SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): October 3, 1999
----------------
CHESAPEAKE CORPORATION
----------------------
(Exact Name of Registrant as Specified in Charter)
Virginia 1-3203 54-0166880
-------- ------ -----------
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
1021 East Cary Street, Richmond, VA 23219
-----------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (804)697-1000
--------------
Exhibit Index appears on page 13.
Item 2: Acquisition or Disposition of Assets.
Effective as of October 3, 1999, Wisconsin Tissue Mills
Inc. ("WTM"), a wholly owned subsidiary of Chesapeake
Corporation ("Chesapeake" or the "Company"), completed the
formation of a joint venture with Georgia-Pacific Corporation
("G-P") through which the two companies combined their
commercial tissue businesses.
WTM contributed substantially all of its assets and
liabilities to the joint venture, known as Georgia-Pacific
Tissue, LLC (the "JV"), and received a 5% equity interest in the
JV and a tax-deferred cash distribution of approximately $755
million (the "Special Distribution"). G-P contributed certain
of its commercial tissue assets and related liabilities to the
JV in return for a 95% equity interest. The respective net
values of WTM's and G-P's contributed businesses were based on a
multiple of each business' 1998 earnings before interest, income
taxes, depreciation and amortization ("EBITDA"), which valuation
principle was negotiated on an arms' length basis. In
connection with its receipt of the Special Distribution, WTM
entered into an Indemnity Agreement pursuant to which it agreed
to indemnify G-P, under certain circumstances, against certain
payments G-P may make under a guaranty of JV debt that was
incurred to finance the Special Distribution (the "JV Debt").
At any time on or after the third anniversary of the
October 4, 1999, closing date, WTM will have up to 3 "put"
rights to sell to G-P, or cause the JV to redeem, all or any
portion of WTM's equity interest in the JV. At any time after
the tenth anniversary of the closing date, G-P will have the
right to "call" all, but not less than all, of WTM's equity
interest in the JV. The purchase and sale price of WTM's equity
interest for both the put and call will be based on the JV's
EBITDA for the immediately preceding 4 fiscal quarters and the
same multiple used to value WTM's and GP's initial contributions
to the JV.
Certain events, including exercise of the put or call,
reduction of the principal amount of the JV Debt or the JV's
sale of the assets contributed to it by WTM, may trigger
recognition of all or a portion of WTM's deferred tax liability
related to the transaction. Under certain circumstances
(primarily related to a sale by the JV of WTM contributed assets
outside of the ordinary course of business prior to the tenth
anniversary of the closing date, or a failure by the JV to
maintain the principal amount of the JV Debt and any
refinancings thereof outstanding for 30 years after the closing
date, or G-P's exercise of the call or other buy out of WTM's
equity interest in the JV), the JV will distribute to WTM an
amount equal to the amount of WTM's federal and state income tax
liability that is triggered, excluding the first $22 million
triggered solely by sales of contributed assets. In certain
other circumstances (primarily related to a determination that
the transaction was not eligible for tax deferral or in the
event of an involuntary dissolution of the JV), G-P will pay to
WTM an amount equal to one-half of the net income tax benefit to
G-P resulting therefrom.
G-P will control and manage the JV, subject to obtaining
WTM's consent in connection with certain actions. Chesapeake
and WTM, on the one hand, and G-P, on the other hand, made
customary representations, warranties and covenants to the JV in
connection with their contributions of assets and liabilities,
and agreed to indemnify the JV (subject to certain deductibles
and caps on the amount of such indemnification, and limitations
on the periods during which claims may be asserted) in
connection with a breach of such representations, warranties and
covenants. The JV has agreed to indemnify Chesapeake, G-P and
their respective affiliates against, among other things, the
liabilities assumed by the JV in connection with the
transaction.
The WTM assets contributed to the JV include production
facilities located in Bellemont and Flagstaff, Arizona; Alsip,
Illinois; Greenwich, New York; Menasha and Neenah, Wisconsin;
and Toluca, Mexico. The JV has assumed all of WTM's liabilities
that relate primarily to its contributed business, including any
liabilities associated with certain alleged violations of
antitrust laws (as more fully described in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998
(the "1998 Form 10-K")), but specifically excluding most tax
liabilities related to the contributed assets for periods prior
to formation of the JV and certain liabilities that have been
retained by WTM associated with the discharge of PCBs and other
hazardous materials in the Fox River and Green Bay System (as
more fully described in the 1998 Form 10-K).
The foregoing description is qualified in its entirety by
reference to the Joint Venture Agreement, Operating Agreement
and Indemnity Agreement filed as exhibits hereto, which
agreements are incorporated herein by reference.
Item 7: Financial Statements, Pro Forma Financial Information
and Exhibits.
a) Financial Statements of Business Acquired.
Not applicable
b) Pro Forma Financial Information.
Unaudited pro forma condensed consolidated
balance sheet as of June 30, 1999, and unaudited
pro forma condensed consolidated statements of
operations for the six months ended June 30,
1999, and the year ended December 31, 1998, are
set forth below under the heading Pro Forma
Financial Information.
c) Exhibits.
Number Exhibit
------ -------
2.1 Joint Venture Agreement among Georgia-
Pacific Corporation, Chesapeake
Corporation, Wisconsin Tissue Mills Inc.
and Georgia-Pacific Tissue Company, LLC,
dated as of October 4, 1999.
2.2 Operating Agreement of Georgia-Pacific
Tissue, LLC, dated as of October 4, 1999,
among Wisconsin Tissue Mills Inc. and
Georgia-Pacific Corporation.
2.3 Indemnity Agreement, dated as of October
4, 1999, between Wisconsin Tissue Mills
Inc. and Georgia-Pacific Corporation.
The Company agrees to furnish supplementally to the
Securities and Exchange Commission, upon request,
copies of any schedules and exhibits to the
foregoing exhibits that are not filed herewith in
accordance with Item 601(b)(2) of Regulation S-K.
PRO FORMA FINANCIAL INFORMATION
Set forth below is certain pro forma condensed consolidated
financial information with respect to WTM's contribution of
substantially all of its assets and liabilities to the JV and
its receipt of a 5% equity interest in the JV and the Special
Distribution of approximately $755 million. The pro forma
condensed consolidated financial information also reflects: (1)
the acquisition, as of March 18, 1999, of substantially all of
the outstanding capital shares of Field Group plc ("Field
Group"), a European specialty packaging company headquartered in
the United Kingdom, for approximately $373 million, as reported
in the Company's Current Report on Form 8-K dated April 2, 1999,
and its Current Report on Form 8-K/A filed May 28, 1999; and (2)
the disposition of approximately 278,000 acres of the Company's
timberlands (the "Timberlands"), which was completed September
10, 1999, and its Building Products business, which was
completed July 30, 1999, for combined cash proceeds of
approximately $185 million.
The unaudited Pro Forma Condensed Consolidated Balance
Sheet presents the consolidated financial position of Chesapeake
assuming that the contribution of WTM's business to the JV and
the sales of the Timberlands and the Building Products business
had occurred on June 30, 1999. The unaudited Pro Forma
Condensed Consolidated Statements of Operations for the six
months ended June 30, 1999, and for the year ended December 31,
1998, present the consolidated results of operations of
Chesapeake assuming that the contribution of WTM's business to
the JV, the acquisition of Field Group and the sale of the
Timberlands and the Building Products business had all occurred
as of January 1, 1998, with the net proceeds of the dispositions
being used to repay a portion of the Company's long-term debt
and reduce related interest expense.
The unaudited pro forma condensed consolidated financial
information should be read in conjunction with the Company's
historical consolidated financial statements as contained in the
1998 Form 10-K and the unaudited consolidated interim financial
statements contained in its Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999. The historical financial
statements of Field Group for its fiscal year ended April 4,
1999, are contained in the Company's Current Report on Form 8-
K/A filed on May 28, 1999. Certain pro forma condensed
consolidated financial information with respect to the Field
Group acquisition is contained in the Company's Current Report
on Form 8-K/A filed on May 28, 1999, and Chesapeake's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999.
Additionally, in accordance with SEC rules, the Company has not
included a pro forma adjustment to reflect the use of excess
cash balances of approximately $487 million. As previously
announced, the Company intends to use a portion of the Special
Distribution and the net proceeds from the sale of Timberlands
and the Building Products business to invest in strategic
business acquisitions that would be expected to generate a
return which is greater than Chesapeake's weighted-average cost
of capital, which is currently estimated to be 10%.
The unaudited Pro Forma Condensed Consolidated Balance
Sheet and unaudited Pro Forma Condensed Consolidated Statements
of Operations are presented for illustrative purposes only and
are not intended to be indicative of actual results that may
have been achieved had the transactions occurred as of the dates
indicated above nor do they purport to indicate results which
may be attained in the future.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(In millions)
(unaudited)
Historical
-----------
Chesapeake Divesti- Pro Forma
Corporation tures(1) Adjustments Pro Forma
----------- ------- ----------- ---------
ASSETS:
Cash and cash equivalents $ 18.2 $ -- $486.8 (3) $ 505.0
Accounts receivable 202.9 53.6 149.3
Inventory 151.9 57.1 94.8
Other current assets 18.2 3.0 (0.3)(4) 14.9
-------- ------ ------ --------
Total current assets 391.2 113.7 486.5 764.0
Property, plant and equipment 751.0 374.2 376.8
Goodwill and intangible assets 263.9 23.6 240.3
Other assets 95.9 9.0 1.0 (4) 92.9
5.0 (4)
-------- ------ ------ ---------
Total assets $1,502.0 $520.5 $492.5 $1,474.0
======== ====== ====== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Accounts payable and
accrued expenses $ 218.0 $ 34.0 $ 22.3 (4) $ 206.3
Current portion of long-term
debt 5.2 0.2 5.0
-------- ------ ------ --------
Total current liabilities 223.2 34.2 22.3 211.3
Long-term debt 696.8 0.1 (402.1)(3) 294.6
Other long-term liabilities 46.1 13.7 1.4 (4) 33.8
Deferred taxes 100.8 132.9 (4) 233.7
-------- ------ ------ --------
Total liabilities 1,066.9 48.0 (245.5) 773.4
Stockholders' equity 435.1 472.5 738.0 (4) 700.6
-------- ------ ------ --------
Total liabilities and
stockholders' equity $1,502.0 $520.5 $492.5 $1,474.0
======== ====== ====== ========
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(In millions, except per share amounts)
(unaudited)
Pro
Historical Forma
---------- -------
Chesapeake Divesti- Field Pro Forma
Corporation tures(1) Group(2) Adjustments Pro Forma
----------- -------- -------- ----------- ---------
Net sales $566.6 $227.2 $79.4 $ -- $418.8
Costs and expenses:
Cost of products sold 408.8 150.7 66.9 325.0
Depreciation, amortization
and cost of timber
harvested 42.4 18.6 7.8 31.6
Selling, general and
administrative expenses 77.5 24.7 7.7 60.5
------ ------ ------ ------ ------
Income (loss)
from operations 37.9 33.2 (3.0) 1.7
Other income, net 5.4 1.9 1.3 1.4(5) 6.2
Interest expense, net (17.4) (5.9) 12.7(3) (10.6)
------ ------ ------ ------ ------
Income (loss) before
income taxes 25.9 35.1 (7.6) 14.1 (2.7)
Income taxes 9.0 12.8 (2.7) 5.6(6) (0.9)
------ ------ ------ ------ ------
Net income (loss) $ 16.9 $ 22.3 ($4.9) $8.5 $ (1.8)
====== ====== ====== ====== ======
Basic earnings (loss) per
share $ 0.79 $(0.08)
====== ======
Diluted earnings (loss)
per share $ 0.78 $(0.07)
====== ======
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(In millions, except per share amounts)
(unaudited)
Pro
Historical Forma
------------ -------
Chesapeake Divesti- Field Pro Forma
Corporation tures(1) Group(2) Adjustments Pro Forma
------------ -------- --------- ----------- ---------
Net sales $950.4 $470.9 $410.5 $ -- $890.0
Costs and expenses:
Cost of products sold 679.8 309.2 316.1 686.7
Depreciation, amortization
and cost of timber
harvested 62.3 38.9 29.8 53.2
Selling, general and
administrative expenses 132.9 48.3 35.7 120.3
Restructuring/special
charges 11.8 5.0 6.8
------ ------ ------ ------ ------
Income from operations 63.6 69.5 28.9 23.0
Other income, net 11.1 4.2 0.2 2.6(5) 9.7
Interest expense, net (18.9) (25.6) 25.1(3) (19.4)
------ ------ ------ ------ ------
Income before income
taxes and cumulative
effect of accounting
change 55.8 73.7 3.5 27.7 13.3
Income taxes 21.8 28.3 0.4 10.7(6) 4.6
------ ------ ------ ------ ------
Income before cumulative
Effect of accounting
Change $ 34.0 $ 45.4 $ 3.1 $17.0 $ 8.7
====== ====== ====== ====== ======
Earnings per share:
Basic earnings per share
Before cumulative effect
of accounting change $ 1.60 $ .41
====== ======
Diluted earnings per share
before cumulative effect
of accounting change $ 1.57 $ .41
====== ======
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. This elimination reflects the historical net asset balances
and related results of operations of WTM's business, Timberlands
and the Building Products business.
2. Pro forma financial information with respect to the
acquisition of Field Group is derived from the Company's Current
Report on Form 8-K/A filed May 28, 1999, and the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.
3. This adjustment reflects the cash received from divestitures
of approximately $755.2 million for WTM's business and $185.3
million for the Timberlands and the Building Products business,
offset in part by the payment of $51.6 million of income taxes and
the following assumption for application of cash proceeds to debt
reduction (in millions):
June 30, 1999 December 31,1998
--------------- ----------------
Debt Interest Debt Interest
Amount Expense Amount Expense
------- ------- ------- -------
Credit lines $372.6 $10.7 $338.4 $20.3
9.875% notes, due 2003 11.2 0.6 11.2 1.1
10.375% notes, due 2000 18.3 0.9 18.3 1.9
------- ------- ------- -------
$402.1 12.2 $367.9 23.3
Eliminate interest ======= ======
income reduction assumed
in Field Group pro forma 0.5 1.8
------- -------
$12.7 $25.1
======= =======
4. The components of the net gain on the contribution of WTM's
assets to the JV and the sale of the Timberlands and the Building
Product business are as follows (in millions):
Timberlands
and
Building
WTM Products
-------- --------
Net cash proceeds $755.2 $185.3
Net assets divested (399.1) (73.4)
Deferred tax impact (144.0) 10.8
Taxes payable (51.6)
Accrued disposition costs (14.7) (7.6)
Curtailment gain on pensions 5.0
Post-retirement benefits (1.4)
Equity investment in JV 1.0
------- --------
$202.0 $ 63.5
======= ========
5. This adjustment reflects estimated equity in earnings of
unconsolidated subsidiaries for WTM's retained 5% interest in the
JV.
6. The effective income tax rates are estimated at 34.9% for the
year ended December 31, 1998, and 34.1% for the six months ended
June 30, 1999. The effective rate is lower than Chesapeake's
historical rate for the year ended December 31, 1998, due to the
lower effective tax rates in the countries in which Field Group
does business.
In accordance with SEC rules, the Company has not included a
pro forma adjustment to reflect interest earned on excess cash
balances, as uses of proceeds cannot be assumed. If the excess
cash of $486.8 million, after repayment of debt, generated by the
Special distribution, the sales of the Timberlands and the
Building Products business were invested at the Company's average
investment rate of 5%, pro forma income before cumulative effect
of accounting change would have increased $16.0 million, or $.74
per diluted share, on an annual basis. As previously announced,
the Company intends to invest a portion of the Special
Distribution and the net proceeds from the sale of Timberlands and
the Building Products business in strategic business acquisitions
that would be expected to generate a return which is greater than
Chesapeake's weighted-average cost of capital, which is currently
estimated to be 10%.
SIGNATURES
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.
CHESAPEAKE CORPORATION
(Registrant)
Date: October 15, 1999 BY: /s/ William T. Tolley
William T. Tolley
Senior Vice President -
Finance & Chief
Financial Officer
EXHIBIT INDEX
2.1 Joint Venture Agreement among Georgia-Pacific
Corporation, Chesapeake Corporation, Wisconsin Tissue
Mills Inc. and Georgia-Pacific Tissue, LLC, dated as of
October 4, 1999.
2.2 Operating Agreement of Georgia-Pacific Tissue, LLC,
dated as of October 4, 1999, among Wisconsin Tissue
Mills Inc. and Georgia-Pacific Corporation.
2.3 Indemnity Agreement, dated as of October 4, 1999,
between Wisconsin Tissue Mills Inc. and Georgia-Pacific
Corporation.
EX-2.1
JOINT VENTURE AGREEMENT
AMONG
GEORGIA-PACIFIC CORPORATION,
CHESAPEAKE CORPORATION,
WISCONSIN TISSUE MILLS INC., AND
GEORGIA-PACIFIC TISSUE, LLC
DATED AS OF OCTOBER 4, 1999
TABLE OF CONTENTS
ARTICLE I ORGANIZATION OF THE COMPANY 1
1.1 FORMATION OF THE COMPANY 1
ARTICLE II CONTRIBUTION OF THE BUSINESSES 2
2.1 CONTRIBUTION OF ASSETS; ASSUMPTION OF LIABILITIES 2
2.2 RETAINED G-P ASSETS AND LIABILITIES 3
2.3 RETAINED WISCO ASSETS AND LIABILITIES 3
2.4 CLOSING OF TRANSACTION 3
2.5 POST-CLOSING ADJUSTMENT 6
2.6 TRANSFER TAXES AND RECORDING FEES 8
2.7 REQUIRED CONSENTS 8
2.8 OWNERSHIP OF THE COMPANY; SPECIAL DISTRIBUTION 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF CSK PARTIES 9
3.1 ORGANIZATION AND QUALIFICATION 9
3.2 CORPORATE AUTHORIZATION 9
3.3 CONSENTS AND APPROVALS 9
3.4 NON-CONTRAVENTION 10
3.5 BINDING EFFECT 10
3.6 FINANCIAL STATEMENTS: ABSENCE OF CERTAIN CHANGES 10
3.7 LITIGATION AND CLAIMS 11
3.8 TAXES 11
3.9 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS 12
3.10 COMPLIANCE WITH LAWS 14
3.11 ENVIRONMENTAL MATTERS 14
3.12 INTELLECTUAL PROPERTY 15
3.13 LABOR MATTERS 16
3.14 CONTRACTS 17
3.15 REAL ESTATE LEASES 18
3.16 ENTIRE BUSINESS; TITLE TO PROPERTY 18
3.17 FINDER'S FEES 19
3.18 INSURANCE 19
3.19 NO UNDISCLOSED LIABILITIES 19
3.20 NO MATERIAL ADVERSE CHANGE 20
3.21 INDEBTEDNESS FOR BORROWED MONEY 21
3.22 KNOWLEDGE AS OF CLOSING DATE 21
3.23 NO OTHER REPRESENTATIONS OR WARRANTIES 21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF G-P 22
4.1 ORGANIZATION AND QUALIFICATION 22
4.2 CORPORATE AUTHORIZATION 22
4.3 CONSENTS AND APPROVALS 22
4.4 NON-CONTRAVENTION 22
4.5 BINDING EFFECT 23
4.6 FINANCIAL STATEMENTS: ABSENCE OF CERTAIN CHANGES 23
4.7 LITIGATION AND CLAIMS 24
4.8 TAXES 24
4.9 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS 25
4.10 COMPLIANCE WITH LAWS 27
4.11 ENVIRONMENTAL MATTERS 27
4.12 INTELLECTUAL PROPERTY 28
4.13 LABOR MATTERS 28
4.14 CONTRACTS 29
4.15 REAL ESTATE LEASES 30
4.16 ENTIRE BUSINESS; TITLE TO PROPERTY. 30
4.17 FINDER'S FEES 30
4.18 INSURANCE 30
4.19 NO UNDISCLOSED LIABILITIES 31
4.20 NO MATERIAL ADVERSE CHANGE 31
4.21 INDEBTEDNESS FOR BORROWED MONEY. 33
4.22 KNOWLEDGE AS OF CLOSING DATE 33
4.23 ORGANIZATION OF COMPANY 33
4.24 AUTHORIZATION OF COMPANY 33
4.25 ACTIVITIES OF COMPANY 33
4.26 NO OTHER REPRESENTATIONS OR WARRANTIES 33
ARTICLE V COVENANTS 33
5.1 COVENANTS REGARDING EMPLOYEES 33
5.2 COMPLIANCE WITH WARN AND SIMILAR LAWS 34
5.3 FURTHER ASSURANCES 34
5.4 USE OF G-P INTELLECTUAL PROPERTY AND CSK MARKS 34
5.5 CERTAIN MATTERS RELATED TO RETAINED AND ASSUMED
LIABILITIES 34
5.6 INTERCOMPANY AGREEMENTS 34
5.7 RECORDS AND RETENTION AND ACCESS 35
5.8 INSURANCE 35
5.9 SPECIAL CSK RETAINED LIABILITY 36
5.10 PREPARATION OF REGISTRATION STATEMENT. 36
5.11 USE OF WISCO NAME 36
5.12 PRORATION OF CERTAIN CHARGES 36
ARTICLE VI CONDITIONS TO CLOSING 37
[Intentionally Deleted] 37
ARTICLE VII SURVIVAL; INDEMNIFICATION 37
7.1 SURVIVAL 37
7.2 INDEMNIFICATION BY G-P 37
7.3 INDEMNIFICATION BY CSK 38
7.4 INDEMNIFICATION BY THE COMPANY 39
7.5 INDEMNIFICATION PROCEDURES 39
7.6 ACKNOWLEDGMENT REGARDING ENVIRONMENTAL LIABILITIES 41
7.7 CHARACTERIZATION OF INDEMNIFICATION PAYMENTS 41
ARTICLE VIII TAX COVENANTS 42
8.1 LIABILITY FOR TAXES 42
8.2 PREPARATION OF TAX RETURNS 43
8.3 AMENDED TAX RETURNS 45
8.4 CARRY BACKS AND CARRY FORWARDS 45
8.5 ADDITIONAL TAX MATTERS 46
8.6 TAX CONTROVERSIES; COOPERATION 47
ARTICLE IX TERMINATION 48
[Intentionally Deleted] 48
ARTICLE X MISCELLANEOUS 48
10.1 NOTICES 48
10.2 AMENDMENT; WAIVER 49
10.3 ASSIGNMENT 49
10.4 ENTIRE AGREEMENT 49
10.5 FULFILLMENT OF OBLIGATIONS 49
10.6 PARTIES IN INTEREST 49
10.7 PUBLIC DISCLOSURE 50
10.8 EXPENSES 50
10.9 SCHEDULES 50
10.10 BULK TRANSFER LAWS 50
10.11 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION
OF 50
10.12 COUNTERPARTS 50
10.13 HEADINGS 50
10.14 SEVERABILITY 51
10.15 INJUNCTIVE RELIEF 51
ARTICLE XI DEFINITIONS AND TERMS 51
11.1 SPECIFIC DEFINITIONS 51
11.2 OTHER TERMS 67
11.3 OTHER DEFINITIONAL PROVISIONS 67
JOINT VENTURE AGREEMENT
This JOINT VENTURE AGREEMENT (the "Agreement") dated as of
October 4, 1999, among Chesapeake Corporation, a Virginia
corporation ("CSK"), Wisconsin Tissue Mills Inc., a Delaware
corporation and a wholly owned subsidiary of CSK ("WISCO"),
Georgia-Pacific Corporation, a Georgia corporation ("G-P"), and
Georgia-Pacific Tissue, LLC, a Delaware limited liability company
(the "Company").
PRELIMINARY STATEMENTS
WHEREAS, G-P is engaged, in part, in the business of
producing, selling, licensing and manufacturing tissue products
for the "away from home" markets and certain related products
(the "Commercial Tissue Business");
WHEREAS, G-P has determined that it will contribute certain
assets and liabilities of its Commercial Tissue Business to the
Company;
WHEREAS, WISCO is engaged in the Commercial Tissue Business
through WISCO and its Contributed Subsidiaries (the "WISCO
Business"); and
WHEREAS, G-P and CSK have determined that it is in the best
interests of their respective shareholders to engage in the
Commercial Tissue Business through a joint venture.
NOW, THEREFORE, G-P, the CSK Parties and the Company agree
as follows:
ARTICLE I
ORGANIZATION OF THE COMPANY
1.1 FORMATION OF THE COMPANY. G-P has caused each of the
following to occur:
(a) ORGANIZATION OF THE COMPANY. The Company is organized
as a limited liability company under the laws of the State of
Delaware.
(b) ORGANIZATIONAL DOCUMENTS. The Company's Certificate of
Formation was filed with the Secretary of State of Delaware, a
copy of which is set forth as Exhibit 1.1A hereto.
1
ARTICLE II
CONTRIBUTION OF THE BUSINESSES
2.1 CONTRIBUTION OF ASSETS; ASSUMPTION OF LIABILITIES. On the terms
and subject to the conditions set forth herein and in the Ancillary Agreements,
at the Closing the parties shall take the following actions,
which shall be deemed to take place simultaneously with the
execution of this Agreement as part of the Closing:
(a) WISCO CONTRIBUTION; ASSUMPTION OF LIABILITIES. (i)
WISCO shall contribute, convey, transfer, assign and deliver to
the Company, and the Company shall accept and acquire from WISCO,
all right, title and interest of the CSK Parties in and to the
WISCO Contributed Assets, free and clear of all Encumbrances
(other than Permitted Encumbrances); and (ii) WISCO shall assign
to the Company and the Company shall assume and agree to pay,
honor, discharge and perform the WISCO Assumed Liabilities. The
parties agree that the WISCO Assumed Liabilities are intended to
be, and the parties shall treat them as, "qualified liabilities"
under Section 1.707-5(a)(6) of the Treasury Regulations unless
different treatment is required under applicable law.
(b) BORROWING BY THE COMPANY; SPECIAL DISTRIBUTION. The
Company will incur the Company Debt in such amounts and on such
terms as set forth on Exhibit 2.8A and will use the net proceeds
of the Company Debt solely (after deducting borrowing expenses
consisting of legal fees, accounting fees, printing fees, filing
fees and underwriting fees, not to exceed $8 million, including
refinancings and replacements thereof) to fund the Special
Distribution to WISCO in the amount of $755,200,000 which shall
be declared and paid to WISCO immediately after the contribution
of the WISCO Contributed Assets in accordance with Section 2.8
hereof. The parties agree that Company Debt (other than amounts
borrowed and used to pay expenses incurred in connection with the
related borrowing expenses) is allocable to, and shall be
allocated to, WISCO under Sections 1.752-2 and 1.707-5(b) of the
Treasury Regulations.
(c) G-P CONTRIBUTION; ASSUMPTION OF LIABILITIES. (i) G-P
shall contribute, convey, transfer, assign and deliver to the
Company, and the Company shall accept and acquire from G-P, all
right, title and interest of G-P in and to the G-P Contributed
Assets, free and clear of all Encumbrances (other than Permitted
Encumbrances); and (ii) G-P shall assign to the Company and the
Company shall assume and agree to pay, honor, discharge and
perform the G-P Assumed Liabilities. The parties agree that the
G-P Assumed Liabilities are intended to be, and the parties shall
treat them as, "qualified liabilities" under Section 1.707-
5(a)(6) of the Treasury Regulations unless different treatment is
required under applicable law.
(d) ISSUANCE OF UNITS. The Company will issue to WISCO and
G-P the number of Units, evidencing their respective equity
interests in the Company, in accordance with Section 2.8(b)
hereof.
2
(e) OPERATING AGREEMENT. G-P and WISCO shall enter into an
Operating Agreement, substantially in the form of Exhibit 2.1E
hereto, the terms of which shall govern the management and
operations of the Company.
2.2 RETAINED G-P ASSETS AND LIABILITIES. Notwithstanding
anything herein to the contrary, (i) from and after the Closing
each of G-P and its Affiliates shall retain all of its direct or
indirect right, title and interest in and to, and there shall be
excluded from the sale, conveyance, assignment or transfer to the
Company hereunder, the G-P Retained Assets and the G-P Retained
Liabilities, and (ii) the G-P Retained Liabilities shall not be
assumed by the Company hereunder.
2.3 RETAINED WISCO ASSETS AND LIABILITIES. Notwithstanding
anything herein to the contrary, (i) from and after the Closing
each of the CSK Parties and their Affiliates shall retain all of
its direct or indirect right, title and interest in and to, and
there shall be excluded from the sale, conveyance, assignment or
transfer to the Company hereunder, the WISCO Retained Assets and
the WISCO Retained Liabilities, and (ii) the WISCO Retained
Liabilities shall not be assumed by the Company hereunder.
2.4 CLOSING OF TRANSACTION. The Closing of the
transactions contemplated by this Agreement shall take place at
the offices of G-P at 10:00 a.m. (Atlanta time), on October 4,
1999, or at such other time and place as the parties hereto may
mutually agree. The date on which the Closing occurs is called
the "Closing Date." The Closing shall be deemed effective at
12:01 a.m. (Atlanta time), on October 3, 1999 (the "Effective
Time"). To effect the steps set forth in Section 2.1 hereof, the
parties shall execute and deliver to each other and to third
parties, as appropriate, all documents reasonably necessary to
effect the Closing. Without limiting the generality of the
foregoing,
(a) CSK PARTIES' DELIVERIES. The appropriate CSK Parties
shall execute and deliver:
(i) to the Company, limited warranty deeds, in form
and substance reasonably acceptable to G-P, transferring all
WISCO Owned Real Property to the Company;
(ii) to the Company, assignments, or where necessary
subleases, in form and substance reasonably acceptable to G-P,
assigning or subleasing to the Company all WISCO Real Property
Leases;
(iii) to the Company, assignments, in form and
substance reasonably acceptable to G-P, assigning to the Company
all WISCO Intellectual Property;
(iv) to the Company, bills of sale, certificates of
title, assignments, and all other instruments of transfer, in
form and substance reasonably acceptable to G-P, transferring to
the Company all WISCO Contributed Assets other than the WISCO
Real Property or the WISCO Intellectual Property which are being
transferred to the Company pursuant to the conveyance documents
described in clauses (i) - (iii) above;
3
(v) to the Company, such instruments of assumption and
other instruments or documents, in form and substance reasonably
acceptable to G-P, as may be necessary to effect assignment of
the WISCO Assumed Liabilities to the Company;
(vi) to the Company or G-P, as appropriate, a duly
executed copy of each of the Ancillary Agreements to which any
CSK Party is a party;
(vii) to G-P and the Company, the opinion of Hunton
& Williams, counsel to the CSK Parties, substantially in the form
of Exhibit 2.4A(vii) hereto;
(viii) to the Company, evidence reasonably
satisfactory to G-P that all Encumbrances other than Permitted
Encumbrances on any of the WISCO Contributed Assets have been
released;
(ix) to the Company, stock certificates or other
evidence of ownership of each of the Contributed Subsidiaries, in
each case duly endorsed for transfer to the Company;
(x) to G-P and the Company from WISCO, a duly executed
Operating Agreement;
(xi) to G-P, the WISCO Debt Indemnity;
(xii) to G-P, current title reports for all WISCO
owned Real Property;
(xiii) to G-P, evidence that all officers (other
than officers of WMex) and directors of the WISCO Contributed
Subsidiaries have resigned, effective as of the Closing, except
as G-P shall otherwise request; and
(xiv) to G-P and/or the Company, as appropriate,
such other instruments or documents, in form and substance
reasonably acceptable to G-P, as may be necessary to effect the
Closing and the contribution of the WISCO Contributed Assets in
accordance with this Agreement.
(b) G-P DELIVERIES. G-P shall execute and deliver:
(i) to the Company, limited warranty deeds, in form
and substance reasonably acceptable to WISCO, transferring all G-
P Owned Real Property to the Company;
(ii) to the Company, assignments, or where necessary
subleases, in form and substance reasonably acceptable to WISCO,
assigning or subleasing to the Company all G-P Real Property
Leases;
(iii) to the Company, a royalty free license,
substantially in the form set forth in Schedule 5.4, licensing to
the Company the G-P Intellectual Property;
4
(iv) to the Company, bills of sale, certificates of
title, assignments, and all other instruments of transfer, in
form and substance reasonably acceptable to WISCO, transferring
to the Company all G-P Contributed Assets other than the G-P Real
Property or the G-P Intellectual Property which are being
transferred or licensed to the Company pursuant to the conveyance
documents described in clauses (i) - (iii) above;
(v) to the Company, such instruments of assumption and
other instruments or documents, in form and substance reasonably
acceptable to WISCO, as may be necessary to effect assignment of
the G-P Assumed Liabilities to the Company;
(vi) to the Company or WISCO, as appropriate, a duly
executed copy of each of the Ancillary Agreements, including the
G-P Guarantee, to which G-P is a party;
(vii) to the Company, WISCO and CSK, a copy of the
opinion of the General Counsel of G-P, substantially in the form
of Exhibit 2.4B(vii) hereto;
(viii) to the Company, evidence reasonably
satisfactory to WISCO that all Encumbrances other than Permitted
Encumbrances on any of the G-P Contributed Assets have been
released;
(ix) to WISCO and the Company, a duly executed
Operating Agreement;
(x) to WISCO, current title reports for all G-P owned
Real Property; and
(xi) to WISCO and/or the Company, as appropriate, such
other instruments or documents, in form and substance reasonably
acceptable to WISCO, as may be necessary to effect the Closing
and the contribution of the G-P Contributed Assets in accordance
with this Agreement.
(c) DELIVERIES BY THE COMPANY. The Company shall execute
and deliver:
(i) to the CSK Parties and G-P, such instruments of
assumption and other instruments or documents, in form and
substance reasonably acceptable to WISCO and G-P, as may be
necessary to effect the Company's assumption of the Assumed
Liabilities;
(ii)to G-P or the CSK Parties, as appropriate, a duly
executed copy of each of the Ancillary Agreements to which the
Company is a party;
(iii) to G-P, certificates representing the number
of Units issuable to G-P as determined in accordance with Section
2.8 hereof;
(iv)to WISCO, certificates representing the number of
Units issuable to WISCO as determined in accordance with Section
2.8 hereof;
5
(v) to WISCO, the Special Distribution; and
(vi)to G-P and WISCO, as appropriate, such other
instruments or documents, in form and substance reasonably
acceptable to WISCO and G-P, as may be necessary to effect the
Closing.
2.5 POST-CLOSING ADJUSTMENT.
(a) Within 90 days following the Closing, the Company shall
prepare, or cause to be prepared, and deliver to G-P and WISCO a
statement (the "Closing Working Capital Statement") which shall
set forth the Working Capital of each of the G-P Business and the
WISCO Business as of the Determination Date (the "Closing Working
Capital"). The amounts so computed shall be used to determine
the final amount of the Working Capital of each of the Businesses
(the "Post-Closing Adjustment"). The Closing Working Capital
Statement shall be prepared in accordance with GAAP using the
same principles, practices and procedures that were used in
preparing the WISCO Financial Statements and the G-P Financial
Statements.
(b) G-P, WISCO and their respective accountants and the
Company's accountants shall have 30 days after the delivery of
the Closing Working Capital Statement to review the Closing
Working Capital Statement. In the event that G-P or WISCO
determines that the Closing Working Capital for either party, as
derived from the Closing Working Capital Statement, has not been
determined on the basis set forth in Section 2.5(a), G-P or WISCO
shall inform the other in writing (the "Objection"), setting
forth a specific description of the basis of the Objection and
the adjustments to the Closing Working Capital which either G-P
or WISCO believes should be made, which Objection must be
delivered to the other party on or before the last day of such 30-
day period. The party receiving an Objection shall then have 30
days to review and respond to the Objection. The parties shall
attempt in good faith to reach an agreement with respect to any
matters in dispute. If the parties are unable to resolve all of
their disagreements with respect to the determination of the
foregoing items within 45 days following the delivery of an
Objection, they shall refer their remaining differences to Ernst
& Young LLP or such other firm mutually agreed to by the parties
(the "CPA Firm"), who shall, acting as experts and not as
arbitrators, determine in accordance with this Agreement, and
only with respect to the remaining differences so submitted,
whether and to what extent, if any, the Closing Working Capital
as derived from the Closing Working Capital Statement requires
adjustment. The parties shall direct the CPA Firm to use its
best efforts to render its determination within 30 days after
such submission. The CPA Firm's determination shall be
conclusive and binding upon G-P, WISCO and the Company. The fees
and disbursements of the CPA Firm shall be paid one-half by G-P
and one-half by WISCO. G-P, the Company and WISCO shall make
readily available to the CPA Firm all relevant Books and Records
and any work papers (including those of the parties' respective
accountants) Relating to the Closing Working Capital Statement
and all other items reasonably requested by the CPA Firm. The
"Final Working Capital Statement" shall be deemed to be (i) the
Closing Working Capital Statement in the event that no Objection
is delivered by G-P or WISCO during the 30-day period specified
above, or (ii) if an objection is delivered by G-P or WISCO, the
Closing Working Capital Statement, as adjusted by either (A) the
agreement of the parties or (B) the CPA Firm.
6
(c) G-P and WISCO shall have the opportunity to participate
in the preparation of the Closing Working Capital Statement by
(i) observing the physical inventory taken in connection
therewith (which may begin prior to the Closing Date), (ii)
attending any audit planning meetings in connection therewith,
(iii) meeting with and discussing procedures with the Company and
its accountants, and (iv) otherwise having full access to all
information used by the Company in preparing the Closing Working
Capital Statement, including the Books and Records and the work
papers of its accountants (subject to execution of any necessary
waivers or indemnifications required by the Company's
accountants).
(d) In reviewing any Objection, G-P and WISCO and their
respective accountants shall have full access to all information
used by the other party in preparing such Objection, including
the work papers of the other party's and the Company's
accountants (subject to the reviewing party executing any
necessary waivers or indemnifications required by the objecting
party's accountants).
(e) If the Closing Working Capital of either Business as
reflected on the Final Working Capital Statement is less than
$32,515,000 with respect to the G-P Business or $73,218,000 with
respect to the WISCO Business (the "Target Working Capital"),
then within 10 Business Days following issuance of the Final
Working Capital Statement, any party whose Closing Working
Capital is below its Target Working Capital shall (as an
additional contribution to the Company) make a payment in
immediately available funds to the Company equal to the
difference between such Business' Target Working Capital, plus
interest at the prime rate (as set forth in the "Money Rates"
section of The Wall Street Journal) on such amount from the
Closing Date through the date of payment. If the Closing Working
Capital of either Business as reflected on the Final Working
Capital Statement is greater than the Target Working Capital of
such Business, then within 10 Business Days following issuance of
the Final Working Capital Statement, the Company shall refund
such excess by (i) making a payment to any party whose Closing
Working Capital exceeded its Target Working Capital, in
immediately available funds, equal to such excess to the extent
of the sum of the amount of cash theretofor contributed to the
Company by such party plus the amount of accounts receivable
contributed by such party to and collected by the Company, and
(ii) if the excess is greater than the amount described in (i),
the remainder of the excess shall be refunded by the Company's
reassignment to such party of accounts receivable (theretofor
contributed by such party) in an aggregate amount equal to such
remainder. In addition, the Company shall pay such party
interest at the prime rate (as set forth in the "Money Rates"
section of The Wall Street Journal) on such excess from the
Closing Date through the date of payment.
(f) In preparing the Closing Working Capital Statement, (i)
liabilities of the Company Related to this transaction shall not
be treated as liabilities, and (ii) no liabilities or reserves
shall be established for matters for which G-P, CSK or the
Company is (or but for the Cap or the Deductible would be)
entitled to indemnification hereunder.
(g) Any payments made to or from the Company pursuant to
Section 2.5(e) shall not result in any change in the value of
either party's Business as set forth in Section 2.8 hereof or
7
either party's Capital Account or Percentage Interest (as both
terms are defined in the Operating Agreement).
2.6 TRANSFER TAXES AND RECORDING FEES. Each party shall be
responsible for any and all Taxes or fees imposed or incurred by
reason of the transfer of its Contributed Assets and Assumed
Liabilities hereunder and/or the filing or recording of any
instruments necessary to effect the transfer of its Contributed
Assets and Assumed Liabilities hereunder, regardless of when such
Taxes or fees are levied or imposed, including sales, use, value-
added, excise, real estate transfer, lease assignment, stamp,
documentary and similar Taxes and fees (the "Transfer Cost"). To
the extent under applicable law the transferee is responsible for
filing Tax Returns in respect of Transfer Costs, the Company
shall prepare all such Tax Returns. The parties shall provide
such certificates and other information and otherwise cooperate
to the extent reasonably required to minimize Transfer Costs.
2.7 REQUIRED CONSENTS. Each of G-P and the CSK Parties
shall use commercially reasonable efforts to obtain, at its sole
expense, each Consent Related to its own Business listed on
Schedule 3.3(a) for the CSK Parties and Schedule 4.3(a) for G-P
(other than those Consents marked with an asterisk on either such
Schedule), and any other material Consent not listed on Schedule
3.3 or Schedule 4.3, if any, if such Consent is required to
operate such Business after Closing as such Business has been
operated over the 12-month period immediately prior to Closing.
If a party has not obtained a Consent (other than a Required
Consent), the Closing of the transactions contemplated by this
Agreement shall not constitute a transfer, or any attempted
transfer, of any Contract or asset, the transfer of which
requires such Consent. Rather, following the Closing, such party
shall use commercially reasonable efforts at its sole expense,
and the other party (or parties) and the Company shall cooperate
in such efforts, to obtain promptly such Consent or to enter into
reasonable and lawful arrangements (including subleasing or
subcontracting if permitted) reasonably acceptable to the other
party to provide to the Company the full economic (taking into
account Tax Costs and benefits) and operational benefits and
liabilities and for substantially similar time periods, as the
Company would have had if such Consent had been obtained as of
Closing. Once such Consent for the transfer of a Contributed
Asset not transferred at the Closing is obtained, the party
receiving such Consent shall promptly transfer, or cause to be
transferred, such Contributed Asset to the Company for no
additional consideration and without changing any party's Capital
Account or Percentage Interest (as both terms are defined in the
Operating Agreement).
2.8 OWNERSHIP OF THE COMPANY; SPECIAL DISTRIBUTION.
(a) The value of contributions of each of G-P and WISCO has
been determined by multiplying 7.38 by the actual 1998 EBITDA for
the G-P Business and the WISCO Business respectively. The value
of the WISCO Business for purposes of this Agreement shall be
$775,000,000 and the value of the G-P Business for purposes of
this Agreement shall be $376,400,000.
(b) Simultaneously with the Closing, the Company shall
incur debt in an amount sufficient to fund a special distribution
to WISCO (the "Company Debt") that will result in a reduction in
8
WISCO's Percentage Interest (as defined in the Operating
Agreement) in the Company to a 5% equity interest in the Company
(the "Special Distribution") immediately after payment of the
Special Distribution. The Company Debt shall be in such amount
and on such terms as is set forth on Exhibit 2.8A. G-P shall
provide to the Company's lenders a full and unconditional
guaranty of payment of the Company Debt substantially in the form
of Exhibit 2.8B hereto (the "G-P Guarantee"). WISCO shall
provide to G-P an indemnity substantially in the form of Exhibit
2.8C hereto (the "WISCO Debt Indemnity") indemnifying G-P against
certain amounts which may be incurred or paid by, or assessed
against, G-P under the G-P Guarantee.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CSK PARTIES
The CSK Parties represent and warrant to G-P and the Company
as follows:
3.1 ORGANIZATION AND QUALIFICATION.
(a) Each of the CSK Parties is a corporation or limited
liability company, duly organized, validly existing and in good
standing under the laws of its state of organization as set forth
on Schedule 3.1. The CSK Parties collectively have all requisite
corporate or limited liability company power and authority to own
and operate the WISCO Contributed Assets and to carry on the
WISCO Business as currently conducted.
(b) Each of the CSK Parties is duly qualified to do
business and is in good standing as a foreign corporation or
limited liability company in the jurisdictions listed on Schedule
3.1, which are the only jurisdictions where the ownership or
operation of the WISCO Contributed Assets or the conduct of the
WISCO Business requires such qualification, except where the
failure to be so qualified would not have a Material Adverse
Effect.
3.2 CORPORATE AUTHORIZATION. Each of the CSK Parties has
full corporate power and authority to execute and deliver this
Agreement, and to perform its obligations hereunder and under any
agreement or contract contemplated hereby, including the
Ancillary Agreements. The execution, delivery and performance by
the CSK Parties of this Agreement and any agreement or contract
contemplated hereby has been duly and validly authorized by all
necessary corporate action and no additional corporate
authorization is required in connection with the execution,
delivery and performance by each of the CSK Parties of this
Agreement and any agreement or contract contemplated hereby.
3.3 CONSENTS AND APPROVALS. Except as specifically set
forth in Schedule 3.3 or as required by the HSR Act, no Consent
is required to be obtained by the CSK Parties from, and no notice
or filing is required to be given by the CSK Parties to, or made
by the CSK Parties with, any Governmental Authority or other
Person or under any Contract listed, or required to be listed, on
Schedule 3.14 in connection with the execution, delivery and
performance by the CSK Parties of this Agreement, each of the
9
Ancillary Agreements, any other agreement or contract
contemplated hereby and the contribution of the WISCO Contributed
Assets, except where the failure to obtain any such Consent or
Consents, give any such notice or notices or make any such filing
or filings would not have a Material Adverse Effect.
3.4 NON-CONTRAVENTION. Except as set forth on Schedule
3.3, the execution, delivery and performance by the CSK Parties
of this Agreement and each of the Ancillary Agreements, and the
consummation of the transactions contemplated hereby and thereby,
does not and will not (i) violate any provision of the
certificate of incorporation or bylaws of any of the CSK Parties
or any Contributed Subsidiary; (ii) subject to obtaining the
Consents referred to in Section 3.3, conflict with, or result in
the breach of, or constitute a default under, or result in the
termination, cancellation or acceleration (whether after the
filing of notice or the lapse of time or both) of any right or
obligation of any of the CSK Parties or any Contributed
Subsidiary under, or to a loss of any benefit to which any of the
CSK Parties or any Contributed Subsidiary is entitled under, any
Contract or result in the creation of any Encumbrance (other than
a Permitted Encumbrance) upon any of the WISCO Contributed
Assets; or (iii) assuming compliance with the matters set forth
in Section 3.3, violate, or result in a breach of or constitute a
default under any Law, rule, regulation, judgment, injunction,
order, decree or other restriction of any court or Governmental
Authority to which any of the CSK Parties or any Contributed
Subsidiary is subject, including any Governmental Authorization,
except in each case, such matter or matters that would not have a
Material Adverse Effect.
3.5 BINDING EFFECT. This Agreement constitutes, and each
of the Ancillary Agreements when executed and delivered by the
parties thereto will constitute, a valid and legally binding
obligation of each of the CSK Parties that is a party thereto,
enforceable with respect to such party in accordance with its
terms, except as the enforceability thereof may be limited or
otherwise effected by bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability Relating to,
or affecting, creditors rights and to general equity principles.
3.6 FINANCIAL STATEMENTS: ABSENCE OF CERTAIN CHANGES.
(a) Attached as Schedule 3.6(a) are the following financial
statements of the WISCO Business: Unaudited Balance Sheet,
Statement of Income and Statement of Cash Flows, as of and for
(i) the years ended December 31, 1997 and 1998 (the "WISCO Annual
Financial Statements"); and (ii) the period ended April 30, 1999
(the "WISCO April Financial Statements"). (Collectively the
financial statements described in this Section 3.6(a) shall be
referred to as the "WISCO Financial Statements.")
(b) Exhibit 3.6(b) sets forth the line items and a
definition for each such line item contained in each of the WISCO
Financial Statements.
(c) The WISCO Financial Statements are true and correct in
all material respects, present fairly the combined financial
position and results of operation, divisional equity and cash
flows of the WISCO Business as of the dates and for the periods
presented, and were prepared in accordance with GAAP applied on a
basis consistent with past practice of the WISCO Business.
10
The WISCO Financial Statements reflect the underlying Books and
Records of the WISCO Business, which are complete and accurate in
all material respects. Except as described on Schedule 3.6(c),
consistent accounting policies and accrual methods were used in
all periods presented. All non-recurring or unusual income or
expense items over $500,000, as reflected in the 1998 Statement
of Income of WISCO, have been disclosed in footnotes to the WISCO
Financial Statements.
(d) Except as described in the notes to the WISCO Financial
Statements, all accounts receivable reflected on the WISCO
Financial Statements are bona fide receivables, accounted for in
accordance with GAAP (including, without limitation, appropriate
reserves), and represent amounts due with respect to actual
transactions in the operation of the WISCO Business; it being
understood that this representation shall not be deemed to
constitute a warranty or guaranty that all such accounts
receivable shall be collected.
3.7 LITIGATION AND CLAIMS. Except as disclosed on Schedule
3.7:
(a) There is no action (whether civil, criminal or
administrative), suit, demand, claim, dispute, hearing,
proceeding (including condemnation or other proceeding in eminent
domain) or investigation pending or, to the Knowledge of any of
the CSK Parties, threatened, Related to the WISCO Business or any
of the WISCO Contributed Assets or included in the WISCO Assumed
Liabilities, that individually or in the aggregate is reasonably
expected to have a Material Adverse Effect.
(b) None of the WISCO Contributed Assets is subject to any
order, writ, judgment, award, injunction, or decree of or
settlement enforceable in any court or governmental or regulatory
authority of competent jurisdiction or any arbitrator or
arbitrators.
3.8 TAXES. Except as disclosed on Schedule 3.8:
(a) The CSK Parties have duly and timely filed (or have
caused to be duly and timely filed), taking into account any
valid extension of the time for filing, each Tax Return required
to be filed with any Tax Authority which includes or is based
upon the WISCO Contributed Assets, or the operations, ownership
or activities of the WISCO Business, and all Taxes due and
payable (whether or not shown on or required to be shown on a Tax
Return) have been paid prior to their due dates; provided,
however, that the representations and warranties set forth in
this paragraph are made only to the extent that (i) such Taxes
are or may become Encumbrances on the WISCO Contributed Assets,
or (ii) the Company is or may be liable in the capacity of
transferee of the Contributed Assets.
(b) The CSK Parties have duly and timely filed (or have
caused to be duly and timely filed), taking into account any
valid extension of the time for filing, each Tax Return which
includes or is based upon the assets, operations, ownership or
activities of any of the WISCO Contributed Subsidiaries, and all
Taxes due and payable (whether or not shown on or required to be
shown on a Tax Return) have been paid prior to their due dates.
11
(c) None of the WISCO Contributed Assets, including the
assets of the WISCO Contributed Subsidiaries (i) is subject to
any lien (other than a Permitted Encumbrance) arising in
connection with any failure or alleged failure to pay any Taxes,
(ii) secures any debt the interest on which is tax-exempt under
Section 103(a) of the Code, (iii) is required to be or is being
depreciated under the alternative depreciation system under
Section 168(g)(2) of the Code, (iv) is "limited use property"
with the meaning of Revenue Procedure 76-30, or (v) will be
treated as owned by any other Person pursuant to the provisions
of former Section 168(f)(8) of the Code.
(d) The CSK Parties (with respect to the WISCO Business) or
the WISCO Contributed Subsidiaries have withheld and paid all
material Taxes required to have been withheld and paid in
connection with amounts paid or owing to any Employee,
independent contractor, creditor, shareholder or other party.
(e) There are no pending, proposed or, to the knowledge of
WISCO, threatened audits, assessments or claims from any Tax
Authority for deficiencies, penalties or interest against any of
the CSK Parties (with respect to the WISCO Contributed Assets or
the WISCO Business), any of the WISCO Contributed Subsidiaries or
any of their assets, operations or activities; provided, however,
that the representations and warranties set forth in this
paragraph are made only to the extent that (i) such Taxes are or
may become Encumbrances on the WISCO Contributed Assets, or (ii)
the Company is or may be liable in the capacity of transferee of
the Contributed Assets.
(f) No CSK Party nor any WISCO Contributed Subsidiary owns,
directly or indirectly, and none of the WISCO Contributed Assets
consists of, any interest in any entity classified as a
partnership for United States federal income Tax purposes.
(g) With respect to the WISCO Business, other than WMex,
the CSK Parties do not have and have not had a permanent
establishment in any foreign country as defined in any applicable
Tax treaty or convention between the United States and such
foreign country.
3.9 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS.
(a) Schedule 3.9(a) lists all the Employees who, as of
August 31, 1999, were employed by WISCO or the WISCO Contributed
Subsidiaries with respect to the WISCO Business, together with
their respective positions, years of employment, and rates of
remuneration, as of August 31, 1999.
(b) Except as disclosed on Schedule 3.9(b), no CSK Party is
a party to nor does it sponsor, maintain, or contribute to any
Employee Plans that provide benefits to Employees or Retired
Employees of the WISCO Business.
(c) WISCO has delivered to G-P true, complete and up-to-
date copies of all documents embodying the CSK Plans including,
without limitation, all amendments thereto, all funding
agreements thereunder (including, but not limited to, trust
agreements), all summaries of such CSK Plans provided to
Employees, Retired Employees, directors, officers, shareholders
12
or their dependents with respect to the WISCO Business, and all
material communications received from or sent to regulatory
authorities within the prior two (2) plan years with respect to
each such CSK Plan as well as the most recent valuation for each
defined contribution retirement plan maintained by any of the CSK
Parties and the most recent actuarial valuation for each of the
CSK Plans for which such valuations are required. The applicable
CSK Party has delivered to G-P a complete written description of
all unwritten CSK Plans, and will deliver such other
documentation with respect to any CSK Plan as is reasonably
requested by G-P.
(d) Except as disclosed on Schedule 3.9(d), no promise or
commitment has been made by any CSK Party (i) to amend any of the
CSK Plans or to provide increased benefits thereunder to any
Employees, Retired Employees, directors, officers, shareholders
of the WISCO Business or the WISCO Contributed Subsidiaries, or
their dependents, except pursuant to the requirements, if any, of
the CSK Plans or any collective bargaining agreement, or (ii) to
establish any new Employee Plan. Except as disclosed on Schedule
3.9(d), no amendment to any CSK Plan has been adopted by any CSK
Party since June 30, 1999. Except as disclosed on Schedule
3.9(d), one or more of the CSK Parties has the right pursuant to
the terms of each CSK Plan and all agreements Related to such
plan unilaterally to terminate such plan (or its participation in
such plan) or to amend the terms of such plan at any time except
as provided under a collective bargaining agreement. Except as
disclosed on Schedule 3.6(a) or Schedule 3.9(d) or as set forth
in the Human Resources Agreement, the transactions contemplated
by this Agreement will not result in any additional payments to,
or increase the vested interest of, any Employee, Retired
Employee, director, officer, shareholder, or their dependents
under any CSK Plan; and the transactions contemplated by this
Agreement will not result in any payment to any Employee or
Retired Employee, director, officer, or shareholder of any CSK
Party which will be subject to Section 280G of the Code.
(e) Each CSK Plan has been established, maintained, and
administered in substantial compliance with its terms and all
related documents or agreements and in substantial compliance
with applicable provisions of ERISA, the Code, and other
applicable Laws.
(f) Except as disclosed on Schedule 3.9(f), all required
employer contributions, premium payments and employee
contributions under the CSK Plans have been made and remitted to
the funding agents or accrued or booked thereunder within the
time prescribed by any such CSK Plan and the Laws. All insurance
premiums required with respect to any CSK Plan, including any
premiums payable to the Pension Benefit Guarantee Corporation,
have been paid, made, accrued or booked within the time
prescribed by any such CSK Plan and the applicable Law. All
benefits, expenses and other amounts due and payable to or under
any CSK Plan, and all contributions, transfers or payments
required to be made to any CSK Plan, have been paid, made,
accrued or booked within the time prescribed by any such CSK Plan
and the Laws. Except as disclosed on Schedule 3.9(f), all of the
assets which have been set aside in a trust or account (other
than an account which is part of a CSK Party's general assets) to
satisfy any obligation under any CSK Plan are shown on the books
and records of each such trust and each such account at their
fair market value, such current fair market value as of the last
valuation date is equal to or exceeds the present value of any
obligation under the CSK Plan, and the liabilities for all other
obligations under any CSK Plan are accurately set forth in the
WISCO Financial Statements.
13
(g) Except as disclosed on Schedule 3.9(g), there is no
pending or, to the Knowledge of the CSK Parties, threatened claim
with respect to a CSK Plan (other than routine and reasonable
claims for benefits made in the ordinary course of the WISCO
Business) or with respect to the terms and conditions of
employment or termination of employment by any Employee, or
Retired Employee, and no audit or investigation by any
governmental or other law enforcement agency is pending or has
been proposed with respect to any CSK Plan.
(h) Except as disclosed on Schedule 3.9(h), no CSK Plan is
subject to Title IV of ERISA. Neither any of the CSK Parties nor
any Related Person has incurred any material liability under or
pursuant to Title I or IV of ERISA or the penalty, excise tax or
joint and several liability provisions of the Code relating to
employee benefit plans and, to the Knowledge of the CSK Parties,
no event or condition has occurred or exists which could result
in any material liability to a CSK Party, such Related Person or
the Company or G-P under or pursuant to Title I or IV of ERISA or
such penalty, excise tax or joint and several liability
provisions of the Code. No CSK Plan has incurred an "accumulated
funding deficiency" within the meaning of such sections of the
Code and ERISA, whether or not waived; and no such CSK Plan has
been terminated. Except as disclosed on Schedule 3.9(h), none of
the CSK Parties contribute to, nor do they have any obligation to
contribute to, a multiemployer plan as defined in Section
4001(a)(3) of ERISA with regard to the Employees or Retired
Employees.
(i) Each of the CSK Plans that is intended to be qualified
under Section 401(a) of the Code, and the trust, if any, forming
a part thereof, has received a favorable determination letter
from the Internal Revenue Service as to the qualification of its
form under the Code and to the effect that each such trust is
exempt from taxation under Section 501(a) of the Code and, to the
Knowledge of the CSK Parties, nothing has occurred since the date
of such determination letter that adversely affects such
qualification or tax-exempt status. Except as disclosed in
Schedule 3.9(i), all reports and other documents required to be
filed with any governmental agency or distributed to plan
participants or beneficiaries (including, but not limited to,
actuarial reports, audits or Tax Returns) have been duly filed or
distributed on a timely basis, and copies thereof have been or
will be furnished to G-P prior to the Closing.
3.10 COMPLIANCE WITH LAWS. Except as set forth in Schedule
3.10, the WISCO Business is being conducted in compliance with
all Laws applicable to the WISCO Business and, as of the Closing,
the Company will have (subject to obtaining the Consents) all
Governmental Authorizations necessary for the conduct of the
WISCO Business as currently conducted, except for such non-
compliance or the failure to obtain such Consent or Consents
which would not have a Material Adverse Effect; it being
understood that nothing in this representation is intended to
address any compliance issue that is the subject of the
representations and warranties set forth in Sections 3.7, 3.8,
3.9, 3.11, 3.12, or 3.13 hereof, and that the CSK Parties make no
representations in this Section 3.10 as to the transferability or
assignability of any such Governmental Authorizations. None of
the CSK Parties has received written notice that any material
Governmental Authorization may be suspended, revoked, modified or
canceled.
3.11 ENVIRONMENTAL MATTERS.
14
(a) Schedule 3.11(a) sets forth a list of all material
Environmental Permits in connection with the WISCO Business.
(b) Except as would not have a Material Adverse
Effect, or as disclosed on Schedule 3.11(b):
(i)The Environmental Permits are all the permits,
licenses, certificates and authorizations of, and registrations
with, any of the Environmental Authorities pursuant to the
Environmental Laws necessary to conduct the WISCO Business
substantially as presently conducted. The Environmental Permits
are in full force and effect and the CSK Parties are in
compliance in all respects thereunder. The consummation of the
transactions contemplated hereunder will not require any renewal,
consent, amendment or other action in connection with any of the
Environmental Permits. The CSK Parties are in compliance with
the Environmental Laws applicable to the conduct of the WISCO
Business.
(ii) There is no claim, suit, action or other
proceeding, including appeals and applications for review,
outstanding or pending against any CSK Party pursuant to any of
the Environmental Laws Relating to the WISCO Business.
(iii) No CSK Party has any liability for any
release, spill, leakage, pumping, emission, emptying, discharge,
injection, escape, leaching, disposal or dumping of any Hazardous
Substances on or from any of the WISCO Real Property, except in
such manner or quantity as would not constitute a violation of
any of the Environmental Laws or Environmental Permits.
(iv) The CSK Parties have maintained all records
in respect of the WISCO Business required by the Environmental
Laws and Environmental Permits in the manner and for the time
periods so required.
(v)Since June 30, 1994, no CSK Party has received any
notice of investigation or non-compliance or written order from
any of the Environmental Authorities, including any notice of
contamination or clean-up requirements, pursuant to any of the
Environmental Laws with respect to the WISCO Business.
3.12 INTELLECTUAL PROPERTY.
(a) Schedule 3.12 sets forth a list and description
(including the country of registration) of all issued or
registered foreign and domestic Intellectual Property currently
(or, to the Knowledge of the CSK Parties, within the last 12
months) used in the WISCO Business (other than "shrink wrap"
consumer software licenses). No third party has rights in, or
otherwise has the right to restrict use of, WISCO Intellectual
Property owned by any CSK Party, and, to the Knowledge of the CSK
Parties, no third party has rights in, or otherwise has the right
to restrict the Company's use of, the WISCO Intellectual Property
owned by any CSK Party as of and following the Closing.
15
(b) To the Knowledge of the CSK Parties, no product,
component, method, process, or material (including computer
software) used, sold or manufactured by the WISCO Business
infringes on, misappropriates, or otherwise violates a valid and
enforceable intellectual property right of any other Person.
(c) There are no demands, actions or proceedings pending
or, to the Knowledge of the CSK Parties, threatened, against the
CSK Parties Relating to the WISCO Business alleging infringement,
misappropriation, or violation of any intellectual property right
of any other Person, and, to the Knowledge of the CSK Parties, no
Person is infringing, misappropriating, challenging or violating,
the Intellectual Property owned by any CSK Party, except for
challenges, infringements, misappropriation or violations which,
individually or in the aggregate, would not have a Material
Adverse Effect.
(d) All of the WISCO Intellectual Property will be
transferred to the Company at Closing, except to the extent
certain Intellectual Property used by the CSK Parties to provide
services under the Transition Services Agreement is specifically
excluded thereunder. The CSK Parties agree that Intellectual
Property provided under the Transition Services Agreement will be
provided to the Company on and after Closing on the same terms
and conditions under which it was available to the WISCO Business
prior to the Closing in accordance with the terms of the
Transition Services Agreement.
(e) Schedule 3.12(e) sets forth the CSK Parties' efforts at
addressing the Year 2000 issue in the WISCO Business. The
information set forth therein is accurate as of the date hereof,
in all material respects. The CSK Parties have developed and
begun implementing a Project Plan to remediate and/or replace
Computer Systems that are used or relied upon in the WISCO
Business but are not Year 2000 Ready. Such remediation and/or
replacement is scheduled to be completed in 1999.
3.13 LABOR MATTERS. Except as disclosed on Schedule 3.13:
(a) As of the date hereof, none of the CSK Parties is a
party to any labor or collective bargaining agreement or similar
agreement with respect to Employees of the WISCO Business, no
such Employees are represented by any labor organization and, to
the Knowledge of the CSK Parties, there are no organizing or de-
certification activities (including any demand for recognition or
certification proceedings pending or threatened to be brought or
filed with the National Labor Relations Board or other labor
relations tribunal) involving the WISCO Business;
(b) As of the date hereof, there are no strikes, work
stoppages, slowdowns, lockouts, unfair labor practice charges
pending or, to the Knowledge of the CSK Parties, threatened
against or involving the Employees of the WISCO Business;
(c) Within the 90-day period immediately preceding the
Effective Time, no Employee of the WISCO Business has been laid
off or terminated for reasons other than a discharge for cause,
voluntary resignation or retirement.
16
(d) There are no complaints, charges, claims or grievances
against the CSK Parties pending or, to the Knowledge of the CSK
Parties, threatened to be brought or filed with any Governmental
Authority, arbitrator or court based on or arising out of the
employment by the CSK Parties of any Employee of the WISCO
Business, except for those which, individually or in the
aggregate, would not have a Material Adverse Effect;
(e) The CSK Parties are in compliance with all Laws
Relating to the employment of labor, including all such Laws
Relating to wages, hours, collective bargaining, discrimination,
civil rights, safety and health, immigration, workers'
compensation, layoffs, and the collection and payment of
withholding and/or Social Security Taxes and similar Taxes,
except where the failure to be in compliance would not have a
Material Adverse Effect; and
(f) The CSK Parties have given all notices required to be
given prior to the Closing Date under the Worker Adjustment and
Retraining Notification Act, 29 U.S.C. Section 2101 et seq.
("WARN"), or under any similar provision of any federal, state,
regional, foreign, or local Law, rule, or regulation (referred to
collectively with WARN as "WARN Obligations") Relating to any
plant closing or mass layoff that occurred during the 90 days
immediately preceding the Effective Time and pertaining to the
WISCO Business.
3.14 CONTRACTS. Schedule 3.14 sets forth a list, as of the
date hereof, of each Contract that is Related to the WISCO
Business other than (a) WISCO Leased Real Property, which are
listed on Schedule 3.15, and collective bargaining agreements
which are listed on Schedule 3.13, (b) purchase orders or similar
agreements for the purchase or sale of goods or services in the
ordinary course of business, (c) confidentiality agreements
entered into in the ordinary course of business in connection
with the purchase and sale of Inventory, and (d) any Contract
which requires a payment or imposes an obligation on either party
thereto of less than $1,000,000 in the aggregate. Schedule 3.14
also identifies any Contract that contains a non-compete covenant
or similar provision that could materially restrict the Company
in its conduct of the WISCO Business following Closing, any
employment agreement with any Employee of the WISCO Business, any
employment agreement included in the WISCO Contributed Assets or
WISCO Assumed Liabilities, any Contract between any Affiliates of
CSK, on one hand, and any of the CSK Parties or any of the WISCO
Contributed Subsidiaries, on the other, any agreements Related to
payments in lieu of taxes, any agreement or license Related to
Intellectual Property (other than "shrink wrap" consumer software
licenses), leases and license agreements for any Computer Systems
(other than "shrink wrap" consumer software licenses), all
material agreements for telecommunications voice (including
without limitation, local, long distance and toll free service)
and data services, Internet access, hosting and use services.
Schedule 3.14 also identifies any Contract concerning any
environmental liability with respect to the WISCO Business. Each
Contract set forth on Schedule 3.14 is a valid and binding
agreement of the applicable CSK Party and, to the Knowledge of
the CSK Parties, is in full force and effect. Except as
otherwise provided in Schedule 3.14, no CSK Party is, and, to
their Knowledge, no other party thereto is, in default in any
material respect under any Contract listed on Schedule 3.14 or
any collective bargaining agreement listed on Schedule 3.13.
17
3.15 REAL ESTATE LEASES. Schedule 3.15 sets forth a list,
as of the date hereof, of each written WISCO Real Estate Lease
with a term of more than one month that is Related to the WISCO
Business. Each WISCO Real Estate Lease set forth on Schedule
3.15 is a valid and binding agreement of a CSK Party and is in
full force and effect. There are no defaults by the applicable
CSK Party under any WISCO Real Estate Lease listed on Schedule
3.15 which defaults have not been cured or waived and which
would, individually or in the aggregate, have a Material Adverse
Effect.
3.16 ENTIRE BUSINESS; TITLE TO PROPERTY.
(a) Except as set forth in Schedule 3.16(a) and Schedule
3.6(a), the WISCO Contributed Assets, the assets held by the
WISCO Contributed Subsidiaries, the WISCO Retained Assets
(including cash and cash accounts, disbursement accounts,
invested securities and other short and medium term investments,
the CSK Marks and CSK Plans, and WISCO's and CSK's insurance
policies), and the rights specifically provided or made available
to the Company under the Ancillary Agreements, include all of the
buildings, machinery, equipment and other assets (whether
tangible or intangible) necessary for the Company immediately
after Closing to conduct in all material respects the WISCO
Business as conducted as of the date hereof, and as conducted
during the 12-month period prior to the date hereof (subject to
changes expressly permitted by the terms hereof to be made after
the date hereof); provided, however, that no representation is
made as to the assignability of Government Authorizations.
(b) A CSK Party has good (and, in the case of its Owned
Real Property, marketable) title to, or a valid and binding
leasehold interest in, the WISCO Contributed Assets, free and
clear of all Encumbrances, except (i) as set forth in Schedule
3.16(b), and (ii) any Permitted Encumbrances.
(c) The capital structure of each of the WISCO Contributed
Subsidiaries is as set forth in Schedule 3.16(c). The shares of
stock or membership interests, as applicable, of the WISCO
Contributed Subsidiaries included in the WISCO Contributed Assets
constitute 100% of the issued and outstanding shares of stock or
membership interests, as applicable, of each WISCO Contributed
Subsidiary. All shares of stock , membership interests or other
form of ownership of the WISCO Contributed Subsidiaries included
in the WISCO Contributed Assets are validly issued, fully paid
and non-assessable. Except as set forth on Schedule 3.16(c), (i)
there are no options, warrants, or similar rights to purchase any
of the shares or membership interests of any of the WISCO
Contributed Subsidiaries, and no obligations binding upon any
WISCO Contributed Subsidiary to issue, sell, redeem, purchase or
exchange any of its capital stock or membership interests or any
right relating thereto, and (ii) there are no shareholders'
agreements, voting agreements, voting trusts or other agreements
or rights of third parties with respect to or affecting any of
the WISCO Contributed Subsidiaries or any of their shares of
stock or membership interests, as applicable. Wisconsin Tissue
Management, LLC has entered into no agreements and conducted no
business and contains only those assets and liabilities
specifically set forth in Schedule 3.16(c), except, in each case,
as set forth in the Human Resources Agreement. WMex assumed no
liabilities or obligations of any other CSK Party Related to or
18
arising from the sale of its capital stock to WISCO. CSK has
provided G-P with true and correct copies of all documentation
Related to such sale.
(d) The WISCO Contributed Assets and the assets of the
WISCO Contributed Subsidiaries are in good operating condition
and repair (subject to normal wear and tear). Except as set
forth on Schedule 3.16(d), the CSK Parties have no Knowledge of
any material structural or mechanical defects with respect to any
buildings, improvements or equipment included in the WISCO
Contributed Assets, which defects are reasonably likely to have a
Material Adverse Effect.
(e) None of the WISCO Owned Real Property or the WISCO
Leased Real Property or other assets of the WISCO Business
(except as set forth in the Transition Services Agreement) are
owned, used or occupied in whole or in part by CSK or any of its
Affiliates other than in connection with the operation of the
WISCO Business.
3.17 FINDER'S FEES. Except for Salomon Smith Barney & Co.,
whose fees will be paid by CSK, there is no investment banker,
broker or finder which has been retained by or is authorized to
act on behalf of any CSK Party who might be entitled to any fee
or commission from G-P or the Company in connection with the
transactions contemplated by this Agreement.
3.18 INSURANCE. Schedule 3.18 attached hereto sets forth
the following information with respect to each insurance policy
to which any CSK Party or a WISCO Contributed Subsidiary, with
respect to the WISCO Business, has been a party, a named insured,
or otherwise the beneficiary of coverage at any time within the
past five years:
(a) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(b) the scope, period and amount of coverage; and
(c) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
Schedule 3.18 also describes any self insurance arrangements
affecting the WISCO Business. As of the date hereof, no CSK
Party has received any written notice of any retroactive premium
increase or assessment applicable to the WISCO Business. Except
as disclosed on Schedule 3.18, all of such policies are in full
force and effect.
3.19 NO UNDISCLOSED LIABILITIES. With respect to the WISCO
Business no CSK Party has any obligations or liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise, whether
or not known to such CSK Party, whether due or to become due and
regardless of when asserted) arising out of transactions entered
into at or prior to the Closing, or any action or inaction at or
prior to the Closing, or any state of facts existing at or prior
to the Closing other than: (a) liabilities set forth on the WISCO
Financial Statements (including any notes thereto, if any); (b)
liabilities and obligations arising from or in connection with
19
matters disclosed pursuant to the CSK Parties' representations
and warranties in this Agreement or in the Disclosure Schedules
(none of which, except as set forth on Schedule 3.7, is a
liability resulting from a breach of contract, breach of
warranty, tort, infringement claim or lawsuit), other than
liabilities and obligations arising from or in connection with
matters disclosed pursuant to Section 3.11; (c) liabilities and
obligations arising from or in connection with matters disclosed
pursuant to Section 3.11; (d) liabilities and obligations which
have arisen after April 30, 1999 in the ordinary course of
business (none of which, except as set forth on Schedule 3.7, is
a liability resulting from a breach of contract, breach of
warranty, tort, infringement claim or lawsuit); and (e) such
other liabilities or obligations that do not have a Material
Adverse Effect.
3.20 NO MATERIAL ADVERSE CHANGE. Except as disclosed on
Schedule 3.20, since April 30, 1999, the CSK Parties have
conducted the WISCO Business in the ordinary course and in a
manner consistent with the practices applied during the periods
specified in the WISCO Financial Statements, and there has been
no Material Adverse Effect in the WISCO Business. Except as set
forth on Schedule 3.20, and except as such does not have a
Material Adverse Effect, no CSK Party has with respect to the
WISCO Business:
(a) been a party to any corporate reorganization,
restructuring or merger or amalgamation or amended its
certificate or articles of incorporation or bylaws;
(b) declared or paid any dividend or declared or made any
other distribution (whether in cash, stock or property) on any of
the shares of its capital stock;
(c) incurred or discharged any obligation or liability
(whether accrued, absolute or contingent) other than in the
ordinary course of and in a manner consistent with past practices
for the WISCO Business;
(d) entered into any transaction, contract, agreement,
indenture, instrument or commitment other than in the ordinary
course of and in a manner consistent with past practices for the
WISCO Business;
(e) suffered or incurred any material damage, destruction,
loss or liability (whether or not covered by any insurance);
(f) experienced any strike, lockout or other labor trouble
such as slow down or work stoppage, or any loss of any of its key
Employees, customers, suppliers or distributors;
(g) suffered any shortage or cessation or interruption of
raw materials, supplies or utilities that could have a Material
Adverse Effect on the WISCO Business;
(h) made any change in its accounting principles, policies
and practices as utilized in the preparation of the WISCO
Financial Statements;
(i) made any loan or advance, or assumed, guaranteed,
endorsed or otherwise become liable with respect to the
liabilities or obligations of any other Person or entity, or
permitted any of its assets to be subjected to any lien or
security interest (except for Permitted Encumbrances);
20
(j) granted to any customer any allowance or discount or
changed its pricing, credit or payment policies other than in the
ordinary course of and in a manner consistent with past practices
for the WISCO Business (except for non-material variations
therefrom in the aggregate);
(k) incurred any indebtedness, liability or obligation
(absolute, accrued, contingent or otherwise) other than in the
ordinary course of and in a manner consistent with past practices
for the WISCO Business;
(l) sold, leased or otherwise disposed of any of its assets
or any right, title or interest therein other than in the
ordinary course of and in a manner consistent with past practices
for the WISCO Business;
(m) made any payment to, or for the benefit of, any present
or former Employee, director, officer or shareholder otherwise
than at the regular rates payable to them, by way of salary,
pension, bonus or other remuneration consistent with past
practices for the WISCO Business;
(n) committed to any capital expenditure project or made
any investment, in either case in excess of Five Hundred Thousand
Dollars ($500,000) not disclosed to G-P prior to the date of this
Agreement; or
(o) authorized or agreed to do any of the foregoing matters
referred to in this Section 3.20.
3.21 INDEBTEDNESS FOR BORROWED MONEY. There is no
indebtedness for borrowed money included in the WISCO Assumed
Liabilities.
3.22 KNOWLEDGE AS OF CLOSING DATE. The CSK Parties have no
Knowledge, as of the Closing Date, that any representation or
warranty made by G-P in Article IV (and related schedules) is
untrue.
3.23 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article III, no
CSK Party nor any other Person makes any other express or implied
representation or warranty on behalf of the CSK Parties.
21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF G-P
G-P represents and warrants to the CSK Parties and the Company as follows:
4.1 ORGANIZATION AND QUALIFICATION. G-P is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Georgia and has all requisite corporate
power and authority to own and operate the G-P Contributed Assets
and to carry on the G-P Business as currently conducted. G-P is
duly qualified to do business and is in good standing as a
foreign corporation in the jurisdictions listed on Schedule 4.1,
which are the only jurisdictions where the ownership or operation
of the G-P Contributed Assets or the conduct of the G-P Business
requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect.
4.2 CORPORATE AUTHORIZATION. G-P has full corporate power
and authority to execute and deliver this Agreement, and to
perform its obligations hereunder and under any agreement or
contract contemplated hereby, including the Ancillary Agreements.
The execution, delivery and performance by G-P of this Agreement
and the agreements and contracts contemplated hereby has been
duly and validly authorized by all necessary corporate action and
no additional corporate authorization is required in connection
with the execution, delivery and performance by G-P of this
Agreement and the agreements and contracts contemplated hereby.
4.3 CONSENTS AND APPROVALS. Except as specifically set
forth in Schedule 4.3 or as required by the HSR Act, no Consent
is required to be obtained by G-P from, and no notice or filing
is required to be given by G-P to or made by G-P with, any
Governmental Authority or other Person or under any Contract
listed, or required to be listed, on Schedule 4.14 in connection
with the execution, delivery and performance by G-P of this
Agreement, each of the Ancillary Agreements, any other agreement
or contract contemplated hereby and the contribution of the G-P
Contributed Assets, except where the failure to obtain any such
Consent or Consents, give any such notice or notices or make any
such filing or filings would not have a Material Adverse Effect.
4.4 NON-CONTRAVENTION. Except as set forth on Schedule
4.3, the execution, delivery and performance by G-P of this
Agreement and each of the Ancillary Agreements, and the
consummation of the transactions contemplated hereby and thereby,
does not and will not (i) violate any provision of the
certificate of incorporation or bylaws of G-P; (ii) subject to
obtaining the Consents referred to in Section 4.3, conflict with,
or result in the breach of, or constitute a default under, or
result in the termination, cancellation or acceleration (whether
after the filing of notice or the lapse of time or both) of any
right or obligation of G-P under, or to a loss of any benefit to
which G-P is entitled under, any Contract or result in the
creation of any Encumbrance (other than a Permitted Encumbrance)
upon any of the G-P Contributed Assets; or (iii) assuming
compliance with the matters set forth in Section 4.3, violate, or
result in a breach of or constitute a default under any Law,
22
rule, regulation, judgment, injunction, order, decree or other
restriction of any court or Governmental Authority to which G-P
is subject, including any Governmental Authorization, except in
each case, such matter or matters that would not have a Material
Adverse Effect.
4.5 BINDING EFFECT. This Agreement constitutes, and each
of the Ancillary Agreements when executed and delivered by the
parties thereto will constitute, a valid and legally binding
obligation of G-P, enforceable with respect to G-P in accordance
with its terms, except as the enforceability thereof may be
limited or otherwise effected by bankruptcy, insolvency,
reorganization, moratorium and similar laws of general
applicability Relating to, or affecting, creditors rights and to
general equity principles.
4.6 FINANCIAL STATEMENTS; ABSENCE OF CERTAIN CHANGES.
(a) Attached as Schedule 4.6(a) are the following financial
statements of the G-P Business: Unaudited Balance Sheet,
Statement of Income and Statement of Cash Flows, as of and for
(i) the years ended December 31, 1997 and 1998 (the "G-P Annual
Financial Statements"); and (ii) the period ended April 30, 1999
(the "G-P April Financial Statements"). (Collectively the
financial statements described in this Section 4.6(a) shall be
referred to as the "G-P Financial Statements.")
(b) Exhibit 3.6(b) sets forth the line items and a
definition for each such line item contained in each of the G-P
Financial Statements.
(c) The G-P Financial Statements are true and correct in
all material respects, present fairly the combined financial
position and results of operation, divisional equity and cash
flows of the G-P Business as of the dates and for the periods
presented, and were prepared in accordance with GAAP applied on a
basis consistent with past practice of the G-P Business. The G-P
Financial Statements reflect the underlying Books and Records of
the G-P Business, which are complete and accurate in all material
respects. Except as described in the footnotes to the G-P
Financial Statements, consistent accounting policies and accrual
methods were used in all periods presented. All non-recurring or
unusual income or expense items over $500,000, as reflected in
the 1998 Statement of Income of G-P, have been disclosed in
footnotes to the G-P Financial Statements.
(d) Except as described in the notes to the G-P Financial
Statements, all accounts receivable reflected on the G-P
Financial Statements are bona fide receivables, accounted for in
accordance with GAAP (including, without limitation, appropriate
reserves), representing amounts due with respect to actual
transactions in the operation of the G-P Business; it being
understood that this representation shall not be deemed to
constitute a warranty or guaranty that all such accounts
receivable shall be collected.
23
4.7 LITIGATION AND CLAIMS. Except as disclosed on Schedule
4.7:
(a) There is no action (whether civil, criminal or
administrative), suit, demand, claim, dispute, hearing,
proceeding (including condemnation or other proceeding in eminent
domain) or investigation pending or, to the Knowledge of G-P,
threatened, Related to the G-P Business or any of the G-P
Contributed Assets or included in the G-P Assumed Liabilities,
that individually or in the aggregate is reasonably expected to
have a Material Adverse Effect.
(b) None of the G-P Contributed Assets is subject to any
order, writ, judgment, award, injunction, or decree of or
settlement enforceable in any court or governmental or regulatory
authority of competent jurisdiction or any arbitrator or
arbitrators.
4.8 TAXES. Except as disclosed on Schedule 4.8:
(a) G-P has duly and timely filed (or has caused to be duly
and timely filed) taking into account any valid extension of the
time for filing, each Tax Return required to be filed with any
Tax Authority which includes or is based upon the G-P Contributed
Assets, or the operations, ownership or activities of the G-P
Business, and all Taxes due and payable (whether or not shown on
or required to be shown on a Tax Return) have been paid prior to
their due dates; provided, however, that the representations and
warranties set forth in this paragraph are made only to the
extent that (i) such Taxes are or may become Encumbrances on the
G-P Contributed Assets, or (ii) the Company is or may be liable
in the capacity of transferee of the Contributed Assets.
(b) G-P has duly and timely filed (or has caused to be duly
and timely filed), taking into account any valid extension of the
time for filing, each Tax Return which includes or is based upon
the assets, operations, ownership or activities of the G-P
Business, and all Taxes due and payable (whether or not shown on
or required to be shown on a Tax Return) have been paid prior to
their due dates.
(c) None of the G-P Contributed Assets (i) is subject to
any lien (other than a Permitted Encumbrance) arising in
connection with any failure or alleged failure to pay any Taxes,
(ii) secures any debt the interest on which is Tax-exempt under
Section 103(a) of the Code, (iii) is required to be or is being
depreciated under the alternative depreciation system under
Section 168(g)(2) of the Code, (iv) is "limited use property"
with the meaning of Revenue Procedure 76-30, or (v) will be
treated as owned by any other Person pursuant to the provisions
of former Section 168(f)(8) of the Code.
(d) G-P (with respect to the G-P Business) has withheld and
paid all material Taxes required to have been withheld and paid
in connection with amounts paid or owing to any Employee,
independent contractor, creditor, shareholder or other party.
(e) There are no pending, proposed or, to the Knowledge of
G-P, threatened audits, assessments or claims from any Tax
Authority for deficiencies, penalties or interest against G-P
(with respect to the G-P Contributed Assets or the G-P Business
24
or any of its assets, operations or activities); provided,
however, that the representations and warranties set forth in
this paragraph are made only to the extent that (i) such Taxes
are or may become Encumbrances on the G-P Contributed Assets, or
(ii) the Company is or may be liable in the capacity of
transferee of the Contributed Assets.
(f) None of the G-P Contributed Assets consists of any
interest in any entity classified as a partnership for United
States federal income Tax purposes.
(g) With respect to the G-P Business, G-P does not have and
has not had a permanent establishment in any foreign country, as
defined in any applicable Tax treaty or convention between the
United States and such foreign country.
4.9 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS.
(a) Schedule 4.9(a) lists all the Employees who, as of
October 1, 1999, were employed by G-P with respect to the G-P
Business, together with their respective positions, years of
employment, and rates of remuneration, as of August 20, 1999.
(b) Except as disclosed on Schedule 4.9(b), G-P is not a
party to nor does it sponsor, maintain, or contribute to any
Employee Plans that provide benefits to Employees or Retired
Employees of the G-P Business.
(c) G-P has delivered to CSK true, complete and up-to-date
copies of all documents embodying the G-P Plans including,
without limitation, all amendments thereto, all funding
agreements thereunder (including, but not limited to, trust
agreements), all summaries of such G-P Plans provided to any of
their Employees, directors, officers, shareholders or their
dependents with respect to the G-P Business, as well as the most
recent valuation for each defined contribution retirement plan
maintained by G-P and the most recent actuarial valuation for
each of the G-P Plans for which such valuations are required. G-
P has delivered to CSK a complete written description of all
unwritten G-P Plans, and will deliver such other documentation
with respect to any G-P Plan as is reasonably requested by CSK.
(d) Except as disclosed on Schedule 4.6(a) or Schedule
4.9(d) or as set forth in the Human Resources Agreement, the
transactions contemplated by this Agreement will not result in
any additional payments to, or increase the vested interest of,
any Employee, Retired Employee, director, officer, shareholder,
or their dependents under any G-P Plan; and the transactions
contemplated by this Agreement will not result in any payment to
any Employee or Retired Employee, director, officer, or
shareholder of G-P which will be subject to Section 280G of the
Code.
(e) Each G-P Plan has been established, maintained and
administered in substantial compliance with its terms and all
related documents or agreements and in substantial compliance
with applicable provisions of ERISA, the Code, and other
applicable Laws.
(f) Except as disclosed on Schedule 4.9(f), all required
employer contributions, premium payments and employee
contributions under the G-P Plans have been made and remitted to
25
the funding agents or accrued or booked thereunder within the
time prescribed by any such G-P Plan and the Laws. All insurance
premiums required with respect to any G-P Plan, including any
premiums payable to the Pension Benefit Guarantee Corporation,
have been paid, made, accrued or booked within the time
prescribed by any such G-P Plan and the applicable Law. All
benefits, expenses and other amounts due and payable to or under
any G-P Plan, have been paid, made, accrued or booked within the
time prescribed by any such G-P Plan and the Laws. Except as
disclosed on Schedule 4.9(f), all of the assets which have been
set aside in a trust or account (other than an account which is
part of G-P's general assets) to satisfy any obligation under any
G-P Plan are shown on the books and records of each such trust
and each such account at their fair market value, such current
fair market value as of the last valuation date is equal to or
exceeds the present value of any obligation under the G-P Plan,
and the liabilities for all other obligations under any G-P Plan
are accurately set forth in the G-P Financial Statements.
(g) Except as disclosed on Schedule 4.9(g), there is no
pending or, to the Knowledge of G-P, threatened claim with
respect to a G-P Plan (other than routine and reasonable claims
for benefits made in the ordinary course of the G-P Business) or
with respect to the terms and conditions of employment or
termination of employment by any Employee, or Retired Employee,
and no audit or investigation by any governmental or other law
enforcement agency is pending or has been proposed with respect
to any G-P Plan.
(h) Except as disclosed on Schedule 4.9(h), no G-P Plan is
subject to Title IV of ERISA. Neither G-P nor any Related Person
has incurred any material liability under or pursuant to Title I
or IV of ERISA or the penalty, excise tax or joint and several
liability provisions of the Code Relating to employee benefit
plans and, to the Knowledge of G-P, no event or condition has
occurred or exists which could result in any material liability
to G-P, such Related Person or the Company or a CSK Party under
or pursuant to Title I or IV of ERISA or such penalty, excise tax
or joint and several liability provisions of the Code. No G-P
Plan has incurred an "accumulated funding deficiency" within the
meaning of such sections of the Code and ERISA, whether or not
waived; and no such G-P Plan has been terminated. Except as
disclosed on Schedule 4.9(h), G-P does not contribute to, or have
any obligation to contribute to, a multiemployer plan as defined
in Section 4001(a)(3) of ERISA with regard to the Employees or
Retired Employees.
(i) Each of the G-P Plans that is intended to be qualified
under Section 401(a) of the Code, and the trust, if any, forming
a part thereof, has received a favorable determination letter
from the Internal Revenue Service as to the qualification of its
form under the Code and to the effect that each such trust is
exempt from taxation under Section 501(a) of the Code and, to the
Knowledge of G-P nothing has occurred since the date of such
determination letter that adversely affects such qualification or
tax-exempt status. Except as disclosed in Schedule 4.9(i), all
reports and other documents required to be filed with any
governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, actuarial reports,
audits or Tax Returns) have been duly filed or distributed on a
timely basis, and copies thereof have been or will be furnished
to CSK upon reasonable request.
26
4.10 COMPLIANCE WITH LAWS. Except as set forth in Schedule
4.10, the G-P Business is being conducted in compliance with all
applicable Laws to the G-P Business and, as of the Closing, the
Company will have (subject to obtaining the Consents) all
Governmental Authorizations necessary for the conduct of the G-P
Business as currently conducted, except for such non-compliance
or the failure to obtain such Consent or Consents which would not
have a Material Adverse Effect; it being understood that nothing
in this representation is intended to address any compliance
issue that is the subject of the representations and warranties
set forth in Sections 4.7, 4.8, 4.9, 4.11, 4.12, or 4.13 hereof,
and that G-P makes no representations in this Section 4.10 as to
the transferability or assignability of any such Governmental
Authorizations. G-P has not received written notice that any
Governmental Authorization may be suspended, revoked, materially
modified or canceled.
4.11 ENVIRONMENTAL MATTERS.
(a) Schedule 4.11(a) sets forth a list of all material
Environmental Permits in connection with the G-P Business.
(b) Except as would not have a Material Adverse Effect, or
as disclosed on Schedule 4.11(b):
(i) The Environmental Permits are all the permits,
licenses, certificates and authorizations of, and registrations
with, any of the Environmental Authorities pursuant to the
Environmental Laws necessary to conduct the G-P Business
substantially as presently conducted. The Environmental Permits
are in full force and effect and G-P is in compliance in all
respects thereunder. The consummation of the transactions
contemplated hereunder will not require any renewal, consent,
amendment or other action in connection with any of the
Environmental Permits. G-P is in compliance with the
Environmental Laws applicable to the conduct of the G-P Business.
(ii) There is no claim, suit, action or other
proceeding, including appeals and applications for review,
outstanding or pending against G-P pursuant to any of the
Environmental Laws Relating to the G-P Business.
(iii) G-P has no liability for any release, spill,
leakage, pumping, emission, empty, discharge, injection, escape,
leaching, disposal or dumping of any Hazardous Substances on or
from any of the G-P Real Property, except in such manner or
quantity as would not constitute a violation of any of the
Environmental Laws or Environmental Permits.
(iv) G-P has maintained all records in respect of the G-
P Business required by the Environmental Laws and Environmental
Permits, in the manner and for the time periods as so required.
(v) Since June 30, 1994, G-P has received no notice of
investigation or non-compliance or written order from any of the
Environmental Authorities, including any notice of contamination
or clean-up requirements, pursuant to any of the Environmental
Laws with respect to the G-P Business.
27
(c) G-P has no liability for release of PCB's and other
Hazardous Substances into the Fox River, Wisconsin or its
associated waterways.
4.12 INTELLECTUAL PROPERTY.
(a) Schedule 4.12 sets forth a list and description
(including the country of registration) of all issued or
registered U.S., Canadian and Mexican patents and trademarks
comprising the owned G-P Intellectual Property currently (or, to
the Knowledge of G-P, within the last 12 months) used in the G-P
Business (other than "shrink wrap" consumer software licenses).
No third party has rights in, or otherwise has the right to
restrict G-P's use of, G-P Intellectual Property owned by G-P,
and, to G-P's Knowledge, no third party has rights in, or
otherwise has the right to restrict the Company's use of the G-P
Intellectual Property as of and following the Closing.
(b) To the Knowledge of G-P, no product, component, method,
process, or material (including computer software) used, sold or
manufactured by the G-P Business infringes on, misappropriates,
or otherwise violates a valid and enforceable intellectual
property right of any other Person.
(c) There are no demands, actions or proceedings pending
or, to the Knowledge of G-P, threatened, against G-P Relating to
the G-P Business alleging infringement, misappropriation or
violation of any intellectual property right of any other Person,
and, to the Knowledge of G-P, no Person is infringing,
misappropriating, challenging, or violating, the Intellectual
Property owned by G-P, except for challenges, infringements,
misappropriation or violations which, individually or in the
aggregate, would not have a Material Adverse Effect.
(d) All of the G-P Intellectual Property will be licensed
to the Company at Closing, except to the extent certain
Intellectual Property used by G-P to provide services under the
Operational Support Agreement is specifically excluded
thereunder. G-P agrees that Intellectual Property provided under
the Operational Support Agreement will be provided to the Company
on and after Closing on the same terms and conditions under which
it was available to the G-P Business prior to the Closing in
accordance with the terms of the Transition Services Agreement.
(e) Schedule 4.12(e) sets forth G-P's efforts at addressing
the Year 2000 issue in the G-P Business. The information set
forth therein is accurate as of the date hereof, in all material
respects. G-P has developed and begun implementing a Project
Plan to remediate and/or replace Computer Systems that are used
or relied upon in the G-P Business but are not Year 2000 Ready.
Such remediation and/or replacement is scheduled to be completed
in 1999.
4.13 LABOR MATTERS. Except as disclosed on Schedule 4.13:
(a) As of the date hereof, G-P is not a party to any labor
or collective bargaining agreement or similar agreement with
respect to Employees of the G-P Business, no such Employees are
represented by any labor organization and, to the Knowledge of G-
P, there are no organizing or de-certification activities
(including any demand for recognition or certification
28
proceedings pending or threatened to be brought or filed with the
National Labor Relations Board or other labor relations tribunal)
involving the G-P Business;
(b) As of the date hereof, there are no strikes, work
stoppages, slowdowns, lockouts, unfair labor practice charges
pending or, to the Knowledge of G-P, threatened against or
involving the Employees of the G-P Business;
(c) There are no complaints, charges, claims or grievances
against G-P pending or, to the Knowledge of G-P, threatened to be
brought or filed with any Governmental Authority, arbitrator or
court based on or arising out of the employment by G-P of any
Employee of the G-P Business, except for those which,
individually or in the aggregate, would not have a Material
Adverse Effect;
(d) G-P is in compliance with all Laws Relating to the
employment of labor, including all such Laws Relating to wages,
hours, collective bargaining, discrimination, civil rights,
safety and health, immigration, workers' compensation, layoffs,
and the collection and payment of withholding and/or Social
Security Taxes and similar Taxes, except where the failure to be
in compliance would not have a Material Adverse Effect; and
(e) G-P has given all notices required to be given prior to
the Closing Date under WARN Obligations Relating to any plant
closing or mass layoff that occurred during the 90 days
immediately preceding the Effective Time pertaining to the G-P
Business.
4.14 CONTRACTS. Schedule 4.14 sets forth a list, as of the
date hereof, of each Contract that is Related to the G-P Business
other than (a) G-P Real Property Leases, which are listed on
Schedule 4.15, and collective bargaining agreements, which are
listed on Schedule 4.13, (b) purchase orders or similar
agreements for the purchase or sale of goods or services in the
ordinary course of business, (c) confidentiality agreements
entered into in the ordinary course of business in connection
with the purchase and sale of Inventory, and (d) any Contract
which requires a payment or imposes an obligation on either party
thereto of less than $1,000,000 in the aggregate. Schedule 4.14
also identifies any Contract that contains a non-compete covenant
or similar provision that could materially restrict the Company
in its conduct of the G-P Business following Closing, any
employment agreement with any Employee of the G-P Business, any
employment agreement included in the G-P Contributed Assets or G-
P Assumed Liabilities, any Contract between any Affiliates of G-
P, on one hand, and G-P on the other hand, any agreements Related
to payments in lieu of taxes, any agreement or license Related to
Intellectual Property (other than "shrink wrap" consumer software
licenses), leases and license agreements for any Computer Systems
(other than "shrink wrap" consumer software licenses), all
material agreements for telecommunications voice (including
without limitation, local, long distance and toll free service)
and data services, Internet access, hosting and use services.
Each Contract set forth on Schedule 4.14 is a valid and binding
agreement of G-P and, to the Knowledge of G-P, is in full force
and effect. Except as otherwise provided in Schedule 4.14, G-P
is not, and, to G-P's Knowledge, no other party thereto is, in
default in any material respect under any Contract listed on
Schedule 4.14 or any collective bargaining agreement listed on
Schedule 4.13.
29
4.15 REAL ESTATE LEASES. Schedule 4.15 sets forth a list,
as of the date hereof, of each material written G-P Real Estate
Lease with a term of more than one month that is Related to the G-
P Business. Each G-P Real Estate Lease set forth on Schedule
4.15 is a valid and binding agreement of G-P and is in full force
and effect. There are no defaults under any G-P Real Estate
Lease listed on Schedule 4.15 which defaults have not been cured
or waived and which would, individually or in the aggregate, have
a Material Adverse Effect.
4.16 ENTIRE BUSINESS; TITLE TO PROPERTY.
(a) Except as set forth in Schedule 4.16(a) and Schedule
4.6(a), the G-P Contributed Assets, the G-P Retained Assets
(including cash and cash accounts, disbursement accounts,
invested securities and other short and medium term investments,
the G-P Marks, the G-P Plans, and G-P's insurance policies), and
the rights specifically provided or made available to the Company
under the Ancillary Agreements, include all of the buildings,
machinery, equipment and other assets (whether tangible or
intangible) necessary for the Company immediately after Closing
to conduct in all material respects the G-P Business as conducted
as of the date hereof, and as conducted during the 12-month
period prior to the date hereof (subject to changes expressly
permitted by the terms hereof to be made after the date hereof);
provided, however, that no representation is made as to the
assignability of Government Authorizations.
(b) G-P has good (and, in the case of its Owned Real
Property, marketable) title to, or a valid and binding leasehold
interest in, the G-P Contributed Assets, free and clear of all
Encumbrances, except (i) as set forth in Schedule 4.16(b) and
(ii) any Permitted Encumbrances.
(c) G-P Contributed Assets do not include any equity
interest in any Subsidiary.
(d) The G-P Contributed Assets are in good operating
condition and repair (subject to normal wear and tear). Except
as set forth on Schedule 4.16(d), to G-P's Knowledge, there are
no material structural or mechanical defects with respect to any
buildings, improvements or equipment included in the G-P
Contributed Assets, which defects are reasonably likely to have a
Material Adverse Effect.
4.17 FINDER'S FEES. Except for Morgan Stanley Dean Witter
Co., whose fees will be paid by G-P, there is no investment
banker, broker or finder which has been retained by or is
authorized to act on behalf of G-P who might be entitled to any
fee or commission from G-P or the Company in connection with the
transactions contemplated by this Agreement.
4.18 INSURANCE. Schedule 4.18 attached hereto sets forth
the following information with respect to each insurance policy
to which G-P, with respect to the G-P Business, has been a party,
a named insured, or otherwise the beneficiary of coverage at any
time with in the past five years:
(a) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
30
(b) the scope, period and amount of coverage; and
(c) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
Schedule 4.18 also describes any self insurance arrangements
affecting the G-P Business. As of the date hereof, G-P has not
received any written notice of any retroactive premium increase
or assessment applicable to the G-P Business. Except as
disclosed on Schedule 4.18, all of such policies are in full
force and effect.
4.19 NO UNDISCLOSED LIABILITIES. With respect to the G-P
Business, G-P does not have any obligations or liabilities
(whether accrued, absolute, contingent, unliquidated or
otherwise, whether or not known to G-P, whether due or to become
due and regardless of when asserted) arising out of transactions
entered into at or prior to the Closing, or any action or
inaction at or prior to the Closing, or any state of facts
existing at or prior to the Closing other than: (a) liabilities
set forth on G-P's Financial Statements (including any notes
thereto, if any); (b) liabilities and obligations arising from or
in connection with matters disclosed pursuant to G-P's
representations and warranties in this Agreement or in the
Disclosure Schedules (none of which, except as set forth on
Schedule 4.7, is a liability resulting from a breach of contract,
breach of warranty, tort, infringement claim or lawsuit), other
than liabilities and obligations arising from or in connection
with matters disclosed pursuant to Section 4.11; (c) liabilities
and obligations arising from or in connection with matters
disclosed pursuant to Section 4.11; (d) liabilities and
obligations which have arisen after April 30, 1999 in the
ordinary course of business (none of which, except as set forth
on Schedule 4.7, is a liability resulting from a breach of
contract, breach of warranty, tort, infringement claim or
lawsuit); and (e) such other liabilities or obligations that do
not have a Material Adverse Effect.
4.20 NO MATERIAL ADVERSE CHANGE. Except as disclosed on
Schedule 4.20, since April 30, 1999, G-P has conducted the G-P
Business in the ordinary course and in a manner consistent with
the practices applied during the periods specified in the G-P
Financial Statements, and there has been no Material Adverse
Effect in the G-P Business. Except as set forth on Schedule
4.20, and except as such does not have a Material Adverse
Effect, G-P has not with respect to the G-P Business:
(a) been a party to any corporate reorganization,
restructuring or merger or amalgamation or amended its
certificate or articles of incorporation or bylaws;
(b) declared or paid any dividend or declared or made
any other distribution (whether in cash, stock or property) on
any of the shares of its capital stock;
(c) incurred or discharged any obligation or liability
(whether accrued, absolute or contingent) other than in the
ordinary course of and in a manner consistent with past practices
for the G-P Business;
31
(d) entered into any transaction, contract, agreement,
indenture, instrument or commitment other than in the ordinary
course of and in a manner consistent with past practices for the
G-P Business;
(e) suffered or incurred any material damage,
destruction, loss or liability (whether or not covered by any
insurance);
(f) experienced any strike, lockout or other labor
trouble such as slow down or work stoppage, or any loss of any of
its key Employees, customers, suppliers or distributors;
(g) suffered any shortage or cessation or interruption
of raw materials, supplies or utilities that could have a
Material Adverse Effect on the G-P Business;
(h) made any change in its accounting principles,
policies and practices as utilized in the preparation of the G-P
Financial Statements;
(i) made any loan or advance, or assumed, guaranteed,
endorsed or otherwise become liable with respect to the
liabilities or obligations of any other Person or entity, or
permitted any of its assets to be subjected to any lien or
security interest (except for Permitted Encumbrances);
(j) granted to any customer any allowance or discount
or changed its pricing, credit or payment policies other than in
the ordinary course of and in a manner consistent with past
practices for the G-P Business (except for non-material
variations therefrom in the aggregate;
(k) incurred any indebtedness, liability or obligation
(absolute, accrued, contingent or otherwise) other than in the
ordinary course of and in a manner consistent with past practices
for the G-P Business;
(l) sold, leased or otherwise disposed of any of its
assets or any right, title or interest therein other than in the
ordinary course of and in a manner consistent with past practices
for the G-P Business;
(m) made any payment to, or for the benefit of, any
present or former Employee, director, officer or shareholder
otherwise than at the regular rates payable to them, by way of
salary, pension, bonus or other remuneration consistent with past
practices for the G-P Business;
(n) committed to any capital expenditure project or
made any investment, in either case in excess of Five Hundred
Thousand Dollars ($500,000) not disclosed to CSK prior to the
date of this Agreement; or
(o) authorized or agreed to do any of the foregoing
matters referred to in this Section 4.20.
32
4.21 INDEBTEDNESS FOR BORROWED MONEY. There is no
indebtedness for borrowed money included in the G-P Assumed
Liabilities.
4.22 KNOWLEDGE AS OF CLOSING DATE. G-P has no Knowledge, as
of the Closing Date, that any representation or warranty made by
the CSK Parties in Article III (and related schedules) is untrue.
4.23 ORGANIZATION OF COMPANY. The Company is a limited
liability company, duly organized, validly existing and in good
standing under the laws of the State of Delaware.
4.24 AUTHORIZATION OF COMPANY. The Company has full limited
liability company power and authority to execute and deliver this
Agreement, and to perform its obligations hereunder and under any
agreement or contract contemplated hereby, including the
Ancillary Agreements. The execution, delivery and performance by
the Company of this Agreement and the agreements and contracts
contemplated hereby has been duly and validly authorized and no
additional limited liability company authorization or consent is
required in connection with the execution, delivery and
performance by the Company of this Agreement and the agreements
and contracts contemplated hereby.
4.25 ACTIVITIES OF COMPANY. Other than entering into this
Agreement and the agreements and contracts contemplated hereby,
the Company has not entered into any agreements or conducted any
other business.
4.26 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article IV,
neither G-P, nor any other Person makes any other express or
implied representation or warranty on behalf of G-P.
ARTICLE V
COVENANTS
5.1 COVENANTS REGARDING EMPLOYEES.
(a) At the Closing, G-P, the CSK Parties and the Company
shall enter into the Human Resources Agreement, and shall take
all actions required by them pursuant to such Human Resources
Agreement.
(b) CSK shall retain sponsorship of the CSK Plans, and
neither the Company nor G-P shall be entitled to any assets or be
liable for any obligations of the CSK Plans except as provided in
the Human Resources Agreement.
(c) G-P shall retain sponsorship of the G-P Plans and no
CSK Party shall be entitled to any assets or be liable for any
obligations of the G-P Plans except as provided in the Human
Resources Agreement.
33
5.2 COMPLIANCE WITH WARN AND SIMILAR LAWS. The Company
will timely give all notices required to be given with respect to
WARN Obligations Relating to actions taken on and after the
Closing Date.
5.3 FURTHER ASSURANCES. At any time after the Closing
Date, the CSK Parties, G-P and the Company shall promptly
execute, acknowledge and deliver any other assurances or
documents reasonably requested by the Company, G-P or the CSK
Parties, as the case may be, and necessary for them or it to
satisfy their or its respective obligations hereunder or obtain
the benefits contemplated hereby. Without limiting the
generality of the foregoing, the Company agrees that if any of
the Contributed Subsidiaries are found to own assets that are not
part of the WISCO Contributed Assets, or if any Retained Assets
are inadvertently transferred to the Company, the Company shall
transfer such assets to G-P or the appropriate CSK Party, as
applicable, at G-P's or such CSK Party's expense, as applicable,
but without consideration. If after the Closing either the
Company, a CSK Party or G-P identifies any assets of any CSK
Party or G-P that Relates to the Business and is not a Retained
Asset of the CSK Party or GP, the party retaining any such assets
shall transfer such assets to the Company at the transferring
party's expense without further consideration.
5.4 USE OF G-P INTELLECTUAL PROPERTY AND CSK MARKS. At
Closing, G-P shall provide to the Company a non-exclusive
license, substantially in the form set forth in Schedule 5.4(a)
hereto, to use the G-P Intellectual Property.
5.5 CERTAIN MATTERS RELATED TO RETAINED AND ASSUMED
LIABILITIES.
(a) With respect to all Retained Liabilities and in
particular indemnification under Sections 7.2(a)(ii) and
7.3(a)(ii), the Company shall, at the expense of the CSK Parties
or G-P as applicable, provide reasonable cooperation including
providing the CSK Parties or G-P, as applicable, as promptly as
practicable with any notices and other information received by
the Company as well as all relevant materials, information and
data requested by the CSK Parties or G-P, as applicable,
including reasonable access (without charge) to Employees of the
Company and to the Real Property.
(b) With respect to all Assumed Liabilities, G-P or the CSK
Parties, as the case may be, shall, at the Company's expense,
reasonably cooperate with the Company, provide the Company as
promptly as possible with any notices and other information
received by such parties as well as all relevant materials,
information and data requested by the Company and shall grant the
Company, without charge, reasonable access to Employees of the
CSK Parties or G-P, as applicable.
5.6 INTERCOMPANY AGREEMENTS.
(a) As of the Effective Time, G-P shall terminate and shall
cause its Affiliates to terminate, any and all agreements between
G-P and its Affiliates to the extent such agreements Relate to
the G-P Business, except as contemplated in the Ancillary
34
Agreements. Without limiting the foregoing, all intercompany
loans between G-P and any of its Affiliates Relating to the G-P
Business shall be paid or otherwise eliminated prior to the
Effective Time.
(b) As of the Effective Time, the CSK Parties shall
terminate and shall cause its Affiliates to terminate, any and
all agreements between any of the CSK Parties and its Affiliates
to the extent such agreements Relate to the WISCO Business,
except as contemplated in the Ancillary Agreements. Without
limiting the foregoing, all intercompany loans between the CSK
Parties and any of its Affiliates Relating to the WISCO Business
shall be paid or otherwise eliminated prior to the Effective
Time.
5.7 RECORDS AND RETENTION AND ACCESS. The Company shall
keep and preserve in an organized and retrievable manner the
Books and Records it receives from either party for at least
seven years from the Closing Date. The Company shall neither
dispose of nor destroy such Books and Records without first
offering to turn over possession thereof to the party that
contributed such Books and Records by written notice to such
party at least thirty (30) days prior to the proposed date of
such disposition or destruction. While such Books and Records
remain in existence, each party shall allow the other party, its
representatives, attorneys and accountants, at the requesting
party's expense, access to the Books and Records upon reasonable
request and advance notice and during normal business hours for
the purpose of interviewing, examining and copying in connection
with such parties' preparation of financial statements.
5.8 INSURANCE.
(a) G-P and the CSK Parties shall use commercially
reasonable efforts to assign to the Company, to the fullest
extent, all of the benefits and rights under any insurance
policies held by them and/or any of their Affiliates with respect
to any Losses arising out of, Related to or in connection with
the Contributed Assets, the Assumed Liabilities and their
respective Businesses (other than benefits and rights to the
extent Related to Retained Assets or Liabilities) with respect to
events occurring prior to the Closing Date (it being understood
that to the extent rights under such insurance policies include
claims for Losses related to Contributed Assets, then such claims
shall be reflected as an insurance receivable on the Closing
Working Capital Statement). The Company shall have the right to
such benefits and rights only to the extent actually paid or
payable, and exclusive of any deductibles (including pass through
deductibles for which either party or any Affiliate of such party
is required to reimburse the insurer). To the extent such
assignment is not permitted, G-P or the CSK Parties, as
applicable, shall use commercially reasonable efforts on the
Company's behalf to obtain such proceeds or benefits for the
Company, or otherwise to provide the Company with the benefit
equivalent to that which would have been available had such
assignment been permitted.
(b) The CSK Parties and G-P shall cooperate with the
Company in obtaining insurance policies for the Business to be in
effect from and after Closing. Notwithstanding such assistance,
all decisions with respect to such policies shall be made solely
by the Company, and neither the CSK Parties nor G-P shall have
any liability, whether to the Company or to any other Person,
whether as an advisor, broker or otherwise, under any other
theory, in connection with providing such assistance and
35
cooperation. The CSK Parties and G-P make no assurances
whatsoever with respect to such insurance coverage, including the
availability or price thereof.
5.9 SPECIAL CSK RETAINED LIABILITY. Notwithstanding
Section 2.1(a) hereof, CSK shall retain and be solely responsible
for, and CSK and WISCO shall indemnify and hold harmless the
Company, G-P and all G-P Affiliates from and against, any and all
costs, liabilities, damages, expenses or Losses of any kind
whatsoever which may be incurred by or assessed against any of
them arising out of or in any way related to the release, spill,
leak, pumping, pouring, emitting, emptying, discharge, injecting,
escaping, leaching, dumping, disposal or arranging for disposal
(hereinafter "release") of (i) PCBs and/or any other Hazardous
Substance into, on or around the Fox River in Wisconsin and its
associated waterways by any CSK Parties, and (ii) PCBs into, on
or around any landfill, disposal site or dump located in
Wisconsin, by CSK, WISCO or any of their Affiliates or successors
or predecessors in interest (the "Fox River Liability"). The
Company shall provide reasonable cooperation to CSK, WISCO and
their predecessors or successors in interest in their defense of
any liability for the release of PCBs and/or other Hazardous
Substances into, on or around the Fox River and its associated
waterways, and all costs incurred by the Company in so
cooperating will be reimbursed to it by CSK or WISCO. Such
indemnification shall not be limited by any Survival Period,
Deductible or WISCO Cap set forth in Article VII. For purposes
of this Section 5.9, the term "Fox River Liability" shall not
include liability for dumping or disposal of Hazardous Substances
by WISCO at the Vinland #1 and #2 disposal sites owned by WISCO.
5.10 PREPARATION OF REGISTRATION STATEMENT. As soon as
practicable after the execution and delivery of this Agreement,
the Company and G-P shall prepare and file with the Securities
and Exchange Commission the Registration Statement in connection
with the registration under the Securities Act of debt to be
incurred by the Company to refinance the Company Debt. The CSK
Parties each shall cooperate to the extent such cooperation is
reasonably required to file such Registration Statement; provided
that the CSK Parties shall not be required to execute any
documents other than a WISCO debt indemnity as contemplated in
the Operating Agreement.
5.11 USE OF WISCO NAME. As soon as practicable and in any
event within three months following the Closing, WISCO shall
change its corporate name, and immediately following the Closing
neither WISCO, CSK nor any Subsidiary or Affiliate of CSK shall
make use of the names "Wisconsin Tissue Mills", "Wisconsin
Tissue" or "WISCO" or any names confusingly similar to such names
other than in connection with the defense of litigation.
5.12 PRORATION OF CERTAIN CHARGES. The following charges
and payments may be prorated on a per diem basis and apportioned
between each party transferring Contributed Assets on the one
hand and the Company on the other, as of the Closing Date:
property taxes, utility charges, prepaid items, license and
permit fees, and similar charges imposed with respect to the
Contributed Assets. To the extent not reflected on the Final
Working Capital Statement, each party transferring Contributed
Assets shall be liable for (and shall reimburse the Company to
36
the extent the Company shall have paid) that portion of such
charges Relating to, or arising in respect to, periods on or
prior to the Closing Date, and the Company shall be liable for
(and shall reimburse the Party contributing such assets to the
extent the contributing party shall have paid) that portion of
the charges Relating to, or arising in respect to, periods after
the Closing Date.
ARTICLE VI
CONDITIONS TO CLOSING
[Intentionally Deleted]
ARTICLE VII
SURVIVAL; INDEMNIFICATION
7.1 SURVIVAL. The representations and warranties contained
in this Agreement shall survive the Closing (regardless of any
investigation, inquiry or examination made by or on behalf of, or
any Knowledge of any party hereto or the acceptance of any party
or on its behalf of a certificate and opinion) for the respective
periods (each, a "Survival Period") set forth in this Section
7.1. All of the representations and warranties of the CSK
Parties and G-P contained in this Agreement and all claims and
causes of action with respect thereto shall terminate on
April 30, 2001, except that (a) the representations and
warranties set forth in Section 3.11, 3.19(c) and 4.11(a)-(b)
shall terminate upon the expiration of the 36 month period
commencing on the Closing Date, (b) the representations and
warranties set forth in Sections 3.8, 3.9, 3.12, and 4.8, 4.9,
and 4.12 shall survive until the expiration of the applicable
statute of limitation (including any extension thereof), and (c)
the representations and warranties set forth in Sections 3.1,
3.2, 3.5, 3.17, and 4.1, 4.2, 4.5, 4.11(c), and 4.17 shall have
no expiration date. Any claim for indemnification for breach of
a representation and warranty must be made during the applicable
Survival Period. In the event notice (within the meaning of
Section 7.5(a)) of any claim for indemnification for a breach of
a representation or warranty is given within the applicable
Survival Period, an Indemnifying Party's obligations with respect
to such indemnification claim shall survive until such time as
such claim is finally resolved.
7.2 INDEMNIFICATION BY G-P
(a) G-P shall indemnify, defend and hold harmless CSK,
WISCO, their Affiliates and, if applicable, their respective
directors, officers, shareholders, partners, members, attorneys,
accountants, agents and Employees and their heirs, successors and
assigns (the "WISCO Indemnified Parties") and the Company from,
against and in respect of any damages, claims, losses, charges,
actions, suits, proceedings, deficiencies, Taxes, interest,
penalties, and reasonable costs and expenses (including
reasonable attorneys' fees, removal costs, remediation costs,
closure costs, fines, penalties and expenses of investigation and
ongoing monitoring) (collectively, the "Losses") imposed on,
sustained, incurred or suffered by or asserted against any of the
37
WISCO Indemnified Parties or the Company, directly or indirectly,
Relating to or arising out of:
(i) subject to Section 7.2(b), any breach of any
representation or warranty made by G-P in this
Agreement;
(ii) the G-P Retained Liabilities; and
(iii)the breach of any covenant or agreement of G-
P contained in this Agreement.
(b) G-P shall not be liable to the WISCO Indemnified
Parties or the Company for any Losses with respect to the matters
contained in Section 7.2(a)(i) (other than the representation in
Section 4.6) until the Losses therefrom first exceed an aggregate
amount equal to $3,760,000 (the "G-P Deductible"), and in that
event, G-P shall be liable for all Losses in excess thereof up to
an aggregate amount equal to 50% of the value of the G-P Business
as set forth in Section 2.8(a) hereof (the "G-P Cap"); provided,
however, that the G-P Deductible and the G-P Cap shall not apply
to claims arising out of the breach of a representation or
warranty, if such representation or warranty was made
fraudulently by G-P or if such representation or warranty was, to
the Knowledge of G-P, false at the time made.
7.3 INDEMNIFICATION BY CSK.
(a) CSK and its Affiliates shall indemnify, defend and hold
harmless G-P, its Affiliates and, if applicable, their respective
directors, officers, shareholders, partners, members, lenders,
attorneys, accountants, agents and Employees and their heirs,
successors and assigns (the "G-P Indemnified Parties") and the
Company from, against and in respect and to the extent of any
Losses imposed on, sustained, incurred or suffered by or asserted
against each of the G-P Indemnified Parties or the Company,
directly or indirectly, Relating to or arising out of:
(i) subject to Section 7.3(b), any breach of any
representation or warranty made by any CSK Party
in this Agreement;
(ii) the WISCO Retained Liabilities; and
(iii)the breach of any covenant or agreement of
any CSK Party contained in this Agreement.
(b) CSK shall not be liable to the G-P Indemnified Parties
or the Company for any Losses with respect to the matters
contained in Section 7.3(a)(i) (other than the representation in
Section 3.6) until the Losses therefrom first exceed an aggregate
amount equal to $7,750,000 (the "WISCO Deductible"), and in that
event, WISCO shall be liable for all Losses in excess thereof
paid or suffered by G-P or the Company up to an aggregate amount
equal to 50% of the value of the WISCO Business as set forth in
Section 2.8 hereof (the "WISCO Cap"); provided, however, that the
WISCO Deductible and the WISCO Cap shall not apply to claims
arising out of the breach of a representation or warranty, if
38
such representation or warranty was made fraudulently by WISCO or
if such representation or warranty was, to the Knowledge of
WISCO, false at the time made.
7.4 INDEMNIFICATION BY THE COMPANY.
The Company shall indemnify, defend and hold harmless
the G-P Indemnified Parties or the WISCO Indemnified Parties, as
the case may be, from and against and in respect and to the
extent of any Losses imposed on, sustained, incurred or suffered
by or asserted against either the G-P Indemnified Parties or the
WISCO Indemnified Parties, directly or indirectly, Relating to or
arising out of (i) the breach of any covenant or agreement of the
Company in this Agreement; or (ii) the Assumed Liabilities;
provided that the Company shall have no indemnification
obligations hereunder for any Losses resulting from a payment of
a claim made pursuant to clauses (i) and (ii) above and incurred
or suffered by any Person solely in such Person's capacity as a
member of the Company, equity owner or debt holder of the
Company, including Losses for diminution of the value of such
equity, debt or member interest.
7.5 INDEMNIFICATION PROCEDURES.
(a) Any Indemnified Person making a claim for
indemnification pursuant to Section 7.2, 7.3 or 7.4 above (an
"Indemnified Party") must give the party from whom
indemnification is sought (an "Indemnifying Party") notice of
such claim (in a manner consistent with Section 10.1 hereof)
describing such claim with reasonable particularity and the
nature and amount of the Loss to the extent that the nature and
amount of such Loss is known at such time (an "Indemnification
Claim Notice") promptly after the Indemnified Party receives any
written notice of any action, lawsuit, proceeding, investigation
or other claim (a "Proceeding") against or involving the
Indemnified Party by a Governmental Authority or other third
party or otherwise discovers the liability, obligations or facts
giving rise to such claim for indemnification; provided that the
failure to notify or delay in notifying an Indemnifying Party
will not relieve the Indemnifying Party of its obligations
pursuant to Section 7.2, 7.3 or 7.4, as applicable, except to the
extent that (and only to the extent that) such failure shall have
(i) caused or materially increased the Indemnifying Party's
liability, (ii) resulted in the forfeiture by the Indemnifying
Party of substantial rights and defenses or (iii) otherwise
materially prejudiced the Indemnifying Party.
(b) The Indemnifying Party shall have 30 days from the date
the Indemnification Claim Notice is deemed given pursuant to
Section 10.1 hereof (the "Notice Period") to notify the
Indemnified Party (i) whether or not the Indemnifying Party
disputes the liability of the Indemnifying Party to the
Indemnified Party with respect to such claim or demand and (ii)
whether or not it desires to defend the Indemnified Party against
such claim or demand.
(c) If (i) the Indemnifying Party agrees in writing that
the subject matter of the claim is subject to indemnification
under this Article VII and (ii) the claim for indemnification
does not relate to a matter (A) that, if determined adversely,
could reasonably be expected to expose the Indemnified Party to
criminal prosecution or penalties, (B) that, if determined
adversely, could reasonably be expected to result in the
imposition of a consent order, injunction or decree which would
39
significantly restrict the activity or conduct of the Indemnified
Party or any Affiliate thereof, or (C) as to which the
Indemnified Party shall have reasonably concluded, in good faith,
after consultation with the Indemnifying Party, that such
representation is likely to result in a conflict of interest or
materially jeopardize the viability of such defense, then the
Indemnifying Party shall have the right to defend the Indemnified
Party by appropriate proceedings and shall have the sole power to
direct and control such defense. If any Indemnified Party
desires to participate in any such defense, it may do so at its
sole cost and expense.
(d) If the claim relates to a matter for which both the
Indemnifying Party and any Indemnified Party could be liable or
responsible hereunder, such as a Loss for which both parties
could be partially liable due to the applicable Cap and the
Deductible, the Indemnifying Party and the Indemnified Parties
shall cooperate in good faith in the defense of such action. In
such event, no party shall settle any claim without the prior
consent of the other party (which consent shall not be
unreasonably withheld); provided, however, that neither an
Indemnified Party nor an Indemnifying Party shall be required to
consent to any settlement if the proposed settlement (i) does not
provide for a full release of all claims against such party, (ii)
is on a basis which would result in the imposition of a consent
order, injunction or decree or any other restriction on the
activity or conduct of such party, or (iii) is on a basis which
could, in such party's judgment, expose such party to criminal
liability or requires an admission of wrongdoing by such party.
If an Indemnified Party or an Indemnifying Party does not consent
to a definitive settlement proposed by the other party (with
respect to which a settlement agreement has been agreed to by all
parties other than such party) which settlement satisfies the
foregoing clauses (i) through (iii), then the party declining
such settlement shall thereafter have full control of the defense
of such claim, and the maximum liability of the party that
proposed such settlement shall be as though such matter had
settled on the terms so proposed, including the amount of the
proposed settlement, together with all legal costs and expenses
incurred in connection with such matter through and including the
proposed settlement date. For purposes of Section 7.2 or 7.3,
the actual amount of the Loss up to the amount of such party's
maximum liability (determined in accordance with the preceding
sentence) shall be the amount of the Loss of such Party for
purposes of determining whether the applicable Deductible has
been met. Notwithstanding anything in Section 7.2 or 7.3 to the
contrary, if an Indemnified Party and all other parties other
than the Indemnifying Parties have reached a definitive
settlement agreement which satisfies the foregoing clauses (i)
through (iii), the amount of the Loss for purposes of determining
whether the applicable Cap has been met shall equal the amount
contemplated by such definitive settlement regardless of the
actual amount of such Loss. If the parties agree to the
settlement, the relative liabilities of the parties for such
Losses shall be determined as provided in the other provisions of
this Article VII.
(e) All costs and expenses incurred by the Indemnifying
Party in defending a claim or demand under Section 7.4(c), and
all costs and expenses incurred by the Indemnified Party in
defending a claim or demand which the Indemnifying Party has
elected not to defend (including by virtue of its failure to give
timely notice to the Indemnified Party) or is not permitted to
defend under Section 7.4(c) shall be a liability of, and shall be
paid by, the Indemnifying Party, subject to any applicable
Deductible and Cap.
40
(f) To the extent the Indemnifying Party shall direct,
control or participate in the defense or settlement of any third-
party claim or demand, the Indemnified Party will give the
Indemnifying Party and its counsel access to, during normal
business hours, the relevant business records and other
documents, and shall permit them to consult with the Employees
and counsel of the Indemnified Party. The Indemnifying Party
and Indemnified Parties shall use their best efforts in the
defense of all such claims.
(g) In connection with the indemnification obligations set
forth in Sections 7.2(a)(ii) and 7.3(a)(ii), CSK Parties, G-P and
the Company shall comply with the obligations contained in
Section 5.5.
7.6 ACKNOWLEDGMENT REGARDING ENVIRONMENTAL LIABILITIES. G-
P and each of the CSK Parties acknowledge the allocation of
relative responsibility for liabilities under Environmental Laws
under this Agreement is a material term of this Agreement, and
that (i) they have taken such matters into consideration in
determining the financial and other terms of this transaction,
and (ii) they understand that the Company is accepting all risks
resulting or arising in any way from any known or unknown
liabilities in connection with such matters arising in connection
with or in any way relating to the Businesses (other than the
Retained Environmental Liabilities of either G-P or the CSK
Parties) and that CSK and WISCO are retaining all risks Relating
to the Retained Environmental Liabilities and indemnifying G-P
and the Company for certain Losses Relating to environmental
matters under Section 7.3(a) and Section 5.9. G-P and the CSK
Parties acknowledge that none of them shall have any claim of any
nature against the other or the other's Affiliates in connection
with any matters Relating to known or unknown soil or groundwater
contamination or any other claims under any Environmental Laws,
other than as set forth herein.
7.7 CHARACTERIZATION OF INDEMNIFICATION PAYMENTS. (a) To
the extent the Company is an Indemnified Party, any payments to
the Company pursuant to this Article VII shall not result in an
adjustment to any party's capital account in the Company or
percentage of ownership interest of the Company; and (b) all
amounts paid to G-P, or CSK, as the case may be, under this
Article VII shall not be treated as adjustments to the amount
contributed to the Company by G-P or CSK, pursuant to Section
2.4(a) or (b) hereof.
41
ARTICLE VIII
TAX COVENANTS
8.1 LIABILITY FOR TAXES.
(a) CSK shall be liable for, and shall indemnify, defend
and hold the Company harmless from and against, and shall be
entitled to all refunds of, any and all Taxes imposed on or with
respect to the WISCO Contributed Subsidiaries, or their
respective assets, operations or activities for any Pre-Closing
Period, except to the extent that any such Taxes are reflected on
the Final Working Capital Statement or result from a carryback
from any Post-Closing Period; provided, however, that the amount
of any indemnity obligation of CSK shall be reduced by the amount
of any Tax Benefits (for any period) realized or to be realized
by the Company, G-P or its Affiliates, or any Contributed
Subsidiary as a result of any adjustment to a Tax item for any
Pre-Closing Period.
(b) The Company shall be liable for, and shall indemnify,
defend and hold CSK harmless from and against, any and all Taxes
imposed on or with respect to the Contributed Subsidiaries or
their respective operations, ownership, assets or activities for
any Post-Closing Period.
(c) Tax items shall be apportioned between Pre-Closing
Periods and Post-Closing Periods based on a closing of the Books
and Records of the relevant entity or entities as of the Closing
Date (provided that (i) depreciation, amortization and depletion
for any Straddle Period shall be apportioned on a daily pro rata
basis and (ii) any Taxes imposed on a periodic basis (including
Real Property Taxes, but not including Taxes based on income and
receipts) for any Straddle Period shall be apportioned on a daily
pro rata basis). Notwithstanding anything to the contrary in the
preceding sentence, the parties agree that for U.S. federal
income Tax purposes, Tax items for any Straddle Period shall be
apportioned between Pre-Closing Periods and Post-Closing Periods
in accordance with U.S. Treasury Regulation Section 1.1502-76(b),
which regulation shall be reasonably interpreted by the parties
in a manner intended to achieve the method of apportionment
described in the preceding sentence. Neither CSK nor G-P will
exercise any option or election (including any election to
ratably allocate a Tax year's items under Treasury Regulation
Section 1.1502-76(b) (2) (ii)) to allocate Tax items in a manner
inconsistent with this section.
(d) G-P shall be liable for, and shall indemnify, defend
and hold the Company harmless from and against, and shall be
entitled to all refunds of, any and all Taxes imposed on or with
respect to the G-P Contributed Subsidiaries, or their respective
assets, operations or activities for any Pre-Closing Period,
except to the extent that any such Taxes are reflected on the
Final Working Capital Statement or result from a carryback from
any Post-Closing Period; provided, however, that the amount of
any indemnity obligation of G-P shall be reduced by the amount of
any Tax Benefits (for any period) realized or to be realized by
the Company, CSK or its Affiliates, or any Contributed Subsidiary
42
as a result of any adjustment to a Tax item for any Pre-Closing
Period.
(e) The Company shall be liable for, and shall indemnify,
defend and hold G-P harmless from and against, any and all Taxes
imposed on or with respect to the Contributed Subsidiaries or
their respective operations, ownership, assets or activities for
any Post-Closing Period.
(f) Tax items shall be apportioned between Pre-Closing
Periods and Post-Closing Periods based on a closing of the Books
and Records of the relevant entity or entities as of the Closing
Date (provided that (i) depreciation, amortization and depletion
for any Straddle Period shall be apportioned on a daily pro rata
basis and (ii) any Taxes imposed on a periodic basis (including
Real Property Taxes, but not including Taxes based on income and
receipts) for any Straddle Period shall be apportioned on a daily
pro rata basis). Notwithstanding anything to the contrary in the
preceding sentence, the parties agree that for U.S. federal
income Tax purposes, Tax items for any Straddle Period shall be
apportioned between Pre-Closing Periods and Post-Closing Periods
in accordance with U.S. Treasury Regulation Section 1.1502-76(b),
which regulation shall be reasonably interpreted by the parties
in a manner intended to achieve the method of apportionment
described in the preceding sentence. Neither G-P nor CSK will
exercise any option or election (including any election to
ratably allocate a Tax year's items under Treasury Regulation
Section 1.1502-76(b) (2) (ii)) to allocate Tax items in a manner
inconsistent with this section.
8.2 PREPARATION OF TAX RETURNS.
(a) CSK shall have the right and obligation to timely
prepare and file, and cause to be timely prepared and filed, when
due (taking into account any valid extension of the time for
filing), any Tax Return that is required to include the
operations, ownership, assets or activities of WISCO, with
respect to the WISCO Contributed Assets, or of any WISCO
Contributed Subsidiary for Tax Periods ending on or before the
Closing Date. CSK shall provide the Company with copies of any
such Tax Returns (to the extent that they relate to the WISCO
Contributed Assets or the Business and reasonably may have a
material effect on the Company's or its Affiliates' liability for
Taxes) at least 30 days prior to the due date (as extended) for
filing such Tax Returns. In the event that the Company
reasonably determines that any such Tax Return should be
modified, the Company shall notify CSK of the Company's proposed
modifications no later than 15 days from the date of receipt of
such Tax Return. To the extent that CSK disagrees with such
modifications, the Company and CSK shall endeavor to agree on the
positions to be taken on such return. To the extent that they
are unable to do so, a CPA Firm (other than the regular auditor
of CSK, G-P or the Company) shall be retained to determine the
position to be taken, with the fees and expenses of such CPA Firm
to be borne equally by WISCO and the Company. Any such Tax
Return which CSK is required to prepare under the terms hereof
shall (to the extent such Tax Return relates to the WISCO
Contributed Assets or the Business and reasonably may have a
material effect on the Company or its Affiliates' Tax liability)
be prepared in accordance with past Tax accounting practices used
with respect to the Tax Returns in question (unless such past
practices are no longer permissible under the Applicable Tax
43
Law), and to the extent any item is not covered by such past
practices (or such past practices are no longer permissible under
the Applicable Tax Law), in accordance with reasonable Tax
accounting practices selected by CSK. The Company shall have the
right and obligation to timely prepare and file, or cause to be
timely prepared and filed, when due (taking into account any
valid extension of the time for filing), all Tax Returns that are
required to include the operations, ownership, assets or
activities Related to the Business after the Closing Date or of
any WISCO Contributed Subsidiary for any Tax Period ending after
the Closing Date (including, solely with respect to the WISCO
Contributed Subsidiaries, Straddle Period Tax Returns). The
Company shall provide CSK with copies of any Straddle Period Tax
Returns required to be filed by the Company hereunder at least 30
days prior to the due date (as extended) for filing such Tax
Returns. In the event CSK reasonably determines that any
Straddle Period Tax Return should be modified, CSK shall notify
the Company of CSK's proposed modifications no later than fifteen
days from the date of receipt of such Tax Return. To the extent
that the Company disagrees with such modifications, the Company
and CSK shall endeavor to agree on the positions to be taken on
such return. To the extent that they are unable to do so, a CPA
Firm (other than the regular auditor of CSK, the Company or G-P)
shall be retained to determine the position to be taken, with the
fees and expenses of such accounting firm to be borne equally by
CSK and the Company. Any Straddle Period Tax Return which the
Company is required to prepare under the terms hereof shall be
prepared in accordance with past Tax accounting practices used
with respect to the Tax Returns in question (unless such past
practices are no longer permissible under the Applicable Tax
Law), and to the extent any item is not covered by such past
practices (or such past practices are no longer permissible under
the Applicable Tax Law), in accordance with reasonable Tax
accounting practices selected by the Company and CSK.
(b) CSK and the Company shall prepare and provide to each
other such Tax information as is reasonably requested by the
other party with respect to the operations, ownership, assets or
activities of the WISCO Business, with respect to the WISCO
Contributed Assets, or of any WISCO Contributed Subsidiary to the
extent such information is relevant to any Tax Return which CSK
or the Company has the right and obligation hereunder to file.
(c) To the extent necessary to comply with the provisions
of Section 8.1, as between CSK and the Company, the party not
preparing a Tax Return shall pay the party preparing such Tax
Return an amount equal to the non-preparing party's share of the
Taxes shown on such Tax Return, if any, determined in accordance
with the principles of Section 8.1, not later than 2 Business
Days before the filing of such Tax Return.
44
8.3 AMENDED TAX RETURNS.
(a) Any amended Tax Return or claim for Tax refund for any
WISCO Contributed Subsidiary for any Pre-Closing Period other
than a Straddle Period shall be filed, or caused to be filed,
only by CSK, who shall not be obligated to make (or cause to be
made) such filing. CSK shall not, without the prior written
consent of the Company (which consent shall not be unreasonably
withheld or delayed), make or cause to be made, any such filing,
to the extent such filing, if accepted, reasonably might change
the Tax liability of the Company or any Affiliate of the Company
for any Post-Closing Period. At the Company's request, CSK shall
file an amended Tax Return with respect to Taxes accrued on the
Final Working Capital Statement, except to the extent CSK
reasonably objects.
(b) Any amended Tax Return or claim for Tax refund for any
Straddle Period shall be filed by the party responsible for
filing the original Tax Return hereunder if either the Company or
CSK so requests, except that such filing shall not be done
without the consent (which shall not be unreasonably withheld or
delayed) of the Company (if the request is made by CSK) or of CSK
(if the request is made by the Company).
(c) Any amended Tax Return or claim for Tax refund for any
Post-Closing Period other than a Straddle Period shall be filed,
or caused to be filed, only by the Company, who shall not be
obligated to make (or cause to be made) such filing. The Company
shall not, without the prior written consent of CSK file, or
cause to be filed, any such filing to the extent that such
filing, if accepted, reasonably might change the Tax liability of
CSK or any Affiliates of CSK for any Pre-Closing Period or
otherwise under this Agreement.
8.4 CARRY BACKS AND CARRY FORWARDS.
(a) Unless CSK, in its sole and absolute discretion,
consents, the Company shall not and shall not permit any WISCO
Contributed Subsidiary to carry back any Losses or credits
accruing after the Closing Date to any Tax Return of CSK, a WISCO
Contributed Subsidiary, or any Affiliate of either CSK or a WISCO
Contributed Subsidiary for any Pre-Closing Period. To the extent
permitted by Applicable Tax Law, the Company shall and shall
cause each WISCO Contributed Subsidiary to make any elections and
take all such actions necessary to avoid any such carry back. To
the extent that, under Applicable Tax Law, and with CSK's
consent, a WISCO Contributed Subsidiary carries back any Losses
or credits accruing after the Closing Date to any Tax Return of
CSK or its Affiliates, CSK shall pay to the Company the excess of
the amount of (i) any Tax Benefit actually realized by CSK and
its Affiliates as a result of such carry back promptly after such
Tax Benefits are realized, over (ii) the amount of any Taxes
incurred by CSK and its Affiliates as a result of such carryback
(including without limitation, any Taxes incurred or to be
incurred as a result of any refund of Taxes or interest thereon).
The amount of any Tax Benefit shall be determined (i) by
comparing the liability of CSK and its Affiliates for Taxes,
determined without the carry back, to the liability of CSK and
its Affiliates for Taxes, taking into account the carry back and
(ii) by treating the carry back as the last item claimed by CSK
and its Affiliates in any given Tax Period.
45
(b) CSK shall not be liable hereunder for any decrease to
any net operating loss carry forward or any other Tax attributes
available to a WISCO Contributed Subsidiary resulting from
adjustments by any Tax Authority to any item of income,
deduction, credit, or exclusion on Tax Returns for which CSK is
responsible.
8.5 ADDITIONAL TAX MATTERS.
(a) As of the Closing Date, CSK shall cause all Tax
allocation, Tax sharing, Tax reimbursement and similar
arrangements or agreements applicable to the WISCO Business
between CSK and any Affiliates, on the one hand, and any of the
WISCO Contributed Subsidiaries, on the other, to be extinguished
and terminated with respect to such WISCO Contributed
Subsidiaries and any rights or obligations existing under any
such agreement or arrangement to be no longer enforceable, except
to the extent reflected on the Final Working Capital Statement.
(b) After the Closing Date, the Company will cause
appropriate Employees of the WISCO Contributed Subsidiaries to
prepare usual and customary Tax Return packages with respect to
the Tax Period beginning January 1, 1999 and ending as of the
Closing Date. The Company will use its commercially reasonable
efforts to cause such Tax Return packages to be delivered to CSK
on or before March 1, 2000, but in any event not later that May
1, 2000.
(c) CSK and G-P agree that the Company will acquire
hereunder substantially all of the property used in the WISCO
Business and that in connection therewith the Company will employ
individuals who immediately before the Closing Date were employed
in such trade or business by WISCO or the WISCO Contributed
Subsidiaries. Accordingly, pursuant to the Alternate Procedure
permitted by Rev. Proc. 96-60, 1996-2 C.B. 399, provided that the
applicable CSK Party makes available to the Company all necessary
payroll records for the calendar year that includes the Closing
Date, the Company will furnish a Form W-2 to each Employee
employed by the Company who had been employed by the WISCO
Business, disclosing all wages and other compensation paid for
such calendar year, and Taxes withheld therefrom, and WISCO and
the applicable CSK Party will be relieved of the responsibility
to do so.
(d) If the Company or any WISCO Contributed Subsidiary
receives a refund with respect to Taxes of any WISCO Contributed
Subsidiary attributable to a Pre-Closing Period (other than a Tax
refund accrued as an asset on the Final Working Capital
Statement) or a refund of Taxes accrued as a liability on the
Final Working Capital Statement, the Company shall pay, within
the thirty (30) days following the receipt of such Tax refund,
the amount of such Tax refund (reduced by the amount of any Taxes
it incurs or will incur as a result of its accrual or receipt of
such refund or any interest thereon), to CSK. If CSK receives a
Tax refund with respect to Taxes of any WISCO Contributed
Subsidiary attributable to any Post-Closing Period or any Tax
refund accrued as an asset on the Final Working Capital
Statement, CSK will pay, within thirty (30) days following the
receipt of such refund, the amount of such Tax refund (reduced by
the amount of any Taxes it incurs or will incur as a result of
its accrual or receipt of such refund or any interest thereon),
to the Company. In the case of any refund with respect to Taxes
46
of a WISCO Contributed Subsidiary attributable to a Straddle
Period, the Tax refund shall be apportioned between Pre-Closing
Periods and Post-Closing Periods in accordance with the
principles of Section 8.1(c) hereof; provided that to the extent
any Tax refund for a Straddle Period was accrued on the Final
Working Capital Statement, such refund shall be for the account
of the Company.
8.6 TAX CONTROVERSIES; COOPERATION.
(a) CSK shall control any audit, dispute, administrative,
judicial or other proceeding Related to Tax Returns filed for Pre-
Closing Periods, and the Company shall control any audit,
dispute, administrative, judicial or other proceeding Related to
Tax Returns filed for Post-Closing Periods and Straddle Periods
of any WISCO Contributed Subsidiary. Subject to the preceding
sentence, in the event an adverse determination may result in
each party having responsibility for any amount of Taxes, each
party shall be entitled to fully participate in that portion of
the proceedings Relating to the Taxes with respect to which it
may incur liability hereunder. For purposes of this Section
8.6(a), the term "participation" shall include (i) participation
in conferences, meetings or proceedings with any Tax Authority,
the subject matter of which includes an item for which such party
may have liability hereunder, (ii) participation in appearances
before any court or tribunal, the subject matter of which
includes an item for which a party may have liability hereunder,
and (iii) with respect to the matters described in the preceding
clauses (i) and (ii), participation in the submission and
determination of the content of the documentation, protests,
memorandum of fact and law, briefs, and the conduct of oral
arguments and presentations.
(b) The Company and CSK shall not agree to settle any Tax
liability or compromise any claim with respect to Taxes, which
settlement or compromise may affect the liability for Taxes (or
right to a Tax Benefit) hereunder of the other party, without
such other party's consent (which consent shall not be
unreasonably withheld or delayed).
(c) G-P and CSK shall bear their own expenses incurred in
connection with audits and other administrative judicial
proceedings Relating to Taxes for which such party or its
Affiliates are liable.
(d) The CSK Parties, G-P, the Company, and the Contributed
Subsidiaries shall cooperate (and cause their Affiliates to
cooperate) with each other and with each other's agents,
including accounting firms and legal counsel, in connection with
Tax matters Relating to the Contributed Assets or the Contributed
Subsidiaries, including (i) preparation and filing of Tax
Returns, (ii) determining the liability and amount of any Taxes
due or the right to and amount of any refund of Taxes, (iii)
examinations of Tax Returns, and (iv) any administrative or
judicial proceeding in respect of Taxes assessed or proposed to
be assessed. Such cooperation shall include (without limitation)
each party making all information and documents in its possession
relating to the Contributed Subsidiaries available to the other
party. The parties shall retain all Tax Returns, schedules and
work papers, and all material records and other documents
Relating thereto, until one year after the expiration of the
applicable statute of limitations (including, to the extent
notified by any party, any extension thereof) of the Tax Period
to which such Tax Returns and other documents and information
47
relate. Each of the parties shall also make available to the
other party, as reasonably requested and available, personnel
(including officers, directors, Employees and agents) responsible
for preparing, maintaining, and interpreting information and
documents relevant to Taxes, and personnel reasonably required as
witnesses or for purposes of providing information or documents
in connection with any administrative or judicial proceedings
Relating to Taxes.
ARTICLE IX
TERMINATION
[Intentionally Deleted]
ARTICLE X
MISCELLANEOUS
10.1 NOTICES. All notices and other communications required
or permitted by this Agreement shall be in writing and shall be
delivered by personal delivery, by nationally recognized
overnight carrier service, by facsimile, by first class mail or
by certified or registered mail, return receipt requested,
addressed to the party for whom it is intended at its address
below, or such other address as may be designated in writing
hereafter by such Person. Notices shall be deemed given one day
after sent, if sent by overnight courier; when delivered and
receipted for, if hand delivered; when received, if sent by
facsimile or other electronic means or by first class mail; or
when receipted for (or upon the date of attempted delivery where
delivery is refused or unclaimed), if sent by certified or
registered mail, return receipt requested.
To G-P: GEORGIA-PACIFIC CORPORATION
133 Peachtree Street, N.E.
Atlanta, GA 30303
Attn: General Counsel
Facsimile: (404) 230-7543
To CSK or WISCO: CHESAPEAKE CORPORATION
1021 East Cary Street
Richmond, VA 23218-2350
Attn: General Counsel
Facsimile: (804) 697-1192
48
To the Company: GEORGIA-PACIFIC TISSUE, LLC
55 Park Place
Atlanta, GA 30303
Attn: President
Facsimile: (404) 230-1763
With a copy to: GEORGIA-PACIFIC CORPORATION
133 Peachtree Street, N.E.
Atlanta, GA 30303
Attn: General Counsel
Facsimile: (404) 230-7543
10.2 AMENDMENT; WAIVER. Any provision of this Agreement may
be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by G-P, CSK
and the Company, or in the case of a waiver, by the party against
whom the waiver is to be effective. No failure or delay by any
party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by Law.
10.3 ASSIGNMENT. No party to this Agreement may assign any
of its rights or obligations under this Agreement without the
prior written consent of the other party hereto (which consent
shall not be unreasonably withheld), except that (i) G-P may
collaterally assign its rights and obligations under this
Agreement to a lender as security for the Company Debt and (ii)
following Closing, G-P and CSK may assign their rights, but not
their obligations, to any Person to whom G-P or CSK may transfer
their Units in the Company if permitted under the Operating
Agreement.
10.4 ENTIRE AGREEMENT. This Agreement (including the
Preliminary Statements, all Schedules and Exhibits hereto and the
Ancillary Agreements) contains the entire agreement between the
parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral or
written, with respect to such matters, except for the obligations
of the parties under the Confidentiality Agreement.
10.5 FULFILLMENT OF OBLIGATIONS. Any obligation of any
party to any other party under this Agreement or any of the
Ancillary Agreements, which obligation is performed, satisfied or
fulfilled by an Affiliate of such party, shall be deemed to have
been performed, satisfied or fulfilled by such party.
10.6 PARTIES IN INTEREST. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any
Person other than G-P, the CSK Parties, the Company or their
respective successors or permitted assigns, any rights or
remedies under or by reason of this Agreement.
49
10.7 PUBLIC DISCLOSURE. Notwithstanding anything herein to
the contrary, except as may be required to comply with the
requirements of any applicable Laws and the rules and regulations
of any stock exchange upon which the securities of one of the
parties (or its Affiliate) is listed, no press release or similar
public announcement or communication shall, prior to the Closing,
be made or caused to be made concerning the execution or
performance of this Agreement unless specifically approved in
advance by all parties hereto which approval shall not be
unreasonably withheld, conditioned or delayed.
10.8 EXPENSES. Except as otherwise expressly provided in
this Agreement, whether or not the transactions contemplated by
this Agreement are consummated, all costs and expenses incurred
in connection with this Agreement and the transactions
contemplated hereby shall be borne by the party incurring such
expenses.
10.9 SCHEDULES. The disclosure of any matter in any
Disclosure Schedule shall not be deemed to constitute an
admission by G-P or the CSK Parties or to otherwise imply that
any such matter is material for the purposes of this Agreement.
10.10 BULK TRANSFER LAWS. The parties acknowledge that
none of them has taken, and none of them intends to take, any
action required to comply with any applicable bulk sale or bulk
transfer laws or similar laws; provided that the CSK parties on
the one hand and G-P on the other shall indemnify the other party
and the Company for any Losses arising from such non-compliance.
10.11 GOVERNING LAW; SUBMISSION TO JURISDICTION;
SELECTION OF FORUM. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware.
Each party hereto agrees that it shall bring any action or
proceeding in respect of any claim arising out of or Related to
this Agreement or the transactions contained in or contemplated
by this Agreement, whether in tort or contract or at law or in
equity, exclusively in the United States District Court or the
state court sitting in New Castle County, Delaware (the "Chosen
Court") and (i) irrevocably submits to the exclusive jurisdiction
of the Chosen Court, (ii) waives any objection to laying venue in
any such action or proceeding in the Chosen Court, (iii) waives
any objection that the Chosen Courts are an inconvenient forum or
do not have jurisdiction over any party hereto, and (iv) agrees
that service of process upon such party in any such action or
proceeding shall be effective if notice is given in accordance
with Section 10.1 of this Agreement.
10.12 COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an
original, and all of which shall constitute one and the same
Agreement.
10.13 HEADINGS. The heading references herein and the
table of contents hereto are for convenience purposes only, do
not constitute a part of this Agreement and shall not be deemed
to limit or affect any of the provisions hereof.
50
10.14 SEVERABILITY. The provisions of this Agreement
shall be deemed severable and the invalidity or unenforceability
of any provision shall not affect the validity or enforceability
of the other provisions hereof. If any provision of this
Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to
carry out, so far as may be valid and enforceable, the intent and
purpose of such invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of such provision
to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
10.15 INJUNCTIVE RELIEF. The parties hereto acknowledge
and agree that in the event of breach or non-compliance with any
of the provisions of this Agreement monetary damages shall not
constitute a sufficient remedy. Consequently, in the event of
such a breach, G-P, the Company, WISCO or CSK, as the aggrieved
party shall be entitled to injunctive or other equitable relief,
including specific performance, in order to enforce or prevent
any violation of such provisions, in addition to any other rights
or remedies to which it may be entitled at law or otherwise.
ARTICLE XI
DEFINITIONS AND TERMS
11.1 SPECIFIC DEFINITIONS. As used in this Agreement, the
following terms shall have the meanings set forth or as
referenced below:
11.1.1 "AFFILIATES" shall mean, with respect to any Person,
any Persons directly or indirectly controlling, controlled by or
under common control with, such other Person as of the date on
which, or at any time during the period for which, the
determination of affiliation is being made. For the purpose of
this definition, "control" means (i) the ownership or control of
50% or more of the equity interest in any Person, or (ii) the
ability to direct or cause the direction of the management or
affairs of a Person, whether through the direct or indirect
ownership of voting interests, by contract or otherwise.
11.1.2 "AGREEMENT" shall mean this Agreement (including the
Preliminary Statements set forth above and all Schedules and
Exhibits), as the same may be amended or supplemented from time
to time in accordance with the terms hereof.
11.1.3 "ANCILLARY AGREEMENTS" shall mean the Human Resources
Agreement, the Operating Agreement, the Parent Roll Supply
Agreement, the Management Support Agreement, the Operational
Support Agreement, the Transition Services Agreement, the G-P
Guarantee and the WISCO Debt Indemnity.
51
11.1.4 "APPLICABLE TAX LAW" shall mean any Law of any
nation, state, region, province, locality, municipality or other
jurisdiction Relating to Taxes, including regulations and other
official pronouncements of any governmental entity or political
subdivision of such jurisdiction charged with interpreting such
Laws.
11.1.5 "ASSUMED LIABILITIES" shall mean all debts,
liabilities, commitments, or obligations whatsoever, other than
Retained Liabilities, Related to either WISCO's or G-P's Business
or Related to either WISCO's or G-P's Contributed Assets, whether
arising before or after the Closing and whether known or unknown,
fixed or contingent, including the following:
(i) all debts, liabilities, obligations or commitments
Related to or arising under the Contracts to the extent such
Contracts are assigned to the Company, including the Real Estate
Leases;
(ii) all debts, liabilities, obligations or commitments
Related to the Real Property;
(iii)the current liabilities;
(iv) except for the Retained Environmental Liabilities, all
liabilities under Environmental Laws Related to the ownership,
operation or conduct of the Business or the Real Property; and
(v) all liabilities with respect to all actions, suits,
proceedings, disputes, claims or investigations Related to the
Business or that otherwise are Related to the Contributed Assets,
at law, in equity or otherwise.
11.1.6 "BOOKS AND RECORDS" shall mean originals or true and
correct copies of all lists, files, data and databases and
documents Relating to customers, suppliers and products of the
Business, the Contributed Assets, or the Assumed Liabilities, all
personnel records or files regarding any Employee of the WISCO
Business or the G-P Business as applicable, all environmental
audit reports (and similar documentation) and assessments with
respect to the Business, and all general ledgers and underlying
books of original entry and other financial records of the
Business, except to the extent included in the Retained Assets.
11.1.7 "BUSINESS" shall mean with respect to either G-P on
the one hand, or the CSK Parties on the other hand, its
Commercial Tissue Business.
11.1.8 "BUSINESS DAY" shall mean any day other than a
Saturday, a Sunday or a day on which banks in New York City are
authorized or obligated by law or executive order to close.
11.1.9 "CHOSEN COURT" shall have the meaning set forth in
Section 10.11.
11.1.10 "CLOSING" shall mean the closing of the
transactions contemplated by this Agreement.
52
11.1.11 "CLOSING DATE" shall have the meaning set forth in
Section 2.4.
11.1.12 "CLOSING WORKING CAPITAL" shall have the meaning
set forth in Section 2.5(a).
11.1.13 "CLOSING WORKING CAPITAL STATEMENT" shall have the
meaning set forth in Section 2.5(a).
11.1.14 "CODE" shall mean the Internal Revenue Code of
1986, as amended.
11.1.15 "COMMERCIAL TISSUE BUSINESS" shall have the
meaning set forth in the Preliminary Statements to this
Agreement.
11.1.16 "COMPANY" shall have the meaning set forth in the
preamble to this Agreement.
11.1.17 "COMPANY DEBT" shall have the meaning set forth in
Section 2.8(b).
11.1.18 "COMPUTER SYSTEM" shall mean any and all computers
(including without limitation personal computers, mid-range
computers and mainframes), process and distributed control
systems and software applications and operating systems and any
other hardware, equipment, and facilities and infrastructure
systems containing an embedded computer chip.
11.1.19 "CONFIDENTIALITY AGREEMENT" shall mean the
Confidentiality Agreement between CSK and G-P dated as of
November 4, 1997, as amended by letter dated June 11, 1999.
11.1.20 "CONSENT" shall mean any consent, approval,
authorization, waiver, permit, grant, franchise, concession,
agreement, license, exemption or order of, registration,
certificate, declaration or filing with, or report or notice to
any Person, including any Governmental Authority, including those
identified on Schedules 3.3 and 4.3.
11.1.21 "CONTRACTS" shall mean all agreements, contracts,
leases, purchase orders, trade billback, refund and other
arrangements, incentive agreements, commitments, collective
bargaining agreements, and licenses that are related to the G-P
Business or the WISCO Business or their respective Contributed
Assets or to which such Contributed Assets are subject, except to
the extent included in such party's Retained Assets.
11.1.22 "CONTRIBUTED ASSETS" shall mean all of the assets
of a party which Relate to the G-P Business or the WISCO
Business, whether tangible or intangible, real or personal, as
they exist on the date hereof, with such changes, deletions or
additions thereto as may occur from the date hereof to the
Closing Date in the ordinary course of business or are otherwise
53
permitted by this Agreement (except, in each case, for the
Retained Assets), including the following:
(i) the Real Property;
(ii) the Fixtures and Equipment;
(iii) the current assets;
(iv) in the case of WISCO, the WISCO Intellectual Property;
(v) the Books and Records;
(vi) the Contracts;
(vii) the stock or other ownership interests of the
Contributed Subsidiaries;
(viii)all Governmental Authorizations which are
transferable without obtaining any Consent; and
(ix) with respect to the WISCO Business, all computer
hardware and peripherals, audio-visual equipment, RF and barcode
scanning and telecommunications equipment, whether owned or
leased by any of the CSK Parties, and all software (including
without limitation all operating system and application
software), whether owned or licensed by any of the CSK Parties.
11.1.23 "CPA FIRM" shall have the meaning set forth in
Section 2.5(b).
11.1.24A "CSK" shall have the meaning set forth in the
preamble to this Agreement.
11.1.24B "CSK MARKS" shall mean any mark that is owned by
CSK and that is described in the license agreement between CSK
and WISCO that is among the Contracts assigned by WISCO to the
Company at Closing pursuant to Section 2.4(a)(iv) hereof.
11.1.24C "CSK PARTIES" or "CSK PARTY" shall mean, as the
context requires, CSK, WISCO and the WISCO Contributed
Subsidiaries, or as the context requires, any one of the
foregoing.
11.1.24D "CSK PLAN" shall mean those Employee Plans
(including all assets and liabilities Related to such Employee
Plans) pursuant to which any Employee or Retired Employee of the
WISCO Business or the WISCO Contributed Subsidiaries is entitled
to benefits.
11.1.25 "DEDUCTIBLE" shall have the meaning set forth in
Section 7.2(b).
11.1.26 "DETERMINATION DATE" as used in Section 2.5(a)
shall mean the Effective Time.
54
11.1.27 "DISCLOSURE SCHEDULES" shall mean the Disclosure
Schedules dated the date hereof delivered by G-P or the CSK
Parties in connection with this Agreement.
11.1.28 "EFFECTIVE TIME" shall have the meaning set forth
in Section 2.4.
11.1.29 "EMPLOYEE" shall mean, with respect to the G-P
Business or the WISCO Business, an individual who is employed by
such party, whether salaried or hourly and whether on lay-off or
medical, family or other authorized leave of absence; provided
that, with respect to the G-P Business, Employee shall not
include any Employee located at G-P's Palatka, Florida, Crossett,
Arkansas, Port Hudson, Louisiana, Plattsburgh, New York or
Bellingham, Washington facilities.
11.1.29A "EMPLOYEE PLANS" shall mean as to any party all
"employee welfare benefit plans" and "employee pension benefit
plans" as respectively defined in Sections 3(1) and 3(2) of
ERISA, all employee benefit and pension plans, all other bonus,
deferred compensation, retirement, savings, excess benefit, stock
option or purchase, retention, termination, severance and
incentive plans, contracts, programs, funds, arrangements,
policies, or practices and all other plans, contracts, programs,
funds, arrangements, policies, or practices (whether voluntary or
compulsory) that provide or may provide money (other than as
current salary or wages), services, property or other benefits,
whether written or oral and whether funded or unfunded, including
(without limitation) any that have been frozen or terminated
since April 30, 1999, and any trust, escrow or similar agreement
related thereto, whether written or oral and whether funded or
unfunded, which are established and maintained by any of the
parties hereto with respect to any of their Employees, Retired
Employees, independent contractors, directors, officers,
shareholders, or their dependents or which are established or
maintained by any party (or any Person that together with any
party is or would have been as of the date of the Agreement
treated as a single employer under Section 414 of the Code) (the
"Related Persons") or with respect to which any party or any
Affiliate thereof have made or are required to make payments,
transfers or contributions.
11.1.30 "ENCUMBRANCES" shall mean liens, charges,
encumbrances, security interests, options or any other
restrictions or third-party rights, including any required third
party consents.
11.1.31A "ENVIRONMENT" means soil, land, water and air in
their natural state, including, without limitation, land surface
or subsurface strata, surface water, ground water and ambient
air.
11.1.31B "ENVIRONMENTAL AUTHORITIES" means all federal,
state or local governmental bodies or regulatory agencies,
foreign or domestic, charged with enforcing any of the
Environmental Laws.
11.1.31C "ENVIRONMENTAL LAW" shall mean any applicable
federal, state, local, common or foreign law, statute, ordinance,
rule, regulation, code, order, judgment, decree or injunction
55
Relating to (i) the protection of the Environment (including air,
water vapor, surface water, groundwater, drinking water supply,
surface or subsurface land), (ii) the exposure to, or the use,
storage, recycling, treatment, generation, transportation,
processing, handling, labeling, protection, release, spill or
discharge or disposal of Hazardous Substances, or (iii) workplace
safety or health.
11.1.31D "ENVIRONMENTAL PERMITS" means all permits,
licenses, certificates and authorizations of, and registrations
with, any of the Environmental Authorities pursuant to any of the
Environmental Laws, issued or granted to any of the CSK Parties
or G-P, as the context requires for the purpose of conducting the
WISCO Business or the G-P Business as presently conducted.
11.1.32 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and regulations promulgated
thereunder.
11.1.33 "FINAL WORKING CAPITAL STATEMENT" shall have the
meaning set forth in Section 2.5(b).
11.1.34 "FINANCIAL STATEMENTS" shall mean the WISCO
Financial Statements, the G-P Financial Statements or both, as
the context may require, as defined in Sections 3.6 and 4.6
respectively.
11.1.35 "FIXTURES AND EQUIPMENT" shall mean all furniture,
fixtures, furnishings, machinery, vehicles, equipment (including
computer hardware, computer terminals, network servers, and
research and development equipment) and other tangible personal
property Related to either the G-P Business or the WISCO
Business.
11.1.36 "FORMER FACILITY" shall mean a facility or
property previously owned or operated by a party or its
predecessors in the conduct of the G-P Business or the WISCO
Business that is not located on the Real Property or the Retained
Real Property.
11.1.37 "FOX RIVER LIABILITY" shall have the meaning set
forth in Section 5.9.
11.1.38 "GAAP" shall mean United States generally accepted
accounting principles, consistently applied.
11.1.39A "G-P" shall have the meaning set forth in the
preamble to this Agreement.
11.1.39B "G-P APRIL FINANCIAL STATEMENTS" shall have the
meaning set forth in Section 4.6(a).
11.1.39C "G-P ASSUMED LIABILITIES" shall mean the Assumed
Liabilities transferred to the Company by G-P.
56
11.1.39D "G-P BUSINESS" shall mean all of the business of G-
P conducted at its Gary, Indiana, Battleboro, Vermont, and
LaGrange, Georgia facilities, together with certain assets and
liabilities associated with its Crossett, Arkansas, and Palatka,
Florida facilities, as more fully described in Schedule 2.1(c)
hereof.
11.1.39E "G-P CAP" shall have the meaning set forth in
Section 7.2(b).
11.1.39F "G-P CONTRIBUTED ASSETS" shall mean the
Contributed Assets transferred to the Company by G-P as set forth
on Schedule 2.1(c).
11.1.39G "G-P FINANCIAL STATEMENTS" shall have the meaning
set forth in Section 4.6(a).
11.1.39H "G-P GUARANTEE" shall have the meaning set forth
in Section 2.8(b).
11.1.39I "G-P INDEMNIFIED PARTIES" shall have the meaning
set forth in Section 7.3(a).
11.1.39J "G-P INTELLECTUAL PROPERTY" shall mean the
Intellectual Property of G-P.
11.1.39K "G-P OWNED REAL PROPERTY" shall mean the Owned
Real Property of the G-P Business.
11.1.39L "G-P PLAN" shall mean those Employee Plans
(including all assets and liabilities Related to such Employee
Plans) of G-P or any Affiliate of G-P pursuant to which any
Employee or Retired Employee of the G-P Business is entitled to
benefits.
11.1.39M "G-P REAL PROPERTY" shall mean the Real Property
of the G-P Business.
11.1.39N "G-P REAL PROPERTY LEASES" shall mean the leases
Relating to the Leased Real Property of the G-P Business.
11.1.39O "G-P RETAINED ASSETS" shall mean the Retained
Assets of the G-P Business as described in Section 11.1.74
hereof.
11.1.39P "G-P RETAINED LIABILITIES" shall mean the Retained
Liabilities of the G-P Business.
11.1.40 "GOVERNMENTAL AUTHORITY" shall mean any nation or
government, any state, province or other political subdivision
thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining
to government, including any government authority, agency,
department, board, commission or instrumentality of the United
States, any State of the United States or any political
subdivision thereof.
57
11.1.41 "GOVERNMENTAL AUTHORIZATIONS" shall mean all
licenses, permits, franchises, certificates of occupancy, other
certificates and other authorizations and approvals required to
carry on a Business as currently conducted under the applicable
laws, ordinances or regulations of any Governmental Authority.
11.1.42 "HAZARDOUS SUBSTANCES" shall mean (i) petroleum,
petroleum byproducts and any petroleum fractions; (ii) any
substance or any material containing a substance, defined as
hazardous or toxic or words of similar meaning or effect under
the following United States federal statutes and their state
counterparts, as well as such statutes' implementing regulations:
the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Water Act,
the Safe Drinking Water Act, the Atomic Energy Act, the Toxic
Substances Control Act, the Federal Insecticide, Fungicide, and
Rodenticide Act, and the Clean Air Act; and (iii) any other
materials as to which liability or standards of conduct are
imposed pursuant to any Environmental Law.
11.1.43 "HSR ACT" shall mean the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
11.1.44 "HUMAN RESOURCES AGREEMENT" shall mean an
agreement to be entered into on the Closing Date by and among G-
P, WISCO, CSK and the Company substantially in the form of
Exhibit 11.1.44 attached hereto.
11.1.45 "INDEMNIFICATION CLAIM NOTICE" shall have the
meaning set forth in Section 7.5(a).
11.1.46 "INDEMNIFIED PARTIES" shall have the meaning set
forth in Section 7.5(a).
11.1.47 "INDEMNIFYING PARTY" shall have the meaning set
forth in Section 7.5(a).
11.1.48 "INTELLECTUAL PROPERTY" shall mean (except to the
extent included in the Retained Assets) the following
intellectual property (and the rights associated therewith)
Related to the G-P Business or the WISCO Business or their
Contributed Assets:
(a) trademarks, service marks, brand names, certification marks,
trade dress, assumed names, Internet domain names, trade names
and other indications of origin, the goodwill associated with the
foregoing and registrations in any jurisdiction of, and
applications in any jurisdiction to register, the foregoing
(including any extension, modification or renewal of any such
registration or application);
(b) patents, applications for patents (including provisional,
divisional, continuation, and continuation-in-part applications),
and any renewals, extensions or reissues thereof, in any
jurisdiction;
58
(c) invention disclosures and innovations (whether or not
patentable and whether or not reduced to practice);
(d) non-public information, trade secrets confidential
information, know how, proprietary technology and rights in any
jurisdiction to limit the use or disclosure thereof by any
Person;
(e) copyrighted works and registrations or applications for
registration of copyrights in any jurisdiction, and any renewals
or extensions thereof;
(f) any similar intellectual property or proprietary rights; and
(g) any claims or causes of action arising out of or Related to
any infringement or misappropriation of any of the foregoing
occurring before or after the Closing.
11.1.49 "INVENTORY" shall mean all inventory held for
resale in connection with the G-P Business or the WISCO Business,
all raw materials, work in process, finished products, office
supplies, storeroom inventory, spare parts and equipment,
wrapping, supply and packaging items, of such Business.
11.1.50 "IRS" shall mean the Internal Revenue Service.
11.1.51 "KNOWLEDGE" or any similar phrase means the actual
knowledge without investigation of those management employees of
G-P, CSK and WISCO identified on Exhibit 11.1.51.
11.1.52 "LAWS" shall mean any federal, state, foreign or
local law, statute, ordinance, rule, code, regulation, order,
judgment or decree of any Governmental Authority.
11.1.53 "LEASED REAL PROPERTY" shall mean all land
(including, to the extent included in any such lease, any
timberlands and tree farms associated with the Contributed
Assets), buildings, fixtures and other Real Property leased on
the date hereof by a party or one of the Contributed Subsidiaries
as lessee pursuant to the Real Estate Leases used by the G-P
Business or the WISCO Business.
11.1.54 "LOSSES" shall have the meaning set forth in
Section 7.2.
11.1.55 "MANAGEMENT SUPPORT AGREEMENT" shall mean the
agreement substantially in the form set forth as Exhibit 11.1.55
attached hereto between G-P and the Company pursuant to which G-P
shall supply management services to the Company.
11.1.56 "MATERIAL ADVERSE EFFECT" shall mean any and all
events, changes or effects that have occurred which have a
material adverse effect upon the value of the Contributed Assets
59
or the G-P Business or the WISCO Business, as the case may be,
taken as a whole, involving an aggregate amount equal to or
exceeding $350,000.
11.1.57 "NOTICE PERIOD" shall have the meaning set forth
in Section 7.5(b).
11.1.58 "OBJECTION" shall have the meaning set forth in
Section 2.5(b).
11.1.59 "OPERATING AGREEMENT" shall mean that certain
Operating Agreement among G-P, CSK and the Company to be dated as
of the Closing substantially in the form of Exhibit 2.1E, that
shall govern the rights and obligations of the Members of the
Company.
11.1.60 "OPERATIONAL SUPPORT AGREEMENT" shall mean the
agreement substantially in the form set forth as Exhibit 11.1.60
attached hereto by and among G-P, WISCO, CSK and the Company.
11.1.61 "OWNED REAL PROPERTY" shall mean all land and all
buildings, fixtures, and other improvements owned by either the
WISCO Business or the G-P Business.
11.1.62 "PARENT ROLL SUPPLY AGREEMENT" shall mean the
agreement substantially in the form of Exhibit 11.1.62 attached
hereto pursuant to which G-P shall supply paper products to the
Company.
11.1.63 "PERMITTED ENCUMBRANCES" shall mean, with respect
to any party's Encumbrances, (i) those expressly disclosed in the
G-P or WISCO Financial Statements; (ii) liens for Taxes (which
are not related to income, sales or withholding Taxes),
assessments and other governmental charges not yet due and
payable or due but not delinquent as of the Closing Date or being
contested in good faith by appropriate proceedings and for which
adequate reserves have been established on the Final Working
Capital Statement; (iii) mechanic's, workmen's, repairmen's,
warehousemen's, carriers, or other like liens arising or incurred
in the ordinary course of business for amounts which are not
delinquent and which will not individually or in the aggregate
have a Material Adverse Effect, original purchase price
conditional sales contracts and equipment leases with third
parties entered into in the ordinary course of business; (iv)
with respect to either the G-P Real Property or the WISCO Real
Property, (A) easements, quasi-easements, licenses, covenants,
rights-of-way and other similar restrictions, including any other
agreements, conditions, restrictions, or other matters which
would be shown by a current title report or other similar report
or listing, (B) any conditions that may be shown by a current
survey, title report or physical inspection, and (C) zoning,
building and other similar restrictions; and (v) Encumbrances not
described in the foregoing clauses (i) through (iv) and which,
individually or in the aggregate, would not have a Material
Adverse Effect (all items included in the foregoing clauses (i)
through (v), including any matter set forth in Schedules 3.16(b)
or 4.16(b), are referred to collectively herein as the "Permitted
Encumbrances").
11.1.64 "PERSON" shall mean an individual, a corporation,
a partnership, an association, a trust or other entity or
organization.
60
11.1.65 "POST-CLOSING PERIOD" shall mean, with respect to
any Contributed Subsidiary, any Tax Period commencing after the
Closing Date and the portion of any Straddle Period commencing
after the Closing Date.
11.1.66 "PRE-CLOSING PERIOD" shall-mean, with respect to
any Contributed Subsidiary, any Tax Period ending on or before
the Closing Date and the portion of any Straddle Period ending on
the Closing Date.
11.1.67 "PROCEEDING" shall have the meaning set forth in
Section 7.5(a).
11.1.68 "PROJECT PLAN" shall mean a plan to remediate
and/or replace Computer Systems that are not Year 2000 Ready.
11.1.69 "REAL ESTATE LEASES" shall mean those agreements
pursuant to which a party or one or more of its Contributed
Subsidiaries leases, subleases, licenses, or otherwise uses or
licenses, Real Property, including land (and everything growing
upon the land, to the extent included in such Real Estate Lease),
buildings, structures and improvements thereon or appurtenances
thereto, which are identified on Schedules 3.15 and 4.15.
11.1.70 "REAL PROPERTY" shall mean the Owned Real Property
and the Leased Real Property.
11.1.71 "REGISTRATION STATEMENT" shall mean the
Registration Statement on Form S-1, or other appropriate form,
including any pre-effective or post-effective amendments or
supplements thereto, filed with the Securities and Exchange
Commission by the Company under the Securities Act with respect
to the Company Debt.
11.1.72 "RELATED TO" OR "RELATING TO" shall mean primarily
related to, or used primarily in connection with.
11.1.73 "REQUIRED CONSENT" shall mean any Consents
specifically identified on Schedule 3.3 or Schedule 4.3 as a
"Required Consent" and each other material Consent, which may be
a Consent listed on Schedule 3.3 or Schedule 4.3.
11.1.74 "RETAINED ASSETS" shall mean
(i) the assets (including Real Property, tangible personal
property, accounts receivable, intellectual property and
contracts) Related to all businesses conducted by CSK or G-P and
any of their respective Affiliates other than the Commercial
Tissue Business, provided, however, with respect to G-P, all
tangible assets located at G-P's Palatka, Florida, Crossett,
Arkansas, Port Hudson, Louisiana, Plattsburgh, New York,
Bellingham, Washington and Atlanta, Georgia facilities and any
tangible asset used in part in the consumer tissue business at G-
P's offices located in Atlanta, Georgia shall constitute G-P
Retained Assets, except for the assets specifically listed on
Schedule 2.1(c) consisting of dedicated commercial tissue
converting lines which shall be included in the G-P Contributed
Assets, and all G-P Intellectual Property;
61
(ii) the stock or other ownership interests of all
Subsidiaries of either G-P or CSK other than the Contributed
Subsidiaries;
(iii) all cash and cash accounts, disbursement accounts,
outstanding checks and disbursements, investment securities and
other short-term and medium-term investments and non-trade
accounts receivable from either G-P or CSK or their respective
Affiliates and owing to the G-P Business or WISCO Business,
respectively;
(iv) all deferred Tax assets of G-P or CSK;
(v) all prepaid Taxes to the extent such prepaid Taxes are
not reflected on the Final Working Capital Statement;
(vi) all refunds of Taxes to the extent such Taxes are not
reflected on the Final Working Capital Statement;
(vii) all Tax Returns and related work papers of G-P,
CSK or their respective Affiliates;
(viii) all Books and Records which G-P or the CSK Parties
are required by law to retain, provided that G-P, CSK or WISCO
shall provide the Company with complete copies of such Books and
Records;
(ix) all G-P Plans, all CSK Plans, and all assets of such
Plans except as contemplated by the Human Resources Agreement;
(x) all Governmental Authorizations to the extent not
transferable without obtaining a Consent;
(xi) the CSK Marks subject to the license assigned pursuant
hereto;
(xii) the Retained Real Property and any financial
instruments Related to the Retained Real Property;
(xiii) all of G-P's or CSK's insurance policies, subject
to the rights of WISCO or any Contributed Subsidiary under such
insurance policies of CSK and the rights of the Company if any
under such policies;
(xiv) all contracts between either G-P or CSK and their
respective Subsidiaries other than the Contributed Subsidiaries,
including Georgia-Pacific S.A.; and
(xv) those assets of the CSK Parties specifically identified
on Schedule 2.3.
62
11.1.75 "RETAINED ENVIRONMENTAL LIABILITIES" has the
meaning set forth in the definition of "Retained Liabilities."
11.1.76 "RETAINED LIABILITIES" shall mean all of the
following debts, liabilities, commitments or obligations, whether
arising before or after the Closing and whether known or unknown,
fixed or contingent:
(i) all liabilities Related to the Retained Assets;
(ii) all (A) liabilities under Environmental Laws with
respect to any Former Facility, (B) liabilities in connection
with the Retained Real Property and (C) with respect to WISCO and
CSK, the Fox River Liability (collectively, the "Retained
Environmental Liabilities");
(iii) all liabilities which are retained by G-P or WISCO
or CSK under the Ancillary Agreements;
(iv) all liabilities under the G-P or CSK Plans, except to
the extent such liabilities are specifically assumed by the
Company or G-P pursuant to the Human Resources Agreement;
(v) all liabilities for Taxes imposed with respect to the
taxable periods, or portions thereof, ending on or before the
Closing Date except to the extent that any such Taxes are
reflected on the Final Working Capital Statement;
(vi) all liabilities for non-trade accounts payable to CSK
or G-P or their respective Affiliates which arise prior to the
Closing Date;
(vii) all liabilities for indebtedness for borrowed
money and any other obligation which are fixed as to amount and
certainty as of the Closing or which are secured by a lien that
is not a Permitted Encumbrance on any of the Contributed Assets,
but not including liabilities under Contracts included in the
Contributed Assets and Assumed Liabilities;
(viii) all severance, termination, change of control and
similar agreements, payments, debts, obligations or liabilities
with respect to any director, officer, employee or consultant of
G-P, the CSK Parties or any of their Subsidiaries which exist as
of or prior to the Closing (after taking into account the
transactions contemplated by this Agreement), other than (i)
obligations under any collective bargaining agreement, and (ii)
obligations under any severance employment, consulting, or other
agreement entered into or assumed by the Company;
(ix) all liabilities and obligations with respect to G-P's
interest in Georgia-Pacific S.A., including all contractual
obligations;
(x) all liabilities and obligations that any party hereto
agrees to retain in any Ancillary Agreement;
63
(xi) all other liabilities and obligations for which CSK,
WISCO or G-P has expressly assumed responsibility pursuant to
this Agreement or the Ancillary Agreements;
(xii) all debts, liabilities or obligations whatsoever,
that do not Relate to the G-P Business or the WISCO Business or
that do not otherwise Relate to the Contributed Assets; and
(xiii) all liabilities and obligations of the WISCO
Business described on Schedule 2.3.
11.1.77 "RETAINED REAL PROPERTY" shall mean the Real
Property retained by WISCO or G-P.
11.1.78 "RETIRED EMPLOYEE" means as to any party, former
Employees who retain rights under any of such party's Employee
Plans.
11.1.79 "SECURITIES ACT" shall mean the Securities Act of
1933, as amended.
11.1.80 "STRADDLE PERIOD" shall mean, with respect to any
Contributed Subsidiary, any Tax Period that begins before and
ends after the Closing Date.
11.1.81 "SPECIAL DISTRIBUTION" shall have the meaning set
forth in Section 2.8(b).
11.1.82 "SUBSIDIARY" shall mean, with respect to any
Person, any corporation, partnership, joint venture or other
legal entity of which such Person, either directly or through or
together with any other Subsidiary of such Person, owns any
equity interests.
11.1.83 "SURVIVAL PERIOD" shall have the meaning set forth
in Section 7.1.
11.1.84 "TARGET WORKING CAPITAL" shall have the meaning
set forth in Section 2.5(e).
11.1.85 "TAX" or "TAXES" shall mean all federal, state,
local or foreign taxes, including but not limited to income,
gross receipts, windfall profits, goods and services, value
added, severance, property, production, sales, use, license,
excise, franchise, employment, withholding or similar taxes,
together with any interest, additions or penalties with respect
thereto and any interest in respect of such additions or
penalties.
11.1.86 "TAX AUTHORITY" shall mean, with respect to any
Tax, the governmental entity or political subdivision thereof
that imposes such Tax, and the agency (if any) charged with the
administration or collection of such Taxes for such entity or
subdivision.
11.1.87 "TAX BENEFIT" shall mean the amount by which a
Person's Tax liability is actually reduced (including any related
interest actually received from a Tax Authority in connection
therewith).
64
11.1.88 "TAX PERIOD" shall mean, with respect to any Tax,
the period for which the Tax is reported as provided under
Applicable Tax Laws.
11.1.89 "TAX RETURN" shall mean, with respect to any Tax,
any information return with respect to such Tax, any report,
statement, declaration or document required to be filed under the
Applicable Tax Law in respect of such Tax, any claim for refund
of Taxes paid, and any amendment or supplement to any of the
foregoing.
11.1.90 "TRANSFER COSTS" shall have the meaning set forth
in Section 2.6.
11.1.91 "TRANSITION SERVICES AGREEMENT" shall mean the
agreement substantially in the form of Exhibit 11.1.91 attached
hereto to be entered into at the Closing among the Company, CSK
and WISCO under which CSK and its Affiliates will provide
transition services requested by the Company in order to allow it
to operate the WISCO Business after the Closing in a manner
consistent with past practices.
11.1.92 "WARN" shall have the meaning set forth in Section
3.13(e).
11.1.93 "WARN OBLIGATIONS" shall have the meaning set
forth in Section 3.13(e).
11.1.94A "WISCO" shall have the meaning set forth in the
preamble to this Agreement.
11.1.94B "WISCO APRIL FINANCIAL STATEMENTS" shall have the
meaning set forth in Section 3.6(a).
11.1.94C "WISCO ASSUMED LIABILITIES" shall mean all Assumed
Liabilities transferred to the Company by WISCO.
11.1.94D "WISCO BUSINESS" shall have the meaning set forth
in the Preliminary Statements to this Agreement.
11.1.94E "WISCO CAP" shall have the meaning set forth in
Section 7.3(b).
11.1.94F "WISCO CONTRIBUTED ASSETS" shall mean all assets
used directly and predominantly in the Commercial Tissue Business
conducted by CSK whether directly or through WISCO or its
Contributed Subsidiaries.
11.1.94G "WISCO CONTRIBUTED SUBSIDIARIES" shall mean the
Contributed Subsidiaries of WISCO as set forth on Schedule
3.16(c).
11.1.94H "WISCO DEBT INDEMNITY" shall have the meaning set
forth in Section 2.8(b).
11.1.94I "WISCO FINANCIAL STATEMENTS" shall have the
meaning set forth in Section 3.6(a).
65
11.1.94J "WISCO INDEMNIFIED PARTIES" shall have the meaning
set forth in Section 7.2(a).
11.1.94K "WISCO INTELLECTUAL PROPERTY" shall mean the
Intellectual Property of WISCO (and CSK to the extent utilized in
the WISCO Business) and includes, without limitation, the WISCO
Marks.
11.1.94L "WISCO LEASED REAL PROPERTY" shall mean the Leased
Real Property of WISCO.
11.1.94M "WISCO MARKS" shall mean any mark currently owned
by the WISCO Business and any mark owned by the CSK Parties that
include the words, phrases and names "Wisconsin Tissue Mills",
"Wisconsin Tissue" or "WISCO", or any variation thereof, and any
trademark, service mark, trade dress, symbol or logo using such
words, phrases or names and any variation thereof.
11.1.94N "WISCO OWNED REAL PROPERTY" shall mean the Owned
Real Property Related to the WISCO Business.
11.1.94O "WISCO REAL PROPERTY" shall mean the Real Property
used in connection with the WISCO Business.
11.1.94P "WISCO REQUIRED CONSENT" shall mean the Required
Consents pursuant to the WISCO Business and set forth on Schedule
3.3.
11.1.94Q "WISCO RETAINED ASSETS" shall mean the Retained
Assets of the WISCO Business as described in Section 11.1.74
hereof.
11.1.94R "WISCO RETAINED LIABILITIES" shall mean the
Retained Liabilities of the WISCO Business.
11.1.95 "WMEX" shall mean Wisconsin Tissue de Mexico, S.A.
de C.V., a corporation organized under the laws of Mexico and a
wholly owned subsidiary of WISCO.
11.1.96 "WORKING CAPITAL" shall mean the excess of current
assets over current liabilities at the Determination Date on a
consolidated basis as determined in accordance with Section 2.5.
11.1.97 "YEAR 2000 READY" shall mean that the Computer
System when used in accordance with its associated documentation,
will not be materially adversely affected by date data but
instead will process such date data accurately with the
implementation of a tested procedure, or is not Year 2000
compliant but will not cause any such processing problem. Year
2000 Ready also means that the applicable Computer System when
used in accordance with its associated documentation will
accurately process date data such that, no value for a date prior
66
to year 2028 will cause any interruption in processing; date-
based functionality operates consistently for dates prior to,
during and after Year 2000 (through year 2027); in all interfaces
and data storage, the century or any other date is specified
either explicitly or by algorithms or inferencing rules; and leap
years will be accurately recognized and processed. If
implemented properly, the Project Plan should be successful in
making all material Computer Systems Year 2000 Ready, except to
the extent that a Computer System interfaces or exchanges data
with other software, firmware, hardware or other similar or
related items of automated, computerized or software systems that
are not Year 2000 compliant.
11.2 OTHER TERMS. Other terms may be defined elsewhere in
the text of this Agreement, and unless otherwise indicated shall
have such meanings throughout this Agreement.
11.3 OTHER DEFINITIONAL PROVISIONS.
(a) The words "whereof", "herein", and "hereunder" and
words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular
provision of this Agreement. The word "including" means
"including without limitation."
(b) The terms defined in the singular shall have a
comparable meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States
dollars.
67
IN WITNESS WHEREOF, the parties have executed this Joint
Venture Agreement as of the date first written above.
WISCONSIN TISSUE MILLS INC.
By: ____________________________
Name: William T. Tolley
Title: Vice President
GEORGIA-PACIFIC CORPORATION
By: ___________________________
Name: Michael C. Burandt
Title: Senior Vice President -
Packaged Products
CHESAPEAKE CORPORATION
By: ___________________________
Name: William T. Tolley
Title: Senior Vice President -
Finance
and Chief Financial Officer
GEORGIA-PACIFIC TISSUE, LLC
By:______________________________
Name: Michael C. Burandt
Title: Manager
68
EXHIBIT 3.6(b)
- The "Unaudited Balance Sheet" should be defined to
- include the following line items, with specific
representations for each line item:
- Receivables (Represents amounts due from sales to
- outside customers; determined in accordance with
GAAP; stated at estimated net realizable value with
adequate reserves for customer deductions, cash
rebates, and uncollectible accounts).
- Inventories (Represents raw materials, operating
- supplies and packaging materials, storeroom parts
and supplies, work in process, and finished goods
held for resale; determined in accordance with GAAP
stated at cost without LIFO reserves, and with
adequate reserves for obsolescence).
- Prepaid Expenses and Other Current Assets (all known
- prepaid expenses, deferred expenses and other
current assets; expected to be amortized or settled
within one year; excluding income taxes and debt.
- Current Assets (Represents the sum total of
- Receivables plus Inventories plus Prepaid Expenses
and Other Current Assets as defined above).
- Property, Plant and Equipment (Represents land,
- buildings, machinery and equipment, and construction
in progress; owned or leased under capital leases;
stated at cost less accumulated depreciation in
accordance with GAAP).
- Other Noncurrent Assets (Represents all known other
- noncurrent assets; excluding any noncurrent assets
related to income taxes and debt).
- Total Assets (Represents the sum total of Current
- Assets plus Property, Plant and Equipment plus Other
Noncurrent Assets as defined above).
- Accounts Payable (Represents all known amounts
- payable to vendors; payable within one year;
incurred in the normal conduct of business).
- Accrued Expenses and Other Current Liabilities
- (Represents all known other accrued expenses,
deferred revenues and current liabilities; expected
to be amortized or settled within one year; incurred
in the normal conduct of business; including
adequate provision for the current portion of any
loss contingencies required to be accrued in
accordance with SFAS No. 5; excluding any
liabilities related to income taxes and debt).
- Current Liabilities (Represents the sum total of
- Accounts Payable plus Accrued Expenses and Other
Current Liabilities as defined above).
- Long-term Liabilities (Represents all known long-
- term liabilities; incurred in the normal conduct of
business; including adequate provision for the non-
current portion of any loss contingencies required
to be accrued in accordance with SFAS No. 5;
excluding any liabilities related to income taxes
and debt).
- Total Liabilities (Represents the sum total of
- Current Liabilities plus Long-term Liabilities as
defined above).
- Equity (Represents Total Assets minus Total
- Liabilities as defined above).
- Total Liabilities and Equity (Represents the sum
- total of Total Liabilities plus Equity as defined
above).
- Working Capital (Represents Current Assets minus
- Current Liabilities as defined above).
- The "Unaudited Statement of Income" should be defined
- to include the following income statement line items,
with specific representations for each line item:
- Net Sales (Represents net revenues from sales to
- outside customers; determined in accordance with
GAAP; excluding sales to Affiliates).
- Cost of Sales (Represents all known costs for
- procuring, manufacturing and handling products sold
to outside customers; excluding depreciation and
amortization expenses;
- Selling, General and Administrative Expenses
- (Represents all known selling, general and
administrative expenses for the period; excluding
depreciation and amortization expenses);
- Other Income (Represents all known other income for
- the period).
- Other Expense (Represents all known other expenses
- for the period; excluding depreciation and
amortization expenses; excluding interest expense;
and excluding income taxes).
- Earnings Before Interest, Income Taxes, Depreciation
- and Amortization (Represents Net Sales minus Cost of
Sales minus Selling, General and Administrative
Expenses plus Other Income minus Other Expense as
defined above).
- Depreciation and Amortization Expenses (Represents
- all known depreciation and amortization expenses for
the period, including the depreciation expense
component of tissue parent roll manufacturing
costs).
- Earnings Before Interest and Income Taxes
- (Represents Earnings Before Interest, Income Taxes,
Depreciation and Amortization minus Depreciation and
Amortization Expenses as defined above).
- The "Unaudited Statement of Cash Flows" should be defined
- to include the following cash flow statement line items:
- Earnings Before Interest and Income Taxes (As
- defined above).
- Depreciation and Amortization Expenses (As defined
- above).
- Earnings Before Interest, Income Taxes, Depreciation
- and Amortization (As defined above).
- Income Tax Expense (Represents the provision for
- income taxes, based on the estimated effective tax
rate for the period).
- Change in Working Capital (Represents Working
- Capital as of the beginning of the period minus
Working Capital as of the end of the period).
- Cash Provided by Operations (Represents Earnings
- Before Interest, Income Taxes, Depreciation and
Amortization minus Income Tax Expense)
- Capital Expenditures (Represents all known
- capitalizable expenditures for property, plant and
equipment in the period).
- Other Investing Activities (Represents other cash
- provided or used in the period, not reflected
elsewhere in the Statement of Free Cash Flows;
excluding cash provided by or used for financing
activities).
- Free Cash Flow (Cash Provided by Operations minus
- Capital Expenditures minus Other Investing
Activities as defined above).
SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 2.1(c) G-P Contributed Assets
Schedule 2.3 WISCO Retained Assets and Retained
Liabilities
Schedule 3.1 CSK Parties Qualifications
Schedule 3.3 WISCO Consent and Approvals
Schedule 3.6(a) Financial Statements
Schedule 3.6(c) Changes in Accounting Methods
Schedule 3.7 Litigation and Claims
Schedule 3.8 Taxes
Schedule 3.9(a) Employees
Schedule 3.9(b) Employee Plans
Schedule 3.9(d) Changes to Plans
Schedule 3.9(f) Funding of Plans
Schedule 3.9(g) Claims Regarding Plans
Schedule 3.9(h) Multi-Employer Plans
Schedule 3.9(i) Plan Documents
Schedule 3.10 Compliance with Laws
Schedule 3.11(a) Environmental Permits
Schedule 3.11(b) Environmental Matters
Schedule 3.12 Intellectual Property
Schedule 3.12(e) Year 2000
Schedule 3.13 Labor Matters
Schedule 3.14 Material Contracts
Schedule 3.15 WISCO Real Estate Leases
Schedule 3.16(a) Exceptions to Entire Business
Schedule 3.16(b) Encumbrances
Schedule 3.16(c) Contributed Subsidiaries
Schedule 3.16(d) Condition of Assets
Schedule 3.18 Insurance
Schedule 3.20 Material Adverse Change
Schedule 4.1 G-P Qualifications
Schedule 4.3 G-P Consent and Approvals
Schedule 4.6(a) Financial Statements
Schedule 4.7 Litigation and Claims
Schedule 4.8 Taxes
Schedule 4.9(a) Employees
Schedule 4.9(b) Employee Plans
Schedule 4.9(d) Changes to Plans
Schedule 4.9(f) Funding of Plans
Schedule 4.9(g) Claims Regarding Plans
Schedule 4.9(h) Multi-Employer Plans
Schedule 4.9(i) Plan Documents
Schedule 4.10 Compliance with Laws
Schedule 4.11(a) Environmental Permits
Schedule 4.11(b) Environmental Matters
Schedule 4.12 Intellectual Property
Schedule 4.12(e) Year 2000
Schedule 4.13 Labor Matters
Schedule 4.14 Material Contracts
Schedule 4.15 G-P Real Estate Leases
Schedule 4.16(a) Exceptions to Entire Business
Schedule 4.16(b) Encumbrances
Schedule 4.16(c) Condition of Assets
Schedule 4.18 Insurance
Schedule 4.20 Material Adverse Changes
Schedule 5.4(a) G-P Intellectual Property
EXHIBITS
Exhibit 1.1A Certificate of Formation
Exhibit 2.1E Form of Operating Agreement
Exhibit 2.4A(vii) Opinion of Hunton & Williams
Exhibit 2.4B(vii) Opinion of General Counsel of G-P
Exhibit 2.8A Company Debt Commitment Letter and
Promissory Note
Exhibit 2.8B G-P Guarantee
Exhibit 2.8C WISCO Debt Indemnity
Exhibit 3.6(b) Financial Statement Line Items
Exhibit 11.1.44 Form of Human Resources Agreement
Exhibit 11.1.51 Individuals with Knowledge
Exhibit 11.1.55 Form of Management Support Agreement
Exhibit 11.1.60 Form of Operational Support Agreement
Exhibit 11.1.62 Form of Parent Roll Supply Agreement
Exhibit 11.1.91 Form of Transition Services Agreement
EX-2.2
OPERATING AGREEMENT
OF
GEORGIA-PACIFIC TISSUE, LLC
Dated As Of:
October 4, 1999
TABLE OF CONTENTS
Page No.
ARTICLE I DEFINITIONS AND TERMS 1
Section 1.1 Certain Definitions. 1
Section 1.2 Rules of Construction. 11
ARTICLE II GENERAL MATTERS 12
Section 2.1 Formation. 12
Section 2.2 Purposes and Business. 12
Section 2.3 Offices. 12
Section 2.4 Name. 12
Section 2.5 Term. 13
Section 2.6 Members. 13
ARTICLE III FINANCIAL AND TAX MATTERS 13
Section 3.1 Capital Contributions. 13
Section 3.2 Loans from Members. 14
Section 3.3 Restrictions Relating to Capital; Company
Property. 14
Section 3.4 Tax Treatment. 15
Section 3.5 Allocation of Profits. 15
Section 3.6 Allocation of Losses. 15
Section 3.7 Special Allocations. 16
Section 3.8 Offsetting Special Allocations. 17
Section 3.9 Other Allocation Rules. 18
Section 3.10 Tax Elections. 18
Section 3.11 Tax Allocations; Code Section 704(c). 19
Section 3.12 Tax Matters Member. 19
Section 3.13 Regular Distribution Policy. 20
Section 3.14 Special Distribution. 20
Section 3.15 Accelerated Gains Tax Liability of WISCO. 20
Section 3.16 Sharing of Company Tax Benefits. 23
Section 3.17 Permanent Company Debt. 25
ARTICLE IV MANAGEMENT 27
Section 4.1 General. 27
Section 4.2 Board Composition. 27
Section 4.3 Term; Removal; Vacancies. 27
Section 4.4 Notice; Quorum. 27
Section 4.5 Voting. 28
Section 4.6 Telephonic Meeting; Written Consents. 29
Section 4.7 Committees of the Board; Officers. 29
Section 4.8 Execution of Documents. 29
Section 4.9 Reliance on Documents and Reports. 30
Section 4.10 Standard of Care; Indemnification. 30
Section 4.11 Member Action. 31
Section 4.12 Certain Transactions. 31
ARTICLE V ACCOUNTING, BOOKS AND RECORDS 32
Section 5.1 Fiscal Year. 32
Section 5.2 Books and Records. 32
Section 5.3 Auditors. 32
Section 5.4 Reporting. 32
Section 5.5 Banking. 33
Section 5.6 Tax Return Information. 33
Section 5.7 Delegation of Responsibility for Accounting
and Reports. 33
ARTICLE VI CONFIDENTIALITY 33
Section 6.1 Confidentiality Obligation. 33
Section 6.2 Exceptions from Confidentiality Obligation. 34
Section 6.3 Employees, Agents and Advisers. 35
Section 6.4 Return of Confidential Information. 35
Section 6.5 Survival After Termination. 36
ARTICLE VII TRANSFER OF UNITS; PUT AND CALL RIGHTS 36
Section 7.1 General. 36
Section 7.2 Put and Call Rights. 37
Section 7.3 Member Transfers. 38
Section 7.4 Retirement. 38
ARTICLE VIII DISSOLUTION AND WINDING UP; BUY OUT RIGHTS 38
Section 8.1 Dissolution. 38
Section 8.2 Winding Up. 39
Section 8.3 In-Kind Distributions. 39
Section 8.4 Cancellation of Certificate of Formation. 40
Section 8.5 Buy Out Rights. 40
ARTICLE IX CERTIFICATES EVIDENCING UNITS 40
Section 9.1 Certificates. 40
Section 9.2 Register. 40
Section 9.3 New Certificates. 41
Section 9.4 Interest as a Security. 41
Section 9.5 Legends. 41
ARTICLE X MISCELLANEOUS 42
Section 10.1 Notices. 42
Section 10.2 Amendment; Waiver. 42
Section 10.3 Assignment. 42
Section 10.4 Entire Agreement. 42
Section 10.5 Public Disclosure. 42
Section 10.6 Parties in Interest. 43
Section 10.7 Governing Law; Submission to Jurisdiction;
Selection of Forum. 43
Section 10.8 Counterparts. 43
Section 10.9 Severability. 43
Section 10.10 Equitable Relief. 44
Section 10.11 No Agency. 44
Section 10.12 Limitation of Liability. 44
Section 10.13 Non-Exclusive Business. 44
Section 10.14 Dispute Resolution. 45
EXHIBIT A Form of Unit Certificate
SCHEDULE 1 Identification of Members
OPERATING AGREEMENT
OF
GEORGIA-PACIFIC TISSUE, LLC
THIS OPERATING AGREEMENT of GEORGIA-PACIFIC TISSUE,
LLC, a Delaware limited liability company (the "Company"), is
made and entered into as of October 4, 1999, among WISCONSIN
TISSUE MILLS INC., a Delaware corporation and a wholly owned
subsidiary of Chesapeake Corporation ("WISCO"), GEORGIA-PACIFIC
CORPORATION, a Georgia corporation ("G-P"), and such other
Persons that become Members as herein provided.
RECITALS
WHEREAS, the Company, G-P, WISCO and certain WISCO
Affiliates are parties to that certain Joint Venture Agreement,
dated as of October 4, 1999 (the "Joint Venture Agreement");
WHEREAS, pursuant to and subject to the terms and
conditions of the Joint Venture Agreement, each of WISCO and G-P
will contribute, or cause to be contributed, to the Company
certain assets and liabilities in exchange for equity interests
in the Company;
WHEREAS, the Members desire to enter into this
Agreement, which shall constitute the limited liability company
agreement of the Members under the Delaware Act, for the purpose
of setting forth the agreements of the Members as to the affairs
of the Company and the conduct of its business;
NOW, THEREFORE, in consideration of the foregoing and
of the mutual covenants and undertakings contained herein, the
parties agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Certain Definitions.
As used herein, the following terms shall have the
meanings set forth or as referenced below:
"Adjusted Capital Account Deficit" means, with respect
to any Member, the deficit balance, if any, in such Member's
Capital Account as of the end of the relevant Fiscal Year, after
giving effect to the following adjustments:
(i) Add to such Capital Account any amounts which
such Member is treated as obligated to restore pursuant to
Regulations Section 1.704-1(b)(2)(ii)(c) by virtue of such
Member's guarantee or indemnity agreement with respect to the
Company Debt or is deemed to be obligated to restore pursuant to
the penultimate sentences of Regulations Sections 1.704-2(g)(1)
and 1.704-2(i)(5); and
1
(ii) Subtract from such Capital Account the items
described in Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the
Regulations.
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section
1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
"Adjusted Property" means any property the Carrying
Value of which has been adjusted pursuant to Section 3.5(e);
"Affiliate" means, with respect to any Person, any
other Person directly or indirectly controlling, controlled by or
under direct or indirect common control with such first Person as
of the date on which, or at any time during the period for which,
the determination of affiliation is being made. For the purpose
of this definition, "control" means (i) the direct or indirect
ownership or control of more than 50% of the voting stock or
general partnership interest or other voting interest in any
Person, or (ii) the ability to direct or cause the direction of
the management or affairs of a Person, whether through the direct
or indirect ownership of voting interests, by contract or
otherwise.
"Affiliate Member" shall have the meaning set forth in
Section 7.3(a).
"Agreed Value" means the Fair Market Value of
Contributed Assets; provided that the initial Agreed Value of
Contributed Assets that a Member is obligated to transfer, or
cause to be transferred, to the Company pursuant to the Joint
Venture Agreement shall be the amount set forth in, or determined
pursuant to, Section 3.1 of this Agreement.
"Agreement" shall mean this Operating Agreement,
including the schedules and exhibits hereto, as the same may be
amended or supplemented from time to time in accordance with the
terms hereof.
"Ancillary Agreements" shall have the meaning set forth
in the Joint Venture Agreement.
"Board" means the governance board of the Company
consisting of all Managers or, as may be applicable, any duly
appointed committee of the Board.
"Built In Gain" means, with respect to any Contributed
Asset, the excess of the Fair Market Value of such Contributed
Asset on the Closing Date as determined under Section 3.1(a) over
the Company's adjusted basis for federal income tax purposes in
such Contributed Asset immediately following its contribution to
the Company.
"Business Day" means a day, other than a Saturday or
Sunday, on which banks generally are open in New York City for a
full range of business.
"Call Price" shall have the meaning set forth in
Section 7.2(b).
2
"Capital Account" means, with respect to any Member,
the Capital Account maintained for such Member in accordance with
the following provisions:
(i) To each Member's Capital Account there shall
be added the amount of money and the initial Gross Asset Value of
any property (other than money) contributed to the Company by
such Member (or its predecessors in interest) with respect to the
Interest in the Company held by such Member, such Member's
distributive share of Profits and any items in the nature of
income or gain which are specially allocated pursuant to Section
3.7 or Section 3.8, and the amount of any Company liabilities
assumed by such Member or which are secured by any Company
property distributed to such Member.
(ii) From each Member's Capital Account there
shall be subtracted the amount of money and the Gross Asset Value
of any property distributed to such Member pursuant to any
provision of this Agreement, such Member's distributive share of
Losses and any items in the nature of expense or loss which are
specially allocated pursuant to Section 3.7 or Section 3.8, and
the amount of any liabilities of such Member assumed by the
Company or which are secured by any property contributed by such
Member to the Company.
(iii) In the event all or a portion of an
Interest in the Company is transferred in accordance with the
terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the
transferred Interest.
(iv) In determining the amount of any liability
for purposes of subparagraphs (i) and (ii) above, there shall be
taken into account Code Section 752(c) and any other applicable
provisions of the Code and Regulations.
The foregoing provisions and the other provisions of
this Agreement relating to the maintenance of Capital Accounts
are intended to comply with Regulations Section 1.704-1(b), and
shall be interpreted and applied in a manner consistent with such
Regulations. In the event the Board shall determine that it is
necessary to modify the manner in which the Capital Accounts, or
any debits or credits thereto (including, without limitation,
debits or credits relating to liabilities which are secured by
contributions or distributed property or which are assumed by the
Company or any Member) are computed in order to comply with such
Regulations, the Board may make such modification, provided that
such modification is not likely to have a material adverse effect
on the amounts distributed to any Member upon the dissolution of
the Company. The Board also shall (i) make any adjustments that
are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of Company capital
reflected on the Company's balance sheet, as computed for book
purposes in accordance with Regulations Section
1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications
in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-1(b),
provided that, to the extent that any such adjustment is
inconsistent with other provisions of this Agreement and would
have a material adverse effect on any Member, such adjustment
shall require the consent of such Member.
3
"Capital Contribution" means, with respect to any
Member, the amount of cash and the Agreed Value of Contributed
Assets contributed by such Member to the Company in accordance
with Section 3.1.
"Cash Balances" means all cash accounts on a balance
sheet representing paper currency and coins, negotiable money
orders, checks and bank balances as well as cash equivalents in
the form of highly liquid securities with a known market value
and a maturity, when acquired, of less than three months.
"Certificate" means a certificate evidencing Units
substantially in the form of Exhibit A to this Agreement.
"Certificate of Formation" shall have the meaning set
forth in Section 2.1.
"Closing" and "Closing Date" shall have the respective
meanings set forth in the Joint Venture Agreement.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor to such statute.
"Commercial Tissue Business" shall have the meaning set
forth in the Joint Venture Agreement.
"Company" shall have the meaning set forth in the
preamble hereto.
"Company Business" means the business intended to be
carried on by the Company Group, as described in Section 2.2
hereof.
"Company Debt" means the debt incurred by the Company
on or about the Closing Date solely to fund the Special
Distribution, as further described in Section 2.8(b) of the Joint
Venture Agreement, and refinancing or replacement therefor
(including up to $8 million of related expenses, including legal
fees, accounting fees, printing fees, filing fees, and
underwriting fees).
"Company Group" means the Company and any Subsidiaries
of the Company from time to time.
"Company Group Affiliate" means any Person that is an
Affiliate of the Company.
"Company Property" means any and all property of
whatsoever nature, tangible or intangible, real or personal, of
the Company Group from time to time.
"Confidential Information" shall have the meaning set
forth in Section 6.1.
"Contributed Assets" means the property or other
consideration (other than cash) contributed to the Company in
exchange for Units in the Company.
4
"CPA Firm" means the independent public auditor
determined pursuant to Section 5.3.
"CSK" means Chesapeake Corporation, a Virginia
corporation, of which WISCO is a wholly-owned subsidiary.
"CSK Group" means CSK, WISCO, and all other CSK
Subsidiaries from time to time.
"CSK Group Affiliate" means any Person that is an
Affiliate of CSK.
"Debt" means any liability of the Company (including,
without limitation, liabilities to Members) for borrowed money,
or any liability for the payment of money by the Company in
connection with any guarantees, surety agreements, letters of
credit, or other interest bearing liabilities evidenced by any
bond, debenture, note or other similar instrument, excluding any
trade liabilities or any non-interest bearing liabilities or
obligations; capital lease (but not operating lease) liabilities
and other liabilities which are in the nature of financing; and
any interest bearing off-balance sheet liabilities and the net
liability of off balance sheet derivative contracts.
"Delaware Act" means the Delaware Limited Liability
Company Act, 6 Del. C. 18-101 et seq., as amended from time to
time, and any successor to such statute.
"Depreciation" means, for each Fiscal Year, an amount
equal to the depreciation, amortization, or other cost recovery
deduction allowable for federal income tax purposes with respect
to an asset for such Fiscal Year, except that if the Gross Asset
Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such Fiscal Year,
Depreciation shall be determined by the Board in the manner
described in Regulations Section 1.704-1(b)(2)(iv)(g)(3).
"Distributable Cash" means the amount of cash that the
Board reasonably determines is available for distribution to
Members at any applicable time, taking into account available
cash and anticipated cash flow and current and anticipated
expenses of the Company and after setting aside reserves in an
amount reasonably deemed necessary to provide for the Company's
planned capital expenditures, debt service and working capital.
"EBITDA" means, at any time of determination as
specified in this Agreement, the earnings before interest, taxes,
depreciation and amortization of the Company Group, computed on a
consolidated basis in accordance with GAAP consistently applied,
for the four fiscal quarters next preceding such date of
determination, excluding any one time, unusual or extraordinary
items (and, if determined at a time prior to the expiration of
four fiscal quarters following the Closing Date, then such EBITDA
shall be deemed to be the EBITDA of the Company Group for post-
Closing completed fiscal quarters of the Company plus combined
EBITDA of the WISCO Business and the G-P Business for such number
of pre-Closing fiscal quarters as, together with the completed
fiscal quarters of the Company, shall equal four (4)).
"Exercise Notice" shall have the meaning set forth in
Section 7.2(c).
5
"Fair Market Value" means, with respect to property, as
of any date of determination, the price for such property that
could be negotiated in an arm's-length free market transaction,
for cash, between a willing seller and a willing buyer, neither
of whom is under pressure or compulsion to complete the
transaction, as of such date of determination, as determined in
good faith by the Board using a reasonable valuation method,
which determination must include the vote or consent of the WISCO
Member; provided that if the full Board is unable to reach such a
determination with the vote or consent of the WISCO Member, the
WISCO Member and the G-P Member shall each select an independent
and nationally recognized accounting firm as its representative,
and such accounting firms shall select one independent and
nationally recognized investment banking firm, accounting firm or
appraisal company as they deem appropriate and in the best
position to determine the Fair Market Value, whose determination
of the Fair Market Value shall be final and binding.
"Final Determination" means (i) a decision, judgment,
decree or other order by any court of competent jurisdiction,
which binds WISCO or CSK and has become final and not subject to
further appeal, (ii) a closing agreement which binds WISCO or CSK
entered into under Section 7121 of the Code or any other binding
settlement agreement with the Internal Revenue Service entered
into in connection with or in contemplation of an administrative
or judicial proceeding, or (iii) the completion of Internal
Revenue Service administrative proceedings which binds WISCO or
CSK and if a judicial contest is not or is no longer available
or, in the sole discretion of WISCO or CSK, is not to be
commenced or continued.
"Financing Agreements" means any agreement pursuant to
which the Company or any Company Affiliate incurs Debt.
"Fiscal Year" means the fiscal year of the Company as
specified in 5.1.
"Formula Price" means, at any date of determination,
the EBITDA of the Company less Net Debt as of such date
multiplied by 7.38.
"G-P Books" means any books and records of G-P Related
to calculation of volume, price or cost allocation methodology
for purposes of the Ancillary Agreements.
"G-P Call" shall have the meaning set forth in Section
7.2(b).
"G-P Group" means G-P and its Subsidiaries from time to
time.
"G-P Group Affiliate" means any Person that is an
Affiliate of G-P.
"G-P Guarantee" shall have the meaning set forth in
Section 3.17.
"G-P Member" means, collectively if more than one, the
G-P Group Affiliate(s) who from time to time is (are) Member(s)
of the Company.
"Gross Asset Value" means, with respect to any asset,
the asset's adjusted basis for federal income tax purposes,
except as follows:
6
(i) The initial Gross Asset Value of any asset
contributed by a Member to Company shall be the Agreed Value of
such asset except as otherwise provided in Section 3.1;
(ii) The Gross Asset Values of all Company assets
shall be adjusted to equal their respective gross Fair Market
Values as of the following times: (A) the acquisition of an
additional Interest in the Company by any new or existing Member
in exchange for more than a de minimis capital contribution; (B)
the distribution by the Company to a Member of more than a de
minimis amount of money or other property as consideration for an
Interest in the Company; and (C) the liquidation of the Company
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);
provided, however, that adjustments pursuant to clauses (A) and
(B) above shall be made only if such adjustments are reasonably
necessary or appropriate to reflect the relative economic
interests of the Members in the Company;
(iii) The Gross Asset Value of any Company
asset distributed to any Member shall be adjusted to equal the
gross Fair Market Value of such asset on the date of
distribution; and
(iv) The Gross Asset Values of Company assets
shall be increased (or decreased) to reflect any adjustments to
the adjusted basis of such assets pursuant to Code Section 734(b)
or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital
Accounts pursuant to Regulation Section 1.704-1(b)(2)(iv)(m) and
subparagraph (vi) of the definition of "Profits" and "Losses" or
Section 3.7(g); provided, however, that Gross Asset Values shall
not be adjusted pursuant to this subparagraph (iv) to the extent
the Board makes an adjustment pursuant to subparagraph (ii) that
would otherwise result in an adjustment pursuant to this
subparagraph (iv).
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to subparagraphs (i), (ii), or (iv), such Gross
Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes of
computing Profits and Losses.
"Group" means the Company Group, the CSK Group or the G-
P Group, or both, as the context may require.
"Independent Third Party" means any Person who,
immediately prior to the contemplated transaction, is not the
owner of in excess of a 5% Percentage Interest in the Company and
who is not a Member of any such 5% Owner.
"Indemnitee" shall have the meaning set forth in
Section 4.10.
"Interest" means the ownership interest of a Member in
the Company (which shall be considered personal property for all
purposes), consisting of (i) such Member's interest in profits,
losses, allocations and distributions, (ii) such Member's right
to vote or grant or withhold consents with respect to Company
matters as provided herein or in the Delaware Act and (iii) such
Member's other rights and privileges as provided herein or under
the Delaware Act.
7
"Involuntary Dissolution Event" shall mean any event
described in Section 8.1(d) hereof if no Member filed a motion,
petition, or other request before a court or an administrative
agency seeking a dissolution of the Company.
"Joint Venture Agreement" shall have the meaning set
forth in the recitals hereto.
"Law" means any federal, state, foreign or local law,
constitutional provision, code, statute, ordinance, rule,
regulation, order, judgment or decree of any governmental
authority.
"Manager" means a person duly elected to the Board
pursuant to the provisions of Section 4.2 or Section 4.3 hereof.
Each Manager shall constitute a "manager" of the Company as such
term is defined in Section 18-101 of the Delaware Act.
"Members" mean WISCO and G-P and all other Persons
admitted as additional or substituted Members pursuant to this
Agreement, so long as they remain Members. Each Member shall
constitute a "Member" of the Company, as such term is defined in
Section 18-101 of the Delaware Act.
"Net Debt" means, at any date of determination, the
amount of all Debt of the Company Group on such date, less all
Cash Balances held by or on behalf of any Company Group Member
and less loans made to the Members as of such date.
"Nonrecourse Deductions" has the meaning set forth in
Section 1.704-2(b)(1) and 1.704-2(c) of the Regulations.
"Obligations" shall have the meaning set forth in
Section 3.17(b).
"Nonrecourse Liability" has the meaning set forth in
Section 1.704-2(b)(3) of the Regulations.
"Option Closing" shall have the meaning set forth in
Section 7.2(c).
"Option Right" shall have the meaning set forth in
Section 7.2(c).
"Partner Nonrecourse Debt" has the same meaning as the
term "partner nonrecourse debt" set forth in Section
1.704-2(b)(4) of the Regulations.
"Partner Nonrecourse Debt Minimum Gain" means an
amount, with respect to each Partner Nonrecourse Debt, equal to
the Partnership Minimum Gain that would result if such Partner
Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section 1.704-2(i)(3) of the
Regulations.
"Partner Nonrecourse Deductions" has the same meaning
as the term "partner nonrecourse deductions" set forth in
Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
8
"Partnership Minimum Gain" has the meaning set forth in
Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"Percentage Interests" means the respective proportions
in which the Members hold their Interests in the Company,
determined for any Member as of any date by dividing the number
of Units held by such Member on such date by the total number of
Units outstanding and held by all Members as of such date.
"Permanent Company Debt" shall mean the indebtedness
incurred by the Company to refinance the Company Debt, as further
described in Section 3.17 hereof, and shall include, where the
context requires, any replacement or refinancing thereof.
"Person" shall mean an individual, a corporation, a
partnership, an association, a trust, a limited liability
company, a governmental authority or any other entity or
organization.
"Products" shall have the meaning set forth in Section
10.13(a).
"Profits" and "Losses" means, for each Fiscal Year, an
amount equal to the Company's taxable income or loss for such
Fiscal Year, determined in accordance with Code Section 703(a)
(for this purpose, all items of income, gain, loss, or deduction
required to be stated separately pursuant to Code Section
703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(i) Any income of the Company that is exempt from
federal income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this definition of
"Profits" and "Losses" shall be added to such taxable income or
loss;
(ii) Any expenditures of the Company described in
Code Section 705(a)(2)(B), or treated as Code Section
705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Profits or Losses pursuant to this definition of
"Profits" and "Losses" shall be subtracted from such taxable
income or loss;
(iii) In the event the Gross Asset Value of
any Company asset is adjusted pursuant to subparagraphs (ii) or
(iii) of the definition of "Gross Asset Value," the amount of
such adjustment shall be taken into account as gain or loss from
the disposition of such asset for purposes of computing Profits
or Losses;
(iv) Gain or loss resulting from any disposition
of property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the
Gross Asset Value of the property disposed of, notwithstanding
that the adjusted tax basis of such property differs from its
Gross Asset Value;
(v) In lieu of the depreciation, amortization,
and other cost recovery deductions taken into account in
9
computing such taxable income or loss, there shall be taken into
account Depreciation for such Allocation Year, computed in
accordance with the definition of "Depreciation";
(vi) To the extent an adjustment to the adjusted
tax basis of any Company asset pursuant to Code Section 734(b) or
Code Section 743(b) is required pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining
Capital Accounts as a result of a distribution other than in
complete liquidation of a Member's Interest, the amount of such
adjustment shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of the
asset and shall be taken into account for purposes of computing
Profits or Losses; and
(vii) Any items which are specially allocated
pursuant to Section 3.7 or Section 3.8 shall not be taken into
account in computing Profits or Losses.
The amounts of the items of Company income, gain, loss or
deduction available to be specially allocated pursuant to
Sections 3.7 and 3.8 shall be determined by applying rules
analogous to those set forth in subparagraphs (i) through (vi)
above.
"Put Price" shall have the meaning set forth in Section
7.2(a).
"Regulations" means the regulations promulgated by the
U.S. Treasury Department pursuant to the Code.
"Regulatory Allocations" shall have the meaning set
forth in Section 3.8.
"Special Distribution" shall have the meaning set forth
in Section 2.8(b) of the Joint Venture Agreement.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, association, trust, limited liability
company or other legal entity or organization of which such
person, either directly or indirectly or through or together with
any other Subsidiary of such Person, owns more than 50% of the
equity interests.
"Tax Matters Member" shall have the meaning set forth
in Section 3.12.
"Tax Opinion" means an opinion of CSK's legal counsel
or public accounting firm to the effect that it is substantially
more likely than not that (1) the transfer of the WISCO Business
constituted a sale to the Company (in whole or in part) for
federal income tax purposes, or (2) the Special Distribution is
taxable to WISCO in whole or in part. Such opinion must be based
upon an addition, amendment, or other modification to the Code or
the Regulations, the issuance by the Internal Revenue Service (or
any other administrative agency or authority having jurisdiction
over the interpretation, administration, or enforcement of
federal income tax laws) of a ruling, notice, or other
administrative pronouncement, or the issuance or publication of a
decision by a court, in any such event occurring after the
Closing but before the eighth anniversary of the Closing Date.
10
"Transfer" shall have the meaning set forth in Section
7.1.
"Units" means the equal proportional units into which
Interests in the Company shall be divided, which term may include
fractions of Units as well as whole Units. Subject to the
Capital Contribution obligations of the Members hereunder, all
Units issued hereunder shall be fully paid and non-assessable.
"Voluntary Dissolution Event" shall mean any event
described in Section 8.1 hereof other than an Involuntary
Dissolution Event.
"Voluntary Dissolution Event Without WISCO's Consent"
shall mean any Voluntary Dissolution Event which is described in
Section 8.1 hereof if the event occurs without the consent of the
WISCO Member. For this purpose, the WISCO Member shall be deemed
to have consented to (i) any action approved by the Manager
designated by the WISCO Member, (ii) any reduction of the WISCO
Member's (or the CSK Group's) ownership of the outstanding Units
below 5% if such reduction occurs because of an exercise of the
WISCO Put, and (iii) the dissolution of the Company under Section
8.1(d) hereof at the request of the WISCO Member.
"WISCO" shall have the meaning set forth in the
preamble hereto.
"WISCO Business" shall have the meaning set forth in
the Joint Venture Agreement.
"WISCO Indemnity Period" shall have the meaning set
forth in Section 3.17.
"WISCO Manager" shall mean a Manager designated by the
WISCO Member.
"WISCO Member" means, collectively if more than one,
the CSK Group Affiliate(s) which from time to time is (are)
Member(s) of the Company.
"WISCO Put" shall have the meaning set forth in Section
7.2(a).
Section 1.2 Rules of Construction.
(a) Words used herein, regardless of the number and
gender used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context requires, and, as used herein,
unless the context requires otherwise, the words "hereof",
"herein", and "hereunder" and words of similar import shall refer
to this Agreement as a whole and not to any particular provision
of this Agreement.
(b) A reference to any statute or statutory provision
shall be construed as a reference to the same as it may have
been, or may from time to time be, amended, modified or re-
enacted.
(c) The terms "dollars" and "$" shall mean United
States dollars.
11
(d) The term "including" shall be deemed to mean
"including without limitation."
(e) Article and section headings used in this
Agreement are for convenience of reference only and shall not
affect the interpretation of this Agreement.
(f) This Agreement is among financially sophisticated
and knowledgeable parties and is entered into by the parties in
reliance upon the economic and legal bargains contained herein
and shall be interpreted and construed in a fair and impartial
manner without regard to such factors as the party who prepared,
or caused the preparation of, this Agreement or the relative
bargaining power of the parties.
ARTICLE II
GENERAL MATTERS
Section 2.1 Formation.
The Members have caused the formation of the Company as
a Delaware Limited Liability Company pursuant to the Delaware Act
by filing a Certificate of Formation of the Company (the
"Certificate of Formation") with the Delaware Secretary of State
in accordance with the Delaware Act and, in connection therewith,
each Member has contributed $10.00 to the capital of the Company
prior to the date hereof. The rights and liabilities of the
Members shall be as provided in the Delaware Act, except as
otherwise provided in this Agreement.
Section 2.2 Purposes and Business.
Except as may otherwise be approved by the Board (which
approval must include the affirmative vote or consent of the
WISCO Manager), the purpose of the Company and the Company Group
shall be to engage in any lawful business in any way related to
the business of producing, licensing for production and selling
commercial tissue products and related products for the "away
from home" market, on a worldwide basis. The Company shall have
all powers necessary or desirable to accomplish the aforesaid
purposes. In connection therewith, the Company may engage in and
enter into any and all activities, contracts and agreements
related or incident to the above-stated purposes as the Board may
determine to be appropriate from time to time. The Company shall
have the power to do all things necessary, appropriate,
advisable, convenient, or incidental in connection with the
fulfillment of its business purposes. The Company shall not, and
shall not permit any of its Subsidiaries to, engage in any other
activity or business except to the extent approved by the Board
(which approval must include the affirmative vote or consent of
the WISCO Manager).
Section 2.3 Offices.
(a) The principal executive offices of the Company
shall be located at 55 Park Place, Atlanta, Georgia at the
offices of G-P or such other location as determined by the Board
from time to time.
12
(b) The registered office of the Company in the State
of Delaware is located at Corporation Trust Center, 1209 Orange
Street, Wilmington, Delaware 19801. The registered agent of the
Company for service of process at such address is The Corporation
Trust Company. Such registered office or registered agent may be
changed by the Board from time to time.
Section 2.4 Name.
The name of the Company shall be Georgia-Pacific
Tissue, LLC or such other name as the Board may from time to time
select.
Section 2.5 Term.
The existence of the Company commenced on the date its
Certificate of Formation was filed with the Secretary of State of
the State of Delaware, and shall continue in perpetuity unless
dissolved in accordance with Section 8.1.
Section 2.6 Members.
The name and business or mailing address of each Member
of the Company are set forth on Schedule 1 to this Agreement.
The Board shall cause Schedule 1 to be amended from time to time
to reflect the addition or retirement of Members, or transfers of
Units, in accordance with the terms of this Agreement. Except in
connection with a permitted redemption or transfer of a Member's
entire Interest in accordance with the terms of this Agreement,
no Member shall have the right to retire from the Company prior
to the termination of the Company following dissolution and
winding up.
ARTICLE III
FINANCIAL AND TAX MATTERS
Section 3.1 Capital Contributions.
(a) Simultaneously with the execution of this
Agreement, WISCO is contributing to the Company the WISCO
Business, as defined and identified in the Joint Venture
Agreement, with an aggregate agreed value of $775,000,000 in
exchange for 5 Units, which number of Units reflects the Special
Distribution. Specifically, the various categories of assets
comprising the Contributed Assets of WISCO are as follows:
Shares of Wisconsin Tissue
de Mexico, S.A.
Shares of Wisconsin Tissue
Management LLC
Interest in Alsip Condominium Association
Working Capital
Land
Buildings
Equipment
Inventory
Goodwill
13
For purposes of maintaining the Company's books in accordance
with Regulations Section 1.704-1(b)(2)(iv), the initial Gross
Asset Value of each asset within each of the above categories
shall be based on the relative Fair Market Values of the assets
within each category.
(b) Simultaneously with the execution of this
Agreement, G-P is contributing to the Company the G-P Contributed
Assets, as defined and identified in the Joint Venture Agreement,
with an aggregate agreed value of $376,400,000 in exchange for 95
Units, which number of Units reflects the Special Distribution.
Specifically, the various categories of assets comprising the
Contributed Assets of G-P are as follows:
Working Capital
Land
Buildings
Equipment
Inventory
Goodwill
For purposes of maintaining the Company's books in accordance
with Regulations Section 1.704-1(b)(2)(iv), the initial Gross
Asset Value of each asset within each of the above categories
shall be based on the relative Fair Market Values of the assets
within each category.
(c) Except as may otherwise be unanimously agreed to
in writing by the Members, the Members shall have no right or
obligation to make any additional Capital Contributions to the
Company.
(d) Unless otherwise unanimously agreed by the
Members, any additional Capital Contributions made by the Members
shall be made in accordance with the Members' respective
Percentage Interests, and additional Units shall be issued in
respect of any such additional Capital Contributions pro rata
based on the Members' respective Percentage Interests.
Section 3.2 Loans from Members.
Loans by a Member to the Company shall not be
considered Capital Contributions. Such loans shall bear interest
at arm's length market rates and may contain other customary
commercial terms as agreed by the Company and the Member;
provided, however, that any such loans shall be fully
subordinated to the Company Debt and the Permanent Company Debt
in accordance with terms that are reasonably acceptable to each
Member. If any Member shall advance funds to the Company in
excess of the amounts required hereunder to be contributed by
such Member to the capital of the Company, such advances shall
not increase the Capital Account of such Member. The amounts of
any such advances shall be a debt of the Company to such Member
and shall be payable or collectible only out of Company assets in
accordance with the terms and conditions upon which such advances
are made. The repayment of debt owed to a Member upon
14
liquidation of the Company shall be subject to the order of
priority set forth in Section 8.2.
Section 3.3 Restrictions Relating to Capital; Company
Property.
(a) Except as otherwise provided herein or by the
Delaware Act, no Member shall have the right to withdraw, or
receive any return of, all or a portion of such Member's Capital
Contribution, nor shall any Member have the right to demand and
receive property other than cash in return for its Capital
Contribution, except as provided in Section 8.3(a).
(b) No interest shall be paid by the Company on
Capital Contributions or on balances in Members' Capital
Accounts.
(c) All Company Property, whether contributed by a
Member or otherwise acquired by the Company, shall be owned by
the Company as a separate legal entity and no Member shall have
any right of partition with respect to any Company Property. The
Board shall cause the Company to execute, file and record such
documents as may be necessary or appropriate to reflect the
Company's ownership of Company Property in appropriate public
offices.
(d) No Member shall be liable to the Company or to any
other Member to restore any deficit balance in its Capital
Account (except as may be required by the Delaware Act) or to
reimburse any other Member for any portion of such other Member's
investment in the Company. No Member shall have priority over
any other Member, either as to the return of its Capital
Contribution or as to income, losses, interest, returns, or
distributions, except for the priority of the WISCO Member with
respect to the Special Distributions and as set forth in Section
8.3(a).
(e) The Company shall not enter into any transaction,
other than the Ancillary Agreements, with any Member or any
Affiliate of any Member except on arms length terms.
Section 3.4 Tax Treatment.
It is the intention of the Members that the Company
shall be taxed as a "partnership" for United States federal,
state and local income tax purposes, and, except as otherwise
required by law, no Member shall take any action inconsistent
with the classification of the Company as a partnership for U.S.
tax purposes, including any action to cause the Company to be
treated as an association taxable as a corporation for U.S. tax
purposes.
Section 3.5 Allocation of Profits.
After giving effect to the special allocations set
forth in Sections 3.7 and 3.8, Profits for any Fiscal Year shall
be allocated among the Members in proportion to their respective
Percentage Interests.
15
Section 3.6 Allocation of Losses.
After giving effect to the special allocations set
forth in Sections 3.7 and 3.8, Losses for any Fiscal Year shall
be allocated as set forth in Section 3.6(a), subject to the
limitation in Section 3.6(b).
(a) Losses for any Fiscal Year shall be allocated
among the Members in proportion to their respective Percentage
Interests.
(b) The Losses allocated pursuant to Section 3.6(a)
shall not exceed the maximum amount of Losses that can be so
allocated without causing any Member to have an Adjusted Capital
Account Deficit at the end of any Fiscal Year. In the event some
but not all of the Members would have Adjusted Capital Account
Deficits as a consequence of an allocation of Losses pursuant to
Section 3.6(a), the limitation set forth in this Section 3.6(b)
shall be applied on a Member by Member basis so as to allocate
the maximum permissible Losses to each Member under Section
1.704-1(b)(2)(ii)(d) of the Regulations.
Section 3.7 Special Allocations.
The following special allocations shall be made in the
following order:
(a) Minimum Gain Chargeback Except as otherwise
provided in Section 1.704-2(f) of the Regulations,
notwithstanding any other provision of this Article III, if there
is a net decrease in Partnership Minimum Gain during any Fiscal
Year, each Member shall be specially allocated items of Company
income and gain for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount equal to such Member's
share of the net decrease in Partnership Minimum Gain, determined
in accordance with Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to
the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(f)(6) and
1.704-2(j)(2) of the Regulations. This Section 3.7(a) is
intended to comply with the minimum gain chargeback requirement
in Section 1.704-2(f) of the Regulations and shall be interpreted
consistently therewith.
(b) Partner Minimum Gain Chargeback. Except as
otherwise provided in Section 1.704-2(i)(4) of the Regulations,
notwithstanding any other provision of this Article III, if there
is a net decrease in Partner Nonrecourse Debt Minimum Gain
attributable to a Partner Nonrecourse Debt during any Fiscal
Year, each Member who has a share of the Partner Nonrecourse Debt
Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Section 1.704-2(i)(5) of the
Regulations, shall be specially allocated items of Company income
and gain for such Fiscal Year (and, if necessary, subsequent
Fiscal Years) in an amount equal to such Member's share of the
net decrease in Partner Nonrecourse Debt Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to
the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and
16
1.704-2(j)(2) of the Regulations. This Section 3.7(b) is
intended to comply with the minimum gain chargeback requirement
in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations, or
distributions described in Section 1.704-1(b)(2)(ii)(d)(4),
Section 1.704-1(b)(2)(ii)(d)(5) or Section
1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company
income and gain shall be specially allocated to each such Member
in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account Deficit
of such Member as quickly as possible, provided that an
allocation pursuant to this Section 3.7(c) shall be made only if
and to the extent that such Member would have an Adjusted Capital
Account Deficit after all other allocations provided for in this
Article III have been tentatively made as if this Section 3.7(c)
were not in the Agreement.
(d) Gross Income Allocation. In the event any Member
has a deficit Capital Account at the end of any Fiscal Year which
is in excess of the sum of (i) the amount such Member is treated
as obligated to restore pursuant to Regulations Section
1.704-1(b)(2)(ii)(c) by virtue of such Partner's guarantee or
indemnity with respect to the Company Debt, and (ii) the amount
such Member is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5), each such Member shall be specially allocated
items of Company income and gain in the amount of such excess as
quickly as possible, provided that an allocation pursuant to this
Section 3.7(d) shall be made only if and to the extent that such
Member would have a deficit Capital Account in excess of such sum
after all other allocations provided for in this Article III have
been made as if Section 3.7(c) and this Section 3.7(d) were not
in the Agreement.
(e) Partner Nonrecourse Deductions. Any Partner
Nonrecourse Deductions for any Fiscal Year shall be allocated to
the Member who bears the economic risk of loss with respect to
the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Regulations
Section 1.704-2(i)(1).
(f) Nonrecourse Deductions. Nonrecourse Deductions
for any Fiscal Year shall be allocated to the Members in
proportion to their respective Percentage Interests.
(g) Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Company asset
pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2)
or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into
account in determining Capital Accounts as the result of a
distribution to a Member in complete liquidation of its interest
in the Company, the amount of such adjustment to Capital Accounts
shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases such
basis) and such gain or loss shall be specially allocated to the
Members in accordance with their Interests in the Company in the
event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies,
or to the Member to whom such distribution was made in the event
that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
17
(h) In the event that the Company makes a distribution
to WISCO pursuant to Section 3.15 hereof, then WISCO shall be
specially allocated items of Company income and gain from each
Fiscal Year in which such distribution is made (and, if
necessary, subsequent Fiscal Years in the case of distributions
under Section 3.15(a) or (b)) in an amount equal to the total of
such distributions made to WISCO.
Section 3.8 Offsetting Special Allocations.
The allocations set forth in Sections 3.6(b), and
3.7(a), (b), (c), (d), (e), (f), and (g) (the "Regulatory
Allocations") are intended to comply with certain requirements of
the Regulations. It is the intent of the Members that, to the
extent possible, all Regulatory Allocations shall be offset
either with other Regulatory Allocations or with special
allocations of other items of Company income, gain, loss or
deduction pursuant to this Section 3.8. Therefore,
notwithstanding any other provision of this Article III (other
than the Regulatory Allocations), the Board shall make such
offsetting special allocations of Company income, gain, loss or
deduction in whatever manner it determines appropriate so that,
after such offsetting allocations are made, each Member's Capital
Account balance is, to the extent possible, equal to the Capital
Account balance such Member would have had if the Regulatory
Allocations were not part of the Agreement and all Company items
were allocated pursuant to Sections 3.5, 3.6(a) and 3.7(h). In
exercising its discretion under this Section 3.8, the Board shall
take into account future Regulatory Allocations under Sections
3.7(a) and 3.7(b) that, although not yet made, are likely to
offset other Regulatory Allocations previously made under
Sections 3.7(e) and 3.7(f).
Section 3.9 Other Allocation Rules.
(a) Profits, Losses, and any other items of income,
gain, loss or deduction shall be allocated to the Members
pursuant to this Article III as of the last day of each Fiscal
Year; provided that Profits, Losses and such other items shall
also be allocated at such times as the Gross Asset Values of
Company Property are adjusted pursuant to subparagraph (ii) of
the definition of Gross Asset Value.
(b) For purposes of determining the Profits, Losses,
or any other items allocable to any period, Profits, Losses, and
any such other items shall be determined on a daily, monthly, or
other basis, as determined by the Board using any permissible
method under Code Section 706 and the Regulations thereunder.
(c) All allocations to the Members pursuant to this
Article III shall, except as otherwise provided, be divided among
them in proportion to their respective Percentage Interests.
(d) The Members are aware of the income tax
consequences of the allocations made by this Article III and
hereby agree to be bound by the provisions of this Article III in
reporting their shares of Company income and loss for income tax
purposes, except to the extent otherwise required by law.
(e) Solely for purposes of determining a Member's
proportionate share of the "excess nonrecourse liabilities" of
the Company within the meaning of Regulations
18
Section 1.752-3(a)(3), the Members' interests in Company profits
are in proportion to their Percentage Interests.
(f) To the extent permitted by Section 1.704-2(h)(3)
of the Regulations, the Board shall endeavor to treat
distributions as having been made from the proceeds of a
Nonrecourse Liability or a Partner Nonrecourse Debt only to the
extent that such distributions would cause or increase an
Adjusted Capital Account Deficit for any Member.
Section 3.10 Tax Elections.
The Company shall make the following elections on the
appropriate tax returns:
(a) to adopt the accrual method of accounting, if
permitted by the Code, and to keep the Company's books and
records in a manner consistent therewith;
(b) to elect to amortize the organizational expenses
and the start-up expenditures of the Company ratably over a
period of sixty (60) months as permitted by Sections 709(b) and
195(b) of the Code;
(c) if so requested by any Member, an election under
Section 754 of the Code to adjust the basis of the Company's
property in the circumstances described therein; and
(d) any other election not inconsistent with this
Agreement or the Joint Venture Agreement that the Tax Matters
Member may deem appropriate and in the best interests of the
Members.
Neither the Company nor any Member may make an election for the
Company to be excluded from the application of the provisions of
subchapter K of chapter 1 of subtitle A of the Code or any
similar provisions of applicable state law.
Section 3.11 Tax Allocations; Code Section 704(c).
In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss, and deduction with respect to any
Contributed Asset shall, solely for tax purposes, be allocated
among the Members so as to take account of any variation between
the adjusted basis of such Contributed Asset to the Company for
federal income tax purposes and its initial Gross Asset Value
(computed in accordance with subparagraph (i) of the definition
of "Gross Asset Value").
In addition, in the event the Gross Asset Value of any
Company asset is adjusted pursuant to subparagraph (ii) of the
definition of the "Gross Asset Value," subsequent allocations of
income, gain, loss, and deduction with respect to such asset
shall take account of any variation between the adjusted basis of
such asset for federal income tax purposes and its Gross Asset
Value in the same manner as under Code Section 704(c) and the
Regulations thereunder.
The Company shall adopt and use only the "traditional
method" permitted by the Regulations under Code Section 704(c),
and therefore shall not make any curative allocations and/or
19
remedial allocations. Allocations pursuant to this Section 3.11
are solely for purposes of federal, state, and local taxes and
shall not affect, or in any way be taken into account in
computing, any Member's Capital Account or share of Profits,
Losses, other items, or distributions pursuant to any provision
of this Agreement.
Except as otherwise provided in this Agreement, all items of
Company income, gain, loss, deduction, and any other allocations
not otherwise provided for shall be divided among the Members in
the same proportions as the Percentage Interest for the Fiscal
Year.
Section 3.12 Tax Matters Member.
The Member having the highest Percentage Interest shall
be the tax matters partner (the "Tax Matters Member") of the
Company pursuant to Section 6231(a)(7) of the Code. Such Member
shall take such action as may be necessary to cause each other
Member to become a notice partner within the meaning of Section
6223 of the Code. Such Member shall inform each other Member of
all significant matters that may come to its attention in its
capacity as Tax Matters Member by giving prompt notice thereof.
The Company agrees to defend, indemnify and hold harmless the Tax
Matters Member from and against all claims and damages relating
to actions taken in good faith in discharging its
responsibilities as Tax Matters Member.
Section 3.13 Regular Distribution Policy.
(a) The Board shall determine from time to time, in
its complete discretion whether and to what extent the Company
shall distribute any portion of available Distributable Cash to
Members; provided, however, that aside from the Special
Distribution, distributions declared or made on or before January
1, 2002 shall not exceed the Company's "net cash flow from
operations" as determined under Section 1.707-4(b), unless
unanimously approved by the Members. All funds distributed to
the Members pursuant to this Section 3.12 shall be distributed to
them in accordance with their respective Percentage Interests.
(b) Subject to Section 8.3 hereof, to the extent that
the Board approves any distribution that consists of property of
a type or in a form other than cash, the types and forms of such
property shall be allocated in an equitable manner among the
Members entitled thereto, such that each Member shall, except for
immaterial variances, receive the same type or form of property.
(c) Any distributions to be made by the Company shall
be made only to the extent permitted by the Company Debt and any
other Financing Agreements to which any Company Group Affiliate
is a party and only if and to the extent permitted by applicable
Law (including, without limitation, Sections 18-607 and 18-804 of
the Delaware Act).
Section 3.14 Special Distribution.
Simultaneous with the Closing, the Company shall use
the net proceeds of the Company Debt (after deducting borrowing
expenses) to make the Special Distribution to the WISCO Member in
an amount that will result in the WISCO Member's Percentage
20
Interest equaling 5%. The amount of the Special Distribution
shall be determined in accordance with Section 2.1(b) of the
Joint Venture Agreement.
Section 3.15 Accelerated Gains Tax Liability of WISCO.
(a) If (on one or more occasions) prior to the tenth
anniversary of the Closing Date, the Company sells or otherwise
disposes of all or any part of the WISCO Contributed Assets, and
if WISCO therefore incurs and pays (either directly or as an
offset against a tax refund or overpayment of tax) federal and/or
state income tax liabilities (on a cumulative basis, taking into
account all such sales or other dispositions) exceeding $22
million as a result of the allocation to it of income or gain(s)
recognized by the Company from such sales or dispositions (up to
the total Built In Gain with respect to the WISCO Contributed
Assets sold or disposed of, determined by assuming, absent a
Final Determination or receipt by CSK of a Tax Opinion, that no
income or gain is recognized by WISCO on the transfer of such
assets to the Company), then the Company shall distribute to
WISCO (after each such occasion and within 10 days after WISCO
has demonstrated to the Company's reasonable satisfaction the
appropriate amount to be distributed) an amount of money equal to
the actual amount, if any, of WISCO's total federal and state
income tax liability in excess of $22 million resulting from the
allocation to it of income or gain so recognized by the Company.
No distribution to WISCO under this Section 3.15(a), however,
shall be made with respect to the Company's sale of inventory,
the collection or disposition of accounts receivable, or the
retirement of other assets in the ordinary course of operating
the WISCO Business (it being understood that the disposition or
partial liquidation of a manufacturing facility or of any stock
or other equity interest in any WISCO Contributed Subsidiary
shall not be considered to be a transaction in the ordinary
course of business) regardless of whether the $22 million limit
otherwise has been exceeded.
(b) (i) Subject to the compliance of WISCO with its
obligations under clause (ii) of this Section 3.15(b), if (on one
or more occasions) the Company or G-P (other than satisfying its
obligations under the G-P Guarantee) pays all or any part of the
principal amount of the Permanent Company Debt prior to the
thirtieth (30th) anniversary of the Closing Date, or if the
Company takes any action prior to such thirtieth (30th)
anniversary that would result in a reduction, after the funding
of the Permanent Company Debt, of the portion of such debt for
which WISCO "bears the economic risk of loss" within the meaning
of Section 1.752-2 of the Regulations, then the Company shall
distribute to WISCO (after each such occasion and within 10 days
after WISCO has demonstrated to the Company's reasonable
satisfaction the appropriate amount to be distributed) an amount
of money equal to the actual increase, if any, in WISCO's total
federal and state income tax liability incurred and paid by WISCO
(either directly or as an offset against a tax refund or
overpayment of tax) as a result of such payment or other action
by the Company. Similar principles shall apply if the Company
repays the principal amount of the Company Debt other than by
replacing such debt with the Permanent Company Debt as provided
in Section 3.17 hereof. WISCO has determined that it "bears the
economic risk of loss" within such meaning for the Company Debt
up to the amount of the Special Distribution as of the Closing
Date and acknowledges that it will need to make a similar
determination with respect to the Permanent Company Debt, and the
Members acknowledge that no distribution will be made pursuant to
this Section 3.15(b) to compensate WISCO for any tax liability
attributable to the incorrectness of WISCO's determinations.
21
(ii) The Members acknowledge that the Company
shall replace the Company Debt and may replace the Permanent
Company Debt from time to time with other indebtedness so long as
(x) such replacement does not result in a reduction in the total
amount of Company indebtedness for which WISCO "bears the
economic risk of loss," (y) such indebtedness is on terms that
are no less favorable to the Company (taking into account the
Company's credit rating) than prevailing terms in the credit
markets in all material respects at the time such indebtedness is
incurred, and (z) the Company shall have provided notice to WISCO
of the terms of such indebtedness as soon after agreeing to such
terms as is reasonably practicable. WISCO hereby agrees to
cooperate to the extent reasonably required to facilitate such
one or more refinancings, including but not limited to, executing
agreements (in form and substance reasonably satisfactory to
WISCO) necessary for it to "bear the economic risk of loss" for
such replacement indebtedness in an amount not less than the
Special Distribution. In such event, any such replacement
indebtedness (and any and all subsequent replacement
indebtedness) shall be treated as Permanent Company Debt for
purposes of this Section 3.15(b).
(c) For the avoidance of doubt, the Members
acknowledge that no distribution will be made pursuant to this
Section 3.15 as a result of the exercise of the WISCO Put, nor
shall any distribution be made pursuant to this Section 3.15 to
compensate WISCO for any tax liability resulting from any
treatment of the contribution of the WISCO Contributed Assets to
the Company as a sale in whole or in part for federal and/or
state income tax purposes (such treatment being evidenced by a
Final Determination or by a Tax Opinion). In making any
determination of the appropriate amount to be distributed
pursuant to this Section 3.15, any effect on WISCO's taxable
income and/or gain resulting from any distribution made to WISCO
pursuant to this Section 3.15, or from any corresponding special
allocation of income under Section 3.7(h), shall be disregarded.
(d) If G-P purchases WISCO's Interest in the Company
pursuant to Section 7.2(b) hereof, or if a Voluntary Dissolution
Event Without WISCO's Consent occurs, then the Company shall
distribute to WISCO an amount of money equal to the lesser of the
following two amounts: (i) the amount of federal and state income
tax liability that WISCO actually incurred and paid (either
directly or as an offset against a tax refund or overpayment of
tax) as a result of the income and/or gain it recognized on the
sale of its Interest to G-P (or an Affiliate of G-P) pursuant to
Section 7.2(b) or Section 8.5(b) hereof, or upon the receipt of
distributions in liquidation of its Interest pursuant to Section
8.2 hereof, or (ii) the amount of federal and state income tax
liability that WISCO would have incurred on the sale of its
Interest to G-P (or an Affiliate of G-P), or upon the receipt of
distributions in liquidation of its Interest, if the income or
gain recognized from such sale or liquidation were an amount
equal to the excess of (x) the aggregate Built In Gain in all of
the WISCO Contributed Assets over (y) any such Built In Gain
previously recognized by WISCO. For purposes of clause (y) of
the preceding sentence, the following items shall be treated as
recognized Built In Gain: (1) any gain actually recognized by
WISCO from action taken by the Company with respect to the
Company Debt if such action would give rise to a distribution
obligation under Section 3.15(b) and (2) any Built In Gain in
WISCO Contributed Assets consisting of inventory or accounts
receivable (whether or not recognized). For purposes of this
Section 3.15(d), in computing the amount of income and/or gain
22
recognized by WISCO on the sale its Interest pursuant to Section
7.2(b) or Section 8.5(b) hereof, or upon the receipt of
distributions in liquidation of its Interest pursuant to Section
8.2 hereof, there shall be included in the amount realized by
WISCO the entire amount of Company Debt (including for this
purpose the Permanent Company Debt) for which WISCO "bears the
economic risk of loss" within the meaning of Section 1.752-2 of
the Regulations immediately before such sale or liquidation,
regardless of whether the indemnity agreement or other
arrangement causing WISCO to "bear the economic risk of loss"
remains in effect after such sale or liquidation. The Company
shall distribute to WISCO the amount determined in this Section
3.15(d) within 10 days after WISCO has demonstrated to the
Company's reasonable satisfaction the amount to be distributed.
If, following a Voluntary Dissolution Event Without WISCO's
Consent, the Company does not have sufficient funds to make the
distribution to WISCO required under this Section 3.15(d), G-P
shall pay WISCO the amount of any shortfall.
(e) If any distribution to WISCO pursuant to this
Section 3.15 is smaller than it otherwise would have been because
the event triggering the Company's obligation to make the
distribution reduced, eliminated, or prevented the creation of or
addition to a net operating loss carryover, capital loss
carryover, tax credit carryover, or other tax attribute of WISCO
(collectively, a "WISCO Tax Attribute"), then the Company shall
distribute to WISCO (within 10 days after WISCO has demonstrated
to the Company's reasonable satisfaction the amount to be
distributed) an amount equal to any actual increase in WISCO's
federal and state income tax liability in one or more prior or
subsequent taxable years of WISCO, but only to the extent that
such increased liability is attributable to the decrease in such
WISCO Tax Attribute.
(f) Upon the occurrence of an event requiring a
distribution to WISCO under Section 3.15(b) or (d), the amount of
such distribution shall be increased pursuant to this Section
3.15(f) if WISCO has theretofore incurred and paid (either
directly or as an offset against a tax refund or overpayment of
tax), and has not been indemnified by the Company pursuant to
Section 3.15(a) (due to the $22 million limit), federal and/or
state income tax liabilities resulting from the allocation to
WISCO of Built In Gain in the WISCO Contributed Assets upon the
Company's sale or other disposition of all or any part of such
assets. The amount of the increased distribution, if any, under
this Section 3.15(f) shall be determined by multiplying (i) the
federal and/or state income tax liabilities actually incurred and
paid by WISCO (either directly or as an offset against a tax
refund or overpayment of tax) from asset sales or other
dispositions by the Company to the extent that such liabilities
were not indemnified by the Company under Section 3.15(a) by
reason of the $22 million limit times (ii) the "Built In Gain
Percentage." For purposes of this Section 3.15(f), the "Built In
Gain Percentage" in the case of a distribution to WISCO pursuant
to Section 3.15(b) is the percentage obtained by dividing (i) the
income or gain actually recognized by WISCO from action taken by
the Company with respect to the Company Debt or the Permanent
Company Debt if such action would give rise to a distribution
obligation under Section 3.15(b) by (ii) the aggregate Built In
Gain in all of the WISCO Contributed Assets. In the case of a
distribution to WISCO pursuant to Section 3.15(d), the "Built In
Gain Percentage" is 100%.
(h) Notwithstanding anything to the contrary in this
Section 3.15, no distribution shall be made to WISCO pursuant to
this Section 3.15 prior to the day after the second anniversary
23
of the Closing Date. If a distribution otherwise would have been
due to WISCO under this Section 3.15 before the second
anniversary of the Closing Date, the amount of the distribution
shall be increased by an amount computed like interest at the
prime rate published in the "Money Rates" table (or any successor
thereto) of The Wall Street Journal from time to time from the
date such distribution otherwise would have been due.
(i) For purposes of applying this Section 3.15, the
Company's adjusted basis for federal and state income tax
purposes in the stock of Wisconsin Tissue de Mexico, S.A. de C.V.
immediately after the contribution of such stock to the Company
shall be increased by the amount of any intercompany loss with
respect to such stock recognized by the CSK Group as a result of
the contribution. WISCO shall inform the Company of the amount
of any such recognized loss on or before September 15, 2000, and
shall inform the Company of any adjustments to the amount of such
recognized loss promptly after any such adjustment is made
(whether by the CSK Group or by the Internal Revenue Service).
Section 3.16 Sharing of Company Tax Benefits.
(a) (i) The Members believe that the contribution of
the WISCO Business constitutes a nonrecognition transaction
pursuant to Section 721(a) of the Code, and the Members and the
Company shall report and otherwise treat the transfer of the
WISCO Contributed Assets to the Company as solely a
nonrecognition transaction pursuant to Section 721(a) of the Code
on all relevant tax returns and reports unless there is a Final
Determination to the contrary or CSK receives a Tax Opinion to
the contrary. In addition, unless there is a Final Determination
to the contrary or CSK receives a Tax Opinion to the contrary,
the Members and the Company agree to treat any excess of the
Special Distribution over WISCO's "allocable share" of the
Company Debt (within the meaning of Regulations Section 1.707-
5(b)), and any excess of the Special Distribution over WISCO's
"allocable share" of the Permanent Company Debt (within the
meaning of Regulations Section 1.707-5(b)), as reimbursements of
capital expenditures incurred by WISCO with respect to the WISCO
Contributed Assets during the two-year period prior to the
Closing Date to the extent permitted by Regulations Section 1.707-
4(d). If CSK receives a Tax Opinion or, prior to the eighth
anniversary of the Closing Date, there is a Final Determination
that the transfer of the WISCO Business to the Company
constituted a sale to the Company (in whole or in part) for
federal income tax purposes, then WISCO and G-P shall jointly
determine the change in the Company's adjusted basis for federal
income tax purposes in the WISCO Contributed Assets (such change
being referred to herein as the "Sale Step-Up").
(ii) If the Company is dissolved because of an
Involuntary Dissolution Event and WISCO recognizes taxable income
and/or gain resulting from the receipt of liquidating
distributions pursuant to Section 8.2 hereof or upon the sale of
its Interest pursuant to Section 8.5 hereof, then WISCO and G-P
shall jointly determine the change, if any, in the Company's (or
G-P's) adjusted basis for federal income tax purposes in the
WISCO Contributed Assets (such change being referred to herein as
the "Involuntary Dissolution Step-Up," and together with the Sale
Step-Up, the "Step-Up").
24
(b) Within 10 days after G-P or an Affiliate of G-P
files any federal or state income tax return (including for this
purpose any amended return or claim for refund) with the Internal
Revenue Service or the applicable state income tax authority, G-P
shall pay to WISCO an amount equal to one-half of the net income
tax benefit to G-P or the Affiliate reflected on such return to
the extent that such benefit is attributable to the Step-Up. In
the case of any tax return described in the preceding sentence in
which a net operating loss or a net capital loss is reported, the
net income tax benefit attributable to the Step-Up shall be
determined as if each deduction or recognized loss of G-P (or its
Affiliate) claimed on such return were used in proportion to (i)
the total amount of deductions or losses claimed on such return
before creating any net operating loss or net capital loss,
divided by (ii) the total amount of deductions or losses claimed
on such return (taking into account the amount of deductions and
losses resulting in a net operating loss or net capital loss for
the year). Any deduction resulting from a net operating loss
carryover, and any net capital loss carryover used to offset a
recognized capital gain, shall be treated as a deduction or loss
attributable to the Step-Up in proportion to a fraction, the
numerator of which is any portion of a deduction or loss
attributable to the Step-Up that is deemed not to have been used
previously and the denominator of which is the total amount of
the deduction resulting from the net operating loss carryover or,
as the case may be, the total amount of the capital loss
carryover that is used to offset a recognized capital gain. To
the extent that G-P or its Affiliate receives (either directly or
as an offset against a liability) a payment of interest or
realizes a reduction in interest expense as a result of filing a
tax return described in the first sentence of this Section
3.16(b), G-P shall pay to WISCO an amount computed in the same
manner as such interest on the amount described in such sentence.
(c) If CSK receives a Tax Opinion or, prior to the
eighth anniversary of the Closing Date, there is a Final
Determination that the transfer of the WISCO Business to the
Company constituted a sale to the Company (in whole or in part)
for federal income tax purposes, and the WISCO Put is exercised
in full following receipt of such Tax Opinion or such Final
Determination, G-P shall continue to make payments to WISCO
pursuant to Section 3.16(b) hereof until the net income tax
benefit attributable to the Step-Up is exhausted. If, however,
WISCO exercises the WISCO Put (in whole or in part) prior to
CSK's receipt of a Tax Opinion or prior to a Final Determination
that the transfer of the WISCO Business to the Company
constituted a sale to the Company (in whole or in part) for
federal income tax purposes, G-P's payment obligation under
Section 3.16(b) shall not apply to any income tax deductions or
losses attributable to the Step-Up which are claimed in any
taxable year (or portion thereof, determined by pro rating the
number of days in such taxable year) of G-P (or its Affiliate)
that occurs after the first such exercise of the WISCO Put.
(d) If G-P makes a payment to WISCO under this Section
3.16 and if WISCO and G-P jointly determine that there should
have been no change in the basis of assets or that the change was
more or less than the amount they originally determined, then (i)
the amount of G-P's income tax savings previously determined
shall be redetermined to reflect the correct change (or no
change) in the basis of assets, and (ii) WISCO shall refund to G-
P or G-P shall pay to WISCO, as appropriate, the difference
between the total amount previously paid by G-P to WISCO under
this Section 3.16 and the total amount that should have been paid
based on the redetermined tax savings. To facilitate the
application of this Section 3.16(d), each party shall promptly
25
notify the other of any event (of which the party becomes aware)
that the party believes likely would give rise to a
redetermination under this Section 3.16(d).
Section 3.17 Permanent Company Debt.
The Company shall refinance the Company Debt (in
accordance with Section 3.15(b)(ii)) with new non-amortizing
indebtedness that remains outstanding for an aggregate term
(taking into account the initial refinancing and any subsequent
refinancings) of 30 years from the maturity date of the Company
Debt (the "Permanent Company Debt"). The principal amount of the
Permanent Company Debt shall be equal to the Company Debt plus an
amount of expenses incurred in obtaining the Permanent Company
Debt (including any refinancings thereof) that does not exceed
the difference between (i) $8,000,000 in the aggregate and (ii)
the amount of any borrowing expenses that were incurred to obtain
the Company Debt and added to the principal amount thereof.
After deducting such expenses, the net proceeds of the Permanent
Company Debt shall be used solely to repay in full the principal
amount of the Company Debt (or, in the case of refinancings of
Permanent Company Debt, such refinanced Debt). In accordance
with Section 3.15(b)(ii), WISCO hereby agrees to cooperate to the
extent reasonably required to facilitate the obtaining of the
Permanent Company Debt, including but not limited to, executing
agreements (in form and substance reasonably satisfactory to
WISCO) necessary for it to "bear the economic risk of loss" for
such debt in an amount not less than the Special Distribution.
The Company agrees that the Permanent Company Debt shall be
issued pursuant to an indenture or credit agreement that contains
covenants that are substantially similar to those contained in
the G-P Member's public bond indenture dated March 1, 1983, from
G-P to Chase Manhattan Bank National Association, as trustee, a
copy of which has been provided to the WISCO Member. Further,
the G-P Member shall fully and unconditionally guarantee all
refinancings of the Company Debt or Permanent Company Debt (such
guarantee to be in substance sufficient for G-P to bear the
"economic risk of loss" for such Debt, but for the WISCO Debt
Indemnity (the "G-P Guarantee")), subject to an indemnity from
WISCO on substantially the same terms as the WISCO Debt
Indemnity.
In addition, at all times that WISCO is subject to any
continuing liability under a WISCO debt indemnity (the "WISCO
Indemnity Period"), the Company agrees (and each of the G-P
Member and WISCO Member agrees to cause the Company) to abide by
the following covenants:
(a) Notwithstanding Section 3.13 hereof, in the event
the Company or any of its Subsidiaries sells any assets (other
than sales of inventory in the ordinary course of its business)
or incurs any indebtedness in addition to the Permanent Company
Debt, the proceeds of such sales or borrowings may not be
distributed to Members, or loaned or contributed to any Person
(including, without limitation, Subsidiaries of the Company);
provided, however, that the Company or any of its Subsidiaries
shall be permitted to lend such proceeds to G-P or a Subsidiary
of the Company (such loan to be evidenced by a G-P note or
Company Subsidiary note, as the case may be, that is not
subordinated to G-P's or such Company Subsidiary's, as the case
may be, other senior unsecured debt).
26
(b) Neither the Company nor any of its Subsidiaries
shall guarantee the debt or other obligations (the "Obligations")
of any other Person (including, without limitation, Subsidiaries
of the Company) other than in the ordinary course, consistent
with the past practices of either Business, except that (i) the
Company or such Subsidiary shall be permitted to guarantee the
Obligations of G-P (including, without limitation, Obligations
pursuant to G-P's senior bank credit agreement), and (ii) the
Company or such Subsidiary shall be permitted to guarantee the
Obligations of other Persons, provided that, with respect to
clause (ii) hereof, G-P has also guaranteed such Obligations on
terms that provide that the beneficiaries of such guarantees will
exhaust their rights and remedies against G-P before exercising
any rights or remedies against the Company or such Subsidiary, as
the case may be, pursuant to its guarantee.
(c) In addition to the negative pledge provisions to
be included in the indenture or credit agreement for the
Permanent Company Debt, neither the Company nor any Subsidiary of
the Company shall grant any liens or encumbrances on any of its
assets to secure Obligations of any other Person (including,
without limitation, Subsidiaries of the Company), except (i) the
Company or such Subsidiary of the Company shall be permitted to
grant liens to secure Obligations of G-P, and (ii) the Company or
such Subsidiary of the Company shall be permitted to grant liens
on its assets to secure Obligations of other Persons, provided
that with respect to clause (ii), G-P has guaranteed such
Obligations on terms that provide that the beneficiaries of such
Obligations will exhaust their rights and remedies against G-P
before exercising any rights or remedies with respect to the
pledged assets of the Company or such Subsidiary of the Company,
as the case may be.
(d) In connection with the G-P guarantees referred to
in the provisos of clauses (b) and (c) of this section, G-P
agrees to provide the WISCO Member with the proposed form of such
guarantee (which shall be the same in all material respects as
the actual guarantee entered into by G-P in connection with the
subject transaction) as soon as practicable, but in any event
within five (5) Business Days prior to G-P's execution of such
guarantee.
(e) If the WISCO Debt Indemnity has terminated in
accordance with its terms, this Section 3.17 shall have no
further effect.
27
ARTICLE IV
MANAGEMENT
Section 4.1 General.
Subject to the delegation of rights and powers provided
herein, the Board shall have the sole right to manage the
business of the Company and shall have all powers and rights
necessary, appropriate or advisable to effectuate and carry out
the purposes and business of the Company. No Member, by reason
of its status as such, shall have any authority to act for or
bind the Company or otherwise take part in the management of the
Company, but shall have only the right to vote on or approve the
matters specifically provided herein or in the Delaware Act (or
hereafter specified by the Board) to be voted on or approved or
determined by the Members.
Section 4.2 Board Composition.
The Board shall consist of 5 Managers or such other
number as the Board shall determine. Each Member shall have the
right to designate such number of Managers (rounded up or down to
the nearest whole number) as is in proportion to its respective
Percentage Interest; provided that the WISCO Member shall, so
long as it holds any Units in the Company, be entitled to appoint
at least one Manager to the Board. Each of CSK and G-P shall
provide notice of its initial designations of Managers in writing
to the other on or prior to the Closing Date. Each Manager shall
hold office until such Manager's resignation, removal, death or
incapacity; provided, however, that if the number of Managers
that a Member is entitled to designate is reduced by reason of a
change in Unit ownership, the one or more affected Managers
appointed by such Member shall automatically cease to be Managers
(if more than one, in the reverse order of the date of their
respective appointments).
Section 4.3 Term; Removal; Vacancies.
Managers shall hold office at the pleasure of the
Member that designated them. Any Member may at any time, by
written notice to the other Members and the Company, remove (with
or without cause) any Manager designated by such Member. Subject
to applicable Law and to the provisions of Section 4.2, a Manager
may not be removed except by written request of the Member that
designated the Manager. In the event a vacancy occurs on the
Board for any reason, the vacancy will be filled by the written
designation of the Member that designated the Manager creating
the vacancy.
Section 4.4 Notice; Quorum.
Meetings of the Board may be called by any Manager on
two Business Days' prior written notice to all Managers stating
in general the purpose or purposes thereof; provided, however,
that any Manager may waive such notice prior to, at or after the
meeting. The presence in person of a majority of the Managers
shall constitute a quorum for the transaction of business at any
meeting of the Board. Each Member shall use its reasonable
efforts to ensure that a quorum is present at any duly convened
meeting of the Board and each Member may designate by written
28
notice to the others an alternate to act in the absence of any of
its previously designated Managers at any such meeting. If at
any meeting of the Board a quorum is not present, a majority of
the Managers present may, without further notice, adjourn the
meeting from time to time until a quorum is obtained.
Section 4.5 Voting.
(a) Each Manager shall be entitled to cast one vote on
each matter considered by the Board. Except as otherwise
expressly provided by this Agreement, the act of a majority of
the Managers present at any meeting at which a quorum is present
shall constitute an act of the Board.
(b) The following matters shall require, in addition
to any other vote required by applicable Law or as otherwise
provided for herein, the affirmative vote of a majority of the
Board in attendance, which majority must include a Manager
designated by the WISCO Member:
(i) except as provided in Article VIII hereof,
and subject to applicable Law, any dissolution or liquidation of
the Company;
(ii) any merger, consolidation, conversion or
other reorganization involving the Company, or the sale or other
disposition of all or substantially all of the assets of the
Company in one transaction or a series of related transactions;
(iii) the admission of an additional Member
except as provided in Section 7.1; and
(iv) any amendment to or waiver or termination of,
any Ancillary Agreement, which amendment or waiver or termination
would have the effect of adversely altering the methodology for
establishing the price of goods or the cost allocation of
services provided to the Company in the Ancillary Agreements
(other than the Parent Roll Supply Agreement) or adversely amend
or waive Section 4.1 of the Parent Roll Supply Agreement or
terminate the Parent Roll Supply Agreement.
(c) Any Manager, when making any determination in such
capacity, including voting or acting by consent with respect to
any matter, shall be entitled to act in his or her discretion,
considering only such interests and factors as such Manager
desires, and such Manager shall have no duty or obligation to
give any consideration to any interest of, or other factors
affecting, the Company or any Member. Further, a Manager may
consider and act in accordance with the interests of the Member
appointing him or her, without regard to the other interests or
factors, including any fiduciary duties, when acting on any
matter presented to the Board for determination, and to the
extent permitted by the Delaware Limited Liability Company Act,
the Members hereby eliminate and waive any and all fiduciary
duties and liabilities of the Manager and their Affiliates to the
Company and any other Members.
29
Section 4.6 Telephonic Meeting; Written Consents.
(a) Any meeting of the Board may be held by conference
telephone or similar communication equipment so long as all
Managers participating in the meeting can hear one another. All
Managers participating by telephone or similar communication
equipment shall be deemed to be present in person at the meeting.
(b) Any action to be taken by the Managers at a
meeting of the Board may be taken without such meeting by the
written consent of a majority of the Managers then in office (or
such higher number of Managers as is required take such action
under the terms of this Agreement or applicable Law). Any such
written consent may be executed and given by telecopy or similar
electronic means and shall be filed with the minutes of the
proceedings of the Board. If any action is so taken by the Board
by the written consent of less than all of the Managers, prior
notice of the taking of such action shall be furnished to each
Manager, which notice shall include a copy of the proposed
consent, as well as any other information provided by the Company
to any Manager with such consent (provided that the effectiveness
of such action shall not be impaired by any delay or failure to
furnish such notice).
Section 4.7 Committees of the Board; Officers.
(a) The Managers may, by resolution (which resolution
shall have been approved by the WISCO Manager), delegate any of
the Board's powers to one or more committees of the Board, each
consisting of one or more Managers (other than the power to take
the actions specified in Section 4.5(b)). The Board, by
resolution, may adopt further procedures relating to the conduct
of business by any of the committees established by it.
(b) The Company shall have such officers as shall be
appointed by the Board, each having such powers and duties as
shall be provided by resolution of the Board. In addition, the
Board may appoint, employ or otherwise cause the Company to
contract with such other Persons for the transaction of the
business of the Company or the performance of services for or on
behalf of the Company as it shall determine in its discretion
from time to time. The Board may delegate to any officer of the
Company or to any such other Person such authority to act on
behalf of the Company as the Board may from time to time
determine appropriate in its discretion. The salaries or other
compensation, if any, of the officers and agents of the Company
shall be fixed from time to time by the Board. The Managers
shall not be responsible for any misconduct or negligence on the
part of any officer, agent or other Person to whom authority is
delegated, provided that such Person was appointed by the
Managers with reasonable care.
Section 4.8 Execution of Documents.
No Manager (acting solely in his capacity as such)
shall have any authority to bind the Company to any third party
with respect to any action except pursuant to a resolution
authorizing such action. Any Manager or officer of the Company,
or any other persons specifically authorized by the Board, may
execute any contract or other agreement or document on behalf of
the Company and may execute on behalf of the Company and file
with the Secretary of State of the State of Delaware any
certificates or filings provided for in the Delaware Act. The
30
filing of the Certificate of Formation with the Secretary of
State of the State of Delaware by the authorized person therein
specified is hereby ratified and confirmed.
Section 4.9 Reliance on Documents and Reports.
A Manager shall be fully protected in relying in good
faith upon the records of the Company and upon such information,
opinions, reports or statements presented to the Company by any
of its other Managers, Members, officers, employees or
committees, or by any other Person, as to matters the Manager
reasonably believes are within such other Person's professional
or expert competence and who has been selected with reasonable
care by or on behalf of the Company (including, without
limitation, information, opinions, reports or statements as to
the value and amount of the assets, liabilities, profits, or
losses of the Company or any other facts pertinent to the
existence and amount of assets from which distributions to
Members might properly be paid). In addition, the Managers may
consult with legal counsel, accountants, appraisers, management
consultants, investment bankers and other consultants and
advisors selected by them, and reliance upon any opinion of any
such Person as to matters which the Managers reasonably believe
to be within such Person's professional or expert competence
shall be full and complete protection in respect of any action
taken or suffered or omitted by the Managers hereunder in good
faith and in accordance with such opinion.
Section 4.10 Standard of Care; Indemnification.
Subject to Section 4.5(c), in carrying out his duties,
a Manager or officer of the Company shall not be liable to the
Company or to any Member for any actions taken in good faith and
reasonably believed by the Manager or officer to be in, or not
opposed to, the best interests of the Company Group, or for
errors of judgment, neglect or omission, including any losses
sustained, liabilities incurred, or benefits not derived by
Members in connection with any action or inaction of the Manager,
provided, however, that a Manager or officer shall be liable for
his willful misconduct or gross negligence.
(a) Each Manager shall, and each officer at the
discretion of the Board may (as so indemnified, an "Indemnitee")
be indemnified and held harmless by the Company from and against
any and all losses, claims, damages, liabilities, expenses
(including legal fees and disbursements), judgments, fines,
settlements and all other amounts arising from any and all
claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, in which the Indemnitee may be
involved, or threatened to be involved, as a party or otherwise
by reason of his status as a Manager or officer, or his
management of the affairs of the Company, or which relate to the
Company, its property, business or affairs, whether or not the
Indemnitee continues to be a Manager or officer at the time any
such liability or expense is paid or incurred, if the Indemnitee
(i) acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Company Group
and, (ii) with respect to any criminal proceeding, had no
reasonable cause to believe his conduct to be unlawful; provided
however, that no Indemnitee shall be entitled to indemnification
if it shall be finally determined that such Indemnitee's act or
omission constituted willful misconduct or gross negligence.
31
(b) Expenses (including legal fees and disbursements)
incurred in defending any proceeding shall be paid by the Company
in advance of the final disposition of such proceeding upon
receipt of an undertaking by or on behalf of the Indemnitee to
repay such amount if it is ultimately determined by a court of
competent jurisdiction that the Indemnitee is not entitled to be
indemnified by the Company as authorized hereunder.
Section 4.11 Member Action.
In the event that any matter is required to be
submitted to the Members for their approval under the terms of
this Agreement or the Delaware Act, the following provisions
shall apply:
(a) The Members may vote on any such matter at a
meeting to be held at such time and place as shall be designated
by the Board. Any meeting of the Members may be held by
conference telephone or similar communication equipment so long
as all Members participating in the meeting can hear one another.
All Members participating by telephone or similar communication
equipment shall be deemed to be present in person at the meeting.
Members shall be given at least three Business Days' prior notice
of any meeting; provided that any Member may waive such notice
prior to, at or after the meeting. The notice shall specify the
place, date and hour of the meeting and the general nature of the
business to be transacted. Every Member entitled to vote or act
on any matter at a meeting of Members shall have the right to do
so either in person or by proxy.
(b) Each Member shall be entitled to one vote for each
Unit owned by it. At any meeting of Members, the presence in
person or by proxy of Members having the right to vote more than
50% of the Units entitled to vote at such meeting shall
constitute a quorum for the transaction of business. Except as
otherwise required by this Agreement or applicable Law, the
affirmative vote of Members having the right to cast more than
50% of the votes present at a meeting of Members at which a
quorum is present is required to approve any action requiring the
Members' approval at such meeting.
(c) Any action that may be taken at any meeting of
Members may be taken without a meeting and without prior notice
if a consent in writing setting forth the action so taken is
signed by all Members. Any such written consent may be executed
and given by telecopy or similar electronic means and such
consents shall be filed with the minutes of the proceedings of
the Members.
Section 4.12 Certain Transactions.
(a) Without requirement of further consent or action
of the Members or Managers of the Company, the Company is
authorized to enter into the Joint Venture Agreement and each of
the Ancillary Agreements and all other documents and agreements
to be delivered by the Company at the Closing pursuant to the
Joint Venture Agreement, to perform the Company's obligations
thereunder, and to consummate the transactions contemplated
thereby, all of which actions are approved, ratified and
confirmed by the Members. Without limiting the foregoing, it is
understood and agreed that, pursuant to the Management Agreement
32
(as defined in the Joint Venture Agreement) G-P shall, subject to
the authority of the Board, be responsible for the management and
operations of the Company.
(b) Notwithstanding anything herein to the contrary,
prior to agreeing to terminate any Ancillary Agreement (other
than the Parent Roll Supply Agreement, which may not be
terminated at any time that WISCO is a Member of the Company
without the WISCO Manager's consent thereto), the Board must make
a good faith determination that it no longer requires the
services provided by G-P in such Ancillary Agreement.
ARTICLE V
ACCOUNTING, BOOKS AND RECORDS
Section 5.1 Fiscal Year.
The fiscal year and fiscal periods of the Company shall
be the same as the fiscal year and fiscal periods of G-P, as the
same may be changed or modified from time to time. The G-P
Member shall give the WISCO Member prompt notice of any material
change in the fiscal year or fiscal periods of G-P.
Section 5.2 Books and Records.
The Company shall keep at its principal executive
offices books and records typically maintained by Persons engaged
in similar businesses and which shall set forth a true, and
complete account of the Company Business and affairs of the
Company Group in all material respects. Such books and records
shall be kept in accordance with GAAP in a manner reasonably
designed to provide such information as well as permit
preparation by Members of their Federal and State tax returns and
to calculate EBITDA of the Company. Each of the Members and
their respective authorized representatives (and with respect to
the G-P Books the WISCO Member) shall have the right, at all
reasonable times and upon reasonable advance written notice to
the Company, at such Member's expense, to inspect, audit and copy
the books and records of the Company Group (and with respect to
the G-P Books the WISCO Member) for any purpose reasonably
related to the Member's interests as a Member of the Company. A
Member requesting any such access to books and records shall
reimburse the Company or G-P, as the case may be, for any costs
reasonably incurred by it in connection therewith.
Section 5.3 Auditors.
The CPA Firm of the Company shall be the same firm used
by G-P, as such CPA Firm may be changed from time to time so long
as it is an auditing firm of national standing.
Section 5.4 Reporting.
The Company shall use reasonable commercial efforts to
deliver to each Member (i) prior to each fiscal quarter, a
quarterly forecast of the results of operations of the Company
33
Group for such quarter, and, as soon as practicable, any material
changes to such forecast; (ii) within 15 days after the close of
each fiscal quarter, estimated financial statements for the
Company Group; (iii) within 30 days after the close of each
fiscal quarter, an Unaudited Balance Sheet, Statement of Income
and Statement of Cash Flows for the Company Group, together with
the notes related thereto; and (iv) within 60 days after the
close of each Fiscal Year, an Audited Balance Sheet, Statement of
Income and Statement of Cash Flows for the Company Group for such
Fiscal Year, together with the notes related thereto. The
Members acknowledge and agree that the Members shall have no
recourse against the Company or each other in the event the
forecast is incorrect and that no Member shall be entitled to
rely on such forecast for any purpose.
Section 5.5 Banking.
All funds of the Company received from any and all
sources shall be deposited in the Company's name in such separate
checking or other such accounts as shall be determined by the
Board. In connection with the maintenance of such bank accounts,
the Board shall designate those individuals who will have
authority to write checks or otherwise disburse funds from such
bank accounts on behalf of the Company in connection with its
activities. Nothing contained herein shall be construed to limit
the ability of the Company to obtain and utilize cash management
services pursuant to the Management Agreement, as defined in the
Joint Venture Agreement.
Section 5.6 Tax Return Information.
The Company shall prepare all federal, foreign, state
and local income tax returns that the Company is required to
file. Within 120 days following the close of each Fiscal Year,
the Company shall send or deliver to each Person that was a
Member at any time during such year such tax information as shall
reasonably be required for the preparation by such Person of its
federal, foreign, state and local income and other income tax
returns.
Section 5.7 Delegation of Responsibility for Accounting
and Reports.
Subject to the provisions of Section 5.3, the Board may
cause the Company to contract with any other Person for the
provision of any of the accounting, cash management and tax
services required under Article III or this Article V and may pay
reasonable compensation for such services.
ARTICLE VI
CONFIDENTIALITY
Section 6.1 Confidentiality Obligation.
The WISCO Member (and, in the case of Section 6.1(c)
below, the Company) shall use (and shall ensure that each of its
Affiliates shall use) all reasonable efforts to keep confidential
(and to ensure that its officers, employees, agents and
professional and other advisers keep confidential) the following
("Confidential Information"):
34
(a) all technical information, formulae, designs,
specifications, drawings, data, manuals, instructions and other
know-how relating to the products and technical processes of the
Company Group, the Company Business or the business of any other
Member;
(b) any information which the WISCO Member may have or
acquire before or after the date of this Agreement with respect
to the customers, business, assets or affairs of any G-P Group
Affiliate, or any Company Group Affiliate, resulting from:
(i) negotiating this Agreement, the Joint Venture
Agreement or any other agreement referred to in or entered into
pursuant to this Agreement or the Joint Venture Agreement;
(ii) being a Member in the Company;
(iii) appointing Managers to the Board and
their exercise of their duties; or
(iv) exercising its rights or performing its
obligations under this Agreement;
(c) any information which the Company may have or
acquire before or after the date of this Agreement in relation to
the customers, business, assets or affairs of any G-P Group
Affiliate or any CSK Group Affiliate resulting from the exercise
of its rights or performance of its obligations under this
Agreement, the Joint Venture Agreement or any other agreement
referred to in or entered into pursuant to this Agreement or the
Joint Venture Agreement; or
(d) any information which such Member may have or
acquire before or after the date of this Agreement with respect
to the customers, business, assets or affairs of the Company
Business.
The WISCO Member (and, in the case of Section 6.1(c), the
Company) shall not (and shall cause its Affiliates not to)
disclose to any third party any Confidential Information without
the consent of the G-P Member. In performing its obligations
under this Article VI, the WISCO Member and the Company shall
(and shall cause its Affiliates to) apply no lesser
confidentiality standards and procedures than it applies
generally in relation to its own confidential information.
Notwithstanding anything herein to the contrary, for purposes of
this Agreement, the term Confidential Information shall not
include information of the type described in Sections 6.2(b) and
6.2(g).
Section 6.2 Exceptions from Confidentiality Obligation.
The obligation not to disclose Confidential Information
to any third party under this Article VI does not apply to:
(a) the disclosure (subject to Section 6.3) on a `need
to know' basis to a company which is another CSK Group Member
where the disclosure is for a purpose reasonably incidental to
35
this Agreement; including, without limitation, as necessary for
the performance of its obligations under any Ancillary Agreement,
in which case such company shall be subject to the
confidentiality obligations of Article VI in this Agreement;
(b) information which is independently developed by
the WISCO Member or acquired from a third party to the extent
that it is acquired with the right to disclose the same after the
date hereof;
(c) the disclosure of information to the extent
required to be disclosed by law, any stock exchange regulation or
any binding judgment, order or requirement of any court or other
competent authority (subject to the obligation to consult with
the G-P Member in advance and to take account of its reasonable
requirements);
(d) disclosure of information to lenders and rating
agencies;
(e) the disclosure of information to any tax authority
to the extent reasonably required for the purposes of the tax
affairs of the WISCO Member concerned or any Member of its Group;
(f) the disclosure (subject to Section 6.3) in
confidence to the WISCO Member's professional advisers of
information reasonably required to be disclosed for a purpose
reasonably incidental to this Agreement; or
(g) information which becomes within the public domain
(otherwise than as a result of a breach of Article VI).
Section 6.3 Employees, Agents and Advisers.
The WISCO Member shall inform (and shall ensure that
each of its Subsidiaries or Affiliates shall inform) any officer,
employee or agent or any professional or other adviser advising
it in relation to the matters referred to in this Agreement, or
any other Person to whom it provides Confidential Information,
that such information is confidential and shall instruct them (i)
to keep it confidential and (ii) not to disclose it to any third
party (other than those persons to whom it has already been
disclosed in accordance with the terms of this Agreement). The
disclosing Member is responsible for any breach of this Article
VI by the person to whom the Confidential Information is
disclosed.
Section 6.4 Return of Confidential Information.
If the Company dissolves and terminates, either the
WISCO Member or the G-P Member may by notice to any other Member
require the other Member to destroy or return the first Member's
(but not the Company's) Confidential Information. In addition,
if at any time either the WISCO Member or the G-P Member shall
cease directly or indirectly to be a Member, the other Member
may, by notice to the first Member, require the first Member to
destroy or return the other Member's Confidential Information.
If so, the first Member shall (and shall ensure that its
Affiliates and its officers and employees shall):
36
(a) destroy or return all documents containing
Confidential Information which have been provided by or on behalf
of the Member demanding the return of Confidential Information;
and
(b) destroy or return any copies of such documents and
any document or other record (including in electronic form)
reproducing, containing or made from or with reference to the
Confidential Information
(except, in each case, for a record of any submission to or
filings with governmental, tax or regulatory authorities or
papers required for a Member's board or other corporate records
or documents required in connection with litigation). The first
Member shall return or destroy the Confidential Information as
soon as practicable after receiving notice and, in the case of
destruction, shall provide a certificate of an officer of that
Member confirming that destruction.
(c) The provisions of Section 6.4(a) shall not apply
in the event of a dissolution and termination in which the Board
has expressed its rights under Section 8.3(a) hereof.
Section 6.5 Survival After Termination.
The provisions of this Section 6.5 shall survive the
dissolution and termination of the Company and any Transfer of a
Member's Units. If either the WISCO Member or the G-P Member
shall cease to be a Member following a Transfer of Units pursuant
to this Agreement, then:
(a) the term Confidential Information for the purposes
of this Article VI shall extend to and include all Confidential
Information held by CSK Group Members or G-P Group Members (as
the case may be) about the other (excluding the Company) and the
confidentiality obligations set out in Section 6.1 shall (subject
to Section 6.2) thereafter apply to each CSK Group Member ceasing
to be a Member (as the case may be) as if it were a Member; and
(b) the provisions of Section 6.4 relating to return
or destruction of Confidential Information shall similarly apply
to such extended application of the term Confidential
Information, pursuant to Section 6.5(a), as if it were
Confidential Information of the remaining Member.
ARTICLE VII
TRANSFER OF UNITS; PUT AND CALL RIGHTS
Section 7.1 General.
Except as permitted by Section 7.2, or with the prior
written consent of all other Members, no Member will directly or
indirectly (i) sell, assign, pledge, encumber, hypothecate,
dispose of or otherwise transfer (collectively, "Transfer") any
37
Units, or any interest in any Units, (ii) agree to any such
Transfer or (iii) permit or suffer any such interest to be
subject to Transfer, directly or indirectly, by merger or other
operation of law, agreement or otherwise. Any purported Transfer
in any manner not permitted by this Article VII shall be null and
void and shall not be recognized or given effect by the Company
or any Member; provided, however, that a change of control of CSK
or G-P shall not be deemed to be a Transfer.
Section 7.2 Put and Call Rights.
(a) At any time on or after the third anniversary of
the Closing Date, the WISCO Member shall have a right to sell to
G-P, or to obligate the Company to redeem, in WISCO's sole
discretion, all or any portion of the WISCO Member's Units (the
"WISCO Put") at a purchase or redemption price, as the case may
be, equal to the Formula Price multiplied by a fraction, the
numerator of which shall be the number of Units being sold or
redeemed and the denominator of which shall be the total number
of Units of the Company then outstanding (the "Put Price");
provided, however, that WISCO shall not have the right to
exercise the WISCO Put on more than (3) three occasions.
(b) At any time commencing after the tenth anniversary
of the Closing, G-P shall have the right to purchase, and the
WISCO Member shall be obligated to sell, all but not less than
all of the Units owned by the WISCO Member (the "G-P Call") at a
purchase price equal to the Formula Price multiplied by a
fraction, the numerator of which shall be the number of Units
then owned by the WISCO Member and the denominator of which shall
be the total number of Units of the Company then outstanding (the
"Call Price").
(c) In the event the WISCO Put or the G-P Call (either
being referred to as "Option Right") is exercised, the following
procedure shall be applicable:
(i) The Member exercising its Option Right shall
deliver a written notice to the other Member and the Company (the
"Exercise Notice").
(ii) The Exercise Notice shall: (a) specify the
identity of each Member electing to exercise an Option Right;
(b) specify the number of Units to be sold, purchased or
redeemed pursuant to such Exercise Notice; and (c) be executed
by a duly authorized officer of such Member.
(iii) In the event of exercise of a WISCO Put,
the G-P Member or the Company, as specified in any Exercise
Notice regarding such WISCO Put, shall purchase and the WISCO
Member shall sell the Units specified in the Exercise Notice. In
the event of exercise of the G-P Call, the WISCO Member shall
sell and the G-P Member shall purchase all Units owned by the
WISCO Member.
38
(iv) The closing of a Transfer pursuant to
exercise of an Option Right (an "Option Closing") shall take
place at a time and place to be designated by mutual agreement
between the Members; provided, however, that the date designated
for the Option Closing shall not be more than ten (10) Business
Days from the date of receipt by the Company of the Exercise
Notice. At the Option Closing, the WISCO Member shall deliver to
the Company certificates representing the Units subject to the
Exercise Notice (free and clear of all liens, charges and
encumbrances) and the Company or the G-P Member, as applicable,
shall pay to the WISCO Member the Put Price or the Call Price, as
applicable, by cashier's or certified check payable to any such
WISCO Member, or by wire transfer of immediately available funds
to an account designated by such WISCO Member.
(v) At the Option Closing, the WISCO Member shall
execute and deliver such documents as reasonably requested by the
G-P Member to fully transfer title to the Units subject to such
Exercise Notice, including documents representing and warranting
good and marketable title to such Units and that such Units are
owned free and clear of all liens, charges and encumbrances.
Section 7.3 Member Transfers.
(a) Upon not less than fifteen (15) days advance
written notice to the Company and effective as of the first day
of the next calendar month, any Member may Transfer any of the
Units held by it to any of its Affiliates and such transferee
shall become a Member hereunder (an "Affiliate Member"), provided
that (i) such transferee shall execute a counterpart of this
Agreement, agreeing thereby to be bound by all of the provisions
hereof and (ii) in the event that such transferee would at any
time thereafter cease to be an Affiliate of the CSK Group or the
G-P Group, as the case may be, then the Units so transferred to
such former Affiliate shall be Transferred back to CSK or G-P, or
an Affiliate of their respective Groups, as applicable, prior to
such CSK Group Affiliate or G-P Group Affiliate ceasing to be
such (and if such transfer back does not occur prior to the
Affiliate ceasing to be such, the transaction which results in
the transferee ceasing to be an Affiliate shall be deemed a
Transfer which is subject to the restrictions of this Section
7.3).
(b) Notwithstanding anything herein to the contrary, G-
P or an Affiliate Member of G-P may transfer its Units or
interests in its Units to any third party at any time after the
tenth anniversary of the date hereof, provided that such
transferee shall execute a counterpart of this Agreement,
agreeing thereby to be bound by all of the provisions hereof.
Section 7.4 Retirement.
Any Member that Transfers all of its Units pursuant to
the terms hereof shall be deemed to have retired and to have
ceased to be a Member as of the effective date of such Transfer.
39
ARTICLE VIII
DISSOLUTION AND WINDING UP; BUY OUT RIGHTS
Section 8.1 Dissolution.
Subject to Section 8.5 hereof, the Company may, at the
sole discretion of the Board, be dissolved and its affairs wound
up and terminated upon the first to occur of the following:
(a) the unanimous consent of all Members to dissolve
the Company, it being expressly understood that Section 18-
801(a)(3) of the Delaware Act shall not apply to the Company;
(b) the sale or other disposition of all or
substantially all of the assets of the Company in one transaction
or a series of related transactions;
(c) the date the WISCO Member or the CSK Group holds
less than 5% of the outstanding Units; and
(d) the occurrence of an event causing a dissolution
of the Company under Section 18-801 of the Delaware Act, unless
the Company is continued as permitted under the Delaware Act.
Section 8.2 Winding Up.
If the Company is dissolved pursuant to Section 8.1,
this Agreement shall remain in full force and effect and shall
continue to govern the rights and obligations of the Members and
Managers and the conduct of the Company during the period of
winding up the Company's affairs. The Board shall apply and
distribute the assets of the Company in the following order of
priority (subject to Section 8.3), unless otherwise required by
mandatory provisions of applicable law:
(a) to satisfy the Company Debt or the Permanent
Company Debt;
(b) to other creditors, including Members who are
creditors, to the extent otherwise permitted by law, in
satisfaction of the liabilities of the Company (whether by
payment, by the establishment of reserves of cash or other assets
of the Company for contingent liabilities in amounts, if any,
determined by the Board to be appropriate for such purposes or by
other reasonable provision for payment), other than liabilities
for distributions to Members and former Members under Sections 18-
601 or 18-604 of the Delaware Act;
(c) to Members and former Members in satisfaction of
liabilities for distributions under 18-601 or 18-604 of the
Delaware Act; and
(d) thereafter to the Members in proportion to the
positive balances of their respective Capital Accounts
(determined after allocating all income, gain, deduction, loss
40
and other like items arising in connection with the liquidation
of Company assets and otherwise making all Capital Account
adjustments required under the definition of Capital Account);
Section 8.3 In-Kind Distributions.
In the event of a dissolution or winding up of the
Company, the Board shall, to the extent permitted by law, (a)
distribute to the G-P Member the amount required by Section 8.2
in kind, from the Company's assets, and to the WISCO Member the
amount required by Section 8.2 in cash, or (b) if the Board
determines (which determination must include the affirmative vote
or consent of the WISCO Manager) that a prompt sale of part or
all of the Company's assets would be impractical or would cause
undue loss to the value of Company assets, the Board may defer
for a reasonable time (up to three (3) years) the liquidation of
any assets, except those necessary to timely satisfy liabilities
of the Company (other than those to Members), and/or may
distribute to the Members, in lieu of cash, as tenants in common,
undivided interests in such Company assets as the Board deems not
suitable for liquidation. Any such in-kind distributions shall
be made in accordance with the priorities set forth in Section
8.2 as if cash equal to the Fair Market Value of the distributed
assets were being distributed. Any such distributions in kind
shall be subject to such conditions relating to the disposition
and management of such properties as are reasonable and equitable
and to any joint operating agreements or other agreements
governing the operation of such properties at such time. The
liquidating distributions to be made pursuant to this section
shall be made within the time set forth in Regulations Section
1.704-1(b)(2)(ii)(b)(2).
Section 8.4 Cancellation of Certificate of Formation.
Upon the completion of the distribution of Company
Property as provided in Sections 8.2 and 8.3, the Company shall
be terminated, and the Board shall cause the cancellation of the
Certificate of Formation and all qualifications of the Company as
a foreign limited liability company and shall take such other
actions as may be necessary to terminate the Company.
Section 8.5 Buy Out Rights.
In the event of the occurrence of any of the events
described in Section 8.1, G-P shall have the option to either (a)
cause the dissolution and wind up the Company pursuant to this
Article VIII; or (b) cause a Subsidiary of G-P to purchase the
Units held by the WISCO Member at a purchase price calculated by
multiplying the Formula Price times the WISCO Member's Percentage
Interest, in which case the Company shall not be dissolved; or
(c) to the extent legally permissible, take no action and
continue the existence of the Company. Such option shall be
exercised, and notice of such exercise provided to the WISCO
Member, within 120 days after the occurrence of any of such
events described in Section 8.1.
41
ARTICLE IX
CERTIFICATES EVIDENCING UNITS
Section 9.1 Certificates.
The Units owned by each Member shall be evidenced by
one or more Certificates. Each Certificate shall be executed by
such Managers or such officers of the Company as the Board shall
designate.
Section 9.2 Register.
The Company shall keep or cause to be kept a register
in which, subject to such regulations as the Board may adopt, the
Company will provide for the registration of Units and the
registration of Transfers of Units. Upon surrender for
registration of Transfer of any Certificate, and subject to the
further provisions of this Section 9.2 and Section 9.3 and the
limitations on Transfer contained elsewhere in this Agreement,
the Company will cause the execution, in the name of the
registered holder or the designated transferee, of one or more
new Certificates, evidencing the same aggregate number of Units
as did the Certificate surrendered or such other number as is
appropriate in the event such Transfer is pursuant to exercise of
an Option Right. Every Certificate surrendered for registration
of Transfer shall be duly endorsed, or be accompanied by a
written instrument of Transfer in form satisfactory to the Board,
duly executed by the registered holder thereof or such holder's
authorized attorney.
Section 9.3 New Certificates.
The Company shall issue a new Certificate in place of
any Certificate previously issued if the record holder of the
Certificate (i) makes proof by affidavit, in form and substance
satisfactory to the Board, that a previously issued Certificate
has been lost, destroyed or stolen, (ii) requests the issuance of
a new Certificate before the Company has received notice that the
Certificate has been acquired by a purchaser for value in good
faith and without notice of an adverse claim, (iii) if requested
by the Board, delivers to the Company a bond, in form and
substance satisfactory to the Board, with such surety or sureties
and with fixed or open liability as the Board may direct, to
indemnify the Company, as registrar, against any claim that may
be made on account of the alleged loss, destruction or theft of
the Certificate, and (iv) satisfies any other reasonable
requirements imposed by the Board.
Section 9.4 Interest as a Security.
A Unit in the Company evidenced by a Certificate shall
constitute a security for all purposes of Article 8 of the
Uniform Commercial Code promulgated by the National Conference of
Commissioners on Uniform State Laws, as in effect in Delaware or
any other applicable jurisdiction. Delaware law shall constitute
the local law of the Company's jurisdiction in its capacity as
the issuer of Units.
42
Section 9.5 Legends.
A copy of this Agreement shall be kept with the records
of the Company. Each of the Members hereby agrees that each
outstanding Certificate shall bear a conspicuous legend reading
substantially as follows:
The Units represented by this Certificate
have not been registered under the Securities
Act of 1933 or applicable state and other
securities laws and may not be sold, pledged,
hypothecated, encumbered, disposed of or
otherwise transferred without compliance with
the Securities Act of 1933 or any exemption
thereunder and applicable state and other
securities laws. The Units represented by
this Certificate are subject to the
restrictions on transfer and other provisions
of an Operating Agreement dated as of October
4, 1999 (as amended from time to time, the
"Agreement") by and among Company and its
Members, and may not be sold, pledged,
hypothecated, encumbered, disposed of or
otherwise transferred except in accordance
therewith. A copy of the Agreement is on file
at the principal executive offices of the
Company.
ARTICLE X
MISCELLANEOUS
Section 10.1 Notices.
All notices and other communications required or
permitted by this Agreement shall be in writing and shall be
delivered by personal delivery, by nationally recognized
overnight courier service, by facsimile, by first class mail or
by certified or registered mail, return receipt requested,
addressed, to any Member at its address as set forth on Schedule
1 (as the same may be updated from time to time at the direction
of such Member) or to the Company at 55 Park Place, Atlanta,
Georgia 30303 (or to such other address as the Company shall
have designated to each of the Members by written notice given in
the manner hereinabove set forth). Notices shall be deemed given
one day after sent, if sent by overnight courier; when delivered
and receipted for, if hand delivered; when received, if sent by
facsimile or other electronic means or by first class mail; or
when receipted for (or upon the date of attempted delivery where
delivery is refused or unclaimed), if sent by certified or
registered mail, return receipt requested.
Section 10.2 Amendment; Waiver.
Any provision of this Agreement may, (i) in the case of
an amendment, be amended if, and only if, such amendment is in
writing and signed by each Member, or (ii) in the case of a
waiver, be waived if such waiver is contained in a writing, and
signed by the party against whom the waiver is to be effective.
No failure or delay by any party in exercising any right, power
43
or privilege hereunder shall operate as a waiver thereof nor
shall any single exercise thereof preclude any other or further
exercise thereof or of any other right, power or privilege.
Except as otherwise provided rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 10.3 Assignment.
Except as otherwise expressly provided herein, no party
to this Agreement may assign any of its rights or obligations
under this Agreement without the prior written consent of the
other parties hereto.
Section 10.4 Entire Agreement.
This Agreement, the Joint Venture Agreement and the
Ancillary Agreements (including the schedules and exhibits hereto
and thereto) contain the entire agreement among the parties
hereto with respect to the subject matter hereof and supersede
all prior agreements and understandings, oral or written, with
respect to such matters.
Section 10.5 Public Disclosure.
Each Member hereby agrees that, except as may be
required to comply with the requirements of any applicable Laws
or the rules and regulations of any exchange upon which its
securities (or the securities of one of its Affiliates) are
traded, it shall not make or permit to be made any press release
or similar public announcement or communication concerning the
execution or performance of this Agreement unless specifically
approved in advance by all parties hereto, which approval shall
not be unreasonably withheld, conditioned or delayed. In the
event that, in the absence of such approval, legal counsel for
any party is of the opinion that a press release or similar
public announcement or communication is required by Law or by the
rules and regulations of any exchange on which such party's
securities (or the securities of one of its Affiliates) are
traded, then such party may issue a public announcement limited
solely to that which legal counsel for such party advises is
required under such Law or such rules and regulations (and the
party making any such announcement shall provide a copy thereof
to the other parties for review before issuing such
announcement).
Section 10.6 Parties in Interest.
This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors
and permitted assigns. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than the
Company, WISCO, G-P or their respective successors or permitted
assigns, any rights or remedies under or by reason of this
Agreement. The Company is executing this Agreement as a party,
and this Agreement shall constitute a contract among the Members
and between the Company and each of the Members.
Section 10.7 Governing Law; Submission to Jurisdiction;
Selection of Forum.
This Agreement shall be governed by, and construed and
enforced in accordance with the laws of the State of Delaware
without giving effect to any choice of law provision or rule
44
(whether of the State of Delaware or any other jurisdiction) that
would cause the application of the Laws of any jurisdiction other
than the internal Laws of the State of Delaware. Each of the
Parties agrees that any legal action between the parties, or any
of them, relating to this Agreement, the interpretation of the
terms hereof or the performance hereof or the consummation of the
transactions contemplated hereby, whether in tort or contract or
at law or in equity, shall exclusively be brought in a Federal or
State Court located in New Castle County, Delaware, having
jurisdiction of the subject matter thereof, and each party
irrevocably (i) consents to personal jurisdiction in any such
Federal or State Court, (ii) waives any objection to laying venue
in any such action or proceeding in any such Court, (iii) waives
any immunity from suit and any objection that any such Court is
an inconvenient forum or does not have jurisdiction over any
party hereto and (iv) agrees that service of complaint or other
process may be made by certified or registered mail addressed to
such party at its address determined in accordance with Section
10.1 of this Agreement.
Section 10.8 Counterparts.
This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all
of which shall constitute one and the same Agreement.
Section 10.9 Severability.
The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other
provisions hereof. If any provision of this Agreement, or the
application thereof to any Person or any circumstance, is invalid
or unenforceable (i) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (ii) the remainder of this Agreement
and the application of such provision to other Persons or
circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
Section 10.10 Equitable Relief.
Each party acknowledges that money damages would be
inadequate to protect against any actual or threatened breach of
this Agreement by any party and that each party shall be entitled
to equitable relief, including specific performance and/or
injunction, without posting bond or other security, in order to
enforce or prevent any violations of the provisions of this
Agreement.
Section 10.11 No Agency.
This Agreement shall not constitute an appointment of
any party as the agent of any other party, nor shall any party
have any right or authority to assume, create or incur in any
manner any obligation or other liability of any kind, express or
implied, against, in the name or on behalf of, any other party.
Nothing herein or in the transactions contemplated by this
Agreement shall be construed as, or deemed to be, the formation
45
of a partnership by or among the parties hereto (provided that
nothing in this Section 10.11 shall affect the tax treatment of
the Company under Article III hereof).
Section 10.12 Limitation of Liability.
The debts, obligations and liabilities of the Company,
whether arising in contract, tort or otherwise, shall be solely
the debts, obligations and liabilities of the Company, and no
Member, Manager or officer of the Company shall be obligated
personally for any such debt, obligation or liability of the
Company solely by reason of being a Member, Manager and/or
officer.
Section 10.13 Non-Exclusive Business.
(a) Notwithstanding anything herein to the contrary,
the parties hereto agree that the Company shall not be the
exclusive vehicle for G-P to engage in the manufacture or sale of
commercial tissue products or "away from home" tissue products
(the "Products"), or to engage in the Commercial Tissue Business
and that G-P shall have the right to engage in the manufacture or
sale of Products and otherwise engage in the Commercial Tissue
Business, whether directly or through other Affiliates, without
regard to the Company or any requirement that G-P make such
opportunity or Commercial Tissue Business available to the
Company in any way.
(b) Notwithstanding anything herein to the contrary,
the parties hereto agree that the Company may provide to any
member of the G-P Group the right to use intangible Company
Property, and such member of the G-P Group will have no
obligation to reimburse the Company for such use.
(c) In the event G-P or a G-P Affiliate uses
production equipment and machines owned by the Company to produce
products for G-P or a G-P Affiliate, all costs, revenues and
profits relating to such products shall be allocated to the
Company.
(d) In the event G-P or a G-P Affiliate uses
production equipment or machines it owns that are located in
facilities owned or operated by the Company to produce products
for G-P or a G-P Affiliate, G-P shall reimburse to the Company an
amount equal to the allocated overhead (including facility costs)
determined pursuant to the cost allocation methodology set forth
in Exhibit B to the Operating Support Services Agreement.
Section 10.14 Dispute Resolution.
Except as otherwise provided in this Agreement, any
dispute among the Members hereto, including disputes related to
the Ancillary Agreements and the review of G-P Books related
thereto, shall be resolved by the Members through good faith
negotiations. If such dispute cannot be resolved by such
negotiation it shall be submitted to non-binding commercial
arbitration pursuant to the commercial arbitration rules then in
effect of the American Arbitration Association, before a panel of
not less than three arbitrators. All costs and expenses incurred
in connection with such proceeding shall be shared equally by the
Members, however each Member shall bear the cost of its legal
fees. Only upon the conclusion of arbitration proceedings in
46
which a decision was rendered may the Members bring an action in
connection with such dispute in the United States District Court
or the state court sitting in New Castle County, Delaware. Each
Member agrees to irrevocably submit to the exclusive jurisdiction
of such court and agrees to waive any objection to laying venue
in such court or that such court is an inconvenient forum or does
not have jurisdiction over the Member.
47
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as of the date first written above.
GEORGIA-PACIFIC CORPORATION
By:
Name: Michael C. Burandt
Title: Senior Vice President -
Packaged Products
WISCONSIN TISSUE MILLS INC.
By:
Name: William T. Tolley
Title: Senior Vice President -
Finance and Chief Financial Officer
Consented/Agreed To
By the Company as Referenced
In Section 10.6
GEORGIA-PACIFIC TISSUE, LLC
By:
Name: Michael C. Burandt
Title: Manager
EX-2.3
INDEMNITY AGREEMENT
INDEMNITY AGREEMENT (the "Agreement"), dated as of
October 4, 1999, between WISCONSIN TISSUE MILLS INC., a
Delaware corporation and wholly owned subsidiary of
Chesapeake Corporation ("WISCO" or the "Indemnitor"), and
GEORGIA-PACIFIC CORPORATION, a Georgia corporation ("G-P").
Capitalized terms used but not otherwise defined herein shall
have the respective meanings given to such terms in the Joint
Venture Agreement or the Operating Agreement, each referred
to below.
W I T N E S S E T H:
WHEREAS, Chesapeake Corporation, WISCO, G-P and Georgia
Pacific Tissue, LLC, a Delaware limited liability company
(the "Company"), are parties to a Joint Venture Agreement,
dated as of October 4, 1999 (the "Joint Venture Agreement");
WHEREAS, WISCO and G-P are parties to the Operating
Agreement of the Company, dated as of October 4, 1999 (the
"Operating Agreement");
WHEREAS, the Company is a party to a Credit Agreement,
dated as of September 13, 1999, among the Company and Bank of
America, N.A. (the "Lender") (as amended, supplemented or
otherwise modified from time to time in accordance with the
Operating Agreement, the "Credit Agreement"), pursuant to
which the Lender has agreed to make a loan to the Company in
the amount of up to $800 million (the "Company Debt");
WHEREAS, the Company has executed a promissory note,
dated as of October 4, 1999, evidencing the Company Debt;
WHEREAS, G-P has provided to the Lender a full and
unconditional guaranty of payment of the Company Debt
pursuant to a Guaranty Agreement, dated as of October 4, 1999
(the "G-P Guaranty");
WHEREAS, the Indemnitor has agreed to indemnify G-P
against amounts that may be actually paid by G-P to the
Lender under the G-P Guaranty for the original principal
amount of the Company Debt, subject to the terms and
limitations set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Indemnity. Subject to Sections 3 and 4
hereof, the Indemnitor unconditionally agrees to indemnify G-
P as follows for payments of the original principal amount of
the Company Debt that G-P may make under the G-P Guaranty:
If (i) G-P shall have made a payment of principal (excluding
any accrued and unpaid interest that may be added to
1
principal) of the Company Debt to the Lender under the G-P
Guaranty, (ii) G-P shall have exhausted all of its rights
(whether by subrogation or otherwise) to reimbursement or
recovery from the Company or the Company's assets, and (iii)
G-P shall have demanded reimbursement from the Indemnitor
within 120 days after G-P exhausts such rights, the
Indemnitor shall reimburse G-P upon demand for the amount of
such payment in excess of the amount so recovered from or
reimbursed by the Company or its assets.
SECTION 2. Subrogation/Acquisition of Interest.
(a) Upon such reimbursement by the Indemnitor pursuant
to Section 1 hereof, the Indemnitor shall (i) be subrogated
to the remaining rights of G-P against the Company to the
extent of such reimbursement and (ii) at the Indemnitor's
option, obtain an Interest or (if the Indemnitor is then a
Member) an increased Interest in the Company in satisfaction
of such rights. To exercise the option to obtain an Interest
or increased Interest, the Indemnitor shall give G-P notice
of exercise within 30 days after the payment of such
reimbursement. Such Interest or increase in Interest shall
consist of (i) a Capital Account, or increase in Capital
Account, equal to the amount of such reimbursement and (ii) a
Percentage Interest, or increase in Percentage Interest,
equal to the ratio of (A) the amount of such reimbursement to
(B) the sum of the total of all Capital Accounts immediately
before the payment of the reimbursement plus the amount of
such reimbursement. For this purpose, the amount of Capital
Accounts immediately before the payment of the reimbursement
shall take into account the revaluation of Capital Accounts,
pursuant to the Regulations under Section 704(b) of the Code,
occasioned by the Indemnitor's acquisition of the Interest or
increased Interest pursuant to this paragraph. G-P shall,
either directly or through any of its Affiliates that is then
a Member, cause the Company to issue to the Indemnitor the
appropriate number of Units to represent such Interest or
increase in Interest.
(b) Notwithstanding any other provision of this
Agreement or of applicable Law to the contrary, the
Indemnitor hereby waives any and all claims and other rights
(whether legal or equitable) that it may now have or
hereafter acquire against G-P, any other Member, or any other
person (other than the Company) by reason of making a payment
pursuant to Section 1 hereof, including, without limitation,
any right of indemnification, subrogation, reimbursement,
exoneration, or contribution or any right to participate in
any claim or remedy of the Lender or G-P against any person
(other than the Company).
SECTION 3. Limitation on Amount of Indemnity.
Notwithstanding any provision of this Agreement to the
contrary, the aggregate obligation of the Indemnitor
hereunder shall in no event exceed the amount of the Special
Distribution (that is, $755.2 million).
2
SECTION 4. Termination. Except as otherwise provided
in this Section 4, this Agreement shall survive and be in
full force and effect so long as any of the original
principal amount of the Company Debt is outstanding and has
not been paid in full. On the third anniversary and on each
subsequent anniversary of the date hereof, the Indemnitor may
terminate this Agreement by giving written notice of such
termination (the "Termination Notice") to G-P at least 15
days and not more than 30 days before the anniversary date on
which such termination is to take effect (the "Termination
Date"), provided that (i) no Default (as defined in the
Credit Agreement) relating to the nonpayment of principal or
interest or Event of Default (as defined in the Credit
Agreement) is pending under the Credit Agreement on the date
of the Termination Notice, and (ii) either (A) neither WISCO
nor any Affiliate of WISCO owns any Interest on the
Termination Date, or (B) notice of exercise of an Option
Right with respect to all Units owned by WISCO and any
Affiliate of WISCO is given under the Operating Agreement on
or before the Termination Date. In addition, this Agreement
shall terminate on the first date (the "Cessation Date") that
both of the following circumstances exist: (x) neither WISCO
nor any Affiliate of WISCO owns any Interest, if WISCO (or
such Affiliate) ceases to own its Interest as a result of the
exercise of the G-P Call or G-P's option under Section 8.5(b)
of the Operating Agreement; and (y) no Default (as defined in
the Credit Agreement) relating to the nonpayment of principal
or interest or Event of Default (as defined in the Credit
Agreement) is pending under the Credit Agreement . As of the
Termination Date or the Cessation Date, as applicable, the
Indemnitor shall be released from any and all liabilities
hereunder; provided, however, that the Indemnitor shall not
be released from any unpaid liability of the Indemnitor for
which G-P has made or is then entitled to make a demand
pursuant to Section 1 hereof, or for which G-P then would be
so entitled to make a demand upon exhaustion of its rights to
reimbursement or recovery from the Company or the Company's
assets.
SECTION 5. No Third Party Reliance. Nothing in this
Agreement, expressed or implied, is intended to confer upon
any person other than the parties hereto and their respective
permitted successors and assigns any rights or remedies under
or by reason of this Agreement. Without limiting the
foregoing, it is expressly understood that the Lender shall
have no rights against the Indemnitor hereunder.
SECTION 6. Governing Law. This agreement shall be
governed by, and construed in accordance with, the laws of
the State of Virginia.
SECTION 7. No Waiver; Amendment.
(a) No failure on the part of the Indemnitor or G-P to
exercise, and no delay in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or
remedy by the Indemnitor or G-P preclude any other or further
exercise thereof or the exercise of any other right, power or
remedy. All remedies hereunder are cumulative and are not
3
exclusive of any other remedies provided by law. Neither the
Indemnitor nor G-P shall be deemed to have waived any rights
hereunder unless such waiver shall be in writing and signed
by such parties.
(b) Neither this Agreement nor any provision hereof may
be waived, amended or modified except pursuant to a written
agreement entered into between all of the parties hereto.
SECTION 8. Notices. All communications and notices
hereunder between and among the parties hereto shall be in
writing and given as provided in the Operating Agreement and
addressed as specified therein.
SECTION 9. Binding Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the permitted successors
and assigns of such party; and all covenants, promises and
agreements by or on behalf of the parties that are contained
in this Agreement shall bind and inure to the benefit of
their respective permitted successors and assigns. No party
hereto may assign or transfer any of its rights or
obligations hereunder (and any such attempted assignment or
transfer shall be void) without the prior written consent of
the other party hereto.
SECTION 10. Severability. In case any one or more of
the provisions contained in this Agreement should be held
invalid, illegal or unenforceable in any respect, no party
hereto shall be required to comply with such provision for so
long as such provision is held to be invalid, illegal or
unenforceable, but the validity, legality and enforceability
of the remaining provisions contained herein shall not in any
way be affected or impaired thereby. The parties shall
endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 11. Counterparts; Effectiveness; Execution.
This Agreement may be executed in counterparts (and by
different parties hereto on different counterparts), each of
which shall constitute an original, but all of which when
taken together shall constitute a single contract. Delivery
of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually
signed counterpart of this Agreement.
SECTION 12. Rules of Interpretation. The rules of
interpretation specified in Section 1.2 of the Operating
Agreement shall be applicable to this Agreement.
4
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their duly
authorized officers as of the date first appearing above.
WISCONSIN TISSUE MILLS INC.
By:_________________________
William T. Tolley
Vice President
GEORGIA-PACIFIC CORPORATION
By:________________________
Kenneth F. Khoury
Vice President, Deputy
General Counsel and Secretary
5
