
Buyer true and complete copies of all indentures and agreements
with respect to the IRBs, including all attachments, amendments,
waivers, consents and supplements thereto.
Purchased Subsidiaries Capitalization.
Section 5.23 of the Disclosure Schedule sets forth the number of
authorized and outstanding shares of capital stock or membership
interests or other ownership interests of each Purchased Subsidiary
("Purchased Subsidiaries Shares"). All outstanding Purchased
Subsidiaries Shares are (i) duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights and (ii) owned by
Seller, or an indirect wholly owned subsidiary of Seller, free and
clear of any pledge, lien, Taxes, security interests, purchase
rights, contracts, commitments, equities, claims, and demands, or
encumbrance. There are no stock appreciation rights, phantom stock
or similar rights with respect to any Purchased Subsidiaries Shares
or any options, warrants, calls, rights or agreements to issue,
deliver, sell, purchase, redeem or acquire, or cause to be issued,
delivered, sold, purchased, redeemed or acquired, any Purchased
Subsidiaries Shares, or securities convertible into or exchangeable
for such Purchased Subsidiaries Shares or obligating any Purchased
Subsidiary or other Person to grant, extend or enter into any such
option, warrant, call, right or agreement. Except as set forth in
Section 5.23 of the Disclosure Schedule, there are no outstanding
contractual obligations of any Sellers (i) restricting the transfer
of, (ii) affecting the voting rights of, (iii) requiring the
repurchase, redemption or disposition of, (iv) requiring the
registration for sale of, or (v) granting any preemptive or
antidilutive right with respect to, any Purchased Subsidiaries
Shares being transferred to Buyer hereunder.
At the Closing, Sellers will deliver, or cause to be delivered,
good and marketable title to the Purchased Subsidiaries Shares to
be transferred to Buyer hereunder, free and clear of any pledge,
lien, Taxes, security interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands, or
encumbrance. The Purchased Subsidiaries have no Subsidiaries.
Neither Purchased Subsidiary has any Liability other than
Liabilities pursuant to the IRBs to which it is a party, and at the
Closing, neither of the Purchased Subsidiaries will have any
Liabilities other than, in the aggregate, Liabilities pursuant to
the IRBs in the amount of the IRB Amount.
Tax Matters.
Each Purchased Subsidiary has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in
all respects. All Taxes shown thereon as owing by each Purchased
Subsidiary have been paid. Except as disclosed on Section 5.24 of
the Disclosure Schedule, none of the Purchased Subsidiaries is
currently the beneficiary of any extension of time within which to
file any Tax Return. To the Knowledge of Seller, no written claim
has ever been made by a Tax Authority in a jurisdiction where one
or both of the Purchased Subsidiaries does not file Tax Returns
that one or both of the Purchased Subsidiaries is or may be subject
to taxation by that jurisdiction. There are no liens or security
interests on any of the assets of a Purchased Subsidiary that arose
in connection with any failure (or alleged failure) to pay any Tax.
Each Purchased Subsidiary has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor,
stockholder, or other third party.
To the Knowledge of Seller, there is no expectation that any Tax
Authority will assess any additional Taxes with respect to the
Purchased Subsidiaries for any period for which Tax Returns have
been filed. There is no dispute or claim concerning any Tax
liability of any of the Purchased Subsidiaries either (A) claimed
or raised by any Tax Authority in writing or (B) to the Knowledge
of Seller. Section 5.24 of the Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed with
respect to the Purchased Subsidiaries for taxable periods ended on
or after December 31, 1996, indicates those Tax Returns that have
been audited, and indicates those Tax Returns that currently are
the subject of audit. Seller delivered or made available to Buyer
correct and complete copies of the portions of all federal income
Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by and pertaining to the Purchased
Subsidiaries since December 31, 1996.
Except as disclosed on Section 5.24 of the Disclosure Schedule, no
Purchased Subsidiary has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to
a Tax assessment or deficiency.
No Purchased Subsidiary has filed a consent under Section 341(f) of
the Code concerning collapsible corporations. No Purchased
Subsidiary has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not
be deductible under Section 280G of the Code. None of the Sellers
is a foreign person within the meaning of Section 1445(b)(2) of the
Code. None of the Purchased Subsidiaries has ever (A) been a member
of an Affiliated Group filing a consolidated federal income Tax
Return (other than a group the common parent of which was Temple-
Inland Parent) or (B) had or has any liability for the Taxes of any
Person (other than the several liability for federal income Taxes
of the Temple-Inland Group,) under Section 1.1502-6 of the Treasury
Regulations (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
The Temple-Inland Group has filed all income Tax Returns that it
was required to file for each taxable period during which any of
the Purchased Subsidiaries was a member of the Temple-Inland Group.
All such Tax Returns were correct and complete in all respects. All
income Taxes shown thereon as owing by any Affiliated Group have
been paid for each taxable period during which any of the Purchased
Subsidiaries was a member of the Temple-Inland Group.
Except as disclosed on Section 5.24 of the Disclosure Schedule, the
Temple-Inland Group has not waived any statute of limitations in
respect of any income Taxes or agreed to any extension of time with
respect to an income Tax assessment or deficiency for any taxable
period during which any of the Purchased Subsidiaries was a member
of the Temple-Inland Group.
The Purchased Subsidiaries are members of the Temple-Inland Group
of corporations that file a consolidated federal income tax return
with Temple-Inland Parent as the common parent.
Disclosure. To the Knowledge of Seller, no representation or
warranty made by any Seller in this Agreement, nor any document,
written information, financial statement, certificate or exhibit
prepared and furnished or to be prepared and furnished by such
Person or their respective representatives pursuant hereto or in
connection with the transactions contemplated hereby, when taken
together and giving effect to corrections contained in such
materials, contains any untrue statement of a material fact.
No Other Representations. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES EXPRESSLY SET FORTH IN ARTICLE V, THE PURCHASED ASSETS
ARE BEING SOLD AND TRANSFERRED "AS IS, WHERE IS," AND THE SELLERS
ARE NOT MAKING ANY OTHER REPRESENTATIONS OR WARRANTIES, WRITTEN OR
ORAL, STATUTORY, EXPRESS OR IMPLIED, INCLUDING, IN PARTICULAR, ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE (AS
DEFINED IN THE NEW YORK COMMERCIAL CODE), ALL OF WHICH ARE HEREBY
EXPRESSLY EXCLUDED AND DISCLAIMED.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Except for effects, events, occurrences, or states of facts
that, taken in the aggregate, do not prevent or materially delay
consummation of any of the transactions contemplated by this
Agreement, Buyer hereby represents and warrants to Seller that:
Organization; Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the General
Corporation Law of the state of Delaware. Buyer has the corporate
power and authority to own all of its properties and assets and to
carry on its business as it is now being conducted and as is
contemplated to be carried on hereunder. Buyer is duly qualified
and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the
Business makes such qualification necessary except in those
jurisdictions where the failure to be duly qualified and in good
standing would not have a material adverse effect on Buyer.
Authority Relative to this Agreement and the Fiber Supply Agreement.
Buyer has the corporate power and authority to execute and
deliver this Agreement and the Fiber Supply Agreement and to
consummate the transactions contemplated hereby and thereby. The
execution and delivery by Buyer of this Agreement and the Fiber
Supply Agreement and the consummation by Buyer of the transactions
contemplated hereby and thereby, have been duly authorized by its
Board of Directors and no other corporate proceedings on its part
are necessary with respect thereto. This Agreement and the Fiber
Supply Agreement, when executed and delivered by Buyer, each
constitutes a valid and binding obligation of Buyer, enforceable in
accordance with its terms except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws of general applicability relating to or
affecting the enforcement of creditors' rights and subject to the
qualification that general equitable principles may limit the
availability of equitable remedies, including without limitation
the remedy of specific performance.
Consents and Approvals. Except for applicable filings under
the HSR Act or as set forth in Section 6.3 of the Disclosure
Schedule hereto, there is no requirement applicable to Buyer to
make any filing with, or to obtain any permit, authorization,
consent or approval from, any third-party (including any Authority)
as a condition to the consummation by Buyer of the transactions
contemplated by this Agreement.
Non-Contravention. The execution and delivery by Buyer of
this Agreement does not, and its execution and delivery of the
Fiber Supply Agreement and the consummation of the transactions
contemplated hereby and thereby will not (a) violate or result in a
breach of any provision of such Buyer's Certificate of
Incorporation or Bylaws, (b) result in a default (or give rise to
any right of termination, cancellation or acceleration) under the
terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement, lease or other instrument or
obligation to which such Buyer is a party or by which such Buyer
may be bound, or (c) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Buyer (other than any
applicable bulk sales laws).
Litigation. There are no actions, suits, claims,
investigations or proceedings (legal, administrative or
arbitrative) pending or threatened against Buyer, whether at law or
in equity and whether civil or criminal in nature before any
federal, state, municipal or other court, arbitrator, governmental
department, commission, agency or instrumentality, nor are there
any judgments, decrees or orders of any such court, arbitrator,
governmental department, commission, agency or instrumentality
outstanding against Buyer which have, or, if adversely determined,
could be reasonably expected to have, a material adverse effect on
Buyer's ability to consummate the transactions contemplated
hereunder, or which seek specifically to prevent, restrict or delay
the consummation of the transaction as contemplated hereby or the
fulfillment of any of the conditions of this Agreement.
Finders. Except for Goldman, Sachs & Co., no broker, finder
or investment banker is entitled to any fee or commission from
Buyer for services rendered on behalf of Buyer in connection with
the transactions contemplated by this Agreement.
Financing. Buyer will, at the Closing, have sufficient
immediately available funds, in cash, to pay the Base Purchase
Price.
ARTICLE VII
ADDITIONAL AGREEMENTS
Conduct of Business and Management of Assets. From and after
the date hereof and until the Closing, each of Seller and the Subs
shall use its reasonable best efforts (a) to conduct the Business
in the ordinary course of business consistent with past practice
(which shall include execution of the Paperboard Mill outage and
related undertakings on dates substantially similar to those
presently scheduled and communicated to Buyer); (b) to preserve
intact the present business organization and operations of the
Business, except for any such changes made in good faith to
facilitate the transactions contemplated by this Agreement; (c) to
keep available the services of its employees; and (d) to preserve
its relationships with licensors, suppliers, dealers, customers and
others having business relationships with the Business.
Forbearances by Seller. Except as specifically contemplated
by this Agreement, Seller shall not, and shall cause each of its
Subsidiaries not to, from the date hereof until the Closing,
without the written consent of Buyer:
sell, dispose of, transfer or encumber any of the Purchased Assets
except in the ordinary course of business;
make any significant acquisition of assets with respect to the
Business other than in the ordinary course of business or as
contemplated by this Agreement;
amend, modify or cancel any contract, agreement or commitment
included in the Purchased Assets except in the ordinary course of
business; provided that the amendment, modification or cancellation
of any contract with a remaining term in excess of six months or
which provides for aggregate payments in excess of $250,000 shall
not be deemed to be in the ordinary course;
enter into any employment, severance, compensation or similar
agreements with any Business Employee other than in the ordinary
course of business or as may be required by law or existing
contractual arrangements;
increase the compensation of, or benefits payable to, Business
Employees other than in the ordinary course of business or as may
be required by law or existing contractual arrangements;
change the assumptions underlying or the methods of calculating any
contingency or other reserve (excluding the reserve for doubtful
accounts receivable and excluding any LIFO reserve to the extent
necessary to be consistent with the Balance Sheet) relating to the
Business except in accordance with this Agreement or as required by
changes in GAAP; provided that no such change in GAAP shall be
recognized for purposes of Article III of this Agreement;
dispose of or permit to lapse any right to the possession, use or
enjoyment of any Business Intellectual Property or dispose of or
disclose to any unauthorized person any information concerning the
Business Intellectual Property;
enter into or renew any collective bargaining or labor agreement
(oral and legally binding or written) with respect to the Business;
cancel or reduce any insurance coverage relating to the Purchased
Assets, unless such coverage is replaced; or
agree, so as to legally bind Buyer whether in writing or otherwise,
to take any of the actions set forth in this Section 7.2 and not
otherwise permitted by this Agreement.
Mail Received after Closing. Following the Closing, Buyer may
receive and open all mail addressed to any Sellers and may deal
with the contents thereof in its reasonable discretion to the
extent that such mail and the contents thereof relate to the
Business. Buyer shall deliver or cause to be delivered to the
Selling Entities, promptly after receipt by Buyer, all mail,
including, without limitation, payments of accounts or claims
receivable, addressed to any Selling Entity which does not relate
to the Business.
Expenses.
Except as otherwise provided in this Agreement, all costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
All sales, use, transfer taxes and other non-income taxes and any
fees (including deed recordation fees and filing fees, if any)
incurred in connection with this Agreement and the transactions
contemplated hereby (the "Transfer Fees") will be borne by Buyer.
At Seller's direction, Buyer will file all necessary tax returns
and other documents required to be filed with respect to all such
Transfer Fees. Seller will cooperate with Buyer to the extent
reasonably necessary to enable Buyer to make such filings and join
in the execution of any tax returns or other documents as may be
required in order for Buyer to comply with the provisions of this
Section.
Confidentiality and Public Announcements. Each party shall
keep this Agreement and its terms confidential, and shall make no
press release or public disclosure, either written or oral,
regarding the transactions contemplated by this Agreement without
the prior knowledge and consent of the other party hereto; provided
that the foregoing shall not prohibit any disclosure (i) by press
release, filing or otherwise that is required by federal securities
laws or the rules of the New York Stock Exchange, (ii) to
attorneys, accountants, investment bankers or other agents of the
parties assisting the parties in connection with the transactions
contemplated by this Agreement and (iii) by Buyer in connection
with obtaining financing for the transactions contemplated by this
Agreement and conducting an examination of the operations and
assets of the Seller. If the transactions contemplated hereby are
not consummated for any reason whatsoever, the parties hereto agree
not to disclose or use any confidential information they may have
concerning the affairs of the other party, except for information
that is required by law to be disclosed. If the transactions
contemplated hereby are consummated, the Selling Entities agree not
to disclose or use any confidential information they have
pertaining to the Purchased Assets, except for information that is
required by law to be disclosed. Confidential information includes,
but is not limited to: financial records, surveys, reports, plans,
proposals, financial information, environmental data, information
relating to personnel, contracts, pricing information, customer
lists, stock ownership, liabilities and litigation; provided that
should the transactions contemplated hereby not be consummated,
nothing contained in this Section 7.5 shall be construed to
prohibit the parties hereto from operating businesses in
competition with each other.
Efforts to Consummate. Subject to the terms and conditions of
this Agreement, each of the parties hereto shall use its reasonable
best efforts to take, or to cause to be taken, all action and to
do, or to cause to be done, all things necessary, proper or
advisable to consummate, as promptly as practicable, the
transactions contemplated hereby, including, but not limited to,
the satisfaction of the conditions listed in Article X or Article
XI that are within the control of such party and the obtaining of
all consents, waivers, authorizations, orders and approvals of
third parties, whether private or governmental, required of it by
this Agreement; provided however, that neither Buyer nor any of its
subsidiaries shall be required to (A) divest or hold separate, or
accept any condition or limitation upon, any material portion of
the Paperboard Mill or the Business, or (B) divest or hold
separate, or accept any condition or limitation upon, any portion
of their respective businesses, products lines or assets material
in relation to the size and operation of the Paperboard Mill. Each
party shall cooperate fully with the other party hereto in
assisting such party to comply with this Section 7.6.
Further Assurances.
At the request of Buyer, Seller will, at or after the Closing,
promptly execute and deliver, or cause to be so executed and
delivered, such documents and take such further action as Buyer may
deem reasonably necessary or desirable to facilitate or better
evidence the consummation of the transactions contemplated hereby.
At the request of Seller, Buyer will, at or after the Closing,
promptly execute and deliver, or cause to be so executed and
delivered, such documents and take such further action as Seller
may deem reasonably necessary or desirable to facilitate or better
evidence the consummation of the transactions contemplated hereby.
Prior to, and for a period of 12 months after, the Closing Date,
the Selling Entities agree to reasonably cooperate with Buyer's
efforts to obtain any consents or Permits from any Person or
Authority necessary in connection with the transfer of the Business
or the Purchased Assets as contemplated hereby.
Use of Seller Name. As soon as practicable after the Closing,
but in any event no later than six months following such date,
Buyer (a) shall remove all names, logos or marks which include the
words "Inland Eastex" or "Inland Paperboard and Packaging, Inc."
("Seller Corporate Designations") (which shall at all times remain
the property of the Seller) from, or render the same illegible on,
all Purchased Assets on which such Seller Corporate Designations
are imprinted or legible or (b) shall discontinue use of any asset
described in clause (a) bearing Seller Corporate Designations,
provided that Buyer shall have absolutely no right to use the names
"Temple-Inland" or "Temple-Inland Forest Products Corporation" or
use of Seller's "T-Wheel Logo" and (c) Buyer shall change the names
of the Purchased Subsidiaries. Notwithstanding the foregoing,
Buyer shall be permitted to use the Seller Corporate Designations
for no more than six months following the Closing with respect to
Purchased Assets on which a Seller Corporate Designation is
imprinted or affixed at the Closing and in the conduct of the
Business solely to the extent of such use immediately prior to the
Closing.
No Solicitation of Employees.
Except in accordance with Section 8.1 hereof, for a period of one
year after the Closing, neither party nor any representative of
such party shall, in any manner, directly or indirectly, (i)
solicit any employee of the other party or any Affiliate of the
other party to terminate his or her employment with such party or
its Affiliate, or (ii) otherwise recruit or encourage any such
employee to become, or hire any such employee as, an employee of,
or a consultant to, the party bound hereby.
Notwithstanding clause (a) of this Section 7.9, no party hereto
shall be restricted from soliciting for employment or hiring any
employee of any other party hereto who has left the employment of
such other party other than as a result of the breach of this
Section 7.9 by any party hereto.
Antitrust Filings.
Seller and Buyer shall each (i) take promptly all actions necessary
to make the filings required of it or any of its Affiliates under
the applicable Antitrust Laws, including the payment by Buyer of
the filing fee required by the HSR Act, (ii) comply at the earliest
practicable date with any request for additional information or
documentary material received by it or any of its Affiliates from
the Federal Trade Commission or the Antitrust Division of the
Department of Justice pursuant to the HSR Act and (iii) cooperate
in connection with any filing or submission under applicable
Antitrust Laws and in connection with resolving any investigation
or other inquiry, including consulting with the other party in
advance of arranging for or participating in any meeting with any
Authority, concerning the transactions contemplated by this
Agreement commenced by any of the Federal Trade Commission, the
Antitrust Division of the Department of Justice or the Attorney
General of any state. Subject to Section 14.1, Seller and Buyer
shall each use all reasonable efforts to resolve such objections,
if any, as may be asserted with respect to the transactions
contemplated by this Agreement under any Antitrust Law.
Notwithstanding anything to the contrary herein, neither Buyer nor
any of its subsidiaries shall be required to (A) divest or hold
separate, or accept any condition or limitation upon, any material
portion of the Paperboard Mill or the Business, or (B) divest or
hold separate, or accept any condition or limitation upon, any
portion of their respective businesses, products lines or assets
material in relation to the size and operation of the Paperboard
Mill.
Seller and Buyer shall each promptly inform the other party of any
material communication made to, or received by such party from, the
Federal Trade Commission, the Department of Justice or any other
governmental or regulatory authority regarding any of the
transactions contemplated hereby. Seller shall not enter into any
proposed understanding, undertaking, or agreement with any
Authority in connection with the transactions contemplated by this
Agreement without the prior written consent of Buyer.
Title Matters.
Seller and Buyer will, as soon as practicable after the execution
and delivery of this Agreement, cause to be issued one or more
title commitments (whether one or more, the "Title Commitment") for
policies of owner's title insurance with respect to the Real
Property (the "Real Property Title Commitment") and current surveys
prepared by a duly licensed surveyor in accordance with Category 1A
of the Texas Society of Professional Surveyors specifications (as
currently in effect) in each case in form and substance reasonably
satisfactory to Buyer ("Texas surveys"). Seller and Buyer shall
each bear 50% of the cost of the Title Commitment and Texas
surveys. Buyer shall procure and pay premiums for such title
insurance as it requires. At Buyer's request, the Closing may be
postponed until the date that is 15 days after the date of the
delivery to Buyer of the Real Property Title Commitment together
with copies of all recorded documents listed as title exceptions in
the Real Property Title Commitment or Texas surveys (collectively,
the "Real Property Title Package"). Within 10 days of the date of
the delivery to Buyer of the Real Property Title Package, Buyer
shall notify Seller of any title matter reflected in the Real
Property Title Commitment or Texas surveys that constitutes a
breach of the representation set forth in Section 5.10 (without
giving effect to the materiality qualification contained in the
first clause of Article V) (any such title matter being a "Title
Defect").
Within ten days of receiving notice from Buyer of any Title Defect,
Seller shall notify Buyer, with respect to each such Title Defect,
whether Seller has elected to cure such matter to the reasonable
satisfaction of Buyer or otherwise cause the same to be deleted
from, or insured over in, the Title Commitment, or if Seller has
elected to take no action; provided Seller shall be required to
remove any Encumbrance (which is not a Permitted Exception)
securing a monetary obligation which can be removed by the payment
of money the amount of which is ascertainable from the face of the
document or which has been determined in writing from the holder of
such obligation; provided further that if such Encumbrance relates
to a mechanic's or materialman's lien that is being contested in
good faith by Seller, Seller may agree to indemnify Buyer for any
and all Losses actually incurred due to such Encumbrance in lieu of
removing such Encumbrance. If Buyer does not deliver written
notice of its objections to any Title Defect within the time
specified above for such notice, Buyer shall be deemed to have
waived all rights it may have against Seller (including the right
to refuse to consummate the transactions called for in this
Agreement or the right otherwise to claim breach of the
representation set forth in Section 5.10) with respect to such
Title Defect and each such defect shall then constitute a
"Permitted Exception." If Seller fails to respond, within the time
set forth above, to any objection to Title Defects timely delivered
by Buyer as set forth above, Seller shall be deemed to have elected
to cure the Title Defects at issue. If Seller elects to take no
action with respect to one or more Title Defects that in the
aggregate would constitute a Business Material Adverse Effect,
Buyer may terminate this Agreement within 10 days of notice of such
election.
Access to Assets and Business Employees.
From the date hereof until Closing or the earlier termination or
expiration of this Agreement, Sellers shall provide Buyer, and
Buyer's counsel, accountants, and representatives with reasonable
opportunities to further investigate the Purchased Assets and
interview Business Employees during normal business hours upon
prior notice from Buyer, for reasonable purposes, including to
conduct Phase I environmental assessments and such Phase II
environmental assessments as may be necessary or desirable based on
the results of the Phase I environmental assessments, provided that
no such investigations or interviews shall unreasonably (in
relation to the nature of the investigations) interfere with the
operation of the Business or Seller's other businesses. Before
starting any Phase II environmental assessment, Buyer will present
to Seller a proposed plan for conducting the Phase II environmental
assessment and will not start the Phase II environmental assessment
until Seller grants its consent, which shall not be unreasonably
withheld.
From the date hereof until Closing or the earlier termination or
expiration of this Agreement, Sellers shall deliver to Buyer, (i)
as soon as available and in any event within five Business Days
after each fiscal month-end after the date hereof, the profit and
loss statement and cash flows of the Business for the period from
the beginning of the then current fiscal year to the end of such
month prepared in a manner consistent with past practice, and (ii)
monthly updates setting forth a comparison of actual expenditures
to budgeted expenditures with respect to each item in the CapX
Plan. Prior to the Closing Date, Seller shall also provide Buyer
with its plan of operations for the Business for year 2000.
Following the Closing Date, the Selling Entities shall make
available to Buyer, and Buyer's counsel, accountants, and
representatives copies of such files and records as are retained on
the Closing Date and relate to the Business or the Purchased Assets
during normal business hours upon prior notice as Buyer may
reasonably request.
Following the Closing Date, if any party hereto requires
information or access to the employees, books and records of
another party hereto in order prepare tax returns or another filing
or report to be made for any period after the Closing Date,
including, without limitation, amended tax returns, claims for
refunds, audits or other proceedings, such possessing party shall
furnish the information and access as practicable and to the extent
reasonably required.
Upon the request of Buyer, Seller (and Temple-Inland Parent) will
cooperate and use reasonable efforts (i) to prepare or cause its
independent accountants to prepare, and cause such accountants to
audit and report on, financial statements related to the Business,
the Purchased Assets and the Assumed Liabilities, (ii) to execute
and deliver, and cause its officers to execute and deliver, such
"representation" letters as are customarily delivered in connection
with audits, reasonably acceptable to Seller and as Seller's
independent accountants may reasonably request under the
circumstances and (iii) cause its independent accountants to
consent to the use of such financial statements in any
registration, proxy or information statement or other document
filed by Buyer or any of its Affiliates under the Securities Act of
1933, as amended. Buyer will promptly reimburse Seller (and Temple-
Inland Parent) for all reasonable costs and expenses (including
without limitation internal costs and expenses) incurred in
connection with such cooperation, consent and efforts.
IRB Obligations. <*> Effective as of the Closing, Buyer shall
procure substitute letters of credit and shall fully cooperate with
Seller to cause itself to be substituted in all respects for Temple-
Inland Parent on any letter of credit or guarantees, related to any
IRB, listed on Schedule 7.13.
Consents and Approvals.
Anything to the contrary herein notwithstanding, this Agreement
shall not constitute an agreement to assign any asset or any claim
or right or any benefit arising under such asset or resulting from
such asset if any attempted assignment thereof, without the consent
of a third-party thereto, would constitute a breach or other
contravention thereof or in any way adversely affect the rights of
Buyer or Seller or its transferring Subsidiary under such Purchased
Asset. Except for any consents, waivers, authorizations or
approvals the failure of which to obtain would not be material,
Seller shall use its reasonable best efforts to obtain all
necessary consents, waivers, authorizations and approvals of all
Authorities and of all other Persons reasonably required in
connection with the execution, delivery and performance by it of
this Agreement (each a "Consent" and, collectively the "Consents"),
including but not limited to, consents to assign the contracts,
agreements and commitments included in the Purchased Assets.
If any Consent is not obtained, or if an attempted assignment
thereof would be ineffective or would adversely affect the rights
of Seller or a transferring Subsidiary so that the Buyer would not
in fact receive all such rights or Seller or the transferring
Subsidiary would forfeit or otherwise substantially lose the
benefit of rights which Seller or its Subsidiary are entitled to
retain, Seller shall provide an arrangement reasonably acceptable
to Buyer under which the Buyer would obtain the benefits and assume
the obligations thereunder in accordance with this Agreement,
including subcontracting, sublicensing, or subleasing to the Buyer
or under which Seller or its transferring Subsidiary would enforce
(at Buyer's expense) for the benefit of Buyer with Buyer assuming
the obligations of Seller or its transferring Subsidiary, as the
case may be, and all rights against a third-party thereto. Seller
or its transferring Subsidiary will promptly pay to Buyer when
received all monies received under any such Purchased Asset or any
claim or right or any benefit arising thereunder. Buyer shall use
its reasonable efforts to obtain the unconditional release of
Seller or its transferring Subsidiary, as the case may be, from any
obligation or liability under or with respect to any contract being
assigned hereunder; provided that, neither Buyer nor Seller shall
be required to make payment or agree to any material undertaking in
connection therewith.
Year 2000 Compliance Program. Sellers shall continue to
implement through the Closing Date, in accordance with the CapX
Plan, its existing program with respect to Year 2000 compliance in
connection with the Business, with such adjustments and additional
expenditures as may be necessary to prevent the representation in
Section 5.21 from becoming untrue.
Transitional Services. For a period of up to six months
following the Closing: Sellers shall provide, or cause to be
provided, information systems services on an as needed basis in
connection with the Business or the Purchased Assets, including
billing, receivables collection, payroll, and process control
services, and Buyer shall have access to and the right to use
certain office space, equipment, information systems, software,
databases and related fixed assets to the extent used in connection
with the Business prior to the Closing as set forth in Schedule
7.16, to facilitate the orderly separation and transfer of the
Business, Purchased Assets and Transferred Employees with minimal
business disruption; provided, that Seller shall not be required to
act in contravention or violation of any order, consent, judgment,
decree or other binding determination of law enjoining or
restricting Seller from providing such services or use. Buyer
shall reimburse Seller on a monthly basis for any and all costs and
expenses, including internal costs and expenses consistent with the
historical rates reflected in the Income Statements, incurred by
Seller in providing such services to Buyer.
Capital Expenditures.
From the date hereof until the Closing Date, Seller shall expend
the funds described in the capital expenditures plan previously
provided to Buyer and set forth on Annex A (the "CapX Plan") for
the purposes and in accordance with the timetable reflected
therein.
From the date hereof until the Closing Date, Seller shall perform
all work and pay any related costs and expenses necessary to pursue
completion of the Phase I Cluster Remediation in accordance with
the spending plan set forth in Annex B. From and after the Closing
Date, Buyer shall assume performance of work and payment of any
related costs and expenses, for the Phase I Cluster Remediation,
and shall continue such performance and payments in accordance with
the spending plan set forth in Annex B and until such time as
substantial compliance with the objectives of the Phase I Cluster
Remediation has been verified by third party testing (such payments
in the aggregate, the "Westvaco Cluster Remediation Costs");
provided, however, that Westvaco Cluster Remediation Costs shall
not include expenditures authorized by Seller or Buyer after the
Closing outside of the scope of work set forth in the Phase I
Cluster Remediation. Buyer shall diligently pursue such completion
of the Phase I Cluster Remediation. If the Westvaco Cluster
Remediation Costs are less than $15,000,000, Buyer shall promptly
pay to (or as directed by) Seller, the amount of the difference.
If the Westvaco Cluster Remediation Costs are more than
$15,000,000, Seller shall promptly pay to (or as directed by)
Buyer, the amount of the difference. Any such payment pursuant to
this Section 7.17(b) shall be made at a mutually convenient time
and place within five Business Days after finalization of the
Westvaco Cluster Remediation Costs. Any payments pursuant to this
Section 7.17(b) shall be made by causing such payments to be
credited in immediately available funds to such bank account or
accounts as may be designated by the receiving party in writing not
less than two Business Days prior to transfer.
Temple-Inland Canal.
At the Closing, (i) Sellers shall grant and convey to Buyer and its
Affiliates and their respective successors and assigns access
rights across the real property of Sellers, including any
structures, improvements, bridges, roads, streets, appurtenances
and access ways thereof, and the benefit of all rights-of-way,
easements, encroachments, and other real property interests
belonging to Sellers across the real property of third parties, as
are necessary to provide Buyer with substantially the same rights
of access to the Temple-Inland Canal as currently exercised by
Seller; and (ii) Seller will retain from its conveyance of the
Temple-Inland Canal Fee Lands access rights across the Temple-
Inland Canal, including any structures, improvements, bridges,
roads, streets, appurtenances and access ways thereof, as are
necessary to provide Sellers with rights of access to Sellers' real
property adjacent to the Temple-Inland Canal for purposes of timber
management, harvesting, fire protection and other timberlands
operations.
The access rights described in Section 7.17(a) to be granted by
Sellers to Buyer at the Closing will be subject to Buyer's
agreement that Buyer will not damage or remove timber from the real
property of Seller, will repair any damage to roads or other
property on the real property of Seller, will not interfere with
Seller's use of its real property, and will defend and indemnify
Seller for property damage or personal injuries occurring on
Seller's real property as a result of the actions of Buyer. The
access rights described in Section 7.17(a) to be retained by
Sellers at the Closing will be subject to Seller's agreement that
Seller will not damage or remove timber from the real property
transferred to Buyer, will repair any damage to roads or other
property on the real property transferred to Buyer, will not
interfere with Buyer's use of the real property transferred to it,
and will defend and indemnify Buyer for property damage or personal
injuries occurring on the real property transferred to Buyer as a
result of the actions of Seller.
If upon the advice of counsel, Buyer determines to restrict public
access to Temple-Inland Canal, Sellers shall grant and convey to
Buyer and its Affiliates such access rights across the real
property of Sellers, including any structures, improvements,
bridges, roads, streets, appurtenances and access ways thereof, and
the benefit of such rights-of-way, easements, encroachments, and
other real property interests belonging to Sellers across the real
property of third parties, as are necessary to permit Buyer to
erect reasonable barriers to public access to the Temple-Inland
Canal, subject to the same limitations and indemnity provisions set
forth in the first sentence of subsection 7.18 (b).
For a period of four years following the Closing Date, Seller and
Temple-Inland Parent will cooperate with and assist Buyer in
connection with any government evaluation of a project involving
construction of a dam on the lower Neches River. In the event a
dam is approved for construction at a site (i) downstream from the
discharge point of the Temple-Inland Canal into the Neches River,
or (ii) upstream from such discharge point within sufficient
proximity to adversely impact the Temple-Inland Canal's lagoon,
Seller agrees to share equally the costs and expenses incurred by
Buyer resulting from such location of the dam provided that
Seller's share of such costs and expenses shall in no event exceed
TWO-MILLION DOLLARS ($2,000,000) in the aggregate, such payments to
be made within 10 days after receipt of a written demand
accompanied by reasonable substantiation.
Bulk Sales Waiver. The Selling Entities and Buyer hereby
waive compliance with the provisions of any applicable bulk
transfer laws. The Selling Entities further agree to indemnify and
hold Buyer harmless from all claims made by Sellers' creditors and
all Liabilities and expenses (including reasonable attorneys' fees
and disbursements, including those related to the enforcement of
this indemnity) with respect to non-compliance with any bulk
transfer law.
Product Liability Claims. Subject to the limitations
contained in this Section 7.20, effective upon the Closing, product
liability claims under $100,000 for products manufactured by Seller
shall be paid by Buyer. Buyer shall have the sole right to defend,
negotiate or settle all such product liability claims including
undertaking appeals and reviews. Product liability claims of
$100,000 or more for products manufactured by Seller shall be paid
100% by Seller. Seller shall have the sole right to defend,
negotiate or settle all such product liability claims including
undertaking appeals and reviews.
Other. As soon as practicable, but in any event prior to the
Closing, the income statements attached hereto as Schedule 5.8(b)
as of the date hereof will be replaced by one Income Statement,
prepared by Seller and agreed to by Buyer (which agreement will not
be unreasonably withheld) that reflects the combined results of
operation of the Business to be transferred to the Buyer, rather
than the results of operation of the subsidiaries named in those
income statements that are attached hereto as Schedule 5.8(b) as of
the date hereof (which income statements reflect the operational
impact of certain assets that will be Excluded Assets and certain
liabilities that will be Excluded Liabilities).
ARTICLE VIII
BUSINESS EMPLOYEE AND EMPLOYEE BENEFIT
MATTERS
Employment of Seller's Employees. (a) Immediately prior to
the Closing Date, Buyer shall offer employment effective as of the
Closing Date to all employees of Sellers who are, on the Closing
Date, employed principally in the Business ("Business Employees")
other than Inactive Employees and the Business Employees that
Buyer, in its discretion causes to be set forth in Schedule 8.1 at
any time prior to the Closing Date; provided, however, that any
Inactive Employee may be offered employment by Buyer in its
discretion upon such Inactive Employee's availability to return to
active service; and provided, further, that Buyer shall offer
employment to any Inactive Employee who has, on the Closing Date, a
legal right to return to work at the conclusion of his or her leave
under applicable workers' compensation laws, the Family Medical
Leave Act or the Americans with Disabilities Act, if such Inactive
Employee in fact exercises such right to return to work and is able
and willing to do so. Each offer of employment to a Business
Employee shall be at such base salary or commission rate and on
such other terms and conditions as Buyer may determine in its
reasonable discretion. All Business Employees who accept offers of
employment with Buyer shall hereafter be referred to as
"Transferred Employees," and the "Hire Date" for a Transferred
Employee means (i) in the case of an Inactive Employee, the date he
or she actually returns to active service with Buyer, and (ii) in
the case of all other Transferred Employees, the Closing Date.
"Inactive Employees" shall mean all Business Employees who are, on
the Closing Date, temporarily absent from active employment by
reason of disability, illness, injury, or workers' compensation and
who are receiving or eligible to receive disability or workers'
compensation payments as a result of such disability, illness or
injury, and employees on non-compensated leave of absences, such as
pursuant to the terms of the Family Medical Leave Act.
Certain Compensation Liabilities. Effective as of the
applicable Hire Date, Buyer shall assume the liability of Sellers
in respect of the Transferred Employees for accrued and unpaid
salaries, wages and vacation and sick pay, but only to the extent
such liability is reflected on the Closing Working Capital.
Sellers shall remain responsible for payment of any and all
retention, change in control or other similar compensation or
benefits which are or may become payable to Business Employees in
connection with the consummation of the transactions contemplated
by this Agreement. Sellers shall remain responsible for, and shall
pay, all bonuses, incentive compensation and commissions that are
earned by Transferred Employees under Employee Plans (collectively,
the "Bonuses"); provided, that if any Transferred Employee would
forfeit his or her right to receive any Bonus by reason of the
termination of his or her employment with Sellers in connection
with the consummation of the transactions contemplated hereby, such
Transferred Employee shall be entitled to receive from Sellers not
less than a percentage of such Bonus determined by dividing (i) the
number of days in the year or other period to which such Bonus
relates that precede the Closing Date by (ii) the total number of
days in such year or other period.
Severance Costs. Seller shall remain solely responsible for
any and all Liabilities relating to or arising out of the
following: (i) any pay, benefits, damages or other Claims to, by
or on behalf of Business Employees who are not Transferred
Employees, including without limitation involving compensation or
benefits or otherwise arising out of employment or the termination
of employment, and whether incurred before, on or after the Closing
Date, and including without limitation pursuant to the individual
agreements listed in Section 5.16(a) of the Disclosure Schedule
(ii) any benefits, damages or other Claims to, by or on behalf of
any Transferred Employee, including without limitation involving
compensation or benefits or otherwise arising out of employment or
the termination of employment, incurred before or on the applicable
Hire Date, except as specifically provided otherwise elsewhere in
this Article VIII; and (iii) any severance pay and severance
benefits payable to any Transferred Employee or Business Employee
listed on Schedule 8.1 under the circumstances set forth in
Schedule 8.3 (the "Retained Severance"); provided, that with
respect to Transferred Employees, Buyer shall pay the Retained
Severance as and when it becomes due, and Seller shall reimburse
Buyer therefor promptly upon receiving invoices from Buyer.
Seller's liabilities under this Section 8.3 shall not include any
Liability for any suits, actions or claims against Buyer based on
violations of any constitutional right, age discrimination or any
other form of hiring or employment discrimination, under every
applicable federal, state or local law, rule or regulation,
including any and all state antidiscrimination laws, the Age
Discrimination in Employment Act of 1967, as amended, Title VII of
the Civil Rights Act of 1964, as amended, the Civil Rights Act of
1991, and the Americans With Disabilities Act.
Welfare Benefits. Seller shall be responsible for claims for
workers compensation and welfare benefits (as described in Section
3(1) of ERISA (whether or not covered by ERISA, but excluding
severance pay) ("Welfare Benefits") that are incurred on or prior
to 8:00 a.m. local time on the applicable Hire Date by Transferred
Employees, including without limitation pursuant to continuation of
health coverage required pursuant to Section 4980B of the Code or
Part 6 of Subtitle B of Title I of ERISA ("COBRA Coverage") with
respect to any Transferred Employees and their beneficiaries and
dependents. Buyer shall be solely responsible for claims for
workers compensation benefits and Welfare Benefits for Transferred
Employees for claims incurred after 8:00 a.m. local time on the
applicable Hire Date, including without limitation pursuant to
COBRA Coverage with respect to Transferred Employees and their
beneficiaries and dependents. For purposes of the foregoing, a
medical/dental claim shall be considered incurred when the medical
services are rendered or medical supplies are provided, and not
when the condition arose. A disability or workers compensation
claim shall be considered incurred on or prior to the applicable
Hire Date if the injury or condition giving rise to the claim
occurs on or prior to the applicable Hire Date, but only if such
claim is actually filed on or before the first anniversary of the
applicable Hire Date.
Pension and Savings Benefits.
Seller shall cause all accrued benefits of Transferred Employees
under all Employee Plans that are "pension plans" within the
meaning of Section 3(3) of ERISA (whether or not such Employee
Plans are subject to ERISA) to be vested in full immediately before
the applicable Hire Date.
To the extent that a Transferred Employee who participates in
Temple-Inland Employee Thrift Plan and the Temple-Inland Savings
Plan for Union Employees (the "Seller Savings Plans") is permitted,
immediately after the Closing, to participate in a tax-qualified
defined contribution plan of Buyer or any of its Affiliates (such
plan(s), the "Buyer Savings Plans"), Seller shall cause the
applicable Seller Savings Plan to offer distributions of all such
account balances as soon as practicable after the Closing. The
Buyer Savings Plans shall accept direct or indirect rollovers of
any such distributions from the Seller Savings Plans, and Seller
and Buyer shall cooperate to ensure that direct rollovers in kind
of participant loans are permitted.
Benefits Generally. For purposes of eligibility to
participate and vesting of benefits under the employee benefit
plans of Buyer and its Affiliates providing benefits after a
Transferred Employee's Hire Date, such Transferred Employee shall
be credited with his or her years of service with Seller and its
Affiliates before such Hire Date, to the same extent as such
Transferred Employee was entitled, before such Hire Date, to
vesting credit for such service under any similar Employee Plans.
In addition, and without limiting the generality of the foregoing:
(i) each Transferred Employee shall be immediately eligible to
participate, without any waiting time, in any and all employee
benefit plans sponsored by Buyer and its Affiliates for the benefit
of Transferred Employees (such plans, collectively, the "New
Plans") to the extent coverage under such New Plan replaces
coverage under a comparable Employee Plan in which such Transferred
Employee participated immediately before such Hire Date (such
plans, collectively, the "Old Plans"); and (ii) for purposes of
each New Plan providing medical, dental, pharmaceutical and/or
vision benefits to any Transferred Employee, Buyer shall cause all
pre-existing condition exclusions and actively-at-work requirements
of such New Plan to be waived for such Transferred Employee and his
or her covered dependents, and Buyer shall cause any eligible
expenses incurred by such Transferred Employee and his or her
covered dependents during the portion of the plan year of the Old
Plan ending on the date such Transferred Employee's participation
in the corresponding New Plan begins to be taken into account under
such New Plan for purposes of satisfying all deductible,
coinsurance and maximum out-of-pocket requirements applicable to
such employee and his or her covered dependents for the applicable
plan year as if such amounts had been paid in accordance with such
New Plan.
Plant Closing Laws. Seller shall be responsible for providing
any notice required, pursuant to the United States Federal Worker
Adjustment and Retraining Act of 1988, as amended ("WARN Act"), any
successor United States federal law, and any applicable plant
closing notification law with respect to a layoff or plant closing
relating to the Business that occurs before or as a result of the
Closing. Buyer shall cooperate with Seller, to the extent
practicable, to enable Seller to comply with the foregoing in
advance of the Closing to the extent made necessary by the actions
contemplated by Section 8.1 hereof. Buyer shall be responsible for
providing any notice required pursuant to the Plant Closing Laws
with respect to a layoff or plant closing affecting Transferred
Employees that occurs after the Closing.
Miscellaneous. Seller and Buyer agree to furnish each other
with such information concerning Business Employees and the
Employee Plans, and to take all such other reasonable action, as is
necessary and appropriate to effect the transactions contemplated
by this Article VIII, in each case, to the extent permitted under
applicable law.
Employee Records. Buyer shall be responsible for, and
indemnify Seller against any Losses arising out of, claims made by
Transferred Employees arising as a result of, and to the extent
such claims relate to, the transfer from Sellers to Buyer of
records described in Section 2.1(n).
ARTICLE IX
TAX MATTERS
Tax Sharing and Allocation Agreements. As of the Closing
Date, any Tax sharing or allocation agreement between Temple-Inland
Parent, Seller and any of their Subsidiaries on the one hand and
the Purchased Subsidiaries on the other hand is terminated with
respect to the Purchased Subsidiaries and will have no further
effect with respect to the Purchased Subsidiaries for any taxable
year (whether the current year, a future year, or a past year).
Survival of Certain Representations. All of the
representations and warranties of the Sellers contained in Section
5.24 shall survive the Closing hereunder and continue in full force
and effect until 30 days after the expiration of any applicable
statutes of limitations.
Returns for Periods Through the Closing Date. Temple-Inland
Parent will include the income of the Purchased Subsidiaries
(including any deferred income triggered into income by Section
1.1502-13 and Section 1.1502-14 of the Treasury Regulations and any
excess loss accounts taken into income under Section 1.1502-19 of
the Treasury Regulations) on the Temple-Inland Parent consolidated
federal income Tax Returns and on any other consolidated, unitary
and combined Tax Returns consistent with past practice for all
periods through the Closing Date and will pay any Taxes
attributable to such income. The Purchased Subsidiaries will
furnish Tax information to Temple-Inland Parent for inclusion in
Temple-Inland Parent's Tax Returns for the period which includes
the Closing Date in accordance with the Purchased Subsidiaries'
past custom and practice. Temple-Inland Parent will allow the
Buyer an opportunity to review and comment upon such Tax Returns
(including any amended returns) to the extent that they relate to a
Purchased Subsidiary and a jurisdiction in which no Section
338(h)(10) Election pursuant to this Agreement was made or
recognized. Temple-Inland Parent will take no position on such Tax
Returns that relates to the Purchased Subsidiaries that would
adversely affect Purchased Subsidiaries after the Closing Date.
The income of Purchased Subsidiaries will be apportioned to the
period up to and including the Closing Date and the period after
the Closing Date in accordance with Section 9.12.
Audits. Temple-Inland Parent will allow Purchased
Subsidiaries and its counsel to participate at its own expense in
any audits of Temple-Inland Parent consolidated federal income Tax
Returns and any other consolidated, unitary and combined Tax
Returns to the extent that such Tax Returns relate to the Purchased
Subsidiaries and adversely affect Purchased Subsidiaries after the
Closing Date. Temple-Inland Parent will not settle any such audit
in a manner which would adversely affect the Purchased Subsidiaries
after the Closing Date without the prior written consent of the
Buyer, which consent shall not unreasonably be withheld.
Carrybacks and Refunds. (a) As soon as reasonably
practicable, Temple-Inland Parent will pay to the Buyer any Tax
refund (or reduction in Tax liability) resulting from a carryback
of a post-acquisition Tax attribute of any of the Purchased
Subsidiaries into a consolidated, combined or unitary group that
includes a Temple-Inland Party, when such refund is received or
reduction is actually realized by a Temple-Inland Party. A
carryback of post-acquisition Tax attributes of a Purchased
Subsidiary is considered to produce a refund (or a reduction of a
Tax liability) only after all Tax attributes of Temple-Inland
Parent and its Subsidiaries have been used or deemed used. Temple-
Inland Parent will cooperate with the Purchased Subsidiaries and
its Subsidiaries in obtaining such refunds (or reduction in Tax
liability), including through the filing of amended Tax Returns or
refund claims. Buyer agrees to indemnify Temple-Inland Parent for
any Taxes resulting from the disallowance of such post-acquisition
Tax attribute on audit or otherwise.
(b) Except as provided in (a) hereof and except for any
refunds (or credits) that result from a carryback of post-
acquisition Tax attributes of a Purchased Subsidiary, any Tax
refunds that are received by Buyer or the Purchased Subsidiaries
(and an amount equal to any actual reduction in the Tax liability
of a Purchased Subsidiary in a Pre-Closing Period that results from
the use of a credit) that relate to a Pre-Closing Period of a
Purchased Subsidiary shall be for the account of Seller, and Buyer
shall pay over to Seller any such refund or the amount of any such
credit within fifteen days after receipt thereof and shall pay to
Seller the actual reduction in Tax liability that resulted from the
use of the credit within fifteen days after the date on which the
benefit of the credit is actually realized. In determining whether
a credit with respect to a Pre-Closing Period results in an actual
reduction of the Tax liability of Purchased Subsidiary for a Pre-
Closing, and whether a refund or credit is the result of a
carryback of a post-acquisition Tax attribute of a Purchased
Subsidiary, all Tax attributes of Buyer and its Subsidiaries shall
be treated as being used or deemed used first. In addition, to the
extent that a claim for refund or a proceeding results in a payment
or credit against a Tax by a Taxing Authority to the Buyer or the
Purchased Subsidiaries of any amount reflected in the reserve for
Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax
income) shown on the Final Closing Working Capital, the Buyer shall
pay such amount to Seller within fifteen days after receipt thereof
and to the extent such payment or credit was shown on the Final
Working Capital as an asset, it shall be retained by the Buyer.
Section 338(h)(10) Election. Temple-Inland Parent will join
with the Buyer in making an election under Section 338(h)(10) of
the Code (and any corresponding elections under state or local tax
law) (each, a "Section 338(h)(10) Election") with respect to the
purchase and sale of the stock of each of the Purchased
Subsidiaries hereunder. Temple-Inland Parent will pay any and all
Taxes attributable to the making of the Section 338(h)(10) Election
and will indemnify each Westvaco Party and the Purchased
Subsidiaries against any Adverse Consequences arising out of any
failure to pay such Taxes. Temple-Inland Parent will also pay any
state or local Tax (and indemnify each Westvaco Party and
Purchased Subsidiaries against any Adverse Consequences arising out
of any failure to pay such Tax) attributable to an election under
state or local law similar to the election available under Section
338(g) of the Code (or which results from the making of an election
under Section 338(g) of the Code) with respect to the purchase and
sale of the stock of one or both of the Purchased Subsidiaries
hereunder. Each of Temple-Inland Parent and Buyer will, and will
cause their respective Subsidiaries and Affiliates to, treat each
Section 338(h)(10) Election as valid, not take any action
inconsistent with such treatment and file all Tax Returns in a
manner consistent with the Section 338(h)(10) Election. As
requested from time to time (whether before, at or after the
Closing), Temple-Inland Parent and Buyer shall assist one another
in, and shall provide (or cause to be provided) to one another such
information as is reasonably requested in connection with, the
preparation of any form or document required to effect a valid and
timely Section 338(h)(10) Election, including any schedules or
attachments thereto (collectively, "Section 338 Forms").
Allocation of Purchase Price for Purchased Subsidiaries Assets.
Sellers and Buyer agree that the portion of the Purchase Price
allocated to the stock of Purchased Subsidiaries pursuant to
Section 2.7 shall be further allocated in the manner described in
this Section. With respect to the Section 338(h)(10) Election (or
similar state or local election) Buyer and Seller shall agree on
the MADSP and (ii) the allocation of MADSP among the assets of each
of the Purchased Subsidiaries for which a Section 338(h)(10) is
being made (collectively, the "Election Allocations"). The
Election Allocations shall be reasonable and shall be determined in
accordance with Section 338 of the Code and the applicable Treasury
regulations thereunder. At least 120 days prior to the latest date
for the filing of each Section 338 Form, Seller shall prepare and
submit to Buyer a draft of such Section 338 Form setting forth the
Election Allocations. Neither Buyer nor Seller shall file, or
permit to be filed, any Section 338 Form unless it shall have
obtained the consent of the other, which consent shall not be
unreasonably withheld or delayed. On or prior to the thirtieth day
after Buyer's receipt of a draft Section 338 Form, Buyer shall
either (i) consent to the filing of the Section 338 Form or
(ii) notify Seller that it disagrees with the Election Allocations
as set forth on the draft Section 338 Form or other matters
contained in the draft Section 338 Form. If Buyer and Seller have
been unable to resolve their differences within 30 days after Buyer
has been notified of Seller's disagreement with the Election
Allocations or other matters as set forth on the draft Section 338
Form, then any remaining disputed issues shall be submitted to a
mutually agreed upon independent national accounting firm to
resolve in a final binding manner after hearing the views of both
Parties. The fees and expenses of the mutually agreed upon
independent national accounting firm shall be shared equally
between Buyer and Seller. Except as may be required by law,
Seller, Temple-Inland Parent and Buyer will (i) file, or cause to
be filed, all Tax Returns in a manner consistent with the Election
Allocations and (ii) not take any action inconsistent therewith.
Tax Periods Ending on or Before the Closing Date. Buyer shall
prepare or cause to be prepared and file or cause to be filed all
Tax Returns for the Purchased Subsidiaries for all taxable periods
ending on or prior to the Closing Date which are filed after the
Closing Date other than income Tax Returns with respect to taxable
periods for which a consolidated, unitary or combined income Tax
Return of Temple-Inland Parent (or any of its Subsidiaries other
than the Purchased Subsidiaries) will include the operations of the
Purchased Subsidiaries pursuant to Section 9.3. Buyer shall permit
Seller to review and comment on each such Tax Return described in
the preceding sentence prior to filing. Seller shall pay to Buyer
(or cause to be paid to Buyer) an amount equal to the total of all
Taxes of the Purchased Subsidiaries shown to be due on such Tax
Returns no later than the due date for payment of such Taxes to the
extent such Taxes are not reflected in the reserve for Tax
liability (rather than any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) shown on
the Final Closing Working Capital.
Tax Periods Beginning Before and Ending after the Closing Date.
Buyer shall prepare or cause to be prepared and file or cause to
be filed any Tax Returns of the Purchased Subsidiaries for a
taxable period which begin on or before the Closing Date and ends
after the Closing Date (such a taxable period, a "Straddle
Period"). Buyer shall permit Seller to review and comment on each
such Tax Return described in the preceding sentence prior to
filing. Seller shall pay (or cause to be paid) to Buyer an amount
equal to the portion of such Taxes which are allocated to the
portion of such Taxable period ending on the Closing Date no later
than the due date for payment of such Taxes to the extent such
Taxes are not reflected in the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the Final Closing
Working Capital.
Cooperation on Tax Matters.
Buyer, Purchased Subsidiaries, Temple-Inland Parent and Sellers
shall cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the filing of Tax Returns
pursuant to this Article and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include
the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder.
Purchased Subsidiaries, Temple-Inland Parent and Sellers agree (A)
to retain all books and records with respect to Tax matters
pertinent to the Purchased Subsidiaries relating to any taxable
period beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified by Buyer or
Sellers, any extensions thereof) of the respective taxable periods,
and to abide by all record retention agreements entered into with
any Taxing Authority, and (B) to give the other party reasonable
written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, the
Purchased Subsidiaries, Temple-Inland Parent or Sellers, as the
case may be, shall allow the other party to take possession of such
books and records.
Buyer, Temple-Inland Parent and Sellers further agree, upon
request, to use their best efforts to obtain any certificate or
other document from any Authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be
imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
Buyer, Temple-Inland Parent and Sellers further agree, upon
request, to provide the other party with all information that
either party may be required to report pursuant to Section 6043 of
the Code and all Treasury Department Regulations promulgated
thereunder.
Tax Indemnification.
From and after the Closing Date, Sellers shall pay or cause to be
paid, and jointly and severally shall indemnify each Buyer Tax
Indemnitee and protect, save and hold each Buyer Tax Indemnitee
harmless from and against any Adverse Consequences resulting from,
arising out of, relating to, in the nature of, or caused by:
any Tax imposed upon or relating to any Temple-Inland Party for any
period (whether before or after the Closing Date), including any
such Tax for which a Westvaco Party or a Purchased Subsidiary may
be liable (w) under Section 1.1502-6 of the Treasury regulations
(or any similar provision of state, local or foreign law), (x) as a
transferee or successor, (y) by contract or (z) otherwise, to the
extent such Tax is not reflected in the reserve for income Tax
liability (rather than any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) shown on
the Final Closing Working Capital;
any Tax (other than those Taxes described in Section 9.11(a)(i))
imposed upon or relating to any Purchased Subsidiary, the Business
or any Business Asset for (x) any Pre-Closing Period and (y) any
actions or transactions undertaken by Temple-Inland Parent or
Seller not in the ordinary course of business occurring on the
Closing Date after the Closing; and
any Tax (other than the Taxes described in Section 9.11(a)(i) and
(a)(ii)) resulting from a breach of any representation contained in
Section 5.24 provided that Buyer makes a written claim for
indemnification against any of the Sellers pursuant to Section 15.1
within the survival period contained in Section 9.2.
From and after the Closing Date, Buyer shall pay or cause to be
paid, and jointly and severally shall indemnify each Seller Tax
Indemnitee and protect, save and hold each Seller Tax Indemnitee
harmless from and against Adverse Consequences relating to, except
as provided in Section 9.11(a), any Tax imposed upon or relating to
the Purchased Subsidiaries for any Post-Closing Period.
Buyer agrees to indemnify Sellers for any Adverse Consequences the
Sellers shall suffer resulting from any additional Tax imposed upon
Sellers resulting from any actions or transactions undertaken by
Buyer or any of the Purchased Subsidiaries not in the ordinary
course of business occurring on the Closing Date after Buyer's
purchase of the stock of the Purchased Subsidiaries.
Payment in full of any amount due from Sellers or Buyer under this
Section 9.11 shall be made by such Person to the affected Tax
Indemnitee in immediately available funds at least two Business
Days before the date payment of the Taxes to which such payment
relates is due, or, if no Tax is payable, within fifteen days after
written demand is made for such payment.
Allocation of Certain Taxes.
If a Purchased Subsidiary is permitted but not required under
applicable state, local or foreign income tax laws to treat the
Closing Date as the last day of a taxable period, then the parties
shall cause such Purchased Subsidiary to treat that day as the last
day of a taxable period.
In the case of Taxes arising in a taxable period of a Purchased
Subsidiary that includes but does not end on the Closing Date,
except as provided in Section 9.12(c), the allocation of such Taxes
between the Pre-Closing Period and the Post-Closing Period shall be
made on the basis of an interim closing of the books as of the end
of the Closing Date. For the avoidance of doubt, for purposes of
this Article IX, any Tax on gain or income resulting from the
triggering into income of deferred intercompany transactions under
Section 1.1502-13 of the Treasury regulations or excess loss
accounts under Section 1.1502-19 of the Treasury regulations is
attributable to the Pre-Closing Period. Any credits relating to a
Taxable period that begins before and ends after the Closing Date
shall be taken into account as though the relevant Taxable period
ended on the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner
consistent with prior practice of the Purchased Subsidiary. Buyer
assumes all property Taxes resulting from the change in use or
ownership of the Temple-Inland Canal Fee Lands after the Closing
Date or on the Closing Date after the Closing.
In the case of (i) franchise Taxes based on capitalization, debt or
shares of stock authorized, issued or outstanding and (ii) ad
valorem Taxes, in either case attributable to any taxable period
that includes but does not end on the Closing Date, the portion of
such Taxes attributable to the Pre-Closing Period shall be the
amount of such Taxes for the entire taxable period, multiplied by a
fraction the numerator of which is the number of calendar days in
such taxable period ending on and including the Closing Date and
the denominator of which is the entire number of calendar days in
such taxable period, and the balance of such Taxes shall be
attributable to the Post-Closing Period; provided, however, that if
any property, asset or other right of Purchased Subsidiaries is
sold or otherwise transferred prior to the Closing Date, then ad
valorem Taxes pertaining to such property, asset or other right
shall be attributed entirely to the Pre-Closing Period.
Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including penalties and
interest) incurred in connection with this Agreement shall be paid
by Buyer when due, and Buyer will, at its own expense, file all
necessary Tax Returns and other documentation with respect to such
transfer, documentary, sales, use, stamp, registration and other
such Taxes and fees, and, if required by applicable law, Seller
will, and will cause its Affiliates to, join in the execution of
such Tax Returns and other documentation.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions
contemplated by this Agreement shall be subject, to the extent not
waived, to the satisfaction of each of the following conditions
before or at the Closing:
Representations and Warranties. The representations and
warranties of Seller and the Subs contained in this Agreement shall
be true and correct without giving effect to any materiality
qualification contained therein or applicable thereto, except as
would not in the aggregate have a Business Material Adverse Effect,
in each case at and as of the date of this Agreement and as of the
Closing, provided that representations and warranties made as of a
specified date need be so true and correct (as described above)
only as of the specified date.
Performance of this Agreement. Seller and the Subs shall have
performed, or caused to be performed, in all material respects all
obligations and complied in all material respects with all
conditions required by this Agreement to be performed or complied
with by Seller or the Subs prior to the Closing, to the extent not
waived.
Proceedings. All corporate and other proceedings to be taken
by Sellers in connection with the transactions contemplated hereby
shall have been completed, all such proceedings and all documents
incident thereto shall be reasonably satisfactory in substance and
form to Buyer and Buyer shall have received all such counterpart
originals or certified or other copies of such documents as Buyer
may reasonably request.
Consents and Approvals. All Consents shall have been obtained
by Sellers and all waiting periods specified by law with respect
thereto shall have passed, other than any such consents,
authorizations, orders or approvals for which, collectively, the
failure to so obtain would not have a Business Material Adverse
Effect.
Injunction, Litigation, etc. No order of any court or
administrative agency shall be in effect which restrains or
prohibits the consummation of the transactions contemplated hereby,
nor shall there be any statute, rule, or regulation, or pending by
or before any Authority any action or proceeding, which is likely
to prohibit, restrict or successfully challenge the validity of any
of the transactions contemplated by this Agreement.
Fiber Supply Agreement. Seller shall have executed and
delivered the Fiber Supply Agreement and the representations and
warranties of Seller contained therein shall be true and complete
in all material respects as of the Closing Date.
Officer's Certificate. Buyer shall have received a
certificate, dated the Closing Date, signed by the Chief Executive
Officer or any Vice President of Seller and each Sub, certifying
that the conditions specified in Sections 10.1 and 10.2 have been
fulfilled.
Memorandum. Seller shall have executed, acknowledged, and
delivered to Buyer the Memorandum (as such term is defined in the
Fiber Supply Agreement), in form and substance satisfactory for
recordation against the Recorded Area in the land records of all
counties in which any portion of the Recorded Area is located.
ARTICLE XI
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller and the Subs to consummate the
transactions contemplated by this Agreement shall be subject, to
the extent not waived, to the satisfaction of each of the following
conditions before or at Closing:
Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and
correct without giving effect to any materiality qualification
contained therein or applicable thereto, except as would not
prevent or materially delay consummation of any of the transactions
contemplated by this Agreement, in each case at and as of the date
of this Agreement and as of the Closing, provided that
representations and warranties made as of a specified date need be
so true and correct (as described above) only as of the specified
date.
Performance of this Agreement. Buyer shall have performed in
all material respects all obligations and complied in all material
respects with all conditions required by this Agreement to be
performed or complied with prior to the Closing, to the extent not
waived.
Proceedings. All corporate and other proceedings to be taken
by Buyer in connection with the transactions contemplated hereby
shall have been completed, all such proceedings and all documents
incident thereto shall be reasonably satisfactory in substance and
form to Seller, and Seller shall have received all such counterpart
originals or other copies of such documents as Seller may
reasonably request.
Consents and Approvals. All consents, authorizations, orders
or approvals of any Authority which Buyer is required to obtain in
order to consummate the transactions contemplated by this Agreement
shall have been obtained by Buyer and all waiting periods specified
by law with respect thereto shall have passed.
Injunction, Litigation, etc. No order of any court or
administrative agency shall be in effect which restrains or
prohibits the consummation of the transactions contemplated hereby,
nor shall there be any statute, rule, or regulation, or pending by
or before any Authority any action or proceeding, which is likely
to prohibit, restrict or successfully challenge the validity of any
of the transactions contemplated by this Agreement.
Fiber Supply Agreement. Buyer shall have executed and
delivered the Fiber Supply Agreement.
Officer's Certificate. Seller shall have received a
certificate, dated the Closing Date, signed by the Chief Executive
Officer or any Vice President of Buyer, certifying that the
conditions specified in Sections 11.1 and 11.2 have been fulfilled.
ARTICLE XII
DELIVERIES, ETC., IN CONNECTION WITH CLOSING
Time and Place of Closing. The closing (the "Closing") shall
occur upon the later of (x) five business days following the
satisfaction of the conditions set forth in Articles X and XI, or
(y) December 29, 1999, at the offices of Wachtell, Lipton, Rosen &
Katz, 51 West 52nd Street, New York, New York, or at the request of
either party, such other date and place as the parties shall agree.
If the Closing takes place, the Closing and all of the transactions
contemplated by this Agreement shall be deemed to have occurred
simultaneously and become effective as of 11:59 P.M. on the date of
Closing. The date on which the Closing shall occur is referred to
herein as the "Closing Date." If the time set forth in subclause
(x) of this Section occurs sooner than the time set forth in
subclause (y), then Buyer shall pay to Seller at the Closing
interest on the Purchase Price for each additional day the Closing
is delayed by the inclusion of subclause (y). The interest to be
paid pursuant to this Section shall be equal to the Prime Rate as
published by The Chase Manhattan Bank. Such interest shall be
payable at the Closing and shall be calculated daily on the basis
of a year of 365 days and the actual number of days for which
interest is due.
Deliveries by Seller. At or before the Closing, Seller shall
deliver to Buyer, as applicable, the following:
duly executed general warranty deeds (or their equivalent in the
state the property is located) in recordable form which convey to
Buyer title to the Real Property, subject only to Permitted
Exceptions and to the exceptions and exclusions contained in the
Title Commitment as of the Closing, other than any Title Defect
which Seller has elected to cure or otherwise delete pursuant to
Section 7.11(b). Seller will provide to Buyer's title insurance
company (i) customary good standing certificates and corporate
authorizations, (ii) owner's affidavits acceptable to such title
insurer to remove any exception for (A) mechanics' or materialmens'
liens and (B) rights of parties in possession, (iii) a gap
indemnity acceptable to such title insurer for insuring over the
"gap" (i.e. the time period from the effective date of the title
company's last checkdown of title to the date of recording of the
deed); and (iv) any other certificates, affidavits, indemnities or
other documents or instruments reasonably requested by Buyer's
title insurance company to insure over any Title Defects existing
as of the Closing which are not Permitted Exceptions or to
otherwise allow Buyer to receive title policies at the Closing in
form reasonably acceptable to Buyer.
a duly executed assignment, in recordable form, from Seller to
Buyer of the Temple-Inland Canal Easement;
duly executed easements, in recordable form and in form reasonably
satisfactory to Buyer and Seller, from Seller granting Buyer the
Water Easements;
a bill of sale and such other document or documents (suitable for
filing, registration or recording, if applicable) as are necessary
to transfer to Buyer the Purchased Assets other than the Real
Property and the Temple-Inland Canal Easement and the Water
Easements;
evidence that all of the proceedings contemplated by Section 10.3
have been completed;
copies of any consents obtained as contemplated by Section 10.4;
certificates from the Secretary of State of the state of Delaware
evidencing the good standing of Seller and its Subsidiaries engaged
in the Business from their state of jurisdiction as of a recent
date;
FIRPTA Certificate;
the Fiber Supply Agreement executed by Seller;
a stock certificate or certificates evidencing the Purchased
Subsidiaries Shares of each Purchased Subsidiary duly endorsed in
blank or accompanied by stock powers duly executed in blank or such
other appropriate transfer document, assignment agreement or deed,
as applicable, all in proper form for transfer, with all required
stock or other transfer tax stamps affixed or provided for;
a good-standing certificate for each Purchased Subsidiary from the
Secretary of State or other appropriate governmental official of
the respective jurisdiction or organization of each Purchased
Subsidiary, dated as of a date not earlier than 10 Business Days
prior to the Closing Date;
the minute books and stock certificate and transfer books (with all
canceled and unused stock certificates attached) and the corporate
seal of each Purchased Subsidiary; and
such additional documents as Buyer may reasonably request.
Deliveries by Buyer. At or before the Closing, Buyer shall
deliver to Seller, as applicable, the following:
the Purchase Price;
a duly executed assumption of the Assumed Liabilities;
evidence that all of the proceedings contemplated by Section 11.3
have been completed;
certificates from the Secretary of State of the state of Delaware
as to the good standing of Buyer (or any Affiliate of Buyer
designated pursuant to Section 2.6) in the state of Delaware as of
a recent date;
the Fiber Supply Agreement duly executed by the Buyer;
evidence of substitute letters of credit as required by Section
7.13; and
such additional documents as Seller may reasonably request.
ARTICLE XIII
INDEMNIFICATION
Indemnification by Seller.
Subject to the limitations contained in this Article XIII,
effective upon the Closing, Seller shall indemnify and hold Buyer
harmless against all Losses arising out of:
any breach of a representation or warranty, determined without
giving effect to any materiality qualification contained therein or
applicable thereto, made by Seller or the Subs in this Agreement;
the breach of any covenant or agreement of any Sellers contained in
this Agreement (but not the Fiber Supply Agreement, or obligations
under Article VIII hereof, which shall stand on their own);
all claims made by Sellers' creditors and all liabilities and
expenses (including reasonable attorneys' fees and disbursements,
including those related to the enforcement of this indemnity) in
any such case with respect to non-compliance with any bulk transfer
law;
any Excluded Liabilities, or the failure of Sellers to discharge
any Excluded Liabilities; or
any Liability, other than the IRB Obligations, of the Purchased
Subsidiaries that is not an Assumed Liability (or would not be an
Assumed Liability if the term "Sellers" were substituted for
"Selling Entities" in Section 2.3).
Notwithstanding the foregoing, in the case of Losses incurred as a
result of the events described in Section 13.1(a)(i), Seller shall
not be liable for indemnification except to the extent that the
aggregate amount of such Losses exceeds $8,000,000 (the "Basket"),
in which event Buyer shall be entitled to indemnification as set
forth above for the amount of such Losses in excess of the Basket.
In no event shall Seller's aggregate obligation to indemnify the
Buyer for Losses incurred as a result of the events described in
Section 13.1(a)(i) exceed $312,500,000. The Basket shall not apply
to Losses under Section 13.1(a)(ii), (iii), (iv) or (v) above.
Indemnification by Buyer.
Subject to the limitations contained in this Article XII, effective
upon the Closing, Buyer shall indemnify and hold Seller harmless
against all Losses arising out of:
any breach of a representation or warranty, determined without
giving effect to any materiality qualification contained therein,
made by Buyer in this Agreement;
the breach of any covenant or agreement of Buyer contained in this
Agreement (but not the Fiber Supply Agreement, or obligations under
Article VIII hereof, which shall stand on their own);
any Assumed Liability or the failure by Buyer to discharge any
Assumed Liability; or
the IRB Obligations.
Notwithstanding the foregoing, in the case of Losses incurred as a
result of the events described in Section 13.2(a)(i), Buyer shall
not be liable for indemnification except to the extent that the
aggregate amount of such Losses exceeds the Basket, in which event
Seller shall be entitled to indemnification as set forth above for
the amount of such Losses in excess of the Basket. In no event
shall Buyer's aggregate obligation to indemnify the Sellers for
Losses incurred as a result of the events described in Section
13.2(a)(i) exceed $312,500,000. The Basket shall not apply to
Losses under Section 13.2(a)(ii), (iii) or (iv) above.
Article VIII Rights and Obligations and Certain Product Liability
and Employee Claims Excluded. The rights and obligations of
Seller and Buyer under Article VIII hereof shall not be subject to
the Basket, or any other provisions of this Article XIII, but shall
apply separately in accordance with their terms. The provisions of
this Article XIII shall not apply to employee claims of the type
described in Section 8.9, which shall be subject solely to the
terms of Section 8.9. The provisions of this Article XIII shall
not apply to product liability claims under $100,000 for products
manufactured by Seller, which shall be subject solely to the terms
of Section 7.20.
Survival Date.
The indemnification obligations of each party (the "Indemnitor")
obligated to provide indemnification to the other (the
"Indemnitee") under Section 13.1(a)(i) and (iii) or Section
13.2(a)(i) shall lapse and become of no further force and effect
with respect to all claims not made by Indemnitee's delivery to the
Indemnitor of written notice containing details reasonably
sufficient to disclose to Indemnitor the nature and scope of the
claim by the end of the 18th month after the Closing, except with
respect to claims for breach of the representations and warranties
contained in Section 5.6 which shall survive without limitation as
to time.
The indemnification obligations under Sections 13.1(a)(ii), (iv)
and (v) and Sections 13.2(a)(ii) and (iii) shall not be limited by
time, but shall survive in accordance with the terms of the
underlying obligations or liabilities to which they relate.
Third-Party Claims.
Each of the parties must follow the procedures set forth in the
following paragraphs of this Section 13.5 in order to be entitled
to indemnification with respect to claims resulting from the
assertion of liability by persons or entities not parties to this
Agreement, including claims by any Authority for penalties, fines
and assessments.
The party seeking indemnification shall give written notice to the
party from whom indemnification is sought of any assertion of
liability by a third-party which might give rise to a claim by the
indemnified party against the indemnifying party based on the
indemnity agreements contained in this Agreement, stating the
nature and basis of the assertion and the amount thereof, to the
extent known. Such notice shall qualify as the notice required
under Section 13.4(a).
In the event that any Action is brought against an indemnified
party with respect to which the indemnifying party may have
liability under an indemnity agreement contained in this Agreement,
the Action shall, upon the written agreement of the indemnifying
party that it is obligated to indemnify under such an indemnity
agreement, be defended by the indemnifying party and such defense
shall include all appeals or reviews which counsel for the
indemnifying party shall deem appropriate. In any such Action the
indemnified party shall have the right to be represented by
advisory counsel and accountants, at its own expense, and the
indemnifying party shall keep the indemnified party fully informed
as to such proceeding, at all stages thereof, whether or not the
indemnified party is represented by its own counsel.
Until the indemnifying party shall have assumed the defense of any
Action, or if the indemnified and indemnifying parties are both
named parties in such Action and the indemnified party shall have
reasonably concluded that there may be defenses available to it
that are materially different from or in addition to the defenses
available to the indemnifying party (in which case the indemnifying
party shall not be entitled to assume the defense of such Action,
but shall remain responsible for its obligation as an indemnitor),
all legal and other reasonable expenses incurred by the indemnified
party as a result of such Action shall be borne by the indemnifying
party. In such event, the indemnified party shall make available
to the indemnifying party and its attorneys and accountants, for
review and copying and in a manner so as not to compromise
privilege, its books and records relating to such Action and the
parties shall render to each other such assistance as may
reasonably be requested to facilitate the proper and adequate
defense of any such Action.
The indemnifying party shall not make any settlement of any claim
without the written consent of the indemnified party, which consent
shall not be unreasonably withheld. Without limiting the
generality of the foregoing, it shall not be deemed unreasonable to
withhold consent to a settlement involving injunctive or other
equitable relief against the indemnified party or its assets,
employees, business or methods of doing business.
The indemnifying party shall be relieved of its obligation to
indemnify the indemnified party to the extent that any failure to
give or delay in giving timely notice as required by this Section
13.5 prejudices the indemnifying party.
Subrogation Rights; No Duplication.
Any Indemnitor required to make a payment under this Article XIII
shall be subrogated, to the extent of such payment, to the rights
of the entity to which such payment has been made for reimbursement
or indemnification against third parties relating to the claim on
which such payment has been based.
Notwithstanding anything in this Article XIII to the contrary, the
obligations of each Indemnitor and its Affiliates pursuant to this
Article XIII shall be without duplication as between entities to
which such Indemnitor and its Affiliates are required to make
payments.
Punitive Damages; Mitigation.
Neither the Buyer nor Seller shall have the right to claim punitive
or exemplary damages, or to recover more than once for the same
Loss, under this Agreement.
Each party agrees to use commercially reasonable efforts to
mitigate indemnifiable Losses.
The indemnification provided for in this Article XIII shall be the
sole and exclusive remedy against an indemnifying party with
respect to the matters covered by this Article XIII.
ARTICLE XIV
TERMINATION, AMENDMENT AND WAIVER
Termination. This Agreement may be terminated at any time
before the Closing:
by mutual written consent of the parties hereto;
by either Seller or Buyer, if there has been a material breach on
the part of the other of a representation, warranty or agreement
contained herein, or in any writing delivered pursuant to the
provisions of this Agreement, which remains uncured for 30 days
after notice of such breach is given by the non-breaching party;
by either Seller or Buyer, if any condition specified in Article X
or IX, as the case may be, becomes incapable of being satisfied,
provided that the terminating party shall not have caused the
failure of such condition by such party's breach of any covenant or
agreement contained herein;
by either Seller or Buyer, if any Authority shall have issued an
order, decree or ruling or taken any other action, in each case,
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree
or other action shall have become final and nonappealable; or
by Seller or Buyer if the Closing has not occurred by March 31,
2000, provided, however, that the right to terminate this Agreement
under this Section 14.1(v) shall not be available to any party
whose failure to fulfill any obligation under this Agreement caused
or resulted in the failure of the transaction to have been
consummated on or before such date.
Effect of Termination. If this Agreement is terminated
pursuant to Section 14.1, this Agreement shall become of no further
force and effect, and the transactions contemplated hereby shall be
abandoned without further action by the parties hereto; provided,
however, that such termination shall not relieve any party hereto
of any liability for breach of this Agreement; and provided,
further, that in connection with any such termination each party
shall be and shall remain liable to pay such expenses and amounts
as are required of it pursuant to Section 7.4 hereof, and to comply
with the confidentiality provisions of Section 7.5.
Amendment. This Agreement may be amended at any time but only
by a written amendment executed on behalf of Seller and Buyer.
Extension; Waiver. At any time before the Closing, any party
to this Agreement which is entitled to the benefits thereof may (a)
extend the time for the performance of any of the obligations of
another party hereto, (b) waive any misrepresentation (including an
omission) or breach of a representation or warranty of another
party hereto, whether contained herein or in any exhibit, schedule
or document delivered pursuant hereto, or (c) waive compliance of
another party hereto with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid only
if set forth in a written instrument signed by Seller and Buyer.
ARTICLE XV
GENERAL PROVISIONS
Notices. All notices and other communications required or
permitted hereunder shall be in writing (including telefax or
similar writing) and shall be given,
if to Seller, to:
Temple-Inland Forest Products Corporation
303 South Temple Drive
Diboll, Texas 75941
Attn: M. Richard Warner
Vice President and Secretary
Telecopy: (409) 829-3333
with copies to:
Skadden, Arps, Slate, Meagher & Flom
1440 New York Ave., NW
Washington, D.C. 20005
Attention: Steve Hamilton
Telecopy: (202) 393-5760
if to Buyer, to:
Westvaco Corporation
299 Park Avenue, 13th Floor
New York, NY 10171
Attention: Wendell Willkie, II
Senior Vice President and General Counsel
Telecopy: (212) 318-5026
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Elliott Stein
Telecopy: (212) 403-2000
or (c) in either case, to such other person or to such other
address or telefax number as the party to whom notice is to be
given may have furnished the other parties in writing by like
notice. If mailed, any such communication shall be deemed to have
been given on the third business day following the day on which the
communication is posted by registered or certified mail (return
receipt requested). If given by any other means it shall be deemed
to have been given when delivered to the address specified in this
Section 15.1.
Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. Unless the context otherwise
requires, terms (including defined terms) used in the plural
include the singular, and vice versa.
Severability. Any provision hereof which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction. To the extent permitted by
applicable Law, the Parties hereby waive any provision of Law which
may render any provision hereof prohibited or unenforceable in any
respect.
Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Miscellaneous. This Agreement (a) and the Fiber Supply
Agreement and the Parent Guarantee together constitute the entire
agreement and supersede all other prior agreements and
understandings, both written and oral, between the parties with
respect to the subject matter hereof; (b) is not intended to and
shall not confer upon any person, association or entity, other than
the parties hereto, any rights or remedies with respect to the
subject matter or any provision hereof; (c) shall not be assigned
directly or indirectly by operation of law or otherwise, except
that Buyer may assign this Agreement to a wholly-owned subsidiary
of Buyer provided that Buyer remains obligated under the terms
hereunder; and (d) shall be governed in all respects by the laws of
the state of New York without regard to any choice of law or
conflict of law provision that would cause the application of any
jurisdiction other than the State of New York, except to the extent
that the laws of the state of Texas may govern the rights of the
parties with respect to real estate located therein.
Third-Party Beneficiaries. Nothing herein contained, whether
express or implied, is intended to confer any right or remedy under
or by reason of this Agreement other than to the parties hereto and
their respective successors and assigns, and no action may be
brought by a third-party claiming as a third-party beneficiary to
this Agreement or the transactions contemplated herein.
Specific Performance. The parties hereto each acknowledge
that, in view of the uniqueness of the subject matter hereof, each
of the parties would not have an adequate remedy at law for money
damages in the event that this Agreement were not performed in
accordance with its terms, and therefore agree that each party
shall be entitled to specific enforcement of the terms hereof in
addition to any other remedy to which the parties hereto may be
entitled at law or in equity.
Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at
law shall be cumulative and not alternative, and the exercise or
beginning of the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of such right, power or
remedy by such party.
Arbitration.
Except as otherwise provided herein, all controversies, disputes or
claims arising among the parties in connection with, or with
respect to, any provision of this Agreement which has not been
resolved within twenty (20) days after either Buyer, on the one
hand, or Seller, on the other hand, have notified the other in
writing of such controversy, dispute or claim, shall be submitted
for arbitration in accordance with the rules of the American
Arbitration Association or any successor thereof except to the
extent the procedures specified in this Section conflict with,
modify or add to such rules, in which case, the procedures
specified in this Section shall control. Arbitration shall take
place at an appointed time and place in Chicago, Illinois. Except
as set forth below, each party shall bear its own expenses with
respect to arbitration and the parties shall share equally the fees
and expenses of the American Arbitration Association and the
arbitrators.
Buyer, on the one hand, and Seller, on the other hand, each shall
select one arbitrator (who shall not be counsel for such party),
and the two so designated shall select a third arbitrator. If
either party shall fail to designate an arbitrator within seven
days after arbitration is requested, or if the two arbitrators
shall fail to select a third arbitrator within 14 days after
arbitration is requested, then such arbitrator shall be selected by
the American Arbitration Association or any successor thereto upon
application of either party. The arbitrators shall be bound by and
strictly enforce the terms of the Agreement and may not limit,
extend, or otherwise modify the terms of this Agreement. The
arbitrators shall make a good faith effort to apply applicable law,
but an arbitration decision and award shall not be subject to
review because of errors of law. The arbitrators shall have the
sole authority to resolve issues of the arbitrability of any
dispute, including the applicability or running of any statute of
limitations. The arbitrators shall have the power (i) to order
reasonable pre-hearing exchange by the parties of documents
strictly limited to those relevant to the specific disputes at
issue, (ii) to order the taking of up to three depositions per
side, and (iii) to issue subpoenas to accomplish the foregoing.
The arbitrators may likewise compel the attendance of witnesses and
the production of documents at the hearing. Judgment upon any
award of the majority of arbitrators shall be binding and shall be
entered in a court of competent jurisdiction. Subject to the
provisions of this Agreement, the award of the arbitrators may
grant any relief that a court of general jurisdiction has authority
to grant, including, without limitation, an award of damages and/or
injunctive relief, and shall assess, in addition, the cost of the
arbitration, including the reasonable fees of the arbitrator and
reasonable attorneys' fees pro rata between Seller and Buyer in
proportion to the allocation of the dollar amount of award between
Buyer and Seller such that the prevailing party pays a lesser
proportion of the fees and expenses.
Nothing herein contained shall bar the right of any of the parties
to seek and obtain temporary injunctive relief from a court of
competent jurisdiction in accordance with applicable law against
threatened conduct that will cause loss or damage, pending
completion of the arbitration, and the prevailing party therein
shall be entitled to an award of its reasonable attorneys' fees and
costs.
Except as otherwise provided in this Agreement, this Section shall
be interpreted, governed by and enforced in accordance with the
United States Arbitration Act, 9 U.S.C. Section 1-14.
No Presumption Against Drafter. Each of the parties hereto
has jointly participated in the negotiation and drafting of this
Agreement. In the event of an ambiguity or a question of intent or
interpretation arises, this Agreement shall be construed as if
drafted jointly by each of the parties hereto and no presumptions
or burdens of proof shall arise favoring any party by virtue of the
authorship of any of the provisions of this Agreement.
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be executed by their duly authorized officers.
Westvaco Corporation
By:
Name: John A. Luke, Jr.
Title: Chairman, President and
Chief Executive Officer
Temple-Inland Forest Products
Corporation
By:
Name: M. Richard Warner
Title: Vice President and Secretary
Inland Eastex Extrusion Company
By:
Name: M. Richard Warner
Title: Secretary
Temple-Inland Recaustisizing Company
By:
Name: M. Richard Warner
Title: Secretary
Temple-Inland Recovery Company
By:
Name: M. Richard Warner
Title: Secretary
Temple-Inland Stores Company
By:
Name: M. Richard Warner
Title: Secretary
SCHEDULE 8.3
(a) Severance pay and severance benefits payable:
to any Transferred Employee employed at the Extruder Facility as a
result of the termination of such Transferred Employee's
employment, where the number of such Transferred Employees
terminated under this clause (i) was set forth in a notice
delivered to Seller by Buyer on or before the 180th day after the
Closing Date and resulted from Buyer discontinuing the operations
of the Extruder Facility on or before the first anniversary of the
Closing Date; and
to Employee 1, Employee 2 and Employee 3, if and to the extent they
become Transferred Employees, pursuant to the agreements with such
individuals listed in Section 5.16(a) of the Disclosure Schedule,
provided that Seller's obligation for severance pay and severance
benefits for each of the foregoing executives shall not exceed 3
years current salary;
to any Transferred Employee as a result of the termination of such
Transferred Employee's employment at any time on or before the
180th day after the Closing Date, and to any Business Employees
listed in Schedule 8.1 as a result of the termination of such
Business Employee's employment on the Closing Date, for up to 5% of
such Business Employees and Transferred Employees other than
Transferred Employees covered by clauses (i) and (ii); provided
that Seller's obligation for severance pay and severance benefits
under this clause (iii) shall not exceed $2,000,000 in the
aggregate.
(b) Solely for the purposes of calculating the aggregate
Retained Severance to be paid by Seller under clause (iii) of this
Schedule and not the Retained Severance of individual Transferred
Employees, when the percentage referenced in such clause (iii)
exceeds 5%, the Retained Severance of each such Transferred
Employee and each such Business Employee shall be deemed to be the
mathematical average of the Retained Severance for all the
Transferred Employees and Business Employees covered by such clause
(iii), including such Transferred Employees and Business Employees
as may be in excess of the 5% limitation.
(c) Retained Severance for any Transferred Employee or
business Employer shall in no event exceed the sum of (i) the
amount of the severance pay and benefits that would be payable to
such Transferred Employee or Business Employer under the applicable
Employee Plans providing severance pay and severance benefits, as in
effect on the date hereof, and (ii) any amounts required to be paid
by contracts in effect as of the date hereof or by applicable law.
Exhibit 99a
Media Contacts: William P. Fuller III (212) 318-5250
Donna N. Bodden (212) 318-5258
Investor Relations Contact: Roger A. Holmes (212) 318-5288
WESTVACO TO ACQUIRE TEMPLE-INLAND'S BLEACHED PAPERBOARD MILL
$575 MILLION DEAL WILL BE ACCRETIVE IN FIRST YEAR
NEW YORK, NY, October 4, 1999 -- Westvaco Corporation (NYSE:W)
today announced a definitive agreement to acquire Temple-Inland
Inc.'s bleached paperboard mill in Evadale, TX, for $575 million
for the fixed assets and approximately $50 million in working
capital. The cash transaction also includes a long-term contract
with Temple-Inland for the supply of wood fiber to the mill. The
boards of directors of both companies have unanimously approved the
transaction, which is scheduled to close in December, pending the
necessary government approvals and other customary conditions.
"I am extremely enthusiastic about the outstanding strategic and
operational fit that this acquisition represents," said John A.
Luke, Jr., Westvaco Chairman and CEO. "The economics of this
transaction at a purchase price of $575 million are compelling.
The Evadale mill will be accretive to earnings and cash flow in the
first year of our ownership. In addition, within three years, we
estimate that synergies and cost savings will total approximately
$100 million annually."
Mr. Luke added, "We have an opportunity to extend the marketing and
manufacturing leadership which we have in a core business and, in
doing so, meaningfully enhance our earnings capability. With
Evadale, we will have a two-mill, eight-machine bleached paperboard
system. This combination will add new products to our portfolio,
improve our manufacturing flexibility and increase our production
capacity by more than two-thirds. These benefits come at a time
when global demand for bleached paperboard is expected to increase
3.0 to 3.5 percent a year, somewhat ahead of supply growth."
The Evadale mill's annual production capacity of 670,000 tons will
increase Westvaco's total bleached paperboard production capacity
to 1.6 million tons, strengthening the company's position as the
third largest bleached paperboard producer in the world. The
company currently operates a world-class bleached board mill in
Covington, VA. Its Printkoter products are used to package
beverages, confections, cosmetics, food, consumer electronics,
pharmaceuticals and tobacco, as well as in commercial printing
applications. With the addition of the Evadale mill, Westvaco will
increase its participation in packaging and commercial printing
markets while adding new business in food service, greeting cards
and office supplies. The purchase agreement also includes an off-
site bleached paperboard extrusion coating plant.
"We are a leader in bleached paperboard because of our commitment
to providing customer value that is second to none," said Mr. Luke.
"Our high-quality products and focused attention to customer
service provides us with many marketing advantages. We expect
excellent results from applying our manufacturing and marketing
expertise at the Evadale mill with the help of its dedicated and
talented workforce. Major investments undertaken in the 1990s have
positioned the mill for significant improvements in operations and
product quality."
Mr. Luke noted that the decision to expand the company's packaging
business is a result of its strategic review process, which began
earlier this year. "That process has enabled us to better identify
the growth opportunities, as well as the challenges, associated
with fast-paced changes in our markets," he said. "In September,
we announced our intent to reorganize more than half of our company
to create a single business unit focused on growing worldwide
markets for packaging. Evadale will position us to further extend
our global reach, and our new Packaging Resources Group will be an
excellent platform for maximizing the value of that operation."
Westvaco Corporation (www.westvaco.com), headquartered in New York,
is a major producer of packaging, paper and specialty chemicals,
all supported by a strategy of building strong customer
relationships through product and service differentiation. The
company supplies customers in more than 70 countries from wholly-
owned operations in the United States, Brazil and the Czech
Republic, as well as a joint venture in China. The company also
owns 1.5 million acres of forests in the United States and Brazil.
In fiscal 1998, international business contributed approximately 25
percent of net sales totaling $2.9 billion.
Certain statements in this document and elsewhere by management of
the company that are neither reported financial results nor other
historical information are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
Such information includes, without limitation, the business
outlook, assessment of market conditions, anticipated financial and
operating results, strategies, future plans, contingencies and
contemplated transactions of the company. Such forward-looking
statements are not guarantees of future performance and are subject
to known and unknown risks, uncertainties and other factors which
may cause or contribute to actual results of company operations, or
the performance or achievements of the company, or industry
results, to differ materially from those expressed, or implied by
the forward-looking statements. In addition to any such risks,
uncertainties and other factors discussed elsewhere herein, and in
the forms 10-K, 10-Q and 8-K and other documents filed by Westvaco
with the Securities and Exchange Commission, risks, uncertainties
and other factors that could cause or contribute to actual results
differing materially from those expressed in or implied by the
forward-looking statements include, but are not limited to,
competitive pricing for the company's products; changes in raw
materials, energy and other costs; impact of Year 2000 issues;
fluctuations in demand and changes in production capacities;
changes to economic growth in the U.S. and international economies,
especially in Asia and Brazil; government policies and
regulations, including but not limited to those affecting the
environment and the tobacco industry; and currency movements.
Exhibit 99b
Media Contacts: William P. Fuller III (212) 318-5250
Donna N. Bodden (212) 318-5258
Investor Relations Contact: Roger A. Holmes (212) 318-5288
WESTVACO ANNOUNCES RESTRUCTURING PLAN
Company expects $35 million in annual pretax savings
NEW YORK, NY, October 4, 1999 -- Westvaco Corporation (NYSE:W)
today announced a series of actions to improve the company's
performance and a related pretax charge against fiscal fourth
quarter 1999 earnings that is expected to total about $85 million.
The charge is primarily a noncash write- down of assets.
"The actions that we are announcing today are a result of our
strategic review process and are principally intended to enhance
the strength and focus of our packaging-related businesses," said
John A. Luke, Jr., Chairman and CEO. "We expect to obtain about
$35 million in pretax annual savings from both operational
efficiencies and from scaling back operations that no longer meet
our financial or strategic objectives."
The projected savings will result from costs associated with
actions at the affected locations, including the elimination of
about 300 jobs. The job eliminations represent less than 2.5
percent of Westvaco's workforce of 12,800 people.
The most significant changes associated with the restructuring
charge are a result of strategic reviews of the units which will
form Westvaco's new Packaging Resources Group. This new group will
be effective November 1 and combines the company's Bleached Board,
Consumer Packaging and Kraft Divisions along with the packaging
component of its international sales operation. This new strategic
platform, which is designed to enhance the company's participation
in growing global markets, also offers opportunities for important
cost reductions. Some of the cost reductions are associated with
writing down certain equipment.
In the company's Consumer Packaging Division, underutilized
production capacity in Richmond, VA, will be eliminated as a result
of changes in market conditions in certain markets. Also, at its
Bleached Board Division mill in Covington, VA, the company will
write down an underutilized recycling facility due to limited
demand for bleached paperboard made with recycled fiber content.
In addition to changes related to Westvaco's packaging businesses,
the restructuring charge includes write-downs within other business
units. The largest of these is the permanent shutdown of an older
paper machine at the company's fine papers mill in Luke, MD, which
as previously announced was temporarily shut down in January.
"The savings that we will achieve through our restructuring plans
will be in addition to the savings we expect from our focus on
sustainable cost reductions," said Mr. Luke. Westvaco is nearing
its multi-year goal of $100 million a year in sustainable cost
reductions set in 1998. At the end of its fiscal third quarter,
the company was accumulating annual savings at a rate of $80
million.
Westvaco Corporation (www.westvaco.com), headquartered in New York,
is a major producer of packaging, paper and specialty chemicals,
all supported by a strategy of building strong customer
relationships through product and service differentiation. The
company supplies customers in more than 70 countries from wholly-
owned operations in the United States, Brazil and the Czech
Republic, as well as a joint venture in China. The company also
owns 1.5 million acres of forests in the United States and Brazil.
In fiscal 1998, international business contributed approximately 25
percent of net sales totaling $2.9 billion.
Certain statements in this document and elsewhere by management of
the company that are neither reported financial results nor other
historical information are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
Such information includes, without limitation, the business
outlook, assessment of market conditions, anticipated financial and
operating results, strategies, future plans, contingencies and
contemplated transactions of the company. Such forward-looking
statements are not guarantees of future performance and are subject
to known and unknown risks, uncertainties and other factors which
may cause or contribute to actual results of company operations, or
the performance or achievements of the company, or industry
results, to differ materially from those expressed, or implied by
the forward-looking statements. In addition to any such risks,
uncertainties and other factors discussed elsewhere herein, and in
the forms 10-K, 10-Q and 8-K and other documents filed by Westvaco
with the Securities and Exchange Commission, risks, uncertainties
and other factors that could cause or contribute to actual results
differing materially from those expressed in or implied by the
forward-looking statements include, but are not limited to,
competitive pricing for the company's products; changes in raw
materials, energy and other costs; impact of Year 2000 issues;
fluctuations in demand and changes in production capacities;
changes to economic growth in the U.S. and international economies,
especially in Asia and Brazil; government policies and
regulations, including but not limited to those affecting the
environment and the tobacco industry; and currency movements.
