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)
July 14, 1995
PENTAIR, INC.
(Exact name of Registrant as specified in its Charter)
MINNESOTA 0-4689 41-0907434
(State or other (Commission (IRS Employer
Jurisdiction of File Number) Identification
Incorporation) Number)
PENTAIR, INC.
1500 County Road B2 West, Suite 400
St. Paul, Minnesota 55113
(Address of Principal Executive Offices)
612-636-7920
(Registrant's Telephone Number, Including Area Code)
Not applicable
(Former name or former address, if changed since last
report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On June 30, 1995, Pentair, Inc. ( the "Registrant")
consummated the disposition of Niagara of Wisconsin
Paper Corporation, its 50 percent share in Lake
Superior Paper Industries ("LSPI") and its 12 percent
share in Superior Recycled Fiber Industries ("SRFI")
to Consolidated Papers, Inc. of Wisconsin Rapids,
Wisconsin ("Consolidated"), pursuant to purchase
agreements dated as of May 8, 1995 by and among the
Registrant and Consolidated. Niagara of Wisconsin
Paper Corporation was the Registrant's coated
groundwood paper manufacturing subsidiary. LSPI
produced supercalendered paper and SRFI produced
recycled fiber for the paper industry.
The purchase price was approximately $109 million,
subject to adjustment based upon an audit by
independent certified public accountants of the net
book value as of June 30, 1995. The estimated purchase price
was paid in cash on June 30, 1995.
Proceeds from the sale were used primarily to reduce
bank borrowings.
Item 5. Other Items
As reported in the Form 8-K filed April 17, 1995, the sale of
Cross Pointe Paper Corporation to Noranda Forest, Inc. was
completed on March 31, 1995. The final purchase price, which was
based on net book value as of March 31, 1995, was subject to an audit
by independent certified public accountants. The audit has been
completed by Deloitte & Touche LLP and the final purchase price is $203.3
million.
Item 7. Financial Statements and Exhibits.
The information supplied under this item is
supplemented by the following:
a. Not Applicable
b. Pro Forma Financial Information:
See Form 8-K/A filed May 30, 1995 which incorporated
this transaction along with the sale transaction of
Cross Pointe Paper Corporation.
c. Exhibits
(2.1) Agreement for Sale and Purchase of Stock of
Niagara of Wisconsin Paper Corporation by and
between Pentair, Inc. and Consolidated Papers,
Inc., dated May 8, 1995. The Registrant agrees
to provide a copy of the exhibits to the
Commission upon request.
(2.2) Agreement for Sale and Purchase of Stock of
Pentair Duluth Corp. and Minnesota Paper
Incorporated by and between Pentair, Inc.,
Minnesota Power & Light and Consolidated Papers,
Inc., dated May 8, 1995. The Registrant agrees
to provide a copy of the exhibits to the
commission upon request.
(2.3) Amendment to Agreement for Sale and Purchase of
Stock of Pentair Duluth Corp. and Minnesota
Paper Incorporated dated June 30, 1995.
(2.4) Agreement for Sale and Purchase of Assets of
LSPI Fiber Co. and Stock of Superior Recycled
Fiber Corporation by and between Pentair, Inc.,
Minnesota Power & Light, Synertec, Inc., LSPI
Fiber Co. and Consolidated Papers, Inc., dated
May 8, 1995. The Registrant agrees to provide a
copy of the exhibits to the commission upon
request.
(99.1) Press Release dated May 8, 1995
(99.2) Press Release dated June 30, 1995
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned hereunto
duly authorized.
PENTAIR, INC
By: David D. Harrison
Senior Vice President &
Chief Financial Officer
Dated: July 14, 1995
AGREEMENT FOR SALE AND PURCHASE
OF STOCK
OF
NIAGARA OF WISCONSIN PAPER CORPORATION
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions. . . . . . . . . . . . . . 1
2. Purchase and Sale of Stock . . . . . . 5
3. Purchase Price . . . . . . . . . . . . 5
4. Payment. . . . . . . . . . . . . . . . 6
5. Assumption of Liabilities. . . . . . . 7
6. Closing. . . . . . . . . . . . . . . . 7
7. Seller's Representations, Warranties and
Covenants . . . . . . . . . . . . . . 8
(a) Organization and Authority of Seller 8
(b) Valid and Enforceable Agreement. 8
(c) Organization of Niagara Paper. . 9
(d) Financial Statements . . . . . . 9
(e) No Material Change . . . . . . . 10
(f) Leases . . . . . . . . . . . . . 10
(g) Title to Personal Property . . . 10
(h) Real Estate. . . . . . . . . . . 10
(i) Plant and Equipment. . . . . . . 12
(j) Intellectual Property. . . . . . 12
(k) Employee Matters . . . . . . . . 13
(l) Litigation . . . . . . . . . . . 13
(m) Compliance with Laws . . . . . . 13
(n) Material Contracts . . . . . . . 13
(o) Licenses and Permits . . . . . . 14
(p) Insurance. . . . . . . . . . . . 14
(q) Employee Benefits. . . . . . . . 14
(r) Transactions with Related Parties 17
(s) Bank Accounts. . . . . . . . . . 17
(t) Tax Matters. . . . . . . . . . . 17
(u) Accounts Receivable. . . . . . . 19
(v) Inventory. . . . . . . . . . . . 20
(w) Motor Vehicles . . . . . . . . . 20
(x) Product Warranty . . . . . . . . 20
8. Buyer's Representations and Warranties 20
(a) Organization . . . . . . . . . . 21
(b) Authority. . . . . . . . . . . . 21
(c) Valid and Enforceable Agreement. 21
(d) No Insolvency. . . . . . . . . . 21
(e) Financial Statements . . . . . . 21
(f) Investment Intent. . . . . . . . 21
9. Actions Pending Closing. . . . . . . . 22
(a) Operations . . . . . . . . . . . 22
(b) Access to Records. . . . . . . . 22
(c) Access to Facilities . . . . . . 22
(d) Release of Guarantees. . . . . . 22
(e) Hart-Scott-Rodino Filings. . . . 23
(f) Notice of Developments . . . . . 23
(g) Best Efforts . . . . . . . . . . 23
(h) Allocation of Pulp . . . . . . . 23
(i) Insurance Matters. . . . . . . . 24
10. Conditions Precedent to Obligations of
Buyer . . . . . . . . . . . . . . . . 24
(a) No Errors; Performance of Obligations 24
(b) Officer's Certificate. . . . . . 24
(c) Certified Copy of Resolutions. . 24
(d) Opinion of Seller's Counsel. . . 24
(e) Injunctions. . . . . . . . . . . 25
(f) Clayton Act Matters. . . . . . . 25
(g) Environmental Matters and Consent
Order. . . . . . . . . . . . . . 25
(h) Labor Negotiations . . . . . . . 25
(i) Financing. . . . . . . . . . . . 26
(j) FIRPTA Certificate . . . . . . . 26
(k) Purchase of LSPI and SRFI. . . . 26
(l) Real Estate Consents . . . . . . 26
(m) Title Insurance and Surveys. . . 26
(n) Niagara Lease. . . . . . . . . . 28
(o) Other Matters. . . . . . . . . . 28
11. Conditions Precedent to Obligations of
Seller. . . . . . . . . . . . . . . . 28
(a) No Errors; Performance of Obligations 28
(b) Officer's Certificate. . . . . . 28
(c) Certified Copy of Resolutions. . 28
(d) Opinion of Buyer's Counsel . . . 29
(e) Injunctions. . . . . . . . . . . 29
(f) Clayton Act Matters. . . . . . . 29
(g) Financing. . . . . . . . . . . . 29
(h) Sale of LSPI and SRFI. . . . . . 29
(i) Niagara Lease. . . . . . . . . . 29
(j) Approvals. . . . . . . . . . . . 29
(k) Other Matters. . . . . . . . . . 30
12. Broker. . . . . . . . . . . . . . . . 30
13. Employees and Employee Benefits . . . 30
14. Confidential Information. . . . . . . 31
15. Indemnification . . . . . . . . . . . 31
16. Guaranteed Obligations. . . . . . . . 34
17. Expenses. . . . . . . . . . . . . . . 34
18. Environmental Matters . . . . . . . . 35
(a) Warranty . . . . . . . . . . . . 35
(b) Indemnity. . . . . . . . . . . . 37
(c) Special Provisions . . . . . . . 37
(d) Exclusive Remedy . . . . . . . . 38
(e) Inspection of Books and Records. 38
19. Termination of Agreement. . . . . . . 39
20. Announcements . . . . . . . . . . . . 39
21. Records . . . . . . . . . . . . . . . 39
22. Assistance after Closing . . . . . . 40
(a) Retained Liabilities . . . . . . 40
(b) Allocation of Pulp . . . . . . . 40
23. Tax Matters; Payment of Taxes . . . . 40
(a) Tax Returns. . . . . . . . . . . 40
(b) Apportionment of Income. . . . . 40
(c) Allocation of Taxes. . . . . . . 41
(d) Indemnity. . . . . . . . . . . . 41
(e) Post-Closing Elections . . . . . 42
(f) Control of Contest . . . . . . . 42
(g) General. . . . . . . . . . . . . 42
(h) Sales and Transfer Taxes . . . . 42
(i) Tax Effective Time . . . . . . . 42
(j) Survival . . . . . . . . . . . . 43
24. Section 338(h)(10) Election . . . . . 43
25. Limitations on Liability. . . . . . . 44
26. Amendment and Waiver. . . . . . . . . 44
27. Notices . . . . . . . . . . . . . . . 44
28. Parties in Interest . . . . . . . . . 45
29. Further Assurances. . . . . . . . . . 45
30. No Waivers. . . . . . . . . . . . . . 45
31. Governing Law . . . . . . . . . . . . 46
32. Severability. . . . . . . . . . . . . 46
33. Miscellaneous . . . . . . . . . . . . 46
<PAGE>
THIS AGREEMENT is made and entered into as of
the 8th day of May, 1995 between Pentair, Inc., a
Minnesota corporation ("Seller"), and Consolidated
Papers, Inc., a Wisconsin corporation ("Buyer").
WHEREAS, Seller is the owner of all of the
issued and outstanding capital stock of Niagara of
Wisconsin Paper Corporation, a Wisconsin corporation
("Niagara Paper"); and
WHEREAS, Seller desires to sell and Buyer
desires to purchase from Seller all of the issued and
outstanding capital stock of Niagara Paper in
accordance with the terms and provisions of this
Agreement;
NOW, THEREFORE, in consideration of the
foregoing premises and of the mutual covenants and
conditions herein contained, the parties agree as
follows:
1. Definitions. The terms below shall have the
following meanings under this Agreement unless the
context clearly requires otherwise:
(a) "Allocations" shall have the meaning set
forth in Section 24(b).
(b) "CERCLA" shall have the meaning set forth
in Section 18(a)(iii).
(c) "Clayton Act" means 15 U.S.C. section 12, et
seq., as amended, and the rules and regulations
promulgated thereunder from time to time.
(d) "Closing" means the actual transfer and
delivery of the certificates evidencing all of the
issued and outstanding capital stock of Niagara Paper,
the delivery of documents providing for the assumption
of the Guaranteed Obligations, and the exchange and
delivery by the parties of the other documents and
instruments contemplated by this Agreement.
(e) "Closing Date" means June 30, 1995 or such
later month end date as mutually agreed upon by the
parties.
(f) "Code" means the Internal Revenue Code of
1986, as amended.
(g) "Commitments" shall have the meaning set
forth in Section 10(m)(i).
(h) "Common Control Entity" shall have the
meaning set forth in Section 7(q)(vi).
(i) "Confidential Information" means all
information designated as "Evaluation Material" in the
confidentiality letter agreement dated August 26, 1994
between Buyer and CS First Boston Corp., acting as
agent for Seller, a copy of which is attached as
Schedule 1(i).
(j) "Election" shall have the meaning set forth
in Section 24.
(k) "Election Form" shall have the meaning set
forth in Section 24(c).
(l) "Employee Benefits" means, with respect to
the employees of Niagara Paper, any and all pension or
welfare benefit programs, plans, arrangements,
agreements and understandings for employees generally
or specific individual employees of Niagara Paper to
which Seller or Niagara Paper contributes or is a
party, by which any of them may be bound, or under
which any of them may have liability, including,
without limitation, pension or retirement plans,
deferred compensation plans, bonus or incentive plans,
early retirement programs, severance pay policies,
support funds, medical, dental, life and disability
insurance, and payment or reimbursement plans.
(m) "Environmental Cleanup" shall have the
meaning set forth in Section 18(c)(iii).
(n) "Environmental Expenditures" means the
environmental expenditures incurred and paid by
Niagara Paper prior to the Closing Date. A list of
the Environmental Expenditures is attached as Schedule
1(n).
(o) "Environmental Laws" means federal, state,
regional, county and local laws, statutes, rules,
regulations and ordinances and common law requirements
as of the Closing Date relating to the environment,
including, without limitation, those relating to the
public health or safety aspects thereof, or to
nuisance, trespasses, releases, discharges, emissions
or disposals to air, water, land or groundwater, to
the withdrawal or use of groundwater, to the use,
handling or disposal of polychlorinated biphenyls
(PCB's), asbestos or urea formaldehyde, to the
treatment, storage, disposal or management of
Hazardous Material (including, without limitation,
petroleum, its derivatives, by-products or other
hydrocarbons), to exposure to toxic, hazardous or
other controlled, prohibited or regulated substances,
to the transportation, storage, disposal, management
or release of gaseous or liquid substances, and any
regulation, order, injunction, judgment, declaration,
notice or demand issued thereunder.
(p) "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended.
(q) "GAAP" means generally accepted accounting
principles consistently applied and maintained
throughout the period indicated and consistent with
prior financial practice of Niagara Paper or Seller,
as the case may be.
(r) "Guaranteed Obligations" means those
obligations and liabilities of Seller, listed on
Schedule 5 hereto, undertaken in respect of Niagara
Paper, including, without limitation, the guaranty
obligations of Seller under the Niagara Leases.
(s) "Hazardous Material" means and includes (a)
petroleum or petroleum products, including crude oil,
(b) any asbestos insulation or other material composed
of or containing asbestos, and (c) any hazardous,
toxic or dangerous waste, substance or material
defined as such in (or for purposes of) the
Comprehensive Environmental Response, Compensation and
Liability Act, as amended, any so-called state or
local "Superfund" or "Superlien" law, Section 144.01
of the Wisconsin Statutes or any other Environmental
Laws.
(t) "Indemnitee" shall have the meaning set
forth in Section 15(e).
(u) "Indemnitor" shall have the meaning set
forth in Section 15(e).
(v) "Intellectual Property" means all patents,
utility patents and design patents and registrations
therefor, trademarks, trade names, trademark rights
and trademark registrations, copyrights and licenses
listed on Schedule 1(v) attached, as well as all
technical documentation reflecting engineering and
production data, design data, plans, specifications,
drawings, technology, know-how, trade secrets,
software (whether owned or licensed), manufacturing
processes and all documentary evidence thereof
relating to Niagara Paper and its business.
(w)"Knowledge" of Seller or the "best knowledge"
of Seller when modifying any representation or
warranty shall mean that no officer or other manager
reporting directly to the President of Seller or of
Niagara Paper (who are involved in or responsible for
operations of Niagara Paper), including the chief
financial officer and the manager of environmental
affairs of Seller and Niagara Paper, has any knowledge
that such representation and warranty is not true and
correct to the same extent as provided therein and
that:
(i) Seller and Niagara Paper have
exercised due diligence and have made
appropriate investigations and inquiries
of the officers and business records of
both Seller and Niagara Paper; and
(ii) nothing has come to the
attention of Seller in the course of such
investigation and review or otherwise
which would reasonably cause such party,
in the exercise of due diligence, to
believe that such representation and
warranty is not true and correct.
Such terms shall have a cognate meaning as applied to
Buyer.
(x) "Leased Real Estate" shall have the meaning
set forth in Section 7(h)(ii). The Niagara Leases are
specifically excluded from the definition of "Leased
Real Estate."
(y) "MADSP" shall have the meaning set forth in
Section 24(b).
(z) "Net Book Value" means the difference
between (x) all assets, less (y) all liabilities,
excluding current income tax accruals, deferred tax
accruals, and subordinated and other debt, whether
current or long-term, owing to Seller, all as
reflected on the balance sheet of Niagara Paper as of
either December 31, 1994 or the Closing Date, as
appropriate.
(aa) "Niagara Financial Statements" means the
unaudited financial statements (for the years ended
December 31, 1993 and 1994) of Niagara Paper.
(bb) "Niagara Leases" means those three
equipment leases listed on Schedule 7(f) hereto.
(cc) "1933 Act" shall have the meaning set
forth in Section 8(f).
(dd) "NOW Defined Benefit Plans" shall have the
meaning set forth in Section 7(q)(i).
(ee) "Owned Real Estate" shall have the meaning
set forth in Section 7(h)(i).
(ff) "PBGC" shall have the meaning set forth in
Section 7(q)(vi).
(gg) "Pension Plans" shall have the meaning set
forth in Section 7(q)(i).
(hh) "Permitted Exceptions" shall have the
meaning set forth in Section 10(m)(i).
(ii) "Real Estate" means all real property,
whether owned, under contract to purchase, or leased
by Niagara Paper, including all land, buildings,
structures, easements, appurtenances and privileges
relating thereto, and all leaseholds, leasehold
improvements, fixtures and other appurtenances and
options, including options to purchase and renew, or
other rights thereunder, used or intended for use in
connection with Niagara Paper's business.
(jj) "Report" shall have the meaning set forth
in Section 24(b).
(kk) "Return(s)" means any return (including
any consolidated or combined return), report, claim
for refund, information return or statement, relating
to any Tax, including any schedule or attachment
thereto.
(ll) "Statement of Net Book Value" means the
audited balance sheet of Niagara Paper as of the
Closing Date in substantially the form reflected in
Schedule 3.2 from which the calculation of the
purchase price of the stock of Niagara Paper will be
made in accordance with Section 3 hereof.
(mm) "Surveys" shall have the meaning set forth
in Section 10(m)(ii).
(nn) "Survey Defect" shall have the meaning set
forth in Section 10(m)(iii).
(oo) "Tax" or "Taxes" means all income, gross
receipts, sales, use, employment, franchise, profits,
property or other taxes, fees, stamp taxes and duties,
assessments or charges of any kind whatsoever (whether
payable directly or by withholding), together with any
interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority
with respect thereto.
(pp) "Title Company" shall have the meaning set
forth in Section 10(m)(i).
(qq) "Title Policy" shall have the meaning set
forth in Section 10(m)(i).
(rr) "Unpermitted Exception" shall have the
meaning set forth in Section 10(m)(iii).
2. Purchase and Sale of Stock. Subject to the
terms and conditions herein stated, Seller shall sell,
transfer and deliver to Buyer, and Buyer shall
purchase from Seller at the Closing all of Seller's
right, title and interest in all of the issued and
outstanding capital stock of Niagara Paper.
3. Purchase Price. The aggregate purchase
price to be paid by Buyer to Seller for the purchase
of all of the issued and outstanding capital stock of
Niagara Paper, shall be:
(a) $31,800,000;
(b) decreased for any increase, or increased
for any decrease, in the unfunded
liability of the Jointly Trusteed Pension
Plan for Bargaining Employees of Niagara
of Wisconsin Paper Corporation from
December 31, 1994 to the Closing Date;
(c) increased for Environmental Expenditures
made in excess of $1,000,000 or decreased
for Environmental Expenditures made of
less than $1,000,000;
(d) increased for any increase, or decreased
for any decrease, in the Net Book Value of
Niagara Paper from December 31, 1994 to
the Closing Date; and
(e) less one-half of the aggregate amount of
transition incentives to be paid by
Niagara Paper pursuant to Section 13 to
certain Niagara Paper employees, which
amount is set forth on Schedule 3.1.
The Net Book Value shall be determined in accordance
with GAAP as set forth on Schedule 3.2, which Schedule
sets forth sample calculations of the Net Book Value
as of December 31, 1994 and March 31, 1995 and the
exceptions to GAAP used in calculating Net Book Value.
Within sixty (60) days following the Closing
Date, Seller shall prepare and deliver to Buyer the
Statement of Net Book Value, which shall be audited by
Seller's auditors based upon an audit of Niagara
Paper's books including an inventory taken by Niagara
Paper beginning at 7:00 a.m. on the Closing Date and a
review of the liabilities as of the Closing Date. The
taking of such inventory may be observed by Buyer and
Buyer's auditors. The Statement of Net Book Value
shall not include any assets acquired by Niagara Paper
from December 31, 1994 through the Closing Date
relating to environmental remediation of the Real
Estate. The Statement of Net Book Value shall have
attached thereto an auditor's report in the form
attached as Schedule 3.3. To the extent possible,
Seller will provide Buyer with a preliminary draft of
the Statement of Net Book Value. Buyer and Seller
will in good faith attempt to resolve any disputes
with respect to such calculation before the final
Statement of Net Book Value is rendered.
Buyer may review the Statement of Net Book Value
and Seller shall make available the work papers of
Seller's auditors to Buyer and its accountants and
Buyer and its accountants may make inquiries of
representatives of Seller and its auditors. Buyer
shall give written notice to Seller of any objection
to the Statement of Net Book Value within thirty (30)
days after Buyer's receipt thereof. The notice shall
specify in reasonable detail the items in the
Statement of Net Book Value to which Buyer objects and
shall provide a summary of Buyer's reasons for such
objections.
Any dispute between Buyer and Seller with
respect to the Statement of Net Book Value which is
not resolved within fifteen (15) business days after
receipt by Seller of the written notice from Buyer
shall be referred for decision to Ernst & Young LLP
who shall cause an audit partner who is not engaged in
providing services to Seller or Buyer to decide the
dispute within thirty (30) days of such referral. The
decision by the partner shall be final and binding on
Seller and Buyer. In resolving any disputed item such
audit partner may not assign a value to any item
greater than the greatest value for such item claimed
by either party or less than the smallest value for
such item claimed by either party. The cost of
retaining the audit partner with respect to resolving
disputes as to the Statement of Net Book Value shall
be borne by Seller and Buyer equally, unless such
partner determines, based on his or her evaluation of
the good faith of the parties, that the fees should be
borne unequally.
4. Payment. The estimated purchase price shall
be paid in U.S. dollars in immediately available funds
on the Closing Date. The amount to be paid on the
Closing Date shall be based upon a preliminary
Statement of Net Book Value delivered to Buyer at
least five (5) business days prior to Closing, which
shall be calculated based on the unaudited balance
sheet of Niagara Paper as of the month end prior to
the Closing Date, prepared by Seller on a basis
consistent with Schedule 3.2. Following delivery of
the final Statement of Net Book Value under Section 3,
any balance due to Seller or refund due to Buyer
reflected thereon shall be paid within ten (10) days
of such delivery, (unless there is an objection under
Section 3, in which case the amount not in dispute
shall be paid within ten (10) days of such delivery,
and the balance in dispute shall be paid within ten
(10) days of the resolution of such objection)
together with interest on such amount from the Closing
Date at the announced large business prime rate of
Morgan Guaranty Trust Company of New York.
Except as Buyer may be otherwise advised in
writing by Seller at least five (5) days prior to any
payment, all payments of the purchase price by Buyer
to Seller at the Closing or any other amounts owed by
Buyer to Seller shall be by wire transfer to First
Bank National Association, Account No xxx-xxxxxxx (ABA
wire transfer routing number 091000022), marked to the
attention of Karen Johnson.
Except as Seller may be otherwise advised in
writing by Buyer at least five (5) days prior to any
payment, payment of any refund to Buyer based on the
final determination of the purchase price pursuant to
Section 3 or any other amounts owed by Seller to Buyer
hereunder shall be made by wire transfer to Harris
Trust and Savings Bank - Consolidated Papers, Inc.,
Account No. xxxxxxx (ABA wire transfer routing number
xxxxx-xxxx-x marked to the attention of J.R. Matsch.
All wire transfers shall be sent by 10:00 a.m.
Minneapolis time on the date of such payment unless
otherwise agreed by the parties.
5. Assumption of Liabilities. At Closing,
Buyer shall assume and agree to satisfy and perform,
to the extent not satisfied or performed prior to the
Closing Date, without any cost or charge to Seller,
all obligations of Seller as guarantor under any
Guaranteed Obligation. If the assumption of the
Guaranteed Obligations by Buyer under this Section 5
requires the consent of any third party, Seller and
Buyer agree they will use their best efforts to obtain
such written consent to such assumption; provided,
however, that in no event shall Buyer be subject,
without its consent, to terms and conditions more
restrictive than those set forth in the existing
obligations of Seller being assumed. Failing the
consent of such creditor, Buyer shall indemnify Seller
in accordance with the provisions of Section 16 hereof
against any claim arising out of the Guaranteed
Obligations.
6. Closing. (a) The Closing shall take place
on the Closing Date at the offices of Henson & Efron,
P.A. in Minneapolis, Minnesota, at 9:00 o'clock a.m.,
local time, or at such other time and place as may be
mutually agreed upon. Buyer and Seller each agree
they shall use their best efforts and shall cause all
relevant affiliates to use their best efforts to
obtain fulfillment of all conditions to Closing set
forth in Sections 10 and 11 hereof.
(b) At the Closing, Seller shall deliver to
Buyer certificates evidencing ownership of all of the
issued and outstanding capital stock of Niagara Paper,
in form ready for transfer and duly endorsed to Buyer,
together with such other documents and instructions as
provided herein, reasonably satisfactory in form and
substance to Buyer and its counsel, as shall be
required to vest in Buyer good and marketable title,
free and clear of all liens, charges and encumbrances
(except as specified in this Agreement, if any) in and
to all of the issued and outstanding capital stock of
Niagara Paper. At the Closing, Seller shall deliver
to Buyer a release of all claims of such Seller and
any person or entity affiliated therewith against
Niagara Paper, in substantially the form of Schedule
6.
(c) At the Closing, Buyer shall deliver to
Seller such documents and instruments as provided
herein and such undertakings and other instruments as
shall be required to cause Buyer to assume the
obligations as provided in Section 5, all of which
shall be reasonably satisfactory in form and substance
to Seller and its counsel.
7. Seller's Representations, Warranties and
Covenants. Seller represents, warrants and covenants
to Buyer as follows:
(a) Organization and Authority of Seller.
Seller is a duly organized and validly existing
corporation in good standing in the state of
Minnesota. Seller has the complete and unrestricted
right, power and authority to sell, transfer and
assign all of the issued and outstanding capital stock
of Niagara Paper pursuant to this Agreement and to
carry out the transactions contemplated hereby without
the consent of any other person (except as otherwise
set forth herein). The execution, delivery and
performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly
authorized by the Board of Directors of Seller.
(b) Valid and Enforceable Agreement. This
Agreement constitutes a valid and binding agreement of
Seller, enforceable in accordance with its terms,
except insofar as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors
generally, and by general equitable principles.
Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated
hereby, nor the performance of Seller's obligations
hereunder materially violates or conflicts with,
results in a material breach of, or constitutes a
material default under (i) to the best knowledge of
Seller, any law, rule or regulation, or (ii) subject
to the obtaining of necessary consents, which consents
are listed on Schedule 7(b), under various loan
agreements, guarantees, leases, and other agreements
(including, without limitation, the Niagara Leases),
any agreement or other restriction of any kind or
character to which Seller or Niagara Paper is a party,
by which Seller or Niagara Paper is bound, or to which
any of the properties of Niagara Paper is subject.
Neither the execution or delivery of this Agreement,
nor the consummation of the transactions contemplated
hereby, nor the performance of Seller's obligations
hereunder, violates or conflicts with, results in a
breach of, or constitutes a default under (i) any
judgment or order, decree, award or ruling to which
Seller or Niagara Paper is subject, or (ii) the
Articles of Incorporation or By-Laws of Seller.
(c) Organization of Niagara Paper.
(i) Niagara Paper is a duly organized and
validly existing corporation in good standing in
Wisconsin and has all requisite corporate power
and authority to carry on its business as
presently conducted in all states in which it
currently does business. Niagara Paper is duly
licensed, registered and qualified to do
business as a foreign corporation and is in good
standing in all jurisdictions in which the
ownership, leasing or operation of its assets or
the conduct of its business requires such
qualification, except where the failure to be so
licensed, registered or qualified would not have
a material adverse effect upon its business or
assets.
(ii) All of the outstanding shares
of capital stock of Niagara Paper have
been duly authorized and validly issued,
are fully paid and nonassessable, and are
owned beneficially and of record by Seller
and are free and clear of all liens,
claims, encumbrances and restrictions
whatsoever. Niagara Paper's entire equity
capital consists of 50,000 authorized
shares of common stock, par value $1.00
per share, of which 1,500 shares are
issued and outstanding. No shares of
capital stock of, or other ownership
interest in, Niagara Paper are reserved
for issuance and there are no outstanding
options, warrants, rights, subscriptions,
claims of any character, agreements,
obligations, convertible or exchangeable
securities, or other commitments,
contingent or otherwise, relating to the
capital stock of, or other ownership
interest in, Niagara Paper pursuant to
which it is or may become obligated to
issue or exchange any shares of capital
stock of, or other ownership interest in,
Niagara Paper.
(iii) Niagara Paper does not own,
directly or indirectly, any capital stock
or other equity or ownership or
proprietary interest in any other
corporation, partnership, association,
trust, joint venture or other entity.
(d) Financial Statements.
(i) Attached hereto as Schedule 7(d) are
the Niagara Financial Statements. The Niagara
Financial Statements were (and the Statement of
Net Book Value will be) prepared in accordance
with the books and records of Niagara Paper
which were used in the preparation of Seller's
audited consolidated financial statements for
the fiscal years ended December 31, 1993 and
December 31, 1994.
(ii) The Niagara Financial Statements
were (and the Statement of Net Book Value will
be) prepared in accordance with GAAP,
consistently applied, but do not include all
information and footnotes required by generally
accepted accounting principles for complete
financial statements. The Statement of Net Book
Value will adequately reflect all liabilities
and obligations of Niagara Paper required to be
shown thereon in accordance with GAAP, except
for those exceptions to GAAP set forth on
Schedule 3.2.
(iii) The Niagara Financial
Statements as of such dates or for the
period ending on such dates present fairly
the financial position and the results of
operations of Niagara Paper for the
periods covered thereby. All adjustments,
consisting of normal recurring accruals
and eliminations and other similar
adjustments, considered necessary for a
fair presentation have been included.
(e) No Material Change. To the best knowledge
of Seller, since December 31, 1994 there has been no
material adverse change in the business, financial
position or results of operations of Niagara Paper.
(f) Leases. Seller has furnished or made
available to Buyer copies of all leases and subleases
of any personal property used in Niagara Paper's
operations, including without limitation the Niagara
Leases, to which it is a party, all of which are
listed on Schedule 7(f). Except as set forth on
Schedule 7(f), no consents or approvals are required
in connection with the transactions contemplated
hereby. No event has occurred which is or, after the
giving of notice or passage of time, or both, would
constitute a default under or a material breach of any
lease by Niagara Paper or, to the best knowledge of
Seller, any other party to such leases. As of the
Closing Date, each lease (including without limitation
the Niagara Leases) shall be in full force and effect
in accordance with its terms, as amended from time to
time.
(g) Title to Personal Property. Niagara Paper
has good and marketable title to its owned personal
property as reflected in the Niagara Financial
Statements free and clear of all liens, claims,
encumbrances and restrictions, except (i) those
reflected on Schedule 7(d) attached and (ii) defects
in title, and liens, charges and encumbrances, if any,
as do not materially detract from the value of or
otherwise materially impair the current operations or
financial condition of Niagara Paper.
(h) Real Estate.
(i) Schedule 7(h)(i) sets forth an
accurate legal description of all Real Estate
owned by Niagara Paper or for which Niagara
Paper has contracted to become the owner (the
"Owned Real Estate"), including identification
of the current owner of fee simple title
thereto. The party identified as the owner on
Schedule 7(h)(i) is the legal and equitable
owner of good and marketable title in fee simple
absolute to such Owned Real Estate, including
the buildings, structures, spurtracks (as set
forth on Schedule 7(h)(i)) and improvements
situated thereon and appurtenances thereto, in
each case free and clear of all tenancies and
other possessory interests, security interests,
conditional sale or other title retention
agreements, liens, encumbrances, mortgages,
pledges, assessments, easements, rights of way,
covenants, restrictions, reservations, options,
rights of first refusal, defects in title,
encroachments and other burdens, except as
disclosed on Schedule 7(h)(i). Except as
disclosed on Schedule 7(h)(i), Niagara Paper is
in possession of the Owned Real Estate. All
contracts, agreements, options and undertakings
affecting the Owned Real Estate are set forth in
Schedule 7(h)(i) and are legally valid and
binding and in full force and effect, and, to
Seller's knowledge, there are no defaults,
offsets, counterclaims or defenses thereunder,
and Niagara Paper has received no notice that
any default, offset, counterclaim or defense
thereunder exists. Seller has delivered or made
available to Buyer correct and complete copies
of all such contracts, agreements, options and
undertakings.
(ii) Schedule 7(h)(ii) sets forth an
accurate, correct and complete list of all Real
Estate leased, subleased or occupied by Niagara
Paper (such interests are the "Leased Real
Estate"), including identification of the lease
or sublease and the parties thereto and list of
contracts, agreements, leases, subleases,
options and commitments, oral or written,
affecting such Leased Real Estate or any
interest therein to which Niagara Paper is a
party or by which any of its interest in the
Leased Real Estate is bound. Niagara Paper has
been in peaceable possession of the Leased Real
Estate since the commencement of the original
term of such Real Estate Lease. Seller has
delivered to Buyer correct and complete copies
of each Real Estate Lease.
(iii) To the knowledge of Seller,
except as shown on the Flood Insurance
Rate Map prepared by the Federal Emergency
Management Agency (Community/Parcel No.
550259/0025B revised as of March 18, 1991)
and Inundation Maps for dam failure of Big
and Little Quinnesec Dams revised December
1993, no Real Estate is located within a
flood or lakeshore erosion hazard zone for
which flood insurance is now required
under the National Flood Insurance
Program. Neither the whole nor any
portion of any Real Estate has been
condemned, requisitioned or otherwise
taken by any public authority, and no
notice of any such condemnation,
requisition or taking has been received.
To the knowledge of Seller, no such
condemnation, requisition or taking is
threatened or contemplated, except as set
forth on Schedule 7(h)(iii). Seller has
no knowledge of any public improvements
which may result in special assessments
against or otherwise affect the Real
Estate, except as set forth on Schedule
7(h)(iii).
(iv) The Real Estate is in good
operating condition and repair (reasonable
wear and tear excepted) and is suitable
and adequate for the purposes for which it
is presently being used.
(v) To the knowledge of Seller, except as
set forth on Schedules 7(h) or 7(o), the Real
Estate is in compliance with all applicable
zoning, building, health, fire, water, use or
similar statutes, codes, ordinances, laws, rules
or regulations. To the knowledge of Seller, the
zoning of each parcel of Real Estate permits the
existing improvements and the continuation
following consummation of the transaction
contemplated hereby of Niagara Paper's business
as presently conducted thereon. Niagara Paper
has all certificates of occupancy and
authorizations required to utilize the Real
Estate. To Seller's knowledge, Niagara Paper has
all easements and rights necessary to conduct
its business, including easements for all
utilities, services, roadway, railway and other
means of ingress and egress. To the knowledge
of Seller, Niagara Paper holds such rights to
off-site facilities as are necessary to ensure
compliance in all material respects with all
zoning, building, health, fire, water, use or
similar statutes, codes, ordinances, laws, rules
or regulations and all such rights, to the
extent held by Seller, shall be conveyed as
directed by Buyer at Closing. Except as
disclosed on Schedule 7(h)(i), to the knowledge
of Seller, no fact or condition exists which
would result in the termination or impairment of
access to the Real Estate or discontinuation of
sewer, water, electric, gas, telephone, waste
disposal or other utilities or services. Except
as disclosed on Schedule 7(h)(i), to the
knowledge of Seller, the facilities servicing
the Real Estate are in full compliance with all
codes, laws, rules and regulations.
(vi) Seller has delivered or made
available to Buyer accurate, correct and
complete copies of all existing title
insurance policies, title reports and
surveys, if any, with respect to each
parcel of Real Estate.
(i) Plant and Equipment. Seller has furnished
to Buyer an accurate list of all plant and equipment,
attached as Schedule 7(i), owned by Niagara Paper. To
the best knowledge of Seller, all plant, structures
and equipment currently being used in the conduct of
its operations are in all material respects in good
operating condition and repair, subject to normal wear
and tear, and to the best of Seller's knowledge, are
free from material structural or mechanical
deficiencies, except as disclosed on Schedule 7(i)
attached.
(j) Intellectual Property. Seller has
furnished to Buyer an accurate list of all
Intellectual Property, attached as Schedule 1(v),
owned or used by Niagara Paper. To the best knowledge
of Seller, no one is infringing upon any rights of
Niagara Paper with respect to any of the Intellectual
Property. Niagara Paper is not infringing on or
otherwise acting adversely to the rights of any person
under, or in respect to, any patents, patent rights,
copyrights, licenses, trademarks, trade names or
trademark rights owned by any person or persons, and
there is no claim or action pending or threatened with
respect thereto. Except as set forth in Schedule
1(v), there are no royalty, commission or similar
arrangements, and no licenses, sublicenses or
agreements pertaining to any of the Intellectual
Property.
(k) Employee Matters. Except as set forth on
Schedule 7(k), Seller does not have any pending
complaint filed with the National Labor Relations
Board or any other governmental agency alleging unfair
labor practices, human rights violations, employment
discrimination charges, or the like against Niagara
Paper which might have a material adverse effect upon
Niagara Paper, its operations or financial condition,
and to the best of Seller's knowledge, there are no
existing facts which might result in any such
complaint or charge. Seller has provided to Buyer a
complete list of all employees of Niagara Paper,
including name, title or position, present annual
compensation, years of service and any interest in
Employee Benefits. Niagara Paper has complied in all
material respects with all laws, rules and regulations
relating to the employment of labor, including
provisions related to wages, hours, equal opportunity,
occupational health and safety, severance, collective
bargaining and the payment of social security and
other employment taxes.
(l) Litigation. Except as set forth on
Schedule 7(l), there are no legal actions, suits,
arbitrations or other legal, administrative or
governmental proceedings or investigations (other than
tax audits or investigations) pending or, to the best
knowledge of Seller, threatened against Niagara Paper
which might have a material adverse effect upon its
operations or financial condition. Niagara Paper is
not subject to any judgment, order, writ, injunction,
stipulation or decree of any court or any governmental
agency or any arbitrator, except as may be set forth
herein or in any Schedule hereto.
(m) Compliance with Laws.
(i) To the best knowledge of Seller, the
operations of Niagara Paper have been and are
being conducted in accordance with all
applicable laws, rules and regulations of
applicable governmental authorities (other than
those covered in Section 18 hereof), except for
such breaches that do not and cannot reasonably
be expected to (either individually or in the
aggregate) materially and adversely affect its
financial condition or operations.
(ii) To the knowledge of Seller, neither
Niagara Paper, nor any of its officers or
employees, has, directly or indirectly, given or
agreed to give any rebate, gift or similar
benefit to any supplier, customer, distributor,
broker, governmental employee or other person,
who was, is or may be in a position to help or
hinder Niagara Paper's business (or assist in
connection with any actual or proposed
transaction) which could subject Buyer or
Niagara Paper's business to any penalty in any
civil, criminal or governmental litigation or
proceeding or which would have a material
adverse effect on Niagara Paper's business.
(n) Material Contracts. Seller has furnished
to Buyer a list, attached as Schedule 7(n), of all
contracts and arrangements, written or oral, which
alone or together with other contracts and
arrangements with the same party are material to
Niagara Paper and it has, in all material respects,
performed all of the obligations required to be
performed by it to date and is not, and will not be as
of the Closing Date, in default under any material
provision of such contracts or arrangements. All such
contracts and arrangements are and will be in good
standing and full force and effect according to their
terms. For purposes of this Section 7(n), a contract
shall be deemed to be material, (i) if it involves
remaining payments of more than $300,000, or (ii) if
it cannot by its terms be completed or terminated
without penalty within 180 days from the Closing Date,
or (iii) if the absence of such contract would have a
material adverse effect on the business of Niagara
Paper.
(o) Licenses and Permits. Except as set forth
on Schedule 7(o), Niagara Paper has all requisite
licenses and permits to operate its business as
currently conducted and neither Seller nor Niagara
Paper has been advised of, nor to the best knowledge
of Seller is there any basis for, any revocation or
anticipated revocation of any permits, licenses or
zoning variances, or of any changes to existing or
pending zoning or other regulations, permits or
licenses which would materially and adversely affect
the conduct of its operations as presently conducted.
(p) Insurance. Schedule 7(p) contains an
accurate and complete list and description of
insurance policies (including the name of the insurer,
coverage, premium and expiration date) which Niagara
Paper currently maintains, or is named as an
additional insured or is entitled to benefits under
(including coverage for events occurring under prior
policies). To the best knowledge of Seller, except as
set forth on Schedule 7(p), all such policies are in
full force and effect and shall survive the Closing
for the benefit of Niagara Paper.
(q) Employee Benefits. Schedule 7(q) contains
a complete listing of Employee Benefits provided to
employees of Niagara Paper. To the best knowledge of
Seller, except as set forth on Schedule 7(q), (i) the
costs of all such Employee Benefits which are paid
currently by Niagara Paper are reflected as expenses
in the Niagara Financial Statements; and (ii) the cost
of such Employee Benefits which are, in whole or in
part, not paid currently are adequately reserved for
in the Niagara Financial Statements.
(i) Pension Plans. Seller has delivered
to Buyer accurate and complete copies of (i) the
Jointly Trusteed Pension Plan for Bargaining
Employees of Niagara of Wisconsin Paper
Corporation and the Pentair, Inc. Pension Plan
(collectively, the "NOW Defined Benefit Plans")
and all other employee pension benefit plans
(within the meaning of Section 3(2) of ERISA)
provided to employees of Niagara Paper
(collectively, together with the NOW Defined
Benefit Plans, the "Pension Plans"), (ii) the
three most recent annual reports on Form 5500
and attached Schedule B (including any related
actuarial valuation report), if any, filed with
the Internal Revenue Service with respect to the
Pension Plans, (if any such report was
required), (iii) each trust agreement and group
annuity contract relating to the Pension Plans,
(iv) certified financial statements, (v)
collective bargaining agreements or other such
contracts, and (vi) the three most recent
actuarial reports prepared in connection with
the Pension Plans and their funded status.
Seller has disclosed to Buyer the information
set forth in the attorney's responses to
auditor's requests for information related to
the Pension Plans.
(ii) NOW Defined Benefit Plans Funding.
All contributions to, and payments from, the NOW
Defined Benefit Plans that may have been
required to be made in accordance with the NOW
Defined Benefit Plans and, when applicable,
Section 302 of ERISA or Section 412 of the Code,
have been timely made. The funding method used
in connection with the NOW Defined Benefit Plans
is acceptable under ERISA, and the actuarial
assumptions used in connection with funding such
NOW Defined Benefit Plans, in the aggregate, are
reasonable. Schedule 7(q) sets forth (i) the
definition of "pension liabilities", "pension
assets" and "unfunded pension liability" as used
in this Agreement, (ii) assumptions and methods
to be used for measuring the above-referenced
terms in accordance herewith and (iii) the
estimated NOW Defined Benefit Plan liabilities
as of December 31, 1994.
(iii) Pension Plan Compliance With the
Code and ERISA. Seller and Niagara Paper and
the Pension Plans (and any related trust
agreement or annuity contract or any other
funding instrument) materially comply currently,
and have materially complied in the past, both
as to form and operation, with the provisions of
ERISA and the Code (including Section 410(b) of
the Code relating to coverage), where required
in order to be tax-qualified under Section
401(a) of the Code, and all other applicable
laws, rules and regulations; all necessary
governmental approvals for such plans have been
obtained. Except as set forth in Schedule 7(q),
the Pension Plans have received a determination
letter from the Internal Revenue Service to the
effect that the Pension Plans (and any related
trust agreements or annuity contracts or other
funding instrument) are qualified and exempt
from Federal income taxes under Sections 401(a)
and 501(a), respectively, of the Code, and no
such determination letter has been revoked nor,
to the best knowledge of Seller, has revocation
been threatened, nor has such Pension Plan been
amended since the date of its most recent
determination letter or application therefor in
any respect which would adversely affect its
qualification or materially increase its cost.
(iv) Employee Benefits Administration.
The Pension Plans and all other Employee
Benefits have been administered to date in
material compliance with the requirements of the
Code and ERISA. All reports, returns and
similar documents with respect to the Employee
Benefits required to be filed with any
government agency or distributed to any Employee
Benefits participant have been duly and timely
filed or distributed. Except as set forth in
Schedule 7(q), there are no investigations by
any governmental agency, termination proceedings
or other claims (except claims for benefits
payable in the normal operation of the Employee
Benefits), suits or proceedings against or
involving the Employee Benefits or asserting any
rights or claims to benefits under Employee
Benefits that could give rise to any material
liability, nor, to the best knowledge of Seller,
are there any facts that could give rise to any
material liability in the event of any such
investigation, claim, suit or proceeding. The
Niagara Financial Statements reflect all of the
Employee Benefit liabilities in a manner
satisfying the requirements of FAS 87 and 88.
No event has occurred and no condition exists
under any Employee Benefits that would subject
Seller, Niagara Paper or Buyer to any tax under
Code Sections 4971, 4972, 4977 or 4979 or to a
fine under ERISA Section 502(c).
(v) Prohibited Transactions. No
"prohibited transaction" (as defined in Section
4975 of the Code or Section 406 of ERISA) has
occurred which involves the assets of the
Pension Plans or Employee Benefits and which
could subject Seller, Niagara Paper or any of
their respective employees, or a trustee,
administrator or other fiduciary of any trusts
created under the Pension Plans to the tax or
penalty on prohibited transactions imposed by
Section 4975 of the Code or the sanctions
imposed under Title I of ERISA. No "reportable
events" (as defined in Section 4043 of ERISA and
the regulations thereunder) have occurred with
respect to the Pension Plans, except (i) such
events for which no filing with the PBGC was
required (e.g. plan merger) and (ii) such events
which may occur as a result of the transactions
contemplated hereby. Neither Seller nor Niagara
Paper nor any trustee, administrator or other
fiduciary of the Pension Plans or the Employee
Benefits nor any agent of any of the foregoing
has engaged in any transaction or acted or
failed to act in a manner which could subject
Niagara Paper, its business or Buyer to any
material liability for breach of fiduciary duty
under ERISA or any other applicable law.
(vi) Liabilities to PBGC. Seller and
Niagara Paper have paid all premiums (and
interest charges and penalties for late payment,
if applicable) due the Pension Benefit Guaranty
Corporation ("PBGC") with respect to the NOW
Defined Benefit Plans and each plan year thereof
for which such premiums are required. No
liability to the PBGC has been incurred by
Seller or Niagara Paper or any corporation or
other trade or business under common control
with Seller or Niagara Paper (as determined
under Section 414(c) of the Code) ("Common
Control Entity") on account of any termination
of an employee pension benefit plan subject to
Title IV of ERISA. No filing has been made by
Seller or any Common Control Entity with the
PBGC (and no proceeding has been commenced by
the PBGC) to terminate any employee pension
benefit plan subject to Title IV of ERISA
maintained, or wholly or partially funded, by
Seller or any Common Control Entity. Neither
Seller nor Niagara Paper nor any Common Control
Entity has (i) ceased operations at a facility
so as to become subject to the provisions of
Section 4062(e) of ERISA, (ii) withdrawn as a
substantial employer so as to become subject to
the provisions of Section 4063 of ERISA, or
(iii) ceased making contributions on or before
the Closing Date to any employee pension benefit
plan subject to Section 4064(a) of ERISA to
which Seller or any Common Control Entity made
contributions during the five (5) years prior to
the Closing Date. No employee pension benefit
plan of Seller or any Common Control Entity
subject to Title IV of ERISA has incurred any
material liability to the PBGC other than for
the payment of premiums, all of which have been
paid when due. No employee pension benefit plan
of Seller or any Common Control Entity has
applied for or received a waiver of the minimum
funding standards imposed by Section 412 of the
Code, and no employee pension benefit plan has
an "accumulated funding deficiency" within the
meaning of Section 412(a) of the Code as of the
most recent plan year.
(vii) Multiemployer Plans. Except as set
forth on Schedule 7(q), at no time has Seller or
Niagara Paper been required to contribute to any
"multiemployer pension plan" (as defined in
Section 3(37) of ERISA) or incurred any
withdrawal liability, within the meaning of
Section 4201 of ERISA, or announced an intention
to withdraw, but not yet completed such
withdrawal, from any multiemployer pension plan.
(r) Transactions with Related Parties.
(i) To the best knowledge of Seller,
except for interest and corporate overhead and
as set forth on Schedule 7(r), Niagara Paper is
not a party to any transaction or proposed
transaction, including, without limitation, the
leasing of real or personal property, the
purchase or sale of raw materials or finished
goods, or the furnishing of services, with
Seller or with any person who is related to or
affiliated with Seller involving the payment or
accrual of more than $1,000,000 during fiscal
years 1993 or 1994.
(ii) Except as set forth on
Schedule 7(r) or as reflected in the
Niagara Financial Statements dated
December 31, 1994, neither Seller nor any
person who is related to or affiliated
with Seller has any cause of action or
other claim whatsoever against or owes any
material amount to, or is owed any
material amount by, Niagara Paper.
(s) Bank Accounts. Schedule 7(s) sets forth a
true and complete list of all banks in which Niagara
Paper has an account, safe deposit box or line of
credit, and the names and titles of all persons
authorized to draw thereon or to have access thereto,
and a summary description of the use thereof.
(t) Tax Matters.
(i) All Returns (including
consolidated or combined Returns including
Niagara Paper) required to be filed on or
before the Closing with respect to Niagara
Paper have been or will be timely filed
(within the time permitted by any timely
filed extension) by or on behalf of
Niagara Paper and all Taxes shown to be
due on such Returns have been timely paid.
(ii) Niagara Paper has not been a
member of an affiliated group (within the
meaning of Section 1504 of the Code)
filing a consolidated federal Return,
other than a group the common parent of
which is Seller.
(iii) Schedule 7(t) lists all
Returns filed with respect to Niagara
Paper for taxable periods which remain
open, indicates those Returns that have
been audited and indicates those Returns
that are currently the subject of audit or
scheduled for an examination by any
relevant taxing authority.
(iv) Except as disclosed in
Schedule 7(t):
(1) no notice or claim
has ever been made by a
governmental authority in a
jurisdiction where Niagara
Paper does not file Returns
that it is or may be subject
to Taxes in that jurisdiction;
(2) no extension of the
statute of limitations with respect
to any assessment or claim for Taxes
has been granted by or on behalf of
Niagara Paper;
(3) there are no liens for
Taxes upon the assets of Niagara
Paper except liens for Taxes not yet
due;
(4) no amended Returns or
refund claims have been or are
scheduled to be filed by or on
behalf of Niagara Paper;
(5) all Taxes and other
liabilities with respect to
completed and settled audits,
examinations or concluded litigation
have been paid; and
(6) there are no pending appeals or
other administrative proceeding with
respect to any Return of Niagara Paper,
and there is no deficiency or refund
litigation with respect to any Return of
Niagara Paper. No material issues have
been raised by any relevant taxing
authorities on audit of the Returns of
Niagara Paper. Niagara Paper has not
received any notice of any Tax deficiency
or assessment.
(v) Niagara Paper has not filed or
had filed on its behalf a consent to the
application of Section 341(f) of the Code.
(vi) Except as disclosed in
Schedule 7(t), Niagara Paper is not a
party to any contractual obligation
requiring the indemnification or
reimbursement of any person with respect
to the payment of any Taxes. Except as
disclosed in Schedule 7(t), no claim has
been asserted, which has not been resolved
or satisfied, for any payment under any
agreement disclosed in Schedule 7(t).
(vii) Except as disclosed in
Schedule 7(t), Niagara Paper is not a
party to or a beneficiary of any
financing, the interest on which is tax-exempt
under the Code, and none of the
assets of Niagara Paper is "tax-exempt use
property."
(viii) As of the Closing Date,
Niagara Paper is not a party to any
agreement, contract, arrangement, or plan
that has resulted or would result,
separately or in the aggregate, in the
payment of any "excess parachute payments"
within the meaning of Section 280G of the
Code.
(ix) Niagara Paper is a "United
States person" within the meaning of the
Code. Niagara Paper has not been a United
States real property holding corporation
within the meaning of Section 897(c)(2) of
the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of
the Code. The transactions contemplated
herein are not subject to the tax
withholding provisions of Section 3406 of
the Code, or of Subchapter A of Chapter 3
of the Code, or of any other provision of
law. Niagara Paper does not have and did
not have a branch in any foreign country.
(x) Niagara Paper is not a party to
any joint venture, partnership, or other
arrangement or contract that could be
treated as a partnership for federal
income Tax purposes.
(xi) Niagara Paper has withheld and
paid all Taxes required to have been
withheld and paid, including (1) amounts
paid to any employee or statutory employee
or any foreign person or entity; and (2)
any backup withholding required under
Section 3406 of the Code.
(u) Accounts Receivable. Schedule 7(u) sets
forth an accurate, correct and complete aging of all
outstanding accounts and notes receivable of Niagara
Paper as of December 31, 1994. All outstanding
accounts and notes receivable reflected on the Niagara
Financial Statements are, and on the Statement of Net
Book Value will be, due and valid claims against
account debtors for goods or services delivered or
rendered and subject to no defenses, offsets or
counterclaims. All receivables arose in the ordinary
course of business. No receivables are subject to
prior assignment, claim, lien or security interest.
The books and records of Niagara Paper reflect amounts
taken as a reserve against noncollection of accounts
receivable, which reserve has been established in
accordance with Niagara Paper's normal accounting
policies consistently maintained for the fiscal years
ended December 31, 1993 and December 31, 1994 and
there is no reason to believe that such reserve will
not be adequate for its purpose. As of the Closing
Date, Niagara Paper will not have incurred any
liabilities to customers for discounts, returns,
promotional allowances or otherwise, except those
granted in the ordinary course of Niagara Paper's
operations and reflected on the Statement of Net Book
Value.
(v) Inventory. All inventories reflected on
the Niagara Financial Statements are, and on the
Statement of Net Book Value will be, properly valued
at the lower of cost or market value on a first-in,
first-out basis in accordance with GAAP. Inventories
of finished goods are of good and merchantable
quality, whether of first line or job lot paper,
contain no material amounts that are not salable in
the ordinary course of business and meet the current
standards and specifications of its business, except
as reserved for on the Niagara Financial Statements.
Inventories of raw materials, stores and replacement
parts are, to the best knowledge of Seller, (i) of
good and merchantable quality and contain no material
amounts that are not usable for the purposes intended
in the ordinary course of Niagara Paper's operations;
(ii) in conformity with warranties customarily given
to purchasers of like products; and (iii) at levels
adequate for and not excessive in relation to the
ordinary course of Niagara Paper's operations and in
accordance with past inventory stocking practices.
Sales of inventories subsequent to December 31, 1994
have been made only in the ordinary course of business
and at prices and under terms that are normal and
consistent with past practice.
(w) Motor Vehicles. Schedule 7(w) sets forth
an accurate and complete list of all motor vehicles
used in the business of Niagara Paper, whether owned
or leased. All such vehicles are (i) properly
licensed and registered in accordance with applicable
law; (ii) insured as set forth on Schedule 7(p); (iii)
in good operating condition and repair (reasonable
wear and tear excepted) and (iv) not subject to any
lien or other encumbrance, except as set forth on
Schedule 7(w).
(x) Product Warranty. The books and records of
Niagara Paper reflect amounts taken as a reserve
against claims and allowances for product warranties,
which reserve has been established in accordance with
Niagara Paper's normal accounting policies
consistently maintained for the fiscal years ended
December 31, 1993 and December 31, 1994 and there is
no reason to believe that such reserve will not be
adequate for its purpose. As of the Closing Date,
Niagara Paper will not have incurred any unpaid
liabilities to customers for such claims and
allowances, except those granted in the ordinary
course of business and reflected on the Statement of
Net Book Value.
Disclosure of any fact in any provision of this
Agreement or in any Schedule attached hereto shall
constitute disclosure thereof for the purposes of any
other provision or Schedule.
8. Buyer's Representations and Warranties.
Buyer represents and warrants to Seller as follows:
(a) Organization. Buyer is a duly organized
and validly existing corporation in good standing
under the laws of the state of Wisconsin. Buyer has
all requisite corporate power to own its property and
carry on its business as presently conducted.
(b) Authority. The execution, delivery and
performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly
authorized by the Board of Directors of Buyer.
(c) Valid and Enforceable Agreement. This
Agreement constitutes a valid and binding agreement of
Buyer, enforceable in accordance with its terms,
except insofar as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors
generally, and by general equitable principles.
Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated
hereby, nor the performance of Buyer's obligations
hereunder materially violates or conflicts with,
results in a material breach of, or constitutes a
material default under (i) to the best knowledge of
Buyer, any law, rule or regulation, or (ii) subject to
the obtaining of necessary consents under various
agreements, any agreement or other restriction of any
kind or character to which Buyer is a party, by which
Buyer is bound, or to which any of the properties of
Buyer is subject. Neither the execution or delivery
of this Agreement, nor the consummation of the
transactions contemplated hereby, nor the performance
of Buyer's obligations hereunder, violates or
conflicts with, results in a breach of or constitutes
a default under (i) any judgment or order, decree,
award or ruling to which Buyer is subject, or (ii) the
Articles of Incorporation or By-Laws of Buyer.
(d) No Insolvency. Buyer is not currently
insolvent, and neither the purchase of the stock of
Niagara Paper, the assumption of the Guaranteed
Obligations of Seller pursuant to Section 5, nor any
related transaction or event shall render Buyer
insolvent or leave Buyer with assets which are
unreasonably small in relation to Niagara Paper and
its own business operations, nor does Buyer intend to
incur debts beyond its ability to pay them as they
come due.
(e) Financial Statements. Buyer's financial
statements for the year ended December 31, 1994, as
filed with the Securities and Exchange Commission
(copies of which have been delivered to Seller) (i)
were prepared in accordance with and accurately
reflect its books and records, (ii) were prepared in
accordance with generally accepted accounting
principles, consistently applied, and (iii) present
fairly the financial position and the results of
operations of Buyer for the periods covered thereby.
(f) Investment Intent. Buyer is purchasing the
outstanding shares of Niagara Paper for its own
account and not with a view to, or present intention
of, sale or distribution thereof in violation of the
Securities Act of 1933, as amended (the "1933 Act")
and such shares will not be disposed of in
contravention of the 1933 Act. Buyer acknowledges
that such shares are not and have not been registered
with the Securities and Exchange Commission or any
securities commission or agency of any state,
including the state of Minnesota, and may not be
transferred or disposed of without registration under
the 1933 Act and applicable state securities laws or
an exemption from such registration.
Disclosure of any fact in any provision of this
Agreement or in any Schedule attached hereto shall
constitute disclosure thereof for the purposes of any
other provision or Schedule.
9. Actions Pending Closing. From the date
hereof through the Closing Date, Seller shall take, or
cause Niagara Paper to take, all actions necessary and
appropriate to comply with, or to refrain from taking
any action in breach of, the following provisions for
the period between the execution of this Agreement and
the termination hereof or the Closing Date:
(a) Operations. Niagara Paper shall conduct
its operations only in the ordinary course of business
and shall not enter into any transaction or perform
any act that would constitute a breach of the
representations, warranties, or agreements contained
herein. Niagara Paper shall use its best efforts to
preserve its business and its organization intact and
to keep available the services of its present
employees. Attached as Schedule 9(a) is a list of
capital expenditures and commitments proposed to be
undertaken by Niagara Paper in its five-year plan.
Niagara Paper shall not initiate any capital
expenditure or commitment other than as set forth on
Schedule 9(a) or initiate any capital expenditure and
commitment as set forth on Schedule 9(a) in excess of
$25,000, without Buyer's approval, which approval
shall not be unreasonably withheld; provided, however,
that Niagara Paper may initiate emergency capital
expenditures or commitments consistent with the past
practices of Niagara Paper. Niagara Paper shall
promptly notify Buyer of such emergency expenditures
or commitments.
(b) Access to Records. Seller and Niagara
Paper shall make available to Buyer, its agents and
employees, all books and records in their possession
relating to the business of Niagara Paper; provided,
however, that Seller has not made, and shall not be
deemed to have made, any representations or warranties
whatsoever with respect to any of such books or
records or any other documents provided to or made
available to Buyer, except as expressly set forth in
this Agreement.
(c) Access to Facilities. Buyer, its agents
and employees, shall be given full access during
regular business hours to the physical facilities of
Niagara Paper, upon appointment with the President
thereof and accompanied by such President or his or
her designee(s). Seller and Niagara Paper and their
respective employees shall cooperate fully with Buyer
in its examinations and inspections, but not to the
detriment of the ongoing business operations of
Niagara Paper prior to Closing.
(d) Release of Guarantees. Seller and Buyer
shall agree on the actions to be taken with respect to
the release of Seller from, and the substitution (as
required) of Buyer as, the guarantor of the Niagara
Leases and other Guaranteed Obligations. Each party
shall pay its own costs in connection with seeking and
obtaining such releases, but if any additional or
different payments or terms are imposed by any lease
participants in connection therewith, the costs or the
performance thereof shall be borne as agreed upon by
Seller and Buyer.
(e) Hart-Scott-Rodino Filings. Seller and
Buyer shall cooperate in the prompt preparation and
filing of all notifications and reports which may be
required with respect to the transactions contemplated
by this Agreement pursuant to Section 7A of the
Clayton Act. Seller and Buyer shall also cooperate in
responding promptly to all inquiries from the Federal
Trade Commission or the Department of Justice
resulting from the filing of such notifications and
reports.
(f) Notice of Developments. At least ten (10)
business days prior to the Closing Date, Seller shall
deliver to Buyer a complete update of the Schedules
from the date hereof. Each party hereto shall notify
the other of any development(s) which shall constitute
a breach of any of the representations and warranties
in Sections 7 or 8 above. The party so notified has
the right to terminate this Agreement within the
period of ten (10) business days from the date of
receipt of such notification, if as a result of such
development the financial condition, results of
operations or prospects of Niagara Paper as a whole,
on the one hand, or Buyer, on the other hand, have
been materially and adversely affected. If within
such ten (10) day period, the party notified shall not
have exercised its right to terminate this Agreement,
the written notice shall be deemed to have amended
this Agreement and the relevant schedules attached
thereto, to have qualified the representations and
warranties contained in Sections 7 or 8 above and to
have cured any misrepresentation or breach of warranty
that otherwise might have existed hereunder by reason
of such development, including for purposes of Section
15 hereof.
(g) Best Efforts. Buyer and Seller shall use
their best efforts to consummate the transactions
contemplated by this Agreement and shall not take any
other action inconsistent with their respective
obligations hereunder or which could hinder or delay
the consummation of the transactions contemplated
hereby. From the date hereof through the Closing
Date, Buyer and Seller shall use their best efforts to
fulfill the conditions to their obligations hereunder
and to cause their representations and warranties to
remain true and correct as of the Closing Date.
(h) Allocation of Pulp. Seller and Buyer shall
take all necessary action to transfer all contracts
for purchase of kraft pulp currently in the name of
Seller and allocated to Niagara Paper into the name of
Niagara Paper or Buyer, as Buyer may direct. Until
such contracts are transferred or terminated, Seller
shall continue to perform such contracts and direct
delivery of pulp thereunder to Niagara Paper in the
same manner as currently performed, and Niagara Paper
shall pay for such kraft pulp delivered to the seller
thereof, or if Seller has paid therefor, promptly to
Seller upon delivery.
(i) Insurance Matters. Buyer and Seller shall
review Niagara Paper's insurance coverage and
negotiate a mutually satisfactory agreement regarding
ongoing insurance coverages, premiums and deductibles.
10. Conditions Precedent to Obligations of
Buyer. The obligations of Buyer hereunder (unless
expressly waived by Buyer) are subject to the
fulfillment, prior to or at Closing, as the case may
be, of each of the following conditions:
(a) No Errors; Performance of Obligations. The
representations and warranties of Seller herein shall
be true and correct as of the Closing Date. Seller
shall have performed the obligations set forth in
Section 9 and in all material respects all of the
other obligations to be performed by it hereunder in
the time and manner herein stated.
(b) Officer's Certificate. Seller shall have
delivered to Buyer a certificate, dated as of the
Closing Date, executed by its Secretary, and in form
and substance satisfactory to Buyer, certifying that
the covenants and conditions specified in this
Agreement to be met by Seller have been performed or
fulfilled and that the representations and warranties
herein made by Seller are true and correct as of such
date.
(c) Certified Copy of Resolutions. Seller
shall have delivered to Buyer a certified copy of
resolutions adopted by Seller's Board of Directors
authorizing the execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby.
(d) Opinion of Seller's Counsel. Seller shall
have delivered to Buyer the opinion of its counsel,
dated as of the Closing Date, in form and substance
satisfactory to Buyer and its counsel, giving the
following clean legal opinions:
(1) valid organization of
Seller and Niagara
Paper;
(2) corporate power and authority
of Seller to enter into the
Agreement;
(3) necessary foreign
qualification of Niagara
Paper;
(4) No Breach or Default Opinion
with respect to Niagara Paper;
(5) No Violation Opinion with
respect to Seller;
(6) Remedies Opinion with respect
to Seller, this Agreement and
the Niagara Leases;
(7) Legal Proceedings Opinion with
respect to Seller and Niagara
Paper;
(8) other legal matters agreed
upon between Seller and Buyer;
and
(9) no violation of registration
provisions of the 1933 Act and
applicable state securities
laws;
all in accordance with, and subject to the General
Qualifications and other limitations and provisions
contained in, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(e) Injunctions. No injunction shall have
issued restricting or prohibiting the transactions
contemplated by this Agreement.
(f) Clayton Act Matters. The waiting period
required by Section 7A of the Clayton Act shall have
expired or been terminated.
(g) Environmental Matters and Consent Order.
(i) The results of any inspections,
soil test boring, soil tests, drainage
tests, surveys, topographical analyses,
engineering studies or other
investigations performed or obtained by
Buyer shall not have disclosed evidence of
Hazardous Materials in, on or adjacent to
any of the real properties owned or
occupied by Niagara Paper, other than
those disclosed in any environmental
studies or other information listed on
Schedule 10(g) attached which would
materially and adversely affect the
operations of Niagara Paper. Buyer shall
not have received any evidence that there
are existing violations of any
Environmental Law, other than those
described in Schedule 10(g), or that any
requisite environmental license or permit
or any occupance, use or building permits
or other approvals from applicable
governmental authorities are currently
required for the continued operation of
the facilities owned by Niagara Paper
which have not been obtained or are not in
effect. In order to enable Buyer to
conduct a due diligence investigation,
Seller and Niagara Paper shall provide
Buyer with access to the environmental
files, licenses, permits, permit
applications, consultant reports, notices
from local, state and federal governmental
entities, environmental audit and
inspection reports, insurance files, and
other information necessary for Buyer to
assess the environmental status of the
operating facilities of Niagara Paper, as
well as permit or obtain permission for
Buyer to conduct soil and groundwater
testing on or beneath the real properties
owned or occupied by Niagara Paper.
(ii) Niagara Paper shall have
received any necessary or required
approvals from the Wisconsin Department of
Natural Resources with respect to the
treatment of surface/ponded water from the
sludge lagoons and impacted groundwater
down gradient from such site.
(h) Labor Negotiations. Buyer shall have
negotiated a new collective bargaining agreement
between Niagara Paper and United Papermakers
International Union, Local No. 1166 which shall become
effective on the Closing Date. Buyer shall have
negotiated a new collective bargaining agreement
between Niagara Paper and the Office and Professional
Employees International Union, Local No. 407 which
shall become effective on the Closing Date. The terms
and conditions of such collective bargaining
agreements shall be substantially similar to those
heretofore discussed by the parties.
(i) Financing. Buyer shall have used its best
efforts to maintain an aggregate of at least $250
million available under Buyer's committed and
uncommitted lines of credit until the Closing Date and
such lenders shall not have cancelled or revoked such
lines of credit prior to the Closing Date.
(j) FIRPTA Certificate. Seller shall have
furnished Buyer with a certificate of non-foreign
status signed by the appropriate party and sufficient
in form and substance to relieve Buyer of all
withholding obligations under Section 1445 of the
Code. If Seller cannot furnish such a certificate or
Buyer is not entitled to rely upon such certificate
under the provisions of Section 1445 of the Code and
the regulations thereunder, Seller shall take and/or
permit Buyer to take any and all steps necessary to
allow Buyer to satisfy the requirements of Section
1445 of the Code.
(k) Purchase of LSPI and SRFI. On or prior to
the Closing Date, Buyer shall have purchased (i) all
of the issued and outstanding capital stock of Pentair
Duluth Corp., a Minnesota corporation and Minnesota
Paper Incorporated, a Minnesota corporation; and (ii)
all of the assets of LSPI Fiber Co., a joint venture
organized under the general partnership laws of the
state of Minnesota and all of the issued and
outstanding capital stock of Superior Recycled Fiber
Corporation, a Minnesota corporation.
(l) Real Estate Consents. Seller shall deliver
to Buyer any consents or approvals of any parties
required pursuant to (i) the terms of any contract,
agreement, option or undertaking affecting the Owned
Real Estate; and (ii) the terms of the Real Estate
Leases and estoppel certificates in form and substance
reasonably acceptable to Buyer from all lessors under
the Real Estate Leases.
(m) Title Insurance and Surveys.
(i) Buyer shall have obtained an
ALTA Owners Policy of Title Insurance Form
B Owner's Form (the "Title Policy") for
each parcel of Owned Real Estate issued by
a nationally recognized title company
reasonably acceptable to Buyer (the "Title
Company"). The Title Policy shall be in
the amount of the purchase price allocated
to the Owned Real Estate by Buyer, showing
fee simple title to the Real Estate in
Niagara Paper (or if Niagara Paper is a
contract purchaser, the seller designated
under the applicable sales contract),
subject only to current real estate taxes
not yet due and payable as of the Closing
Date, liens and encumbrances reflected on
Schedule 10(m) hereto, and such other
covenants, conditions, easements and
exceptions to title as Buyer may approve
in writing (collectively, the "Permitted
Exceptions"). With reasonable promptness,
after the date of this Agreement, Buyer
shall order commitments (the
"Commitments") for the Title Policy.
Copies of the Commitments shall be
promptly delivered to Seller. The
Commitments and the Title Policy to be
issued by the Title Company shall have all
Standard and General Exceptions deleted so
as to afford full "extended form coverage"
and shall contain an Alta Zoning
Endorsement 3.1, contiguity, non-imputation,
and such other endorsements as
may be reasonably requested by Buyer. At
Closing, Seller shall deliver to Buyer a
seller's affidavit or similar instruments
as the Title Company may require. Buyer
shall be responsible for the cost of all
title insurance charges, premiums and
endorsements, title abstracts and
attorneys' opinions, including all search,
continuation and later-date fees.
(ii) Buyer shall have obtained an
as-built plat of survey of each parcel of
the Owned Real Estate (the "Surveys")
prepared by a registered land surveyor or
engineer, licensed in the respective
states in which the Owned Real Estate is
located, dated on or after the date
hereof, certified to Buyer, the Title
Company and such other entities as Buyer
may designate, and conforming to current
ALTA Minimum Detail Requirements for Land
Title Surveys, sufficient to cause the
Title Company to delete the standard
printed survey exception and to issue the
Title Policy free from any survey
objections or exceptions whatsoever.
Buyer shall pay the entire cost of
obtaining the Surveys. Any Survey may be
a recertification of a prior survey,
provided that it meets the above-described
criteria. Each Survey shall show all
conditions as then existing, including the
location of all pipes, wires and conduits
serving the Owned Real Estate and their
connections to public ways, parking areas
denominated as such, loading docks and
other improvements, the access to and from
the improvements on the Owned Real Estate,
and a flood plain certification indicating
no flood zone classification or area which
would materially interfere with the normal
operation of Niagara Paper. With
reasonable promptness after the date of
this Agreement, Buyer shall order the
Surveys. Copies of the Surveys shall be
promptly delivered to Seller.
(iii) If (i) any Commitment
discloses a title exception, other than a
Permitted Exception, that represents a
defect affecting the marketability of the
Owned Real Estate (an "Unpermitted
Exception") or (ii) any Survey discloses
that improvements located on the surveyed
land encroach onto adjoining land or onto
any easements, building lines or set-back
requirements, or encroachments by
improvements from adjoining land onto the
surveyed land or onto any easements for
the benefit of the surveyed land, or
overlap or reflects that any utility
service to the improvements or access
thereto does not lie wholly within the
Owned Real Estate or an unencumbered
easement for the benefit of the Owned Real
Estate or reflects any other matter, any
of which materially and adversely affects
the use or improvements of such parcel of
Owned Real Estate, or any other matter
which renders title to any Owned Real
Estate unmarketable (a "Survey Defect"),
then, in any such event, Seller shall have
thirty (30) days from the date of delivery
thereof to have the Unpermitted Exception
removed from such Commitment or the Survey
Defect corrected or insured over by an
appropriate title insurance endorsement,
all at Seller's cost and in a manner
reasonably satisfactory to Buyer, and in
any such event the Closing shall be
extended, if necessary, to the date which
is five (5) business days after the
expiration of such 30-day period. If
Seller fails to have any Unpermitted
Exception removed or any Survey Defect
corrected or otherwise insured over to the
reasonable satisfaction of Buyer within
the time specified therefor, Buyer, at its
sole option, upon not less than three (3)
days' prior written notice to Seller, may
terminate this Agreement and all of
Buyer's obligations hereunder.
(n) Niagara Lease. Seller shall have been
released from its Guaranteed Obligations under the
Niagara Lease dated September 7, 1990.
(o) Other Matters. All corporate and other
proceedings and actions taken in connection with the
transactions contemplated hereby and all certificates,
opinions, agreements, instruments and documents
mentioned herein or incident to any such transaction
shall be delivered to Buyer and be reasonably
satisfactory in form and substance to Buyer and its
counsel.
11. Conditions Precedent to Obligations of
Seller. The obligations of Seller hereunder (unless
expressly waived by Seller) are subject to fulfillment
by Buyer, prior to or at Closing, as the case may be,
of each of the following conditions:
(a) No Errors; Performance of Obligations. The
representations and warranties of Buyer herein shall
be true and correct as of the Closing Date. Buyer
shall have performed in all material respects all of
the obligations to be performed by it hereunder in the
time and manner herein stated.
(b) Officer's Certificate. Buyer shall have
delivered to Seller a certificate, dated as of the
Closing Date, executed by an officer of Buyer, and in
form and substance satisfactory to Seller, certifying
that the covenants and conditions specified in this
Agreement to be met by Buyer have been performed or
fulfilled and that the representations and warranties
herein made by Buyer are true and correct as of such
date.
(c) Certified Copy of Resolutions. Buyer shall
have delivered to Seller a certified copy of
resolutions adopted by the Board of Directors of Buyer
authorizing the execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby.
(d) Opinion of Buyer's Counsel. Buyer shall
have delivered to Seller the opinion of its counsel,
dated as of the Closing Date, in form and substance
satisfactory to Seller and its counsel, giving the
following clean legal opinions:
(1) valid organization of Buyer;
(2) corporate power and authority
of Buyer to enter into the
Agreement;
(3) No Breach or Default
Opinion;
(4) No Violation Opinion;
(5) Legal Proceedings Opinion;
(6) Remedies Opinion with respect
to this Agreement; and
(7) other legal matters agreed
upon between Seller and Buyer;
all in accordance with, and subject to the General
Qualifications and other limitations and provisions
contained in, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(e) Injunctions. No injunctions shall have
issued restricting or prohibiting the transactions
contemplated by this Agreement.
(f) Clayton Act Matters. The waiting period
required by Section 7A of the Clayton Act shall have
expired or been terminated.
(g) Financing. Buyer shall have used its best
efforts to maintain an aggregate of at least $250
million available under Buyer's committed and
uncommitted lines of credit until the Closing Date and
such lenders shall not have cancelled or revoked such
lines of credit prior to the Closing Date.
(h) Sale of LSPI and SRFI. On or prior to the
Closing Date, Buyer shall have purchased (i) all of
the issued and outstanding capital stock of Pentair
Duluth Corp., a Minnesota corporation and Minnesota
Paper Incorporated, a Minnesota corporation; and (ii)
all of the assets of LSPI Fiber Co., a joint venture
organized under the general partnership laws of the
state of Minnesota and all of the issued and
outstanding capital stock of Superior Recycled Fiber
Corporation, a Minnesota corporation.
(i) Niagara Lease. Seller shall have been
released from its Guaranteed Obligations under the
Niagara Lease dated September 7, 1990.
(j) Approvals. Niagara Paper shall have
received any necessary or required approvals from the
Wisconsin Department of Natural Resources with respect
to the treatment of surface/ponded water from the
sludge lagoons and impacted groundwater down gradient
from such site; provided, however, that such approvals
shall not require any material expenditures by Niagara
Paper which are not acceptable to Seller.
(k) Other Matters. All corporate and other
proceedings and actions taken in connection with the
transactions contemplated hereby and all certificates,
opinions, agreements, instruments and documents
mentioned herein or incident to any such transaction
shall be delivered to Seller and be reasonably
satisfactory in form and substance to Seller and its
counsel.
12. Broker. Seller represents and warrants
that CS First Boston was retained by Seller to
represent it in this transaction. Buyer represents
and warrants that Dillon, Read & Co. Inc. has been
retained by Buyer to represent it. Seller shall be
responsible for payment of all fees and expenses of CS
First Boston and Buyer shall be responsible for
payment of all fees and expenses of Dillon, Read & Co.
Inc. Should any claims for commissions be made by any
other person claiming an interest in this Agreement,
or in the underlying transactions, by reason of any
agreement, understanding or other arrangement with
Buyer or with Seller, or their respective agents,
servants, employees, or other representatives, then
the party through, or on account of, whom such claims
are made shall indemnify and hold harmless the other
party from any and all liabilities and expenses in
connection therewith in accordance with the provisions
of Section 15 below. The foregoing provisions of this
Section 12 shall survive not only the Closing
hereunder, but also any termination or cancellation of
this Agreement.
13. Employees and Employee Benefits. (a)
Seller and Niagara Paper agree to use all reasonable
efforts to keep the present employees of Niagara Paper
during the period between the execution hereof and the
Closing Date. Niagara Paper has bargained with the
United Papermakers International Union, Local No. 1166
for an extension to June 30, 1995 of the currently
effective Collective Bargaining Agreement between
them, which expired January 31, 1994. Buyer and
Niagara Paper shall indemnify and hold Seller harmless
against any severance or termination pay obligations
based upon prior policies of Seller or Niagara Paper
or arising from the transactions contemplated hereby.
Following the Closing, Niagara Paper shall continue to
provide the post-retirement medical benefits currently
provided by Niagara Paper to former Niagara Paper
employees who retired prior to the Closing Date,
subject to the terms and conditions of such Employee
Benefits. Except as set forth in the preceding
sentence, Seller shall indemnify and hold Buyer and
Niagara Paper harmless against any and all liabilities
and obligations with respect to the current retirees
of Niagara Paper. Except as expressly agreed between
the parties, neither Niagara Paper nor Buyer shall
assume or be responsible for any Employee Benefits or
any liabilities related thereto.
(b) Seller has announced to selected employees
of Niagara Paper transition incentives heretofore
disclosed to Buyer, to encourage their continued
employment and achievement of performance targets for
Niagara Paper prior to Closing. The costs and
administration of all such transition incentives shall
be the sole responsibility of Niagara Paper which
shall pay such transition incentives promptly after
Closing, in accordance with the terms thereof.
14. Confidential Information. (a) Buyer
acknowledges that pursuant to its right to inspect
Seller's records and facilities under Section 9, Buyer
shall become privy to Confidential Information. Buyer
agrees that in the event the transaction contemplated
by this Agreement is not completed, all Confidential
Information disclosed to Buyer shall remain
confidential, shall not be used for the benefit of
Buyer or any of Buyer's affiliates or disclosed to any
person or entity, and all recorded evidence thereof
shall be delivered to Seller together with an
officer's certificate to the effect that no copies
thereof or any extracts, derivatives or compilations
thereof remain in possession of Buyer, its employees,
affiliates, agents, counsel or auditors. The
confidentiality and nonuse provisions hereof shall
survive any termination of this Agreement until August
26, 1997. Buyer acknowledges that it has entered into
a confidentiality letter dated August 26, 1994 between
itself and CS First Boston on behalf of Seller and
agrees that such confidentiality letter shall continue
in full force and effect for the duration of its term
in addition to the provisions of this Section 14.
(b) Seller agrees that in the event the
transaction contemplated by this Agreement is
completed, all confidential and proprietary
information related to Niagara Paper shall remain
confidential, shall not be used for the benefit of
Seller or any of Seller's affiliates or disclosed to
any person or entity. The confidentiality and nonuse
obligations of Seller hereunder shall be on the same
terms and conditions as the confidentiality letter set
forth in Section 14(a) and shall survive any
termination of this Agreement until August 26, 1997.
15. Indemnification. (a) Without limiting any
remedy Buyer may have hereunder, Seller hereby agrees
to indemnify, defend and hold Buyer harmless from and
against and in respect of any and all liabilities,
losses, damages, claims, costs and expenses, including
reasonable attorneys fees, suffered or incurred by
Buyer or Niagara Paper when so suffered or incurred,
by reason of or relating to:
(i) any representation or warranty
of Seller contained in this Agreement
being breached or untrue;
(ii) any covenant or agreement of
Seller contained in this Agreement being
breached or not fulfilled in any material
respect, and not waived;
(iii) any economic harm incurred or
payment required to be made by Niagara
Paper under the Niagara Leases, due to
Niagara Paper's obligations to the
respective Owner Participants therein
arising out of tax indemnity agreements
incident to the Niagara Leases;
(iv) the assertion against Buyer of
any other liability of Seller not assumed
by Buyer hereunder; or
(v) the assertion against Buyer or
Niagara Paper of any liability of Niagara
Paper assumed by Seller;
provided, however, that any claim arising out of any
breach of warranty or otherwise relating to (x)
environmental conditions, permits or liabilities or
obligations with respect to Hazardous Materials shall
be dealt with solely in accordance with Section 18
hereof and (y) taxes shall be dealt with solely in
accordance with Section 23 hereof.
(b) Without limiting any remedy Seller may have
hereunder, Buyer hereby agrees to indemnify, defend,
and hold Seller harmless from and against and in
respect of any and all liabilities, losses, damages,
claims, costs and expenses, including reasonable
attorneys fees, by reason of or relating to:
(i) any representation or warranty
by Buyer contained in this Agreement being
breached or untrue;
(ii) any covenant or agreement of
Buyer contained in this Agreement being
breached or not fulfilled in a material
respect, and not waived;
(iii) any economic benefit (net of
taxes) realized or payment received by
Niagara Paper under the Niagara Leases
following the Closing Date, arising out of
any payment made or accommodation extended
by Seller or Niagara Paper prior to the
Closing Date, with respect to any
liability of Niagara Paper to the
respective Owner Participant(s) in the
Niagara Leases under the Transaction
Documents which are a part thereof
(including without limitation the tax
indemnity agreements); or
(iv) the failure of Buyer to pay,
discharge, or perform any guaranty,
obligation or liability assumed by Buyer
hereunder (including without limitation
the Guaranteed Obligations).
(c) Notice of any claim of indemnification
under this Agreement (other than for claims pursuant
to Sections 16, 18 and 23) shall be effective only if
such notice shall have been given in writing to the
Indemnitor (as hereinafter defined) on or prior to
December 31, 1997. Notice of claims by Seller against
Buyer regarding Guaranteed Obligations shall be
effective only if given in writing on or prior to the
date six months following the date on which the
liability of Seller is discharged with respect to the
last outstanding Guaranteed Obligation.
(d) The first $1,500,000 in the aggregate of
claims made by either party (except claims against
Seller under Sections 19 or 23 or pursuant to
subparagraphs 15(a)(iii), (iv) and (v) above, claims
against Buyer under Section 19 or under subparagraph
15(b) (iii) and (iv) above or claims against either
Buyer or Seller under Sections 12, 13, 14 or 16
hereof) pursuant to this Section shall be borne by
that party and shall not be indemnifiable. The
minimum amount of each such claim shall be not less
than $50,000 in the aggregate.
(e) In the event that indemnification is sought
with respect to any obligation of Buyer and Seller
under this Agreement, the party seeking
indemnification (the "Indemnitee") shall give the
party from whom indemnification is sought (the
"Indemnitor") notice of any claim of the commencement
of any action or proceeding promptly after the
Indemnitee receives notice thereof, and shall permit
the Indemnitor to assume the defense of any such claim
or litigation resulting from such claim.
If the Indemnitor assumes the defense of any
such claim or litigation resulting therefrom, the
obligations of Indemnitor as to such claim shall be
limited to taking all steps necessary in the defense
or settlement of such claim or litigation resulting
therefrom and to holding the Indemnitee harmless from
and against any and all losses, damages and
liabilities caused by or arising out of any settlement
approved by the Indemnitor or any judgment in
connection with such claim or litigation resulting
therefrom.
The Indemnitee may participate, at its expense,
in the defense of any such claim or litigation,
provided that the Indemnitor shall direct and control
the defense of such claim or litigation.
Except with the written consent of the
Indemnitee, the Indemnitor shall not, in the defense
of such claim or any litigation resulting therefrom,
consent to entry of any judgment or enter into any
settlement which does not include as an unconditional
term thereof, the giving by the claimant or the
plaintiff to the Indemnitee of a release from all
liability with respect to the claim or litigation.
If the Indemnitor shall not assume the defense
of any such claim or litigation resulting therefrom,
the Indemnitee may defend against such claim or
litigation in such manner as it may deem appropriate
and, unless the Indemnitor shall deposit with the
Indemnitee a sum equivalent to the total amount
demanded in such claim or litigation, or shall deliver
to Indemnitee a surety bond for such amount in form
and substance reasonably satisfactory to Indemnitee,
Indemnitee may settle such claim or litigation on such
terms as it may reasonably deem appropriate, and the
Indemnitor shall promptly reimburse Indemnitee for
the amount of all costs and expenses, legal or
otherwise, reasonably incurred by the Indemnitee in
connection with the defense against or settlement of
such claims or litigation. If no settlement of such
claim or litigation is made, the Indemnitor shall
promptly reimburse the Indemnitee for the amount of
any final judgment rendered with respect to such claim
or in such litigation and for all reasonable costs and
expenses, legal or otherwise, incurred by the
Indemnitee in the defense against such claim or
litigation, but only to the extent that such amounts
are actually paid.
16. Guaranteed Obligations. (a) In the event
that Seller's release from the Guaranteed Obligations
is not obtained, Seller and Buyer agree that they will
continue to use their best efforts to obtain the
complete release of Seller from the Guaranteed
Obligations. Except as set forth in Section 16(b),
Buyer shall indemnify Seller against any and all
demands, payments, expenses and costs incurred by
Seller in connection with such Guaranteed Obligations
in accordance with Section 15 hereof for so long as
Seller has any potential liability under any such
Guaranteed Obligation. Buyer agrees that it will
cause Niagara Paper to comply with all of its
obligations and covenants under the Guaranteed
Obligations.
(b) Following the Closing Date, Buyer agrees
that it shall not pledge, sell, transfer, assign or
otherwise dispose of all or any part of the Capital
Stock of Niagara Paper or all or substantially all of
the assets of Niagara Paper without the written
consent of Seller, which consent may be granted or
withheld in its sole discretion. At any time, Buyer
may merge with to into, or consolidate with, any other
corporation or sell Niagara Paper or the assets
thereof, provided that:
(i) Buyer remains absolutely and
unconditionally obligated under this Agreement
including specifically, but without limitation,
Section 15 and 16 hereof; and
(ii) prior to such transaction there
shall have been delivered to Seller an opinion
of Buyer's counsel reasonably satisfactory to
Seller stating in effect that Buyer's
obligations under Section 15 and 16 of this
Agreement are legal, valid and binding
obligations of Buyer enforceable in accordance
with their terms against Buyer, subject to
customary qualifications as to enforceability.
(c) Until Seller is released from all of its
Guaranteed Obligations, Seller agrees to comply with
any and all of its non-monetary obligations and
covenants under the Niagara Leases. In the event of
any breach by Seller of such obligations and
covenants, Seller shall indemnify Buyer against any
and all demands, payments, expenses and costs incurred
by Buyer or Niagara Paper in excess of those which
would have been incurred by Niagara Paper in the
course of performance of the Guaranteed Obligations
but for any breach of Seller, in connection with the
foregoing sentence in accordance with Section 15
hereof for so long as Seller has any obligation under
any such Guaranteed Obligation. Buyer and Seller
agree that the provisions of this Section 16 shall
continue in full force and effect until the complete
discharge of Seller under such Guaranteed Obligations.
17. Expenses. Seller and Buyer shall each be
responsible for all of their own expenses incurred in
connection with the transactions contemplated hereby.
Seller shall be responsible for the accounting and
auditing fees and expenses related to the preparation
of the Statement of Net Book Value. Seller shall
cooperate and cause its accountants to cooperate and
assist Buyer and its accountants (including consenting
to the use of the Niagara Financial Statements) with
respect to any filings by Buyer with the Securities
and Exchange Commission in connection with the
transactions contemplated hereby. Seller shall be
responsible for any and all fees and expenses of
Seller's accountants with respect to the foregoing.
Buyer will pay the incremental costs and expenses of
auditing Niagara Paper's financial statements or other
information required by Buyer other than the Statement
of Net Book Value as of the Closing Date. Buyer will
pay the cost of the Commitments, Title Policies and
Surveys set forth in Section 10(m).
18. Environmental Matters.
(a) Warranty. Seller warrants that, other than
as disclosed to Buyer pursuant to Schedule 10(g)
attached:
(i) Compliance with Environmental Laws.
The business and operations of Niagara Paper
comply in all material respects with all
applicable Environmental Laws, except to the
extent that such noncompliance could not be
reasonably expected to have a material adverse
effect on the business, operations, properties,
assets or condition (financial or otherwise) of
Niagara Paper.
(ii) Notice/Receipt of Notice. Niagara
Paper has not given, or is required to give, nor
has it received, any written notice, letter,
citation, or order, or any written warning,
complaint, inquiry, claim or demand (or if
verbal, to the extent the warning, complaint,
inquiry, claim or demand is recorded in a
written log) that: (i) Niagara Paper has
violated, or is about to violate, any
Environmental Law; (ii) there has been a
release, or there is a threat of release, of a
non-de minimis quantity of Hazardous Material
from Niagara Paper's property, facilities,
equipment or vehicles or previously owned or
leased properties; (iii) Niagara Paper may be or
is liable, in whole or in part, for material
costs of cleaning up, remediating, restoring or
responding to a release of Hazardous Material;
(iv) any of Niagara Paper's property or assets
or previously owned or leased properties or
assets are subject to a lien in favor of any
governmental entity for any liability, costs or
damages, under any federal, state or local
environmental law, rule or regulation arising
from, or costs incurred by such governmental
entity in response to, a release of Hazardous
Material; (v) Niagara Paper may be or is liable
in whole or in part, for natural resource
damages; provided, that for purposes of
liability for natural resource damages such
notice, letter, citation, order, inquiry, claim
or demand was made by a governmental agency.
(iii) Property on Environmental Cleanup
Lists. No property now or previously owned or
leased by Niagara Paper is listed (with respect
to Owned Real Estate proposed for listing) on
the National Priorities List pursuant to
Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as
amended (42 U.S.C. section 9601 et seq.) ("CERCLA"), on
the CERCLIS or on any similar state list of
sites requiring investigation or clean-up.
(iv) Reports of Hazardous Waste Sites.
Niagara Paper fully complied in a timely manner
with the provisions of 42 U.S.C. section 9603 including
conducting any required investigation of
employees, former employees and available
records and filed any required notices and
reports required under that section and any
notices filed pursuant to 42 U.S.C. section 9603 are
attached to Schedule 10(g).
(v) Past Disposal -- On site. Neither
Niagara Paper, nor to the best knowledge of
Seller any previous owner or other person, has
ever caused or permitted any material release or
disposal of any Hazardous Material on, under or
at any of the facilities or properties of
Niagara Paper or any part thereof, and none of
such facilities or properties, nor any part
thereof have ever been used (whether by Niagara
Paper, or to Seller's best knowledge by any
other person) as a permanent storage facility or
disposal site for any Hazardous Material.
(vi) Underground Storage Tanks. There
are no underground storage tanks, including any
associated piping, active or abandoned,
including petroleum storage tanks, on or under
any property now or previously owned or leased
by Niagara Paper that, singly or in the
aggregate, have, or may reasonably be expected
to have, a material adverse effect on the
financial condition, operations, assets,
business, or properties of Niagara Paper.
(vii) Off-Site Disposal. Niagara Paper
has not directly transported or directly
arranged for the transportation of any Hazardous
Material to any location which is listed,
proposed for listing or which if known to the
state or federal government would warrant
listing on the National Priorities List pursuant
to CERCLA, on the CERCLIS or on any similar
state list or which is or reasonably could be
the subject of federal, state or local
enforcement actions or other investigations
which may reasonably be expected to lead to
material claims for any remedial work, damage to
natural resources or personal injury, including
claims under CERCLA.
(viii) PCBs/Asbestos. There are no PCB's
or friable asbestos present at any property now
or previously owned or leased by Niagara Paper
that, singly or in the aggregate, have, or may
reasonably be expected to have, a material
adverse effect on the financial condition,
operations, assets, business or properties of
Niagara Paper.
(ix) Pollution Control Equipment. All
material pollution control equipment, including
any monitoring devices or related equipment, is
in proper operating condition, has been properly
maintained, and, in the case of major ("end-of-pipe")
wastewater treatment and air pollution
control facilities, has been designed to
maintain compliance with applicable
Environmental Laws based upon production rates
and operating policies of Niagara Paper in
effect since January 1, 1995. All material
actions necessary to maintain in force any
original, as delivered, manufacturer warranties
have been taken with respect to all major
components of wastewater and air pollution
control facilities.
(x) Other Environmental Conditions Off-Site.
To Seller's best knowledge there are no
sites or locations not currently owned or leased
by Niagara Paper where Hazardous Materials were
disposed of which with the passage of time, or
the giving of notice or both could reasonably be
expected to give rise to any material liability
under any Environmental Law.
(b) Indemnity. Subject to the provisions of
Section 18(c) below and the limitations on
indemnification set forth in Section 15(b) above,
Seller shall indemnify and hold Buyer and Niagara
Paper harmless from and against any and all losses,
liabilities, damages, injuries, penalties, fines,
costs, expenses and claims of any and every kind
whatsoever (including reasonable attorneys' and
consultants' fees and expenses), paid, incurred or
suffered by Buyer as a result of any breach of
warranties set forth in Section 18(a). With respect
to any liability for disposal or arranging for
disposal of Hazardous Materials at sites or locations
not currently owned or leased by Niagara Paper, this
indemnity shall apply notwithstanding the fact that
Buyer may have received or obtained information before
the Closing Date, other than that information
disclosed on Schedule 10(g) indicating or otherwise
showing that a claim exists or may exist under this
indemnity, including, but not limited to, any
information relating to a breach of the warranties set
forth in Section 18(a) above.
(c) Special Provisions. The following
provisions shall apply in the event of any breach of
any warranty under this Section 18.
(i) Notice. Buyer shall promptly, and in
no event later than 90 days from the date Buyer
has knowledge, notify Seller in writing of any
claim, demand or action, situation or event
covered by the warranty and indemnification
provisions of Section 18. With respect to any
work or activities undertaken by Buyer which is
subject to this indemnity, Buyer shall provide
Seller in a timely manner, written documentation
prepared in the normal course of business
describing the work or activities.
(ii) Disclosure of On-Site Environmental
Matters. Buyer agrees that environmental
matters associated with the Real Estate and
which are contained in the environmental reports
and documents listed on Schedule 10(g), as well
as any information obtained by Buyer during its
due diligence activities conducted on the Real
Estate between the signing of this Agreement and
the Closing Date, shall be considered disclosed
to Buyer.
(iii) Election of Control Off-Site Work.
At Seller's option, to the extent Seller is
obligated to indemnify Buyer under this Section
for the costs of investigating, remediating,
restoring, cleaning-up any site where Hazardous
Materials were disposed and the site is located
on property not currently owned, leased or
otherwise used by Niagara Paper (nor reasonably
anticipated to be used by Niagara Paper), Seller
may elect to take control of the investigation,
remediation, restoration and/or clean-up
("Environmental Cleanup"). If it elects to do
so, Seller shall so notify Buyer and Seller
thereafter shall be solely responsible (as
between the parties hereto) for managing and
paying for such Environmental Cleanup (to the
extent it is obligated to indemnify Buyer)
including any fines, penalties or third-party
actions associated with the Environmental
Cleanup.
(iv) Buyer's Control of Work. Other than
in connection with off-site Environmental
Cleanups, Buyer and/or Niagara Paper shall
manage and conduct any Environmental Cleanup
work and shall manage and control the repair and
replacement of any pollution control equipment.
All such work shall be done in a commercially
reasonable, cost-effective manner using good
faith business judgment and without regard to
the availability of indemnification hereunder.
(v) Pollution Control Equipment. In
situations where the installation of pollution
control equipment is required in order to obtain
compliance with the Environmental Laws, Seller's
liability under this Section shall include both
capital and reasonable operation and maintenance
costs (calculated on a reasonable present value
basis).
(vi) Interference with Operations. In
situations where the Environmental Cleanup or
the installation, repair or replacement of the
pollution control equipment will materially
interfere with the conduct of the operations of
Niagara Paper, Seller shall be responsible for
the reasonable costs, expenses or losses
associated with or attributable to any material
business interruption losses, provided that
Buyer shall do the work or activities in a
manner that is least disruptive of Niagara
Paper's ongoing operations.
(vii) Sludge Lagoons. Seller shall not
indemnify Buyer in any amount with respect to
the closure of the sludge lagoons currently in
use located in Dickinson County, Michigan and
the remediation of any associated soil and
groundwater contamination in accordance with the
consent order between Niagara Paper and the
Michigan Department of Natural Resources.
(d) Exclusive Remedy. This Section provides to
Buyer, Niagara Paper and anyone claiming under or
through them the exclusive remedy against Seller with
respect to any matter covered by this Section 18, and
such exclusive remedy shall lapse and be of no further
force or effect on and after the fifth anniversary of
the Closing Date.
(e) Inspection of Books and Records. In the
event of any claim for indemnification made by Buyer
under this Section 18, Seller shall be entitled to
access, at times reasonably convenient to Buyer and
Niagara Paper, to such books, records and data related
to such claim for indemnification hereunder, as Seller
deems necessary to verify the amount of such claim.
19. Termination of Agreement. This Agreement
may be terminated upon ten (10) business days prior
written notice at any time prior to Closing without
liability of either party to the other:
(a) by mutual consent of Seller and
Buyer;
(b) by Buyer, if notice of a
material adverse development with respect
to the financial condition, results of
operations or prospects of Niagara Paper
has been given, in accordance with Section
9(f) hereof;
(c) by Buyer, if Closing has not
occurred on or before September 30, 1995
as a result of the nonfulfillment of any
of the conditions to Buyer's obligation to
perform contained in Section 10 of this
Agreement;
(d) by Seller, if notice of a
material adverse development with respect
to the financial condition, results of
operations or prospects of Buyer has been
given, in accordance with Section 9(f)
hereof;
(e) by Seller, if Closing has not
occurred on or before September 30, 1995
as a result of the nonfulfillment of any
of the conditions to Seller's obligation
to perform contained in Section 11 of this
Agreement; and
(f) by any party, if Closing has
not occurred by September 30, 1995.
Termination of this Agreement shall not affect in any
way the continuing obligations of the parties hereto
pursuant to Section 12 relating to brokers and Section
14 hereof relating to the treatment of confidential
information.
20. Announcements. Buyer and Seller shall
cooperate in the preparation of any announcements
regarding the transactions contemplated by this
Agreement. Except as required by law, neither party
shall issue any announcement regarding the
transactions contemplated hereby without the prior
consent of the other party, which consent shall not be
unreasonably withheld. The covenants set forth in
this Section shall be enforceable in law or at equity
by either party.
21. Records. After the Closing Date, Buyer
shall retain the books, records or other data of
Niagara Paper existing at the Closing Date for a
period of ten (10) years. During the retention period
specified above, Seller shall be entitled to access,
at times reasonably convenient to Buyer, to such
books, records and data in connection with the
preparation or handling of Seller's tax returns,
financial reports, tax audits, W-2 forms, litigation
matters or any other reasonable need of Seller. If
Niagara Paper or Buyer wish to dispose of such
material (whether during or following the 10-year
period), it shall give Seller prior notice and the
opportunity to remove such material at the expense of
Seller.
22. Assistance after Closing. Buyer shall
furnish, at no cost to Seller, such assistance to
Seller in the preparation of its fiscal 1994 year-end
financial and tax reports and interim 1995 financial
reports as Seller may reasonably request. All such
assistance shall be on a confidential basis and Seller
agrees to comply with the confidentiality and
limitation on use provisions of Section 14 hereof with
respect to such confidential information.
(a) Retained Liabilities. Buyer shall also
provide Seller with reasonable assistance, including
without limitation furnishing of documents and making
available to Seller potential witnesses within its or
Niagara Paper's control and the assistance of its or
Niagara Paper's engineers or experts, in the defense
of any claim, lawsuit or tax examination arising out
of the operations of Niagara Paper prior to the
Closing Date for which Seller retains liability under
this Agreement. Seller shall reimburse Buyer or
Niagara Paper for its out of pocket expenses incurred
in providing such assistance.
(b) Allocation of Pulp. Seller and Buyer shall
take all necessary action to transfer all contracts
for purchase of kraft pulp currently in the name of
Seller and allocated to Niagara Paper into the name of
Niagara Paper or Buyer, as Buyer may direct. Until
such contracts are transferred or terminated, Seller
shall continue to perform such contracts and direct
delivery of pulp thereunder to Niagara Paper in the
same manner as currently performed, and Niagara Paper
shall pay for such kraft pulp delivered to the seller
thereof, or if Seller has paid therefor, promptly to
Seller upon delivery.
23. Tax Matters; Payment of Taxes. (a) Tax
Returns. Seller shall prepare or cause to be prepared
and shall timely file all Returns (including any
amendments thereto) relating to any Taxes of Niagara
Paper with respect to any tax period ending on or
before the Closing. Seller shall pay or cause to be
paid all Taxes of Niagara Paper with respect to any
period ending on or before the Closing as determined
in accordance with Sections 23(b) and 23(c) hereof.
(b) Apportionment of Income. Seller will
include the income of Niagara Paper (including any
deferred income and any excess loss accounts pursuant
to relevant rules and regulations of the Internal
Revenue Service) on Seller's federal and state income
tax Returns for all periods through the Closing Date
and shall pay any federal and state income taxes
attributable to such income. Niagara Paper will
furnish all tax information requested by Seller to it
for inclusion in Seller's income tax Returns for the
period which includes the Closing Date in accordance
with Seller's past custom and practice. The income of
Niagara Paper will be apportioned to the period up to
and including the Closing Date and the period after
the Closing Date by closing the books of Niagara Paper
as of the end of the Closing Date.
(c) Allocation of Taxes. For purposes of this
Agreement, in the case of any Taxes that are imposed
on a periodic basis and are payable for a period that
begins before the Closing Date and ends after the
Closing Date, Seller shall reimburse Buyer for the
portion of such Taxes payable for the period ending on
the Closing Date to the extent such Taxes are not
reflected on the Statement of Net Book Value as of the
Closing Date. For this purpose, the portion of such
Tax payable for the period ending on the Closing Date
shall in the case of any Taxes other than Taxes based
upon or related to income or sales or use taxes, be
deemed to be the amount of such Taxes for the entire
period multiplied by a fraction, the numerator of
which is the number of days in the period ending on
the Closing Date, and the denominator of which is the
number of days in the entire period. The preceding
sentence shall be applied with respect to Taxes
relating to capital (including net worth or long-term
debt) or intangibles by reference to the level of such
items on the Closing Date to the extent such Taxes are
not reflected on the Statement of Net Book Value as of
the Closing Date.
(d) Indemnity. Notwithstanding anything to the
contrary in this Agreement whether expressed or
implied, Seller shall indemnify and hold harmless
Buyer, and Niagara Paper against:
(1) all Taxes imposed on Niagara
Paper with respect to any period ending on
or before the Closing;
(2) all Taxes imposed on Buyer or
on Niagara Paper with respect to any
period which begins before the Closing
Date and ends after the Closing Date to
the extent allocated to the portion of
such period ending on the Closing Date,
determined in accordance with Section 23
hereof;
(3) all Taxes imposed on Buyer or
on Niagara Paper with respect to income
earned by Niagara Paper for the period
beginning January 1, 1995 and ending on
the Closing Date, determined in accordance
with Section 23(b) hereof;
(4) all Taxes imposed on Seller or
Niagara Paper as a result of the Section
338(h)(10) Election contemplated by Section 24
hereof;
(5) all Taxes imposed on any member
of an affiliated, consolidated, combined
or unitary group which includes or has
included Niagara Paper with respect to any
taxable period that ends on or prior to
the Closing;
(6) all liability resulting from or
attributable to a breach of the
representations, warranties and covenants
contained in Section 7(t) and this Section
23; and
(7) any claim under Treas. Reg.
section 1.1502-6 by the Internal Revenue Service
against Niagara Paper as a member of
Seller's consolidated group prior to the
Closing Date with respect to any federal
income tax liability of Seller for any
period ending on or prior to December 31,
1995.
(e) Control of Contest. Seller shall have the
right, at its own expense, to control any audit or
determination by any taxing authority, initiate any
claim for refund or amended Return and contest,
resolve and defend against any assessment, notice of
deficiency or other adjustment or proposed adjustment
of Taxes for any taxable period for which Seller (or
any of its affiliates) is charged with responsibility
for filing a Return under this Agreement. Each party
will allow the other and its counsel (at its or their
own expense) to be represented during any audits of
income tax Returns to the extent that disputed items
therein relate to Niagara Paper. Buyer shall, or
shall cause its affiliates to, undertake or authorize
actions in their capacity as tax matters partner of
Niagara Paper as requested by Seller with respect to
this Section 23(e).
(f) General. Each of Buyer and Seller shall
provide the other, and Buyer shall following the
Closing cause Niagara Paper to provide to Seller, with
the right, at reasonable times and upon reasonable
notice, to have access to personnel, and to copy and
use, any records or information that may be relevant
in connection with the preparation of any Returns, any
audit or other examination by any taxing authority or
any litigation relating to liability for Taxes.
Information required in the filing of any Return shall
be provided to the other party not less than thirty
(30) days before such Return is due. Seller will
allow Buyer an opportunity to review and comment upon
any Returns under Subsection 23(a) (including any
amended returns) to the extent that they relate to
Niagara Paper. Seller will take no position on such
Returns that relate to Niagara Paper that would
adversely affect Niagara Paper after the Closing.
Seller and Buyer shall retain all records relating to
Taxes for as long as the statute of limitations with
respect thereto shall remain open.
(g) Sales and Transfer Taxes. All sales and
transfer Taxes (including all stock transfer taxes, if
any) incurred in connection with the transactions
contemplated hereby will be borne by the statutorily
responsible party. If required by applicable law,
Buyer or Seller, as the case may be, will join in the
preparation and execution of any Returns or other
documentation related to the payment of any sales or
transfer Taxes.
(h) Tax Effective Time. For purposes of Taxes,
the Closing shall be deemed to have occurred, and
shall be effective, as of the close of business on the
Closing.
(i) Survival. All of the representations,
warranties, covenants and indemnities contained in
this Agreement which relate to Taxes shall survive the
Closing (even if the Indemnified Party knew or had
reason to know of any misrepresentation or breach of
warranty or covenant at the time of the Closing) and
continue in full force and effect until the expiration
of the applicable statute of limitations (including
any extensions thereof).
24. Section 338(h)(10) Election. Seller agrees
to jointly file with Buyer the election (the
"Election") provided for by Section 338(h)(10) of the
Code and the corresponding election under applicable
state or local tax law with respect to the sale and
purchase of capital stock of Niagara Paper. In
connection with the Election:
(a) Buyer and Seller shall each provide
to the other all necessary information,
including information as to tax basis, to permit
the Election to be made and its consequences to
be accurately reflected for all relevant
accounting and tax reporting purposes, and to
take all other actions necessary to enable Buyer
and Seller to make the Election.
(b) Buyer shall retain at Buyer's
cost an appraiser to prepare a report (a
"Report") appraising the value of the
assets of Niagara Paper to determine the
proper allocations (the "Allocations") of
the "adjusted grossed-up basis" (within
the meaning of Treasury Regulation
section 1.338(b)-1) and the modified adjusted
deemed selling price ("MADSP") (within the
meaning of Treasury Regulation
section 1.338(h)(10)-1) among the assets of
Niagara Paper in accordance with Section
338(b)(5) and (h)(10) of the Code and
Treasury Regulations thereunder. Seller
and Niagara Paper and their respective
employees shall cooperate fully with Buyer
and its appraiser in connection with the
appraisal.
The Report shall be finalized no later
than 120 days after the Closing Date. At least
30 days before such Report is finalized, Buyer
shall provide Seller a copy of the appraiser's
preliminary report or indication of the
Allocations. After receipt of such preliminary
report or indication, Seller shall give to Buyer
in writing any objections or questions which
Seller may have to such preliminary report or
indication, and the parties shall thereafter use
their best efforts to resolve such objections or
questions so that the Report is finalized no
later than 120 days after the Closing Date and
the Election is timely made.
(c) Buyer and Seller shall jointly
prepare a Form 8023-A, together with all
required attachments, and the corresponding
forms required or appropriate under state tax
laws (collectively, an "Election Form") in a
manner consistent with the Allocations.
(d) As promptly as practicable after the
Closing Date, Buyer and Seller shall take all
action and file all documents to effect and
preserve a timely Election.
(e) Seller shall allocate the MADSP
resulting from the Election in a manner
consistent with the Allocations and shall
not take any position inconsistent with
the Election or the Allocations in
connection with any Return; provided,
however, that Seller may take into account
its transaction costs when calculating
such MADSP.
(f) Buyer shall allocate the
"adjusted grossed-up basis" of the capital
stock of Niagara Paper among the assets of
Niagara Paper in a manner consistent with
the Allocations and shall not take any
position inconsistent with the Election or
the Allocations in any Return or
otherwise; provided, however, that Buyer
may add its transaction costs to the
"adjusted grossed-up basis" of the capital
stock of Niagara Paper for purposes of
allocating among the assets of Niagara
Paper.
(g) Seller and Buyer acknowledge that for
federal income tax purposes (and for state
income tax purposes in those states whose income
tax provisions follow the federal income tax
treatment), the sale of the capital stock of
Niagara Paper from Seller to Buyer will be
treated as a sale of assets by Niagara Paper to
Buyer followed by a complete liquidation of
Niagara Paper with and into Seller, and the
parties agree to report the transaction in a
manner consistent with this treatment and to
take no positions inconsistent with this
treatment. The parties also agree that neither
Buyer nor Niagara Paper shall be liable for any
Taxes resulting from the sale of the capital
stock of Niagara Paper or the Election.
25. Limitations on Liability. (a) No party is
responsible for, and no party may recover from any
other party, any amount of consequential (e.g., lost
profits or the like) or punitive damages.
Notwithstanding the foregoing exclusion, to the extent
any party hereto sustains any loss or incurs any
expense compensable under this Agreement that contains
or includes any measure of consequential or punitive
damages awarded to a third party, then such indirect
consequential and punitive damages may be recovered.
(b) Seller and Buyer specifically agree that
the total amount of indemnification payable by Seller
pursuant to Sections 15, 16, 18 and 23 together shall
not exceed the amount of the purchase price paid to
Seller in cash hereunder.
26. Amendment and Waiver. This Agreement may
not be amended or modified at any time or in any
respect other than by an instrument in writing
executed by Buyer and Seller.
27. Notices. Any notice or communication
provided for in this Agreement shall be in writing and
shall be deemed given when delivered personally,
against receipt, or when deposited in the United
States mail, registered or certified mail, return
receipt requested to the following address:
(a) If to Pentair:
Pentair, Inc.
1500 County Road B2 West
St. Paul, Minnesota 55113-3105
Attention: Ronald V. Kelly
Facsimile: (612) 639-5209
with a copy to:
Henson & Efron, P.A.
1200 Title Insurance Building
400 Second Avenue South
Minneapolis, Minnesota 55401
Attention: Louis L. Ainsworth
Facsimile: (612) 339-6364
(b) If to Buyer:
Consolidated Papers, Inc.
231 First Avenue North
P. O. Box 8050
Wisconsin Rapids, WI 54495-8050
Attention: Carl H. Wartman
Facsimile: (715) 422-3203
with a copy to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606-5096
Attention: Robert A. Schreck, Jr.
Facsimile: (312) 984-3669
Any party may change the above address for
notice by written notice to the other parties in
accordance with the provisions of this Section.
28. Parties in Interest. All of the terms and
provisions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by Seller
and Buyer, their respective successors and permitted
assigns. Neither party may assign this Agreement
without the express written consent of the other
party, except that Buyer may assign this Agreement to
an affiliate of Buyer provided that no such assignment
shall relieve Buyer of its obligations hereunder or
otherwise prejudice Seller. This Agreement shall not
confer any rights or remedies upon any person other
than Buyer and Seller and their respective successors
and permitted assigns.
29. Further Assurances. Each party shall from
time to time execute and deliver such further
documents and do such further acts as the other party
may reasonably require for carrying out the purposes
and intent of this Agreement.
30. No Waivers. No failure of either party to
this Agreement to pursue any remedy resulting from a
breach of this Agreement shall be construed as a
waiver of that breach or as a waiver of any subsequent
or other breach.
31. Governing Law. This Agreement shall be
construed in accordance with and governed by the
substantive laws of the state of Minnesota without
giving effect to the choice of law provisions thereof.
This Agreement shall be subject to the exclusive
jurisdiction of the courts of, and United States
federal courts sitting in, the state of Minnesota, and
all parties hereby irrevocably submit to the
jurisdiction of such courts with respect to any claim
arising out of this Agreement.
32. Severability. Should any provision of this
Agreement be or become invalid in whole or in part or
be incapable of performance for whatever reason, then
the validity of the remaining provisions of this
Agreement shall not be affected thereby. In such
event, the parties hereby undertake to substitute for
any such invalid provision or for any provision
incapable of performance, a provision which
corresponds to the spirit and purpose of such invalid
or unperformable provision as far as permitted under
applicable law, so as to realize to the fullest extent
possible the economic purpose and effect of this
Agreement.
33. Miscellaneous. This Agreement constitutes
the entire agreement between the parties and
supersedes all prior representations, understandings
or agreements between them, written or oral,
respecting the within subject matter. Headings are
for convenience only and are not intended to alter any
of the provisions of this Agreement. Words importing
the singular number include the plural and vice versa.
This Agreement may be signed in multiple copies, each
of which shall be considered an original, but all of
which shall together constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, each party has caused this
Agreement to be executed by its authorized officer as
of the date first above written.
PENTAIR, INC.
By:
Its:
CONSOLIDATED PAPERS, INC.
By:
Its:
EXHIBIT 99.1
PENTAIR, INC. NEWS RELEASE
May 8, 1995
PENTAIR TO SELL NIAGARA PAPER AND ITS SHARE
OF LSPI TO CONSOLIDATED PAPERS, PERMITTING
FULL FOCUS
ON INDUSTRIAL GROWTH STRATEGY
ST. PAUL, MINNESOTA - - May 8, 1995 - - Pentair, Inc.
(NASDAQ/NMS:PNTA) , which in April sold its Cross
Pointe Paper
subsidiary to Noranda Forest, Inc., announced today it
has signed a definitive agreement to sell its remaining
paper assets to
Consolidated Papers, Inc. (CPI) of Wisconsin Rapids,
Wisconsin, for approximately $103 million, plus assumed
debt and lease
obligations. These businesses include Niagara of
Wisconsin Paper Corporation, Pentair's 50% share of
Lake Superior Paper
Industries (LSPI) joint venture and its 12% share of
Superior Recycled Fiber Industries (SRFI). Pentair's
partner in the LSPI joint
venture, Minnesota Power of Duluth, Minnesota, also is
selling its shares of the LSPI and SRFI businesses to CPI.
The transaction
is expected to close in late June 1995, subject to
regulatory clearance and further due diligence.
Winslow H. Buxton, Pentair chairman and chief executive
officer, stated, "With the completion of this sale, Pentair
will be able to
devote its full financial and managerial resources to the
implementation of its industrial growth strategy, including
the internal
development of existing business as well as a substantial
acquisition program targeting new industrial businesses."
Buxton added, "We believe Pentair has a very exciting
future as a diversified industrial company, based on
demonstrated ability to
build our businesses into growth leaders."
Pentair's industrial products businesses represented
$1,261.7 million, or 77 percent, of the company's 1994
sales and $125.5
million, or 90 percent, of 1994 operating income. First
quarter 1995 sales for Pentair's industrial segments
increased 13 percent,
while earnings increased 28 percent over the same period
in 1994. Sales of the industrial segments have grown at
an average
annual rate of 23 percent over the last decade, while their
combined operating income growth has averaged 27
percent annually
over the same period.
Niagara of Wisconsin is a leading manufacturer of coated
groundwood publication papers, including recycled-fiber
and chlorine-free papers. The company employs about
600 people at the Niagara, Wisconsin, mill and at sales
offices in Illinois and
Connecticut.
The LSPI joint venture manufacturers supercalendered
paper and employs about 330 people at the Duluth,
Minnesota, mill site
and at sales offices in Illinois. The company was
launched as a greenfield project in 1985 by Pentair and
Minnesota Power. LSPI
also operates SRFI, which started up in 1993, and
recycles pulp from post-consumer wastepaper at a site
adjacent to LSPI.
"Niagara and LSPI are excellent businesses that have
performed well during their time with Pentair," Buxton
said. "Their excellent
product lines, sound management teams and dedicated,
talented employees have played important roles in the
growth and
development of Pentair. We anticipate that opportunities
for all stakeholders will continue under the ownership and
leadership of
CPI."
Pentair is a St. Paul, Minnesota-based company with
1994 sales of $1.6 billion. Pentair's 10 remaining
domestic and international
businesses employ approximately 9,700 people. Products
manufactured by Pentair businesses include electrical and
electronics
enclosures; woodworking equipment; power tools;
sporting ammunition; automotive service equipment;
industrial lubrication
systems and material dispensing equipment; pumps; and
publication papers.
EXHIBIT 99.2
PENTAIR, INC. NEWS RELEASE
June 30, 1995
PENTAIR COMPLETES SALE OF NIAGARA PAPER
AND ITS SHARE OF LAKE SUPERIOR PAPER
INDUSTRIES
ST. PAUL, MINNESOTA - - June 30, 1995 - - Pentair, Inc.
(NASDAQ/NMS:PNTA) today announced it has
completed the sale of its
remaining paper assets to Consolidated Papers, Inc. (CPI)
of Wisconsin Rapids, Wisconsin, for approximately $109
million, plus
assumed debt and subject to certain lease obligations.
The purchase price increased approximately $6 million
since the definitive
agreement was signed May 8 due to changes in book
value of the paper businesses. These businesses include
Niagara of
Wisconsin Paper Corporation, Pentair's 50% share of
Lake Superior Paper Industries (LSPI) joint venture and its
12% share of
Superior Recycled Fiber Industries (SRFI).
Niagara of Wisconsin is a leading manufacturer of coated
groundwood publication papers, including recycled-fiber
and chlorine-free papers. The company employs about
600 people at the Niagara, Wisconsin, mill and at sales
offices in Illinois and
Connecticut.
The LSPI joint venture manufacturers supercalendered
paper and employs about 330 people at the Duluth,
Minnesota, mill site
and at sales offices in Illinois. The company was
launched as a greenfield project in 1985 by Pentair and
Minnesota Power. LSPI
also operates SRFI, which started up in 1993, and
recycles pulp from post-consumer wastepaper at a site
adjacent to LSPI.
Pentair's eight industrial businesses employ approximately
8,700 people in 27 locations around the world. Products
manufactured
by Pentair businesses include electrical and electronics
enclosures; woodworking equipment; power tools; pumps;
sporting
ammunition; automotive service equipment; industrial
lubrication systems; and material dispensing equipment.
AGREEMENT FOR SALE AND PURCHASE
OF STOCK
OF
PENTAIR DULUTH CORP.
AND
MINNESOTA PAPER INCORPORATED
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions. . . . . . . . . . . . . . 1
2. Purchase and Sale of Stock . . . . . . 6
3. Purchase Price . . . . . . . . . . . . 6
4. Payment. . . . . . . . . . . . . . . . 7
5. Assumption of Liabilities. . . . . . . 8
6. Closing. . . . . . . . . . . . . . . . 8
7. Sellers' Representations, Warranties and
Covenants . . . . . . . . . . . . . . 9
(a) Organization and Authority of Seller 9
(b) Valid and Enforceable Agreement. 9
(c) Organization of Subsidiaries . . 10
(d) Financial Statements . . . . . . 11
(e) No Material Change . . . . . . . 11
(f) Leases . . . . . . . . . . . . . 11
(g) Title to Personal Property . . . 12
(h) Real Estate. . . . . . . . . . . 12
(i) Plant and Equipment. . . . . . . 14
(j) Intellectual Property. . . . . . 14
(k) Employee Matters . . . . . . . . 14
(l) Litigation . . . . . . . . . . . 15
(m) Compliance with Laws . . . . . . 15
(n) Material Contracts . . . . . . . 15
(o) Licenses and Permits . . . . . . 16
(p) Insurance. . . . . . . . . . . . 16
(q) Employee Benefits. . . . . . . . 16
(r) Transactions with Related Parties 18
(s) Bank Accounts. . . . . . . . . . 18
(t) Tax Matters. . . . . . . . . . . 18
(u) Accounts Receivable. . . . . . . 20
(v) Inventory. . . . . . . . . . . . 21
(w) Motor Vehicles . . . . . . . . . 21
(x) Product Warranty . . . . . . . . 21
8. Buyer's Representations and Warranties 22
(a) Organization . . . . . . . . . . 22
(b) Authority. . . . . . . . . . . . 22
(c) Valid and Enforceable Agreement. 22
(d) No Insolvency. . . . . . . . . . 22
(e) Financial Statements . . . . . . 22
(f) Investment Intent. . . . . . . . 22
9. Actions Pending Closing. . . . . . . . 23
(a) Operations . . . . . . . . . . . 23
(b) Access to Records. . . . . . . . 23
(c) Access to Facilities . . . . . . 23
(d) Release of Guarantees. . . . . . 23
(e) Hart-Scott-Rodino Filings. . . . 24
(f) Notice of Developments . . . . . 24
(g) LSPI Restrictions. . . . . . . . 24
(h) Best Efforts . . . . . . . . . . 24
(i) Allocation of Pulp . . . . . . . 25
10. Conditions Precedent to Obligations of
Buyer . . . . . . . . . . . . . . . . 25
(a) No Errors; Performance of Obligations 25
(b) Officer's Certificates . . . . . 25
(c) Certified Copy of Resolutions. . 25
(d) Opinion of Sellers' Counsel. . . 25
(e) Injunctions. . . . . . . . . . . 26
(f) Clayton Act Matters. . . . . . . 26
(g) Environmental Matters. . . . . . 26
(h) LSPI Restrictions. . . . . . . . 26
(i) Financing. . . . . . . . . . . . 26
(j) FIRPTA Certificate . . . . . . . 27
(k) Purchase of SRFI and Niagara Paper 27
(l) Real Estate Consents . . . . . . 27
(m) Title Insurance and Surveys. . . 27
(n) Provision of Documentation . . . 29
(o) Other Matters. . . . . . . . . . 29
11. Conditions Precedent to Obligations of
Sellers . . . . . . . . . . . . . . . 29
(a) No Errors; Performance of Obligations 29
(b) Officer's Certificate. . . . . . 29
(c) Certified Copy of Resolutions. . 29
(d) Opinion of Buyer's Counsel . . . 29
(e) Injunctions. . . . . . . . . . . 30
(f) Clayton Act Matters. . . . . . . 30
(g) Financing. . . . . . . . . . . . 30
(h) Sale of SRFI and Niagara Paper . 30
(i) Other Matters. . . . . . . . . . 30
12. Broker. . . . . . . . . . . . . . . . 30
13. Employees . . . . . . . . . . . . . . 31
14. Confidential Information. . . . . . . 31
15. Indemnification . . . . . . . . . . . 31
16. Guaranteed Obligations. . . . . . . . 34
17. Expenses. . . . . . . . . . . . . . . 35
18. Environmental Matters . . . . . . . . 36
(a) Warranty . . . . . . . . . . . . 36
(b) Indemnity. . . . . . . . . . . . 37
(c) Special Provisions . . . . . . . 38
(d) Exclusive Remedy . . . . . . . . 39
(e) Inspection of Books and Records. 39
19. Termination of Agreement. . . . . . . 39
20. Announcements . . . . . . . . . . . . 40
21. Records . . . . . . . . . . . . . . . 40
22. Assistance after Closing . . . . . . 40
(a) Retained Liabilities . . . . . . 40
(b) Allocation of Pulp . . . . . . . 40
23. Tax Matters; Payment of Taxes . . . . 41
(a) Tax Returns. . . . . . . . . . . 41
(b) Apportionment of Income. . . . . 41
(c) Allocation of Taxes. . . . . . . 41
(d) Indemnity. . . . . . . . . . . . 41
(e) Post-Closing Elections . . . . . 42
(f) Control of Contest . . . . . . . 42
(g) General. . . . . . . . . . . . . 43
(h) Sales and Transfer Taxes . . . . 43
(i) Tax Effective Time . . . . . . . 43
(j) Survival . . . . . . . . . . . . 43
(k) LSPI Leases Tax Rate Change Indemnity 43
(l) Refund of Tax Indemnity Payment. 45
(m) Tax Agreements . . . . . . . . . 45
24. Section 338(h)(10) Election . . . . . 45
25. Limitations on Liability. . . . . . . 46
26. Amendment and Waiver. . . . . . . . . 47
27. Notices . . . . . . . . . . . . . . . 47
28. Parties in Interest . . . . . . . . . 49
29. Further Assurances. . . . . . . . . . 49
30. No Waivers. . . . . . . . . . . . . . 49
31. Governing Law . . . . . . . . . . . . 49
32. Severability. . . . . . . . . . . . . 49
33. Miscellaneous . . . . . . . . . . . . 49
<PAGE>
THIS AGREEMENT is made and entered into as of
the 8th day of May, 1995 between Pentair, Inc., a
Minnesota corporation ("Pentair"), Minnesota Power &
Light Company, a Minnesota corporation ("Minnesota
Power") and Consolidated Papers, Inc., a Wisconsin
corporation ("Buyer").
WHEREAS, Pentair is the owner of all of the
issued and outstanding capital stock of Pentair Duluth
Corp., a Minnesota corporation ("Pentair Duluth"), and
Minnesota Power is the owner of all of the issued and
outstanding capital stock of Minnesota Paper
Incorporated, a Minnesota corporation ("Minnesota
Paper"); and
WHEREAS, Pentair Duluth and Minnesota Paper each
own a 50% equity interest in Lake Superior Paper
Industries, a joint venture organized under the
general partnership laws of the state of Minnesota
("LSPI"); and
WHEREAS, Pentair and Minnesota Power
(collectively, "Sellers") desire to sell and Buyer
desires to purchase from Sellers all of the issued and
outstanding capital stock of Pentair Duluth and
Minnesota Paper in accordance with the terms and
provisions of this Agreement;
NOW, THEREFORE, in consideration of the
foregoing premises and of the mutual covenants and
conditions herein contained, the parties agree as
follows:
1. Definitions. The terms below shall have the
following meanings under this Agreement unless the
context clearly requires otherwise:
(a) "Allocations" shall have the meaning set
forth in Section 24(b).
(b) "CERCLA" shall have the meaning set
forth in Section 18(a)(iii).
(c) "Change of Control Date" means the date on
which any one or more of the following events shall
first have occurred:
(i) all or substantially all of the
assets of Buyer are sold, leased,
exchanged or transferred in one
transaction or a series of related
transactions;
(ii) beneficial ownership (as
defined in Rule 13d-3 promulgated under
the Securities Exchange Act of 1934 (the
"1934 Act") as amended from time to time)
of more than fifty percent (50%) of the
issued and outstanding voting stock of
Buyer is acquired by any person, as such
term is used in Section 13(d) and 14(d) of
the 1934 Act; or
(iii) Buyer merges with or into
another corporation or is consolidated
with another corporation and Buyer is not
the surviving corporation or Buyer is the
surviving corporation but all or part of
its issued and outstanding voting stock
shall be changed into or exchanged for
stock or other securities of any other
person or into cash or any other property.
(d) "Clayton Act" means 15 U.S.C. section 12, et
seq., as amended, and the rules and regulations
promulgated thereunder from time to time.
(e) "Closing" means the actual transfer and
delivery of the certificates evidencing all of the
LSPI Group Stock, the delivery of documents providing
for the assumption of certain specified liabilities
and the exchange and delivery by the parties of the
other documents and instruments contemplated by this
Agreement.
(f) "Closing Date" means June 30, 1995 or such
later month end date as mutually agreed upon by the
parties.
(g) "Code" means the Internal Revenue Code of
1986, as amended.
(h) "Commitments" shall have the meaning set
forth in Section 10(m)(i).
(i) "Confidential Information" means all
information designated as "Evaluation Material" in the
confidentiality letter agreement dated August 26, 1994
between Buyer and CS First Boston Corp., acting as
agent for Pentair, and in the confidentiality letter
agreement dated January 9, 1995, between Buyer and
PaineWebber Incorporated, acting as agent for
Minnesota Power, copies of which are attached as
Schedule 1(i).
(j) "Election" shall have the meaning set forth
in Section 24.
(k) "Election Form" shall have the meaning set
forth in Section 24(c).
(l) "Employee Benefits" means, with respect to
the employees of the LSPI Group, any and all pension
or welfare benefit programs, plans, arrangements,
agreements and understandings for employees generally
or specific individual employees of the LSPI Group to
which any member of the LSPI Group contributes or is a
party, by which any of them may be bound, or under
which any of them may have liability, including,
without limitation, pension or retirement plans,
deferred compensation plans, bonus or incentive plans,
early retirement programs, severance pay policies,
support funds, medical, dental, life and disability
insurance, and payment or reimbursement plans.
(m) "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended.
(n) "Environmental Cleanup" shall have the
meaning set forth in Section 18(c)(iii).
(o) "Environmental Laws" means federal, state,
regional, county and local laws, statutes, rules,
regulations and ordinances and common law requirements
as of the Closing Date relating to the environment,
including, without limitation, those relating to the
public health or safety aspects thereof or to
nuisance, trespasses, releases, discharges, emissions
or disposals to air, water, land or groundwater, to
the withdrawal or use of groundwater, to the use,
handling or disposal of polychlorinated biphenyls
(PCB's), asbestos or urea formaldehyde, to the
treatment, storage, disposal or management of
Hazardous Material (including, without limitation,
petroleum, its derivatives, by-products or other
hydrocarbons), to exposure to toxic, hazardous or
other controlled, prohibited or regulated substances,
to the transportation, storage, disposal, management
or release of gaseous or liquid substances, and any
regulation, order, injunction, judgment, declaration,
notice or demand issued thereunder.
(p) "GAAP" means generally accepted accounting
principles consistently applied and maintained
throughout the period indicated and consistent with
prior financial practice of LSPI, or Pentair or
Minnesota Power (and their respective wholly-owned
affiliates), as the case may be.
(q) "Guaranteed Obligations" means those
obligations and liabilities of Sellers, listed on
Schedule 5 hereto, undertaken in respect of the
LSPI Group, including, without limitation, the
Keepwell Obligations of Sellers under the LSPI Leases.
(r) "Hazardous Material" means and includes (a)
petroleum or petroleum products, including crude oil,
(b) any asbestos insulation or other material composed
of or containing asbestos, and (c) any hazardous,
toxic or dangerous waste, substance or material
defined as such in (or for purposes of) the
Comprehensive Environmental Response, Compensation and
Liability Act, as amended, any so-called state or
local "Superfund" or "Superlien" law, Section 115B.02
of the Minnesota Statutes or any other Environmental
Laws.
(s) "Indemnitee" shall have the meaning set
forth in Section 15(e).
(t) "Indemnitor" shall have the meaning set
forth in Section 15(e).
(u) "Intellectual Property" means all patents,
utility patents and design patents and registrations
therefor, trademarks, trade names, trademark rights
and trademark registrations, copyrights and licenses
listed on Schedule 1(u) attached, as well as all
technical documentation reflecting engineering and
production data, design data, plans, specifications,
drawings, technology, know-how, trade secrets,
software (whether owned or licensed), manufacturing
processes and all documentary evidence thereof
relating to the LSPI Group and its business.
(v) "Joint Venturers" means both of Pentair
Duluth and Minnesota Paper, the joint venturers of
LSPI, and "Joint Venturer" means any one of them.
(w) "Joint Venturer Stock" means all of the
issued and outstanding capital stock of each of
Pentair Duluth and Minnesota Paper, respectively.
(x) "Keepwell Obligations" means the
obligations of Sellers under their respective Keepwell
Agreements and Assignments entered into in connection
with the LSPI Leases.
(y) "Knowledge" of Sellers or the "best
knowledge" of Sellers when modifying any
representation or warranty shall mean that no officer
or other manager reporting directly to the President
of any of the Sellers (who are involved in or
responsible for operations of LSPI or Superior
Recycled Fiber Industries, a joint venture organized
under the general partnership laws of the state of
Minnesota) or of any member of the LSPI Group or the
SRFI Group, including the chief financial officer and
the manager of environmental affairs, if any, of
Sellers or of any member of the LSPI Group or the SRFI
Group, has any knowledge that such representation and
warranty is not true and correct to the same extent as
provided therein and that:
(i) Sellers and each member of
the LSPI Group has exercised due diligence
and has made appropriate investigations
and inquiries of the officers and business
records of each of Sellers, the LSPI Group
and the SRFI Group; and
(ii) nothing has come to the
attention of Sellers or of any member of
the LSPI Group in the course of such
investigation and review or otherwise
which would reasonably cause such party,
in the exercise of due diligence, to
believe that such representation and
warranty is not true and correct.
Such terms shall have a cognate meaning as
applied to Buyer.
(z) "LSPI Group" means all of Pentair Duluth,
Minnesota Paper and LSPI.
(aa) "LSPI Group Financial Statements" means
(i) the audited financial statements (for the years
ended December 31, 1991 through 1994) of LSPI and (ii)
the unaudited internal financial statements of the
other members of the LSPI Group for the fiscal years
ended December 31, 1991 through 1994.
(bb) "LSPI Group Stock" means all of the issued
and outstanding capital stock of Pentair Duluth and
Minnesota Paper.
(cc) "LSPI Leases" means the five separate
Facility Leases dated December 31, 1987 between LSPI
and First National Bank of Minneapolis, as Owner
Trustee, and all Transaction Documents (as defined in
the Definition of Terms attached as Appendix A to the
Facility Leases) listed on Schedule 7(n) hereto.
(dd) "LSPI Restrictions" means, with respect to
the shares of the Joint Venturers, the right of first
refusal granted by Pentair and Minnesota Power to the
other to purchase its stock in their respective Joint
Venturer, respectively, pursuant to Section 2 of the
Restated Agreement to Restrict Transfer of Shares
dated April 25, 1986.
(ee) "Leased Real Estate" shall have the
meaning set forth in Section 7(h)(ii). The LSPI
Leases are specifically excluded from the definition
of "Leased Real Estate."
(ff) "MADSP" shall have the meaning set forth
in Section 24(b).
(gg) "1933 Act" shall have the meaning set
forth in Section 8(f).
(hh) "Net Book Value" means, with respect to
the stock of each Joint Venturer, the difference
between (x) the assets of such Joint Venturer
(including therein, without duplication, its
respective investment in the net assets of LSPI), less
(y) all liabilities of such Joint Venturer, excluding
current income tax accruals, deferred tax accruals and
subordinated and other debt, whether current or long-term, owing to Sellers,
all as reflected on the
balance sheet of the respective Joint Venturers as of
either December 31, 1994 or the Closing Date, as
appropriate.
(ii) "Owned Real Estate" shall have the meaning
set forth in Section 7(h)(i).
(jj) "PBGC" shall have the meaning set forth in
Section 7(q)(vi).
(kk) "Pension Plans" shall have the meaning set
forth in Section 7(q)(i).
(ll) "Permitted Exceptions" shall have the
meaning set forth in Section 10(m)(i).
(mm) "Real Estate" means all real property,
whether owned, under contract to purchase, or leased
by the LSPI Group, including all land, buildings,
structures, easements, appurtenances and privileges
relating thereto, and all leaseholds, leasehold
improvements, fixtures and other appurtenances and
options, including options to purchase and renew, or
other rights thereunder, used or intended for use in
connection with the business of the LSPI Group,
including the eight parcels of real property adjacent
to LSPI, which are owned by Pentair Duluth and
Minnesota Paper.
(nn) "Report" shall have the meaning set forth
in Section 24(b).
(oo) "Return(s)" means any return (including
any consolidated or combined return), report, claim
for refund, information return or statement, relating
to any Tax, including any schedule or attachment
thereto.
(pp) "SRFC" shall have the meaning set forth in
Section 10(k).
(qq) "SRFI Group" means all of SRFC, LSPI Fiber
Co., a joint venture organized under the general
partnership laws of the state of Minnesota, Synertec,
Inc., a Minnesota corporation, and Superior Recycled
Fiber Industries, a joint venture organized under the
general partnership laws of the state of Minnesota.
(rr) "Statement of Net Book Value" means the
audited balance sheet of each Joint Venturer as of the
Closing Date in substantially the form reflected in
Schedule 3.2 from which the calculation of the
purchase price of the Joint Venturer Stock will be
made in accordance with Section 3 hereof.
(ss) "Surveys" shall have the meaning set forth
in Section 10(m)(ii).
(tt) "Survey Defect" shall have the meaning set
forth in Section 10(m)(iii).
(uu) "Tax" or "Taxes" means all income, gross
receipts, sales, use, employment, franchise, profits,
property or other taxes, fees, stamp taxes and duties,
assessments or charges of any kind whatsoever (whether
payable directly or by withholding), together with any
interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority
with respect thereto.
(vv) "Tax Indemnity Agreements" means all of
the tax indemnity agreements entered into in
connection with the LSPI Leases.
(ww) "Title Company" shall have the meaning set
forth in Section 10(m)(i).
(xx) "Title Policy" shall have the meaning set
forth in Section 10(m)(i).
(yy) "Unpermitted Exception" shall have the
meaning set forth in Section 10(m)(iii).
2. Purchase and Sale of Stock. Subject to the
terms and conditions herein stated, Sellers shall
sell, transfer and deliver to Buyer, and Buyer shall
purchase from Sellers, at the Closing all of each
Seller's right, title and interest in all of the
issued and outstanding capital stock of its Joint
Venturer. Promptly following Closing, Buyer shall
cause Pentair Duluth to change its name to exclude the
word "Pentair" and shall promptly make all filings
necessary to reflect such change.
3. Purchase Price. The aggregate purchase
price to be paid by Buyer to each Seller for the
purchase of all of the issued and outstanding capital
stock of its respective Joint Venturer, shall be:
(a) $58,800,000;
(b) increased for any increase, or
decreased for any decrease, in
the Net Book Value of such Joint
Venturer from December 31, 1994
to the Closing Date; and
(c) less one-quarter of the aggregate
amount of transition incentives to be
paid by LSPI pursuant to Section 13 to
certain LSPI employees, which amount is
set forth on Schedule 3.1.
The Net Book Value shall be determined in accordance
with GAAP as set forth on Schedule 3.2, which Schedule
sets forth sample calculations of the Net Book Value
as of December 31, 1994 and March 31, 1995 and the
exceptions to GAAP used in calculating Net Book Value.
Within sixty (60) days following the Closing
Date, each Seller shall prepare and deliver to Buyer a
Statement of Net Book Value for its respective Joint
Venturer, which shall be audited by such Seller's
auditors based upon an audit of LSPI's books,
including an inventory taken by LSPI beginning at 7:00
a.m. on the Closing Date and a review of the
liabilities as of the Closing Date. The taking of
such inventory may be observed by Buyer and Buyer's
auditors. Each Statement of Net Book Value shall have
attached thereto an auditor's report in the form
attached as Schedule 3.3. To the extent possible,
Sellers will provide Buyer with a preliminary draft of
the Statement of Net Book Value. Buyer and Sellers
will in good faith attempt to resolve any disputes
with respect to such calculation before the final
Statements of Net Book Value are rendered.
Buyer may review the Statements of Net Book
Value and Sellers shall make available the work papers
of Sellers' auditors to Buyer and its accountants and
Buyer and its accountants may make inquiries of
representatives of Sellers and their auditors. Buyer
shall give written notice to Sellers of any objection
to their respective Statements of Net Book Value
within thirty (30) days after Buyer's receipt thereof.
The notice shall specify in reasonable detail the
items in such Statement of Net Book Value to which
Buyer objects and shall provide a summary of Buyer's
reasons for such objections.
Any dispute between Buyer and either or both
Sellers with respect to the respective Statements of
Net Book Value which is not resolved within fifteen
(15) business days after receipt by Sellers of the
written notice from Buyer shall be referred for
decision to Ernst & Young LLP who shall cause an audit
partner who is not engaged in providing services to
Sellers or Buyer to decide the dispute within thirty
(30) days of such referral. The decision by the
partner shall be final and binding on Sellers and
Buyer. In resolving any disputed item such audit
partner may not assign a value to any item greater
than the greatest value for such item claimed by
either party or less than the smallest value for such
item claimed by either party. The cost of retaining
the audit partner with respect to resolving disputes
as to the Statements of Net Book Value shall be borne
by the respective Seller and Buyer equally, unless
such partner determines, based on his or her
evaluation of the good faith of the parties, that the
fees should be borne unequally.
4. Payment. The estimated purchase price shall
be paid in U.S. dollars in immediately available funds
on the Closing Date. The amount to be paid on the
Closing Date shall be based upon preliminary
Statements of Net Book Value delivered to Buyer at
least five (5) business days prior to Closing, which
shall be calculated based on the unaudited balance
sheets of the respective Joint Venturers as of the
month end prior to the Closing Date, prepared by
Sellers on a basis consistent with Schedule 3.2, plus
any amounts advanced by, and less any distributions
paid to each Seller or its respective Joint Venturer
between one month prior to the Closing Date and the
Closing Date. Following delivery of the final
Statements of Net Book Value under Section 3, any
balance due to Sellers or refunds due to Buyer
reflected thereon shall be paid within ten (10) days
of such delivery, (unless there is an objection under
Section 3, in which case the amount not in dispute
shall be paid within ten (10) days of such delivery,
and the balance in dispute shall be paid within ten
(10) days of the resolution of such objection)
together with interest on such amount from the Closing
Date at the announced large business prime rate of
Morgan Guaranty Trust Company of New York.
Except as Buyer may be otherwise advised in
writing by Sellers at least five (5) days prior to any
payment, all payments of the purchase price by Buyer
to Sellers at the Closing or any other amounts owed by
Buyer to Sellers shall be by wire transfer to:
Seller
Bank and Routing Number
Bank Account Number
Pentair
First Bank National Association
(091000022) to attention of Karen
Johnson
xxx-xxxxxxx
Minnesota Power
First Bank National Association
(091000022) to attention of
Russell Arneson
xxx-xxxxxxx
Except as Sellers may be otherwise advised in
writing by Buyer at least five (5) days prior to any
payment, payment of any refund to Buyer based on the
final determination of the purchase price pursuant to
Section 3 or any other amounts owed by Sellers to
Buyer hereunder shall be made by wire transfer to
Harris Trust and Savings Bank - Consolidated Papers,
Inc., Account No. xxxxxxx (ABA wire transfer routing
number xxxx-xxxx-x), marked to the attention of J.R.
Matsch.
All wire transfers shall be sent by 10:00 a.m.
Minneapolis time on the date of such payment, unless
otherwise agreed by the parties.
5. Assumption of Liabilities. At Closing,
Buyer shall assume and agree to satisfy and perform,
to the extent not satisfied or performed prior to the
Closing Date, without any cost or charge to Sellers,
all obligations of Sellers as guarantor under any
Guaranteed Obligation. If the assumption of the
Guaranteed Obligations by Buyer under this Section 5
requires the consent of any third party, Buyer and
each respective Seller agree they will use their best
efforts to obtain such written consent to such
assumption; provided, however, that in no event shall
Buyer be subject, without its consent, to terms and
conditions more restrictive than those set forth in
the existing obligations of Sellers being assumed.
Failing the consent of such creditor, Buyer shall
indemnify Sellers in accordance with the provisions of
Section 16 hereof against any claim arising out of the
Guaranteed Obligations.
6. Closing. (a) The Closing shall take place
on the Closing Date at the offices of Henson & Efron,
P.A. in Minneapolis, Minnesota, at 9:00 o'clock a.m.,
local time, or at such other time and place as may be
mutually agreed upon. Buyer and Sellers each agree
they shall use their best efforts and shall cause all
relevant affiliates to use their best efforts to
obtain fulfillment of all conditions to Closing set
forth in Sections 10 and 11 hereof.
(b) At the Closing, Sellers shall deliver to
Buyer certificates evidencing ownership of all of the
LSPI Group Stock, in form ready for transfer and duly
endorsed to Buyer, together with such other documents
and instructions as provided herein, reasonably
satisfactory in form and substance to Buyer and its
counsel, as shall be required to vest in Buyer good
and marketable title, free and clear of all liens,
charges and encumbrances (except as specified in this
Agreement, if any) in and to the LSPI Group Stock. At
the Closing, each Seller shall deliver to Buyer a
release of all claims of such Seller and any person or
entity affiliated therewith against all members of the
LSPI Group, in substantially the form of Schedule 6.
(c) At the Closing, Buyer shall deliver to
Sellers such documents and instruments as provided
herein and such undertakings, and other instruments as
shall be required to cause Buyer to assume the
obligations as provided in Section 5, all of which
shall be reasonably satisfactory in form and substance
to Sellers and their respective counsel.
7. Sellers' Representations, Warranties and
Covenants. Subject to the several liability of
Sellers provided for in Section 25 hereof, Sellers
represent, warrant and covenant to Buyer as follows:
(a) Organization and Authority of Seller. Each
Seller is a duly organized and validly existing
corporation in good standing in the state of
Minnesota. Sellers have the complete and unrestricted
right, power and authority to sell, transfer and
assign all of the issued and outstanding capital stock
of their respective Joint Venturers pursuant to this
Agreement and to carry out the transactions
contemplated hereby without the consent of any other
person (except as otherwise set forth herein), subject
only to the LSPI Restrictions. The execution,
delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby
have been duly authorized by the Boards of Directors
of each Seller.
(b) Valid and Enforceable Agreement. This
Agreement constitutes a valid and binding agreement of
each respective Seller, enforceable in accordance with
its terms, except insofar as enforceability may be
limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of
creditors generally, and by general equitable
principles. Neither the execution and delivery of
this Agreement, nor the consummation of the
transactions contemplated hereby, nor the performance
of its obligations hereunder materially violates or
conflicts with, results in a material breach of, or
constitutes a material default under (i) to the best
knowledge of each respective Seller, any law, rule or
regulation, or (ii) subject to the obtaining of
necessary consents, which consents are listed on
Schedule 7(b), under various loan agreements,
guarantees, leases, and other agreements (including
without limitation the LSPI Leases and the LSPI
Restrictions), any agreement or other restriction of
any kind or character to which such Seller or any
member of the LSPI Group is a party, by which such
Seller or any member of the LSPI Group is bound, or to
which any of the properties of any member of the LSPI
Group is subject. Neither the execution or delivery
of this Agreement, nor the consummation of the
transactions contemplated hereby, nor the performance
of its obligations hereunder violates or conflicts
with, results in a breach of, or constitutes a default
under (i) any judgment or order, decree, award or
ruling to which such Seller or any member of the LSPI
Group is subject, or (ii) the Articles of
Incorporation or By-Laws of such Seller or its
respective Joint Venturer, or the Joint Venture
Partnership Agreement, excluding the LSPI
Restrictions.
(c) Organization of Subsidiaries.
(i) Each member of the LSPI
Group is a duly organized and validly
existing corporation or joint venture
general partnership, as the case may be,
in good standing, to the extent
applicable, in its respective state of
incorporation or organization, as set
forth in Schedule 7(c). Each member of
the LSPI Group has all requisite corporate
or general partnership power and
authority, as the case may be, to carry on
its respective business as presently
conducted in all states in which it
currently does business. Each member of
the LSPI Group is duly licensed,
registered and qualified to do business as
a foreign corporation, partnership or
joint venture and, to the extent
applicable, is in good standing in all
jurisdictions in which the ownership,
leasing or operation of its assets or the
conduct of its business requires such
qualification, except where the failure to
be so licensed, registered or qualified
would not have a material adverse effect
upon its business or assets.
(ii) All of the outstanding
shares of capital stock of Pentair Duluth
and Minnesota Paper have been duly
authorized and validly issued, are fully
paid and nonassessable, and are owned,
beneficially and of record, by Pentair and
Minnesota Power respectively and are free
and clear of all liens, claims,
encumbrances and restrictions whatsoever,
other than the LSPI Restrictions. Pentair
Duluth's entire equity capital consists of
25,000 authorized shares of common stock,
par value $1.00 per share, of which 1,000
shares are issued and outstanding.
Minnesota Paper's entire equity capital
consists of 1,000 authorized shares of
common stock, no par value, of which 1,000
shares are issued and outstanding. No
shares of capital stock of, or other
ownership interest in, either of the Joint
Venturers are reserved for issuance and
there are no outstanding options,
warrants, rights (other than the LSPI
Restrictions), subscriptions, claims of
any character, agreements, obligations,
convertible or exchangeable securities, or
other commitments, contingent or otherwise
(except for the Keepwell Obligations),
relating to the capital stock of, or other
ownership interest in, either of such
corporations pursuant to which either of
such corporations is or may become
obligated to issue or exchange any shares
of capital stock of, or other ownership
interest in, such corporation.
(iii) Except as set forth on
Schedule 7(c), no member of the LSPI Group
owns, directly or indirectly, any capital
stock or other equity or ownership or
proprietary interest in any other
corporation, partnership, association,
trust, joint venture (other than in LSPI)
or other entity.
(iv) True and complete copies of
the LSPI Leases and the agreements
containing the LSPI Restrictions have been
furnished to Buyer; each of those
agreements is currently in good standing
and in full force and effect and no
default by either Seller or any member of
the LSPI Group party thereto, or to the
best knowledge of Sellers, any other party
thereto, exists thereunder.
(d) Financial Statements.
(i) Attached hereto as Schedule 7(d)
are the LSPI Group Financial Statements. The
LSPI Group Financial Statements were (and the
Statements of Net Book Value will be) prepared
in accordance with the books and records of the
respective members of the LSPI Group which were
used in the preparation of each Seller's audited
consolidated financial statements for the fiscal
years ended December 31, 1993 and December 31,
1994.
(ii) The LSPI Group Financial
Statements were (and the Statements of Net
Book Value will be) prepared in accordance
with GAAP, consistently applied, but,
except for the audited financial
statements of LSPI, do not include all
information and footnotes required by
generally accepted accounting principles
for complete financial statements. The
Statements of Net Book Value will
adequately reflect all liabilities and
obligations of the LSPI Group required to
be shown thereon in accordance with GAAP
except for those exceptions to GAAP set
forth on Schedule 3.2.
(iii) The LSPI Group Financial
Statements as of such dates or for the
period ending on such dates present fairly
the financial position and the results of
operations of the members of the LSPI
Group for the periods covered thereby.
All adjustments, consisting of normal
recurring accruals and eliminations and
other similar adjustments, considered
necessary for a fair presentation have
been included.
(e) No Material Change. To the best knowledge
of Sellers, since December 31, 1994 there has been no
material adverse change in the business, financial
position or results of operations of the LSPI Group,
taken as a whole.
(f) Leases. Sellers have furnished or made
available to Buyer copies of all leases and subleases
of any personal property used in the operations of
members of the LSPI Group, including without
limitation the LSPI Leases, to which any member of the
LSPI Group is a party, all of which are listed on
Schedule 7(f). Except as set forth on Schedule 7(f),
no consents or approvals are required in connection
with the transactions contemplated hereby. No event
has occurred which is or, after the giving of notice
or passage of time, or both, would constitute, a
default under or a material breach of any lease by any
member of the LSPI Group or, to the best knowledge of
Sellers, any other party to such leases. As of the
Closing Date, each lease (including without limitation
the LSPI Leases) shall be in full force and effect in
accordance with its terms, as amended from time to
time.
(g) Title to Personal Property. Each member of
the LSPI Group has good and marketable title to its
respective owned personal property as reflected in the
LSPI Group Financial Statements, free and clear of all
liens, claims, encumbrances and restrictions, except
(i) those reflected on Schedule 7(d) attached and (ii)
defects in title, and liens, charges and encumbrances,
if any, as do not materially detract from the value of
or otherwise materially impair the current operations
or financial conditions of the LSPI Group, taken as a
whole.
(h) Real Estate.
(i) Schedule 7(h)(i) sets forth
an accurate legal description of all Real
Estate owned by a member of the LSPI Group
or for which a member of the LSPI Group
has contracted to become the owner (the
"Owned Real Estate"), including
identification of the current owner of fee
simple title thereto. The party
identified as the owner on Schedule
7(h)(i) is the legal and equitable owner
of good and marketable title in fee simple
absolute to such Owned Real Estate,
including the buildings, structures,
spurtracks (as set forth on Schedule
7(h)(i)) and improvements situated thereon
and appurtenances thereto, in each case
free and clear of all tenancies and other
possessory interests, security interests,
conditional sale or other title retention
agreements, liens, encumbrances,
mortgages, pledges, assessments,
easements, rights of way, covenants,
restrictions, reservations, options,
rights of first refusal, defects in title,
encroachments and other burdens, except as
disclosed on Schedule 7(h)(i). Except as
disclosed on Schedule 7(h)(i), a member of
the LSPI Group is in possession of the
Owned Real Estate. All contracts,
agreements, options and undertakings
affecting the Owned Real Estate are set
forth in Schedule 7(h)(i) and are legally
valid and binding and in full force and
effect, and, to Sellers' knowledge, there
are no defaults, offsets, counterclaims or
defenses thereunder, and the LSPI Group
has received no notice that any default,
offset, counterclaim or defense thereunder
exists. Sellers have delivered or made
available to Buyer correct and complete
copies of all such contracts, agreements,
options and undertakings.
On Schedule 7(h)(i), certain parcels of
Owned Real Estate are identified as "Buffer Real
Estate." Such parcels are located across North
Central Avenue from the LSPI Mill, and are owned
by either Pentair Duluth or Minnesota Paper.
The particular Seller who holds title to a
parcel of Buffer Real Estate represents and
warrants to Buyer that it has not made or done
any act or thing to impair the quality or
marketability of title to the Buffer Real
Estate. Except for the preceding sentence, none
of the representations, warranties or covenants
of Section 7(h) shall apply to the Buffer Real
Estate.
(ii) Schedule 7(h)(ii) sets
forth an accurate, correct and complete
list of all Real Estate leased, subleased
or occupied by a member of the LSPI Group
(such interests are the "Leased Real
Estate"), including identification of the
lease or sublease and the parties thereto
and list of contracts, agreements, leases,
subleases, options and commitments, oral
or written, affecting such Leased Real
Estate or any interest therein to which a
member of the LSPI Group is a party or by
which any of its interest in the Leased
Real Estate is bound. The LSPI Group
member identified in the Real Estate Lease
has been in peaceable possession of the
Leased Real Estate since the commencement
of the original term of such Real Estate
Lease. Sellers have delivered to Buyer
correct and complete copies of each Real
Estate Lease.
(iii) To the knowledge of the
LSPI Group, except as set forth on the
Flood Insurance Rate Map prepared by the
Federal Emergency Management Agency
(Community/Panel No. 270420/004B; revised
as of November 1992), no Real Estate is
located within a flood or lakeshore
erosion hazard zone for which flood
insurance is now required under the
National Flood Insurance Program. Neither
the whole nor any portion of any Real
Estate has been condemned, requisitioned
or otherwise taken by any public
authority, and no notice of any such
condemnation, requisition or taking has
been received, other than the
condemnations conducted in connection with
acquisitions of the Real Estate for use by
LSPI. To the knowledge of the LSPI Group,
no such condemnation, requisition or
taking is threatened or contemplated,
except as set forth on Schedule 7(h)(iii).
The LSPI Group has no knowledge of any
public improvements which may result in
special assessments against or otherwise
affect the Real Estate, except as set
forth on Schedule 7(h)(iii).
(iv) The Real Estate is in good
operating condition and repair (reasonable
wear and tear excepted) and is suitable
and adequate for the purposes for which it
is presently being used.
(v) To the knowledge of the LSPI
Group, except as set forth on Schedules
7(h) or 7(o), the Real Estate is in
compliance with all applicable zoning,
building, health, fire, water, use or
similar statutes, codes, ordinances, laws,
rules or regulations. To the knowledge of
the LSPI Group, the zoning of each parcel
of Real Estate permits the existing
improvements and the continuation
following consummation of the transaction
contemplated hereby of the business of the
LSPI Group as presently conducted thereon.
The LSPI Group has all certificates of
occupancy and authorizations required to
utilize the Real Estate. To the knowledge
of the LSPI Group, the LSPI Group has all
easements and rights necessary to conduct
its business, including easements for all
utilities, services, roadway, railway and
other means of ingress and egress. To the
knowledge of the LSPI Group, the LSPI
Group holds such rights to off-site
facilities as are necessary to ensure
compliance in all material respects with
all zoning, building, health, fire, water,
use or similar statutes, codes,
ordinances, laws, rules or regulations and
all such rights, to the extent held by the
LSPI Group or Sellers, shall be conveyed
as directed by Buyer at Closing. Except
as disclosed on Schedule 7(h)(i), to the
knowledge of the LSPI Group, no fact or
condition exists which would result in the
termination or impairment of access to the
Real Estate or discontinuation of sewer,
water, electric, gas, telephone, waste
disposal or other utilities or services.
Except as disclosed on Schedule 7(h)(i),
to the knowledge of the LSPI Group, the
facilities servicing the Real Estate are
in full compliance with all codes, laws,
rules and regulations.
(vi) Seller has delivered or
made available to Buyer accurate, correct
and complete copies of all existing title
insurance policies, title reports and
surveys, if any, with respect to each
parcel of Real Estate.
(i) Plant and Equipment. Sellers have
furnished to Buyer an accurate list of all plant and
equipment, attached as Schedule 7(i), owned by LSPI.
To the best knowledge of Sellers, all plant,
structures and equipment, currently being used in the
conduct of LSPI's operations are in all material
respects in good operating condition and repair,
subject to normal wear and tear, and to the best of
each Seller's knowledge, are free from material
structural or mechanical deficiencies, except as
disclosed on Schedule 7(i) attached.
(j) Intellectual Property. Sellers have
furnished to Buyer an accurate list of all
Intellectual Property, attached as Schedule 1(u),
owned or used by the LSPI Group. To the best
knowledge of Sellers, no one is infringing upon any
rights of the LSPI Group with respect to any of the
Intellectual Property, no member of the LSPI Group is
infringing on or otherwise acting adversely to the
rights of any person under, or in respect to, any
patents, patent rights, copyrights, licenses,
trademarks, trade names or trademark rights owned by
any person or persons, and there is no claim or action
pending or threatened with respect thereto. Except as
set forth in Schedule 1(u), there are no royalty,
commission or similar arrangements, and no licenses,
sublicenses or agreements pertaining to any of the
Intellectual Property.
(k) Employee Matters. Except as set forth on
Schedule 7(k), neither Sellers nor any member of the
LSPI Group has any pending complaint filed with the
National Labor Relations Board or any other
governmental agency alleging unfair labor practices,
human rights violations, employment discrimination
charges or the like against any member of the LSPI
Group which might have a material adverse effect upon
the LSPI Group, its operations or financial condition,
and to the best knowledge of Sellers, there are no
existing facts which might result in any such
complaint or charge. Sellers have provided to Buyer a
complete list of all employees of the LSPI Group,
including name, title or position, present annual
compensation, years of service and any interest in
Employee Benefits. Each member of the LSPI Group has
complied in all material respects with all laws, rules
and regulations relating to the employment of labor,
including provisions related to wages, hours, equal
opportunity, occupational health and safety,
severance, collective bargaining and the payment of
social security and other employment taxes. No member
of the LSPI Group has any retired employees who have
elected to receive retiree medical benefits under any
Employee Benefits. No member of the LSPI Group has
any collective bargaining agreement or other such
contracts. Other than with respect to LSPI, no member
of the LSPI Group has any employees.
(l) Litigation. Except as set forth on
Schedule 7(l), there are no legal actions, suits,
arbitrations or other legal, administrative or
governmental proceedings or investigations (other than
tax audits or investigations) pending or, to the best
knowledge of Sellers, threatened against any member of
the LSPI Group which might have a material adverse
effect upon the operations or financial condition of
the LSPI Group, taken as a whole. No member of the
LSPI Group is subject to any judgment, order, writ,
injunction, stipulation or decree of any court or any
governmental agency or any arbitrator, except as may
be set forth herein or in any Schedule hereto.
(m) Compliance with Laws.
(i) To the best knowledge of Sellers,
the operations of the members of the LSPI Group
have been and are being conducted in accordance
with all applicable laws, rules and regulations
of applicable governmental authorities (other
than those covered in Section 18 hereof), except
for such breaches that do not and cannot
reasonably be expected to (either individually
or in the aggregate) materially and adversely
affect the financial condition or operations of
the LSPI Group, taken as a whole.
(ii) To the best knowledge of Sellers,
neither the LSPI Group, nor any of their
officers or employees, has, directly or
indirectly, given or agreed to give any rebate,
gift or similar benefit to any supplier,
customer, distributor, broker, governmental
employee or other person, who was, is or may be
in a position to help or hinder the business of
the LSPI Group (or assist in connection with any
actual or proposed transaction) which could
subject Buyer or the business of the LSPI Group
to any penalty in any civil, criminal or
governmental litigation or proceeding or which
would have a material adverse effect on the
business of the LSPI Group.
(n) Material Contracts. Sellers have furnished
to Buyer a list, attached as Schedule 7(n), of all
contracts and arrangements, written or oral, which
alone or together with other contracts and
arrangements with the same party are material to the
LSPI Group taken as a whole. All members of the LSPI
Group have, in all material respects, performed all of
the respective obligations required to be performed by
them to date and are not, and will not be as of the
Closing Date, in default under any material provision
of such contracts or arrangements. All such contracts
and arrangements are and will be in good standing as
of the Closing Date and in full force and effect
according to their terms. For purposes of this
Section 7(n), a contract shall be deemed to be
material, (i) if it involves remaining payments of
more than $300,000, or (ii) if it cannot by its terms
be completed or terminated without penalty within 180
days from the Closing Date, or (iii) if the absence of
such contract would have a material adverse effect on
the business of the LSPI Group.
(o) Licenses and Permits. Except as set forth
on Schedule 7(o), each member of the LSPI Group has
all requisite licenses and permits to operate its
business as currently conducted and Sellers have not
been advised of, nor to the best knowledge of Sellers
is there any basis for, any revocation or anticipated
revocation of any permits, licenses or zoning
variances, or of any changes to existing or pending
zoning or other regulations, permits or licenses which
would materially and adversely affect the conduct of
its operations as presently conducted.
(p) Insurance. Schedule 7(p) contains an
accurate and complete list and description of
insurance policies (including the name of the insurer,
coverage, premium and expiration date) which each
member of the LSPI Group currently maintains, or is
named as an additional insured or is entitled to
benefits under (including coverage for events
occurring under prior policies). To the best
knowledge of Sellers, except as set forth on Schedule
7(p), all such policies are in full force and effect
and shall survive the Closing for the benefit of LSPI.
(q) Employee Benefits. Schedule 7(q) contains
a complete listing of Employee Benefits provided to
employees of LSPI. To the best knowledge of Sellers,
except as set forth on Schedule 7(q), (i) the costs of
all such Employee Benefits which are paid currently by
LSPI are reflected as expenses in the LSPI Group
Financial Statements; and (ii) the cost of such
Employee Benefits which are, in whole or in part, not
paid currently are adequately reserved for in the LSPI
Group Financial Statements. Sellers do not provide
either directly or indirectly any Employee Benefits to
the employees of LSPI.
(i) Pension Plans. Sellers have
delivered to Buyer accurate, correct and
complete copies of (i) any pension plan
(as defined in Section 3(2) of ERISA) in
which the employees of LSPI currently
participate a list of which is set forth
on Schedule 7(q) (the "Pension Plans"),
(ii) the three most recent annual reports
on Form 5500 and attached Schedule B, if
any, filed with the Internal Revenue
Service with respect to the Pension Plans,
(if any such report was required), (iii)
each trust agreement and group annuity
contract relating to the Pension Plans, if
any, and (iv) certified financial
statements, if any. Sellers have
disclosed to Buyer the information set
forth in the attorney's responses to
auditor's requests for information related
to the Pension Plans.
(ii) Pension Plan Funding. All
contributions to, and payments from, each
Pension Plan that may have been required
to be made in accordance with each Pension
Plan and, when applicable, Section 302 of
ERISA or Section 412 of the Code, have
been timely made. All such contributions
to, and payments from, the Pension Plans,
except those payments to be made from a
trust qualified under Section 401(a) of
the Code, for any period ending on or
before the Closing Date that are not yet,
but will be, required to be made, will be
properly accrued and reflected in the
Statements of Net Book Value. No employee
of the LSPI Group participates in or has
previously participated in any defined
benefit plan, as defined in Section 3(35)
of ERISA, of LSPI.
(iii) Pension Plan Compliance
With the Code and ERISA. The Pension
Plans (and any related trust agreement or
annuity contract or any other funding
instrument) materially comply currently,
and have materially complied in the past,
both as to form and operation, with the
provisions of ERISA and the Code
(including Section 410(b) of the Code
relating to coverage), where required in
order to be tax-qualified under Section
401(a) of the Code, and all other
applicable laws, rules and regulations;
all necessary governmental approvals for
the Pension Plans have been obtained.
Except as set forth in Schedule 7(q), each
Pension Plan (and any related trust
agreements or annuity contracts or other
funding instrument) has received a
determination letter from the Internal
Revenue Service to the effect that such
Pension Plan (and any related trust
agreements or annuity contracts or other
funding instrument) is qualified and
exempt from federal income taxes under
Sections 401(a) and 501(a), respectively,
of the Code, and no such determination
letter has been revoked nor, to the
knowledge of Sellers, has revocation been
threatened, nor has such Pension Plan been
amended since the date of its most recent
determination letter or application
therefor in any respect which would
adversely affect its qualification or
materially increase its cost.
(iv) Employee Benefits
Administration. The Pension Plans and
Employee Benefits have been administered
to date in material compliance with the
requirements of the Code and ERISA. All
legally required reports, returns and
similar documents with respect to the
Pension Plans and Employee Benefits
required to be filed with any government
agency or distributed to any Pension Plans
or Employee Benefits participant have been
duly and timely filed or distributed.
Except as set forth in Schedule 7(q),
there are no investigations by any
governmental agency, termination
proceedings or other claims (except claims
for benefits payable in the normal
operation of the Pension Plans or Employee
Benefits), suits or proceedings against or
involving the Pension Plans or Employee
Benefits or asserting any rights or claims
to benefits under the Pension Plans or
Employee Benefits that could give rise to
any material liability, nor, to the
knowledge of Sellers, are there any facts
that could give rise to any material
liability in the event of any such
investigation, claim, suit or proceeding.
No event has occurred and no condition
exists under the Pension Plans or Employee
Benefits that would subject the LSPI Group
or Buyer to any tax under Code Sections
4971, 4972, 4977 or 4979 or to a fine
under ERISA Section 502(c).
(v) Prohibited Transactions. No
"prohibited transaction" (as defined in
Section 4975 of the Code or Section 406 of
ERISA) has occurred which involves the
assets of the Pension Plans or other
Employee Benefits and which could subject
the LSPI Group or any of their respective
employees, or a trustee, administrator or
other fiduciary of any trusts created
under the Pension Plans to the tax or
penalty on prohibited transactions imposed
by Section 4975 of the Code or the
sanctions imposed under Title I of ERISA.
Neither the LSPI Group nor any trustee,
administrator or other fiduciary of the
Pension Plans nor any agent of any of the
foregoing has engaged in any transaction
or acted or failed to act in a manner
which could subject the LSPI Group, its
business or Buyer to any material
liability for breach of fiduciary duty
under ERISA or any other applicable law.
(vi) Liabilities to PBGC or
Multiemployer or Multiple Employer Plans.
No liability to the Pension Benefit
Guaranty Corporation or to any
multiemployer or multiple employer plan
has been incurred by the LSPI Group.
Sellers and LSPI are not under common
control within the meaning of Section
414(b) or 414(c) of the Code.
(r) Transactions with Related Parties.
(i) To the best knowledge of
Sellers, except for interest and corporate
overhead and as set forth on
Schedule 7(r), none of the LSPI Group
members are a party to any transaction or
proposed transaction, including, without
limitation, the leasing of real or
personal property, the purchase or sale of
raw materials or finished goods, or the
furnishing of services, with either Seller
or with any person who is related to or
affiliated with Sellers (other than
another member of the LSPI Group),
involving the payment or accrual of more
than $1,000,000 during fiscal years 1993
or 1994.
(ii) Except as set forth on
Schedule 7(r) or as reflected in the LSPI
Group Financial Statements dated
December 31, 1994, neither Sellers nor any
person who is related to or affiliated
with Sellers has any cause of action or
other claim whatsoever against or owes any
material amount to, or is owed any
material amount by, any member of the LSPI
Group.
(s) Bank Accounts. Schedule 7(s) sets forth a
true and complete list of all banks in which any
member of the LSPI Group has an account, safe deposit
box or line of credit, and the names and titles of all
persons authorized to draw thereon or to have access
thereto, and a summary description of the use thereof.
(t) Tax Matters.
(i) All Returns (including
consolidated or combined Returns including
any member of the LSPI Group) required to
be filed on or before the Closing with
respect to each member of the LSPI Group
have been or will be timely filed (within
the time permitted by any timely filed
extension) by or on behalf of each member
of the LSPI Group and all Taxes shown to
be due on such Returns have been timely
paid.
(ii) No member of the LSPI Group
has been a member of an affiliated group
(within the meaning of Section 1504 of the
Code) filing a consolidated federal
Return, other than a group the common
parent of which is a Seller.
(iii) Schedule 7(t) lists all
Returns filed with respect to any of the
members of the LSPI Group for taxable
periods which remain open, indicates those
Returns that have been audited and
indicates those Returns that are currently
the subject of audit or scheduled for an
examination by any relevant taxing
authority.
(iv) Except as disclosed in
Schedule 7(t):
(1) no notice or
claim has ever been made
by a governmental
authority in a
jurisdiction where any
member of the LSPI Group
does not file Returns
that it is or may be
subject to Taxes in that
jurisdiction;
(2) no extension of
the statute of
limitations with respect
to any assessment or
claim for Taxes has been
granted by or on behalf
of any member of the LSPI
Group;
(3) there are no
liens for Taxes upon the
assets of any member of
the LSPI Group except
liens for Taxes not yet
due;
(4) no amended
Returns or refund claims
have been or are
scheduled to be filed by
or on behalf of any
member of the LSPI Group;
(5) all Taxes and
other liabilities with
respect to completed and
settled audits,
examinations or concluded
litigation have been
paid; and
(6) there are no
pending appeals or other
administrative proceeding
with respect to any
Return of any member of
the LSPI Group, and there
is no deficiency or
refund litigation with
respect to any Return of
any member of the LSPI
Group. No material
issues have been raised
by any relevant taxing
authorities on audit of
the Returns of the LSPI
Group. No member of the
LSPI Group has received
any notice of any Tax
deficiency or assessment.
(v) No member of the LSPI Group has
filed or had filed on its behalf a consent to
the application of Section 341(f) of the
Code.
(vi) Except as disclosed in
Schedule 7(t), no member of the LSPI Group is
a party to any contractual obligation
requiring the indemnification or
reimbursement of any person with respect to
the payment of any Taxes. Except as
disclosed in Schedule 7(t), no claim has been
asserted, which has not been resolved or
satisfied, for any payment under any
agreement disclosed in Schedule 7(t).
(vii) Except as disclosed in Schedule
7(t), no member of the LSPI Group is a party
to or a beneficiary of any financing, the
interest on which is tax-exempt under the
Code, and none of the assets of any member of
the LSPI Group is "tax-exempt use property."
(viii) As of the Closing Date, no
member of the LSPI Group is a party to any
agreement, contract, arrangement, or plan
that has resulted or would result, separately
or in the aggregate, in the payment of any
"excess parachute payments" within the
meaning of Section 280G of the Code.
(ix) Each member of the LSPI Group is
a "United States person" within the meaning
of the Code. No member of the LSPI Group has
been a United States real property holding
corporation within the meaning of Section
897(c)(2) of the Code during the applicable
period specified in Section 897(c)(1)(A)(ii)
of the Code. The transactions contemplated
herein are not subject to the tax withholding
provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code, or of
any other provision of law. No member of the
LSPI Group has nor had a branch in any
foreign country.
(x) No member of the LSPI Group is a
party to any joint venture, partnership, or
other arrangement or contract that could be
treated as a partnership for federal income
Tax purposes, except for LSPI.
(xi) Each member of the LSPI Group has
withheld and paid all Taxes required to have
been withheld and paid, including (1) amounts
paid to any employee or statutory employee or
any foreign person or entity and (2) any
backup withholding required under
Section 3406 of the Code.
(u) Accounts Receivable. Schedule 7(u) sets forth
an accurate, correct and complete aging of all
outstanding accounts and notes receivable of LSPI as
of December 31, 1994. All outstanding accounts and
notes receivable reflected on the LSPI Group Financial
Statements are, and on the Statements of Net Book
Value will be, due and valid claims against account
debtors for goods or services delivered or rendered
and subject to no defenses, offsets or counterclaims.
All receivables arose in the ordinary course of
business. No receivables are subject to prior
assignment, claim, lien or security interest, except
under the Credit Agreement dated April 19, 1991, as
amended. The books and records of LSPI reflect
amounts taken as a reserve against noncollection of
accounts receivable, which reserve has been
established in accordance with LSPI's normal
accounting policies consistently maintained for the
fiscal years ended December 31, 1993 and December 31,
1994 and there is no reason to believe that such
reserve will not be adequate for its purpose. As of
the Closing Date, LSPI will not have incurred any
liabilities to customers for discounts, returns,
promotional allowances or otherwise, except those
granted in the ordinary course of LSPI's operations
and reflected on the Statements of Net Book Value. No
other member of the LSPI Group has any business
operations which would result in the establishment of
any trade accounts receivable or the granting of any
discounts, returns, promotional allowances or similar
charges.
(v) Inventory. All inventories reflected on the
LSPI Group Financial Statements are, and on the
Statements of Net Book Value will be, properly valued
at the lower of cost or market value on a first-in,
first-out basis in accordance with GAAP. Inventories
of finished goods are of good and merchantable
quality, whether of first line or job lot paper,
contain no material amounts that are not salable in
the ordinary course of business and meet the current
standards and specifications of its business, except
as reserved for on the LSPI Group Financial
Statements. Inventories of raw materials, stores and
replacement parts are, to the best knowledge of
Sellers, (i) of good and merchantable quality and
contain no material amounts that are not usable for
the purposes intended in the ordinary course of LSPI's
operations; (ii) in conformity with warranties
customarily given to purchasers of like products; and
(iii) at levels adequate for and not excessive in
relation to the ordinary course of LSPI's operations
and in accordance with past inventory stocking
practices. Sales of inventories subsequent to
December 31, 1994 have been made only in the ordinary
course of business and at prices and under terms that
are normal and consistent with past practice.
(w) Motor Vehicles. Schedule 7(w) sets forth an
accurate and complete list of all motor vehicles used
in the business of the LSPI Group, whether owned or
leased. All such vehicles are (i) properly licensed
and registered in accordance with applicable law; (ii)
insured as set forth on Schedule 7(p); (iii) in good
operating condition and repair (reasonable wear and
tear excepted) and (iv) not subject to any lien or
other encumbrance, except as set forth on Schedule
7(w).
(x) Product Warranty. The books and records of
LSPI reflect amounts taken as a reserve against claims
and allowances for product warranties, which reserve
has been established in accordance with LSPI's normal
accounting policies consistently maintained for the
fiscal years ended December 31, 1993 and December 31,
1994 and there is no reason to believe that such
reserve will not be adequate for its purpose. As of
the Closing Date, LSPI will not have incurred any
unpaid liabilities to customers for such claims and
allowances, except those granted in the ordinary
course of business and reflected on the Statements of
Net Book Value.
Disclosure of any fact in any provision of this
Agreement or in any Schedule attached hereto shall
constitute disclosure thereof for the purposes of any
other provision or Schedule.
8. Buyer's Representations and Warranties. Buyer
represents and warrants to Sellers as follows:
(a) Organization. Buyer is a duly organized and
validly existing corporation in good standing under
the laws of the state of Wisconsin. Buyer has all
requisite corporate power to own its property and
carry on its business as presently conducted.
(b) Authority. The execution, delivery and
performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly
authorized by the Board of Directors of Buyer.
(c) Valid and Enforceable Agreement. This
Agreement constitutes a valid and binding agreement of
Buyer, enforceable in accordance with its terms,
except insofar as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors
generally, and by general equitable principles.
Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated
hereby, nor the performance of Buyer's obligations
hereunder materially violates or conflicts with,
results in a material breach of, or constitutes a
material default under (i) to the best knowledge of
Buyer, any law, rule or regulation, or (ii) subject to
the obtaining of necessary consents under various
agreements, any agreement or other restriction of any
kind or character to which Buyer is a party, by which
Buyer is bound, or to which any of the properties of
Buyer is subject. Neither the execution or delivery
of this Agreement, nor the consummation of the
transactions contemplated hereby, nor the performance
of Buyer's obligations hereunder violates or conflicts
with, results in a breach of or constitutes a default
under (i) any judgment or order, decree, award or
ruling to which Buyer is subject, or (ii) the Articles
of Incorporation or By-Laws of Buyer.
(d) No Insolvency. Buyer is not currently
insolvent, and neither the purchase of the LSPI Group
Stock, the assumption of the Guaranteed Obligations of
Sellers pursuant to Section 5, nor any related
transaction or event shall render Buyer insolvent or
leave Buyer with assets which are unreasonably small
in relation to the business of the LSPI Group and its
own business operations, nor does Buyer intend to
incur debts beyond its ability to pay them as they
come due.
(e) Financial Statements. Buyer's financial
statements for the year ended December 31, 1994, as
filed with the Securities and Exchange Commission
(copies of which have been delivered to Sellers) (i)
were prepared in accordance with, and accurately
reflect, its books and records, (ii) were prepared in
accordance with generally accepted accounting
principles, consistently applied, and (iii) present
fairly the financial position and the results of
operations of Buyer for the periods covered thereby.
(f) Investment Intent. Buyer is purchasing the
LSPI Group Stock for its own account and not with a
view to, or present intention of, sale or distribution
thereof in violation of the Securities Act of 1933, as
amended (the "1933 Act") and such shares will not be
disposed of in contravention of the 1933 Act. Buyer
acknowledges that the LSPI Group Stock is not and has
not been registered with the Securities and Exchange
Commission or any securities commission or agency of
any state, including the state of Minnesota, and may
not be transferred or disposed of without registration
under the 1933 Act and applicable state securities
laws or an exemption from such registration.
Disclosure of any fact in any provision of this
Agreement or in any Schedule attached hereto shall
constitute disclosure thereof for the purposes of any
other provision or Schedule.
9. Actions Pending Closing. From the date hereof
through the Closing Date, Sellers shall take, or cause
their respective Joint Venturers and LSPI to take, all
actions necessary and appropriate to comply with, or
to refrain from taking any action in breach of, the
following provisions for the period between the
execution of this Agreement and the termination hereof
or the Closing Date:
(a) Operations. Each member of the LSPI Group
shall conduct its operations only in the ordinary
course of business and shall not enter or permit any
member of the LSPI Group to enter into any transaction
or perform any act that would constitute a breach of
the representations, warranties, or agreements
contained herein. Each member of the LSPI Group shall
use its best efforts to preserve its business and its
organization intact and to keep available the services
of its present employees. Attached as Schedule 9(a)
is a list of capital expenditures and commitments to
be initiated by the LSPI Group prior to the Closing
Date. No member of the LSPI Group shall initiate any
capital expenditure or commitment, other than as set
forth on Schedule 9(a) or initiate any capital
expenditure or commitment as set forth on Schedule
9(a) in excess of $25,000, without Buyer's approval,
which approval shall not be unreasonably withheld;
provided, however, that any member of the LSPI Group
may initiate emergency capital expenditures or
commitments consistent with the past practices of such
LSPI Group member. Sellers shall promptly notify
Buyer of such emergency expenditures or commitments.
(b) Access to Records. Sellers shall, and shall
cause each member of the LSPI Group to, make available
to Buyer, its agents and employees, all books and
records in its possession relating to the businesses
of each member of the LSPI Group; provided, however,
that Sellers have not made, and shall not be deemed to
have made, any representations or warranties
whatsoever with respect to any of such books or
records or any other documents provided to or made
available to Buyer, except as expressly set forth in
this Agreement.
(c) Access to Facilities. Buyer, its agents and
employees, shall be given full access during regular
business hours to the physical facilities of LSPI upon
appointment with the President thereof and accompanied
by such President or his designee(s). Sellers and
each member of the LSPI Group and their respective
employees shall cooperate fully with Buyer in its
examinations and inspections, but not to the detriment
of the ongoing business operations of the LSPI Group
prior to Closing.
(d) Release of Guarantees. Sellers and Buyer
shall agree on the actions to be taken with respect to
the release of each Seller from, and the substitution
(as required) of Buyer as, the guarantor of the LSPI
Leases and other Guaranteed Obligations. Each party
shall pay its own costs in connection with seeking and
obtaining such releases, but if any additional or
different payments or terms are imposed by any lease
participants in connection therewith, the costs or the
performance thereof shall be borne as agreed upon by
Sellers and Buyer.
(e) Hart-Scott-Rodino Filings. Sellers and Buyer
shall cooperate in the prompt preparation and filing
of all notifications and reports which may be required
with respect to the transactions contemplated by this
Agreement pursuant to Section 7A of the Clayton Act.
Sellers and Buyer shall also cooperate in responding
promptly to all inquiries from the Federal Trade
Commission or the Department of Justice resulting from
the filing of such notifications and reports.
(f) Notice of Developments. At least ten (10)
business days prior to the Closing Date, Sellers shall
deliver to Buyer a complete update of the Schedules
from the date hereof. Each party hereto shall notify
the others of any development(s) which shall
constitute a breach of any of the representations and
warranties in Sections 7 or 8 above. The party so
notified has the right to terminate this Agreement
within the period of ten (10) business days from the
date of receipt of such notification, if as a result
of such development the financial condition, results
of operations or prospects of the LSPI Group as a
whole, on the one hand, or Buyer, on the other hand,
have been materially and adversely affected. If
within such ten (10) day period, the party notified
shall not have exercised its right to terminate this
Agreement, the written notice shall be deemed to have
amended this Agreement and the relevant schedules
attached thereto, to have qualified the
representations and warranties contained in Sections 7
or 8 above and to have cured any misrepresentation or
breach of warranty that otherwise might have existed
hereunder by reason of such development, including for
purposes of Section 15 hereof.
(g) LSPI Restrictions. Prior to the Closing Date,
each Seller shall waive or abandon its right of first
refusal with respect to the transfer of the other's
interest in its respective Joint Venturer pursuant to
this Agreement.
(h) Best Efforts. Buyer and Sellers shall use
their best efforts to consummate the transactions
contemplated by this Agreement and shall not take any
other action inconsistent with their respective
obligations hereunder or which could hinder or delay
the consummation of the transactions contemplated
hereby. From the date hereof through the Closing
Date, Buyer and Sellers shall use their best efforts
to fulfill the conditions to their obligations
hereunder and to cause their representations and
warranties to remain true and correct as of the
Closing Date.
(i) Allocation of Pulp. Pentair and Buyer shall
take all necessary action to transfer all contracts
for purchase of kraft pulp currently in the name of
Pentair and allocated to LSPI into the name of LSPI or
Buyer, as Buyer may direct. Until such contracts are
transferred or terminated, Pentair shall continue to
perform such contracts or direct delivery of pulp
thereunder to LSPI in the same manner as currently
performed, and LSPI shall pay for such kraft pulp
delivered to the seller thereof, or if Pentair has
paid therefor, promptly to Pentair upon delivery.
10. Conditions Precedent to Obligations of Buyer.
The obligations of Buyer hereunder (unless expressly
waived by Buyer) are subject to the fulfillment, prior
to or at Closing, as the case may be, of each of the
following conditions:
(a) No Errors; Performance of Obligations. The
representations and warranties of Sellers herein shall
be true and correct as of the Closing Date. Sellers
shall have performed the obligations set forth in
Section 9 and in all material respects all of the
other obligations to be performed by them hereunder in
the time and manner herein stated.
(b) Officer's Certificates. Sellers shall have
delivered to Buyer certificates, dated as of the
Closing Date, executed by their respective
Secretaries, and in form and substance satisfactory to
Buyer, certifying that the covenants and conditions
specified in this Agreement to be met by Sellers have
been performed or fulfilled and that the
representations and warranties herein made by Sellers
are true and correct as of such date.
(c) Certified Copy of Resolutions. Sellers shall
have delivered to Buyer a certified copy of
resolutions adopted by their respective Boards of
Directors authorizing the execution and delivery of
this Agreement and the consummation of the
transactions contemplated hereby.
(d) Opinion of Sellers' Counsel. Sellers shall
have delivered to Buyer the opinion of their
respective counsel, dated as of the Closing Date, in
form and substance satisfactory to Buyer and its
counsel, giving the following clean legal opinions:
(1) valid organization of Sellers and
each of the members of the LSPI
Group;
(2) corporate power and authority of
each Seller to enter into the
Agreement;
(3) necessary foreign qualification
of members of the LSPI Group;
(4) No Breach or Default Opinion with
respect to members of the LSPI
Group;
(5) No Violation Opinion with respect
to each Seller;
(6) Remedies Opinion with respect to
each Seller, this Agreement and
the LSPI Leases;
(7) Legal Proceedings Opinion with
respect to each Seller and
members of the LSPI Group;
(8) other legal matters agreed upon
between Sellers and Buyer; and
(9) no violation of registration
provisions of the 1933 Act and
applicable state securities laws;
all in accordance with, and subject to the General
Qualifications and other limitations and provisions
contained in, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(e) Injunctions. No injunction shall have issued
restricting or prohibiting the transactions
contemplated by this Agreement.
(f) Clayton Act Matters. The waiting period
required by Section 7A of the Clayton Act shall have
expired or been terminated.
(g) Environmental Matters. The results of any
inspections, soil test boring, soil tests, drainage
tests, surveys, topographical analyses, engineering
studies or other investigations performed or obtained
by Buyer shall not have disclosed evidence of
Hazardous Materials in, on or adjacent to any of the
real properties owned or occupied by any member of the
LSPI Group, other than those disclosed in any
environmental studies or other information listed on
Schedule 10(g) which would materially and adversely
affect the operations of the LSPI Group taken as a
whole. Buyer shall not have received any evidence
that there are existing violations of any
Environmental Law, other than those described in
Schedule 10(g), or that any requisite environmental
license or permit or any occupance, use or building
permits or other approvals from applicable
governmental authorities are currently required for
the continued operation of the facilities owned by the
LSPI Group which have not been obtained or are not in
effect. In order to enable Buyer to conduct a due
diligence investigation, Sellers and LSPI, and any
other entity within the LSPI Group or SRFI Group with
relevant information on the environmental status of
the operating facilities of LSPI, shall provide Buyer
with access to the environmental files, licenses,
permits, permit applications, consultant reports,
notices from local, state and federal governmental
entities, environmental audit and inspection reports,
insurance files, and other information necessary for
Buyer to assess the environmental status of the
operating facilities of LSPI as well as permit or
obtain permission for Buyer to conduct soil and
groundwater testing on or beneath the real properties
owned or occupied by any member of the LSPI Group.
(h) LSPI Restrictions. Each Seller shall have
waived or abandoned its right of first refusal with
respect to the transfer of the other's interest in its
respective Joint Venturer pursuant to this Agreement.
(i) Financing. Buyer shall have used its best
efforts to maintain an aggregate of at least $250
million available under Buyer's committed and
uncommitted lines of credit until the Closing Date,
and such lenders shall not have cancelled or revoked
such lines of credit prior to the Closing Date.
(j) FIRPTA Certificate. Sellers shall have
furnished Buyer with a certificate of non-foreign
status signed by the appropriate party and sufficient
in form and substance to relieve Buyer of all
withholding obligations under Section 1445 of the
Code. If Sellers cannot furnish such a certificate or
Buyer is not entitled to rely upon such certificate
under the provisions of Section 1445 of the Code and
the regulations thereunder, Sellers shall take and/or
permit Buyer to take any and all steps necessary to
allow Buyer to satisfy the requirements of Section
1445 of the Code.
(k) Purchase of SRFI and Niagara Paper. On or
prior to the Closing Date, Buyer shall have purchased
all of the assets of LSPI Fiber Co., a joint venture
organized under the general partnership laws of the
state of Minnesota and all of the issued and
outstanding capital stock of Superior Recycled Fiber
Corporation, a Minnesota corporation, and all of the
issued and outstanding capital stock of Niagara of
Wisconsin Paper Corporation, a Wisconsin corporation.
(l) Real Estate Consents. Sellers shall deliver
to Buyer any consents or approvals of any parties
required pursuant to (i) the terms of any contract,
agreement, option or undertaking affecting the Owned
Real Estate; and (ii) the terms of the Real Estate
Leases and estoppel certificates in form and substance
reasonably acceptable to Buyer from all lessors under
the Real Estate Leases.
(m) Title Insurance and Surveys.
(i) Buyer shall have obtained an ALTA
Owners Policy of Title Insurance Form B
Owner's Form (the "Title Policy") for each
parcel of Owned Real Estate, except the
Buffer Real Estate, issued by a nationally
recognized title company reasonably
acceptable to Buyer (the "Title Company").
The Title Policy shall be in the amount of
the purchase price allocated to the Owned
Real Estate by Buyer, showing fee simple
title to the Real Estate in a member of the
LSPI Group (or if the member of the LSPI
Group is a contract purchaser, the seller
designated under the applicable sales
contract), subject only to current real
estate taxes not yet due and payable as of
the Closing Date, liens and encumbrances
reflected on Schedule 10(m) hereto, and such
other covenants, conditions, easements and
exceptions to title as Buyer may approve in
writing (collectively, the "Permitted
Exceptions"). With reasonable promptness,
after the date of this Agreement, Buyer shall
order commitments (the "Commitments") for the
Title Policy. Copies of the Commitments
shall be promptly delivered to Sellers. The
Commitments and the Title Policy to be issued
by the Title Company shall have all Standard
and General Exceptions deleted so as to
afford full "extended form coverage" and
shall contain an ALTA Zoning Endorsement 3.1,
contiguity, non-imputation, and such other
endorsements as may be reasonably requested
by Buyer. At Closing, Sellers shall deliver
to Buyer a seller's affidavit or similar
instruments as the Title Company may require.
Buyer shall be responsible for the cost of
all title insurance charges, premiums and
endorsements, title abstracts and attorneys'
opinions, including all search, continuation
and later-date fees. To the extent that any
parcel of Owned Real Estate is registered
Torrens title, Sellers shall deliver the
owner's duplicate certificates of titles.
(ii) Buyer shall have obtained an
as-built plat of survey of each parcel of the
Owned Real Estate (the "Surveys"), prepared
by a registered land surveyor or engineer,
licensed in the respective states in which
the Owned Real Estate is located, dated on or
after the date hereof, certified to Buyer,
the Title Company and such other entities as
Buyer may designate and conforming to current
ALTA Minimum Detail Requirements for Land
Title Surveys, sufficient to cause the Title
Company to delete the standard printed survey
exception and to issue the Title Policy free
from any survey objections or exceptions
whatsoever. Buyer shall pay the entire cost
of obtaining the Surveys. Any Survey may be
a recertification of a prior survey, provided
that it meets the above-described criteria.
Each Survey shall show all conditions as then
existing, including the location of all
pipes, wires and conduits serving the Owned
Real Estate and their connections to public
ways, parking areas denominated as such,
loading docks and other improvements, the
access to and from the improvements on the
Owned Real Estate, and a flood plain
certification indicating no flood zone
classification or area which would materially
interfere with the normal operations of LSPI.
With reasonable promptness after the date of
this Agreement, Buyer shall order the
Surveys. Copies of the Surveys shall be
promptly delivered to Sellers.
(iii) If (i) any Commitment or owner's
duplicate certificate of title discloses a
title exception, other than a Permitted
Exception, that represents a defect affecting
the marketability of the title to any parcel
of Owned Real Estate (an "Unpermitted
Exception") or (ii) any Survey discloses that
improvements located on the surveyed land
encroach onto adjoining land or onto any
easements, building lines or set-back
requirements, or encroachments by
improvements from adjoining land onto the
surveyed land, or onto any easements for the
benefit of the surveyed land or overlap or
reflects that any utility service to the
improvements or access thereto does not lie
wholly within the Owned Real Estate or an
unencumbered easement for the benefit of the
Owned Real Estate or reflects any other
matter, any of which materially and adversely
affects the use or improvements of such
parcel of Owned Real Estate, or any other
matter which renders title to any Owned Real
Estate unmarketable (a "Survey Defect"),
then, in any such event, Sellers shall have
thirty (30) days from the date of delivery
thereof to have the Unpermitted Exception
removed from such Commitment and owner's
certificate of title, if applicable, or the
Survey Defect corrected or insured over by an
appropriate title insurance endorsement, all
at Sellers' cost and in a manner reasonably
satisfactory to Buyer, and in any such event
the Closing shall be extended, if necessary,
to the date which is five (5) business days
after the expiration of such 30-day period.
If Sellers fail to have any Unpermitted
Exception removed or any Survey Defect
corrected or otherwise insured over to the
reasonable satisfaction of Buyer within the
time specified therefor, Buyer, at its sole
option, upon not less than three (3) days'
prior written notice to Sellers, may
terminate this Agreement and all of Buyer's
obligations hereunder.
(n) Provision of Documentation. Sellers shall
provide, to Buyer's reasonable satisfaction, copies of
all documentation set forth on Schedule 7(q) but not
delivered prior to the date hereof.
(o) Other Matters. All corporate and other
proceedings and actions taken in connection with the
transactions contemplated hereby and all certificates,
opinions, agreements, instruments and documents
mentioned herein or incident to any such transaction
shall be delivered to Buyer and be reasonably
satisfactory in form and substance to Buyer and its
counsel.
11. Conditions Precedent to Obligations of
Sellers. The obligations of Sellers hereunder (unless
expressly waived by Sellers) are subject to
fulfillment by Buyer, prior to or at Closing, as the
case may be, of each of the following conditions:
(a) No Errors; Performance of Obligations. The
representations and warranties of Buyer herein shall
be true and correct as of the Closing Date. Buyer
shall have performed in all material respects all of
the obligations to be performed by it hereunder in the
time and manner herein stated.
(b) Officer's Certificate. Buyer shall have
delivered to Sellers a certificate, dated as of the
Closing Date, executed by an officer of Buyer, and in
form and substance satisfactory to Sellers, certifying
that the covenants and conditions specified in this
Agreement to be met by Buyer have been performed or
fulfilled and that the representations and warranties
herein made by Buyer are true and correct as of such
date.
(c) Certified Copy of Resolutions. Buyer shall
have delivered to Sellers a certified copy of
resolutions adopted by the Board of Directors of Buyer
authorizing the execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby.
(d) Opinion of Buyer's Counsel. Buyer shall have
delivered to Sellers the opinion of its counsel, dated
as of the Closing Date, in form and substance
satisfactory to Sellers and their counsel, giving the
following clean legal opinions:
(1) valid organization of Buyer;
(2) corporate power and authority of
Buyer to enter into the
Agreement;
(3) No Breach or Default Opinion;
(4) No Violation Opinion;
(5) Legal Proceedings Opinion;
(6) Remedies Opinion with respect to
this Agreement; and
(7) other legal matters agreed upon
between Sellers and Buyer;
all in accordance with, and subject to the General
Qualifications and other limitations and provisions
contained in, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(e) Injunctions. No injunctions shall have issued
restricting or prohibiting the transactions
contemplated by this Agreement.
(f) Clayton Act Matters. The waiting period
required by Section 7A of the Clayton Act shall have
expired or been terminated.
(g) Financing. Buyer shall have used its best
efforts to maintain an aggregate of at least $250
million available under Buyer's committed and
uncommitted lines of credit until the Closing Date and
such lenders shall not have cancelled or revoked such
lines of credit prior to the Closing Date.
(h) Sale of SRFI and Niagara Paper. On or prior
to the Closing Date, Buyer shall have purchased all of
the assets of LSPI Fiber Co., a joint venture
organized under the general partnership laws of the
State of Minnesota, and all of the issued and
outstanding capital stock of Superior Recycled Fiber
Corporation, a Minnesota corporation, and all of the
issued and outstanding capital stock of Niagara of
Wisconsin Paper Corporation, a Wisconsin corporation.
(i) Other Matters. All corporate and other
proceedings and actions taken in connection with the
transactions contemplated hereby and all certificates,
opinions, agreements, instruments and documents
mentioned herein or incident to any such transaction
shall be delivered to Sellers and be reasonably
satisfactory in form and substance to Sellers and
their counsel.
12. Broker. Pentair represents and warrants that
CS First Boston was retained by it to represent it in
this transaction. Minnesota Power represents and
warrants that PaineWebber Incorporated was retained by
it to represent it in this transaction. Buyer
represents and warrants that Dillon, Read & Co. Inc.
has been retained by Buyer to represent it. Each
Seller shall be responsible for payment of all fees
and expenses of its respective investment banker and
Buyer shall be responsible for payment of all fees and
expenses of Dillon, Read & Co. Inc. Should any claims
for commissions be made by any other person claiming
an interest in this Agreement, or in the underlying
transactions, by reason of any agreement,
understanding or other arrangement with Buyer or with
either Seller, or their respective agents, servants,
employees, or other representatives, then the party
through, or on account of, whom such claims are made
shall indemnify and hold harmless the other parties
from any and all liabilities and expenses in
connection therewith in accordance with the provisions
of Section 15 below. The foregoing provisions of this
Section 12 shall survive not only the Closing
hereunder, but also any termination or cancellation of
this Agreement.
13. Employees. (a) Sellers and LSPI agree to use
all reasonable efforts to keep the present employees
of LSPI, during the period between the execution
hereof and the Closing Date. Buyer agrees that in the
event that employee health and retirement benefit
programs currently provided to employees of LSPI are
changed or substituted for, all prior years of service
of such employees with LSPI or with other affiliates
of Sellers will be recognized for all purposes. Buyer
and LSPI shall indemnify and hold Sellers harmless
against any severance or termination pay obligations
based upon prior policies of Sellers or LSPI or
arising from the transactions contemplated hereby.
(b) Sellers have announced to selected employees
of LSPI transition incentives heretofore disclosed to
Buyer, to encourage their continued employment and
achievement of performance targets for LSPI prior to
Closing. The costs and administration of all such
transition incentives shall be the sole responsibility
of LSPI which shall pay such transition incentives
promptly after Closing, in accordance with the terms
thereof.
14. Confidential Information. (a) Buyer
acknowledges that pursuant to its right to inspect
Sellers and LSPI's records and facilities under
Section 9, Buyer shall become privy to Confidential
Information. Buyer agrees that in the event the
transaction contemplated by this Agreement is not
completed, all Confidential Information disclosed to
Buyer shall remain confidential, shall not be used for
the benefit of Buyer or any of Buyer's affiliates or
disclosed to any person or entity, and all recorded
evidence thereof shall be delivered to Sellers
together with an officer's certificate to the effect
that no copies thereof or any extracts, derivatives or
compilations thereof remain in possession of Buyer,
its employees, affiliates, agents, counsel or
auditors. The confidentiality and nonuse provisions
hereof shall survive any termination of this Agreement
until August 26, 1997 with respect to Pentair and
January 9, 1998 with respect to Minnesota Power.
Buyer acknowledges that it has entered into a
confidentiality letter dated August 26, 1994 between
itself and CS First Boston on behalf of Pentair, and a
confidentiality letter dated January 9, 1995 between
itself and PaineWebber on behalf of Minnesota Power,
and agrees that such confidentiality letters shall
continue in full force and effect for the duration of
their respective terms in addition to the provisions
of this Section 14.
(b) Sellers agree that in the event the
transaction contemplated by this Agreement is
completed, all confidential and proprietary
information related to the LSPI Group shall remain
confidential, shall not be used for the benefit of
Sellers or any of Sellers' affiliates or disclosed to
any person or entity. The confidentiality and nonuse
obligations of Sellers hereunder shall be on the same
terms and conditions as the confidentiality letters
set forth in Section 14(a) and shall survive any
termination of this Agreement until August 26, 1997
with respect to Pentair and January 9, 1998 with
respect to Minnesota Power.
15. Indemnification. (a) Without limiting any
remedy Buyer may have hereunder, Sellers hereby agree
to indemnify, defend and hold Buyer harmless from and
against and in respect of any and all liabilities,
losses, damages, claims, costs and expenses, including
reasonable attorneys fees, suffered or incurred by
Buyer, Pentair Duluth, Minnesota Paper or LSPI, when
so suffered or incurred, by reason of or relating to:
(i) any representation or warranty of
Sellers contained in this Agreement being
breached or untrue;
(ii) any covenant or agreement of
Sellers contained in this Agreement being
breached or not fulfilled in any material
respect, and not waived;
(iii) the assertion against Buyer of
any other liability of either Seller not
assumed by Buyer hereunder; or
(iv) the assertion against Buyer or
the LSPI Group of any liability of the LSPI
Group assumed by Sellers;
provided, however, that any claim arising out of any
breach of warranty or otherwise relating to (x)
environmental conditions, permits or liabilities or
obligations with respect to Hazardous Materials shall
be dealt with solely in accordance with Section 18
hereof and (y) taxes shall be dealt with solely in
accordance with Section 23 hereof.
(b) Without limiting any remedy Sellers may have
hereunder, Buyer hereby agrees to indemnify, defend,
and hold Sellers harmless from and against and in
respect of any and all liabilities, losses, damages,
claims, costs and expenses, including reasonable
attorneys fees, by reason of or relating to:
(i) any representation or warranty by
Buyer contained in this Agreement being
breached or untrue;
(ii) any covenant or agreement of
Buyer contained in this Agreement being
breached or not fulfilled in a material
respect, and not waived; or
(iii) the failure of Buyer to pay,
discharge, or perform any guaranty,
obligation or liability assumed by Buyer
hereunder (including without limitation the
Guaranteed Obligations).
(c) Notice of any claim of indemnification under
this Agreement (other than for claims pursuant to
Sections 16, 18 and 23) shall be effective only if
such notice shall have been given in writing to the
Indemnitor (as hereinafter defined) on or prior to
December 31, 1997. Notice of claims by Sellers
against Buyer regarding Guaranteed Obligations shall
be effective only if given in writing on or prior to
the date six months following the date on which the
liability of Sellers is discharged with respect to the
last outstanding Guaranteed Obligation.
(d) The first $1,500,000 in the aggregate of
claims made by Buyer or by Sellers as a group (except
claims against Sellers under Sections 19 or 23 or
under subparagraphs 15(a)(iii) and (iv) above, claims
against Buyer under Section 19 or under subparagraphs
15(b)(iii) above or claims against either Buyer or
Sellers under Sections 12, 13, 14, or 16 hereof)
pursuant to this Section shall be borne by that party
and shall not be indemnifiable. The minimum amount of
each such claim shall be not less than $50,000 in the
aggregate.
(e) In the event that indemnification is sought
with respect to any obligation of Buyer and Sellers
under this Agreement, the party seeking
indemnification (the "Indemnitee") shall give the
party from whom indemnification is sought (the
"Indemnitor") notice of any claim of the commencement
of any action or proceeding promptly after the
Indemnitee receives notice thereof, and shall permit
the Indemnitor to assume the defense of any such claim
or litigation resulting from such claim.
If the Indemnitor assumes the defense of any such
claim or litigation resulting therefrom, the
obligations of Indemnitor as to such claim shall be
limited to taking all steps necessary in the defense
or settlement of such claim or litigation resulting
therefrom and to holding the Indemnitee harmless from
and against any and all losses, damages and
liabilities caused by or arising out of any settlement
approved by the Indemnitor or any judgment in
connection with such claim or litigation resulting
therefrom.
The Indemnitee may participate, at its expense, in
the defense of any such claim or litigation, provided
that the Indemnitor shall direct and control the
defense of such claim or litigation.
Except with the written consent of the Indemnitee,
the Indemnitor shall not, in the defense of such claim
or any litigation resulting therefrom, consent to
entry of any judgment or enter into any settlement
which does not include as an unconditional term
thereof, the giving by the claimant or the plaintiff
to the Indemnitee of a release from all liability with
respect to the claim or litigation.
If the Indemnitor shall not assume the defense of
any such claim or litigation resulting therefrom, the
Indemnitee may defend against such claim or litigation
in such manner as it may deem appropriate and, unless
the Indemnitor shall deposit with the Indemnitee a sum
equivalent to the total amount demanded in such claim
or litigation, or shall deliver to Indemnitee a surety
bond for such amount in form and substance reasonably
satisfactory to Indemnitee, Indemnitee may settle such
claim or litigation on such terms as it may reasonably
deem appropriate, and the Indemnitor shall promptly
reimburse Indemnitee for the amount of all costs and
expenses, legal or otherwise, reasonably incurred by
the Indemnitee in connection with the defense against
or settlement of such claims or litigation. If no
settlement of such claim or litigation is made, the
Indemnitor shall promptly reimburse the Indemnitee for
the amount of any final judgment rendered with respect
to such claim or in such litigation and for all
reasonable costs and expenses, legal or otherwise,
incurred by the Indemnitee in the defense against such
claim or litigation, but only to the extent that such
amounts are actually paid.
16. Guaranteed Obligations. In the event that
Sellers' release from the Guaranteed Obligations is
not obtained, Sellers and Buyer agree that they will
continue to use their best efforts to obtain the
complete release of Sellers from the Guaranteed
Obligations. Buyer shall indemnify Sellers against
any and all demands, payments, expenses and costs
incurred by Sellers in connection with such Guaranteed
Obligations in accordance with Section 15 hereof for
so long as Sellers have any potential liability under
any such Guaranteed Obligations. Buyer and Sellers
agree that the provisions of this Section 16 shall
continue in full force and effect until the complete
discharge of Sellers under such Guaranteed
Obligations.
Until Sellers are released from all of the
Guaranteed Obligations, Sellers agree to comply with
any and all of their non-monetary obligations and
covenants under the LSPI Leases. In the event of any
breach by Sellers of such obligations and covenants,
Sellers shall indemnify Buyer against any and all
demands, payments, expenses and costs incurred by
Buyer or any member of the LSPI Group in excess of
those which would have been incurred by any member of
the LSPI Group in the course of performance of the
Guaranteed Obligations but for any breach by Sellers,
in connection with the foregoing sentence in
accordance with Section 15 hereof for so long as
Sellers have any obligations under such Guaranteed
Obligations. Buyer and Sellers agree that the
provisions of this Section 16 shall continue in full
force and effect until the complete discharge of
Sellers under such Guaranteed Obligations.
In addition, with respect to the Keepwell
Obligations of Sellers, until complete discharge of
Sellers thereunder, on the earlier to occur of (x) the
second anniversary of the Midterm Purchase Date or (y)
the Change of Control Date, and on each succeeding
anniversary date thereof,
(a) Buyer shall post with Sellers
irrevocable Letters of Credit for the benefit
of the members of the LSPI Group having a
face value equal to the nominal maximum
amount of such Keepwell Obligations, which
Letters of Credit shall
(i) be in substantially
the form set forth in Schedule 16
hereto,
(ii) be issued by a
national banking institution with
a rating by Standard & Poor's of
A or better or otherwise
acceptable to Sellers in their
sole discretion,
(iii) be immediately
payable to the respective
Indenture Trustees under the
Trust Indentures entered into in
connection with the LSPI Lease,
upon written notice to the
issuing bank by the respective
Sellers of any demand, notice or
claim for payment or performance
made upon such Seller under its
Keepwell Obligations, and
(iv) shall be renewed (not
less than thirty (30) days prior
to the expiration of any previous
Letters of Credit) by substitute
Letters of Credit satisfying the
conditions hereof.
Buyer shall use its best efforts to procure
such Letters of Credit for as long as its
obligations under this subparagraph 16(a)
continue.
(b) If Buyer is unable to post such
Letters of Credit, for so long as such
Letters of Credit have not been provided,
Buyer shall pay to Sellers an annual guaranty
fee equal to 2.0% of the then current nominal
remaining maximum amount of such Keepwell
Obligations, not as penalty but as
compensation for Sellers' continuing guaranty
thereof for the benefit of Buyer.
(c) Following the Closing Date, Buyer
agrees that it shall not pledge, sell,
transfer, assign or otherwise dispose of all
or any part of the LSPI Group Stock or all or
substantially all of the assets of LSPI
without the written consent of Sellers, which
consent may be granted or withheld in its
sole discretion. At any time, Buyer may
merge with to into, or consolidate with, any
other corporation or sell any members of the
LSPI Group or the assets thereof, provided
that:
(i) Buyer remains
absolutely and unconditionally
obligated under this Agreement
including specifically, but
without limitation, Section 15
and 16 hereof; and
(ii) prior to such
transaction there shall have been
delivered to Sellers an opinion
of Buyer's counsel reasonably
satisfactory to Sellers stating
in effect that Buyer's
obligations under Section 15 and
16 of this Agreement are legal,
valid and binding obligations of
Buyer enforceable in accordance
with their terms against Buyer,
subject to customary
qualifications as to
enforceability.
17. Expenses. Sellers and Buyer shall each be
responsible for all of their own expenses incurred in
connection with the transactions contemplated hereby.
Sellers shall be responsible for the accounting and
auditing fees and expenses related to the preparation
of the Statement of Net Book Value. Sellers shall
cooperate and cause their respective accountants and
the accountants for LSPI to cooperate and assist Buyer
and its accountants (including consenting to the use
of the LSPI Group Financial Statements with respect to
any filings by Buyer with the Securities and Exchange
Commission in connection with the transactions
contemplated hereby. Sellers shall be responsible for
any and all fees and expenses of Sellers' and LSPI's
accountants with respect to the foregoing. Buyer will
pay the incremental costs and expenses of auditing the
LSPI financial statements or other information
required by Buyer, other than the statement of Net
Book Value as of the Closing Date. Buyer will pay the
cost of the Commitments, Title Policies and Surveys
set forth in Section 10(n).
18. Environmental Matters.
(a) Warranty. Sellers warrant that, other than
as disclosed to Buyer pursuant to Schedule 10(g)
attached:
(i) Compliance with Environmental Laws.
The business and operations of each member of the
LSPI Group comply in all material respects with all
applicable Environmental Laws, except to the extent
that such noncompliance could not be reasonably
expected to have a material adverse effect on the
business, operations, properties, assets or
condition (financial or otherwise) of the LSPI
Group.
(ii) Notice/Receipt of Notice. No member of
the LSPI Group has given, or is required to give,
nor has any member received, any written notice,
letter, citation, or order, or any written warning,
complaint, inquiry, claim or demand (or if verbal,
to the extent the warning, complaint, inquiry,
claim or demand is recorded in a written log) that:
(i) any member of the LSPI Group has violated, or
is about to violate, any Environmental Law; (ii)
there has been a release, or there is a threat of
release, of a non-de minimis quantity of Hazardous
Material from any of the LSPI Group's property,
facilities, equipment or vehicles or previously
owned or leased properties; (iii) any member of the
LSPI Group may be or is liable, in whole or in
part, for material costs of cleaning up,
remediating, restoring or responding to a release
of Hazardous Material; (iv) any of the LSPI Group's
property or assets or previously owned or leased
properties or assets are subject to a lien in favor
of any governmental entity for any liability, costs
or damages, under any Environmental Law; and (v)
any member of the LSPI Group may be or is liable in
whole or in part, for natural resource damages;
provided, that for purposes of liability for
natural resource damages such notice, letter,
citation, order, inquiry, claim or demand was made
by a governmental agency.
(iii) Property on Environmental Cleanup
Lists. No property now or previously owned or
leased by the LSPI Group is listed (or with respect
to Owned Real Estate proposed for listing) on the
National Priorities List pursuant to Comprehensive
Environmental Response, Compensation and Liability
Act of 1980, as amended (42 U.S.C. section 9601 et seq.)
("CERCLA"), on the CERCLIS or on any similar state
list of sites requiring investigation or clean-up.
(iv) Intentionally left blank.
(v) Past Disposal -- On site. Neither any
member of the LSPI Group nor to the best knowledge
of Sellers any previous owner or other person, has
ever caused or permitted any material release or
disposal of any Hazardous Material on, under or at
any of the facilities or properties of the LSPI
Group or any part thereof, and none of such
facilities or properties, nor any part thereof have
ever been used (whether by the LSPI Group or to
Sellers' best knowledge by any other person) as a
permanent storage facility or disposal site for any
Hazardous Material.
(vi) Underground Storage Tanks. There are
no underground storage tanks, including any
associated piping, active or abandoned, including
petroleum storage tanks, on or under any property
now or previously owned or leased by the LSPI Group
that, singly or in the aggregate, have, or may
reasonably be expected to have, a material adverse
effect on the financial condition, operations,
assets, business, or properties of the LSPI Group.
(vii) Off-Site Disposal. No member of the
LSPI Group has directly transported or directly
arranged for the transportation of any Hazardous
Material to any location which is listed, proposed
for listing or, to the best knowledge of Sellers,
which if known to the state or federal government
would warrant listing on the National Priorities
List pursuant to CERCLA, on the CERCLIS or on any
similar state list or which is or reasonably could
be the subject of federal, state or local
enforcement actions or other investigations which
may reasonably be expected to lead to material
claims for any remedial work, damage to natural
resources or personal injury, including claims
under CERCLA.
(viii) PCBs/Asbestos. There are no PCB's or
friable asbestos present at any property now or
previously owned or leased by the LSPI Group that,
singly or in the aggregate, have, or may reasonably
be expected to have, a material adverse effect on
the financial condition, operations, assets,
business or properties of the LSPI Group.
(ix) Pollution Control Equipment. All
pollution control equipment, including any
monitoring devices or related equipment, is in
proper operating condition, has been properly
maintained, and, in the case of major ("end-of-pipe")
wastewater treatment and air pollution
control facilities, has been designed to maintain
compliance with applicable Environmental Laws based
upon the current production rates and operating
policies of LSPI in effect since January 1, 1995.
All material actions necessary to maintain in force
any original, as delivered, manufacturer warranties
have been taken with respect to all major
components of wastewater and air pollution control
facilities.
(x) Other Environmental Conditions Off-Site.
To Sellers' best knowledge there are no
sites or locations not currently owned or leased by
the LSPI Group where Hazardous Materials were
disposed of which with the passage of time, or the
giving of notice or both could reasonably be
expected to give rise to any material liability
under any Environmental Law, to any member of the
LSPI Group.
(b) Indemnity. Subject to the provisions of
Section 18(c) below and the limitations on
indemnification set forth in Section 15(d) above,
Sellers shall indemnify and hold Buyer and the members
of the LSPI Group harmless from and against any and
all losses, liabilities, damages, injuries, penalties,
fines, costs, expenses and claims of any and every
kind whatsoever (including reasonable attorneys' and
consultants' fees and expenses), paid, incurred or
suffered by Buyer as a result of any breach of
warranties set forth in Section 18(a). With respect
to any liability for disposal or arranging for
disposal of Hazardous Materials at sites or locations
not currently owned or leased by the LSPI Group, this
indemnity shall apply notwithstanding the fact that
Buyer may have received or obtained information before
the Closing Date, other than that information
disclosed on Schedule 10(g) indicating or otherwise
showing that a claim exists or may exist under this
indemnity, including, but not limited to, any
information relating to a breach of the warranties set
forth in Section 18(a) above.
(c) Special Provisions. The following provisions
shall apply in the event of any breach of warranty
under this Section 18.
(i) Notice. Buyer shall promptly, and in
no event later than 90 days from the date Buyer has
knowledge, notify Sellers in writing of any claim,
demand or action, situation or event covered by the
warranty and indemnification provisions of Section
18. With respect to any work or activities
undertaken by Buyer which is subject to this
indemnity, Buyer shall provide Sellers in a timely
manner, written documentation prepared in the
normal course of business describing the work or
activities.
(ii) Disclosure of On-Site Environmental
Matters. Buyer agrees that environmental matters
associated with the Real Estate which are contained
in the environmental reports and documents listed
on Schedule 10(g), as well as any information
obtained by Buyer during its due diligence
activities conducted on the Real Estate between the
signing of this Agreement and the Closing Date,
shall be considered disclosed to Buyer.
(iii) Election of Control Off-Site Work. At
Sellers' option, to the extent Sellers are
obligated to indemnify Buyer under this Section for
the costs of investigating, remediating, restoring
or cleaning-up any site where Hazardous Materials
were disposed and the site is located on property
not currently owned, leased or otherwise used by
the LSPI Group (nor reasonably anticipated to be
used by the LSPI Group), Sellers may elect to take
control of the investigation, remediation,
restoration and/or clean-up ("Environmental
Cleanup"). If they elect to do so, Sellers shall
so notify Buyer and Sellers thereafter shall be
solely responsible (as between the parties hereto)
for managing and paying for such Environmental
Cleanup (to the extent it is obligated to indemnify
Buyer) including any fines, penalties or third-party
actions associated with the Environmental
Cleanup.
(iv) Buyer's Control of Work. Other than in
connection with off-site Environmental Cleanups,
Buyer and/or the LSPI Group shall manage and
conduct any Environmental Cleanup work and shall
manage and control the repair and replacement of
any pollution control equipment. All such work
shall be done in a commercially reasonable,
cost-effective manner using good faith business judgment
and without regard to the availability of
indemnification hereunder.
(v) Pollution Control Equipment. In
situations where the installation of pollution
control equipment is required in order to obtain
compliance with the Environmental Laws, Sellers'
liability under this Section shall include both
capital and reasonable operation and maintenance
costs (calculated on a reasonable present value
basis).
(vi) Interference with Operations. In
situations where the Environmental Cleanup or the
installation, repair or replacement of the
pollution control equipment will materially
interfere with the conduct of the operations of the
LSPI Group, Sellers shall be responsible for the
reasonable costs, expenses or losses associated
with or attributable to any material business
interruption losses, provided that Buyer shall do
the work or activities in a manner that is least
disruptive of the LSPI Group's ongoing operations.
(d) Exclusive Remedy. This Section provides to
Buyer, the respective LSPI Group members and anyone
claiming under or through them the exclusive remedy
against Sellers with respect to any matter covered by
this Section 18, and such exclusive remedy shall lapse
and be of no further force or effect on and after the
fifth anniversary of the Closing Date.
(e) Inspection of Books and Records. In the
event of any claim made by Buyer for indemnification
under this Section 18, Sellers shall be entitled to
access, at times reasonably convenient to Buyer and
the members of the LSPI Group, to such books, records
and data related to such claim for indemnification
hereunder, as Sellers deem necessary to verify the
basis or amount of such claim.
19. Termination of Agreement. This Agreement may
be terminated upon ten (10) business days prior
written notice at any time prior to Closing without
liability of any party to the other:
(a) by mutual consent of Sellers and Buyer;
(b) by Buyer, if notice of a material adverse
development with respect to the financial condition,
results of operations or prospects of the LSPI Group
has been given, in accordance with Section 9(f)
hereof;
(c) by Buyer, if Closing has not occurred on or
before September 30, 1995 as a result of the
nonfulfillment of any of the conditions to Buyer's
obligation to perform contained in Section 10 of this
Agreement;
(d) by Sellers, if notice of a material adverse
development with respect to the financial condition,
results of operations or prospects of Buyer has been
given, in accordance with Section 9(f) hereof;
(e) by Sellers, if Closing has not occurred on or
before September 30, 1995 as a result of the
nonfulfillment of any of the conditions to Sellers'
obligation to perform contained in Section 11 of this
Agreement; and
(f) by any party, if the Closing has not occurred
by October 31, 1995.
Termination of this Agreement shall not affect in any
way the continuing obligations of the parties hereto
pursuant to Section 12 relating to brokers and Section
14 hereof relating to the treatment of confidential
information.
20. Announcements. Buyer and Sellers shall
cooperate in the preparation of any announcements
regarding the transactions contemplated by this
Agreement. Except as required by law, no party shall
issue any announcement regarding the transactions
contemplated hereby without the prior consent of the
other parties, which consents shall not be
unreasonably withheld. The covenants set forth in
this Section shall be enforceable in law or at equity
by either party.
21. Records. After the Closing Date, Buyer shall
retain the books, records or other data of each member
of the LSPI Group existing at the Closing Date for a
period of ten (10) years. During the retention period
specified above, Sellers shall be entitled to access,
at times reasonably convenient to Buyer, to such
books, records and data in connection with the
preparation or handling of Sellers' tax returns,
financial reports, tax audits, W-2 forms, litigation
matters or any other reasonable need of either Seller.
If the LSPI Group or Buyer wish to dispose of such
material (whether during or following the 10-year
period), it shall give Sellers prior notice and the
opportunity to remove such material at the expense of
the Seller(s) requesting the same.
22. Assistance after Closing. Buyer shall
furnish, at no cost to Sellers, such assistance to
Sellers in the preparation of their respective fiscal
1994 and 1995 financial and tax reports as Sellers may
reasonably request. All such assistance shall be on a
confidential basis and Sellers agree to comply with
the confidentiality and limitation on use provisions
of Section 14 hereof with respect to such confidential
information.
(a) Retained Liabilities. Buyer shall also
provide Sellers with reasonable assistance, including
without limitation furnishing of documents and making
available to Sellers potential witnesses within its
control or that of any member of the LSPI Group and
the assistance of their respective engineers or
experts, in the defense of any claim, lawsuit or tax
examination arising out of the operations of LSPI
prior to the Closing Date for which Sellers retain
liability under this Agreement. Sellers shall
reimburse Buyer or such member of the LSPI Group for
its out of pocket expenses incurred in providing such
assistance.
(b) Allocation of Pulp. Pentair and Buyer shall
take all necessary action to transfer all contracts
for purchase of kraft pulp currently in the name of
Pentair and allocated to LSPI into the name of LSPI or
Buyer, as Buyer may direct. Until such contracts are
transferred or terminated, Pentair shall continue to
perform such contracts and direct delivery of pulp
thereunder to LSPI in the same manner as currently
performed, and LSPI shall pay for such kraft pulp
delivered to the seller thereof, or if Pentair has
paid therefor, promptly to Pentair upon delivery.
23. Tax Matters; Payment of Taxes.
(a) Tax Returns. Sellers shall prepare or cause
to be prepared and shall timely file all Returns
(including any amendments thereto) relating to any
Taxes of the members of the LSPI Group with respect to
any tax period ending on or before the Closing.
Sellers shall pay or cause to be paid all Taxes of the
members of the LSPI Group with respect to any period
ending on or before the Closing as determined in
accordance with Sections 23(b) and 23(c) hereof.
(b) Apportionment of Income. Sellers will include
the income of the LSPI Group (including any deferred
income and any excess loss accounts pursuant to
relevant rules and regulations of the Internal Revenue
Service) on Sellers' federal and state income tax
Returns for all periods through the Closing Date and
shall pay any federal and state income taxes
attributable to such income. The LSPI Group will
furnish all tax information requested by Sellers to it
for inclusion in Sellers' income tax Returns for the
period which includes the Closing Date in accordance
with Sellers' past custom and practice. The income of
the LSPI Group will be apportioned to the period up to
and including the Closing Date and the period after
the Closing Date by closing the books of the LSPI
Group as of the end of the Closing Date.
(c) Allocation of Taxes. For purposes of this
Agreement, in the case of any Taxes that are imposed
on a periodic basis and are payable for a period that
begins before the Closing Date and ends after the
Closing Date, Sellers shall reimburse Buyer for the
portion of such Taxes payable for the period ending on
the Closing Date to the extent such Taxes are not
reflected on the Statement of Net Book Value as of the
Closing Date. For this purpose, the portion of such
Tax payable for the period ending on the Closing Date
shall in the case of any Taxes other than Taxes based
upon or related to income or sales or use taxes, be
deemed to be the amount of such Taxes for the entire
period multiplied by a fraction, the numerator of
which is the number of days in the period ending on
the Closing Date, and the denominator of which is the
number of days in the entire period. The preceding
sentence shall be applied with respect to Taxes
relating to capital (including net worth or long-term
debt) or intangibles by reference to the level of such
items on the Closing Date to the extent such Taxes are
not reflected on the Statement of Net Book Value as of
the Closing Date.
(d) Indemnity. Notwithstanding anything to the
contrary in this Agreement whether expressed or
implied, Sellers shall indemnify and hold harmless
Buyer, and each member of the LSPI Group against:
(1) all Taxes imposed on any member of the
LSPI Group with respect to any period
ending on or before the Closing;
(2) all Taxes imposed on Buyer or on any
member of the LSPI Group with respect
to any period which begins before the
Closing Date and ends after the Closing
Date to the extent allocated to the
portion of such period ending on the
Closing Date, determined in accordance
with Section 23 hereof;
(3) all Taxes imposed on Buyer or on any
member of the LSPI Group with respect
to income earned by any member of the
LSPI Group for the period beginning
January 1, 1995 and ending on the
Closing Date, determined in accordance
with Section 23(b) hereof;
(4) all Taxes imposed on any member of the LSPI
Group as a result of the Section 338(h)(10)
Elections contemplated by Section 24 hereof;
(5) all Taxes imposed on any member of an
affiliated, consolidated, combined or
unitary group which includes or has
included any member of the LSPI Group
with respect to any taxable period that
ends on or prior to the Closing;
(6) all liability resulting from or
attributable to a breach of the
representations, warranties and
covenants contained in Section 7(t) and
this Section 23; and
(7) any claim under Treas. Reg. section 1.1502-6
by the Internal Revenue Service against
any member of the LSPI Group which was
a member of Sellers' respective
consolidated groups prior to the
Closing Date with respect to any
federal income tax liability of any
Sellers for any period ending on or
prior to December 31, 1995.
(e) Post-Closing Elections. Sellers will (or will
cause members of the LSPI Group, as the case may be
to) make or join, as necessary, with Buyer in making
any election relating to income taxes, including, but
not limited to, elections under Section 732(d) and
Section 754 of the Code, for the year in which the
Closing Date occurs. Prior to Closing, Buyer shall
retain an appraiser to appraise the assets of the LSPI
Group. Sellers and the members of the LSPI Group and
their respective employees shall cooperate fully with
Buyer and its appraiser in connection with the
appraisal. The cost of the appraisal shall be borne
by Buyer.
(f) Control of Contest. Sellers shall have the
right, at their own expense, to control any audit or
determination by any taxing authority, initiate any
claim for refund or amended Return and contest,
resolve and defend against any assessment, notice of
deficiency or other adjustment or proposed adjustment
of Taxes for any taxable period for which any Sellers
(or any of its affiliates) is charged with
responsibility for filing a Return under this
Agreement. Each party will allow the other and its
counsel (at its or their own expense) to be
represented during any audits of income tax Returns to
the extent that disputed items therein relate to the
LSPI Group. Buyer shall, or shall cause its
affiliates to, undertake or authorize actions in their
capacity as tax matters partner of LSPI as requested
by Sellers with respect to this Section 23(f).
(g) General. Each of Buyer and Sellers shall
provide the other, and Buyer shall following the
Closing cause each member of the LSPI Group to provide
to Sellers, with the right, at reasonable times and
upon reasonable notice, to have access to personnel,
and to copy and use, any records or information that
may be relevant in connection with the preparation of
any Returns, any audit or other examination by any
taxing authority or any litigation relating to
liability for Taxes. Information required in the
filing of any Return shall be provided to the other
party not less than thirty (30) days before such
Return is due. Sellers will allow the Buyer an
opportunity to review and comment upon any Returns
under Subsection 23(a) (including any amended returns)
to the extent that they relate to any member of the
LSPI Group. Sellers will take no position on such
Returns that relate to any member of the LSPI Group
that would adversely affect any member of the LSPI
Group after the Closing. Sellers and Buyer shall
retain all records relating to Taxes for as long as
the statute of limitations with respect thereto shall
remain open.
(h) Sales and Transfer Taxes. All sales and
transfer Taxes (including all stock transfer taxes, if
any) incurred in connection with the transactions
contemplated hereby will be borne by the statutorily
responsible party. If required by applicable law,
Buyer or Sellers, as the case may be, will join in the
preparation and execution of any Returns or other
documentation related to the payment of any sales or
transfer Taxes.
(i) Tax Effective Time. For purposes of Taxes,
the Closing shall be deemed to have occurred, and
shall be effective, as of the close of business on the
Closing.
(j) Survival. All of the representations,
warranties, covenants and indemnities contained in
this Agreement which relate to Taxes shall survive the
Closing (even if the Indemnified Party knew or had
reason to know of any misrepresentation or breach of
warranty or covenant at the time of the Closing) and
continue in full force and effect until the expiration
of the applicable statute of limitations (including
any extensions thereof).
(k) LSPI Leases Tax Rate Change Indemnity. In the
event of an adjustment of rents under the LSPI Leases,
as a result of a Change in Tax Law which becomes
effective after the date hereof and on or prior to the
date (the "Midterm Purchase Date") on which LSPI may
make the Midterm Purchase in accordance with Section
13(b) of the Facility Leases (whether or not such
Midterm Purchase is made),
(i) if such adjustment occurs as a
result of an increase in corporate tax rates,
Sellers shall indemnify and hold harmless
Buyer and each member of the LSPI Group
(without duplication) against
(A) any increase in Basic
Rent, payable to any Lessor not
affiliated with Buyer, over the
amount of Basic Rent payable as
of the Closing Date under each of
the LSPI Leases, for the period
from the effective date of such
increase to the Midterm Purchase
Date; and
(B) if and only if LSPI
exercises its option to purchase
the Undivided Interests on the
Midterm Purchase Date pursuant to
Section 13(b) under the LSPI
Leases, any increase in the
Agreed Fair Market Value, paid to
any Lessor not affiliated with
Buyer, over the Agreed Fair
Market Value payable as of the
Closing Date under each of the
LSPI Leases;
in each event payable at the time
such increased amount is paid by
such member of the LSPI Group;
(ii) if such adjustment occurs as a
result of a decrease in corporate tax rates,
Buyer shall pay to Sellers
(A) any decrease in Basic
Rent, payable to any Lessor not
affiliated with Buyer, over the
amount of Basic Rent payable as
of the Closing Date under each of
the LSPI Leases, for the period
from the effective date of such
decrease to the Midterm Purchase
Date; and
(B) if and only if LSPI
exercises its option to purchase
the Undivided Interests on the
Midterm Purchase Date pursuant to
Section 13(b) under the LSPI
Leases, any decrease in the
Agreed Fair Market Value, paid to
any Lessor not affiliated with
Buyer, over the Agreed Fair
Market Value payable as of the
Closing Date under each of the
LSPI Leases;
in each event payable at the time
such decreased amount is paid by
such member of the LSPI Group;
Attached hereto as Schedule 23 is a schedule
of Basic Rent, Agreed Fair Market Values and
other pricing items for the LSPI Leases, in
effect as of the Closing Date. Capitalized
terms used in this Section 23(k) but not
defined in this Agreement shall have the
meanings ascribed to them in the LSPI Leases.
(l) Refund of Tax Indemnity Payment. In
accordance with the Tax Indemnity Agreement with NYNEX
Credit Corporation ("NYNEX") under the LSPI Leases,
LSPI advanced funds to NYNEX in connection with its
tax audit as affected by a tax audit relating to
LSPI's tax years 1985-87. LSPI has transferred to the
Sellers as of December 31, 1994 a receivable from
NYNEX with respect to any refund of such advance. If
and to the extent LSPI is repaid by NYNEX for such
advance, Buyer agrees to cause LSPI to pay such
refunded amounts one-half to each Seller promptly upon
receipt. Notwithstanding the foregoing, Sellers shall
indemnify and hold harmless Buyer and each member of
the LSPI Group from and against any and all demands,
payments, expenses and costs incurred by Buyer or any
member of the LSPI Group under the Tax Indemnity
Agreements with respect to any actions taken by
Sellers or any members of the LSPI Group or events
occurring prior to the Closing Date.
(m) Tax Agreements. Minnesota Power and Buyer
agree that, upon Closing, the Tax Agreement dated
October 5, 1993 and the State Tax Agreement dated
October 5, 1993, both between Minnesota Power and its
subsidiaries, including Minnesota Paper, shall
terminate as to Minnesota Paper, and, that
notwithstanding Section 7 of each such agreement,
following termination of each agreement, Minnesota
Paper and Buyer shall not be bound by the terms of the
agreements and not be entitled to receive or obligated
to make payments under the agreements attributable to
any period during which Minnesota Paper was a party to
each agreement.
24. Section 338(h)(10) Election. Each Seller
agrees to jointly file with Buyer the election (the
"Election") provided for by Section 338(h)(10) of the
Code and the corresponding election under applicable
state or local tax law with respect to the sale and
purchase of capital stock of each of the Joint
Venturers, as the case may be. In connection with the
Election:
(a) Buyer and Sellers shall each provide to the
other all necessary information, including information
as to tax basis, to permit the Election to be made and
its consequences to be accurately reflected for all
relevant accounting and tax reporting purposes, and to
take all other actions necessary to enable Buyer and
Sellers to make the Election.
(b) Buyer shall retain at Buyer's cost an
appraiser to prepare a report (a "Report") appraising
the value of the assets of the Joint Venturers to
determine the proper allocations (the "Allocations")
of the "adjusted grossed-up basis" (within the meaning
of Treasury Regulation section 1.338(b)-(1) and the modified
adjusted deemed selling price ("MADSP") (within the
meaning of Treasury Regulation section 1.338(h)(10)-1) among
the assets of the Joint Venturers in accordance with
Section 338(b)(5) and (h)(10) of the Code and Treasury
Regulations thereunder.
The Report shall be finalized no later than 120
days after the Closing Date. At least thirty (30)
days before such Report is finalized, Buyer shall
provide Sellers a copy of the appraiser's preliminary
report or indication of the Allocations. After
receipt of such preliminary report or indication,
Sellers shall give to Buyer in writing any objections
or questions which Sellers may have to such
preliminary report or indication, and the parties
shall thereafter use their best efforts to resolve
such objections or questions so that the Report is
finalized no later than 120 days after the Closing
Date and the Election is timely made.
(c) Buyer and Sellers shall jointly prepare a Form
8023-A, together with all required attachments, and
the corresponding forms required or appropriate under
state tax laws (collectively, an "Election Form") in a
manner consistent with the Allocation.
(d) As promptly as practicable after the Closing
Date, Buyer and Sellers shall take all action and file
all documents to effect and preserve a timely
Election.
(e) Each Seller shall allocate the MADSP resulting
from the Election in a manner consistent with the
Allocations and shall not take any position
inconsistent with the Election or the Allocations in
connection with any Return; provided, however, that
each Seller may take into account its transaction
costs when calculating such MADSP.
(f) Buyer shall allocate the "adjusted grossed-up
basis" of the capital stock of the Joint Venturers
among the assets of the Joint Venturers in a manner
consistent with the Allocations and shall not take any
position inconsistent with the Election or the
Allocations in any Return or otherwise; provided,
however, that Buyer may add its transaction costs to
the "adjusted grossed-up basis" of the capital stock
of the Joint Venturers for purposes of allocating
among the assets of the Joint Venturers.
(g) Sellers and Buyer acknowledge that for federal
income tax purposes (and for state income tax purposes
in those states whose income tax provisions follow the
federal income tax treatment), the sale of the capital
stock of the Joint Venturers from Sellers to Buyer
will be treated as a sale of assets by each Joint
Venturer to Buyer followed by a complete liquidation
of each Joint Venturer with and into Sellers, and the
parties agree to report the transaction in a manner
consistent with this treatment and to take no
positions inconsistent with this treatment. The
parties also agree that neither Buyer nor the Joint
Venturers shall be liable for any Taxes resulting from
the sale of the capital stock of Joint Venturers or
the Election.
25. Limitations on Liability.
(a) Any amount of indemnity payable by Sellers
under Sections 12, 14, 15, 16, 18, 19 or 23 of, or
relating to the transactions contemplated by, this
Agreement, or arising in connection with the
operations, properties or financial condition of
members of the LSPI Group shall be paid by Sellers
severally, and not jointly or jointly and severally,
in accordance with the following principles:
(i) if the claim arises out of any
misrepresentation or breach of warranty made
with respect to either Seller or its
respective Joint Venturer, the claim shall be
the sole responsibility of such Seller;
(ii) if the claim arises out of any
misrepresentation or breach of warranty made
with respect to LSPI, the claim shall be the
responsibility of both Sellers, who shall
each pay one-half of any amount of indemnity
with respect thereto;
(iii) if the claim arises out of the
breach of any covenant or agreement by either
Seller or its respective Joint Venturer, the
claim shall be the sole responsibility of
such Seller;
(iv) if the claim arises out of the
breach of any covenant or agreement by LSPI,
the claim shall be the responsibility of both
Sellers, who shall each pay one-half of any
amount of indemnity with respect thereto;
(v) if the claim arises out of
assertion by any third party of any claim
(including tax claims), liability or
obligation against or with respect to any
member of the LSPI Group which is assumed, or
indemnified against, by either Seller, with
respect to its respective Joint Venturer, the
claim shall be the sole responsibility of
such Seller;
(vi) if the claim arises out of
assertion by any third party of any claim
(including tax claims), liability or
obligation against or with respect to any
member of the LSPI Group which is assumed, or
indemnified against, by both Sellers, with
respect to LSPI, the claim shall be the
responsibility of both Sellers, who shall
each pay one-half of any amount of indemnity
with respect thereto; and
(vii) if the claim arises from the
termination of this Agreement, compensation
for which is provided in Section 19 hereof,
Seller(s) in breach shall be solely
responsible for such claim.
To the extent that any amount of indemnity is
payable by Buyer to Seller(s), the foregoing
principles shall apply to the determination of the
Seller to whom such indemnity is payable, mutatis
mutandis.
(b) No party is responsible for, and no party may
recover from any other party, any amount of
consequential (e. g., lost profits or the like) or
punitive damages. Notwithstanding the foregoing
exclusion, to the extent any party hereto sustains any
loss or incurs any expense compensable under this
Agreement that contains or includes any measure of
consequential or punitive damages awarded to a third
party, then such indirect consequential and punitive
damages may be recovered.
(c) Sellers and Buyer specifically agree that the
total amount of indemnification payable by Sellers
pursuant to Sections 15, 16, 18 and 23 together shall
not exceed the amount of the purchase price paid to
each Seller in cash hereunder.
26. Amendment and Waiver. This Agreement may not
be amended or modified at any time or in any respect
other than by an instrument in writing executed by
Buyer and Sellers.
27. Notices. Any notice or communication provided
for in this Agreement shall be in writing and shall be
deemed given when delivered personally, against
receipt, or when deposited in the United States mail,
registered or certified mail, return receipt requested
to the following address:
(a) If to Pentair:
Pentair, Inc.
1500 County Road B2 West
St. Paul, Minnesota 55113-3105
Attention: Ronald V. Kelly
Facsimile: (612) 639-5209
with a copy to:
Henson & Efron, P.A.
1200 Title Insurance Building
400 Second Avenue South
Minneapolis, Minnesota 55401
Attention: Louis L. Ainsworth
Facsimile: (612) 339-6364
(b) If to Minnesota Power:
Minnesota Power & Light Company
30 West Superior Street
Duluth , Minnesota 55802
Attention: David G. Gartzke
Facsimile: (218) 723-3960
with a copy to:
Minnesota Power & Light Company
30 West Superior Street
Duluth , Minnesota 55802
Attention: Steven W. Tyacke
Facsimile: (218) 723-3955
(c) If to Buyer:
Consolidated Papers, Inc.
231 First Avenue North
P. O. Box 8050
Wisconsin Rapids, WI 54495-8050
Attention: Carl H. Wartman
Facsimile: (715) 422-3203
with a copy to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606-5096
Attention: Robert A. Schreck, Jr.
Facsimile: (312) 984-3669
Any party may change the above address for notice by
written notice to the other parties in accordance with
the provisions of this Section.
28. Parties in Interest. All of the terms and
provisions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by Sellers
and Buyer, their respective successors and permitted
assigns. No party may assign this Agreement without
the express written consent of the other parties,
except that Buyer may assign this Agreement to an
affiliate of Buyer provided that no such assignment
shall relieve Buyer of its obligations hereunder or
otherwise prejudice Sellers. This Agreement shall not
confer any rights or remedies upon any person other
than Buyer and Sellers and their respective successors
and permitted assigns.
29. Further Assurances. Each party shall from
time to time execute and deliver such further
documents and do such further acts as the other
parties may reasonably require for carrying out the
purposes and intent of this Agreement.
30. No Waivers. No failure of any party to this
Agreement to pursue any remedy resulting from a breach
of this Agreement shall be construed as a waiver of
that breach or as a waiver of any subsequent or other
breach.
31. Governing Law. This Agreement shall be
construed in accordance with and governed by the
substantive laws of the state of Minnesota without
giving effect to the choice of law provisions thereof.
This Agreement shall be subject to the exclusive
jurisdiction of the courts of, and United States
federal courts sitting in, the state of Minnesota, and
all parties hereby irrevocably submit to the
jurisdiction of such courts with respect to any claim
arising out of this Agreement.
32. Severability. Should any provision of this
Agreement be or become invalid in whole or in part or
be incapable of performance for whatever reason, then
the validity of the remaining provisions of this
Agreement shall not be affected thereby. In such
event, the parties hereby undertake to substitute for
any such invalid provision or for any provision
incapable of performance, a provision which
corresponds to the spirit and purpose of such invalid
or unperformable provision as far as permitted under
applicable law, so as to realize to the fullest extent
possible the economic purpose and effect of this
Agreement.
33. Miscellaneous. This Agreement constitutes the
entire agreement between the parties and supersedes
all prior representations, understandings or
agreements between them, written or oral, respecting
the within subject matter. Headings are for
convenience only and are not intended to alter any of
the provisions of this Agreement. Words importing the
singular number include the plural and vice versa.
This Agreement may be signed in multiple copies, each
of which shall be considered an original, but all of
which shall together constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, each party has caused this
Agreement to be executed by its authorized officer as
of the date first above written.
PENTAIR, INC.
By:
Its:
MINNESOTA POWER & LIGHT COMPANY
By:
Its:
CONSOLIDATED PAPERS, INC.
By:
Its:
AMENDMENT TO
AGREEMENT FOR SALE AND PURCHASE
OF STOCK
OF
PENTAIR DULUTH CORP.
AND
MINNESOTA PAPER INCORPORATED
THIS AMENDMENT TO AGREEMENT is made and entered
into as of the 30th day of June, 1995 between Pentair, Inc.,
a Minnesota corporation ("Pentair"), Minnesota Power & Light
Company, a Minnesota corporation ("Minnesota Power"), and
Consolidated Papers, Inc., a Wisconsin corporation ("Buyer").
WHEREAS, The parties entered into the Agreement for Sale
and Purchase of Stock of Pentair Duluth Corp. and
Minnesota Paper Incorporated on May 8, 1995 (the "Agreement");
WHEREAS, the parties desire to clarify their respective
responsibilities under Section 5 of that Agreement;
NOW, THEREFORE, in consideration of the foregoing
premises and of the mutual covenants and conditions herein
contained, the parties agree as follows:
Section 5 of the Agreement shall be amended and shall read
in its entirety as follows:
"5. Assumption of Liabilities. Buyer shall indemnify Sellers in
accordance with the provisions of Section 16 hereof against
any claim arising out of any Guaranteed Obligations. In no
event shall Buyer be subject, without its consent, to terms
and conditions more restrictive than those set forth in the
existing Guaranteed Obligations."
IN WITNESS WHEREOF, each party has caused this
Amendment to Agreement to be executed by its authorized
officer
as of the date first above written.
PENTAIR, INC.
By:
Its:
MINNESOTA POWER & LIGHT COMPANY
By:
Its:
CONSOLIDATED PAPERS, INC.
By:
Its:
AGREEMENT FOR SALE AND PURCHASE
OF
ASSETS OF
LSPI FIBER CO.
AND
STOCK OF
SUPERIOR RECYCLED FIBER CORPORATION
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions. . . . . . . . . . . . . . 1
2. Purchase and Sale Transaction. . . . . 6
(a) Purchase of Assets . . . . . . . 6
(b) Assumed Liabilities and Obligations 6
(c) Purchase of Stock. . . . . . . . 6
3. Purchase Price . . . . . . . . . . . . 6
4. Payment. . . . . . . . . . . . . . . . 7
5. Assumption of Liabilities. . . . . . . 8
6. Closing. . . . . . . . . . . . . . . . 9
7. Parents' Representations, Warranties and
Covenants . . . . . . . . . . . . . . 9
(a) Organization and Authority of Seller 9
(b) Valid and Enforceable Agreement. 9
(c) Organization of Subsidiaries . . 10
(d) Financial Statements . . . . . . 11
(e) No Material Change . . . . . . . 11
(f) Leases . . . . . . . . . . . . . 12
(g) Title to Personal Property . . . 12
(h) Real Estate. . . . . . . . . . . 12
(i) Plant and Equipment. . . . . . . 14
(j) Intellectual Property. . . . . . 14
(k) Employee Matters . . . . . . . . 14
(l) Litigation . . . . . . . . . . . 14
(m) Compliance with Laws . . . . . . 14
(n) Material Contracts . . . . . . . 15
(o) Licenses and Permits . . . . . . 15
(p) Insurance. . . . . . . . . . . . 15
(q) Liabilities to PBGC or Multiemployer
or Multiple Employer Plans . . . 15
(r) Transactions with Related Parties 15
(s) Bank Accounts. . . . . . . . . . 16
(t) Tax Matters. . . . . . . . . . . 16
(u) Accounts Receivable. . . . . . . 18
(v) Inventory. . . . . . . . . . . . 18
(w) Motor Vehicles . . . . . . . . . 19
(x) Product Warranty . . . . . . . . 19
8. Buyer's Representations and Warranties 19
(a) Organization . . . . . . . . . . 19
(b) Authority. . . . . . . . . . . . 19
(c) Valid and Enforceable Agreement. 19
(d) No Insolvency. . . . . . . . . . 20
(e) Financial Statements . . . . . . 20
(f) Investment Intent. . . . . . . . 20
9. Actions Pending Closing. . . . . . . . 20
(a) Operations . . . . . . . . . . . 20
(b) Access to Records. . . . . . . . 21
(c) Access to Facilities . . . . . . 21
(d) Hart-Scott-Rodino Filings. . . . 21
(e) Notice of Developments . . . . . 21
(f) SRFI Restrictions. . . . . . . . 22
(g) Best Efforts . . . . . . . . . . 22
10. Conditions Precedent to Obligations of
Buyer . . . . . . . . . . . . . . . . 22
(a) No Errors; Performance of Obligations 22
(b) Officer's Certificates . . . . . 22
(c) Certified Copy of Resolutions. . 22
(d) Opinion of Sellers' and Parent's
Counsel. . . . . . . . . . . . . 22
(e) Injunctions. . . . . . . . . . . 23
(f) Clayton Act Matters. . . . . . . 23
(g) Environmental Matters. . . . . . 23
(h) SRFI Restrictions. . . . . . . . 23
(i) Consents . . . . . . . . . . . . 24
(j) Financing. . . . . . . . . . . . 24
(k) FIRPTA Certificate . . . . . . . 24
(l) Assignments of Contracts . . . . 24
(m) Purchase of LSPI and Niagara Paper 24
(n) Real Estate Consents . . . . . . 24
(o) Title Insurance and Surveys. . . 24
(p) Note Purchase Agreement. . . . . 26
(q) Other Matters. . . . . . . . . . 26
11. Conditions Precedent to Obligations of
Sellers . . . . . . . . . . . . . . . 26
(a) No Errors; Performance of Obligations 26
(b) Officer's Certificate. . . . . . 26
(c) Certified Copy of Resolutions. . 27
(d) Opinion of Buyer's Counsel . . . 27
(e) Injunctions. . . . . . . . . . . 27
(f) Clayton Act Matters. . . . . . . 27
(g) Financing. . . . . . . . . . . . 27
(h) Purchase of LSPI and Niagara Paper 27
(i) Note Purchase Agreement. . . . . 27
(j) Other Matters. . . . . . . . . . 27
12. Broker. . . . . . . . . . . . . . . . 28
13. [Intentionally Left Blank]. . . . . . 28
14. Confidential Information. . . . . . . 28
15. Indemnification . . . . . . . . . . . 29
16. [Intentionally left blank]. . . . . . 31
17. Expenses. . . . . . . . . . . . . . . 31
18. Environmental Matters . . . . . . . . 31
(a) Warranty . . . . . . . . . . . . 31
(b) Indemnity. . . . . . . . . . . . 33
(c) Special Provisions . . . . . . . 33
(d) Exclusive Remedy . . . . . . . . 34
(e) Inspection of Books and Records. 34
19. Termination of Agreement. . . . . . . 35
20. Announcements . . . . . . . . . . . . 35
21. Records . . . . . . . . . . . . . . . 35
22. Assistance after Closing. . . . . . . 36
23. Tax Matters; Payment of Taxes . . . . 36
(a) Tax Returns. . . . . . . . . . . 36
(b) Apportionment of Income. . . . . 36
(c) Allocation of Taxes. . . . . . . 36
(d) Indemnity. . . . . . . . . . . . 37
(e) Post-Closing Elections . . . . . 38
(f) Control of Contest . . . . . . . 38
(g) General. . . . . . . . . . . . . 38
(h) Sales and Transfer Taxes . . . . 38
(i) Tax Effective Time . . . . . . . 38
(j) Survival . . . . . . . . . . . . 39
(k) Tax Agreements . . . . . . . . . 39
24. Section 338(h)(10) Election . . . . . 39
25. Limitations on Liability. . . . . . . 40
26. Amendment and Waiver. . . . . . . . . 41
27. Notices . . . . . . . . . . . . . . . 41
28. Parties in Interest . . . . . . . . . 43
29. Further Assurances. . . . . . . . . . 43
30. No Waivers. . . . . . . . . . . . . . 43
31. Governing Law . . . . . . . . . . . . 43
32. Severability. . . . . . . . . . . . . 43
33. Miscellaneous . . . . . . . . . . . . 43
<PAGE>
THIS AGREEMENT is made and entered into as of
the 8th day of May, 1995 by and among Pentair, Inc., a
Minnesota corporation ("Pentair"), Minnesota Power &
Light Company, a Minnesota corporation ("Minnesota
Power"), Synertec, Inc., a Minnesota Corporation
("Synertec"), LSPI Fiber Co., a joint venture
organized under the general partnership laws of the
state of Minnesota ("LSPI Fiber"), and Consolidated
Papers, Inc., a Wisconsin corporation ("Buyer").
WHEREAS, Pentair is the owner of all of the
issued and outstanding capital stock of Duluth
Holdings (Paper) Corp., a Minnesota corporation
("Duluth Holdings") which owns all of the issued and
outstanding stock of Pentair Duluth Pulp Corp., a
Minnesota corporation ("Pentair Duluth Pulp"); and
WHEREAS, Minnesota Power is the owner of all of
the issued and outstanding capital stock of Minnesota
Pulp Incorporated, a Minnesota corporation ("Minnesota
Pulp"), which owns all of the issued and outstanding
stock of Minnesota Pulp Incorporated II, a Minnesota
corporation ("Minnesota Pulp II"); and
WHEREAS, Pentair Duluth Pulp and Minnesota Pulp
II each own a 50% equity interest in LSPI Fiber; and
WHEREAS, Minnesota Power is the owner of all of
the issued and outstanding stock of Synertec which
owns all of the issued and outstanding capital stock
of Superior Recycled Fiber Corporation, a Minnesota
corporation ("SRFC"); and
WHEREAS, LSPI Fiber owns a 24% equity interest,
and SRFC owns a 76% equity interest, in Superior
Recycled Fiber Industries, a joint venture organized
under the general partnership laws of the state of
Minnesota ("SRFI"); and
WHEREAS, Synertec and LSPI Fiber (collectively,
"Sellers") desire to sell and Buyer desires to
purchase from Sellers all of the issued and
outstanding capital stock of SRFC and all of the
assets of LSPI Fiber in accordance with the terms and
provisions of this Agreement;
NOW, THEREFORE, in consideration of the
foregoing premises and of the mutual covenants and
conditions herein contained, the parties agree as
follows:
1. Definitions. The terms below shall have the
following meanings under this Agreement unless the
context clearly requires otherwise:
(a) "Affiliates" means Duluth Holdings and
Pentair Duluth Pulp, in the case of Pentair; and
Minnesota Pulp, Minnesota Pulp II, Synertec and SRFC,
in the case of Minnesota Power; and all of the
foregoing, in the case of Pentair and Minnesota Power.
(b) "Allocations" shall have the meaning set
forth in Section 24(b).
(c) "Assumed Liabilities and Obligations" means
the liabilities set forth in Section 2(b).
(d) "CERCLA" shall have the meaning set forth
in Section 18(a)(iii).
(e) "Clayton Act" means 15 U.S.C. section 12, et
seq., as amended, and the rules and regulations
promulgated thereunder from time to time.
(f) "Closing" means the actual transfer of the
Purchased Interests, the delivery of documents
providing for the assumption of the Assumed
Liabilities and Obligations, and the exchange and
delivery by the parties of the other documents and
instruments contemplated by this Agreement.
(g) "Closing Date" means June 30, 1995, or such
later month end date as mutually agreed upon by the
parties.
(h) "Code" means the Internal Revenue Code of
1986, as amended.
(i) "Commitments" shall have the meaning set
forth in Section 10(o)(i).
(j) "Confidential Information" means all
information designated as "Evaluation Material" in the
confidentiality letter agreement dated August 26, 1994
between Buyer and CS First Boston Corp., acting as
agent for Pentair and in the confidentiality letter
agreement dated January 9, 1995 between Buyer and
PaineWebber Incorporated, acting as agent for
Minnesota Power, copies of which are attached as
Schedule 1(j).
(k) "Election" shall have the meaning set forth
in Section 24.
(l) "Election Form" shall have the meaning set
forth in Section 24(c).
(m) "Environmental Cleanup" shall have the
meaning set forth in Section 18(c)(iii).
(n) "Environmental Laws" means federal, state,
regional, county and local laws, statutes, rules,
regulations and ordinances and common law requirements
as of the Closing Date relating to the environment,
including, without limitation, those relating to the
public health or safety aspects thereof, or to
nuisance, trespasses, releases, discharges, emissions
or disposals to air, water, land or groundwater, to
the withdrawal or use of groundwater, to the use,
handling or disposal of polychlorinated biphenyls
(PCB's), asbestos or urea formaldehyde, to the
treatment, storage, disposal or management of
Hazardous Material (including, without limitation,
petroleum, its derivatives, by-products or other
hydrocarbons), to exposure to toxic, hazardous or
other controlled, prohibited or regulated substances,
to the transportation, storage, disposal, management
or release of gaseous or liquid substances, and any
regulation, order, injunction, judgment, declaration,
notice or demand issued thereunder.
(o) "GAAP" means generally accepted accounting
principles consistently applied and maintained
throughout the period indicated and consistent with
prior financial practice of LSPI Fiber, SRFC, SRFI,
Pentair or Minnesota Power (and their respective
Affiliates), as the case may be.
(p) [Intentionally left blank]
(q) "Hazardous Material" means and includes (a)
petroleum or petroleum products, including crude oil,
(b) any asbestos insulation or other material composed
of or containing asbestos, and (c) any hazardous,
toxic or dangerous waste, substance or material
defined as such in (or for purposes of) the
Comprehensive Environmental Response, Compensation and
Liability Act, as amended, any so-called state or
local "Superfund" or "Superlien" law, Section 115B.02
of the Minnesota Statutes, or any other Environmental
Laws.
(r) "Indemnitee" shall have the meaning set
forth in Section 15(e).
(s) "Indemnitor" shall have the meaning set
forth in Section 15(e).
(t) "Intellectual Property" means all patents,
utility patents and design patents and registrations
therefor, trademarks, trade names, trademark rights
and trademark registrations, copyrights and licenses
listed on Schedule 1(t) attached, as well as all
technical documentation reflecting engineering and
production data, design data, plans, specifications,
drawings, technology, know-how, trade secrets,
software (whether owned or licensed), manufacturing
processes and all documentary evidence thereof
relating to the SRFI Group and its business.
(u) "Knowledge" of Sellers or the "best
knowledge" of Sellers when modifying any
representation or warranty shall mean that: (i) no
officer or other manager, reporting directly to the
President of any of Sellers or the Parents (who are
involved in or responsible for operations of the SRFI
Group or the LSPI Group); and (ii) no officer or other
manager of any member of the SRFI Group and the LSPI
Group, including the chief financial officer and the
manager of environmental affairs, if any, of Sellers,
the Parents or of any member of the SRFI Group or the
LSPI Group, has any knowledge that such representation
and warranty is not true and correct to the same
extent as provided therein and that:
(i) Sellers, the Parents and each
member of the SRFI Group has exercised due
diligence and has made appropriate
investigations and inquiries of the
officers and business records of each of
Sellers, the Parents, the SRFI Group and
the LSPI Group; and
(ii) nothing has come to the
attention of Sellers, the Parents or of
any member of the SRFI Group in the course
of such investigation and review or
otherwise which would reasonably cause
such party, in the exercise of due
diligence, to believe that such
representation and warranty is not true
and correct.
Such terms shall have a cognate meaning as applied to
Buyer.
(v) "LSPI Group" means Pentair Duluth Corp., a
Minnesota corporation, Minnesota Paper Incorporated, a
Minnesota corporation and Lake Superior Paper
Industries, a joint venture organized under the
general partnership laws of the state of Minnesota.
(w) "LSPI Supply Contract" means the Pulp
Supply Agreement dated as of August 9, 1993, between
LSPI Fiber and Lake Superior Paper Industries, a joint
venture organized under the general partnership laws
of the state of Minnesota.
(x) "MADSP" shall have the meaning set forth in
Section 24(b).
(y) "Material Contracts" means those contracts
and arrangements listed on Schedule 7(n).
(z) "Net Book Value" means the sum of: (i) with
respect to LSPI Fiber, the difference between (x) the
Purchased Assets less (y) all of the liabilities of
LSPI Fiber set forth on the balance sheet of LSPI
Fiber as of December 31, 1994 or the Closing Date, as
appropriate; and (ii) with respect to the Stock, the
difference between (x) the assets of SRFC (including
therein, its investments in the net assets of SRFI)
less (y) all liabilities of SRFC excluding current
income tax accruals, deferred tax accruals, and
subordinated and other debt, whether current or long-term,
owing to Sellers, Parents, or Affiliates, all as
reflected on the balance sheet of SRFC as of
December 31, 1994 or the Closing Date, as appropriate.
(aa) "1933 Act" shall have the meaning set
forth in Section 8(f).
(bb) "Note Purchase Agreement" means the Note
Purchase Agreement between SRFC, SRFI and New York
Life Insurance Company dated as of December 30, 1993,
as amended and all of the Security Documents
collateral thereto, as defined in the Note Purchase
Agreement.
(cc) "Owned Real Estate" shall have the meaning
set forth in Section 7(h)(i).
(dd) "Parents" shall mean both of Pentair and
Minnesota Power and "Parent" shall mean any one of
them.
(ee) "Permitted Exceptions" shall have the
meaning set forth in Section 10(o)(i).
(ff) "Purchased Assets" shall have the meaning
set forth in Section 2(a).
(gg) "Purchased Interests" means the Stock and
the Purchased Assets.
(hh) "Real Estate" means all real property,
whether owned, under contract to purchase, or leased
by the SRFI Group, including all land, buildings,
structures, easements, appurtenances and privileges
relating thereto, and all leaseholds, leasehold
improvements, fixtures and other appurtenances and
options, including options to purchase and renew, or
other rights thereunder, used or intended for use in
connection with the business of the SRFI Group.
(ii) "Report" shall have the meaning set forth
in Section 24(b).
(jj) "Return(s)" means any return (including
any consolidated or combined return), report, claim
for refund, information return or statement, relating
to any Tax, including any schedule or attachment
thereto.
(kk) "SRFI Group" means all of LSPI Fiber, SRFC
and SRFI.
(ll) "SRFI Group Financial Statements" means
(i) the audited financial statements (for the year
ended December 31, 1994) of SRFI and SRFC, (ii) the
unaudited financial statements (for the year ended
December 31, 1993) of SRFI and SRFC, (iii) the
unaudited internal financial statements of the other
members of the SRFI Group for the fiscal years ended
December 31, 1993 and 1994, (iv) the combined
unaudited balance sheet for the fiscal year ended
December 31, 1994 reflecting the assets and
liabilities of each member of the SRFI Group as of
those dates, with all applicable adjustments and
eliminations and as combined, and (v) the combined
unaudited income statement for the year ended December
31, 1994 reflecting all items of income and expense
for each member of the SRFI Group, with all applicable
adjustments and eliminations and as combined.
(mm) "SRFI Pledges" means the pledges by LSPI
Fiber and all of the Affiliates of all of their
interests, direct or indirect, including the stock of
Pentair Duluth Pulp, Minnesota Pulp and SRFC, in SRFI
and the entities which own such direct or indirect
interests, all pursuant to the Note Purchase
Agreement.
(nn) "SRFI Put and Call Rights" means the
rights of each Parent to put and the rights of the
other Parent to call, each Parent's interest in its
respective Affiliates and in LSPI Fiber pursuant to
Section 2 of the Amended and Restated Agreement to
Restrict Transfer of Stock dated January 19, 1994 and
Section 12 of the LSPI Fiber Joint Venture Agreement
dated May 28, 1993, as amended December 30, 1993 and
January 18, 1994.
(oo) "SRFI Restrictions" means, with respect to
the shares of SRFC and to LSPI Fiber, the SRFI Put and
Call Rights, the SRFI Rights of First Refusal and the
SRFI Pledges.
(pp) "SRFI Rights of First Refusal" means the
right of first refusal granted by each Parent to the
other to purchase its stock in Duluth Holdings and
Minnesota Pulp, respectively, pursuant to Section 2 of
the Restated Agreement to Restrict Transfer of Stock
dated January 19, 1994.
(qq) "Statement of Net Book Value" means the
combined audited balance sheet of the SRFI Group as of
the Closing Date in substantially the form reflected
in Schedule 3.2 from which the calculation of the
purchase price of the Purchased Interests will be made
in accordance with Section 3 hereof.
(rr) "Stock" means all of the issued and
outstanding capital stock of SRFC.
(ss) "Surveys" shall have the meaning set forth
in Section 10(o)(ii).
(tt) "Survey Defect" shall have the meaning set
forth in Section 10(o)(iii).
(uu) "Tax" or "Taxes" means all income, gross
receipts, sales, use, employment, franchise, profits,
property or other taxes, fees, stamp taxes and duties,
assessments or charges of any kind whatsoever (whether
payable directly or by withholding), together with any
interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority
with respect thereto.
(vv) "Title Company" shall have the meaning set
forth in Section 10(o)(i).
(ww) "Title Policy" shall have the meaning set
forth in Section 10(o)(i).
(xx) "Unpermitted Exception" shall have the
meaning set forth in Section 10(o)(iii).
2. Purchase and Sale Transaction. (a)
Purchase of Assets. Subject to the terms and
conditions herein stated, LSPI Fiber shall sell,
transfer, assign and deliver to Buyer and Buyer shall
purchase from LSPI Fiber, at the Closing, all of the
assets of LSPI Fiber including, but not limited to,
its 24% partnership interest in SRFI (collectively,
the "Purchased Assets").
(b) Assumed Liabilities and Obligations.
At the Closing, Buyer shall assume and agree to
satisfy and perform to the extent not satisfied or
performed prior to the Closing Date, without any cost
or charge to Sellers, all obligations of LSPI Fiber as
set forth on Schedule 5 and under the Material
Contracts (collectively, the "Assumed Liabilities and
Obligations").
(c) Purchase of Stock. Subject to the
terms and conditions herein stated, Synertec shall
sell, transfer, assign and deliver to Buyer, and Buyer
shall purchase from Synertec, at the Closing, all of
Synertec's right, title and interest in the Stock.
3. Purchase Price. The aggregate purchase
price to be paid by Buyer to Sellers for the purchase
of all the Stock and the Purchased Assets, shall be:
(a) $65,300,000;
(b) increased for any increase, or
decreased for any decrease, in the Net
Book Value from December 31, 1994 to the
Closing Date; and
(c) the assumption by Buyer of the
Assumed Liabilities and Obligations.
The aggregate purchase price set forth above shall be
paid to Sellers as set forth on Schedule 3.1.
The Net Book Value shall be determined in
accordance with GAAP as set forth on Schedule 3.2,
which Schedule sets forth sample calculations of the
Net Book Value as of December 31, 1994 and March 31,
1995 and the exceptions to GAAP used in calculating
Net Book Value.
Within sixty (60) days following the Closing
Date, Sellers shall prepare and deliver to Buyer a
Statement of Net Book Value, which shall be audited by
SRFC's auditors based upon the audits of SRFI's,
SRFC's and LSPI Fiber's books, including an inventory
taken by the SRFI Group beginning at 7:00 a.m. on the
Closing Date and a review of the liabilities as of the
Closing Date. The taking of such inventory may be
observed by Buyer and Buyer's auditors. The Statement
of Net Book Value shall have attached thereto an
auditor's report in the form attached as Schedule 3.3.
To the extent possible, Sellers will provide Buyer
with a preliminary draft of the Statement of Net Book
Value. Buyer and Parents will in good faith attempt
to resolve any disputes with respect to such
calculation before the final Statement of Net Book
Value is rendered.
Buyer may review the Statement of Net Book Value
and Sellers shall make available the work papers of
SRFC's auditors to Buyer and its accountants and Buyer
and its accountants may make inquiries of
representatives of Sellers' and SRFC's auditors.
Buyer shall give written notice to Parents of any
objection to the Statement of Net Book Value within
thirty (30) days after Buyer's receipt thereof. The
notice shall specify in reasonable detail the items in
the Statement of Net Book Value to which Buyer objects
and shall provide a summary of Buyer's reasons for
such objections.
Any dispute between Buyer and either or both
Parents with respect to the Statement of Net Book
Value which is not resolved within fifteen (15)
business days after receipt by Parents of the written
notice from Buyer shall be referred for decision to
Ernst & Young LLP who shall cause an audit partner who
is not engaged in providing services to Sellers or
Buyer to decide the dispute within thirty (30) days of
such referral. The decision by the partner shall be
final and binding on Parents and Buyer. In resolving
any disputed item, such audit partner may not assign a
value to any item greater than the greatest value for
such item claimed by either party or less than the
smallest value for such item claimed by either party.
The cost of retaining the audit partner with respect
to resolving disputes as to the Statement of Net Book
Value shall be borne by Parents and Buyer equally,
unless such partner determines, based on his or her
evaluation of the good faith of the parties, that the
fees should be borne unequally.
4. Payment. The estimated purchase price shall
be paid in U.S. dollars in immediately available funds
on the Closing Date. The amount to be paid on the
Closing Date shall be based upon a preliminary
Statement of Net Book Value delivered to Buyer at
least five (5) business days prior to Closing, which
shall be calculated based on the unaudited combined
balance sheet of the SRFI Group as of the month end
prior to the Closing Date, prepared by Sellers on a
basis consistent with Schedule 3.2. Following
delivery of the final Statement of Net Book Value
under Section 3, any balance due to Sellers or refunds
due to Buyer reflected thereon shall be paid within
ten (10) days of such delivery, (unless there is an
objection under Section 3, in which case the amount
not in dispute shall be paid within ten (10) days of
such delivery, and the balance in dispute shall be
paid within ten (10) days of the resolution of such
objection) together with interest on such amount from
the Closing Date at the announced large business prime
rate of Morgan Guaranty Trust Company of New York.
Except as Buyer may be otherwise advised in
writing by Sellers at least five (5) days prior to any
payment, all payments of the purchase price by Buyer
to Sellers at the Closing or any other amounts owed by
Buyer to Sellers or Parents shall be by wire transfer
to:
Parent and
Affiliates
Bank and Routing Number
Bank Account Number
Pentair
First Bank National Association
(091000022) to attention of Karen
Johnson
xxx-xxxxxxx
Minnesota Pulp
Incorporated II
First Bank National Association,
(091000022) to attention of Russell
Arneson
xxx-xxxxxxx
Synertec
First Bank National Association,
(091000022) to attention of Russell
Arneson
xxx-xxxxxxx
Except as Parents may be otherwise advised in writing
by Buyer at least five (5) days prior to any payment,
payment of any refund to Buyer based on the final
determination of the purchase price pursuant to
Section 3 or any other amounts owed by Sellers or
Parents to Buyer hereunder shall be made by wire
transfer to Harris Trust and Savings Bank -
Consolidated Papers, Inc., Account No. xxxxxxx (ABA
wire transfer routing number xxxx-xxxx-x), marked to
the attention of J.R. Matsch.
All wire transfers shall be sent by 10:00 a.m.
Minneapolis time on the date of such payment, unless
otherwise agreed by the parties.
5. Assumption of Liabilities. At Closing,
Buyer shall assume and agree to satisfy and perform,
to the extent not satisfied or performed prior to the
Closing Date, without any cost or charge to Sellers,
all Assumed Liabilities and Obligations. If the
assumption of the Assumed Liabilities and Obligations
by Buyer under this Section 5 requires the consent of
any third party, Buyer and each respective Parent
and/or Seller agree they will use their best efforts
to obtain such written consent to such assumption;
provided, however, that in no event shall Buyer be
subject, without its consent, to terms and conditions
more restrictive than those set forth in the existing
obligations of Parents being assumed.
6. Closing. (a) The Closing shall take place
on the Closing Date at the offices of Henson & Efron,
P.A. in Minneapolis, Minnesota, at 9:00 o'clock a.m.,
local time, or at such other time and place as may be
mutually agreed upon. Buyer and Sellers each agree
they shall use their best efforts and shall cause all
relevant affiliates to use their best efforts to
obtain fulfillment of all conditions to Closing set
forth in Sections 10 and 11 hereof.
(b) At the Closing, Sellers shall deliver to
Buyer such documents and instructions as provided
herein, including the assignment to Buyer of the LSPI
Supply Contract, reasonably satisfactory in form and
substance to Buyer and its counsel, as shall be
required to vest in Buyer good and marketable title,
free and clear of all liens, charges and encumbrances
(except as specified in this Agreement, if any) in and
to the Purchased Interests. At the Closing, each
Seller and Parent shall deliver to Buyer a release of
all claims of such Seller and Parent and any person or
entity affiliated therewith against all members of the
SRFI Group, in substantially the form of Schedule 6.
(c) At the Closing, Buyer shall deliver to
Parents such documents and instruments as provided
herein and such undertakings, and other instruments as
shall be required to cause Buyer to assume the
obligations as provided in Section 5, all of which
shall be reasonably satisfactory in form and substance
to Parents and their respective counsel.
7. Parents' Representations, Warranties and
Covenants. Subject to the several liability of
Parents provided for in Section 25 hereof, Parents
represent, warrant and covenant to Buyer as follows:
(a) Organization and Authority of Seller. Each
of Pentair, Duluth Holdings, Pentair Duluth Pulp,
Minnesota Power, Synertec, Minnesota Pulp, Minnesota
Pulp II and SRFC is a duly organized and validly
existing corporation in good standing under the laws
of the state of Minnesota. Each of SRFI and LSPI
Fiber is a duly organized and validly existing joint
venture organized as a general partnership under the
laws of the state of Minnesota. Sellers and Parents
have the complete and unrestricted right, power and
authority to sell, transfer and assign all of the
Purchased Interests pursuant to this Agreement and to
carry out the transactions contemplated hereby without
the consent of any other person (except as otherwise
set forth herein), subject only to the SRFI
Restrictions. The execution, delivery and performance
of this Agreement and the consummation of the
transactions contemplated hereby have been duly
authorized by the Boards of Directors and the general
partners of each Seller and Parent, respectively.
(b) Valid and Enforceable Agreement. This
Agreement constitutes a valid and binding agreement of
each respective Seller and Parent, enforceable in
accordance with its terms, except insofar as
enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally, and by
general equitable principles. Neither the execution
and delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, nor the
performance of its obligations hereunder materially
violates or conflicts with, results in a material
breach of, or constitutes a material default under (i)
to the best knowledge of each respective Seller and
Parent, any law, rule, or regulation, or (ii) subject
to the obtaining of necessary consents, which consents
are listed on Schedule 7(b), under various loan
agreements, guarantees, leases, and other agreements
(including without limitation the SRFI Restrictions),
any agreement or other restriction of any kind or
character to which such Seller, Parent or any member
of the SRFI Group is a party, by which such Seller,
Parent or any member of the SRFI Group is bound, or to
which any of the properties of Sellers, Parents or any
member of the SRFI Group is subject. Neither the
execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby,
nor the performance of its obligations hereunder
violates or conflicts with, results in a breach of, or
constitutes a default under, (i) any judgment or
order, decree, award or ruling to which such Seller or
Parent is subject, (ii) the Articles of Incorporation,
By-Laws or Partnership Agreement of such Seller or
Parent, excluding the SRFI Restrictions.
(c) Organization of Subsidiaries.
(i) Each member of the SRFI Group is a
duly organized and validly existing corporation
or joint venture general partnership, as the
case may be, in good standing, to the extent
applicable, in its respective state of
incorporation or organization, as set forth in
Schedule 7(c). Each member of the SRFI Group
has all requisite corporate or general
partnership power and authority, as the case may
be, to carry on its respective business as
presently conducted in all states in which it
currently does business. Each member of the
SRFI Group is duly licensed, registered and
qualified to do business as a foreign
corporation, partnership or joint venture and,
to the extent applicable, is in good standing in
all jurisdictions in which the ownership,
leasing or operation of its assets or the
conduct of its business requires such
qualification, except where the failure to be so
licensed, registered or qualified would not have
a material adverse effect upon its business or
assets.
(ii) All of the outstanding shares
of capital stock or partnership interests
of SRFC and LSPI Fiber have been duly
authorized and validly issued, are fully
paid and nonassessable, and are owned,
beneficially and of record, by Synertec
and Minnesota Pulp II and Pentair Duluth
Pulp, respectively, and are free and clear
of all liens, claims, encumbrances and
restrictions whatsoever, other than the
SRFI Restrictions. SRFC's entire equity
capital consists of 50 authorized shares
of common stock, no par value, of which 50
shares are issued and outstanding. No
shares of capital stock of, or other
ownership interest in, SRFC or LSPI Fiber
are reserved for issuance and there are no
outstanding options, warrants, rights,
other than the SRFI Restrictions,
subscriptions, claims of any character,
agreements, obligations, convertible or
exchangeable securities, or other
commitments, contingent or otherwise,
relating to the capital stock of, or other
ownership interest in, either of such
corporation or partnership pursuant to
which either of such corporation or
partnership is or may become obligated to
issue or exchange any shares of capital
stock of, or other ownership interest in,
such corporation or partnership.
(iii) Except as set forth on
Schedule 7(c), no member of the SRFI Group
owns, directly or indirectly, any capital
stock or other equity or ownership or
proprietary interest in any other
corporation, partnership, association,
trust, joint venture (other than in SRFI)
or other entity.
(iv) True and complete copies of
the agreements containing the SRFI
Restrictions have been furnished or made
available to Buyer; each of those
agreements is currently in good standing
and in full force and effect and no
default by any Seller, Parent or any
member of the SRFI Group party thereto, or
to the best knowledge of Sellers, any
other party thereto, exists thereunder.
(d) Financial Statements.
(i) Attached hereto as Schedule
7(d) are the SRFI Group Financial
Statements. The SRFI Group Financial
Statements were (and the Statement of Net
Book Value will be) prepared in accordance
with the books and records of the
respective members of the SRFI Group,
which were used in the preparation of each
Parent's audited consolidated financial
statements for the fiscal years ended
December 31, 1993 and December 31, 1994.
(ii) The SRFI Group Financial
Statements were (and the Statement of Net
Book Value will be) prepared in accordance
with GAAP consistently applied, but,
except for the audited financial
statements of SRFI, do not include all
information and footnotes required by
generally accepted accounting principles
for complete financial statements. The
Statement of Net Book Value will
adequately reflect all liabilities and
obligations of the SRFI Group required to
be shown thereon in accordance with GAAP,
except for those exceptions to GAAP set
forth on Schedule 3.2.
(iii) The SRFI Group Financial
Statements as of such dates or for the
period ending on such dates present fairly
the financial position and the results of
operations of the members of the SRFI
Group for the periods covered thereby.
All adjustments, consisting of normal
recurring accruals and eliminations and
other similar adjustments, considered
necessary for a fair presentation have
been included.
(e) No Material Change. To the best knowledge
of Sellers, since December 31, 1994 there has been no
material adverse change in the business, financial
position or results of operations of the SRFI Group
taken as a whole.
(f) Leases. Sellers have furnished or made
available to Buyer copies of all leases and subleases
of any personal property used in the operations of the
members of the SRFI Group to which any member of the
SRFI Group is a party, all of which are listed on
Schedule 7(f). Except as set forth on Schedule 7(f),
no consents or approvals are required in connection
with the transactions contemplated hereby. No event
has occurred which is or, after the giving of notice
or passage of time, or both, would constitute a
default under or a material breach of any lease by any
member of the SRFI Group or, to the best knowledge of
Sellers, any other party to such leases. As of the
Closing Date, each lease shall be in full force and
effect in accordance with its terms, as amended from
time to time.
(g) Title to Personal Property. Each member of
the SRFI Group has good and marketable title to its
respective owned personal property as reflected in the
SRFI Group Financial Statements, free and clear of all
liens, claims, encumbrances and restrictions, except
(i) those reflected on Schedule 7(g), (ii) the lien of
the Note Purchase Agreement and (iii) defects in
title, and liens, charges and encumbrances, if any, as
do not materially detract from the value of or
otherwise materially impair the current operations or
financial conditions of the SRFI Group, taken as a
whole.
(h) Real Estate.
(i) Schedule 7(h) sets forth an
accurate legal description of all Real
Estate owned by a member of the SRFI Group
for which a member of the SRFI Group has
contracted to become the owner (the "Owned
Real Estate"), including identification of
the current owner of fee simple title
thereto. The party identified as the
owner on Schedule 7(h) is the legal and
equitable owner of good and marketable
title in fee simple absolute to such Owned
Real Estate, including the buildings,
structures, spurtracks (as set forth on
Schedule 7(h) and improvements situated
thereon and appurtenances thereto, in each
case free and clear of all tenancies and
other possessory interests, security
interests, conditional sale or other title
retention agreements, liens, encumbrances,
mortgages, pledges, assessments,
easements, rights of way, covenants,
restrictions, reservations, options,
rights of first refusal, defects in title,
encroachments and other burdens, except as
disclosed on Schedule 7(h). Except as
disclosed on Schedule 7(h), a member of
the SRFI Group is in possession of the
Owned Real Estate. All contracts,
agreements, options and undertakings
affecting the Owned Real Estate are set
forth in Schedule 7(h) and are legally
valid and binding and in full force and
effect, and to Seller's knowledge, there
are no defaults, offsets, counterclaims or
defenses thereunder, and the SRFI Group
has received no notice that any default,
offset, counterclaim or defense thereunder
exists. Sellers have delivered or made
available to Buyer correct and complete
copies of all such contracts, agreements,
options and undertakings.
(ii) There is no Real Estate
leased, subleased or occupied by a member
of the SRFI Group.
(iii) To the knowledge of Sellers,
except as set forth on the Flood Insurance
Rate Maps prepared by the Federal
Emergency Management Agency
(Community/Parcel No. 270420/004B; revised
as of November 1992), no Real Estate is
located within a flood or lakeshore
erosion hazard zone for which flood
insurance is now required under the
National Flood Insurance Program. Neither
the whole nor any portion of any Real
Estate has been condemned, requisitioned
or otherwise taken by any public
authority, and no notice of any such
condemnation, requisition or taking has
been received. To the knowledge of
Sellers, no such condemnation, requisition
or taking is threatened or contemplated,
except as set forth on Schedule 7(h).
Sellers have no knowledge of any public
improvements which may result in special
assessments against or otherwise affect
the Real Estate, except as set forth on
Schedule 7(h).
(iv) The Real Estate is in good
operating condition and repair (reasonable
wear and tear excepted) and is suitable
and adequate for the purposes for which it
is presently being used.
(v) To the knowledge of Sellers,
except as set forth on Schedules 7(h) or
7(o), the Real Estate is in compliance
with all applicable zoning, building,
health, fire, water, use or similar
statutes, codes, ordinances, laws, rules
or regulations. To the knowledge of
Sellers, the zoning of each parcel of Real
Estate permits the existing improvements
and the continuation following
consummation of the transaction
contemplated hereby of the business of the
SRFI Group as presently conducted thereon.
The SRFI Group has all certificates of
occupancy and authorizations required to
utilize the Real Estate. To Sellers'
knowledge, the SRFI Group has all
easements and rights necessary to conduct
its business, including easements for all
utilities, services, roadway, railway and
other means of ingress and egress. To
Sellers' knowledge, the SRFI Group holds
such rights to any off-site facilities as
are necessary to ensure compliance in all
material respects with all zoning,
building, health, fire, water, use or
similar statutes, codes, ordinances, laws,
rules or regulations and all such rights,
to the extent held by the SRFI Group and
Sellers, shall be conveyed as directed by
Buyer at Closing. Except as disclosed on
Schedule 7(h), to the knowledge of
Sellers, no fact or condition exists which
would result in the termination or
impairment of access to the Real Estate or
discontinuation of sewer, water, electric,
gas, telephone, waste disposal or other
utilities or services. Except as
disclosed on Schedule 7(h), to the
knowledge of Sellers, the facilities
servicing the Real Estate are in full
compliance with all codes, laws, rules and
regulations.
(vi) Sellers have delivered or made
available to Buyer accurate, correct and
complete copies of all existing title
insurance policies, title reports and
surveys, if any, with respect to each
parcel of Real Estate.
(i) Plant and Equipment. Sellers have
furnished to Buyer an accurate list of all plant and
equipment, attached as Schedule 7(i), owned by the
SRFI Group. To the best knowledge of Sellers, all
plant, structures and equipment currently being used
in the conduct of the operations of the SRFI Group are
in all material respects in good operating condition
and repair, subject to normal wear and tear, and to
the best of each Seller's knowledge, are free from
material structural or mechanical deficiencies, except
as disclosed on Schedule 7(i) attached.
(j) Intellectual Property. Sellers have
furnished to Buyer an accurate list of all
Intellectual Property, attached as Schedule 1(t),
owned or used by the SRFI Group. To the best
knowledge of Sellers, no one is infringing upon any
rights of the SRFI Group with respect to any of the
Intellectual Property, no member of the SRFI Group is
infringing on or otherwise acting adversely to the
rights of any person under, or in respect to, any
patents, patent rights, copyrights, licenses,
trademarks, trade names or trademark rights owned by
any person or persons, and there is no claim or
action pending or threatened with respect thereto.
Except as set forth in Schedule 1(t), there are no
royalty, commission or similar arrangements, and no
licenses, sublicenses or agreements pertaining to any
of the Intellectual Property.
(k) Employee Matters. No member of the SRFI
Group has, nor has any member of the SRFI Group ever
had, any employees.
(l) Litigation. Except as set forth on
Schedule 7(l), there are no legal actions, suits,
arbitrations or other legal, administrative or
governmental proceedings or investigations (other than
tax audits or investigations) pending or, to the best
knowledge of Sellers, threatened against any member of
the SRFI Group which might have a material adverse
effect upon the operations or financial condition of
the SRFI Group, taken as a whole. No member of the
SRFI Group is subject to any judgment, order, writ,
injunction, stipulation or decree of any court or any
governmental agency or any arbitrator, except as may
be set forth herein or in any Schedule hereto.
(m) Compliance with Laws.
(i) To the best knowledge of Sellers, the
operations of the members of the SRFI Group have
been and are being conducted in accordance with
all applicable laws, rules and regulations of
applicable governmental authorities (other than
those covered in Section 18 hereof), except for
such breaches that do not and cannot reasonably
be expected to (either individually or in the
aggregate) materially and adversely affect the
financial condition or operations of the SRFI
Group taken as a whole.
(ii) To the best knowledge of Sellers, no
member of the SRFI Group nor any of their
officers or employees, has, directly or
indirectly, given, or agreed to give, any
rebate, gift or similar benefit to any supplier,
customer, distributor, broker, governmental
employee or other person, who was, is or may be
in a position to help or hinder the SRFI Group's
business (or assist in connection with any
actual or proposed transaction) which could
subject Buyer or the SRFI Group's business to
any penalty in any civil, criminal or
governmental litigation or proceeding or which
would have a material adverse effect on the SRFI
Group's business.
(n) Material Contracts. Sellers have furnished
to Buyer a list, attached as Schedule 7(n), of all
contracts and arrangements, written or oral, which
alone or together with other contracts and
arrangements with the same party are material to the
SRFI Group's business taken as a whole. All members
of the SRFI Group have, in all material respects,
performed all of the respective obligations required
to be performed by them to date and are not, and will
not be as of the Closing Date, in default under any
material provision of such contracts or arrangements.
All such contracts and arrangements are and will be as
of the Closing Date in good standing and full force
and effect according to their terms. For purposes of
this Section 7(n), a contract shall be deemed to be
material, (i) if it involves remaining payments of
more than $300,000, or (ii) if it cannot by its terms
be completed or terminated without penalty within 180
days from the Closing Date, or (iii) if the absence of
such contract would have a material adverse effect on
the business of the SRFI Group.
(o) Licenses and Permits. Except as set forth
on Schedule 7(o), each member of the SRFI Group has
all requisite licenses and permits to operate its
business as currently conducted and Sellers have not
been advised of, nor to the best knowledge of Sellers
is there any basis for, any revocation or anticipated
revocation of any permits, licenses or zoning
variances, or of any changes to existing or pending
zoning or other regulations, permits or licenses which
would materially and adversely affect the conduct of
its operations as presently conducted.
(p) Insurance. Schedule 7(p) contains an
accurate and complete list and description of
insurance policies (including the name of the insurer,
coverage, premium and expiration date) which each
member of the SRFI Group currently maintains, or is
named as an additional insured or is entitled to
benefits under (including coverage for events
occurring under prior policies). To the best
knowledge of Sellers, except as set forth on Schedule
7(p), all such policies are in full force and effect
and shall survive the Closing for the benefit of SRFC,
SRFI or Buyer.
(q) Liabilities to PBGC or Multiemployer or
Multiple Employer Plans. No liability to the Pension
Benefit Guaranty Corporation or to any multiemployer
or multiple employer plan has been incurred by the
SRFI Group.
(r) Transactions with Related Parties.
(i) To the best knowledge of Sellers,
except for interest and corporate overhead and
as set forth on Schedule 7(r), none of the SRFI
Group members are a party to any transaction or
proposed transaction, including, without
limitation, the leasing of real or personal
property, the purchase or sale of raw materials
or finished goods, or the furnishing of
services, with any Seller or Parent or with any
person who is related to or affiliated with
Sellers or Parents (other than another member of
the SRFI Group), involving the payment or
accrual of more than $1,000,000 during fiscal
years 1993 or 1994.
(ii) Except as set forth on Schedule 7(r)
or as reflected in the SRFI Group Financial
Statements dated December 31, 1994, neither
Sellers nor Parents nor any person who is
related to or affiliated with Sellers or Parents
has any cause of action or other claim
whatsoever against or owes any material amount
to, or is owed any material amount by, any
member of the SRFI Group.
(s) Bank Accounts. Schedule 7(s) sets forth a
true and complete list of all banks in which any
member of the SRFI Group has an account, safe deposit
box or line of credit, and the names and titles of all
persons authorized to draw thereon or to have access
thereto, and a summary description of the use thereof.
(t) Tax Matters.
(i) All Returns (including
consolidated or combined Returns including
any member of the SRFI Group) required to
be filed on or before the Closing with
respect to any member of the SRFI Group
have been or will be timely filed (within
the time permitted by any timely filing
extension) by or on behalf of such member
of the SRFI Group and all Taxes shown to
be due on such Returns have been timely
paid.
(ii) No member of the SRFI Group
has been a member of an affiliated group
(within the meaning of Section 1504 of the
Code) filing a consolidated federal
Return, other than a group the common
parent of which is a Parent.
(iii) Schedule 7(t) lists all
Returns filed with respect to any of the
members of the SRFI Group for taxable
periods which remain open, indicates those
Returns that have been audited and
indicates those Returns that are currently
the subject of audit or scheduled for an
examination by any relevant taxing
authority.
(iv) Except as disclosed in
Schedule 7(t):
(1) no notice or claim has
ever been made by a
governmental authority
in a jurisdiction where
any member of the SRFI
Group does not file
Returns that it is or
may be subject to Taxes
in that jurisdiction;
(2) no extension of the
statute of limitations
with respect to any
assessment or claim for
Taxes has been granted
by or on behalf of any
member of the SRFI
Group;
(3) there are no liens for
Taxes upon the assets of
any member of the SRFI
Group except liens for
Taxes not yet due;
(4) no amended Returns or
refund claims have been
or are scheduled to be
filed by or on behalf of
any member of the SRFI
Group;
(5) all Taxes and other
liabilities with respect
to completed and settled
audits, examinations or
concluded litigation
have been paid; and
(6) there are no pending
appeals or other
administrative
proceeding with respect
to any Return of any
member of the SRFI
Group, and there is no
deficiency or refund
litigation with respect
to any Return of any
member of the SRFI
Group. No material
issues have been raised
by any relevant taxing
authorities on the audit
of the Returns of any
member of the SRFI
Group. No member of the
SRFI Group has received
any notice of any Tax
deficiency or
assessment.
(v) No member of the SRFI Group has
filed or had filed on its behalf a consent
to the application of Section 341(f) of
the Code.
(vi) Except as disclosed in
Schedule 7(t), no member of the SRFI Group
is a party to any contractual obligation
requiring the indemnification or
reimbursement of any person with respect
to the payment of any Taxes. Except as
disclosed in Schedule 7(t), no claim has
been asserted, which has not been resolved
or satisfied, for any payment under any
agreement disclosed in Schedule 7(t).
(vii) Except as disclosed in
Schedule 7(t), no member of the SRFI Group
is a party to or a beneficiary of any
financing, the interest on which is tax-exempt under the Code,
and none of the
assets of any member of the SRFI Group is
"tax-exempt use property."
(viii) As of the Closing Date, no
member of the SRFI Group is a party to any
agreement, contract, arrangement, or plan
that has resulted or would result,
separately or in the aggregate, in the
payment of any "excess parachute payments"
within the meaning of Section 280G of the
Code.
(ix) Each member of the SRFI Group
is a "United States person" within the
meaning of the Code. No member of the
SRFI Group has been a United States real
property holding corporation within the
meaning of Section 897(c)(2) of the Code
during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code. The
transactions contemplated herein are not
subject to the tax withholding provisions
of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code, or
of any other provision of law. No member
of the SRFI Group has nor had a branch in
any foreign country.
(x) No member of the SRFI Group is
a party to any joint venture, partnership,
or other arrangement or contract that
could be treated as a partnership for
federal income Tax purposes, except for
SRFI or LSPI Fiber.
(xi) Each member of the SRFI Group
has withheld and paid all Taxes required
to have been withheld and paid including
(1) amounts paid to any employee or
statutory employee or any foreign person
or entity; and (2) any backup withholding
required under Section 3406 of the Code.
(u) Accounts Receivable. Schedule 7(u) sets
forth an accurate, correct and complete aging of all
outstanding accounts and notes receivable of SRFC,
SRFI and LSPI Fiber as of December 31, 1994. All
outstanding accounts and notes receivable reflected on
the SRFI Group Financial Statements are, and on the
Statement of Net Book Value will be, due and valid
claims against account debtors for goods or services
delivered or rendered and subject to no defenses,
offsets or counterclaims. All receivables arose in the
ordinary course of business. No receivables are
subject to prior assignment, claim, lien or security
interest, except under the Note Purchase Agreement.
The books and records of SRFC, SRFI and LSPI Fiber
reflect amounts taken as a reserve against
noncollection of accounts receivable, which reserve
has been established in accordance with SRFC's, SRFI's
and LSPI Fiber's normal accounting policies
consistently maintained for the fiscal years ended
December 31, 1993 and December 31, 1994 and there is
no reason to believe that such reserve will not be
adequate for its purpose. As of the Closing Date,
neither SRFC, SRFI nor LSPI Fiber will have incurred
any liabilities to customers for discounts, returns,
promotional allowances or otherwise, except those
granted in the ordinary course of SRFC's, SRFI's or
LSPI Fiber's operations and reflected on the Statement
of Net Book Value. No other member of the SRFI Group
has any business operations which would result in the
establishment of any trade accounts receivable or the
granting of any discounts, returns, promotional
allowances or similar charges.
(v) Inventory. All inventories reflected on
the SRFI Group Financial Statements are, and on the
Statement of Net Book Value will be, properly valued
at the lower of cost or market value on a first-in,
first-out basis in accordance with GAAP. Inventories
of finished goods are of good and merchantable
quality, whether of first line, or off-quality pulp
and contain no material amounts that are not salable
in the ordinary course of business and meet the
current standards and specifications of its business,
except as reserved for on the SRFI Group Financial
Statements. Inventories of raw materials, stores and
replacement parts are, to the best knowledge of
Sellers, (i) of good and merchantable quality and
contain no material amounts that are not usable for
the purposes intended in the ordinary course of the
SRFI Group's operations; (ii) in conformity with
warranties customarily given to purchasers of like
products; and (iii) at levels adequate for and not
excessive in relation to the ordinary course of the
SRFI Group's operations and in accordance with past
inventory stocking practices. Sales of inventories
subsequent to December 31, 1994 have been made only in
the ordinary course of business and at prices and
under terms that are normal and consistent with past
practice.
(w) Motor Vehicles. Schedule 7(w) sets forth
an accurate and complete list of all motor vehicles
used in the business of the SRFI Group, whether owned
or leased. All such vehicles are (i) properly licensed
and registered in accordance with applicable law; (ii)
insured as set forth on Schedule 7(p); (iii) in good
operating condition and repair (reasonable wear and
tear excepted) and (iv) not subject to any lien or
other encumbrance, except as set forth on Schedule
7(w).
(x) Product Warranty. The books and records of
each member of SRFI Group reflect amounts taken as a
reserve against claims and allowances for product
warranties, which reserve has been established in
accordance with the members of the SRFI Group's normal
accounting policies consistently maintained for the
fiscal years ended December 31, 1993 and December 31,
1994 and there is no reason to believe that such
reserve will not be adequate for its purpose. As of
the Closing Date, neither SRFC, SRFI nor LSPI Fiber
will have incurred any unpaid liabilities to customers
for such claims and allowances, except those granted
in the ordinary course of business and reflected on
the Statement of Net Book Value.
Disclosure of any fact in any provision of this
Agreement or in any Schedule attached hereto shall
constitute disclosure thereof for the purposes of any
other provision or Schedule.
8. Buyer's Representations and Warranties.
Buyer represents and warrants to Parents as follows:
(a) Organization. Buyer is a duly organized
and validly existing corporation in good standing
under the laws of the state of Wisconsin. Buyer has
all requisite corporate power to own its property and
carry on its business as presently conducted.
(b) Authority. The execution, delivery and
performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly
authorized by the Board of Directors of Buyer.
(c) Valid and Enforceable Agreement. This
Agreement constitutes a valid and binding agreement of
Buyer, enforceable in accordance with its terms,
except insofar as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors
generally, and by general equitable principles.
Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated
hereby, nor the performance of Buyer's obligations
hereunder materially violates or conflicts with,
results in a material breach of, or constitutes a
material default under (i) to the best knowledge of
Buyer, any law, rule or regulation, or (ii) subject to
the obtaining of necessary consents under various
agreements, any agreement or other restriction of any
kind or character to which Buyer is a party, by which
Buyer is bound, or to which any of the properties of
Buyer is subject. Neither the execution or delivery
of this Agreement, nor the consummation of the
transactions contemplated hereby, nor the performance
of Buyer's obligations hereunder, violates or
conflicts with, results in a breach of or constitutes
a default under (i) any judgment or order, decree,
award or ruling to which Buyer is subject, or (ii) the
Articles of Incorporation or By-Laws of Buyer.
(d) No Insolvency. Buyer is not currently
insolvent, and neither the purchase of the Purchased
Interests, the assumption of the Assumed Liabilities
and Obligations pursuant to Section 5, nor any related
transaction or event shall render Buyer insolvent or
leave Buyer with assets which are unreasonably small
in relation to the business of the SRFI Group and its
own business operations, nor does Buyer intend to
incur debts beyond its ability to pay them as they
come due.
(e) Financial Statements. Buyer's financial
statements for the year ended December 31, 1994, as
filed with the Securities and Exchange Commission
(copies of which have been delivered to Seller) (i)
were prepared in accordance with and accurately
reflect its books and records, (ii) were prepared in
accordance with generally accepted accounting
principles, consistently applied, and (iii) present
fairly the financial position and the results of
operations of Buyer for the periods covered thereby.
(f) Investment Intent. Buyer is purchasing the
Stock for its own account and not with a view to, or
present intention of, sale or distribution thereof in
violation of the Securities Act of 1933, as amended
(the "1933 Act") and such shares will not be disposed
of in contravention of the 1933 Act. Buyer
acknowledges that such shares are not and have not
been registered with the Securities and Exchange
Commission or any securities commission or agency of
any state, including the state of Minnesota, and may
not be transferred or disposed of without registration
under the 1933 Act and applicable state securities
laws or an exemption from such registration.
Disclosure of any fact in any provision of this
Agreement or in any Schedule attached hereto shall
constitute disclosure thereof for the purposes of any
other provision or Schedule.
9. Actions Pending Closing. From the date
hereof through the Closing Date, Sellers shall take,
or cause their respective Affiliates to take, all
actions necessary and appropriate to comply with, or
to refrain from taking any action in breach of, the
following provisions for the period between the
execution of this Agreement and the termination hereof
or the Closing Date:
(a) Operations. Each member of the SRFI Group
shall conduct its operations only in the ordinary
course of business and shall not enter or permit any
member of the SRFI Group to enter into any transaction
or perform any act that would constitute a breach of
the representations, warranties, or agreements
contained herein. Each member of the SRFI Group shall
use its best efforts to preserve its business and its
organization intact and to keep available the services
of its present employees. Attached as Schedule 9(a)
is a list of capital expenditures and commitments to
be initiated by the SRFI Group prior to the Closing
Date. No member of the SRFI Group shall initiate any
capital expenditure or commitment other than as set
forth on Schedule 9(a) or initiate any capital
expenditure or commitment as set forth on Schedule
9(a) in excess of $25,000 without Buyer's approval,
which approval shall not be unreasonably withheld;
provided, however, that any member of the SRFI Group
may initiate emergency capital expenditures or
commitments consistent with the past practices of such
SRFI Group member. Sellers or Parents shall promptly
notify Buyer of such emergency expenditures or
commitments.
(b) Access to Records. Sellers shall, and
shall cause the members of the SRFI Group to, make
available to Buyer, its agents and employees, all
books and records in their possession relating to the
business of the SRFI Group; provided, however, that
Sellers have not made, and shall not be deemed to have
made, any representations or warranties whatsoever
with respect to any of such books or records or any
other documents provided to or made available to
Buyer, except as expressly set forth in this
Agreement.
(c) Access to Facilities. Buyer, its agents
and employees, shall be given full access during
regular business hours to the physical facilities of
SRFI, upon appointment with the President thereof and
accompanied by such President or his or her
designee(s). Sellers and each member of the SRFI
Group and their respective employees shall cooperate
fully with Buyer in its examinations and inspections,
but not to the detriment of the ongoing business
operations of the SRFI Group prior to Closing.
(d) Hart-Scott-Rodino Filings. Parents and
Buyer shall cooperate in the prompt preparation and
filing of all notifications and reports which may be
required with respect to the transactions contemplated
by this Agreement pursuant to Section 7A of the
Clayton Act. Parents and Buyer shall also cooperate
in responding promptly to all inquiries from the
Federal Trade Commission or the Department of Justice
resulting from the filing of such notifications and
reports.
(e) Notice of Developments. At least ten (10)
business days prior to the Closing Date, Sellers shall
deliver to Buyer a complete update of the Schedules
from the date hereof. Each party hereto shall notify
the other of any development(s) which shall constitute
a breach of any of the representations and warranties
in Sections 7 or 8 above. The party so notified has
the right to terminate this Agreement within the
period of ten (10) business days from the date of
receipt of such notification, if as a result of such
development the financial condition, results of
operations or prospects of the SRFI Group as a whole,
on the one hand, or Buyer, on the other hand, have
been materially and adversely affected. If within
such ten (10)-day period, the party notified shall not
have exercised its right to terminate this Agreement,
the written notice shall be deemed to have amended
this Agreement and the relevant schedules attached
thereto, to have qualified the representations and
warranties contained in Sections 7 or 8 above and to
have cured any misrepresentation or breach of warranty
that otherwise might have existed hereunder by reason
of such development, including for purposes of Section
15 hereof.
(f) SRFI Restrictions. Prior to the Closing
Date, each Seller shall waive or abandon its right of
first refusal with respect to the transfer of the
other's interest in the entities that own indirectly
an interest in LSPI Fiber, SRFC or SRFI pursuant to
this Agreement.
(g) Best Efforts. Sellers, Parents and Buyer
shall use their best efforts to consummate the
transactions contemplated by this Agreement and shall
not take any other action inconsistent with their
respective obligations hereunder or which could hinder
or delay the consummation of the transactions
contemplated hereby. From the date hereof through the
Closing Date, Sellers, Parents and Buyer shall use
their best efforts to fulfill the conditions to their
obligations hereunder and to cause their
representations and warranties to remain true and
correct as of the Closing Date.
10. Conditions Precedent to Obligations of
Buyer. The obligations of Buyer hereunder (unless
expressly waived by Buyer) are subject to the
fulfillment, prior to or at Closing, as the case may
be, of each of the following conditions:
(a) No Errors; Performance of Obligations. The
representations and warranties of Parents herein shall
be true and correct as of the Closing Date. Sellers
and Parents shall have performed the obligations set
forth in Section 9 and in all material respects all of
the other obligations to be performed by them
hereunder in the time and manner herein stated.
(b) Officer's Certificates. Sellers and
Parents shall have delivered to Buyer certificates,
dated as of the Closing Date, executed by their
respective Secretaries, and in form and substance
satisfactory to Buyer, certifying that the covenants
and conditions specified in this Agreement to be met
by Sellers and Parents have been performed or
fulfilled and that the representations and warranties
herein made by Sellers and Parents are true and
correct as of such date.
(c) Certified Copy of Resolutions. Sellers and
Parents shall have delivered to Buyer a certified copy
of resolutions adopted by their respective Boards of
Directors authorizing the execution and delivery of
this Agreement and the consummation of the
transactions contemplated hereby.
(d) Opinion of Sellers' and Parent's Counsel.
Sellers and Parents shall have delivered to Buyer the
opinion of their respective counsel, dated as of the
Closing Date, in form and substance satisfactory to
Buyer and its counsel, giving the following clean
legal opinions:
(1) valid organization of Sellers,
Parents and each of the
members of the SRFI Group;
(2) corporate power and authority of
each Seller and Parent to enter into
the Agreement;
(3) necessary foreign
qualification of members of
the SRFI Group;
(4) No Breach or Default Opinion
with respect to members of the
SRFI Group;
(5) No Violation Opinion with
respect to each Seller and
Parent;
(6) Remedies Opinion with respect
to each Seller and this
Agreement;
(7) Legal Proceedings Opinion with
respect to each Seller, Parent
and members of the SRFI Group;
(8) other legal matters agreed
upon between Sellers, Parents
and Buyer; and
(9) no violation of
registration provisions
of the 1933 Act and
applicable state
securities laws;
all in accordance with, and subject to the General
Qualifications and other limitations and provisions
contained in, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(e) Injunctions. No injunction shall have
issued restricting or prohibiting the transactions
contemplated by this Agreement.
(f) Clayton Act Matters. The waiting period
required by Section 7A of the Clayton Act shall have
expired or been terminated.
(g) Environmental Matters. The results of any
inspections, soil test boring, soil tests, drainage
tests, surveys, topographical analyses, engineering
studies or other investigations performed or obtained
by Buyer shall not have disclosed evidence of
Hazardous Materials in, on or adjacent to any of the
real properties owned or occupied by any member of the
SRFI Group, other than those disclosed in any
environmental studies or other information listed on
Schedule 10(g) which would materially and adversely
affect the operations of the SRFI Group taken as a
whole. Buyer shall not have received any evidence
that there are existing violations of any
Environmental Law, other than those described in
Schedule 10(g), or that any requisite environmental
license or permit or any occupance, use or building
permits or other approvals from applicable
governmental authorities are currently required for
the continued operation of the facilities owned by the
SRFI Group which have not been obtained or are not in
effect. In order to enable Buyer to conduct a due
diligence investigation, Sellers, Parents, the SRFI
Group, and any entity within the LSPI Group with
relevant information on the environmental status of
the operating facilities of the SRFI Group shall
provide Buyer with access to the environmental files,
licenses, permits, permit applications, consultant
reports, notices from local, state and federal
governmental entities, environmental audit and inspec-
tion reports, insurance files, and other information
necessary for Buyer to assess the environmental status
of the operating facilities of the SRFI Group, as well
as permit or obtain permission for Buyer to conduct
soil and groundwater testing on or beneath the real
properties owned or occupied by any member of the SRFI
Group.
(h) SRFI Restrictions. Each Seller and Parent
shall have waived or abandoned its right of first
refusal with respect to the transfer of the other's
interest in the entities that own indirectly an
interest in LSPI Fiber, SRFC or SRFI pursuant to this
Agreement.
(i) Consents. All consents and releases by
third parties that are required for the transfer of
the Purchased Interests or the Assumed Liabilities and
Obligations, or that are required for the consummation
of the transactions contemplated hereby, or that are
required in order to prevent a breach of or a default
under or a termination of any agreement to which any
Seller or any member of the SRFI Group or Affiliates
is a party or to which any portion of the property of
any Seller or any member of the SRFI Group or
Affiliates is subject, including, but not limited to,
the consent of New York Life Insurance Company
relating to the Note Purchase Agreement, shall have
been obtained or provided for.
(j) Financing. Buyer shall have used its best
efforts to maintain an aggregate of at least $250
million available under Buyer's committed and
uncommitted lines of credit until the Closing Date,
and such lenders shall not have cancelled or revoked
such lines of credit prior to the Closing Date.
(k) FIRPTA Certificate. Sellers shall have
furnished Buyer with certificates of non-foreign
status signed by the appropriate party and sufficient
in form and substance to relieve Buyer of all
withholding obligations under Section 1445 of the
Code. If Sellers cannot furnish such certificates or
Buyer is not entitled to rely upon such certificates
under the provisions of Section 1445 of the Code and
the regulations thereunder, Sellers shall take and/or
permit Buyer to take any and all steps necessary to
allow Buyer to satisfy the requirements of Section
1445 of the Code.
(l) Assignments of Contracts. Sellers
shall have assigned to Buyer the LSPI Supply Contract
and all other Material Contracts.
(m) Purchase of LSPI and Niagara Paper. On or
prior to the Closing Date, Buyer shall have purchased
all of the issued and outstanding capital stock of
Pentair Duluth Corp., a Minnesota corporation,
Minnesota Paper Incorporated, a Minnesota corporation
and Niagara of Wisconsin Paper Corporation, a
Wisconsin corporation.
(n) Real Estate Consents. Sellers shall
deliver to Buyer any consents or approvals of any
parties required pursuant to the terms of any
contract, agreement, option or undertaking affecting
the Owned Real Estate.
(o) Title Insurance and Surveys.
(i) Buyer shall have obtained an
ALTA Owners Policy of Title Insurance Form
B Owner's Form (the "Title Policy") for
each parcel of Owned Real Estate issued by
a nationally recognized title company
reasonably acceptable to Buyer (the "Title
Company"). The Title Policy shall be in
the amount of the purchase price allocated
to the Owned Real Estate by Buyer, showing
fee simple title to the Real Estate in a
member of the SRFI Group (or if the member
of the SRFI Group is a contract purchaser,
the seller designated under the applicable
sales contract), subject only to current
real estate taxes not yet due and payable
as of the Closing Date, liens and
encumbrances reflected on Schedule 10(m)
hereto, and such other covenants,
conditions, easements and exceptions to
title as Buyer may approve in writing
(collectively, the "Permitted
Exceptions"). With reasonable promptness,
after the date of this Agreement, Buyer
shall order commitments (the
"Commitments") for the Title Policy.
Copies of the Commitments shall be
promptly delivered to Sellers. The
Commitments and the Title Policy to be
issued by the Title Company shall have all
Standard and General Exceptions deleted so
as to afford full "extended form coverage"
and shall contain an ALTA Zoning
Endorsement 3.1, contiguity, non-imputation,
and such other endorsements as
may be reasonably requested by Buyer. At
Closing, Sellers shall deliver to Buyer, a
seller's affidavit or similar instruments
as the Title Company may require. Buyer
shall be responsible for the cost of all
title insurance charges, premiums and
endorsements, title abstracts and
attorneys' opinions, including all search,
continuation and later-date fees. To the
extent that any parcel of Owned Real
Estate is registered Torrens title,
Sellers shall deliver the owner's
duplicate certificates of titles.
(ii) Buyer shall have obtained an
as-built plat of survey of each parcel of
the Owned Real Estate (the "Surveys")
prepared by a registered land surveyor or
engineer, licensed in the respective
states in which the Owned Real Estate is
located, dated on or after the date
hereof, certified to Buyer, the Title
Company and such other entities as Buyer
may designate and conforming to current
ALTA Minimum Detail Requirements for Land
Title Surveys, sufficient to cause the
Title Company to delete the standard
printed survey exception and to issue the
Title Policy free from any survey
objections or exceptions whatsoever.
Buyer shall pay the entire cost of
obtaining the Surveys. Any Survey may be
a recertification of a prior survey,
provided that it meets the above-described
criteria. Each Survey shall show all
conditions as then existing, including the
location of all pipes, wires and conduits
serving the Owned Real Estate and their
connections to public ways, parking areas
denominated as such, loading docks and
other improvements, the access to and from
the improvements on the Owned Real Estate,
and a flood plain certification indicating
no flood zone classification or area which
would materially interfere with the normal
operations of the SRFI Group. With
reasonable promptness after the date of
this Agreement, Buyer shall order the
Surveys. Copies of the Surveys shall be
promptly delivered to Sellers.
(iii) If (i) any Commitment or
owner's duplicate certificate of title
discloses a title exception other than a
Permitted Exception that represents a
defect affecting the marketability of the
title to any parcel of Owned Real Estate
(an "Unpermitted Exception") or (ii) any
Survey discloses that improvements located
on the surveyed land encroach onto
adjoining land or onto any easements,
building lines or set-back requirements,
or encroachments by improvements from
adjoining land onto the surveyed land or
onto any easements for the benefit of the
surveyed land or overlap or reflects that
any utility service to the improvements or
access thereto does not lie wholly within
the Owned Real Estate or an unencumbered
easement for the benefit of the Owned Real
Estate or reflects any other matter, any
of which materially and adversely affects
the use or improvements of such parcel of
Owned Real Estate, or any other matter
which renders title to any Owned Real
Estate unmarketable (a "Survey Defect"),
then, in any such event, Sellers shall
have thirty (30) days from the date of
delivery thereof to have the Unpermitted
Exception removed from such Commitment and
owner's duplicate certificate of title, if
applicable, or the Survey Defect corrected
or insured over by an appropriate title
insurance endorsement, all at Sellers'
cost in a manner reasonably satisfactory
to Buyer, and in any such event the
Closing shall be extended, if necessary,
to the date which is five (5) business
days after the expiration of such 30-day
period. If Sellers fail to have any
Unpermitted Exception removed or any
Survey Defect corrected or otherwise
insured over to the reasonable
satisfaction of Buyer within the time
specified therefor, Buyer, at its sole
option, upon not less than three (3) days'
prior written notice to Sellers, may
terminate this Agreement and all of
Buyer's obligations hereunder.
(p) Note Purchase Agreement. Sellers and
Parents and their Affiliates shall have been released
under the Note Purchase Agreement or the outstanding
indebtedness under the Note Purchase Agreement shall
have been repaid.
(q) Other Matters. All corporate and other
proceedings and actions taken in connection with the
transactions contemplated hereby and all certificates,
opinions, agreements, instruments and documents
mentioned herein or incident to any such transaction
shall be delivered to Buyer and be reasonably
satisfactory in form and substance to Buyer and its
counsel.
11. Conditions Precedent to Obligations of
Sellers. The obligations of Sellers and Parents
hereunder (unless expressly waived by Sellers) are
subject to fulfillment by Buyer, prior to or at
Closing, as the case may be, of each of the following
conditions:
(a) No Errors; Performance of Obligations. The
representations and warranties of Buyer herein shall
be true and correct as of the Closing Date. Buyer
shall have performed in all material respects all of
the obligations to be performed by it hereunder in the
time and manner herein stated.
(b) Officer's Certificate. Buyer shall have
delivered to Sellers a certificate, dated as of the
Closing Date, executed by an officer of Buyer, and in
form and substance satisfactory to Sellers, certifying
that the covenants and conditions specified in this
Agreement to be met by Buyer have been performed or
fulfilled and that the representations and warranties
herein made by Buyer are true and correct as of such
date.
(c) Certified Copy of Resolutions. Buyer shall
have delivered to Sellers a certified copy of
resolutions adopted by the Board of Directors of Buyer
authorizing the execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby.
(d) Opinion of Buyer's Counsel. Buyer shall
have delivered to Sellers the opinion of its counsel,
dated as of the Closing Date, in form and substance
satisfactory to Sellers, Parents and their counsel,
giving the following clean legal opinions:
(1) valid organization of Buyer;
(2) corporate power and authority of
Buyer to enter into the Agreement;
(3) No Breach or Default Opinion;
(4) No Violation Opinion;
(5) Legal Proceedings Opinion;
(6) Remedies Opinion with respect to
this Agreement; and
(7) other legal matters agreed
upon between Sellers, Parents
and Buyer;
all in accordance with, and subject to the General
Qualifications and other limitations and provisions
contained in, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(e) Injunctions. No injunctions shall have
issued restricting or prohibiting the transactions
contemplated by this Agreement.
(f) Clayton Act Matters. The waiting period
required by Section 7A of the Clayton Act shall have
expired or been terminated.
(g) Financing. Buyer shall have used its best
efforts to maintain an aggregate of at least $250
million available under Buyer's committed and
uncommitted lines of credit until the Closing Date and
such lenders shall not have cancelled or revoked such
lines of credit prior to the Closing Date.
(h) Purchase of LSPI and Niagara Paper. On or
prior to the Closing Date, Buyer shall have purchased
all of the issued and outstanding capital stock of
Pentair Duluth Corp., a Minnesota corporation,
Minnesota Paper Incorporated, a Minnesota corporation
and Niagara of Wisconsin Paper Corporation, a
Wisconsin corporation.
(i) Note Purchase Agreement. Sellers and
Parents and their Affiliates (except SRFC) shall have
been released under the Note Purchase Agreement and
the SRFI Pledges by Buyer's assumption of the Note
Purchase Agreement or the repayment of the outstanding
indebtedness under the Note Purchase Agreement shall
have been made by Buyer.
(j) Other Matters. All corporate and other
proceedings and actions taken in connection with the
transactions contemplated hereby and all certificates,
opinions, agreements, instruments and documents
mentioned herein or incident to any such transaction
shall be delivered to Sellers and be reasonably
satisfactory in form and substance to Sellers and
their counsel.
12. Broker. Pentair represents and warrants
that CS First Boston was retained by it to represent
it in this transaction. Minnesota Power represents
and warrants that PaineWebber Incorporated was
retained by it to represent it in this transaction.
Buyer represents and warrants that Dillon, Read & Co.
Inc. has been retained by Buyer to represent it. Each
Parent shall be responsible for payment of all fees
and expenses of its respective investment banker and
Buyer shall be responsible for payment of all fees and
expenses of Dillon, Read & Co. Inc. Should any claims
for commissions be made by any other person claiming
an interest in this Agreement, or in the underlying
transactions, by reason of any agreement, under-
standing or other arrangement with Buyer or with
either Parent, or their respective agents, servants,
employees, or other representatives, then the party
through, or on account of, whom such claims are made
shall indemnify and hold harmless the other parties
from any and all liabilities and expenses in
connection therewith in accordance with the provisions
of Section 15 below. The foregoing provisions of this
Section 12 shall survive not only the Closing
hereunder, but also any termination or cancellation of
this Agreement.
13. [Intentionally Left Blank].
14. Confidential Information. (a) Buyer
acknowledges that pursuant to its right to inspect
Sellers' and the SRFI Group's records and facilities
under Section 9, Buyer shall become privy to
Confidential Information. Buyer agrees that in the
event the transaction contemplated by this Agreement
is not completed, all Confidential Information
disclosed to Buyer shall remain confidential, shall
not be used for the benefit of Buyer or any of Buyer's
affiliates or disclosed to any person or entity, and
all recorded evidence thereof shall be delivered to
Sellers together with an officer's certificate to the
effect that no copies thereof or any extracts,
derivatives or compilations thereof remain in
possession of Buyer, its employees, affiliates,
agents, counsel or auditors. The confidentiality and
nonuse provisions hereof shall survive any termination
of this Agreement until August 26, 1997 with respect
to Pentair and January 9, 1998 with respect to
Minnesota Power. Buyer acknowledges that it has
entered into a confidentiality letter dated August 26,
1994 between itself and CS First Boston on behalf of
Pentair, and a confidentiality letter dated January 9,
1995 between itself and PaineWebber on behalf of
Minnesota Power, and agrees that such confidentiality
letters shall continue in full force and effect for
the duration of their respective terms in addition to
the provisions of this Section 14.
(b) Sellers and Parents agree that in the event
the transaction contemplated by this Agreement is
completed, all confidential and proprietary
information related to the SRFI Group shall remain
confidential, shall not be used for the benefit of
Sellers, Parent or any of their affiliates or
disclosed to any person or entity. The
confidentiality and nonuse obligations of Sellers and
Parents hereunder shall be on the same terms and
conditions as the confidentiality letters set forth in
Section 14(a) and shall survive any termination of
this Agreement until August 26, 1997 with respect to
Pentair and January 9, 1998 with respect to Minnesota
Power.
15. Indemnification.
(a) Without limiting any remedy Buyer may have
hereunder, Parents hereby agree to indemnify, defend
and hold Buyer harmless from and against and in
respect of any and all liabilities, losses, damages,
claims, costs and expenses, including reasonable
attorneys fees, suffered or incurred by Buyer, when so
suffered or incurred, by reason of or relating to:
(i) any representation or warranty
of Parents or Sellers contained in this
Agreement being breached or untrue;
(ii) any covenant or agreement of
Sellers or Parents contained in this
Agreement being breached or not fulfilled
in any material respect, and not waived;
(iii) the assertion against Buyer
of any other liability of any Seller or
Parent not assumed by Buyer hereunder; or
(iv) the assertion against Buyer,
SRFC or SRFI of any liability of the SRFI
Group assumed by Sellers or Parents;
provided, however, that any claim arising out of any
breach of warranty or otherwise relating to (x)
environmental conditions, permits or liabilities or
obligations with respect to Hazardous Materials shall
be dealt with solely in accordance with Section 18
hereof and (y) taxes shall be dealt with solely in
accordance with Section 23 hereof.
(b) Without limiting any remedy Parents and
Sellers may have hereunder, Buyer hereby agrees to
indemnify, defend, and hold Parents and Sellers harm-
less from and against and in respect of any and all
liabilities, losses, damages, claims, costs and
expenses, including reasonable attorneys fees, by
reason of or relating to:
(i) any representation or warranty
by Buyer contained in this Agreement being
breached or untrue;
(ii) any covenant or agreement of Buyer
contained in this Agreement being breached or
not fulfilled in a material respect, and not
waived; or
(iii) the failure of Buyer to pay,
discharge, or perform any guaranty,
obligation or liability assumed by Buyer
hereunder (including without limitation
the Assumed Liabilities and Obligations.
(c) Notice of any claim of indemnification
under this Agreement (other than for claims pursuant
to Sections 18 and 23) shall be effective only if such
notice shall have been given in writing to the
Indemnitor (as hereinafter defined) on or prior to
December 31, 1997. Notice of claims by the Parents
against Buyer regarding Assumed Liabilities and
Obligations shall be effective only if given in
writing on or prior to the date six months following
the date on which the liability of Parents is
discharged with respect to the last outstanding
Assumed Liabilities and Obligations.
(d) The first $1,500,000 in the aggregate of
claims made by Buyer or by Parents and Sellers as a
group (except claims against Parents under Sections 19
or 23 or under subparagraphs 15 (a)(iii) and (iv)
above, claims against Buyer under Section 19 or under
subparagraphs 15 (b)(iii) above or claims against
either Buyer or Parents under Sections 12 or 14
hereof) pursuant to this Section shall be borne by
that party and shall not be indemnifiable. The
minimum amount of each such claim shall be not less
than $50,000 in the aggregate.
(e) In the event that indemnification is sought
with respect to any obligation of Buyer and Parents
and Sellers under this Agreement, the party seeking
indemnification (the "Indemnitee") shall give the
party from whom indemnification is sought (the "Indem-
nitor") notice of any claim of the commencement of any
action or proceeding promptly after the Indemnitee
receives notice thereof, and shall permit the
Indemnitor to assume the defense of any such claim or
litigation resulting from such claim.
If the Indemnitor assumes the defense of any
such claim or litigation resulting therefrom, the
obligations of Indemnitor as to such claim shall be
limited to taking all steps necessary in the defense
or settlement of such claim or litigation resulting
therefrom and to holding the Indemnitee harmless from
and against any and all losses, damages and
liabilities caused by or arising out of any settlement
approved by the Indemnitor or any judgment in
connection with such claim or litigation resulting
therefrom.
The Indemnitee may participate, at its expense,
in the defense of any such claim or litigation,
provided that the Indemnitor shall direct and control
the defense of such claim or litigation.
Except with the written consent of the
Indemnitee, the Indemnitor shall not, in the defense
of such claim or any litigation resulting therefrom,
consent to entry of any judgment or enter into any
settlement which does not include as an unconditional
term thereof, the giving by the claimant or the
plaintiff to the Indemnitee of a release from all
liability with respect to the claim or litigation.
If the Indemnitor shall not assume the defense
of any such claim or litigation resulting therefrom,
the Indemnitee may defend against such claim or
litigation in such manner as it may deem appropriate
and, unless the Indemnitor shall deposit with the
Indemnitee a sum equivalent to the total amount
demanded in such claim or litigation, or shall deliver
to Indemnitee a surety bond for such amount in form
and substance reasonably satisfactory to Indemnitee,
Indemnitee may settle such claim or litigation on such
terms as it may reasonably deem appropriate, and the
Indemnitor shall promptly reimburse Indemnitee for
the amount of all costs and expenses, legal or
otherwise, reasonably incurred by the Indemnitee in
connection with the defense against or settlement of
such claims or litigation. If no settlement of such
claim or litigation is made, the Indemnitor shall
promptly reimburse the Indemnitee for the amount of
any final judgment rendered with respect to such claim
or in such litigation and for all reasonable costs and
expenses, legal or otherwise, incurred by the
Indemnitee in the defense against such claim or
litigation, but only to the extent that such amounts
are actually paid.
16. [Intentionally left blank]
17. Expenses. Parents, Sellers and Buyer shall
each be responsible for all of their own expenses
incurred in connection with the transactions
contemplated hereby. Parents and Sellers shall be
responsible for the accounting and auditing fees and
expenses related to the preparation of the Statement
of Net Book Value. Parents and Sellers shall
cooperate and cause their accountants and SRFI's
accountants to cooperate and assist Buyer and its
accountants (including consenting to the use of the
SRFI Group Financial Statements) with respect to any
filings by Buyer with the Securities and Exchange
Commission in connection with the transactions
contemplated hereby. Parents and Sellers shall be
responsible for any and all fees and expenses of
Parents', Sellers' and SRFI's accountants with respect
to the foregoing. Buyer will pay the incremental
costs and expenses of auditing the SRFI financial
statements or other information required by Buyer,
other than the Statement of Net Book Value as of the
Closing Date. Buyer will pay the cost of the
Commitments, Title Policies and Surveys set forth in
Section 10(o).
18. Environmental Matters.
(a) Warranty. Parents warrant that, other
than as disclosed to Buyer pursuant to Schedule 10(g)
attached:
(i) Compliance with Environmental Laws.
The business and operations of each member of
the SRFI Group comply in all material respects
with all applicable Environmental Laws, except
to the extent that such noncompliance could not
be reasonably expected to have a material
adverse effect on the business, operations,
properties, assets or condition (financial or
otherwise) of the SRFI Group.
(ii) Notice/Receipt of Notice. No member
of the SRFI Group has given, or is required to
give, nor has any member of the SRFI Group
received, any written notice, letter, citation,
or order, or any written warning, complaint,
inquiry, claim or demand (or if verbal, to the
extent the warning, complaint, inquiry, claim or
demand is recorded in a written log) that: (i)
any member of the SRFI Group has violated, or is
about to violate, any Environmental Law; (ii)
there has been a release, or there is a threat
of release, of a non-de minimis quantity of
Hazardous Material from any member of the SRFI
Group's property, facilities, equipment or
vehicles or previously owned or leased
properties; (iii) any member of the SRFI Group
may be or is liable, in whole or in part, for
material costs of cleaning up, remediating,
restoring or responding to a release of
Hazardous Material; (iv) any of the SRFI Group's
property or assets or previously owned or leased
properties or assets are subject to a lien in
favor of any governmental entity for any
liability, costs or damages, under any
Environmental Law; and (v) any member of the
SRFI Group may be or is liable in whole or in
part, for natural resource damages; provided,
that for purposes of liability for natural
resource damages such notice, letter, citation,
order, inquiry, claim or demand was made by a
governmental agency.
(iii) Property on Environmental Cleanup
Lists. No property now or previously owned or
leased by the SRFI Group is listed (or with
respect to Owned Real Estate proposed for
listing) on the National Priorities List
pursuant to Comprehensive Environmental
Response, Compensation and Liability Act of
1980, as amended (42 U.S.C. section 9601 et seq.)
("CERCLA"), on the CERCLIS or on any similar
state list of sites requiring investigation or
clean-up.
(iv) [Intentionally left blank.]
(v) Past Disposal -- On site. Neither
any member of the SRFI Group nor to the best
knowledge of Sellers any previous owner or other
person, has ever caused or permitted any
material release or disposal of any Hazardous
Material on, under or at any of the facilities
or properties of the SRFI Group or any part
thereof, and none of such facilities or
properties, nor any part thereof have ever been
used (whether by any member of the SRFI Group or
to Sellers' best knowledge by any other person)
as a permanent storage facility or disposal site
for any Hazardous Material.
(vi) Underground Storage Tanks. There
are no underground storage tanks, including any
associated piping, active or abandoned,
including petroleum storage tanks, on or under
any property now or previously owned or leased
by the SRFI Group that, singly or in the
aggregate, have, or may reasonably be expected
to have, a material adverse effect on the
financial condition, operations, assets,
business, or properties of the SRFI Group.
(vii) Off-Site Disposal. No member of
the SRFI Group has directly transported or
directly arranged for the transportation of any
Hazardous Material to any location which is
listed, proposed for listing or, to the best
knowledge of Sellers, which if known to the
state or federal government would warrant
listing on the National Priorities List pursuant
to CERCLA, on the CERCLIS or on any similar
state list or which is or reasonably could be
the subject of federal, state or local
enforcement actions or other investigations
which may reasonably be expected to lead to
material claims for any remedial work, damage to
natural resources or personal injury, including
claims under CERCLA.
(viii) PCBs/Asbestos. There are no PCB's
or friable asbestos present at any property now
or previously owned or leased by the SRFI Group
that, singly or in the aggregate, have, or may
reasonably be expected to have, a material
adverse effect on the financial condition,
operations, assets, business or properties of
the SRFI Group.
(ix) Pollution Control Equipment. All
pollution control equipment is in proper
operating condition, has been properly
maintained, and, in the case of major ("end-of-pipe")
wastewater treatment and air pollution
control facilities, has been designed to
maintain compliance with applicable
Environmental Laws based upon the current
production rates and operating policies of SRFI
in effect since January 1, 1995. All material
actions necessary to maintain in force any
original, as delivered, manufacturer warranties
have been taken with respect to all major
components of wastewater and air pollution
control facilities.
(x) Other Environmental Conditions Off-Site.
To Sellers' best knowledge there are no
sites or locations currently owned or leased by
the SRFI Group where Hazardous Materials were
disposed of which with the passage of time, or
the giving of notice or both could reasonably be
expected to give rise to any material liability
under any Environmental Law, to any member of
the SRFI Group.
(b) Indemnity. Subject to the provisions of
Section 18(c) below and the limitations on
indemnification set forth in Section 15(d) above,
Parents shall indemnify and hold Buyer and the members
of the SRFI Group harmless from and against any and
all losses, liabilities, damages, injuries, penalties,
fines, costs, expenses and claims of any and every
kind whatsoever (including reasonable attorneys' and
consultants' fees and expenses), paid, incurred or
suffered by Buyer as a result of any breach of
warranties set forth in Section 18(a). With respect
to any liability for disposal or arranging for
disposal of Hazardous Materials at sites or locations
not currently owned or leased by the SRFI Group this
indemnity shall apply notwithstanding the fact that
Buyer may have received or obtained information before
the Closing Date, other than that information
disclosed on Schedule 10(g) indicating or otherwise
showing that a claim exists or may exist under this
indemnity, including, but not limited to, any
information relating to a breach of the warranties set
forth in Section 18(a) above.
(c) Special Provisions. The following
provisions shall apply in the event of any breach of
warranty under this Section 18.
(i) Notice. Buyer shall promptly, and
in no event later than 90 days from the date
Buyer has knowledge, notify Parents in writing
of any claim, demand or action, situation or
event covered by the warranty and
indemnification provisions of Section 18, with
respect to any work or activities undertaken by
Buyer which is subject to this indemnity, Buyer
shall provide Parents in a timely manner,
written documentation prepared in the normal
course of business describing the work or
activities.
(ii) Disclosure of On-Site Environmental
Matters. Buyer agrees that environmental
matters associated with the Real Estate which
are contained in the environmental reports and
documents listed on Schedule 10(g), as well as
any information obtained by Buyer during its due
diligence activities conducted on the Real
Estate between the signing of this Agreement and
the Closing Date, shall be considered disclosed
to Buyer.
(iii) Election of Control Off-Site Work.
At Parents' option, to the extent Parents are
obligated to indemnify Buyer under this Section
for the costs of investigating, remediating,
restoring, cleaning-up any site where Hazardous
Materials were disposed and the site is located
on property not currently owned, leased or
otherwise used by the SRFI Group (nor reasonably
anticipated to be used by the SRFI Group),
Parents may elect to take control of the
investigation, remediation, restoration and/or
clean-up ("Environmental Cleanup"). If they
elect to do so, Parents shall so notify Buyer
and Parents thereafter shall be solely
responsible (as between the parties hereto) for
managing and paying for such Environmental
Cleanup (to the extent it is obligated to
indemnify Buyer) including any fines, penalties
or third-party actions associated with the
Environmental Cleanup.
(iv) Buyer's Control of Work. Other than
in connection with off-site Environmental
Cleanups, Buyer and/or the SRFI Group shall
manage and conduct any Environmental Cleanup
work and shall manage and control the repair and
replacement of any pollution control equipment.
All such work shall be done in a commercially
reasonable, cost-effective manner using good
faith business judgment and without regard to
the availability of indemnification hereunder.
(v) Pollution Control Equipment. In
situations where the installation of pollution
control equipment is required in order to obtain
compliance with the Environmental Laws, Parents'
liability under this Section shall include both
capital and reasonable operation and maintenance
costs (calculated on a reasonable present value
basis).
(vi) Interference with Operations. In
situations where the Environmental Cleanup or
the installation, repair or replacement of the
pollution control equipment will materially
interfere with the conduct of the operations of
the SRFI Group, Parents shall be responsible for
the reasonable costs, expenses or losses
associated with or attributable to any material
business interruption losses, provided that
Buyer shall do the work or activities in a
manner that is least disruptive of the SRFI
Group's ongoing operations.
(d) Exclusive Remedy. This Section provides to
Buyer, the respective SRFI Group members, and anyone
claiming under or through Buyer the exclusive remedy
against Parents with respect to any matter covered by
this Section 18, and such exclusive remedy shall lapse
and be of no further force or effect on and after the
fifth anniversary of the Closing Date.
(e) Inspection of Books and Records. In the
event of any claims made by Buyer for indemnification
under this Section 18, Sellers shall be entitled to
access, at times reasonably convenient to Buyer and
the members of the SRFI Group, to such books, records
and data related to such claim for indemnification
hereunder, as Parents deem necessary to verify the
basis or amount of such claim.
19. Termination of Agreement. This Agreement
may be terminated upon ten (10) business days prior
written notice at any time prior to Closing without
liability of any party to the other:
(a) by mutual consent of Parents and Buyer;
(b) by Buyer, if notice of a material adverse
development with respect to the financial condition,
results of operations or prospects of the SRFI Group
has been given, in accordance with Section 9(e)
hereof;
(c) by Buyer, if Closing has not occurred on or
before September 30, 1995 as a result of the
nonfulfillment of any of the conditions to Buyer's
obligation to perform contained in Section 10 of this
Agreement;
(d) by Parents, if notice of a material adverse
development with respect to the financial condition,
results of operations or prospects of Buyer has been
given, in accordance with Section 9(e) hereof;
(e) by Parents, if Closing has not occurred on
or before September 30, 1995 as a result of the
nonfulfillment of any of the conditions to Sellers'
obligation to perform contained in Section 11 of this
Agreement; and
(f) by any party, if Closing has not occurred
by October 31, 1995.
Termination of this Agreement shall not affect in any
way the continuing obligations of the parties hereto
pursuant to Section 12 relating to brokers and Section
14 hereof relating to the treatment of confidential
information.
20. Announcements. Buyer and Parents shall
cooperate in the preparation of any announcements
regarding the transactions contemplated by this
Agreement. Except as required by law, no party shall
issue any announcement regarding the transactions
contemplated hereby without the prior consent of the
other parties, which consents shall not be
unreasonably withheld. The covenants set forth in
this Section shall be enforceable in law or at equity
by either party.
21. Records. After the Closing Date, Buyer
shall retain the books, records or other data of each
member of the SRFI Group existing at the Closing Date
for a period of ten (10) years. During the retention
period specified above, Parents shall be entitled to
access, at times reasonably convenient to Buyer, to
such books, records and data in connection with the
preparation or handling of Sellers' and Parents' tax
returns, financial reports, tax audits, W-2 forms,
litigation matters or any other reasonable need of any
Seller or Parent. If Buyer wishes to dispose of such
material (whether during or following the 10-year
period), it shall give Parents prior notice and the
opportunity to remove such material at the expense of
the Parent(s) requesting the same.
22. Assistance after Closing. Buyer shall
furnish, at no cost to Parents and Sellers, such
assistance to Parents and Sellers in the preparation
of their respective fiscal 1994 and 1995 financial and
tax reports as Parents and Sellers may reasonably
request. All such assistance shall be on a
confidential basis and Parents and Sellers agree to
comply with the confidentiality and limitation on use
provisions of Section 14 hereof with respect to such
confidential information.
Buyer shall also provide Parents with reasonable
assistance, including, without limitation, furnishing
of documents and making available to Parents potential
witnesses within its control or that of any member of
the SRFI Group and the assistance of their respective
engineers or experts, in the defense of any claim,
lawsuit or tax examination arising out of the
operations of SRFI prior to the Closing Date for which
Parents or Sellers retain liability under this Agree-
ment. Parents shall reimburse Buyer or such member of
the SRFI Group for its out of pocket expenses incurred
in providing such assistance.
23. Tax Matters; Payment of Taxes.
(a) Tax Returns. Parents and Sellers shall
prepare or cause to be prepared and shall timely file
all Returns (including any amendments thereto)
relating to any Taxes of the members of the SRFI Group
with respect to any tax period ending on or before the
Closing. Parents or Sellers shall pay or cause to be
paid all Taxes of the members of the SRFI Group with
respect to any period ending on or before the Closing
as determined in accordance with Sections 23(b) and
23(c) hereof.
(b) Apportionment of Income. Parents and
Sellers will include the income of the SRFI Group
(including any deferred income and any excess loss
accounts pursuant to relevant rules and regulations of
the Internal Revenue Service) on Parents' and Sellers'
federal and state income tax Returns for all periods
through the Closing Date and shall pay any federal and
state income taxes attributable to such income. The
SRFI Group will furnish all tax information requested
by Parents and Sellers to it for inclusion in Parents'
and Sellers' income tax Returns for the period which
includes the Closing Date in accordance with Parents'
and Sellers' past custom and practice. The income of
the SRFI Group will be apportioned to the period up to
and including the Closing Date and the period after
the Closing Date by closing the books of the SRFI
Group as of the end of the Closing Date.
(c) Allocation of Taxes. For purposes of this
Agreement, in the case of any Taxes that are imposed
on a periodic basis and are payable for a period that
begins before the Closing Date and ends after the
Closing Date, Parents or Sellers shall reimburse Buyer
for the portion of such Taxes payable for the period
ending on the Closing Date to the extent such Taxes
are not reflected on the Statement of Net Book Value
as of the Closing Date. For this purpose, the portion
of such Tax payable for the period ending on the
Closing Date shall in the case of any Taxes other than
Taxes based upon or related to income or sales or use
taxes, be deemed to be the amount of such Taxes for
the entire period multiplied by a fraction, the
numerator of which is the number of days in the period
ending on the Closing Date, and the denominator of
which is the number of days in the entire period. The
preceding sentence shall be applied with respect to
Taxes relating to capital (including net worth or
long-term debt) or intangibles by reference to the
level of such items on the Closing Date to the extent
such Taxes are not reflected on the Statement of Net
Book Value as of the Closing Date.
(d) Indemnity. Notwithstanding anything to the
contrary in this Agreement whether expressed or
implied, Parents shall indemnify and hold harmless
Buyer, and each member of the SRFI Group, against:
(1) all Taxes imposed on any member of
the SRFI Group with respect to any
period ending on or before the
Closing;
(2) all Taxes imposed on Buyer or on any
member of the SRFI Group with
respect to any period which begins
before the Closing Date and ends
after the Closing Date to the extent
allocated to the portion of such
period ending on the Closing Date,
determined in accordance with
Section 23 hereof;
(3) all Taxes imposed on Buyer or on any
member of the SRFI Group with respect to
income earned by any member of the SRFI
Group for the period beginning January 1,
1995 and ending on the Closing Date,
determined in accordance with Section
23(b) hereof;
(4) all Taxes imposed on any member of
the SRFI Group as a result of the
Section 338(h)(10) Elections
contemplated by Section 24 hereof;
(5) all Taxes imposed on any member of
an affiliated, consolidated,
combined or unitary group which
includes or has included any member
of the SRFI Group with respect to
any taxable period that ends on or
prior to the Closing;
(6) all liability resulting from or
attributable to a breach of the
representations, warranties and
covenants contained in Section 7(t)
and this Section 23; and
(7) any claim under Treas. Reg. section 1.1502-6
by the Internal Revenue Service
against any member of the SRFI Group
which was a member of Parents'
respective consolidated groups prior
to the Closing Date with respect to
any federal income tax liability of
Parents and Sellers for any period
ending on or prior to December 31,
1995.
(e) Post-Closing Elections. Parents and
Sellers will (or will cause members of the SRFI Group,
as the case may be to) make or join, as necessary,
with Buyer in making any election relating to income
taxes, including, but not limited to, elections under
Section 732(d) and Section 754 of the Code, for the
year in which the Closing Date occurs. Prior to
Closing, Buyer shall retain an appraiser to appraise
the assets of the SRFI Group. Sellers and the members
of the SRFI Group and their respective employees shall
cooperate fully with Buyer and its appraiser in
connection with the appraisal. The cost of the
appraisal shall be borne by Buyer.
(f) Control of Contest. Parents shall have the
right, at their own expense, to control any audit or
determination by any taxing authority, initiate any
claim for refund or amended Return and contest,
resolve and defend against any assessment, notice of
deficiency or other adjustment or proposed adjustment
of Taxes for any taxable period for which any Seller
or Parent (or any of their affiliates) is charged with
responsibility for filing a Return under this
Agreement. Each party will allow the other and its
counsel (at its or their own expense) to be
represented during any audits of income tax Returns to
the extent that disputed items therein relate to the
SRFI Group. Buyer shall, or shall cause its
affiliates to, undertake or authorize actions in their
capacity as tax matters partner of the SRFI Group as
requested by Parents with respect to this Section
23(f).
(g) General. Each of Buyer, Parents and
Sellers shall provide the other, and Buyer shall
following the Closing cause each member of the SRFI
Group to provide to Parents and Sellers, with the
right, at reasonable times and upon reasonable notice,
to have access to personnel, and to copy and use, any
records or information that may be relevant in
connection with the preparation of any Returns, any
audit or other examination by any taxing authority or
any litigation relating to liability for Taxes.
Information required in the filing of any Return shall
be provided to the other party not less than thirty
(30) days before such Return is due. Parents and
Sellers will allow Buyer an opportunity to review and
comment upon any Returns under Subsection 23(a)
(including any amended returns) to the extent that
they relate to any member of the SRFI Group. Parents
and Sellers will take no position on such Returns that
relate to any member of the SRFI Group that would
adversely affect any member of the SRFI Group after
the Closing. Parents, Sellers and Buyer shall retain
all records relating to Taxes for as long as the
statute of limitations with respect thereto shall
remain open.
(h) Sales and Transfer Taxes. All sales and
transfer Taxes (including all stock transfer taxes, if
any) incurred in connection with the transactions
contemplated hereby will be borne by the statutorily
responsible party. If required by applicable law,
Buyer or Parents or Sellers, as the case may be, will
join in the preparation and execution of any Returns
or other documentation related to the payment of any
sales or transfer Taxes.
(i) Tax Effective Time. For purposes of Taxes,
the Closing shall be deemed to have occurred, and
shall be effective, as of the close of business on the
Closing.
(j) Survival. All of the representations,
warranties, covenants and indemnities contained in
this Agreement which relate to Taxes shall survive the
Closing (even if the Indemnified Party knew or had
reason to know of any misrepresentation or breach of
warranty or covenant at the time of the Closing) and
continue in full force and effect until the expiration
of the applicable statute of limitations (including
any extensions thereof).
(k) Tax Agreements. Minnesota Power and Buyer
agree that, upon Closing, the Tax Agreement dated
October 5, 1993 and the State Tax Agreement dated
October 5, 1993, both between Minnesota Power and its
subsidiaries, including SRFC, shall terminate as to
SRFC, and, that notwithstanding Section 7 of each such
agreement, following termination of each agreement,
SRFC and Buyer shall not be bound by the terms of the
agreements and not be entitled to receive or obligated
to make payments under the agreements attributable to
any period during which SRFC was a party to each
agreement.
24. Section 338(h)(10) Election. Minnesota
Power and Synertec agree to jointly file with Buyer
the election (the "Election") provided for by Section
338(h)(10) of the Code and the corresponding election
under applicable state or local tax law with respect
to the sale and purchase of the Stock. In connection
with the Election:
(a) Buyer and Minnesota Power and Synertec
shall each provide to the other all necessary
information, including information as to tax basis, to
permit the Election to be made and its consequences to
be accurately reflected for all relevant accounting
and tax reporting purposes, and to take all other
actions necessary to enable Buyer and Minnesota Power
and Synertec to make the Election.
(b) Buyer shall retain at Buyer's cost an
appraiser to prepare a report (a "Report") appraising
the value of the assets of SRFC to determine the
proper allocations (the "Allocations") of the
"adjusted grossed-up basis" (within the meaning of
Treasury Regulation section 1.338(b)-1) and the modified
adjusted deemed selling price ("MADSP") (within the
meaning of Treasury Regulation section 1.338(h)(10)-1) among
the assets of SRFC in accordance with Section
338(b)(5) and (h)(10) of the Code and Treasury
Regulations thereunder.
The Report shall be finalized no later than 120
days after the Closing Date. At least thirty (30)
days before such Report is finalized, Buyer shall
provide Parents a copy of the appraiser's preliminary
report or indication of the Allocations. After
receipt of such preliminary report or indication,
Minnesota Power shall give to Buyer in writing any
objections or questions which Minnesota Power may have
to such preliminary report or indication, and the
parties shall thereafter use their best efforts to
resolve such objections or questions so that the
Report is finalized no later than 120 days after the
Closing Date and the Election is timely made.
(c) Buyer and Minnesota Power and Synertec
shall jointly prepare a Form 8023-A, together with all
required attachments, and the corresponding forms
required or appropriate under state tax laws
(collectively, an "Election Form") in a manner
consistent with the Allocation.
(d) As promptly as practicable after the
Closing Date, Buyer and Minnesota Power and Synertec
shall take all action and file all documents to effect
and preserve a timely Election.
(e) Minnesota Power and Synertec shall allocate
the MADSP, if any, resulting from the Election in a
manner consistent with the Allocations and shall not
take any position inconsistent with the Election or
the Allocations in connection with any Return;
provided, however, that Minnesota Power and Synertec
may take into account their transaction costs when
calculating such MADSP.
(f) Buyer shall allocate the "adjusted grossed-up basis"
of the capital stock of SRFC among the
assets of SRFC in a manner consistent with the
Allocations and shall not take any position
inconsistent with the Election or the Allocations in
any Return or otherwise; provided, however, that Buyer
may add its transaction costs to the "adjusted
grossed-up basis" of the capital stock of SRFC for
purposes of allocating among the assets of SRFC.
(g) Synertec and Buyer acknowledge that for
federal income tax purposes (and for state income tax
purposes in those states whose income tax provisions
follow the federal income tax treatment), the sale of
the capital stock of SRFC from Synertec to Buyer will
be treated as a sale of assets by SRFC to Buyer
followed by a complete liquidation of SRFC with and
into Synertec, and the parties agree to report the
transaction in a manner consistent with this treatment
and to take no positions inconsistent with this
treatment. The parties also agree that neither Buyer
nor SRFC shall be liable for any Taxes resulting from
the sale of the capital stock of SRFC or the Election.
25. Limitations on Liability.
(a) Any amount of indemnity payable by Parents
under Sections 12, 14, 15, 18, 19 or 23 of, or
relating to the transactions contemplated by, this
Agreement, or arising in connection with the
operations, properties or financial condition of
members of the SRFI Group shall be paid by Parents
severally, and not jointly or jointly and severally,
in accordance with the following principles:
(i) if the claim arises out of any
misrepresentation or breach of warranty made
with respect to either Parent or its respective
Affiliates, the claim shall be the sole
responsibility of such Parent;
(ii) if the claim arises out of any
misrepresentation or breach of warranty made
with respect to LSPI Fiber, SRFI or SRFC, the
claim shall be the responsibility of both
Parents, who shall each pay an amount of
indemnity with respect thereto in proportion to
their respective equity interests therein;
(iii) if the claim arises out of the
breach of any covenant or agreement by either
Parent or its respective Affiliates, the claim
shall be the sole responsibility of such Parent;
(iv) if the claim arises out of the
breach of any covenant or agreement by LSPI
Fiber, SRFI or SRFC, the claim shall be the
responsibility of both Parents, who shall each
pay an amount of indemnity with respect thereto
in proportion to their respective equity
interests therein;
(v) if the claim arises out of assertion
by any third party of any claim (including tax
claims), liability or obligation against or with
respect to any member of the SRFI Group which is
assumed, or indemnified against, by either
Parent, with respect to its respective
Affiliates, the claim shall be the sole
responsibility of such Parent;
(vi) if the claim arises out of assertion
by any third party of any claim (including tax
claims), liability or obligation against or with
respect to any member of the SRFI Group which is
assumed, or indemnified against, by both
Parents, with respect to LSPI Fiber, SRFI or
SRFC, the claim shall be the responsibility of
both Parents, who shall each pay an amount of
indemnity with respect thereto in proportion to
their respective equity interests therein; and
(vii) if the claim arises from the
termination of this Agreement, compensation for
which is provided in Section 19 hereof, the
Parent(s) in breach shall be solely responsible
for such claim.
To the extent that any amount of indemnity is payable
by Buyer to Parent(s), the foregoing principles shall
apply to the determination of the Parent to whom such
indemnity is payable, mutatis mutandis.
(b) No party is responsible for, and no party
may recover from any other party, any amount of
consequential (e. g., lost profits or the like) or
punitive damages. Notwithstanding the foregoing
exclusion, to the extent any party hereto sustains any
loss or incurs any expense compensable under this
Agreement that contains or includes any measure of
consequential or punitive damages awarded to a third
party, then such indirect consequential and punitive
damages may be recovered.
(c) Parents and Buyer specifically agree that
the total amount of indemnification payable by Parents
pursuant to Sections 15, 18 and 23 together shall not
exceed the amount of the purchase price paid to each
Parent in cash hereunder.
26. Amendment and Waiver. This Agreement may
not be amended or modified at any time or in any
respect other than by an instrument in writing
executed by Buyer and Parents.
27. Notices. Any notice or communication
provided for in this Agreement shall be in writing and
shall be deemed given when delivered personally,
against receipt, or when deposited in the United
States mail, registered or certified mail, return
receipt requested to the following address:
(a) If to Pentair:
Pentair, Inc.
1500 County Road B2 West
St. Paul, Minnesota 55113-3105
Attention: Ronald V. Kelly
Facsimile: (612) 639-5209
with a copy to:
Henson & Efron, P.A.
1200 Title Insurance Building
400 Second Avenue South
Minneapolis, Minnesota 55401
Attention: Louis L. Ainsworth
Facsimile: (612) 339-6364
(b) If to Minnesota Power:
Minnesota Power & Light Company
30 West Superior Street
Duluth , Minnesota 55802
Attention: David G. Gartzke
Facsimile: (218) 723-3960
with a copy to:
Minnesota Power & Light Company
30 West Superior Street
Duluth , Minnesota 55802
Attention: Steven W. Tyacke
Facsimile: (218) 723-3955
(c) If to Buyer:
Consolidated Papers, Inc.
231 First Avenue North
P. O. Box 8050
Wisconsin Rapids, WI 54495-8050
Attention: Carl H. Wartman
Facsimile: (715) 422-3203
with a copy to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606-5096
Attention: Robert A. Schreck, Jr.
Facsimile: (312) 984-3669
Any party may change the above address for notice by
written notice to the other parties in accordance with
the provisions of this Section.
28. Parties in Interest. All of the terms and
provisions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by Parents,
Sellers and Buyer, their respective successors and
permitted assigns. No party may assign this Agreement
without the express written consent of the other
parties, except that Buyer may assign this Agreement
to an affiliate of Buyer provided that no such
assignment shall relieve Buyer of its obligations
hereunder or otherwise prejudice Parents or Sellers.
This Agreement shall not confer any rights or remedies
upon any person other than Buyer, Parents and Sellers
and their respective successors and permitted assigns.
29. Further Assurances. Each party shall from
time to time execute and deliver such further
documents and do such further acts as the other
parties may reasonably require for carrying out the
purposes and intent of this Agreement.
30. No Waivers. No failure of any party to
this Agreement to pursue any remedy resulting from a
breach of this Agreement shall be construed as a
waiver of that breach or as a waiver of any subsequent
or other breach.
31. Governing Law. This Agreement shall be
construed in accordance with and governed by the
substantive laws of the state of Minnesota without
giving effect to the choice of law provisions thereof.
This Agreement shall be subject to the exclusive
jurisdiction of the courts of, and United States
federal courts sitting in, the state of Minnesota, and
all parties hereby irrevocably submit to the
jurisdiction of such courts with respect to any claim
arising out of this Agreement.
32. Severability. Should any provision of this
Agreement be or become invalid in whole or in part or
be incapable of performance for whatever reason, then
the validity of the remaining provisions of this
Agreement shall not be affected thereby. In such
event, the parties hereby undertake to substitute for
any such invalid provision or for any provision
incapable of performance, a provision which
corresponds to the spirit and purpose of such invalid
or unperformable provision as far as permitted under
applicable law, so as to realize to the fullest extent
possible the economic purpose and effect of this
Agreement.
33. Miscellaneous. This Agreement constitutes
the entire agreement between the parties and
supersedes all prior representations, understandings
or agreements between them, written or oral,
respecting the within subject matter. Headings are
for convenience only and are not intended to alter any
of the provisions of this Agreement. Words importing
the singular number include the plural and vice versa.
This Agreement may be signed in multiple copies, each
of which shall be considered an original, but all of
which shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, each party has caused this
Agreement to be executed by its authorized officer as
of the date first above written.
PENTAIR, INC.
By:
Its:
MINNESOTA POWER
& LIGHT COMPANY
By:
Its:
SYNERTEC, INC.
By:
Its:
LSPI FIBER CO.
By Pentair
Duluth Pulp Corp.,
its general
partner
By
its
By Minnesota
Pulp Incorporated II,
its general
partner
By:
Its:
CONSOLIDATED
PAPERS, INC.
By:
Its:
