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) June 30, 1995
CONSOLIDATED PAPERS, INC.
(Exact name of registrant as specified in charter)
Wisconsin 0-1051 39-0223100
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
231 First Avenue North, Wisconsin Rapids, WI 54495-8050
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (715) 422-3111
----------------------------------------------------------------------
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
On June 30, 1995, the Registrant acquired all of the outstanding shares
of the capital stock of Niagara of Wisconsin Paper Corporation, Pentair
Duluth Corp., Minnesota Paper Corporation and Superior Recycled Fiber
Corporation and all of the assets of LSPI Fiber Co. (collectively, the
"Acquired Companies") pursuant to (i) an Agreement for Sale and Purchase of
Stock of Niagara of Wisconsin Paper Corporation dated May 8, 1995 among the
Registrant and Pentair, Inc. ("Pentair"), (ii) an Agreement for Sale and
Purchase of Stock of Pentair Duluth Corp. and Minnesota Paper Incorporated
dated May 8, 1995 among the Registrant, Pentair and Minnesota Power & Light
Company ("Minnesota Power") pursuant to which the Registrant also acquired
all of the interests of Pentair and Minnesota Power in Lake Superior Paper
Industries and (iii) an Agreement for Sale and Purchase of Assets of LSPI
Fiber Co. and Stock of Superior Recycled Fiber Corporation dated May 8, 1995
among the Registrant, Pentair, Minnesota Power, Synertec, Inc. (a subsidiary
of Minnesota Power) and LSPI Fiber Co. (a subsidiary of Pentair and Minnesota
Power) pursuant to which the Registrant also acquired all of the interests of
Pentair and Minnesota Power in Superior Recycled Fiber Industries
(collectively, the "Agreements").
The aggregate purchase price (the "Purchase Price") for the Acquired
Companies, which was determined on the basis of arm's-length negotiations,
consisted of (i) approximately $227 million in cash and (ii) the pay-off of
approximately $54 million of debt associated with the Acquired Companies. In
addition, certain assets of the Acquired Companies remain subject to
operating leases entered into by the prior owners.
The Purchase Price shall be increased (or decreased) by the amount, if
any, by which the Acquired Companies' net book value (after certain
adjustments) as of June 30, 1995, exceeds (or is less than) the Acquired
Companies' net book value as of December 31, 1994. The Purchase Price paid
on June 30, 1995 was based on an estimate of the net book value of the
Acquired Companies as of May 31, 1995.
The sources of the cash consideration paid at closing consisted of (i)
borrowings pursuant to Credit Agreements among the Registrant and Wachovia
Bank of Georgia, N.A., (ii) the sale by the Registrant of 6.95% Senior Notes
due June 30, 2000 and 7.25% Senior Notes due June 30, 2005, in the aggregate
principal amount of $85,000,000 pursuant to Note Purchase Agreements among
the Registrant and New York Life Insurance Company and certain of its
affiliates, and (iii) borrowings against the Registrant's lines of credit
with the Northern Trust Company and Firstar Bank, Milwaukee, N.A.
Niagara of Wisconsin Paper Corporation, Niagara, Wisconsin, is a
manufacturer of coated groundwood publication papers. The mill, which was
founded in 1889, has three fourdrinier paper machines, which combine to total
240,000 tons of annual papermaking capacity. Lake Superior Paper
Industries, Duluth, Minnesota, manufactures supercalendered paper on a
fourdrinier machine equipped with a top-wire former. The machine's annual
capacity is 240,000 tons. Lake Superior Paper Industries also operates
Superior Recycled Fiber Industries, which is adjacent to the Lake Superior
Paper Industries mill in Duluth. Superior Recycled Fiber Industries produces
more than 90,000 tons a year of high-quality pulp from post-consumer
wastepaper. The Registrant intends to continue the businesses of the
Acquired Companies.
The Registrant, based in central Wisconsin, manufactures and markets a
complete line of enamel papers, also known as coated papers. These papers
are used in many prominent magazines and in an assortment of printed
materials, including distinguished books, brochures, advertising
communications and corporate annual reports. The Registrant is also the
nation's largest manufacturer of lightweight coated specialty papers, which
are used in food and consumer product packaging and labeling. Other products
manufactured by the Registrant include paperboard products and custom-
designed corrugated displays and containers.
Prior to the acquisitions there were no material relationships between
Pentair or Minnesota Power and the Registrant or its affiliates, directors or
officers or any associate of any director or officer of the Registrant.
The foregoing description of the Registrant's acquisition of the
Acquired Companies is qualified in its entirety by reference to the
Agreements which are filed as Exhibits to this Report.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
At the time of filing this Report, it is impracticable to provide
the required financial statements of the acquired business described in Item
2, of this Report. The required financial statements will be filed by the
Registrant, under cover of Form 8-K/A, as soon as practicable, but not later
than September 13, 1995.
(b) Pro forma financial information.
At the time of filing this Report, it is impracticable to provide
the required pro forma financial statements. The required pro forma
financial statements will be filed by the Registrant, under cover of Form 8-
K/A, as soon as practicable, but not later than September 13, 1995.
(c) Exhibits.
Exhibit No. Description of Document
(2)(a) Agreement for Sale and Purchase of Stock of Niagara of
Wisconsin Paper Corporation dated May 8, 1995 among the
Registrant and Pentair, Inc. (together with a list
briefly identifying the contents of all omitted schedules
thereto). The Registrant agrees to provide copies of
such schedules to the Commission upon request.
(2)(b) Agreement for Sale and Purchase of Stock of Pentair
Duluth Corp. and Minnesota Paper Incorporated dated May
8, 1995 among the Registrant, Pentair, Inc. and Minnesota
Power & Light Company as amended on June 30, 1995
(together with a list briefly identifying the contents of
all omitted schedules thereto). The Registrant agrees to
provide copies of such schedules to the Commission upon
request.
(2)(c) Agreement for Sale and Purchase of Assets of LSPI Fiber
Co. and Stock of Superior Recycled Fiber Corporation
dated May 8, 1995 among the Registrant, Pentair, Inc.,
Minnesota Power & Light Company, Synertec, Inc. and LSPI
Fiber Co. (together with a list briefly identifying the
contents of all omitted schedules thereto). The
Registrant agrees to provide copies of such schedules to
the Commission upon request.
(4)(a) $130,000,000 Credit Agreement dated June 27, 1995 among
the Registrant and Wachovia Bank of Georgia, N.A.
(together with a list briefly identifying the contents of
all omitted exhibits and Schedules thereto). The
Registrant agrees to provide copies of such exhibits and
schedules to the Commission upon request.
(4)(b) $120,000,000 Credit Agreement dated June 27, 1995 among
the Registrant and Wachovia Bank of Georgia N.A.
(together with a list briefly identifying the contents of
all omitted exhibits and Schedules thereto). The
Registrant agrees to provide copies of such exhibits and
schedules to the Commission upon request.
The Registrant has additional long-term debt that does
not exceed 10 percent of its total assets. The
Registrant agrees to provide copies of agreements
covering such indebtedness to the Commission upon
request.
(99)(a) Forms of documents covered by an indemnification
agreement as set forth in Exhibit 2(b): Financing
Agreement and related transaction documents, including
Keepwell Agreement and Lease, all dated December 31,
1987.
(99)(b) Press Release dated June 30, 1995 covering the
transactions described in this Form 8-K.
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 hereunto duly authorized.
CONSOLIDATED PAPERS, INC.
Date: July 14, 1995 By: /s/ Richard J. Kenney
Richard J. Kenney
Its: Vice President, Finance
INDEX TO EXHIBITS
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession
(a) Agreement for Sale and Purchase of Stock of Niagara of Wisconsin
Paper Corporation dated May 8, 1995 among the Registrant and
Pentair, Inc. (together with a list briefly identifying the
contents of all omitted schedules thereto). The Registrant agrees
to provide copies of such schedules to the Commission upon request.
(b) Agreement for Sale and Purchase of Stock of Pentair Duluth Corp.
and Minnesota Paper Incorporated dated May 8, 1995 among the
Registrant, Pentair, Inc. and Minnesota Power & Light Company as
amended on June 30, 1995 (together with a list briefly identifying
the contents of all omitted schedules thereto). The Registrant
agrees to provide copies of such schedules to the Commission upon
request.
(c) Agreement for Sale and Purchase of Assets of LSPI Fiber Co. and
Stock of Superior Recycled Fiber Corporation dated May 8, 1995
among the Registrant, Pentair, Inc., Minnesota Power & Light
Company, Synertec, Inc. and LSPI Fiber Co. (together with a list
briefly identifying the contents of all omitted schedules thereto).
The Registrant agrees to provide copies of such schedules to the
Commission upon request.
(4) Instruments defining the rights of security holders, including
indentures
(a) $130,000,000 Credit Agreement dated June 27, 1995 among the
Registrant and Wachovia Bank of Georgia, N.A. (together with a list
briefly identifying the contents of all omitted exhibits and
Schedules thereto). The Registrant agrees to provide copies of
such exhibits and schedules to the Commission upon request.
(b) $120,000,000 Credit Agreement dated June 27, 1995 among the
Registrant and Wachovia Bank of Georgia N.A. (together with a list
briefly identifying the contents of all omitted exhibits and
Schedules thereto). The Registrant agrees to provide copies of
such exhibits and schedules to the Commission upon request.
The Registrant has additional long-term debt that does not exceed
10 percent of its total assets. The Registrant agrees to provide
copies of agreements covering such indebtedness to the Commission
upon request.
(99) Additional Exhibits
(a) Forms of documents covered by an indemnification agreement as set
forth in Exhibit 2(b): Financing Agreement and related transaction
documents, including Keepwell Agreement and Lease, all dated
December 31, 1987.
(b) Press Release dated June 30, 1995 covering the transactions
described in this Form 8-K.
EXHIBIT 2(a)
AGREEMENT FOR SALE AND PURCHASE
OF STOCK
OF
NIAGARA OF WISCONSIN PAPER CORPORATION
TABLE OF CONTENTS
Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Purchase and Sale of Stock . . . . . . . . . . . . . . . . . . . . .
3. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . .
6. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Seller's Representations, Warranties and Covenants . . . . . . . . .
(a) Organization and Authority of Seller . . . . . . . . . . . . .
(b) Valid and Enforceable Agreement . . . . . . . . . . . . . . . .
(c) Organization of Niagara Paper . . . . . . . . . . . . . . . . .
(d) Financial Statements . . . . . . . . . . . . . . . . . . . . .
(e) No Material Change . . . . . . . . . . . . . . . . . . . . . . .
(f) Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(g) Title to Personal Property . . . . . . . . . . . . . . . . . . .
(h) Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . .
(i) Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . .
(j) Intellectual Property . . . . . . . . . . . . . . . . . . . . . .
(k) Employee Matters . . . . . . . . . . . . . . . . . . . . . . . .
(l) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . .
(m) Compliance with Laws . . . . . . . . . . . . . . . . . . . . . .
(n) Material Contracts . . . . . . . . . . . . . . . . . . . . . . .
(o) Licenses and Permits . . . . . . . . . . . . . . . . . . . . . .
(p) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(q) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . .
(r) Transactions with Related Parties . . . . . . . . . . . . . . . .
(s) Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . .
(t) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . .
(u) Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . .
(v) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(w) Motor Vehicles . . . . . . . . . . . . . . . . . . . . . . . . .
(x) Product Warranty . . . . . . . . . . . . . . . . . . . . . . . .
8. Buyer's Representations and Warranties . . . . . . . . . . . . . . . .
(a) Organization . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) Valid and Enforceable Agreement . . . . . . . . . . . . . . . . .
(d) No Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . .
(e) Financial Statements . . . . . . . . . . . . . . . . . . . . . .
(f) Investment Intent . . . . . . . . . . . . . . . . . . . . . . . .
9. Actions Pending Closing . . . . . . . . . . . . . . . . . . . . . . . .
(a) Operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Access to Records . . . . . . . . . . . . . . . . . . . . . . . .
(c) Access to Facilities . . . . . . . . . . . . . . . . . . . . . .
(d) Release of Guarantees . . . . . . . . . . . . . . . . . . . . . .
(e) Hart-Scott-Rodino Filings . . . . . . . . . . . . . . . . . . . .
(f) Notice of Developments . . . . . . . . . . . . . . . . . . . . .
(g) Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . .
(h) Allocation of Pulp . . . . . . . . . . . . . . . . . . . . . . .
(i) Insurance Matters . . . . . . . . . . . . . . . . . . . . . . . .
10. Conditions Precedent to Obligations of Buyer . . . . . . . . . . . . .
(a) No Errors; Performance of Obligations . . . . . . . . . . . . . .
(b) Officer's Certificate . . . . . . . . . . . . . . . . . . . . . .
(c) Certified Copy of Resolutions . . . . . . . . . . . . . . . . . .
(d) Opinion of Seller's Counsel . . . . . . . . . . . . . . . . . . .
(e) Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . . .
(f) Clayton Act Matters . . . . . . . . . . . . . . . . . . . . . . .
(g) Environmental Matters and Consent Order . . . . . . . . . . . . .
(h) Labor Negotiations . . . . . . . . . . . . . . . . . . . . . . .
(i) Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(j) FIRPTA Certificate . . . . . . . . . . . . . . . . . . . . . . .
(k) Purchase of LSPI and SRFI . . . . . . . . . . . . . . . . . . . .
(l) Real Estate Consents . . . . . . . . . . . . . . . . . . . . . .
(m) Title Insurance and Surveys . . . . . . . . . . . . . . . . . . .
(n) Niagara Lease . . . . . . . . . . . . . . . . . . . . . . . . . .
(o) Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . .
11. Conditions Precedent to Obligations of Seller . . . . . . . . . . . .
(a) No Errors; Performance of Obligations . . . . . . . . . . . . . .
(b) Officer's Certificate . . . . . . . . . . . . . . . . . . . . . .
(c) Certified Copy of Resolutions . . . . . . . . . . . . . . . . . .
(d) Opinion of Buyer's Counsel . . . . . . . . . . . . . . . . . . .
(e) Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . . .
(f) Clayton Act Matters . . . . . . . . . . . . . . . . . . . . . . .
(g) Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(h) Sale of LSPI and SRFI . . . . . . . . . . . . . . . . . . . . . .
(i) Niagara Lease . . . . . . . . . . . . . . . . . . . . . . . . . .
(j) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(k) Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13. Employees and Employee Benefits . . . . . . . . . . . . . . . . . . .
14. Confidential Information . . . . . . . . . . . . . . . . . . . . . . .
15. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . .
16. Guaranteed Obligations . . . . . . . . . . . . . . . . . . . . . . . .
17. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . .
(a) Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) Special Provisions . . . . . . . . . . . . . . . . . . . . . . .
(d) Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . .
(e) Inspection of Books and Records . . . . . . . . . . . . . . . . .
19. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . .
20. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22. Assistance after Closing . . . . . . . . . . . . . . . . . . . . . .
(a) Retained Liabilities . . . . . . . . . . . . . . . . . . . . . .
(b) Allocation of Pulp . . . . . . . . . . . . . . . . . . . . . . .
23. Tax Matters; Payment of Taxes . . . . . . . . . . . . . . . . . . . .
(a) Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Apportionment of Income . . . . . . . . . . . . . . . . . . . . .
(c) Allocation of Taxes . . . . . . . . . . . . . . . . . . . . . . .
(d) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(e) Post-Closing Elections . . . . . . . . . . . . . . . . . . . . .
(f) Control of Contest . . . . . . . . . . . . . . . . . . . . . . .
(g) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(h) Sales and Transfer Taxes . . . . . . . . . . . . . . . . . . . .
(i) Tax Effective Time . . . . . . . . . . . . . . . . . . . . . . .
(j) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24. Section 338(h)(10) Election . . . . . . . . . . . . . . . . . . . . .
25. Limitations on Liability . . . . . . . . . . . . . . . . . . . . . . .
26. Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . .
27. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28. Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . .
29. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . .
30. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule 1(i) Confidentiality Letter Agreement
Schedule 1(n) Environmental Expenditures
Schedule 1(v) Intellectual Property
Schedule 3.1. Transition Incentives
Schedule 3.2 Form of Statement of Net Book Value
Schedule 3.3. Form of Auditor's Report
Schedule 5 Guaranteed Obligations
Schedule 6 Form of Release
Schedule 7(b) Valid and Enforceable Agreement
Schedule 7(d) Financial Statements
Schedule 7(f) Leases
Schedule 7(h) Real Estate
Schedule 7(i) Plant and Equipment
Schedule 7(k) Employee Matters
Schedule 7(l) Litigation
Schedule 7(n) Material Contracts
Schedule 7(o) Licenses and Permits
Schedule 7(p) Insurance
Schedule 7(q) Employee Benefits
Schedule 7(r) Transactions with Related Parties
Schedule 7(s) Bank Accounts
Schedule 7(t) Tax Matters
Schedule 7(u) Accounts Receivable
Schedule 7(w) Motor Vehicules
Schedule 9(a) Capital Expenditures and Commitments
Schedule 10(g) Environmental Matters and Consent Order
Schedule 10(m) Title Insurance and Surveys
THIS AGREEMENT is made and entered into as of the 8th day of May, 1995
between Pentair, Inc., a Minnesota corporation ("SELLER"), and Consolidated
Papers, Inc., a Wisconsin corporation ("BUYER").
WHEREAS, Seller is the owner of all of the issued and outstanding
capital stock of Niagara of Wisconsin Paper Corporation, a Wisconsin
corporation ("NIAGARA PAPER"); and
WHEREAS, Seller desires to sell and Buyer desires to purchase from
Seller all of the issued and outstanding capital stock of Niagara Paper in
accordance with the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and conditions herein contained, the parties agree as
follows:
1. DEFINITIONS. The terms below shall have the following meanings
under this Agreement unless the context clearly requires otherwise:
(a) "ALLOCATIONS" shall have the meaning set forth in Section 24(b).
(b) "CERCLA" shall have the meaning set forth in Section 18(a)(iii).
(c) "CLAYTON ACT" means 15 U.S.C. 12, et seq., as amended, and the
rules and regulations promulgated thereunder from time to time.
(d) "CLOSING" means the actual transfer and delivery of the
certificates evidencing all of the issued and outstanding capital stock of
Niagara Paper, the delivery of documents providing for the assumption of the
Guaranteed Obligations, and the exchange and delivery by the parties of the
other documents and instruments contemplated by this Agreement.
(e) "CLOSING DATE" means June 30, 1995 or such later month end date as
mutually agreed upon by the parties.
(f) "CODE" means the Internal Revenue Code of 1986, as amended.
(g) "COMMITMENTS" shall have the meaning set forth in Section 10(m)(i).
(h) "COMMON CONTROL ENTITY" shall have the meaning set forth in Section
7(q)(vi).
(i) "CONFIDENTIAL INFORMATION" means all information designated as
"Evaluation Material" in the confidentiality letter agreement dated
August 26, 1994 between Buyer and CS First Boston Corp., acting as agent for
Seller, a copy of which is attached as Schedule 1(i).
(j) "ELECTION" shall have the meaning set forth in Section 24.
(k) "ELECTION FORM" shall have the meaning set forth in Section 24(c).
(l) "EMPLOYEE BENEFITS" means, with respect to the employees of
Niagara Paper, any and all pension or welfare benefit programs, plans,
arrangements, agreements and understandings for employees generally or
specific individual employees of Niagara Paper to which Seller or Niagara
Paper contributes or is a party, by which any of them may be bound, or under
which any of them may have liability, including, without limitation, pension
or retirement plans, deferred compensation plans, bonus or incentive plans,
early retirement programs, severance pay policies, support funds, medical,
dental, life and disability insurance, and payment or reimbursement plans.
(m) "ENVIRONMENTAL CLEANUP" shall have the meaning set forth in Section
18(c)(iii).
(n) "ENVIRONMENTAL EXPENDITURES" means the environmental expenditures
incurred and paid by Niagara Paper prior to the Closing Date. A list of the
Environmental Expenditures is attached as Schedule 1(n).
(o) "ENVIRONMENTAL LAWS" means federal, state, regional, county and
local laws, statutes, rules, regulations and ordinances and common law
requirements as of the Closing Date relating to the environment, including,
without limitation, those relating to the public health or safety aspects
thereof, or to nuisance, trespasses, releases, discharges, emissions or
disposals to air, water, land or groundwater, to the withdrawal or use of
groundwater, to the use, handling or disposal of polychlorinated biphenyls
(PCB's), asbestos or urea formaldehyde, to the treatment, storage, disposal
or management of Hazardous Material (including, without limitation,
petroleum, its derivatives, by-products or other hydrocarbons), to exposure
to toxic, hazardous or other controlled, prohibited or regulated substances,
to the transportation, storage, disposal, management or release of gaseous or
liquid substances, and any regulation, order, injunction, judgment,
declaration, notice or demand issued thereunder.
(p) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
(q) "GAAP" means generally accepted accounting principles consistently
applied and maintained throughout the period indicated and consistent with
prior financial practice of Niagara Paper or Seller, as the case may be.
(r) "GUARANTEED OBLIGATIONS" means those obligations and liabilities of
Seller, listed on Schedule 5 hereto, undertaken in respect of Niagara Paper,
including, without limitation, the guaranty obligations of Seller under the
Niagara Leases.
(s) "HAZARDOUS MATERIAL" means and includes (a) petroleum or petroleum
products, including crude oil, (b) any asbestos insulation or other material
composed of or containing asbestos, and (c) any hazardous, toxic or dangerous
waste, substance or material defined as such in (or for purposes of) the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, any so-called state or local "Superfund" or "Superlien" law, Section
144.01 of the Wisconsin Statutes or any other Environmental Laws.
(t) "INDEMNITEE" shall have the meaning set forth in Section 15(e).
(u) "INDEMNITOR" shall have the meaning set forth in Section 15(e).
(v) "INTELLECTUAL PROPERTY" means all patents, utility patents and
design patents and registrations therefor, trademarks, trade names, trademark
rights and trademark registrations, copyrights and licenses listed on
Schedule 1(v) attached, as well as all technical documentation reflecting
engineering and production data, design data, plans, specifications,
drawings, technology, know-how, trade secrets, software (whether owned or
licensed), manufacturing processes and all documentary evidence thereof
relating to Niagara Paper and its business.
(w)"KNOWLEDGE" of Seller or the "BEST KNOWLEDGE" of Seller when
modifying any representation or warranty shall mean that no officer or other
manager reporting directly to the President of Seller or of Niagara Paper
(who are involved in or responsible for operations of Niagara Paper),
including the chief financial officer and the manager of environmental
affairs of Seller and Niagara Paper, has any knowledge that such
representation and warranty is not true and correct to the same extent as
provided therein and that:
(i) Seller and Niagara Paper have exercised due diligence and
have made appropriate investigations and inquiries of the officers
and business records of both Seller and Niagara Paper; and
(ii) nothing has come to the attention of Seller in the
course of such investigation and review or otherwise which would
reasonably cause such party, in the exercise of due diligence, to
believe that such representation and warranty is not true and
correct.
Such terms shall have a cognate meaning as applied to Buyer.
(x) "LEASED REAL ESTATE" shall have the meaning set forth in Section
7(h)(ii). The Niagara Leases are specifically excluded from the definition
of "Leased Real Estate."
(y) "MADSP" shall have the meaning set forth in Section 24(b).
(z) "NET BOOK VALUE" means the difference between (x) all assets, less
(y) all liabilities, excluding current income tax accruals, deferred tax
accruals, and subordinated and other debt, whether current or long-term,
owing to Seller, all as reflected on the balance sheet of Niagara Paper as of
either December 31, 1994 or the Closing Date, as appropriate.
(aa) "NIAGARA FINANCIAL STATEMENTS" means the unaudited financial
statements (for the years ended December 31, 1993 and 1994) of Niagara Paper.
(ab) "NIAGARA LEASES" means those three equipment leases listed on
Schedule 7(f) hereto.
(ac) "1933 ACT" shall have the meaning set forth in Section 8(f).
(ad) "NOW DEFINED BENEFIT PLANS" shall have the meaning set forth in
Section 7(q)(i).
(ae) "OWNED REAL ESTATE" shall have the meaning set forth in Section
7(h)(i).
(af) "PBGC" shall have the meaning set forth in Section 7(q)(vi).
(ag) "PENSION PLANS" shall have the meaning set forth in Section
7(q)(i).
(ah) "PERMITTED EXCEPTIONS" shall have the meaning set forth in
Section 10(m)(i).
(ai) "REAL ESTATE" means all real property, whether owned, under
contract to purchase, or leased by Niagara Paper, including all land,
buildings, structures, easements, appurtenances and privileges relating
thereto, and all leaseholds, leasehold improvements, fixtures and other
appurtenances and options, including options to purchase and renew, or other
rights thereunder, used or intended for use in connection with Niagara
Paper's business.
(aj) "REPORT" shall have the meaning set forth in Section 24(b).
(ak) "RETURN(S)" means any return (including any consolidated or
combined return), report, claim for refund, information return or statement,
relating to any Tax, including any schedule or attachment thereto.
(al) "STATEMENT OF NET BOOK VALUE" means the audited balance sheet of
Niagara Paper as of the Closing Date in substantially the form reflected in
Schedule 3.2 from which the calculation of the purchase price of the stock of
Niagara Paper will be made in accordance with Section 3 hereof.
(am) "SURVEYS" shall have the meaning set forth in Section 10(m)(ii).
(an) "SURVEY DEFECT" shall have the meaning set forth in Section
10(m)(iii).
(ao) "TAX" or "TAXES" means all income, gross receipts, sales, use,
employment, franchise, profits, property or other taxes, fees, stamp taxes
and duties, assessments or charges of any kind whatsoever (whether payable
directly or by withholding), together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority with
respect thereto.
(ap) "TITLE COMPANY" shall have the meaning set forth in Section
10(m)(i).
(aq) "TITLE POLICY" shall have the meaning set forth in Section
10(m)(i).
(ar) "UNPERMITTED EXCEPTION" shall have the meaning set forth in
Section 10(m)(iii).
2. PURCHASE AND SALE OF STOCK. Subject to the terms and conditions
herein stated, Seller shall sell, transfer and deliver to Buyer, and Buyer
shall purchase from Seller at the Closing all of Seller's right, title and
interest in all of the issued and outstanding capital stock of Niagara Paper.
3. PURCHASE PRICE. The aggregate purchase price to be paid by Buyer to
Seller for the purchase of all of the issued and outstanding capital stock of
Niagara Paper, shall be:
(a) $31,800,000;
(b) decreased for any increase, or increased for any decrease, in the
unfunded liability of the Jointly Trusteed Pension Plan for
Bargaining Employees of Niagara of Wisconsin Paper Corporation from
December 31, 1994 to the Closing Date;
(c) increased for Environmental Expenditures made in excess of
$1,000,000 or decreased for Environmental Expenditures made of less
than $1,000,000;
(d) increased for any increase, or decreased for any decrease, in the
Net Book Value of Niagara Paper from December 31, 1994 to the
Closing Date; and
(e) less one-half of the aggregate amount of transition incentives to
be paid by Niagara Paper pursuant to Section 13 to certain Niagara
Paper employees, which amount is set forth on Schedule 3.1.
The Net Book Value shall be determined in accordance with GAAP as set forth
on Schedule 3.2, which Schedule sets forth sample calculations of the Net
Book Value as of December 31, 1994 and March 31, 1995 and the exceptions to
GAAP used in calculating Net Book Value.
Within sixty (60) days following the Closing Date, Seller shall prepare
and deliver to Buyer the Statement of Net Book Value, which shall be audited
by Seller's auditors based upon an audit of Niagara Paper's books including
an inventory taken by Niagara Paper beginning at 7:00 a.m. on the Closing
Date and a review of the liabilities as of the Closing Date. The taking of
such inventory may be observed by Buyer and Buyer's auditors. The Statement
of Net Book Value shall not include any assets acquired by Niagara Paper from
December 31, 1994 through the Closing Date relating to environmental
remediation of the Real Estate. The Statement of Net Book Value shall have
attached thereto an auditor's report in the form attached as Schedule 3.3.
To the extent possible, Seller will provide Buyer with a preliminary draft of
the Statement of Net Book Value. Buyer and Seller will in good faith attempt
to resolve any disputes with respect to such calculation before the final
Statement of Net Book Value is rendered.
Buyer may review the Statement of Net Book Value and Seller shall make
available the work papers of Seller's auditors to Buyer and its accountants
and Buyer and its accountants may make inquiries of representatives of Seller
and its auditors. Buyer shall give written notice to Seller of any objection
to the Statement of Net Book Value within thirty (30) days after Buyer's
receipt thereof. The notice shall specify in reasonable detail the items in
the Statement of Net Book Value to which Buyer objects and shall provide a
summary of Buyer's reasons for such objections.
Any dispute between Buyer and Seller with respect to the Statement of
Net Book Value which is not resolved within fifteen (15) business days after
receipt by Seller of the written notice from Buyer shall be referred for
decision to Ernst & Young LLP who shall cause an audit partner who is not
engaged in providing services to Seller or Buyer to decide the dispute within
thirty (30) days of such referral. The decision by the partner shall be
final and binding on Seller and Buyer. In resolving any disputed item such
audit partner may not assign a value to any item greater than the greatest
value for such item claimed by either party or less than the smallest value
for such item claimed by either party. The cost of retaining the audit
partner with respect to resolving disputes as to the Statement of Net Book
Value shall be borne by Seller and Buyer equally, unless such partner
determines, based on his or her evaluation of the good faith of the parties,
that the fees should be borne unequally.
4. PAYMENT. The estimated purchase price shall be paid in U.S. dollars
in immediately available funds on the Closing Date. The amount to be paid on
the Closing Date shall be based upon a preliminary Statement of Net Book
Value delivered to Buyer at least five (5) business days prior to Closing,
which shall be calculated based on the unaudited balance sheet of Niagara
Paper as of the month end prior to the Closing Date, prepared by Seller on a
basis consistent with Schedule 3.2. Following delivery of the final
Statement of Net Book Value under Section 3, any balance due to Seller or
refund due to Buyer reflected thereon shall be paid within ten (10) days of
such delivery, (unless there is an objection under Section 3, in which case
the amount not in dispute shall be paid within ten (10) days of such
delivery, and the balance in dispute shall be paid within ten (10) days of
the resolution of such objection) together with interest on such amount from
the Closing Date at the announced large business prime rate of Morgan
Guaranty Trust Company of New York.
Except as Buyer may be otherwise advised in writing by Seller at least
five (5) days prior to any payment, all payments of the purchase price by
Buyer to Seller at the Closing or any other amounts owed by Buyer to Seller
shall be by wire transfer to First Bank National Association, Account No xxx-
xxxxxxx (ABA wire transfer routing number 091000022), marked to the attention
of Karen Johnson.
Except as Seller may be otherwise advised in writing by Buyer at least
five (5) days prior to any payment, payment of any refund to Buyer based on
the final determination of the purchase price pursuant to Section 3 or any
other amounts owed by Seller to Buyer hereunder shall be made by wire
transfer to Harris Trust and Savings Bank - Consolidated Papers, Inc.,
Account No. xxxxxxx (ABA wire transfer routing number xxxxx-xxxx-x marked to
the attention of J.R. Matsch.
All wire transfers shall be sent by 10:00 a.m. Minneapolis time on the
date of such payment unless otherwise agreed by the parties.
5. ASSUMPTION OF LIABILITIES. At Closing, Buyer shall assume and agree
to satisfy and perform, to the extent not satisfied or performed prior to the
Closing Date, without any cost or charge to Seller, all obligations of Seller
as guarantor under any Guaranteed Obligation. If the assumption of the
Guaranteed Obligations by Buyer under this Section 5 requires the consent of
any third party, Seller and Buyer agree they will use their best efforts to
obtain such written consent to such assumption; provided, however, that in no
event shall Buyer be subject, without its consent, to terms and conditions
more restrictive than those set forth in the existing obligations of Seller
being assumed. Failing the consent of such creditor, Buyer shall indemnify
Seller in accordance with the provisions of Section 16 hereof against any
claim arising out of the Guaranteed Obligations.
6. CLOSING. (a) The Closing shall take place on the Closing Date at
the offices of Henson & Efron, P.A. in Minneapolis, Minnesota, at 9:00
o'clock a.m., local time, or at such other time and place as may be mutually
agreed upon. Buyer and Seller each agree they shall use their best efforts
and shall cause all relevant affiliates to use their best efforts to obtain
fulfillment of all conditions to Closing set forth in Sections 10 and 11
hereof.
(b) At the Closing, Seller shall deliver to Buyer certificates
evidencing ownership of all of the issued and outstanding capital stock of
Niagara Paper, in form ready for transfer and duly endorsed to Buyer,
together with such other documents and instructions as provided herein,
reasonably satisfactory in form and substance to Buyer and its counsel, as
shall be required to vest in Buyer good and marketable title, free and clear
of all liens, charges and encumbrances (except as specified in this
Agreement, if any) in and to all of the issued and outstanding capital stock
of Niagara Paper. At the Closing, Seller shall deliver to Buyer a release of
all claims of such Seller and any person or entity affiliated therewith
against Niagara Paper, in substantially the form of Schedule 6.
(c) At the Closing, Buyer shall deliver to Seller such documents and
instruments as provided herein and such undertakings and other instruments as
shall be required to cause Buyer to assume the obligations as provided in
Section 5, all of which shall be reasonably satisfactory in form and
substance to Seller and its counsel.
7. SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Seller
represents, warrants and covenants to Buyer as follows:
(a) ORGANIZATION AND AUTHORITY OF SELLER. Seller is a duly organized
and validly existing corporation in good standing in the state of Minnesota.
Seller has the complete and unrestricted right, power and authority to sell,
transfer and assign all of the issued and outstanding capital stock of
Niagara Paper pursuant to this Agreement and to carry out the transactions
contemplated hereby without the consent of any other person (except as
otherwise set forth herein). The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Board of Directors of Seller.
(b) VALID AND ENFORCEABLE AGREEMENT. This Agreement constitutes a
valid and binding agreement of Seller, enforceable in accordance with its
terms, except insofar as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights
of creditors generally, and by general equitable principles. Neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, nor the performance of Seller's obligations
hereunder materially violates or conflicts with, results in a material breach
of, or constitutes a material default under (i) to the best knowledge of
Seller, any law, rule or regulation, or (ii) subject to the obtaining of
necessary consents, which consents are listed on Schedule 7(b), under various
loan agreements, guarantees, leases, and other agreements (including, without
limitation, the Niagara Leases), any agreement or other restriction of any
kind or character to which Seller or Niagara Paper is a party, by which
Seller or Niagara Paper is bound, or to which any of the properties of
Niagara Paper is subject. Neither the execution or delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, nor
the performance of Seller's obligations hereunder, violates or conflicts
with, results in a breach of, or constitutes a default under (i) any judgment
or order, decree, award or ruling to which Seller or Niagara Paper is
subject, or (ii) the Articles of Incorporation or By-Laws of Seller.
(c) ORGANIZATION OF NIAGARA PAPER.
(i) Niagara Paper is a duly organized and validly existing
corporation in good standing in Wisconsin and has all requisite
corporate power and authority to carry on its business as presently
conducted in all states in which it currently does business. Niagara
Paper is duly licensed, registered and qualified to do business as a
foreign corporation and is in good standing in all jurisdictions in
which the ownership, leasing or operation of its assets or the conduct
of its business requires such qualification, except where the failure to
be so licensed, registered or qualified would not have a material
adverse effect upon its business or assets.
(ii) All of the outstanding shares of capital stock of
Niagara Paper have been duly authorized and validly issued, are
fully paid and nonassessable, and are owned beneficially and of
record by Seller and are free and clear of all liens, claims,
encumbrances and restrictions whatsoever. Niagara Paper's entire
equity capital consists of 50,000 authorized shares of common
stock, par value $1.00 per share, of which 1,500 shares are issued
and outstanding. No shares of capital stock of, or other ownership
interest in, Niagara Paper are reserved for issuance and there are
no outstanding options, warrants, rights, subscriptions, claims of
any character, agreements, obligations, convertible or exchangeable
securities, or other commitments, contingent or otherwise, relating
to the capital stock of, or other ownership interest in, Niagara
Paper pursuant to which it is or may become obligated to issue or
exchange any shares of capital stock of, or other ownership
interest in, Niagara Paper.
(iii) Niagara Paper does not own, directly or indirectly, any
capital stock or other equity or ownership or proprietary interest
in any other corporation, partnership, association, trust, joint
venture or other entity.
(d) FINANCIAL STATEMENTS.
(i) Attached hereto as Schedule 7(d) are the Niagara Financial
Statements. The Niagara Financial Statements were (and the Statement of
Net Book Value will be) prepared in accordance with the books and
records of Niagara Paper which were used in the preparation of Seller's
audited consolidated financial statements for the fiscal years ended
December 31, 1993 and December 31, 1994.
(ii) The Niagara Financial Statements were (and the Statement of
Net Book Value will be) prepared in accordance with GAAP, consistently
applied, but do not include all information and footnotes required by
generally accepted accounting principles for complete financial
statements. The Statement of Net Book Value will adequately reflect all
liabilities and obligations of Niagara Paper required to be shown
thereon in accordance with GAAP, except for those exceptions to GAAP set
forth on Schedule 3.2.
(iii) The Niagara Financial Statements as of such dates or
for the period ending on such dates present fairly the financial
position and the results of operations of Niagara Paper for the
periods covered thereby. All adjustments, consisting of normal
recurring accruals and eliminations and other similar adjustments,
considered necessary for a fair presentation have been included.
(e) NO MATERIAL CHANGE. To the best knowledge of Seller, since
December 31, 1994 there has been no material adverse change in the business,
financial position or results of operations of Niagara Paper.
(f) LEASES. Seller has furnished or made available to Buyer copies of
all leases and subleases of any personal property used in Niagara Paper's
operations, including without limitation the Niagara Leases, to which it is a
party, all of which are listed on Schedule 7(f). Except as set forth on
Schedule 7(f), no consents or approvals are required in connection with the
transactions contemplated hereby. No event has occurred which is or, after
the giving of notice or passage of time, or both, would constitute a default
under or a material breach of any lease by Niagara Paper or, to the best
knowledge of Seller, any other party to such leases. As of the Closing Date,
each lease (including without limitation the Niagara Leases) shall be in full
force and effect in accordance with its terms, as amended from time to time.
(g) TITLE TO PERSONAL PROPERTY. Niagara Paper has good and marketable
title to its owned personal property as reflected in the Niagara Financial
Statements free and clear of all liens, claims, encumbrances and
restrictions, except (i) those reflected on Schedule 7(d) attached and (ii)
defects in title, and liens, charges and encumbrances, if any, as do not
materially detract from the value of or otherwise materially impair the
current operations or financial condition of Niagara Paper.
(h) REAL ESTATE.
(i) Schedule 7(h)(i) sets forth an accurate legal description of
all Real Estate owned by Niagara Paper or for which Niagara Paper has
contracted to become the owner (the "OWNED REAL ESTATE"), including
identification of the current owner of fee simple title thereto. The
party identified as the owner on Schedule 7(h)(i) is the legal and
equitable owner of good and marketable title in fee simple absolute to
such Owned Real Estate, including the buildings, structures, spurtracks
(as set forth on Schedule 7(h)(i)) and improvements situated thereon and
appurtenances thereto, in each case free and clear of all tenancies and
other possessory interests, security interests, conditional sale or
other title retention agreements, liens, encumbrances, mortgages,
pledges, assessments, easements, rights of way, covenants, restrictions,
reservations, options, rights of first refusal, defects in title,
encroachments and other burdens, except as disclosed on Schedule
7(h)(i). Except as disclosed on Schedule 7(h)(i), Niagara Paper is in
possession of the Owned Real Estate. All contracts, agreements, options
and undertakings affecting the Owned Real Estate are set forth in
Schedule 7(h)(i) and are legally valid and binding and in full force and
effect, and, to Seller's knowledge, there are no defaults, offsets,
counterclaims or defenses thereunder, and Niagara Paper has received no
notice that any default, offset, counterclaim or defense thereunder
exists. Seller has delivered or made available to Buyer correct and
complete copies of all such contracts, agreements, options and
undertakings.
(ii) Schedule 7(h)(ii) sets forth an accurate, correct and
complete list of all Real Estate leased, subleased or occupied by
Niagara Paper (such interests are the "LEASED REAL ESTATE"), including
identification of the lease or sublease and the parties thereto and list
of contracts, agreements, leases, subleases, options and commitments,
oral or written, affecting such Leased Real Estate or any interest
therein to which Niagara Paper is a party or by which any of its
interest in the Leased Real Estate is bound. Niagara Paper has been in
peaceable possession of the Leased Real Estate since the commencement of
the original term of such Real Estate Lease. Seller has delivered to
Buyer correct and complete copies of each Real Estate Lease.
(iii) To the knowledge of Seller, except as shown on the
Flood Insurance Rate Map prepared by the Federal Emergency
Management Agency (Community/Parcel No. 550259/0025B revised as of
March 18, 1991) and Inundation Maps for dam failure of Big and
Little Quinnesec Dams revised December 1993, no Real Estate is
located within a flood or lakeshore erosion hazard zone for which
flood insurance is now required under the National Flood Insurance
Program. Neither the whole nor any portion of any Real Estate has
been condemned, requisitioned or otherwise taken by any public
authority, and no notice of any such condemnation, requisition or
taking has been received. To the knowledge of Seller, no such
condemnation, requisition or taking is threatened or contemplated,
except as set forth on Schedule 7(h)(iii). Seller has no knowledge
of any public improvements which may result in special assessments
against or otherwise affect the Real Estate, except as set forth on
Schedule 7(h)(iii).
(iv) The Real Estate is in good operating condition and
repair (reasonable wear and tear excepted) and is suitable and
adequate for the purposes for which it is presently being used.
(v) To the knowledge of Seller, except as set forth on Schedules
7(h) or 7(o), the Real Estate is in compliance with all applicable
zoning, building, health, fire, water, use or similar statutes, codes,
ordinances, laws, rules or regulations. To the knowledge of Seller, the
zoning of each parcel of Real Estate permits the existing improvements
and the continuation following consummation of the transaction
contemplated hereby of Niagara Paper's business as presently conducted
thereon. Niagara Paper has all certificates of occupancy and
authorizations required to utilize the Real Estate. To Seller's
knowledge, Niagara Paper has all easements and rights necessary to
conduct its business, including easements for all utilities, services,
roadway, railway and other means of ingress and egress. To the
knowledge of Seller, Niagara Paper holds such rights to off-site
facilities as are necessary to ensure compliance in all material
respects with all zoning, building, health, fire, water, use or similar
statutes, codes, ordinances, laws, rules or regulations and all such
rights, to the extent held by Seller, shall be conveyed as directed by
Buyer at Closing. Except as disclosed on Schedule 7(h)(i), to the
knowledge of Seller, no fact or condition exists which would result in
the termination or impairment of access to the Real Estate or
discontinuation of sewer, water, electric, gas, telephone, waste
disposal or other utilities or services. Except as disclosed on
Schedule 7(h)(i), to the knowledge of Seller, the facilities servicing
the Real Estate are in full compliance with all codes, laws, rules and
regulations.
(vi) Seller has delivered or made available to Buyer
accurate, correct and complete copies of all existing title
insurance policies, title reports and surveys, if any, with respect
to each parcel of Real Estate.
(i) PLANT AND EQUIPMENT. Seller has furnished to Buyer an accurate
list of all plant and equipment, attached as Schedule 7(i), owned by Niagara
Paper. To the best knowledge of Seller, all plant, structures and equipment
currently being used in the conduct of its operations are in all material
respects in good operating condition and repair, subject to normal wear and
tear, and to the best of Seller's knowledge, are free from material
structural or mechanical deficiencies, except as disclosed on Schedule 7(i)
attached.
(j) INTELLECTUAL PROPERTY. Seller has furnished to Buyer an accurate
list of all Intellectual Property, attached as Schedule 1(v), owned or used
by Niagara Paper. To the best knowledge of Seller, no one is infringing upon
any rights of Niagara Paper with respect to any of the Intellectual Property.
Niagara Paper is not infringing on or otherwise acting adversely to the
rights of any person under, or in respect to, any patents, patent rights,
copyrights, licenses, trademarks, trade names or trademark rights owned by
any person or persons, and there is no claim or action pending or threatened
with respect thereto. Except as set forth in Schedule 1(v), there are no
royalty, commission or similar arrangements, and no licenses, sublicenses or
agreements pertaining to any of the Intellectual Property.
(k) EMPLOYEE MATTERS. Except as set forth on Schedule 7(k), Seller
does not have any pending complaint filed with the National Labor Relations
Board or any other governmental agency alleging unfair labor practices, human
rights violations, employment discrimination charges, or the like against
Niagara Paper which might have a material adverse effect upon Niagara Paper,
its operations or financial condition, and to the best of Seller's knowledge,
there are no existing facts which might result in any such complaint or
charge. Seller has provided to Buyer a complete list of all employees of
Niagara Paper, including name, title or position, present annual
compensation, years of service and any interest in Employee Benefits.
Niagara Paper has complied in all material respects with all laws, rules and
regulations relating to the employment of labor, including provisions related
to wages, hours, equal opportunity, occupational health and safety,
severance, collective bargaining and the payment of social security and other
employment taxes.
(l) LITIGATION. Except as set forth on Schedule 7(l), there are no
legal actions, suits, arbitrations or other legal, administrative or
governmental proceedings or investigations (other than tax audits or
investigations) pending or, to the best knowledge of Seller, threatened
against Niagara Paper which might have a material adverse effect upon its
operations or financial condition. Niagara Paper is not subject to any
judgment, order, writ, injunction, stipulation or decree of any court or any
governmental agency or any arbitrator, except as may be set forth herein or
in any Schedule hereto.
(m) COMPLIANCE WITH LAWS.
(i) To the best knowledge of Seller, the operations of Niagara
Paper have been and are being conducted in accordance with all
applicable laws, rules and regulations of applicable governmental
authorities (other than those covered in Section 18 hereof), except for
such breaches that do not and cannot reasonably be expected to (either
individually or in the aggregate) materially and adversely affect its
financial condition or operations.
(ii) To the knowledge of Seller, neither Niagara Paper, nor any of
its officers or employees, has, directly or indirectly, given or agreed
to give any rebate, gift or similar benefit to any supplier, customer,
distributor, broker, governmental employee or other person, who was, is
or may be in a position to help or hinder Niagara Paper's business (or
assist in connection with any actual or proposed transaction) which
could subject Buyer or Niagara Paper's business to any penalty in any
civil, criminal or governmental litigation or proceeding or which would
have a material adverse effect on Niagara Paper's business.
(n) MATERIAL CONTRACTS. Seller has furnished to Buyer a list, attached
as Schedule 7(n), of all contracts and arrangements, written or oral, which
alone or together with other contracts and arrangements with the same party
are material to Niagara Paper and it has, in all material respects, performed
all of the obligations required to be performed by it to date and is not, and
will not be as of the Closing Date, in default under any material provision
of such contracts or arrangements. All such contracts and arrangements are
and will be in good standing and full force and effect according to their
terms. For purposes of this Section 7(n), a contract shall be deemed to be
material, (i) if it involves remaining payments of more than $300,000, or
(ii) if it cannot by its terms be completed or terminated without penalty
within 180 days from the Closing Date, or (iii) if the absence of such
contract would have a material adverse effect on the business of Niagara
Paper.
(o) LICENSES AND PERMITS. Except as set forth on Schedule 7(o),
Niagara Paper has all requisite licenses and permits to operate its business
as currently conducted and neither Seller nor Niagara Paper has been advised
of, nor to the best knowledge of Seller is there any basis for, any
revocation or anticipated revocation of any permits, licenses or zoning
variances, or of any changes to existing or pending zoning or other
regulations, permits or licenses which would materially and adversely affect
the conduct of its operations as presently conducted.
(p) INSURANCE. Schedule 7(p) contains an accurate and complete list
and description of insurance policies (including the name of the insurer,
coverage, premium and expiration date) which Niagara Paper currently
maintains, or is named as an additional insured or is entitled to benefits
under (including coverage for events occurring under prior policies). To the
best knowledge of Seller, except as set forth on Schedule 7(p), all such
policies are in full force and effect and shall survive the Closing for the
benefit of Niagara Paper.
(q) EMPLOYEE BENEFITS. Schedule 7(q) contains a complete listing of
Employee Benefits provided to employees of Niagara Paper. To the best
knowledge of Seller, except as set forth on Schedule 7(q), (i) the costs of
all such Employee Benefits which are paid currently by Niagara Paper are
reflected as expenses in the Niagara Financial Statements; and (ii) the cost
of such Employee Benefits which are, in whole or in part, not paid currently
are adequately reserved for in the Niagara Financial Statements.
(i) PENSION PLANS. Seller has delivered to Buyer accurate and
complete copies of (i) the Jointly Trusteed Pension Plan for Bargaining
Employees of Niagara of Wisconsin Paper Corporation and the Pentair,
Inc. Pension Plan (collectively, the "NOW DEFINED BENEFIT PLANS") and
all other employee pension benefit plans (within the meaning of Section
3(2) of ERISA) provided to employees of Niagara Paper (collectively,
together with the NOW Defined Benefit Plans, the "PENSION PLANS"),
(ii) the three most recent annual reports on Form 5500 and attached
Schedule B (including any related actuarial valuation report), if any,
filed with the Internal Revenue Service with respect to the Pension
Plans, (if any such report was required), (iii) each trust agreement and
group annuity contract relating to the Pension Plans, (iv) certified
financial statements, (v) collective bargaining agreements or other such
contracts, and (vi) the three most recent actuarial reports prepared in
connection with the Pension Plans and their funded status. Seller has
disclosed to Buyer the information set forth in the attorney's responses
to auditor's requests for information related to the Pension Plans.
(ii) NOW DEFINED BENEFIT PLANS FUNDING. All contributions to, and
payments from, the NOW Defined Benefit Plans that may have been required
to be made in accordance with the NOW Defined Benefit Plans and, when
applicable, Section 302 of ERISA or Section 412 of the Code, have been
timely made. The funding method used in connection with the NOW Defined
Benefit Plans is acceptable under ERISA, and the actuarial assumptions
used in connection with funding such NOW Defined Benefit Plans, in the
aggregate, are reasonable. Schedule 7(q) sets forth (i) the definition
of "pension liabilities", "pension assets" and "unfunded pension
liability" as used in this Agreement, (ii) assumptions and methods to be
used for measuring the above-referenced terms in accordance herewith and
(iii) the estimated NOW Defined Benefit Plan liabilities as of
December 31, 1994.
(iii) PENSION PLAN COMPLIANCE WITH THE CODE AND ERISA. Seller and
Niagara Paper and the Pension Plans (and any related trust agreement or
annuity contract or any other funding instrument) materially comply
currently, and have materially complied in the past, both as to form and
operation, with the provisions of ERISA and the Code (including Section
410(b) of the Code relating to coverage), where required in order to be
tax-qualified under Section 401(a) of the Code, and all other applicable
laws, rules and regulations; all necessary governmental approvals for
such plans have been obtained. Except as set forth in Schedule 7(q),
the Pension Plans have received a determination letter from the Internal
Revenue Service to the effect that the Pension Plans (and any related
trust agreements or annuity contracts or other funding instrument) are
qualified and exempt from Federal income taxes under Sections 401(a) and
501(a), respectively, of the Code, and no such determination letter has
been revoked nor, to the best knowledge of Seller, has revocation been
threatened, nor has such Pension Plan been amended since the date of its
most recent determination letter or application therefor in any respect
which would adversely affect its qualification or materially increase
its cost.
(iv) EMPLOYEE BENEFITS ADMINISTRATION. The Pension Plans and all
other Employee Benefits have been administered to date in material
compliance with the requirements of the Code and ERISA. All reports,
returns and similar documents with respect to the Employee Benefits
required to be filed with any government agency or distributed to any
Employee Benefits participant have been duly and timely filed or
distributed. Except as set forth in Schedule 7(q), there are no
investigations by any governmental agency, termination proceedings or
other claims (except claims for benefits payable in the normal operation
of the Employee Benefits), suits or proceedings against or involving the
Employee Benefits or asserting any rights or claims to benefits under
Employee Benefits that could give rise to any material liability, nor,
to the best knowledge of Seller, are there any facts that could give
rise to any material liability in the event of any such investigation,
claim, suit or proceeding. The Niagara Financial Statements reflect all
of the Employee Benefit liabilities in a manner satisfying the
requirements of FAS 87 and 88. No event has occurred and no condition
exists under any Employee Benefits that would subject Seller, Niagara
Paper or Buyer to any tax under Code Sections 4971, 4972, 4977 or 4979
or to a fine under ERISA Section 502(c).
(v) PROHIBITED TRANSACTIONS. No "prohibited transaction" (as
defined in Section 4975 of the Code or Section 406 of ERISA) has
occurred which involves the assets of the Pension Plans or Employee
Benefits and which could subject Seller, Niagara Paper or any of their
respective employees, or a trustee, administrator or other fiduciary of
any trusts created under the Pension Plans to the tax or penalty on
prohibited transactions imposed by Section 4975 of the Code or the
sanctions imposed under Title I of ERISA. No "reportable events" (as
defined in Section 4043 of ERISA and the regulations thereunder) have
occurred with respect to the Pension Plans, except (i) such events for
which no filing with the PBGC was required (e.g. plan merger) and (ii)
such events which may occur as a result of the transactions contemplated
hereby. Neither Seller nor Niagara Paper nor any trustee, administrator
or other fiduciary of the Pension Plans or the Employee Benefits nor any
agent of any of the foregoing has engaged in any transaction or acted or
failed to act in a manner which could subject Niagara Paper, its
business or Buyer to any material liability for breach of fiduciary duty
under ERISA or any other applicable law.
(vi) LIABILITIES TO PBGC. Seller and Niagara Paper have paid all
premiums (and interest charges and penalties for late payment, if
applicable) due the Pension Benefit Guaranty Corporation ("PBGC") with
respect to the NOW Defined Benefit Plans and each plan year thereof for
which such premiums are required. No liability to the PBGC has been
incurred by Seller or Niagara Paper or any corporation or other trade or
business under common control with Seller or Niagara Paper (as
determined under Section 414(c) of the Code) ("COMMON CONTROL ENTITY")
on account of any termination of an employee pension benefit plan
subject to Title IV of ERISA. No filing has been made by Seller or any
Common Control Entity with the PBGC (and no proceeding has been
commenced by the PBGC) to terminate any employee pension benefit plan
subject to Title IV of ERISA maintained, or wholly or partially funded,
by Seller or any Common Control Entity. Neither Seller nor Niagara
Paper nor any Common Control Entity has (i) ceased operations at a
facility so as to become subject to the provisions of Section 4062(e) of
ERISA, (ii) withdrawn as a substantial employer so as to become subject
to the provisions of Section 4063 of ERISA, or (iii) ceased making
contributions on or before the Closing Date to any employee pension
benefit plan subject to Section 4064(a) of ERISA to which Seller or any
Common Control Entity made contributions during the five (5) years prior
to the Closing Date. No employee pension benefit plan of Seller or any
Common Control Entity subject to Title IV of ERISA has incurred any
material liability to the PBGC other than for the payment of premiums,
all of which have been paid when due. No employee pension benefit plan
of Seller or any Common Control Entity has applied for or received a
waiver of the minimum funding standards imposed by Section 412 of the
Code, and no employee pension benefit plan has an "accumulated funding
deficiency" within the meaning of Section 412(a) of the Code as of the
most recent plan year.
(vii) MULTIEMPLOYER PLANS. Except as set forth on Schedule 7(q),
at no time has Seller or Niagara Paper been required to contribute to
any "multiemployer pension plan" (as defined in Section 3(37) of ERISA)
or incurred any withdrawal liability, within the meaning of Section 4201
of ERISA, or announced an intention to withdraw, but not yet completed
such withdrawal, from any multiemployer pension plan.
(r) TRANSACTIONS WITH RELATED PARTIES.
(i) To the best knowledge of Seller, except for interest and
corporate overhead and as set forth on Schedule 7(r), Niagara Paper is
not a party to any transaction or proposed transaction, including,
without limitation, the leasing of real or personal property, the
purchase or sale of raw materials or finished goods, or the furnishing
of services, with Seller or with any person who is related to or
affiliated with Seller involving the payment or accrual of more than
$1,000,000 during fiscal years 1993 or 1994.
(ii) Except as set forth on Schedule 7(r) or as reflected in
the Niagara Financial Statements dated December 31, 1994, neither
Seller nor any person who is related to or affiliated with Seller
has any cause of action or other claim whatsoever against or owes
any material amount to, or is owed any material amount by, Niagara
Paper.
(s) BANK ACCOUNTS. Schedule 7(s) sets forth a true and complete list
of all banks in which Niagara Paper has an account, safe deposit box or line
of credit, and the names and titles of all persons authorized to draw thereon
or to have access thereto, and a summary description of the use thereof.
(t) TAX MATTERS.
(i) All Returns (including consolidated or combined Returns
including Niagara Paper) required to be filed on or before the
Closing with respect to Niagara Paper have been or will be timely
filed (within the time permitted by any timely filed extension) by
or on behalf of Niagara Paper and all Taxes shown to be due on such
Returns have been timely paid.
(ii) Niagara Paper has not been a member of an affiliated
group (within the meaning of Section 1504 of the Code) filing a
consolidated federal Return, other than a group the common parent
of which is Seller.
(iii) Schedule 7(t) lists all Returns filed with respect to
Niagara Paper for taxable periods which remain open, indicates
those Returns that have been audited and indicates those Returns
that are currently the subject of audit or scheduled for an
examination by any relevant taxing authority.
(iv) Except as disclosed in Schedule 7(t):
(1) no notice or claim has ever been made by a
governmental authority in a jurisdiction where Niagara
Paper does not file Returns that it is or may be subject
to Taxes in that jurisdiction;
(2) no extension of the statute of limitations with
respect to any assessment or claim for Taxes has been granted
by or on behalf of Niagara Paper;
(3) there are no liens for Taxes upon the assets of
Niagara Paper except liens for Taxes not yet due;
(4) no amended Returns or refund claims have been or are
scheduled to be filed by or on behalf of Niagara Paper;
(5) all Taxes and other liabilities with respect to
completed and settled audits, examinations or concluded
litigation have been paid; and
(6) there are no pending appeals or other administrative
proceeding with respect to any Return of Niagara Paper, and there
is no deficiency or refund litigation with respect to any Return of
Niagara Paper. No material issues have been raised by any relevant
taxing authorities on audit of the Returns of Niagara Paper.
Niagara Paper has not received any notice of any Tax deficiency or
assessment.
(v) Niagara Paper has not filed or had filed on its behalf a
consent to the application of Section 341(f) of the Code.
(vi) Except as disclosed in Schedule 7(t), Niagara Paper is
not a party to any contractual obligation requiring the
indemnification or reimbursement of any person with respect to the
payment of any Taxes. Except as disclosed in Schedule 7(t), no
claim has been asserted, which has not been resolved or satisfied,
for any payment under any agreement disclosed in Schedule 7(t).
(vii) Except as disclosed in Schedule 7(t), Niagara Paper is
not a party to or a beneficiary of any financing, the interest on
which is tax-exempt under the Code, and none of the assets of
Niagara Paper is "tax-exempt use property."
(viii) As of the Closing Date, Niagara Paper is not a party
to any agreement, contract, arrangement, or plan that has resulted
or would result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G
of the Code.
(ix) Niagara Paper is a "United States person" within the
meaning of the Code. Niagara Paper has not been a United States
real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code. The transactions
contemplated herein are not subject to the tax withholding
provisions of Section 3406 of the Code, or of Subchapter A of
Chapter 3 of the Code, or of any other provision of law. Niagara
Paper does not have and did not have a branch in any foreign
country.
(x) Niagara Paper is not a party to any joint venture,
partnership, or other arrangement or contract that could be treated
as a partnership for federal income Tax purposes.
(xi) Niagara Paper has withheld and paid all Taxes required
to have been withheld and paid, including (1) amounts paid to any
employee or statutory employee or any foreign person or entity; and
(2) any backup withholding required under Section 3406 of the Code.
(u) ACCOUNTS RECEIVABLE. Schedule 7(u) sets forth an accurate, correct
and complete aging of all outstanding accounts and notes receivable of
Niagara Paper as of December 31, 1994. All outstanding accounts and notes
receivable reflected on the Niagara Financial Statements are, and on the
Statement of Net Book Value will be, due and valid claims against account
debtors for goods or services delivered or rendered and subject to no
defenses, offsets or counterclaims. All receivables arose in the ordinary
course of business. No receivables are subject to prior assignment, claim,
lien or security interest. The books and records of Niagara Paper reflect
amounts taken as a reserve against noncollection of accounts receivable,
which reserve has been established in accordance with Niagara Paper's normal
accounting policies consistently maintained for the fiscal years ended
December 31, 1993 and December 31, 1994 and there is no reason to believe
that such reserve will not be adequate for its purpose. As of the Closing
Date, Niagara Paper will not have incurred any liabilities to customers for
discounts, returns, promotional allowances or otherwise, except those granted
in the ordinary course of Niagara Paper's operations and reflected on the
Statement of Net Book Value.
(v) INVENTORY. All inventories reflected on the Niagara Financial
Statements are, and on the Statement of Net Book Value will be, properly
valued at the lower of cost or market value on a first-in, first-out basis in
accordance with GAAP. Inventories of finished goods are of good and
merchantable quality, whether of first line or job lot paper, contain no
material amounts that are not salable in the ordinary course of business and
meet the current standards and specifications of its business, except as
reserved for on the Niagara Financial Statements. Inventories of raw
materials, stores and replacement parts are, to the best knowledge of Seller,
(i) of good and merchantable quality and contain no material amounts that are
not usable for the purposes intended in the ordinary course of Niagara
Paper's operations; (ii) in conformity with warranties customarily given to
purchasers of like products; and (iii) at levels adequate for and not
excessive in relation to the ordinary course of Niagara Paper's operations
and in accordance with past inventory stocking practices. Sales of
inventories subsequent to December 31, 1994 have been made only in the
ordinary course of business and at prices and under terms that are normal and
consistent with past practice.
(w) MOTOR VEHICLES. Schedule 7(w) sets forth an accurate and complete
list of all motor vehicles used in the business of Niagara Paper, whether
owned or leased. All such vehicles are (i) properly licensed and registered
in accordance with applicable law; (ii) insured as set forth on Schedule
7(p); (iii) in good operating condition and repair (reasonable wear and tear
excepted) and (iv) not subject to any lien or other encumbrance, except as
set forth on Schedule 7(w).
(x) PRODUCT WARRANTY. The books and records of Niagara Paper reflect
amounts taken as a reserve against claims and allowances for product
warranties, which reserve has been established in accordance with Niagara
Paper's normal accounting policies consistently maintained for the fiscal
years ended December 31, 1993 and December 31, 1994 and there is no reason to
believe that such reserve will not be adequate for its purpose. As of the
Closing Date, Niagara Paper will not have incurred any unpaid liabilities to
customers for such claims and allowances, except those granted in the
ordinary course of business and reflected on the Statement of Net Book Value.
Disclosure of any fact in any provision of this Agreement or in any Schedule
attached hereto shall constitute disclosure thereof for the purposes of any
other provision or Schedule.
8. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and
warrants to Seller as follows:
(a) ORGANIZATION. Buyer is a duly organized and validly existing
corporation in good standing under the laws of the state of Wisconsin. Buyer
has all requisite corporate power to own its property and carry on its
business as presently conducted.
(b) AUTHORITY. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Board of Directors of Buyer.
(c) VALID AND ENFORCEABLE AGREEMENT. This Agreement constitutes a
valid and binding agreement of Buyer, enforceable in accordance with its
terms, except insofar as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights
of creditors generally, and by general equitable principles. Neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, nor the performance of Buyer's obligations
hereunder materially violates or conflicts with, results in a material breach
of, or constitutes a material default under (i) to the best knowledge of
Buyer, any law, rule or regulation, or (ii) subject to the obtaining of
necessary consents under various agreements, any agreement or other
restriction of any kind or character to which Buyer is a party, by which
Buyer is bound, or to which any of the properties of Buyer is subject.
Neither the execution or delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, nor the performance of Buyer's
obligations hereunder, violates or conflicts with, results in a breach of or
constitutes a default under (i) any judgment or order, decree, award or
ruling to which Buyer is subject, or (ii) the Articles of Incorporation or
By-Laws of Buyer.
(d) NO INSOLVENCY. Buyer is not currently insolvent, and neither the
purchase of the stock of Niagara Paper, the assumption of the Guaranteed
Obligations of Seller pursuant to Section 5, nor any related transaction or
event shall render Buyer insolvent or leave Buyer with assets which are
unreasonably small in relation to Niagara Paper and its own business
operations, nor does Buyer intend to incur debts beyond its ability to pay
them as they come due.
(e) FINANCIAL STATEMENTS. Buyer's financial statements for the year
ended December 31, 1994, as filed with the Securities and Exchange Commission
(copies of which have been delivered to Seller) (i) were prepared in
accordance with and accurately reflect its books and records, (ii) were
prepared in accordance with generally accepted accounting principles,
consistently applied, and (iii) present fairly the financial position and the
results of operations of Buyer for the periods covered thereby.
(f) INVESTMENT INTENT. Buyer is purchasing the outstanding shares of
Niagara Paper for its own account and not with a view to, or present
intention of, sale or distribution thereof in violation of the Securities Act
of 1933, as amended (the "1933 ACT") and such shares will not be disposed of
in contravention of the 1933 Act. Buyer acknowledges that such shares are
not and have not been registered with the Securities and Exchange Commission
or any securities commission or agency of any state, including the state of
Minnesota, and may not be transferred or disposed of without registration
under the 1933 Act and applicable state securities laws or an exemption from
such registration.
Disclosure of any fact in any provision of this Agreement or in any
Schedule attached hereto shall constitute disclosure thereof for the purposes
of any other provision or Schedule.
9. ACTIONS PENDING CLOSING. From the date hereof through the Closing
Date, Seller shall take, or cause Niagara Paper to take, all actions
necessary and appropriate to comply with, or to refrain from taking any
action in breach of, the following provisions for the period between the
execution of this Agreement and the termination hereof or the Closing Date:
(a) OPERATIONS. Niagara Paper shall conduct its operations only in the
ordinary course of business and shall not enter into any transaction or
perform any act that would constitute a breach of the representations,
warranties, or agreements contained herein. Niagara Paper shall use its best
efforts to preserve its business and its organization intact and to keep
available the services of its present employees. Attached as Schedule 9(a)
is a list of capital expenditures and commitments proposed to be undertaken
by Niagara Paper in its five-year plan. Niagara Paper shall not initiate any
capital expenditure or commitment other than as set forth on Schedule 9(a) or
initiate any capital expenditure and commitment as set forth on Schedule 9(a)
in excess of $25,000, without Buyer's approval, which approval shall not be
unreasonably withheld; provided, however, that Niagara Paper may initiate
emergency capital expenditures or commitments consistent with the past
practices of Niagara Paper. Niagara Paper shall promptly notify Buyer of
such emergency expenditures or commitments.
(b) ACCESS TO RECORDS. Seller and Niagara Paper shall make available
to Buyer, its agents and employees, all books and records in their possession
relating to the business of Niagara Paper; provided, however, that Seller has
not made, and shall not be deemed to have made, any representations or
warranties whatsoever with respect to any of such books or records or any
other documents provided to or made available to Buyer, except as expressly
set forth in this Agreement.
(c) ACCESS TO FACILITIES. Buyer, its agents and employees, shall be
given full access during regular business hours to the physical facilities of
Niagara Paper, upon appointment with the President thereof and accompanied by
such President or his or her designee(s). Seller and Niagara Paper and their
respective employees shall cooperate fully with Buyer in its examinations and
inspections, but not to the detriment of the ongoing business operations of
Niagara Paper prior to Closing.
(d) RELEASE OF GUARANTEES. Seller and Buyer shall agree on the actions
to be taken with respect to the release of Seller from, and the substitution
(as required) of Buyer as, the guarantor of the Niagara Leases and other
Guaranteed Obligations. Each party shall pay its own costs in connection
with seeking and obtaining such releases, but if any additional or different
payments or terms are imposed by any lease participants in connection
therewith, the costs or the performance thereof shall be borne as agreed upon
by Seller and Buyer.
(e) HART-SCOTT-RODINO FILINGS. Seller and Buyer shall cooperate in the
prompt preparation and filing of all notifications and reports which may be
required with respect to the transactions contemplated by this Agreement
pursuant to Section 7A of the Clayton Act. Seller and Buyer shall also
cooperate in responding promptly to all inquiries from the Federal Trade
Commission or the Department of Justice resulting from the filing of such
notifications and reports.
(f) NOTICE OF DEVELOPMENTS. At least ten (10) business days prior to
the Closing Date, Seller shall deliver to Buyer a complete update of the
Schedules from the date hereof. Each party hereto shall notify the other of
any development(s) which shall constitute a breach of any of the
representations and warranties in Sections 7 or 8 above. The party so
notified has the right to terminate this Agreement within the period of ten
(10) business days from the date of receipt of such notification, if as a
result of such development the financial condition, results of operations or
prospects of Niagara Paper as a whole, on the one hand, or Buyer, on the
other hand, have been materially and adversely affected. If within such ten
(10) day period, the party notified shall not have exercised its right to
terminate this Agreement, the written notice shall be deemed to have amended
this Agreement and the relevant schedules attached thereto, to have qualified
the representations and warranties contained in Sections 7 or 8 above and to
have cured any misrepresentation or breach of warranty that otherwise might
have existed hereunder by reason of such development, including for purposes
of Section 15 hereof.
(g) BEST EFFORTS. Buyer and Seller shall use their best efforts to
consummate the transactions contemplated by this Agreement and shall not take
any other action inconsistent with their respective obligations hereunder or
which could hinder or delay the consummation of the transactions contemplated
hereby. From the date hereof through the Closing Date, Buyer and Seller
shall use their best efforts to fulfill the conditions to their obligations
hereunder and to cause their representations and warranties to remain true
and correct as of the Closing Date.
(h) ALLOCATION OF PULP. Seller and Buyer shall take all necessary
action to transfer all contracts for purchase of kraft pulp currently in the
name of Seller and allocated to Niagara Paper into the name of Niagara Paper
or Buyer, as Buyer may direct. Until such contracts are transferred or
terminated, Seller shall continue to perform such contracts and direct
delivery of pulp thereunder to Niagara Paper in the same manner as currently
performed, and Niagara Paper shall pay for such kraft pulp delivered to the
seller thereof, or if Seller has paid therefor, promptly to Seller upon
delivery.
(i) INSURANCE MATTERS. Buyer and Seller shall review Niagara Paper's
insurance coverage and negotiate a mutually satisfactory agreement regarding
ongoing insurance coverages, premiums and deductibles.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligations of
Buyer hereunder (unless expressly waived by Buyer) are subject to the
fulfillment, prior to or at Closing, as the case may be, of each of the
following conditions:
(a) NO ERRORS; PERFORMANCE OF OBLIGATIONS. The representations and
warranties of Seller herein shall be true and correct as of the Closing Date.
Seller shall have performed the obligations set forth in Section 9 and in all
material respects all of the other obligations to be performed by it
hereunder in the time and manner herein stated.
(b) OFFICER'S CERTIFICATE. Seller shall have delivered to Buyer a
certificate, dated as of the Closing Date, executed by its Secretary, and in
form and substance satisfactory to Buyer, certifying that the covenants and
conditions specified in this Agreement to be met by Seller have been
performed or fulfilled and that the representations and warranties herein
made by Seller are true and correct as of such date.
(c) CERTIFIED COPY OF RESOLUTIONS. Seller shall have delivered to
Buyer a certified copy of resolutions adopted by Seller's Board of Directors
authorizing the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby.
(d) OPINION OF SELLER'S COUNSEL. Seller shall have delivered to Buyer
the opinion of its counsel, dated as of the Closing Date, in form and
substance satisfactory to Buyer and its counsel, giving the following clean
legal opinions:
(1) valid organization of Seller and Niagara Paper;
(2) corporate power and authority of Seller to
enter into the Agreement;
(3) necessary foreign qualification of Niagara Paper;
(4) No Breach or Default Opinion with respect to Niagara
Paper;
(5) No Violation Opinion with respect to Seller;
(6) Remedies Opinion with respect to Seller, this
Agreement and the Niagara Leases;
(7) Legal Proceedings Opinion with respect to Seller and
Niagara Paper;
(8) other legal matters agreed upon between Seller
and Buyer; and
(9) no violation of registration provisions of the
1933 Act and applicable state securities laws;
all in accordance with, and subject to the General Qualifications and other
limitations and provisions contained in, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(e) INJUNCTIONS. No injunction shall have issued restricting or
prohibiting the transactions contemplated by this Agreement.
(f) CLAYTON ACT MATTERS. The waiting period required by Section 7A of
the Clayton Act shall have expired or been terminated.
(g) ENVIRONMENTAL MATTERS AND CONSENT ORDER.
(i) The results of any inspections, soil test boring, soil
tests, drainage tests, surveys, topographical analyses, engineering
studies or other investigations performed or obtained by Buyer
shall not have disclosed evidence of Hazardous Materials in, on or
adjacent to any of the real properties owned or occupied by Niagara
Paper, other than those disclosed in any environmental studies or
other information listed on Schedule 10(g) attached which would
materially and adversely affect the operations of Niagara Paper.
Buyer shall not have received any evidence that there are existing
violations of any Environmental Law, other than those described in
Schedule 10(g), or that any requisite environmental license or
permit or any occupance, use or building permits or other approvals
from applicable governmental authorities are currently required for
the continued operation of the facilities owned by Niagara Paper
which have not been obtained or are not in effect. In order to
enable Buyer to conduct a due diligence investigation, Seller and
Niagara Paper shall provide Buyer with access to the environmental
files, licenses, permits, permit applications, consultant reports,
notices from local, state and federal governmental entities,
environmental audit and inspection reports, insurance files, and
other information necessary for Buyer to assess the environmental
status of the operating facilities of Niagara Paper, as well as
permit or obtain permission for Buyer to conduct soil and
groundwater testing on or beneath the real properties owned or
occupied by Niagara Paper.
(ii) Niagara Paper shall have received any necessary or
required approvals from the Wisconsin Department of Natural
Resources with respect to the treatment of surface/ponded water
from the sludge lagoons and impacted groundwater down gradient from
such site.
(h) LABOR NEGOTIATIONS. Buyer shall have negotiated a new collective
bargaining agreement between Niagara Paper and United Papermakers
International Union, Local No. 1166 which shall become effective on the
Closing Date. Buyer shall have negotiated a new collective bargaining
agreement between Niagara Paper and the Office and Professional Employees
International Union, Local No. 407 which shall become effective on the
Closing Date. The terms and conditions of such collective bargaining
agreements shall be substantially similar to those heretofore discussed by
the parties.
(i) FINANCING. Buyer shall have used its best efforts to maintain an
aggregate of at least $250 million available under Buyer's committed and
uncommitted lines of credit until the Closing Date and such lenders shall not
have cancelled or revoked such lines of credit prior to the Closing Date.
(j) FIRPTA CERTIFICATE. Seller shall have furnished Buyer with a
certificate of non-foreign status signed by the appropriate party and
sufficient in form and substance to relieve Buyer of all withholding
obligations under Section 1445 of the Code. If Seller cannot furnish such a
certificate or Buyer is not entitled to rely upon such certificate under the
provisions of Section 1445 of the Code and the regulations thereunder, Seller
shall take and/or permit Buyer to take any and all steps necessary to allow
Buyer to satisfy the requirements of Section 1445 of the Code.
(k) PURCHASE OF LSPI AND SRFI. On or prior to the Closing Date, Buyer
shall have purchased (i) all of the issued and outstanding capital stock of
Pentair Duluth Corp., a Minnesota corporation and Minnesota Paper
Incorporated, a Minnesota corporation; and (ii) all of the assets of LSPI
Fiber Co., a joint venture organized under the general partnership laws of
the state of Minnesota and all of the issued and outstanding capital stock of
Superior Recycled Fiber Corporation, a Minnesota corporation.
(l) REAL ESTATE CONSENTS. Seller shall deliver to Buyer any consents
or approvals of any parties required pursuant to (i) the terms of any
contract, agreement, option or undertaking affecting the Owned Real Estate;
and (ii) the terms of the Real Estate Leases and estoppel certificates in
form and substance reasonably acceptable to Buyer from all lessors under the
Real Estate Leases.
(m) TITLE INSURANCE AND SURVEYS.
(i) Buyer shall have obtained an ALTA Owners Policy of Title
Insurance Form B Owner's Form (the "TITLE POLICY") for each parcel
of Owned Real Estate issued by a nationally recognized title
company reasonably acceptable to Buyer (the "TITLE COMPANY"). The
Title Policy shall be in the amount of the purchase price allocated
to the Owned Real Estate by Buyer, showing fee simple title to the
Real Estate in Niagara Paper (or if Niagara Paper is a contract
purchaser, the seller designated under the applicable sales
contract), subject only to current real estate taxes not yet due
and payable as of the Closing Date, liens and encumbrances
reflected on Schedule 10(m) hereto, and such other covenants,
conditions, easements and exceptions to title as Buyer may approve
in writing (collectively, the "PERMITTED EXCEPTIONS"). With
reasonable promptness, after the date of this Agreement, Buyer
shall order commitments (the "COMMITMENTS") for the Title Policy.
Copies of the Commitments shall be promptly delivered to Seller.
The Commitments and the Title Policy to be issued by the Title
Company shall have all Standard and General Exceptions deleted so
as to afford full "extended form coverage" and shall contain an
Alta Zoning Endorsement 3.1, contiguity, non-imputation, and such
other endorsements as may be reasonably requested by Buyer. At
Closing, Seller shall deliver to Buyer a seller's affidavit or
similar instruments as the Title Company may require. Buyer shall
be responsible for the cost of all title insurance charges,
premiums and endorsements, title abstracts and attorneys' opinions,
including all search, continuation and later-date fees.
(ii) Buyer shall have obtained an as-built plat of survey of
each parcel of the Owned Real Estate (the "SURVEYS") prepared by a
registered land surveyor or engineer, licensed in the respective
states in which the Owned Real Estate is located, dated on or after
the date hereof, certified to Buyer, the Title Company and such
other entities as Buyer may designate, and conforming to current
ALTA Minimum Detail Requirements for Land Title Surveys, sufficient
to cause the Title Company to delete the standard printed survey
exception and to issue the Title Policy free from any survey
objections or exceptions whatsoever. Buyer shall pay the entire
cost of obtaining the Surveys. Any Survey may be a recertification
of a prior survey, provided that it meets the above-described
criteria. Each Survey shall show all conditions as then existing,
including the location of all pipes, wires and conduits serving the
Owned Real Estate and their connections to public ways, parking
areas denominated as such, loading docks and other improvements,
the access to and from the improvements on the Owned Real Estate,
and a flood plain certification indicating no flood zone
classification or area which would materially interfere with the
normal operation of Niagara Paper. With reasonable promptness
after the date of this Agreement, Buyer shall order the Surveys.
Copies of the Surveys shall be promptly delivered to Seller.
(iii) If (i) any Commitment discloses a title exception,
other than a Permitted Exception, that represents a defect
affecting the marketability of the Owned Real Estate (an
"UNPERMITTED EXCEPTION") or (ii) any Survey discloses that
improvements located on the surveyed land encroach onto adjoining
land or onto any easements, building lines or set-back
requirements, or encroachments by improvements from adjoining land
onto the surveyed land or onto any easements for the benefit of the
surveyed land, or overlap or reflects that any utility service to
the improvements or access thereto does not lie wholly within the
Owned Real Estate or an unencumbered easement for the benefit of
the Owned Real Estate or reflects any other matter, any of which
materially and adversely affects the use or improvements of such
parcel of Owned Real Estate, or any other matter which renders
title to any Owned Real Estate unmarketable (a "SURVEY DEFECT"),
then, in any such event, Seller shall have thirty (30) days from
the date of delivery thereof to have the Unpermitted Exception
removed from such Commitment or the Survey Defect corrected or
insured over by an appropriate title insurance endorsement, all at
Seller's cost and in a manner reasonably satisfactory to Buyer, and
in any such event the Closing shall be extended, if necessary, to
the date which is five (5) business days after the expiration of
such 30-day period. If Seller fails to have any Unpermitted
Exception removed or any Survey Defect corrected or otherwise
insured over to the reasonable satisfaction of Buyer within the
time specified therefor, Buyer, at its sole option, upon not less
than three (3) days' prior written notice to Seller, may terminate
this Agreement and all of Buyer's obligations hereunder.
(n) NIAGARA LEASE. Seller shall have been released from its Guaranteed
Obligations under the Niagara Lease dated September 7, 1990.
(o) OTHER MATTERS. All corporate and other proceedings and actions
taken in connection with the transactions contemplated hereby and all
certificates, opinions, agreements, instruments and documents mentioned
herein or incident to any such transaction shall be delivered to Buyer and be
reasonably satisfactory in form and substance to Buyer and its counsel.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligations of
Seller hereunder (unless expressly waived by Seller) are subject to
fulfillment by Buyer, prior to or at Closing, as the case may be, of each of
the following conditions:
(a) NO ERRORS; PERFORMANCE OF OBLIGATIONS. The representations and
warranties of Buyer herein shall be true and correct as of the Closing Date.
Buyer shall have performed in all material respects all of the obligations to
be performed by it hereunder in the time and manner herein stated.
(b) OFFICER'S CERTIFICATE. Buyer shall have delivered to Seller a
certificate, dated as of the Closing Date, executed by an officer of Buyer,
and in form and substance satisfactory to Seller, certifying that the
covenants and conditions specified in this Agreement to be met by Buyer have
been performed or fulfilled and that the representations and warranties
herein made by Buyer are true and correct as of such date.
(c) CERTIFIED COPY OF RESOLUTIONS. Buyer shall have delivered to
Seller a certified copy of resolutions adopted by the Board of Directors of
Buyer authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(d) OPINION OF BUYER'S COUNSEL. Buyer shall have delivered to Seller
the opinion of its counsel, dated as of the Closing Date, in form and
substance satisfactory to Seller and its counsel, giving the following clean
legal opinions:
(1) valid organization of Buyer;
(2) corporate power and authority of Buyer to enter
into the Agreement;
(3) No Breach or Default Opinion;
(4) No Violation Opinion;
(5) Legal Proceedings Opinion;
(6) Remedies Opinion with respect to this Agreement; and
(7) other legal matters agreed upon between Seller and
Buyer;
all in accordance with, and subject to the General Qualifications and other
limitations and provisions contained in, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(e) INJUNCTIONS. No injunctions shall have issued restricting or
prohibiting the transactions contemplated by this Agreement.
(f) CLAYTON ACT MATTERS. The waiting period required by Section 7A of
the Clayton Act shall have expired or been terminated.
(g) FINANCING. Buyer shall have used its best efforts to maintain an
aggregate of at least $250 million available under Buyer's committed and
uncommitted lines of credit until the Closing Date and such lenders shall not
have cancelled or revoked such lines of credit prior to the Closing Date.
(h) SALE OF LSPI AND SRFI. On or prior to the Closing Date, Buyer
shall have purchased (i) all of the issued and outstanding capital stock of
Pentair Duluth Corp., a Minnesota corporation and Minnesota Paper
Incorporated, a Minnesota corporation; and (ii) all of the assets of LSPI
Fiber Co., a joint venture organized under the general partnership laws of
the state of Minnesota and all of the issued and outstanding capital stock of
Superior Recycled Fiber Corporation, a Minnesota corporation.
(i) NIAGARA LEASE. Seller shall have been released from its Guaranteed
Obligations under the Niagara Lease dated September 7, 1990.
(j) APPROVALS. Niagara Paper shall have received any necessary or
required approvals from the Wisconsin Department of Natural Resources with
respect to the treatment of surface/ponded water from the sludge lagoons and
impacted groundwater down gradient from such site; provided, however, that
such approvals shall not require any material expenditures by Niagara Paper
which are not acceptable to Seller.
(k) OTHER MATTERS. All corporate and other proceedings and actions
taken in connection with the transactions contemplated hereby and all
certificates, opinions, agreements, instruments and documents mentioned
herein or incident to any such transaction shall be delivered to Seller and
be reasonably satisfactory in form and substance to Seller and its counsel.
12. BROKER. Seller represents and warrants that CS First Boston was
retained by Seller to represent it in this transaction. Buyer represents and
warrants that Dillon, Read & Co. Inc. has been retained by Buyer to represent
it. Seller shall be responsible for payment of all fees and expenses of CS
First Boston and Buyer shall be responsible for payment of all fees and
expenses of Dillon, Read & Co. Inc. Should any claims for commissions be
made by any other person claiming an interest in this Agreement, or in the
underlying transactions, by reason of any agreement, understanding or other
arrangement with Buyer or with Seller, or their respective agents, servants,
employees, or other representatives, then the party through, or on account
of, whom such claims are made shall indemnify and hold harmless the other
party from any and all liabilities and expenses in connection therewith in
accordance with the provisions of Section 15 below. The foregoing provisions
of this Section 12 shall survive not only the Closing hereunder, but also any
termination or cancellation of this Agreement.
13. EMPLOYEES AND EMPLOYEE BENEFITS. (a) Seller and Niagara Paper
agree to use all reasonable efforts to keep the present employees of Niagara
Paper during the period between the execution hereof and the Closing Date.
Niagara Paper has bargained with the United Papermakers International Union,
Local No. 1166 for an extension to June 30, 1995 of the currently effective
Collective Bargaining Agreement between them, which expired January 31, 1994.
Buyer and Niagara Paper shall indemnify and hold Seller harmless against any
severance or termination pay obligations based upon prior policies of Seller
or Niagara Paper or arising from the transactions contemplated hereby.
Following the Closing, Niagara Paper shall continue to provide the post-
retirement medical benefits currently provided by Niagara Paper to former
Niagara Paper employees who retired prior to the Closing Date, subject to the
terms and conditions of such Employee Benefits. Except as set forth in the
preceding sentence, Seller shall indemnify and hold Buyer and Niagara Paper
harmless against any and all liabilities and obligations with respect to the
current retirees of Niagara Paper. Except as expressly agreed between the
parties, neither Niagara Paper nor Buyer shall assume or be responsible for
any Employee Benefits or any liabilities related thereto.
(b) Seller has announced to selected employees of Niagara Paper
transition incentives heretofore disclosed to Buyer, to encourage their
continued employment and achievement of performance targets for Niagara Paper
prior to Closing. The costs and administration of all such transition
incentives shall be the sole responsibility of Niagara Paper which shall pay
such transition incentives promptly after Closing, in accordance with the
terms thereof.
14. CONFIDENTIAL INFORMATION. (a) Buyer acknowledges that pursuant to
its right to inspect Seller's records and facilities under Section 9, Buyer
shall become privy to Confidential Information. Buyer agrees that in the
event the transaction contemplated by this Agreement is not completed, all
Confidential Information disclosed to Buyer shall remain confidential, shall
not be used for the benefit of Buyer or any of Buyer's affiliates or
disclosed to any person or entity, and all recorded evidence thereof shall be
delivered to Seller together with an officer's certificate to the effect that
no copies thereof or any extracts, derivatives or compilations thereof remain
in possession of Buyer, its employees, affiliates, agents, counsel or
auditors. The confidentiality and nonuse provisions hereof shall survive any
termination of this Agreement until August 26, 1997. Buyer acknowledges that
it has entered into a confidentiality letter dated August 26, 1994 between
itself and CS First Boston on behalf of Seller and agrees that such
confidentiality letter shall continue in full force and effect for the
duration of its term in addition to the provisions of this Section 14.
(b) Seller agrees that in the event the transaction contemplated by this
Agreement is completed, all confidential and proprietary information related
to Niagara Paper shall remain confidential, shall not be used for the benefit
of Seller or any of Seller's affiliates or disclosed to any person or entity.
The confidentiality and nonuse obligations of Seller hereunder shall be on
the same terms and conditions as the confidentiality letter set forth in
Section 14(a) and shall survive any termination of this Agreement until
August 26, 1997.
15. INDEMNIFICATION. (a) Without limiting any remedy Buyer may have
hereunder, Seller hereby agrees to indemnify, defend and hold Buyer harmless
from and against and in respect of any and all liabilities, losses, damages,
claims, costs and expenses, including reasonable attorneys fees, suffered or
incurred by Buyer or Niagara Paper when so suffered or incurred, by reason of
or relating to:
(i) any representation or warranty of Seller contained in
this Agreement being breached or untrue;
(ii) any covenant or agreement of Seller contained in this
Agreement being breached or not fulfilled in any material respect,
and not waived;
(iii) any economic harm incurred or payment required to be
made by Niagara Paper under the Niagara Leases, due to Niagara
Paper's obligations to the respective Owner Participants therein
arising out of tax indemnity agreements incident to the Niagara
Leases;
(iv) the assertion against Buyer of any other liability of
Seller not assumed by Buyer hereunder; or
(v) the assertion against Buyer or Niagara Paper of any
liability of Niagara Paper assumed by Seller;
provided, however, that any claim arising out of any breach of warranty or
otherwise relating to (x) environmental conditions, permits or liabilities or
obligations with respect to Hazardous Materials shall be dealt with solely in
accordance with Section 18 hereof and (y) taxes shall be dealt with solely in
accordance with Section 23 hereof.
(b) Without limiting any remedy Seller may have hereunder, Buyer hereby
agrees to indemnify, defend, and hold Seller harmless from and against and in
respect of any and all liabilities, losses, damages, claims, costs and
expenses, including reasonable attorneys fees, by reason of or relating to:
(i) any representation or warranty by Buyer contained in this
Agreement being breached or untrue;
(ii) any covenant or agreement of Buyer contained in this
Agreement being breached or not fulfilled in a material respect,
and not waived;
(iii) any economic benefit (net of taxes) realized or payment
received by Niagara Paper under the Niagara Leases following the
Closing Date, arising out of any payment made or accommodation
extended by Seller or Niagara Paper prior to the Closing Date, with
respect to any liability of Niagara Paper to the respective Owner
Participant(s) in the Niagara Leases under the Transaction
Documents which are a part thereof (including without limitation
the tax indemnity agreements); or
(iv) the failure of Buyer to pay, discharge, or perform any
guaranty, obligation or liability assumed by Buyer hereunder
(including without limitation the Guaranteed Obligations).
(c) Notice of any claim of indemnification under this Agreement (other
than for claims pursuant to Sections 16, 18 and 23) shall be effective only
if such notice shall have been given in writing to the Indemnitor (as
hereinafter defined) on or prior to December 31, 1997. Notice of claims by
Seller against Buyer regarding Guaranteed Obligations shall be effective only
if given in writing on or prior to the date six months following the date on
which the liability of Seller is discharged with respect to the last
outstanding Guaranteed Obligation.
(d) The first $1,500,000 in the aggregate of claims made by either
party (except claims against Seller under Sections 19 or 23 or pursuant to
subparagraphs 15(a)(iii), (iv) and (v) above, claims against Buyer under
Section 19 or under subparagraph 15(b) (iii) and (iv) above or claims against
either Buyer or Seller under Sections 12, 13, 14 or 16 hereof) pursuant to
this Section shall be borne by that party and shall not be indemnifiable.
The minimum amount of each such claim shall be not less than $50,000 in the
aggregate.
(e) In the event that indemnification is sought with respect to any
obligation of Buyer and Seller under this Agreement, the party seeking
indemnification (the "INDEMNITEE") shall give the party from whom
indemnification is sought (the "INDEMNITOR") notice of any claim of the
commencement of any action or proceeding promptly after the Indemnitee
receives notice thereof, and shall permit the Indemnitor to assume the
defense of any such claim or litigation resulting from such claim.
If the Indemnitor assumes the defense of any such claim or litigation
resulting therefrom, the obligations of Indemnitor as to such claim shall be
limited to taking all steps necessary in the defense or settlement of such
claim or litigation resulting therefrom and to holding the Indemnitee
harmless from and against any and all losses, damages and liabilities caused
by or arising out of any settlement approved by the Indemnitor or any
judgment in connection with such claim or litigation resulting therefrom.
The Indemnitee may participate, at its expense, in the defense of any
such claim or litigation, provided that the Indemnitor shall direct and
control the defense of such claim or litigation.
Except with the written consent of the Indemnitee, the Indemnitor shall
not, in the defense of such claim or any litigation resulting therefrom,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnitee of a release from all liability with respect to
the claim or litigation.
If the Indemnitor shall not assume the defense of any such claim or
litigation resulting therefrom, the Indemnitee may defend against such claim
or litigation in such manner as it may deem appropriate and, unless the
Indemnitor shall deposit with the Indemnitee a sum equivalent to the total
amount demanded in such claim or litigation, or shall deliver to Indemnitee a
surety bond for such amount in form and substance reasonably satisfactory to
Indemnitee, Indemnitee may settle such claim or litigation on such terms as
it may reasonably deem appropriate, and the Indemnitor shall promptly
reimburse Indemnitee for the amount of all costs and expenses, legal or
otherwise, reasonably incurred by the Indemnitee in connection with the
defense against or settlement of such claims or litigation. If no settlement
of such claim or litigation is made, the Indemnitor shall promptly reimburse
the Indemnitee for the amount of any final judgment rendered with respect to
such claim or in such litigation and for all reasonable costs and expenses,
legal or otherwise, incurred by the Indemnitee in the defense against such
claim or litigation, but only to the extent that such amounts are actually
paid.
16. GUARANTEED OBLIGATIONS. (a) In the event that Seller's release
from the Guaranteed Obligations is not obtained, Seller and Buyer agree that
they will continue to use their best efforts to obtain the complete release
of Seller from the Guaranteed Obligations. Except as set forth in Section
16(b), Buyer shall indemnify Seller against any and all demands, payments,
expenses and costs incurred by Seller in connection with such Guaranteed
Obligations in accordance with Section 15 hereof for so long as Seller has
any potential liability under any such Guaranteed Obligation. Buyer agrees
that it will cause Niagara Paper to comply with all of its obligations and
covenants under the Guaranteed Obligations.
(b) Following the Closing Date, Buyer agrees that it shall not pledge,
sell, transfer, assign or otherwise dispose of all or any part of the Capital
Stock of Niagara Paper or all or substantially all of the assets of Niagara
Paper without the written consent of Seller, which consent may be granted or
withheld in its sole discretion. At any time, Buyer may merge with to into,
or consolidate with, any other corporation or sell Niagara Paper or the
assets thereof, provided that:
(i) Buyer remains absolutely and unconditionally obligated under
this Agreement including specifically, but without limitation, Section
15 and 16 hereof; and
(ii) prior to such transaction there shall have been delivered to
Seller an opinion of Buyer's counsel reasonably satisfactory to Seller
stating in effect that Buyer's obligations under Section 15 and 16 of
this Agreement are legal, valid and binding obligations of Buyer
enforceable in accordance with their terms against Buyer, subject to
customary qualifications as to enforceability.
(c) Until Seller is released from all of its Guaranteed Obligations,
Seller agrees to comply with any and all of its non-monetary obligations and
covenants under the Niagara Leases. In the event of any breach by Seller of
such obligations and covenants, Seller shall indemnify Buyer against any and
all demands, payments, expenses and costs incurred by Buyer or Niagara Paper
in excess of those which would have been incurred by Niagara Paper in the
course of performance of the Guaranteed Obligations but for any breach of
Seller, in connection with the foregoing sentence in accordance with Section
15 hereof for so long as Seller has any obligation under any such Guaranteed
Obligation. Buyer and Seller agree that the provisions of this Section 16
shall continue in full force and effect until the complete discharge of
Seller under such Guaranteed Obligations.
17. EXPENSES. Seller and Buyer shall each be responsible for all of
their own expenses incurred in connection with the transactions contemplated
hereby. Seller shall be responsible for the accounting and auditing fees and
expenses related to the preparation of the Statement of Net Book Value.
Seller shall cooperate and cause its accountants to cooperate and assist
Buyer and its accountants (including consenting to the use of the Niagara
Financial Statements) with respect to any filings by Buyer with the
Securities and Exchange Commission in connection with the transactions
contemplated hereby. Seller shall be responsible for any and all fees and
expenses of Seller's accountants with respect to the foregoing. Buyer will
pay the incremental costs and expenses of auditing Niagara Paper's financial
statements or other information required by Buyer other than the Statement of
Net Book Value as of the Closing Date. Buyer will pay the cost of the
Commitments, Title Policies and Surveys set forth in Section 10(m).
18. ENVIRONMENTAL MATTERS.
(a) WARRANTY. Seller warrants that, other than as disclosed to Buyer
pursuant to Schedule 10(g) attached:
(i) Compliance with Environmental Laws. The business and
operations of Niagara Paper comply in all material respects with all
applicable Environmental Laws, except to the extent that such
noncompliance could not be reasonably expected to have a material
adverse effect on the business, operations, properties, assets or
condition (financial or otherwise) of Niagara Paper.
(ii) Notice/Receipt of Notice. Niagara Paper has not given, or is
required to give, nor has it received, any written notice, letter,
citation, or order, or any written warning, complaint, inquiry, claim or
demand (or if verbal, to the extent the warning, complaint, inquiry,
claim or demand is recorded in a written log) that: (i) Niagara Paper
has violated, or is about to violate, any Environmental Law; (ii) there
has been a release, or there is a threat of release, of a non-de minimis
quantity of Hazardous Material from Niagara Paper's property,
facilities, equipment or vehicles or previously owned or leased
properties; (iii) Niagara Paper may be or is liable, in whole or in
part, for material costs of cleaning up, remediating, restoring or
responding to a release of Hazardous Material; (iv) any of Niagara
Paper's property or assets or previously owned or leased properties or
assets are subject to a lien in favor of any governmental entity for any
liability, costs or damages, under any federal, state or local
environmental law, rule or regulation arising from, or costs incurred by
such governmental entity in response to, a release of Hazardous
Material; (v) Niagara Paper may be or is liable in whole or in part, for
natural resource damages; provided, that for purposes of liability for
natural resource damages such notice, letter, citation, order, inquiry,
claim or demand was made by a governmental agency.
(iii) Property on Environmental Cleanup Lists. No property now or
previously owned or leased by Niagara Paper is listed (with respect to
Owned Real Estate proposed for listing) on the National Priorities List
pursuant to Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. 9601 et seq.) ("CERCLA"),
on the CERCLIS or on any similar state list of sites requiring
investigation or clean-up.
(iv) Reports of Hazardous Waste Sites. Niagara Paper fully
complied in a timely manner with the provisions of 42 U.S.C. 9603
including conducting any required investigation of employees, former
employees and available records and filed any required notices and
reports required under that section and any notices filed pursuant to 42
U.S.C. 9603 are attached to Schedule 10(g).
(v) Past Disposal -- On site. Neither Niagara Paper, nor to the
best knowledge of Seller any previous owner or other person, has ever
caused or permitted any material release or disposal of any Hazardous
Material on, under or at any of the facilities or properties of Niagara
Paper or any part thereof, and none of such facilities or properties,
nor any part thereof have ever been used (whether by Niagara Paper, or
to Seller's best knowledge by any other person) as a permanent storage
facility or disposal site for any Hazardous Material.
(vi) Underground Storage Tanks. There are no underground storage
tanks, including any associated piping, active or abandoned, including
petroleum storage tanks, on or under any property now or previously
owned or leased by Niagara Paper that, singly or in the aggregate, have,
or may reasonably be expected to have, a material adverse effect on the
financial condition, operations, assets, business, or properties of
Niagara Paper.
(vii) Off-Site Disposal. Niagara Paper has not directly
transported or directly arranged for the transportation of any Hazardous
Material to any location which is listed, proposed for listing or which
if known to the state or federal government would warrant listing on the
National Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar state list or which is or reasonably could be the subject of
federal, state or local enforcement actions or other investigations
which may reasonably be expected to lead to material claims for any
remedial work, damage to natural resources or personal injury, including
claims under CERCLA.
(viii) PCBs/Asbestos. There are no PCB's or friable asbestos
present at any property now or previously owned or leased by Niagara
Paper that, singly or in the aggregate, have, or may reasonably be
expected to have, a material adverse effect on the financial condition,
operations, assets, business or properties of Niagara Paper.
(ix) Pollution Control Equipment. All material pollution control
equipment, including any monitoring devices or related equipment, is in
proper operating condition, has been properly maintained, and, in the
case of major ("end-of-pipe") wastewater treatment and air pollution
control facilities, has been designed to maintain compliance with
applicable Environmental Laws based upon production rates and operating
policies of Niagara Paper in effect since January 1, 1995. All material
actions necessary to maintain in force any original, as delivered,
manufacturer warranties have been taken with respect to all major
components of wastewater and air pollution control facilities.
(x) Other Environmental Conditions Off-Site. To Seller's best
knowledge there are no sites or locations not currently owned or leased
by Niagara Paper where Hazardous Materials were disposed of which with
the passage of time, or the giving of notice or both could reasonably be
expected to give rise to any material liability under any Environmental
Law.
(b) INDEMNITY. Subject to the provisions of Section 18(c) below and
the limitations on indemnification set forth in Section 15(b) above, Seller
shall indemnify and hold Buyer and Niagara Paper harmless from and against
any and all losses, liabilities, damages, injuries, penalties, fines, costs,
expenses and claims of any and every kind whatsoever (including reasonable
attorneys' and consultants' fees and expenses), paid, incurred or suffered by
Buyer as a result of any breach of warranties set forth in Section 18(a).
With respect to any liability for disposal or arranging for disposal of
Hazardous Materials at sites or locations not currently owned or leased by
Niagara Paper, this indemnity shall apply notwithstanding the fact that Buyer
may have received or obtained information before the Closing Date, other than
that information disclosed on Schedule 10(g) indicating or otherwise showing
that a claim exists or may exist under this indemnity, including, but not
limited to, any information relating to a breach of the warranties set forth
in Section 18(a) above.
(c) SPECIAL PROVISIONS. The following provisions shall apply in the
event of any breach of any warranty under this Section 18.
(i) Notice. Buyer shall promptly, and in no event later than 90
days from the date Buyer has knowledge, notify Seller in writing of any
claim, demand or action, situation or event covered by the warranty and
indemnification provisions of Section 18. With respect to any work or
activities undertaken by Buyer which is subject to this indemnity, Buyer
shall provide Seller in a timely manner, written documentation prepared
in the normal course of business describing the work or activities.
(ii) Disclosure of On-Site Environmental Matters. Buyer agrees
that environmental matters associated with the Real Estate and which are
contained in the environmental reports and documents listed on Schedule
10(g), as well as any information obtained by Buyer during its due
diligence activities conducted on the Real Estate between the signing of
this Agreement and the Closing Date, shall be considered disclosed to
Buyer.
(iii) Election of Control Off-Site Work. At Seller's option, to
the extent Seller is obligated to indemnify Buyer under this Section for
the costs of investigating, remediating, restoring, cleaning-up any site
where Hazardous Materials were disposed and the site is located on
property not currently owned, leased or otherwise used by Niagara Paper
(nor reasonably anticipated to be used by Niagara Paper), Seller may
elect to take control of the investigation, remediation, restoration
and/or clean-up ("Environmental Cleanup"). If it elects to do so,
Seller shall so notify Buyer and Seller thereafter shall be solely
responsible (as between the parties hereto) for managing and paying for
such Environmental Cleanup (to the extent it is obligated to indemnify
Buyer) including any fines, penalties or third-party actions associated
with the Environmental Cleanup.
(iv) Buyer's Control of Work. Other than in connection with off-
site Environmental Cleanups, Buyer and/or Niagara Paper shall manage and
conduct any Environmental Cleanup work and shall manage and control the
repair and replacement of any pollution control equipment. All such
work shall be done in a commercially reasonable, cost-effective manner
using good faith business judgment and without regard to the
availability of indemnification hereunder.
(v) Pollution Control Equipment. In situations where the
installation of pollution control equipment is required in order to
obtain compliance with the Environmental Laws, Seller's liability under
this Section shall include both capital and reasonable operation and
maintenance costs (calculated on a reasonable present value basis).
(vi) Interference with Operations. In situations where the
Environmental Cleanup or the installation, repair or replacement of the
pollution control equipment will materially interfere with the conduct
of the operations of Niagara Paper, Seller shall be responsible for the
reasonable costs, expenses or losses associated with or attributable to
any material business interruption losses, provided that Buyer shall do
the work or activities in a manner that is least disruptive of Niagara
Paper's ongoing operations.
(vii) Sludge Lagoons. Seller shall not indemnify Buyer in any
amount with respect to the closure of the sludge lagoons currently in
use located in Dickinson County, Michigan and the remediation of any
associated soil and groundwater contamination in accordance with the
consent order between Niagara Paper and the Michigan Department of
Natural Resources.
(d) EXCLUSIVE REMEDY. This Section provides to Buyer, Niagara Paper
and anyone claiming under or through them the exclusive remedy against Seller
with respect to any matter covered by this Section 18, and such exclusive
remedy shall lapse and be of no further force or effect on and after the
fifth anniversary of the Closing Date.
(e) INSPECTION OF BOOKS AND RECORDS. In the event of any claim for
indemnification made by Buyer under this Section 18, Seller shall be entitled
to access, at times reasonably convenient to Buyer and Niagara Paper, to such
books, records and data related to such claim for indemnification hereunder,
as Seller deems necessary to verify the amount of such claim.
19. TERMINATION OF AGREEMENT. This Agreement may be terminated upon
ten (10) business days prior written notice at any time prior to Closing
without liability of either party to the other:
(a) by mutual consent of Seller and Buyer;
(b) by Buyer, if notice of a material adverse development
with respect to the financial condition, results of operations or
prospects of Niagara Paper has been given, in accordance with
Section 9(f) hereof;
(c) by Buyer, if Closing has not occurred on or before
September 30, 1995 as a result of the nonfulfillment of any of the
conditions to Buyer's obligation to perform contained in Section 10
of this Agreement;
(d) by Seller, if notice of a material adverse development
with respect to the financial condition, results of operations or
prospects of Buyer has been given, in accordance with Section 9(f)
hereof;
(e) by Seller, if Closing has not occurred on or before
September 30, 1995 as a result of the nonfulfillment of any of the
conditions to Seller's obligation to perform contained in Section
11 of this Agreement; and
(f) by any party, if Closing has not occurred by
September 30, 1995.
Termination of this Agreement shall not affect in any way the continuing
obligations of the parties hereto pursuant to Section 12 relating to brokers
and Section 14 hereof relating to the treatment of confidential information.
20. ANNOUNCEMENTS. Buyer and Seller shall cooperate in the preparation
of any announcements regarding the transactions contemplated by this
Agreement. Except as required by law, neither party shall issue any
announcement regarding the transactions contemplated hereby without the prior
consent of the other party, which consent shall not be unreasonably withheld.
The covenants set forth in this Section shall be enforceable in law or at
equity by either party.
21. RECORDS. After the Closing Date, Buyer shall retain the books,
records or other data of Niagara Paper existing at the Closing Date for a
period of ten (10) years. During the retention period specified above,
Seller shall be entitled to access, at times reasonably convenient to Buyer,
to such books, records and data in connection with the preparation or
handling of Seller's tax returns, financial reports, tax audits, W-2 forms,
litigation matters or any other reasonable need of Seller. If Niagara Paper
or Buyer wish to dispose of such material (whether during or following the
10-year period), it shall give Seller prior notice and the opportunity to
remove such material at the expense of Seller.
22. ASSISTANCE AFTER CLOSING. Buyer shall furnish, at no cost to
Seller, such assistance to Seller in the preparation of its fiscal 1994
year-end financial and tax reports and interim 1995 financial reports as
Seller may reasonably request. All such assistance shall be on a
confidential basis and Seller agrees to comply with the confidentiality and
limitation on use provisions of Section 14 hereof with respect to such
confidential information.
(a) RETAINED LIABILITIES. Buyer shall also provide Seller with
reasonable assistance, including without limitation furnishing of documents
and making available to Seller potential witnesses within its or Niagara
Paper's control and the assistance of its or Niagara Paper's engineers or
experts, in the defense of any claim, lawsuit or tax examination arising out
of the operations of Niagara Paper prior to the Closing Date for which Seller
retains liability under this Agreement. Seller shall reimburse Buyer or
Niagara Paper for its out of pocket expenses incurred in providing such
assistance.
(b) ALLOCATION OF PULP. Seller and Buyer shall take all necessary
action to transfer all contracts for purchase of kraft pulp currently in the
name of Seller and allocated to Niagara Paper into the name of Niagara Paper
or Buyer, as Buyer may direct. Until such contracts are transferred or
terminated, Seller shall continue to perform such contracts and direct
delivery of pulp thereunder to Niagara Paper in the same manner as currently
performed, and Niagara Paper shall pay for such kraft pulp delivered to the
seller thereof, or if Seller has paid therefor, promptly to Seller upon
delivery.
23. TAX MATTERS; PAYMENT OF TAXES. (a) TAX RETURNS. Seller shall
prepare or cause to be prepared and shall timely file all Returns (including
any amendments thereto) relating to any Taxes of Niagara Paper with respect
to any tax period ending on or before the Closing. Seller shall pay or cause
to be paid all Taxes of Niagara Paper with respect to any period ending on or
before the Closing as determined in accordance with Sections 23(b) and 23(c)
hereof.
(b) APPORTIONMENT OF INCOME. Seller will include the income of Niagara
Paper (including any deferred income and any excess loss accounts pursuant to
relevant rules and regulations of the Internal Revenue Service) on Seller's
federal and state income tax Returns for all periods through the Closing Date
and shall pay any federal and state income taxes attributable to such income.
Niagara Paper will furnish all tax information requested by Seller to it for
inclusion in Seller's income tax Returns for the period which includes the
Closing Date in accordance with Seller's past custom and practice. The
income of Niagara Paper will be apportioned to the period up to and including
the Closing Date and the period after the Closing Date by closing the books
of Niagara Paper as of the end of the Closing Date.
(c) ALLOCATION OF TAXES. For purposes of this Agreement, in the case
of any Taxes that are imposed on a periodic basis and are payable for a
period that begins before the Closing Date and ends after the Closing Date,
Seller shall reimburse Buyer for the portion of such Taxes payable for the
period ending on the Closing Date to the extent such Taxes are not reflected
on the Statement of Net Book Value as of the Closing Date. For this purpose,
the portion of such Tax payable for the period ending on the Closing Date
shall in the case of any Taxes other than Taxes based upon or related to
income or sales or use taxes, be deemed to be the amount of such Taxes for
the entire period multiplied by a fraction, the numerator of which is the
number of days in the period ending on the Closing Date, and the denominator
of which is the number of days in the entire period. The preceding sentence
shall be applied with respect to Taxes relating to capital (including net
worth or long-term debt) or intangibles by reference to the level of such
items on the Closing Date to the extent such Taxes are not reflected on the
Statement of Net Book Value as of the Closing Date.
(d) INDEMNITY. Notwithstanding anything to the contrary in this
Agreement whether expressed or implied, Seller shall indemnify and hold
harmless Buyer, and Niagara Paper against:
(1) all Taxes imposed on Niagara Paper with respect to any
period ending on or before the Closing;
(2) all Taxes imposed on Buyer or on Niagara Paper with
respect to any period which begins before the Closing Date and ends
after the Closing Date to the extent allocated to the portion of
such period ending on the Closing Date, determined in accordance
with Section 23 hereof;
(3) all Taxes imposed on Buyer or on Niagara Paper with
respect to income earned by Niagara Paper for the period beginning
January 1, 1995 and ending on the Closing Date, determined in
accordance with Section 23(b) hereof;
(4) all Taxes imposed on Seller or Niagara Paper as a result of
the Section 338(h)(10) Election contemplated by Section 24 hereof;
(5) all Taxes imposed on any member of an affiliated,
consolidated, combined or unitary group which includes or has
included Niagara Paper with respect to any taxable period that ends
on or prior to the Closing;
(6) all liability resulting from or attributable to a breach
of the representations, warranties and covenants contained in
Section 7(t) and this Section 23; and
(7) any claim under Treas. Reg. 1.1502-6 by the Internal
Revenue Service against Niagara Paper as a member of Seller's
consolidated group prior to the Closing Date with respect to any
federal income tax liability of Seller for any period ending on or
prior to December 31, 1995.
(e) CONTROL OF CONTEST. Seller shall have the right, at its own
expense, to control any audit or determination by any taxing authority,
initiate any claim for refund or amended Return and contest, resolve and
defend against any assessment, notice of deficiency or other adjustment or
proposed adjustment of Taxes for any taxable period for which Seller (or any
of its affiliates) is charged with responsibility for filing a Return under
this Agreement. Each party will allow the other and its counsel (at its or
their own expense) to be represented during any audits of income tax Returns
to the extent that disputed items therein relate to Niagara Paper. Buyer
shall, or shall cause its affiliates to, undertake or authorize actions in
their capacity as tax matters partner of Niagara Paper as requested by Seller
with respect to this Section 23(e).
(f) GENERAL. Each of Buyer and Seller shall provide the other, and
Buyer shall following the Closing cause Niagara Paper to provide to Seller,
with the right, at reasonable times and upon reasonable notice, to have
access to personnel, and to copy and use, any records or information that may
be relevant in connection with the preparation of any Returns, any audit or
other examination by any taxing authority or any litigation relating to
liability for Taxes. Information required in the filing of any Return shall
be provided to the other party not less than thirty (30) days before such
Return is due. Seller will allow Buyer an opportunity to review and comment
upon any Returns under Subsection 23(a) (including any amended returns) to
the extent that they relate to Niagara Paper. Seller will take no position
on such Returns that relate to Niagara Paper that would adversely affect
Niagara Paper after the Closing. Seller and Buyer shall retain all records
relating to Taxes for as long as the statute of limitations with respect
thereto shall remain open.
(g) SALES AND TRANSFER TAXES. All sales and transfer Taxes (including
all stock transfer taxes, if any) incurred in connection with the
transactions contemplated hereby will be borne by the statutorily responsible
party. If required by applicable law, Buyer or Seller, as the case may be,
will join in the preparation and execution of any Returns or other
documentation related to the payment of any sales or transfer Taxes.
(h) TAX EFFECTIVE TIME. For purposes of Taxes, the Closing shall be
deemed to have occurred, and shall be effective, as of the close of business
on the Closing.
(i) SURVIVAL. All of the representations, warranties, covenants and
indemnities contained in this Agreement which relate to Taxes shall survive
the Closing (even if the Indemnified Party knew or had reason to know of any
misrepresentation or breach of warranty or covenant at the time of the
Closing) and continue in full force and effect until the expiration of the
applicable statute of limitations (including any extensions thereof).
24. SECTION 338(H)(10) ELECTION. Seller agrees to jointly file with
Buyer the election (the "ELECTION") provided for by Section 338(h)(10) of the
Code and the corresponding election under applicable state or local tax law
with respect to the sale and purchase of capital stock of Niagara Paper. In
connection with the Election:
(a) Buyer and Seller shall each provide to the other all necessary
information, including information as to tax basis, to permit the
Election to be made and its consequences to be accurately reflected for
all relevant accounting and tax reporting purposes, and to take all
other actions necessary to enable Buyer and Seller to make the Election.
(b) Buyer shall retain at Buyer's cost an appraiser to
prepare a report (a "REPORT") appraising the value of the assets of
Niagara Paper to determine the proper allocations (the
"ALLOCATIONS") of the "adjusted grossed-up basis" (within the
meaning of Treasury Regulation 1.338(b)-1) and the modified
adjusted deemed selling price ("MADSP") (within the meaning of
Treasury Regulation 1.338(h)(10)-1) among the assets of Niagara
Paper in accordance with Section 338(b)(5) and (h)(10) of the Code
and Treasury Regulations thereunder. Seller and Niagara Paper and
their respective employees shall cooperate fully with Buyer and its
appraiser in connection with the appraisal.
The Report shall be finalized no later than 120 days after the
Closing Date. At least 30 days before such Report is finalized, Buyer
shall provide Seller a copy of the appraiser's preliminary report or
indication of the Allocations. After receipt of such preliminary report
or indication, Seller shall give to Buyer in writing any objections or
questions which Seller may have to such preliminary report or
indication, and the parties shall thereafter use their best efforts to
resolve such objections or questions so that the Report is finalized no
later than 120 days after the Closing Date and the Election is timely
made.
(c) Buyer and Seller shall jointly prepare a Form 8023-A, together
with all required attachments, and the corresponding forms required or
appropriate under state tax laws (collectively, an "ELECTION FORM") in a
manner consistent with the Allocations.
(d) As promptly as practicable after the Closing Date, Buyer and
Seller shall take all action and file all documents to effect and
preserve a timely Election.
(e) Seller shall allocate the MADSP resulting from the
Election in a manner consistent with the Allocations and shall not
take any position inconsistent with the Election or the Allocations
in connection with any Return; provided, however, that Seller may
take into account its transaction costs when calculating such
MADSP.
(f) Buyer shall allocate the "adjusted grossed-up basis" of
the capital stock of Niagara Paper among the assets of Niagara
Paper in a manner consistent with the Allocations and shall not
take any position inconsistent with the Election or the Allocations
in any Return or otherwise; provided, however, that Buyer may add
its transaction costs to the "adjusted grossed-up basis" of the
capital stock of Niagara Paper for purposes of allocating among the
assets of Niagara Paper.
(g) Seller and Buyer acknowledge that for federal income tax
purposes (and for state income tax purposes in those states whose income
tax provisions follow the federal income tax treatment), the sale of the
capital stock of Niagara Paper from Seller to Buyer will be treated as a
sale of assets by Niagara Paper to Buyer followed by a complete
liquidation of Niagara Paper with and into Seller, and the parties agree
to report the transaction in a manner consistent with this treatment and
to take no positions inconsistent with this treatment. The parties also
agree that neither Buyer nor Niagara Paper shall be liable for any Taxes
resulting from the sale of the capital stock of Niagara Paper or the
Election.
25. LIMITATIONS ON LIABILITY. (a) No party is responsible for, and no
party may recover from any other party, any amount of consequential (e.g.,
lost profits or the like) or punitive damages. Notwithstanding the foregoing
exclusion, to the extent any party hereto sustains any loss or incurs any
expense compensable under this Agreement that contains or includes any
measure of consequential or punitive damages awarded to a third party, then
such indirect consequential and punitive damages may be recovered.
(b) Seller and Buyer specifically agree that the total amount of
indemnification payable by Seller pursuant to Sections 15, 16, 18 and 23
together shall not exceed the amount of the purchase price paid to Seller in
cash hereunder.
26. AMENDMENT AND WAIVER. This Agreement may not be amended or
modified at any time or in any respect other than by an instrument in writing
executed by Buyer and Seller.
27. NOTICES. Any notice or communication provided for in this
Agreement shall be in writing and shall be deemed given when delivered
personally, against receipt, or when deposited in the United States mail,
registered or certified mail, return receipt requested to the following
address:
(a) If to Pentair:
Pentair, Inc.
1500 County Road B2 West
St. Paul, Minnesota 55113-3105
Attention: Ronald V. Kelly
Facsimile: (612) 639-5209
with a copy to:
Henson & Efron, P.A.
1200 Title Insurance Building
400 Second Avenue South
Minneapolis, Minnesota 55401
Attention: Louis L. Ainsworth
Facsimile: (612) 339-6364
(b) If to Buyer:
Consolidated Papers, Inc.
231 First Avenue North
P. O. Box 8050
Wisconsin Rapids, WI 54495-8050
Attention: Carl H. Wartman
Facsimile: (715) 422-3203
with a copy to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606-5096
Attention: Robert A. Schreck, Jr.
Facsimile: (312) 984-3669
Any party may change the above address for notice by written notice to
the other parties in accordance with the provisions of this Section.
28. PARTIES IN INTEREST. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be
enforceable by Seller and Buyer, their respective successors and permitted
assigns. Neither party may assign this Agreement without the express written
consent of the other party, except that Buyer may assign this Agreement to an
affiliate of Buyer provided that no such assignment shall relieve Buyer of
its obligations hereunder or otherwise prejudice Seller. This Agreement
shall not confer any rights or remedies upon any person other than Buyer and
Seller and their respective successors and permitted assigns.
29. FURTHER ASSURANCES. Each party shall from time to time execute and
deliver such further documents and do such further acts as the other party
may reasonably require for carrying out the purposes and intent of this
Agreement.
30. NO WAIVERS. No failure of either party to this Agreement to pursue
any remedy resulting from a breach of this Agreement shall be construed as a
waiver of that breach or as a waiver of any subsequent or other breach.
31. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the substantive laws of the state of Minnesota without
giving effect to the choice of law provisions thereof. This Agreement shall
be subject to the exclusive jurisdiction of the courts of, and United States
federal courts sitting in, the state of Minnesota, and all parties hereby
irrevocably submit to the jurisdiction of such courts with respect to any
claim arising out of this Agreement.
32. SEVERABILITY. Should any provision of this Agreement be or become
invalid in whole or in part or be incapable of performance for whatever
reason, then the validity of the remaining provisions of this Agreement shall
not be affected thereby. In such event, the parties hereby undertake to
substitute for any such invalid provision or for any provision incapable of
performance, a provision which corresponds to the spirit and purpose of such
invalid or unperformable provision as far as permitted under applicable law,
so as to realize to the fullest extent possible the economic purpose and
effect of this Agreement.
33. MISCELLANEOUS. This Agreement constitutes the entire agreement
between the parties and supersedes all prior representations, understandings
or agreements between them, written or oral, respecting the within subject
matter. Headings are for convenience only and are not intended to alter any
of the provisions of this Agreement. Words importing the singular number
include the plural and vice versa. This Agreement may be signed in multiple
copies, each of which shall be considered an original, but all of which shall
together constitute one and the same instrument.
* * *
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
by its authorized officer as of the date first above written.
PENTAIR, INC.
By: /s/ Winslow H. Buxton
Its: Chief Executive Officer
CONSOLIDATED PAPERS, INC.
By: /s/ Patrick F. Brennan
Its: President and Chief Executive Officer
Exhibit 2(b)
AGREEMENT FOR SALE AND PURCHASE
OF STOCK
OF
PENTAIR DULUTH CORP.
AND
MINNESOTA PAPER INCORPORATED
TABLE OF CONTENTS
Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Purchase and Sale of Stock . . . . . . . . . . . . . . . . . . . . .
3. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . .
6. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Sellers' Representations, Warranties and Covenants . . . . . . . . .
(a) Organization and Authority of Seller . . . . . . . . . . . . .
(b) Valid and Enforceable Agreement . . . . . . . . . . . . . . . .
(c) Organization of Subsidiaries . . . . . . . . . . . . . . . . .
(d) Financial Statements . . . . . . . . . . . . . . . . . . . . .
(e) No Material Change . . . . . . . . . . . . . . . . . . . . . .
(f) Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(g) Title to Personal Property . . . . . . . . . . . . . . . . . .
(h) Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . .
(i) Plant and Equipment . . . . . . . . . . . . . . . . . . . . . .
(j) Intellectual Property . . . . . . . . . . . . . . . . . . . . .
(k) Employee Matters . . . . . . . . . . . . . . . . . . . . . . .
(l) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . .
(m) Compliance with Laws . . . . . . . . . . . . . . . . . . . . .
(n) Material Contracts . . . . . . . . . . . . . . . . . . . . . .
(o) Licenses and Permits . . . . . . . . . . . . . . . . . . . . .
(p) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .
(q) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . .
(r) Transactions with Related Parties . . . . . . . . . . . . . . .
(s) Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . .
(t) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . .
(u) Accounts Receivable . . . . . . . . . . . . . . . . . . . . . .
(v) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . .
(w) Motor Vehicles . . . . . . . . . . . . . . . . . . . . . . . .
(x) Product Warranty . . . . . . . . . . . . . . . . . . . . . . .
8. Buyer's Representations and Warranties . . . . . . . . . . . . . . .
(a) Organization . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Authority . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) Valid and Enforceable Agreement . . . . . . . . . . . . . . . .
(d) No Insolvency . . . . . . . . . . . . . . . . . . . . . . . . .
(e) Financial Statements . . . . . . . . . . . . . . . . . . . . .
(f) Investment Intent . . . . . . . . . . . . . . . . . . . . . . .
9. Actions Pending Closing . . . . . . . . . . . . . . . . . . . . . . .
(a) Operations . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Access to Records . . . . . . . . . . . . . . . . . . . . . . .
(c) Access to Facilities . . . . . . . . . . . . . . . . . . . . .
(d) Release of Guarantees . . . . . . . . . . . . . . . . . . . . .
(e) Hart-Scott-Rodino Filings . . . . . . . . . . . . . . . . . . .
(f) Notice of Developments . . . . . . . . . . . . . . . . . . . .
(g) LSPI Restrictions . . . . . . . . . . . . . . . . . . . . . . .
(h) Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . .
(i) Allocation of Pulp . . . . . . . . . . . . . . . . . . . . . .
10. Conditions Precedent to Obligations of Buyer . . . . . . . . . . . .
(a) No Errors; Performance of Obligations . . . . . . . . . . . . .
(b) Officer's Certificates . . . . . . . . . . . . . . . . . . . .
(c) Certified Copy of Resolutions . . . . . . . . . . . . . . . . .
(d) Opinion of Sellers' Counsel . . . . . . . . . . . . . . . . . .
(e) Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . .
(f) Clayton Act Matters . . . . . . . . . . . . . . . . . . . . . .
(g) Environmental Matters . . . . . . . . . . . . . . . . . . . . .
(h) LSPI Restrictions . . . . . . . . . . . . . . . . . . . . . . .
(i) Financing . . . . . . . . . . . . . . . . . . . . . . . . . . .
(j) FIRPTA Certificate . . . . . . . . . . . . . . . . . . . . . .
(k) Purchase of SRFI and Niagara Paper . . . . . . . . . . . . . .
(l) Real Estate Consents . . . . . . . . . . . . . . . . . . . . .
(m) Title Insurance and Surveys . . . . . . . . . . . . . . . . . .
(n) Provision of Documentation . . . . . . . . . . . . . . . . . .
(o) Other Matters . . . . . . . . . . . . . . . . . . . . . . . . .
11. Conditions Precedent to Obligations of Sellers . . . . . . . . . . .
(a) No Errors; Performance of Obligations . . . . . . . . . . . . .
(b) Officer's Certificate . . . . . . . . . . . . . . . . . . . . .
(c) Certified Copy of Resolutions . . . . . . . . . . . . . . . . .
(d) Opinion of Buyer's Counsel . . . . . . . . . . . . . . . . . .
(e) Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . .
(f) Clayton Act Matters . . . . . . . . . . . . . . . . . . . . . .
(g) Financing . . . . . . . . . . . . . . . . . . . . . . . . . . .
(h) Sale of SRFI and Niagara Paper . . . . . . . . . . . . . . . .
(i) Other Matters . . . . . . . . . . . . . . . . . . . . . . . . .
12. Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14. Confidential Information . . . . . . . . . . . . . . . . . . . . . .
15. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . .
16. Guaranteed Obligations . . . . . . . . . . . . . . . . . . . . . . .
17. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . .
(a) Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) Special Provisions . . . . . . . . . . . . . . . . . . . . . .
(d) Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . .
(e) Inspection of Books and Records . . . . . . . . . . . . . . . .
19. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . .
20. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . .
21. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22. Assistance after Closing . . . . . . . . . . . . . . . . . . . . .
(a) Retained Liabilities . . . . . . . . . . . . . . . . . . . . .
(b) Allocation of Pulp . . . . . . . . . . . . . . . . . . . . . .
23. Tax Matters; Payment of Taxes . . . . . . . . . . . . . . . . . . .
(a) Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Apportionment of Income . . . . . . . . . . . . . . . . . . . .
(c) Allocation of Taxes . . . . . . . . . . . . . . . . . . . . . .
(d) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . .
(e) Post-Closing Elections . . . . . . . . . . . . . . . . . . . .
(f) Control of Contest . . . . . . . . . . . . . . . . . . . . . .
(g) General . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(h) Sales and Transfer Taxes . . . . . . . . . . . . . . . . . . .
(i) Tax Effective Time . . . . . . . . . . . . . . . . . . . . . .
(j) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . .
(k) LSPI Leases Tax Rate Change Indemnity . . . . . . . . . . . . .
(l) Refund of Tax Indemnity Payment . . . . . . . . . . . . . . . .
(m) Tax Agreements . . . . . . . . . . . . . . . . . . . . . . . .
24. Section 338(h)(10) Election . . . . . . . . . . . . . . . . . . . .
25. Limitations on Liability . . . . . . . . . . . . . . . . . . . . . .
26. Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . .
27. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28. Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . .
29. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . .
30. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . .
32. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule 1(i) Confidentiality Letter Agreement
Schedule 1(u) Intellectual Property
Schedule 3.1. Transition Incentives
Schedule 3.2 Form of Statement of Net Book Value
Schedule 3.3. Form of Auditor's Report
Schedule 5 Guaranteed Obligations
Schedule 6 Form of Release
Schedule 7(b) Valid and Enforceable Agreement
Schedule 7(c) Organization of Subsidiaries
Schedule 7(d) Financial Statements
Schedule 7(f) Leases
Schedule 7(h) Real Estate
Schedule 7(i) Plant and Equipment
Schedule 7(k) Employee Matters
Schedule 7(l) Litigation
Schedule 7(n) Material Contracts
Schedule 7(o) Licenses and Permits
Schedule 7(p) Insurance
Schedule 7(q) Employee Benefits
Schedule 7(r) Transactions with Related Parties
Schedule 7(s) Bank Accounts
Schedule 7(t) Tax Matters
Schedule 7(u) Accounts Receivable
Schedule 7(w) Motor Vehicules
Schedule 9(a) Capital Expenditures and Commitments
Schedule 10(g) Environmental Matters
Schedule 10(m) Title Insurance and Surveys
Schedule 16 Form of Letter of Credit
Schedule 23 Pricing Items for LSPI Leases
THIS AGREEMENT is made and entered into as of the 8th day of May, 1995
between Pentair, Inc., a Minnesota corporation ("PENTAIR"), Minnesota Power &
Light Company, a Minnesota corporation ("MINNESOTA POWER") and Consolidated
Papers, Inc., a Wisconsin corporation ("BUYER").
WHEREAS, Pentair is the owner of all of the issued and outstanding
capital stock of Pentair Duluth Corp., a Minnesota corporation ("PENTAIR
DULUTH"), and Minnesota Power is the owner of all of the issued and
outstanding capital stock of Minnesota Paper Incorporated, a Minnesota
corporation ("MINNESOTA PAPER"); and
WHEREAS, Pentair Duluth and Minnesota Paper each own a 50% equity
interest in Lake Superior Paper Industries, a joint venture organized under
the general partnership laws of the state of Minnesota ("LSPI"); and
WHEREAS, Pentair and Minnesota Power (collectively, "SELLERS") desire to
sell and Buyer desires to purchase from Sellers all of the issued and
outstanding capital stock of Pentair Duluth and Minnesota Paper in accordance
with the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and conditions herein contained, the parties agree as
follows:
1. DEFINITIONS. The terms below shall have the following meanings
under this Agreement unless the context clearly requires otherwise:
(a) "ALLOCATIONS" shall have the meaning set forth in Section 24(b).
(b) "CERCLA" shall have the meaning set forth in Section
18(a)(iii).
(c) "CHANGE OF CONTROL DATE" means the date on which any one or more of
the following events shall first have occurred:
(i) all or substantially all of the assets of Buyer are sold,
leased, exchanged or transferred in one transaction or a series of
related transactions;
(ii) beneficial ownership (as defined in Rule 13d-3
promulgated under the Securities Exchange Act of 1934 (the "1934
Act") as amended from time to time) of more than fifty percent
(50%) of the issued and outstanding voting stock of Buyer is
acquired by any person, as such term is used in Section 13(d) and
14(d) of the 1934 Act; or
(iii) Buyer merges with or into another corporation or is
consolidated with another corporation and Buyer is not the
surviving corporation or Buyer is the surviving corporation but all
or part of its issued and outstanding voting stock shall be changed
into or exchanged for stock or other securities of any other person
or into cash or any other property.
(d) "CLAYTON ACT" means 15 U.S.C. 12, et seq., as amended, and the
rules and regulations promulgated thereunder from time to time.
(e) "CLOSING" means the actual transfer and delivery of the
certificates evidencing all of the LSPI Group Stock, the delivery of
documents providing for the assumption of certain specified liabilities and
the exchange and delivery by the parties of the other documents and
instruments contemplated by this Agreement.
(f) "CLOSING DATE" means June 30, 1995 or such later month end date as
mutually agreed upon by the parties.
(g) "CODE" means the Internal Revenue Code of 1986, as amended.
(h) "COMMITMENTS" shall have the meaning set forth in Section 10(m)(i).
(i) "CONFIDENTIAL INFORMATION" means all information designated as
"Evaluation Material" in the confidentiality letter agreement dated
August 26, 1994 between Buyer and CS First Boston Corp., acting as agent for
Pentair, and in the confidentiality letter agreement dated January 9, 1995,
between Buyer and PaineWebber Incorporated, acting as agent for Minnesota
Power, copies of which are attached as Schedule 1(i).
(j) "ELECTION" shall have the meaning set forth in Section 24.
(k) "ELECTION FORM" shall have the meaning set forth in Section 24(c).
(l) "EMPLOYEE BENEFITS" means, with respect to the employees of the
LSPI Group, any and all pension or welfare benefit programs, plans,
arrangements, agreements and understandings for employees generally or
specific individual employees of the LSPI Group to which any member of the
LSPI Group contributes or is a party, by which any of them may be bound, or
under which any of them may have liability, including, without limitation,
pension or retirement plans, deferred compensation plans, bonus or incentive
plans, early retirement programs, severance pay policies, support funds,
medical, dental, life and disability insurance, and payment or reimbursement
plans.
(m) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
(n) "ENVIRONMENTAL CLEANUP" shall have the meaning set forth in Section
18(c)(iii).
(o) "ENVIRONMENTAL LAWS" means federal, state, regional, county and
local laws, statutes, rules, regulations and ordinances and common law
requirements as of the Closing Date relating to the environment, including,
without limitation, those relating to the public health or safety aspects
thereof or to nuisance, trespasses, releases, discharges, emissions or
disposals to air, water, land or groundwater, to the withdrawal or use of
groundwater, to the use, handling or disposal of polychlorinated biphenyls
(PCB's), asbestos or urea formaldehyde, to the treatment, storage, disposal
or management of Hazardous Material (including, without limitation,
petroleum, its derivatives, by-products or other hydrocarbons), to exposure
to toxic, hazardous or other controlled, prohibited or regulated substances,
to the transportation, storage, disposal, management or release of gaseous or
liquid substances, and any regulation, order, injunction, judgment,
declaration, notice or demand issued thereunder.
(p) "GAAP" means generally accepted accounting principles consistently
applied and maintained throughout the period indicated and consistent with
prior financial practice of LSPI, or Pentair or Minnesota Power (and their
respective wholly-owned affiliates), as the case may be.
(q) "GUARANTEED OBLIGATIONS" means those obligations and liabilities of
Sellers, listed on Schedule 5 hereto, undertaken in respect of the
LSPI Group, including, without limitation, the Keepwell Obligations of
Sellers under the LSPI Leases.
(r) "HAZARDOUS MATERIAL" means and includes (a) petroleum or petroleum
products, including crude oil, (b) any asbestos insulation or other material
composed of or containing asbestos, and (c) any hazardous, toxic or dangerous
waste, substance or material defined as such in (or for purposes of) the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, any so-called state or local "Superfund" or "Superlien" law, Section
115B.02 of the Minnesota Statutes or any other Environmental Laws.
(s) "INDEMNITEE" shall have the meaning set forth in Section 15(e).
(t) "INDEMNITOR" shall have the meaning set forth in Section 15(e).
(u) "INTELLECTUAL PROPERTY" means all patents, utility patents and
design patents and registrations therefor, trademarks, trade names, trademark
rights and trademark registrations, copyrights and licenses listed on
Schedule 1(u) attached, as well as all technical documentation reflecting
engineering and production data, design data, plans, specifications,
drawings, technology, know-how, trade secrets, software (whether owned or
licensed), manufacturing processes and all documentary evidence thereof
relating to the LSPI Group and its business.
(v) "JOINT VENTURERS" means both of Pentair Duluth and Minnesota Paper,
the joint venturers of LSPI, and "Joint Venturer" means any one of them.
(w) "JOINT VENTURER STOCK" means all of the issued and outstanding
capital stock of each of Pentair Duluth and Minnesota Paper, respectively.
(x) "KEEPWELL OBLIGATIONS" means the obligations of Sellers under their
respective Keepwell Agreements and Assignments entered into in connection
with the LSPI Leases.
(y) "KNOWLEDGE" of Sellers or the "best knowledge" of Sellers when
modifying any representation or warranty shall mean that no officer or other
manager reporting directly to the President of any of the Sellers (who are
involved in or responsible for operations of LSPI or Superior Recycled Fiber
Industries, a joint venture organized under the general partnership laws of
the state of Minnesota) or of any member of the LSPI Group or the SRFI Group,
including the chief financial officer and the manager of environmental
affairs, if any, of Sellers or of any member of the LSPI Group or the SRFI
Group, has any knowledge that such representation and warranty is not true
and correct to the same extent as provided therein and that:
(i) Sellers and each member of the LSPI Group has exercised
due diligence and has made appropriate investigations and inquiries
of the officers and business records of each of Sellers, the LSPI
Group and the SRFI Group; and
(ii) nothing has come to the attention of Sellers or of any
member of the LSPI Group in the course of such investigation and
review or otherwise which would reasonably cause such party, in the
exercise of due diligence, to believe that such representation and
warranty is not true and correct.
Such terms shall have a cognate meaning as applied to Buyer.
(z) "LSPI GROUP" means all of Pentair Duluth, Minnesota Paper and LSPI.
(aa) "LSPI GROUP FINANCIAL STATEMENTS" means (i) the audited financial
statements (for the years ended December 31, 1991 through 1994) of LSPI and
(ii) the unaudited internal financial statements of the other members of the
LSPI Group for the fiscal years ended December 31, 1991 through 1994.
(ab) "LSPI GROUP STOCK" means all of the issued and outstanding capital
stock of Pentair Duluth and Minnesota Paper.
(ac) "LSPI LEASES" means the five separate Facility Leases dated
December 31, 1987 between LSPI and First National Bank of Minneapolis, as
Owner Trustee, and all Transaction Documents (as defined in the Definition of
Terms attached as Appendix A to the Facility Leases) listed on Schedule 7(n)
hereto.
(ad) "LSPI RESTRICTIONS" means, with respect to the shares of the Joint
Venturers, the right of first refusal granted by Pentair and Minnesota Power
to the other to purchase its stock in their respective Joint Venturer,
respectively, pursuant to Section 2 of the Restated Agreement to Restrict
Transfer of Shares dated April 25, 1986.
(ae) "LEASED REAL ESTATE" shall have the meaning set forth in Section
7(h)(ii). The LSPI Leases are specifically excluded from the definition of
"Leased Real Estate."
(af) "MADSP" shall have the meaning set forth in Section 24(b).
(ag) "1933 ACT" shall have the meaning set forth in Section 8(f).
(ah) "NET BOOK VALUE" means, with respect to the stock of each Joint
Venturer, the difference between (x) the assets of such Joint Venturer
(including therein, without duplication, its respective investment in the net
assets of LSPI), less (y) all liabilities of such Joint Venturer, excluding
current income tax accruals, deferred tax accruals and subordinated and other
debt, whether current or long-term, owing to Sellers, all as reflected on the
balance sheet of the respective Joint Venturers as of either December 31,
1994 or the Closing Date, as appropriate.
(ai) "OWNED REAL ESTATE" shall have the meaning set forth in Section
7(h)(i).
(aj) "PBGC" shall have the meaning set forth in Section 7(q)(vi).
(ak) "PENSION PLANS" shall have the meaning set forth in Section
7(q)(i).
(al) "PERMITTED EXCEPTIONS" shall have the meaning set forth in
Section 10(m)(i).
(am) "REAL ESTATE" means all real property, whether owned, under
contract to purchase, or leased by the LSPI Group, including all land,
buildings, structures, easements, appurtenances and privileges relating
thereto, and all leaseholds, leasehold improvements, fixtures and other
appurtenances and options, including options to purchase and renew, or other
rights thereunder, used or intended for use in connection with the business
of the LSPI Group, including the eight parcels of real property adjacent to
LSPI, which are owned by Pentair Duluth and Minnesota Paper.
(an) "REPORT" shall have the meaning set forth in Section 24(b).
(ao) "RETURN(S)" means any return (including any consolidated or
combined return), report, claim for refund, information return or statement,
relating to any Tax, including any schedule or attachment thereto.
(ap) "SRFC" shall have the meaning set forth in Section 10(k).
(aq) "SRFI GROUP" means all of SRFC, LSPI Fiber Co., a joint venture
organized under the general partnership laws of the state of Minnesota,
Synertec, Inc., a Minnesota corporation, and Superior Recycled Fiber
Industries, a joint venture organized under the general partnership laws of
the state of Minnesota.
(ar) "STATEMENT OF NET BOOK VALUE" means the audited balance sheet of
each Joint Venturer as of the Closing Date in substantially the form
reflected in Schedule 3.2 from which the calculation of the purchase price of
the Joint Venturer Stock will be made in accordance with Section 3 hereof.
(as) "SURVEYS" shall have the meaning set forth in Section 10(m)(ii).
(at) "SURVEY DEFECT" shall have the meaning set forth in Section
10(m)(iii).
(au) "TAX" or "TAXES" means all income, gross receipts, sales, use,
employment, franchise, profits, property or other taxes, fees, stamp taxes
and duties, assessments or charges of any kind whatsoever (whether payable
directly or by withholding), together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority with
respect thereto.
(av) "TAX INDEMNITY AGREEMENTS" means all of the tax indemnity
agreements entered into in connection with the LSPI Leases.
(aw) "TITLE COMPANY" shall have the meaning set forth in Section
10(m)(i).
(ax) "TITLE POLICY" shall have the meaning set forth in Section
10(m)(i).
(ay) "UNPERMITTED EXCEPTION" shall have the meaning set forth in
Section 10(m)(iii).
2. PURCHASE AND SALE OF STOCK. Subject to the terms and conditions
herein stated, Sellers shall sell, transfer and deliver to Buyer, and Buyer
shall purchase from Sellers, at the Closing all of each Seller's right, title
and interest in all of the issued and outstanding capital stock of its Joint
Venturer. Promptly following Closing, Buyer shall cause Pentair Duluth to
change its name to exclude the word "Pentair" and shall promptly make all
filings necessary to reflect such change.
3. PURCHASE PRICE. The aggregate purchase price to be paid by Buyer to
each Seller for the purchase of all of the issued and outstanding capital
stock of its respective Joint Venturer, shall be:
(a) $58,800,000;
(b) increased for any increase, or decreased for any decrease,
in the Net Book Value of such Joint Venturer from December
31, 1994 to the Closing Date; and
(c) less one-quarter of the aggregate amount of transition incentives
to be paid by LSPI pursuant to Section 13 to certain LSPI
employees, which amount is set forth on Schedule 3.1.
The Net Book Value shall be determined in accordance with GAAP as set forth
on Schedule 3.2, which Schedule sets forth sample calculations of the Net
Book Value as of December 31, 1994 and March 31, 1995 and the exceptions to
GAAP used in calculating Net Book Value.
Within sixty (60) days following the Closing Date, each Seller shall
prepare and deliver to Buyer a Statement of Net Book Value for its respective
Joint Venturer, which shall be audited by such Seller's auditors based upon
an audit of LSPI's books, including an inventory taken by LSPI beginning at
7:00 a.m. on the Closing Date and a review of the liabilities as of the
Closing Date. The taking of such inventory may be observed by Buyer and
Buyer's auditors. Each Statement of Net Book Value shall have attached
thereto an auditor's report in the form attached as Schedule 3.3. To the
extent possible, Sellers will provide Buyer with a preliminary draft of the
Statement of Net Book Value. Buyer and Sellers will in good faith attempt to
resolve any disputes with respect to such calculation before the final
Statements of Net Book Value are rendered.
Buyer may review the Statements of Net Book Value and Sellers shall make
available the work papers of Sellers' auditors to Buyer and its accountants
and Buyer and its accountants may make inquiries of representatives of
Sellers and their auditors. Buyer shall give written notice to Sellers of
any objection to their respective Statements of Net Book Value within thirty
(30) days after Buyer's receipt thereof. The notice shall specify in
reasonable detail the items in such Statement of Net Book Value to which
Buyer objects and shall provide a summary of Buyer's reasons for such
objections.
Any dispute between Buyer and either or both Sellers with respect to the
respective Statements of Net Book Value which is not resolved within fifteen
(15) business days after receipt by Sellers of the written notice from Buyer
shall be referred for decision to Ernst & Young LLP who shall cause an audit
partner who is not engaged in providing services to Sellers or Buyer to
decide the dispute within thirty (30) days of such referral. The decision by
the partner shall be final and binding on Sellers and Buyer. In resolving
any disputed item such audit partner may not assign a value to any item
greater than the greatest value for such item claimed by either party or less
than the smallest value for such item claimed by either party. The cost of
retaining the audit partner with respect to resolving disputes as to the
Statements of Net Book Value shall be borne by the respective Seller and
Buyer equally, unless such partner determines, based on his or her evaluation
of the good faith of the parties, that the fees should be borne unequally.
4. PAYMENT. The estimated purchase price shall be paid in U.S. dollars
in immediately available funds on the Closing Date. The amount to be paid on
the Closing Date shall be based upon preliminary Statements of Net Book Value
delivered to Buyer at least five (5) business days prior to Closing, which
shall be calculated based on the unaudited balance sheets of the respective
Joint Venturers as of the month end prior to the Closing Date, prepared by
Sellers on a basis consistent with Schedule 3.2, plus any amounts advanced
by, and less any distributions paid to each Seller or its respective Joint
Venturer between one month prior to the Closing Date and the Closing Date.
Following delivery of the final Statements of Net Book Value under Section 3,
any balance due to Sellers or refunds due to Buyer reflected thereon shall be
paid within ten (10) days of such delivery, (unless there is an objection
under Section 3, in which case the amount not in dispute shall be paid within
ten (10) days of such delivery, and the balance in dispute shall be paid
within ten (10) days of the resolution of such objection) together with
interest on such amount from the Closing Date at the announced large business
prime rate of Morgan Guaranty Trust Company of New York.
Except as Buyer may be otherwise advised in writing by Sellers at least
five (5) days prior to any payment, all payments of the purchase price by
Buyer to Sellers at the Closing or any other amounts owed by Buyer to Sellers
shall be by wire transfer to:
Seller Bank and Routing Number Bank Account
Number
------- ----------------------- ------------
Pentair First Bank National xxx-xxxxxxx
Association (091000022) to
attention of Karen Johnson
Minnesota First Bank National xxx-xxxxxxx
Power Association
(091000022) to attention of
Russell Arneson
Except as Sellers may be otherwise advised in writing by Buyer at least
five (5) days prior to any payment, payment of any refund to Buyer based on
the final determination of the purchase price pursuant to Section 3 or any
other amounts owed by Sellers to Buyer hereunder shall be made by wire
transfer to Harris Trust and Savings Bank - Consolidated Papers, Inc.,
Account No. xxxxxxx (ABA wire transfer routing number xxxx-xxxx-x), marked to
the attention of J.R. Matsch.
All wire transfers shall be sent by 10:00 a.m. Minneapolis time on the
date of such payment, unless otherwise agreed by the parties.
5. ASSUMPTION OF LIABILITIES. At Closing, Buyer shall assume and agree
to satisfy and perform, to the extent not satisfied or performed prior to the
Closing Date, without any cost or charge to Sellers, all obligations of
Sellers as guarantor under any Guaranteed Obligation. If the assumption of
the Guaranteed Obligations by Buyer under this Section 5 requires the consent
of any third party, Buyer and each respective Seller agree they will use
their best efforts to obtain such written consent to such assumption;
provided, however, that in no event shall Buyer be subject, without its
consent, to terms and conditions more restrictive than those set forth in the
existing obligations of Sellers being assumed. Failing the consent of such
creditor, Buyer shall indemnify Sellers in accordance with the provisions of
Section 16 hereof against any claim arising out of the Guaranteed
Obligations.
6. CLOSING. (a) The Closing shall take place on the Closing Date at
the offices of Henson & Efron, P.A. in Minneapolis, Minnesota, at 9:00
o'clock a.m., local time, or at such other time and place as may be mutually
agreed upon. Buyer and Sellers each agree they shall use their best efforts
and shall cause all relevant affiliates to use their best efforts to obtain
fulfillment of all conditions to Closing set forth in Sections 10 and 11
hereof.
(b) At the Closing, Sellers shall deliver to Buyer certificates
evidencing ownership of all of the LSPI Group Stock, in form ready for
transfer and duly endorsed to Buyer, together with such other documents and
instructions as provided herein, reasonably satisfactory in form and
substance to Buyer and its counsel, as shall be required to vest in Buyer
good and marketable title, free and clear of all liens, charges and
encumbrances (except as specified in this Agreement, if any) in and to the
LSPI Group Stock. At the Closing, each Seller shall deliver to Buyer a
release of all claims of such Seller and any person or entity affiliated
therewith against all members of the LSPI Group, in substantially the form of
Schedule 6.
(c) At the Closing, Buyer shall deliver to Sellers such documents and
instruments as provided herein and such undertakings, and other instruments
as shall be required to cause Buyer to assume the obligations as provided in
Section 5, all of which shall be reasonably satisfactory in form and
substance to Sellers and their respective counsel.
7. SELLERS' REPRESENTATIONS, WARRANTIES AND COVENANTS. Subject to the
several liability of Sellers provided for in Section 25 hereof, Sellers
represent, warrant and covenant to Buyer as follows:
(a) ORGANIZATION AND AUTHORITY OF SELLER. Each Seller is a duly
organized and validly existing corporation in good standing in the state of
Minnesota. Sellers have the complete and unrestricted right, power and
authority to sell, transfer and assign all of the issued and outstanding
capital stock of their respective Joint Venturers pursuant to this Agreement
and to carry out the transactions contemplated hereby without the consent of
any other person (except as otherwise set forth herein), subject only to the
LSPI Restrictions. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the Boards of Directors of each Seller.
(b) VALID AND ENFORCEABLE AGREEMENT. This Agreement constitutes a
valid and binding agreement of each respective Seller, enforceable in
accordance with its terms, except insofar as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the rights of creditors generally, and by general equitable principles.
Neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, nor the performance of its obligations
hereunder materially violates or conflicts with, results in a material breach
of, or constitutes a material default under (i) to the best knowledge of each
respective Seller, any law, rule or regulation, or (ii) subject to the
obtaining of necessary consents, which consents are listed on Schedule 7(b),
under various loan agreements, guarantees, leases, and other agreements
(including without limitation the LSPI Leases and the LSPI Restrictions), any
agreement or other restriction of any kind or character to which such Seller
or any member of the LSPI Group is a party, by which such Seller or any
member of the LSPI Group is bound, or to which any of the properties of any
member of the LSPI Group is subject. Neither the execution or delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
nor the performance of its obligations hereunder violates or conflicts with,
results in a breach of, or constitutes a default under (i) any judgment or
order, decree, award or ruling to which such Seller or any member of the LSPI
Group is subject, or (ii) the Articles of Incorporation or By-Laws of such
Seller or its respective Joint Venturer, or the Joint Venture Partnership
Agreement, excluding the LSPI Restrictions.
(c) ORGANIZATION OF SUBSIDIARIES.
(i) Each member of the LSPI Group is a duly organized and
validly existing corporation or joint venture general partnership,
as the case may be, in good standing, to the extent applicable, in
its respective state of incorporation or organization, as set forth
in Schedule 7(c). Each member of the LSPI Group has all requisite
corporate or general partnership power and authority, as the case
may be, to carry on its respective business as presently conducted
in all states in which it currently does business. Each member of
the LSPI Group is duly licensed, registered and qualified to do
business as a foreign corporation, partnership or joint venture
and, to the extent applicable, is in good standing in all
jurisdictions in which the ownership, leasing or operation of its
assets or the conduct of its business requires such qualification,
except where the failure to be so licensed, registered or qualified
would not have a material adverse effect upon its business or
assets.
(ii) All of the outstanding shares of capital stock of
Pentair Duluth and Minnesota Paper have been duly authorized and
validly issued, are fully paid and nonassessable, and are owned,
beneficially and of record, by Pentair and Minnesota Power
respectively and are free and clear of all liens, claims,
encumbrances and restrictions whatsoever, other than the LSPI
Restrictions. Pentair Duluth's entire equity capital consists of
25,000 authorized shares of common stock, par value $1.00 per
share, of which 1,000 shares are issued and outstanding. Minnesota
Paper's entire equity capital consists of 1,000 authorized shares
of common stock, no par value, of which 1,000 shares are issued and
outstanding. No shares of capital stock of, or other ownership
interest in, either of the Joint Venturers are reserved for
issuance and there are no outstanding options, warrants, rights
(other than the LSPI Restrictions), subscriptions, claims of any
character, agreements, obligations, convertible or exchangeable
securities, or other commitments, contingent or otherwise (except
for the Keepwell Obligations), relating to the capital stock of, or
other ownership interest in, either of such corporations pursuant
to which either of such corporations is or may become obligated to
issue or exchange any shares of capital stock of, or other
ownership interest in, such corporation.
(iii) Except as set forth on Schedule 7(c), no member of
the LSPI Group owns, directly or indirectly, any capital stock or
other equity or ownership or proprietary interest in any other
corporation, partnership, association, trust, joint venture (other
than in LSPI) or other entity.
(iv) True and complete copies of the LSPI Leases and the
agreements containing the LSPI Restrictions have been furnished to
Buyer; each of those agreements is currently in good standing and
in full force and effect and no default by either Seller or any
member of the LSPI Group party thereto, or to the best knowledge of
Sellers, any other party thereto, exists thereunder.
(d) FINANCIAL STATEMENTS.
(i) Attached hereto as Schedule 7(d) are the LSPI Group
Financial Statements. The LSPI Group Financial Statements were (and the
Statements of Net Book Value will be) prepared in accordance with the
books and records of the respective members of the LSPI Group which were
used in the preparation of each Seller's audited consolidated financial
statements for the fiscal years ended December 31, 1993 and December 31,
1994.
(ii) The LSPI Group Financial Statements were (and the
Statements of Net Book Value will be) prepared in accordance with
GAAP, consistently applied, but, except for the audited financial
statements of LSPI, do not include all information and footnotes
required by generally accepted accounting principles for complete
financial statements. The Statements of Net Book Value will
adequately reflect all liabilities and obligations of the LSPI
Group required to be shown thereon in accordance with GAAP except
for those exceptions to GAAP set forth on Schedule 3.2.
(iii) The LSPI Group Financial Statements as of such dates
or for the period ending on such dates present fairly the financial
position and the results of operations of the members of the LSPI
Group for the periods covered thereby. All adjustments, consisting
of normal recurring accruals and eliminations and other similar
adjustments, considered necessary for a fair presentation have been
included.
(e) NO MATERIAL CHANGE. To the best knowledge of Sellers, since
December 31, 1994 there has been no material adverse change in the business,
financial position or results of operations of the LSPI Group, taken as a
whole.
(f) LEASES. Sellers have furnished or made available to Buyer copies
of all leases and subleases of any personal property used in the operations
of members of the LSPI Group, including without limitation the LSPI Leases,
to which any member of the LSPI Group is a party, all of which are listed on
Schedule 7(f). Except as set forth on Schedule 7(f), no consents or
approvals are required in connection with the transactions contemplated
hereby. No event has occurred which is or, after the giving of notice or
passage of time, or both, would constitute, a default under or a material
breach of any lease by any member of the LSPI Group or, to the best knowledge
of Sellers, any other party to such leases. As of the Closing Date, each
lease (including without limitation the LSPI Leases) shall be in full force
and effect in accordance with its terms, as amended from time to time.
(g) TITLE TO PERSONAL PROPERTY. Each member of the LSPI Group has good
and marketable title to its respective owned personal property as reflected
in the LSPI Group Financial Statements, free and clear of all liens, claims,
encumbrances and restrictions, except (i) those reflected on Schedule 7(d)
attached and (ii) defects in title, and liens, charges and encumbrances, if
any, as do not materially detract from the value of or otherwise materially
impair the current operations or financial conditions of the LSPI Group,
taken as a whole.
(h) REAL ESTATE.
(i) Schedule 7(h)(i) sets forth an accurate legal
description of all Real Estate owned by a member of the LSPI Group
or for which a member of the LSPI Group has contracted to become
the owner (the "OWNED REAL ESTATE"), including identification of
the current owner of fee simple title thereto. The party
identified as the owner on Schedule 7(h)(i) is the legal and
equitable owner of good and marketable title in fee simple absolute
to such Owned Real Estate, including the buildings, structures,
spurtracks (as set forth on Schedule 7(h)(i)) and improvements
situated thereon and appurtenances thereto, in each case free and
clear of all tenancies and other possessory interests, security
interests, conditional sale or other title retention agreements,
liens, encumbrances, mortgages, pledges, assessments, easements,
rights of way, covenants, restrictions, reservations, options,
rights of first refusal, defects in title, encroachments and other
burdens, except as disclosed on Schedule 7(h)(i). Except as
disclosed on Schedule 7(h)(i), a member of the LSPI Group is in
possession of the Owned Real Estate. All contracts, agreements,
options and undertakings affecting the Owned Real Estate are set
forth in Schedule 7(h)(i) and are legally valid and binding and in
full force and effect, and, to Sellers' knowledge, there are no
defaults, offsets, counterclaims or defenses thereunder, and the
LSPI Group has received no notice that any default, offset,
counterclaim or defense thereunder exists. Sellers have delivered
or made available to Buyer correct and complete copies of all such
contracts, agreements, options and undertakings.
On Schedule 7(h)(i), certain parcels of Owned Real Estate are
identified as "BUFFER REAL ESTATE." Such parcels are located across
North Central Avenue from the LSPI Mill, and are owned by either Pentair
Duluth or Minnesota Paper. The particular Seller who holds title to a
parcel of Buffer Real Estate represents and warrants to Buyer that it
has not made or done any act or thing to impair the quality or
marketability of title to the Buffer Real Estate. Except for the
preceding sentence, none of the representations, warranties or covenants
of Section 7(h) shall apply to the Buffer Real Estate.
(ii) Schedule 7(h)(ii) sets forth an accurate, correct and
complete list of all Real Estate leased, subleased or occupied by a
member of the LSPI Group (such interests are the "LEASED REAL
ESTATE"), including identification of the lease or sublease and the
parties thereto and list of contracts, agreements, leases,
subleases, options and commitments, oral or written, affecting such
Leased Real Estate or any interest therein to which a member of the
LSPI Group is a party or by which any of its interest in the Leased
Real Estate is bound. The LSPI Group member identified in the Real
Estate Lease has been in peaceable possession of the Leased Real
Estate since the commencement of the original term of such Real
Estate Lease. Sellers have delivered to Buyer correct and complete
copies of each Real Estate Lease.
(iii) To the knowledge of the LSPI Group, except as set
forth on the Flood Insurance Rate Map prepared by the Federal
Emergency Management Agency (Community/Panel No. 270420/004B;
revised as of November 1992), no Real Estate is located within a
flood or lakeshore erosion hazard zone for which flood insurance is
now required under the National Flood Insurance Program. Neither
the whole nor any portion of any Real Estate has been condemned,
requisitioned or otherwise taken by any public authority, and no
notice of any such condemnation, requisition or taking has been
received, other than the condemnations conducted in connection with
acquisitions of the Real Estate for use by LSPI. To the knowledge
of the LSPI Group, no such condemnation, requisition or taking is
threatened or contemplated, except as set forth on Schedule
7(h)(iii). The LSPI Group has no knowledge of any public
improvements which may result in special assessments against or
otherwise affect the Real Estate, except as set forth on Schedule
7(h)(iii).
(iv) The Real Estate is in good operating condition and
repair (reasonable wear and tear excepted) and is suitable and
adequate for the purposes for which it is presently being used.
(v) To the knowledge of the LSPI Group, except as set forth
on Schedules 7(h) or 7(o), the Real Estate is in compliance with
all applicable zoning, building, health, fire, water, use or
similar statutes, codes, ordinances, laws, rules or regulations.
To the knowledge of the LSPI Group, the zoning of each parcel of
Real Estate permits the existing improvements and the continuation
following consummation of the transaction contemplated hereby of
the business of the LSPI Group as presently conducted thereon. The
LSPI Group has all certificates of occupancy and authorizations
required to utilize the Real Estate. To the knowledge of the LSPI
Group, the LSPI Group has all easements and rights necessary to
conduct its business, including easements for all utilities,
services, roadway, railway and other means of ingress and egress.
To the knowledge of the LSPI Group, the LSPI Group holds such
rights to off-site facilities as are necessary to ensure compliance
in all material respects with all zoning, building, health, fire,
water, use or similar statutes, codes, ordinances, laws, rules or
regulations and all such rights, to the extent held by the LSPI
Group or Sellers, shall be conveyed as directed by Buyer at
Closing. Except as disclosed on Schedule 7(h)(i), to the knowledge
of the LSPI Group, no fact or condition exists which would result
in the termination or impairment of access to the Real Estate or
discontinuation of sewer, water, electric, gas, telephone, waste
disposal or other utilities or services. Except as disclosed on
Schedule 7(h)(i), to the knowledge of the LSPI Group, the
facilities servicing the Real Estate are in full compliance with
all codes, laws, rules and regulations.
(vi) Seller has delivered or made available to Buyer
accurate, correct and complete copies of all existing title
insurance policies, title reports and surveys, if any, with respect
to each parcel of Real Estate.
(i) PLANT AND EQUIPMENT. Sellers have furnished to Buyer an accurate
list of all plant and equipment, attached as Schedule 7(i), owned by LSPI.
To the best knowledge of Sellers, all plant, structures and equipment,
currently being used in the conduct of LSPI's operations are in all material
respects in good operating condition and repair, subject to normal wear and
tear, and to the best of each Seller's knowledge, are free from material
structural or mechanical deficiencies, except as disclosed on Schedule 7(i)
attached.
(j) INTELLECTUAL PROPERTY. Sellers have furnished to Buyer an
accurate list of all Intellectual Property, attached as Schedule 1(u), owned
or used by the LSPI Group. To the best knowledge of Sellers, no one is
infringing upon any rights of the LSPI Group with respect to any of the
Intellectual Property, no member of the LSPI Group is infringing on or
otherwise acting adversely to the rights of any person under, or in respect
to, any patents, patent rights, copyrights, licenses, trademarks, trade names
or trademark rights owned by any person or persons, and there is no claim or
action pending or threatened with respect thereto. Except as set forth in
Schedule 1(u), there are no royalty, commission or similar arrangements, and
no licenses, sublicenses or agreements pertaining to any of the Intellectual
Property.
(k) EMPLOYEE MATTERS. Except as set forth on Schedule 7(k), neither
Sellers nor any member of the LSPI Group has any pending complaint filed with
the National Labor Relations Board or any other governmental agency alleging
unfair labor practices, human rights violations, employment discrimination
charges or the like against any member of the LSPI Group which might have a
material adverse effect upon the LSPI Group, its operations or financial
condition, and to the best knowledge of Sellers, there are no existing facts
which might result in any such complaint or charge. Sellers have provided to
Buyer a complete list of all employees of the LSPI Group, including name,
title or position, present annual compensation, years of service and any
interest in Employee Benefits. Each member of the LSPI Group has complied in
all material respects with all laws, rules and regulations relating to the
employment of labor, including provisions related to wages, hours, equal
opportunity, occupational health and safety, severance, collective bargaining
and the payment of social security and other employment taxes. No member of
the LSPI Group has any retired employees who have elected to receive retiree
medical benefits under any Employee Benefits. No member of the LSPI Group
has any collective bargaining agreement or other such contracts. Other than
with respect to LSPI, no member of the LSPI Group has any employees.
(l) LITIGATION. Except as set forth on Schedule 7(l), there are no
legal actions, suits, arbitrations or other legal, administrative or
governmental proceedings or investigations (other than tax audits or
investigations) pending or, to the best knowledge of Sellers, threatened
against any member of the LSPI Group which might have a material adverse
effect upon the operations or financial condition of the LSPI Group, taken as
a whole. No member of the LSPI Group is subject to any judgment, order,
writ, injunction, stipulation or decree of any court or any governmental
agency or any arbitrator, except as may be set forth herein or in any
Schedule hereto.
(m) COMPLIANCE WITH LAWS.
(i) To the best knowledge of Sellers, the operations of the
members of the LSPI Group have been and are being conducted in
accordance with all applicable laws, rules and regulations of applicable
governmental authorities (other than those covered in Section 18
hereof), except for such breaches that do not and cannot reasonably be
expected to (either individually or in the aggregate) materially and
adversely affect the financial condition or operations of the LSPI
Group, taken as a whole.
(ii) To the best knowledge of Sellers, neither the LSPI Group,
nor any of their officers or employees, has, directly or indirectly,
given or agreed to give any rebate, gift or similar benefit to any
supplier, customer, distributor, broker, governmental employee or other
person, who was, is or may be in a position to help or hinder the
business of the LSPI Group (or assist in connection with any actual or
proposed transaction) which could subject Buyer or the business of the
LSPI Group to any penalty in any civil, criminal or governmental
litigation or proceeding or which would have a material adverse effect
on the business of the LSPI Group.
(n) MATERIAL CONTRACTS. Sellers have furnished to Buyer a list,
attached as Schedule 7(n), of all contracts and arrangements, written or
oral, which alone or together with other contracts and arrangements with the
same party are material to the LSPI Group taken as a whole. All members of
the LSPI Group have, in all material respects, performed all of the
respective obligations required to be performed by them to date and are not,
and will not be as of the Closing Date, in default under any material
provision of such contracts or arrangements. All such contracts and
arrangements are and will be in good standing as of the Closing Date and in
full force and effect according to their terms. For purposes of this Section
7(n), a contract shall be deemed to be material, (i) if it involves remaining
payments of more than $300,000, or (ii) if it cannot by its terms be
completed or terminated without penalty within 180 days from the Closing
Date, or (iii) if the absence of such contract would have a material adverse
effect on the business of the LSPI Group.
(o) LICENSES AND PERMITS. Except as set forth on Schedule 7(o), each
member of the LSPI Group has all requisite licenses and permits to operate
its business as currently conducted and Sellers have not been advised of, nor
to the best knowledge of Sellers is there any basis for, any revocation or
anticipated revocation of any permits, licenses or zoning variances, or of
any changes to existing or pending zoning or other regulations, permits or
licenses which would materially and adversely affect the conduct of its
operations as presently conducted.
(p) INSURANCE. Schedule 7(p) contains an accurate and complete list
and description of insurance policies (including the name of the insurer,
coverage, premium and expiration date) which each member of the LSPI Group
currently maintains, or is named as an additional insured or is entitled to
benefits under (including coverage for events occurring under prior
policies). To the best knowledge of Sellers, except as set forth on Schedule
7(p), all such policies are in full force and effect and shall survive the
Closing for the benefit of LSPI.
(q) EMPLOYEE BENEFITS. Schedule 7(q) contains a complete listing of
Employee Benefits provided to employees of LSPI. To the best knowledge of
Sellers, except as set forth on Schedule 7(q), (i) the costs of all such
Employee Benefits which are paid currently by LSPI are reflected as expenses
in the LSPI Group Financial Statements; and (ii) the cost of such Employee
Benefits which are, in whole or in part, not paid currently are adequately
reserved for in the LSPI Group Financial Statements. Sellers do not provide
either directly or indirectly any Employee Benefits to the employees of LSPI.
(i) PENSION PLANS. Sellers have delivered to Buyer
accurate, correct and complete copies of (i) any pension plan (as
defined in Section 3(2) of ERISA) in which the employees of LSPI
currently participate a list of which is set forth on Schedule 7(q)
(the "PENSION PLANS"), (ii) the three most recent annual reports on
Form 5500 and attached Schedule B, if any, filed with the Internal
Revenue Service with respect to the Pension Plans, (if any such
report was required), (iii) each trust agreement and group annuity
contract relating to the Pension Plans, if any, and (iv) certified
financial statements, if any. Sellers have disclosed to Buyer the
information set forth in the attorney's responses to auditor's
requests for information related to the Pension Plans.
(ii) PENSION PLAN FUNDING. All contributions to, and
payments from, each Pension Plan that may have been required to be
made in accordance with each Pension Plan and, when applicable,
Section 302 of ERISA or Section 412 of the Code, have been timely
made. All such contributions to, and payments from, the Pension
Plans, except those payments to be made from a trust qualified
under Section 401(a) of the Code, for any period ending on or
before the Closing Date that are not yet, but will be, required to
be made, will be properly accrued and reflected in the Statements
of Net Book Value. No employee of the LSPI Group participates in
or has previously participated in any defined benefit plan, as
defined in Section 3(35) of ERISA, of LSPI.
(iii) PENSION PLAN COMPLIANCE WITH THE CODE AND ERISA. The
Pension Plans (and any related trust agreement or annuity contract
or any other funding instrument) materially comply currently, and
have materially complied in the past, both as to form and
operation, with the provisions of ERISA and the Code (including
Section 410(b) of the Code relating to coverage), where required in
order to be tax-qualified under Section 401(a) of the Code, and all
other applicable laws, rules and regulations; all necessary
governmental approvals for the Pension Plans have been obtained.
Except as set forth in Schedule 7(q), each Pension Plan (and any
related trust agreements or annuity contracts or other funding
instrument) has received a determination letter from the Internal
Revenue Service to the effect that such Pension Plan (and any
related trust agreements or annuity contracts or other funding
instrument) is qualified and exempt from federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, and no such
determination letter has been revoked nor, to the knowledge of
Sellers, has revocation been threatened, nor has such Pension Plan
been amended since the date of its most recent determination letter
or application therefor in any respect which would adversely affect
its qualification or materially increase its cost.
(iv) EMPLOYEE BENEFITS ADMINISTRATION. The Pension Plans
and Employee Benefits have been administered to date in material
compliance with the requirements of the Code and ERISA. All
legally required reports, returns and similar documents with
respect to the Pension Plans and Employee Benefits required to be
filed with any government agency or distributed to any Pension
Plans or Employee Benefits participant have been duly and timely
filed or distributed. Except as set forth in Schedule 7(q), there
are no investigations by any governmental agency, termination
proceedings or other claims (except claims for benefits payable in
the normal operation of the Pension Plans or Employee Benefits),
suits or proceedings against or involving the Pension Plans or
Employee Benefits or asserting any rights or claims to benefits
under the Pension Plans or Employee Benefits that could give rise
to any material liability, nor, to the knowledge of Sellers, are
there any facts that could give rise to any material liability in
the event of any such investigation, claim, suit or proceeding. No
event has occurred and no condition exists under the Pension Plans
or Employee Benefits that would subject the LSPI Group or Buyer to
any tax under Code Sections 4971, 4972, 4977 or 4979 or to a fine
under ERISA Section 502(c).
(v) PROHIBITED TRANSACTIONS. No "prohibited transaction"
(as defined in Section 4975 of the Code or Section 406 of ERISA)
has occurred which involves the assets of the Pension Plans or
other Employee Benefits and which could subject the LSPI Group or
any of their respective employees, or a trustee, administrator or
other fiduciary of any trusts created under the Pension Plans to
the tax or penalty on prohibited transactions imposed by
Section 4975 of the Code or the sanctions imposed under Title I of
ERISA. Neither the LSPI Group nor any trustee, administrator or
other fiduciary of the Pension Plans nor any agent of any of the
foregoing has engaged in any transaction or acted or failed to act
in a manner which could subject the LSPI Group, its business or
Buyer to any material liability for breach of fiduciary duty under
ERISA or any other applicable law.
(vi) LIABILITIES TO PBGC OR MULTIEMPLOYER OR MULTIPLE
EMPLOYER PLANS. No liability to the Pension Benefit Guaranty
Corporation or to any multiemployer or multiple employer plan has
been incurred by the LSPI Group. Sellers and LSPI are not under
common control within the meaning of Section 414(b) or 414(c) of
the Code.
(r) TRANSACTIONS WITH RELATED PARTIES.
(i) To the best knowledge of Sellers, except for interest
and corporate overhead and as set forth on Schedule 7(r), none of
the LSPI Group members are a party to any transaction or proposed
transaction, including, without limitation, the leasing of real or
personal property, the purchase or sale of raw materials or
finished goods, or the furnishing of services, with either Seller
or with any person who is related to or affiliated with Sellers
(other than another member of the LSPI Group), involving the
payment or accrual of more than $1,000,000 during fiscal years 1993
or 1994.
(ii) Except as set forth on Schedule 7(r) or as reflected
in the LSPI Group Financial Statements dated December 31, 1994,
neither Sellers nor any person who is related to or affiliated with
Sellers has any cause of action or other claim whatsoever against
or owes any material amount to, or is owed any material amount by,
any member of the LSPI Group.
(s) BANK ACCOUNTS. Schedule 7(s) sets forth a true and complete list
of all banks in which any member of the LSPI Group has an account, safe
deposit box or line of credit, and the names and titles of all persons
authorized to draw thereon or to have access thereto, and a summary
description of the use thereof.
(t) TAX MATTERS.
(i) All Returns (including consolidated or combined Returns
including any member of the LSPI Group) required to be filed on or
before the Closing with respect to each member of the LSPI Group
have been or will be timely filed (within the time permitted by any
timely filed extension) by or on behalf of each member of the LSPI
Group and all Taxes shown to be due on such Returns have been
timely paid.
(ii) No member of the LSPI Group has been a member of an
affiliated group (within the meaning of Section 1504 of the Code)
filing a consolidated federal Return, other than a group the common
parent of which is a Seller.
(iii) Schedule 7(t) lists all Returns filed with respect to
any of the members of the LSPI Group for taxable periods which
remain open, indicates those Returns that have been audited and
indicates those Returns that are currently the subject of audit or
scheduled for an examination by any relevant taxing authority.
(iv) Except as disclosed in Schedule 7(t):
(1) no notice or claim has ever been made by a
governmental authority in a jurisdiction where any
member of the LSPI Group does not file Returns that
it is or may be subject to Taxes in that
jurisdiction;
(2) no extension of the statute of limitations
with respect to any assessment or claim for Taxes has
been granted by or on behalf of any member of the
LSPI Group;
(3) there are no liens for Taxes upon the assets
of any member of the LSPI Group except liens for
Taxes not yet due;
(4) no amended Returns or refund claims have been
or are scheduled to be filed by or on behalf of any
member of the LSPI Group;
(5) all Taxes and other liabilities with respect
to completed and settled audits, examinations or
concluded litigation have been paid; and
(6) there are no pending appeals or other
administrative proceeding with respect to any Return
of any member of the LSPI Group, and there is no
deficiency or refund litigation with respect to any
Return of any member of the LSPI Group. No material
issues have been raised by any relevant taxing
authorities on audit of the Returns of the LSPI
Group. No member of the LSPI Group has received any
notice of any Tax deficiency or assessment.
(v) No member of the LSPI Group has filed or had filed on its
behalf a consent to the application of Section 341(f) of the Code.
(vi) Except as disclosed in Schedule 7(t), no member of the
LSPI Group is a party to any contractual obligation requiring the
indemnification or reimbursement of any person with respect to the
payment of any Taxes. Except as disclosed in Schedule 7(t), no
claim has been asserted, which has not been resolved or satisfied,
for any payment under any agreement disclosed in Schedule 7(t).
(vii) Except as disclosed in Schedule 7(t), no member of the
LSPI Group is a party to or a beneficiary of any financing, the
interest on which is tax-exempt under the Code, and none of the
assets of any member of the LSPI Group is "tax-exempt use
property."
(viii) As of the Closing Date, no member of the LSPI Group is
a party to any agreement, contract, arrangement, or plan that has
resulted or would result, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of
Section 280G of the Code.
(ix) Each member of the LSPI Group is a "United States
person" within the meaning of the Code. No member of the LSPI
Group has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. The transactions contemplated herein are not subject to the
tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code, or of any other provision of
law. No member of the LSPI Group has nor had a branch in any
foreign country.
(x) No member of the LSPI Group is a party to any joint
venture, partnership, or other arrangement or contract that could
be treated as a partnership for federal income Tax purposes, except
for LSPI.
(xi) Each member of the LSPI Group has withheld and paid all
Taxes required to have been withheld and paid, including (1)
amounts paid to any employee or statutory employee or any foreign
person or entity and (2) any backup withholding required under
Section 3406 of the Code.
(u) ACCOUNTS RECEIVABLE. Schedule 7(u) sets forth an accurate, correct
and complete aging of all outstanding accounts and notes receivable of LSPI
as of December 31, 1994. All outstanding accounts and notes receivable
reflected on the LSPI Group Financial Statements are, and on the Statements
of Net Book Value will be, due and valid claims against account debtors for
goods or services delivered or rendered and subject to no defenses, offsets
or counterclaims. All receivables arose in the ordinary course of business.
No receivables are subject to prior assignment, claim, lien or security
interest, except under the Credit Agreement dated April 19, 1991, as amended.
The books and records of LSPI reflect amounts taken as a reserve against
noncollection of accounts receivable, which reserve has been established in
accordance with LSPI's normal accounting policies consistently maintained for
the fiscal years ended December 31, 1993 and December 31, 1994 and there is
no reason to believe that such reserve will not be adequate for its purpose.
As of the Closing Date, LSPI will not have incurred any liabilities to
customers for discounts, returns, promotional allowances or otherwise, except
those granted in the ordinary course of LSPI's operations and reflected on
the Statements of Net Book Value. No other member of the LSPI Group has any
business operations which would result in the establishment of any trade
accounts receivable or the granting of any discounts, returns, promotional
allowances or similar charges.
(v) INVENTORY. All inventories reflected on the LSPI Group Financial
Statements are, and on the Statements of Net Book Value will be, properly
valued at the lower of cost or market value on a first-in, first-out basis in
accordance with GAAP. Inventories of finished goods are of good and
merchantable quality, whether of first line or job lot paper, contain no
material amounts that are not salable in the ordinary course of business and
meet the current standards and specifications of its business, except as
reserved for on the LSPI Group Financial Statements. Inventories of raw
materials, stores and replacement parts are, to the best knowledge of
Sellers, (i) of good and merchantable quality and contain no material amounts
that are not usable for the purposes intended in the ordinary course of
LSPI's operations; (ii) in conformity with warranties customarily given to
purchasers of like products; and (iii) at levels adequate for and not
excessive in relation to the ordinary course of LSPI's operations and in
accordance with past inventory stocking practices. Sales of inventories
subsequent to December 31, 1994 have been made only in the ordinary course of
business and at prices and under terms that are normal and consistent with
past practice.
(w) MOTOR VEHICLES. Schedule 7(w) sets forth an accurate and complete
list of all motor vehicles used in the business of the LSPI Group, whether
owned or leased. All such vehicles are (i) properly licensed and registered
in accordance with applicable law; (ii) insured as set forth on Schedule
7(p); (iii) in good operating condition and repair (reasonable wear and tear
excepted) and (iv) not subject to any lien or other encumbrance, except as
set forth on Schedule 7(w).
(X) PRODUCT WARRANTY. The books and records of LSPI reflect amounts
taken as a reserve against claims and allowances for product warranties,
which reserve has been established in accordance with LSPI's normal
accounting policies consistently maintained for the fiscal years ended
December 31, 1993 and December 31, 1994 and there is no reason to believe
that such reserve will not be adequate for its purpose. As of the Closing
Date, LSPI will not have incurred any unpaid liabilities to customers for
such claims and allowances, except those granted in the ordinary course of
business and reflected on the Statements of Net Book Value.
Disclosure of any fact in any provision of this Agreement or in any
Schedule attached hereto shall constitute disclosure thereof for the purposes
of any other provision or Schedule.
8. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and
warrants to Sellers as follows:
(a) ORGANIZATION. Buyer is a duly organized and validly existing
corporation in good standing under the laws of the state of Wisconsin. Buyer
has all requisite corporate power to own its property and carry on its
business as presently conducted.
(b) AUTHORITY. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Board of Directors of Buyer.
(c) VALID AND ENFORCEABLE AGREEMENT. This Agreement constitutes a
valid and binding agreement of Buyer, enforceable in accordance with its
terms, except insofar as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights
of creditors generally, and by general equitable principles. Neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, nor the performance of Buyer's obligations
hereunder materially violates or conflicts with, results in a material breach
of, or constitutes a material default under (i) to the best knowledge of
Buyer, any law, rule or regulation, or (ii) subject to the obtaining of
necessary consents under various agreements, any agreement or other
restriction of any kind or character to which Buyer is a party, by which
Buyer is bound, or to which any of the properties of Buyer is subject.
Neither the execution or delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, nor the performance of Buyer's
obligations hereunder violates or conflicts with, results in a breach of or
constitutes a default under (i) any judgment or order, decree, award or
ruling to which Buyer is subject, or (ii) the Articles of Incorporation or
By-Laws of Buyer.
(d) NO INSOLVENCY. Buyer is not currently insolvent, and neither the
purchase of the LSPI Group Stock, the assumption of the Guaranteed
Obligations of Sellers pursuant to Section 5, nor any related transaction or
event shall render Buyer insolvent or leave Buyer with assets which are
unreasonably small in relation to the business of the LSPI Group and its own
business operations, nor does Buyer intend to incur debts beyond its ability
to pay them as they come due.
(e) FINANCIAL STATEMENTS. Buyer's financial statements for the year
ended December 31, 1994, as filed with the Securities and Exchange Commission
(copies of which have been delivered to Sellers) (i) were prepared in
accordance with, and accurately reflect, its books and records, (ii) were
prepared in accordance with generally accepted accounting principles,
consistently applied, and (iii) present fairly the financial position and the
results of operations of Buyer for the periods covered thereby.
(f) INVESTMENT INTENT. Buyer is purchasing the LSPI Group Stock for
its own account and not with a view to, or present intention of, sale or
distribution thereof in violation of the Securities Act of 1933, as amended
(the "1933 ACT") and such shares will not be disposed of in contravention of
the 1933 Act. Buyer acknowledges that the LSPI Group Stock is not and has
not been registered with the Securities and Exchange Commission or any
securities commission or agency of any state, including the state of
Minnesota, and may not be transferred or disposed of without registration
under the 1933 Act and applicable state securities laws or an exemption from
such registration.
Disclosure of any fact in any provision of this Agreement or in any
Schedule attached hereto shall constitute disclosure thereof for the purposes
of any other provision or Schedule.
9. ACTIONS PENDING CLOSING. From the date hereof through the Closing
Date, Sellers shall take, or cause their respective Joint Venturers and LSPI
to take, all actions necessary and appropriate to comply with, or to refrain
from taking any action in breach of, the following provisions for the period
between the execution of this Agreement and the termination hereof or the
Closing Date:
(a) OPERATIONS. Each member of the LSPI Group shall conduct its
operations only in the ordinary course of business and shall not enter or
permit any member of the LSPI Group to enter into any transaction or perform
any act that would constitute a breach of the representations, warranties, or
agreements contained herein. Each member of the LSPI Group shall use its
best efforts to preserve its business and its organization intact and to keep
available the services of its present employees. Attached as Schedule 9(a)
is a list of capital expenditures and commitments to be initiated by the LSPI
Group prior to the Closing Date. No member of the LSPI Group shall initiate
any capital expenditure or commitment, other than as set forth on Schedule
9(a) or initiate any capital expenditure or commitment as set forth on
Schedule 9(a) in excess of $25,000, without Buyer's approval, which approval
shall not be unreasonably withheld; provided, however, that any member of the
LSPI Group may initiate emergency capital expenditures or commitments
consistent with the past practices of such LSPI Group member. Sellers shall
promptly notify Buyer of such emergency expenditures or commitments.
(b) ACCESS TO RECORDS. Sellers shall, and shall cause each member of
the LSPI Group to, make available to Buyer, its agents and employees, all
books and records in its possession relating to the businesses of each member
of the LSPI Group; provided, however, that Sellers have not made, and shall
not be deemed to have made, any representations or warranties whatsoever with
respect to any of such books or records or any other documents provided to or
made available to Buyer, except as expressly set forth in this Agreement.
(c) ACCESS TO FACILITIES. Buyer, its agents and employees, shall be
given full access during regular business hours to the physical facilities of
LSPI upon appointment with the President thereof and accompanied by such
President or his designee(s). Sellers and each member of the LSPI Group and
their respective employees shall cooperate fully with Buyer in its
examinations and inspections, but not to the detriment of the ongoing
business operations of the LSPI Group prior to Closing.
(d) RELEASE OF GUARANTEES. Sellers and Buyer shall agree on the
actions to be taken with respect to the release of each Seller from, and the
substitution (as required) of Buyer as, the guarantor of the LSPI Leases and
other Guaranteed Obligations. Each party shall pay its own costs in
connection with seeking and obtaining such releases, but if any additional or
different payments or terms are imposed by any lease participants in
connection therewith, the costs or the performance thereof shall be borne as
agreed upon by Sellers and Buyer.
(e) HART-SCOTT-RODINO FILINGS. Sellers and Buyer shall cooperate in
the prompt preparation and filing of all notifications and reports which may
be required with respect to the transactions contemplated by this Agreement
pursuant to Section 7A of the Clayton Act. Sellers and Buyer shall also
cooperate in responding promptly to all inquiries from the Federal Trade
Commission or the Department of Justice resulting from the filing of such
notifications and reports.
(f) NOTICE OF DEVELOPMENTS. At least ten (10) business days prior to
the Closing Date, Sellers shall deliver to Buyer a complete update of the
Schedules from the date hereof. Each party hereto shall notify the others of
any development(s) which shall constitute a breach of any of the
representations and warranties in Sections 7 or 8 above. The party so
notified has the right to terminate this Agreement within the period of ten
(10) business days from the date of receipt of such notification, if as a
result of such development the financial condition, results of operations or
prospects of the LSPI Group as a whole, on the one hand, or Buyer, on the
other hand, have been materially and adversely affected. If within such ten
(10) day period, the party notified shall not have exercised its right to
terminate this Agreement, the written notice shall be deemed to have amended
this Agreement and the relevant schedules attached thereto, to have qualified
the representations and warranties contained in Sections 7 or 8 above and to
have cured any misrepresentation or breach of warranty that otherwise might
have existed hereunder by reason of such development, including for purposes
of Section 15 hereof.
(g) LSPI RESTRICTIONS. Prior to the Closing Date, each Seller shall
waive or abandon its right of first refusal with respect to the transfer of
the other's interest in its respective Joint Venturer pursuant to this
Agreement.
(h) BEST EFFORTS. Buyer and Sellers shall use their best efforts to
consummate the transactions contemplated by this Agreement and shall not take
any other action inconsistent with their respective obligations hereunder or
which could hinder or delay the consummation of the transactions contemplated
hereby. From the date hereof through the Closing Date, Buyer and Sellers
shall use their best efforts to fulfill the conditions to their obligations
hereunder and to cause their representations and warranties to remain true
and correct as of the Closing Date.
(i) ALLOCATION OF PULP. Pentair and Buyer shall take all necessary
action to transfer all contracts for purchase of kraft pulp currently in the
name of Pentair and allocated to LSPI into the name of LSPI or Buyer, as
Buyer may direct. Until such contracts are transferred or terminated,
Pentair shall continue to perform such contracts or direct delivery of pulp
thereunder to LSPI in the same manner as currently performed, and LSPI shall
pay for such kraft pulp delivered to the seller thereof, or if Pentair has
paid therefor, promptly to Pentair upon delivery.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligations of
Buyer hereunder (unless expressly waived by Buyer) are subject to the
fulfillment, prior to or at Closing, as the case may be, of each of the
following conditions:
(a) NO ERRORS; PERFORMANCE OF OBLIGATIONS. The representations and
warranties of Sellers herein shall be true and correct as of the Closing
Date. Sellers shall have performed the obligations set forth in Section 9
and in all material respects all of the other obligations to be performed by
them hereunder in the time and manner herein stated.
(b) OFFICER'S CERTIFICATES. Sellers shall have delivered to Buyer
certificates, dated as of the Closing Date, executed by their respective
Secretaries, and in form and substance satisfactory to Buyer, certifying that
the covenants and conditions specified in this Agreement to be met by Sellers
have been performed or fulfilled and that the representations and warranties
herein made by Sellers are true and correct as of such date.
(c) CERTIFIED COPY OF RESOLUTIONS. Sellers shall have delivered to
Buyer a certified copy of resolutions adopted by their respective Boards of
Directors authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(d) OPINION OF SELLERS' COUNSEL. Sellers shall have delivered to Buyer
the opinion of their respective counsel, dated as of the Closing Date, in
form and substance satisfactory to Buyer and its counsel, giving the
following clean legal opinions:
(1) valid organization of Sellers and each of the members of
the LSPI Group;
(2) corporate power and authority of each Seller to enter
into the Agreement;
(3) necessary foreign qualification of members of the LSPI
Group;
(4) No Breach or Default Opinion with respect to members of
the LSPI Group;
(5) No Violation Opinion with respect to each Seller;
(6) Remedies Opinion with respect to each Seller, this
Agreement and the LSPI Leases;
(7) Legal Proceedings Opinion with respect to each Seller and
members of the LSPI Group;
(8) other legal matters agreed upon between Sellers and
Buyer; and
(9) no violation of registration provisions of the 1933 Act
and applicable state securities laws;
all in accordance with, and subject to the General Qualifications and other
limitations and provisions contained in, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(e) INJUNCTIONS. No injunction shall have issued restricting or
prohibiting the transactions contemplated by this Agreement.
(f) CLAYTON ACT MATTERS. The waiting period required by Section 7A of
the Clayton Act shall have expired or been terminated.
(g) ENVIRONMENTAL MATTERS. The results of any inspections, soil test
boring, soil tests, drainage tests, surveys, topographical analyses,
engineering studies or other investigations performed or obtained by Buyer
shall not have disclosed evidence of Hazardous Materials in, on or adjacent
to any of the real properties owned or occupied by any member of the LSPI
Group, other than those disclosed in any environmental studies or other
information listed on Schedule 10(g) which would materially and adversely
affect the operations of the LSPI Group taken as a whole. Buyer shall not
have received any evidence that there are existing violations of any
Environmental Law, other than those described in Schedule 10(g), or that any
requisite environmental license or permit or any occupance, use or building
permits or other approvals from applicable governmental authorities are
currently required for the continued operation of the facilities owned by the
LSPI Group which have not been obtained or are not in effect. In order to
enable Buyer to conduct a due diligence investigation, Sellers and LSPI, and
any other entity within the LSPI Group or SRFI Group with relevant
information on the environmental status of the operating facilities of LSPI,
shall provide Buyer with access to the environmental files, licenses,
permits, permit applications, consultant reports, notices from local, state
and federal governmental entities, environmental audit and inspection
reports, insurance files, and other information necessary for Buyer to assess
the environmental status of the operating facilities of LSPI as well as
permit or obtain permission for Buyer to conduct soil and groundwater testing
on or beneath the real properties owned or occupied by any member of the LSPI
Group.
(h) LSPI RESTRICTIONS. Each Seller shall have waived or abandoned its
right of first refusal with respect to the transfer of the other's interest
in its respective Joint Venturer pursuant to this Agreement.
(i) FINANCING. Buyer shall have used its best efforts to maintain an
aggregate of at least $250 million available under Buyer's committed and
uncommitted lines of credit until the Closing Date, and such lenders shall
not have cancelled or revoked such lines of credit prior to the Closing Date.
(j) FIRPTA CERTIFICATE. Sellers shall have furnished Buyer with a
certificate of non-foreign status signed by the appropriate party and
sufficient in form and substance to relieve Buyer of all withholding
obligations under Section 1445 of the Code. If Sellers cannot furnish such a
certificate or Buyer is not entitled to rely upon such certificate under the
provisions of Section 1445 of the Code and the regulations thereunder,
Sellers shall take and/or permit Buyer to take any and all steps necessary to
allow Buyer to satisfy the requirements of Section 1445 of the Code.
(k) PURCHASE OF SRFI AND NIAGARA PAPER. On or prior to the Closing
Date, Buyer shall have purchased all of the assets of LSPI Fiber Co., a joint
venture organized under the general partnership laws of the state of
Minnesota and all of the issued and outstanding capital stock of Superior
Recycled Fiber Corporation, a Minnesota corporation, and all of the issued
and outstanding capital stock of Niagara of Wisconsin Paper Corporation, a
Wisconsin corporation.
(l) REAL ESTATE CONSENTS. Sellers shall deliver to Buyer any consents
or approvals of any parties required pursuant to (i) the terms of any
contract, agreement, option or undertaking affecting the Owned Real Estate;
and (ii) the terms of the Real Estate Leases and estoppel certificates in
form and substance reasonably acceptable to Buyer from all lessors under the
Real Estate Leases.
(m) TITLE INSURANCE AND SURVEYS.
(i) Buyer shall have obtained an ALTA Owners Policy of Title
Insurance Form B Owner's Form (the "TITLE POLICY") for each parcel
of Owned Real Estate, except the Buffer Real Estate, issued by a
nationally recognized title company reasonably acceptable to Buyer
(the "TITLE COMPANY"). The Title Policy shall be in the amount of
the purchase price allocated to the Owned Real Estate by Buyer,
showing fee simple title to the Real Estate in a member of the LSPI
Group (or if the member of the LSPI Group is a contract purchaser,
the seller designated under the applicable sales contract), subject
only to current real estate taxes not yet due and payable as of the
Closing Date, liens and encumbrances reflected on Schedule 10(m)
hereto, and such other covenants, conditions, easements and
exceptions to title as Buyer may approve in writing (collectively,
the "PERMITTED EXCEPTIONS"). With reasonable promptness, after the
date of this Agreement, Buyer shall order commitments (the
"COMMITMENTS") for the Title Policy. Copies of the Commitments
shall be promptly delivered to Sellers. The Commitments and the
Title Policy to be issued by the Title Company shall have all
Standard and General Exceptions deleted so as to afford full
"extended form coverage" and shall contain an ALTA Zoning
Endorsement 3.1, contiguity, non-imputation, and such other
endorsements as may be reasonably requested by Buyer. At Closing,
Sellers shall deliver to Buyer a seller's affidavit or similar
instruments as the Title Company may require. Buyer shall be
responsible for the cost of all title insurance charges, premiums
and endorsements, title abstracts and attorneys' opinions,
including all search, continuation and later-date fees. To the
extent that any parcel of Owned Real Estate is registered Torrens
title, Sellers shall deliver the owner's duplicate certificates of
titles.
(ii) Buyer shall have obtained an as-built plat of survey of
each parcel of the Owned Real Estate (the "SURVEYS"), prepared by a
registered land surveyor or engineer, licensed in the respective
states in which the Owned Real Estate is located, dated on or after
the date hereof, certified to Buyer, the Title Company and such
other entities as Buyer may designate and conforming to current
ALTA Minimum Detail Requirements for Land Title Surveys, sufficient
to cause the Title Company to delete the standard printed survey
exception and to issue the Title Policy free from any survey
objections or exceptions whatsoever. Buyer shall pay the entire
cost of obtaining the Surveys. Any Survey may be a recertification
of a prior survey, provided that it meets the above-described
criteria. Each Survey shall show all conditions as then existing,
including the location of all pipes, wires and conduits serving the
Owned Real Estate and their connections to public ways, parking
areas denominated as such, loading docks and other improvements,
the access to and from the improvements on the Owned Real Estate,
and a flood plain certification indicating no flood zone
classification or area which would materially interfere with the
normal operations of LSPI. With reasonable promptness after the
date of this Agreement, Buyer shall order the Surveys. Copies of
the Surveys shall be promptly delivered to Sellers.
(iii) If (i) any Commitment or owner's duplicate certificate
of title discloses a title exception, other than a Permitted
Exception, that represents a defect affecting the marketability of
the title to any parcel of Owned Real Estate (an "UNPERMITTED
EXCEPTION") or (ii) any Survey discloses that improvements located
on the surveyed land encroach onto adjoining land or onto any
easements, building lines or set-back requirements, or
encroachments by improvements from adjoining land onto the surveyed
land, or onto any easements for the benefit of the surveyed land or
overlap or reflects that any utility service to the improvements or
access thereto does not lie wholly within the Owned Real Estate or
an unencumbered easement for the benefit of the Owned Real Estate
or reflects any other matter, any of which materially and adversely
affects the use or improvements of such parcel of Owned Real
Estate, or any other matter which renders title to any Owned Real
Estate unmarketable (a "SURVEY DEFECT"), then, in any such event,
Sellers shall have thirty (30) days from the date of delivery
thereof to have the Unpermitted Exception removed from such
Commitment and owner's certificate of title, if applicable, or the
Survey Defect corrected or insured over by an appropriate title
insurance endorsement, all at Sellers' cost and in a manner
reasonably satisfactory to Buyer, and in any such event the Closing
shall be extended, if necessary, to the date which is five (5)
business days after the expiration of such 30-day period. If
Sellers fail to have any Unpermitted Exception removed or any
Survey Defect corrected or otherwise insured over to the reasonable
satisfaction of Buyer within the time specified therefor, Buyer, at
its sole option, upon not less than three (3) days' prior written
notice to Sellers, may terminate this Agreement and all of Buyer's
obligations hereunder.
(n) PROVISION OF DOCUMENTATION. Sellers shall provide, to Buyer's
reasonable satisfaction, copies of all documentation set forth on Schedule
7(q) but not delivered prior to the date hereof.
(o) OTHER MATTERS. All corporate and other proceedings and actions
taken in connection with the transactions contemplated hereby and all
certificates, opinions, agreements, instruments and documents mentioned
herein or incident to any such transaction shall be delivered to Buyer and be
reasonably satisfactory in form and substance to Buyer and its counsel.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS. The obligations of
Sellers hereunder (unless expressly waived by Sellers) are subject to
fulfillment by Buyer, prior to or at Closing, as the case may be, of each of
the following conditions:
(a) NO ERRORS; PERFORMANCE OF OBLIGATIONS. The representations and
warranties of Buyer herein shall be true and correct as of the Closing Date.
Buyer shall have performed in all material respects all of the obligations to
be performed by it hereunder in the time and manner herein stated.
(b) OFFICER'S CERTIFICATE. Buyer shall have delivered to Sellers a
certificate, dated as of the Closing Date, executed by an officer of Buyer,
and in form and substance satisfactory to Sellers, certifying that the
covenants and conditions specified in this Agreement to be met by Buyer have
been performed or fulfilled and that the representations and warranties
herein made by Buyer are true and correct as of such date.
(c) CERTIFIED COPY OF RESOLUTIONS. Buyer shall have delivered to
Sellers a certified copy of resolutions adopted by the Board of Directors of
Buyer authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(d) OPINION OF BUYER'S COUNSEL. Buyer shall have delivered to Sellers
the opinion of its counsel, dated as of the Closing Date, in form and
substance satisfactory to Sellers and their counsel, giving the following
clean legal opinions:
(1) valid organization of Buyer;
(2) corporate power and authority of Buyer to enter into the
Agreement;
(3) No Breach or Default Opinion;
(4) No Violation Opinion;
(5) Legal Proceedings Opinion;
(6) Remedies Opinion with respect to this Agreement; and
(7) other legal matters agreed upon between Sellers and
Buyer;
all in accordance with, and subject to the General Qualifications and other
limitations and provisions contained in, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(e) INJUNCTIONS. No injunctions shall have issued restricting or
prohibiting the transactions contemplated by this Agreement.
(f) CLAYTON ACT MATTERS. The waiting period required by Section 7A of
the Clayton Act shall have expired or been terminated.
(g) FINANCING. Buyer shall have used its best efforts to maintain an
aggregate of at least $250 million available under Buyer's committed and
uncommitted lines of credit until the Closing Date and such lenders shall not
have cancelled or revoked such lines of credit prior to the Closing Date.
(h) SALE OF SRFI AND NIAGARA PAPER. On or prior to the Closing Date,
Buyer shall have purchased all of the assets of LSPI Fiber Co., a joint
venture organized under the general partnership laws of the State of
Minnesota, and all of the issued and outstanding capital stock of Superior
Recycled Fiber Corporation, a Minnesota corporation, and all of the issued
and outstanding capital stock of Niagara of Wisconsin Paper Corporation, a
Wisconsin corporation.
(i) OTHER MATTERS. All corporate and other proceedings and actions
taken in connection with the transactions contemplated hereby and all
certificates, opinions, agreements, instruments and documents mentioned
herein or incident to any such transaction shall be delivered to Sellers and
be reasonably satisfactory in form and substance to Sellers and their
counsel.
12. BROKER. Pentair represents and warrants that CS First Boston was
retained by it to represent it in this transaction. Minnesota Power
represents and warrants that PaineWebber Incorporated was retained by it to
represent it in this transaction. Buyer represents and warrants that Dillon,
Read & Co. Inc. has been retained by Buyer to represent it. Each Seller
shall be responsible for payment of all fees and expenses of its respective
investment banker and Buyer shall be responsible for payment of all fees and
expenses of Dillon, Read & Co. Inc. Should any claims for commissions be
made by any other person claiming an interest in this Agreement, or in the
underlying transactions, by reason of any agreement, understanding or other
arrangement with Buyer or with either Seller, or their respective agents,
servants, employees, or other representatives, then the party through, or on
account of, whom such claims are made shall indemnify and hold harmless the
other parties from any and all liabilities and expenses in connection
therewith in accordance with the provisions of Section 15 below. The
foregoing provisions of this Section 12 shall survive not only the Closing
hereunder, but also any termination or cancellation of this Agreement.
13. EMPLOYEES. (a) Sellers and LSPI agree to use all reasonable
efforts to keep the present employees of LSPI, during the period between the
execution hereof and the Closing Date. Buyer agrees that in the event that
employee health and retirement benefit programs currently provided to
employees of LSPI are changed or substituted for, all prior years of service
of such employees with LSPI or with other affiliates of Sellers will be
recognized for all purposes. Buyer and LSPI shall indemnify and hold Sellers
harmless against any severance or termination pay obligations based upon
prior policies of Sellers or LSPI or arising from the transactions
contemplated hereby.
(b) Sellers have announced to selected employees of LSPI transition
incentives heretofore disclosed to Buyer, to encourage their continued
employment and achievement of performance targets for LSPI prior to Closing.
The costs and administration of all such transition incentives shall be the
sole responsibility of LSPI which shall pay such transition incentives
promptly after Closing, in accordance with the terms thereof.
14. CONFIDENTIAL INFORMATION. (a) Buyer acknowledges that pursuant to
its right to inspect Sellers and LSPI's records and facilities under Section
9, Buyer shall become privy to Confidential Information. Buyer agrees that
in the event the transaction contemplated by this Agreement is not completed,
all Confidential Information disclosed to Buyer shall remain confidential,
shall not be used for the benefit of Buyer or any of Buyer's affiliates or
disclosed to any person or entity, and all recorded evidence thereof shall be
delivered to Sellers together with an officer's certificate to the effect
that no copies thereof or any extracts, derivatives or compilations thereof
remain in possession of Buyer, its employees, affiliates, agents, counsel or
auditors. The confidentiality and nonuse provisions hereof shall survive any
termination of this Agreement until August 26, 1997 with respect to Pentair
and January 9, 1998 with respect to Minnesota Power. Buyer acknowledges that
it has entered into a confidentiality letter dated August 26, 1994 between
itself and CS First Boston on behalf of Pentair, and a confidentiality letter
dated January 9, 1995 between itself and PaineWebber on behalf of Minnesota
Power, and agrees that such confidentiality letters shall continue in full
force and effect for the duration of their respective terms in addition to
the provisions of this Section 14.
(b) Sellers agree that in the event the transaction contemplated by
this Agreement is completed, all confidential and proprietary information
related to the LSPI Group shall remain confidential, shall not be used for
the benefit of Sellers or any of Sellers' affiliates or disclosed to any
person or entity. The confidentiality and nonuse obligations of Sellers
hereunder shall be on the same terms and conditions as the confidentiality
letters set forth in Section 14(a) and shall survive any termination of this
Agreement until August 26, 1997 with respect to Pentair and January 9, 1998
with respect to Minnesota Power.
15. INDEMNIFICATION. (a) Without limiting any remedy Buyer may have
hereunder, Sellers hereby agree to indemnify, defend and hold Buyer harmless
from and against and in respect of any and all liabilities, losses, damages,
claims, costs and expenses, including reasonable attorneys fees, suffered or
incurred by Buyer, Pentair Duluth, Minnesota Paper or LSPI, when so suffered
or incurred, by reason of or relating to:
(i) any representation or warranty of Sellers contained in
this Agreement being breached or untrue;
(ii) any covenant or agreement of Sellers contained in this
Agreement being breached or not fulfilled in any material respect,
and not waived;
(iii) the assertion against Buyer of any other liability of
either Seller not assumed by Buyer hereunder; or
(iv) the assertion against Buyer or the LSPI Group of any
liability of the LSPI Group assumed by Sellers;
provided, however, that any claim arising out of any breach of warranty or
otherwise relating to (x) environmental conditions, permits or liabilities or
obligations with respect to Hazardous Materials shall be dealt with solely in
accordance with Section 18 hereof and (y) taxes shall be dealt with solely in
accordance with Section 23 hereof.
(b) Without limiting any remedy Sellers may have hereunder, Buyer
hereby agrees to indemnify, defend, and hold Sellers harmless from and
against and in respect of any and all liabilities, losses, damages, claims,
costs and expenses, including reasonable attorneys fees, by reason of or
relating to:
(i) any representation or warranty by Buyer contained in this
Agreement being breached or untrue;
(ii) any covenant or agreement of Buyer contained in this
Agreement being breached or not fulfilled in a material respect,
and not waived; or
(iii) the failure of Buyer to pay, discharge, or perform any
guaranty, obligation or liability assumed by Buyer hereunder
(including without limitation the Guaranteed Obligations).
(c) Notice of any claim of indemnification under this Agreement (other
than for claims pursuant to Sections 16, 18 and 23) shall be effective only
if such notice shall have been given in writing to the Indemnitor (as
hereinafter defined) on or prior to December 31, 1997. Notice of claims by
Sellers against Buyer regarding Guaranteed Obligations shall be effective
only if given in writing on or prior to the date six months following the
date on which the liability of Sellers is discharged with respect to the last
outstanding Guaranteed Obligation.
(d) The first $1,500,000 in the aggregate of claims made by Buyer or by
Sellers as a group (except claims against Sellers under Sections 19 or 23 or
under subparagraphs 15(a)(iii) and (iv) above, claims against Buyer under
Section 19 or under subparagraphs 15(b)(iii) above or claims against either
Buyer or Sellers under Sections 12, 13, 14, or 16 hereof) pursuant to this
Section shall be borne by that party and shall not be indemnifiable. The
minimum amount of each such claim shall be not less than $50,000 in the
aggregate.
(e) In the event that indemnification is sought with respect to any
obligation of Buyer and Sellers under this Agreement, the party seeking
indemnification (the "INDEMNITEE") shall give the party from whom
indemnification is sought (the "INDEMNITOR") notice of any claim of the
commencement of any action or proceeding promptly after the Indemnitee
receives notice thereof, and shall permit the Indemnitor to assume the
defense of any such claim or litigation resulting from such claim.
If the Indemnitor assumes the defense of any such claim or litigation
resulting therefrom, the obligations of Indemnitor as to such claim shall be
limited to taking all steps necessary in the defense or settlement of such
claim or litigation resulting therefrom and to holding the Indemnitee
harmless from and against any and all losses, damages and liabilities caused
by or arising out of any settlement approved by the Indemnitor or any
judgment in connection with such claim or litigation resulting therefrom.
The Indemnitee may participate, at its expense, in the defense of any
such claim or litigation, provided that the Indemnitor shall direct and
control the defense of such claim or litigation.
Except with the written consent of the Indemnitee, the Indemnitor shall
not, in the defense of such claim or any litigation resulting therefrom,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnitee of a release from all liability with respect to
the claim or litigation.
If the Indemnitor shall not assume the defense of any such claim or
litigation resulting therefrom, the Indemnitee may defend against such claim
or litigation in such manner as it may deem appropriate and, unless the
Indemnitor shall deposit with the Indemnitee a sum equivalent to the total
amount demanded in such claim or litigation, or shall deliver to Indemnitee a
surety bond for such amount in form and substance reasonably satisfactory to
Indemnitee, Indemnitee may settle such claim or litigation on such terms as
it may reasonably deem appropriate, and the Indemnitor shall promptly
reimburse Indemnitee for the amount of all costs and expenses, legal or
otherwise, reasonably incurred by the Indemnitee in connection with the
defense against or settlement of such claims or litigation. If no settlement
of such claim or litigation is made, the Indemnitor shall promptly reimburse
the Indemnitee for the amount of any final judgment rendered with respect to
such claim or in such litigation and for all reasonable costs and expenses,
legal or otherwise, incurred by the Indemnitee in the defense against such
claim or litigation, but only to the extent that such amounts are actually
paid.
16. GUARANTEED OBLIGATIONS. In the event that Sellers' release from
the Guaranteed Obligations is not obtained, Sellers and Buyer agree that they
will continue to use their best efforts to obtain the complete release of
Sellers from the Guaranteed Obligations. Buyer shall indemnify Sellers
against any and all demands, payments, expenses and costs incurred by Sellers
in connection with such Guaranteed Obligations in accordance with Section 15
hereof for so long as Sellers have any potential liability under any such
Guaranteed Obligations. Buyer and Sellers agree that the provisions of this
Section 16 shall continue in full force and effect until the complete
discharge of Sellers under such Guaranteed Obligations.
Until Sellers are released from all of the Guaranteed Obligations,
Sellers agree to comply with any and all of their non-monetary obligations
and covenants under the LSPI Leases. In the event of any breach by Sellers
of such obligations and covenants, Sellers shall indemnify Buyer against any
and all demands, payments, expenses and costs incurred by Buyer or any member
of the LSPI Group in excess of those which would have been incurred by any
member of the LSPI Group in the course of performance of the Guaranteed
Obligations but for any breach by Sellers, in connection with the foregoing
sentence in accordance with Section 15 hereof for so long as Sellers have any
obligations under such Guaranteed Obligations. Buyer and Sellers agree that
the provisions of this Section 16 shall continue in full force and effect
until the complete discharge of Sellers under such Guaranteed Obligations.
In addition, with respect to the Keepwell Obligations of Sellers, until
complete discharge of Sellers thereunder, on the earlier to occur of (x) the
second anniversary of the Midterm Purchase Date or (y) the Change of Control
Date, and on each succeeding anniversary date thereof,
(a) Buyer shall post with Sellers irrevocable Letters of
Credit for the benefit of the members of the LSPI Group having a
face value equal to the nominal maximum amount of such Keepwell
Obligations, which Letters of Credit shall
(i) be in substantially the form set forth in
Schedule 16 hereto,
(ii) be issued by a national banking institution
with a rating by Standard & Poor's of A or better or
otherwise acceptable to Sellers in their sole discretion,
(iii) be immediately payable to the respective
Indenture Trustees under the Trust Indentures entered
into in connection with the LSPI Lease, upon written
notice to the issuing bank by the respective Sellers of
any demand, notice or claim for payment or performance
made upon such Seller under its Keepwell Obligations, and
(iv) shall be renewed (not less than thirty (30)
days prior to the expiration of any previous Letters of
Credit) by substitute Letters of Credit satisfying the
conditions hereof.
Buyer shall use its best efforts to procure such Letters of Credit
for as long as its obligations under this subparagraph 16(a)
continue.
(b) If Buyer is unable to post such Letters of Credit, for so
long as such Letters of Credit have not been provided, Buyer shall
pay to Sellers an annual guaranty fee equal to 2.0% of the then
current nominal remaining maximum amount of such Keepwell
Obligations, not as penalty but as compensation for Sellers'
continuing guaranty thereof for the benefit of Buyer.
(c) Following the Closing Date, Buyer agrees that it shall
not pledge, sell, transfer, assign or otherwise dispose of all or
any part of the LSPI Group Stock or all or substantially all of the
assets of LSPI without the written consent of Sellers, which
consent may be granted or withheld in its sole discretion. At any
time, Buyer may merge with to into, or consolidate with, any other
corporation or sell any members of the LSPI Group or the assets
thereof, provided that:
(i) Buyer remains absolutely and unconditionally
obligated under this Agreement including specifically,
but without limitation, Section 15 and 16 hereof; and
(ii) prior to such transaction there shall have
been delivered to Sellers an opinion of Buyer's counsel
reasonably satisfactory to Sellers stating in effect that
Buyer's obligations under Section 15 and 16 of this
Agreement are legal, valid and binding obligations of
Buyer enforceable in accordance with their terms against
Buyer, subject to customary qualifications as to
enforceability.
17. EXPENSES. Sellers and Buyer shall each be responsible for all of
their own expenses incurred in connection with the transactions contemplated
hereby. Sellers shall be responsible for the accounting and auditing fees
and expenses related to the preparation of the Statement of Net Book Value.
Sellers shall cooperate and cause their respective accountants and the
accountants for LSPI to cooperate and assist Buyer and its accountants
(including consenting to the use of the LSPI Group Financial Statements with
respect to any filings by Buyer with the Securities and Exchange Commission
in connection with the transactions contemplated hereby. Sellers shall be
responsible for any and all fees and expenses of Sellers' and LSPI's
accountants with respect to the foregoing. Buyer will pay the incremental
costs and expenses of auditing the LSPI financial statements or other
information required by Buyer, other than the statement of Net Book Value as
of the Closing Date. Buyer will pay the cost of the Commitments, Title
Policies and Surveys set forth in Section 10(n).
18. ENVIRONMENTAL MATTERS.
(a) WARRANTY. Sellers warrant that, other than as disclosed to Buyer
pursuant to Schedule 10(g) attached:
(i) Compliance with Environmental Laws. The business and
operations of each member of the LSPI Group comply in all material
respects with all applicable Environmental Laws, except to the extent
that such noncompliance could not be reasonably expected to have a
material adverse effect on the business, operations, properties, assets
or condition (financial or otherwise) of the LSPI Group.
(ii) Notice/Receipt of Notice. No member of the LSPI Group has
given, or is required to give, nor has any member received, any written
notice, letter, citation, or order, or any written warning, complaint,
inquiry, claim or demand (or if verbal, to the extent the warning,
complaint, inquiry, claim or demand is recorded in a written log) that:
(i) any member of the LSPI Group has violated, or is about to violate,
any Environmental Law; (ii) there has been a release, or there is a
threat of release, of a non-de minimis quantity of Hazardous Material
from any of the LSPI Group's property, facilities, equipment or vehicles
or previously owned or leased properties; (iii) any member of the LSPI
Group may be or is liable, in whole or in part, for material costs of
cleaning up, remediating, restoring or responding to a release of
Hazardous Material; (iv) any of the LSPI Group's property or assets or
previously owned or leased properties or assets are subject to a lien in
favor of any governmental entity for any liability, costs or damages,
under any Environmental Law; and (v) any member of the LSPI Group may be
or is liable in whole or in part, for natural resource damages;
provided, that for purposes of liability for natural resource damages
such notice, letter, citation, order, inquiry, claim or demand was made
by a governmental agency.
(iii) Property on Environmental Cleanup Lists. No property now or
previously owned or leased by the LSPI Group is listed (or with respect
to Owned Real Estate proposed for listing) on the National Priorities
List pursuant to Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. 9601 et seq.) ("CERCLA"),
on the CERCLIS or on any similar state list of sites requiring
investigation or clean-up.
(iv) Intentionally left blank.
(v) Past Disposal -- On site. Neither any member of the LSPI
Group nor to the best knowledge of Sellers any previous owner or other
person, has ever caused or permitted any material release or disposal of
any Hazardous Material on, under or at any of the facilities or
properties of the LSPI Group or any part thereof, and none of such
facilities or properties, nor any part thereof have ever been used
(whether by the LSPI Group or to Sellers' best knowledge by any other
person) as a permanent storage facility or disposal site for any
Hazardous Material.
(vi) Underground Storage Tanks. There are no underground storage
tanks, including any associated piping, active or abandoned, including
petroleum storage tanks, on or under any property now or previously
owned or leased by the LSPI Group that, singly or in the aggregate,
have, or may reasonably be expected to have, a material adverse effect
on the financial condition, operations, assets, business, or properties
of the LSPI Group.
(vii) Off-Site Disposal. No member of the LSPI Group has directly
transported or directly arranged for the transportation of any Hazardous
Material to any location which is listed, proposed for listing or, to
the best knowledge of Sellers, which if known to the state or federal
government would warrant listing on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar state list or which
is or reasonably could be the subject of federal, state or local
enforcement actions or other investigations which may reasonably be
expected to lead to material claims for any remedial work, damage to
natural resources or personal injury, including claims under CERCLA.
(viii) PCBs/Asbestos. There are no PCB's or friable asbestos
present at any property now or previously owned or leased by the LSPI
Group that, singly or in the aggregate, have, or may reasonably be
expected to have, a material adverse effect on the financial condition,
operations, assets, business or properties of the LSPI Group.
(ix) Pollution Control Equipment. All pollution control equipment,
including any monitoring devices or related equipment, is in proper
operating condition, has been properly maintained, and, in the case of
major ("end-of-pipe") wastewater treatment and air pollution control
facilities, has been designed to maintain compliance with applicable
Environmental Laws based upon the current production rates and operating
policies of LSPI in effect since January 1, 1995. All material actions
necessary to maintain in force any original, as delivered, manufacturer
warranties have been taken with respect to all major components of
wastewater and air pollution control facilities.
(x) Other Environmental Conditions Off-Site. To Sellers' best
knowledge there are no sites or locations not currently owned or leased
by the LSPI Group where Hazardous Materials were disposed of which with
the passage of time, or the giving of notice or both could reasonably be
expected to give rise to any material liability under any Environmental
Law, to any member of the LSPI Group.
(b) INDEMNITY. Subject to the provisions of Section 18(c) below and
the limitations on indemnification set forth in Section 15(d) above, Sellers
shall indemnify and hold Buyer and the members of the LSPI Group harmless
from and against any and all losses, liabilities, damages, injuries,
penalties, fines, costs, expenses and claims of any and every kind whatsoever
(including reasonable attorneys' and consultants' fees and expenses), paid,
incurred or suffered by Buyer as a result of any breach of warranties set
forth in Section 18(a). With respect to any liability for disposal or
arranging for disposal of Hazardous Materials at sites or locations not
currently owned or leased by the LSPI Group, this indemnity shall apply
notwithstanding the fact that Buyer may have received or obtained information
before the Closing Date, other than that information disclosed on Schedule
10(g) indicating or otherwise showing that a claim exists or may exist under
this indemnity, including, but not limited to, any information relating to a
breach of the warranties set forth in Section 18(a) above.
(c) SPECIAL PROVISIONS. The following provisions shall apply in the
event of any breach of warranty under this Section 18.
(i) Notice. Buyer shall promptly, and in no event later than 90
days from the date Buyer has knowledge, notify Sellers in writing of any
claim, demand or action, situation or event covered by the warranty and
indemnification provisions of Section 18. With respect to any work or
activities undertaken by Buyer which is subject to this indemnity, Buyer
shall provide Sellers in a timely manner, written documentation prepared
in the normal course of business describing the work or activities.
(ii) Disclosure of On-Site Environmental Matters. Buyer agrees
that environmental matters associated with the Real Estate which are
contained in the environmental reports and documents listed on Schedule
10(g), as well as any information obtained by Buyer during its due
diligence activities conducted on the Real Estate between the signing of
this Agreement and the Closing Date, shall be considered disclosed to
Buyer.
(iii) Election of Control Off-Site Work. At Sellers' option, to
the extent Sellers are obligated to indemnify Buyer under this Section
for the costs of investigating, remediating, restoring or cleaning-up
any site where Hazardous Materials were disposed and the site is located
on property not currently owned, leased or otherwise used by the LSPI
Group (nor reasonably anticipated to be used by the LSPI Group), Sellers
may elect to take control of the investigation, remediation, restoration
and/or clean-up ("ENVIRONMENTAL CLEANUP"). If they elect to do so,
Sellers shall so notify Buyer and Sellers thereafter shall be solely
responsible (as between the parties hereto) for managing and paying for
such Environmental Cleanup (to the extent it is obligated to indemnify
Buyer) including any fines, penalties or third-party actions associated
with the Environmental Cleanup.
(iv) Buyer's Control of Work. Other than in connection with off-
site Environmental Cleanups, Buyer and/or the LSPI Group shall manage
and conduct any Environmental Cleanup work and shall manage and control
the repair and replacement of any pollution control equipment. All such
work shall be done in a commercially reasonable, cost-effective manner
using good faith business judgment and without regard to the
availability of indemnification hereunder.
(v) Pollution Control Equipment. In situations where the
installation of pollution control equipment is required in order to
obtain compliance with the Environmental Laws, Sellers' liability under
this Section shall include both capital and reasonable operation and
maintenance costs (calculated on a reasonable present value basis).
(vi) Interference with Operations. In situations where the
Environmental Cleanup or the installation, repair or replacement of the
pollution control equipment will materially interfere with the conduct
of the operations of the LSPI Group, Sellers shall be responsible for
the reasonable costs, expenses or losses associated with or attributable
to any material business interruption losses, provided that Buyer shall
do the work or activities in a manner that is least disruptive of the
LSPI Group's ongoing operations.
(d) EXCLUSIVE REMEDY. This Section provides to Buyer, the respective
LSPI Group members and anyone claiming under or through them the exclusive
remedy against Sellers with respect to any matter covered by this Section 18,
and such exclusive remedy shall lapse and be of no further force or effect on
and after the fifth anniversary of the Closing Date.
(e) INSPECTION OF BOOKS AND RECORDS. In the event of any claim made by
Buyer for indemnification under this Section 18, Sellers shall be entitled to
access, at times reasonably convenient to Buyer and the members of the LSPI
Group, to such books, records and data related to such claim for
indemnification hereunder, as Sellers deem necessary to verify the basis or
amount of such claim.
19. TERMINATION OF AGREEMENT. This Agreement may be terminated upon
ten (10) business days prior written notice at any time prior to Closing
without liability of any party to the other:
(a) by mutual consent of Sellers and Buyer;
(b) by Buyer, if notice of a material adverse development with respect
to the financial condition, results of operations or prospects of the LSPI
Group has been given, in accordance with Section 9(f) hereof;
(c) by Buyer, if Closing has not occurred on or before September 30,
1995 as a result of the nonfulfillment of any of the conditions to Buyer's
obligation to perform contained in Section 10 of this Agreement;
(d) by Sellers, if notice of a material adverse development with
respect to the financial condition, results of operations or prospects of
Buyer has been given, in accordance with Section 9(f) hereof;
(e) by Sellers, if Closing has not occurred on or before September 30,
1995 as a result of the nonfulfillment of any of the conditions to Sellers'
obligation to perform contained in Section 11 of this Agreement; and
(f) by any party, if the Closing has not occurred by October 31, 1995.
Termination of this Agreement shall not affect in any way the continuing
obligations of the parties hereto pursuant to Section 12 relating to brokers
and Section 14 hereof relating to the treatment of confidential information.
20. ANNOUNCEMENTS. Buyer and Sellers shall cooperate in the
preparation of any announcements regarding the transactions contemplated by
this Agreement. Except as required by law, no party shall issue any
announcement regarding the transactions contemplated hereby without the prior
consent of the other parties, which consents shall not be unreasonably
withheld. The covenants set forth in this Section shall be enforceable in
law or at equity by either party.
21. RECORDS. After the Closing Date, Buyer shall retain the books,
records or other data of each member of the LSPI Group existing at the
Closing Date for a period of ten (10) years. During the retention period
specified above, Sellers shall be entitled to access, at times reasonably
convenient to Buyer, to such books, records and data in connection with the
preparation or handling of Sellers' tax returns, financial reports, tax
audits, W-2 forms, litigation matters or any other reasonable need of either
Seller. If the LSPI Group or Buyer wish to dispose of such material (whether
during or following the 10-year period), it shall give Sellers prior notice
and the opportunity to remove such material at the expense of the Seller(s)
requesting the same.
22. ASSISTANCE AFTER CLOSING. Buyer shall furnish, at no cost to
Sellers, such assistance to Sellers in the preparation of their respective
fiscal 1994 and 1995 financial and tax reports as Sellers may reasonably
request. All such assistance shall be on a confidential basis and Sellers
agree to comply with the confidentiality and limitation on use provisions of
Section 14 hereof with respect to such confidential information.
(a) RETAINED LIABILITIES. Buyer shall also provide Sellers with
reasonable assistance, including without limitation furnishing of documents
and making available to Sellers potential witnesses within its control or
that of any member of the LSPI Group and the assistance of their respective
engineers or experts, in the defense of any claim, lawsuit or tax examination
arising out of the operations of LSPI prior to the Closing Date for which
Sellers retain liability under this Agreement. Sellers shall reimburse Buyer
or such member of the LSPI Group for its out of pocket expenses incurred in
providing such assistance.
(b) ALLOCATION OF PULP. Pentair and Buyer shall take all necessary
action to transfer all contracts for purchase of kraft pulp currently in the
name of Pentair and allocated to LSPI into the name of LSPI or Buyer, as
Buyer may direct. Until such contracts are transferred or terminated,
Pentair shall continue to perform such contracts and direct delivery of pulp
thereunder to LSPI in the same manner as currently performed, and LSPI shall
pay for such kraft pulp delivered to the seller thereof, or if Pentair has
paid therefor, promptly to Pentair upon delivery.
23. TAX MATTERS; PAYMENT OF TAXES.
(a) TAX RETURNS. Sellers shall prepare or cause to be prepared and
shall timely file all Returns (including any amendments thereto) relating to
any Taxes of the members of the LSPI Group with respect to any tax period
ending on or before the Closing. Sellers shall pay or cause to be paid all
Taxes of the members of the LSPI Group with respect to any period ending on
or before the Closing as determined in accordance with Sections 23(b) and
23(c) hereof.
(b) APPORTIONMENT OF INCOME. Sellers will include the income of the
LSPI Group (including any deferred income and any excess loss accounts
pursuant to relevant rules and regulations of the Internal Revenue Service)
on Sellers' federal and state income tax Returns for all periods through the
Closing Date and shall pay any federal and state income taxes attributable to
such income. The LSPI Group will furnish all tax information requested by
Sellers to it for inclusion in Sellers' income tax Returns for the period
which includes the Closing Date in accordance with Sellers' past custom and
practice. The income of the LSPI Group will be apportioned to the period up
to and including the Closing Date and the period after the Closing Date by
closing the books of the LSPI Group as of the end of the Closing Date.
(c) ALLOCATION OF TAXES. For purposes of this Agreement, in the case
of any Taxes that are imposed on a periodic basis and are payable for a
period that begins before the Closing Date and ends after the Closing Date,
Sellers shall reimburse Buyer for the portion of such Taxes payable for the
period ending on the Closing Date to the extent such Taxes are not reflected
on the Statement of Net Book Value as of the Closing Date. For this purpose,
the portion of such Tax payable for the period ending on the Closing Date
shall in the case of any Taxes other than Taxes based upon or related to
income or sales or use taxes, be deemed to be the amount of such Taxes for
the entire period multiplied by a fraction, the numerator of which is the
number of days in the period ending on the Closing Date, and the denominator
of which is the number of days in the entire period. The preceding sentence
shall be applied with respect to Taxes relating to capital (including net
worth or long-term debt) or intangibles by reference to the level of such
items on the Closing Date to the extent such Taxes are not reflected on the
Statement of Net Book Value as of the Closing Date.
(d) INDEMNITY. Notwithstanding anything to the contrary in this
Agreement whether expressed or implied, Sellers shall indemnify and hold
harmless Buyer, and each member of the LSPI Group against:
(1) all Taxes imposed on any member of the LSPI Group with respect
to any period ending on or before the Closing;
(2) all Taxes imposed on Buyer or on any member of the LSPI Group
with respect to any period which begins before the Closing
Date and ends after the Closing Date to the extent allocated
to the portion of such period ending on the Closing Date,
determined in accordance with Section 23 hereof;
(3) all Taxes imposed on Buyer or on any member of the LSPI Group
with respect to income earned by any member of the LSPI Group
for the period beginning January 1, 1995 and ending on the
Closing Date, determined in accordance with Section 23(b)
hereof;
(4) all Taxes imposed on any member of the LSPI Group as a result of
the Section 338(h)(10) Elections contemplated by Section 24 hereof;
(5) all Taxes imposed on any member of an affiliated,
consolidated, combined or unitary group which includes or has
included any member of the LSPI Group with respect to any
taxable period that ends on or prior to the Closing;
(6) all liability resulting from or attributable to a breach of
the representations, warranties and covenants contained in
Section 7(t) and this Section 23; and
(7) any claim under Treas. Reg. 1.1502-6 by the Internal Revenue
Service against any member of the LSPI Group which was a
member of Sellers' respective consolidated groups prior to the
Closing Date with respect to any federal income tax liability
of any Sellers for any period ending on or prior to
December 31, 1995.
(e) POST-CLOSING ELECTIONS. Sellers will (or will cause members of the
LSPI Group, as the case may be to) make or join, as necessary, with Buyer in
making any election relating to income taxes, including, but not limited to,
elections under Section 732(d) and Section 754 of the Code, for the year in
which the Closing Date occurs. Prior to Closing, Buyer shall retain an
appraiser to appraise the assets of the LSPI Group. Sellers and the members
of the LSPI Group and their respective employees shall cooperate fully with
Buyer and its appraiser in connection with the appraisal. The cost of the
appraisal shall be borne by Buyer.
(f) CONTROL OF CONTEST. Sellers shall have the right, at their own
expense, to control any audit or determination by any taxing authority,
initiate any claim for refund or amended Return and contest, resolve and
defend against any assessment, notice of deficiency or other adjustment or
proposed adjustment of Taxes for any taxable period for which any Sellers (or
any of its affiliates) is charged with responsibility for filing a Return
under this Agreement. Each party will allow the other and its counsel (at
its or their own expense) to be represented during any audits of income tax
Returns to the extent that disputed items therein relate to the LSPI Group.
Buyer shall, or shall cause its affiliates to, undertake or authorize actions
in their capacity as tax matters partner of LSPI as requested by Sellers with
respect to this Section 23(f).
(g) GENERAL. Each of Buyer and Sellers shall provide the other, and
Buyer shall following the Closing cause each member of the LSPI Group to
provide to Sellers, with the right, at reasonable times and upon reasonable
notice, to have access to personnel, and to copy and use, any records or
information that may be relevant in connection with the preparation of any
Returns, any audit or other examination by any taxing authority or any
litigation relating to liability for Taxes. Information required in the
filing of any Return shall be provided to the other party not less than
thirty (30) days before such Return is due. Sellers will allow the Buyer an
opportunity to review and comment upon any Returns under Subsection 23(a)
(including any amended returns) to the extent that they relate to any member
of the LSPI Group. Sellers will take no position on such Returns that relate
to any member of the LSPI Group that would adversely affect any member of the
LSPI Group after the Closing. Sellers and Buyer shall retain all records
relating to Taxes for as long as the statute of limitations with respect
thereto shall remain open.
(h) SALES AND TRANSFER TAXES. All sales and transfer Taxes (including
all stock transfer taxes, if any) incurred in connection with the
transactions contemplated hereby will be borne by the statutorily responsible
party. If required by applicable law, Buyer or Sellers, as the case may be,
will join in the preparation and execution of any Returns or other
documentation related to the payment of any sales or transfer Taxes.
(i) TAX EFFECTIVE TIME. For purposes of Taxes, the Closing shall be
deemed to have occurred, and shall be effective, as of the close of business
on the Closing.
(j) SURVIVAL. All of the representations, warranties, covenants and
indemnities contained in this Agreement which relate to Taxes shall survive
the Closing (even if the Indemnified Party knew or had reason to know of any
misrepresentation or breach of warranty or covenant at the time of the
Closing) and continue in full force and effect until the expiration of the
applicable statute of limitations (including any extensions thereof).
(k) LSPI LEASES TAX RATE CHANGE INDEMNITY. In the event of an
adjustment of rents under the LSPI Leases, as a result of a Change in Tax Law
which becomes effective after the date hereof and on or prior to the date
(the "MIDTERM PURCHASE DATE") on which LSPI may make the Midterm Purchase in
accordance with Section 13(b) of the Facility Leases (whether or not such
Midterm Purchase is made),
(i) if such adjustment occurs as a result of an increase in
corporate tax rates, Sellers shall indemnify and hold harmless
Buyer and each member of the LSPI Group (without duplication)
against
(A) any increase in Basic Rent, payable to any
Lessor not affiliated with Buyer, over the amount of
Basic Rent payable as of the Closing Date under each of
the LSPI Leases, for the period from the effective date
of such increase to the Midterm Purchase Date; and
(B) if and only if LSPI exercises its option to
purchase the Undivided Interests on the Midterm Purchase
Date pursuant to Section 13(b) under the LSPI Leases, any
increase in the Agreed Fair Market Value, paid to any
Lessor not affiliated with Buyer, over the Agreed Fair
Market Value payable as of the Closing Date under each of
the LSPI Leases;
in each event payable at the time such increased amount
is paid by such member of the LSPI Group;
(ii) if such adjustment occurs as a result of a decrease in
corporate tax rates, Buyer shall pay to Sellers
(A) any decrease in Basic Rent, payable to any
Lessor not affiliated with Buyer, over the amount of
Basic Rent payable as of the Closing Date under each of
the LSPI Leases, for the period from the effective date
of such decrease to the Midterm Purchase Date; and
(B) if and only if LSPI exercises its option to
purchase the Undivided Interests on the Midterm Purchase
Date pursuant to Section 13(b) under the LSPI Leases, any
decrease in the Agreed Fair Market Value, paid to any
Lessor not affiliated with Buyer, over the Agreed Fair
Market Value payable as of the Closing Date under each of
the LSPI Leases;
in each event payable at the time such decreased amount
is paid by such member of the LSPI Group;
Attached hereto as Schedule 23 is a schedule of Basic Rent, Agreed
Fair Market Values and other pricing items for the LSPI Leases, in
effect as of the Closing Date. Capitalized terms used in this
Section 23(k) but not defined in this Agreement shall have the
meanings ascribed to them in the LSPI Leases.
(l) REFUND OF TAX INDEMNITY PAYMENT. In accordance with the Tax
Indemnity Agreement with NYNEX Credit Corporation ("NYNEX") under the LSPI
Leases, LSPI advanced funds to NYNEX in connection with its tax audit as
affected by a tax audit relating to LSPI's tax years 1985-87. LSPI has
transferred to the Sellers as of December 31, 1994 a receivable from NYNEX
with respect to any refund of such advance. If and to the extent LSPI is
repaid by NYNEX for such advance, Buyer agrees to cause LSPI to pay such
refunded amounts one-half to each Seller promptly upon receipt.
Notwithstanding the foregoing, Sellers shall indemnify and hold harmless
Buyer and each member of the LSPI Group from and against any and all demands,
payments, expenses and costs incurred by Buyer or any member of the LSPI
Group under the Tax Indemnity Agreements with respect to any actions taken by
Sellers or any members of the LSPI Group or events occurring prior to the
Closing Date.
(m) TAX AGREEMENTS. Minnesota Power and Buyer agree that, upon
Closing, the Tax Agreement dated October 5, 1993 and the State Tax Agreement
dated October 5, 1993, both between Minnesota Power and its subsidiaries,
including Minnesota Paper, shall terminate as to Minnesota Paper, and, that
notwithstanding Section 7 of each such agreement, following termination of
each agreement, Minnesota Paper and Buyer shall not be bound by the terms of
the agreements and not be entitled to receive or obligated to make payments
under the agreements attributable to any period during which Minnesota Paper
was a party to each agreement.
24. SECTION 338(H)(10) ELECTION. Each Seller agrees to jointly file
with Buyer the election (the "ELECTION") provided for by Section 338(h)(10)
of the Code and the corresponding election under applicable state or local
tax law with respect to the sale and purchase of capital stock of each of the
Joint Venturers, as the case may be. In connection with the Election:
(a) Buyer and Sellers shall each provide to the other all necessary
information, including information as to tax basis, to permit the Election to
be made and its consequences to be accurately reflected for all relevant
accounting and tax reporting purposes, and to take all other actions
necessary to enable Buyer and Sellers to make the Election.
(b) Buyer shall retain at Buyer's cost an appraiser to prepare a report
(a "REPORT") appraising the value of the assets of the Joint Venturers to
determine the proper allocations (the "ALLOCATIONS") of the "adjusted
grossed-up basis" (within the meaning of Treasury Regulation 1.338(b)-(1)
and the modified adjusted deemed selling price ("MADSP") (within the meaning
of Treasury Regulation 1.338(h)(10)-1) among the assets of the Joint
Venturers in accordance with Section 338(b)(5) and (h)(10) of the Code and
Treasury Regulations thereunder.
The Report shall be finalized no later than 120 days after the Closing
Date. At least thirty (30) days before such Report is finalized, Buyer shall
provide Sellers a copy of the appraiser's preliminary report or indication of
the Allocations. After receipt of such preliminary report or indication,
Sellers shall give to Buyer in writing any objections or questions which
Sellers may have to such preliminary report or indication, and the parties
shall thereafter use their best efforts to resolve such objections or
questions so that the Report is finalized no later than 120 days after the
Closing Date and the Election is timely made.
(c) Buyer and Sellers shall jointly prepare a Form 8023-A, together
with all required attachments, and the corresponding forms required or
appropriate under state tax laws (collectively, an "ELECTION FORM") in a
manner consistent with the Allocation.
(d) As promptly as practicable after the Closing Date, Buyer and
Sellers shall take all action and file all documents to effect and preserve a
timely Election.
(e) Each Seller shall allocate the MADSP resulting from the Election in
a manner consistent with the Allocations and shall not take any position
inconsistent with the Election or the Allocations in connection with any
Return; provided, however, that each Seller may take into account its
transaction costs when calculating such MADSP.
(f) Buyer shall allocate the "adjusted grossed-up basis" of the capital
stock of the Joint Venturers among the assets of the Joint Venturers in a
manner consistent with the Allocations and shall not take any position
inconsistent with the Election or the Allocations in any Return or otherwise;
provided, however, that Buyer may add its transaction costs to the "adjusted
grossed-up basis" of the capital stock of the Joint Venturers for purposes of
allocating among the assets of the Joint Venturers.
(g) Sellers and Buyer acknowledge that for federal income tax purposes
(and for state income tax purposes in those states whose income tax
provisions follow the federal income tax treatment), the sale of the capital
stock of the Joint Venturers from Sellers to Buyer will be treated as a sale
of assets by each Joint Venturer to Buyer followed by a complete liquidation
of each Joint Venturer with and into Sellers, and the parties agree to report
the transaction in a manner consistent with this treatment and to take no
positions inconsistent with this treatment. The parties also agree that
neither Buyer nor the Joint Venturers shall be liable for any Taxes resulting
from the sale of the capital stock of Joint Venturers or the Election.
25. LIMITATIONS ON LIABILITY.
(a) Any amount of indemnity payable by Sellers under Sections 12, 14,
15, 16, 18, 19 or 23 of, or relating to the transactions contemplated by,
this Agreement, or arising in connection with the operations, properties or
financial condition of members of the LSPI Group shall be paid by Sellers
severally, and not jointly or jointly and severally, in accordance with the
following principles:
(i) if the claim arises out of any misrepresentation or
breach of warranty made with respect to either Seller or its
respective Joint Venturer, the claim shall be the sole
responsibility of such Seller;
(ii) if the claim arises out of any misrepresentation or
breach of warranty made with respect to LSPI, the claim shall be
the responsibility of both Sellers, who shall each pay one-half of
any amount of indemnity with respect thereto;
(iii) if the claim arises out of the breach of any covenant
or agreement by either Seller or its respective Joint Venturer, the
claim shall be the sole responsibility of such Seller;
(iv) if the claim arises out of the breach of any covenant or
agreement by LSPI, the claim shall be the responsibility of both
Sellers, who shall each pay one-half of any amount of indemnity
with respect thereto;
(v) if the claim arises out of assertion by any third party
of any claim (including tax claims), liability or obligation
against or with respect to any member of the LSPI Group which is
assumed, or indemnified against, by either Seller, with respect to
its respective Joint Venturer, the claim shall be the sole
responsibility of such Seller;
(vi) if the claim arises out of assertion by any third party
of any claim (including tax claims), liability or obligation
against or with respect to any member of the LSPI Group which is
assumed, or indemnified against, by both Sellers, with respect to
LSPI, the claim shall be the responsibility of both Sellers, who
shall each pay one-half of any amount of indemnity with respect
thereto; and
(vii) if the claim arises from the termination of this
Agreement, compensation for which is provided in Section 19 hereof,
Seller(s) in breach shall be solely responsible for such claim.
To the extent that any amount of indemnity is payable by Buyer to
Seller(s), the foregoing principles shall apply to the determination of the
Seller to whom such indemnity is payable, mutatis mutandis.
(b) No party is responsible for, and no party may recover from any
other party, any amount of consequential (e. g., lost profits or the like) or
punitive damages. Notwithstanding the foregoing exclusion, to the extent any
party hereto sustains any loss or incurs any expense compensable under this
Agreement that contains or includes any measure of consequential or punitive
damages awarded to a third party, then such indirect consequential and
punitive damages may be recovered.
(c) Sellers and Buyer specifically agree that the total amount of
indemnification payable by Sellers pursuant to Sections 15, 16, 18 and 23
together shall not exceed the amount of the purchase price paid to each
Seller in cash hereunder.
26. AMENDMENT AND WAIVER. This Agreement may not be amended or
modified at any time or in any respect other than by an instrument in writing
executed by Buyer and Sellers.
27. NOTICES. Any notice or communication provided for in this
Agreement shall be in writing and shall be deemed given when delivered
personally, against receipt, or when deposited in the United States mail,
registered or certified mail, return receipt requested to the following
address:
(a) If to Pentair:
Pentair, Inc.
1500 County Road B2 West
St. Paul, Minnesota 55113-3105
Attention: Ronald V. Kelly
Facsimile: (612) 639-5209
with a copy to:
Henson & Efron, P.A.
1200 Title Insurance Building
400 Second Avenue South
Minneapolis, Minnesota 55401
Attention: Louis L. Ainsworth
Facsimile: (612) 339-6364
(b) If to Minnesota Power:
Minnesota Power & Light Company
30 West Superior Street
Duluth , Minnesota 55802
Attention: David G. Gartzke
Facsimile: (218) 723-3960
with a copy to:
Minnesota Power & Light Company
30 West Superior Street
Duluth , Minnesota 55802
Attention: Steven W. Tyacke
Facsimile: (218) 723-3955
(c) If to Buyer:
Consolidated Papers, Inc.
231 First Avenue North
P. O. Box 8050
Wisconsin Rapids, WI 54495-8050
Attention: Carl H. Wartman
Facsimile: (715) 422-3203
with a copy to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606-5096
Attention: Robert A. Schreck, Jr.
Facsimile: (312) 984-3669
Any party may change the above address for notice by written notice to the
other parties in accordance with the provisions of this Section.
28. PARTIES IN INTEREST. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be
enforceable by Sellers and Buyer, their respective successors and permitted
assigns. No party may assign this Agreement without the express written
consent of the other parties, except that Buyer may assign this Agreement to
an affiliate of Buyer provided that no such assignment shall relieve Buyer of
its obligations hereunder or otherwise prejudice Sellers. This Agreement
shall not confer any rights or remedies upon any person other than Buyer and
Sellers and their respective successors and permitted assigns.
29. FURTHER ASSURANCES. Each party shall from time to time execute and
deliver such further documents and do such further acts as the other parties
may reasonably require for carrying out the purposes and intent of this
Agreement.
30. NO WAIVERS. No failure of any party to this Agreement to pursue
any remedy resulting from a breach of this Agreement shall be construed as a
waiver of that breach or as a waiver of any subsequent or other breach.
31. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the substantive laws of the state of Minnesota without
giving effect to the choice of law provisions thereof. This Agreement shall
be subject to the exclusive jurisdiction of the courts of, and United States
federal courts sitting in, the state of Minnesota, and all parties hereby
irrevocably submit to the jurisdiction of such courts with respect to any
claim arising out of this Agreement.
32. SEVERABILITY. Should any provision of this Agreement be or become
invalid in whole or in part or be incapable of performance for whatever
reason, then the validity of the remaining provisions of this Agreement shall
not be affected thereby. In such event, the parties hereby undertake to
substitute for any such invalid provision or for any provision incapable of
performance, a provision which corresponds to the spirit and purpose of such
invalid or unperformable provision as far as permitted under applicable law,
so as to realize to the fullest extent possible the economic purpose and
effect of this Agreement.
33. MISCELLANEOUS. This Agreement constitutes the entire agreement
between the parties and supersedes all prior representations, understandings
or agreements between them, written or oral, respecting the within subject
matter. Headings are for convenience only and are not intended to alter any
of the provisions of this Agreement. Words importing the singular number
include the plural and vice versa. This Agreement may be signed in multiple
copies, each of which shall be considered an original, but all of which shall
together constitute one and the same instrument.
* * *
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
by its authorized officer as of the date first above written.
PENTAIR, INC.
By: /s/ Winslow H. Buxton
Its: Chief Executive Officer
MINNESOTA POWER & LIGHT
COMPANY
By: /s/ Arend J. Sandbulte
Its: Chairman and President
CONSOLIDATED PAPERS, INC.
By: /s/ Patrick F. Brennan
Its: President and Chief Executive Officer
AMENDMENT TO AGREEMENT FOR
SALE AND PURCHASE OF STOCK OF
PENTAIR DULUTH CORP. AND
MINNESOTA PAPER INCORPORATED
THIS AMENDMENT TO AGREEMENT is made and entered into as of the 30th day
of June, 1995 between Pentair, Inc., a Minnesota corporation ("Pentair"),
Minnesota Power & Light Company, a Minnesota corporation ("Minnesota Power")
and Consolidated Papers, Inc., a Wisconsin corporation ("Buyer").
WHEREAS, the parties entered into the Agreement for Sale and Purchase of
Stock of Pentair Duluth Corp. and Minnesota Paper Incorporated on May 8, 1995
(the "Agreement");
WHEREAS, the parties desire to clarify their respective responsibilities
under Section 5 of that Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and conditions herein contained, the parties agree as
follows:
Section 5 of the Agreement shall be amended and shall read in its
entirety as follows:
"5. Assumption of Liabilities. Buyer shall indemnify Sellers in
accordance with the provisions of Section 16 hereof against any
claim arising out of any Guaranteed Obligations. In no event shall
Buyer be subject, without its consent, to terms and conditions more
restrictive than those set forth in the existing Guaranteed
Obligations."
IN WITNESS WHEREOF, each party has caused this Amendment to Agreement to
be executed by its authorized officer as of the date first above written.
PENTAIR, INC. MINNESOTA POWER
& LIGHT COMPANY
By: /s/ Ronald V. Kelly By: /s/ David G. Gartzke
Its: Senior Vice President Its: Senior Vice President
CONSOLIDATED PAPERS, INC.
By: /s/ Richard J. Kenney
Its: Vice President, Finance
Exhibit 2(c)
AGREEMENT FOR SALE AND PURCHASE
OF
ASSETS OF
LSPI FIBER CO.
AND
STOCK OF
SUPERIOR RECYCLED FIBER CORPORATION
TABLE OF CONTENTS
Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Purchase and Sale Transaction . . . . . . . . . . . . . . . . . . . .
(a) Purchase of Assets . . . . . . . . . . . . . . . . . . . . . .
(b) Assumed Liabilities and Obligations . . . . . . . . . . . . . .
(c) Purchase of Stock . . . . . . . . . . . . . . . . . . . . . . .
3. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . .
6. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Parents' Representations, Warranties and Covenants . . . . . . . . .
(a) Organization and Authority of Seller . . . . . . . . . . . . .
(b) Valid and Enforceable Agreement . . . . . . . . . . . . . . . .
(c) Organization of Subsidiaries . . . . . . . . . . . . . . . . .
(d) Financial Statements . . . . . . . . . . . . . . . . . . . . . .
(e) No Material Change . . . . . . . . . . . . . . . . . . . . . . .
(f) Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(g) Title to Personal Property . . . . . . . . . . . . . . . . . . .
(h) Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . .
(i) Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . .
(j) Intellectual Property . . . . . . . . . . . . . . . . . . . . . .
(k) Employee Matters . . . . . . . . . . . . . . . . . . . . . . . .
(l) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . .
(m) Compliance with Laws . . . . . . . . . . . . . . . . . . . . . .
(n) Material Contracts . . . . . . . . . . . . . . . . . . . . . . .
(o) Licenses and Permits . . . . . . . . . . . . . . . . . . . . . .
(p) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(q) Liabilities to PBGC or Multiemployer or Multiple Employer
Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(r) Transactions with Related Parties . . . . . . . . . . . . . . . .
(s) Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . .
(t) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . .
(u) Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . .
(v) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(w) Motor Vehicles . . . . . . . . . . . . . . . . . . . . . . . . .
(x) Product Warranty . . . . . . . . . . . . . . . . . . . . . . . .
8. Buyer's Representations and Warranties . . . . . . . . . . . . . . . .
(a) Organization . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) Valid and Enforceable Agreement . . . . . . . . . . . . . . . . .
(d) No Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . .
(e) Financial Statements . . . . . . . . . . . . . . . . . . . . . .
(f) Investment Intent . . . . . . . . . . . . . . . . . . . . . . . .
9. Actions Pending Closing . . . . . . . . . . . . . . . . . . . . . . . .
(a) Operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Access to Records . . . . . . . . . . . . . . . . . . . . . . . .
(c) Access to Facilities . . . . . . . . . . . . . . . . . . . . . .
(d) Hart-Scott-Rodino Filings . . . . . . . . . . . . . . . . . . . .
(e) Notice of Developments . . . . . . . . . . . . . . . . . . . . .
(f) SRFI Restrictions . . . . . . . . . . . . . . . . . . . . . . . .
(g) Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Conditions Precedent to Obligations of Buyer . . . . . . . . . . . . .
(a) No Errors; Performance of Obligations . . . . . . . . . . . . . .
(b) Officer's Certificates . . . . . . . . . . . . . . . . . . . . .
(c) Certified Copy of Resolutions . . . . . . . . . . . . . . . . . .
(d) Opinion of Sellers' and Parent's Counsel . . . . . . . . . . . .
(e) Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . . .
(f) Clayton Act Matters . . . . . . . . . . . . . . . . . . . . . . .
(g) Environmental Matters . . . . . . . . . . . . . . . . . . . . . .
(h) SRFI Restrictions . . . . . . . . . . . . . . . . . . . . . . . .
(i) Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(j) Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(k) FIRPTA Certificate . . . . . . . . . . . . . . . . . . . . . . .
(l) Assignments of Contracts . . . . . . . . . . . . . . . . . . . .
(m) Purchase of LSPI and Niagara Paper . . . . . . . . . . . . . . .
(n) Real Estate Consents . . . . . . . . . . . . . . . . . . . . . .
(o) Title Insurance and Surveys . . . . . . . . . . . . . . . . . . .
(p) Note Purchase Agreement . . . . . . . . . . . . . . . . . . . .
(q) Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . .
11. Conditions Precedent to Obligations of Sellers . . . . . . . . . . . .
(a) No Errors; Performance of Obligations . . . . . . . . . . . . . .
(b) Officer's Certificate . . . . . . . . . . . . . . . . . . . . . .
(c) Certified Copy of Resolutions . . . . . . . . . . . . . . . . . .
(d) Opinion of Buyer's Counsel . . . . . . . . . . . . . . . . . . .
(e) Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . . .
(f) Clayton Act Matters . . . . . . . . . . . . . . . . . . . . . . .
(g) Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . .
(h) Purchase of LSPI and Niagara Paper . . . . . . . . . . . . . . .
(i) Note Purchase Agreement . . . . . . . . . . . . . . . . . . . . .
(j) Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13. [Intentionally Left Blank] . . . . . . . . . . . . . . . . . . . . . .
14. Confidential Information . . . . . . . . . . . . . . . . . . . . . . .
15. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . .
16. [Intentionally left blank] . . . . . . . . . . . . . . . . . . . . .
17. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . .
(a) Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) Special Provisions . . . . . . . . . . . . . . . . . . . . . . .
(d) Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . .
(e) Inspection of Books and Records . . . . . . . . . . . . . . . . .
19. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . .
20. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22. Assistance after Closing . . . . . . . . . . . . . . . . . . . . . . .
23. Tax Matters; Payment of Taxes . . . . . . . . . . . . . . . . . . . .
(a) Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Apportionment of Income . . . . . . . . . . . . . . . . . . . . .
(c) Allocation of Taxes . . . . . . . . . . . . . . . . . . . . . . .
(d) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(e) Post-Closing Elections . . . . . . . . . . . . . . . . . . . . .
(f) Control of Contest . . . . . . . . . . . . . . . . . . . . . . .
(g) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(h) Sales and Transfer Taxes . . . . . . . . . . . . . . . . . . . .
(i) Tax Effective Time . . . . . . . . . . . . . . . . . . . . . . .
(j) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(k) Tax Agreements . . . . . . . . . . . . . . . . . . . . . . . . .
24. Section 338(h)(10) Election . . . . . . . . . . . . . . . . . . . . .
25. Limitations on Liability . . . . . . . . . . . . . . . . . . . . . . .
26. Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . .
27. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28. Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . .
29. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . .
30. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule 1(j) Confidentiality Letter Agreement
Schedule 1(t) Intellectual Property
Schedule 3.1. Payment of Purchase Price
Schedule 3.2 Form of Statement of Net Book Value
Schedule 3.3. Form of Auditor's Report
Schedule 5 Assumed Liabilites and Obligations
Schedule 6 Form of Release
Schedule 7(b) Valid and Enforceable Agreement
Schedule 7(c) Organization of Subsidiaries
Schedule 7(d) Financial Statements
Schedule 7(f) Leases
Schedule 7(g) Title to Personal Property
Schedule 7(h) Real Estate
Schedule 7(i) Plant and Equipment
Schedule 7(l) Litigation
Schedule 7(n) Material Contracts
Schedule 7(o) Licenses and Permits
Schedule 7(p) Insurance
Schedule 7(r) Transactions with Related Parties
Schedule 7(s) Bank Accounts
Schedule 7(t) Tax Matters
Schedule 7(u) Accounts Receivable
Schedule 7(w) Motor Vehicules
Schedule 9(a) Capital Expenditures and Commitments
Schedule 10(g) Environmental Matters
Schedule 10(m) Title Insurance and Surveys
THIS AGREEMENT is made and entered into as of the 8th day of May, 1995
by and among Pentair, Inc., a Minnesota corporation ("PENTAIR"), Minnesota
Power & Light Company, a Minnesota corporation ("MINNESOTA POWER"), Synertec,
Inc., a Minnesota Corporation ("SYNERTEC"), LSPI Fiber Co., a joint venture
organized under the general partnership laws of the state of Minnesota ("LSPI
FIBER"), and Consolidated Papers, Inc., a Wisconsin corporation ("BUYER").
WHEREAS, Pentair is the owner of all of the issued and outstanding
capital stock of Duluth Holdings (Paper) Corp., a Minnesota corporation
("DULUTH HOLDINGS") which owns all of the issued and outstanding stock of
Pentair Duluth Pulp Corp., a Minnesota corporation ("PENTAIR DULUTH PULP");
and
WHEREAS, Minnesota Power is the owner of all of the issued and
outstanding capital stock of Minnesota Pulp Incorporated, a Minnesota
corporation ("MINNESOTA PULP"), which owns all of the issued and outstanding
stock of Minnesota Pulp Incorporated II, a Minnesota corporation ("MINNESOTA
PULP II"); and
WHEREAS, Pentair Duluth Pulp and Minnesota Pulp II each own a 50% equity
interest in LSPI Fiber; and
WHEREAS, Minnesota Power is the owner of all of the issued and
outstanding stock of Synertec which owns all of the issued and outstanding
capital stock of Superior Recycled Fiber Corporation, a Minnesota corporation
("SRFC"); and
WHEREAS, LSPI Fiber owns a 24% equity interest, and SRFC owns a 76%
equity interest, in Superior Recycled Fiber Industries, a joint venture
organized under the general partnership laws of the state of Minnesota
("SRFI"); and
WHEREAS, Synertec and LSPI Fiber (collectively, "SELLERS") desire to
sell and Buyer desires to purchase from Sellers all of the issued and
outstanding capital stock of SRFC and all of the assets of LSPI Fiber in
accordance with the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and conditions herein contained, the parties agree as
follows:
1. DEFINITIONS. The terms below shall have the following meanings
under this Agreement unless the context clearly requires otherwise:
(a) "AFFILIATES" means Duluth Holdings and Pentair Duluth Pulp, in the
case of Pentair; and Minnesota Pulp, Minnesota Pulp II, Synertec and SRFC, in
the case of Minnesota Power; and all of the foregoing, in the case of Pentair
and Minnesota Power.
(b) "ALLOCATIONS" shall have the meaning set forth in Section 24(b).
(c) "ASSUMED LIABILITIES AND OBLIGATIONS" means the liabilities set
forth in Section 2(b).
(d) "CERCLA" shall have the meaning set forth in Section 18(a)(iii).
(e) "CLAYTON ACT" means 15 U.S.C. 12, et seq., as amended, and the
rules and regulations promulgated thereunder from time to time.
(f) "CLOSING" means the actual transfer of the Purchased Interests, the
delivery of documents providing for the assumption of the Assumed Liabilities
and Obligations, and the exchange and delivery by the parties of the other
documents and instruments contemplated by this Agreement.
(g) "CLOSING DATE" means June 30, 1995, or such later month end date as
mutually agreed upon by the parties.
(h) "CODE" means the Internal Revenue Code of 1986, as amended.
(i) "COMMITMENTS" shall have the meaning set forth in Section 10(o)(i).
(j) "CONFIDENTIAL INFORMATION" means all information designated as
"Evaluation Material" in the confidentiality letter agreement dated August
26, 1994 between Buyer and CS First Boston Corp., acting as agent for Pentair
and in the confidentiality letter agreement dated January 9, 1995 between
Buyer and PaineWebber Incorporated, acting as agent for Minnesota Power,
copies of which are attached as Schedule 1(j).
(k) "ELECTION" shall have the meaning set forth in Section 24.
(l) "ELECTION FORM" shall have the meaning set forth in Section 24(c).
(m) "ENVIRONMENTAL CLEANUP" shall have the meaning set forth in Section
18(c)(iii).
(n) "ENVIRONMENTAL LAWS" means federal, state, regional, county and
local laws, statutes, rules, regulations and ordinances and common law
requirements as of the Closing Date relating to the environment, including,
without limitation, those relating to the public health or safety aspects
thereof, or to nuisance, trespasses, releases, discharges, emissions or
disposals to air, water, land or groundwater, to the withdrawal or use of
groundwater, to the use, handling or disposal of polychlorinated biphenyls
(PCB's), asbestos or urea formaldehyde, to the treatment, storage, disposal
or management of Hazardous Material (including, without limitation,
petroleum, its derivatives, by-products or other hydrocarbons), to exposure
to toxic, hazardous or other controlled, prohibited or regulated substances,
to the transportation, storage, disposal, management or release of gaseous or
liquid substances, and any regulation, order, injunction, judgment,
declaration, notice or demand issued thereunder.
(o) "GAAP" means generally accepted accounting principles consistently
applied and maintained throughout the period indicated and consistent with
prior financial practice of LSPI Fiber, SRFC, SRFI, Pentair or Minnesota
Power (and their respective Affiliates), as the case may be.
(p) [INTENTIONALLY LEFT BLANK]
(q) "HAZARDOUS MATERIAL" means and includes (a) petroleum or petroleum
products, including crude oil, (b) any asbestos insulation or other material
composed of or containing asbestos, and (c) any hazardous, toxic or dangerous
waste, substance or material defined as such in (or for purposes of) the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, any so-called state or local "Superfund" or "Superlien" law, Section
115B.02 of the Minnesota Statutes, or any other Environmental Laws.
(r) "INDEMNITEE" shall have the meaning set forth in Section 15(e).
(s) "INDEMNITOR" shall have the meaning set forth in Section 15(e).
(t) "INTELLECTUAL PROPERTY" means all patents, utility patents and
design patents and registrations therefor, trademarks, trade names, trademark
rights and trademark registrations, copyrights and licenses listed on
Schedule 1(t) attached, as well as all technical documentation reflecting
engineering and production data, design data, plans, specifications,
drawings, technology, know-how, trade secrets, software (whether owned or
licensed), manufacturing processes and all documentary evidence thereof
relating to the SRFI Group and its business.
(u) "KNOWLEDGE" of Sellers or the "best knowledge" of Sellers when
modifying any representation or warranty shall mean that: (i) no officer or
other manager, reporting directly to the President of any of Sellers or the
Parents (who are involved in or responsible for operations of the SRFI Group
or the LSPI Group); and (ii) no officer or other manager of any member of the
SRFI Group and the LSPI Group, including the chief financial officer and the
manager of environmental affairs, if any, of Sellers, the Parents or of any
member of the SRFI Group or the LSPI Group, has any knowledge that such
representation and warranty is not true and correct to the same extent as
provided therein and that:
(i) Sellers, the Parents and each member of the SRFI Group
has exercised due diligence and has made appropriate investigations
and inquiries of the officers and business records of each of
Sellers, the Parents, the SRFI Group and the LSPI Group; and
(ii) nothing has come to the attention of Sellers, the
Parents or of any member of the SRFI Group in the course of such
investigation and review or otherwise which would reasonably cause
such party, in the exercise of due diligence, to believe that such
representation and warranty is not true and correct.
Such terms shall have a cognate meaning as applied to Buyer.
(v) "LSPI GROUP" means Pentair Duluth Corp., a Minnesota corporation,
Minnesota Paper Incorporated, a Minnesota corporation and Lake Superior Paper
Industries, a joint venture organized under the general partnership laws of
the state of Minnesota.
(w) "LSPI SUPPLY CONTRACT" means the Pulp Supply Agreement dated as of
August 9, 1993, between LSPI Fiber and Lake Superior Paper Industries, a
joint venture organized under the general partnership laws of the state of
Minnesota.
(x) "MADSP" shall have the meaning set forth in Section 24(b).
(y) "MATERIAL CONTRACTS" means those contracts and arrangements listed
on Schedule 7(n).
(z) "NET BOOK VALUE" means the sum of: (i) with respect to LSPI Fiber,
the difference between (x) the Purchased Assets less (y) all of the
liabilities of LSPI Fiber set forth on the balance sheet of LSPI Fiber as of
December 31, 1994 or the Closing Date, as appropriate; and (ii) with respect
to the Stock, the difference between (x) the assets of SRFC (including
therein, its investments in the net assets of SRFI) less (y) all liabilities
of SRFC excluding current income tax accruals, deferred tax accruals, and
subordinated and other debt, whether current or long-term, owing to Sellers,
Parents, or Affiliates, all as reflected on the balance sheet of SRFC as of
December 31, 1994 or the Closing Date, as appropriate.
(aa) "1933 ACT" shall have the meaning set forth in Section 8(f).
(ab) "NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement
between SRFC, SRFI and New York Life Insurance Company dated as of December
30, 1993, as amended and all of the Security Documents collateral thereto, as
defined in the Note Purchase Agreement.
(ac) "OWNED REAL ESTATE" shall have the meaning set forth in Section
7(h)(i).
(ad) "PARENTS" shall mean both of Pentair and Minnesota Power and
"Parent" shall mean any one of them.
(ae) "PERMITTED EXCEPTIONS" shall have the meaning set forth in
Section 10(o)(i).
(af) "PURCHASED ASSETS" shall have the meaning set forth in Section
2(a).
(ag) "PURCHASED INTERESTS" means the Stock and the Purchased Assets.
(ah) "REAL ESTATE" means all real property, whether owned, under
contract to purchase, or leased by the SRFI Group, including all land,
buildings, structures, easements, appurtenances and privileges relating
thereto, and all leaseholds, leasehold improvements, fixtures and other
appurtenances and options, including options to purchase and renew, or other
rights thereunder, used or intended for use in connection with the business
of the SRFI Group.
(ai) "REPORT" shall have the meaning set forth in Section 24(b).
(aj) "RETURN(S)" means any return (including any consolidated or
combined return), report, claim for refund, information return or statement,
relating to any Tax, including any schedule or attachment thereto.
(ak) "SRFI GROUP" means all of LSPI Fiber, SRFC and SRFI.
(al) "SRFI GROUP FINANCIAL STATEMENTS" means (i) the audited financial
statements (for the year ended December 31, 1994) of SRFI and SRFC, (ii) the
unaudited financial statements (for the year ended December 31, 1993) of SRFI
and SRFC, (iii) the unaudited internal financial statements of the other
members of the SRFI Group for the fiscal years ended December 31, 1993 and
1994, (iv) the combined unaudited balance sheet for the fiscal year ended
December 31, 1994 reflecting the assets and liabilities of each member of the
SRFI Group as of those dates, with all applicable adjustments and
eliminations and as combined, and (v) the combined unaudited income statement
for the year ended December 31, 1994 reflecting all items of income and
expense for each member of the SRFI Group, with all applicable adjustments
and eliminations and as combined.
(am) "SRFI PLEDGES" means the pledges by LSPI Fiber and all of the
Affiliates of all of their interests, direct or indirect, including the stock
of Pentair Duluth Pulp, Minnesota Pulp and SRFC, in SRFI and the entities
which own such direct or indirect interests, all pursuant to the Note
Purchase Agreement.
(an) "SRFI PUT AND CALL RIGHTS" means the rights of each Parent to put
and the rights of the other Parent to call, each Parent's interest in its
respective Affiliates and in LSPI Fiber pursuant to Section 2 of the Amended
and Restated Agreement to Restrict Transfer of Stock dated January 19, 1994
and Section 12 of the LSPI Fiber Joint Venture Agreement dated May 28, 1993,
as amended December 30, 1993 and January 18, 1994.
(ao) "SRFI RESTRICTIONS" means, with respect to the shares of SRFC and
to LSPI Fiber, the SRFI Put and Call Rights, the SRFI Rights of First Refusal
and the SRFI Pledges.
(ap) "SRFI RIGHTS OF FIRST REFUSAL" means the right of first refusal
granted by each Parent to the other to purchase its stock in Duluth Holdings
and Minnesota Pulp, respectively, pursuant to Section 2 of the Restated
Agreement to Restrict Transfer of Stock dated January 19, 1994.
(aq) "STATEMENT OF NET BOOK VALUE" means the combined audited balance
sheet of the SRFI Group as of the Closing Date in substantially the form
reflected in Schedule 3.2 from which the calculation of the purchase price of
the Purchased Interests will be made in accordance with Section 3 hereof.
(ar) "STOCK" means all of the issued and outstanding capital stock of
SRFC.
(as) "SURVEYS" shall have the meaning set forth in Section 10(o)(ii).
(at) "SURVEY DEFECT" shall have the meaning set forth in Section
10(o)(iii).
(au) "TAX" or "TAXES" means all income, gross receipts, sales, use,
employment, franchise, profits, property or other taxes, fees, stamp taxes
and duties, assessments or charges of any kind whatsoever (whether payable
directly or by withholding), together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority with
respect thereto.
(av) "TITLE COMPANY" shall have the meaning set forth in Section
10(o)(i).
(aw) "TITLE POLICY" shall have the meaning set forth in Section
10(o)(i).
(ax) "UNPERMITTED EXCEPTION" shall have the meaning set forth in
Section 10(o)(iii).
2. PURCHASE AND SALE TRANSACTION. (a) PURCHASE OF ASSETS. Subject to
the terms and conditions herein stated, LSPI Fiber shall sell, transfer,
assign and deliver to Buyer and Buyer shall purchase from LSPI Fiber, at the
Closing, all of the assets of LSPI Fiber including, but not limited to, its
24% partnership interest in SRFI (collectively, the "PURCHASED ASSETS").
(b) ASSUMED LIABILITIES AND OBLIGATIONS. At the Closing, Buyer
shall assume and agree to satisfy and perform to the extent not satisfied or
performed prior to the Closing Date, without any cost or charge to Sellers,
all obligations of LSPI Fiber as set forth on Schedule 5 and under the
Material Contracts (collectively, the "ASSUMED LIABILITIES AND OBLIGATIONS").
(c) PURCHASE OF STOCK. Subject to the terms and conditions herein
stated, Synertec shall sell, transfer, assign and deliver to Buyer, and Buyer
shall purchase from Synertec, at the Closing, all of Synertec's right, title
and interest in the Stock.
3. PURCHASE PRICE. The aggregate purchase price to be paid by Buyer to
Sellers for the purchase of all the Stock and the Purchased Assets, shall be:
(a) $65,300,000;
(b) increased for any increase, or decreased for any
decrease, in the Net Book Value from December 31, 1994 to the
Closing Date; and
(c) the assumption by Buyer of the Assumed Liabilities and
Obligations.
The aggregate purchase price set forth above shall be paid to Sellers as set
forth on Schedule 3.1.
The Net Book Value shall be determined in accordance with GAAP as set
forth on Schedule 3.2, which Schedule sets forth sample calculations of the
Net Book Value as of December 31, 1994 and March 31, 1995 and the exceptions
to GAAP used in calculating Net Book Value.
Within sixty (60) days following the Closing Date, Sellers shall prepare
and deliver to Buyer a Statement of Net Book Value, which shall be audited by
SRFC's auditors based upon the audits of SRFI's, SRFC's and LSPI Fiber's
books, including an inventory taken by the SRFI Group beginning at 7:00 a.m.
on the Closing Date and a review of the liabilities as of the Closing Date.
The taking of such inventory may be observed by Buyer and Buyer's auditors.
The Statement of Net Book Value shall have attached thereto an auditor's
report in the form attached as Schedule 3.3. To the extent possible, Sellers
will provide Buyer with a preliminary draft of the Statement of Net Book
Value. Buyer and Parents will in good faith attempt to resolve any disputes
with respect to such calculation before the final Statement of Net Book Value
is rendered.
Buyer may review the Statement of Net Book Value and Sellers shall make
available the work papers of SRFC's auditors to Buyer and its accountants and
Buyer and its accountants may make inquiries of representatives of Sellers'
and SRFC's auditors. Buyer shall give written notice to Parents of any
objection to the Statement of Net Book Value within thirty (30) days after
Buyer's receipt thereof. The notice shall specify in reasonable detail the
items in the Statement of Net Book Value to which Buyer objects and shall
provide a summary of Buyer's reasons for such objections.
Any dispute between Buyer and either or both Parents with respect to the
Statement of Net Book Value which is not resolved within fifteen (15)
business days after receipt by Parents of the written notice from Buyer shall
be referred for decision to Ernst & Young LLP who shall cause an audit
partner who is not engaged in providing services to Sellers or Buyer to
decide the dispute within thirty (30) days of such referral. The decision by
the partner shall be final and binding on Parents and Buyer. In resolving
any disputed item, such audit partner may not assign a value to any item
greater than the greatest value for such item claimed by either party or less
than the smallest value for such item claimed by either party. The cost of
retaining the audit partner with respect to resolving disputes as to the
Statement of Net Book Value shall be borne by Parents and Buyer equally,
unless such partner determines, based on his or her evaluation of the good
faith of the parties, that the fees should be borne unequally.
4. PAYMENT. The estimated purchase price shall be paid in U.S. dollars
in immediately available funds on the Closing Date. The amount to be paid on
the Closing Date shall be based upon a preliminary Statement of Net Book
Value delivered to Buyer at least five (5) business days prior to Closing,
which shall be calculated based on the unaudited combined balance sheet of
the SRFI Group as of the month end prior to the Closing Date, prepared by
Sellers on a basis consistent with Schedule 3.2. Following delivery of the
final Statement of Net Book Value under Section 3, any balance due to Sellers
or refunds due to Buyer reflected thereon shall be paid within ten (10) days
of such delivery, (unless there is an objection under Section 3, in which
case the amount not in dispute shall be paid within ten (10) days of such
delivery, and the balance in dispute shall be paid within ten (10) days of
the resolution of such objection) together with interest on such amount from
the Closing Date at the announced large business prime rate of Morgan
Guaranty Trust Company of New York.
Except as Buyer may be otherwise advised in writing by Sellers at least
five (5) days prior to any payment, all payments of the purchase price by
Buyer to Sellers at the Closing or any other amounts owed by Buyer to Sellers
or Parents shall be by wire transfer to:
Parent and Bank Account
Affiliates Bank and Routing Number Number
---------- ----------------------- ------------
Pentair First Bank National xxx-xxxxxxx
Association (091000022) to
attention of Karen Johnson
Minnesota First Bank National xxx-xxxxxxx
Pulp Association,
Incorporated (091000022) to attention of
II Russell Arneson
Synertec First Bank National xxx-xxxxxxx
Association,
(091000022) to attention of
Russell Arneson
Except as Parents may be otherwise advised in writing by Buyer at least five
(5) days prior to any payment, payment of any refund to Buyer based on the
final determination of the purchase price pursuant to Section 3 or any other
amounts owed by Sellers or Parents to Buyer hereunder shall be made by wire
transfer to Harris Trust and Savings Bank - Consolidated Papers, Inc.,
Account No. xxxxxxx (ABA wire transfer routing number xxxx-xxxx-x), marked to
the attention of J.R. Matsch.
All wire transfers shall be sent by 10:00 a.m. Minneapolis time on the
date of such payment, unless otherwise agreed by the parties.
5. ASSUMPTION OF LIABILITIES. At Closing, Buyer shall assume and agree
to satisfy and perform, to the extent not satisfied or performed prior to the
Closing Date, without any cost or charge to Sellers, all Assumed Liabilities
and Obligations. If the assumption of the Assumed Liabilities and
Obligations by Buyer under this Section 5 requires the consent of any third
party, Buyer and each respective Parent and/or Seller agree they will use
their best efforts to obtain such written consent to such assumption;
provided, however, that in no event shall Buyer be subject, without its
consent, to terms and conditions more restrictive than those set forth in the
existing obligations of Parents being assumed.
6. CLOSING. (a) The Closing shall take place on the Closing Date at
the offices of Henson & Efron, P.A. in Minneapolis, Minnesota, at 9:00
o'clock a.m., local time, or at such other time and place as may be mutually
agreed upon. Buyer and Sellers each agree they shall use their best efforts
and shall cause all relevant affiliates to use their best efforts to obtain
fulfillment of all conditions to Closing set forth in Sections 10 and 11
hereof.
(b) At the Closing, Sellers shall deliver to Buyer such documents and
instructions as provided herein, including the assignment to Buyer of the
LSPI Supply Contract, reasonably satisfactory in form and substance to Buyer
and its counsel, as shall be required to vest in Buyer good and marketable
title, free and clear of all liens, charges and encumbrances (except as
specified in this Agreement, if any) in and to the Purchased Interests. At
the Closing, each Seller and Parent shall deliver to Buyer a release of all
claims of such Seller and Parent and any person or entity affiliated
therewith against all members of the SRFI Group, in substantially the form of
Schedule 6.
(c) At the Closing, Buyer shall deliver to Parents such documents and
instruments as provided herein and such undertakings, and other instruments
as shall be required to cause Buyer to assume the obligations as provided in
Section 5, all of which shall be reasonably satisfactory in form and
substance to Parents and their respective counsel.
7. PARENTS' REPRESENTATIONS, WARRANTIES AND COVENANTS. Subject to the
several liability of Parents provided for in Section 25 hereof, Parents
represent, warrant and covenant to Buyer as follows:
(a) ORGANIZATION AND AUTHORITY OF SELLER. Each of Pentair, Duluth
Holdings, Pentair Duluth Pulp, Minnesota Power, Synertec, Minnesota Pulp,
Minnesota Pulp II and SRFC is a duly organized and validly existing
corporation in good standing under the laws of the state of Minnesota. Each
of SRFI and LSPI Fiber is a duly organized and validly existing joint venture
organized as a general partnership under the laws of the state of Minnesota.
Sellers and Parents have the complete and unrestricted right, power and
authority to sell, transfer and assign all of the Purchased Interests
pursuant to this Agreement and to carry out the transactions contemplated
hereby without the consent of any other person (except as otherwise set forth
herein), subject only to the SRFI Restrictions. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Boards of Directors and
the general partners of each Seller and Parent, respectively.
(b) VALID AND ENFORCEABLE AGREEMENT. This Agreement constitutes a
valid and binding agreement of each respective Seller and Parent, enforceable
in accordance with its terms, except insofar as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally, and by general equitable
principles. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the performance of
its obligations hereunder materially violates or conflicts with, results in a
material breach of, or constitutes a material default under (i) to the best
knowledge of each respective Seller and Parent, any law, rule, or regulation,
or (ii) subject to the obtaining of necessary consents, which consents are
listed on Schedule 7(b), under various loan agreements, guarantees, leases,
and other agreements (including without limitation the SRFI Restrictions),
any agreement or other restriction of any kind or character to which such
Seller, Parent or any member of the SRFI Group is a party, by which such
Seller, Parent or any member of the SRFI Group is bound, or to which any of
the properties of Sellers, Parents or any member of the SRFI Group is
subject. Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the performance of
its obligations hereunder violates or conflicts with, results in a breach of,
or constitutes a default under, (i) any judgment or order, decree, award or
ruling to which such Seller or Parent is subject, (ii) the Articles of
Incorporation, By-Laws or Partnership Agreement of such Seller or Parent,
excluding the SRFI Restrictions.
(c) ORGANIZATION OF SUBSIDIARIES.
(i) Each member of the SRFI Group is a duly organized and validly
existing corporation or joint venture general partnership, as the case
may be, in good standing, to the extent applicable, in its respective
state of incorporation or organization, as set forth in Schedule 7(c).
Each member of the SRFI Group has all requisite corporate or general
partnership power and authority, as the case may be, to carry on its
respective business as presently conducted in all states in which it
currently does business. Each member of the SRFI Group is duly
licensed, registered and qualified to do business as a foreign
corporation, partnership or joint venture and, to the extent applicable,
is in good standing in all jurisdictions in which the ownership, leasing
or operation of its assets or the conduct of its business requires such
qualification, except where the failure to be so licensed, registered or
qualified would not have a material adverse effect upon its business or
assets.
(ii) All of the outstanding shares of capital stock or
partnership interests of SRFC and LSPI Fiber have been duly
authorized and validly issued, are fully paid and nonassessable,
and are owned, beneficially and of record, by Synertec and
Minnesota Pulp II and Pentair Duluth Pulp, respectively, and are
free and clear of all liens, claims, encumbrances and restrictions
whatsoever, other than the SRFI Restrictions. SRFC's entire equity
capital consists of 50 authorized shares of common stock, no par
value, of which 50 shares are issued and outstanding. No shares of
capital stock of, or other ownership interest in, SRFC or LSPI
Fiber are reserved for issuance and there are no outstanding
options, warrants, rights, other than the SRFI Restrictions,
subscriptions, claims of any character, agreements, obligations,
convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to the capital stock of, or other
ownership interest in, either of such corporation or partnership
pursuant to which either of such corporation or partnership is or
may become obligated to issue or exchange any shares of capital
stock of, or other ownership interest in, such corporation or
partnership.
(iii) Except as set forth on Schedule 7(c), no member of the
SRFI Group owns, directly or indirectly, any capital stock or other
equity or ownership or proprietary interest in any other
corporation, partnership, association, trust, joint venture (other
than in SRFI) or other entity.
(iv) True and complete copies of the agreements containing
the SRFI Restrictions have been furnished or made available to
Buyer; each of those agreements is currently in good standing and
in full force and effect and no default by any Seller, Parent or
any member of the SRFI Group party thereto, or to the best
knowledge of Sellers, any other party thereto, exists thereunder.
(d) FINANCIAL STATEMENTS.
(i) Attached hereto as Schedule 7(d) are the SRFI Group
Financial Statements. The SRFI Group Financial Statements were
(and the Statement of Net Book Value will be) prepared in
accordance with the books and records of the respective members of
the SRFI Group, which were used in the preparation of each Parent's
audited consolidated financial statements for the fiscal years
ended December 31, 1993 and December 31, 1994.
(ii) The SRFI Group Financial Statements were (and the
Statement of Net Book Value will be) prepared in accordance with
GAAP consistently applied, but, except for the audited financial
statements of SRFI, do not include all information and footnotes
required by generally accepted accounting principles for complete
financial statements. The Statement of Net Book Value will
adequately reflect all liabilities and obligations of the SRFI
Group required to be shown thereon in accordance with GAAP, except
for those exceptions to GAAP set forth on Schedule 3.2.
(iii) The SRFI Group Financial Statements as of such dates or
for the period ending on such dates present fairly the financial
position and the results of operations of the members of the SRFI
Group for the periods covered thereby. All adjustments, consisting
of normal recurring accruals and eliminations and other similar
adjustments, considered necessary for a fair presentation have been
included.
(e) NO MATERIAL CHANGE. To the best knowledge of Sellers, since
December 31, 1994 there has been no material adverse change in the business,
financial position or results of operations of the SRFI Group taken as a
whole.
(f) LEASES. Sellers have furnished or made available to Buyer copies
of all leases and subleases of any personal property used in the operations
of the members of the SRFI Group to which any member of the SRFI Group is a
party, all of which are listed on Schedule 7(f). Except as set forth on
Schedule 7(f), no consents or approvals are required in connection with the
transactions contemplated hereby. No event has occurred which is or, after
the giving of notice or passage of time, or both, would constitute a default
under or a material breach of any lease by any member of the SRFI Group or,
to the best knowledge of Sellers, any other party to such leases. As of the
Closing Date, each lease shall be in full force and effect in accordance with
its terms, as amended from time to time.
(g) TITLE TO PERSONAL PROPERTY. Each member of the SRFI Group has good
and marketable title to its respective owned personal property as reflected
in the SRFI Group Financial Statements, free and clear of all liens, claims,
encumbrances and restrictions, except (i) those reflected on Schedule 7(g),
(ii) the lien of the Note Purchase Agreement and (iii) defects in title, and
liens, charges and encumbrances, if any, as do not materially detract from
the value of or otherwise materially impair the current operations or
financial conditions of the SRFI Group, taken as a whole.
(h) REAL ESTATE.
(i) Schedule 7(h) sets forth an accurate legal description of
all Real Estate owned by a member of the SRFI Group for which a
member of the SRFI Group has contracted to become the owner (the
"OWNED REAL ESTATE"), including identification of the current owner
of fee simple title thereto. The party identified as the owner on
Schedule 7(h) is the legal and equitable owner of good and
marketable title in fee simple absolute to such Owned Real Estate,
including the buildings, structures, spurtracks (as set forth on
Schedule 7(h) and improvements situated thereon and appurtenances
thereto, in each case free and clear of all tenancies and other
possessory interests, security interests, conditional sale or other
title retention agreements, liens, encumbrances, mortgages,
pledges, assessments, easements, rights of way, covenants,
restrictions, reservations, options, rights of first refusal,
defects in title, encroachments and other burdens, except as
disclosed on Schedule 7(h). Except as disclosed on Schedule 7(h),
a member of the SRFI Group is in possession of the Owned Real
Estate. All contracts, agreements, options and undertakings
affecting the Owned Real Estate are set forth in Schedule 7(h) and
are legally valid and binding and in full force and effect, and to
Seller's knowledge, there are no defaults, offsets, counterclaims
or defenses thereunder, and the SRFI Group has received no notice
that any default, offset, counterclaim or defense thereunder
exists. Sellers have delivered or made available to Buyer correct
and complete copies of all such contracts, agreements, options and
undertakings.
(ii) There is no Real Estate leased, subleased or occupied by
a member of the SRFI Group.
(iii) To the knowledge of Sellers, except as set forth on the
Flood Insurance Rate Maps prepared by the Federal Emergency
Management Agency (Community/Parcel No. 270420/004B; revised as of
November 1992), no Real Estate is located within a flood or
lakeshore erosion hazard zone for which flood insurance is now
required under the National Flood Insurance Program. Neither the
whole nor any portion of any Real Estate has been condemned,
requisitioned or otherwise taken by any public authority, and no
notice of any such condemnation, requisition or taking has been
received. To the knowledge of Sellers, no such condemnation,
requisition or taking is threatened or contemplated, except as set
forth on Schedule 7(h). Sellers have no knowledge of any public
improvements which may result in special assessments against or
otherwise affect the Real Estate, except as set forth on Schedule
7(h).
(iv) The Real Estate is in good operating condition and
repair (reasonable wear and tear excepted) and is suitable and
adequate for the purposes for which it is presently being used.
(v) To the knowledge of Sellers, except as set forth on
Schedules 7(h) or 7(o), the Real Estate is in compliance with all
applicable zoning, building, health, fire, water, use or similar
statutes, codes, ordinances, laws, rules or regulations. To the
knowledge of Sellers, the zoning of each parcel of Real Estate
permits the existing improvements and the continuation following
consummation of the transaction contemplated hereby of the business
of the SRFI Group as presently conducted thereon. The SRFI Group
has all certificates of occupancy and authorizations required to
utilize the Real Estate. To Sellers' knowledge, the SRFI Group has
all easements and rights necessary to conduct its business,
including easements for all utilities, services, roadway, railway
and other means of ingress and egress. To Sellers' knowledge, the
SRFI Group holds such rights to any off-site facilities as are
necessary to ensure compliance in all material respects with all
zoning, building, health, fire, water, use or similar statutes,
codes, ordinances, laws, rules or regulations and all such rights,
to the extent held by the SRFI Group and Sellers, shall be conveyed
as directed by Buyer at Closing. Except as disclosed on Schedule
7(h), to the knowledge of Sellers, no fact or condition exists
which would result in the termination or impairment of access to
the Real Estate or discontinuation of sewer, water, electric, gas,
telephone, waste disposal or other utilities or services. Except
as disclosed on Schedule 7(h), to the knowledge of Sellers, the
facilities servicing the Real Estate are in full compliance with
all codes, laws, rules and regulations.
(vi) Sellers have delivered or made available to Buyer
accurate, correct and complete copies of all existing title
insurance policies, title reports and surveys, if any, with respect
to each parcel of Real Estate.
(i) PLANT AND EQUIPMENT. Sellers have furnished to Buyer an accurate
list of all plant and equipment, attached as Schedule 7(i), owned by the SRFI
Group. To the best knowledge of Sellers, all plant, structures and equipment
currently being used in the conduct of the operations of the SRFI Group are
in all material respects in good operating condition and repair, subject to
normal wear and tear, and to the best of each Seller's knowledge, are free
from material structural or mechanical deficiencies, except as disclosed on
Schedule 7(i) attached.
(j) INTELLECTUAL PROPERTY. Sellers have furnished to Buyer an accurate
list of all Intellectual Property, attached as Schedule 1(t), owned or used
by the SRFI Group. To the best knowledge of Sellers, no one is infringing
upon any rights of the SRFI Group with respect to any of the Intellectual
Property, no member of the SRFI Group is infringing on or otherwise acting
adversely to the rights of any person under, or in respect to, any patents,
patent rights, copyrights, licenses, trademarks, trade names or trademark
rights owned by any person or persons, and there is no claim or action
pending or threatened with respect thereto. Except as set forth in Schedule
1(t), there are no royalty, commission or similar arrangements, and no
licenses, sublicenses or agreements pertaining to any of the Intellectual
Property.
(k) EMPLOYEE MATTERS. No member of the SRFI Group has, nor has any
member of the SRFI Group ever had, any employees.
(l) LITIGATION. Except as set forth on Schedule 7(l), there are no
legal actions, suits, arbitrations or other legal, administrative or
governmental proceedings or investigations (other than tax audits or
investigations) pending or, to the best knowledge of Sellers, threatened
against any member of the SRFI Group which might have a material adverse
effect upon the operations or financial condition of the SRFI Group, taken as
a whole. No member of the SRFI Group is subject to any judgment, order,
writ, injunction, stipulation or decree of any court or any governmental
agency or any arbitrator, except as may be set forth herein or in any
Schedule hereto.
(m) COMPLIANCE WITH LAWS.
(i) To the best knowledge of Sellers, the operations of the
members of the SRFI Group have been and are being conducted in
accordance with all applicable laws, rules and regulations of applicable
governmental authorities (other than those covered in Section 18
hereof), except for such breaches that do not and cannot reasonably be
expected to (either individually or in the aggregate) materially and
adversely affect the financial condition or operations of the SRFI Group
taken as a whole.
(ii) To the best knowledge of Sellers, no member of the SRFI Group
nor any of their officers or employees, has, directly or indirectly,
given, or agreed to give, any rebate, gift or similar benefit to any
supplier, customer, distributor, broker, governmental employee or other
person, who was, is or may be in a position to help or hinder the SRFI
Group's business (or assist in connection with any actual or proposed
transaction) which could subject Buyer or the SRFI Group's business to
any penalty in any civil, criminal or governmental litigation or
proceeding or which would have a material adverse effect on the SRFI
Group's business.
(n) MATERIAL CONTRACTS. Sellers have furnished to Buyer a list,
attached as Schedule 7(n), of all contracts and arrangements, written or
oral, which alone or together with other contracts and arrangements with the
same party are material to the SRFI Group's business taken as a whole. All
members of the SRFI Group have, in all material respects, performed all of
the respective obligations required to be performed by them to date and are
not, and will not be as of the Closing Date, in default under any material
provision of such contracts or arrangements. All such contracts and
arrangements are and will be as of the Closing Date in good standing and full
force and effect according to their terms. For purposes of this Section
7(n), a contract shall be deemed to be material, (i) if it involves remaining
payments of more than $300,000, or (ii) if it cannot by its terms be
completed or terminated without penalty within 180 days from the Closing
Date, or (iii) if the absence of such contract would have a material adverse
effect on the business of the SRFI Group.
(o) LICENSES AND PERMITS. Except as set forth on Schedule 7(o), each
member of the SRFI Group has all requisite licenses and permits to operate
its business as currently conducted and Sellers have not been advised of, nor
to the best knowledge of Sellers is there any basis for, any revocation or
anticipated revocation of any permits, licenses or zoning variances, or of
any changes to existing or pending zoning or other regulations, permits or
licenses which would materially and adversely affect the conduct of its
operations as presently conducted.
(p) INSURANCE. Schedule 7(p) contains an accurate and complete list
and description of insurance policies (including the name of the insurer,
coverage, premium and expiration date) which each member of the SRFI Group
currently maintains, or is named as an additional insured or is entitled to
benefits under (including coverage for events occurring under prior
policies). To the best knowledge of Sellers, except as set forth on Schedule
7(p), all such policies are in full force and effect and shall survive the
Closing for the benefit of SRFC, SRFI or Buyer.
(q) LIABILITIES TO PBGC OR MULTIEMPLOYER OR MULTIPLE EMPLOYER PLANS.
No liability to the Pension Benefit Guaranty Corporation or to any
multiemployer or multiple employer plan has been incurred by the SRFI Group.
(r) TRANSACTIONS WITH RELATED PARTIES.
(i) To the best knowledge of Sellers, except for interest and
corporate overhead and as set forth on Schedule 7(r), none of the SRFI
Group members are a party to any transaction or proposed transaction,
including, without limitation, the leasing of real or personal property,
the purchase or sale of raw materials or finished goods, or the
furnishing of services, with any Seller or Parent or with any person who
is related to or affiliated with Sellers or Parents (other than another
member of the SRFI Group), involving the payment or accrual of more than
$1,000,000 during fiscal years 1993 or 1994.
(ii) Except as set forth on Schedule 7(r) or as reflected in the
SRFI Group Financial Statements dated December 31, 1994, neither Sellers
nor Parents nor any person who is related to or affiliated with Sellers
or Parents has any cause of action or other claim whatsoever against or
owes any material amount to, or is owed any material amount by, any
member of the SRFI Group.
(s) BANK ACCOUNTS. Schedule 7(s) sets forth a true and complete list
of all banks in which any member of the SRFI Group has an account, safe
deposit box or line of credit, and the names and titles of all persons
authorized to draw thereon or to have access thereto, and a summary
description of the use thereof.
(t) TAX MATTERS.
(i) All Returns (including consolidated or combined Returns
including any member of the SRFI Group) required to be filed on or
before the Closing with respect to any member of the SRFI Group
have been or will be timely filed (within the time permitted by any
timely filing extension) by or on behalf of such member of the SRFI
Group and all Taxes shown to be due on such Returns have been
timely paid.
(ii) No member of the SRFI Group has been a member of an
affiliated group (within the meaning of Section 1504 of the Code)
filing a consolidated federal Return, other than a group the common
parent of which is a Parent.
(iii) Schedule 7(t) lists all Returns filed with respect to
any of the members of the SRFI Group for taxable periods which
remain open, indicates those Returns that have been audited and
indicates those Returns that are currently the subject of audit or
scheduled for an examination by any relevant taxing authority.
(iv) Except as disclosed in Schedule 7(t):
(1) no notice or claim has ever been made by a
governmental authority in a jurisdiction where any
member of the SRFI Group does not file Returns that
it is or may be subject to Taxes in that
jurisdiction;
(2) no extension of the statute of limitations with
respect to any assessment or claim for Taxes has
been granted by or on behalf of any member of the
SRFI Group;
(3) there are no liens for Taxes upon the assets of any
member of the SRFI Group except liens for Taxes not
yet due;
(4) no amended Returns or refund claims have been or are
scheduled to be filed by or on behalf of any member
of the SRFI Group;
(5) all Taxes and other liabilities with respect to
completed and settled audits, examinations or
concluded litigation have been paid; and
(6) there are no pending appeals or other administrative
proceeding with respect to any Return of any member
of the SRFI Group, and there is no deficiency or
refund litigation with respect to any Return of any
member of the SRFI Group. No material issues have
been raised by any relevant taxing authorities on
the audit of the Returns of any member of the SRFI
Group. No member of the SRFI Group has received any
notice of any Tax deficiency or assessment.
(v) No member of the SRFI Group has filed or had filed on its
behalf a consent to the application of Section 341(f) of the Code.
(vi) Except as disclosed in Schedule 7(t), no member of the
SRFI Group is a party to any contractual obligation requiring the
indemnification or reimbursement of any person with respect to the
payment of any Taxes. Except as disclosed in Schedule 7(t), no
claim has been asserted, which has not been resolved or satisfied,
for any payment under any agreement disclosed in Schedule 7(t).
(vii) Except as disclosed in Schedule 7(t), no member of the
SRFI Group is a party to or a beneficiary of any financing, the
interest on which is tax-exempt under the Code, and none of the
assets of any member of the SRFI Group is "tax-exempt use
property."
(viii) As of the Closing Date, no member of the SRFI Group is
a party to any agreement, contract, arrangement, or plan that has
resulted or would result, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of
Section 280G of the Code.
(ix) Each member of the SRFI Group is a "United States
person" within the meaning of the Code. No member of the SRFI
Group has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. The transactions contemplated herein are not subject to the
tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code, or of any other provision of
law. No member of the SRFI Group has nor had a branch in any
foreign country.
(x) No member of the SRFI Group is a party to any joint
venture, partnership, or other arrangement or contract that could
be treated as a partnership for federal income Tax purposes, except
for SRFI or LSPI Fiber.
(xi) Each member of the SRFI Group has withheld and paid all
Taxes required to have been withheld and paid including (1) amounts
paid to any employee or statutory employee or any foreign person or
entity; and (2) any backup withholding required under Section 3406
of the Code.
(u) ACCOUNTS RECEIVABLE. Schedule 7(u) sets forth an accurate, correct
and complete aging of all outstanding accounts and notes receivable of SRFC,
SRFI and LSPI Fiber as of December 31, 1994. All outstanding accounts and
notes receivable reflected on the SRFI Group Financial Statements are, and on
the Statement of Net Book Value will be, due and valid claims against account
debtors for goods or services delivered or rendered and subject to no
defenses, offsets or counterclaims. All receivables arose in the ordinary
course of business. No receivables are subject to prior assignment, claim,
lien or security interest, except under the Note Purchase Agreement. The
books and records of SRFC, SRFI and LSPI Fiber reflect amounts taken as a
reserve against noncollection of accounts receivable, which reserve has been
established in accordance with SRFC's, SRFI's and LSPI Fiber's normal
accounting policies consistently maintained for the fiscal years ended
December 31, 1993 and December 31, 1994 and there is no reason to believe
that such reserve will not be adequate for its purpose. As of the Closing
Date, neither SRFC, SRFI nor LSPI Fiber will have incurred any liabilities to
customers for discounts, returns, promotional allowances or otherwise, except
those granted in the ordinary course of SRFC's, SRFI's or LSPI Fiber's
operations and reflected on the Statement of Net Book Value. No other member
of the SRFI Group has any business operations which would result in the
establishment of any trade accounts receivable or the granting of any
discounts, returns, promotional allowances or similar charges.
(v) INVENTORY. All inventories reflected on the SRFI Group Financial
Statements are, and on the Statement of Net Book Value will be, properly
valued at the lower of cost or market value on a first-in, first-out basis in
accordance with GAAP. Inventories of finished goods are of good and
merchantable quality, whether of first line, or off-quality pulp and contain
no material amounts that are not salable in the ordinary course of business
and meet the current standards and specifications of its business, except as
reserved for on the SRFI Group Financial Statements. Inventories of raw
materials, stores and replacement parts are, to the best knowledge of
Sellers, (i) of good and merchantable quality and contain no material amounts
that are not usable for the purposes intended in the ordinary course of the
SRFI Group's operations; (ii) in conformity with warranties customarily given
to purchasers of like products; and (iii) at levels adequate for and not
excessive in relation to the ordinary course of the SRFI Group's operations
and in accordance with past inventory stocking practices. Sales of
inventories subsequent to December 31, 1994 have been made only in the
ordinary course of business and at prices and under terms that are normal and
consistent with past practice.
(w) MOTOR VEHICLES. Schedule 7(w) sets forth an accurate and complete
list of all motor vehicles used in the business of the SRFI Group, whether
owned or leased. All such vehicles are (i) properly licensed and registered
in accordance with applicable law; (ii) insured as set forth on Schedule
7(p); (iii) in good operating condition and repair (reasonable wear and tear
excepted) and (iv) not subject to any lien or other encumbrance, except as
set forth on Schedule 7(w).
(x) PRODUCT WARRANTY. The books and records of each member of SRFI
Group reflect amounts taken as a reserve against claims and allowances for
product warranties, which reserve has been established in accordance with the
members of the SRFI Group's normal accounting policies consistently
maintained for the fiscal years ended December 31, 1993 and December 31, 1994
and there is no reason to believe that such reserve will not be adequate for
its purpose. As of the Closing Date, neither SRFC, SRFI nor LSPI Fiber will
have incurred any unpaid liabilities to customers for such claims and
allowances, except those granted in the ordinary course of business and
reflected on the Statement of Net Book Value.
Disclosure of any fact in any provision of this Agreement or in any
Schedule attached hereto shall constitute disclosure thereof for the purposes
of any other provision or Schedule.
8. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and
warrants to Parents as follows:
(a) ORGANIZATION. Buyer is a duly organized and validly existing
corporation in good standing under the laws of the state of Wisconsin. Buyer
has all requisite corporate power to own its property and carry on its busi-
ness as presently conducted.
(b) AUTHORITY. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Board of Directors of Buyer.
(c) VALID AND ENFORCEABLE AGREEMENT. This Agreement constitutes a
valid and binding agreement of Buyer, enforceable in accordance with its
terms, except insofar as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights
of creditors generally, and by general equitable principles. Neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, nor the performance of Buyer's obligations
hereunder materially violates or conflicts with, results in a material breach
of, or constitutes a material default under (i) to the best knowledge of
Buyer, any law, rule or regulation, or (ii) subject to the obtaining of
necessary consents under various agreements, any agreement or other
restriction of any kind or character to which Buyer is a party, by which
Buyer is bound, or to which any of the properties of Buyer is subject.
Neither the execution or delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, nor the performance of Buyer's
obligations hereunder, violates or conflicts with, results in a breach of or
constitutes a default under (i) any judgment or order, decree, award or
ruling to which Buyer is subject, or (ii) the Articles of Incorporation or
By-Laws of Buyer.
(d) NO INSOLVENCY. Buyer is not currently insolvent, and neither the
purchase of the Purchased Interests, the assumption of the Assumed
Liabilities and Obligations pursuant to Section 5, nor any related
transaction or event shall render Buyer insolvent or leave Buyer with assets
which are unreasonably small in relation to the business of the SRFI Group
and its own business operations, nor does Buyer intend to incur debts beyond
its ability to pay them as they come due.
(e) FINANCIAL STATEMENTS. Buyer's financial statements for the year
ended December 31, 1994, as filed with the Securities and Exchange Commission
(copies of which have been delivered to Seller) (i) were prepared in
accordance with and accurately reflect its books and records, (ii) were
prepared in accordance with generally accepted accounting principles,
consistently applied, and (iii) present fairly the financial position and the
results of operations of Buyer for the periods covered thereby.
(f) INVESTMENT INTENT. Buyer is purchasing the Stock for its own
account and not with a view to, or present intention of, sale or distribution
thereof in violation of the Securities Act of 1933, as amended (the "1933
ACT") and such shares will not be disposed of in contravention of the 1933
Act. Buyer acknowledges that such shares are not and have not been
registered with the Securities and Exchange Commission or any securities
commission or agency of any state, including the state of Minnesota, and may
not be transferred or disposed of without registration under the 1933 Act and
applicable state securities laws or an exemption from such registration.
Disclosure of any fact in any provision of this Agreement or in any
Schedule attached hereto shall constitute disclosure thereof for the purposes
of any other provision or Schedule.
9. ACTIONS PENDING CLOSING. From the date hereof through the Closing
Date, Sellers shall take, or cause their respective Affiliates to take, all
actions necessary and appropriate to comply with, or to refrain from taking
any action in breach of, the following provisions for the period between the
execution of this Agreement and the termination hereof or the Closing Date:
(a) OPERATIONS. Each member of the SRFI Group shall conduct its
operations only in the ordinary course of business and shall not enter or
permit any member of the SRFI Group to enter into any transaction or perform
any act that would constitute a breach of the representations, warranties, or
agreements contained herein. Each member of the SRFI Group shall use its
best efforts to preserve its business and its organization intact and to keep
available the services of its present employees. Attached as Schedule 9(a)
is a list of capital expenditures and commitments to be initiated by the SRFI
Group prior to the Closing Date. No member of the SRFI Group shall initiate
any capital expenditure or commitment other than as set forth on Schedule
9(a) or initiate any capital expenditure or commitment as set forth on
Schedule 9(a) in excess of $25,000 without Buyer's approval, which approval
shall not be unreasonably withheld; provided, however, that any member of the
SRFI Group may initiate emergency capital expenditures or commitments
consistent with the past practices of such SRFI Group member. Sellers or
Parents shall promptly notify Buyer of such emergency expenditures or
commitments.
(b) ACCESS TO RECORDS. Sellers shall, and shall cause the members of
the SRFI Group to, make available to Buyer, its agents and employees, all
books and records in their possession relating to the business of the SRFI
Group; provided, however, that Sellers have not made, and shall not be deemed
to have made, any representations or warranties whatsoever with respect to
any of such books or records or any other documents provided to or made
available to Buyer, except as expressly set forth in this Agreement.
(c) ACCESS TO FACILITIES. Buyer, its agents and employees, shall be
given full access during regular business hours to the physical facilities of
SRFI, upon appointment with the President thereof and accompanied by such
President or his or her designee(s). Sellers and each member of the SRFI
Group and their respective employees shall cooperate fully with Buyer in its
examinations and inspections, but not to the detriment of the ongoing
business operations of the SRFI Group prior to Closing.
(d) HART-SCOTT-RODINO FILINGS. Parents and Buyer shall cooperate in
the prompt preparation and filing of all notifications and reports which may
be required with respect to the transactions contemplated by this Agreement
pursuant to Section 7A of the Clayton Act. Parents and Buyer shall also
cooperate in responding promptly to all inquiries from the Federal Trade
Commission or the Department of Justice resulting from the filing of such
notifications and reports.
(e) NOTICE OF DEVELOPMENTS. At least ten (10) business days prior to
the Closing Date, Sellers shall deliver to Buyer a complete update of the
Schedules from the date hereof. Each party hereto shall notify the other of
any development(s) which shall constitute a breach of any of the
representations and warranties in Sections 7 or 8 above. The party so
notified has the right to terminate this Agreement within the period of ten
(10) business days from the date of receipt of such notification, if as a
result of such development the financial condition, results of operations or
prospects of the SRFI Group as a whole, on the one hand, or Buyer, on the
other hand, have been materially and adversely affected. If within such ten
(10)-day period, the party notified shall not have exercised its right to
terminate this Agreement, the written notice shall be deemed to have amended
this Agreement and the relevant schedules attached thereto, to have qualified
the representations and warranties contained in Sections 7 or 8 above and to
have cured any misrepresentation or breach of warranty that otherwise might
have existed hereunder by reason of such development, including for purposes
of Section 15 hereof.
(f) SRFI RESTRICTIONS. Prior to the Closing Date, each Seller shall
waive or abandon its right of first refusal with respect to the transfer of
the other's interest in the entities that own indirectly an interest in LSPI
Fiber, SRFC or SRFI pursuant to this Agreement.
(g) BEST EFFORTS. Sellers, Parents and Buyer shall use their best
efforts to consummate the transactions contemplated by this Agreement and
shall not take any other action inconsistent with their respective
obligations hereunder or which could hinder or delay the consummation of the
transactions contemplated hereby. From the date hereof through the Closing
Date, Sellers, Parents and Buyer shall use their best efforts to fulfill the
conditions to their obligations hereunder and to cause their representations
and warranties to remain true and correct as of the Closing Date.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligations of
Buyer hereunder (unless expressly waived by Buyer) are subject to the
fulfillment, prior to or at Closing, as the case may be, of each of the
following conditions:
(a) NO ERRORS; PERFORMANCE OF OBLIGATIONS. The representations and
warranties of Parents herein shall be true and correct as of the Closing
Date. Sellers and Parents shall have performed the obligations set forth in
Section 9 and in all material respects all of the other obligations to be
performed by them hereunder in the time and manner herein stated.
(b) OFFICER'S CERTIFICATES. Sellers and Parents shall have delivered
to Buyer certificates, dated as of the Closing Date, executed by their
respective Secretaries, and in form and substance satisfactory to Buyer,
certifying that the covenants and conditions specified in this Agreement to
be met by Sellers and Parents have been performed or fulfilled and that the
representations and warranties herein made by Sellers and Parents are true
and correct as of such date.
(c) CERTIFIED COPY OF RESOLUTIONS. Sellers and Parents shall have
delivered to Buyer a certified copy of resolutions adopted by their
respective Boards of Directors authorizing the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(d) OPINION OF SELLERS' AND PARENT'S COUNSEL. Sellers and Parents
shall have delivered to Buyer the opinion of their respective counsel, dated
as of the Closing Date, in form and substance satisfactory to Buyer and its
counsel, giving the following clean legal opinions:
(1) valid organization of Sellers, Parents and each of
the members of the SRFI Group;
(2) corporate power and authority of each Seller and Parent to
enter into the Agreement;
(3) necessary foreign qualification of members of the
SRFI Group;
(4) No Breach or Default Opinion with respect to members of
the SRFI Group;
(5) No Violation Opinion with respect to each Seller and
Parent;
(6) Remedies Opinion with respect to each Seller and
this Agreement;
(7) Legal Proceedings Opinion with respect to each
Seller, Parent and members of the SRFI Group;
(8) other legal matters agreed upon between Sellers,
Parents and Buyer; and
(9) no violation of registration provisions of the
1933 Act and applicable state securities laws;
all in accordance with, and subject to the General Qualifications and other
limitations and provisions contained in, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(e) INJUNCTIONS. No injunction shall have issued restricting or
prohibiting the transactions contemplated by this Agreement.
(f) CLAYTON ACT MATTERS. The waiting period required by Section 7A of
the Clayton Act shall have expired or been terminated.
(g) ENVIRONMENTAL MATTERS. The results of any inspections, soil test
boring, soil tests, drainage tests, surveys, topographical analyses,
engineering studies or other investigations performed or obtained by Buyer
shall not have disclosed evidence of Hazardous Materials in, on or adjacent
to any of the real properties owned or occupied by any member of the SRFI
Group, other than those disclosed in any environmental studies or other
information listed on Schedule 10(g) which would materially and adversely
affect the operations of the SRFI Group taken as a whole. Buyer shall not
have received any evidence that there are existing violations of any
Environmental Law, other than those described in Schedule 10(g), or that any
requisite environmental license or permit or any occupance, use or building
permits or other approvals from applicable governmental authorities are
currently required for the continued operation of the facilities owned by the
SRFI Group which have not been obtained or are not in effect. In order to
enable Buyer to conduct a due diligence investigation, Sellers, Parents, the
SRFI Group, and any entity within the LSPI Group with relevant information on
the environmental status of the operating facilities of the SRFI Group shall
provide Buyer with access to the environmental files, licenses, permits,
permit applications, consultant reports, notices from local, state and
federal governmental entities, environmental audit and inspection reports,
insurance files, and other information necessary for Buyer to assess the
environmental status of the operating facilities of the SRFI Group, as well
as permit or obtain permission for Buyer to conduct soil and groundwater
testing on or beneath the real properties owned or occupied by any member of
the SRFI Group.
(h) SRFI RESTRICTIONS. Each Seller and Parent shall have waived or
abandoned its right of first refusal with respect to the transfer of the
other's interest in the entities that own indirectly an interest in LSPI
Fiber, SRFC or SRFI pursuant to this Agreement.
(i) CONSENTS. All consents and releases by third parties that are
required for the transfer of the Purchased Interests or the Assumed
Liabilities and Obligations, or that are required for the consummation of the
transactions contemplated hereby, or that are required in order to prevent a
breach of or a default under or a termination of any agreement to which any
Seller or any member of the SRFI Group or Affiliates is a party or to which
any portion of the property of any Seller or any member of the SRFI Group or
Affiliates is subject, including, but not limited to, the consent of New York
Life Insurance Company relating to the Note Purchase Agreement, shall have
been obtained or provided for.
(j) FINANCING. Buyer shall have used its best efforts to maintain an
aggregate of at least $250 million available under Buyer's committed and
uncommitted lines of credit until the Closing Date, and such lenders shall
not have cancelled or revoked such lines of credit prior to the Closing Date.
(k) FIRPTA CERTIFICATE. Sellers shall have furnished Buyer with
certificates of non-foreign status signed by the appropriate party and
sufficient in form and substance to relieve Buyer of all withholding
obligations under Section 1445 of the Code. If Sellers cannot furnish such
certificates or Buyer is not entitled to rely upon such certificates under
the provisions of Section 1445 of the Code and the regulations thereunder,
Sellers shall take and/or permit Buyer to take any and all steps necessary to
allow Buyer to satisfy the requirements of Section 1445 of the Code.
(l) ASSIGNMENTS OF CONTRACTS. Sellers shall have assigned to Buyer
the LSPI Supply Contract and all other Material Contracts.
(m) PURCHASE OF LSPI AND NIAGARA PAPER. On or prior to the Closing
Date, Buyer shall have purchased all of the issued and outstanding capital
stock of Pentair Duluth Corp., a Minnesota corporation, Minnesota Paper
Incorporated, a Minnesota corporation and Niagara of Wisconsin Paper
Corporation, a Wisconsin corporation.
(n) REAL ESTATE CONSENTS. Sellers shall deliver to Buyer any consents
or approvals of any parties required pursuant to the terms of any contract,
agreement, option or undertaking affecting the Owned Real Estate.
(o) TITLE INSURANCE AND SURVEYS.
(i) Buyer shall have obtained an ALTA Owners Policy of Title
Insurance Form B Owner's Form (the "TITLE POLICY") for each parcel
of Owned Real Estate issued by a nationally recognized title
company reasonably acceptable to Buyer (the "TITLE COMPANY"). The
Title Policy shall be in the amount of the purchase price allocated
to the Owned Real Estate by Buyer, showing fee simple title to the
Real Estate in a member of the SRFI Group (or if the member of the
SRFI Group is a contract purchaser, the seller designated under the
applicable sales contract), subject only to current real estate
taxes not yet due and payable as of the Closing Date, liens and
encumbrances reflected on Schedule 10(m) hereto, and such other
covenants, conditions, easements and exceptions to title as Buyer
may approve in writing (collectively, the "PERMITTED EXCEPTIONS").
With reasonable promptness, after the date of this Agreement, Buyer
shall order commitments (the "COMMITMENTS") for the Title Policy.
Copies of the Commitments shall be promptly delivered to Sellers.
The Commitments and the Title Policy to be issued by the Title
Company shall have all Standard and General Exceptions deleted so
as to afford full "extended form coverage" and shall contain an
ALTA Zoning Endorsement 3.1, contiguity, non-imputation, and such
other endorsements as may be reasonably requested by Buyer. At
Closing, Sellers shall deliver to Buyer, a seller's affidavit or
similar instruments as the Title Company may require. Buyer shall
be responsible for the cost of all title insurance charges,
premiums and endorsements, title abstracts and attorneys' opinions,
including all search, continuation and later-date fees. To the
extent that any parcel of Owned Real Estate is registered Torrens
title, Sellers shall deliver the owner's duplicate certificates of
titles.
(ii) Buyer shall have obtained an as-built plat of survey of
each parcel of the Owned Real Estate (the "SURVEYS") prepared by a
registered land surveyor or engineer, licensed in the respective
states in which the Owned Real Estate is located, dated on or after
the date hereof, certified to Buyer, the Title Company and such
other entities as Buyer may designate and conforming to current
ALTA Minimum Detail Requirements for Land Title Surveys, sufficient
to cause the Title Company to delete the standard printed survey
exception and to issue the Title Policy free from any survey
objections or exceptions whatsoever. Buyer shall pay the entire
cost of obtaining the Surveys. Any Survey may be a recertification
of a prior survey, provided that it meets the above-described
criteria. Each Survey shall show all conditions as then existing,
including the location of all pipes, wires and conduits serving the
Owned Real Estate and their connections to public ways, parking
areas denominated as such, loading docks and other improvements,
the access to and from the improvements on the Owned Real Estate,
and a flood plain certification indicating no flood zone
classification or area which would materially interfere with the
normal operations of the SRFI Group. With reasonable promptness
after the date of this Agreement, Buyer shall order the Surveys.
Copies of the Surveys shall be promptly delivered to Sellers.
(iii) If (i) any Commitment or owner's duplicate certificate
of title discloses a title exception other than a Permitted
Exception that represents a defect affecting the marketability of
the title to any parcel of Owned Real Estate (an "UNPERMITTED
EXCEPTION") or (ii) any Survey discloses that improvements located
on the surveyed land encroach onto adjoining land or onto any
easements, building lines or set-back requirements, or
encroachments by improvements from adjoining land onto the surveyed
land or onto any easements for the benefit of the surveyed land or
overlap or reflects that any utility service to the improvements or
access thereto does not lie wholly within the Owned Real Estate or
an unencumbered easement for the benefit of the Owned Real Estate
or reflects any other matter, any of which materially and adversely
affects the use or improvements of such parcel of Owned Real
Estate, or any other matter which renders title to any Owned Real
Estate unmarketable (a "SURVEY DEFECT"), then, in any such event,
Sellers shall have thirty (30) days from the date of delivery
thereof to have the Unpermitted Exception removed from such
Commitment and owner's duplicate certificate of title, if
applicable, or the Survey Defect corrected or insured over by an
appropriate title insurance endorsement, all at Sellers' cost in a
manner reasonably satisfactory to Buyer, and in any such event the
Closing shall be extended, if necessary, to the date which is five
(5) business days after the expiration of such 30-day period. If
Sellers fail to have any Unpermitted Exception removed or any
Survey Defect corrected or otherwise insured over to the reasonable
satisfaction of Buyer within the time specified therefor, Buyer, at
its sole option, upon not less than three (3) days' prior written
notice to Sellers, may terminate this Agreement and all of Buyer's
obligations hereunder.
(p) NOTE PURCHASE AGREEMENT. Sellers and Parents and their Affiliates
shall have been released under the Note Purchase Agreement or the outstanding
indebtedness under the Note Purchase Agreement shall have been repaid.
(q) OTHER MATTERS. All corporate and other proceedings and actions
taken in connection with the transactions contemplated hereby and all
certificates, opinions, agreements, instruments and documents mentioned
herein or incident to any such transaction shall be delivered to Buyer and be
reasonably satisfactory in form and substance to Buyer and its counsel.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS. The obligations of
Sellers and Parents hereunder (unless expressly waived by Sellers) are
subject to fulfillment by Buyer, prior to or at Closing, as the case may be,
of each of the following conditions:
(a) NO ERRORS; PERFORMANCE OF OBLIGATIONS. The representations and
warranties of Buyer herein shall be true and correct as of the Closing Date.
Buyer shall have performed in all material respects all of the obligations to
be performed by it hereunder in the time and manner herein stated.
(b) OFFICER'S CERTIFICATE. Buyer shall have delivered to Sellers a
certificate, dated as of the Closing Date, executed by an officer of Buyer,
and in form and substance satisfactory to Sellers, certifying that the
covenants and conditions specified in this Agreement to be met by Buyer have
been performed or fulfilled and that the representations and warranties
herein made by Buyer are true and correct as of such date.
(c) CERTIFIED COPY OF RESOLUTIONS. Buyer shall have delivered to
Sellers a certified copy of resolutions adopted by the Board of Directors of
Buyer authorizing the execution and delivery of this Agreement and the con-
summation of the transactions contemplated hereby.
(d) OPINION OF BUYER'S COUNSEL. Buyer shall have delivered to Sellers
the opinion of its counsel, dated as of the Closing Date, in form and
substance satisfactory to Sellers, Parents and their counsel, giving the
following clean legal opinions:
(1) valid organization of Buyer;
(2) corporate power and authority of Buyer to enter into the
Agreement;
(3) No Breach or Default Opinion;
(4) No Violation Opinion;
(5) Legal Proceedings Opinion;
(6) Remedies Opinion with respect to this Agreement; and
(7) other legal matters agreed upon between Sellers, Parents
and Buyer;
all in accordance with, and subject to the General Qualifications and other
limitations and provisions contained in, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(e) INJUNCTIONS. No injunctions shall have issued restricting or
prohibiting the transactions contemplated by this Agreement.
(f) CLAYTON ACT MATTERS. The waiting period required by Section 7A of
the Clayton Act shall have expired or been terminated.
(g) FINANCING. Buyer shall have used its best efforts to maintain an
aggregate of at least $250 million available under Buyer's committed and
uncommitted lines of credit until the Closing Date and such lenders shall not
have cancelled or revoked such lines of credit prior to the Closing Date.
(h) PURCHASE OF LSPI AND NIAGARA PAPER. On or prior to the Closing
Date, Buyer shall have purchased all of the issued and outstanding capital
stock of Pentair Duluth Corp., a Minnesota corporation, Minnesota Paper
Incorporated, a Minnesota corporation and Niagara of Wisconsin Paper
Corporation, a Wisconsin corporation.
(i) NOTE PURCHASE AGREEMENT. Sellers and Parents and their Affiliates
(except SRFC) shall have been released under the Note Purchase Agreement and
the SRFI Pledges by Buyer's assumption of the Note Purchase Agreement or the
repayment of the outstanding indebtedness under the Note Purchase Agreement
shall have been made by Buyer.
(j) OTHER MATTERS. All corporate and other proceedings and actions
taken in connection with the transactions contemplated hereby and all
certificates, opinions, agreements, instruments and documents mentioned
herein or incident to any such transaction shall be delivered to Sellers and
be reasonably satisfactory in form and substance to Sellers and their
counsel.
12. BROKER. Pentair represents and warrants that CS First Boston was
retained by it to represent it in this transaction. Minnesota Power
represents and warrants that PaineWebber Incorporated was retained by it to
represent it in this transaction. Buyer represents and warrants that Dillon,
Read & Co. Inc. has been retained by Buyer to represent it. Each Parent
shall be responsible for payment of all fees and expenses of its respective
investment banker and Buyer shall be responsible for payment of all fees and
expenses of Dillon, Read & Co. Inc. Should any claims for commissions be
made by any other person claiming an interest in this Agreement, or in the
underlying transactions, by reason of any agreement, understanding or other
arrangement with Buyer or with either Parent, or their respective agents,
servants, employees, or other representatives, then the party through, or on
account of, whom such claims are made shall indemnify and hold harmless the
other parties from any and all liabilities and expenses in connection
therewith in accordance with the provisions of Section 15 below. The
foregoing provisions of this Section 12 shall survive not only the Closing
hereunder, but also any termination or cancellation of this Agreement.
13. [INTENTIONALLY LEFT BLANK].
14. CONFIDENTIAL INFORMATION. (a) Buyer acknowledges that pursuant to
its right to inspect Sellers' and the SRFI Group's records and facilities
under Section 9, Buyer shall become privy to Confidential Information. Buyer
agrees that in the event the transaction contemplated by this Agreement is
not completed, all Confidential Information disclosed to Buyer shall remain
confidential, shall not be used for the benefit of Buyer or any of Buyer's
affiliates or disclosed to any person or entity, and all recorded evidence
thereof shall be delivered to Sellers together with an officer's certificate
to the effect that no copies thereof or any extracts, derivatives or
compilations thereof remain in possession of Buyer, its employees,
affiliates, agents, counsel or auditors. The confidentiality and nonuse
provisions hereof shall survive any termination of this Agreement until
August 26, 1997 with respect to Pentair and January 9, 1998 with respect to
Minnesota Power. Buyer acknowledges that it has entered into a
confidentiality letter dated August 26, 1994 between itself and CS First
Boston on behalf of Pentair, and a confidentiality letter dated January 9,
1995 between itself and PaineWebber on behalf of Minnesota Power, and agrees
that such confidentiality letters shall continue in full force and effect
for the duration of their respective terms in addition to the provisions of
this Section 14.
(b) Sellers and Parents agree that in the event the transaction
contemplated by this Agreement is completed, all confidential and proprietary
information related to the SRFI Group shall remain confidential, shall not be
used for the benefit of Sellers, Parent or any of their affiliates or
disclosed to any person or entity. The confidentiality and nonuse
obligations of Sellers and Parents hereunder shall be on the same terms and
conditions as the confidentiality letters set forth in Section 14(a) and
shall survive any termination of this Agreement until August 26, 1997 with
respect to Pentair and January 9, 1998 with respect to Minnesota Power.
15. INDEMNIFICATION.
(a) Without limiting any remedy Buyer may have hereunder, Parents
hereby agree to indemnify, defend and hold Buyer harmless from and against
and in respect of any and all liabilities, losses, damages, claims, costs and
expenses, including reasonable attorneys fees, suffered or incurred by Buyer,
when so suffered or incurred, by reason of or relating to:
(i) any representation or warranty of Parents or Sellers
contained in this Agreement being breached or untrue;
(ii) any covenant or agreement of Sellers or Parents
contained in this Agreement being breached or not fulfilled in any
material respect, and not waived;
(iii) the assertion against Buyer of any other liability of
any Seller or Parent not assumed by Buyer hereunder; or
(iv) the assertion against Buyer, SRFC or SRFI of any
liability of the SRFI Group assumed by Sellers or Parents;
provided, however, that any claim arising out of any breach of warranty or
otherwise relating to (x) environmental conditions, permits or liabilities or
obligations with respect to Hazardous Materials shall be dealt with solely in
accordance with Section 18 hereof and (y) taxes shall be dealt with solely in
accordance with Section 23 hereof.
(b) Without limiting any remedy Parents and Sellers may have hereunder,
Buyer hereby agrees to indemnify, defend, and hold Parents and Sellers harm-
less from and against and in respect of any and all liabilities, losses,
damages, claims, costs and expenses, including reasonable attorneys fees, by
reason of or relating to:
(i) any representation or warranty by Buyer contained in this
Agreement being breached or untrue;
(ii) any covenant or agreement of Buyer contained in this
Agreement being breached or not fulfilled in a material respect, and not
waived; or
(iii) the failure of Buyer to pay, discharge, or perform any
guaranty, obligation or liability assumed by Buyer hereunder
(including without limitation the Assumed Liabilities and
Obligations.
(c) Notice of any claim of indemnification under this Agreement (other
than for claims pursuant to Sections 18 and 23) shall be effective only if
such notice shall have been given in writing to the Indemnitor (as
hereinafter defined) on or prior to December 31, 1997. Notice of claims by
the Parents against Buyer regarding Assumed Liabilities and Obligations shall
be effective only if given in writing on or prior to the date six months
following the date on which the liability of Parents is discharged with
respect to the last outstanding Assumed Liabilities and Obligations.
(d) The first $1,500,000 in the aggregate of claims made by Buyer or by
Parents and Sellers as a group (except claims against Parents under Sections
19 or 23 or under subparagraphs 15 (a)(iii) and (iv) above, claims against
Buyer under Section 19 or under subparagraphs 15 (b)(iii) above or claims
against either Buyer or Parents under Sections 12 or 14 hereof) pursuant to
this Section shall be borne by that party and shall not be indemnifiable.
The minimum amount of each such claim shall be not less than $50,000 in the
aggregate.
(e) In the event that indemnification is sought with respect to any
obligation of Buyer and Parents and Sellers under this Agreement, the party
seeking indemnification (the "INDEMNITEE") shall give the party from whom
indemnification is sought (the "INDEMNITOR") notice of any claim of the
commencement of any action or proceeding promptly after the Indemnitee
receives notice thereof, and shall permit the Indemnitor to assume the
defense of any such claim or litigation resulting from such claim.
If the Indemnitor assumes the defense of any such claim or litigation
resulting therefrom, the obligations of Indemnitor as to such claim shall be
limited to taking all steps necessary in the defense or settlement of such
claim or litigation resulting therefrom and to holding the Indemnitee
harmless from and against any and all losses, damages and liabilities caused
by or arising out of any settlement approved by the Indemnitor or any
judgment in connection with such claim or litigation resulting therefrom.
The Indemnitee may participate, at its expense, in the defense of any
such claim or litigation, provided that the Indemnitor shall direct and
control the defense of such claim or litigation.
Except with the written consent of the Indemnitee, the Indemnitor shall
not, in the defense of such claim or any litigation resulting therefrom,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnitee of a release from all liability with respect to
the claim or litigation.
If the Indemnitor shall not assume the defense of any such claim or
litigation resulting therefrom, the Indemnitee may defend against such claim
or litigation in such manner as it may deem appropriate and, unless the
Indemnitor shall deposit with the Indemnitee a sum equivalent to the total
amount demanded in such claim or litigation, or shall deliver to Indemnitee a
surety bond for such amount in form and substance reasonably satisfactory to
Indemnitee, Indemnitee may settle such claim or litigation on such terms as
it may reasonably deem appropriate, and the Indemnitor shall promptly
reimburse Indemnitee for the amount of all costs and expenses, legal or
otherwise, reasonably incurred by the Indemnitee in connection with the
defense against or settlement of such claims or litigation. If no settlement
of such claim or litigation is made, the Indemnitor shall promptly reimburse
the Indemnitee for the amount of any final judgment rendered with respect to
such claim or in such litigation and for all reasonable costs and expenses,
legal or otherwise, incurred by the Indemnitee in the defense against such
claim or litigation, but only to the extent that such amounts are actually
paid.
16. [INTENTIONALLY LEFT BLANK]
17. EXPENSES. Parents, Sellers and Buyer shall each be responsible for
all of their own expenses incurred in connection with the transactions
contemplated hereby. Parents and Sellers shall be responsible for the
accounting and auditing fees and expenses related to the preparation of the
Statement of Net Book Value. Parents and Sellers shall cooperate and cause
their accountants and SRFI's accountants to cooperate and assist Buyer and
its accountants (including consenting to the use of the SRFI Group Financial
Statements) with respect to any filings by Buyer with the Securities and
Exchange Commission in connection with the transactions contemplated hereby.
Parents and Sellers shall be responsible for any and all fees and expenses of
Parents', Sellers' and SRFI's accountants with respect to the foregoing.
Buyer will pay the incremental costs and expenses of auditing the SRFI
financial statements or other information required by Buyer, other than the
Statement of Net Book Value as of the Closing Date. Buyer will pay the cost
of the Commitments, Title Policies and Surveys set forth in Section 10(o).
18. ENVIRONMENTAL MATTERS.
(a) WARRANTY. Parents warrant that, other than as disclosed to Buyer
pursuant to Schedule 10(g) attached:
(i) Compliance with Environmental Laws. The business and
operations of each member of the SRFI Group comply in all material
respects with all applicable Environmental Laws, except to the extent
that such noncompliance could not be reasonably expected to have a
material adverse effect on the business, operations, properties, assets
or condition (financial or otherwise) of the SRFI Group.
(ii) Notice/Receipt of Notice. No member of the SRFI Group has
given, or is required to give, nor has any member of the SRFI Group
received, any written notice, letter, citation, or order, or any written
warning, complaint, inquiry, claim or demand (or if verbal, to the
extent the warning, complaint, inquiry, claim or demand is recorded in a
written log) that: (i) any member of the SRFI Group has violated, or is
about to violate, any Environmental Law; (ii) there has been a release,
or there is a threat of release, of a non-de minimis quantity of
Hazardous Material from any member of the SRFI Group's property,
facilities, equipment or vehicles or previously owned or leased
properties; (iii) any member of the SRFI Group may be or is liable, in
whole or in part, for material costs of cleaning up, remediating,
restoring or responding to a release of Hazardous Material; (iv) any of
the SRFI Group's property or assets or previously owned or leased
properties or assets are subject to a lien in favor of any governmental
entity for any liability, costs or damages, under any Environmental Law;
and (v) any member of the SRFI Group may be or is liable in whole or in
part, for natural resource damages; provided, that for purposes of
liability for natural resource damages such notice, letter, citation,
order, inquiry, claim or demand was made by a governmental agency.
(iii) Property on Environmental Cleanup Lists. No property now or
previously owned or leased by the SRFI Group is listed (or with respect
to Owned Real Estate proposed for listing) on the National Priorities
List pursuant to Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. 9601 et seq.) ("CERCLA"),
on the CERCLIS or on any similar state list of sites requiring
investigation or clean-up.
(iv) [Intentionally left blank.]
(v) Past Disposal -- On site. Neither any member of the SRFI
Group nor to the best knowledge of Sellers any previous owner or other
person, has ever caused or permitted any material release or disposal of
any Hazardous Material on, under or at any of the facilities or
properties of the SRFI Group or any part thereof, and none of such
facilities or properties, nor any part thereof have ever been used
(whether by any member of the SRFI Group or to Sellers' best knowledge
by any other person) as a permanent storage facility or disposal site
for any Hazardous Material.
(vi) Underground Storage Tanks. There are no underground storage
tanks, including any associated piping, active or abandoned, including
petroleum storage tanks, on or under any property now or previously
owned or leased by the SRFI Group that, singly or in the aggregate,
have, or may reasonably be expected to have, a material adverse effect
on the financial condition, operations, assets, business, or properties
of the SRFI Group.
(vii) Off-Site Disposal. No member of the SRFI Group has directly
transported or directly arranged for the transportation of any Hazardous
Material to any location which is listed, proposed for listing or, to
the best knowledge of Sellers, which if known to the state or federal
government would warrant listing on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar state list or which
is or reasonably could be the subject of federal, state or local
enforcement actions or other investigations which may reasonably be
expected to lead to material claims for any remedial work, damage to
natural resources or personal injury, including claims under CERCLA.
(viii) PCBs/Asbestos. There are no PCB's or friable asbestos
present at any property now or previously owned or leased by the SRFI
Group that, singly or in the aggregate, have, or may reasonably be
expected to have, a material adverse effect on the financial condition,
operations, assets, business or properties of the SRFI Group.
(ix) Pollution Control Equipment. All pollution control equipment
is in proper operating condition, has been properly maintained, and, in
the case of major ("end-of-pipe") wastewater treatment and air pollution
control facilities, has been designed to maintain compliance with
applicable Environmental Laws based upon the current production rates
and operating policies of SRFI in effect since January 1, 1995. All
material actions necessary to maintain in force any original, as
delivered, manufacturer warranties have been taken with respect to all
major components of wastewater and air pollution control facilities.
(x) Other Environmental Conditions Off-Site. To Sellers' best
knowledge there are no sites or locations currently owned or leased by
the SRFI Group where Hazardous Materials were disposed of which with the
passage of time, or the giving of notice or both could reasonably be
expected to give rise to any material liability under any Environmental
Law, to any member of the SRFI Group.
(b) INDEMNITY. Subject to the provisions of Section 18(c) below and
the limitations on indemnification set forth in Section 15(d) above, Parents
shall indemnify and hold Buyer and the members of the SRFI Group harmless
from and against any and all losses, liabilities, damages, injuries,
penalties, fines, costs, expenses and claims of any and every kind whatsoever
(including reasonable attorneys' and consultants' fees and expenses), paid,
incurred or suffered by Buyer as a result of any breach of warranties set
forth in Section 18(a). With respect to any liability for disposal or
arranging for disposal of Hazardous Materials at sites or locations not
currently owned or leased by the SRFI Group this indemnity shall apply
notwithstanding the fact that Buyer may have received or obtained information
before the Closing Date, other than that information disclosed on Schedule
10(g) indicating or otherwise showing that a claim exists or may exist under
this indemnity, including, but not limited to, any information relating to a
breach of the warranties set forth in Section 18(a) above.
(c) SPECIAL PROVISIONS. The following provisions shall apply in the
event of any breach of warranty under this Section 18.
(i) Notice. Buyer shall promptly, and in no event later than 90
days from the date Buyer has knowledge, notify Parents in writing of any
claim, demand or action, situation or event covered by the warranty and
indemnification provisions of Section 18, with respect to any work or
activities undertaken by Buyer which is subject to this indemnity, Buyer
shall provide Parents in a timely manner, written documentation prepared
in the normal course of business describing the work or activities.
(ii) Disclosure of On-Site Environmental Matters. Buyer agrees
that environmental matters associated with the Real Estate which are
contained in the environmental reports and documents listed on Schedule
10(g), as well as any information obtained by Buyer during its due
diligence activities conducted on the Real Estate between the signing of
this Agreement and the Closing Date, shall be considered disclosed to
Buyer.
(iii) Election of Control Off-Site Work. At Parents' option, to
the extent Parents are obligated to indemnify Buyer under this Section
for the costs of investigating, remediating, restoring, cleaning-up any
site where Hazardous Materials were disposed and the site is located on
property not currently owned, leased or otherwise used by the SRFI Group
(nor reasonably anticipated to be used by the SRFI Group), Parents may
elect to take control of the investigation, remediation, restoration
and/or clean-up ("Environmental Cleanup"). If they elect to do so,
Parents shall so notify Buyer and Parents thereafter shall be solely
responsible (as between the parties hereto) for managing and paying for
such Environmental Cleanup (to the extent it is obligated to indemnify
Buyer) including any fines, penalties or third-party actions associated
with the Environmental Cleanup.
(iv) Buyer's Control of Work. Other than in connection with off-
site Environmental Cleanups, Buyer and/or the SRFI Group shall manage
and conduct any Environmental Cleanup work and shall manage and control
the repair and replacement of any pollution control equipment. All such
work shall be done in a commercially reasonable, cost-effective manner
using good faith business judgment and without regard to the
availability of indemnification hereunder.
(v) Pollution Control Equipment. In situations where the
installation of pollution control equipment is required in order to
obtain compliance with the Environmental Laws, Parents' liability under
this Section shall include both capital and reasonable operation and
maintenance costs (calculated on a reasonable present value basis).
(vi) Interference with Operations. In situations where the
Environmental Cleanup or the installation, repair or replacement of the
pollution control equipment will materially interfere with the conduct
of the operations of the SRFI Group, Parents shall be responsible for
the reasonable costs, expenses or losses associated with or attributable
to any material business interruption losses, provided that Buyer shall
do the work or activities in a manner that is least disruptive of the
SRFI Group's ongoing operations.
(d) EXCLUSIVE REMEDY. This Section provides to Buyer, the respective
SRFI Group members, and anyone claiming under or through Buyer the exclusive
remedy against Parents with respect to any matter covered by this Section 18,
and such exclusive remedy shall lapse and be of no further force or effect on
and after the fifth anniversary of the Closing Date.
(e) INSPECTION OF BOOKS AND RECORDS. In the event of any claims made
by Buyer for indemnification under this Section 18, Sellers shall be entitled
to access, at times reasonably convenient to Buyer and the members of the
SRFI Group, to such books, records and data related to such claim for
indemnification hereunder, as Parents deem necessary to verify the basis or
amount of such claim.
19. TERMINATION OF AGREEMENT. This Agreement may be terminated upon
ten (10) business days prior written notice at any time prior to Closing
without liability of any party to the other:
(a) by mutual consent of Parents and Buyer;
(b) by Buyer, if notice of a material adverse development with respect
to the financial condition, results of operations or prospects of the SRFI
Group has been given, in accordance with Section 9(e) hereof;
(c) by Buyer, if Closing has not occurred on or before September 30,
1995 as a result of the nonfulfillment of any of the conditions to Buyer's
obligation to perform contained in Section 10 of this Agreement;
(d) by Parents, if notice of a material adverse development with
respect to the financial condition, results of operations or prospects of
Buyer has been given, in accordance with Section 9(e) hereof;
(e) by Parents, if Closing has not occurred on or before September 30,
1995 as a result of the nonfulfillment of any of the conditions to Sellers'
obligation to perform contained in Section 11 of this Agreement; and
(f) by any party, if Closing has not occurred by October 31, 1995.
Termination of this Agreement shall not affect in any way the continuing
obligations of the parties hereto pursuant to Section 12 relating to brokers
and Section 14 hereof relating to the treatment of confidential information.
20. ANNOUNCEMENTS. Buyer and Parents shall cooperate in the
preparation of any announcements regarding the transactions contemplated by
this Agreement. Except as required by law, no party shall issue any
announcement regarding the transactions contemplated hereby without the prior
consent of the other parties, which consents shall not be unreasonably
withheld. The covenants set forth in this Section shall be enforceable in
law or at equity by either party.
21. RECORDS. After the Closing Date, Buyer shall retain the books,
records or other data of each member of the SRFI Group existing at the
Closing Date for a period of ten (10) years. During the retention period
specified above, Parents shall be entitled to access, at times reasonably
convenient to Buyer, to such books, records and data in connection with the
preparation or handling of Sellers' and Parents' tax returns, financial
reports, tax audits, W-2 forms, litigation matters or any other reasonable
need of any Seller or Parent. If Buyer wishes to dispose of such material
(whether during or following the 10-year period), it shall give Parents prior
notice and the opportunity to remove such material at the expense of the
Parent(s) requesting the same.
22. ASSISTANCE AFTER CLOSING. Buyer shall furnish, at no cost to
Parents and Sellers, such assistance to Parents and Sellers in the
preparation of their respective fiscal 1994 and 1995 financial and tax
reports as Parents and Sellers may reasonably request. All such assistance
shall be on a confidential basis and Parents and Sellers agree to comply with
the confidentiality and limitation on use provisions of Section 14 hereof
with respect to such confidential information.
Buyer shall also provide Parents with reasonable assistance, including,
without limitation, furnishing of documents and making available to Parents
potential witnesses within its control or that of any member of the SRFI
Group and the assistance of their respective engineers or experts, in the
defense of any claim, lawsuit or tax examination arising out of the
operations of SRFI prior to the Closing Date for which Parents or Sellers
retain liability under this Agreement. Parents shall reimburse Buyer or such
member of the SRFI Group for its out of pocket expenses incurred in providing
such assistance.
23. TAX MATTERS; PAYMENT OF TAXES.
(a) TAX RETURNS. Parents and Sellers shall prepare or cause to be
prepared and shall timely file all Returns (including any amendments thereto)
relating to any Taxes of the members of the SRFI Group with respect to any
tax period ending on or before the Closing. Parents or Sellers shall pay or
cause to be paid all Taxes of the members of the SRFI Group with respect to
any period ending on or before the Closing as determined in accordance with
Sections 23(b) and 23(c) hereof.
(b) APPORTIONMENT OF INCOME. Parents and Sellers will include the
income of the SRFI Group (including any deferred income and any excess loss
accounts pursuant to relevant rules and regulations of the Internal Revenue
Service) on Parents' and Sellers' federal and state income tax Returns for
all periods through the Closing Date and shall pay any federal and state
income taxes attributable to such income. The SRFI Group will furnish all
tax information requested by Parents and Sellers to it for inclusion in
Parents' and Sellers' income tax Returns for the period which includes the
Closing Date in accordance with Parents' and Sellers' past custom and
practice. The income of the SRFI Group will be apportioned to the period up
to and including the Closing Date and the period after the Closing Date by
closing the books of the SRFI Group as of the end of the Closing Date.
(c) ALLOCATION OF TAXES. For purposes of this Agreement, in the case
of any Taxes that are imposed on a periodic basis and are payable for a
period that begins before the Closing Date and ends after the Closing Date,
Parents or Sellers shall reimburse Buyer for the portion of such Taxes
payable for the period ending on the Closing Date to the extent such Taxes
are not reflected on the Statement of Net Book Value as of the Closing Date.
For this purpose, the portion of such Tax payable for the period ending on
the Closing Date shall in the case of any Taxes other than Taxes based upon
or related to income or sales or use taxes, be deemed to be the amount of
such Taxes for the entire period multiplied by a fraction, the numerator of
which is the number of days in the period ending on the Closing Date, and the
denominator of which is the number of days in the entire period. The
preceding sentence shall be applied with respect to Taxes relating to capital
(including net worth or long-term debt) or intangibles by reference to the
level of such items on the Closing Date to the extent such Taxes are not
reflected on the Statement of Net Book Value as of the Closing Date.
(d) INDEMNITY. Notwithstanding anything to the contrary in this
Agreement whether expressed or implied, Parents shall indemnify and hold
harmless Buyer, and each member of the SRFI Group, against:
(1) all Taxes imposed on any member of the SRFI Group with respect
to any period ending on or before the Closing;
(2) all Taxes imposed on Buyer or on any member of the SRFI Group
with respect to any period which begins before the Closing
Date and ends after the Closing Date to the extent allocated
to the portion of such period ending on the Closing Date,
determined in accordance with Section 23 hereof;
(3) all Taxes imposed on Buyer or on any member of the SRFI Group with
respect to income earned by any member of the SRFI Group for the
period beginning January 1, 1995 and ending on the Closing Date,
determined in accordance with Section 23(b) hereof;
(4) all Taxes imposed on any member of the SRFI Group as a result
of the Section 338(h)(10) Elections contemplated by Section 24
hereof;
(5) all Taxes imposed on any member of an affiliated,
consolidated, combined or unitary group which includes or has
included any member of the SRFI Group with respect to any
taxable period that ends on or prior to the Closing;
(6) all liability resulting from or attributable to a breach of
the representations, warranties and covenants contained in
Section 7(t) and this Section 23; and
(7) any claim under Treas. Reg. 1.1502-6 by the Internal Revenue
Service against any member of the SRFI Group which was a
member of Parents' respective consolidated groups prior to the
Closing Date with respect to any federal income tax liability
of Parents and Sellers for any period ending on or prior to
December 31, 1995.
(e) POST-CLOSING ELECTIONS. Parents and Sellers will (or will cause
members of the SRFI Group, as the case may be to) make or join, as necessary,
with Buyer in making any election relating to income taxes, including, but
not limited to, elections under Section 732(d) and Section 754 of the Code,
for the year in which the Closing Date occurs. Prior to Closing, Buyer shall
retain an appraiser to appraise the assets of the SRFI Group. Sellers and
the members of the SRFI Group and their respective employees shall cooperate
fully with Buyer and its appraiser in connection with the appraisal. The
cost of the appraisal shall be borne by Buyer.
(f) CONTROL OF CONTEST. Parents shall have the right, at their own
expense, to control any audit or determination by any taxing authority,
initiate any claim for refund or amended Return and contest, resolve and
defend against any assessment, notice of deficiency or other adjustment or
proposed adjustment of Taxes for any taxable period for which any Seller or
Parent (or any of their affiliates) is charged with responsibility for filing
a Return under this Agreement. Each party will allow the other and its
counsel (at its or their own expense) to be represented during any audits of
income tax Returns to the extent that disputed items therein relate to the
SRFI Group. Buyer shall, or shall cause its affiliates to, undertake or
authorize actions in their capacity as tax matters partner of the SRFI Group
as requested by Parents with respect to this Section 23(f).
(g) GENERAL. Each of Buyer, Parents and Sellers shall provide the
other, and Buyer shall following the Closing cause each member of the SRFI
Group to provide to Parents and Sellers, with the right, at reasonable times
and upon reasonable notice, to have access to personnel, and to copy and use,
any records or information that may be relevant in connection with the
preparation of any Returns, any audit or other examination by any taxing
authority or any litigation relating to liability for Taxes. Information
required in the filing of any Return shall be provided to the other party not
less than thirty (30) days before such Return is due. Parents and Sellers
will allow Buyer an opportunity to review and comment upon any Returns under
Subsection 23(a) (including any amended returns) to the extent that they
relate to any member of the SRFI Group. Parents and Sellers will take no
position on such Returns that relate to any member of the SRFI Group that
would adversely affect any member of the SRFI Group after the Closing.
Parents, Sellers and Buyer shall retain all records relating to Taxes for as
long as the statute of limitations with respect thereto shall remain open.
(h) SALES AND TRANSFER TAXES. All sales and transfer Taxes (including
all stock transfer taxes, if any) incurred in connection with the
transactions contemplated hereby will be borne by the statutorily responsible
party. If required by applicable law, Buyer or Parents or Sellers, as the
case may be, will join in the preparation and execution of any Returns or
other documentation related to the payment of any sales or transfer Taxes.
(i) TAX EFFECTIVE TIME. For purposes of Taxes, the Closing shall be
deemed to have occurred, and shall be effective, as of the close of business
on the Closing.
(j) SURVIVAL. All of the representations, warranties, covenants and
indemnities contained in this Agreement which relate to Taxes shall survive
the Closing (even if the Indemnified Party knew or had reason to know of any
misrepresentation or breach of warranty or covenant at the time of the
Closing) and continue in full force and effect until the expiration of the
applicable statute of limitations (including any extensions thereof).
(k) TAX AGREEMENTS. Minnesota Power and Buyer agree that, upon
Closing, the Tax Agreement dated October 5, 1993 and the State Tax Agreement
dated October 5, 1993, both between Minnesota Power and its subsidiaries,
including SRFC, shall terminate as to SRFC, and, that notwithstanding Section
7 of each such agreement, following termination of each agreement, SRFC and
Buyer shall not be bound by the terms of the agreements and not be entitled
to receive or obligated to make payments under the agreements attributable to
any period during which SRFC was a party to each agreement.
24. SECTION 338(H)(10) ELECTION. Minnesota Power and Synertec agree to
jointly file with Buyer the election (the "ELECTION") provided for by Section
338(h)(10) of the Code and the corresponding election under applicable state
or local tax law with respect to the sale and purchase of the Stock. In
connection with the Election:
(a) Buyer and Minnesota Power and Synertec shall each provide to the
other all necessary information, including information as to tax basis, to
permit the Election to be made and its consequences to be accurately
reflected for all relevant accounting and tax reporting purposes, and to take
all other actions necessary to enable Buyer and Minnesota Power and Synertec
to make the Election.
(b) Buyer shall retain at Buyer's cost an appraiser to prepare a report
(a "REPORT") appraising the value of the assets of SRFC to determine the
proper allocations (the "ALLOCATIONS") of the "adjusted grossed-up basis"
(within the meaning of Treasury Regulation 1.338(b)-1) and the modified
adjusted deemed selling price ("MADSP") (within the meaning of Treasury
Regulation 1.338(h)(10)-1) among the assets of SRFC in accordance with
Section 338(b)(5) and (h)(10) of the Code and Treasury Regulations
thereunder.
The Report shall be finalized no later than 120 days after the Closing
Date. At least thirty (30) days before such Report is finalized, Buyer shall
provide Parents a copy of the appraiser's preliminary report or indication of
the Allocations. After receipt of such preliminary report or indication,
Minnesota Power shall give to Buyer in writing any objections or questions
which Minnesota Power may have to such preliminary report or indication, and
the parties shall thereafter use their best efforts to resolve such
objections or questions so that the Report is finalized no later than 120
days after the Closing Date and the Election is timely made.
(c) Buyer and Minnesota Power and Synertec shall jointly prepare a Form
8023-A, together with all required attachments, and the corresponding forms
required or appropriate under state tax laws (collectively, an "ELECTION
FORM") in a manner consistent with the Allocation.
(d) As promptly as practicable after the Closing Date, Buyer and
Minnesota Power and Synertec shall take all action and file all documents to
effect and preserve a timely Election.
(e) Minnesota Power and Synertec shall allocate the MADSP, if any,
resulting from the Election in a manner consistent with the Allocations and
shall not take any position inconsistent with the Election or the Allocations
in connection with any Return; provided, however, that Minnesota Power and
Synertec may take into account their transaction costs when calculating such
MADSP.
(f) Buyer shall allocate the "adjusted grossed-up basis" of the capital
stock of SRFC among the assets of SRFC in a manner consistent with the
Allocations and shall not take any position inconsistent with the Election or
the Allocations in any Return or otherwise; provided, however, that Buyer may
add its transaction costs to the "adjusted grossed-up basis" of the capital
stock of SRFC for purposes of allocating among the assets of SRFC.
(g) Synertec and Buyer acknowledge that for federal income tax purposes
(and for state income tax purposes in those states whose income tax
provisions follow the federal income tax treatment), the sale of the capital
stock of SRFC from Synertec to Buyer will be treated as a sale of assets by
SRFC to Buyer followed by a complete liquidation of SRFC with and into
Synertec, and the parties agree to report the transaction in a manner
consistent with this treatment and to take no positions inconsistent with
this treatment. The parties also agree that neither Buyer nor SRFC shall be
liable for any Taxes resulting from the sale of the capital stock of SRFC or
the Election.
25. LIMITATIONS ON LIABILITY.
(a) Any amount of indemnity payable by Parents under Sections 12, 14,
15, 18, 19 or 23 of, or relating to the transactions contemplated by, this
Agreement, or arising in connection with the operations, properties or
financial condition of members of the SRFI Group shall be paid by Parents
severally, and not jointly or jointly and severally, in accordance with the
following principles:
(i) if the claim arises out of any misrepresentation or breach of
warranty made with respect to either Parent or its respective
Affiliates, the claim shall be the sole responsibility of such Parent;
(ii) if the claim arises out of any misrepresentation or breach of
warranty made with respect to LSPI Fiber, SRFI or SRFC, the claim shall
be the responsibility of both Parents, who shall each pay an amount of
indemnity with respect thereto in proportion to their respective equity
interests therein;
(iii) if the claim arises out of the breach of any covenant or
agreement by either Parent or its respective Affiliates, the claim shall
be the sole responsibility of such Parent;
(iv) if the claim arises out of the breach of any covenant or
agreement by LSPI Fiber, SRFI or SRFC, the claim shall be the
responsibility of both Parents, who shall each pay an amount of
indemnity with respect thereto in proportion to their respective equity
interests therein;
(v) if the claim arises out of assertion by any third party of any
claim (including tax claims), liability or obligation against or with
respect to any member of the SRFI Group which is assumed, or indemnified
against, by either Parent, with respect to its respective Affiliates,
the claim shall be the sole responsibility of such Parent;
(vi) if the claim arises out of assertion by any third party of
any claim (including tax claims), liability or obligation against or
with respect to any member of the SRFI Group which is assumed, or
indemnified against, by both Parents, with respect to LSPI Fiber, SRFI
or SRFC, the claim shall be the responsibility of both Parents, who
shall each pay an amount of indemnity with respect thereto in proportion
to their respective equity interests therein; and
(vii) if the claim arises from the termination of this Agreement,
compensation for which is provided in Section 19 hereof, the Parent(s)
in breach shall be solely responsible for such claim.
To the extent that any amount of indemnity is payable by Buyer to Parent(s),
the foregoing principles shall apply to the determination of the Parent to
whom such indemnity is payable, mutatis mutandis.
(b) No party is responsible for, and no party may recover from any
other party, any amount of consequential (e. g., lost profits or the like) or
punitive damages. Notwithstanding the foregoing exclusion, to the extent any
party hereto sustains any loss or incurs any expense compensable under this
Agreement that contains or includes any measure of consequential or punitive
damages awarded to a third party, then such indirect consequential and
punitive damages may be recovered.
(c) Parents and Buyer specifically agree that the total amount of
indemnification payable by Parents pursuant to Sections 15, 18 and 23
together shall not exceed the amount of the purchase price paid to each
Parent in cash hereunder.
26. AMENDMENT AND WAIVER. This Agreement may not be amended or
modified at any time or in any respect other than by an instrument in writing
executed by Buyer and Parents.
27. NOTICES. Any notice or communication provided for in this
Agreement shall be in writing and shall be deemed given when delivered
personally, against receipt, or when deposited in the United States mail,
registered or certified mail, return receipt requested to the following
address:
(a) If to Pentair:
Pentair, Inc.
1500 County Road B2 West
St. Paul, Minnesota 55113-3105
Attention: Ronald V. Kelly
Facsimile: (612) 639-5209
with a copy to:
Henson & Efron, P.A.
1200 Title Insurance Building
400 Second Avenue South
Minneapolis, Minnesota 55401
Attention: Louis L. Ainsworth
Facsimile: (612) 339-6364
(b) If to Minnesota Power:
Minnesota Power & Light Company
30 West Superior Street
Duluth , Minnesota 55802
Attention: David G. Gartzke
Facsimile: (218) 723-3960
with a copy to:
Minnesota Power & Light Company
30 West Superior Street
Duluth , Minnesota 55802
Attention: Steven W. Tyacke
Facsimile: (218) 723-3955
(c) If to Buyer:
Consolidated Papers, Inc.
231 First Avenue North
P. O. Box 8050
Wisconsin Rapids, WI 54495-8050
Attention: Carl H. Wartman
Facsimile: (715) 422-3203
with a copy to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606-5096
Attention: Robert A. Schreck, Jr.
Facsimile: (312) 984-3669
Any party may change the above address for notice by written notice to the
other parties in accordance with the provisions of this Section.
28. PARTIES IN INTEREST. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be
enforceable by Parents, Sellers and Buyer, their respective successors and
permitted assigns. No party may assign this Agreement without the express
written consent of the other parties, except that Buyer may assign this
Agreement to an affiliate of Buyer provided that no such assignment shall
relieve Buyer of its obligations hereunder or otherwise prejudice Parents or
Sellers. This Agreement shall not confer any rights or remedies upon any
person other than Buyer, Parents and Sellers and their respective successors
and permitted assigns.
29. FURTHER ASSURANCES. Each party shall from time to time execute and
deliver such further documents and do such further acts as the other parties
may reasonably require for carrying out the purposes and intent of this
Agreement.
30. NO WAIVERS. No failure of any party to this Agreement to pursue
any remedy resulting from a breach of this Agreement shall be construed as a
waiver of that breach or as a waiver of any subsequent or other breach.
31. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the substantive laws of the state of Minnesota without
giving effect to the choice of law provisions thereof. This Agreement shall
be subject to the exclusive jurisdiction of the courts of, and United States
federal courts sitting in, the state of Minnesota, and all parties hereby
irrevocably submit to the jurisdiction of such courts with respect to any
claim arising out of this Agreement.
32. SEVERABILITY. Should any provision of this Agreement be or become
invalid in whole or in part or be incapable of performance for whatever
reason, then the validity of the remaining provisions of this Agreement shall
not be affected thereby. In such event, the parties hereby undertake to
substitute for any such invalid provision or for any provision incapable of
performance, a provision which corresponds to the spirit and purpose of such
invalid or unperformable provision as far as permitted under applicable law,
so as to realize to the fullest extent possible the economic purpose and
effect of this Agreement.
33. MISCELLANEOUS. This Agreement constitutes the entire agreement
between the parties and supersedes all prior representations, understandings
or agreements between them, written or oral, respecting the within subject
matter. Headings are for convenience only and are not intended to alter any
of the provisions of this Agreement. Words importing the singular number
include the plural and vice versa. This Agreement may be signed in multiple
copies, each of which shall be considered an original, but all of which shall
together constitute one and the same instrument.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
by its authorized officer as of the date first above written.
PENTAIR, INC.
By: /s/ Winslow H. Buxton
Its: Chief Executive Officer
MINNESOTA POWER & LIGHT COMPANY
By: /s/ Arend J. Sandbulte
Its: Chairman and President
SYNERTEC, INC.
By: /s/ Gerald B. Ostroski
Its: President and General Manager
LSPI FIBER CO.
By Pentair Duluth Pulp Corp.,
its general partner
By: /s/ Ronald V. Kelly
Its: Chief Executive Officer
By Minnesota Pulp Incorporated II,
its general partner
By: /s/ David G. Gartzke
Its: Vice President and Chief Financial Officer
CONSOLIDATED PAPERS, INC.
By: /s/ Patrick F. Brennan
Its: President and Chief Executive Officer
Exhibit 4(a)
$130,000,000
CREDIT AGREEMENT
DATED AS OF
JUNE 27, 1995
BETWEEN
CONSOLIDATED PAPERS, INC.
AND
WACHOVIA BANK OF GEORGIA, N.A.
TABLE OF CONTENTS
[Not a part of the Agreement]
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . .
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . .
SECTION 1.03. References . . . . . . . . . . . . . . . . . . . . . .
ARTICLE II. THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.01. Commitment to Lend . . . . . . . . . . . . . . . . . .
SECTION 2.02. Method of Borrowing . . . . . . . . . . . . . . . . . .
SECTION 2.03. Note . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.04. Maturity of Advances . . . . . . . . . . . . . . . . .
SECTION 2.05. Interest Rates . . . . . . . . . . . . . . . . . . . .
SECTION 2.06. Fees . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.07. Optional Termination or Reduction of Commitment . . . .
SECTION 2.08. Mandatory Termination of Commitment; Extension of
Expiration Date . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.09. Optional Prepayments . . . . . . . . . . . . . . . . .
SECTION 2.10. Mandatory Prepayments . . . . . . . . . . . . . . . . .
SECTION 2.11. General Provisions Concerning Payments . . . . . . . .
SECTION 2.12. Computation of Interest and Fees . . . . . . . . . . .
ARTICLE III. CHANGE IN CIRCUMSTANCES; COMPENSATION . . . . . . . . . . . .
SECTION 3.01. Basis for Determining Interest Rate Inadequate or
Unfair . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.02. Illegality . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.03. Increased Cost and Reduced Return . . . . . . . . . . .
SECTION 3.04. Base Rate Loans Substituted for Affected Euro-Dollar
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.05. Compensation . . . . . . . . . . . . . . . . . . . . .
ARTICLE IV. CONDITIONS TO BORROWINGS . . . . . . . . . . . . . . . . . . .
SECTION 4.01. Conditions to First Borrowing . . . . . . . . . . . . .
SECTION 4.02. Conditions to All Borrowings . . . . . . . . . . . . .
ARTICLE V. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . .
SECTION 5.01. Corporate Existence and Power . . . . . . . . . . . . .
SECTION 5.02. Corporate and Governmental Authorization;
Contravention . . . . . . . . . . . . . . . . . . . . .
SECTION 5.03. Binding Effect . . . . . . . . . . . . . . . . . . . .
SECTION 5.04. Financial Information . . . . . . . . . . . . . . . . .
SECTION 5.05. Litigation . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.06. Compliance with ERISA . . . . . . . . . . . . . . . . .
SECTION 5.07. Taxes . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.08. Subsidiaries . . . . . . . . . . . . . . . . . . . . .
SECTION 5.09. Not an Investment Company . . . . . . . . . . . . . . .
SECTION 5.10. Ownership of Property; Liens . . . . . . . . . . . . .
SECTION 5.11. No Default . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.12. Full Disclosure . . . . . . . . . . . . . . . . . . . .
SECTION 5.13. Environmental Matters . . . . . . . . . . . . . . . .
SECTION 5.14. Compliance with Laws . . . . . . . . . . . . . . . . .
SECTION 5.15. Transactions with Affiliates . . . . . . . . . . . . .
ARTICLE VI. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.01. Information . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.02. Inspection of Property, Books and Records . . . . . . .
SECTION 6.03. Ratio of Indebtedness For Borrowed Money to Total
Capitalization . . . . . . . . . . . . . . . . . . . .
SECTION 6.04. Minimum Consolidated Tangible Net Worth . . . . . . . .
SECTION 6.05. Loans or Advances . . . . . . . . . . . . . . . . . . .
SECTION 6.06. Negative Pledge . . . . . . . . . . . . . . . . . . . .
SECTION 6.07. Maintenance of Existence; Fields of Business . . . . .
SECTION 6.08. Dissolution . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.09. Consolidations, Mergers and Sales of Assets . . . . . .
SECTION 6.10. Use of Proceeds . . . . . . . . . . . . . . . . . . . .
SECTION 6.11. Compliance with Laws; Payment of Taxes . . . . . . . .
SECTION 6.12. Insurance . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.13. Maintenance of Property . . . . . . . . . . . . . . . .
SECTION 6.14. Environmental Notices . . . . . . . . . . . . . . . . .
ARTICLE VII. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.01. Events of Default . . . . . . . . . . . . . . . . . . .
SECTION 7.02. Remedies on Default . . . . . . . . . . . . . . . . . .
SECTION 7.03. Offset . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.01. Notices . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.02. No Waivers . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.03. Expenses; Documentary Taxes . . . . . . . . . . . . . .
SECTION 8.04. Amendments and Waivers . . . . . . . . . . . . . . . .
SECTION 8.05. Successors and Assigns . . . . . . . . . . . . . . . .
SECTION 8.06. Confidentiality . . . . . . . . . . . . . . . . . . . .
SECTION 8.07. Interest Limitation . . . . . . . . . . . . . . . . . .
SECTION 8.08. Governing Law . . . . . . . . . . . . . . . . . . . . .
SECTION 8.09. Counterparts . . . . . . . . . . . . . . . . . . . . .
SECTION 8.10. Consent to Jurisdiction . . . . . . . . . . . . . . . .
SECTION 8.11. Severability . . . . . . . . . . . . . . . . . . . . .
SECTION 8.12. Captions . . . . . . . . . . . . . . . . . . . . . . .
SCHEDULE 5.05 Description of Potential Litigation
SCHEDULE 5.13 Potentially Responsible Party Designations and Properties on
National Priorities List or CERCLIS List
EXHIBIT A Form of Note
EXHIBIT B Form of Opinion of Counsel for the Borrower
EXHIBIT C Form of Assignment and Acceptance
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, made as of the 27th day of June 1995, by and
between CONSOLIDATED PAPERS, INC., a Wisconsin corporation (together with its
successors, the "Borrower"), and WACHOVIA BANK OF GEORGIA, N.A., a national
banking association (together with its endorsees, successors and assigns, the
"Bank").
BACKGROUND
The Borrower desires to establish with the Bank a credit facility
providing for revolving loans of up to $130,000,000 in the aggregate maximum
principal amount at any time outstanding, and the Bank is willing to
establish such a credit facility on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and the promises
herein contained, and each intending to be legally bound hereby, the parties
agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Definitions. The terms as defined in this
Section 1.01 shall, for all purposes of this Agreement and any amendment
hereto (except as herein otherwise expressly provided or unless the context
otherwise requires), have the meanings set forth herein (terms defined in the
singular to have the same meanings when used in the plural and vice versa):
"Acceptable Obligations" means any of the following:
(i) commercial paper rated A-1 or the equivalent thereof by
Standard & Poor's Ratings Group, Inc., a division of McGraw-Hill, Inc.
or P-1 or the equivalent thereof by Moody's Investors Service, Inc. and
in either case maturing within one year after the date of acquisition;
(ii) tender bonds the payment of the principal of and interest on
which is fully supported by a letter of credit issued by a United States
bank whose long-term certificates of deposit are rated at least AA or
the equivalent thereof by Standard & Poor's Rating Group, a division of
McGraw-Hill, Inc. or Aa or the equivalent thereof by Moody's Investors
Service, Inc.;
(iii) direct obligations of the United States of America;
(iv) obligations issued or unconditionally guaranteed by a state
or municipality, having a rating of AA or better from Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc. or Aa or better from
Moody's Investors Service, Inc.; and
(v) obligations of a corporation having a rating of AA or better
from Standard & Poor's Rating Group, a division of McGraw-Hill, Inc., or
Aa or better from Moody's Investors Service, Inc.
"Acquisitions" means and includes the acquisition by the Borrower
of:
(a) 100% of the issued and outstanding capital stock of Niagara
Paper from Pentair,
(b) (i) 100% of the issued and outstanding capital stock of SRFC
and (ii) 100% of the assets of LSPI Fiber from Synertec and LSPI Fiber,
and
(c) 100% of the issued and outstanding capital stock of Pentair
Duluth and Minnesota Paper from Pentair and Minnesota Power,
in each case, pursuant to the Acquisition Documents.
"Acquisition Documents" means and includes:
(a) that certain Agreement for Sale and Purchase of Stock of
Niagara of Wisconsin Paper Corporation, dated as of May 8, 1995, between
the Borrower and Pentair, together with all agreements, exhibits,
schedules, annexes and documents executed or delivered in connection
therewith;
(b) that certain Agreement for Sale and Purchase of Assets of LSPI
Fiber Co. and Stock of Superior Recycled Fiber Corporation, dated as of
May 8, 1995, among the Borrower and each of Pentair, Minnesota Power,
Synertec and LSPI Fiber, together with all agreements, exhibits,
schedules, annexes and documents executed or delivered in connection
therewith; and
(c) that certain Agreement for Sale and Purchase of Stock of
Pentair Duluth Corp. and Minnesota Paper Incorporated, dated as of May
8, 1995, among the Borrower and each of Pentair and Minnesota Power,
together with all agreements, exhibits, schedules, annexes and documents
executed or delivered in connection therewith.
"Adjusted London Interbank Offered Rate" applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the
applicable London Interbank Offered Rate for such Interest Period by
(ii) 1.00 minus the Euro-Dollar Reserve Percentage.
"Advance" means any advance by the Bank under the Commitment.
"Affiliate" of any Person means (i) any other Person which
directly, or indirectly through one or more intermediaries, controls such
Person, (ii) any other Person which directly, or indirectly through one or
more intermediaries, is controlled by or is under common control with such
Person, or (iii) any other Person of which such Person owns, directly or
indirectly, 20% or more of the common stock or equivalent equity interests.
As used herein, the term "control" means possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies
of a Person, whether through the ownership of voting securities, by contract
or otherwise.
"Agreement Accounting Principles" means generally accepted
principles of accounting as in effect from time to time.
"Applicable Margin" has the meaning set forth in Section 2.05(c).
"Assignee" has the meaning set forth in Section 8.05(c).
"Assignment and Acceptance" means an Assignment and Acceptance
executed in accordance with Section 8.05(c) in the form attached hereto as
Exhibit C.
"Authority" has the meaning set forth in Section 3.02.
"Base Rate" means for any Base Rate Loan for any day, the rate per
annum equal to the higher as of such day of (i) the Prime Rate, and (ii) one-
half of one percent above the Federal Funds Rate for such day. For purposes
of determining the Base Rate for any day, changes in the Prime Rate shall be
effective on the date of each such change.
"Base Rate Loan" means an Advance which bears or is to bear
interest at a rate based upon the Base Rate.
"Borrowing" means a borrowing under the Commitment consisting of an
Advance by the Bank. A Borrowing is a "Euro-Dollar Borrowing" if the Advance
is made as a Euro-Dollar Loan and a "Base Rate Borrowing" if the Advance is
made as a Base Rate Loan.
"Capital Lease" means at any date any lease of Property which in
accordance with Agreement Accounting Principles would be required to be
capitalized on a balance sheet of the lessee.
"Capital Stock" means any nonredeemable capital stock of the
Borrower or any Consolidated Subsidiary (to the extent issued to a Person
other than the Borrower), whether common or preferred.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person, prepared in accordance with
Agreement Accounting Principles.
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act.
"CERCLIS" means the Comprehensive Environmental Response
Compensation and Liability Information System established pursuant to CERCLA.
"Change of Law" shall have the meaning set forth in Section 3.02.
"Closing Date" means June 27, 1995.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code.
"Commitment" shall have the meaning assigned to it in Section 2.01.
"Commitment Fee Payment Date" means the first day of each January,
April, July and October, commencing October 1, 1995; provided that if any
such day is not a Domestic Business Day, the Commitment Fee Payment Date
shall be on the next succeeding Domestic Business Day.
"Consolidated Net Earnings" for any period, means the consolidated
net income of the Borrower and its Subsidiaries accrued during such period as
computed on a consolidated basis in accordance with Agreement Accounting
Principles, and, without limiting the foregoing, after deduction from gross
income of all charges and reserves, including charges and reserves for all
taxes on or measured by income, but excluding any profits or losses on the
sale or other disposition not in the ordinary course of business of fixed or
capital assets or on the acquisition, retirement, sale or other disposition
of stock or securities of the Borrower and its Subsidiaries, and also
excluding taxes on such profits and any tax deductions or credits on account
of any such losses.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which, in accordance with generally accepted
accounting principles consistently applied, would be consolidated with those
of the Borrower in its consolidated financial statements as of such date.
"Consolidated Tangible Net Worth" means, the excess of total assets
of the Borrower and its Subsidiaries over total liabilities and reserves of
the Borrower and its Subsidiaries computed on a consolidated basis, total
assets and total liabilities each to be determined in accordance with
Agreement Accounting Principles excluding, however, from the determination of
total assets, (i) all Intangible Assets and (ii) all Minority Interests.
"Consolidated Total Assets" means, at any time, the total assets of
the Borrower and its Consolidated Subsidiaries, determined on a consolidated
basis, as set forth or reflected on the most recent consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries, prepared in
accordance with generally accepted accounting principles consistently
applied.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"Default" means any condition or event which constitutes an Event
of Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Dollars" or "$" means dollars in lawful currency of the United
States of America.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in Georgia are authorized by law to
close.
"Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Borrower or any Subsidiary required by any Environmental
Requirement.
"Environmental Authority" means any foreign, federal, state, local
or regional government that exercises any form of jurisdiction or authority
under any Environmental Requirement.
"Environmental Judgments and Orders" means all judgments, decrees
or orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent or written agreements with
an Environmental Authority or other entity arising from or in any way
associated with any Environmental Requirement, whether or not incorporated in
a judgment, decree or order.
"Environmental Liabilities" means any liabilities, whether accrued,
contingent or otherwise, arising from and in any way associated with any
Environmental Requirements.
"Environmental Notices" means notice from any Environmental
Authority or by any other person or entity, of possible or alleged
noncompliance with any Environmental Requirement, including without
limitation any complaints, citations, demands or requests from any
Environmental Authority or from any other person or entity for correction of
any violation of any Environmental Requirement or any investigations
concerning any violation of any Environmental Requirement.
"Environmental Proceedings" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.
"Environmental Releases" means releases as defined in CERCLA or
under any applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement relating
to health, safety or the environment and applicable to the Borrower, any
Subsidiary or the Real Properties, including but not limited to any such
requirement under CERCLA or similar state legislation.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, or any successor law, including any rules or
regulations promulgated thereunder. Any reference to any provision of ERISA
shall also be deemed to be a reference to any successor provision or
provisions thereof.
"Euro-Dollar Business Day" means any Domestic Business Day on which
dealings in Dollar deposits are carried out in the London interbank market.
"Euro-Dollar Loan" means an Advance which bears or is to bear
interest at a rate based upon the Adjusted London Interbank Offered Rate.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which
the interest rate on Euro-Dollar Loans is determined or any category of
extensions of credit or other assets which includes loans by a non-United
States office of the Bank to United States residents). The Adjusted London
Interbank Offered Rate shall be adjusted automatically on and as of the
effective date of any change in the Euro-Dollar Reserve Percentage.
"Event of Default" shall have the meaning assigned to such term in
Section 7.01.
"Excepted Lease Obligations" means Indebtedness For Borrowed Money
of the Borrower or any Subsidiary incurred in connection with the refinancing
of, and secured by the Property which is, as of the Closing Date, the subject
of, any of the LSPI Leases or the Niagara Leases, so long as (a) the
aggregate amount of all obligations of the Borrower and its Subsidiaries in
respect of such Indebtedness For Borrowed Money does not exceed Five Hundred
Million Dollars ($500,000,000) and (b) such Property is subject to no other
Liens securing any other Indebtedness For Borrowed Money.
"Expiration Date" means the Initial Expiration Date or, if the term
of the Commitment is extended pursuant to Section 2.08(b), the last day of
each Successive Extension Period.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the next higher 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the
Domestic Business Day next succeeding such day, provided that (i) if the day
for which such rate is to be determined is not a Domestic Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Domestic Business Day as so published on the next
succeeding Domestic Business Day, and (ii) if such rate is not so published
for any day, the Federal Funds Rate for such day shall be the average rate
charged to Wachovia on such day on such transactions.
"Fiscal Quarter" means any fiscal quarter of the Borrower.
"Fiscal Year" means any fiscal year of the Borrower.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness For Borrowed Money or other obligation of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to secure, purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness For Borrowed Money or other obligation (whether arising by
virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to provide collateral security, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the obligee
of such Indebtedness For Borrowed Money or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole
or in part), provided that the term Guarantee shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Hazardous Materials" includes, without limitation, (a) solid or
hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, or in any applicable state or local law or regulation, (b) hazardous
substances, as defined in CERCLA, or in any applicable state or local law or
regulation, (c) gasoline, or any other petroleum product or by-product, (d)
toxic substances, as defined in the Toxic Substances Control Act of 1976, or
in any applicable state or local law or regulation or (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide,
Fungicide, and Rodenticide Act of 1975, or in any applicable state or local
law or regulation, as each such Act, statute or regulation may be amended
from time to time.
"Indebtedness For Borrowed Money" means all indebtedness of the
Borrower and its Subsidiaries (computed on a consolidated basis in accordance
with Agreement Accounting Principles) for borrowed money, including without
limitation, (i) obligations representing the deferred purchase price of
Property (other than accounts payable arising in the ordinary course of
business on customary trade terms), (ii) obligations, whether or not assumed,
secured by Liens or payable out of proceeds or production from Property now
or hereafter acquired by the Borrower or any Subsidiary, (iii) obligations
which are evidenced by notes, acceptances or other instruments, (iv)
Capitalized Lease Obligations, (v) obligations in respect of letters of
credit, and (vi) obligations in respect of Guaranties; provided that in no
event shall Indebtedness For Borrowed Money include any obligations arising
in connection with the Steam Bonds.
"Initial Expiration Date" means July 27, 1996.
"Intangible Assets" means any assets that are not Tangible Assets.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending on
the numerically corresponding day in the first, second or third calendar
month thereafter, as the Borrower may elect in the applicable Notice of
Borrowing; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (c) below) which would otherwise end
on a day which is not a Euro-Dollar Business Day shall be extended
to the next succeeding Euro-Dollar Business Day unless such Euro-
Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar
Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the appropriate subsequent
calendar month) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of the appropriate subsequent calendar
month; and
(c) any Interest Period which begins before the Termination
Date and would otherwise end after the Termination Date shall end
on the Termination Date; and
(2) with respect to each Base Rate Borrowing, the period commencing on the
date of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would otherwise end
on a day which is not a Domestic Business Day shall be extended to
the next succeeding Domestic Business Day; and
(b) any Interest Period which begins before the Termination
Date and would otherwise end after the Termination Date shall end
on the Termination Date.
"Lending Office" means the Bank's office located at its address set
forth on the signature pages hereof (or identified on the signature pages
hereof as its Lending Office) or such other office as the Bank may hereafter
designate as its Lending Office by notice to the Borrower.
"Letter Agreement" means that certain letter agreement, dated as of
May 18, 1995 and accepted by the Borrower effective May 30, 1995, between the
Borrower and the Bank relating to the Advances, and certain fees from time to
time payable by the Borrower to the Bank, together with all amendments and
modifications thereto.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For the purposes of this Agreement, the Borrower or any
Subsidiary shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, Capital Lease or other title retention agreement
relating to such asset.
"Loan Documents" means this Agreement, the Note and any other
document evidencing or securing the Advances.
The "London Interbank Offered Rate" applicable to any Euro-Dollar
Loan means for the Interest Period of such Euro-Dollar Loan the rate per
annum determined on the basis of the offered rate for deposits in Dollars of
amounts equal or comparable to the principal amount of such Euro-Dollar Loan
offered for a term comparable to such Interest Period, which rate appears on
the Reuters Screen LIBO Page as of 11:00 a.m., London time, two (2) Euro-
Dollar Business Days prior to the first day of such Interest Period, provided
that (i) if more than one such offered rate appears on the Reuters Screen
LIBO Page, the "London Interbank Offered Rate" will be the arithmetic average
(rounded upward, if necessary, to the next higher 1/100th of 1%) of such
offered rates; and (ii) if no such offered rates appear on such page, the
"London Interbank Offered Rate" for such Interest Period will be the
arithmetic average (rounded upward, if necessary, to the next higher 1/100th
of 1%) of rates quoted by not less than two major banks in New York City,
selected by the Bank, at approximately 10:00 a.m., Atlanta, Georgia time, two
(2) Euro-Dollar Business Days prior to the first day of such Interest Period,
for deposits in Dollars offered to leading European banks for a period
comparable to such Interest Period in an amount comparable to the principal
amount of such Euro-Dollar Loan.
"LSPI" means Lake Superior Paper Industries, a joint venture
organized under the general partnership laws of the State of Minnesota.
"LSPI Fiber" means LSPI Fiber Co., a joint venture organized under
the general partnership laws of the State of Minnesota.
"LSPI Leases" means and includes those five separate Facility
Leases dated December 31, 1987 between LSPI and First National Bank of
Minneapolis, as Owner Trustee.
"Margin Stock" means "margin stock" as defined in Regulations G, T,
U or X of the Board of Governors of the Federal Reserve System, as in effect
from time to time, together with all official rulings and interpretations
issued thereunder.
"Material Subsidiary" means, at any time, any Subsidiary having
Total Assets as of the end of the Fiscal Quarter most recently ended at least
60 days prior to such time in excess of $1,000,000.
"Minnesota Paper" means Minnesota Paper Incorporated, a Minnesota
corporation.
"Minnesota Power" means Minnesota Power & Light Company, a
Minnesota corporation.
"Minority Interests" means any partnership interests, or any shares
of stock of any class of a Subsidiary (other than directors' qualifying
shares as required by law) that are not owned by the Borrower and/or one of
its Wholly Owned Subsidiaries or any other similar interest in a Person.
Minority Interests shall be valued by valuing Minority Interests constituting
partnership or other similar interests in a Person in accordance with
Agreement Accounting Principles, or by valuing such Minority Interests
constituting preferred stock at the voluntary or involuntary liquidation
value of such preferred stock, whichever is greater, and by valuing Minority
Interests constituting common stock at the book value of capital, paid-in-
capital and retained earnings applicable thereto adjusted, if necessary, to
reflect any changes from the book value of such common stock required by the
foregoing method of valuing Minority Interests in preferred stock.
"Multiemployer Plan" shall have the meaning set forth in
Section 4001(a)(3) or ERISA.
"Net Proceeds of Capital Stock" means any proceeds received by the
Borrower or a Consolidated Subsidiary in respect of the issuance of Capital
Stock, after deducting therefrom all costs and expenses incurred by the
Borrower or such Consolidated Subsidiary in connection with the issuance of
such Capital Stock.
"Niagara Leases" means and includes (a) that certain Lease
Agreement, dated as of November 26, 1985, between Bank One Arizona Leasing
Corporation (formerly Valley Bank and Leasing, Inc.) and Niagara Paper
(successor to Pentair Financial Corporation), (b) that certain Lease
Agreement, dated as of December 30, 1986, between Equipment Credit Services,
Inc. (successor to Wells Fargo Leasing Corporation) and Niagara Paper
(successor to Pentair Financial Corporation), and (c) that certain Lease
Agreement, dated as of September 2, 1990, between Bank One Wisconsin Trust
Company, N.A. and Niagara Paper (successor to Pentair Financial Corporation).
"Niagara Paper" means Niagara of Wisconsin Paper Corporation, a
Wisconsin corporation.
"Note" means a promissory note of the Borrower payable to the order
of the Bank, in substantially the form of Exhibit A hereto, evidencing the
maximum principal indebtedness of the Borrower to the Bank under the
Commitment, either as originally executed or as it may be from time to time
supplemented, modified, amended, renewed or extended.
"Notice of Borrowing" shall have the meaning assigned to it in
Section 2.02.
"Notice of Non-Extension" means a written notice delivered by the
Bank to the Borrower to the effect that the Commitment will not be extended
for a Successive Extension Period.
"Obligations" means all indebtedness, obligations and liabilities
to the Bank existing on the date of this Agreement or arising thereafter,
direct or indirect, joint or several, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising by
contract, operation of law or otherwise, of the Borrower under this Agreement
or any other Loan Document.
"Participant" has the meaning set forth in Section 8.05(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Pentair" means Pentair, Inc., a Minnesota corporation.
"Pentair Duluth" means Pentair Duluth Corp. a Minnesota
corporation.
"Permitted Encumbrances" means:
(a) Liens (i) existing on the date of this Agreement securing
Indebtedness For Borrowed Money outstanding on the date of this
Agreement in an aggregate principal amount not exceeding $0 or
(ii) securing Excepted Lease Obligations;
(b) Liens in connection with worker's compensation,
unemployment insurance, old age benefits, social security
obligations, taxes, assessments, statutory obligations or other
similar charges, good faith deposits in connection with tenders,
contracts or leases to which the Borrower or any Subsidiary is a
party (other than contracts for borrowed money), or other deposits
required to be made in the ordinary course of business; provided
that either: (i) in each case the obligation secured is not overdue
or, if overdue, is being contested in good faith by appropriate
proceedings and reserves have been established therefor that in the
Borrower's reasonable opinion are adequate or (ii) the aggregate
amount of liabilities (including interest and penalties, if any) of
the Borrower and its Subsidiaries secured by such Liens (other than
those covered by clause (i) of this paragraph) does not at any time
exceed $10,000,000 and no such Lien (other than those covered by
clause (i) of this paragraph) could reasonably be expected to have
a material adverse effect on the Borrower and its Subsidiaries
taken as a whole;
(c) mechanics', workmen's, materialmen's, landlords',
carriers' or other similar Liens arising in the ordinary course of
business with respect to obligations which are not due or, if
overdue, either (i) are being contested in good faith by
appropriate proceedings and for which reserves have been
established that in the Borrower's reasonable opinion are adequate
or (ii) the aggregate amount of liabilities (including interest and
penalties, if any) of the Borrower and its Subsidiaries secured by
such Liens (other than those covered by clause (i) of this
paragraph) does not at any time exceed $10,000,000 and no such
Lien (other than those covered by clause (i) of this paragraph)
could reasonably be expected to have a material adverse effect on
the Borrower and its Subsidiaries taken as a whole;
(d) Liens arising out of judgments or awards against the
Borrower or any Subsidiary with respect to which the Borrower or
such Subsidiary shall be prosecuting an appeal or proceeding for
review and with respect to which it shall have obtained a stay of
execution pending such appeal or proceeding for review and shall
maintain reserves in accordance with Agreement Accounting
Principles;
(e) Liens for property taxes not yet subject to penalties for
nonpayment, or survey exceptions, encumbrances, mineral or royalty
reservations, easements or reservations of, or rights of others
for, rights of way, sewers, electric lines, pipe lines, telegraph
and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of its Real Properties, which
exceptions, encumbrances, easements, reservations, rights and
restrictions do not in the aggregate materially detract from the
value of such Real Properties taken as a whole or materially impair
their use in the operation of the business of the Borrower and its
Subsidiaries;
(f) Liens upon any Property acquired by the Borrower or any
Subsidiary after the date hereof (A) to secure the payment of all
or any part of the purchase price of such Property upon the
acquisition thereof by the Borrower or such Subsidiary, or (B) to
secure any Indebtedness For Borrowed Money issued, assumed or
guaranteed by the Borrower or any Subsidiary prior to, at the time
of, or within 90 days after the acquisition of such Property, which
Indebtedness For Borrowed Money is issued, assumed or guaranteed
for the purpose of financing all or any part of the purchase price
of such Property, provided that in the case of any such acquisition
the Lien shall not apply to any Property other than the Property so
acquired or purchased;
(g) any extension, renewal or replacement (or successive
extensions, renewals, or replacements) in whole or in part of any
Lien referred to in the foregoing paragraphs (a) through (f),
inclusive, provided, however, that the principal amount of
Indebtedness For Borrowed Money secured thereby shall not exceed
the principal amount of Indebtedness For Borrowed Money so secured
at the time of such extension, renewal or replacement, and that
such extension, renewal or replacement shall be limited to the
Property which was subject to the Lien so extended, renewed or
replaced; or
(h) other Liens, provided that the aggregate principal amount of
Indebtedness For Borrowed Money secured by such Liens (which are not
otherwise permitted by the foregoing clauses (a) through (g)) shall not
exceed at any time 10% of Consolidated Tangible Net Worth.
"Person" means any individual, joint venture, corporation, company,
voluntary association, partnership, trust, joint stock company,
unincorporated organization, association, government, or any agency,
instrumentality, or political subdivision thereof, or any other form of
entity or organization.
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code and is either (i) maintained by a member of the
Controlled Group for employees of any member of the Controlled Group or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to
which a member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions.
"Prime Rate" refers to that interest rate so denominated and set by
Wachovia from time to time as an interest rate basis for borrowings. The
Prime Rate is but one of several interest rate bases used by Wachovia.
Wachovia lends at interest rates above and below the Prime Rate. A change in
the Prime Rate shall be effective on the date of such change.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible, whether now owned
or hereafter acquired.
"Real Properties" means all real property owned, leased or
otherwise used or occupied by the Borrower or any Subsidiary, wherever
located.
"Redeemable Preferred Stock" of any Person means any preferred
stock issued by such Person which is at any time prior to the Termination
Date either (i) mandatorily redeemable (by sinking fund or similar payments
or otherwise) or (ii) redeemable at the option of the holder thereof.
"Reportable Event" has the meaning given such term in
Section 4043(b) of Title V of ERISA.
"Significant Subsidiary" means at any time any Subsidiary of the
Borrower that would at such time constitute a "significant subsidiary" (as
such term is defined in Regulation S-X of the Securities and Exchange
Commission as in effect on the Closing Date) of the Borrower.
"SRFC" means Superior Recycled Fiber Corporation, a Minnesota
corporation.
"Steam Bonds" means (a) the Tax Increment Revenue Bonds (Lake
Superior Paper Company Project Series 1985) in the aggregate principal amount
of $29,300,000 issued by the City of Duluth (the "Issuer"), and subject to a
Development Agreement, dated December 2, 1985, as amended, between the Issuer
and LSPI, (b) the Steam Utility Revenue Bonds of 1987 in the aggregate
principal amount of $17,000,000 issued by the Issuer pursuant to a Financing
Agreement, dated as of May 15, 1987 among the Issuer, LSPI and the Prudential
Insurance Company of America, and (c) any liabilities and obligations related
to or arising from the foregoing.
"Subsidiary" of a Person means any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such
Person. Unless otherwise indicated, all references herein to Subsidiaries
refer to Subsidiaries of the Borrower.
"Successive Extension Period" has the meaning ascribed thereto in
Section 2.08(b).
"Synertec" means Synertec, Inc. a Minnesota corporation.
"Tangible Assets" of any Person means, as of the date of any
determination thereof, the total amount of all assets of such Person (less
depreciation, depletion and other properly deductible valuation reserves)
after deducting the following: good will, patents, trade names, trade marks,
copyrights, franchises, experimental expense, organization expense,
unamortized debt discount and expense, deferred assets, the excess of cost of
shares acquired over book value of related assets, any write-ups in the book
value of any asset resulting from a revaluation thereof, and such other
assets as are properly classified as "intangible assets" in accordance with
Agreement Accounting Principles.
"Termination Date" means the earlier of (i) the Expiration Date, or
(ii) February 29, 2000, or such later date as to which the Borrower and the
Bank may agree in writing.
"Third Parties" means all lessees, sublessees, licenses and other
users of the Real Properties, excluding those users of the Real Properties in
the ordinary course of the Borrower's or any Subsidiary's business and on a
temporary basis.
"Total Assets" means, at any time and as to each Person, the total
assets of such Person, determined in accordance with Agreement Accounting
Principles.
"Total Capitalization" means, at any time, the sum of (a)
Consolidated Tangible Net Worth at such time and (b) Indebtedness For
Borrowed Money at such time.
"Transferee" has the meaning set forth in Section 8.05(d).
"Unused Commitment" means at any date an equal to the Commitment
less the aggregate outstanding principal amount of the Advances.
"Wachovia" means Wachovia Bank of Georgia, N.A., a national banking
association, together with its successors.
"Wholly Owned Subsidiary" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the
Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all terms of an accounting character used herein
shall be interpreted, all accounting determinations hereunder shall be made,
and all financial statements required to be delivered hereunder shall be
prepared in accordance with generally accepted accounting principles as in
effect from time to time, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants) with the most
recent audited consolidated financial statements of the Borrower and its
Consolidated Subsidiaries delivered to the Bank.
SECTION 1.03. References. Except as otherwise expressly provided
in this Agreement: the words "herein," "hereof," "hereunder" and other words
of similar import refer to this Agreement as a whole, including the Schedule
hereto which is a part hereof, and not to any particular Section, Article,
paragraph or other subdivision; the singular includes the plural and the
plural includes the singular; "or" is not exclusive; the words "include,"
"includes" and "including" are not limiting; a reference to any agreement or
other contract includes past and future permitted supplements, amendments,
modifications and restatements thereto or thereof; a reference to an Article,
Section, paragraph or other subdivision is a reference to an Article,
Section, paragraph or other subdivision of this Agreement; a reference to any
law includes any amendment or modification to such law and any rules and
regulations promulgated thereunder; a reference to a Person includes its
permitted successors and assigns; any right may be exercised at any time and
from time to time; and, except as otherwise expressly provided therein, all
obligations under any agreement or other contract are continuing obligations
throughout the term of such agreement or contract.
ARTICLE II. THE CREDITS
SECTION 2.01. Commitment to Lend. The Bank agrees, on the terms
and conditions set forth herein, to make Advances to the Borrower from time
to time before the Termination Date; provided that, immediately after each
such Advance is made, the aggregate principal amount of outstanding Advances
shall not exceed $130,000,000 (as such figure may be reduced from time to
time as provided in this Agreement, the "Commitment"). Each Borrowing under
this Section shall be in an aggregate principal amount of $1,000,000 or any
larger multiple of $500,000 (except that any such Borrowing may be in the
amount of the Unused Commitment). Within the foregoing limits, the Borrower
may borrow under this Section, repay or, to the extent permitted by Section
2.09, prepay Advances and reborrow under this Section at any time before the
Termination Date. The Bank shall have no obligation to advance funds in
excess of the amount of the Commitment.
SECTION 2.02. Method of Borrowing. (a) The Borrower shall give
the Bank notice (a "Notice of Borrowing") at least one Domestic Business Day
before each Base Rate Borrowing and at least three Euro-Dollar Business Days
before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Base Rate Borrowing, or a Euro-Dollar Business Day
in the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Advance comprising such Borrowing is to be a
Base Rate Loan or a Euro-Dollar Loan, and
(iv) in the case of a Euro-Dollar Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
(b) A Notice of Borrowing, once given, shall be irrevocable. The
Bank shall be entitled to rely on any telephonic Notice of Borrowing which it
believes in good faith to have been given by a duly authorized officer or
employee of the Borrower and any Advances made by the Bank based on such
telephonic notice shall, when credited by the Bank to the regular deposit
account maintained by the Borrower with the Bank, be an Advance for all
purposes hereunder. Not later than 2:00 p.m., Atlanta, Georgia time, on the
date specified for the Borrowing in the Notice of Borrowing, the Bank shall
credit, in immediately available funds, the amount of such Borrowing to the
regular deposit account maintained by the Borrower with the Bank.
(c) If the Bank makes a new Advance hereunder on a day on which
the Borrower is to repay all or any part of an outstanding Advance, the Bank
shall apply the proceeds of its new Advance to make such repayment and only
an amount equal to the difference (if any) between the amount being borrowed
and the amount being repaid shall be made available by the Bank to the
Borrower as provided in subsection (b) of this Section, or remitted by the
Borrower to the Bank as provided in Section 2.11, as the case may be.
(d) Notwithstanding anything to the contrary contained in this
Agreement, no Euro-Dollar Borrowing may be made if there shall have occurred
a Default or an Event of Default, which Default or Event of Default shall not
have been cured or waived.
(e) In the event that a Notice of Borrowing fails to specify
whether the Advance comprising such Borrowing is to be a Base Rate Loan or a
Euro-Dollar Loan, such Advance shall be made as a Base Rate Loan. If the
Borrower is otherwise entitled under this Agreement to repay any Advance
maturing at the end of an Interest Period applicable thereto with the
proceeds of a new Borrowing, and the Borrower fails to repay such Advance
using its own moneys and fails to give a Notice of Borrowing in connection
with such new Borrowing, a new Borrowing shall be deemed to be made on the
date such Advance matures in an amount equal to the principal amount of the
Advance so maturing, and the Advance comprising such new Borrowing shall be a
Base Rate Loan.
SECTION 2.03. Note. The Advances shall be evidenced by a single
Note payable to the order of the Bank for the account of its Lending Office
in an amount equal to the original principal amount of the Bank's Commitment.
The Bank shall record, and prior to any transfer of its Note shall endorse on
the schedule forming a part thereof appropriate notations to evidence, the
date, amount and maturity of, and effective interest rate for, each Advance
made by it, the date and amount of each payment of principal made by the
Borrower with respect thereto and whether such Advance is a Base Rate Loan or
a Euro-Dollar Loan, and such recordations and endorsements shall constitute
rebuttable presumptive evidence of the principal amount owing and unpaid on
the Note; provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligation of the Borrower hereunder or
under the Note. The Bank is hereby irrevocably authorized by the Borrower so
to endorse its Note and to attach to and make a part of any Note a
continuation of any such schedule as and when required.
SECTION 2.04. Maturity of Advances. Each Advance included in any
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing.
SECTION 2.05. Interest Rates. (a) Each Advance made as a Base
Rate Loan shall bear interest on the outstanding principal amount thereof,
for each day from the date such Advance is made until it becomes due, at a
rate per annum equal to the Base Rate for such day plus the Applicable
Margin. Such interest shall be payable for each Interest Period on the last
day thereof.
(b) Each Advance made as a Euro-Dollar Loan shall bear interest on
the outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Applicable Margin plus
the applicable Adjusted London Interbank Offered Rate for such Interest
Period; provided that if any Advance made as a Euro-Dollar Loan shall, as a
result of clause (1)(c) of the definition of Interest Period, have an
Interest Period of less than one month, such Advance so made as a Euro-Dollar
Loan shall bear interest during such Interest Period at the rate applicable
to Advances made as Base Rate Loans during such period. Such interest shall
be payable for each Interest Period on the last day thereof.
(c) "Applicable Margin" shall be determined quarterly based upon
the ratio of Indebtedness For Borrowed Money to Total Capitalization
(calculated as of the last day of each Fiscal Quarter), as follows:
Ratio of Indebtedness
For Borrowed Money Base Euro
to Total Capitalization Rate Loans Euro Dollar
------------------------- ---------- -----------
Greater than or equal to .40 to 1.00 0% .30%
Less than .40 to 1.00 0% .25%
The Applicable Margin shall be determined effective as of the date (herein,
the "Rate Determination Date") which is 60 days after the last day of the
Fiscal Quarter as of the end of which the foregoing ratio is being
determined, based on the quarterly financial statements for such Fiscal
Quarter, and the Applicable Margin so determined shall remain effective from
such Rate Determination Date until the date which is 60 days after the last
day of the Fiscal Quarter in which such Rate Determination Date falls (which
latter date shall be a new Rate Determination Date); provided that (i) for
the period from and including the Closing Date to but excluding the Rate
Determination Date next following the Closing Date, the Applicable Margin
shall be (A) 0% for Base Rate Loans, and (B) .25% for Euro-Dollar Loans, (ii)
in the case of any Applicable Margin determined for the fourth and final
Fiscal Quarter of a Fiscal Year, the Rate Determination Date shall be the
date which is 105 days after the last day of such final Fiscal Quarter and
such Applicable Margin shall be determined based upon the annual audited
financial statements for the Fiscal Year ended on the last day of such Fiscal
Quarter, and (iii) if on any Rate Determination Date the Borrower shall have
failed to deliver to the Bank the financial statements required to be
delivered pursuant to Section 6.01(b) with respect to the Fiscal Quarter most
recently ended prior to such Rate Determination Date, then for the period
beginning on such Rate Determination Date and ending on the earlier of (A)
the date on which the Borrower shall deliver to the Bank the financial
statements to be delivered pursuant to Section 6.01(b) with respect to such
Fiscal Quarter or any subsequent Fiscal Quarter, or (B) the date on which the
Borrower shall deliver to the Bank annual financial statements required to be
delivered pursuant to Section 6.01(a) with respect to the Fiscal Year which
includes such Fiscal Quarter or any subsequent Fiscal Year, the Applicable
Margin shall be determined as if the ratio of Indebtedness For Borrowed Money
to Total Capitalization was greater than .40 to 1.00 at all times during such
period. Any change in the Applicable Margin on any Rate Determination Date
shall result in a corresponding change, effective on and as of such Rate
Determination Date, in the interest rate applicable to each Advance
outstanding on such Rate Determination Date.
(d) After the occurrence and during the continuance of a Default,
the principal amount of the Advances (and, to the extent permitted by
applicable law, all accrued interest thereon) shall bear interest at a rate
per annum equal to the sum of 2% plus the Base Rate from time to time in
effect.
SECTION 2.06. Fees. (a) From and after the Closing Date up to and
including the Termination Date, the Borrower shall pay to the Bank a
commitment fee at the rate of one-tenth of one percent (0.10%) per annum
(calculated from the date hereof on the basis of a year of 360 days and
payable for the actual number of days elapsed) on the average daily balance
of the Unused Commitment (the "Commitment Fee"). The Commitment Fee shall be
payable by the Borrower quarterly in arrears on each Commitment Fee Payment
Date and on the Termination Date, provided that should the Commitment be
terminated at any time prior to the Termination Date (whether by termination
of the Commitment as provided in Section 2.07 or Section 2.08 or otherwise),
the entire accrued and unpaid Commitment Fee shall be paid on the date of
such termination.
(b) The Borrower shall pay to the Bank such fees and other amounts
on such dates as set forth in the Letter Agreement.
SECTION 2.07. Optional Termination or Reduction of Commitment.
The Borrower may, upon at least three Domestic Business Days' notice to the
Bank, terminate the Commitment at any time, or reduce the Commitment from
time to time by an aggregate minimum amount of at least $1,000,000 or an
integral multiple of $500,000 in excess thereof. If the Commitment is so
reduced, such reduction shall be accounted for in determining the fees due
under Section 2.06(a). If the Commitment is so terminated in its entirety,
all accrued fees (as provided under Section 2.06(a)) shall be payable on the
effective date of such termination. A notice of reduction or termination
of the Commitment hereunder, once given, shall not thereafter be revocable by
the Borrower.
SECTION 2.08. Mandatory Termination of Commitment; Extension of
Expiration Date. (a) The Commitment shall terminate and the unpaid
principal balance and all accrued and unpaid interest on the Note will be due
and payable upon the first of the following dates or events to occur: (i)
acceleration of the maturity of the Note in accordance with the remedies
contained in Section 7.02; (ii) the Borrower's termination of the Commitment
pursuant to Section 2.07; or (iii) upon the expiration of the Commitment on
the Termination Date. From and after the date of such termination, no
Advances shall be made.
(b) The initial term of the Commitment is stated to expire,
subject to earlier termination, on the Initial Expiration Date. If the
Borrower does not receive a Notice of Non-Extension from the Bank at least
thirteen (13) months prior to the Initial Expiration Date, however, the
Expiration Date will be automatically extended for successive additional
periods of one calendar month each ("Successive Extension Periods") until the
earlier of (i) the first day of the thirteenth month following receipt by the
Borrower of a Notice of Non-Extension from the Bank, or (ii) the Termination
Date. The Bank may determine to extend the Expiration Date in its sole
discretion and no course of dealing or other circumstance shall require the
Bank to extend the Expiration Date.
SECTION 2.09. Optional Prepayments. (a) The Borrower may, upon
at least one Domestic Business Days' notice to the Bank, prepay any Base Rate
Loan in whole at any time, or from time to time in part in amounts
aggregating at least $500,000 or any larger multiple of $500,000, by paying
the principal amount to be prepaid together with accrued interest thereon to
the date of prepayment.
(b) The Borrower may, upon at least three Euro-Dollar Business
Days' notice to the Bank, prepay all or any portion of the principal amount
of any Euro-Dollar Loan in amounts aggregating at least $500,000 or any
larger multiple of $500,000, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment and, if such
prepayment is made on a day other than the last day of an Interest Period
applicable to such Euro-Dollar Loan, any compensation payable pursuant to
Section 3.05.
(c) A notice of prepayment pursuant to this Section, once given,
shall not thereafter be revocable by the Borrower.
SECTION 2.10. Mandatory Prepayments. On each date on which the
Commitment is reduced or terminated pursuant to Section 2.07 or terminated
pursuant to Section 2.08, the Borrower shall repay or prepay such principal
amount of the outstanding Advances, if any (together with interest accrued
thereon), as may be necessary so that after such payment the aggregate unpaid
principal amount of the outstanding Advances does not exceed the aggregate
amount of the Commitment as then reduced.
SECTION 2.11. General Provisions Concerning Payments. (a) All
payments of principal of, or interest on, the Note, and of any fees, shall be
made in Federal or other funds immediately available to the Bank at its
office in Atlanta, Georgia not later than 11:00 a.m., Atlanta, Georgia time;
provided that unless otherwise instructed by the Borrower, the Bank shall
automatically debit the deposit account of the Borrower maintained with the
Bank or any Affiliate of the Bank in the amount of each such payment on the
due date thereof. Funds received after 11:00 a.m., Atlanta, Georgia time,
shall be deemed to have been paid on the next following Domestic Business
Day.
(b) Whenever any payment of principal of, or interest on, the Base
Rate Loans or of any fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-
Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
SECTION 2.12. Computation of Interest and Fees. Interest on Base
Rate Loans and interest on Euro-Dollar Loans shall be computed on the basis
of a year of 360 days and paid for the actual number of days elapsed,
calculated as to each Interest Period from and including the first day
thereof to but excluding the last day thereof. Commitment fees shall be
computed on the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day).
ARTICLE III. CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 3.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period:
(i) the Bank determines that deposits in Dollars (in the
applicable amounts) are not being offered in the relevant market
for such Interest Period, or
(ii) the Bank determines that the London Interbank Offered
Rate as determined by the Bank will not adequately and fairly
reflect the cost to the Bank of funding Euro-Dollar Loans for such
Interest Period,
the Bank shall forthwith give notice thereof to the Borrower, whereupon until
the Bank notifies the Borrower that the circumstances giving rise to such
suspension no longer exist, the obligations of the Bank to make or maintain
Euro-Dollar Loans shall be suspended. Unless the Borrower notifies the Bank
at least two Domestic Business Days before the date of any Borrowing of or
the commencement of any Interest Period for Euro-Dollar Loans for which a
Notice of Borrowing has previously been given that it elects not to borrow on
such date, such Borrowing shall instead be made as a Base Rate Borrowing.
SECTION 3.02. Illegality. If, after the date hereof, the adoption
of any applicable law, rule or regulation, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation
or administration thereof (any such authority, bank or agency being referred
to as an "Authority" and any such event being referred to as a "Change of
Law"), or compliance by the Bank (or its Lending Office) with any request or
directive (whether or not having the force of law) of any Authority shall
make it unlawful or impossible for the Bank (or its Lending Office) to make,
maintain or fund its Euro-Dollar Loans and the Bank shall so notify the
Borrower, until the Bank notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligation of the Bank to make
Euro-Dollar Loans shall be suspended. Before giving any notice pursuant to
this paragraph, the Bank shall designate a different Lending Office if able
to do so and if such designation will avoid the need for giving such notice
and will not, in the judgment of the Bank, be otherwise disadvantageous to
the Bank. If the Bank shall determine that it may not lawfully continue to
maintain and fund any of its outstanding Euro-Dollar Loans to maturity and
shall so specify in such notice, the Borrower shall immediately prepay in
full the then outstanding principal amount of each Euro-Dollar Loan, together
with accrued interest thereon. Concurrently with prepaying each such
Advance, the Borrower shall borrow an Advance as a Base Rate Loan in an equal
principal amount from the Bank and the Bank shall make such an Advance.
SECTION 3.03. Increased Cost and Reduced Return. (a) If after
the date hereof, a Change of Law or compliance by the Bank (or its Lending
Office) with any request or directive (whether or not having the force of
law) of any Authority:
(i) shall subject the Bank (or its Lending Office) to any
tax, duty or other charge with respect to its Euro-Dollar Loans,
the Note or its obligation to make or maintain Euro-Dollar Loans,
or shall change the basis of taxation of payments to the Bank (or
its Lending Office) of the principal of or interest on its Euro-
Dollar Loans or any other amounts due under this Agreement in
respect of its Euro-Dollar Loans or its obligation to make or
maintain Euro-Dollar Loans (except for changes in the rate of tax
on the overall net income of the Bank or its Lending Office imposed
by the jurisdiction in which the Bank's principal executive office
or Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without
limitation, any such requirement imposed by the Board of Governors
of the Federal Reserve System, but excluding any such requirement
included in an applicable Euro-Dollar Reserve Percentage) against
assets of, deposits with or for the account of, or credit extended
by, the Bank (or its Lending Office); or
(iii) shall impose on the Bank (or its Lending Office) or
the London interbank market any other condition affecting its Euro-
Dollar Loans, its Note or its obligation to make or maintain Euro-
Dollar Loans;
and the result of any of the foregoing is to increase the cost to the Bank
(or its Lending Office) of making or maintaining any Euro-Dollar Loan, or to
reduce the amount of any sum received or receivable by the Bank (or its
Lending Office) under this Agreement or under the Note with respect thereto,
by an amount deemed by the Bank to be material, then, within 15 days after
demand by the Bank, the Borrower shall pay to the Bank such additional amount
or amounts as will compensate the Bank for such increased cost or reduction.
(b) If the Bank shall have determined that after the date hereof
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof, or compliance by the Bank (or its Lending Office)
with any request or directive regarding capital adequacy (whether or not
having the force of law) of any Authority, has or would have the effect of
reducing the rate of return on the Bank's capital as a consequence of its
obligations under this Agreement with respect to any Advance to a level below
that which the Bank could have achieved but for such adoption, change or
compliance (taking into consideration the Bank's policies with respect to
capital adequacy) by an amount deemed by the Bank to be material, then from
time to time, within 15 days after demand by the Bank, the Borrower shall pay
to the Bank such additional amount or amounts as will compensate the Bank for
such reduction.
(c) The Bank will promptly notify the Borrower of any event of
which it has knowledge, occurring after the date hereof, which will entitle
the Bank to compensation pursuant to this Section and will designate a
different Lending Office if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the judgment of the
Bank, be otherwise disadvantageous to the Bank. A certificate of the Bank
claiming compensation under this Section and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive in the
absence of manifest error. In determining such amount, the Bank may use any
reasonable averaging and attribution methods.
(d) The provisions of this Section shall be applicable with
respect to any Participant in, or Assignee or other Transferee of, the
obligations of the Borrower hereunder to the Bank, and any calculations
required by such provisions shall be made based upon the circumstances of
such Participant, Assignee or other Transferee.
SECTION 3.04. Base Rate Loans Substituted for Affected Euro-Dollar
Loans. If (i) the obligation of the Bank to make or maintain Euro-Dollar
Loans has been suspended pursuant to Section 3.01 or Section 3.02, or (ii)
the Bank has demanded compensation under Section 3.03, and if in either case
the Borrower, by at least one Domestic Business Day's prior notice to the
Bank, shall have elected that the provisions of this Section shall apply,
then, unless and until the Bank notifies the Borrower that the circumstances
giving rise to such suspension or demand for compensation no longer apply:
(a) all Advances which would otherwise be made by the Bank as
Euro-Dollar Loans shall be made instead as Base Rate Loans, and
(b) after each of its Euro-Dollar Loans has been repaid, all
payments of principal which would otherwise be applied to repay
such Euro-Dollar Loans shall be applied to repay its Base Rate
Loans instead.
SECTION 3.05. Compensation. Upon the request of the Bank,
delivered to the Borrower, the Borrower shall pay to the Bank such amount or
amounts as shall compensate the Bank for any loss, cost or expense incurred
by the Bank as a result of:
(a) any optional or mandatory payment or prepayment (pursuant
to Section 3.02 or otherwise) of a Euro-Dollar Loan on a date other
than the last day of an Interest Period for such Euro-Dollar Loan;
or
(b) any failure by the Borrower to prepay a Euro-Dollar Loan
on the date for such prepayment specified in the relevant notice of
prepayment or notice of reduction of the Commitment, as the case
may be; or
(c) any failure by the Borrower to borrow an Advance as a
Euro-Dollar Loan on the date for the Borrowing specified in the
applicable Notice of Borrowing delivered pursuant to Section 2.02;
such compensation to include, without limitation, an amount equal to the
excess, if any, of (x) the amount of interest which would have accrued on the
amount so paid or prepaid or not prepaid or borrowed, for the period from the
date of such payment, prepayment or failure to prepay or borrow to the last
day of the then current Interest Period for such Euro-Dollar Loan (or, in the
case of a failure to prepay or borrow, the Interest Period for such Euro-
Dollar Loan which would have commenced on the date of such failure to prepay
or borrow) at the applicable rate of interest for such Euro-Dollar Loan
provided for herein over (y) the amount of interest (as reasonably determined
by the Bank) the Bank would have paid on deposits in Dollars of comparable
amounts having terms comparable to such period placed with it by leading
banks in the London interbank market.
ARTICLE IV. CONDITIONS TO BORROWINGS
SECTION 4.01. Conditions to First Borrowing. The obligation of
the Bank to make an Advance on the occasion of the first Borrowing is subject
to the satisfaction of the conditions set forth in Section 4.02 and the
following additional conditions:
(a) receipt by the Bank from the Borrower of a duly executed
counterpart of this Agreement signed by the Borrower;
(b) receipt by the Bank of the duly executed Note complying
with the provisions of Section 2.03;
(c) receipt by the Bank of an opinion of counsel of (i)
McDermott, Will & Emery, counsel for the Borrower, substantially in
the form of Exhibit B hereto, and covering such additional matters
relating to the transactions contemplated hereby as the Bank may
reasonably request and (ii) Womble Carlyle Sandridge & Rice, PLLC,
counsel to the Bank, as to the enforceability of this Agreement and
the Note under the laws of the State of Georgia;
(d) receipt by the Bank of a certificate, dated the date of
the first Borrowing, signed by a principal financial officer of the
Borrower to the effect that (i) no Default hereunder has occurred
and is continuing on the date of the first Borrowing and (ii) the
representations and warranties of the Borrower contained in
Article V are true on and as of the date of the first Borrowing
hereunder;
(e) receipt by the Bank of all documents which the Bank may
reasonably request relating to the existence of the Borrower, the
corporate authority for and the validity of this Agreement and the
Note, and any other matters relevant hereto, all in form and
substance satisfactory to the Bank, including without limitation a
certificate of incumbency of the Borrower, signed by the Secretary
or an Assistant Secretary of the Borrower, certifying as to the
names, true signatures and incumbency of the officer or officers of
the Borrower authorized to execute and deliver the Loan Documents,
and certified copies of the following items: (i) the Borrower's
Certificate of Incorporation, (ii) the Borrower's Bylaws, (iii) a
certificate of the Secretary of State (or other appropriate office)
of the jurisdiction of the Borrower's incorporation as to the good
standing of the Borrower as a corporation in such jurisdiction, and
(iv) the action taken by the Board of Directors of the Borrower
authorizing the Borrower's execution, delivery and performance of
this Agreement, the Note and the other Loan Documents to which the
Borrower is a party; and
(f) receipt by the Bank of a Notice of Borrowing specifying a
Borrowing in a minimum amount of $1,000,000.
SECTION 4.02. Conditions to All Borrowings. The obligation of the
Bank to make an Advance on the occasion of each Borrowing is subject to the
satisfaction of the following conditions:
(a) receipt by the Bank of Notice of Borrowing as required by
Section 2.02;
(b) the fact that, immediately after such Borrowing, no
Default shall have occurred and be continuing;
(c) the fact that the representations and warranties of the
Borrower contained in Article V shall be true on and as of the date
of such Borrowing; and
(d) the fact that, immediately after such Borrowing, the
aggregate outstanding principal amount of the Advances will not
exceed the amount of the Commitment.
Each Borrowing hereunder shall be deemed to be a representation and warranty
by the Borrower on the date of such Borrowing as to the facts specified in
clauses (b), (c) and (d) of this Section; provided that such Borrowing shall
not be deemed to be such a representation and warranty to the effect set
forth in Section 5.04(b) as to any material adverse change which has
theretofore been disclosed in writing by the Borrower to the Bank if the
aggregate outstanding principal amount of the Advances immediately after such
Borrowing will not exceed the aggregate outstanding principal amount of
Advances immediately before such Borrowing.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 5.01. Corporate Existence and Power. The Borrower is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Wisconsin, is duly qualified to transact business in
every jurisdiction where, by the nature of its business, the failure to be so
qualified could reasonably be expected to have a material adverse effect on
the business, operations, properties, assets or conditions (financial or
otherwise) of the Borrower or on the validity or enforceability of this
Agreement or any other Loan Document or the rights or remedies of the Bank
hereunder or thereunder, and has all corporate powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted (except for such governmental licenses,
authorizations, consents and approvals the failure to have which could not
reasonably be expected to have a material adverse effect on the business,
operations, properties, assets or conditions (financial or otherwise) of the
Borrower or on the validity or enforceability of this Agreement or any other
Loan Document or the rights or remedies of the Bank hereunder or thereunder).
SECTION 5.02. Corporate and Governmental Authorization;
Contravention. The execution, delivery and performance by the Borrower of
this Agreement, the Note and the other Loan Documents (i) are within the
Borrower's corporate powers, (ii) have been duly authorized by all necessary
corporate action, (iii) require no action by or in respect of, or filing
with, any governmental body, agency or official, (iv) do not contravene, or
constitute a default under, any provision of applicable law or regulation (if
the contravention thereof could reasonably be expected to have a material
adverse effect on the business, operations, properties, assets or conditions
(financial or otherwise) of the Borrower and its Subsidiaries, taken as a
whole, or on the validity or enforceability of this Agreement or any other
Loan Document or the rights or remedies of the Bank hereunder or thereunder)
or of the certificate of incorporation or by-laws of the Borrower or of any
agreement, judgment, injunction, order, decree or other instrument binding
upon the Borrower or any of its Subsidiaries, and (v) do not result in the
creation or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
SECTION 5.03. Binding Effect. This Agreement constitutes a valid
and binding agreement of the Borrower enforceable in accordance with its
terms, and the Note and the other Loan Documents, when executed and delivered
in accordance with this Agreement, will constitute valid and binding
obligations of the Borrower enforceable in accordance with their respective
terms, provided that the enforceability hereof and thereof is subject in each
case to general principles of equity and to bankruptcy, insolvency and
similar laws affecting the enforcement of creditors' rights generally.
SECTION 5.04. Financial Information. (a) The consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as of December 31,
1994, and the related consolidated statements of income, shareholders' equity
and cash flows for the Fiscal Year then ended, reported on by Arthur Andersen
LLP, copies of which have been delivered to the Bank, and the unaudited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries for the interim period ended March 31, 1995, copies of which
have been delivered to the Bank, fairly present, in conformity with generally
accepted accounting principles, the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such dates and their
consolidated results of operations and cash flows for such periods stated.
(b) Since March 31, 1995, there has been no material adverse
change in the business, financial position or results of operations of the
Borrower and its Consolidated Subsidiaries, taken as a whole.
SECTION 5.05. Litigation. Except as disclosed on Schedule 5.05
hereto, there is no action, suit, proceeding or labor dispute pending, or to
the knowledge of the Borrower threatened, against or affecting the Borrower
or any of its Subsidiaries before any court or arbitrator or any governmental
body, agency or official which (except as disclosed in writing to the Bank
prior to the Closing Date) could materially adversely affect the business,
consolidated financial position or consolidated results of operations of the
Borrower and its Consolidated Subsidiaries, taken as a whole, or which in any
manner draws into question the validity of, or could impair the ability of
the Borrower to perform its obligations under, this Agreement, the Note or
any of the other Loan Documents.
SECTION 5.06. Compliance with ERISA. (a) The Borrower and each
member of the Controlled Group have fulfilled their obligations under the
minimum funding standards of ERISA and the Code with respect to each Plan and
are in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and have not incurred any liability to the
PBGC or a Plan under Title IV of ERISA.
(b) Neither the Borrower nor any member of the Controlled Group is
or ever has been obligated to contribute to any Multiemployer Plan.
SECTION 5.07. Taxes. There have been filed on behalf of the
Borrower and its Subsidiaries all Federal, state and local income, excise,
property and other tax returns which are required to be filed by them and all
taxes due pursuant to such returns or pursuant to any assessment received by
or on behalf of the Borrower or any Subsidiary have been paid. The charges,
accruals and reserves on the books of the Borrower and its Subsidiaries in
respect of taxes or other governmental charges are adequate under generally
accepted accounting principles consistently applied. United States income
tax returns of the Borrower and its Subsidiaries have been examined and
closed through the Fiscal Year ended December 31, 1988.
SECTION 5.08. Subsidiaries. Each of the Borrower's Significant
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted (except where
the failure to have such governmental licenses, authorizations, consents and
approvals could not reasonably be expected to have a material adverse effect
on the business, operations, properties, assets or conditions (financial or
otherwise) of any such Subsidiary or on the validity or enforceability of
this Agreement or any other Loan Document or the rights or remedies of the
Bank hereunder or thereunder).
SECTION 5.09. Not an Investment Company. Neither the Borrower nor
any of its Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 5.10. Ownership of Property; Liens. Each of the Borrower
and its Subsidiaries has title to its properties sufficient for the conduct
of its business, and none of such property is subject to any Lien except for
Permitted Encumbrances.
SECTION 5.11. No Default. Neither the Borrower nor any of its
Consolidated Subsidiaries is in default under or with respect to any
agreement, instrument or undertaking to which it is a party or by which it or
any of its property is bound, which default could reasonably be expected to
have a material adverse effect on the business, properties, assets,
operations or conditions (financial or otherwise) of the Borrower and its
Subsidiaries, taken as a whole, or on the validity or enforceability of this
Agreement or any other Loan Document or the rights or remedies of the Bank
hereunder and thereunder. No Default has occurred and is continuing.
SECTION 5.12. Full Disclosure. All information heretofore
furnished by the Borrower to the Bank for purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Borrower to the Bank will be, true,
accurate and complete in every material respect or based on reasonable
estimates on the date as of which such information is stated or certified.
The Borrower has disclosed to the Bank in writing any and all facts which
materially and adversely affect or may affect (to the extent the Borrower can
now reasonably foresee), the business, operations, properties, assets, or
conditions (financial or otherwise) of the Borrower and its Subsidiaries,
taken as a whole, or the ability of the Borrower to perform its obligations
under this Agreement.
SECTION 5.13. Environmental Matters. (a) Neither the Borrower
nor any Subsidiary is subject to any Environmental Liability which is likely
to have a material adverse effect on the business, financial position,
results of operations or prospects of the Borrower and its Subsidiaries,
taken as a whole, and, except as disclosed on Schedule 5.13 hereto, neither
the Borrower nor any Subsidiary has been designated as a potentially
responsible party under CERCLA or under any state statute similar to CERCLA.
Except as disclosed on Schedule 5.13 hereto, none of the Real Properties
have been identified on any current or proposed (i) National Priorities List
under 40 C.F.R. 300, (ii) CERCLIS list or (iii) any list arising from a
state statute similar to CERCLA.
(b) No Hazardous Materials have been or are being used, produced,
manufactured, processed, generated, stored, disposed of, managed at, or
shipped or transported to or from the Real Properties or are otherwise
present at, on, in or under the Real Properties, or, to the best of the
knowledge of the Borrower, at or from any adjacent site or facility, except
for Hazardous Materials used, produced, manufactured, processed, generated,
stored, disposed of, and managed in compliance with all applicable
Environmental Requirements, except where the failure to comply with such
Environmental Requirements could not reasonably be expected to have a
material adverse effect on the business, financial position, results of
operations or prospects of the Borrower and its Subsidiaries, taken as a
whole.
(c) The Borrower, and each of its Subsidiaries and Affiliates, has
procured all Environmental Authorizations necessary for the conduct of its
business and is in compliance with all Environmental Requirements in
connection with the operation of the Real Properties and the Borrower's and
each of its Subsidiaries' and Affiliates' respective businesses, except where
the failure to obtain such Environmental Authorization or to comply with such
Environmental Requirements could not reasonably be expected to have a
material adverse effect on the business, financial position, results of
operations or prospects of the Borrower and its Subsidiaries, taken as a
whole.
SECTION 5.14. Compliance with Laws. The Borrower and each
Subsidiary is in compliance with all applicable laws, except where any
failure to comply with any such laws would not, alone or in the aggregate,
materially adversely affect the business, operations, properties, assets or
conditions (financial or otherwise) of the Borrower and its Subsidiaries,
taken as a whole, or which in any manner draws into question the validity of,
or could impair the ability of the Borrower to perform its obligations under,
this Agreement or any of the other Loan Documents.
SECTION 5.15. Transactions with Affiliates. Neither the Borrower
nor any of its Subsidiaries has entered into, or is a party to, any
transaction with any Affiliate of the Borrower or such Subsidiary (which
Affiliate is not the Borrower or a Subsidiary), except as permitted by law
and which are on terms and conditions which are not less favorable to the
Borrower or such Subsidiary than would be obtained in a comparable arm's
length transaction with a Person which is not an Affiliate of the Borrower or
such Subsidiary.
ARTICLE VI. COVENANTS
The Borrower agrees that, so long as the Commitment is in effect
hereunder or any amount payable under this Agreement remains unpaid:
SECTION 6.01. Information. The Borrower will deliver to the Bank:
(a) as soon as available and in any event within 105 days
after the end of each Fiscal Year, a consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as of the end of
such Fiscal Year and the related consolidated statements of income,
shareholders' equity and cash flows for such Fiscal Year, setting
forth in each case in comparative form the figures for the previous
fiscal year, all certified by Arthur Andersen LLP or other
independent public accountants of nationally recognized standing,
with such certification to be free of exceptions and qualifications
not acceptable to Bank; provided that the delivery within the time
period specified above of the Borrower's Annual Report on Form 10-K
for such Fiscal Year (together with the Borrower's annual report to
shareholders, if any, prepared pursuant to Rule 14a-3 under the
Exchange Act) prepared in accordance with the requirements therefor
and filed with the Securities and Exchange Commission shall be
deemed to satisfy the requirements of this Section 6.01(a);
(b) as soon as available and in any event within 60 days
after the end of each Fiscal Quarter of each Fiscal Year, a
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such Fiscal Quarter and the related
statement of income and statement of cash flows for such Fiscal
Quarter and for the portion of the Fiscal Year ended at the end of
such Fiscal Quarter, setting forth in each case in comparative form
the figures for the corresponding Fiscal Quarter and the
corresponding portion of the previous Fiscal Year, all certified
(subject to normal year-end adjustments) as to fairness of
presentation, generally accepted accounting principles and
consistency by the chief financial officer or the chief accounting
officer of the Borrower; provided that delivery within the time
period specified above of copies of the Borrower's Quarterly Report
on Form 10-Q for such Fiscal Quarter prepared in compliance with
the requirements therefor and filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of
this Section 6.01(b);
(c) simultaneously with the delivery of each set of financial
statements referred to in clause (b) above, a certificate of the
chief financial officer or the chief accounting officer of the
Borrower (i) setting forth in reasonable detail the calculations
required to establish whether the Borrower was in compliance with
the requirements of Sections 6.03 and 6.04 on the date of such
financial statements and (ii) stating whether any Default exists on
the date of such certificate and, if any Default then exists,
setting forth the details thereof and the action which the Borrower
is taking or proposes to take with respect thereto;
(d) within five Domestic Business Days after the chief
executive officer, chief operating officer, chief financial
officer, treasurer or assistant treasurer of the Borrower becomes
aware of the occurrence of any Default, a certificate of the chief
financial officer or the chief accounting officer of the Borrower
setting forth the details thereof and the action which the Borrower
is taking or proposes to take with respect thereto;
(e) promptly upon the mailing thereof to the shareholders of
the Borrower generally, copies of all financial statements, reports
and proxy statements so mailed;
(f) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and annual,
quarterly or monthly reports or any reports on Form 8-K which the
Borrower shall have filed with the Securities and Exchange
Commission;
(g) if and when any member of the Controlled Group (i) gives
or is required to give notice to the PBGC of any Reportable Event
with respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the
plan administrator of any Plan has given or is required to give
notice of any such Reportable Event, a copy of the notice of such
Reportable Event given or required to be given to the PBGC;
(ii) receives notice of complete or partial withdrawal liability
under Title IV of ERISA, a copy of such notice; or (iii) receives
notice from the PBGC under Title IV of ERISA of an intent to
terminate or appoint a trustee to administer any Plan, a copy of
such notice; and
(h) from time to time such additional information regarding
the financial position or business of the Borrower and its
Subsidiaries as the Bank may reasonably request.
SECTION 6.02. Inspection of Property, Books and Records. The
Borrower will keep, and will cause each Subsidiary to keep, proper books of
record and account in which full, true and correct entries in conformity with
generally accepted accounting principles shall be made of all dealings and
transactions in relation to its business and activities; and will permit, and
will cause each Subsidiary to permit, representatives of the Bank at the
Bank's expense prior to the occurrence of an Event of Default and at the
Borrower's expense after the occurrence of an Event of Default to visit and
inspect any of their respective properties, to examine and make abstracts
from any of their respective books and records and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants (provided that prior to the
occurrence of any Default, the Bank shall only be permitted to discuss such
matters with such independent public accountants if a representative of the
Borrower is present and reasonable prior notice has been given to the
Borrower). The Borrower agrees to cooperate and assist in such visits and
inspections, in each case at such reasonable times and as often as may
reasonably be desired.
SECTION 6.03. Ratio of Indebtedness For Borrowed Money to Total
Capitalization. The ratio of Indebtedness For Borrowed Money to Total
Capitalization will not at any time (i) on or prior to December 31, 1996,
exceed .50 to 1.00; (ii) on or after January 1, 1997 and on or prior to
December 31, 1998, exceed .45 to 1.00; and (iii) on or after January 1, 1999,
exceed .40 to 1.00.
SECTION 6.04. Minimum Consolidated Tangible Net Worth.
Consolidated Tangible Net Worth will at no time be less than $850,000,000
plus the sum of (i) 35% of the cumulative Consolidated Net Earnings of the
Borrower and its Consolidated Subsidiaries during any period after March 31,
1995 (taken as one accounting period), calculated quarterly but excluding
from such calculations any quarter in which the Consolidated Net Earnings of
the Borrower and its Consolidated Subsidiaries are negative, and (ii) 100% of
the cumulative Net Proceeds of Capital Stock received during any period after
March 31, 1995, calculated quarterly.
SECTION 6.05. Loans or Advances. Neither the Borrower nor any of
its Subsidiaries shall make loans or advances to any Person except
(i) deposits required by government agencies or public utilities; (ii) loans
or advances to Wholly Owned Subsidiaries; (iii) loan or advances constituting
Acceptable Obligations; and (iv) any other loan or advance which, when
aggregated with all other loans and advances made under this clause (iv),
does not exceed an amount equal to $50,000,000 at any one time outstanding;
provided that after giving effect to the making of any loans, advances or
deposits permitted by clause (i), (ii), (iii) or (iv) of this Section, no
Default will exist.
SECTION 6.06. Negative Pledge. Neither the Borrower nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except for Permitted Encumbrances.
SECTION 6.07. Maintenance of Existence; Fields of Business. The
Borrower shall, and shall cause each Subsidiary to, maintain its corporate
existence and carry on its business in substantially the same manner and in
substantially the same fields as such business is now carried on and
maintained; provided, however, that nothing contained in this Section shall
prohibit the termination of existence of any Subsidiary, all of whose assets
are sold in a transaction permitted by Section 6.09 or prohibit the
termination of existence of a Subsidiary pursuant to a merger permitted by
Section 6.09.
SECTION 6.08. Dissolution. Neither the Borrower nor any of its
Significant Subsidiaries shall suffer or permit dissolution or liquidation
either in whole or in part or redeem or retire any shares of its own stock or
that of any Subsidiary, except through corporate reorganization to the extent
permitted by Section 6.09.
SECTION 6.09. Consolidations, Mergers and Sales of Assets. The
Borrower will not, nor will it permit any Subsidiary to, consolidate or merge
with or into, or sell, lease or otherwise transfer all or any substantial
part of its assets to, any other Person, or discontinue or eliminate any
business line or segment, provided that
(a) the Borrower or any Subsidiary may merge with another
Person if (i) such Person was organized under the laws of the
United States of America or one of its states, (ii) the Borrower or
such Subsidiary is the corporation surviving such merger, (iii) any
Subsidiary which is a party to a merger remains a Subsidiary after
such merger, and (iv) immediately after giving effect to such
merger, no Default shall have occurred and be continuing,
(b) Subsidiaries of the Borrower may merge with one another or
with the Borrower, and
(c) the foregoing limitation on the sale, lease or other
transfer of assets and on the discontinuation or elimination of a
business line or segment shall not prohibit, during any Fiscal
Quarter, (i) a transfer of assets to the Borrower or one or more
Consolidated Subsidiaries, or (ii) a transfer of assets or the
discontinuance or elimination of a business line or segment (in a
single transaction or in a series of related transactions) unless
the aggregate assets to be so transferred or utilized in a business
line or segment to be so discontinued, when combined with all other
assets transferred pursuant to this clause (ii), and all other
assets utilized in all other business lines or segments
discontinued, during such Fiscal Quarter and the immediately
preceding eleven Fiscal Quarters, either (x) constituted more than
10% of Consolidated Total Assets at the end of the Fiscal Quarter
immediately preceding such Fiscal Quarter, or (y) contributed more
than 10% of Consolidated Net Earnings during the period of eight
consecutive Fiscal Quarters immediately preceding such Fiscal
Quarter.
SECTION 6.10. Use of Proceeds. The proceeds of the Advances shall
be used first to finance the Acquisitions and thereafter for general
corporate purposes. No portion of the proceeds of the Advances will be used
by the Borrower (x) in connection with any tender offer for, or other
acquisition of, stock of any corporation with a view towards obtaining
control of such other corporation (except for Acquisitions), (y) directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any Margin Stock, or (z) for any purpose in violation
of any applicable law or regulation.
SECTION 6.11. Compliance with Laws; Payment of Taxes. The
Borrower will, and will cause each of its Subsidiaries and each member of the
Controlled Group to, comply with applicable laws (including but not limited
to ERISA and Environmental Requirements), regulations and similar
requirements of governmental authorities (including but not limited to PBGC),
except where the necessity of such compliance is being contested in good
faith through appropriate proceedings and reserves, if appropriate, shall
have been established therefor that are satisfactory to the Bank and except
where noncompliance could not reasonably be expected to materially impair the
validity or enforceability of, or the ability of the Borrower to perform its
obligations under, this Agreement or any other Loan Document or result in any
material adverse change in the financial condition or properties, business or
operations of the Borrower and its Subsidiaries, taken as a whole. The
Borrower will, and will cause each of its Subsidiaries to, pay before they
become delinquent all taxes, assessments, governmental charges, claims for
labor, supplies, rent and other obligations which, if unpaid, might become a
lien against the property of the Borrower or any Subsidiary, except
liabilities being contested in good faith and against which, if requested by
the Bank, the Borrower will set up reserves satisfactory to the Bank.
SECTION 6.12. Insurance. The Borrower will maintain, and will
cause each of its Subsidiaries to maintain (either in the name of the
Borrower or in such Subsidiary's own name), with financially sound and
reputable insurance companies, insurance on all its property in at least such
amounts and against at least such risks as are usually insured against in the
same general area by companies of established repute engaged in the same or
similar business and subject to self-insurance retentions; and to the extent
usually insured (subject to self-insured retentions) by companies similarly
situated and conducting similar businesses, the Borrower will also insure,
and cause each Subsidiary to insure, employers' and public and product
liability risks in good and responsible insurance companies. The Borrower
will upon request of the Bank furnish a summary setting forth the nature and
extent of the insurance maintained pursuant to this Section.
SECTION 6.13. Maintenance of Property. The Borrower shall, and
shall cause each Subsidiary to, maintain all of its properties and assets in
good condition, repair and working order, ordinary wear and tear excepted.
SECTION 6.14. Environmental Notices. The Borrower shall furnish
to the Bank prompt written notice of all material Environmental Liabilities,
pending, threatened or anticipated material Environmental Proceedings,
material Environmental Notices, Environmental Judgments and Orders, and
material Environmental Releases at, on, in, under or in any way affecting the
Real Properties or any adjacent property, and all facts, events, or
conditions that could reasonably be expected to lead to any of the foregoing.
For purposes of this Section 6.14, disclosure of such matters by the Borrower
in its filings with the Securities and Exchange Commission shall constitute
notice to the Bank of such matters.
ARTICLE VII. DEFAULTS
SECTION 7.01. Events of Default. The occurrence of any one or
more of the following events shall constitute an Event of Default by the
Borrower under this Agreement:
(a) the Borrower shall fail to pay when due any principal of
any Advance or shall fail to pay any interest on any Advance within
three Domestic Business Days after such interest shall become due,
or shall fail to pay any fee or other amount payable hereunder
within three Domestic Business Days after such fee or other amount
becomes due; or
(b) the Borrower shall fail to observe or perform any
covenant contained in Sections 6.03 through 6.10, inclusive; or
(c) the Borrower shall fail to observe or perform any
covenant or agreement contained in this Agreement (other than those
covered by clause (a) or (b) above) for thirty days after the
earlier of (i) the first day on which a responsible officer of the
Borrower has knowledge of such failure, or (ii) written notice
thereof has been given to the Borrower by the Bank; or
(d) any representation, warranty, certification or statement
made by the Borrower in Article V or in any certificate, financial
statement or other document delivered pursuant to this Agreement
shall prove to have been incorrect in any material respect when
made (or deemed made); or
(e) the Borrower or any Subsidiary shall fail to make any
payment in respect of Indebtedness For Borrowed Money outstanding
in an aggregate amount equal to or exceeding $25,000,000 (other
than the Note) when due or within any applicable grace period; or
(f) any event or condition shall occur which results in the
acceleration of the maturity of Indebtedness For Borrowed Money
outstanding in an aggregate amount equal to or exceeding
$25,000,000 of the Borrower or any Subsidiary or the purchase of
such Indebtedness For Borrowed Money by the Borrower (or its
designee) or such Subsidiary (or its designee) prior to the
scheduled maturity thereof or enables (or, with the giving of
notice or lapse of time or both, would enable) the holders of such
Indebtedness For Borrowed Money or any Person acting on such
holders' behalf to accelerate the maturity thereof or require the
purchase thereof by the Borrower (or its designee) or such
Subsidiary (or its designee) prior to the scheduled maturity
thereof, without regard to whether such holders or other Person
shall have exercised or waived their right to do so;
(g) the Borrower or any Material Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced
against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the
foregoing; or
(h) an involuntary case or other proceeding shall be
commenced against the Borrower or any Material Subsidiary seeking
liquidation, reorganization or other relief with respect to it or
its debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period
of 60 days; or an order for relief shall be entered against the
Borrower or any Material Subsidiary under the federal bankruptcy
laws as now or hereafter in effect; or
(i) the Borrower or any member of the Controlled Group shall
fail to pay when due any material amount which it shall have become
liable to pay to the PBGC or to a Plan under Title IV of ERISA; or
the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any
such Plan or Plans or a proceeding shall be instituted by a
fiduciary of any such Plan or Plans to enforce Section 515 or
4219(c)(5) of ERISA and such proceeding shall not have been
dismissed within 30 days thereafter; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree
adjudicating that any such Plan or Plans must be terminated; or
(j) one or more judgments or orders for the payment of money
in an aggregate amount in excess of $25,000,000 shall be rendered
against the Borrower or any Subsidiary and such judgment or order
shall continue unsatisfied and unstayed for a period of 30 days; or
(k) a federal tax lien shall be filed against the Borrower
under Section 6323 of the Code or a lien of the PBGC shall be filed
against the Borrower under Section 4068 of ERISA and in either case
such lien shall remain undischarged for a period of 25 days after
the date of filing; or
(l) (i) any Person or two or more Persons acting in concert
shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 20% or more of the outstanding
shares of the voting stock of the Borrower (it being understood and
agreed that any change in any person or group of persons having
power to cause the trustee of any voting trust to vote, shall
constitute a change in voting power, except to the extent that the
members of the Mead Voting Trust (which is evidenced by a voting
trust agreement dated December 20, 1986) are all descendants of
George W. Mead, I, or spouses thereof, and the aforesaid change
constitutes a transfer of such power from one member of the
aforesaid Mead Voting Trust to another member of the Mead Voting
Trust); or (ii) as of any date a majority of the Board of Directors
of the Borrower consists of individuals who were not either (A)
directors of the Borrower as of the corresponding date of the
previous year, (B) selected or nominated to become directors by the
Board of Directors of the Borrower of which a majority consisted of
individuals described in clause (A), or (C) selected or nominated
to become directors by the Board of Directors of the Borrower of
which a majority consisted of individuals described in clause (A)
and individuals described in clause (B).
SECTION 7.02. Remedies on Default. Upon the occurrence of an
Event of Default, the Bank may, by notice to the Borrower, terminate the
Commitment which shall thereupon terminate, and by notice to the Borrower
declare the Note (together with accrued interest thereon) to be, and the Note
and all outstanding Advances shall thereupon become, immediately due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower; provided that if any Event of
Default specified in clause (g) or (h) above occurs with respect to the
Borrower, without any notice to the Borrower or any other act by the Bank,
the Commitment shall thereupon terminate and the Note and all outstanding
Advances (together with accrued interest thereon) and fees shall become
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower.
SECTION 7.03. Offset. In addition to, and not in limitation of,
all rights of offset that the Bank or other holder of the Note may have under
applicable law, the Borrower hereby grants to the Bank, and to each
Participant, Assignee or other Transferee, a right of offset against all
deposits and other sums credited by or due from the Bank (or such
Participant, Assignee or other Transferee) to the Borrower or subject to
withdrawal by the Borrower; and regardless of the adequacy of any collateral
or other means of obtaining repayment of the Obligations, the Bank (and each
such Assignee and, to the extent permitted by applicable law, each such
Participant and other Transferee) may, at any time after the occurrence of an
Event of Default and without notice to the Borrower, set off the whole or any
portion or portions of any or all such deposits and other sums against the
amounts owing under this Agreement and the Note, whether or not any other
Person or Persons could also withdraw money therefrom.
ARTICLE VIII. MISCELLANEOUS
SECTION 8.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including
facsimile transmission or similar writing) and shall be given to such party
at its address or telecopy number set forth below or such other address or
telecopy number as such party may hereafter specify for the purpose by notice
to the other party:
(a) If to the Borrower:
Consolidated Papers, Inc.
P. O. Box 8050
Wisconsin Rapids, Wisconsin 54495-8050
Attention: Mr. Richard J. Kenney
Vice President, Finance
Fax number: (715) 422-3469
Telephone number: (715) 422-3111
(b) If to the Bank:
Wachovia Bank of Georgia, N.A.
MC GA-370
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Central District Loan Administration
Fax number: (404) 332-6898
Telephone number: (404) 332-5279
With a copy to:
Wachovia Corporate Services, Inc.
MC IL-90911
Suite 1740, Xerox Center
55 W. Monroe Street
Chicago, Illinois 60603-5006
Attention: D. Kelly Long
Fax number: (312) 853-0693
Telephone number: (312) 853-0459
Each such notice, request or other communication shall be effective (i) if
given by telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section and transmission thereof is confirmed, (ii) if
given by mail, 72 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid or (iii) if given by
any other means, when delivered at the address specified in this Section;
provided that notices to the Bank under Article II or Article III shall not
be effective until received.
SECTION 8.02. No Waivers. No failure or delay by the Bank in
exercising any right, power or privilege hereunder or under the Note 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.
SECTION 8.03. Expenses; Documentary Taxes. The Borrower shall pay
(i) all out-of-pocket expenses of the Bank, including reasonable fees and
disbursements of counsel for the Bank, in connection with the preparation of
this Agreement and the other Loan Documents (to the extent set forth in the
Letter Agreement), any waiver or consent hereunder or any amendment hereof or
any actual or alleged Default hereunder and (ii) if an Event of Default
occurs, all out-of-pocket expenses incurred by the Bank, including fees and
disbursements of counsel, in connection with such Event of Default and
collection and other enforcement proceedings resulting therefrom, including
out-of-pocket expenses incurred in enforcing this Agreement and the other
Loan Documents. The Borrower shall indemnify the Bank against any transfer
taxes, documentary taxes, assessments or charges made by any Authority by
reason of the execution and delivery of this Agreement or the other Loan
Documents.
SECTION 8.04. Amendments and Waivers. Any provision of this
Agreement, the Note or any other Loan Documents may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by the
Borrower and the Bank.
SECTION 8.05. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; provided that the
Borrower may not assign or otherwise transfer any of its rights under this
Agreement.
(b) The Bank may at any time sell to one or more Persons (each a
"Participant") participating interests in any Advance, the Note, the
Commitment hereunder or any other interest of the Bank hereunder. In the
event of any such sale by the Bank of a participating interest to a
Participant, the Bank's obligations under this Agreement shall remain
unchanged, the Bank shall remain solely responsible for the performance
thereof, the Bank shall remain the holder of any the Note for all purposes
under this Agreement, and the Borrower shall continue to deal solely and
directly with the Bank in connection with the Bank's rights and obligations
under this Agreement. In no event shall the Bank be obligated to the
Participant to take or refrain from taking any action hereunder except that
the Bank may agree with the Participant to repurchase any participating
interest upon prior notice from such Participant to the Bank and the Bank may
further agree that it will not, without the consent of the Participant, agree
to (i) the change of any date fixed for the payment of principal of or
interest on the related Advance or Advances, (ii) the change of the amount of
any principal, interest or fees due on any date fixed for the payment thereof
with respect to the related Advance or Advances, (iii) the change of the
principal of the related Advance or Advances, or (iv) any change in the rate
at which either interest is payable thereon or (if the Participant is
entitled to any part thereof) commitment fee is payable hereunder from the
rate at which the Participant is entitled to receive interest or commitment
fee (as the case may be) in respect of such participation. The Bank shall,
within ten Domestic Business Days after selling a participating interest in
any Advance, the Note, the Commitment or other interest under this Agreement,
provide the Borrower with written notification stating that such sale has
occurred and identifying the Participant and the interest purchased by such
Participant. The Borrower agrees that each Participant shall be entitled to
the benefits of Article III and Section 7.03 with respect to its
participation in Advances outstanding from time to time.
(c) The Bank may at any time assign to one or more banks or
financial institutions (each an "Assignee") all, or a proportionate part of
all, of its rights and obligations under this Agreement and the Note, and
such Assignee shall assume all such rights and obligations, pursuant to an
Assignment and Acceptance in the form attached hereto as Exhibit C executed
by such Assignee, the Bank and the Borrower; provided that (i) no interest
may be sold by the Bank pursuant to this paragraph (c) unless the Assignee
shall agree to assume ratably equivalent portions of the Commitment, and
(ii) no interest may be sold by the Bank pursuant to this paragraph (c) to
any Assignee which is not an Affiliate of the Bank without the consent of the
Borrower, which consent may be withheld in its sole discretion. Upon
(A) execution of the Assignment and Acceptance by the Bank, such Assignee,
and the Borrower, (B) delivery of an executed copy of the Assignment and
Acceptance to the Borrower, and (C) payment by such Assignee to the Bank of
an amount equal to the purchase price agreed between the Bank and such
Assignee, such Assignee shall for all purposes be a Bank party to this
Agreement and shall have all the rights and obligations of a Bank under this
Agreement to the same extent as if it were an original party hereto with a
Commitment as set forth in such instrument of assumption, and the Bank shall
be released from its obligations hereunder to a corresponding extent, and no
further consent or action by the Borrower or the Bank shall be required.
Upon the consummation of any transfer to an Assignee pursuant to this
paragraph (c), the Bank and the Borrower shall make appropriate arrangements
so that, if required, a new Note is issued to such Assignee.
(d) Subject to the provisions of Section 8.06, the Borrower
authorizes the Bank to disclose to any Participant or Assignee (each a
"Transferee") and any prospective Transferee any and all financial
information in the Bank's possession concerning the Borrower which has been
delivered to the Bank by the Borrower pursuant to this Agreement or which has
been delivered to the Bank by the Borrower in connection with the Bank's
credit evaluation prior to entering into this Agreement.
(e) No Transferee shall be entitled to receive any greater payment
under Section 3.03 than the transferor Bank would have been entitled to
receive with respect to the rights transferred, unless such transfer is made
with the Borrower's prior written consent or by reason of the provisions of
Section 3.02 or 3.03 requiring the Bank to designate a different Lending
Office under certain circumstances or at a time when the circumstances giving
rise to such greater payment did not exist.
SECTION 8.06. Confidentiality. The Bank agrees to exercise its
best efforts to keep any information delivered or made available by the
Borrower to it which is clearly indicated to be confidential information,
confidential from any one other than persons employed or retained by the Bank
who are or are expected to become engaged in evaluating, approving,
structuring or administering the Advances; provided, however, that nothing
herein shall prevent the Bank from disclosing such information (i) upon the
order of any court or administrative agency, (ii) upon the request or demand
of any regulatory agency or authority having jurisdiction over the Bank,
(iii) which has been publicly disclosed, (iv) to the extent reasonably
required in connection with any litigation to which the Bank or their
respective Affiliates may be a party, (v) to the extent reasonably required
in connection with the exercise of any remedy hereunder, (vi) to the Bank's
legal counsel and independent auditors and (vii) to any actual or proposed
Participant, Assignee or other Transferee of all or part of its rights
hereunder which has agreed in writing to be bound by the provisions of this
Section.
SECTION 8.07. Interest Limitation. Notwithstanding any other term
of this Agreement, the Note or any other Loan Document, the maximum amount of
interest which may be charged to or collected from any person liable
hereunder or under the Note by the Bank shall be absolutely limited to, and
shall in no event exceed, the maximum amount or interest which could lawfully
be charged or collected under applicable law (including, to the extent
applicable, the provisions of section 5197 of the Revised Statutes of the
United States of America, as amended, 12 U.S.C. 85, as amended), so that the
maximum of all amounts constituting interest under applicable law, howsoever
computed, shall never exceed as to any Person liable therefor such lawful
maximum, and any term of this Agreement, the Note or any other Loan Document
which could be construed as providing for interest in excess of such lawful
maximum shall be and hereby is made expressly subject to and modified by the
provisions of this paragraph.
SECTION 8.08. Governing Law. This Agreement and the Note shall be
construed in accordance with and governed by the law of the State of Georgia.
This Agreement and the Note are intended to be effective as instruments
executed under seal.
SECTION 8.09. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
SECTION 8.10. Consent to Jurisdiction. The Borrower (a) submits
to personal jurisdiction in the State of Georgia, the courts thereof and the
United States District Courts sitting therein, for the enforcement of this
Agreement, the Note and the other Loan Documents, (b) waives any and all
personal rights under the law of any jurisdiction to object on any basis
(including, without limitation, inconvenience of forum) to jurisdiction or
venue within the State of Georgia for the purpose of litigation to enforce
this Agreement, the Note or the other Loan Documents, and (c) agrees that
service of process may be made upon it in the manner prescribed in Section
8.01 for the giving of notice to the Borrower. Nothing herein contained,
however, shall prevent the Bank from bringing any action or exercising any
rights against any security and against the Borrower personally, and against
any assets of the Borrower, within any other state or jurisdiction.
SECTION 8.11. Severability. If any provisions of this Agreement
shall be held invalid under any applicable laws, such invalidity shall not
affect any other provision of this Agreement that can be given effect without
the invalid provision, and, to this end, the provisions hereof are severable.
SECTION 8.12. Captions. Captions in this Agreement are for the
convenience of reference only and shall not affect the meaning or
interpretation of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed under seal as of the year and day first above written.
BORROWER:
CONSOLIDATED PAPERS, INC.
ATTEST:
By: (SEAL)
Secretary Title:
[CORPORATE SEAL]
BANK:
Lending Office WACHOVIA BANK OF GEORGIA, N.A.
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303 By:
Title:
Exhibit 4(b)
$120,000,000
CREDIT AGREEMENT
DATED AS OF
JUNE 27, 1995
BETWEEN
CONSOLIDATED PAPERS, INC.
AND
WACHOVIA BANK OF GEORGIA, N.A.
TABLE OF CONTENTS
[Not a part of the Agreement]
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . .
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . .
SECTION 1.03. References . . . . . . . . . . . . . . . . . . . . . .
ARTICLE II. THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.01. Commitment to Lend . . . . . . . . . . . . . . . . . .
SECTION 2.02. Method of Borrowing . . . . . . . . . . . . . . . . . .
SECTION 2.03. Note . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.04. Maturity of Advances . . . . . . . . . . . . . . . . .
SECTION 2.05. Interest Rates . . . . . . . . . . . . . . . . . . . .
SECTION 2.06. Fees . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.07. Optional Termination or Reduction of Commitment . . . .
SECTION 2.08. Mandatory Termination of Commitment; Extension of
Expiration Date . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.09. Optional Prepayments . . . . . . . . . . . . . . . . .
SECTION 2.10. Mandatory Prepayments . . . . . . . . . . . . . . . . .
SECTION 2.11. General Provisions Concerning Payments . . . . . . . .
SECTION 2.12. Computation of Interest and Fees . . . . . . . . . . .
ARTICLE III. CHANGE IN CIRCUMSTANCES; COMPENSATION . . . . . . . . . . . .
SECTION 3.01. Basis for Determining Interest Rate Inadequate or
Unfair . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.02. Illegality . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.03. Increased Cost and Reduced Return . . . . . . . . . . .
SECTION 3.04. Base Rate Loans Substituted for Affected Euro-Dollar
Loans or Offered Rate Loans . . . . . . . . . . . . . .
SECTION 3.05. Compensation . . . . . . . . . . . . . . . . . . . . .
ARTICLE IV. CONDITIONS TO BORROWINGS . . . . . . . . . . . . . . . . . . .
SECTION 4.01. Conditions to First Borrowing . . . . . . . . . . . . .
SECTION 4.02. Conditions to All Borrowings . . . . . . . . . . . . .
ARTICLE V. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . .
SECTION 5.01. Corporate Existence and Power . . . . . . . . . . . . .
SECTION 5.02. Corporate and Governmental Authorization;
Contravention . . . . . . . . . . . . . . . . . . . . .
SECTION 5.03. Binding Effect . . . . . . . . . . . . . . . . . . . .
SECTION 5.04. Financial Information . . . . . . . . . . . . . . . . .
SECTION 5.05. Litigation . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.06. Compliance with ERISA . . . . . . . . . . . . . . . . .
SECTION 5.07. Taxes . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.08. Subsidiaries . . . . . . . . . . . . . . . . . . . . .
SECTION 5.09. Not an Investment Company . . . . . . . . . . . . . . .
SECTION 5.10. Ownership of Property; Liens . . . . . . . . . . . . .
SECTION 5.11. No Default . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.12. Full Disclosure . . . . . . . . . . . . . . . . . . . .
SECTION 5.13. Environmental Matters . . . . . . . . . . . . . . . .
SECTION 5.14. Compliance with Laws . . . . . . . . . . . . . . . . .
SECTION 5.15. Transactions with Affiliates . . . . . . . . . . . . .
ARTICLE VI. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.01. Information . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.02. Inspection of Property, Books and Records . . . . . . .
SECTION 6.03. Ratio of Indebtedness For Borrowed Money to Total
Capitalization . . . . . . . . . . . . . . . . . . . .
SECTION 6.04. Minimum Consolidated Tangible Net Worth . . . . . . . .
SECTION 6.05. Loans or Advances . . . . . . . . . . . . . . . . . . .
SECTION 6.06. Negative Pledge . . . . . . . . . . . . . . . . . . . .
SECTION 6.07. Maintenance of Existence; Fields of Business . . . . .
SECTION 6.08. Dissolution . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.09. Consolidations, Mergers and Sales of Assets . . . . . .
SECTION 6.10. Use of Proceeds . . . . . . . . . . . . . . . . . . . .
SECTION 6.11. Compliance with Laws; Payment of Taxes . . . . . . . .
SECTION 6.12. Insurance . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.13. Maintenance of Property . . . . . . . . . . . . . . . .
SECTION 6.14. Environmental Notices . . . . . . . . . . . . . . . . .
ARTICLE VII. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.01. Events of Default . . . . . . . . . . . . . . . . . . .
SECTION 7.02. Remedies on Default . . . . . . . . . . . . . . . . . .
SECTION 7.03. Offset . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.01. Notices . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.02. No Waivers . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.03. Expenses; Documentary Taxes . . . . . . . . . . . . . .
SECTION 8.04. Amendments and Waivers . . . . . . . . . . . . . . . .
SECTION 8.05. Successors and Assigns . . . . . . . . . . . . . . . .
SECTION 8.06. Confidentiality . . . . . . . . . . . . . . . . . . . .
SECTION 8.07. Interest Limitation . . . . . . . . . . . . . . . . . .
SECTION 8.08. Governing Law . . . . . . . . . . . . . . . . . . . . .
SECTION 8.09. Counterparts . . . . . . . . . . . . . . . . . . . . .
SECTION 8.10. Consent to Jurisdiction . . . . . . . . . . . . . . . .
SECTION 8.11. Severability . . . . . . . . . . . . . . . . . . . . .
SECTION 8.12. Captions . . . . . . . . . . . . . . . . . . . . . . .
SCHEDULE 5.05 Description of Potential Litigation
SCHEDULE 5.13 Potentially Responsible Party Designations and Properties on
National Priorities List or CERCLIS List
EXHIBIT A Form of Note
EXHIBIT B Form of Opinion of Counsel for the Borrower
EXHIBIT C Form of Assignment and Acceptance
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, made as of the 27th day of June 1995, by and
between CONSOLIDATED PAPERS, INC., a Wisconsin corporation (together with its
successors, the "Borrower"), and WACHOVIA BANK OF GEORGIA, N.A., a national
banking association (together with its endorsees, successors and assigns, the
"Bank").
BACKGROUND
The Borrower desires to establish with the Bank a credit facility
providing for revolving loans of up to $120,000,000 in the aggregate maximum
principal amount at any time outstanding, and the Bank is willing to
establish such a credit facility on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and the promises
herein contained, and each intending to be legally bound hereby, the parties
agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Definitions. The terms as defined in this
Section 1.01 shall, for all purposes of this Agreement and any amendment
hereto (except as herein otherwise expressly provided or unless the context
otherwise requires), have the meanings set forth herein (terms defined in the
singular to have the same meanings when used in the plural and vice versa):
"Acceptable Obligations" means any of the following:
(i) commercial paper rated A-1 or the equivalent thereof by
Standard & Poor's Ratings Group, Inc., a division of McGraw-Hill, Inc.
or P-1 or the equivalent thereof by Moody's Investors Service, Inc. and
in either case maturing within one year after the date of acquisition;
(ii) tender bonds the payment of the principal of and interest on
which is fully supported by a letter of credit issued by a United States
bank whose long-term certificates of deposit are rated at least AA or
the equivalent thereof by Standard & Poor's Rating Group, a division of
McGraw-Hill, Inc. or Aa or the equivalent thereof by Moody's Investors
Service, Inc.;
(iii) direct obligations of the United States of America;
(iv) obligations issued or unconditionally guaranteed by a state
or municipality, having a rating of AA or better from Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc. or Aa or better from
Moody's Investors Service, Inc.; and
(v) obligations of a corporation having a rating of AA or better
from Standard & Poor's Rating Group, a division of McGraw-Hill, Inc., or
Aa or better from Moody's Investors Service, Inc.
"Acquisitions" means and includes the acquisition by the Borrower
of:
(a) 100% of the issued and outstanding capital stock of Niagara
Paper from Pentair,
(b) (i) 100% of the issued and outstanding capital stock of SRFC
and (ii) 100% of the assets of LSPI Fiber from Synertec and LSPI Fiber,
and
(c) 100% of the issued and outstanding capital stock of Pentair
Duluth and Minnesota Paper from Pentair and Minnesota Power, in each
case, pursuant to the Acquisition Documents.
"Acquisition Documents" means and includes:
(a) that certain Agreement for Sale and Purchase of Stock of
Niagara of Wisconsin Paper Corporation, dated as of May 8, 1995, between
the Borrower and Pentair, together with all agreements, exhibits,
schedules, annexes and documents executed or delivered in connection
therewith;
(b) that certain Agreement for Sale and Purchase of Assets of LSPI
Fiber Co. and Stock of Superior Recycled Fiber Corporation, dated as of
May 8, 1995, among the Borrower and each of Pentair, Minnesota Power,
Synertec and LSPI Fiber, together with all agreements, exhibits,
schedules, annexes and documents executed or delivered in connection
therewith; and
(c) that certain Agreement for Sale and Purchase of Stock of
Pentair Duluth Corp. and Minnesota Paper Incorporated, dated as of May
8, 1995, among the Borrower and each of Pentair and Minnesota Power,
together with all agreements, exhibits, schedules, annexes and documents
executed or delivered in connection therewith.
"Adjusted London Interbank Offered Rate" applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the
applicable London Interbank Offered Rate for such Interest Period by
(ii) 1.00 minus the Euro-Dollar Reserve Percentage.
"Advance" means any advance by the Bank under the Commitment.
"Affiliate" of any Person means (i) any other Person which
directly, or indirectly through one or more intermediaries, controls such
Person, (ii) any other Person which directly, or indirectly through one or
more intermediaries, is controlled by or is under common control with such
Person, or (iii) any other Person of which such Person owns, directly or
indirectly, 20% or more of the common stock or equivalent equity interests.
As used herein, the term "control" means possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies
of a Person, whether through the ownership of voting securities, by contract
or otherwise.
"Agreement Accounting Principles" means generally accepted
principles of accounting as in effect from time to time.
"Applicable Margin" has the meaning set forth in Section 2.05(c).
"Assignee" has the meaning set forth in Section 8.05(c).
"Assignment and Acceptance" means an Assignment and Acceptance
executed in accordance with Section 8.05(c) in the form attached hereto as
Exhibit C.
"Authority" has the meaning set forth in Section 3.02.
"Base Rate" means for any Base Rate Loan for any day, the rate per
annum equal to the higher as of such day of (i) the Prime Rate, and (ii) one-
half of one percent above the Federal Funds Rate for such day. For purposes
of determining the Base Rate for any day, changes in the Prime Rate shall be
effective on the date of each such change.
"Base Rate Loan" means an Advance which bears or is to bear
interest at a rate based upon the Base Rate.
"Borrowing" means a borrowing under the Commitment consisting of an
Advance by the Bank. A Borrowing is a "Euro-Dollar Borrowing" if the Advance
is made as a Euro-Dollar Loan, a "Base Rate Borrowing" if the Advance is made
as a Base Rate Loan and an "Offered Rate Borrowing" if the Advance is made as
an Offered Rate Loan.
"Capital Lease" means at any date any lease of Property which in
accordance with Agreement Accounting Principles would be required to be
capitalized on a balance sheet of the lessee.
"Capital Stock" means any nonredeemable capital stock of the
Borrower or any Consolidated Subsidiary (to the extent issued to a Person
other than the Borrower), whether common or preferred.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person, prepared in accordance with
Agreement Accounting Principles.
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act.
"CERCLIS" means the Comprehensive Environmental Response
Compensation and Liability Information System established pursuant to CERCLA.
"Change of Law" shall have the meaning set forth in Section 3.02.
"Closing Date" means June 27, 1995.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code.
"Commitment" shall have the meaning assigned to it in Section 2.01.
"Commitment Fee Payment Date" means the first day of each January,
April, July and October, commencing October 1, 1995; provided that if any
such day is not a Domestic Business Day, the Commitment Fee Payment Date
shall be on the next succeeding Domestic Business Day.
"Consolidated Net Earnings" for any period, means the consolidated
net income of the Borrower and its Subsidiaries accrued during such period as
computed on a consolidated basis in accordance with Agreement Accounting
Principles, and, without limiting the foregoing, after deduction from gross
income of all charges and reserves, including charges and reserves for all
taxes on or measured by income, but excluding any profits or losses on the
sale or other disposition not in the ordinary course of business of fixed or
capital assets or on the acquisition, retirement, sale or other disposition
of stock or securities of the Borrower and its Subsidiaries, and also
excluding taxes on such profits and any tax deductions or credits on account
of any such losses.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which, in accordance with generally accepted
accounting principles consistently applied, would be consolidated with those
of the Borrower in its consolidated financial statements as of such date.
"Consolidated Tangible Net Worth" means, the excess of total assets
of the Borrower and its Subsidiaries over total liabilities and reserves of
the Borrower and its Subsidiaries computed on a consolidated basis, total
assets and total liabilities each to be determined in accordance with
Agreement Accounting Principles excluding, however, from the determination of
total assets, (i) all Intangible Assets and (ii) all Minority Interests.
"Consolidated Total Assets" means, at any time, the total assets of
the Borrower and its Consolidated Subsidiaries, determined on a consolidated
basis, as set forth or reflected on the most recent consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries, prepared in
accordance with generally accepted accounting principles consistently
applied.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"Default" means any condition or event which constitutes an Event
of Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Dollars" or "$" means dollars in lawful currency of the United
States of America.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in Georgia are authorized by law to
close.
"Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Borrower or any Subsidiary required by any Environmental
Requirement.
"Environmental Authority" means any foreign, federal, state, local
or regional government that exercises any form of jurisdiction or authority
under any Environmental Requirement.
"Environmental Judgments and Orders" means all judgments, decrees
or orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent or written agreements with
an Environmental Authority or other entity arising from or in any way
associated with any Environmental Requirement, whether or not incorporated in
a judgment, decree or order.
"Environmental Liabilities" means any liabilities, whether accrued,
contingent or otherwise, arising from and in any way associated with any
Environmental Requirements.
"Environmental Notices" means notice from any Environmental
Authority or by any other person or entity, of possible or alleged
noncompliance with any Environmental Requirement, including without
limitation any complaints, citations, demands or requests from any
Environmental Authority or from any other person or entity for correction of
any violation of any Environmental Requirement or any investigations
concerning any violation of any Environmental Requirement.
"Environmental Proceedings" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.
"Environmental Releases" means releases as defined in CERCLA or
under any applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement relating
to health, safety or the environment and applicable to the Borrower, any
Subsidiary or the Real Properties, including but not limited to any such
requirement under CERCLA or similar state legislation.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, or any successor law, including any rules or
regulations promulgated thereunder. Any reference to any provision of ERISA
shall also be deemed to be a reference to any successor provision or
provisions thereof.
"Euro-Dollar Business Day" means any Domestic Business Day on which
dealings in Dollar deposits are carried out in the London interbank market.
"Euro-Dollar Loan" means an Advance which bears or is to bear
interest at a rate based upon the Adjusted London Interbank Offered Rate.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which
the interest rate on Euro-Dollar Loans is determined or any category of
extensions of credit or other assets which includes loans by a non-United
States office of the Bank to United States residents). The Adjusted London
Interbank Offered Rate shall be adjusted automatically on and as of the
effective date of any change in the Euro-Dollar Reserve Percentage.
"Event of Default" shall have the meaning assigned to such term in
Section 7.01.
"Excepted Lease Obligations" means Indebtedness For Borrowed Money
of the Borrower or any Subsidiary incurred in connection with the refinancing
of, and secured by the Property which is, as of the Closing Date, the subject
of, any of the LSPI Leases or the Niagara Leases, so long as (a) the
aggregate amount of all obligations of the Borrower and its Subsidiaries in
respect of such Indebtedness For Borrowed Money does not exceed Five Hundred
Million Dollars ($500,000,000) and (b) such Property is subject to no other
Liens securing any other Indebtedness For Borrowed Money.
"Existing Commitment" means the commitment of Wachovia to make
advances to the Borrower under the line of credit evidenced by the letter
agreement referred to in Section 6.10.
"Expiration Date" means the Initial Expiration Date or, if the term
of the Commitment is extended pursuant to Section 2.08(b), the last day of
each Successive Extension Period.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the next higher 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the
Domestic Business Day next succeeding such day, provided that (i) if the day
for which such rate is to be determined is not a Domestic Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Domestic Business Day as so published on the next
succeeding Domestic Business Day, and (ii) if such rate is not so published
for any day, the Federal Funds Rate for such day shall be the average rate
charged to Wachovia on such day on such transactions.
"Fiscal Quarter" means any fiscal quarter of the Borrower.
"Fiscal Year" means any fiscal year of the Borrower.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness For Borrowed Money or other obligation of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to secure, purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness For Borrowed Money or other obligation (whether arising by
virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to provide collateral security, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the obligee
of such Indebtedness For Borrowed Money or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole
or in part), provided that the term Guarantee shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Hazardous Materials" includes, without limitation, (a) solid or
hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, or in any applicable state or local law or regulation, (b) hazardous
substances, as defined in CERCLA, or in any applicable state or local law or
regulation, (c) gasoline, or any other petroleum product or by-product, (d)
toxic substances, as defined in the Toxic Substances Control Act of 1976, or
in any applicable state or local law or regulation or (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide,
Fungicide, and Rodenticide Act of 1975, or in any applicable state or local
law or regulation, as each such Act, statute or regulation may be amended
from time to time.
"Indebtedness For Borrowed Money" means all indebtedness of the
Borrower and its Subsidiaries (computed on a consolidated basis in accordance
with Agreement Accounting Principles) for borrowed money, including without
limitation, (i) obligations representing the deferred purchase price of
Property (other than accounts payable arising in the ordinary course of
business on customary trade terms), (ii) obligations, whether or not assumed,
secured by Liens or payable out of proceeds or production from Property now
or hereafter acquired by the Borrower or any Subsidiary, (iii) obligations
which are evidenced by notes, acceptances or other instruments, (iv)
Capitalized Lease Obligations, (v) obligations in respect of letters of
credit, and (vi) obligations in respect of Guaranties; provided that in no
event shall Indebtedness For Borrowed Money include any obligations arising
in connection with the Steam Bonds.
"Initial Expiration Date" means July 27, 1996.
"Intangible Assets" means any assets that are not Tangible Assets.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending on
the numerically corresponding day in the first, second or third calendar
month thereafter, as the Borrower may elect in the applicable Notice of
Borrowing; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (c) below) which would otherwise end
on a day which is not a Euro-Dollar Business Day shall be extended
to the next succeeding Euro-Dollar Business Day unless such Euro-
Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar
Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the appropriate subsequent
calendar month) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of the appropriate subsequent calendar
month; and
(c) any Interest Period which begins before the Termination
Date and would otherwise end after the Termination Date shall end
on the Termination Date;
(2) with respect to each Base Rate Borrowing, the period commencing on the
date of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would otherwise end
on a day which is not a Domestic Business Day shall be extended to
the next succeeding Domestic Business Day; and
(b) any Interest Period which begins before the Termination
Date and would otherwise end after the Termination Date shall end
on the Termination Date; and
(3) with respect to each Offered Rate Borrowing, the period commencing on
the date of such Borrowing and ending from 1 to 180 days thereafter, as the
Borrower may elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would otherwise end
on a day which is not a Domestic Business Day shall be extended to
the next succeeding Domestic Business Day;
(b) any Interest Period which begins before the Termination
Date and would otherwise end after the Termination Date shall end
on the Termination Date.
"Lending Office" means the Bank's office located at its address set
forth on the signature pages hereof (or identified on the signature pages
hereof as its Lending Office) or such other office as the Bank may hereafter
designate as its Lending Office by notice to the Borrower.
"Letter Agreement" means that certain letter agreement, dated as of
May 18, 1995 and accepted by the Borrower effective May 30, 1995, between the
Borrower and the Bank relating to the Advances, and certain fees from time to
time payable by the Borrower to the Bank, together with all amendments and
modifications thereto.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For the purposes of this Agreement, the Borrower or any
Subsidiary shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, Capital Lease or other title retention agreement
relating to such asset.
"Loan Documents" means this Agreement, the Note and any other
document evidencing or securing the Advances.
The "London Interbank Offered Rate" applicable to any Euro-Dollar
Loan means for the Interest Period of such Euro-Dollar Loan the rate per
annum determined on the basis of the offered rate for deposits in Dollars of
amounts equal or comparable to the principal amount of such Euro-Dollar Loan
offered for a term comparable to such Interest Period, which rate appears on
the Reuters Screen LIBO Page as of 11:00 a.m., London time, two (2) Euro-
Dollar Business Days prior to the first day of such Interest Period, provided
that (i) if more than one such offered rate appears on the Reuters Screen
LIBO Page, the "London Interbank Offered Rate" will be the arithmetic average
(rounded upward, if necessary, to the next higher 1/100th of 1%) of such
offered rates; and (ii) if no such offered rates appear on such page, the
"London Interbank Offered Rate" for such Interest Period will be the
arithmetic average (rounded upward, if necessary, to the next higher 1/100th
of 1%) of rates quoted by not less than two major banks in New York City,
selected by the Bank, at approximately 10:00 a.m., Atlanta, Georgia time, two
(2) Euro-Dollar Business Days prior to the first day of such Interest Period,
for deposits in Dollars offered to leading European banks for a period
comparable to such Interest Period in an amount comparable to the principal
amount of such Euro-Dollar Loan.
"LSPI" means Lake Superior Paper Industries, a joint venture
organized under the general partnership laws of the State of Minnesota.
"LSPI Fiber" means LSPI Fiber Co., a joint venture organized under
the general partnership laws of the State of Minnesota.
"LSPI Leases" means and includes those five separate Facility
Leases dated December 31, 1987 between LSPI and First National Bank of
Minneapolis, as Owner Trustee.
"Margin Stock" means "margin stock" as defined in Regulations G, T,
U or X of the Board of Governors of the Federal Reserve System, as in effect
from time to time, together with all official rulings and interpretations
issued thereunder.
"Material Subsidiary" means, at any time, any Subsidiary having
Total Assets as of the end of the Fiscal Quarter most recently ended at least
60 days prior to such time in excess of $1,000,000.
"Minnesota Paper" means Minnesota Paper Incorporated, a Minnesota
corporation.
"Minnesota Power" means Minnesota Power & Light Company, a
Minnesota corporation.
"Minority Interests" means any partnership interests, or any shares
of stock of any class of a Subsidiary (other than directors' qualifying
shares as required by law) that are not owned by the Borrower and/or one of
its Wholly Owned Subsidiaries or any other similar interest in a Person.
Minority Interests shall be valued by valuing Minority Interests constituting
partnership or other similar interests in a Person in accordance with
Agreement Accounting Principles, or by valuing such Minority Interests
constituting preferred stock at the voluntary or involuntary liquidation
value of such preferred stock, whichever is greater, and by valuing Minority
Interests constituting common stock at the book value of capital, paid-in-
capital and retained earnings applicable thereto adjusted, if necessary, to
reflect any changes from the book value of such common stock required by the
foregoing method of valuing Minority Interests in preferred stock.
"Multiemployer Plan" shall have the meaning set forth in
Section 4001(a)(3) or ERISA.
"Net Proceeds of Capital Stock" means any proceeds received by the
Borrower or a Consolidated Subsidiary in respect of the issuance of Capital
Stock, after deducting therefrom all costs and expenses incurred by the
Borrower or such Consolidated Subsidiary in connection with the issuance of
such Capital Stock.
"Niagara Leases" means and includes (a) that certain Lease
Agreement, dated as of November 26, 1985, between Bank One Arizona Leasing
Corporation (formerly Valley Bank and Leasing, Inc.) and Niagara Paper
(successor to Pentair Financial Corporation), (b) that certain Lease
Agreement, dated as of December 30, 1986, between Equipment Credit Services,
Inc. (successor to Wells Fargo Leasing Corporation) and Niagara Paper
(successor to Pentair Financial Corporation), and (c) that certain Lease
Agreement, dated as of September 2, 1990, between Bank One Wisconsin Trust
Company, N.A. and Niagara Paper (successor to Pentair Financial Corporation).
"Niagara Paper" means Niagara of Wisconsin Paper Corporation, a
Wisconsin corporation.
"Note" means a promissory note of the Borrower payable to the order
of the Bank, in substantially the form of Exhibit A hereto, evidencing the
maximum principal indebtedness of the Borrower to the Bank under the
Commitment, either as originally executed or as it may be from time to time
supplemented, modified, amended, renewed or extended.
"Notice of Borrowing" shall have the meaning assigned to it in
Section 2.02.
"Notice of Non-Extension" means a written notice delivered by the
Bank to the Borrower to the effect that the Commitment will not be extended
for a Successive Extension Period.
"Obligations" means all indebtedness, obligations and liabilities
to the Bank existing on the date of this Agreement or arising thereafter,
direct or indirect, joint or several, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising by
contract, operation of law or otherwise, of the Borrower under this Agreement
or any other Loan Document.
"Offered Rate" means a per annum interest rate offered by the Bank
as the rate of interest applicable to an Offered Rate Loan during the
applicable Interest Period of such Offered Rate Loan. The Offered Rate for
any Offered Rate Loan shall be set by the Bank at its discretion and may vary
depending, among other things, on the duration of the Interest Period for
such Offered Rate Loan.
"Offered Rate Loan" means an Advance which bears or is to bear
interest at a rate based upon the Offered Rate.
"Participant" has the meaning set forth in Section 8.05(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Pentair" means Pentair, Inc., a Minnesota corporation.
"Pentair Duluth" means Pentair Duluth Corp. a Minnesota
corporation.
"Permitted Encumbrances" means:
(a) Liens (i) existing on the date of this Agreement securing
Indebtedness For Borrowed Money outstanding on the date of this
Agreement in an aggregate principal amount not exceeding $0 or
(ii) securing Excepted Lease Obligations;
(b) Liens in connection with worker's compensation,
unemployment insurance, old age benefits, social security
obligations, taxes, assessments, statutory obligations or other
similar charges, good faith deposits in connection with tenders,
contracts or leases to which the Borrower or any Subsidiary is a
party (other than contracts for borrowed money), or other deposits
required to be made in the ordinary course of business; provided
that either: (i) in each case the obligation secured is not overdue
or, if overdue, is being contested in good faith by appropriate
proceedings and reserves have been established therefor that in the
Borrower's reasonable opinion are adequate or (ii) the aggregate
amount of liabilities (including interest and penalties, if any) of
the Borrower and its Subsidiaries secured by such Liens (other than
those covered by clause (i) of this paragraph) does not at any time
exceed $10,000,000 and no such Lien (other than those covered by
clause (i) of this paragraph) could reasonably be expected to have
a material adverse effect on the Borrower and its Subsidiaries
taken as a whole;
(c) mechanics', workmen's, materialmen's, landlords',
carriers' or other similar Liens arising in the ordinary course of
business with respect to obligations which are not due or, if
overdue, either (i) are being contested in good faith by
appropriate proceedings and for which reserves have been
established that in the Borrower's reasonable opinion are adequate
or (ii) the aggregate amount of liabilities (including interest and
penalties, if any) of the Borrower and its Subsidiaries secured by
such Liens (other than those covered by clause (i) of this
paragraph) does not at any time exceed $10,000,000 and no such
Lien (other than those covered by clause (i) of this paragraph)
could reasonably be expected to have a material adverse effect on
the Borrower and its Subsidiaries taken as a whole;
(d) Liens arising out of judgments or awards against the
Borrower or any Subsidiary with respect to which the Borrower or
such Subsidiary shall be prosecuting an appeal or proceeding for
review and with respect to which it shall have obtained a stay of
execution pending such appeal or proceeding for review and shall
maintain reserves in accordance with Agreement Accounting
Principles;
(e) Liens for property taxes not yet subject to penalties for
nonpayment, or survey exceptions, encumbrances, mineral or royalty
reservations, easements or reservations of, or rights of others
for, rights of way, sewers, electric lines, pipe lines, telegraph
and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of its Real Properties, which
exceptions, encumbrances, easements, reservations, rights and
restrictions do not in the aggregate materially detract from the
value of such Real Properties taken as a whole or materially impair
their use in the operation of the business of the Borrower and its
Subsidiaries;
(f) Liens upon any Property acquired by the Borrower or any
Subsidiary after the date hereof (A) to secure the payment of all
or any part of the purchase price of such Property upon the
acquisition thereof by the Borrower or such Subsidiary, or (B) to
secure any Indebtedness For Borrowed Money issued, assumed or
guaranteed by the Borrower or any Subsidiary prior to, at the time
of, or within 90 days after the acquisition of such Property, which
Indebtedness For Borrowed Money is issued, assumed or guaranteed
for the purpose of financing all or any part of the purchase price
of such Property, provided that in the case of any such acquisition
the Lien shall not apply to any Property other than the Property so
acquired or purchased;
(g) any extension, renewal or replacement (or successive
extensions, renewals, or replacements) in whole or in part of any
Lien referred to in the foregoing paragraphs (a) through (f),
inclusive, provided, however, that the principal amount of
Indebtedness For Borrowed Money secured thereby shall not exceed
the principal amount of Indebtedness For Borrowed Money so secured
at the time of such extension, renewal or replacement, and that
such extension, renewal or replacement shall be limited to the
Property which was subject to the Lien so extended, renewed or
replaced; or
(h) other Liens, provided that the aggregate principal amount of
Indebtedness For Borrowed Money secured by such Liens (which are not
otherwise permitted by the foregoing clauses (a) through (g)) shall not
exceed at any time 10% of Consolidated Tangible Net Worth.
"Person" means any individual, joint venture, corporation, company,
voluntary association, partnership, trust, joint stock company,
unincorporated organization, association, government, or any agency,
instrumentality, or political subdivision thereof, or any other form of
entity or organization.
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code and is either (i) maintained by a member of the
Controlled Group for employees of any member of the Controlled Group or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to
which a member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions.
"Prime Rate" refers to that interest rate so denominated and set by
Wachovia from time to time as an interest rate basis for borrowings. The
Prime Rate is but one of several interest rate bases used by Wachovia.
Wachovia lends at interest rates above and below the Prime Rate. A change in
the Prime Rate shall be effective on the date of such change.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible, whether now owned
or hereafter acquired.
"Real Properties" means all real property owned, leased or
otherwise used or occupied by the Borrower or any Subsidiary, wherever
located.
"Redeemable Preferred Stock" of any Person means any preferred
stock issued by such Person which is at any time prior to the Termination
Date either (i) mandatorily redeemable (by sinking fund or similar payments
or otherwise) or (ii) redeemable at the option of the holder thereof.
"Reportable Event" has the meaning given such term in
Section 4043(b) of Title V of ERISA.
"Significant Subsidiary" means at any time any Subsidiary of the
Borrower that would at such time constitute a "significant subsidiary" (as
such term is defined in Regulation S-X of the Securities and Exchange
Commission as in effect on the Closing Date) of the Borrower.
"SRFC" means Superior Recycled Fiber Corporation, a Minnesota
corporation.
"Steam Bonds" means (a) the Tax Increment Revenue Bonds (Lake
Superior Paper Company Project Series 1985) in the aggregate principal amount
of $29,300,000 issued by the City of Duluth (the "Issuer"), and subject to a
Development Agreement, dated December 2, 1985, as amended, between the Issuer
and LSPI, (b) the Steam Utility Revenue Bonds of 1987 in the aggregate
principal amount of $17,000,000 issued by the Issuer pursuant to a Financing
Agreement, dated as of May 15, 1987 among the Issuer, LSPI and the Prudential
Insurance Company of America, and (c) any liabilities and obligations related
to or arising from the foregoing.
"Subsidiary" of a Person means any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such
Person. Unless otherwise indicated, all references herein to Subsidiaries
refer to Subsidiaries of the Borrower.
"Successive Extension Period" has the meaning ascribed thereto in
Section 2.08(b).
"Synertec" means Synertec, Inc. a Minnesota corporation.
"Tangible Assets" of any Person means, as of the date of any
determination thereof, the total amount of all assets of such Person (less
depreciation, depletion and other properly deductible valuation reserves)
after deducting the following: good will, patents, trade names, trade marks,
copyrights, franchises, experimental expense, organization expense,
unamortized debt discount and expense, deferred assets, the excess of cost of
shares acquired over book value of related assets, any write-ups in the book
value of any asset resulting from a revaluation thereof, and such other
assets as are properly classified as "intangible assets" in accordance with
Agreement Accounting Principles.
"Termination Date" means the earlier of (i) the Expiration Date, or
(ii) February 29, 2000, or such later date as to which the Borrower and the
Bank may agree in writing.
"Third Parties" means all lessees, sublessees, licenses and other
users of the Real Properties, excluding those users of the Real Properties in
the ordinary course of the Borrower's or any Subsidiary's business and on a
temporary basis.
"Total Assets" means, at any time and as to each Person, the total
assets of such Person, determined in accordance with Agreement Accounting
Principles.
"Total Capitalization" means, at any time, the sum of (a)
Consolidated Tangible Net Worth at such time and (b) Indebtedness For
Borrowed Money at such time.
"Transferee" has the meaning set forth in Section 8.05(d).
"Unused Commitment" means at any date an equal to the Commitment
less the aggregate outstanding principal amount of the Advances.
"Wachovia" means Wachovia Bank of Georgia, N.A., a national banking
association, together with its successors.
"Wholly Owned Subsidiary" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the
Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all terms of an accounting character used herein
shall be interpreted, all accounting determinations hereunder shall be made,
and all financial statements required to be delivered hereunder shall be
prepared in accordance with generally accepted accounting principles as in
effect from time to time, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants) with the most
recent audited consolidated financial statements of the Borrower and its
Consolidated Subsidiaries delivered to the Bank.
SECTION 1.03. References. Except as otherwise expressly provided
in this Agreement: the words "herein," "hereof," "hereunder" and other words
of similar import refer to this Agreement as a whole, including the Schedule
hereto which is a part hereof, and not to any particular Section, Article,
paragraph or other subdivision; the singular includes the plural and the
plural includes the singular; "or" is not exclusive; the words "include,"
"includes" and "including" are not limiting; a reference to any agreement or
other contract includes past and future permitted supplements, amendments,
modifications and restatements thereto or thereof; a reference to an Article,
Section, paragraph or other subdivision is a reference to an Article,
Section, paragraph or other subdivision of this Agreement; a reference to any
law includes any amendment or modification to such law and any rules and
regulations promulgated thereunder; a reference to a Person includes its
permitted successors and assigns; any right may be exercised at any time and
from time to time; and, except as otherwise expressly provided therein, all
obligations under any agreement or other contract are continuing obligations
throughout the term of such agreement or contract.
ARTICLE II. THE CREDITS
SECTION 2.01. Commitment to Lend. The Bank agrees, on the terms
and conditions set forth herein, to make Advances to the Borrower from time
to time before the Termination Date; provided that, immediately after each
such Advance is made, the aggregate principal amount of outstanding Advances
shall not exceed $120,000,000 (as such figure may be reduced from time to
time as provided in this Agreement, the "Commitment"). Each Borrowing under
this Section shall be in an aggregate principal amount of $1,000,000 or any
larger multiple of $500,000 (except that any such Borrowing may be in the
amount of the Unused Commitment). Within the foregoing limits, the Borrower
may borrow under this Section, repay or, to the extent permitted by Section
2.09, prepay Advances and reborrow under this Section at any time before the
Termination Date. The Bank shall have no obligation to advance funds in
excess of the amount of the Commitment.
SECTION 2.02. Method of Borrowing. (a) The Borrower shall give
the Bank notice (a "Notice of Borrowing") on or before 11:00 a.m., Atlanta,
Georgia time, on a Domestic Business Day of an Offered Rate Borrowing or at
least one Domestic Business Day before each Base Rate Borrowing and at least
three Euro-Dollar Business Days before each Euro-Dollar Borrowing,
specifying:
(i) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Base Rate Borrowing or Offered Rate Borrowing, or a
Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Advance comprising such Borrowing is to be a
Base Rate Loan, a Euro-Dollar Loan or an Offered Rate Loan, and
(iv) in the case of a Euro-Dollar Borrowing or an Offered Rate
Borrowing, the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period.
(b) A Notice of Borrowing, once given, shall be irrevocable. The
Bank shall be entitled to rely on any telephonic Notice of Borrowing which it
believes in good faith to have been given by a duly authorized officer or
employee of the Borrower and any Advances made by the Bank based on such
telephonic notice shall, when credited by the Bank to the regular deposit
account maintained by the Borrower with the Bank, be an Advance for all
purposes hereunder. Not later than 2:00 p.m., Atlanta, Georgia time, on the
date specified for the Borrowing in the Notice of Borrowing, the Bank shall
credit, in immediately available funds, the amount of such Borrowing to the
regular deposit account maintained by the Borrower with the Bank.
(c) If the Bank makes a new Advance hereunder on a day on which
the Borrower is to repay all or any part of an outstanding Advance, the Bank
shall apply the proceeds of its new Advance to make such repayment and only
an amount equal to the difference (if any) between the amount being borrowed
and the amount being repaid shall be made available by the Bank to the
Borrower as provided in subsection (b) of this Section, or remitted by the
Borrower to the Bank as provided in Section 2.11, as the case may be.
(d) Notwithstanding anything to the contrary contained in this
Agreement, no Euro-Dollar Borrowing or Offered Rate Borrowing may be made if
there shall have occurred a Default or an Event of Default, which Default or
Event of Default shall not have been cured or waived.
(e) In the event that a Notice of Borrowing fails to specify
whether the Advance comprising such Borrowing is to be a Base Rate Loan, a
Euro-Dollar Loan or an Offered Rate Loan, such Advance shall be made as a
Base Rate Loan. If the Borrower is otherwise entitled under this Agreement
to repay any Advance maturing at the end of an Interest Period applicable
thereto with the proceeds of a new Borrowing, and the Borrower fails to repay
such Advance using its own moneys and fails to give a Notice of Borrowing in
connection with such new Borrowing, a new Borrowing shall be deemed to be
made on the date such Advance matures in an amount equal to the principal
amount of the Advance so maturing, and the Advance comprising such new
Borrowing shall be a Base Rate Loan.
SECTION 2.03. Note. The Advances shall be evidenced by a single
Note payable to the order of the Bank for the account of its Lending Office
in an amount equal to the original principal amount of the Bank's Commitment.
The Bank shall record, and prior to any transfer of its Note shall endorse on
the schedule forming a part thereof appropriate notations to evidence, the
date, amount and maturity of, and effective interest rate for, each Advance
made by it, the date and amount of each payment of principal made by the
Borrower with respect thereto and whether such Advance is a Base Rate Loan, a
Euro-Dollar Loan or an Offered Rate Loan, and such recordations and
endorsements shall constitute rebuttable presumptive evidence of the
principal amount owing and unpaid on the Note; provided that the failure of
the Bank to make any such recordation or endorsement shall not affect the
obligation of the Borrower hereunder or under the Note. The Bank is hereby
irrevocably authorized by the Borrower so to endorse its Note and to attach
to and make a part of any Note a continuation of any such schedule as and
when required.
SECTION 2.04. Maturity of Advances. Each Advance included in any
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing.
SECTION 2.05. Interest Rates. (a) Each Advance made as a Base
Rate Loan shall bear interest on the outstanding principal amount thereof,
for each day from the date such Advance is made until it becomes due, at a
rate per annum equal to the Base Rate for such day plus the Applicable
Margin. Such interest shall be payable for each Interest Period on the last
day thereof.
(b) Each Advance made as a Euro-Dollar Loan shall bear interest on
the outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Applicable Margin plus
the applicable Adjusted London Interbank Offered Rate for such Interest
Period; provided that if any Advance made as a Euro-Dollar Loan shall, as a
result of clause (1)(c) of the definition of Interest Period, have an
Interest Period of less than one month, such Advance so made as a Euro-Dollar
Loan shall bear interest during such Interest Period at the rate applicable
to Advances made as Base Rate Loans during such period. Such interest shall
be payable for each Interest Period on the last day thereof.
(c) "Applicable Margin" shall be determined quarterly based upon
the ratio of Indebtedness For Borrowed Money to Total Capitalization
(calculated as of the last day of each Fiscal Quarter), as follows:
Ratio of Indebtedness
For Borrowed Money Base Euro
to Total Capitalization Rate Loans Euro Dollar
------------------------- ---------- -----------
Greater than or equal to .40 to 1.00 0% .30%
Less than .40 to 1.00 0% .25%
The Applicable Margin shall be determined effective as of the date (herein,
the "Rate Determination Date") which is 60 days after the last day of the
Fiscal Quarter as of the end of which the foregoing ratio is being
determined, based on the quarterly financial statements for such Fiscal
Quarter, and the Applicable Margin so determined shall remain effective from
such Rate Determination Date until the date which is 60 days after the last
day of the Fiscal Quarter in which such Rate Determination Date falls (which
latter date shall be a new Rate Determination Date); provided that (i) for
the period from and including the Closing Date to but excluding the Rate
Determination Date next following the Closing Date, the Applicable Margin
shall be (A) 0% for Base Rate Loans, and (B) .25% for Euro-Dollar Loans, (ii)
in the case of any Applicable Margin determined for the fourth and final
Fiscal Quarter of a Fiscal Year, the Rate Determination Date shall be the
date which is 105 days after the last day of such final Fiscal Quarter and
such Applicable Margin shall be determined based upon the annual audited
financial statements for the Fiscal Year ended on the last day of such Fiscal
Quarter, and (iii) if on any Rate Determination Date the Borrower shall have
failed to deliver to the Bank the financial statements required to be
delivered pursuant to Section 6.01(b) with respect to the Fiscal Quarter most
recently ended prior to such Rate Determination Date, then for the period
beginning on such Rate Determination Date and ending on the earlier of (A)
the date on which the Borrower shall deliver to the Bank the financial
statements to be delivered pursuant to Section 6.01(b) with respect to such
Fiscal Quarter or any subsequent Fiscal Quarter, or (B) the date on which the
Borrower shall deliver to the Bank annual financial statements required to be
delivered pursuant to Section 6.01(a) with respect to the Fiscal Year which
includes such Fiscal Quarter or any subsequent Fiscal Year, the Applicable
Margin shall be determined as if the ratio of Indebtedness For Borrowed Money
to Total Capitalization was greater than .40 to 1.00 at all times during such
period. Any change in the Applicable Margin on any Rate Determination Date
shall result in a corresponding change, effective on and as of such Rate
Determination Date, in the interest rate applicable to each Advance
outstanding on such Rate Determination Date.
(d) Each Advance made as an Offered Rate Loan shall bear interest
on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the applicable Offered Rate.
Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than 90 days, on the 90th day
of such Interest Period.
(e) After the occurrence and during the continuance of a Default,
the principal amount of the Advances (and, to the extent permitted by
applicable law, all accrued interest thereon) shall bear interest at a rate
per annum equal to the sum of 2% plus the Base Rate from time to time in
effect.
SECTION 2.06. Fees. From and after the Closing Date up to and
including the Termination Date, the Borrower shall pay to the Bank a
commitment fee at the rate of one-tenth of one percent (0.10%) per annum
(calculated from the date hereof on the basis of a year of 360 days and
payable for the actual number of days elapsed) on the average daily balance
of the Unused Commitment (the "Commitment Fee"). The Commitment Fee shall be
payable by the Borrower quarterly in arrears on each Commitment Fee Payment
Date and on the Termination Date, provided that should the Commitment be
terminated at any time prior to the Termination Date (whether by termination
of the Commitment as provided in Section 2.07 or Section 2.08 or otherwise),
the entire accrued and unpaid Commitment Fee shall be paid on the date of
such termination.
SECTION 2.07. Optional Termination or Reduction of Commitment.
The Borrower may, upon at least three Domestic Business Days' notice to the
Bank, terminate the Commitment at any time, or reduce the Commitment from
time to time by an aggregate minimum amount of at least $1,000,000 or an
integral multiple of $500,000 in excess thereof. If the Commitment is so
reduced, such reduction shall be accounted for in determining the fees due
under Section 2.06(a). If the Commitment is so terminated in its entirety,
all accrued fees (as provided under Section 2.06(a)) shall be payable on the
effective date of such termination. A notice of reduction or termination
of the Commitment hereunder, once given, shall not thereafter be revocable by
the Borrower.
SECTION 2.08. Mandatory Termination of Commitment; Extension of
Expiration Date. (a) The Commitment shall terminate and the unpaid
principal balance and all accrued and unpaid interest on the Note will be due
and payable upon the first of the following dates or events to occur: (i)
acceleration of the maturity of the Note in accordance with the remedies
contained in Section 7.02; (ii) the Borrower's termination of the Commitment
pursuant to Section 2.07; or (iii) upon the expiration of the Commitment on
the Termination Date. From and after the date of such termination, no
Advances shall be made.
(b) The initial term of the Commitment is stated to expire,
subject to earlier termination, on the Initial Expiration Date. If the
Borrower does not receive a Notice of Non-Extension from the Bank at least
thirteen (13) months prior to the Initial Expiration Date, however, the
Expiration Date will be automatically extended for successive additional
periods of one calendar month each ("Successive Extension Periods") until the
earlier of (i) the first day of the thirteenth month following receipt by the
Borrower of a Notice of Non-Extension from the Bank, or (ii) the Termination
Date. The Bank may determine to extend the Expiration Date in its sole
discretion and no course of dealing or other circumstance shall require the
Bank to extend the Expiration Date.
SECTION 2.09. Optional Prepayments. (a) The Borrower may, upon
at least one Domestic Business Days' notice to the Bank, prepay any Base Rate
Loan in whole at any time, or from time to time in part in amounts
aggregating at least $500,000 or any larger multiple of $500,000, by paying
the principal amount to be prepaid together with accrued interest thereon to
the date of prepayment.
(b) The Borrower may, upon at least three Euro-Dollar Business
Days' notice to the Bank, prepay all or any portion of the principal amount
of any Euro-Dollar Loan in amounts aggregating at least $500,000 or any
larger multiple of $500,000, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment and, if such
prepayment is made on a day other than the last day of an Interest Period
applicable to such Euro-Dollar Loan, any compensation payable pursuant to
Section 3.05.
(c) The Borrower may, upon at least three Domestic Business Days'
notice to the Bank, prepay all or any portion of the principal amount of any
Offered Rate Loan in amounts aggregating at least $500,000, by paying the
principal amount to be prepaid together with accrued interest thereon to the
date of prepayment and, if such prepayment is made on a day other than the
last day of an Interest Period applicable to such Offered Rate Loan, any
compensation payable pursuant to Section 3.05.
(d) A notice of prepayment pursuant to this Section, once given,
shall not thereafter be revocable by the Borrower.
SECTION 2.10. Mandatory Prepayments. On each date on which the
Commitment is reduced or terminated pursuant to Section 2.07 or terminated
pursuant to Section 2.08, the Borrower shall repay or prepay such principal
amount of the outstanding Advances, if any (together with interest accrued
thereon), as may be necessary so that after such payment the aggregate unpaid
principal amount of the outstanding Advances does not exceed the aggregate
amount of the Commitment as then reduced.
SECTION 2.11. General Provisions Concerning Payments. (a) All
payments of principal of, or interest on, the Note, and of any fees, shall be
made in Federal or other funds immediately available to the Bank at its
office in Atlanta, Georgia not later than 11:00 a.m., Atlanta, Georgia time;
provided that unless otherwise instructed by the Borrower, the Bank shall
automatically debit the deposit account of the Borrower maintained with the
Bank or any Affiliate of the Bank in the amount of each such payment on the
due date thereof. Funds received after 11:00 a.m., Atlanta, Georgia time,
shall be deemed to have been paid on the next following Domestic Business
Day.
(b) Whenever any payment of principal of, or interest on, the Base
Rate Loans or the Offered Rate Loans or of any fees shall be due on a day
which is not a Domestic Business Day, the date for payment thereof shall be
extended to the next succeeding Domestic Business Day. Whenever any payment
of principal of, or interest on, the Euro-Dollar Loans shall be due on a day
which is not a Euro-Dollar Business Day, the date for payment thereof shall
be extended to the next succeeding Euro-Dollar Business Day unless such Euro-
Dollar Business Day falls in another calendar month, in which case the date
for payment thereof shall be the next preceding Euro-Dollar Business Day. If
the date for any payment of principal is extended by operation of law or
otherwise, interest thereon shall be payable for such extended time.
SECTION 2.12. Computation of Interest and Fees. Interest on Base
Rate Loans, Euro-Dollar Loans and Offered Rate Loans shall be computed on the
basis of a year of 360 days and paid for the actual number of days elapsed,
calculated as to each Interest Period from and including the first day
thereof to but excluding the last day thereof. Commitment fees shall be
computed on the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day).
ARTICLE III. CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 3.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period:
(i) the Bank determines that deposits in Dollars (in the
applicable amounts) are not being offered in the relevant market
for such Interest Period, or
(ii) the Bank determines that the London Interbank Offered
Rate as determined by the Bank will not adequately and fairly
reflect the cost to the Bank of funding Euro-Dollar Loans for such
Interest Period,
the Bank shall forthwith give notice thereof to the Borrower, whereupon until
the Bank notifies the Borrower that the circumstances giving rise to such
suspension no longer exist, the obligations of the Bank to make or maintain
Euro-Dollar Loans shall be suspended. Unless the Borrower notifies the Bank
at least two Domestic Business Days before the date of any Borrowing of or
the commencement of any Interest Period for Euro-Dollar Loans for which a
Notice of Borrowing has previously been given that it elects not to borrow on
such date, such Borrowing shall instead be made as a Base Rate Borrowing.
SECTION 3.02. Illegality. If, after the date hereof, the adoption
of any applicable law, rule or regulation, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation
or administration thereof (any such authority, bank or agency being referred
to as an "Authority" and any such event being referred to as a "Change of
Law"), or compliance by the Bank (or its Lending Office) with any request or
directive (whether or not having the force of law) of any Authority shall
make it unlawful or impossible for the Bank (or its Lending Office) to make,
maintain or fund its Euro-Dollar Loans and the Bank shall so notify the
Borrower, until the Bank notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligation of the Bank to make
Euro-Dollar Loans shall be suspended. Before giving any notice pursuant to
this paragraph, the Bank shall designate a different Lending Office if able
to do so and if such designation will avoid the need for giving such notice
and will not, in the judgment of the Bank, be otherwise disadvantageous to
the Bank. If the Bank shall determine that it may not lawfully continue to
maintain and fund any of its outstanding Euro-Dollar Loans to maturity and
shall so specify in such notice, the Borrower shall immediately prepay in
full the then outstanding principal amount of each Euro-Dollar Loan, together
with accrued interest thereon. Concurrently with prepaying each such
Advance, the Borrower shall borrow an Advance as a Base Rate Loan in an equal
principal amount from the Bank and the Bank shall make such an Advance.
SECTION 3.03. Increased Cost and Reduced Return. (a) If after
the date hereof, a Change of Law or compliance by the Bank (or its Lending
Office) with any request or directive (whether or not having the force of
law) of any Authority:
(i) shall subject the Bank (or its Lending Office) to any
tax, duty or other charge with respect to its Euro-Dollar Loans,
Offered Rate Loans, the Note or its obligation to make or maintain
Euro-Dollar Loans or Offered Rate Loans, or shall change the basis
of taxation of payments to the Bank (or its Lending Office) of the
principal of or interest on its Euro-Dollar Loans or Offered Rate
Loans or any other amounts due under this Agreement in respect of
its Euro-Dollar Loans or Offered Rate Loans or its obligation to
make or maintain Euro-Dollar Loans or Offered Rate Loans (except
for changes in the rate of tax on the overall net income of the
Bank or its Lending Office imposed by the jurisdiction in which the
Bank's principal executive office or Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without
limitation, any such requirement imposed by the Board of Governors
of the Federal Reserve System, but excluding any such requirement
included in an applicable Euro-Dollar Reserve Percentage) against
assets of, deposits with or for the account of, or credit extended
by, the Bank (or its Lending Office); or
(iii) shall impose on the Bank (or its Lending Office) or
the London interbank market any other condition affecting its Euro-
Dollar Loans or Offered Rate Loans, its Note or its obligation to
make or maintain Euro-Dollar Loans or Offered Rate Loans;
and the result of any of the foregoing is to increase the cost to the Bank
(or its Lending Office) of making or maintaining any Euro-Dollar Loan or
Offered Rate Loan, or to reduce the amount of any sum received or receivable
by the Bank (or its Lending Office) under this Agreement or under the Note
with respect thereto, by an amount deemed by the Bank to be material, then,
within 15 days after demand by the Bank, the Borrower shall pay to the Bank
such additional amount or amounts as will compensate the Bank for such
increased cost or reduction.
(b) If the Bank shall have determined that after the date hereof
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof, or compliance by the Bank (or its Lending Office)
with any request or directive regarding capital adequacy (whether or not
having the force of law) of any Authority, has or would have the effect of
reducing the rate of return on the Bank's capital as a consequence of its
obligations under this Agreement with respect to any Advance to a level below
that which the Bank could have achieved but for such adoption, change or
compliance (taking into consideration the Bank's policies with respect to
capital adequacy) by an amount deemed by the Bank to be material, then from
time to time, within 15 days after demand by the Bank, the Borrower shall pay
to the Bank such additional amount or amounts as will compensate the Bank for
such reduction.
(c) The Bank will promptly notify the Borrower of any event of
which it has knowledge, occurring after the date hereof, which will entitle
the Bank to compensation pursuant to this Section and will designate a
different Lending Office if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the judgment of the
Bank, be otherwise disadvantageous to the Bank. A certificate of the Bank
claiming compensation under this Section and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive in the
absence of manifest error. In determining such amount, the Bank may use any
reasonable averaging and attribution methods.
(d) The provisions of this Section shall be applicable with
respect to any Participant in, or Assignee or other Transferee of, the
obligations of the Borrower hereunder to the Bank, and any calculations
required by such provisions shall be made based upon the circumstances of
such Participant, Assignee or other Transferee.
SECTION 3.04. Base Rate Loans Substituted for Affected Euro-Dollar
Loans or Offered Rate Loans. If (i) the obligation of the Bank to make or
maintain Euro-Dollar Loans has been suspended pursuant to Section 3.01 or
Section 3.02, or (ii) the Bank has demanded compensation under Section 3.03,
and if in either case the Borrower, by at least one Domestic Business Day's
prior notice to the Bank, shall have elected that the provisions of this
Section shall apply, then, unless and until the Bank notifies the Borrower
that the circumstances giving rise to such suspension or demand for
compensation no longer apply:
(a) all Advances which would otherwise be made by the Bank as
Euro-Dollar Loans (or, in the case of a demand for compensation in
respect of Offered Rate Loans, as Offered Rate Loans) shall be made
instead as Base Rate Loans, and
(b) after each of its Euro-Dollar Loans (or, in the case of a
demand for compensation in respect of Offered Rate Loans, its
Offered Rate Loans) has been repaid, all payments of principal
which would otherwise be applied to repay such Euro-Dollar Loans or
Offered Rate Loans, as the case may be, shall be applied to repay
its Base Rate Loans instead.
SECTION 3.05. Compensation. Upon the request of the Bank,
delivered to the Borrower, the Borrower shall pay to the Bank such amount or
amounts as shall compensate the Bank for any loss, cost or expense incurred
by the Bank as a result of:
(a) any optional or mandatory payment or prepayment (pursuant
to Section 3.02 or otherwise) of a Euro-Dollar Loan or Offered Rate
Loan on a date other than the last day of an Interest Period for
such Euro-Dollar Loan or Offered Rate Loan; or
(b) any failure by the Borrower to prepay a Euro-Dollar Loan
or Offered Rate Loan on the date for such prepayment specified in
the relevant notice of prepayment or notice of reduction of the
Commitment, as the case may be; or
(c) any failure by the Borrower to borrow an Advance as a
Euro-Dollar Loan or Offered Rate Loan on the date for the Borrowing
specified in the applicable Notice of Borrowing delivered pursuant
to Section 2.02;
such compensation to include, without limitation, in the case of a Euro-
Dollar Loan an amount equal to the excess, if any, of (x) the amount of
interest which would have accrued on the amount so paid or prepaid or not
prepaid or borrowed, for the period from the date of such payment, prepayment
or failure to prepay or borrow to the last day of the then current Interest
Period for such Euro-Dollar Loan (or, in the case of a failure to prepay or
borrow, the Interest Period for such Euro-Dollar Loan which would have
commenced on the date of such failure to prepay or borrow) at the applicable
rate of interest for such Euro-Dollar Loan provided for herein over (y) the
amount of interest (as reasonably determined by the Bank) the Bank would have
paid on deposits in Dollars of comparable amounts having terms comparable to
such period placed with it by leading banks in the London interbank market.
ARTICLE IV. CONDITIONS TO BORROWINGS
SECTION 4.01. Conditions to First Borrowing. The obligation of
the Bank to make an Advance on the occasion of the first Borrowing is subject
to the satisfaction of the conditions set forth in Section 4.02 and the
following additional conditions:
(a) receipt by the Bank from the Borrower of a duly executed
counterpart of this Agreement signed by the Borrower;
(b) receipt by the Bank of the duly executed Note complying
with the provisions of Section 2.03;
(c) receipt by the Bank of an opinion of counsel of (i)
McDermott, Will & Emery, counsel for the Borrower, substantially in
the form of Exhibit B hereto, and covering such additional matters
relating to the transactions contemplated hereby as the Bank may
reasonably request and (ii) Womble Carlyle Sandridge & Rice, PLLC,
counsel to the Bank, as to the enforceability of this Agreement and
the Note under the laws of the State of Georgia;
(d) receipt by the Bank of a certificate, dated the date of
the first Borrowing, signed by a principal financial officer of the
Borrower to the effect that (i) no Default hereunder has occurred
and is continuing on the date of the first Borrowing and (ii) the
representations and warranties of the Borrower contained in
Article V are true on and as of the date of the first Borrowing
hereunder;
(e) receipt by the Bank of all documents which the Bank may
reasonably request relating to the existence of the Borrower, the
corporate authority for and the validity of this Agreement and the
Note, and any other matters relevant hereto, all in form and
substance satisfactory to the Bank, including without limitation a
certificate of incumbency of the Borrower, signed by the Secretary
or an Assistant Secretary of the Borrower, certifying as to the
names, true signatures and incumbency of the officer or officers of
the Borrower authorized to execute and deliver the Loan Documents,
and certified copies of the following items: (i) the Borrower's
Certificate of Incorporation, (ii) the Borrower's Bylaws, (iii) a
certificate of the Secretary of State (or other appropriate office)
of the jurisdiction of the Borrower's incorporation as to the good
standing of the Borrower as a corporation in such jurisdiction, and
(iv) the action taken by the Board of Directors of the Borrower
authorizing the Borrower's execution, delivery and performance of
this Agreement, the Note and the other Loan Documents to which the
Borrower is a party;
(f) receipt by the Bank of evidence satisfactory to it that
the Existing Commitment shall have been terminated by the Borrower;
and
(g) receipt by the Bank of a Notice of Borrowing specifying a
Borrowing in a minimum amount of $1,000,000.
SECTION 4.02. Conditions to All Borrowings. The obligation of the
Bank to make an Advance on the occasion of each Borrowing is subject to the
satisfaction of the following conditions:
(a) receipt by the Bank of Notice of Borrowing as required by
Section 2.02;
(b) the fact that, immediately after such Borrowing, no
Default shall have occurred and be continuing;
(c) the fact that the representations and warranties of the
Borrower contained in Article V shall be true on and as of the date
of such Borrowing; and
(d) the fact that, immediately after such Borrowing, the
aggregate outstanding principal amount of the Advances will not
exceed the amount of the Commitment.
Each Borrowing hereunder shall be deemed to be a representation and warranty
by the Borrower on the date of such Borrowing as to the facts specified in
clauses (b), (c) and (d) of this Section; provided that such Borrowing shall
not be deemed to be such a representation and warranty to the effect set
forth in Section 5.04(b) as to any material adverse change which has
theretofore been disclosed in writing by the Borrower to the Bank if the
aggregate outstanding principal amount of the Advances immediately after such
Borrowing will not exceed the aggregate outstanding principal amount of
Advances immediately before such Borrowing.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 5.01. Corporate Existence and Power. The Borrower is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Wisconsin, is duly qualified to transact business in
every jurisdiction where, by the nature of its business, the failure to be so
qualified could reasonably be expected to have a material adverse effect on
the business, operations, properties, assets or conditions (financial or
otherwise) of the Borrower or on the validity or enforceability of this
Agreement or any other Loan Document or the rights or remedies of the Bank
hereunder or thereunder, and has all corporate powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted (except for such governmental licenses,
authorizations, consents and approvals the failure to have which could not
reasonably be expected to have a material adverse effect on the business,
operations, properties, assets or conditions (financial or otherwise) of the
Borrower or on the validity or enforceability of this Agreement or any other
Loan Document or the rights or remedies of the Bank hereunder or thereunder).
SECTION 5.02. Corporate and Governmental Authorization;
Contravention. The execution, delivery and performance by the Borrower of
this Agreement, the Note and the other Loan Documents (i) are within the
Borrower's corporate powers, (ii) have been duly authorized by all necessary
corporate action, (iii) require no action by or in respect of, or filing
with, any governmental body, agency or official, (iv) do not contravene, or
constitute a default under, any provision of applicable law or regulation (if
the contravention thereof could reasonably be expected to have a material
adverse effect on the business, operations, properties, assets or conditions
(financial or otherwise) of the Borrower and its Subsidiaries, taken as a
whole, or on the validity or enforceability of this Agreement or any other
Loan Document or the rights or remedies of the Bank hereunder or thereunder)
or of the certificate of incorporation or by-laws of the Borrower or of any
agreement, judgment, injunction, order, decree or other instrument binding
upon the Borrower or any of its Subsidiaries, and (v) do not result in the
creation or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
SECTION 5.03. Binding Effect. This Agreement constitutes a valid
and binding agreement of the Borrower enforceable in accordance with its
terms, and the Note and the other Loan Documents, when executed and delivered
in accordance with this Agreement, will constitute valid and binding
obligations of the Borrower enforceable in accordance with their respective
terms, provided that the enforceability hereof and thereof is subject in each
case to general principles of equity and to bankruptcy, insolvency and
similar laws affecting the enforcement of creditors' rights generally.
SECTION 5.04. Financial Information. (a) The consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as of December 31,
1994, and the related consolidated statements of income, shareholders' equity
and cash flows for the Fiscal Year then ended, reported on by Arthur Andersen
LLP, copies of which have been delivered to the Bank, and the unaudited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries for the interim period ended March 31, 1995, copies of which
have been delivered to the Bank, fairly present, in conformity with generally
accepted accounting principles, the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such dates and their
consolidated results of operations and cash flows for such periods stated.
(b) Since March 31, 1995, there has been no material adverse
change in the business, financial position or results of operations of the
Borrower and its Consolidated Subsidiaries, taken as a whole.
SECTION 5.05. Litigation. Except as disclosed on Schedule 5.05
hereto, there is no action, suit, proceeding or labor dispute pending, or to
the knowledge of the Borrower threatened, against or affecting the Borrower
or any of its Subsidiaries before any court or arbitrator or any governmental
body, agency or official which (except as disclosed in writing to the Bank
prior to the Closing Date) could materially adversely affect the business,
consolidated financial position or consolidated results of operations of the
Borrower and its Consolidated Subsidiaries, taken as a whole, or which in any
manner draws into question the validity of, or could impair the ability of
the Borrower to perform its obligations under, this Agreement, the Note or
any of the other Loan Documents.
SECTION 5.06. Compliance with ERISA. (a) The Borrower and each
member of the Controlled Group have fulfilled their obligations under the
minimum funding standards of ERISA and the Code with respect to each Plan and
are in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and have not incurred any liability to the
PBGC or a Plan under Title IV of ERISA.
(b) Neither the Borrower nor any member of the Controlled Group is
or ever has been obligated to contribute to any Multiemployer Plan.
SECTION 5.07. Taxes. There have been filed on behalf of the
Borrower and its Subsidiaries all Federal, state and local income, excise,
property and other tax returns which are required to be filed by them and all
taxes due pursuant to such returns or pursuant to any assessment received by
or on behalf of the Borrower or any Subsidiary have been paid. The charges,
accruals and reserves on the books of the Borrower and its Subsidiaries in
respect of taxes or other governmental charges are adequate under generally
accepted accounting principles consistently applied. United States income
tax returns of the Borrower and its Subsidiaries have been examined and
closed through the Fiscal Year ended December 31, 1988.
SECTION 5.08. Subsidiaries. Each of the Borrower's Significant
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted (except where
the failure to have such governmental licenses, authorizations, consents and
approvals could not reasonably be expected to have a material adverse effect
on the business, operations, properties, assets or conditions (financial or
otherwise) of any such Subsidiary or on the validity or enforceability of
this Agreement or any other Loan Document or the rights or remedies of the
Bank hereunder or thereunder).
SECTION 5.09. Not an Investment Company. Neither the Borrower nor
any of its Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 5.10. Ownership of Property; Liens. Each of the Borrower
and its Subsidiaries has title to its properties sufficient for the conduct
of its business, and none of such property is subject to any Lien except for
Permitted Encumbrances.
SECTION 5.11. No Default. Neither the Borrower nor any of its
Consolidated Subsidiaries is in default under or with respect to any
agreement, instrument or undertaking to which it is a party or by which it or
any of its property is bound, which default could reasonably be expected to
have a material adverse effect on the business, properties, assets,
operations or conditions (financial or otherwise) of the Borrower and its
Subsidiaries, taken as a whole, or on the validity or enforceability of this
Agreement or any other Loan Document or the rights or remedies of the Bank
hereunder and thereunder. No Default has occurred and is continuing.
SECTION 5.12. Full Disclosure. All information heretofore
furnished by the Borrower to the Bank for purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Borrower to the Bank will be, true,
accurate and complete in every material respect or based on reasonable
estimates on the date as of which such information is stated or certified.
The Borrower has disclosed to the Bank in writing any and all facts which
materially and adversely affect or may affect (to the extent the Borrower can
now reasonably foresee), the business, operations, properties, assets, or
conditions (financial or otherwise) of the Borrower and its Subsidiaries,
taken as a whole, or the ability of the Borrower to perform its obligations
under this Agreement.
SECTION 5.13. Environmental Matters. (a) Neither the Borrower
nor any Subsidiary is subject to any Environmental Liability which is likely
to have a material adverse effect on the business, financial position,
results of operations or prospects of the Borrower and its Subsidiaries,
taken as a whole, and, except as disclosed on Schedule 5.13 hereto, neither
the Borrower nor any Subsidiary has been designated as a potentially
responsible party under CERCLA or under any state statute similar to CERCLA.
Except as disclosed on Schedule 5.13 hereto, none of the Real Properties
have been identified on any current or proposed (i) National Priorities List
under 40 C.F.R. 300, (ii) CERCLIS list or (iii) any list arising from a
state statute similar to CERCLA.
(b) No Hazardous Materials have been or are being used, produced,
manufactured, processed, generated, stored, disposed of, managed at, or
shipped or transported to or from the Real Properties or are otherwise
present at, on, in or under the Real Properties, or, to the best of the
knowledge of the Borrower, at or from any adjacent site or facility, except
for Hazardous Materials used, produced, manufactured, processed, generated,
stored, disposed of, and managed in compliance with all applicable
Environmental Requirements, except where the failure to comply with such
Environmental Requirements could not reasonably be expected to have a
material adverse effect on the business, financial position, results of
operations or prospects of the Borrower and its Subsidiaries, taken as a
whole.
(c) The Borrower, and each of its Subsidiaries and Affiliates, has
procured all Environmental Authorizations necessary for the conduct of its
business and is in compliance with all Environmental Requirements in
connection with the operation of the Real Properties and the Borrower's and
each of its Subsidiaries' and Affiliates' respective businesses, except where
the failure to obtain such Environmental Authorization or to comply with such
Environmental Requirements could not reasonably be expected to have a
material adverse effect on the business, financial position, results of
operations or prospects of the Borrower and its Subsidiaries, taken as a
whole.
SECTION 5.14. Compliance with Laws. The Borrower and each
Subsidiary is in compliance with all applicable laws, except where any
failure to comply with any such laws would not, alone or in the aggregate,
materially adversely affect the business, operations, properties, assets or
conditions (financial or otherwise) of the Borrower and its Subsidiaries,
taken as a whole, or which in any manner draws into question the validity of,
or could impair the ability of the Borrower to perform its obligations under,
this Agreement or any of the other Loan Documents.
SECTION 5.15. Transactions with Affiliates. Neither the Borrower
nor any of its Subsidiaries has entered into, or is a party to, any
transaction with any Affiliate of the Borrower or such Subsidiary (which
Affiliate is not the Borrower or a Subsidiary), except as permitted by law
and which are on terms and conditions which are not less favorable to the
Borrower or such Subsidiary than would be obtained in a comparable arm's
length transaction with a Person which is not an Affiliate of the Borrower or
such Subsidiary.
ARTICLE VI. COVENANTS
The Borrower agrees that, so long as the Commitment is in effect
hereunder or any amount payable under this Agreement remains unpaid:
SECTION 6.01. Information. The Borrower will deliver to the Bank:
(a) as soon as available and in any event within 105 days
after the end of each Fiscal Year, a consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as of the end of
such Fiscal Year and the related consolidated statements of income,
shareholders' equity and cash flows for such Fiscal Year, setting
forth in each case in comparative form the figures for the previous
fiscal year, all certified by Arthur Andersen LLP or other
independent public accountants of nationally recognized standing,
with such certification to be free of exceptions and qualifications
not acceptable to Bank; provided that the delivery within the time
period specified above of the Borrower's Annual Report on Form 10-K
for such Fiscal Year (together with the Borrower's annual report to
shareholders, if any, prepared pursuant to Rule 14a-3 under the
Exchange Act) prepared in accordance with the requirements therefor
and filed with the Securities and Exchange Commission shall be
deemed to satisfy the requirements of this Section 6.01(a);
(b) as soon as available and in any event within 60 days
after the end of each Fiscal Quarter of each Fiscal Year, a
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such Fiscal Quarter and the related
statement of income and statement of cash flows for such Fiscal
Quarter and for the portion of the Fiscal Year ended at the end of
such Fiscal Quarter, setting forth in each case in comparative form
the figures for the corresponding Fiscal Quarter and the
corresponding portion of the previous Fiscal Year, all certified
(subject to normal year-end adjustments) as to fairness of
presentation, generally accepted accounting principles and
consistency by the chief financial officer or the chief accounting
officer of the Borrower; provided that delivery within the time
period specified above of copies of the Borrower's Quarterly Report
on Form 10-Q for such Fiscal Quarter prepared in compliance with
the requirements therefor and filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of
this Section 6.01(b);
(c) simultaneously with the delivery of each set of financial
statements referred to in clause (b) above, a certificate of the
chief financial officer or the chief accounting officer of the
Borrower (i) setting forth in reasonable detail the calculations
required to establish whether the Borrower was in compliance with
the requirements of Sections 6.03 and 6.04 on the date of such
financial statements and (ii) stating whether any Default exists on
the date of such certificate and, if any Default then exists,
setting forth the details thereof and the action which the Borrower
is taking or proposes to take with respect thereto;
(d) within five Domestic Business Days after the chief
executive officer, chief operating officer, chief financial
officer, treasurer or assistant treasurer of the Borrower becomes
aware of the occurrence of any Default, a certificate of the chief
financial officer or the chief accounting officer of the Borrower
setting forth the details thereof and the action which the Borrower
is taking or proposes to take with respect thereto;
(e) promptly upon the mailing thereof to the shareholders of
the Borrower generally, copies of all financial statements, reports
and proxy statements so mailed;
(f) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and annual,
quarterly or monthly reports or any reports on Form 8-K which the
Borrower shall have filed with the Securities and Exchange
Commission;
(g) if and when any member of the Controlled Group (i) gives
or is required to give notice to the PBGC of any Reportable Event
with respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the
plan administrator of any Plan has given or is required to give
notice of any such Reportable Event, a copy of the notice of such
Reportable Event given or required to be given to the PBGC;
(ii) receives notice of complete or partial withdrawal liability
under Title IV of ERISA, a copy of such notice; or (iii) receives
notice from the PBGC under Title IV of ERISA of an intent to
terminate or appoint a trustee to administer any Plan, a copy of
such notice; and
(h) from time to time such additional information regarding
the financial position or business of the Borrower and its
Subsidiaries as the Bank may reasonably request.
SECTION 6.02. Inspection of Property, Books and Records. The
Borrower will keep, and will cause each Subsidiary to keep, proper books of
record and account in which full, true and correct entries in conformity with
generally accepted accounting principles shall be made of all dealings and
transactions in relation to its business and activities; and will permit, and
will cause each Subsidiary to permit, representatives of the Bank at the
Bank's expense prior to the occurrence of an Event of Default and at the
Borrower's expense after the occurrence of an Event of Default to visit and
inspect any of their respective properties, to examine and make abstracts
from any of their respective books and records and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants (provided that prior to the
occurrence of any Default, the Bank shall only be permitted to discuss such
matters with such independent public accountants if a representative of the
Borrower is present and reasonable prior notice has been given to the
Borrower). The Borrower agrees to cooperate and assist in such visits and
inspections, in each case at such reasonable times and as often as may
reasonably be desired.
SECTION 6.03. Ratio of Indebtedness For Borrowed Money to Total
Capitalization. The ratio of Indebtedness For Borrowed Money to Total
Capitalization will not at any time (i) on or prior to December 31, 1996,
exceed .50 to 1.00; (ii) on or after January 1, 1997 and on or prior to
December 31, 1998, exceed .45 to 1.00; and (iii) on or after January 1, 1999,
exceed .40 to 1.00.
SECTION 6.04. Minimum Consolidated Tangible Net Worth.
Consolidated Tangible Net Worth will at no time be less than $850,000,000
plus the sum of (i) 35% of the cumulative Consolidated Net Earnings of the
Borrower and its Consolidated Subsidiaries during any period after March 31,
1995 (taken as one accounting period), calculated quarterly but excluding
from such calculations any quarter in which the Consolidated Net Earnings of
the Borrower and its Consolidated Subsidiaries are negative, and (ii) 100% of
the cumulative Net Proceeds of Capital Stock received during any period after
March 31, 1995, calculated quarterly.
SECTION 6.05. Loans or Advances. Neither the Borrower nor any of
its Subsidiaries shall make loans or advances to any Person except
(i) deposits required by government agencies or public utilities; (ii) loans
or advances to Wholly Owned Subsidiaries; (iii) loan or advances constituting
Acceptable Obligations; and (iv) any other loan or advance which, when
aggregated with all other loans and advances made under this clause (iv),
does not exceed an amount equal to $50,000,000 at any one time outstanding;
provided that after giving effect to the making of any loans, advances or
deposits permitted by clause (i), (ii), (iii) or (iv) of this Section, no
Default will exist.
SECTION 6.06. Negative Pledge. Neither the Borrower nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except for Permitted Encumbrances.
SECTION 6.07. Maintenance of Existence; Fields of Business. The
Borrower shall, and shall cause each Subsidiary to, maintain its corporate
existence and carry on its business in substantially the same manner and in
substantially the same fields as such business is now carried on and
maintained; provided, however, that nothing contained in this Section shall
prohibit the termination of existence of any Subsidiary, all of whose assets
are sold in a transaction permitted by Section 6.09 or prohibit the
termination of existence of a Subsidiary pursuant to a merger permitted by
Section 6.09.
SECTION 6.08. Dissolution. Neither the Borrower nor any of its
Significant Subsidiaries shall suffer or permit dissolution or liquidation
either in whole or in part or redeem or retire any shares of its own stock or
that of any Subsidiary, except through corporate reorganization to the extent
permitted by Section 6.09.
SECTION 6.09. Consolidations, Mergers and Sales of Assets. The
Borrower will not, nor will it permit any Subsidiary to, consolidate or merge
with or into, or sell, lease or otherwise transfer all or any substantial
part of its assets to, any other Person, or discontinue or eliminate any
business line or segment, provided that
(a) the Borrower or any Subsidiary may merge with another
Person if (i) such Person was organized under the laws of the
United States of America or one of its states, (ii) the Borrower or
such Subsidiary is the corporation surviving such merger, (iii) any
Subsidiary which is a party to a merger remains a Subsidiary after
such merger, and (iv) immediately after giving effect to such
merger, no Default shall have occurred and be continuing,
(b) Subsidiaries of the Borrower may merge with one another or
with the Borrower, and
(c) the foregoing limitation on the sale, lease or other
transfer of assets and on the discontinuation or elimination of a
business line or segment shall not prohibit, during any Fiscal
Quarter, (i) a transfer of assets to the Borrower or one or more
Consolidated Subsidiaries, or (ii) a transfer of assets or the
discontinuance or elimination of a business line or segment (in a
single transaction or in a series of related transactions) unless
the aggregate assets to be so transferred or utilized in a business
line or segment to be so discontinued, when combined with all other
assets transferred pursuant to this clause (ii), and all other
assets utilized in all other business lines or segments
discontinued, during such Fiscal Quarter and the immediately
preceding eleven Fiscal Quarters, either (x) constituted more than
10% of Consolidated Total Assets at the end of the Fiscal Quarter
immediately preceding such Fiscal Quarter, or (y) contributed more
than 10% of Consolidated Net Earnings during the period of eight
consecutive Fiscal Quarters immediately preceding such Fiscal
Quarter.
SECTION 6.10. Use of Proceeds. The proceeds of the Advances shall
be used (i) first to refinance all amounts outstanding under the letter
agreement between the Borrower and Wachovia dated February 28, 1994 and
accepted and agreed to by the Borrower on March 7, 1994, and (ii) thereafter
to finance the Acquisitions and for general corporate purposes. No portion
of the proceeds of the Advances will be used by the Borrower (x) in
connection with any tender offer for, or other acquisition of, stock of any
corporation with a view towards obtaining control of such other corporation
(except for Acquisitions), (y) directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any
Margin Stock, or (z) for any purpose in violation of any applicable law or
regulation.
SECTION 6.11. Compliance with Laws; Payment of Taxes. The
Borrower will, and will cause each of its Subsidiaries and each member of the
Controlled Group to, comply with applicable laws (including but not limited
to ERISA and Environmental Requirements), regulations and similar
requirements of governmental authorities (including but not limited to PBGC),
except where the necessity of such compliance is being contested in good
faith through appropriate proceedings and reserves, if appropriate, shall
have been established therefor that are satisfactory to the Bank and except
where noncompliance could not reasonably be expected to materially impair the
validity or enforceability of, or the ability of the Borrower to perform its
obligations under, this Agreement or any other Loan Document or result in any
material adverse change in the financial condition or properties, business or
operations of the Borrower and its Subsidiaries, taken as a whole. The
Borrower will, and will cause each of its Subsidiaries to, pay before they
become delinquent all taxes, assessments, governmental charges, claims for
labor, supplies, rent and other obligations which, if unpaid, might become a
lien against the property of the Borrower or any Subsidiary, except
liabilities being contested in good faith and against which, if requested by
the Bank, the Borrower will set up reserves satisfactory to the Bank.
SECTION 6.12. Insurance. The Borrower will maintain, and will
cause each of its Subsidiaries to maintain (either in the name of the
Borrower or in such Subsidiary's own name), with financially sound and
reputable insurance companies, insurance on all its property in at least such
amounts and against at least such risks as are usually insured against in the
same general area by companies of established repute engaged in the same or
similar business and subject to self-insurance retentions; and to the extent
usually insured (subject to self-insured retentions) by companies similarly
situated and conducting similar businesses, the Borrower will also insure,
and cause each Subsidiary to insure, employers' and public and product
liability risks in good and responsible insurance companies. The Borrower
will upon request of the Bank furnish a summary setting forth the nature and
extent of the insurance maintained pursuant to this Section.
SECTION 6.13. Maintenance of Property. The Borrower shall, and
shall cause each Subsidiary to, maintain all of its properties and assets in
good condition, repair and working order, ordinary wear and tear excepted.
SECTION 6.14. Environmental Notices. The Borrower shall furnish
to the Bank prompt written notice of all material Environmental Liabilities,
pending, threatened or anticipated material Environmental Proceedings,
material Environmental Notices, Environmental Judgments and Orders, and
material Environmental Releases at, on, in, under or in any way affecting the
Real Properties or any adjacent property, and all facts, events, or
conditions that could reasonably be expected to lead to any of the foregoing.
For purposes of this Section 6.14, disclosure of such matters by the Borrower
in its filings with the Securities and Exchange Commission shall constitute
notice to the Bank of such matters.
ARTICLE VII. DEFAULTS
SECTION 7.01. Events of Default. The occurrence of any one or
more of the following events shall constitute an Event of Default by the
Borrower under this Agreement:
(a) the Borrower shall fail to pay when due any principal of
any Advance or shall fail to pay any interest on any Advance within
three Domestic Business Days after such interest shall become due,
or shall fail to pay any fee or other amount payable hereunder
within three Domestic Business Days after such fee or other amount
becomes due; or
(b) the Borrower shall fail to observe or perform any
covenant contained in Sections 6.03 through 6.10, inclusive; or
(c) the Borrower shall fail to observe or perform any
covenant or agreement contained in this Agreement (other than those
covered by clause (a) or (b) above) for thirty days after the
earlier of (i) the first day on which a responsible officer of the
Borrower has knowledge of such failure, or (ii) written notice
thereof has been given to the Borrower by the Bank; or
(d) any representation, warranty, certification or statement
made by the Borrower in Article V or in any certificate, financial
statement or other document delivered pursuant to this Agreement
shall prove to have been incorrect in any material respect when
made (or deemed made); or
(e) the Borrower or any Subsidiary shall fail to make any
payment in respect of Indebtedness For Borrowed Money outstanding
in an aggregate amount equal to or exceeding $25,000,000 (other
than the Note) when due or within any applicable grace period; or
(f) any event or condition shall occur which results in the
acceleration of the maturity of Indebtedness For Borrowed Money
outstanding in an aggregate amount equal to or exceeding
$25,000,000 of the Borrower or any Subsidiary or the purchase of
such Indebtedness For Borrowed Money by the Borrower (or its
designee) or such Subsidiary (or its designee) prior to the
scheduled maturity thereof or enables (or, with the giving of
notice or lapse of time or both, would enable) the holders of such
Indebtedness For Borrowed Money or any Person acting on such
holders' behalf to accelerate the maturity thereof or require the
purchase thereof by the Borrower (or its designee) or such
Subsidiary (or its designee) prior to the scheduled maturity
thereof, without regard to whether such holders or other Person
shall have exercised or waived their right to do so;
(g) the Borrower or any Material Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced
against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the
foregoing; or
(h) an involuntary case or other proceeding shall be
commenced against the Borrower or any Material Subsidiary seeking
liquidation, reorganization or other relief with respect to it or
its debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period
of 60 days; or an order for relief shall be entered against the
Borrower or any Material Subsidiary under the federal bankruptcy
laws as now or hereafter in effect; or
(i) the Borrower or any member of the Controlled Group shall
fail to pay when due any material amount which it shall have become
liable to pay to the PBGC or to a Plan under Title IV of ERISA; or
the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any
such Plan or Plans or a proceeding shall be instituted by a
fiduciary of any such Plan or Plans to enforce Section 515 or
4219(c)(5) of ERISA and such proceeding shall not have been
dismissed within 30 days thereafter; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree
adjudicating that any such Plan or Plans must be terminated; or
(j) one or more judgments or orders for the payment of money
in an aggregate amount in excess of $25,000,000 shall be rendered
against the Borrower or any Subsidiary and such judgment or order
shall continue unsatisfied and unstayed for a period of 30 days; or
(k) a federal tax lien shall be filed against the Borrower
under Section 6323 of the Code or a lien of the PBGC shall be filed
against the Borrower under Section 4068 of ERISA and in either case
such lien shall remain undischarged for a period of 25 days after
the date of filing; or
(l) (i) any Person or two or more Persons acting in concert
shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 20% or more of the outstanding
shares of the voting stock of the Borrower (it being understood and
agreed that any change in any person or group of persons having
power to cause the trustee of any voting trust to vote, shall
constitute a change in voting power, except to the extent that the
members of the Mead Voting Trust (which is evidenced by a voting
trust agreement dated December 20, 1986) are all descendants of
George W. Mead, I, or spouses thereof, and the aforesaid change
constitutes a transfer of such power from one member of the
aforesaid Mead Voting Trust to another member of the Mead Voting
Trust); or (ii) as of any date a majority of the Board of Directors
of the Borrower consists of individuals who were not either (A)
directors of the Borrower as of the corresponding date of the
previous year, (B) selected or nominated to become directors by the
Board of Directors of the Borrower of which a majority consisted of
individuals described in clause (A), or (C) selected or nominated
to become directors by the Board of Directors of the Borrower of
which a majority consisted of individuals described in clause (A)
and individuals described in clause (B).
SECTION 7.02. Remedies on Default. Upon the occurrence of an
Event of Default, the Bank may, by notice to the Borrower, terminate the
Commitment which shall thereupon terminate, and by notice to the Borrower
declare the Note (together with accrued interest thereon) to be, and the Note
and all outstanding Advances shall thereupon become, immediately due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower; provided that if any Event of
Default specified in clause (g) or (h) above occurs with respect to the
Borrower, without any notice to the Borrower or any other act by the Bank,
the Commitment shall thereupon terminate and the Note and all outstanding
Advances (together with accrued interest thereon) and fees shall become
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower.
SECTION 7.03. Offset. In addition to, and not in limitation of,
all rights of offset that the Bank or other holder of the Note may have under
applicable law, the Borrower hereby grants to the Bank, and to each
Participant, Assignee or other Transferee, a right of offset against all
deposits and other sums credited by or due from the Bank (or such
Participant, Assignee or other Transferee) to the Borrower or subject to
withdrawal by the Borrower; and regardless of the adequacy of any collateral
or other means of obtaining repayment of the Obligations, the Bank (and each
such Assignee and, to the extent permitted by applicable law, each such
Participant and other Transferee) may, at any time after the occurrence of an
Event of Default and without notice to the Borrower, set off the whole or any
portion or portions of any or all such deposits and other sums against the
amounts owing under this Agreement and the Note, whether or not any other
Person or Persons could also withdraw money therefrom.
ARTICLE VIII. MISCELLANEOUS
SECTION 8.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including
facsimile transmission or similar writing) and shall be given to such party
at its address or telecopy number set forth below or such other address or
telecopy number as such party may hereafter specify for the purpose by notice
to the other party:
(a) If to the Borrower:
Consolidated Papers, Inc.
P. O. Box 8050
Wisconsin Rapids, Wisconsin 54495-8050
Attention: Mr. Richard J. Kenney
Vice President, Finance
Fax number: (715) 422-3469
Telephone number: (715) 422-3111
(b) If to the Bank:
Wachovia Bank of Georgia, N.A.
MC GA-370
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Central District Loan Administration
Fax number: (404) 332-6898
Telephone number: (404) 332-5279
With a copy to:
Wachovia Corporate Services, Inc.
MC IL-90911
Suite 1740, Xerox Center
55 W. Monroe Street
Chicago, Illinois 60603-5006
Attention: D. Kelly Long
Fax number: (312) 853-0693
Telephone number: (312) 853-0459
Each such notice, request or other communication shall be effective (i) if
given by telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section and transmission thereof is confirmed, (ii) if
given by mail, 72 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid or (iii) if given by
any other means, when delivered at the address specified in this Section;
provided that notices to the Bank under Article II or Article III shall not
be effective until received.
SECTION 8.02. No Waivers. No failure or delay by the Bank in
exercising any right, power or privilege hereunder or under the Note 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.
SECTION 8.03. Expenses; Documentary Taxes. The Borrower shall pay
(i) all out-of-pocket expenses of the Bank, including reasonable fees and
disbursements of counsel for the Bank, in connection with the preparation of
this Agreement and the other Loan Documents (to the extent set forth in the
Letter Agreement), any waiver or consent hereunder or any amendment hereof or
any actual or alleged Default hereunder and (ii) if an Event of Default
occurs, all out-of-pocket expenses incurred by the Bank, including fees and
disbursements of counsel, in connection with such Event of Default and
collection and other enforcement proceedings resulting therefrom, including
out-of-pocket expenses incurred in enforcing this Agreement and the other
Loan Documents. The Borrower shall indemnify the Bank against any transfer
taxes, documentary taxes, assessments or charges made by any Authority by
reason of the execution and delivery of this Agreement or the other Loan
Documents.
SECTION 8.04. Amendments and Waivers. Any provision of this
Agreement, the Note or any other Loan Documents may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by the
Borrower and the Bank.
SECTION 8.05. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; provided that the
Borrower may not assign or otherwise transfer any of its rights under this
Agreement.
(b) The Bank may at any time sell to one or more Persons (each a
"Participant") participating interests in any Advance, the Note, the
Commitment hereunder or any other interest of the Bank hereunder. In the
event of any such sale by the Bank of a participating interest to a
Participant, the Bank's obligations under this Agreement shall remain
unchanged, the Bank shall remain solely responsible for the performance
thereof, the Bank shall remain the holder of any the Note for all purposes
under this Agreement, and the Borrower shall continue to deal solely and
directly with the Bank in connection with the Bank's rights and obligations
under this Agreement. In no event shall the Bank be obligated to the
Participant to take or refrain from taking any action hereunder except that
the Bank may agree with the Participant to repurchase any participating
interest upon prior notice from such Participant to the Bank and the Bank may
further agree that it will not, without the consent of the Participant, agree
to (i) the change of any date fixed for the payment of principal of or
interest on the related Advance or Advances, (ii) the change of the amount of
any principal, interest or fees due on any date fixed for the payment thereof
with respect to the related Advance or Advances, (iii) the change of the
principal of the related Advance or Advances, or (iv) any change in the rate
at which either interest is payable thereon or (if the Participant is
entitled to any part thereof) commitment fee is payable hereunder from the
rate at which the Participant is entitled to receive interest or commitment
fee (as the case may be) in respect of such participation. The Bank shall,
within ten Domestic Business Days after selling a participating interest in
any Advance, the Note, the Commitment or other interest under this Agreement,
provide the Borrower with written notification stating that such sale has
occurred and identifying the Participant and the interest purchased by such
Participant. The Borrower agrees that each Participant shall be entitled to
the benefits of Article III and Section 7.03 with respect to its
participation in Advances outstanding from time to time.
(c) The Bank may at any time assign to one or more banks or
financial institutions (each an "Assignee") all, or a proportionate part of
all, of its rights and obligations under this Agreement and the Note, and
such Assignee shall assume all such rights and obligations, pursuant to an
Assignment and Acceptance in the form attached hereto as Exhibit C executed
by such Assignee, the Bank and the Borrower; provided that (i) no interest
may be sold by the Bank pursuant to this paragraph (c) unless the Assignee
shall agree to assume ratably equivalent portions of the Commitment, and
(ii) no interest may be sold by the Bank pursuant to this paragraph (c) to
any Assignee which is not an Affiliate of the Bank without the consent of the
Borrower, which consent may be withheld in its sole discretion. Upon
(A) execution of the Assignment and Acceptance by the Bank, such Assignee,
and the Borrower, (B) delivery of an executed copy of the Assignment and
Acceptance to the Borrower, and (C) payment by such Assignee to the Bank of
an amount equal to the purchase price agreed between the Bank and such
Assignee, such Assignee shall for all purposes be a Bank party to this
Agreement and shall have all the rights and obligations of a Bank under this
Agreement to the same extent as if it were an original party hereto with a
Commitment as set forth in such instrument of assumption, and the Bank shall
be released from its obligations hereunder to a corresponding extent, and no
further consent or action by the Borrower or the Bank shall be required.
Upon the consummation of any transfer to an Assignee pursuant to this
paragraph (c), the Bank and the Borrower shall make appropriate arrangements
so that, if required, a new Note is issued to such Assignee.
(d) Subject to the provisions of Section 8.06, the Borrower
authorizes the Bank to disclose to any Participant or Assignee (each a
"Transferee") and any prospective Transferee any and all financial
information in the Bank's possession concerning the Borrower which has been
delivered to the Bank by the Borrower pursuant to this Agreement or which has
been delivered to the Bank by the Borrower in connection with the Bank's
credit evaluation prior to entering into this Agreement.
(e) No Transferee shall be entitled to receive any greater payment
under Section 3.03 than the transferor Bank would have been entitled to
receive with respect to the rights transferred, unless such transfer is made
with the Borrower's prior written consent or by reason of the provisions of
Section 3.02 or 3.03 requiring the Bank to designate a different Lending
Office under certain circumstances or at a time when the circumstances giving
rise to such greater payment did not exist.
SECTION 8.06. Confidentiality. The Bank agrees to exercise its
best efforts to keep any information delivered or made available by the
Borrower to it which is clearly indicated to be confidential information,
confidential from any one other than persons employed or retained by the Bank
who are or are expected to become engaged in evaluating, approving,
structuring or administering the Advances; provided, however, that nothing
herein shall prevent the Bank from disclosing such information (i) upon the
order of any court or administrative agency, (ii) upon the request or demand
of any regulatory agency or authority having jurisdiction over the Bank,
(iii) which has been publicly disclosed, (iv) to the extent reasonably
required in connection with any litigation to which the Bank or their
respective Affiliates may be a party, (v) to the extent reasonably required
in connection with the exercise of any remedy hereunder, (vi) to the Bank's
legal counsel and independent auditors and (vii) to any actual or proposed
Participant, Assignee or other Transferee of all or part of its rights
hereunder which has agreed in writing to be bound by the provisions of this
Section.
SECTION 8.07. Interest Limitation. Notwithstanding any other term
of this Agreement, the Note or any other Loan Document, the maximum amount of
interest which may be charged to or collected from any person liable
hereunder or under the Note by the Bank shall be absolutely limited to, and
shall in no event exceed, the maximum amount or interest which could lawfully
be charged or collected under applicable law (including, to the extent
applicable, the provisions of section 5197 of the Revised Statutes of the
United States of America, as amended, 12 U.S.C. 85, as amended), so that the
maximum of all amounts constituting interest under applicable law, howsoever
computed, shall never exceed as to any Person liable therefor such lawful
maximum, and any term of this Agreement, the Note or any other Loan Document
which could be construed as providing for interest in excess of such lawful
maximum shall be and hereby is made expressly subject to and modified by the
provisions of this paragraph.
SECTION 8.08. Governing Law. This Agreement and the Note shall be
construed in accordance with and governed by the law of the State of Georgia.
This Agreement and the Note are intended to be effective as instruments
executed under seal.
SECTION 8.09. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
SECTION 8.10. Consent to Jurisdiction. The Borrower (a) submits
to personal jurisdiction in the State of Georgia, the courts thereof and the
United States District Courts sitting therein, for the enforcement of this
Agreement, the Note and the other Loan Documents, (b) waives any and all
personal rights under the law of any jurisdiction to object on any basis
(including, without limitation, inconvenience of forum) to jurisdiction or
venue within the State of Georgia for the purpose of litigation to enforce
this Agreement, the Note or the other Loan Documents, and (c) agrees that
service of process may be made upon it in the manner prescribed in Section
8.01 for the giving of notice to the Borrower. Nothing herein contained,
however, shall prevent the Bank from bringing any action or exercising any
rights against any security and against the Borrower personally, and against
any assets of the Borrower, within any other state or jurisdiction.
SECTION 8.11. Severability. If any provisions of this Agreement
shall be held invalid under any applicable laws, such invalidity shall not
affect any other provision of this Agreement that can be given effect without
the invalid provision, and, to this end, the provisions hereof are severable.
SECTION 8.12. Captions. Captions in this Agreement are for the
convenience of reference only and shall not affect the meaning or
interpretation of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed under seal as of the year and day first above written.
BORROWER:
CONSOLIDATED PAPERS, INC.
ATTEST:
By: (SEAL)
-------------------------
Secretary Title:
[CORPORATE SEAL]
BANK:
Lending Office WACHOVIA BANK OF GEORGIA, N.A.
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303 By:
Title:
Exhibit 99(a)
[COMPOSITE CONFORMED COPY IN RESPECT OF FIVE
SEPARATE UNDIVIDED INTEREST TRANSACTIONS]
FINANCING AGREEMENT
dated December 31, 1987
among
[Note 1]<F1>
as Owner Participant [Note 2]<F2>
THE SEVERAL INSTITUTIONS NAMED IN SCHEDULE A,
each as a Loan Participant
FIRST NATIONAL BANK OF MINNEAPOLIS,
in its individual capacity, to the
extent set forth herein, and
as Owner Trustee under a Trust Agreement,
dated December 31, 1987, with note 11,
as Owner Trustee or Lessor
THE CONNECTICUT BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION,
in its individual capacity, to the
extent set forth herein, and
as Indenture Trustee under a Trust Indenture,
dated December 31, 1987, with the Owner Trustee,
as Indenture Trustee
MINNESOTA PAPER INCORPORATED
and
PENTAIR DULUTH CORP.,
____________________
<F1> Note 1: Original Undivided Interest Owner Participants:
Associated Southern Investment Company (Associated) Dana Lease
Finance Corporation (Dana); NYNEX Credit Company (NYNEX); Public
Service Resources Corporation (PSR); Southern Indiana Properties,
Inc. (SoInd)
<F2> Note 2: Associated assigned its Undivided lnterest to its
Affiliate, Mission Funding Delta (Mission) on January 29, 1988;
Dana assigned its Undivided Interest to its Affiliate, Dana
Leasing, Inc. (Dana Leasing) on January 14, 1988; PSR assigned
its Undivided Interest to Resources Capital Investment
Corporation (Resources) on January 14, 1988; SoInd assigned its
Undivided Interest to its Affiliate, Joint Ventures Affiliated,
Inc. (Joint Ventures) on January 15, 1988. Unless the context
otherwise requires, from the respective dates set out above, any
reference to Associated, Dana, PSR or SoInd shall be read as
being a reference to Mission, Dana Leasing, Resources or Joint
Ventures, respectively.
each as a Joint Venturer
MINNESOTA POWER & LIGHT COMPANY
and
PENTAIR, INC.,
each as a Sponsor
and
LAKE SUPERIOR PAPER INDUSTRIES,
as Lessee
SALE AND LEASEBACK OF UNDIVIDED INTEREST IN
LAKE SUPERIOR PAPER INDUSTRIES' SUPERCALENDERED
PAPER MILL
FINANCING AGREEMENT
THIS FINANCING AGREEMENT, dated December 31, 1987, among [NOTE 1], [NOTE
3]<F3> (the Owner Participant), THE SEVERAL INSTITUTIONS NAMED IN SCHEDULE A
(each as a Loan Participant and, collectively, the Loan Participants), FIRST
NATIONAL BANK OF MINNEAPOLIS [Note 4]<F4>, a national banking association, in
its individual capacity, to the extent set forth herein, and as Owner Trustee
(the Owner Trustee) under a Trust Agreement, dated December 31, 1 987, with
the Owner Participant, THE CONNECTICUT BANK AND TRUST COMPANY, NATIONAL
ASSOCIATION, a national banking association, in its individual capacity, to
the extent set forth herein, and as Indenture Trustee (the Indenture Trustee)
under an Indenture, dated December 31, 1987, with the Owner Trustee,
MINNESOTA POWER & LIGHT COMPANY, a Minnesota corporation (Minnesota Power or
a Sponsor), MINNESOTA PAPER INCORPORATED, a Minnesota corporation (Minnesota
Paper or a Joint Venturer) and a wholly owned subsidiary of Minnesota Power,
PENTAIR, INC., a Minnesota corporation (Pentair or a Sponsor, and, severally
with Minnesota Power, the Sponsors), PENTAIR DULUTH CORP., a Minnesota
corporation (Pentair Duluth or a Joint Venturer, and, severally with
Minnesota Paper, the Joint Venturers) and a wholly owned subsidiary of
Pentair, and LAKE SUPERIOR PAPER INDUSTRIES, a joint venture organized under
the Minnesota general partnership law (the Lessee),
W I T N E S S E T H:
WHEREAS, the Owner Participant and First National Bank of Minneapolis
have executed the Trust Agreement concurrently herewith and, as provided in
the Trust Agreement, the Owner Trustee and The Connecticut Bank and Trust
Company, National Association, are executing the Indenture concur herewith;
WHEREAS, the Owner Participant has heretofore obtained the Appraisal and
the Environmental Report and Opinion;
WHEREAS,(A)(i) the Owner Participant is willing to make its Investment
in the Trust, and (ii) each Loan Participant is willing to lend to the
____________________
<F3> Note 3: Owner Participants' states of incorporation:
Associated and Mission California; Dana and Dana Leasing
Delaware; NYNEX Delaware; SoInd and Joint Ventures Indiana; PSR
and Resources New Jersey
<F4> Note 4: Effective January 1, 1988, First National Bank of
Minneapolis changed its name to First Bank National Association.
Lessor, and the Lessor desires to borrow from each Loan Participant, the
amount of such Loan Participant's Loan, and (B) the Owner Trustee, pursuant
to the terms and provisions of the Indenture, has authorized the creation,
issuance, sale and delivery of the Notes and the granting of the security
therefor;
WHEREAS, the Owner Participant, each Other Owner Participant, each Loan
Participant, the Funding Agent, the Owner Trustee, the Indenture Trustee, the
Lessee, each of the Joint Venturers and each of the Sponsors have heretofore
executed and delivered the Funding Agreement;
WHEREAS, each Person which is a party hereto is concurrently executing
and delivering each other Transaction Document to which such Person is a
party; and
WHEREAS, (A) the Lessor, with the proceeds of the Loans and that amount
paid by the Owner Participant equal to the difference between Facility Cost
and the proceeds of the Loans (herein referred to as the Owner Participant's
Investment), by an assignment of the Funding Account, desires to (i) purchase
the Undivided Interest from the Lessee pursuant to the Bill of Sale for a
price equal to Facility Cost and (ii) lease the Undivided Interest to the
Lessee pursuant to the Facility Lease, and (B) the Lessee desires to (i) sell
the Undivided Interest to the Lessor pursuant to the Bill of Sale for a price
equal to Facility Cost, and (ii) lease back the Undivided Interest pursuant
to the Facility Lease;
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS
For the purposes hereof, capitalized terms used herein shall have the
respective meanings assigned to such terms in Appendix A.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF EACH LOAN PARTICIPANT.
Each Loan Participant represents and warrants that:
(A) INVESTMENT REPRESENTATION. Such Loan Participant is acquiring the
Note acquired by it hereunder for its own account for investment and not with
a view to, or for sale in connection with, any distribution thereof in
violation of Section 5 of the Securities Act; provided that the disposition
by such Loan Participant of its property shall at all times be within its
control.
(B) ERISA. If such Loan Participant is an insurance company, the funds
being used by such Loan Participant to pay the purchase price of the Note
acquired by such Loan Participant hereunder do not constitute assets
allocated to any separate account (as defined in Section 3 of ERISA)
maintained by such Loan Participant in which any employee benefit plan (as
defined in Section 3 of ERISA) participates to the extent of 5 percent or
more. If such Loan Participant is not an insurance company, the funds being
used by it to acquire its Note do not constitute assets allocable to any
"employee benefit plan" other than a "governmental plan" exempt from the
coverage of ERISA, or if any part of the purchase by such Loan Participant
hereunder constitutes assets of an investment fund which are allocable to any
employee benefit plan (as defined in Section 3 of ERISA, the Plan), then
either (i) such investment fund is entitled to the exemptions provided by
Prohibited Transaction Class Exemption 7819 issued by the United States
Department of Labor, and such Loan Participant has identified to the Lessee,
the Owner Participant and the Owner Trustee in writing each employee benefit
plan which has a 5% or greater interest in such investment fund and such Loan
Participant has taken all action necessary to maintain such exemption or (ii)
(a) such investment fund is managed by such Loan Participant as a qualified
professional asset manager (QPAM) within the meaning of Prohibited
Transaction Class Exemption 8>14 (PTE 8414) issued by the Department of
Labor, and (b); provided that no other party to the transaction and no
"affiliate" of any such other party (as defined in Part V (c) of PTE 8414)
has, at this time, and during the immediately preceding one year has not
exercised, the authority to appoint or terminate said QPAM as manager of such
Plan assets or to negotiate the terms of said QPAM's management agreement on
behalf of such Plan, such investment fund is entitled to the exemption
granted in Part 1 of PTE 8414 (as each such term is defined in Section 3 of
ERISA).
SECTION 3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE OWNER
PARTICIPANT.
SECTION 3(A). REPRESENTATIONS AND WARRANTIES. The Owner Participant
represents and warrants that:
SECTION 3(A)(1). DUE ORGANIZATION. The Owner Participant is a
corporation duly organized and validly existing in good standing under the
laws of [Note 31 and has all requisite corporate power and authority to enter
into and perform its obligations under this Financing Agreement and each
other Transaction Document to which it is a party.
SECTION 3(A)(2). DUE AUTHORIZATION. This Financing Agreement and each
other Transaction Document to which the Owner Participant is a party have
been duly authorized by all necessary corporate action on the part of the
Owner Participant and do not require the consent or approval of its
stockholders or any trustee or holder of any of its indebtedness or other
obligations, except such, if any, as have been duly obtained, given or
accomplished.
SECTION 3(A)(3). EXECUTION; ENFORCEABILITY. This Financing Agreement and
each other Transaction Document to which the Owner Participant is a party
have been duly executed and delivered by the Owner Participant and constitute
its legal, valid and binding obligations, enforceable against it in
accordance with their respective terms, and, pursuant to the Trust Agreement,
the Owner Participant has authorized the Owner Trustee to execute and deliver
this Financing Agreement and each other Transaction Document to which the
Owner Trustee is a party.
SECTION 3(A)(4). NO VIOLATION. The execution and delivery by the Owner
Participant of this Financing Agreement and each other Transaction Document
to which it is a party are not, and the performance by the Owner Participant
of its obligations under each will not be, inconsistent with its Charter or
By-Laws, and do not and will not, assuming the Lessee's representations
herein are correct, contravene any Applicable Law, and do not and will not
contravene any provision of, or constitute a default under, or result in the
creation of any Lien on its interest in the Lease Indenture Estate or the
Trust Estate under, any indenture, Mortgage, lease or any other agreement or
instrument to which the Owner Participant is a party or by which the Owner
Participant or its property is bound or require any Governmental Action,
except such as have been duly obtained, given or accomplished and are in full
force and effect; provided, however, that the Owner Participant makes no
representation or warranty as to any Applicable Law or Governmental Action
relating to the Securities Act, the Exchange Act, the Trust Indenture Act,
the environment or health and safety or the performance of the Owner
Participant's obligations under the Support Agreement; and provided further,
however, that the Owner Participant has no knowledge of any such Applicable
Law or Governmental Action that would have a material adverse effect upon the
Lease Indenture Estate, the Trust Estate or the economic operation of the
Facility.
SECTION 3(A)(5). NO OWNER PARTICIPANT'S LIENS. The Trust Estate and
the Lease Indenture Estate are free of any Owner Participant's Lien. The
performance by the Owner Participant of its obligations hereunder and under
any other Transaction Document to which the Owner Participant is a party will
not subject the Trust Estate, or any portion thereof, to any the Owner
Participant's Lien, and the Owner Participant has not taken or omitted to
take any action which would result in the creation of any Owner Participant's
Lien.
SECTION 3(A)(6). ACQUISITION FOR INVESTMENT. The Owner Participant is
acquiring the beneficial interest in the Trust Estate for its own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof in violation of Section 5 of the Securities Act, but
subject, nevertheless, to any requirement of law that the disposition by the
Owner Participant of its property shall at all times be within its control.
SECTION 3(A)(7). SECURITIES ACT. Neither the Owner Participant nor
anyone authorized by it has directly or indirectly offered or sold any
interest in the Trust Estate or any part thereof, or in any similar security,
or in any security the offering of which for the purposes of the Securities
Act would be deemed to be part of the same offering as the offering of the
Trust Estate or any part thereof, or solicited any offer to acquire any of
the same from any Person in violation of Section 5 of the Securities Act, and
neither the Owner Participant nor anyone authorized to act on its behalf will
take any action which would subject the issuance or sale of the Notes or any
interest in the Facility Lease to the registration requirements of such
Section.
SECTION 3(A)(8). ERISA. No part of the funds being used by the Owner
Participant to pay the amount of its Investment constitutes assets allocable
to (i) any separate account (as defined in Section 3 of ERISA) maintained by
the Owner Participant in which any employee benefit plan (as defined in
Section 3 of ERISA) participates to the extent of 5 percent or more, or (ii)
any employee benefit plan (as defined in Section 3 of ERISA).
SECTION 3(A)(9). DEFAULTS. To the best knowledge of the Owner
Participant, no Indenture Default or Indenture Event of Default has occurred
and is continuing. The Owner Participant is not in violation of any of the
terms of this Financing Agreement or any other Transaction Document to which
it is a party.
SECTION 3(B). AGREEMENTS OF THE OWNER PARTICIPANT. The Owner
Participant agrees that:
SECTION 3(B)(1). OWNER PARTICIPANT'S LIENS. The Owner Participant will
not create or suffer to exist, and, at its own cost and expense, the Owner
Participant will promptly take such action as may be necessary duly to
discharge, all Owner Participant's Liens and it will indemnify, protect, save
and keep harmless all present and future Holders from and against any
reduction in the amount payable out of the Trust Estate, or any other loss,
cost or expense (including reasonable legal fees and expenses) incurred by
such Holders, as a result of the imposition or enforcement of any Owner
Participant's Liens.
SECTION 3(B)(2). TRANSFERS OF BENEFICIAL INTEREST.
(i) Unless effective on or after the Discharge of the Indenture, (x) the
Owner Trustee will not assign, convey or transfer all or any portion of its
right, title and interest in the Trust Estate or any undivided interest
therein, and (y) the Owner Participant will not assign, convey or transfer
all or any portion of its beneficial interest in the Trust Estate, in each
case without the prior written consent of (1) the Lessee (unless a Default or
an Event of Default shall have occurred and be continuing), such consent not
to be unreasonably withheld, and (2) a Majority in Interest of Noteholders;
provided, however, that, subject to Section 3(b)(2)(ii), the Owner
Participant may assign, convey or transfer all or any portion of such
beneficial interest which is in respect of, or evidences an interest in, a
Facility Cost of not less than $25,000,000 without the consent of any Person
(except a Majority in Interest of Noteholders, if such assignment, conveyance
or transfer occurs prior to the Discharge of the Indenture and during any
period during which any Indenture Event of Default, other than an Indenture
Event of Default under paragraph (a) of Section 4.01 of the Indenture, shall
have occurred and be continuing, unless such Indenture Event of Default shall
be cured in consequence of, or concurrently with, such assignment, conveyance
or transfer) to any corporation organized under the laws of any state of the
United States or the District of Columbia if such Person is either:
(A) a corporation having a net worth of not less than
$75,000,000, in which case the transferor shall be released from
all of its liabilities hereunder and under each other Transaction
Document to which the transferor was a party;
(B) a corporation which (x) has a net worth of not less than
$25,000,000 and (y) is a direct or indirect subsidiary of a
corporation which (AA) has a net worth of not less than $75,000,000
and (BB) has agreed to accept secondary liability for all of such
transferee's liabilities under the Transaction Documents, in which
case the transferor shall be released from all of its liabilities
hereunder and under each other Transaction Document to which the
transferor was a party; or
(C) a corporation which (x) has no business other than that
of purchasing and holding the beneficial interest assigned,
conveyed or transferred to it and (y) is a direct or indirect
subsidiary of a corporation which (AA) has a net worth of not less
than $75,000,000 and (BB) has agreed to accept secondary liability
for all of such transferee's liabilities under the Transaction
Documents, in which case the transferor shall be released from all
of its liabilities hereunder and under each other Transaction
Document to which the transferor was a party;
provided, however, that if the transferor is the original Owner Participant
named herein and the transferee is an Affiliate of such transferor the
provisions of clause (y) of subparagraph (C) above shall not apply if the
transferor shall have agreed to remain secondarily liable for all of the
transferee's liabilities under the Transaction Documents; provided further,
however, that if the transferor is a transferee pursuant to subparagraph (B)
or (C) above, the provisions of clause (y) of such subparagraph (B) or (C),
as the case may be, shall not apply if the corporation which had accepted
secondary liability for all of such transferor's liabilities under the
Transaction Documents at the time of such prior assignment, conveyance or
transfer shall have agreed to remain so liable notwithstanding such further
assignment, conveyance or transfer; provided further, however, that if the
transferee is an Affiliate of the original Owner Participant named herein and
such original Owner Participant is organized under the laws of the State of
California, the provisions of subclause (AA) of clause (y) of subparagraph
(C) shall not apply if such transferee is, or concurrently with such transfer
will become, a direct subsidiary of a corporation organized under the laws of
the State of California which has a net worth of at least $35,000,000 and in
accordance with subclause (BB) of clause (y) of subparagraph (C) shall have
agreed to accept secondary liability for all of such transferee's
liabilities; provided further, however. that no transfer shall be permitted
hereunder if such transfer would result in a violation of any Applicable Law
or any agreement by which the transferor or its property is bound. Upon any
such assignment, conveyance or transfer, the transferee shall be deemed to be
the "Owner Participant" hereunder and under each other Transaction Document
to the extent of the interest so assigned, conveyed or transferred, shall be
deemed to have made all payments, in respect of the right, title or interest
so assigned, conveyed or transferred, and shall have the entire interest
therein, and, to the extent of the interest assigned, conveyed or
transferred, each reference to such transferring Owner Participant in this
Financing Agreement, any other Transaction Document and the Notes shall
thereafter be deemed to be a reference to such transferee to the extent of
the right, title or interest so assigned, conveyed or transferred. If the
Owner Participant shall propose to make any assignment, conveyance or
transfer pursuant to this Section 3(b)(2)(i), it shall give 30 days' prior
written notice thereof to the Loan Participants (if such assignment,
conveyance or transfer occurs prior to the Discharge of the Indenture), the
Indenture Trustee (if such assignment, conveyance or transfer occurs prior to
the Discharge of the Indenture), the Owner Trustee, and the Lessee (if the
Lease is in effect). Notwithstanding the foregoing provisions of this Section
3(b)(2)(i), the Owner Participant shall not be released after any assignment,
conveyance or transfer pursuant to this Section from (i) any obligation
arising prior to such assignment, conveyance or transfer, (ii) any liability
arising out of any breach or inaccuracy of the representations set forth in
Section 3(a) or (iii) any obligation matured under the Tax Indemnity
Agreement prior to the transfer.
(ii) Notwithstanding anything herein contained to the contrary, no
such assignment, conveyance or transfer of any beneficial interest in
the Trust Estate, or any portion thereof, shall be permitted unless,
(A) simultaneously with the assignment, conveyance or
transfer of such beneficial interest in the Trust Estate, or such
portion thereof, the transferee shall receive an assignment of all,
or such portion, of the transferring Owner Participant's right,
title and interest in and to, and shall, pursuant to an agreement
in form and substance reasonably satisfactory to the Lessee and
each Loan Participant (unless such transfer is effective on or
after the expiration of the Lease Term, in the case of the Lessee,
and the Discharge of the Indenture, in the case of the Loan
Participants), assume and agree to be bound by all, or such
portion, of the obligations, duties, responsibilities and burdens
of such transferring Owner Participant and shall make, as of the
date of transfer, all representations and warranties required to
have been made by the transferring Owner Participant, under this
Financing Agreement and each other Transaction Document to which
the transferring Owner Participant is a party, to the extent of the
interest so assigned, conveyed or transferred and shall deliver to
the Lessee (if the Lease Term is in effect), the Loan Participants
(at any time prior to the Discharge of the Indenture) and any Owner
Participant other than the transferring Owner Participant, if any,
(i) an opinion of counsel to the effect that such agreement of
assumption has been duly authorized, executed and delivered and
constitutes the legal, valid and binding obligations of the
transferee Owner Participant, enforceable (subject to bankruptcy
and other similar laws affecting creditors' and lessors' rights
generally, and to principles of equity) in accordance with their
terms and (ii) such other documentation as may be reasonably
requested by the Lessee (if the Lease Term is in effect), the Loan
Participants (at any time prior to the Discharge of the Indenture),
or any Owner Participant other than the transferring Owner
Participant;
(B) such transferring Owner Participant shall deliver to the
Lessee (if the Lease Term is in effect), the Owner Trustee, the
Indenture Trustee (at any time prior to the Discharge of the
Indenture) the Loan Participants (at any time prior to the
Discharge of the Indenture) and any Owner Participant other than
the transferring Owner Participant, if any, a representation and
warranty and an opinion of counsel satisfactory to the Lessee, the
Owner Trustee, the Indenture Trustee (at any time prior to the
Discharge of the Indenture) and the Loan Participants (at any time
prior to the Discharge of the Indenture) and any such other Owner
Participant that the assignment, conveyance or transfer of such
interest to, and the ownership of such interest by, such transferee
Owner Participant will not cause such transferee Owner Participant,
the Owner Trustee, FNB, the Lessee (if the Lease Term is in
effect), the Indenture Trustee (at any time prior to the Discharge
of the Indenture), the State of Wisconsin, the Loan Participants
(at any time prior to the Discharge of the Indenture) or any such
other Owner Participant to be engaged in a "prohibited
transaction", as defined in section 406 of ERISA or section 4975 of
the Code, which is not subject to an exemption contained in ERISA
or in the rules, regulations, releases or bulletins adopted
thereunder;
(C) the transferee is not nor is the transferee affiliated
with, (whether as an Affiliate, joint venturer or otherwise), a
manufacturer, converter or distributor of publication and printing
grade papers; provided, however, that this clause (C) shall not
apply if (x) any Event of Default has occurred and is continuing,
(y) the transferee is an Affiliate of the Owner Participant or (z)
consent to such transfer is granted by the Lessee, which consent
shall not be unreasonably withheld; and
(D) such transfer does not result in additional Governmental
Action or in additional jurisdiction of any Governmental Authority
relating to the Facility, and
(iii) The Owner Participant shall not assign, convey or transfer any
part of its then existing right, title or interest in and to the beneficial
interest in the Trust Estate to a Person who may not, under section 1.48-4 of
the Regulations, make a valid election under section 48(d) of the Code to
treat the Lessee as having purchased the Undivided Interest for Investment
Tax Credit purposes.
(iv) All out-of-pocket costs (including reasonable attorneys' fees) and
expenses incurred by the Lessee, the Owner Participant, the Indenture
Trustee, the Owner Trustee or the Loan Participants and any fee payable to
the Indenture Trustee or the Owner Trustee, in each case in connection with
an assignment, conveyance or transfer by the Owner Participant hereunder,
including any of the foregoing which relate to any amendments to this
Financing Agreement or any Transaction Document required in connection
therewith, shall be paid by the transferring Owner Participant.
SECTION 3(B)(3). NOTICE OF INDENTURE DEFAULTS. Promptly upon a
Responsible Officer's obtaining knowledge of any Indenture Default or
Indenture Event of Default relating solely to the Owner Participant, the
Owner Participant shall deliver to the Indenture Trustee, each Loan
Participant and the Lessee an Officers' Certificate of the Owner Participant
specifying the nature of such Indenture Default or Indenture Event of Default
and the period of existence thereof and any action the Owner Participant has
taken with respect thereto.
SECTION 3(B)(4). LIMITATION ON PURCHASE OF NOTES. The Owner
Participant shall not purchase any Notes except pursuant to Section 2.12 or
2.13 of the Indenture.
SECTION 4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE OWNER
TRUSTEE AND FNB.
SECTION 4(A). REPRESENTATIONS AND WARRANTIES. First National Bank of
Minneapolis, as Owner Trustee and (except as otherwise provided in the last
sentence of this Section 4(a)) in its individual capacity (in such individual
capacity, FNB), represents and warrants that:
SECTION 4(A)(1). DUE ORGANIZATION. FNB is a national banking
association duly organized and validly existing in good standing under the
laws of the United States and has the corporate power and authority under
Minnesota and federal laws, in its individual capacity, to execute, deliver
and perform the Trust Agreement, and, in its capacity as trustee, this
Financing Agreement, the Facility Lease and each other Transaction Document
to which it is or is to become a party, and, in its capacity as trustee, to
issue the Notes, and the Owner Trustee has taken all necessary action to
authorize the execution, delivery and performance by it, in such respective
capacities, of this Financing Agreement, the Trust Agreement, the Facility
Lease and such other Transaction Documents and the issuance by it of the
Notes.
SECTION 4(A)(2). DUE AUTHORIZATION; ENFORCEABILITY; ETC. This
Financing Agreement and each other Transaction Document to which FNB is a
party have been duly authorized by FNB (in its individual capacity or as
Owner Trustee, as the case may be) and duly executed and delivered and
constitute legal, valid and binding obligations of FNB (in each such
capacity), enforceable against it (in each such capacity) in accordance with
their respective terms; it being understood that FNB is not making any
representation or warranty as to the priorities of the Liens created or to be
created under any Transaction Document, title to the Trust Estate or
recordings or filings necessary in connection therewith.
SECTION 4(A)(3). NOTES. Upon execution of the Notes to be issued by
the Owner Trustee under the Indenture, authentication thereof by the
Indenture Trustee pursuant to the Indenture and delivery thereof against
payment therefor, each of such Notes will be a legal, valid and binding
obligation of the Owner Trustee, enforceable against the Owner Trustee in
accordance with its terms.
SECTION 4(A)(4). NO VIOLATION. The execution and delivery by (x) FNB
of the Trust Agreement and, to the extent FNB is a party hereto in its
individual capacity, this Financing Agreement and (y) the Owner Trustee of
this Financing Agreement and each other Transaction Document (other than the
Trust Agreement) to which the Owner Trustee is a party, are not, and the
performance by FNB, in its individual capacity or as Owner Trustee, as the
case may be, of its obligations under each will not be, inconsistent with its
Charter or By-Laws and do not and will not contravene any Applicable Law of
the United States of America or the State of Minnesota governing the banking
or trust powers of FNB, and do not and will not contravene any provision of,
or constitute a default under, any indenture, mortgage, contract or other
instrument to which FNB is a party or by which it is bound or require any
Governmental Action under any Federal or Minnesota law, except such as have
been duly obtained, given or accomplished; provided, however, that no
representation is made with respect to the right, power or authority of FNB
or the Owner Trustee to act as operator of the Undivided Interest or the
Facility following an Event of Default and the Owner Trustee makes no
representation or warranty as to any Applicable Law or Governmental Action in
relation to the Securities Act, the Exchange Act, the Investment Company Act,
the Trust Indenture Act, the environment or health and safety.
SECTION 4(A)(5). DEFAULTS. To the best knowledge of the Owner Trustee,
no Indenture Default or Indenture Event of Default has occurred and is
continuing. The Owner Trustee is not in violation of any of the terms of this
Financing Agreement or any other Transaction Document to which it is a party.
SECTION 4(A)(6). LITIGATION. There is no action, suit, investigation
or proceeding pending or, to the knowledge of FNB, threatened against FNB (in
any capacity) before any court, arbitrator or administrative or governmental
body and which relates to its banking or trust powers which, individually or
in the aggregate, if decided adversely to the interests of FNB in such
capacity would have an adverse effect upon the ability of FNB (in any
capacity) to perform its obligations under this Financing Agreement or any
other Transaction Document to which it is a party (in any capacity).
SECTION 4(A)(7). LOCATION OF CHIEF PLACE OF BUSINESS AND CHIEF
EXECUTIVE OFFICE, ETC. The chief place of business and chief executive office
of the Owner Trustee is located at First Bank Place, 120 South Sixth Street,
Minneapolis, Minnesota 55402, and the office where its records concerning the
accounts and contract rights relating to the transactions contemplated hereby
are kept, is located at c/o First Trust Company, Inc., Corporate Trust
Department, Box 64111, St. Paul, Minnesota 55164-0111.
SECTION 4(A)(8). NO OWNER TRUSTEE LIEN. There exists no Lien on the
Lease Indenture Estate arising as a result of claims against FNB.
SECTION 4(A)(9). NO LESSOR'S LIENS. The Trust Estate and the Lease
Indenture Estate are free of any Lessor's Lien.
The representations and warranties in Section 4(a)(2) and Section
4(a)(3), as to Transaction Documents (except the Trust Agreement and this
Financing Agreement, to the extent that FNB makes representations and
warranties herein in its individual capacity) and the Notes being legal,
valid and binding obligations enforceable in accordance with their respective
terms, are given only by FNB in its capacity as Owner Trustee and not in its
individual capacity.
SECTION 4(B). AGREEMENTS. FNB agrees, in its individual capacity with
respect to Sections 4(b)(1), 4(b)(2) and 4(b)(3) that:
SECTION 4(B)(1). DISCHARGE OF LIENS. FNB will not create or suffer to
exist, and, at its own cost and expense, FNB will take such action as may be
necessary duly to discharge, all Lessor's Liens and it will indemnify,
protect, save and keep harmless all present and future Holders from and
against any reduction in the amount payable out of the Trust Estate, or any
other loss, cost or expense (including reasonable legal fees and expenses)
incurred by such Holders, as a result of the imposition or enforcement of any
Lessor's Liens.
SECTION 4(B)(2). CERTAIN AMENDMENTS. Unless an Event of Default has
occurred and is continuing, FNB will not amend any of the payment terms of
any of the Notes, or take, or permit any other Person to take, any action to
refund any of the Notes after the issue thereof pursuant to the terms of this
Financing Agreement or the Indenture, without the prior written consent of
the Lessee. Except for amendments or supplements necessary to effectuate a
transfer pursuant to Section 3(b)(2), FNB will not amend or supplement, or
consent to any amendment of, or supplement to, the Trust Agreement without
the prior written consent of (x) a Majority in Interest of Noteholders, and
(y) unless an Event of Default has occurred and is continuing, the Lessee, if
such amendment or supplement would materially and adversely affect the rights
of the Holders of the Notes under the Indenture or of the Lessee under the
Facility Lease, as the case may be.
SECTION 4(B)(3). CHANGE IN LOCATION OF CHIEF PLACE OF BUSINESS AND
CHIEF EXECUTIVE OFFICE, ETC. FNB shall notify the Lessee, each Loan
Participant, the Owner Participant and the Indenture Trustee promptly after
any change in its chief executive office, principal place of business or
place where its records concerning the accounts and contract rights relating
to the transactions contemplated hereby are kept.
SECTION 4(B)(4). NOTICE OF INDENTURE DEFAULTS. Promptly upon obtaining
knowledge of any event or condition that constitutes a Default, an Event of
Default, an Indenture Default or an Indenture Event of Default, the Owner
Trustee shall deliver to the Indenture Trustee, each Loan Participant and the
Lessee an Officers' Certificate of the Owner Trustee specifying the nature of
such condition or event.
SECTION 5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE INDENTURE
TRUSTEE.
SECTION 5(A). REPRESENTATIONS AND WARRANTIES. The Connecticut Bank and
Trust Company, National Association represents and warrants that:
SECTION 5(A)(1). DUE ORGANIZATION. The Indenture Trustee is a national
banking association duly organized and validly existing in good standing
under the laws of the United States and has the corporate power and authority
and legal right to enter into and perform its obligations under the
Indenture, this Financing Agreement and each other Transaction Document to
which it is a party.
SECTION 5(A)(2). DUE AUTHORIZATION. This Financing Agreement and each
other Transaction Document to which the Indenture Trustee is a party have
been duly authorized by the Indenture Trustee and each has been duly executed
and delivered by it and each such agreement is a legal, valid and binding
obligation of the Indenture Trustee, enforceable against it in accordance
with its respective terms.
SECTION 5(A)(3). AUTHENTICATION OF NOTES. The officer of the Indenture
Trustee who shall authenticate any Note pursuant to the Indenture shall be,
at the time of such authentication, duly authorized by appropriate corporate
action on the part of the Indenture Trustee.
SECTION 5(A)(4). NO VIOLATION. The execution and delivery by it of
this Financing Agreement and the Indenture, the authentication by it of the
Notes, the consummation by it of the transactions contemplated for it hereby
or thereby, and the compliance by it with the provisions hereof or thereof
are not and will not be inconsistent with its Articles of Incorporation or
By-Laws, and do not and will not contravene any Applicable Law of the United
States of America or the State of Connecticut governing its banking or trust
powers, and do not and will not contravene any provision of, or constitute a
default under, any indenture, mortgage, contract or other instrument to which
it is a party or by which it is bound, or require any Governmental Action
under Federal or Connecticut law, except such as have been duly obtained,
given or accomplished. No representation is made with respect to the right,
power or authority of the Indenture Trustee to act as operator of the
Undivided Interest or the Facility following an Indenture Event of Default
and the Indenture Trustee makes no representation or warranty as to any
Applicable Law or Governmental Action in relation to the Securities Act, the
Exchange Act, the Investment Company Act or the Trust Indenture Act or the
environment or health and safety.
SECTION 5(A)(5). NO INDENTURE TRUSTEE LIENS. The Lease Indenture
Estate and the Trust Estate are free of all Indenture Trustee's Liens.
SECTION 5(B). AGREEMENTS. The Indenture Trustee agrees that it will
not create or permit to exist, and will promptly take such action as may be
necessary duly to discharge, all Indenture Trustee's Liens on the Lease
Indenture Estate
SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF EACH JOINT
VENTURER.
SECTION 6(A). REPRESENTATIONS AND WARRANTIES. Each Joint Venturer
represents and warrants, severally and not jointly with the Other Joint
Venturer, that:
SECTION 6(A)(1). DUE ORGANIZATION. It is duly organized and validly
existing in good standing under the laws of the State of Minnesota and has
the corporate power and authority to carry on its business as presently
conducted, to own or hold under lease its properties and to enter into and
perform its obligations under this Financing Agreement and each other
Transaction Document to which it is a party. It has not failed to qualify to
do business in any jurisdiction where failure so to qualify would materially
and adversely affect its financial condition or its ability to perform any of
its obligations under this Financing Agreement or any Transaction Document to
which it is a party.
SECTION 6(A)(2). DUE AUTHORIZATION. The execution, delivery and
performance by it of this Financing Agreement and of each other Transaction
Document to which it is a party have been duly authorized by all necessary
corporate action on its part and do not, and will not, require the consent or
approval of its stockholders or any trustee or holder of any indebtedness or
other obligation thereof.
SECTION 6(A)(3). EXECUTION; ENFORCEABILITY. Each of this Financing
Agreement and each Transaction Document to which it is a party has been duly
executed and delivered by it and this Financing Agreement and each such
Transaction Document constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms.
SECTION 6(A)(4). NO VIOLATION, ETC. The Joint Venturer is not in
violation of any provision of its Articles of Incorporation or By-Laws, or
any Applicable Law, or any indenture, mortgage, lease or any other agreement
or instrument to which it is a party or by which it or its property is bound.
Neither the execution, delivery or performance by it of this Financing
Agreement or any other Transaction Document to which it is a party, nor the
consummation by it of the transactions contemplated hereby or thereby, nor
compliance by it with the provisions hereof or thereof, conflicts or will
conflict with, or results or will result in a breach or contravention of any
of the provisions of, its Articles of Incorporation or By-Laws, or any
Applicable Law, or any indenture, mortgage, lease or any other agreement or
instrument to which it is a party or by which it or its property is bound, or
constitutes or will constitute a default under any provision thereof.
SECTION 6(A)(5). GOVERNMENTAL ACTIONS. No Governmental Action is
required in connection with its execution, delivery or performance of, or the
consummation by it of the transactions contemplated by, this Financing
Agreement or any other Transaction Document to which it is a party, except
(i) such Governmental Actions as have been duly obtained, given or
accomplished, and (ii) such other Governmental Actions as may be required
under any law or regulation not in effect on the date hereof.
SECTION 6(A)(6). SECURITIES ACT. Neither it nor anyone acting on its
behalf has directly or indirectly in violation of Section 5 of the Securities
Act, offered or sold any interest in the Notes, the notes issued with respect
to any other undivided interest in the Facility, the Undivided Interest or
any other undivided interest in the Facility, or the Facility Lease or any
other lease of an undivided interest in the Facility, or any similar security
or lease, or in any security or lease the offering of which, for purposes of
the Securities Act, would be deemed to be part of the same offering as the
offering of the aforementioned securities or leases, or solicited any offer
to acquire any of the aforementioned securities or leases and neither it nor
anyone authorized to act on its behalf will take any action which would
subject the issuance or sale of the aforementioned securities or leases to
the registration requirements of Section 5 of the Securities Act.
SECTION 6(A)(7). LOCATION OF CHIEF EXECUTIVE OFFICE. Its chief executive
office and the office where it keeps its records concerning its accounts or
contract rights is at the address set forth in Section 18.
SECTION 6(A)(8). OUTSTANDING INDEBTEDNESS. It has no outstanding
indebtedness other than (i) indebtedness subordinated on substantially the
same terms as those described in the definition of "Subordinated Debt", (ii)
obligations as joint venturer under the Joint Venture Agreement and the
general partnership law of the State of Minnesota and (iii) obligations under
the Restated Cross Indemnification Agreement, nor has it agreed to act as
guarantor or surety of any obligation of any Person, other than of the Lessee
pursuant to the Cash Deficiency Agreement.
SECTION 6(A)(9). LITIGATION. There is no action, suit, investigation or
proceeding pending or, to its knowledge, threatened against it before any
court, arbitrator or administrative or governmental body which questions the
validity or enforceability of this Financing Agreement or any other
Transaction Document or which, individually or in the aggregate, if decided
adversely to its interests, would either have a material adverse effect on
its business or financial condition or materially and adversely affect its
ability to perform its obligations under this Financing Agreement or any
other Transaction Document to which it is a party.
SECTION 6(A)(10). ERISA. Tt is not entering into this Financing
Agreement or any transaction contemplated hereby or by any other Transaction
Document to which it is a party, directly or indirectly in connection with
any arrangement or understanding by it in any way involving any "employee
benefit plan" with respect to which it, or to the best of its knowledge, the
Owner Participant, the Owner Trustee, FNB, the Indenture Trustee, The
Connecticut Bank and Trust Company, National Association, the State of
Wisconsin or any of the Loan Participants is a "party in interest", all
within the meaning of ERISA. The representation and warranty in the preceding
sentence is made by it in reliance upon, and is subject to the accuracy of,
the representations and warranties made herein by each of the above Persons
as to the source of funds used to acquire the Notes, in the case of each Loan
Participant, or the interest in the Trust Estate, in the case of the Owner
Participant.
SECTION 6(A)(11). AUTHORIZATIONS, ETC. It has not failed to obtain any
authorization, license, approval, permit, consent, right or interest, the
failure to obtain which would materially and adversely affect its ability to
carry on its business as presently conducted, and it reasonably anticipates
that it will not be prevented by any Governmental Authority, in any material
respect, from so carrying on its business as presently conducted or
contemplated by this Financing Agreement and any other Transaction Document.
SECTION 6(A)(12). INVESTMENT COMPANY ACT. It is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act.
SECTION 6(A)(13). TAX RETURNS. lt has filed all Federal, state, local
and foreign tax returns, if any, which were required to be filed, and has
paid all Taxes shown to be due and payable on such returns and has paid all
other Taxes in respect of the Facility which are payable by it to the extent
the same have become due and payable and before they have become delinquent,
except for any Taxes of which the amount, applicability or validity may be in
dispute or is currently being contested in good faith by appropriate
proceedings and with respect to which it has set aside on its books reserves
(segregated to the extent required by Generally Accepted Accounting
Principles) deemed by it to be adequate. In its opinion all of its tax
liabilities are adequately provided for on its books.
SECTION 6(A)(14). NO MATERIAL OMISSION. With respect to matters relating
to it and the Lessee, none of (x) the Transaction Documents, (y) the Offering
Memorandum, or (z) any certificate, written statement or other document
furnished, or oral statement made, to the Owner Participant or any Loan
Participant in connection with the transactions contemplated hereby contains
any untrue statement of a material fact or omits to state a material fact
with respect to it or the Lessee necessary to make the statements contained
therein not misleading. There is no fact known to it or its officers which
the Lessee, its Sponsor Affiliate or it has not disclosed in writing, or
orally, to the Owner Participant and in writing, or orally at the
presentations on November 18 and November 19, 1987, to each Loan Participant
which materially and adversely affects or will materially and adversely
affect its or the Lessee's assets, liabilities, business or financial
condition or materially impairs or will materially impair its or the Lessee's
ability to perform their respective obligations under this Financing
Agreement or any other Transaction Document to which it or the Lessee is a
party or which would materially and adversely affect the value of the
Undivided Interest or the Owner Trustee's, the Owner Participant's, the
Indenture Trustee's or the Loan Participant's respective interests under the
Transaction Documents.
SECTION 6(A)(15). PROPERTY; LIENS. Such Joint Venturer holds no assets
other than (i) its interest, as a joint venturer under the Joint Venture
Agreement, in the Lessee and (ii) the real property described in Schedule D.
There exists no Lien upon any such assets of such Joint Venturer.
SECTION 6(A)(16). BUSINESS. Such Joint Venturer has engaged in no
activities and has incurred no obligations or liabilities other than in
connection with the business of the Lessee relating to the financing,
construction and operation of the Facility and the Facility Site and the
acquisition of the real property described in Schedule D.
SECTION 6(A)(17). REASONABLENESS OF PROJECTIONS. All projections
contained in (x) the Offering Memorandum, and (y) any certificate, written
statement or other document furnished or to be furnished to the Owner
Participant or any Loan Participant in connection with the transactions
contemplated hereby constitute reasonable estimates, when made, of the
financial, operational and other conditions or results that reasonably may be
expected with respect to the Facility and the business contemplated to be
conducted by the Lessee, to the best knowledge of such Joint Venturer, after
due inquiry and based on all information currently available to it.
SECTION 6(B). AGREEMENTS OF EACH JOINT VENTURER.
SECTION 6(B)(1). NO DEFAULT; INFORMATION. Each Joint Venturer
agrees that it will deliver to the Owner Participant, the Owner Trustee, the
Indenture Trustee and each of the Loan Participants:
(i) Notice of Default. Promptly upon its becoming aware of the existence
thereof, written notice specifying any condition or event which constituted
or constitutes a Default or an Event of Default and the nature and status
thereof and specifying any action taken by the Joint Venturer with respect
thereto;
(ii) Annual Certificate. Within 90 days after the end of each fiscal
year, commencing with the 1988 fiscal year, a certificate of a Responsible
Officer stating that (x) he has made, or caused to be made under his
supervision, a review of this Financing Agreement, the Keepwell Agreement of
its Sponsor Affiliate, the Cash Deficiency Agreement to which it is a party
and the Facility Lease, and (y) such review has not disclosed the existence
during such fiscal year (and such officer does not have knowledge of the
existence as of the date of such certificate) of any condition or event
constituting a Default or an Event of Default, or, if such condition or event
existed or exists, specifying the nature thereof, the period of existence
thereof and the action which such Joint Venturer proposes to take with
respect thereto;
(iii) Requested Information. With reasonable promptness, such other data
and information as to its business and properties as from time to time may be
reasonably requested by the Owner Participant or any Loan Participant; and
(iv) Inspection. Each Joint Venturer agrees that each of the Owner
Trustee, the Owner Participant, the Indenture Trustee and the Loan
Participants, or any of their authorized representatives, shall have the
right, but not the duty, to visit and inspect the properties of such Joint
Venturer, to examine its corporate books and financial records and make
copies thereof or extracts therefrom and to discuss its affairs, finances and
accounts with its principal officers and its independent public accountants,
all at such reasonable times and as often as such Persons may reasonably
request.
SECTION 6(B)(2). FURTHER ASSURANCES. At its own cost, expense and
liability, it will cause to be promptly and duly taken, executed,
acknowledged and delivered all such further acts, documents and assurances as
the Owner Trustee, the Indenture Trustee, the Owner Participant or any Loan
Participant may from time to time reasonably request in order to carry out
the intent and purposes of this Financing Agreement and the other Transaction
Documents, and the transactions contemplated hereby and thereby.
SECTION 6(B)(3). COVENANTS. Each Joint Venturer covenants and agrees
with the Owner Participant, the Owner Trustee, each Loan Participant and the
Indenture Trustee, as follows:
(i) Maintenance of Corporate Existence, etc. lt shall at all times
maintain its existence under the laws of the State of Minnesota and shall
cause the Lessee to maintain its existence as a joint venture organized under
the Minnesota general partnership law. It will do or cause to be done all
things necessary to preserve and keep in full force and effect its rights
(charter and statutory), licenses, privileges and franchises.
(ii) Merger, Sale, etc. It will not (v) consolidate with or merge with
or into any other corporation, (w) sell, pledge, convey, transfer or lease
all or substantially all of its assets to any Person, (x) sell, pledge,
convey or transfer any of its joint venture interest in the Lessee, (y)
permit the Lessee to admit any new joint venturer or (z) to become a limited
partnership.
(iii) Liens. It will not, directly or indirectly, create, incur, assume
or suffer to exist any Liens on or with respect to the Facility or the
Facility Site or any part thereof (other than Permitted Encumbrances) or the
real property described in Schedule D (other than Liens of the nature
described in the definition of the term "Permitted Encumbrances").
(iv) Change in Chief Executive Office. It will notify the Owner
Trustee, the Owner Participant, each Loan Participant and the Indenture
Trustee promptly after any change in its chief executive office, principal
place of business or place where it maintains its business records.
(v) Amendment of Joint Venture Agreement. Without the prior written
consent of the Owner Participant, the Owner Trustee, the Indenture Trustee
and the Holders of a Majority in Interest of Noteholders, it will not amend
Paragraphs 6, 9, 12 or 19 of the Joint Venture Agreement.
(vi) Condemnation Rights. It covenants that it will not request the City
to exercise any right of condemnation or eminent domain now or hereafter
available to the City in order to acquire the ownership interest of the Owner
Trustee in the Undivided Interest.
(vii) Indebtedness. It shall not, other than pursuant to its Cash
Deficiency Agreement, directly or indirectly, as obligor, guarantor, surety
or otherwise, create, incur or assume any indebtedness other than
indebtedness of the Lessee to any Sponsor or any Affiliate thereof
subordinated under substantially the same terms as described in the
definition of Subordinated Debt.
(viii) Nature of Business. It shall not engage in any business other
than that of a joint venturer of the Lessee in the ownership and/or operation
of (i) the Facility and any improvements thereon, (ii) any Expansion, (iii)
the Facility Site, or (iv) the land described in Schedule D, and it shall not
make any material change in the scope or nature of its business objectives,
purposes or operations or invest in, undertake, or participate in, activities
other than those described in this paragraph. lt hereby waives any right
retained under Section 16 of the Joint Venture Agreement to engage in any
activities independent of the Lessee, and it agrees that the land which it
owns or may acquire in the future in the general vicinity of the Facility
Site shall, so long as it shall be owned by it or any Affiliate, remain
undeveloped as a buffer zone between the Facility Site and adjacent property
owned by Persons other than the Lessee or any Affiliate of the Lessee.
SECTION 7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF EACH SPONSOR.
SECTION 7(A). REPRESENTATIONS AND WARRANTIES. Each Sponsor represents
and warrants, severally and not jointly with the Other Sponsor, that:
SECTION 7(A)(1). DUE ORGANIZATION. It is duly organized and validly
existing in good standing under the laws of the State of Minnesota and has
the corporate power and authority to carry on its business as presently
conducted, to own or hold under lease its properties and to enter into and
perform its obligations under this Financing Agreement and each other
Transaction Document to which it is a party. It has not failed to qualify to
do business in any jurisdiction where failure so to qualify would materially
and adversely affect its financial condition or affect its ability to perform
any of its obligations under this Financing Agreement or any Transaction
Document to which it is a party.
SECTION 7(A)(2). DUE AUTHORIZATION. The execution, delivery and
performance by it of this Financing Agreement and each other Transaction
Document to which it is a party have been duly authorized by all necessary
corporate action on its part and do not, and will not, require the consent or
approval of its stockholders or any trustee or holder of any indebtedness or
other obligation thereof.
SECTION 7(A)(3). EXECUTION. This Financing Agreement and each other
Transaction Document to which it is a party have been duly executed and
delivered by it and this Financing Agreement and each such other Transaction
Document constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms.
SECTION 7(A)(4). NO VIOLATION, ETC. Neither the Sponsor nor any of its
Affiliates is in violation of any provision of its Articles of Incorporation
or By-Laws, or any Applicable Law, or any indenture, mortgage, lease or any
other agreement or instrument to which it is a party or by which it or its
property is bound, which violation would materially and adversely affect its
business or financial condition. Neither the execution, delivery or
performance by it of this Financing Agreement or any other Transaction
Document to which it is a party, nor the consummation by it of the
transactions contemplated hereby or thereby, nor compliance by it with the
provisions hereof or thereof, conflicts or will conflict with, or results or
will result in a breach or contravention of any of the provisions of, its
Articles of Incorporation or By-Laws, or any Applicable Law, or any
indenture, mortgage, lease or any other agreement or instrument to which it
is a party or by which it or its property is bound, or constitutes or will
constitute a default under any provision thereof, which breach, contravention
or default would materially and adversely affect its business or financial
condition.
SECTION 7(A)(5). GOVERNMENTAL ACTIONS. No Governmental Action is
required in connection with the execution, delivery or performance by it of,
or the consummation by it of the transactions contemplated by, this Financing
Agreement or the Keepwell Agreement, except (i) such Governmental Actions
listed in Schedule C as have been duly obtained, given or accomplished, and
(ii) such other Governmental Actions as may be required under any law,
regulation or order not in effect on the date hereof.
SECTION 7(A)(6). SECURITIES ACT. Neither it nor anyone acting on its
behalf has, directly or indirectly in violation of Section 5 of the
Securities Act, offered or sold any interest in the Notes, the notes issued
with respect to any other undivided interest in the Facility, the Undivided
Interest or any other undivided interest in the Facility, or the Facility
Lease or any other lease of an undivided interest in the Facility, or any
similar security or lease, or in any security or lease the offering of which,
for purposes of the Securities Act, would be deemed to be part of the same
offering as the offering of the aforementioned securities or leases, or
solicited any offer to acquire any of the aforementioned securities or leases
and neither it nor anyone authorized to act on its behalf will take any
action which would subject the issuance or sale of the aforementioned
securities or leases to the registration requirements of Section 5 of the
Securities Act.
SECTION 7(A)(7). LOCATION OF CHIEF EXECUTIVE OFFICE. Its chief executive
office and the office where it keeps its records concerning its accounts or
contract rights is at the address set forth in Section 18.
SECTION 7(A)(8). FINANCIAL STATEMENTS. Its consolidated balance sheets
(A) as at December 31, 1985 and December 31, 1986, respectively, and the
related statements, for each of the 12-month periods ended December 31, 1985
and December 31, 1986, respectively, together with the notes accompanying
such consolidated financial statements, all certified by Deloitte, Haskins &
Sells, in the case of Pentair, and Price Waterhouse & Co., in the case of
Minnesota Paper, its certified public accountant, and (B) as at September 30,
1987 and 1986, respectively, and the related statements, for the nine-month
periods ended September 30, 1987 and 1986, respectively, included in the Form
10 Q for such period filed with the SEC and heretofore furnished to the Owner
Participant and each Loan Participant, fairly present its financial position
at each such date and the results of its operations and changes in financial
position for each of the periods then ended in conformity with GAAP, applied
on a consistent basis, subject in the case of the consolidated statements
described in clause (B) above, to the condensation of certain financial
information and the omission of certain footnote disclosures as permitted by
the rules and regulations of the SEC and to year-end audit adjustments. The
Sponsors know of no such adjustments which would, if made on the date hereof,
be material. Since December 31, 1986, no material adverse change has occurred
in its assets, liabilities, business or financial position and no event has
occurred since December 31, 1986 which would materially and adversely affect
its ability to perform its obligations under this Financing Agreement or any
other Transaction Document to which it is a party.
SECTION 7(A)(9). LITIGATION. There is no action, suit, investigation or
proceeding pending or, to its knowledge threatened, against it before any
court, arbitrator or administrative or governmental body which questions the
validity or enforceability of this Financing Agreement or any other
Transaction Document or which, individually or in the aggregate, if decided
adversely to its interests, would either have a material adverse effect on
its business or financial condition or materially and adversely affect its
ability to perform its obligations under this Financing Agreement or any
other Transaction Document to which it is a party.
SECTION 7(A)(10). TAX RETURNS. It has filed, or caused its Affiliates to
file, all Federal, state, local and foreign tax returns, if any, which were
required to be filed, and has paid, or has caused each such Affiliate to pay,
all Taxes shown to be due and payable on such returns and all other Taxes in
respect of the Facility which are payable by it or its Affiliates to the
extent the same have become due and payable and before they have become
delinquent, except for any Taxes of which the amount, applicability or
validity may be in dispute or is currently being contested in good faith by
appropriate proceedings and with respect to which it has, or its Affiliates
have, set aside on its or their books reserves (segregated to the extent
required by Generally Accepted Accounting Principles) deemed by it to be
adequate. It does not know of any extraordinary proposed tax assessment
against it or any of its Affiliates, other than as described in Section
8(a)(13), which are not adequately provided for on its or their books.
SECTION 7(A)(11). ERISA. It is not entering into this Financing
Agreement or any transaction contemplated hereby or by any other Transaction
Document directly or indirectly in connection with any arrangement or
understanding by it in any way involving any "employee benefit plan" with
respect to which it, or to the best of its knowledge, the Owner Participant,
the Owner Trustee, FNB, the State of Wisconsin, the Indenture Trustee, The
Connecticut Bank and Trust Company, National Association or any of the Loan
Participants is a "party in interest", all within the meaning of ERISA. The
representation and warranty in the preceding sentence is made by it in
reliance upon, and is subject to the accuracy of, the representations and
warranties made by each of the parties hereto, as to the source of funds used
to acquire the Notes, in the case of each Loan Participant, or the interest
in the Trust Estate, in the case of the Owner Participant.
SECTION 7(A)(12). NO MATERIAL OMISSION. With respect to matters relating
to it and its Affiliates, none of (x) the Transaction Documents, (y) the
Offering Memorandum, or (z) any certificate, written statement or other
document furnished, or oral statement made, to the Owner Participant or any
Loan Participant in connection with the transactions contemplated hereby,
contains any untrue statement of a material fact or omits to state a material
fact with respect to it or any Affiliate necessary to make the statements
contained therein not misleading. There is no fact known to it or its
officers which the Lessee, its Joint Venturer Affiliate or it has not
disclosed in writing, or orally, to the Owner Participant and in writing, or
orally at the presentations on November 18 and November 19, 1987, to each
Loan Participant which materially and adversely affects or will materially
and adversely affect its or any Affiliate's assets, liabilities, business or
financial condition or materially impairs or will materially impair its or
any Affiliate's ability to perform its obligations under this Financing
Agreement or any other Transaction Document to which it or any Affiliate is a
party or which would materially and adversely affect the value of the
Undivided Interest or the Owner Trustee's the Owner Participant's, the
Indenture Trustee's or the Loan Participants' respective interests under the
Transaction Documents.
SECTION 7(A)(13). AUTHORIZATIONS, ETC. It has not failed to obtain any
authorization, license, approval, permit, consent, right or interest, the
failure to obtain which would materially and adversely affect its ability to
carry on its business as presently conducted, and it reasonably anticipates
to its best knowledge based on all information known to it after due inquiry
that neither it, its Joint Venturer Affiliate nor the Lessee will be
prevented by any Governmental Authority, in any material respect, from so
carrying on its or their respective businesses as presently conducted or
contemplated by this Financing Agreement and any other Transaction Document.
SECTION 7(A)(14). INVESTMENT COMPANY ACT. It is not an "investment
company" or a company "controlled;" by an "investment company", within the
meaning of the Investment Company Act.
SECTION 7(A)(15). OUTSTANDING INDEBTEDNESS. There exists no default
under the provisions of any instruments evidencing indebtedness of the
Sponsor or of any agreement relating thereto.
SECTION 7(A)(16). OWNERSHIP OF THE JOINT VENTURER. It is the owner of
all of the capital stock of the Joint Venturer which is its Affiliate and
such capital stock has not been pledged and is free and clear of all Liens.
SECTION 7(A)(17). REASONABLENESS OF PROJECTIONS. All projections
contained in (x) the Offering Memorandum, and (y) any certificate, written
statement or other document furnished or to be furnished for the Owner
Participant or any Loan Participant in connection with the transactions
contemplated hereby constitute reasonable estimates, when made, of the
financial, operational and other conditions or results that reasonably may be
expected with respect to the Facility and the business contemplated to be
conducted by the Lessee, to the best knowledge of such Sponsor, after due
inquiry and based on all information currently available to it.
SECTION 7(B). AGREEMENTS OF SPONSORS.
SECTION 7(B)(1). DELIVERY OF DOCUMENTS. Each Sponsor agrees that it will
deliver to the Owner Participant, the Owner Trustee, the Indenture Trustee
and each of the Loan Participants:
(i) Financial Statements: No Default Certificate.
(A) As soon as practicable and in any event within 45 days
after the end of each quarterly period (other than the last
quarterly period) in each of its fiscal years, commencing March 31,
1988, its consolidated balance sheet as at the end of such quarter
and the related consolidated statements of income and changes in
financial position of the Sponsor for such period and (in case of
the second and third quarterly periods) for the period from the
beginning of the current fiscal year to the end of such quarterly
period, setting forth in each case in comparative form the
consolidated figures for the corresponding periods of the previous
fiscal year, all in reasonable detail and certified by a
Responsible Officer of the Sponsor as presenting fairly, in
accordance with GAAP applied (except as specifically set forth
therein) on a basis consistent with such prior fiscal periods, the
information contained therein, subject to changes resulting from
normal year-end audit adjustments;
(B) As soon as practicable and in any event within 90 days
after the end of each fiscal year, commencing with the 1987 fiscal
year, its Consolidated Balance Sheet as at the end of such fiscal
year and the related consolidated statements of income,
stockholders' equity and changes in financial position of the
Sponsor for such fiscal year, setting forth in each case in
comparative form the consolidated figures for the previous fiscal
year, all in reasonable detail (x) accompanied by a report thereon
of its independent public accountants, which report shall state
that such consolidated financial statements present fairly the
financial position of the Sponsor as at the dates indicated and the
results of their operations and changes in their financial position
for the periods indicated in conformity with GAAP applied on a
basis consistent with prior years (except as otherwise specified in
such report) and that the audit by such accountants in connection
with such consolidated financial statements has been made in
accordance with generally accepted auditing standards on a basis
consistent with such prior fiscal periods, and (y) certified by a
Responsible Officer of the Sponsor as presenting fairly, in
accordance with GAAP applied (except as specifically set forth
therein) on a basis consistent with such prior fiscal periods, the
information contained therein;
(C) together with each delivery to the Owner Participant and
each Loan Participant of financial statements pursuant to
subdivisions (A) and (B) above, a certificate of a Responsible
Officer stating that (x) he has made, or caused to be made under
his supervision, a review of this Financing Agreement, its Keepwell
Agreement, the Cash Deficiency Agreement of its Joint Venturer
Affiliate and the Facility Lease and (y) such review has not
disclosed the existence during such fiscal year (and such officer
does not have knowledge of the existence as of the date of such
certificate) of any condition or event constituting a Default or
Event of Default by it, its Joint Venturer Affiliate or the Lessee
under the Financing Agreement, its Keepwell Agreement or the Cash
Deficiency Agreement of its Joint Venturer Affiliate, or, if any
such condition or event existed or exists, specifying the nature
thereof, the period of existence thereof and the action which it
proposes to take with respect thereto;
(ii) Other Reports. Promptly upon their becoming available or, if such
Sponsor should cease to be a public company whose securities are registered
under the Exchange Act, at the time periodic and other reports would have
been required to be filed under the Exchange Act, copies of each registration
statement, offering statement, memorandum and prospectus (other than the
exhibits thereto and any registration statements or prospectuses filed on
Form S-8 or its equivalent) prepared by it in connection with the public
offering of its or any of its Affiliates' securities, each financial
statement, proxy statement, notice and report to its public shareholders,
each periodic report (including, without limitation, Form 8-K Reports) filed
with the SEC, and each report submitted to it or any Affiliate by independent
accountants in connection with any annual, interim or special audit made by
them of its consolidated financial statements, not including, however, any
letter not made available publicly from such Sponsor's or such Sponsor
Affiliates' independent public accountants to their management or such
Sponsor's Board of Directors commenting upon such Sponsor's internal
accounting controls;
(iii) Notice of Default. Promptly upon a Responsible Officer's becoming
aware of the existence thereof, written notice specifying (x) any condition
which constituted or constitutes a default under its Keepwell Agreement or
the Cash Deficiency Agreement to which its Joint Venturer Affiliate is party
or a Default or an Event of Default under the Facility Lease or any Other
Facility Lease, and (y) any action taken by such Sponsor with respect to any
of the foregoing;
(iv) Requested Information. With reasonable promptness, such other data
and information as to its business and properties as from time to time may be
reasonably requested by the Owner Participant or any of the Loan
Participants; and
(v) Inspection. Each Sponsor agrees that each of the Owner Trustee,
the Owner Participant, the Indenture Trustee and the Loan Participants, or
any of their authorized representatives, shall have the right, but not the
duty, to visit and inspect the properties of such Sponsor and to discuss its
affairs, finances and accounts with its principal officers and its
independent public accountants, and, so long as a Default or an Event of
Default shall have occurred and be continuing, to examine its corporate books
and financial records and make copies thereof or extracts therefrom, all at
such reasonable times and as often as such Persons may reasonably request.
SECTION 7(B)(2). FURTHER ASSURANCES. At its own cost, expense and
liability, it will cause to be promptly and duly taken, executed,
acknowledged and delivered all such further acts, documents and assurances as
the Owner Trustee, the Indenture Trustee, the Owner Participant or any Loan
Participant may from time to time reasonably request in order to carry out
the intent and purposes of this Financing Agreement and the other Transaction
Documents, and the transactions contemplated hereby and thereby.
SECTION 7(B)(3). COVENANTS. Each Sponsor covenants and agrees with the
Owner Participant, the Owner Trustee, each Loan Participant and the Indenture
Trustee, as follows:
(i) Maintenance of Corporate Existence, etc. It shall at all times
maintain its existence, and shall cause its Joint Venturer Affiliate to
maintain its existence, under the laws of any state of the United States.
Each Sponsor will do or cause to be done all things necessary to preserve and
keep in full force and effect its rights (charter and statutory), licenses,
privileges and franchises; provided, however, that it may discontinue any
license, privilege, right or franchise if its Board of Directors shall
determine that such discontinuance is necessary or desirable in the conduct
of its business and does not materially and adversely affect or diminish any
right of the Owner Participant, the Owner Trustee, the Indenture Trustee or
any Loan Participant.
(ii) Reports of Liens. It shall promptly, and in no event later than 30
days after a Responsible Officer shall have obtained knowledge of the
attachment of any Lien (a) on the stock of its Joint Venturer or (b) that the
Lessee shall be obligated to discharge or eliminate pursuant hereto or to the
Facility Lease, notify the Owner Trustee, the Indenture Trustee, the Owner
Participant and the Loan Participants of the attachment of any such Lien and
the full particulars thereof, unless the same theretofore shall have been
removed or discharged by the Lessee.
(iii) Change in Chief Executive Office. It shall notify the Owner
Trustee, the Owner Participant, each Loan Participant and the Indenture
Trustee promptly after any change in its chief executive office, principal
place of business or place where it maintains its business records.
(iv) Condemnation Rights. It covenants that it will not request the City
to exercise any right of condemnation or eminent domain now or hereafter
available to it or the City in order to acquire the ownership interest of the
Owner Trustee in the Undivided Interest.
(v) Acquisition of Facility Site. Each Sponsor hereby agrees,
severally and not jointly, to pay, through its Joint Venturer or another
Affiliate, one-half of any and all Facility Site acquisition costs and other
costs and expenses to obtain good and marketable title to the real estate
comprising the Facility Site subsequent to the Closing Date, to the extent
that such costs exceed $1,000,000. Such costs will be paid, in addition to,
and not in substitution for, the obligations of (i) such Joint Venturer under
its Cash Deficiency Agreement or (ii) the Lessee under Section 12(b) hereof.
Such Sponsor may elect to advance equity or loan funds as shall be necessary
to fulfill its obligation to pay such acquisition costs. Each Sponsor hereby
agrees, severally and not jointly, that, from and after the Completion Date,
if good and marketable title to the Facility Site shall not have been
conveyed to Lessee on or before the Completion Date, it will indemnify, or
cause an Affiliate to indemnify, protect and hold each Indemnitee harmless
from and against one-half of any and all Claims imposed on, incurred by or
asserted against an Indemnitee or for loss to such Indemnitee resulting from
loss of use of the Facility Site arising out of the failure of the Lessee to
have obtained good and marketable title to the Facility Site to the extent
that such indemnity has not been paid, performed or discharged through such
Sponsor's respective Joint Venturer or an Affiliate.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE LESSEE.
SECTION 8(A). REPRESENTATIONS AND WARRANTIES. The Lessee represents and
warrants that:
SECTION 8(A)(1). DUE ORGANIZATION. The Lessee is a joint venture duly
organized and validly existing in good standing under the Minnesota general
partnership law and has the power and authority to carry on its business as
presently conducted, which business is its sole business, to own or hold
under lease its properties and to enter into and perform its obligations
under this Financing Agreement and each other Transaction Document to which
it is a party. The Lessee is not required to qualify to do business in any
jurisdiction other than the State of Minnesota. The Lessee has no
subsidiaries and conducts no business other than business relating to the
operation of the Facility or the Facility Site.
SECTION 8(A)(2). DUE AUTHORIZATION. The execution, delivery and
performance by the Lessee of this Financing Agreement and each other
Transaction Document to which it is a party have been duly authorized by all
necessary action on the part of the Lessee and do not and will not require
the further consent or approval of its Joint Venturer Affiliate or any
trustee or holder of any indebtedness or other obligation of the Lessee.
SECTION 8(A)(3). EXECUTION; ENFORCEABILITY. This Financing Agreement and
each other Transaction Document to which the Lessee is a party have been duly
executed and delivered by the Lessee and this Financing Agreement and each
such Transaction Document constitutes the legal, valid and binding obligation
of the Lessee, enforceable against the Lessee in accordance with its terms.
SECTION 8(A)(4). NO VIOLATION, ETC. The Lessee is not in violation of
any provision of the Joint Venture Agreement, or any Applicable Law, or any
indenture, mortgage, lease or any other agreement or instrument to which it
is a party or by which it or its property is bound. Neither the execution,
delivery or performance by the Lessee of this Financing Agreement or any
other Transaction Document to which it is a party, nor the consummation by
the Lessee of the transactions contemplated hereby or thereby, nor compliance
by the Lessee with the provisions hereof or thereof, conflicts or will
conflict with, or results or will result in a breach or contravention of any
of the provisions of, the Joint Venture Agreement or its By-Laws, or any
Applicable Law, or any indenture, mortgage, lease or any other agreement or
instrument to which the Lessee is a party or by which it or its property is
bound, or constitutes or will constitute a default under any provision
thereof, or results or will result in the creation or imposition of any Lien
(other than Permitted Encumbrances) upon any property of the Lessee, which
breach, contravention or default would materially and adversely affect its
business or financial condition. Notwithstanding anything to the contrary
contained in any of the Transaction Documents, it is understood and agreed by
all parties hereto that the consummation of the transactions contemplated by
the Funding Agreement shall not be construed to be a violation by the Lessee
or any Affiliate of the Lessee of any provisions of the Credit Agreement or
of any of the Transaction Documents.
SECTION 8(A)(5). GOVERNMENTAL ACTIONS. No Governmental Action is
required in connection with the execution, delivery or performance by the
Lessee of, or the consummation by the Lessee of the transactions contemplated
by, this Financing Agreement or any other Transaction Document to which it is
a party, except (i) such Governmental Actions as have been duly obtained,
given or accomplished, and identified in Schedule C, (ii) such Governmental
Actions as may be required under existing law or regulation to be obtained,
given or accomplished from time to time after the date hereof in connection
with the maintenance or operation of the Facility and which are routine in
nature and which the Lessee has no reason to believe will not be timely
obtained and (iii) such other Governmental Actions as may be required under
law or regulation not in effect on the date hereof.
SECTION 8(A)(6). SECURITIES ACT. Neither the Lessee nor anyone acting on
its behalf has, directly or indirectly, in violation of Section 5 of the
Securities Act, offered or sold any interest in the Notes, the "Notes" issued
with respect to any other undivided interest in the Facility, the Undivided
Interest or any other "Undivided Interest" in the Facility, or the Facility
Lease or any Other Facility Lease, or any similar security or lease, or in
any security or lease the offering of which, for purposes of the Securities
Act, would be deemed to be part of the same offering as the offering of the
aforementioned securities or leases, or solicited any offer to acquire any of
the aforementioned securities or leases and neither the Lessee nor anyone
authorized to act on its behalf will take any action which would subject the
issuance or sale of the aforementioned securities or leases to the
registration requirements of Section 5 of the Securities Act.
SECTION 8(A)(7). TITLE, EASEMENT AND SECURITY INTEREST. The Lessee has
(A) duly, validly and effectively conveyed and transferred to the Owner
Trustee good and marketable title to the Undivided Interest free and clear of
all Liens, except Permitted Encumbrances, and (B), good and marketable title
to, or an enforceable right to acquire, the Facility Site and has granted or
assigned to the Owner Trustee good and valid easements in and to, and a
license to use, the Facility Site in accordance with the Easement Agreement,
free and clear of all Liens, except Permitted Encumbrances, and such other
Liens as the Owner Participant and each Loan Participant shall have consented
to in writing on or prior to the date hereof. Such Permitted Encumbrances do
not in the aggregate materially affect or interfere with the occupancy, use
or operation of the Facility for its intended purposes or the economic value,
utility or condition of the Facility, the Facility Site, or the Owner
Trustee's peaceful and quiet use and possession of the Undivided Interest or
the exercise by the Owner Trustee or the Indenture Trustee, as assignee under
the Indenture, of any of their rights under the Facility Lease or any of the
other Transaction Documents.
SECTION 8(A)(8). PERFECTION OF SECURITY INTERESTS. All filings and
recordings necessary or advisable to perfect the Owner Trustee's title to the
Undivided Interest and the easement with respect to the Facility Site
pursuant to the Easement Agreement, and to perfect for the benefit of the
Indenture Trustee and the Holders of the Notes the first mortgage lien and
first priority security interest provided for in the Indenture, have been
duly made, filling fees required with respect thereto have been paid, and the
Original of the Facility Lease has been delivered to the Indenture Trustee.
No other filing or recording (except the filing of continuation statements
with respect to the financing statements filed on or prior to the date hereof
at the time and in the manner provided under Applicable Law) of any financing
statement or document or payment of any taxes or recording fees will be
necessary in order to establish, preserve, protect and perfect such title and
the security interest referred to in the Transaction Documents. No other
action will be required, including any action under any fraudulent conveyance
statute, to protect the Owner Trustee's easement in and to the Facility Site
and the Owner Trustee's title to the Undivided Interest against the claims of
all Persons whatsoever.
SECTION 8(A)(9). LOCATION OF CHIEF EXECUTIVE OFFICE. The chief executive
office of the Lessee and the office where it keeps its records concerning its
accounts and contract rights is at 100 N. Central Avenue, Duluth, Minnesota
55807. Attention: Vice-president Finance.
SECTION 8(A)(10). FINANCIAL STATEMENTS. The balance sheet of the Lessee
at December 31, 1986, together with the notes accompanying such balance
sheet, all certified by KMG Main Hurdman, the certified public accountant for
the Lessee, and heretofore furnished to the Owner Participant and each Loan
Participant, fairly present the financial position of the Lessee at December
31, 1986, in conformity with Generally Accepted Accounting Principles applied
on a consistent basis. Since December 31, 1986, no material adverse change
has occurred in the assets, liabilities, business or financial position of
the Lessee and no event has occurred since December 31, 1986, which would
materially and adversely affect the ability of the Lessee to perform its
obligations under this Financing Agreement or any other Transaction Document
to which it is a party.
SECTION 8(A)(11). OUTSTANDING INDEBTEDNESS. The Lessee has no
outstanding indebtedness, other than Permitted Indebtedness. There exists no
default under any provision of the instruments evidencing such indebtedness
or of any agreement relating thereto.
SECTION 8(A)(12). LITIGATION. Except as set forth in Schedule E, there
is no action, suit, investigation or proceeding pending or, to the knowledge
of the Lessee, threatened against the Lessee, before any court, arbitrator or
administrative or governmental body which questions the validity or
enforceability of this Financing Agreement or any other Transaction Document
or which, individually or in the aggregate, if decided adversely to the
interests of the Lessee, would either have a material adverse effect on the
business or financial condition of the Lessee or materially and adversely
affect the ability of the Lessee to perform its obligations under this
Financing Agreement or any other Transaction Document to which it is a party.
SECTION 8(A)(13). TAX RETURNS. The Lessee has filed all Federal, state,
local and foreign income tax returns, if any, which were required to be
filed, and has provided information returns to the Joint Venturers. The
Lessee has paid all other Taxes in respect of the Facility which are payable
by the Lessee to the extent the same have become due and payable and before
they have become delinquent, except for any Taxes of which the amount,
applicability or validity may be in dispute or are currently being contested
in good faith by appropriate proceedings and with respect to which the Lessee
has reserves (segregated to the extent required by GAAP) reasonably deemed by
it to be adequate. The Lessee does not know of any extraordinary proposed tax
assessment against it, except that relating to the $1,425,000 General
Obligation Improvement Bonds, Series 1987, and in its opinion all Taxes of
the Lessee are adequately provided for on its books. The federal income tax
returns of the Lessee have not been audited by the IRS for any taxable year.
There are no Taxes payable in connection with the recordation of the Bill of
Sale, the Easement Agreement, the Facility Lease or the Indenture (or
memoranda thereof), or the filing of financing statements with respect
thereto, or the construction, sale or transfer of the Facility or any part
thereof, or the execution, delivery or consummation of this Financing
Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby, or upon or with respect to the Trust Estate
or the Lease Indenture Estate, except for Taxes paid on the date hereof or,
with respect to the State of Minnesota, other Taxes which the Lessee is
obligated to pay pursuant hereto, or if paid or payable by an Indemnitee, to
indemnify such Indemnitee for such payment pursuant to Section 12 hereof.
SECTION 8(A)(14). ERISA. The Lessee is not entering into this Financing
Agreement or any transaction contemplated hereby or by any other Transaction
Document to which it is a party, directly or indirectly in connection with
any arrangement or understanding by it in any way involving any "employee
benefit plan" with respect to which it, or to the best of its knowledge, the
Owner Participant, FNB, the Owner Trustee, the Indenture Trustee, The
Connecticut Bank and Trust Company, National Association or any of the Loan
Participants is a "party in interest", all within the meaning of ERISA. The
representation and warranty in the preceding sentence is made by the Lessee
in reliance upon, and is subject to the accuracy of, the representations and
warranties made by each of the parties hereto as to the source of funds used
to acquire the Notes, in the case of each Loan Participant, or the interest
in the Trust Estate, in the case of the Owner Participant. The Lessee
covenants that it will not sublease or otherwise dispose of the Undivided
Interest to any Person if the Lessee knows or should know that such transfer
or other disposition is a transaction prohibited by Part 4 of Subtitle B of
Title I of ERISA or section 4975 of the Code and is not exempted from such
prohibition by applicable regulations or administrative exemptions.
SECTION 8(A)(15). NO MATERIAL OMISSION. With respect to matters relating
to it, none of (w) the Transaction Documents, (x) the Offering Memorandum, or
(y) the balance sheet referred to in Section 8(a)(10) or any certificate,
written statement or other document furnished or oral statement made to the
Owner Participant or any Loan Participant in connection with the transactions
contemplated hereby, contains any untrue statement of a material fact or
omits to state a material fact with respect to it necessary to make the
statements contained therein not misleading. There is no fact known to it or
its officers which the Lessee has not disclosed in writing, or orally, to the
Owner Participant and in writing, or orally at the presentations on November
18 and November 19, 1987, to each Loan Participant which materially and
adversely affects or will materially and adversely affect the assets,
liabilities, business or financial condition of the Lessee or materially
impairs or will materially impair the ability of the Lessee to perform its
obligations under this Financing Agreement or any other Transaction Document
to which the Lessee is a party or which would materially and adversely affect
the value of the Undivided Interest or the Owner Trustee's, the Owner
Participant's, the Indenture Trustee's or the Loan Participants' respective
interests under the Transaction Documents. Attached hereto as Schedule B is a
list of documents which summarize the Pre-Existing Environmental Condition,
the actions taken to remedy it, and the allocation of responsibilities for
continuing environmental quality control at the Facility or the Facility
Site. To the best of the Lessee's knowledge and belief, there are no other
material facts, beyond those indicated in such documents, that bear upon
environmental risks or environmental liability exposures of any party with
respect to the Facility or the Facility Site.
SECTION 8(A)(16). AUTHORIZATIONS, ETC. Except for the permit
applications described in Schedule F and pending before the Minnesota
Pollution Control Agency (MPCA), on which no official action has yet been
taken, the Lessee has not failed to obtain any authorization, license,
approval, permit, consent, right or interest, the failure to obtain which
would materially and adversely affect the ability of the Lessee to carry on
its business as presently conducted, and the Lessee has no reason to believe
that it will be prevented by any Governmental Authority, in any material
respect, from so carrying on its business as presently conducted or
contemplated by this Financing Agreement and any other Transaction Document.
The Lessee has no reason to believe that it may fail to obtain the NPDES
permit or the berm operator permit for which applications are pending before
the MPCA.
SECTION 8(A)(17). THE FACILITY, ETC.
(i) Each of the Facility and the building enclosure and other structures
and improvements located on the Facility Site is substantially complete,
properly installed on the Facility Site and constructed in a good and
workmanlike manner in accordance with the construction and engineering
practices of the industry and the Plans and Specifications and the Facility
has been "placed in service" for purposes of the Code. All permits and
licenses necessary for the commercial operation of the Facility (including
the Undivided Interest) have been received, other than those which cannot be
obtained, or are not normally applied for, prior to the time they are
required, and are reasonably expected by the Lessee to be obtained in due
course. There is no event or condition presently existing of which the Lessee
is aware, to its best knowledge based on all information known to it after
due inquiry, and which would, in the Lessee's reasonable judgment, in the
future adversely affect such operation, or prevent the Completion Date from
occurring, or would cause an Event of Loss to occur. The description of the
Facility set forth in Annex A of the Certificate of Acceptance is correct and
sufficiently complete to identify such property.
(ii) The Undivided Interest is an undivided interest in the Facility.
The Facility is wholly within the boundaries of the Facility Site. The land
which is part of the Facility Site is as described in the Title Policy and
the Survey.
(iii) The rights of the Owner Participant and the Owner Trustee against
the Lessee and in and to the Undivided Interest are not subject or
subordinate to the rights of any Person, except the Indenture Trustee and the
Holders of the Notes under the Indenture, the rights of the Owner Trustee
under the Facility Lease and the respective rights of the parties to the
Support Agreement.
SECTION 8(A)(18). FEDERAL RESERVE REGULATIONS. None of the transactions
contemplated by this Financing Agreement (including, without limitation, the
Owner Trustee's use of the proceeds of the Loans and the Investment,
respectively) or the other Transaction Documents violate or will result in a
violation of Section 7 of the Exchange Act, or any regulations issued
pursuant thereto, including, without limitation, Regulations G, T, U, and X
of the Board of Governors of the Federal Reserve System.
SECTION 8(A)(19). PATENTS, ETC. No rights under patents, copyrights or
trademarks, or rights in confidential proprietary information or "know how",
are required to be granted to Owner Trustee, or any successor to Owner
Trustee, or the Indenture Trustee or any other Person owning or operating the
Facility in order for such Person to be able to operate the Facility for its
intended purposes.
SECTION 8(A)(20). CONTRACTORS. No Assigned Contract requires the consent
of the Contractor thereunder to the assignment thereof pursuant to the
Assignment of Contracts.
SECTION 8(A)(21). INVESTMENT COMPANY ACT. The Lessee is not an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act.
SECTION 8(A)(22). INFORMATION PROVIDED APPRAISER. The Lessee has
provided to the Appraiser all information requested by the Appraiser for
purposes of the Appraisal. The information supplied to the Appraiser, taken
as a whole, does not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make such information not
misleading insofar as the same relates to the Appraisal.
SECTION 8(A)(23). REASONABLENESS OF PROJECTIONS. All projections
contained in (x) the Offering Memorandum, (y) the pro forma balance sheet of
Lessee as of December 31, 1987 and (z) any certificate, written statement or
other document furnished or to be furnished to the Owner Participant or any
Loan Participant in connection with the transactions contemplated hereby
constitute reasonable estimates, when made, of the Financial, operational and
other conditions or results that reasonably may be expected with respect to
the Facility and the business contemplated to be conducted by the Lessee, to
the best knowledge of such Lessee, after due inquiry and based on all
information currently available to it.
SECTION 8(A)(24). COMPLIANCE WITH ERISA. The Lessee has not engaged in
any transaction in connection with which the Lessee could be subjected to
either a civil penalty assessed pursuant to section 502(i) of ERISA or a tax
imposed by section 4975 of the Code. On the date hereof, the Lessee does not
maintain or contribute to, and at no time in the past has Lessee maintained
or contributed to, any plan subject to section 302 or Title IV of ERISA or
section 412 of the Code or any "employee benefit plan" as defined in Section
3 of ERISA. The Lessee is not and has never been obligated to contribute to
any "multi-employer plan", as defined in Section 4001(a)(3) of ERISA.
SECTION 8(B). AGREEMENTS OF LESSEE.
SECTION 8(B)(1). DELIVERY OF DOCUMENTS. The Lessee agrees that it will
deliver to the Owner Participant, the Owner Trustee, the Indenture Trustee
and each of the Loan Participants:
(i) Financial Statements; No Default Certificate; CDA Charge.
(A) As soon as practicable and in any event within 45 days
after the end of each quarterly period (other than the last
quarterly period) in each fiscal year of the Lessee, commencing
March 31, 1988, the balance sheet of the Lessee as at the end of
such quarter and the related statement of operations and statement
of changes in financial position for the period then ended, and (in
case of the second and third quarterly periods) for the period from
the beginning of the current fiscal year to the end of such
quarterly period, setting forth in each case in comparative form
the figures for the corresponding periods of the previous fiscal
year, all in reasonable detail and certified by a Responsible
Officer of the Lessee as presenting fairly, in accordance with GAAP
applied (except as specifically set forth therein) on a basis
consistent with such prior fiscal periods, the information
contained therein, subject to changes resulting from normal year-
end audit adjustments;
(B) As soon as practicable and in any event within 45 days of
the Completion Date, the balance sheet of the Lessee as at the end
of the month which includes the Completion Date and the related
statement of operations and changes in financial position for the
period from the preceding December 31 to such month-end, certified
by the chief financial officer of the Lessee subject to year-end
audit adjustment, together with a certificate of such officer to
the effect that all Lessee's Obligations have been accrued in
accordance with GAAP, and to the further effect that no Default or
Event of Default has occurred and is continuing;
(C) (1) Annually, at the time of delivery of the financial
statements and accountants' letter provided for in subparagraph (D)
below, the definitive CDA Worksheet with respect to such preceding
calendar fiscal year (excluding payments of Basic Rent due January
1 of such fiscal year and including payments of Basic Rent due
January 1 of the following year) [for Associated Undivided Interest
transaction only, the preceding words in parenthesis are deleted]
based upon the actual results of operations for such preceding
fiscal year (as so adjusted) and (2) not less than (x) 15 days
prior to each Basic Rent Payment Date or (y) 5 days prior to any
other payment of CDA Rent (unless such amount shall not exceed in
the cumulative $10,000 in any fiscal year), a fully-completed
interim CDA Worksheet, each calculation therein to be determined by
the Lessee in good faith on the basis of its then current estimates
and all CDA Worksheets to be certified by the chief financial
officer of the Lessee;
(D) As soon as practicable and in any event within 90 days
after the end of each fiscal year, commencing with the 1987 fiscal
year, (i) a balance sheet of the Lessee as at the end of such
fiscal year and (ii) the related statements of income and changes
in financial position of the Lessee for such fiscal year, setting
forth in each case in comparative form figures for the previous
fiscal year, all in reasonable detail and (x) accompanied by a
report thereon of its independent public accountants of nationally
recognized standing, which report shall state that such financial
statements present fairly the financial position of the Lessee as
at the dates indicated and the results of their operations and
changes in their financial position for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years
(except as otherwise specified in such report) and that the audit
by such accountants in connection with such financial statements
has been made in accordance with generally accepted auditing
standards and (y) certified by a Responsible Officer of the Lessee
as presenting fairly, in accordance with GAAP applied (except as
specifically set forth therein) on a basis consistent with such
prior fiscal periods, the information contained therein, and (iii)
(except for 1987) a letter of such accountants reflecting their
review of the Lessee's calculation of the definitive CDA Worksheet,
as at January 1 of the current fiscal year;
(E) together with each delivery to the Owner Participant and
each Loan Participant of financial statements pursuant to
subdivisions (A) and (D) above, a certificate of a Responsible
Officer of the Lessee stating that (x) he has made, or caused to be
made under his supervision, a review of this Financing Agreement
and the Facility Lease and (y) such review has not disclosed the
existence during such fiscal year (and such officer does not have
knowledge of the existence as of the date of such certificate) of
any condition or event constituting a Default or Event of Default,
or, if any such condition or event existed or exists, specifying
the nature thereof, the period of existence thereof and the action
which the Lessee proposes to take with respect thereto;
(F) together with each delivery of financial statements
pursuant to subdivision (D) of this Section 8(b)(1)(i), a written
statement by its independent public accountants giving a report
thereon (x) stating that their audit examination has included a
review of the terms of this Financing Agreement and the Facility
Lease as they relate to accounting matters (it being understood
that no special audit procedures, other than those required by
generally accepted auditing standards, shall be required) and (y)
stating whether, in the course of their audit examination, they
obtained knowledge (and whether, as of the date of such written
statement, they have knowledge) of the existence of any condition
or event which constitutes a Default or an Event of Default, and,
if so, specifying the nature and period of existence thereof; and
(G) As soon as practicable and in any event within 15 days
prior to the end of each fiscal year, an annual profit plan
(including a capital plan) for the succeeding fiscal year, in
reasonable detail and certified by the chief financial officer of
the Lessee.
(ii) Audit Reports, etc. Promptly upon receipt thereof, copies of all
material reports submitted to the Lessee by independent public accountants
retained by the Lessee in connection with any annual, interim or
extraordinary audit of the books of the Lessee made by such accountants (not
including, however, any letter, not made available publicly, from the
Lessee's independent public accountants to the Lessee's management or the
Venture Council commenting upon the Lessee's internal accounting controls);
(iii) Notice of Default, etc. Promptly upon a Responsible Officer's
becoming aware of the existence thereof, written notice of the Lessee
specifying (A) any condition which (i) constituted or constitutes a Default
or an Event of Default under the Facility Lease or a "Default" or an "Event
of Default" under any Other Facility Lease or (ii) has resulted or might
result in a material adverse change in the business or financial condition of
the Lessee, and (B) any litigation involving the Lessee as a party thereto,
and the nature and status of any thereof, which might result in a material
adverse change in the business or financial condition of the Lessee; and
(iv) Requested Information. With reasonable promptness, such other data
and information as to the business and properties of the Lessee as from time
to time may be reasonably requested by the Owner Participant or any Loan
Participant.
SECTION 8(B)(2). FURTHER ASSURANCES. The Lessee, at its own cost,
expense and liability, will cause to be promptly and duly taken, executed,
acknowledged and delivered all such further acts, documents and assurances as
the Owner Trustee, the Indenture Trustee, the Owner Participant or any Loan
Participant may from time to time reasonably request in order to carry out
the intent and purposes of this Financing Agreement and the other Transaction
Documents, and the transactions contemplated hereby and thereby. The Lessee,
at its own cost, expense and liability will cause the financing statements
(and continuation statements with respect thereto), the Bill of Sale, the
Easement Agreement, the Facility Lease, the Indenture and any other documents
requested by the Owner Participant, the Owner Trustee, any Loan Participant
or the Indenture Trustee, to be recorded or filed at such places and times in
such manner, and will take all such other actions or cause such actions to be
taken, as may be necessary or reasonably requested by the Owner Participant,
the Owner Trustee, the Indenture Trustee, any Loan Participant or the Holder
of any Note, in order to warrant, defend, establish, preserve, protect and
perfect (i) the good and marketable title of the Owner Trustee to the
Undivided Interest, (ii) the Owner Trustee's easement in the Facility Site
under and pursuant to the Easement Agreement, subject only to Permitted
Encumbrances, (iii) the Owner Trustee's rights under this Financing Agreement
and the other Transaction Documents, and (iv) so long as any Note is
Outstanding, the first and prior security interest of the Indenture Trustee
in the Lease Indenture Estate and the Indenture Trustee's rights under the
Granting Clause Documents, subject only to Permitted Encumbrances. During the
Lease Term the Lessee at its own expense will promptly furnish to the Owner
Trustee, the Indenture Trustee, the Owner Participant and each Loan
Participant annually in each year (but not later than April 1 of each such
year), commencing with the year 1989, an opinion, reasonably satisfactory to
the Owner Trustee, the Indenture Trustee, the Owner Participant and each Loan
Participant, of the Lessee's counsel (A) either (x) to the effect that such
filings and recordings (or refilings and rerecordings) have been duly made
and that all other action has been taken as is necessary to comply with the
requirements of this clause (2), or (y) that no such additional filings,
recordings, refilings, rerecordings or other actions are necessary to comply
with the requirements of this clause (2), and (B) specifying the particulars
of all action required by this clause (2) during the 21-month period from
April 1 of the year in which such opinion is rendered through the last day of
the next succeeding calendar year, including, in the case of each
continuation statement required to be filed during such period, the office in
which each such continuation statement is to be filed and the filing date and
filing number of the original financing statement or fixture filing to be
continued, and the dates within which such continuation statement may be
filed under Applicable Law.
SECTION 8(B)(3). COVENANTS. The Lessee covenants and agrees with the
Owner Participant, the Owner Trustee, each Loan Participant and the Indenture
Trustee, as follows:
(i) Maintenance of Existence, etc. The Lessee shall at all times
maintain its existence as a joint venture organized under the Minnesota
general partnership law. The Lessee will do or cause to be done all things
necessary to preserve and keep in full force and effect its rights (charter
and statutory), licenses, privileges and franchises relating to its business;
provided, however, that the Lessee may discontinue any right, license,
privilege or franchise if its Venture Council shall determine that such
discontinuance is necessary or desirable in the conduct of the Lessee's
business and does not adversely affect or diminish any right of the Owner
Participant, the Owner Trustee, the Indenture Trustee or the Loan
Participants.
(ii) Dissolution, Sale, etc. The Lessee shall not change its form of
organization, become a limited partnership, admit any new joint venturers (or
the equivalent), dissolve or wind-up its affairs, distribute all or
substantially all of its assets, or convey, pledge, transfer or lease any
significant portion of its assets to any Person, except for Capital
Improvements, title to which shall not vest in the Lessor pursuant to the
Facility Lease, or Expansion Assets.
(iii) Inspection. Each of the Owner Trustee, the Owner Participant,
the Indenture Trustee and the Loan Participants, or any of their respective
authorized representatives, shall have the right, but not the duty, to
inspect the Facility and the Facility Site at the expense of the Person
requesting such inspection. Upon the reasonable request of any such Person,
the Lessee shall, at any reasonable time, make the Facility and the Facility
Site available to such Person for inspection. Logs, reports, manuals and
Plans and Specifications specified in Section 8(b) of the Facility Lease
shall be kept on file by the Lessee and, with the exception of daily
operating logs, shall be made available only for inspection to such Person
upon reasonable request, and in no event may such Person reproduce or prepare
extracts or summaries thereof; provided, however, that such logs and reports
(but not such manuals or Plans and Specifications) may be destroyed in
accordance with the Lessee's normal document retention program applicable to
the Facility and all Components and other comparable facilities of the
Lessee; and provided, further, however, that the foregoing restrictions upon
such Person shall not apply if a Default or an Event of Default shall have
occurred and so long as such Default or Event of Default shall be continuing.
Such Person may discuss the Lessee's affairs, finances and accounts relating
to the transactions contemplated by any Transaction Document with the
Lessee's officers and its independent public accountants, and if a Default or
Event of Default shall have occurred and be continuing, the Lessee shall
furnish to such Persons written statements, accurate in all material
respects, regarding the condition and state of repair of the Facility, all
upon reasonable notice and as often as may be reasonably requested. The Owner
Trustee, the Owner Participant, the Indenture Trustee and each Loan
Participant agrees that all financial statements and other information
furnished under this Financing Agreement and any other Transaction Document
(i) will be treated by the recipient in a responsible manner, kept in a
secure place and its confidentiality strictly maintained, and (ii) will not
be disclosed, except to officers, directors, employees and professional
consultants who, for proper reasons consistent with the purposes for which
such material is furnished, need access to such material, to such other
parties to whom the recipient may have a duty or legal obligation of
disclosure and to any bona fide prospective purchaser of the Notes, the
Undivided Interest, the beneficial interest of the Owner Participant in the
Trust, or the Trust Estate, or any interest therein.
(iv) Accuracy of Books and Records. The Lessee shall maintain accurate
books and records of its operations, all in accordance with GAAP.
(v) Filing of Reports. To the extent permissible, the Lessee, at its
own expense, shall prepare and, upon the request of the Owner Trustee, the
Owner Participant, the Indenture Trustee or any Loan Participant, file in
timely fashion, or, where the Owner Trustee, the Owner Participant, the
Indenture Trustee or any Loan Participant shall be required to file, the
Lessee, at its own expense, shall prepare and deliver to the Owner Trustee,
the Owner Participant, the Indenture Trustee or such Loan Participant within
a reasonable time prior to the date for filing, any reports with respect to
the ownership, condition or operation of the Facility or the Facility Site
that shall be required to be filed with any Governmental Authority in
connection with the transactions contemplated by this Financing Agreement or
any other Transaction Document. Upon the preparation by the Lessee of such
reports that the Owner Trustee, the Owner Participant, the Indenture Trustee
or any such Loan Participant shall be required to file, and the delivery of
such reports to such Person, such Person shall promptly file such reports as
instructed by the Lessee, at the Lessee's expense. The Owner Trustee, the
Owner Participant, the Indenture Trustee or any such Loan Participant shall
cooperate with the Lessee in the preparation and filing of reports required
to be prepared or filed by the Lessee hereunder or under any Transaction
Document, and in connection therewith shall furnish such information as the
Lessee may reasonably request.
(vi) Reports of Liability. The Lessee shall give prompt written notice
to the Owner Participant, the Owner Trustee, each Loan Participant, the
Indenture Trustee and (until the Discharge of the Indenture) each Holder of a
Note, of each accident likely to result in material damages or claims for
material damages against the Lessee or any Indemnitee with respect to the
Facility or the Facility Site if the risk of such accident was self-insured
or if such damages are in excess of applicable insurance coverage and occur,
in whole or in part (whenever asserted), during the Basic Lease Term or any
Renewal Term, promptly upon the Lessee becoming aware of the same. Upon
request of any such Person, the Lessee shall furnish to the Owner
Participant, the Owner Trustee, each Loan Participant, the Indenture Trustee
and (until the Discharge of the Indenture) each Holder of a Note, copies of
any claim or report filed with the Lessee's insurance broker with respect
thereto.
(vii) Reports of Liens. The Lessee shall promptly, and in no event later
than 30 days after it shall have obtained knowledge of the attachment of any
Lien that the Lessee shall be obligated to discharge or eliminate pursuant
hereto or to any other Transaction Document, notify the Owner Participant,
the Owner Trustee, the Indenture Trustee and each Loan Participant of the
attachment of any such Lien and the full particulars thereof, unless the same
theretofore shall have been removed or discharged by the Lessee.
(viii) No Liens. The Lessee shall not incur, create or assume, or suffer
to exist, any Lien (except Permitted Encumbrances) upon or with respect to
the Facility, the Undivided Interest or the Lease Indenture Estate or, to the
extent it would materially interfere with the rights of the Lessor under the
Easement Agreement, the Facility Site; provided that in the event such Lien
shall not have been incurred, created or assumed by the Lessee and involves
an amount of less than $2 million, no violation of this covenant shall occur
until the expiration of 5 days after discovery thereof by a Responsible
Officer of the Lessee.
(ix) Change in Chief Executive Office. The Lessee shall notify the Owner
Trustee, the Owner Participant, each Loan Participant and the Indenture
Trustee promptly after any change in its chief executive office, principal
place of business or place where the Lessee maintains its business records.
(x) Condemnation Rights. The Lessee covenants that it will not request
the City to exercise any right of condemnation or eminent domain now or
hereafter available to the Lessee or the City in order to acquire the
ownership interest of the Owner Trustee in the Undivided Interest.
(xi) Distribution of Excess Cash. The Lessee covenants that it will not
accumulate cash in excess of its reasonably anticipated capital needs and, to
the extent of any excess, it will, so long as no Default or Event of Default
shall have occurred and be continuing, make cash distributions only to the
Joint Venturers in accordance with the Joint Venture Agreement, and it will
not, so long as any Default or Event of Default shall have occurred and be
continuing, make any Lessee Distributions or CDA Trigger Distributions paid
in cash.
(xii) Funding of Capital Improvements. The Lessee may make Capital
Improvements to the Facility from time to time in accordance with Section 8
of the Facility Lease. In each year the Lessee may make Scheduled Capital
Expenditures in an amount equal to the Scheduled Capital Expenditure
Allowance.
(xiii) Excess Capital Expenditures. The Lessee may make Excess Capital
Expenditures from amounts of Cash Available After CDA Rent remaining after
payment of all Aggregate Special Supplemental Rent then due and owing, or
from contribution of capital or the proceeds of Subordinated Debt; provided,
however, that at the time of the Lessee's commitment to make any such Excess
Capital Expenditure (i) the Combined Applicable CDA Amount shall be equal to
or in excess of the Lessor's Allocable Percentage of $100 million and (ii) no
amount of Special Supplemental Rent shall be unpaid.
(xiv) Outstanding Indebtedness. The Lessee shall not create, incur or
assume any indebtedness other than:
(A) Unsecured indebtedness outstanding on the date hereof
owed to Dorr-Oliver Corp., in the amount of approximately
$1,300,000, with respect to the acquisition of equipment; provided
that in no event may such indebtedness be refunded, renewed or
extended;
(B) Unsecured indebtedness outstanding on the date hereof owed
to Voith Brazil (under the so-called FlNEX Financing program), in
the amount of approximately $4,400,000, with respect to the
acquisition of equipment; provided that in no event may such
indebtedness be refunded, renewed or extended;
(C) A working capital line of credit, in a maximum amount
not to exceed $20,000,000 at any time outstanding, secured only by
accounts receivable, inventories and proceeds thereof;
(D) Subordinated Debt;
(E) Expansion Debt;
(F) Capital Improvement Debt; and
(G) Unsecured indebtedness at any time outstanding relating
to ordinary operating expenses, taxes not yet due and accounts
payable (including guaranties thereof) for equipment or other
property leased and to suppliers of goods and services, in each
case incurred in the ordinary course of business.
Indebtedness permitted under clauses (A) through (G) above is herein referred
to as "Permitted Indebtedness".
(xv) Nature of Business. The Lessee shall not engage in any business
other than that relating to the ownership and operation of the Facility, any
Capital Improvement, any Expansion and the Facility Site, and it shall not
make any material change in the scope or nature of its business objectives,
purposes or operations or invest in, undertake or participate in, activities
other than those related to such ownership and operation and the continuance
of its business.
(xvi) Development Agreement. The Lessee shall not amend or modify in any
material respect or terminate either the Development Agreement or the Haindl
Agreement.
(xvii) Facility Site Acquisition. The Lessee covenants that it will
pursue in good faith the acquisition of, and use its best efforts to acquire,
any land which is a part of the Facility Site to which it does not presently
have title, and promptly cure any defects in title thereto (other than
Permitted Encumbrances) and such land is, or upon completion of such
acquisition will become, without further act on the part of the Lessee or the
Owner Trustee, subject to the Easement.
(xviii) Compliance with Laws. The Lessee covenants that it will comply
with all applicable laws, rules, regulations and orders, including, without
limitation, any environmental laws, rules, regulations or orders; provided
that any failure to comply with such laws, rules, regulations and orders
which does not adversely affect either the ability of the Facility to operate
as contemplated in an economic manner or the ability of the Lessee to conduct
its business as generally contemplated by the Offering Memorandum will not
constitute a breach of this paragraph.
(xix) Payment of Obligations and Taxes. The Lessee shall file or cause
to be filed all federal, state and local tax returns and other reports as
Lessee is required to file and shall pay and discharge all taxes,
assessments, governmental charges and levies which the Lessee is required to
pay or discharge prior to the date on which the same becomes delinquent or
any penalties or interest attach thereto, except where the same may be
contested in good faith by appropriate proceedings and appropriate reserves
have been established with respect thereto.
(xx) Notice of Litigation, etc. The Lessee shall provide prompt notice
of any litigation, events of default or material adverse change in its
business or financial condition to the Owner Participant, each Loan
Participant, the Owner Trustee and the Indenture Trustee.
(xxi) Compliance with ERISA. The Lessee will not engage in any
transaction in connection with which the Lessee could be subject to either a
civil penalty assessed pursuant to section 502(i) of ERISA or a tax imposed
by section 4975 of the Code, terminate or withdraw from any plan "employee
pension benefit plan" as defined in Section 3 of ERISA (other than a "multi-
employer plan" as defined in Section 4001(a)(3) of ERISA) in a manner, or
take any other action with respect to any such plan (including, without
limitation, a substantial cessation of operations within the meaning of
section 4062 (f) of ERISA), which could result in any material liability of
the Lessee or to the Pension Benefit Guaranty Corporation, to a trust
established pursuant to section 4041 (c)(3)(b)(ii) or (iii) or 4042(i) of
ERISA, or to a trustee appointed under section 4042(b) or (c) of ERISA, incur
any liability to the Pension Benefit Guaranty Corporation on account of a
termination of a plan under section 4062 of ERISA, or permit to exist any
accumulated funding deficiency, whether or not waived, with respect to any
such plan (other than a multi-employer plan), if, in any such case, such
penalty or tax or such liability, or the failure to make such payment, or the
existence of such deficiency, as the case may be, could have a material
adverse effect on the Lessee.
(xxii) Lease Covenants. The Lessee will perform for the benefit of the
other parties hereto all of the agreements and covenants of Lessee set forth
in the Facility Lease, as though all such agreements and covenants were set
forth fully herein.
(xxiii) Transactions with Affiliates. The Lessee will not enter into any
transaction with any Affiliate on terms that are materially less favorable to
the Lessee than those which could be obtained in an arm's-length transaction
with an unrelated party.
(xxiv) Insurance Certificate. On the date hereof, the Lessee has
delivered to the Owner Trustee, the Owner Participant, each Loan Participant
and the Indenture Trustee an insurance certificate with respect to the
insurances required to be maintained pursuant to Section 10 of the Facility
Lease.
(xxv) Payment of Statutory Obligations. If any portion of Rent paid by
the Lessee shall be required, pursuant to Minn. Stat. section 559.17 or any
successor or other statute, to be applied to discharge any obligations
referred to in such statute, the Lessee shall promptly pay to the Lessor, as
Supplemental Rent, an amount equal to such portion.
(xxvi) Midterm Purchase and Essential Improvement Buy-Out. If, at any
time, the Lessee assumes pursuant to Section 2.16 of the Indenture the
indebtedness evidenced by the Notes in connection with its purchase of the
Undivided Interest pursuant to Section 8(h) or 13(b) of the Facility Lease,
the Lessee shall concurrently therewith assume the obligations under all of
the Other Notes then Outstanding. If, at any time, the Lessee prepays the
Notes in connection with its purchase of the Undivided Interest pursuant to
Section 8(h) or 13(b) of the Facility Lease, the Lessee shall concurrently
therewith prepay all of the Other Notes then Outstanding.
(xxvii) Burdensome Buy-Out. If, at any time, the Lessee purchases the
Undivided Interest pursuant to Section 13(c) of the Facility Lease, the
Lessee shall concurrently therewith assume the indebtedness evidenced by the
Notes then Outstanding, as provided in Section 2.16 of the Indenture;
provided, however, that if following such purchase the Lessee owns all the
undivided interests in respect of the Facility, it may, in lieu of an
assumption of all of the Notes and the Other Notes, prepay all of such Notes
and Other Notes.
(xxviii) Undertaking Regarding Essential Improvement. The Lessee shall,
prior to any assumption under Section 2.16 of the Indenture in respect of a
purchase of the Undivided Interest pursuant to Section 8(h) of the Facility
Lease, (x) provide proof satisfactory to a Majority in Interest of
Noteholders establishing that the Capital Improvement requested by the Lessee
and entitling the Lessee to purchase the Undivided Interest has, or will be,
constructed and (y) represent, or covenant, as the case may be, to such
effect.
(xxix) Prepayment of Notes Assumed by Lessee. If the Lessee shall have
assumed the Notes in accordance with the provisions of the Facility Lease and
of Section 2.16 of the Indenture, (x) it shall exercise its right to prepay
the Assumed Notes after such assumption only if all Other Notes shall be
prepaid simultaneously, and (y) if any Other Notes are prepaid, it shall
prepay simultaneously the Assumed Notes.
(xxx) Payment of Excepted Payments and Special Supplemental Rent. If
an Indenture Default or an Indenture Event of Default shall have occurred and
be continuing, or if any foreclosure of the Indenture has occurred and any
Notes remain Outstanding, the Lessee shall not pay any amount constituting
Special Supplemental Rent to the Owner Participant or any amounts
constituting Excepted Payments to any Person (other than the Indenture
Trustee, the Loan Participants and the Holders).
SECTION 9. PURCHASE, SALE, FINANCING AND LEASE.
SECTION 9(A). PURCHASE AND SALE. The Lessee hereby sells to the Owner
Trustee, and the Owner Trustee hereby purchases from the Lessee, the
Undivided Interest for a purchase price equal to Facility Cost. The Lessee
hereby delivers to the Owner Trustee, and the Owner Trustee hereby accepts,
the Bill of Sale. The Owner Trustee hereby delivers to the Lessee the
Certificate of Acceptance.
SECTION 9(B). SATISFACTION OF CREDIT AGREEMENT AND RELEASE OF LIEN. The
Lessee hereby acknowledges (i) that the Owner Participant and the Loan
Participants have irrevocably assigned to Toronto-Dominion all of their
right, title and interest in and to the Funding Account and (ii) that
Toronto-Dominion has placed in escrow all releases or termination statements
under the UCC necessary to release, discharge and terminate all Liens on the
Facility and the Facility Site, such releases and statements to be released
from such escrow upon execution by the Funding Agent of the disbursement
instructions contained in the agreement relating to the assignment referred
to in clause (i) above.
SECTION 9(C). FINANCING. Each Loan Participant concurrently has assigned
to Toronto-Dominion all of its right, title and interest in and to the
Funding Account; and the Owner Participant has concurrently assigned to
Toronto-Dominion all of its right, title and interest in and to the Funding
Account. The Owner Trustee hereby acknowledges notice of such assignments and
the Owner Participant hereby directs the Owner Trustee to deliver to the
respective Loan Participants Notes, duly authenticated by the Indenture
Trustee pursuant to the Owner Trustee'ssee Authentication Request, in the
respective original principal amounts set forth in Schedule A. The respective
Loan Participants hereby acknowledge receipt of such Notes.
SECTION 9(D). LEASE. The Lessor hereby agrees to lease to the Lessee,
and the Lessee hereby agrees to lease from the Lessor, pursuant to the
Facility Lease, the Facility. The Lessor and the Lessee hereby exchange
executed copies of the Facility Lease and the Easement Agreement and the
Lessor hereby delivers the Original of the Facility Lease to the Indenture
Trustee.
SECTION 9(E). [Intentionally Omitted].
SECTION 9(F). CONCURRENT TRANSACTIONS. All transactions pursuant to this
Section 9 and Section 10 are considered to have occurred simultaneously and
no such transaction was considered to have been completed until all such
transactions had been completed.
SECTION 10. DOCUMENTS, CERTIFICATES AND OPINIONS.
SECTION 10(A). TRANSACTION DOCUMENTS. The respective parties hereto
executed and delivered this Agreement and each such party executed and
delivered each other Transaction Document to which it is a party. Executed
counterparts of all Transaction Documents were delivered to each party
hereto.
SECTION 10(B). AUTHENTICATION AND EXECUTION OF NOTES. The Owner Trustee
delivered to the Indenture Trustee a request for authentication of the Notes
(the Authentication Request). The Indenture Trustee authenticated the Notes,
in the respective original principal amounts set forth in Schedule A and
confirmed in the Authentication Request, and delivered such Notes to the Loan
Participants.
SECTION 10(C). RECORDING AND FILING. Financing statements and fixture
filings under the Uniform Commercial Code, the Bill of Sale, the Easement
Agreement and the Indenture were filed and recorded in the respective offices
and in the form approved by the Loan Participant's Special Counsel and the
Owner Participant's Special Counsel. A memorandum of the Facility Lease and
of the Support Agreement shall be filed and recorded in the form approved by
the parties thereto and their respective counsel as promptly as practicable
after the Closing.
SECTION 10(D). GOVERNMENTAL ACTIONS. Minnesota Power delivered a copy of
the nonappealable order of the Minnesota Public Utilities Commission, dated
November 30, 1987.
SECTION 10(E). OPINIONS. The following opinions were delivered to the
respective addressees thereof:
(i) Loan Participants' Special Counsel;
(ii) Owner Participant's Special Counsel;
(iii) Owner Participant's Counsel;
(iv) Lessee's Special Counsel;
(v) Lessee's Special New York Counsel;
(vi) Lessee's Special Minnesota Real Estate Counsel;
(vii) Loan Participants' Special Minnesota Counsel;
(viii) Owner Participant's Special Minnesota Counsel;
(ix) Owner Trustee's Counsel;
(x) Indenture Trustee's Counsel;
(xi) Minnesota Power's Counsel;
(xii) Pentair's Counsel;
(xiii) Minnesota Paper's Counsel; and
(xiv) Pentair Duluth's Counsel.
SECTION 10(F). INSURANCE. The Lessee delivered an insurance certificate
to the Loan Participants, the Indenture Trustee, the Owner Trustee and the
Owner Participant
SECTION 10(G). TAXES. The Lessee delivered to the Owner Participant, the
Loan Participants, the Owner Trustee and the Indenture Trustee evidence
satisfactory to each of them to the effect that (i) all Taxes, if any,
payable in connection with (w) the recordings and filings required for
purposes of compliance herewith, (x) the execution and delivery of this
Financing Agreement, (y) the Assignment of Contracts, and (z) the original
issue, sale and delivery of the Notes and the making by the Owner Participant
of its Investment, and (ii) all sales taxes relating to the consummation of
the transactions contemplated hereby and by the other Transaction Documents
then due and payable have been duly paid in full.
SECTION 10(H). NOTICE OF ASSIGNMENT OF CONTRACTS. The Lessee gave notice
of the Assignment of Contracts to each Contractor.
SECTION 10(I). REAL ESTATE MATTERS. The Lessee delivered to the Owner
Participant, the Loan Participants, the Owner Trustee and the Indenture
Trustee, and their respective counsel or special counsel, copies of the
Survey and the Title Policy.
SECTION 10(J). AMENDMENTS TO STEAM SUPPLY AGREEMENT AND WATER SUPPLY
AGREEMENT. The Lessee delivered to the Owner Participant, the Loan
Participants, the Owner Trustee and the Indenture Trustee, and their
respective counsel or special counsel, copies of amendments to the Steam
Supply Agreement and the Water Supply Agreement.
SECTION 10(K). DEVELOPMENT AGREEMENT. The Lessee delivered to the Owner
Participant, the Loan Participants, the Owner Trustee and the Indenture
Trustee, and their respective counsel or special counsel, a copy of the
Development Agreement.
SECTION 11. CONSENT TO ASSIGNMENT OF THE FACILITY LEASE; CONSENT TO
INDENTURE.
SECTION 11(A). CONSENT TO ASSIGNMENT OF FACILITY LEASE. The Lessee
hereby acknowledges, and consents in all respects to, the assignment of the
Facility Lease by the Owner Trustee to the Indenture Trustee under and
pursuant to the Indenture and agrees:
(i) prior to the Discharge of the Indenture, to make each payment of
Basic Rent and Supplemental Rent due or to become due thereunder, except all
Excepted Payments and Special Supplemental Rent unless otherwise provided
herein, directly to the Indenture Trustee at the Indenture Trustee's Office;
and
(ii) not to seek to recover any payment (other than a payment made in
mistake) made to the Indenture Trustee or to any Indemnitee as an Excepted
Payment in accordance with this Agreement, the Facility Lease, the Trust
Agreement or the Indenture, once such payment is made.
SECTION 11(B). CONSENT TO THE INDENTURE. The Lessee hereby consents in
all respects to the execution and delivery of the Indenture, and to all of
the terms thereof, and the Lessee acknowledges receipt of an executed
counterpart of the Indenture.
SECTION 12. LESSEE'S INDEMNITIES AND AGREEMENTS; JOINT VENTURERS'
INDEMNITY; SPONSORS' INDEMNITY.
SECTION 12(A). PERFORMANCE OF INDEMNITIES. The Lessee hereby agrees,
whether or not any of the transactions contemplated hereby shall be
consummated, to perform, for the benefit of the Indemnitees entitled thereto,
the indemnities and undertakings of the Lessee contained in this Section 12,
the Assignment of Contracts and the Tax Indemnity Agreement to the same
extent, and with the same force and effect, as if such indemnities and
undertakings were set forth in full herein. Unless otherwise expressly
provided, all payments to be made by the Lessee under this Section 12, the
indemnification in the Assignment of Contracts or the Tax Indemnity Agreement
will be free of expense to the Indemnitee for collection or other charges.
The Lessee's obligations under the indemnities provided for in this Financing
Agreement and the other Transaction Documents to which it is a party shall be
those of a primary obligor, whether or not the Indemnitee shall also be
indemnified with respect to the same matter under the terms of any other
agreement contemplated hereby or thereby, or any other document or instrument
whether or not related to the transactions contemplated hereby or thereby,
and the Person seeking indemnification from the Lessee pursuant to any
provisions of this Financing Agreement or any other Transaction Document to
which it is a party may proceed directly against the Lessee without first
seeking to enforce any other right of indemnification.
SECTION 12(B). GENERAL INDEMNIFICATION.
(i) Whether or not any of the transactions contemplated hereby are
consummated, the Lessee shall pay (except to the extent that any of the items
hereinafter described shall actually have been paid by the Owner Trustee as
part of Transaction Costs), and shall indemnify and hold harmless each
Indemnitee from, on an After-tax Basis, any and all Claims imposed on,
incurred by or asserted against any Indemnitee in any way relating to or
arising out of (w) the Facility, the Facility Site, the Undivided Interest or
any part thereof; (x) the Transaction Documents, or any of them, or payments
made pursuant thereto or any other transactions contemplated thereby, all
costs and expenses incurred by any Indemnitee in connection with any Event of
Default under the Facility Lease, any Event of Loss, any redemption,
refunding, refinancing, prepayment, registration, exchange or transfer of any
Note, the revision to the Amortization Schedules permitted by Section 15
hereof and the Indenture, or any transfer of all or any part of the right,
title and interest of the Owner Participant in the Trust or in, to and under
any of the Transaction Documents; (y) the design, manufacture, construction,
inspection, purchase, acceptance, rejection, ownership, delivery, lease,
sublease, installation, maintenance, repair, use, operation, condition, sale,
return, or other application or disposition of all or any part of the
Undivided Interest, the Facility, the Facility Site, or any Component; and
(z) the imposition of any Lien (or incurrence of any liability to refund or
pay over any amount as a result of any Lien) on the Undivided Interest, the
Facility Site, the Facility or any Component (other than Permitted
Encumbrances), including, without limitation, (A) Claims arising from any
violation of Applicable Law, Claims in tort (strict or otherwise) or from the
active or passive negligence of any Indemnitee, (B) loss of, or damage to,
any property, or death and injury to any Person, (C) latent or other defects,
whether or not discoverable, (D) any claim for patent, trademark or copyright
infringement and (E) any defect in title to the Facility or the Facility
Site.
(ii) If the Lessee has knowledge of any claim or liability indemnified
against under this Section 12(b), it shall give prompt written notice thereof
to all Indemnitees, and if any Indemnitee shall have any such knowledge, it
shall give prompt written notice to the Lessee. With respect to any amount
which the Lessee is requested by an Indemnitee to pay by reason of this
Section 12(b), the Indemnitee shall, if requested by the Lessee and prior to
any payment, submit such additional information to the Lessee as the Lessee
may reasonably request properly to substantiate the requested payment.
(iii) ln case any action, suit or proceeding shall be brought against
any Indemnitee, it shall notify the Lessee of the commencement thereof, and
the Lessee may, at its expense, participate in, and, to the extent that it
shall wish, assume the defense thereof, with counsel satisfactory to such
Indemnitee; provided, however, that the Lessee shall not be entitled to
participate in, or to assume the defense of, any such action, suit or
proceeding, if and to the extent that in the opinion of the Indemnitee the
Claims shall involve the potential imposition of criminal liability on such
Indemnitee or a conflict of interest between such Indemnitee and the Lessee
or shall entail a reasonable possibility of compromising or jeopardizing any
substantial interest of the Indemnitee or if a Default or Event of Default
shall have occurred and be continuing.
(iv) Any Indemnitee that proposes to settle or compromise any Claim or
proceeding shall notify the Lessee of such intent. Such Indemnitee shall have
the right to settle or compromise such Claim or proceeding, provided,
however, that, if the proviso to clause (iii) above shall not apply and the
Lessee in writing reasonably withholds its consent to all or part of such
settlement or compromise, the Lessee shall not be obligated to indemnify such
Indemnitee hereunder to the extent of the amount of the Claim to which such
settlement or compromise relates to which the Lessee has reasonably refused
its consent.
(v) Notwithstanding the foregoing, the Lessee shall have no obligation
of indemnity under this Section 12(b) with respect to any Claim (u) resulting
from the willful misconduct or gross negligence of an Indemnitee (other than
willful misconduct or gross negligence imputed to such Indemnitee by reason
of its interest in the Undivided Interest, in the Facility or any Component)
or its respective successors, assigns, servants, agents or employees; (v)
resulting primarily from the breach by such Indemnitee of any of its
warranties or covenants in any of the Transaction Documents or any
misrepresentation made by such Indemnitee in any Transaction Document; (w) so
long as no Default or Event of Default shall have occurred and be continuing,
to the extent attributable to acts or events not attributable to the Lessee
which shall occur after the later of (I) the date on which the Undivided
Interest shall cease to be a part of the Trust Estate or (2) the date on
which Lessee shall cease to have any obligations under any Facility Lease;
(x) so long as no Default or Event of Default shall have occurred and be
continuing, in respect of the Facility, the Facility Site, any Component or
the Undivided Interest, asserted subsequent to redelivery of the Undivided
Interest to the Lessor in accordance with Section 5 of the Facility Lease;
(y) any Transaction Expense required to be paid by the Owner Participant; or
(z) resulting directly from a voluntary transfer by the Lessor or the Owner
Participant of all or part of its interest in the Facility Lease, the
Facility, the Facility Site or the Undivided Interest other than in
connection with an Event of Default, an Event of Loss or the exercise by the
Lessor of its rights under Section 15 of the Facility Lease.
(vi) To the extent that any Indemnitee in fact receives indemnification
payments from the Lessee under this Section 12(b), and so long as no Default
or Event of Default shall have occurred and be continuing, the Lessee shall
be subrogated, to the extent of such indemnity paid, to such Indemnitee's
rights with respect to the transaction or event requiring or giving rise to
such indemnity. Nothing herein contained shall be construed as constituting a
guaranty by the Lessee of the principal or, premium, if any, or interest on
the Notes.
(vii) If an Indemnitee is entitled to indemnity hereunder or the Lessee
has knowledge of any liability hereby indemnified against, it shall give
prompt notice thereof to the Lessee or the party entitled to be indemnified,
as the case may be, and the Lessee covenants and agrees to pay all amounts
due under this Section 12(b) within 30 days of the receipt of such notice;
provided, however, that the failure of any party entitled to indemnity
hereunder to so notify the Lessee shall not relieve the Lessee from any
liability it may have to any party entitled to indemnity under this Section
12(b).
SECTION 12(C). GENERAL TAX INDEMNITY. All payments by the Lessee in
connection with the transactions contemplated by the Transaction Documents
shall be free of withholdings with respect to Taxes (and at the time that the
Lessee is required to make any payment upon which any withholding is
required, the Lessee shall pay an additional amount such that the net amount
actually received by the Person entitled to receive such payment will, after
such withholding, equal the full amount of the payment then due) and shall be
free of expense to each Indemnitee for collection or other charges. The
Lessee shall pay, and shall indemnify and hold each Indemnitee harmless from,
on an After-tax Basis, all license, documentation, recording and registration
fees, and all taxes (including, without limitation, income, franchise, gross
receipts, capital, excise, sales, use, leasing, fuel, excess profits, value-
added, turnover, occupational, property (personal and real, tangible and
intangible), transfer, recording and stamp taxes), levies, imposts, duties,
assessments, fees, charges and withholdings of any nature whatsoever and any
transaction privilege or similar taxes, together with any penalties, fines,
additions to tax or interest thereon, howsoever imposed, whether levied or
imposed upon an Indemnitee or otherwise, by any Federal, state or local
government or taxing authority in the United States or by any foreign
country, foreign governmental subdivision or other foreign taxing authority
or territory or other possession of the United States or by any international
organization or taxing authority or by any administrative agency or
department, political, geographic or other subdivision or taxing authority of
any of the foregoing, (all such license, documentation, recording and
registration fees, taxes, levies, imposts, duties, assessments, fees,
charges, withholdings, penalties, fines, additions to tax and interest
imposed as aforesaid being called Taxes) upon or with respect to (a) the
Facility, the Facility Site, the Undivided Interest, or any part thereof or
interest therein, (b) the manufacture, financing, construction, testing,
inspection, purchase, acceptance, rejection, ownership, preparation,
installation, assembly, storage, maintenance, repair, rebuilding,
modification, transfer of title, abandonment, redelivery, possession,
repossession, rental, use, operation, condition, sale, replacement,
transportation, return, importation, exportation or other application or
disposition of, or the imposition of any Lien (or incurrence of any liability
to refund or pay over any amount as a result of any Lien) on, all or any part
of any interest in the Facility, the Facility Site, the Undivided Interest or
any part thereof or interest therein, (c) the rentals, receipts, gains or
earnings arising from the Facility, the Facility Site, the Undivided Interest
or any part thereof or interest therein, or any applications or dispositions
thereof, including, without limitation, principal, premium, if any, and
interest and other amounts payable on the Notes, (d) any Transaction
Document, (e) any amount paid or payable pursuant to any Transaction
Document, (f) the Trust Estate, the Lease Indenture Estate, the property, the
income or other proceeds received with respect to property held by any Owner
Participant, by the Owner Trustee under the Trust Agreement or by the
Indenture Trustee under the Indenture or (g) otherwise with respect to or in
connection with the transactions contemplated by the Transaction Documents,
including, without limitation, the issuance, acquisition, assumption,
exchange or reoptimization of the Notes; excluding, however any of the
following.
(i) any Taxes based on or measured by the net or gross income (including
gross receipts and withholding) or capital of the Owner Participant, the
Owner Trustee or the Trust Estate or which are franchise taxes, conduct of
business taxes or minimum taxes for tax preferences imposed on the Owner
Participant, the Owner Trustee or the Trust Estate unless such Taxes are
sales or use taxes or other similar taxes or charges; provided, however, that
this paragraph (i) shall not apply to Taxes imposed on the Owner Trustee or
the Trust Estate unless a Discharge of the Indenture has occurred or both (A)
a Majority in Interest of Noteholders states in writing (which writing will
not be unreasonably withheld) that the payment by the Owner Trustee or the
Trust Estate of such Taxes will not result, directly or indirectly, in the
occurrence of an Indenture Event of Default and (B) no Default, Event of
Default, Indenture Default or Indenture Event of Default shall have occurred
and be continuing;
(ii) any Taxes based on or measured by the net or gross income
(including gross receipts and withholding) or capital of any Loan Participant
or which are franchise taxes, conduct of business taxes or minimum taxes for
tax preferences imposed on any Loan Participant, provided, however, that this
paragraph (ii) shall not apply to Taxes (a) in excess of Taxes that would
have been imposed if the loans evidenced by the Notes had been made directly
to the Lessee, (b) which would not have been imposed, or would not have been
imposed at the time imposed, if a change in the Amortization Schedules
pursuant to Section 15 of this Financing Agreement had not occurred and (c)
which would not have been imposed, or would not have been imposed at the time
imposed, if the Lessee had not assumed the Owner Trustee's obligations in
respect of the Notes pursuant to the Indenture;
(iii) any Taxes based on, or measured by, any fees or compensation
received by the Owner Trustee or the Indenture Trustee for services rendered
in connection with the transactions contemplated hereby;
(iv) in the case of the Owner Participant or the Owner Trustee, any
Taxes imposed with respect to any period after the later of the Termination
Date or, if applicable, the date of redelivery of the Undivided Interest to
the Lessor;
(v) in the case of the Indenture Trustee or any Loan Participant, for so
long as no Default or Event of Default shall have occurred and be continuing,
any Taxes imposed with respect to any period beginning after the Discharge of
the Indenture; provided, however, that this paragraph (v) shall not apply to
Taxes relating to events occurring or matters arising prior to or
concurrently with the Discharge of the Indenture;
(vi) any Taxes imposed on the Owner Participant, the Owner Trustee, the
Trust Estate or any Loan Participant as a result of the voluntary or
involuntary transfer (including an involuntary transfer in bankruptcy) by
such Person of the Undivided Interest, or any interest or beneficial interest
therein or part thereof, or any interest in the Transaction Documents, or in
any Note, unless such transfer results from an exercise of remedies under the
Transaction Documents, provided, however, that this paragraph (vi) shall not
apply to Taxes (A) resulting from any transfer of any interest in any Note
which occurs in connection with (a) a change in the Amortization Schedules
pursuant to Section 15 of this Financing Agreement or (b) the Lessee's
assumption of the Owner Trustee's obligations in respect of the Notes
pursuant to the Indenture or (B) imposed on the Owner Trustee or the Trust
Estate unless a Discharge of the Indenture has occurred or both (x) a
Majority in Interest of Noteholders states in writing (which writing will not
be unreasonably withheld) that the payment by the Owner Trustee or the Trust
Estate of such Taxes will not result, directly or indirectly, in the
occurrence of an Indenture Event of Default and (y) no Default, Event of
Default, Indenture Default or Indenture Event of Default shall have occurred
and be continuing;
(vii) any Taxes imposed on any Indemnitee as a result of such
Indemnitee's breach of any of its representations, warranties, covenants or
duties under the Transaction Documents;
(viii) any Taxes based on or measured by the value of the interest of a
Loan Participant in any Note, provided, however, that this paragraph (viii)
shall not apply to Taxes of such nature imposed on any Loan Participant in
excess of Taxes of such nature that would have been imposed if the loans
evidenced by the Notes had been made directly to the Lessee;
(ix) any Taxes imposed on the Owner Participant to the extent such Taxes
would not have been imposed if the Owner Participant had not engaged in
activities in the jurisdiction imposing such Taxes where such activities are
unrelated to the transactions contemplated by the Transaction Documents;
(x) interest, penalties, additions to tax or fines resulting from a
failure of an Indemnitee to properly and timely file returns as required by a
taxing authority unless such failure is caused by a failure of the Lessee or
the sublessee, assignee or successor to provide the Indemnitee with any
information or document that the Lessee or any sublessee, assignee or
successor is required to provide pursuant to the Transaction Documents;
(xi) any Taxes indemnified by the Lessee pursuant to the Tax Indemnity
Agreement;
(xii) any Taxes which are being contested pursuant to Section 12(c)(2),
so long as such contest is continuing; and
(xiii) any Taxes imposed on the Owner Participant to the extent that
such Taxes by the express terms of such Taxes or as expressly set forth in
the legislative history thereof are hereafter enacted or adopted as a direct
substitute for, or reduce (but only to the extent of such reduction) Taxes
that are not Taxes indemnified against under this Section 12(c).
In the case of any Taxes which are reported on a consolidated or
combined basis by an Indemnitee and any Affiliate of such Indemnitee, the
amount of the indemnity under this Section 12(c) in respect of such Taxes
shall be computed with reference to the rules applicable to the consolidated
or combined return of such Indemnitee and such Affiliate of the Indemnitee.
In case any report or return is required to be made with respect to any
obligation of the Lessee under this Section 12(c), the Lessee will either
timely and properly make such report or return in such manner as will show
the Owner Trustee's ownership of Undivided Interest and send a copy to the
Owner Trustee or applicable Indemnitee, or will timely notify the Owner
Trustee or the applicable Indemnitee of such requirement and make such report
or return in such manner as shall be reasonably satisfactory to the Owner
Trustee or such applicable Indemnitee.
Each Indemnitee shall forward to the Lessee all written notices of Taxes
due and all written notices of personal property assessments or other
valuations received from a taxing authority as soon as practicable, but in
any event not later than 45 days following receipt thereof by such
Indemnitee. The Lessee covenants and agrees to pay all amounts due under this
Section 12(c) within 30 days, if permitted by law, after the receipt of
notice from an Indemnitee or relevant taxing authority that such payment is
due. The Lessee further covenants and agrees to indemnify each Indemnitee
against any Taxes imposed upon such Indemnitee by reason of any payment by
the Lessee to any party pursuant to this Section 12(c), including any payment
made pursuant to this sentence. Any payment by the Lessee pursuant to this
Section 12(c) shall be on an After-tax Basis.
SECTION 12(C)(1). PAYMENTS BY AN INDEMNITEE. If any Indemnitee shall
obtain a credit or refund of any Taxes paid by the Lessee pursuant to Section
12(c), such Indemnitee shall pay to the Lessee the amount of such credit or
refund, together with the amount of any interest received by such Indemnitee
on account of such credit or refund, plus an amount equal to any tax benefit
actually received by such Indemnitee solely as a result of any payment to the
Lessee pursuant to this sentence net of any tax detriment to such Indemnitee
attributable to such credit or refund and such interest. If a Loan
Participant as a result of any Tax becoming payable with respect to any year,
which Tax such Loan Participant previously has been indemnified for by the
Lessee pursuant to Section 12(c), actually realizes with respect to such year
or any prior or subsequent year Tax savings that would not have been realized
but for such Tax becoming payable in such year, including a reduction in
amount recognized upon sale, exchange or redemption of a Note in a subsequent
year (Tax Savings), the Loan Participant shall pay to the Lessee the amount
of such Tax Savings plus an amount equal to any tax benefit actually received
by such Loan Participant solely as a result of any payment to the Lessee
pursuant to this sentence. Anything to the contrary in Sections 12(c) and
this Section 12(c)(1) notwithstanding, an Indemnitee shall not be obligated
to make any payment to the Lessee under this Section 12(c)(1),(i) before such
time as the Lessee shall have made all payments or indemnities then due and
payable under Section 12(c) or the Tax Indemnity Agreement, (ii) if at the
time such payment shall be due, a Default, an Event of Default or an Event of
Loss shall have occurred and be continuing or (iii) to the extent the amount
of such payment would exceed (x) the amount of payments which the Lessee
shall have previously made to such Indemnitee pursuant to Section 12(c) less
(y) the amount of all prior payments by such Indemnitee to the Lessee
pursuant to this Section 12(c)(1); provided, however, that any interest
received which is payable to the Lessee pursuant to the first sentence of
this Section 12(c)(1) shall not be taken into account for purposes of
computing the limitation described in (iii) above. The amount payable
pursuant to this Section 12(c)(1) shall be paid to the Lessee within 30 days
of the date on which the credit, refund or Tax Savings are actually realized.
The loss of any Tax Savings, a payment in full with respect to which has been
made by the Loan Participant hereunder, subsequent to the realization by the
Loan Participant shall be treated as a Tax reimbursable on an After-tax Basis
(without regard to the exclusions in Section 12(c)) pursuant to Section
12(c).
SECTION 12(C)(2). CONTEST. If written claim shall be made against any
Indemnitee for any Taxes which are subject to indemnification under Section
12(c), such Indemnitee shall, within 45 days after such Indemnitee receives
such claim, give the Lessee notice of such claim. If the Lessee shall so
request in writing within 30 days, if permitted by law, after receipt of such
notice, such Indemnitee shall, in good faith, and at the Lessee's expense
(including, without limitation, all costs, expenses, losses, reasonable legal
and accounting fees and disbursements, penalties and interest), contest any
such claim; provided, however, that such Indemnitee shall, in its sole
discretion, select the forum for such contest (after conferring in good faith
with the Lessee as to the most appropriate forum) and determine whether any
such contest of the validity, applicability or amount of such Taxes shall be
by (1) resisting payment thereof or (2) paying such Taxes and seeking a
refund thereof in appropriate administrative or judicial proceedings; and
provided further, however, that (a) at such Indemnitee's option, such contest
may be conducted by the Lessee in the name of such Indemnitee and (b) in no
event shall such Indemnitee be required to take any action pursuant to this
Section 12(c)(2) unless and until (i) the Lessee shall have agreed to pay on
demand any liability, expenses or loss arising out of or related to such
contest (including, without limitation, indemnification for all costs,
expenses, losses, reasonable legal and accounting fees and disbursements,
penalties and interest); (ii) the Lessee shall have furnished at the Lessee's
sole expense, an opinion of tax counsel (Tax Counsel) selected by such
Indemnitee and reasonably acceptable to the Lessee to the effect that a
Reasonable Basis exists for contesting such claim; (iii) such Indemnitee
shall have determined that the action to be taken will not result in any
danger of sale, forfeiture or loss of, or the creation of any Lien (except if
such Lien shall be bonded) on, the Facility, the Facility Site, the Easement
Agreement, the Undivided Interest, the Trust Estate, or any part thereof or
any interest therein; (iv) the amount of the indemnity arising from any
adjustments arising with respect to a taxable year, or a series of taxable
years if the subject matter thereof shall be of a continuing nature, shall be
at least $50,000; (v) the Lessee acknowledges its liability for the Taxes
which are the subject of such contest to the extent of any adverse decision
and (vi) if such contest shall be conducted in a manner requiring the payment
of the claim, the Lessee shall have paid the amount required. Notwithstanding
anything contained in this Section 12(c)(2) to the contrary, the Lessee may
contest without limitation any claim which the Lessee may contest in its own
name. An Indemnitee may settle or compromise any claim or proceeding provided
it shall notify the Lessee of its intent to do so and the terms and
conditions of such settlement. So long as no Default or Event of Default has
occurred and is continuing, if the Lessee does not consent in writing to such
settlement or compromise, the Lessee shall not be obligated to indemnify such
Indemnitee hereunder to the extent of the amount of the Taxes to which such
settlement or compromise relates. If such Indemnitee effects a settlement or
compromise of such contest, notwithstanding that the Lessee has withheld its
consent thereto, such Indemnitee shall repay to the Lessee the amount of such
Taxes theretofore paid or advanced by the Lessee to such Indemnitee as relate
to such claim, to the extent the Lessee has reasonably withheld its consent
to the settlement or compromise thereof; provided, however, that such
Indemnitee shall not be obligated pursuant to this sentence to pay the Lessee
an amount in excess of the amounts previously paid or advanced by the Lessee
to such Indemnitee as relate to such claim less the amount of all prior
payments by such Indemnitee to the Lessee as relate to such claim pursuant to
this Section 12(c)(2).
SECTION 12(C)(3). INDEMNITY OF THE JOINT VENTURERS.
(i) Each Joint Venturer agrees, severally and not jointly with the Other
Joint Venturer, to pay one-half of the costs of any presently or hereafter
required remediation of the Pre-Existing Environmental Condition, to the
extent that such costs are not paid by the State of Minnesota or by the
Lessee after notice of such required remediation from the applicable
Government Authority. Each Joint Venturer further agrees, severally and not
jointly with the Other Joint Venturer, to assume one-half of the liability
for, and, to such extent, to indemnify, protect, save, and keep harmless each
Indemnitee, from and against, any and all Claims that are imposed on,
incurred by, or asserted against any Indemnitee, whether or not such
Indemnitee shall also be indemnified as to any such Claim by any other
Person, in any way relating to or arising out of the Pre-Existing
Environmental Condition; provided, however, that such Joint Venturer shall
have no obligation to indemnify any Indemnitee with respect to any Claim
resulting from any willful misconduct or gross negligence of such Indemnitee.
(ii) The foregoing indemnity and payment obligations of such Joint
Venturer shall be in addition to, and not in substitution for, all
obligations of such Joint Venturer under its Cash Deficiency Agreement. No
payment by such Joint Venturer in discharge of its indemnification
obligations under this Section shall be chargeable to the Applicable CDA
Amount or constitute a CDA Charge.
(iii) If such Joint Venturer has knowledge of any claim or liability
indemnified against under this Section, it shall give prompt written notice
thereof to all Indemnitees, and if any Indemnitee shall have any such
knowledge, it shall give prompt written notice to such Joint Venturer. With
respect to any amount which such Joint Venturer is requested by an Indemnitee
to pay by reason of this Section, the Indemnitee shall, if requested by such
Joint Venturer and prior to any payment, submit such additional information
to such Joint Venturer as such Joint Venturer may reasonably request properly
to substantiate the requested payment.
(iv) ln case any action, suit or proceeding shall be brought against any
Indemnitee, it shall notify such Joint Venturer of the commencement thereof,
and such Joint Venturer may, at its expense, participate in, and, to the
extent that it shall wish, assume the defense thereof, with counsel
satisfactory to such Indemnitee; provided, however, that such Joint Venturer
shall not be entitled to participate in, or to assume the defense of, any
such action, suit or proceeding, if and to the extent that in the opinion of
the Indemnitee the claims shall involve the potential imposition of criminal
liability on such Indemnitee or a conflict of interest between such
Indemnitee and such Joint Venturer or shall entail a reasonable possibility
of compromising or jeopardizing any substantial interest of the Indemnitee or
if a Default under any Lease shall have occurred and be continuing.
(v) Any Indemnitee that proposes to settle to compromise any Claim or
proceeding shall notify the Lessee of such intent. Such Indemnitee shall have
the right to settle or compromise such Claim or proceeding; provided,
however, that if the Lessee in writing reasonably withholds its consent to
all or part of such settlement or compromise, the Lessee shall not be
obligated to indemnify such Indemnitee hereunder to the extent of the amount
of the Claim to which such settlement or compromise relates to which the
Lessee has reasonably refused its consent.
(vi) If any party is entitled to indemnity hereunder or such Joint
Venturer has knowledge of any liability hereby indemnified against, it shall
give prompt notice thereof to such Joint Venturer or the party entitled to be
indemnified, as the case may be, and such Joint Venturer covenants and agrees
to pay all amounts due under this Section 12(c)(3) within 30 days after
receipt of such notice; provided, however, that the failure of any party
entitled to indemnity hereunder to so notify such Joint Venturer shall not
relieve such Joint Venturer from any liability it may have to any party
entitled to indemnity under this Section.
SECTION 12(C)(4). INDEMNITY OF THE SPONSORS.
(i) Each Sponsor agrees, severally and not jointly with the Other
Sponsor, to pay, or cause an Affiliate to pay, one-half of the costs of any
presently or hereafter required remediation of the Pre-Existing Environmental
Condition, to the extent that such costs are not paid by the State of
Minnesota, by the Lessee, or by the Joint Venturers after notice of such
required remediation from the applicable Government Authority. Such Sponsor
further agrees, severally and not jointly with the Other Sponsor, to assume,
directly or jointly and severally with an Affiliate, one-half of the
liability for, and, to such extent, to indemnify, protect, save and keep
harmless each Indemnitee, from and against, any and all Claims that may be
imposed on, incurred by, or asserted against any Indemnitee, whether or not
such Indemnitee shall also be indemnified as to any such Claim by any other
Person, in any way relating to or arising out of the Pre-Existing
Environmental Condition; provided, however, that such Sponsor shall have no
obligation to indemnify any Indemnitee with respect to any Claim resulting
from any willful misconduct or gross negligence of such Indemnitee.
(ii) The foregoing indemnity and payment obligations of such Sponsor
shall be in addition to, and not in substitution for, all obligations of such
Sponsor under its Keepwell Agreement. No payment by such Sponsor in discharge
of its indemnification obligations under this Section shall, in respect of
such Sponsor's Keepwell Agreement, constitute a CDA Charge.
(iii) If such Sponsor has knowledge of any claim or liability
indemnified against under this Section, it shall give prompt written notice
thereof to all Indemnitees, and if any Indemnitee shall have any such
knowledge, it shall give prompt written notice to such Sponsor. With respect
to any amount which such Sponsor is requested by an Indemnitee to pay by
reason of this Section, the Indemnitee shall, if requested by such Sponsor
and prior to any payment, submit such additional information to such Sponsor
as such Sponsor may reasonably request properly to substantiate the requested
payment.
(iv) In case any action, suit or proceeding shall be brought against any
Indemnitee, it shall notify such Sponsor of the commencement thereof, and
such Sponsor may, at its expense, participate in, and, to the extent that it
shall wish, assume the defense thereof, with counsel satisfactory to such
Indemnitee; provided, however, that such Sponsor shall not be entitled to
participate in, or to assume the defense of, any such action, suit or
proceeding, if and to the extent that in the opinion of the Indemnitee the
claims shall involve the potential imposition of criminal liability on such
Indemnitee or a conflict of interest between such Indemnitee and such Sponsor
or shall entail a reasonable possibility of compromising or jeopardizing any
substantial interest of the Indemnitee or if a Default under any Facility
shall have occurred and be continuing.
(v) Any Indemnitee that proposes to settle or compromise any Claim or
proceeding shall notify the Sponsor of such intent. Such Indemnitee shall
have the right to settle or compromise such Claim or proceeding; provided,
however, that if such Sponsor in writing reasonably withholds its consent to
all or part of such settlement or compromise, the Lessee shall not be
obligated to indemnify such Indemnitee hereunder to the extent of the amount
of the Claim to which such settlement or compromise relates to which the
Lessee has reasonably refused its consent.
(vi) If any party is entitled to indemnity hereunder or such Sponsor has
knowledge of any liability hereby indemnified against, it shall give prompt
notice thereof to such Sponsor or the party entitled to be indemnified, as
the case may be, and such Sponsor covenants and agrees to pay all amounts due
under this Section within 30 days after receipt of such notice; provided,
however, that the failure of any party entitled to indemnity hereunder to so
notify such Sponsor shall not relieve such Sponsor from any liability it may
have to any party entitled to indemnity under this Section.
SECTION 13. EXPANSION.
(A) RESTRICTION. The Lessee shall not undertake to acquire for use in,
or construct or install within, the Facility Site any equipment or structures
except (i) in accordance with the provisions of Section 8 of the Facility
Lease and (ii) as otherwise provided in this Section 13.
(B) EXPANSION; RIGHTS OF FIRST OPPORTUNITY. Subject to paragraphs (b)
through (h) hereof, the Lessee may, or may cause an Affiliate to, procure,
construct or install an Expansion within the Facility Site; provided,
however, that (i) the Owner Participant and the Other Owner Participants (on
a proportionate basis among them, or as they may otherwise agree) shall be
given a right of first opportunity with respect to participation in the
equity portion of any lease financing of any Expansion and (ii) the Loan
Participants (on a proportionate basis among them, or as they may otherwise
agree) shall be given a right of first opportunity with respect to
participation in any Expansion Financing (including the debt portion of any
lease financing), upon terms and conditions reasonably acceptable to the
parties, and; provided further, that no Owner Participant or Loan Participant
shall have such a right to participate in an Expansion Financing if, within
60 days of receiving written notice granting such right, such Owner
Participant or Loan Participant, as the case may be, has not in writing
notified the Lessee of its interest in participation in such Expansion
Financing.
(C) APPROVAL PROCEDURE. The Lessee shall not, nor shall it cause its
Affiliate to, undertake an Expansion without the approval of the respective
Boards of Directors of the Sponsors, which approval may be given based upon a
good faith determination made prior to the Commitment Date that the Expansion
is economically and technically feasible when operated in accordance with
Prudent Industry Practice and will not adversely affect the economic or
technical feasibility of the Facility, in consideration of due investigation
of the following factors made by Lessee or independent engineers or
consultants, undertaken in accordance with Prudent Industry Practice and
reviewed by the Lessee's Venture Council:
(i) Expansion project scope,
(ii) market and economic feasibility studies,
(iii) wood resource and other key resource or support service
availability, and
(iv) Expansion cost estimates and pro forma financial statements.
(D) CONDITIONS TO EXPANSION. No Expansion may be undertaken unless, as
of the Commitment Date, (i) each Cash Deficiency Agreement and each Keepwell
Agreement shall be in full force and effect, (ii) the Applicable CDA Amount
under each Cash Deficiency Agreement shall be at its Maximum Available CDA
Amount, (iii) if CDA Charges shall have been made under the Cash Deficiency
Agreements, the Applicable CDA Amount under each Cash Deficiency Agreement
shall have been increased to its maximum solely through normal operating cash
flow (which shall not include voluntary capital contributions or Subordinated
Debt proceeds) distributed to the Joint Venturers by the Lessee (or if not so
increased solely by such means, it would have been so increased out of normal
operating cash flow, but for a voluntary increase in the Applicable CDA
Amount), (iv) the debt ratings of the Sponsors published by Standard & Poor's
Corporation (or, if such rating agency is not then rating debt obligations of
the kind in question, equivalent ratings published by a nationally recognized
rating agency), with respect to the senior debt securities of Minnesota Power
and Pentair shall be not less than BBB- and BB-, respectively (or, in the
event Pentair has no senior debt securities outstanding, Pentair's
subordinated debt or preferred stock shall be rated at least B+ by such
rating agency), and, if the rating for either Minnesota Power or Pentair's
debt securities shall be at the minimum respective requirement set forth
above, such Sponsor (or its debt securities) shall not be on "credit watch"
(or equivalent list of issuers or debt securities under special consideration
for potential downgrading of rating); (v) there shall be no Event of Default
or Default under the Facility Lease and no "event of default" or "default"
under any of the Other Facility Leases and (vi) no Special Supplemental Rent
shall be payable.
(E) EXPANSION FINANCING. The Lessee shall not, nor shall it cause any of
its Affiliates to, undertake an Expansion Financing unless (i) Expansion Debt
incurred in connection with such Expansion Financing is not in excess of 75%
of the Cost of Expansion, (ii) after giving effect to such Expansion
Financing, the Total Indebtedness of the Lessee is not in excess of 66 2/3%
of the Total Capitalization of the Lessee, (iii) the Owner Trustee and, by an
assignment therefrom, the Indenture Trustee shall have been granted a first
priority perfected security interest in the cash flow of the Facility,
subject to the prior rights of Lessee's working capital lender(s) as
contemplated by Section 8(b)(3)(xiv)(C) hereof, provided, however, that prior
to a Default or an Event of Default, the cash flow of the Facility shall be
available for all business purposes of the Lessee, including Lessee
Distributions, (iv) no mortgage lien or other security interest in any assets
of the Lessee shall be granted to secure any obligations incurred in
connection with the Expansion Financing, except a security interest in (or,
in the case of a lease financing of the Expansion Assets, ownership of) the
Expansion Assets and a security interest in the cash flow of the Expansion
Assets, and (v) if any credit support (in addition to the obligations of
Lessee itself under the Expansion Financing documents and the security
interests referred to in clause (iv) above) is given by the Lessee, any
Sponsor, any Affiliate or any thereof or any other Person in connection with
an Expansion Financing which is in excess of 50% of the Cost of Expansion for
any period following Commissioning thereof, additional credit support will be
provided under the Transaction Documents so that the total percentage of
credit support under the Transaction Documents shall be equal to the total
percentage of credit support in connection with the Expansion Financing, and
the incremental amount of credit support so provided under the Transaction
Documents shall be of quality equivalent to that provided in connection with
the Expansion Financing.
(F) SUPPORT AGREEMENT. The equity or debt participants providing such
Expansion Financing shall have entered into or agreed to be bound by the
terms of the Support Agreement with respect to any portions of the Facility
which are or may be used in common by the Expansion. The Lessee shall have
agreed to operate the Facility and the Expansion, so long as the Lessee shall
remain in possession of the Undivided Interest under the Lease or the Support
Agreement, on a nondiscriminatory pari passu basis utilizing the Lessee's
operating policies and procedures.
(G) SEPARATE ACCOUNTING. At the time an Expansion shall be undertaken,
the Lessee shall keep and maintain accounting books and records on a
divisional basis with respect to the Facility and the Expansion in sufficient
detail to permit CDA Worksheet calculations to be made with respect to the
Facility in accordance with this Financing Agreement, including an allocation
of all cost and other items on a basis consistent with prudent accounting and
financial practice and Prudent Industry Practice.
(H) EXPANSION DEBT. Expansion Debt may be refunded, renewed or extended
at any time, provided the principal amount outstanding is not increased and
any liens would not be extended to other assets of the Lessee.
SECTION 13A. CDA CHARGE AND SPECIAL SUPPLEMENTAL RENT.
SECTION 13A(A). INITIAL AND PERIODIC CDA CALCULATIONS. Following the
Completion Date, the Lessee will provide to the Owner Participant, the Loan
Participants and the Indenture Trustee copies of the balance sheet prepared
pursuant to Section 8(b)(1)(i)(B) and, on the basis thereof, a sample
calculation of the CDA Worksheet as of the date thereof. Thereafter, pursuant
to Section 8(b)(1)(i)(C), the Lessee will provide to the Owner Participant,
the Loan Participants and the Indenture Trustee the CDA Worksheets required
pursuant thereto. The annual definitive CDA Worksheet will establish with
respect to the preceding fiscal year the amount of any CDA Charge, CDA
Increase, Lessee Distribution, Deemed Distribution and Normalized Debt
Coverage for the period covered, and shall reconcile and definitively
establish the Applicable CDA Amount and the applicable CDA Trigger as at the
end of such period. The Joint Venturers and the Sponsors shall have the right
at any time during such year to make Designated Voluntary Contributions and
other voluntary capital contributions and, at or prior to the time of such
annual reconciliation in the definitive CDA Worksheet delivered pursuant to
Section 8(b)(1)(i)(C)(l) hereof, to irrevocably designate the amount of
Designated Voluntary Contributions to voluntarily reduce or eliminate any CDA
Charge and thereby to not decrease the Applicable CDA Amount as at the date
of the CDA Worksheet. Notwithstanding the formula for such calculations
above, no cash payment under the Cash Deficiency Agreements may be applied to
any claim other than CDA Rent and payment thereof to the Owner Trustee shall
be subject to the provisions of Section 13A(b) hereof with respect to such
payment.
SECTION 13A(B). PAYMENTS OF CDA RENT.
(i) If, at the time any cash payment constituting Combined CDA Rent is
made, the Combined Applicable CDA Amount (as estimated at such time) equals
or exceeds the applicable Combined CDA Trigger, all amounts received by the
Indenture Trustee as payment of Combined CDA Rent shall, together with all
other payments made concurrently therewith, be distributed and applied in
accordance with Section 3 of the Indenture and, without distinction as to the
source of such amounts, the Loan Participants and the Owner Trustee shall be
entitled to receive all amounts distributable to them as provided in such
Section 3.
(ii) If, at the time any cash payment constituting Combined CDA Rent is
made, the Combined Applicable CDA Amount (as estimated at such time) is less
than the applicable Combined CDA Trigger, all or that portion of the amounts
received by the Indenture Trustee as payment of Combined CDA Rent, together
with all other payments made concurrently therewith, shall be distributed and
applied in accordance with Section 3 of the Indenture; provided, however,
that the portion of such payment of Combined CDA Rent as would have been
payable to the Owner Trustee or the Owner Participant which is equal to the
amount by which the applicable Combined CDA Trigger exceeds the sum of (x)
the Combined Applicable CDA Amount and (y) the principal balance, if any,
previously deposited and remaining in the CDA Escrow Account shall be
retained by the Indenture Trustee under Section 3.08 of the Indenture and
such portion shall be held by the Indenture Trustee in the CDA Escrow Account
and disbursed solely upon the terms and conditions set forth below.
(iii) Monies deposited in the CDA Escrow Account shall be held by the
Indenture Trustee therein and shall be invested and reinvested from time to
time by the Indenture Trustee in accordance with Section 3.04 of the
Indenture. Investment income and losses shall be credited or charged, as the
case may be, to the CDA Escrow Account.
(iv) At such time as the applicable Combined CDA Trigger shall no longer
exceed the Combined Applicable CDA Amount as shown by the annual
reconcilement of the CDA Worksheet delivered by the Lessee, pursuant to
Section 8(b)(1)(i)(C)(l) hereof, and so long as (a) no Indenture Default or
Indenture Event of Default shall have occurred and be continuing and (b) if
the Indenture has been foreclosed, no Notes are Outstanding, the Indenture
Trustee shall distribute all or that portion of the CDA Escrow Account
deposited with respect to Combined CDA Rent due on or before the date as of
which such reconciled CDA Worksheet was prepared (including investment
income, net of all investment losses, thereon) to the Owner Trustee or its
assignee. The provisions of this clause notwithstanding, until distributed in
accordance herewith, the entire balance of the CDA Escrow Account shall be
and remain subject to the Indenture, the Lien of the Indenture and the rights
of the Indenture Trustee and the Holders thereunder.
(v) A Majority in Interest of Noteholders may direct the Indenture
Trustee to release any amounts held in the CDA Escrow Account to the Owner
Trustee (or as it may direct) at any time more than thirty (30) months after
the next preceding date that amounts previously deposited into the CDA Escrow
Account pursuant to this Section 13A and Section 3.08 of the Indenture were
distributed to the Owner Trustee (or as it directed).
(vi) All payments and distributions received by the Owner Trustee
pursuant to clauses (i), (iv) and (v) hereof may be retained by, and shall
become the property of, the Owner Trustee and neither the Loan Participants,
the Lessee (except pursuant to Section ll(a) hereof) nor the Indenture
Trustee shall seek to recover any such payments.
SECTION 13A(C). SPECIAL SUPPLEMENTAL RENT.
(i) Upon the creation of the CDA Escrow Account the Lessee will be
unconditionally obligated to pay, and hereby agrees to pay, to the Owner
Participant an amount (herein referred to as Special Supplemental Rent) equal
to the balance from time to time in the CDA Escrow Account, together with an
additional amount which, from the date on which monies shall have been first
deposited therein to the date on which the Owner Participant shall have
received payment (or would have received payment, but for the occurrence of
an Indenture Default or an Indenture Event of Default which is not a Lease
Default or Lease Event of Default) of such Special Supplemental Rent, will
preserve and maintain the Net Economic Return of the Owner Participant.
(ii) The entire amount of Special Supplemental Rent shall be the
property of the Owner Participant and, other than the portion thereof held in
the CDA Escrow Account, shall not be subject to the Lien of the Indenture.
The Lessee or any Affiliate may acquire the Owner Participant's right to
receive all or any portion of the CDA Escrow Amount and the Owner Participant
may assign to such Person its right to receive all or any specified portion
of the CDA Escrow Account; in which case the Owner Trustee shall give notice
of such assignment to the Indenture Trustee and, thereafter, the Indenture
Trustee shall distribute, in accordance with Section 13A(b)(iv) hereof, the
assigned portion of the CDA Escrow Account to such Person, as assignee.
(iii) Special Supplemental Rent shall be payable by the Lessee at such
time as (x) Cash Available After CDA Rent minus all CDA Indemnities paid to
the Lessor and all Other Lessors and minus any CDA Trigger Distribution shall
be greater than 0 and (y) the Combined Applicable CDA Amount has been
increased by any means, including a CDA Trigger Distribution, to an amount at
least equal to the applicable Combined CDA Trigger. At such time, two-thirds
of the amount determined in (x) above (up to the full amount of Special
Supplemental Rent owed to all Owner Participants under all Financing
Agreements minus the aggregate of the amounts, if any, then held in an"CDA
Escrow Account" under the Financing Agreement or any other Financing
Agreement) will be distributed to the Owner Participant and all Other Owner
Participants to whom the Lessee shall owe Special Supplemental Rent, pro rata
in the ratio that Special Supplemental Rent bears to Aggregate Special
Supplemental Rent.
SECTION 14. TRANSACTION EXPENSES.
SECTION 14(A). TRANSACTION EXPENSES. Subject to Section 12(c), the Owner
Participant hereby agrees that it will pay when due, the Lessor's Share of
all Transaction Expenses in excess of Estimated Transaction Expenses.
SECTION 14(B). POST-CLOSING EXPENSES. The Lessee will pay the fees and
expenses (including, without limitation, all legal expenses) of the Indenture
Trustee and the Owner Trustee to the extent not included in Transaction
Expenses. The Lessee will pay the expenses (including, without limitation,
reasonable appraisal, accounting and legal fees and disbursements) of the
Loan Participants, the Indenture Trustee, the Owner Trustee and the Owner
Participant in connection with any refiling or rerecording of any Transaction
Document, assumption of the Notes by the Lessee, any prepayment of the Notes,
any change in the amortization of the Notes pursuant to Section 15 hereof,
any Facility Lease Supplement, any amendment to, or other modification of, or
waiver or consent under any provision of, this Financing Agreement or any
other Transaction Document, any Default or Event of Default, Indenture
Default or Indenture Event of Default (to the extent related to a Default or
Event of Default), any Event of Loss or transfer of all or any part of the
right, title or interest of Lessor or the Indenture Trustee in the Facility
or the Facility Site or in, to or under any of the Transaction Documents, and
any adjustments pursuant to Section 15 hereof.
SECTION 15. ADJUSTMENTS.
SECTION 15(A). ADJUSTMENT OF RENT. In the event that:
(i) any change in the Pricing Assumptions shall occur which relates to
(x) any change in consequence of any Change in Tax Law, or (y) any difference
between Transaction Expenses and Estimated Transaction Expenses or the period
during which such Transaction Expenses shall be amortized;
(ii) any change in the amortization of the Notes shall occur in
consequence of any Change in Tax Law; provided, however, that such change
shall occur only once and shall relate only to any such Change in Tax Law
enacted on or prior to the end of the First Session of the One Hundred First
Congress; and
(iii) the Lessee is required by the IRS to levelize rental deductions
pursuant to Section 467 of the Code and, as a result, the Owner Participant
is required to levelize rental income, and if an adjustment to levelize such
rental deductions and rental income is, in the judgment of the Owner
Participant, reasonably practicable;
then in each such case Basic Rent and the Casualty Value, Termination
Value, Special Termination Value and Agreed Fair Market Value percentages
shall be appropriately adjusted upward or downward by such amounts as will,
in the sole discretion of the Owner Participant, minimize the net present
value cost to the Lessee and preserve the Owner Participant's Net Economic
Return; provided, however, that in the case of subclause (x) of clause (i)
above the present value of Basic Rent, as adjusted, over the remaining Basic
Lease Term, computed by using a discount rate equal to 7.248% per annum,
shall not exceed the present value of Basic Rent payable (determined before
any adjustment under subclause (x) of clause (i)) over the remaining Basic
Lease Term, computed by using the same discount rate, by more than 10%.
Adjustments shall be made as soon as practicable after the event requiring an
adjustment.
SECTION 15(B). COMPLIANCE WITH REGULATIONS, ETC. Any recomputation of
Basic Rent percentages pursuant to paragraph (a) of this Section 15 shall,
among other things, be in amounts that will not cause acceleration of income
recognition under section 467 of the Code and of Revenue Procedure 75-21,
1975-1 C.B. 715, Revenue Procedure 75-28, 1975-1 C.B. 752, and any other
applicable statute, Revenue Procedure, Regulation, Proposed Regulation,
Temporary Regulation, Revenue Ruling or Information Release, in each case as
in effect on the date such adjustment is required to be made pursuant to
Section 15(a), relating to the subject matter of such Revenue Procedures;
provided, however, that any such calculation shall in no event be in a manner
other than the manner used to calculate the Owner Participant's Net Economic
Return.
SECTION 15(C). SUFFICIENCY. NOTWITHSTANDING any provision in this
Financing Agreement or in any other Transaction Document, after giving effect
to any recomputation of Basic Rent, Casualty Value, Special Termination
Value, Termination Value or Agreed Fair Market Value percentages shall be at
least equal to the Minimum Percentage Requirement.
SECTION 15(D). COMPUTATION OF ADJUSTMENTS. Upon the occurrence of an
event requiring an adjustment to any Basic Rent, Casualty Value, Special
Termination Value, Termination Value and Agreed Fair Market Value percentages
in the Facility Lease pursuant to Section 15(a), the Owner Participant shall
make the necessary computations and furnish to the Lessee, the Loan
Participants, the Owner Trustee and the Indenture Trustee a certificate of
the Owner Participant setting forth the amount of any increase or decrease in
such percentages and the computation of such amounts. Such computations shall
be conclusive and shall be binding on the Lessee if the Owner Participant
confirms to the Lessee that the assumptions and methods of calculation
employed in the original calculation of Basic Rent, Casualty Value, Special
Termination Value, Termination Value and Agreed Fair Market Value were used
consistently in such adjustment. In the case of any adjustment made in
consequence of Section 15(a), the consistency of the lease pricing model used
by the Owner Participant for such adjustment with such original method of
calculation shall be subject to confirmation by an independent auditing firm
selected by the Lessee and the Owner Participant, provided that such
independent auditing firm shall have no access to the books, records or tax
returns of the Owner Participant. The fees and expenses of such independent
auditing firm shall be paid by the Lessee, unless the average annual adjusted
Basic Rent shall be at least 1.5% less than that calculated by the Owner
Participant, in which case the Owner Participant shall pay such fees and
expenses.
SECTION 16. BROKERAGE AND FINDERS' FEES AND COMMISSIONS.
The Lessee will indemnify and hold harmless each Loan Participant, the
Indenture Trustee, the Owner Trustee and the Owner Participant in respect of
any commissions, fees, judgments or other expenses of any nature and kind
which any of them may become liable to pay by reason of any claims by or on
behalf of brokers, finders, agents, advisors or investment bankers in
connection with the transactions contemplated by this Financing Agreement or
any other Transaction Document, or any litigation or similar proceeding
arising from any such claims, other than, in respect of the Owner
Participant, those claims arising out of agreements made by the Owner
Participant or its agents with any such broker, finder, agent, advisor or
investment banker.
SECTION 17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; BINDING EFFECT.
SECTION 17(A). SURVIVAL. All agreements, indemnities, representations
and warranties contained in this Financing Agreement, in any other
Transaction Document and in any agreement, document or certificate delivered
pursuant hereto or thereto or in connection herewith or therewith, shall
survive, and shall continue in effect following, the execution and delivery
of this Financing Agreement and the issue and delivery of the Notes pursuant
to the Indenture and the expiration or other termination of any of the
Transaction Documents notwithstanding (i) any investigation made by the Owner
Participant or the Loan Participants or (ii) the fact that any of the
Indenture Trustee, the Owner Trustee, any Loan Participant or the Owner
Participant may waive compliance with any of the other terms, provisions or
conditions of any of the Transaction Documents.
SECTION 17(B). BINDING EFFECT; SUCCESSORS AND ASSIGNS. All agreements,
indemnities, representations and warranties in this Financing Agreement and
the other Transaction Documents and in any agreement, document or certificate
delivered concurrently with the execution of this Financing Agreement and the
other Transaction Documents, or from time to time thereafter, shall bind the
party making the same and its successors and permitted assigns and shall
inure to the benefit of each party for whom made and their respective
successors and permitted assigns; provided, however, that, except to the
extent permitted by the Facility Lease, the Lessee shall not assign any of
its rights or obligations hereunder without the prior written consent of the
Owner Participant, the Owner Trustee and, based upon a directive of a
Majority in Interest of Noteholders, the Indenture Trustee. Except as
otherwise indicated, all references herein to any party to this Financing
Agreement and the other Transaction Documents shall include the permitted
successors and assigns of such party.
SECTION 18. NOTICES.
All communications, notices and consents provided for herein shall be in
writing, and shall be given in Person or by means of telex, telecopy or other
wire transmission or mailed by registered or certified mail, addressed as
follows: (i) if to [Note 11 at [Note 5]<F5>, (ii) if to The Northwestern
Mutual Life Insurance Company, at 720 East Wisconsin in Avenue, Milwaukee,
Wisconsin 53202, Attention: Securities Department; (iii) if to State of
Wisconsin Investment Board at P.O. Box 7842, Madison, Wisconsin 53707,
Attention: Investment Director Private Placements; (iv) if to The Prudential
Insurance Company of America at 100 Mulberry Street, Three Gateway Centre,
Newark, New Jersey 07102-4082, Attention: Senior Managing Director in Charge
of the Capital Markets Group and c/o Prudential Capital Corporation, 3701
Wayzata Blvd., P.O. Box 1143, Minneapolis, Minnesota 55440, Attention:
Regional Vice President; (v) if to John Hancock Mutual Life Insurance Company
at John Hancock Place, P.O. Box 111, Boston, Massachusetts 02117, Attention:
Bond and Corporate Finance Department, T-57; if to Mellon Bank, N.A., as
trustee for AT&T Master Pension Trust, send to John Hancock Mutual Life
Insurance Company at John Hancock Place, P.O. Box 111, Boston, Massachusetts
02117, Attention: Stephen A. MacLean, Bond and Corporate Finance Department
T-57, with a copy to: Mellon Bank, N.A., at One Mellon Bank Center, Room
3120, Pittsburgh, Pennsylvania 15258, Attention: Deborah Wright; (vi) if to
FNB, or the Owner Trustee, at c/o First Trust Company, Inc., Corporate Trust
Department, Box 64111, St. Paul, Minnesota 55164-0111; (vii) if to The
Connecticut Bank and Trust Company, National Association or to the Indenture
Trustee at One Constitution Plaza, Hartford, Connecticut 06115,
Attention: Corporate Trust
____________________
<F5> Note 5: Address of each Owner Participant: Associated and
Mission-3010 Old Ranch Parkway, Suite 400, Seal Beach, California
90740, Attention: Thomas R. McDaniel, President, with a copy of
all communications, notices and consents sent to Associated or
Mission to be sent to Southern California Edison Company, 2244
Walnut Grove Avenue, Rosemead, California 91770, Attention: David
L. Minning; Dana and Dana Leasing-1300 Indianwood Circle, Maumee,
OH 43537, Attention: John F. Tiegland; NYNEX-335 Madison Avenue,
New York, NY 10017, Attention: Mirijana Kocho, Vice President and
General Counsel; PSR and Resources-80 Park Plaza T6B, Newark,
New Jersey 07101, Attention: Eileen A. Moran; SoInd and Joint
Ventures-P.O. Box 20006, 100 N.W. Second Street, Suite 310,
Evansville, IN 47708, Attention: Fred Creech, Vice President-
General Manager.
Department; (viii) if to Minnesota Paper at 30 West Superior Street, Duluth,
MN 55802 Attention: Vice President-Finance; (ix) if to Pentair Duluth at 1700
West Highway 36, St. Paul, MN 55113 Attention: Vice President-Finance; (x) if
to Minnesota Power at 30 West Superior Street, Duluth, MN 55802 Attention:
Vice President-Finance; (xi) if to Pentair at 1700 West Highway 36, St. Paul,
MN 55113 Attention: Vice President-Finance; and (xii) if to the Lessee, at
100 N . Central Avenue, Duluth, Minnesota 55807, Attention: Vice President-
Finance; or at such other address as any party hereto may from time to time
designate by notice duly given in accordance with the provisions of this
Section to the other parties hereto.
SECTION 19. MISCELLANEOUS.
SECTION 19(A). EXECUTION. This Financing Agreement may be executed in
any number of counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed and delivered, shall be an
original, but all such counterparts shall together constitute but one and the
same instrument. Fully executed sets of counterparts shall be delivered to
and retained by the Indenture Trustee.
SECTION 19(B). INTENTIONS OF THE OWNER PARTICIPANT. The Owner
Participant intends to exercise its rights and carry out its obligations
hereunder and under the other Transaction Documents solely with a view to
furthering its own best interests and does not have, and does not expect to
have, so long as the Facility Lease is in effect, any form of joint profit
motive with any other Person. Except as provided in the Indenture, the Owner
Participant shall not be required to share any Rent to which it is entitled
under the Facility Lease with any other Person. The Owner Participant is not
under the control of nor shall be deemed to be under the control of any
Person having any interest in the Facility, and shall not be the agent of or
have a right or power to bind any such Person without its express written
consent. The Owner Participant accordingly does not intend to create any form
of partnership or joint venture with any other Person by virtue of the
transactions contemplated hereby or by any other Transaction Document. In the
event that it is determined, contrary to the intent of the Owner Participant,
that, for purposes of the Code or any other income tax law, a form of
partnership or joint venture exists between the Owner Participant and any
other Person, the Owner Participant hereby elects to the extent permitted by
law (i) not to have the partnership provisions of the Code or such other
income tax law apply to any of the transactions contemplated hereby or by any
other Transaction Document and (ii) to be treated as the sole Person owning
the Undivided Interest.
SECTION 19(C). GOVERNING LAW. This Financing Agreement has been
negotiated, executed and delivered in the State of New York and shall be
governed by, and be construed in accordance with, the laws of the State of
New York.
SECTION 19(D). AMENDMENTS, SUPPLEMENTS, ETC. Neither this Financing
Agreement nor any of the terms hereof may be amended, supplemented, waived or
modified orally, but only by an instrument in writing signed by the party
against which enforcement of such change is sought. Neither any Transaction
Document (except the Tax Indemnity Agreement), nor any Assigned Contract or
the Support Agreement, shall be amended or terminated without the prior
written consent of a Majority in Interest of Noteholders, unless such
amendment shall be effective on or after the Discharge of the Indenture.
SECTION 19(E). HEADINGS. The division of this Financing Agreement into
sections, the provision of a table of contents and the insertion of headings
are for convenience of reference only and shall not affect the construction
or interpretation of this Financing Agreement.
SECTION 19(F). BANKRUPTCY OF OWNER PARTICIPANT. If (i) for any reason
other than a voluntary declaration of bankruptcy by the Owner Participant on
behalf of itself or of the Trust, the Owner Participant or the Trust becomes
a debtor subject to the reorganization provisions of the Bankruptcy Reform
Act of 1978, or any successor provision, (ii) pursuant to such reorganization
provisions the Owner Participant is required, by reason of the Owner
Participant being held against its timely asserted objections to be liable in
its individual capacity (whether or not the Owner Participant is then also
subject to such reorganization provisions) to make payment on account of any
amount payable as principal, interest or premium (if any) on the Notes and
(iii) any Holder of a Note or the Indenture Trustee actually receives an
Excess Amount (as defined below) as a result of any payment by such Owner
Participant on account of any such recourse liability referred to in clause
(ii) of this Section 19(f), then such Holder or the Indenture Trustee, as the
case may be, shall promptly refund such Excess Amount, without interest, to
the Owner Participant after receipt by such Holder or the Indenture Trustee,
as the case may be, of a written request for such refund by the Owner
Participant (which request shall specify the amount of such Excess Amount and
shall set forth in detail the calculation thereof). For purposes of this
Section 19(f), "Excess Amount" means the amount by which payments to such
Holder and the Indenture Trustee on account of amounts payable as principal,
interest or premium (if any) on the Notes exceed the amount which would have
been received by such Holder and the Indenture Trustee on account of amounts
payable as principal, interest or premium (if any) on the Notes from the
Lease Indenture Estate in the administration of the Indenture in a manner
which gave effect to the terms and conditions of the Indenture and in which
the Owner Participant did not become subject to the recourse liability
referred to in clause (ii) of this Section 19(f). Nothing in this Section
19(f) shall prevent the Indenture Trustee or the Holders from enforcing and
retaining the proceeds of any personal recourse obligation of Owner
Participant under the Financing Agreement.
SECTION 19(G). ENTIRE AGREEMENT. This Financing Agreement (including the
Appendix, the Schedules and the Exhibits) and the other Transaction Documents
supersede all prior agreements, written or oral, between or among any of the
parties hereto relating to the transactions contemplated hereby or thereby
and each of the parties hereto represents and warrants to the others that
this Financing Agreement and the other Transaction Documents constitute the
entire agreement among the parties relating to the transactions contemplated
hereby or thereby.
SECTION 19(H). NONRECOURSE LOAN AS TO JOINT VENTURERS AND THE SPONSORS.
The Loan is a nonrecourse Loan with respect to the Joint Venturers and the
Sponsors. The Joint Venturers and the Sponsors have certain contractual
obligations under this Financing Agreement, the Keepwell Agreements and the
Cash Deficiency Agreements only. In addition, the Joint Venturers and the
Sponsors are not responsible for any obligations of the Lessee to the Lessor
except as specifically set forth in this Financing Agreement, the Keepwell
Agreements and the Cash Deficiency Agreements.
SECTION 19(I). SEVERABILITY OF PROVISIONS. Any provision of this
Financing Agreement which may be determined by competent authority to be
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have each caused this Financing
Agreement to be duly executed by their respective officers thereunto duly
authorized this 31st day of December, 1987.
[NOTE 1]
By /s/ [Note 6]<F6>
[Note 6]
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By /s/ M. P. Fraher
Vice President
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By /s/ Herman R. Seavey
Senior Investment Officer
STATE OF WISCONSIN INVESTMENT
BOARD
By /s/ Richard V. Gibson
Investment Director
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By /s/ Casey J. Sylla
Vice President
MELLON BANK, N.A., as trustee for
AT&T Master Pension Trust
By /s/ Paul C. Clark
Associate Counsel
FIRST NATIONAL BANK OF
MINNEAPOLIS, as Owner
Trustee, except as expressly
set forth herein
____________________
[FN]
<F6> Note 6: Signatory and title for each Owner Participant:
Associated - Thomas R. McDaniel, Vice President; Dana - John F.
Tiegland, Senior Vice President; NYNEX - William F. Heitmann,
President; PSR - Eileen A. Moran, Vice President; SoInd - N. P.
Wagner, President.
By /s/ Jon M. Stevens
Assistant Vice President
By /s/ Frank P. Leslie III
Assistant Secretary
THE CONNECTICUT BANK AND
TRUST COMPANY,
NATIONAL ASSOCIATION, as
Indenture Trustee, and in its
individual capacity to the extent
set forth in Section 5
By /s/ Donald E. Smith
Vice President
MINNESOTA PAPER INCORPORATED
By /s/ R.D. Edwards
Vice President-Finance
PENTAIR DULUTH CORP.
By /s/ J.H. Grunewald
Vice President
MINNESOTA POWER & LIGHT
COMPANY
By /s/ R.D. Edwards
Vice President-Finance
PENTAIR, INC.
By /s/ J.H. Grunewald
Vice President
LAKE SUPERIOR PAPER INDUSTRIES
By /s/ Ronald V. Kelly
President
[COMPOSITE CONFORMED COPY IN RESPECT OF FIVE
SEPARATE UNDIVIDED INTEREST TRANSACTIONS]
KEEPWELL AGREEMENT AND ASSIGNMENT<F1>
dated December 31, 1987
among
PENTAIR, INC.,
as Sponsor
PENTAIR DULUTH CORP.,
as Joint Venturer
and
FIRST NATIONAL BANK OF MINNEAPOLIS,
not in its individual capacity, but solely as Owner Trustee under a Trust
Agreement, dated December 31, 1987, with [Note 1]<F2> [Note 2]<F3>,
as Owner Trustee
SALE AND LEASEBACK OF UNDIVIDED INTEREST IN
LAKE SUPERIOR PAPER INDUSTRIES' SUPERCALENDERED PAPER MILL
THE RIGHTS OF THE OWNER TRUSTEE UNDER THIS AGREEMENT ARE SUBJECT TO A LIEN
AND SECURITY INTEREST IN FAVOR OF THE CONNECTICUT BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE UNDER A TRUST INDENTURE, MORTGAGE,
FIXTURE FINANCING STATEMENT AND SECURITY AGREEMENT, DATED DECEMBER 31, 1987,
WITH THE OWNER TRUSTEE.
____________________
<F1> Each Sponsor and its affiliated Joint Venturer entered
into a Keepwell Agreement and Assignment with each Owner Trustee,
in the form hereof.
<F2> Note 1: Original Undivided Interest Owner Participants:
Associated Southern Investment Company (Associated); Dana Lease
Finance Corporation (Dana); NYNEX Credit Company (NYNEX); Public
Service Resources Corporation (PSR); Southern Indiana Properties,
Inc. (SoInd)
<F3> Note 2: Associated assigned its Undivided Interest to its
Affiliate, Mission Funding Delta (Mission) on January 29, 1988;
Dana assigned its Undivided Interest to its Affiliate, Dana
Leasing, Inc. (Dana Leasing) on January 14, 1988; PSR assigned
its Undivided Interest to Resources Capital Investment
Corporation (Resources) on January 14, 1988; SoInd assigned its
Undivided Interest to its Affiliate, Joint Ventures Affiliated,
Inc. (Joint Ventures) on January 15, 1988. Unless the context
otherwise requires, from the respective dates set out above, any
reference to Associated, Dana, PSR or Solnd shall be read as
being a reference to Mission, Dana Leasing, Resources or Joint
Ventures, respectively.
KEEPWELL AGREEMENT AND ASSIGNMENT
THIS KEEPWELL AGREEMENT AND ASSIGNMENT, dated December 31, 1987, among
PENTAIR, INC., a Minnesota corporation (the Sponsor), PENTAIR DULUTH CORP., a
Minnesota corporation (the Joint Venturer), and FIRST NATIONAL BANK OF
MINNEAPOLIS [NOTE 3]<F4> a national banking association, not in its individual
capacity, but solely as Owner Trustee under a Trust Agreement, dated December
31, 1987, with [NOTE 1] (the Owner Trustee).
W I T N E S E T H:
WHEREAS, the Joint Venturer is a wholly-owned subsidiary of the Sponsor;
WHEREAS, the Sponsor has caused the Joint Venturer to enter into the
Joint Venture Agreement pursuant to which the Joint Venturer and the Other
Joint Venturer have created Lake Superior Paper Industries, a joint venture
organized under the general partnership law of the State of Minnesota;
WHEREAS, the Joint Venturer is a party to the Cash Deficiency Agreement,
under the terms of which the Joint Venturer has agreed to guarantee the
payment by the Lessee of all Lessee's Obligations under the Guaranteed
Agreements, in accordance with, and to the extent set forth in, the Cash
Deficiency Agreement;
WHEREAS, in order to induce the Loan Participants and the Owner
Participant to enter into and perform their respective obligations under the
Financing Agreement, the Sponsor has agreed to support the obligations of the
Joint Venturer under the Cash Deficiency Agreement;
WHEREAS, the Joint Venturer has agreed to assign to the Owner Trustee
all of its rights under this Agreement in accordance with, and to the extent
set forth in, the terms and conditions of this Agreement; and
WHEREAS, in consideration of the issuance, sale and delivery by the
Owner Trustee of the Notes, the proceeds of which are to be used for the
purpose of financing part of the cost of the Owner Trustee's Undivided
Interest, the Owner Trustee, concurrently with the execution and delivery of
this Agreement, is further assigning to the Indenture Trustee the rights
assigned to the Owner Trustee hereunder.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
agree as follows:
SECTION 1. DEFINITIONS.
For the purposes hereof, capitalized terms used herein, unless otherwise
defined herein, shall have the respective meanings assigned to such terms in
Appendix A.
____________________
<F4> Effective January 1, 1988, First National Bank of
Minneapolis changed its name to First Bank National Association.
SECTION 2. KEEPWELL AGREEMENT.
SECTION 2(A). PAYMENT KEEPWELL. The Sponsor hereby irrevocably and
unconditionally agrees to pay to the Joint Venturer, on demand, such amount
as shall be necessary from time to time to ensure that the Joint Venturer has
funds adequate and sufficient to pay, at the time such amounts shall be due
and payable, any and all of the amounts payable by the Joint Venturer under
the Cash Deficiency Agreement.
SECTION 2(B). PERFORMANCE KEEPWELL. Without limiting the operation of
Section 2(a), the Sponsor hereby irrevocably and unconditionally agrees to
cause the Joint Venturer to perform any and all of its obligations under the
Cash Deficiency Agreement in accordance with the terms and provisions
thereof.
SECTION 2(C). LIMITATION ON PAYMENTS; REINSTATEMENTS. Anything contained
in this Agreement or any other Guaranteed Agreement to the contrary
notwithstanding, the liability of the Sponsor under this Section 2 shall be
limited to the Applicable CDA Amount in respect of the Joint Venturer;
provided, however, that the Sponsor's obligations under this Agreement shall
continue to be effective if payment of all or any part of such obligations is
avoided or otherwise recovered by the Sponsor upon the bankruptcy,
reorganization or otherwise of the Sponsor or any other Person.
SECTION 3. UNCONDITIONAL NATURE OF OBLIGATIONS.
SECTION 3(A). ABSOLUTE AND UNCONDITIONAL OBLIGATIONS. The obligations of
the Sponsor hereunder shall be absolute and unconditional, and shall remain
in full force and effect without regard to, and shall not be released,
discharged or in any way affected by any circumstance or condition (whether
or not the Sponsor, the Lessee or the Joint Venturer shall have any knowledge
or notice thereof), irrespective of:
(i) the validity, regularity or enforceability of any Guaranteed
Agreement (or any other agreement), or any provision thereof, the absence of
any action to enforce the same or any waiver or consent with respect to any
provision thereof;
(ii) the recovery of any judgment against any Person or entity or any
action to enforce the same;
(iii) any failure or delay in the enforcement of the obligations of any
Person or entity under any Guaranteed Agreement (or any other agreement), or
any provision thereof;
(iv) any other circumstances which might otherwise constitute a legal or
equitable defense or discharge of a guarantor or surety; or
(v) any set-off, counterclaim, deduction, defense, abatement,
suspension, deferment, diminution, recoupment, limitation or termination, and
irrespective of any other circumstances which might otherwise limit recourse
against the Sponsor.
SECTION 3(B). ENFORCEMENT. Without limiting the generality of Section
3(a), the obligations of the Sponsor, and the rights of the Joint Venturer or
the Owner Trustee to enforce the same by proceedings, whether by action at
law, suit in equity or otherwise, shall not be in any way affected by:
(i) any insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, winding up or other proceeding
involving or affecting the Joint Venturer, the Lessee, the Other Joint
Venturer, the Sponsor, the Other Sponsor or their respective properties or
creditors, or any other Person, or any action taken by any trustee or
receiver or by any court in any such proceeding;
(ii) any amendment to the Joint Venture Agreement or change in the joint
venture interests in the Lessee (including without limitation the admission
or withdrawal of joint venturers, including the Joint Venturer), the
dissolution or winding up of the Lessee for any reason whatsoever, or any
change in the ownership of any of the capital stock of the Joint Venturer,
the Other Joint Venturer, the Sponsor, the Other Sponsor or any other Person;
or
(iii) any failure of any Person, whether or not without fault on its
part, to perform or comply with any of the terms of any Guaranteed Agreement.
SECTION 3(C). AMENDMENTS. No compromise, alteration, amendment,
modification, extension, renewal, release or other change of, or waiver,
consent or other action, or delay or omission or failure to act, in respect
of, any liability or obligation under or in respect of, or of any of the
terms, covenants or conditions of, any Guaranteed Agreement, any other
agreement or any related document referred to therein, or any assignment or
transfer of any thereof or any furnishing or acceptance of additional
security, or any release of any security, for the Joint Venturer's
obligations under the Cash Deficiency Agreement or for the CDA Rent, shall in
any way alter or affect any of the obligations of the Sponsor hereunder.
SECTION 3(D). WAIVER BY SPONSOR. Except as herein otherwise provided,
the Sponsor hereby expressly and irrevocably waives diligence, demand for
payment, filing of claims with any court, any proceeding to enforce any
provision of the Cash Deficiency Agreement, any right to require a proceeding
first against the Joint Venturer, the Other Joint Venturer, the Other Sponsor
or the Lessee, or to exhaust any security for the performance of the
obligations of the Joint Venturer or the Lessee, and any protest,
presentment, notice or demand whatsoever, all claims of waiver, release,
surrender, alteration or compromise and all defenses, set-offs,
counterclaims, recoupments, reductions, limitations, impairments or
terminations, whether arising hereunder or otherwise.
SECTION 3(E). FURTHER WAIVER BY SPONSOR. Anything contained in this
Agreement or any other Guaranteed Agreement to the contrary notwithstanding,
the Sponsor hereby waives, and agrees that it will not assert in any action
or proceeding brought by any Person having any right, benefit or claim under
this Agreement, any right, defense or other benefit it may have with respect
to this Agreement arising under Section 365(c)(2) of the Bankruptcy Code of
the United States, as at any time amended, or any successor provision
thereto. This waiver shall be irrevocable so long as any Guaranteed Agreement
shall remain in effect and the Discharge of the Indenture shall not have
occurred.
SECTION 4. KEEPWELL OF PAYMENT OF INTEREST ON OVERDUE AMOUNTS.
Notwithstanding anything to the contrary contained in this Agreement
(including, without limitation, the limitation on the liability of the
Sponsor contained in Section 2(c) of this Agreement), as a separate and
independent obligation, the Sponsor hereby irrevocably and unconditionally
agrees to pay to the Joint Venturer, on demand, such amount as shall be
necessary from time to time to ensure that the Joint Venturer has funds
adequate and sufficient to pay, at the time such amounts shall be due and
payable, all interest payable by the Joint Venturer pursuant to Section 5 of
the Cash Deficiency Agreement; furthermore, any payments by the Sponsor under
this Section shall not be or constitute a CDA Charge; and furthermore, the
Sponsor's obligations under this Section shall continue to be effective if
payment of all or any part of such obligations is avoided or otherwise
recovered by the Sponsor upon the bankruptcy, reorganization or otherwise of
the Sponsor on any other Person.
SECTION 5. REINSTATEMENT.
The limitation upon the obligations of the Sponsor hereunder shall not
be affected by the fact that (i) payment of all or any part of any of the
Lessee's Obligations or any of the Joint Venturer's obligations under the
Cash Deficiency Agreement are avoided or otherwise recovered by the Lessee,
the Joint Venturer, or any other Person (other than the Sponsor) upon the
bankruptcy, reorganization or other similar proceeding of the Lessee, the
Joint Venturer, the Other Joint Venturer, the Sponsor, the Other Sponsor or
any other Person, (ii) any payment made by the Sponsor hereunder shall not
have been received or retained by the Owner Trustee, the Owner Participant,
the Indenture Trustee or any other Person entitled to the benefits of this
Agreement (except in the case where such payment is returned to the Sponsor)
or (iii) any such payment shall be subject to set-off, abatement,
counterclaim, suspension, recoupment, reduction, defense or other right or
claim of any kind of any Person other than the Sponsor.
SECTION 6. ASSIGNMENT.
The Joint Venturer hereby assigns, conveys, transfers and sets over unto
the Owner Trustee absolutely all of the Joint Venturer's right, title and
interest in, to and under this Agreement, including, without limitation, (i)
all rights of the Joint Venturer to demand and receive payment of monies due
and to become due under or pursuant to this Agreement, (ii) all rights of the
Joint Venturer to receive proceeds of any indemnity, warranty or guaranty
with respect to this Agreement, (iii) claims of the Joint Venturer for
damages arising out of or for breach of or default under this Agreement, (iv)
the right of the Joint Venturer to terminate this Agreement and to compel
performance (including, without limitation, the right of the Joint Venturer
to demand payment from the Sponsor) and otherwise exercise all rights and
remedies hereunder, and (v) to the extent not included in the foregoing, all
proceeds of any and all of the foregoing.
SECTION 7. OBLIGATIONS OF JOINT VENTURER.
Notwithstanding any other provision of this Agreement:
(i) the Joint Venturer shall at all times remain liable under the Cash
Deficiency Agreement to perform all of its duties and obligations thereunder
to the same extent as if this Agreement had not been executed;
(ii) neither this Agreement, nor the exercise by the Owner Trustee of
any of the rights assigned hereunder, shall cause the Owner Trustee to become
subject to any obligation or liability of the Joint Venturer, or release the
Joint Venturer from any of its duties or obligations, under this Agreement or
the Cash Deficiency Agreement; and
(iii) the Owner Trustee shall not be obligated to perform any of the
obligations or duties of the Joint Venturer under this Agreement or be
obligated to make any inquiry as to the sufficiency of any payment received
by the Owner Trustee or to present or file any claim or take any other action
to collect or enforce any claim or any payment assigned hereunder.
SECTION 8. APPOINTMENT OF ATTORNEY.
The Joint Venturer hereby irrevocably appoints the Owner Trustee, its
successors and assigns, as the Joint Venturer's true and lawful attorney,
with full power (in the name of the Joint Venturer or otherwise) to ask,
require, demand, receive, compound or give acquittance for any and all monies
and claims for money due or to become due under, or arising out of, the
rights assigned hereunder and, to endorse any checks or other instruments or
orders in connection therewith and to file any claims or take any action or
institute or take control of any proceedings and to obtain any recovery in
connection therewith which the Owner Trustee may deem necessary or advisable.
SECTION 9. CONSENT OF SPONSOR.
The Sponsor hereby consents to the assignment by the Joint Venturer to
the Owner Trustee of all of its right, title and interest in, to and under
this Agreement in accordance with the terms and provisions of this Agreement.
The execution of this Agreement by the Sponsor shall constitute a sufficient
notice of assignment to the Sponsor and the terms of such assignment and the
Sponsor waives all rights which it may have to receive any notice of
assignment. Notwithstanding any provision of this Agreement or any other
Guaranteed Agreement, until the Discharge of the Indenture, the Sponsor shall
make all payments of all amounts payable hereunder to the Owner Trustee to
the Indenture Trustee or such other Person as the Indenture Trustee may
specify, and the right of the Indenture Trustee to receive all such payments
shall not be subject to any defense, counterclaim, set-off or other right or
claim of any kind which the Sponsor or the Joint Venturer may be able to
assert against the Owner Trustee or the Owner Participant in any action
brought by either thereof on this Agreement. Notwithstanding the foregoing,
the Indenture Trustee shall not have any obligation or liability under this
Agreement.
SECTION 10. ASSIGNMENT BY OWNER TRUSTEE.
In order to secure the indebtedness evidenced by the Notes and certain
other obligations as provided in the Indenture, the Indenture provides, among
other things, for the further assignment by the Owner Trustee to the
Indenture Trustee of its right, title and interest in, to and under this
Agreement to the extent set forth in the Indenture. The Joint Venturer and
the Sponsor each hereby consent to such further assignment and consent to the
terms and provisions of the Indenture. The Joint Venturer and the Sponsor
each hereby (a) acknowledge that the Indenture provides for the exercise by
the Indenture Trustee of all rights of the Owner Trustee hereunder to give
any consents, approvals, waivers, notices or the like, to make any elections,
demands or the like or to take any other discretionary action hereunder,
except as specifically set forth in the Indenture, (b) acknowledge receipt of
an executed counterpart of the Indenture and (c) agree that, to the extent
provided in the Indenture, the Indenture Trustee shall have all the rights of
the Owner Trustee hereunder as if the Indenture Trustee had originally been
named as the Owner Trustee herein (every reference herein to the "Owner
Trustee" being read to mean, except where the context otherwise requires, the
Indenture Trustee). The Joint Venturer or the Sponsor (as the case may be)
will furnish to the Indenture Trustee and the Loan Participants counterparts
of all notices, certificates, opinions or other documents of any kind
required to be delivered hereunder by the Joint Venturer or the Sponsor (as
the case may be) to the Owner Trustee. Notwithstanding the foregoing, the
Indenture Trustee shall not have any obligation or liability under this
Agreement.
SECTION 11. TERM.
Subject to any reinstatement as provided in Sections 2(c) and 5, this
Agreement, and the assignment contained in this Agreement, shall be in effect
until the discharge in full of all the Joint Venturer's obligations under the
Cash Deficiency Agreement. Upon termination of this Agreement, all rights and
liabilities conferred or imposed upon the Sponsor by this Agreement shall be
cancelled and this Agreement shall thereafter have no further force or
effect, except as to the settlement of all obligations pursuant to this
Agreement incurred prior to the date of such termination or arising
thereafter as a result of such termination.
SECTION 12. MISCELLANEOUS.
SECTION 12(A). NO LIMITATION ON CAPITAL CONTRIBUTIONS. Nothing herein
contained shall limit the right of the Sponsor or any Affiliate of the
Sponsor to make voluntary capital contributions to the Lessee, the Joint
Venturer or the Other Joint Venturer at any time or to extend credit, or make
loans, to the Lessee or any Joint Venturer; provided, however, that, in the
case of any such extension of credit or loan, the obligation of the Lessee or
the Joint Venturer (as the case may be) in respect thereof shall constitute
Subordinated Debt; provided further, however, that nothing herein contained
shall require, or be deemed to require, the Sponsor to make any additional
capital contributions or loans constituting Subordinated Debt to the Lessee,
the Joint Venturer or the Other Joint Venturer.
SECTION 12(B). AMENDMENT, WAIVER. No modification, amendment or waiver
of any provision of, or consent required by, this Agreement shall be
effective unless the same shall be approved in writing by the Sponsor, the
Joint Venturer, the Owner Trustee, the Owner Participant and, until the
Discharge of the Indenture, the Indenture Trustee. Any such waiver, consent
or approval shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand on any party hereto shall
entitle such party to any other or further notice or demand in the same,
similar or other circumstances, unless such notice is otherwise required to
be given by this Agreement, the Cash Deficiency Agreement or any other
Guaranteed Agreement. No waiver of any breach or default of the Sponsor under
this Agreement shall be deemed a waiver of any other previous breach or
default or any thereafter occurring.
SECTION 12(C). REMEDIES CUMULATIVE. No right, power or remedy herein
conferred upon or reserved to the Joint Venturer, the Owner Trustee, the
Holders, the Loan Participants, the Owner Participant, the Indenture Trustee
and their respective successors or assigns is intended to be exclusive of any
other right, power or remedy, and each and every right, power and remedy of
the Joint Venturer, the Owner Trustee, the Holders, the Loan Participants,
the Owner Participant, the Indenture Trustee and their respective successors
or assigns pursuant to this Agreement or any other Guaranteed Agreement or
other agreement or now or hereafter existing at law or in equity or by
statute or otherwise, shall, to the extent permitted by Applicable Law, be
cumulative and concurrent and shall be in addition to every other right,
power or remedy pursuant to this Agreement or now or hereafter existing at
law or in equity or by statute or otherwise, and the exercise or beginning of
the exercise by any one or more of the Joint Venturer, the Owner Trustee, the
Holders, the Loan Participants, the Owner Participant, the Indenture Trustee
or their respective successors or assigns of any one or more of such rights,
powers or remedies shall not preclude the simultaneous or later exercise by
any one or more of the Joint Venturer, the Owner Trustee, the Holders, the
Loan Participants, the Owner Participant, the Indenture Trustee, their
respective successors or assigns or any other Person of any or all such other
rights, powers or remedies.
SECTION 12(D). SEVERABILITY. Any provision of this Agreement prohibited
by the laws of any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition, or modified to conform with
such laws, without invalidating the remaining provisions of this Agreement,
and any such prohibition in any jurisdiction shall not invalidate such
provisions in any other jurisdiction. To the extent permitted by applicable
law, the Sponsor hereby waives any provision of law which renders any
provision hereof prohibited or unenforceable in any respect.
SECTION 12(E). EXECUTION. This Agreement may be executed in any number
of counterparts and by the parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute but one and the same instrument. Fully
executed sets of counterparts shall be delivered to and retained by the
Indenture Trustee.
SECTION 12(F). GOVERNING LAW. This Agreement has been negotiated and
delivered in the State of New York and shall be governed by, and be construed
in accordance with, the laws of the State of New York.
SECTION 12(G). NOTICES. All communications and notices provided for in
this Agreement shall be in writing and shall be given in person or by means
of telex, telecopy, or other wire transmission, or mailed by registered or
certified mail, addressed as provided in the Financing Agreement. All such
communications and notices given in such manner shall be effective on the
date of receipt of such communication or notice.
SECTION 12(H). SUCCESSORS AND ASSIGNS; ASSIGNMENT AND ASSUMPTION. This
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither the
Sponsor nor the Joint Venturer shall, except pursuant to this Agreement,
assign or transfer any of its rights or obligations hereunder without the
prior written consent of the Owner Trustee, the Owner Participant and the
Indenture Trustee; provided, however, that without such consent, upon the
occurrence of an Event of Default by the Sponsor or by the Joint Venturer,
the Other Sponsor may assume the obligations of the Sponsor hereunder if (and
such assumption shall remain in effect only so long as) (i) such assumption
shall have occurred within 30 days of the date of occurrence of such Event of
Default (or such longer period of time, not exceeding six months, as may be
required to obtain any required Governmental Action; provided, however, that
such Governmental Action is being diligently pursued by the Person requiring
the same), (ii) the Other Joint Venturer shall have concurrently assumed the
obligations of the Joint Venturer under the Cash Deficiency Agreement and the
Joint Venturer shall have concurrently assigned its rights hereunder to the
Other Joint Venturer, and (iii) such Other Sponsor shall, at the time of such
assumption and at all times thereafter, have an investment rating in respect
of its senior securities at least equal to BBB- by Standard & Poor's
Corporation (or if such rating agency is not then rating debt obligations of
that kind, an equivalent rating by a nationally recognized rating agency), or
if such Other Sponsor shall not then have outstanding senior securities, an
investment rating in respect of its subordinated debt or of preferred stock
securities of not less than BB + by Standard & Poor's Corporation (or if such
rating agency is not then rating debt obligations or preferred stock
securities of that kind, an equivalent rating by a nationally recognized
rating agency); provided, however, that if such Other Sponsor shall not have
such investment rating at the time of assumption or at any time thereafter,
so long as this Agreement shall continue in effect, such Other Sponsor shall
have a period of ninety (90) days (or such longer period of time, not
exceeding six months, as may be required to obtain any required Governmental
Action; provided, however, that such Governmental Action is being diligently
pursued by the Person requiring the same) from the date of the assumption
hereof, or any later date on which such investment rating shall have been
reduced, to (x) obtain security in the full amount of its obligations
hereunder reasonably acceptable to the Owner Trustee, the Owner Participant,
the Indenture Trustee and the Loan Participants, or (y) raise its investment
rating to the level required hereinabove. No such assumption by the Other
Sponsor shall relieve the Sponsor of any liability in connection with the
occurrence of such Event of Default.
SECTION 12(I). BENEFICIARY. This Agreement is made solely for the
benefit of the Joint Venturer and its successors and assigns (including,
without limitation, the Owner Trustee and, until the Discharge of the
Indenture, the Holders, the Loan Participants, the Indenture Trustee and
their respective successors or assigns) and no other Person shall acquire or
have any right hereunder or by virtue hereof.
IN WITNESS WHEREOF, the parties hereto have each caused this Keepwell
Agreement and Assignment to be duly executed in New York, New York, on the
date first set forth above by their respective officers thereunto duly
authorized.
PENTAIR, INC.
By /s/ J. H. Grunewald
Vice President
PENTAIR DULUTH CORP.
By /s/ J. H. Grunewald
Vice President
FIRST NATIONAL BANK OF
MINNEAPOLIS, not in its
individual capacity but solely
as Owner Trustee under a Trust
Agreement, dated December 31,
1987, with [Note 1]
By /s/ Jon M. Stevens
Assistant Vice President
By /s/ Frank P. Leslie III
Assistant Secretary
APPENDIX A
DEFINITIONS
[SEE APPENDIX A TO COMPOSITE CONFORMED FINANCING AGREEMENT]
[COMPOSITE CONFORMED COPY IN RESPECT OF FIVE
SEPARATE UNDIVIDED INTEREST TRANSACTIONS]
CERTAIN RIGHTS OF THE LESSOR UNDER THIS FACILITY LEASE AND IN THE UNDIVIDED
INTEREST COVERED HEREBY HAVE BEEN ASSIGNED TO, AND ARE SUBJECT TO A LIEN AND
SECURITY INTEREST IN FAVOR OF, THE CONNECTICUT BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE UNDER A TRUST INDENTURE, MORTGAGE,
FIXTURE FINANCING STATEMENT AND SECURITY AGREEMENT, DATED DECEMBER 31, 1987.
THIS FACILITY LEASE HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. SEE SECTION
20(E) OF THIS FACILITY LEASE FOR INFORMATION CONCERNING THE RIGHTS OF HOLDERS
OF THE VARIOUS COUNTERPARTS HEREOF.
FACILITY LEASE
dated December 31, 1987
among
LAKE SUPERIOR PAPER INDUSTRIES,
as Lessee
and
FIRST NATIONAL BANK OF MINNEAPOLIS,
not in its individual capacity, but solely as Owner Trustee under a Trust
Agreement, dated December 31, 1987, with [Note 1]<F1> [Note 2]<F2>
as Lessor
SALE AND LEASEBACK OF UNDIVIDED INTEREST IN
LAKE SUPERIOR PAPER INDUSTRIES' SUPERCALENDERED PAPER MILL
FACILITY LEASE
THIS FACILITY LEASE, dated December 31, 1987, among FIRST NATIONAL BANK
____________________
[FN]
<F1> Note 1. Original Undivided Interest Owner Participants:
Associated Southern Investment Company (Associated); Dana Lease
Finance Corporation (Dana); NYNEX Credit Company (NYNEX); Public
Service Resources Corporation (PSR); Southern Indiana Properties,
Inc. (Solnd)
<F2> Note 2: Associated assigned its Undivided Interest to its
Affiliate, Mission Funding Delta (Mission) on January 29, 1988;
Dana assigned its Undivided Interest to its Affiliate, Dana
Leasing, Inc. (Dana Leasing) on January 14, 1988; PSR assigned
its Undivided Interest to Resources Capital Investment
Corporation (Resources) on January 14, 1988; SoInd assigned its
Undivided Interest to its Affiliate, Joint Ventures Affiliated,
Inc. (Joint Ventures) on January 15, 1988. Unless the context
otherwise requires, from the respective dates set out above, any
reference to Associated, Dana, PSR or SoInd shall be read as
being a reference to Mission, Dana Leasing, Resources or Joint
Ventures, respectively.
OF MINNEAPOLIS [NOTE 3]<F3>, a national banking association, not in its
individual capacity, but solely as Owner Trustee under a Trust Agreement,
dated December 31, 1987, with [NOTE 1] [NOTE 2] (such Owner Trustee being
herein referred to as the Lessor), and LAKE SUPERIOR PAPER INDUSTRIES, a
joint venture organized under the Minnesota general partnership law (the
Lessee).
W I T N E S S E T H :
WHEREAS, the Lessor owns the Undivided Interest;
WHEREAS, the Lessee desires to lease the Undivided Interest from the
Lessor on the terms and conditions set forth herein; and
WHEREAS, the Lessor is willing to lease the Undivided Interest to the
Lessee on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS.
For purposes hereof, capitalized terms used herein shall have the
meanings assigned to such terms in Appendix A hereto.
SECTION 2. LEASE OF UNDIVIDED INTEREST; TERM; PERSONAL PROPERTY.
Upon and subject to the terms and conditions of this Facility Lease, the
Lessor hereby leases to the Lessee, and the Lessee hereby leases from the
Lessor, the Undivided Interest. The term of this Facility Lease shall begin
on the Closing Date and shall end on the last day of the Lease Term. It is
the express intention of the Lessor and the Lessee that title to the
Undivided Interest and every portion thereof is severed, and shall be and
remain severed, from the Facility Site, a description of which is attached as
Exhibit B hereto. The Lessor and the Lessee intend that the Undivided
Interest shall constitute personal property to the maximum extent permitted
by Applicable Law.
SECTION 3. RENT; ADJUSTMENTS TO RENT.
SECTION 3(A). BASIC RENT. The Lessee shall pay to the Lessor, as basic
rent (herein referred to as Basic Rent) for the Undivided Interest, the
following amounts:
(i) on January 1, 1988 and on each Basic Rent Payment Date
thereafter to, and including, July 1, 2012, an amount equal to the
percentage of Facility Cost set forth opposite such Basic Rent
Payment Date on Schedule 2 hereto, as adjusted in accordance with
Sections 3(e) and 3(f); and [NOTE 4]4
(ii) if the Lessee shall have complied with Section 12 and shall
have elected to extend this Facility Lease for the Renewal Term, on
January 1, 2013 and on each Basic Rent Payment Date thereafter
____________________
<F3> Note 3: Effective January 1, 1988, First National Bank of
Minneapolis changed its name to First Bank National Association.
<F4> Note 4: Used in connection with Associated Undivided
Interest transaction only.
during any Renewal Term, an amount equal to the Fair Market Rental
Value of the Undivided Interest. [NOTE 4]
(i) on December 31, 1987 and on each Basic Rent Payment Date
thereafter to, and including, June 22, 2012, an amount equal to the
percentage of Facility Cost set forth opposite such Basic Rent
Payment Date on Schedule 2 hereto, as adjusted in accordance with
Sections 3(e) and 3(f); and [NOTE 5]<F5>
(ii) if the Lessee shall have complied with Section 12 and shall
have elected to extend this Facility Lease for the Renewal Term, on
December 22, 2012 and on each Basic Rent Payment Date thereafter
during any Renewal Term, an amount equal to the Fair Market Rental
Value of the Undivided Interest. [NOTE 5]
SECTION 3(B). SUPPLEMENTAL RENT. The Lessee shall pay to the Lessor the
following amounts (herein referred to as Supplemental Rent, which term
expressly excludes all Special Supplemental Rent):
(i) on demand, any amount (other than Basic Rent, Casualty Value,
Agreed Fair Market Value, Fair Market Sales Value, Termination
Value, Special Termination Value and Special Supplemental Rent)
which the Lessee assumes the obligation to pay, or agrees to pay,
under this Facility Lease or any other Transaction Document to the
Lessor or others;
(ii) on the date provided herein, any amount payable hereunder as
Casualty Value, Agreed Fair Market Value, Termination Value or
Special Termination Value;
(iii) on demand, and in any event on the Basic Rent Payment
Date next following the date any payment referred to in this
Section 3 shall be due and payable hereunder or under any
Transaction Document, to the extent permitted by Applicable Law,
interest (computed on the basis of a 360-day year) at a rate per
annum equal to the Overdue Rate on any payment of Basic Rent or
Supplemental Rent (including, without limitation, to the extent
permitted by Applicable Law, interest payable pursuant to this
clause (iii)) not paid when due (without regard to any period of
grace) for any period for which the same shall be overdue;
(iv) if the provisions of the last sentence of Section 3(d) shall
be applicable, on such succeeding Business Day interest at a rate
equal to 12.08% per annum on all Basic Rent or Supplemental Rent
paid on such day for the period from, and including, the day on
which such Basic Rent or Supplemental Rent was otherwise due to,
but excluding, such succeeding Business Day; and
(v) on any date other than a Basic Rent Payment Date on which any
Note is prepaid, in whole or in part, an amount equal to all
interest accrued and unpaid on each such Note, or portion, to be so
prepaid for the period from, and including, the preceding Basic
Rent Payment Date to, but excluding, such date, except to the
extent that such interest shall have been otherwise duly paid.
In the event of any failure on the part of the Lessee to pay any Supplemental
Rent when the same shall become due and payable, the Lessor shall have all
rights, powers and remedies provided for in Section 16(a), or in equity or
otherwise, in the case of non-payment of Basic Rent.
____________________
<F5> Note 5: Used in connection with Dana, NYNEX, PSR and SoInd
Undivided Interest transactions.
SECTION 3(C). SPECIAL SUPPLEMENTAL RENT. The Lessee shall pay to the
Lessor all Special Supplemental Rent at the time, in the amount or amounts
and subject to the conditions provided in the Financing Agreement. In the
event of any failure on the part of the Lessee to pay any Special
Supplemental Rent when the same shall become due and payable, the Lessor
shall have all rights, powers and remedies provided in Section 16(a), or in
equity or otherwise.
SECTION 3(D). FORM OF PAYMENT. All payments of Rent shall be made so
that the Person entitled to receive the same shall have immediately available
funds prior to 12:00 noon, New York City time, on the date each such payment
shall be due and payable and shall be paid either (A) to the Lessor at its
address set forth in Section 17 or at such other address as the Lessor may
direct by notice in writing to the Lessee or (B) to such other Person as
shall be entitled to receive such payment at such address as such Person may
direct by notice in writing to the Lessee. If the date on which any payment
of Basic Rent, Supplemental Rent or Special Supplemental Rent is due shall
not be a Business Day, the payment otherwise due shall be due and payable on
the next succeeding Business Day, with the same force and effect as if paid
on the nominal date provided herein or in the Financing Agreement.
SECTION 3(E). ADJUSTMENTS TO RENT. Basic Rent and the Schedules of
Casualty Values, Agreed Fair Market Values, Termination Values and Special
Termination Values attached hereto shall be subject to adjustment pursuant to
the Financing Agreement, and each such adjustment shall be reflected in a
Facility Lease Supplement.
SECTION 3(F). SUFFICIENCY OF BASIC RENT AND SUPPLEMENTAL RENT. Any other
provision of this Facility Lease or any other Transaction Document to the
contrary notwithstanding, (i) the amount of Basic Rent payable on each Basic
Rent Payment Date, computed as a percentage of Facility Cost and (ii) the
amount of Casualty Value, Agreed Fair Market Value, Termination Value and
Special Termination Value payable hereunder, computed as a percentage of
Facility Cost, shall in no event be less than the Minimum Percentage
Requirement.
SECTION 4. NET LEASE.
This Facility Lease shall be a net lease and the Lessee hereby
acknowledges and agrees that the Lessee's obligation to pay all Rent, and the
rights of the Lessor in and to such Rent, shall be absolute and unconditional
and shall not be affected by any circumstances of any character, including,
without limitation, (i) any set-off, abatement, counterclaim, suspension,
recoupment, reduction, defense or other right or claim which the Lessee may
have against either Sponsor, either Joint Venturer, the Lessor, the Owner
Participant, the Indenture Trustee, any Loan Participant, any vendor or
manufacturer of any equipment or assets incorporated in, attached to, or
installed on, the Facility or any part of any thereof, or any other Person
for any reason whatsoever, (ii) any defect in or failure of the title,
merchantability, condition, design, compliance with specifications, operation
or fitness for use of all or any part of the Undivided Interest or the
Facility, any Component or the Facility Site, (iii) any damage to, removal,
abandonment, salvage, scrapping, requisition, taking, loss, theft or
destruction of all or any part of the Undivided Interest or the Facility, any
Component, the Facility Site, or any interference, interruption or cessation
in the use or possession of all or any part of the Undivided Interest, the
Facility, any Component or the Facility Site by the Lessee or by any other
Person for any reason whatsoever or of whatever duration, (iv) any
restriction, prevention or curtailment of or interference with any use of all
or any part of the Undivided Interest, the Facility, any Component or the
Facility Site, (v) any insolvency, bankruptcy, reorganization or similar
proceeding by or against the Lessee, either Sponsor, either Joint Venturer,
the Lessor, the Owner Participant, the Indenture Trustee, any Loan
Participant or any other Person, (vi) the invalidity, illegality,
disaffirmance or unenforceability of this Facility Lease or any other
Transaction Document or any other instrument referred to herein or therein or
any other infirmity herein or therein or any lack of right, power or
authority of the Lessor, the Lessee, either Sponsor, either Joint Venturer,
the Owner Participant, the Indenture Trustee, any Loan Participant or any
other Person to enter into this Facility Lease or any other Transaction
Document, or any doctrine of force majeure or frustration, (vii) the breach
or failure of any warranty or representation made in, or the failure to
perform or comply with any of the terms of, this Facility Lease or any other
Transaction Document by the Lessor, either Sponsor, either Joint Venturer,
the Owner Participant, the Indenture Trustee, any Loan Participant or any
other Person, (viii) any amendment or other change of, or any assignment of
rights under, any waiver, action or inaction under or in respect of, or any
exercise or non-exercise of any right or remedy under, this Facility Lease or
any other Transaction Document, including, without limitation, the exercise
of any foreclosure or other remedy under the Indenture or this Facility
Lease, or the sale of the Undivided Interest, the Facility, any Component or
the Facility Site, or any part thereof or any interest therein, or (ix) any
other circumstance or happening whatsoever whether or not similar to any of
the foregoing. The Lessee hereby waives, to the extent permitted by
Applicable Law, any and all rights which it may now have or which at any time
hereafter may be conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Facility Lease, to reject or cancel its
obligations under the Financing Agreement relating to Special Supplemental
Rent, or to effect or claim any diminution or reduction of Rent payable by
the Lessee hereunder or thereunder, or any amounts payable by the Lessee in
connection with any Event of Loss or an Event of Default, except in
accordance with the express terms hereof or thereof. If for any reason
whatsoever this Facility Lease or any other Transaction Document shall be
terminated, in whole or in part, by operation of law or otherwise, except as
otherwise specifically provided herein or therein, the Lessee nonetheless
agrees to pay to the Lessor an amount equal to each installment of Basic
Rent, all Supplemental Rent and all Special Supplemental Rent at the time
such payment would have become due and payable had this Facility Lease or
such other Transaction Document not been terminated in whole or in part. Each
payment of Rent shall be final and the Lessee shall not seek, or claim any
right, to recover all or any part of such payment from the Lessor or any
other Person for any reason whatsoever.
SECTION 5. RETURN OF THE UNDIVIDED INTEREST.
SECTION 5(A). RETURN OF THE UNDIVIDED INTEREST. Upon the expiration of
the Lease Term, or the termination of this Facility Lease, the Lessee will
(i) surrender possession of the Undivided Interest to the Lessor, subject to
the terms and provisions of the Support Agreement or (ii) if required under
the terms of the Support Agreement, dismantle and crate the Facility in
accordance with the Support Agreement, and pay the expenses of any such
dismantling and crating; provided, however, that, in lieu of dismantling the
Facility, the Lessee may purchase the Undivided Interest for an amount equal
to the greater of (x) the Fair Market Sales Value of the Undivided Interest,
less an amount equal to the Lessor's Share of the estimated cost of
disassembly and reassembly, or (y) one dollar ($1.00). At the time of any
action taken pursuant to clauses (i) or (ii) above, the Lessee shall pay or
have paid all amounts due and payable by it hereunder and under each of the
Transaction Documents allocable or chargeable to the Undivided Interest, no
Note shall remain Outstanding, the Undivided Interest shall be free and clear
of all Liens (other than Lessor's Liens, Owner Participant's Liens and
Indenture Trustee's Liens) and the Facility shall be in the condition and
repair required by Section 8. If required under the terms of the Support
Agreement, the Lessee will provide storage of the dismantled Facility in
accordance with the Support Agreement.
SECTION 5(B). DISPOSITION SERVICES. The Lessee agrees that if it does
not exercise its options under either Section 12 or Section 13, then during
the last eighteen months of the Lease Term, the Lessee will fully cooperate
with the Lessor in connection with the Lessor's efforts to dispose of the
Undivided Interest and the Lessor's interests under the Easement Agreement
and the Support Agreement, including using the Lessee's best efforts to
dispose of the Undivided Interest and such interests under the Easement
Agreement and the Support Agreement. The Lessor agrees to reimburse the
Lessee for the reasonable costs and expenses of the Lessee incurred in
connection with such cooperation, performed at the Lessor's request, should
the Lessor dispose of the Undivided Interest and its interests under the
Easement Agreement and the Support Agreement, or should no such disposition
take place.
SECTION 6. WARRANTY OF THE LESSOR.
SECTION 6(A). LESSEE'S USE. The Lessor warrants that during the Lease
Term, so long as no Event of Default shall have occurred and be continuing,
the Lessee's use of the Facility and the Undivided Interest shall not be
interrupted by the Lessor or any Person claiming through or under the Lessor.
SECTION 6(B). DISCLAIMER OF OTHER WARRANTIES. The warranty set forth in
Section 6(a) is in lieu of all other warranties of the Lessor, whether
written, oral or implied, with respect to this Facility Lease, the Facility
or the Undivided Interest. As among the Owner Participant, the Owner Trustee,
the Loan Participants, the Indenture Trustee, the Lessor and the Lessee,
execution by the Lessee of this Facility Lease shall be conclusive proof of
the compliance of the Facility and the Undivided Interest with all
requirements of this Facility Lease, and the Lessee acknowledges and agrees
that (i) THE FACILITY IS, AND EACH CAPITAL IMPROVEMENT AT THE TIME OF
INSTALLATION WILL BE, SUBSTANTIALLY OF THE SIZE, DESIGN, CAPACITY AND
MANUFACTURE SELECTED BY THE LESSEE, (II) THE LESSEE IS SATISFIED THAT THE
FACILITY IS, AND EACH CAPITAL IMPROVE-MENT AT THE TIME OF INSTALLATION WILL
BE, SUITABLE FOR ITS PURPOSES, (III) THE LESSOR IS NOT A MANUFACTURER OR A
DEALER IN PROPERTY OF SUCH KIND AND, (IV) THE LESSOR LEASES AND THE LESSEE
TAKES THE FACILITY AND THE UNDIVIDED INTEREST, AND SHALL TAKE EACH CAPITAL
IMPROVEMENT, AND ANY PART THEREOF, AS IS, and neither the Lessor, the Loan
Participants nor the Indenture Trustee shall be deemed to have made, and THE
LESSOR HEREBY DISCLAIMS, ANY OTHER REPRESENTATION OR WARRANIY, EITHER EXPRESS
OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE
DESIGN OR CONDITION OF THE FACILITY, ANY CAPITAL IMPROVEMENT OR THE UNDIVIDED
INTEREST, OR ANY PART THEREOF, THE MERCHANTABILITY THEREOF OR THE FITNESS
THEREOF FOR ANY PARTICULAR PURPOSE, TITLE TO THE FACILITY, ANY CAPITAL
IMPROVEMENT, OR THE UNDIVIDED INTEREST, OR ANY PART THEREOF, THE QUALLTY OF
THE MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFLCATIONS,
FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT OR THE ABSENCE OF ANY LATENT OR
OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, NOR SHALL THE LESSOR BE LIABLE
FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING LIABILITY IN TORT, STRICT
OR OTHERWISE), it being agreed that all such risks, as among the Owner
Participant, the Loan Participants, the Indenture Trustee, the Owner Trustee,
the Lessor and the Lessee, are to be borne by the Lessee. The provisions of
this paragraph (b) have been negotiated, and, except to the extent otherwise
expressly stated, the foregoing provisions are intended to be a complete
exclusion and negation of any representations or warranties by the Lessor,
the Owner Trustee, the Owner Participant, the Loan Participants or the
lndenture Trustee, express or implied, with respect to the Facility or the
Undivided Interest, that may arise pursuant to any Applicable Law now or
hereafter in effect, or otherwise. The Lessor authorizes the Lessee, at the
Lessee's expense, to assert for the Lessor's account, during the Basic Lease
Term and the Renewal Term, so long as no Default or Event of Default shall
have occurred and be continuing, all of the Lessor's rights under any
applicable warranty and any other claims that the Lessee or the Lessor may
have against any vendor or manufacturer with respect to the Facility, any
Component or any Capital Improvement title to an undivided interest in which
shall have vested in the Lessor pursuant to Section 8 (except that consent of
the Lessor shall be required for any monetary settlement of any such claims
involving an amount exceeding $1,000,000) and the Lessor agrees to cooperate,
at the Lessee's expense, with the Lessee in asserting such rights; provided,
however, that the Lessee shall indemnify each Indemnitee and hold each
Indemnitee harmless from and against any and all Claims incurred or suffered
by such Indemnitee in connection with, as a result of, or incidental to, any
action by the Lessee pursuant to the above authorization. At the request of
the Lessee (provided no Default or Event of Default shall have occurred and
be continuing and provided, further, that the Lessor shall have been
indemnified to its satisfaction by the Lessee with respect to all costs and
expenses), and, if required for the realization of any Claim the Lessor shall
commence an action on behalf of the Lessee against any such vendor or
manufacturer and, subject to the preceding sentence, the Lessee shall have
the right to direct and control the conduct of such action. The Lessor's
Share of any amount received by the Lessee as payment with respect to the
Facility, any Component or any Capital Improvement title to an undivided
interest in which shall have vested in the Lessor pursuant to Section 8 under
any such warranty or other claim against any vendor or manufacturer shall be
paid or applied, (i) until a Discharge of the Indenture shall have occurred,
promptly to the Indenture Trustee to be deposited in an account established
for such purpose and paid to the Lessee, upon receipt of certification of
obligations incurred or expenses paid, and (ii) after a Discharge of the
Indenture, to the Lessee unless a Default or Event of Default shall have
occurred and be continuing, first, for the purpose of restoring the Facility
to the condition required by Section 8, second, to reimburse the Lessee for
its reasonable out-of-pocket fees and expenses, if any, incurred in enforcing
any such warranty or other claim, and third, the balance, if any, shall be
applied to the Payment of Basic Rent.
SECTION 7. LIENS; NO ACCESSIONS; NO MORTGAGES, ETC.
SECTION 7(A). LIENS. The Lessee will not directly or indirectly create,
incur or assume or suffer to exist, any Lien (except Permitted Encumbrances)
on or with respect to, (A) the Facility Site, (B) the Facility, any
Component, any Capital Improvement title to an undivided interest in which
shall have vested in the Lessor pursuant to Section 8, the Undivided Interest
or any interest of the Owner Participant or the Lessor therein or (C) the
Trust Estate or the Indenture Trust Estate; provided, however, that the
Lessee shall not be in violation of this covenant with respect to such Liens
involving amounts of less than $2,000,000 which the Lessee did not create,
incur or assume and which the Lessee discharges within five days after a
Responsible Officer of the Lessee first has knowledge or notice thereof. The
Lessee will promptly, at its own expense, take such action as may be
necessary duly to discharge any such Lien, except Permitted Liens.
SECTION 7(B). NO ACCESSIONS. The Lessee shall not permit the Facility,
any Component or any Capital Improvement title to an undivided interest in
which shall have vested in the Lessor pursuant to Section 8 to be attached
to, installed on, incorporated in, or used, stored or maintained with, any
personal property (including, without limitation, any Capital Improvement
title to which shall have vested in the Lessee or any other Person) in such
manner or under such circumstances that such portion would become an
accession to such other personal property.
SECTION 7(C). NO MORTGAGES. The Lessee shall not permit the Facility,
any Component or any Capital Improvement title to an undivided interest in
which shall have vested in the Lessor pursuant to Section 8, to be attached
to, installed on, incorporated in, or used, stored or maintained with, any
real property in such manner or under such circumstances that any Person
would acquire any rights in the Facility, such Component or such Capital
Improvement paramount to or ratable with the rights of the Lessor by reason
of the Facility, such Component or such Capital Improvement being deemed to
be real property or a fixture on real property. The Lessee will not enter
into or be a party to any site lease, easement or mortgage of the Facility
Site other than the Easement Agreement and other nonexclusive easements
permitting other Persons (including, without limitation, the Other Lessors)
having property interests in the Facility or any Expansion to have rights
substantially similar to those granted to the Lessor under the Easement
Agreement.
SECTION 8. OPERATION AND MAINTENANCE; CAPITAL IMPROVEMENTS; MARKING.
SECTION 8(A). OPERATION AND MAINTENANCE. The Lessee covenants that it
will (A) operate, service and maintain the Facility and the Facility Site (t)
so that the condition and operating efficiency of the Facility will be
maintained and preserved, ordinary wear and tear excepted, (u) in accordance
with Applicable Law, (v) in accordance with Prudent Industry Practice for
property or facilities of a similar size and nature, (w) in accordance with
such operating standards as shall be required to enforce warranty claims
against all vendors and manufacturers providing goods, materials or equipment
constituting Components of the Facility, (x) in accordance with the terms and
conditions of all insurance policies in effect at any time with respect to
the Facility or any part thereof, (y) in accordance with such operating
standards as shall be applied by the Lessee with respect to similar
facilities owned or leased by the Lessee, either Joint Venturer, either
Sponsor or any Affiliate of any thereof, and (z) in such condition that the
Facility will be mechanically capable of operating at 100% of Capability in
normal commercial operation on a continuing basis for its estimated useful
life, (B) comply with all Applicable Laws affecting the Facility, the
Facility Site, any Component or any Capital Improvement and the use,
operation and maintenance thereof and (C) keep and maintain proper books and
records relating to all services rendered and all funds expended for
operation and maintenance of the Facility and the Facility Site and the
acquisition, construction and installation of Capital Improvements, the
payment of the Cost thereof, and the payment of debt service on any
indebtedness incurred in connection therewith, all in accordance with
Generally Accepted Accounting Principles and Prudent Industry Practice. lf
any Component shall be removed and such removal shall cause damage to the
Facility, the Lessee, at its own expense and risk, shall promptly repair such
damage. The Lessor shall not be obliged in any way to maintain, alter,
repair, rebuild or replace the Facility or any Component, or any part thereof
or to pay the cost of alteration, rebuilding, replacing, repair or
maintenance of the Facility, any Component or the Undivided Interest or the
Cost of any Capital Improvement, and the Lessee expressly waives the right to
perform any such action at the expense of the Lessor pursuant to any law at
any time in effect (to the extent permitted under Applicable Law).
SECTION 8(B). OPERATING LOGS; PLANS AND SPECIFICATIONS. The Lessee
shall, throughout the Lease Term (A) maintain daily operating logs, whether
manually prepared or computer-generated, showing the output of the Facility,
(B) keep maintenance and repair reports in sufficient detail to indicate the
nature and date of major work done, and (C) maintain appropriate current
operating manuals and a complete set of Plans and Specifications for the
Facility in sufficient detail to enable an engineer not otherwise familiar
with the Facility to identify and locate the various Components within the
Facility. Such logs, reports, manuals and Plans and Specifications shall be
kept on file by the Lessee and, with the exception of daily operating logs,
shall be made available only for inspection to the Lessor upon reasonable
request, and in no event may the Lessor reproduce or prepare extracts or
summaries thereof; provided, however, that such logs and reports (but not
such manuals or Plans and Specifications) may be destroyed in accordance with
the Lessee's normal document retention program applicable to the Facility and
all Components and other comparable facilities of the Lessee; and provided,
further, however, that the foregoing restrictions upon the Lessor shall not
apply if a Default or an Event of Default shall have occurred and so long as
such Default or Event of Default shall be continuing.
SECTION 8(C). CAPITAL IMPROVEMENTS. Lessee shall, at its sole expense,
promptly replace all necessary or useful Components that may from time to
time be affixed to, installed on, or incorporated in, or attached to or
otherwise made a part of the Facility and that may from time to time fail to
function in accordance with the Plans and Specifications or become worn out,
destroyed, damaged beyond repair, lost, condemned, confiscated, stolen or
seized for any reason whatsoever. To the extent required by Section 8(a) and
in compliance with the Lessee's covenants and agreements hereunder and under
any other Transaction Document, unless prohibited by Applicable Law, the
Lessee shall also, and if not so required, the Lessee may also, at its sole
expense, make any and all other Capital Improvements to the Facility and each
Component. In addition, in the ordinary course of maintenance, service,
repair or testing, and in the course of making any Capital Improvement, the
Lessee may remove any Component from the Facility; provided, however, that
the Lessee shall cause such Component to be replaced by a Capital Improvement
to the extent necessary to comply with the terms of this Section 8(c) as
promptly as practicable. The Lessor's Share of the net proceeds of any sale
or other disposition of such removed Component received by the Lessor and any
insurance proceeds received by the Lessor in respect of the loss or
destruction of any such Component shall be applied, to the extent required,
as provided in Section 8(f). An undivided interest equal to the Lessor's
Share in each Component at any time removed from the Facility shall remain
the property of the Lessor, no matter where located, until such time as such
Component shall be replaced by a Capital Improvement complying with the terms
of this Section 8(c) which has been affixed to, installed on, or incorporated
in, the Facility in accordance with the terms of this Section 8(c), in which
case, immediately upon any such Capital Improvement becoming affixed to,
installed on, or incorporated in, the Facility, without further act, (i)
title to an undivided interest equal to the Lessor's Share in the removed
Component shall thereupon vest in the Lessee or such other Person as shall be
designated by the Lessee, free and clear of all rights of the Lessor or the
Indenture Trustee, (ii) title to an undivided interest equal to the Lessor's
Share in such Capital Improvement shall thereupon vest in the Lessor as
provided in Section 8(e) and (iii) such undivided interest in such Capital
Improvement shall become subject to this Facility Lease and, so long as a
Discharge of the Indenture shall not have occurred, to the Lien of the
Indenture, and be deemed to be part of the Undivided Interest and the
Facility for all purposes hereof to the same extent that the Lessor had an
undivided interest equal to the Lessor's Share in the Component originally
affixed to, installed on, or incorporated in, the Facility. All Capital
Improvements shall be free and clear of all Liens, except Permitted Liens,
and, in the case of Capital Improvements constituting replacements of
Components, shall be in as good operating condition as, and shall have a
value and utility at least equal to, the Component replaced, assuming such
replaced Component was in at least the condition and repair required to be
maintained under Section 8(a). Any Capital Improvements affixed to, installed
on, or incorporated in, the Facility, and made by Lessee:
(i) shall not reduce the value or utility of the Facility or the
Undivided Interest;
(ii) shall not be made if such Capital Improvement is to have a
Cost in excess of $5,000,000, unless an executive summary of an
appropriation request with respect thereto shall have been
delivered to the Lessor, together with a certificate of a
Responsible Officer of the Lessee with respect to compliance with
the requirements of clause (i) of this sentence, and, except those
relating to Liens, of the next preceding sentence;
(iii) shall not reduce the Fair Market Sales Value of the
Undivided Interest from that existing immediately prior to the time
such Capital Improvement is proposed;
(iv) shall not (A) adversely affect the anticipated residual value
of the Facility or the Undivided Interest at the expiration of the
Basic Lease Term or (B) cause this Facility Lease to lose its
characterization as a true lease for United States Federal income
tax purposes or to fail to satisfy the Guidelines; and
(v) shall be financed by the Lessee.
All Capital Improvements shall be completed in a good and workmanlike manner,
with reasonable dispatch.
If any Non-Severable Improvement made pursuant to this Section 8 shall
have a Cost (including installation) in excess of $5,000,000, the Lessee, at
its sole cost and expense, shall promptly (i) furnish the Lessor with a full
warranty bill of sale in form and substance satisfactory to the Lessor,
conveying title to each Non-Severable Improvement free and clear of all
Liens, (ii) furnish the Lessor with such evidence of the Lessor's title to
each such Non-Severable Improvement, as the Lessor may reasonably request,
(iii) prepare, or cause to be prepared, and, after execution thereof by the
Lessor and the Indenture Trustee, record, or cause to be recorded such
supplement to the Indenture and such other instruments, and make, or cause to
be made, such filings with respect thereto, as may be necessary to subject
each such Non-Severable Improvement to the Lien of the Indenture, subject
only to Permitted Liens, and (iv) furnish, or cause to be furnished, to the
Indenture Trustee and the Lessor such number of copies of such instruments as
each of them shall reasonably request, together with an opinion in form and
substance satisfactory to the Indenture Trustee and the Lessor of counsel
reasonably satisfactory to the Lessor and the Indenture Trustee stating that
title to each such Non-Severable Improvement has been vested in the Lessor,
that each such Non-Severable Improvement is subject to this Facility Lease,
that each such Non-Severable Improvement has been duly subjected to the Lien
of the Indenture, and that all recordings, filings or other action required
or advisable to establish, perfect, protect and preserve the Lien of the
Indenture as a valid first mortgage lien on, or first and prior perfected
security interest in, each such Non-Severable Improvement, have been duly
made or taken (specifying the same) and are in full force and effect, or
stating that no such instruments, recordings, filings or other action, as the
case may be, are required.
SECTION 8(D). REPORTS OF CAPITAL IMPROVEMENTS. In each year throughout
the Lease Term, commencing in 1989, (x) on or before January 25 of each year
and (y) on the date on which the Basic Lease Term or, if elected hereunder,
the last Renewal Term shall expire or be terminated for any reason, the
Lessee shall furnish the Lessor with a report (A) indicating the aggregate
Cost of all Capital Improvements and describing (including the identification
of the owner thereof) separately and in reasonable detail each Capital
Improvement made during the period from the Closing Date to December 31,
1988, in the case of the first such report, or during the previous calendar
year, in the case of all subsequent reports, or stating that no such Capital
Improvements were made during the period to which such report relates and (B)
describing separately and in reasonable detail each Capital Improvement which
the Lessee then proposes to make during the calendar year which includes the
date of such report and the estimated Cost of each such Capital Improvement
referred to in this clause (B).
SECTION 8(E). TITLE TO CAPITAL IMPROVEMENTS. Title to an undivided
interest, the percentage of which shall be equal to the Lessor's Share, in
each Non-Severable Improvement shall vest in the Lessor, whether or not the
Lessor shall have financed or provided financing (in whole or in part) for
such undivided interest in such Non-Severable Improvement, effective on the
date such Non-Severable Improvement shall have been delivered to the Facility
Site, and thereupon the Lessor shall, without further act, acquire title to
such undivided interest in such Non-Severable Improvement. The Lessee shall
retain title to each Severable Improvement unless such Severable Improvement
was financed by the Lessor by means of a sale-leaseback or similar
transaction.
SECTION 8(F). FUNDING OF THE COST OF CERTAIN CAPITAL IMPROVEMENTS. The
Lessor's Share of the Cost of Capital Improvements which shall constitute
replacements of or substitutions for Components shall be paid first, from the
Lessor's Share of the sum of (A) the net proceeds of any sale or disposition
of the replaced Component and (B) any insurance proceeds made available in
accordance with Section 10 in respect of the loss or destruction of such
replaced Component, and second, to the extent of the unpaid balance of such
Cost, from funds provided by the Lessee. Neither the Lessor nor the Owner
Participant shall have any obligation to make any investment in Capital
Improvements; provided, however, that the Owner Participant and each Loan
Participant shall have a right of first opportunity to make such investment
on terms and conditions mutually satisfactory to the Owner Participant or
such Loan Participant, as the case may be, and the Lessee.
SECTION 8(G). MARKING. The Lessee agrees, at its own cost, expense and
liability, to maintain in a prominent place at the Facility Site a durable,
readily visible inscription of such type and content as from time to time may
be required by law or otherwise deemed necessary by the Lessor in order to
protect the title of the Lessor to the Undivided Interest, the rights of the
Lessor under this Facility Lease and the Lien of the Indenture. The Lessee
will replace such marking promptly if the same shall have been removed,
defaced, obliterated or destroyed.
SECTION 8(H). ESSENTIAL IMPROVEMENT. In the event that, at any time
after January 1, 2003, the Lessor is unwilling or unable to provide financing
in connection with any Capital Improvement (i) that is a Non-Severable
Improvement, and (ii) (A) is required by Applicable Law, (B) the absence of
which would render the Facility economically obsolete or (C) which, in the
Lessee's reasonable good faith judgment, would substantially improve the
economic return to the Lessee from operation of the Facility, which
improvements are believed by the Lessee to be achievable only by means of
such Capital Improvement, then the Lessee shall have the right, upon 180
days' prior written notice, to purchase the Undivided Interest for an amount
equal to the greater of (A) Special Termination Value as of the Basic Rent
Payment Date next succeeding the date of purchase, plus any prepayment
premium payable on the Notes and all Supplemental Rent and Special
Supplemental Rent then due and payable or (B) Fair Market Sales Value, plus
any prepayment premium payable on the Notes and all Supplemental Rent and
Special Supplemental Rent then due and payable; provided, however, that,
subject to compliance with the conditions contained in Section 2.16 of the
Indenture, if the Notes are assumed by the Lessee the purchase price of the
Undivided Interest shall be reduced by an amount equal to the unpaid
principal and interest on the Notes assumed by the Lessee.
SECTION 8(I). REMOVAL FROM FACILITY SITE. The Lessee shall not remove,
or permit to be removed, the Facility or any Component from the Facility Site
without the prior written consent of the Lessor, except that the Lessee or
any other Person acting on behalf of the Lessee may remove any Component in
accordance with the provisions of this Section 8 in connection with the
performance of the Lessee's obligations under Section 8(a) and 8(c);
provided, however, that if the aggregate value of such removed Components
exceeds $10,000,000 at any time, the Lessee shall provide evidence reasonably
satisfactory to the Indenture Trustee that the Indenture Trustee's security
interest in such Components remains perfected.
SECTION 8(J). REMOVAL OF SEVERABLE IMPROVEMENTS. All Severable
Improvements to which the Lessee shall have title pursuant to the provisions
of Section 8(e) may, so long as such removal shall not result in any
violation of any law or governmental regulation and so long as no Event of
Default shall have occurred and be continuing, be removed at any time by the
Lessee and may be removed by the Lessee prior to the return of the Lessor's
Undivided Interest to the Lessor in accordance with Section 5, other than
upon the termination of this Facility Lease pursuant to Section 16, and title
to such Severable Improvements shall at all times remain in the Lessee.
SECTION 9. LOSS OR DESTRUCTION; REQUISITION OF USE.
SECTION 9(A). DAMAGE OR LOSS. In the event that the Facility shall be or
become substantially damaged, for any reason whatsoever, or an Event of Loss
shall occur, the Lessee shall promptly, and in any case within five Business
Days of any such event, give written notice thereof to the Lessor.
SECTION 9(B). REPAIR. In the event of damage to the Facility or damage
to, or destruction of, any Component not constituting an Event of Loss, the
Lessee shall, in accordance with Prudent Industry Practice, promptly repair
the Facility and, in the case of any Component, repair such Component or
replace such Component with a Capital Improvement in accordance with the
provisions of Section 8. subject to the provisions of Section 9(d).
SECTION 9(C). PAYMENT UPON AN EVENT OF LOSS. If an Event of Loss occurs,
the Lessee shall promptly notify the Lessor thereof and on the later of (i)
the date on which the Lessee shall have determined, in compliance with
Section 9(d), that an Event of Loss has occurred and (ii) the Basic Rent
Payment Date next following the date on which such Event of Loss shall have
occurred, as determined under the definition of such term, the Lessee shall,
except as provided in Sections 9(d) and 9(g), pay to the Lessor the sum of
(x) the amount of all Special Supplemental Rent whether or not then due and
payable, and (y) the remainder of (XX) the sum of (A) the Casualty Value of
the Undivided Interest, determined on or as of the Basic Rent Payment Date
next following the date on which such Event of Loss shall have occurred
adjusted, however, to take into account any reduction in tax benefits
resulting from any determination that such Event of Loss actually occurred in
a tax year other than the year in which such Basic Rent Payment Date occurs,
(B) any premium then due and payable with respect to the prepayment of the
Notes, (C) interest at the rate of 12.08% per annum from, but excluding, the
date on which such Event of Loss shall have occurred to, and including, the
date of payment, on an amount equal to the remainder of (1) such Casualty
Value minus (2) the principal amount of, and accrued interest on, the Notes
Outstanding, calculated as at the Basic Rent Payment Date next following the
date on which such Event of Loss shall have occurred, (D) interest, if any,
at the rate of 12.08% per annum from, but excluding, the Basic Rent Payment
Date next following such Event of Loss, to, and including, the day of payment
thereof, on the principal amount of the Notes Outstanding, calculated as of
the Basic Rent Payment Date (taking into account any payment thereof made on
such Basic Rent Payment Date) next following the date on which the Event of
Loss shall have occurred and (E) all Supplemental Rent then due and payable
to the extent not already paid pursuant to clauses (A) through (D) above),
minus (YY) the amount, if any, of Basic Rent actually paid subsequent to the
date on which the Event of Loss occurred. From the date of such Event of Loss
to, and including, such date of payment, all Rent shall continue to be paid
when due. If no Default or Event of Default shall have occurred and be
continuing, the Lessor shall, subject to Section 9(f), upon payment of all
amounts described in this Section 9(c) transfer the Undivided Interest to the
Lessee on an as is, where is basis, together with all of the Lessor's right,
title and interest in and to the Support Agreement, the Assigned Contracts
and the Easement Agreement, free and clear of all Lessor's Liens and Owner
Participant's Liens, BUT WITHOUT ANY OTHER RECOURSE, REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, BY THE LESSOR OR THE OWNER PARTICIPANT.
SECTION 9(D). REPAIR PERIOD. In the event that damage to the Facility is
not immediately determined to constitute an Event of Loss, the Lessee shall
have six months in which to inspect the Facility and determine whether or not
an Event of Loss shall have occurred and the Lessee shall notify the Owner
Participant, the Indenture Trustee and all Holders of Notes Outstanding of
the declaration of an Event of Loss or of intent to repair. If such damage
does not constitute an Event of Loss, the Lessee shall cause the Facility to
be repaired within twenty-four months after the occurrence of such damage;
provided, however, that if the Lessee shall, within such period, have
commenced the repair of the Facility and be diligently pursuing such repair,
but is prevented from completing such repair within such period due to
Uncontrollable Forces, then the time for repair shall be extended by the
number of months necessary to complete such repair up to a maximum of twelve
additional months; and provided, further, however, that if the Lessee shall
fail to repair the Facility within such repair period, including any
extension thereof, or the Lessee shall determine more than six months after
the date of damage to the Facility that such damage constitutes an Event of
Loss, the Lessee shall pay to the Lessor promptly after the termination of
such repair period, or promptly after such determination, as the case may be,
the remainder of (XX) the sum of (A) the Casualty Value of the Undivided
Interest, determined as of the Basic Rent Payment Date next following the
date of the occurrence of such damage, (B) interest, at the rate of 12.08%
per annum from, but excluding, the date on which such damage shall have
occurred to, and including, the date of payment thereof, on an amount equal
to the remainder of (1) such Casualty Value minus (2) the principal amount
of, and accrued interest on, the Notes Outstanding calculated as at the Basic
Rent Payment Date next following the date on which such damage shall have
occurred, (C) interest, at the rate of 12.08% per annum from, but excluding,
the Basic Rent Payment Date next following the date on which such damage
shall have occurred to, and including, the date of payment thereof, on the
principal amount, from time to time, of the Notes Outstanding, (D) a Yield-
Maintenance Premium if the date of payment occurs on or prior to January 1,
1999 and a premium on the aggregate outstanding principal amount of the Notes
determined pursuant to the table set forth in Section 2.15(g)(ii) of the
Indenture if the date of payment occurs after January 1, 1999 and (E) all
Supplemental Rent and Special Supplemental Rent then due and payable (to the
extent not already paid pursuant to clauses (A) through (D) above), minus (W)
the amount of Basic Rent actually paid subsequent to the date on which such
damage occurred.
SECTION 9(E). TERMINATION OF OBLIGATION. Upon payment of all amounts set
forth in Section 9(c), or Section 9(d), and all Rent then due and owing, the
Lessee's obligation to pay further Basic Rent and Special Supplemental Rent
shall cease, but the Lessee's obligation to pay all Supplemental Rent before,
on and after such date shall remain unchanged.
SECTION 9(F). SALVAGE. Subject to Section 9(g), following an Event of
Loss, neither the Lessee nor any Affiliate of the Lessee shall at any time
thereafter, either as principal or agent, operate the Facility, and the
Lessee shall, unless title to, or possession of, the Facility shall have been
transferred to an insurance carrier in respect of a claim made against such
carrier in connection with such Event of Loss, for the Lessee's own account,
and as agent for the Lessor, dispose of the Undivided Interest as soon as
practicable for the best cash price obtainable. Any such disposition shall be
on an as is, where is basis, without recourse, representation or warranty,
expressed or implied. The Lessee may retain all proceeds of such disposition
up to the amount by which (i) the amount of the Casualty Value paid by the
Lessee to the Lessor plus the Lessee's reasonable costs and expenses of
disposition attributable thereto exceeds (ii) the amount of Rent otherwise
due on the date of actual disposition, and the balance, if any, of such
proceeds shall be paid over to and retained by the Lessor.
SECTION 9(G). FAILURE TO COMPLETE. Following an Event of Loss described
in clause (a) of the definition of such term, upon payment by the Lessee to
the Lessor of an amount equal to Termination Value, plus any prepayment
premium on the Notes and all Supplemental Rent and Special Supplemental Rent
then due and payable, which payment shall be due six months after receipt of
notice given to the Lessee from the Owner Trustee or a Majority in Interest
of Noteholders to the effect that an Event of Loss has been declared, the
Lessor shall thereupon transfer the Undivided Interest to the Lessee on an as
is, where is basis, together with all of the Lessor's right, title and
interest in and to the Support Agreement, the Assigned Contracts and the
Easement, free and clear of all Lessor's and Owner Participant's Liens, BUT
WITHOUT ANY OTHER RECOURSE, REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
BY THE LESSOR OR THE OWNER PARTICIPANT.
SECTION 9(H). APPLICATION OF OTHER PAYMENTS IN AN EVENT OF LOSS. Any
payments received at any time by the Lessor or by the Lessee from any
Governmental Authority or other Person (except the Lessee) as a result of the
occurrence of an Event of Loss shall be applied as follows:
(i) all such payments received at any time by the Lessor or the
Lessee shall be promptly paid to the Indenture Trustee, until
Discharge of the Indenture shall have occurred, for application
pursuant to the Indenture, and thereafter paid to or held by the
Lessor for application pursuant to the following provisions of this
Section 9(h), except that so long as no Default or an Event of
Default shall have occurred and be continuing, the Lessee may
retain any amounts that the Lessor would at the time be obligated
to pay to the Lessee as reimbursement under the provisions of
paragraph (ii) below;
(ii) so much of such payments as shall not exceed the amounts
required to be paid by the Lessee pursuant to Section 9(c) or 9(d),
as the case may be, shall be applied in reduction of the Lessee's
obligation to pay such amount if not already paid by the Lessee or,
if already paid by the Lessee, shall be applied to reimburse the
Lessee for its payment of such amount, unless a Default or an Event
of Default shall have occurred and be continuing; and
(iii) the balance, if any, of such payments remaining
thereafter shall be divided between the Lessor and the Lessee as
their interests may appear.
SECTION 9(I). APPLICATION OF PAYMENTS NOT RELATING TO EVENT OF LOSS.
Unless a Default or an Event of Default shall have occurred and be continuing
and except as otherwise provided in Section 10, payments received at any time
by the Lessor or the Lessee from any Governmental Authority or other Person
with respect to any Requisition of Use not constituting an Event of Loss
shall be paid to or retained by the Indenture Trustee, until a Discharge of
the Indenture, and thereafter to the Lessor, and shall be applied (subject to
the Indenture), as follows: first, directly in payment for repairs or
replacement in accordance with Section 8, if not already paid for by Lessee,
or, if already paid for by the Lessee, to reimburse the Lessee for such
payment; and second, the balance remaining, if any, shall be divided between
the Lessor and the Lessee as their interests may appear.
SECTION 9(J). OTHER DISPOSITIONS. If a Default or an Event of Default
shall have occurred and be continuing, any amount payable to or for the
account of, or to be retained by, the Lessee pursuant to this Section 9 shall
be paid to the Lessor as security for the obligations of the Lessee under
this Facility Lease and each other Transaction Document to which the Lessee
is a party, and, at such time thereafter as no such Default or Event of
Default shall be continuing, such amount shall be paid promptly to the
Lessee, together with any earnings thereon.
SECTION 10. INSURANCE.
The Lessee will, at its own expense, cause to be carried and maintained
insurance, with insurers (and reinsurers, if any) having a rating of at least
"A" by A.M. Best Company, against damage to or destruction of the Facility or
the Facility Site, liability insurance with respect to third party bodily
injury and property damage, in each case and at all times in amounts which,
(x) in the case of insurance in respect of damage to or destruction of the
Facility and the Facility Site, shall be at least equal to the greater of
Casualty Value or 100% of replacement cost, and (y) in the case of insurance
in respect of third party bodily injury and property damage, shall be at
least equal to $10,000,000, and against risks (A) consistent with Prudent
Industry Practice, and (B) in an amount sufficient to prevent the Lessor, the
Owner Participant, the Indenture Trustee or the Holders of the Notes from
becoming at any time a coinsurer with respect to any loss relating to events
or occurrences covered under any policy. The Lessee will maintain business
interruption insurance in an amount not less than $50,000,000, but in any
event at least equal to the sum of Basic Rent payable on the next succeeding
Basic Rent Payment Date, Taxes, payments due under take-or-pay power
contracts, as well as payroll and other operating expenses incurred while
maintaining an idle facility to the extent such coverage is available on
commercially reasonable terms or if such coverage is not available, such
other coverage as is available to the Lessee on commercially reasonable
terms, but in no event less than is consistent with Prudent Industry
Practice. Off-site supplier power service interruption insurance shall be
carried in an amount not less than $5,000,000 to the extent such coverage is
available on commercially reasonable terms. So long as no Event of Default
shall have occurred and be continuing, the Lessee may self-insure, by way of
deductible or premium adjustment provision in insurance policies, the risks
required to be insured against pursuant to the preceding sentence up to an
amount customarily self-insured by owners and operators in the paper
manufacturing industry; provided, however, that such self-insurance shall not
be in amounts in excess of (x) $1,000,000, in respect of damage to or
destruction of the Facility and the Facility Site, or (y) $250,000 in respect
of liability. Any policies with respect to such insurance shall (i) name the
Lessee, the Lessor, the Owner Participant, the Loan Participants and the
Indenture Trustee as additional insureds and, subject to clause (viii) of
this sentence, as loss payees, as their respective interests may appear, (ii)
provide for at least 60 days' prior written notice (or such lesser notice
period of not less than 30 days as shall be available from time to time in
the insurance markets; provided, however, that the Lessee shall use its best
efforts to obtain the longest such period available on commercially
reasonable terms) by the insurance carrier to the Lessor, the Owner
Participant, the Loan Participants and the Indenture Trustee in the event of
cancellation, expiration or material modification, (iii) waive any right to
claim any premiums or commissions against the Lessor, the Owner Participant,
the Loan Participants and the Indenture Trustee, (iv) provide that the
insurers shall waive any rights of subrogation against the Lessor, the Owner
Participant, the Loan Participants and the Indenture Trustee, (v) provide
that if such insurance is cancelled for any reason whatsoever, or any
substantial change is made in the coverage which affects the interests of the
Lessor, the Owner Participant, the Loan Participants or the Indenture Trustee
or if such insurance is allowed to lapse for nonpayment of premiums, such
cancellation, change or lapse shall not be effective against the Lessor, the
Owner Participant, the Loan Participants or the Indenture Trustee for 60 days
(or such lesser period of not less than 10 days as shall be available from
time to time in the insurance markets; provided however, that the Lessee
shall use its best efforts to obtain the longest period available on
commercially reasonable terms) after receipt by the Lessor, the Owner
Participant, the Loan Participants and the Indenture Trustee, respectively,
of written notice from any applicable insurers of such cancellation, change
or lapse, (vi) provide that each of the Lessor, the Owner Participant, the
Loan Participants and the Indenture Trustee is permitted to make payments to
effect the continuation of such insurance coverage upon notice of
cancellation due to nonpayment of premiums, (vii) provide that the respective
interests of the Lessor, the Owner Participant, the Loan Participants and the
Indenture Trustee shall not be invalidated by any action or inaction of the
Lessee or any other Person and shall insure the Lessor, the Owner
Participant, the Loan Participants and the Indenture Trustee regardless of
any breach or violation by the Lessee or any other Person of any warranties,
declarations or conditions contained in such policies and (viii) provide that
insurance proceeds in respect of any loss or damage to the Facility or the
Facility Site in the amount of $1,000,000 or more for any single occurrence
shall, subject to the remainder of this Section 10, be payable to the
Indenture Trustee to the extent of the Lessor's Share thereof so long as a
Discharge of the Indenture shall not have occurred, and thereafter shall be
paid to the Lessor. Insurance proceeds in respect of damage to the Facility
or the Facility Site in an amount of less than $1,000,000 for any single
occurrence shall, provided no Default or Event of Default shall have occurred
and be continuing, be paid to the Lessee. Each such policy shall (X) be
primary without right of contribution from any other insurance which is
carried by the Lessor, the Owner Participant, the Loan Participants or the
Indenture Trustee, with respect to its interest as such in the Facility and
(Y) expressly provide that all of the provisions thereof, except the limits
of liability, shall operate in the same manner as if there were a separate
policy covering each insured. Such policies shall provide that in respect of
the interests of the Lessor, the Owner Participant, the Loan Participants and
the Indenture Trustee in such policies the insurance shall not require
contributions from other policies held by the Lessor, the Owner Participant,
the Loan Participants or the Indenture Trustee. The Lessee shall, on or
before January I of each year, commencing January 1, 1989, furnish to the
Lessor, the Owner Participant, the Loan Participants and the Indenture
Trustee, (AA) a certificate signed by H.L. Jamison & Company, or another
independent insurance broker selected by the Lessee and acceptable to the
Lessor, the Owner Participant, the Loan Participants and the Indenture
Trustee, showing the insurance then maintained by the Lessee pursuant to this
Section 10 and stating that in the opinion of such independent broker such
insurance complies, or substantially complies, with the terms hereof and
setting forth recommendations, if any, of such broker as to additional
insurance, if any, reasonably required in light of Prudent Industry Practice
for similar facilities to protect the respective interests of the Lessor, the
Owner Participant, the Loan Participants and the Indenture Trustee and
stating whether such insurance is available from insurers of recognized
responsibility qualified to insure risks in the State of Minnesota on
reasonable terms and conditions, and (BB) upon the reasonable request of the
Lessor, the Owner Participant, any Loan Participant or the Indenture Trustee,
copies of policies carried and maintained by the Lessee pursuant to this
Section 10. In the event that the Lessee shall fail to maintain insurance as
herein provided either the Lessor, the Owner Participant, any Loan
Participant, or the Indenture Trustee may at its option maintain insurance
which is required to be maintained by the Lessee hereunder, and, in such
event, the Lessee shall reimburse such party upon demand for the cost
thereof, together with interest thereon at the rate per annum specified in
Section 3(b)(iii) as Supplemental Rent. So long as no Default or Event of
Default shall have occurred and be continuing, all insurance proceeds paid in
respect of damage to the Facility, the Facility Site or any Component and
received by the Lessor in compliance with the provisions of this Section 10
(directly or from the Indenture Trustee) in respect of the Undivided Interest
with respect to an occurrence not constituting an Event of Loss shall be paid
to the Lessee; provided, however, that if a Default or Event of Default shall
have occurred and be continuing, all insurance proceeds shall be paid to the
Indenture Trustee until Discharge of the Indenture shall have occurred and
thereafter to the Lessor and be applied or dealt with in accordance with
clauses (i) through (iv) below; and provided, further, that, whether or not a
Default or an Event of Default shall have occurred and be continuing, the
Lessor's Share of any of such insurance proceeds in excess of $1,000,000 for
any single occurrence in the aggregate shall be paid to the Indenture Trustee
until Discharge of the Indenture shall have occurred and thereafter to the
Lessor and be applied or dealt with as follows:
(i) All such proceeds actually received on account of any such
damage other than in connection with an Event of Loss shall, unless
a Default or Event of Default shall have occurred and be
continuing, be paid over to the Lessee or as it may direct from
time to time as restoration progresses, to pay (or reimburse the
Lessee for) the Lessor's Share of the cost of restoration if the
amount of such proceeds received by the Indenture Trustee or the
Lessor when added to proceeds received by Other Indenture Trustees
under Other Trust Indentures in respect of loans made to Other
Lessors, together with such additional amounts, if any, theretofore
expended by the Lessee out of its own funds for such restoration,
are sufficient to pay the estimated cost of completing such
restoration, but only upon a written application of the Lessee to
the Lessor and the Indenture Trustee accompanied by an Officers'
Certificate of the Lessee showing in reasonable detail the nature
of such restoration, the actual cash expenditures made to date for
such restoration and stating that no Default or Event of Default
shall have occurred and be continuing. Upon the written request of
the Lessee to the Lessor and the Indenture Trustee, accompanied by
evidence reasonably satisfactory to the Owner Participant, each
Loan Participant and the Lessor that such restoration has been
completed and the costs thereof paid in full and that there are no
Liens other than Permitted Liens on the Facility, the balance, if
any, of such proceeds shall, unless a Default or Event of Default
shall have occurred and be continuing, be paid over or assigned to
the Lessee or as it may direct.
(ii) All such proceeds received or payable on account of an Event
of Loss shall be dealt with in accordance with Section 9(h).
(iii) If a Default or an Event of Default shall have occurred
and be continuing at the time of the requested application of any
such proceeds, such proceeds shall be held and applied as provided
in Section 9(j).
(iv) Losses under any property damage insurance required to be
carried by this Section 10 shall be adjusted (including the filing
of proceedings deemed advisable by the Lessee) with the insurer or
otherwise collected by the Lessee upon the approval of the
Indenture Trustee with respect to losses exceeding $5,000,000 or if
an Event of Default shall have occurred and be continuing. All such
policies shall provide that the loss, if any, under such insurance
shall be adjusted and paid as provided in this Facility Lease.
(v) Nothing in this Section 10 shall prohibit the Lessee from
placing at its expense insurance on or with respect to the Facility
or the Undivided Interest, or the operation of the Facility, naming
the Lessee (but not the Lessor, the Owner Participant, any Loan
Participant or the Indenture Trustee) as insured and loss payee, in
an amount exceeding the Casualty Value or replacement cost thereof
unless such insurance would conflict with or otherwise limit the
insurance to be provided or maintained by the Lessee in accordance
with this Section 10. Nothing in this Section 10 shall prohibit the
Lessor or the Owner Participant from placing at its expense
insurance on or with respect to the Facility or the Undivided
Interest, or the operation of the Facility, naming the Lessor or
the Owner Participant (but not the Lessee, any Loan Participant or
the Indenture Trustee) as insured and loss payee, in any amount, up
to an amount equal to the difference between the present value of
the Agreed Fair Market Value at expiration of the Lease Term and
Casualty Value; provided, however, that no such insurance shall
conflict with or otherwise limit the insurance required to be
provided or maintained by the Lessee or permitted to be maintained
by any Loan Participant in accordance with this Section 10. Nothing
in this Section 10 shall prohibit any Loan Participant from placing
at its expense insurance on or with respect to the Facility or the
Undivided Interest, or the operation of the Facility, naming such
Loan Participant (but not the Lessee, the Lessor, the Owner
Participant or the Indenture Trustee) as insured and loss payee;
provided, however, that no such insurance shall conflict with or
otherwise limit the insurance required to be provided or maintained
by the Lessee or permitted to be maintained by the Owner
Participant, the Lessee or the Lessor in accordance with this
Section 10.
SECTION 11. RIGHTS TO ASSIGN OR SUBLEASE.
SECTION 11(A). ASSIGNMENT OR SUBLEASE BY THE LESSEE. Without the prior
written consent of the Lessor, the Lessee shall not assign, sublease,
transfer or encumber (except for Permitted Liens) its leasehold interest
under this Facility Lease; provided, however, that notwithstanding any such
consent, (A) no such sublease shall extend beyond the Basic Lease Term, (B)
no such assignment, sublease, transfer or encumbrance shall impair or
diminish any of the rights of the Lessor hereunder or under any other
Transaction Document, or of any Loan Participant or the Indenture Trustee
hereunder or under the Indenture or the obligations of the Lessee hereunder
or under any Facility Lease Supplement or any other Transaction Document,
which rights and obligations shall continue in full force and effect as
though no assignment, sublease, transfer or encumbrance had been made, (C)
any such assignment, sublease, transfer or encumbrance of the Undivided
Interest shall be expressly subject and subordinate to the provisions of this
Facility Lease and all other Transaction Documents, including, without
limitation, the rights of the Lessor and the Indenture Trustee to enforce
remedies under Section 16 if an Event of Default shall have occurred and be
continuing, (D) the Lessee shall have effectively assigned to the Lessor and
the Lessor shall have assigned to the Indenture Trustee, in a manner
satisfactory to each of them, such assignment, sublease, transfer or
encumbrance and all rentals and other proceeds payable thereunder and (E) the
Lessee shall remain primarily liable for all obligations to be performed by
it hereunder or under any Transaction Documents, such liability to be
unconditional, irrespective of any circumstances whatsoever which might
constitute a legal or equitable discharge or defense of a surety or
guarantor; provided, further, however, that unless and until an Event of
Default shall have occurred and be continuing, such rentals and other
proceeds shall be collected and retained by the Lessee. The Lessee shall not,
without the prior written consent of the Lessor, the Owner Participant, each
Loan Participant and the Indenture Trustee, part with the possession or
control of, or suffer or allow to pass out of its possession or control, the
Facility, any Component or any Capital Improvement, or any interest in any
thereof, except to the extent permitted by the provisions of this Facility
Lease or any other Transaction Document.
SECTION 11(B). ASSIGNMENT BY LESSOR AS SECURITY FOR LESSOR'S
OBLIGATIONS. In order to secure the indebtedness evidenced by the Notes and
certain other obligations as provided in the Indenture, the Indenture
provides, among other things, for the assignment by the Lessor to the
Indenture Trustee of its right, title and interest in, to and under this
Facility Lease, including, without limitation, the payments due to it under
this Facility Lease (other than Excepted Payments and Special Supplemental
Rent), to the extent set forth in the Indenture, and for the creation of a
mortgage lien on and a security interest in the Facility in favor of the
Indenture Trustee. The Lessee hereby consents to such assignment and to the
creation of such mortgage and security interest and consents to the terms and
provisions thereof. The Lessee hereby (a) acknowledges that such assignment,
mortgage and security interest provide for the exercise by the Indenture
Trustee of all rights of the Lessor hereunder to give any consents,
approvals, waivers, notices or the like, to make any elections, demands or
the like or to take any other discretionary action hereunder, except as
specifically set forth in the Indenture, (b) acknowledges receipt of an
executed counterpart of the Indenture and (c) agrees that, to the extent
provided in the Indenture, the Indenture Trustee shall have all the rights of
the Lessor hereunder as if the Indenture Trustee had originally been named as
the Lessor herein (every reference herein to the "Lessor" being read to mean,
except where the context otherwise requires, the Indenture Trustee). The
Lessee will furnish to the Indenture Trustee and the Loan Participants
counterparts of all notices, certificates, opinions or other documents of any
kind required to be delivered hereunder by the Lessee to the Lessor.
Notwithstanding any provision of this Facility Lease and any other
Transaction Document, so long as no Discharge of the Indenture shall have
occurred, the Lessee shall make all payments of Basic Rent, and all other
amounts payable hereunder to the Lessor, other than Excepted Payments and
Special Supplemental Rent, to the Indenture Trustee or such other Person as
the Indenture Trustee may specify, and the right of the Indenture Trustee to
receive all such payments shall not be subject to any defense, counterclaim,
set-off or other right or claim of any kind which the Lessee may be able to
assert against the Lessor or the Owner Participant in any action brought by
either thereof on this Facility Lease (to the extent permitted under
Applicable Law). Notwithstanding the foregoing, the Indenture Trustee shall
not have any obligation or liability under this Facility Lease except as set
forth in the Indenture and the Financing Agreement.
SECTION 12. FAIR MARKET RENEWAL.
Subject to Section 13(a), at the end of the Basic Lease Term or any
preceding Renewal Term, provided that no Default or Event of Default shall
have occurred and be continuing and all Special Supplemental Rent shall have
been paid in full and a Discharge of the Indenture shall have occurred, the
Lessee shall have the right to renew the term of this Facility Lease for one
or more Renewal Terms (a Renewal Term or the Renewal Terms), in which case
Basic Rent payable during each such Renewal Term shall be the Fair Market
Rental Value of the Undivided Interest, payable as provided in Section
3(a)(ii). The first Renewal Term will be for the period commencing December
22, 2012 [NOTE 4], January 1, 2013 [NOTE 5] and ending on a date not less
than five years thereafter. Each subsequent Renewal Term shall be for a
period of not less than five, nor more than seven years.
SECTION 13. NOTICES FOR RENEWAL OR PURCHASE; PURCHASE OPTIONS.
SECTION 13(A). NOTICE; DETERMINATION OF VALUES; APPRAISAL PROCEDURE. If
the Lessee shall have the right hereunder to elect, and shall elect, any of
the options provided in Section 12 or Section 13(b), (c) or (d), written
notice of any such election shall be given to the Lessor,
(i) 120 days prior to the Basic Rent Payment Date on which any
purchase may occur, in the case of Section 13(b);
(ii) 180 days prior to the Basic Rent Payment Date on which any
purchase may occur, in the case of Section 13(c);
(iii) eighteen months prior to the expiration of the Basic
Lease Term, in the case of Section 12 or Section 13(d); and
(iv) eighteen months prior to the expiration of the then effective
Renewal Term elected pursuant to Section 12, in the case of Section
13(d).
In the absence of any such notice in respect of either Section 12 or Section
13(d), the Lessee shall be deemed to have elected to return the Undivided
Interest to the Lessor pursuant to Section 5(a). No such notice shall be
valid hereunder or binding on the Lessor unless (y) at the time of such
notice and also on the date on which any such option shall be exercisable
hereunder, no Default or Event of Default shall have occurred and be
continuing and (z) on the date on which any such option shall be exercisable
hereunder, (A) all Special Supplemental Rent shall have been paid in full,
(B) all amounts of principal of, and premium, if any, and interest on the
Notes shall have been paid in full and no Note shall remain Outstanding, (or
the obligations of the Lessor in respect of the Notes shall have been assumed
in accordance with the Financing Agreement and the Indenture), (C) all other
amounts payable to any Holder, the Loan Participants or the Indenture Trustee
under any Transaction Document shall have been paid in full and (D) except in
the case of Section 13(c), the same such notice shall have been delivered to
the Other Lessors under the Other Facility Leases. Any such notice duly given
shall, as to the Lessee, be irrevocable (to the extent permitted under
Applicable Law). Promptly after the giving of any such notice, the Lessee and
the Owner Participant shall, if the option so elected shall require,
negotiate in good faith the Fair Market Rental Value or the Fair Market Sales
Value of the Undivided Interest, as the case may be, and, if the Lessee and
the Owner Participant shall be unable to agree on such value or values within
30 days after the date of such notice, such value or values shall be
determined by the Appraisal Procedure.
SECTION 13(B). MIDTERM PURCHASE OPTION. Subject to Section 13(a), on
December 22, 1992 [NOTE 4] January 1, 1993 [NOTE 5] and, if this Facility
Lease shall not have theretofore been terminated, December 22, 1997 [NOTE 4],
January 1, 1998 [NOTE 5], the Lessee shall have the right to purchase the
Undivided Interest for an amount equal to the sum of (x) the Agreed Fair
Market Value applicable on such date, (y) prepayment premium payable on any
Notes prepaid, and (z) all Supplemental Rent and Special Supplemental Rent
unpaid on such date whether or not then payable; provided, however, that,
subject to compliance with the provisions contained in Section 2.16 of the
Indenture, if the Notes are assumed by the Lessee then, (i) the amount
described in clause (x) shall be reduced by the unpaid principal amount of,
and interest on the Notes assumed by the Lessee, and (ii) the amount
described in clause (y) hereof shall not be payable.
SECTION 13(C). PURCHASE OPTION UPON ADJUSTMENT OF BASIC RENT. Subject to
Section 13(a), if (x) as a result of a Change in Tax Law, Basic Rent shall be
adjusted, or (y) under the Tax Indemnity Agreement, an indemnity payment
shall be due and payable, so that the sum of (i) the present value of all
Basic Rent payable thereafter during the Basic Lease Term, discounted at a
rate equal to 1 2.08% per annum, and (ii) in the case of any such indemnity
payment, the amount of such indemnity payment and all prior indemnity
payments, shall exceed the present value of all Basic Rent which would have
been payable thereafter during the Basic Lease Term had no such adjustments
or indemnity payments occurred, discounted at the same rate, by an amount
equal to, or in excess of, 7.5%, then the Lessee shall have the right to
purchase the Undivided Interest for an amount equal to the greater of (A)
Fair Market Sales Value, or (B) the sum of (w) Special Termination Value
applicable on such date, (x) the amount of all indemnities due and payable
under the Tax Indemnity Agreement, (y) any prepayment premium payable on the
Notes, and (z) all Supplemental Rent and Special Supplemental Rent unpaid on
such date; provided, however, that, subject to compliance with the provisions
of Section 2.16 of the Indenture, if the Notes are assumed by the Lessee, the
purchase price of the Undivided Interest shall be reduced by an amount equal
to the sum of unpaid principal and interest on the Notes assumed by the
Lessee.
SECTION 13(D). PURCHASE OPTION AT EXPIRATION OF THE LEASE TERM. Subject
to Section 13(a), on the date of the expiration of the Basic Lease Term or
any Renewal Term, as the case may be, the Lessee shall have the right to
purchase the Undivided Interest for an amount equal to (x) if such option
shall be exercised at the expiration of the Basic Lease Term, the lesser of
(i) Fair Market Sales Value, or (ii) Agreed Fair Market Value, or (y) if such
option shall be exercised at the expiration of any Renewal Term, Fair Market
Sales Value.
SECTION 13(E). PURCHASE OF THE UNDIVIDED INTEREST; PAYMENT, ETC. If the
Lessee shall have elected to purchase the Undivided Interest, payment by the
Lessee of the purchase price (or such purchase price reduced by the unpaid
principal amount of, premium, if any, and interest on, the Notes assumed by
the Lessee in accordance with the Financing Agreement and the Indenture) for
the Undivided Interest shall be made in immediately available funds against
delivery of (A) a bill of sale transferring and assigning to the Lessee all
right, title and interest of the Lessor in and to the Undivided Interest, the
Support Agreement and the Assigned Contracts, free and clear of all Lessor's
Liens and all Owner Participant's Liens BUT WITHOUT OTHER RECOURSE,
REPRESENTATION OR WARRANTY and (B) if the Indenture has not been theretofore
discharged in accordance with its terms, and the obligation of the Lessor in
respect of the principal of, premium, if any, and interest on, the Notes
shall not have been assumed by the Lessee in accordance with the Financing
Agreement and the Indenture, an instrument executed by the Indenture Trustee
(in recordable form) terminating its interest in the Undivided Interest and
under the Support Agreement and the Assigned Contracts. In connection with
any sale by the Lessor to the Lessee under this Section 13, the Lessor may
specifically disclaim representations and warranties (other than as
contemplated by clause (A) of the preceding sentence) in a manner comparable
to that set forth in the second sentence of Section 6(b).
SECTION 14. TERMINATION FOR OBSOLESCENCE.
SECTION 14(A). TERMINATION NOTICE. Any provision herein contained to the
contrary notwithstanding, unless a Default or an Event of Default shall have
occurred and be continuing, the Lessee shall have the option, on not less
than one year's prior written notice (a Termination Notice) given on or after
the 14th anniversary of the first Basic Rent Payment Date, which notice shall
be accompanied by an Officers' Certificate to the effect that the Venture
Council of the Lessee has adopted a resolution determining that the Facility
is, or where there exists an Expansion which is substantially interconnected
with the Facility, both the Facility and such Expansion are, economically
obsolete, to terminate this Facility Lease on the Basic Rent Payment Date
specified in such notice (the Termination Date). If the Lessee shall give the
Lessor a Termination Notice, upon request by the Lessor the Lessee shall, as
agent for the Lessor, use its best efforts to obtain cash bids for the
purchase of the Undivided Interest. The Lessor shall also have the right to
obtain cash bids for the purchase of the Undivided Interest, either directly
or through agents other than the Lessee. The Lessee shall certify to the
Lessor within ten days after the Lessee's receipt of each bid and in any
event prior to the Termination Date) the amount and terms thereof and the
name and address of the party (which shall not be the Lessee or any Affiliate
of the Lessee) submitting such bid.
SECTION 14(B). RIGHT OF LESSOR TO RETAIN UNDIVIDED INTEREST. The Lessor
may elect to retain, rather than sell, the Undivided Interest by giving
written notice to the Lessee and the Indenture Trustee at any time prior to
the Termination Date. It shall be a condition precedent to the Lessor's right
to retain the Undivided Interest that on or prior to the Termination Date the
Lessor shall have caused a Discharge of the Indenture to occur. If the Lessor
elects to retain the Undivided Interest pursuant to this Section 14(b), the
Lessee shall (A) pay to the Lessor on the Termination Date any Rent other
than Basic Rent (including, without limitation, all Special Supplemental
Rent) otherwise payable or due on such Termination Date, including any
prepayment premium payable on the Notes issued by the Lessor, but shall not
be required to pay Termination Value and (B) deliver to the Lessor on the
Termination Date such instrument as the Lessor shall reasonably request to
evidence the release of the Undivided Interest from this Facility Lease.
SECTION 14(C). EVENTS ON THE TERMINATION DATE. If the Lessor has not
elected to retain the Undivided Interest as provided in Section 14(b), on the
Termination Date the Lessor shall (subject to receipt of the sale price and
all additional payments specified in the next sentence) transfer the
Undivided Interest and its interests under the Easement Agreement, the
Support Agreement and the Assigned Contracts for cash to the bidder (which
shall not be the Lessee or an Affiliate of the Lessee) that shall have
submitted the highest bid before the Termination Date. The total sale price
realized at such sale shall be retained by the Lessor and, in addition, on
the Termination Date the Lessee shall pay to the Lessor (or, in the case of
Special Supplemental Rent and Supplemental Rent, the Person entitled thereto)
(A) the excess, if any, of the Termination Value as of the Termination Date
over the sale price of the Undivided Interest, after deducting from the sale
price all expenses incurred by the Lessor in connection with such sale and
(B) all other Special Supplemental Rent and Supplemental Rent, including any
prepayment premium payable on the Outstanding Notes, then due. Upon
compliance by the Lessee with the provisions of this Section 14, the
obligation of the Lessee to pay Basic Rent due hereunder for any period after
the Termination Date shall cease and the Lease Term shall end on the
Termination Date. If, other than as a result of the Lessor's election to
retain its Undivided Interest as provided in Section 14(b), on or as of the
Termination Date no such sale shall occur or the Lessee shall not have
complied in full with this Section 14, this Facility Lease shall continue in
full force and effect in accordance with its and their terms without
prejudice to the Lessee's right to exercise its rights under this Section 14
thereafter; provided, however, that the Lessee may not give more than one
Termination Notice pursuant to this Section 14 in any 24-month period. The
Lessor shall be under no duty to solicit bids, to inquire into the efforts of
the Lessee to obtain bids or otherwise take any action in connection with any
such sale other than, if the Lessor has not elected to retain its Undivided
Interest, to transfer the Undivided Interest and its interests under the
Support Agreement, the Assigned Contracts and the Easement to the purchaser
named in the highest bid certified by the Lessee to the Lessor or obtained by
the Lessor, free and clear of Lessor's Liens and Owner Participant's Liens,
against receipt of the payments provided for herein.
SECTION 15. EVENTS OF DEFAULT.
The term Event of Default, wherever used herein, shall mean any of the
following events (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary, or come about or be effected by
operation of law, or be pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the Lessee shall fail to make, or cause to be made, any
payment of Basic Rent within 5 Business Days after the same shall
become due and payable or, in the case of a payment of Basic Rent
payable in December, on or before the last Business Day of the
calendar year; or [NOTE 4]
(i) the Lessee shall fail to make, or cause to be made, any
payment of Basic Rent within 5 Business Days after the same shall
become due and payable; or [NOTE 5]
(ii) the Lessee shall fail to make, or cause to be made, any
payment of Casualty Value, Termination Value, Special Termination
Value or Agreed Fair Market Value or, provided that a Discharge of
the Indenture shall have occurred, Special Supplemental Rent, in
each case, when due or any payment of Supplemental Rent (other than
Special Supplemental Rent, Casualty Value, Termination Value,
Special Termination Value or Agreed Fair Market Value) within 15
days after the same shall become due and payable; or
(iii) Either Sponsor shall fail to pay any obligation, on the
due date for payment thereof (whether at maturity, upon
acceleration or otherwise) or after the expiration of any
applicable grace period, contained in any indenture, contract,
agreement or other instrument evidencing any obligation with
respect to any borrowed monies or advances for borrowed monies (or
any obligation under any conditional sale or other title retention
agreement, or any obligation issued or assumed as full or partial
payment for property whether or not secured by a purchase money
mortgage, or any obligation for notes payable or drafts accepted
representing extensions of credit or any obligation under any
capital lease) in the aggregate outstanding principal amount of
$10,000,000 or more (including any obligation with respect to
borrowed monies or advances directly or indirectly guaranteed by
such Sponsor, or in respect of which such Sponsor is contingently
liable) unless acceleration of the payment of such obligation shall
not have occurred and such Sponsor shall have cured any such
failure within 30 days after the expiration of any applicable grace
period provided in respect of such obligation; provided, however,
that no such cure may materially and adversely affect the rights of
the Lessor under the Keepwell Agreement of such Sponsor or the Cash
Deficiency Agreement of the Joint Venturer that is an Affiliate of
such Sponsor; or
(iv) Either Sponsor shall fail to observe or perform any term,
covenant or agreement (other than one described in clause (iii) of
this Section 15) contained in any indenture, contract, agreement or
other instrument evidencing any obligation referred to in such
clause (iii), and (A) such failure shall have caused the
acceleration of the payment of such obligation or (B) such failure
would permit such acceleration and the Lessor or the Indenture
Trustee shall have delivered to such Sponsor written notice that
such failure constitutes an Event of Default; provided that, unless
an acceleration described in clause (A) above shall occur, such
failure shall not constitute an Event of Default if such Sponsor
shall cure such failure within 30 days after the date of delivery
of such notice without materially adversely affecting the Lessor's
rights under the Keepwell Agreement of such Sponsor or the Cash
Deficiency Agreement of the Joint Venturer that is an Affiliate of
such Sponsor; or
(v) a voluntary or involuntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to either
Sponsor, either Joint Venturer or the Lessee or any of their debts
under any bankruptcy, insolvency, or other similar law now or
hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of any of
them or any substantial part of any of their property shall be
filed, or either Sponsor, either Joint Venturer or the Lessee shall
consent to any such relief or to the appointment of or taking
possession by any such official or agency in an involuntary case or
other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to
pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing; or an involuntary case or
other proceeding shall be commenced against either Sponsor, either
Joint Venturer or the Lessee seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official or agency of it or any
substantial part of its property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period
of 60 days; or
(vi) any insurance required to be maintained pursuant to Section 10
shall be terminated or cancelled and not replaced or shall not be
renewed or replaced; or
(vii) the Lessee shall fail to perform or observe any other
covenant, condition or agreement to be performed or observed by it
under this Facility Lease or any other Transaction Document to
which the Lessee is a party or any agreement, document or
certificate delivered by the Lessee in connection herewith or
therewith, and, except with respect to those covenants set forth in
Sections 7, 8(i) and 11 of this Facility Lease and Sections
8(b)(3)(i), (ii), (viii), (x), (xi), (xiii), (xiv), (xv) and (xvi)
of the Financing Agreement to which subparagraph (viii) of this
Section 15 shall apply, such failure shall continue for a period of
30 days after the earlier of (x) the date on which notice of such
failure shall have been given to the Lessee by the Lessor or the
Indenture Trustee or (y) the date on which a Responsible Officer of
the Lessee, a Sponsor or a Joint Venturer, as the case may be,
shall have actual knowledge of such failure; provided, however,
that no Event of Default shall have occurred so long as the Lessee
is diligently pursuing action which will enable it to comply
therewith within 60 days after such notice or actual knowledge by
the Lessee; and provided, further, however, that in respect of
Applicable Laws, compliance may be deferred or the applicability
thereof may be contested so long as such failure of compliance does
not adversely affect either the ability of the Facility to operate
in an economic manner or the ability of the Lessee to conduct its
business as generally contemplated by the Offering Memorandum; or
(viii) the Lessee shall fail to perform or observe any covenant
set forth in Section 7, 8(i) or 11 of this Facility Lease or
Section 8(b)(3)(i), (ii), (viii), (x), (xi), (xiii), (xiv), (xv) or
(xvi) of the Financing Agreement; or
(ix) any representation or warranty made by the Lessee, any Sponsor
or any Joint Venturer in this Facility Lease or any other
Transaction Document to which the Lessee, such Sponsor or such
Joint Venturer is a party or any agreement, document or certificate
delivered by the Lessee, such Sponsor or such Joint Venturer in
connection herewith or therewith shall prove to have been incorrect
in any material respect when any such representation or warranty
was made or given and shall remain material at the time in
question; or
(x) a Joint Venturer shall default in the performance of any of
its obligations under its Cash Deficiency Agreement, or a Sponsor
shall default in the performance of any of its obligations under
its Keepwell Agreement, and, in either such case, the Other Joint
Venturer or the Other Sponsor, as the case may be, shall not have
cured any such default after notice of such failure by (x) payment
within 10 days of all amounts due and payable by such defaulting
Joint Venturer or Sponsor, and (y) assumption of the obligations of
such defaulting Joint Venturer under its Cash Deficiency Agreement
or of such defaulting Sponsor under its Keepwell Agreement in
accordance with their respective Cash Deficiency Agreements; or
Keepwell Agreements; provided, however, that if after such Other
Joint Venturer or Other Sponsor shall have cured any such default,
in either case, the Other Sponsor shall fail to maintain its
investment rating at the level required in Section 12(h) of its
Keepwell Agreement and, within the time allotted therein, to take
the actions described in Section 12(h)(x) or Section 12(h)(y) of
its Keepwell Agreement, then such failure by such Other Sponsor
shall constitute an Event of Default; or
(xi) The Lessee shall fail to (x) pay any obligation on the due
date for payment thereof (whether or not at maturity, upon
acceleration or otherwise) or after the expiration of any
applicable grace period, or (y) observe or perform any term,
covenant or agreement (other than those described in (x) above),
contained in any indenture, contract, agreement or other instrument
evidencing any obligation with respect to any borrowed monies or
advances for borrowed monies (or any obligation under any
conditional sale or other title retention agreement, or any
obligation issued or assumed as full or partial payment for
property whether or not secured by a purchase money mortgage, or
any obligation for notes payable or drafts representing extensions
of credit or any obligation under any capitalized or other lease of
any real or personal property) in the aggregate outstanding
principal amount (or with respect to any lease of real or personal
property, having a present value of all remaining rentals payable
thereunder, discounted at a discount rate equal to 12.08% per
annum) of $5,000,000 or more (including any obligation with respect
to borrowed monies or advances directly or indirectly guaranteed by
Lessee or in respect of which the Lessee is contingently liable).
SECTION 16. REMEDIES.
SECTION 16(A). REMEDIES. Upon the occurrence of any Event of Default and
so long as the same shall be continuing, the Lessor may, at its option,
declare this Facility Lease to be in default by written notice to such effect
given to the Lessee, and at any time thereafter the Lessor may exercise one
or more of the following remedies (to the extent permitted under Applicable
Law), as the Lessor in its sole discretion shall elect:
(i) the Lessor may, by notice to the Lessee, rescind or terminate
this Facility Lease and exercise its rights under the Support
Agreement; or
(ii) the Lessor may (A) demand that the Lessee, and the Lessee
shall upon the demand of the Lessor, redeliver the Undivided
Interest to the Lessor in the manner provided in Section 5, and the
Lessor shall not be liable for the reimbursement of the Lessee for
any costs and expenses incurred by the Lessee in connection
therewith or (B) enter upon the Facility Site and take immediate
possession of (to the exclusion of the Lessee) the Undivided
Interest by summary proceedings or otherwise, and in the case of
either (A) or (B) may exercise its rights under the Support
Agreement, all without liability to the Lessee for or by reason of
such action; or
(iii) the Lessor may sell the Undivided Interest together with
its interest under the Support Agreement, the Easement Agreement
and the Assigned Contracts, or any part thereof, at public or
private sale, as the Lessor may determine, free and clear of any
rights of the Lessee in the Undivided Interest and without any duty
to account to the Lessee with respect to such action or inaction or
any proceeds with respect thereto (except to the extent required by
clause (vi) below if the Lessor shall elect to exercise its rights
thereunder), in which event the Lessee's obligation to pay Basic
Rent hereunder for periods commencing after the date of such sale
shall be terminated (except to the extent that Basic Rent is to be
included in computations under clause (v) or clause (vi) below if
the Lessor shall elect to exercise its rights thereunder); or
(iv) the Lessor may hold, operate, keep idle or lease to others all
or any part of the Undivided Interest, as the Lessor in its sole
discretion may determine, free and clear of any rights of the
Lessee and without any duty to account to the Lessee with respect
to such action or inaction or for any proceeds with respect to such
action or inaction, except that the Lessee's obligation to pay
Basic Rent hereunder for periods commencing after the Lessee shall
have been deprived of use of the Undivided Interest pursuant to
this clause (iv) shall be reduced by the net proceeds, if any,
received by the Lessor from leasing to any Person other than the
Lessee for the same periods or any portion thereof; or
(v) the Lessor may, whether or not the Lessor shall have exercised
or shall thereafter at any time exercise its rights under clause
(i), (ii), (iii) or (iv) above, demand, by written notice to the
Lessee specifying a payment date which shall be a Basic Rent
Payment Date not earlier than 10 days after the date of such
notice, that the Lessee pay to the Lessor, and the Lessee shall pay
to the Lessor, on the Basic Rent Payment Date specified in such
notice, as liquidated damages for loss of a bargain and not as a
penalty (in lieu of the Basic Rent due after the Basic Rent Payment
Date specified in such notice), any unpaid Rent due through the
Basic Rent Payment Date specified in such notice plus whichever of
the following amounts the Lessor, in its sole discretion, shall
specify in such notice (together with interest on such amount at
the interest rate specified in Section 3(b)(iii) from the Basic
Rent Payment Date specified in such notice to the date of actual
payment and any prepayment premium on the Notes):
(A) an amount equal to the excess, if any, of Casualty Value,
computed as of the Basic Rent Payment Date specified in such
notice, over the Fair Market Rental Value of the Undivided
Interest until the end of the Basic Lease Term or the Renewal
Term, as the case may be, after discounting such Fair Market
Rental Value semiannually to present value as of the Basic
Rent Payment Date specified in such notice at the rate of
12.08% per annum; or
(B) an amount equal to the excess, if any, of such Casualty
Value over the Fair Market Sales Value of the Undivided
Interest as of the Basic Rent Payment Date specified in such
notice; or
(C) an amount equal to the highest of (1) such Casualty
Value, (2) such discounted Fair Market Rental Value and (3)
such Fair Market Sales Value and, in this event, upon full
payment by the Lessee of all sums due hereunder, the Lessor
may, at the option of the Owner Participant, either (x)
exercise its best efforts promptly to sell the Undivided
Interest together with its interest under the Support
Agreement, the Easement Agreement and the Assignment of
Contracts and pay over to the Lessee the Sale Proceeds up to
the amount set forth in (1), (2) or (3) above actually paid by
the Lessee to the Lessor, or (y) deliver to the Lessee (AA) a
bill of sale transferring and assigning to the Lessee all
right, title and interest of the Lessor in and to the
Undivided Interest free and clear of all Lessor's Liens and
Owner Participant's Liens, but without recourse or warranty,
and (BB) the agreement of the Lessor terminating its interest
under the Support Agreement, the Easement Agreement and the
Assigned Contracts and this Facility Lease, whereupon the
Lessee's obligation to pay Basic Rent hereunder for periods
commencing after the date of such sale or delivery shall be
terminated; or
(D) an amount equal to the excess of (1) the present value as
of the Basic Rent Payment Date specified in such notice of all
installments of Basic Rent until the end of the Basic Lease
Term or the Renewal Term, as the case may be, discounted semi-
annually at a rate of 12.08% per annum, over (2) the present
value as of such Basic Rent Payment Date of the Fair Market
Rental Value of the Undivided Interest until the end of the
Basic Lease Term or the Renewal Term, as the case may be,
discounted semi-annually at a rate of 12.08% per annum; or
(vi) if the Lessor shall have sold the Undivided Interest together
with its interest under the Support Agreement, the Easement
Agreement and the Assigned Contracts pursuant to clause (iii)
above, the Lessor, in lieu of exercising its rights under clause
(v) above with respect to the Undivided Interest and its interest
under the Support Agreement, the Easement Agreement and the
Assigned Contracts may, if it shall so elect, demand that the
Lessee pay to the Lessor and the Lessee shall pay to the Lessor on
the date of such sale, as liquidated damages for loss of a bargain
and not as a penalty (in lieu of Basic Rent due for periods
commencing after the next Basic Rent Payment Date following the
date of such sale), any unpaid Basic Rent due through such Basic
Rent Payment Date and any prepayment premium on the Notes, plus the
amount of any deficiency between the Sale Proceeds and Casualty
Value, computed as of such Basic Rent Payment Date, together with
interest at the interest rate specified in Section 3(b)(iii) on the
amount of such Rent and such deficiency from the date of such sale
until the date of actual payment; or
(vii) the Lessor may exercise any other right or remedy that
may be available to it under any Applicable Law or proceed by
appropriate court action to enforce the terms hereof or to recover
damages for the breach hereof.
SECTION 16(B). NO RELEASE. No rescission or termination of this Facility
Lease, in whole or in part, or repossession of the Undivided Interest or
exercise of any remedy under Section 16(a) shall, except as specifically
provided therein, relieve the Lessee of any of its liabilities and
obligations hereunder. In addition, the Lessee shall be liable, except as
otherwise provided above, for any and all unpaid Rent due hereunder before,
after or during the exercise of any of the foregoing remedies, including all
reasonable legal fees and other costs and expenses incurred by the Lessor,
the Owner Participant, any Loan Participant or the Indenture Trustee by
reason of the occurrence of any Event of Default or the exercise of the
Lessor's remedies with respect thereto, including, without limitation, any
costs reasonably incurred in connection with preparing the Facility for
occupation and operation by any other Person.
SECTION 16(C). REMEDIES CUMULATIVE. No remedy under Section 16(a) is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy provided under such Section 16(a) or otherwise available to the
Lessor at law or in equity. No express or implied waiver by the Lessor of any
Default or Event of Default hereunder shall in any way be, or be construed to
be, a waiver of any future or subsequent Default or Event of Default. The
failure or delay of the Lessor in exercising any rights granted it hereunder
upon any occurrence of any of the contingencies set forth herein shall not
constitute a waiver of any such right upon the continuation or recurrence of
any such contingencies or similar contingencies and any single or partial
exercise of any particular right by the Lessor shall not exhaust the same or
constitute a waiver of any other right provided herein. To the extent
permitted by applicable law, the Lessee hereby waives any rights now or
hereafter conferred by statute or otherwise which may require the Lessor to
sell, lease or otherwise use the Undivided Interest or the Facility in
mitigation of the Lessor's damages as set forth in paragraph (a) of this
Section 16 or which may otherwise limit or modify any of the Lessor's rights
and remedies provided in such paragraph.
SECTION 16(D). SURVIVAL OF LESSEE'S OBLIGATIONS. In addition to the
provisions of Section 20(b), no termination of this Facility Lease, in whole
or in part, or exercise of any remedy under this Section 16 shall, except as
specifically provided herein, relieve the Lessee of any of its liabilities
and obligations hereunder, all of which shall survive such termination or
exercise of remedy. In addition, the Lessee shall be liable, except as
otherwise provided above, for any and all unpaid Rent due hereunder before,
after or during the exercise of any of the foregoing remedies (the Lessee's
obligation to pay Supplemental Rent being intended to survive any payment of
liquidated damages in lieu of Basic Rent pursuant to this Section 16),
including all reasonable legal fees and other costs and expenses incurred by
the Lessor, the Owner Participant, the Indenture Trustee or any Holder of a
Note by reason of the occurrence of any Event of Default or the exercise of
the Lessor's remedies with respect thereto, and including all costs and
expenses incurred in connection with the return of the Undivided Interest in
accordance with the provisions of Section 5 as if such Undivided Interest
were being surrendered at the end of the Lease Term. At any sale of the
Undivided Interest, the Support Agreement, the Easement Agreement and the
Assigned Contracts or any part thereof pursuant to this Section 16, the Owner
Participant, the Lessor, the Indenture Trustee or any Holder of a Note may
bid for and purchase such property. It is agreed that 30 days' notice to the
Lessee of the date, time and place of any proposed sale by the Lessor or the
Indenture Trustee of all or any part of the Undivided Interest or any other
part of the Trust Estate is reasonable.
SECTION 16(E). COOPERATION ON FORECLOSURE. The Lessee agrees that, if a
foreclosure occurs under the Indenture at a time when an Event of Default
shall not have occurred, it will take all appropriate steps to facilitate
such foreclosure, including, without limitation, acceptance of a new lessor
under this Facility Lease, provided, however, that the new lessor is not, and
is not affiliated with (whether as Affiliate, joint venturer or otherwise) a
manufacturer, converter or distributor of printing and publication grade
papers.
SECTION 17. NOTICES.
All communications and notices provided for in this Facility Lease shall
be in writing and shall be given in Person or by means of telex, telecopy, or
other wire transmission, or mailed by registered or certified mail, addressed
as provided in the Financing Agreement. All such communications and notices
given in such manner shall be effective on the date of receipt of such
communication or notice.
SECTION 18. SUCCESSORS AND ASSIGNS.
This Facility Lease, including all agreements, covenants,
representations and warranties, shall be binding upon and inure to the
benefit of the Lessor and its successors and permitted assigns, and the
Lessee and its successors and, to the extent permitted hereby, assigns.
SECTION 19. RIGHT TO PERFORM FOR LESSEE.
If the Lessee shall fail to make any payment of Rent to be made by it
hereunder, or shall fail to perform or comply with any of its other
agreements contained herein or therein, either the Lessor, the Owner
Participant, any Loan Participant or the Indenture Trustee may, but shall not
be obligated to, make such payment or perform or comply with such agreement,
and the amount of such payment and the amount of all costs and expenses
(including, without limitation, reasonable attorneys' and other
professionals' fees and expenses) of the Lessor, the Owner Participant, the
Loan Participants or the Indenture Trustee, as the case may be, incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the rate
specified by Section 3(b)(iii), shall be deemed Supplemental Rent, payable by
the Lessee upon demand.
SECTION 20. AMENDMENTS AND MISCELLANEOUS.
SECTION 20(A). AMENDMENTS IN WRITING. The terms of this Facility Lease
shall not be waived, altered, modified, amended, supplemented or terminated
in any manner whatsoever, except by a Facility Lease Supplement.
SECTION 20(B). SURVIVAL. All agreements, indemnities, representations
and warranties contained in this Facility Lease and the Transaction Documents
or any agreement, document or certificate delivered pursuant hereto or
thereto or in connection herewith or therewith shall survive the execution
and delivery of this Facility Lease and the expiration or other termination
of this Facility Lease.
SECTION 20(C). SEVERABILITY OF PROVISIONS. Any provision of this
Facility Lease which may be determined by competent authority to be
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
thereof, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the Lessee hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
SECTION 20(D). TRUE LEASE. This Facility Lease shall constitute an
agreement of lease and nothing herein shall be construed as conveying to the
Lessee any right, title or interest in or to the Undivided Interest or the
Facility, except as lessee only.
SECTION 20(E). ORIGINAL LEASE. The single executed original of this
Facility Lease and each Facility Lease Supplement marked "Original" and
containing the receipt of the Indenture Trustee thereon shall be the
"Original" of this Facility Lease or any such Facility Lease Supplement. To
the extent that this Facility Lease constitutes chattel paper, as such term
is defined in the Uniform Commercial Code, as in effect in any applicable
jurisdiction, no security interest in this Facility Lease may be created
through the transfer or possession of any counterpart other than the
"Original" of this Facility Lease and each Facility Lease Supplement.
SECTION 20(F). GOVERNING LAW. This Facility Lease has been negotiated,
executed and delivered in the State of New York, and this Facility Lease
shall be governed by and construed in accordance with the laws of the State
of New York, except to the extent that the laws of the State of Minnesota
shall mandatorily apply.
SECTION 20(G). HEADINGS. The division of this Facility Lease into
sections, the provision of a table of contents and the insertion of headings
are for convenience of reference only and shall not affect the construction
or interpretation of this Facility Lease.
SECTION 20(H). CONCERNING THE OWNER TRUSTEE. FNB is entering into this
Agreement solely as Owner Trustee under the Trust Agreement and not in its
individual capacity. Anything herein to the contrary notwithstanding, all and
each of the representations, warranties, undertakings and agreements herein
made on the part of the Owner Trustee are made and intended not as personal
representations, warranties, undertakings and agreements by or for the
purpose or with the intention of binding the Owner Trustee personally, but
are made and intended for the purpose of binding only the Trust Estate, and
this Facility Lease is executed and delivered by the Owner Trustee solely in
the exercise of the powers expressly conferred upon it as trustee under the
Trust Agreement; and no personal liability or responsibility is assumed
hereunder by or shall at any time be enforceable against the Owner Trustee or
any successor in trust or the Owner Participant on account of any
representation, warranty, undertaking or agreement hereunder of the Owner
Trustee, either express or implied, ALL SUCH PERSONAL LIABILITY, IF ANY,
BEING EXPRESSLY WAIVED BY THE LESSEE, except that the Lessee or any Person
claiming by, through or under it, making claim hereunder, may look to the
Trust Estate for satisfaction of the same and the Owner Trustee or its
successor in trust, as applicable, shall be personally liable for its own
gross negligence or willful misconduct. The Owner Participant shall have no
liability, obligation, responsibility or duty to any Person whatsoever for or
with respect to any of the transactions contemplated by this Facility Lease,
except as provided in the Financing Agreement or in the Trust Agreement,
whether as a result of the negligence or willful misconduct of FNB or
otherwise. If a successor owner trustee is appointed in accordance with the
terms of the Trust Agreement, such successor owner trustee shall, without any
further act, succeed to all the rights, duties, immunities and obligations of
the Owner Trustee hereunder and the predecessor owner trustee shall be
released from all further duties and obligations hereunder; provided,
however, that the predecessor Owner Trustee shall remain personally liable
for its own gross negligence and willful misconduct arising prior to such
appointment. If a transferee owner trustee is appointed in accordance with
the terms of Article IX of the Trust Agreement, such transferee owner trustee
shall, without any further act, succeed to all the rights, duties, immunities
and obligations of the Owner Trustee hereunder, or such portion thereof as is
transferred pursuant to such Article IX, and the predecessor owner trustee
shall be released from all further duties and obligations hereunder or such
portion thereof so transferred; provided, however, that the predecessor Owner
Trustee shall remain personally liable for its own gross negligence and
willful misconduct arising prior to such appointment.
SECTION 20(I). COUNTERPART EXECUTION. This Facility Lease and each
Facility Lease Supplement may be executed in any number of counterparts and
by each of the parties hereto or thereto on separate counterparts, all such
counterparts together constituting but one and the same instrument, with the
counterparts delivered to the Indenture Trustee pursuant to the Indenture
being deemed the "Original" and all other counterparts being deemed
duplicates.
SECTION 20(J). NO MERGER OF TITLE. There shall be no merger of this
Facility Lease or the leasehold estate created by this Facility Lease with
any other estate in the Facility or the Facility Site or any part thereof by
reason of the fact that the same Person may acquire or own or hold, directly
or indirectly, (i) this Facility Lease or the leasehold estate created by
this Facility Lease or any interest in this Facility Lease or in any such
leasehold estate and (ii) any other estate in the Facility or the Facility
Site or any part thereof or any interest in such estate, and no such merger
shall occur unless and until all Persons having an interest in this Facility
Lease or the leasehold estate created by this Facility Lease and any other
estate in the Facility or the Facility Site or any part thereof shall join in
a written instrument effecting such merger, and shall duly record the same.
IN WITNESS WHEREOF, the parties hereto have each caused this Facility
Lease to be duly executed in New York, New York on the date first set forth
above by their respective officers thereunto duly authorized.
FIRST NATIONAL BANK OF
MINNEAPOLIS, not in its individual
capacity, but solely as Owner Trustee
under a Trust Agreement, dated
December 31, 1987 with [NOTE 1]
as Lessor
By /s/ Jon M. Stevens
Assistant Vice President
By /s/ Frank P. Leslie III
Assistant Secretary
LAKE SUPERIOR PAPER INDUSTRIES,
as Lessee
By /s/ Ronald V. Kelly
President
* Receipt of this original counterpart of
the foregoing Facility Lease is hereby
acknowledged.
The Connecticut Bank and Trust Company,
National Association
as Indenture Trustee
By: /s/ Virginia Kreuscher
Assistant Vice President
Date: December 31, 1987
* Receipt signed on original counterpart only.
This Facility Lease was prepared by Mudge Rose Guthrie Alexander & Ferdon and
after recording return to:
J. D. Clayton, Esq., Mudge Rose Guthrie Alexander & Ferdon, 180 Maiden Lane,
New York, New York 10038.
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 30th day of December, 1987, before me personally came FRANK P. LESLIE
III, and JON M. STEVENS to me known, who being by me duly sworn, did depose
and say that they reside in Oakdale, Minnesota and New Brighton, Minnesota,
respectively; that they are the Assistant Secretary and the Assistant Vice
President, respectively, of FIRST NATIONAL BANK OF MINNEAPOLIS, a national
banking association, described in and which executed the foregoing
instrument; and that they signed their names thereto by authority of said
association.
/s/ [NOTE 6]<F6>
Notary Public
[NOTARIAL SEAL]
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 30th day of December, 1987, before me personally came RONALD V. KELLY,
to me known, who being by me duly sworn, did depose and say that he resides
in Duluth, Minnesota; that he is the President of LAKE SUPERIOR PAPER
INDUSTRIES, a joint venture organized under the Minnesota general partnership
law, described in and which executed the foregoing instrument; and that he
signed his name thereto by authority of the By-Laws and Management Protocol
of the said joint venture.
/s/ [Note 7]<F7>
Notary Public
[NOTARIAL SEAL]
APPENDIX A
DEFINITIONS
[SEE APPENDIX A TO COMPOSITE CONFORMED FINANCING AGREEMENT]
____________________
<F6> Note 6: Notarizations on Original Facility Leases:
Associated, Dana, NYNEX and PSR - Richard T. Jordan; Notary
Public, State of New York; No. 24-0lJ04854587; Certificate filed
in Kings County; Qualified in New York County; Commission Expires
March 30, 1988; SoInd - David Feldman; Notary Public, State of
New York; No. 31-4884747; Qualified in New York County;
Commission Expires February 2, 1989.
<F7> Note 7: Notarizations on Original Facility Leases:
Associated, Dana, and NYNEX - Catt Wilbur; Notary Public, State
of New York; No. 31-4888983; Qualified in New York County;
Commission Expires April 6, 1989: PSR and Solnd - David Feldman;
Notary Public, State of New York; No. 31-4884747; Qualified in
New York County; Commission Expires February 2, 1989.
APPENDIX A
[COMPOSITE CONFORMED COPY IN RESPECT OF FIVE
SEPARATE UNDIVIDED INTEREST TRANSACTIONS]
DEFINITION OF TERMS
for
FINANCING AGREEMENT
dated December 31, 1987
and
THE TRANSACTION DOCUMENTS REFERRED TO THEREIN
SALE AND LEASEBACK OF UNDIVIDED INTEREST IN
LAKE SUPERIOR PAPER INDUSTRIES' SUPERCALENDERED PAPER MILL
DEFINITION OF TERMS
The terms deemed herein relate to the Financing Agreement (as defined below),
and the Transaction Documents referred to therein executed in connection with
the Financing Agreement and which incorporate this Appendix. Such terms shall
include the plural as well as the singular. Any agreement defined or referred
to below shall include each amendment, modification and supplement thereto
and waiver thereof as may become effective from time to time, except where
otherwise indicated. Any term defined below by reference to any agreement
shall have such meaning whether or not such document is in effect. The terms
"hereof', "herein", "hereunder" and comparable terms refer to the entire
agreement with respect to which such terms are used and not to any particular
article, section or other subdivision thereof.
If, and to the extent that, either the Financing Agreement or any other
Transaction Document which incorporates this Appendix shall be amended
pursuant to the respective terms thereof, this Appendix shall be, or be
deemed to have been, amended concurrently with the execution and delivery of
each such amendment in order to conform the definitions herein to the new or
amended definitions set forth in or required by each such amendment.
ACRS Deductions shall have the meaning set forth in Section 1 of the Tax
Indemnity Agreement.
Adjustments to Basic Rent shall mean any change in Basic Rent made
pursuant to the provisions of Section 15 of the Financing Agreement.
Affiliate, with respect to any Person, shall mean any other Person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For purposes of this definition,
the term "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of such Person,
whether through the ownership of voting securities or partnership interests
or by contract or otherwise.
Affiliated Group shall have the meaning set forth in Section 9 of the
Tax Indemnity Agreement.
After-Tax Additional Percentage shall mean, with respect to the eleventh
and the twenty-first Basic Rent Payment Dates, the values provided in
Schedule 5 to the Facility Lease.
After-Tax Basis shall mean, with respect to any payment to be made on an
"After-Tax Basis", that such payment will be grossed-up by the payor to make
the payee whole for the net amount of additional Federal, state and local
income taxes payable as a result of the receipt or accrual of such payment
and such gross-up amount. ln calculating the gross-up amount, (i) the Federal
income tax rate used shall be the highest marginal tax rate in effect for
taxpayers such as the payee on the date of such payment, and (ii) all other
state and local income tax rates shall be at the highest marginal tax rate in
effect for taxpayers such as the payee on the date of such payment; provided,
however, that nothing herein shall affect the right of any taxpayer to
determine the correct treatment of any item of its income or deduction.
Aggregate CDA Rent shall mean the aggregate of CDA Rent due and payable
in accordance with the Facility Lease and all "CDA Rent" due and payable in
accordance with the Other Facility Leases.
Aggregate Excepted Payments shall mean the sum of (i) Excepted Payments
due and payable and (ii) the aggregate of all due and payable "Excepted
Payments" as defined in each Other Financing Agreement
Aggregate Special Supplemental Rent shall mean the aggregate of all
Special Supplemental Rent payable in accordance with Section 13A(c)(iii) of
the Financing Agreement, and all "Special Supplemental Rent" payable in
accordance with Section 13A(c)(iii) of the Other Financing Agreements.
Agreed Fair Market Value shall mean, as of the eleventh and twenty-first
Basic Rent Payment Dates, and as of the end of the Basic Lease Term, the
amount determined by multiplying the percentage set forth opposite each such
date in Schedule 5 of the Facility Lease by Facility Cost; provided, further,
however, that the percentages set forth in such Schedule 5 shall be subject
to adjustment as provided in the Financing Agreement, and provided, further,
however, that the percentages set forth in such Schedule 5 shall be at least
equal to the Minimum Percentage Requirement. In the event of an adjustment of
Agreed Fair Market Value occasioned by clause (i) of Change in Tax Law, only
the Agreed Fair Market Values as of the eleventh and twenty-first Basic Rent
Payment Dates are subject to adjustment; provided, further, however, that the
percentages set forth in such Schedule shall be at least equal to the Minimum
Percentage Requirement. Such adjustments are calculated by adding the After-
Tax Additional Percentage applicable at such date divided by the quantity (1
minus the highest marginal Federal tax rate to corporations applicable at
such date) to the adjusted Termination Values calculated as of such dates.
Allowance for Depreciation shall mean, with respect to each fiscal year
of the Lessee, the amount of all depreciation and amortization for such
fiscal year that has been charged to expense with respect to real and
personal property and intangibles (including goodwill) and any other
depreciable assets or amortizable costs, determined in accordance with GAAP.
Amortization Deductions shall have the meaning set forth in Section 1 of
the Tax Indemnity Agreement.
Amortization Schedule with respect to each Note, shall mean the Schedule
attached thereto, and as amended pursuant to the Indenture and the Financing
Agreement, setting forth the amortization of the principal amount thereof.
Applicable CDA Amount shall mean, with respect to each Cash Deficiency
Agreement, (A) during the period from the Closing to the Completion Date, an
amount equal to one-half of all Lessee's Obligations due and payable from
time to time during, or accrued at the end of, such period, and (B) during
the Flscal year which includes the Completion Date (such fiscal year being
herein a short year which shall be deemed to have commenced on the first day
of the month next following the Completion Date and ended on the December 31
next following the Completion Date) and each fiscal year thereafter, an
amount equal to the lesser of (i) the Maximum Available CDA Amount or (ii)
the Applicable CDA Amount established as at the beginning of such fiscal year
pursuant to Section 13A(a) of the Financing Agreement reduced by an amount
equal to CDA Charges estimated during such fiscal year, as reconciled on the
annual CDA Worksheet provided by the Lessee pursuant to Section
8(b)(1)(i)(C)(1) of the Financing Agreement, increased by an amount equal to
the CDA Increase estimated during such fiscal year, as reconciled on the
annual CDA Worksheet provided by the Lessee pursuant to Section
8(b)(1)(i)(C)(I) of the Financing Agreement and increased by an amount equal
to any voluntary increase in the Applicable CDA Amount under such Cash
Deficiency Agreement and related Keepwell Agreement pursuant to any binding
agreement by a Joint Venturer and its Affiliate Sponsor; provided, however,
that the Sponsors or Joint Venturers retain the right to provide Designated
Voluntary Contributions at any time, thereby eliminating, or decreasing the
amount of, any CDA Charge and increasing the Applicable CDA Amount; provided,
however, that at any time that the proviso to the definition of "Lessor's
Allocable Percentage" or Section 1 of Appendix B to the Cash Deficiency
Agreements shall be in effect, Applicable CDA Amount shall equal the product
of (i) Lessor's Allocable Percentage, as calculated pursuant to such proviso
or Section, as the case may be, and (ii) the sum of the Applicable CDA
Amounts under all Cash Deficiency Agreements of a Joint Venturer.
Applicable Law shall mean all applicable laws, statutes, treaties,
rules, codes, ordinances, regulations, permits, certificates, orders,
licenses and permits of any Governmental Authority, interpretations of any of
the foregoing by a Governmental Authority having jurisdiction, and judgments,
decrees, injunctions, writs, orders or like action of any court, arbitrator
or other judicial or quasi judicial tribunal (including those pertaining to
health, safety, the environment or otherwise).
Appraisal shall mean the appraisal of the Appraiser delivered to the
Owner Participant.
Appraisal Procedure shall mean a procedure whereby two independent
appraisers, one chosen by the Lessee and one by the Lessor, shall mutually
agree upon the value, period or amount then the subject of an appraisal. If
either the Lessor or the Lessee, as the case may be, shall determine that a
value, period or amount to be determined under the Facility Lease or any
other Transaction Document cannot be established by mutual agreement, such
party shall appoint its appraiser and deliver a written notice thereof to the
other party. Such other party shall appoint its appraiser within 21 days
after receipt from the other party of the foregoing written notice. If either
party fails to appoint an independent appraiser within the time required, the
determination of the independent appraiser appointed by the other party shall
be final. If within 30 days after appointment of the second appraiser, as
described above, the two appraisers are unable to agree upon the value,
period or amount in question, a third independent appraiser shall be chosen
within ten days thereafter by the mutual consent of such first two appraisers
or, if such first two appraisers fail to agree upon the appointment of a
third appraiser, such appointment shall be made by the American Arbitration
Association, or any organization successor thereto, from a panel of
arbitrators having experience in the business of operating a paper mill and a
familiarity with equipment used or operated in such business. The decision of
the third appraiser so appointed and chosen shall be given within 21 days
after the selection of such third appraiser. If three appraisers shall be so
appointed and the determination of one appraiser is more disparate from the
average of all three determinations than each of the other two
determinations, then the determination of such appraiser shall be excluded,
the remaining two determinations shall be averaged and such average shall be
binding and conclusive on the Lessor and the Lessee. If no determination is
more disparate from the average of all three determinations than each of the
other determinations, then such average shall be binding and conclusive on
the Lessor and the Lessee. With respect to any Appraisal Procedure, each
party shall pay (i) the fees and expenses of the appraiser appointed by it,
or on its behalf, and (ii) equal shares of an amount equal to the sum of (a)
the other expenses of the appraisal properly incurred and (b) the fees and
expenses of the third appraiser, if any, except that the Lessee shall pay all
such fees and expenses if an Event of Default shall have occurred and be
continuing. The fees and expenses of appraisers incurred with respect to any
Appraisal Procedure relating to any transaction contemplated by the Support
Agreement shall be divided equally between the Lessor and the Lessee.
Appraiser shall mean Marshall and Stevens, Incorporated.
Arbitration Proceeding shall mean a procedure whereby the Person seeking
to arbitrate a dispute arising under a Transaction Document, shall provide
written notice of its intention to arbitrate at the time and to those Persons
specified in the applicable Transaction Document. Such notice (i) shall
specify the section or sections of the Transaction Document which authorizes
or authorize an Arbitration Proceeding, (ii) provide reasonable detail of the
item or items in dispute, and (iii) set forth the name and address of the
Person designated to act as the arbitrator on behalf of the Person providing
such notice. Within 21 days after such notice is given, the party to which
such notice was given shall give notice to the first party, specifying the
name and address of the Person designated to act as arbitrator on its behalf.
If the second party fails to notify the first party of the appointment of its
arbitrator within such 21 day period, then the appointment of the second
arbitrator shall be made in the same manner as hereinafter provided for the
appointment of a third arbitrator. The arbitrators so chosen shall meet
within 10 days after the second arbitrator is appointed and within 30 days
thereafter shall decide the dispute. If within such period they cannot agree
upon their decision, they shall within 10 days thereafter appoint a third
arbitrator and, if they cannot agree upon such appointment, the third
arbitrator shall be appointed, upon their application or upon the application
of either party, by the American Arbitration Association, or any organization
which is a successor thereto, from a panel of arbitrators having expertise in
the business of operating a paper mill and a familiarity with the equipment
used or operated in such business. The three arbitrators shall meet and
decide the dispute within 30 days of the appointment of the third arbitrator.
Any decision or determination in which two of the three arbitrators shall
concur or, if no two of the three arbitrators shall concur, the decision or
determination of the arbitrator last selected shall be final and binding upon
the parties to the extent permitted by Applicable Law. In designating
arbitrators and in deciding the dispute, the arbitrators shall act in
accordance with the rules of the American Arbitration Association then in
force, subject, however, to express provisions to the contrary, if any,
contained in the applicable Transaction Document. In the event that the
American Arbitration Association or a nationally recognized successor shall
not then be in existence, the arbitration shall proceed under comparable laws
or statutes then in effect. The parties to the arbitration shall be entitled
to present evidence and argument to the arbitrators. Each party shall pay (i)
the fees and expenses of the arbitrator appointed by it, or on its behalf,
and (ii) equal shares of an amount equal to the sum of (a) the other expenses
of the arbitration properly incurred and (b) the fees and expenses of the
third arbitrator, if any.
Assigned Contracts shall mean, collectively, the contracts listed in
Schedule 1 to the Assignment of Contracts.
Assignment of Contracts shall mean the Assignment of Contracts, dated
December 31, 1987, from the Lessee to the Owner Trustee.
Assumed Notes shall have the meaning set forth in Section 2.16(a) of the
Indenture.
Authentication Request shall have the meaning set forth in Section 10(b)
of the Financing Agreement.
Authorized Officer shall mean, with respect to the Indenture Trustee,
any officer of the Indenture Trustee who shall be duly authorized by
appropriate corporate action to authenticate a Note or to execute any
Transaction Document to which the Indenture Trustee is a party, and shall
mean, with respect to the Owner Trustee, any officer of the Owner Trustee who
shall be duly authorized by appropriate corporate action to execute any
Transaction Document to which the Owner Trustee is a party.
Bankruptcy Code shall mean the Bankruptcy Code of 1978, 11 U.S.C.
sectionsection 101 et. seq. (1979), as amended, or any comparable successor
law.
Basic Lease Term shall mean the initial term of the Facility Lease which
shall begin on December 31, 1987 and end on December 22, 2012. [Note ]<F1>
Basic Lease Term shall mean the initial term of the Facility Lease which
shall begin on December 31, 1987 and end on December 31, 2012. [Note 2]<F2>
Basic Rent shall have the meaning set forth in Section 3(a) of the
Facility Lease; provided, however, that the percentages of Basic Rent set
forth in Schedule 2 to the Facility Lease shall at all times be at least
equal to the Minimum Percentage Requirement.
Basic Rent Payment Dates shall mean and include December 31, 1987, and
each June 22 and December 22 of each year thereafter, commencing June 22,
1988, and ending June 22, 2012, and, if the Lessee shall elect one or more
Renewal Terms, each June 22 and December 22 of each year during each such
Renewal Term, commencing December 22, 2012. [Note 1]
Basic Rent Payment Dates shall mean and include January 1, 1988, and
each January 1 and July 1 of each year thereafter, commencing July 1, 1988,
and ending July 1, 2012, and, if the Lessee shall elect one or more Renewal
Terms, each January 1 and July 1 of each year during each such Renewal Term,
commencing January 1, 2013. [Note 2]
____________________
<F1> Note 1: Used in connection with Associated Undivided
Interest transaction only.
<F2> Note 2: Used in connection with Dana, NYNEX, PSR and SoInd
Undivided Interest transactions.
Bill of Sale shall mean the Severance Agreement and Bill of Sale, dated
December 31, 1987, from the Lessee to the Owner Trustee with respect to the
Undivided Interest.
Burdensome Buy-Out shall mean the purchase by the Lessee of the
Undivided Interest pursuant to Section 13(c) of the Facility Lease.
Burdensome Buy-Out Option shall mean the option, exercisable by the
Lessee in accordance with the terms of Section 13(c) of the Facility Lease,
to undertake a Burdensome Buy-Out.
Business Day shall mean any day other than a Saturday or Sunday or other
day on which banks in St. Paul, Minnesota, Duluth, Minnesota, or Hartford,
Connecticut, are authorized or obligated to be closed.
Capability shall mean the production of lightweight SCA Paper at the
rates set forth in Table 7 of the Offering Memorandum and, for periods after
1991, approximately 243,000 tons per year.
Capital Expenditure shall mean, with respect to each fiscal year of the
Lessee, an amount equal to the sum of (i) that portion, if any, of the Cost
of Capital Improvements paid by the Lessee in cash, (ii) the aggregate of all
amounts paid by the Lessee for or in respect of the principal of, premium, if
any, and interest on all Capital lmprovement Debt to the extent not covered
by clauses (i) or (iii) hereof, and (iii) all rentals paid under leases of
property constituting Capital Improvements.
Capital Improvement shall mean any addition, betterment, enlargement or
replacement of any property owned or leased by the Lessee (including, without
limitation, the Facility, the Facility Site or any Component) and used in
connection with the Facility, the Cost of which may be capitalized, in whole
or in part, and not charged to maintenance or repairs, in accordance with
Generally Accepted Accounting Principles.
Capital Improvement Debt shall mean any indebtedness (including the
equity portion of any lease financing) of the Lessee provided by any Person
(other than any Sponsor or Joint Venturer, or any Affiliate thereof) incurred
for the direct or indirect purpose of financing or funding the Cost of any
Severable Improvement within 12 months of the date of the completion of the
installation, affixation or incorporation thereof, under any credit
agreement, loan agreement, conditional sale or title retention agreement,
purchase money mortgage, lease agreement (with respect to either capitalized
or operating leases) or any similar instrument; provided, however, that the
following conditions shall be met:
(i) the original principal amount of such Capital Improvement Debt
(for purposes hereof, Capital Improvement Debt shall include, in
the case of any lease financing, only the debt portion of such
lease) shall not exceed an amount equal to 75% of the Cost of such
Severable Improvement;
(ii) after giving effect to such Capital Improvement Debt, Total
Indebtedness shall not exceed 66 2/3% of Total Capitalization;
(iii) on the date on which the Lessee shall enter into binding
contracts to construct and install, amx or incorporate such
Severable Improvement, the Applicable CDA Amount shall be equal to
the Lessor's Allocable Percentage of not less than $95 million;
(iv) the sum of the original principal amount of all Capital
lmprovement Debt shall not exceed an amount equal to 75% of the
aggregate Cost of all Scheduled Capital Expenditures through the
date on which the Lessee shall enter into such binding contract, in
both cases including the Cost of the Capital Improvement being
financed;
(v) the Lien or security interest granted to any third party
providing such Capital Improvement Debt shall neither extend to
assets other than the Capital Improvements then being financed, nor
conflict in any way with the first and prior security interest in
the Trust Estate granted and conveyed to the Indenture Trustee
under and pursuant to the Indenture;
(vi) no Special Supplemental Rent shall be unpaid, whether or not
then due and payable, on the date on which the Lessee shall enter
into such binding contract;
(vii) any third party providing such Capital Improvement Debt
shall have no rights or claim in and to the Cash Deficiency
Agreements or the Keepwell Agreements, whether or not such right or
claim shall be subordinated, but may have a claim to payment out of
the cash flow of the Lessee; provided, however, that (i) the
instrument or agreement by which such Capital Improvement Debt was
incurred shall expressly provide that any such claim to share in
the Lessee's cash flow shall be pari passu with the claim of the
Owner Trustee and, through the Owner Trustee pursuant to the
Indenture, the Indenture Trustee thereto and (ii) the Lessee shall
secure the Facility Lease and the Other Facility Leases, pro rata,
by the grant to the Indenture Trustee of a first and prior right to
the extent of the Lessor's Share in the revenues from the Facility
subject to prior rights of Lessee's working capital lender(s) as
contemplated in section8(b)(3)(xiv)(C) of the Financing Agreement);
provided, however, that until such time as a Default or Event of
Default shall have occurred and be continuing, the cash flow of the
Facility shall be available for all business purposes of the
Lessee, including Lessee Distributions; and
(viii) the Owner Participant and the Other Owner Participants
(or any of them) with respect to the equity portion of any lease
financing and the Loan Participants (or any of them) with respect
to the debt portion of any lease financing or any debt financing
shall have a right of first opportunity to provide the financing of
such Severable Improvement, if the terms of such financing
hereunder are acceptable to the Lessee;
provided, further, that any such indebtedness may be renewed, refinanced, or
extended only if the unpaid principal amount thereof shall not be increased
and any Lien on such Capital Improvements shall secure only such Capital
Improvement Debt.
Cash Available After CDA Rent shall mean Net Cash Flow plus Designated
Voluntary Contributions minus (x) Combined CDA Rent other than all CDA
Indemnities and (y) "Combined CDA Rent" other than all "CDA Indemnities"
under all Other Facility Leases.
Cash Deficiency Agreement shall mean a Cash Deficiency Agreement, dated
December 31, 1987, among a Joint Venturer, the Indenture Trustee, the Owner
Participant and the Owner Trustee, and Cash Deficiency Agreements shall mean
the two Cash Deficiency Agreements to each of which a Joint Venturer is a
party.
Cash Flow Available for CDA Rent shall mean Net Cash Flow plus
Designated Voluntary Contributions.
Cash Proceeds From Capital Asset Sales shall mean cash proceeds from
asset sales or other dispositions of capital assets.
Cash Proceeds (Payments) For Extraordinary, Unusual or Non-recurring
Items shall mean cash proceeds received or payment made for extraordinary,
unusual or non-recurring items determined in accordance with GAAP.
Casualty Value, as of any Basic Rent Payment Date during the Basic Lease
Term, shall mean (a) the amount determined by multiplying Facility Cost by
the percentage set forth opposite such Basic Rent Payment Date in Schedule 1
to the Facility Lease on which Casualty Value shall be payable under the
Facility Lease, or (b) if Casualty Value shall not be payable on a Basic Rent
Payment Date, an amount determined by calculating the appropriate Casualty
Value as of the month-end of the month in which the loss occurred using the
Pricing Assumptions; provided, however, that the percentages set forth in
such Schedule 1 shall be subject to adjustment as provided in the Financing
Agreement; and provided, further, however, that the percentages set forth in
such Schedule 1 shall be at least equal to the Minimum Percentage
Requirement. Casualty Value as of any Basic Rent Payment Date during any
Renewal Term shall mean the unamortized portion as of such Basic Rent Payment
Date of the Fair Market Sales Value of the Undivided Interest, determined by
the straight-line amortization of such Fair Market Sales Value at the
commencement of each such Renewal Term over the period from such commencement
date through the end of the estimated useful life of the Facility.
CDA Certificate shall mean the certificate delivered by the Lessee in
accordance with Section 13A(a) of the Financing Agreement.
CDA Charge shall have the meaning set forth in Schedule H to the
Financing Agreement, determined as at January 1 of each fiscal year following
the Completion Date, as shown on the definitive CDA Worksheet to be provided
by the Lessee pursuant to Section 8(b)(1)(i)(C)(l) of the Financing
Agreement; provided, however, that in the event an Expansion is undertaken,
the CDA Worksheet calculations shall be made only with respect to the
Facility in accordance with Section 13(g) of the Financing Agreement.
CDA Escrow Account shall have the meaning set forth in Section 3.08 of
the Indenture.
CDA Escrow Indemnity Payment shall mean any payment required to be held
in the CDA Escrow Account pursuant to Section 13A(b) of the Financing
Agreement in respect of any amount described in clause (v) of the definition
of CDA Rent and any interest and earnings thereon.
CDA Increase shall have the meaning set forth in Schedule H to the
Financing Agreement, determined as at January 1 of each fiscal year following
the Completion Date, as shown on the definitive CDA Worksheet to be provided
by the Lessee pursuant to Section 8(b)(1)(i)(C)(l) of the Financing
Agreement; provided, however, that in the event an Expansion is undertaken,
the CDA Worksheet calculations shall be made only with respect to the
Facility in accordance with Section 13(g) of the Financing Agreement.
CDA Indemnities shall mean, with respect to the Lessor, any amounts
described in clause (v) of the definition of CDA Rent and any interest and
earnings thereon paid from funds under each Cash Deficiency Agreement, not to
exceed as to each Cash Deficiency Agreement an amount equal to the Lessor's
Allocable Percentage of $7,500,000.
CDA Rent shall mean, with respect to each Cash Deficiency Agreement as
of a date for the determination thereof, an amount equal to one-half of the
sum of (i) all Indenture Trustee's Expenses due and payable, (ii) all amounts
due and payable to the Loan Participants, the Holders, the Indenture Trustee
and The Connecticut Bank and Trust Company, National Association, as
Indemnitees or payees of amounts constituting Supplemental Rent under the
Transaction Documents, (iii) all Basic Rent (as adjusted in compliance with
the Financing Agreement in consequence of a change in Federal income tax
rates applicable to corporations occurring at any time during the Basic Lease
Term) then due and payable, (iv) Casualty Value, Termination Value, Special
Termination Value, Fair Market Sales Value, and Agreed Fair Market Value then
due and payable unless the Lessee is assuming the Notes pursuant to Section
2.16 of the Indenture or otherwise, and (v) all amounts then due and payable
described in clauses (i), (ii), (iii), (iv) and (v) of the definition of
Excepted Payments, and any interest on such amounts as described in clause
(vii) of such definition and (vi) all amounts payable by the Lessee under any
Assumed Note; provided, however, that until the Discharge of the Indenture
the amount constituting CDA Rent under clause (v) above shall not, when added
to all other amounts paid under clause (v) above as CDA Rent from funds
provided under the Cash Deficiency Agreement, exceed an amount equal to the
Lessor's Allocable Percentage of $7,500,000.
CDA Trigger shall mean an amount equal to (i) the lesser of (x) the
Lessor's Allocable Percentage of $61.25 million, or (y) 35% of the unpaid
principal amount of all Notes Outstanding, if at such time Normalized Debt
Coverage is less than 1.0, and (ii), at all other times, equal to the lesser
of (x) the Lessor's Allocable Percentage of $47.5 million, or (y) 23.75% of
the unpaid principal amount of all Notes Outstanding. For purposes of this
definition, Normalized Debt Coverage shall be deemed to be less than 1.0
unless (a) Normalized Debt Coverage, as calculated pursuant to the most
recent CDA Worksheet delivered pursuant to Section 8(b)(1)(i)(C)(l) of the
Financing Agreement, is greater than or equal to 1.0 and (B) Normalized Debt
Coverage, as calculated, since the date of such CDA Worksheet, in each CDA
Worksheet, if any, delivered pursuant to Section 8(b)(1)(i)(C)(2) of the
Financing Agreement is greater than or equal to 1.0.
CDA Trigger Distribution shall mean, with respect to each fiscal year of
the Lessee, the actual or imputed distribution by the Lessee to the Joint
Venturers or the Sponsors from time to time of Cash Available After CDA Rent
in amounts equal to the lesser of (i) Cash Available After CDA Rent or (ii),
in each case under the Cash Deficiency Agreements and the Other Cash
Deficiency Agreements, the excess of (x) the amount of the applicable CDA
Trigger as at the end of such fiscal year over (y) the Applicable CDA Amount
as at the beginning of such fiscal year, which distribution shall be, for
purposes of determining the amount of any CDA Increase, allocated among the
Cash Deficiency Agreement and all Other Cash Deficiency Agreements pro rata
in the ratio that the excess amount calculated in (ii) above with respect to
the Cash Deficiency Agreement bears to the calculation of (ii) above for the
Cash Deficiency Agreements and all Other Cash Deficiency Agreements.
CDA Worksheet shall mean the CDA Worksheet attached as Schedule H to the
Financing Agreement.
Certificate of Acceptance shall mean a certificate in the form of
Exhibit A to the Facility Lease, which certificate shall have been duly
completed and duly executed and delivered by or on behalf of the Lessee on
the Closing Date.
Change in Tax Law shall mean any change in (i) Federal income tax rates
applicable to corporations occurring at any time during the Basic Lease Term,
and (ii) except with respect to any change referred to in clause (i) above,
any change in the Code (x) proposed on or before December 31, 1987 and
identified by the Owner Participant on or before such date and which, if
enacted, would affect the Tax Assumptions, but only if (y) such change shall
have been enacted into law by the 100th Congress of the United States of
America.
City shall mean the City of Duluth, Minnesota.
Claims shall mean liabilities, obligations, losses, damages, penalties,
claims (including, without limitation, claims involving liability in tort,
strict or otherwise), actions, suits, judgments, costs, expenses and
disbursements, whether or not any of the foregoing shall be founded or
unfounded (including, without limitation, legal fees and expenses and costs
of investigation) of any kind and nature whatsoever without any limitation as
to amount.
Closing shall mean the proceedings which occur on the Closing Date, as
contemplated by the Financing Agreement.
Closing Date shall mean December 31, 1987.
Code shall mean the Internal Revenue Code of 1986, as amended, or any
comparable successor law.
1954 Code shall mean the Internal Revenue Code of 1954, as amended
through the date of enactment of the Code.
Combined Applicable CDA Amount shall mean as of a moment in time the sum
of Applicable CDA Amounts with respect to both Cash Deficiency Agreements.
Combined CDA Rent shall mean as of a moment in time the sum of CDA Rent
due and payable with respect to both Cash Deficiency Agreements.
Combined CDA Trigger shall mean as of a moment in time the sum of CDA
Triggers with respect to both Cash Deficiency Agreements.
Commissioning shall mean the completion of any Expansion to an extent
agreed upon between the Lessee and the other participants in any Expansion
Financing, based upon achievement of reasonable operating abilities and
standards, production milestones, quality and efficiency standards, sales
goals or sustainability of operations.
Commitment Date shall mean, with respect to any Expansion, the date on
which the respective Boards of Directors of the respective Sponsors shall
have made the determinations required by the Financing Agreement and shall
have authorized the Lessee or an Affiliate of the Lessee to undertake an
Expansion.
Completion Date shall mean the date on which (A) the Lessee shall have
delivered to the Owner Participant, the Owner Trustee, the Indenture Trustee
and each Loan Participant an Officers' Certificate to the effect that the
Facility has been operated for at least 60 consecutive working days (i) with
no unscheduled interruption or downtime of twenty-four consecutive hours or
more duration attributable to major mechanical or operational problems, (ii)
during which period, the approach system, headbox, forming section, press
section and drying section shall have operated at rates equivalent to 4,000
fpm without excessive vibration or instability, (iii) during which period,
weighed production shall have averaged not less than 490 tons per day and no
more than 5% of such weighed production shall be ';job lot" production sold
outside of the normal course of business and the balance of such weighed
production shall be of Prime Quality, (iv) more than 60% of all Prime Quality
paper produced during such period shall have met generally accepted quality
standards for SCA Paper grades with respect to brightness, opacity,
smoothness and porosity, (v) Prime Quality paper produced during such period
shall have been accepted commercially by at least four Major Customers each
of which shall theretofore have purchased similar grades of paper in
substantially similar quantities from other suppliers and (vi) SCA Paper
produced during such period shall have averaged not less than 18% ash on web
offset grades and not less than 23% ash on rotogravure grades, and shall have
had kraft pulp content averaging not more than 24% of the furnish and (B)(i)
Jaako Poyry Inc., a Delaware corporation, or another independent consultant
selected by the Owner Participant and acceptable to the Loan Participants,
the Owner Trustee, the Indenture Trustee and the Lessee, shall have delivered
a certificate to the effect that, in its judgment, nothing has occurred or is
reasonably expected to occur that would indicate that the Facility will not
be able to sustain production at the rates set forth in Table 7 of the
Offering Memorandum and (ii) the Lessee and each Joint Venturer shall have
delivered their certiElcate to the Owner Participant, the Owner Trustee, the
Indenture Trustee and each Loan Participant to the effect that the items set
forth in clause (A) above have occurred and agreeing with the conclusions
described in the certificate delivered pursuant to clause (B)(i) of this
sentence.
Component shall mean any separate item of property from time to time
affixed to, installed on, or incorporated in, and constituting a part of, the
Facility and title to which shall be in, or shall, pursuant to Section 8(e)
of the Facility Lease, have vested in, the Lessor. Each Component so affixed,
installed or incorporated on December 31, 1987 is separately listed in Annex
A to the CertifSlcate of Acceptance and in Exhibit B to the Bill of Sale.
Construction Contract shall mean the Construction Contract, dated July
31, 1986, between RUST International Corporation. a Delaware corporation and
the Lessee, as amended on July 15, 1987.
Contract Year shall have the meaning set forth in the Support Agreement.
Contractor shall have the meaning set forth in the Assignment of
Contracts.
Cost shall mean, with respect to any Capital Improvement, the actual
cost or purchase price thereof, all as determined by the Lessee in accordance
with Generally Accepted Accounting Principles, and such Cost shall include
the properly allocable direct and indirect overheads, including capitalized
interest on any Capital Improvement Debt, of the Lessee incurred by the
Lessee in respect of the acquisition and installation of such Capital
Improvement.
Cost of Expansion shall mean all costs of development, construction and
start-up of an Expansion necessary to achieve Commissioning, including,
without limitation, feasibility studies, site development, engineering,
equipment procurement, development and construction costs, start-up expenses,
interest during construction and all related fees and expenses.
Credit Agreement shall mean the Credit Agreement, dated as of May 22,
1986, as amended, among Lake Superior, The Toronto-Dominion Bank Trust
Company, as Agent, and the lenders named therein.
Deemed Distributions shall mean that portion of Cash Available After CDA
Rent equal to the sum of (i) funds applied to the payment of Excess Capital
Expenditures and (ii) all Excepted Payments and "Excepted Payments" under all
Other Indentures not constituting Aggregate Special Supplemental Rent or
Aggregate CDA Rent as reflected in the Lessee's definitive CDA Worksheet.
Default shall mean an event or condition which, with the giving of
notice or lapse of time, or both, would constitute an Event of Default.
Defaulting Party shall have the meaning set forth in the Easement
Agreement.
Designated Voluntary Contributions shall mean the aggregate of all
capital contributions made to or proceeds of Subordinated Debt received by
the Lessee from any Sponsor or Joint Venturer during any fiscal year of the
Lessee which are irrevocably designated (by written notice to the Indenture
Trustee and the Owner Trustee at or prior to the time of reconciliation of
the Applicable CDA Amount as reflected in the Lessee's definitive CDA
Worksheet, by such Sponsor or Joint Venturer) as a Designated Voluntary
Contribution.
Development Agreement shall mean the Certificate of Completion and
Continuation Agreement, dated December 29, 1987, between the City and the
Lessee.
Discharge of the Indenture shall mean the payment in full of the
principal of, premium, if any, and interest on the Notes and all other
amounts due and payable to the Indenture Trustee and the Loan Participants in
accordance with the Indenture and each other Transaction Document, provided
that no Note shall remain Outstanding.
Easement shall mean the easements conveyed and granted under the
Easement Agreement and, for purposes of the lndenture, shall mean the
Easement Agreement and the rights granted thereunder.
Easement Agreement shall mean the Easement Agreement, dated December 31,
1987, between the Lessee, as grantor, and the Owner Trustee, as grantee.
Effective Rate shall have the meaning set forth in Section 5 of the Tax
Indemnity Agreement.
Electrical Service Agreement shall mean the Electric Service Agreement,
dated June 2, 1986, between the Lessee and Minnesota Power.
Engineering Contract shall mean the Engineering Contract, dated in
December, 1985, between the Lessee and RUST International Corporation, a
Delaware corporation.
Environmental Report and Opinion shall mean the environmental report and
opinion of Messrs. DiCara, Selig, Sawyer & Holt, dated December 30, 1987,
delivered to the Owner Participant and each of the Loan Participants.
ERISA shall mean the Employee Retirement Income Security Act of 1974. as
amended.
Essential Improvement Buy-Out shall mean any purchase of the Undivided
Interest by the Lessee pursuant to Section 8(h) of the Facility Lease.
Estimated Transaction Expenses shall mean such of the Transaction
Expenses as the payees thereof shall have estimated and established, to the
satisfaction of the Owner Participant and the Lessee, on or before December
31, 1987.
Event of Default shall have the meaning set forth in the Facility Lease.
Event of Loss shall mean any of the following events: (a) the Completion
Date shall not have been determined before January 15, 1991, but only if
either the Owner Participant or the Majority in Interest of Noteholders shall
have declared such failure to be an Event of Loss at any time on or before
June 1, 1991, (b) a total or constructive total loss of the Facility
(including the Undivided Interest) or the Facility Site, (c) the payment of
insurance proceeds in respect of a total or a constructive total loss of the
Facility (including the Undivided Interest) or the Facility Site, (d) a
Requisition of Use of the Facility or the Undivided Interest for an
indefinite period which can reasonably be expected to exceed, or a stated
period which ends on or after, the Basic Lease Term or the then applicable
Renewal Term, (e) if the Lessee shall, in accordance with Section 9(d) of the
Facility Lease, give notice of its intention to repair the Facility and fail,
or abandon its effort, to complete such repair within such period, and the
extensions of such period, provided in such Section 9(d), (f) a Requisition
of Title, or (g) facilities used by others under the Assigned Contracts, or
access to or the right to use or purchase the output thereof, in their
entirety or a substantial portion of any thereof, shall have been lost,
destroyed, cancelled, annulled, voided, breached, condemned or otherwise
permanently rendered unfit for normal use, confiscated, seized or become
unenforceable in circumstances where the Lessee reasonably determines it is
not commercially feasible to replace the same, such that the Facility cannot
be operated at 100% of its Capability. The date of occurrence of an Event of
Loss shall be deemed to be: (1) the date six months following the date on
which such Event of Loss shall have been declared, or if such date of
occurrence shall not be a Business Day, the next succeeding Business Day, in
the case of subclause (a) of the first sentence of this definition; (2) the
date of a total or constructive total loss, in the case of sub-clauses (b),
(c) and (e) of the first sentence of this definition; provided, however, that
under Section 9(d) of the Facility Lease the Lessee shall be permitted (x) a
period of six months to determine whether such Event of Loss has occurred
under subclause (b) of the first sentence of this definition, and (y) the
period for repair in the case of such subclause (e), but if during either
such period such Event of Loss shall be determined to have occurred the
determination would relate back to the date of occurrence; (3) the date of a
Requisition of Use, in the case of sub-clause (d) of the SIrst sentence of
this definition; (4) the date of a Requisition of Title, in the case of
subclause (f) of the first sentence of this definition; or (5) the date of
any determination by the Lessee, in the case of subclause (g) of the first
sentence of this definition.
Excepted Payments shall mean and include (i) any indemnity or other
payment payable under any Transaction Document directly to the Owner
Participant, the Lessor or FNB to reimburse such Person for costs and
expenses incurred by it in exercising its rights under any of the Transaction
Documents, (ii) insurance proceeds, if any, payable to the Lessor or the
Owner Participant (A) under insurance separately maintained by the Lessor or
the Owner Participant for their benefit as permitted by Section 10(v) of the
Facility Lease or (B) as proceeds of liability insurance, (iii) any amount or
amounts to which the Owner Trustee, FNB or the Owner Participant shall be
entitled by subrogation, (iv) any amount payable to the Owner Participant as
the purchase price of the Owner Participant's interest in the Trust in
connection with a transfer thereof (other than in connection with any
transfer to the Lessee or any Affiliate thereof), (v) any payments, insurance
proceeds or other amounts with respect to any portion of the Undivided
Interest which has been released from the Lien of the Indenture in accordance
with the terms of the Indenture (other than pursuant to Section 5.11 of the
Indenture) (vi) any amount payable to the Owner Trustee or the Owner
Participant pursuant to the Financing Agreement as Special Supplemental Rent
and (vii) any payments in respect of interest to the extent attributable to
payments referred to in clauses (i) through (vi) above; provided that
"Excepted Payments" shall not include any CDA Escrow Indemnity Payment.
Excess Capital Expenditures shall mean, for each fiscal year, all
Capital Expenditures in excess of the Scheduled Capital Expenditures.
Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
Expansion shall mean those Expansion Assets, permitted to be constructed
under the Financing Agreement and constructed from time to time by the Lessee
following the Completion Date, located on the Facility Site.
Expansion Assets shall mean not more than two paper machines and related
assets.
Expansion Debt shall mean any indebtedness of the Lessee complying with
Section 13 of the Financing Agreement incurred pursuant to any credit
agreement, loan agreement, conditional sale or title retention agreement,
purchase money mortgage, the debt portion of any lease financing (with
respect to either capitalized or operating leases) or any similar instrument
in connection with an Expansion complying with Section 13 of the Financing
Agreement.
Expansion Facility Mortgage shall mean any mortgage of any Expansion.
Expansion Facility Mortgagee shall mean any Person that finances or
refinances Expansion Assets, whether such financing is in the form of a sale-
leaseback, conditional sale, construction or long-term mortgage loan or
otherwise.
Expansion Facility Operator shall have the meaning set forth in the
Support Agreement.
Expansion Financing shall mean any financing undertaken for the
acquisition of any Expansion complying with Section 13 of the Financing
Agreement.
Expenses shall have the meaning set forth in Section 7.1 of the Trust
Agreement.
Facility shall mean all of the property described or intended to be
described in Exhibit B to the Bill of Sale, together with all Capital
Improvements title to an undivided interest, equal to the Lessor's Share, in
which is acquired by or conveyed to the Lessor pursuant to the Facility Lease
from time to time during the Lease Term.
Facility Cost shall mean [Note 3]<F3> being the price paid by the Lessor
to the Lessee on the Closing Date pursuant to the Financing Agreement.
Facility Lease shall mean the Facility Lease, dated December 31, 1987,
between the Lessee and the Owner Trustee, as amended and supplemented from
time to time pursuant to a Facility Lease Supplement.
Facility Lease Supplement shall mean any supplement to the Facility
Lease executed by the Lessor and the Lessee for purposes of (i) adjusting
Basic Rent, Casualty Value, Special Termination Value, Termination Value and
Agreed Fair Market Value pursuant to Section 3(e) of the Facility Lease, (ii)
adding the Lessor's Share in any Capital Improvement, if title thereto shall
vest in the Owner Trustee pursuant to the terms of the Facility Lease, or
(iii) otherwise changing or modifying the terms of the Facility Lease, all in
accordance with and subject to the terms of the Facility Lease.
Facility Site shall mean the land legally described in Schedule 1 to the
Indenture, together with the building enclosure and other structures and
improvements located therein, other than the Facility.
Facility Site Impositions shall have the meaning set forth in the
Easement Agreement.
Facility User shall have the meaning set forth in the Support Agreement.
Fair Market Compensation shall mean the value of any and all services
rendered or products supplied by the Interconnected Components Operator in
connection with the operation of the Interconnected Components for the
benefit of a Facility User or an Expansion Facility Operator (other than the
____________________
<F3> Note 3: Facility Cost in respect of each Undivided
Interest transaction: Associated - $75,000,000; Dana -
$40,000,000; NYNEX - $100,000,000; PSR - $ 142,000,000; SoInd -
$25,000,000
Lessee), determined on the basis of an arm's-length transaction. Fair Market
Compensation shall be determined on the assumptions that (i) the Facility has
been maintained in accordance with, and the Interconnected Components
Operator has complied with, the requirements of the Facility Leases and the
other applicable Transaction Documents and the Interconnected Components have
been maintained in accordance with Prudent Industry Practice, and (ii) the
compensation will be payable on a net 30 days basis. If the parties to a
determination of Fair Market Compensation are unable to agree upon a
determination of Fair Market Compensation, within thirty days after receipt
of notification requiring such a determination, such Fair Market Compensation
shall be determined in accordance with an Arbitration Proceeding. All
capitalized terrns used in this definition and not defined in this Appendix A
shall have the meaning set forth in the Support Agreement.
Fair Market Rental Value or Fair Market Sales Value of any property
shall mean the value of such property for lease or sale determined on the
basis of an arm's-length transaction for cash between an informed and willing
lessee or buyer (under no compulsion to lease or purchase) and an informed
and willing lessor or seller (under no compulsion to lease or sell), and
shall take into account the Lessor's rights and obligations under the Support
Agreement, the Easement Agreement and the Assigned Contracts. Except for
purposes of Section 12 of the Facility Lease, Fair Market Rental Value and
Fair Market Sales Value shall be determined on the assumptions that (i) the
Facility has been maintained in accordance with, and the Lessee has complied
with, the requirements of the Facility Lease and the other Transaction
Documents, (ii) the lessee or the buyer shall have available to it the rights
and obligations of the Lessor under the Support Agreement, the Assigned
Contracts and the Easement Agreement, and (iii) the Lessee, as operator of
the Facility, is otherwise in compliance with the requirements of all
Transaction Documents. Fair Market Rental Value shall be determined on the
assumption that rent will be payable in equal semi-annual installments in
advance. If the Lessor and the Lessee are unable to agree upon a
determination of Fair Market Rental Value or Fair Market Sales Value, as the
case may be, within 30 days after receipt of notification requiring such a
determination, such Fair Market Rental Value or Fair Market Sales Value shall
be determined in accordance with the Appraisal Procedure.
Final Determination shall have the meaning set forth in Section 8 of the
Tax Indemnity Agreement.
Financing Agreement shall mean the Financing Agreement, dated December
31, 1987, among the Owner Participant, the Owner Trustee, First National Bank
of Minneapolis, the Indenture Trustee, The Connecticut Bank and Trust
Company, National Association, the Loan Participants, each Joint Venturer,
each Sponsor, and the Lessee.
Financing Charges shall mean all rent expensed in respect of operating
leases and all interest expensed in respect of any capitalized lease or debt
for borrowed money, or interest otherwise due, other than any interest
expensed on any Permitted lndebtedness described in Section 8(b)(3)(xiv)(A),
(B) or (C) of the Financing Agreement, in each case as determined in
accordance with GAAP for a given fiscal year.
FNB shall mean First National Bank of Minneapolis in its individual
capacity, its successors and assigns.
Foreclosed Note shall mean any Note, the principal, premium, if any, and
interest of which has been paid through foreclosure of the Indenture.
Foreclosed Note Balance. See Outstanding.
Foreclosure Balance shall mean, in respect of any Foreclosed Note, the
outstanding principal balance thereof plus any premium and all accrued and
unpaid interest thereon as of the date of foreclosure.
Funding Account shall have the meaning set forth in the Funding
Agreement.
Funding Agent shall mean Morgan Guaranty Trust Company of New York.
Funding Agreement shall mean the Funding Agreement, dated December 31,
1987, among the Owner Participant, the Other Owner Participants, the Funding
Agent and the Loan Participants, together with the Omnibus Transaction
Expense Escrow Letter among tbe Owner Participant, the Other Owner
Participants and the Funding Agent and the related undertakings of the
Lessee.
GAAP or Generally Accepted Accounting Principles shall mean generally
accepted accounting principles consistently applied and maintained throughout
the period indicated and consistent with prior financial practice of the
Person in question and any predecessors, except for changes mandated by the
Financial Accounting Standards Board or any similar accounting authority of
comparable standing; provided, however, that, solely for purposes of the
computation of the CDA Charge, CDA Increase and related computations in the
CDA Worksheet, in the event of an Expansion, the Expansion Assets and the
business thereof, including, without limitation, the accounting effects of
any Expansion Financing, the costs of operating such Expansion and all income
and expenses included in the determination of net income shall be accounted
for as a separate division of the Lessee and thus separated from comparable
accounting for the Facility, which shall also be accounted for as a division
of the Lessee.
Governmental Action shall mean all authorizations, consents, approvals,
waivers, exceptions, variances, orders, licenses, exemptions, publications,
filings and declarations of or with, any Governmental Authority, (other than
routine reporting requirements, failure to comply with which will not affect
the validity or enforceability of any of the Transaction Documents or have a
material adverse effect on the transactions contemplated by the Financing
Agreement), and the giving of notice to any Governmental Authority or any
other action in respect of or by any Governmental Authority and shall
include, without limitation, those siting, environmental and operating
permits and licenses which are required for the use and operation of the
Facility, including the Undivided Interest.
Governmental Authority shall mean any Federal, state, county, municipal,
regional or other governmental authority, agency, board, body,
instrumentality or court.
Granting Clause Documents shall have the meaning set forth in the
Granting Clause of the Indenture.
Gross-up Rate shall have the meaning set forth in Section 5 of the Tax
Indemnity Agreement.
Guaranteed Agreements shall mean the Financing Agreement, the other
Transaction Documents (other than the Support Agreement), and each other
agreement, heretofore executed or executed from time to time hereafter and
prior to the payment, performance and discharge of all obligations of the
Lessee under the Facility Lease and each other Transaction Document, under
which the Lessee agrees to perform any duties or obligations, or to pay, or
assume any obligations of others to pay, any amounts whatsoever to the Owner
Trustee, FNB, or the Owner Participant and, until the Discharge of the
Indenture, the Indenture Trustee, The Connecticut Bank and Trust Company,
National Association, the Loan Participants and any Holder of the Notes.
Guidelines shall mean the ruling policy of the IRS, to the extent
applicable to the circumstances contemplated by the Transaction Documents, in
Revenue Procedure 75-21, 1975-1 C.B. 715, Revenue Procedure 75-28, 1975-1
C.B. 752, and Revenue Procedure 79 48, 1979-2 C.B. 529, or any other statute,
Regulation, revenue procedure, revenue ruling or information release
applicable at the time in question relating to the subject matter of Revenue
Procedure 79-48.
Holder shall mean the registered holder, from time to time, of a Note
Outstanding.
Haindl Agreement shall mean the Agreement, dated as of September 16,
1985, between Haindl Papier GmbH and the Lessee.
Impositions shall have the meaning set forth in the Financing Agreement.
Indemnitee shall mean the Owner Participant, the Owner Trustee, FNB,
each of the Loan Participants, the Indenture Trustee, The Connecticut Bank
and Trust Company, National Association, each Holder, the Lease Indenture
Estate, the Trust Estate, any Affiliate of any of the foregoing and the
respective successors, assigns, agents, officers, directors or employees of
the foregoing.
Indenture shall mean the Trust Indenture, Mortgage, Fixture Financing
Statement and Security Agreement, dated December 31, 1987, between the Owner
Trustee and the Indenture Trustee, as amended and restated by the Amended and
Restated Trust Indenture, Mortgage, Fixture Financing Statement and Security
Agreement, dated as of December 31, 1987, between the Owner Trustee and the
Indenture Trustee.
Indenture Default shall mean an event or condition which, after giving
of notice or lapse of time, or both, would become an Indenture Event of
Default.
Indenture Event of Default shall mean any of the events specifled in
Section 4.01 of the lndenture.
lndenture Trustee shall mean The Connecticut Bank and Trust Company,
National Association, a national banking association, not in its individual
capacity, but solely as Indenture Trustee under the Indenture, dated December
31, 1987, with the Owner Trustee, and each successor trustee and co-trustee
thereunder.
Indenture Trustee's Counsel shall mean Day, Berry & Howard, City Place,
Hartford, Connecticut 06103-3499.
Indenture Trustee's Expenses shall mean the reasonable, ongoing expenses
of the Indenture Trustee incurred as trustee under the Indenture.
lndenture Trustee's Liens shall mean Liens which result from acts of, or
any failure to act, by or as a result of claims against, the Indenture
Trustee, in its individual capacity, unrelated to the transactions
contemplated by the Transaction Documents.
Indenture Trustee's Office shall mean the Corporate Trust Department of
the Indenture Trustee presently located at One Constitution Plaza, Hartford,
Connecticut 06115, or such other office as may be designated by the Indenture
Trustee to the Owner Trustee and each Holder.
Interconnected Components shall have the meaning set forth in the
Support Agreement.
Interconnected Components Operator shall have the meaning set forth in
the Support Agreement.
Interest Deductions shall have the meaning set forth in Section 1 of the
Tax Indemnity Agreement.
Interest on Subordinated Debt shall mean the aggregate of all interest
included in Financing Charges during a given fiscal year of the Lessee in
respect of any indebtedness constituting Subordinated Debt.
Investment shall have the meaning set forth in the Financing Agreement.
Investment Company Act shall mean the Investment Company Act of 1940, as
amended.
Investment Credit shall have the meaning set forth in Section 1 of the
Tax Indemnity Agreement. [Note 4]<F4>
IRS shall mean the Internal Revenue Service of the United States
Department of the Treasury, or any successor agency.
Joint Venture Agreement shall mean the Second Amended and Restated Joint
Venture Agreement, dated December 31, 1987, between Minnesota Paper and
Pentair Duluth.
Joint Venturer shall mean either of Minnesota Paper or Pentair Duluth,
as the context so requires, and Joint Venturers shall mean both such Persons.
Keepwell Agreement shall mean each of (i) the Keepwell Agreement and
Assignment, dated December 31, 1987, among Minnesota Power, Minnesota Paper
and the Owner Trustee, and (ii) the Keepwell Agreement and Assignment, dated
December 31, 1987, among Pentair, Pentair Duluth and the Owner Trustee, and
Keepwell Agreements shall mean both of such Agreements.
Lease Default shall mean a Default.
Lease Event of Default shall mean an Event of Default.
Lease Indenture Estate shall have the meaning set forth in the Granting
Clause of the Indenture.
Lease Term shall mean the aggregate of the Basic Lease Term and all
Renewal Terms, if any.
Lessee shall mean Lake Superior Paper Industries, a joint venture
organized under the Minnesota general partnership law, its successors under
the Joint Venture Agreement and, to the extent permitted by the Financing
Agreement, assigns.
Lessee Distribution shall mean any (i) interest, principal, premium or
other payment on Subordinated Debt, (ii) dividends, (iii) payment of any type
(other than any payment made in the ordinary course of business of Lessee in
accordance with Section 8(b)(3)(xxiii) of the Financing Agreement) or (iv)
cash distribution, in each case from Lessee to either any Sponsor or Joint
Venturer, or any Affiliate thereof other than any portion of any CDA Trigger
Distribution.
Lessee's Obligations shall mean all obligations imposed upon the Lessee
under the Facility Lease (including, without limitation, payment of Basic
Rent, Supplemental Rent and Special Supplemental Rent, which term also
includes amounts constituting Excepted Payments) and all other Guaranteed
Agreements, which term includes all obligations assumed by the Lessee under
____________________
<F4> Note 4: Used in connection with NYNEX and PSR Undivided
Interest transactions only.
any Guaranteed Agreements and all other obligations owed by the Lessee to the
Owner Trustee, the Indenture Trustee, the Loan Participants, the Holders or
the Owner Participant.
Lessee's Special Counsel shall mean Henson & Efron, 1200 Title Insurance
Building, Minneapolis, Minnesota 55401.
Lessee's Special New York Counsel shall mean Cahill Gordon & Reindel, 80
Pine Street, New York, New York 10005.
Lessee's Special Real Estate Counsel shall mean Fryberger, Buchanan,
Smith & Frederick, 700 Lonsdale Building, 302 West Superior Street, Duluth,
Minnesota 55802-1863.
Lessor shall mean the Owner Trustee, as lessor under the Facility Lease.
Lessor's Allocable Percentage shall mean [Note 5]<F5>, as adjusted in
accordance with Appendix B to each Cash Deficiency Agreement; provided that
if and so long as the Combined Applicable CDA Amount shall be less than the
Second CDA Trigger or any "Combined Applicable CDA Amount" under any Other
Financing Agreement shall be less than the "Second CDA Trigger" under such
Other Financing Agreement the Lessor's Allocable Percentage shall be equal to
the percentage derived by dividing (X) an amount equal to the difference
between (i) the aggregate principal amount of the Notes then Outstanding,
together with all unpaid interest and other amounts due on such Notes, and
(ii) any amount then held in the CDA Escrow Account pursuant to the terms of
such Financing Agreement, by (Y) an amount equal to the difference between
(A) the sum of (i) the amount determined under clause (X)(i) above and (ii)
the aggregate principal amount of all the Other Notes then Outstanding,
together with all unpaid interest and other amounts due on such Other Notes,
and (B) the sum of (i) the amount determined under clause (X) (ii) above and
(ii) the aggregate amount then held in the "CDA Escrow Account" pursuant to
the terms of all Other Financing Agreements, and multiplying the quotient by
100.
Lessor's Liens shall mean Liens against the Trust Estate which result
from acts of, or any failure to act by, or as a result of claims against, FNB
or the Lessor, unrelated either to the ownership of the Undivided Interest,
the administration of the Trust Estate or the transactions contemplated by
the Transaction Documents.
Lien or lien shall mean any mortgage, pledge, security interest,
encumbrance, lien, easement, servitude or charge of any kind, including,
without limitation, any conditional sale or other title retention agreement,
any lease in the nature thereof or the filing of, or agreement to give, any
financing statement under the Uniform Commercial Code of any jurisdiction.
Loan shall mean, with respect to each Loan Participant, the loan, in the
original principal amount set forth opposite the name of such Loan
Participant in Schedule A to the Financing Agreement, made by such Loan
Participant under and pursuant to the Financing Agreement, and Loans shall
mean the loans so made by all Loan Participants, severally.
Loan Participant shall mean each of the institutions named in Schedule A
to the Financing Agreement and each Holder, and Loan Participants shall mean
all of such institutions and Holders.
____________________
<F5> Note 5: Lessor's Allocable Percentage for each Undivided
Interest transaction: Associated - 20.4800130%; Dana -
10.8555321%; NYNEX - 25.6899547%; PSR - 36.1897927%: SoInd -
6.7847075%
Loan Participants' Special Counsel shall mean Debevoise & Plimpton, 875
Third Avenue, New York, New York 10022.
Loan Participants' Special Minnesota Counsel shall mean Faegre & Benson,
2300 Multifoods Tower. 33 South Sixth Street, Minneapolis, Minnesota 55402-
3694.
Major Customer shall mean a customer that has purchased not less than
1,250 tons of SCA Paper produced during the period constituting the period
for determination of the Completion Date and has a commitment to the Lessee
to purchase from the Lessee not less than 7,500 tons of SCA Paper annually,
and for the foregoing purpose, an executed letter of intent, as well as a
reservation contract, shall be deemed to be a "commitment".
Majority in Interest of Noteholders shall mean the Holders of at least
66-2/3% of the aggregate principal amount of all Notes Outstanding as of the
date of determination, excluding all Notes owned by the Owner Trustee, the
Owner Participant, the Lessee, any Joint Venturer, any Sponsor, any Other
Owner Participant, any Other Owner Trustee or any Affiliate of any thereof,
unless all Notes at the time Outstanding shall be owned by any such Person or
any combination of such Persons.
Maximum Available CDA Amount shall mean, with respect to each Cash
Deficiency Agreement, the Lessor's Allocable Percentage of the lesser of (i)
$95,000,000 or (ii) one-half of the sum from time to time of (AA) Casualty
Value which would have been due and payable under the Facility Lease and
"Casualty Value" which would have been due and payable under the Other
Facility Leases if Casualty Value had been payable on January 1 of such
fiscal year or December 22 of the preceding Fiscal year, as the case may be,
under the Facility Lease and the Other Facility Leases or, if the Lessee
undertakes to repair any damage to the Facility pursuant to Section 9(d) of
the Facility Lease and the Other Facility Leases, the Casualty Value under
the Facility Lease and "Casualty Value" under the Other Facility Leases as of
the Basic Rent Payment Date next following the date of the occurrence of such
damage, plus other amounts payable under Section 9(d) thereunder, until the
date on which such repair has been completed pursuant thereto, (BB) Basic
Rent otherwise payable on the date such Casualty Value or "Casualty Value"
would have been payable under the Facility Lease and the Other Facility
Leases, and (CC) all other Lessee's Obligations (including, without
limitation, all Special Supplemental Rent and Excepted Payments) accrued and
unpaid on such date under the Facility Lease and all Other Facility Leases;
provided, however, that the sum under clause (ii) above shall be calculated
without regard to the occurrence of any of the events referred to in Section
13 (c) of the Facility Lease or Section 13(c) of any Other Facility Lease.
Midterm Purchase shall mean the purchase by the Lessee of the Undivided
Interest pursuant to Section 13(b) of the Facility Lease.
Minimum Percentage Requirement shall mean, with respect to Basic Rent,
Casualty Value, Special Termination Value, Termination Value and Agreed Fair
Market Value, respectively, including each adjustment thereto made from time
to time until the Discharge of the Indenture, those percentages which, when
applied to Facility Cost, will yield an amount (i) in the case of Basic Rent,
at least equal to the aggregate amount of all principal and accrued interest
payable on the applicable Basic Rent Payment Date on all Notes then
Outstanding, and (ii) in the case of Casualty Value, Termination Value,
Special Termination Value and Agreed Fair Market Value, at least equal (when
added to all other amounts, excluding Excepted Payments and Special
Supplemental Rent required to be paid by the Lessee under the Facility Lease)
to an amount sufficient, as of the date of payment, to pay in full the
principal of, premium (not including any Yield-Maintenance Premium payable
solely pursuant to Section 4.03 of the Indenture), if any, and interest on,
all Notes then Outstanding and to pay all other amounts due to the Holders,
the Loan Participants and the Indenture Trustee under any Transaction
Document; provided, however, that for purposes of calculating the Minimum
Percentage Requirement with respect to a Foreclosed Note, the principal and
interest payable thereon as of any Basic Rent Payment Date shall be the semi-
annual payment of principal and interest required to fully amortize the
unpaid Foreclosure Balance (not including any Yield-Maintenance Premium
payable solely pursuant to Section 4.03 of the Indenture), plus interest
thereon, over a term beginning on that Basic Rent Payment Date and ending on
the stated maturity date of the Foreclosed Note in question.
Minnesota Paper shall mean Minnesota Paper Incorporated, a Minnesota
corporation, and its successors and assigns.
Minnesota Paper's Counsel shall mean Steven W. Tyacke, Esq.
Minnesota Power shall mean Minnesota Power & Light Company, a Minnesota
corporation, and its successors and assigns.
Minnesota Power's Counsel shall mean Steven W. Tyacke, Esq.
Month shall mean a calendar month.
MPCA shall have the meaning set forth in the Financing Agreement.
Net Cash Flow shall mean, with respect to each fiscal year of the
Lessee, Pre-Tax Income increased by the sum of (i) Allowance for
Depreciation, (ii) Financing Charges, (iii) Non-Cash Losses (Gains), (iv)
Cash Proceeds from Capital Asset Sales, (v) Cash Proceeds (Payments) for
Extraordinary, Unusual or Non-recurring Items, reduced by Scheduled Capital
Expenditures.
Net Economic Return shall mean the Owner Participant's (i) after-tax
yield, (ii) aggregate after-tax cash flow, and (iii) the net present value of
after-tax cash flows (discounted at the discount rate provided in the Pricing
Assumptions) each as reflected in, or determinable from, the Pricing
Assumptions and the initial computation of Basic Rent, Casualty Value,
Termination Value and Special Termination Value. ln the event of an
adjustment calculated pursuant to Section 15(a) of the Financing Agreement
which is occasioned by clause (i) of the definition of Change in Tax Law, Net
Economic Return shall mean the Owner Participant's (i) after-tax return on
equity, (ii) aggregate after-tax income net of recourse interest expense, and
(iii) the net present value of after-tax income flows net of recourse
interest expense (discounted at the discount rate provided in the Pricing
Assumptions) each as reflected in, or determinable from, the Pricing
Assumptions (inclusive of the recourse leverage and interest rate assumptions
of the Owner Participant) and the initial computation of Basic Rent, Casualty
Value, Termination Value, Special Termination Value, and Agreed Fair Market
Value.
Non-Cash Losses (Gains) shall mean, to the extent included in the
determination of Pre-Tax Income, all (a) book losses (gains) realized upon
the sale or other disposition of capital assets determined in accordance with
GAAP and (b) all non-cash losses (gains) recorded in respect of
extraordinary, unusual or non-recurring items, in each case determined in
accordance with GAAP.
Non-Defaulting Party shall have the meaning set forth in the Easement
Agreement.
Non-Severable Improvement shall mean any Capital Improvement which is
not a Severable Improvement.
Normalized Debt Coverage shall have the meaning set forth in Schedule H
to the Financing Agreement.
Normalized Debt Service shall mean (i) for fiscal years ending in 1988
through 1998, $36 million, (ii) for fiscal years ending in 1999 through 2004,
$29 million, and (iii) for fiscal years ending thereafter, $18 million.
Noteholder shall mean the Holder of a Note.
Notes shall have the meaning set forth in Section 2.01 of the Indenture.
Obsolescence Termination shall mean termination of the Facility Lease
pursuant to Section 14 thereof.
Offering Memorandum shall mean (i) as to the Owner Participant, the
Offering Memorandum, dated August, 1987, and (ii) as to the Loan
Participants, the Offering Memorandum, dated October, 1987, in each case as
prepared by the Lessee and the Sponsors and distributed by The First Boston
Corporation on the basis of information provided by the Lessee and the
Sponsors.
Officers' Certificate shall mean a certificate signed by the President
or any Vice President and by the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary of the Person with respect to which such
term is used.
Operator shall have the meaning set forth in the Support Agreement.
Original of the Facility Lease shall mean the fully-executed counterpart
of the Facility Lease or any Facility Lease Supplement, marked "Original",
pursuant to Section 20(e) of the Facility Lease and containing the receipt of
the Indenture Trustee.
Other Cash Deficiency Agreements shall mean all of the "Cash Deficiency
Agreements", each dated December 31, 1987, among the several Joint Venturers
(each under separate "Cash Deficiency Agreements"), the Other Owner
Participants and the Other Owner Trustees.
Other Facility Leases shall mean leases of undivided interests in the
Facility in which Other Owner Participants, directly or through an owner
trustee, have ownership or beneficial interests.
Other Financing Agreements shall mean the four separate Financing
Agreements, each dated December 31, 1987, among the Other Owner Trustees, the
Other Indenture Trustees and the Other Owner Participants named therein, and
the Lessee, each Joint Venturer and each Sponsor.
Other Indenture Trustees shall mean The Connecticut Bank and Trust
Company, National Association, as indenture trustee under the Other
Indentures.
Other Indentures shall mean the four separate indentures entitled "Trust
Indenture, Mortgage, Fixture Financing Statement and Security Agreement",
each dated December 31, 1987, between the Other Owner Trustees, respectively,
and the Other Indenture Trustees, respectively.
Other Joint Venturer shall mean (i) when used with reference to
Minnesota Paper, as Joint Venturer, Pentair Duluth, and (ii) when used with
reference to Pentair Duluth, as Joint Venturer, Minnesota Paper.
Other Lessors shall mean, collectively, each of the entities becoming a
lessor of an undivided interest in the Facility, other than the Lessor.
Other Notes shall mean "Notes" as defined in Section 2.01 of the Other
Indentures.
Other Owner Participants shall mean, collectively, each of the entities
becoming a beneficial owner of an undivided interest in the Facility, other
than the Owner Participant.
Other Owner Trustees shall mean, collectively, the trustees becoming
owners of other undivided interests in the Facility, other than the Owner
Trustee.
Other Sponsor shall mean (i) when used with reference to Minnesota
Power, as Sponsor, Pentair, and (ii) when used with reference to Pentair, as
Sponsor, Minnesota Power.
Outstanding shall mean, as of the date of determination, all Notes
theretofore issued, authenticated and delivered pursuant to the Indenture,
except (i) Notes theretofore cancelled by the Indenture Trustee or delivered
to the Indenture Trustee for cancellation pursuant to the Indenture, (ii)
Notes for which replacement Notes have been executed, authenticated and
delivered pursuant to the Indenture, and (iii) Notes which have been redeemed
pursuant to the Indenture; provided, however, that any Foreclosed Note shall
remain Outstanding through the period of redemption from any foreclosure
sale, and thereafter if no redemption occurs, and the outstanding balance
(the Foreclosed Note Balance) of that Foreclosed Note shall be determined as
follows:
(a) the outstanding balance of the Note (the Foreclosure Balance)
as of the date of foreclosure shall be the outstanding principal
balance thereof plus any premium and all accrued and unpaid
interest as of that date;
(b) the unpaid Foreclosure Balance shall bear interest (compounded
semi-annually to the extent not paid) at an annual rate of 12.08%
per annum;
(c) each Rent payment received by the purchaser at foreclosure
sale and its successors and assigns shall be applied first to
interest accrued and unpaid pursuant to clause (b), and then to the
Foreclosure Balance; and
(d) the Foreclosed Note Balance as of any date shall be the unpaid
Foreclosure Balance plus accrued and unpaid interest thereon as of
that date, after giving effect to all payments in accordance with
clause (c).
Overdue Rate shall mean the rate of interest equal to the greater of (i)
13.08% per annum and (ii) 1% above the Prime Rate.
Owner Participant shall mean [note 6]<F6> [note 7]<F7> a [note 8]<F8>
____________________
<F6> Note 6: Original Owner Participants: Associated Southern
Investment Company (Associated); Dana Lease Finance Corporation
(Dana); NYNEX Credit Company (NYNEX); Public Service Resources
Corporation (PSR); Southern Indiana Properties, Inc. (Solnd)
<F7> Note 7: Associated assigned its Undivided Interest to its
Affiliate, Mission Funding Delta (Mission) on January 29, 1988;
Dana assigned its Undivided Interest to its Affiliate, Dana
Leasing, Inc. (Dana Leasing) on January 14, 1988; PSR assigned
its Undivided Interest to Resources Capital Investment
Corporation (Resources) on January 14, 1988; SoInd assigned its
Undivided Interest to its Affiliate, Joint Ventures Affiliated,
Inc. (Joint Ventures) on January 15, 1988. Unless the context
otherwise requires, from the respective dates set out above, any
reference to Associated, Dana, PSR or SoInd shall be read as
being a reference to Mission, Dana Leasing, Resources or Joint
Ventures, respectively.
<F8> Note 8: Owner Participants' states of incorporation:
Associated and Mission -California; Dana and Dana Leasing -
Delaware; NYNEX - Delaware; SoInd and Joint Ventures - Indiana;
PSR and Resources - New Jersey
corporation, and the successors and assigns of such Person in accordance with
the Trust Agreement and the Financing Agreement.
Owner Participant's Liens shall mean Liens against the Trust Estate
which result from acts of, or any failure to act by, or as a result of claims
against, the Owner Participant unrelated to the transactions contemplated by
the Transaction Documents.
Owner Participant's Special Counsel shall mean Mudge Rose Guthrie
Alexander & Ferdon, 180 Maiden Lane, New York, New York 10038.
Owner Participant's Special Minnesota Counsel shall mean Dorsey &
Whitney, 2200 First Bank Place East, Minneapolis, Minnesota 55402.
Owner Trustee shall mean First National Bank of Minneapolis, a national
banking association, as Owner Trustee under the Trust Agreement, dated
December 31, 1987, with [Note 61, and each successor trustee, co-trustee and
separate trust thereunder. Effective January 1, 1988, First National Bank of
Minneapolis will have changed its name to "First Bank National Association".
Owner Trustee's Counsel shall mean Dorsey & Whitney, 2200 First Bank
Place East, Minneapolis, Minnesota 55402.
Paper Machine shall mean the paper machine and related facilities for
production of SCA Paper, all Components of which constitute part of the
Facility.
Partnership Capital shall mean partnership capital as determined in
accordance with GAAP.
Pentair shall mean Pentair, Inc., a Minnesota corporation, and its
successors and assigns.
Pentair's Counsel shall mean Henson & Efron, 1200 Title Insurance
Building. Minneapolis, Minnesota 55401.
Pentair Duluth shall mean Pentair Duluth Corp., a Minnesota corporation,
and its successors and assigns.
Pentair Duluth's Counsel shall mean Henson & Efron, 1200 Title Insurance
Building. Minneapolis, Minnesota 55401.
Permitted Encumbrances shall mean (i) mineral rights, utility access and
other easements or servitudes the use and enjoyment of which do not and will
not at any time materially interfere with the peaceful and quiet use,
possession, maintenance and repair of, and access to, the Facility or the
Facility Site or the operation of the Facility in an efficient and economic
manner or the production of supercalendered paper thereby (ii) any
reservations, encumbrances and title defects listed as exceptions to the
Title Policy, so long as such reservations, encumbrances and title defects do
not, in the aggregate, materially interfere with the use of the Facility by
the Lessee or the Facility Site, and (iii) Permitted Liens.
Permitted Indebtedness shall have the meaning set forth in the Financing
Agreement.
Permitted Investments shall have the meaning set forth in Section 3.04
of the Indenture.
Permitted Liens shall mean (i) the respective rights and interests of
the Lessee, the Owner Participant, the Lessor, the Loan Participants and the
Indenture Trustee, as provided in the Transaction Documents; (ii) the rights
of any sublessee or assignee under a sublease or an assignment permitted by
the terms of the Facility Lease; (iii) Liens for Taxes either not yet due or
which are being contested in good faith and by appropriate proceedings
diligently conducted, so long as such proceedings shall not (x) involve any
danger of the sale, forfeiture or loss of the Facility or the Facility Site,
any part of the Facility or the Undivided Interest, title thereto or any
interest of the Lessor or the Owner Participant therein, (y) interfere with
the use of the Facility or the Facility Site or any part thereof or interest
therein, or (z) impair payment of Rent; (iv) inchoate materialmen's,
mechanics', workmen's, repairmen's, employees', carriers', warehousemen's, or
other like Liens arising in the ordinary course of business of the Lessee or
the sublessee under any sublease permitted by the Facility Lease or any
Facility Lease Supplement, and not delinquent; (v) Lessor's Liens, Owner
Participant's Liens and Indenture Trustee's Liens; (vi) choate Liens that
have been bonded for the full amount in dispute and which are being contested
diligently by the Lessee in good faith and by appropriate proceedings so long
as such proceedings shall not (x) involve any danger of the sale, forfeiture
or loss of the Facility or the Facility Site, any part thereof or the
Undivided Interest, title thereto or any interest of the Lessor or the Owner
Participant therein, (y) interfere with the use of the Facility or the
Facility Site or any part thereof or interest therein, or (z) impair payment
of Rent; (vii) Liens that have been bonded for the full amount in dispute and
which arise out of judgments or awards against the Lessee and with respect to
which (x) at the time an appeal or proceeding for review is being prosecuted
in good faith and for the payment of which adequate reserves shall have been
provided as required by Generally Accepted Accounting Principles and (y)
there shall have been secured a stay of execution pending such appeal or
proceeding for review, so long as such proceedings shall not (a) involve any
danger of the sale, forfeiture or loss of the Facility, the Facility Site,
any part of the Facility or the Undivided Interest, title thereto or any
interest of the Lessor or the Owner Participant therein, (b) interfere with
the use of the Facility or any part thereof or interest therein, or (c)
impair payment of Rent; (viii) the Lien of the Support Agreement; and (ix)
Liens on any undivided interest in the Facility which are not Liens on the
Undivided Interest or the Facility.
Person shall mean any individual, partnership, corporation, trust,
unincorporated association or joint venture, a government or any department
or agency thereof, or any other entity.
Plans and Specifications shall mean the plans and specifications for the
Facility, as such Plans and Specifications (i) existed on December 31, 1987
(it being understood that on such date such Plans and Specifications will not
have been fully documented or conformed to the Facility, as initially
completed) and (ii) may be amended or changed, and documented and conformed,
to reflect the Facility as built or as modified from time to time after the
date of execution of the Financing Agreement with respect to Capital
Improvements made in accordance with the terms of the Facility Lease and the
other Transaction Documents.
Pre-Existing Environmental Condition shall mean the past and continuing
presence of chemical contaminants, including without limitation
polychlorinated biphenyls, lead, and volatile organic chemicals, that existed
prior to 1987 on or under the Facility Site.
Pre-Tax Income shall mean, with respect to each fiscal year of the
Lessee, the amount of the pre-tax income of the Lessee for such fiscal year,
as recorded in its financial statements delivered pursuant to Section
8(b)(1)(i)(D) of the Financing Agreement, determined in accordance with GAAP.
Pricing Assumptions shall mean the pricing assumptions attached to the
Financing Agreement.
Prime Quality shall mean, for purposes of the definition of "Completion
Date", SCA Paper that meets prevailing quality standards, can be used in the
normal market for SCA Paper and is available for shipment to the Lessee's
regular customers.
Prime Rate shall mean the rate of interest announced and published from
time to time by Morgan Guaranty Trust Company of New York as its "base rate".
Proceeds, as used in the Indenture, shall have the meaning set forth in
Section 3.03 of the lndenture.
Prudent Industry Practice shall mean, at a particular time, any of the
practices, methods and acts which, in the exercise of reasonable judgment, in
light of the facts, including, but not limited to, the practices, methods and
acts engaged in or approved by a significant portion of the paper
manufacturing industry in the United States of America, which would have been
expected to accomplish the desired result at the lowest reasonable cost
consistent with reliability, safety and expedition and all Applicable Law.
Prudent Industry Practice is not intended to be limited to the optimum
practice, method or act, to the exclusion of all others, but rather is a
spectrum of possible practices, methods and acts which could have been
expected to accomplish the desired result at the lowest reasonable cost
consistent with reliability, safety and expedition and all Applicable Law,
but Prudent Industry Practice is intended to mean at least the same standard
as the Lessee would, in the prudent management of its own properties, use
from time to time. Prudent Industry Practice shall not include any practice,
method or act that discriminates against the Facility or the Undivided
lnterest in relation to those practices, methods or acts employed by the
Lessee with respect to paper manufacturing facilities other than the
Facility, or that is less favorable to the Facility than those practices,
methods or acts which would have been employed by the Lessee if it had been
the owner of the Facility.
Reasonable Basis shall have the meaning set forth in the Tax Indemnity
Agreement.
Regulations shall mean the income tax regulations issued, published or
promulgated under the Code.
Renewal Term shall have the meaning set forth in the Facility Lease.
Rent shall mean Basic Rent and Supplemental Rent.
Rent Expense shall mean, with respect to each fiscal year of the Lessee,
the amount of Basic Rent under the Facility Lease and "Basic Rent" under the
Other Facility Leases charged to income.
Reoptimization Amortization Schedule shall have the meaning set forth in
Section 10 of the Indenture.
Requisition of Title shall mean any circumstances in which the Facility
or the Facility Site shall be condemned or seized or title thereto shall be
requisitioned or taken by any Governmental Authority under power of eminent
domain or otherwise and all administrative or judicial appeals opposing such
condemnation, seizure or taking shall be exhausted or the period for such
appeal shall have expired.
Requisition of Use shall mean any circumstance or event other than a
Requisition of Title in consequence of which the use of the Facility or the
Facility Site shall be requisitioned or taken by any Governmental Authority
under power of eminent domain or otherwise.
Responsible Officer shall mean, with respect to the subject matter of
any covenant, agreement or obligation of any party contained in any
Transaction Document, the President, any Vice President, Assistant Vice
President, Treasurer, Assistant Treasurer or other officer who in the normal
performance of his operational responsibility would have knowledge of such
matter and the requirements with respect thereto; provided, however, that the
term "Responsible Officer" with respect to the Indenture Trustee shall mean
any officer of the Indenture Trustee assigned by the Indenture Trustee to
administer its corporate trust matters.
Restated Cross Indemnification Agreement shall mean the Restated Cross
Indemnification Agreement, dated December 31, 1987, among Minnesota Power,
Minnesota Paper, Pentair and Pentair Duluth.
Retention Event shall mean (i) any Indenture Default that is not a
Default and (ii) any Default under clauses (iii), (iv) (but only with respect
to material negative covenants), (v), (x) and (xi) of Section 15 of the
Facility Lease.
Sale Proceeds shall mean, with respect to any sale of the Undivided
Interest by the Lessor to any Person other than the Lessee, the gross
proceeds of such sale payable in cash, less all costs and expenses whatsoever
incurred by the Lessor in connection therewith.
SCA Paper shall mean highly clay-filled uncoated groundwood
supercalendered printing and publication grade papers.
Scheduled Capital Expenditure Allowance shall mean the sum of (x) the
amount set forth opposite such year, or determined with respect to such year,
below:
YEAR AMOUNT
1988 $ 3,000,000;
1989 6,000,000;
1990 9,000,000;
1991 12,000,000;
and thereafter 12,000,000;
provided, however, that the amounts in respect of fiscal years commencing
with the 1991 fiscal year shall be adjusted for inflation, using fiscal year
1991 as the "base year", in accordance with the "Producer Price Index for
Paper Industry Machinery - SIC Code 3554" compiled by the Bureau of Labor
Statistics, Department of Labor plus (y) the Scheduled Capital Expenditure
Carryforward from the preceding fiscal year.
Scheduled Capital Expenditures shall mean any Capital Expenditures
which, when added to all other such Capital Expenditures made during a fiscal
year, do not exceed the Scheduled Capital Expenditure Allowance for such
fiscal year. Scheduled Capital Expenditures for any fiscal year shall be
applied first to clause (x) of Scheduled Capital Expenditure Allowance and
then to clause (y).
Scheduled Capital Expenditure Carryforward shall mean, with respect to
each fiscal year of the Lessee, the excess of (x) the amount listed in clause
(x) of Scheduled Capital Expenditure Allowance over (y), the Scheduled
Capital Expenditures for such year.
SEC shall mean the Securities and Exchange Commission of the United
States of America or any successor agency.
Second CDA Trigger shall mean an amount equal to the sum of the amount
calculated under clause (ii) of the definition of "CDA Trigger" for both Cash
Deficiency Agreements.
Securities Act shall mean the Securities Act of 1933, as amended.
Severable Improvement shall mean any Capital Improvement which (i) is
not required pursuant to the terms of Section 8 of the Facility Lease, (ii)
can be readily removed from the Facility without causing material damage
thereto, and (iii) if removed, would not result in any reduction in the
Capability of the Facility.
Share means [note 9]9.
Special Event of Loss shall mean an Event of Loss described in clause
(e) or clause (g) of the definition of the term "Event of Loss"; provided,
however, that, in the case of clause (g), if as a result of Governmental
Action or Applicable Law the Lessee shall be required to permanently abandon
the Facility, no Special Event of Loss shall have occurred.
Special Supplemental Rent shall have the meaning set forth in the
Financing Agreement.
Special Termination Value as of any Basic Rent Payment Date during the
Basic Lease Term shall mean the amount determined by multiplying the
percentage set forth opposite such Basic Rent Payment Date in Schedule 4 to
the Facility Lease by Facility Cost; provided, however, that the percentage
set forth in Schedule 4 shall be subject to adjustment as provided in the
Financing Agreement; and provided, further, however, that the percentages set
forth in such schedule shall be at least equal to the Minimum Percentage
Requirement. Special Termination Value is calculated for any Basic Rent
Payment Date as the sum of Termination Value as of such date and 5.0% of
Facility Cost
Sponsor shall mean either of Minnesota Power or Pentair, as the context
so requiress and Sponsors shall mean both such Persons.
Steam Supply Agreement shall mean the City of Duluth Steam District No.
2 Take or Pay Steam Service Agreement, dated May 15, 1987, as amended on
December 29, 1987, between the City and the Lessee.
Subordinated Debt shall mean all indebtedness and liabilities of the
Lessee to the Joint Venturers or the Sponsors, or any of them, or any
Affiliate of any of them, which shall be subordinated and junior in right of
payment to the prior payment in full of all (i) Lessee's Obligations and all
"Lessee's Obligations" incurred under or in respect of the Other Facility
Leases (including, without limitation, an amount with respect to post
petition interest), and (ii) principal of, premium, if any, and interest on
all Permitted Indebtedness other than the Permitted Indebtedness described in
clause (D) of the definition of such term (such Lessee's Obligations and
____________________
<F9> Note 9: Share for each Undivided Interest transaction:
Associated -19.63350785%; Dana - 10.47120419%; NYNEX -
26.17801047%; PSR -37.17277487%; SoInd - 6.54450262%
Permitted Indebtedness described in clauses (i) and (ii) above being herein
referred to, for purposes of this definition, as Senior Indebtedness), in the
manner and with the effect provided below:
(a) Unless and until all Senior Indebtedness shall have been paid
in full in accordance with its terms, (i) if and so long as any
Event of Default shall have occurred and be continuing the Lessee
will not make and neither a Joint Venturer, a Sponsor nor any
Affiliate of any of such Persons, nor any assignee or successor or
holder of any Subordinated Debt will demand, accept or receive any
direct or indirect payment (in cash or property or by set-off or
otherwise) of or on account of any Subordinated Debt and no such
payment shall be due or made, (ii) the Lessee will not execute and
deliver, issue or give, and neither a Joint Venturer, a Sponsor nor
any Affiliate of any such Persons, nor any assignee or successor
holder of any Subordinated Debt will demand, accept or receive any
instrument or other evidence of, or any direct or indirect security
for, any Subordinated Debt, and (iii) except to the extent
permitted by clause (i) of this paragraph (a), none of the Lessee,
any Joint Venturer, any Sponsor, any Affiliate of any such Persons,
any assignee or any successor holder of Subordinated Debt will
cancel or otherwise discharge any Subordinated Debt.
(b) In the event of (i) any insolvency, bankruptcy, receivership,
liquidation, reorganization, readjustment, composition or other
similar proceeding relating to the Lessee or any Joint Venturer or
any of its or their property, or (ii) any proceeding for voluntary
liquidation, dissolution or other winding up of the Lessee or any
Joint Venturer, whether or not involving insolvency or bankruptcy
proceedings, or (iii) any assignment for the benefit of creditors
or any other marshalling for the benefit of creditors or any other
marshalling of the assets of the Lessee or any Joint Venturer, then
and in any such event all Senior Indebtedness shall first be paid
in full before any payment or distribution of any kind or
character, whether in cash, securities or other property, shall be
made on account of any Subordinated Debt, and any payment or
distribution of any kind or character, whether in cash, securities
or other property or deliverable in respect of any Subordinated
Debt shall be paid or delivered directly to the Lessor and the
holder of any such Permitted Indebtedness until all Senior
Indebtedness shall have been paid in full, and each Joint Venturer,
each Sponsor, each such Affiliate and each assignee or successor
holder of Subordinated Debt irrevocably authorizes and empowers the
Lessor and the holder of any such Permitted Indebtedness to demand,
sue for, collect and receive any such payment or distribution and
to receipt therefor, and to file and prove all such claims and take
all such other action, in the name of the Lessee, any Joint
Venturer, any Sponsor, any such Affiliate or such assignee or
successor holder of Subordinated Debt or otherwise, as the Lessor
or the holder of any such Permitted Indebtedness may determine to
be necessary or appropriate for the enforcement of these
provisions. Neither any Joint Venturer, any Sponsor, any such
Affiliate or any assignee or successor holder of Subordinated Debt
shall exercise any right of set-off or counterclaim in respect of
any obligations owed to the Lessee against the obligations of the
Lessee with respect to Subordinated Debt if the effect thereof
shall be to reduce the amount of any such payment or distribution
to which the Lessor or any holder of such Permitted Indebtedness
would be entitled in the absence of such set-off or counterclaim;
and if and to the extent that, notwithstanding the foregoing, any
Joint Venturer, any Sponsor, any such Affiliate or any assignee or
successor holder of Subordinated Debt is required by any mandatory
provision or law to exercise any such right of set-off or
counterclaim, each reduction of the amount owing on account of
Subordinated Debt by reason of such set-off or counterclaim shall
be deemed to be a payment by the Lessee in a like amount in respect
of such Subordinated Debt to which the provisions of paragraph (c)
below shall apply. Each Joint Venturer, each Sponsor, each such
Affiliate and each assignee or successor holder of Subordinated
Debt will also execute and deliver such further instruments
confirming such authorization and such powers of attorney, proofs
of claim, assignments of claim and other instruments, and will take
such other action, as may be requested by the Lessor or any holder
of such Permitted Indebtedness in order to enable any such Person
to enforce any and all claims upon or in respect of any
Subordinated Debt.
(c) In case any payment or distribution of any character, whether
in cash, securities or other property, on account of or in respect
of any Subordinated Debt shall be paid or delivered to any Joint
Venturer, any Sponsor, any such Affiliate or any assignee or
successor holder of Subordinated Debt, in violation of this
provision, the same shall be held in trust for and paid and
delivered to the Lessor and the holders of such Permitted
lndebtedness until all Senior Indebtedness shall have been paid in
full.
(d) So long as any Senior Indebtedness shall be outstanding and
unpaid the holder of Subordinated Debt shall have no right to
declare the Subordinated Debt to be in default. Upon payment in
full of all Senior lndebtedness, any cash, securities or other
property then held or thereafter received by the Lessor or the
holders of such Permitted Indebtedness shall be paid or delivered
to whosoever may be entitled thereto or as a court of competent
jurisdiction may direct.
(e) For the purpose of these provisions, Senior Indebtedness shall
not be deemed to have been paid in full unless and until the Lessor
shall and the holders of such Permitted Indebtedness shall have
received cash equal to the amount of all Senior Indebtedness at the
time remaining unpaid.
(f) So long as any Senior Indebtedness remains unpaid, no Joint
Venturer, Sponsor or Affiliate of any thereof will assign or
otherwise transfer any Subordinated Debt unless such assignment or
transfer is made expressly subject to these provisions.
(g) The Lessee will mark its books of account in such manner as
shall be effective to give proper notice of the subordination
effected by this provision.
(h) Without in any way affecting any of the obligations of the
Lessee under these provisions, the Lessee may from time to time, to
the extent and in the manner permitted by these provisions, extend
or renew any Senior Indebtedness or in any other manner change,
supplement or add to any of the terms or provisions of any Senior
Indebtedness, or compromise, release or otherwise affect any
liability or obligation of the Lessee under or in respect thereof.
Supplemental Rent shall have the meaning set forth in the Facility
Lease.
Support Agreement shall mean the Operating and Support Agreement, dated
December 31, 1987, among the Lessee, the Owner Trustee, and the several Other
Owner Trustees for the Other Owner Participants.
Survey shall mean the survey of the Facility Site prepared by Dale L.
Bernsten, registered land surveyor, dated December 29, 1987, and identified
as Job No. L-3182E.
Taxes shall have the meaning set forth in the Financing Agreement.
Tax Assumptions shall mean the assumptions with respect to the Federal
income tax consequences, set forth in Section 1 of the Tax Indemnity
Agreement, of the transactions included or reflected in the Pricing
Assumptions.
Tax Counsel shall have the meaning set forth in the Financing Agreement.
Tax Indemnity Agreement shall mean the Tax Indemnity Agreement, dated
December 31, 1987, between the Lessee and the Owner Participant.
Tax Loss shall have the meaning set forth in Section 3.1 of the Tax
Indemnity Agreement.
Tax Representations shall mean the representations made by the Lessee in
Section 1.2 of the Tax Indemnity Agreement.
Tax Savings shall have the meaning set forth in Section 12(c)(1) of the
Financing Agreement.
Termination Date shall have the meaning set forth in the Facility Lease.
Termination Notice shall have the meaning set forth in the Facility
Lease.
Termination Value as of any Basic Rent Payment Date during the Basic
Lease Term shall mean the amount determined by multiplying the percentage set
forth opposite such Basic Rent Payment Date in Schedule 3 to the Facility
Lease by Facility Cost; provided, however, that the percentages set forth in
such Schedule 3 shall be subject to adjustment as provided in the Financing
Agreement; and provided further, however, that the percentages set forth in
such Schedule 3 shall be at least equal to the Minimum Percentage
Requirement.
Title Policy shall mean the policy of title insurance issued by American
Title Insurance Company pursuant to Commitment Number 01-742234.
Toronto-Dominion shall mean the Toronto-Dominion Bank Trust Company, a
New York corporation, and its successors and assigns.
Total Capitalization shall mean, as of December 31 of each calendar
year, the sum of (i) Total lndebtedness, (ii) the lnvestment of the Owner
Participant and the "Investment" of each Other Owner Participant in respect
of the "Facility Cost" of property leased under all Other Facility Leases,
(iii) the unpaid principal amount of all Subordinated Debt, and (iv)
Partnership Capital.
Total Indebtedness shall mean, as of December 31 of each calendar year,
without duplication, the sum of (i) the aggregate unpaid principal amount of
all indebtedness of the Lessee for borrowed money (including, without
limitation, Permitted Indebtedness, but excluding all Subordinated Debt), and
(ii) the unpaid principal amount of the Notes and all "Notes" issued in
connection with the Other Facility Leases, and (iii) with respect to any
lease of real or personal property other than the Facility Lease, each Other
Facility Lease, and any other lease in respect of which any Sponsor or Joint
Venturer is lessor, the present value of all remaining rentals payable
thereunder, discounted at a discount rate equal to the lesser of 12.08% per
annum or the rate of interest applicable on the senior secured indebtedness
of the Lessee, as such rate on such senior indebtedness shall be in effect
from time to time.
Transaction Documents shall mean the Financing Agreement, the Funding
Agreement, the Facility Lease, the Trust Agreement, the Indenture, the Tax
Indemnity Agreement, the Bill of Sale, the Support Agreement, the Assignment
of Contracts, the Notes, the Easement Agreement, the Cash Deficiency
Agreements and the Keepwell Agreements.
Transaction Expenses shall mean the sum of the following, whether or not
included in Estimated Transaction Expenses:
(i) the reasonable legal fees and disbursements of Loan Participants'
Special Counsel, Loan Participants' Special Minnesota Counsel, Owner
Participant's Special Counsel, Owner Participant's Special Minnesota Counsel,
Messrs. DiCara, Selig, Sawyer & Holt, Owner Trustee's Counsel and Indenture
Trustee's Counsel, in each case for their services rendered in connection
with the execution and delivery of this Financing Agreement and other
Transaction Documents, and all reasonable expenses and disbursements incurred
by each or any of them in connection with such transactions;
(ii) the initial fees and expenses of the Owner Trustee and the
Indenture Trustee not otherwise covered by other subclauses of this
definition of Transaction Expenses;
(iii) all stenographic, printing, reproduction, binding and other
reasonable out-of-pocket expenses and costs (other than investment banking or
brokerage fees and out-of-pocket expenses of the Lessee) incurred in
connection with the execution and delivery of this Financing Agreement and
the other Transaction Documents and all other agreements, documents or
instruments prepared in connection therewith (including all computer analyses
and travel-related costs);
(iv) fees and reasonable out-of-pocket expenses of the Marsh & McLennan
and Marshall & Stevens; and
(v) all fees and reasonable out-of-pocket expenses of The Prudential
Insurance Company of America, The First Boston Corporation, Lease Management
Corporation (as to out-of-pocket expenses), and other structuring, financial
and investment advisors, if any, incurred in connection herewith.
Trust shall mean the trust created by the Trust Agreement.
Trust Agreement shall mean the Trust Agreement, dated December 31, 1987,
between [Note 6] and FNB.
Trust Estate shall have the meaning set forth in Section 2.2 of the
Trust Agreement.
Trust Indenture Act shall mean the Trust Indenture Act of 1939, as
amended.
Uncontrollable Forces shall mean any cause beyond the control of the
party affected thereby and which, by the exercise of reasonable diligence,
such party is unable to prevent or overcome, including, but not limited to,
an act of God, fire, flood, explosion, earthquake, strike, sabotage,
pestilence, an act of the public enemy, civil or military authority,
including Governmental Actions prohibiting, or the failure of any
Governmental Authority to take Governmental Actions permitting, acts
necessary to performance hereunder or permitting any such act only subject to
unreasonable conditions, insurrection or riot, an act of the elements,
unforeseen shortages of water, failure of equipment, or inability to obtain
or ship materials or equipment because of the effect of similar causes on
suppliers or carriers. Nothing contained herein shall be construed so as to
require a party to settle any strike or labor dispute in which it may be
involved; provided, however, that in no event shall lack of funds constitute
in and of itself an "Uncontrollable Force".
UCC or Uniform Commercial Code shall mean the Uniform Commercial Code,
as in effect in any applicable jurisdiction.
Undivided Interest shall mean an undivided interest equal to the Share
of the Lessor, as a tenant-in-common with the Other Lessors, in the Facility,
with the estate of the Lessor being concurrent as to right and priority with
that of each Other Lessor.
Venture Council shall have the meaning set forth in the Joint Venture
Agreement.
Voluntary Contributions shall mean contributions by the Joint Venturers,
or either of them, or any Affiliate of the Joint Venturers, or either of
them, to the capital of the Lessee.
Water Supply Agreement shall mean the Water Service Agreement, dated
April 1, 1987, as amended, between the City and Lake Superior.
WLSSD shall have the meaning set forth in the Financing Agreement.
Yield-Maintenance Premium means a premium, determined as of the date of
any applicable prepayment, purchase or acceleration in respect of each Note,
equal to the amount obtained by subtracting (x) the sum of the unpaid
principal amount of all the Notes and the amount of interest on all the Notes
accrued to the prepayment or purchase date or date of acceleration, as the
case may be, from (y) the sum of the Current Values of (A) each payment of
principal under the Notes required to be made thereafter, and (B) each
payment of interest required to be made thereafter under the Notes (assuming
the required payments of principal and interest pursuant to the terms of the
Notes are made when due). Current Value, as used in this definition, as to
any amount payable means such amount discounted (on a semiannual basis) to
its present value on the date ofdetermination at the Treasury Yield, in
accordance with the following formula:
Current Value = Amount Payable
--------------
. (1 + d/2)n
where "d" is the Treasury Yield per annum expressed as a decimal and "n" is
an exponent (which need not be an integer) equal to the number of semiannual
periods and portions thereof (any such period to be determined by dividing
the number of days in such portion by the total number of days in such
period, both computed on the basis of a 360-day year of twelve 30-day months)
between the date of such determination and the due date of the amount
payable. Treasury Yield, as used in this definition, shall be determined by
reference to the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two Business Days prior to the
date fixed for prepayment or the date of acceleration, as the case may be
(or, if such Statistical Release is no longer published, any publicly
available source of similar market data), and shall be the most recent weekly
average yield on actively traded United States Treasury securities adjusted
to a constant maturity equal to the then weighted average life to maturity of
the Notes (the Remaining Life). If the Remaining Life is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Yield shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the
weekly average yields of United States Treasury securities for which such
yields are given, except that if the Remaining Life is less than one year,
the weekly average yield on actively traded U.S. Treasury securities adjusted
to a constant maturity of one year shall be used. The Treasury Yield shall be
computed to the fifth decimal place (one thousandth of a percentage point)
and then rounded to the fourth decimal place (one hundredth of a percentage
point). In the event the Indenture shall be amended to provide for, or the
Holders shall consent to, partial prepayment of Notes conditioned upon
payment of the Yield-Maintenance Premium, an appropriate adjustment shall be
made to this definition in connection with such partial prepayment to relate
the provisions hereof only to the particular scheduled payment of principal
and interest which would be so prepaid. In no case will the Yield-Maintenance
Premium be less than zero.
Exhibit 99(b)
Public Affairs Department
Scott A. Deitz
Phone: (715) 422-4023 or
Tami Barber
Phone: (715) 422-3632
FOR IMMEDIATE RELEASE June 30, 1995
CONSOLIDATED PAPERS COMPLETES ACQUISITIONS
WISCONSIN RAPIDS, WIS. - Patrick F. Brennan, president and chief
executive officer, Consolidated Papers, Inc. (NYSE:CDP), today announced that
the company has completed the acquisition of Niagara of Wisconsin Paper
Corporation, Lake Superior Paper Industries and Superior Recycled Fiber
Industries.
Niagara of Wisconsin was acquired from Pentair, Inc. Consolidated also
purchased Pentair's and Minnesota Power's interests in both Lake Superior
Paper Industries and Superior Recycled Fiber Industries.
The completed transaction results in Consolidated's full ownership of
all three of the businesses as of July 1, 1995.
Consolidated paid approximately $227 million in cash and extinguished
$52 million of debt associated with the acquired companies. In addition,
certain assets of the acquired companies remain subject to operating leases
entered into by the prior owners.
"The friendly acquisition of these organizations has been completed, and
we are pleased to welcome the almost 1,000 employees of these companies to
the Consolidated Papers family," Brennan said.
"By adding Niagara of Wisconsin, we expand our capability to meet
customer demand for coated groundwood papers; by adding Superior Recycled
Fiber Industries, we now produce high-quality recycled fiber from post-
consumer wastepaper; and by adding Lake Superior Paper Industries, we broaden
our grade line to include supercalendered papers, which are often used by
many of the same customers who purchase No. 5 lightweight coated publication
grades," he said.
"These acquisitions are timely, strategic and represent our commitment
to meeting the needs of our customers. And while this is our first major
acquisition in 40 years, we will retain our long-standing commitment to
invest millions of dollars in our current operations to ensure that we keep
pace with marketplace demand for our paper products," Brennan said, noting
that the company broke ground this week for a $166 million coated specialty
paper machine at its Stevens Point Division in Stevens Point, Wisconsin.
This machine is expected to start up in April 1997.
Robert L. Wheeler has been named operations manager at Niagara of
Wisconsin. He has 36 years of manufacturing experience in the paper industry
and has worked at Niagara since 1991. David L. Beal has been named
operations manager at Lake Superior Paper Industries and Superior Recycled
Fiber Industries. Beal has 28 years of experience in papermaking and joined
Lake Superior Paper Industries in 1986.
Niagara of Wisconsin Paper Corporation, Niagara, Wisconsin, is a
manufacturer of coated groundwood publication papers. The mill, which was
founded in 1889, has three fourdrinier paper machines, which combine to total
240,000 tons of annual papermaking capacity. The company employs about 600
people. Five-year contracts between Niagara of Wisconsin and members of the
two labor unions that comprise all union-affiliated employees at that company
were recently ratified.
Lake Superior Paper Industries, Duluth, Minnesota, manufactures
supercalendered paper on a fourdrinier machine equipped with a top-wire
former. The machine's annual capacity is also 240,000 tons. The company,
which began operations in late 1987, employs approximately 330 people, who
work in a nonunion, team-based system that Consolidated expects to retain
there.
Lake Superior Paper Industries also operates Superior Recycled Fiber
Industries, which is adjacent to the Lake Superior Paper Industries mill in
Duluth. Superior Recycled Fiber Industries produces more than 90,000 tons a
year of high-quality pulp from post-consumer wastepaper. The company began
operations in 1993 and employs about 35 people, who also work in a nonunion,
team-based system.
In 1994, a year that began with severely depressed prices for coated and
supercalendered papers and ended with a strong recovery, combined sales of
the acquired companies were in excess of $360 million. These operations were
profitable in 1994.
Pentair, Inc., St. Paul, Minnesota, is a diversified manufacturer with
1994 sales of $1.6 billion. Products made by Pentair's domestic and
international businesses include: electrical and electronic enclosures,
woodworking equipment, power tools, sporting ammunition, automotive service
equipment, industrial lubrication systems and material-dispensing equipment.
Minnesota Power is a diversified utility company headquartered in
Duluth, Minnesota. The company provides electrical service to customers in
northern Minnesota and northwestern Wisconsin. Minnesota Power also has
water utility operations and other investments and corporate services.
Consolidated Papers, Inc., based in central Wisconsin, manufactures and
markets a complete line of enamel papers, also known as coated papers. These
papers are used in many prominent magazines and in an assortment of printed
materials including distinguished books, brochures, advertising
communications and corporate annual reports.
Consolidated Papers is also the nation's largest manufacturer of
lightweight coated specialty papers, which are used in food and consumer
product packaging and labeling. Other products manufactured by Consolidated
include paperboard products and custom-designed corrugated displays and
containers. The company reported 1994 sales of $1.03 billion. Prior to
these acquisitions, Consolidated employed approximately 5,000 people.
Consolidated has been in the papermaking business more than 90 years and has
specialized in the manufacture of coated papers for the past 60 years.
