<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 17, 1999
---------------
BOWATER INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 1-8712 62-0721803
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
55 East Camperdown Way
P.O. Box 1028
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 271-7733
--------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 17, 1999, Bowater Incorporated ("Bowater") sold all of the
stock of its wholly-owned subsidiary Great Northern Paper, Inc. ("GNP") to
Inexcon Maine, Inc. ("Inexcon"). The sale was made pursuant to a Stock Purchase
Agreement dated May 18, 1999, by and between Bowater and Inexcon, as amended on
August 17, 1999. The aggregate consideration of $250 million (consisting of
cash, a note and the assumption of certain liabilities) was determined by
arms-length negotiation between the parties. GNP operates pulp and paper mills
in Millinocket and East Millinocket, Maine, and owns approximately 400,000 acres
of timberlands and an extensive hydroelectric system.
A copy of the related press release issued by Bowater on August 17,
1999, is attached hereto as Exhibit 99.1 and is incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Financial statements of businesses acquired:
Not applicable.
Pro forma financial information:
The required pro forma financial information is filed
herewith.
Exhibits
Exhibit No. Description
----------- -----------
2.1 Stock Purchase Agreement dated as of May 18, 1999, by
and between Inexcon Maine, Inc. and the Company.
Schedules and other attachments have been omitted but
will be furnished supplementally to the Commission
upon request.
2.1.1 Amendment No. 1 dated August 17, 1999, to Stock
Purchase Agreement dated May 18, 1999, between Inexcon
Maine, Inc. and the Company. Attachments have been
omitted but will be furnished supplementally to the
Commission upon request.
99.1 Press release dated August 17, 1999.
<PAGE> 3
BOWATER INCORPORATED
PRO FORMA CONDENSED FINANCIAL STATEMENTS OF BOWATER INCORPORATED
The following unaudited proforma condensed financial statements give effect to
the sale of Great Northern Paper ("GNP") which occurred August 17, 1999. The
unaudited pro forma condensed income statements were prepared as if the sale had
occurred as of the beginning of the periods presented (i.e. January 1, 1998),
and the unaudited pro forma condensed balance sheet was prepared as if the sale
occurred as of June 30, 1999. These statements do not purport to represent what
the results of operations or financial position of Bowater would actually have
been if the sale had occurred on the dates referred to above or to be indicative
of the future results of operations or financial position of Bowater. The
unaudited pro forma condensed financial statements should be read together with
the audited financial statements and notes thereto as included in the Bowater
Incorporated 1998 Annual Report on Form 10-K and the unaudited 1999 Quarterly
Reports on Form 10-Q.
<PAGE> 4
BOWATER INCORPORATED
PRO FORMA CONDENSED BALANCE SHEET - UNAUDITED
JUNE 30, 1999
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Bowater (1) Pro Forma
As Reported GNP Adjustments Pro Forma
------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 36.5 $ (0.1) $ 39.5 (1) $ 75.9
Marketable securities 2.1 - - 2.1
Accounts receivable, net 301.0 (33.1) 10.0 (1),(2) 277.9
Inventories 187.4 (28.6) - 158.8
Other current assets 71.3 (4.9) - 66.4
------------------------------------------------------------
Total current assets 598.3 (66.7) 49.5 581.1
Timber and timberlands 372.0 (24.3) - 347.7
Fixed assets 2,722.8 (139.3) - 2,583.5
Goodwill 889.9 - - 889.9
Other assets 141.5 (3.4) - 138.1
------------------------------------------------------------
Total assets $ 4,724.5 $ (233.7) $ 49.5 $ 4,540.3
============================================================
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Current installments of long-term debt $ 20.0 $ - $ - $ 20.0
Short-term bank debt 70.5 - (70.5) (2) -
Accounts payable and accrued liabilities 321.3 (41.2) 28.0 (3) 308.1
Income taxes payable 57.2 - (50.8) (4) 6.4
Dividends payable 10.9 - - 10.9
------------------------------------------------------------
Total current liabilities 479.9 (41.2) (93.3) 345.4
Long-term debt, net of current installments 1,463.5 - - 1,463.5
Other long-term liabilities 340.2 (122.7) 65.0 (3) 282.5
Deferred income taxes 454.1 - 34.1 (4) 488.2
Minority interests in subsidiaries 128.6 - - 128.6
Commitments and contingencies
Shareholders' Equity
Common stock 59.6 - - 59.6
Exchangeable shares 151.2 - - 151.2
Additional paid-in capital 1,260.4 (78.3) 78.3 1,260.4
Retained earnings 746.7 - (34.6) (5) 712.1
Accumulated other comprehensive income/(loss) (26.2) 8.5 - (17.7)
Loan to ESOT (1.7) - - (1.7)
Treasury stock (331.8) - - (331.8)
------------------------------------------------------------
Total shareholders' equity 1,858.2 (69.8) 43.7 1,832.1
------------------------------------------------------------
Total liabilities and shareholders' equity $ 4,724.5 $ (233.7) $ 49.5 $ 4,540.3
============================================================
</TABLE>
See accompanying notes to Pro Forma Condensed Financial Statements.
<PAGE> 5
BOWATER INCORPORATED
PRO FORMA CONDENSED INCOME STATEMENT - UNAUDITED
FOR THE YEAR ENDED DECEMBER 31, 1998
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
(1)
GNP and
Bowater Pro Forma
As Reported Adjustments Pro Forma
-----------------------------------------------
<S> <C> <C> <C>
Net Sales $ 1,995.0 $ (425.0) $ 1,570.0
Cost of Sales 1,422.2 (351.7) 1,070.5
Depreciation, amortization and cost
of timber harvested 229.6 (29.4) 200.2
Impairment of assets 119.6 (119.6) -
-----------------------------------------------
Gross profit 223.6 75.7 299.3
Selling and administrative expense 81.4 - 81.4
-----------------------------------------------
Operating income 142.2 75.7 217.9
Other expense (income):
Interest income (17.5) (0.7) (2) (18.2)
Interest expense, net of capitalized interest 98.4 (4.2) (2) 94.2
Gain on sale of timberlands (21.1) 1.1 (20.0)
Other, net 65.6 0.1 65.7
-----------------------------------------------
Income before income taxes and
minority interest 16.8 79.4 96.2
Income tax expense (benefit) 27.1 36.0 63.1
Minority interests in net income of subsidiaries 8.2 - 8.2
-----------------------------------------------
Net income (loss) $ (18.5) $ 43.4 $ 24.9
=========== =============
Per Share amounts:
Basic average common shares outstanding 47.6 - 47.6
Basic earnings (loss) per share $ (0.44) $ 0.92 $ 0.48
=========== =============
Diluted average common and common
equivalent shares outstanding 47.6 1.9 49.5 (6)
Diluted earnings (loss) per share $ (0.44) $ 0.92 $ 0.48 (6)
=========== =============
</TABLE>
See accompanying notes to Pro Forma Condensed Financial Statements.
<PAGE> 6
BOWATER INCORPORATED
PRO FORMA CONDENSED INCOME STATEMENT - UNAUDITED
FOR THE SIX MONTHS ENDED JUNE 30, 1999
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
(1)
GNP and
Bowater Pro Forma
As Reported Adjustments Pro Forma
------------------------------------------------
<S> <C> <C> <C>
Net Sales $ 1,098.7 $ (159.4) $ 939.3
Cost of Sales 840.8 (148.5) 692.3
Depreciation, amortization and cost
of timber harvested 151.8 (13.9) 137.9
Impairment of assets 92.0 (92.0) -
------------------------------------------------
Gross profit 14.1 95.0 109.1
Selling and administrative expense 42.6 - 42.6
------------------------------------------------
Operating income (28.5) 95.0 66.5
Other expense (income):
Interest income (1.8) (0.4) (2) (2.2)
Interest expense, net of capitalized interest 63.0 (2.1) (2) 60.9
Gain on sale of timberlands (253.7) 253.7 -
Other, net (28.2) - (28.2)
------------------------------------------------
Income (loss) before income taxes and
minority interest 192.2 (156.2) 36.0
Income tax expense 77.5 (60.0) 17.5
Minority interests in net income of subsidiaries 3.0 - 3.0
------------------------------------------------
Net income (loss) $ 111.7 $ (96.2) $ 15.5
============= ==============
Per Share amounts:
Basic average common shares outstanding 54.4 - 54.4
Basic earnings (loss) per share $ 2.03 $ (1.77) $ 0.26
============= ==============
Diluted average common and common
equivalent shares outstanding 55.3 - 55.3 (7)
Diluted earnings (loss) per share $ 2.00 $ (1.74) $ 0.26 (7)
============= ==============
</TABLE>
See accompanying notes to Pro Forma Condensed Financial Statements.
<PAGE> 7
BOWATER INCORPORATED
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
($ IN MILLIONS UNLESS OTHERWISE NOTED)
1. These unaudited proforma condensed financial statements present results of
operations as if the sale of Great Northern Paper ("GNP") occurred as of
January 1, 1998 and present financial position as if the sale occurred on
June 30, 1999. Proceeds from the sale include cash of $110.0 million, a note
receivable for $10.0 million, and the assumption of certain liabilities of
$130.0 million.
2. Debt Repayment and Interest Costs
The proforma condensed financial statements reflect, for the periods
presented, the interest savings resulting from the repayment of debt, and
interest income on the $10.0 million note receivable from the buyer. Interest
expense decreased $4.2 million for 1998 and $2.1 million for the first six
months of 1999 assuming debt totaling $70.5 million was repaid with an
interest cost of 6%. Interest income from the note receivable amounted to
$0.7 million for 1998 and $0.4 million for the first six months of 1999. The
tax effect of the reduction in net interest cost was additional tax expense
of $1.9 million for 1998 and $1.0 million for the six months ended June 30,
1999.
3. Liabilities
In connection with the sale, Bowater retained certain employee related
liabilities and accrued transaction costs, working capital and other
adjustments totalling $93.0 million.
4. Income Taxes
Deferred tax adjustments associated with additional accrued liabilities noted
above and the loss on sale net to $34.1 million. The current income tax
adjustment totaled $50.8 million.
5. Loss on Sale
The proforma condensed balance sheet reflects a charge to retained earnings
of $34.6 million representing the net loss on the sale of GNP.
6. Earnings per share for the year ended December 31, 1998
The diluted earnings per share calculation includes the following
adjustments: (i) weighted shares outstanding include the dilutive effect of
an additional 1.9 million common stock equivalents; (ii) net income is
increased by adding back $1.0 million of interest expense on convertible
debentures that are assumed to be converted to common stock; and (iii) net
income is reduced by $2.2 million of preferred stock dividends.
7. Earnings per Share for the six months ended June 30, 1999
The diluted earnings per share calculation includes a reduction to net income
of $1.1 million for preferred stock dividends.
<PAGE> 8
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 1, 1999
BOWATER INCORPORATED
(Registrant)
By: /s/ Michael F. Nocito
---------------------------------------
Name: Michael F. Nocito
-------------------------------------
Title: Vice President and Controller
------------------------------------
<PAGE> 9
EXHIBIT INDEX
The following exhibits are filed herewith:
Exhibit No. Description
- ----------- -----------
2.1 Stock Purchase Agreement dated as of May 18, 1999, by and between
Inexcon Maine, Inc. and the Company. Schedules and other attachments
have been omitted but will be furnished supplementally to the
Commission upon request.
2.1.1 Amendment No. 1 dated August 17, 1999, to Stock Purchase Agreement
dated May 18, 1999, between Inexcon Maine, Inc. and the Company.
Attachments have been omitted but will be furnished supplementally to
the Commission upon request.
99.1 Press release dated August 17, 1999.
<PAGE> 1
EXHIBIT 2.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
BETWEEN
INEXCON MAINE, INC.
AND
BOWATER INCORPORATED
------------------------
DATED AS OF MAY 18, 1999
THIS AGREEMENT SHALL BE KEPT CONFIDENTIAL PURSUANT TO THE TERMS OF THE
CONFIDENTIALITY AGREEMENT DATED JANUARY 11, 1999 BETWEEN INEXCON PAPERS INC. AND
BOWATER INCORPORATED
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF TRANSACTION............................................................................................1
ARTICLE I.........................................................................................................1
CERTAIN DEFINITIONS...............................................................................................1
1.01 Specific Definitions............................................................................1
1.02 Other Terms....................................................................................11
1.03 Other Definitional Provisions..................................................................12
ARTICLE II.......................................................................................................12
PURCHASE AND SALE OF GNP SHARES..................................................................................12
2.01 Basic Transaction..............................................................................12
2.02 Purchase Price.................................................................................12
2.03 Post-Closing Adjustments.......................................................................14
(a) Adjusted Net Working Capital..........................................................14
(b) Net Working Capital Adjustment........................................................15
2.04 Retained Assets................................................................................16
2.05 Retained Liabilities...........................................................................16
ARTICLE III......................................................................................................16
RELATED AGREEMENTS...............................................................................................16
3.01 Stock Certificates; Stock Powers...............................................................16
3.02 Promissory Notes...............................................................................16
3.03 Marketing Agreement............................................................................16
3.04 Shared Services Agreement......................................................................16
3.05 Nonsolicitation Agreement......................................................................16
ARTICLE IV.......................................................................................................17
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF SELLER..........................................................................................17
4.01 Organization and Good Standing.................................................................17
4.02 Due Authorization..............................................................................17
4.03 Noncontravention...............................................................................18
4.04 Capitalization.................................................................................18
4.05 GNP Shares.....................................................................................18
4.06 Litigation Regarding GNP Shares. ..............................................................19
4.07 Interest in Related Entities...................................................................19
4.08 Investments....................................................................................19
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
4.09 Title to Assets; Encumbrances..................................................................19
4.10 Real and Leased Property.......................................................................20
(a) Mill Sites............................................................................20
(b) Fee Timberlands.......................................................................20
(c) Owned Real Property...................................................................20
(d) Leased Real Property..................................................................21
(e) Hydroelectric System Easements........................................................21
(f) Permitted Exceptions..................................................................22
(g) Required Records......................................................................22
(h) Hydroelectric System Operation........................................................22
4.11 Intellectual Property..........................................................................22
4.12 No Undisclosed Liabilities.....................................................................24
4.13 Financial Statements...........................................................................24
4.14 Absence of Changes.............................................................................24
4.15 Tax Matters....................................................................................27
4.16 Compliance with Laws, Etc......................................................................28
4.17 Litigation Regarding GNP.......................................................................29
4.18 Permits, Etc...................................................................................30
4.19 Employees; Labor Relations.....................................................................30
4.20 Employee Benefits..............................................................................31
(a) Benefit Plans.........................................................................31
(b) Documents Furnished...................................................................31
(c) Qualification; Compliance.............................................................32
(d) Multiemployer Plans...................................................................32
4.21 Powers of Attorney.............................................................................32
4.22 Agreements, Etc................................................................................33
4.23 Brokers' or Finders' Fees, Etc.................................................................34
4.24 Environmental Protection.......................................................................34
4.25 Projections....................................................................................38
4.26 Disclosures....................................................................................38
4.27 Condition of Hydroelectric System Assets.......................................................38
4.28 Books and Records..............................................................................39
4.29 Accounts Receivable............................................................................39
4.30 Inventories....................................................................................39
4.31 Bank Accounts..................................................................................39
4.32 Warranty and Product Liability Matters.........................................................39
4.33 Insurance......................................................................................40
4.34 Additional Representations or Warranties.......................................................40
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE V........................................................................................................40
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF BUYER...........................................................................................40
5.01 Organization and Good Standing.................................................................40
5.02 Due Authorization..............................................................................40
5.03 Noncontravention...............................................................................41
5.04 Investment.....................................................................................41
5.05 Disclosure.....................................................................................41
ARTICLE VI.......................................................................................................41
CERTAIN TAX MATTERS AND EXPENSES.................................................................................41
6.01 Section 338(h)(10) Election....................................................................41
6.02 Tax Allocation.................................................................................42
6.03 Tax Periods Ending on or Before the Closing Date...............................................43
6.04 Tax Periods Ending After the Closing Date......................................................44
6.05 Cooperation on Tax Matters.....................................................................44
6.06 Tax Sharing Agreements.........................................................................45
6.07 Sales and Transfer Taxes.......................................................................45
6.08 Tax Elections, Etc.............................................................................46
ARTICLE VII......................................................................................................46
PRE-CLOSING COVENANTS............................................................................................46
7.01 General........................................................................................46
7.02 Press Releases and Public Announcements........................................................46
7.03 Disclosure.....................................................................................46
7.04 Operation of Business..........................................................................47
7.05 Books of Account...............................................................................47
7.06 Access to Information..........................................................................47
7.07 Cooperation....................................................................................48
7.08 Consents.......................................................................................48
7.09 Notice of Developments.........................................................................48
7.10 Related Agreements.............................................................................48
7.11 Other Changes..................................................................................48
7.12 Real Property Transactions.....................................................................49
7.13 Hart-Scott-Rodino..............................................................................49
7.14 Issuance of Securities.........................................................................49
7.15 Negotiation with Unions........................................................................49
7.16 No Negotiation.................................................................................50
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
7.17 Audited Financial Statements. .................................................................50
7.18 Financing Commitment...........................................................................50
7.19 Negotiation of Retained Liabilities............................................................50
ARTICLE VIII.....................................................................................................51
CONDITIONS TO OBLIGATION TO CLOSE................................................................................51
8.01 Conditions to Obligations of Both Parties......................................................51
(a) No Order, Decree or Injunction........................................................51
(b) Expiration of HSR Act Waiting Period..................................................51
(c) Consents Obtained.....................................................................51
(d) Environmental Insurance...............................................................51
8.02 Conditions to Obligation of Buyer..............................................................51
(a) Representations and Warranties........................................................52
(b) Performance of Obligations of Seller..................................................52
(c) Closing Documentation.................................................................52
(d) No Adverse Change.....................................................................53
(e) Union Contracts.......................................................................53
(f) FIRPTA Certificate....................................................................53
(g) Affiliate Transactions................................................................53
(h) No Proceedings........................................................................53
(i) No Claim Regarding Stock Ownership or Sale Proceeds...................................53
(j) Financing Commitment..................................................................53
8.03 Conditions to Obligation of Seller.............................................................54
(a) Representations and Warranties........................................................54
(b) Performance of Obligations of Buyer...................................................54
(c) Closing Documentation.................................................................54
(d) Release of Guaranty...................................................................55
(e) Board Approval........................................................................55
ARTICLE IX.......................................................................................................55
THE CLOSING......................................................................................................55
9.01 Time and Place of Closing......................................................................55
9.02 Instruments of Transfer, Etc...................................................................56
ARTICLE X........................................................................................................56
POST-CLOSING COVENANTS...........................................................................................56
10.01 Expenses.......................................................................................56
10.02 Further Assurances.............................................................................56
10.03 Commissions and Fees...........................................................................57
10.04 Consents.......................................................................................57
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
10.05 Removal of Trademarks, Etc.....................................................................57
10.06 Participation and Service......................................................................57
10.07 Cafeteria Plan.................................................................................57
10.08 Confidentiality................................................................................58
10.09 Directory Paper Sales..........................................................................58
10.10 Purchase Agreement Distributions...............................................................58
10.11 Change in Use of Recycled Pulp Plant...........................................................58
10.12 Retention Bonuses..............................................................................58
ARTICLE XI.......................................................................................................59
REMEDIES FOR BREACHES OF THIS AGREEMENT..........................................................................59
11.01 Survival of Representations and Warranties.....................................................59
11.02 Indemnification Provisions for Benefit of Buyer................................................60
11.03 Indemnification Provisions for Benefit of Seller...............................................61
11.04 Indemnification Regarding Purchase Agreements..................................................62
11.05 Matters Involving Third Parties................................................................63
11.06 Sole Remedy....................................................................................64
ARTICLE XII......................................................................................................65
TERMINATION......................................................................................................65
12.01 Termination of Agreement.......................................................................65
12.02 Effect of Termination..........................................................................65
ARTICLE XIII.....................................................................................................66
MISCELLANEOUS....................................................................................................66
13.01 Entire Agreement...............................................................................66
13.02 No Third-Party Beneficiaries...................................................................66
13.03 Succession and Assignment......................................................................66
13.04 Counterparts...................................................................................66
13.05 Headings.......................................................................................66
13.06 Notices........................................................................................67
13.07 Governing Law..................................................................................67
13.08 Dispute Resolution.............................................................................67
(a) Mediation.............................................................................67
(b) Arbitration...........................................................................69
13.09 Return of Information..........................................................................70
13.10 Amendments and Waivers.........................................................................70
13.11 Severability...................................................................................70
13.12 Expenses.......................................................................................71
13.13 Construction...................................................................................71
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C>
13.14 Incorporation of Exhibits, Annexes, and Schedules..............................................71
13.15 Specific Performance...........................................................................71
13.16 Submission to Jurisdiction.....................................................................71
13.17 Fulfillment of Obligations.....................................................................72
13.18 Definition of "ordinary course"................................................................72
13.19 Attorney's Fees................................................................................72
</TABLE>
vi
<PAGE> 8
DISCLOSURE SCHEDULE
<TABLE>
<CAPTION>
PAGE/SECTION
SECTION DESCRIPTION OF SCHEDULE REFERENCE
------- ----------------------- ---------
<S> <C> <C>
1.01(H) Hydroelectric System 6 [ss.1.01]
1.01(T1) Leases Extending Beyond Fifth Anniversary 10 [ss.1.01]
2.04 Retained Assets 16 [ss.2.04]
2.05 Retained Liabilities 16 [ss.2.05]
4.02 Approvals 18 [ss.4.02]
4.03 Noncontravention 18 [ss.4.03]
4.07 Interest in Related Entities 19 [ss.4.07]
4.08 Investments 19 [ss.4.08]
4.09 Title to Assets; Encumbrances 19 [ss.4.09]
4.10(a) Mill Sites; Leased Real Property 20 [ss.4.10(a)]
4.10(b) Fee Timberlands; Leased Real Property 20 [ss.4.10(b)]
4.10(c) Owned Real Property 20 [ss.4.10(c)]
4.11(a) Intellectual Property 22 [ss.4.11(a)]
4.11(b) Intellectual Property - Computer Software 22 [ss.4.11(b)]
4.11(d) Intellectual Property - Litigation; Infringements 23 [ss.4.11(d)]
4.11(g) Intellectual Property - Encumbrances 23 [ss.4.11(g)]
4.11(h) Intellectual Property - Licenses 23 [ss.4.11(h)]
4.12 No Undisclosed Liabilities 24 [ss.4.12]
4.13 Financial Statements 24 [ss.4.13]
4.14 Absence of Changes 24 [ss.4.14]
4.15 Tax Matters 27 [ss.4.15]
4.16 Compliance with Laws 28 [ss.4.16]
4.17 Litigation Regarding GNP 29 [ss.4.17]
</TABLE>
vii
<PAGE> 9
<TABLE>
<CAPTION>
SECTION DESCRIPTION OF SCHEDULE REFERENCE
------- ----------------------- ---------
<S> <C> <C>
4.18 Permits 30 [ss.4.18]
4.19 Employees; Labor Relations 30 [ss.4.19]
4.20(a) Employee Benefit Plans 31 [ss.4.20(a)]
4.20(b) Benefit Plans Retained by Seller 31 [ss.4.20(b)]
4.20(c) Qualification; Compliance 32 [ss.4.20(c)]
4.21 Powers of Attorney 32 [ss.4.21]
4.22 Material Agreements 33 [ss.4.22]
4.24 Environmental Protection 36 [ss.4.24]
4.30 Inventory 39 [ss.4.30]
4.31 Bank Accounts 39 [ss.4.31]
4.32 Product Liability Claims 39 [ss.4.32]
4.33 Insurance Policies 40 [ss.4.33]
7.04 Assets 47 [ss.7.04]
7.11 Other Changes 48 [ss.7.11]
7.12 Real Property Transactions 49 [ss.7.12]
</TABLE>
viii
<PAGE> 10
EXHIBITS
<TABLE>
<CAPTION>
PAGE/SECTION
EXHIBIT DESCRIPTION REFERENCE
- ------- ----------- ------------
<S> <C> <C>
A Form of Term Note 13 [ss.2.02(b)]
B Base Balance Sheet Working Capital 15 [ss.2.03(b)]
C Form of Marketing Agreement 16 [ss.3.03]
D Form of Shared Services Agreement 16 [ss.3.04]
E Form of Nonsolicitation Agreement 16 [ss.3.05]
F Union Contracts 49 [ss.7.15]
G Form of Opinion of General Counsel 52 [ss.8.02(c)(vi)]
of Seller
H Form of Opinion of Counsel to Buyer 54 [ss.8.03(c)(iii)]
M Description of Modernization Program 8 [ss.1.01(M)]
</TABLE>
ix
<PAGE> 11
STOCK PURCHASE AGREEMENT
Agreement entered into as of May 18, 1999, by and between Inexcon
Maine, Inc., a Maine corporation ("Buyer"), and Bowater Incorporated, a Delaware
corporation ("Seller"). Buyer and Seller are referred to collectively herein as
the "Parties."
SUMMARY OF TRANSACTION
WHEREAS, Seller is the record and beneficial owner of all of the issued
and outstanding shares of common stock, par value $1.00 per share (the "GNP
Shares"), of Great Northern Paper, Inc., a Delaware corporation ("GNP"); and
WHEREAS, Buyer desires to purchase, and Seller desires to sell, all of
the GNP Shares, upon the terms and subject to the satisfaction of the conditions
set forth in this Agreement.
NOW, THEREFORE, to effect such transactions and in consideration of the
mutual covenants, representations, warranties and agreements hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged by each Party, and intending to be legally bound hereby, the
Parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 SPECIFIC DEFINITIONS. As used in this Agreement and in the
Disclosure Schedule, the following terms shall have the meanings set forth or as
referenced below:
"ADR" shall have the meaning set forth in Section 13.08(a).
"Adjusted Closing Net Working Capital Amount" shall have the
meaning set forth in Section 2.03(a).
"Adverse Consequences" shall mean actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
"Affiliate" shall mean with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under common control with,
such other Person at the time at which the determination of affiliation is made.
As used in this definition, the term "control" (including, with
1
<PAGE> 12
correlative meanings, the terms "controlled by" and "under common control
with"), as applied to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or other
ownership interests, by contract or otherwise.
"Affiliate Transaction" shall mean any transaction between
Seller or any Affiliate of Seller, on the one hand, and GNP, on the other hand.
"Agreement" shall mean this Agreement, as the same may be
amended or supplemented from time to time in accordance with the terms hereof.
"Approvals" shall have the meaning set forth in Section 4.02.
"Assets" shall mean the assets of the Business, including, but
not limited to the Assets set forth on the Base Balance Sheet, the Owned Real
Property, those assets described in Schedule 7.04, the Intellectual Property and
the Books and Records, but excluding the Retained Assets.
"Assumed Contracts" shall mean all contracts to which GNP is a
party which by their terms will continue in force and effect and with respect to
which GNP shall have obligations and/or derive benefits following the Closing
Date.
"Assumed Liabilities" shall have the meaning set forth in
Section 4.12.
"Authorizations" shall have the meaning set forth in Section
4.18.
"Base Balance Sheet" shall have the meaning set forth in
Section 4.13.
"Benefit Plans" shall have the meaning set forth in Section
4.20(a).
"Books and Records" shall mean all books, ledgers, files,
reports, plans, photographs and operating records and databases, whether in
electronic format or otherwise, deeds, title abstracts, title records, plans,
acquisition files and all other title and boundary information and all
information as to inventory, management and the history of GNP in the possession
of, or maintained by or for, GNP.
"Business" shall mean, to the extent conducted by GNP as of
the date of this Agreement, the manufacture, sale and distribution by GNP of
newsprint, directory paper, various grades of coated and uncoated ground
wood-containing paper and pulp, the sale of standing timber or logs, the
generation, transmission and sale of hydroelectric power and power with fossil
fuels, the ownership and management of timberlands and the growing of trees.
2
<PAGE> 13
"Business Day(s)" shall mean any day or days other than a
Saturday, a Sunday or a day on which commercial banks in either New York City or
Montreal are authorized or required by law to close.
"Business Equipment Tax Reimbursement Program" means the
Business Equipment Tax Reimbursement Program, 36 M.R.S.A. Secs. 6651 et seq.
"Buyer" shall have the meaning set forth in the recitals.
"Buyer Deductible Amount" shall have the meaning set forth in
Sections 11.03.
"Buyer Group" shall have the meaning set forth in Section
7.03.
"Buyer Indemnified Parties" shall have the meaning set forth
in Section 11.02(a).
"Chosen Courts" shall have the meaning set forth in Section
13.16.
"Cleanup" shall have the meaning set forth in Section 4.24(a).
"Closing" shall mean the closing of the transactions
contemplated by this Agreement.
"Closing Date" shall have the meaning set forth in Section
9.01.
"Closing Date Net Working Capital Amount" shall have the
meaning set forth in Section 2.03(a).
"Closing Net Working Capital Certificate" shall have the
meaning set forth in Section 2.06(b).
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commercial Forestry Excise Tax" shall mean the Commercial
Forestry Excise Tax, 36 M.R.S.A. ss.2721, et. seq.
"Confidentiality Agreement" shall mean the Agreement, dated
January 11, 1999 between Buyer and Seller.
"Consents" shall have the meaning set forth in Section 7.08.
"Contracts" shall mean any agreements, contracts, leases,
purchase orders, arrangements, commitments and licenses.
"Controlled Group" shall have the meaning set forth in Section
4.20(a).
3
<PAGE> 14
"Counter-Notice" shall have the meaning set forth in Section
13.08(a).
"Current Assets" shall mean the amount, determined in
accordance with GAAP applied on a consistent basis, of the following items which
are shown on the applicable balance sheet relating to the Business: Accounts
Receivable, Inventories and Prepaid Items (excluding all Tax assets and all
amounts payable to GNP pursuant to the Irving Purchase Agreement and the
McDonald Purchase Agreement).
"Current Liabilities" shall mean the amount, determined in
accordance with GAAP applied on a consistent basis, of the following items which
are shown on the applicable balance sheet relating to the Business: Accounts
Payable and Accrued Liabilities (which consists of accrued expenses and other
current liabilities and excludes Tax liabilities and excludes any liabilities
regarding pensions, OPEB and workers compensation).
"de Minimis Claims" shall have the meaning set forth in
Section 11.02(a) or 11.03(a), as appropriate.
"Derivative Work" shall have the meaning set forth in Section
4.11(k).
"Disclosure Schedule" shall have the meaning set forth in
Article IV.
"Dispute" shall have the meaning set forth in Section
13.08(a).
"Effective Time" shall have the meaning set forth in Section
2.03(a).
"Election Amount" shall have the meaning set forth in Section
6.01.
"Employee Plan" shall have the meaning set forth in Section
10.07.
"Employee Liability Policy"shall have the meaning set forth in
Section 5.07.
"Employees" shall mean all current and former employees of
GNP.
"Encumbrances" shall mean any and all mortgages, pledges,
easements, assessments, security interests, leases, subleases, liens, adverse
claims, tribal claims, levies, charges, options, warrants, assignments, rights
to possession, rights of others or restrictions (whether on voting, sale,
transfer, disposition or otherwise) or other encumbrances of any kind, whether
imposed by agreement, understanding, law or equity, or any conditional sale
contract, option contract, title retention contract, or other contract to give
or refrain from giving any of the foregoing.
"Environmental Law(s)" shall have the meaning set forth in
Section 4.24(a).
4
<PAGE> 15
"Environmental Liabilities and Costs" shall have the meaning
set forth in Section 4.24(a).
"Environmental Permits" shall have the meaning set forth in
Section 4.24(b).
"Environmental Policy" shall have the meaning set forth in
Section 5.06.
"Equity Commitments" shall have the meaning set forth in
Section 7.18.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Escrow Agreement" shall have the meaning set forth in Section
2.02(c).
"Fee Timberlands" shall have the meaning set forth in Section
4.10(b).
"FERC" shall mean the Federal Energy Regulatory Commission.
"Financial Statements" shall have the meaning set forth in
Section 4.13.
"Financing Commitment" shall have the meaning set forth in
Section 7.18. "GAAP" shall mean generally accepted accounting principles as
currently in effect in the United States.
"GNP Pension Plans" shall mean the pension plans maintained by
GNP as of the date hereof for the employees of GNP and includes the Great
Northern Paper, Inc. Salaried Employees Retirement Plan and the Great Northern
Paper, Inc. Pension Plan for Certain Employees.
"GNP Shares" shall have the meaning set forth in the recitals
and in Section 4.04.
"Guaranty" shall have the meaning set forth in Section
8.03(d).
"Hazardous Substance" shall have the meaning set forth in
Section 4.24(a).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
5
<PAGE> 16
"Hydroelectric System" shall include (i) one (1) pumping
station, and transmission lines, tower, conduits, and other electric
transmission facilities, presently constituting the hydroelectric system
operated by GNP and all land rights within FERC project boundaries or otherwise
reasonably necessary to operate and maintain the facilities or to comply with
the provisions of any of GNP's FERC licenses, including all recreational
facilities and shoreline buffers; (ii) all rights, easements and options
reserved pursuant to the McDonald Transaction Deeds; and (iii) those assets
described in Section 1.01(H) of the Disclosure Schedule.
"Indemnified Parties" shall have the meaning set forth in
Section 11.05(a).
"Indemnifying Party" shall have the meaning set forth in
Section 11.05(a).
"Initial Cash Payment" shall have the meaning set forth in
Section 2.02(a).
"Initiating Party" shall have the meaning set forth in Section
13.08(a).
"Intellectual Property" shall mean all of the following used
or held for use in the Business at any time in the past three (3) years, except
to the extent owned by Seller, including, without limitation, references to
"Bowater" and derivatives thereof, and logos associated therewith, and except
for Intellectual Property related primarily to Seller's prior sawmill operations
commonly known as the "Pinkham Lumber Company": (i) registered or unregistered
trademarks, logos, trade or brand names, service marks, industrial designs,
copyrights in both published and unpublished works and applications therefor;
(ii) patents (including divisions, reissues, renewals and extensions), patent
applications, patent rights or patent disclosures (including any patents issuing
on such applications, rights or disclosures); (iii) patterns, plans and designs;
(iv) registered user agreements, licenses, sublicenses and franchises; (v)
inventions, research and development work and data, trade secrets, formulae and
other proprietary know-how, aggregation and/or combination of compounds,
processes, technology; (vi) unpatented blue prints, flow sheets, equipment and
parts lists and descriptions and related instructions, manuals, data, records,
procedures and industrial property; (vii) computer software, source and object
codes, algorithms and all manuals and records in respect thereof to the extent
that all the above items of Intellectual Property have been used or held for use
in the Business at any time in the past three (3) years ("Computer Software");
and (viii) all other intellectual property rights, irrespective of the support
on which they are recorded or affixed, throughout the world.
"Interest Rate" shall have the meaning set forth in Section
2.02(b).
"Irving Purchase Agreement" shall mean the Purchase and Sale
Agreement dated as of December 23, 1998 by and among GNP, Seller, J.D. Irving,
Limited, Aroostook Timberlands, LLC, Irving Forest Products, Inc. and Irving
America, Inc., and the documents, instruments and agreements delivered pursuant
thereto and the closing thereof.
6
<PAGE> 17
"Knowledge of Seller" shall mean actual knowledge of Arthur
Birt, Sheldon Cote, Anthony H. Barash, Harry F. Geair, Eldon Doody, Roger Loney,
Donald G. McNeil, Arthur D. Fuller, David G. Maffucci, Marcia A. McKeague, Brian
R. Stetson, Richard Kuran, Frank Windle and Jeffrey M. Martin, after due inquiry
with respect to the period since January 1, 1992.
"Laws" shall mean any federal, state, foreign, or local law,
statute, ordinance, rule, regulation, order, judgment or decree.
"Leased Real Property" shall have the meaning set forth in
Section 4.10(d).
"Liabilities" shall have the meaning set forth in Section
4.12.
"Licensee Software" shall have the meaning set forth in
Section 4.11(c).
"Marketing Agreement" shall have the meaning set forth in
Section 3.03.
"Material Agreements" shall have the meaning set forth in
Section 4.22.
"McDonald Purchase Agreement" shall mean the Purchase and Sale
Agreement dated as of February 3, 1999 by and among GNP, Seller and McDonald
Investment Company, Inc., and the documents, instruments and agreements
delivered pursuant thereto and the closing thereof.
"McDonald Transaction Deeds" shall mean the following deeds
from GNP dated March 30, 1999: (i) to Great Northwoods, LLC recorded in the
Piscataquis County Registry of Deeds in Book 1191, Page 326; (ii) to Great
Northwoods, LLC recorded in the Somerset Registry of Deeds in Book 2541, Page
252 and (iii) to Somerset Woodlands Limited Liability Company recorded in the
Somerset County Registry of Deeds in Book 2541, Page 221.
"Mediation Notice"shall have the meaning set forth in Section
13.08(a).
"Mill Sites"shall have the meaning set forth in Section 4.10.
"Mill Site Permitted Exceptions" shall mean, to the extent in
force and applicable to the Mill Sites: (i) all liens for Taxes, assessments,
general and special, and governmental charges which are not due and payable as
of the Closing; (ii) any rights of the United States of America, the State of
Maine or others under the laws of the United States or the State of Maine in the
use and continuous flow of any brooks, streams or other natural water courses or
water bodies within, crossing or abutting the Mill Sites, riparian rights,
navigational servitudes and any rights of the State of Maine in and to the Great
Ponds as that term is defined in 38 M.R.S.A. ss.480-B(5); (iii) all land use
(including environmental and wetlands), building and zoning codes and ordinances
and other laws, ordinances, regulations, rules, orders, licenses or
determinations of any federal, state, county, municipal or other governmental
authority heretofore, now or hereafter enacted, made or issued by any such
authority affecting the Mill Sites; (iv) to the extent of record, all easements,
rights-of-way,
7
<PAGE> 18
covenants, conditions, restrictions, reservations, licenses and agreements; (v)
all electric power, telephone, gas, sanitary sewer, storm sewer, water and other
utility lines, pipelines, service lines and facilities of any nature now located
on, over or under the Mill Sites; (vi) all existing public and private roads and
streets (whether dedicated or undedicated), and all railroad lines and
rights-of-way affecting the Mill Sites; (vii) the exceptions set forth in the
Title Insurance Policies; (viii) those matters set forth as items 1 and 2 of
Section 4.10(c) of the Disclosure Schedule; and (ix) all easements and other
Encumbrances granted pursuant to the McDonald Transaction Deeds.
"Modernization Program" shall mean the modernization program
described in Exhibit M attached hereto.
"Mortgage"shall have the meaning set forth in Section 2.02(b).
"Net Working Capital" shall mean (x) Current Assets minus (y)
Current Liabilities of GNP.
"Net Working Capital Adjustment" shall have the meaning set
forth in Section 2.03(b).
"Non-Core Assets" shall mean certain assets to be identified
by the Parties prior to the Closing (negotiating in good faith), which are not
essential to the Business as presently conducted, including certain designated
timberlands and development rights.
"North Maine Woods" shall mean North Maine Woods Inc., a Maine
not-for-profit corporation.
"OPEB" shall mean obligations for post employment benefits
other than pensions.
"OSHA" shall mean the Federal Occupational Safety and Health
Code of 1970, as amended.
"Owned Real Property" shall have the meaning set forth in
Section 4.10(c).
"Party and "Parties" shall mean any signatory to this
Agreement.
"Person" shall mean an individual, a corporation, a
partnership, an association, a limited liability company, a trust or other
entity or organization.
"Pre-Closing Periods" shall mean all periods ending on or
before the Closing Date and, with respect to any Tax period that includes but
does not end on the Closing Date, the portion of such period that ends on and
includes the Closing Date.
"Promissory Notes" shall have the meaning set forth in Section
2.02(c).
8
<PAGE> 19
"Property" and "Properties" shall have the meaning set forth
in Section 4.24(b).
"Purchase Price" shall have the meaning set forth in Section
2.02.
"Recipient Party" shall have the meaning set forth in Section
13.08(a).
"Related Agreements" shall mean the instruments and agreements
delivered in accordance with Article III.
"Release" shall have the meaning set forth in Section 4.24(a).
"Resolution CPA Firm" shall have the meaning set forth in
Section 2.03(a).
"Retained Assets" shall have the meaning set forth in Section
2.04.
"Retained Liabilities" shall have the meaning set forth in
Section 2.05.
"Rules" shall have the meaning set forth in Section 13.08(b).
"Section 338(h)(10) Election" shall have the meaning set forth
in Section 6.01.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor law, and rules and regulations issued pursuant to that
Act or any successor law.
"Seller" shall have the meaning set forth in the recitals.
"Seller Deductible Amount" shall have the meaning set forth in
Section 11.02(a).
"Seller Group" shall have the meaning set forth in Section
7.03.
"Seller Indemnified Parties" shall have the meaning set forth
in Section 11.03(a).
"Seller's Objection" shall have the meaning set forth in
Section 2.03(a).
"Senior Lender" shall have the meaning set forth in Section
2.02(c).
"Seven Islands Purchase Agreement" shall mean the Purchase and
Sale Agreement dated as of March 31, 1998 between Seven Islands Land Company and
GNP.
"Shared Services Agreement" shall have the meaning set forth
in Section 3.04.
9
<PAGE> 20
"Six-Month LIBOR" shall mean a rate per annum equal to the
London Interbank offered rate for six month deposits, as such rate shall change
from day to day, as published from time to time in the Federal Reserve
Statistical Release - Selected Interest Rates (H.15 (519)) such rate to be
computed on the basis of a 360-day year.
"Subordinated Note" shall have the meaning set forth in
Section 2.02(c).
"Subordination Agreement" shall have the meaning set forth in
Section 2.02(c).
"Tax Returns" shall mean all reports, returns, declarations,
estimates and statements of any nature regarding Taxes, including, without
limitation, all schedules and other forms filed therewith, all amended returns,
refund claims, credit claims, reimbursement claims, information returns and
similar returns and reports.
"Tax" or "Taxes" shall mean all federal, state, local or
foreign taxes and similar governmental assessments and impositions, including,
but not limited to, income, gross receipts, windfall profits, value added,
severance, real property, personal property, production, sales, use, license,
excise, franchise, employment, withholding, transfer or similar taxes, together
with any interest, additions or penalties with respect thereto and any interest
in respect of such additions or penalties.
"Term Note" shall have the meaning set forth in Section
2.02(b).
"Third Party Claim" shall have the meaning set forth in
Section 11.05(a).
"Timberlands Permitted Exceptions" shall mean, to the extent
in force and applicable to the Fee Timberlands: (i) all liens for Taxes,
assessments and governmental charges which are not due and payable as of the
Closing; (ii) any rights of the United States of America, the State of Maine or
others under the laws of the United States or the State of Maine in the use and
continuous flow of any brooks, streams or other natural water courses or water
bodies within, crossing or abutting the Fee Timberlands, riparian rights,
navigational servitudes and any rights of the State of Maine in and to the Great
Ponds as that term is defined in 38 M.R.S.A. ss.480-B(5); (iii) all land use
(including environmental and wetlands), building and zoning codes and ordinances
and other laws, ordinances, regulations, rules, orders, licenses or
determinations of any federal, state, county, municipal or other governmental
authority affecting the Fee Timberlands; (iv) to the extent of record, all
easements, rights-of-way, licenses, permits and agreements for existing public
and private roads and streets, railroads, and electric power, telephone, gas,
water and other utility lines, pipelines, service lines and similar facilities;
(v) all existing leases, licenses, permits, notices and other agreements for
roads, bridges, boat ramps, woodyards, logging camps, tower sites, forestry
practice activities, and existing leases not having a term or renewal rights
extending beyond the fifth anniversary of the Closing Date and existing leases
extending beyond the fifth anniversary of the Closing Date and set forth in
Section 1.01(T1) of the Disclosure Schedule, for hunting, fishing and other
recreational purposes (including cabins and camps relating thereto), copies of
which have heretofore been provided to
10
<PAGE> 21
Buyer; (vi) rights of others under Assumed Contracts; (vii) rights, if any, of
persons in possession, with or without the knowledge and consent of the owner of
the property, and any claims of adverse possession; (viii) all encroachments,
overlaps, boundary line disputes, shortage in area, cemeteries and burial
grounds and other similar matters that would be disclosed by an accurate survey
or inspection of the Fee Timberlands; (ix) (A) all rights that have been granted
for sand and gravel removal in the normal course of Seller's timberland business
and (B) all rights excepted or reserved by, persons other than Seller or any
Affiliate of Seller, with respect to the mining, extraction and removal of all
minerals of whatever kind and character, including, without limitation, all
coal, iron ore, oil, gas, sulfur, methane gas in coal seams, limestone and other
minerals, metals and ores located on, in or under the Fee Timberlands that do
not materially interfere with the cutting and hauling of timber; (x) any loss or
claim that may arise by reason of or in connection with any indefiniteness or
uncertainty in the legal descriptions of the Fee Timberlands; (xi) any loss or
claim due to lack of access to any portions of the Fee Timberlands; (xii) as to
Fee Timberlands owned in common with others to the extent reflected in Section
4.10(b) of the Disclosure Schedule, any rights or claims of such other owners in
common, (xiii) mechanics liens arising from actions of Buyer, its agents,
employees or contractors; (xiv) all easements and other Encumbrances granted
pursuant to the McDonald Purchase Agreement or the McDonald Transaction Deeds;
and (xv) those matters set forth as items 1 and 2 of Section 4.10(c) of the
Disclosure Schedule; provided that none of the exceptions, with the exception of
those referred to in clauses (ix)(A), (xiii) and (xiv) above, will, individually
or in the aggregate, materially interfere with the ownership or use of the Fee
Timberlands as currently used.
"Title Insurance Policies" shall mean the title insurance
policies issued to GNP on December 30, 1991 by Chicago Title Insurance Company
(Policy Nos. OD58910-8920 and OD58910-8921).
"Transmission Facilities" shall have the meaning set forth in
Section 4.10(e).
"Uncollected Receivables" shall have the meaning set forth in
Section 4.29.
"Union Contracts" shall have the meaning set forth in Section
7.15.
"Usage Rights" shall have the meaning set forth in Section
4.10(c).
1.02 OTHER TERMS. Other terms may be defined elsewhere in the
text of this Agreement and, unless otherwise indicated, shall have the meaning
specifically ascribed to such terms wherever such terms appear elsewhere in this
Agreement.
11
<PAGE> 22
1.03 OTHER DEFINITIONAL PROVISIONS.
(a) References in this Agreement to "Sections," "Articles,"
"Exhibits," "Annexes" and the "Disclosure Schedule" are to sections, articles,
exhibits, annexes and the disclosure schedules herein and hereto unless
otherwise indicated. Unless otherwise set forth herein, references in this
Agreement to any document, instrument or agreement (including, without
limitation, this Agreement) (i) shall include all exhibits, annexes, schedules
and other attachments thereto, (ii) shall include all documents, instruments or
agreements issued or executed in replacement thereof and (iii) shall mean such
document, instrument or agreement, or replacement or predecessor thereto, as
amended, modified or supplemented from time to time in accordance with its terms
and in effect at any given time.
(b) Wherever from the context it appears appropriate, each
term stated in either the singular or plural shall include the singular or
plural.
(c) The words "hereof", "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(d) References to any statute or statutory provision shall be
construed as a reference to such statute or statutory provision as in force at
the date of this Agreement and as respectively subsequently amended, re-enacted
or consolidated.
(e) References to "dollars" or "$" shall be construed as being
United States dollars.
ARTICLE II
PURCHASE AND SALE OF GNP SHARES
2.01 BASIC TRANSACTION. On the terms and subject to the conditions
of this Agreement, and in reliance upon the representations and warranties of
the Parties herein, at the Closing Buyer agrees to purchase from Seller, and
Seller agrees to sell, transfer and convey to Buyer, all of the GNP Shares for
the consideration specified in Section 2.02 hereof.
2.02 PURCHASE PRICE. At the Closing, as the Purchase Price (the
"Purchase Price") to be paid by Buyer for the GNP Shares, Buyer shall pay to
Seller the sum of $120,000,000, payable as follows:
(a) CASH PAYMENT. Cash in the amount of $90,000,000, subject
to reduction as provided in Section 2.02(c) (such amount, the "Initial Cash
Payment"), subject to the Net Working Capital Adjustment pursuant to the
provisions of Section 2.03, if any. The Initial Cash Payment shall be paid at
the Closing in immediately available Federal Funds by wire transfer to the bank
account of Seller designated by Seller not later than two Business Days prior to
the Closing. The Net Working Capital Adjustment shall be paid (promptly after it
is determined in accordance with the
12
<PAGE> 23
provisions of Section 2.03 hereof) by the relevant Party in immediately
available Federal Funds by wire transfer to the bank account of the recipient
designated by the recipient not later than two Business Days prior to the day of
payment.
(b) TERM NOTE. A promissory note of Buyer and GNP in the
principal amount of $10,000,000, payable in full to Seller, its successors and
assigns on the first anniversary of the Closing Date, bearing interest at the
rate of the Six-Month LIBOR plus 1 3/8% (which interest shall be due and payable
together with any payment of the principal thereof, including any prepayment
thereof, in which event any such payment shall be applied against interest due
and payable before being applied against the principal thereof), subject to a
right of set-off for valid indemnification claims pursuant to Article XI hereof,
and otherwise in the form attached hereto as Exhibit A (the "Term Note").
(c) SUBORDINATED NOTE. A subordinated promissory note of Buyer
and GNP (the "Subordinated Note", and together with the Term Note, the
"Promissory Notes"), in the principal amount of $20,000,000, payable to Seller,
its successors and assigns, bearing interest at the five year treasury rate, as
the same shall exist on the Closing Date, plus 1 1/2% (which interest shall be
due and payable together with any payment of principal thereof, in which event
any such payment shall be applied against interest due and payable before being
applied against the principal thereof) and maturing on the date of maturity of
any indebtedness incurred by Buyer to an institutional lender (the "Senior
Lender"). The Subordinated Note shall provide for mandatory payments (which
payments shall not subordinated, except as set forth below): (i) upon any sale
by GNP of Non-Core Assets, with respect to which Buyer will cause GNP to use
reasonable commercial efforts to sell as promptly as practicable following the
Closing at a commercially reasonable price, the payments in such case to be the
net after-tax proceeds of each such sale, and (ii) upon any payment by Seller to
Buyer pursuant to Section 6.01, a payment by Buyer of so much of the amount
thereof as does not exceed the outstanding principal balance of the Subordinated
Note as of the date of such payment, provided, however, that any payment to be
made prior to the completion of the Modernization Program and shall be deferred
and instead shall be placed in an escrow account to be established by the
Parties promptly upon the execution hereof (the "Escrow Account"), the contents
of which Escrow Account to be paid to Seller on the earlier of said date, such
completion or the abandonment of the Modernization Program, subject to any
rights the Senior Lender may have in the event of acceleration of its
indebtedness, the terms of the subordination (to be included in such
subordinated note or in a separate subordination agreement) and the terms of the
escrow agreement pertaining to the Escrow Account, to be negotiated in good
faith by the parties in a manner reasonably satisfactory to the Senior Lender
and consistent with the foregoing.
13
<PAGE> 24
2.03 POST-CLOSING ADJUSTMENTS.
(a) ADJUSTED NET WORKING CAPITAL.
(i) As promptly as practicable after the
Closing (but in any event not later than 60 days after the Closing Date), Buyer
shall cause to be prepared and delivered to Seller, a certificate (the "Closing
Net Working Capital Certificate") setting forth Buyer's calculation of the Net
Working Capital (the "Closing Date Net Working Capital Amount") as of 12:01 A.M.
on the Closing Date (the "Effective Time") based upon the books and records of
GNP. Buyer will make available to Seller and its accountants copies of all
customary accounting working papers in their possession that were prepared in
connection with the calculation of the Closing Date Net Working Capital Amount
and to provide Seller and its accountants with access to the persons conducting
such preparation or review by or for Buyer. The Closing Net Working Capital
Amount shall be determined (x) in accordance with GAAP, and (y) in accordance
with accounting policies and practices consistent with those used in the
preparation of the Base Balance Sheet, without giving effect to the transactions
contemplated hereby. The fees and expenses of preparing the Closing Net Working
Capital Certificate shall be borne equally by Buyer and Seller.
(ii) Seller and Seller's accountants shall,
within 45 days after delivery by Buyer of the Closing Net Working Capital
Certificate, complete their review of the documents referred to in Section
2.03(a)(i) above. In the event that Seller questions or disagrees with the
proposed Closing Date Net Working Capital Amount, Seller shall inform Buyer in
writing (the "Seller's Objection"), setting forth a specific description of the
basis of Seller's Objection and the changes and adjustments to the Closing Date
Net Working Capital Amount which Seller believes should be made, on or before
the last day of such 45-day period. The failure to notify Buyer of any
objections or proposed changes within such period shall be deemed to mean that
Seller has no such objections or proposed changes.
(iii) If a Seller's Objection is timely delivered
pursuant to Section 2.03(a)(ii) above, Buyer and Seller, during the 15 days
following delivery of such notice, shall use their commercially reasonable
efforts to reach agreement on the disputed items or amounts in order to
determine, as may be required, the amount of the Closing Date Net Working
Capital Amount. If during such period, Buyer and Seller are unable to reach such
agreement, they shall refer their remaining differences to Arthur Anderson,
L.P., or another internationally recognized firm of independent public
accountants as to which Seller and Buyer mutually agree (the "Resolution CPA
Firm"), who shall be informed of the confidentiality agreements contained herein
and applicable hereto and agree to be bound thereby, and who shall determine on
the basis of the standards set forth in Section 2.03(a)(i) hereof, and only with
respect to the remaining differences so submitted, whether and to what extent,
if any, the Closing Date Net Working Capital Amount, as set forth in the Closing
Net Working Capital Certificate, requires adjustment. Buyer and Seller shall
make readily available to the Resolution CPA Firm all relevant books and records
and any work papers (including those of the Parties' respective accountants)
relating to the Base Balance Sheet and the Closing Net Working Capital
Certificate and all other items reasonably requested by the Resolution CPA Firm.
The Parties shall instruct the Resolution CPA Firm to deliver its written
determination to Buyer and Seller no later than the twentieth day after the
remaining differences underlying Seller's Objection are referred to the
Resolution CPA Firm. The Resolution CPA Firm's determination shall be conclusive
and binding upon Buyer and Seller.
14
<PAGE> 25
(iv) The "Adjusted Closing Net Working Capital
Amount" shall be (A) the Closing Date Net Working Capital Amount reflected in
the Closing Net Working Capital Certificate in the event that (x) no Seller's
Objection is delivered to Buyer during the 45-day period specified above or (y)
Seller and Buyer so agree during such 45-day period; (B) the Closing Date Net
Working Capital Amount, adjusted in accordance with Seller's Objection, in the
event that a Seller's Objection is timely delivered to Buyer and (x) Buyer does
not respond to Seller's Objection within the 45-day period following receipt by
Buyer of Seller's Objection or (y) Seller and Buyer so agree during such 45-day
period; or (C) the Closing Date Net Working Capital Amount, as adjusted by (x)
the agreement of Seller and Buyer and/or (y) the Resolution CPA Firm.
(v) Seller shall provide Buyer and its
accountants with (i) all data and financial statements reasonably requested by
Buyer and (ii) full access to the Books and Records, and the books and records
of Seller, and any other information, including work papers of its accountants,
and to any employees to the extent necessary for Buyer to prepare the Closing
Net Working Capital Certificate and the Adjusted Closing Net Working Capital
Amount.
(vi) The fees and expenses of the Resolution CPA
Firm shall be borne equally by Buyer and Seller.
(vii) For purposes of all provisions of this
Agreement other than this Section 2.03(a), the "Closing Net Working Capital
Certificate" shall mean the Closing Net Working Capital Certificate, as the same
may be finally modified by the Parties or the Resolution CPA Firm pursuant to
this Section 2.03(a).
(b) NET WORKING CAPITAL ADJUSTMENT. If the Adjusted
Closing Net Working Capital Amount exceeds $37,445,000 (the "Base Balance Sheet
Working Capital", calculated pursuant to Exhibit B hereto), then Buyer shall pay
to Seller in cash the amount of such excess, with interest from the Closing Date
through the date of payment at the Interest Rate. If the Adjusted Closing Net
Working Capital Amount is less than the Base Balance Sheet Working Capital, then
Seller shall pay to Buyer in cash the amount of such deficit with interest from
the Closing Date to the date of payment at the Interest Rate. In either case,
such payment shall be made within five Business Days of the date that the
Adjusted Closing Net Working Capital Amount shall become final and binding upon
the Parties.
2.04 RETAINED ASSETS. By dividend or other distribution to Seller
prior to the Closing, Seller shall retain those assets identified in Section
2.04 of the Disclosure Schedule, including, without limitation, the GNP Pension
Plans and all assets of the GNP Pension Plans (the "Retained Assets").
2.05 RETAINED LIABILITIES. Seller shall retain by assumption prior
to the Closing and/or indemnify and hold harmless Buyer and GNP with respect to:
(i) those liabilities identified in Section 2.05 of the Disclosure Schedule,
including any and all liabilities arising under the Irving Purchase
15
<PAGE> 26
Agreement and the McDonald Purchase Agreement (in each case subject to the
limitations contained therein and subject to the provisions of Section 11.04
hereof); (ii) any and all liabilities arising under the GNP Pension Plans or
directly related to any Retained Asset; and (iii) those liabilities determined
in accordance with the provisions of Section 7.19 hereof to be retained by
Seller (collectively, the "Retained Liabilities").
ARTICLE III
RELATED AGREEMENTS
Simultaneously with the Closing hereunder the following instruments and
agreements (the "Related Agreements") shall be executed and delivered:
3.01 STOCK CERTIFICATES; STOCK POWERS. At the Closing, Seller
shall deliver to Buyer a certificate or certificates representing the GNP Shares
duly endorsed in blank or, at the request of Buyer, with a fully executed stock
power attached, all in proper form for transfer. The GNP Shares shall be
delivered to Buyer free and clear of all Encumbrances, other than pursuant to
this Agreement.
3.02 PROMISSORY NOTES. At the Closing, Buyer shall deliver to
Seller the Term Note and the Subordinated Note, each dated the Closing Date.
3.03 MARKETING AGREEMENT. A Marketing Agreement pursuant to which
Seller will sell all newsprint paper produced by GNP's Mills for a term of three
years at a commission of two percent (2%) and otherwise on the terms and in the
form attached as Exhibit C hereto (the "Marketing Agreement").
3.04 SHARED SERVICES AGREEMENT. A Shared Services Agreement
whereby Seller shall agree to continue to provide to GNP certain services which
it currently provides, such as order fulfillment, payroll and accounting and
shared software, for a term of not more than eighteen (18) months on the terms
and in the form attached as Exhibit D hereto (the "Shared Services Agreement").
3.05 NONSOLICITATION AGREEMENT. A Nonsolicitation Agreement
between Seller and GNP in the form attached hereto as Exhibit E (the
"Nonsolicitation Agreement").
16
<PAGE> 27
ARTICLE IV
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF SELLER
Seller hereby represents and warrants to, and covenants with, Buyer
that the statements contained in this Article IV are correct and complete as of
the date of this Agreement and will be correct and complete as of the time of
the Closing, as though made then and as though the time of the Closing were
substituted for the date of this Agreement throughout this Article IV (except
that representations and warranties that are made as of a specific date need to
be true only as of such date), subject to and except as disclosed in the
Disclosure Schedule delivered by Seller to Buyer (the "Disclosure Schedule").
For purposes of this Agreement the disclosure of any matter with sufficient
particularity in any Section of the Disclosure Schedule shall serve as
sufficient disclosure for purposes of all of the representations and warranties
contained in this Article IV.
4.01 ORGANIZATION AND GOOD STANDING. Seller and GNP are each
corporations duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. GNP is duly qualified to do business as a foreign
corporation and is in good standing under the laws of the State of Maine and in
each other state in which either the ownership or use of the properties used or
owned by GNP, or the nature of the activities conducted by GNP, requires such
qualification. GNP has all requisite corporate power and authority to own, lease
and operate the Assets and to carry on the Business in the manner presently
conducted. Prior to the Closing, Seller shall have delivered to Buyer true,
complete and correct copies of the Certificate of Incorporation (including all
amendments thereto), and the By-Laws of GNP.
4.02 DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and the Related Agreements and, subject to the provisions of
Section 8.03(e) hereof, the consummation of the transactions contemplated hereby
and thereby, have been duly authorized by all necessary corporate action on the
part of Seller and GNP. This Agreement has been duly executed and delivered by
Seller and is a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, and the Related Agreements will, when
executed and delivered by Seller at Closing, constitute valid and binding
obligations of Seller, enforceable against Seller in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles and, except as expressly
contemplated herein and except with respect to Approvals under the Environmental
Laws (as defined in Section 4.24 hereof) which are the subject matter of Section
4.24 hereof, all authorizations, licenses, permits, approvals and consents of,
or notices to or filings or registrations with, any domestic or foreign
governmental agency or body, or any other third party, necessary for the
execution and delivery by Seller of this Agreement and the Related Agreements,
and/or the consummation of the transactions contemplated hereby and thereby
(collectively, the "Approvals"), have been, or as of the Closing will have been,
duly obtained, effected or given and are, or as of the Closing will be, in full
force and effect or will have been obtained prior to the Closing. Section 4.02
of the Disclosure Schedule sets forth a list of all Approvals, other than those
required under the Environmental Laws.
4.03 NONCONTRAVENTION. Except as set forth in Section 4.03 of the
Disclosure Schedule, the execution, delivery and performance of this Agreement
and the Related Agreements will not (with or without notice or the lapse of
time) (i) result in a violation of any provision of the Certificate
17
<PAGE> 28
of Incorporation or By-Laws of Seller or GNP, or of any material contract by
which Seller or GNP is bound, or of any judgment or decree to which either
Seller or GNP is a party or by which Seller or the GNP Shares may be bound or
affected; or (ii) result in a default (or give rise to any right of termination,
cancellation or acceleration) or result in the creation of any lien,
encumbrance, security agreement, charge, pledge, equity or other claim or right
of any person in or to the GNP Shares, the Assets or the Liabilities, under the
terms, conditions or provisions of any note, bond, mortgage, indenture, license
agreement or other instrument or obligation to which Seller or GNP is a Party or
by which Seller, GNP or the GNP Shares or by which any of the Assets or
Liabilities may be bound. All necessary authorizations of the transactions
contemplated by this Agreement and the Related Agreements required to be
obtained by Seller or GNP from any Federal, state, local or foreign government
or agency shall have been obtained prior to the Closing, and any filings,
notifications or disclosures required by law or regulations of such government
or agency shall have been made in such form as is acceptable as filed. Buyer
shall cooperate, at Seller's expense (except with respect to any filing required
to be made pursuant to the HSR Act), with Seller and GNP with respect to the
aforesaid filings, notifications or disclosures to the extent necessary to
obtain said authorizations. Seller will deliver to Buyer at the Closing true and
complete copies of all resolutions of its board of directors by which the
execution, delivery and performance of this Agreement and the Related Agreements
and consummation of the transactions contemplated hereby and thereby were
authorized, certified by the Secretary or Assistant Secretary of Seller as of
the Closing Date.
4.04 CAPITALIZATION. The authorized capital stock of GNP consists
of one thousand (1,000) shares of common stock, $1.00 par value per share (the
"GNP Shares"), all of which shares are issued and outstanding. The GNP Shares
are duly authorized, validly issued, fully paid and non-assessable. There are no
pre-emptive rights, whether at law or otherwise, to purchase any of the
securities of GNP and there are no outstanding options, warrants, subscriptions,
agreements, plans or other commitments pursuant to which GNP is or may become
obligated to sell or issue any shares of its capital stock or any other debt or
equity security, and there are no outstanding securities convertible into shares
of such capital stock or any other debt or equity security. None of the GNP
Shares or other equity securities of GNP was issued in violation of the
Securities Act or other applicable laws.
4.05 GNP SHARES. Seller holds of record and owns beneficially
1,000 GNP Shares, free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. Seller is not a party to any option, warrant,
purchase right, or other contract or commitment that could require Seller to
sell, transfer, or otherwise dispose of any capital stock of GNP (other than
this Agreement). Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock of
GNP.
4.06 LITIGATION REGARDING GNP SHARES. There are no actions, suits,
claims, investigations (to the Knowledge of Seller) or legal or administrative
or arbitration (or other binding alternative dispute resolution) proceedings
pending or, to the Knowledge of Seller, threatened by or against Seller,
relating to the GNP Shares, this Agreement and/or the transactions contemplated
18
<PAGE> 29
hereby, before any court, governmental agency or other body, and no judgment,
order, writ, injunction, decree or other similar command of any court or
governmental agency or other body has been entered against or served upon Seller
relating to the GNP Shares, this Agreement and/or the transactions contemplated
hereby including, without limitation, the transfer to Buyer of the GNP Shares.
4.07 INTEREST IN RELATED ENTITIES. Except as set forth in Section
4.07 of the Disclosure Schedule, and except for agreements executed pursuant
hereto, neither Seller nor any Affiliate of Seller will, immediately following
the Closing Date (i) have any direct or indirect interest in any person or
entity which is a lessor of assets or properties to, material supplier of, or
provider of services to GNP, or (ii) have a direct or indirect interest in any
contract or agreement to which GNP is a party (except the McDonald Purchase
Agreement, the Irving Purchase Agreement, and the agreements executed pursuant
thereto). For purposes of this Section, any investment by Seller or any
Affiliate of Seller in any company whose stock is listed on a national
securities exchange or actively traded in the over-the-counter market, which
investment does not give Seller or such Affiliate the right to control or
influence the policy decisions of such company, shall be deemed not to
constitute a direct or indirect interest in such company.
4.08 INVESTMENTS. Except as set forth in Section 4.08 of the
Disclosure Schedule, as of the Closing Date, GNP will not own or maintain,
directly or indirectly, any capital stock or other equity or ownership or
proprietary interest in any corporation, partnership, association, trust, joint
venture or other entity, except for GNP's membership interest in North Maine
Woods.
4.09 TITLE TO ASSETS; ENCUMBRANCES. Except with respect to the
Owned Real Property and the Intellectual Property (the representations and
warranties with respect to which shall be as set forth in Sections 4.10 and 4.11
below, respectively), GNP has good and marketable title to all of the Assets,
free and clear of all Encumbrances, except those specified in Section 4.09 of
the Disclosure Schedule and liens for Taxes not yet due and payable, and except
for Mill Site Permitted Exceptions and Timberland Permitted Exceptions. Except
as set forth in Section 4.09 of the Disclosure Schedule, the Assets include all
material assets necessary for the operation of the Business as presently
conducted.
4.10 REAL AND LEASED PROPERTY.
(a) MILL SITES.
(i) Section 4.10(a) of the Disclosure Schedule
is a list and description of all Mill Sites (the "Mill Sites") and Leased Real
Property, together with a brief description of all buildings and other major
improvements located on said properties.
(ii) GNP has fee title to the Mill Sites to the
extent set forth in GNP's Title Insurance Policies, together with all easements
and other appurtenant rights, free and clear of all mortgages granted by any
Person, and free and clear of all Encumbrances except for the Mill Site
19
<PAGE> 30
Permitted Exceptions. The Mill Site Permitted Exceptions in existence on the
Closing Date will not, individually or in the aggregate, materially interfere
with the ownership and use of the Mill Sites, for the purposes for which each is
currently used and in the operation of the Business as presently conducted.
(b) FEE TIMBERLANDS.
(i) Section 4.10(b) of the Disclosure Schedule
contains a list and description of all the Fee Timberlands (the "Fee
Timberlands") and Leased Real Property.
(ii) Except as specifically provided in
Section 4.10(b) of the Disclosure Schedule, GNP has good and marketable title,
and fee interests in, the Fee Timberlands together with all easements and other
appurtenant rights, free and clear of all Encumbrances and other matters
affecting title except for the Timberland Permitted Exceptions. The Timberland
Permitted Exceptions in existence at the Effective Time will not, individually
or in the aggregate, materially interfere with the ownership and use of the Fee
Timberlands for the purposes for which they are currently used.
(iii) Except as specifically provided in Section
4.10(b) of the Disclosure Schedule, the Mill Site Permitted Exceptions in
existence on the Closing Date and the Timberlands Permitted Exceptions in
existence on the Closing Date will not materially interfere with GNP's use,
enjoyment and possession of the Hydroelectric System in the manner currently
used and in the operation of the Business as currently conducted.
(c) OWNED REAL PROPERTY.
(i) The "Owned Real Property" consists of the
Fee Timberlands, the Mill Sites, the Hydroelectric System (the fee ownership of
such Hydroelectric System being included within the definition of "Fee
Timberlands" and "Mill Sites") and the surplus real property generally described
on in Section 4.10(c) of the Disclosure Schedule. Other than as set forth in
Section 4.10(c) of the Disclosure Schedule, there are no condemnation
proceedings pending or, to the Knowledge of Seller, threatened relating to the
Owned Real Property.
(ii) GNP has deeds or other evidence of title
or usage rights to all of the Owned Real Property. With respect to the assets
that comprise the Hydroelectric System, and other than as set forth in Section
4.10(c) of the Disclosure Schedule and except for Timberland Permitted
Exceptions and Mill Site Permitted Exceptions, as the case may be, to the
Knowledge of Seller, GNP has deeds, usage rights in perpetuity (except licenses
which may be terminated or which expire by their terms), valid rights of way or
other rights of access to the Owned Real Property which are customary in
connection with timberlands in the region in the State of Maine in which such
Owned Real Property is located, except where the failure to have such rights
would not materially interfere with the use of such property for the purposes
for which such property is currently used.
20
<PAGE> 31
(iii) Except as provided in Section 4.10(c) of
the Disclosure Schedule, neither Seller nor GNP has granted to any party any
option, right of first refusal or other agreement to sell or dispose of the
Owned Real Property.
(iv) To the Knowledge of Seller, except asset
forth in Section 4.10(c) of the Disclosure Schedule, there are no persons having
or claiming adverse possession of any Owned Real Property.
(v) The Hydroelectric System is wholly located
within the Mill Sites and the Fee Timberlands and on real property not owned by
GNP but as to which GNP has easements, rights of way, leases, licenses, charter
rights, prescriptive rights or other rights to use such real property
(collectively, the "Usage Rights"). The fact that a portion of the Hydroelectric
System is on land in which GNP has Usage Rights, as opposed to fee ownership,
does not materially interfere with GNP's use or continued operation of the
Hydroelectric System.
(d) LEASED REAL PROPERTY. Each lease of Leased Real
Property ("Leased Real Property") is valid and in full force and effect, and GNP
is not in material default of any of its obligations under such leases and there
is no event or condition that the giving of notice or the passage of time, or
both, would create such a default. To the Knowledge of Seller, (i) no lessor
under any of such leases is in default of any of its obligations thereunder and
(ii) there is no event or condition that with the giving of notice or the
passage of time, or both, would create a default by GNP or any such lessor under
any such lease.
(e) HYDROELECTRIC SYSTEM EASEMENTS. The continued
operation of the Hydroelectric System, or any component thereof, depends upon
transmission lines, towers, conduits and/or other electric transmission
facilities (the "Transmission Facilities"), some of which are located in, on,
under or over real property not owned by GNP. GNP holds valid Usage Rights,
obtained from the owners of such other real property for the maintenance and
operation of the Transmission Facilities. The fact that a portion of the
Transmission Facilities is on land in which GNP has Usage Rights, as opposed to
fee ownership, does not materially interfere with GNP's use or continued
operation of the Transmission Facilities.
(f) PERMITTED EXCEPTIONS. Seller has furnished to, or
made available for inspection by, Buyer a complete copy of each written license,
easement, right-of-way and other written agreement referred to in the
definitions of Timberlands Permitted Exceptions and Mill Site Permitted
Exceptions that is in the possession of Seller or GNP or that is within the
Knowledge of Seller.
(g) REQUIRED RECORDS. GNP maintains all records
regarding the Hydroelectric System which are required pursuant to applicable
laws and permits issued to GNP.
(h) HYDROELECTRIC SYSTEM OPERATION. GNP maintains all
licenses and permits required to operate the Hydroelectric System as it is
currently being operated, including those permits
21
<PAGE> 32
and licenses required by the Maine Department of Environmental Protection, the
Maine Land Use Regulatory Commission and the Federal Energy Regulatory
Commission. GNP has substantially complied with all material terms and
conditions of such licenses and permits, and any deviations therefrom do not
materially and adversely affect the use, enjoyment and possession of the
Hydroelectric System. Since January 1, 1992, the Hydroelectric System has been
regularly inspected and GNP has substantially followed, or is presently in the
process of substantially following, the recommendations resulting from such
inspections.
4.11 INTELLECTUAL PROPERTY
(a) Section 4.11(a) of the Disclosure Schedule sets
forth a list of (i) patents, registered trademarks, intent-to-use trademark
registrations, registered trade names, registered service marks, and registered
copyrights owned by GNP and currently used or held for use in the Business, and
all applications therefor, and (ii) to the Knowledge of Seller, all unregistered
trademarks, trade names, service marks and copyrights used or held for use in
the Business and owned by GNP.
(b) Section 4.11(b) of the Disclosure Schedule sets
forth a list of computer programs (excluding readily available, off-the-shelf
personal computer software packages) currently used or held for use in the
Business. With respect to software designated in Section 4.11(b) of the
Disclosure Schedule as "Owned by Bowater", "Common" or "Shared" and used in the
Business, Seller shall retain ownership and shall provide a royalty-free license
to GNP to use such software following the Closing until termination or
expiration of the Shared Services Agreement, at which time such software license
shall terminate.
(c) GNP's rights in the Intellectual Property are valid
and enforceable and GNP has the right to use all Intellectual Property used or
held for use in the Business except Computer Software identified in Section
4.11(b) of the Disclosure Schedule as computer software not owned by Seller or
GNP and used in the Business ("Licensee Software"). With respect to Licensee
Software, at Buyer's request and to the extent permitted under the license
applicable to such Licensee Software, Seller shall sublicense the Licensee
Software to GNP on the same terms and conditions as Seller's license applicable
thereto, until termination or expiration of the Shared Services Agreement, at
which time any and all such permitted sublicenses shall terminate. Seller agrees
to execute such documents as may be reasonably required by the Licensors of the
Licensee Software to effectuate the sublicense to Buyer.
(d) Except as set forth in Section 4.11(d) of the
Disclosure Schedule, there are no pending or, to the Knowledge of Seller,
threatened proceedings or litigation against GNP: (i) based upon the
Intellectual Property, or (ii) alleging that operation of the Business of any of
the Assets infringe or misappropriate the patents, trademarks, trade names,
copyrights, trade secrets or other intellectual property rights of others.
22
<PAGE> 33
(e) Except as set forth in Section 4.11(d) of the
Disclosure Schedule, to the Knowledge of Seller, (i) there are no infringements,
misappropriations or other violations by others of valid, enforceable items of
Intellectual Property, and (ii) use of the Intellectual Property and operation
of the Business as currently conducted do not infringe, misappropriate or
violate the patents, trademarks, trade names, copyrights, trade secrets or other
intellectual property rights of others.
(f) In the case of software designated as "Local",
"Owned by GNP" or "Licensed by GNP" in Section 4.11(b) of the Disclosure
Schedule, Seller releases and waives any right, title and interest in said
software.
(g) Except as set forth in Section 4.11(g) of the
Disclosure Schedule, GNP has good and marketable title to the Intellectual
Property, free and clear of all Encumbrances.
(h) Except as set forth in Section 4.11(h) of the
Disclosure Schedule, GNP has not granted any license with respect to any of the
Intellectual Property to any Person.
(i) GNP has exclusive control over the source codes for
all of the Computer Software which is owned by GNP and, to the Knowledge of
Seller, no third party has copies of the source codes for any of the Computer
Software that is owned by GNP.
(j) None of the former or current members of management
or key personnel of GNP or Seller, including all former and current employees,
agents, consultants and contractors who have contributed to or participated in
the conception and development of the Computer Software which is owned by GNP,
has asserted or, to the Knowledge of Seller, threatened, either orally or in
writing, any claims against GNP in connection with the involvement of such
persons in the conception and development of any of such Computer Software.
(k) No licenses or rights have been granted to
distribute the source code of, or to use source code to create Derivative Works
(as hereinafter defined) from, the Computer Software that is owned by GNP. As
used herein, "Derivative Work" shall mean a work which is based upon one or more
preexisting works, such as a revision, enhancement, modification, abridgment,
condensation, expansion or any other form in which such preexisting works may be
recast, transformed or adapted, and which, if prepared without authorization of
the owner of the copyright in such preexisting work, would constitute a
copyright infringement. For purposes hereof, a Derivative Work shall also
include any compilation that incorporates such a preexisting work as well as
translations from one human language to another and from one type of code to
another.
(l) The source codes for all Computer Software which is
owned by GNP have been placed in back-up files that are securely stored in a
location other than the Facility or Facilities where such Computer software is
used. All databases used in the Business are periodically (at least once every
week) backed-up and such back-up materials are moved to and securely stored at
locations other than the Facility or Facilities where such databases are stored.
23
<PAGE> 34
4.12 NO UNDISCLOSED LIABILITIES. Except as set forth in Section
4.12 of the Disclosure Schedule, and except for the Retained Liabilities, GNP
has no known liabilities or obligations of any nature, fixed or contingent,
matured or unmatured ("Liabilities"), other than (i) the liabilities and
obligations to the extent reflected in the Base Balance Sheet or the Net Working
Capital Certificate, (ii) Liabilities incurred in the ordinary course of
business since the date of the Base Balance Sheet, (iii) routine, ongoing
compliance obligations under statutes, regulations and ordinances of general
applicability and not unique to the Business and not otherwise disclosed in this
Agreement, (iv) the liabilities and obligations disclosed in any Section of the
Disclosure Schedule, and (v) the liabilities and obligations in any of the
documents specifically identified in any Section of the Disclosure Schedule,
except to the extent within the Knowledge of Seller (after no inquiry by Seller)
and not disclosed by Seller herein or in the Disclosure Schedule (collectively,
with the exception of Retained Liabilities, the "Assumed Liabilities").
4.13 FINANCIAL STATEMENTS. Seller has provided Buyer with copies
of the unaudited consolidated balance sheets of GNP as of December 31, 1996,
1997 and 1998 and as of March 31, 1999, (the December 31, 1998 balance sheet
being referred to herein as the "Base Balance Sheet"), and the related unaudited
consolidated statements of earnings and stockholders' equity of GNP for each of
the three fiscal years ended December 31, 1996, 1997 and (all such financial
statements, including any notes thereto, are referred to herein as the
"Financial Statements"). Copies of the Financial Statements are attached hereto
as Section 4.13 of the Disclosure Schedule. The Financial Statements have been
prepared in accordance with GAAP consistently applied during the periods
involved, except as otherwise disclosed in any notes to such financial
statements, and present fairly in all material respects the financial position
of GNP as of such dates and the results of operations, stockholders' equity and
cash flows of GNP for the periods then ended.
4.14 ABSENCE OF CHANGES. Except as set forth in Section 4.14 of the
Disclosure Schedule, reflecting, among other things, transactions pursuant to
the Irving Purchase Agreement and the McDonald Purchase Agreement and the
agreements executed pursuant thereto (including two related fiber supply
agreements), including (i) the sale of approximately 1.6 million acres of
timberland and the Pinkham Lumber Company, (ii) the dividend of proceeds
thereof, and (iii) the dividend of GNP's membership interest in Rich Timber
Holdings, LLC, since the date of the Base Balance Sheet, the Business has been
operated in the ordinary course, and there has not been incurred, nor has there
occurred:
(a) Any material damage, destruction or loss (whether
or not covered by insurance);
(b) Any strikes, work stoppages or other labor disputes
involving the employees of GNP or any grievances other than those described in
Section 4.17 of the Disclosure Schedule or Section 4.19 of the Disclosure
Schedule;
24
<PAGE> 35
(c) Any issuance, declaration, setting aside or payment
of any cash or non-cash dividend or other distribution of cash or property on
any of the capital stock of GNP, or any direct or indirect redemption, purchase
or other acquisition of any shares of capital stock of GNP or any agreement or
commitment by GNP to do so;
(d) Any sale, transfer or other disposition of any of the
Assets, or any interest therein, except for (i) sales made in the ordinary
course of business of inventory; (ii) sales of timber and other forest products,
stumpage, logs and chips made in a manner consistent with past practices of GNP;
(iii) sales of equipment in aggregate amount less than $25,000, with respect to
which Seller represents and warrants that, as of the Closing, the premises where
such equipment was located will have been restored to a useable and safe
condition and with all physical damage caused as a result of the removal of such
equipment repaired; (iv) transfer to Seller of the Retained Assets; and (v) any
other transfer or other disposition expressly contemplated by this Agreement,
provided that all of such sales or transfers, except those in subsection (iv),
are conducted on an arm's length basis;
(e) Any material change in policies, operations or
practices of GNP, including, without limitation, with respect to selling
methods, returns, discounts or other terms of sale, as well as purchasing and
payments of liabilities;
(f) Any amendment, termination, waiver or cancellation
of any Material Agreement included in the Assets, or of any right or claim
thereunder, other than the possible cancellation by GNP of the pending program
for the installation of a TMP facility and related capital improvements, with
respect to which Seller agrees to indemnify Buyer and GNP for any cancellation
charges incurred, and other than any settlement, in the ordinary course, of an
unfair labor practice charge or grievance under a Collective Bargaining
Agreement except where such settlement (i) was for cash which has been paid in
full or (ii) was with respect to a charge or grievance which will not have any
continuing material adverse effect on GNP or the Business;
(g) Any (i) general uniform increase in the compensation
of the Employees of GNP (including, without limitation, any increase pursuant to
any bonus, pension, profit-sharing or other plan or commitment), other than in
the ordinary course of business and consistent with past practice, (ii) increase
in any such compensation payable to any Employee, consultant or agent in respect
of the Business, other than in the ordinary course of business and consistent
with past practice, or (iii) loan or commitment therefor made by GNP to any
officer, director, stockholder, employee, consultant or agent of GNP;
(h) Any material change in the accounting methods,
procedures or practices followed by GNP;
(i) Any sales contracts or commitments which will be in
excess of the production capacity of GNP as of the Closing Date;
25
<PAGE> 36
(j) Any purchase contracts or commitments in excess of
the requirements of the Business in the ordinary course;
(k) Except as contemplated by clause (i) of Section 7.11
hereof, any capital appropriation, expenditure or commitment therefor by GNP
outside of the ordinary course of business;
(l) Any pledge or agreement by GNP to make any charitable
contribution or to incur any non-business expense that is either (i) outside of
the ordinary course of business and not consistent with past practice or (ii) in
excess of $1,000 individually or $10,000 in the aggregate;
(m) Except as contemplated by clauses (ii), (iii) and
(iv) of Section 7.11 hereof, any material change in policies, operations or
practices of GNP concerning the Employees thereof, including, without
limitation, with respect to any Benefit Plans, as hereinafter defined;
(n) Any cancellation or forgiveness of debt due GNP,
except with respect to credit for returned items and other forgiveness of debt
in the ordinary course of business;
(o) Any mortgage, pledge or lien on any of the Assets,
except for Mill Site Permitted Exceptions and Timberland Permitted Exceptions;
(p) Any transaction with an Affiliate of GNP, except as
otherwise contemplated hereby;
(q) Any payment of debt other than in the ordinary
course of business or disclosed in the Disclosure Schedule; or
(r) Any agreement, whether in writing or otherwise, for
Seller or GNP to take any of the actions enumerated in this Section 4.14 or any
other action outside of the ordinary course of business.
4.15 TAX MATTERS.
Except as disclosed in Section 4.15 of the Disclosure
Schedule:
(a) All Tax Returns of GNP have been timely filed or
extended, and all such Tax Returns as filed were accurate in all material
respects. All Taxes shown on the Tax Returns have been or will be timely paid
when due.
(b) Neither Seller nor GNP have written notice of:
(i) any action, suit, proceeding, investigation, audit or claim currently
pending or threatened, (ii) any deficiency claimed, proposed or asserted, or
(iii) any proposed revaluations for real and personal property tax purposes
26
<PAGE> 37
for fiscal years beginning after the Closing Date, in each case regarding Taxes
applicable to the Business, the Assets or the income of GNP.
(c) There are no Tax liens (other than for property
Taxes not yet due and payable) on any of the Assets.
(d) GNP is not required to treat any Asset as being
owned by any other person pursuant to the safe harbor lease provisions of former
Section 168(f)(8) of the Code (or comparable provisions of foreign, state or
local Law).
(e) There are no agreements or consents currently in
effect for the extension or waiver of the time (A) to file any Tax Return or (B)
for assessment or collection of any Taxes relating to the Business, the Assets
or the income of GNP for any Pre-Closing Period, for which GNP is or may become
liable,
(f) To the Knowledge of Seller, all Taxes which GNP is
required by law to withhold or collect have been duly withheld or collected, and
have either been timely paid over to the appropriate governmental authorities to
the extent due and payable or, if not yet due and payable, are reflected on the
Base Balance Sheet.
(g) GNP is not a party to any contract or agreement or
other arrangement that, separately or in the aggregate, (i) could give rise to
the payment of any "excess parachute payment" by Buyer or GNP (or any Affiliate
of any of them) within the meaning of Section 280G of the Code (or comparable
provisions of foreign, state or local Law), or (ii) could be non-deductible
pursuant to Section 162 or Section 404 of the Code.
(h) No Tax deficiencies have been claimed, proposed or
asserted against GNP in any written notice received by GNP or by Seller or are
in existence to the Knowledge of Seller.
(i) Neither Seller nor GNP has executed or entered into a
closing agreement pursuant to Code Section 7121 (or any comparable provision of
state, local or foreign law) that is currently in force and determines the Tax
liabilities of GNP.
(j) To the Knowledge of Seller, no power of attorney is
in effect (except with respect to attorneys appearing on behalf of GNP before
federal, state and local tax authorities), and no formal, private Tax ruling is
in effect, with respect to any Tax matter that can affect the Business, the
Assets or the income of GNP for any period ending after the Closing.
(k) The sole Tax Returns filed with respect to GNP, and
that are required to be filed with respect to GNP are (i) U.S. federal Tax
Returns, (ii) Tax Returns filed with the State of Maine or political
subdivisions thereof, and (iii) Tax Returns filed with a State having unitary
filing laws, in which case the filing is not required by GNP's ownership or
operation of the Business or the Assets in that State.
27
<PAGE> 38
(l) GNP does not have outstanding any debt the interest
on which is tax-exempt under Section 103(a) of the Code (or comparable
provisions of foreign, state or local Law).
(m) None of GNP's assets is "tax-exempt use property"
within the meaning of Section 168(h) of the Code (or comparable provisions of
foreign, state or local law).
(n) To the Knowledge of Seller, neither Seller nor GNP
has made an affirmative election with respect to Taxes relating to GNP or the
Business that would have a material adverse effect on the Buyer.
(o) GNP is not liable for the Taxes of any other person
under Treasury Regulation 1.1502-6 (or any similar provision of state, local or
foreign law) or by virtue of GNP's control of such other person or such other
person's control of GNP.
(p) Except as reflected on the Base Balance Sheet, there
are no charges, accruals or reserves for Taxes due, or accrued but not yet due,
relating to the Business, the Assets or the income of GNP and none is necessary
properly to reflect income of GNP.
4.16 COMPLIANCE WITH LAWS, ETC. (a) Except as set forth in Section
4.16 of the Disclosure Schedule, and except with respect to Environmental Laws,
compliance with which is the subject of Section 4.24 hereof, and Taxes, which is
the subject of Section 4.15 hereof: (i) GNP has in all material respects
conducted the Business and maintained and operated the Assets in compliance with
(A) all applicable Laws and (B) all applicable orders, writs, judgments,
injunctions, decrees and similar commands of courts or governmental agencies or
other governmental bodies and all decisions and awards of any arbitration panel
or tribunal, except, in each case, with respect to OSHA, with respect to which,
to the Knowledge of Seller, GNP has in all material respects conducted the
Business and maintained and operated the Assets in compliance with OSHA; and
(ii) except as set forth in Section 4.16 of the Disclosure Schedule, since
January 1, 1992, GNP has not received any notification of any asserted present
or past failure by it to comply with such Laws, or such orders, writs,
judgments, injunctions or decrees. Section 4.16 of the Disclosure Schedule also
lists all citations, if any, of GNP issued under OSHA, and under all other
applicable occupational health and safety laws and regulations since January 1,
1992 related to the Business. GNP is a graduate of the P-200 program. A
description of the P-200 program and GNP's program regarding OSHA is set forth
in the GNP Safety Improvement Process Summary attached to Section 4.16(a) of the
Disclosure Schedule.
(b) GNP has not submitted any claim for payment to any
payer source, either governmental or non-governmental, in material violation of
any false claim or fraud law, including the "False Claim Act," 31 U.S.C. ss.
3729, or any other applicable U.S. false claim, or fraud laws.
(c) Neither GNP nor, to the Knowledge of Seller, any
employee of GNP or any agent acting on behalf of or for the benefit thereof, has
directly or indirectly (i) offered or paid any
28
<PAGE> 39
remuneration, in cash or in kind, to, or made any financial arrangements with,
any past or present customers, past or present suppliers, contractors or third
party payers of GNP in order to obtain business or payments from such persons,
other than entertainment activities in the ordinary and lawful course of
business, (ii) given or agreed to give, or is aware that there has been made or
that there is any agreement to make, any gift or gratuitous payment of any kind,
nature or description (whether in money, property or services) to any customer
or potential customer, supplier or potential supplier, contractor, third party
payer or any other person other than in connection with reasonable promotional
or entertainment expenses in the ordinary and lawful course of business, (iii)
made or agreed to make, or is aware that there has been made or that there is
any agreement to make, or is aware that there has been made or that there is any
agreement to make, any contribution, payment or gift of funds or property to, or
for the private use of, any governmental official, employee or agent where
either the contribution, payment or gift is or was illegal under the laws of the
United States or under the laws of any state or any other jurisdiction (foreign
or domestic) under which such payment, contribution or gift was made, (iv)
established or maintained any unrecorded fund or asset for any purpose or made
any false or artificial entries on any of its books or records for any reasons,
(v) made, or agreed to make, or is aware that there has been made or that there
is any agreement to make, any payment to any person with the intention or
understanding that any part of such payment would be used for any purpose other
than described in the documents supporting such payment, or (vi) paid or offered
to pay any illegal remuneration for any referral to GNP in violation of any
applicable anti-kickback law, including U.S. Federal anti-Kickback Statute, 42
U.S.C. ss. 1320a-7b(b), or any applicable state anti-kickback law.
4.17 LITIGATION REGARDING GNP. Except as set forth in Section
4.17 of the Disclosure Schedule, there are no (i) civil or criminal actions,
suits, claims, investigations (to the Knowledge of Seller), or legal or
administrative or arbitration (or other binding alternative dispute resolution)
proceedings pending or, to the Knowledge of Seller, threatened against GNP or
(ii) orders, writs, judgments, injunctions, decrees, awards or similar commands
of any court, any government agency or other governmental body, or any
arbitration tribunal or panel, applicable to GNP and affecting the Business or
the Assets at law or in equity. Nothing contained in this Section 4.17 shall
constitute a representation or warranty regarding Environmental Laws or
Environmental Liabilities and Costs, or Taxes, all such representations and
warranties being contained solely in Sections 4.24 and 4.15 hereof,
respectively.
4.18 PERMITS, ETC. Set forth in Section 4.18 of the Disclosure
Schedule is a list of all material governmental licenses, permits, certificates
of inspection, other authorizations and registrations (except for those
pertaining to Environmental Laws, which shall be governed by Section 4.24 hereof
and those pertaining to Taxes, which shall be governed by Section 4.15 hereof)
which are necessary for GNP to own and operate the Business and Assets,
including the Hydroelectric System, as presently operated (collectively, the
"Authorizations"). All the Authorizations have been duly and lawfully secured or
made by Seller and are in full force and effect and GNP has substantially
complied with all terms and conditions of the Authorizations. Except as set
forth in Section
29
<PAGE> 40
4.18 of the Disclosure Schedule, there is no proceeding pending or, to the
Knowledge of Seller, threatened to revoke or limit any Authorization. Except as
specifically set forth in Section 4.18 of the Disclosure Schedule, none of the
transactions contemplated by this Agreement (including the change in control of
GNP), will terminate, violate or limit the effectiveness of any of the
Authorizations, including, without limitation, the continuation and renewal of
the Business's FERC licenses. GNP has made, in a timely manner, all material
filings, reports, notices and other communications with the appropriate
governmental body, and has otherwise taken, in a timely manner, all other
action, known or anticipated to be required to be taken by GNP, reasonably
necessary to secure the renewal of the respective Authorizations prior to the
dates of their respective expirations.
4.19 EMPLOYEES; LABOR RELATIONS. Except as set forth in Section
4.19 of the Disclosure Schedule (i) GNP (A) is not delinquent in the payment to
or on behalf of any past or present Employees of GNP of any wages, salaries,
commissions, bonuses, Benefit Plan contributions, medical benefits payments or
other compensation (including without limitation disability compensation) for
all periods prior to the date hereof, and (B) is not delinquent in the payment
of any amount which is due and payable to any state or state fund pursuant to
any workers' compensation statute, rules or regulations or any amount which is
due and payable to any workers' compensation claimant or any other party arising
under or with respect to a claim that has been filed under state statutes and
approved in the ordinary course in accordance with GNP's policies regarding
workers' compensation and/or any applicable state statute or administrative
procedure; (ii) there is no labor strike, slowdown or work stoppage in progress
against GNP; (iii) no collective bargaining agreement is currently being
negotiated by GNP; (iv) to the Knowledge of Seller, there has been no request to
GNP for collective bargaining on behalf of any employees of the Business not
represented currently by a union or from the National Labor Relations Board in
respect of any Employees of GNP; (v) to the Knowledge of Seller, no union
representation or jurisdictional dispute or question exists respecting any
Employees of GNP; and (vi) no material dispute exists between GNP and any of its
sales representatives or, to the Knowledge of Seller, between any such sales
representatives with respect to territory, commissions, products or any other
terms of their representation.
4.20 EMPLOYEE BENEFITS.
(a) BENEFIT PLANS. Section 4.20(a) of the Disclosure
Schedule lists each employee benefit plan (within the meaning of Section 3(3) of
ERISA), stock purchase plan, stock option plan, fringe benefit plan, bonus plan
and any other deferred compensation agreement or plan or funding arrangement
which covers any Employee immediately prior to Closing and which is sponsored or
maintained or to which contributions are required to be made by (i) Seller or
(ii) any other organization which is a member of a controlled group of
organizations (within the meanings of Sections 44(b), (c), (m) or (o) of the
Code) of which Seller is a member (the "Controlled Group"), such plans described
in this sentence being referred to collectively as the "Benefit Plans."
(b) DOCUMENTS FURNISHED. Except for such Benefit Plans
as shall be transferred to and become the obligation of Seller prior to the
Closing, which plans are described in Section 4.20(b) of the Disclosure Schedule
and constitute all plans, funds, programs, policies or arrangements under which
employees or former employees of the Business are provided or promised
30
<PAGE> 41
pensions, retirement income, deferred compensation or profit sharing, including
but not limited to each "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA, Seller has furnished to or made available for inspection
by Buyer a current copy of each Benefit Plan specified in Section 4.20(a) of the
Disclosure Schedule (including all other instruments relating thereto) and, to
the extent applicable, copies of the most recent:
(i) determination letter and any outstanding
request for a determination letter;
(ii) Forms 5500 for the last two (2) plan years for
which the deadline for filing Forms 5500 has passed;
(iii) summaries of plan provisions for Seller Hourly
Pension Plan and Seller Salaried Pension Plan contained in the most
recent actuarial reports pertaining to those Plans; and
(iv) summaries of Plans required by ERISA.
To the Knowledge of Seller, no representations have been made, orally or
otherwise, nor do any practices exist, which vary or hinder the operation of any
term or condition of any Benefit Plan as reflected in the foregoing documents
and agreements.
(c) QUALIFICATION; COMPLIANCE. Except as set forth on
Section 4.20(c) of the Disclosure Schedule, and except for such Benefit Plans as
shall be transferred to and become the obligation of Seller prior to the
Closing, for each Benefit Plan specified below, the following is true:
(i) each such Benefit Plan which is an "employee
pension benefit plan" (as such term is defined in ERISA Section 3(2))
and is intended to qualify under the Code has received a favorable
determination letter as to its qualification under the Code and either
(A) has not been amended since such letter was issued, or (B) has been
or may (before the end of any applicable remedial amendment period) be
filed with the IRS with a request for a determination letter as to the
effect of any amendment not covered by such received determination
letter;
(ii) all Benefit Plans have been administered in all
material respects in accordance with their terms and applicable law,
and with respect to such Benefit Plans, there are no actions, suits or
claims (other than routine claims for benefits in the ordinary course)
pending, and to the Knowledge of Seller there are no threatened
actions, suits or claims (other than routine claims for benefits in the
ordinary course), including, without limitation, actions, suits or
claims based on (A) minimum funding liability, (B) termination
liability, (C) withdrawal liability, (D) PBGC insurance premium
liability, (E) disqualification of a qualified plan, (F) liability for
failure to file, disclose or notify, (G) excise taxes, or (H)
violations of fiduciary duties; and
31
<PAGE> 42
(iii) all contributions and/or premiums (including
all employer contributions and employee salary reduction contributions)
which are due for each Benefit Plan have been made.
(d) MULTIEMPLOYER PLANS. There is no Benefit Plan which
is a multiemployer plan (within the meaning of Section 3(37) or ERISA) to which
Seller or any member of the Controlled Group contributes (or has since January
1, 1992 contributed or had an obligation to contribute). GNP is not liable for
it or a Member of the Controlled Group having terminated any pension plan of any
Member of the Controlled Group with assets insufficient to satisfy all
guaranteed benefits under Title IV of ERISA, including plan terminations which
may occur after the date of this Agreement but with effective dates of plan
termination prior hereto.
4.21 POWERS OF ATTORNEY. Except as set forth in Section 4.21 of
the Disclosure Schedule, on the Closing Date there will be no persons, firms,
associations, corporations or business organizations or entities holding general
or special powers of attorney from GNP, other than powers of attorney given to
freight forwarders, custom brokers and attorneys prosecuting trademark, service
mark and patent applications before the United States Patent and Trademark
Office on behalf of GNP and attorneys appearing on behalf of GNP before federal,
state and local tax authorities.
4.22 AGREEMENTS, ETC. Set forth in Section 4.22 of the Disclosure
Schedule is a list of all of the following contracts, agreements, documents,
instruments, understandings or arrangements, written or oral, included in the
Assets and/or the Liabilities or otherwise related to the operation of the
Business as of the date hereof (collectively, the "Material Agreements"):
(a) Sales orders and other contracts (except purchase orders
received in the ordinary course of business) for the sale of goods or services,
in any instance in excess of One Hundred Fifty Thousand Dollars ($150,000) per
year;
(b) Purchase contracts involving the expenditure of more than
One Hundred Fifty Thousand Dollars ($150,000) per year in any instance for the
purchase of materials, supplies, equipment or services, except those which are
cancelable on or less than thirty (30) days notice without penalty;
(c) Contracts and agreements relating to the sales of gravel
and the cutting and hauling of timber, in any instance in excess of One Hundred
Fifty Thousand Dollars ($150,000) per year and contracts and agreements relating
to the sales of standing or severed timber, in any instance in excess of One
Hundred Fifty Thousand Dollars ($150,000) per year;
(d) Contracts and agreements relating to the leasing (as
lessor or lessee) of any property, real, personal or mixed, except for leases
which individually do not generate rental income or involve, in any instance,
the expenditure of more than One Hundred Fifty Thousand Dollars ($150,000) per
year;
32
<PAGE> 43
(e) Contracts, commitments and arrangements with any
governmental body, agency or authority;
(f) Indentures, mortgages, promissory notes, loan agreements,
capital leases, security agreements, or other agreements or commitments for the
borrowing of money, or the purchase of assets involving deferred payments, or
which otherwise evidence indebtedness or which create an Encumbrance on any of
the Assets;
(g) Guarantees of the obligations of a third party or
agreements to indemnify third parties;
(h) Agreements which restrict GNP from doing business in any
geographic location or from producing or selling any product;
(i) Contracts or agreements with Seller or any Affiliate of
Seller;
(j) License agreements (as licensee or licensor) with third
parties to the extent involving, in any instance, an expenditure or commitment
in excess of One Hundred Fifty Thousand Dollars ($150,000) per year;
(k) Individual employment, severance or consulting agreements
or arrangements under which payments were in excess of Seventy-five Thousand
Dollars ($75,000) during 1998 or are reasonably projected to exceed Seventy-five
Thousand Dollars ($75,000) in 1999;
(l) Distributor, dealer, sales, advertising, agency,
manufacturer's representative, franchise or similar contracts or any other
contract relating to the payment of a commission under which payments were in
excess of Seventy-five Thousand Dollars ($75,000), in any instance, during 1998
or are reasonably projected to exceed Seventy-five Thousand Dollars ($75,000) in
1999;
(m) Collective Bargaining Agreements with labor unions; and
(n) Contracts or agreements entered into by Seller, or any
Affiliate of Seller, for the benefit of GNP, or requiring performance by GNP in
connection therewith.
Subject to exceptions and limitations of the kind or nature described
in Section 7.06 hereof, true copies of all written Material Agreements, and
written summaries of all oral Material Agreements, described on Section 4.22 of
the Disclosure Schedule have been furnished to or made available for inspection
by Buyer. Each of the Material Agreements is valid and in full force and effect
and, except as set forth in Section 4.02 of the Disclosure Schedule, the
transactions contemplated hereby will not require the consent of any party
thereto or otherwise adversely affect the validity and effectiveness thereof.
GNP is not in default in any material respect or alleged to be in default in any
material respect under any Material Agreement nor, to the Knowledge of Seller,
is any other party to any of the Material Agreements in default of any of its
obligations thereunder.
33
<PAGE> 44
4.23 BROKERS' OR FINDERS' FEES, ETC. Other than Donaldson, Lufkin &
Jenrette Securities Corporation (the fees and expenses of which will be paid by
Seller), no agent, broker, investment banker, person or firm acting on behalf of
Seller or GNP or any firm or corporation affiliated with Seller or under its
authority is or will be entitled to any brokers' or finders' fee or any other
commission or similar fee directly or indirectly from GNP in connection with the
transactions contemplated hereby.
4.24 ENVIRONMENTAL PROTECTION.
(a) For purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Cleanup" shall mean all actions required
under the Environmental Laws to: (1) assess, investigate, abate,
correct, remove, treat or remediate Hazardous Substances in the
environment; (2) prevent the Release of Hazardous Substances so that
they do not migrate, endanger or threaten to endanger public health or
welfare or the environment; (3) perform pre-remedial studies and
investigations and post-remedial monitoring and care; and (4) respond
to any government requests for information or documents relating to the
assessment, investigation, abatement, correction, removal, treatment or
remediation of Hazardous Substances in the environment at the Business,
or at any site to which the Business Released, disposed, treated,
stored or arranged for the Release, disposal, treatment or storage, or
allegedly Released, disposed, treated or stored or arranged for the
Release, disposal, treatment or storage of any Hazardous Substance.
(ii) "Environmental Laws" shall mean all federal,
state and local laws, regulations, rules, ordinances, orders,
Environmental Permits, judgments, decrees or common law (including,
without limitation, principles of negligence, trespass, nuisance,
intentional tort, strict liability, contribution or indemnification) in
effect as of the Effective Time relating to pollution or protection of
the environment (but not including any occupational health and safety
laws, which are the subject of Section 4.16, or any federal, or state
hydropower or dam safety laws), natural resources, or the welfare,
safety or health of humans or other living organisms, or relating to
the manufacture, distribution in commerce, use, record keeping,
notification, disclosure and reporting requirements respecting
Hazardous Substances; provided, however, that standards scheduled to go
into effect after the Effective Time, which are contained in laws,
regulations, rules, ordinances and judgments, decrees and orders
promulgated, issued or passed prior to the Effective Time, are not
considered to be in effect as of the Effective Time.
(iii) "Hazardous Substance" shall mean all
hazardous substances, oils, pollutants or contaminants as those terms
are defined as of the Effective Time in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5, or
under the Maine Uncontrolled Hazardous Substance Sites Law, 38 M.R.S.A.
Section 1362.1.
34
<PAGE> 45
(iv) "Environmental Liabilities and Costs" shall
mean all liabilities, losses, obligations, responsibilities,
obligations to conduct Cleanup, damages (including incidental and
consequential damages), punitive damages, treble damages, costs and
expenses (including, without limitation, all reasonable fees,
disbursements and expenses of counsel, expert and consulting fees,
costs of investigations and of responding to government requests for
information or documents), fines, penalties, liens, restitution,
monetary sanctions, interest, judgments and disbursements of any kind
or nature whatsoever, claims, actions, causes of action, demands,
filings, investigations, administrative proceedings, arbitrations,
mediations, suits, requests for information or other proceedings,
direct or indirect, accrued, absolute, contingent, liquidated, pending
or threatened, and whether, without limitation, based on strict
liability, joint and several liability, or criminal or civil liability,
arising under any Environmental Law as a result of past or present
ownership, leasing or operation by GNP (excluding any arising with
respect to the properties sold by GNP pursuant to the Irving Purchase
Agreement and the McDonald Purchase Agreement). Notwithstanding the
foregoing, Environmental Liabilities and Costs do not include costs
incurred in connection with responding to governmental requests for
information directed at GNP unless the request seeks information: (a)
relating to Cleanup at the Business or at any off-site location to
which the Business sent or Released or is alleged to have sent or
Released Hazardous Substances on or prior to the Effective Time, or (b)
as to whether the Business was operated in compliance with
Environmental Laws on or prior to the Effective Time.
(v) "Release" shall include all releases as
such term is defined in 42 U.S.C.A. Section 9601(22) and all discharges
as such term is defined in 33 U.S.C.A. Section 1321(a)(2) and 38
M.R.S.A. Section 1317, as in effect at the Effective Time; provided,
however, changes in the definition of a release or discharge scheduled
to go into effect after the Effective Time, which are contained in
laws, regulations, rules, ordinances and court decisions promulgated,
issued or passed prior to the Effective Time are not considered to be
in effect as of the Effective Time.
(b) Section 4.18 of the Disclosure Schedule and Section
4.24(b)(i) of the Disclosure Schedule is a list of all permits (including,
without limitation, land use permits), licenses, approvals, consents, notices,
pending applications and registrations and other authorizations that are
required under the Environmental Laws and that are material to the ownership,
use or operation of the Business or any of the real property and personal
property included in the Assets (collectively, the "Property"), including but
not limited to permits and licenses from the Maine Land Use Regulation
Commission, the Maine Department of Environmental Protection and the U.S.
Environmental Protection Agency ("Environmental Permits"). Except as set forth
in Section 4.24(b)(ii) of the Disclosure Schedule, all such Environmental
Permits are in effect and no appeal nor any other action is pending to revoke
any such Environmental Permit. To the Knowledge of Seller, and except as set
forth in Section 4.24(b)(ii) of the Disclosure Schedule, GNP is in compliance in
all material respects with all terms and conditions of all such Environmental
Permits. The execution, delivery and performance of this Agreement and the
Related Agreements, and the
35
<PAGE> 46
consummation of the transactions contemplated hereby and thereby, will not
result in the revocation or limitation of any material Environmental Permits.
(c) Except as set forth in Section 4.24(c) of the
Disclosure Schedule, since January 1, 1992:
(i) To the Knowledge of Seller, the Business and
the Property are in compliance in all material respects with all
Environmental Laws including, without limitation, all restrictions,
conditions, standards, limitations, prohibitions, requirements,
obligations, schedules and timetables contained in the Environmental
Laws or contained in any plan, order, decree, judgment or injunction,
promulgated or approved thereunder or in a Cleanup or compliance plan
to which GNP has agreed and Seller has provided to Buyer a copy of all
documents in its possession showing noncompliance since January 1, 1992
with any Environmental Law relating to the Business or the Property.
(ii) Seller has heretofore delivered, or caused GNP
to deliver, to Buyer a true and complete list of all environmental
studies made since January 1, 1992 relating to the Property, and has
delivered to Buyer copies of all such studies requested by Buyer, a
true copy of which list is set forth in Section 4.24(c)(ii) of the
Disclosure Schedule. To the Knowledge of Seller, the work recommended
in each of such studies has been satisfactorily completed.
(iii) To the Knowledge of Seller, there is no civil,
criminal or administrative action, suit, demand, claim, hearing, notice
of violation, investigation, proceeding, notice or demand letter
pending or threatened in respect of the Property or the Business
relating in any way to the Environmental Laws, including without
limitation, any plan, order, decree, judgment or injunction entered,
promulgated or approved thereunder or to any Cleanup or compliance plan
to which Seller has agreed.
(iv) To the Knowledge of Seller, no person has
Released, placed, stored, buried or dumped any Hazardous Substances on,
beneath or adjacent to the Property or the Business, except for
inventories of such substances used or to be used, and wastes generated
therefrom, in the ordinary course of the Business or in connection with
the Property (which inventories and wastes, if any, were and are stored
or disposed of in accordance with applicable laws, regulations, and
approvals, and in a manner such that there has been no unpermitted
Release of any such substances into the environment). Schedule 4.24
(c)(iv) sets forth a list of sites in which Hazardous Substances have
been disposed by the Business since January 1, 1992.
(v) To the Knowledge of Seller, no Release or
Cleanup of a Hazardous Substance has occurred at the Property or the
Business or any other location relating to, arising out of, or in
connection with the ownership or operation of the Business or the
Property which could result in the assertion or creation of a lien on
any of the Business or the
36
<PAGE> 47
Property by any governmental body or agency with respect thereto, nor
has any such assertion of a lien been made by any governmental body or
agency with respect thereto.
(vi) Neither Seller nor GNP has received any notice
or order from any governmental agency or private or public entity
advising it, with regard to the Business, that it is responsible for or
potentially responsible for Cleanup or for paying the cost of Cleanup
of any Hazardous Substances or of any other waste or substance at the
Property or at any other property which has received Hazardous
Substances generated, stored or transported by the Business prior to
the Effective Time and has not entered into any agreements concerning
such Cleanup, nor to the Knowledge of Seller does any fact exist which
is likely to give rise to such notice, order or agreement.
(vii) Except with respect to the McDonald Purchase
Agreement, the Irving Purchase Agreement and the Seven Islands Purchase
Agreement, neither Seller nor GNP has entered into any agreement that
requires GNP to pay to, reimburse, guarantee, pledge, defend, indemnify
or hold harmless any person for or against Environmental Liabilities
and Costs relating to, arising out of, or in connection with the
ownership, leasing or operation of the Business or the Property.
(viii) To the Knowledge of Seller, the operation of
the Business or use of the Property has not resulted in the "taking" of
any endangered or threatened species or the adverse modification of
"critical habitat" of an endangered or threatened species as those
terms are defined under the Environmental Laws.
(ix) The solid waste facilities owned by the Business
as of the date hereof are described in Section 4.24(c)(ix) of the
Disclosure Schedule.
(x) All wastewater discharges from January 1, 1992 to
the date hereof that exceed the Environmental Permits and all spills on
the Mill Sites from January 1, 1992 to the date hereof are subject to a
draft agreement with the Maine Department of Environmental Protection,
as to which GNP's maximum liability is not more than Forty Thousand
Dollars ($40,000).
(xi) The toxic use and release practices and programs
of the Business are described in Schedule 4.24(c)(xi), TURA Policy
Summary.
(d) Sections 4.24(b) and (c) hereof notwithstanding, but
subject to the provisions of Section 4.26, Seller has not delivered to Buyer
certain documents subject to the attorney-client or work-product privileges,
where providing the documents to Buyer or Seller would waive any legal
privilege. The information contained in such documents does not disclose any
fact or circumstance that would make Seller's representations contained in this
Section 4.24 untrue.
37
<PAGE> 48
4.25 PROJECTIONS. Seller makes no representation or warranty, express
or implied, in respect of financial information or projections relating to GNP
or the Business which may have been reviewed by or supplied to Buyer.
4.26 DISCLOSURES. No representation or warranty by Seller contained in
this Agreement, and no statement contained in any certificate or Schedule
furnished by Seller to Buyer in connection with this Agreement, including the
Financial Statements, contains an untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
herein or therein not misleading.
4.27 CONDITION OF HYDROELECTRIC SYSTEM ASSETS. The buildings, plants,
structures and equipment of GNP used in connection with the Hydroelectric System
are adequate for the uses to which they are being put, normal wear and tear
excepted and taking into account the age of such buildings, plants, structures
and equipment.
4.28 BOOKS AND RECORDS. The books of account, minute books, stock
record books and other records of GNP, all of which have been made available to
Buyer, are complete and correct and have been maintained in accordance with
sound business practices, including the maintenance of an adequate system of
internal controls. The minute books of GNP contain accurate and complete records
of all meetings held of, and corporate action taken by, the stockholders, the
Board of Directors and committees thereof, and no meeting of any such
stockholders, Board of Directors or committee thereof, has been officially held
for which minutes have not been prepared and are not contained in such minute
books. At the Closing, all of the aforementioned books and records will be in
the possession of GNP.
4.29 ACCOUNTS RECEIVABLE. The Seller has delivered to Buyer an aged
list of accounts receivable of GNP as of the Base Balance Sheet Date. The
accounts receivable reflected on the Base Balance Sheet and all accounts
receivable arising between the Base Balance Sheet Date and the Closing Date
arose from (or will arise from) bona fide transactions in the ordinary course of
business and once the receivables were recorded, no further services are
required or will be required to be provided in order to complete the sales and
to entitle GNP or its assignees to collect the accounts receivable in full. No
such account has been assigned or pledged to any other person, firm or
corporation and no defense or setoff to any such account has, to the Knowledge
of Seller, been asserted by the account obligor in excess of reserves provided
therefor. Any accounts receivable as of the Base Balance Sheet Date not
collected within ninety (90) days after the Closing Date, to the extent
exceeding the reserves for the same, shall be deemed "Uncollected Receivables".
4.30 INVENTORIES. Except as set forth in Section 4.30 of the Disclosure
Schedule, all tangible personal property included within the category of
Inventory on the Base Balance Sheet as of the Balance Sheet Date and since such
date until the Closing Date are (or will be as of the Closing Date) in good and
merchantable condition and procured or produced for sale or use in accordance
with customary practice and in the ordinary course of business.
38
<PAGE> 49
4.31 BANK ACCOUNTS. Section 4.31 of the Disclosure Schedule sets forth
all bank, money market, savings and similar accounts and safe deposit boxes of
GNP, specifying the account numbers and authorized signatories or persons having
authorized access thereto.
4.32 WARRANTY AND PRODUCT LIABILITY MATTERS. GNP's products and
services comply with and meet the standards of all applicable laws in all
material respects. Section 4.32 of the Disclosure Schedule sets forth a summary
of all product liability and warranty claims made against GNP during the
three-year period immediately preceding the date hereof. To the Knowledge of
Seller, GNP's products have no design or manufacturing defects which
individually or in the aggregate would have a material adverse effect on GNP,
and to the Knowledge of Seller such products comply in all material respects
with, and meet the standards of, all applicable laws.
4.33 INSURANCE. Section 4.33 of the Disclosure Schedule sets forth all
insurance policies or similar contracts regarding the Business, in each case
specifying the type of policy, policy number and insurer, coverage dates, named
insured, limit of liability and deductible. All such insurance policies and
contracts are, and from the date hereof until the Closing, will be, in full
force and effect. No written notice of cancellation or termination of any such
insurance policies or contracts has been given to GNP or Seller by the carrier
of any such policy or contract.
4.34 ADDITIONAL REPRESENTATIONS OR WARRANTIES. Except as expressly set
forth in Sections 4.1 through 4.33 hereof or in the Exhibits and Schedules
hereto, Seller makes no representations or warranties to Buyer, express or
implied, and no representations or warranties by Seller to Buyer shall be deemed
to arise hereafter except as set forth (i) in this Agreement and the documents
contemplated hereby and delivered at the Closing by Seller or (ii) in documents
otherwise delivered by Seller to Buyer on or after the date of this Agreement
that have been executed by an officer of Seller and which expressly makes
representations and warranties to Buyer.
ARTICLE V
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF BUYER
Buyer hereby represents and warrants to, and covenants with, Seller
that the statements contained in this Article V are correct and complete as of
the date of this Agreement and will be correct and complete as of the time of
the Closing, as though made then and as though the time of the Closing were
substituted for the date of this Agreement throughout this Article V (except
that representations and warranties that are made as of a specific date need to
be true only as of such date).
5.01 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maine.
39
<PAGE> 50
5.02 DUE AUTHORIZATION. The execution, delivery and performance of this
Agreement and the Related Agreements, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly executed and
delivered by Buyer and is a valid and binding obligation of Buyer enforceable
against Buyer in accordance with its terms, and the Related Agreements will,
when executed and delivered by Buyer at Closing, constitute valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles and, except as expressly
contemplated herein, Buyer need give no notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement.
5.03 NONCONTRAVENTION. The execution, delivery and performance of this
Agreement and the Related Agreements will not result in a violation of any
provision of the Articles of Incorporation or By-Laws of any of Buyer, or of any
order, writ, injunction, judgment, decree, law, statute, rule or regulation to
which Buyer is subject. All necessary authorizations of the transactions
contemplated by this Agreement and the Related Agreements required to be
obtained by Buyer from any Federal, state, local or foreign or provincial
government or agency shall have been obtained prior to the Closing, and any
filings, notifications or disclosures required by law or regulations of such
government or agency shall have been made in such form as is acceptable as
filed. Seller shall (and shall cause GNP to) cooperate with Buyer, at Buyer's
expense, with respect to the aforesaid filings, notifications or disclosures to
the extent necessary to obtain said authorizations. Buyer will deliver to Seller
at the Closing true and complete copies of all resolutions of its board of
directors by which the execution, delivery and performance of this Agreement and
the Related Agreements and consummation of the transactions contemplated hereby
and thereby were authorized, certified by the Clerk of Buyer as of the Effective
Time.
5.04 INVESTMENT. Buyer is acquiring the GNP Shares solely for the
purpose of investment and not with a view to, or for sale in connection with,
any distribution thereof in violation of the Securities Act. Buyer acknowledges
that the GNP Shares are not registered under the Securities Act or any
applicable state securities law, and that such GNP Shares may not be transferred
or sold except pursuant to the registration provisions of the Securities Act or
pursuant to an applicable exemption therefrom and pursuant to state securities
laws and regulation as applicable.
5.05 DISCLOSURE. No representation or warranty by Buyer contained in
this Agreement, and no statement contained in any certificate or Schedule
furnished by Buyer to Seller in connection with this Agreement, contains an
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading.
40
<PAGE> 51
ARTICLE VI
CERTAIN TAX MATTERS AND EXPENSES
The following provisions shall govern the allocation of responsibility
as between Buyer and Seller for certain tax matters and expenses following the
Closing Date:
6.01 SECTION 338(H)(10) ELECTION. If requested by Seller, Seller and
Buyer will jointly make an election under Section 338(h)(10) of the Code (and
any corresponding election under State of Maine tax law) (collectively a
"Section 338(h)(10) Election") with respect to the purchase and sale of the GNP
Shares hereunder. Seller will include any income, gain, loss, deduction, or
other tax item resulting from the Section 338(h)(10) Election on its Tax Returns
to the extent permitted by applicable law, and will indemnify Buyer and GNP
against any Tax imposed on GNP as a result of the deemed asset sale resulting
from the Section 338(h)(10) Election. It is the intent of the Parties to
neutralize the impact on Buyer of making the Section 338(h)(10) Election. Due to
the inability of the Parties to determine with specificity the amount of
additional taxes incurred by Buyer, therefor, Seller shall pay in full
satisfaction of the above indemnification when paid (or, if not fully paid, in
proportion to the amount of the payment), (i) to the Escrow Account the sum of
$20,000,000 and (ii) to the Buyer, after payment to the Escrow Account, the sum
of $2,000,000 (the "Election Amount"). The Election Amount shall be paid by
Seller upon filing of Seller's federal and corresponding Maine income tax
returns for the tax year in which the Closing occurs, provided, however, to the
extent that Seller does not realize the full benefit of the Section 338(h)(10)
Election at the time such income tax returns are filed (including by carryback
to prior taxable years), Seller shall only pay such portion of the Election
Amount as bears the same relation to the Election Amount as the realized tax
benefit bears to the total reasonably expected tax benefit, and shall thereafter
pay the remainder of the Election Amount at such times, and in such proportions,
as shall correspond to the amount of tax benefit realized at the time of filing
of subsequent federal and corresponding Maine income tax returns.
6.02 TAX ALLOCATION. The Purchase Price and the liabilities of GNP
(plus other relevant items) shall be allocated among the assets of GNP in the
manner required by Treasury regulations Section 1.338(h)(10)-1(f). Buyer shall
prepare and deliver such allocation for review and comment by Seller within
thirty (30) days after the Closing Date, and Seller shall be deemed to have
accepted such determination unless Seller notifies Buyer in writing of an
objection within thirty (30) days after receipt of Buyer's allocation. If Seller
gives such notice of objection to Buyer's allocation, and if Buyer and Seller
are unable to resolve such objection through commercially reasonable efforts
within thirty (30) days of Buyer's receipt of Seller's notice, then the
objection shall be submitted to and reviewed by the Resolution CPA Firm, whose
determination shall be conclusive and binding upon Seller and Buyer. In
connection with the foregoing, Buyer and Seller shall make readily available to
the Resolution CPA Firm all relevant items reasonably requested by the
Resolution CPA Firm. Further, the Parties shall instruct the Resolution CPA Firm
to deliver its written determination to Buyer and Seller no later than thirty
(30) days after the matter is referred to the Resolution CPA Firm. The fees and
expenses of the Resolution CPA Firm shall be borne equally by Buyer and Seller.
41
<PAGE> 52
Seller and Buyer agree that (i) Seller and Buyer shall file with their
respective federal income Tax Returns (and applicable foreign, state and local
Tax Returns) (A) consistent IRS Forms 8023 (and comparable foreign, state and
local forms), including any required amendments thereto, which shall reflect the
allocation determined pursuant hereto and (B) IRS Forms T (Timber) (and
comparable foreign, state and local forms) consistent with such allocation and
(ii) absent a final determination to the contrary, the allocation determined in
accordance herewith (subject to appropriate adjustments to reflect any
subsequent change in the Purchase Price or other adjustments to the
consideration hereunder) shall be binding on Seller and Buyer for all federal,
state, local and foreign Tax purposes.
6.03 TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE.
(a) Seller shall prepare and file or cause to be prepared and filed all
income Tax Returns of GNP for Pre-Closing Periods, and all other Tax Returns
which are due prior to the Closing Date and will pay or cause GNP to pay all
taxes due in respect thereof. Buyer shall prepare and file or cause to be
prepared and filed all Tax Returns of GNP not described in the preceding
sentence, and pay all Taxes related thereto. In each case, Buyer and Seller
shall permit the other to review and comment on any such Tax Return prior to
filing and shall make such revisions to such Tax Returns as are reasonably
requested by the other Party, if the other party is liable for some or all of
the Taxes on such Tax Returns. Seller will indemnify and hold harmless GNP and
Buyer from and against all Taxes that relate to the Business for any Pre-Closing
Periods. Buyer shall pay to Seller promptly upon receipt by GNP, as additional
Purchase Price, any Tax refunds, reimbursements (including without limitation
reimbursements under the Business Equipment Tax Reimbursement Program), and the
value of any credits or benefits of GNP attributable to Pre-Closing Periods. For
purposes of this Article VI, "Pre-Closing Periods" means GNP Tax Periods ending
at or prior to the end of the Closing Date.
For purposes of this Article VI, "GNP Tax Periods" means (i) in the
case of income Taxes, GNP's taxable year (or shorter required tax period) for
federal, state and local income Taxes, respectively, (ii) in the case of any
real or personal property Taxes or Taxes under the Maine Tree Growth Tax Law,
the fiscal year of the relevant taxing jurisdiction, (iii) in the case of the
Commercial Forestry Excise Tax and the Unorganized Territory Educational and
Services Tax, the fiscal year of the State of Maine, and (iv) in the case of all
other Taxes, the statutory reporting period for that Tax.
(b) In furtherance of, and not in limitation of, the foregoing, Seller
will include the income or loss of GNP for all Pre-Closing Periods on the
Seller's consolidated federal income Tax Returns, and pay any federal income
Taxes attributable to such income. Seller will prepare and Buyer will cause GNP
to file an income Tax Return with the State of Maine for the period beginning
January 1, 1999, and ending on the Closing Date, such return to include any
income, gain, loss, deduction, or other Tax item resulting from the Section
338(h)(10) Election. Seller shall be responsible for any Tax due with respect to
such return, and shall be entitled to any overpayment of Tax reflected thereon.
If such Tax Return should show a loss which must be carried forward, Buyer shall
pay
42
<PAGE> 53
Seller the benefit of such loss promptly upon its resulting in a Tax benefit to
GNP or Buyer of any kind. Buyer will prepare and cause GNP to file an income Tax
Return with the State of Maine for the period beginning on the day after the
Closing Date, and Buyer (or GNP) will be responsible for all Taxes shown
thereon. If the Maine Revenue Services requires GNP to pay income Tax on the
basis of a tax period that begins on or before the Closing Date and ends after
the Closing Date, the Parties shall allocate the resulting Tax liability, refund
or credit consistent with intentions expressed in this Section 6.03 and Section
6.04, including (without limitation) the allocation to Seller of the benefit or
burden of any income, gain, loss, deduction, or other tax item resulting from
the Section 338(h)(10) Election.
6.04 TAX PERIODS ENDING AFTER THE CLOSING DATE. Buyer shall prepare
or cause to be prepared and file or cause to be filed any Tax Returns of GNP for
GNP Tax Periods which begin before the Closing Date and end after the Closing
Date ("Straddle Periods") and pay all related Taxes. Buyer shall permit Seller
to review and comment on each Tax Return for a Straddle Period prior to filing
and shall make such revisions to such Tax Returns as are reasonably requested by
Seller. Seller will indemnify and hold harmless GNP and Buyer for Taxes
attributable to the portion of any Straddle Period ending on the Closing Date.
Buyer shall pay to Seller promptly upon receipt by GNP, as additional Purchase
Price, any Tax refunds, reimbursements (including without limitation
reimbursements under the Business Equipment Tax Reimbursement Program), and the
value of any credits or benefits attributable to such portion of the Straddle
Period.
For purposes of this Section 6.04, in the case of any Taxes that are
imposed on a periodic basis and are payable for a Straddle Period, the portion
of such Tax which relates to the portion of such Straddle Period ending on the
Closing Date shall (x) if reasonably determinable on such basis, or if such Tax
is based on income, sales or use or receipts, be deemed equal to the amount
which would be payable if the relevant Straddle Period terminated at the end of
the Closing Date, or (y) otherwise, and in the case of real or personal property
Taxes, Taxes under the Maine Tree Growth Tax Law and the Commercial Forestry
Excise Tax, be deemed to be the amount of such Tax for the entire Straddle
Period multiplied by a fraction the numerator of which is the number of days in
the Straddle Period up to and including the Closing Date and the denominator of
which is the number of days in the entire Straddle Period. Any credits or
benefits relating to a Straddle Period shall be taken into account as though the
relevant Straddle Period terminated at the end of the Closing Date.
Buyer shall pay to Seller as additional Purchase Price the amount of
any payments by Seller or GNP on or prior to the Closing Date of Taxes
attributable in whole or in part to any GNP Tax Period or portion thereof ending
after the Closing Date, to the extent attributable to such post-Closing period
or portion thereof.
6.05 COOPERATION ON TAX MATTERS.
(a) Notwithstanding the foregoing provisions of this Article
VI, Buyer and Seller shall (and each shall cause GNP to) cooperate fully, as and
to the extent reasonably requested by the other Party, in connection with the
filing of Tax Returns and any audit, litigation or other proceeding
43
<PAGE> 54
with respect to Taxes. Such cooperation shall include, at Seller's request and
expense, GNP's timely filing and prosecution (including any administrative or
judicial appeals) of claims for Tax refunds, reimbursements, credits or benefits
relating to Straddle Periods or Pre-Closing Periods, in the name of GNP, and any
such claims (including any such claims pending on the Closing Date) shall be
governed by Section 11.05(f) hereof. Such cooperation shall also include the
retention and (upon the other Party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and, upon reasonable request, making employees (to the extent such
employees were responsible for the preparation, maintenance or interpretation of
information and documents relevant to Tax matters or to the extent required as
witnesses in any Tax proceedings), available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The Parties agree (and Buyer agrees to cause GNP) (i) to retain all
books and records with respect to Tax matters pertinent to GNP relating to any
taxable period beginning on or before the Closing Date until six months after
the expiration of the statute of limitations applicable thereto (and, to the
extent notified by Buyer, Seller or GNP, any extensions thereof), and to abide
by all record retention obligations imposed by law, and (ii) to give the other
Party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other Party so requests, Buyer or Seller,
as the case may be, shall allow (and Buyer shall cause GNP to allow) the other
Party to take possession of such books and records. In the event that GNP
receives any Tax refunds, reimbursements, credits or other benefits relating to
a Pre-Closing Period or to a Straddle Period, Buyer shall notify (or cause GNP
to notify) Seller in writing of such receipt within 10 days of such receipt.
(b) Buyer and Seller further agree, upon request, to use their
commercially reasonable efforts to obtain, on behalf of themselves or GNP, any
certificate or other document from any governmental authority or any other
Person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed with respect to the transactions contemplated hereby provided that
doing so does not require the payment of money or the incurrence of liability
not indemnified against by the requesting Party or otherwise give rise to any
Tax or economic cost not indemnified against by the requesting Party.
(c) At Seller's request, Buyer will cause GNP to make and/or
join with Seller in making after Closing any election of Seller's consolidated
group for which each member's consent is required, if the making of such
election does not have a material adverse impact on Buyer (or GNP) for any
post-acquisition Tax period.
6.06 TAX SHARING AGREEMENTS. All tax sharing agreements or similar
agreements with respect to or involving GNP shall be terminated as of the
Closing Date and, after the Closing Date, GNP, Buyer and Seller shall not be
bound thereby or have any liability thereunder, except to the extent that such
liability is reflected on the Base Balance Sheet.
6.07 SALES AND TRANSFER TAXES. All transfer, documentary, sales, stamp,
registration and other such Taxes incurred in connection with this Agreement and
the transactions contemplated hereby (including in the event of an assessment
after the Closing), shall, whether imposed upon
44
<PAGE> 55
Seller, Buyer or GNP, be borne equally by Buyer and Seller. Seller will file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, stamp, registration and other Taxes, subject to review and
approval by Buyer and, if required by applicable law, Buyer will, and will cause
GNP to, join in the execution of any such Tax Returns and other documentation.
All costs and expenses incurred in connection with Seller's filing of Tax
Returns hereunder shall be borne equally by Buyer and Seller.
6.08 TAX ELECTIONS, ETC. Except as provided in Section 6.01 hereof,
none of Seller or GNP, or any Affiliate of either thereof will make or permit
there to be made any new elections with respect to Taxes, or any changes in
current elections, accounting methods or similar matters with respect to Taxes,
affecting GNP after the Closing, without the prior written consent of Buyer.
Anything in this Agreement to the contrary notwithstanding, Buyer shall be
solely responsible for any penalties and Taxes assessed against GNP under the
Maine Tree Growth Tax Law (36 M.R.S.A. Sec. 571 et seq.) after the Closing,
including penalties and Taxes due to a withdrawal from taxation under the Maine
Tree Growth Tax Law or a change in use after the Closing Date.
ARTICLE VII
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
7.01 GENERAL. Each of the Parties will use its reasonable efforts to
take all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Article VIII below).
7.02 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Neither Party shall issue
or cause to be issued any press release or make or cause to be made any public
announcement relating to the subject matter of this Agreement prior to the
Closing, without the prior written approval of the other Party (such approval
not to be unreasonably withheld, delayed or conditioned); provided, however,
that either Party may make any public disclosure it believes in good faith is
required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its best
efforts to advise the other Party prior to making the disclosure). The
provisions of this Section 7.02 shall supersede any conflicting provision
contained in the Confidentiality Agreement.
45
<PAGE> 56
7.03 DISCLOSURE. All information delivered to Buyer, or the directors,
officers, employees, agents or professional advisors of, and lenders to, Buyer
("Buyer Group"), by GNP or Seller, or the directors, officers, employees, agents
or professional advisors of either ("Seller Group"), in connection with this
Agreement and the transactions contemplated hereby or in connection with any
previously contemplated transaction of a similar size or scope, or to which
Buyer Group has been provided access by Seller Group, shall be subject to the
terms of the Confidentiality Agreement, which Confidentiality Agreement shall
survive the Closing or any termination of this Agreement. All information
delivered to Seller Group by Buyer Group in connection with this Agreement and
the transactions contemplated hereby or in connection with any previously
contemplated transaction of a similar size or scope, or to which Seller Group
has been provided access by Buyer Group, shall be subject to the terms of the
Confidentiality Agreement, which Confidentiality Agreement shall survive the
Closing or any termination of this Agreement.
7.04 OPERATION OF BUSINESS. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Closing, Seller shall,
and shall cause GNP to, (i) maintain their respective corporate existences in
good standing, (ii) conduct the Business in, and only in, the ordinary course of
business and substantially in the manner heretofore conducted and in conformity
with good manufacturing and forestry practices, (iii) use reasonable efforts to
preserve intact the present business organization and employees of GNP in
respect of the Business and relationships with persons having business dealings
with GNP in respect of the Business; (iv) pay when due all Taxes of Seller and
GNP in respect of Business, in respect of the assets relating to the Business as
described in Section 7.04 of the Disclosure Schedule (the "Assets"), or the
Liabilities, except for such Taxes as are being contested by Seller or GNP in
good faith and with respect to which a reserve shall be made, (v) make all debt
service payments in respect of the Business when contractually due and payable,
(vi) pay all accounts payable and other current liabilities when due in respect
of the Business except accounts payable being contested in good faith, (vii)
maintain each Benefit Plan, and (viii) maintain the property, plant and
equipment included in the Assets in the ordinary course of business.
7.05 BOOKS OF ACCOUNT. Seller shall maintain in respect of the
Business, the Assets and the Liabilities, and shall cause GNP to maintain, their
respective books and records of account in the usual, regular and ordinary
manner, consistent with past practices.
7.06 ACCESS TO INFORMATION. Buyer acknowledges that it has performed,
to its satisfaction, all due diligence necessary in connection with Buyer's
purchase of the GNP Shares hereunder, including all investigations, inspections
and tests of the Assets, and has reviewed all documents and records within the
possession of GNP or Seller or subject to GNP's or Seller's control relating to
the Business and the Assets, including the Fee Timberlands (except such
documents and records as were subject to written confidentiality agreements or
protected by any privilege that would be waived or lost as a result of
disclosure or which Seller deems to be competitively sensitive, and in each such
case the information contained in such document does not disclose any fact or
circumstance that would make Seller's representations contained in this
Agreement untrue), and, subject to its rights to take steps reasonably necessary
to verify Seller's compliance with its representations, warranties
46
<PAGE> 57
and covenants herein and satisfaction of the conditions to Closing hereunder,
that it does not need to conduct any further due diligence with respect thereto
prior to the Closing. Seller agrees to cooperate with Buyer to facilitate
closing under Buyer's Financing Commitment, and in connection therewith will,
only following receipt of reasonable notice and only upon the prior written
consent of Seller, permit Buyer and representatives of Buyer's lender access to
GNP's premises and Books and Records and Seller's Books and Records with respect
to GNP, subject to Section 7.03 hereof and applicable Laws.
7.07 COOPERATION. Seller shall cooperate and shall cause GNP to
cooperate and take all actions reasonably requested by Buyer, at no expense to
Seller or GNP, in order to permit satisfaction of the conditions to the
financing arranged by Buyer (if any) pursuant to the Financing Commitment to
fund the purchase of the GNP Shares.
7.08 CONSENTS. The Parties will use their commercially reasonable
efforts (including the giving of required notices) to promptly obtain consents
("Consents") (including any required Consents to the assignment of Material
Agreements and any required approvals or permit transfers from governmental
agencies) of all Persons and governmental authorities necessary for the
consummation of the sale of the GNP Shares and the other transactions
contemplated by this Agreement and the Related Agreements.
7.09 NOTICE OF DEVELOPMENTS. From the date hereof until the Closing
Date, the parties shall promptly notify each other in writing and supply full
details of (i) any facts indicating that any representation or warranty was not
true and correct when made, and (ii) any matter arising after the date hereof
which, if existing or occurring at the date of this Agreement, would have been
required to be set forth or described in the Schedules hereto. For the purpose
of determining the satisfaction of the conditions set forth in Article VIII
hereof, updated information pursuant to clause (ii) of the preceding sentence
shall not be deemed added to the Schedules to this Agreement or to prevent or
cure any misrepresentation, breach of warranty, or breach of covenant, but if
the Closing shall occur, such updated information shall be deemed added to the
Schedules for purposes of determining whether representations and warranties
have been breached and give rise to indemnification pursuant to Sections 11.02
and 11.03 hereof.
7.10 RELATED AGREEMENTS. The Parties hereto agree that at Closing they
will execute and deliver (or cause their Affiliates to execute and deliver) the
Related Agreements to which they or their Affiliates are to be a Party.
7.11 OTHER CHANGES. Seller shall not take, permit, cause, agree to
take, or permit GNP to take, permit, cause or agree to take, any of the actions
described in Section 4.14 as not having occurred since December 31, 1998 (other
than paragraphs (a) and (c) thereof); provided, however, Seller and/or GNP may
(i) make capital expenditures of an emergency nature required to avoid imminent
material damage to or shutdown of the GNP's facilities, or reasonably necessary
for safety reasons, (ii) take such actions as may be required by law, (iii)
change, for any Employee who is not exempt from the overtime provisions of the
Fair Labor Standards Act, the method of calculating the
47
<PAGE> 58
regular rate of pay for overtime pay calculation purposes to using a weighted
average of the different rates earned by the Employee during the workweek, (iv)
make distributions to Seller with respect to the McDonald Purchase Agreement and
the Irving Purchase Agreement as contemplated by Section 10.09 hereof, (v) take
such actions and make such expenditures as may be reasonably required in order
for Seller to comply with the provisions of Section 7.04 hereof (subject to the
consent of Buyer with respect to any proposed action by Seller pursuant to
Section 7.04(iii), which consent shall not be unreasonably withheld), and (vi)
take such actions as are set forth in Sections 7.11 and 7.12 of the Disclosure
Schedule.
7.12 REAL PROPERTY TRANSACTIONS.
(a) Except for the transactions set forth in Section 7.12 of
the Disclosure Schedule, and except as permitted under Section 4.14(d), without
the prior written consent of Buyer, which consent shall not be unreasonably
withheld, conditioned or delayed, Seller shall not make or commit to make, and
shall cause GNP not to make or commit to make, any purchases, sales or exchanges
of real property comprising the Fee Timberlands which individually involve the
expenditure or receipt of more than Seventy Five Thousand Dollars ($75,000).
(b) Except in fulfillment of the contracts set forth in Section
4.22 of the Disclosure Schedule and except for actions described in Section
4.14(d), Seller shall make no further sales of stumpage.
7.13 HART-SCOTT-RODINO. The Parties have made, or will promptly make,
any and all filings which are required in connection with the transactions
contemplated hereby under the HSR Act. Each of the Parties and their appropriate
Affiliates will furnish the other Parties such information and assistance as may
reasonably be requested in connection with preparation of filings or submissions
to any governmental agency, including, without limitation, any necessary under
the provisions of the HSR Act. The Parties will each use their reasonable
efforts to resist any assertion that the transactions contemplated by this
Agreement constitute a violation of federal or state antitrust laws and shall
seek early termination of the waiting period under the HSR Act. In the event
that Buyer determines that it is exempt from all filings pursuant to the HSR Act
(which determination shall be made no later than May 31, 1999), Buyer will
promptly notify Seller in writing of such determination. Notwithstanding any
other provision of this Agreement, Seller shall have no liability, and shall
provide no indemnity, to Buyer or GNP, and Buyer and GNP shall indemnify and
hold harmless Seller, for any failure of Seller to make any filing pursuant to
the HSR Act if such failure to file is based upon Seller's receipt of written
notification from Buyer pursuant to the foregoing sentence.
7.14 ISSUANCE OF SECURITIES. Except as otherwise contemplated by this
Agreement, Seller shall not permit GNP to (i) issue any debt or equity security
or any options or warrants, (ii) enter into any subscriptions, agreements, plans
or other commitments pursuant to which GNP is or may become obligated to issue
any shares of its capital stock or any securities convertible into shares of
48
<PAGE> 59
its capital stock, (iii) otherwise change or modify its capital structure, (iv)
engage in any reorganization or similar transaction, or (v) agree to take any of
the foregoing actions.
7.15 NEGOTIATION WITH UNIONS. Buyer shall use its commercially
reasonable efforts to negotiate with the unions which are parties to those
contracts concerning the Millinocket Mill specified on Exhibit F hereto (the
"Union Contracts"), amendments to the Union Contracts pursuant to an agenda
discussed with Seller to achieve reasonably satisfactory results for Buyer.
Buyer may negotiate amendments of contracts with unions at the East Millinocket
Mill, but successful negotiation with respect thereto shall in no event
constitute a condition to the obligations of either party to close the
transactions contemplated hereby.
7.16 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Article XII, Seller will not, and will cause GNP not to,
directly or indirectly solicit, initiate or encourage any inquiries or proposals
from, discuss or negotiate with, provide any non-public information to, or
consider the merits of any unsolicited inquiries or proposals from, any Person
(other than Buyer) relating to any transaction involving the sale of the
Business or Assets (other than in the ordinary course of business), or any of
the capital stock of GNP, or any merger, consolidation, business combination, or
similar transaction involving GNP, provided, however, that the provisions of
this Section 7.16 shall not apply with respect to, and shall not be construed to
prohibit or limit, any unsolicited inquiries or proposals from any Person
relating to any transaction involving the sale, merger, consolidation, business
combination or similar transaction involving Seller, in the event of which
transaction this Agreement shall remain in full force and effect.
7.17 AUDITED FINANCIAL STATEMENTS. Seller will use its commercially
reasonable efforts to provide to Buyer audited consolidated balance sheets of
GNP as of December 31, 1996, 1997 and 1998, and the related audited consolidated
statements of earnings and stockholders' equity of GNP for each of the three
fiscal years ended December 31, 1996, 1997 and 1998. Such audited financial
statements have been prepared in accordance with GAAP consistently applied
during the periods involved, except as otherwise disclosed in any notes to such
financial statements, and will present fairly in all material respects the
financial position of GNP as of such dates and the results of operations,
stockholders' equity and cash flows of GNP for the periods then ended.
7.18 FINANCING COMMITMENT. Buyer will use its commercially reasonable
efforts to obtain and provide to Seller, by June 30, 1999: (i) a written
commitment from an institutional lender (the "Financing Commitment"), on terms
reasonably acceptable to Seller, which provides financing to Buyer in an amount
not less than $60,000,000, and (ii) commitments in writing ("Equity
Commitments") from sources available to Buyer which are reasonably acceptable to
Seller, to provide not less than $40,000,000 in equity to Buyer by the Closing
Date.
7.19 NEGOTIATION OF RETAINED LIABILITIES. As soon as practicable
following the date hereof, Buyer and Seller agree to negotiate in good faith to
reach agreement with respect to a division of GNP's OPEB and worker's
compensation liabilities such that Buyer shall assume no more than $102,000,000
of such liabilities as estimated as of the date of such determination, and
Seller shall
49
<PAGE> 60
retain all such liabilities in excess of $102,000,000. Seller shall determine
which such liabilities it shall retain and which such liabilities shall be
assumed by Buyer (subject to Buyer's approval, which approval shall not be
unreasonably withheld). Nothing contained in this Section 7.19 shall be
construed as a representation, warranty or covenant of Seller that the
liabilities assumed by Buyer under this Section 7.19 will at no time in the
future exceed $102,000,000.
ARTICLE VIII
CONDITIONS TO OBLIGATION TO CLOSE
8.01 CONDITIONS TO OBLIGATIONS OF BOTH PARTIES. The respective
obligations of each Party to effect the transactions contemplated hereby shall
be subject to the fulfillment at or prior to the Closing of the following
conditions:
(a) NO ORDER, DECREE OR INJUNCTION. No order, decree or ruling
of any governmental authority or court shall have been entered and not
vacated prohibiting, restraining or otherwise preventing the
consummation of the transactions contemplated hereby;
(b) EXPIRATION OF HSR ACT WAITING PERIOD. All applicable
waiting periods under the HSR Act shall have expired without any
indication by the Department of Justice or the Federal Trade Commission
that either of them intends to challenge the transactions contemplated
hereby, or early termination thereof shall have been granted; and
(c) CONSENTS OBTAINED. All Consents and Authorizations
material for the consummation of the transactions contemplated by this
Agreement, and all Consents and Authorizations required for the GNP
Shares to be transferred to Buyer, and for the Business to be operated
by Buyer after the Closing in all material respects in the manner and
to the extent of GNP's current operations, shall have been obtained
(provided, however, that obtaining such Consents and Authorizations
shall not be a condition to Seller's obligations except to the extent
the lack of any such Consents or Authorizations would result in the
transactions contemplated hereby being in violation of any Laws or
would result in any material fine, penalty or liability imposed on
Seller).
(d) ENVIRONMENTAL INSURANCE. GNP shall have received a
single-premium, environmental insurance policy reasonably acceptable to
Seller (the "Environmental Policy"), in the amount of $25,000,000 and
naming GNP as insured and Seller and Buyer as additional insureds for
all environmental obligations which may result from GNP's operation of
the Business prior to Closing or from GNP's or Buyer's operation or
cessation of operation of the Business or any portion thereof,
including, without limitation, those environmental obligations related
to the Millinocket Mill, the Dolby Landfill and the East Millinocket
Mill. The Environmental Policy shall be a 15-year policy (if
commercially available). The premium of the Environmental Policy shall
be paid by Seller.
50
<PAGE> 61
8.02 CONDITIONS TO OBLIGATION OF BUYER. The obligations of Buyer
under this Agreement and the consummation by Buyer of the transactions
contemplated hereby are subject to the satisfaction at or prior to the Closing
of the following conditions, unless waived by Buyer in writing:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and
as of the Closing as though made on and as of the Closing.
(b) PERFORMANCE OF OBLIGATIONS OF SELLER. Seller and its
Affiliates shall have performed in all material respects all
obligations required to be performed by them under this Agreement, and
complied in all material respects with all covenants for which
compliance by them is required under this Agreement, prior to or at the
Closing.
(c) CLOSING DOCUMENTATION. Buyer shall have received the
following documents, agreements and instruments from Seller:
(i) The stock certificates and, if applicable, stock
powers, for the GNP Shares described in Section 3.01 hereof;
(ii) A copy of GNP's Certificate of Incorporation,
including all amendments thereto, certified by the Secretary
of State of the State of Delaware;
(iii) The minute books and stock record books of GNP;
(iv) A certificate dated as of a recent date from the
Secretary of State of the State of Delaware to the effect that
GNP is duly incorporated and in good standing in such
jurisdiction;
(v) A certificate signed by an officer of Seller
certifying as to the matters set forth in Sections 8.02(a),
8.02(b) and 8.02(d);
(vi) An opinion of Anthony H. Barash, Senior Vice
President, Corporate Affairs and General Counsel of Seller,
relying upon and attaching opinions of such other counsel to
Seller as shall be appropriate or necessary, each dated the
date of the Closing and addressed to Buyer with respect to the
subjects set forth in Exhibit G hereto.
(The opinions required by this Section 8.02(c) may expressly rely as to
matters of fact upon certificates furnished by appropriate officers and
directors of Seller and GNP and by public officials;)
(vii) A certificate of the Secretary or an Assistant
Secretary of Seller dated the Closing Date certifying (A) that
attached thereto are true, complete and correct
51
<PAGE> 62
copies of resolutions, as in effect on the date of such
certification, duly adopted by the Board of Directors of
Seller, or a duly authorized committee thereof, approving the
transactions contemplated hereby and authorizing the
execution, delivery and performance by Seller of this
Agreement and the sale and transfer of the GNP Shares in
accordance herewith, and (B) as to the incumbency and
signatures of the officers of Seller executing this Agreement
and all instruments or other documents delivered in connection
with this Agreement;
(viii) All other instruments and documents required
by this Agreement to be delivered by Seller to Buyer on or
before the Closing.
(d) NO ADVERSE CHANGE. There shall have been no material
adverse change in the condition of any of the Owned Real Property,
Assets or Business which in Buyer's reasonable business judgment, would
be material and adverse to the acquisition of the GNP Shares pursuant
to this Agreement or would be material and adverse to the Business.
(e) UNION CONTRACTS. The unions which are parties to the Union
Contracts shall have ratified, by necessary vote of their respective
memberships, amendments to such contracts, as agreed between such
unions and Buyer, subject to the provisions of Section 7.15 hereof.
(f) FIRPTA CERTIFICATE. Seller shall have delivered to Buyer,
pursuant to Section 1445(b)(2) of the Code and in conformity with
Treasury Regulation Section 1.1445-2(b)(2)(iii)(B), a duly executed
certification of non-foreign status.
(g) AFFILIATE TRANSACTIONS. All amounts owing to GNP from
Seller or any Affiliate thereof shall have been paid in full and any
indebtedness of GNP to Seller and/or its Affiliates shall have been
settled or otherwise paid.
(h) NO PROCEEDINGS. Since the date of this Agreement, there
must not have been commenced and pending against Buyer, or against any
Person affiliated with Buyer, any proceeding (i) involving any
challenge to, or seeking damages or other relief in connection with,
any of the transactions contemplated by this Agreement; or (ii) that
are likely to have the effect of preventing, making illegal or
otherwise materially interfering with any of the transactions
contemplated by this Agreement.
(i) NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There
must not have been made by any Person and be pending any claim
asserting that such Person is the holder or the beneficial owner of, or
has the right to acquire or obtain beneficial ownership of, any stock
of, or any other voting, equity or ownership interest in, GNP.
(j) FINANCING COMMITMENT. Buyer receives the financing from
the commercial bank pursuant to the Financing Commitment.
52
<PAGE> 63
8.03 CONDITIONS TO OBLIGATION OF SELLER. The obligations of Seller
under this Agreement and the consummation by Seller of the transactions
contemplated hereby are subject to the satisfaction at or prior to the Closing
of the following conditions, unless waived by Seller in writing:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and
as of the Closing as though made on and as of the Closing.
(b) PERFORMANCE OF OBLIGATIONS OF BUYER. Buyer and its
Affiliates shall have performed in all material respects all
obligations required to be performed by them under this Agreement, and
complied in all material respects with all covenants for which
compliance by them is required under this Agreement, prior to or at the
Closing.
(c) CLOSING DOCUMENTATION. Seller shall have received the
following documents, agreements and instruments from Buyer:
(i) Payment of the Purchase Price pursuant to Section
2.02 hereof, including delivery of the Promissory Notes;
(ii) A certificate signed by an officer of Buyer
certifying as to the matters set forth in Sections 8.03(a) and
8.03(b) above;
(iii) An opinion of one or more counsel to Buyer,
each dated the date of the Closing and addressed to Seller
with respect to the subjects set forth in Exhibit H hereto.
(The opinions required by this Section 8.03(c) may expressly rely as to
matters of fact upon certificates furnished by appropriate officers and
directors of Buyer and by public officials);
(iv) Copies of all consents, notices and Approvals
referred to in Section 4.02 and hereof;
(v) A certificate of the Secretary or an Assistant
Secretary of Buyer dated the Closing Date certifying (A) that
attached thereto are true, complete and correct copies of
resolutions, as in effect on the date of such certification,
duly adopted by the Board of Directors of Buyer, or a duly
authorized committee thereof, approving the transactions
contemplated hereby and authorizing the execution, delivery
and performance by Buyer of this Agreement, and (B) as to the
incumbency and signatures of the officers of Buyer executing
this Agreement and all instruments or other documents
delivered in connection with this Agreement;
(vi) All other instruments and documents required by
this Agreement to be delivered by Buyer to Seller on or before
the Closing.
53
<PAGE> 64
(d) RELEASE OF GUARANTY. Buyer shall have taken such actions
(including, without limitation, the provision of a substitute guaranty,
letter of credit or other acceptable substitute security) as were
necessary to obtain and deliver to Seller a complete release of all of
Seller's obligations as a guarantor of GNP's workers compensation self
insurance obligations pursuant to the Guaranty (the "Guaranty") dated
January 1, 1992, issued by Seller to the Bureau of Insurance of the
State of Maine. If such release is not obtained and Seller chooses to
waive this condition and proceed to consummate the Closing, Buyer will,
immediately upon Closing, cause GNP to purchase workers compensation
insurance coverage which Seller reasonably determines to be sufficient
in scope and amount to cover any claims which might be included in the
Guaranty and, in either case, continue diligently and in good faith to
pursue such release of Seller's obligations under the Guaranty. After
the Closing occurs, Buyer agrees to indemnify and defend, and to cause
GNP to indemnify and defend, Seller against any liability or obligation
under the Guaranty, provided, however, that Seller may waive all or any
of the provisions of this Section 8.03(d) in their entirety. If such
actions of providing acceptable substitute security have not been
accomplished by the Closing Date, Seller agrees to permit its existing
guaranty and letter of credit to remain in place with the Bureau of
Insurance for an additional period of up to ninety (90) days.
(e) BOARD APPROVAL The Board of Directors of Seller shall have
authorized and approved the consummation of the transactions
contemplated hereby and the execution, delivery and performance of the
Related Agreements by Seller, which shall be on the agenda at the next
scheduled meeting thereof.
ARTICLE IX
THE CLOSING
9.01 TIME AND PLACE OF CLOSING. Upon the terms and subject to the
satisfaction or waiver of the conditions in this Agreement, the Closing of the
transactions contemplated hereby (the "Closing") shall take place as of the
Effective Time on the fifth Business Day following notice by either Party to the
other that it believes that all conditions outside the control of the Parties
have been satisfied (provided that if the Party receiving such notice determines
that any such condition has not in fact been satisfied, it shall give notice of
such determination to the other Party and the Closing shall be delayed until the
third Business Day after all such conditions have in fact been satisfied) at the
offices of Seller's counsel, Carter, Ledyard & Milburn, Two Wall Street, New
York, New York 10005, or at such other time and place as the Parties hereto may
agree in writing. The date on which the Closing occurs is herein referred to as
the "Closing Date".
9.02 INSTRUMENTS OF TRANSFER, ETC. At the Closing, Seller will deliver
to Buyer such stock certificates, stock powers, instruments of assignment and
other good and sufficient instruments of transfer and the other instruments and
documents contemplated hereby, executed by Seller and its
54
<PAGE> 65
Affiliates and in form and substance reasonably satisfactory to Buyer, as Buyer
may reasonably require to vest in Buyer all right, title and interest of Seller
and its Affiliates in and to the GNP Shares, and Buyer shall pay to Seller the
amount, and deliver to Seller the other instruments and documents required of
it at the Closing.
Seller shall deliver to Buyer at the Closing possession of the GNP
Shares pursuant to this Agreement and the entire right, title and interest of
Seller in and to such GNP Shares shall pass to such Buyer at the Closing.
ARTICLE X
POST-CLOSING COVENANTS
10.01 EXPENSES. Except as otherwise provided herein, Seller and
Buyer shall each bear their own costs and expenses incurred in connection with
this Agreement, the Related Agreements and the transactions contemplated hereby
and thereby. Seller shall be responsible for the fees, commissions, expenses and
reimbursements incurred by or required to be paid to its and GNP's professional
advisors, and Buyer shall be responsible for the fees, commissions, expenses and
reimbursements incurred by or required to be paid to Buyer's professional
advisors. Buyer and Seller will each pay one-half of any fees charged by any
accountants retained to resolve disputes pursuant to Section 2.03 hereof, except
as otherwise set forth in such Section.
10.02 FURTHER ASSURANCES. Subject to the terms and conditions of
this Agreement, each of the Parties hereto will use its commercially reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the sale of the GNP Shares and the
other transactions contemplated by this Agreement and the Related Agreements.
From time to time after the date hereof (including after the Closing Date if
requested), Seller and its Affiliates will, at their own expense and without
further consideration, execute and deliver such instruments and documents to
Buyer as Buyer may reasonably request in order more effectively to vest in Buyer
ownership of the GNP Shares and to more effectively consummate the transactions
contemplated by this Agreement and the Related Agreements.
10.03 COMMISSIONS AND FEES. Seller and Buyer each represent and
warrant to the other that no broker, finder, financial adviser or other person
is entitled to any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated hereby by reason of any action taken by the
Party making such representation, except for fees which may be payable to
Donaldson, Lufkin & Jenrette Securities Corporation by Seller, as to which
Seller shall indemnify and hold harmless GNP and Buyer. Seller and Buyer will
pay to the other or otherwise discharge, and will jointly and severally
indemnify and hold the other harmless from and against, any and all claims or
liabilities for all brokerage fees, commissions and finder's fees (other than as
described above) incurred by reason of any action taken by such Party.
55
<PAGE> 66
10.04 CONSENTS.
(a) If any Consent required for the transfer or assignment of
a Material Agreement to GNP as set forth in Section 4.22 of the Disclosure
Schedule is not obtained on or before the Closing Date and the Closing shall
occur, Seller shall continue for a reasonable time after the Closing to use all
commercially reasonable efforts to obtain such Consent or Consents.
(b) If Seller shall be unable to obtain any such Consent
within a reasonable time following the Closing, Seller and GNP agree to enter
into an agreement which will provide GNP and Seller with substantially equal
benefits or use of such Material Agreement for which such Consent has not been
obtained (and at no substantial additional expense to Seller), subject to GNP's
performance of, and indemnification of Seller with respect to, all obligations
imposed on Seller or GNP under such Material Agreement.
10.05 REMOVAL OF TRADEMARKS, ETC. As promptly as practicable after the
Closing, and in no event later than six (6) months after the Closing Date, and
except as otherwise contemplated by the Marketing Agreement, Buyer agrees to
cease use of and to delete, remove or otherwise obliterate from all packaging,
signage, advertisements, marketing and promotional materials and other materials
of GNP, all trade names and trademarks of Seller, including, but not limited to,
references to "Bowater" and derivatives thereof, and logos associated therewith.
10.06 PARTICIPATION AND SERVICE. Except as otherwise contemplated by
Section 7.15, and except for pension obligations, (i) employees of GNP after the
Closing will be eligible to participate in all plans, programs and arrangements
of Buyer applicable to similarly situated employees or former employees, as the
case may be, of Buyer (or the plans, programs and arrangements of GNP that are
continued after the Closing, if they provide the same or better benefits), and
shall not be subject to waiting periods or preexisting condition limitations in
connection with such eligibility, and (ii) employees of GNP after the Closing
will receive credit for purposes of eligibility, vesting and benefit accrual
under such plans, programs and arrangements for periods of employment with
Seller or GNP.
10.07 CAFETERIA PLAN. Seller and Buyer will cooperate to provide for an
orderly transition of the Flexible Spending Plan.
10.08 CONFIDENTIALITY. All copies of any Books and Records of GNP
retained by Seller shall, for a period of two (2) years from the date hereof, be
maintained by Seller with the same degree of confidentiality as Seller maintains
its own confidential information. All trade secrets and proprietary information
of GNP shall be maintained by Seller with the same degree of confidentiality as
Seller maintains its own trade secrets and proprietary information. Seller
agrees not to use such trade secrets and proprietary information for its own
benefit or for the benefit of another, except to the extent that Seller already
uses such information in connection with its business, which usage shall be
unaffected hereby.
56
<PAGE> 67
10.09 DIRECTORY PAPER SALES. In the event that Buyer causes GNP to
continue to manufacture directory paper following the Closing Date, Seller shall
cooperate with Buyer as reasonably necessary to facilitate Buyer's recruitment
of such of Seller's or GNP's personnel as are, as of the date hereof and as of
the Closing Date, primarily engaged in the sale of GNP's directory paper
products. In such event, Seller shall assign to GNP, and GNP shall assume,
Seller's or GNP's outstanding agreements for the sale of directory paper and
other groundwood specialty agreements with GNP's customers for products
manufactured by GNP.
10.10 PURCHASE AGREEMENT DISTRIBUTIONS. The Parties acknowledge and
agree that notwithstanding any other provision of this Agreement to the
contrary, Seller shall at or prior to Closing hereunder receive as a liquidating
distribution all payments (representing Purchase Price, adjustments,
apportionments and other payments contemplated thereby) received by GNP under
the Irving Purchase Agreement and the McDonald Purchase Agreement, including all
of GNP's rights to receive any additional payments payable after the Closing
Date under the Irving Purchase Agreement and the McDonald Purchase Agreement,
subject to Seller's assumption and performance of all payment obligations of GNP
thereunder to the other parties thereto.
10.11 CHANGE IN USE OF RECYCLED PULP PLANT. Buyer shall notify Seller
in writing at least 90 days prior to any disposition, discontinuance of use or
other event which would cause interest on the tax-exempt bonds issued by Seller
with respect to the recycled pulp plant at the East Millinocket Mill to become
taxable for Federal income tax purposes.
10.12 RETENTION BONUSES. Seller shall reimburse GNP with respect to
retention bonuses paid to GNP employees employed by GNP for a period of not less
than 18 months following the Closing Date, upon receipt of evidence reasonably
satisfactory to Seller that the employee with respect to which such
reimbursement is claimed met the foregoing qualification, provided, however,
that the foregoing obligation of Seller shall apply with respect to not more
than 15 individuals of GNP's choosing and the reimbursement obligation of Seller
under this Section 10.12 shall not exceed $2,000,000 in aggregate amount.
57
<PAGE> 68
ARTICLE XI
REMEDIES FOR BREACHES OF THIS AGREEMENT
11.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding any
otherwise applicable statute of limitations, all of the representations,
warranties and covenants of Seller contained in Sections 4.02 and 4.14 shall
survive the Closing hereunder (unless Buyer was informed by Seller, pursuant to
Section 7.09, of any misrepresentation or breach of warranty at the time of
Closing, in which event such breach shall be deemed to be waived upon
consummation of the Closing) and continue in full force and effect for a period
of one year thereafter; all of the representations, warranties and covenants of
Seller contained in Sections 4.03, 4.05, 4.08, 4.09, 4.10, 4.11, 4.18 and 4.24
shall survive the Closing hereunder (unless Buyer was informed by Seller,
pursuant to Section 7.09, of any misrepresentation or breach of warranty at the
time of Closing, in which event such breach shall be deemed to be waived upon
consummation of the Closing) and continue in full force and effect for a period
of three years thereafter. All of the other representations, warranties and
covenants of the Parties contained in this Agreement shall survive the Closing
(unless the damaged Party was informed, pursuant to Section 7.09, of any
misrepresentation or breach of warranty at the time of Closing, in which event
such breach shall be deemed to be waived upon consummation of the Closing) and
continue in full force and effect for a period of two years thereafter, except
(i) for the representations, warranties and covenants contained in Sections
4.04, 4.05, 4.06, 4.15, and 4.24, which shall survive the Closing hereunder
until the later of the expiration of the statute of limitations on assessments
applicable thereto or final settlement or determination of an assessed
liability, in each case, plus 180 days, and (ii) for the provisions of Article
VI, which shall survive indefinitely.
The Indemnification provisions set forth in this Article XI shall, if
there is an applicable survival period for the representation, warranty or
covenant breached, survive for such period, and otherwise shall survive Closing
for a period of three years thereafter, and shall thereupon expire except: (a)
the provisions of Section 11.03 shall survive indefinitely; (b) the provisions
of Section 7.13, 11.04 and Article VI shall survive indefinitely and shall not
be subject to any minimum or maximum amount set forth in Section 11.02 or 11.03
below; (c) with respect to any claim, written notice of which shall have been
delivered to the Party against which the claim is made, such claim shall survive
the termination of such period and shall survive for as long as such claim is
unsettled; and (d) with respect to any litigation which shall have been
commenced to resolve such claim on or prior to such date.
Except as set forth in this Article XI, Seller shall have no further
liability to Buyer, and Buyer shall have no further liability to Seller, from
and after the Closing, with respect to the representations, warranties and
covenants referred to in this Agreement and in any exhibit, certificate,
affidavit, statutory declaration, disclosure schedule or other document
delivered or given pursuant to this Agreement.
58
<PAGE> 69
Any Party entitled to receive indemnification pursuant to this Article
XI shall use commercially reasonable efforts to seek recovery (including both
costs of defense and indemnity) under applicable insurance policies with respect
to any Adverse Consequences.
11.02 INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER.
(a) In the event that Seller breaches any of its
representations, warranties, and covenants contained herein or in any instrument
delivered by Seller pursuant hereto at or prior to Closing, and, provided that
Buyer makes a written claim for indemnification against Seller pursuant to
Section 11.05 below within the applicable survival period set forth in Section
11.01, then Seller shall indemnify GNP, Buyer and its officers, directors,
stockholders and Affiliates (the "Buyer Indemnified Parties") from and against
any Adverse Consequences Buyer Indemnified Parties may suffer through and after
the date of the claim for indemnification (including any Adverse Consequences
Buyer Indemnified Parties may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of, or caused
by the breach up to an aggregate maximum amount of $10,000,000 with respect to
all claims against Seller (excluding de Minimis Claims, claims under Article VI
and Retained Liabilities); provided, however, that Seller shall have no
obligation to indemnify Buyer Indemnified Parties from and against any Adverse
Consequences until Buyer Indemnified Parties have suffered Adverse Consequences
by reason of all such breaches in excess of an aggregate deductible amount of a
$100,000 (excluding de Minimis Claims and Retained Liabilities), aggregate
deductible (the "Seller Deductible Amount"), at which point Seller will be
obligated to indemnify Buyer Indemnified Parties from and against all such
Adverse Consequences in excess of such Seller Deductible Amount; and provided,
further that Seller shall not be liable under this Section 11.02 for a claim if
the amount of Adverse Consequences thereunder is less than $5,000 (for purposes
hereof, any series of claims arising from the same or substantially similar
facts or circumstances shall be treated as one claim) ("de Minimis Claims").
Without prejudice to the provisions of Sections 10.02 and 13.15, indemnification
pursuant to the terms of this Section 11.02 shall be the sole and exclusive
remedy against Seller for breaches of the nature set forth herein.
(b) Except as otherwise required by law, all indemnification
payments under this Section 11.02 shall be treated for Tax purposes as
adjustments to the Purchase Price. In determining the amount payable hereunder
there shall be taken into account (i) the dollar amount of any insurance or
other net proceeds actually receivable by (or payable for the benefit of) the
Buyer Indemnified Party with respect to the events giving rise to a claim
hereunder and (ii) any income Tax benefit to the Buyer Indemnified Party
actually realized as a direct result of, and that would not have arisen but for,
the events giving rise to such claim under this Section 11.02. If any such
income Tax benefit is subsequently disallowed in whole or in part, Seller shall
promptly reimburse and pay to such Buyer Indemnified Party such disallowed
amount. The amount of any indemnity or other amount payable by Seller to any
Buyer Indemnified Party pursuant to this Section 11.02 shall be increased by
such amount as shall be necessary to assure that, net of the amount of any and
all Taxes payable by the Buyer Indemnified Party in respect of the receipt or
accrual of any amount paid to or for the account of the Buyer Indemnified Party
or otherwise paid pursuant to Seller's indemnification of Buyer
59
<PAGE> 70
Indemnified Parties under this Section 11.02 (including the dollar amount of any
insurance or other net proceeds received or receivable by the Buyer Indemnified
Party in respect of the events giving rise to the claim hereunder), the Buyer
Indemnified Party receives the amount otherwise payable to it under this Section
11.02 and is held harmless, on an after-Tax basis, from and against the events
giving rise to the claim made hereunder. Subject to the foregoing provisions of
this Section 11.02(b), any valid claim for indemnification pursuant to this
Section 11.02 shall be satisfied first by set-off against and reduction of the
Term Note by such claim being applied first against accrued but unpaid interest
on the principal amount of the Term Note to the date of such claim and then
against payment of the outstanding principal amount of the Term Note in reverse
chronological order of such payments.
(c) The limitations on liability set forth in this Section
11.02 shall not apply with respect to any payment contemplated by Article II or
Article VI of this Agreement. Such payments shall not be included in the
calculation of de Minimis Claims.
(d) Seller shall indemnify the Buyer Indemnified Parties
against any Adverse Consequences incurred by any of them as a result of a claim
for indemnification made against GNP by any pre-Closing officer of GNP or any
other Person entitled to indemnification from GNP with regard to any occurrence
prior to the Closing, whether such claim arises out of GNP's Bylaws, GNP's
Certificate of Incorporation, the Delaware General Corporation Law or otherwise.
The indemnification obligations provided in this Section 11.02(d) shall survive
the Closing indefinitely and shall not be subject to the limits set forth in
Sections 11.02(a) above.
11.03 INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER.
(a) In the event that Buyer breaches any of its
representations, warranties, and covenants contained herein or in any instrument
delivered by Buyer pursuant hereto at or prior to Closing, and, provided that
Seller makes a written claim for indemnification against Buyer pursuant to
Section 11.05 below within the applicable survival period set forth in Section
11.01, then Buyer shall indemnify Seller and its officers, directors,
stockholders and Affiliates (the "Seller Indemnified Parties") from and against
any Adverse Consequences Seller Indemnified Parties may suffer through and after
the date of the claim for indemnification (including any Adverse Consequences
Seller Indemnified Parties may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of, or caused
by the breach up to an aggregate maximum amount of $10,000,000 with respect to
all claims against Buyer (excluding de Minimis Claims, claims under Article VI
and Assumed Liabilities); provided, however, that Buyer shall have no obligation
to indemnify Seller Indemnified Parties from and against any Adverse
Consequences until Seller Indemnified Parties have suffered Adverse Consequences
by reason of all such breaches in excess of an aggregate deductible amount of a
$100,000 (excluding de Minimis Claims and Assumed Liabilities), aggregate
deductible (the "Buyer Deductible Amount"), at which point Buyer will be
obligated to indemnify Seller Indemnified Parties from and against all such
Adverse Consequences in excess of such Buyer Deductible Amount; and provided,
further that Buyer shall not be liable under this Section 11.03 for a claim if
the amount of Adverse Consequences thereunder is less than
60
<PAGE> 71
$5,000 (for purposes hereof, any series of claims arising from the same or
substantially similar facts or circumstances shall be treated as one claim) ("de
Minimis Claims"). Without prejudice to the provisions of Sections 10.02 and
13.15, indemnification pursuant to the terms of this Section 11.03 shall be the
sole and exclusive remedy against Buyer for breaches of the nature set forth
herein.
(b) Except as otherwise required by law, all indemnification
payments under this Section 11.03 shall be treated for Tax purposes as
adjustments to the Purchase Price. In determining the amount payable hereunder
there shall be taken into account (i) the dollar amount of any insurance or
other net proceeds actually receivable by (or payable for the benefit of) the
Seller Indemnified Party with respect to the events giving rise to a claim
hereunder and (ii) any income Tax benefit to the Seller Indemnified Party
actually realized as a direct result of, and that would not have arisen but for,
the events giving rise to such claim under this Section 11.03. If any such
income Tax benefit is subsequently disallowed in whole or in part, the
indemnifying party in respect of the original indemnity claim shall promptly
reimburse and pay to such Seller Indemnified Party such disallowed amount. The
amount of any indemnity or other amount payable by Buyer to any Seller
Indemnified Party pursuant to this Section 8.03 shall be increased by such
amount as shall be necessary to assure that, net of the amount of any and all
Taxes payable by the Seller Indemnified Party in respect of the receipt or
accrual of any amount paid to or for the account of the Seller Indemnified Party
or otherwise paid pursuant to Buyer's indemnification of Seller Indemnified
Parties under this Section 11.03 (including the dollar amount of any insurance
or other net proceeds received or receivable by the Seller Indemnified Party in
respect of the events giving rise to the claim hereunder), the Seller
Indemnified Party receives the amount otherwise payable to it under this Section
11.03 and is held harmless, on an after-Tax basis, from and against the events
giving rise to the claim made hereunder.
(c) The limitations on liability set forth in Section 11.03(a)
above shall not apply with respect to any payment contemplated by Article II or
Article VI of this Agreement. Such payments shall not be included in the
calculation of de Minimis Claims.
(d) In furtherance of the indemnification provided to Seller
by Buyer under this Section 11.3, Buyer agrees that, immediately upon Closing,
Buyer will cause GNP to sign and deliver to Seller a written statement in form
and substance satisfactory to Seller, whereby GNP will agree to be bound by and
provide to Seller the indemnity set forth by this Article XI on a joint and
several basis with Buyer.
11.04 INDEMNIFICATION REGARDING PURCHASE AGREEMENTS. With respect to
any indemnification claims against Seller pursuant to Article XI of the Irving
Purchase Agreement Buyer agrees that no such claims shall be brought by Buyer or
any Affiliate or former Affiliate of Buyer to the extent that the Adverse
Consequences giving rise to such claims resulted from any act or omission of
GNP, Buyer or Buyer's Affiliates occurring after the Effective Time (and all
such claims are hereby waived and released and Buyer and GNP agree to jointly
and severally indemnify and hold harmless Seller against all Adverse
Consequences arising from any such claims). With respect to any indemnification
claims against Seller or GNP pursuant to Article X of the McDonald Purchase
Agreement ("McDonald Claims"): (a) Seller will indemnify and hold harmless Buyer
and GNP with
61
<PAGE> 72
respect to all Adverse Consequences arising from McDonald Claims to the extent
that the McDonald Claims result from any act or omission of GNP or Seller
occurring prior to the Effective Time; and (b) Buyer and GNP will jointly and
severally indemnify and hold harmless Seller with respect to all Adverse
Consequences arising from McDonald Claims to the extent that the McDonald
Claims result from any act or omission of GNP, Buyer or Buyer's Affiliates
occurring after the Effective Time. With respect to any indemnification claims
against GNP pursuant to Section 8 of the Seven Islands Purchase Agreement,
Seller will indemnify and hold harmless Buyer and GNP. There shall be no
minimum or maximum limitations on indemnification claims by the Parties
pursuant to this Section 11.04.
11.05 MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Article XI, then the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) The Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days after the Indemnified
Party has given notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief, (iv)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice adverse to the continuing business interests of
the Indemnified Party, and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
(c) (i) The Indemnified Party may retain separate co-counsel
at its sole cost and expense and participate in the defense of the Third Party
Claim, (ii) so long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 11.05(b) above the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
62
<PAGE> 73
(d) In the event any of the conditions in Section 11.05(b)
above is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it may deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent from,
any Indemnifying Party in connection therewith), (ii) the Indemnifying Parties
will reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (iii) the Indemnifying Parties will remain responsible for
any Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party
Claim to the fullest extent provided in this Article XI.
(e) In the event that a Tax matter arises pursuant to Section
6.04 or Section 6.07 hereof, (i) the Party contacted by the taxing authority
shall provide written notice thereof to the other Party hereto, (ii) the Parties
shall cooperate in good faith to resolve the matter and shall jointly control
all actions taken in connection with any Tax claim relating solely to such Tax
matter (and each Party shall bear its own expenses with respect thereto), (iii)
the Parties shall keep each other informed of all material developments and
proceedings, and (iv) neither Party shall settle such Tax claim without the
other Party's prior written consent; provided, however, that if either Party
shall refuse to consent to any settlement that the other Party proposed to
accept (a "Proposed Settlement"), then (A) the liability with respect to the
subject matter of the Proposed Settlement of the Party who proposed to accept
the Proposed Settlement shall be limited to the amount that such liability would
have been if the Proposed Settlement had been accepted and (B) the other Party
shall be responsible for all expenses incurred thereafter in connection with the
contest of such Tax audit or proceeding except to the extent that the final
settlement imposes less liability on the Party who proposed to accept the
Proposed Settlement than the Proposed Settlement would have imposed.
(f) If a Tax Matter arises under Section 6.03 hereof, (i) the
Party contacted by the taxing authority shall provide written notice thereof to
the other Party hereto, (ii) the Parties shall keep each other informed of all
material developments and proceedings, and (iii) Buyer and GNP shall cooperate
in good faith with the Seller and Seller shall control all actions taken in
connection with any Tax claim relating solely to such Tax matter (and each Party
shall bear its own expenses with respect thereto). For purposes of Sections
11.05(e) and (f), "Party" includes GNP, and Seller (before the Closing) and
Buyer (after the Closing) shall cause GNP to comply with the provisions of such
Sections.
11.06 SOLE REMEDY. Without prejudice to the provisions of Sections
10.02 and 13.15, Buyer and Seller each acknowledge and agree that the foregoing
indemnification provisions of this Article XI are Buyer's and Seller's sole and
exclusive remedies against the other for any claim with respect to the
transactions contemplated hereby or otherwise relating to GNP, the Assets or the
Business and Buyer and Seller each hereby waive and release any statutory,
equitable or common law remedies which might otherwise be available against the
other.
63
<PAGE> 74
ARTICLE XII
TERMINATION
12.01 TERMINATION OF AGREEMENT. This Agreement may be terminated by
the Parties as provided below:
(a) Buyer and Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(b) Buyer may terminate this Agreement by giving written
notice to Seller at any time prior to the Closing (i) in the event that
Seller has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Buyer has notified
Seller of the breach, and the breach has continued without cure for a
period of 10 days after the notice of breach, or (ii) if the Closing
shall not have occurred on or before July 31, 1999, by reason of the
failure of any condition precedent under Section 8.01 or 8.02 hereof
(unless the failure results primarily from Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement);
(c) Seller may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing (i) in the event Buyer
has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Seller has
notified Buyer of the breach, and the breach has continued without cure
for a period of 10 days after the notice of breach, (ii) Buyer has
failed to provide to Seller by June 30, 1999, a Financing Commitment
and Equity Commitments meeting the requirements of Section 7.18
hereof,] or (iii) if the Closing shall not have occurred on or before
July 31, 1999, by reason of the failure of any condition precedent
under Section 8.01 or 8.03 hereof (unless the failure results primarily
from any of Seller breaching any representation, warranty, or covenant
contained in this Agreement); and
(d) Buyer or Seller may terminate this Agreement by giving
written notice to the other if there shall be in effect any law or
regulation that prohibits the consummation of the Closing or if
consummation of the Closing would violate any non-appealable final
order, decree or judgment of any court or governmental body having
competent jurisdiction.
12.02 EFFECT OF TERMINATION. If either Party terminates this
Agreement pursuant to Section 12.01 above, all rights and obligations of the
Parties hereunder shall terminate without any Liability of any Party to any
other Party or their respective Affiliates, directors, officers or employees,
except for the obligations of the Parties hereto contained in provisions which
are stated to survive any termination of this Agreement, including, without
limitation, Sections 7.02, 7.03, 12.01(b), 12.01(c), 13.01, 13.06, 13.07, 13.08,
13.09, 13.12, 13.13, 13.16 and 13.19 and Article XI (except for any Liability of
any Party then in breach).
64
<PAGE> 75
ARTICLE XIII
MISCELLANEOUS
13.01 ENTIRE AGREEMENT. This Agreement (including the Annexes,
Exhibits, Schedules and documents attached hereto or referred to herein)
constitutes the entire agreement between the Parties and supersedes any prior
understandings, agreements, or representations by or between the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof, except for the Confidentiality Agreement which will remain in full force
and effect for the term provided therein.
13.02 NO THIRD-PARTY BENEFICIARIES. Except as otherwise expressly
provided for in this Agreement, nothing in this Agreement, express or implied,
is intended or shall be construed to confer upon or give to any employee of GNP,
Seller or Buyer or any other Person, other than the Parties hereto (and their
successors and permitted assigns), any rights, remedies or other benefits under
or by reason of this Agreement.
13.03 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. Neither Party may assign either this Agreement
or any of its rights, interests, or obligations hereunder without the prior
written approval of the other Party; provided, however, that Buyer may (i)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder, provided, however, that any such assignment shall not
relieve Buyer of its liabilities and obligations to Seller hereunder in the
event that Buyer's assignee does not perform such liabilities and obligations
and Buyer will execute and deliver to Seller guarantees in form and substance
reasonably satisfactory to Seller of Buyer's assignees' obligations (including,
specifically and without limitation obligations under the Promissory Notes and
under any financing provided by Seller pursuant to Section 10.01 hereof).
13.04 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by either Party on separate counterparts, each of which as so
executed and delivered shall be deemed an original, but all of which together
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement as to any Party hereto to produce or account for
more than one such counterpart executed and delivered by such Party. Execution
by facsimile signature shall be deemed to be, and shall have the same effect as,
execution by original signature.
13.05 HEADINGS. The Article and Section headings, and the table of
contents, contained in this Agreement are inserted for convenience only and
shall not affect in any way the meaning or interpretation of this Agreement.
13.06 NOTICES. All notices, certificates, requests, demands, claims,
and other communications hereunder shall be given in writing and shall be
delivered personally (including by personal courier or delivery service) or sent
by facsimile, telex or telegram or by the registered or certified mail (return
receipt requested), postage prepaid, to the Parties at the following address (or
at such other addresses as the shall be specified by like notice):
65
<PAGE> 76
<TABLE>
<CAPTION>
If to Seller: Copy to:
------------- --------
<S> <C>
Bowater Incorporated Carter, Ledyard & Milburn
55 East Camperdown Way Two Wall Street
P.O. Box 1028 New York, New York 10005
Greenville, South Carolina 29602
Facsimile No.: (864) 282-9468 Facsimile No.: (212) 732-3232
Attention: Anthony H. Barash, Esq. Attention: Peter P. McN. Gates, Esq.
Senior Vice President
and General Counsel
If to Buyer: Copy to:
------------ --------
Inexcon Maine, Inc. Brann & Isaacson, LLP
c/o Brann & Isaacson, LLP 184 Main Street
184 Main Street P.O. Box 3070
P.O. Box 3070 Lewiston, Maine 04243-3070
Lewiston, Maine 04243-3070 Facsimile No.: (207) 783-9325
Facsimile No.: (207) 783-9325 Attention: Martin I. Eisenstein, Esq.
Attention: Martin I. Eisenstein, Esq.
</TABLE>
Any notice given personally or by mail or telegram shall be effective when
received. Any notice given by telex or facsimile shall be effective when the
appropriate telex or facsimile answerback is received.
13.07 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Maine as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies (without giving effect to any choice or conflict of law
provision or rule, whether of the State of Maine or any other jurisdiction, that
would cause the application of the laws of any jurisdiction other than the State
of Maine).
13.08 DISPUTE RESOLUTION.
(a) MEDIATION.
(i) In the event of any dispute, controversy or
claim arising out of or relating to this Agreement or the breach, termination,
or validity thereof, except for disputes required to be resolved pursuant to
Section 2.03 of this Agreement and disputes in respect of which equitable relief
is sought ("Dispute"), the Parties shall make a good faith attempt to settle the
Dispute by mediation pursuant to the provisions of this Section 13.08(a) before
resorting to the procedure set forth in Section 13.08(b) below.
(ii) Unless the Parties agree otherwise, the
mediation shall be conducted in accordance with the Commercial Mediation Rules
of the American Arbitration Association by a mediator who (x) has the
qualifications and experience set forth in paragraph (iii) of this Section
13.08(a) and (y) is selected as provided in paragraph (iv) of this Section
13.08.
66
<PAGE> 77
(iii) Unless the Parties agree otherwise, the
mediator shall be a lawyer or retired judge who has mediated cases involving
large commercial transactions for the federal or state courts or a reputable
commercial alternative dispute resolution ("ADR") firm or not-for-profit ADR
organization.
(iv) Either Party (the "Initiating Party") may
initiate mediation of the Dispute by giving the other Party (the "Recipient
Party") written notice (a "Mediation Notice") setting forth a list of the names
and resumes of qualifications and experience of three impartial persons who the
Initiating Party believes would be qualified as a mediator pursuant to the
provisions of paragraph (iii) hereof. Within 7 days after the delivery of the
Mediation Notice, the Recipient Party shall give a counter-notice (the
"Counter-Notice") to the Initiating Party in which the Recipient Party may
designate a person to serve as the mediator from among the three persons listed
by the Initiating Party in the Mediation Notice (in which event such designated
person shall be the mediator). If none of the persons listed in the Mediation
Notice is designated by the Recipient Party to serve as the mediator, the
Counter-Notice shall set forth a list of the names and resumes of three
impartial persons who the Recipient Party believes would be qualified as a
mediator pursuant to the provisions of paragraph (iii) hereof. Within 7 days
after the delivery of the Counter-Notice, the Initiating Party may designate a
person to serve as the mediator from among the three persons listed by the
Recipient Party in the Counter-Notice (in which event such designated person
shall be the mediator). If the Parties cannot agree on a mediator from the three
impartial nominees submitted by each Party, each Party shall strike two names
from the other Party's list, and the two remaining persons on both lists will
jointly select as the mediator any person who has the qualifications and
experience set forth in paragraph (iii) hereof. If they are unable to agree,
then the mediator will be selected by the American Arbitration Association.
(v) If the Dispute cannot be settled within 30
days after the mediator has been selected as provided above, either Party may
give the other and the mediator a written notice declaring the mediation process
at an end, in which event the Dispute shall be resolved by arbitration as
hereinafter provided.
(vi) All conferences and discussions which occur
in connection with mediation conducted pursuant to this Agreement shall be
deemed settlement discussions, and nothing said or disclosed, nor any document
produced which is not otherwise independently discoverable, shall be offered or
received as evidence or used for impeachment or for any other purpose in any
current or future arbitration or litigation.
(vii) Each Party shall bear its own costs and
expenses with respect to mediation; provided that the costs of the mediator
shall be shared equally between the Parties.
(b) ARBITRATION.
(i) Except as otherwise expressly provided
herein or in any of the Related Agreements, any Dispute not settled in
accordance with the procedures set forth in Section 13.08(a) of this Agreement
shall, at the request of any Party, be settled by arbitration in accordance with
the
67
<PAGE> 78
Commercial Arbitration Rules of the American Arbitration Association then in
effect (the "Rules"), except as the Rules may be modified in this Section
13.08(b).
(ii) The arbitration shall be held in Boston,
Massachusetts. There shall be three arbitrators, of whom each Party shall select
one. The Party-appointed arbitrators shall select the third arbitrator. Each of
the arbitrators shall be a former or retired judge with at least 10 years'
experience in commercial matters.
(iii) The arbitrators shall decide the matters in
dispute in accordance with the laws of Maine, without reference to the conflict
of laws rules thereof (except with respect to disputes pertaining to title,
possession or use of real property located in the State of Maine, which issues
shall be governed by the laws of the State of Maine). The arbitration shall be
governed by Maine Civil Procedure.
(iv) The hearing shall be commenced within 90
days and the award shall be rendered no later than 120 days following the
appointment of the last of the three arbitrators, unless the Parties agree
otherwise or the Arbitrator orders otherwise. All discovery shall be completed
no later than 20 days prior to the commencement of the hearing.
(v) Consistent with the expedited nature of
arbitration, each Party will, upon the written request of the other Party,
provide the other with copies of documents in its possession, custody or control
relevant to the issues raised by any claim or counterclaim. Other discovery may
be agreed by the Parties or ordered by the arbitrators to the extent the
arbitrators deem additional discovery relevant and appropriate, and any dispute
regarding discovery, including disputes as to the need therefor or the relevance
or scope thereof, shall be determined by the arbitrators, which determination
shall be conclusive.
(vi) The Parties and the arbitrators shall treat
the proceedings, any related discovery and the decisions of the arbitral
tribunal as confidential, except in connection with a judicial challenge to, or
enforcement of, an award, and unless otherwise required by law.
(vii) Any claim by either Party shall be time
barred unless the asserting Party makes a demand for arbitration with respect to
such claim within the applicable statute of limitations except to the extent
otherwise provided in this Agreement. Any dispute as to the timeliness of such
demand or other statute of limitations issues shall be decided by the
arbitrators.
(viii) The award of the arbitrators shall be final
and binding and shall be the sole and exclusive remedy between the Parties
regarding any claim, counterclaims, issues, or accounting presented to the
tribunal. The arbitrators' award shall state the reasons on which the award is
based. Any monetary award shall include interest from the date of any breach of
or other violation of this Agreement to the date of which the award is paid, at
a rate to be determined by the arbitrators. Judgment upon the award rendered by
the arbitrators may be entered by any court having jurisdiction thereof. Each of
the Parties hereby consents to service of process by registered mail, by
receipted Federal Express or other courier delivery, or by personal delivery at
its address set forth
68
<PAGE> 79
above and agrees that its submission to jurisdiction and its consent to service
of process by mail is made for the express benefit of the other Party.
(ix) This agreement to arbitrate shall be
binding upon the successors and assigns and any trustee, receiver, or executor
of each Party, provided that nothing contained in this Section 13.08 shall limit
the right of either Party, or any of their respective Affiliates, successors, or
assigns, at its election, to seek equitable remedies in a court of equity or law
in the event of a breach or threatened breach hereof, without first proceeding
under this Section 13.08.
13.09 RETURN OF INFORMATION. If for any reason whatsoever the sale and
purchase of the GNP Shares pursuant to this Agreement is not consummated, Buyer
shall promptly return to Seller all books, records and documents of Seller or
GNP (including all copies, if any, thereof) furnished by Seller or GNP or any of
their respective agents, employees, or representatives, and shall not use or
disclose the information contained in such books, records or documents for any
purpose or make such information available to any other entity or person, except
that one copy of all such information may be retained in the files of Buyer's
legal department.
13.10 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by both
of the Parties hereto. Either Party hereto may, by written notice to the other
Party, waive any provision of this Agreement. No waiver by either Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
13.11 SEVERABILITY. The provisions of this Agreement shall be deemed
severable and any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof. If any provision
of this Agreement, or the application thereof to any person or entity or any
circumstance, is invalid or unenforceable, (i) a suitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision,
and (ii) the remainder of this Agreement and the application of such provision
to other persons, entities or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
13.12 EXPENSES. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, each of the Parties will bear its own costs and expenses
(including, but not limited to, all compensation and expenses of counsel,
financial advisors, consultants, actuaries and independent accountants) incurred
in connection with this Agreement and the transactions contemplated hereby.
13.13 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of
69
<PAGE> 80
proof shall arise favoring or disfavoring any Party by virtue of the authorship
of any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
13.14 INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits,
Annexes, and the Disclosure Schedule identified in this Agreement are
incorporated herein by reference and made a part hereof.
13.15 SPECIFIC PERFORMANCE. Both Parties acknowledge and agree that the
other Party would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each Party agrees that the other Party
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in Section 13.16 below), in addition to any
other remedy to which they may be entitled, at law or in equity.
13.16 SUBMISSION TO JURISDICTION. WITHOUT LIMITING THE PARTIES?
AGREEMENT TO SUBMIT ANY AND ALL DISPUTES TO MEDIATION AND ARBITRATION AS HEREIN
PROVIDED, IF, NOTWITHSTANDING SAID SECTION, EITHER PARTY SHALL HAVE THE RIGHT TO
SEEK RECOURSE TO A COURT WITH RESPECT TO ANY DISPUTE ARISING OUT OF OR RELATED
TO THIS AGREEMENT OR THE TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY THIS
AGREEMENT, WHETHER IN TORT OR CONTRACT OR AT LAW OR IN EQUITY, THEN ANY ACTION
OR PROCEEDING IN RESPECT OF ANY SUCH DISPUTE SHALL BE BROUGHT EXCLUSIVELY IN
EITHER THE SUPREME COURT OF THE STATE OF DELAWARE FOR THE COUNTY OF KENT OR THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE ( THE ?CHOSEN COURTS?)
AND (I) IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE CHOSEN COURTS
FOR SUCH PURPOSES, (II) WAIVES ANY OBJECTION TO LAYING VENUE IN ANY SUCH ACTION
OR PROCEEDING IN THE CHOSEN COURTS, (III) WAIVES ANY OBJECTION THAT THE CHOSEN
COURTS ARE AN INCONVENIENT FORUM OR DO NOT HAVE JURISDICTION OVER ANY PARTY
HERETO AND (IV) AGREES THAT SERVICE OF PROCESS UPON SUCH PARTY IN ANY SUCH
ACTION OR PROCEEDING SHALL BE EFFECTIVE IF NOTICE IS GIVEN IN ACCORDANCE WITH
SECTION 13.06 OF THIS AGREEMENT. EACH PARTY AGREES THAT A FINAL JUDGMENT IN ANY
ACTION OR PROCEEDING SO BROUGHT SHALL BE CONCLUSIVE AND MAY BE ENFORCED BY SUIT
ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW OR AT EQUITY. EACH PARTY
ALSO AGREES NOT TO BRING ANY ACTION OR PROCEEDING
70
<PAGE> 81
ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY OTHER COURT. BUYER
IRREVOCABLY DESIGNATES BRANN & ISAACSON, LLP AS ITS AGENT AND ATTORNEY-IN-FACT
FOR THE ACCEPTANCE OF SERVICE OF PROCESS ON ITS BEHALF IN ANY SUCH CLAIM OR
PROCEEDING (AND HEREBY WAIVES ANY OBJECTION TO SERVICES OF PROCESS AT THE
LEWISTON, MAINE OFFICES THEREOF) AND TAKING ALL SUCH ACTS AS MAY BE NECESSARY OR
APPROPRIATE IN ORDER TO CONFER JURISDICTION OVER IT UPON THE CHOSEN COURTS AND
BUYER STIPULATES THAT SUCH CONSENT AND APPOINTMENT IS IRREVOCABLE AND COUPLED
WITH AN INTEREST. SELLER IRREVOCABLY DESIGNATES THE CORPORATION TRUST COMPANY AS
ITS AGENT AND ATTORNEY-IN-FACT FOR THE ACCEPTANCE OF SERVICE OF PROCESS AND
MAKING AN APPEARANCE ON ITS BEHALF IN ANY SUCH CLAIM OR PROCEEDING AND TAKING
ALL SUCH ACTS AS MAY BE NECESSARY OR APPROPRIATE IN ORDER TO CONFER JURISDICTION
OVER IT UPON THE CHOSEN COURTS AND SELLER STIPULATES THAT SUCH CONSENT AND
APPOINTMENT IS IRREVOCABLE AND COUPLED WITH AN INTEREST.
13.17 FULFILLMENT OF OBLIGATIONS. Any obligation of either Party to the
other Party under this Agreement, which obligation is performed, satisfied or
fulfilled by an Affiliate of such Party, shall be deemed to have been performed,
satisfied or fulfilled by such Party.
13.18 DEFINITION OF "ORDINARY COURSE". For purposes of this Agreement,
the term "ordinary course" as it relates to the Business prior to the Closing
means in a manner substantially the same as that normally employed by GNP in the
ordinary course with respect to businesses it holds with a view towards
operating and maintaining such businesses rather than a view towards the sale of
such businesses to a third party.
13.19 ATTORNEY'S FEES. In any arbitration or other proceeding brought
by any Party hereto to enforce this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees incurred by the prevailing party in
connection therewith, plus arbitration and court costs.
**************
[Remainder of Page Intentionally Left Blank]
71
<PAGE> 82
IN WITNESS WHEREOF, Seller and Buyer have each caused this Agreement to
be executed by their duly authorized officers, each as of the date first above
written.
INEXCON MAINE, INC.
By: /s/ Joseph G. Kass
----------------------------------------
Name: Joseph G. Kass
Title: Chairman and CEO
BOWATER INCORPORATED
By: /s/ David G. Maffucci
----------------------------------------
Name: David G. Maffucci
Title: Senior Vice President and
Chief Financial Officer
72
<PAGE> 1
EXHIBIT 2.1.1
AMENDMENT NO. 1
to
Stock Purchase Agreement
THIS AMENDMENT entered into as of August 13, 1999 to the STOCK
PURCHASE AGREEMENT (the "Agreement") dated May 18, 1999 between Inexcon Maine,
Inc. ("Buyer") and Bowater Incorporated ("Seller"),
WITNESSETH
WHEREAS, Seller and Buyer each desire an amendment of the
Agreement to reflect changes with regard to the payment of the Purchase Price
and other terms of the Agreement.
NOW, THEREFORE, to effectuate such changes and in
consideration of the mutual agreements hereinafter set forth and other good and
valuable consideration, the receipt of which is hereby acknowledged by each
Party, and intending to be legally bound hereby, the Parties agree as follows:
1. All capitalized terms used and not otherwise defined herein
shall have the meanings given thereto in the Agreement; references to Sections
are to Sections of the Agreement.
2. The definitions of "Election Amount," "Escrow Agreement"
and "Subordinated Note" set forth in Section 1.01 are deleted.
3. The following definition is added to Section 1.01:
"Bank of Montreal Undertaking" shall have the meaning
set forth in Section 6.01."
4. In the first sentence of Section 2.01(a), the clause, "Cash
in the amount of $90,000,000." is replaced with the following: "A purchase price
note in the principal amount of $110,000,000 payable on demand in the form
attached hereto as Exhibit X".
5. Section 2.02(c) is deleted.
6. Section 3.02 is deleted and replaced with the following:
"3.02 Promissory Note. At the Closing, Buyer shall
deliver to Seller the
<PAGE> 2
Term Note, dated the Closing Date."
7. Section 4.12 is amended by adding thereto, prior to the
final parenthetical therein: "and (vi) any liability assumed by Buyer pursuant
to Section 7.19."
8. Section 6.01 is deleted and replaced with the following:
"6.01 SECTION 338(h)(10) ELECTION. (a) Seller and
Buyer will jointly make an election under Section
338(h)(10) of the Code (and any corresponding
election under State of Maine tax law) (collectively
a "Section 338(h)(10) Election") with respect to the
purchase and sale of the GNP Shares hereunder. Seller
will include any income, gain, loss, deduction, or
other tax item resulting from the Section 338(h)(10)
Election on its Tax Returns to the extent permitted
by applicable law, and will indemnify Buyer and GNP
against any Tax imposed in GNP as a result of the
deemed asset sale resulting from the Section
338(h)(10) election, except to the extent Buyer is
otherwise required to indemnify Seller. It is the
intent of the Parties to neutralize the impact on
Buyer of making the Section 338(h)(10) Election. Due
to the inability of the Parties to determine with
specificity the amount of additional taxes incurred
by Buyer, therefor, Seller shall pay in full
satisfaction of the above indemnification: (i)
$2,000,000 to the Buyer upon receipt by Seller of
payment in full of the Purchase Price Note; and (ii)
$20,000,000 on behalf of Buyer to the Bank of
Montreal or its assigns on or before September 29,
2000 pursuant to an agreement in the form of Exhibit
Y hereto (the "Bank of Montreal Undertaking"). The
Bank of Montreal Undertaking shall be executed and
delivered by Seller to the Bank of Montreal at the
Closing."
If there is a Final Negative Determination as herein
defined, Buyer shall thereupon pay to Seller in cash
the full $22,000,000 paid by Seller pursuant to
Section 6.01(a) plus interest thereon from the date
of the payment thereof by Seller until repaid at the
"prime rate" as reported from time to time in the
Wall Street Journal, or if not so reported, such
other comparable fluctuating rate as Seller may
select in its reasonable discretion. "Final Negative
Determination" shall mean a determination that the
Section 338(h)10 Election by Seller is invalid by
reason of the failure of the sale of the GNP Shares
under this Agreement to constitute a "qualified stock
purchase" under Section 338(d)(3) of the Code which
(i) is reflected in a decision, judgment, decree or
other order by any court of competent jurisdiction,
which decision, judgment, decree or other order has
become final, i.e., when all allowable appeals have
been exhausted by Seller; (ii) is embodied in a
closing agreement entered into under Section
<PAGE> 3
7121 of the Code or any other binding settlement
agreement entered into in connection with an
administrative or judicial proceeding, or (iii)
results from the expiration of the time for
instituting a claim for refund, or if such a claim
was filed, the expiration of the time for instituting
suit with respect thereto. The provisions of Section
11.05(f) shall apply in the event Seller receives
notice from the Internal Revenue Service indicating
that the Service may challenge the validity of the
Section 338(h)10 Election.
9. Section 8.03(d) is deleted and replaced with the following:
"Seller agrees to permit its existing guaranty (the
"Guaranty") dated January 1, 1992 to GNP's workers
compensation self insurance obligations and its
letter of credit to remain in place for a period of
up to ninety (90) days after the Closing Date. On or
prior to the expiration of such ninety (90) day
period Buyer shall cause GNP to purchase workers
compensation insurance coverage, or continue
self-insurance coverage without the benefit of the
Guaranty and Seller's letter of credit, for workers
compensation claims that are incurred on or after the
Closing Date. Notwithstanding any contrary provisions
of Section 2.05 and 7.19, and in lieu of the
assumption thereof, and in each case subject to
Section 11.05, Seller agrees to indemnify and defend
Buyer against any claim for workers compensation
claims incurred prior to the Closing Date, including
reported and unreported claims, which claims shall
constitute Retained Liabilities. With respect to
workers compensation claimants, Buyer will cause GNP
to continue to administer personnel policies and
procedures consistent with GNP's past practices.
Buyer agrees to indemnify and defend, and to cause
GNP to indemnify and defend, Seller against any
liability arising from a workers compensation claim
incurred on or after the Closing Date."
All other terms and conditions of the Agreement not
specifically amended shall remain in full force and effect in accordance with
the terms therein.
* * * * *
10. Pursuant to Section 7.19, Bowater and Inexcon agree that
the liabilities assumed by Inexcon shall include OPEB liabilities and
liabilities for bark pile remediation in an aggregate amount not to exceed
$102,000,000, which shall be measured as of the Closing Date by Hewitt
Associates LLC giving effect to the new collective bargaining agreements with
GNP labor unions and, using normal and customary actuarial assumptions according
to past practices utilized by Seller and GNP. In the event that the measured
amount exceeds $102,000,000, Bowater shall pay the excess amount to Inexcon in
quarterly installments as and when Inexcon
<PAGE> 4
makes payments to existing retirees up to the amount of such retiree
payments; in the event that the measured amount is less than $102,000,000,
Inexcon shall not be obligated to make any payment to Bowater.
11. As soon as practicable after the Closing, Bowater will pay
a signing bonus payment in the amount of $5,000 to each employee of GNP who is a
member of a union that has approved the new collective bargaining agreement
prior to the Closing. Concurrently with such payment, Inexcon will reimburse
Bowater $500 for each $5,000 bonus payment made by Bowater. Liability for any
new pension plan adopted by GNP pursuant to the new collective bargaining
agreements shall be borne by Inexcon.
INEXCON MAINE, INC.
By: /s/ Joseph Kass
------------------------------------
Name: Joseph Kass
Title: Chairman and Chief Executive
Officer
BOWATER INCORPORATED
By: /s/ David G. Maffucci
------------------------------------
Name: David G. Maffucci
Title: Senior Vice President
and Chief Financial Officer
Attachments Omitted
-------------------
Exhibit X: Form of purchase price note.
Exhibit Y: Form of Bank of Montreal Undertaking.
<PAGE> 1
Exhibit 99.1
Media contact:
Deborah L. Humphrey
864-282-9571
Analyst contact:
James H. Dorton
864-282-9500
FOR IMMEDIATE RELEASE
TUESDAY, AUGUST 17, 1999
BOWATER COMPLETES SALE OF GREAT NORTHERN PAPER, INC.
GREENVILLE, SC - Bowater Incorporated (NYSE: BOW) today announced that it has
completed the sale of Great Northern Paper, Inc. (GNP) to Inexcon Maine, Inc., a
Quebec-based investment group, for $250 million, consisting of cash, a note, and
the assumption of certain liabilities. GNP operates pulp and paper mills in
Millinocket and East Millinocket, Maine, and owns approximately 400,000 acres of
timberlands and an extensive hydroelectric system.
Bowater Incorporated, headquartered in Greenville, SC, is a global
leader in newsprint. In addition, the company makes coated and uncoated
groundwood papers, bleached kraft pulp and lumber products. It has eight pulp
and paper mills in the United States, Canada and South Korea. The company also
owns and operates a coating operation and three sawmills that produce softwood
dimension lumber. These operations are supported by 2 million acres of
timberlands owned or leased in the United States and Canada and over 14 million
acres of timber cutting rights in Canada. The company is one of the world's
largest consumers of recycled newspapers and magazines. Bowater common stock is
listed on the New York Stock Exchange, U.S. regional exchanges and the London
Stock Exchange. A special class of stock exchangeable into Bowater common stock
is listed on the Toronto and Montreal exchanges (TSE and ME: BWX).
###
