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): August 25, 1995
JAMES RIVER CORPORATION OF VIRGINIA
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of incorporation)
1-7911 54-0848173
(Commission File Number) (IRS Employer Identification Number)
120 Tredegar Street, Richmond, Virginia 23219
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (804) 644-5411
Item 2. Acquisitions or Dispositions of Assets.
On August 25, 1995, James River Corporation of Virginia ("James
River") completed the spin-off to its shareholders of a large part of
the Company's Communications Papers Business, along with the
specialty paper-based portion of its Food and Consumer Packaging
Business. The new company, Crown Vantage Inc. ("Crown Vantage")
includes the operations, assets and liabilities of pulp and paper
manufacturing facilities located in St. Francisville, LA, Berlin-
Gorham, NH, Adams, MA, Newark, DE, Ypsilanti, MI, Port Huron, MI,
Parchment, MI, Milford, NJ, Richmond, VA, and two mills located in
Scotland. These operations produce coated groundwood and uncoated
freesheet papers and pulp.
This tax-free spin-off consisted of a series of transactions.
James River transferred to Crown Vantage certain James River assets
and Crown Vantage assumed certain related liabilities from James
River as described above (the "Asset Transfer"). Simultaneously,
Crown Paper Co. (the operating subsidiary of Crown Vantage) obtained
financing through a public debt offering and initial borrowings under
its bank credit facilities (collectively, the "Financings"). The net
proceeds from the Financings of $480 million were received by James
River and were treated as a return of capital. In addition, $100
million pay-in-kind notes were issued to James River from Crown
Vantage as an additional return of its capital investment in Crown
Vantage. Thereafter, the common stock of Crown Vantage was
distributed on a pro rata basis to James River shareholders (the
"Distribution"). The Asset Transfer, the Financings, and the
Distribution are herein referred to collectively as the "Spin-Off."
In addition, one of the seven members of Crown Vantage's and Crown
Paper Co.'s initial Boards of Directors is an executive officer of
James River and two of the seven members of Crown Vantage's and Crown
Paper Co.'s initial Boards of Directors are directors of James River.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
Not applicable
(b) Pro forma financial information.
Unaudited pro forma financial information for James River, as
adjusted for the Spin-Off of Crown Vantage:
(i) Pro forma consolidated condensed balance sheet as of June
25, 1995
(ii) Pro forma consolidated statements of operations for the six
months ended June 25, 1995, and the year ended December 25,
1994
(iii) Notes to pro forma consolidated financial information
(c) Exhibits.
2 Contribution Agreement among James River Corporation of
Virginia, James River Paper Company, Inc., Crown Vantage
Inc. and Crown Paper Co., dated as of August 15, 1995 -- filed
herewith.
99 Pro forma financial information referenced in Item 7(b)
above -- filed herewith.
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.
JAMES RIVER CORPORATION OF VIRGINIA
By: /s/ James R. Hudson, Jr.
James R. Hudson, Jr.
Vice President, Corporate Controller
Date: August 31, 1995
EXHIBIT 2
CONTRIBUTION AGREEMENT
AMONG
JAMES RIVER CORPORATION OF VIRGINIA,
JAMES RIVER PAPER COMPANY, INC.,
CROWN VANTAGE INC.
AND
CROWN PAPER CO.
Dated as of August 15, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
CONTRIBUTIONS AND TRANSFERS TO NEWCO
2.1 Contribution and Transfer of Assets. . . . . . . . . 13
2.2 Excluded Assets. . . . . . . . . . . . . . . . . . . 16
2.3 Assumed Liabilities. . . . . . . . . . . . . . . . . 16
2.4 Additional Payments. . . . . . . . . . . . . . . . . 19
ARTICLE III
CERTAIN EVENTS OCCURRING BEFORE THE SPINOFF RECORD DATE
3.1 Reorganization . . . . . . . . . . . . . . . . . . . 20
3.2 Senior Bank Debt . . . . . . . . . . . . . . . . . . 20
3.3 Registration of the Newco High Yield Debt and
Consummation of the High Yield Debt Offering . . . . 21
3.4 Application of Debt Proceeds . . . . . . . . . . . . 21
3.5 Recapitalization of Newco Holdings . . . . . . . . . 21
3.6 Registration of the Newco Holdings Common Shares . . 22
3.7 Declaration by Board of Directors of James River
of Spinoff Record Date . . . . . . . . . . . . . . . 22
3.8 Election of Officers and Directors of Newco
Holdings and Newco.. . . . . . . . . . . . . . . . . 23
ARTICLE IV
SPINOFF
4.1 Spinoff. . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE V
RELATED AGREEMENTS
5.1 Related Agreements . . . . . . . . . . . . . . . . . 24
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF JAMES RIVER
6.1 Organization; Qualification. . . . . . . . . . . . . 26
6.2 Organization of JR U.K. Holdings; Ownership and
Validity of Shares . . . . . . . . . . . . . . . . . 26
6.3 Organization of JR N.H. Electric; Ownership and
Validity of Shares . . . . . . . . . . . . . . . . . 27
6.4 Organization of Berlin Mills Railway; Ownership
and Validity of Shares . . . . . . . . . . . . . . . 27
6.5 Ownership of Stock of Subsidiaries by JR U.K.
Holdings.. . . . . . . . . . . . . . . . . . . . . . 28
6.6 Authority Relative to this Agreement and the
Related Agreements . . . . . . . . . . . . . . . . . 28
6.7 Consents and Approvals . . . . . . . . . . . . . . . 29
6.8 Non-Contravention. . . . . . . . . . . . . . . . . . 29
6.9 Compliance with Laws . . . . . . . . . . . . . . . . 29
6.10 Environmental Matters. . . . . . . . . . . . . . . . 30
6.11 Licenses and Permits . . . . . . . . . . . . . . . . 30
6.12 Financial Statements . . . . . . . . . . . . . . . . 31
6.13 Litigation . . . . . . . . . . . . . . . . . . . . . 31
6.14 Title to Properties. . . . . . . . . . . . . . . . . 31
6.15 Leases . . . . . . . . . . . . . . . . . . . . . . . 32
6.16 Newco Intellectual Property. . . . . . . . . . . . . 32
6.17 Material Contracts . . . . . . . . . . . . . . . . . 33
6.18 Labor Matters. . . . . . . . . . . . . . . . . . . . 33
6.19 Employee Benefit Plans . . . . . . . . . . . . . . . 34
6.20 Conduct of Business and Management of Assets since
Date of June Financial Statements. . . . . . . . . . 35
6.21 Finders. . . . . . . . . . . . . . . . . . . . . . . 36
6.22 Sufficiency of Assets. . . . . . . . . . . . . . . . 37
6.23 Undisclosed Liabilities. . . . . . . . . . . . . . . 37
6.24 Insurance. . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF NEWCO HOLDINGS AND NEWCO
7.1 Organization; Qualification. . . . . . . . . . . . . 37
7.2 Authority Relative to this Agreement and the
Related Agreements . . . . . . . . . . . . . . . . . 38
7.3 Non-Contravention. . . . . . . . . . . . . . . . . . 38
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 Conduct of Business and Management of Assets . . . . 38
8.2 Forbearances by James River, Newco Holdings, Newco
and the JR U.K. Group. . . . . . . . . . . . . . . . 39
8.3 Taxes and Recording Fees . . . . . . . . . . . . . . 40
8.4 Mail Received After Spinoff. . . . . . . . . . . . . 41
8.5 Retention of Books and Records . . . . . . . . . . . 41
8.6 Expenses . . . . . . . . . . . . . . . . . . . . . . 42
8.7 Confidentiality. . . . . . . . . . . . . . . . . . . 42
8.8 Public Announcements . . . . . . . . . . . . . . . . 43
8.9 Efforts to Consummate. . . . . . . . . . . . . . . . 43
8.10 Further Assurances . . . . . . . . . . . . . . . . . 43
8.11 Use of James River Name. . . . . . . . . . . . . . . 44
8.12 Instruments of Conveyance and Transfer, etc. . . . . 45
8.13 Assignment of Contracts, Rights, etc.. . . . . . . . 45
8.14 ESOP Sale. . . . . . . . . . . . . . . . . . . . . . 46
8.15 Insurance for Newco Assets and Newco Business
after Paper Contribution Date. . . . . . . . . . . . 46
8.16 No Solicitation of Employees.. . . . . . . . . . . . 46
8.17 Distribution to James River of Cash in JR U.K.
Holdings and its Subsidiaries. . . . . . . . . . . 47
8.18 Local Bank Accounts. . . . . . . . . . . . . . . . . 48
8.19 Parchmentizing Business. . . . . . . . . . . . . . . 48
ARTICLE IX
ENVIRONMENTAL MATTERS
9.1 ISRA Obligations and Liabilities.. . . . . . . . . . 49
9.2 Expenditures for Environmental Investigation and
Compliance.. . . . . . . . . . . . . . . . . . . . . 53
ARTICLE X
EMPLOYEE AND EMPLOYEE BENEFIT MATTERS
10.1 Newco Employees. . . . . . . . . . . . . . . . . . 54
10.2 Salaried Employee Employment and Employee
Benefits . . . . . . . . . . . . . . . . . . . . . 56
10.3 Hourly Employee Employment and Employee Benefits . 57
10.4 Assumption of Liabilities. . . . . . . . . . . . . 57
10.5 Collective Bargaining Agreements . . . . . . . . . 58
10.6 Pension Plans for Hourly Newco Employees . . . . . 58
10.7 Pension Plan for Salaried Newco Employees. . . . . 65
10.8 ESOP . . . . . . . . . . . . . . . . . . . . . . . 69
10.9 Stock Option and Deferred Stock Plans. . . . . . . 70
10.10 Worker's Compensation. . . . . . . . . . . . . . . 72
10.11 Welfare Benefit Plans. . . . . . . . . . . . . . . 72
10.12 Profit Sharing and Performance Productivity
Plans. . . . . . . . . . . . . . . . . . . . . . . 75
10.13 Nonqualified Plans . . . . . . . . . . . . . . . . 76
10.14 Vacation Pay . . . . . . . . . . . . . . . . . . . 77
10.15 Administration . . . . . . . . . . . . . . . . . . 77
10.16 Indemnity. . . . . . . . . . . . . . . . . . . . . 77
ARTICLE XI
CROSS-LICENSE
11.1 Cross-License. . . . . . . . . . . . . . . . . . . . 78
ARTICLE XII
CONDITIONS TO OBLIGATIONS OF NEWCO HOLDINGS AND NEWCO
12.1 Representations and Warranties. . . . . . . . . . . 85
12.2 Performance of this Agreement.. . . . . . . . . . . 85
12.3 Proceedings.. . . . . . . . . . . . . . . . . . . . 85
12.4 Consents and Approvals. . . . . . . . . . . . . . . 86
12.5 Injunction, Litigation, etc.. . . . . . . . . . . . 86
12.6 Legislation.. . . . . . . . . . . . . . . . . . . . 86
12.7 Opinion of Counsel for James River. . . . . . . . . 86
12.8 Consummation of Article III Transactions. . . . . . 86
12.9 Financing.. . . . . . . . . . . . . . . . . . . . . 86
12.10 Receipt of a Solvency Opinion By Newco
Holdings Board of Directors.. . . . . . . . . . . . 86
ARTICLE XIII
CONDITIONS TO OBLIGATIONS OF JAMES RIVER AND JAMES RIVER PAPER
13.1 Representations and Warranties . . . . . . . . . . . 87
13.2 Performance of this Agreement. . . . . . . . . . . . 87
13.3 Proceedings. . . . . . . . . . . . . . . . . . . . . 87
13.4 Consents and Approvals . . . . . . . . . . . . . . . 87
13.5 Injunction, Litigation, etc. . . . . . . . . . . . . 87
13.6 Legislation. . . . . . . . . . . . . . . . . . . . . 88
13.7 Financing. . . . . . . . . . . . . . . . . . . . . . 88
13.8 Consummation of Article III Transactions . . . . . . 88
13.9 Receipt of a Solvency Opinion By Newco Holdings
Board of Directors . . . . . . . . . . . . . . . . . 88
ARTICLE XIV
DELIVERIES, ETC., IN CONNECTION WITH SPINOFF
14.1 Effectiveness of Spinoff . . . . . . . . . . . . . . 88
14.2 Deliveries by James River. . . . . . . . . . . . . . 88
14.3 Deliveries by Newco Holdings and Newco . . . . . . . 89
14.4 Deliveries of Related Agreements . . . . . . . . . . 90
ARTICLE XV
INDEMNIFICATION
15.1 Survival; Remedy for Breach. . . . . . . . . . . . . 90
15.2 Indemnification by James River . . . . . . . . . . . 90
15.3 Indemnification by Newco Holdings. . . . . . . . . . 91
15.4 Definition of Loss . . . . . . . . . . . . . . . . . 92
15.5 Third Party Claims . . . . . . . . . . . . . . . . . 92
15.6 Subrogation Rights; No Duplication . . . . . . . . . 94
15.7 Priority of Payment. . . . . . . . . . . . . . . . . 94
ARTICLE XVI
TERMINATION, AMENDMENT AND WAIVER
16.1 Termination. . . . . . . . . . . . . . . . . . . . . 94
16.2 Effect of Termination. . . . . . . . . . . . . . . . 95
16.3 Amendment. . . . . . . . . . . . . . . . . . . . . . 95
16.4 Extension; Waiver. . . . . . . . . . . . . . . . . . 95
ARTICLE XVII
UNWIND PROVISIONS
17.1 Events Triggering Unwind.. . . . . . . . . . . . . . 96
17.2 Rights and Obligations with respect to the Call. . . 96
17.3 Unwind of Transactions Contemplated Hereby . . . . . 96
17.4 Unwind Further Assurances. . . . . . . . . . . . . . 98
17.5 Indemnification. . . . . . . . . . . . . . . . . . . 98
ARTICLE XVIII
GENERAL PROVISIONS
18.1 Notices. . . . . . . . . . . . . . . . . . . . . . . 99
18.2 Interpretation . . . . . . . . . . . . . . . . . . .100
18.3 Counterparts . . . . . . . . . . . . . . . . . . . .100
18.4 Miscellaneous. . . . . . . . . . . . . . . . . . . .100
<PAGE>
Exhibits:
A - Form of Transition Services Agreement
B - Form of Information Technology Transition Services
Agreement
C - Form of Assignment and Assumption Agreement
D - Form of Tax Agreement
E - Form of Cottonwood Pedigreed Plant Material
Sharing Agreement
F - Form of Berlin Product Supply Agreement
G - Form of St. Francisville Product Supply Agreement
(Consumer Products Business)
H - Form of St. Francisville Product Supply Agreement
(Packaging Business)
I - Form of Offices Sharing Agreement
J - Form of Pulp Technology Services Agreement
K - Form of Pulp Sales Transition Agreement
L - Form of Pulp Purchase Agreement
M - Form of Environmental Services Agreement
N - Form of Parchment/Kalamazoo Landfill Agreement
O - Form of Technical Services Agreement
P - Form of Allocation Agreement (relating to
Parchment/Kalamazoo Superfund)
Q - Form of Packaging Papers Supply Agreement
R - Form of Naheola Product Supply Agreement
S - Form of Equipment Removal Agreement
T - Form of Confidentiality Agreement
U - Form of Pension Funding Agreement
V - Form of St. Francisville Wood Chip Supply
Agreement
W - Form of St. Francisville Roundwood Supply and
Cutting Rights Agreement
X - Form of Northeast Roundwood Supply Agreement
Y - Form of Guaranty Support Agreement
Z - Form of Eureka Trademark Agreement
AA - Form of KVP Parchment Lease
BB - Form of KVP Parchment Agreement
CC - Patapar Trademark License Agreement
DD - Curtis Fine Papers Division Sales and Warehousing
Agreement
EE - Form of Employment Agreement
FF - Form of Opinion of McGuire, Woods, Battle &
Boothe, L.L.P.
<PAGE>
Schedules:
1.1-A - Leased Premises
1.1-B - Plant Sites
1.1-C - Reimbursable Advances
2.1(a)(i) - Paper Real Property
2.1(a)(xii) - Prepaid Expenses and Deferred Charges
2.1(b)(i)(A) - Timber Real Property
2.1(b)(i)(A-1) - Timber Leases
2.2(e) - Excluded Personal Property
2.2(f) - Excluded Technology
2.2(g) - Excluded Real Property
2.3(a)(vii) - Certain Assumed Environmental
Liabilities and Obligations
2.3(a)(ix) - Certain Long-Term Liabilities to be
Assumed
3.9(i) - List of Officers of Newco Holdings and
Newco
3.9(ii) - List of Directors of Newco Holdings and
Newco
6.7 - James River Required Consents and
Approvals
6.8 - James River Defaults Caused by
Consummation of Transactions
6.9 - Noncompliance with Laws
6.10 - Environmental Permits Not Obtained
6.11 - Material Licenses and Permits
6.12 - December and June Financial Statements
6.13 - James River Litigation
6.15 - Certain Leases
6.16 - Filed and Non-Filed Intellectual
Property
6.17 - Material Contracts
6.18 - Labor Agreements
6.19 - Employee Benefit Plans
6.23 - Persons Deemed to Have Knowledge of
Undisclosed Liabilities
10.6(a) - Transferred Hourly Plans
10.9 - James River Option Plans
10.13 - James River Nonqualified Plans
11.1(c) - Field of Use Limitations
11.1(c)(i) - James River Covered Licenses
11.1(d)(i) - Industrial Property to which Cross-
License to Newco Extends
11.1(d)(ii) - Industrial Property to which Cross
License to James River Extends
11.1(j)(i) - James River Licensed Marks to Newco
11.1(j)(ii) - Newco Licensed Marks to James River
<PAGE>
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT (the "Agreement"), dated as of
August 15, 1995, is made among JAMES RIVER CORPORATION OF
VIRGINIA, a Virginia corporation ("James River"), JAMES RIVER
PAPER COMPANY, INC., a Virginia corporation ("James River
Paper"), CROWN VANTAGE INC., a Virginia corporation ("Newco
Holdings"), and CROWN PAPER CO., a Virginia corporation
("Newco").
RECITALS
A. As of the date hereof: (i) James River is the holder of
all of the issued and outstanding shares of capital stock of
James River Paper; (ii) James River Paper is the holder of one
share of common stock of Newco (which constitutes all of the
issued and outstanding shares of capital stock of Newco); and
(iii) James River is the holder of one share of
common stock of Newco Holdings (which constitutes all of the
issued and outstanding shares of capital stock of Newco
Holdings).
B. Pursuant to the terms and subject to the conditions of
this Agreement, James River Paper desires to recapitalize Newco,
and James River Paper desires to contribute, or to cause the
contribution of, the Paper Assets (as hereinafter defined) to
Newco on the Paper Contribution Date (as hereinafter defined) for
additional shares of common stock of Newco to be issued to James
River Paper pursuant to such recapitalization.
C. Pursuant to the terms and subject to the conditions of
this Agreement, after the Paper Contribution Date, but before the
Timber Transfer Date (as hereinafter defined): (i) James River
desires to cause James River Paper to distribute all of the
issued and outstanding shares of capital stock of Newco to James
River as a dividend (the "Reorganization"); (ii) Newco wishes,
after the Reorganization, to obtain the Senior Bank Debt and to
issue the Newco High Yield Debt (each as hereinafter defined) and
to use the respective proceeds therefrom to pay expenses of the
transactions contemplated by this Agreement, to pay an amount to
James River in respect of the cash and cash equivalents held by
JR U.K. Holdings and its Subsidiaries (each as hereinafter
defined) as of the U.K. Stock Transfer Date (as hereinafter
defined), to repay certain Intercompany Loans (as hereinafter
defined), to fund all or part of the purchase of the U.K. Stock
(as hereinafter defined) and to make a distribution to James
River; and (iii) before the purchase of the U.K Stock, but after
the other actions described in clause (ii) above, James River
desires to recapitalize Newco Holdings and, pursuant to such
recapitalization, to transfer to Newco Holdings all of the issued
and outstanding shares of capital stock of Newco in exchange for
Newco Holdings' issuance to James River of additional Newco
Holdings Common Shares (as hereinafter defined).
D. James River desires to cause JRTC (as hereinafter
defined) to transfer the Timber Assets (as hereinafter defined)
to Newco Holdings or the designee of Newco Holdings (the "First
Designee") or the designee of the First Designee (the "Second
Designee") on the Timber Transfer Date in accordance with the
Timber Transfer Agreement.
E. In accordance with the U.K. Stock Transfer Agreement,
on the U.K. Stock Transfer Date, James River desires to cause
JRIH (as hereinafter defined) to transfer (i) to Newco Holdings
or its designee, ninety-six (96) shares of the entire issued
share capital of JR U.K. Holdings (the "U.K. Stock") and (ii) to
Newco, the balance of the U.K. Stock on Newco's own behalf.
F. As more specifically described herein, before the
Spinoff Record Date (as hereinafter defined), James River, Newco
Holdings and Newco desire to cooperate with each other to:
(i) negotiate and obtain the Senior Bank Debt;
(ii) register the Newco High Yield Debt under the
Securities Act (as hereinafter defined) and applicable state
securities laws; and
(iii) consummate a public offering registered
under the Securities Act with respect to the Newco High
Yield Debt (the "High Yield Debt Offering").
G. On the Spinoff Date, James River desires to distribute
(the "Spinoff") all of the issued and outstanding shares of
capital stock of Newco Holdings to James River's shareholders of
record as of the Spinoff Record Date in the form of a dividend in
the ratio (the "Exchange Ratio") of one (1) Newco Holdings Common
Share to each ten (10) James River Common Shares held by each
such shareholder as of such date. James River desires to engage
an independent agent (the "Independent Agent") to aggregate and
sell any fractional shares created by the application of the
Exchange Ratio and to pay cash in respect of any such fractional
shares to shareholders who would otherwise receive fractional
shares.
H. As soon as practicable after the Spinoff, (i) Newco
Holdings desires to sell (the "ESOP Sale") to Newco Holdings'
ESOP (as hereinafter defined), and Newco Holdings' ESOP desires
to purchase from Newco Holdings, for $10,000,000 cash, Newco
Holdings Common Shares, and (ii) Newco Holdings desires to use
the proceeds of the ESOP Sale to make a contribution to the
capital of Newco.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties and agreements contained herein, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used herein, the following terms have
the following meanings:
"Affiliate," with respect to any party, means a party,
person or entity that, directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under
common control with, such party, whether through the ownership of
voting securities, by contract or otherwise.
"Agreement" has the meaning set forth in the introductory
paragraph hereof.
"Article III Transactions" has the meaning set forth in
Article III.
"Assets" means the Newco Assets, the Leased Assets and the
Stock Company Assets.
"Assumed Liabilities" has the meaning set forth in Section
2.3.
"Authority" means any national, federal, state or local
governmental, judicial or regulatory agency or authority within
or without the United States.
"Average Cost of Funds" means an interest rate of seven and
seven-tenths percent (7.7%) per annum.
"Berlin Equipment" means the No. 9 paper machine and the
related converting and other equipment, more particularly
described on Schedule A to the form of Berlin Product Supply
Agreement attached hereto as Exhibit F, which are located at
James River Paper's mill in Berlin, New Hampshire.
"Berlin Mills Railway" means Berlin Mills Railway, Inc., a
corporation organized under the laws of New Hampshire.
"Berlin Sales Operation" means the sale and distribution of
unconverted parent rolls of wet crepe towel and the derivatives
therefrom related to the tissue paper converting operations
customarily conducted on the Berlin Equipment at James River
Paper's Berlin, New Hampshire mill.
"Call" has the meaning set forth in Section 17.1(b)(iii).
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act codified at 42 U.S.C. sect. 9601 et
seq. as in effect on the date of this Agreement (including the
amendments made by the Superfund Amendments and Reauthorization
Act of 1986).
"Confidential Information" has the meaning set forth in
Section 8.7.
"Cross-License" has the meaning set forth in Section 11.1.
"Credit Agreement" means the $350,000,000 Credit Agreement
among Newco, Newco Holdings and various banks pursuant to which
the Senior Bank Debt is incurred.
"Debt Proceeds" means the aggregate net proceeds received by
Newco in respect of the consummation of the High Yield Debt
Offering and the initial borrowing under the Senior Bank Debt.
"December Financial Statements" means the consolidated
financial statements for the Newco Business for the fiscal year
ended December 25, 1994, previously delivered by James River to
Newco.
"Employee Plans" has the meaning set forth in Section
6.19(a).
"Environment" means ambient air, surface water, ground
water, land surface or land subsurface.
"Environmental Condition" means any condition existing at
any Plant Site to the extent resulting from a Release into the
Environment of any Hazardous Substance or Oil by any member of
the Group.
"Environmental Laws" means Environmental Statutes and any
common law governing the contamination, pollution or protection
of the Environment or allocating liabilities in respect thereof.
"Environmental Statutes" means federal statutes and
regulations promulgated thereunder intended to provide protection
for public health and the environment, including, without
limitation, the Clean Air Act, the Clean Water Act, CERCLA, the
Solid Waste Disposal Act (including the Resource Conservation and
Recovery Act), the Toxic Substances Control Act, their state
statutory and regulatory counterparts and other substantially
similar foreign statutes and regulations.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESOP Sale" has the meaning set forth in the Recitals.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Ratio" has the meaning set forth in the Recitals.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section
2.3(b).
"Excluded Technology" means the technology listed in
Schedule 2.2(f).
"Filed Newco Intellectual Property" means trade names,
trademarks and service marks, together with the associated
goodwill, letters patent, copyrights, design registrations and
inventor certificates as well as applications, registrations, and
certificates for any of the foregoing or any other intellectual
property which is embodied in a form which is filed or registered
with any Authority and used in connection with the Newco
Business.
"First Designee" has the meaning set forth in the Recitals.
"Frozen Hourly Plan" has the meaning set forth in Section
10.6(b).
"Frozen JRII Plan" has the meaning set forth in Section
10.6(b).
"Frozen Transferred Hourly Plan" has the meaning set forth
in Section 10.6(a).
"Glory Land" means that certain real property formerly owned
by JR U.K. Holdings which is located in England and has recently
been sold to a third party.
"Group" means James River and all of its Subsidiaries as of
the date hereof.
"Hazardous Substance" has the meaning set forth in Section
101(14) of CERCLA.
"High Yield Debt Offering" has the meaning set forth in the
Recitals.
"Holdings Employee" has the meaning set forth in Section
8.16(a).
"Hourly Newco Employees" has the meaning set forth in
Section 10.1(b).
"Indenture" means the Indenture between Newco, as issuer and
the Bank of New York, as trustee, pursuant to which the High
Yield Debt is issued.
"Independent Agent" has the meaning set forth in the
Recitals.
"Intercompany Loan" means, at any time, any amount that
would be reflected, on a balance sheet for the Newco Business
created as of such time in accordance with the principles applied
in the June Financial Statements, as intercompany indebtedness of
any Person, business unit or business group within the Spin
Group, to any Person, business unit or business group within the
JR Group. The amount outstanding in respect of the Intercompany
Loans is, in the aggregate, $350,000,000. Notwithstanding the
foregoing, Reimbursable Advances, the Timber Note and the Stock
Note shall not be Intercompany Loans.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended.
"Inventory" has the meaning set forth in Section
2.1(a)(iii).
"ISRA" means the Industrial Site Recovery Act, N.J.S.A.
13:1K-6 et seq., and the regulations promulgated pursuant
thereto.
"James River" has the meaning set forth in the introductory
paragraph hereof.
"James River Common Shares" means the shares of common
stock, $.10 par value per share, of James River.
"James River Corporate Designations" has the meaning set
forth in Section 8.11.
"James River Deferred Stock Plan" has the meaning set forth
in Section 10.9(d).
"James River Employee" has the meaning set forth in Section
8.16(b).
"James River Nonqualified Plan" has the meaning set forth in
Section 10.13(a).
"James River Option Plan" has the meaning set forth in
Section 10.9(a).
"James River Options" has the meaning set forth in Section
10.9(b).
"James River Paper" has the meaning set forth in the
introductory paragraph hereof.
"James River Performance Plan" has the meaning set forth in
Section 10.12(b).
"James River Plan" has the meaning set forth in Section
10.6(f).
"James River II Plan" has the meaning set forth in Section
10.6(b).
"James River Profit Sharing Plan" has the meaning set forth
in Section 10.12(a).
"James River Salaried Retirement Plan" has the meaning set
forth in Section 10.7(a).
"James River's Auditors" means Coopers & Lybrand.
"James River's Section 125 Plan" has the meaning set forth
in Section 10.11(c).
"JR Group" means all members of the Group other than members
of the Spin Group.
"JR N.H. Electric" means James River New Hampshire Electric,
Inc., a corporation organized under the laws of New Hampshire.
"JRTC" means James River Timber Corporation, a corporation
organized under the laws of Alabama.
"JR U.K. Group" means, as of any date of determination, JR
U.K. Holdings and each of its Subsidiaries.
"JR U.K. Holdings" means James River UK Holdings Limited, a
corporation organized under the laws of England.
"JRIH" means James River International Holdings, Ltd., a
corporation organized under the laws of Virginia.
"June Financial Statements" means the unaudited consolidated
financial statements for the Newco Business for the fiscal
quarter ended June 25, 1995, previously delivered by James River
to Newco.
"Lease" means any lease, agreement or commitment to lease
under which any member of the JR Group is lessee and that relates
principally to the Newco Business and to real or personal
property.
"Leased Assets" has the meaning set forth in Section 2.2(c).
"Leased Premises" means that real property leased by James
River or any of its Subsidiaries, as lessee, and listed on
Schedule 1.1-A.
"Legal Action" has the meaning set forth in Section 15.4.
"LNA" means a Letter of Nonapplicability with respect to
ISRA.
"Loss" and "Losses" have the meaning set forth in Section
15.4.
"Material Contract" has the meaning set forth in Section
6.17.
"Milford Mill" means James River's Milford, New Jersey mill
which is described on Schedule 2.1(a)(i) as the "Milford Mill".
"Newco" has the meaning set forth in the introductory
paragraph hereof.
"Newco Assets" means the Paper Assets, the Timber Assets and
the U.K. Stock.
"Newco Business" means (i) the business customarily operated
by James River with respect to the products manufactured at the
Plant Sites, excluding the Berlin Sales Operation and excluding
all portions of James River's business relating to products
manufactured at locations (including the plants at Wauna, Oregon,
and Camas, Washington) other than the Plant Sites and (ii) the
business customarily operated by the Stock Companies; provided,
that the "Newco Business" shall not include any portion of such
business customarily operated by any member of the Group using,
or with respect to, the Excluded Assets.
"Newco Employees" has the meaning set forth in Section 10.1.
"Newco High Yield Debt" means the indebtedness evidenced by
those certain Senior Subordinated Notes Due 2005 in aggregate
original principal amount of $250,000,000 to be issued by Newco
pursuant to the High Yield Debt Offering.
"Newco Holdings" has the meaning set forth in the
introductory paragraph hereof.
"Newco Holdings Common Shares" means the authorized shares
of common stock, no par value, of Newco Holdings.
"Newco Holdings' ESOP" has the meaning set forth in Section
10.8(a).
"Newco Hourly Retirement Plan" has the meaning set forth in
Section 10.6(c).
"Newco Intellectual Property" has the meaning set forth in
Section 2.1(a)(iv).
"Newco Nonqualified Plan" has the meaning set forth in
Section 10.13(a).
"Newco Option Plan" has the meaning set forth in Section
10.9(a).
"Newco Performance Plan" has the meaning set forth in
Section 10.12(b).
"Newco Profit Sharing Plan" has the meaning set forth in
Section 10.12(a).
"Newco's Salaried Retirement Plan" has the meaning set forth
in Section 10.7(b).
"Newco's Section 125 Plan" has the meaning set forth in
Section 10.11(c).
"NJDEP" means the New Jersey Department of Environmental
Protection.
"Non-Filed Newco Intellectual Property" means unpatented
technology, inventions, trade secrets, processes, know-how,
designs and formulae and unfiled trade names, trademarks and
service marks, together with the associated goodwill, copyrights
and other industrial or intellectual property used in connection
with the Newco Business.
"Oil" means petroleum and petroleum products, including
crude oil and any fraction thereof.
"Pan Liner Paper" has the meaning set forth in Section
8.19(c).
"Paper Assets" means the assets, properties and rights to be
contributed pursuant to Section 2.1(a).
"Paper Contribution Date" means the time and day on which
the Paper Assets are contributed to Newco pursuant to Section
2.1(a).
"Paper Equipment" has the meaning set forth in Section
2.1(a)(ii).
"Paper Real Property" has the meaning set forth in Section
2.1(a)(i).
"Parchmentizing" has the meaning set forth in Section
10.1(b).
"Parchmentizing Agreements" has the meaning set forth in
Section 8.19(a).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Exceptions" means (i) statutory liens for current
taxes or assessments not yet due and payable or being contested
in good faith; (ii) mechanics', carriers', workers', repairers'
and other similar liens arising or incurred in the ordinary
course of business relating to obligations as to which there is
no default on the part of James River or any of its Subsidiaries;
(iii) exceptions that would be shown by surveys of such property;
(iv) terms and conditions of any Leases; (v) such liens,
imperfections in title, charges, easements, restrictions,
encumbrances or other matters which do not adversely and
materially affect the Assets and the Newco Business, taken as a
whole; (vi) such other liens, imperfections in title, charges,
easements, restrictions, encumbrances and other matters of a
similar nature which have been agreed to by Newco; and (vii)
liens or charges securing indebtedness to be assumed hereunder by
any member of the Spin Group or contemplated hereunder to be the
obligation of any member of the Spin Group.
"Person" means an individual, partnership (general or
limited), corporation, association or other form of business
organization (whether or not regarded as a legal entity under
applicable law), trust, estate or any other entity.
"Plan 1" has the meaning set forth in Section 10.6(e).
"Plan 2" has the meaning set forth in Section 10.6(e).
"Plan 4" has the meaning set forth in Section 10.6(e).
"Plan 10" has the meaning set forth in Section 10.6(l).
"Plant Sites" means those portions of the Real Property and
Leased Premises locations listed on Schedule 1.1-B.
"Post-Contribution Timber Profits" has the meaning set forth
in Section 8.1(b)(ii).
"Proposed Cluster Rules" means the proposed rules of the
Environmental Protection Agency entitled, as of the date hereof,
"Effluent Limitations Guidelines, Pretreatment Standards and New
Source Performance Standards: Pulp, Paper, and Paperboard
Category; National Emission Standards for Hazardous Air
Pollutants for Source Category: Pulp and Paper Production" and
set forth, as of the date hereof, at 58 Federal Register 66078.
"Real Property" means the Paper Real Property and the Timber
Real Property.
"Reigel Mill" has the meaning set forth in Section 8.19(c).
"Reimbursable Advances" means any amount advanced after the
date hereof by any member of the JR Group to Newco or Newco
Holdings, or for the account of either, in respect of expenses
incurred by or to be incurred by Newco or Newco Holdings in
respect of the business to be conducted by Newco or Newco
Holdings after the Paper Contribution Date and including those
items listed on Schedule 1.1-C.
"Related Agreements" has the meaning set forth in Section
5.1.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing into the Environment, not including any such
action which results in exposure to persons solely within a
workplace or emissions from the engine exhaust of a motor
vehicle, rolling stock, aircraft, vessel or pipeline pumping
station.
"Remedial Actions" mean actions required to clean up or
contain or otherwise ameliorate or remedy any Environmental
Condition, including but not limited to preventing a Release or
threatened Release and performing studies, investigations and
monitoring.
"Reorganization" has the meaning set forth in the Recitals.
"Representative," with respect to any party, means any
officer, director, employee, representative, consultant or
advisor of such party.
"Salaried Newco Employees" has the meaning set forth in
Section 10.1.
"SAR" has the meaning set forth in Section 10.9(b).
"Second Designee" has the meaning set forth in the Recitals.
"Securities Act" means the Securities Act of 1933, as
amended.
"Senior Bank Debt" has the meaning set forth in Section 3.2.
"Spin Group" means Newco Holdings and Newco and any Person
that is a Subsidiary of either Newco Holdings or Newco as of the
date hereof or is contemplated hereunder to become such a
Subsidiary (including, without limitation, the Stock Companies).
"Spinoff" has the meaning set forth in the Recitals.
"Spinoff Date" means the time and day on which the mailing
to the shareholders of James River commences in respect of the
consummation of the Spinoff pursuant to Section 4.1.
"Spinoff Record Date" means the time and day that the Board
of Directors of James River, as contemplated by Section 3.8,
designates as the record date for determining the names and
holdings of the James River shareholders entitled to participate
in the distribution of Newco Holdings Common Shares contemplated
as part of the Spinoff.
"Stock Companies" means JR U.K. Holdings, Berlin Mills
Railway and JR N.H. Electric and, in each case, any Subsidiaries
thereof.
"Stock Company Assets" means any assets owned by any Stock
Company as of the Paper Contribution Date.
"Stock Note" has the meaning set forth in the U.K. Stock
Transfer Agreement.
"StockPlus Plan" has the meaning set forth in Section
10.8(b).
"Subsidiary", when used with respect to any Person, means
any corporation or other business entity, whether or not
incorporated, of which such Person holds, directly or indirectly,
more than 50% of the securities or interests having, by their
terms, ordinary voting power to elect members of the Board of
Directors, or other persons performing similar functions with
respect to such entity.
"Survival Date" has the meaning set forth in Section 15.1.
"Timber Assets" has the meaning set forth in Section
2.1(b)(i).
"Timber Equipment" has the meaning set forth in Section
2.1(b)(i)(B).
"Timber Leases" has the meaning set forth in Section
2.1(b)(i)(A).
"Timber Note" has the meaning set forth in the Timber
Transfer Agreement.
"Timber Real Property" has the meaning set forth in Section
2.1(b)(i)(A).
"Timber Transfer Agreement" means the agreement dated August
15, 1995 between JRTC and Newco Holdings pursuant to which JRTC
is required to transfer to Newco Holdings or the First Designee
or the Second Designee the Timber Assets.
"Timber Transfer Date" means the time and day on which the
Timber Assets are transferred to Newco Holdings or its designee
pursuant to the Timber Transfer Agreement.
"Triggering Date" has the meaning set forth in Section 17.3.
"U.K. Cash Payment" has the meaning set forth in the U.K.
Stock Transfer Agreement.
"U.K. Stock" has the meaning set forth in the Recitals.
"U.K. Stock Transfer Agreement" means the agreement dated
August 15, 1995 between JRIH, Newco Holdings and Newco pursuant
to which JRIH is required (i) to transfer to Newco Holdings or
its designee ninety-six (96) shares of the U.K. Stock and (ii) to
transfer to Newco the balance of the U.K. Stock on Newco's own
behalf.
"U.K. Stock Transfer Date" means the time and day on which
the U.K. Stock is transferred to Newco Holdings or its designee
and Newco pursuant to the U.K. Stock Transfer Agreement.
ARTICLE II
CONTRIBUTIONS AND TRANSFERS TO NEWCO
2.1 Contribution and Transfer of Assets. (a) After the
execution hereof, James River Paper shall contribute, effective
as of 11:58 p.m. on the date of such contribution, to Newco all
of the right, title and interest of James River Paper in and to
the following assets, properties and rights other than the
Excluded Assets, the Timber Assets and the Stock Company Assets:
(i) the real property listed in Schedule
2.1(a)(i) together with the buildings, fixtures and other
improvements located thereon and the appurtenances thereto (the
"Paper Real Property");
(ii) the machinery, equipment, furniture,
vehicles, tools, supplies and other tangible personal property
(other than the tangible personal property and fixtures described
in other clauses of this Section 2.1(a)) which is ordinarily
located on the Paper Real Property or the Leased Premises and the
vehicles and mobile machinery or mobile equipment that are used
solely in the Newco Business (the "Paper Equipment");
(iii) the raw materials, work-in-process, finished
goods, stores, supplies and spare parts which are located at the
Plant Sites or are in transit or located elsewhere and, in each
case, which relate principally to the Newco Business (the
"Inventory");
(iv) except to the extent specified on Schedule
6.16, the Filed Newco Intellectual Property listed in Schedule
6.16, together with Non-Filed Newco Intellectual Property used
exclusively in, or applicable exclusively to, the Newco Business
(such Filed Newco Intellectual Property and such Non-Filed Newco
Intellectual Property, collectively, the "Newco Intellectual
Property"), subject however, to the provisions of Article XI;
(v) the Material Contracts, the Leases (except
for the Timber Leases) and all other contracts, leases and
commitments which relate principally to the Newco Business to the
extent so related and to the extent the obligations thereunder of
any member of the Group are assumed by Newco in accordance with
Section 2.3 (except for contracts or commitments substantially
all of the benefits of which are to be conferred upon Newco
pursuant to any Related Agreement);
(vi) to the extent assignable, all federal,
state, local and foreign governmental licenses, permits,
approvals and authorizations held by James River Paper which
relate principally to the Newco Business;
(vii) all of the issued and outstanding shares of
capital stock of JR N.H. Electric;
(viii) all of the issued and outstanding shares of
capital stock of Berlin Mills Railway;
(ix) all accounts receivable and notes receivable
arising from the Newco Business, including receivables from Newco
Employees that exist as of the Paper Contribution Date;
(x) all property records, production records,
engineering records, purchasing and sales records, personnel and
payroll records for Newco Employees, accounting records, customer
and vendor lists and other records and files (including, but not
limited to, any such records maintained in connection with any
computer system, but subject to the provisions of any applicable
Related Agreement) used exclusively in the Newco Business; a co-
ownership interest in any of the foregoing assets which are used
only in part in the Newco Business, but only to the extent of
such use; and copies of the information relating to the Newco
Business contained in the computer files referred to in Section
2.2(iv), but only to the extent such information relates to the
Newco Business; provided, however, that the contribution of the
assets and properties referred to in this Section 2.1(a)(x) that
do not constitute indicia of title, may, at the option of James
River, consist of contribution of true, correct and complete
copies thereof;
(xi) subject to the provisions of Section 8.11
and Article XI, all purchase orders, forms, labels, stationery,
shipping materials, catalogues, brochures, art work, photographs
and advertising materials which relate principally to the Newco
Business; and
(xii) to the extent not applied or liquidated,
those categories of prepaid expenses, deferred charges and other
assets created in the ordinary course of, or related solely to,
the Newco Business, which are reflected on the June Financial
Statements or listed on Schedule 2.1(a)(xii) except to the extent
constituting Reimbursable Advances.
(b) (i) After the date of the recapitalization
referred to in Section 3.5, but before the U.K. Stock Transfer
Date, James River shall cause JRTC, pursuant to the Timber
Transfer Agreement, to transfer to Newco Holdings or the First
Designee or the Second Designee all of its right, title and
interest in and to the following assets, properties and rights
other than the Excluded Assets (collectively, the "Timber
Assets"):
(A) the real property listed in Schedule
2.1(b)(i)(A) together with the fixtures and other improvements
located thereon and the appurtenances thereto (the "Timber Real
Property") and those leases (the "Timber Leases") listed on
Schedule 2.1(b)(i)(A-1);
(B) the machinery, equipment, furniture,
vehicles, tools, supplies and other tangible personal property
(other than the tangible personal property and fixtures described
in Section 2.1(a)) which is ordinarily located on the Timber Real
Property and any vehicles and mobile machinery or equipment that
are used solely in connection with that portion of the Newco
Business relating to the management or operation of timberlands
or the harvesting of timber (the "Timber Equipment");
(C) an amount equal to the Post-Contribution
Timber Profits; and
(D) the raw materials, work-in-process and
finished goods in inventory, to the extent each of the foregoing
relates to other assets constituting Timber Assets.
(ii) On the Timber Transfer Date, pursuant to the
Timber Transfer Agreement, Newco Holdings shall issue the Timber
Note to JRTC.
(c) (i) After the Timber Transfer Date, but before
the Spinoff Record Date, James River shall cause JRIH, pursuant
to the U.K. Stock Transfer Agreement, (A) to transfer JRIH's
right, title and interest in and to ninety-six (96) shares of the
U.K. Stock to Newco Holdings or its designee, and (B) to transfer
JRIH's right, title and interest in and to the balance of the
U.K. Stock to Newco on Newco's own behalf.
(ii) On the U.K. Stock Transfer Date, pursuant to
the U.K. Stock Transfer Agreement, Newco Holdings shall issue to
JRIH the Stock Note, and Newco shall pay to JRIH the U.K. Cash
Payment.
2.2 Excluded Assets. The following assets (the "Excluded
Assets") shall, to the extent that, but for this sentence, they
would constitute Paper Assets or Timber Assets, not be included
in the Newco Assets:
(a) all cash and cash equivalents, including cash on
hand or in bank accounts, certificates of deposit, commercial
paper and securities, except petty cash funds located at the
Plant Sites or the Leased Premises and Post-Contribution Timber
Profits;
(b) all prepaid expenses and deferred charges other
than those listed in Schedule 2.1(a)(xii);
(c) the real property, improvements, equipment and all
other assets to be leased from a member of the Group pursuant to
any Related Agreement, or any such asset leased to a member of
the Group pursuant to the Leases (the "Leased Assets");
(d) all computer files which contain any records or
lists relating to any business of the Group other than the Newco
Business and the information contained in such files;
(e) the personal property listed in Schedule 2.2(e)
and any other personal property or tangible or intangible assets,
other than the Berlin Equipment, which relate principally to the
Berlin Sales Operation;
(f) the Excluded Technology listed in Schedule 2.2(f);
and
(g) all real property listed in Schedule 2.2(g).
2.3 Assumed Liabilities. (a) Except to the extent set
forth in Section 2.3(b), Newco shall assume, as of the dates
specified in this Section 2.3, all liabilities and obligations of
all members of the JR Group which relate to the Newco Business or
to the Newco Assets (collectively, the "Assumed Liabilities"), to
the extent such liabilities and obligations relate to the Newco
Business or the Newco Assets and are not satisfied or discharged
on or before the dates specified in this Section 2.3 including,
without limitation, the following:
(i) as of the Paper Contribution Date, the
current liabilities related to the Newco Business or the Paper
Assets, including, but not limited to, all accounts and trade
payables, all liabilities and all obligations accruable as a
current liability on James River's financial statements as of the
Paper Contribution Date to the extent such payables, liabilities
and obligations are related to the Newco Business or the Paper
Assets;
(ii) as of the Paper Contribution Date, all
liabilities and obligations related to the Timber Assets required
to be assumed pursuant to the Timber Transfer Agreement;
(iii) as of the U.K. Stock Transfer Date, all
liabilities, and obligations, including any guaranties, related
to the U.K. Stock or to the business or assets of JR U.K.
Holdings (but not including any liabilities or obligations of JR
U.K. Holdings or its Subsidiaries) required to be assumed by
Newco under the U.K. Stock Transfer Agreement;
(iv) as of the later of the Paper Contribution
Date or the date on which such obligations arise, all liabilities
and obligations of any member of the JR Group to deliver goods or
services to customers of the Newco Business arising from orders
placed in the normal course of business of the Newco Business;
(v) as of the Paper Contribution Date, all
liabilities and obligations of any member of the JR Group under
any contract, commitment, license, permit, approval,
authorization or other agreement or arrangement constituting part
of the Newco Assets;
(vi) as of the Paper Contribution Date,
liabilities and obligations of James River or any of its
Affiliates existing as of the Paper Contribution Date and
relating to Newco Employees and employee benefits to the extent
set forth in Article X;
(vii) as of the Paper Contribution Date,
liabilities and obligations under Environmental Laws of all
members of the JR Group, including, without limitation, any
obligation to conduct or pay for any Remedial Action for any
Environmental Condition or any obligation to correct or to pay a
penalty for failure to comply with Environmental Statutes
(regardless whether such condition or failure exists on, or is
specifically related to, any Real Property or Leased Premises)
arising in connection with the conduct of the Newco Business or
the operation or ownership of the Newco Assets, and including,
without limitation, those liabilities listed on Schedule
2.3(a)(vii), to the extent such liabilities or obligations relate
to the Newco Business or the Newco Assets;
(viii) as of the Paper Contribution Date, the
Intercompany Loans;
(ix) as of the Paper Contribution Date, unless
otherwise noted on Schedule 2.3(a)(ix) (and in such event, as of
the date so noted), other long-term liabilities or obligations in
respect of which an amount is reflected in the balance sheet and
notes thereto included in the December Financial Statements or
the June Financial Statements; and
(x) as of the Paper Contribution Date, any other
liability or obligation of any member of the JR Group to the
extent such liability or obligation relates to the Newco Business
or the Newco Assets.
(b) Notwithstanding the provisions of Section 2.3(a),
all of the following liabilities and obligations (collectively,
the "Excluded Liabilities") shall be excluded from the Assumed
Liabilities:
(i) liabilities for federal, state and local
income and franchise taxes and any other taxes incurred by any
member of the JR Group in the conduct of the Newco Business or
with respect to the Newco Assets before the Paper Contribution
Date, except to the extent such taxes are required to be paid
pursuant to the Tax Agreement referred to in Section 5.1;
(ii) indebtedness of any member of the JR Group
resulting from borrowings (it being understood that, for the
purposes of this clause (ii), obligations under leases assumed by
Newco shall in no event be deemed to result from borrowings) or
guaranties thereof;
(iii) all liabilities and obligations relating to
any employee who is not a Newco Employee or any employee benefits
or benefit plans which are not to be assumed by Newco pursuant to
Article X;
(iv) all liabilities or obligations to the extent
relating to the acquisition, ownership or use of any of the
Excluded Assets; and
(v) up to $1,550,000 of any payment or settlement
amount required to be paid by any member of the JR Group with
respect to the private civil damage action relating to the
"Combustion, Inc. Site" pursuant to the approximately $1,550,000
settlement offer made by James River.
2.4 Additional Payments. (a) If any Newco Asset or Stock
Company Asset or the Newco Business shall suffer any damage,
destruction or loss after the date hereof, but before the Paper
Contribution Date (or with respect to the Timber Assets, the
Timber Transfer Date), and such Asset or Business and the related
casualty are covered by any insurance policy maintained by any
member of the JR Group: (i) James River shall pay to Newco, as
soon as practicable after receipt by James River, in cash, the
amount by which the proceeds from such policy in respect of such
damage, destruction or loss exceed the sum of (A) any amount
payable to Newco with respect to repair, restoration or
replacement related to such damage, destruction or loss and (B)
any amount paid by any member of the JR Group after the date
hereof in cash for the repair, restoration or replacement of
fixed assets included in the Newco Assets or the Stock Company
Assets; and (ii) James River, at its sole option, (A) shall allow
Newco, at its sole cost and expense, to pursue any claim under
such policy in respect to such damage, destruction or loss or (B)
shall diligently pursue, upon reasonable written request and
direction of Newco and at Newco's sole cost and expense, any such
claim on behalf, and for the benefit, of Newco.
(b) All proceeds of insurance which are applicable to
insured claims of third parties included in the Assumed
Liabilities and are received by any member of the JR Group after
the Spinoff Date shall (i) be used to discharge, in whole or in
part, the applicable Assumed Liabilities, (ii) be retained by
James River if, and to the extent that, such Assumed Liabilities
have been discharged by James River or any of its Subsidiaries
before James River receives such proceeds or (iii) be paid to
Newco if, and to the extent that, such Assumed Liabilities have
been discharged by Newco or any of its Subsidiaries before James
River receives such proceeds.
(c) To the extent not reimbursed before the Spinoff
Date, Newco shall reimburse James River for payments made by any
member of the JR Group at any time (i) as retrospective premium
adjustments resulting from any damage, destruction or loss
relating to any Newco Asset, any Stock Company Asset or the Newco
Business or any action taken pursuant to Section 2.4(a)(ii) by
James River or Newco or (ii) for any other reason under any
insurance policy held by any member of the JR Group with respect
to any Newco Asset, any Stock Company Asset or the Newco
Business. Newco shall reimburse James River in accordance with
this Section 2.4(c) promptly after Newco's receipt of a notice
specifying the amount of, and supporting documentation for, such
reimbursement.
(d) As soon as practicable after James River's receipt
thereof, James River shall pay to Newco such portion of any claim
bonus or refund that James River receives after the Spinoff Date
under its railroad liability policy or pollution liability policy
that may be properly allocated to any Newco Asset, Stock Company
Asset or the Newco Business.
ARTICLE III
CERTAIN EVENTS OCCURRING BEFORE THE SPINOFF RECORD DATE
As a condition to the consummation of the Spinoff, each of
the transactions listed in this Article III (collectively, the
"Article III Transactions") shall be consummated before the
Spinoff Record Date.
3.1 Reorganization. After the Paper Contribution Date, but
before the Timber Transfer Date, James River shall effect the
Reorganization by causing James River Paper to distribute all of
the issued and outstanding shares of capital stock of Newco to
James River as a dividend.
3.2 Senior Bank Debt. After the Reorganization, but before
the Timber Transfer Date, the parties hereto shall cooperate with
each other to obtain, on behalf, and for the benefit, of Newco a
$350,000,000 credit facility (including a $150,000,000 revolving
line of credit) from one or more financial institutions (the
"Senior Bank Debt"); provided, that (i) the terms of the Senior
Bank Debt shall be acceptable to Newco and James River and (ii)
the aggregate principal amount of the Senior Bank Debt shall be
acceptable to James River.
3.3 Registration of the Newco High Yield Debt and
Consummation of the High Yield Debt Offering. Before the
recapitalization of Newco Holdings as described in Section 3.5,
the parties hereto shall take all action necessary (i) to
register the offer and sale of the Newco High Yield Debt under
the Securities Act and applicable state securities laws, and
(ii) to consummate the High Yield Debt Offering. Newco agrees to
offer and issue the maximum aggregate amount of High Yield Debt
that its underwriters advise can be sold at an interest rate and
other terms acceptable to James River.
3.4 Application of Debt Proceeds. After the Senior Bank
Debt has been obtained and the High Yield Debt Offering has been
consummated, Newco shall apply the Debt Proceeds in the following
order of priority:
(a) First, to pay expenses of the transactions
contemplated herein in accordance with Section 8.6;
(b) Second, to repay in full the Intercompany Loans;
(c) Third, (i) the excess of $146,082,000 over the
amount described in subsection (a) above plus (ii) the amount
required to be paid to James River pursuant to Section 8.17 shall
be distributed to James River as a dividend and return of
capital;
(d) Fourth to repay to James River the Reimbursable
Advances; and
(e) Fifth, to JRIH in the amount of the U.K. Cash
Payment, in partial payment for the U.K. Stock.
3.5 Recapitalization of Newco Holdings.
(a) After the consummation of the transactions
contemplated by Sections 3.1, 3.2, 3.3 and 3.4(a), (b), (c) and
(d), but before the Timber Transfer Date, and before the payment
of the U.K. Cash Payment in accordance with Section 3.4(e), James
River shall transfer all of the issued and outstanding shares of
capital stock of Newco to Newco Holdings in exchange for
additional Newco Holdings Common Shares.
(b) As consideration for James River's transfer
pursuant to Section 3.5(a), Newco Holdings shall issue, at the
close of business on the Spinoff Record Date, to James River a
sufficient number of Newco Holdings Common Shares such that the
ratio of the total number of Newco Holdings Common Shares held by
James River as of the Spinoff Record Date to the number of James
River Common Shares that are issued and outstanding as of the
Spinoff Record Date equals the Exchange Ratio; provided, however,
that the number of Newco Holdings Common Shares to be issued
hereunder shall be rounded to the nearest whole share. Newco
Holdings shall rely upon any advice given it by either Stephen
Hare, Clifford Cutchins or Michael Allan as to the number of
James River Common Shares outstanding as of the Spinoff Record
Date in calculating the number of Newco Holdings Common Shares to
be issued pursuant to this Section 3.5(b).
3.6 Registration of the Newco Holdings Common Shares.
Before the Spinoff Date, the parties hereto shall take all action
necessary to ensure the exemption of the issuance of the Newco
Holdings Common Shares from the registration requirements of the
Securities Act or to register the distribution of the Newco
Holdings Common Shares contemplated by Section 4.1 under the
Securities Act, to register such Shares under the Exchange Act,
and to take all necessary or appropriate action under state
securities laws to enable a public trading market in such Shares
to develop through the NASDAQ National Market System as soon as
market conditions permit.
3.7 Declaration by Board of Directors of James River of
Spinoff Record Date. As of or after the date hereof, the Board
of Directors of James River shall declare a dividend on the James
River Common Shares, which declaration shall be revocable until
the Spinoff Record Date, and shall establish the Spinoff Record
Date which shall be after the U.K. Stock Transfer Date. Such
dividend shall be of all of the issued and outstanding Newco
Holdings Common Shares and shall be distributed to the holders of
record, as of the Spinoff Record Date, of James River Common
Shares in the ratio equal to the Exchange Ratio. To the extent
that the application of the Exchange Ratio to any shareholder's
holdings gives rise to fractional Newco Holdings Common Shares,
James River shall arrange for such fractional shares to be
aggregated and sold by the Independent Agent in the open market
on behalf of shareholders who otherwise would have received such
fractional shares, and for each shareholder to receive a cash
payment from the Independent Agent equal to his pro rata portion
of the net proceeds from the sale of all aggregated fractional
shares.
3.8 Election of Officers and Directors of Newco Holdings
and Newco. If not done prior to the execution of this Agreement,
James River, as the sole shareholder, directly or indirectly, of
Newco Holdings and Newco before the Spinoff, shall elect or cause
to be elected, effective promptly after the execution of this
Agreement, the slates of officers and directors designated on
Schedules 3.8(i) and 3.8(ii), respectively, as the officers and
directors, respectively, of Newco Holdings and Newco. After the
Paper Contribution Date, James River shall not take any action as
shareholder to cause removal of any director of Newco Holdings or
Newco or any of their Subsidiaries except for cause.
Notwithstanding the foregoing, James River shall have the right
to remove any such director at any time until the Spinoff Date if
such action, in James River's judgment, is advisable to
accomplish the completion of, or prevent the frustration of, any
of the transactions contemplated hereby or by the provisions
hereby intended to be included in any of the Related Agreements.
Notwithstanding any provision set forth herein to the contrary,
each of James River and James River Paper reserves any rights
available to it under applicable law as the sole shareholder,
from time to time, of Newco (and, with respect to James River,
Newco Holdings) with respect to the direction and control of
Newco (and, with respect to James River, Newco Holdings) for the
purposes of accomplishing, or preventing the frustration of, any
of the transactions contemplated hereby or by the provisions
hereby intended to be included in any of the Related Agreements.
ARTICLE IV
SPINOFF
4.1 Spinoff. (a) After the consummation of the Article
III Transactions and the satisfaction or waiver of all other
conditions to the Spinoff listed in Article XII and Article XIII,
James River shall effect the Spinoff by distributing the dividend
declared pursuant to Section 3.7.
(b) As of the Spinoff Date, James River and James
River Paper shall have no further responsibility for, or any
rights with respect to, the management or operation of Newco
Holdings, Newco or the Newco Business; provided, that the
foregoing shall not affect any rights of any member of the JR
Group established herein or in any Related Agreement.
ARTICLE V
RELATED AGREEMENTS
5.1 Related Agreements. In connection with the
consummation of the transactions contemplated hereby, James River
(or the Subsidiary of James River named therein) and Newco shall
enter into each of the following agreements (collectively, the
"Related Agreements") on or before the Paper Contribution Date:
(a) a Transition Services Agreement in substantially
the form attached hereto as Exhibit A;
(b) an Information Technology Transition Services
Agreement in substantially the form attached hereto as Exhibit B;
(c) an Assignment and Assumption Agreement in
substantially the form attached hereto as Exhibit C;
(d) a Tax Agreement in substantially the form attached
hereto as Exhibit D;
(e) a Cottonwood Pedigreed Plant Material Sharing
Agreement in substantially the form attached hereto as Exhibit E;
(f) a Berlin Product Supply Agreement in substantially
the form attached hereto as Exhibit F;
(g) a St. Francisville Product Supply Agreement
(Consumer Products Business) in substantially the form attached
hereto as Exhibit G;
(h) a St. Francisville Product Supply Agreement
(Packaging Business) in substantially the form attached hereto as
Exhibit H;
(i) an Offices Sharing Agreement in substantially the
form attached hereto as Exhibit I;
(j) a Pulp Technology Services Agreement in
substantially the form attached hereto as Exhibit J;
(k) a Pulp Sales Transition Agreement in substantially
the form attached hereto as Exhibit K;
(l) a Pulp Purchase Agreement in substantially the
form attached hereto as Exhibit L;
(m) an Environmental Services Agreement in
substantially the form attached hereto as Exhibit M;
(n) a Parchment/Kalamazoo Landfill Agreement in
substantially the form attached hereto as Exhibit N;
(o) a Technical Services Agreement in substantially
the form attached hereto as Exhibit O;
(p) an Allocation Agreement (relating to
Parchment/Kalamazoo Superfund) in substantially the form attached
hereto as Exhibit P;
(q) a Packaging Papers Supply Agreement in
substantially the form attached hereto as Exhibit Q;
(r) a Naheola Product Supply Agreement in
substantially the form attached hereto as Exhibit R;
(s) an Equipment Removal Agreement in substantially
the form attached hereto as Exhibit S;
(t) a Confidentiality Agreement in substantially the
form attached hereto as Exhibit T;
(u) a Pension Funding Agreement in substantially the
form attached hereto as Exhibit U;
(v) a St. Francisville Wood Chip Supply Agreement in
substantially the form attached hereto as Exhibit V;
(w) a St. Francisville Roundwood Supply and Cutting
Rights Agreement in substantially the form attached hereto as
Exhibit W;
(x) a Northeast Roundwood Supply Agreement in
substantially the form attached hereto as Exhibit X;
(y) a Guaranty Support Agreement in substantially the
form attached hereto as Exhibit Y;
(z) a Eureka Trademark Agreement in substantially the
form attached hereto as Exhibit Z;
(aa) a KVP Parchment Lease in substantially the form
attached hereto as Exhibit AA; and
(bb) a KVP Parchment Agreement in substantially the
form attached hereto as Exhibit BB.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF JAMES RIVER
James River represents and warrants the following to Newco
as of the date hereof:
6.1 Organization; Qualification. James River is a
corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Virginia and has corporate
power and authority to own all of its properties and assets and
to carry on its business as it is now being conducted. James
River and each member of the JR Group engaged in the Newco
Business as of the date hereof is duly qualified and in good
standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary
except in those jurisdictions where the failure to be duly
qualified and in good standing would not have a material adverse
effect on the Assets and the Newco Business, taken as a whole.
6.2 Organization of JR U.K. Holdings; Ownership and
Validity of Shares.
(a) JR U.K. Holdings is a company duly incorporated
and registered in England and Wales and has corporate authority
to own all of its properties and assets and to carry on its
business as it is now being conducted.
(b) JRIH owns all of the outstanding capital stock of
JR U.K. Holdings free and clear of all liens, charges, pledges,
security interests or other encumbrances and all of such capital
stock is duly authorized, validly issued, fully paid and non-
assessable, and was not issued in violation of any preemptive
rights. JR U.K. Holdings has not made any commitment to issue or
sell any shares of its capital stock or any securities or
obligations convertible or exchangeable therefor, or given any
person any right to acquire from JR U.K. Holdings any shares of
its capital stock and no such securities or obligations of JR
U.K. Holdings are outstanding.
6.3 Organization of JR N.H. Electric; Ownership and
Validity of Shares.
(a) JR N.H. Electric is a corporation duly organized,
validly existing and in good standing under the laws of New
Hampshire and has corporate power and authority to own all of its
properties and assets and to carry on its business as it is now
being conducted.
(b) James River Paper owns all of the outstanding
capital stock of JR N.H. Electric free and clear of all liens,
charges, pledges, security interests or other encumbrances and
all of such capital stock is duly authorized, validly issued,
fully paid and non-assessable, and was not issued in violation of
any preemptive rights. JR N.H. Electric has not made any
commitment to issue or sell any shares of its capital stock or
any securities or obligations convertible or exchangeable
therefor, or given any person any right to acquire from JR N.H.
Electric any shares of its capital stock and no such securities
or obligations of JR N.H. Electric are outstanding.
6.4 Organization of Berlin Mills Railway; Ownership and
Validity of Shares.
(a) Berlin Mills Railway is a corporation duly
organized, validly existing and in good standing under the laws
of New Hampshire and has corporate power and authority to own all
of its properties and assets and to carry on its business as it
is now being conducted.
(b) James River Paper owns all of the outstanding
capital stock of Berlin Mills Railway free and clear of all
liens, charges, pledges, security interests or other encumbrances
and all of such capital stock is duly authorized, validly issued,
fully paid and non-assessable, and was not issued in violation of
any preemptive rights. Berlin Mills Railway has not made any
commitment to issue or sell any shares of its capital stock or
any securities or obligations convertible or exchangeable
therefor, or given any person any right to acquire from Berlin
Mills Railway any shares of its capital stock and no such
securities or obligations of Berlin Mills Railway are
outstanding.
6.5 Ownership of Stock of Subsidiaries by JR U.K. Holdings.
JR U.K. Holdings or one of its Subsidiaries owns all of the
outstanding capital stock of its Subsidiaries that own assets
reflected in the financial statements described in Schedule 6.12
free and clear of all liens, charges, pledges, security interests
or other encumbrances and all of such capital stock is duly
authorized, validly issued, fully paid and non-assessable, and
was not issued in violation of any preemptive rights. None of
such Subsidiaries has made any commitment to issue or sell any
shares of its stock or any securities or obligations convertible
or exchangeable therefor, or given any person any right to
acquire from it any shares of its capital stock and no such
securities or obligations of any such Subsidiary are outstanding.
6.6 Authority Relative to this Agreement and the Related
Agreements. Each of James River and James River Paper has
corporate power and authority to execute and deliver this
Agreement and the Related Agreements to which it is a party and
to consummate the transactions contemplated on its part hereby
and thereby. The execution and delivery by James River and James
River Paper of this Agreement and such Related Agreements and the
consummation by them of the transactions contemplated on their
parts hereby and thereby, have been duly authorized by their
Boards of Directors and no other corporate proceedings on the
part of James River or James River Paper are necessary with
respect thereto. This Agreement constitutes, and the Related
Agreements (when executed and delivered by James River or another
member of the JR Group) will constitute, valid and binding
obligations of James River or such other member of the JR Group,
as the case may be, enforceable in accordance with their terms
except as the same may be limited by (i) any applicable
bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally, or (ii) general principles
of equity, whether considered in a proceeding in equity or at
law.
6.7 Consents and Approvals. Except as set forth in
Schedule 6.7, there is no requirement applicable to James River
or James River Paper to make any filing with, or to obtain any
permit, authorization, consent or approval from, any public body
as a condition to the lawful consummation of the transactions
contemplated by this Agreement, excluding any such requirement
(A) as to which any Newco Employee had, or should have had,
knowledge as of the date hereof or (B) which, if unsatisfied,
would not have a material adverse effect on the Assets and the
Newco Business, taken as a whole.
6.8 Non-Contravention. The execution and delivery by James
River and James River Paper of this Agreement does not, and the
execution and delivery of the Related Agreements by any member of
the Group, and the consummation of the transactions contemplated
hereby and thereby will not, (i) violate or result in a breach of
any provision of the Articles of Incorporation or Bylaws of James
River or James River Paper, (ii) except as set forth in Schedule
6.8, result in a default (or give rise to any right of
termination, cancellation or acceleration) under the terms,
conditions or provisions of any note, bond, mortgage, indenture,
license, agreement, lease or other instrument or obligation to
which James River or James River Paper is a party or by which
James River or James River Paper or any of the Assets may be
bound, except for such defaults (or rights of termination,
cancellation or acceleration) as to which requisite waivers or
consents have been or shall be obtained by James River or James
River Paper before the Spinoff Record Date or the obtaining of
which has been or shall be waived by Newco before the Spinoff
Record Date, or (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to James River or
James River Paper or any of the Assets or the Newco Business
(other than any applicable "bulk sales" laws), excluding from the
foregoing clauses (ii) and (iii) such defaults and violations (A)
as to which Newco Employees had, or should have had, knowledge as
of the date hereof or (B) which would not have a material adverse
effect on the Assets and the Newco Business, taken as a whole.
6.9 Compliance with Laws. Except as set forth in Schedule
6.9 and excluding all matters relating to the representations and
warranties contained in Section 6.10 and Section 6.11, the
members of the JR Group have operated the Newco Business, in all
material respects, in substantial compliance with all laws,
regulations, policies, guidelines, orders, judgments or decrees
of any Authority applicable to, or having jurisdiction over,
James River, the Assets or the Newco Business, the failure to
comply with which could reasonably be expected to affect,
materially and adversely, the Assets and the Newco Business,
taken as a whole.
6.10 Environmental Matters. Except as described on Schedule
6.10, the members of the JR Group have obtained all federal,
state and local permits, licenses and other authorizations which
are required under applicable Environmental Statutes other than
licenses, permits and other authorizations, the failure to obtain
which, individually or in the aggregate, would not have a
material adverse effect on the Assets and the Newco Business,
taken as a whole. Except as described on Schedule 6.10, the
Assets and the Newco Business are in material compliance with all
terms and conditions of such permits, licenses and
authorizations, and are also in material compliance with all
other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables
contained in any Environmental Statute. Except as described in
Schedule 6.10, neither James River nor any other member of the JR
Group has received notice from any Authority of any failure of
the Assets or the Newco Business to comply in any material
respect with any Environmental Statute, except for any such
Statute, the failure to comply with which could not reasonably be
expected to affect, materially and adversely, the Assets and the
Newco Business, taken as a whole.
6.11 Licenses and Permits. Schedule 6.11 contains a
complete and correct list of all material federal, state and
local permits and licenses issued to any member of the Group, the
absence of which would materially and adversely affect the
ability to conduct the Newco Business, taken as a whole, all of
which are in effect as of the date hereof. Except as set forth
in Schedule 6.11, no notice of a violation of any such license or
permit has been received by any member of the JR Group or
recorded or published, and no proceeding is pending or
threatened, to revoke or limit any such license or permit, except
for such violations, revocations or limitations that could not
reasonably be expected to affect, materially and adversely, the
Assets and the Newco Business, taken as a whole. Notwithstanding
the foregoing, all matters relating to the representations and
warranties contained in Section 6.9 and Section 6.10 are excluded
from the representations and warranties contained in this Section
6.11.
6.12 Financial Statements. James River has previously
furnished Newco with the December Financial Statements and the
June Financial Statements, copies of which are set forth in
Schedule 6.12. Such financial statements have been prepared in
conformity with generally accepted accounting principles applied,
except as otherwise set forth in the financial statements, on a
basis consistent with the preparation of the consolidated
financial statements of James River and its consolidated
Subsidiaries (other than the Stock Companies) for the respective
periods relevant thereto. The December Financial Statements and
the June Financial Statements fairly present the financial
positions of the Newco Business as of the relevant dates and for
the periods thereof.
6.13 Litigation. Except as set forth in Schedule 6.13,
there are no actions, suits, claims, investigations or
proceedings (legal, administrative or arbitrative) pending or
threatened against any member of the JR Group, whether at law or
in equity and whether civil or criminal in nature, before any
federal, state, municipal or other court, arbitrator,
governmental department, commission, agency or instrumentality,
nor are there any judgments, decrees or orders of any such court,
arbitrator, governmental department, commission, agency or
instrumentality outstanding against any member of the JR Group
which have, or, if adversely determined, could reasonably be
expected to have, a material adverse effect on the Assets and the
Newco Business, taken as a whole, or which seek specifically to
prevent, restrict or delay the consummation of the transactions
contemplated hereby or the fulfillment of any of the conditions
of this Agreement.
6.14 Title to Properties. (a) Except for Permitted
Exceptions, James River or another member of the JR Group has
title to the Real Property sufficiently free and clear of any
liens, charges, pledges, security interests or other defects or
encumbrances for the use of such Property in the manner the same
has been customarily used in the Newco Business.
(b) James River or another member of the JR Group has
title to all tangible personal property that is included in the
Newco Assets (and leasehold title to the Leased Assets leased by
such member as lessee) sufficiently free and clear of any liens,
charges, pledges, security interests or other defects or
encumbrances for the use of such property in the manner the same
has been customarily used in the Newco Business.
(c) Except for Permitted Exceptions, JR U.K. Holdings
or a Subsidiary of JR U.K. Holdings has title to all real
property (other than the Glory Land, which has been sold) and
tangible personal property reflected as owned by JR U.K. Holdings
and its Subsidiaries in the June Financial Statements
sufficiently free and clear of any liens, charges, pledges,
security interests or other defects or encumbrances for the use
of such property in the manner the same has been customarily used
in the Newco Business.
(d) Except for Permitted Exceptions, JR N.H. Electric
has title to all real property and tangible personal property
reflected as owned by JR N.H. Electric in the June Financial
Statements sufficiently free and clear of any liens, charges,
pledges, security interests or other defects or encumbrances for
the use of such property in the manner the same has been
customarily used in the Newco Business.
(e) Except for Permitted Exceptions, Berlin Mills
Railway has title to all real property and tangible personal
property reflected as owned by Berlin Mills Railway in the June
Financial Statements sufficiently free and clear of any liens,
charges, pledges, security interests or other defects or
encumbrances for the use of such property in the manner the same
has been customarily used in the Newco Business.
6.15 Leases. Schedule 6.15 is a list of those Leases, other
than leases of personal property which may be cancelled without
material penalty upon not more than 60 days notice or which
require the payment of not more than $20,000 per month. Except
as set forth in Schedule 6.15, there is not, with respect to any
of the scheduled Leases, any existing material default or event
of default on the part of any member of the JR Group, excluding
any default or event of default which would not have a material
adverse effect on the Assets and the Newco Business, taken as a
whole.
6.16 Newco Intellectual Property. Schedule 6.16 sets forth
a complete and correct list of the Filed Newco Intellectual
Property that is used exclusively in, or applicable exclusively
to, the Newco Business. Except as set forth in Schedule 6.16,
James River or another member of the JR Group owns the Filed
Newco Intellectual Property and such Filed Newco Intellectual
Property is subsisting on the record of the applicable Authority
on the date hereof. Except as set forth in Schedule 6.16, there
is no claim, suit, action or proceeding pending or threatened
against any member of the JR Group asserting that its use of any
Newco Intellectual Property infringes upon the rights of any
third parties which could reasonably be expected to have a
material adverse effect upon the Assets and the Newco Business,
taken as a whole.
6.17 Material Contracts. Schedule 6.17 sets forth a
complete and correct list of every contract, agreement or
commitment of the members of the JR Group, other than Leases,
(each, a "Material Contract"):
(a) which provides for aggregate future payments by
the Newco Business of more than $500,000, except for purchase
orders or sales orders arising in the ordinary and usual course
of business, in which case such contract, agreement or commitment
is listed only if any party thereto is obligated to make payments
during the term thereof which will exceed $5,000,000 in the
aggregate; or
(b) which provides for the sale, after the date hereof
and other than in the ordinary course of business, of any of the
Assets.
Except as set forth in Schedule 6.17, all of the
Material Contracts are in full force and effect and there has not
occurred, with respect to any Material Contract, any material
default or event of default on the part of any member of the JR
Group or any other party thereto, excluding any default or event
of default which would not have a material adverse effect on the
Assets and the Newco Business, taken as a whole.
6.18 Labor Matters. Schedule 6.18 sets forth a complete and
correct list of every collective bargaining agreement covering
Newco Employees. Except as set forth on Schedule 6.18, there are
no material controversies, disagreements or disputes pending
between James River or any other member of the JR Group and any
of their respective employees which affect, or can reasonably be
expected to affect, materially and adversely, the Assets and the
Newco Business, taken as a whole, or which relate to any specific
effort to prevent, restrict or delay consummation of the
transactions contemplated by this Agreement.
6.19 Employee Benefit Plans. (a) Schedule 6.19 lists all
of the employee benefit plans and programs, including, without
limitation, all retirement, savings and other pension plans, all
health, severance, insurance, disability and other employee
welfare plans and all employment, incentive, vacation and other
similar plans, that are maintained by James River or any of its
Affiliates with respect to Newco Employees or to which James
River or its Affiliates contribute on behalf of the employees of
Newco Business (collectively, the "Employee Plans").
(b) The Employee Plans that are maintained by James
River or an Affiliate are in compliance in all material respects
with applicable laws and regulations, and James River and its
Affiliates have administered the Employee Plans in accordance
with applicable laws and regulations in all material respects.
(c) Each Employee Plan that is maintained by James
River or an Affiliate and that is intended to be qualified under
Section 401(a) of the Internal Revenue Code has been determined
by the Internal Revenue Service to be so qualified, or an
application for a determination letter to that effect has been
submitted to the Internal Revenue Service and not rejected.
James River and its Affiliates have not been notified of, or
incurred, any material liability to the PBGC under Section 4001
et seq. of ERISA with respect to the Employee Plans.
(d) James River has made available to Newco copies of
all Employee Plans and, where applicable, summary plan
descriptions and annual reports filed within the last three years
pursuant to ERISA or the Internal Revenue Code with respect to
the Employee Plans.
(e) Neither James River nor its Affiliates have
engaged in any prohibited transactions, as defined in Section
4975 of the Internal Revenue Code, with respect to any Employee
Plan that is a pension plan as defined in Section 3(2) of ERISA.
None of the Employee Plans that are maintained by James River or
an Affiliate and are subject to Section 412 of the Internal
Revenue Code has incurred any accumulated funding deficiency, as
defined in Section 412 of the Internal Revenue Code, whether or
not waived. There has not been, with regard to any Employee Plan
that is maintained by James River or an Affiliate and is subject
to Section 4043 of ERISA, any reportable event, as defined in
Section 4043 of ERISA, that is required to be reported to the
PBGC by law or regulation and that has not been so reported
(other than a reportable event arising as a result of the
transactions contemplated by this Agreement, which will be timely
reported if required).
6.20 Conduct of Business and Management of Assets since Date
of June Financial Statements. (a) Between the date of the June
Financial Statements and the date hereof, the members of the
Group (i) have conducted the Newco Business and have managed the
Newco Assets only in the usual, regular and ordinary manner
consistent with past practice; and (ii) have used reasonable
efforts to preserve intact the present business organization and
operations of the Newco Business, keep available the services of
its employees and preserve their respective relationships with
the Newco Business.
(b) James River has not, between the date of the June
Financial Statements and the date hereof, caused or allowed Newco
Holdings, Newco or any of the Stock Companies to:
(i) make any payment (except payments for goods
and services delivered or supplied in the ordinary course of
business) to any member of the JR Group, except for (A) payments
of principal and interest on Intercompany Loans, (B) payments
made in respect of expenses incurred in connection with the
transactions contemplated by this Agreement, (C) payments applied
to the discharge of Assumed Liabilities or payments in
reimbursements of payments applied to the discharge of Assumed
Liabilities and (D) distributions or payments by JR U.K. Holdings
of the net proceeds derived from the sale of the Glory Land.
(ii) make, or cause to be made, (A) any
distribution from Newco Holdings to any member of the Group or
(B) any distribution from Newco to any member of the Group (other
than Newco Holdings);
(iii) make any individual commitment for
capital expenditure related to the Newco Business in excess of
$2,000,000, except pursuant to the Timber Transfer Agreement and
the U.K. Stock Transfer Agreement;
(iv) enter into any contract in respect of the
Newco Business which shall require an expenditure of more than
$2,000,000, except for orders for raw materials placed in the
ordinary course of business; or
(v) become indebted for borrowed money except
with respect to Intercompany Loans and Reimbursable Advances.
(vi) sell, dispose of, transfer or encumber, other
than in the ordinary course of business, any of the Assets
material to the Newco Business;
(vii) amend, modify or cancel any Material
Contract or Lease except in accordance with its terms; or
(viii) enter into any binding agreement with
respect to any of the foregoing, other than the Timber Transfer
Agreement and the U.K. Stock Transfer Agreement.
(c) Neither James River nor any member of the JR Group
has, between the date of the June Financial Statements and the
date hereof:
(i) except for the sales of timber lands of
approximately 1500 acres and two lots of approximately one-half
acre in the aggregate, and the disposition of other timberlands
pursuant to arrangements under which timber cutting rights or
similar rights have been retained for use in the Newco Business,
sold, disposed of, transferred or encumbered, other than in the
ordinary course of business, any of the Assets material to the
Newco Business; or
(ii) amended, modified or cancelled any Material
Contract or Lease except in accordance with its terms.
6.21 Finders. Except for Merrill Lynch, Pierce, Fenner &
Smith Incorporated, whose fees shall be paid by Newco pursuant to
a separate agreement, no broker, finder or investment banker is
entitled to any fee or commission for services rendered to, on
behalf of, James River or any other member of the JR Group in
connection with the transactions contemplated by this Agreement.
6.22 Sufficiency of Assets. The Assets, the rights granted
to Newco under Article XI and rights under certain Related
Agreements include all of the assets necessary to conduct the
Newco Business in substantially the same manner as it is
presently being conducted.
6.23 Undisclosed Liabilities. Except as disclosed on the
schedules hereto or elsewhere herein, or as known by any Person
listed on Schedule 6.23, there exist no liabilities that are
required to be assumed by Newco hereunder that would be reflected
on a balance sheet (or in footnotes thereto) for the Newco
Business prepared as of the date hereof in accordance with the
principles and methods applied in the June Financial Statements,
other than (i) liabilities reflected in the June Financial
Statements, (ii) liabilities incurred in the ordinary course of
business, and (iii) liabilities that do not materially adversely
affect the Assets and the Newco Business, taken as a whole.
6.24 Insurance. The Newco Business has been insured through
the Paper Contribution Date in a manner and amount that is
customary in the industry for businesses similar to the Newco
Business.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF NEWCO HOLDINGS AND NEWCO
Each of Newco Holdings and Newco represents and warrants the
following to James River as of the date hereof:
7.1 Organization; Qualification. It is a corporation duly
organized, validly existing and in good standing under the laws
of the Commonwealth of Virginia and has corporate power and
authority to own all of its properties and assets and to carry on
its business as it is contemplated to be carried on hereunder.
It is duly qualified and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by
it or the nature of the Newco Business makes such qualification
necessary except in those jurisdictions where the failure to be
duly qualified and in good standing would not have a material
adverse effect on the Assets and the Newco Business, taken as a
whole.
7.2 Authority Relative to this Agreement and the Related
Agreements. It has corporate power and authority to execute and
deliver this Agreement and the Related Agreements to which it is
contemplated to be a party and to consummate the transactions
contemplated on its part hereby and thereby. The execution and
delivery by it of this Agreement and the Related Agreements to
which it is a party and the consummation by it of the
transactions contemplated on its part hereby and thereby, have
been duly authorized by its Board of Directors and no other
corporate proceedings on its part are necessary with respect
thereto. This Agreement constitutes, and any Related Agreement
to which it is a party when executed and delivered by it will
constitute, its valid and binding obligations, enforceable in
accordance with their terms except as the same may be limited by
(i) any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors' rights generally
or (ii) general principles of equity, whether considered in a
proceeding in equity or at law.
7.3 Non-Contravention. The execution and delivery by it of
this Agreement does not, and its execution and delivery of any
Related Agreements to which it is a party and the consummation of
the transactions contemplated hereby and thereby will not violate
or result in a breach of any provision of its Articles of
Incorporation or Bylaws.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 Conduct of Business and Management of Assets. (a)
After the date hereof and until the Spinoff Record Date, the
members of the Group (i) shall conduct the Newco Business only in
the usual, regular and ordinary manner consistent with past
practice; and (ii) shall use reasonable efforts to preserve
intact the present business organization and operations of the
Newco Business, keep available the services of its employees and
preserve its relationships with licensors, suppliers, dealers,
customers and others having business relationships with the Newco
Business. In this regard, to the extent necessary to fund
working capital levels consistent with past practice, James River
shall advance to Newco, from time to time until the date on which
Newco receives the Debt Proceeds, Reimbursable Advances which
shall bear interest at a rate equal to the Average Cost of Funds.
(b) (i) After the date hereof and until the Timber
Transfer Date, James River shall cause JRTC to manage the Timber
Assets in a manner consistent with past practice; provided, that,
after the Paper Contribution Date, James River shall cause JRTC
to manage and operate the Timber Assets on behalf, and for the
account, of Newco Holdings or the First Designee or the Second
Designee.
(ii) In accordance with the proviso included in
clause (i) above, Newco Holdings or the First Designee or the
Second Designee shall assume all loss, profit and risk of loss
with respect to the Timber Assets as of the Paper Contribution
Date. Any cumulative loss with respect to the Timber Assets
funded by James River or JRTC between the Paper Contribution Date
and the Timber Transfer Date shall constitute a Reimbursable
Advance and any profits after tax earned with respect to the
Timber Assets during such period shall constitute "Post-
Contribution Timber Profits" for purposes of Section 2.1(b)(i)(C)
and Section 2.2(a) .
8.2 Forbearances by James River, Newco Holdings, Newco and
the JR U.K. Group. Except as specifically contemplated by this
Agreement:
(a) James River shall not, after the date hereof,
cause or allow Newco Holdings, Newco or any of the Stock
Companies to:
(i) make any payment (except payments for goods
and services delivered or supplied in the ordinary course of
business) to any member of the JR Group, except for (A) payments
of principal and interest on Intercompany Loans, (B) payments
made in respect of expenses incurred in connection with the
transactions contemplated by this Agreement, (C) payments applied
to the discharge of Assumed Liabilities or payments in
reimbursement of payments applied to the discharge of Assumed
Liabilities;
(ii) make, or cause to be made, (A) any
distribution from Newco Holdings to any member of the Group or
(B) any distribution from Newco to any member of the Group (other
than Newco Holdings);
(iii) make any commitment for capital
expenditures in respect of any individual project related to the
Newco Business in excess of $2,000,000;
(iv) enter into any contract in respect of the
Newco Business which shall require an expenditure of more than
$2,000,000, except for orders for raw materials placed in the
ordinary course of business;
(v) become indebted for borrowed money except as
contemplated by the Timber Transfer Agreement, the U.K. Stock
Transfer Agreement, Section 3.2 or Section 3.3 hereof or with
respect to Intercompany Loans and Reimbursable Advances; or
(vi) enter into any binding agreement with respect
to any of the foregoing.
(b) Neither James River nor any other member of the JR
Group shall, after the date hereof:
(i) sell, dispose of, transfer or encumber,
other than in the ordinary course of business, any of the Assets
material to the Newco Business;
(ii) amend, modify or cancel any Material Contract
or Lease except in accordance with its terms;
(iii) enter into any binding agreement with
respect to any of the foregoing.
(c) From the date hereof until January 1, 1996,
neither Newco Holdings, Newco nor any member of the JR U.K. Group
shall make or cause to be made any distribution from any member
of the JR U.K. Group to Newco Holdings, Newco, any member of the
JR U.K. Group or any Subsidiary or Affiliate of any of the
foregoing.
8.3 Taxes and Recording Fees. (a) All property taxes and
special assessments payable or refunds receivable in respect of
any of the Real Property shall be governed by the Tax Agreement.
(b) All sales and transfer taxes and fees (including
filing fees, if any) incurred in connection with this Agreement
and the transactions contemplated hereby and all required tax
returns and other documents relating to such taxes and fees shall
be paid in accordance with the Tax Agreement.
8.4 Mail Received After Spinoff. (a) Following the
Spinoff, Newco may receive and open all mail addressed to any
member of the JR Group and may deal with the contents thereof in
its discretion to the extent that such mail and the contents
thereof relate to the Newco Business. Newco shall deliver or
cause to be delivered to James River, promptly after receipt by
Newco, all mail, including, without limitation, payments of
accounts or claims receivable, addressed to any member of the JR
Group which does not relate to the Newco Business.
(b) Following the Spinoff, James River may receive and
open all mail addressed to any member of the Spin Group and may
deal with the contents thereof in its discretion to the extent
that such mail and the contents thereof do not relate to the
Newco Business. James River shall deliver or cause to be
delivered to Newco, promptly after receipt by James River or any
of its Subsidiaries, all mail, including, without limitation,
payments of accounts or claims receivable, addressed to any
member of the Spin Group which relates to the Newco Business.
8.5 Retention of Books and Records. For a period of seven
years after the Spinoff Date, the parties shall retain all books
or records relating to the Assets or the Newco Business. After
such seven-year period, any party shall provide not less than 45
nor more than 90 days prior written notice to the other party of
any proposed destruction or disposition of any such books and
records. If the recipient of such notice desires to obtain any
such documents, it may do so by notifying the other party in
writing at any time before the scheduled date for such
destruction or disposal. Such notice must specify the documents
which the requesting party wishes to obtain. The parties shall
then promptly arrange for the delivery of such documents. The
requesting party shall pay all out-of-pocket costs associated
with the locating, photocopying (if necessary) and delivery of
the requested documents. To the extent that any Related
Agreement requires treatment or retention of any books, records
or documents in a fashion other than as set forth in this Section
8.5, the provisions of such Related Agreement shall control.
8.6 Expenses. Except as otherwise provided herein, all
costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid out of the
Debt Proceeds by Newco.
8.7 Confidentiality. (a) Newco and Newco Holdings
shall each hold, and shall cause its respective Representatives
and the Representatives of all members of the Spin Group to hold,
and James River and James River Paper shall each hold, and shall
cause its respective Representatives and the Representatives of
all members of the JR Group to hold, in strict confidence, unless
compelled to disclose by judicial or administrative process or by
other requirements of law, all documents and information obtained
by such parties in connection with the transactions contemplated
hereby or otherwise obtained hereunder ("Confidential
Information") except to the extent that such Information can be
shown to have been or to have become (i) generally available to
the public other than as a result of disclosure by any
Representative of a party other than the parties entitled to the
protection offered hereby, (ii) made available to the public on a
nonconfidential basis from a source other than a Representative
of a party entitled to the protection offered hereby, or (iii)
known to the party receiving such Information before the date of
disclosure of such Information to such party. However, nothing
contained in this Section 8.7 shall preclude the disclosure of
Confidential Information, on the condition that it remain
confidential, to auditors, attorneys, lenders, financial advisors
and other consultants and advisors in connection with the
performance of their duties in preparation for the consummation
of the transactions contemplated hereby.
(b) The provisions of Section 8.7(a) notwithstanding,
Newco acknowledges that, as of the Paper Contribution Date, as
specified in Article X, it shall employ certain former employees
of James River, or its Affiliates, who before such date had
access, or were exposed, to Excluded Technology. Newco agrees
that it shall not utilize the services of any such person in
connection with research relating to, or the development or
improvement of, technology which is similar in purpose and method
to Excluded Technology to which such person had access or was
exposed in the course of his employment with any member of the JR
Group.
8.8 Public Announcements. The parties shall consult with
each other before issuing any press releases or otherwise making
any public statements with respect to this Agreement and the
transactions contemplated hereby and shall not issue any such
press release or make any such public statement without providing
reasonable notice to the other parties hereto of the intent to do
so and obtaining the consent of the other parties hereto, unless
such action is required by law.
8.9 Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each of the parties hereto shall
use its reasonable best efforts to take, or to cause to be taken,
all action and to do, or to cause to be done, all things
necessary, proper or advisable to consummate, as promptly as
practicable, the transactions contemplated hereby, including, but
not limited to, the satisfaction of the conditions listed in
Articles III, XII or XIII that are within the control of such
party and the obtaining of all consents, waivers, authorizations,
orders and approvals of third parties, whether private or
governmental, required of it by this Agreement. Each party shall
cooperate fully with the other parties hereto in assisting such
parties to comply with this Section 8.9. However, no party shall
be required to initiate any litigation, make any payment or incur
any economic burden in connection with the obtaining of any
consent, waiver, authorization, order or approval, and if,
despite such efforts, any party is unable to obtain any consent,
waiver, authorization, order or approval, the other party or
parties may terminate this Agreement and shall have no liability
therefor.
8.10 Further Assurances. (a) Subject to the provisions of
Section 8.12 and Section 8.13, each of James River and James
River Paper shall, at the request of Newco Holdings or Newco, at
or after the Spinoff Date, without further consideration, do,
execute, acknowledge or deliver, or shall cause to be done,
executed, acknowledged or delivered, all such further acts,
deeds, transfers, conveyances, assignments or assurances as may
be reasonably required for the better transferring, conveying,
assigning and assuring to Newco Holdings or Newco, or for aiding
and assisting in the collection of or reducing to possession by
Newco Holdings or Newco, any of the Newco Assets; provided,
however, that the obligation of James River and James River Paper
under this Section 8.10 shall not require either such party to
expend any funds or incur any economic burden in connection with
obtaining any consents from third parties, whether governmental
or private, or to pay any transfer, filing or recordation taxes
or fees, except as otherwise provided in this Agreement.
(b) Subject to the provisions of Section 8.12 and
Section 8.13, each of Newco and Newco Holdings shall, at the
request of James River, at or after the Spinoff Date, without
further consideration, do, execute, acknowledge or deliver, or
shall cause to be done, executed, acknowledged or delivered, all
such further acts, deeds, assumptions or assurances as may be
reasonably required for the better effecting or evidencing the
assumption of the Assumed Liabilities, or for reconveying, or
evidencing James River Paper's or JRTC's rights in and to, any
Excluded Asset; provided, however, that the obligation of Newco
and Newco Holdings under this Section 8.10 shall not require
either such party to expend any funds or incur any economic
burden in connection with obtaining any consents from third
parties, whether governmental or private, or to pay any transfer,
filing or recordation taxes or fees, except as otherwise provided
in this Agreement.
8.11 Use of James River Name. Within 12 months after the
Spinoff Date, each of Newco Holdings and Newco (i) shall remove
all names, logos or marks which include the words "James River"
or the letters "JR" ("James River Corporate Designations") from,
or render the same illegible on, all Newco Assets and all assets
held directly or indirectly by any Stock Company on which such
Designations are imprinted or legible or (ii) shall discontinue
use of any asset described in clause (i) bearing James River
Corporate Designations. Notwithstanding the foregoing, each of
Newco Holdings and Newco shall be permitted to use the James
River Corporate Designations with respect to Inventory
constituting work-in-process or finished goods on which a James
River Corporate Designation is imprinted or affixed at the
Spinoff Date until such Inventory is sold. Each of Newco
Holdings and Newco undertakes to use reasonable best efforts to
sell such Inventory within twelve months after the Spinoff Date.
At the end of the twelve-month period referred to in the
preceding sentence (or upon completion of the removal, rendering
illegible or discontinuance of the James River Corporate
Designations and variations thereof described above, whichever
occurs sooner), an executive officer of Newco shall notify James
River that such removal, rendering illegible or discontinuance
has been completed. Except as expressly permitted by this
Section 8.11, neither Newco Holdings, Newco nor any of their
respective Affiliates (other than members of the JR Group) shall
use the James River Corporate Designations or any similar mark or
name.
8.12 Instruments of Conveyance and Transfer, etc. On the
date each Newco Asset is contributed or transferred hereunder,
James River shall deliver to Newco such deeds, bills of sale,
endorsements, assignments and other instruments of transfer,
conveyance and assignment as shall be reasonably necessary to
transfer each Newco Asset to Newco; provided, however, that all
such instruments shall be without recourse and without
representation or warranty (all such representations and
warranties being made exclusively in this Agreement). To the
extent not completed by the Paper Contribution Date, as promptly
as possible and no later than the Spinoff Date, James River shall
take all such steps as may be reasonably required to put Newco in
possession and operating control of the Newco Assets. Except as
otherwise contemplated by Section 2.2, if any member of the JR
Group shall hold title to any asset that would be included in the
Newco Assets were such asset owned by James River Paper, James
River Paper and James River shall take whatever steps are
necessary to transfer such asset to Newco and such asset shall
for all purposes of this Agreement be deemed part of the Newco
Assets; provided, however, that in the case of a Subsidiary which
is not wholly-owned by James River Paper, directly or indirectly,
and in the case of any Affiliate which is not a Subsidiary, James
River Paper need only use its reasonable best efforts to effect
such transfer.
8.13 Assignment of Contracts, Rights, etc. (a)
Notwithstanding anything contained in this Agreement to the
contrary, this Agreement shall not constitute an agreement to
assign the right, title or interest of any member of the JR Group
in, to or under any contract, license, lease, commitment, sales
order, purchase order or other agreement or any claim or right of
any benefit arising thereunder or resulting therefrom if any
attempted assignment thereof, without the consent of a third
party thereto, would constitute a breach thereof or in any way
adversely affect the rights of any member of the JR Group
thereunder. James River shall use its reasonable best efforts to
obtain, and Newco agrees to cooperate with James River in its
efforts to obtain, any required third party consent to the
assignment or transfer thereof to Newco. If such consent is not
obtained, James River and Newco shall cooperate in any reasonable
arrangements designed to provide Newco with the benefits
thereunder, including enforcement for the benefit of Newco of any
and all rights of members of the JR Group against such third
party arising out of the cancellation by such third party or
otherwise.
(b) Notwithstanding the foregoing provisions of this
Section 8.13, the obligations of the members of the JR Group
under this Section 8.13 shall not include any obligation to make
any payment or to incur any economic burden.
8.14 ESOP Sale. As soon as practicable after the Spinoff,
(i) Newco Holdings shall effect the ESOP Sale by selling to Newco
Holdings' ESOP, and Newco Holdings' ESOP shall purchase from
Newco Holdings, for $10,000,000 cash, Newco Holdings Common
Shares and (ii) Newco Holdings shall use the proceeds of the ESOP
Sale to make a contribution to the capital of Newco.
8.15 Insurance for Newco Assets and Newco Business after
Paper Contribution Date. On the Paper Contribution Date (or,
with respect to title insurance for real property other than the
Paper Real Property, on the date on which such property is
transferred to, or acquired by, Newco), Newco shall purchase
casualty, liability and title insurance in respect of the Newco
Assets, the Stock Company Assets and the Newco Business in
accordance with James River's past practice, and in such amounts
as are customarily purchased with respect to assets and
businesses similar to the Newco Assets, the Stock Company Assets
and the Newco Business.
8.16 No Solicitation of Employees. (a) For a period of one
year after the Spinoff Date, neither James River, any other
member of the JR Group nor any Representative of any of the
foregoing shall, in any manner, directly or indirectly, (i)
solicit any Newco Employee or any employee of Newco Holdings
(each, a "Holdings Employee") to terminate his or her employment
with either Newco or Newco Holdings or (ii) otherwise recruit or
encourage any Newco Employee or Holdings Employee to become an
employee of, or a consultant to, any member of the JR Group.
(b) For a period of one year after the Spinoff Date,
neither Newco, Newco Holdings, any other member of the Spin Group
nor any Representative of any of the foregoing shall, in any
manner, directly or indirectly, (i) solicit any employee of a
member of the JR Group (each, a "James River Employee") to
terminate his or her employment with such member of the JR Group
or (ii) otherwise recruit or encourage any James River Employee
to become an employee of, or a consultant to, Newco, Newco
Holdings or any other member of the Spin Group.
(c) As promptly as practicable after the Spinoff Date,
each party hereto shall use its best efforts to advise the
appropriate Subsidiaries and Representatives of such party
(including the department heads and human resources personnel)
of their respective obligations set forth in this Section 8.16.
(d) Notwithstanding clauses (a) through (c) of this
Section 8.16, no party hereto shall be restricted from soliciting
for employment any employee of any other party hereto who has
left the employment of such other party other than as a result of
the breach of this Section 8.16 by any party hereto.
8.17 Distribution to James River of Cash in JR U.K. Holdings
and its Subsidiaries. On the date on which Newco obtains the
Debt Proceeds, Newco shall pay to James River an amount equal to
the aggregate amount of cash and cash equivalents (including,
without limitation, cash on hand and in bank accounts,
certificates of deposit, commercial paper and securities) that
would be reflected as owned by JR U.K. Holdings and its
Subsidiaries in a balance sheet prepared as of the U.K. Stock
Transfer Date in accordance with the principles and methods
applied in the June Financial Statements. Such amount shall be
translated into U.S. Dollars by applying an exchange rate equal
to the average over the five business days next preceding the
U.K. Stock Transfer Date of the closing quotations of the
exchange rate for British Pounds into U.S. Dollars listed in the
table entitled "Currency Trading - Exchange Rate" in the Wall
Street Journal.
8.18 Local Bank Accounts. As of the Paper Contribution
Date, James River shall, at its election, either (a) remove the
names of all Newco Employees as signatories on any bank accounts
customarily used in connection with the Newco Business and
subsequently deal with such accounts as it deems appropriate, or
(b) transfer such accounts to Newco after transferring any funds
remaining in such accounts to other bank accounts designated by
James River. If James River elects to proceed in accordance with
(b) above, James River and Newco shall cooperate to require the
removal of the name of any member of the JR Group from the names
of such accounts and to remove the names of any employees of the
JR Group as signatories on such accounts.
8.19 Parchmentizing Business. Newco and Newco Holdings
recognize that James River Paper is currently negotiating for the
sale of the parchmentizing business it now carries on at property
located adjacent to the Parchment, Michigan, Plant Site. In
accordance with the foregoing:
(a) Newco agrees that upon the request of James River
or James River Paper, Newco will either, at James River Paper's
election (i) enter into a Patapar Trademark License Agreement and
a Curtis Fine Papers Division Sales and Warehousing Agreement, in
substantially the forms attached hereto as Exhibit CC and Exhibit
DD, respectively (together, the "Parchmentizing Agreements") in
lieu of James River Paper's entering into the same, or (b) if
James River Paper has entered into the Parchmentizing Agreements,
upon James River Paper's assignment thereof to Newco, assume the
obligations of James River Paper under the Parchmentizing
Agreements.
(b) Newco recognizes that James River Paper may be required
to guarantee the monetary obligations arising from the
Parchmentizing Agreements, including any monetary damages
resulting from any breach of Newco's performance under the
Parchmentizing Agreements. Upon Newco's entering into, or
assuming the obligations of James River Paper under, the
Parchmentizing Agreements, Newco shall execute an agreement in
form reasonably satisfactory to James River Paper pursuant to
which Newco shall indemnify and hold harmless James River Paper
for any loss, damage, costs, expenses (including reasonable
attorneys' fees) or claims arising out of or in any way connected
with any default by Newco in the performance of its obligations
undertaken or assumed under either of the Parchmentizing
Agreements.
(c) In addition, Newco recognizes that James River Paper
may be asked to restrict its production of silicone grease proof
paper for pan liner application (hereinafter the "Pan Liner
Paper"), and Newco agrees that upon the request of James River
Paper or James River, Newco will enter into an agreement, or an
assignment of an agreement, which would, at James River Paper's
election, either (i) restrict the production levels at the Reigel
Mill in Milford, New Jersey (the "Reigel Mill") to the production
levels at such mill in fiscal year 1994 and/or (ii) limit sales
to either the existing customer base at the Reigel Mill during
fiscal year ended 1994 or the customer base at such mill as of a
more recent date. Either of the foregoing restrictions would
apply in the event that Newco relocates the production of its Pan
Liner Paper to a site other than the Reigel Mill or determines to
start-up the production of the Pan Liner Paper at any additional
location. This agreement will be binding on Newco and its
successors and assigns from the closing date of James River
Paper's sale of its parchmentizing business until December 31,
1998.
ARTICLE IX
ENVIRONMENTAL MATTERS
9.1 ISRA Obligations and Liabilities. (a) James River has
applied to NJDEP for a LNA or other instrument to limit the
applicability or the effect of ISRA with respect to this
Agreement and the transfer of the Milford Mill to Newco.
(b) If NJDEP does not issue a LNA prior to the Paper
Contribution Date, James River and Newco shall work together to
negotiate with NJDEP for the issuance of an ISRA Remediation
Agreement in which Newco shall be the responsible party.
(c) Subject to subsection (e) of this Section 9.1,
Newco shall take or shall cause to be taken all actions necessary
to comply with ISRA and to obtain a "No Further Action" letter
from NJDEP with respect to the Milford Mill. James River agrees
to cooperate with Newco in the ISRA process to the extent
reasonable and necessary.
(d) Except as provided for in this Section 9.1, Newco
shall bear all costs relating to ISRA compliance. Newco shall
bear all investigation cost incurred in connection with ISRA
compliance (including without limitation the costs of report
preparation) without any reimbursement from James River.
(e) Newco shall apply for and make best efforts to
obtain a deferral of the preparation, approval or implementation
of a remedial action work plan pursuant to NJ Stat. sect. 13:1K-11.
If, pursuant to ISRA, NJDEP shall require the implementation of
remedial action under ISRA in respect of the Remediation
Agreement entered into in connection with the transfer of the
Milford, New Jersey Plant Site, and any remedial action commences
within six (6) years of the date of this Agreement, James River
shall be obligated to pay fifty (50%) percent of the costs of
such ISRA-required remediation unless such requirement arises in
connection with a transfer of the Milford New Jersey Plant Site,
or any portion thereof, after the Paper Contribution Date (either
directly or indirectly, such as by virtue of a transfer of
ownership of the entity holding title to the Milford, New Jersey,
Plant Site). Notwithstanding these provisions, James River shall
bear no liability for costs associated with those properties
historically known as the "Old Abandoned Landfill", the "Pastore
Landfill", the "Warren Glen Landfill" or the "#3 Sludge Lagoon."
(f) James River's obligations under this Section 9.1
are further conditioned as follows:
(i) Newco shall provide James River drafts of all
submissions under ISRA for review and comment, and further agrees
that, where practicable, it will consider all reasonable comments
for incorporation into the final submissions. Newco also shall
provide, on a timely basis, copies of all communications between
Newco and NJDEP relating to ISRA, and shall otherwise keep James
River fully informed of its progress in achieving compliance with
ISRA.
(ii) Regardless of whether ISRA is triggered in
the future by Newco, James River shall not be liable or
responsible for the analysis and the remediation and any and all
other responsibilities relating to any conditions created or
occurring after the Spinoff Record Date to the extent caused by
the actions after the Spinoff Record Date of any Persons (other
than James River, its Affiliates, employees, consultants,
representatives or agents or persons acting on behalf or at the
direction of any such Person) all of which shall be the
responsibility of Newco.
(iii) After the Spinoff Record Date, Newco
will not instigate, arrange, conduct or otherwise facilitate
intrusive investigation (e.g., digging up underground tanks or
performing site borings) other than (v) as required by NJDEP
under ISRA, (w) in the normal course of business in the good
faith exercise of business judgment (exercised without regard to
the terms of this Agreement), which judgment shall be made by the
senior management of Newco, (x) as required by applicable law or
agreement entered into with lenders in connection with the
financing of the transactions contemplated by this Agreement or
any refinancing or refunding or replacement thereof, (y) in
connection with the defense or investigation of a third party or
governmental claim, or (z) to identify the cause or basis for any
potential problem which is apparent from evidence other than the
proposed intrusive investigation, provided such action is
reasonable under the circumstances.
(iv) After the Spinoff Record Date, Newco will not
instigate, arrange, conduct or otherwise facilitate remediation
other than (x) as required by NJDEP under ISRA or (y) upon a
determination by the senior management of Newco in the good faith
exercise of business judgment (exercised without regard to the
terms of this Agreement) that such action shall be taken;
provided that if James River, as promptly as practicable but in
any event within 30 days of receiving written notice of the
proposed action and the reasons therefor (with reasonable
supporting detail), notifies Newco in writing that it disagrees
with the judgment made by the senior management of Newco, which
James River notice shall specify the reasons therefor (with
reasonable supporting detail), Newco and James River will each in
good faith attempt to resolve the disagreement on a reasonable
basis with the assistance of their respective environmental
consultants and any remaining disagreements shall promptly be
referred to an independent consultant having expertise in the
matter at issue, mutually acceptable to the parties (or if the
parties cannot agree on the selection of such consultant and
their respective environmental consultants cannot so agree, the
American Arbitration Society shall select, or designate a
recognized mediation authority to select, such a consultant who
shall be independent from each of the parties and whose fees and
expenses shall be paid equally by the parties, who shall evaluate
the facts and circumstances at issue, taking into consideration
both environmental concerns and the economic consequences to the
affected business operations, and shall recommend a course of
action which the independent consultant believes in his good
faith judgment (exercised without regard to the availability of
James River funding under this Agreement) should be taken. Such
recommendation shall be final and binding upon the parties. The
parties agree to act as promptly as practicable in implementing
the procedures set forth in clause (y). The parties further
agree, in the event of exigent circumstances that require
remediation by Newco before the procedures in clause (y) can be
implemented, that Newco may undertake such remediation at its own
expense and shall be entitled to indemnification to the extent
that its actions are subsequently ratified by the procedures set
forth in clause (y). Notwithstanding this subsection (iv) of
Section 9.1(f), Newco may elect to undertake voluntary
remediation at its own expense and without reimbursement from
James River.
(v) Newco, in consultation with James River,
shall have the right to plan, implement and control actions taken
to remediate conditions or to contest a proposed ISRA
remediation; James River and Newco shall cooperate fully and in
good faith with each other in respect of such Remedial Actions;
Newco will act in good faith in planning, implementing and
controlling any Remedial Actions, and in the case of any
disagreement between Newco and James River over the need for or
timing or any Remedial Action, Newco and James River will each in
good faith attempt to resolve the disagreement on a reasonable
basis with the assistance of their respective environmental
consultants, with any remaining disagreements to be resolved in
the good faith business judgment of the board of directors of
Newco (exercised without regard to the terms of this Agreement);
provided that if James River, as promptly as practicable but in
any event within 30 days of receiving written notice of the
proposed action and the reasons therefor (with reasonable
supporting detail), notifies Newco in writing that it disagrees
with the judgment made by the board of directors of Newco, which
James River notice shall specify the reasons therefor (with
reasonable supporting detail), the matter shall promptly be
referred to an independent consultant having expertise in the
matter at issue, mutually acceptable to the parties (or if the
parties cannot agree on the selection of such consultant and
their respective environmental consultants cannot so agree, the
American Arbitration Society shall select, or designate a
recognized mediation authority to select, such a consultant who
shall be independent from each of the parties and whose fees and
expenses shall be paid equally by the parties, who shall evaluate
the facts and circumstances at issue, taking into consideration
both environmental concerns and the economic consequences to the
affected business operations, and shall recommend a course of
action which the independent consultant believes in his good
faith judgment (exercised without regard to the availability of
indemnification under this Agreement) should be taken. Such
recommendation shall be final and binding upon the parties. The
parties agree to act as promptly as practicable in implementing
the foregoing procedures.
(vi) James River shall be obligated to contribute
funds for a Remedial Action only to the extent such Remedial
Action is necessary to achieve a reasonable standard of
compliance (e.g., non-residential cleanup standards) with
Environmental Statutes in effect as of the date of the
Remediation Agreement in order to fulfill its obligations under
this Section 9.1 and in no event shall James River have any
liability hereunder arising for any increase in remediation costs
resulting from any change in Environmental Laws after the Spinoff
Record Date; and
(vii) James River's obligations under this
Section 9.1 shall be reduced to the extent that the acts or
omissions to act or gross negligence by Newco or its Affiliates,
successors or assigns (with respect to matters actually known to
such Person, including the actual knowledge of its directors)
after the Spinoff Record Date substantially and adversely affect
such obligations.
(g) The provisions of this Section 9.1 deal only with
compliance with ISRA and shall not in any manner affect Newco's
assumption of liabilities as provided in Section 2.3(a).
9.2 Expenditures for Environmental Investigation and
Compliance. Except as set forth in Section 9.1 above, Newco
shall be responsible for making any capital or other expenditures
which may be required for it to comply with any Environmental
Law, including, without limitation, environmental regulations
under development as of the Paper Contribution Date (including,
without limitation, the Proposed Cluster Rules).
ARTICLE X
EMPLOYEE AND EMPLOYEE BENEFIT MATTERS
10.1 Newco Employees. (a) As of the Paper Contribution
Date, except as specifically provided otherwise in this Article
X, Newco shall be responsible for wages, salaries and other
employee benefits for the following persons (collectively, the
"Newco Employees"), who shall be included on the list
contemplated in this Section 10.1:
(i) all persons employed by James River or any of
its Affiliates in the Newco Business immediately before the Paper
Contribution Date;
(ii) all employees of James River or any of its
Affiliates who are absent from work on account of disability,
layoff, leave of absence or for any other reason on the Paper
Contribution Date, whether or not they return to active
employment with Newco after the Paper Contribution Date, whose
last day of active employment was in the Newco Business;
(iii) all employees of James River or any of
its Affiliates who are not employed in the Newco Business
immediately before the Paper Contribution Date but who, in the
ordinary course of business, or if not in the ordinary course of
business, with the consent of Newco and subject to any
restrictions on solicitation of employees specified herein or in
the Related Agreements, become employees of Newco on or before
the Spinoff Date or who become employees of Newco within 60 days
after the Spinoff Date;
(iv) all persons who retired or whose employment
with James River or an Affiliate otherwise terminated before the
Paper Contribution Date and who can be identified as having been
employed by or primarily in connection with the Newco Business on
their last day of active employment (other than former employees
who retired or terminated employment before the Paper
Contribution Date and whose last day of active employment was at
the Oakland headquarters, and who are not otherwise employees of
the Newco Business under this Section 10.1); and
(v) all persons with retirement benefits accrued
or payable under (x) the Retirement Plan for Bargaining Unit
Hourly Paid Employees of James River Paper Co., Inc. - Milford,
(y) the Retirement Plan for Bargaining Unit Hourly Paid Employees
of James River Paper Company, or (z) James River Plan No. 10.
(b) For purposes of this Article X, all persons
described in subsection (a) who have been or will be compensated
on an hourly basis or who have been or are subject to a
collective bargaining agreement shall be referred to as "Hourly
Newco Employees," and all persons described in subsection (a) who
have been or will be compensated on a salaried basis (or
otherwise are classified by James River as salaried employees)
shall be referred to as "Salaried Newco Employees." In this
Article X, references to "Newco" shall be deemed to include Newco
Holdings, and references to "Newco Holdings" shall be deemed to
include Newco. For purposes of this Article X only, the Newco
Business includes the parchmentizing equipment at James River's
Parchment mill ("Parchmentizing"), so that employees and former
employees of Parchmentizing are considered Newco Employees. As
clarification, a former employee whose last day worked was in
James River's Epic mill is not a Newco Employee.
(c) James River will provide Newco with a preliminary
list of Newco Employees, and James River and Newco will agree on
a list of Newco Employees before the Paper Contribution Date.
Employees described in subsection (a)(iii) above shall be added
to the list within 90 days after the Spinoff Date. If, after the
Spinoff Date, James River or Newco identifies additional Newco
Employees who should be added to the list based on the criteria
described in subsections (a)(i) through (v) above, such employees
shall be added to the list of Newco Employees. If a Newco
Employee is identified and added to the list after plan assets
have been transferred pursuant to Sections 10.6, 10.7 and 10.8,
James River and Newco shall make appropriate arrangements, based
on the terms set forth in Sections 10.6, 10.7 and 10.8, as
applicable, for the transfer of the Newco Employee's accrued
benefits to Newco's applicable plans. James River and Newco will
each appoint a representative to review the preliminary list of
Newco Employees and agree on any appropriate changes and to
review and agree on any subsequent additions to the list. If the
representatives cannot agree, Ernest S. Leopold and Stephen E.
Hare will together make the final determination as to who should
be included on the list of Newco Employees.
10.2 Salaried Employee Employment and Employee Benefits.
(a) Newco shall offer employment, effective as of the Paper
Contribution Date (or, in the case of any Newco Employee
specified in Section 10.1(a)(iii), effective as of the date of
hiring), to each of the Salaried Newco Employees described in
Sections 10.1(a)(i), 10.1(a)(ii) and 10.1(a)(iii) on terms and
conditions that are initially equivalent to those provided by
James River immediately before the Paper Contribution Date. For
purposes of this Agreement, equivalent terms and conditions of
employment means employment with Newco at the same or greater
salaries as those provided by James River and its Affiliates
immediately before the Paper Contribution Date and at salary
grades substantially similar to those provided by James River and
its Affiliates immediately before the Paper Contribution Date,
without requiring relocation of the employees. Newco shall enter
into an employment agreement with Ernest S. Leopold in
substantially the form attached hereto as Exhibit EE. Absent a
specific written agreement to the contrary, Newco's offer of
employment to each Salaried Newco Employee shall not be deemed a
contract of employment.
(b) Newco shall offer Salaried Newco Employees
benefits that in the aggregate are initially not less favorable
than the benefits currently in effect with James River and its
Affiliates. For purposes of this Section 10.2(b), benefits
include any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, leave of absence, layoff, vacation,
cafeteria, life, health, accident, disability, severance,
separation or other employee benefit plan, practice, policy or
arrangement of any kind (including, but not limited to, any
"employee benefit plan" within the meaning of Section 3(3) of
ERISA).
(c) Newco shall treat service of each Salaried Newco
Employee with James River, its Affiliates and its predecessor
companies before the Paper Contribution Date as if such service
had been with Newco for purposes of determining eligibility to
participate, eligibility for benefits, benefit calculations,
benefit forms and vesting under plans maintained by Newco.
10.3 Hourly Employee Employment and Employee Benefits. (a)
Newco shall offer employment, effective as of the Paper
Contribution Date (or, in the case of any Newco Employee
specified in Section 10.1(a)(iii), effective as of the date of
hiring), to each of the Hourly Newco Employees described in
Sections 10.1(a)(i), 10.1(a)(ii) and 10.1(a)(iii) on terms and
conditions that initially are equivalent to those provided by
James River immediately before the Paper Contribution Date.
Absent a specific written agreement to the contrary, Newco's
offer of employment to each Hourly Newco Employee shall not be
deemed a contract of employment.
(b) Newco shall provide such compensation and benefits
as are from time to time required by the applicable collective
bargaining agreements for Hourly Newco Employees covered by such
agreements.
(c) Newco shall treat service of each Hourly Newco
Employee with James River, its Affiliates and its predecessor
companies before the Paper Contribution Date as if such service
had been with Newco for purposes of (i) seniority rights and
benefits (to the extent related to service) under collective
bargaining agreements covering Hourly Newco Employees and (ii)
determining eligibility to participate, eligibility for benefits,
benefit calculations, benefit forms and vesting under plans
maintained by Newco.
10.4 Assumption of Liabilities. Except as specifically
provided otherwise in this Article X, as of the Paper
Contribution Date, Newco shall assume all employee-related
liabilities and obligations that are payable on or after the
Paper Contribution Date with respect to Newco Employees and their
beneficiaries and dependents, without regard to when such
liabilities and obligations arose. Without limiting the
foregoing, Newco shall specifically assume any severance or
separation liabilities, including costs and expenses related
thereto, arising out of the transactions contemplated by this
Agreement with respect to Newco Employees; provided, however,
that James River shall remain liable for (and shall reimburse
Newco for) severance pay obligations at the benefit levels in
effect as of the Paper Contribution Date (including employer FICA
and FUTA taxes, but not pension or other obligations) that are
payable to Newco Employees as a direct result of James River's
shutdown in June, 1995 of the No. 10 paper machine included in
the Berlin Equipment and the tissue converting operation at
Berlin. James River shall be liable for employee liabilities
with respect to Newco Employees in Parchmentizing (as described
in Section 10.1(b)) to the extent provided in the KVP Parchment
Agreement attached as Exhibit BB.
10.5 Collective Bargaining Agreements. On the Paper
Contribution Date, Newco shall adopt and assume the collective
bargaining agreements covering Hourly Newco Employees as a
successor employer to James River or an Affiliate. Newco shall
assume, as a successor employer, the obligations of James River
and its Affiliates to contribute to multiemployer plans (as
defined in Section 3(37) of ERISA) that cover Hourly Newco
Employees who are covered by multiemployer plans. On and after
the Paper Contribution Date, any withdrawal liability obligations
that may be payable to a multiemployer plan with respect to
Hourly Newco Employees, regardless of whether such obligations
relate to services performed before or after the Paper
Contribution Date, shall be the sole responsibility of Newco.
10.6 Pension Plans for Hourly Newco Employees. (a) As of
the Paper Contribution Date, all benefits under the pension plans
listed on Schedule 10.6(a) shall be frozen, and participants
shall not accrue additional benefits under such plans after the
Paper Contribution Date. Each pension plan listed on Schedule
10.6(a) is referred to as a "Frozen Transferred Hourly Plan".
Newco shall assume all of James River's rights and obligations
with respect to the Frozen Transferred Hourly Plans as of the
Paper Contribution Date. Newco shall maintain each Frozen
Transferred Hourly Plan on and after the Paper Contribution Date,
and Newco Holdings shall take all actions necessary to be
substituted for James River with respect to each Frozen
Transferred Hourly Plan. James River and its Affiliates shall
have no liability for a Frozen Transferred Hourly Plan on or
after the Paper Contribution Date, except as provided in
subsection (n) below.
(b) As of the Paper Contribution Date, Newco shall
establish a defined benefit pension plan and trust, which shall
be initially comparable to the James River II Retirement Plan
(Schedules 48 and 106) (the "James River II Plan") as it relates
to the Hourly Newco Employees covered by the James River II Plan,
which shall provide that benefits are frozen as of the Paper
Contribution Date, and which shall be qualified under Sections
401 and 501 of the Internal Revenue Code (the "Frozen JRII
Plan"). The Frozen JRII Plan shall provide that each Hourly
Newco Employee covered by the Frozen JRII Plan shall be given
credit under the Frozen JRII Plan, for purposes of determining
eligibility to participate, eligibility for benefits, benefit
calculations, benefit forms and vesting, for the Hourly Newco
Employee's service before the Paper Contribution Date with James
River, its Affiliates and its predecessor companies, to the same
extent that the James River II Plan gave credit for such service
to the Hourly Newco Employee. Hourly Newco Employees shall not
accrue benefits after the Paper Contribution Date under the
Frozen JRII Plan or under any defined benefit plans maintained by
James River or its Affiliates (other than Newco). James River
and its Affiliates shall have no liability for the Frozen JRII
Plan, except as provided in subsection (n) below. The Frozen
JRII Plan and the Frozen Transferred Hourly Plans are each
referred to as a "Frozen Hourly Plan". Participants in the
Frozen Hourly Plans shall receive credit for their service with
Newco and its Affiliates on and after the Paper Contribution Date
for purposes of vesting and eligibility for benefits (but not
benefit accrual) under the Frozen Hourly Plans.
(c) As of the Paper Contribution Date, Newco shall
establish one or more defined benefit pension plans and trusts,
which shall be initially comparable to (i) the pension plans
listed on Schedule 10.6(a), as they relate to the Hourly Newco
Employees covered by the applicable plans, and (ii) the James
River II Plan as it relates to the Hourly Newco Employees covered
by the James River II Plan (each such plan is referred to as a
"Newco Hourly Retirement Plan"). Each Newco Hourly Retirement
Plan shall provide for the accrual of benefits after the Paper
Contribution Date and shall be qualified under Sections 401 and
501 of the Internal Revenue Code. Each Newco Hourly Retirement
Plan shall provide that each Hourly Newco Employee covered by the
Plan shall be given credit under the Newco Hourly Retirement
Plan, for purposes of determining eligibility to participate,
eligibility for benefits, benefit calculations, benefit forms and
vesting, for the Hourly Newco Employee's service before the Paper
Contribution Date with James River, its Affiliates and its
predecessor companies, to the same extent that the corresponding
James River plan gave credit for such service to the Hourly Newco
Employee. Each Newco Hourly Retirement Plan shall provide that a
Hourly Newco Employee's benefits under the Plan will be computed
by offsetting against such benefits the amount of his vested
accrued benefit (if any) under the Frozen Hourly Plan. If
benefits are increased after the Paper Contribution Date with
respect to an Hourly Newco Employee's service with James River or
an Affiliate or predecessor company, the increased benefits and
credit for past service shall be provided through the applicable
Newco Hourly Retirement Plan and not through a Frozen Hourly
Plan. All benefits accrued after the Paper Contribution Date
shall be accrued under the Newco Hourly Retirement Plans and not
under the Frozen Hourly Plans, and any changes to the benefit
formulas or otherwise shall be made to the Newco Hourly
Retirement Plans and not to the Frozen Hourly Plans.
(d) James River shall direct the trustee of the James
River II Plan to transfer assets equal to the accrued benefit
values (as described below) of the Hourly Newco Employees covered
by the James River II Plan to the Frozen JRII Plan as soon as is
practicable after the Spinoff Date. The term "accrued benefit
values" means the present value of the accrued benefits
(regardless of vesting status) of Hourly Newco Employees as of
the Paper Contribution Date under the James River II Plan, based
on benefits accrued as of the Paper Contribution Date. Accrued
benefit values for the James River II Plan shall be calculated on
the basis of an interest rate equal to the average interest rate
in effect for United States 30-year Treasury bonds for the three
calendar month period ending on or immediately before the Spinoff
Date, plus 50 basis points, the 1983 Group Annuity Mortality
Table with margins and otherwise in accordance with the actuarial
assumptions and calculation procedures used in the January 1,
1995 actuarial valuation of the James River II Plan, including,
without limitation, the retirement scale, retirement age,
turnover and other assumptions used therein, but in any event
excluding assumptions not relevant to an accrued benefit
calculation (such as, without limitation, salary increases).
(e) (i) As of the Paper Contribution Date, the assets
of each of James River Plan No. 1, Supplement 1 ("Plan 1") and
James River Plan No. 4 ("Plan 4") (which are Frozen Hourly Plans)
shall be allocated among the participants of each Plan, based on
the participants' accrued benefits as of the Paper Contribution
Date, in accordance with Section 414(l) of the Internal Revenue
Code and Section 4044 of ERISA. The interest rate, actuarial
assumptions and calculation procedures described in the last
sentence of subsection (d) above (but substituting Plan 1 or Plan
4, as applicable, for the James River II Plan) shall be used to
make the allocation. The fair market value of the assets of Plan
1 and Plan 4 shall be determined based on the actual market
values of the assets as of the Paper Contribution Date in
accordance with reports generated by the trustee of the Plan.
After the Plan assets have been allocated as described above, the
portion of the Plan assets allocated to Newco Employees shall
remain in Plan 1 and Plan 4, as applicable. As soon as
practicable after the Plan assets have been allocated, James
River shall direct the Plan trustee to transfer the portion of
the Plan assets allocated to employees and former employees other
than Newco Employees to the trustee of one or more pension plans
to be retained by James River.
(ii) Subject to the following provisions of this
subsection and after the allocations described in subsection (i)
have been made, James River shall direct the trustee of James
River Plan No. 1, Supplement 2 ("Plan 2") to transfer assets
equal to the Plan 2 accrued benefit values of Newco Employees to
Plan 1 or, if applicable for the particular Newco Employee, Plan
4. The term "accrued benefit values" shall have the meaning set
forth in subsection (d) above (but substituting Plan 2 for the
James River II Plan). The transfer shall be made as a de minimis
spinoff under section 414(l) of the Internal Revenue Code. If
James River is not able to make the transfer under this
subsection (ii) as a de minimis spinoff, the transfer will not be
made. If the failure to make the transfer described in this
subsection (ii) results in Plan 2 retaining a liability for a
Newco Employee, Newco shall pay to James River and James River
shall contribute to Plan 2 an amount equal to Plan 2's
underfunding attributable to such Newco Employee. James River
shall determine the amount of any such payment using the interest
rate and assumptions set forth in subsection (d) (but
substituting Plan 2 for the James River II Plan). The
underfunding under this subsection (ii) shall be determined by
allocating the assets of Plan 2 pro rata, based on the proportion
that each participant's accrued benefit as of the Paper
Contribution Date bears to the total accrued benefits under the
Plan as of the Paper Contribution Date.
(iii) Newco shall assume all of James River's
rights and obligations with respect to Plan 1 and Plan 4 as of
the Paper Contribution Date, subject to the transfers described
above, and James River shall retain all rights and obligations
with respect to Plan 2 and the Retirement Plan for Bargaining
Unit Hourly Paid Employees of James River Paper Company, Inc.
Epic Plant. After such assumption, Newco shall maintain Plan 1
and Plan 4 as Frozen Transferred Hourly Plans, and Newco shall
take all actions necessary to be substituted for James River with
respect to those Plans. Plan 1 and Plan 4 shall be considered
Frozen Transferred Hourly Plans for purposes of this Agreement.
(f) James River shall adjust the amount to be
transferred from the James River II Plan and the plans described
in subsection (e) (each, a "James River Plan"), as calculated
pursuant to subsection (d) or (e), by a pro rata share of the
applicable James River Plan earnings, gains and losses,
appreciation and depreciation for the period between the Spinoff
Date and the date on which the assets are actually transferred.
Before the Paper Contribution Date, James River will contribute
to each Frozen Transferred Hourly Plan in cash an amount equal to
James River's "usual contribution" to the Frozen Transferred
Hourly Plan for the 1994 plan year. James River will contribute
to each Frozen Transferred Hourly Plan a pro rata portion of
James River's "usual contribution" to the Frozen Transferred
Hourly Plan for the portion of the 1995 plan year up to and
including the day prior to the Paper Contribution Date (computed
without regard to the transfers contemplated by this Agreement).
(g) The calculations referred to in subsections (d)
and (e) shall be made by James River's actuaries, subject to
review by Newco's actuary. The assets of the James River Plans
and the Frozen Transferred Hourly Plans shall be transferred in
kind or in cash, or a combination thereof, as determined by James
River. In determining what types of assets shall be transferred,
James River shall apportion the assets of the trust fund for its
pension plans in a fair and equitable manner between the plans
remaining with James River and the plans or assets being
transferred to plans for Newco.
(h) Any benefits that are payable from the James River
Plans after the Spinoff Date and before Plan assets are
transferred shall be paid from the James River Plans in the
ordinary course. The amount to be transferred under subsection
(d) or (e) shall be reduced by such benefits paid to participants
whose benefits are being transferred, and the applicable Plan
earnings shall be adjusted appropriately.
(i) The accrued benefits to be credited under the
Frozen Hourly Plans with respect to Hourly Newco Employees shall
not be less than the accrued benefits of the Hourly Newco
Employees under the James River Plans as of the Paper
Contribution Date. Effective on the date of any transfer of
assets of each of the James River Plans, (i) Newco and the Frozen
Hourly Plans shall assume all liabilities in connection with the
transferred assets, and (ii) James River, its Affiliates (other
than Newco) and the James River Plans shall have no further
liability with respect to the assets and liabilities that are
transferred, including, without limitation, obligations with
respect to the accrued benefits of Hourly Newco Employees. James
River and its Affiliates shall have no liability whatsoever with
respect to the Newco Hourly Retirement Plans or (except as
provided in subsection (n)) the Frozen Hourly Plans. Newco shall
have no liability whatsoever with respect to hourly pension plans
retained by James River.
(j) Newco and James River shall make the appropriate
filings required under the Internal Revenue Code or ERISA, in
connection with the transfers described in this Section 10.6 as
soon as practicable after the Spinoff Date. The parties agree
that the transfers described in this Section 10.6 shall be made
in accordance with Section 414(l) of the Internal Revenue Code.
Newco and James River shall make the appropriate filings required
under any applicable laws.
(k) Newco shall request that the Internal Revenue
Service issue favorable determination letters with respect to the
qualification under Sections 401 and 501 of the Internal Revenue
Code of the pension plans to be maintained by Newco pursuant to
this Section 10.6 and Section 10.7 below and the related trusts.
Newco shall make such changes to its plans as may be required by
the Internal Revenue Service in order for the Internal Revenue
Service to issue favorable determination letters. Newco shall
provide James River with a copy of the determination letters
received from the Internal Revenue Service with respect to its
pension plans as soon as the determination letters are received.
(l) As soon as practicable after the calculations are
completed, James River shall contribute to James River Plan No.
10 ("Plan 10") (which is a Frozen Hourly Plan) an amount equal to
any underfunding in Plan 10 as of the Paper Contribution Date
that is attributable to any participants in Plan 10 who would not
be considered Newco Employees under Section 10.1 but for Section
10.1(a)(v) and any retiree medical liability assumed by Newco
with respect to such participants. However, if the contribution
exceeds the maximum deductible contribution allowed under the
Internal Revenue Code, James River shall pay the excess amount to
Newco and Newco shall contribute such amount to Plan 10 (the
Frozen Hourly Plan) as soon as possible consistent with the
Internal Revenue Service deduction rules. James River shall
determine the amount of the payment in a reasonable manner. For
purposes of calculating the amount to be paid with respect to the
pension underfunding, James River shall use the interest rate and
assumptions set forth in subsection (d) above (but substituting
Plan 10 for the James River II Plan). The underfunding under
this subsection (l) shall be determined by allocating the assets
of Plan 10 pro rata, based on the proportion that each
participant's accrued benefit as of the Paper Contribution Date
bears to the total accrued benefits under the Plan as of the
Paper Contribution Date. The participants in Plan 10 (the Berlin
mill) who would not be considered Newco Employees but for Section
10.1(a)(v) are those former employees as of the Paper
Contribution Date whose last day worked was either at the Berlin
No. 10 machine or in a tissue converting operation that has been
discontinued by James River.
(m) As soon as practicable after the calculations are
completed, James River shall contribute to Plan 1 (which is a
Frozen Hourly Plan) an amount equal to any underfunding in Plan 1
as of the Paper Contribution Date that is attributable to any
participants in Plan 1 who retired or terminated employment
before the Paper Contribution Date and whose last day worked was
for Parchmentizing, and any retiree medical liability assumed by
Newco with respect to such participants. After Parchmentizing is
sold or closed, as described in the KVP Parchment Agreement
attached as Exhibit BB, James River shall contribute to Plan 1
(the Frozen Hourly Plan) an amount equal to any underfunding in
Plan 1 as of the date of the sale or closure that is attributable
to any participants in Plan 1 whose employment terminates during
the period beginning on the Paper Contribution Date and ending on
the date on which Parchmentizing is sold or closed and whose last
day of work was for Parchmentizing, and any retiree medical
liability assumed by Newco with respect to such participants.
However, if the contributions described above exceed the maximum
deductible contribution allowed under the Internal Revenue Code,
James River shall pay the excess amount to Newco and Newco shall
contribute such amount to Plan 1 (the Frozen Hourly Plan) as soon
as possible consistent with the Internal Revenue Service
deduction rules. James River shall determine the amount of the
payment in a reasonable manner. For purposes of calculating the
amount to be paid with respect to the pension underfunding, James
River shall use the interest rate and assumptions set forth in
subsection (d) above (but substituting Plan 1 for the James River
II Plan). The underfunding under this subsection (m) shall be
determined by allocating the assets of Plan 1 pro rata based on
the proportion that each participant's accrued benefit as of the
Paper Contribution Date bears to the total accrued benefits under
the Plan as of the Paper Contribution Date.
(n) James River has entered into an agreement with the
PBGC under which James River will assume sponsorship of a Frozen
Hourly Plan or the Frozen Salaried Plan described in Section 10.7
below if the PBGC institutes proceedings to terminate a Frozen
Hourly Plan or the Frozen Salaried Plan in an involuntary or
distress termination during the time period specified in the
agreement. In connection with that agreement, James River and
Newco agree to enter into a Pension Funding Agreement in the form
set forth in Exhibit U, under which Newco shall agree to maintain
the Frozen Hourly Plans and the Frozen Salaried Plan as frozen
plans and shall agree to take other actions set forth in the
Pension Funding Agreement.
10.7 Pension Plan for Salaried Newco Employees. (a) As of
the Paper Contribution Date, Newco shall establish a defined
benefit pension plan and trust covering Salaried Newco Employees,
which shall be initially comparable to the James River
Corporation of Virginia Retirement Plan for Salaried and Other
Non-Bargaining Unit Employees (the "James River Salaried
Retirement Plan"), which shall provide that benefits are frozen
as of the Paper Contribution Date, and which shall be qualified
under Sections 401 and 501 of the Internal Revenue Code (the
"Frozen Salaried Plan"). The Frozen Salaried Plan shall provide
that each such Salaried Newco Employee shall be given credit
under the Frozen Salaried Plan, for purposes of determining
eligibility to participate, eligibility for benefits, benefit
calculations, benefit forms and vesting, for the Salaried Newco
Employee's service before the Paper Contribution Date with James
River, its Affiliates and its predecessor companies, to the same
extent that James River's defined benefit plan that covered the
Salaried Newco Employee as of the Paper Contribution Date gave
credit for such service. Salaried Newco Employees shall not
accrue benefits after the Paper Contribution Date under the
Frozen Salaried Plan or under any defined benefit plans
maintained by James River or its Affiliates (other than Newco).
Participants in the Frozen Salaried Plan shall receive credit for
their service with Newco and its Affiliates on and after the
Paper Contribution Date for purposes of vesting and eligibility
for benefits (but not benefit accrual) under the Frozen Salaried
Plan. James River and its Affiliates shall have no liability for
the Frozen Salaried Plan, except as provided in Section 10.6(n).
(b) As of the Paper Contribution Date, Newco shall
establish a defined benefit pension plan and trust covering
Salaried Newco Employees, which shall be initially comparable to
the James River Salaried Retirement Plan, which shall provide for
the accrual of benefits after the Paper Contribution Date, and
which shall be qualified under Sections 401 and 501 of the
Internal Revenue Code (such plan is referred to as "Newco's
Salaried Retirement Plan"). Newco's Salaried Retirement Plan
shall provide that each such Salaried Newco Employee shall be
given credit under Newco's Salaried Retirement Plan, for purposes
of determining eligibility to participate, eligibility for
benefits, benefit calculations, benefit forms and vesting, for
the Salaried Newco Employee's service before the Paper
Contribution Date with James River, its Affiliates and its
predecessor companies, to the same extent that James River's
defined benefit plan that covered the Salaried Newco Employee as
of the Paper Contribution Date gave credit for such service. If
benefits are increased after the Paper Contribution Date with
respect to a Salaried Newco Employee's service with James River
or an Affiliate or predecessor company, the increased benefits
and credit for past service shall be provided through the Newco
Salaried Retirement Plan and not through the Frozen Salaried
Plan. All benefits accrued after the Paper Contribution Date
shall be accrued under the Newco Salaried Retirement Plan and not
under the Frozen Salaried Plan, and any changes to the benefit
formulas or otherwise shall be made to the Newco Salaried
Retirement Plan and not to the Frozen Salaried Plan. The Newco
Salaried Retirement Plan shall provide that a Salaried Newco
Employee's benefits will be computed by offsetting against such
benefits the amount of his vested accrued benefit (if any) under
the Frozen Salaried Plan.
(c) James River shall direct the trustee of the James
River Salaried Retirement Plan to transfer assets equal to the
accrued benefit values (as described below) of the Salaried Newco
Employees covered by the James River Salaried Retirement Plan to
the Frozen Salaried Plan as soon as is practicable after the
Spinoff Date. The term "accrued benefit values" means the
present value of the accrued benefits (regardless of vesting
status) of Salaried Newco Employees as of the Paper Contribution
Date under the James River Salaried Retirement Plan, based on
benefits accrued as of the Paper Contribution Date. Accrued
benefit values for the James River Salaried Retirement Plan shall
be calculated on the basis of an interest rate equal to the
average interest rate in effect for United States 30-year
Treasury bonds for three calendar month period ending on or
immediately before the Spinoff Date, plus 50 basis points, the
1983 Group Annuity Mortality Table with margins and otherwise in
accordance with the actuarial assumptions and calculation
procedures used in the January 1, 1995 actuarial valuation of the
James River Salaried Retirement Plan, including, without
limitation, retirement scale, retirement age, turnover and other
assumptions used therein, but in any event excluding assumptions
not relevant to an accrued benefit calculation (such as, without
limitation, salary increases).
(d) James River shall adjust the amount to be
transferred from the James River Salaried Retirement Plan to the
Frozen Salaried Plan, as calculated pursuant to subsection (c),
by a pro rata share of the James River Salaried Retirement Plan
earnings, gains and losses, appreciation and depreciation for the
period between the Spinoff Date and the date on which the assets
are actually transferred.
(e) The calculations referred to in subsection (c)
shall be made by James River's actuaries, subject to review by
Newco's actuary. The assets shall be transferred in kind or in
cash, or a combination thereof, as determined by James River.
James River shall apportion the trust assets as described in the
last sentence of Section 10.6(g).
(f) Any benefits that are payable to Salaried Newco
Employees from the James River Salaried Retirement Plan after the
Spinoff Date, and before Plan assets are transferred, shall be
paid from the James River Salaried Retirement Plan in the
ordinary course. The amount to be transferred under subsection
(c) shall be reduced by the payments so made, and the Plan
earnings shall be adjusted appropriately.
(g) The accrued benefits to be credited under the
Frozen Salaried Plan with respect to Salaried Newco Employees
shall not be less than the accrued benefits of the Salaried Newco
Employees under the James River Salaried Retirement Plan as of
the Paper Contribution Date. Effective on the date of any
transfer of assets of the James River Salaried Retirement Plan,
(i) Newco and the Frozen Salaried Plan shall assume all
liabilities in connection with the transferred assets, and (ii)
James River, its Affiliates (other than Newco) and the James
River Salaried Retirement Plan shall have no further liability
with respect to the assets and liabilities that are transferred,
including, without limitation, obligations with respect to the
accrued benefits of Salaried Newco Employees. James River and
its Affiliates shall have no liability whatsoever with respect to
Newco's Salaried Retirement Plan or (except as provided in
Section 10.6(n)) the Frozen Salaried Plan. Newco shall have no
liability whatsoever with respect to the James River Salaried
Retirement Plan.
(h) Newco and James River shall make the appropriate
filings required under the Internal Revenue Code or ERISA, in
connection with the transfer described in this Section 10.7 as
soon as practicable after the Spinoff Date. The parties agree
that the transfer described in this Section 10.7 shall be made in
accordance with Section 414(l) of the Internal Revenue Code.
Newco and James River shall make the appropriate filings required
under any applicable laws.
10.8 ESOP. (a) As of the Paper Contribution Date, Newco
Holdings shall establish a defined contribution plan and trust
for Newco Employees, which shall be generally comparable to James
River's StockPlus Plan (as defined below) and shall be qualified
under Sections 401 and 501 of the Internal Revenue Code and which
shall be an employee stock ownership plan that provides for
salary reduction contributions pursuant to Section 401(k) of the
Internal Revenue Code ("Newco Holdings' ESOP"). Newco Holdings'
ESOP shall provide that each Newco Employee shall be given credit
under Newco Holdings' ESOP, for purposes of determining
eligibility to participate, eligibility for benefits, benefit
calculations, benefit forms and vesting, for the Newco Employee's
service with James River, its Affiliates and its predecessor
companies, to the extent that James River's StockPlus Plan (as
defined below) gave credit for such service. Newco Employees
shall not continue to participate in defined contribution plans
maintained by James River or its Affiliates (other than Newco
Holdings) after the Paper Contribution Date.
(b) Assets of the James River Corporation of Virginia
StockPlus Investment Plan (the "StockPlus Plan") equal to the
account balances of the Newco Employees under the StockPlus Plan
shall be transferred to Newco Holdings' ESOP as soon as
practicable after the Paper Contribution Date. If practicable,
the transfer shall be made as of the last business day of the
first full calendar quarter ending after the Paper Contribution
Date. The transfer shall be made in cash, interests in mutual
funds, James River Common Shares, Newco Holdings Common Shares
and an interest in an Executive Life Insurance Company contract,
according to the investment of the accounts for the particular
Newco Employee as of the date on which the transfer is made. Any
outstanding balances of plan loans to Newco Employees shall be
transferred with the underlying accounts. The account balances
of the Newco Employees shall be valued as of the date on which
the transfer is made. The account balances of Newco Employees in
the StockPlus Plan shall share in the earnings, gains and losses,
appreciation and depreciation of the investment funds in which
the accounts are invested for the period between the Paper
Contribution Date and the date on which the transfer is made.
(c) Any benefits that are payable to Newco Employees
from the StockPlus Plan after the Paper Contribution Date and
before assets are transferred shall be paid from the StockPlus
Plan in the ordinary course. The amount to be transferred to
Newco Holdings' ESOP shall be the then balance in the accounts of
such Newco Employees as reduced by the amount of such payments.
(d) The account balances to be credited under Newco
Holdings' ESOP for Newco Employees as of the transfer date shall
not be less than the account balances of the Newco Employees
under the StockPlus Plan as of the date on which the transfer is
made. Effective on the date of the transfer of StockPlus Plan
assets, (i) Newco Holdings and Newco Holdings' ESOP shall assume
all liabilities in connection with the account balances of Newco
Employees under the StockPlus Plan, and (ii) James River, its
Affiliates (other than Newco) and the StockPlus Plan shall have
no further liability with respect to the account balances of
Newco Employees. James River and its Affiliates (other than
Newco) shall have no liability with respect to Newco Holdings'
ESOP. Newco Holdings shall have no liability whatsoever with
respect to the James River StockPlus Plan.
(e) Newco Holdings shall request that the Internal
Revenue Service issue a favorable determination letter with
respect to the qualification under Sections 401 and 501 of the
Internal Revenue Code of Newco Holdings' ESOP and the related
trust. Newco Holdings shall make such changes to Newco Holdings'
ESOP as may be required by the Internal Revenue Service in order
for the Internal Revenue Service to issue a favorable
determination letter. Newco Holdings shall provide James River
with a copy of the determination letter received from the
Internal Revenue Service with respect to Newco Holdings' ESOP as
soon as the determination letter is received.
10.9 Stock Option and Deferred Stock Plans. (a) As of the
Spinoff Date, Newco Holdings shall establish one or more stock
option plans for Salaried Newco Employees (each, a "Newco Option
Plan") which initially shall be at least comparable in total to
the James River stock option plans listed on Schedule 10.9 (each,
a "James River Option Plan").
(b) Grants outstanding as of the Spinoff Date under
the James River Option Plan ("James River Options") and not
exercised pursuant to the James River Option Plan will be
adjusted after the Spinoff Date to preserve the economic benefit
of the James River Options for the James River Employees and the
Newco Employees. If the Fair Market Value of a James River
Common Share after the Spinoff Record Date is less than the Fair
Market Value before the Spinoff Record Date, each James River
Employee and Newco Employee will receive an adjustment to the
number of James River Common Shares which may be purchased upon
exercise of an James River Option currently held equal to the
product of (i) the number of shares currently subject to such
option multiplied by (ii) a fraction, the numerator of which is
the Fair Market Value of a James River Common Share before the
Spinoff Record Date and the denominator of which is the Fair
Market Value of a James River Common Share after the Spinoff
Record Date. Such option will be exercisable at an adjusted
exercise price equal to the product of (a) the old option
exercise price multiplied by (b) a fraction, the numerator of
which is the Fair Market Value of a James River Common Share
after the Spinoff Record Date and the denominator of which is the
Fair Market Value of a James River Common Share before the
Spinoff Record Date. All stock appreciation rights ("SAR"s)
outstanding as of the Spinoff Date under James River's Stock
Appreciation Rights Plan will be adjusted after the Spinoff Date
in a similar manner to preserve the economic value of the SARs
for the James River Employees and Newco Employees. The Fair
Market Value of James River Common Shares before and after the
Spinoff Record Date will be determined by the Compensation
Committee of James River's Board of Directors based on the value
of such stock before and after the Spinoff Record Date (or such
other date as the Compensation Committee deems appropriate).
(c) James River shall cause all outstanding James
River Options held on the Spinoff Date by active Newco Employees
(including Newco Employees who would be considered active
employees except that they are absent from work on account of
sickness or leave of absence) to become fully vested and
exercisable as of the Spinoff Date. James River shall give such
active Newco Employees a period of three months after the Spinoff
Date to exercise their outstanding James River Options and SARs,
provided that (i) the exercise period of an Option or SAR may not
extend beyond its current term, (ii) any portion of an Option
that is exercisable after retirement without regard to the
acceleration of vesting described above may be exercised during
the period specified in the applicable stock option agreement by
a Newco Employee who meets the requirements for retirement from
James River as of the Spinoff Date, and (iii) SARs may be
exercised during the period specified in the Stock Appreciation
Rights Plan by a Newco Employee who meets the requirements for
retirement from James River as of the Spinoff Date. James River
Options and SARs held by active Newco Employees shall terminate
as of the end of the period described in the preceding sentence.
Any outstanding James River Options and SARs held by Newco
Employees who retired, became permanently disabled or terminated
employment before the Spinoff Date shall not be affected by the
provisions of this subsection (c).
(d) All grants to Newco Employees under James River's
Deferred Stock Plan (the "James River Deferred Stock Plan") that
are not vested as of the Spinoff Date shall terminate as of the
Spinoff Date. Immediately following the Spinoff Date, Newco
Holdings may make an initial grant of deferred stock or
restricted stock, which shall have similar provisions, including
initial value and vesting, as the Newco Employees' forfeited
shares of James River deferred stock. Newco Holdings may make
such additional grants of deferred or restricted Newco Holdings
stock to Newco Employees as it deems appropriate. Any Newco
Employees who have deferred stock grants under the James River
Deferred Stock Plan that are vested as of the Spinoff Date and
are payable after the Spinoff Date shall receive payment when due
of their deferred stock benefits from James River, and Newco
shall reimburse James River for the amount of deferred stock
benefits so paid (including the cost of any FICA, FUTA and other
payroll taxes on the payments).
10.10 Worker's Compensation. As of the Paper Contribution
Date, Newco shall assume liability for all claims under worker's
compensation laws that are payable on or after the Paper
Contribution Date with respect to Newco Employees, without regard
to when the liabilities arose.
10.11 Welfare Benefit Plans. (a) As of the Paper
Contribution Date, Newco shall establish one or more welfare
benefit plans for Salaried Newco Employees which initially shall
be comparable to the James River welfare benefit plans for
salaried employees, and Newco shall establish such welfare
benefit plans for Hourly Newco Employees as may be required by
the applicable collective bargaining agreements or, in the case
of employees not covered by a collective bargaining agreement,
which shall initially be comparable to the James River welfare
benefit plans for such employees. A welfare benefit plan is a
plan defined in Section 3(1) of ERISA which provides medical,
health, disability, accident, life insurance, death, dental or
other welfare benefits, including any post-employment benefits or
retiree medical, life insurance or other such benefits. Newco
shall be liable for welfare benefit claims that are payable on or
after the Paper Contribution Date with respect to Newco Employees
and their beneficiaries and dependents, without regard to when
the claims arose. As of the Paper Contribution Date, Newco
Employees shall begin participating in Newco's welfare benefit
plans and shall cease participating in welfare benefit plans
maintained by James River or its Affiliates (other than Newco).
If either party pays any welfare benefit claims that are a
liability of the other party, such other party shall reimburse
the paying party for all such payments.
(b) Newco shall maintain its health benefit plans as a
continuation of James River's health benefit plans, so that Newco
shall give Newco Employees credit under its health benefit plans
for payments made under James River's health benefit plans for
purposes of deductibles and maximum out-of-pocket limits.
(c) As of the Paper Contribution Date, Newco shall
establish plans under section 125 and section 129 of the Internal
Revenue Code ("Newco's Section 125 Plan") that are substantially
similar to James River's benefit plans under section 125 and
section 129 of the Internal Revenue Code that cover Newco
Employees ("James River's Section 125 Plan"). The Newco
Employees who elected to participate in James River's Section 125
Plan for the 1995 calendar year shall be eligible to participate
in Newco's Section 125 Plan for that part of the 1995 calendar
year remaining after the Paper Contribution Date. Newco shall
maintain Newco's Section 125 Plan as a continuation of James
River's Section 125 Plan for the 1995 calendar year, so that the
aggregate benefits that Newco Employees receive under James
River's Section 125 Plan and Newco's Section 125 Plan for 1995
are not less than the benefits that the Newco Employees would
have received had they remained employed by James River through
1995. At the end of the 1995 year, the following adjustments
shall be made between Newco and James River:
(i) If the aggregate amount contributed by Newco
Employees for 1995 to the Newco Employees' spending accounts
under James River's Section 125 Plan exceeds the aggregate claims
paid by James River for 1995 with respect to the Newco Employees'
spending accounts, James River shall pay Newco an amount in cash
equal to such excess to the extent that the aggregate amount
contributed by Newco Employees for 1995 to their spending
accounts under Newco's Section 125 Plan is less than the
aggregate claims paid by Newco for 1995 with respect to the Newco
Employees' spending accounts.
(ii) If the aggregate amount contributed by Newco
Employees for 1995 to their spending accounts under James River's
Section 125 Plan is less than the aggregate claims paid by James
River for 1995 with respect to the Newco Employees' spending
accounts, Newco shall pay James River an amount in cash equal to
such deficit, to the extent that the aggregate amount contributed
by Newco Employees for 1995 to the Newco Employees' spending
accounts under Newco's Section 125 Plan exceeds the aggregate
claims paid by Newco for 1995 with respect to the Newco
Employees' spending accounts.
(iii) The foregoing payments shall be made as soon
as practicable after all claims have been paid for the 1995 year.
(d) Without limiting any provision of this Agreement,
Newco shall assume responsibility for all retiree medical and
retiree life insurance benefits that are payable on or after the
Paper Contribution Date with respect to Newco Employees and their
beneficiaries and dependents, without regard to when the
liabilities arose. James River and its Affiliates shall have no
liability with respect to such retiree medical and retiree life
insurance benefits.
(e) For purposes of allowing James River to determine
health care continuation requirement obligations under Section
4980B of the Internal Revenue Code and sections 601 through 608
of ERISA, Newco agrees to provide such information as is required
by James River with respect to the volume and level of coverage
under such plans. Newco shall assume and be liable for all of
James River's health care continuation obligations under Section
4980B of the Internal Revenue Code and Section 601 through 608 of
ERISA for all Newco Employees, including employees described in
Section 10.1(a)(ii).
10.12 Profit Sharing and Performance Productivity Plans.
(a) As of the Paper Contribution Date, Newco shall establish a
profit sharing plan for Salaried Newco Employees for periods
beginning on and after the Paper Contribution Date (the "Newco
Profit Sharing Plan"). Salaried Newco Employees shall cease
participating in James River's Profit Sharing Plan for Salaried
Employees (the "James River Profit Sharing Plan") as of the Paper
Contribution Date. Newco shall pay to the Salaried Newco
Employees any benefits payable to such Newco Employees under the
James River Profit Sharing Plan for the portion of the 1995 year
ending on the Paper Contribution Date, and James River shall
reimburse Newco for such payments (including the cost of any
FICA, FUTA and other payroll taxes on the payments). James River
shall determine the amount of benefits payable to Salaried Newco
Employees for the 1995 year under the James River Profit Sharing
Plan. James River shall consult with Ernest S. Leopold and shall
make the determination of the 1995 contribution as James River
deems appropriate in its sole discretion. Newco shall be
responsible for the payment of all liabilities and obligations
for benefits that become due and payable to Salaried Newco
Employees under the Newco Profit Sharing Plan with respect to
periods commencing on and after the Paper Contribution Date.
(b) As of the Paper Contribution Date, Newco shall
establish a 1995 performance/productivity plan for Salaried Newco
Employees for periods beginning on and after the Paper
Contribution Date (the "Newco Performance Plan"). Salaried Newco
Employees shall cease participating in James River's
Performance/Productivity Bonus Plan (the "James River Performance
Plan") as of the Paper Contribution Date. Newco shall pay to the
Salaried Newco Employees any benefits payable to such Newco
Employees under the James River Performance Plan for the portion
of the 1995 year ending on the Paper Contribution Date, and James
River shall reimburse Newco for such payments (including the cost
of any FICA, FUTA and other payroll taxes on the payments).
James River shall determine the amount of benefits payable to
Salaried Newco Employees for the 1995 year under the James River
Performance Plan. James River shall consult with Ernest S.
Leopold and shall make the determination of the 1995 contribution
as James River deems appropriate in its sole discretion. Newco
shall be responsible for the payment of all liabilities and
obligations for benefits that become due and payable to Salaried
Newco Employees under the Newco Performance Plan with respect to
periods commencing on and after the Paper Contribution Date.
10.13 Nonqualified Plans. (a) As of the Paper
Contribution Date, Newco shall establish one or more plans that
provide retirement or deferred compensation benefits on an
unfunded basis and are not intended to qualify under Section
401(a) of the Code (each, a "Newco Nonqualified Plan") which
initially shall be comparable to the James River nonqualified
plans listed on Schedule 10.13 (each, a "James River Nonqualified
Plan"). The Newco Nonqualified Plan initially shall provide
benefits to each Salaried Newco Employee that are identical to
the benefits provided to such Salaried Newco Employee under the
James River Nonqualified Plan immediately prior to the Paper
Contribution Date.
(b) James River shall distribute to each Salaried
Newco Employee who has an accrued benefit under James River's
Supplemental Benefit Plan an amount equal to the Salaried Newco
Employee's accrued benefit under the Supplemental Benefit Plan
(including a gross up of the distribution for tax effects, as
reasonably computed by James River). James River shall calculate
Ernest S. Leopold's distribution as if he was three years older
than his age as of the Spinoff Date. Newco shall reimburse James
River for such distributions (including the cost of any FICA,
FUTA and other payroll taxes on the distributions, any out of
pocket costs and expenses and the cost of any gross up of the
distributions for tax effects), less the amount allocable to the
Salaried Newco Employees under James River's Supplemental Benefit
Trust. James River shall allocate to Salaried Newco Employees
assets of its Supplemental Benefit Trust based on the ratio that
the accrued benefits of Salaried Newco Employees under the
Supplemental Benefit Plan as of the Paper Contribution Date
(excluding the additional three years of age for Ernest S.
Leopold) bear to the total accrued benefits of participants in
the Supplemental Benefit Plan. The benefits under the
Supplemental Benefit Plan shall be paid in the form of an annuity
contract, cash or both, as James River shall determine.
(c) After the Spinoff Date, James River shall
distribute to each Salaried Newco Employee who is a participant
in James River's Supplemental Deferral Plan an amount equal to
the Salaried Newco Employee's account balance under the
Supplemental Deferral Plan as of the date of the distribution.
Newco shall reimburse James River for such payment (including the
cost of any FICA, FUTA and other payroll taxes on the payment and
any out of pocket costs and expenses), less the amount of
employee contributions made to the Supplemental Deferral Plan by
the Salaried Newco Employee. The benefits under the Supplemental
Deferral Plan shall be paid in cash.
(d) Except as provided in Section 10.13(b) and (c),
Newco shall assume all of James River's rights and obligations
with respect to Newco Employees under each James River
Nonqualified Plan as of the Paper Contribution Date, and James
River and its Affiliates shall have no liability for benefits to
Newco Employees under James River Nonqualified Plans on or after
the Paper Contribution Date.
10.14 Vacation Pay. Newco shall assume liability for all
unpaid vacation pay banked or accrued by Newco Employees prior to
the Paper Contribution Date. After the Paper Contribution Date,
James River shall have no liability for vacation pay for Newco
Employees.
10.15 Administration. James River shall provide Newco with
transition services to administer the various Newco plans, as
provided in the Transition Services Agreement referred to in
Section 5.1. Newco and James River shall each make its
appropriate employees and data regarding employee benefit
coverage available to the other at such reasonable times as may
be necessary for the proper administration by the other of any
and all matters relating to employee benefits and worker's
compensation claims affecting its employees.
10.16 Indemnity. Newco Holdings agrees to indemnify and
hold James River and its Affiliates (other than Newco) harmless
against any Loss arising with respect to the employee benefit
liabilities and obligations assumed, and agreements made, by
Newco pursuant to this Article X. James River agrees to
indemnify and hold Newco Holdings and Newco harmless against any
Loss arising with respect to any employee benefit liabilities and
obligations retained, and agreements made, by James River
pursuant to this Article X.
ARTICLE XI
CROSS-LICENSE
11.1 Cross-License. (a) It is the intention of the parties
that in certain situations, as provided in this Section 11.1,
members of the JR Group shall have the right to use certain Newco
Intellectual Property, and Newco shall have the right to use
certain filed intellectual property and non-filed intellectual
property owned by members of the JR Group, in their respective
businesses after the Paper Contribution Date without royalty or
other charge. Accordingly, from and after the Paper Contribution
Date, the members of the JR Group and the members of the Spin
Group agree as follows:
(b) For all purposes of this Section 11.1, the
following terms shall have the following meanings:
(i) "Derivative" has the meaning set forth in
Section 11.1(e).
(ii) "Filed Industrial Property" means letters
patent, patent applications, copyright registrations and
copyright applications, design registrations, inventor
certificates, and all other industrial and intellectual property
which is embodied in a form that is filed with any Authority
(excluding trade designations such as trade names, service marks,
trademarks and related registrations and applications, which
shall be governed by Section 11.1(j)).
(iii) "Industrial Property" means Filed
Industrial Property and Non-Filed Industrial Property.
(iv) "James River Covered License" has the meaning
set forth in Section 11.1(c)(i).
(v) "James River Industrial Property" means all
Industrial Property owned by James River or any of its Affiliates
immediately before the Paper Contribution Date, other than Newco
Industrial Property.
(vi) "James River Industrial Property Licensed to
Newco" means James River Industrial Property which is licensed to
Newco pursuant to Sections 11.1(c)(i) and 11.1(d).
(vii) "James River Licensed Marks" has the
meaning set forth in Section 11.1(j).
(viii) "Limited Use Technology" has the meaning
set forth in Section 11.1(e).
(ix) "Newco Covered License" has the meaning set
forth in Section 11.1(c)(ii).
(x) "Newco Industrial Property" means all
Industrial Property owned by James River or any of its Affiliates
immediately before the Paper Contribution Date and transferred to
Newco pursuant to this Agreement.
(xi) "Newco Industrial Property Licensed to James
River" means Newco Industrial Property which is licensed to James
River pursuant to Sections 11.1(c)(ii) and 11.1(d).
(xii) "Newco Industrial Property Not Licensed
to James River" means Newco Industrial Property which is not
licensed to James River pursuant to Sections 11.1(c)(ii) and
11. (xiii) "Newco Filed Industrial Property" means
that portion of the Newco Industrial Property which is Filed
Industrial Property.
(xiv) "Newco Licensed Marks" has the meaning
set forth in Section 11.1(j).
(xv) "Non-Filed Industrial Property" means
unpatented technology, inventions, trade secrets, processes,
know-how, designs, copyrights and formulae and all other
industrial and intellectual property (excluding trade
designations such as trade names, service marks, trademarks and
related registrations and applications, which shall be governed
by Section 11.1(j)).
(xvi) "Permitted Successor" has the meaning
set forth in Section 11.1(i).
(c) James River and Newco hereby agree to the
following terms (the "Cross-License") with respect to the
Industrial Property made subject to the Cross-License by
paragraph (c) of this Section 11.1:
(i) Subject to the provisions of Section 11.1,
James River hereby grants to Newco a perpetual, non-exclusive,
royalty-free license to make, use, sell and exploit, within any
field unless a limited field of use is indicated on Schedule
11.1(c), products, processes, apparatuses or works covered by
James River Industrial Property which, as of the Paper
Contribution Date, is used in, needed for or related to the Newco
Business, provided that if and to the extent that a royalty-free
license with respect to any James River Industrial Property would
require payment terms to be lowered pursuant to any license of
such James River Industrial Property to any third party (any
license requiring such adjustment being, a "James River Covered
License"), Newco shall pay James River for the license hereunder
of such James River Industrial Property a royalty equal to the
lowest royalty that would not require any reduction of such
payment terms applicable from time to time pursuant to any
agreement as in effect on the date hereof. James River
represents to Newco that except as set forth on Schedule
11.1(c)(i), neither James River nor any of its Affiliates is a
party to a James River Covered License.
(ii) Subject to the provisions of Section 11.1,
Newco hereby grants to James River a perpetual, non-exclusive,
royalty-free license to make, use, sell and exploit, within any
field unless a limited field of use is indicated on Schedule
11.1(c), products, processes, apparatuses or works covered by
Newco Industrial Property which, as of the Paper Contribution
Date, is used in, needed for or related to any business of James
River or its Affiliates other than the Newco Business; provided
that if and to the extent that a royalty-free license with
respect to any Newco Industrial Property would require payment
terms to be lowered pursuant to any license of such Newco
Industrial Property to any third party (any license requiring
such adjustment being, a "Newco Covered License"), James River
shall pay to Newco for the license hereunder of such Newco
Industrial Property a royalty equal to the lowest royalty that
would not require any reduction of such payment terms applicable
from time to time pursuant to any agreement as in effect on the
date hereof. Newco represents to James River that neither Newco
nor any of its Affiliates is a party to a Newco Covered License
and agrees that it will not and will cause its Affiliates not to
enter into a Newco Covered License without the prior written
consent of James River.
(d) The Cross-License referred to in clause (i) of
Section 11.1(c) shall extend only to Filed Industrial Property
identified on Schedule 11.1(d)(i), and to all Non-Filed
Industrial Property described in clause (i) of Section 11.1(c),
including, without limitation, the Non-Filed Industrial Property
identified on Schedule 11.1(d)(i). The Cross-License referred to
in clause (ii) of Section 11.1(c) shall extend to Filed
Industrial Property and Non-Filed Industrial Property described
in clause (ii) of Section 11.1(c) including, without limitation,
the Filed and Non-Filed Industrial Property identified on
Schedule 11.1(d)(ii).
(e) The technology listed on Schedule 11.1(c) and
indicated with a (#) shall be referred to as "Limited Use
Technology." Newco agrees that it will not use any technology
which is a "Derivative" (as hereinafter defined) of an item of
Limited Use Technology other than in the manner which Newco is
permitted to use such item of Limited Use Technology pursuant to
this Agreement and Schedule 11.1(c). For purposes of this
Agreement, technology will be deemed a Derivative of an item of
Limited Use Technology if (a) it is developed by or for Newco,
(b) one or more former employees of James River or its
Affiliates, who, prior to the Paper Contribution Date, had access
or were exposed, to the Limited Use Technology, participated in
the development thereof, and (c) it is similar in method and
purpose to the Limited Use Technology.
(f) Except to the extent otherwise provided in this
Agreement, including Schedule 11.1(d)(i) and 11.1(d)(ii) or the
Related Agreements, neither Newco nor James River shall have any
right of access to personnel or records of the other party with
respect to the Industrial Property licensed to such party
pursuant to the Cross-License after the Spinoff Date. Except to
the extent otherwise provided in this Agreement, including
Schedule 11.1(c), or the Related Agreements, such access before
the Spinoff Date (i) shall be limited to situations where the
party seeking access has a reasonable need therefor in order to
utilize the Industrial Property licensed to it under the Cross-
License, (ii) shall require reasonable notice to the party from
whom access is sought, (iii) shall be at the expense of the party
seeking access including personnel costs of the disclosing party,
and (iv) shall not impose any unreasonable burden on the party
from whom such access is sought.
(g) James River and Newco each agrees, upon the
request of the other party, to do, execute, acknowledge, deliver,
file or cause to be done, executed, acknowledged, delivered or
filed all such further acts or agreements as may be reasonably
required to evidence, assure or make the grants set forth in this
Section 11.1.
(h) The parties agree to hold all Industrial Property
of the other in the strictest confidence, to make no use of such
Industrial Property except as permitted under this Article XI,
and not to publish or disclose to anyone else such Industrial
Property, in whole or in part, unless permitted in accordance
with Section 11.1(i), without the prior written consent of the
other parties hereto. The foregoing shall not prohibit the
disclosure of Industrial Property by the receiving party in the
ordinary course of business where necessary to enable customers
and vendors of the receiving party that are not direct
competitors of the licensing party to undertake or pursue special
projects and disclosure pursuant to written confidentiality
agreements providing for substantially equivalent or greater
protection than provided in this Section 11.1(h). The provisions
of this Section 11.1(h) shall not apply to any information which
(i) is or becomes generally available to the public other than as
a result of disclosure by such party or its employees,
representatives or advisors, (ii) is disclosed to the receiving
party after the Paper Contribution Date by a third party without
knowledge by such receiving party that such disclosure breaches a
confidentiality obligation, or (iii) is required to be disclosed
pursuant to an order of a court or governmental agency. To
protect the secrecy of the Non-Filed Industrial Property licensed
under Section 11.1, each party shall limit access to all
materials and physical items involving, documenting or embodying
any such Non-Filed Industrial Property (including documents,
electronic databases, electronic information, storage media,
samples and models) to its personnel with a need for such access
to perform their duties and shall make all such personnel aware
of the obligations of confidentiality under this Agreement.
(i) The provisions of this Section 11.1 shall inure to
the benefit of and be binding upon the parties hereto and
Permitted Successors (as defined below). The parties hereto
shall not have the right to transfer, assign, sell or sublicense
any license granted under this Section 11.1 to a Person other
than a Permitted Successor and no rights with respect to the
licenses granted under this Section 11.1 shall run in favor of
any transferee or sublicensee other than a Permitted Successor.
For purposes of this Article XI, and except as explicitly
provided herein, "Permitted Successors" shall include the
following: (i) the respective successors of the parties hereto by
merger, consolidation or transfer (by sale or lease) of all or
substantially all of their assets (ii) in the case of any
intellectual property that is reasonably necessary to the
economic utilization of a plant or a material component of a
plant, a transferee (by sale or lease) of such plant or component
or (iii) any Subsidiary of any party hereto; provided, however,
that (A) any transfer, assignment, sale or sublicense to a
Subsidiary of any party hereto shall require automatic
reconveyance or re-assignment to the transferor if such
transferee or assignee fails to remain a Subsidiary of such party
and (B) rights with respect to the licenses granted under this
Section 11.1 shall cease to run in favor of any Subsidiary of any
party hereto who ceases to remain a Subsidiary of such party
after obtaining the benefit of such rights, unless, in the case
of either subclause (A) or subclause (B), the Subsidiary
qualifies as a Permitted Successor under clause (i) or clause
(ii) of this sentence. Notwithstanding the foregoing
prohibitions, Newco shall have no right to license, transfer,
assign or sell any of the Newco Industrial Property Licensed to
James River other than to a Permitted Successor, and Newco may
make available to a joint venture the James River Industrial
Property Licensed to Newco and the Newco Industrial Property
Licensed to James River only if and so long as (A) such joint
venture is a Subsidiary of Newco or (B) Newco is an active
participant in the management of such joint venture. The
foregoing provisions of this Section 11.1(i) shall not restrict
Newco or its transferees' or sublicensees' rights to sell,
transfer, assign, license or sublicense any of the Newco
Industrial Property not licensed to James River and shall not
restrict James River or its transferees' or sublicensees' rights
to sell, transfer, assign, license or sublicense any of the James
River Industrial Property.
(j) From and after the Paper Contribution Date, James
River and Newco agree to the following terms with respect to the
trademarks and service marks made subject to this Section 11.1(j)
by clauses (i) and (ii) herein:
(i) James River hereby grants to Newco a
perpetual, royalty-free, non-exclusive (except as otherwise
indicated on Schedule 11.1(j)(i)) license to use the marks (the
"James River Licensed Marks") set forth on Schedule 11.1(j)(i) in
the respective territory and upon and in connection with the sale
or marketing and advertising for sale or marketing of the
respective products or services described on Schedule 11.1(j)(i).
(ii) Newco hereby grants to James River a
perpetual, royalty-free, non-exclusive (except as otherwise
indicated on Schedule 11.1(j)(ii)) license to use the marks (the
"Newco Licensed Marks") set forth on Schedule 11.1(j)(ii) in the
respective territory and upon and in connection with the sale or
marketing and advertising for sale or marketing of the respective
products or services described on Schedule 11.1(j)(ii).
(iii) The licensor hereunder shall have the
right to control the quality of all of the products or services
with which the licensee uses each mark and Newco and James River,
as licensees hereunder, agree that the standard of quality for
such products or services shall equal or exceed the standard of
quality for such products or services at the Paper Contribution
Date.
(iv) The licensor hereunder shall have the right
to make such inspections of the processes and materials of
manufacture used by the licensee hereunder and the products and
services marketed by the licensee hereunder as the licensor may
determine to be reasonably necessary to assure the consistent,
high quality of the products and services provided by the
licensee hereunder, and the licensee will permit licensor's
representatives at reasonable hours and upon reasonable notice to
enter the licensee's premises where such products are being
manufactured to inspect the same and obtain samples.
(v) The licensee hereunder agrees that nothing
herein shall give to it any right, title, or interest in the
marks subject to this license (except the right to use in
accordance with the terms and conditions of this license), and
that any and all goodwill resulting from and relating to the use
by the licensee of the marks shall inure to the benefit of the
licensor.
(vi) The licenses granted herein shall be for the
respective terms set out in Schedules 11.1(j)(i) and 11.1(j)(ii),
unless the licensor shall reasonably conclude that the licensee
has failed to meet the standards of quality established for the
manufacture of the respective products or for the marketing of
the respective services, in which case the licensor shall give
the licensee written notice of such failure and 30 days within
which to cure such failure. If such failure is not timely cured,
the licensor may terminate the licenses with respect to the
affected mark in the affected territory upon written notice to
the licensee.
(vii) The licenses granted herein may not be
assigned, transferred, or sublicensed by the licensee in any
manner whatsoever except in accordance with Section 11.1(i).
ARTICLE XII
CONDITIONS TO OBLIGATIONS OF NEWCO HOLDINGS AND NEWCO
The obligations of Newco Holdings and Newco to consummate
the transactions contemplated by this Agreement shall be subject,
to the extent not waived, to the satisfaction of each of the
following conditions before or on the Spinoff Record Date:
12.1 Representations and Warranties. Except for changes
contemplated by this Agreement, the representations and
warranties of James River and James River Paper contained in
Article VI of this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the
day immediately after the Paper Contribution Date.
12.2 Performance of this Agreement. James River and James
River Paper shall have performed all obligations and complied
with all conditions required by this Agreement to be performed or
complied with by it.
12.3 Proceedings. All corporate and other proceedings to be
taken by James River and James River Paper in connection with the
transactions contemplated hereby shall have been completed, all
such proceedings and all documents incident thereto shall be
reasonably satisfactory in substance and form to Newco Holdings
and Newco and such entities shall have received all such
counterpart originals or certified or other copies of such
documents as either such entity may reasonably request.
12.4 Consents and Approvals. All consents, authorizations,
orders or approvals of any Authority and of individuals or
business entities (including the approval of its lenders, if
required) which James River and James River Paper is required to
obtain in order for James River Paper to be able to transfer the
Newco Assets to Newco and for Newco to conduct the Newco Business
as it is presently conducted shall have been obtained by James
River, James River Paper, Newco Holdings or Newco and all waiting
periods specified by law with respect thereto shall have passed.
12.5 Injunction, Litigation, etc. No order of any court or
administrative agency shall be in effect which restrains or
prohibits the consummation of the transactions contemplated
hereby, and there shall not have been threatened, nor shall there
be pending, any action or proceeding by or before any Authority
which is likely to prohibit, delay or successfully challenge the
validity of any of the transactions contemplated by this
Agreement.
12.6 Legislation. No statute, rule or regulation shall have
been enacted which prohibits, restricts or delays the
consummation of the transactions contemplated hereby.
12.7 Opinion of Counsel for James River. Newco Holdings and
Newco shall have received an opinion from McGuire, Woods, Battle
& Boothe, L.L.P., counsel for James River, in substantially the
form attached hereto as Exhibit FF.
12.8 Consummation of Article III Transactions. Each of the
Article III Transactions shall have been consummated.
12.9 Financing. Newco shall have obtained the Debt
Proceeds.
12.10 Receipt of a Solvency Opinion By Newco Holdings
Board of Directors. Newco Holdings' Board of Directors shall
have received an opinion from Houlihan, Lokey, Howard & Zukin,
Inc. confirming the solvency of Newco and Newco Holdings
immediately after giving effect to the transactions contemplated
hereby.
ARTICLE XIII
CONDITIONS TO OBLIGATIONS OF JAMES RIVER AND JAMES RIVER PAPER
The obligations of James River and James River Paper to
consummate the transactions contemplated by this Agreement shall
be subject, to the extent not waived, to the satisfaction of each
of the following conditions before or on the Spinoff Record Date:
13.1 Representations and Warranties. Except for changes
contemplated by this Agreement, the representations and
warranties of Newco Holdings and Newco contained in Article VII
of this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the day
immediately after the Paper Contribution Date.
13.2 Performance of this Agreement. Each of Newco Holdings
and Newco shall have performed all obligations and complied with
all conditions required by this Agreement to be performed or
complied with by it.
13.3 Proceedings. All corporate and other proceedings to be
taken by either Newco Holdings or Newco in connection with the
transactions contemplated hereby shall have been completed, all
such proceedings and all documents incident thereto shall be
reasonably satisfactory in substance and form to James River and
James River Paper, and James River and James River Paper shall
have received all such counterpart originals or other copies of
such documents as James River and James River Paper may
reasonably request.
13.4 Consents and Approvals. All consents, authorizations,
orders or approvals of any Authority and of individuals or
business entities (including the approval of any lenders, if
required) which either Newco Holdings or Newco is required to
obtain in order to consummate the transactions contemplated by
this Agreement shall have been obtained by James River, James
River Paper, Newco Holdings or Newco and all waiting periods
specified by law with respect thereto shall have passed.
13.5 Injunction, Litigation, etc. No order of any court or
administrative agency shall be in effect which restrains or
prohibits the consummation of the transactions contemplated
hereby or which would limit or affect James River's right to
transfer the Newco Assets to Newco, Newco's ability to issue the
Newco High Yield Debt or the ability of Newco or Newco Holdings
to issue stock as required for the reorganizations and the
recapitalizations contemplated hereunder and there shall not have
been threatened, nor shall there be pending, any action or
proceeding by or before any Authority which is likely to
prohibit, delay or successfully challenge the validity of any of
the transactions contemplated by this Agreement.
13.6 Legislation. No statute, rule or regulation shall have
been enacted which prohibits, restricts or delays the
consummation of the transactions contemplated hereby.
13.7 Financing. Newco shall have obtained the Debt
Proceeds.
13.8 Consummation of Article III Transactions. Each of the
Article III Transactions shall have been consummated.
13.9 Receipt of a Solvency Opinion By Newco Holdings Board
of Directors. James River's Board of Directors shall have
received an opinion from Houlihan, Lokey, Howard & Zukin, Inc.
confirming the solvency of Newco and Newco Holdings immediately
after giving effect to the transactions contemplated hereby.
ARTICLE XIV
DELIVERIES, ETC., IN CONNECTION WITH SPINOFF
14.1 Effectiveness of Spinoff. The consummation of the
Spinoff shall be deemed to have occurred, as long as the
conditions specified in Article XII and Article XIII have been
satisfied or waived, upon the distribution of the dividend as
contemplated in Section 4.1 and the actions taken in connection
therewith shall be effective as of the Spinoff Date. The
deliveries required to be made under this Article XIV shall occur
at the offices of McGuire, Woods, Battle & Boothe, L.L.P. in
Richmond, Virginia or at such other place as the parties shall
agree.
14.2 Deliveries by James River. At or before the Spinoff
Record Date, James River shall deliver to Newco Holdings and
Newco, as applicable, the following:
(a) copies of duly executed quitclaim deeds in
recordable form which convey to Newco title to the Real Property,
subject to Permitted Exceptions;
(b) copies of such document or documents (suitable for
filing, registration or recording, if applicable) as are
necessary to transfer to Newco the Newco Assets other than the
Real Property;
(c) evidence that all of the proceedings contemplated
by Section 12.3 have been completed;
(d) copies of any consents obtained as contemplated by
Section 12.4;
(e) certificates from the State Corporation Commission
of Virginia evidencing the good standing of James River and James
River Paper in the Commonwealth of Virginia as of a recent date;
(f) the certificates representing all of the issued
and outstanding shares of common stock of JR N.H. Electric and
Berlin Mills Railway included in the Newco Assets and the U.K.
Stock, duly registered in the name of Newco or duly endorsed or
with stock powers attached thereto duly signed for transfer, with
customary guarantees of signature;
(g) the opinion of counsel required by Section 12.7;
and
(h) such additional documents as Newco Holdings and
Newco may reasonably request.
14.3 Deliveries by Newco Holdings and Newco. At or before
the Spinoff Record Date, Newco Holdings and Newco shall deliver
to James River and James River Paper, as applicable, the
following:
(a) evidence that all of the proceedings contemplated
by Section 13.3 have been completed;
(b) copies of any consents obtained as contemplated by
Section 13.4;
(c) certificates from the State Corporation Commission
of the Commonwealth of Virginia as to the good standing of Newco
Holdings and Newco in the Commonwealth of Virginia as of the most
recent date obtainable; and
(d) such additional documents as James River and James
River Paper may reasonably request.
14.4 Deliveries of Related Agreements. At or before the
Spinoff Date, each of the parties to each Related Agreement shall
deliver an executed copy of such Agreement to the other parties
thereto.
ARTICLE XV
INDEMNIFICATION
15.1 Survival; Remedy for Breach. (a) The representations
and warranties of the respective parties contained in Section 6.1
through and including Section 6.8, Section 6.12, Section 6.20 and
Article VII shall survive until the date that is 90 days after
the first audit conducted with respect to the Newco Business
after the Spinoff Record Date (the "Survival Date"), at which
time they shall lapse. Notwithstanding the provisions of the
preceding sentence, any representation or warranty in respect of
which indemnity may be sought under Section 15.2 or Section 15.3
shall survive the Survival Date if notice, given in good faith,
of the specific inaccuracy or breach giving rise to a claim for
indemnification and the representation or warranty to which it
relates, shall have been given before the Survival Date to the
party from which indemnification is sought before the Survival
Date. All representations and warranties that are not explicitly
specified in the first sentence of this Section 15.1(a) shall not
survive after the Paper Contribution Date. All covenants of each
party made hereunder shall survive the consummation of the
transactions contemplated hereby and shall not lapse except in
accordance with their respective terms.
(b) No investigation by either of the parties, whether
made before or after the date hereof, shall affect the survival
of any representation and warranty specified in the first
sentence of Section 15.1(a).
15.2 Indemnification by James River. (a) Subject to the
limitations contained in this Article XV, James River shall
indemnify and hold Newco Holdings and Newco harmless against all
Losses arising out of:
(i) any breach of a representation or warranty
made by James River in Section 6.1 through and including Section
6.8, Section 6.12 and Section 6.20 of this Agreement, to the
extent attributable to facts, events, actions or omissions of any
member of the JR Group occurring on or before the Spinoff Date
whether accrued, absolute, contingent or otherwise;
(ii) the breach of any agreement of James River or
James River Paper contained in this Agreement (but not the
Related Agreements, each of which shall stand on its own); or
(iii) any liability or obligation of James
River or James River Paper specifically retained by any member of
the JR Group pursuant to this Agreement.
Notwithstanding the foregoing, James River shall not be
required to indemnify either Newco Holdings or Newco for
liabilities arising from changes in law after the Spinoff Record
Date.
(b) Notwithstanding the foregoing, in the case of
Losses incurred as a result of the breach of a representation or
warranty as described in Section 15.2(a)(i), James River shall
not be liable for indemnification hereunder unless and until the
aggregate amount of such Losses exceeds $7,500,000 and thereafter
its liability for such Losses shall be limited to the amount
thereof in excess of $7,500,000.
15.3 Indemnification by Newco Holdings. (a) Subject to the
limitations contained in this Article XV, Newco Holdings shall
indemnify and hold James River and James River Paper harmless
against all Losses arising out of:
(i) any breach of a representation or warranty
made by Newco Holdings or Newco in Article VII, to the extent
attributable to facts, events, actions or omissions of either
Newco Holdings or Newco occurring on or before the Spinoff Date,
whether accrued, absolute, contingent or otherwise;
(ii) the breach of any agreement of Newco Holdings
or Newco contained in this Agreement (but not the Related
Agreements, each of which shall stand on its own);
(iii) any Assumed Liability or the failure by
Newco Holdings or Newco to discharge any Assumed Liability.
(b) Notwithstanding the foregoing, in the case of
Losses incurred as a result of the breach of a representation or
warranty as described in Section 15.3(a)(i), Newco Holdings shall
not be liable for indemnification hereunder unless and until the
aggregate amount of such Losses exceeds $7,500,000, and
thereafter its liability for such Losses shall be limited to the
amount thereof in excess of $7,500,000.
15.4 Definition of Loss. For purposes of this Article XV,
Section 10.16 and Section 17.5, "Loss" and "Losses" shall mean
direct damages and expenses incurred by a party entitled to
indemnification hereunder as a result of a matter giving rise to
a claim for indemnification hereunder, including, without
limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses incurred in connection with any
action, suit or proceeding ("Legal Action") instituted against
such party determined, net of the:
(a) tax savings realized by such party in respect of
such matter;
(b) insurance proceeds to which such party is entitled
in respect of such matter;
(c) indemnity payments to which such party is entitled
from parties other than the indemnifying party hereunder in
respect of such matter; and
(d) any other economic benefit realized by such party
in respect of such matter.
Notwithstanding any provision of this Article XV,
consequential damages or any damages to the extent attributable
to a failure to mitigate damages shall not constitute Losses.
15.5 Third Party Claims. (a) Each of the parties must
follow the procedures set forth in the following paragraphs of
this Section 15.5 in order to be entitled to indemnification with
respect to claims resulting from the assertion of liability by
persons or entities not parties to this Agreement, including
claims by any Authority for penalties, fines and assessments.
(b) The party seeking indemnification shall give
prompt written notice to the party from which indemnification is
sought of any assertion of liability by a third party which might
give rise to a claim by the indemnified party against the
indemnifying party based on the indemnity agreements contained in
this Agreement, stating the nature and basis of the assertion and
the amount thereof, to the extent known.
(c) In the event that any Legal Action is brought
against an indemnified party with respect to which the
indemnifying party may have liability under an indemnity
agreement contained in this Agreement, the Legal Action shall,
upon the written agreement of the indemnifying party that it is
obligated to indemnify under such an indemnity agreement, be
defended by the indemnifying party and such defense shall include
all appeals or reviews which counsel for the indemnifying party
shall deem appropriate. In any such Legal Action the indemnified
party shall have the right to be represented by advisory counsel
and accountants, at its own expense, and the indemnifying party
shall keep the indemnified party fully informed as to such
proceeding at all stages thereof, whether or not the indemnified
party is represented by its own counsel.
(d) Until the indemnifying party shall have assumed
the defense of any Legal Action, or if the indemnified and
indemnifying parties are both named parties in such Legal Action
and the indemnified party shall have reasonably concluded that
there may be defenses available to it that are materially
different from or in addition to the defenses available to the
indemnifying party (in which case the indemnifying party shall
not be entitled to assume the defense of such Legal Action, but
shall remain responsible for its obligation as an indemnitor),
all legal and other reasonable expenses incurred by the
indemnified party as a result of such Legal Action shall be borne
by the indemnifying party. In such event, the indemnified party
shall make available to the indemnifying party and its attorneys
and accountants, for review and copying, its books and records
relating to such Legal Action and the parties shall render to
each other such assistance as may reasonably be requested to
facilitate the proper and adequate defense of any such Legal
Action.
(e) The indemnifying party shall not make any
settlement of any claim without the written consent of the
indemnified party, which consent shall not be unreasonably
withheld. Without limiting the generality of the foregoing, it
shall not be deemed unreasonable to withhold consent to a
settlement involving injunctive or other equitable relief against
the indemnified party or its assets, employees, business or
methods of doing business.
15.6 Subrogation Rights; No Duplication. (a) Any entity
required to make a payment under this Article XV shall be
subrogated, to the extent of such payment, to the rights of the
entity to which such payment has been made for reimbursement or
indemnification against third parties relating to the claim on
which such payment has been based.
(b) Notwithstanding anything in this Article XV to the
contrary, the obligations of each indemnitor and its Affiliates
pursuant to this Article XV shall be without duplication as
between entities to which such indemnitor and its Affiliates are
required to make payments.
15.7 Priority of Payment. (a) If, and to the extent that,
Newco Holdings would, in the absence of this Section, be entitled
to indemnification under this Article by reason of any damage or
loss in respect of its investment in Newco which arises from any
Loss in respect of which Newco is entitled to indemnification
pursuant to this Article, then James River shall be obligated to
indemnify and hold Newco harmless as set forth in this Article.
(b) Upon James River's indemnification and holding
harmless of Newco, Newco Holdings shall have no further right to
indemnification therefor, and James River's obligation to
indemnify Newco Holdings and Newco in respect thereof shall be
fully discharged.
ARTICLE XVI
TERMINATION, AMENDMENT AND WAIVER
16.1 Termination. (a) This Agreement may be terminated at
any time before the Spinoff Record Date by James River, in its
sole and absolute discretion.
(b) Except as otherwise specified in clause (a) of
this Section 16.1, this Agreement may be terminated at any time
before the Spinoff Record Date:
(i) by mutual written consent of the parties
hereto;
(ii) by any party hereto, if a determination is
made in good faith by the Board of Directors of one of such
parties prior to September 15, 1995 that a condition to the
consummation of the Spinoff, the benefit of which such party is
entitled to, shall not be fulfilled; or
(iii) by either James River or James River
Paper on the one hand, or either Newco Holdings or Newco on the
other, if there has been a material breach on the part of the
other of a representation, warranty or agreement contained
herein, or in any writing delivered pursuant to the provisions of
this Agreement which remains uncured; provided, however, that no
breach of representation or warranty shall form the basis of a
right to terminate this Agreement if the party to whom such
representation or warranty was made or its officers, directors or
representatives had notice of the existence of such breach on or
before the date of this Agreement.
16.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 16.1, this Agreement shall become wholly void
and of no further force and effect and there shall be no further
liability or obligation on the part of any party hereto except to
pay such expenses as are required of it and to comply with the
confidentiality provisions of Section 8.7. Without limiting the
liability under the foregoing, any such termination shall
terminate any claim a party may have for damages caused by reason
of a material misrepresentation (including an omission) or a
breach of a representation or warranty made by another party
hereto in this Agreement.
16.3 Amendment. This Agreement and the exhibits and
schedules hereto may be amended at any time before the Spinoff;
provided, that any such amendment is approved in writing by each
of the parties hereto. All representations and warranties which
are true and correct as modified and approved shall be deemed
true and correct for the purposes of Section 12.1 and Section
13.1.
16.4 Extension; Waiver. At any time before the Spinoff, any
party to this Agreement which is entitled to the benefits thereof
may (i) extend the time for the performance of any of the
obligations of another party hereto, (ii) waive any
misrepresentation (including an omission) or breach of a
representation or warranty of another party hereto, whether
contained herein or in any exhibit, schedule or document
delivered pursuant hereto, or (iii) waive compliance of another
party hereto with any of the agreements or conditions contained
herein. Any such extension or waiver shall be valid if set forth
in a written instrument signed by the party or parties giving the
extension or waiver.
ARTICLE XVII
UNWIND PROVISIONS
17.1 Events Triggering Unwind. (a) The provisions of
Article II shall be subject to the provisions of Section 17.1(b).
(b) The parties shall become obligated to unwind the
transactions contemplated hereby in accordance with this Article
XVII if all of the following events occur:
(i) Newco obtains the Debt Proceeds;
(ii) the Spinoff Record Date occurs and James
River is required to complete the distribution of Newco Holdings
Common Shares to the holders of James River Common Shares for any
reason, including because the declaration of the dividend
pursuant to Section 3.7 has not been revoked; and
(iii) either of the following shall occur: (A)
Newco exercises its right to redeem the Newco High Yield Debt in
accordance with Section 1102(c) of the Indenture (the "Call"); or
(B) the "Maturity Date" (as defined in the Credit Agreement)
becomes or remains the "Early Termination Date" (as defined in
the Credit Agreement) as a result of the operation of the
definition of the "Maturity Date" in the Credit Agreement.
17.2 Rights and Obligations with respect to the Call. If
James River notifies Newco that the Call shall be exercised,
Newco shall forthwith exercise the Call, and James River shall
provide Newco with all funds that are required in connection with
such exercise. Newco hereby grants to James River an irrevocable
power of attorney which shall be coupled with an interest, to
take, on Newco's behalf, all action necessary to exercise the
Call.
17.3 Unwind of Transactions Contemplated Hereby. As soon as
practicable after the date on which the last of the events
described in Section 17.1(b) shall have occurred (the "Triggering
Date") and provided that the Call shall have been exercised by or
on behalf of Newco and the conditions of clause (a) of paragraph
1301 of the Indenture shall have been satisfied, the parties
hereto shall unwind any transaction contemplated hereby that has
been consummated before the Triggering Date with the result that
each party hereto is returned to its status existing immediately
before the commencement of the transactions contemplated hereby,
including taking the following actions:
(a) Newco shall deliver to James River, James River
Paper, JRIH or JRTC, as the case may be, such deeds, bills of
sale, endorsements, assignments and other instruments of
transfer, conveyance and assignment as shall be reasonably
necessary to convey or reconvey (i) the Paper Assets and any
other assets held by Newco or Newco Holdings as of the Triggering
Date to James River Paper or its designee, (ii) the Timber Assets
to JRTC and (iii) the U.K. Stock to JRIH; provided, however, that
all such documents shall be without recourse and without
representation or warranty. Newco shall take all such steps as
may be reasonably required to put (i) James River Paper in
possession and operating control of the Paper Assets and any
other assets held by Newco or Newco Holdings as of the Triggering
Date, (ii) JRTC in possession and operating control of the Timber
Assets and (iii) JR U.K. Holdings in possession of the U.K.
Stock.
(b) James River shall deliver to Newco such
assignments and other instruments of transfer, conveyance and
assumption as shall be reasonably necessary to transfer each
Assumed Liability and any other liabilities held by Newco or
Newco Holdings as of the Triggering Date to James River Paper and
JRTC.
(c) The parties hereto will take all action and
execute all documents necessary to terminate, or to cause the
termination of, this Agreement and each Related Agreement.
Termination of this Agreement in accordance with this Section
17.3(c) shall cause this Agreement to become wholly void and of
no further force and effect and there shall be no further
liability or obligation on the part of any party hereto except to
comply with the confidentiality provisions of Section 8.7 and the
provisions of this Article XVII.
(d) James River shall cause the holders of the Timber
Note and the Stock Note to deliver the same to Newco Holdings for
cancellation.
(e) James River shall have no obligation to complete
the Spinoff until the completion of the actions and deliveries
set forth in the preceding provisions of this Section 17.3.
17.4 Unwind Further Assurances. (a) Subject to the
provisions of Section 17.3(a), each of Newco and Newco Holdings
shall, at the request of James River or James River Paper, at or
after the Triggering Date, without further consideration, do,
execute, acknowledge or deliver, or shall cause to be done,
executed, acknowledged or delivered, all such further acts,
deeds, transfers, conveyances, assignments or assurances as may
be reasonably required for the better transferring, conveying,
assigning and assuring the Paper Assets and any other assets held
by Newco or Newco Holdings as of the Triggering Date to James
River Paper, the Timber Assets to JR Timber, and the U.K. Stock
to JRIH, or for aiding and assisting in the collection of or
reducing to possession (i) by James River or its designee the
Paper Assets or any other assets held by Newco or Newco Holdings
as of the Triggering, (ii) by JRTC, the Timber Assets and (iii)
by JR U.K. Holdings, the U.K. Stock.
(b) James River shall, at the request of Newco
Holdings or Newco, at or after the Triggering Date, without
further consideration, do, execute, acknowledge or deliver, or
shall cause to be done, executed, acknowledged or delivered, all
such further acts, deeds, or assurances as may be reasonably
required for the better effecting and evidencing of the
assumption by James River Paper or JRTC or another member of the
JR Group of the Assumed Liabilities and any other liabilities
held by Newco or Newco Holdings as of the Triggering Date.
17.5 Indemnification. If the events described in Section
17.1 occur, James River shall indemnify and hold Newco and Newco
Holdings and each of its Representatives harmless against all
Losses arising out of:
(a) the exercise of the rights described in Section
17.1(b)(iii) by Newco, any holder of the Newco High Yield Debt or
the lenders of the Senior Bank Debt;
(b) any actions taken by the parties to effect the
transactions contemplated hereby, including the unwind described
in this Article XVII; and
(c) the Assumed Liabilities and any other liabilities
transferred to James River in accordance with Section 17.3(b).
ARTICLE XVIII
GENERAL PROVISIONS
18.1 Notices. All notices and other communications required
or permitted hereunder shall be in writing (including telex,
telefax or similar writing) and shall be given, (a) if to James
River or James River Paper, to:
James River Corporation of Virginia
Tredegar Street
Richmond, Virginia 23217
Attention: Stephen E. Hare
Telefax: (804) 649-4317
with copies to:
James River Corporation of Virginia
Tredegar Street
Richmond, Virginia 23217
Attention: Clifford A. Cutchins, IV, Esquire
Telefax: (804) 649-4317
and:
McGuire, Woods, Battle & Boothe, L.L.P.
One James Center
Richmond, Virginia 23219
Attention: Marshall H. Earl, Jr., Esquire
Telefax: (804) 775-1061
(b) if to Newco or Newco Holdings, to:
Ernest S. Leopold
Executive Vice President
James River Corporation of Virginia
300 Lakeside Drive
Oakland, California 94612
Telefax: (510) 874-3939
and (b) if to Newco Holdings or Newco, to such address as may be
identified in a written notice to James River, which notice shall
specifically refer to this Section 18.1; or (c) in either case,
to such other person or to such other address or telex number as
the party to whom notice is to be given may have furnished the
other parties in writing by like notice. If mailed, any such
communication shall be deemed to have been given on the third
business day following the day on which the communication is
posted by registered or certified mail (return receipt
requested). If given by any other means it shall be deemed to
have been given when delivered to the address specified in this
Section 18.1.
18.2 Interpretation. The headings contained in this
Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement. Unless the
context otherwise requires, terms (including defined terms) used
in the plural include the singular, and vice versa.
18.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
18.4 Miscellaneous. This Agreement together with the
Related Agreements (i) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject
matter hereof; (ii) is not intended to and shall not confer upon
any person, association or entity, other than the parties hereto,
any rights or remedies with respect to the subject matter or any
provision hereof; (iii) shall not be assigned by operation of law
or otherwise; and (iv) shall be governed in all respects by the
laws of the Commonwealth of Virginia without regard to its laws
or regulations relating to conflicts of laws.
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be executed by their duly authorized officers.
JAMES RIVER CORPORATION OF VIRGINIA
By:/s/ Stephen E. Hare
Title: Senior Vice President
JAMES RIVER PAPER COMPANY, INC.
By:/s/ Stephen E. Hare
Title: Senior Vice President
CROWN VANTAGE INC.
By:/s/ Ernest S. Leopold
Title: Chairman & CEO
CROWN PAPER CO.
By:/s/ Ernest S. Leopold
Title: Chairman & CEO
<PAGE>
Note: Exhibits and Schedules omitted. The registrant
hereby undertakes to furnish to the Commission,
upon request, copies of any such documents.
Exhibit 99
UNAUDITED PRO FORMA JAMES RIVER
FINANCIAL INFORMATION
The following pro forma consolidated condensed balance sheet as
of June 25, 1995, and the pro forma consolidated statements of
operations for the six months ended June 25, 1995, and the year ended
December 25, 1994, are based on James River's financial statements,
as adjusted to give pro forma effect to the following:
(i) James River's receipt of cash from Crown Vantage, and application
thereof, in connection with the Spin-Off of Crown Vantage,
(ii) the receipt by James River of $100 million pay-in-kind notes
from Crown Vantage and
(iii) the execution of the transition agreements between James River
and Crown Vantage.
The pro forma information is presented as if the Spin-Off had
been completed as of June 25, 1995, for the pro forma consolidated
condensed balance sheet and as of the beginning of the year ended
December 25, 1994, for the pro forma consolidated statements of
operations presented. The pro forma financial information does not
purport to represent the actual financial position as it will finally
be recorded, or the results of operations which would actually have
been reported if the Spin-Off had occurred on the dates or for the
periods indicated, or which may be reported in the future.
JAMES RIVER AND CONSOLIDATED
SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED
BALANCE SHEET
(Unaudited)
June 25, 1995
(in millions)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
Historical Increase Pro Forma
James River Crown Vantage (Decrease) James River
(Note 2)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $45.7 $2.3 $482.3 (a) $43.4
(482.3) (b)
Accounts receivable 960.0 90.0 870.0
Inventories 896.4 101.8 794.6
Other current assets 162.9 16.7 146.2
Total current assets 2,065.0 210.8 0.0 1,854.2
Property, plant and equipment 7,191.1 1,151.9 6,039.2
Less accumulated depreciation 2,467.0 468.7 1,998.3
Net property, plant and equipment 4,724.1 683.2 0.0 4,040.9
Investments in affiliates 126.7 126.7
Other assets 368.5 42.9 100.0 (c) 427.9
2.3 (d)
Goodwill 804.7 30.3 774.4
Total assets $8,089.0 $967.2 $102.3 $7,224.1
LIABILITIES AND CAPITAL
Current liabilities
Accounts payable $607.2 $51.9 $555.3
Accrued liabilities 548.6 63.4 485.2
Long term debt, current portion 229.5 0.9 228.6
Other current liablities 18.7 1.6 17.1
Total current liabilities 1,404.0 117.8 0.0 1,286.2
Long-term debt 2,857.3 24.0 $(482.3) (b) 2,351.0
Accrued postretirement benefits
other
than pensions 552.7 104.7 448.0
Other long-term liabilities 318.0 40.0 278.0
Deferred income taxes 585.7 116.0 0.9 (d) 482.4
11.8 (e)
Minority interests 167.8 167.8
Shareholders' equity:
Preferred stock 740.3 740.3
Common shareholders' equity 1,463.2 564.7 482.3 (a) 1,470.4
100.0 (c)
1.4 (d)
(11.8) (e)
Total shareholders' equity 564.7 571.9 2,210.7
2,203.5
Total liabilities and capital $8,089.0 $967.2 $102.3 $7,224.1
</TABLE>
The accompanying notes are an integral part of this pro
forma information.
JAMES RIVER AND CONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS
(Unaudited)
For the Six Months Ended June 25, 1995
(in millions, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
Historical Increase Pro Forma
James Crown Vantage (Decrease) James River
River
(Note 3)
<S> <C> <C> <C> <C> <C>
Net sales $3,449.4 $533.9 $52.6 (a) $2,979.6
10.6 (b)
0.9 (c)
Cost of goods sold 2,703.8 468.2 52.6 (a) 2,298.2
10.6 (b)
(0.5) (d)
(0.1) (e)
Selling and administrative
expenses 522.4 28.1 494.3
Severance and other items 8.3 8.3
Income (loss) from operations 214.9 37.6 1.5 178.8
Interest expense 120.4 1.0 (15.4) (f) 104.0
Other income, net 18.5 0.3 6.7 (g) 24.9
Income before minority interests
and income tax expense 113.0 36.9 23.6 99.7
Income tax expense 48.6 14.8 9.2 (h) 43.0
Income before minority interests 64.4 22.1 14.4 56.7
Minority interests (0.5) (0.5)
Net income (loss) $63.9 $22.1 $14.4 $56.2
Preferred dividend requirements (29.3) (29.3)
Net income (loss) applicable to common
shares $34.6 $22.1 $14.4 $26.9
Net income (loss) per common share
and common share equivalent $.42 $.32
Weighted average number of common
shares and common share
equivalents 83.2 83.2
</TABLE>
The accompanying notes are an integral part of this pro
forma information.
JAMES RIVER AND CONSOLIDATED
SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS
(Unaudited)
For the Year Ended December 25, 1994
(in millions, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
Historical Increase Pro Forma
James Crown (Decrease) James River
River Vantage
(Note 3)
<S> <C> <C> <C> <C> <C>
Net sales $5,417.3 $875.3 $75.3 (a) $4,634.5
16.5 (b)
0.7 (c)
Cost of goods sold 4,452.0 832.5 75.3 (a) 3,709.6
16.5 (b)
(1.0) (d)
(0.7) (e)
Selling and administrative
expenses 808.7 51.1 757.6
Severance and other items 9.6 6.0 3.6
Income (loss) from operations 147.0 (14.3) 2.4 163.7
Interest expense 185.6 2.0 (22.8) (f) 160.8
Other income, net 28.9 0.7 12.4 (g) 40.6
Income before minority interests
and income tax expense (9.7) (15.6) 37.6 43.5
Income tax expense (benefit) 4.4 (5.6) 14.6 (h) 24.6
Income before minority interests (14.1) (10.0) 23.0 18.9
Minority interests 1.1 1.1
Net income (loss) $(13.0) $(10.0) $23.0 $20.0
Preferred dividend requirements (45.8) (45.8)
Net income (loss) applicable to
common shares $(58.8) $(10.0) $23.0 $(25.8)
Net income (loss) per common share
and common share equivalent $(.72) $(.32)
Weighted average number of common
shares and common share
equivalents 81.7 81.7
</TABLE>
The accompanying notes are an integral part of this pro
forma information.
JAMES RIVER AND CONSOLIDATED SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
1. Basis of Presentation
The accompanying pro forma consolidated condensed
balance sheet as of June 25, 1995, and the pro forma
consolidated statements of operations for the six months
ended June 25, 1995, and the year ended December 25, 1994,
give effect to the Spin-Off of Crown Vantage. The
historical combined financial statements of Crown Vantage
included in the pro forma information consist of the
historical combined assets and liabilities and operating
results of certain operations of James River which comprised
a substantial portion of James River's Communications Papers
Business and the specialty paper-based portion of its Food
and Consumer Packaging Business. Crown Vantage will include
the operations, assets and liabilities of pulp and paper
manufacturing facilities located in St. Francisville, LA,
Berlin-Gorham, NH, Adams, MA, Newark, DE, Ypsilanti, MI,
Port Huron, MI, Parchment, MI, Milford, NJ, Richmond, VA,
and two mills located in Scotland.
The historical consolidated financial statements of
James River are based on the unaudited consolidated balance
sheet as of June 25, 1995, and unaudited consolidated
statement of operations for the six months ended June 25,
1995. The results of operations for the six months ended
June 25, 1995, are not necessarily indicative of the results
to be expected for the full year. The consolidated
statement of operations for the year ended December 25,
1994, was derived from audited consolidated financial
statements as of that date.
2. Pro Forma Balance Sheet Adjustments
The pro forma consolidated condensed balance sheet gives
effect to the adjustments described below.
(a) To reflect the receipt of cash by James River from Crown
Vantage of $480 million of net cash proceeds upon the Spin-
Off of Crown Vantage and $2.3 million of cash dividends to
be received from a foreign subsidiary of James River to be
spun-off to Crown Vantage.
(b) To reflect the application of the $482.3 million of cash
received to reduce long-term debt.
(c) To record the issuance of $100 million pay-in-kind notes
to James River from Crown Vantage.
(d) To adjust the funded status of two of the pension plans
in which both James River and Crown Vantage employees
participate in order to reflect the estimated amount of plan
assets which will be transferred to Crown Vantage upon
completion of the Spin-Off.
(e) To reflect James River's portion of the deferred tax
liability related to the unremitted earnings of its foreign
subsidiary to be spun-off to Crown Vantage.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(Continued)
3. Pro Forma Statements of Operations Adjustments
The pro forma consolidated statements of operations give
effect to the adjustments described below.
(a) To adjust for Crown Vantage's sales to James River
facilities which are treated as third party sales in Crown
Vantage's historical financial statements. These sales
should not be subtracted from James River's historical
financial statements where they are properly treated as
intercompany sales.
(b) To adjust for James River's sales to Crown Vantage
facilities which are treated as intercompany sales in James
River's historical financial statements. These sales should
be treated as third party sales of James River on a pro
forma basis.
(c) Historically, when Crown Vantage had purchased pulp from
facilities within James River, the purchase price of the
pulp was reflected at existing published prices less a
discount ranging from 0% to 9% based upon a combination of
prevailing market prices and volumes purchased. In the
future, based upon a three year Pulp Purchase Agreement
between Crown Vantage and James River, the price of such
pulp purchases will be at existing published prices less a
discount ranging from 0% to 6% based upon a combination of
prevailing market prices and volumes purchased. This
adjustment reflects the increase in James River's sales
pursuant to this agreement.
(d) To reflect the decrease in James River's cost of goods
sold due to the decrease in cost per ton for James River's
purchases of creped paper from the Berlin-Gorham mill,
pursuant to the Berlin-Gorham Product Supply Agreement
between Crown Vantage and James River.
(e) To reflect the decrease in James River's pension expense
related to adjustments to the funded status of two of the
pension plans in which both James River and Crown Vantage
employees participate.
(f) To reflect the decrease in James River's interest
expense resulting from James River's receipt of $480 million
of net cash proceeds upon the Spin-Off of Crown Vantage and
$2.3 million of cash dividends to be received from a foreign
subsidiary of James River to be spun-off to Crown Vantage,
both of which were applied to reduce James River's long-term
debt.
(g) To reflect James River's interest income on the pay-in-
kind notes received from Crown Vantage as if such notes were
received as of the beginning of the year ended December 25,
1994.
(h) To reflect the effect of the pro forma adjustments on
income tax expense using an estimated marginal tax rate of
38.9% for the periods presented.
